Young Men's Christian Association vs Joint Commissioner of Income Tax (OSD)

Chitra Venkataraman, J.�The assessee is on appeal as against the common order passed by the Income-tax Appellate Tribunal dated April 29, 2013, and August 26, 2013, in I.T.A. No. 1888/Mds/2012 and M.P. No. 94/Mds/2013 in I.T.A. No. 18888/Mds/2012 relating to the assessment year 2009-10. Following are the questions of law raised by the assessee in Tax Case (Appeals) Nos. 37 of 2014 and 38 of 2014.

T.C. (A.) Nos. 37 and 38 of 2014

"1. Whether the Tribunal is right in law in holding that the cash credit amount of Rs. 1,00,00,000 assessed under section 68 and forms part of the total income cannot be considered as application of income for the purpose of section 11 for the assessment year 2009-10 because the same is not a donation?

Alternatively, whether the Appellate Tribunal''s interpretation of section 68 of the Income-tax Act, 1961, is correct in law?

Whether the Tribunal''s conclusion that the amounts advanced by the late Mr. Ebanesan to the assessee-appellant is not acceptable even though the assessee has proved the initial source of such advance and, consequently, whether the Tribunal was justified in law in asking for the source of source?

Whether the Tribunal was right in law in holding that the amounts collected by the late Mr. Ebenesan was not acceptable, when the Revenue itself has accepted the similar loan transaction from the same Mr. Ebenesan as genuine?"

T.C. (A) No. 38 of 2014

Whether the Tribunal was right in not allowing the miscellaneous petition filed under section 254(2) of the Income-tax Act, 1961?"

The assessee is an association granted registration under section 12AA of the Income-tax Act, 1961. On going through the balance-sheet, the Assessing Officer pointed out that to the discrepancies pointed out by the auditor in the internal audit as regards the repayment of loan in cash to the tune of Rs. 1,16,18,000 was brought into the books of account with no identity of creditors. On calling for the vouchers for the cash receipts, it was found that a sum of Rs. 1 crore was collected through vouchers Nos. 3866 to 3871 and 7804 all dated April 2, 2004, received through various branches of the assessee. The repayment vouchers also were filed. The Assessing Officer pointed out that the receipts and payments were not identified with the name of any persons, no interest payment was made on those sums, though retained for a very long period. One G. Ebinesan was the general secretary of the assessee, who was responsible for collecting those loans and its repayment. Unfortunately, during the pendency of the assessment proceedings, the said general secretary passed away. The efforts to gather information on the loans taken in his name further proved futile and the assessee also denied having any knowledge about the whereabouts of the legal heirs of the ex-general secretary to offer any assistance in this regard. The statement was recorded from one Shri R.C. Samueal Swamikkan, employee of the assessee who stated that he had the knowledge about the loan credits received and accounted in the books of account as per the instruction of the then general secretary. He admitted that the loan received were not accounted in the name of G. Ebenesan and that he used to collected funds and hand over the same for the use of the assessee. The Assessing Officer held that contrary to his claim, the book entries carried the name of G. Ebanesan as the creditor. The fact remains there was no resolution of the board produced acknowledging the availing of loan or payment of interest. In the circumstances the Assessing Officer viewed that it was unexplained credit to the tune of Rs. 1,16,18,000 and the amount had been taken away without identifying any person. Thus, when the entries were not proved as genuine transaction, the amount was taken to be income of the assessee as per section 68 of the Income-tax Act, 1961, as unexplained income from other sources. Aggrieved by this the assessee went on appeal before the Commissioner of Income-tax (Appeals).

The assessee contended that the dispute pointed out by the internal audit of the assessee was accepted and it repaid certain cash loan and the details of such creditors were not known. The assessee submitted that during the financial year 2007-08, it had taken up lots of developmental/construction activities for the purposes of the society and on account of delay in obtaining the loan from the banks, the then general secretary, G. Ebanesan, who was looking after the day-to-day affairs of the assessee borrowed funds from several persons both by cash and cheque. One of such persons from whom money was borrowed was M/s. India Cements Ltd. to the tune of Rs. one crore for a period of six months. Towards the repayment of loan, the assessee had given post-dated cheques to M/s. India Cements. When the due date to repay the money approached and the banks had not released the loans, the said Ebinesan borrowed money from private persons and deposited the same in the bank and honoured the post-dated cheques issued to M/s. India Cements. On receipts of the bank loan, the loan amounts were repaid during the financial year. The assessee explained its inability to give the details on account of the sudden demise of Shri G. Ebinesan. The amount of loan availed of and accounted in the name of Shri G. Ebinesan was to the tune of Rs. 16,18,000. On a perusal of the submission it was seen that a sum of Rs. 16,18,000 was received from Shri G. Ebinesan and that amount was repaid to him only. The Commissioner of Income-tax (Appeals) held that the said amount could not constitute an unexplained cash credits within the meaning of section 68 of the Income-tax Act, 1961. Consequently, the Assessing Officer was directed to exclude the said amount from the assessment of the assessee. As regards the balance of Rs. 1 crore of which Rs. 50,00,000 (rupees fifty lakhs only) was partly repaid in cash, the Commissioner of Income-tax (Appeals) pointed out that the assessee-organisation had no details. Consequently, the Assessing Officer''s order treating it as unexplained cash credit under section 68 of the Income-tax Act, 1961, was upheld. Aggrieved by this, the assessee went on appeal before the Income-tax Appellate Tribunal.

After referring to the order of the Commissioner of Income-tax (Appeals), the Income-tax Appellate Tribunal pointed out that the assessee could not explain the source for such credits or the persons from whom the loans were taken. In the absence of any material shown by the assessee, the Income-tax Appellate Tribunal held that there were no good reasons to interfere with the order of the Commissioner of Income-tax (Appeals), in sustaining the addition. Consequently, the assessee''s appeal was dismissed. Aggrieved by this the assessee has preferred T.C. (A.) No. 37 of 2014.

Quite apart from the fact that the issue raised is a pure question of fact, we find from the order of the Commissioner of Income-tax (Appeals) as well as the Assessing Officer that the assessee had not in any manner let in any evidence to show that the amount of Rs. 1 crore received from M/s. India Cements was repaid by further availing of loan from various parties. It is no doubt true that the person who had taken the said loan, expired during the course of the assessment proceedings. Consequently, the names could not be furnished. Nevertheless it is a matter of record that the assessee had not produced any material by way of any resolution passed to avail of such loan to discharge the liability. Thus, in the absence of any material furnished by the assessee, the only other course available to the Assessing Officer was to consider this income as income from other sources. We do not find that the reasoning is faulty or illogical for this court to interfere with the order of the Income-tax Appellate Tribunal. Consequently, the Tax Case (Appeal) No. 37 of 2014 fails and the same is dismissed.

In the light of the order passed by us in Tax Case (Appeal) No. 37 of 2014, the Tax Case (Appeal) No. 38 of 2014 filed as against the dismissal of the miscellaneous petition wherein the assessee has sought for rehearing of the appeal also fails and the same is dismissed. In the result, both the tax case (appeals) are dismissed. No costs. Consequently, the connected miscellaneous petitions are closed.