SUSHRUT HOSPITAL AND RESEARCH CENTRE, Nagpur V. ACIT,CENTRAL CIRCLE-1(2), Nagpur

ITA 146/NAG/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1583 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 16-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Depreciation; Loose papers; Document seized; Charitable institution; Fair market value; Benefit of exemption; Revenue expenditure; Capital expenditure
• Section: 143(3); 153A; 234B; 80G; 12A; 132; 11

Judgement Text

1 ITA NO. 146/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 146/NAG/2013 ASSESSMENT YEAR : 2003 - 04. SUSHRUT HOSPITAL AND RESEARCH CENTRE, ASSTT. COMMISSIONER OF , NAGPUR. VS. INCOME - TAX, CENTRAL CIR.1(2) PAN AAATS 5281K NAGPUR APPELLANT. RESPONDENT. APPELLANT BY : SHRI K.P. DEWANI. RESPONDENT BY : SHRI NARENDRA KANE. DATE OF HEARING : 04 - 09 - 2015. DATE OF PRO NOUNCEMENT : 18 TH NOV., 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - 16, MUMBAI (CAMP OFFICE NAGPUR) DATED 24 - 01 - 2013 AND PERTAINS TO ASSESSMENT YEAR 2003 - 04. 2. GROUNDS OF APPEAL READ AS UNDER : 1. THE ORDER PASSED BY AO U/S 153A R.W.S. 143(3) OF I.T. ACT, 1961 IS ILLEGAL, INVALID AND BAD IN A LAW. 2. THE LEARNED A.O. ERRED IN HOLDING THAT ASSESSEE IS NOT ELIGIBLE FOR BENEFIT OF INCOME BEING EXEMPT U/S 11 OF I.T. ACT, 1961. 3 . THE LEARNED A.O. ERRED IN HOLDING THAT IN THE CASE OF ASSESSEE TRUST THERE IS VIOLATION OF SECTION 13(1)(C) OF I.T. ACT, 1961 AND THEREFORE ASSESSEE IS NOT ELIGIBLE FOR BENEFIT OF INCOME BEING EXEMPT U/S 11 OF I.T. ACT, 1961. 4. THE LEA RNED CIT(A) ERRED IN UPHOLDING THE ACTION OF A.O. IN NOT GRANTING EXEMPTION U/S 11 OF I.T. ACT, 1961 AND UPHOLDING THE ACTION OF A.O. THAT THERE IS VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF I.T. ACT, 1961. 2 ITA NO. 146/NAG/2013 5. THE ADDITION SUSTAINED OUT OF TRAVELLING A ND CONVEYANCE EXPENSES BY HONBLE CIT(A) IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 6. THE ADDITION SUSTAINED OUT OF PROMOTIONAL AND INAUGURAL EXPENSES BY HONBLE CIT(A) IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 7. THE ADDITION SUSTAINED OUT OF DEPRECIATI ON ON CARS BY HONBLE CIT(A) AT RS.1,94,129 IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 8. THE ADDITION SUSTAINED BY CIT(A) AT RS.10,000/ - ON ACCOUNT OF SALARY IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 9. THE ADDITION SUSTAINED OUT OF EXPENSES BY CIT(A) AT RS.75,000/ - IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 10. THE ASSESSEE DENIES LIABILITY TO BE ASSESSED TO INTEREST U/S 234B OF I.T. ACT, 1961 IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 3. IN THIS CASE A SEARCH U/S 132 OF THE I.T. ACT WAS CARRIED OUT AT THE HOSPITAL OF THE ASSESSEE AS WELL AS THE RESIDENCE OF DR. SUDHIR BABHULKAR AND DR. SUSHRUT BABHULKAR WHO ALSO HAPPENS TO BE THE TRUSTEES OF THE ASSESSEE TRUST. THE SEARCH WAS CONDUCTED ON 10 - 04 - 2008. DURING THE COURSE OF SEARCH, A CASH OF RS.2,00,000/ - AND JEWELLERY OF RS.5,90,000/ WAS SEIZED FROM THE RESIDENCE OF DR. SUDHIR BABHULKAR. PURSUANT TO THE SEARCH , NOTICE U/S 153A WAS ISSUED TO THE ASSESSEE. DURING THE COURSE OF ASSESSMENT THE AO REFERRED TO THE PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT AND OBSERVED THAT IN THE CASE OF THE ASSESSEE FOLLOWING PERSONS FALL WITHIN THE DEFINITION OF SECTION 13(3) R EAD WITH SECTION 13(1)(C) : A DR. SUDHIR BABHULKAR FOUNDER TRUSTGEE B DR. ARUNA BABHULKAR TRUSTEE C DR. SUSHRUT BABHULKAR TRUSTEE D DR. NANDANI BABHULKAR RELATIVE OF TRUSTEE E DAUGHTER OF DR. SUSHRUT BABHULKAR F DR. SONALI PANDE TRUSTEE G DR. KETAN PANDE TRUSTEE. 3 ITA NO. 146/NAG/2013 4. AO FORMED AN OPINION THAT IN VIEW OF PROVISION OF SECTION 13(1)(C) ASSESSEE WAS NOT ENTITLED TO EXEMPTION U/S 11. FOR THIS HE MADE FOLLOWING SUBMISSIONS, EXAMINATION AND OBSERVATIONS. S TATUS OF THE VEHICLES OWNED BY THE TRUST. HE NOTED THAT THREE VEHICLES OF THE ASSESSEE TRUST WERE BEING USED BY DR. SUDHIR BABHULKAR AND DR. SURHSUT BABHULKAR. THE AO REFERRED TO THE EXTRACT FROM THE STATEMENT OF DR. SUDHIR BABHULKAR THAT NO LOG BOOK WAS MAINTAINED . T HAT THE VEHICLES WERE PARTLY USED FOR PERSONAL PURPOSES . T HAT DR. SUDHIR BABHULKAR ALSO OWNS A MERCEDEZE BENZ CAR. THAT THERE WAS NO WRITTEN AGREEMENT BETWEEN THE TRUST AND SHRI SUDHIR BABHULKAR. THE AO FURTHER REFERRED TO THE REGISTRATION BOOK OF THESE VEHICLES AND NOTED THAT THESE WERE OWNED BY THE TRUSTEES IN THEIR INDIVIDUAL NAMES. FROM THE ABOVE THE AO CONCLUDED THAT THE VEHICLES OF THE TRUST WERE USED BY THE TRUSTEES FOR THEIR PERSONAL USE. HENCE THE AO HELD THAT IN VIEW OF PROVISION OF SECTION 13(1)(C) THE TRUS T W OULD NOT BE ELIGIBLE FOR EXEMPTION U/S 11. 5. RENOVATION OF HOSPITAL BUILDING OWNED BY DR. SUDHIR BABHULKAR. IN THIS REGARD THE AO NOTED THAT THE ASSESSEE TRUST CARRIED OUT MAJOR REPAIR AND RENOVATION OF RS.35,86,995/ - DURING THE FINANCIAL YEAR 2006 - 07. TOTAL EXPENDITURE OF SUCH MAJOR REPAIR WAS RS.61,43,599/ - DURING THE PERIOD RELEVANT TO ASSESSMENT YEARS 2005 - 06 TO 2008 - 09. IN THIS REGARD THE AO REFERRED TO A STATEMENT OBTAINED FROM DR. SUDHIR BABHULKAR. THE AO OBSERVED THAT FROM THE STATEMENT IT I S CLEAR THAT THE ASSESSEE TRUST CARRIED OUT MAJOR CAPITAL EXPENDITURE IN THE FORM OF CHANGE OF THE FLOURING OF THE ENTIRE BUILDING AND PATIENT ROOM, ELECTRIFICATION AND PAINTING OF THE BUILDING. THERE WAS ALSO FRONT ELEVATION OF THE HOSPITAL. THE AO HELD THAT THESE WERE CAPITAL EXPENSES AND NOT REPAIR AND WERE MEANT TO GIVE BENEFIT TO ITS FOUNDER TRUSTEE DR. SUDHIR BABHULKAR. ON THIS 4 ITA NO. 146/NAG/2013 ACCOUNT ALSO THE AO HELD THAT FOUNDER TRUSTEE GOT DIRECT BENEFIT AND, THEREFORE, THE ASSESSEE WOULD NOT BE ENTITLED TO EXEMP TION U/S 11 OF THE I.T. ACT. 6. PRIVATE PRACTICE OF DR. MRS. NANDANI SUSHRUT BABHULKAR. IN THIS REGARD THE AO OBSERVED THAT DR. NANDANI S. BABHULKAR WHO IS WIFE OF DR. SUSHRUT BABHULKAR, ONE OF THE TRUSTEES, IS ENGAGED IN HER PRACTICE FROM HOSPITAL PREM ISES. SHE HAS BEEN PROVIDED WITH HER ONE INDEPENDENT CABIN AND USES THE FACILITIES OF THE HOSPITAL LIKE STAFF OF THE HOSPITAL, ELECTRICITY, WATER, STATIONERY, NURSING STAFF ETC. HOWEVER, SHE DID NOT SHARE HER PROFESSIONAL RECEIPT WITH THE ASSESSEE TRUST. H ENCE THE AO HELD THAT THE ACTION OF THE ASSESSEE TRUST RESULTED IN DIRECT BENEFIT TO DR. MRS. NANDANI S. BABHULKAR WHO HAPPENS TO BE THE WIFE OF TRUSTEE AND THE PROVISIONS OF SECTION 13(1)(C) ARE APPLICABLE. HENCE EXEMPTION U/S 11 TO THE ASSESSEE WAS DENIE D. 7. PERSONAL USE OF STAFF OF HOSPITAL BY THE TRUSTEES. IN THIS REGARD THE AO REFERRED TO THE EXTRACT OF A STATEMENT FROM AN ACCOUNTANT MR. ANIL MOHALE. FROM HIS STATEMENT WHEREIN THE SAID ACCOUNTANT HAS MENTIONED THAT HE M AINTAINED I N TALLY PACKAGE D ATA OF THE FAMILY MEMBERS, THE AO DEDUCED THAT THE TRUSTEES HAVE BEEN USING THE SERVICE OF TRUST EMPLOYEES TO MAINTAIN ACCOUNTS OF THE TRUSTEES AND THE RELATIVES. HENCE THE AO HELD THAT THIS AMOUNTS TO DIRECT BENEFIT TO THE TRUSTEES WITHIN THE MEANING OF S ECTION 13(1)(C) OF THE I.T. ACT. HENCE THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION U/S 11 OF I.T. ACT. 8. COMMISSION PAID TO MRS. ARUNA BABHULKAR/MRS. NANDANI BABHULKAR. IN THIS REGARD THE AO OBSERVED THAT ON GOING THROUGH RETURN OF INCOME OF MRS. ARUNA BABHULKAR/MRS. NANDANI BABHULKAR IT WAS SEEN THAT THEY HAVE RECEIVED COMMISSION ON SALE OF DRUG FROM ASSESSMENT YEARS 2006 - 07 ONWARDS. THE AO OBSERVED T HAT THE COMMISSION WAS PAID BY THE MEDICAL STORE THAT RUNS FROM THE HOSPITAL. THAT THE MEDICAL STORE D OES NOT PAY ANY RENT TO THE ASSESSEE 5 ITA NO. 146/NAG/2013 TRUST. THE AO HELD T HAT THIS WAS AN INDIRECT BENEFIT TO THE TRUSTEE AND WIFE OF ONE OF THE TRUSTEE WHICH FELL WITHIN THE MEANING OF SECTION 13(1)(C) OF THE I.T. ACT. HENC E THE ASSESSEE WOULD NOT BE ELIGIBLE FOR EXEMPTI ON U/S 11 OF I.T. ACT. 9. EXPENSES DEBITED ON ACCOUNT OF TRAVELLING EXPENSES. IN THIS REGARD THE AO OBSERVED THAT THE ASSESSEE HAS INCURRED TRAVELLING EXPENSES FROM ASSESSMENT YEAR 2003 - 04 TO ASSESSMENT YEAR 2009 - 10. THE ASSESSEE WAS ASKED TO SUBMIT THE NATURE OF EXPENSES AND HOW IT WAS FOR THE PURPOSE OF BUSINESS. HOWEVER, THE AO OBSERVED THAT THE ASSESSEE DID NOT SUBMIT ANY EXPLANATION. HENCE THE AO HELD THAT THE ASSESSEE TRUST DEBITED PERSONAL EXPENSES OF THE TRUSTEE. IN THIS REGARD THE AO REFERRED T O CERTAIN LOOSE PAPERS WHICH WERE MEANT FOR TICKET OF MRS. ARUNA BABHULKAR, SUDHIR BA BHULKAR, NANDANI BABHULKAR, MS SANSKRITI BABHULKAR AND MS SIDDHI BABHULKAR. REFERRING TO THIS THE AO HELD THAT IT WAS AMPLY CLEAR THAT EXPENSES ARE IN THE NATURE OF EXPENSES INCURRED ON PERSONAL PURPOSE OF BOTH THE TRUSTEE AND THE RELATIVE. THE AO ALSO NOTED THAT IN THE STATEMENT OF DR. SUDHIR BABHULKAR REGARDING THE PROFESSIONAL AC T IVITY O F MRS. ARUNA BABHULKAR, HE HAD EXPLAINED THAT |MRS. ARUNA BABHULKAR IS ENGAGED IN THE BUSINESS OF GARDEN LAYOUT AND MAINTENANCE OF GARDEN. HENCE THE AO HELD THAT THE VISIT OF MRS. ARUNA BABHULKAR TO FOREIGN COUNTRY IS A DIRECT BENEFIT TO THE ASSESSEE WITHIN THE MEANING OF SECTION 13(1)(C). IN ABSENCE OF EXPLANATION REGARDING THE NATURE OF TRAVELLING EXPENSES AND ITS PURPOSE, THE AO HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR EXEMPTION U/S 11 OF THE I.T. ACT. 10. PERSONAL EXPENSES OF TRUSTEES. IN THIS REGARD TH E AO REFERRED TO A BILL OF GONDWANA CLUP FOR RS.1100/ - IN THE NAME OF DR. SUDHIR BABHULKAR. THE AO HELD THAT IN ABSENCE OF ANY EXPLANATION THIS WAS A DIRECT BENEFIT TO THE TRUSTEE. THE AO FURTHER REFERRED TO A BILL OF EUREKA FORBES OF DR. MRS. NANDANI BA BHULKAR PAID BY THE ASSESSEE TRUST. THE AO FOUND THIS ANOTHER EXAMPLE OF PERSONAL EXPENSES OF TRUSTEE/THEIR 6 ITA NO. 146/NAG/2013 RELATIVE INCURRED BY THE ASSESSEE. THE AO FURTHER NOTED THAT DR. SUDHIR BABHULKAR OFFERED THE PROFESSIONAL FEE RECEIVED FROM THE ASSESSEE TRUST UNDE R THE HEAD BUSINESS/PROFESSIONAL INCOME AND CLAIMED EXPENSES MAINLY AS SALARY. THE SALARY WAS PAID TO MBBS DOCTORS WHO WERE PURSUING THEIR POST GRADUATION AT M/S SUSHRUT HOSPITAL AND RESEARCH CENTRE AND WERE ASS IST ING HIM WHILE PERFORMING OPERATION ET C. THESE MBBS DOCTORS WERE RESIDING AT M/S SUSHRUT HOSPITAL AND RESEARCH CENTRE AND THEIR EXPENSES WERE BORNE BY M/S SUSHRUT HOSPITAL AND RESEARCH CENTRE. IN THESE CIRCUMSTANCES THE AO WAS OF THE OPINION THAT IT WAS THE DUTY OF THE ASSESSEE TRUST TO PA Y SALARY/STIPEND TO THEM. HOWEVER, THE AO HELD THAT BY MAKING THE PAYMENT OF SALARY BY SHRI SUDHIR BABHULKAR AND DR. SUSHRT SUDHIR BABHULKAR IN THEIR INDIVIDUAL CAPACITY. THE ASSESSEE TRFUST BENEFITED THEIR TRUSTEE IN EVADING TAX ALSO. THE AO HELD THAT SUCH AN ACT OF THE ASSESSEE TRUST AMOUNTS DIRECT BENEFIT TO THE TRUSTEES. 11. THE AO FURTHER OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2003 - 04 IN THE CASE OF DR. SUDHIR BABHULKAR IT WAS SEEN THAT HE ALONG WITH HIS SPOUS E AND CHILDREN WERE STAYING ON TOP OF THE HOSPITAL PREMISES. THE AO HELD THAT THIS WAS A BENEFIT TO THE TRUSTEE WITHIN THE MEANING OF SECTION 13(1)(C) OF THE ACT. 12. THE AO FURTHER HELD THAT THE ASSESSEE WAS NOT A CHARITABLE TRUST. HE HELD THAT MERE FACT THAT SOME OF THE PATIENTS WERE TREATED EITHER FREE OF COST OR ON DISCOUNTED RATE DOES NOT CHANGE THE COMMERCIAL NATURE OF THE ASSESSEE TRUST. THE AO ALSO FOUND THAT THE ASSESSEE WAS PAYING RENT TO DR. SUDHIR BABHULKAR WHICH WAS A DIVERSION OF FUNDS. 13 . THE AO FURTHER OBSERVED THAT THE ASSESSEE MAY ARGUE THAT THERE WAS NO SPECIFIC EVIDENCE TO ATTRACT THE PROVISION OF SECTION 13(1)(C) IN EVERY ASSESSMENT YEAR. IN THIS CONNECTION AO OPINED THAT IT CANNOT BE EXPECTED THAT THE ASSESSEE WOULD RETAIN D OCUME NTS REGARDING THE PERSONA L BENEFIT ALLOWED TO THE TRUSTEES 7 ITA NO. 146/NAG/2013 AND THEIR RELATIVE. IF DOCUMENTS FOR EACH AND EVERY ASSESSMENT YEAR ARE INSISTED TO BE SEARCHED, PRACTICALLY THE PROVISION FOR SEARCH ASSESSMENT WOULD BE DEFEATED. THIS CAN NOT BE INTENTION OF THE LEGISLATURE. THE AO STATED THAT HE CANNOT SHUT HIS EYES TO THE LEGISLATIVE INTENT. HENCE THE AO HELD THAT IT WAS JUST AND APPROPRIATE TO PRESUME THAT THERE WAS UNIFORM PRACTICE IN ALL THE ASSESSMENT YEARS DURING THE SEARCH PERIOD. AO PROCEEDED TO MAKE T HE ASSESSMENT AT RS.14,28,700/ - . 14. AGAINST THE ABOVE ORDER, ASSESSEE APPEALED BEFORE THE LEARNED CIT(APPEALS). THE LEARNED CIT(APPEALS) CONSIDERED THE VARIOUS SUBMISSIONS OF THE ASSESSEE. HE ALSO OBTAINED THE REMAND REPORT FROM THE AO. THE LEARNED CIT(APPEALS) PROCEEDED TO PRINCIPALLY AFFIRM THE FINDING OF THE AO AND HELD THAT THE AO HAS RIGHTLY DENIED THE EXEMPTION U/S 11 OF THE I.T. ACT. LEARNED CIT(APPEALS) GRANTED SOME RELIEF ON ADDITION. 1 5 . AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. AT THE THRESHOLD LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT IN THE FIRST YEAR I.E. ASSESSMENT YEAR 2003 - 04 THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 31 - 10 - 2003. THE ASSESSMENT WAS COMPLETED WHEN THE SEARCH WAS CONDUCTED ON 1 0 - 04 - 2008. HE SUBMITTED THAT THE ASSESSMENT HAS NOT BEEN MADE ON THE BASIS OF ANY MATERIAL FOUND DURING THE SEARCH. HENCE PLACING RELIANCE UPON HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. ALL CARGO GLOBAL LOGISTICS LTD. IN INCOME TAX APPEAL NO. 1969 OF 2013 VIDE ORDER DATED 21 ST APRIL, 2015, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT SINCE THE ASSESSMENT WAS COMPLETE AND IT IS A NON ABATED ASSESSMENT, THE ADDITION MADE DEHORSE ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH T HE ASSESSMENT IS BAD IN LAW. 8 ITA NO. 146/NAG/2013 16. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SHRI K.P. DEWANI SUMMARISED HIS SUBMISSIONS IN THIS REGARD AS UNDER : A) THE ASSESSEE TRUST IS CONSTITUTED ON 30/3/1991 AND MAIN O BJECT OF THE TRUST IS TO PROVIDE MEDICAL RELIEF AND PROMOTING EDUCATION IN THE FIELD OF MEDICINE. THE TRUST IS REGISTERED UNDER SECTION 12A OF I . T . ACT 1961 AND CERTIFICATE HAS BEEN ISSUED UNDER SECTION 12A OF I . T . ACT 1961 ON 3/3/1992 . IT IS HOLDING VALID REGISTRAT I ON EVEN ON DATE . B) THE ASSESSEE TRUST IS HOLDING APPROVAL UNDER SECTION 80G OF I . T . ACT 1961 FROM ITS INCEPTION . THE APPROVAL UNDER SECTION 80G IS VALID TILL TODAY. C) IN THE CASE OF ASSESSEE ALL ALONG IN THE PAST UPTO ASSESSMENT YEAR 2002 - 03 THE TRUST HAS BEEN GRANTED BENEF I TS OF EXEMPTION UNDER SECTION 11 OF I . T . ACT 1961 WITHOUT THERE BEING ANY DISPUTE FOR THE SAME. D) IN THE CASE OF ASSESSEE ACTION U/S 132( 1) HAD BEEN TAKEN ON 21/3/1995 AND BENEFIT U/S 11 WAS GRANT ED WITHOUT INVITING ANY ADVERSE OBSERVATION. SUBMISSION MADE IS NOT DISPUTED BY A O. . E) IN THE CASE OF ASSESSEE ACTION 132(1) OF I T . ACT 1961 HAD TAKEN PLACE ON 10104/2008. IN THE COURSE OF I SEARCH NO INCRIMINATING MATERIAL OR EVIDENCE WAS FOUND. THE A . O . ON REAPPRAISAL OF THE EVIDENCE AVAILABLE ON RECORD HAS DENIED THE BENEFIT OF EXEMPTION ULS 11 IN THE ASSESSMENT FRAMED UNDER SECTION 153A R . W . S . 143(3) OF I. T. ACT 1961 WHICH IS IM PE RM IS S I BLE. TH E AO . WH I LE MAKING ADVERSE OBSERVAT I ON FOR HOLDING THAT THERE IS VIOLATION OF PROVISIONS OF SEC. 13(1 )(C) HAS NOT RELIED UPON ANY DOCUMENT SEIZED WHICH IS 9 ITA NO. 146/NAG/2013 INCRIMINATING IN NATURE . F) THE AO . HAS PROVIDED THE DETAILED REASONING FROM PARA 7 TO 16 TO CONCLUDE THAT THE ASSESSEE I S NOT ELIGIBLE FO R BENEFIT OF EXEMPTION UNDER SECTION 11 OF I. T . ACT 1961 AS THERE HAS BEEN VIOLATION OF PROVISIONS OF SECTION 13(1 )(C) OF LT . ACT 1961 . THE VARIOUS ITEMS OF EXPENDITURE HAVE BEEN IDENTIFIED TO CONCLUDE THAT THERE IS VIOLATION OF PROVISIONS OF SECTION 13(1 )(C). THE VARIOUS ITEMS WHICH HAVE BEEN OBSERVED FOR VIOLATION OF PROVISIONS OF SECTION 13(1 )(C) ARE AS UNDER: 1. PERSONAL EXPENSES OF TRUSTEES. 1. 2. TRAVELLING EXPENSES. 3 CHARITABLE COMMERCIAL CHARACTER OF ASSESSEE. 4. USE OF VEHICLES. ~ 5 . RENOVATION OF BUIDING. 6. PERSONAL USE OF STAFF. ~ 3. COMMISSION PAID TO MRS. ARUNA BHABULKAR, G) THE ASSESSEE TRUST IS MANAGED BY TWO EXPERIENCED SENIO R DOCTORS SPECIALIZED IN ORTHOPEDIC. THE EDUCATIONA L QUALIFICATION AND EXPERIENCE OF SUCH DOCTORS WAS EXPLAINED BEFORE THE AUTHORITY BY PLACING PROFILES OF SUCH DOCTORS. H) TWO SENIOR DOCTORS ARE FULL TIME LOOKING AFTER THE ACTIVITY OF THE TRUST AND ARE ALSO TRUSTEES . FOR RENDERING SERVICES FOR DAY TO DAY A CTIVITY, A REASONABLE COMPENSATION IS BEING PAID TO TRUSTEES IN THE FORM OF SHARING OF FEES AND OTHER REASONABLE FACILITIES/PERQUISITES. VALUE OF COMPENSATION PAID EVEN AFTER CONSIDERING DISALLOWANCE MADE BY A O . IS COMPUTED AT PAGES 20 TO 34 . . I) THE ASS ESSMENTS OF TWO DOCTORS WERE ALSO COMPLETED UNDER SECTION 153A R.W.S. 143(3) OF LT . ACT 1961 AND INCOME 10 ITA NO. 146/NAG/2013 SHOWN BY THEM IN THE RETURN BEING AMOUNT PAID BY ASSESSEE TRUST HAS BEEN ACCEPTED BY THE SAME A.O. WITHOUT INVITING ANY ADVERSE OBSERVATION WITH REGARD TO INCOME EARNED OR ASSETS HELD BY THEM. J) THE A . O. IN THE CASE OF TWO DOCTORS HAS DISALLOWED SALARY PAID TO DOCTORS FOR ASSISTING THEM BEING THE EXPENDITURE OF TRUST AND NOT OF INDIVIDUAL . THE OBSERVATION OF A O . NULLIFIES THE ADVERSE OBSERVATION MADE IN THE CASE OF TRUST THAT UNREASONABLE BENEFIT IS BEING GIVEN BY TRUST TO THE TWO DOCTORS. K) THE A O HAS MADE DISALLOWANCE IN THE ASSESSMENT FRAMED BY OBSERVING THAT THE PAYMENT MADE IS TOW ARDS PERSONA L L) M) USE OR IS IN THE NATURE OF PERSONAL USE O F TRUS T EES . - ASSESSEE HAS SUBMITTED CHART WHEREIN PAY M E NTS MADE TO TRUSTEES FOR RENDERING SERVICES AND DISA LL OWA N CES MA DE BY A.O. TOWARDS PERSONAL USE HAVE BEEN AGGREGA T E D TO ARRIVE : AT ALLEGED GROSS COMPENSATION PAID TO TRUSTEES FO R SE RVICES . RENDERED AS SENIOR PROFESSIONALS OF THE TRUST . T H E A VE RAGE . .. . : MONTH L Y REMUNERATION/COMPENSATION IS FAIR AND R EAS O NABLE CONSIDERING THE FAIR MARKET VALUE OF THE SERV I CES O BT A I NED BY TRUST. . L ) THE EVIDENCE ON RECORD MAKES IT EVIDENT THAT PA YME NT MADE TO TRUSTEES IS MOST REASONABLE FOR THE SE RV I CES RENDERED TO TRUST AND SAME IN NO MANNER OF CONS I DE R A TION CAN BE HELD TO BE EXCESSIVE OR UNREASONABLE . ON A BO V E UNDISPUTED FACTUAL POSITION THERE IS NO CASE FOR INVOCA T I ON OF THE PROVISIONS OF SECTION 13(1 )(C) . THERE IS NO EVIDE NCE ON RECORD TO HOLD THAT THERE HAS BEEN VIOLATION OF PROV I S IONS OF SECT I ON 13(1 )( C ) OF I . T . ACT 1961 . 11 ITA NO. 146/NAG/2013 M. THE TRAVELLING EXPENDITURE IS IN THE COURSE OF DAY TO D A Y ACTIVITIES OF RUNNING OF HOSPITAL . GENUINENESS OF EXPENDITURE IS NOT IN DISPUTE. NECESSITY AND NEXUS OF EXPENDITURE HAS BEEN AMPLY DEMONSTRATED BEFORE LO WER AUTHORITIES . THE TRAVELLING IS REQUIRED TO BE MADE FOR MEDICAL CONSULTATION , RESEARCH ACTIVITY AND ATTEND ING CONFERENCES . NO JUSTIFICATION FOR DISALLOWANCE CONS I DE RING THE CLAIM AND ACTIVITIES OF ASSESSEE TRUST . CERTIFICATE OF ATTENDANCE OF CONFERENCES OUT OF INDIA PLACED IN PAPER BO OK AT PAGE 81 & 82 [VOL . - II] . N) THE DETAILED EVIDENCE/MATERIAL PLACED BEFORE AO/CIT ( A ) 0 DEMONSTRATE THE CHARITABLE ACTIVITY CONDUCTED BY ASSESSEE TRUST. . 0) THE ASSESSEE TRUST IS HAVING FACILITY OF PROVIDING 10 BEDS AVAILABLE TO PATIENTS FREE OF CHARGE WHICH IS ABOUT 18% O F THE TOTAL 56 BEDS AVAILABLE IN HOSPITAL . THE AFORESAID FREE FACILITY PROVIDED TO VARIOUS PATIENTS HAS BEEN REPORTED TO JOINT CHARITY COMMISSIONER IN TERMS OF PROVISIONS OF BOMBAY PUBLIC TRUST ACT 1951 . THE EVIDENCE OF REPORT PLACED BEFORE THE AUTHORITY IS AT PAGE 32 TO 45 IN THE PAPER BOOK [VOL . - 11] . THE EVIDENCE SUBMITTED FOR CHARITABLE ACTIVITY WAS VERIFIED BY THE AUTHORITY AND NO FAULT/MISTAKE HAS BEEN FOUND WITH THE SAME . P) THE VARIOUS CAMPS CONDUCTED AT TRIBAL AREAS TO PROVIDE MEDICAL RELIEF TO POOR IS DEMONSTRATED BY PLACING LEGAL EVIDENCE ON RECORD I . E . PHOTOGRAPHS, PUBLICATIONS & ADVERTISEMENT . Q) THE ASSESSEE TRUST HAS BEEN HOLDING ACCREDITATION OF NATIONAL BOARD OF EXAMINATIONS AND COLLEGE OF PHYSICIANS 12 ITA NO. 146/NAG/2013 AND SURGEONS OPERATING UNDER THE MINISTRY OF HEALTH AND FAMILY WELFARE, GOVT . OF INDIA. THE AFORESAID ACCREDITION IS PROVIDED TO CHARITABLE TRUST AS PER RULES FRAMED BY GOVERNMENT OF INDIA. THIS AMPLY DEMONSTRATES THAT ONE ARM OF THE GOVERNMENT OF INDIA HAS DULY RECOGNIZED THE ASSESSEE TRUST AS CHARITABLE INSTITUT ION AND SAME IS DISPUTED BY REVENUE AUTHORITIES BEING ANOTHER ARM OF GOVERNMENT OF INDIA. R) THERE IS EVIDENCE ON RECORD THAT ONE MERCEDEZ BE N Z CA OWNED BY DR. SUSHRUT BABULKAR . THE AO . I N ASSESSMENT FRAMED ULS 153A / 143(3) MADE PART DISALLOWANCE FOR PERSONAL USE OF CAR OUT OF DEPREC I A TI O N A ND EXPENSES . THIS TAKES REASONABLE CARE FOR PERSONA L U SE OF VEHICLE. THE CARS OWNED BY TRUST ARE USED FOR THE P URPO S E OF OBJECTS OF TRUST . THE EXPENSE CLAIMED BY TRUST ON CA R IN NO MANNER OF CONSIDERATION CAN BE SAID TO BE EXCESS IV E OR UNREASONABLE WARRANTING INVOCATION OF PROVISIONS OF SE C . 13(1)(C) OF I . T . ACT 1961. S) THE REPAIRS AND RENOVATION OF BUILDING IS REASONAB L E EXPENDITURE. THE TOTAL AREA OF BUILDING IS 18300 SQ . F T . EVEN AS PER AO . TOTAL EXPENDITURE CLAIMED IN BLOCK PER I OD IS RS.61 , 43,599/ - WHICH ALSO INCLUDES REPLACING THE O L D FLOORING . THE TOTAL EXPENDITURE BY NO STANDARDS CAN BE CONSIDERED AS EXCESSIVE OR UNREASONABLE. OBSERVATION O F AO. THAT BUILDING IS DIPLATED IS FACTUALLY INCORR ECT . BUILDING I S ALL ALONG BEING USED AS RUNNING HOSPITAL . AO. HAS ASSESSED INCOME FROM HOSPITAL IN ALL THE YEARS . EXPENDITURE ON RENTED BUILDING IS ALWAYS EXPENDITURE IN THE NATURE OF REVENUE EXPENDITURE. THE RENT PAID FOR SUCH PROPERTY IS RS.2 . 75 PER SQ . FT . AND THE ASKING RENT OF SIMILARLY LOCATED PROPERTY IS AROUND RS.901 - TO 13 ITA NO. 146/NAG/2013 RS . 1001 - PER SQ. FT. THE TRUST IS OCCUPYING THE PROPERTY SINCE 1992 AND HAD TO REPLACE FLOORING DUE TO EXTENSIVE FOOT FALL BEING A PUBLIC HOSPITAL . THE PROPERTY SHALL BE USED FOR FURTHER PERIOD OF 15 YEARS BY THE TRUST . U) T) THE EMPLOYEE OF TRUST SHRI ANIL MOHALE IS PART TIM E EMPLOYEE OF TRUSTEES . SALARY HAS BEEN PAID TO EMPLOYEE SHRI ANIL MOHALE BY TRUSTEES WHICH HAS ALSO BEEN SHOWN IN PERSONAL ACC OUNT OF DOCTORS. THE PERSONAL ACCOUNT O F DOCTORS HAS BEEN ACCEPTED IN THE ASSESSMENT FRAMED U / S 143(3)/153A OF I T . ACT 1961. IN VIEW OF THERE REMA IN NOTHING FOR WHICH ANY ADVERSE VIEW CAN BE TAKEN IN THE CASE OF ASSESSEE . U) THE COMMISSION PAID BY SHRI GUPTA OWNER OF THE MED I CA L STORE IN THE PREMISES OF THE TRUST ARE PAYMENT MADE FO R SERVICES PROVIDED IN INDIVIDUAL CAPACITY TO OUTSIDE PARTY AND HAD NO NEXUS WITH THE ACTIVITY OF THE TRUST OR ANY PROFIT OF THE TRUST . THE VARIOUS ADVERSE OBSERVATIO NS OF THE A . O. THUS DESERVE NO CREDENCE . NO BENEFIT COULD BE SAID TO HAVE BEEN EXTENDED BY TRUST . V) NANDIN BABULKAR IS RENDERING SERVICES WITHOUT ANY REMUNERATION AND IN LIEU OF THAT OCCUPYING LUNCH ROOM OF HOSPITAL BUILDING FOR FEW HOURS . INCOME RANGING RS . 25,OOO I - TO RS . 30,OOOI - TO HER PER YEAR IS ACCEPTED BY REVENUE AUTHORITIES FROM PRIVATE PRACTICE AND THUS FACILITY OF PROVIDING 180 SQ . FT . OF AREA OF SPACE CANNOT BE HELD ADVERSELY TO THE PURPOSE OF SEC. 13(1)(C) OF I. T . ACT 1961. 14 ITA NO. 146/NAG/2013 W) RELIANCE ON : I) (2006) 286 ITR 89 (SC) ARUN KUMAR & ORS. VS. UNION OF INDIA & ORS. II) (1995) 52 TT J) (DEL . ) 42 HYUNDAI HEAVY INDUSTRIES CO. LTD. VS. ITA III) 76 ITD 101 (DEL . (S8) SAIPEM SPA AS AGENT OF D . N . VITTORIA & ORS . VS. ITA IV) (1989) 178 ITR 470 (CAL . ) CIT VS. D . S . 81ACKWOOD V) ITAT ORDER IN ITA NO . 4514/DE1/2011 IN THE CASE OF M/S . IDICULA TRUST SOCIETY VIDE ORDER DATED 30/4/2012 VI) HON'BLE HIGH COURT PUNJAB AND HARYANA AT CHANDIGARH IN ITA NO.1 OF 2011 (0 & M) IN THE CASE OF M/S . IDICULA TRUST SOCIETY VIDE ORDER DATED 11/04/2014 VII) ITAT ORDER IN ITA NO.5503/DE1/2012 IN THE CASE OF I NSTITUTE FOR HUMAN DEVELOPMENT VIDE ORDER DATED 10/10/2014 . VIII) ITAT ORDER IN ITA NO.2745/DE1/2011 IN THE CASE OF NUTRITION FOUNDATION OF INDIA VIDE ORDER DATED 7/2/2014 IX) (2009) 17 DTR (DEL . ) 283 DIRECTOR OF INCOME TAX (EXEMPTION) VS. SPAN FOUNDATION X) (2014) 41 CCH 0119/AHD. (TRIB.) PNR SOCIETY FIR RELIEF AND REHABILITATION OF THE DISABLED TRUST VS. DOLT (EXEMPTIONS) XI) (2013) 354 ITR 605 (AP) CHIREC EDUCATION SOCIETY VS . ASSISTANT DIRECTOR OF INCOME TAX 17. PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW . 15 ITA NO. 146/NAG/2013 18. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. FIRST WE DEAL WITH THE PRELIMINARY ISSUE OF JURISDICTION FOR ASSESSMENT YEAR 2003 - 04. ASSESSMENT IN THIS CASE HAS BEEN FRAMED U/S 153A READ WITH SECTION 143 (3) OF I.T. ACT. THE ASSESSEE HAS FILED THE ORIGINAL RETURN IN THIS CASE FOR ASSESSMENT YEAR 2003 - 04 ON 31 - 10 - 2003. THE ASSESSMENT WAS COMPLETE AND THE SEARCH WAS CONDUCTED ON 10 - 04 - 2008. THIS ASSESSMENT HAS BEEN FRAMED PURSUANT TO THE SAID SEARCH U/S 153A OF THE I.T. ACT. HENCE IT IS CLEAR THAT THE ASSE SSMENT WAS COMPLETE AND IT IS A NON - ABATED ASSESSMENT. WE ALSO NOTE THAT THE ASSESSMENT IN THIS CASE HAS BEEN MADE DEHORSE ANY INCRIMINATING MATERIAL FOUND DURING SEARCH. REFERRING TO THE SEARCH AT THE HOSPITAL AS WELL AS RESIDENTIAL PREMISES THE AO IN THE ASSESSMENT ORDER HAS MENTIONED T HAT CASH OF RS.2 LAKHS AND JEWELLERY OF RS.5,90,000/ - WAS SEIZED FROM THE RESIDENCE OF DR. SUDHIR BABHULKAR. ASSESSMENT HAS BEEN MADE WITH REFERENCE TO FOLLOWING OBSERVATIONS : I) STATEMENT REGARDING PERSONAL USE OF VEHICLES. II) RENOVA TION OF HOSPITAL BUILDING TREATED AS MAJOR CAPITAL EXPENDITURE. III) APPRECIATION OF PRIVATE PRACTICE OF DR. MRS. NANDANI |BABHULKAR FROM THE CABIN OF THE HOSPITAL PREMISES. IV) STATEMENT OF A PART TIME ACCOUNTANT THAT HIS SERVICES ARE USED BY THE TRUSTEES IN MAINTAINING THEIR ACCOUNTS. V) APPRECIATION THAT COMMISSION PAID TO MRS. ARUNA BABHULKAR AND MRS. NANDANI BABHULKAR BY THE MEDICAL STORE IS A BENEFIT TO THE TRUSTEE. VI) AOS OBSERVATION THAT THE ASSESSEE HAS NOT PROVED THAT THE TRAVELLING EXPENDITURE WERE NOT PERSONAL IN NATURE. VII) AOS OBSERVATION THAT DR. SUDHIR BABHULKAR HAS PAID SALARY TO M.B. B .S. DOCTORS WHICH SHOULD HAVE BEEN PAID BY THE ASSESSEE TRUST. TH U S ASSESSEE TRUST HAS HELPED DR. SUDHIR BABHULKAR TO REDUCE HIS TAX LIABILITY. VIII) OBSE RVATION OF THE AO THAT DR. SUDHIR BABHULKAR WAS STAYING ALONG WITH CHILDREN ON THE TOP OF THE HOSPITAL PREMISES. 16 ITA NO. 146/NAG/2013 IX) AOS APPRECIATION THAT ASSESSEES TRUST ACTIVITY WAS NOT CHARITABLE IN NATURE. 19. FROM THE ABOVE IT IS EVIDENT THAT THE ABOVE DISCUSSION MADE BY THE AO IN MAKING THE ADDITIONS AND DENYING BENEFIT TO THE ASSESSEE FOR EXEMPTION U/S 11 HAVE NOT ANY THING TO DO WITH THE MATERIAL FOUND DURING SEARCH. HENCE IN THIS REGARD RATIO FROM THE HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF ALL CARGO GLOBAL LOGISTICS (SUPRA) IS APPLICABLE. IN THIS CASE THE HONBLE JURISDICTIONAL HIGH COURT HAS UPHELD THE FOLLOWING EXPOSITIONS BY THE SPECIAL BENCH OF THE ITAT : A) IN SO FAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE ORIGI NAL ASSESSMENT AND ASSESSMENT U/S 153A MERGE INTO ONE AND ONLY ONE ASSESSMENT FOR EACH ASSESSMENT YEAR SHALL BE MADE SEPARATELY ON THE BASIS OF THE FINDIN G OF T HE SECTION AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. B) IN RESPECT OF NON - ABATED ASSESSMENTS, THE ASSESSMENT WILL BE MADE ON THE BASIS OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT BUT FOUND IN THE COURSE OF SEARCH, AND UNDISCLOSED INCOME OR UNDISCLOSED PROPERTY DISCOVERED IN THE C OURSE OF SEARCH. 20. FROM THE ABOVE IT IS EVIDENT THAT IN RESPECT OF NON - ABATED ASSESSMENTS, THE ASSESSMENT U/S 153A HAS TO BE MADE ON THE BASIS OF BOOKS OF ACCOUNTS OR OTHER DOCUMENTS NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT BUT FOUND IN THE COU RSE OF SEARCH AND UNDISCLOSED INCOME OR UNDISCLOSED PROPERTY IS COVERED IN THE COURSE OF SEARCH. WHEN THE ABOVE EXPOSITION IS VIEWED AND THE BASIS OF AOS ASSESSMENT AS ABOVE IS CONSIDERED, WE DO NOT HAVE ANY HESITATION IN HOLDING THAT SINCE THE ASSESSMENT YEAR 2003 - 04 IS A CASE OF NON - ABATED ASSESSMENT, THE AOS JURISDICTION TO MAKE ASSESSMENT U/S 153A WITHOUT ANY REFERENCE TO BOOKS OF ACCOUNTS OR OTHER DOCUMENTS ETC. NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT BUT FOUND IN THE COURSE OF SEARCH IS NOT SUSTAINABLE AND IS LIABLE TO BE QUASHED AND THE SAME IS QUASHED AS SUCH. 17 ITA NO. 146/NAG/2013 21. NOW WE CONSIDER THE MERITS OF AOS ASSESSMENT WHEREBY HE HAS HELD THAT IN VIEW OF PROVISIONS OF SECTION 13(1)(C) THE TRUST WILL NOT BE ELIGIBLE FOR EXEMPTION U/S 11. THE FIRS T OBSERVATION OF THE AO IS THAT THREE VEHICLES OF THE ASSESSEE TRUS T WERE BEING USED BY THE TRUSTEES DR. SUDHIR BABHULKAR AND DR. SUSHSRUT BABHULKAR. THIS OBSERVATION OF THE AO HAS NOT BEEN MADE ON THE BASIS OF ANY MATERIAL FOUND DURING THE COURSE OF SEA RCH. THE AO HAS NO EVIDENCE IN HIS POSSESSION THAT THE TRUSTEES HAVE USED THE VEHICLES FOR THEIR PRIVATE PURPOSES. THE SOLE BASIS IS A STATEMENT OBTAINED FROM DR. SUDHIR BABHULKAR WHERE HE HAS ACCEPTED THAT THE VEHICLES ALSO USED FOR PRIVATE PURPOSES. T HE AO HAS ALSO DRAWN ADVERSE INFERENCE FOR LACK OF MAINTENANCE OF LOG BOOK OF THE FACTS. IN THIS REGARD THE AO HAS DISREGARDED THE SUBMISSIONS OF DR. SUDHIR BABHULKAR THAT HE ALSO OWNS A PERSONAL MERCEDEZE BENZ CAR. WE FIND THAT THE AO HAD COME TO THE C ONCLUSION THAT THE VEHICLES OF THE TRUST ARE BEING USED BY THE TRUSTEES PERSONALLY IS NOT BASED UPON ANY COGENT EVIDENCE. LACK OF MAINTENANCE OF LOG BOOK CANNOT LEAD TO AN INFERENCE THAT THERE WAS PERSONAL USE OF VEHICLES BY THE TRUSTEES. SIMILARLY THE FACT THAT THE TRUSTEES WERE ALSO HAVING THEIR PERSONAL CARS HAS TO BE TAKEN INTO ACCOUNT AND IT CANNOT BE PRESUMED THAT THE TRUSTEES WERE KEEPING THEIR PERSONAL CARS IDLE AND USING THE TRUST VEHICLES FOR PERSONAL PURPOSES. SIMILARLY A STATEMENT OF ONE OF THE TRUSTEES THAT SOMETIMES THE CARS ARE USED FOR PRIVATE PURPOSES ALSO CANNOT BE TAKEN AS MISUSE OF THE TRUST VEHICLES FOR PERSONAL PURPOSES. BOTH THE TRUSTEES WERE USING THE VEHICLES ARE ALSO S ENIOR AND QUALIFIED DOCTORS AND PROVIDING SERVICES TO THE TRUST. HENCE THEIR USE OF VEHICLES CANNOT BE SAID TO BE FOR PRIVATE PURPOSES ONLY ON THE BASIS OF SURMISES AND CONJECTURES. FROM THE ABOVE IT IS EVIDENT THAT THE OBSERVATIONS OF THE AO THAT THERE IS MISUSE OF VEHICLES OF THE TRUST FOR PERSONAL PURPOSES OF THE TRUSTEES AND HENCE THE PROVISIONS OF SECTION 13(1)(C) ARE ATTRACTED IS TOTALLY BASED ON SURMISES AND CONJECTURE AND THE SAME IS NOT AT ALL SUSTAINABLE. 18 ITA NO. 146/NAG/2013 22. THE SECOND OBSERVATION OF THE AO IS THAT THERE HAS BEEN RENOVATION IN THE HOSPITAL BUILDING WHI CH HAS BEEN DONE TO BENEFIT FOR THE TRUSTEES WHO IS OWNER OF THE BUILDING. IN THIS REGARD THE AO HAS OBSERVED THAT THERE HAS BEEN MAJOR CAPITAL EXPENDITURE WHICH IS IN THE FORM OF CHANGE OF THE FLOORING, ELECTRIFICATION, PAINTING AND FRONT ELEVATION. THE A O HAS HELD THAT THESE ARE NOT REPAIR AND RENOVATION AND WERE MEANT TO BE GIVEN BENEFIT TO ITS F OUNDER TRUSTEE. ABOVE OBSERVATION OF THE AO CLEARLY IS IN THE NATURE OF A SWEEPING GENERALISATION AND COMMENT. THE TO T AL AREA OF THE BUILDING IS 18306 SQ.FT. AN D THE TOTAL EXPENDITURE UNDER THE BLOCK PERIOD IS 6143699. IN THIS REGARD ASSESSEES CONTENTION IS THAT RENT PAID FOR SUCH PROPERTY IS RS.2.75 PER SQ.FT. AND THE ASKING RENT FOR SIMILARLY LOCATED PROPERTY IS AROUND 901 TO 100/ - PER SQ.FT.S THE TRUST IS OCCUPYING THE PROPERTY SINCE 1992 AND HAD TO REPLACE FLOORING DUE TO EXTENSIVE FOOT FALL BEING A PUBLIC HOSPITAL. THAT THE PROPERTY SHALL BE USED FOR A FURTHER PERIOD OF 15 YEARS BY THE TRUST. CONSIDERING FROM THIS ANGLE, THE QUANTUM OF EXPENDITURE ON RE PAIR AND RENOVATION AND THE NATURE THEREOF IT CANNOT BE HELD THAT EXPENDITURE WAS NOT MEAN T FOR THE PURPOSES OF THE TRUST BUT IT WAS MEANT TO GIVE UNDUE BENEFIT TO THE OWNER TRUSTEE. HENCE IN OUR CONSIDERED OPINION THIS PLANK OF AOS DRAWING ADVERSE INFERENCE IS ALSO DEVOID OF COGENCY. 23. ANOTHER PLANK OF AOS ARGUMENT THAT DR. NANDANI BABHULK AR WHO IS WIFE OF DR. SUSHRUT BABHULKAR, ONE OF THE TRUSTEES, IS ENGAGED IN HER PERSONAL PRACTICE FROM HOSPITAL PREMISES. IN THIS REGARD ASSESSEES SUBMISSION IS THAT NANDANI BABHULKAR IS RENDERING SERVICES TO THE HOSPITAL TRUST WITHOUT ANY REMUNERATION AN D IN LIEU OF THIS SHE IS OCCUPYING THE LUNCH ROOM OF HOSPITAL BUILDING FOR FEW HOURS. IN THIS REGARD SHE IS OFFERING INCOME IN THE RANGE OF RS.25,000/ - TO RS.30,000/ - PER YEAR FROM H ER PRIVATE PRACTICE WHICH IS BEING ACCEPTED BY THE REVENUE. HENCE IT IS A PLEA OF THE ASSE SSEE THAT THE FACILITY 19 ITA NO. 146/NAG/2013 PROVIDING 180 SQ.FT. OF AREA OF A SPACE CANNOT BE HELD ADVERSELY FOR THE PURPOSE OF SECTION 13(1) (C) OF THE I.T. ACT. 24. WE FIND CONSIDERABLE COGENCY IN THIS SUBMISSION THAT NANDANI BABHULKAR IS ALSO PROVIDING S ERVICES TO THE TRUST AND IN LIEU THEREOF SHE IS USING THEIR SMALL SPACE FOR PRIVATE PRACTICE CANNOT BE HELD TO BE PROVIDING UNDUE BENEFIT AS IS ENVISAGED U/S 13(1)(C) OF THE I.T. ACT FOR THE TRUSTEES. HENCE THIS PLANK OF AOS ACTION IS FOUND TO BE DEVOID OF COGENCY. 25. ANOTHER PLANK OF AOS OBSERVATION IS THAT IN A STATEMENT OBTAINED FROM ONE ACCOUNTANT WHO HAD STATED THAT HE WAS ALSO MAINTAINING ON TALLY PACKAGE DATA OF FAMILY MEMBERS. IN OUR CONSIDERED OPINION, MAKING A GENERALISED OBSERVATION FROM T HE ABOVE STATEMENT THAT THERE IS PERSONAL USE OF STAFF BY THE HOSPITAL TRUSTEES IS A FAR FETCHED ANALYSIS BY THE AO. ASSESSEES COUNSEL HAS SUBMITTED THAT THE SAID ACCOUNTANT MR. ANIL MOHALE IS A PART TIME EMPLOYEE OF THE TRUST AS ALSO A ND SALARY HAS B EEN PAID TO THE SAID EMPLOYEE BY THE TRUSTEES WHICH HAS ALSO BEEN SHOWN IN THE ACCOUNTS AS DOCTORS. THE PERSONAL ACCOUNTS OF DOCTORS/TRUSTEES HA VE BEEN ACCEPTED IN THE ASSESSMENT FRAMED U/S 143(3)/153A OF THE I.T. ACT. CONSIDERED IN THIS VIEW, IN OUR CON SIDERED OPINION, THE SAID STATEMENT OF THE ACCOUNTANT CAN BE NO STRETCH OF IMAGINATION BE TAKEN TO DRAW INFERENCE THAT THERE IS PERSONAL USE OF STAFF OF THE HOSPITAL BY THE TRUSTEES WITHIN THE MEANING OF SECTION 13(1)(C) OF THE I.T. ACT. 2 6 . ANOTHER OBSERVATION OF THE AO IS THAT DR. ARUNA BABHULKAR AND DR. NANDANI BABHULKAR HAVE RECEIVED COMMISSION ON SALE OF DRUGS. THIS COMMISSION HAS BEEN PAID BY A MEDICAL STORE THAT RUNS FROM HOSPITAL. SINCE THE MEDICAL STORE DOES NOT PAY ANY RENT TO THE ASSESSEE TRUST, THIS WAS AN INDIRECT BENEFIT TO THE TRUSTEE AND WI FE OF ONE OF THE TRUSTEES. IN THIS REGARD WE FIND THAT IT IS THE SUBMISSION OF THE ASSESSEE THAT SHRI GUPTA, OWNER OF THE MEDICAL STORE IN THE PREMISES OF THE TRUST , HAS MADE PAYMENT FOR SERVICES PROVIDED BY THE 20 ITA NO. 146/NAG/2013 CONCERNED PERSONS ON INDIVIDUAL PERSONAL CA PACITY AND IT HAS NO NEXUS WITH THE ACTIVITY OF THE TRUST OR ANY PROFIT OF THE TRUST. HENCE THE PAYMENT OF COMMISSION BY THE MEDICAL STORE CANNOT BE SAID TO BE AN INDIRECT BENEFIT TO THE TRUSTEES. 2 7 . ANOTHER OBSERVATION OF THE AO IS THAT THE ASSESSEE HA S NOT BEEN ABLE TO EXPLAIN THE NATURE OF THE TRAVELLING EXPENSES AND HOW IT WAS DONE FOR THE PURPOSE OF THE BUSINESS. IN THIS REGARD IT IS THE ASSESSEES SUBMISSION THAT TRAVELLING EXPENDITURE HAS BEEN INCURRED IN THE COUR SE OF DAY TO DAY ACTIVITY OF RU NNING OF HOSPITAL. GENUINENESS OF THIS EXPENDITURE HAS NOT BEEN DOUBTED. NECESSITY AND NEXUS OF EXPENDITURE HAS BEEN SAID TO BE DEMONSTRATED BY THE FACT THAT THEY WERE MADE FOR MEDICAL CONSULTATION, RESEARCH ACTIVITY AND ATTENDING CONFERENCES. IN THIS RE GARD CERTIFICATE OF ATTENDANCE OF VARIOUS FIRMS OUT OF INDIA HAS ALSO BEEN PLACED IN PAPER BOOK. THUS WE FIND THAT THE AO HAS ALSO MADE THIS OBSERVATION OF MIS - USE OF TRAVELLING EXPENDITURE ALSO ON THE BASIS OF HIS SURMISES AND CONJECTURE. HENCE THERE IS NO BASIS ON WHICH IT CAN BE HELD THAT THERE IS ANY UNDUE BENEFIT TO THE TRUSTEES WITHIN THE MEANING OF SECTION 13(1)(C) OF I.T. ACT BY WAY OF PERSONAL TRAVELLING EXPENDITURE. 2 8 . ANOTHER OBSERVATION OF THE AO IS THAT THE ASSESSEE TRUST HAS ALLOWED DR. SUD HIR BABHULKAR TO PAY SALARY TO MBBS DOCTORS WHO ARE PURSUING THEIR POST GRADUATION AT SUSHRUT HOSPITAL. AOS OBSERVATION IS THAT THE HOSPITAL SHOULD HAVE PAID THE SALARY . B Y LETTING DOCTOR SUSHRUT BABHULKAR TO PAY THEIR SALARY IN HIS INDIVIDUAL ACCOUNT , T HE ASSESSEE TRUST HAS BENEFITED THE TRUSTEE IN EVADING TAX. WE FIND THAT THIS IS ALSO A VERY FAR FETCHED OBSERVATION AND IT IS THE AOS SURMISES AND CONJECTURE. HOW PAYMENT OF SALARY BY SUSHRUT BABHULKAR CAN RESULT IN BENEFIT TO HIMSELF IS BEYOND OUR COMP REHENSION. IN OUR CONSIDERED OPINION, THIS PLANK OF AOS OBSERVATION IS ALSO DEVOID OF COGENCY. 2 9 . ANOTHER PLANK OF AOS ARGUMENT IS THAT FOR ASSESSMENT YEAR 2003 - 04 DR. SUDHIR BABHULKAR WAS OCCUPYING THE TOP OF THE HOSPITAL PREMISES IN HIS 21 ITA NO. 146/NAG/2013 PERSONAL CAPA CITY. IN THIS REGARD IT IS THE SUBMISSION OF THE ASSESSEE THAT DR. SUDHIR BABHULKAR WAS ALSO ENGAGED AS CONSULTING DOCTOR TO THE HOSPITAL. HIS STAY AT HOSPITAL PREMISES WAS NECESSARY FOR THE INTEREST OF PATIENTS OF THE HOSPITAL. HENCE PROVIDING HIM ACCOMM ODATION CANNOT BE TREATED AS ANY UNDUE BENEFIT WITHIN THE MEANING OF SECTION 13(1)(C) OF THE I.T. ACT. WE FIND THAT IT IS CERTAINLY TRUE THAT HOSPITALS PROVIDE THEIR DOCTORS RESIDENTIAL ACCOMMODATION IN THE HOSPITAL PREMISES SO THAT THEY CAN BE AVAILABLE TO ATTEND THEIR PATIENTS. THIS CANNOT BE SAID TO BE AN UNDUE ADVANTAGE IN THE NATURE OF PERSONAL BENEFIT TO THE TRUSTEES. MOREOVER, THIS ASPECT IS ONLY RELEVANT FOR ASSESSMENT YEAR 2003 - 04. WE HAD ALREADY HELD IN THE INITIAL PART OF OUR ADJUDICATION THAT ASSESSMENT FOR THE ASSESSMENT YEAR 2003 - 04 U/S 153A WAS WITHOUT JURISDICTION. 30 . WE FIND THAT THE AO WAS HIMSELF AWARE OF HIS OBSERVATION IN ASSESSMENT BEING IN THE NATURE OF SURMISES AND CONJECTURE. THE AO HAS OBSERVED THAT IT CANNOT BE EXPECTED THAT T HE ASSESSEE WOULD RETAIN DOCUMENTS REGARDING THE PERSONAL BENEFIT ALLOWED TO THE TRUSTEES AND THE RELATIVES. THAT IF THE DOCUMENTS FOR EACH AND EVERY ASSESSMENT YEAR ARE INSISTED TO BE SEARCHED PRACTICALLY THE PROVISION FOR SUCH ASSESSMENT WOULD BE DEFEAT ED. THAT THIS CANNOT BE AN INTENTION OF THE LEGISLATURE THAT THE AO CANNOT SHUT HIS EYES TO THE LEGISLATIVE INTENT. THAT IT WAS JUST AND APPROPRIATE TO ASSUME THAT THERE WAS UNIFORM PRACTICE IN ALL ASSESSMENT DURING SEARCH PERIOD. THE ABOVE OBSERVATION OF THE AO CLEARLY AMPLIFY THAT THE AO HAS PICKED UP AND MAGNIF IED SOME STATEMENTS OBTAINED AND HAS MADE SWEEPING GENERALISATION WHICH IS NOT SUSTAINABLE IN LAW. BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT IT IS A LEGISLATIVE INTENT THAT THE AOS INTENTION AND FEELINGS SHOULD BE THE BASIS OF ASSESSMENT. THE AOS OBSERVATION THAT THE ASSESSEE TRUST IS NOT DOING ANY CHARITABLE ACTIVITY IS ALSO DEVOID OF ANY COGENCY. THE ASSESSEE TRUST WAS CONSTITUTED ON 30 - 03 - 1991 AND THE MAIN OBJECT OF THE TRUST WAS TO PROVIDE MEDICAL RELIEF AND PROMOTE EDUCATION IN THE FIELD OF MEDICINE. THE T R UST IS REGISTERED U/S 12A OF TH E I.T. ACT AND A 22 ITA NO. 146/NAG/2013 CERTIFICATE HAS BEEN ISSUED U/S 12A ON 13 - 03 - 1992. IT IS HOLDING VALID REGISTRATION EVEN ON DATE. THE ASSESSEE TRUST IS HOLDING THE APPROVAL U/S 80G OF THE I.T. ACT FROM ITS INCEPTION. THE APPROVAL OF SECTION 80G IS VALID EVEN TODAY. ALL ALONG IN THE PAST UPTO ASSESSMENT YEAR 2003 - 04 THE TRUST HAS BEEN GRANTED BENEFIT OF EXEMPTION U/S 11. THERE WAS AN ACTION U/S 132A ON 21 - 03 - 1995 UPON THE ASSESSEE AND BENEFIT U/S 11 WAS GRANTED WITHOUT INVITING ANY ADVERSE OBSERVATION. WE ALSO NOTE TH E FOLLOWING SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE WHICH HAS NOT BEEN DISPUTED BY THE REVENUE : 1) THE ASSESSEE TRUST IS HAVING FACILITY OF PROVIDING 10 BEDS AVAILABLE TO PATIENTS FREE OF CHARGE WHICH IS ABOUT 18% O F THE TOTAL 56 BEDS AVAILABLE IN HOSPITAL . THE AFORESAID FREE FACILITY PROVIDED TO VARIOUS PATIENTS HAS BEEN REPORTED TO JOINT CHARITY COMMISSIONER IN TERMS OF PROVISIONS OF BOMBAY PUBLIC TRUST ACT 1951 . THE EVIDENCE OF REPORT PLACED BEFORE THE AUTHORITY IS AT PAGE 32 TO 45 IN THE PAPER BOOK [VOL . - 11] . THE EVIDENCE SUBMITTED FOR CHARITABLE ACTIVITY WAS VERIFIED BY THE AUTHORITY AND NO FAULT/MISTAKE HAS BEEN FOUND WITH THE SAME . Q) THE VARIOUS CAMPS CONDUCTED AT TRIBAL AREAS TO PROVIDE MEDICAL RELIEF TO POOR IS DEMONSTRATED BY PLACING LEGAL EVIDENCE ON RECORD I . E . PHOTOGRAPHS, PUBLICATIONS & ADVERTISEMENT . R) THE ASSESSEE TRUST HAS BEEN HOLDING ACCREDITATION OF NATIONAL BOARD OF EXAMINATIONS AND COLLEGE OF PHYSICIANS AND SURGEONS OP ERATING UNDER THE MINISTRY OF HEALTH AND FAMILY WELFARE, GOVT . OF INDIA. THE AFORESAID ACCREDITION IS PROVIDED TO CHARITABLE TRUST AS PER RULES FRAMED BY GOVERNMENT OF INDIA. THIS AMPLY DEMONSTRATES THAT ONE ARM OF THE GOVERNMENT OF INDIA HAS DULY RECO GNIZED THE ASSESSEE TRUST AS CHARITABLE INSTITUTION AND SAME IS DISPUTED BY REVENUE AUTHORITIES BEING ANOTHER ARM OF GOVERNMENT OF INDIA. 3 1 . FROM THE ABOVE DISCUSSION IT IS AMPLY CLEAR THAT THERE IS NO DIVERSION IN THE ACTIVITY OF THE TRUST WHICH CAN SHOW THAT THE ASSESSEE HAS DEVIATED FROM ITS 23 ITA NO. 146/NAG/2013 MAIN OBJECT WHICH IS TO PROVIDE MEDICAL RELIEF AND PROMOTE MEDICAL EDUCATION IN THE FIELD OF MEDICINE . AOS OBSERVATION THAT THE ASSESSEE TRUST IS NOT DOING ANY CHARITABLE ACTIVITY IS NOT AT ALL BASED UPON ANY COGENT MATERIAL. AOS OBSERVATION THAT THERE HAS BEEN USE OF ASSESSEES TRUST PROPERTY FOR THE BENEFIT OF TRUSTEES HAS ALSO BEEN FOUND BY US TO BE NOT BASED UPON ANY COGE NT EVIDENCES BUT BASED UPON SURMISES AND CONJECTURE OF THE AO. HENCE IN OUR CONSIDERED OPINION, THERE IS NO BASIS FOR THE AO TO HOLD THAT THE ASSESSEE SHOULD BE DENIED BENEFIT U/S 11 OF THE I.T. ACT. 3 2 . I) APROPOS ADDITION OUT OF TRAVELLING AND CONVEYA NCE EXPENSES: II) APROPOS ADDITION OUT OF PROMOTIONAL AND INAUGURAL EXPENSES: III) APROPOS ADDITION OUT OF DEPRECIATION ON CARS. IV) APROPOS ADDITION OF RS.10,000/ - ON ACCOUNT OF SALARY. V) APROPOS ADDITION ON ACCOUNT OF EXPENSES OF RS.75,000/ - . WE HAVE ALREADY HELD IN INITIAL PARAS OF THIS ORDER THAT THE ASSUMPTION OF JURISDICTION IN THIS CASE WAS BAD IN LAW AS THIS WAS A CASE OF NON ABATED ASSESSMENT AND NO ADDITION DEHORSE ANY THING FOUND IN SEARCH IS SUSTAINABLE. O N NONE OF THE ADDITIONS ABOVE, THE AO HAS REFERRED TO ANY MATERIAL FOUND ON SEARCH. HE HAS MERELY REFERRED THAT SOME MATERIAL WERE FOUND WITHOUT EVEN BOTHERING TO SPECIFY THE NATURE AND CONTENTS THEREOF OR THE AMOUNTS INVOLVED. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THESE ADDITIONS ON MERITS ARE NOT AT ALL SUSTAINABLE IN THE CASE OF ASSESSMENT U/S 153A IN CASE OF NON ABATED ASSESSMENT. HENCE RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ALL CARGO GLOB AL LOGISTICS ABOVE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON ALL THE ADDITIONS ABOVE. 24 ITA NO. 146/NAG/2013 32. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF NOV., 2015. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 18 TH NOV., 2015. COPY FORWARDED TO : 1. SUSHRUT HOSPITAL AND RESEARCH CENTRE, 30 - A, CENTRAL BAZAR ROAD, RAMDASPETH, NAGPUR - 440 010. 2. ACIT, CENTRAL CIRCLE - 1(2), NAGPUR. 3. C.I.T., CONCERNED 4. CIT(APPEALS) - 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE .