Neelachal Institute of Medical Sciences, Cuttack V. ITO, Bhubaneswar

CO 7/CTK/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9683 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 31-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: S N SAHU
• Keywords: Depreciation; Charitable institution; Principle of natural justice; Corroborative evidences; Assessment record
• Section: 40A(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI P.K.BANSAL (AM) AND D.T.GARASIA (JM) I.T.A. NO. 580 /CTK/2012 ASSESSMENT YEAR: 2009-2010 ITO, WARD-1(4), BHUBANESWAR. VS NEELACHAL INSTITUTE OF MEDICAL SCIENCES, BHUBANESWAR. PAN. NO .AAATN 5290 M APPELLANT RESPONDENT C.O. NO. 007/CTK/2013 (ARISING OUT OF I.T.A. NO. 580 /CTK/2012) ASSESSMENT YEAR: 2009-2010 ITO, WARD-1(4), BHUBANESWAR. VS NEELACHAL INSTITUTE OF MEDICAL SCIENCES, BHUBANESWAR. PA N NO. AAATN 5290 M APPELLANT RESPONDENT FOR THE ASSESSEE : SHRI S.N.SAHU FOR THE REVENUE: SHRI N.K.NEB DATE OF HEARING: 23. 4.2014 DATE OF PRONOUNCEMENT: 27/ 6/2014 ORDER PER BENCH: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST ORDER DATED 18.9.2012 OF LD CIT(A)- 1, BHUBANESWAR FOR THE ASSESSMENT YEAR 2009-2010. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION. 2. GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING THE AO TO ALLOW DEPRECIATION ON MOTOR BUS @ 30% IN PLACE OF 15% ALLOWED BY THE AO. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.44,790/- MADE BY THE AO ON ACCOUNT OF DELAY IN DEPOSIT OF EPF. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING RELIEF OF RS.42,04,865/- TO THE ASSESSEE IN REGARD TO THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF EXPENDITURES DUE TO LACK OF SUPPORTING EVIDENCES. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN ITS CROSS OBJECTION: 1. THAT THE INCOME RETURNED BY THE APPELLANT SHOULD HAVE BEEN ACCEPTED BY THE LEARNED CIT (A) IN VIEW OF THE FACTS THAT THE ASSESSEE MAINTAINS PROPER AND COMPLETE BOOKS OF ACCOUNTS IN ACCORDANCE WITH PROVISION OF IT. ACT DULY AUDITED U/S. 44AB OF THE ACT AND NO ADVERSE OBSERVATION HAVE BEEN POINTED OUT BY THE AUDITOR. [PUSHPANJALI DYEING & PRINTING MILLS [P] LTD VS. JCIT, 72 TT] 886 [AND), APOLLO TYRES LTD VS. CIT, 255 ITR 273 [SQ] 2.THAT THE ACCOUNTS HAVING BEEN PROPERLY AUDITED AND REASONS FOR SUCH EXPENSES EXPLAINED IN THE WRITTEN SUBMISSION SUBMITTED ON BEHALF OF THE ASSESSEE, THE ID. CIT(A) IS NOT JUSTIFIED IN SUSTAINING ADHOC DISALLOWANCES OF RS. 10,00,000/-. THAT THE CIT(A) IS NOT JUSTIFIED IN SUSTAINING DISALLOWANCES OF RS. 10,00,000/-OUT OF DISALLOWANCE OF RS. 52,04,865/- MADE BY THE LEARNED AO IN AN ADHOC BASIS AND HE SHOULD HAVE ALLOWED THE ENTIRE CLAIM MADE BY THE ASSESSEE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT NO COGENT REASONS GIVEN BY THE AO FOR MAKING DISALLOWANCES. THE DISALLOWANCES MADE BEING BASED ON CONJUNCTURE AND SURMISES CANNOT BE SUSTAINED. CASE LAW RELIED UPON ARE AS UNDER :- (A) LARVIDS KNUDSEN MANKIN FABRIK LTD VS. AC1T, 102 TT] 882 (PUNE) (B) SAYAJI IRON & ENGINEERING CO. VS. CIT, 172 CTR 339, 253 ITR 749 [GUJ] (C) A.P. INDUSTRIAL COMPANIES LTD, 74 TT] 272. (D) ANIL L. SHAH VS. AC1T, 95 TT] E) CIT VS. INDIA GULTINE & CHEMICALS LTD, 194 CTR 492, 275 ITR 284 (GUJ] 5. THAT THE DISALLOWANCES MADE WERE ARBITRARY AND WITHOUT ANY MATERIAL ON RECORD. IT IS SETTLED LAW THAT SUSPICION HOWSOEVER STRONG CANNOT TAKE THE PLACE OF EVIDENCE OR PROOF. 6. THAT PAYMENT OF EPF WAS MADE ON THE BASIS OF DEMAND RAISED BY THE DEPARTMENT THEREFORE THE LEARNED C1T(A) APPRECIATING THE FACT HAS RIGHTLY DELETED ADDITION MADE BY THE AO. 3 7. THAT THE EMPLOYEES PROVIDENT FUND (EPF) ORGANIZATION DIRECTED THE ASSESSEE TO DEDUCT EPF W.E.F. 02-04-2008 AND IN COMPLIANCE TO THE SAID DIRECTION THE ASSESSEE IMMEDIATELY COLLECTED EPF FROM THE EMPLOYEES FROM APRIL, 2008 TO ]UNE, 2009 AND DEPOSITED THE SAME IN THE MONTH OF FEBRUARY WITHIN THE DUE DATE, THEREFORE THERE WAS NO VIOLATION OF EPF ACT AND SECTION 40A(3) IN DEPOSITING THE DEDUCTION MADE WITHIN THE DUE DATE. THEREFORE APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED C1T(A) WAS VERY MUCH JUSTIFIED IN DELETING OF RS. 44,790/- HENCE THE DEPARTMENT SHOULD NOT HAVE ANY GRIEVANCE TO COME IN FILING 2ND APPEAL AGAINST SUCH CORRECT DECISION. 8. THAT THE MOTOR BUSES TRANSPORTING STUDENTS IS BEING COMMERCIAL VEHICLES IN ACCORDANCE WITH M.V. ACT, 1988, THE EDUCATIONAL INSTITUTION BUSES USE FOR CARRYING OF STUDENTS ARE COMMERCIAL VEHICLES. THEREFORE HAVING APPRECIATED THE MISTAKE COMMITTED BY THE AO THE LEARNED C1T(A) HAS CORRECTLY DIRECTED TO ALLOW DEPRECIATION @ 30% HENCE THE DEPARTMENT SHOULD NOT HAVE ANY GRIEVANCE AGAINST TO COME UP IN APPEAL AGAINST THE CORRECT ORDER BEFORE THE L.TA.T. 3. BRIEF FACTS OF THE CASE ARE LIKE THIS. THE ASSESSEE IS RUNNING AN EDUCATIONAL INSTITUTION IN THE FIELD OF NURSING, BIOTECHNOLOGY AND PHYSIOTHERAPY. THE RETURN OF INCOME WAS FILED ON 30.10.2009 DECLARING TOTAL INCOME OF RS.11,83,750/-. A SURVEY ACTION UNDER SECTION 133A WAS CONDUCTED ON 26.3.2009 IN THE PREMISES OF THE ASSESSEE. THE ASSESSEE INSTITUTION DOES NOT APPEAR TO BE APPROVED U/S.10(23C)(VI) OR REGISTERED U/S.12AA OF THE ACT. THE INCOME OF THE INSTITUTION IS NOT EXEMPT FROM TAXATION; HENCE, THE INCOME OF THE ASSESSEE IS TO BE COMPUTED IN THE MANNER OF COMPUTATION OF INCOME FROM BUSINESS. THE ASSESSING OFFICER COMPUTED THE ASSESSMENT UNDER SECTION 143(3), INTER ALIA, MAKING FOLLOWING DISALLOWANCES: I) DEPRECIATION OF RS.48,421/- II) DISALLOWANCE OF EPF OF RS.44,790/- III) ADHOC DISALLOWANCE OF RS.52,04,865/- 4. BEING AGGRIEVED, THE ASSESSEE CARRIED IN APPEAL BEFORE THE CIT(A). THE CIT(A) DELETED THE DISALLOWANCE IN RESPECT OF DEPRECIATION OF RS.48,421/- AND RS.44,790/-. HOWEVER, WITH REGARD TO ADHOC DISALLOWANCE OF RS.52,04,865/- DUE TO LACK OF SUPPORTING EVIDENCE, THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS.10,00,000/-. HENCE, THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS FILED CROSS OBJECTION WITH REGARD TO SUSTENANCE OF RS.10,00,000/-. 4 5. GROUND NO.1 OF THE DEPARTMENT AND GROUND NO.8 OF CROSS OBJECTION IS SIMILAR. HENCE, WE DISPOSE OF THE SAME TOGETHER. 6. ON PERUSAL OF THE DETAILS OF FIXED ASSETS SCHEDULE AND THE DEPRECIATION CHART, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION TO THE TUNE OF RS.2,34,460/- ON MOTOR VEHICLES FOR TRANSPORTING STUDENTS. THE ASSESSEE HAS COMPUTED DEPRECIATION @ 30% ON W.D.V. THE AO WAS OF THE VIEW THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATION @ 15% ON W.D.V. AND ACCORDINGLY MADE THE DISALLOWANCE @ 15% AMOUNTING TO RS.48,421/- AND ADDED THE SAME TO THE TOTAL TURNOVER. LD CIT(A) HAS ALLOWED THE DEPRECIATION @ 30%. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD OF THE CASE. WE FIND THAT THE ASSESSEE HAS USED THE BUSES FOR TRANSPORTING THE STUDENTS, WHICH ARE COMMERCIAL IN NATURE, THEREFORE, ENTITLED FOR DEPRECIATION @ 30/-. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DIRECTING THE AO TO ALLOW DEPRECIATION @ 30% ON THE MOTOR BUSES. GROUND NO.1 OF THE DEPARTMENT IS DISMISSED AND GROUND NO.8 OF CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 8. GROUND NO.2 TAKEN BY THE DEPARTMENT IS SIMILAR TO GROUNDS OF OBJECTION NO.6 & 7 TAKEN BY THE ASSESSEE. 9. THE ASSESSING OFFICER HAS VERIFIED THE EMPLOYEES PROVIDENT CONTRIBUTION AND FOUND THAT THE ASSESSEE HAS RECEIVED PROVIDENT FUND FROM THE EMPLOYEES TOWARDS THEIR EPF, WHICH WAS NOT DEPOSITED WITHIN THE SPECIFIED DUE DATE UNDER THE EPF ACT. THE AO HAS VERIFIED THE STATEMENT SHOWING DETAIL OF EPF CONTRIBUTION AND DEPOSIT THEREOF. FROM THE SAID STATEMENT, IT WAS FOUND THAT THE ASSESSEE HAS COLLECTED AN AMOUNT OF RS.54,150/- TOWARDS EPF OUT OF WHICH RS.44,790/- HAS NOT BEEN DEPOSITED IN THE FUND WITHIN THE DUE DATE SPECIFIED IN THE ACT. THEREFORE, THE AO TREATED AN AMOUNT OF RS.44,790/- AS INCOME U/S.2(24)(X) R.W.S. 36(1)(VA) OF THE ACT AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN THE FIRST APPEAL, LD CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE ADDITION MADE BY THE AO. 10. WE HAVE HEARD BOTH PARTIES AND CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT BEFORE THE CIT(A), ASSESSEE HAS SUBMITTED A LETTER DATED 23.12.2008 OF EPFO, WHICH CONTAINS THE DIRECTION TO THE ASSESSEE TO DEDUCT THE EFP W.E.F. 2.4.2008. AS SOON AS THE DIRECTION RECEIVED BY THE ASSESSEE, THE EPF DUES COLLECTED FROM THE EMPLOYEES FOR THE MONTH 5 OF APRIL, 2008 TO JANUARY, 2009 WERE DEPOSITED IN THE MONTH OF FEBRUARY, 2009. HENCE, THERE IS NO VIOLATION OF EPF ACT. IN VIEW OF THIS, WE ARE OF THE OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD CIT(A). HENCE, GROUND NO.2 OF THE DEPARTMENT IS DISMISSED AND CROSS OBJECTION TAKEN IN GROUND NOS.6 & 7 ARE ALLOWED. 11. GROUND NO.3 TAKEN BY THE DEPARTMENT AND CROSS OF OBJECTION TAKEN BY THE ASSESSEE IN GROUND NOS.1 TO 3 & 5 ARE SIMILAR. THEREFORE, WE DISPOSE OF THEM TOGETHER. 12. THE SHORT FACTS OF THE CASE ARE LIKE THIS. THE ASSESSEE HAS FILED AUDITED PROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. ON GOING THROUGH THE SAME, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SHOWN TOTAL RECEIPT OF RS.1,95,76,355/- AND CLAIMED TOTAL EXPENDITURE OF RS.1,84,31,044/- AND NET PROFIT HAS BEEN SHOWN AT RS.11,45,311/-. DURING THE COURSE OF SURVEY OPERATION ON 26.3.2009, THE SURVEY PARTY OBTAINED THE BALANCE SHEET AND PROFIT LOSS ACCOUNT AS ON 25.3.2009 UNDER THE SIGNATURE OF GANGADHAR PATI, DEVELOPMENT OFFICER OF THE ASSESSEE INSTITUTION. IN THE PROFIT AND LOSS ACCOUNT PREPARED ON 25.3.2009, THE ASSESSEE HAS SHOWN GROSS RECEIPT OF RS.1,64,58,762/- AND CLAIMED EXPENDITURE UNDER VARIOUS HEADS TO THE TUNE OF RS.81,28,923/- AND NET PROFIT WAS SHOWN AT RS.83,29,839/-. THEREFORE, A SHOW CAUSE NOTICE WAS GIVEN AND THE AO HAS VERIFIED THE RECEIPT AND EXPENDITURE. HE WAS OF THE VIEW THAT THE ASSESSEE HAS CLAIMED EXCESS EXPENDITURE OF RS.81,48,653/-. THEREFORE, THE AO HAS CALLED FOR THE BOOKS OF ACCOUNT AND TRIED TO VERIFY THE INCOME AND EXPENDITURE ACCOUNT. AO HAS VERIFIED THE BANK STATEMENT, TDS CERTIFICATE, SALARY REGISTER AND AFTER VERIFICATION, THE AO WAS OF THE VIEW THAT THE EXPENDITURE TO THE EXTENT OF RS.52,04,865/- UNDER THE FOLLOWING HEADS, WHICH READS AS UNDER: 1.ANNUAL FUNCTION RS.2,49,715/- 2. CONSULTANCY FEES RS. 57,500/- 3. ORIENTATION & FAREWELL RS.27,215/- 4. REPAIR & MAINTENANCE RS.7,06,834/- 5. SPORTS & CULTURAL EXPENSES RS.2,26,800/- 6. STIPEND & SCHOLARSHIP RS.3,25,584/- 6 7. STUDENT WELFARE RS.3,31,380/- 8. STUDENTS UNIFORM RS.1,12,744/- 9. TRAVELLING EXPENSES RS.92,051/- 10. WELCOME CEREMONY RS.40,000/- 11. PRINTING & STATIONERY RS.1,25,448/- 12. HOSTEL EXPENSES RS.6,12,218/- 13. SALARY RS.22,62,340/- 14. SEMINAR CHARGES RS.35,036/- TOTAL RS.52,04,865/- 13. THE ASSESSING OFFICER WAS OF THE VIEW THAT WHILE VERIFYING THE EXPENDITURE VOUCHERS, IT WAS NOTICED THAT ALMOST ALL THE EXPENDITURE VOUCHERS ARE SELF MADE AND NOT PROPERLY VOUCHED AND EXPENDITURE VOUCHERS HAVE BEEN PREPARED WITHOUT SUPPORTING EXPENDITURE BILLS. KEEPING ALL THE MATERS IN VIEW, THE AO DISALLOWED EXCESS EXPENDITURE TO THE TUNE OF RS.52,04,865/-. 14. IN THE FIRST APPEAL, THE CIT(A) RESTRICTED THE DISALLOWANCE FROM RS.52,04,865/- TO RS.10 LAKHS TO THE ASSESSEE, INTER ALIA, OBSERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE MATTER. I HAVE GONE THROUGH THE ASSESSMENT RECORD WHEREIN A CHART IS AVAILABLE SHOWING DISALLOWABLE ITEMS. THE CHART SHOWS TOTAL EXPENDITURE ITEMS AS ON 31.3.2009, EXPENDITURE ITEM AS ON 25.3,2009 (DATE OF SURVEY), VOUCHERS NOT ENTERED FOR THE PERIOD BEFORE SURVEY AND EXPENSES ALLOWED IN THE ASSESSMENT ORDER. ACCORDING TO THE SAID CHART, EXCEPT ITEMS UNDER THE HEADS SEMINAR CHARGES, HOSTEL &. CANTEEN EXPENSES AND SALARY IN RESPECT OF ALL OTHER ITEMS OF EXPENDITURE, THE DISALLOWANCE IS EQUAL TO VOUCHERS NOT ENTERED AS ON DATE OF SURVEY FOR THE PERIOD 1.4.2008 TO 25.3.2009 (DATE OF SURVEY). THE EXCEPTION MADE IN RESPECT OF SEMINAR CHARGES, HOSTEL & CANTEEN EXPENSES AND SALARY EXPENSES HAVE NOT BEEN DISCUSSED. THE AO HAS NOT ELABORATED THE FACTS BEFORE DISALLOWANCE EXCEPT GENERALLY OBSERVING THAT THE EXPENDITURE IS NOT PROPERLY VOUCHED AND SELF-MADE. THERE ARE CERTAIN EXPENDITURES FOR WHICH RECEIPTS MAY NOT BE AVAILABLE IN THE MARKET LIKE, BUYING VEGETABLE FROM THE MARKET FOR RUNNING THE MESS. CERTAIN LABOUR CHARGES AND SMALL EXPENDITURE ALSO NEED TO BE SELF-VOUCHED. THE AO DISALLOWED STIPEND TO STUDENTS OR SCHOLARSHIP TO STUDENTS WITHOUT MAKING ANY VERIFICATION WITH THE STUDENTS. IN FACT, AS EXPLAINED BY THE APPELLANT, AN AMOUNT OF RS.2,00,557/- HAS BEEN PAID AS SCHOLARSHIP TO THE STUDENTS BY CHEQUES, DETAILS OF WHICH HAVE BEEN FILED. SUBSIDY WAS RECEIVED 7 FROM THE GOVERNMENT IN RESPECT OF SCHOLARSHIP FOR SC/ST STUDENTS. STIPEND TO THE STUDENTS STAYING IN HOSTEL HAS BEEN PAID IN CASH WHICH IS QUITE REASONABLE. IT S SEEN THAT MAJOR AMOUNTS UNDER THE HEAD REPAIR & MAINTENANCE HAVE BEEN PAID IN CHEQUES. ACCORDINGLY, THE AOS OBSERVATION IS ALSO NOT CORRECT WHEN HE OBSERVES THAT EXPENDITURES WHICH HAVE BEEN DISALLOWED ARE NOT PROPERLY VOUCHED OR SELF-MADE. EVEN SUBSTANTIAL PORTION OF SALARY HAS BEEN DISALLOWED WITHOUT MAKING ANY ENQUIRY. UNDER SUCH CIRCUMSTANCES, THE AO HAS BEEN VERY CAPRICIOUS IN DISALLOWING THE CLAIM OF THE APPELLANT AND THE DISALLOWANCES ARE NOT REASONABLE BY ANY STANDARD. HOWEVER, IT CANNOT BE DENIED THAT THE APPELLANT HAS PREPARED SELF-MADE VOUCHERS AFTER THE SURVEY AND CASH EXPENDITURES BEEN INCURRED FOR WHICH EXCESSIVE CLAIM CANNOT BE RULED OUT. UNDER THE CIRCUMSTANCE MEET THE ENDS OF JUSTICE, A REASONABLE ESTIMATE IS REQUIRED TO BE MADE TO DISALLOW EXPENDITURE ON ACCOUNT OF EXCESSIVE CLAIM. THE MADHYA PRADESH HIGH COURT IN THE CASE OF G PRASAD SHARMA VS CIT, REPORTED IN [1981] 132 ITR 0087, HAS OBSERVED THAT, IT IS SETTLED THAT WHILE MAKING A BEST JUDGMENT ASSESSMENT, THOUGH THERE MUST NECESSARY BE GUESS-WORK IN THE MATTER, IT MUST NOT BE ARBITRARY. THE HON'BLE SUPREME COURT IN THE CASE OF KACHWALA GEMS VS. JCIT REPORTED IN 288 ITR 010 [2007] HAS OBSERVED THAT AUTHORITIES CONCERNED SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF INCOME EVEN BEST JUDGEMENT, EVEN THOUGH THE FAULT FOR BEST JUDGEMENT ASSESSMENT LIES WITH ASSESSEE. ACCORDINGLY, IN A NORMAL ASSESSMENT IF ESTIMATE IS NECESSARY IN VIEW OF LACI PROPER EVIDENCES AND VOUCHERS WHEN BOOKS OF ACCOUNTS ARE BEING MAINTAINED, MORE CAR NECESSARY FOR UNDERTAKING ESTIMATE WHICH SHOULD BE REASONABLE AND PROPORTION . CONSIDERING THE FACTS AND CIRCUMSTANCES AND PREPARATION ACCOUNTS AFTER THE SURVEY DISALLOWANCE OF RS. 10,00,000/- ON ACCOUNT OF EXCESSIVE CLAIM OF EXPENDITURE WOULD THE ENDS OF JUSTICE. THUS, THE DISALLOWANCE OF RS.52,04,865/- IS RESTRICTED TO RS.10,00,000/-. 15. THUS, THE DEPARTMENT IS IN APPEAL AGAINST RESTRICTING THE ADDITION FROM RS.52,04,865/- TO RS.10,00,000/-. IN THE CROSS OBJECTION, THE ASSESSEE HAS OBJECTED TO THE RESTRICTING THE ADDITION TO RS.10,00,000/-. 16. LD D.R. SUBMITTED BEFORE US THAT THE ASSESSEE TRUST IS NOT CHARITABLE TRUST OR EDUCATIONAL INSTITUTION. THERE WAS A SURVEY OPERATION IN THE PREMISES OF THE ASSESSEE ON 26.3.2009 AND PROFIT AND LOSS ACCOUNT AND BALANCE SHEET AS ON 25.3.2009 WAS OBTAINED FROM THE ASSESSEE UNDER THE SIGNATURE OF DEVELOPMENT OFFICER OF THE ASSESSEE TRUST. IN THAT PROFIT AND LOSS ACCOUNT, ASSESSEE HAS CLAIMED EXPENDITURE TO THE TUNE OF RS.81,28,926/- AND NET PROFIT WAS SHOWN AT RS.83,29,839/-. HOWEVER, AFTER THE SURVEY, WHILE FILING THE RETURN OF INCOME, ASSESSEE HAS PREPARED PROFIT AND LOSS ACCOUNT, WHICH IS AUDITED AND THE ASSESSEE HAS CLAIMED TOTAL EXPENDITURE OF RS.1,84,31,044/- DURING THE COURSE OF SURVEY, HE HAS CLAIMED EXPENDITURE OF RS.81,28,923/- ONLY. THE AO HAS VERIFIED THE BANK STATEMENT, TDS CERTIFICATE, AND SALARY REGISTER AND AFTER THE VERIFICATION OF ALL EXPENDITURES, SOME OF THE EXPENDITURE COULD NOT BE 8 VERIFIED, THEREFORE, THE AO HAS SPECIFICALLY DISALLOWED THE EXPENDITURE. THE CIT(A) IN HIS ORDER HAS HELD THAT THE ASSESSEE HAS PREPARED SELF MADE VOUCHERS AFTER THE SURVEY, AND CASH EXPENDITURES HAVE BEEN INCURRED FOR WHICH EXCESSIVE CLAIM CANNOT BE RULED OUT. THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN RESTRICTING THE EXPENDITURE TO RS.10 LAKHS AND URGED TO SUSTAIN THE ORDER OF THE AO. 17. ON THE OTHER HAND, LD A.R. SUBMITTED BEFORE US THAT INCOME RETURNED BY THE ASSESSEE SHOULD HAVE BEEN ACCEPTED BY THE CIT(A) IN VIEW OF THE FACT THAT ASSESSEE MAINTAINS PROPER AND COMPLETE BOOKS OF ACCOUNT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 44AB OF THE ACT AND NO ADVERSE COMMENTS HAVE BEEN POINTED OUT BY THE AUDITOR. HE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF APOLO TYRES VS CIT, (2002) 225 ITR 273 (SC.). LD A.R. SUBMITTED THAT THE CIT(A) IS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO RS.10 LAKHS. THE AO HAS NOT GIVEN ANY COGENT REASON FOR MAKING THE DISALLOWANCE. MOREOVER, ASSESSEE HAS PREPARED SELF MADE VOUCHERS FOR SOME OF THE VOUCHERS LIKE BUYING VEGETABLE FOR RUNNING THE MESS, CERTAIN LABOUR CHARGES AND SOME SMALL EXPENDITURE HAS TO BE SELF VOUCHED. ASSESSEE HAS ALSO PAID STIPEND TO STUDENTS OF SC/ST, WHICH WAS NOT VERIFIABLE AND SOME OF THE STUDENTS, STIPENDS WERE PAID IN CASH ALSO. THEREFORE, IN VIEW OF THESE FACTS AND CIRCUMSTANCES, AND WHEN THE COMMISSIONER OF INCOME TAX HAS VERIFIED ALL THESE ACCOUNTS THEN THE AO HAS NO POWER TO TAKE A DIFFERENT VIEW AS PER THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. ARVIND MILLS LTD., 314 ITRR 251 (GUJ). LD A.R. SUBMITTED THAT THE DECISION RELIED UPON BY LD CIT(A) IN THE IMPUGNED ORDER IN THE CASE OF CIT VS. MAHESH CHAND, 199 ITR247 (ALL) DOES NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE BECAUSE IT WAS A CASE WHERE DISALLOWANCES WERE MADE ARBITRARILY AND IT MUST BE WITH THE MATERIAL ON RECORD. HERE THE MATERIAL IS ON THE RECORD, EVERY VOUCHERS ARE ON RECORD, THEREFORE, THERE CANNOT BE ANY DISALLOWANCE. HENCE, THE DECISION RELIED UPON BY LD CIT(A) IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. MOREOVER, THE CASE OF GANGA PRASAD SHARMA VS CIT, 132 ITR 87 IS A CONTRACTORS CASE. THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS (SUPRA), WHEREIN, THERE WAS A FACTUAL DIFFERENCE, THEREFORE STOCK REGISTER WAS NOT MAINTAINED TO VERIFY THE CLOSING STOCK AND THE ASSESSMENT WAS MADE UNDER SECTION 144. IN THE CASE BEFORE US, THE FACTS ARE ALTOGETHER DIFFERENT. THEREFORE, THE ADHOC DISALLOWANCE OF RS.10 LAKHS DESERVES TO BE DELETED. HE RELIED UPON THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE OF RS.42,04,865/-. 9 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY CONSIDERED THE ORDERS OF AUTHORITIES BELOW. WE OBSERVE THAT THE AO HAS MADE A CHART OF RECEIPT ITEM AS ON 25.3.2009 AND EXPENDITURE ITEM AS ON 25.3.2009 I.E. THE DATE OF SURVEY. THE VOUCHERS WERE ENTERED FOR THE PERIOD BEFORE THE SURVEY AND EXPENDITURE AND EXPENSES WERE ALLOWED IN THE ASSESSMENT ORDER. ACCORDINGLY, THE SAID CHART EXCEPT ITEM UNDER THE HEAD SEMINAR CHARGES, HOTEL AND CANTEEN EXPENSES AND SALARY IN RESPECT OF OTHER ITEMS OF EXPENDITURE, THE DISALLOWANCE IS EQUAL TO VOUCHERS NOT ENTERED AS ON DATE OF SURVEY FOR THE PERIOD 1.4.2009 TO 25.3.2009 (I.E. DATE OF SURVEY). THERE ARE CERTAIN EXPENDITURE FOR WHICH RECEIPTS MAY NOT BE AVAILABLE IN THE MARKET LIKE, BUYING VEGETABLE FROM THE MARKET FOR RUNNING THE MESS, CERTAIN LABOUR CHARGES AND SMALL EXPENDITURES NEED TO BE SELF VOUCHED. THE ASSESSEE HAS TO INCUR THIS EXPENDITURE THROUGHOUT THE YEAR AND BEFORE THE SURVEY PARTY, ASSESSE HAS ALSO SHOWN THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET. DURING THE COURSE OF SURVEY, ASSESSEE COULD NOT POINT OUT THE SURVEY PARTY THAT THESE ARE THE FOLLOWING EXPENDITURES WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS NOT POINTED OUT TO THE SURVEY PARTY AND IF AT ALL HE HAS POINTED ANYTHING, THERE IS NO EVIDENCE BEFORE US TO SHOW THAT ALL THESE EXPENSES WERE INCURRED BUT THEY WERE NOT PROPERLY VOUCHED UPTO THE DATE OF SURVEY. SOME OF THE EXPENDITURES LIKE, SEMINAR CHARGES, STUDENT UNIFORM, REPAIR AND MAINTENANCES EXPENDITURES AND THERE ARE MAJOR EXPENDITURES I.E. SALARY TO THE EMPLOYEES HAS TO BE PAID IN EVERY MONTH. THEREFORE, IF AT ALL, THE ASSESSEE HAS NOT PAID SALARY UPTO THE DATE OF SURVEY, ASSESSEE SHOULD HAVE POINTED OUT TO THE SURVEY PARTY. LD CIT(A) THEREFORE HELD THAT FOR DISALLOWING THE EXPENDITURE, ONE HAS TO ESTIMATE THE EXPENDITURE ON ESTIMATE BASIS. THEREFORE, IN OUR OPINION, LD CIT(A) HAS RIGHTLY ALLOWED THE EXPENDITURE OF RS.10 LAKHS. ASSESSEE HAS CLAIMED EXPENDITURE, WHICH IS EXCESSIVE AFTER THE SURVEY. THEREFORE, IN ORDER TO MEET THE NATURAL JUSTICE, A REASONABLE DISALLOWANCE HAS TO BE MADE. 19. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED AND C.O. FILED BY THE ASSESSEE IS ALSO DISMISSED. 20. ORDER PRONOUNCEMENT IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT CUTTACK IN THE OPEN COURT ON 27.6 .2014. SD/- SD/- (P.K.BANSAL) (D.T.GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27/ 06/2014 PLACE: PANAJI 10 B.K.PARIDA, SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT: ITO WARD 1(4), BHUBANESWAR 2. THE RESPONDENT: NEELACHAL INSTITUTE OF MEDICAL SCIENCES, BHUBANESWAR 3. THE CIT, BHUBANESWAR 4. THE CIT(A),BHUBANESWAR 5. DR, CUTTACK BENCH 6. GUARD FILE. TRUE COPY// BY ORDER ASST. REGISTRAR, ITAT, CUTTACK