Income Tax Appellate Tribunal - Bangalore
Sri. Harsha V. Shastry, Bangalore vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH : BANGALORE
BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER
AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
ITA Nos. 568 & 569/Bang/2010
Assessment years : 2000-01 & 2001-02
The Income Tax Officer,
Ward 2(3),
Bangalore. : APPELLANT
Vs.
Shri Harsha V. Shastry,
No.294/C, 17th Main Road,
Ideal Home Township,
Rajarajeshwari Nagar,
Bangalore - 560 098. : RESPONDENT
C.O. Nos. 39 & 40/Bang/2010
(in ITA Nos. 568 & 569/Bang/2010)
Assessment years : 2000-01 & 2001-02
Shri Harsha V. Shastry,
No.294/C, 17th Main Road,
Ideal Home Township,
Rajarajeshwari Nagar,
Bangalore - 560 098. : CROSS OBJECTOR
Vs.
The Income Tax Officer,
Ward 2(3),
Bangalore. : APPELLANT IN
APPEAL
ITA Nos. 568 & 569/B/10
& CO Nos.39 & 40/B/10
Page 2 of 15
Revenue by : Shri G.V. Gopala Rao, CIT-I(DR) &
Smt. Jacinta Zimik Vashai, Addl.CIT(DR)
Assessee by : Shri Sachin Kumar, C.A.
ORDER
Per A. Mohan Alankamony, Accountant Member
These are four appeals instituted - (i) two appeals by the Revenue as well as (ii) two Cross Objections of the assessee - are directed against the orders of the Ld. CIT (A)-I, Bangalore in ITA Nos: 14/W-2(3)/A-I/07-08 & 8/W-2(3)/A-I/07-08 dated: 20.1.2010 & 22.01.2020 for the assessment years 2000-01 and 2001-02 respectively in the case of Harsha V.Shastry of Bangalore.
ITA NO: 568/10 - A.Y 2000-01 - By the Revenue:
2. The Revenue in its grounds of appeal had raised six grounds, out of which, ground Nos.1, 4 & 6 being general and no specific issues involved, they have become non-consequential. In the remaining grounds, the substances of the issues raised are reformulated, for the sake of clarity, as under:
(i) the CIT(A) had erred in holding that the addition of Rs.17.71 lakhs cannot be sustained since the same was assessed in the hands of the Trust without appreciating the facts of the issues; &
(ii) that the CIT (A) also erred in deleting the additions of Rs.2.4 lakhs and Rs.1.1 lakhs on the ground that the said sums were not found a place in the recording of the reasons for re-opening of the assessment without appreciating the fact the AO's action in bringing the same to tax was in accordance with law.
ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 3 of 15 ITA NO: 569/10 - A.Y 2001-02 - By the Revenue:
3. For this AY too, the Revenue in its grounds of appeal had raised five grounds, in which, ground Nos.1, 4 & 5 being general in nature, they do not survive for adjudication. In the remaining grounds, the substance of the issue is confined to the fact that -
(i) the CIT(A) had erred in deleting the addition of Rs.13.4 lakhs being gifts received from donors abroad on the ground that that the same has already been assessed in the hands of the Trust without appreciating the facts of the issues;
(ii) - that the CIT(A) erred in not appreciating the fact that the AO had considered some of the donations received as genuine and only wherever discrepancies were noticed, the claim was rejected. CO NO: 39/10 - A.Y 2000-01 - By the assessee:
4. In his cross objections, the assessee had raised the following issues:
(i) the order of the Ld. CIT (A) is correct in law;
(ii) during the course of assessment proceedings, the assessee had submitted that the professional receipts sought to be taxed in his hands had already been considered in the hands of the Trust and, thus, there was no escapement of income;
- that the averment of the assessee has since been upheld by the CIT(A) on appeal; &
- the Ld. CIT (A) also held that the interest on deposit and air ticket amount was not discussed in the assessment order and also did not find a place in the reasons recorded. CO NO: 40/10 - A.Y 2001-02 - By the assessee:
5. Likewise for this AY too, the assessee had raised the following objections:
(i) the order of the Ld. CIT (A) is correct in law;
(ii) during the course of assessment proceedings, the assessee had submitted a list of persons from whom gifts were received through ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 4 of 15 banking channels as gurupada kanike; that declarations from such donors were furnished which exhibit that such donors were in existence; &
- that the Ld. CIT (A) also held that the additions made by the AO was unwarranted and, accordingly, deleted the same.
6. As the issues raised by the rival parties being inter-linked pertaining to the same assessee, for the sake of convenience and cohesion, these appeals were heard, considered together and disposed off in this common order.
A.Y 2000-01 - By the Revenue:
7. The issue, in brief, was that, the assessee, an individual - being a consultant on vedantha and spiritual feature - furnished his return of income, admitting an income of Rs.1102/- for the assessment year under consideration. For the reasons set-out in her impugned order, the AO had reopened the assessment of the assessee and after much deliberations held that that the professional receipts of Rs.17.71 lakhs, accrued interest of Rs.2.4 lakhs and air ticket amount received from Rajeev of Rs.1.1 lakh was the income of the assessee and concluded the assessment accordingly.
8. Agitated, the assessee had carried the issues before the Ld. CIT (A) for relief. After considering the various contentions put forth by the assessee, the Ld. CIT (A), among others, had observed thus -
"12. I have carefully considered the facts of the case, the findings of the AO and the submissions made by the assessee. The assessment herein, heavily relied upon the AO's finding in the assessment of AY 1998-99 and 1999- 2000 and CIT (A)'s order thereon dated 28.10.2005 wherein the learned ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 5 of 15 CIT (A) supported the argument of the AO made in the assessment order that the Trust was not carrying on any charitable activity and, therefore, no expenses is allowable and also the income earned by the trust was actually gifts resulting from professional efficiency of the founder member trustee, Sri Harsha V.Shastry. On the basis of such supportive decision of CIT (A) in AYs. 1998-99 and 1999-2000, in this assessment year the AO took the view that there is no genuine trust in existence. While framing the assessment of the trust for this year, he concluded that the receipts of the trust does not actually belong to the trust but to this assessee. He even proceeded to tax corpus donations apart from taxing the net income of the trust. The AO also denied exemption u/s 11 of the Income-tax Act.
13. But the above analysis of the CIT (A)'s order dated 28.10.2005 is totally a mistaken understanding of the finding of CIT(A) by the AO. In fact the order of CIT (A) has been appreciated by the Learned ITAT vide its order in ITA No.23 & 24/B/2006 (AYs 1998-99 and 1999-2000) dated 11th May 2007 and also MP No.88(BNG)/08 dated 9.4.2009. in these decisions the order of CIT (A) that donations being part of corpus fund of the assessee trust has to be treated as income of that trust and has to enjoy the exemption u/s 12A of I.T. Act even if AO discovers that the trust is not carrying on any charity unless and until the registration u/s 12A is not cancelled or withdrawn by the CIT has been upheld. Succinctly, the income intended to be taxed herein has already been taxed in the hands of the trust substantively. Once income is assessed in the hands of the trust on a substantive basis, for whatever reason the same can't be considered in any other hand. Thus, the income that is sought to be taxed now in the hands of the assessee has already been brought to tax in the hands of the trust.
14. Therefore in the light of the above discussion, the action of the AO in bringing to tax the sum of Rs.17,71,360/- in the hands of the assessee cannot be sustained.
15. Coming to other two amounts of Rs.2,40,000/- and the sum of Rs.1,10,000/- being accrued interest on 24 lakhs and the air ticket amount received from Sri Rajiv respectively there is not much of a discussion in the order of assessment. These two items do not find a place in the reasons recorded for re-opening the assessment either. It appears that the sum of Rs.2,40,000/- is the amount belonging to the trust and therefore accrued interest thereon can't be taxed in the hands of the assessee. Similarly, the sum of Rs.1,10,000/- appears to have been recorded by the trust and accounted in its books of accounts. Therefore, these two amounts also can't be taxed in hands of the appellant."
ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 6 of 15
9. Aggrieved, the Revenue has come up with the present appeal. The grievance of the Revenue was revolved around against the stand of the Ld. CIT (A) that -
- he had erred in holding that the addition of Rs.17.71 lakhs cannot be sustained since the same has already been assessed in the hands of the trust, without appreciating the circumstances under which the AO had considered such receipts in the hands of the assessee;
- he had further erred in deleting the additions of Rs.2.40 lakhs and Rs.1.1 lakhs mainly on the ground that the said sums have not been found a place in the recording of the reasons for re-opening of the assessment and in holding that the sums were not taxable in the hands of the assessee, without appreciating the fact that the AO's action in bringing the sums to tax was in accordance with law.
9.1. It was, therefore, fervently pleaded that the order of the AO requires to be restored.
9.2. On the other hand, the Ld. A R came up with a spirited defense, among others, that -
- the AO had held in the case of Sri Durga Nimishamba Trust was not genuine and was not eligible for exemption u/s 11 of the Act, and, accordingly, concluded the assessments for the AYs. 1998.99 and 99-00 taxing the entire receipts as income of the trust; that the entire income was to be taxed in the hands of Harsha V Shastry (the assessee) on protective basis;
- however, on an appeal, the Ld. CIT (A), Mysore held that it was not the prerogative of the AO to question the registration u/s 12A of the Act, but, of the CIT, Mysore and, thus, ruled that the corpus donations of the trust cannot be brought to tax. However, the CIT (A) confirmed the order of the AO, holding that there was no application of income of the trust and, thus, taxed the other receipts;
- aggrieved, the Revenue took up the issue with the Hon'ble Tribunal which was dismissed by the Hon'ble Bench vide its Order in ITA Nos: 23 & 24/B/2006 dt.:11.5.07;
ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 7 of 15
- that since the donations for the AY under dispute were also been received by the Trust, the taxability has to be considered only in the hands of the trust, but, not in the hands of the assessee;
- that during the course of assessment proceedings, confirmation letters were furnished ,but, those confirmation letters have not been duly considered to find out the veracity of such a claim and even on this count also the order of the CIT(A) is liable to be confirmed;
- countering the Revenue's plea for remit back the issue to the AO for a fresh look, the assessee's plea that the donations were received more than a decade ago and most of the donors would have shifted their places of stay and it would be unwise to reconfirm the receipt of such donations as the donors were abroad while the donations were received;
- with regard to the addition of Rs.2.4 lakhs, it was the case of the assessee that the AO had made the addition on a notional basis on the ground that the funds of the trust had been diverted for the purposes other than the objects of the trust. As the notional income which had never been accrued or deemed to have been accrued to the assessee, the same cannot be assessed in his hands:
- relies on (i) Jawala Prasad Radha Krishna v. CIT 198 ITR 415 (All)
(ii) Highways Construction v. CIT 199 ITR 702 (Gauh)
- in respect of the addition of Rs.1.1 lakhs being travel expenditure of the assessee, it was explained during the course of assessment proceedings of the Trust that even if it was to be included in the total receipts, it had to be treated as application of income. Turning down the assessee's request, the AO treated the same as income of the trust on the ground that it did not find a place in the total receipts; that without any discussion, the AO treated the same as income in the hands of the trust as well as in the hands of the assessee, that this was only an expenditure of the assessee which was incurred by his devotee and, thus, it cannot be treated as income in the hands of the assessee.
10. We have carefully considered the rival submissions, meticulously perused the relevant case records. 10.1. On a critical perusal of the CIT(A)'s finding in the case of Sri Durga Nimishamba Trust [for the AYs 1998-99 & 99-00]- in which the ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 8 of 15 assessee appears to be associated - cited supra, the CIT (A)'s had held that (pg. 86 of paper book) -
"11.2.........It is necessary to add here that while supporting the view held by the AO to the extent that adequate materials are not established with regard to existence of authentic activities to avail exemption u/s 11 of the Act, but, I cannot legally place my findings for holding that 'genuine trust is not existent'. As already mentioned in the beginning of this order, the appellant trust has been accorded a registration u/s 12A by my colleague, the Commissioner of Income-tax, Mysore. This administrative power is vested with the said authority only and as an appellate authority I cannot step in (into) the shoes of this authority and pass a judgment on the issue. To make a decision whether there is a genuine trust existent or not is in the Commissioner's domain only. Hence, to this I hold that the AO is not right in his decision for bringing the corpus donation into the tax basket."
10.1.1. Aggrieved by the above finding of the CIT(A), the Revenue took up the issue with the Tribunal for a solace. However, the Hon'ble Bench in its wisdom, in ITA Nos: 23 & 24/B/2006 dated: 11.5.2007 and also after much deliberations and by placing reliance on several judicial pronouncements as detailed in the said order, observed that (pg. 11 of the PB) "6. In view of the decisions of various High Courts which are specific on the subject matter of appeal, viz., corpus fund could not be treated as income of the assessee, we are of the opinion that the order of the CIT (A) is justified...."
10.1.2. Not to take the above finding lying down, the Revenue had again approached the Tribunal with a Misc. Petition [on being directed by the Hon'ble jurisdictional High Court on an appeal by the Revenue u/s 260A of the Act]. Taking cue from the observation of the Hon'ble Court, the Hon'ble Bench had, in M.P.No.88/Bang/08 dated: 9.4.2009, after ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 9 of 15 extensively quoting the ruling of the Hon'ble Supreme Court's in the case of R.B.Shreeram Religious and Charitable Trust v.CIT reported in 233 ITR 53 (SC), observed thus (pg. 117 of PB) -
"5......................However, for clarity, we are inclined to hold that the decision of the Hon'ble Supreme Court sought to be brought for consideration as was the sole contention before the jurisdictional High Court as well becomes a decision rather leans in favour the assessee on the facts considered by the Tribunal therefore becomes apparent and does not require any further deliberation. In view thereof, this Misc. Petition stands dismissed."
10.1.3. Thus, the finding of the Ld. CIT (A) had become final. 10.2. Let us now turn our attention to the finding of the Ld. CIT (A) for the AY under challenge in the case of the present assessee. We quote the relevant portion of his findings (of course, at the cost of repetition) here-below:
"13. But the above analysis of the CIT (A)'s order dated 28.10.2005 is totally a mistaken understanding of the finding of CIT(A) by the AO. In fact the order of CIT (A) has been appreciated by the Learned ITAT vide its order in ITA No.23 & 24/B/2006 (AYs 1998-99 and 1999-2000) dated 11th May 2007 and also MP No.88(BNG)/08 dated 9.4.2009. In these decisions the order of CIT (A) that donations being part of corpus fund of the assessee trust has to be treated as income of that trust and has to enjoy the exemption u/s 12A of I.T.Act even if AO discovers that the trust is not carrying on any charity unless and until the registration u/s 12A is not cancelled or withdrawn by the CIT has been upheld. Succinctly, the income intended to be taxed herein has already been taxed in the hands of the trust substantively. Once income is assessed in the hands of the trust on a substantive basis, for whatever reason the same can't be considered in any other hand. Thus, the income that is sought to be taxed now in the hands of the assessee has already been brought to tax in the hands of the trust.
14. Therefore in the light of the above discussion, the action of the AO in bringing to tax the sum of Rs.17,71,360/- in the hands of the assessee cannot be sustained."
ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 10 of 15 10.3. On a critical analysis of the assessment order for the AY under challenge in the case of the Trust [source: P.20 -30 of PB AR], though it has been mentioned, perhaps inadvertently, as 'protectively' (on page 8 of the assessment order) by treating the trust as AOP and brought to tax even the corpus donations apart from taxing the net income of the trust and charged the income at maximum marginal rate. The stand of the AO was quite contrast to the finding of the Ld. CIT (A), Mysore in the case of the Trust for the AYs 1998-99 & 99-00 which has been upheld by the Hon'ble Tribunal. As highlighted by the Ld. CIT (A) in the case of the present assessee which is under dispute, the income which was sought to be taxed now in the hands of the assessee has already been taxed in the hands of the trust cited supra, we are of the considered view that the Ld. CIT (A) was within his realm to pronounce that the sum of Rs.17.71 lakhs brought to tax in the hands of the assessee cannot be sustained. It is ordered accordingly.
10.4. The other grievance of the Revenue was that the CIT (A) erred in deleting the additions of Rs.2.4 lakhs and Rs.1.1 lakhs on the ground that these sums were not finding a place in the recording of the reasons for re-opening of the assessment without appreciating that the AO's action in bringing those sums to tax net which was, according to the Revenue, in accordance with law. However, on a glimpse of the impugned order of the AO, we find that there was no discussion worth the name at all, except a brief that "in view of the above stated reasons, I hold the professional receipts of Rs.17,71,360/- along with accrued interest of Rs.2,40,000 on 24 lakhs and air ticket amount received from Sri Rajee of ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 11 of 15 Rs.1,10,000 as income of Sri Harsha V Shastry and add to his total income"
10.4.1. To be precise, there was no discussion whatsoever to justify the stand of the AO to add those amounts to the assessee's kitty as his income.
10.4.2. We are of the firm view that there must be a sound reasoning backed with documentary evidence while making an addition to the income of an assessee. Addition cannot be made for the sake of making addition in a routine manner. As these additions have not been made on a sound footing and that the basis on which such additions made is not advanced even at this stage, we are in agreement with the finding of the Ld. CIT (A) on this count. It is ordered accordingly.
A.Y 2001-02 - By the Revenue:
11. The lone grievance of the Revenue was that the CIT (A) was wrong in deleting the addition of Rs.13.4 lakhs made by the AO, mainly on the ground that the donors have not furnished the particulars of the mode of payments, their residential addresses etc., as the reasons set-out in her impugned order.
11.1. On due consideration of the claim and counter claim of the rival parties, the Ld. CIT (A) had framed up his view thus -
"11. I have considered the decision of the Hon'ble Supreme Court in the case of Mohanakala 291 ITR 278 wherein it was held that the attendant circumstances have to be same as to whether it would be a genuine gift. It is not disputed that the assessee is a spiritual guru. It is undisputed fact that the AO himself (sic) herself had accepted Rs.7,00,000/- as gurupada kanike ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 12 of 15 and has, further, accepted that Rs.11,50,000/- has been credited to assessee's bank account.
12. The Hon'ble ITAT, Bangalore B Bench in their order in ITA Nos.23 & 24/B/2006 dated: 11th May, 2007 in the case of Sri Durga Nimishamba Trust, in which the assessee is a trustee have held that corpus fund could not be treated as income of the assessee. While arriving at this decision, the Hon'ble Tribunal has relied on judgments of various courts. I am therefore of the opinion that the addition made by the AO is unwarranted and, accordingly, I delete the addition made."
11.2 At the outset, we would like to point out that the AO had honestly conceded in her impugned order that the assessee had furnished confirmations letters, but, viewed that those were on plain papers and were all in a common format, containing almost the same prose etc. In this connection, we would like to clarify the point that the confirmation letters being on plain papers with standardized proforma or format alone cannot be a sole reason to view or put the very bona fide of such confirmation under a scanner. While examining/approaching an issue, one should have a clear mind which should not be allowed to be influenced with any pre- determined conclusion. It has not been prescribed under any law of the land or by any authority that the confirmation letter should be in a particular manner or in a standardized way. As a matter of fact, the assessee would have hastened to obtain the confirmation letters to beat the deadline set by the AO to furnish the same. What was required to be seen primarily was - whether the transaction was genuine or otherwise? This vital issue should not be allowed to loss sight of by clinging to a procedural wrangle. 11.2.1. As rightly highlighted by the Ld. CIT (A), the AO had not disputed the very fact that the monies have come to the assessee's ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 13 of 15 bank account through normal banking channels and the AO had any doubt with regard to the bona-fide of the assessee's claim, she could have cross-verified the same with Centurion Bank which was within her arm's length.
11.2.2. Reverting back to the main issue that the assessee had furnished the confirmation letters during the course of assessment proceedings which has been acknowledged by the Revenue and, thus, the assessee had furnished the names and addresses of the donors whereby he had discharged his onus by placing the same at the doorstep of the Revenue. We are, therefore, of the firm view that the assessee was not at fault.
11.2.3 Turning to the submission of the Ld. D R during the course of hearing that the matter be remitted back on the file of AO for fresh consideration, we are of the considered view, as rightly pointed out by the Ld. AR, that it would lead to a futile exercise, in the sense that the alleged transactions appears to have taken place way back in 2000 and most of the donors would have shifted their places of stay to elsewhere by now. 11.3. In an over consideration of the facts of the issue as deliberated upon in the fore-going paragraphs and in particular the Revenue had failed to bring on record any clinching documentary evidence to the effect that the claim of the assessee of 'gurupada kanike' was nothing but a vocational receipt, as projected by the AO, we are in total agreement with the finding of the Ld. CIT (A) on this issue. It is ordered accordingly.
ITA Nos. 568 & 569/B/10 & CO Nos.39 & 40/B/10 Page 14 of 15 CO NOs: 39 & 40/10 - A.Ys. 2000-01 & 2001-02 - By the assessee:
12. Let us now turn our attention to address to the cross objections raised by the assessee for the both the assessment years under challenge.
12.1. At the out-set, we would like to point out that since we have, in the fore-going paragraphs, upheld the findings of the Ld. CIT (A) for both the assessment years under consideration, the cross objections raised by the assessee for the AYs. 2000-01 and 2001-02 have become superfluous and, accordingly, they have not been addressed to.
13. In the result:
(i) the Revenue's appeals for the assessment years 2000-01 and 2001-02 are dismissed; &
(ii) the Cross Objections of the assessee for the AYs 2000-01 and 2001-02 are dismissed.
Pronounced in the open court on this 10th day of March, 2011.
Sd/- Sd/-
( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY )
Judicial Member Accountant Member
Bangalore,
Dated, the 10th March, 2011.
Ds/-
ITA Nos. 568 & 569/B/10
& CO Nos.39 & 40/B/10
Page 15 of 15
Copy to:
1. Revenue
2. Assessee
3. CIT
4. CIT(A)
5. DR, ITAT, Bangalore.
6. Guard file (1+1)
By order
Assistant Registrar
ITAT, Bangalore.