Appeal Details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 1447 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-03-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2013-2014
Appeal Filed On
03-01-2019
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NOS. 09 & 10/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-15 ST. WILFRED EDUCATIONAL SOCIETY, SECTOR-10, MEERA MARG, MANSAROVAR, JAIPUR. CUKE VS. PR. COMMISSIONER OF INCOME TAX (CENTRAL), RAJASTHAN, 2 ND FLOOR, NEW CENTRAL REVENUE BUILDING (ANNEXE), JANPATH, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABAS 4029 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI DILIP SHIVPURI (ADV) & SHRI ROHIT BADAYA (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI VARINDER MEHTA (CIT-DR) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 07/02/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 18/03/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M.: THESE ARE TWO APPEALS FILED BY THE ASSESSEE SOCIETY AGAINST TWO SEPARATE ORDERS OF THE LD. PR.CIT (CENTRAL), RAJASTH AN, JAIPUR DATED 14/12/2018. THE LD. PR.CIT HAS PASSED AN ORDER U/S 12 AA(3) AND 12AA(4) OF THE INCOME TAX ACT, 1961 CANCELLING THE REGISTRAT ION GRANTED TO THE ASSESSEE SOCIETY U/S 12AA OF THE ACT, WHICH WAS ORIGI NALLY GRANTED ON 02/01/2004. FURTHER THE LD. PR. CIT HAS PASSED ANOTH ER ORDER U/S 10(23C)(VI) OF THE ACT WITHDRAWING THE EXEMPTION GRAN TED TO THE ASSESSEE ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 2 SOCIETY VIDE NOTIFICATION NO. 10/2007-08 DATED 28/ 12/2007 AND SUBSEQUENT CORRIGENDUM DATED 24/01/2008. ITA NO. 9/JP/2019 2. FIRSTLY, WE TAKE UP THE APPEAL OF THE ASSESSEE SO CIETY CHALLENGING THE WITHDRAWAL OF EXEMPTION GRANTED U/S 12AA OF THE A CT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE SOCIETY IS ENGAGED IN PROVIDING EDUCATIONAL SERVICES THROUGH 1 9 EDUCATIONAL INSTITUTES AT JAIPUR, AJMER AND MUMBAI UNDER THE UM BRELLA OF ST. WILFRED GROUP OF COLLEGES. THE LD. PR. CIT REFERRING TO THE OBJECTS OF THE ASSESSEE SOCIETY AND IN VIEW OF VARIOUS EVIDENCES IN POSSESS ION OF THE DEPARTMENT STATED THAT THE ASSESSEE IS NOT WORKING AS PER THE O BJECTS FOR WHICH REGISTRATION WAS INITIALLY GRANTED AND THE CASE OF T HE ASSESSEE FALLS U/S 12AA(3) AND 12AA(4) OF THE ACT. THESE ISSUES RELATE TO DIVERSION OF FUND OF THE ASSESSEE SOCIETY FOR PERSONAL PURPOSES, NON- GENUINE SCHOLARSHIP EXPENSES AND ADDITION TO FIXED ASSETS IN VIEW OF THE PAYMENTS MADE TO RAJASTHAN HOUSING BOARD IN CONTRAVENTION OF SECTION 11(5) READ WITH SECTION 13(1)(C) OF THE ACT. IN LIGHT OF THE DISCUS SION MADE IN HIS ORDER, THE LD. PR. CIT HAS HELD THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE NOT GENUINE AND ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTIVES OF THE ASSESSEE SOCIETY AND THE REGISTRATION OF THE AS SESSEE SOCIETY U/S 12AA(1)(B)(I) WAS CANCELLED BY INVOKING THE PROVISIO NS OF SECTION 12AA(3) W.E.F. 01/04/2013 I.E. THE FINANCIAL YEAR FROM WHICH IRREGULARITIES IN THE FUNCTIONING OF THE ASSESSEE HAVE COME TO NOTICE AND BY INVOKING 12AA(4) OF THE ACT W.E.F. 01/10/2014 I.E. THE DATE FROM WHICH THIS SUB-SECTION HAS COME INTO FORCE. ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 3 4. WE NOW REFER TO THE RELEVANT FINDINGS OF THE LD. PR. CIT ON EACH OF THE ISSUES SO RAISED IN HIS ORDER AND THE SUBMISSIO NS MADE BY BOTH THE PARTIES BEFORE US. DIVERSION OF THE FUNDS OF THE ASSESSEE SOCIETY FOR PERSONAL PURPOSES 5. BRIEFLY FACTS OF THE CASE ARE THAT A SEARCH ACTI ON WAS CONDUCTED AT THE OFFICE PREMISES OF INTEGRAL BANK GROUP OF JAI PUR ON 11.12.2016. DURING THE COURSE OF SEARCH PROCEEDINGS, CASH AMOUN TING TO RS 1,56,59,500/- WAS FOUND IN AN ALMIRAH IN THE CLEARING HOUSE ROOM OF THE INTEGRAL BANK. AS PER LD PR.CIT, THIS ENTIRE CAS H WAS NOT FOUND RECORDED IN THE BOOKS OF ACCOUNTS OF THE BANK AND O UT OF THIS CASH OF RS. 1,56,59,500, MAJORITY OF AMOUNT I.E. RS.1,38,08,000 (6904 NOTES) COMPRISES OF 2000 RUPEES NOTES AND OUT OF WHICH 2289 NOTES TOTALING TO RS 45,78,000 WERE IN NEW SERIES AND WHICH WAS TAKEN O UT OF THE BANKING SYSTEM IN AN ILLEGAL MANNER SINCE SUCH HUGE WITHDRAWA LS WERE NOT YET PERMITTED BY THE RBI FROM ANY ACCOUNT. IT HAS FURTH ER BEEN STATED BY THE LD PR.CIT THAT THIS CASH OF RS. 1,56,59,500/- WAS CLA IMED TO BE BELONGING TO ST. WILFRED GROUP OF COLLEGES. 6. SIMULTANEOUSLY, A SURVEY U/S 133A OF THE ACT WAS CONDUCTED AT EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE SOCIET Y. DURING THE COURSE OF SURVEY, THE LD PR.CIT STATED THAT IT WAS OBSERVED ON THE BASIS OF EVIDENCES COLLECTED AND STATEMENTS RECORDED THAT THE ASSESSEE WAS COLLECTING FEES IN OLD DENOMINATION OF RS. 500, EVEN AFTER NOTIFICATIO N OF DEMONETIZATION BY THE GOVERNMENT OF INDIA. CASH OF RS. 2,21,000 WAS FOUND IN OLD DENOMINATIONS DURING THE COURSE OF SURVEY PROCEEDIN GS WHILE REPORTED CASH-IN-HAND AS ON DATE WAS RS.6,94,774/-. IT WAS ALS O CLAIMED ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 4 BY THE ASSESSEE SOCIETY THAT APPROXIMATELY RS.2,00,00,000 WAS COLLECTED AS FEE FROM 01.12.2016 TILL 09.12.2016 WHI LE ONLY CASH AMOUNTING TO RS.54,186/- WAS DEPOSITED IN THE BANK A CCOUNT OF THE ASSESSEE AND THAT NO CASH DEPOSIT WAS MADE THEREAFTE R IN THE BANK ACCOUNT OF THE ASSESSEE. IT WAS ALSO GATHERED THAT T HE FEE COLLECTED IN CASH FROM THE STUDENTS OF THE ASSESSEE WAS REGULARLY BEING TRANSFERRED TO THE PREMISES OF THE INTEGRAL BANK WITHOUT MAKING ANY CORRESPONDING ENTRY EITHER IN THE BOOKS OF THE ASSESSEE SOCIETY OR IN T HE BOOKS OF THE BANK. AS PER LD PR CIT, THIS CLEARLY IMPLIES THAT THE ASSESSE E INDEED COLLECTED FEES IN OLD DENOMINATION NOTES ILLEGALLY WITH AN INTENTION T O GET IT EXCHANGED BY ROUTING IT THROUGH THE INTEGRAL URBAN COOPERATIVE B ANK, ANOTHER CONCERN WHERE THE MANAGEMENT OF ST. WILFRED EDUCATION SOCIET Y HAD EFFECTIVE CONTROL. NOT RECORDING OF THE CASH RECEIPT IN ITS B OOKS OF ACCOUNTS CLEARLY SHOWS THAT THE FUNDS WERE BEING DIVERTED FOR PERSONAL PURPOSES AND THEREFORE THE ACTIVITIES OF THE ASSESSEE ARE NOT GE NUINE. 7. THE LD. PR. CIT FURTHER STATED THAT SERIOUS DISCR EPANCIES WERE ALSO DETECTED IN THE DAILY RECORD OF DENOMINATION OF RS. 500 /RS.1000 NOTES MAINTAINED BY THE INTEGRAL BANK. ONE LOOSE PAPER FO UND AND SEIZED FROM THE CHAMBER OF SHRI HARISH GUPTA, GM OF THE BANK CO NTAINING THE ACTUAL RECORD OF CASH POSITION OF THE BANK ON 30.11.2016, WHICH DID NOT MATCH WITH THE ACTUAL BREAKUP KEPT ON RECORD BY THE BANK I N AN ELECTRONIC /SOFT FORM. IT WAS EVIDENT FROM THE HAND WRITTEN LOOSE PAPE R THAT THE TOTAL CASH BALANCE SHOWN IN THE HAND WRITTEN PAPER TALLIES WITH THE TOTAL CASH BALANCE, SHOWN IN THE DAILY CASH SHEET PREPARED BY T HE BANK. IT WAS OBSERVED BY THE LD. PR.CIT THAT THE BANK HAS REDUCED THE ACTUAL NUMBER OF RS.2000 NOTES FROM 1605 TO 1223. ON THE OTHER HA ND, THE NUMBER OF RS.500 NOTES HAVE INCREASED FROM 2,60,298 TO 2,79,082. THIS FACT PROVES ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 5 THAT THE NUMBER OF RS.500 NOTES (OLD) WERE INCREASED BY THE BANK STAFF WHICH IS ALSO TO BE SEEN IN LIGHT OF THE FACT THAT THE FEE FROM VARIOUS STUDENTS WAS BEING COLLECTED IN RS.500 NOTES (OLD) E VEN AFTER DEMONETIZATION. THIS CLEARLY IMPLIES THAT THE OLD RS .500 NOTES, COLLECTED AS FEES FROM VARIOUS STUDENTS WERE PUT IN THE CASH OF T HE BANK AND IN LIEU THEREOF, RS.2000 NOTES WERE TAKEN OUT. THIS MODUS-OP ERANDI, AS IS EVIDENT FROM THE PERUSAL OF THE HAND-WRITTEN SHEET A ND THE OFFICIAL DAILY SHEET, IS THAT THE KEY PERSONS OF THE BANK WERE REGU LARLY EXCHANGING OLD CURRENCY WITH NEW CURRENCY IN AN UNAUTHORIZED AND IL LEGAL MANNER. FURTHER THE STATEMENT OF SHRI HARISH GUPTA WAS ALSO RECORDED WHEREIN HE ADMITTED THAT THE DIFFERENCE IN DENOMINATIONS ON TH ESE TWO SHEETS IS ON ACCOUNT OF EXCHANGE OF CURRENCY ON THE INSTRUCTIONS OF SHRI KESHAV BADAYA, CEO OF INTEGRAL BANK. THIS SHOWS THAT THE MAN AGEMENT OF ST. WILFREDS EDUCATIONAL SOCIETY WHICH WAS ALSO CONT ROLLING THE OPERATIONS OF INTEGRAL BANK ABUSED THE OFFICIAL POSITION AND E XERCISED UNDUE INFLUENCE OVER OFFICIALS OF THE BANK. IT WAS SEEN THAT THE RS. 500 NOTES COLLECTED AS FEE IN THE ST. WILFRED GROUP OF COLLEGES WERE BEING PUT IN THE CASH OF THE INTEGRAL BANK AND CORRESPONDING NUMBER OF RS.2000 N OTES WERE BEING TAKEN OUT FOR PERSONAL CONSUMPTION OF THE MEMBERS O F THE ST. WILFREDS EDUCATION SOCIETY. ACCORDINGLY, THE LD. PR.CIT HAS STATED THAT THE OLD CURRENCY NOTES RECEIVED FROM THE STUDENTS AS FEE WAS NEVER APPLIED FOR THE PURPOSES OF THE SOCIETY AND WAS DIVERTED FOR PER SONAL BENEFITS OF THE TRUSTEES I.E. BADAYA FAMILY WHICH WAS NOT IN CONSONAN CE WITH THE OBJECTIVES OF THE ASSESSEE SOCIETY. INSTEAD OF APPL YING THE RECEIPTS FOR CHARITABLE EDUCATIONAL PURPOSES, THE FUNDS WERE TAKE N OUT FOR PERSONAL PURPOSES AND THEREFORE, THE ACTIVITIES OF THE ASSES SEE WERE NOT GENUINE. ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 6 8. BASED ON THESE FINDINGS, THE LD PR. CIT ISSUED A SHOW CAUSE NOTICE DATED 27/11/2018 TO THE ASSESSEE AS TO WHY THE REGISTRATION GRANTED TO THE ASSESSEE SOCIETY U/S 12AA OF THE ACT SHOULD NOT BE CANCELLED IN VIEW OF THE AFORESAID REASONS. IN RESP ONSE, THE ASSESSEE FILED ITS WRITTEN SUBMISSION ON 10.12.2018 WHEREIN IT HAS C ONTENDED THAT THE SOURCE OF THE CASH FOUND IN THE ALMIRAH IN CLEARING HOUSE ROOM OF INTEGRAL BANK IS UNDISPUTEDLY FROM FEES COLLECTED FROM STUDE NTS OF THE ASSESSEE SOCIETY, A FACT WHICH IS SUPPORTED BY STATEMENTS RE CORDED FROM VARIOUS PERSONS DURING THE SURVEY / SEARCH ACTION. THEREFORE, IT WAS SUBMITTED THAT THERE IS NO BASIS WITH THE DEPARTMENT FOR DOUBT ING THE SOURCE OF THE CASH FOUND AND THEY HAVE THEMSELVES ADMITTED THAT T HE SOURCE OF THE CASH FOUND WAS FEE COLLECTED FROM STUDENTS. REGARDIN G THE ISSUE AS TO WHY THE CASH WAS NOT OFFICIALLY DEPOSITED BY THE BANK , IT WAS SUBMITTED THAT IT IS FOR THE BANK TO EXPLAIN THE SAME AND NOT THE ASSESSEE. IN RELATION TO THE FACT THAT THERE ARE CERTAIN NEW NOTE S WHICH ARE IN NEW SERIES AND WHICH COULD NOT HAVE BEEN GIVEN BY STUDEN TS AS FEES, THE ASSESSEE CONTENDS THAT WHATEVER MONEY WAS SENT BY TH E ASSESSEE FROM THE COLLEGE I.E. RS. 1,56,59,500/-, THE SAME WAS DUL Y ACCOUNTED FOR IN THE BOOKS OF THE ASSESSEE SOCIETY. IT IS FOR THE BANK T O EXPLAIN WHEREFROM THE NEW NOTES CAME. REGARDING THE ALLEGATION THAT THE DI VERSION WAS DONE TO BENEFIT THE TRUSTEES (BADAYA FAMILY), IT WAS SUBMITTE D BY THE ASSESSEE SOCIETY THAT THE MONEY WAS DULY RECORDED IN THE RECE IPT BOOKS OF THE ASSESSEE AS FEE RECEIVED FROM STUDENTS, AND HOW THE BADAYA FAMILY HAS BEEN BENEFITTED THEREFROM IS UNPROVED AND UNSUBSTAN TIATED. 9. THE SUBMISSION SO FILED BY THE ASSESSEE SOCIETY WA S CONSIDERED, BUT NOT FOUND UNACCEPTABLE TO THE LD PR.CIT. REGARDING T HE SOURCE OF FUNDS THAT THERE ARE FEES RECEIVED FROM THE STUDENTS, THE LD. PR.CIT HELD THAT BE ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 7 THAT AS IT MAY, THE VERY FACT THAT THESE FUNDS WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE ITSELF CASTS SUSPICION ON THE ASSESSEE WITH REGARD TO THE INTENDED APPLICATION OF SUCH FUNDS BY THE ASSESSEE. IF THE ASSESSEE DID NOT INTEND TO DIVERT ANY FUNDS, AND IF THEY ACTUALLY INTENDED TO USE THE SAID FUNDS FOR THE PUR POSES OF THE ASSESSEE SOCIETY ITSELF, THE SAME WOULD HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HOWEVER, WHEN THE INCOME-TA X SEARCH/SURVEY WAS CONDUCTED ON 10.12.2016/ 11.12.2016, THE INCOME- TAX TEAM DID NOT FIND ANY ENTRY IN THE CASH BOOK OF THE ASSESSEE REL ATING TO DEPOSIT OF CASH IN ITS BANK ACCOUNT AND IT IS ONLY AFTER THE SURVEY / SEARCH ACTIONS OF THE INCOME-TAX DEPARTMENT THAT THE ASSESSEE HAS ATTEMPT ED TO EXPLAIN THE SOURCE OF FUNDS. DURING THE SURVEY PROCEEDINGS NOWHE RE IT WAS STATED THAT FEES IN FORM OF CASH WAS TRANSFERRED TO INTEGRA L BANK AND ONLY AFTER THE CASH WAS FOUND IN THE SECRET CHAMBER, THEN EXPLA NATION REGARDING THE SAME WAS TENDERED. THE LD. PR.CIT FURTHER HELD THAT TH E ASSESSEE AND THE INTEGRAL BANK ARE NOT TWO INDEPENDENT ENTITIES, BUT SHARE COMMON MANAGEMENT AND THE GM OF INTEGRAL BANK HAS STATED O N OATH THAT DIFFERENCE IN DENOMINATIONS ON THESE TWO SHEETS IS O N ACCOUNT OF EXCHANGE OF CURRENCY ON THE INSTRUCTIONS OF SHRI KE SHAV BADAYA, CEO OF INTEGRAL BANK, WHO IS ALSO THE KEY PERSON AND MAIN T RUSTEE OF ASSESSEE. THE LD. PR.CIT ACCORDINGLY HELD THAT THE MANAGEMENT O F ST. WILFREDS EDUCATIONAL SOCIETY WHICH WAS ALSO CONTROLLING THE OP ERATIONS OF INTEGRAL BANK ABUSED THE OFFICIAL POSITION AND EXERCISED UND UE INFLUENCE OVER OFFICIALS OF THE BANK. THE KEY INDIVIDUAL HAVING OPE RATING INFLUENCE OVER THE ASSESSEE SOCIETY HAD BEEN INDULGING IN ILLEGAL EXCHANGE OF THE OLD CURRENCY CLAIMED TO BE COLLECTED IN THE FORM OF FEE WHICH WAS SUPPOSED TO BE USED FOR THE PURPOSES OF THE ASSESSE E SOCIETY WITH NEW CURRENCY. HOWEVER, NO SUCH ENTRIES IN THE BOO KS OF THE ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 8 ASSESSEE WERE FOUND TO BE RECORDED. SUCH AN ACT CLEARLY SHOWS THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE MANIPULATED F OR THE BENEFIT OF THE BADAYA FAMILY AS FEES ALLEGEDLY COLLECTED FROM STUD ENTS IN OLD DENOMINATION WAS NOWHERE RECORDED IN BOOKS OF THE ASS ESSEE. HENCE, THESE FEES WERE FREE TO BE USED BY THE BADAYA FAMILY FOR THEIR PERSONAL BENEFIT. IN CASE, FEES WERE RECORDED IN THE BOOKS, T HEN IT WOULD HAVE BEEN ENSURED THAT THESE RECEIPTS WOULD HAVE BEEN USED SOL ELY FOR THE PURPOSES FOR WHICH THE ASSESSEE SOCIETY WAS ESTABLISH ED AND IN ORDER TO ENJOY THE FUNDS FOR THEIR PERSONAL BENEFIT, THE BAD AYA FAMILY DID NOT RECORD THE FEES RECEIVED IN THE BOOKS OF ACCOUNTS O F THE ASSESSEE. IT WAS FINALLY HELD BY THE LD. PR.CIT THAT THE MONEY FOUND DURING SEARCH/SURVEY WAS NOT RECORDED IN THE BOOKS OF THE INTEGRAL BANK A ND NEITHER WAS IT DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. THERE FORE, THIS MONEY WAS LYING UNACCOUNTED AND THE PROMOTERS OF THE ASSESSEE WERE FREE TO USE THIS MONEY AS THEY DEEMED FIT. THE SAID MONEY WAS DIVERTED FROM THE CHARITABLE EDUCA TION PURPOSES AND THEREFORE THE ACTIVITIES OF THE ASSE SSEE SOCIETY ARE NOT GENUINE. 10. THE LD CIT DR HAS HEAVILY RELIED ON THE AFORESAID FINDINGS OF THE LD PR.CIT. AND SUBMITTED THAT FEES HAVE BEEN COLLECTED IN CASH BY THE ASSESSEE SOCIETY FROM ITS STUDENTS AND GIVEN THAT T HE SAME WAS NOT RECORDED IN ITS BOOKS OF ACCOUNT AND SUBSEQUENTLY F OUND IN POSSESSION OF THE BANK, IT IS A CLEAR CASE OF DIVERSION OF FUNDS OF THE ASSESSEE SOCIETY. IT WAS FURTHER SUBMITTED THAT IN SUBSTANCE, BOTH THE AS SESSEE SOCIETY AND THE INTEGRAL BANK ARE CONTROLLED BY THE BADAYA FAMI LY AND THUS THE PROVISIONS OF SECTION 13(3) ARE CLEARLY ATTRACTED A ND ONCE THE FUNDS OF THE ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 9 ASSESSEE SOCIETY ARE FOUND IN POSSESSION OF THE BAN K, IT IS A CLEAR CASE OF ATTRACTING THE PROVISIONS OF SECTION 13(1)( C) OF THE ACT. 11. IN HIS SUBMISSIONS, THE LD AR OF THE ASSESSEE F IRSTLY DRAWN OUR ATTENTION TO THE PROVISIONS OF SECTION 12AA(3) OF T HE ACT AND SUBMITTED THAT A PERUSAL OF THE PROVISIONS OF SECTION 12AA(3) SHOWS THAT TO INVOKE THE PROVISIONS OF THIS SECTION, THE DEPARTMENT HAS TO PROVE THAT ACTIVITIES OF THE SOCIETY/TRUST ARE NOT GENUINE OR ARE NOT BEI NG CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY/TRUST. IN SO FAR AS SECTION 12AA(4) IS CONCERNED, IT IS INVOKED IF ACTIVITIES O F THE SOCIETY/TRUST ARE IN VIOLATION OF SECTION 13(1) OF THE ACT. IT WAS SUBMI TTED BY THE LD AR THAT IN THE IMPUGNED ORDER OF THE PCIT, EXCEPT FOR MAKING TH E ALLEGATION, HAS NOT PROVIDED EVEN ONE PIECE OF EVIDENCE TO PROVE IT. 12. REFERRING TO THE FACTS OF THE CASE, IT WAS SUBMI TTED BY THE LD AR THAT INITIALLY A SURVEY WHICH WAS LATER CONVERTED INTO A S EARCH U/S 132 OF THE ACT WAS CONDUCTED AT THE OFFICE OF M/S INTEGRAL URBA N CO-OPERATIVE BANK LTD. HAVING ITS OFFICE ON AJMER ROAD, JAIPUR ON 11. 12.2016 AND A SURVEY U/S 133A WAS CONDUCTED ON THE OFFICE OF THE APPELLAN T ST. WILFRED'S EDUCATIONAL SOCIETY IN SECTOR 10, MANSAROVAR, JAIPU R ON 9.12.2016. DURING THE COURSE OF SEARCH OF THE BANK, CASH AMOUNTING TO RS. 1,56,59,500/- WAS FOUND IN AN ALMIRAH. IT WAS SUBMITTED THAT IT IS VERY CLEAR FROM THE NARRATION IN PARA 3 OF THE IMPUGNED ORDER OF LD PCI T THAT THE CASH WAS FOUND IN THE ALMIRAH OF THE CLEARING HOUSE OF M/S I NTEGRAL URBAN CO- OPERATIVE BANK LTD., AND THE CASH WAS NOT RECORDED I N THE BOOKS OF THE BANK. 13. IT WAS SUBMITTED BY THE LD AR THAT INTEGRAL URBA N CO-OPERATIVE BANK LTD. IS A CO-OPERATIVE SOCIETY RUNNING THE BUS INESS OF BANKING, ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 10 HENCE IT IS AN ENTITY THAT IS LEGALLY AND FACTUALLY , A SEPARATE ENTITY FROM THE APPELLANT, ST. WILFRED'S EDUCATIONAL SOCIETY. E ACH IS OPERATING LEGALLY IN DIFFERENT FIELDS. THEREFORE, IF THERE WAS ANY DISCRE PANCY OR ILLEGALITY IN THE CASH HELD, OR, IF THE CASH REMAINED UNEXPLAINED, TH EN THE BANK SHOULD HAVE BEEN QUESTIONED THEREON, AND ACTION SHOULD HAV E BEEN TAKEN AGAINST THE BANK, AND NOT THE APPELLANT SOCIETY. THIS WAS VER Y CLEARLY POINTED OUT IN THE REPLY TO THE SHOW-CAUSE NOTICE SUBMITTED TO THE RESPONDENT. A COPY OF THE REPLY FILED BEFORE THE PCIT (CENTRAL), JAIPUR , IN RESPONSE TO THE SHOW-CAUSE NOTICE DATED 22.11.2018 IS ENCLOSED AND MARKED AS ANNEXURE A/1. 14. IT WAS FURTHER SUBMITTED BY THE LD AR THAT SURPR ISINGLY, NO DISCREPANCY HAS BEEN POINTED OUT IN THE ASSESSMENT ORDER OF THE INTEGRAL URBAN CO-OPERATIVE BANK LTD. PASSED RECENTLY U/S 14 3(3) R/W 153B(1)(B) ON 28.12.2018 FOR A.Y 2017-18, THE ASSESSMENT YEAR PERTAINING TO PREVIOUS YEAR IN WHICH SEARCH WAS CONDUCTED. A COPY O F THE ASSESSMENT ORDER FOR THE A.Y. 2017-18 IS ENCLOSED AND MARKED A S ANNEXURE A/2. IN VIEW OF THIS FACT, THERE IS NO REASON TO PENALISE TH E APPELLANT SOCIETY BY CANCELLING ITS REGISTRATION. 15. IT WAS FURTHER SUBMITTED BY THE LD AR THAT IN HI S ORDER, THE RESPONDENT STATES THAT THE APPELLANT SOCIETY HAS TR USTEES WHICH ARE ALSO PRESENT AS DIRECTORS IN THE BANK. BUT NO SHRED OF E VIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE APPELLANT SOCIET Y AND THE BANK WERE WORKING TOGETHER TO DIVERT FUNDS. IF THIS LOGIC IS E XTENDED THEN ALL THE SEPARATE ENTITIES OF A BUSINESS FAMILY WOULD BE CLU BBED TOGETHER ON THE PREMISE THAT SOME OF THE DIRECTORS/SHAREHOLDERS/PAR TNERS ARE COMMON. IF SOME DISCREPANCY WAS FOUND IN THE NEW AND OLD (DEMON ETISED) BANK NOTES FOUND, THE BANK NEEDED TO BE QUESTIONED BY RB I, AND NOT THE ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 11 INCOME-TAX DEPARTMENT, AND NO ESCAPEMENT OF INCOME R ESULTED THEREFROM. 16. IT WAS FURTHER SUBMITTED BY THE LD AR THAT IN T HE REPLY TO THE SHOW- CAUSE NOTICE FILED ON 10.12.2018, THE ASSESSEE SOCI ETY HAD MADE IT CLEAR THAT AS PER THE SCHEME OF THE GOVERNMENT OF INDIA, DEMONETIZATION OF RS. 1000/- AND RS. 500/- BANK NOTES WAS ANNOUNCED ON 08.11.2016. THE RBI STIPULATED THAT THE DEMONETIZED BANK NOTES COUL D BE DEPOSITED WITH BANKS OVER A PERIOD OF 50 DAYS UNTIL 30.12.2016. THE SEARCH ON THE BANK WAS CARRIED OUT ON 11.12.2016 MUCH BEFORE THE WINDOW OF 50 DAYS PROVIDED BY THE RBI WAS OVER. HENCE, IN THESE 50 DAY S, BOTH DEMONETISED NOTES AS WELL AS FRESH NOTES WERE BEING ACCEPTED BY B ANKS. BANKS WERE ALSO ALLOWED TO WITHDRAW FRESH BANK NOTES FROM THEIR C ASH RESERVES. THERE WAS NOTHING ILLEGAL IN THE BANK HAVING BOTH DEMONETI SED NOTES AND FRESHLY-ISSUED NOTES IN THE CASH FOUND. AND, AS STA TED ABOVE, IF THERE WAS ANY DISCREPANCY IN THE NUMBER OF NOTES OF DEMONETIS ED CURRENCY AND FRESHLY-ISSUED BANK NOTES, IT WAS FOR THE RBI TO QUE STION THE BANK. HOW IS THE APPELLANT SOCIETY CONCERNED WITH IT. AS FAR AS THE APPELLANT SOCIETY IS CONCERNED, IT HAD POINTED OUT IN ITS REPLY DATED 10 .12.2018 THAT THE CASH OF RS. 1,56,59,500/-WAS COLLECTED AS FEE FROM STUDEN TS OF THE EDUCATIONAL INSTITUTIONS RUN BY THE SOCIETY, AND DEPOSITED WITH THE BANK. THE RESPONDENT ALSO STATES IN ITS SHOW-CAUSE NOTICE THA T THE AMOUNT OF CASH FOUND WAS COLLECTED AS FEE FROM THE STUDENTS OF THE EDUCATIONAL INSTITUTIONS RUN BY THE SOCIETY. IN THE SAID REPLY, THE FOLLOWING STATEMENTS OF EMPLOYEES RECORDED BY THE SEARCH TEAM OF THE DEP ARTMENT WAS REFERRED TO: I) STATEMENT OF SHRI GANESH NARAIN GUPTA, ACCOUNTAN T, ST. WILFRED COLLEGE, DATED 09.12.2016 - REPLY TO QUESTION NO. 11; ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 12 II) STATEMENT OF SHRI HARISH GUPTA, GM, INTEGRAL UR BAN CO-OPERATIVE BANK LTD. DATED 11.12.2016 - REPLY TO QUESTION NO. 13; III) STATEMENT OF SHRI VIKRAM SINGH, CASHIER, INTEG RAL URBAN CO-OPERATIVE BANK LTD. DATED 10.12.2016 - REPLY TO QUESTION NO. 14 & 21. THUS, ALL CONTEMPORANEOUS STATEMENTS CONFIRMED THAT THE CASH OF RS. 1,56,59,500/- ORIGINATED FROM THE STUDENTS OF T HE APPELLANT SOCIETY. TO SUPPORT THIS STAND, PHOTOCOPIES OF SOME SAMPLE RE CEIPTS, MENTIONING THE AMOUNT OF FEE, NAME OF STUDENT ETC. IS ENCLOSED AS ANNEXURE A/6. IT MAY BE STATED HERE THAT WHEN THE FEE WAS COLLECTED, R ECEIPTS FROM THE RECEIPT BOOK OF THE APPELLANT SOCIETY WERE ISSUED TO THE STUDENTS, ENTRIES MADE IN THE INDIVIDUAL STUDENT REGISTER AND THEIR C OUNTERFOIL KEPT BY THE SOCIETY, TO BE RECORDED IN THE CASH BOOK. HENCE, TH E FEE WAS COMPLETELY EXPLAINED AS PART OF THE RECEIPTS OF THE APPELLANT SOCIETY. 17. IT WAS ACCORDINGLY SUBMITTED BY THE LD AR THAT T HERE IS NO DISCREPANCY AS FAR AS THE APPELLANT SOCIETY IS CONC ERNED. THE CASH FOUND IN THE BANK IS EXPLAINED AS VERY MUCH PART OF THE R ECEIPTS OF THE APPELLANT SOCIETY. THERE IS NO EVIDENCE IN THE ORDER OR ELSEWHE RE THAT THE RECEIPT WERE UNACCOUNTED. SECONDLY, THERE IS ABSOLUTELY NO E VIDENCE, IN EITHER THE SHOW-CAUSE NOTICE OR IN THE ORDER DATED 14.12.2018 THAT ANY BENEFIT IS ACCRUING TO THE PERSONS DEFINED IN SECTION 13 (3) O F THE ACT, EITHER DIRECTLY OR INDIRECTLY. WHERE HAVE THE FUNDS BEEN DIRECTED, AND TO WHOM, ARE QUESTIONS WHICH HAVE NOT BEEN ANSWERED BY THE RESPON DENT, THEY REMAIN ONLY ALLEGATIONS. HENCE, THE ALLEGATION OF DIVERSIO N OF FUNDS IS UNFOUNDED, UNSUBSTANTIATED, AND, HENCE, NEEDS TO BE REJECTED. ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 13 18. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PURSUED THE MATERIAL AVAILABLE ON THE RECORD. DURI NG THE COURSE OF SEARCH OPERATIONS CONDUCTED AT THE PREMISES OF INTEGRAL UR BAN CO-OPERATIVE BANK LIMITED, CASH AMOUNTING TO RS 1,56,59,000 HAS BEEN FOUND IN POSSESSION OF THE BANK AT ITS CLEARING HOUSE ROOM. THE STATEME NT OF GENERAL MANAGER OF THE BANK, SHRI HARISH GUPTA WAS RECORDED U/S 131 ON 9.12.2016. IN RESPONSE TO QUESTION NO. 30, HE HAS STATED THAT THE SAID AMOUNT OF RS 1,56,59,000 HAS BEEN RECEIVED DURING L AST 4-5 DAYS TILL 8.12.2016. IN RESPONSE TO QUESTION NO. 34 WHERE HE WAS ASKED AS TO WHO HAS SENT THE SAID AMOUNT OF RS 1,56,59,000 TO THE B ANK, HE HAS STATED THAT THE SAID AMOUNT IS THE FEES COLLECTION OF SAIN T WILFRED COLLEGE AND HAS BEEN SENT BY SHRI KESHAV BADAYA. IN RESPONSE TO QUE STION NO. 41, HE HAS STATED THAT THE SAID AMOUNT HAS BEEN KEPT IN THE CU STODY OF BRANCH MANAGER, SHRI DILIP MAHESWARI AND CASHIER, SHRI VIKR AM SINGH SHEKAWAT. THE STATEMENT OF SHRI VIKRAM SINGH SHEKAWAT WAS ALSO R ECORDED U/S 131 ON 10.12.2016 AND HE HAS ALSO BEEN ASKED SPECIFIC Q UESTIONS REGARDING THE SOURCE OF SAID AMOUNT OF RS 1,56,59,000. IN RE SPONSE TO QUESTION NO. 13, HE HAS STATED THAT THE SAID AMOUNT HAS BEEN REC EIVED IN 2-4 TIMES IN THE FIRST WEEK OF DECEMBER 2016. IN RESPONSE TO QU ESTION NO. 14, HE HAS STATED THAT THE SAID AMOUNT HAS BEEN RECEIVED FROM SAINT WILFRED COLLEGE, MANSAROVAR. THEREFORE, WE FIND THAT THERE IS A CONSIS TENCY IN THE STATEMENT OF BANKS EMPLOYEES WHEREIN THEY HAVE CONF IRMED THAT THE SOURCE OF CASH OF RS 1,56,59,000 FOUND IN POSSESSIO N OF THE BANK AT ITS PREMISES IS THE AMOUNT OF FEES COLLECTION OF SAINT WILFRED COLLEGE, MANSAROVAR. NOW, COMING TO THE STATEMENT OF ACCOUNT ANT OF THE ASSESSEE SOCIETY, MR. GANESH NARAYAN GUPTA RECORDED U/S 131 OF THE ACT ON 9.12.2016. IN RESPONSE TO QUESTION NO. 8, HE HAS S TATED THAT SAINT WILFRED ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 14 COLLEGE HAS ONLY ONE BANK ACCOUNT IN FORM OF CURREN T ACCOUNT MAINTAINED WITH MANSAROVAR BRANCH OF INTEGRAL URBAN CO-OPERATIVE BANK LIMITED. IN RESPONSE TO QUESTION NO. 11, HE HAS ST ATED THAT APPROX. RS 2 CRORE FEES HAVE BEEN COLLECTED IN CASH DURING THE P ERIOD 1.12.2016 TO 9.12.2016. FURTHER, THE TAX AUTHORITIES DURING THE COURSE OF SURVEY HAVE GONE THROUGH THE RECEIPT VOUCHERS ISSUED BY THE SAI NT WILFRED COLLEGE TO ITS STUDENTS TOWARDS RECEIPTS OF FEES AND OTHER CHAR GES COLLECTED FROM STUDENTS AS IS EVIDENT FROM QUESTION NO. 13 RAISED BY THE SURVEY TEAM TO GANESH NARAYAN GUPTA WHEREIN THERE IS REFERENCE TO VOUCHERS AND RECEIPTS AS PER WHICH FEES AND OTHER RELATED CHARGES HAVE BEEN COLLECTED IN CASH AMOUNTING TO RS 2.15 CRORES FROM THE STUDEN TS. FURTHER, WE REFER TO THE STATEMENT OF SHRI MAHAVIR PRASAD, ANOTHER AC COUNTANT OF THE ASSESSEE SOCIETY WHOSE STATEMENT WAS RECORDED U/S 13 1 ON 9.12.2016. IN RESPONSE TO QUESTION NO. 19, HE HAS STATED THAT THE Y ISSUE RECEIPT TO THE STUDENTS AGAINST DEPOSIT OF THEIR FEES AND SUBSEQUE NTLY IN RESPONSE TO QUESTION NO. 51, HE HAS AGAIN CONFIRMED THAT STUDEN TS HAVE BEEN GIVEN RECEIPT AGAINST DEPOSIT OF THEIR FEES AND THE SAME IS RECORDED IN THE COMPUTERS. FURTHER, IN RESPONSE TO QUESTION NO. 9 WHEREIN HE WAS ASKED THE STATUS OF CASH IN HAND, HE HAS STATED THAT THEY PREPARE A DAILY COLLECTION SHEET AND BASED ON THE SAME, THE DAILY C OLLECTION IS DEPOSITED IN THE BANK. FURTHER, HE HAS STATED THAT THEY UPDATE THE BOOKS LATER AS AND WHEN THEY GET TIME. IN RESPONSE TO QUESTION NO. 10, HE HAS FURTHER STATED THAT BOOKS HAVE BEEN UPDATED TILL 30.11.2016 AND FO R THE REMAINING DAYS, VOUCHERS HAVE BEEN PREPARED BUT THEY COULDNT DO TH E ENTRY. IF WE CORRELATE THE SAID STATEMENTS OF ACCOUNTANTS OF THE ASSESSEE SOCIETY WITH THE STATEMENTS OF THE BANKS EMPLOYEES, WE FIND THAT THE SAID STATEMENTS CORROBORATES THE FACT THAT THE SOURCE OF CASH FOUND IN THE POSSESSION OF THE BANK IS THE FEES COLLECTED FROM STUDENTS BY SAI NT WILFRED COLLEGE. IT IS ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 15 ALSO CLEAR ON CLOSE EXAMINATION OF THESE STATEMENTS THAT THE FEE RECEIPTS ARE ISSUED TO THE STUDENTS AT THE TIME OF RECEIVING THE FEES FROM THEM, THESE RECEIPTS ARE UPDATED IN THE INDIVIDUAL STUDENT REGISTER MAINTAINED ONLINE IN THE COMPUTER SYSTEM, DAILY CAS H COLLECTION SUMMARIES AND RELATES VOUCHERS ARE PREPARED. THE SAID FEE RECE IPTS AND VOUCHERS WERE AVAILABLE ON RECORD AT THE TIME OF SURVEY AND H AS IN FACT BEEN EXAMINED BY THE SURVEY TEAM AND ARE VERY MUCH PART OF BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE SOCIETY IN REGU LAR COURSE OF ITS ACTIVITIES. THEREFORE, ONCE THE SOURCE OF CASH HAS B EEN ESTABLISHED TO BE FEES COLLECTED FROM THE STUDENTS, SUCH FEES HAVE BE EN RECORDED IN THE BOOKS OF ACCOUNTS AND THE CASH HAS BEEN PHYSICALLY FOUND IN POSSESSION OF THE ASSESSEES BANK, THERE IS NO BASIS TO HOLD THAT THERE IS ANY DIVERSION OF FUNDS OF THE ASSESSEE SOCIETY. IN FACT, THE LD PR CIT HAS ALSO NOT RECORDED ANY CATEGORICAL FINDING THAT FUNDS OF THE ASSESSEE SOCIETY HAVE ACTUALLY BEEN DIVERTED, RATHER HE HAS ONLY CAST SUSPICION RE GARDING INTENDED APPLICATION AND DIVERSION OF FUNDS BY THE ASSESSEE SOCIETY FOR THE PERSONAL BENEFIT OF THE BADAYA FAMILY. THE BASIS OF SUCH SUSP ICION, AS WE HAVE NOTED FROM HIS FINDINGS IS THE NON-RECORDING OF FEE RECEIPTS IN THE BOOKS MAINTAINED BY THE ASSESSEE SOCIETY AS FOUND AT THE TIME OF SURVEY ON 9.12.2016 AND THE INVOLVEMENT OF SHRI KESHAV BADAYA IN THE FUNCTIONING OF THE ASSESSEE SOCIETY AND THE BANK. IN ORDINARY C OURSE WHERE THERE IS MOVEMENT OF CASH, ONCE THE CASH IS DEPOSITED IN THE BANK ACCOUNT, NECESSARY ENTRIES ARE MADE IN THE CASH BOOK. IN TH E INSTANT CASE, THERE SEEMS TO BE CERTAIN SLIPPAGES ON PART OF THE ASSESS EE SOCIETY IN TERMS OF NOT UPDATING ITS CASH BOOK WHEN THE CASH WAS RECEIVED AND SENT FOR DEPOSIT IN ITS BANK ACCOUNT AND AT THE TIME OF SURV EY, IT WAS NOT UPDATED. AT THE SAME TIME, AS WE HAVE NOTED ABOVE, THE FACT O F THE MATTER IS THAT FEE RECEIVED FROM THE STUDENTS IS RECORDED IN THE B OOKS OF ACCOUNTS AS ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 16 CORROBORATED BY FEE RECEIPTS, INDIVIDUAL STUDENT RE GISTER MAINTAINED ONLINE IN THE COMPUTER SYSTEM, DAILY CAS H COLLECTION SUMMARIES AND RELATES VOUCHERS. THESE DOCUMENTS ARE WRITTEN/PR INTED DOCUMENTS AVAILABLE ON RECORD AND ARE VERY MUCH PART OF BOOKS OF ACCOUNTS MAINTAINED IN THE REGULAR COURSE AND CLEARLY FALL I N THE INCLUSIVE DEFINITION OF BOOKS OF ACCOUNTS SO DEFINED U/S 2(12A) OF THE A CT. SUCH FEE RECEIPTS AND RELATED VOUCHERS HAVE BEEN EXAMINED BY THE SURV EY TEAM AT THE TIME OF SURVEY AS EVIDENT FROM THE QUESTION NO. 13 RAISE D TO GANESH KUMAR GUPTA, THE ACCOUNTANT OF THE ASSESSEE SOCIETY WHERE THE TAX OFFICIAL HAS ASKED A QUESTION THAT BASED ON PERUSAL OF VOUCHERS, IT IS APPARENT THAT AFTER 21.11.2016, FEES AND OTHER RELATED CHARGES HA VE BEEN COLLECTED IN CASH AMOUNTING TO RS 2.15 CRORES. THEREFORE, WE FIND THAT THOUGH THE CASH BOOK HAS NOT BE UPDATED AT THE TIME OF SURVEY IN TERMS OF RECORDING THE MOVEMENT OF CASH FOR DEPOSIT IN ITS BANK ACCOUN T, CASH INWARD IN FORM OF FEES COLLECTED FROM THE STUDENTS HAVE BEEN DULY RECORDED IN THE BOOKS OF ACCOUNTS AS DEMONSTRATED BY FEE RECEIPTS, INDIVI DUAL STUDENT REGISTER, DAILY CASH COLLECTION SHEETS AND RELATED VOUCHERS P REPARED BY THE ASSESSEE SOCIETY. WE THEREFORE FIND THAT THERE WAS SUSPICION IN THE MIND OF AUTHORITIES THAT ASSESSEES FUNDS HAVE BEEN DIVE RTED AS THE CASH BOOK DOESNT REFLECT ANY OUTWARD MOVEMENT OF CASH. FURTHE R, EVEN THE BANK HAS NOT RECORDED SUCH FUNDS AND THERE ARE ALLEGATIO NS REGARDING EXCHANGE OF OLD CURRENCY NOTES WITH NEW NOTES. TO OUR MIND, O NCE THE CASH IS FOUND IN POSSESSION OF THE BANK WHERE THE ASSESSEE M AINTAINS ITS BANK ACCOUNT AND IT IS CONFIRMED BY THE BANK OFFICIALS T HAT THE CASH SO FOUND BELONG TO THE ASSESSEE SOCIETY, THERE IS NO BASIS T O HOLD ONTO SUCH SUSPICION AS FAR AS THE ASSESSEE SOCIETY IS CONCERN ED. ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 17 19. NOW, IN TERMS OF INVOLVEMENT OF SHRI KESHAV BADA YA AND INTENDED BENEFIT OF SUCH FUNDS SO FOUND IN THE POSSESSION OF THE BANK FOR THE PERSONAL BENEFIT OF THE BADAYA FAMILY, THE LD AR DR AWN OUR REFERENCE, DURING THE COURSE OF HEARING, AT THE CONSTITUTION O F THE EXECUTIVE COMMITTEE OF SAINT WILFRED EDUCATION SOCIETY WHERE WE FIND THAT SHRI KESHAV BADAYA HOLDS THE POST OF THE SECRETARY AND H IS UNCLE, SHRI SURESH KUMAR IS THE PRESIDENT OF THE SOCIETY. FURTHER, OU R REFERENCE WAS DRAWN TO THE LIST OF BOARD OF DIRECTORS OF THE INTEGRATED URBAN CO-OPERATIVE BANK LTD AND WE FIND THAT NONE OF THESE TWO PERSONS OR ANY OTHER BADAYA FAMILY MEMBER IS HOLDING THE POST OF DIRECTORS. FU RTHER, THE LD AR HAS STATED AT THE BAR THAT NEITHER SHRI KESHAV BADAYA N OR ANY OTHER MEMBERS OF THE BADAYA FAMILY HOLD ANY STAKE OR FINANCIAL IN TEREST/SHAREHOLDING IN INTEGRATED URBAN CO-OPERATIVE BANK LTD. THEREFORE, THE ONLY COMMON LINKAGE BETWEEN THE TWO ENTITIES IS THE INVOLVEMENT O F SHRI KESHAV BADAYA WHO IS HOLDING THE POST OF SECRETARY IN THE ASSESSEE SOCIETY AND ALSO HOLDING THE POST OF CHIEF EXECUTIVE OFFICER IN THE INTEGRATED URBAN CO- OPERATIVE BANK LTD. FROM WHERE HE IS DRAWING HIS REM UNERATION AND THE QUESTION IS WHETHER THE PROVISIONS OF SECTION 13(3) ARE ATTRACTED IN THE INSTANT CASE. IN THIS REGARD, WE REFER TO THE PROVI SIONS OF SECTION 13(3) WHICH READS AS UNDER: (3) THE PERSONS REFERRED TO IN CLAUSE (C) OF SUB-SE CTION (1) AND SUB- SECTION (2) ARE THE FOLLOWING, NAMELY : (A) THE AUTHOR OF THE TRUST OR THE FOUNDER OF THE INSTI TUTION; (B) ANY PERSON WHO HAS MADE A SUBSTANTIAL CONTRIBUTION T O THE TRUST OR INSTITUTION, THAT IS TO SAY, ANY PERSON WHOSE TOTAL CONTRIBUTION ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 18 UP TO THE END OF THE RELEVANT PREVIOUS YEAR EXCEEDS FIFTY THOUSAND RUPEES; (C) WHERE SUCH AUTHOR, FOUNDER OR PERSON IS A HINDU UNDI VIDED FAMILY, A MEMBER OF THE FAMILY; (CC) ANY TRUSTEE OF THE TRUST OR MANAGER (BY WHATEVER NAM E CALLED) OF THE INSTITUTION; (D) ANY RELATIVE OF ANY SUCH AUTHOR, FOUNDER, PERSON, MEMBER, TRUSTEE OR MANAGER AS AFORESAID; (E) ANY CONCERN IN WHICH ANY OF THE PERSONS REFERRED TO IN CLAUSES (A), (B), (C), (CC) AND (D) HAS A SUBSTANTIAL INTER EST. 20. AS PER CLAUSE (CC) TO SECTION 13(3), IT TALKS A BOUT ANY TRUSTEE OF THE TRUST OR MANAGER (BY WHATEVER NAME CALLED) OF THE IN STITUTION. SHRI KESHAV BADAYA IS THE SECRETARY OF THE ASSESSEE SOCI ETY AND INVOLVED IN ITS ADMINISTRATIVE AFFAIRS AND THUS FALLS UNDER CLAUSE (CC) OF SECTION 13(3) AS A RELATED PERSON IN RELATION TO THE ASSESSEE SOCIET Y. THE CLAUSE (E) TO SECTION 13(3) TALKS ABOUT ANY CONCERN IN WHICH ANY O F THE PERSONS REFERRED TO IN CLAUSES (A), (B), (C), (CC) AND (D) HAS A SUBSTANTIAL INTEREST. IF WE WERE TO READ THE SAID CLAUSE (E) IN THE CONTEXT OF PRESENT FACTS, IT MEANS INTEGRAL URBAN CO-OPERATIVE BANK, BEING A CON CERN IN WHICH MEMBERS/TRUSTEES OF THE ASSESSEE SOCIETY HAVE A SUB STANTIAL INTEREST. THE TERM SUBSTANTIAL INTEREST IN A CONCERN HAS BEE N DEFINED IN EXPLANATION 3 TO MEAN: (I) IN A CASE WHERE THE CONCERN IS A COMPANY, IF ITS SHA R ES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 19 A FURTHER RIGHT TO PARTICIPATE IN PROFITS) CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER ARE, AT ANY TIME DURING THE PREVIOUS YEAR, OWNED BENEFICIALLY BY SUCH PE RSON OR PARTLY BY SUCH PERSON AND PARTLY BY ONE OR MORE OF THE OTHER PERSONS REFERRED TO IN SUB-SECTION (3); (II) IN THE CASE OF ANY OTHER CONCERN, IF SUCH PERSON IS ENTITLED, OR SUCH PERSON AND ONE OR MORE OF THE OTHER PERSONS RE FERRED TO IN SUB-SECTIO N (3) ARE ENTITLED IN THE AGGREGATE, AT ANY TIME DU RING THE PREVIOUS YEAR, TO NOT LESS THAN TWENTY PER CENT OF THE PROFITS OF SUCH CONCERN. 21. THAT IS, MEMBERS AND TRUSTEES OF THE ASSESSEE SO CIETY EITHER INDIVIDUALLY OR COLLECTIVELY ARE ENTITLED AT ANY TI ME DURING THE PREVIOUS YEAR, TO NOT LESS THAN TWENTY PER CENT OF THE PROFIT S OF SUCH CONCERN I.E, INTEGRAL URBAN CO-OPERATIVE BANK. IN THE PRESENT C ASE, THE SAID CONDITION IS NOT SATISFIED AS NONE OF THE MEMBERS AND TRUSTEE S OF THE ASSESSEE SOCIETY INCLUDING THAT OF BADAYA FAMILY HOLDS ANY F INANCIAL INTEREST IN THE INTEGRAL URBAN CO-OPERATIVE BANK. MERELY ON ACCOUN T OF SHRI KESHAV BADAYA, BEING THE CHIEF EXECUTIVE OFFICER OF THE IN TEGRAL URBAN CO- OPERATIVE BANK AND ALSO HOLDING THE POST OF THE SEC RETARY TO THE ASSESSEE SOCIETY, IN OUR VIEW, WILL NOT MAKE THE INTEGRAL URBA N CO-OPERATIVE BANK AND THE ASSESSEE SOCIETY AS RELATED ENTITY IN TERMS OF SECTION 13(3) OF THE ACT. 22. NOW, IN ORDER TO INVOKE THE PROVISIONS OF SECTIO N 13(1)(C) OF THE ACT, THE QUESTION THAT ARISE FOR CONSIDERATION IS WHETHER SHRI KESHAV BADAYA, BEING A RELATED PERSON IN RELATION TO THE ASSESSEE SOCIETY HAS ACTUALLY BENEFITED DIRECTLY OR INDIRECTLY BY VIRTUE OF CASH BELONGING TO THE ASSESSEE SOCIETY FOUND IN THE POSSESSION OF THE INTEGRAL URB AN CO-OPERATIVE BANK WHERE HE HOLD THE POSITION OF CHIEF EXECUTIVE OFFICE R. THE PROVISIONS OF SECTION 13(1)(C) STATES THAT IF ANY PART OF THE INC OME DURING THE PREVIOUS ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 20 YEAR USED OR APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO SUB-SECTION (3) TO SECTION 13 OF THE ACT. IT THUS TALKS ABOUT THE USAGE OR APPLICATION I.E, THERE HAS TO BE ACTUAL UTILIZATION OR APPLICATION OF FUNDS FOR THE BENEFIT OF THE RELATED PERSON. IT DOESNT CONTEMPLATE A SITUATION OF INTENDED OR FUTURE APPLI CATION OF SUCH FUNDS FOR THE BENEFIT OF SUCH PERSON. IN THE INSTANT CASE, F IRSTLY THE FUNDS BELONGING TO THE ASSESSEE SOCIETY HAVE BEEN PHYSICALLY FOUND IN THE POSSESSION OF THE BANK AT ITS STRONG ROOM AND NOT IN POSSESSION O F SHRI KESHAV BADAYA. SECONDLY, SUCH FUNDS HAVE NOT BEEN USED OR APPLIED AND HAVE BEEN PHYSICALLY FOUND AND THUS, THERE IS NO BENEFIT WHIC H CAN BE SAID TO HAVE ACTUALLY BEEN GAINED BY SHRI KESHAV BADAYA EITHER D IRECTLY OR INDIRECTLY IN HIS INDIVIDUAL CAPACITY BY HAVING SUCH FUNDS IN THE POSSESSION OF THE BANK. IN LIGHT OF ABOVE, WE ARE OF THE CONSIDERED VIEW THA T THE PROVISIONS OF SECTION 13(1)(C) ARE NOT ATTRACTED IN THE INSTANT A ND THE CONTENTIONS SO ADVANCED BY THE REVENUE AND THE LD CIT DR CANNOT BE ACCEPTED. 23. WE THEREFORE FIND THAT IT WAS MERELY A SUSPICION GATHERED THROUGH THE PRELIMINARY ENQUIRY CONDUCTED DURING THE SURVEY AND SEARCH OPERATIONS. A SUSPICION HOWSOEVER STRONG CANNOT BE A BASIS TO DENY A LEGIBLE CLAIM OF THE ASSESSEE UNLESS AND UNTIL IT I S SUPPORTED BY VERIFIABLE EVIDENCE ON RECORD BROUGHT OUT THROUGH THE PROCESS OF DETAILED INVESTIGATION. IN THE HANDS OF THE INTEGRATED BANK WHERE THE CASH WAS PHYSICALLY FOUND IN ITS PREMISES, NO ADDITION HAS B EEN MADE ON ACCOUNT OF UNACCOUNTED CASH AND THERE IS ALSO NO FINDING REGAR DING ILLEGAL EXCHANGE OF OLD CURRENCY VIS--VIS NEW CURRENCY AS EVIDENT FR OM THE ASSESSMENT ORDER PASSED IN CASE OF THE INTEGRATED BANK FOR AY 2017-18. THE SAME RATHER SUPPORTS THE CASE OF THE ASSESSEE SOCIETY TH AT THE CASH SO FOUND BELONGS TO THE ASSESSEE SOCIETY AND THE DEPARTMENT HAS THUS ACCEPTED ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 21 THE SAID FACT AND IT HAS ATTAINED FINALITY. FURTHE R, IT IS NOT THE CASE OF THE REVENUE THAT OLD CURRENCY WHICH IS NOT A LEGA L TENDER CANNOT BE BROUGHT TO TAX. THEREFORE, UNLESS AND UNTIL THERE IS A FINDING BY THE APPROPRIATE AUTHORITY THAT THERE WAS ANY ILLEGALITY IN THE ACT OF THE ASSESSEE IN ACCEPTING THE FEES IN OLD CURRENCY, THE SAME CANNOT BE HELD AGAINST THE ASSESSEE SOCIETY. THEREFORE, WE FIND TH AT IT IS A CASE OF MERE SUSPICION AND NOT A CONCLUSIVE FINDING AND EVEN THE DEPARTMENT ITSELF HAS GIVEN A CLEAN CHIT TO THE BANK. AS FAR AS THE ASSE SSEE SOCIETY IS CONCERNED, BANK OFFICIALS AS WELL AS THE ASSESSEES RECORDS CONCLUSIVELY PROVE THAT THE FUNDS SO FOUND ARE FEES COLLECTED FR OM THE STUDENTS DULY RECORDED IN THE BOOKS OF ACCOUNTS AND INFACT, SUCH AMOUNT HAS BEEN SEIZED BY THE DEPARTMENT WHICH FURTHER PROVES THAT T HERE WAS NO DIVERSION OF FUNDS AND NO APPLICATION FOR PERSONAL BENEFIT OF ANY PERSON. THEREFORE, THERE IS NO BASIS TO SUSTAIN THE FINDINGS OF THE LD PR CIT. ONLY IN A SCENARIO, WHERE IT IS PROVED BEYOND DOUBT THAT THE FUNDS OF THE ASSESSEE SOCIETY HAVE ACTUALLY BEEN DIVERTED FOR PU RPOSES OTHER THAN THE STATED OBJECTS OF THE ASSESSEE SOCIETY, IT CAN BE S AID THAT SUCH FUNDS HAVE NOT BEEN UTILIZED FOR THE PURPOSES THE EXEMPTION UN DER THE INCOME TAX ACT HAS BEEN GRANTED TO THE ASSESSEE SOCIETY AND TO THE EXTENT OF SUCH DIVERSION, THE PROVISIONS OF SECTION 11 AND 12 SHAL L NOT APPLY. FURTHER, WHERE THE REVENUE THROUGH ITS INVESTIGATION FINDS TH AT THERE IS ACTUAL DIVERSION OF FUNDS OF THE ASSESSEE SOCIETY AND SUCH DIVERSION HAS ACTUALLY RESULTED IN DIRECT/INDIRECT BENEFIT OF THE RELATED PERSONS SO DEFINED U/S 13(3) OF THE ACT, THE ACTIVITIES AND THE CONDUCT OF THE ASSESSEE SOCIETY WILL SURELY COME UNDER THE CLOUD. IN THE INSTANT CASE, THE CASH HAS BEEN PHYSICALLY FOUND IN POSSESSION OF THE ASSESSEES BA NK AND THE SAID CASH BELONGS TO THE ASSESSEE SOCIETY AS CORROBORATED BY THE STATEMENTS OF THE BANK EMPLOYEES, THERE IS THUS NO BASIS TO HOLD THAT THERE IS ANY DIVERSION ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 22 OF FUNDS OF THE ASSESSEE SOCIETY FOR THE PERSONAL B ENEFIT OF BADAYA FAMILY AND THE SAME CANNOT BE A BASIS TO WITHDRAWN TH E EXEMPTION SO GRANTED TO THE ASSESSEE SOCIETY U/S 12AA OF THE ACT . NON-GENUINE SCHOLARSHIP EXPENSES: 24. BRIEFLY THE FACTS OF THE CASE ARE THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS FOR THE AY 2014-15, THE ASSE SSEE SOCIETY WAS ASKED BY THE ASSESSING OFFICER AND IT HAS FURNISHED A LIST OF 301 STUDENTS TO WHOM THE ASSESSEE HAS CLAIMED TO HAVE PAID A TOTA L SCHOLARSHIP OF RS.25,83,142/. TO VERIFY THE CLAIM OF THE ASSESSEE, NOTICES WERE ISSUED BY THE ASSESSING OFFICER U/S 133(6) OF THE ACT TO 25 S TUDENTS TO ASCERTAIN WHETHER THEY HAVE RECEIVED THE SCHOLARSHIP FROM THE ASSESSEE SOCIETY. OUT OF TOTAL 25 STUDENTS, REPLIES OF 16 STUDENTS WER E NOT RECEIVED. LETTERS SENT TO TWO STUDENTS WERE RETURNED BACK UNSERVED BY T HE POSTAL AUTHORITIES AND THREE STUDENTS DENIED TO RECEIVE AN Y SCHOLARSHIP DURING F.Y. 2013-14 FROM THE ASSESSEE SOCIETY. BASED ON TH ESE FINDINGS BY THE ASSESSING OFFICER, WHICH WERE MADE AVAILABLE TO THE L D PR CIT, THE LATTER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE SOCIETY A S PART OF THE PRESENT PROCEEDINGS AND THE ISSUE OF SCHOLARSHIP WAS ONE OF THE MATTER HIGHLIGHTED IN THE SAID SHOW-CAUSE. 25. THE ASSESSEE SOCIETY, IN RESPONSE TO THE SHOW-C AUSE, SUBMITTED THAT ALL THE AMOUNT OF SCHOLARSHIP WERE PAID THROUGH ACCOUNT PAYEE CHEQUES ISSUED IN THE NAME OF THE STUDENTS, AND ALL EXCEPT ONE CHEQUE HAVE BEEN DEBITED IN THE BANK ACCOUNT OF THE ASSESS EE SOCIETY. THE ASSESSEE SOCIETY FURTHER SUBMITTED THAT ALL THE STU DENTS, IN WHOSE CASE REPLY WAS NOT RECEIVED OR WHO HAVE DENIED HAVING RECE IVED THE SCHOLARSHIP MONEY, WERE CALLED TO THE OFFICE OF THE DEPARTMENT ALONG WITH ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 23 THEIR GUARDIANS AND NECESSARY VERIFICATION WAS DONE. REGARDING ONE STUDENT NAMELY YUVRAJ SINGH, WHO DENIED TO HAVE RECEIVED THE SCHOLARSHIP, IT WAS SUBMITTED THAT HE DID NOT PUT TH E CHEQUE IN HIS BANK ACCOUNT AND THEREFORE, THE ENTRY MADE IN THE BOOKS OF ACCOUNTS WAS REVERSED ON 31.03.2015, MUCH BEFORE THE SURVEY/SEAR CH. 26. THE SUBMISSIONS SO FILED BY THE ASSESSEE SOCIETY WERE CONSIDERED BUT NOT FOUND ACCEPTABLE TO THE LD. PR.CIT. IT WAS H ELD BY THE LD PR.CIT THAT THE LETTERS SENT U/S 133(6) OF THE ACT WERE REC EIVED BACK UNSERVED EVEN THOUGH THE ADDRESSES OF THE STUDENTS WERE PROVI DED BY THE ASSESSEE SOCIETY. FURTHER, THREE STUDENTS WERE EXAMINED ON OA TH AND THEY HAVE STATED THAT THEY HAVE NOT RECEIVED ANY SCHOLARSHIP. MERE FILING OF CONFIRMATION LETTERS IS NOT SUFFICIENT TO PROVE THA T SCHOLARSHIP WAS ACTUALLY RECEIVED BY STUDENTS, ESPECIALLY WHEN SOME OF THEM H AVE DENIED RECEIVING THE SAME ON OATH. THE FACT THAT SCHOLARSHIP MONEY WAS TRANSFERRED THROUGH BANKING CHANNELS IS ALSO NOT CONCLUSIVE PRO OF THAT THE SCHOLARSHIP PAYMENTS WERE GENUINE AND WERE ACTUALLY ENCASHED BY T HE REAL BENEFICIARIES. FURTHER THE LD. PR.CIT HELD THAT NO S UCH VERIFICATION WAS DONE BY THE DEPARTMENT AS SO CLAIMED AND THEREFORE, THE ASSESSEES CONTENTION THAT THE STUDENTS IN RESPECT OF WHOM THE REPLY WAS NOT RECEIVED, THEY WERE CALLED TO THE OFFICE OF THE DEPA RTMENT AND NECESSARY VERIFICATION WAS DONE, WAS NOT FOUND ACCEPTABLE. IT WA S HELD THAT NO VERIFICATION WAS DONE BY THE DEPARTMENT RATHER THE A SSESSEE MERELY SUBMITTED CONFIRMATION LETTERS ON BEHALF OF THE STU DENTS. THE LD. PR. CIT ACCORDINGLY HELD THAT IN ABSENCE OF PHYSICAL EXAMIN ATION, SUCH CONFIRMATION LETTERS CANNOT BE TREATED AS CONCLUSIV E PROOF OF THE GENUINENESS OF SCHOLARSHIP PAYMENT. IT WAS ACCORDING LY CONCLUDED THAT ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 24 THE ASSESSEE HAS MISUSED FUNDS WHICH WERE CLAIMED AS EXPENSES IN THE GUISE OF SCHOLARSHIP PAYMENTS. 27. DURING THE COURSE OF HEARING, IT WAS SUBMITTED B Y THE LD AR THAT ALL THE SCHOLARSHIP MONEY WAS PAID BY ACCOUNT PAYEE CHEQ UES. EXCEPT IN THE CASE OF YUVRAJ SINGH, ALL THE CHEQUES HAVE BEEN CLE ARED AND DEBITED IN THE BANK ACCOUNT OF THE SOCIETY. A COPY OF THE BANK ACCOUNT OF THE SOCIETY SHOWING DEBITS DUE TO SCHOLARSHIP MONEY CHEQ UES IS ENCLOSED AS ANNEXURE A/7. NO EVIDENCE HAS BEEN BROUGHT ON RECOR D TO SHOW THAT THE SCHOLARSHIP MONEY OR EVEN PART OF IT HAS BEEN SIPHO NED OFF BY THE TRUSTEES AND UTILISED FOR THEIR BENEFIT. IN THE CASE OF YUVRAJ SINGH, THE CHEQUE WAS NEVER DEPOSITED BY HIM IN HIS BANK ACCOUN T, HENCE, THE AMOUNT WAS CREDITED, AS A CONTRA ENTRY, IN THE BANK ACCOUNT OF THE SOCIETY. COPY OF THE RELEVANT EXTRACT OF THE SOCIET Y'S BANK ACCOUNT IS ANNEXED AS ANNEXURE A/8. THIS EXTRACT WAS ALSO SUPP LIED WITH THE REPLY TO THE SHOW-CAUSE NOTICE, FILED BY THE APPELLANT SOCIE TY BEFORE THE LD PR.CIT. FURTHER, IN RESPECT OF OTHER TWO STUDENTS, NECESSARY DETAILS ARE AVAILABLE ON RECORD WHICH CLEARLY DEMONSTRATES THAT THEY HAVE RECEIVED THE SCHOLARSHIP MONEY AND THE CHEQUE ISSUED TO THEM HAV E BEEN CLEARED. 28. IT WAS FURTHER SUBMITTED BY THE LD AR THAT THE S URVEY U/S 133A OF THE ACT WAS UNDERTAKEN ON 11.12.2016 AND THE YEAR RE LEVANT TO THE ISSUE OF SCHOLARSHIP MONEY IS FINANCIAL YEAR 2013-14. MAN Y STUDENTS HAD LEFT, MANY MAY NOT REMEMBER, AT THE FIRST INSTANCE, OF RE CEIPT OF SCHOLARSHIP MONEY 2-3 YEARS AGO. HOWEVER, TO HAVE THE ISSUE VERI FIED, MOST OF THE STUDENTS THAT HAD BEEN MENTIONED ABOVE WERE TRACED, AND THEN PRODUCED BEFORE THE CONCERNED ITO AND CONFIRMATORY LETTERS WE RE ALSO FILED. THE ITO MADE DUE VERIFICATION, AND WAS CONVINCED THAT THE SCHOLARSHIP MONEY HAD INDEED BEEN RECEIVED BY THOSE STUDENTS. HENCE, IT IS WHOLLY INCORRECT ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 25 FOR THE LD. PR CIT TO STATE IN HIS ORDER THAT ONLY CONFIRMATORY LETTERS OF STUDENTS WERE FILED, THE STUDENTS WERE NOT PHYSICA LLY PRODUCED, AND THE ONUS WAS ON THE SOCIETY TO PRODUCE THEM. IT MAY BE STATED CATEGORICALLY THAT THE ONUS OF PRODUCING THE STUDENTS IS NOT ON T HE SOCIETY SINCE THE SCHOOL HAS NO STATUTORY MEANS OF FORCING A STUDENT TO BE PRESENT BEFORE AN INCOME-TAX AUTHORITY. SECONDLY, THE PCIT(CENTRAL) HAS WRONGLY STATED THAT THE STUDENTS WERE NOT PHYSICALLY PRODUCED. IT I S REITERATED THAT ALL THE CONCERNED STUDENTS WERE PRODUCED BEFORE THE INCOME-TA X AUTHORITIES, AND VERIFICATION WAS DONE. AN AFFIDAVIT FROM SHRI GA NESH NARAIN GUPTA, ACCOUNTANT OF THE SOCIETY, WHO HAD ACCOMPANIED THE S TUDENTS TO THE INCOME-TAX OFFICE, AND WAS PRESENT DURING THE VERIFIC ATION, IS ANNEXED HEREWITH AND MARKED AS ANNEXURE A/9. 29. IT WAS FURTHER SUBMITTED BY THE LD AR THAT EVEN IF IT IS FINALLY HELD BY THE TRIBUNAL THAT SCHOLARSHIP MONEY SHOWN AS PAID WAS NOT ACTUALLY PAID, IT WILL ONLY DEFLATE/DECREASE THE EXPENSES, AND INFL ATE/INCREASE THE SURPLUS OF THE SOCIETY. SINCE THE INCOME OF THE SOCIETY IS EXEMPT FROM TAX, IT WILL NOT MAKE ANY DIFFERENCE AS FAR THE TAXABILITY OF TH E AMOUNT IS CONCERNED, UNLESS IT IS SHOWN THAT SOME BENEFIT, DIRECT OR IND IRECT, HAS BEEN GIVEN TO ANY PERSON MENTIONED IN SECTION 13(3) OF THE ACT. I T WAS SUBMITTED THAT NOT A SHRED OF EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE DEPARTMENT THAT ANY BENEFIT HAS FLOWN TO ANY PERSON SO REFERRED IN SECTION 13(3) OF THE ACT. IN THE LIGHT OF THE SAME, IT WAS FINALLY S UBMITTED THAT THE CONCLUSION DRAWN BY THE LD PR.CIT IS WHOLLY ERRONEOUS , INCORRECT, AND NEEDS TO BE REJECTED. 30. THE LD CIT DR WAS HEARD WHO HAS RELIED HEAVILY ON T HE FINDINGS OF THE LD PR.CIT. WE HAVE ALREADY TAKEN NOTE OF THE SA ID FINDINGS AND THE SAME ARE NOT BEING REPEATED FOR THE SAKE OF BREVITY . ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 26 31. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE L D PR CIT HAS RAISED CERTAIN APPREHENSION ABOUT NON-VERIFIABILITY AND GE NUINENESS OF THE SCHOLARSHIP PAYMENTS MADE BY THE ASSESSEE SOCIETY T O ITS 301 STUDENTS DURING THE FINANCIAL YEAR 2013-14. THE BASIS OF SUCH APPREHENSION IS THAT NOTICES U/S 133(6) ISSUED BY THE ASSESSING OFFICER TO SIXTEEN STUDENTS WERE NOT COMPLIED WITH AND IN TWO CASES, NOTICES WERE RETUR NED UNSERVED, AND THREE STUDENTS HAVE DENIED RECEIVING THE SCHOLARSHI P DURING THE FINANCIAL YEAR 2013-14. FURTHER, THESE STUDENTS WERE NOT PROD UCED FOR VERIFICATION AND IT WAS CONCLUDED THAT THE ASSESSEE HAS MISUSED F UNDS WHICH WERE CLAIMED AS EXPENSES IN THE GUISE OF SCHOLARSHIP PAY MENTS. IN RESPONSE, THE ASSESSEE SOCIETY HAS SUBMITTED THAT ALL SCHOLAR SHIP PAYMENTS HAVE BEEN PAID THROUGH ACCOUNT PAYEE CHEQUES AND EXCEPT IN CASE OF ONE STUDENT WHO DIDNT PRESENT THE CHEQUE, ALL THE CHEQU ES HAVE BEEN CLEARED AND PAYMENTS ARE DULY REFLECTED IN THE ASSESSEES B ANK ACCOUNT. FURTHER, STUDENTS WERE PRODUCED FOR VERIFICATION BEFORE THE I TO AND AN AFFIDAVIT OF ASSESSEES ACCOUNTANT WHO ACCOMPANIED THE STUDENTS FOR VERIFICATION HAS BEEN PLACED ON RECORD AND CONFIRMATION LETTERS FROM THE STUDENTS HAVE ALSO BEEN FILED. 32. FIRSTLY, WE FIND THAT THE APPREHENSION RAISED BY THE LD PR CIT IS BASED ON PROCEEDINGS CONDUCTED BY THE ASSESSING OFF ICER FOR AY 2014-15 WHEREBY THE AO HAS ISSUED THE SUMMONS TO THE STUDENT S AND BASIS THAT, HE HAS REACHED CERTAIN PRELIMINARY FINDINGS AS THE ASSESSING OFFICER HAS FINALLY PASSED THE ASSESSMENT ORDER FOR AY 2014-15 MUCH AFTER THE CONCLUSION OF THE PRESENT PROCEEDINGS BEFORE THE LD PR.CIT. WE THEREFORE FIND THAT THE LD PR.CIT HAS PROCEEDED ON THE PRELIMI NARY FINDINGS ARRIVED AT BY THE ASSESSING OFFICER. THEREAFTER, EVEN THOU GH HE HAS ISSUED THE ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 27 SHOW-CAUSE TO THE ASSESSEE DURING THE IMPUGNED PROC EEDINGS, HOWEVER, HIS FINDINGS REFLECT THAT HE WAS GUIDED SOLE LY BY THE INITIAL AND PRELIMINARY FINDINGS SO ARRIVED BY THE ASSESSING OF FICER AND HAS NOT CARRIED OUT ANY INDEPENDENT EXAMINATION AND VERIFICATION OF THE TRANSACTIONS UNDER CONSIDERATION. THERE IS NOTHING IN LAW WHICH PR EVENTS THE PR.CIT TO RELY ON THE FINDINGS OF THE ASSESSING OFFICER, AT T HE SAME TIME, HE SHOULD CARRY OUT INDEPENDENT EXAMINATION AND VERIFICATION AND THE FINAL FINDINGS SO ARRIVED AT SHOULD REFLECT HIS THOUGHT PROCESS AN D THE REASONING. HOWEVER, IN THE INSTANT CASE, WE FIND THAT LD PR.CIT I S GUIDED BY THE FINDINGS OF THE ASSESSING OFFICER AND SUCH FINDINGS WHICH HAVE EVEN NOT ATTAINED FINALITY AS FAR AS PASSING OF THE ASSESSME NT ORDER FOR AY 2014-15 IS CONCERNED WHICH WAS PASSED SUBSEQUENT TO PASSING O F THE IMPUGNED ORDER. 33. HAVING SAID THAT, THOUGH THERE HAVE BEEN CONTRA DICTORY CLAIMS REGARDING PRODUCTION OF STUDENTS FOR VERIFICATION B EFORE THE ASSESSING OFFICER. AT THE SAME TIME, IN OUR CONSIDERED VIEW, M ERE NON-APPEARANCE OF CERTAIN STUDENTS FOR VERIFICATION CANNOT BE A SOLE BASIS TO RAISE A QUESTION MARK ON THE WHOLE SCHEME AND GE NUINENESS OF SCHOLARSHIP PAYMENTS TO OVER 301 STUDENTS ON A SAMP LE SURVEY SIZE OF AROUND 8% AND BASIS THE SAME, TO ARRIVE AT A FINDIN G THAT THE ASSESSEE HAS MISUSED FUNDS WHICH WERE CLAIMED AS EXPENSES IN T HE GUISE OF SCHOLARSHIP PAYMENTS. WE FIND THAT THE DOCUMENTS PR ODUCED BY THE ASSESSEE SOCIETY IN SUPPORT OF THE SCHOLARSHIP PAYM ENTS HAVE NOT BEEN CONSIDERED. THE SCHOLARSHIP PAYMENTS HAVE BEEN PAID TO THE REGULAR STUDENTS WHO ARE ENROLLED IN VARIOUS COURSES CONDUC TED BY THE EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE SOCIETY. DURING T HE COURSE OF HEARING, THE LD AR STATED AT THE BAR THAT THE CRITERIA FOR SUCH SCHOLARSHIP HAS BEEN WELL ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 28 LAID DOWN IN TERMS OF ECONOMIC CONDITION OF THE STUD ENTS AND THEIR PARENTS, PAST ACADEMIC RESULTS, ETC AND THERE IS A WELL LAID DOWN PROCESS FOR SEEKING APPLICATION FROM THE STUDENTS AND AFTER DUE VERIFICATION AND APPROVAL FROM THE HEAD OF THE EDUCATIONAL INSTITUTI ON, SCHOLARSHIP PAYMENTS ARE SANCTIONED AND SUBSEQUENTLY DISBURSED TO THE STUDENTS. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THESE ARE NOT REGULAR STUDENTS WHICH WERE ENROLLED WITH THE ASSESSEES EDUCATIONAL I NSTITUTIONS AND THAT THEY WERE NOT ELIGIBLE TO RECEIVE THE SCHOLARSHIP AS PER THE POLICY FRAMED BY THE ASSESSEES EDUCATIONAL INSTITUTIONS. THE CON FIRMATION LETTERS FILED BY THE STUDENTS HAVE BEEN PLACED ON RECORD AND THE CONTENTS THEREOF HAVE NOT BEEN DISPUTED. WE ALSO FIND THAT THE PAYM ENTS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES TO ALL THESE STUDENTS AND ALL THE CHEQUES HAVE BEEN CLEARED (EXCEPT IN CASE OF ONE STUDENT) A ND THE SAID PAYMENTS HAS BEEN DULY REFLECTED IN THE ASSESSEES BANK ACCO UNT. IN RESPECT OF THREE STUDENTS WHO HAVE DENIED RECEIVING THE SCHOLAR SHIP, THE ASSESSEE HAS SUBMITTED DUE EXPLANATION IN TERMS OF ONE OF TH E STUDENT (YUVRAJ SINGH) HAVING NOT PRESENTED THE CHEQUE NO. 780228 F OR PAYMENT OF RS 3306 AND THE ENTRY FOR SUCH PAYMENTS BEEN REVERS ED IN THE BOOKS OF ACCOUNTS ON 31.3.2015, AND IN RESPECT OF OTHER TWO S TUDENTS NAMELY ANSHU AGARWAL AND POOJA KUMAR JAIN, COPY OF THEIR SC HOLARSHIP FORMS DULY APPROVED BY THE PRINCIPAL, ST. WILFREDS COLLEGE FO R GIRLS, COPY OF ACCOUNT PAYEE CHEQUES ISSUED IN THEIR FAVOUR BEARING CHEQUE NO. 780912 DATED 13.01.2014 FOR RS 3,180 CLEARED ON 10.02.2014 AND C HEQUE NO. 780917 DATED 13.01.2014 FOR RS 3,180 CLEARED ON 17.02.2014 RESPECTIVELY AND COPY OF THEIR CONFIRMATIONS ADDRESSED TO DCIT(EXEMP TION), CIRCLE 1, JAIPUR ARE AVAILABLE ON RECORD. THEREFORE, THERE IS NOTHING ON RECORD TO SUGGEST THAT THE SCHOLARSHIP PAYMENTS ARE NOT GENUINE AND T HE AMOUNT HAS BEEN WITHDRAWN BY THE ASSESSEE SOCIETY IN THE GUISE OF SCH OLARSHIP EXPENSES. ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 29 FURTHER, THERE IS NOTHING ON RECORD WHICH REMOTELY S UGGESTS THAT THE AMOUNT SO CLAIMED BY THE ASSESSEE SOCIETY AS SCHOLA RSHIP EXPENSES HAVE REACHED BACK IN THE HANDS OF THE ASSESSEE SOCIETY A ND THE LATTER HAS MISUSED SUCH FUNDS. WE THEREFORE FOUND THE APPREHE NSION SO RAISED BY THE LD PR.CIT BASED ON PRELIMINARY ENQUIRIES DRAWN BY THE ASSESSING OFFICER ARE NOT TENABLE AND SUSTAINABLE IN THE LIGH T OF CLEAR EVIDENCE ON RECORD BROUGHT BY THE ASSESSEE SOCIETY THAT THESE A RE GENUINE PAYMENTS OF SCHOLARSHIP TO ITS STUDENTS AS PER WELL LAID DOWN SCHOLARSHIP POLICY AND THEREFORE, SUCH APPREHENSION HAS NO LEGAL LEGS TO S TAND AND THE SAME CANNOT BE A BASIS TO DISALLOW THE CLAIM OF THE SCHOL ARSHIP EXPENSES. 34. FURTHER, SEEKING CONFIRMATIONS FROM THE STUDENT S AS TO WHETHER THEY HAVE RECEIVED THE AMOUNT IS NO DOUBT PART OF AN INV ESTIGATE EXERCISE AND THE OFFICER IS DULY AUTHORIZED UNDER LAW, HOWEVER SO LELY GUIDED BY NON- RECEIPT OF CONFIRMATION AND THAT TOO, FROM FEW STUDE NTS CANNOT BE SOLE BASIS FOR DENIAL OF CLAIM IN THE HANDS OF THE ASSES SEE SOCIETY. EVEN WHERE CERTAIN SCHOLARSHIP EXPENSES REMAINS UNVERIFIED, TH E SAME AT BEST MAY BE A BASIS TO DISALLOW THE SAID EXPENSES LIMITED TO TH E EXTENT IT REMAIN UNVERIFIED, HOW THE SAME CAN BE BASIS TO HOLD THAT T HE ASSESSEE SOCIETY HAS MISUSED THE FUNDS OF THE SOCIETY IN GARB OF WHOL E OF THE SCHOLARSHIP EXPENSES AND IF THE SAID ANALOGY IS ACCEPTED, THEN EVERY EXPENSE CLAIM WHERE THE SAME IS NOT PROVED BY PERSONAL APPEARANCE OF THE PERSON TO WHOM SUCH PAYMENT HAS BEEN MADE WOULD BE A BASIS TO HOLD THAT THE ASSESSEE SOCIETY HAS MISUSED THE FUNDS OF THE SOCIE TY. TO OUR MIND, AS THE ASSESSEE SOCIETY HAS DOCUMENTATION TO SUPPORT I TS CLAIM, SUCH APPREHENSION IS ILL-FOUNDED AND IS NOT SUPPORTED BY WELL ESTABLISHED LEGAL PROPOSITION AND RULE OF LAW. ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 30 35. FURTHER, WE FIND THAT THE REVENUE AUTHORITIES HA VE TO APPRECIATE THAT A STUDENT STUDYING IN A COLLEGE OR UNIVERSITY CANNOT BE EQUATED WITH A REGULAR VENDOR OR A SERVICE PROVIDER. A STUDENT INVOLVEMENT IS LIMITED TO THE EDUCATIONAL SPHERE AN D TO A LIMITED EXTENT WHERE HE/SHE AND THEIR PARENTS/GUARDIANS ARE REQUIRE D TO PAY HIS FEES AND RECEIVE SCHOLARSHIP WHEREVER HE/SHE IS ELIGIBLE FOR THE SAME AND NOTHING BEYOND THAT. AS AGAINST THAT, A VENDOR OR A SERVIC E PROVIDER IS IN THE BUSINESS OF SUPPLY OF GOODS AND PROVISION OF SERVIC ES AND IS RUNNING A COMMERCIAL ESTABLISHMENT WHERE HE MAINTAINS ITS RECO RDS AND REPORTS HIS RECEIPTS AND EXPENSES AND IS SUBJECT TO SCRUTINY OF THE TAX AUTHORITIES. THEREFORE, THE LATTER IS IN A POSITION AND IS EXPECT ED TO TIMELY RESPOND AND CO-OPERATE IN THE PROCEEDINGS BEFORE THE TAXING AUT HORITIES AND IN CASE OF NON-COMPLIANCE, HE CAN BE FASTENED WITH APPROPRIATE PENALTY ACTIONS. HOWEVER, A STUDENT WHO IS STUDYING OR HAS RECENTLY PA SSED OUT OF HIS/HER COLLEGE OR UNIVERSITY AND WHO IS ISSUED SUMMONS UNDE R SECTION 131, HE OR SHE IS NOT EXPECTED TO APPRECIATE AND RESPOND IN TH E MANNER AS EXPECTED FROM ANY OTHER SERVICE PROVIDER. THEREFORE, WHERE TH ERE IS A NON- COMPLIANCE ON PART OF CERTAIN STUDENTS TO RESPOND T O SUCH NOTICES/SUMMONS IN A TIMELY MANNER AND IN SOME CASE S, WHERE THEY HAVE RESPONDED THOUGH WITH WRONG FACTS, THE AUTHORITIES HA VE TO APPRECIATE THE SAME IN A MORE REALISTIC MANNER RATHER THAN IN A RI TUALISTIC MANNER AND THEIR CONCLUSIONS SHOULD NOT BE GUIDED SOLELY BY NO N-APPEARANCE OF CERTAIN STUDENTS BEFORE THEM. IN OTHER WORDS, UNLES S THE REVENUE AUTHORITIES ARE CEASED OF SUFFICIENT MATERIAL OR IN FORMATION AND SUCH MATERIAL/INFORMATION IS CREDIBLE ENOUGH TO PROVE TH AT THE ASSESSEE SOCIETY IS WITHDRAWING THE FUNDS OF THE SOCIETY IN THE GUISE OF SCHOLARSHIP EXPENSES SYSTEMATICALLY OVER A PERIOD OF TIME AND S UCH FUNDS ARE NOT ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 31 REACHING THE STUDENTS CONCERNED IN WHOSE NAME THE SC HOLARSHIP PAYMENTS HAVE BEEN SHOWN TO HAVE BEEN MADE, IN SUCH A CASE, THE AUTHORITIES HAVE ALL THE RIGHT AND THE JURISDICTION TO PROCEED AGAINST THE SOCIETY. HOWEVER, IN THE INSTANT CASE, THERE IS NOT HING ON RECORD WHICH HAS BEEN BROUGHT ON RECORD TO PROVE SUCH MIS-MANAGE MENT AND DIVERSION OF SOCIETY FUNDS. 36. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR CONSIDERED VIEW, S CHOLARSHIP PAYMENTS ARE GENUINE PAYMENTS MADE BY THE ASSESSEE SOCIETY A ND THERE IS NO BASIS TO HOLD THAT THE ASSESSEE SOCIETY HAS MISUSED THE S OCIETY FUNDS IN GUISE OF SCHOLARSHIP PAYMENTS. THEREFORE, THE SAID FINDINGS OF THE LD PR CIT CANNOT BE SUSTAINED AND CANNOT BE MADE A BASIS TO HOLD THA T THE ASSESSEE SOCIETY IS NOT CARRYING OUT ITS ACTIVITIES AS PER I TS OBJECTS AND THE EXEMPTION GRANTED UNDER SECTION 12AA SHOULD BE WITHD RAWN. PAYMENT MADE TO RAJASTHAN HOUSING BOARD IN CONTRAVENTION OF SECTION 11(5) READ WITH SECTION 13(1)(C) 37. BRIEFLY STATED FACTS OF THE CASE ARE THAT DURIN G THE F.Y. 2013-14, THE ASSESSEE HAS MADE A PAYMENT OF RS. 6,73,70,930/- TO RAJASTHAN HOUSING BOARD TOWARDS ALLOTMENT OF LAND BY RAJASTHAN HOUSING BOARD TO M/S ADARSH GYAN VIDYALAYA SAMITI AND HAS SHOWN THE SAME IN ITS FINANCIAL STATEMENTS AS PART OF LAND PURCHASED DURING THE YEA R. FOR THE PURPOSES, THE ASSESSEE ENTERED INTO AN AGREEMENT TO SELL WIT H M/S ADARSH GYAN VIDYALYA SAMITI. THE CONVEYANCE CUM PERPETUAL LEASE DEED THOUGH HAS BEEN EXECUTED BY RAJASTHAN HOUSING BOARD IN FAVOUR OF M/S ADARSH GYAN VIDYALYA SAMITI, HOWEVER, NO REGISTRY OR TITLE TRANS FER HAS BEEN DONE IN FAVOUR OF THE ASSESSEE SOCIETY. ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 32 38. THE LD PCIT, REFERRING TO THE CONDITIONS OF ALLOT MENT AS PER ALLOTMENT LETTER ISSUED BY RAJASTHAN HOUSING BOARD TO M/S ADARSH GYAN VIDYALYA SAMITI, HELD THAT A PERSON TO WHOM THE LAN D HAS BEEN ALLOTTED CANNOT TRANSFER IT TO ANY OTHER PERSON. IT WAS ACCOR DINGLY HELD THAT THE CLAIM OF THE ASSESSEE SOCIETY THAT IT HAS PURCHASED THE LAND IS PATENTLY FALSE AS IT IS ILLEGAL FOR M/S ADARSH GYAN VIDYALYA SAMITI TO SELL/TRANSFER THE LAND TO THE ASSESSEE. IT WAS FURTHER OBSERVED THAT M /S ADARSH GYAN VIDYALYA SAMITI AND THE ASSESSEE SOCIETY HAVE THREE COMMON MEMBERS/TRUSTEES AND THEREFORE, M/S ADARSH GYAN VID YALYA SAMITI IS RELATED ENTITY WITHIN THE MEANING OF SECTION 13(3) O F THE ACT. THE LD. PR. CIT HAS HELD THAT IT IS A CASE OF USE OF SOCIETY FU ND FOR THE BENEFIT OF M/S ADARSH GYAN VIDHALAYA SOCIETY, A RELATED ENTITY, WHI CH IS IN VIOLATION OF THE PROVISIONS OF SECTION 13(3) OF THE ACT. FURTHER , IT WAS HELD THAT IT IS AGAINST THE OBJECTS OF THE SOCIETY / TRUST, AS IT I S DIVERSION OF FUNDS. FURTHER, BOOKING OF LAND AS ASSET IN THE BOOKS OF THE ASSESSEE SOCIETY FOR WHICH THE ASSESSEE HAS NO LEGAL OWNERSHIP SHOWS T HAT BALANCE SHEET DOES NOT REFLECT TRUE & FAIR PICTURE OF THE ASSETS OF THE ASSESSEE. FURTHER, IT WAS HELD THAT THIS PAYMENT TO RAJASTHAN HOUSING B OARD ON BEHALF OF M/S ADARSH GYAN VIDHALAYA SOCIETY IS NEITHER A LOAN NOR A DONATION BUT IT APPEARS TO BE AN INVESTMENT NOT ALLOWABLE U/S 11(5) OF THE ACT. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED TO THE AS SESSEE SOCIETY 39. IN RESPONSE TO THE SHOW-CAUSE, THE ASSESSEE SOC IETY SUBMITTED THAT ADARSH GYAN VIDHALAYA SOCIETY OWNED A PIECE OF LAND WHICH IT WAS NOT UTILIZING. SINCE THE ASSESSEE WAS LOOKING AT EXPANDI NG ITS EDUCATIONAL ACTIVITIES, THE ASSESSEE OFFERED TO PURCHASE THE SA ME FOR WHICH A REGULAR 'AGREEMENT TO SELL WAS ENTERED INTO BETWEEN THE TWO E NTITIES. THE ASSESSEE CONTENDED THAT AS PER THE NARRATION IN THI S DOCUMENT DATED ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 33 04.12.2013, ADARSH GYAN VIDHALAYA SOCIETY HAD PURCH ASED THE SAID LAND FROM RAJASTHAN HOUSING BOARD FOR AN INITIAL PAYMENT OF RS. 80,46,880/-. DUE TO PAUCITY OF FUNDS WITH ADARSH GYAN SOCIETY, TH E ASSESSEE AGREED TO PURCHASE THE SAID LAND FROM ADARSH GYAN SOCIETY FOR THE AMOUNT OF RS. 7,54,17,810/- IN PURSUANCE OF WHICH THE SAID AMOUNT WAS PAID BY THE ASSESSEE AND RAJASTHAN HOUSING BOARD WAS INFORMED OF THE CHANGE IN OWNERSHIP. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS SUBSEQUENTLY BUILT A BUILDING ON THE SAID PIECE OF LAND AND IS C ARRYING ON EDUCATIONAL ACTIVITIES THEREON, RECEIPTS OF WHICH WERE BEING REFL ECTED IN ITS BOOKS OF ACCOUNTS. 40. THE SUBMISSION SO FILED BY THE ASSESSEE WERE CONS IDERED BUT NOT FOUND ACCEPTABLE BY THE LD. PR. CIT. IT WAS HELD BY THE LD PR CIT THAT THE ASSESSEE SOCIETY HAS NOT FILED ANY EVIDENCE TO SUBS TANTIATE THAT RAJASTHAN HOUSING BOARD WAS DULY INFORMED OF THE CHANGE OF OWN ERSHIP. ALSO, AS PER THE TERMS AND CONDITIONS OF ALLOTMENT BY RAJAST HAN HOUSING BOARD, ADARSH GYAN SOCIETY CANNOT LEGALLY TRANSFER OR SELL THE LAND TO THE ASSESSEE AND THEREFORE, IT IS ILLEGAL FOR ADARSH GY AN SOCIETY TO TRANSFER OR SELL THE LAND IN QUESTION TO ASSESSEE. IT WAS ACCORD INGLY HELD THAT THE AGREEMENT TO SALE IS NOTHING BUT AN ILLEGAL PIECE OF DOCUMENT WHICH HAS BEEN FABRICATED BY THE ASSESSEE IN AN ATTEMPT TO SU BMIT AS FALSE EVIDENCE BEFORE INCOME-TAX AUTHORITIES. IT WAS ACCORDINGLY HE LD THAT BY MAKING PAYMENT ON BEHALF OF ADARSH GYAN SOCIETY, THE ASSES SEE HAS USED PART OF ITS INCOME FOR THE DIRECT BENEFIT OF ITS SISTER CON CERN, ADARSH GYAN SOCIETY AND HAS THEREFORE VIOLATED PROVISIONS OF SECTION 13 (1)(C) OF THE ACT AND CONSEQUENTLY, SECTIONS 11 AND 12 WILL NOT BE APPLICA BLE IN THE CASE OF THE ASSESSEE. ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 34 41. THE LD CIT DR HAS STRONGLY RELIED ON THE AFORESAI D FINDINGS OF LD PCIT. IN HIS SUBMISSIONS, THE LD AR ON BEHALF OF TH E ASSESSEE SUBMITTED THAT ADARSH GYAN VIHAR VIDHALAYA SOCIETY, IN WHICH S OME OF THE TRUSTEES ARE COMMON AS THAT OF THE ASSESSEE SOCIETY, HAD PUR CHASED LAND FROM RAJASTHAN HOUSING BOARD TO BUILD A SCHOOL THEREON. THE SOCIETY PAID THE INITIAL AMOUNT OF RS. 80,46,880/- BUT WAS UNABLE TO PAY THE REST OF THE AMOUNT OF RS. 6,73,70,930/- DUE TO PAUCITY OF FUNDS . HENCE, THE APPELLANT SOCIETY MADE AN OFFER TO GYAN VIHAR VIDHALAYA SOCIE TY TO PURCHASE THE SAID LAND SINCE IT WANTED TO EXPAND ITS EDUCATIONAL ACTIVITIES. IT PAID THE SAID AMOUNT TO GYAN VIHAR SOCIETY, AND ENTERED INTO A REGISTERED 'AGREEMENT TO SELL' IN THIS REGARD WITH IT. THEREAFTE R, IT WROTE TO RHB INFORMING THEM OF THE SAID PURCHASE AND REQUESTING THEM FOR APPROVAL FOR CHANGE OF OWNERSHIP IN THEIR RECORDS. SINCE, THE APP ROVAL HAD NOT BEEN RECEIVED, A FORMAL 'SALE DEED' HAD NOT BEEN EXECUTE D. MEANWHILE, AS STATED IN ITS REPLY DATED 10.12.2018 BEFORE THE PCI T, THE APPELLANT SOCIETY HAD BUILT A SCHOOL BUILDING THEREON, AND WAS CARRYIN G ON EDUCATIONAL ACTIVITIES THEREIN. FEE RECEIVED FROM STUDENTS STUD YING IN THIS BUILDING WERE BEING DULY REFLECTED IN THE AUDITED ACCOUNTS OF THE APPELLANT SOCIETY. 42. REGARDING THE FINDINGS OF THE LD PCIT(CENTRAL) I N HIS ORDER THAT THE AGREEMENT TO SELL WAS ILLEGAL AND A FABRICATION; TH AT NO EVIDENCE TO SHOW THAT RHB HAD BEEN INFORMED HAS BEEN SUBMITTED; THAT THE SOCIETY HAD USED ITS INCOME FOR THE DIRECT BENEFIT OF ITS 'SIST ER CONCERN', HENCE HIT BY THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT, THE PAYMENT COULD AT BEST BE CALLED AN INVESTMENT, BUT MADE IN CONTRAVENTION OF SECTION 11(5) OF THE ACT, IT WAS SUBMITTED BY THE LD AR THAT IT IS NOT KN OWN HOW CAN A REGISTERED AGREEMENT TO SELL CAN BE CALLED A FABRIC ATION BY THE PCIT. THE PCIT HAS NO EVIDENCE TO BACK HIS ALLEGATION, WHICH I S TOTALLY UNFOUNDED, ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 35 BASELESS, AND MALICIOUS. THE 'AGREEMENT TO SELL' IS A GENUINE DOCUMENT, AND NOT A FABRICATED ONE. A COPY OF THE ' AGREEMENT TO SELL' IS ENCLOSED AND MARKED AS ANNEXURE A/10. SECONDLY, THE PCIT (CENTRAL) DELIBERATELY HAS IGNORED/NOT MENTIONED THE FACT THA T THE DEPARTMENT HAD VERIFIED THIS PURCHASE FROM RHB WHICH HAD ACKNOWLEDG ED THAT THEY HAD RECEIVED SUCH A LETTER FROM THE APPELLANT SOCIETY. PCIT(CENTRAL) WAS AWARE OF THIS EVIDENCE. A COPY OF THE SAID EVIDENCE IS ANNEXED HEREWITH AND MARKED AS ANNEXURE A/11. ALSO, A COPY OF THE LE TTER WRITTEN BY THE APPELLANT SOCIETY TO THE RAJASTHAN HOUSING BOARD IS ENCLOSED AND MARKED AS ANNEXURE A/12. HENCE, THE ALLEGATION OF THE RESP ONDENT IS FACTUALLY INCORRECT AND A CLEAR CUT ATTEMPT TO SUPPRESS MATER IAL INFORMATION. IT WAS FURTHER SUBMITTED THAT THE COST OF LAND IS INCLUDED IN THE BALANCE-SHEET OF THE APPELLANT SOCIETY, AND THE RECEIPTS FROM STUDEN TS ARE INCLUDED IN ITS RECEIPTS. A COPY OF THE AUDITED A/CS OF THE APPELLA NT SOCIETY FOR THE YEAR A.Y. 2017-18 ARE ENCLOSED AS PROOF AND MARKED AS AN NEXURE A-13. THE ALLEGATION THAT THE PURCHASE IS NOT A PURCHASE, BUT AN INVESTMENT IS ALSO INCORRECT, IN THE LIGHT OF THE FACT THAT PAYMENT HA S BEEN MADE TOWARDS PURCHASE OF THE LAND. HENCE, IT DOES NOT FALL WITHIN THE AMBIT OF SECTION 11(5) OF THE ACT. 43. IT WAS FURTHER SUBMITTED THAT EVEN FOR THE SAKE OF ARGUMENT, IF IT IS TAKEN THAT THERE IS A DEFICIENCY IN THE PAPERS OF P URCHASE OF LAND IN THE ABSENCE OF A SALE DEED, THAT DOES NOT AFFECT THE FA CT OF PURCHASE OF LAND AS HELD BY THE ITAT, JAIPUR BENCH, IN THE CASE OF IN DIAN MEDICAL TRUST V. PCIT(CENTRAL), JAIPUR [2018] 99 TAXMANN.COM 273 IN F OLLOWING WORDS: 'WHERE ASSESSEE TRUST ENGAGED IN RUNNING VARIOUS ED UCATIONAL INSTITUTIONS WAS DENIED REGISTRATION UNDER SECTION 1 2AA MERELY ON GROUND THAT SOME PART OF LAND ON WHICH ASSESSEE HAD SET UP AN ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 36 UNIVERSITY WAS NOT IN THE OWNERSHIP OF SAID UNIVERSIT Y AS PER CERTAIN GOVERNMENT NOTIFICATION, SAME WAS UNJUSTIFIE D.' 44. IT WAS FURTHER SUBMITTED BY THE LD AR THAT VERY ALLEGATION OF THE RESPONDENT THAT THE PURCHASE PRICE IS ACTUALLY AN I NVESTMENT NOT SANCTIONED BY SECTION 11(5) OF THE ACT IS LEGALLY I NCORRECT. THE ATTENTION OF THE BENCH IS DRAWN TOWARDS SECTION 11(5) (X) OF THE ACT WHICH STATES AS UNDER: '(5) THE FORMS AND MODES OF INVESTING OR DEPOSITING THE MONEY REFERRED TO IN CLAUSE (B) OF SUB-SECTION (2) SHALL BE THE FO LLOWING, NAMELY:- (X) INVESTMENT IN IMMOVABLE PROPERTY.' HENCE, EVEN BY THE ARGUMENT ADVANCED BY THE RESPOND ENT, THAT THE MONEY PAID IS AN INVESTMENT, THE INVESTMENT IN IMMO VABLE PROPERTY IS A FORM OF INVESTMENT APPROVED BY THE ACT. 45. IT WAS FURTHER SUBMITTED BY THE LD AR THAT NO EV IDENCE HAS BEEN PLACED ON RECORD BY THE RESPONDENT WITH REGARD TO AN Y DIRECT OR INDIRECT BENEFIT FLOWING TO THE TRUSTEES/MEMBERS OF THE SOCIE TY WHICH MIGHT BRING IT WITHIN THE AMBIT OF SECTION 13(1) R.W.S.13(3) OF T HE ACT. IT WAS POINTED OUT IN THE REPLY SUBMITTED TO THE SHOW-CAUSE NOTICE THAT THE CASE OF THE APPELLANT SOCIETY DOES NOT FALL WITHIN ANY OF THE CL AUSES OR SUB-CLAUSES OF SECTION 13(3), HENCE THE ALLEGATION IS NOT MAINTAIN ABLE IN ANY CASE. 46. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PURSUED THE MATERIAL AVAILABLE ON THE RECORD. ADARS H GYAN VIDHALAYA SAMITI HAS BEEN ALLOTTED AN INSTITUTIONAL PLOT MEAS URING 4151.34 SQ. METERS OPPOSITE SECTOR 3, SHIPRA PATH, MANSAROVAR, JAIPUR BY RAJASTHAN HOUSING BOARD VIDE ALLOTMENT LETTER DATED 17.12.201 3 ON LEASEHOLD BASIS ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 37 FOR A PERIOD OF 99 YEARS SUBJECT TO PAYMENT OF RS 7 .54 CRORES AND RS 34.45 LACS AS ANNUAL LEASE PAYMENT. THE SAID ALL OTMENT LETTER TALKS ABOUT PAYMENT OF LEASE MONEY WITHIN STIPULATED TIME FRAME IN ABSENCE OF WHICH THE ALLOTMENT WILL BE CANCELLED BESIDES STATING OTHER TERMS AND CONDITIONS OF ALLOTMENT INCLUDING THE FACT THAT THE LAND SO ALLOTTED SHALL NOT BE TRANSFERRED. IN TERMS OF AGREEMENT TO SELL EN TERED INTO BETWEEN ADARSH GYAN VIDHALAYA SAMITI AND THE ASSESSEE SOCIE TY, IT HAS BEEN STATED THEREIN THAT THE FORMER HAS EXPRESSED ITS INABILITY TO ARRANGE THE FUNDS AND MAKE PAYMENT TO RAJASTHAN HOUSING BOARD TO THE EXTENT OF RS 6.73 CRORES AFTER MAKING THE INITIAL PAYMENT OF RS 80.46 LACS AND THEREFORE HAS APPROACHED THE ASSESSEE SOCIETY TO MA KE PAYMENT TO RAJASTHAN HOUSING BOARD AND IN CONSIDERATION, HAS A GREED TO SELL THE AFORESAID PROPERTY TO THE ASSESSEE SOCIETY FOR A TO TAL CONSIDERATION OF RS 7.54 CRORES AS STATED INITIALLY IN THE ALLOTMENT LETTER. THE ASSESSEE SOCIETY IN PURSUANCE OF THE SAID AGREEMENT TO SELL HAS THEREAFTER MADE A PAYMENT OF RS 6.73 CRORES DIRECTLY TO RAJASTHAN HOU SING BOARD. SUBSEQUENTLY, ADARSH GYAN VIDHALAYA SAMITI, HAVING COMPLIED WITH THE TERMS AND CONDITIONS OF ALLOTMENT LETTER INCLUDING THE REQUISITE TERMS OF PAYMENTS, HAS ENTERED INTO A CONVEYANCE CUM PERPETU AL LEASE DEED WITH RAJASTHAN HOUSING BOARD WHICH HAS BEEN REGISTERED WIT H THE OFFICE OF SUB-REGISTRAR VIII JAIPUR ON 7.02.2014 AND THE RELE VANT TERMS AND CONDITIONS OF SUCH CONVEYANCE CUM PERPETUAL LEASE D EED READS AS UNDER: 4. THE LESSEE MAY TRANSFER, ASSIGN OTHERWISE PART PO SSESSION OF THE WHOLE OR ANY PART OF THE SAID LAND WITH THE PREV IOUS CONSENT OF LESSOR. WHICH IT SHALL BE ENTITLED TO REFUSE IN ITS ABSOLUTE DISCRETION. 5. WHENEVER THE TITLE OF LESSEE IN THE SAID LAND IS TRANSFERRED IN ANY MANNER WHAT SO EVER THE TRANSFEREE SHALL BE BOU ND BY ALL ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 38 COVENANTS AND CONDITIONS CONTAINED HEREIN BE ANSWERA BLE IN ALL RESPECT THEREOF. IN CASE THE PROPERTY IS MORTGA GED TO ANY FINANCIAL INSTITUTION, BANK, RAJASTHAN STATE INDUST RIAL DEVELOPMENT & INVESTMENT CORPORATION LTD. (RIICO) FOR A LOAN AGAI NST IT, THE RAJASTHAN HOUSING BOARD ACCEPTS THE RIGHT OF THE FI NANCIAL INSTITUTION, BANK, RAJASTHAN STATE INDUSTRIAL DEVEL OPMENT & INVESTMENT CORPORATION LTD. (RIICO) ETC. TO SELL TH E SAID PROPERTY TO ANY PERSON IN EXERCISE OF THE RIGHT RESERVED BY THE FINANCIAL INSTITUTION, BANK, RAJASTHAN STATE INDUSTRIAL DEVEL OPMENT & INVESTMENT CORPORATION LTD. (RIICO) UNDER THE TERMS OF THE MORTGAGE DEED ENTERED INTO BY THE FINANCIAL INSTITU TION, BANK, RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD. (RIICO) AND THE LESSEE. 6. WHEREEVER THE TITLE OF LESSEE IN THE SAID LAND I N TRANSFEROR IN ANY MANNER WHAT SO OVER THE TRANSFEROR AND TRANSFERE E SHALL, WITHIN THREE MONTHS OF THE TRANSFER GIVE A NOTICE OF SUCH TRANSFER IN WRITING TO THE LESSOR. IN THE EVENT OF THE WINDING UP OR LIQ UIDATION OF ALLOTTEE/ LESSEE'S SOCIETY / TRUST THE PERSON ON WHO M THE TITLE OF THE SOCIETY DEVOLVE/ SUCCEED AS THE CASE MAY BE, SHALL APPLY TO THE LESSOR WITH CERTIFIED COPIES OF THE DOCUMENTS (AS EV IDENCING THE TRANSFER OR DEVOLUTION/SUCCESSION). IF THE TRANSFER OR AND THE TRANSFEREE NEGLECT TO GIVE THE NOTICE OF SUCH TRANS FER IN WRITING TO THE LESSOR THE LESSOR MAY IMPOSE FOR EACH SUCH CASE OF THE NEGLECT, LIQUIDATED/ DAMAGES, AMOUNTING TO RS.100/- FOR THE FIRST YEAR AND THEREAFTER RS. 100/- FOR EACH SUCCESSIVE YEAR OR PA RT THEREOF SUCH NEGLECT. THE LESSEE SHALL FROM TIME TO TIME AND AT A LL TIMES PAY AND DISCHARGE ALL RATES TAXES CHARGES AND ASSESSMENT OF EVERY ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 39 DESCRIPTION WHICH ARE NOW OR AT ANY TIME HEREAFTER DU RING THE CONTINUANCE OF THIS DEED BE ASSESSED, CHARGED OR IM POSED UPON THE SAID LAND HEREBY THE LESSEE SHALL ALSO PAY ANY INCR EASE IN THE PREMIUM OF THE LAND UNDER HIS PLOT IF IN FUTURE THE COST (PREMIUM) OF THE LIND GOES UP AS RESULT OF CERTAIN JUDGMENT O F A COURT OR DUE TO ANY OTHER UNFORESEEN REASON BEYOND THE CONTROL O F THE LESSOR. 47. ON PERUSAL OF ABOVE TERMS AND CONDITIONS OF THE CONVEYANCE CUM PERPETUAL LEASE DEED, WE FIND THAT IT CONTAINS ENABL ING PROVISIONS FOR TRANSFER OF LEASEHOLD LAND BY THE LESSEE I.E, ADARS H GYAN VIDHALAYA SAMITI WITH THE PREVIOUS CONSENT OF THE LESSOR I.E, RAJASTH AN HOUSING BOARD AND THE LATTER SHALL BE ENTITLED TO REFUSE SUCH TRANSFE R AT ITS DISCRETION. IT IS A SETTLED LEGAL PROPOSITION THAT THE LATTER AGREEMENT SUPERCEDES ANY EARLIER AGREEMENT/UNDERSTANDING BETWEEN THE TWO PARTIES. WHE N THE SAID TERMS AND CONDITIONS OF THE CONVEYANCE CUM PERPETUAL LEAS E DEED CONTAINING THE ENABLING PROVISIONS FOR TRANSFER ARE READ IN CO MPARISON TO THE TERMS OF THE EARLIER ALLOTMENT LETTER DATED 17.12.2013 WHEREI N THE TRANSFER WAS NOT PERMITTED, THE TERMS OF CONVEYANCE CUM PERPETUAL LE ASE DEED SHALL SUPERSEDE THE TERMS OF INITIAL ALLOTMENT. FURTHER, WHERE BOTH THE PARTIES HAVE CONTRACTUALLY AGREED TO THE TERMS OF CONVEYANC E CUM PERPETUAL LEASE DEED, IN THE CONTEXT OF PRESENT PROCEEDINGS, WE CANN OT BE GUIDED BY THE INITIAL ALLOTMENT LETTER WHICH STANDS SUBSUMED AND M ERGED/MODIFIED BY CONVEYANCE CUM PERPETUAL LEASE DEED. THEREFORE, WE A RE UNABLE TO AGREE WITH THE FINDINGS OF THE LD PR.CIT THAT ADARSH GYAN V IDHALAYA SAMITI CANNOT LEGALLY TRANSFER OR SELL THE LAND TO THE ASS ESSEE SOCIETY AS THERE ARE ENABLING PROVISIONS, AS WE HAVE NOTED ABOVE, IN THE CONVEYANCE DEED WHICH ALLOWS SUCH TRANSFER SUBJECT TO APPROVAL AND SA NCTION OF RAJASTHAN HOUSING BOARD. ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 40 48. NOW, IN TERMS OF SEEKING APPROVAL AND PERMISSION OF RAJASTHAN HOUSING BOARD TO TRANSFER THE LAND IN FAV OUR OF THE ASSESSEE SOCIETY, WE FIND THAT A LETTER DATED 14.03.2014 HAS BEEN WRITTEN BY ADARSH GYAN VIDHALAYA SAMITI TO DEPUTY HOUSING COMMISSIONE R, CIRCLE-2, RAJASTHAN HOUSING BOARD, JAIPUR AVAILABLE ON RECORD AT ANNEXURE A/12 AND THE CONTENTS THEREOF READS AS UNDER: DT. 14/03/2014 DY. HOUSING COMMISSIONER, CIRCLE-2, RAJASTHAN HOUSING BOARD, JAIPUR. DEAR SIR, SUB: REQUEST FOR ALLOWING PERMISSION TO TRANSFER IN STITUTION PLOT AT MANSAROVAR, JAIPUR TO ANOTHER EDUCATIONAL INSTITUTION. WITH REFERENCE TO ABOVE, WE ARE TO SUBMIT AS UNDER: 1. THAT ADARSH GYAN VIDHYALAYA SAMITI WAS ALLOTTED AN INSTITUTIONAL PLOT OPPOSITE SECTOR 03, SHIPRA PATH MANSAROVAR, JAIPUR ADMEASURING 4151.34 SQ. YD VIDE LETTER NO. 2442 DT. 23/09/2013 WHICH WAS SUBSEQUENTLY MODIFIED VIDE LET TER NO. 3070 DT- 17/12/2013 ON LEASEHOLD BASIS FOR A PERIOD OF 99 YEARS. 2. THE APPLICANT SOCIETY WAS IN THE PROCESS OF SET TING UP OF SCHOOL ON THE AFORESAID PLOT OF LAND, HOWEVER DUE TO CERTAIN TECHNICAL & FINANCIAL PROBLEM, SOCIETY' IS NOT IN POSITION TO COMMENCE THE SCHOOL ON THE AFORESAID INSTITUTIONAL PLOT. THE ASSOCIATE SOCIETY IE ST. WILFRED EDUCATION SOCIETY WHO IS RUNNING THE EDUCATIONAL IN STITUTION DESIRE TO COMMENCE THE ANOTHER EDUCATIONAL INSTITUTION ON THE SAID INSTITU TIONAL PLOT. 3. SINCE THE OBJECT OF BOTH THE SOCIETY ARE SIMILAR AND THE SAID INSTITUTIONAL PLOT OF LAND WAS ALLOTTED FOR RUNNING EDUCATIONAL INSTITUTION, IT IS THUS REQUESTED TO GRANT THE PERMISSION TO TRANSFER THE SAID INSTITUTIONAL PLOT TO ST. WILFRED EDUCATION SOCIETY, JAIPUR FOR RUNNING/THE EDUCATIONAL INSTITUTION. THE APPLICANT IS READY TO DEPOSIT IF ANY FEES IS CHARGEABLE FOR FOLLOWING PERMISSION TO TRANSFER THE SAID INSTITUTI ONAL PLOT. THANKING YOU, YOURS FAITHFULLY, FOR ADARSH GYAN VIDHALYA SAMITI. (SECRETARY) ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 41 49. FURTHER, WE FIND THAT DCIT(BP) JAIPUR VIDE HIS L ETTER DATED 13.10.2017 HAS SOUGHT CERTAIN INFORMATION REG ARDING THE IMPUGNED PLOT OF LAND FROM RAJASTHAN HOUSING BOARD AND THE L ATTER VIDE LETTER OF DEPUTY HOUSING COMMISSIONER, CIRCLE-2, RAJASTHAN HO USING BOARD , JAIPUR DATED 15.11.2017 AVAILABLE ON RECORD AS ANNEXURE A/ 11 HAS REPLIED AND CONTENTS THEREOF READS AS UNDER: ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 42 50. ON PERUSAL OF ABOVE COMMUNICATIONS AND THE CONT ENTS THEREOF, WE FIND THAT THE PERMISSION OF RAJASTHAN HO USING BOARD HAS BEEN SOUGHT FOR THE INTENDED TRANSFER OF THE IMPUGNED LA ND IN FAVOUR OF THE ASSESSEE SOCIETY AND THE REVENUE AUTHORITIES ARE EQ UALLY CEASED OF THE MATTER. GIVEN THAT THE APPROVAL OF RAJASTHAN HOUSIN G BOARD HAS NOT BEEN RECEIVED, THE CONVEYANCE DEED HAS NOT BEEN EXECUTED IN FAVOUR OF THE ASSESSEE SOCIETY. 51. WE THEREFORE FIND THAT THE ASSESSEE SOCIETY HAS ENTERED INTO AN AGREEMENT TO SELL WITH ADARSH GYAN VIDHALAYA SAMITI WHEREIN THE FORMER HAS AGREED TO PURCHASE AN INSTITUTIONAL PLOT OF LAN D WHICH HAS BEEN ALLOTTED TO THE LATTER VIDE CONVEYANCE CUM PERPETUA L LEASE DEED FOR 99 YEARS BY THE RAJASTHAN HOUSING BOARD. THERE ARE ENA BLING PROVISIONS IN THE CONVEYANCE CUM PERPETUAL LEASE DEED WHICH ALLOWS SUCH TRANSFER SUBJECT TO APPROVAL AND SANCTION OF RAJASTHAN HOUSI NG BOARD. NECESSARY PERMISSION HAS BEEN SOUGHT FROM THE RAJASTHAN HOUSI NG BOARD FOR SUCH TRANSFER IN FAVOUR OF THE ASSESSEE SOCIETY AND THE SAME IS CURRENTLY AWAITED AND ON RECEIPT THEREOF, FORMAL SALE DEED SHA LL BE EXECUTED IN FAVOUR OF THE ASSESSEE SOCIETY. THE ASSESSEE SOCIE TY HAS ALREADY PAID SUBSTANTIAL AMOUNT OF RS 6.73 CRORES, OUT OF TOTAL PURCHASE CONSIDERATION OF RS 7.54 CRORES IN TERMS OF AGREEMENT TO SELL, DI RECTLY TO RAJASTHAN HOUSING BOARD. FURTHER, THE ASSESSEE SOCIETY IS IN EFFECTIVE POSSESSION OF THE SAID PLOT OF LAND AS IT HAS SINCE BUILT A SCHOO L BUILDING THEREON AND CARRYING ON ITS EDUCATIONAL ACTIVITIES AND THE FEES SO RECEIVED HAVE BEEN REFLECTED IN ITS BOOKS OF ACCOUNTS. 52. IN LIGHT OF ABOVE FACTUAL MATRIX, AS FAR AS PRO XIMATE AND IMMEDIATE BENEFIT OF SUCH PAYMENT OF RS 6.73 CRORES IS CONCER NED, IT IS THE ASSESSEE ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 43 SOCIETY WHICH IS BENEFITTED WHEREBY IT HAS BUILT A S CHOOL BUILDING WHEREIN IT IS CARRYING ON ITS EDUCATIONAL ACTIVITIES . AT THE SAME TIME, IT CANNOT BE RULED OUT THAT ADARSH GYAN VIDHALAYA SAMI TI IS NOT BENEFITTED BY SUCH PAYMENT BY THE ASSESSEE SOCIETY ON ITS BEHA LF TO RAJASTHAN HOUSING BOARD. HAD THE ASSESSEE SOCIETY NOT STEPPE D-IN AND MADE THE PAYMENT TO RAJASTHAN HOUSING BOARD, ADARSH GYAN VID HALAYA SAMITI WAS LIKELY TO DEFAULT ON ITS PAYMENTS AS PER STIPULATED TIME FRAME AND IN ALL LIKELIHOOD, THE ALLOTMENT OF THE PLOT OF LAND WOULD HAVE GOT TERMINATED. THEREFORE, TILL THE TIME THE APPROVAL OF RAJASTHAN H OUSING BOARD IS NOT RECEIVED FOR TRANSFER IN FAVOUR OF THE ASSESSEE SOC IETY, THE PLOT OF LAND STAND IN NAME OF THE ADARSH GYAN VIDHALAYA SAMITI A ND CONVEYANCE DEED HAS NOT BEEN EXECUTED IN FAVOUR OF THE ASSESSEE SOC IETY. AT THE SAME TIME, SUCH RIGHT OVER THE LAND IS NOT AN ABSOLUTE R IGHT AS THE SAME IS SUBJECT TO THE TERMS OF AGREEMENT TO SELL ENTERED INTO WITH THE ASSESSEE SOCIETY AND AT LEAST TO THE EXTENT OF PAYMENT MADE BY THE ASSESSEE SOCIETY TO THE TUNE OF RS 6.73 CRORES, THE LATTER C AN ENFORCE ITS RIGHT OVER SUCH LAND IN PRIORITY TO ANY THIRD PARTY. 53. HAVING SAID THAT, THE QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER BY ENTERING INTO THE SUBJECT TRANSACTION, TH E ASSESSEE SOCIETY HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(C) READ WIT H SECTION 13(3) OF THE ACT AS INVOKED BY THE LD PR.CIT. 54. AS PER LD PR. CIT, ADARSH GYAN VIDYALYA SOCIETY AND THE ASSESSEE SOCIETY HAVE THREE COMMON MEMBERS/TRUSTEES AND THER EFORE, M/S ADARSH GYAN VIDYALYA SOCIETY IS A RELATED ENTITY WITHIN THE MEANING OF SECTION 13(3) OF THE ACT AND SOCIETY FUNDS HAVE BEEN USED F OR THE BENEFIT OF ADARSH GYAN VIDHALAYA SOCIETY IN VIOLATION OF THE P ROVISIONS OF SECTION 13(1)(C) OF THE ACT. THE ARGUMENT OF THE ASSESSEE S OCIETY IS THAT NO ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 44 EVIDENCE HAS BEEN PLACED ON RECORD BY THE REVENUE WI TH REGARD TO ANY DIRECT OR INDIRECT BENEFIT FLOWING TO THE TRUSTEES/M EMBERS OF THE SOCIETY WHICH MIGHT BRING IT WITHIN THE AMBIT OF SECTION 13(1 ) R.W.S.13(3) OF THE ACT AND FURTHER, THE MATTER DOES NOT FALL WITHIN ANY OF THE CLAUSES OR SUB- CLAUSES OF SECTION 13(3) OF THE ACT. 55. IN ORDER TO APPRECIATE THE RIVAL CONTENTIONS, WE AGAIN REFER TO THE PROVISIONS OF SECTION 13(3) OF THE ACT. THE CLAUSES FROM (A) TO (CC) OF SECTION 13(3) ARE NOT APPLICABLE IN THE INSTANT CAS E AS THERE IS NOTHING ON RECORD THAT SUGGEST THAT THE COMMON MEMBERS HAVE BE EN BENEFITTED IN THEIR INDIVIDUAL AND IN THEIR OWN RIGHT BY SUCH TRA NSACTION. THE CLAUSE (D) TALKS ABOUT ANY RELATIVE OF ANY SUCH AUTHOR, FOUNDE R, PERSON, MEMBER, TRUSTEE OR MANAGER OF THE ASSESSEE SOCIETY WHICH IS ALSO NOT A CASE BEFORE US. THE CLAUSE (E) TALKS ABOUT ANY CONCERN IN WHICH ANY OF THE PERSONS REFERRED TO IN CLAUSES (A), (B), (C), (CC) AND (D) HAS A SUBSTANTIAL INTEREST. IF WE WERE TO READ THE SAID CLAUSE (E) IN THE CONTEXT OF PRESENT FACTS, IT MEANS ADARSH GYAN VIDYALYA SOCIETY, BEING A CONCERN IN WHICH MEMBERS/TRUSTEES OF THE ASSESSEE SOCIETY HAVE A SUB STANTIAL INTEREST. THE TERM SUBSTANTIAL INTEREST IN A CONCERN HAS BEEN D EFINED IN EXPLANATION 3 TO MEAN: (I) IN A CASE WHERE THE CONCERN IS A COMPANY, IF ITS SHA RES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A FURTHER RIGHT TO PARTICIPATE IN PROFITS) CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER ARE, AT ANY TIME DURING THE PREVIOUS YEAR, OWNED BENEFICIALLY BY SUCH PERSON OR PARTLY BY SUCH PERSON AND PARTLY BY ONE OR MORE O F THE OTHER PERSONS REFERRED TO IN SUB-SECTION (3); (II) IN THE CASE OF ANY OTHER CONCERN, IF SUCH PERSON IS ENTITLED, OR SUCH PERSON AND ONE OR MORE OF THE OTHER PERSONS RE FERRED TO IN SUB- SECTION (3) ARE ENTITLED IN THE AGGREGATE, AT ANY T IME DURING T HE PREVIOUS YEAR, TO NOT LESS THAN TWENTY PER CENT O F THE PROFITS ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 45 OF SUCH CONCERN. 56. THAT IS, MEMBERS AND TRUSTEES OF THE ASSESSEE SO CIETY EITHER INDIVIDUALLY OR COLLECTIVELY ARE ENTITLED AT ANY TI ME DURING THE PREVIOUS YEAR, TO NOT LESS THAN TWENTY PER CENT OF THE PROFIT S OF SUCH CONCERN I.E, ADARSH GYAN VIDYALYA SOCIETY. IN THE PRESENT CASE, THE CASE OF THE REVENUE IS THAT THERE ARE THREE COMMON MEMBERS/TRUS TEES IN BOTH THE SOCIETIES AND THEREFORE, THESE ARE RELATED ENTITIES AND ARE COVERED BY PROVISIONS OF SECTION 13(3) OF THE ACT. ON PERUSAL OF RECORDS, WE FIND THAT THERE ARE FIFTEEN MEMBERS IN THE EXECUTIVE COMMITTE E OF SAINT WILFRED EDUCATION SOCIETY AND EQUALLY NUMBER OF MEMBERS IN THE EXECUTIVE COMMITTEE OF ADARSH GYAN VIDYALYA SOCIETY. THE PRES IDENT OF THE ASSESSEE SOCIETY IS HOLDING THE POST OF SECRETARY I N ADARSH GYAN VIDYALYA SOCIETY. FURTHER, TWO MEMBERS WHO ARE EDUCATIONIST A ND DOCTOR BY PROFESSION ARE COMMON IN BOTH THE SOCIETIES. HOWEVE R, MERELY HAVING COMMON MEMBERS IN BOTH THE SOCIETIES ARE NOT SUFFIC IENT TO HOLD THE SOCIETIES AS RELATED ENTITIES WITHIN THE MEANING OF SECTION 13(3) OF THE ACT. WHAT HAS TO BE PROVED IS THAT THESE COMMON MEMBERS HOLD SUBSTANTIAL INTEREST IN THE RELATED ENTITY IN THEIR OWN RIGHT EI THER INDIVIDUALLY OR COLLECTIVELY AND THAT TOO, BY ENTITLEMENT TO NOT LE SS THAN 20% OF PROFITS IN SUCH RELATED ENTITY. HOWEVER, THERE IS NOTHING ON RE CORD EITHER IN THE IMPUGNED ORDER OF THE LD PR.CIT OR BROUGHT TO OUR N OTICE DURING THE COURSE OF HEARING BY THE LD CIT DR THAT THESE COMMON MEMBERS ARE ENTITLEMENT TO ANY PROFITS AND THAT TOO, EXCEEDING THE PRESCRIBED THRESHOLD IN ADARSH GYAN VIDYALYA SOCIETY. PER CONTRA, THE LD AR SUBMITTED THAT ADARSH GYAN VIDYALYA SOCIETY IS AN OLD SOCIETY REGI STERED UNDER THE RAJASTHAN SOCIETIES REGISTRATION ACT IN YEAR 1961-6 2 VIDE REGISTRATION NO. 03/1961-62 AND BY VIRTUE OF BEING A REGISTERED SOCI ETY, IT CANNOT TRANSFER ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 46 ANY SURPLUS TO ITS MEMBERS AND SUCH SURPLUS, IF ANY HAS TO BE DEPLOYED IN THE SOCIETY AND EVEN IN THE EVENT OF WIN DING UP, THE ASSETS AND FUNDS OF THE SOCIETY HAVE TO BE TRANSFERRED TO ANY OTHER REGISTERED SOCIETY WITH SIMILAR OBJECTS. IN LIGHT OF THE SAME, WE DONT FIND ANY LEGAL BASIS TO HOLD THAT ADARSH GYAN VIDYALYA SOCIETY IS A RELATED ENTITY WITHIN THE MEANING OF SECTION 13(3) OF THE ACT. IN ABSENC E THEREOF, EVEN WHERE IT IS HELD THAT SOME BENEFIT HAS FLOWN TO ADARSH GY AN VIDYALYA SOCIETY, THE PROVISIONS OF SECTION 13(1)(C) ARE NOT ATTRACTED IN THE INSTANT CASE. 57. FURTHER, WE NOTE THAT THE LD PR.CIT HAS RAISED A N APPREHENSION AT THE TIME OF ISSUANCE OF SHOW-CAUSE THAT THE PAYMENT TO RAJASTHAN HOUSING BOARD ON BEHALF OF ADARSH GYAN VIDYALYA SOCIETY IS NEITHER A LOAN NOR A DONATION BUT APPEARS TO BE AN INVESTMENT NOT ALLOWAB LE U/S 11(5) OF THE ACT AND THEREAFTER, TOWARDS THE END OF HIS ORDER WHIL E GIVING HIS CONCLUDING FINDINGS HAS HELD THAT THE PAYMENT MADE IS IN CONTRAVENTION OF SECTION 11(5) R/W SECTION 13(1)(C) OF THE ACT. HOWEV ER, HOW THE PAYMENT IS IN CONTRAVENTION OF SECTION 11(5) HAS NOT BEEN S PELT OUT IN HIS ORDER. IF WE LOOK AT THE PROVISIONS OF SECTION 11(5), IN CLAUS E (X), IT PROVIDES FOR INVESTMENT IN IMMOVEABLE PROPERTY AS ONE OF THE PER MISSIBLE MODE OF INVESTMENT OF AMOUNT OF INCOME WHICH IS ACCUMULATED OR SET-APART FOR BEING NOT INCLUDED IN THE TOTAL INCOME OF THE PERSO N IN RECEIPT OF INCOME. IN THE INSTANT CASE, THE ASSESSEE SOCIETY HAVING EN TERED INTO AN AGREEMENT TO SELL WITH ADARSH GYAN VIDYALYA SOCIETY AND HAVING PAID A SUBSTANTIAL AMOUNT IN CONSIDERATION FOR PURCHASE OF LAND AND IN POSSESSION OF THE SAID LAND HAS CLEARLY MADE AN INVESTMENT IN AN IMMOVEABLE PROPERTY THOUGH THE SAME IS SUBJECT TO APPROVAL OF RAJASTHAN HOUSING BOARD AND SIGNING OF THE FINAL CONVEYANCE DEED. ACC ORDINGLY, IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 47 CASE, THE PAYMENT TO RAJASTHAN HOUSING BOARD IS NOT IN CONTRAVENTION OF SECTION 11(5) R/W SECTION 13(1)(C) OF THE ACT. THEREFORE, THE FINDINGS OF THE LD PR CIT CANNOT BE SUSTAINED A ND CANNOT BE MADE A BASIS TO HOLD THAT THE ASSESSEE SOCIETY IS NOT CARR YING OUT ITS ACTIVITIES AS PER ITS OBJECTS AND THE EXEMPTION GRANTED UNDER SE CTION 12AA SHOULD BE WITHDRAWN. 58. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE FINDINGS OF THE LD P R.CIT RELATING TO DIVERSION OF FUND OF THE ASSESSEE SOCIETY FOR PERSO NAL PURPOSES, NON- GENUINE SCHOLARSHIP EXPENSES AND PAYMENTS MADE TO R AJASTHAN HOUSING BOARD IN CONTRAVENTION OF SECTION 11(5) READ WITH S ECTION 13(1)(C) OF THE ACT CANNOT BE SUSTAINED. THESE ARE MERELY APPREHENS ION WHICH HAVE BEEN RAISED BY THE LD. PR. CIT AND THERE IS NO CRED IBLE EVIDENCE ON RECORD WHICH CAN CONCLUSIVELY DEMONSTRATE THAT THE ASSESSEE IS NOT WORKING AS PER THE OBJECTS FOR WHICH REGISTRATION WAS INITIALLY GRANTED, THAT THE ACTIVITIES OF THE ASSESSEES SOCIETY ARE NOT GENUIN E OR ANY PERSONAL BENEFIT HAS BEEN DERIVED BY ANY PERSON SO DEFINED U/S 13(3) OF THE ACT. THE CASE OF THE ASSESSEE THEREFORE DOESNT FALLS U/S 12AA(3) AND 12AA(4) OF THE ACT. IN LIGHT OF OUR DETAILS DISCUSSION AND FINDING S, THE REGISTRATION OF THE ASSESSEE SOCIETY U/S 12AA IS HEREBY DIRECTED TO BE RESTORED FROM THE DATE THE SAME WAS WITHDRAWN AND CANCELLED BY THE LD. PR. CI T IN TERMS OF THE IMPUGNED ORDER. 59. IN THE RESULT, THE APPEAL OF THE ASSESSEE SOCI ETY IS ALLOWED. ITA NO. 10/JP/2019 60. IN ITA NO. 10/JP/2019, THE ASSESSEE HAS CHALLEN GED THE WITHDRAWAL OF THE EXEMPTION GRANTED U/S 10(23C)(VI) OF THE ACT . BOTH THE PARTIES ITA 09 & 10/JP/2019_ ST. WILFRED EDUCATION SOCIETY VS PR.CIT 48 HAVE FAIRLY SUBMITTED THAT UNDER IDENTICAL FACTS AN D CIRCUMSTANCES OF THE CASE AS IN ITA NO. 9/JP/2019 AND FOLLOWING THE S AME REASONING, THE LD. PR. CIT HAS WITHDRAWN THE EXEMPTION BY INVOKING 15 TH PROVISO TO SECTION 10(23C) OF THE ACT AND SIMILAR CONTENTIONS HAVE BEEN RAISED BY BOTH THE PARTIES. THEREFORE, OUR FINDINGS AND DIRE CTIONS AS CONTAINED IN ITA NO. 09/JP/2019 SHALL APPLY MUTATIS MUTANDIS TO THIS MATTER AS WELL. THE EXEMPTION GRANTED TO THE ASSESSEE SOCIETY U/S 1 0(23C)(VI) OF THE ACT IS HEREBY DIRECTED TO BE RESTORED FROM THE DATE THE SAME WAS WITHDRAWN AND CANCELLED BY THE LD. PR. CIT IN TERMS OF THE IM PUGNED ORDER. 61. IN THE RESULT, THE APPEAL OF THE ASSESSEE SOCIE TY IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18 TH MARCH, 2019 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ST. WILFRED EDUCATIONAL SOCIETY, JAIP UR. 2. IZR;FKHZ@ THE RESPONDENT- THE PR. CIT, (CENTRAL), RAJASTHAN, JA IPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K]T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 09 & 10/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR
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