DIRECTOR OF INCOME TAX (EXEMPTIONS) AND ANOTHER Vs. SRI BELIMATHA MAHASAMSTHANA SOCIO CULTURAL AND EDUCATIONAL TRUST

JUDGEMENT

(1.) The revenue has filed this appeal by challenging the order dated 22-10-2003, passed in ITA No. 498/Bang/2003 for the assessment year 2001-02.

(2.) The facts leading to the filing of this appeals are that the Assessee which is in the status of an AOP for the assessment year 2001-02 filed a return of income declaring nil income and claiming exemption under Section 11 of the Income Tax Act. The said return was taken up for scrutiny assessment and the assessing officer found that the Assessee had not maintained proper books of accounts and that the Assessee was releasing cash from unknown sources which was not explained properly and consequently, held that the trust was not being administered in accordance with law and consequently, denied the exemption under Section 11 of the Act. Accordingly, he held that a sum of Rs. 28,30,094 collected towards donations from students was contrary to law and that the trust was acting opposed to public policy and had failed to comply with the pre-requisites of a charitable organization. Further the assessing officer disallowed a sum of Rs. 14,36,500 which was shown as corpus donation as the source of such donations had not been proved by the Assessee and therefore, the said amount was also not allowed as an exemption under Section 11(1)(d) of the Act. The assessing officer also disallowed a sum of Rs. 6,00,747 by treating the same as cash credit and unaccounted investment. Consequently, the said amounts were brought to tax as income by order dated 29-8-2002.

(3.) Being aggrieved by the said order, the Assessee preferred an appeal before the Commissioner (Appeals) which was rejected by an order dated 3-3-2007. Being aggrieved by the said order, further appeal was preferred before the Tribunal, Bangalore. The Tribunal however held that the dominant object of the Assessee organization was charitable in nature and that it had a registration under Section 12A of the Act and therefore, was entitled to all benefits under Section 11 of the Act. The said order is under challenge in this appeal by raising substantial questions of law.