M/s Taramati Education Society, Bhopal V. The ACIT, 3(1), Bhopal

CO 8/IND/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7012 (ITAT-INDORE)
• Duration Of Justice: 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-02-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 24-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: SACHIN SAXENA
• Keywords: Depreciation; Charitable institution; Additional evidence; Corroborative evidences
• Section: 143(3); 12A; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 19/IND/2011 A.Y. 2005-06 ACIT-3(1), BHOPAL . APPELLANT VS. TARAMATI EDUCATION SOCIETY, BHOPAL PAN AAAAT 4598 H . RESPONDENT AND, CROSS-OBJECTION NO.8/IND/2012 (ARISING OUT OF ITA NO.19/IND/2011) A.Y. 2005-06 TARAMATI EDUCATION SOCIETY, BHOPAL PAN AAAAT 4598 H . OBJECTOR VS. ACIT-3(1), BHOPAL . RESPONDENT 2 REVENUE BY : SHRI ARUN DEWAN, SR. DR ASSESSEE BY : SHRI SACHIN SAXENA, CIT/DR DATE OF HEARING : 28.2.2012 DATE OF PRONOUNCEMENT : .2.2012 ORDER PER JOGINDER SINGH, JUDICIAL MEMBER THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 29.11.2010 PASSED BY THE LD. FIRST APPELLATE AUTHOR ITY FOR THE AY 2005-06 ON THE SOLE GROUND THAT THE LD. CIT(A) ERRE D IN ALLOWING A RELIEF OF RS.60,93,644/- TO THE ASSESSEE, OUT OF TOTAL ADDITION OF RS.81,24,859/- MADE BY THE ASSESSING OFFICER AS THE ASSESSEE HAS FAILED TO PROVE ITS CLAIM OF VERY HIGH EXPENSES WITH SUPPORTING EVIDENCES LIKE BILLS AND VOUCHERS. ON THE OTHER HAND, THE ASSESSEE HAS ALSO FILED A CROSS-OBJECTION , WHICH IS MERELY IN SUPPORT OF THE ORDER OF THE LD. CIT(A). 2. DURING HEARING OF THIS APPEAL, THE LD. SR. DR AD VANCED HIS ARGUMENTS WHICH IS IDENTICAL TO THE GROUND RAISED B Y FURTHER SUBMITTING THAT THE ASSESSMENT WAS FRAMED BY THE AS SESSING OFFICER U/S 144 OF THE ACT AND THE ASSESSEE DID NOT PRODUCE THE 3 BOOKS OF ACCOUNTS AND OTHER RELEVANT DOCUMENTS. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER BY SUBMITTING THAT ONE ACCOUNTANT OF THE ASSE SSEE DEFRAUDED THE ASSESSEE AND DID NOT HAND OVER THE BO OKS OF ACCOUNTS TO WHICH AN F.I.R. WAS LODGED AGAINST HIM AND ULTIMATELY HE WAS PUNISHED BY THE COURT. IT WAS ALS O SUBMITTED THAT THE DOCUMENTS, WHICH WERE LATER HANDED OVER TO THE ASSESSEE BY THE SAID ACCOUNTANT, WERE PRODUCED BEF ORE THE LD. CIT(A) AND THE LD. FIRST APPELLATE AUTHORITY AFTER GETTING THE REMAND REPORT FROM THE ASSESSING OFFICER DECIDED TH E ISSUE IN A JUSTIFIED MANNER. ON CROSS-OBJECTION, THE LD. COU NSEL FOR THE ASSESSEE MERELY STATED THAT IT IS IN SUPPORT TO THE IMPUGNED ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A REGISTERED SOCIETY, HAVING CHARITABLE OBJECTS, DE CLARED INCOME AT RS.6,70,661/- IN ITS RETURN FILE ON 26.10.2005. THE CASE WAS SELECTED FOR SCRUTINY, THEREFORE, NOTICE U/S 143(2) WAS ISSUED ON 4 2.7.2007 TO THE ASSESSEE. IN RESPONSE TO WHICH, THE ASSESSEE ATTENDED THE HEARING ON 9.7.2007 AND SOUGHT ADJOURN MENT. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASK ED TO FURNISH CERTAIN DETAILS AS HAS BEEN MENTIONED AT PA GE 1 & 2 OF THE ASSESSMENT ORDER. AS PER THE REVENUE, ONLY FEW DETAILS WERE FURNISHED AND REMAINING QUERRIES WERE ASKED TO BE FURNISHED ON 12.12.2007. ON 19.12.2007, THE ASSESSE E CLAIMED THAT THE BILLS AND VOUCHERS WERE LOST AND THE BOOKS OF ACCOUNTS WERE NOT HANDED OVER BY THE ACCOUNTANT OF THE ASSES SEE. THE LD. ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSE SSEE DELIBERATELY AND WILLFULLY NOT COOPERATING IN THE I NVESTIGATION AND ULTIMATELY, HE FRAMED THE ASSESSMENT U/S 144 OF THE ACT. THE ASSESSEE LODGED AN F.I.R. AGAINST THE ACCOUNTANT ON 19.12.2007 AND ULTIMATELY THE SAID ACCOUNTANT WAS P UNISHED BY THE COURT OF LAW AND SOME AMOUNT WAS IMPOSED UPON H IM. IT WAS CLAIMED BY THE LD. COUNSEL FOR THE ASSESSEE THA T LATER ON, THE SAID ACCOUNTANT HANDED OVER THE BOOKS OF ACCOUNTS/OTHER DOCUMENTS AND THE SAME WERE PRODUCED DURING FIRST APPELLATE STAGE. IT IS PERTINENT TO MENTION H ERE THAT THE LD. 5 CIT(A) SENT THESE DOCUMENTS TO THE FILE OF THE ASSE SSING OFFICER AND SOUGHT REMAND REPORT FROM HIM AND THEREAFTER, A PARTICULAR CONCLUSION WAS ARRIVED AT. THE RELEVANT PORTION OF THE CONCLUSION ARRIVED AT BY THE LD. CIT(A) IS REPRODUC ED HEREUNDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER, REMAND R EPORT OF THE ASSESSING OFFICER, SUBMISSION OF THE LD. AR AND THE DOCUMENTS PRODUCED BEFORE ME. THE ASSESSING OFFICER HAS ESTIMATED 20% OF TOTAL RECEIPTS AS N.P. OF THE ASSE SSEE SOCIETY AS INCOME WHILE FINALIZING ASSESSMENT U/S 144 DUE T O NON- FURNISHING OF DETAILS OF EXPENSES AND NON-COMPLIANC E DURING THE ASSESSMENT PROCEEDINGS. DURING THE APPEAL IT HAS BE EN STATED BY THE LD. AR THAT THE ASSESSEE HAS MAINTAINED BOOK S OF ACCOUNTS, BILLS AND VOUCHERS IN THE REGULAR COURSE OF ITS ACTIVITY AND THE BOOKS OF ACCOUNTS ARE DULY AUDITED U/S 44AB OF THE I.T. ACT WHICH WERE NOT PRODUCED DURING THE ASSESSMENT D UE TO CIRCUMSTANCES BEYOND CONTROL. THE APPELLANT DURING THE APPEAL HAS GIVEN COMPLETE DETAILS OF DIRECT AND INDIRECT EXPENSES CLAIMED IN THE INCOME AND EXPENDITURE ACCOUNT ALONGWITH COPIES OF LEDGER ACCO UNT AND OTHER RELATED PAPERS AND DOCUMENTS IN THE FORM OF B ILLS AND VOUCHERS OF ALL THE PARTIES WITH WHOM THE APPELLANT HAD TRANSACTIONS DURING THE YEAR UNDER CONSIDERATION. I N THE REMAND REPORT THE AO HAS NOT NOTICED ANY DEFECT IN THE BOO KS OF ACCOUNT AND OTHER DOCUMENTS SUBMITTED BY THE APPELL ANT. IT HAS BEEN OBSERVED BY THE AO IN THE REMAND REPORT THAT THE EXPENSES ARE NOT FULLY VERIFIABLE BECAUSE SOME OF T HE PARTIES HAVE FILED COPY OF ACCOUNT AND CONFIRMED THE PAYMEN TS WHEREAS SOME OF THE PARTIES HAVE NOT SUBMITTED THEI R REQUISITE CONFIRMATION OF ACCOUNTS AND PAYMENTS. HOWEVER, MOS T OF THE DETAILS REGARDING THE PAYMENTS MADE TO THE FIFTEEN PARTIES WHO WERE EXAMINED BY THE AO WHICH COULD NOT BE PRODUCED BEFORE THE AO WERE SUBSEQUENTLY FURNISHED BEFORE ME. IN THE WRITTEN SUBMISSION FILED THE LD. AR HAS CONT ENDED THAT IT IS UNFAIR TO MAKE COMPARISON OF THE EXPENSES OF THE ASSESSEE WITH SOME INSTITUTES HAVING DIFFERENT STUDENT BASE, YEAR OF EXISTENCE, DIFFERENT LOCATION AND INFRASTRUCTURAL F ACILITIES. THE INSTITUTES WITH WHOM COMPARISON WITH THE EDUCATIONA L INSTITUTIONS WITH A STANDING OF NINE TO TEN YEARS W HEREAS THE ASSESSEE SOCIETY CAME TO EXISTENCE ONLY IN THE LAST FOUR YEARS. THESE INSTITUTES HAVE NOT ONLY REACHED ITS BREAKEVE N POINT BUT HAVE EARNED PROFIT. THUS, THE COMPARISON WITH OTHER COLLEGES OF 6 MUCH LONGER STANDING IS NOT CORRECT. THE LD. AR HAS ALSO GIVEN SOME INSTANCES OF EXPENSE S AND DEPRECIATION CLAIMED BY THE ASSESSEE VIZ-A-VIZ OTHE R INSTITUTIONS MENTIONED BY THE AO. THE ASSESSEE SOCIETY HAS CLAIM ED DEPRECIATION AT 27.57 % OF THE TOTAL RECEIPTS WHICH IS COMPARABLE ONLY TO VICHAR BHARTI WHEREAS IT IS ONLY 19% IN THE CASE OF THE DEVI SHAKUNTALA TRUST AND 0.21 % IN THE CASE OF SHREE INSTITUTE OF SCIENCE AND TECHNOLOGY. THE CASH POSITION ED OVERALL SURPLUS DEPENDS A LOT ON THE QUANTUM AND CLAIM OF DEPRECIATION ON THE FIXED ASSETS. THE LD. AR HAS SU BMITTED THAT THE SURPLUS OF THE SOCIETY DEPENDS ON OTHER FACTORS LIKE INTEREST PAYMENT ETC. DUE TO LATE ENTRANT IN THE FIELD OF ED UCATION, THE SOCIETY HAS INCURRED 9.78 % OF THE GROSS RECEIPTS A S INTEREST / BANK CHARGES WHEREAS IT IS HARDLY 0.43 % IN THE CAS E OF DEVI SHAKUNTALA TRUST AND 1.52 % IN THE CASE OF VICHAR B HARTI. IT HAS BEEN FURTHER CONTENDED THAT DUE TO THE AFORESAID RE ASON THE ASSESSEE HAS INCURRED ADVERTISEMENT EXPENSES OF RS.10,39,60L/- WHICH IS MORE THAN THE DOUBLE OF SUC H EXPENDITURE INCURRED BY OTHER EDUCATIONAL INSTITUTE S. BECAUSE OF THE ABOVEMENTIONED REASON THE APPELLANT HAS ALSO IN CURRED VISITING FACULTY EXPENSES AND OTHER EXPENSES ENUMER ATED IN DETAIL IN LD. AR'S SUBMISSION COMPARED TO OTHERS. T HESE ARE SOME OF THE INSTANCES OF EXPENSES WHICH HAVE DIRECT LY AFFECTED THE SURPLUS OF THE ASSESSEE SOCIETY WHICH HAS NOT B EEN PROPERLY APPRECIATED BY THE AO WHILE MAKING THE COMPARISON W ITH OTHER EDUCATIONAL INSTITUTIONS AND ESTIMATING INCOME AT 2 0 % OF THE GROSS RECEIPTS FOR THE YEAR. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS ALSO FURNISHED A COMPARATIVE CHART OF ITS SURPLUS WHICH IS REPRODUCED BELOW: - PARTICULARS A.Y. 2002-03 A.Y. 2003-04 A.Y. 2004-05 A.Y. 2005-06 A.Y. 2006-07 GROSS RECEIPTS 11015761 18509366 25849146 40624299 37177664 EXCESS OF INCOME OVER EXPENDITURE 62688 1041129 -64722 670661 886904 % OF SURPLUS AGAINST GROSS RECEIPTS 0.56 0.57 N.A. 1.65 2.38 IT HAS BEEN STATED THAT THE APPELLANT HAS ALWAYS CO MPLIED WITH THE INCOME TAX PROCEEDING AND THERE HAS BEEN COMPLE TE COMPLIANCE BEFORE THE AO IN THE EARLIER AND SUBSEQUENT YEAR WHEREIN INCOME HAS BEEN ASSESSED WITH NOMINAL TAX D EMAND AN [THE YEAR UNDER CONSIDERATION IS THE ONLY EXCEPT ION BECAUSE OF THE CIRCUMSTANCES BEYOND THE CONTROL OF THE MANA GEMENT. 7 THE LD. AR HAS ALSO FURNISHED PHOTO COPY OF ASSESSM ENT ORDER PASSED U/S 143(3) FOR A.YS. 2004-05 AND 2006-07 IN SUPPORT OF HIS CONTENTION. THE AO HAS ALSO NOT GIVEN ANY ADVERSE FINDING IN THE REMAND REPORT WITH REGARD TO THE ADDITIONAL EVIDENCE WHEREIN BOOKS OF ACCOUNT, BILLS AND VOUCHERS, PAN N O. AND CONFIRMATION OF VARIOUS PARTIES WERE PRODUCED AND V ERIFIED. IT IS IN THE CASE OF ONLY TWO PARTIES OUT OF THE 15 PARTI ES EXAMINED BY THE AO THAT DETAILS WERE FILED BUT CONFIRMATIONS WE RE NOT FILED. THE SOCIETY HAS ALSO BEEN REGISTERED U/S 12A W.E.F. 01.04.2007 WHICH IMPLIES THAT IS A NON-PROFIT MAKING ORGANIZAT ION MEANT FOR CHARITABLE PURPOSE OF IMPARTING EDUCATION. IN VIEW OF THE ABOVE FACTS, THE ESTIMATION OF PROFIT @ 20 % OF THE TOTAL RECEIPTS BY THE AO IN THE ORDER U/S 144 APPEARS UNREASONABLE AND ON THE HIGHER SIDE. MOREOVER, IN THE SCRUTINY ASSESSMENT M ADE IN THE CASE OF THE ASSESSEE FOR A. Y. 2004-05, THE ASSESSE D INCOME AFTER VARIOUS ADDITIONS COMES TO RS.3,10,279/- (1.2 0 %) AND FOR A.Y. 2006-07 THE SAME IS RS.19,45,750/-(3.59%) OF T OTAL RECEIPTS. THE ASSESSMENT FOR BOTH THE ASSESSMENT YE ARS HAVE BEEN COMPLETES U/S 143(3) WHEREIN PROFIT ASSESSED A S AT 1.20 % TO 3.59 % OF THE TOTAL RECEIPTS AND THE ASSESSED IN COME IS RS.3,10,279/- FOR A. Y. 2004-05 AND RS.19,45,750/- FOR A.Y. 2006-07 RESPECTIVELY. IN THE LIGHT OF THE ABOVE FAC TS AND CONSIDERING/THE TOTALITY OF FACTS AND CIRCUMSTANCES , IT WOULD BE REASONABLE TO ESTIMATE PROFIT @ 5% OF THE GROSS RECEIPTS SHOWN BY THE APPELLANT AS THE INCOME OF THE YEAR WHICH CO MES TO RS.20,31,215/-. IN VIEW OF THE ABOVE, THE RELIEF AL LOWED TO THE APPELLANT WOULD BE RS.60,93,644/- (RS.8124859 - RS. 2031215). 4. IF THE FINDING CONTAINED IN THE IMPUGNED ORDER I S ANALYSED WITH THE ARGUMENTS ADVANCED BY THE LD. RESPECTIVE C OUNSEL, IT IS SEEN THAT THE LD. ASSESSING OFFICER WHILE FRAMING T HE ASSESSMENT CONCLUDED THAT THE EXPENSES CLAIMED BY T HE ASSESSEE ARE ON HIGHER SIDE AS COMPARED TO OTHER SO CIETIES OF SIMILAR NATURE. HE FURTHER OBSERVED THAT THE ASSESS EE SOCIETY INFLATED ITS EXPENSES TO LOWER DOWN THE PROFITS, CO NSEQUENTLY, HE ESTIMATED 20% OF THE TOTAL RECEIPT AS EXCESS OF INCOME OVER 8 THE EXPENDITURE AGAINST 1.60% SHOWN BY THE ASSESSEE . IT IS PERTINENT TO POINT OUT HERE THAT SUCH ESTIMATION WA S MADE BY THE ASSESSING OFFICER FOR WANT OF DOCUMENTS/DETAILS , WHICH COULD NOT BE FURNISHED BY THE ASSESSEE. BEFORE THE LD. CIT(A), IT WAS CLAIMED BY THE ASSESSEE THAT THE BOOKS OF ACCOU NTS ARE DULY MAINTAINED, SUPPORTED BY VOUCHERS IN ITS REGUL AR COURSE AND SAME ARE DULY AUDITED U/S 44AB OF THE ACT. THER E IS A FINDING IN THE IMPUGNED ORDER THAT DURING FIRST APP ELLATE STAGE, THE ASSESSEE FURNISHED COMPLETE DETAILS OF DIRECT A ND INDIRECT EXPENSES ALONG WITH COPY OF LEDGER ACCOUNT AND OTHE R RELATED PAPERS. THE LD. CIT(A) ALSO SOUGHT REMAND REPORT FR OM THE ASSESSING OFFICER. ADMITTEDLY, IN THE REMAND REPORT , THERE IS A MENTION THAT THE EXPENSES, CLAIMED BY THE ASSESSEE, ARE NOT FULLY VERIFIABLE AS SOME OF THE PARTIES HAVE NOT CO NFIRMED THE PAYMENTS. THERE IS A FURTHER FINDING IN THE IMPUGNE D ORDER THAT MOST OF THE DETAILS OF PAYMENTS, MADE TO FIFTEEN PA RTIES, COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER AND TH E SAME WERE DULY FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(A). ON THE CONTENTION OF THE REVENUE THAT IDENTICALLY, THE OTHER 9 INSTITUTIONS MADE LESSER EXPENSES, IT WAS SUBMITTED THAT THE INSTITUTIONS WITH WHOM THE COMPARISON WAS MADE ARE OLD INSTITUTIONS HAVING EXPERIENCE OF 9 TO 10 YEARS WHE REAS THE ASSESSEE SOCIETY IS COMPARATIVELY NEW ONE. IT IS AL SO A FACT THAT SO FAR AS THE SURPLUS OF A PARTICULAR SOCIETY IS CO NCERNED, IT DEPENDS ON SO MANY FACTORS LIKE, EXPERIENCE, FINANC IAL CAPACITY OF THE MANAGEMENT, PAYMENT OF INTEREST, INTAKE OF S TUDENTS AND OTHER FACILITIES ETC. IN THE IMPUGNED ORDER, THE LD . CIT(A) HAS MENTIONED THAT DUE TO NEW ENTRY IN THE FIELD OF EDU CATION, THE ASSESSEE INCURRED 9.78% AS INTEREST/BANK CHARGES WH EREAS THE OTHER INSTITUTES LIKE, DEVI SHAKUNTAL TRUST HARDLY INCURRED 0.43% AND VICHAR BHARTI AT 1.25%. THE ASSESSEE ALSO INCUR RED RS.10,39,601/- AS ADVERTISEMENT EXPENSES TO REMAIN IN COMPLETION IN THE FIELD IN COMPARISON TO OLD INSTIT UTIONS. THE ASSESSEE ALSO CLAIMED TO HAVE MADE EXTRA EXPENSES O N VISITING FACULTIES WHICH AFFECTED THE SURPLUS OF THE ASSESSE E SOCIETY. THE COMPARATIVE CHART OF INCOME & EXPENSES HAS ALSO BEEN MENTIONED IN THE IMPUGNED ORDER. WE FIND THAT THE L D. CIT(A) AS WELL AS THE LD. ASSESSING OFFICER HAS NOT ASSIGNED ANY REASON 10 IN ADOPTING/ESTIMATING THE FIGURE OF 5% AND 20%, RE SPECTIVELY. IT IS ALSO SEEN THAT IN THE REMAND REPORT, THE LD. ASS ESSING OFFICER HAS STILL RAISED CERTAIN QUERRIES THAT THE EXPENSES ARE STILL NOT FULLY VERIFIABLE AND SOME OF THE PARTIES HAVE NOT F URNISHED THE REQUISITE INFORMATION OF ACCOUNTS AND PAYMENTS. AFT ER VISUALIZING THE TOTALITY OF FACTS, PRINCIPLE OF NAT URAL JUSTICE AND TO PUT AN END TO THE LITIGATION, WE ESTIMATE THE PROFI T @ 8% OF THE GROSS RECEIPTS IN PLACE OF 5% ADOPTED BY THE LD. CI T(A) AND 20% ESTIMATED BY THE LD. ASSESSING OFFICER, CONSEQU ENTLY, THIS APPEAL OF THE REVENUE IS PARTLY ALLOWED. 5. SO FAR AS THE CROSS-OBJECTION OF THE ASSESSEE IS CONCERNED, THE ASSESSEE HAS MERELY CHALLENGED THE A PPLICATION OF PERCENTAGE BY THE ASSESSING OFFICER. IN OTHER WO RDS, THE CROSS-OBJECTION IS IN SUPPORT OF THE IMPUGNED ORDER . SINCE NO OTHER CONTENTION WAS RAISED BY EITHER SIDE AND WE H AVE PARTLY ALLOWED THE APPEAL OF THE REVENUE, THE CROSS-OBJECT ION OF THE ASSESSEE HAS REMAINED FOR ACADEMIC INTEREST ONLY, T HEREFORE, DISMISSED AS SUCH. 11 FINALLY, THE APPEAL OF THE REVENUE IS PARTLY ALLOWE D WHEREAS THE CROSS-OBJECTION OF THE ASSESSEE IS DISM ISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON .2.2012. SD SD (R.C. SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: .2.2012 COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR !VYS!