1. In this appeal filed by the assessee relating to the assessment year 1983 -84, the sole question is whether on the facts and in the circumstances of the case and in law the learned Commissioner of Income-tax (Appeals) was right in upholding the disallowance of deduction for Rs. 1,98,000 under Section 80GGA of the Income-tax Act in respect of the contribution made by the assessee to M/s Ramakrishna Vivekanand Mission.
2. The assessee a Chief Executive of Usha International, a public limited company, of which he was neither a Director nor a shareholder made a donation of Rs. 2 lacs to Ramakrishna Vivekanand Mission by way of two cheques of Rs. 1 lac each drawn on Bank of Baroda on 22-3-1983.
These cheques were given to one Mr. Vipin Mehra, an authorised agent of Ramakrishna Vivekanand Mission to collect donations on behalf of the said Mission. The said Vipin Mehra opened a bank account in the name of the Mission without its authority and encashed these cheques in Delhi on 25-3-1983, paid only a sum of Rs. 2,000 into this account and retained the balance of Rs. 1,98,000 with him. Subsequent events showed that the balance money of Rs. 1,98,000 also was sent to Ramakrishna Vivekanand Mission in 1986. The assessee claimed deduction under Section 80GGA of the sum of Rs. 2 lacs in his assessment. The assessee filed the original return on 1-6-1983 disclosing an income of Rs. 1,16,737 after claiming deduction for the above sum. Subsequently a revised return was filed on 5-12-1983 showing an income of Rs. 3,16,740. The assessee then again revised the return and made the claim for Rs. 2 lacs - in other words the original claim was restored.
3. In September 1983, the Income-tax Department conducted raids under Section 132 of the Income-tax Act on the premises of certain persons who are alleged to be connected with a racket of making false claims under Section 80GGA by making bogus donations. The assessee's premises was also one of those which was searched and during the search operations, it came to light that the said sum of Rs. 2 lacs did not reach the Ramakrishna Vivekanand Mission (hereinafter referred to as 'Mission" for short). The conclusion of the Department was that the cheque issued in favour of the Mission was actually deposited in a fictitious account opened in the name of the Mission by a person not authorised by the Mission to operate such accounts. Enquiries made by the Department at the time of assessment of the Mission revealed that the Mission had no bank account in Delhi. The conclusion of the Department was that it was after the discovery of the bogus nature of the donation that the assessee revised return on 5-12-1983 withdrawing the claim for deduction. During the course of assessment proceedings, which were taken up much later, when a second revised return was filed restoring the claim for the deduction, a receipt issued by the said Mission bearing No. 000031 dated 28-3-1983 was produced for a sum of Rs. 1,98,000. Earlier a receipt for a sum of Rs. 2,000 was produced. On the production of this receipt, the Department made enquiries with the Mission. The Mission admitted that it received the amount of Rs. 1,98,000 in January 1986 and credited their donation account only in January 1986 in their Central Office books at Barrack pore, Calcutta.
The Mission, however, admitted that though they received the money in January 1986, they gave the receipt under the date 28-3-1983 and explained the circumstances as to why it had to issue the receipt under back-date of 28-3-1983. The claim of the assessee is that the cheques were handed over to Mr. Mehra who was authorised to collect the donations and since Mr. Mehra had withdrawn the money from the Bank, but misappropriated it to the extent of Rs. 1,98,000 by defrauding the Mission, the assessee could not be found fault with, since the donation was genuinely made for the benefit of the Mission. If a person had in the meantime defalcated, the assessee should not be punished for that.
That the middleman Mr. Mehra had defalcated the money was proved by the fact that Mr. Mehra remitted the money to the Mission in 1986 and the Mission had owned up the defalcation by Mr. Mehra which was proved by the correspondence that had taken place between the assessee, the department and the Mission. Since the Mission had accepted that the donations given to them were misappropriated by their agent, it could not be said that the assessee did not make a donation or made a false and a fictitious donation. But the Income-tax Officer rejected the assessee's contentions, declined to place any reliance on the receipt dated 28-3-1983 as proof of the donation having a bearing in the assessment year 1983-84. The Income-tax Officer also made a mention of the expiry of the approval given by the Commissioner of Income-tax-I, West Bengal to the Mission to hold that since the purpose for which the donation under Section 80GGA was allowed had expired, the receipt given by the Mission could not be of any avail to the assessee. The Income-tax Officer thus concluded that the claim made by the assessee for the deduction of the donation under Section 80GGA was a bogus claim intended to conceal his income by furnishing inaccurate particulars.
Therefore, he accepted the income returned in the first revised return of Rs. 3,16,740 which meant disallowing the donation.
4. There was then an appeal before the Commissioner of Income-tax who virtually agreeing with the Income-tax Officer's view confirmed the disallowance. He held that the assessee never intended to give any genuine contribution to the Mission in March 1983 and that if at all any contribution was made to the Mission, it was only in January 1986 and not earlier. However, since an amount of Rs. 2,000 was paid by the middleman Mr. Mehra to the Mission in March 1986 on behalf of the appellant and since he also issued a receipt for that, the Commissioner of Income-tax held that the assessee would be entitled to deduction under Section 80GGA only to the extent of Rs. 2,000.
5. It was against this order of the Commissioner of Income-tax (A) that the present appeal was filed by the assessee, urging that on the facts and in the circumstances of the case, the disallowance of the claim of the assessee for the deduction of Rs. 1,98,000 under Section 80GGA was totally untenable, uncalled for and unjust.
6. The point made on behalf of the assessee was that when the assessee issued the cheques to a person authorised by the Mission to accept donations, he bona fide believed that he was genuinely making a donation to the Mission and never expected that there would be defalcation by the middleman and that he would be thrown into this kind of a mess. He further stated that the Department had viewed the entire transaction with a suspicion all because of a generalised belief that existed at the relevant time that people were making false claims under Section 80GG A for getting tax exemption. The Department, he claimed, should have judged the issue on the merits of this case, disassociating it in toto with the general prejudice. When cheques were issued by the assessee and they were encashed and his bank account was debited, the sum involved therein had irretrievably gone out of the assessee's hands and the mere fact that the Mission received the money from its agent after a period of time, misappropriating the money in the meantime does not lend credence to the view that the assessee had not made the donation or made a false claim of donation or made the donation in the year in which the Mission was able to recover the money from its agent.
As there was no gainsaying of the fact that money was handed over by the assessee in good faith to the agent of the Mission, the Department should not have taken any view other than accepting the claim made on behalf of the assessee in all good faith.
7. The Departmental Representative on the other hand relying very strongly upon the orders of the Income-tax Officer, the Commissioner of Income-tax and the correspondence and other circumstances, emphasized that the assessee never intended to make the donation and as a consequence of the search that was conducted in his premises, he somehow got over Mr. Mehra as well as the Mission and got the money deposited with the Mission in January 1986 and managed to get a receipt of the date of 28-3-1983, all with a view to create evidence of a genuine donation without ever making a genuine donation. If the search had not been conducted in the premises of the assessee, the assessee would have walked away with getting the deduction for this sum defrauding thereby the Revenue. Since the search had exposed the assessee the evidence created by the assessee subsequent to the search should not be relied upon as genuine, supporting the claim of the assessee. He, therefore, defended the view taken by the authorities below in rejecting the claim of the assessee. He also laid great emphasis on the filing of two revised returns - one as soon as the Department came to know about the falsification of the claim and secondly, after he was able to manage the middleman of the Mission to get them agree to the donation. He concluded his arguments by urging that the entire transaction should be seen in the light of the discoveries made during the search.
8. In our opinion, certain amount of prejudice appear to have crept in into the appraisal of the evidence produced by the assessee in support of his claim. In the normal course when a cheque was issued by the assessee in favour of the Mission, he is entitled to expect that the proceeds of the cheque would go to the Mission, after they were encashed. For us to conclude that the assessee made a false claim of donation for getting an unjust deduction under Section 80GG A, we have to assume, in other words we are asked to assume that the assessee, the agent Mr. Mehra, and the Mission have colluded to defraud the Revenue.
Apart from the fact that there is not even an iota of evidence to support the theory of collusion, it is well-nigh impossible even to entertain an idea that a noble, a pure Institution like Ramakrishna Vivekanand Mission established for the propagation of the vedic thoughts and knowledge among the people nationally and internationally existing for so many decades having earned the glory and fame of a noble organisation serving the cause of public by noble and dedicated persons, would involve themselves either directly or indirectly for the sake of a paltry sum of donation to collude with the Department by breaking their moral values, conventions and the trust and faith reposed in them by the public, particularly after the claim of the department that it had discovered a kind of a fraud being perpetrated against the revenue with the connivance of Trusts and funds. This is an unthinkable proposition. One can believe that an ordinary person, with a view to enrich himself for his private gain may indulge in such kind of unholy and unethical practices but to assume that a renowned Mission like Ramakrishna Vivekanand Mission is also included in it is extremely difficult to believe, and even a sacrilege.
9. Apart from that the evidence on record shows that the Ramakrishna Vivekanand Mission had accepted the mischief done by its agent, the misappropriation of money made by Mr. Mehra and its success in recovering the money from Mr. Mehra, its agent. When the Mission received the money from its agent in January 1986 it credited the sum in its books of account only then and not earlier. Therefore, crediting of the, sum in the books of the Mission in 1986 does not support the contention of the Department in any manner. Receipt of money by the Mission from its agent is not the date of receipt of the donation by the assessee. Insofar as the assessee is concerned, the date of donation is the date when he issued the cheque not even the date of encashment of the cheque, provided the cheque was issued (a) in favour of the Mission, (b) either to the Mission or to its authorised agent, (c) the cheque was encashed and (d) absence of any proof even a suggestion that the money so encashed had come back to the assessee in one form or the other.
The correspondence and the evidence on record more than clearly established that the facts mentioned at (a), (b) and (c) are proved and (d) was not at all even attempted to be proved. Therefore, the conclusion can only be that the assessee issued in all good faith and with a genuine desire to help the laudable cause of the Mission, a donation of a sum ofRs.21acs and was waiting for the receipt from the Mission. It may be that the assessee wanted to take advantage of the relief provided under the Income-tax Act if donations were made to the specified Institutions for specified purposes as stipulated under Section 80GGA. This desire to help a cause and to gain advantage in tax as provided for in the Income-tax Act cannot be frowned upon. The facts now emerge on the basis of the evidence produced before us is that the money reached the Mission, though late in January 1986, and the Mission admitted that it received the money and there was defalcation of the money by its agent for which it expressed its regrets. It is also to be remembered that the Department has not been able to prove that the assessee gave the money to the Mission in January 1986 nor is it the case of the Revenue that the cheque issued by the assessee in 1983 was encashed and the money was received by the assessee out of the proceeds of the cheque and that money was given to the Mission in January 1986.
The entire evidence in this case, copies of which are not reproduced here in this order, was looked upon with coloured glasses and not straight.
10. However, we would like to refer to in brief certain important letters which would show how we were persuaded to come to the above conclusion, that the assessee made a genuine donation in all good faith on 22-3-1983. On 3-3-1986 the representatives of the assessee addressed a letter to the Income-tax Officer reproducing therein a copy of the authorisation issued by the Mission in favour of Mr. Vipin Mehra to collect donations. That letter clearly said that the Mission had decided to open a branch centre in Delhi with a view to render services to the people belonging to the weaker section of the society in the light of the teachings of Shri Ramakrishna Vivekananda, i.e., worship of God in man, Shiva in Jiva. Then the letter proceeded to say that "the governing body of the Ramakrishna Vivekananda Mission have authorised and requested Mr. Vipin Mehra of D-9/19, Model Town, Opp.
Gurdwara, Delhi-110 009 to contact people and receive contributions against receipts for this purpose on behalf of the Mission". This letter was signed by Swami Nityan and, Secretary to the Mission.
Thereafter a certificate was issued by the Mission certifying that a sum of Rs. 2 lacs was collected by Mr. Vipin Mehra on behalf of the Mission towards Rural Development Programme from the assessee. The certificate was in the following words and this was also conveyed to the Income-tax Officer by the same letter referred to above: This is to certify that a sum of Rs. 2 lacs (Rs. two lacs only) was collected by Sh. Vipin Mehra of D-9/18, Model Town, Delhi - 9 on 25-3-1983 on behalf of the Mission towards Rural Development Programme from one Sh. N.R. Dongre of D-7/5, Vasant Vihar, Delhi - It was then pointed out to the Income-tax Officer in that letter that since the payment was made to an approved Institution under Section 35CCA, the assessee was eligible for the deduction of the sum under Section 80GGA by pointing out that what happened between the authorised representative of the Mission and the Mission was a matter wholly irrelevant for the purpose of determining whether the assessee was eligible for the deduction under Section 80GGA of the Act. It is also noteworthy that the Mission addressed letters directly to the Commissioner of Income-tax, Delhi-Ill New Delhi and also to the Chief Commissioner of Income-tax, West Bengal that the assessee is entitled to the deduction under the provisions of Section 80GGA for the assessment year 1983-84, These facts were not controverted anywhere by the Department except drawing adverse conclusions based upon suspicions.
11. The assessee received on 5-12-1983 a registered letter dated 3-12-1983 from the Mission stating that they received a donation of Rs. 2,000 and asked for his confirmation. The assessee was then shocked to learn the situation and pending further enquiries in the matter, hastened to file a revised return on 5-12-1983 itself withdrawing the claim for deduction for donation under Section 80GGA. This return was filed, it is to be remembered, long before the assessment for this year was taken up or before any intimation was given to the assessee by or from the Department. The assessee then learnt through his own sources that the authorised representative has misappropriated the Mission's funds and submitted to the Mission only a part of the donation.
Thereafter the assessee requested the Mission to issue a receipt for the entire sum of Rs. 2 lacs urging that since he handed over the cheque to the authorised agent, the non-recovery of any part thereof could only be a matter between the Mission and its authorised agent and the assessee should not be deprived of the benefit for the wrongs done by its agent. The Mission generously accepted its responsibility and assured the assessee to look into the matter and redress his grievance.
Ultimately when the efforts succeeded and the balance amount of Rs. 1,98,000 was also paid back by the authorised representative Shri Mehra to the Mission, the Mission issued two official receipts in favour of the assessee confirming the receipt of the donations. One receipt was bearing No. 000026 dated 25-3-1983 for Rs. 2,000 and another receipt bearing No. 000031 dated 28-3-1983 for Rs. 1,98,000. The issue of the receipt by the Mission under date 28-3-1983, though in 1986 prove not only the acceptance of the fact that the donation given by the assessee was received by its agent in March 1983 but also ratified the act of the agent. As soon as the assessee was able to get the receipt from the Mission, the assessee revised its claim for deduction by filing another revised return. Therefore, the filing of these revised returns should not be seen as if they are to cover up a sinister act done by the assessee but to prove his bona fides. When the assessee knew that his donation did not reach the Mission, in all good faith, he withdrew the claim. When he was able to succeed in convincing the Mission that the money was given by him to its agent in 1983 and when the Mission accepted this and ratified the act, he revived the claim. Therefore, nothing turns upon the filing of these revised returns as militating against the claim of the assessee. Unfortunately the Department had looked upon the filing of the revised returns not in a proper perspective. It is to be remembered that the basic law of contracts is that an act of an agent is an act done by the principal and the principal when he ratifies the act it becomes an act done by himself under the law. The ratification by the Mission of the act of the agent not having been proved to be a bogus affair or a sham affair it has to take its effect which is establishment of the fact that there was a genuine donation made in March 1983 in all good faith. We do not wish to burden this order with the relevant law on the subject as it is accepted during the course of hearing before us about the legal position. The payment made by the assessee to the agent having been ratified by the Mission, it should be taken as payment to the Mission itself in 1983 and the fact that the agent misappropriated the money in the meantime cannot be taken as a ground to say that the assessee did not make the payment to the Mission. In this context the letter written on 6-2-1986 by the Mission to the Chief Commissioner of Income-tax, Calcutta, to which we have alluded to above, categorically admits that Mr. Mehra collected the funds from the assessee and misappropriated the same by showing only Rs. 2,000 in the counterfoil and that the Mission came to know about it only through the Newspapers and after persuasions succeeded to recover the money from him only in January 1986. We fail to see what more is needed to prove the assessee's claim than the unequivocal admission by the Mission about the claim of the assessee that he was cheated by the agent of the Mission.
12. Ramakrishna Vivekananda Mission wrote a letter to the assessee on 18-1-1986, which is very touching and sincere and we wish to reproduce it below: The episode relating to Mr. V.K. Mehra's collection of funds from you, cheating you and the Mission totally has come to an end by the immense grace of the Lord through your continuous efforts. lean understand the strain and trouble you had to take on this account and I must say that it is only because the money was meant for poorest of poor of our country to be spent through an Institution standing in the holy names of Sri Ramakrishna and Vivekananda that your efforts have been successful cent per cent.
A Receipt for Rs. 2,000 bearing No. 000026 dated 25-3-1983 was supposed to have been issued to you by Mr. Mehra under Section 35CCA of Income-tax Act, a certificate for which held at that time.
Subsequently, it appeared that Mr. Mehra collected Rs. 2,00,000 from you, paid us Rs. 2,000 after writing Rs. 2,000 only in the counterpart of the Receipt above, photocopy of which we sent to you, and did not give you the other part of the Receipt at all and thus he managed to appropriate the balance money, practically the whole amount of Rs. 1,98,000 for his personal benefit. It came up in the Newspapers and we also wrote to you and Mr. Mehra and there were correspondences on this issue but without any effect so far.
Now that Mr. Mehra has come down to the track and has paid Rs. 1,98,000 to the Mission by the Demand Draft drawn on the State Bank of India, Barrackpore Branch, bearing No. AA987075 dated 15-1-1986 for Rs. 1,98,000.1 enclose herewith a Receipt bearing No. 000031 dated 28-3-1983 for Rs. 1,98,000 under Section 35CCA and give a certificate to that effect which will help you to claim 100 per cent deduction of your Income-tax during the assessment year 1983-84.
This letter proves beyond doubt the genuineness of the assessee's claim. Like this, there is enough of material on record to prove the assessee's claim beyond any shadow of doubt. We are, therefore, of the opinion that the view taken by the authorities below on this issue is erroneous on facts and the assessee was unfairly deprived of the benefit of the deduction of the claim under Section 80GGA.13. The discussion about the exhausting of the time limit for the purpose of grant of deduction under Section 80GGA read with Section 35CCA for earning the exemption need not be discussed in the light of the view that we are taking that the donation was complete in 1983 by when the exemption granted was in full force. We, therefore, allow the assessee's appeal.