ITO, CHENNAI V. International Maritime Academy, CHENNAI

ITA 2888/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8956 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 28-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 24-11-2014
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: D ANAND
• Keywords: Capital asset; Depreciation; Charitable institution; Principle of natural justice; Additional evidence; Cost of acquisition
• Section: 12AA; 145

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 2888/MDS/2014 / ASSESSMENT YEAR :20 1 1 - 1 2 THE INCOME TAX OFFICER (EXEMPTIONS) IV , AAYAKAR BHAVAN, ANNEXE BUILDING, III FLOOR, 121, MG ROAD, NUNGAMBAKKAM, CHENNAI 600 0 34. VS. M/S. INTERNATIONAL MARIT IME ACADEMY, NO. 41, GIRI ROAD, T. NAGAR, CHENNAI 600 017. [PAN: AA B C I3658J ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI PATHLAVATH PEERYA, CIT / RESPONDENT BY : SHRI D. ANAND, A DVOCATE / DATE OF HEARING : 28 . 0 3 .201 6 / DATE OF P RONOUNCEMENT : 24 . 0 6 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COM MISSIONER OF INCOME TAX (APPEALS) VII , CHENNAI , DATED 28 . 08 .20 14 RELEVANT TO THE ASSESSMENT YEAR 2011 - 12. THE FIRST GROUND RAISED BY THE REVENUE FOR OUR CONSIDERATION IS WITH REGARD TO THE FINDING THAT THE VIOLATION OF SECTION 13(1)(C) R.WS. 13(2)(G) AND 1 3(3) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] IS NOT PROVED IN THE ASSESSEE S CASE. THE REVENUE ALSO RAISED A GROUND THAT WHILE HOLDING SO, THE LD. CIT(A) ADMITTED ADDITIONAL I.T.A. NO . 2888 /M/ 14 2 EVIDENCE IN VIOLATION OF RULE 46A(1) OF INCOME TAX RULES 1962 AND GIVEN RELIE F TO THE ASSESSEE INSTEAD OF ENHANCING THE ASSESSMENT IN TERMS OF SECTION 251(1)(A) OF THE ACT. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT IF THE ASSESSEE IS DISENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE ACT, THE RECEIPT OF BUILDING FUND OF .4,70,00 ,001/ - IS REQUIRED TO BE TREATED AS INCOME. FURTHER, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF DEPRECIATION WHEN THE ENTIRE COST OF ACQUISITION OF ASSETS WERE TREATED AS APPLICATION OF INCOME FOR THE PURPOSE OF CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT, 1956. IT WAS REGISTERED UNDER SECTION 12AA OF THE INCOME TAX ACT BY THE DIRECTOR OF INCOME TAX (EXEMPTIONS), CHENNAI VIDE HIS ORDER DATED 30.11.2005. THE ASSESSEE IS HAVING FOLLOWING DIRECTORS: 1. SHRI J. SENTHIL KUMAR, 2. MS. S. HEMALATHA, 3. SHRI K. JAYARAMAN, 4. MS. J. CHANDRA 2.1 FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS TAKEN TWO PROPERTIES ON RENTAL BASIS VIZ., ONE FROM S HRI J. SENTHIL KUMAR ON MONTHLY RENT OF .4,80,000/ - IN RESPECT OF THE PROPERTY AT NO. 33, RAMANUJAM STREET, T. NAGAR, CHENNAI FOR A PERIOD OF SEVEN YEARS.; AND ANOTHER PROPERTY OF MS. S. HEMALATHA IN RESPECT OF PROPERTY AT NO. 41, GIRI STREET, T. NAGAR, C HENNAI FOR A PERIOD OF ELEVEN MONTHS. ACCORDING TO THE ASSESSING OFFICER, THE I.T.A. NO . 2888 /M/ 14 3 PROPERTY AT RAMANUJAM STREET IS MEASURING ABOUT 6000 SQ.FT., WHEREIN THE ASSESSEE HAS OFFERED MONTHLY RENT OF .4,80,000/ - , WHICH AMOUNTS TO .80/ - PER SQ.FT. ANOTHER PROPERTY TA KEN ON LEASE FROM MS. HEMALATHA IS MEASURING ABOUT 3000 SQ.FT. AND THE ASSESSEE HAS OFFERED RENT OF .4.00 LAKHS, WHICH AMOUNTS TO .133.33 PER SQ.FT. IN ADDITION TO THIS, THE ASSESSEE HAS ALSO PAID HUGE AMOUNT OF .3,00,00,224/ - . ACCORDING TO THE ASSESSI NG OFFICER, THE RENTAL ADVANCE, AT BEST COULD BE TEN MONTHS OF RENT AND IN THIS CASE, IT IS VERY EXORBITANT. ACCORDING TO HIM THE DIVERSION OF FUNDS FOR THE BENEFIT OF INTERESTED PERSON IN TERMS OF SECTION 13(3) OF THE ACT AND THE TRANSACTIONS ARE COVERED BY SECTION 13 OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER, INVOKED SECTION 13 OF THE ACT AND DISALLOWED THE EXCESSIVE RENTAL ADVANCE PAID BY THE ASSESSEE AND TREATED THE SAME AS INCOME OF THE ASSESSEE INTER ALIA WITH OTHER ADDITIONS. AGAINST THIS, THE A SSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE FILED COPY OF THE FOLLOWING DOCUMENTS : 1. COPY OF LEASE DEED DATED 10.12.2010 EXECUTED BETWEEN MR. J. SENTHIL KUMAR (LESSOR) AND M/S. INTERNATIONAL MARITIME AC ADEMY REGARDING LEASE OF 7.50 ACRES OF LAND. 2. COPY OF RECEIPT DATED 11.02.2011 REGARDING PAYMENT OF .1,12,50,000/ - BY M/S. INTERNATIONAL MARITIME ACADEMY TO MR. J. SENTHIL KUMAR AS SECURITY DEPOSIT. 3. COPY OF LEASE DEED DATED 10.12.2010 EXECUTED BETWEEN MR. J. SENTHIL KUMAR (LESSOR) AND M/S. INTERNATIONAL MARITIME ACADEMY REGARDING LEASE OF 7.03 ACR ES OF LAND. 4. COPY OF RECEIPT DATED 28.01.2011 REGARDING PAYMENT OF .1,05,45,000/ - BY M/S. INTERNATIONAL MARITIME ACADEMY TO MR. J. SENTHIL KUMAR AS SECURITY DEPOSIT. I.T.A. NO . 2888 /M/ 14 4 5. COPY OF LEASE DEED DATED 10.11.2010 EXECUTED BETWEEN MR. J. SENTHIL KUMAR (LESSO R) AND M/S. INTERNATIONAL MARITIME ACADEMY REGARDING LEASE OF 9.31 ACRES OF LAND. 6. COPY OF RECEIPT DATED 11.01.2011 REGARDING PAYMENT OF .1,25,00,000/ - BY M/S. INTERNATIONAL MARITIME ACADEMY TO MR. J. SENTHIL KUMAR AS SECURITY DEPOSIT. 2.2 THE ABOVE DOCUMENTS ALONG WITH WRITTEN SUBMISSIONS OF THE ASSESSEE WERE SENT TO THE ASSESSING OFFICER FOR COMMENTS. THE ASSESSING OFFICER OBJECTED TO THE ADMISSION OF TWO FRESH DOCUMENTS DATED 10.12.2010 EXECUTED BY MR. J. SENTHIL KUMAR (LESSOR) AND THE ASSESSEE (LE SSEE). ACCORDING TO THE ASSESSING OFFICER, IT IS IN CONTRAVENTION OF RULE 46(1) OF THE INCOME TAX RULES. THE ASSESSING OFFICER OBJECTED THAT THESE DOCUMENTS ARE PRODUCED FOR THE FIRST TIME IS CLEARLY AN AFTERTHOUGHT. 2.3 THE ASSESSING OFFICER WAS OF TH E VIEW THAT THE RENT PAID TO LANDLORD TRUSTEES WAS EXCESSIVE COMPARED TO THE PREVAILING MARKET RENT AND REQUESTED THE LD. CIT(A) TO ENHANCE THE INCOME UNDER SECTION 251(1)(A) OF THE ACT. THE ASSESSING OFFICER ALSO SUBMITTED THE WORKING OF EXCESS RENT PAID AND EXCESS RENTAL DEPOSIT PAID, WHICH IS REPRODUCED AS UNDER: S.NO. NAME & ADDRESS OF THE PROPERTY FAIR RATE PER SQ.FT. DURING FY 2010 - 11 FAIR RENT PAYABLE FOR THE YEAR ACTUAL RENT PAID EXCESSIVE RENT PAID FAIR RENTAL DEPOSIT WORKED OUT @ 10 TIMES OF MONTH LY RENT ON THE BASIS OF FAIR RENT EXCESS RENT DEPOSIT MADE 1. J. SENTHIL KUMAR, NO. 33, RAMANUJAM STREET, T. NAGAR, CHENNAI .22/ - FOR 6000 SQ.FT. 1584000 5760000 4176000 1320000 13680000 I.T.A. NO . 2888 /M/ 14 5 2. S. HEMALATHA, NO. 41, GIRI ROAD, T. NAGAR, CHENNAI. . 31/ - FOR 3000 SQ.FT. 1116000 4800000 3640000 930000 14070000 2. 4 DURING THE REMAND PROCEEDINGS, THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT THE DEPOSITS GIVEN ON 01.01.2011 AND 28.01.2011 COVER THE LEASE DEPOSITS FOR GIRI ROAD PROPERTY AND RAMANUJAM S TREET PROPERTY IN ADDITION TO LEASE FOR LAND ON WHICH THE COLLEGE STANDS. FOR THIS PURPOSE, THE ASSESSEE PRODUCED COPY OF THE ASSESSEE COMPANY S BOARD RESOLUTION DATED 05.08.2004 & LEASE DEED DATED 10.11.2010 FOR 9.31 ACRES. ORIGINAL MINUTE BOOKS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER FOR VERIFICATION . WHEN QUESTIONED BY THE ASSESSING OFFICER, THE AR STATED THAT THE ORIGINAL MINUTE BOOK WAS MISPLACED DURING SHIFTING OF OFFICE. THIS PLEA WAS NOT ACCEPTED BY THE ASSESSING OFFICER FOR THE REASON THAT T HE OFFICE WAS SHIFTED TO THE PRESENT PLACE FROM 4A, MOUNT CHAMBERS, 758, MOUNT ROAD, CHENNAI DURING FINANCIAL YEAR 2008 - 09, WHEREAS, THE RESOLUTION COPY WAS SOUGHT FOR THE FINANCIAL YEAR 2010 - 11. HENCE, THE ASSESSING OFFICER WAS OF THE FIRM VIEW THAT THE A SSESSEE S ACTION IS NOT ONLY AN AFTERTHOUGHT BUT DELIBERATE ATTEMPT FOR NOT PRODUCING ORIGINAL MINUTE BOOK. THE ASSESSING OFFICER ARGUED THAT THE FRESH EVIDENCE SUBMITTED BY THE ASSESSEE MAY NOT BE ENTERTAINED FOR THE FOLLOWING REASONS: (A) THE ADVANCE GIV EN TO THE TUNE OF .3 CRORES TO THE TRUSTEES WERE PROVED TO BE ONLY FOR THE BUILDING OF TWO PLACES AT T. NAGAR, CHENNAI AND NOT FOR THE LAND AS PER THE DEED EXECUTED ON 01.01.2011 AND 28.01.2011. EVEN WHEN CALLED FOR THE DETAILS/EVIDENCES FOR THE ABOVE, IT WAS ONLY CONTENDE D THAT THE SAME WAS GIVEN FOR I.T.A. NO . 2888 /M/ 14 6 THE PREMISES TAKEN ON LEASE AND THERE WAS NO MENTION OF ANY LEASE OF LAND IN THOSE TWO AGREEMENTS FILED DURING THE ASSESSMENT PROCEEDINGS. (B) ORIGINAL MINUTES BOOK HAS NOT BEEN SUBMITTED AND STATED TO BE MISPLACED AND NOT T RACEABLE. (C) THE LEASE DEED PURPORTED TO BE EXECUTED ON 10. 12.2010 WAS NOT REGISTERED AND NO VALID EXPLANATION WAS OFFERED BY THE ASSESSEE. (D) THE RENT PAID TO THE TRUSTEES WERE MUCH HIGHER WHEN COMPARED WITH THE RENT PAID IN THE NEARBY PROPERTIES AND SAME PROPERTY IN FY 2013 - 14 WHICH IS ALSO IN VIOLATION OF 13(1)(C) OF I. T. ACT, 1961. (E) DURING THE PERIOD, THE TRUSTEES RECEIVED AN AMOUNT OF RS.4,65,00,224/ - AND RETURNED AN AMOUNT OF RS.1,65,00,000/ - AS PER THE STATEMENT FILED (COPY ENCLOSED AS PER ANNEXURE 'E ). THIS CLEARLY SHOWS THAT AN AMOUNT OF RS.1,65,00,000/ - WAS UTILIZED BY THE TRUSTEE DURING THE YEAR WITHOUT PAYING ANY INTEREST. THIS IS A CLEAR VIOLATION OF SEC. 13(1)(C) OF THE INCOME - TAX ACT, 1961 READ WITH SEC. 13(2)(3) AND 13(3) OF T HE ACT. (F) THE RECEIPT PURPORTED TO BE DATED 11.01.2011 REFERS TO THE LEASE DEED DATED 10.12.2010. WHEN POINTED OUT, IT WAS REPLIED AS A TYPOGRAPHICAL ERROR BY THE ASSESSEE. (G) ASSESSEE FAILED TO PRODUCE OLD DOCUMENTS OF LEASE DEED EXECUTED PRIOR T O THE DATED 10 TH DECEMBER, 2010 FOR 7.03 ACRES AND 7.50 ACRES OF COLLEGE LAND. PRAYER: (I) THE LEARNED CIT(A) MAY BE PLEASED NOT TO ADMIT FRESH/ADDITIONAL EVIDENCE PRODUCED BEFORE HIM. (II) THE LEARNED CIT(A) MAY ENHANCE THE INCOME U/S 251(1)(A) OF TH E ACT ON ACCOUNT OF EXCESSIVE RENT PAID AND EXCESSIVE DEPOSIT MADE TO THE TRUSTEES, AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE. 2.5 THE REPORT OF THE A SSESSING OFFICER DATED 11.07.2014 WAS FORWARDED BY THE JDIT(E), CHENNAI STATING THAT THE ASSESSEE VIOL ATED SECTION 13(1)(C) AND 13(1)(D) OF THE ACT. ON 23.07.2014, THE AUTHORIZED REPRESENTATIVE AND MR. J. SENTHIL KUMAR, MANAGING I.T.A. NO . 2888 /M/ 14 7 DIRECTOR OF THE COMPANY WERE PRESENT. THE ASSESSEE COMPANY FILED AN EXHAUSTIVE REPLY ON THE REPORT OF THE ASSESSING OFFICER. 2. 7 THE AR OF THE ASSESSEE HAS CONTROVERTED THE OBSERVATIONS OF THE REMAND REPORT AS FOLLOWS. (1)THE UNDISPUTED FACTS AS STATED BY THE LEARNED ASSESSING OFFICER ARE A. PROPERTIES BELONGING TO THE DIRECTORS OF THE COMPANY ARE L E T OUT TO THE COMPANY, WHEREIN F EW PROPERTIES ARE USED FOR ADMINISTRATIVE PURPOSES AND FEW PROPERTIES ARE USED TO RUN THE COLLEGE. B. THE PROPERTIES WHICH ARE USED FOR ADMINISTRATIVE PURPOSE FETCH BOTH RENT AND DEPOSIT. C. THE PROPERTIES WHICH ARE USED FOR COLLEGE FETCHED ONLY DEPOSIT. D. THE COLLEGE IS FULLY APPROVED AND IS A RUNNING ONE. E. THE RELEVANT ASSESSMENT YEAR IS NOT THE FIRST YEAR OF OPERATION. F. BOTH RENT AND ADVANCE HAVE BEEN THROUGH PROPER BANKING CHANNEL AND DULY REFLECTED IN THE BOOKS AND RETURN OF INCOME FILED . ..... THE LEARN ED ASSESSING OFFICER HAS AT NO POINT STATED THAT THERE IS NO COLLEGE OR ADMINISTRATIVE OFFICE IN EXISTENCE. THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE THE FACT THAT THE APPELLANT HAD, VIDE ITS LETTER DATED 17 . 3 . 2014, CLEARLY STATED THAT THE PROPERT IES ARE USED FOR BOTH ADMINISTRATIVE OFFICE & COLLEGE. THE RELEVANT LETTER IS ENCLOSED ALONG WITH THIS SUBMISSION FOR YOUR READY REFERENCE. ANNEXURE - 1. HENCE THE QUESTION OF FRESH EVIDENCE DOES NOT ARISE . THE LEARNED ASSESSING OFFICER FOR THE REASONS B EST KNOWN TO HER HAD INTENTIONALLY OMITTED THE FIRST PARAGRAPH OF OUR SUBMISSION WHEREIN IT WAS SUBMITTED BY US THAT IT THE FACT IS THAT THE PAYMENT TO TWO TRUSTEES IS TOWARDS RENT ADVANCE/DEPOSIT TOWARDS THE PROPERTY ACQUIRED TROM THEM TO RUN THE ADMINIST RATIVE OFFICE AND COLLEGE' . THE ADMITTED FACT REMAINS THAT IT IS ON RECORD THAT SUM OF RS. 1,50,00,000/ - HAS BEEN PAID TOWARDS THE PROPERTIES TO RUN BOTH THE ADMINISTRATIVE OFFICE AND THE COLLEGE. THE FACT ALSO REMAINS THAT PROPERTIES AT T.NAGAR (DOOR N O.41, GIRI ROAD AND DOOR NO.33 RAMANUJAM STREET) ARE USED ONLY FOR THE PURPOSE OF ADMINISTRATIVE OFFICE AND NOT FOR RUNNING THE COLLEGE. THE OTHER ADMITTED FACT ALSO REMAINS THAT COLLEGE IS SITUATED AT JAMIN KORATUR, I.T.A. NO . 2888 /M/ 14 8 PUDHUCHATIRAM VILLAGE WHERE OTHER TWO L EASES (7.50 ACRE AND 7.03 ACRES) WERE GIVEN TO THE COLLEGE FOR THE PURPOSE OF RUNNING THE COLLEGE. THOUGH, THIS IS SPECIFICALLY CONTENDED, THE SAME IS NOT ADVERTED TO, BY THE ASSESSING OFFICER WHICH IS INAPPROPRIATE ON THE PART OF THE ASSESSING OFFICER. TH E FACT IS THAT THE ASSESSING OFFICER INTENTIONALLY OMITTING THE LEASE DEED & ADVANCE GIVEN TOWARDS THE COLLEGE. THE ASSESSING OFFICER AGAIN AND AGAIN SCRUTINIZING ONLY TWO LEASE DEEDS WHICH ARE GIVEN FOR THE ADMINISTRATIVE OFFICE PURPOSES & NOT LOOKING INT O THE TWO LEASE DEEDS SUBMITTED FOR THE COLLEGE LAND OF 7.50 ACRES & 7.03 ACRES. THE PURPOSE OF THIS APPEAL IS TO SCRUTINIZE ALL THE LEASE DEEDS SUBMITTED FOR THE ADMINISTRATIVE OFFICE & COLLEGE AS PER THE SUBMISSION MADE BY THE APPELLANT IN THE HON'BLE HI GH COURT. THE COLLEGE HAD STARTED FUNCTIONING FROM THE YEAR 2005 ONWARDS AT JAMIN KORATTUR, PUDHUCHATIRAM VILLAGE. INITIALLY THE COMPANY HAD TAKEN LEASE OF 9.31 ACRES LAND FOR 99 YEARS AND STARTED CONSTRUCTION ACTIVITIES FOR COLLEGE PURPOSES. FACILITIE S PROVIDED IN 9.31 ACRES LEASED LAND: THE ACADEMY BUILDING (1,00,000 SQ. FT - GROUND+3 FLOORS), LIBRARY BUILDING (45,000 SQFT - GROUND+3 FLOORS), TWO HOSTEL BUILDING (2,00,000 SQFT - G+8 FLOORS EACH). FROM THE YEAR 2010 TO 2014 CONSTRUCTION ACTIVITIES WERE GO ING ON IN THE TWO HOSTEL BUILDINGS. IN THE YEAR 2010, ADJOINING LANDS OF 7.50 ACRES & 7.03 ACRES WERE TAKEN FOR LEASE FOR 99 YEARS. FACILITIES PROVIDED IN 7.50 ACRES LEASED LAND: 6 WORKSHOPS OF EACH 2500 SQ. FT, SHIP IN CAMPUS BUILDING OF 10,000 SQ,FT (G +2 FLOORS), SEWAGE TREATMENT PLANT (STP), GUEST HOUSE (3000 SQFT - G+2 FLOORS), CRICKET PLAY GROUND, FOOT BALL GROUND, FIRE FIGHTING DRILL AREA. FACILITIES PROVIDED IN 7.03 ACRES LEASED LAND: CRICKET PLAY AREA, FOOT BALL GROUND, ADDITIONAL PARADE AREA FOR THE STUDENTS AND PLACE FOR CONSTRUCTING THE LABOUR'S SHED FOR THE CONSTRUCTION COMPANY WORKERS. THE CONSTRUCTION WAS GOING ON IN 9.31 ACRES FOR THE CONSTRUCTION OF TWO HOSTEL BUILDING DURING THE PERIOD OF 2010 TO 2014. THE 7.03 ACRES IS PRESENTLY NOT IN T HE LEASE. THE LEASE DEED FOR 7.03 ACRES WAS CANCELLED & THE LEASE DEPOSIT WAS REPAID BY THE DIRECTORS TO THE COMPANY DATED ON JUNE 2012. THIS WAS MENTIONED IN THE COURT AFFIDAVIT. ANNEXURE 2 PARA 3(G) . DURING THE SAME PERIOD, FOR THE CITY ADMINISTRATIVE OFFICE PURPOSES, TWO RENTAL PREMISES AT DOOR NO: 41, GIRI ROAD, T.NAGAR & DOOR NO: 33, RAMANUJAM STREET, T.NAGAR WERE TAKEN FOR LEASE. I.T.A. NO . 2888 /M/ 14 9 THE LEASE DEPOSIT FOR THE ABOVE LEASED PROPERTIES WAS PAID BY THE COMPANY TO THE DIRECTORS (IN THIS CASE THE LAND OWNE R) COMBINED AS AND WHEN THE FUND WAS AVAILABLE. THE LEASE DEEDS WAS ENTERED ON 10 - 11 - 2010, 10 - 12 - 2010, 1 - 1 - 2011 & 23 - 1 - 2011. BUT ON THE DATE OF LEASE, THERE WAS NO SUFFICIENT AMOUNT AVAILABLE WITH THE COMPANY. HENCE, THERE WAS A CLAUSE IN THE LEASE STATING THAT THE LESSEE AGREES TO PAY' . AS AND WHEN THE PAYMENT WAS RECEIVED BY THE DIRECTORS, THE RECEIPT OF SUCH LEASE DEPOSIT WAS ACKNOWLEDGED BY THE DIRECTORS (LAND OWNER) BY WAY OF RECEIPTS, ENDORSED IN THE LEASE DEEDS & COMBINED ACKNOWLEDGEMENT IN THE LEAS E DEEDS. THIS FACT IS EVIDENT FROM THE LEASE DEED VIZ A VIZ THE RECEIPTS. 2.8 THUS, ACCORDING TO THE AR, THE RENT PAID BY THE ASSESSEE TO THE PROPERTY TAKEN ON LEASE FROM THE DIRECTORS IS VERY REASONABLE AND THE ASSESSEE HAS BEEN ENJOYING 9.31 ACRES OF L AND FOR 99 YEARS. HE FURTHER SUBMITTED THAT 1. THE AMOUNTS GIVEN BY THE COMPANY IS ONLY TOWARDS LANDS TAKEN ON LEASE FOR RUNNING THE COLLEGE AND ADMINISTRATIVE OFFICES. 2. THERE HAS BEEN NO APPROPRIATION, OR UNDUE ADVANTAGE TAKEN AGAINST THE FUNDS OF THE APPEL LANT COMPANY. IN FACT, DIRECTORS HAVE ADVANCED INTEREST FREE FUNDS TO THE APPELLANT COMPANY AS AND WHEN THERE WERE FINANCIAL CONSTRAINTS TO THE APPELLANT COMPANY. 3. THESE FACTS THOUGH ALLEGED AS FRESH EVIDENCE AND AFTERTHOUGHT BY THE AO, THE FACT REMAINS T HAT ALL THESE ARE ALREADY AVAILABLE IN THE FINANCIAL STATEMENTS FILED BY THE APPELLANT COMPANY WELL BEFORE THE COMPLETION OF SCRUTINY ASSESSMENT. 3 . THE LD. CIT(A) GAVE A FINDING REGARDING CONSIDERATION OF LEASE DEED PERTAINING TO 7.5 ACRES AND 7.03 ACRE S OF LANDS CLAIMED THOSE ARE NOT FRESH EVIDENCE AND THERE IS A MENTIONING IN ONE LINE STATEMENT IN THE INITIAL SCRUTINY ITSELF BY THE AR VIDE ASSESSEE S LETTER DATED 17.03.2014 AND THE ASSESSING OFFICER HAD ACCEPTED ABOUT THE ONE LINE STATEMENT SUBMISSION IN I.T.A. NO . 2888 /M/ 14 10 HIS REMAND REPORT. THEREFORE, HE WAS OF THE OPINION THAT THE LEASE DEED PERTAINING TO 7.5 ACRES AND 7.03 ACRES OF LANDS ARE NOT FRESH EVIDENCE AS OBJECTED BY THE ASSESSING OFFICER. EVEN OTHERWISE, HE HAS OBSERVED THAT THOSE LEASE DEEDS ARE PERTAINING TO 7.5 ACRES AND 7.03 ACRES OF LANDS WERE GIVEN FOR COMMENTS DURING THE COURSE OF REMAND PROCEEDINGS AND ACCORDINGLY, HE REJECTED THE OBJECTION OF THE ASSESSING OFFICER THAT THOSE FRESH EVIDENCE. 3.1 REGARDING PAYMENT LEASE ADVANCE, THE LD. CIT(A) OBSERVED IN 4.2 AND 4.3 OF HIS ORDER AND REPRODUCED AS UNDER: 4.2 NOW THE SECOND ISSUE BEFORE US IS WHETHER THE ASSESSEE TRUST'S TRANSACTIONS WITH THE DIRECTORS OF THE COMPANY ARE COVERED BY SECTION 13(1)(C) READ WITH SEC.13(3) OF THE I.T. ACT OR NOT? ACCORDING TO THE AO, A SUM OF RS.1,50,00,121/ - WAS GIVEN TO MR. J. SENTHIL KUMAR, MANAGING DIRECTOR AS LEASE ADVANCE AND RS.4,80,000/ - WAS PAID AS RENT PER MONTH TO HIM FOR THE PROPERTY SITUATED AT NO.33 RAMANUJAM STREET, T. NAGAR, CHENNAI. THE RENTAL ADVANCE WORKE D OUT TO 31 MONTHS RENT WHEREAS THE NORMAL PRACTICE IS TO PAY 10 MONTHS RENTAL ADVANCE AND RENT/SQ.FT, WORKED OUT TO RS.80/SQ.FT. WHEREAS, THE FAIR RENT/SQ.FT. IN THAT AREA DURING THE RELEVANT PERIOD WAS RS.22/SQ.FT. AND HENCE THERE WAS EXCESS RENT PAYMENT OF RS.41,76,000/ - TO THE MANAGING DIRECTOR AND EXCESS RENTAL ADVANCE TO HIM WAS RS.1,36,80,000/ - , ACCORDING TO THE ASSESSING OFFICER. HENCE THE AO IN HIS REPORT DATED 11.07.2014 REQUESTED TO ENHANCE THE INCOME ACCORDINGLY IN RESPECT OF PAYMENTS MADE TO MR . J. SENTHIL KUMAR, MANAGING DIRECTOR OF THE ASSESSEE COMPANY. SIMILARLY A SUM OF RS.L,50,00,121/ - WAS GIVEN TO MRS. S. HEMALATHA, DIRECTOR OF THE ASSESSEE COMPANY AS LEASE ADVANCE AND RS.4,00,000/ - WAS PAID AS RENT PER MONTH TO HER FOR THE PROPERTY SITU ATED AT NO.41, GIRI STREET, T. NAGAR, CHENNAI. THE RENTAL ADVANCE WORKED OUT TO 11 MONTHS RENT AND THE RENT/SQ.FT. WORKED OUT TO RS.133/SQ.FT. WHEREAS FAIR I.T.A. NO . 2888 /M/ 14 11 RENT IN THAT AREA DURING THE RELEVANT PERIOD WORKS OUT TO RS.31/SQ.FT. AND HENCE THERE WAS EXCESS RE NT PAYMENT OF RS.36,40,000/ - AND EXCESS RENTAL ADVANCE OF RS.1,40,70,000/ - TO HER ACCORDING TO THE AO. HENCE THE AO IN HIS REPORT DATED 11.07.2014 REQUESTED TO ENHANCE THE INCOME ACCORDINGLY IN RESPECT OF PAYMENT MADE TO MRS. S. HEMALATHA, DIRECTOR OF THE ASSESSEE COMPANY. 4.3. IN RESPONSE TO THE ABOVE FINDINGS OF THE ASSESSING OFFICER, THE ASSESSEE IN ITS REPLY DATED 23.07.2014 STATED AS UNDER: THE FOLLOWING ARE THE RECEIPTS IN RESPECT OF RAMANUJAM STREET PROPERTY AND 7.03 ACRES OF LAND AT PUDUCHATRAM . 1. SBI/092759/14.12.2010 = RS. 75,00,000 2. SBI/092792/04.01.2011 = RS. 75,00,000 RS. 1,50,00,000 OUT OF THE SUM OF RS.1,50,00,000/ - RENTAL DEPOSIT FOR RAMANUJAM ROAD PROPERTY WAS RS.44,55,000/ - AND RS.1,05,45,000/ - WAS FOR PUDUCHATRAM LAND OF 7.03 ACRES. THE FOLLOWING ARE THE RECEIPTS IN RESPECT OF GIRI ROAD PROPERTY AND 7.50 ACRES OF LAND AT PUDUCHATRAM AND 9.31 ACRES OF LAND AT PUDUCHATRAM. 1. ICICI/107786/05.08.2004 = RS. 7,00,000 2. SBI/092791/04.01.2011 = RS. 75,00,000 3. RTGS FROM SBI 11.01.2011 = RS. 2,00,00,000 RS. 2,82,00,000 RENTAL ADVANCE FOR GIRI ROAD PROPERTY WAS RS.37.50,000/ - AND RS. 1,12,50,000/ - WAS INTEREST FREE DEPOSIT FOR 7/.50 ACRES OF LAND AND RS. 1,25,00,000/ - FOR 9.31 ACRES OF LAND. 3.2 ACCORDINGLY, HE OBS ERVED THAT THESE AMOUNTS ARE TO BE APPORTIONED TO VARIOUS PROPERTIES AS FOLLOWS: (1) .37,50,000/ - TOWARDS RENTAL ADVANCE FOR GIRI ROAD PROPERTY. (2) .1,12,50,000/ - TOWARDS INTEREST FREE DEPOSIT FOR 7.5 ACRES OF LAND (3) .1,15 , 00,000/ - TOWARDS INTEREST FREE DEPOSIT FOR 9.31 ACRES OF LAND (4) .44,55,000/ - TOWARDS ADVANCE FOR RAMAJUNAM STREET PROPERTY (5) .1,05,45,000/ - TOWARDS INTEREST FREE DEPOSIT FOR 7.03 ACRES OF LAND. I.T.A. NO . 2888 /M/ 14 12 AS SUCH, ACCORDINGLY, THERE IS NO ACTUAL BENEFIT GIVEN TO ANY OF THE TRUSTEES OF THE ASSESSEE AND THE ASSESSEE RUNNING ITS COLLEGE IN THE LEASE PROPERTY AND ALSO ADMINISTRATIVE OFFICE LOCATED AT THE RENTAL PROPERTY. ACCORDINGLY, THE LD. CIT(A) OBSERVED THAT THERE IS NO APPLICABILITY OF PROVISIONS OF SECTION 13(1)(C) R.W.S. 13(2)(G) AND 13(3) OF THE ACT. 3 .4 HE FINALLY OBSERVED THAT THE COLLEGE LEASE LANDS ARE NOT FRESH EVIDENCES AS THE ASSESSEE HAD MENTIONED THE SAME IN ITS LETTER DATED 17 - 3 - 2014. IN CASE, DUE TO OVERSIGHT OR COMMUNICATION GAP, IF THE LEASE DEEDS WERE NOT TAKEN INTO ACCOUNT DURING THE INI TIAL SCRUTINY, THE SAME ARE ADMITTED AS ADDITIONAL EVIDENCE AND THE DETAILED BREAK UP WERE SOUGHT BY THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS. FURTHER, ADDITIONAL EVIDENCE OF 9.31 ACRES WAS ACCEPTED BY THE AO WHICH HAS UNDER NO DISPUTE BY THE AO . THIS WAS MENTIONED BY THE AO IN PAGE 14 AT PARA 3 OF THE SECOND REMAND REPORT DATED 14.08.2014. THE LEASE DEPOSITS HAD BEEN PAID FOR THE ALL PROPERTIES DURING THE SAME YEAR THROUGH COMBINED PAYMENTS & RECEIPTS ON VARIOUS DATES. THE LEASE DEPOSIT FOR PR OPERTIES IN WHICH COLLEGE IS SITUATED ARE INTEREST FREE AND LEASED IN FOR A PERIOD OF 99 YEARS AND THE NECESSARY INFRASTRUCTURES HAVE BEEN RAISED BY THE LESSEE I.E THE ASSESSEE COMPANY. THEREFORE THE LEASE DEPOSIT PAID TO THESE PROPERTIES IN MY OPINION ARE NOT COVERED UJS 13(2)(G) OF THE ACT. THERE IS NO EXCESSIVE RENTAL DEPOSIT PAID FOR THE GIRI ROAD PROPERTY & RAMAUJAM PROPERTY WHICH ARE BELOW 10 MONTHS RENTAL ADVANCES. THIS WAS CLEARLY EXPLAINED BY THE ASSESSEE IN PAGE 12 ARID 13 OF THIS ORDER AND THE SAME WAS FOUND TO BE CORRECT AS EXPLAINED AT PAGE NO.29 AND 36 OF THIS ORDER BY THE UNDERSIGNED. REGARDING THE RENT PAID TO THE T.NAGAR PROPERTIES ARE CONCERNED, THE REQUIREMENTS OF THE ASSESSEE COMPANY HAVE TO BE TAKEN INTO CONSIDERATION FOR CHOOSING TH E CITY ADMINISTRATIVE OFFICE AS PER THEIR NEEDS & HENCE IT DEPENDS ON FACTS AND CIRCUMSTANCES OF THE CASE AND MARKET FORCES. I.T.A. NO . 2888 /M/ 14 13 IN VIEW OF THE ABOVE DISCUSSION, THE ORDER OF THE ASSESSING OFFICER IS SET - ASIDE. THE AO IS DIRECTED TO ACCEPT THE INCOME RETURNE D AS THE EXEMPTION UJS 11 OF THE ACT IS ALLOWED BECAUSE VIOLATION OF SECTION 13(1)(C) READ WITH SECTION 13(2)(G) AND 13(3) OF THE ACT IS NOT PROVED BY THE ASSESSING OFFICER. ACCORDINGLY, THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE, AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS: GROUND NO.1: THE ORDER OF THE ID. CIT(A) IS CONTRARY TO THE LAW AND FACT OF THE CASE. GROUND NO.2: 2.1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE VIOLATION OF SECTION 13(1)(C ) R.W.S 13(2)(9) AND 13(3) OF THE INCOME TAX ACT IS NOT PROVED IN THE ASSESSEE CASE, ALTHOUGH VOLUMINOUS MATERIAL WAS BROUGHT ON RECORD BOTH DURING ASSESSMENT AND REMAND PROCEEDINGS BY THE AO POINTING AT BOTH PAYMENT OF RENT AND RENTAL DEPO SIT TO THE TRUSTEES AT A RATE HIGHER THAN NORMAL MARKET RENT AND RENTAL DEPOSIT AS DISCUSSED ELABORATELY IN STATEMENT OF FACTS (SOF). 2.2 THE LD. CIT (A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE ITSELF HAD ADMITTED IN 'SCHEDULE 05C' TO THE BALAN CE SHEET, WHICH WAS FILED ALONG WITH THE RETURN OF INCOME (ANNEXED AS ANNEXURE A' TO THE STATEMENT OF FACTS FILED IN THE FORMS OF PAPER BOOK), THAT THE ADVANCE OF RS.3,00,00, 112/ - , WAS PAID ONLY TOWARDS THE PROPERTIES AT NO.33, RAMANUJARN STREET, T. NAGA R (RS. 1.5 CRORE) AND NO.41, GIRI ROAD, T.NAGAR (RS. 1.5 CRORE) ONLY. GROUND NO. 3: 3.1 THE LEARNED C!T(A) HAS ERRED IN LAW AND ON FACTS IN ADMITTING COOKED - UP EVIDENCE SUBMITTED IN THE GUISE OF FRESH /ADDITIONAL EVIDENCE ALTHOUGH SPECIFIED IN RULE 46A (1) OF THE INCOME TAX RULES, 1962 WERE SATISFIED FOR WHICH DETAILED NARRATION IS GIVEN IN THE STATEMENT OF FACTS (SOF). 3.2 THE LD. CIT (A) FAILED TO PASS A SPEAKING ORDER REGARDING THE REASONS FOR ADMITTING THE ADDITIONAL EVIDENCE IN THIS CASE. RELIANC E IS PLACED ON THE DECISION OF BIMAL KUMAR ANANT KUMAR VS. CIT (2007) 288 ITR 278 (ALL), THE ALLAHABAD WHEREIN IT HAS BEEN HELD AS UNDER: I.T.A. NO . 2888 /M/ 14 14 'FOR ADMISSION OF ADDITIONAL EVIDENCE, AN APPLICATION MUST BE MADE ALONG WITH REASONS SO THAT THE APPELLATE AUTHORIT Y CAN DECIDE WHETHER SUFFICIENT CIRCUMSTANCES EXIST FOR ADMISSION OF ADDITIONAL EVIDENCE'. 3.3 THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE HAS NOWHERE MADE OUT A CASE THAT THE ASSESSING OFFICER HAS NOT GRANTED SUFFICIENT OPPORTUNITY TO I T DURING THE ASSESSMENT PROCEEDINGS. IN THE ABSENCE OF SUCH PLEADINGS, SUCH COOKED - UP FABRICATED ADDITIONAL EVIDENCE COULD NOT HAVE BEEN ADMITTED AS HELD IN THE CASE OF FAIRDEAL FILAMENTS LTD. V. CIT (2008) 302 ITR 173 (GUJ). GROUND NO.4: 4.1 THE ID. CIT (A) ERRED IN LAW IN NOT ENHANCING THE ASSESSMENT EVEN THOUGH PLENTY OF EVIDENCE WAS MADE AVAILABLE BY THE AO IN HIS REMAND REPORT DATED 11.07.2014 AND 14.08.2014, IN VIOLATION OF SECTION 251(1)(A) OF THE INCOME TAX ACT, MORE ELABORATELY DISCUSSED IN ST ATEMENT OF FACTS (SOF). 4.2 THE ID. CIT(A) FAILED TO ENHANCE THE INCOME OF THE ASSESSEE TRUST AN ACCOUNT OF PAYMENT OF RENT AND DEPOSIT AT A RATE HIGHER THAN THE PREVALENT MARKET RATE AND THE HON'ABLE IT AT, MAY DIRECT ENHANCEMENT IN THE LIGHT OF THE FO LLOWING DECISIONS. (I) CIT VS ASSAM TRAVELS SHIPPING SERVICE (1993) 199 ITR 1(SC) (II) BHAVANA CHEMICALS LTD. VS CIT(1998) 231 ITR 507 (SC) GROUND NO.5: 5.1 THE LD. CIT(A) ERRED IN !AW IN NOT PUTTING UP THE MATERIAL TO THE AO FOR FURNISHING HIS REP LY/REBUTTAL ON THE RESPONSE SUBMITTED BY THE ASSESSEE TO THE CIT(A) ON 23. 8.2014, WHICH INCLUDED FRESH EVIDENCE AS WELL. GROUND NO.6: THE LD. CIT (A) FAILED TO APPRECIATE THAT IF THE ASSESSEE IS DISENTITLED FOR EXEMPTION U/S 11 OF THE ACT, RECEIPT OF BUILDING FUND OF RS.4,70,00,001/ - IS REQUIRED TO BE TREATED AS INCOME; GROUND NO.7: 7.1 THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF DEPRECIATION WHEN THE ENTIRE COST OF ACQUISITION OF ASSETS WERE TREATED AS 'APPLICATION OF INCOME' FOR THE PURPOSE O F CLAIMING, EXEMPTION U/S. 11 OF THE ACT. 7.2 THE LD. CIT(A) FAILED TO APPRECIATE THAT AS PER THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF M/S. NECTAR BEVERAGES LIMITED VS CIT 314 ITR 314, DEPRECIATION IS NEITHER A LOSS NOR EXPENDITURE. DEPRECI ATION IS ONLY AN 'ALLOWANCE' I.T.A. NO . 2888 /M/ 14 15 AND THE VIEW THAT DEPRECIATION IS AN 'EXPENDITURE' TO BE TREATED AS 'APPLICATION OF INCOME' FOR CHARITABLE PURPOSES IS INCORRECT. 7.3 THE LD. CIT(A) FAILED TO APPRECIATE THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE C ASE OF LISSIE MEDICAL INSTITUTIONS VS CIT 348 ITR 344 (KER.), WHICH DECISION WAS RENDERED AFTER SEEKING THE VIEW OF THE CBDT. IN THAT CASE, THE HIGH COURT HELD THAT IF THE ASSESSEE TREATS EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME FOR CH ARITABLE PURPOSES UNDER SECTION 11(1)(A), THEN ASSESSEE CANNOT CLAIM DEPRECIATION ON VALUE OF SUCH ASSETS.' 7.4 THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE DECISION OF THE HON BLE DELHI COURT IN THE CASE OF DIT VS. M/S. CHARANJIV CHARITABLE TRUST (2014 ) 43 TAXMANN.COM 300 (DEL.) WHEREIN IT HAS BEEN HELD THAT DEPRECIATION WOULD NOT BE ALLOWED IN CASES WHERE THE TRUSTS ARE CLAIMING THE COST OF ACQUISITION OF ASSETS AS APPLICATION OF INCOME. 7.5 THE LD. CIT(A) ERRED IN NOT CONSIDERING THE APEX COURT DEC ISION IN THE CASE OF J.K. SYNTHETICS LIMITED (65 TAXMAN 420) WHEREIN IT WAS HELD THAT A DOUBLE DEDUCTION CANNOT BE A MATTER OF INFERENCE. IT MUST BE PROVIDED FOR IN CLEAR AND EXPRESS LANGUAGE, HAVING REGARD TO ITS UNUSUAL NATURE AND ITS SERIOUS IMPACT ON T HE REVENUES OF THE STATE. 7.6 THE LD. CIT(A) FAILED TO APPRECIATE THE DECISION OF THE ITAT, COCHIN IN THE CASE OF DDIT, ERNAKULAM VS ADI SANKARA TRUST (2012) 143 TTJ 234 WHEREIN IT WAS HELD THAT WHEN A CHARITABLE BODY HAS ALREADY CLAIMED DEDUCTION FOR AC QUISITION OF CAPITAL ASSETS AS APPLICATION OF MONEY, FURTHER CLAIM OF DEPRECIATION ON THE SAME ASSETS WOULD AMOUNT TO DOUBLE BENEFITS AND CANNOT BE ALLOWED. 7.7 THE LD. CIT(A) OUGHT TO HAVE FOLLOWED THE JURISDICTIONAL HIGH COURT'S DECISION IN THE CASE O F CIT VS. RAO BAHADUR CUNNAN CHETTY CHAIRITES 135 ITR 485 (MAD), WHEREIN IT WAS HELD THAT THE WORD 'INCOME' APPEARING IN SECTION 11 TO SECTION 12 HAS TO BE UNDERSTOOD IN NORMAL PARLANCE WITHOUT LOOKING INTO OR INVOKING THE PROVISIONS OF SECTION 14 OF THE I NCOME TAX ACT. ONCE THAT IS DONE, 'DEPRECIATION' WHICH IS NOT AN 'ACTUAL EXPENDITURE', CANNOT BE ALLOWED. GROUND NO.8: FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE ID CIT(A) ,MAY BE SET ASID E AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE MAIN CONTENTION OF THE LD. DR IS THAT THERE IS VIOLATION OF PROVISIONS OF SECTION 13( 1)(C) R.W.S. 13(2)(G) AND I.T.A. NO . 2888 /M/ 14 16 13(3) OF THE ACT ON THE PAYMENTS OF RENT AND RENTAL DEPOSITS TO THE TRUSTEES IS EXCESSIVE AS PARED TO THE PREVAILING MARKET CONDITION. THE DETAILS OF THE RENT AND RENTAL ADVANCE PAID TO THE DIRECTORS OF THE ASSESSEE COMPANY ARE RE PRODUCED AT PARA 2. 3 OF THIS ORDER HEREINABOVE. ACCORDING TO THE ASSESSING OFFICER, THE RENTAL ADVANCE WORKED OUT TO 31 MONTHS IN RESPECT OF THE FIRST PROPERTY AND 37 TIMES OF THE MONTHLY RENT IN RESPECT OF SECOND PROPERTY. THE ASSESSING OFFICER WAS OF THE OPINION THAT IN CHENNAI STANDARD PRACTICE WAS TO TAKE RENTAL ADVANCE OF 10 MONTHS RENT. ACCORDINGLY, HE INVOKED THE PROVISION OF SECTION S 13(1)(C) R.W.S. 13(2)(G) OF THE A CT. THE LD. AR MADE A CONTENTION BEFORE US THAT THE ASSESSEE NOT ONLY TAKEN THESE T WO PROPERTIES, BUT ALSO TAKEN OTHER PROPERTIES FOR WHICH, THE ASSESSEE HAS NOT PAID ANY ADVANCE OR RENT. ACCORDING TO THE AR, THERE ARE FOUR LEASE AGREEMENT AND INSTEAD OF TWO CONSIDERED BY THE ASSESSING OFFICER. THE TWO AGREEMENT FOR COLLEGE LAND, WHEREIN , THE ASSESSEE HAS AGREED TO PAY DEPOSIT IN FUTURE DATE AND TWO AGREEMENT FOR THE ADMINISTRATION PURPOSE, WHICH HAS THE LEASE AGREEME NT FOR THE CITY LAND/PROPERTIES, STATES THAT TOTAL LEASE DEPOSIT PAID IN EFFECT INCLUDES THESE DEPOSITS FOR THE COLLEGE LAN D AS WELL. TO THIS EFFECT, THE ASSESSEE FILED COPIES OF BOARD RESOLUTION AND ALL THE COPIES OF FOUR LEASE DEED BEFORE THE LOWER AUTHORITIES. HOWEVER, THE ASSESSING OFFICER IS NOT IN A POSITION TO APPRECIATE THE OTHER TWO LEASE AGREEMENTS IN RESPECT OF 7.5 ACRES OF LAND EXECUTED BETWEEN MR. J. SENTHIL KUMAR AND THE ASSESSEE ON 10.12.2010 AND ANOTHER AGREEMENT DATED I.T.A. NO . 2888 /M/ 14 17 10.12.2010 IN RESPECT OF 7.03 ACRES OF LAND. ANOTHER LEASE DEED DATED 10.11.2010 WAS EXECUTED BETWEEN MR. SENTHIL KUMAR AND THE ASSESSEE IN RESPE CT OF 9.31 ACRES OF LAND. REGARDING ALL THESE TRANSACTION, THE ASSESSEE FILED DOCUMENTS BEFORE THE LOWER AUTHORITIES AS WELL AND THE DETAILS ARE REPRODUCED HEREINABOVE AT PARA 2.1 OF THIS ORDER. 4.1 THE LD. CIT(A) CALLED FOR THE REMAND REPORT ALONG WITH THE SUBMISSIONS OF THE AR FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER SUBMITTED HER REPORT DATED 11.07.2014 ON 16.07.2014. THE ASSESSING OFFICER IN HER REPORT STATED THAT ONLY TWO LEASE DEEDS PRODUCED BEFORE HER AT THE TIME OF ASSESSMENT AND FILING O F FOUR LEASE DEEDS CANNOT BE ACCEPTED. ACCORDING TO HER, IT IS AN AFTERTHOUGHT AND IT IS IN VIOLATION OF RULE 46A(1) OF THE INCOME TAX RULES. IT IS THE PLEA OF THE ASSESSEE THAT THE LEASE DEPOSITS PAID BY THE ASSESSEE ON 11.01.2011 AND 11.02.2011 COVERS LE ASE DEPOSIT FOR GIRI ROAD PROPERTY AND RAMANUJAM STREET PROPERTY IN ADDITION TO LEASE FOR LAND ON WHICH THE COLLEGE IS FUNCTIONING. THIS WAS SUPPORTED BY THE BOARD RESOLUTION PASSED BY THE ASSESSEE ON 05.08.2004 AND LEASE DEED DATED 10.11.2010 FOR 9.31 ACR ES OF LAND AGAINST WHICH, THE ASSESSING OFFICER WAS OF THE OPINION THAT THESE LEASE DEEDS WERE NOT PRODUCED IN ORIGINAL AND HENCE IT CANNOT BE ACCEPTED. ACCORDING TO THE ASSESSING OFFICER, THE ACTION OF THE ASSESSEE IS AN AFTERTHOUGHT AND DELIBERATE ATTEMP T FOR NOT PRODUCING ORIGINAL MINUTE BOOK AND THE PLEA OF THE ASSESSEE IS THAT THESE DOCUMENTS ARE I.T.A. NO . 2888 /M/ 14 18 MISPLACED DURING SHIFTING CANNOT BE GIVEN ANY CREDENCE. THE ASSESSING OFFICER, INSTEAD OF VERIFYING THE DOCUMENTS PRODUCED DURING THE COURSE OF APPELLATE PROC EEDINGS AND SENT TO HER FOR COMMENTS, SHE HAS TAKEN A STRONG PLEA THAT THESE DOCUMENTS CANNOT BE ADMITTED, BUT IN OUR OPINION, THE POWER OF LD. CIT(A) IS COTERMINOUS AND IT IS FAIR AND PROPER TO THE LD. CIT(A) TO CALL FOR REMAND REPORT ON THE DOCUMENTS PRO DUCED BEFORE HIM AT THE TIME OF FIRST APPELLATE PROCEEDINGS. THE LD. CIT(A) WAS VERY FAIR FOR PUTTING THE DOCUMENTS FOR HER COMMENTS DURING THE FIRST APPELLATE PROCEEDINGS AND THE ASSESSING OFFICER IS DUTY BOUND TO GIVE THE FINDINGS ON IT IN HER REMAND REP ORT INSTEAD OF OBJECTING THE LD. CIT(A) TO ADMIT THE SAME. IT IS THE PREROGATIVE OF THE LD. CIT(A) TO ADMIT THE SAME AND ONCE HE ADMITTED AND REMANDED TO THE ASSESSING OFFICER FOR HER COMMENTS, SHE HAS NO OTHER GO BUT TO GIVE HER FINDING ON IT. IN THE PRES ENT CASE, THE ASSESSING OFFICER INSTEAD OF GIVING HER FINDING ON IT, THE ASSESSING OFFICER HAS PROTESTING THE ADMISSION OF ADDITIONAL EVIDENCE BY THE LD. CIT(A), WHICH IS NOT JUSTIFIED. 4.2 WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF RULE 46A OF THE INCOME TAX RULES. THE RULE 46A OF I.T. RULES HAS BEEN INSERTED BY THE INCOME - TAX (SECOND AMENDMENT) RULES, 1973 WITH EFFECT FROM 01 - 04 - 1973. THIS RULE PROVIDES THAT AN ASSESSEE SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE FIRST APPELLATE AUTHORITY EVIDENCE , WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE I.T.A. NO . 2888 /M/ 14 19 THE ASSESSING OFFICER. RULE HOWEVER ENUMERATE CERTAIN EXCEPTIONAL CIRCUMSTANCES SUCH AS WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED OR WHERE THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER OR WHICH IS OTHERWISE RELEVANT TO ANY GROUND OF APPEAL TAKEN BY THE ASSESSEE OR WH ERE THE ASSESSMENT ORDER ITSELF IS MADE WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. PROVISION OF RULE 46A ENJOINS UPON THE FIRST APPELLATE AUTHORITY NOT TO ADMIT ANY FRESH EVIDENCE UNLESS HE RE CORDS IN WRITING HIS REASONS FOR ITS ADMISSION. FURTHER RULE 46A ENJOINS UPON HIM TO PROVIDE THE ASSESSING OFFICER A REASONABLE OPPORTUNITY TO EXAMINE THE FRESH EVIDENCE OR TO CROSS EXAMINE THE WITNESS PRODUCED BY THE ASSESSEE OR TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE. 4.3 THE PROVISIONS OF SECTION 250(4), ON THE OTHER HAND, EMPOWER THE FIRST APPELLATE AUTHORITY TO MAKE SUCH FURTHER ENQUIRY AS HE THINKS FIT OR TO DIRECT THE ASSESS ING OFFICER TO MAKE FURTHER ENQUIRY AND REPORT THE RESULT OF THE SAME. THE PROVISIONS OF SECTION 250(4) ARE THE PROVISIONS OF LONG STANDING THAT EXISTED UNDER 1922 ACT ALSO IN SECTION 31 OF THAT ACT. IN THE CASE OF CIT V. KANPUR COAL SYNDICATE 53 ITR 225 ( SC) THE HON'BLE SUPREME COURT HAVE HELD THAT THE FIRST APPELLATE AUTHORITY CAN DO WHAT THE ASSESSING OFFICER COULD I.T.A. NO . 2888 /M/ 14 20 DO AND CAN ALSO DIRECT THE LATTER TO DO WHAT THE LATTER HAS FAILED TO DO. IN THE CASE OF JUTE CORPORATION OF INDIA LTD V. CIT 187 ITR 688 (SC ) AND IN THE CASE OF CIT V. NIRBHERAM DALURAM 224 ITR 610 (SC) THE HON'BLE SUPREME COURT HAVE HELD THAT THE POWERS OF THE FIRST APPELLATE AUTHORITY OVER AN ASSESSMENT ARE ALL PERVASIVE AND THEY ARE NOT CONFINED TO THE MATTERS CONSIDERED BY THE ASSESSING OF FICER. THERE ARE MANY JUDGMENTS TO THE EFFECT THAT IN VIEW OF THE PROVISIONS OF SECTION 250(4) THE FIRST APPELLATE AUTHORITY IS DUTY BOUND TO MAKE AN ENQUIRY EVEN IF SUCH ENQUIRY WAS NOT MADE BY THE ASSESSING OFFICER IF THE FACTS AND CIRCUMSTANCES OF THE C ASE WARRANT SUCH AN ENQUIRY TO BE MADE. REFERENCE IN THIS REGARD MAY BE MADE TO THE JUDGMENTS REPORTED IN 107 ITR 808 (KER); 204 ITR 580 (CAL); 231 ITR 1 (BOM) AND 36 TAXMAN 353 (DEL). IT THEREFORE FOLLOWS THAT THE MATTERS TO BE CONSIDERED BY THE FIRST APP ELLATE AUTHORITY NEED NOT BE CONFINED TO WHAT WAS CONSIDERED BY THE ASSESSING OFFICER WHILE MAKING THE ORDER APPEALED AGAINST. 4.4 THE PROVISIONS OF RULE 46A PROMULGATED WITH EFFECT FROM 01 - 04 - 1973 WERE CHALLENGED AS BEING ULTRA VIRES TO THE PROVISIONS O F SECTIONS 250 AND 251 OF THE ACT IN THE CASE OF SMT. MOHINDER KAUR V. CENTRAL GOVERNMENT 104 ITR 120 (ALL). AFTER CONSIDERATION OF THE PROVISIONS OF SECTIONS 250 AND 251 OF THE ACT AS WELL AS RULE 46A OF I.T. RULES THE HON'BLE HIGH COURT ARRIVED AT THE CO NCLUSION IN THE FOLLOWING WORDS: SUB - RULE (1) OF THE SAID RULE LAYS DOWN THE CIRCUMSTANCES IN WHICH ALONE THE APPELLANT IS ENTITLED TO PRODUCE ADDITIONAL EVIDENCE. SUB - I.T.A. NO . 2888 /M/ 14 21 SECTION (4) PRESERVES THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER TO MAKE FURTHER INQUIRY AS CONTEMPLATED BY SECTION 250 OF THE ACT. THUS, IT IS CLEAR THAT NO PART OF RULE 46A WHITTLES DOWN OR IMPAIRS THE POWER TO MAKE FURTHER INQUIRY CONFERRED UPON THE APPELLATE ASSISTANT COMMISSIONER BY SECTION 250 OF THE ACT. SIMILARLY, SUB - SECTION (5) OF THE SAID SECTION CONFERS A POWER ON THE APPELLATE ASSISTANT COMMISSIONER TO PERMIT THE APPELLANT TO RAISE A FRESH POINT. THIS POWER HAS NOT BEEN EVEN TOUCHED BY RULE 46A. PREVIOUSLY, THE APPELLANT HAD NO RIGHT TO ADDUCE ADDITIONAL EVIDENCE. THE APPE LLATE ASSISTANT COMMISSIONER COULD PERMIT THE PRODUCTION OF ADDITIONAL EVIDENCE IF HE THOUGHT IT WAS NECESSARY TO ENABLE HIM TO DISPOSE OF THE APPEAL, OR IF HE THOUGHT IT FIT TO MAKE FURTHER INQUIRY; BUT UNDER SUB - RULE (1) OF RULE 46A THE APPELLANT HAD A R IGHT TO PRODUCE ADDITIONAL EVIDENCE IN THE CIRCUMSTANCES MENTIONED IN ITS VARIOUS CLAUSES. WE ARE UNABLE TO AGREE WITH THE SUBMISSION THAT RULE 46A OR ITS SUB CLAUSES IS ULTRA VIRES SECTION 250 OR 251 OF THE ACT. THE RULE DOES NOT AFFECT THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER CONFERRED UPON HIM BY THAT RULE. IT IN ADDITION GIVES A RIGHT TO THE APPELLANT IN THE MATTER OF PRODUCTION OF ADDITIONAL EVIDENCE . 4.5 SIMILAR ISSUE CAME FOR CONSIDERATION BY HON'BLE KERALA HIGH COURT IN THE CASE OF CIT V. K RAVINDRANATHAN NAIR 265 ITR 217 (KER). HON'BLE HIGH COURT HELD THAT THE PROVISIONS OF SUB - RULE (4) OF RULE 46A LAID DOWN THAT THE POWERS OF THE APPELLATE AUTHORITY UNDER SECTION 250 WAS NOT AFFECTED. THE HON'BLE KERALA HIGH COURT FURTHER OBSERVED ' O N A CONSIDERATION OF THE PROVISIONS OF RULE 46A PARTICULARLY SUB - RULE (4) THEREOF AND THE PROVISIONS OF SECTION 250(1) OF THE INCOME - TAX ACT CONFERRING POWER ON THE COMMISSIONER OF INCOME - TAX (APPEALS), WE ARE ALSO OF THE VIEW THAT IN SPITE OF THE PROVISIO NS OF RULE 46A(1), THE PROVISIONS OF SECTION 250 ENABLE THE COMMISSIONER OF INCOME - TAX (APPEALS) TO ACCEPT ADDITIONAL EVIDENCE IN APPROPRIATE CASES WHICH POWER HAS BEEN PRESERVED BY SUB - RULE (4) OF RULE I.T.A. NO . 2888 /M/ 14 22 46A ALSO. IF THE PROVISIONS OF RULE 46A, SUB - RULE (4) THEREOF, ARE HELD TO BE MANDATORY THAT WILL GO AGAINST THE PROVISIONS OF SECTION 250 OF THE ACT CONFERRING POWER ON THE FIRST APPELLATE AUTHORITY TO ENQUIRE INTO THE MATTER AND PASS APPROPRIATE ORDERS. IN OTHER WORDS, RULE 46A WITHOUT SUB - RULE (4) WILL BE OPEN TO CHALLENGE AS ULTRA VIRES SECTION 250 OF THE ACT.' 4.6 THERE ARE OF COURSE SEVERAL JUDGMENTS WHERE IT HAS CLEARLY BEEN LAID DOWN THAT THE ASSESSEE ON HIS OWN CANNOT PRODUCE ANY ADDITIONAL EVIDENCE NOT FURNISHED BEFORE THE ASSESSING OFFICER WITHOU T MEETING HE VARIOUS CONDITIONS PROVIDED UNDER RULE 46A FOR WHICH SATISFACTION IS TO BE RECORDED BY THE APPELLATE AUTHORITY IN WRITING AND WITH WHICH THE APPELLATE AUTHORITY IS FURTHER REQUIRED TO CONFRONT THE ASSESSING OFFICER AND ALLOW HIM REASONABLE OPP ORTUNITY TO HAVE HIS SAY IN THE MATTER. IN THE CASE OF RAJKUMAR SRIMAL V. CIT 102 ITR 525 (CAL) THE HON'BLE CALCUTTA HIGH COURT HAVE CLEARLY HELD THAT WHERE THE CIT IS NOT ACTING SUO MOTU IN ADMITTING ADDITIONAL EVIDENCE, THERE MUST BE SOME GROUND FOR ADMI TTING NEW EVIDENCE. THE HON'BLE CALCUTTA HIGH COURT HAVE FURTHER OBSERVED THAT IN SUCH A CASE THE TRIBUNAL CAN INTERFERE WITH THE DISCRETION EXERCISED BY THE FIRST APPELLATE AUTHORITY IN ADMITTING THE ADDITIONAL EVIDENCE. IN THE WORDS OF HON'BLE HIGH COURT 'IT IS TRUE, AS WAS CONTENDED BY COUNSEL FOR THE ASSESSEE, THAT THE APPELLATE ASSISTANT COMMISSIONER HAS VERY WIDE POWERS AND IN THE INTERESTS OF JUSTICE HE CAN MAKE FURTHER ENQUIRY AND HE CAN ADMIT NEW GROUND OF APPEAL. HE CAN ALSO GIVE DEDUCTIONS NOT C LAIMED BY THE ASSESSEE, AS WAS HELD BY THIS COURT IN THE CASE OF UNION COAL CO. LTD. V. COMMISSIONER OF INCOME TAX. IN THIS CASE COUNSEL FOR THE REVENUE I.T.A. NO . 2888 /M/ 14 23 ALSO DID NOT DISPUTE THAT IN CERTAIN CIRCUMSTANCES THE APPELLATE ASSISTANT COMMISSIONER HAD JURISDICTIO N TO ADMIT NEW GROUNDS IF IT WAS NECESSARY TO ADMIT NEW EVIDENCE. THE POINT IN THIS CASE IS NOT WHETHER THE APPELLATE ASSISTANT COMMISSIONER IS ENTITLED TO ADMIT NEW GROUND OR EVIDENCE EITHER SUO MOTU OR AT THE INVITATION OF THE PARTIES. IN THIS CASE IT IS APPARENT THAT THE APPELLATE ASSISTANT COMMISSIONER WAS NOT ACTING SUO MOTO IN ADMITTING ADDITIONAL EVIDENCE. IF THE APPELLATE ASSISTANT COMMISSIONER WAS ACTING ON BEING INVITED BY THE ASSESSEE, THEN THERE MUST BE SOME GROUND FOR ADMITTING NEW EVIDENCE IN THE SENSE THAT THERE MUST BE SOME EXPLANATION TO SHOW THAT THE FAILURE TO ADDUCE EVIDENCE EARLIER SOUGHT TO BE ADDUCED BEFORE THE APPELLATE ASSISTANT COMMISSIONER WAS NOT WILFUL AND NOT UNREASONABLE. WE FIND FROM THE RECORD THAT NO SUCH EXPLANATION WAS EVE R OFFERED OR REFERRED TO. IF WITHOUT ANY EXPLANATION AT ALL THE APPELLATE ASSISTANT COMMISSIONER ADMITS EVIDENCE AT THE INVITATION OF THE PARTIES, HE WOULD BE EXERCISING, IN OUR OPINION, DISCRETION NOT PROPERLY. HE HAS UNDOUBTEDLY A DISCRETION VESTED IN HI M TO ADMIT ADDITIONAL EVIDENCE IN APPROPRIATE CASES BUT ADMISSION OF EVIDENCE AT THE INSTANCE OF AN APPELLANT WITHOUT ANY GROUND OR EXPLANATION WOULD NOT BE EXERCISING DISCRETION PROPERLY AND IN SUCH A CASE THE APPELLATE AUTHORITY IS COMPETENT, IN OUR OPIN ION, TO INTERFERE WITH THE DISCRETION EXERCISED BY THE APPELLATE ASSISTANT COMMISSIONER. RELIANCE IN THIS CONNECTION MAY BE PLACED ON THE OBSERVATIONS IN THE CASE OF RAMGOPAL GANPATRAI SONS LTD. V. COMMISSIONER OF EXCESS PROFITS TAX, IN THE CASE OF BYRAMJI CO. V. COMMISSIONER OF INCOME TAX AND IN THE CASE OF KARAMCHAND V. COMMISSIONER OF INCOME TAX.' 4.7 IN THE CASE OF CIT V. VALI MOHAMED AHMEDBHAI 134 ITR 214 (GUJ) HON'BLE GUJARAT HIGH COURT HAVE HELD THAT IF ANY ADDITIONAL EVIDENCE SUBMITTED BY AN ASSESS EE IS ACCEPTED BEHIND THE BACK OF THE ASSESSING OFFICER AND THE ASSESSING OFFICER IS NOT GIVEN PROPER OPPORTUNITY TO REBUT THE SAME, IT WOULD AMOUNT TO THE VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. HON'BLE GUJARAT HIGH COURT OBSERVED: IT IS CLEAR FR OM THE ABOVE QUOTED PROVISION THAT THE AAC SHOULD NOT HAVE TAKEN INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB - RULE (1) UNLESS THE ITO HAD BEEN ALLOWED A REASONABLE OPPORTUNITY TO EXAMINE THE EVIDENCE OR TO CROSS EXAMINE THE WITNESS WHOSE EVIDENCE WAS TAKEN I.T.A. NO . 2888 /M/ 14 24 ON RECORD OR TO PRODUCE ANY EVIDENCE IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE. IT IS, THEREFORE, OBVIOUS THAT THE AAC COULD NOT HAVE RELIED ON THE ADDITIONAL EVIDENCE WITHOUT GIVING SUCH OPPORTUNITY TO THE ITO. THE MERE FACT THAT NO TICE OF HEARING OF THE APPEAL WAS GIVEN TO THE ITO WOULD NOT MEET THE REQUIREMENTS OF THE ABOVE RULE. EVEN IF NO SUCH RULE WAS IN EXISTENCE, ENDS OF JUSTICE AND FAIR PLAY DEMAND THAT WHEN AN ASSESSEE PRODUCES ADDITIONAL EVIDENCE IN HIS APPEAL AN OPPORTUNIT Y IS GIVEN TO THE ITO TO TEST THE EVIDENCE OR TO COUNTER THE EFFECT OF THE EVIDENCE BY PRODUCING EVIDENCE IN REBUTTAL OR OTHERWISE. THE REASON IS SELF EVIDENT. IT STANDS TO REASON TO PRESUME THAT THE ITO TOOK HIS DECISION NOT TO REMAIN PRESENT BECAUSE HE C ONSIDERED IT UNNECESSARY TO DO SO IN THE CONTEXT OF THE EXISTING RECORD. HE COULD NOT HAVE ANTICIPATED OR REASONABLY FORESEEN THAT THE RECORD WAS GOING TO BE AUGMENTED BY ADDUCING FRESH EVIDENCE. BESIDES, HE HAD A RIGHT TO OBJECT TO THE PRODUCTION OF ADDIT IONAL EVIDENCE. SINCE SOMETHING ADVERSE TO THE ITO WAS SOUGHT TO BE DONE IN THE COURSE OF THE APPEAL BY WAY OF AUGMENTING THE RECORD, THE ITO OUGHT TO HAVE BEEN HEARD AND GIVEN AN OPPORTUNITY TO MEET WITH THE ADDITIONAL MATERIAL BY WAY OF CROSS EXAMINATION , COUNTER EVIDENCE AND URGING SUBMISSIONS IN THE CONTEXT OF THE AUGMENTED RECORD. OF COURSE, IF THE APPEAL WAS GOING TO BE DECIDED ON THE BASIS OF THE EXISTING RECORD OF WHICH HE HAD NOTICE, NO SUCH QUESTION COULD ARISE AND NO GRIEVANCE COULD BE MADE AS TH E ITO HAD FAILED TO EXERCISE HIS OPTION TO REMAIN PRESENT. HE A NO NOTICE OF THE APPLICATION FOR ADDITIONAL EVIDENCE AS NO NOTICE WAS ISSUED. WHEN A PRAYER FOR ADDITIONAL EVIDENCE WAS MADE, IT WAS AN INDEPENDENT AND SUBSTANTIVE APPLICATION SEEKING A NEW RI GHT. NOTICE OF SUCH APPLICATION WAS NECESSARY TO THE ITO AND HE OUGHT TO HAVE BEEN AFFORDED BOTH AN OPPORTUNITY TO OPPOSE IT AND TO TEST THE ADDITIONAL EVIDENCE OR COUNTER THE EFFECT THEREOF OR PRODUCE EVIDENCE IN REBUTTAL. NO SUCH ORDER GRANTING THE REQUE ST COULD HAVE BEEN PASSED BEHIND THE BACK OF THE ITO IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. AT THE COST OF REPETITION, IT BE STATED THAT NOTICE OF APPEAL CANNOT BE EQUATED WITH NOTICE OF A FUTURE APPLICATION TO LEAD ADDITIONAL EVIDENCE WHICH NO ONE COULD HAVE ANTICIPATED OR REASONABLY FORESEEN. ORDINARILY, THE APPEAL WOULD BE DECIDED ON THE EVIDENCE RECORDED IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE ITO, THEREFORE, MAY NOT, IN A GIVEN CASE, THINK IT NECESSARY TO REMAIN PRESENT AT THE HEARING OF THE APPEAL. HE, HOWEVER, CANNOT BE EXPECTED TO ANTICIPATE THAT ADDITIONAL EVIDENCE MIGHT BE PRODUCED BY THE ASSESSEE IN HIS APPEAL. IT IS FOR THIS REASON THAT IT IS NECESSARY TO GIVE HIM AN OPPORTUNITY TO MEET THE ADDITIONAL EVIDENCE. THE TRIBUNAL HAS, THEREFORE, FALLEN INTO AN ERROR IN REJECTING THE PLEA OF THE REVENUE THAT THE AAC OUGHT TO HAVE GIVEN AN OPPORTUNITY TO THE ITO TO EXAMINE THE ADDITIONAL EVIDENCE OR TO CROSS I.T.A. NO . 2888 /M/ 14 25 EXAMINE THE WITNESSES WHOSE EVIDENCE WAS TAKEN ON RECORD OR TO REBUT THE ADDITION AL EVIDENCE. WE, THEREFORE, ANSWER THE QUESTION REFERRED TO US IN THE NEGATIVE AND AGAINST THE ASSESSEE. 4.8 THE PROPOSITION THAT THE FIRST APPELLATE AUTHORITY CAN ADMIT ADDITIONAL EVIDENCE SOUGHT TO BE FILED BY AN ASSESSEE ONLY FOR GOOD REASONS AND AFTE R ALLOWING THE ASSESSING OFFICER REASONABLE OPPORTUNITY TO HAVE HIS SAY IN THE MATTER IS SUPPORTED BY SOME MORE JUDGMENTS SUCH AS CIT V. BABULAL JAIN 176 ITR 411 (MP); C. UNNIKRISHNAN V. CIT 233 ITR 485 (KER); AND RAMPRASAD SHARMA V. CIT 119 ITR 867 (ALL). 4.9 IN THE CASE OF SMT. PRABHAVATI SHAH V. CIT 231 ITR 1 (BOM) HON'BLE JURISDICTIONAL HIGH COURT DEALT WITH A CASE WHERE THE ASSESSEE SOUGHT TO PRODUCE FRESH EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY FOR NO GOOD REASONS FOR NOT HAVING PRODUCED THE S AME BEFORE THE ASSESSING OFFICER. REFERRING TO THE PROVISIONS OF RULE 46A THE HON'BLE BOMBAY HIGH COURT HELD THAT THE FIRST APPELLATE AUTHORITY WAS JUSTIFIED IN NOT TAKING ON RECORD THE FRESH EVIDENCE SOUGHT TO BE PRODUCED BEFORE HIM BY THE ASSESSEE. IN TH E COURSE OF THE JUDGMENT HON'BLE HIGH COURT CLOSELY EXAMINED THE PROVISIONS OF SECTION 250(4) OF THE ACT AND THE PROVISIONS OF RULE 46A AND OBSERVED AS UNDER: 'ON A PLAIN READING OF RULE 46A, IT IS CLEAR THAT THIS RULE IS INTENDED TO PUT FETTERS ON THE RI GHT OF THE APPELLANT TO PRODUCE BEFORE THE APPELLATE ASSISTANT COMMISSIONER ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF THE PROCEEDINGS BEFORE THE INCOME - TAX OFFICER, EXCEPT IN THE CIRCUMSTANCES S ET OUT THEREIN. IT DOES NOT DEAL WITH THE POWERS OF THE APPELLATE I.T.A. NO . 2888 /M/ 14 26 ASSISTANT COMMISSIONER TO MAKE FURTHER ENQUIRY OR TO DIRECT THE INCOME - TAX OFFICER TO MAKE FURTHER ENQUIRY AND TO REPORT THE RESULT OF THE SAME TO HIM. THIS POSITION HAS BEEN MADE CLEAR BY S UB - RULE (4) WHICH SPECIFICALLY PROVIDES THAT THE RESTRICTIONS PLACED ON THE PRODUCTION OF ADDITIONAL EVIDENCE BY THE APPELLANT WOULD NOT AFFECT THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER TO CALL FOR THE PRODUCTION OF ANY DOCUMENT OR THE EXAMINATION OF ANY WITNESS TO ENABLE HIM TO DISPOSE OF THE APPEAL. UNDER SUB - SECTION (4) OF SECTION 250 OF THE ACT, THE APPELLATE ASSISTANT COMMISSIONER IS EMPOWERED TO MAKE SUCH FURTHER INQUIRY AS HE THINGS FIT OR TO DIRECT THE INCOME - TAX OFFICER TO MAKE FURTHER INQ UIRY AND TO REPORT THE RESULT OF THE SAME TO HIM. SUB - SECTION (5) OF SECTION 250 OF THE ACT EMPOWERS THE APPELLATE ASSISTANT COMMISSIONER TO ALLOW THE APPELLANT, AT THE HEARING OF THE APPEAL, TO GO INTO ANY GROUND OF APPEAL NOT SPECIFIED IN THE GROUNDS OF APPEAL, ON HIS BEING SATISFIED THAT THE OMISSION OF THE GROUND FROM THE FORM OF APPEAL WAS NOT WILFUL. IT IS CLEAR FROM THE ABOVE PROVISIONS THAT THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER ARE MUCH WIDER THAN THE POWERS OF AN ORDINARY COURT OF APPE AL. THE SCOPE OF HIS POWERS IS COTERMINUS WITH THAT OF THE INCOME - TAX OFFICER. HE CAN DO WHAT THE INCOME - TAX OFFICER CAN DO. HE CAN ALSO DIRECT THE INCOME - TAX OFFICER TO DO WHAT HE FAILED TO DO. THE POWER CONFERRED ON THE APPELLATE ASSISTANT COMMISSIONER U NDER SUB - SECTION (4) OF SECTION 250 BEING A QUASI - JUDICIAL POWER, IT IS INCUMBENT ON HIM TO EXERCISE THE SAME IF THE FACTS AND CIRCUMSTANCES JUSTIFY. IF THE APPELLATE ASSISTANT COMMISSIONER FAILS TO EXERCISE HIS DISCRETION JUDICIALLY, AND ARBITRARILY REFUS ES TO MAKE ENQUIRY IN A CASE WHERE THE FACTS AND CIRCUMSTANCES SO DEMAND, HIS ACTION WOULD BE OPEN FOR CORRECTION BY A HIGHER AUTHORITY'. THEREAFTER THE HON'BLE HIGH COURT AGAIN OBSERVED AT PAGE 8 IN THE FOLLOWING WORDS: 'ON A CONJOINT READING OF SECTI ON 250 OF THE ACT AND RULE 46A OF THE RULES, IT IS CLEAR THAT THE RESTRICTIONS PLACED ON THE APPELLANT TO PRODUCE EVIDENCE DO NOT AFFECT THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER UNDER SUB - SECTION (4) OF SECTION 250 OF THE ACT. THE PURPOSE OF RULE 46A APPEARS TO BE TO ENSURE THAT EVIDENCE IS PRIMARILY LED BEFORE THE INCOME - TAX OFFICER.' 4.10 FROM THE VARIOUS AUTHORITIES CITED BY US (SUPRA) IN THIS ORDER, W E FIND THAT THE LEGAL POSITION IS THAT THE FIRST APPELLATE AUTHORITY HAS WIDE POWERS I.T.A. NO . 2888 /M/ 14 27 OVER TH E ORDER OF ASSESSMENT APPEALED AGAINST BEFORE HIM. IN THE COURSE OF EXERCISE OF SUCH POWER THE FIRST APPELLATE AUTHORITY CAN DIRECT THE ASSESSEE TO PRODUCE ANY EVIDENCE, INFORMATION OR MATERIAL THAT WAS NOT PRODUCED BEFORE OR CONSIDERED BY THE ASSESSING OF FICER. THE PURPOSE OF RULE 46A IS TO PLACE FETTERS ON THE RIGHTS OF AN APPELLANT TO PRODUCE ADDITIONAL EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY AND NOT THE RIGHTS OF THE FIRST APPELLATE AUTHORITY TO CALL FOR PRODUCTION OF ANY FRESH EVIDENCE OR INFORMA TION. THIS ASPECT OF THE PROVISIONS OF RULE 46A IS CLEAR FROM THE PROVISIONS OF SUB - RULE (4) OF RULE 46A ITSELF THAT NOTHING CONTAINED IN RULE 46A SHALL AFFECT THE POWER OF FIRST APPELLATE AUTHORITY TO DIRECT THE PRODUCTION OF ANY DOCUMENT OR EXAMINATION O F ANY WITNESS TO ENABLE HIM TO DISPOSE OF THE APPEAL OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETHER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSING OFFICER). 4.11 IN THE INSTANT CASE THE ENTIRE ADD ITIONAL EVIDENCE HAS COME ON THE RECORD OF THE FIRST APPELLATE AUTHORITY BECAUSE THE FIRST APPELLATE AUTHORITY DECIDED TO EXAMINE THE FACTS OF THE CASE IN DEPTH AND ADJUDICATE UPON THE MATTER ON THE BASIS OF EVIDENCE AND MATERIAL THUS GATHERED. THE LEARNED CIT(A) WAS EMPOWERED TO DO SO UNDER THE PROVISIONS OF SECTION 250(4). THE RESULTS OF ENQUIRY CONDUCTED BY HIM COULD EITHER GO TO FURTHER CEMENT THE CASE MADE OUT BY THE ASSESSING OFFICER OR TO HELP OUT THE ASSESSEE AGAINST I.T.A. NO . 2888 /M/ 14 28 THE FINDINGS OF THE ASSESSING OF FICER. THE MERE FACT THAT THE RESULTS OF THE ENQUIRIES THUS CONDUCTED SUPPORTED THE CASE OF THE ASSESSEE AND NOT THAT OF REVENUE HAS NO BEARING ON THE JURISDICTION AND POWERS OF THE LEARNED CIT(A). THE LEARNED CIT(A) HA S CONFRONTED THE ASSESSING OFFICER WI TH THE EVIDENCE THUS RECEIVED AND THE MATERIAL THUS GATHERED AND ALLOW THE ASSESSING OFFICER TO HAVE H ER SAY IN THE MATTER AND PERHAPS S HE HAD DONE SO AND THIS DISPUTE HAVE NO MERIT . SINCE THE LD. CIT(A) HAS CONFRONT ED THE ASSESSING OFFICER EVERY TIME AN A DDITIONAL EVIDENCE THAT WAS NOT BEFORE THE ASSESSING OFFICER COMES ON THE RECORD OF THE FIRST APPELLATE AUTHORITY. WHERE THE ADDITIONAL EVIDENCE IS OBTAINED BY THE FIRST APPELLATE AUTHORITY ON ITS OWN MOTION, AND HE HAD CONFRONT ED THE ASSESSING OFFICER WIT H SUCH ADDITIONAL EVIDENCE , AND THEN THE ASSESSING OFFICER CANNOT FIND FAULT WITH THE LD. CIT(A) ON THIS ISSUE. T HERE MAY BE CASES WHERE ADDITIONAL EVIDENCE IS ADMITTED BY THE FIRST APPELLATE AUTHORITY ON A REQUEST OR APPLICATION BEING MADE BY THE ASSESSEE AND O N SUCH CASES SUB - RULE (2) OF RULE 46A REQUIRES THE FIRST APPELLATE AUTHORITY TO ALLOW THE ASSESSING OFFICER A FURTHER OPPORTUNITY TO REBUT THE FRESH EVIDENCE FILED BY THE ASSESSEE. IF THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE BEFORE THE APPEL LATE AUTHORITY IS IN THE NATURE OF CLINCHING EVIDENCE LEAVING NO FURTHER ROOM FOR ANY DOUBT OR CONTROVERSY IN SUCH A CASE NO USEFUL PURPOSE WOULD BE SERVED ON PERFORMING THE RITUAL OF FORWARDING THE EVIDENCE/ MATERIAL TO THE ASSESSING OFFICER AND OBTAIN HI S I.T.A. NO . 2888 /M/ 14 29 REPORT. IN SUCH EXCEPTIONAL CIRCUMSTANCES THE REQUIREMENT OF SUB - RULE (3) MAY BE DISPENSED WITH. 4.12 BEING SO, IN OUR OPINION, IT CANNOT BE SAID THAT IT IS IN VIOLATION OF RULE 46A(1) OF THE INCOME TAX RULES. 5 . COMING TO THE MAIN ISSUE IN THIS APPE AL REGARDING INVOKING OF SECTIONS 13(1)(C) R.W.S. 13(2)(G) OF THE ACT, THE PLEA OF THE ASSESSEE IS THAT THE TOTAL ADVANCE PAID BY THE ASSESSEE ARE TO BE SEGREGATED AS FOLLOWS: LEASE/RENTAL DEPOSIT TOWARDS THE PROPERTIES RENT RECEIVED PER MONTH LEASE/RENTA L DEPOSIT AMOUNT PAID FOR EACH PROPERTY AS ON DATE CHEQUE DETAILS OF RENTAL/LEASE DEPOSIT AMOUNT PAID FROM IMA 33, RAMANUJAM STREET, T. NAGAR 4,80,000/ - PER MONTH . 44,55,000/ - 1.SBI/092759/14 - 12 - 2010/ .75,00,000/ - 2. SBI/092792/4 - 1 - 2011/ .75,00,000/ - LEASE FOR 7.03 ACRES (COLLEGE LAND AT PUDHUCHAT I RAM) NIL (NO RENT) .1,05,45,000/ - TOTAL .1,50,00,000/ - .1,50,00,000/ - 41, GIRI ROA D, T. NAGAR .2,00,000/ - FOR THE PERIOD 18.10.2010 TO 30.12.2010 .40,00,000/ - (RETURNED BACK ON 1.3.2011) 1.ICICI/107786/5 - 8 - 2004/ .7,00,000/ - 2.SBI/092791/4 - 1 - 2011/ .75,00,000/ - 3.RTGS FROM SBI DATED ON 11.1.2011 FOR .2,00,00,000/ - .4,00,000/ - FO R THE PERIOD 1.1.2011 TO 31.3.2011 .37,50,000/ - LEASE FOR 7.50 ACRES (COLLEGE LAND AT PUDHUCHATIRAM) NIL (NO RENT) . 1,12,50,000/ - LEASE FOR 9.31 ACRES (COLLEGE LAND AT PUDHUCHATIRAM) NIL (NO RENT) .1,32,00,000/ - OUT OF THIS 1,32,00,000/ - , .1,25,0 0,000/ - WAS RETURNED BACK TO IMA DUE TO INSUFFICIENT FUND IN IMA FROM S. HENMALATHA ACCOUNT VIDE CHEQUES ON 7.3.2011/019551/ .1,00,00,000/ - & ON 16.3.2011/019552/ .25,00,000/ - I.T.A. NO . 2888 /M/ 14 30 AS ON 31.3.2011, ONLY .7,00,000/ - IS TAKEN AS ADVANCE FOR 9.31 ACRES TOTAL .2,82,00,000/ - .2,82,00,000/ - IN SHORT, FROM THE ABOVE TABLE, IT WAS CLARIFIED BY THE LD. AR THAT THE DEPOSITS ARE TO BE CONSIDERED AS FOLLOWS: 1. DOOR NO. 41, GIRI ROAD PROPERTY, THE RENTAL ADVANCE OF 37,50,000/ - WORKED OUT AT 9.375 MONTHS ADVANCE . 2. FOR THE SUM OF .1,12,50,000/ - WAS TOWARDS INTEREST FREE DEPOSIT FOR USAGE OF LANDS IN SURVEY NO. 51/1A, 51/3B, 51/2B, 51/3A, 51/2C, 49/3, 53/2, 53/3, 53/4 BY THE COLLEGE [TOTALLING 7.5 ACRES ] OWNED BY THE DIRECTORS. 3. THE BALANCE AMOUNT OF .1,25, 00,000/ - WAS TOWARDS INTEREST FREE DEPOSIT FOR USAGE OF LANDS IN SURVEY NO. 51/1B, 51/1A AND 52/1 BY THE COLLEGE [TOTALLING 9.31 ACRES OWNED BY THE DIRECTORS. 5.1 IT WAS THE SUBMISSIONS OF THE AR THAT T HE DIRECTORS HAVE ACKNOWLEDGED THE RECEIPT OF THE AB OVE DEPOSITS THROUGH SEPARATE RECEIPTS, ENDORSEMENT IN THE LEASE DEED AND COMBINED ACKNOWLEDGEMENT IN THE LEASE DEEDS AS AND WHEN THE DEPOSIT AMOUNT RECEIVED FROM THE ASSESSEE. IN THE LEASE DEED OF 412, GIRI ROAD PROPERTY, THE DIRECTOR ACKNOWLEDGED THE REC EIPT OF .1.50 CRORES FOR 7.5 ACRES OF THE PROPERTY. SIMILARLY, THE DIRECTOR ACKNOWLEDGED THE RECEIPT OF .1.50 CRORES THROUGH TWO PAYMENTS OF .75 LAKHS FOR THE TWO PROPERTIES NAMELY DOOR NO. 33, RAMANUJAM STREET, T. NAGAR, CHENNAI [RENTAL ADVANCE OF .44 ,55,000/ - WORKED OUT AT 9.28 MONTHS ADVANCE]. BALANCE AMOUNT OF .1,04,45,000/ - WAS PAID TOWARDS THE PROPERTY AT SURVEY NO. 49/1, 49/4A, 50/1, 49/4B, 50/2, 50/4, 49/4C TO THE COLLEGE PREMISES OF THE ASSESSEE. FURTHER, IT WAS ALSO BROUGHT ON RECORD BY THE LD. I.T.A. NO . 2888 /M/ 14 31 AR THAT THERE IS CONDITION LAID OUT BY THE GOVERNMENT WHILE APPROVING THE ASSESSEE FOR CONDUCTING THE MARINE COURSES BY DGS ORDER NO. 02 OF 2007 DATED 31.10.2007 AS FOLLOWS: (E) INTENDED LOCATION OF INSTITUTE WITH AVAILABILITY OF LAND OF MINIMUM FOUR H ECTARES OF LAND ON OWNERSHIP BASIS OR LONG TERM LEASE OF NOT LESS THAN 10 YEARS. FURTHER, THE APPROVAL WAS GRANTED TO THE ASSESSEE VIDE APPROVAL NO. TR/A/342003 DATED 24.04.2003, WHEREIN, SHIP - IN - CAMPUS WAS LOCATED IN 2/397, M U KA M BIKA NAGAR, KATTUPAKKAM, CHENNAI 56 , WHICH IS STATED TO BE LOCATED IN 7.5 ACRES AND 7.03 ACRES OF AREA OWNED BY THE TRUSTEES . FURTHER, IN CONNECTION WITH VARIOUS MARINE COURSES VIDE APPROVAL NO. TR/A/36/10 DATED 30.08.2010 LOCATED AT 41,JAMIN KORATTUR , PUDHUCHATIRAM, CHENNAI 602 107 FOR WHICH THE ASSESSEE PAID ONLY ADVANCE AND NO RENT FOR IT. FURTHER, THE ASSESSEE GOT APPROVAL OF PLANS FOR VARIOUS BUILDING LOCATED AT PROPERTY BEARING NO. 51/1A2, 51/B AND 52/1 AT VILLAGE 5, KORATTUR VILLAGE, ZAMIN KORATTUR, POONAMALLEE TALUK, TIRUV ALLUR DISTRICT. 5.2 THE ASSESSEE HAS CREATED THE FACILITIES IN A TOTAL LAND OF 23.84 ACRES AS REQUIRED BY THE GOVERNMENT OF INDIA IN ITS APPROVAL. THUS, IT IS NOT ONLY THE PROPERTY SITUATED AT GIRI ROAD PROPERTY AND RAMANUJAM STREET PROPERTY WERE TAKEN BY THE ASSESSEE ON RENTAL BASIS, BUT ALSO OTHER PROPERTIES AS SPECIFIED IN TABLE REPRODUCED HEREINABOVE. 5 .3 THE ASSESSING OFFICER ATTRIBUTED LEASE ADVANCE PAID BY THE ASSESSEE ONLY IN RESPECT OF GIRI ROAD PROPERTY AND RAMANUJAM STREET PROPERTY. THE I.T.A. NO . 2888 /M/ 14 32 COLLEGE OF THE ASSESSEE IS FUNCTIONING TOTALLY IN AN AREA OF 23.84 ACRES OF LAND AND THE ASSESSING OFFICER TAKEN VERY NARROW VIEW OF THE FACTS OF THE CASE THAT THE ASSESSEE HAS TAKEN ONLY TWO PROPERTIES AT GIRI ROAD AND RAMANUJAM STREET, WHERE THE ADMINISTRATIVE O FFICE IS SITUATED. THE ASSESSEE ALSO EXPLAINED THAT IN ADDITION TO THE PROPERTY AT GIRI ROAD, T. NAGAR, AND RAMANUJAM STREET, T. NAGAR, THE PROPERTY IN AN AREA OF 9.31 ACRES AT KORATTUR VILLAGE WAS TAKEN ON LEASE FOR 99 YEARS FROM 10.11.2010 AND 7.5 ACRES OF LAND AT KORATTUR VILLAGE ZAMIN KORATTUR, POONAMALLEE TALUK FOR 99 YEARS FROM 10.12.2010. ANOTHER AREA OF 7.03 ACRES AT KORATTRUR VILLAGE, ZAMIN KORATTUR, POONAMALLEE TALUK AND IF WE CONSIDER ALL THESE LAND, THE PAYMENT WHAT IS MADE BY THE ASSESSEE TO THOSE PERSONS CANNOT BE SAID THAT IT IS EXCESSIVE AND UNREASONABLE AND THE ADVANCE PAYMENT IS ONLY REFUNDABLE DEPOSIT AND FOR THREE PROPERTIES, THE ASSESSEE IS NOT PAYING ANY RENT AND IF WE CONSIDER IN TOTA LITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE CANNOT HOLD THAT FROM THE ASSESSEE, THOSE TRUSTEES HAVE DERIVED ANY EXCESSIVE BENEFIT AND THE ASSESSEE HAS NOT GIVEN ANY EXC ESSIVE BENEFIT TO ANY TRUSTEES OR TO THE PERSONS REFERRED IN SECTION 1 3 ( 3 ) OF THE AC T SO AS TO INVOKE PROVISIONS OF SECTION 13(2)(G) OF THE ACT. TO SUM UP, THE BENEFIT DERIVED BY THE ASSESSEE IS BY TAKING THE ABOVE PROPERTIES ARE MORE THAN THE BENEFIT DERIVED BY THE TRUSTEES. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE L D. CIT(A) AND THE SAME IS CONFIRMED. I.T.A. NO . 2888 /M/ 14 33 6 . FURTHER, THERE IS ANOTHER GROUND IN THE APPEAL OF THE REVENUE WITH REGARD TO ENHANCEMENT OF ASSESSMENT. THOUGH THE ASSESSING OFFICER ASKED THE LD. CIT(A) FOR ENHANCEMENT OF ASSESSMENT , H E FAILED TO ENHANCE THE ASS ESSMENT. IN THIS CASE, THE ASSESSING OFFICER REQUESTED THE LD. CIT(A) FOR ENHANCEMENT OF TAXABLE INCOME UNDER SECTION 251 (1)(A) OF THE ACT. THE LD. CIT(A) HAS TO APPLY HIS MIND INDEPENDENTLY AND COME TO THE CONCLUSION ON THE ISSUE BEFORE HIM. THE ASSESSING OFFICER CANNOT INFLUENCE THE DECISION MAKING PROCESS OF THE LD. CIT(A) AND IN THIS CASE, THE DECISION MAKING PROCESS OF THE LD. CIT(A) WAS VITIATED BY CLEAR ATTEMPT ON THE PART OF THE ASSESSING OFFICER. T HE ASSESSING OFFICER SHOWED EXTRA INTEREST DEVOICE ON HER OWN METHODOLOGY WHEN THE LD. CIT(A) CALLED FOR REMAND REPORT. THE ASSESSING OFFICER SHOULD NOT HAVE REQUESTED THE LD. CIT(A) TO ENHANCE THE ASSESSMENT AS THE LD. CIT(A) IS AN HIGHER AUTHORITY AS CAPABLE OF TAKING H IS OWN DECISION AND HE HAS THE POWE R OF ENHANCEMENT OF ASSESSMENT WHEREVER NECESSARY. THERE IS NO CONCLUSIVE REASON AS TO HOW THE ASSESSING OFFICER COULD ASK FOR ENHANCEMENT OF ASSESSMENT. IN OUR OPINION, THE ASSESSING OFFICER WANTED TO DO THE THINGS INDIRECTLY THROUGH THE LD. CIT(A), WHICH CANNOT BE DO NE BY HERSELF. BEING SO, WE ARE OF THE OPINION THAT THERE IS NO ERROR COMMITTED BY THE LD. CIT(A) IN NOT ENTERTAINING THE PLEA OF THE ASSESSING OFFICER TO ENHANCE THE ASSESSMENT. ACCORDINGLY, THIS GROUND OF THE REVENUE IS DISMISSED. I.T.A. NO . 2888 /M/ 14 34 7. THE REVENUE HAS RAISED ONE MORE GROUND WITH REGARD TO DENYING OF EXEMPTION UNDER SECTION 11 OF THE ACT ON THE RECEIPT OF BUILDING FUND OF 4.7 CRORES AND TREATED AS INCOME OF THE ASSESSEE. 7.1 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GON E THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE ASSESSMENT, THE ASSESSEE HAS RECEIVED A SUM OF .4.7 CRORES AS BUILDING FUND AND TREATED IT AS CORPUS DONATION AND CLAIMED AS EXEMPT FROM APPLICATION OF INCOME. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 13(1)(C) R.W.S. 13( 1(C) ( II ) AND 13( 2 ) (G) OF THE ACT AND DENIED THE EXEMPTION UNDER SECTION 11 OF THE ACT. HOWEVER, THE LD. CIT(A) GRANTED THE EXEMPTION UNDER SECTION 11 OF THE ACT. SINCE WE HAVE, IN EARLIER PARA OF THIS ORDER HELD THAT THERE IS NO APPLICABILITY OF SECTION 13(1)(C) R.W.S. 13(2)(G) AND 13(3) OF THE ACT AND THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE ACT, THERE IS NO QUESTION OF TREATING THE CORPUS DONATION RECEIVED BY THE ASSESSEE TOWARDS BUILDING FUND, WHICH IS VOLUNTARY CONTRIBUTION IN TERMS OF SECTION 2(24)(IIA) OF THE ACT AND IT COULD NOT BE BROUGHT TO TAX IN THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8 . THE LAST GROUND RAISED BY THE REVENUE FOR OUR CONSIDERATION IS WITH REGARD TO ALLOWING THE CLAIM OF DEPRECIATION WHEN THE ENTIRE COST OF ACQUISITION OF ASSETS WERE TREATED AS APPLICATION OF INCOME FOR THE PURPOSE OF CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT. IN OUR OPINION, SIMILAR I.T.A. NO . 2888 /M/ 14 35 ISSUE WA S CONSIDERED BY THE HON BLE SUPREME COURT IN THE CASE OF NECTOR BEVERAGES LIMITED V. CIT 314 ITR 314, WHEREIN, IT WAS HELD THAT THE DEPRECIATION IS NEITHER A LOSS NOR EXPENDITURE. DEPRECIATION IS ONLY AN ALLOWANCE AND THE VIEW THAT DEPRECIATION IS EXPEN DITURE TO BE TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES IS INCORRECT. T HE COST OF ASSETS WAS ALREADY ALLOWED AS APPLICATION OF INCOME WHILE GRANTING EXEMPTION UNDER SECTION 11 OF THE ACT IN ANY EARLIER ASSESSMENT YEAR, THE DEPRECIATION ONC E AGAIN CANNOT BE GRANTED TO THE ASSESSEE IN SUBSEQUENT ASSESSMENT YEARS SO AS TO CONSIDER IT AS APPLICATION OF INCOME. IN OUR OPINION, THE PROVISION OF SECTION 11 OF THE ACT CANNOT OVERRIDE SECTION 32 OF THE ACT. IF THE ASSESSEE CLAIMED EXEMPTION UNDER SE CTION 11 UNDER CHAPTER III OF THE ACT, IT CANNOT CLAIM DEPRECIATION UNDER SECTION 32 OF THE ACT. THEREFORE, THE ASSESSING OFFICER HAS TO EXAMINE WHETHER THE ASSESSEE HAS CLAIMED THE COST OF ACQUISITION OF CAPITAL ASSETS AS APPLICATION OF INCOME OR NOT IN A NY EARLIER ASSESSMENT YEARS AND IF IT IS CLAIMED SO, THE ASSESSEE CANNOT CLAIM DEPRECIATION AS AN APPLICATION OF INCOME WHILE CLAIMING EXEMPTION UNDER SECTION 11 OF THE A CT IN SUBSEQUENT ASSESSMENT YEARS . WHEN THE COST OF ASSET BECOME NIL, THERE IS NO QUES TION OF ALLOWING ANY DEPRECIATION. T HE COST OF ASSET WAS ALLOWED ONCE AGAIN AS APPLICATION OF INCOME, IT WOULD AMOUNTS TO DOUBLE DEDUCTION , IF DEPRECIATION IS ALSO ALLOWED AS APPLICATION OF INCOME , WHICH CANNOT BE PERMITTED. ACCORDINGLY, WE DIRECT THE ASSE SSING OFFICER TO EXAMINE THIS ISSUE AND GRANT DEPRECIATION IF THE I.T.A. NO . 2888 /M/ 14 36 ASSESSEE HAS NOT CLAIMED THE COST OF ACQUISITION OF ASSET AS APPLICATION OF INCOME WHILE CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT IN ANY ASSESSMENT YEAR. THUS, THIS GROUND OF REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 24 TH JUNE , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 24 . 0 6 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.