Young Scholars Educational Society, Barnala V. ITO, Barnala

ITA 1456/CHANDI/2010

• Counselvise Citation: 145621514 RSA 2010
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Onus to prove
• Section: 12; 11; 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1456/CHD/2010 ASSESSMENT YEAR: 2007-08 YOUNG SCHOLARS EDUCATIONAL V ITO, SOCIETY, NEW BUS STAND ROAD, BARNALA. BARNALA. PAN: AAATY-0373L (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI SUDHIR SEHGAL DEPARTMENT BY: SMT.JAISHREE SHARMA DATE OF HEARING : 11.10.2011 DATE OF PRONOUNCEMENT : 17.10.2011 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 22.11.2010 OF THE LD. CIT(A ) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE AC T'). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. AO AS WELL AS THE CIT(A) PATIALA H AS ERRED IN LAW AND ON FACTS BY RESORTING TO THE PROVISIONS OF SECTION 13(1)(C)(II) OF THE ACT IBID FOR DISALLOWING THE SALARY DISBURSED AT RS.2,58,378/- TO SMT.SHANTA KUMAR W/O SHRI DARSHAN KUMAR WHO WAS THE PRINCIPAL OF Y.S.SCHOOL,BARNALA AND DIRECTOR OF Y.S.PUBLIC SCHOOL, V.HANDYA RUN BY THE SOCIETY. 2. THAT THE DISALLOWANCE OF SALARY TO SMT.SHANTA KUMAR IS UNJUSTIFIED IN VIEW OF THE FACTS THAT IN 2 THE PERVIOUS COMPLETED ASSESSMENT U/S 143(3) AND 143(1), SUCH PAYMENT OF SALARY AND RENDERING OF SERVICE BY SMT.SHANTA KUMAR HAS BEEN ACCEPTED BY THE AO. 3. THAT THE LD. AO AS WELL AS THE CIT(A) PATIALA HAS ERRED IN LAW AND ON FACTS BY RESORTING TO THE PROVISION OF SECTION 13(1)3(II) OF THE ACT IBID FOR DISALLOWING THE ADVERTISEMENT EXPENSES DISBURSED AT RS.21,000/- TO SHRI VARUN BHARATI S/O SHRI DARSHAN KUMAR AGAINST THE WORK DONE BY HIM. 4. THAT THE AO AND CIT(A) HAS BEEN FAILED TO APPRECIATE OF THE SERVICES RENDERED BY SHRI VARUN BHARATI AND, THEREFORE, SUCH DISALLOWANCE OF RS.21000/- IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THAT THE CIT(A) HAS ERRED IN HOLDING IN PARA 8.2 OF HIS ORDER THAT THE AO HAS RIGHTLY DISALLOWED THE CLAIM OF EXEMPTION U/S 11 TO THE APPELLANT SOCIETY AND HAS FURTHER ERRED IN GIVING THE FINDING THAT THE APPELLANT SOCIETY CANNOT BE CONSIDERED TO HAVE COMPLIED WITH THE PROVISIONS OF SECTION 11 AND 12 OF THE ACT. 6. THAT THE LD. AO HAS ERRED IN LAW AND ON FACTS IN CHARGING INTEREST U/S 234B OF THE ACT IBID AND THE CIT(A), FURTHER ERRED IN LAW AND ON FACTS IN CONSIDERING THE SAME BEING CONSEQUENTIAL IN NATURE. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THE LD. AR STATED THAT GROUND NOS. 2 TO 5 ARE RELEVANT AN D GROUND NO. 3 & 4 ARE INTER-CONNECTED. IN GROUND NO.1, THE ASSESSEE CONTENDED THAT THE CIT(A) ERRED IN LAW AND ON FACTS BY RESORTING TO THE PROVISIONS OF SECTION 13(1)(C)(II) OF THE ACT FOR DISALLOWING THE SALARY OF RS.2,58,378/- PAID TO SMT .SHANTA 3 KUMAR W/O SHRI DARSHAN KUMAR. LD. AR SUBMITTED T HAT THE SALARY PAID TO SMT.SHANTA KUMAR WAS ALLOWED WHILE F RAMING ASSESSMENT U/S 143(3) IN THE PREVIOUS YEAR. THEREF ORE, THERE IS NO CONSISTENCY ON THE IDENTICAL FACTS AND CIRCUM STANCES TO DISALLOW SUCH PAYMENT OF SALARY IN THE ASSESSMENT Y EAR UNDER REFERENCE. HE REFERRED TO VARIOUS PAGES OF THE PAPE R BOOK EVIDENCING REQUISITE QUALIFICATION OF SMT.SHANTA KU MAR. IT WAS ALSO POINTED OUT BY THE LD. AR THAT SALARY IS NOT EXCESSIVE HAVING REGARD TO THE SERVICES RENDERED BY HER. 4. LD. DR ON THE OTHER HAND, PLACED RELIANCE ON T HE ORDER OF THE LOWER AUTHORITIES. 5. WE HAVE CAREFULLY PERUSED THE FACT SITUATION OF THE PRESENT CASE, RIVAL SUBMISSIONS AND RELEVANT PROVIS IONS OF THE ACT. THE AO HAS DISALLOWED THE IMPUGNED SALARY PAI D TO SMT.SHANTA KUMAR, MEMBER OF THE SOCIETY BY RESORTIN G TO PROVISIONS OF SECTION 13(3) OF THE ACT. LD. CIT(A) , AFTER APPRECIATION OF THE REMAND REPORT SUBMITTED BY THE AO CONFIRMED THE IMPUGNED DISALLOWANCE BY HOLDING THAT THE SALARY WAS PAID TO SMT.SHANTA KUMAR IN VIOLATION OF PROVISIONS OF SECTION 13(1)(C)(II) OF THE ACT. AS THE HEADING OF SECTION 13 OF THE ACT SECTION 11 NOT TO APPLY IN C ERTAIN CASES CLEARLY INDICATES THAT SECTION 13 ENUMERATES SUCH CASES AND SITUATIONS IN WHICH THE EXEMPTION U/S 11 WOULD HAVE BEEN ALLOWED UNLESS PROHIBITED BY SECTION 13 O F THE ACT. THEREFORE, THE PROVISION OF SECTION 13 ENACTS A COM PLETE BAR TO THE AVAILABILITY OF EXEMPTION U/S 11 IN RESPECT OF VARIOUS INCOMES UNDER THE CASES ENUMERATED THEREUNDER. SEC TION 13 STARTS WITH NON-OBSTANTE CLAUSE AND HENCE BY VIRTUE OF THE 4 SAID PROVISIONS, EXCEPTION OF EXEMPTION PROVIDED U/ S 11 IS CARVED AND AN ASSESSEE IS DENIED EXEMPTION U/S 11 O F THE ACT IN A CASE WHERE THE INCOME OR PROPERTY OF THE TRUST IS USED OR APPLIED FOR THE BENEFIT OF ANY PERSON REFERRED TO I N SECTION 13(3) OF THE ACT. THE PERSON, WHO MAKES A POSITIVE STATEMENT, IS REQUIRED TO ESTABLISH THE SAME. IT IS NOT FOR T HE PERSON AGAINST WHOM THE AVERMENT IS MADE TO ESTABLISH NEGA TIVELY THAT THE STATE OF AFFAIRS AVERRED BY THE OTHER PERS ON DOES NOT EXIST. THEREFORE, THE EXCEPTION HAS TO BE STATED A ND ESTABLISHED BY THE REVENUE AND THE BURDEN TO PROVE LIES ON THE REVENUE TO PROVE THAT SECTION 13 IN A PARTICULA R CASE APPLIES. IN THE PRESENT CASE, REVENUE HAS FAILED T O DISCHARGE SUCH BURDEN TO PROVE, CAST ON IT AS IS EVIDENT FROM THE ENSUING DISCUSSIONS. IN THE CONTEXT OF THE PRESENT FACT SITUATION OF THE CASE, RELEVANT PROVISIONS ARE REPR ODUCED HEREUNDER : ( SECTION 11 NOT TO APPLY IN CERTAIN CASES.) 13(1) NOTHING CONTAINED IN SECTION 11 (OR SECTION 12) SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOM E OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THERE OF- (A)------ (B)----- (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGI OUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THEREOF- (I) IF SUCH TRUST OR INSTITUTION HAS BEEN CREATED OR ESTABLISHED AFTER THE COMMENCEMENT OF THIS ACT AND UNDER THE TERMS OF THE TRUST OR THE RULES GOVERNING THE INSTITUTION, ANY PART OF SUCH INCOME ENURES, OR (II) IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION (WHENEVER CREATED OR ESTABLISHED) IS DURING THE PREVIOUS YEAR USED OR APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSO N REFERRED TO IN SUB-SECTION (3). 5 2) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISI ONS OF CLAUSE (C) (AND CLAUSE D) OF SUB-SECTION (1), TH E INCOME OR THE PROPERTY OF THE TRUST OR INSTITUTION OR ANY PART OF SUCH INCOME OR PROPERTY SHALL, FOR THE PURPOSES OF THAT CLAUSE, BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SUB-SECTION (3) (A)------ (B)----- (C) IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWAN CE OR OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON RE FERRED TO IN SUB-SECTION (3) OUT OF THE RESOURCES OF THE T RUST OR INSTITUTION FOR SERVICES RENDERED BY THAT PERSON TO SUCH TRUST OR INSTITUTION AND THE AMOUNT SO PAID IS IN E XCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. 3) (D) ANY RELATIVE OF ANY SUCH AUTHOR, FOUNDER, PERSO N (MEMBER, TRUSTEE OR MANAGER) AS AFORESAID; 6. THE ASSESSEE HAD ANNEXED A CHART GIVING DETAILS OF SALARY PAID TO MRS.SHANTA KUMAR FROM THE ASSESSMENT YEAR 2 003-04 TO 2007-08. A PERUSAL OF THE SAME REVEALS THAT FOR THE ASSESSMENT YEAR 2003-04, THE ASSESSMENT OF THE ASSE SSEE WAS COMPLETED U/S 143(3) AND NO DISALLOWANCE OF SALARY PAID TO SMT.SHANTA KUMAR WAS MADE. IT IS WELL SETTLED LAW THAT THE DOCTRINE OF RES-JUDICATA IS NOT APPLICABLE TO THE F ISCAL STATUTES. HOWEVER, THE DOCTRINE OF CONSISTENCY PREV AILS OVER THE DOCTRINE OF RES-JUDICATA WHERE THE FACTS AND CI RCUMSTANCES OF THE CASE ARE IDENTICAL AND REVENUE HAS GRANTED A LLOWANCE OF SALARY FOR THE ASSESSMENT YEAR 2003-04. 7. THE LD. AR REFERRED TO PAGE 34 OF THE PAPER BO OK WHEREBY THE QUALIFICATION OF SMT.SHANTA KUMAR IS IN DICATED AS M.A.B.ED. BESIDES OTHER DEGREES AND DIPLOMAS, E.G. SANGEET VISHARAD (SITAR), SANGEET BHUSHAN (VOCAL), SANGEET BHUSHAN (SITAR) SENIOR DIPLOMA (VOCAL), SANGEET PARVEWSHIKA VOCAL AND 6 ALSO HOLDS NCC J CERTIFICATE. A NUMBER OF CERTIF ICATES AND DISTINCTIONS HAVE ALSO BEEN MENTIONED HAVING REGARD TO PROFESSIONAL QUALIFICATIONS OF THE PRINCIPAL SMT.SH ANTA KUMAR. THE PAYMENT OF SALARY, THOUGH FALLS UNDER THE BAR P LACED BY SECTION 13 OF THE ACT. HOWEVER HAVING REGARD TO HER QUALIFICATIONS AND SERVICES RENDERED TO THE ASSESSE E, THE CASE OF THE ASSESSEE FALLS U/S 13(2)(C) OF THE ACT AS TH E SALARY PAID IS NOT UNREASONABLE. IN VIEW OF THIS, THE ASSESSEE GOES OUT OF THE BAR PLACED BY THE PROVISIONS OF SECTION 13 OF T HE ACT, AS THE SALARY PAID IS REASONABLE. 8. HAVING REGARD TO THE LEGAL AND FACTUAL DISCUSSIO NS, FINDINGS OF THE LD. CIT(A) ARE CONTRARY TO THE EXPR ESS PROVISIONS DISCUSSED AND REPRODUCED ABOVE. THEREFOR E, SUCH FINDINGS CANNOT BE SUSTAINED. THE ASSESSEE SUCCEEDS IN THIS GROUND OF APPEAL. 9. GROUND NOS. 3 & 4 COLLECTIVELY SPEAKS AGAINST DISALLOWANCE OF RS.21,000/- REPRESENTING ADVERTISEM ENT EXPENSES PAID TO SHRI VARUN BHARATI S/O SHRI DARSHA N KUMAR AGAINST THE WORK DONE BY HIM WHICH WERE UPHELD BY T HE CIT(A). LD. AR FILED EVIDENCES IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS WHICH ARE AVAILABLE FROM PAGE 107 TO 110 OF THE PAPER BOOK INDICATING THE NATURE OF SERV ICES IN THE FORM OF ADVERTISEMENT WORK RENDERED BY SHRI VARUN B HARATI, S/O SHRI DARSHAN KUMAR. HE WAS OF THE OPINION THAT THE TRANSACTION IS GENUINE AND THE PAYMENT IS PURELY MA DE ON ACCOUNT OF PROFESSIONAL SERVICES IN THE FORM OF ADV ERTISEMENT RENDERED BY VARUN BHARATI. 7 10. LD. DR PLACED RELIANCE ON THE ORDER OF THE LO WER AUTHORITIES. 11. THE AO DISALLOWED ADVERTISEMENT EXPENSES OF RS.21,000/- PAID TO SHRI VARUN BHARATI WHO IS SON O FSH DARSHAN KUMAR, SECRETARY OF THE ASSESSEE SOCIETY. THE AMOUNT OF RS.12,000/- WAS PAID ON 26.06.2006 AND RS.9,000/- PAID ON 11.07.2006. LD. CIT(A) UPHELD T HE DISALLOWANCE MADE BY THE AO BY INVOKING THE PROVISI ONS OF SECTION 13(1)(3)(II) OF THE ACT. IT WAS ARGUED BY THE LD. AR THAT SHRI VARUN BHARATI IS MBA (MARKETING) AND HE P OSSESSES REQUISITE QUALIFICATION IN THE FIELD OF ADVERTISEME NT. THE AO AS WELL AS CIT(A) FAILED TO BRING ANY COGENT AND CR EDIBLE EVIDENCE DEMONSTRATING NON-GENUINENESS OF THE PAYME NT IN THE FACE OF SUBMISSIONS FILED BY THE ASSESSEE IN TH E FORM OF VARIOUS EVIDENCES INDICATING RENDERING OF SERVICES BY SHRI VARUN BHARATI. 12. HAVING REGARD TO THE NATURE OF PROFESSIONAL SER VICES RENDERED BY SHRI VARUN BHARTI, WHO POSSESSES REQUIS ITE PROFESSIONAL QUALIFICATIONS AND EVIDENCE FILED TO P ROVE THE FACTUM OF RENDERING OF SUCH SERVICES, THE IMPUGNED PAYMENT CANNOT BE DISALLOWED AS IT GOES OUT OF THE MISCHIEF OF PROVISION OF SECTION 13 OF THE ACT. THUS, THIS GRO UND OF APPEAL OF THE ASSESSEE IS ALLOWED. 13. IN GROUND NO.5, THE ASSESSEE CONTENDED THAT THE CIT(A) ERRED IN HOLDING IN PARA 8.2 OF THE ORDER THAT AO H AS RIGHTLY DISALLOWED THE CLAIM OF EXEMPTION U/S 11 OF THE ACT TO THE APPELLANT SOCIETY AND HAS FURTHER ERRED IN GIVING F INDING THAT 8 THE APPELLANT SOCIETY CANNOT BE CONSIDERED TO HAVE COMPLIED WITH THE PROVISIONS OF SECTION 11 & 12 OF THE ACT. IN VIEW OF OUR ADJUDICATION IN RESPECT OF SUBSTANTIVE GROUND O F APPEAL RAISED BY THE ASSESSEE ALLOWING THE CLAIM MADE BY T HE ASSESSEE IN RESPECT OF SALARY PAID TO SMT.SHANTA KU MAR AND PAYMENT OF RS.21,000/- MADE TO SHRI VARUN BHARTI IN RESPECT OF PROFESSIONAL SERVICES RENDERED BY THE ASSESSEE, GROUND NO.5 BECOMES INCONSEQUENTIAL, HENCE NEEDS NO SEPARA TE ADJUDICATION AND THE SAME IS DISMISSED. 14. GROUND NO.6 RAISED BY THE ASSESSEE PERTAINS TO THE CHARGING OF INTEREST U/S 234B OF THE ACT. IT IS A WELL SETTLED PROPOSITION THAT CHARGING OF INTEREST U/S 234B IS M ANDATORY AND CONSEQUENTIAL, HENCE NEEDS NO SEPARATE ADJUDICA TION. 15. GROUND NO.7 IS GENERAL IN NATURE AND NEEDS NO ADJUDICATION. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER,2011. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17 TH OCT.,2011 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH