THE ACIT (Exemtions), Vijayawada V. Kolli Ramaiah Educational Society,

ITA 17/VIZ/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8812 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 08-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PASS ROAD TIRUVURU PAN AABTK L
• Keywords: Depreciation; Maximum Marginal Rate; Additional evidence
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 17 /VIZAG/ 201 5 ( / ASSESSMENT YEAR: 20 11 - 12) THE ASST. COMMISSIONER OF INCOME - TAX (EXEMPTIONS) CIRCLE, VIJAYAWADA KOLLI RAMAIAH EDUCATIONAL SOCIETY BEHIND GANESH TEMPLE SAI VAHINI NAGAR, BYPASS ROAD, TIRUVURU (PAN : AABTK 3128L) ( / APPELLANT) / RESPONDENT) / APPELLANT BY : SHRI M.K.SETHI, DR / RESPONDENT BY : SHRI C SUBRAHMANYAM, AR / DATE OF HEARING : 2 4 .0 7 .2017 / DATE OF P RONOUNCEMENT : 28 . 07. 2017 / O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER : TH IS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE C O MMISSIONER OF INCOME TAX (A PPEALS ) [CIT(A)], VI JAYAWADA VIDE ITA NO. 340/CIT(A)/VJA/14 - 15 FOR THE A.Y. 20 11 - 12 . 2 ITA NO. 17/VIZ/2015 M/S KOLLI RAMAIAH EDUCATIONAL SOCIETY 2. BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE, A S OCIETY RUNNING AN EDUCATIONAL INSTITUTION, FILED ITS RETURN OF INCOME F OR THE A.Y.2011 - 12 ON 30.09.2011 ADMITTING TOTAL INCOME OF RS. NIL. THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT U/S 143(3) WAS COMPLETED BY DETERMINING THE TOTAL INCOME OF THE APPELLANT AT RS.1,15,37,780/ - BY DISALLOWING THE EXEMPTION CLAIMED U/S 11 OF THE ACT FOR VIOLATION OF PROVISIONS OF SEC.13(2)(A) & 13(2)(D) OF THE ACT FOR THE FOLLOWING REASONS. 2.1 ON VERIFICATION OF THE UNSECURED LOANS, THE AO FOUND THAT THE NAME OF THE CHAIRMAN OF THE ASSESSEE SOCIETY SRI K.V.RAVI KUMAR WAS APPEARING AS A DE BTOR. ON VERIFICATION OF THE LEDGER ACCOUNT, THE AO FOUND THAT SHRI RAVI KUMAR TOOK A LOAN OF RS.8,15,000/ - FROM THE ASSESSEE S OCIETY AND REPAID AN AMOUNT OF RS.4,99,944/ - AND THE OUTSTAN DING BALANCE AS ON 31.03.2011 WAS RS.3,15,056/ - . HENCE, THE AO FELT THA T THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SEC.13(1)(C) R.W.S. 13(2)(A) AND CALLED FOR THE ASSESSEES EXPLANATION. THE ASSESSEE EXPLAINED THAT THE AMOUNTS WERE PAID TO THE CHAIRMAN FOR THE PURPOSE OF PAYMENT OF ADVANCE FOR BUYING BUSES. THE ASSESS ING OFFICER WAS NOT SATISFIED WITH THE ASSESSEES EXPLANATION AND HELD THAT THE ASSESSEE HAS 3 ITA NO. 17/VIZ/2015 M/S KOLLI RAMAIAH EDUCATIONAL SOCIETY LENT THIS AMOUNT TO SHRI RAVI KUMAR, THE FOUNDER TRUSTEE WITHOUT ADEQUATE SECURITY A N D WITHOUT ANY INTEREST AND HENCE, PROVISIONS OF SEC.13(1)(C) R.W.S. 13(2)(A) A RE ATTRACTED IN ASSESSEES CASE. 2.2. THE A SSESSING OFFICER FURTHER FOUND THAT THE CANTEEN EXPENDITURE INCLUDED FREE MEALS PROVIDED TO SPECIFIED PERSONS SUCH AS CHAIRMAN, CORRESPONDENT, TREASURER ETC. AND NUMBER OF SUCH MEALS WERE 73. IN THIS CONNEC TION, THE ASSESSEE EXPLAINED THAT THE ASSESSEE S OCIETY IS LOCATED IN A REMOTE VILLAGE, THE ABOVE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF PROVIDING CUSTOMARY MEALS TO GUESTS / OFFICIALS WHO CAME FOR THE PURPOSE OF INSPECTIONS, AUDITS AND VERIFICATION S BY UNIVERSITIES, BOARDS, GOVERNMENT INSTITUTIONS AND BANKERS. ON SUCH OCCASIONS, THE MEMBERS OF SOCIETY HAVE TO ACCOMPANY THE OFFICERS AS A CUSTOM. OUT OF THE 3236 MEALS PAID TO CANTEEN SUCH MEALS WERE ONLY 73 WHICH WORKS OUT TO 2.26% ONLY. HOWEVER, TH E AO REJECTED THE ASSESSEES EXPLANATION AND HELD THAT THE FREE MEALS WERE PROVIDED TO SPECIFIED PERSONS WITHOUT ANY COMP ENSATION OR CONSIDERATION AND HENCE, SECTION 13(2)(D) IS ATTRACTED IN ASSESSEES CASE. 4 ITA NO. 17/VIZ/2015 M/S KOLLI RAMAIAH EDUCATIONAL SOCIETY 2.3. THE ASSESSING OFFICER FOUND THAT AN AMOUNT OF RS.300/ - WAS PAID TO THE CHAIRMAN TOWARDS ADVERTISEMENT FOR THE PURPOSE OF WISHES TO AMC CHAIRMAN. LIKEWISE, AN AMOUNT OF RS.1,000/ - WAS PAID FOR THE PURPOSE OF ADVERTISEMENT IN NEWSPAPER FOR EXPRESSING WISHES ON RETIREMENT OF ASWO, TIRUVURU. THE ASS ESSING OFFICER FELT THAT THESE EXPENSES WERE NOT INCURRED FOR THE OBJECTS OF THE SOCIETY. HOWEVER, IN VIEW OF PROVISIONS OF SECTION 13(2)(G), THESE TRANSACTIONS WERE NOT CONSIDERED AS VIOLATIONS U/S 13(1)(C) R.W.S. 13(2)(G) OF THE ACT BY THE ASSESSING OFF ICER, HOWEVER, THE SAME WERE CONSIDERED FOR DISALLOWANCE WHILE COMPUTING THE INCOME OF THE SOCIETY AS UNRELATED TO THE BUSINESS OF THE ASSESSEE. 2.4. WITH THE ABOVE OBSERVATIONS, THE ASSESSING OFFICER REJECTED THE ASSESSEES CLAIM OF EXEMPTION U/S 11 OF THE ACT AND COMPUTED THE INCOME OF THE ASSESSEE UNDER REGULAR PROVISIONS AND TAXED THE SAME AT THE MAXIMUM MARGINAL RATE. 3 . AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE WENT ON APPEAL BEFORE CIT(APPEALS). THE LD.CIT(APPEALS) A LLOWED THE APPEAL OF THE ASSESSEE. 5 ITA NO. 17/VIZ/2015 M/S KOLLI RAMAIAH EDUCATIONAL SOCIETY 4 . WITH REGARD TO THE FIRST ISSUE OF UNSECURED LOANS TO SHRI K.V.RAVI KUMAR IS CONCERNED, THE LD.CIT(APPEALS) OBSERVED THAT THE AMOUNT WAS GIVEN TO CHAIRMAN SHRI K.V.RAVI KUMAR FOR PURCHASE OF BUSES. THE CHAIRMAN A S PER THE RESOLUTION OF THE SOCIETY ENTERED INTO AN AGREEMENT FOR PURCHASE OF BUSES WITH SHRI A.MOHANA CHALAPATHI RAO ON 13.10.2010. IT WAS FURTHER OBSERVED BY THE CIT(APPEALS) THAT SHRI RAVI KUMAR HAS MADE THE PAYMENT OF RS.4 LAKHS TO SHRI A.MOHANA CHALAPA THI RAO FOR PURCHASE OF BUSES WITH THE BALANCE AMOUNT OF RS.3,15,056/ - PLUS FROM HIS OWN SOURCES . IN FACT SHRI RAVI KUMAR HAS PAID RS.4,00,000/ - AS ADVANCE TO THE BUS OWNER WHICH IS INCLUSIVE OF RS.85,000/ - FROM HIS POCKET. THEREFORE, THE LD.CIT(APPEALS) HELD THAT THE LOAN WAS GIVEN FOR GENUINE PURPOSE FOR PURCHASE OF BUSES, BUT NO PERSONAL LOSS OR PERSONAL GAIN WAS INVOLVED IN THIS ISSUE. HENCE, THE LD.CIT(APPEALS) HELD THAT THE PROVISIONS OF SECTION 13(1)(C) R.W.S. 13(2 )(A) ARE NOT ATTRACTED IN THIS C ASE. SIMILARLY WITH REGARD TO THE MEALS COUPONS UTILIZED BY THE CHAIRMAN, THE LD.CIT(APPEALS) OBSERVED THAT THE NUMBER OF MEALS COUPONS UTILIZED WERE ONLY 73 WHICH WORKS OUT TO 2.26% AND FURTHER THE LD.CIT GIVEN A FINDING THAT IT IS CUSTOMARY ON THE PART OF TH E SOCIETY TO PROVIDE THE FOOD ETC. TO THE GUESTS VISITING THE 6 ITA NO. 17/VIZ/2015 M/S KOLLI RAMAIAH EDUCATIONAL SOCIETY SOCIETY ON OFFICIAL DUTY SINCE THE SOCIETY I S LOCATED IN FAR AWAY PLACE WHERE THERE ARE NO HOTELS ETC AND THE MEALS WAS PROVIDED TO THE OFFICERS VISITING FROM VARIOUS DEPARTMENTS / ORGANIZATIONS S H OULD BE TREATED AS GENUINE EXPENDITURE FOR RUNNING THE SOCIETY . HENCE, THE LD.CIT(APPEALS) HELD THAT FREE MEALS WERE NOT UTILIZED BY THE SPECIFIED PERSONNE L FOR THEIR PERSONAL PURPOSES AND A CCORDINGLY DIRECTED THE ASSESSING OFFICER TO ALLOW THE EXEMPTION U/S 1 1 OF THE I.T.ACT. 5. A GGRIEVED BY THE ORDER OF THE CIT (APPEALS), THE REVENUE IS IN APPEAL BEFORE US AND THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE ORDER OF THE LD.CIT(APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LD.CIT( A) ERRED IN LAW IN DIRECTING THE ALLOW EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961, TO THE ASSESSEE WHEN THE PROVISIONS OF SEC.13(1)(C) R.W.S. 13(2)(A) OF THE ACT ARE FULLY ATTRACTED IN THE CASE OF THE ASSESSEE SOCIETY, AS CLEARLY ESTABLISHED BY THE AO IN THE ASSESSMENT ORDER. 3. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE HAS ADVANCED INTEREST FREE LOAN OF RS.8,15,000/ - TO SRI K.V.RAVI KUMAR, THE FOUNDER TRUSTEE, AND OUT OF THE SAME A SUM OF RS.3,15,056/ - WAS OUTSTANDING AS ON 31.0 3.2011 AS NOTED BY THE AO IN THE ASSESSMENT, THEREBY ESTABLISHING THAT PROVISIONS OF SEC.13(1)(C) R.W.S. 13(2)(A) OF 7 ITA NO. 17/VIZ/2015 M/S KOLLI RAMAIAH EDUCATIONAL SOCIETY THE ACT ARE APPLICABLE TO THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2011 - 12. 4. THE LD.CIT(A) ERRED IN LAW IN DIRECTING TO ALLOW EX EMPTION U/S.11 OF THE INCOME TAX ACT, 1961, WHEN THE PROVISIONS OF SEC.13(1)(C) R.W.S. 13(2)(D) OF THE ACT, ARE FULLY ATTRACTED IN THE CASE OF THE ASSESSEE SOCIETY, AS CLEARLY ESTABLISHED BY THE AO IN THE ASSESSMENT ORDER. 5. THE LD.CIT(A) ERRED IN ENTERT AINING AND ACCEPTING THE ALLEGED COPY OF PURCHASE AGREEMENT DT.13.10.2010, PRODUCED BY THE ASSESSEE DURING THE COURSE OF APPEAL, WHICH CONSTITUTES ADDITIONAL EVIDENCE, WITHOUT GIVING ANY OPPORTUNITY TO THE AO TO EXAMINE THE SAME, IN CONTRAVENTION OF RULE 4 6A(3) OF THE INCOME TAX RULES, 1962. 6. THE LD.CIT(A) ERRED IN DIRECTING THE AO TO ACCEPT THE RETURNED INCOME, THEREBY ALLOWING THE CLAIM FOR DEDUCTION OF AN AMOUNT OF RS. 89,48,864/ - , CLAIMED BY THE ASSESSEE TOWARDS DEPRECIATION ON ASSETS, WHEN THE ASSESS EE HAS NOT SPECIFICALLY STATED THAT IT HAS NOT CLAIMED THE COST OF THE ASSETS ON WHICH SUCH DEPRECIATION IS CLAIMED, AS APPLICATION OF INCOME IN THE EARLIER YEARS. 7. ANY OTHER GROUND THAT MAY BE RAISED AT THE TIME OF HEARING OF THE CASE. 5.1. GROUND NO .5 IS RELATED TO THE CONTRAVENTION OF RULE 46A(3) OF THE INCOME TAX RULES, 1962. DURING THE APPEAL HEARING, THE LD.DR ARGUED THAT THE ASSESSEE HAS FURNISHED THE PURCHASE AGREEMENT, ESTIMATION OF BUSES , RESOLUTION OF THE EXECUTIVE BODY MEETING ON 1 8.0 9 .200 8 ETC. BEFORE THE CIT(APPEALS) WHICH WAS NOT PLACED BEFORE THE ASSESSING 8 ITA NO. 17/VIZ/2015 M/S KOLLI RAMAIAH EDUCATIONAL SOCIETY OFFICER. THEREFORE, THE LD.DR ARGUED THAT THERE WAS NO OCCASION TO THE ASSESSING OFFICER TO EXAMINE THE ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSEE IN PAGE 32 - 51 OF THE PAPER BOOK FILED BEFORE THE CIT(APPEAL AND THE LD.CIT(A) HAS NOT CALLED FOR THE REMAND REPORT. THEREFORE, THE LD.DR ARGUED THAT THE EVIDENCES PRODUCED BY THE ASSESSEE IN THE FORM OF PURCHASE AGREEMENT PROCEEDINGS OF THE COMMITTEE, TENDERS OBTAINED FOR PURCHASE OF BUSES, PAYMENT OF VOUCHER CONSTITUTE THE ADDITIONAL EVIDENCE. HENCE, THE LD.DR ARGUED THAT THE CASE SHOULD BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE GENUINENESS AND CORRECTNESS OF THE DOCUMENTS PRODUCED BEFORE THE LD.CIT(APPEALS). 5.2. ON THE OTHER HAND, THE LD. AR RELIED ON THE ORDERS OF THE LD.CIT(APPEALS). 5.3. WE HAVE GONE THROUGH THE SUBMISSIONS OF THE BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE AR HAS FILED PAPER BOOK CONTAINING 82 PAGES BUT WITHOUT CER TI FI CATION / U NDERTAKING. THEREFORE, THE PAPER BOOK FILED BY THE LD. AR IS IGNORED. IN THIS CASE, THE ASSESSEE HAS GIVEN A LOAN OF RS.8,15,000/ - TO SHRI K.RAVI KUMAR, FOUNDER TRUSTEE 9 ITA NO. 17/VIZ/2015 M/S KOLLI RAMAIAH EDUCATIONAL SOCIETY AND A SUM OF RS.3,15,056/ - WAS OUTSTANDING ON 31.03.2011. AS PER THE ASSESSM ENT ORDER, IT IS OBSERVED THAT THE ASSESSEE HAS EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE AMOUNT WAS GIVEN FOR PURCHASE OF BUSES AND THE SAME COULD NOT BE MATERIALIZED AND THE AMOUNT WAS L YING WITH THE FOUNDER. HOWEVER, NO EVIDENCE WAS FURNISHED BY THE AS SESSEE TO THE ASSESSING OFFICER. THE ISSUE REGARDING PAYMENT OF ADVANCE TO SHRI AKULA MOHANA CHALAPATI RAO ON 13.10.2010 CAME BEFORE THE CIT(APPEALS). NO OTHER DISCUSSION W AS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER WITH REGARD TO THE EXECUTIVE BODY MEETING HELD ON 18.09. 2008, PURCHASE AGREEMENT, TENDER DOCUMENTS ETC. THE LD.CIT(APPEALS) ALSO HAS NOT CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER. FROM THE FACTS OF THE CASE, THE LD.CIT(APPEALS) ALSO HAS NOT MADE ANY E NQU IRY WITH THE SELLER OF THE BUSSES WHETHER IT IS FIRST HAND OR SECOND HAND BUSES, NO SUCH DETAILS WERE VERIFIED BY THE LD.CIT(APPEALS). THEREFORE, IN THE INTEREST OF THE JUSTICE, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE GENUINENESS OF THE ADVANCE GIVEN TO SHRI K RAVI KUMAR. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE 10 ITA NO. 17/VIZ/2015 M/S KOLLI RAMAIAH EDUCATIONAL SOCIETY LD.CIT(APPEALS) AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH ON M ERITS. 6. WITH REGARD TO THE SECOND ISSUE ON VIOLATION OF PROVISIONS OF SECTION 13(1)(C) AND REJECTION OF EXEMPTION U/S 11 OF THE I.T. ACT IS CONCERNED, THE LD.CIT(APPEALS) OBSERVED THAT THE NUMBER OF MEALS COUPONS UTILIZED WAS 73 AND THE SAME WERE UTILIZED FOR T HE PURPOSE OF PROVIDING FOOD TO OFFICERS AND VIPS VISITING THE SOCIETY FROM VARIOUS DEPARTMENTS / ORGANIZATIONS. IT WAS ALSO OBSERVED BY THE LD.CIT(APPEALS) THAT THE SOCIETY IS LOCATED IN FAR AWAY PLACE, WHERE THERE ARE NO HOTELS ETC. FOR SUPPLY OF FOOD. IN SUCH CIRCUMSTANCES, THE ASSESSEE HAS PROVIDED FOOD TO THE OFFICERS AND THEIR GUESTS VISITING THE SOCIETY, SIGNING THE COUPON ON THE REAR SIDE. THE EXPLANATION APPEARS TO BE REASONABLE AND WE DO NOT FIND ANY REASON TO INTERFERE WITH THE O RDER OF THE LD.CIT(APPEALS). ACCORDINGLY, THE RE VENUES APPEAL ON VIOLATION OF PROVISIONS OF SECTION 13(1)(C) R.W.S. 13(2)(A) WITH REGARD TO 73 MEALS COUPONS UTILIZED BY THE CHAIRMAN IS DISMISSED. 7 . IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PU RPOSES . 11 ITA NO. 17/VIZ/2015 M/S KOLLI RAMAIAH EDUCATIONAL SOCIETY T HE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28 TH JU L 20 17 . SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 28. 07 .2017 L. RAMA, SPS / COPY OF THE ORDER FORWARDED TO : - 1. / THE APPELLANT THE ASST.COMMISSIONER OF INCOME TAX (EXEMPTIONS) CIRCLE, VIJAYAWADA 2 . / THE RESPONDENT KOLLI RAMAIAH EDUCATIONAL SOCIETY, BEHIND GANESH TEMPLE, SAI VAHINI NAGAR, BYPASS ROAD, TIRUVURU 3 . / THE CIT , VIJAYAWADA 4 . ( ) / THE CIT (A) , V IJAYAWADA 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM