Addition u/s 68 of the i.t. act
Maulin Shah
(Querist) 28 April 2014
This query is : Resolved
With reference to above, I beg to send the following query for early reply.
“A” The Charitable Trust is minority trust and conducting educational institution since 15 years. Some of the educational institution are receiving grant from the govt. and some are self finance institution. The Trust is filing the I.T. Return since 7 to 8 years. The trust and their ancillary institutions are working by receiving grant from the govt. and by receiving loan or donation from agriculturists or private parties since 7 to 8 years. The return filed for nil income for the A.Y. 2011-12 In March 11 and assessed on 31-03-2014. The A.O. has made an addition of Rs.72,13,812/- u/s. 68 in spite of confirmation holding PAN in almost all cases were produced at the time of assessment along with copy of 7/12 (agriculture) & salary certificate. Most of the loan givers are old and having PAN and also there is a credit balance of the loan giver, i.e. The loan givers has also given loan to the trust in the previous years and also earlier years and the same persons have given the loan during the year of assessment in cash but repayment during the year is only by cheque. Some of the loan givers are agriculturist and some are salary persons and they have no any other source of income so the question of introducing unaccounted money does not arise
The Grant in the ancillary institutions were not regular and therefore the trust has received the loan and transfer to institutions as per need and loan repaid to trust no Sooner grant received by the ancillary institution and trust repaid to loan givers. There is no bad intention of the trust to receive loan in cash but it is only to run and conduct the ancillary institution well, If no grant received. The trust is not a profit making institution but in deficit since 7 to 8 years and no position to pay demand of Rs. 29,00,000/-. I have preferred an appeal to C.I.T against the order of A.O.
So you are requested to reply on the following points.
1. How to plead before C.I.T. appeals as this is a minority Institution (Charitable Trust) and as mentioned above cash received from loan givers only to run ancillary institution good and then repay after receiving grant.
2. How to get stay ? Whether possible to get stay during the pendency of appeal as per judgment of M.P. High Court.in the case of Maheshwari Agro Industries v/s Union of india & others(2012) 246 CTR 113 and as per instruction no 96 of CBDT (F.NO. 1/6 169, ITCC) 21/08/69.
Please reply and opine with case law if any immediately
R.V.RAO
(Expert) 29 April 2014
It is well settled law that burden is upon the assessee to prove ingredients of section 68 of the Act by proving identity and creditworthiness of the creditors and genuineness of the transactions.
The Hon'ble Calcutta High Court in the case of CIT Vs United Commercial and Industrial Co. (P) Ltd., 187 ITR 596 held as under:
"The primary onus lies on the assessee to prove the nature and source of credits in its account. It is necessary for the assessee to prove prima facie the identity of his creditors, the capacity of such creditors to advance the money and lastly the genuineness of the transactions. Only when these things are proved by the assessee prima facie and only after the assessee has adduced evidence to establish the aforesaid facts does the onus shift on to the Department. It is not enough to establish the identity of the creditors. Mere production of the confirmation letters before the Income-tax Officer would not by itself prove that the loans have been obtained from those loan creditors or that they have credit-worthiness"...
The Hon'ble Supreme Court in the case of Durga Prasad More, 82 ITR 540 and Sumati Dayal, 214 ITR 801 held that "the Courts and Tribunal have to judge the evidences before them by applying the test of human probabilities after considering the surrounding circumstances..."
the above supreme court judgement talks about applying human probabilities and surrounding circumstances, which in your case refers to :
1.your organisation does not bring in cash credits /loans into books to run/ to achieve your objects,there being no profit motives or commercial considerations beind such credits.
2.the payment of demand raised by IT Dept. of Rs.29 lacs destroys your finances and ruins the the organisation , which is charity and results in damages to society at large.
3. the agriculturist lenders in rural areas are justified in paying cash as loan/donation.even some sections of the IT act are ok with cash payments in rural areas .
4.since you have submitted identity,pan etc.. of lenders, now the onus is on the IT dept,to satisfy themselves as to genuineness of such credits after making any further necessary enquiries or examine in person U/S 131, as laid down in cit vs.
orissa Cement (P) Corporation (1986) 159 ITR 78 (SC); DCIT v. Rohini Builders (2002) 256 ITR 360 (Guj); Nemi Chand Kothari v. CIT (2003) 264 ITR 254 (Guh); CIT v. Divine Leasing and Finance Ltd (2008) 299 ITR 268 (Del); CIT v. Dwarikadish Investment (P) Ltd. (2011) 330 ITR 298 (Del) and CIT v. Oasis Hospitalities (P) Ltd (2011) 333 ITR 199 (Del)," that the appellant-assessee discharged its burden under Section 68 of the Income Tax Act by giving the names, PAN numbers, and producing the assessment orders and accounts books of the unsecured creditors. ....It is submitted that once the burden was discharged by the assessee, it was open to the Assessing Officer to have called the creditors by issuing notices under Section 131 of the Act to examine their creditworthiness and the genuineness of transactions. It was not open to the AO to examine the assessment orders and pass books and draw conclusions on the creditworthiness of the creditors, to add back at the entire loan amount to assessee's income"....
source: http://indiankanoon.org/
AS REGARDS, STAY OF DEMAND ,YES The CIT(A) has inherent, implied and ancillary powers to grant stay against recovery of disputed demand of tax while seized of an appeal filed before him. The relevant factors to be considered are prima facie case, balance of convenience, irreparable injury, nature of demand and hardship likely to be caused to the assessee, liquidity available to the assessee, etc.
Under section 220(6) the AO has the discretion not to treat the assessee as being in default during the pendency of the appeal. The AO has to normally use this discretion in favour of the assessee particularly when high pitched assessments are made and the demand of tax is several times the declared tax liability in the spirit of Instruction No. 95 dated 21 August 1969 which holds the field and is binding on the AO.
SOURCE:http://www.itatonline.org/
