Dy. CIT Cen Cir Kolhapur, Kolhapur V. Dr. D.Y. Patil Pratishtan, Kolhapur

ITA 253/PUN/2012

• Counselvise Citation: 25324514 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 07-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Business income; Charitable institution; Principle of natural justice; Rule of consistency; Additional evidence; Capital receipt; Onus to prove; Cancellation of registration
• Section: 133A; 12A; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 253/PN/2012 (ASSESSMENT YEAR 2007-08) DCIT, CENTRAL CIRCLE, KOLHAPUR .. APPELLANT VS. DR. D.Y. PATIL PRATISHTAN, 212/E, TARABAI PARK, KOLHAPUR .. RESPONDENT PAN NO.AAATD 5311R APPELLANT BY : SHRI S.K. SINGH RESPONDENT BY : SHRI NIKHIL PATHAK DATE OF HEARING : 05-06-2013 DATE OF PRONOUNCEMENT : 25-06-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 31-10-2011 OF THE CIT(A) CENTRAL, PUNE RELATI NG TO ASSESSMENT YEAR 2007-08. 2. GROUNDS OF APPEAL NO. 1 AND 2 BY THE REVENUE REA DS AS UNDER : 1. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING EXEMPT ION U/S.1L OF THE I.T. ACT TO THE ASSESSEE IGNORING THE FACT THAT ACTIVITIES O F THE ASSESSEE ARE NOT GENUINE AND ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. 2. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING EXE MPTION U/S1L OF THE I.T. ACT TO THE ASSESSEE INSPITE OF THE FACT REGIST RATION U/S.!2A WAS CANCELLED BY THE CIT. FURTHER ITAT'S ORDER RESTORIN G THE REGISTRATION U/S.12A IS CHALLENGED BY THE REVENUE BEFORE THE HON BLE BOMBAY HIGH COURT. 2.1 AFTER HEARING BOTH THE SIDES WE FIND THE ASSESS EE DR. D.Y. PATIL PRATISHTAN WAS FOUNDED THROUGH A DEED OF TRUST ON 2 7-12-1990 VIDE 2 REGISTRATION NO.E-1175 UNDER BOMBAY PUBLIC TRUST AC T 1950. THE ASSESSEE IS ENGAGED IN RUNNING EDUCATIONAL INSTITUTIONS AND HAS OBTAINED THE CERTIFICATE OF REGISTRATION U/S.12A FROM COMMISSIONER OF INCOME TAX ON 15-11-1991 VIDE REGISTRATION NO. D-/93/63/85/1991-92. FROM A. Y. 2000-01 ONWARDS THE EXEMPTION HAS BEEN DENIED TO THE TRUST ON VARIO US GROUNDS INCLUDING CANCELLATION OF REGISTRATION BY CIT CENTRAL U/S.12A A(3) AND FOR INDULGENCE IN ILLEGAL ACTIVITIES AND VIOLATION OF PROVISIONS O F SECTION 13(1)(C). FOLLOWING THE ORDERS IN THE CASE OF THE TRUST FOR EARLIER YEA RS THE AO DENIED EXEMPTION U/S.11 OF THE I.T. ACT ON THE FOLLOWING GROUNDS : (1) THE REGISTRATION U/S.12A OF THE ASSESSEE WAS C ANCELLED BY LEARNED CIT CENTRAL AND THEREFORE, THE EXEMPTION CA NNOT BE ALLOWED. (2) THE ASSESSEE TRUST HAS GENERATED SUBSTANTIAL S URPLUS AND HENCE, IT IS NOT IMPARTING EDUCATION AND THEREFORE, THE EX EMPTION U/S.11 IS BEING DENIED. (3) THE ASSESSEE TRUST HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(C) AND THEREFORE, THE EXEMPTION HAS BEEN DISA LLOWED. 2.2 IN APPEAL THE LD. CIT(A) FOLLOWING VARIOUS DECI SIONS AND OBSERVING THAT THE DENIAL U/S.12A BY THE CIT HAS BEEN RESTORE D BY THE TRIBUNAL HELD THAT THE AO WAS NOT JUSTIFIED IN DENYING THE EXEMPTION U /S.11. 2.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 2.4 WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO.182 /PN/2008 ORDER DATED 28-11-2008 HAS RESTORED THE REGISTRATION GRANTED TO THE ASSESSEE U/S.12A. SIMILARLY, THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 IN ITA NO.1592/PN/2011 ORDER DATED 14-12-2012 HAS HELD THA T THE ASSESSEE IS ENTITLED TO BENEFIT OF SECTION 11 OF THE I.T. ACT A ND THERE IS NO VIOLATION OF THE 3 PROVISIONS OF SECTION 13(1)(C) OR 13(1)(D). MERELY BECAUSE THE REVENUE HAS NOT ACCEPTED THE DECISION OF THE TRIBUNAL AND HAS F ILED AN APPEAL BEFORE THE HONBLE HIGH COURT THE SAME IN OUR OPINION CANNOT B E A GROUND TO TAKE A DIFFERENT VIEW IN ABSENCE OF ANY ADVERSE ORDER AGAI NST THE ORDER OF THE TRIBUNAL BY THE HONBLE HIGH COURT. SINCE THE REGI STRATION U/S.12A CANCELLED BY THE CIT HAS BEEN RESTORED BY THE TRIBU NAL VIDE ORDER DATED 28- 11-2008 AND SINCE IN THE IMMEDIATELY PRECEDING ASSE SSMENT YEAR THE CLAIM OF EXEMPTION U/S.11 ALLOWED BY THE CIT(A) HAS BEEN UPH ELD BY THE TRIBUNAL, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROU GHT TO OUR NOTICE WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ALLOWIN G EXEMPTION U/S.11 OF THE I.T. ACT. ACCORDINGLY, THE GROUNDS OF APPEAL NO. 1 AND 2 BY THE REVENUE ARE DISMISSED. 3. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS UN DER : 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING MAINTE NANCE EXPENSES OF FLATS AT GULMOHAR SOCIETY WHEN THE SAID FLATS WERE USED EXCL USIVELY BY THE FOUNDER OF THE TRUST VIOLATING THE PROVISIONS OF SEC. 13(1)(C) OF THE ACT. 3.1 AFTER HEARING BOTH THE SIDES WE FIND THE ASSESS ING OFFICER FOLLOWING HIS ORDER FOR THE PRECEDING ASSESSMENT YE AR DISALLOWED AN AMOUNT OF RS.74,632/- ON ACCOUNT OF MAINTENANCE OF FLAT AT GULMOHAR SOCIETY ON THE GROUND THAT THE SAME WAS EXCLUSIVELY USED BY THE FOUNDER OF THE TRUST IN VIOLATION OF THE PROVISIONS OF SECT ION 13(1)(C) OF THE I.T. ACT. IN APPEAL THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT THE EXPENDITURE ON THE GUEST HOUSE WAS INCURRE D FOR OBJECTS OF THE TRUST AND THERE IS NO VIOLATION OF THE PROVISIONS O F SECTION 13(1)(C) OF THE I.T. ACT. THE RELEVANT OBSERVATIONS OF THE LD. CIT (A) READS AS UNDER : 4 8.5 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE APPELLANT. SIMILAR ISSUE HAD COME IN APPEAL FOR TH E EARLIER YEARS INCLUDING THE APPEAL FOR A.Y. 2006-07. THE AO DISALLOWED THE SE EXPENDITURES AND ALSO HELD THAT THE APPELLANT HAD VIOLATED PROVISIONS OF SECTION 13(1)(C). HOWEVER, IN THE APPELLATE PROCEEDINGS FOR THESE YEARS INCLUD ING THE APPEAL ORDER FOR A.Y. 2006-07 (PARA 22 TO 22.17 OF THE APPEAL ORDER) IT WAS FOUND THAT THE STAND OF THE AO WAS NOT CORRECT AND, THEREFORE, APP ELLANTS APPEALS WERE ALLOWED ON THIS ISSUE AND IT HAS BEEN HELD THAT THE ENTIRE EXPENDITURE ON THE GUEST HOUSE WAS INCURRED FOR THE OBJECTS OF THE TRU ST AND NO VIOLATION HAS BEEN COMMITTED U/S.13(1)(C). AS THE FACTS FOR A.Y. 2007-08 ARE SUBSTANTIVELY IDENTICAL WITH THE FACTS OF EARLIER YEARS, DECISION ON THIS ISSUE IN THE APPEAL ORDER OF EARLIER YEARS INCLUDING A.Y. 2006-07 IS EQ UALLY APPLICABLE FOR A.Y. 2007-08. ACCORDINGLY, I HOLD THAT THE ENTIRE EXPEN DITURE ON THE GUEST HOUSE WAS INCURRED FOR THE OBJECTS OF THE TRUST AND NO VI OLATION HAS BEEN COMMITTED U/S.13(1)(C). THEREFORE, THIS GROUND OF APPEAL IS ALLOWED. 3.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 3.3 AFTER HEARING BOTH THE SIDES WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO.1612/PN/2011 FILED BY THE REVENUE. THE GROUND RAISED BY THE REV ENUE WAS DISMISSED BY THE TRIBUNAL BY HOLDING AS UNDER : 45. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND THE AO DISALLOWED THE MAINTENA NCE EXPENSES OF FLATS AT GULMOHAR SOCIETY ON THE GROUND THAT THOSE FLATS ARE EXCLUSIVELY USED BY DR.D.Y. PATIL AND THEREFORE THERE IS VIOLATION OF P ROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT. WE FIND THE LEARNED CIT(A) HAD GI VEN A CATEGORICAL FINDING THAT THE SAID FLATS ARE NOT EXCLUSIVELY USED BY DR. D.Y. PATIL BUT ALSO BY OTHER GUESTS. IT IS THE SUBMISSION OF THE LEARNED COUNSE L FOR THE ASSESSEE THAT THE STATEMENT RECORDED FROM THE CARETAKER SRI SADASHIV BAPU PATIL WAS NOT GIVEN TO THE ASSESSEE AND THE ASSESSEE WAS NOT AFFORDED A N OPPORTUNITY TO CROSS EXAMINE SRI SADASHIV BAPU PATIL. IT IS ALSO THE SU BMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT AFFIDAVITS OF CERTAIN OTHER PROFESSORS WHO STAYED AT THE GUEST HOUSE WERE FURNISHED WHO HAVE CONFIRME D THAT THEY HAVE STAYED IN THE GUEST HOUSE. THEREFORE, IT CANNOT BE SAID T HAT SUCH GUEST HOUSE IS EXCLUSIVELY USED BY DR. D.Y. PATIL. IT IS ALSO THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT NO SALARY HAS BEEN PA ID TO DR. D.Y. PATIL AND IF HE WOULD HAVE STAYED IN ANY HOTEL THE EXPENDITURE W OULD HAVE BEEN MUCH MORE THAN THE EXPENDITURE INCURRED ON ACCOUNT OF MA INTENANCE OF THE FLATS USED AS GUEST HOUSES. FURTHER THERE IS NOTHING ADV ERSE IN THE REMAND REPORT GIVEN BY THE AO. IT IS ALSO THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT SIMILAR EXPENSES WERE ALLOWED IN THE PAST AND NO DISALLOWANCE WAS MADE IN THE PRECEDING YEAR. WE FIND MERIT IN T HE ABOVE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. FROM THE COP Y OF THE ASSESSMENT ORDERS FOR A.YS. 2000-01 TO 2002-03 WE FIND NO SUCH DISALL OWANCE HAS BEEN MADE. THEREFORE, IN VIEW OF THE RULE OF CONSISTENCY ALONE NO DISALLOWANCE SHOULD HAVE BEEN MADE ON ACCOUNT OF MAINTENANCE OF FLATS. WE ALSO FIND MERIT IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT DR. D.Y. PATIL HAS NOT 5 BEEN GIVEN ANY SALARY AND IF HE WOULD HAVE STAYED I N ANY HOTEL THE EXPENDITURE WOULD HAVE BEEN MUCH MORE THAN THE EXPE NDITURE INCURRED ON ACCOUNT OF MAINTENANCE OF THE GUEST HOUSES. 45.1 WE FIND THAT THE LEARNED CIT(A) WHILE DELETING THE DISALLOWANCE HAS EXHAUSTIVELY DISCUSSED THE ISSUES AT PARA 22.8 TO 2 2.17 OF HIS ORDER WHICH READS AS UNDER : 22.8. I HAVE CONSIDERED THE FACTS OF THE CASE, TH E SUBMISSIONS MADE BY THE APPELLANT, REMAND REPORT OF THE AO, REJOINDE R OF THE APPELLANT THEREON AND OTHER MATERIAL AVAILABLE ON RECORD. THE AO, WHILE MAKING THIS ADDITION, HAS PLACED HEAVY RELIANCE ON THE STATEMENT OF THE CARETAKER OF THE GUEST HOUSE. PERUSAL OF THE AS SESSMENT PROCEEDINGS REVEALS THAT THE ONLY QUERY MADE IN RES PECT OF GUEST HOUSE WAS RELATING TO THE DETAILS OF THE EXPENSES I NCURRED THEREON. THE AO DID NOT DISCLOSE HER INTENTION TO MAKE DISAL LOWANCE OF THE EXPENSES INCURRED ON THE MAINTENANCE OF GUEST HOUSE ON THE BASIS OF THE STATEMENT OF THE CARETAKER. NOR DID SHE GIVE TH E STATEMENT OF CARETAKER OF THE GUEST HOUSE TO THE APPELLANT FOR I TS COMMENTS / REBUTTAL ETC. IN FACT, THE APPELLANT WAS NOT TOLD A NYTHING ABOUT THIS STATEMENT DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. THE APPELLANT CAME TO KNOW ABOUT THE CONTENTS OF THE STATEMENT OF THE CARETAKER ONLY AFTER ASSESSMENT ORDER WAS PASSED. AFTER IT RECEIVE D THE ASSESSMENT ORDER, THE APPELLANT OBJECTED TO THE USE OF THE STA TEMENT OF THE CARETAKER WHICH WAS TAKEN AT ITS BACK. IT CONTENDED THAT THE STATEMENT TAKEN AT ITS BACK COULD NOT BE USED WITHOUT GIVING AN OPPORTUNITY TO CROSS-EXAMINE. IT GAVE ONE NOTE DURING APPELLATE PR OCEEDING. IN ITS NOTE, IT VEHEMENTLY ARGUED THAT CERTAIN STATEMENT R ECORDED OF CERTAIN PERSON IN THE COURSE OF ASSESSMENT PROCEEDING WERE USED TO ITS DISADVANTAGE WITHOUT GIVING AN OPPORTUNITY TO IT TO EXAMINE THE STATEMENT AND EXERCISE ITS RIGHT TO CROSS-EXAMINE T HE PERSON WHO MADE THE STATEMENT. THE RELEVANT PORTION OF THE NOT E IS AS UNDER : 1] THE LEARNED A.O. HAS COMPLETED THE ASSTS. FOR A. Y. 2000-01 TO A.Y. 2006-07. WHILE MAKING THE ASSTS., THE TEAMED A.O. H AS RELIED UPON THE STATEMENTS OF A FEW PERSONS. IN RESPECT OF A.Y. 200 5-06, THE LEARNED A.O. HAS MADE AN ADDITION OF RS.50,85,000/- ON THE GROUND THAT THE ASSESSEE HAD RECEIVED THE SAID AMOUNT FROM SHRI R. S. YADAV. FOR GIVING ADMISSIONS TO CERTAIN STUDENTS. FROM PARA. 6 2-66 OF THE ORDER FOR A.Y. 2005-06, THE LEARNED A.O. HAS. REFERRED TO THE FACTS AND HAS ALSO RELIED UPON THE EVIDENCE FOUND WITH SHRI R. S. YADAV IN THE SEARCH PROCEEDINGS CONDUCTED ON HIM. THE LEARNED A. O. HAS ALSO RELIED UPON THE ORDER OF LEARNED CIT CANCELLING THE REGISTRATION U/S 12A. THE ASSESSEE HAD REQUESTED THE LEARNED CIT IN THE CONTEXT OF CANCELLATION OF REGISTRATION U/S 12A AND ALSO THE L EARNED A.O. DURING THE ASST. PROCEEDINGS FOR AN OPPORTUNITY TO CROSS E XAMINE SHRI R. S. YADAV. THE LEARNED CIT IN HIS ORDER CANCELLING THE REGISTRATION HAS STATED THAT NO USEFUL PURPOSE WOULD BE SERVED BY AL LOWING CROSS EXAMINATION OF SHRI R. S YADAV TO THE ASSESSEE. THE RELEVANT PARS HAS BEEN REPRODUCED BY THE LEARNED A.O. ON PAGE 29 & 30 OF THE ASST. ORDER FOR A.Y. 2005-06. THE A.O. FOLLOWING THE ORDE R OF CIT (C) DID NOT GRANT ANY OPPORTUNITY TO CROSS EXAMINE SHRI R. S. YADAV AND MADE AN ADDITION OF RS.50,85, 000/-. 6 2] SECONDLY, FOR A.Y. 2001-02 TO A.Y. 2006-07, THE LEARNED A.O. HAS DISALLOWED THE EXPENSES INCURRED ON THE GUEST HOUSE OF THE ASSESSEE SOCIETY AT GULMOHAR HSG. SOC., PUNE. THE LEARNED A. O. HAS STATED THAT THE EXPENDITURE RESULTED IN BENEFIT TO THE TRUSTEES . WHILE MAKING THE DISALLOWANCE, THE LEARNED A.O. RECORDED THE STATEME NT OF SHRI. SADASHIV BAPU PATIL, CARETAKER OF THE GUEST HOUSE. SHE HAS REPRODUCED THE RELEVANT PORTION OF HIS STATEMENT ON PAGE 14 OF THE ORDER FOR A.Y. 2001-02. THUS, THE LEARNED A.O. HAS RELIED UPON THE STATEMENT OF SHRI S. B. PATIL WHILE MAKING THE DISA LLOWANCE. THEY ASSESSEE SUBMITS THAT THE LEARNED A.O. DID NOT EVEN GIVE THE COPY OF THE STATEMENT OF SHRI S. B. PATIL TO THE ASSESSEE. IT IS SUBMITTED THAT THIS DISALLOWANCE HAS BEEN MADE WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE SOCIETY TO CROSS EXAMINE SHRI S. B. PA TIL. 3] IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE A.O. HAS RELIED UPON THE STATEMENTS OF THIRD PARTIES AND ALSO THE EVIDENCE F OUND WITH THEM WHILE MAKING THE ADDITION. HOWEVER, SHE DID NOT GIV E ANY OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI YADAV OR SHRI PATIL BEFORE MAKING THE ADDITION. IT IS SUBMITTED THAT THIS ACTI ON ON THE PART OF THE LEARNED A.O. IN NOT GRANTING CROSS EXAMINATION IS N OT JUSTIFIED. SUPREME COURT IN THE CASE OF KISHINCHAND CHELLARAM [125 ITR 713] HAS HELD THAT IF ANY STATEMENT OF A THIRD PARTY IS TO BE USED AGAINST THE ASSESSES, AN OPPORTUNITY SHOULD BE GIVEN TO THE ASS ESSEE TO CROSS EXAMINE THE THIRD PARTY BEFORE ANY INFERENCE CAN BE DRAWN FROM THE STATEMENT. ON PAGE 720, HONBLE SUPREME COURT HAS H ELD THAT IT IS TRUE THAT THE PROCEEDINGS UNDER THE INCOME TAX LAW ARE NOT GOVERNED BY STRICT RULES OF EVIDENCE AND THEREFORE, IT MAY B E SAID THAT EVEN WITHOUT CALLING THE MANAGER OF THE BANK TO PROVE TH IS LETTER, IT COULD BE TAKEN INTO ACCOUNT AS EVIDENCE. BUT BEFORE THE I .T. AUTHORITIES COULD RELY UPON IT, THEY WERE BOUND TO PRODUCE IT B EFORE THE ASSESSEE SO THAT THE ASSESSEE COULD CONTROVERT THE STATEMENT S CONTAINED IN IT BY ASKING FOR AN OPPORTUNITY TO CROSS EXAMINE THE MANA GER OF THE BANK WITH REFERENCE TO THE STATEMENTS MADE BY HIM. 4] SIMILARLY, IN THE CASE OF CIT V. EASTERN COMMERC IAL ENTERPRISES [210 IT R 103 (CAL) ], HONBLE H.C. HELD THAT THE A SSESSEE MUST BE GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE WITNESS. IN THIS CASE, THE LEARNED A.O. HAD RELIED UPON A STATEMENT OF SHRI RA M SEVAK SUKLA WHILE MAKING THE ADDITION. H.C. HELD THAT THE LEARN ED A.O. OUGHT TO HAVE GIVEN AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI SUKLA BEFORE MAKING AN ADDITION. FURTHER, SUPREME COURT I N THE CASE OF C. VASANTLAL & CO. [45 IT R 206] HAS HELD THAT THE LEA RNED A.O. CAN COLLECT MATERIAL TO FACILITATE THE ASST. HOWEVER, I F HE DESIRES TO USE THE MATERIAL SO COLLECTED, THE ASSESSEE MUST BE INFORME D OF THE MATERIAL COLLECTED AND SHOULD BE GIVEN AN OPPORTUNITY OF EXP LAINING IT. SIMILAR VIEW HAS BEEN TAKEN IN THE FOLLOWING DECISIONS 7 A. BANAL STRIPS P LTD. [99 IT D I 77 (DEL) ] B. ASST. CIT V/S. MAHESH T PATODIA [79 ITD 40 (PUNE )] 5] IN VIEW OF ABOVE DECISIONS THAT THE LEARNED A.O. WAS DUTY BOUND TO GIVE AN OPPORTUNITY TO THE ASSESSEE BEFORE RELYING ON THE STATEMENTS OF SHRI YADAV AND SHRI S. B. PATIL. THE CONTENTION OF THE A.O. AND THE CIT (C) THAT NO USEFUL PURPOSE WOULD BE SERVED BY G RANTING AN OPPORTUNITY TO CROSS EXAMINATION IS WITHOUT ANY MER IT AND AGAINST THE PRINCIPLES LAID DOWN BY THE SUPREME COURT AND HIGH COURTS. 22.9 THE ABOVE NOTE WAS SENT TO THE AO FOR HIS COMM ENTS. HE WAS ALSO REQUESTED BY THE THEN CIT(A) TO CONSIDER THE REQUES T OF THE APPELLANT, FURNISH THE DOCUMENT AND ALLOW THE APPELLANT TO CROSS-EXAMI NE THE PERSON. THE AO WAS ALSO REQUESTED TO GIVE REASONS IN CASE HE WAS O F THE VIEW THAT REQUEST OF THE APPELLANT CANNOT BE GRANTED TO. RELEVANT PORTIO N OF THE LETTER OF THE THEN CIT(A) IS REPRODUCED BELOW :- THE ABOVE APPEALS ARE BEING HEARD IN THE COURSE OF HEARING OF THE ABOVE APPEALS, THE APPELLANT HAS VEHEMENTLY ARG UED THAT CERTAIN STATEMENT RECORDED OF CERTAIN PERSONS IN THE COURSE OF ASSESSMENT PROCEEDINGS HAVE BEEN USED TO THE DISADVANTAGE OF T HE APPELLANT WITHOUT GIVING AN OPPORTUNITY TO THE APPELLANT TO E XAMINE THE STATEMENT AND EXERCISE ITS RIGHT TO CROSS EXAMINE T HE PERSONS WHO HAVE MADE THE STATEMENTS. THE APPELLANT HAS SUBMITT ED A DETAILED NOTE POINTING OUT SUCH INSTANCES WHERE EVIDENCES RELIED UPON BY THE AO WAS NOT FURNISHED TO THE APPELLANT. THE NOTE IS ENC LOSED AT ANNEXURE-A TO THIS LETTER. 2. YOU ARE REQUESTED TO CONSIDER THE REQUEST OF TH E APPELLANT AND FURNISH THE DOCUMENTS TO THE APPELLANT AND AS WELL AS ALLOW THE APPELLANT TO CROSS EXAMINE THE PERSONS. THE ACTION TAKEN BY YOU MAY KINDLY BE REPORTED TO THIS OFFICE. IN THE EVENT, YO U ARE OF THE VIEW THAT THE REQUEST OF THE APPELLANT CANNOT BE GRANTED, THE REASONS FOR THE SAME MAY KINDLY BE INCLUDED IN THE REPORT. 3. IN THE COURSE OF APPELLATE PROCEEDINGS, THE APP ELLANT HAS SUBMITTED 15 ITEMS OF EVIDENCE WHICH WERE NOT SUBMI TTED BEFORE THE AO AT THE TIME OF ASSESSMENT. THE EVIDENCE IS THERE FORE IN THE NATURE OF ADDITIONAL EVIDENCE. THE LIST OF 15 ITEMS IS AT FLAG AA OF THE VOLUME TITLED 'INDEX'. THE EVIDENCE APPEARS TO BE RELEVANT IN TAKING A DECISION ON THE ISSUES IN APPEAL. IT IS STATED BY THE APPELL ANT THAT THE EVIDENCE COULD NOT BE PRODUCED BEFORE THE AO DUE TO NON AVAI LABILITY OF DOCUMENTS AT THE TIME OF ASSESSMENT DUE TO PAUCITY OF TIME AND OTHER REASONS. THE WRITTEN SUBMISSION AND PAPER BOOK IN 1 0 VOLUMES IS ENCLOSED. THE ADDITIONAL EVIDENCE IS PRESENT IN DIF FERENT VOLUMES. THE SET NUMBER AND THE PAGE NUMBER OF THE DOCUMENTS ARE MENTIONED IN THE LIST AT F LAG AA OF THE ANNEXED VOLUME. 3.1 YOU ARE REQUESTED TO KINDLY EXAMINE THE ADDITI ONAL EVIDENCE SUBMITTED BY THE APPELLANT AND SUBMIT YOUR COMMENTS ON THE ADMISSIBILITY ON THE SAME ALONG WITH REASONS. YOU A RE ALSO REQUESTED TO KINDLY OFFER YOUR COMMENTS ON THE ADDITIONAL EVI DENCE FURNISHED BY THE APPELLANT. 8 4. AT FLAG BB OF THE ANNEXED VOLUME, THERE IS A LIS T OF ITEMS OF EVIDENCE WHICH ACCORDING TO THE APPELLANT WERE WITH THE AO BUT WERE NOT CONSIDERED, THIS EVIDENT FROM THE FACT THAT THE RE IS NO MENTION OF SUCH EVIDENCE IN THE RELEVANT PORTION OF THE ASSESS MENT ORDER. THE APPELLANT HAS REQUESTED THAT THE EVIDENCE WHICH IS WITH THE DEPARTMENT AND WHICH APPEARS NOT TO HAVE BEEN CONSI DERED SHOULD BE CONSIDERED WHILE TAKING A DECISION IN APPEAL. CROSS REFERENCE TO THE DOCUMENTS INCLUDING SET AND PAGE NUMBER OF THE PAPE R BOOK IS GIVEN IN THE LIST AT FLAG BB. 5. YOU ARE REQUESTED TO KINDLY STUDY THE ABOVE EVID ENCE AND OFFER YOUR COMMENTS AS TO WHETHER ANY SUCH EVIDENCE INFLUENCES THE DECISION TAKEN IN THE ASSESSMENT ON THE RELEVANT ISSUE, IN A NY SIGNIFICANT MANNER. AT THE SAME TIME, YOU MAY ALSO CONFIRM WHET HER SUCH EVIDENCE WAS ON RECORD AT THE TIME OF ASSESSMENT. 6. THE PAPER BOOKS FILED BY THE APPELLANT IN I0 VOL UMES ARE ENCLOSED IT IS REQUESTED THAT THE REPORT ON THE ABOVE ISSUES MA Y KINDLY BE SENT EXPEDITIOUSLY. IF THERE IS ANY FURTHER ISSUE YOU WO ULD LIKE TO BRING TO MY NOTICE, THE SAME MAY KINDLY BE INCORPORATED IN Y OUR REPORT. 22.10 THE AO DID NOT GIVE OPPORTUNITY TO THE APPELL ANT TO CROSS-EXAMINE CARETAKER OF THE GUEST HOUSE, ON THE BASIS OF WHOSE STATEMENT, ADDITION IN RESPECT OF DISALLOWANCE OF GUEST HOUSE EXPENSES WAS MADE. HOWEVER, HE GAVE COPY OF THE STATEMENT OF THE CARETAKER TO THE APPEL LANT. IN HIS REPORT, HE STATED THAT THE ISSUE RELATING TO CROSS-EXAMINATION HAS BE EN DEALT WITH NOT ONLY BY THE AO IN HER ASSESSMENT ORDER BUT EVEN BY CIT(CENT RAL), PUNE WHILE DECIDING THE ISSUE IN RESPECT OF REGISTRATION U/S.1 2AA OF L.T. ACT. HE ALSO STATED THAT RIGHT OF CROSS-EXAMINATION IS NOT AN AB SOLUTE RIGHT. THE RELEVANT PORTION OF THE REPORT OF THE AO IS REPRODUCED BELOW :- C) KIND REFERENCE IS INVITED TO PARA I AND 2 OF YOU R OFFICE LETTER DATED 17. 03.2009 WHEREIN IT IS DIRECTED TO CONSIDER THE REQUEST OF THE APPELLANT AND FURNISH THE DOCUMENTS TO THE APPELLAN T AND AS WELL AS ALLOW THE APPELLANT TO CROSS EXAMINE THE PERSONS WH OSE STATEMENT RECORDED AND HAVE BEEN UTILIZED WHILE FINALIZING THE ASSESSMENT. 24. IN THIS REGARD IT IS SUBMITTED THAT STATEMENTS OF TWO PERSONS NAMELY (1) SHRI R.S.YADAV, A BROKER BETWEEN THE ASS ESSEE TRUST AND ASPIRING STUDENTS AND (2) SHRI SADASHIV BAPU PATIL, CARETAKER OF THE GUEST HOUSE ARE UTILIZED WHILE FINALIZING THE ASSES SMENT. A COPY OF STATEMENT OF SHRI R.S.YADAV WAS MADE AVAILABLE TO T HE ASSESSEE. THIS IS EVIDENT FROM THE ASSESSEES OWN SUBMISSION ON ST ATEMENTS OF SHRI YADAV FILED BEFORE THE A.O. VIDE LETTER DATED 11.07 .2008. AT THIS TIME THE ASSESSEE HAS NEVER ASKED FOR CROSS EXAMINATION OF SHRI YADAV. NOW THE ASSESSEE CANNOT ASK FOR SUCH CROSS EXAMINAT ION. THE ETHOS UNDERLYING THE PRINCIPLES OF NATURAL JUSTICE MAKE I T SUFFICIENTLY CLEAR THAT ONCE AN ADEQUATE AND REASONABLE NOTICE IS GIVE N, IT IS FOR THE ASSESSEE TO AVAIL OF THAT OPPORTUNITY; WHEN FOR NO GOOD REASON, OPPORTUNITY IS NOT TAKEN, THE ASSESSEE CANNOT COMPL AIN THAT PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED (VINEET ENTERPRISES V/S STATE OF ANDHRA PRADESH (I996) 101 ST C 426 (AP)). 9 25. SIMILARLY A COPY OF STATEMENT OF SHRI SADASHIV BAPU PATIL, CARETAKER OF THE GUEST HOUSE IS NOW MADE AVAILABLE TO THE ASSESSEE. AS SUCH DIRECTION IN RESPECT OF FURNISHING THE DOCU MENT TO THE ASSESSEE IS COMPLIED. IN RESPECT OF AFFORDING OPPORTUNITY TO CROSS VERIFY THE PERSONS MENTIONED ABOVE IT IS SUBMITTED THAT THIS I SSUE HAS BEEN DEALT WITH NOT ONLY BY THE A.O. IN HER ASSESSMENT ORDER B UT EVEN BY THE COMMISSIONER OF INCOME TAX (CENTRAL) PUNE, WHILE DE CIDING THE ISSUE IN RESPECT OF REGISTRATION U/S. 12 AA OF THE I.T.AC T. IT IS FURTHER SUBMITTED THAT THE RIGHT OF CROSS-EXAMINATION IS NO T AN ABSOLUTE RIGHT. (NATH INTERNATIONAL SALES VS UOI AIR(DEL) 295), THE RIGHT OF HEARING DOES NOT NECESSARILY INCLUDE RIGHT OF CROSS EXAMINA TION (STATE OF J & K VS. BAKSHI GULAM MOHAMMAD AIR I 96 7 SC I22). 26. NOT ONLY THAT, IT IS HUMBLY SUBMITTED THAT CIT( A)'S POWERS ARE COTERMINOUS WITH THAT OF ASSESSING OFFICER. HE HOLD S A GOOD ENOUGH JURISDICTIONS OVER THE ISSUE AND THEREFORE, THE CIT (A) MAY CALL THESE PERSONS AT HIS OFFICE AND MAY AFFORD AN OPPORTUNITY TO THE ASSESSEE SUBJECT TO GRANTING AN OPPORTUNITY TO THE A.O. TO C ROSS VERIFY THE WITNESSES. 22.11 THE ISSUE RELATING TO THE STATEMENT OF SHRI R .S. YADAV HAS BEEN DEALT WITH IN THE APPEAL ORDER OF THE RELEVANT ASSESSMENT YEAR. 22.12 AS FAR AS ISSUE RELATING TO THE STATEMENT OF SHRI SADASHIV PATIL, CARETAKER OF THE GUEST HOUSE IS CONCERNED, A CAREFU L PERUSAL OF THE REMAND REPORT OF THE AO REVEALS THAT HE HAS RELIED MAINLY ON THE DISCUSSION OF THE AO IN THE ASSESSMENT ORDER AND OF THE CIT(CENTRAL) WHI LE DECIDING THE ISSUE IN RESPECT OF REGISTRATION U/S.12AA OF THE I.T. ACT. H OWEVER, HE HAS NOT BROUGHT ON RECORD THE DISCUSSION OF THE AO AND CIT(CENTRAL) WHERE THEY SPECIFICALLY DEALT WITH THE ISSUE RELATING TO CROSS-EXAMINATION OF SHRI SADASHIV BAPU PATIL, CARETAKER OF THE GUEST HOUSE. IN FACT, WHIL E DISCUSSING THE ISSUE RELATING TO DISALLOWANCE OF GUEST HOUSE EXPENSES, T HE AO HAS NOT DISCUSSED THE ISSUE RELATING TO CROSS-EXAMINATION OF CARETAKE R OF THE GUEST HOUSE AT ALL, NOR ANY REFERENCE OF ANY SUCH DISCUSSION OF CIT(CEN TRAL) WAS MADE. UNDER THE CIRCUMSTANCES, THE STATEMENT OF THE A0 THAT THE ISSUE RELATING TO CROSS- EXAMINATION OF SHRI SADASHIV BAPU PATIL, CARETAKER HAS BEEN DISCUSSED BY THE AO IN THE ASSESSMENT ORDER AND BY THE CIT (CENTRAL) WHILE DECIDING THE ISSUE OF REGISTRATION U/S.12AA OF L.T. ACT IS NOT CORRECT . RELIANCE OF THE AO ON THE CASE LAWS OF NATH INTERNATIONAL SALES VS. UOI (AIR (DEL) 295) AND STATE OF J & K VS.BAKSHI GULAM MOHAMMAD (AIR 1967 SC 122) IS, AS DISCUSSED IN PARA 20.11.2 AND 20.11.1, ALSO NOT CORRECT. 22.12.1 RELIANCE OF THE AO ON THE OBSERVATION OF HO N'BLE SUPREME COURT TO THE EFFECT THAT RIGHT OF HEARING DOES NOT NECESSARILY INCLUDE RIGHT OF CROSS-EXAMINATION IN THE CASE OF STATE OF JAMMU & K ASHMIR VS. BAKSHI GHULAM MOHAMMAD, (1967 AIR 122) IS MISPLACED. THE A O MISUNDERSTOOD, MISINTERPRETED AND MISQUOTED THIS OBSERVATION OF TH E HON'BLE SUPREME COURT. THE ABOVE OBSERVATION WAS MADE BY THE SUPREME COURT WITH REFERENCE TO THE RIGHT OF CROSS-EXAMINATION OF THE PERSONS WHO HAD S WORN AFFIDAVIT SUPPORTING ALLEGATION AGAINST PETITIONER UNDER JAMMU & KASHMIR COMMISSION OF INQUIRY ACT. THIS OBSERVATION WAS GIVEN BY HON'BLE COURT IN THE PARTICULAR SET OF FACTS AND CIRCUMSTANCES OF THAT CASE. FACTS AND CIR CUMSTANCES OF THE APPELLANT'S CASE ARE ENTIRELY DIFFERENT. IN FACT, T HE RATIO OF JUDGMENT GIVEN BY THE HON'BLE COURT IN THE CASE OF STATE OF JAMMU & K ASHMIR VS. BAKSHI 10 GHULAM MOHAMMAD, (1967 AIR 122) SUPPORTS CROSS-EXAM INATION OF THE CARETAKER IN THE APPELLANT'S CASE. IN THE CASE OF S TATE OF JAMMU & KASHMIR VS. BAKSHI GHULAM MOHAMMAD, (SUPRA), THE FIRST RESP ONDENT BECAME A MEMBER OF THE COUNCIL OF MINISTERS OF THE STATE OF JAMMU AND KASHMIR IN 1947 AND WAS THE PRIME MINISTER OF THE STATE FROM 1 953 TO JANUARY 1963, WHEN HE RESIGNED. THEREAFTER A NOTIFICATION WAS ISS UED BY THE STATE GOVERNMENT UNDER S.3 OF THE JAMMU AND KASHMIR COMMI SSION OF INQUIRY ACT 1962 SETTING UP A COMMISSION TO INQUIRE INTO THE WE ALTH, ACQUIRED BY THE FIRST RESPONDENT AND CERTAIN SPECIFIED MEMBERS OF HIS FAM ILY DURING HIS PERIOD OF OFFICE, THE COMMISSION WAS ALSO TO INQUIRE WHETHER IN ACQUIRING THIS WEALTH THERE WAS ANY ABUSE OF HIS OFFICIAL POSITION BY THE FIRST RESPONDENT OR THE SAID RELATIVES. THE COMMISSIONER SO APPOINTED HELD CERTA IN SITTINGS BETWEEN FEBRUARY 1965 AND AUGUST 1965 IN WHICH THE FIRST RE SPONDENT TOOK PART. IN SEPTEMBER 1965 HE FILED A WRIT PETITION BEFORE THE HIGH COURT OF JAMMU AND KASHMIR AND THE HIGH COURT, ALLOWING THE SAID PETIT ION, SET ASIDE THE NOTIFICATION INSTITUTING THE INQUIRY AND QUASHED TH E PROCEEDINGS OF THE COMMISSION. THE STATE APPEALED TO THE SUPREME COURT . HON'BLE SUPREME COURT, AMONG OTHER THINGS, EXAMINED THE ISSUE RELAT ING TO CROSS-EXAMINATION OF THE PERSONS WHO GAVE AFFIDAVITS AGAINST FIRST RE SPONDENT. THIS ISSUE WAS EXAMINED WITH REFERENCE TO THE RELEVANT ACT I.E. JA MMU AND KASHMIR COMMISSION OF INQUIRY ACT. AFTER EXAMINATION OF THE ISSUE, HON'BLE COURT WAS OF THE VIEW THAT RIGHT OF CROSS-EXAMINATION MUST DE PEND UPON CIRCUMSTANCES OF EACH CASE AND ALSO ON THE RELEVANT STATUTE. IN J AMMU AND KASHMIR COMMISSION OF INQUIRY ACT, RIGHT TO CROSS-EXAMINATI ON HAS BEEN ASSURED IN RESPECT OF WITNESSES CALLED TO DEPOSE AGAINST THE P ERSON DEMANDING THE RIGHT. HOWEVER, THERE IS NO SUCH PROVISION IN RESPECT OF T HE PERSON WHO GAVE AFFIDAVIT AGAINST THE PERSON DEMANDING SUCH RIGHTS. THEREFORE, THIS JUDGMENT ENSURES, IN UNAMBIGUOUS TERMS, RIGHT OF CROSS-EXAMI NATION AGAINST THE WITNESS WHO HAS DEPOSED AGAINST THE PERSON. THE CAS E OF THE APPELLANT FALLS UNDER THIS CATEGORY. THE AO WHILE MAKING DISALLOWAN CE IN RESPECT OF GUEST HOUSE EXPENSES, RELIED, SUBSTANTIALLY, ON THE STATE MENT OF THE CARETAKER. UNDER THE CIRCUMSTANCES, IN VIEW OF THE RATIO PRONO UNCED BY THE HON'BLE COURT IN THE CASE OF STATE OF JAMMU & KASHMIR VS. B AKSHI GHULAM MOHAMMAD (SUPRA), CROSS-EXAMINATION OF CARETAKER SH OULD HAVE BEEN ALLOWED BY THE AO AS HE RELIED ON HIS STATEMENT AND USED THE SAME AGAINST THE APPELLANT. IT IS NOT THE CASE OF THE AO THAT CA RETAKER FILED AN AFFIDAVIT AGAINST THE APPELLANT. EVEN IN THE CASE WHERE AFFID AVITS ARE FILED, CROSS- EXAMINATION OF THE PERSON GIVING THE AFFIDAVITS MAY BE ALLOWED AFTER CONSIDERING FACTS AND CIRCUMSTANCES OF THE CASE. HO WEVER, IN THIS CASE, HON'BLE SUPREME COURT UPHELD THAT WHEN EVIDENCE IS GIVEN VIVA-VOCE AGAINST THE PERSON, HE (THE PERSON AGAINST WHOM SUCH EVIDEN CE IN THE FORM OF VIVA- VOCE HAS BEEN GIVEN) MUST HAVE THE OPPORTUNITY TO H EAR IT AND TO PUT THE WITNESS QUESTION IN CROSS-EXAMINATION. THE RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED BELOW:- THE NEXT POINT IS AS TO THE RIGHT OF CROSS-EXAMINAT ION. THIS CLAIM WAS FIRST BASED ON THE RULES OF NATURAL JUSTICE. IT WAS SAID THAT THESE RULES REQUIRE THAT BAKSHI GHULAM MOHAMMAD SHOULD HAVE BEEN GIVEN A RIGHT TO CROSS- EXAMINE ALL THOSE PERSONS WHO HAD SWORN AFFIDAVITS SUPPORTING THE ALLEGATIONS AGAINST HIM. WE ARE NOT AWARE OF ANY SU CH RULE OF NATURAL JUSTICE. NO AUTHORITY HAS BEEN CITED IN SUPPORT OF IT. OUR A TTENTION WAS DRAWN TO MEENGLAS TEA ESTATES V. THEIR WORKMEN(L), BUT THERE ALL THAT WAS SAID WAS THAT WHEN EVIDENCE IS GIVEN VIVA VOCE AGAINST A PER SON BE MUST HAVE THE 11 OPPORTUNITY TO HEAR IT AND TO PUT THE WITNESSES QUE STIONS IN CROSS- EXAMINATION. THAT IS NOT OUR CASE. FURTHERMORE, IN MEENGLAS TEA ESTATE CASE(I) THE COURT WAS NOT DEALING WITH A FACT FINDI NG BODY AS WE ARE. RULES OF NATURAL JUSTICE REQUIRE THAT A PARTY AGAINST WHOM A N ALLEGATION IS BEING INQUIRED INTO SHOULD BE GIVEN A HEARING. BAKSHI GHU LAM MOHAMMAD WAS CERTAINLY GIVEN THAT IT WAS SAID THAT THE RIGHT TO THE HEARING INCLUDED A RIGHT TO CROSS-EXAMINE. WE ARE UNABLE TO AGREE THAT IS SO . THE RIGHT MUST DEPEND UPON THE CIRCUMSTANCES OF EACH CASE AND MUST ALSO D EPEND ON THE STATUTE UNDER WHICH THE ALLEGATIONS ARE BEING INQUIRED INTO . THIS COURT HAS HELD IN NAGENDRA NATH BORA V. COMMISSIONER OF HILLS DIVISIO N AND APPEALS, ASSAM(1) THAT 'THE RULES OF NATURAL JUSTICE VARY WI TH THE VARYING CONSTITUTION OF STATUTORY BODIES AND THE RULES PRESCRIBED BY THE ACT UNDER WHICH THEY FUNCTION; AND THE QUESTION WHETHER OR NOT ANY RULES OF NATURAL JUSTICE HAD BEEN CONTRAVENED, SHOULD BE DECIDED NOT UNDER ANY P RECONCEIVED NOTIONS, BUT IN THE LIGHT OF THE STATUTORY RULES AND PROVISIONS. ' WE HAVE TO REMEMBER THAT WE ARE DEALING WITH A STATUTE WHICH PERMITS A COMMI SSION OF INQUIRY TO BE SET UP FOR FACT-FINDING PURPOSES. THE REPORT OF THE COM MISSION HAS NO FORCE PROPORTION VIGOROUS. THIS ASPECT OF THE MATTER IS I MPORTANT IN DECIDING THE RULES OF NATURAL JUSTICE REASONABLY APPLICABLE IN T HE PROCEEDINGS OF THE COMMISSION OF INQUIRY UNDER THE ACT. THEN WE FIND THAT S. 10 TO WHICH WE HAVE EARLIER REFERRED, GIVES A RIGHT TO BE HEARD BU T ONLY A RESTRICTED RIGHT OF CROSS-EXAMINATION. THE LATTER RIGHT IS CONFINED ONL Y TO THE WITNESSES CALLED TO DEPOSE AGAINST THE PERSON DEMANDING THE RIGHT. SO T HE ACT DID NOT CONTEMPLATE A RIGHT OF HEARING TO INCLUDE A RIGHT T O CROSS-EXAMINE. IT WILL BE NATURAL TO THINK THAT THE STATUTE DID NOT INTEND TH AT IN OTHER CASES A PARTY APPEARING BEFORE THE COMMISSION SHOULD HAVE ANY FUR THER RIGHT OF CROSS- EXAMINATION. WE, THEREFORE. THINK THAT NO CASE HAS BEEN MADE OUT BY BAKSHI GHULAM MOHAMMAD THAT THE RULES OF NATURAL JUSTICE R EQUIRE THAT LIE SHOULD HAVE A RIGHT TO CROSS- EXAMINE ALL, THE PERSONS WHO HAD SWORN AFFIDAVITS SUPPORTING THE ALLEGATIONS MADE AGAINST HIM. IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPRE ME COURT IN THE ABOVE MENTIONED CASE TO THE EFFECT THAT WHEN EVIDENCE IS GIVEN VIVA-VOCE AGAINST THE PERSON, HE MUST HAVE THE OPPORTUNITY TO HEAR AND TO CROSS-EXAMINE THE PERSON GIVING SUCH EVIDENCE, THE AO'S CONTENTION THAT CROS S-EXAMINATION OF THE CARETAKER WAS NOT REQUIRED IS NOT CORRECT. 24.12.2 RELIANCE OF THE AO OF THE JUDGMENT OF HON' BLE DELHI HIGH COURT IN THE CASE OF NATH INTERNATIONAL SALES AND A NR. VS. UNION OF INDIA AND ORS.(AIR 1992 DELHI 295) IS ALSO MISPLACED. IN THIS CASE, HON'BLE DELHI HIGH COURT RELIED ON THE DECISION OF SUPREME COURT IN TH E STATE OF JAMMU & KASHMIR VS. BAKSHI GHULAM MOHAMMAD AND CAME TO THE CONCLUSION THAT IN THE FACTS OF THAT CASE, CROSS-EXAMINATION WAS NOT R EQUIRED. HON'BLE DELHI HIGH COURT GAVE THIS DECISION IN THE PARTICULAR SET OF FACTS AND CIRCUMSTANCES IN THAT CASE. IN FACT, FACTS OF THAT PARTICULAR CAS E (NATH INTERNATIONAL SALES AND ANR. VS. UNION OF INDIA AND ORS.) DID NOT REQUI RE OPPORTUNITY OF CROSS- EXAMINATION. THE CASE WAS IN RELATION TO THE BLACK LISTING OF ONE OF THE SUPPLIERS OF DIESEL LOCOMOTIVE WORKS (DLW), INDIAN RAILWAYS, VARANASI NAMELY NATH INTERNATIONAL SALES AND ITS SISTER CONC ERN. BLACK LISTING WAS DONE BECAUSE THE SUPPLIER FURNISHED A TEST CERTIFIC ATE FROM THE MANUFACTURER WHICH WAS BOGUS AS THE MANUFACTURER CONCERN WAS NOT IN EXISTENCE. THE MANUFACTURER CONCERN ALREADY STOOD TAKEN OVER BY SO ME OTHER CONCERN WHO WAS NOT MANUFACTURING THE BRAND OF THE PRODUCT IN R ESPECT OF WHOM THE TEST CERTIFICATE WAS SUBMITTED BY THE SUPPLIER BEFORE TH E INSPECTOR OF DLW. THE 12 MANUFACTURER CONCERN / THE CONCERN WHICH TOOK OVER THE MANUFACTURER CONCERN DENIED HAVING ISSUED SUCH TEST CERTIFICATE. THE AUTHORITIES OF INDIAN RAILWAYS BLACK LISTED THE SUPPLIER AND ITS SISTER C ONCERN ON THE BASIS OF, AMONG OTHERS, PRODUCTION OF THE FAKE CERTIFICATE FR OM THE ALLEGED MANUFACTURER. BEFORE DELHI HIGH COURT, TWO SETS OF REPORT OF THE INSPECTOR OF DLW WERE PRODUCED. ONE SET WAS PRODUCED BY THE PETI TIONER I.E. M/S. NATH INTERNATIONAL SALES. OTHER SET WAS PRODUCED BY THE RESPONDENT I.E. UNION OF INDIA REPRESENTED BY DLW, INDIAN RAILWAYS. THESE TW O SETS OF INSPECTOR'S REPORT WERE NOT EXACTLY IDENTICAL. HON'BLE DELHI HI GH COURT CONSIDERED THESE FACTS AND WAS OF THE VIEW THAT THE PETITIONER I.E. M/S.NATH INTERNATIONAL SALES HAD FULL KNOWLEDGE THAT THE ORIGINAL MANUFACTURER H AD BEEN TAKEN OVER BY OTHER CONCERN AND AT THE RELEVANT TIME, NEITHER VAL VES OF THE REQUIRED MAKE (THE PRODUCT WHICH WAS TO BE SUPPLIED TO DLW) WERE THE MANUFACTURED NOR WERE MARKETTED UNDER THE TRADE NAME WHICH WAS TO BE SUPPLIED TO DLW. ON THE BASIS OF THESE VITAL PIECES OF EVIDENCE, NAMELY , DENIAL OF THE MANUFACTURER CONCERN / CONCERN WHICH TOOK OVER THE MANUFACTURER CONCERN AND TWO SETS OF INSPECTOR'S REPORT CONTAINING, AMONG OTHERS, TEST C ERTIFICATE OF THE MANUFACTURER, HON'BLE COURT STRONGLY SUSPECTED THE MOTIVE OF THE PETITIONER AND REJECTED ITS CONTENTIONS. ADVOCATE OF THE PETIT IONER DEMANDED OPPORTUNITY TO CROSS-EXAMINE THE INSPECTOR TO ELICIT THE TRUTH AS TO WHICH OF THE TWO REPORTS IS GENUINE. ON THIS DEMAND, HON'BLE COURT H ELD THAT THERE IS NO DIFFERENCE IN BOTH THE REPORTS ON THE CRUCIAL POINT OF FILING OF TRW'S WORK TEST CERTIFICATE AND, THEREFORE, IN THE CIRCUMSTANCES OF THIS CASE, CROSS- EXAMINATION IS NOT REQUIRED. RELEVANT PORTION OF TH E JUDGMENT IS REPRODUCED BELOW :- (24) LASTLY, IT IS URGED BY MR.JAITLY THAT THE PRIN CIPLES OF NATURAL JUSTICE DEMAND THAT AN OPPORTUNITY SHOULD BE GIVEN TO THE PETITIONERS TO CROSS-EXAMINE MR.S.A. KHAN, DLW'S INSPECTOR, TO ELICIT THE TRUTH AS TO WHICH OF THE TWO INSPECTION REPORTS IS GENUINE. WE DO NOT FEEL PERSUADED TO DO SO. AS IS OBSERVED BY THE SUPREME C OURT IN STATE OF J&K AND OTHERS VS. BAKSHI GULAM MOHAMMAD & ANR.., A RIGHT OF HEARING DOES NOT INCLUDE A RIGHT TO CROSS-EXAMINE A ND THE RIGHT TO CROSS-EXAMINE MUST DEPEND UPON THE CIRCUMSTANCES OF EACH CASE. AS ALREADY OBSERVED, THERE IS NO DIFFERENCE IN BOTH TH E REPORTS ON THE CRUCIAL POINT OF FILING OF TRW'S WORKS TEST CERTIFI CATE, WHICH IS SUFFICIENT TO SUPPORT RESPONDENTS ACTION. THEREFORE, CROSS-EXAMINATION IN THE ABOVE MENTIONED CASE WAS NOT ALLOWED AS IT WAS NOT REQUIRED IN THE FACTS AND CIRCUMSTANC ES OF THE CASE BECAUSE THE PETITIONER WAS FOUND TO BE PURSUING ITS CASE ON THE BASIS OF A CERTIFICATE WHICH, AFTER INQUIRY FROM THE RELEVANT PARTY, WAS F OUND TO BE FAKE. UNDER THESE SET OF CIRCUMSTANCES, CROSS-EXAMINATION OF TH E PERSON BEFORE WHOM THE CERTIFICATE WAS PRODUCED, WOULD HAVE NOT SERVED ANY PURPOSE. HOWEVER, IN THIS CASE ALSO, HON'BLE COURT FOLLOWED DECISION OF HON'BLE SUPREME COURT IN THE CASE OF STATE OF JAMMU & KASHMIR VS. BAKSHI GHU LAM MOHAMMAD. THIS CASE HAS BEEN DISCUSSED IN DETAIL IN THE PRECEDING PARAGRAPH. IN FACT, AS STATED IN THE PRECEDING PARAGRAPH, THE RATIO OF THI S JUDGMENT GIVES OPPORTUNITY OF CROSS-EXAMINATION OF THE CARETAKER T O THE APPELLANT. 22.13 IN VIEW OF THE DISCUSSION IN THE PRECEDING PA RAGRAPHS, L AM OF THE CONSIDERED VIEW THAT THE AO WAS NOT RIGHT IN HOLDIN G THAT CROSS-EXAMINATION WAS NOT TO BE GIVEN IN THIS CASE. I AM IN AGREEMENT WITH THE SUBMISSION OF THE APPELLANT THAT IN VIEW OF VARIOUS JUDICIAL RULINGS, THE AO WAS DUTY BOUND TO 13 GIVE OPPORTUNITY OF CROSS- EXAMINATION OF THE CARET AKER TO THE APPELLANT. SUPREME COURT IN THE CASE OF KISHINCHAND CHELLARAM [125 ITR 713] HAS HELD THAT IF ANY STATEMENT OF A THIRD PARTY IS TO BE USE D AGAINST THE ASSESSES, AN OPPORTUNITY SHOULD BE GIVEN TO HIM TO CROSS EXAMINE THE THIRD PARTY BEFORE ANY INFERENCE CAN BE DRAWN FROM THE STATEMENT. ON P AGE 720, HON'BLE SUPREME COURT HAS HELD THAT IT IS TRUE THAT THE PR OCEEDINGS UNDER THE INCOME TAX LAW ARE NOT GOVERNED BY STRICT RULES OF EVIDENCE AND THEREFORE, IT MAY BE SAID THAT EVEN WITHOUT CALLING THE MANAGER O F THE BANK TO PROVE THIS LETTER, IT COULD BE TAKEN INTO ACCOUNT AS EVIDENCE. BUT BEFORE THE I.T. AUTHORITIES COULD RELY UPON IT, THEY WERE BOUND TO PRODUCE IT BEFORE THE APPELLANT SO THAT THE APPELLANT COULD CONTROVERT TH E STATEMENTS CONTAINED IN IT BY ASKING FOR AN OPPORTUNITY TO CROSS EXAMINE THE M ANAGER OF THE BANK WITH REFERENCE TO THE STATEMENTS MADE BY HIM . SIMILARLY , IN THE CASE OF CIT V. EASTERN COMMERCIAL ENTERPRISES [210 ITR 103 (CAL)], HONBLE H.C. HELD THAT THE ASSESSEE MUST BE GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE WITNESS. IN THIS CASE, THE AO HAD RELIED UPON A STATEMENT OF SH RI RAM SEVAK SUKLA WHILE MAKING THE ADDITION. H.C. HELD THAT THE AO OUGHT TO HAVE GIVEN AN OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE SHRI SUKLA BEFORE MAKING AN ADDITION. FURTHER, SUPREME COURT IN THE CASE OF C. VASANTLAL & CO. [45 ITR 206] HAS HELD THAT THE AO CAN COLLECT MATERIAL TO F ACILITATE THE ASST. HOWEVER, IF HE DESIRES TO USE THE MATERIAL SO COLLECTED, THE APPELLANT MUST BE INFORMED OF THE MATERIAL COLLECTED AND SHOULD BE GIVEN AN OP PORTUNITY OF EXPLAINING IT. SIMILAR VIEW HAS BEEN TAKEN IN THE FOLLOWING DECISI ONS A.BANAL STRIPS P LTD. [99 ITD 177 (DEL)] B. ASST. CIT V/S. MAHESH T PATODIA [79 ITD 40 (PUNE )] IN VIEW OF ABOVE DECISIONS, THE A.O. WAS DUTY BOUND TO GIVE AN OPPORTUNITY TO THE APPELLANT BEFORE RELYING ON THE STATEMENT OF SH RI S. B. PATIL. 22.14 IT MAY NOT BE OUT OF PLACE TO MENTION THAT TH E STATEMENT RECORDED UNDER SURVEY, ON ITSELF, HAS NO EVIDENTIARY VALUE. THIS V IEW WAS HELD BY HON'BLE KERALA HIGH COURT IN THE CASE OF PAUL MATHEWS & SON S VS. CIT 263 ITR 101. IN THIS CASE, HON'BLE COURT HELD THAT SEC.133A(3)(M ) ENABLES THE AUTHORITY TO RECORD THE STATEMENT OF ANY PERSON WHICH MAY BE USE FUL FOR, OR RELEVANT TO, ANY PROCEEDING UNDER THE ACT. SEC. 133A HOWEVER, EN ABLES THE IT AUTHORITY ONLY TO RECORD ANY STATEMENT OF ANY PERSON WHICH MA Y BE USEFUL, BUT DOES NOT AUTHORISE FOR TAKING ANY SWORN IN STATEMENT. THE IT ACT, WHENEVER IT THOUGHT FIT AND NECESSARY TO CONFER SUCH POWER TO EXAMINE A PERSON ON OATH, THE SAME HAS BEEN EXPRESSLY PROVIDED WHEREAS S.133A DOES NOT EMPOWER ANY ITO TO EXAMINE ANY PERSON ON OATH. THUS, IN CONTRA DISTINC TION TO THE POWER UNDER S.133A, S.132(4) ENABLES THE AUTHORISED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH E XAMINATION CAN ALSO BE USED IN EVIDENCE UNDER THE IT ACT. ON THE OTHER HAN D, WHATEVER STATEMENT RECORDED UNDER S.133A IS NOT GIVEN ANY EVIDENTIARY VALUE OBVIOUSLY FOR THE REASON THAT THE OFFICER IS NOT AUTHORISED TO ADMINI STER OATH AND TO TAKE ANY SWORN STATEMENT WHICH ALONE HAS THE EVIDENTIARY VAL UE AS CONTEMPLATED UNDER LAW. THE RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED BELOW :- 11. THE PROVISION ALSO ENABLES THE IT AUTHORITY TO IMPOUND AND RETAIN IN HIS CUSTODY FOR SUCH PERIOD AS HE THINKS FIT ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS INSPECTED BY HIM, PROVIDED THE AUTH ORITY RECORDS HIS REASONS FOR DOING SO AND ALSO SHALL NOT RETAIN THE BOOKS OF ACCOUNT FOR A PERIOD NOT EXCEEDING 15 DAYS. SEC. 133A(3)(III) E NABLES THE 14 AUTHORITY TO RECORD THE STATEMENT OF ANY PERSON WHI CH MAY BE USEFUL FOR, OR RELEVANT TO, ANY PROCEEDING UNDER THE ACT. SEC. 133A HOWEVER, ENABLES THE IT AUTHORITY ONLY TO RECORD ANY STATEME NT OF ANY PERSON WHICH MAY BE USEFUL, BUT DOES NOT AUTHORIZE FOR TAK ING ANY SWORN IN STATEMENT. ON THE OTHER HAND, WE FIND THAT SUCH A P OWER TO EXAMINE A PERSON ON OATH IS SPECIFICALLY CONFERRED ON THE AUT HORISED OFFICER ONLY UNDER S. 132(4) OF THE IT ACT IN THE COURSE OF ANY SEARCH OR SEIZURE. THUS, THE IT ACT, WHENEVER IT THOUGHT FIT AND NECES SARY TO CONFER SUCH POWER TO EXAMINE A PERSON ON OATH, THE SAME HAS BEE N EXPRESSLY PROVIDED WHEREAS S. 133A DOES NOT EMPOWER ANY ITO T O EXAMINE ANY PERSON ON OATH. THUS, IN CONTRA-DISTINCTION TO THE POWER UNDER S. 133A, S. 132(4) OF THE IT ACT ENABLES THE AUTHORISE D OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PER SON DURING SUCH EXAMINATION CAN ALSO BE USED IN EVIDENCE UNDER THE IT ACT. ON THE OTHER HAND, WHATEVER STATEMENT RECORDED UNDER S. 13 3A OF THE IT ACT IS NOT GIVEN ANY EVIDENTIARY VALUE OBVIOUSLY FOR TH E REASON THAT THE OFFICER IS NOT AUTHORISED TO ADMINISTER OATH AND TO TAKE ANY SWORN IN STATEMENT WHICH ALONE HAS THE EVIDENTIARY VALUE AS CONTEMPLATED UNDER LAW. THEREFORE, THERE IS MUCH FORCE IN THE AR GUMENT OF THE LEARNED COUNSEL FOR THE APPELLANT THAT THE STATEMEN T, ELICITED DURING THE SURVEY OPERATION HAS NO EVIDENTIARY VALUE AND T HE ITO WAS WELL AWARE OF THIS. IN MAKING DISALLOWANCE OUT OF GUEST HOUSE EXPENSES, THE AO, SUBSTANTIVELY, RELIED ON THE STATEMENT OF THE CARET AKER WHICH, ACCORDING TO ABOVE JUDGMENT, DID NOT HAVE ANY EVIDE NTIARY VALUE. 22.15 IN VIEW OF THE DISCUSSION IN THE PRECEDING P ARAGRAPHS, IT IS OBVIOUS THAT THE AO MADE DISALLOWANCE OF GUEST HOUS E EXPENSES ON THE BASIS OF THE STATEMENT WHICH WAS RECORDED AT IT S BACK AND IN RESPECT OF WHICH NO OPPORTUNITY WAS GIVEN TO THE AP PELLANT FOR CROSS- EXAMINATION. THIS STATEMENT, ON ITS OWN, DID NOT HA VE EVIDENTIARY VALUE. UNDER THE CIRCUMSTANCES, THE AO'S ACTION IN RESPECT OF DISALLOWANCE OF THE GUEST HOUSE EXPENSES CANNOT BE UPHELD. 22.16 DURING THE COURSE OF APPELLATE PROCEEDINGS, T HE APPELLANT HAS SUBMITTED, AMONG OTHER THINGS, AFFIDAVIT OF THE CAR ETAKER OF THE GUEST HOUSE AND AFFIDAVIT OF CERTAIN OTHER PERSONS. THE A FFIDAVIT OF THE CARETAKER IS A CLARIFICATION THAT THE FLAT NOS.G1 A ND G2 WERE BEING USED BY OTHER GUESTS (OTHER THAN SHRI D.Y. PATIL) A LSO. AFFIDAVIT OF SHRI P.D. PATIL WAS ALSO IN THIS RESPECT AS WELL AS TO A DD THAT THIS PARTICULAR PORTION (FLAT NOS.G1 AND G2) WAS USED FO R OFFICIAL PURPOSES ALSO. AFFIDAVITS FROM OTHER PERSONS WERE IN RESPECT OF THEIR STAY IN THE GUEST HOUSE. THESE EVIDENCES WERE SENT TO THE AO FO R THEIR ADMISSIBILITY OR OTHERWISE. THE AO GAVE A GENERAL S TATEMENT QUOTING PROVISIONS OF RULE 46A OF I.T. RULES. THE AO ALSO S TATED THAT THE APPELLANT WAS NEVER RESTRICTED FROM SUBMISSION OF E VIDENCES / DOCUMENTS ETC. ON THE CONTRARY, IT WAS GIVEN SUFFIC IENT OPPORTUNITY DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TO JUS TIFY ITS RETURN OF INCOME BY SUBMITTING NECESSARY DETAIL IN SUPPORT OF ITS CLAIM. HOWEVER, A CAREFUL PERUSAL OF MATERIAL AVAILABLE ON RECORD REVEALS THAT THE AO DID NOT GIVE ANY NOTICE TO THE APPELLAN T OF HIS INTENTION TO DISALLOW GUEST HOUSE EXPENSES, SUBSTANTIVELY, ON TH E BASIS OF THE STATEMENT OF THE CARETAKER, DURING THE COURSE OF AS SESSMENT 15 PROCEEDINGS, AND, THEREFORE, THE APPELLANT DID NOT HAVE ANY OCCASION OR OPPORTUNITY TO FILE ANY EVIDENCE IN SUPPORT OF I TS CLAIM OF GUEST HOUSE EXPENSES. IN FACT, THE APPELLANT WAS NOT IN T HE POSSESSION OF THE STATEMENT ON THE BASIS OF WHICH THE AO WAS TO MAKE THIS ADDITION. UNDER THE CIRCUMSTANCES, I AM SATISFIED THAT THE AP PELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THESE EVIDENCES BEFORE THE A0 DURING THE COURSE OF ASSESSMENT PROCEEDING A ND THEREFORE, ADMIT THEM. THESE AFFIDAVITS WERE SENT TO THE AO FO R HIS COMMENTS ON THEIR IMPACT ON THE ASSESSMENT OF THE APPELLANT. TH E AO HAS NOT GIVEN ANY SPECIFIC COMMENT ON THESE AFFIDAVITS. HE HAS SI MPLY STATED THAT THESE AFFIDAVITS REPRESENT AFTERTHOUGHT. HE HAS ALS O STATED THAT PAYMENT OF SALARY TO THE GUEST HOUSE STAFF DOES NOT RESULT IN VIOLATION OF SECTION 13(1)(C) OF I.T. ACT. HE HAS ALSO RECOMM ENDED A REASONABLE RELIEF ON ACCOUNT OF DISALLOWANCE OF GUEST HOUSE EX PENSES AS HE ACCEPTS THE FACT THAT THE APPELLANT WAS MAINTAINING A GUEST HOUSE. IT IS AN UNDISPUTED FACT THAT DISALLOWANCE OF GUEST HOUSE EXPENSES WAS MADE BECAUSE OF THE FACT THAT AO CAME TO THE CONCLU SION THAT ONE PARTICULAR PORTION OF THE GUEST HOUSE (FLAT NOS.G1 AND G2) WAS USED BY SHRI D.Y. PATIL, TRUSTEE, EXCLUSIVELY. THIS CONC LUSION WAS ARRIVED AT, SUBSTANTIVELY, ON THE BASIS OF THE STATEMENT OF THE CARETAKER OF THE GUEST HOUSE. AS DISCUSSED IN PRECEDING PARAGRAPHS, DISALLOWANCE OF GUEST HOUSE EXPENSES CANNOT BE MADE ON THE BASIS OF STATEMENT OF THE CARETAKER ON WHICH RELIANCE WAS PLACED BY THE AO. U NDER THE CIRCUMSTANCES, THIS DISALLOWANCE OF GUEST HOUSE EXP ENSES WAS NOT JUSTIFIED AND IS, THEREFORE, DIRECTED TO BE DELETED . I FURTHER HOLD THAT NO PERSONAL BENEFIT HAS ACCRUED TO ANY PERSON ON ACCOU NT OF THESE EXPENSES. THEREFORE, THE ABOVE MENTIONED GROUNDS OF APPEAL ARE ALLOWED. 22.17 THE AO IN HIS REMAND REPORT HAS POINTED OUT THAT THE POWERS OF CIT(A) ARE CO-TERMINUS WITH THOSE OF THE AO. THE REFORE, HE SUBMITTED THAT CIT(A) MAY CALL THESE PERSONS (INCLU DING SHRI SADASHIV BAPU PATIL) IN HIS OFFICE AND MAY AFFORD OPPORTUNIT Y TO THE APPELLANT SUBJECT TO GRANTING AN OPPORTUNITY TO THE AO TO CRO SS-VERIFY THE WITNESSES. INTENTION OF THE AO IN MAKING THIS SUBMI SSION IS NOT UNDERSTANDABLE. IT IS NOT THE CIT(A) WHO RECORDED S TATEMENT OF THE CARETAKER AT THE BACK OF THE APPELLANT AND USED THE SAME AGAINST IT. IT WAS THE AO WHO CONDUCTED THE INQUIRY AND RECORDED S TATEMENT OF THE CARETAKER AT THE BACK OF THE APPELLANT AND USED THE SAME AGAINST IT, WITHOUT DISCLOSING DETAILS OF THE MATERIAL GATHERED , WITHOUT CONFRONTING THEM WITH THE APPELLANT , WITHOUT GIVIN G ANY OPPORTUNITY TO THE APPELLANT FOR ITS COMMENTS/REBUTTAL AND WITH OUT GIVING ANY OPPORTUNITY OF CROSS-VERIFICATION/EXAMINATION IN VI OLATION TO THE ESTABLISHED LAW OF THE LAND . IT IS THE AO WHO, EVE N AFTER A SPECIFIC OPPORTUNITY WAS GIVEN TO HIM TO GIVE OPPORTUNITY OF CROSS-EXAMINATION TO THE APPELLANT DURING REMAND PROCEEDINGS, DID NOT GIVE THE SAME TO THE APPELLANT .UNDER THE CIRCUMSTANCES, SUBMISSION OF THE AO TO CIT(A) TO GIVE OPPORTUNITY OF CROSS-EXAMINATION TO THE APPELLANT BY CALLING THE WITNESS WHOSE STATEMENT WAS USED BY HIM WITHOUT GIVING PROPER OPPORTUNITY OF CROSS-EXAMINATION, IN VIOLATI ON TO THE LAW OF LAND, IN HIS OFFICE [IN THE OFFICE OF CIT(A)], AND GRANTING OPPORTUNITY TO THE AO TO CROSS-VERIFY THE WITNESS, BEING ABSURD , UNWARRANTED AND UNCALLED FOR, IS REJECTED. 16 46. CONSIDERING THE TOTALITY OF THE FACTS OF THE CA SE, CONSIDERING THE DETAILED ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE LEARNED DR AGAINST THE ORDER OF THE LEARNED CIT(A) WE FIND NO INFIRMITY IN THE SAME AND ACCORDINGLY UPHOLD THE SAME. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 3.4 RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH OF THE TRIBUNAL AND IN ABSENCE OF ANY CONTRARY MATERIA L BROUGHT TO OUR NOTICE WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THI S ISSUE AND THE GROUND BY THE REVENUE IS DISMISSED. 4. GROUNDS OF APPEAL NO.4 (I) AND (II) BY THE REVEN UE READ AS UNDER ; 4. (I) WHETHER ON THE FACTS & IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING REMUNE RATION PAID TO RELATIVES OF TRUSTEES TO THE TUNE OF RS.50,67,850/- HOLDING T HAT NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT MARKET VALUE OF THE SERVICES/JOBS WAS LESS THAN THE PAYMENTS MADE TO THEM WHEN THE PAYMEN TS WERE SQUARELY COVERED U/S.40A(2)(B). (II) WITHOUT PREJUDICE TO THE ABOVE, LD CIT(A) HAS ERRED IN NOT EXERCISING HIS PLENARY POWERS WHICH ARE CONTERMINOU S WITH THAT OF ASSESSING OFFICER AS PER THE RATIO LAID DOWN BY CIT VS. KANPUR COAL SYNDICATE (1964) 53 ITR 225, 229 (SC). 4.1 AFTER HEARING BOTH THE SIDES WE FIND THE AO D ISALLOWED AN AMOUNT OF RS.50,67,850/- ON THE GROUND THAT THE PAY MENTS MADE TO THE PERSONS SPECIFIED U/S.40A(2)(B) R.W.S.13(1)/13( 3) AND ARE IN VIOLATION OF PROVISIONS OF SECTION 13(1)(C). IN AP PEAL THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING HIS ORDER FOR A.Y. 2006-07. THE RELEVANT OBSERVATION OF THE LD. CIT(A ) AT PARA 9.7 OF THE ORDER READ AS UNDER : 17 9.7 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE APPELLANT. SIMILAR ISSUE HAD COME IN APPEAL FOR TH E EARLIER YEARS INCLUDING THE APPEAL FOR A.Y. 2006-07. THE AO DISALLOWED THE SE EXPENDITURES AND ALSO HELD THAT THE APPELLANT HAD VIOLATED PROVISIONS OF SECTION 13(1)(C). HOWEVER, IN THE APPELLATE PROCEEDINGS FOR THESE YEARS INCLUD ING THE APPEAL ORDER FOR A.Y. 2006-07 (PARA 24 TO 24.16 OF THE APPEAL ORDER) IT WAS FOUND THAT THE STAND OF THE AO WAS NOT CORRECT AND, THEREFORE, EXP ENDITURE ON ACCOUNT OF REMUNERATION TO TRUSTEES AND THEIR RELATIVES WAS IN CURRED FOR THE OBJECTS OF THE TRUST AND NO VIOLATION HAS BEEN COMMITTED U/S.1 3(1)(C). AS THE FACTS FOR A.Y. 2007-08 ARE SUBSTANTIVELY IDENTICAL WITH THE F ACTS OF EARLIER YEARS, DECISION ON THIS ISSUE IN THE APPEAL ORDER OF EARLI ER YEARS INCLUDING A.Y. 2006-07 IS EQUALLY APPLICABLE FOR A.Y. 2007-08. AC CORDINGLY, I HOLD THAT THE ENTIRE EXPENDITURE ON ACCOUNT OF REMUNERATION TO TH E TRUSTEES AND THEIR RELATIVES WAS INCURRED FOR THE OBJECTS OF THE TRUST AND NO VIOLATION HAS BEEN COMMITTED U/S.13(1)(C). THEREFORE, THIS GROUND OF APPEAL IS ALLOWED. 4.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 4.3 AFTER HEARING BOTH SIDES, WE FIND SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE AND THE TRIBUNA L IN ITA NO.1612/PN/2011 FILED BY THE REVENUE VIDE ORDER DT. 14-12-2012 HAS DISMISSED THE GROUND RAISED BY THE REVENUE BY HOLDI NG AS UNDER : 36. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAP ER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US. WE FIND THE AO DISALLOWED THE REMUNERATION PAID TO THE TRUSTEES AMOUNTING TO RS. 38,37,221/- ON THE GROUND THAT SUCH PAYMENT WAS UNREASONABLE CONSIDERI NG THEIR EXPERIENCE AND QUALIFICATION AND THEREFORE THE MONEY HAS NOT BEEN UTILISED FOR THE OBJECTS OF THE TRUST FOR WHICH THE PROVISIONS OF SECTION 13(1) (C) ARE ATTRACTED. WE FIND THE LEARNED CIT(A) VERY EXHAUSTIVELY ANALYSED THE F ACTS AND HELD THAT SUCH DISALLOWANCE MADE BY THE AO WAS UNJUSTIFIED AND UNC ALLED FOR. THE RELEVANT OBSERVATION OF THE LEARNED CIT(A) AT PARA 24.11 TO 24.16 OF THE ORDER READS AS UNDER : 24.11 FROM THE JUSTIFICATION NARRATED IN THE PRECE DING PARAGRAPHS, IT IS OBVIOUS THAT THE APPELLANT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ITSELF, GAVE DETAILED JUSTIFICATION IN RESPECT OF, AMONG OTHER THINGS, REMUNERATION/CONSULTANCY CHARGES PAID TO THE PERSONS SPECIFIED U/S.40A(2)(B) I 13(3) OF I.T. ACT. IN ITS JUSTIFICATION, THE APPELLANT SPECIFICALLY POINTED OUT THE NATURE OF SE RVICES / JOBS RENDERED BY THESE PERSONS AND HAS CONTENDED THAT PA YMENTS MADE TO THEM WERE REASONABLE. UNDER THE CIRCUMSTANCES, THE APPELLANT DISCHARGED ITS ONUS TO PROVE REASONABLENESS OF THE PAYMENTS MADE TO THE PERSONS SPECIFIED U/S.4OA(2)(B)/ 13(3) OF I.T. ACT. THE AO CONTENDED THAT THE PAYMENTS WERE TOTALLY UNREASONAB LE, EXCESSIVE AND FOR THE PERSONAL BENEFIT OF TRUSTEES. AS STATED ABO VE, THE AO DREW THIS 18 INFERENCE AS THE APPELLANT FAILED TO FURNISH MINUTE S BOOKS OF THE MEETING OF BOARD OF DIRECTORS. IN PURSUANCE OF THIS FAILURE ON THE PART OF THE APPELLANT, SHE CONCLUDED THAT PAYMENTS TO TH ESE PERSONS WERE WITHOUT ANY AUTHORIZATION. AS STATED ABOVE, SHE GAV E VERY GENERAL REMARK IN RESPECT OF SMT.BHAGYASHREE PATIL AND SMT. RAJASHREE KAKADE TO THE EFFECT THAT NO DETAILS OF DUTIES PERF ORMED BY THEM WERE AVAILABLE. HOWEVER, A CAREFUL CONSIDERATION OF THE MATERIAL AVAILABLE ON RECORD REVEALS THAT THE AO DID NOT BRING ANYTHIN G ON RECORD TO PROVE THE FACT THAT MARKET VALUE OF THE SERVICES RE NDERED /JOBS DONE BY THESE PERSONS WAS LESS THAN THE PAYMENT MADE TO THE M. AS STATED ABOVE, THE APPELLANT DISCHARGED ITS ONUS IN RESPECT OF PROVING REASONABLENESS OF PAYMENT MADE TO THESE PERSONS. UN DER THE CIRCUMSTANCES, ONUS WAS ON THE AO TO PROVE THE FACT THAT MARKET VALUE OF THESE SERVICES/JOBS WERE LESS THAN THE AMOUNT PA ID TO THESE PERSONS. HOWEVER, NOTHING TO PROVE THE FACT THAT MARKET VALU E OF THE SERVICES RENDERED/JOBS DONE BY THE PERSONS SPECIFIED IN SEC. 4OA(2)(B)/13(3) WAS BROUGHT ON RECORD. UNDER THE CIRCUMSTANCES, THE ACTION OF THE AO IN DISALLOWING THE WHOLE AMOUNT OF REMUNERATION/CON SULTANCY CHARGES PAID TO ALL PERSONS SPECIFIED IN SECTION 40A(2)(B)/ 13(3) OF I.T. ACT WAS NOT AT ALL JUSTIFIED. RELIANCE OF THE AO ON THE REPORT OF THE AUDITOR U/S .142(2A) TO PROVE THE FACT THAT THE PAYMENTS WERE FOR THE PERSONAL BENEFIT OF THE TRUSTEES AS STATED IN PARA 22(IV) IS ALSO NOT CORRECT. IN FACT, THE AUDIT OR GAVE A CATEGORICAL STATEMENT THAT IN THE ABSENCE OF RELEVANT INFORMATI ON EXCESSIVENESS I UNREASONABLENESS OF SUCH EXPENSES CANNOT BE DETERMI NED. THIS STATEMENT OF THE AUDITOR HAS BEEN GIVEN AT SR.NO.9(A) OF STATEME NT OF PARTICULARS WHICH IS REPRODUCED BELOW :- 9. DETAILS OF AMOUNTS NOT DEDUCTIBLE UNDER SECTION 40A A. PARTICULARS OF PAYMENT WHICH APPEAR TO BE EXCESSIVE OR UNREASONABLE IN TERMS OF SECTION 40A (2)(A). REFER ANNEXURE IX (FORMING PART OF ADDITIONAL REPORT) SPECIFYING PAYMENTS MADE TO PERSONS REFERRED U/S.40A (2)(B). IN THE ABSENCE OF RELEVANT INFORMATION EXCESSIVENESS / UNREASONABLENESS OF SUCH EXPENSES CANNOT BE DETERMINED. 24.12 AS FAR AS THE SPECIFIC COMPLIANCE RELATING TO THE NUMBER OF VISITS SMT. BHAGYASHREE PATIL PAID TO THE SCHOOL AND RELATING T HE MAJOR ROLE PLAYED BY SMT. RAJASHREE KAKADE IN THE SETTING UP OF IACST (C -DAC) CENTRE AT KOLHAPUR IS CONCERNED, THERE IS NOTHING ON RECORD T O SHOW THAT SUCH SPECIFIC QUERIES WERE MADE BY THE AO IN THE ASSESSMENT PROCE EDINGS AND THE APPELLANT DID NOT MAKE COMPLIANCE TO THESE SPECIFIC QUERIES. UNDER THE CIRCUMSTANCES, DISALLOWANCE OF THE WHOLE AMOUNT OF REMUNERATION TO THE TRUSTEES AND THEIR RELATIVES ON THE BASIS OF, AMONG OTHER THINGS, NON- FURNISHING OF DETAILS OF THE NUMBER OF VISITS SMT.B HAGYASHREE PATIL MADE TO THE SCHOOL AND THE ROLE PLAYED BY SMT.RAJASHREE KAK ADE IN THE SETTING UP OF IACST (C-DAC) CENTRE AT KOLHAPUR WAS NOT PROPER. 19 24.13 EVEN DURING REMAND PROCEEDINGS, THE AO HAS NO T BROUGHT ON RECORD ANYTHING TO PROVE THE FACT THAT THE MARKET VALUE OF THE SERVICES RENDERED I JOBS DONE BY THESE PERSONS WERE LESS THAN THE PAYME NTS MADE TO THEM. HE HAS NOT GIVEN ANY SPECIFIC COMMENTS IN RESPECT OF THE A UTHORIZATION OF THE PAYMENTS TO THESE PERSONS BY VARIOUS MINUTES OF MEE TINGS OF TRUSTEES. HE HAS POINTED OUT THAT SALARY PAYMENT HAS BEEN MADE TO SM T.RAJASHREE KAKADE AND SMT.SUPRIYA P.C. PATIL SINCE A.Y.2000-01. NO RESOLU TION PASSED BY THE TRUST WAS EITHER FILED AT THE TIME ASSESSMENT PROCEEDINGS OR AT THE TIME OF CURRENT PROCEEDINGS. HE FURTHER OBSERVED THAT JUSTIFICATION OF SALARY PAYMENT SPECIFICALLY TO SMT.RAJASHREE KAKADE AND SMT.SUPRIY A P.C.PATIL WAS NEVER GIVEN TO THE SATISFACTION OF THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. HE FURTHER STATED THAT THE AO WHO MADE THE ASSESSMENT HAD EXPRESSED HER OPINION ONLY ABOUT SMT.BHAGYASHREE PA TIL AND SMT.RAJASHREE KAKADE. ACCORDING TO HIM, THE AO WHO MADE THE ASSES SMENT HAD CATEGORICALLY HELD THAT PAYMENTS MADE TO THESE TWO LADIES WERE DISPROPORTIONATE AND EXCESSIVE AS COMPARED TO THE S ERVICES RENDERED BY THEM. AS STATED ABOVE, THE AO HAS NOT BROUGHT ON RE CORD ANY MATERIAL TO PROVE THAT MARKET VALUE OF THE SERVICES RENDERED/JO BS DONE BY THE PERSONS SPECIFIED IN SEC.40A(2)(B)/13(3) WAS LESS THAN THE PAYMENTS MADE TO THEM. UNDER THE CIRCUMSTANCES, THE STATEMENT OF THE AO IN THE REMAND REPORT TO THE EFFECT THAT THE AO WHO MADE THE ASSESSMENTS HAS CAT EGORICALLY PROVED THAT THE PAYMENTS MADE TO SMT.BHAGYASHREE PATIL AND SMT. KAKADE WERE DISPROPORTIONATE / EXCESSIVE IS NOT CORRECT. THE IS SUE RELATING TO AUTHORIZATION OF PAYMENTS TO THESE PERSONS HAS BEEN DISCUSSED IN THE PRECEDING PARAGRAPHS 24.14 UNDER THE CIRCUMSTANCES, THE AO DURING THE CO URSE OF REMAND PROCEEDINGS DID NOT BRING ANY MATERIAL TO PROVE THE FACT THAT EXCESSIVE / DISPROPORTIONATE PAYMENTS WERE MADE TO THESE PERSON S. IN FACT, HE IS OF THE VIEW THAT THERE IS NO SPECIFIC YARDSTICK TO DETERMI NE WHETHER A PAYMENT IS EXCESSIVE OR NOT. HE IS ALSO OF THE VIEW THAT ARMS LENGTH PAYMENT CAN BE MADE TO THESE PERSONS. HE ALSO POINTED OUT THAT THE AO MADE THE ADDITION SAYING THAT THESE ARE THE PERSONS CLASSIFIED U/S.13 (3). HE HAS FURTHER STATED THAT THERE IS NO BAN IN THE INCOME-TAX ACT ON PAYME NT TO SUCH PERSONS BY A TRUST PROVIDED THE PAYMENT IS REASONABLE AND PROPOR TIONATE TO THE SERVICES RENDERED BY THEM. IN OTHER WORDS, IF THE PAYMENT IS AT ARMS LENGTH THEN THE INCOME-TAX ACT DOES NOT TREAT THIS AS A VIOLATION. THE AO HAS NOT GIVEN ANY CATEGORICAL FINDING AS TO HOW THE PAYMENT MADE TO T HESE PERSONS IS EXCESSIVE AND HOW IT CONSTITUTES VIOLATION U/S 13(L )(C).THE APPELLANT HAS NOW PROVIDED DETAILS OF THE EDUCATIONAL QUALIFICATIONS OF THE PE RSONS AND THE DUTIES AND ROLES PLAYED BY THEM. AT THE OUTSET, IT CANT BE CO MMENTED AS TO WHETHER THE PAYMENT IS EXCESSIVE OR NOT AS THERE IS NO SPECIFIC YARDSTICK TO DETERMINE THE SAME. THE PERSONS SEEM TO POSSESS REASONABLE QUALIF ICATIONS AND EXPERIENCE. HOWEVER, WHETHER THE PAYMENT OF SALARIES IS COMMENS URATE WITH THE QUALIFICATION AND EXPERIENCE IS A SUBJECTIVE MATTER . THE AO HAS NOT OPINED ON THE SAME. THE DECISION ON THE SAME MAY BE TAKEN ON MERITS AS DEEMED FIT. IF HELD AS UNREASONABLE; THIS WILL INDEED CONSTITUTE A VIOLATION U/S 13(1)(C). HOWEVER IT IS OPINED THAT TOTAL DISALLOWANCE OF SAL ARY TO ALL TRUSTEES AND THEIR RELATIVES IS NOT PROPER. ONLY UNREASONABLE SALARY P AID TO OTHER PERSONS WILL HAVE TO BE DISALLOWED. 20 AS DISCUSSED ABOVE, NOTHING HAS BEEN BROUGHT ON REC ORD EITHER DURING ASSESSMENT PROCEEDING OR DURING REMAND PROCEEDING T O PROVE THAT THE PAYMENTS MADE TO THE PERSONS SPECIFIED U/S.4OA(2)(B )/13(3) WERE EXCESSIVE OR DISPROPORTIONATE IN COMPARISON TO THE MARKET VAL UE OF THE SERVICES RENDERED/JOBS DONE BY THESE PERSONS. UNDER THE CIRC UMSTANCES, NO DISALLOWANCE ON ACCOUNT OF EXCESSIVE/DISPROPORTIONA TE/UNREASONABLE PAYMENT TO THESE PERSONS CAN BE MADE. THEREFORE, TH E DISALLOWANCE ON ACCOUNT OF REMUNERATION / CONSULTANCY CHARGES PAID TO TRUSTEES/THEIR RELATIVES IS DIRECTED TO BE DELETED. 24.15 THE AOS CONTENTION THAT PROVISIONS OF SEC.13 (1)(C) APPLY TO THE APPELLANTS CASE IS ALSO NOT CORRECT AND IS AGAINST JUDICIAL RULINGS ON THE SUBJECT. IN VARIOUS JUDICIAL RULINGS, IT HAS BEEN H ELD THAT AO HAS TO COLLECT MATERIAL TO SHOW THAT THE PAYMENT TO THE PERSONS SP ECIFIED IN SEC.13(3) IS UNREASONABLE COMPARED TO THE MARKET RATE FOR THE SE RVICES RENDERED. THIS VIEW HAS BEEN HELD RECENTLY BY HONBLE ITAT LUCKNOW IN THE CASE OF ITO VS. VIRENDRA SINGH MEMORIAL SHIKSHA SAMITI REPORTED IN (2009) 18 DTR 502. THE RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED BELOW:- I 7. IN THIS REGARD, WE REFER TO S. 13 AS UNDER '13. (I) NOTHING CONTAINED IN S. 11 OR S. 12 SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF-................ (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGI OUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THE REOF- (I) IF SUCH TRUST OR INSTITUTION HAS BEEN CREATED O R 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 DU RING THE PREVIOUS YEAR USED OR APPLIED, DIRECTLY OR INDIRECTLY FOR TH E BENEFIT OF ANY PERSON REFERRED TO IN SUB-S. (3) : (2) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROV ISIONS OF CL. (C) AND CL. (D) OF SUB-S. (I), THE INCOME OR THE PROPERTY O F THE TRUST OR INSTITUTION OR ANY PART OF SUCH INCOME OR PROPERTY SHALL, FOR THE PURPOSES OF THAT CLAUSE, BE DEEMED TO HAVE BEEN USE D OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SUB-S. (3), ................. (C) IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWAN CE OR OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON REFERRED TO IN SUB-S. (3 ) OUT OF THE RESOURCES OF THE TRUST OR INSTITUTION FOR SERVI CES RENDERED BY THAT PERSON TO SUCH TRUST OR INSTITUTION AND THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES;.. ............... 21 (G) IF ANY INCOME OR PROPERTY OF THE TRUST OR INSTI TUTION IS DIVERTED DURING THE PREVIOUS YEAR IN FAVOUR OF ANY PERSON RE FERRED TO IN SUB-S. (3):................... (3) THE PERSONS REFERRED TO IN CL. (C) OF SUB-S. (1 ) AND SUB-S. (2) ARE THE FOLLOWING, NAMELY: (A) THE AUTHOR OF THE TRUST OR THE FOUNDER OF THE I NSTITUTION; (B) ANY PERSON WHO HAS MADE A SUBSTANTIAL CONTRIBUT ION TO THE TRUST OR INSTITUTION, THAT IS TO SAY, ANY PERSON WHOSE TOTAL CONTRIBUTION UPTO THE END OF THE RELEVANT PREVIOUS YEAR EXCEEDS FIFTY THO USAND RUPEES; (C) WHERE SUCH AUTHOR, FOUNDER OR PERSON IS AN H UF , A MEMBER OF THE FAMILY/; (CC) ANY TRUSTEE OF THE TRUST OR MANAGER ( BY WHATEVER NAME CALLED) OF THE INSTITUTION; (D) ANY RELATIVE OF ANY SUCH AUTHOR, FOUNDER, PERSO N, (MEMBER, TRUSTEE OR MANAGER) AS AFORESAID; (E) ANY CONCERN IN WHICH ANY OF THE PERSONS REFERRE D TO IN CLS. (A), (B), (C), (CC) AND (D) HAS A SUBSTANTIAL INTEREST.' I8. LET US EXAMINE WHETHER CASE OF THE REVENUE FALL S UNDER CL. (2) OF S. 13(1)(C) OR UNDER S. I3 (2). IT IS NOT DISPUTED THA T THE PERSON REFERRED TO IN SUB-S. (3) IS THE FOUNDER MEMBER OF THE TRUST. THE CONDITION MENTIONED IN S. 13(1)(C) (II) IS THAT INCOME OF THE TRUST SHOULD BE USED OR APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON FALLING IN THE PROHIBITED CATEGORY. BENEFIT HERE WOULD MEAN SOME EX GRATIS EXPENDITURE WITHOUT ANY CONTRIBUTION BY SUCH PERSON TO THE SOCIETY. THE TERM 'BENEFIT E XCLUDE FROM ITS AMBIT A TWO WAY PROCESS. IF THE PERSON IN THE PROHIBITED CATEGO RY RENDERS SERVICES AND IN LIEU THEREOF A BENEFIT IS PROVIDED THEN THE CASE DO ES NOT FALL IN CL. (II) OF S. 13(1)(C). THE EXPENDITURE INCURRED ON THOSE INTERES TED PERSONS WOULD BE A COMPENSATION FOR SUCH SERVICES. A BENEFIT WOULD BE SAID TO HAVE BEEN GIVEN TO THE PERSONS OF PROHIBITED CATEGORY, IF THEY IN RETU RN DO NOTHING BUT ONLY ENJOY THE FRUITS OF THE TRUST/SOCIETY AND TAKE AWAY THE F UNDS/INCOME OF THE SOCIETY FOR THEIR PERSONAL BENEFIT OR DISCHARGING PERSONAL OBLI GATION, BUT WHERE PERSONS OF PROHIBITED CATEGORY RENDER SERVICES TO THE SOCIE TY AND IN TURN, GET SOME REMUNERATION, SALARY AND ALLOWANCES ETC. AS A MEMBE R THEN PROVISIONS OF SUB-S. (2) WOULD BE APPLICABLE AND NOT OF SUB-S. (1 ) AND FOR APPLYING THE PROVISIONS OF SUB-S. (2) OF S. 13, IT HAS TO BE SHO WN BY THE REVENUE THAT AMOUNT PAID TO THE PERSONS OF PROHIBITED CATEGORY W AS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. IN OTHER WORD S, THE AO HAS TO COLLECT MATERIAL TO SHOW THAT PAYMENT TO THE PERSONS OF PRO HIBITED CATEGORY WAS UNREASONABLE AS COMPARED TO THE MARKET RATES FOR TH E SERVICES RENDERED. IN THE PRESENT CASE, THERE IS NO MATERIAL ON RECORD FI RSTLY TO SHOW THAT ALLEGED INFLATED EXPENDITURE HAS GONE TO THE PERSONS OF PRO HIBITED CATEGORY, THEREFORE, THE CASE OF THE REVENUE MADE OUT ON THE BASIS OF S. 13(1) CANNOT BE UPHELD. THE QUESTION OF INVOKING S. 13(2) IN THE PR ESENT CASE ALSO DOES NOT ARISE BECAUSE S. 13(2) COULD BE INVOKED ONLY WHEN T HERE IS A CLAIM OF EXPENSES IN THE FORM OF SALARY/ALLOWANCES OR PERQUI SITES TO THE PERSONS OF PROHIBITED CATEGORY FOR SOME SERVICES RENDERED. THE AO HAS NOT MADE OUT A 22 CASE ON THESE PREMISES. THUS, NEITHER S. 13(1) NOR S. 13(2) IS APPLICABLE ON THE FACTS OF THE PRESENT CASE. 24.16 THE AO IN HER ORDER HAS STATED THAT THE PAYME NTS TO THESE PERSONS WERE NOT AUTHORIZED BY THE MINUTES OF THE MEETING OF BOA RD OF DIRECTORS. AS DISCUSSED IN THE PRECEDING PARAGRAPHS, THE AO WAS P REVENTED BY SUFFICIENT CAUSE FROM PRODUCTION OF MINUTES OF MEETING OF TRUS TEES IN WHICH PAYMENTS TO VARIOUS PERSONS WERE AUTHORIZED. IN THE CASES WHERE PAYMENTS WERE NOT AUTHORIZED BY MINUTES OF THE MEETING OF TRUSTEES, T HEY WERE AUTHORIZED BY THE PERSONS COMPETENT TO AUTHORIZE THEM. IN ANY CASE, T HE ISSUE TO BE EXAMINED HERE IS WHETHER THE MARKET VALUE OF THE SERVICES RE NDERED / JOBS DONE WAS LESS THAN THE PAYMENTS MADE TO THE RESPECTIVE PERSONS. A S DISCUSSED ABOVE, NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT MAR KET VALUE OF THESE SERVICES / JOBS WERE LESS THAN THE PAYMENTS MADE IN RESPECT OF THEM. UNDER THE CIRCUMSTANCES, I AM OF THE CONSIDERED VIEW THAT DISALLOWANCE ON ACCOUNT OF REMUNERATION / CONSULTANCY CHARGES TO TRUSTEES A ND THEIR RELATIVES AMOUNTING TO RS.38,37,221/- CANNOT BE MADE. THEREFO RE, PART OF THESE GROUNDS OF APPEAL RELATING TO THE PAYMENTS TO THE T RUSTEES AND THEIR RELATIVES ON ACCOUNT OF SALARY AND CONSULTANCY CHARGES ARE AL LOWED. 37. THE LEARNED DR COULD NOT CONTROVERT THE FINDIN GS GIVEN BY THE LEARNED CIT(A). FURTHER WE FIND NOWHERE IN THE ASSESSMENT ORDER THE AO HAS BROUGHT ON RECORD HOW MUCH SHOULD HAVE BEEN THE REASONABLE REM UNERATION TO THE TRUSTEES AND THEIR RELATIVES AND WHAT IS THE AMOUNT PAID BY SIMILARLY PLACED ORGANISATIONS TO THEIR EMPLOYEES. THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IN THE PAST ALSO SUCH TYPE OF PAYMENTS WERE MADE AND I T WAS ACCEPTED BY THE DEPARTMENT IN SCRUTINY ASSESSMENTS FOR A.Y. 2000-01 TO 2002-03 (PLACED AT PAPER BOOK PAGE NOS. 293 TO 307) AND NO DISALLOWANCE HAS BEEN MADE COULD NOT BE CONTROVERTED BY THE LEARNED DR. UNDER THESE CIRCUM STANCES AND IN VIEW OF THE EXHAUSTIVE ORDER PASSED BY THE LEARNED CIT(A) GIVIN G REASONS FOR SUCH DELETION AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE FINDINGS GIVEN BY THE CIT(A), WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE LEARNED CIT(A) DELETING THE DISALLOWANCE MADE BY THE AO U/S .40(A)(2)(B) OF THE I.T. ACT. SINCE THE DISALLOWANCE HAS BEEN DELETED BY US , THEREFORE, WE HOLD THAT THERE IS NO VIOLATION OF PROVISIONS OF SECTION 13(1)(C) O F THE I.T. ACT. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 4.4 RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND THE GROUNDS BY THE REVENUE ARE DISMI SSED. 5. GROUNDS OF APPEAL NO.5(I) AND (II) BY THE REVENU E READ AS UNDER : 5. (I) WHETHER ON THE FACTS & IN THE CIRCUMSTAN CES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN A LLOWING ENTIRE EXPENDITURE OF RS.2,15,692/- CLAIMED BY THE ASSESSE E ON ACCOUNT OF 23 TELEPHONE AND MOBILE EXPENSES PAID TO THE TRUSTEES AT THE RESIDENCE OF THE TRUSTEES WITHOUT CONSIDERING THE PERSONAL USE O F TELEPHONES AND MOBILES AND WITHOUT APPRECIATING THAT NO EVIDENCE W AS PRODUCED BEFORE THE AO AND WERE COVERED U/S.40A(2)(B). (II) WITHOUT PREJUDICE TO THE ABOVE, LD. CIT(A) HA S ERRED IN NOT EXERCISING HIS PLENARY POWERS WHICH ARE CONTERMINOU S WITH THAT OF AO AS PER THE RATIO LAID DOWN BY CIT VS. KANPUR COA L SYNDICATE (1964) 53 ITR 225, 229 (SC). 5.1 AFTER HEARING BOTH THE SIDES WE FIND THE ASSES SING OFFICER DISALLOWED AN AMOUNT OF RS.2,15,692/- CLAIMED BY TH E ASSESSEE ON ACCOUNT OF TELEPHONE AND MOBILE EXPENSES PAID TO TH E TRUSTEES ON THE GROUND THAT NO EVIDENCE WAS PRODUCED BEFORE HIM TO SUBSTANTIATE THAT THE SAME WAS NOT FOR THE PURPOSE OF THE TRUSTEES AND TH AT THERE IS AN ELEMENT OF PERSONAL USE OF TELEPHONES AND MOBILES BY THE TR USTEES. THEREFORE, THERE IS VIOLATION OF PROVISIONS OF SECTION 13(1)(C ) OF THE I.T. ACT. 5.2 IN APPEAL THE LD. CIT(A) DELETED THE ADDITION B Y HOLDING AS UNDER: 11.7 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. AS REGARDS, MOBILE PHONE EXPENDITUR E, SIMILAR EXPENDITURE WAS INCURRED IN THE EARLIER YEARS AND THE AO HAS DI SALLOWED THE SAME. THIS ISSUE HAS BEEN DISCUSSED IN DETAIL IN THE APPEAL OR DER OF EARLIER YEAR INCLUDING THE APPEAL FOR A.Y. 2006-07 WHEREIN IT HA S BEEN HELD THAT THIS EXPENDITURE WAS INCURRED FOR THE OBJECTS OF THE TRU ST AND NO VIOLATION OF SECTION 13(1)(C) WAS COMMITTED BY THE APPELLANT. T HE DECISION WAS GIVEN, AMONG OTHER THINGS, ON THE GROUND THAT NO SPECIFIC INSTANCE OF USE OF THESE EXPENSES FOR PERSONAL PURPOSE WAS BROUGHT ON RECORD . FACTS OF THIS YEAR ARE SUBSTANTIVELY IDENTICAL WITH THAT OF EARLIER YEARS INCLUDING A.Y. 2006-07. THEREFORE, THE DECISION IN THE APPEAL ORDER FOR EAR LIER YEARS IS EQUALLY APPLICABLE FOR THIS YEAR AS NO SPECIFIC INSTANCE OF THESE EXPENSES INCURRED FOR PERSONAL PURPOSES OF THE PERSON MENTIONED IN SECTIO N 13(3) OF I.T. ACT HAS BEEN BROUGHT ON RECORD. ACCORDINGLY, I HOLD THAT T HE MOBILE PHONE EXPENDITURE OF RS.2,15,692/- IS ALLOWABLE AS A DEDU CTION AND FURTHER, NO VIOLATION HAS BEEN COMMITTED BY THE APPELLANT U/S.1 3(1)(C). 5.2.1 WE FIND SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE AND THE TRIBUNAL DISMISSED THE GROUND RAISED BY THE REVENUE IN ITA NO.1612/PN/2011 ORDER DATED 14-12-20 12 FOR A.Y. 2006-07 BY HOLDING AS UNDER : 24 39. AFTER HEARING BOTH SIDES WE FIND THE AO HAS DIS CUSSED THIS ISSUE AT PARA NOS. 21 TO 24 OF THE ASSESSMENT ORDER. ACCOR DING TO THE AO THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION REGARDING THE PAYMENT OF TELEPHONE AND MOBILE EXPENSES OF SOME OF THE TRUSTEES. THE A O ALSO REFERRED TO THE REPORT OF THE SPECIAL AUDITOR WHEREIN IT HAS BEEN M ENTIONED THAT SUCH EXPENDITURE INCURRED IS FOR THE BENEFIT OF THE PERS ONS SPECIFIED U/S.13(1)(3) OF THE I.T. ACT. THE AO THEREFORE DISALLOWED SUCH PAY MENTS BY HOLDING THAT THE ASSESSEE HAD VIOLATED THE PROVISIONS OF SECTION 13( 1)(C) OF THE ACT. IN APPEAL THE LEARNED CIT(A) DELETED THE ADDITION ON THE GROU ND THAT THE ASSESSEE HAD DULY EXPLAINED THE JUSTIFICATION OF THE TELEPHONE A ND MOBILE CHARGES OF THE TRUSTEES INCURRED BY THE TRUST DURING THE ASSESSMEN T PROCEEDINGS ITSELF. HE FURTHER HELD THAT THE AO HAD NOT BROUGHT ANY CONCRE TE EVIDENCE ON RECORD TO PROVE THAT THE SAID EXPENSES RESULTED IN A BENEFIT TO THE CONCERNED PERSONS AND THEREFORE THERE IS NO VIOLATION OF PROVISIONS OF SE CTION 13(1)(C) OF THE I.T. ACT. 40. IT IS THE SUBMISSION OF THE LEARNED DR THAT SIN CE THE ASSESSEE HAD NOT OFFERED ANY EXPLANATION REGARDING SUCH PAYMENTS DUR ING THE ASSESSMENT PROCEEDINGS, THEREFORE, EXPENSES INCURRED FOR THE TRUSTEES IS A VIOLATION OF THE PROVISIONS OF SECTION 3(1)(C) OF THE I.T. ACT. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE TRUSTEES WHOSE TELEPHONE AND MOBILE EXPENSES ARE BORNE BY THE ASSESSEE TRUST ARE THE KE Y PERSONS OF THE TRUST AND BECAUSE OF THEIR WHOLE-HEARTED EFFORTS THE TRUST HA D GROWN REMARKABLY. FURTHER, SIMILAR EXPENSES WERE ALLOWED IN THE PAST AND THERE WAS NO DISALLOWANCE ON THIS ACCOUNT. WE FIND MERIT IN THE ABOVE ARGUMENTS BY THE LEARNED COUNSEL FOR THE ASSESSEE. FROM THE COPY OF THE ASSESSMENT ORDER FOR A.Y. 2000-01 TO 2002-03 PLACED AT PAPER BOOK PAGE N OS. 293 TO 307 WE FIND NO SUCH DISALLOWANCE HAS BEEN MADE BY THE AO IN THE SCRUTINY ASSESSMENTS ON ACCOUNT OF TELEPHONE AND MOBILE EXPENSES INCURRE D BY THE TRUST FOR THE TRUSTEES. WE FIND THAT THE LEARNED CIT(A) WHILE DE LETING THE DISALLOWANCE HAS DISCUSSED THE ISSUE AT PARA 26.4 OF HIS ORDER WHICH READS AS UNDER : 46.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT. THERE IS NO DOUBT THAT THE APPELLANT TRUST HAS INCURRED TELEPHO NE/ MOBILE EXPENSES OF THE TRUSTEES. THE APPELLANT HAS ARGUED THAT THE TRUSTEES ARE WORKING FOR THE TRUST AND IT IS IN THE INTEREST OF THE TRUS T THAT TELEPHONE / MOBILE ARE PROVIDED TO THE TRUSTEES. PAYMENTS IN RESPECT O F TELEPHONE I MOBILE ARE BASICALLY REIMBURSEMENT OF THE EXPENSES INCURRED FOR THE PURPOSES OF THE TRUST. THE AO DISALLOWED THESE EXPE NSES AND CONSIDERED THEM RESULTING INTO PERSONAL BENEFIT TO THE TRUSTEES MAINLY ON ACCOUNT OF THE FACT THAT, ACCORDING TO HIM, THE APPELLANT PURPOSELY KEPT MUM ON THE TELEPHONE CHARGE ON THE PAYMENTS MA DE TO THE TRUSTEES AND THEIR RELATIVES. HOWEVER, A CLOSER LOO K AT THE ASSESSMENT PROCEEDINGS REVEALS THAT THE APPELLANT DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, ITSELF, CLARIFIED THAT, AMO NG OTHERS, PAYMENT ON ACCOUNT OF TELEPHONE EXPENSES WAS NOT FOR THE BE NEFIT OF ANY TRUSTEES BUT WERE REIMBURSEMENT OF EXPENSES. THE RE LEVANT PORTION OF THE SUBMISSION DT.30/06/2008 OF THE APPELLANT, WHIC H WAS RECEIVED IN THE OFFICE OF THE AO DURING ASSESSMENT PROCEEDINGS ON 1/7/2008 IS AS UNDER :- QUERY NO. 6 : . . . . . . THE AUDITORS REPORT POINTS THAT APART FROM REMUNER ATION, ITEMS LIKE TRAVELLING EXPENSES AND TELEPHONE EXPENSES INCURRED ON THE TRUSTEES. IT IS SUBMITTED THAT, BOTH THE PAYMENTS ARE NOT FOR THE B ENEFIT OF ANY TRUSTEE BUT 25 ARE THE REIMBURSEMENT OF EXPENSES, (SOMETIMES DIREC T PAYMENT BY US) INCURRED BY THEM FOR THE PURPOSES OF THE TRUST. THEREFORE, THE STATEMENT OF THE AO THAT THE APPELLA NT PURPOSELY KEPT MUM ON TELEPHONE CHARGES IS NOT CORRECT. THE AO DID NOT BR ING ON RECORD ANYTHING TO CONTROVERT THE STATEMENT OF THE APPELLANT THAT THE PAYMENT ON ACCOUNT OF TELEPHONE EXPENSES WAS, IN FACT, REIMBURSEMENT OF E XPENSES INCURRED FOR THE PURPOSES OF TRUST. THEREFORE, I FIND MERIT IN THE C ONTENTION OF THE APPELLANT THAT THE A.O. HAS SIMPLY DISALLOWED THE EXPENDITURE WITHOUT POINTING OUT ANY SPECIFIC VIOLATION COMMITTED BY THE APPELLANT TRUST . THE APPELLANT HAS ALSO PLACED RELIANCE ON THE DECISION OF ITAT COCHIN IN T HE CASE OF GEORGE EDUCATIONAL, MEDICAL AND CHARITABLE TRUST WHEREIN I T HAS BEEN STATED THAT FOR INVOKING THE PROVISIONS OF SECTION 13(1)(C), ON US IS ON THE DEPARTMENT TO PROVE THAT THE APPELLANT HAS COMMITTED ANY VIOLATIO N. HON'BLE ITAT IN THE CASE OF GEORGE EDUCATIONAL, MEDICAL AND CHARITABLE TRUST (80 ITD 619 [COCH]) HAS HELD THAT IN THE CASE OF A CHARITABLE T RUST, DISALLOWANCE OF EXPENDITURE FOR PERSONAL USE IF MADE, HAS SERIOUS C ONSEQUENCES BY WAY OF ATTRACTING THE PROVISIONS OF SECTION 13(1)(C) OR HI GHER RATE OF TAX U/S.164(2). FOR INVOKING THESE SECTIONS, ONUS IS ON THE DEPARTM ENT TO PROVE PERSONAL ELEMENT IN THE CONTEXT OF USE OF ASSETS OR INCURRIN G OF EXPENDITURE. RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED BELOW :- 18 ........ .. IT MAY BE OBSERVED THAT THE GENUINENESS OF THE EXPE NDITURE IS NOT DOUBTED. IT IS NOT AS THOUGH THE EXPENDITURE IS NOT DOUBTED. IT IS NOT AS THOUGH THE EXPENDITURE IS UNVOUCHED. THE CLAIM OF THE ASSESSEE IS THAT THE GOVERNING COUNCIL MEMBERS, INCLUSIVE OF THE CHAIRMAN, WERE NO RMALLY RESIDING OUTSIDE INDIA. THE WORK OF THE TRUST TOOK THEM TO DIFFERENT PLACES LIKE PALGHAT, TRIVANDRUM, MAVELIKARA, ETC. THERE ARE ALSO SUFFICI ENT WITHDRAWALS FROM THE NRE ACCOUNT OF THE CHAIRMAN TO EXPLAIN HIS PERSONAL VISITS. WE SEE NO REASON FOR THE ABOVE DISALLOWANCES. THE DISALLOWANC ES AGGREGATING TO RS. 44, 048/- IS DELETED IN THIS CONTEXT WE MAY MENTION THAT IN THE COMPUTATION OF BUSINESS INCOME, NORMALLY CERTAIN DISALLOWANCES ARE MADE FOR PROBABLE PERSONAL USE OF ASSETS / EXPENDITURE ON THE GROUND THAT THERE IS NO SUFFICIENT EVIDENCE BY WAY OF LOG BOOK, ETC. HOWEVER, IN THE C ASE OF A CHARITABLE TRUST, SUCH DISALLOWANCES FOR PERSONAL USE IF MADE HAVE SE RIOUS CONSEQUENCES BY WAY OF ATTRACTING THE PROVISIONS OF S.13(1)(C) OR H IGHER RATE OF TAX UNDER S.164(2) OF THE II ACT. FOR INVOKING THESE SECTIONS , WE ARE OF THE VIEW THAT THE ONUS IS ON THE DEPARTMENT TO PROVE PERSONAL USE IN THE CONTEXT OF USE OF ASSETS OR INCURRING OF EXPENDITURE. SUCH ONUS HAS N OT BEEN DISCHARGED IN RESPECT OF THE DISALLOWANCE OF THE TRAVELLING EXPEN SES. 19. SIMILAR IS THE POSITION WITH REGARD TO THE DISA LLOWANCE OF RS.13,4 75/- OUT OF TELEPHONE EXPENSES ............ .. AGAIN IT IS NOT THE CASE OF THE REVENUE THAT THE EX PENDITURE IS NOT VOUCHED. THEY HAVE MADE THE IMPUGNED DISALLOWANCE ONLY ON SU RMISES OR ESTIMATE FOR THE POSSIBLE PERSONAL USE OF TELEPHONE BY THE CHAIR MAN. SIMPLY BECAUSE THE CALLS ARE FREQUENT BETWEEN SINGAPORE AND TRIVANDRUM , IT CANNOT BE ASSUMED THAT THEY ARE NOT RELATABLE TO THE WORK OF THE TRUS T. AS THE ASSESSEE ADMITTEDLY HAS A CENTRE IN TRIVANDRUM AND THE GOVER NING COUNCIL MEMBERS ARE STAYING IN SINGAPORE, IT IS QUITE POSSIBLE THAT THE DIRECTIONS OF THE GOVERNING COUNCIL MEMBERS WERE SOUGHT OR THAT THEY GAVE INSTRUCTIONS TO THEIR OFFICE AT TRIVANDRUM. IN RESPECT OF THE DISAL LOWANCE, OF TELEPHONE 26 EXPENSES AT THE OFFICE, THE CIT (A) REDUCED THE DIS ALLOWANCE, BUT CONFIRMED A PORTION, AGAIN ONLY ON SURMISES. CONSIDERING THE SERIOUS CONSEQUENCES THAT COULD FLOW, LIKE THE DENIAL OF EXEMPTION UNDER S. 11, DISALLOWANCE FOR PERSONAL USER BY TRUSTEES CANNOT BE COUNTENANCED, U NLESS PROVED. THERE IS NO SUCH PROOF IN RESPECT OF THE DISALLOWANCES IN TH E PRESENT CASE. WE ACCORDINGLY DELETE THE DISALLOWANCE OF RS. 13,475 O UT OF TELEPHONE EXPENSES. ACCORDINGLY, IN VIEW OF THE ABOVE DECISION, I HOLD THAT IN THE ABSENCE OF CONCRETE EVIDENCE BROUGHT ON RECORD BY THE A.O. TO INDICATE THAT THE ASSESSEE HAS GIVEN BENEFIT TO THE CONCERNED PERSONS, THERE I S NO VIOLATION OF SECTION 13(1)(C). FURTHER, THE DISALLOWANCE MADE BY THE A.O. IS ALSO DELETED. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED. 41. THE LEARNED DR COULD NOT CONTROVERT THE ABOVE F INDINGS GIVEN BY THE LEARNED CIT(A). IN VIEW OF THE DETAILED DISCUSSION BY THE LEARNED CIT(A) AND CONSIDERING THE FACT THAT NO SUCH DISALLOWANCE WAS MADE IN THE SCRUTINY ASSESSMENTS FOR A.YS. 2000-01 TO 2002-03 AND IN ABS ENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) DELETING THE DISALLOWANCE ON ACCOUNT OF TEL EPHONE AND MOBILE EXPENSES. ACCORDINGLY, THE ORDER OF THE CIT(A) ON THIS ISSUE IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. SINCE THE EXP ENSES ARE ALLOWED AS FOR THE OBJECTS OF THE TRUST, THERE IS NO VIOLATION OF PROV ISIONS OF SECTION 13(1)(C) OF THE I.T. ACT. 5.3 RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BR OUGHT TO OUR NOTICE WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. GROUNDS OF APPEAL NO.6 BY THE REVENUE READS AS U NDER : 6. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT EMPLOYEES CONTRIBUTION WHICH WAS NOT DEPOSITED WITHIN DUE DAT E UNDER THAT ACT IS ALLOWABLE AS EXPENDITURE SUBJECT TO EXEMPTION U/ S.11 IS AVAILABLE TO ASSESSEE WHEN THE SAME WAS RIGHTLY DISALLOWED BY TH E AO. 6.1 AFTER HEARING BOTH THE SIDES WE FIND THE AO DIS ALLOWED AN AMOUNT OF RS.11,35,788/- ON ACCOUNT OF LATE PAYMENT OF EMP LOYEES P.F. IN APPEAL THE LD. CIT(A) HELD THAT SINCE THE ASSESSEE IS ENTITLED TO EXEMPTION U/S.11, THEREFORE SUCH DISALLOWANCE IS NO T WARRANTED. ACCORDING TO HIM, SINCE THE INCOME IS EXEMPT THERE IS NO QUESTION OF 27 MAKING THIS DISALLOWANCE. FURTHER, THE AMOUNT HAS TO BE CONSIDERED FOR COMPUTING THE INCOME OF THE TRUST U/S.11 BECAUSE TH E INCOME IS NOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND THE PROVISION S OF SECTION 28 TO 43 ARE NOT APPLICABLE. HE, HOWEVER, HELD THAT IN C ASE THE EXEMPTION U/S.11 IS SUBSEQUENTLY REJECTED THEN THIS DISALLOWA NCE MADE BY THE AO IS JUSTIFIED. 6.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 6.3 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. IN OUR OPINION, THE ORDER OF THE CIT(A) IS JUSTIFIE D. ONCE THE ASSESSEE IS ENTITLED TO EXEMPTION U/S.11 THEN IN THAT CASE IN O UR OPINION NO SUCH DISALLOWANCE IS WARRANTED. THIS VIEW OF OURS IS IN CONFORMITY WITH THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE I TA NO.1592/PN/2011 & ITA NO.1612/PN/2011 ORDER DATED 14-12-2012 FOR A. Y. 2006-07. GROUND RAISED BY THE REVENUE IS THEREFORE DISMISSED . 7. GROUNDS OF APPEAL NO.7 BY THE REVENUE READS AS U NDER : 7. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN HOLDING DEVEL OPMENT FEE OF RS.6,26,38,496/- AS CAPITAL RECEIPT IGNORING THE FA CT THAT THE SAME WAS TO BE TREATED AS INCOME IN VIEW OF CANCELLATION OF REGISTRATION U/S.12A AND ALSO IN VIEW OF VIOLATION OF SECTION 13(1)(C) W HICH AUTOMATICALLY RENDERED THE INCOME CHARGEABLE TO TAX. 7.1 AFTER HEARING BOTH THE SIDES WE FIND THE ASSESS ING OFFICER TAXED THE DEVELOPMENT FEE OF RS.6,26,38,496/- COLLECTED F ROM THE STUDENTS AS PER CIRCULAR ISSUED BY THE GOVERNMENT. IN APPEAL T HE LD. CIT(A) HELD THAT SINCE THE ASSESSEE IS ENTITLED TO CLAIM EXEMPT ION U/S.11 AS IT HAS BEEN ALLOWED REGISTRATION U/S.12A AND SINCE THERE IS NO INSTANCE OF VIOLATION OF ANY CONDITION LAID DOWN U/S.11 TO SEC.13, THEREFORE , EXEMPTION U/S.11 HAS 28 TO BE ALLOWED. ONCE THE EXEMPTION IS ALLOWED THEN THE ENTIRE DEVELOPMENT FEE COLLECTED HAS TO BE CONSIDERED AS I NCOME OF THE ASSESSEE FOR DETERMINING THE AMOUNT TO BE APPLIED BY THE ASS ESSEE FOR CHARITABLE PURPOSES. HE HELD THAT THE DEVELOPMENT FEE COLLECT ED FROM THE STUDENTS IS NOT TOWARDS THE CORPUS OF THE TRUST AND THEREFOR E THE AMOUNT IS NOT EXEMPTED U/S.11(1)(D). 7.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 7.3 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. WE FIND SIMILAR GROUND HAD BEEN TAKEN BY THE REVENU E IN ITA NO.1612/PN/2012 FOR A.Y. 2006-07. THE TRIBUNAL DIS MISSED THE GROUND RAISED BY THE REVENUE HOLDING THAT SUCH ADDITIONS/D ISALLOWANCE WERE MADE SINCE BENEFIT OF DEDUCTION U/S.11 WAS DENIED T O THE ASSESSEE. HOWEVER, ONCE IT IS HELD THAT THERE IS NO VIOLATION OF PROVISIONS OF SECTION 13(1)(D) AND 13(1)(C) OF THE I.T. ACT ON AN Y OF THE ISSUES AND SINCE THE TRIBUNAL HAS ALREADY RESTORED THE REGISTR ATION U/S.12A OF THE I.T. ACT, THEREFORE, THE ASSESSEE IS ENTITLED TO BE NEFIT U/S.11 OF THE I.T. ACT. THEREFORE, THE GROUND BEING CONSEQUENTIAL IN N ATURE BECOME ACADEMIC AND THEREFORE DOES NOT REQUIRE ANY ADJUDIC ATION. SINCE IN THE INSTANT CASE THE REGISTRATION U/S.12A OF THE I.T. A CT HAS BEEN RESTORED AND SINCE THERE IS NO VIOLATION OF ANY OF THE CONDITION LAID DOWN U/S.11 TO 13 OF THE I.T. ACT, THEREFORE, THE ENTIRE DEVELOPMENT FEE COLLECTED BY THE TRUST HAS TO BE CONSIDERED AS INCOME OF THE ASSESSE E FOR DETERMINING THE AMOUNT TO BE APPLIED BY THE ASSESSEE FOR CHARITABLE PURPOSES. IN THIS 29 VIEW OF THE MATTER WE UPHOLD THE ORDER OF THE LD. C IT(A) AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 25 TH DAY OF JUNE 2013 SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA ) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE DATED: 25 TH JUNE 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A) CENTRAL, PUNE 4 CIT CENTRAL, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE