Appeal Details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 0363 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
6 year(s) 9 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-12-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Next Hearing Date
06-01-2016
Assessment Year
2006-2007
Appeal Filed On
24-02-2010
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.320/PUN/2010 #& & / ASSESSMENT YEAR : 2006-07 SINHGAD TECHNICAL EDUCATION SOCIETY, S.NO.44/1, VADGAON (BUDRUK), OFF SINGHAD ROAD, PUNE-411041 PAN AABTS9900Q . / APPELLANT V/S ACIT, CENTRAL CIRCLE-2(2), PUNE . / RESPONDENT / APPELLANT BY : SHRI S.N. DOSHI / RESPONDENT BY : MR. J.P. CHANDRAKAR, CIT-DR AND MRS. NANDITA KANCHAN / ORDER PER R.K.PANDA, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 29-01-2010 OF THE CIT(A)-II, PUNE RELATING TO ASSES SMENT YEAR 2006-07. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A TRUST RUNNING VARIOUS EDUCATIONAL INSTITUTIONS WHICH CONDUCT VARI OUS TECHNICAL COURSES SUCH AS ENGINEERING, MEDICINE, MBA ETC. IT WAS REG ISTERED U/S.12A OF THE I.T. ACT, 1961 AND IT HAD CLAIMED EXEMPTION U/S.11 OF THE I.T. ACT. IT HAD FILED ORIGINAL RETURN OF INCOME ON 4-01-2007 WHICH WAS SUBSEQUENTLY REVISED ON 13-08-2007. / DATE OF HEARING :19.09.2016 / DATE OF PRONOUNCEMENT:14.12.2016 2 ITA NO.320/PUN/2010 3. A SEARCH AND SEIZURE OPERATION U/S.132 OF THE I. T. ACT WAS CARRIED OUT IN THE CASE OF SHRI M.N. NAVALE ON 20-07-2005 WHO I S THE PRINCIPAL TRUSTEE OF THE ASSESSEE TRUST. DURING THE COURSE OF SEARCH OP ERATION CERTAIN DOCUMENTS WERE SEIZED FROM THE RESIDENCE OF SHRI M. N. NAVALE WHICH, ACCORDING TO THE REVENUE, REVEALED THAT THE ASSESSE E TRUST IS TAKING HUGE DONATIONS FOR THE PURPOSE OF ADMISSIONS AND QUITE A LARGE PART OF THE SAME IS BEING APPROPRIATED BY THE TRUSTEES FOR THEIR PERSON AL PURPOSES. 4. THE ASSESSING OFFICER FURTHER NOTED THAT IN THIS CASE THE REGISTRATION OF THE TRUST HAS BEEN CANCELLED BY THE CIT CENTRAL, PU NE U/S.12AA(3) VIDE ORDER DATED ON 16-11-2007. SINCE THE REGISTRATION HAS BE EN CANCELLED THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS TO BE T REATED LIKE ANY OTHER ASSESSEE AND CANNOT HIDE BEHIND THE SHIELD OF SECTI ONS 11 AND 12. WITHOUT PREJUDICE TO THIS, THE ASSESSING OFFICER HELD THAT SECTION 11, 12 AND 13 GRANT PRIVILEGE TO THE ASSESSEE IN THE SENSE THAT ITS INC OME IS EXEMPT FROM TAXATION AND THERE IS NO DISTINCTION BETWEEN CAPITAL AND REV ENUE EXPENDITURE. ACCORDING TO THE ASSESSING OFFICER IN ORDER TO AVAI L BENEFIT OF SECTION 11 AND 12, THE ASSESSEE HAS TO STRICTLY COMPLY WITH THE CO NDITIONS CONTAINED THEREIN AND SHOULD NOT BE HIT BY THE MISCHIEF OF SECTION 13 . HE NOTED THAT THE OPENING LINE OF SECTION 13 CLEARLY STATES THAT PROV ISIONS OF SECTION 11 AND 12 WILL NOT BE APPLICABLE WHERE PROVISIONS OF SECTION 13 ARE VIOLATED. HE NARRATED SOME OF THE DETAILS OF THE ASSETS CREATED/ HELD AND BENEFITS DERIVED BY THE PRINCIPAL TRUSTEES/OTHER PERSONS ATTRACTING THE PROVISIONS OF SECTION 13(1)(C) WHICH ARE AS UNDER : 1. IN THE COURSE OF SEARCH OPERATION CONDUCTED AT TH E RESIDENCE OF SHRI M.N. NAVALE, PRINCIPAL TRUSTEE, DOCUMENTS FOUND AND SEIZED AS BUNDLE A-2, SHOW THAT MORE THAN RS.22 CRORES WERE COLL ECTED AS DONATIONS FOR GRANTING ADMISSIONS IN VARIOUS INSTITUTIONS . THIS IS ONLY FOR A SHORT TIME DURING THE YEAR OF SEARCH, I.E. 2005 -06. OTHERWISE, THE DONATIONS COLLECTED WILL BE MUCH MORE. 2. CASH OF RS.1,20,00,000/- BELONGING TO SHRI M.N. NA VALE, PRINCIPAL TRUSTEE, IS UNACCOUNTED AND WAS SEIZED IN THE COURSE OF SEARCH OPERATION. 3 ITA NO.320/PUN/2010 3. JEWELLERY OF RS.40,90,206/- IS UNACCOUNTED AND WAS SEIZED IN THE COURSE OF SEARCH OPERATION. 4. RENT PAID PER ANNUM IN RESPECT OF THE PROPERTY AT GOVIND CHAMBERS, KARVE ROAD, PUNE OWNED BY SHRI M.N. NAVALE IS RS.9,00,000/- WHILE THE FAIR RENT WORKS OUT TO RS.23,835/-. THIS IS EXCESS PAYMENT. 5. RENT PAID PER ANNUM IN RESPECT OF THE PROPERTY AT FARM HOUSE AT NDA ROAD, PUNE OWNED BY SHRI M.N. NAVALE, IS RS.15,00 ,000/- WHILE THE FAIR RENT WORKS OUT TO RS.4,78,100/-. THIS IS EXCESS PAY MENT. 6. RENT PAID PER ANNUM IN RESPECT OF THE PROPERTY AT FLAT NOS. 7,8, & 9, GEETA BUILDING, SION, MUMBAI, OWNED BY SHRI M.N. NAVALE, IS RS.25,44,000/- WHILE THE FAIR RENT WORKS OUT TO RS.7,5 8,100/-. THIS IS EXCESS PAYMENT. 7. THE FARM HOUSE OF SHRI M.N. NAVALE, TAKEN ON RENT UNHEARD OF, DOES NOT SERVE ANY PURPOSE RELATING TO OBJECTS OF THE T RUST AND IS ONLY FOR THE BENEFIT OF TRUSTEES. 8. APART FROM THE ABOVE, THERE ARE NUMBER OF PROPER TIES ACQUIRED BY THE PRINCIPAL TRUSTEE/OTHER TRUSTEES AND SOME OF THE DE TAILS ARE DISCUSSED IN THE ORDER AND THE DETAILED DISCUSSION IS AVAI LABLE IN THE COPY OF THE ORDER U/S.171 DATED 06-12-2007, WHICH IS ENCLO SED AS ANNEXURE VII TO THIS ORDER. 5. HE OBSERVED THAT IN THE CASE OF THE ASSESSEE EVI DENCES SHOW SIPHONING OF MONEY, DIVERSION OF AMOUNTS, CREATION OF ASSETS ON WHICH ALL ASSETS ARE OUT OF THE RECEIPTS ON ACCOUNT OF DONATI ON. THE ASSETS CREATED BY SHRI M.N. NAVALE AND OTHERS ARE SUBSTANTIAL IN VALU E AND ARE MUCH MORE THAN THE KNOWN SOURCES OF INCOME AND THE INCOMES RE TURNED. THIS AND THE BENEFITS TO THE TRUSTEES WAS POSSIBLE ONLY BECAUSE OF THE RECEIPTS ON ACCOUNT OF DONATIONS/CAPITATION FEE. THE ASSESSING OFFICER FURTHER NOTED THAT THE PAYMENT OF RENT TO THE RELATED PERSONS IS ALSO NOT REASONABLE. ALL THIS ATTRACT PROVISIONS OF SECTION 13(1)(C). THESE ARE THE BENE FITS DERIVED BY PERSONS REFERRED TO IN SECTION 13(3) OF THE I.T. ACT. THER EFORE, THE ASSESSEE IS HIT BY THE MISCHIEF OF SECTION 13(1)(C). HE ACCORDINGLY H ELD THAT IN VIEW OF APPLICABILITY OF SECTION 13(1)(C) ALSO THE ASSESSEE HAS TO BE ASSESSED LIKE ANY OTHER ASSESSEE AND NO BENEFIT OF SECTION 11 AND 12 CAN BE GIVEN. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER HELD THAT THE STATUS OF THE ASSESSEE HAS TO BE TREATED AS AOP. 4 ITA NO.320/PUN/2010 6. IN VIEW OF THE CANCELLATION OF REGISTRATION AND HAVING REGARD TO THE COMPLEXITIES INVOLVED IN THE ACCOUNTS THE MATTER WA S REFERRED TO THE SPECIAL AUDIT U/S.142(2A) OF THE I.T. ACT. THE REPORT OF T HE SPECIAL AUDITOR WAS RECEIVED BY THE ASSESSING OFFICER ON 11-06-2008 WHO QUANTIFIED THE UNDISCLOSED INCOME ON ACCOUNT OF DONATIONS ARISING OUT OF SEIZED MATERIAL AND WORKED OUT THE SURPLUS PROFIT ON THE BASIS OF R ECASTED ACCOUNTS. IN VIEW OF APPLICABILITY OF PROVISIONS OF SECTION 13(1)(C) REGARDLESS OF CANCELLATION OF REGISTRATION U/S.12AA(3) THE BENEFITS OF SECTION 11 AND 12 WERE DENIED BY THE ASSESSING OFFICER AND THE ASSESSMENT OF THE ASSESSE E WAS MADE AS THAT OF ANY OTHER PERSON. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED FROM THE SEIZED DOCUMENTS AS PER BUNDLE A-2 T HAT THESE EVIDENCES REFLECT THE TRUE STATE OF AFFAIRS AND THAT THE PAGE S ARE GENUINE. ON THE LEFT HAND SIDE THE ASSESSEE HAS WRITTEN NAMES OF THE INS TITUTIONS WHERE ADMISSIONS HAVE TAKEN PLACE AND FROM WHERE THE MONE Y HAS BEEN RECEIVED. THESE SHEETS RELATE TO THIS PERIOD AND SHOW RECEIPT S FROM VARIOUS INSTITUTES SUCH AS SKNCOE (SMT. KASHIBAI NAVALE COLLEGE OF ENG INEERING), POLY (SOU VENUTAI CHAVAN POLYTECHNIC), SCOE (SINHAGAD COLLEGE OF ENGINEERING), MBA, B-PHARMA, SIPS (SINHAGAD INSTITUTE OF PHARMACY ), SCNE (SINHAGAD COLLEGE OF NURSING). ACCORDING TO THE ASSESSING OF FICER, THESE ARE DEFINITELY CASH COLLECTION AT THE HEAD OFFICE ON CASE TO CASE BASIS FOR ADMISSION IN DIFFERENT COURSES. HE OBSERVED THAT THERE ARE MULT IPLE RECEIPTS ON ACCOUNT OF SAME COLLEGE/COURSE IN THE SAME DAY. 8. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAS PURPOSELY WRITTEN THE PAPERS IN SUCH A FORM THAT ONLY THE NAM ES OF INSTITUTIONS IN CODED FORM ARE KNOWN AND THE NAMES OF THE STUDENTS DO NOT BECOME CLEAR WHICH PREVENTS ALL THE CROSS CHECKING AND FURTHER VERIFIC ATION. AGAINST THESE RECEIPTS THE EXPENSES ARE ALSO WRITTEN WHICH ARE CL EARLY IDENTIFIABLE AND 5 ITA NO.320/PUN/2010 INDEPENDENT EVIDENCES EXIST TO PROVE THAT THE ENTRI ES CONTAINED THEREIN ARE TRUE AND CORRECT. 9. THE ASSESSING OFFICER ANALYSED PAGES 31, 43, 45, 71, 83 AND 87 OF BUNDLE A-2 AND OBSERVED THAT CASH DEPOSITS MENTIONE D ON THE RIGHT HAND SIDE OF THESE PAGES WERE DULY VERIFIED FROM THE VAR IOUS BANK ACCOUNTS IN THANE JANATA SAHAKARI BANK OR CENTRAL BANK OF INDIA AS DISCUSSED IN PARA 4.3 OF THE ORDER. ACCORDING TO HIM, THE FACT THAT THESE CASH DEPOSITS WERE DULY VERIFIABLE FROM THE BANK ACCOUNTS PROVE THAT T HE ENTRIES RECORDED IN THE SEIZED DOCUMENTS REFLECT THE TRUE AND ACTUAL STATE OF AFFAIRS. MOREOVER, SOME OTHER ENTRIES ON THE RIGHT HAND SIDE LIKE THAT OF REFUND GIVEN AS A RESULT OF CANCELLATION OF ADMISSION AS MENTIONED IN PAGE 3 9 OF ANNEXURE A-2 WAS ALSO ADMITTED AS CORRECT BY THE ASSESSEE. 10. THE ASSESSING OFFICER ANALYSED THE LEFT HAND SI DE OF THE SEIZED PAPERS AND NOTED THAT OPENING BALANCE OF PARTICULAR PAGE, THEN AMOUNTS AGAINST THE NAMES OF SOME INSTITUTIONS CONTROLLED B Y THE ASSESSEE IN ABBREVIATIVE FORMS LIKE SKNCOE, SCOE ETC. HAVE BEE N MENTIONED OR IN THE NAMES OF COURSES LIKE MBA, B PHARMA ETC. WAS MENTIO NED. HE INFERRED THAT THESE REFLECTED RECEIPTS ON ACCOUNT OF ADMISSION IN THESE INSTITUTES OR IN THESE COURSES. ON ANALYSIS OF DOCUMENTS IN PARA 5.3 OF THE ORDER THE ASSESSING OFFICER HELD THAT THE PAYMENTS WERE RECOR DED ON THE RIGHT HAND SIDE, CLOSING BALANCE WERE WORKED OUT AFTER DEDUCTI NG THESE PAYMENTS/OUTGOINGS/DEPOSITS IN BANK ACCOUNTS ETC. A ND THE SAME CLOSING BALANCE WAS ALSO CARRIED FORWARD TO THE NEXT DAY OP ENING BALANCE. IT IS THEREFORE OBVIOUS THAT AFTER MENTIONING VARIOUS EXP ENSES/OUTGOINGS RECORDED IN CASH ON THE RIGHT HAND SIDE OF THE SEIZED PAPERS , THE CLOSING BALANCES WERE WORKED OUT. IT SHOWS THAT THESE RECORDINGS WE RE IN THE FORM OF DAY TO DAY CASH BOOK SHOWING RECEIPTS AND PAYMENTS AND THE CORRECTNESS OF THE ENTRIES WAS AGAIN PROVED ON ACCOUNT OF FINDINGS ON VERIFICATION OF THE HUGE CASH DEPOSITS IN VARIOUS BANK ACCOUNTS. THE ASSESS ING OFFICER EMPHASIZED 6 ITA NO.320/PUN/2010 THAT WHILE THESE LARGE DEPOSITS IN BANK ACCOUNTS WE RE VERIFIABLE, THE ASSESSEE HAS FAILED TO EXPLAIN ANYTHING ABOUT THE E NTRIES IN THE LEFT HAND SIDE WHICH ACTUALLY REFLECTED THE NAME OF VARIOUS INSTIT UTES/COURSES. THE EXPLANATION OF THE ASSESSEE THAT THESE WERE FOR THE PURPOSE OF PERIODICAL REVIEW OF FINANCIAL POSITION OF THE UNITS AND WERE REGARDING FEES COLLECTED, DAILY BANK BALANCE, EXPECTED GENERATION OF FEES I N NEXT FEW DAYS AND COMMITMENT FOR FINANCIAL OUTGOINGS ETC. WAS DISBELI EVED BY THE ASSESSING OFFICER. 11. HE OBSERVED THAT WHILE THE ASSESSEE HAS REPEATE DLY ACCEPTED THE ENTRIES ON RIGHT HAND SIDE SUCH AS CASH DEPOSITS IN BANK ACCOUNTS, BUT THE ENTRIES ON THE LEFT HAND SIDE OF THE SAME PAPER WAS DENIED. ACCORDING TO THE ASSESSING OFFICER UNLESS THERE WERE CASH RECEIPTS H OW COULD THERE BE HUGE CASH DEPOSITS IN BANK ACCOUNTS AND OTHER EXPENDITUR E ETC AS RECORDED IN THE RIGHT HAND SIDE OF THE SEIZED PAPERS. ON BEING QUE STIONED BY THE ASSESSING OFFICER IT WAS EXPLAINED BY THE ASSESSEE THAT THE H UGE CASH DEPOSITS ARE VERIFIABLE FROM BANK ACCOUNTS AND ALSO THE ENTRIES OF EXPENSES LIKE REFUND OF FEES ON CANCELLATION OF ADMISSION WERE ADMITTED AS CORRECT. HE THEREFORE INFERRED THAT IF IT IS SO, THEN FROM WHERE THE MONE Y IS COMING FOR THESE OUTGOINGS. HE ACCORDINGLY CONCLUDED THAT WHEN A PA RT OF THE ENTRIES ON THE RIGHT HAND SIDE OF THE SEIZED DOCUMENTS WERE FOUND TO BE CORRECT AND ACCEPTED BY THE ASSESSEE, THE REMAINING ENTRIES INC LUDING THOSE ON THE LEFT HAND SIDE CANNOT BE DENIED. HE ACCORDINGLY CONCLUD ED THAT THE ENTRIES ON THE LEFT HAND SIDE WERE FOR THE RECEIPTS OR INCOMIN GS AND ACCORDINGLY REJECTED THE EXPLANATION OF THE ASSESSEE AS UNACCEPTABLE. 12. SO FAR AS RIGHT HAND SIDE IS CONCERNED, THE ASS ESSING OFFICER NOTED THAT THERE ARE CERTAIN AMOUNTS WITHDRAWN AGAINST TH E NAME SHENDESAHEB WHICH IS TOTALING TO RS.36 LAKHS AND THE AMOUNT PAI D AGAINST THE ARROW ( ) MARK WHICH IS PARTICULARLY VERY LARGE AND TO THE T UNE OF RS.7,36,90,000/-. HE OBSERVED THAT THE ASSESSEE WAS UNABLE TO GIVE ANY S PECIFIC EXPLANATION TO 7 ITA NO.320/PUN/2010 THE QUERY RAISED ON THIS ISSUE. HE, THEREFORE ,CON CLUDED THAT ALL ENTRIES ON THE SEIZED DOCUMENTS ARE REAL AND REFLECT ACTUAL TR ANSACTIONS. THE ASSESSING OFFICER FURTHER NOTED THAT IN VIEW OF ABU NDANT EVIDENCES CLEARLY SHOWING CHARGING OF DONATIONS, THE ASSESSEE FAILED TO EXPLAIN THE TRANSACTIONS IN THE LIGHT OF BOOKS MAINTAINED. HE REFERRED TO THE STATEMENT OF SHRI MARUTI N. NAVALE, THE PRESIDENT OF THE ASSESSE E TRUST WHEREIN HE HAS STATED THAT THE ABOVE TRANSACTIONS HAVE NO RELEVANC E WITH THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER NOTED THAT HUGE AMOU NTS HAVE BEEN DEPOSITED IN THE BANK ACCOUNT MAINTAINED WITH THE THANE JANATA SAHAKARI BANK AND PART OF THE ABOVE MONEY HAS BEEN PAID INTO THE BOOKS OF ACCOUNT OF THE ASSESSEE TRUST. HE REFERRED TO THE STATEMEN T OF SHRI SHARAD DATTATRAYA BHOSALE, EMPLOYEE OF THE ASSESSEE TRUST, WHICH WAS RECORDED ON OATH ON 07-10-2005 IN WHICH HE HAD CONFIRMED THAT T HE ENTRIES MADE ON THE VARIOUS PAGES ARE IN HIS HANDWRITING. HE OBSERVED THAT SHRI SHARAD D. BHOSALE IN HIS STATEMENT HAD GIVEN VAGUE REPLIES WI THOUT ANSWERING SPECIFIC QUESTIONS AND NOTINGS ON THE SEIZED MATERIAL. 13. ON THE BASIS OF THE VARIOUS DOCUMENTS SEIZED FR OM THE RESIDENCE OF SHRI MARUTI N. NAVALE, PRESENT OF THE ASSESSEE TRUS T AND THE STATEMENTS RECORDED OF VARIOUS PERSONS THE ASSESSING OFFICER C ONCLUDED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.22,45,06,500/ - ON ACCOUNT OF DONATIONS FOR ADMISSION TO ITS VARIOUS COURSES IN D IFFERENT INSTITUTES RUN BY IT. HE FURTHER NOTED THAT EVEN IN THE SPECIAL AUDIT REP ORT THE ASSESSEE HAS ALSO AVOIDED TO EXPLAIN AND ANSWER THE RELEVANT SEIZED M ATERIAL AS PER ANNEXURE A-2, CASH COLLECTION, CREDITS IN BANK ACCOUNTS, CAS H DEBITED TO SHRI SHENDESAHEB, CASH WITH MARKED ( ) ALL TABULATED, NATURE OF TRANSACTIONS IN THE BANK ACCOUNTS WHERE CASH WAS CREDITED ON ACCOUN T OF DONATIONS AND RECEIPTS IN RESPECT OF AMOUNTS REFUNDED. THE ASSES SEE HAS NOT COOPERATED IN FURNISHING THE RELEVANT DETAILS IN ACCORDANCE WI TH THE TERMS OF REFERENCE. HE THEREFORE HELD THAT THE SUM OF RS.22,45,06,500/- IS THE AMOUNT COLLECTED 8 ITA NO.320/PUN/2010 ON ACCOUNT OF DONATIONS OVER AND ABOVE THE REGULAR FEE AGAINST GRANTING OF ADMISSION AND THE SAME WOULD NOT HAVE BEEN DISCLOSE D AS INCOME FOR A.Y. 2006-07 HAD THERE BEEN NO SEARCH. REJECTING THE VA RIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING OFFICER TREATED THE A MOUNT OF RS.22,45,06,500/- AS UNDISCLOSED INCOME OF THE ASSE SSEE FOR A.Y.2006-07 ON ACCOUNT OF COLLECTION OF DONATIONS BY CONCLUDING AT PARA 6.10 OF THE ASSESSMENT ORDER WHICH READ AS UNDER : 1. THE DOCUMENTS SEIZED FROM THE RESIDENCE OF SHRI M. N. NAVALE, PRINCIPAL TRUSTEE, CLEARLY SHOW THAT HUGE DONATIONS AR E COLLECTED BY STES FOR THE PURPOSE OF GRANTING ADMISSIONS. 2. THE SEIZURE, AS PER BUNDLE NO.A-2, REFLECTS THE TRU E STATE OF AFFAIRS AND THE DOCUMENTS THERE IN ARE GENUINE. 3. THE CORRECTNESS AND RELEVANCE OF THE SEIZED MATERI AL TO THE CASE OF THE ASSESSEE IS CLEARLY ESTABLISHED. 4. THERE IS TOTAL FAILURE ON THE PART OF THE ASSESSEE T O EXPLAIN THE SEIZED MATERIAL AND ALSO TO EXPLAIN THE RELEVANT EVI DENCES IN THE LIGHT OF THE BOOKS MAINTAINED. THE RELEVANCE AND CORRECTNESS O F THE SEIZED MATERIAL IS CLEARLY ESTABLISHED. 5. THE SUM OF RS.22,45,06,500/- REPRESENTS UNDISCLOSED IN COME OF THE ASSESSEE, FOR A.Y. 2006-07, ON ACCOUNT OF COLLECTIO N OF DONATIONS. 14. THE ASSESSING OFFICER FURTHER NOTED THAT THE RE GISTRATION OF THE TRUST HAS BEEN CANCELLED BY THE CIT CENTRAL, PUNE U/S.12A A(3) VIDE ORDER DATED 09-10-2007 AS THE ACTIVITIES OF THE TRUST ARE NOT FOUND TO BE GENUINE AND ALSO THAT THE ACTIVITIES OF THE TRUST ARE NOT BEING CARR IED OUT IN ACCORDANCE WITH THE TRUST DEED. HE, THEREFORE, HELD THAT REGARDLESS OF CANCELLATION OF REGISTRATION THE BENEFIT OF SECTION 11 AND 12 ARE DENIED TO THE ASSESSEE IN VIEW OF APPLICABILITY OF SECTION 13(1)(C) OF THE ACT AND TH E STATUS OF THE ASSESSEE HAS TO BE TREATED AS AOP. 15. THE ASSESSING OFFICER NOTED THAT AS PER THE TER MS OF REFERENCE, THE SPECIAL AUDITORS HAVE RECASTED INCOME & EXPENDITURE ACCOUNT AND BALANCE SHEET OF THE ASSESSEE BY EFFECTING CHANGES IN THE F OLLOWING LINES : 9 ITA NO.320/PUN/2010 I. ALL CAPITAL RECEIPTS INCLUDING DONATIONS IN THE BA LANCE SHEET WHETHER SHOWN UNDER CORPUS FUND OR ANY OTHER FUND HAV E BEEN TREATED AS REVENUE RECEIPTS, AMONGST OTHER THINGS, IN THE INCO ME & EXPENDITURE A/C. II. ALL INSTANCES OF CAPITAL EXPENDITURE DEBITED IN T HE INCOME & EXPENDITURE A/C WERE IDENTIFIED AND CAPITALIZED FOR WORKING OUT THE ALLOWABLE DEPRECIATION AS PER THE PROVISION OF THE I. T. ACT. III. DEPRECIATION CHART AS PER THE PROVISIONS OF I.T. ACT HAS BEEN PREPARED. IV. VARIOUS DISALLOWANCE AS LAID DOWN IN TAX AUDIT REP ORT U/S.44AB OF THE I.T. ACT HAVE BEEN COMPUTED. V. DISALLOWANCES AS PER THE TAX AUDIT REPORT, YEAR WISE , SUCH AS 40(A)(IA), 40A(2)(B), 40A(3), 43B AND EXPLANATION T O 37(1) HAVE BEEN TABULATED. VI. VIOLATIONS AS PER TAX AUDIT REPORT SUCH AS TDS VIOL ATIONS HAVE BEEN TABULATED. 16. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE SPECIAL AUDITORS IN THEIR AUDIT R EPORT AT PARA 3.1 TO 3.6 HAVE MENTIONED THAT THE ASSESSEE HAD ITSELF CAPITALIZED PART OF THE INTEREST ON BORROWED FUNDS UTILIZED FOR ACQUISITION OF ASSETS, I.E. WHEN PROVISO TO SECTION 36(1)(III) WAS INSERTED W.E.F. 01-04-2004. IN RESP ECT OF THE PERIOD PRIOR TO THIS, ON BEING ASKED BY THE AUDITOR REGARDING THE D ATE ON WHICH THE RESPECTIVE FIXED ASSETS WERE RECEIVED AND WERE PUT TO USE, END USE OF THE TERM LOANS ETC. THE ASSESSEE WAS NOT ABLE TO PROVID E ANY SATISFACTORY REPLY. THEREFORE THE AUDITOR HAS CAPITALIZED THE ENTIRE IN TEREST AMOUNT IN THE RECASTED ACCOUNTS. 17. ON BEING QUESTIONED BY THE ASSESSING OFFICER TH E ASSESSEE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F DCIT, AHMEDABAD VS. CORE HEALTH CARE LTD. REPORTED IN (2008) 167 TAXMAN N.COM 206 (SC) AND SUBMITTED THAT THE ENTIRE INTEREST PAID DURING A.Y. 1999-00 TO 2003-04 SHOULD BE ALLOWED AS DEDUCTION WITHOUT GOING INTO DETAILS OF UTILIZATION. IT WAS ALSO STATED THAT DEPRECIATION ALLOWABLE AS PER THE I.T. ACT WILL HAVE TO BE REWORKED. 10 ITA NO.320/PUN/2010 18. HOWEVER, THE ASSESSING OFFICER REJECTED THE EXP LANATION GIVEN BY THE ASSESSEE AND DISALLOWED THE DEDUCTION CLAIMED ON AC COUNT OF INTEREST. WHILE DOING SO, HE OBSERVED THAT WHILE THE TOTAL AM OUNT OF INTEREST PAID DURING THE YEAR WAS RS.15,97,37,629/- THE INTEREST CAPITALIZED BY THE ASSESSEE ITSELF WAS RS.2,67,71,378/- AND THE INTERE ST DEBITED TO THE INCOME AND EXPENDITURE WAS RS.13,29,66,251/-. REJECTING T HE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING OFFICER CAPITAL IZED THE AMOUNT OF RS.12,58,58,634/- OUT OF THE ABOVE AMOUNT OF RS.13, 29,66,251/- TOWARDS THE COST OF THE ASSET BY FOLLOWING THE SPECIAL AUDIT RE PORT ON THE GROUND THAT RELEVANT DETAILS OF TERM LOAN, WORKING CAPITAL LOAN ETC AND THEIR UTILIZATION WERE NOT GIVEN. 19. THE ASSESSING OFFICER NOTED THAT DURING THE COU RSE OF SEARCH AT THE RESIDENCE OF SHRI M.N. NAVALE ON 20-07-2005 CASH O F RS.1,26,81,775/- AND JEWELLERY OF RS.45,92,610/- WAS FOUND OUT OF WHICH CASH AMOUNTING TO RS.1,20,00,000/- AND JEWELLERY VALUED AT RS.40,90,2 06/- WAS SEIZED. HE OBSERVED THAT SHRI M.N. NAVALE COULD NOT EXPLAIN T HE SOURCE OF CASH AND IN RESPONSE TO QUESTION NO.15 HE HAD SURRENDERED A SUM OF RS.1,25,00,000/-. THE ASSESSING OFFICER REPRODUCED THE RELEVANT QUEST ION AND ANSWER AT PARA 10.1 OF THE ASSESSMENT ORDER. HE NOTED THAT SUBSEQ UENTLY SHRI M.N. NAVALE HAD TAKEN A DIFFERENT STAND AND RETRACTED FROM THE STATEMENT AND CREATED A BIGGER HUF AND OBTAINED A COURT DECREE IN ORDER TO CREATE AN IMPRESSION THAT THE ASSETS FOUND AND SEIZED PERTAIN TO THE BIG GER HUF AND OUT OF THE SOURCES OF THE BIGGER HUF. THE SUBMISSION OF THE A SSESSEE THAT DURING THE LAST 6 TO 7 YEARS THE HUF HAD GIVEN CASH AMOUNTING TO RS.12,30,00,000/- TO SHRI M.N. NAVALE WAS DISBELIEVED BY THE ASSESSING O FFICER ON THE GROUND THAT THERE WAS NO PROOF OF THE EXPENSES OF THE HUF AND NO INCOME-TAX AND WEALTH-TAX RETURNS WERE FILED BY THE HUF. FURTHER, NONE OF THE PROPERTY RECORDS HAVE ANY REFERENCE TO ANY HUF AND THERE IS NOTHING ON RECORD TO SHOW THAT THE PROPERTIES WERE INDEED PURCHASED FROM HUF FUND. HE 11 ITA NO.320/PUN/2010 THEREFORE HELD THAT THE HUF DOES NOT HAVE THE CAPAC ITY TO GENERATE SO MUCH OF CASH AND THE ASSETS SAID TO BE BELONGING TO THE HUF ARE ACTUALLY THE PROPERTIES PURCHASED/ACQUIRED BY THE TRUST OVER A P ERIOD OF TIME OUT OF THEIR INCOME AND THIS IS CLEAR FROM THE RECORD. 20. SIMILAR WAS THE POSITION WITH REGARD TO THE JEW ELLERY VALUED AT RS.40.90 LAKHS. IN ABSENCE OF ANY PROOF TO SUPPORT THE STAND THAT SMT. KASHIBAI NAVALE WHO DIED ON 08-04-1998 OWNED 4430 G RAMS OF GOLD JEWELLERY BECAUSE SHE CAME FROM A VERY RICH FAMILY, THE ASSESSING OFFICER HELD THAT THE JEWELLERY HAS BEEN ACQUIRED OUT OF TH E FUNDS GENERATED AND SIPHONED OFF OUT OF THE RECEIPTS OF THE TRUST. 21. THE ASSESSING OFFICER ANALYSED VARIOUS IMMOVABL E PROPERTIES HELD BY SHRI M.N. NAVALE AND HIS FAMILY MEMBERS THE DETAILS OF WHICH ARE GIVEN AT PAGES 47 AND 48 OF THE ASSESSMENT ORDER. ACCORDING TO THE ASSESSING OFFICER ALL THESE PROPERTIES WERE PURCHASED OUT OF THE MONEY GENERATED AND SIPHONED OFF OUT OF THE RECEIPTS ON ACCOUNT OF DONA TIONS. THE DIVERSION/SIPHONED OFF MONEY IS OBVIOUSLY TO CREATE ASSETS, MEET PERSONAL EXPENSES AND DERIVE PERSONAL BENEFITS FOR THE TRUST EES. THE TRUSTEES SIMPLY CANNOT EXPLAIN THE ASSETS ON THE BASIS OF NOMINAL I NCOME RETURNED AND KNOWN SOURCE OF INCOME. HE ACCORDINGLY HELD THAT THE FUNDS OF THE TRUST HAVE BEEN DIVERTED FOR THE BENEFIT OF THE TRUSTEES AND THEIR CLOSE RELATIVES. 22. THE ASSESSING OFFICER FURTHER NOTED THAT THE AS SESSEE HAS PAID RENT ON PROPERTIES TAKEN ON HIRE PARTICULARLY FROM SHRI M.N. NAVALE AND FAMILY MEMBERS WHICH IS NOT REASONABLE AT ALL. HE REFERRE D TO THE SPECIAL AUDIT REPORT WHO HAVE GIVEN THE FOLLOWING DETAILS IN THE LIGHT OF THE DECISION OF HONBLE ALLAHABAD HIGH COURT REPORTED IN 125 ITR 13 4. 12 ITA NO.320/PUN/2010 DESCRIPTION OF PROPERTY OWNER OF THE PROPERTY COST OF THE PROPERTY (RS.) PERIOD OF LEASE COVERED IN THE AUDIT PERIOD LICENSE FEE PAID FOR PREMISES ONLY (PER ANNUM) FAIR RENT AS PER HONBLE HIGH COURT OF ALLAHABAD @7% P.A. OFFICE AT GOVIND CHAMBERS, KARVE ROAD, PUNE M.N. NAVALE 3,40,493 1 - 12 - 2004 TO 31-3-2006 9,00,000 23,835 FARMHOUSE AT NDA ROAD, PUNE M.N. NAVALE 68,30,000 1 - 1 - 2005 TO 31-3-2006 15,00,000 4,78,100 FLAT NO.7,8 & 9, GEETA BUILDING, SION, MUMBAI M.N. NAVALE 1,08,30,000 6 - 10 - 2005 TO 31-3-2006 25,44,000 7,58,100 23. ACCORDING TO THE ASSESSING OFFICER THE RENT PAI D BY THE ASSESSEE TO SHRI M.N. NAVALE AND HIS FAMILY MEMBERS IS NOT AT A LL REASONABLE AND THEREFORE ATTRACTS THE PROVISIONS OF SECTION 13(1)( C)(II). ACCORDING TO THE ASSESSING OFFICER THE FARM HOUSE DOES NOT SERVICE A NY PURPOSE RELATING TO THE OBJECTS OF THE TRUST AND HAS GOT NOTHING TO DO WITH RUNNING OF EDUCATIONAL INSTITUTIONS. THE RENT CHARGED IS UNHEARD OF. THE RENT CHARGED IS ABNORMALLY HIGH WHEN COMPARED WITH THE COST OF THE PROPERTY. THE ASSESSEE HAS BEEN CREATING PROPERTIES OUT OF FUNDS GENERATED FROM THE TRUST AND THEN MAKING USE OF THESE PROPERTIES FOR FURTHER SIPHONING OFF F UNDS FROM THE TRUST IN THE FORM OF ABNORMALLY HIGH RENTS. REJECTING THE VARIO US EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING OFFICER MADE ADDITION OF RS.24,55,015/-. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.34,79,98,520/- BY CONCLUDING AS UNDE R: 16. IN VIEW OF THE TOTALITY OF FACTS AND CIRCUMSTAN CES, DISCUSSED AS ABOVE, UNDER PART A AND PART B OF THE ORDER, FOLLO WING CONCLUSIONS ARE REACHED. I) THE ASSESSEE STES CHARGED DONATIONS WHILE GRANTING AD MISSIONS. II) AS THE REGISTRATION OF THE TRUST IS CANCELLED ON T HE GROUNDS THAT ACTIVITIES OF THE TRUST ARE NOT GENUINE AND ALSO ARE N OT BEING CARRIED OUT IN ACCORDANCE WITH THE TRUST DEED, THE ASSESSEE STES WI LL HAVE TO BE ASSESSED AS AN AOP. 13 ITA NO.320/PUN/2010 III) REGARDLESS OF CANCELLATION OF REGISTRATION, THE BENEFITS OF SECTIONS 11 & 12 ARE DENIED IN VIEW OF APPLICABILITY OF SECTI ON 13(1)(C) ON ACCOUNT OF CASH AND JEWELLERY SEIZED, SIPHONING/ DIVERSION OF MONEY, CREATION OF ASSETS MUCH MORE IN VALUE THAN THE NOMINAL INCOMES RETU RNED AND KNOWN SOURCES OF INCOME, PAYMENT OF RENT IN EXCESS OF REASONABLE RENT AND OTHER BENEFITS. IV) IN VIEW OF COMPLEXITY INVOLVED IN THE ACCOUNTS AND THE CHANGES TO BE EFFECTED ON ACCOUNT OF CHANGE IN THE STATUS OF THE ASSESSEE TO THAT OF 'AOP', SPECIAL AUDIT U/S.142(2A) HAS BEEN CONDUCTED A ND THE NET TAXABLE INCOMES, FOR A.YRS 1999-2000 TO 2006-07, HAVE BEEN WO RKED OUT ON THE BASIS OF RECAST ACCOUNTS AND TAXED IN THIS ORDER. V) THERE IS TOTAL FAILURE ON THE PART OF THE ASSESSEE TO EXPLAIN THE SEIZED MATERIAL, EVIDENCING COLLECTION OF DONATIONS/ CAPITATION FEE. VI) THE RELEVANCE AND CORRECTNESS OF THE SEIZED MATER IAL IS CLEARLY ESTABLISHED. VII) THE UNDISCLOSED INCOME, ON ACCOUNT OF DONATIONS COLLECTED, FOR A.Y.2006-07, HAS BEEN WORKED OUT AND TAXED IN THIS OR DER. VIII) SEIZED MATERIAL CLEARLY SHOWS COLLECTION OF DO NATIONS / CAPITATION FEE ON ONE HAND AND EXPENDITURE/ OUTGOINGS ON THE OT HER HAND. IX) INSTANCES OF SIPHONING AND DIVERSION OF AMOUNTS, O UT OF RECEIPTS ON ACCOUNT OF DONATIONS/CAPITATION FEE, ARE EVIDENT FROM THE SEIZED MATERIAL. X) NUMBER OF ASSETS OF THE PRINCIPAL TRUSTEE/RELATED PE RSONS HAVE BEEN FOUND/ SEIZED AS AGAINST NOMINAL INCOMES RETURNED AND KNOWN SOURCES OF INCOME. THE ASSETS/BENEFITS DERIVED ARE POSSIBLE ONLY BECAUSE OF RECEIPTS ON ACCOUNT OF DONATIONS/CAPITATION FEE. XI) THE THEORY OF BIGGER HUF AND OBTAINING OF DECR EE FROM THE COURT IS AN EFFORT ONLY TO ESCAPE THE RIGOURS OF LAWS RELATI NG TO TAXATION. THE SAID DECREE OF THE HON. COURT HAS BEEN OBTAINED BY MI SREPRESENTATION AND SUPPRESSION OF FACTS. THE SAME IS NOT ACCEPTED BY THE DEPARTMENT AND APPROPRIATE COURSE OF ACTION IS CONTEMPLATED. XII) SIPHONING OF MONEY, DIVERSION OF AMOUNTS, CREAT ION OF ASSETS, ALL OUT OF THE RECEIPTS ON ACCOUNT OF DONATIONS, AND PAYM ENT OF RENT WHICH IS NOT REASONABLE ATTRACT THE PROVISIONS OF SECTION 13(1)( C). THESE ARE THE BENEFITS DERIVED BY PERSONS REFERRED TO IN SECTION 13(3 ). 24. BEFORE CIT(A) THE ASSESSEE CHALLENGED THE VALID ITY OF THE ORDER PASSED U/S.153C R.W.S. 143(3) ON THE GROUND THAT TH E SAME IS BASED ON THE ORDER OF THE CIT PASSED U/S.12AA(3) FOR CANCELLING THE REGISTRATION WHICH IS INVALID SINCE THE REGISTRATION GRANTED U/S.12A(A) C ANNOT BE CANCELLED U/S.12AA(3). IT WAS ARGUED THAT THE ASSESSING OFFI CER HAD PASSED THE ASSESSMENT ORDER BASED ON THE FACT THAT THE CIT CEN TRAL HAD CANCELLED THE 14 ITA NO.320/PUN/2010 REGISTRATION OF THE TRUST HELD U/S.12A. HOWEVER, T HE ITAT HAS RESTORED THE REGISTRATION. THEREFORE, THE REASONING GIVEN BY TH E ASSESSING OFFICER FOR DENYING THE CLAIM OF EXEMPTION DOES NOT SURVIVE. 25. THE ASSESSING OFFICER VIDE HIS LETTER DATED 03- 02-2009 POINTED OUT THAT THE ASSESSEE HAD VIOLATED THE PROVISIONS OF SE CTION 13(D)(I) BY INVESTING IN SHARES OF COOPERATIVE BANKS AND ALSO BY MAKING C ERTAIN ADVANCES AND DEPOSITS NOT PERMITTED U/S.11(5). SINCE THIS ASPEC T WAS NOT EXAMINED BY THE ASSESSING OFFICER THE LD.CIT(A) RELYING ON VARIOUS DECISIONS HELD THAT THE POWERS OF THE CIT(A) WAS COTERMINOUS WITH THAT OF T HE ASSESSING OFFICER AND U/S.250(4). HE CAN MAKE ENQUIRIES AND ADJUDICATE ON ANY MATTER NOTICED BY HIM DURING THE APPELLATE PROCEEDINGS WHICH RELATED TO THE ISSUE AT HAND. HE FURTHER HELD THAT THE CIT(A) WAS ALSO EMPOWERED TO IMPROVE AN ASSESSMENT ORDER BY TAKING A DIFFERENT LINE ALTOGETHER THAN TA KEN IN THE ASSESSMENT ORDER AFTER DUE APPLICATION OF MIND. HE OBSERVED THAT SI MILAR FINDINGS AND INFERENCES WERE ALSO FOLLOWED IN THE APPEAL ORDERS FOR A.Y. 2000-01 AND A.Y. 2009-10 AND IN SUBSEQUENT YEARS TILL A.Y. 2005-06. 26. FROM THE VARIOUS DETAILS FILED HE NOTED THAT TH E ASSESSEE HELD THE FOLLOWING SHARES OF COOPERATIVE BANKS : A.Y. NAME OF THE COOPERATIVE BANK VALUE OF SHARES 2006 - 07 DOMBIVALI NAGARI SAHAKARI BANK LTD. 4,96,970 RUPEE COOPERATIVE BANK LTD. 49,750 SAMPAD A SAHAKARI BANK LTD. 1,00,000 THE THANE JANATA SAHAKARI BANK LTD. 1,00,000 TOTAL 7,46,720 27. SIMILARLY, THE ASSESSEE HAD ALSO MADE THE FOLLO WING INVESTMENTS/ADVANCES IN VIOLATION OF SECTION 13(1)( D) AS POINTED OUT BY THE ASSESSING OFFICER VIDE LETTER DATED 03-02-2009 : 15 ITA NO.320/PUN/2010 A.Y. NAME OF THE TRUST VALUE OF SHARES 2006 - 07 (I) SAVITRIBAI PHUNE SHIKSHAN MANDAL 1,81,63,948 (II) SHRINATH SHIKSHAN PRASARAK MANDAL 99,91,659 28. THE ASSESSEE FILED DETAILED SUBMISSIONS AND REL IED ON VARIOUS DECISIONS. ON THE BASIS OF THE VARIOUS SUBMISSIO N FILED BY THE ASSESSEE THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSES SING OFFICER. AFTER CONFRONTING THE REMAND REPORT TO THE ASSESSEE AND C ONSIDERING THE SUBMISSION OF THE ASSESSEE TO SUCH REMAND REPORT TH E LD.CIT(A) RELYING ON HIS ORDER FOR A.Y. 2000-01 AND ONWARDS HELD THAT BY INVESTING IN SHARES OF COOPERATIVE BANKS TO THE TUNE OF RS.7,46,720/- THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(D)(I) AND THEREFORE THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S.L1 OF THE I.T. ACT DUE TO SUCH VIOLAT ION. 29. THE LD.CIT(A) FURTHER NOTED THAT ASSESSEE HAD I NVESTED IN SHARES OF LIMITED COMPANIES IN VIOLATION OF PROVISIONS OF SEC TION 13(1)(D)(III). ON BEING CONFRONTED BY THE CIT(A) IT WAS ARGUED THAT EACH MA NAGEMENT INSTITUTION OF THE ASSESSEE TRUST HAS INITIALLY ACQUIRED ONLY ONE SHARE OF THE PUBLIC LIMITED COMPANIES WHICH ARE RENOWNED AND RECOGNIZED AS BLUE CHIP COMPANIES. THE PURPOSE OF ACQUISITION OF THE SHARES WAS TO OBT AIN THE ACTUAL FINANCIAL STATEMENTS, FINANCIAL ANALYSIS, AUDITORS REPORTS AN D DIRECTORS REPORT ETC WHICH FORMS PART OF SYLLABUS OF MANAGEMENT COURSES SUCH AS MBA, MCA ETC. AND WHICH ARE KEPT IN THE LIBRARY AND ARE READILY MADE AVAILABLE TO THE STUDENTS. THESE ANNUAL REPORTS ARE PROVIDED TO THE STUDENTS F OR THEIR INDEPTH STUDIES AND DISCUSSIONS AND TO FORM THEIR OPINION ABOUT THE PORTFOLIO MANAGEMENT OF THESE COMPANIES. IT WAS ARGUED THAT INVESTMENT IN S HARES OF THOSE COMPANIES WAS TOWARDS THE ACCOMPLISHMENT OF THE OBJ ECTIVES OF THE TRUST AND THEREFORE THE ACQUISITION OF THE SHARES IS COUP LED WITH THE ADEQUATE CONSIDERATION IN THE FORM OF BENEFITS ACCRUABLE TO THE STUDENTS OF VARIOUS MANAGEMENT COURSES. THEREFORE, THE PROVISIONS OF S ECTION 13(1)(D) ARE NOT 16 ITA NO.320/PUN/2010 APPLICABLE. THE ASSESSEE GAVE THE LIST OF VARIOUS COMPANIES WHOSE TOTAL COST IS ONLY RS.1,50,000/-. 30. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFIC ER. AFTER CONSIDERING THE REMAND REPORT OF THE ASSESSING OFFICER AND THE SUBM ISSION OF THE ASSESSEE HE OBSERVED THAT IN VIEW OF THE HOLDING OF SHARES I N DIFFERENT COMPANIES BY THE ASSESSEE TRUST, IT HAS VIOLATED PROVISIONS OF S ECTION 13(1)(D)(III) WHICH PROHIBITS THE HOLDING OF SHARES WHATSOEVER OTHER TH AN THOSE OF PUBLIC SECTOR UNDERTAKINGS. THEREFORE, THE CONTENTION OF THE ASSE SSEE THAT THESE WERE NOT INVESTMENT IS THEREFORE NOT TENABLE IN LAW. HE HEL D THAT ALTHOUGH THE TOTAL COST OF PURCHASE OF THE SHARES HAVE BEEN STATED TO BE ONLY RS.1,50,000/-, STILL IN VIEW OF THE CLEAR PROHIBITION UNDER PROVIS IONS OF SECTION 13(1)(D)(III) TOWARDS HOLDING OF SHARES OF COMPANIES OTHER THAN P ROVIDED THEREIN, THERE IS VIOLATION OF THIS RESTRICTION AND THEREFORE THE ASS ESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(D)(III) OF THE I.T. ACT . 31. SO FAR AS THE ISSUE RELATING TO VIOLATION OF PR OVISIONS OF SECTION 13(1)(D)(I) ON ACCOUNT OF INVESTMENTS/ADVANCES MADE BY THE ASSESSEE TO DIFFERENT INSTITUTIONS/TRUSTS ARE CONCERNED, HE HEL D THAT IN VIEW OF HIS DECISION FOR A.Y. 2005-06 AND THE BOARDS INSTRUCTIONS NO.113 2 THE EXPLANATION OF THE ASSESSEE THAT SUCH LOANS AND ADVANCES GIVEN TO OTHE RS TRUSTS/SOCIETIES WHICH HAVE BEEN DULY REGISTERED UNDER THE BOMBAY PU BLIC TRUST ACT, SOCIETY REGISTRATION ACT AND SECTION 12A OF THE ACT WAS AN APPLICATION OF INCOME AND THEREFORE PROVISIONS OF SECTION 13(1)(D)(I) WOU LD NOT BE ATTRACTED IS CORRECT. HE OBSERVED THAT DURING THIS YEAR ADVANCE S WERE MADE BY THE ASSESSEE TO TWO DIFFERENT TRUST/INSTITUTIONS AMOUNT ING TO RS.2,81,55,607/-. FOLLOWING HIS ORDER FOR A.Y. 2005-06 HE HELD THAT M AKING THESE ADVANCES WOULD NOT MAKE THE ASSESSEE INELIGIBLE FOR EXEMPTIO N. 17 ITA NO.320/PUN/2010 32. SO FAR AS ADDITION OF RS.22,45,06,500/- ON THE BASIS OF CAPITATION FEE/DONATIONS RECEIVED FOR GRANTING ADMISSIONS TO V ARIOUS COURSES RUN BY DIFFERENT INSTITUTIONS OF THE ASSESSEE TRUST IS CON CERNED IT WAS SUBMITTED THAT THE ASSESSING OFFICER ERRED IN INTERPRETING THE NOT INGS AND RECORDINGS ON THE LOOSE PAPERS SEIZED FROM SHRI M.N. NAVALE AS COLLEC TION OF CAPITATION FEE AND DONATION FOR ADMISSIONS AND SIPHONING OFF THE SAME. IT WAS ARGUED THAT THE ASSESSING OFFICER HAS FAILED TO PROVE THAT THE ASSE SSEE HAS SIPHONED OFF THE MONEY. THE ASSESSEE MADE ELABORATE SUBMISSIONS TO COUNTER THE ALLEGATION OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS RECE IVED HUGE DONATION/CAPITATION FEE FOR GIVING ADMISSION TO VAR IOUS STUDENTS IN DIFFERENT INSTITUTIONS RUN BY IT AND THAT THE TRUSTEES AND TH EIR RELATIVES HAVE SIPHONED OFF THE MONEY FOR ACQUIRING VARIOUS ASSETS. 33. BASED ON THE SUBMISSIONS MADE BY THE ASSESSEE T HE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFIC ER. AFTER CONFRONTING THE SAME TO THE ASSESSEE AND CONSIDERING THE SUBMISSION S MADE BY THE ASSESSEE FROM TIME TO TIME FOR SUCH REMAND REPORT T HE LD.CIT(A) UPHELD THE ADDITION OF RS.22,45,06,500/- MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER : 8.16 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLAN T AND THE MATERIAL AVAILABLE ON RECORD. IT IS NOTICED THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS ANALYSED THE DOCUMENTS SEIZED FROM THE RESIDENCE OF SHRI M.N.NAVALE AS PER BUNDLE-A2, PAGES 1 TO 101, AND BUNDLE NO.5 AND ALSO SOME OTHER PAGES SEIZED FROM THE RESIDENCE OF S HRI G.K.SHAHANI LISTED AS PER BUNDLE NO.1. VARIOUS INSTANCES HAVE BEEN M ENTIONED IN THE ASSESSMENT ORDER FROM THE SEIZED DOCUMENTS IN WHICH THE A UTHENTICITY AND THE CORRECTNESS OF THE ENTRIES HAVE BEEN ANALYSED A ND ASCERTAINED. THE ANALYSIS OF THE ENTRIES ON PAGE NOS.31, 43, 45, 71, 83 & 87 OF THIS BUNDLE A-2 WERE MADE ELABORATELY AND THE CASH DEPOSIT S MENTIONED ON RIGHT HAND SIDE OF THESE PAGES WERE DULY VERIFIED FROM THE VARIOUS BANK ACCOUNTS IN THANE JANATA BANK OR CENTRAL BANK OF IND IA, AS DISCUSSED IN PARA 4.3 OF THE ORDER. THE FACT THAT THESE CASH DEPOSI TS WERE DULY VERIFIABLE FROM THE BANK ACCOUNTS, PROVES THAT THE EN TRIES RECORDED IN THE SEIZED DOCUMENTS REFLECTED TRUE AND ACTUAL STATE O F AFFAIRS. MOREOVER, SOME OTHER ENTRIES ON THE RIGHT HAND SIDE LIKE THAT OF REFUND GIVEN AS A RESULT OF CANCELLATION OF ADMISSION AS MENTIONED IN PA GE 39 OF ANNEXURE- A2 WAS ALSO ADMITTED AS CORRECT BY THE APPELLANT. IN T HE WRITTEN SUBMISSION DATED 4.2.2009, THE ASSESSEE HAS ADMITTED THAT T HESE ENTRIES ON RIGHT HAND SIDE OF THE SEIZED PAPERS SHOWED OUTGOING S, BEING CASH DEPOSITS IN BANK ACCOUNTS, FEES REFUNDED ON CANCELLATIO N OF ADMISSIONS 18 ITA NO.320/PUN/2010 AND EXPENSES INCURRED. THEREFORE, THE INFERENCES / CON CLUSIONS DRAWN BY THE ASSESSING OFFICER REGARDING RIGHT HAND SIDE OF THESE DOCUMENTS ARE BEING ADMITTED IN THE ASSESSEE'S SUBMISSIONS . 8.17 NOW, COMING TO THE LEFT HAND SIDE OF THESE SEIZED PAPERS; THE ANALYSIS IN THE ASSESSMENT ORDER SHOWED THAT OPENING BALAN CE OF A PARTICULAR PAGE, THEN AMOUNTS AGAINST THE NAMES OF SOME INSTITUTIONS CONTROLLED BY THE APPELLANT IN ABBREVIATE FORMS LIKE SKNCOE, SCOE ETC. HAVE BEEN MENTIONED OR IN THE NAMES OF COURSES LIKE MB A, B PHARMA ETC. WAS MENTIONED. IT WAS INFERRED THAT THESE REFLECTED RE CEIPTS ON ACCOUNT OF ADMISSIONS IN THESE INSTITUTES OR IN THESE COURSES. IT WA S ALSO NOTICED FROM THE ANALYSIS OF DOCUMENTS IN PARA 5.3 OF THE ORDE R, THAT THE PAYMENTS WERE RECORDED ON THE RIGHT HAND SIDE, CLOSIN G BALANCES WERE WORKED OUT AFTER DEDUCTING THESE PAYMENTS / OUTGOINGS / DEPOSITS IN BANK ACCOUNT'S ETC; AND THE SAME CLOSING BALANCE WAS AL SO CARRIED FORWARD TO THE NEXT DAY AS OPENING BALANCE. FOR EXAM PLE, FROM LOOSE PAPER NO.25 DATED 17.6.2005, THE CLOSING BALANCE AFT ER DEDUCTING ALL OUTGOINGS (INCLUDING AN AMOUNT OF RS.57 IAKHS AGAINST A RROW ( ) MARK), OF RS.RS.77,000/- WAS CARRIED FORWARD TO LOOSE P APERS NO.27 TO 29 FOR 18.6.2005. IT IS, THEREFORE, OBVIOUS THAT AFTE R MENTIONING VARIOUS EXPENDITURES / OUTGOINGS RECORDED IN CASH ON THE RIGHT HAND SIDE OF THE SEIZED PAPERS, THE CLOSING BALANCES WERE WORKED OUT. IT SHOWS THAT THESE RECORDINGS WERE IN THE FORM OF DAY TO DAY CASH BOOK SH OWING RECEIPTS AND PAYMENTS, AND THE CORRECTNESS OF THE ENTRIES WAS AGA IN PROVED ON ACCOUNT OF THE FINDINGS OF VERIFICATION OF THE HUGE CASH DEPOSITS IN VARIOUS BANK ACCOUNTS DISCUSSED ABOVE. 8.18 AT DIFFERENT INSTANCES IN THE ASSESSMENT ORDER , IT HAS BEEN REPEATEDLY EMPHASISED BY THE ASSESSING OFFICER THAT WHILE THESE LARGE DEPOSITS IN BANK ACCOUNTS AS DISCUSSED ABOVE WERE VERIFIABLE, THE APPELLANT HAS FAILED TO EXPLAIN ANYTHING ABOUT THE ENTRIES ON THE LEFT HAND SIDE; WHICH ACTUALLY REFLECTED RECEIPTS I N THE NAME OF VARIOUS INSTITUTES OR COURSES. THE SAME APPROACH ON THE PART OF THE APPELLANT HAS CONTINUED THROUGHOUT THE REPLY DATED 4.2.2009; REPRODUCED ABOVE AT PARA 8.13. THE APPELLANT STARTS OFF WITH THE EXPLANATION THAT 'THE NOTINGS ON THE LEFT HAND SIDE OF THE PAPER IS AN OVERALL OR EXPECTED CASH POSITION INCLUSIVE OF CHEQ UES / DDS GET TO BE DEPOSITED AS INFORMED BY THE RESPECTIVE UNITS' . IT WAS ALSO CLAIMED THAT THESE WERE FOR THE PURPOSE OF PERIODICAL REVIE W OF FINANCIAL POSITION OF THE UNITS - AND WERE REGARDING FEES COL LECTED, DAILY BANK BALANCE, EXPECTED GENERATION OF FEES IN NEXT FEW DA YS AND COMMITMENT FOR FINANCIAL OUTGOINGS ETC. IN THE SAME PARAS, HOWEVER, MAKING A U-TURN; IT IS ALSO CLAIMED TO BE MERELY 'R OUGH WORK', AND IT IS CLAIMED THAT THE ENTRIES ON THE LEFT HAND SIDE D O NOT NECESSARILY MEAN ANY INCOMINGS. THIS EXPLANATION OF THE APPELLA NT IS NEITHER HERE NOR THERE. IT IS ONLY GOING HALF WAY AND WITHOUT GI VING NECESSARY PROOF. GENERAL EXPLANATIONS ARE RESORTED TO, WITHOU T SPECIFIC ONES REGARDING EACH ENTRY RECORDED ON THE LEFT HAND SIDE OF THE SEIZED DOCUMENTS. BUT THE TENOR OF THE EXPLANATION DATED 4 .2.2009 MAKES IT ABUNDANTLY CLEAR THAT THE APPELLANT IS NOT DENYING THESE ENTRIES ALTOGETHER; AS APPARENT FROM THE ABOVE UNDERLINED P ORTION. BUT, AFTER GOING HALF WAY THROUGH, AGAIN THE APPELLANT GOES IN TO A DENIAL MODE AND STATES THAT THESE ARE ONLY ROUGH WORKINGS ETC. THE ASSESSEE HAS REPEATEDLY ACCEPTED THE ENTRIES ON RIGHT HAND SIDE SUCH AS CASH DEPOSITS IN BANK ACCOUNT'S; BUT THE ENT RIES ON LEFT HAND SIDE OF THE SAME PAPER IS BEING DENIED. THE ASSESSING OFFI CER HAS CORRECTLY POINTED OUT THAT UNLESS THERE WERE CASH RECE IPTS; HOW COULD 19 ITA NO.320/PUN/2010 THERE BE HUGE CASH DEPOSITS IN THE BANK ACCOUNTS AND OT HER EXPENDITURE ETC. AS RECORDED ON RIGHT HAND SIDE OF THE SEIZED PAPE RS. IN REPLY DATED 4.2.2009; IN RESPECT OF BUNDLE A-2, PAGE NOS.31, 43, 45, 71, 83 & 87 (REFER PARA 4.3 OF ASSESSMENT ORDER), THE ASSESSEE HAS CATEGORICALL Y STATED THAT THE HUGE CASH DEPOSITS ARE VERIFIABLE FROM BANK A/C'S A ND ALSO THE ENTRIES OF EXPENSES LIKE REFUND OF FEES ON CANCELLATION OF ADMISSION WERE ADMITTED AS CORRECT. IF IT IS SO, FROM WHERE IS THE MON EY COMING FOR THESE OUTGOINGS? OBVIOUSLY, ON LEFT HAND SIDE OF THESE SAME P APERS THE INCOMINGS OR RECEIPTS IN CASH HAVE BEEN RECORDED, WHIC H ARE THE SOURCES OF THESE PAYMENTS AND HUGE DEPOSITS IN BANK ACCOUNTS ETC . THE ASSESSING OFFICER HAS THUS RIGHTLY CONCLUDED THAT WHEN A PART O F THE ENTRIES ON THE RIGHT HAND SIDE OF THESE SEIZED DOCUMENTS WERE FOUND TO BE CORRECT AND ACCEPTED BY THE APPELLANT, THE REMAINING ENTRIES INC LUDING THOSE ON THE LEFT HAND SIDE CANNOT BE DENIED. IT IS, THEREFORE, CO RRECTLY CONCLUDED THAT THE ENTRIES ON THE LEFT HAND SIDE WERE FOR THE RECEIP TS OR INCOMINGS; AND THE APPELLANT'S EXPLANATION IN THIS REGARD IS NOT ACCE PTABLE. 8.19 SIMILARLY, ON THE RIGHT HAND SIDE, IN RESPECT OF THE AMOUNTS WITHDRAWN AGAINST THE NAME 'SHENDE SAHEB' OR WITH TH E ARROW (' ') MARK, WHICH IS PARTICULARLY VERY LARGE AND TO THE TU NE OF RS.7,36,90,000/- IN TOTAL, (IN ACCORDANCE WITH THE TABLE OF SEIZED DO CUMENTS PAGES 1 TO 101/A2,) THE APPELLANT HAS NOT BEEN ABLE TO GIVE ANY SPECIFIC EXPLANATION IN ITS LETTER DATED 4.2.2009. IT IS STATED BY THE APPE LLANT THAT THE FIGURE AGAINST THE ' ' MARK 'MAY ' INDICATE THE AMOUNT DEPOSITED INTO VARIOUS BANK ACCOUNTS. HOWEVER, IN SPITE OF MAKING EFFORTS THE APPELLANT WAS NOT ABLE TO SHOW IT, AS DISCUSSED ABOVE IN PARA 8.9. STILL, THE FACT THAT THIS EXPLANATION HAS BEEN GIVEN REPEATEDLY ESTABLISHED THE FACT THAT THE ' ' MARK IS NOT MEANINGLESS. IT LEADS TO LOGICAL CONCLUSION THAT ALL ENTRIES ON THE SEIZED DOCUMENTS ARE REAL AND REFLECT ACTUAL TRAN SACTIONS. AS ALREADY DISCUSSED ABOVE IN THE PRECEDING PARA, THE APPELLANT C ANNOT BE ALLOWED TO SELECTIVELY DENY SOME OF THE ENTRIES ON THESE SEIZED PAPERS WHEN THE OTHER ENTRIES HAVE BEEN VERIFIED AND ALSO ACCEPTED BY IT. IT IS CORRECTLY CONCLUDED THAT THE AMOUNT AGAINST THE ARROW MARK REF LECTS PAYMENT OR OUTGOINGS; WHICH THE ASSESSING OFFICER HAS CONCLUDED TO H AVE BEEN WITHDRAWN BY SHRI M.N.NAVALE. 8.20 AS WOULD BE SEEN FROM THE SEIZED DOCUMENTS AND TH E DISCUSSION MADE ABOVE THAT MOST OF THE ENTRIES RELATED TO THE PE RIOD MAY TO JULY, 2005 AND IN PARTICULAR JUNE AND JULY, 2005. IN THE SUBMISSION DATED 17.9.2009 IT HAS BEEN CLAIMED THAT THE PERIOD COMPR ISING OF MAY TO JUNE IS WHEN MOST OF THE OLD STUDENTS IN THE EARLIER YEAR AR E GIVEN ADMISSION FOR THE NEXT YEAR, AND THE FRESH ADMISSIONS ONLY TAKE P LACE DURING AUGUST ONWARDS. THIS CONTENTION OF THE APPELLANT IS NOT ACCEP TABLE. ADMISSION PROCESS FOR THE FIRST YEAR IN VARIOUS COURSES ALSO STARTS DURING THE MONTH MAY / JUNE ITSELF AND AT JULY IT IS AT ITS PEAK. MOREO VER, THOUGH THE ADMISSION UNDER THE MANAGEMENT QUOTA, IS GIVEN ONLY DU RING THE PERIOD WHEN THE ACTUAL ADMISSIONS ON MERITS HAVE TAKEN PLACE , STILL IT IS A MATTER OF COMMON KNOWLEDGE THAT SEATS ARE BOOKED MUCH PRIOR TO THE ACTUAL COMMENCEMENT OF ADMISSIONS. 8.21 THE APPELLANT HAS MADE A SUBMISSION DURING APPELLA TE PROCEEDINGS DATED 4.2.2009 IN WHICH FOR THE FIRST TIME IT WAS CLA IMED THAT THE RECORDINGS ON THE SEIZED PAPERS WERE MERELY ROUGH WORK OR CALCULATIONS REGARDING FEES COLLECTED, DAILY BANK BALANCE, EXPECT ED GENERATION OF MONEY DURING THE NEXT FEW DAYS AND COMMITMENT FOR FI NANCIAL OUTGOINGS; WHICH IS COLLECTED AT THE VARIOUS INSTITUTES FOR THE SAKE OF INFORMATION OF THE MANAGEMENT. IT IS CLAIMED TO HAVE BEEN MADE ON A DAY TO DAY BASIS, SINCE THE CENTRAL OFFICE OF THE APPE LLANT TRUST FOR KEEPING 20 ITA NO.320/PUN/2010 EFFECTIVE CONTROL OVER THE WORKING OF VARIOUS UNITS, HAS TO KEEP A CONSTANT TRACK OF THE FINANCIAL POSITION AND ABILITY TO REPAY LOAN AND LIABILITY FOR ADMINISTRATIVE EXPENSES ETC. IT IS CONTEN DED THAT THE MONITORING OF FINANCIAL CONDITION OF VARIOUS UNITS FO R COMMITMENT OF PAYMENTS AND EXPECTED GENERATION OF FEES ETC. IS BEIN G DONE AND, THEREFORE, NOTINGS OF THESE FIGURES WAS ONLY ROUGH WORK . IT IS FURTHER EXPLAINED THAT NOTINGS ON THE LEFT HAND SIDE OF THE P APER WAS AN OVERALL EXPECTED CASH POSITION INCLUSIVE OF CHEQUES / DDS, YET T O BE DEPOSITED, WHICH DO NOT REPRESENT ANY ADMISSION FEE. SO FAR AS TH E OUTGOINGS ARE CONCERNED, IT IS EXPLAINED BEING IN THE NATURE OF D EPOSITS TO BE MADE IN THE BANKS OR FEE REFUNDED ON CANCELLATION OF ADMISSION OR EXPENSES TO BE INCURRED ETC. THIS HAS BEEN DISCUSSED ABOVE IN PARAS 8.18 AND 8.19. 8.22 IT IS FURTHER CONTENDED THAT FIGURES MARKED BY ' ' ON THE PAGES SEIZED 'MAY' INDICATE THE AMOUNT DEPOSITED INTO VARIO US BANK ACCOUNTS, OR THE APPROXIMATE ACCOUNTS REQUIRED TO BE DEPOSITED AND HAS NO OTHER SIGNIFICANCE. SIMILARLY, THE DEPOSITS IN BANK WITH THE NARRATION 'CASH-M', IS EXPLAINED AS ENTRY MADE BY THE BANK IN ITS BOOKS AND ONLY THE BANKERS SHOULD KNOW THE RELEVANCE OF THIS NARRATION AND THE I NFERENCE THAT THIS NARRATION INDICATED THAT IT BELONG TO SHRI M.N.NAVA LE WAS NOT CORRECT. HOWEVER, IT SHOULD BE THE APPELLANT WHO SHOULD HAVE G IVEN THE PROPER EXPLANATION FOR THIS 'M' MARKING, INSTEAD OF MERELY DENYING THE INFERENCE OF THE ASSESSING OFFICER IN CASE THE INFERENCE WAS NOT AC CEPTED BY IT. HOWEVER, NO EXPLANATION IS FORTHCOMING REGARDING THI S USE OF THE WORD 'M' AGAINST THE DEPOSITS DURING THE APPELLATE PROCEED INGS ALSO. 8.23 IT IS POINTED OUT BY THE ASSESSING OFFICER IN THE R EMAND REPORT THAT THE APPELLANT DID NOT GIVE ANY SUCH EXPLANATION REGA RDING ROUGH WORK FOR ASCERTAINING FINANCIAL STATUS DURING THE ASSESSMENT P ROCEEDINGS. IT IS ALSO NOTICED THAT EVEN DURING THE PROCEEDINGS U/S.12AA (3) BEFORE THE CIT (CENTRAL) NO SUCH EXPLANATION WAS GIVEN BY THE AP PELLANT. THE ASSESSING OFFICER HAS, THEREFORE, RIGHTLY POINTED OUT TH AT IF THIS WAS THE NATURE OF THESE NOTINGS, WHAT PREVENTED THE APPELLANT FROM OFFERING THIS CLARIFICATION EARLIER. IT IS FURTHER STATED THAT IF T HE NOTINGS REFLECTED THE FEES COLLECTED OR OTHER RECEIPTS, IT IS UNDERSTOOD; BU T HOW COULD EXPECTED GENERATION OF FEES DURING THE NEXT FEW DAYS COULD BE PREDICTED UNLESS THE RELEVANT AMOUNTS HAVE ACTUALLY BEEN RECEIVED. FURTHE R, IT IS ADMITTED BY THE APPELLANT THAT THE FINANCIAL POSITION WAS BEING A SCERTAINED. HOWEVER, IF THESE RECORDINGS WERE ONLY ROUGH ENTRIES WITHOUT ME ANING ANYTHING, HOW COULD ANY FINANCIAL POSITION BE ASCERTAINED BY IT ? IT IS TOO NAIVE ON THE PART OF THE APPELLANT TO HAVE SUBMITTED SUCH AN EXPLANATION. IT IS CORRECTLY STATED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD TO BRING IN THIS THESIS OF 'EXPECTED GENERATION OF FEES SINCE IT FA ILED TO TALLY THE RECEIPTS ON THE LEFT HAND SIDE WITH THE FEES AND OTHER RECEIPTS ACTUALLY SHOWN IN THE BOOKS OF ACCOUNTS. A CAREFUL PERUSAL OF TH E ENTRIES ON THE SEIZED PAPERS WOULD REVEAL THAT THESE WERE NOTHING BUT RECORDINGS FOR CASH RECEIPTS AND PAYMENTS ON A DAY TO DAY BASIS, WHICH COULD BE ROUGHLY BE TERMED AS CASH BOOK ONLY. NO ONE WOULD BEL IEVE THAT THE ENTRIES MADE ON THE LEFT HAND SIDE OF THE SEIZED PAPER S WHICH SHOWED SPECIFIC AMOUNTS AGAINST THE NAMES OF VARIOUS INSTITUTES O R COURSES IN ABBREVIATED FORMS ON A PARTICULAR DATE WOULD BE MERE LY A PROJECTION OR ROUGH CALCULATION OR EXPECTED GENERATION OF FEES. FO R EG., ON SEIZED DOCUMENTS NO.39 MADE AS ANNEXURE-III OF THE ORDER, TH ERE ARE AS MANY AS 25 ENTRIES ON THE LEFT HAND SIDE AGAINST THE ABBREVI ATED FORMS LIKE SKNOE, SKNE, BBA, BCS, B PHARMA, SCOE, MBA, MCA ETC . ON THE RIGHT HAND SIDE, ENTRIES FOR ADMISSIONS CANCELLED IN THE NAME OF 3 PERSONS TOTALLING RS.42,000/-, CASH PAID TO SHENDE SAHEB RS.2 LAKHS AND AMOUNT WITHDRAWN OR PAID AGAINST THE ' ' MARK, RS.70 LAKHS ARE MENTIONED. 21 ITA NO.320/PUN/2010 CLOSING BALANCE OF RS.1,83,000/- HAS ALSO BEEN WORKED OUT ON THE RIGHT HAND SIDE AND THE TOTAL OF THE RIGHT HAND SIDE AND TH E LEFT HAND SIDE ON THIS DATE HAS BEEN TALLIED AT RS.74,25,000/-. SIMILAR ENTRIES ARE SEEN ON THE OTHER SEIZED DOCUMENTS. IT IS, THEREFORE, NOT ACCE PTABLE THAT SUCH LARGE NUMBER OF INDIVIDUAL ENTRIES WOULD BE MADE AGA INST THE NAME OF INSTITUTES OR COURSES ON A DAY TO DAY BASIS REGULARLY, W HICH ARE MEANINGLESS OR WITHOUT ANY SIGNIFICANCE. ONLY WHEN THE RIGHT HAND SIDE SHOWS A CASH DEPOSIT IN A PARTICULAR BANK ACCOUNT, LIKE 'THANE JANATA SAHAKARI BANK (CC-20) RS.45 LAKHS' MENTIONED ON THE R IGHT HAND SIDE ON THE SEIZED DOCUMENTS NO.43 (ANNEXURE-IV OF THE ASSESSMENT ORDER), THE ENTRY IS ACCEPTED TO BE CORRECT SINCE IT IS VERIFIABL E FROM THE BANK ACCOUNT AND THE APPELLANT CANNOT DENY IT. BUT IT IS PERTINENT TO MENTION HERE THAT WHENEVER THERE IS AN ENTRY IN THE BANK ACC OUNT OF SUCH CASH, IT IS OUT OF THE RECEIPTS SHOWN ON THE LEFT HAND SIDE ONL Y; AND THE TOTAL OF THE RIGHT HAND SIDE INCLUSIVE OF THESE BANK DEPOSITS HAV E BEEN DULY WORKED OUT, WHICH MATCHED WITH THE TOTAL ON THE LEF T HAND SIDE. SIMILARLY, WHEN THE AMOUNT IS PAID AGAINST THE ' ' MARK AND RECORDED ON THE RIGHT HAND SIDE, IT IS A CLEARCUT INDICATION OF THE AMOUNT WITHDRAWN OR PAID SINCE THAT IS ALSO INCLUDED IN TH E TOTAL OF THE RIGHT HAND SIDE. THIS IS A REGULAR FEATURE IN THE RECORDI NGS IN THE SEIZED DOCUMENTS PAGES 1 TO 101 OF A2 WHICH HAVE BEEN LIST ED AS PER ANNEXURE-I TO THE ORDER. THEREFORE, THE APPELLANTS CONTENTION THAT THESE WERE MERELY ROUGH NOTINGS SIGNIFYING NOTHING IS ACCEPTABLE. 8.24 THE ASSESSING OFFICER HAS RIGHTLY POINTED OUT THAT EVEN ADMITTING FOR A MINUTE THAT THE ENTRIES ON THE LEFT HAND SIDE R EPRESENTED FEE COLLECTED AND TO BE COLLECTED, THE ASSESSEE HAS NOT COME FORWARD TO SHOW HOW THESE CORRESPOND TO THE FEES ACTUALLY COLLECTED. I F IT WAS NOT SO, THE OFFICIAL WHO WAS MAKING THESE NUMEROUS ENTRIES ON A DAI LY AND REGULAR BASIS WAS ENGAGED IN A FUTILE EXERCISE, AND SUCH IRRELEV ANT NOTINGS WOULD NOT HAVE GIVEN ANY FAIR IDEA OF THE FUND POSITION OF THE ASSESSEE. IT IS UNACCEPTABLE THEREFORE THAT SUCH ENTRIES BEING MADE ON A REGULAR BASIS EVERY DAY WERE IRRELEVANT, RANDOM AND ROUGH NOTINGS. 8.25 THE APPELLANT'S EXPLANATION FOR DIFFERENT PAGES ON IN THE SUBMISSION DATED 4.2.2009 ALSO REFLECTS THAT IN SOME CASES THE APPE LLANT HAS BEEN ADMITTING THAT THE ENTRIES WERE REAL AND THEREFORE R EFLECTED THE TRUE STATE OF AFFAIRS. FOR EXAMPLE, IN RESPECT OF PARA 4 TO 4.2 OF THE ASSESSMENT ORDER IT IS .STATED THAT THESE NOTINGS ARE OF CASH OR BA NK BALANCES THAT COULD BE AVAILABLE WITH THESE UNITS. HOWEVER, IN REMA ND REPORT, THE ASSESSING OFFICER STATES THAT IF IT WAS SO, ALL THE ASSESSEE HA D TO DO WAS TO TALLY THESE AMOUNTS WITH THE ACTUAL CASH OR BANK BALAN CE OF THE CONCERNED UNIT ON PARTICULAR DATE. HOWEVER, IT WAS N OT DONE. IN THIS CONNECTION, IT IS PERTINENT TO MENTION HERE THAT DUR ING SPECIAL AUDIT U/S.142(2A) ALSO, THE AUDITOR WAS ASKED TO TALLY SUCH EN TRIES WITH RESPECT TO THE RESPECTIVE BANK ACCOUNT'S. HOWEVER, THE APPELLANT FAILED TO EXPLAIN ANYTHING TO THE AUDITOR, AND, IN FACT, R EFUSED TO COOPERATE. THEREFORE, THE APPELLANT'S EXPLANATION HAS RIGHTLY BE EN REJECTED BY THE ASSESSING OFFICER. IN RESPECT OF PARA 4.3. IT IS CONTENDE D THAT THESE NOTHINGS SUGGESTED THAT THE APPELLANT HAD MADE THESE:: DEPOSITS IN ITS VARIOUS BANK ACCOUNTS AND THESE CASH DEPOSITS ARE DULY A CCOUNTED IN THE REGULAR BOOKS OF ACCOUNTS. FURTHER EXPLANATION HAS BEE N GIVEN IN RESPECT OF PARA 4.5 TO 4.10 WHICH BASICALLY RELATED TO THE H UGE AMOUNTS OF CASH PAYMENTS RECORDED IN THESE SEIZED DOCUMENTS AGAINST THE ARROW (' ') MARK, AND ALSO CASH PAID TO SHENDE SAHEB. NOW, IN RESPECT OF THIS CASH PAYMENT OF RS.36 LAKHS WHICH IS WORKED OUT AS PER THE TABULATED CHART GIVEN IN ANNEXURE-1 TO ASSESSMENT ORDER; IT IS EXPLAINED THAT VIDE PAGE NO.135 OF THE PAPER BOOK, ENTRY BY ENTRY EXPLANATIO N OF THE AMOUNT OF 22 ITA NO.320/PUN/2010 RS.36 LAKHS HAS BEEN GIVEN BY THE APPELLANT. THE EXPLA NATION GIVEN IN THIS PAGE NO.135 IS AS UNDER: PAGE NO. DATE OF THE DOCUMENT AMOUNT RS. PARTICULA RS 13 NOT AVAILABLE 1,00,000 THIS IS PAYMENT MADE TO QUALITY PRODUCT CO. WHICH IS OWNED BY SHRI SHENDE. THE PAYMENT RELATES TO JULY 2013. 39 2.7.05 2,00,000 THIS IS PAYMENT MADE TO TUSHAR CONSTRUCTION WHICH IS OWNED BY SHRI SHENDE. THE PAYMENT RELATES TO 2.7.05. 47 9.7.05 5,00,000 THIS IS PAYMENT MADE TO TUSHAR CONSTRUCTION WHICH IS OWNED BY SHRI SHENDE. THE PAYMENTS ARE ACTUALLY EFFECT AS UNDER : 8.7.2005 RS.2,00,000 9.7.2005 RS.3,00,000 51 NOT AVAILABLE 6,00,000 THIS WAS AMOUNT MARKED FOR PAYMEN T BUT NOT ACTUALLY PAID 53 NOT AVAILABLE 5,00,000 THIS IS PAYMENT MADE TO TUSHAR CONSTRUCTION WHICH IS OWNED BY SHRI SHENDE. THE PAYMENTS ARE ACTUALLY EFFECTED AS UNDER : 14.7.2005 RS.3,00,000 16.7.2005 RS.2,00,000 71 NOT AVAILABLE 5,00,000 THIS WAS AMOUNT MARKED FOR PAYMENT BUT NOT ACTUALLY PAID 75 NOT AVAILABLE 5,00,000 THIS WAS AMOUNT MARKED FOR PAYMENT BUT NOT ACTUALLY PAID 77 NOT AVAILABLE 5,00,000 THIS WAS AMOUNT MARKED FOR PAYMENT BUT NOT ACTUALLY PAID 9 5 NOT AVAILABLE 2,00,000 PAID ON 18 - 7 - 2005 IN TUSHAR CONSTRUCTION ACCOUNT TOTAL 36,00,000 8.26 THE ABOVE REFERRED TO EXPLANATION FOR ENTRIES I N THE SEIZED DOCUMENTS ALSO REFLECT THAT THE APPELLANT IS NOT DENYI NG THE CORRECTNESS OF THE ENTRIES MADE ON THE RIGHT HAND SIDE IN THE NA ME OF 'SHENDE SAHEB', AND WHICH IS BEING EXPLAINED AS PAYMENT MADE BY THE A PPELLANT TO HIM OR HIS CONCERN WHICH ARE ON ACCOUNT OF VARIOUS EXPEND ITURES. IT IS ONLY IN RESPECT OF SOME OF THESE PAYMENTS THAT THE COMMENT GIVE N IS THAT THE AMOUNT WAS MARKED FOR PAYMENT BUT WAS NOT ACTUALLY P AID. THIS CONTENTION OF THE APPELLANT IS NOT ACCEPTABLE, SINCE WHAT IS BEING RECORDED IN THE SEIZED DOCUMENTS ON THE RIGHT HAND SID E HAS BEEN FOUND TO BE ACTUAL TRANSACTIONS ON ACCOUNT OF PAYMENTS I OUTGOINGS, BE IT CASH DEPOSITS IN BANK ACCOUNT LIKE THANE JANATA BANK OR CE NTRAL BANK OF INDIA; REFUND OF FEES GIVEN ON ACCOUNT OF CANCELLATI ON OF ADMISSIONS; AND PAYMENTS MADE TO 'SHENDE SAHEB' OR HIS CONCERNS OR TO O THERS FOR EXPENDITURE INCURRED. THEREFORE, SOME OF THE PAYMENT S AGAINST THE NAME SHENDE SAHEB CANNOT BE DENIED BY THE APPELLANT IN T HE MANNER WHICH HAS BEEN MENTIONED IN PAGE NO.135 OF THE PAPER BOOK SHOWN ABOVE. THESE ENTRIES MAY ACTUALLY REFLECT UNACCOUNT PAYMENTS MADE TO SHENDE SAHEB AS STATED BY THE ASSESSING OFFICER. HOWEVER. THE PO INT BEING EMPHASISED IS THAT THE APPELLANT ITSELF IS ADMITTING TH E CORRECTNESS OF THE ENTRIES MADE ON THE SEIZED DOCUMENTS BY WAY OF EXPLAIN ING THE ENTRIES ON THE RIGHT HAND SIDE IN THE NAME OF 'SHENDE SAHEB' , AS IT HAS DONE IN RESPECT OF ENTRIES IN SEIZED DOCUMENTS BUNDLE A-2. PAGE 25, 31. 43. 45. 71. 83 & 87 DISCUSSED IN PARAS 4 TO 4.2 AND PARA 4.3 OF THE ASSESSMENT 23 ITA NO.320/PUN/2010 ORDER . MANY OTHER EXAMPLES HAVE BEEN CITED BY THE ASSESSING O FFICER IN PARA 5.3(A) TO (D) IN WHICH ENTRIES ON SEIZED PAPERS N OS.25, 27 TO 29, 49 AND 83 & 84 OF BUNDLE A12 HAVE BEEN DISCUSSED. THE ASSE SSING OFFICER HAS NOT SUBMITTED ANY EXPLANATION IN THE SUBMISSION DATE D 4.2.2009 ON THESE SEIZED PAPERS; WHICH RELATE TO EXPENSES, REFUND ON CANCELLED ADMISSIONS; AMOUNT WITHDRAWN AGAINST ' ' MARK, CASH DEPOSITS IN BANK ACCOUNT'S AND RECEIPTS IN THE NAMES OF INSTITUTES/ COURSES. 8.27 NOW COMING TO THE PAYMENTS INDICATED IN THE SEIZ ED DOCUMENTS ON THE RIGHT HAND SIDE AGAINST THE ARROW (' ') MARK WHICH TOTALS TO RS.7,36,90,000/- IN -ACCORDANCE WITH TABULATED CHART FROM THE SEIZED DOCUMENTS, BUNDLE A-2 PAGES 1 TO 101, (ANNEXURE-I TO ASSESSMENT ORDER). IN THE LETTER DATED 4.2.2009 IT IS STATED THA T THE FIGURES MARKED BY ARROW INDICATED THE AMOUNT AVAILABLE FOR DEPOSITING IN VARIOUS BANK ACCOUNTS OR THOSE WHICH ARE ACTUALLY DEPOSITED. IT IS N OTICED THAT OUT OF THE PAYMENTS RECORDED ON THE SEIZED DOCUMENTS ON THE RIGHT HAND SIDE, THE APPELLANT HAS ADMITTED THE ENTRIES REGARDING HUGE CASH DEPOSIT IN THE BANK ACCOUNTS AT THANE JANATA SAHAKARI BANK AND CENT RAL BANK OF INDIA, REFUND GIVEN ON ACCOUNT OF CANCELLATION OF ADMISSION, THE ENTRIES IN THE NAME OF SHENDE SAHEB FOR PAYMENTS MADE TO HIM, AND SO ME OTHER EXPENSES. HOWEVER, IT IS ONLY WITH REGARD TO THE ENTRI ES MADE AGAINST THE ARROW ' ' MARK ON THE RIGHT HAND SIDE, THAT THE APPELLANT HA S NOT BEEN ABLE TO COME UP WITH A PROPER EXPLANATION OR VERIFI CATION. IN THE REMAND REPORT, THE ASSESSING OFFICER STATES THAT IF THE EXPLANAT ION GIVEN THAT IT WAS AMOUNTS AVAILABLE FOR DEPOSITING IN THE VARIOUS BAN K ACCOUNTS OR THOSE WHICH ARE ACTUALLY DEPOSITED BY DIFFERENT UNITS, WAS CORRECT, THEN WHAT PREVENTED THE APPELLANT FROM GETTING IT CROSSED VERIFIED FROM THE BANK ACCOUNTS, AND ESTABLISH THE VERACITY OF ITS EXPLAN ATION? EVEN THE DATES WERE ALSO MENTIONED ON THESE PAGES. THE APPELLANT FAILED TO EXPLAIN THE SAME DURING THE ASSESSMENT PROCEEDINGS OR PRO CEEDINGS U/S.12AA(3) BEFORE THE CIT(CENTRAL), PUNE INSPITE OF BEING REPEATED ASKED. IT IS AGAIN POINTED OUT THAT THE APPELLANT FAI LED TO GET THIS VERIFICATION DONE AT THE STAGE OF SPECIAL AUDIT U/S.1 42(2A). THE ASSESSING OFFICER HAD ASKED THE AUDITOR TO DO THIS VERIFI CATION AND TALLYING, WHICH THE AUDITOR COULD NOT DO DUE TO NON -COOPERATION FROM THE APPELLANT. THE ASSESSING OFFICER HAS RIGHTLY CONTENDED I N THE REMAND REPORT THAT IF THESE EXPLANATIONS WERE CORRECT, THIS V ERIFICATION COULD HAVE BEEN DONE EVEN AT THE APPELLAGE STAGE, FROM THE FIGURES OF THE CASH AVAILABLE WITH THE VARIOUS UNITS ON THE RELEVANT DATE S AND THE DEPOSITS IN THE BANK ACCOUNT BY THESE RESPECTIVE UNITS, WHICH HAS NOT BEEN DONE. THEREFORE, THE ASSESSEE HAS FAILED TO EXPLAIN AS TO WHAT HAPPENED TO THE HUGE AMOUNTS WITHDRAWN/PAID AGAINST THE MARKING ' '; WHICH TOTALLED TO RS.7,36,90,000/-. IT WAS INFERRED BY THE ASSESSING OFF ICER THAT THE PAYMENT WOULD HAVE GONE TO THE PERSON WHO HAS ABSOLUTE CONTROL OVER THE MONIES COLLECTED TOWARDS ADMISSIONS, BE IT BY WAY O F DONATIONS I CAPITATION FEES, AND THAT PERSON WAS SHRI M.N.NAVALE, PRINCIPAL TRUSTEE OF THE APPELLANT. IT WAS, THEREFORE, CONCLUDED THAT THE AMOUNTS INDICATED AGAINST THE MARKS WERE ACTUALLY TAKEN OUT BY SHRI M. N. NAVALE OUT OF THE DONATIONS COLLECTED. 8.28 WITH REGARD TO PARAS 4.12 & 4.13 OF THE ASSESS MENT ORDER WHERE IT WAS MENTIONED THAT THE CASH DEPOSITED IN ALL THE BANK ACCOUNTS OF THE APPELLANT WAS RS.8.90 CRORES ONLY WHEREAS AS PE R THE SEIZED DOCUMENTS PAGES 1 TO 101 / ANNEXURE-A2 IT WORKED OU T TO RS.13.41 CRORES, IT IS STATED BY THE APPELLANT THAT THESE EN TRIES ON THE LOOSE PAPERS HAVE GOT NO RELEVANCE. IN THE REMAND REPORT IT IS STATED BY THE ASSESSING OFFICER THAT DURING THE COURSE OF ASSESSM ENT PROCEEDINGS THE APPELLANT HAD TRIED TO VERIFY THESE AMOUNTS MEN TIONED IN THE 24 ITA NO.320/PUN/2010 SEIZED DOCUMENTS, BUT DUE TO THIS DIFFERENCE NOTED AS ABOVE, IT WAS CLAIMED AGAIN BY THE APPELLANT THAT THESE ENTRIES W ERE OF NO RELEVANCE. IT IS THUS CONCLUDED THAT THE DEPOSITS I N THE REGULAR BANK ACCOUNTS WERE OF THE REGULAR FEES AND THE RECEIPTS OF THE ASSESSEE'S WHEREAS THE AMOUNTS INDICATED IN THE SEIZED DOCUMEN TS ON THE LEFT HAND SIDE WERE THE DONATION OR CAPITATION FEE RECEI PTS IN CASH, WHICH WERE NOT ACCOUNTED FOR AND THEREFORE, THE APPELLANT WAS UNABLE TO TALLY THE SAME. THE CONTENTION OF THE APPELLANT THA T IT WAS OF NO RELEVANCE IS LIABLE TO BE REJECTED IN VIEW OF THE F INDINGS GIVEN ABOVE REGARDING VARIOUS ENTRIES. 8.29 IN PARA 5 & 6 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS GIVEN INSTANCES OF RECOMMENDATIONS FROM IMPORTANT P ERSONALITIES FOR ADMISSIONS, IN WHICH DONATIONS HAVE BEEN FREQUE NTLY MENTIONED. MOREOVER, THE SAME POSITION IS THERE WITH REGARD TO THE SEIZED DOCUMENTS FROM SHRI G.K.SHAHANI, DIRECTOR OF STES, WHEREIN THE REGULAR FEES, HOSTEL FEES AND DONATION AMOUNTS FOR VARIOUS COURSES AND INSTITUTES WERE FOUND TO HAVE BEEN CATEGORICALL Y RECORDED. THE EXPLANATION DATED 4.2.2009 GIVEN FOR THESE DOCUMENT S OF BUNDLE A-5 PAGE 44, 52, 59, 63, 65 AND 72 WHICH HAVE BEEN CITE D FOR RECOMMENDATION OF VIPS, SHOWS THAT THE APPELLANT IS AGAIN NOT DENYING THE RECORDINGS ON THESE SEIZED PAGES ALTOGE THER. THUS, THESE REFLECT ANOTHER SET OF CASES WHERE THE ENTRIES ON T HE SEIZED DOCUMENTS ARE NOT BEING DENIED AND IT GOES A LONG W AY TO PROVE THE AUTHENTICITY OF THE RECORDINGS ON THE OTHER SEIZED DOCUMENTS ALSO. IT IS ONLY BEING EXPLAINED THAT IN SOME OF THE RECOMMENDAT IONS, CONCESSION IN THE FEES IS MENTIONED AND NO 'DONATION' WORD IS IND ICATED. SECONDLY, IN SOME OF THESE CASES, IT WAS STATED THAT ADMISSION WAS NOT AC TUALLY GRANTED, OR NOT GRANTED FROM THE MANAGEMENT QUOTA; THEREFORE, THERE WAS NO QUESTION OF ANY DONATION ETC. IT IS EXPLAINED B Y THE ASSESSING OFFICER IN THE REMAND REPORT THAT THESE SEIZED RECOMM ENDATION LETTERS WERE NOT REFERRED TO IN THE ASSESSMENT ORDER TO PROVE A CCEPTANCE OF DONATIONS FROM THESE VERY STUDENTS; BUT MERELY TO INDIC ATE THAT THERE WAS A TRADITION OF COLLECTING DONATIONS FOR ADMISSIONS I N THE APPELLANT'S CASE. THESE SEIZED PAPERS HAVE NOT BEEN USED FOR MAKING SPECIFIC ADDITIONS EITHER, BUT ONLY USED FOR THE SAKE OF BUTTRE SSING THE ARGUMENT THAT ADMISSIONS WERE BEING MADE AFTER TAKING DONATIONS AND THE RATES OF DONATIONS WERE FREQUENTLY BEING QUOTED. IT IS ALSO NOT ICED THAT THE APPELLANT HAS GIVEN EXPLANATION REGARDING SEIZED PAPE RS 61 AND 62 OF BUNDLE A-5 ALSO IN THE SUBMISSION DATED 4.2.2009, WHERE AS AS THE ASSESSING OFFICER HAS NOT CITED THESE SEIZED PAPERS. 8.30 IN THE REMAND REPORT, THE ASSESSING OFFICER HAS ALSO MET THE ARGUMENT OF THE APPELLANT THAT THESE LETTERS ARE MOSTL Y SEEKING CONCESSIONS IN FEES AND NOT DONATION. THE ASSESSING OFFICER HAS RIGHTLY CONTENDED THAT FEE CONCESSION WAS NOT A NORMAL THING, WHICH COULD HAVE BEEN DONE ON REQUEST OF A MLA, MP ETC. BUT IT WAS AVA ILABLE ONLY TO CERTAIN CATEGORIES OF STUDENTS UNDER A VERY STRICT GUI DELINES OR FRAME WORK LAID DOWN BY GOVERNMENT. IT IS CONTENDED THAT T HE NORMAL FEES WAS NON-NEGOTIABLE AND IT WAS ALSO AS PER THE GOVERNMENT REGULATIONS THEREFORE IT WAS NOT THE CONCESSION IN FEE WHICH THESE PERSONS WERE SEEKING; AND 'FEES' WAS ONLY A TERMINOLOGY USED FOR DON ATION. THE ASSESSING OFFICER HAS FURTHER ANALYSED THE SEIZED DOCUMENT S FROM SHRI G.K.SHAHANI, DIRECTOR PROJECTS WHICH HAS BEEN DISCUSSED IN ASSESSMENT ORDER FROM PARAS 5.1 TO 5.3. MANY OTHER EXAMPLES FROM THE SEIZED DOCUMENTS HAVE ALSO BEEN CITED AS PER PARA 5.3, AND T HE APPELLANT HAS NOT GIVEN ANY EXPLANATION WITH REGARD TO THE EXAMPL ES CITED IN PARA 5.3(A) TO (D). 25 ITA NO.320/PUN/2010 8.31 IN THE REMAND REPORT, IT IS ALSO STATED BY TH E ASSESSING OFFICER THAT NO PROPER EXPLANATION COULD BE GIVEN REGARDING RECOMMENDATION LETTER FROM MR. JAGDALE AND VASANT C HAVAN. WITH REGARD TO THE RECORDINGS ON THE SEIZED DOCUMENTS F ROM SHRI G. K. SHAHANI, WHICH SHOWED THE NORMAL RATE OF FEES AND H OSTEL CHARGES AND ALSO FOR DONATIONS IN VARIOUS COURSES IN DIFFER ENT INSTITUTES, THE APPELLANT'S EXPLANATION IS THAT HE WAS DIRECTOR (PR OJECTS) AND WAS NOT INVOLVED IN ADMISSION PROCESS. ON THIS, THE ASSESSI NG OFFICER HAS POINTED TO THE DOUBLE STANDARDS OF THE APPELLANT, N OTING THAT IF THE SEIZED PAPER DOES NOT SPECIFICALLY MENTION THE 'DON ATION' WORD, THEN THE APPELLANT STATES THAT NO INFERENCE REGARDING DO NATION CAN BE DRAWN; AND WHEN A SEIZED PAPER DOES SPECIFICALLY ME NTION THE WORD 'DONATION', THEN, IT IS CLAIMED THAT THE PERSON FRO M WHOM THE PAGE WAS SEIZED WAS NOT CONCERNED WITH THE ADMISSION PRO CESS, AND, THEREFORE, THESE PAPERS DO NOT SIGNIFY ANYTHING. TH E ASSESSING OFFICER RIGHTLY STATES THAT IF HE WAS NOT CONCERNED AT ALL WITH THE ADMISSION PROCESS, HOW THESE DOCUMENTS WERE SEIZED FROM HIM G IVING THE DETAILS OF FEES AND DONATIONS IN VARIOUS INSTITUTES . IT IS ALSO CORRECTLY STATED BY THE ASSESSING OFFICER THAT NO COMPLAINT BY ANY STUDENT OR PARENT HAS BEEN MADE, BECAUSE ULTIMATELY THESE STUDENT S WERE STUDYING IN THE SAME INSTITUTES WHO HAD CONTROL OVER THE STUDEN TS FUTURE AND CAREER. IT WAS ALSO CONTENDED BY THE ASSESSING OFFICER TH AT THE REFERENCE TO AFFIDAVIT FILED BY THE PRINCIPALS OF VARIOUS INSTI TUTES WAS ALSO NOT RELEVANT BECAUSE IT WAS NOT THE DEPARTMENT'S CASE THAT THE DONATIONS WERE BEING ACCEPTED BY THE PRINCIPALS OF VARIOUS INSTI TUTES; BUT IT WERE BEING COLLECTED BY THE PRINCIPAL TRUSTEE SHRI M.N.NA VALE, OR THE PERSONS APPOINTED BY HIM FOR THIS PURPOSE, WHICH IS ALSO REVEAL ED FROM THE DOCUMENTS SEIZED FROM HIS RESIDENCE U/S.132. THEREFORE, THE ASSESSING OFFICER HAS CORRECTLY CONCLUDED THAT THE AFFIDAVIT F ROM THE PRINCIPALS DO NOT HELP THE APPELLANT. 8.32 IN THE WRITTEN SUBMISSION DATED 4.2.2009, IT IS AL SO CONTENDED BY THE APPELLANT THAT THE ASSESSING OFFICER HAS ALSO MADE AN ADDITION OF RS.10,15,22,340/- IN THE CASE OF SHRI M.N.NAVALE IN HIS INDIVIDUAL CASE ON SUBSTANTIVE BASIS, ON THE BASIS OF THE EXAMINATION OF THE SAME SEIZED DOCUMENTS IN A.Y.2006-07 ITSELF. IT IS EXPLAINED BY TH E ASSESSING OFFICER IN THE REMAND REPORT THAT ADDITION IN RESPECT OF SHRI M.N. NAVALE WAS OF THE AMOUNT WHICH WAS FOUND TO HAVE BEEN APPROPRI ATED BY HIM OUT OF THE DONATIONS COLLECTED BY THE APPELLANT; WH ICH HAS BEEN CORRECTLY TREATED AS THE APPELLANT'S INCOME. 8.33 THE APPELLANT HAS MADE ANOTHER SURPRISING OBSERVAT ION IN THE LETTER DATED 4.2.2009 THAT IF CAPITATION FEES WAS FOUND TO H AVE BEEN ACCEPTED, THE APPELLANT WOULD BE LIABLE UNDER MAHARASHTRA EDUC ATION INSTITUTION (PROHIBITION OF CAPITATION FEE) ACT, 1987; BUT IT I S OF NO RELEVANCE FOR THE PURPOSES OF EXEMPTION U/S.11 OF THE I.T. ACT, AND SINCE EVEN THE DONATIONS WOULD CONSTITUTE INCOME DERIVED FROM THE P ROPERTY HELD UNDER THE TRUST, THE SAME QUALIFIES FOR EXEMPTION U/S. 11. IN THE REMAND REPORT THE ASSESSING OFFICER STATED THAT THIS WAS NOT CORR ECT SINCE IF THE ACTIVITIES OF THE ASSESSEE WAS FOUND TO BE ILLEGAL, THEY AS WOULD NOT BE TREATED AS GENUINE, AND THEREFORE THE ELIGIBILITY U/ S.11 & 12 NOT SURVIVE BECAUSE OF APPELLANT'S ACTIVITIES NOT BEING GENUINE CH ARITABLE ACTIVITIES. 8.34 IN THIS CONNECTION, IN THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF VODITHALA EDUCATION SOCIETY VS. AD IT, (2008) 20 SOT 353 THIS ISSUE WAS ANALYSED IN DETAIL. THE ITAT RELIED ON THE DE CISION OF THE APEX COURT IN ISLAMIC ACADEMY OF EDUCATION VS. STATE OF KA RNATAKA (2003) 6 26 ITA NO.320/PUN/2010 SCC 697 AND HELD THAT COLLECTION OF MONEY OVER AND ABOVE THE FEE PRESCRIBED BY THE COMMITTEE APPOINTED FOR THE PURPOSE , WOULD AMOUNT TO COLLECTION OF CAPITATION FEES AND WAS CONTRARY TO THE CONSTITUTIONAL SCHEME AND PROHIBITED BY THE STATE ENACTMENT. THEREF ORE, WHEN THE ASSESSEE COLLECTED CAPITATION FEE FOR ADMISSION TO A INSTI TUTE, THE ACTIVITY OF ASSESSEE WOULD NOT REMAIN A CHARITABLE ACTIVITY, WIT HIN THE MEANING OF SECTION 2(15) OF THE ACT. THUS, THE ASSESSEE COULD NOT B E CONSIDERED AS A CHARITABLE INSTITUTION U/S.2(15) AND WAS NOT ELIGIBLE FOR EXEMPTION U/S.11 OF THE ACT. THE MONEY COLLECTED OVER AND ABOV E THE PRESCRIBED FEE BY THE COMMITTEE FORMED BY THE GOVERNMENT, FOR ADMI TTING STUDENTS, CANNOT BE CONSTRUED AS INCOME DERIVED FROM / INCIDENTAL TO THE ACTIVITY OF CARRYING ON CHARITABLE ACTIVITY. IT WAS ALSO OBSERV ED BY THE ITAT THAT THE MATERIAL FOUND IN THAT CASE ESTABLISHED THAT THE M ONIES COLLECTED OVER AND ABOVE THE PRESCRIBED FEE WAS PAID TO THE CHA IRMAN AND OTHER INTERESTED PERSONS OF THE : SOCIETY. THEREFORE, THERE WAS A C1EARCUT VIOLATION OF PROVISIONS OF SECTION 13(1)(C) BY THE BEN EFITING PERSONS REFERRED TO IN SECTION 13(3) OF THE ACT. BECAUSE OF T HESE REASONS ALSO THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION U/S.11 AND 12 OF T HE ACT. THEREFORE, THE APPELLANT'S EXPLANATION IN THIS REGARD WAS NOT ACCEPTABLE AND THE ACCEPTANCE OF CAPITATION FEE WAS SUFFICIENT T O RENDER THE APPELLANT INELIGIBLE FOR EXEMPTION U/S.11. 8.35 IN ACCORDANCE WITH THIS DISCUSSION MADE ABOVE FROM PARAS 8.16 ONWARDS, IT IS HELD THAT THE ENTRIES MADE ON THE LEFT HAND SIDE OF THE SEIZED DOCUMENTS PAGES 1 TO 101 OF BUNDLE A.2 AND ALSO BUNDLE NO.5 WHICH HAVE BEEN TABULATED IN PARA 6.5 OF THE ASSESSMENT ORDER; ALONG WITH ANNEXURE-I TO ASSESSMENT ORDER, REFLECT THE AMOUNT S RECEIVED ON ACCOUNT OF ADMISSIONS GRANTED TO VARIOUS INSTITUTES AND C OURSES, WHICH ARE UNACCOUNTED. RELIANCE IS PLACED ON THE RATIO OF THE DECISIONS OF HON'BLE APEX COURT IN THE CASES OF SUMATI DAYAL VS. CIT (1995) 214 ITR 801 (S.C) AND CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540, (S.C) PP 545, 547 IN WHICH IT WAS LAID DOWN THAT APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE RE ASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUT HORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT TH E REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF H UMAN PROBABILITIES. THEREFORE, THE ASSESSING OFFICER'S CONCLUSION THAT RECEIP TS SHOWN IN THE NAME OF INSTITUTES / COURSES ON THE LEFT HAND SIDE OF SEI ZED DOCUMENTS WERE ON ACCOUNT OF DONATIONS RECEIVED FOR ADMISSIONS; I S HELD TO BE VALID FOR THE REASONS DISCUSSED ABOVE, ACCORDING TO WHICH THE APPELLANT'S EXPLANATION WAS NOT FOUND TO BE ACCEPTABLE. THE APPE LLANT COULD NOT EXPLAIN THESE ENTRIES EITHER DURING THE ASSESSMENT PROC EEDINGS OR APPELLATE PROCEEDINGS, WHILE THE MAJORITY OF THE ENT RIES ON THE RIGHT HAND SIDE OF THE SEIZED DOCUMENTS WERE BEING ADMITTED AND A LSO VERIFIABLE FROM THE APPELLANT'S BANK ACCOUNTS; OR THOSE FOR EXPEN SES PAID TO SHENDE SAHEB, FEES REFUNDED FOR CANCELLATION OF ADMISSION ET C. WERE ADMITTED BY THE APPELLANT. THEREFORE, IT CANNOT BE ACCEPTED THA T ENTRIES ON THE LEFT HAND SIDE OF THE SAME SEIZED DOCUMENTS SIGNIFY NOTHING . WHEN THERE WAS EXPENDITURE RECORDED ON THE RIGHT HAND SIDE OF THE SE IZED DOCUMENTS AND CASH OUTGOINGS DUE TO DEPOSITS IN BANK ACCOUNTS ETC . THERE WERE BOUND TO BE CORRESPONDING RECEIPTS AS DULY RECORDED ON THE LEFT HAND SIDE OF THESE SEIZED DOCUMENTS; SINCE THE TOTALS OF THE L EFT HAND SIDE AND THE RIGHT HAND SIDE HAVE BEEN SHOWN TALLYING ON DAY T O DAY BASIS; AND EVEN THE CLOSING BALANCES OF ONE DAY IS SHOWN TO BE CA RRIED FORWARD AS OPENING BALANCE OF THE NEXT DAY. THE CONCLUSIONS DRA WN BY THE ASSESSING OFFICER BASED ON THE INDEPTH ANALYSIS OF THE SEIZ ED DOCUMENTS AND THE APPELLANTS EXPLANATION GIVEN DURING ASSESSMENT PROCEEDINGS; AS WELL AS DURING THE APPELLATE PROCEEDINGS BY WAY OF TH E REMAND REPORT, 27 ITA NO.320/PUN/2010 ARE HELD TO BE ON SOUND FOOTING; AND THE APPELLANT H AS NOT BEEN ABLE TO DISPEL THE INFERENCE DRAWN BY THE ASSESSING OFFICER IN T HIS REGARD. THE ADDITION MADE AT RS.22,45,06,500/- IS, THEREFORE, UPH ELD AND GROUNDS OF APPEAL NOS. 3 TO 5 ARE LIABLE TO BE DISMISSED. 34. SO FAR AS THE ISSUE RELATING TO CONTRAVENTION OF PROVIS IONS OF SECTION 13(1)(C) FOR PAYING UNREASONABLE RENT IN RESPECT OF P ROPERTIES OWNED BY SHRI M.N. NAVALE IS CONCERNED THE ASSESSEE FILED A REPORT OF THE REGISTERED VALUER FOR JUSTIFYING THE RENT PAID TO SHR I M.N. NAVALE AS REASONABLE. THE LD.CIT(A) NOTED THAT IDENTICAL ISSUE HAD COME UP IN A.Y. 2005-06 ALSO WHEREIN THE ASSESSEE HAD MADE IDEN TICAL SUBMISSIONS. A REMAND REPORT WAS OBTAINED FROM THE ASSE SSING OFFICER AND AFTER CONFRONTING THE SAME AND AFTER CONSIDERING THE COMMENTS OF THE ASSESSEE TO SUCH REMAND REPORT HE HA D HELD THAT PROVISIONS OF SECTION 13(1)(C) ARE APPLICABLE TO THE ASSESSEE S CASE. FOLLOWING HIS ORDER FOR A.Y. 2005-06 THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER IN INVOKING THE PROVISIONS OF SECTION 13(1)(C) AND MADE ADDITION OF RS.24,55,015/- U/S.40A(2)(B) TO THE TOTAL INCOME OF THE ASSESSEE. FOLLOWING HIS ORDER FOR A.Y. 2005-06 HE FURTHER HELD THAT THE BENEFIT HAS BEEN DERIVED BY THE PE RSONS REFERRED TO IN SECTION 13(3) OF THE I.T. ACT ON ACCOUNT OF APPROPR IATION OF UNACCOUNTED INCOME OF THE ASSESSEE TRUST WHICH WAS REC EIVED FOR GIVING ADMISSION TO STUDENTS BY ACCEPTING DONATION/CAPITAT ION FEE AND INVESTING THE SAME IN JEWELLERY, ASSETS AND ACCUMULATIO N OF HUGE CASH BALANCES. THEREFORE, THE PROVISIONS OF SECTION 13(1)(C) A RE ALSO APPLICABLE. 35. BEFORE CIT(A) THE ASSESSEE ALSO CONTESTED THE ASSESS ING OFFICERS ACTION IN PASSING THE ASSESSMENT ORDER ON THE FIN DINGS OF THE SPECIAL AUDIT REPORT U/S.L42(2A) OF THE I.T. ACT. THE L D.CIT(A) 28 ITA NO.320/PUN/2010 FOLLOWING HIS ORDER FOR A.Y. 2000-01 DISMISSED THE GROUND RAIS ED BY THE ASSESSEE ON THIS ISSUE. 36. SO FAR AS THE ACTION OF THE ASSESSING OFFICER IN CAPITALIZIN G THE INTEREST AND MAKING DISALLOWANCE U/S.40A(2)(B), 40(A)(IA) AND 40A(3 ) ETC. ARE CONCERNED THE LD.CIT(A) PARTLY ALLOWED THE GRIEV ANCE OF THE ASSESSEE REGARDING CAPITALIZATION OF INTEREST TOWARDS THE COST OF THE ASSET. THE RELEVANT OBSERVATION OF THE CIT(A) AT PARA 11 .7 READS AS UNDER : 11 . 7 I HAVE CONSIDERED THE EXPLANATION GIVEN WITH THE LETTERS DATED 8. 1 2.2009 , 11.12.2009 AND 19. ' 12.2009 ALONG WI TH TH E DETAILS T HEREOF . OUT OF THE TOTAL AMOUNT OF RS.12 , 58 , 58,634/- WHICH HAS BEEN CAPITALISED TOWARDS THE COST OF ASSETS IN THE ASSESSMENT ORDER , THE AMOUNT OF INTEREST WHICH IS RELATED TO WORKING CAP I TAL LOAN , VEHICLE LOAN AND BANK COMMISSION AND CHARGES W I LL HAVE TO BE ALLOWED AS REVENUE EXPENDITURE AND IS NOT REQUIRED TO BE CAPITALISED . IN R ESPECT OF THE ITEMS I NCLUDED UNDER ' INTEREST PAID ON TERM LOAN ' WH I CH HAS NOT BEEN CAPITALISED BY THE APPELLANT IN I TS BOOKS OF ACCOUNTS, AND , INSTEAD DEBITED TO INCOME AND EXPENDITURE ACCOUNT , THE ASSESSING OFFICER SHALL EXAMINE THE DETAILS SUBMITTED BY THE APPEL L ANT . I N CASE THE CONCERNED ASSET, FOR WH I CH THE TERM LOAN WAS RAISED , WAS PUT TO USE OR THE CONCERNED INSTITUTE HAS STARTED FUNCTIONING ALONG WITH THE ASSETS , I N THIS ASSESSMENT YEAR OR ANY EARLIE R ASSESSMENT YE AR; THEN TH E CORR E SPONDIN G I NT E R ES T IS ALSO NOT R EQU IRED T O B E CAPITAL I SED AND ON L Y THE BALANCE AMOUNT , I . E . WHEN THE ASSET I S NOT PUT TO USE AT ALL, WILL BE LIABLE TO BE CAPITAL ISED AND DISALLOWED U/S . 36(1 )(III) READ WITH ITS PROVISO. THERE WILL BE A CONSEQUENTIAL EFFECT ON THE DEPRECIATION CALCULAT I ON ALSO SINCE THE ASSESSING OFFICER HAS ALLOWED THE DEPRECIAT I ON AMOUNTING TO RS . 23 , 67 , 5 9 , 294/- BASE D O N THIS INT ERES T CAP I TAL I ZED U/ S . 36( 1 )(III ) , WHI CH WILL NOW UNDE R GO A CHANGE . GRO U ND OF APPEA L NO . 8 I S , T HEREFO R E , T REATED A S PA R T LY ALLOWED . 37. SO FAR AS THE ISSUE RELATING TO DISALLOWANCE U/S.40A(2)(B), 40(A)(IA) AND 40A(3) ARE CONCERNED HE UPHELD THE ACTION OF TH E ASSESSING OFFICER BY OBSERVING AS UNDER : 11.8 IT IS NOTICED THAT IN GROUND. NO.9 THE ISSUE RA ISED ITSELF IS NOT FULLY CORRECT. IT IS STATED THAT THE ASSESSING OFFICER HAS ERRE D IN .MAKING DISALLOWANCE U/S.40A(2)(B) / 40(A)(IA) / 40A(3), OVER LOOKING THE FACT THAT SUCH DISALLOWANCE CAN ONLY BE MADE WHEN INCOME W AS ASSESSABLE UNDER THE HEAD 'BUSINESS INCOME', THIS CONTENTION OF TH E APPELLANT IS NOT CORRECT SINCE THE PROVISIONS OF SECTION 58(2) OF TH E I.T. ACT, 1961 CLEARLY STIPULATE AS UNDER: 29 ITA NO.320/PUN/2010 'PROVISIONS OF SECTION 40A SHALL SO FAR AS MAY BE, APPLY IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES AS THEY APPLY IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THEREFORE, THE OBJECTION RAISED IN RESPECT OF SECTION 40A(2)(B) AND 40A(3) WAS INCORRECT; EVEN IF FOR THE SAKE OF ARGUMEN T, THE APPELLANT'S CONTENTION THAT IN ITS CASE THERE CANNOT BE ANY 'PROF ITS AND GAINS FROM BUSINESS OR PROFESSION' WAS PRESUMED TO BE CORRECT. IN THI S ASSESSMENT YEAR, THE ASSESSING OFFICER HAS MADE DISALLOWANCE U/S.40A( 2)(B) AT RS.24,55,015/- OUT OF THE RENT PAYMENTS MADE TO SHRI M.N.NAVALE, THE PRINCIPAL TRUSTEE. THIS ISSUE HAS BEEN DISCUSSED ABOVE IN R ESPECT OF REASONABLENESS OF THE RENT PAID, FOR THE PURPOSES OF SECT ION 13(1)(C) OF THE I.T. ACT, UNDER GROUND NOS. 2 & 6 OF THE APPEAL. HOWEVER, THE APPELLANT HAS NOT STATED ANYTHING REGARDING THE COMPU TATION, APPLYING PROVISIONS OF SECTION 40A(2)(B) ON MERITS. THE APPELLAN T HAD OBJECTED TO CONSIDERING 7% RETURN ON INVESTMENT AS REASONABLE RENT CONSIDERING ALLAHABAD HIGH COURT DECISION REPORTED IN 125 ITR 13 4. FURTHER, AS DISCUSSED ABOVE, THE GUJARAT HIGH COURT IN THE JUDGMEN T REPORTED IN 208 ITR 1005 (GUJ.) HAS UPHELD THE ADOPTION OF 8.4% ON C OST OF INVESTMENTS AS THE FAIR AND REASONABLE RENT. HERE, THE ASSESSING OFF ICER HAS TREATED 7% AS FAIR RENT AND DISALLOWED THE DIFFERENCE U/S.40A2 (B). THOUGH, THESE TWO DECISIONS MAY GIVE AN INDICATION FOR THIS PURPOSE, THESE DECISIONS HAVE NOT BEEN RENDERED IN THE CONTEXT OF SECTION 40A (2)(B). THEREFORE, TAKING A REASONABLE VIEW AND CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE MATTER, INCLUDING THE JUDICIAL P RONOUNCEMENTS DISCUSSED ABOVE, IT IS CONSIDERED FAIR REASONABLE TO RESTR ICT THE DISALLOWANCE FOR THE EXCESS RENT PAID TO THAT EXCEEDIN G 9% OF THE CAPITAL VALUE (COST OF INVESTMENT) IN THE PROPERTY. THEREFORE , THE ASSESSING OFFICER SHALL RECOMPUTE RENT ALLOWABLE FOR KARVE ROA D OFFICE, TAKING THE COST OF INVESTMENT AT RS.3,40,493/-; NDA ROAD, FARM HO USE PURCHASED AT A TOTAL COST OF RS.63,30,000/- IN THE LAST YEAR; AND T HE THREE FLATS IN SION, MUMBAI PURCHASED FOR RS.1,14,59,000/- DURING THIS YEAR ITSELF, WHICH WAS HIRED FROM 6.10.05 TO 31.10.2006; ASSUMING 9% OF T HESE INVESTMENT AMOUNTS AS REASONABLE RENTS PER ANNUM AND THE BALANCE W ILL BE DISALLOWED U/S.40A(2)(B) R.W.S. 40A(2)(A). 11.9 FURTHER, DISALLOWANCE HAS BEEN MADE AT RS.2,44,09 5/- U/S.40A(3) AS PER PAGE NO.863 OF ANNEXURE-9 OF PART II OF SPECIAL AUDIT REPORT WHICH IS INCLUDED IN THE COMPUTATION OF INCOME IN THE STARTIN G AMOUNT OF RS.12,10,37,009/-. THE APPELLANT HAS NOT GIVEN ANY EX PLANATION FOR THE SAME; THEREFORE THIS DISALLOWANCE IS UPHELD. 38. AS REGARDS THE DISALLOWANCE U/S. 40(A)(IA) AT RS.4,02,80,770/ - IS CONCERNED THE LD.CIT(A) PARTLY ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER : 11.11 IN RESPECT OF THIS ISSUE, THE PRIMARY OBJECTION OF THE APPELLANT IS THAT EVEN IF THE EXEMPTION U/S.11 IS WITH DRAWN IN THE APPELLANT'S CASE, THE INCOME IS NOT ASSESSABLE UNDER THE H EAD 'PROFIT AND GAINS OF BUSINESS AND PROFESSION'. THE APPELLANT HAS KEPT ON RAISING THIS ISSUE ON DIFFERENT OCCASIONS AND ALSO VIDE ITS LETTER DAT ED 27.7.2009. THE ASSESSING OFFICER HAS COUNTERED THE ARGUMENT IN THE REMA ND REPORT 30 ITA NO.320/PUN/2010 DATED 3.6.2009 AND ALSO SUBSEQUENTLY, WHICH HAS BEEN ME NTION AT PARA 9.2 OF THIS ORDER. BRIEFLY, IT IS CONTENDED BY THE ASSE SSING OFFICER THAT IN VIEW OF THE EVIDENCE FOUND DURING SEARCH, THE APPELL ANT WAS FOUND TO BE COLLECTION DONATIONS FOR ADMISSIONS WHICH REVEALED THE COMMERCIAL NATURE OF THE RUNNING OF INSTITUTIONS BY THE APPELLAN T, WITH A VIEW TO EARN INCOME. IT WAS, THEREFORE, CONTENDED BY THE ASSESSING OF FICER THAT THE INCOME WAS ASSESSABLE UNDER THE HEAD 'PROFIT AND GAINS FR OM BUSINESS OR PROFESSION'. FURTHER, IN THE ORDER GRANTING APPRO VAL U/S.142(2A) DATED 20.11.2007, THE CIT (CENTRAL), PUNE VIDE PARA 8 HAD OBSERVED AS UNDER: 'THE ID. COUNSEL OF THE ASSESSEE HAS STATED THAT DISALLOWAN CES U/S.43B, 40A(2), 40A(3) ETC. CAN BE MADE ONLY WHILE CALCULATING THE PROFIT OF BUSINESS. IT HAS FURTHER BEEN ARGUED THAT MERELY THE LEGAL STATUS HAS BEEN CHANGED TO A OP, IT CANNOT BE CO NSTRUED THAT THE ASSESSEE IS CARRYING OUT BUSINESS ACTIVITY. FOR THE SAI D PURPOSE, THE ID. COUNSEL OF THE ASSESSEE HAS RELIED UPON T HE DEFINITION OF BUSINESS AS GIVEN IN SECTION 2(13) OF THE I.T. ACT, 1961. I AM AFRAID THAT THE CONTENTION OF THE LD. C OUNSEL OF THE ASSESSEE IS NOT CORRECT. IT HAS BEEN HELD BY THE SUPREME COURT IN THE CASE OF LAXMINARAYAN RAM GOPAL VS. GOVERNMENT OF HYDERABAD (1954) (25 ITR 449 (SC)] THAT - BUSINESS CON NOTES SOME REAL, SUBSTANTIVE AND SYSTEMATIC COURSE OF ACTIVITY OR CONDUCT WITH A SET PURPOSE. THE ASSESSEE IS CARRYING OUT THE ACTIVITY OF RUNNING SCHOOLS AND COLLEGES IN A REGULATE D MANNER FROM WHICH PROFIT IS BEING MADE IN THE COMMERCIAL SEN SE. THE ASSESSEE IS FURTHER CHARGING MONEY FROM THE STUDENTS WHO ARE DESIROUS OF TAKING ADMISSION. SOME PART OF IT IS BROUGHT INTO THE TRUST AND SOME PART OF IT IS APPROPRIATED BY THE TRUSTE ES. IT IS ACTIVITY FOR PROFIT. THIS ACTIVITY OF PROFIT CANNOT BE ASSESSED AS BUSINESS INCOME SO LONG AS THE ASSESSEE HAS SHELTER U/S. 11, 12 & 13 OF THE I.T. ACT. THE MOMENT THIS SHELTER IS WITHDRA WN, THE INCOME HAS TO BE COMPUTED IN A NORMAL MANNER AS BUSIN ESS INCOME.' 11 . 12 IT IS FURTHER NOTICED THAT THE APPELLANT IS ITSELF CLAIMING DEPRECIATION IN ITS RETU R NS FILED BY IT FOR VARIOUS ASSESSMENT YEARS. NOW , U/S.57 OF THE I . T . ACT , DEPRECIATION IS NOT TO BE ALLOWED AS A DEDUCTION FROM INCOME FROM OTHER SOURCES , EXCEPT WHEN THE INCOME IS FROM H I RING OF PLANT AND MACHINE R Y OR BUILD I NG INHERENTLY CONNECTED WITH PLANT AND MACHINERY , WHICH IS ASSESSABLE U /S . 56(2) (I I ) OR (III) . OTHERWISE , DEPRECIATION U/S.32 IS ALLOWABLE ONLY WHEN THE INCOME IS ASSESSABLE UNDER THE HEAD 'PROFIT AND GAINS FROM BUSINESS AND PROF ESSION' . THEREFORE, WHEN THE APPELLANT IS ITSELF CLAIMING DEPR ECIATION UNDER T H I S SECTIO N APPLICABLE TO INCOME FROM BUSINESS AND PROFESSION , IT IMPLIES THAT THE O N CE THE EXEMPTION I S WITHDRAWN , THAT WOULD BE THE HEAD APPL I CABLE I N APPEL L ANT ' S CASE . IMPARTING OF EDUCATION IS A PROFESS I ONAL ACTIV I TY AND , THEREFORE , THE R ECE I PTS THEREFROM WOULD BE INCOME FROM PROFESSION . THE INCOME AND EXP END I TUR E ACCOUNT PREPA R ED BY THE APPELLANT ALSO SHOWED RECEIPTS FRO M FEE ETC . F OR THE PURPOSE OF IMPARTING EDUCATION AND AS AGA I NST VARIOUS ESTABL I SHMENT EXPE N SES , OFFICE EXPENSES , SALARY PAID TO TEACHING AND NON-TEACHING STA FF AND D EPREC I ATION , INTEREST ETC. A R E CLAIMED AS EXPENDITURE . THE ASSESSING OFF I CE R ' S AR G UM ENTS R EGARD I NG APP E LL AN T'S I N COME LIABLE TO BE A SSESSED AS BUS IN ESS INCOME WAS ALSO DISCUSSED ABOVE FOR GROUND NO.8 (PARA 11 ) . THEREFORE, IT IS A CASE WHERE SINCE EXEMPTION U/S . 11 CLAIMED BY THE APPELLANT IS NOT ALLOWED ABOVE IN ACCORDANCE WITH SEC TION 13(1)(D)(I) AND SECTION 13(1)(C) OF THE I . T . ACT , INCOME IS CHARGEABLE UNDER THE HEAD 31 ITA NO.320/PUN/2010 INCOME FROM BUSINESS AND PROFESSION AND PROVISIONS OF SECTION 40(A)(IA) INTRODUCED INTO THE STATUTE FROM THIS YEAR WOULD BE APPLICABLE . S I NCE DURING THE APPELLATE PROCEEDINGS , THE APPELLANT HAS NOT STA T ED ANYTHING REGARDING THE D I SAL L OWANCE MADE AT RS . 4 , 02 , 80 ,7 701 - ON MERITS, APART FROM RAISING ABOVE LEGAL PROPOSITION , THIS DISALLOWANCE IS HEREBY UPHELD . THEREFORE , GROUND NO . 9 RAISED BY THE APPELLANT IS TO BE TREATED AS PARTLY ALLOWED . 39. SO FAR AS THE CLAIM OF THE ASSESSEE THAT SPECIAL AUDITO R HAS ERRED IN TREATING REVENUE EXPENDITURE AS CAPITAL EXPENDIT URE IS CONCERNED HE HELD THAT ASSESSEE HAS NOT MADE ANY SPE CIFIC COMMENTS TO THE FINDINGS OF THE SPECIAL AUDITOR WHO HAS HELD THAT CAPITAL EXPENSES WERE DEBITED TO THE INCOME AND EXPENDIT URE ACCOUNT. HE NOTED THAT CAPITAL EXPENDITURE WAS NOT ALLOWABLE EVEN IN CASE OF INCOME FROM OTHER SOURCES AS PROVIDED U/S.57(III) OF THE I.T. ACT. IN ABSENCE OF ANY SPECIFIC EXPLANATION GIVEN BY THE A SSESSEE ON THIS ISSUE OF CAPITAL EXPENSES HE DISMISSED THE GROUND RA ISED BEFORE HIM. 40. SO FAR AS THE GROUND RELATING TO TREATING DONATIONS R ECEIVED TOWARDS CORPUS OF THE TRUST AS REVENUE INCOME IS CONCE RNED HE ALSO UPHELD THE ACTION OF THE ASSESSING OFFICER AND DISMISSED T HE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE BY OBSERVING AS UNDER : 1 3 . GROUND NO.11 RELATES TO TR EATI N G THE DONATION RECE I VED T OWARDS C ORP U S O F THE TR U ST AS REVENUE I NCOME . IT I S F U R THER STATED THAT DEN I A L OF EXEM PTI O N U/S . 11 CANNOT CHANGE THE BASIC AND T RUE NATURE OF THE RECEIPT . THE APPE LLAN T HAS NOT SUBMITTED ANY SPECIF I C EXPLA N A TI O N I N RESPECT OF TH I S I SS U E IN TH E F IRST SUBM ISS I O N D A T E D 4 . 2 . 2009 EXCEPT STA TIN G T HAT S IN CE TH E REG I S TR A TI O N WAS R ES T ORE D BY T HE ITAT SUCH D I SALLOWANCES / AD D I TI ONS CA NN OT BE MA DE. I N T HE SP E C IAL AUDIT REPO RT I T H AS BEEN POINTED OUT T HA T TH E TO T AL AMOUNT OF DO NAT I ON RECEIVED WAS RS . 43,148/- . THOUGH IN THE BALANCE SHEET ENCLOSED ALONG WI T H R E TURN OF I NCOME THIS DONATION HAS BEEN ADDED , THERE WAS NOTHING ON RECORD TO SUGGEST THAT THE DONATI ONS RECEIVED WERE CORPUS DONATIONS , SO AS TO QUALIFY UNDER THE PROVISIONS OF SECTION 11(1)(D) OF THE I.T. ACT. EVEN IN THE RETURN OF IN COME, AGAINST THE COLUMN GIVEN IN SCHEDULE F FOR MENTIONING THE AMOUNT - ELIGIBLE FOR EXEMPTION U/S . 11 (1)(D) , NOTHING HAS BEEN MENTIONED . MORE OVER IN THE APPELLANT'S CASE IT HAS ALREADY BEEN , HELD IN PARA 6 ABOVE THAT IT WAS NOT ELIGIBLE FOR EXEMPTION U/S . 11 OF THE I . T . ACT . THEREFORE, THE DONATION RECEIVED WAS RIGHTLY TREATED IN THE SPECIAL AUDIT REPORT AS INCOME . AS DURING THE APPELLATE PROCEEDINGS NO EXPLANATION HAS BEEN GIVEN I N RESPECT OF THIS 32 ITA NO.320/PUN/2010 DONATION RECEIVED BY THE APPELLANT , ITS TREATMENT AS INCOME IS HEREBY UPHELD AND THIS GROUND OF APPEAL I S , THEREFORE , DISMISSED. 41. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : CONCISED GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE TH E ORDER OF CIT(A) IS BAD IN LAW AND. INVALID AS HE HAS NOT ISSUED T HE MANDATORY NOTICE AS REQUIRED BY SEC. 251 (2) OF THE INCOME TAX ACT 1961, IN ORDER TO ENHANCE THE ASSESSMENT THEREBY MAKING THE APPELLANT LIABLE ON THE GROUNDS DIFFERENT FROM THOSE NOT CONSIDERED BY THE ASSESSI NG/OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D WITHOUT PREJUDICE TO THE ABOVE GROUND NO. 1 THE ORDER OF CI T (A) IS BAD IN LAW AND INVALID AS HE HAS DECIDED THE APPEAL BY CONSIDERIN G THE ISSUES WHICH ARE NOT CONSIDERED BY THE ITO IN THE ORDER APPEALED FROM. - REFER CIT VS. SHAPURJI PALLOJI MISTRI. 44 ITR 89 (SC). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D WITHOUT PREJUDICE TO THE ABOVE GROUND NO. I THE LEARNED CIT (A) HAS ERRED IN NOT APPRECIATING THE ESTABLISHED LEGAL POSITION THAT HIS PO WER OF ENHANCEMENT IS RESTRICTED TO THE SUBJECT MATTER OF ASSESSM ENT WHICH HAS BEEN CONSIDERED EXPRESSLY OR BY CLEAR IMPLICATION BY T HE ASSESSING OFFICER. REFER CIT VS. RAJ BAHADHUR HARDUTROI MOTILA L CHAMARIA - 66 ITR 443 (SC). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE TH E ASSESSMENT ORDER-PASSED U/S. 153C R.W.S. 143(3) IS BAD IN LAW IN AS MUCH AS THE SAME IS BASED ON THE ORDER OF CIT PASSED U/S. 12AA(3) WH ICH ORDER ITSELF IS INVALID, MAINLY BECAUSE THE REGISTRATION GRANTED U/ S. 12A(A) CANNOT BE CANCELLED U/S. 12AA(3), AS HELD BY THE ITAT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE TH E CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS.22,45,06,500/- HOLDING THAT THE SAME REPRESENTS THE DONATIONS/CAPITATION FEES COLLECTED BY THE APPELLANT FOR GRANTING THE ADMISSIONS IN VARIOUS COURSES RUN BY TH E APPELLANT BY MISINTERPRETING THE DOCUMENTS I.E. LOOSE PAPERS SEIZED F ROM THE RESIDENCE OF MR. M.N. NAVALE, PRINCIPAL TRUSTEE OF TH E APPELLANT AND IN DOING SO CIT (A) HAS DISREGARDED WITHOUT ASSIGNING ANY V ALID REASON THE DETAIL EXPLANATION FURNISHED BY THE APPELLANT SUPPOR TED BY DOCUMENTARY EVIDENCES. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D WITHOUT PREJUDICE TO THE GROUND NO. 1 TO 4 ABOVE, THE CIT(A ) HAS ERRED IN HOLDING THAT APPELLANT INSTITUTION HAS CONTRAVENED THE PROVISI ON OF SECTION 13(1)(C), BY PAYING EXCESSIVE AND UNREASONABLE RENT FO R THE PROPERTIES OWNED BY SHRI. M.N. NAVALE AND M. N. NAVALE (BIGGER HUF) AND FURTHER HOLDING THAT APPELLANT HAS ALSO CONTRAVENED THE PROVI SION OF SECTION 13(2)(A) AND 13(2)(G) OF THE ACT. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D WITHOUT PREJUDICE TO GROUND NO.1 TO 4 ABOVE, THE CIT (A) HA S ERRED IN TREATING THE ACQUISITION OF SHARES IN COOPERATIVE BANK FOR RS. 7,46, 720/- AS IN CONTRAVENTION OF PROVISION OF SECTION 13(1)(D)(I) OF THE INCOME TAX ACT, 33 ITA NO.320/PUN/2010 1961 DISREGARDING THE FACT THAT THIS ACQUISITION OF SHA RE IS NEITHER THE INVESTMENT NOR THE DEPOSIT MADE OUT OF THE FUNDS OF TH E INSTITUTION AND SUCH ACQUISITION WAS NECESSARY BEING A PRE-CONDITION FOR AVAILING THE LOAN FROM THE SAID CO-OPERATIVE BANK. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D WITHOUT PREJUDICE TO GROUND NO. 1 TO 4 ABOVE, THE CIT (A) H AS ERRED IN TREATING THE ACQUISITION OF SHARES IN PUBLIC LIMITED COMPANIES F OR RS. 1,50,000/- AS IN CONTRAVENTION OF PROVISION OF SECTION 13(1)( D)( I) OF THE INCOME TAX ACT, 1961 DISREGARDING THE FACT THAT THIS ACQUISITION OF SHARE IS NEITHER THE INVESTMENT NOR THE DEPOSIT MADE OUT OF THE FUNDS O F THE INSTITUTION AND SUCH ACQUISITION WAS NECESSARY BEING ESSENTIAL FOR THE STUDENTS OF BUSINESS MANAGEMENT COURSES WHO NEED TO STUDY THE AUDIT R EPORTS, FINAL ACCOUNTS, DIRECTORS REPORT ETC., IN ORDER TO CO MPLETE THE PROJECTS AS PER SYLLABUS AND HENCE CONSTITUTE THE APPLICATION OF I NCOME. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND WITHOUT PREJUDICE TO GROUND NO. 1 TO 4 ABOVE, THE CIT (A) H AS ERRED IN TREATING THE DONATIONS OF RS.43148/- RECEIVED TOWARDS TRUST CORP US AS REVENUE INCOME. DENIAL OF EXEMPTION U/S. 11 CANNOT CHANGE TH E BASIC AND TRUE NATURE OF THE RECEIPT. 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND WITHOUT PREJUDICE TO GROUND NO.1 TO 4, THE CIT (A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 2,50,000/- ON ACCOUNT OF DONATION S PAID. 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND WITHOUT PREJUDICE TO GROUND NO.1 TO 4 THE CIT (A) HAS ERRED IN INDIRECTLY HOLDING THAT BY REASON OF DENIAL OF EXEMPTION ALLOWABLE U/S.1 1, THE APPELLANTS ACTIVITY IS BEING RUN IN A COMMERCIAL MANNER AND HAS ALSO ERRED BY SUSTAINING THE DISALLOWANCE : I. U/S.40(A)(IA) RS.4,02,80,770/- II. U/S.40A(3) RS. 2,44,095/- III. U/S.36(1)(VA) RS. 31,30,020/- 12. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND WITHOUT PREJUDICE TO GROUND NO . 1 TO 4 ABOVE, CIT (A) HAS ERRED IN SUSTAINING THE ADDITIONS OR DISALLOWANCES MADE ON TH E G ROUND THAT CAPITAL EXPENSES HAVE BEEN DEBITED TO INCOME & EXPENDITURE A/C WITHO UT APPLYING H I S COMPETENT MIND AND I N THE PROCESS HAS FURTHER OVE R LOOKED THE FACT THAT SPECIAL AUDITORS HAVE THEMSELVES ERRED IN TREATING THE REVENUE EXPENDITUR E S AS CAPITAL EXPENDITURES. 13. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND WITHOUT PREJUDICE TO THE GROUND NO. 1 TO 4 THE CIT (A) HAS E RRED IN SUSTAINING THE DISALLOWANCE OF RS. 94,84,854/- MADE ON ACCOUNT OF PR IOR PERIOD EXPENDITURE DISREGARDING THE CONTENTION THAT THESE EX PENSES MATERIALIZED IN THE CONTEXT OF THEIR LIABILITY IN THE YEAR UNDER CONSIDERATION ONLY. 34 ITA NO.320/PUN/2010 42. THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDITIONAL GROUNDS : ADDITIONAL GROUND NO. 1 :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) R.W.S. 153C IS BAD IN LAW IN AS MUCH AS:- I. HE HAS FAILED TO ISSUE THE NOTICE U/S. 153C AND MAKE THE ASSESSMENT U/S. 153C R.W.S. 143(3) INSPITE OF STATING SO I N THE DETAILS OF THE ASSESSMENT ORDER, II. WITHOUT PREJUDICE TO (I) HE HAS FAILED TO RECORD AND INFORM THE NECESSARY SATISFACTION AS WELL AS FAILED TO PROVIDE THE C ERTIFIED TRUE COPIES OF THE DOCUMENTS SEARCHED AND SEIZED IN AN ACTIO N TAKEN UNDER SECTION 132 ON SHRI. M.N. NAVALE AND III. HE HAS FAILED TO APPRECIATE THAT THE SEIZED PAP ER IS NOT INCRIMINATORY IN NATURE. ADDITIONAL GROUND NO.2 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE O RDER PASSED BY THE ACIT, CENTRAL CIRCLE 2(2) PUNE IS INVALID AND BA D IN LAW AS THE CASE OF THE APPELLANT WHICH IS WITH THE ACIT CIRCLE 1(1) PU NE HAS NOT BEEN TRANSFERRED TO ACIT/DCIT CENTRAL CIRCLE 2(2) PUNE, W HO HAS PASSED THE ORDER WITHOUT ASSUMING THE LEGAL JURISDICTION. ADDITIONAL GROUND NO. 3:- (ON MERIT) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND E VEN WITHOUT PREJUDICE TO OUR CONTENTION THAT THE LOWER AUTHORIT IES HAVE ERRED IN REJECTING THE CLAIM OF EXEMPTION MADE U/S. 11 THERE CANNOT BE WHOLESALE DENIAL OF EXEMPTION OF THE ENTIRE INCOME O F THE APPELLANT AND THAT AT THE MOST THE RELEVANT INCOME EARNED FROM THE SHARES OF THE CO- OPERATIVE BANK AND BY ANALOGY THE ALLEGED EXCESS RENT PAID IN CONTRAVENTION OF SECTION 13(1)(C) OF I.T. ACT 1961 C AN ONLY BE SUBJECTED TO MARGINAL RATE OF TAX AS HELD BY THE JURISDICTIONA L BOMBAY HIGH COURT IN THE CASE OF SETH MAFATLAL GAGALBAI FOUNDATION TRU ST - 249 ITR 533 AS WELL AS THE TRIBUNALS OF MUMBAI BENCH AND DELHI BENCH AND RESPECTFULLY FOLLOWED BY THIS HON'BLE PUNE BENCH IN T HE CASE OF THE APPELLANT ITSELF IN ITA NO. 113/PN/10 FOR A. Y. 1999 -2000 PRONOUNCED ON 18/03/2011. (RELEVANT TO GROUND NO.6, 7 AND 8) ADDITIONAL GROUND NO. 4 :- (ON MERIT) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND W ITHOUT PREJUDICE TO THE CONCISED GROUNDS NO. 'S 1 TO 4 THE CIT(A) HAS ER RED IN NOT ADMITTING THE ADDITIONAL EVIDENCE FILED IN THE FORM OF VALUATION REPORT OF THE APPROVED VALUER WITH RESPECT TO THE FAIR RENT OF THE PROPERTIES ACQUIRED BY THE APPELLANT AS REQUIRED UNDER RULE 46A (4) OF THE LT. RULES, 35 ITA NO.320/PUN/2010 1960 IN ORDER TO DECIDE THE REASONABILITY OF THE REN T PAID BY THE APPELLANT AND THE APPLICABILITY OF SECTION 13(1)( C (II) OF THE INCOME TAX ACT, 1961. (RELEVANT TO GROUND NO.6) 43. THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF NTPC LTD. REPORTED IN 229 ITR 383, JUTE CORPORATION OF INDIA LTD. REPORTED IN 187 ITR 688 A ND THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF AHMEDABAD ELECTRIC ITY COMPANY REPORTED IN 199 ITR 351 SUBMITTED THAT THE ABOVE GROUNDS AR E PURELY LEGAL GROUNDS AND ALL FACTS ARE AVAILABLE ON RECORD AND NO FRESH FACTS ARE REQUIRED TO BE INVESTIGATED. THEREFORE, THESE ADDITIONAL GROUNDS SHOULD BE ADMITTED FOR ADJUDICATION. 44. AFTER HEARING BOTH THE SIDES AND CONSIDERING TH E FACT THAT THE ADDITIONAL GROUNDS ARE PURELY LEGAL IN NATURE THE A BOVE GROUNDS ARE ADMITTED FOR ADJUDICATION. 45. SO FAR AS ADDITIONAL GROUND NO.1 IS CONCERNED T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SEARCH TOOK PLACE IN TH E RESIDENCE OF SHRI M.N. NAVALE AND HIS WIFE SMT. SUNANDA M.NAVALE ON 20-07- 2005. CERTAIN LOOSE PAPERS BELONGING TO THE ASSESSEE TRUST WERE FOUND. HE SUBMITTED THAT THE ASSESSING OFFICER ISSUED NOTICE U/S.153C FOR A.YRS. 2000-01 TO 2005-06 AND 143(2) WAS ISSUED FOR A.Y. 2006-07. HE SUBMITTED T HAT THE ASSESSMENT ORDER FOR A.Y. 2000-01 TO 2005-06 PASSED U/S.153C H AVE BEEN HELD AS INVALID BY THE TRIBUNAL ON THE GROUND THAT NO ASSES SMENT YEAR SPECIFIC INCRIMINATING DOCUMENTS WERE FOUND. REFERRING TO T HE COPY OF THE ORDER OF THE HONBLE BOMBAY HIGH COURT VIDE ORDER DATED 25-0 3-2015, HE SUBMITTED THAT THE APPEAL FILED BY THE REVENUE HAS BEEN DISMI SSED BY THE HONBLE HIGH COURT. HE SUBMITTED THAT IN CASE OF A NON-SEARCHED PERSON SIX PRECEDING YEARS ARE TO BE RECKONED FROM THE DATE OF HANDING O VER OF THE RELEVANT RECORDS, SATISFACTION NOTE ETC. OF THE SAID PERSON TO HIS ASSESSING OFFICER. 36 ITA NO.320/PUN/2010 SINCE SATISFACTION NOTE IS DATED 18-04-2007, THEREF ORE RELEVANT A.Y. IS 2008- 09. THEREFORE, SIX PRECEDING YEARS INCLUDE A.YRS. 2002-03 TO 2007-08. HE ACCORDINGLY SUBMITTED THAT THE ASSESSMENT FOR THE I MPUGNED ASSESSMENT YEAR SHOULD HAVE BEEN PASSED BY ISSUING NOTICE U/S. 153C. HOWEVER, NO SUCH NOTICE HAS BEEN ISSUED. REFERRING TO THE COPY OF THE SATISFACTION NOTE DATED 18-04-2007, A COPY OF WHICH IS PLACED AT PAGE S 5A AND 5B OF THE PAPER BOOK HE SUBMITTED THAT THE ASSESSING OFFICER IN THE SAID SATISFACTION NOTE HAS CATEGORICALLY MENTIONED THAT NOTICE U/S.15 3C HAS BEEN ISSUED FOR A.YRS. 2000-01 TO 2005-06 AND NOTICE U/S.143(2) HAS BEEN ISSUED FOR A.Y. 2006-07. REFERRING TO THE FOLLOWING DECISIONS HE S UBMITTED THAT NOTICE U/S.153C SHOULD HAVE BEEN ISSUED TO THE ASSESSEE. SINCE THE SAME HAS NOT BEEN DONE, THEREFORE, THE ORDER OF THE ASSESSING OF FICER PASSING THE ORDER U/S.143(3) SHOULD BE HELD AS BAD IN LAW AND VOID. 1. VIJAY M. VIMALWAL VS. ACIT REPORTED IN 124 TTJ 508 (AHD.). 2. M/S. SDL PROPERTIES PVT. LTD. VS. DCIT ITA NO.1344/D EL/2012 DATED 22-03-2013. 3. V.K. FISCAL SERVICES PVT. LTD. VS. DCIT ITA NOS. 5460 TO 5465 /DEL/2012 FOR A.YRS. 2004-05 TO 2008-10 4. SSP AVIATION LTD. VS. DCIT REPORTED IN 252 ITR 291 5. JASJIT SINGH VS. ACIT FOR A.Y. 2009-10 REPORTED IN 352 ITR 53 6. SHIKSHANA PRASARAKA MANDALI VS. CIT REPORTED IN 352 IT R 53 (BOM.) 7. M/S. R.L. ALLIED INDUSTRIES VS. ITO - ITA NOS.567 & 568 /DEL/2011 FOR A.YRS. 200-102 & 2003-03 ORDER DATED 28-11-2014 8. ACIT VS. INLAY MARKETING PVT. LTD. REPORTED IN 41 CC H 320 46. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS FAILED TO RECORD AND INFORM THE NECESSARY SATISFACTION AND FAILED TO PROVIDE THE CERTIFIED TRUE COPIES OF THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH FROM THE RESIDENCE OF SHRI M.N. NAVALE. THE SATISFACTION NO TE DOES NOT MENTION THE LOOSE PAPERS BEING NOS. 1 TO 101 OF BUNDLE NO.A-2. THEREFORE, THERE IS NO SATISFACTION THAT THE LOOSE PAPERS BELONG TO THE AS SESSEE TRUST. FURTHER, THE ASSESSING OFFICER ALSO FAILED TO APPRECIATE THAT TH E SEIZED PAPER IS NOT INCRIMINATORY IN NATURE. HE ALSO RELIED ON VARIOUS OTHER DECISIONS FILED IN THE PAPER BOOK AND ALTERNATIVELY SUBMITTED THAT ASSUMIN G THIS ASSESSMENT YEAR 37 ITA NO.320/PUN/2010 IS THE SEARCH YEAR, FOR THE ASSESSEE, EVEN THEN ALS O THE ASSESSMENT SHOULD HAVE BEEN MADE U/S.153C. 47. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND STRONGLY OPPOSED THE ARGUMENTS ADVANCED BY THE LD. COUNSEL F OR THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 04-01-2007 VOLUNTARILY, I.E. BEFORE RECORDING OF SATISFACTION NOTE. THE ASSESSEE FILED THE REVISED RETURN ON 13-08-2007. THEREFORE, THE ASSES SING OFFICER HAS RIGHTLY ASSUMED JURISDICTION AND ISSUED NOTICE U/S.143(2). REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DR. PRA TAP SINGH AND ANOTHER VS. DIRECTOR OF ENFORCEMENT AND OTHERS REPORTED IN 155 ITR 166 HE DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING : ILLEGALITY OF A SEARCH DOES NOT VITIATE THE EVIDENCE COLLECTED DURING SUCH ILLEGAL SEARCH. THE ONLY REQUIREMENT IS THAT THE COU RT OR THE AUTHORITY BEFORE WHICH SUCH MATERIAL OR EVIDENCE IS PLACED HAS T O BE CAUTIOUS AND CIRCUMSPECT IN DEALING WITH SUCH MATERIAL OR EVIDENCE . RADHA KISHAN V. STATE OF U.P. [1963] SUPP. I SCR 408 ; AIR 1963 SC 822 RELIED ON. WHERE THE DOCUMENTS AND OTHER MATERIALS SEIZED IN A SEA RCH UNDER S.37 OF THE FOREIGN EXCHANGE REGULATION ACT, 1971, DO NO T PROVIDE SUFFICIENT MATERIAL FOR TAKING FURTHER PROCEEDINGS UNDER THE A CT, BUT THOSE DOCUMENTS AND OTHER MATERIALS ARE SEALED UNDER A WARRA NT OF AUTHORIZATION ISSUED UNDER S. 132A OF THE I.T. ACT, 19 61, THE ENFORCEMENT DIRECTORATE MAY LEGITIMATELY CLOSE ITS PROCEEDINGS. M ERELY BECAUSE NO FURTHER PROCEEDINGS ARE TAKEN, THE ISSUANCE OF THE SEAR CH WARRANT OR THE SEARCH DOES NOT BECOME ILLEGAL OR INVALID, IF THE OFF ICER WHO ISSUED THE SEARCH WARRANT HAD MATERIAL FOR FORMING A REASONABLE BELIEF TO EXERCISE THE POWER UNDER S. 37(1), AND THE DIRECTORATE IS NOT BOUND TO RETURN THE DOCUMENTS. EVERY SEARCH NEED NOT NECESSARILY RESULT IN SEIZURE OF I NCRIMINATING MATERIAL : THERE CAN BE CASES IN WHICH THE SEARCH MAY FAIL OR A REASONABLE EXPLANATION MAY BE FORTHCOMING IN RESPECT OF THE MAT ERIAL. 48. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUB MITTED THAT THE ASSESSMENT FOR A.Y. 2006-07 HAD TO BE COMPLETED UND ER THE NORMAL PROVISIONS, I.E. 143(3) WHICH IS EXACTLY WHAT HAS B EEN DONE BY THE ASSESSING OFFICER. IT HAS BEEN MISTAKENLY MENTIONED ON THE F IRST PAGE OF THE ORDER THAT THE SAME IS PASSED U/S.153C R.W.S. 143(3). THIS IS PURELY AN INADVERTENT 38 ITA NO.320/PUN/2010 CLERICAL ERROR AND IN THE NATURE CONTEMPLATED U/S.2 92B WHICH CANNOT VITIATE THE ASSESSMENT PROCEEDINGS. THE PORTION WHERE THE M ISTAKE HAS OCCURRED IS NOT EVEN A PART OF THE BODY OF THE ORDER. ON THE O THER HAND REFERRING TO PAGE 6 OF THE ASSESSMENT ORDER HE SUBMITTED THAT THIS PA RT OF THE ORDER WHICH CLEARLY MENTIONS THAT THE A.Y. 2006-07 IS COVERED U /S.143(3) AND NOT U/S.153C LEAVES ABSOLUTELY NO ROOM FOR ANY AMBIGUIT Y. HE SUBMITTED THAT IN THE INSTANT CASE NOTICE U/S.143(2) WAS ISSUED ON 31-03-2007 WITH REFERENCE TO THE RETURN FILED ON 04 -01-2007. REFERRING TO THE PROVISIONS OF SUB-SECTION 2 OF SECTION 153C(2), HE SUBMITTED THAT THE ABOVE PROVISION CLEARLY STATES THAT WHERE A RETURN OF INC OME HAS BEEN FURNISHED BY SUCH OTHER PERSON BUT NO NOTICE U/S.143(2) HAS BEEN ISSUED AND LIMITATION FOR SERVING A NOTICE U/S.143(2) HAS EXPIRED, THEN ONLY THE ASSESSING OFFICER SHALL ISSUE THE NOTICE AND ASSESS OR REASSESS TOTAL INCOM E IN THE MANNER PROVIDED IN SECTION 153A. IN THE INSTANT CASE, A VALID NOTI CE U/S.143(2) WAS THERE AND THEREFORE THERE WAS NO REQUIREMENT OF ISSUING ANY F URTHER NOTICE U/S.153C AS NOWHERE IT IS MENTIONED THAT EVEN SUCH PROCEEDINGS ARE TO BE ABATED. THE LAW ALSO DOES NOT PROVIDE FOR INITIATION OF PARALLE L PROCEEDINGS SIMULTANEOUSLY. THEREFORE, THE VARIOUS DECISIONS R ELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 49. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAT BHATIA REPORTED IN 24 TAXMANN.CO M 98 HE SUBMITTED THAT POST SEARCH REASSESSMENT IN RESPECT OF ALL 6 YEARS CAN BE MADE EVEN IF ORIGINAL RETURNS ARE ALREADY PROCESSED U/S.143(1)(1 ). ASSESSING OFFICER HAS POWER U/S.153A TO MAKE ASSESSMENT FOR ALL SIX YEARS AND COMPUTE TOTAL INCOME OF ASSESSEE INCLUDING UNDISCLOSED INCOME, NO TWITHSTANDING THAT RETURNS FOR THESE YEARS HAVE ALREADY BEEN PROCESSED U/S.143(1)(A). HE ALSO RELIED ON THE FOLLOWING DECISIONS : 1. SAVESH KUMAR AGARWAL VS. UNION OF INDIA R3EPORTED IN 35 TAXMANN.COM 85 (ALLAHABAD) 2. FILATEX INDIA LTD. VS. CIT REPORTED IN 49 TAXMANN.CO M 465 (DELHI) 39 ITA NO.320/PUN/2010 50. THE LD. LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT WHILE THE ASSESSEE STATES THAT ASSESSING OFFICER HAS FAIL ED TO ISSUE NOTICE U/S.153C BUT ON THE OTHER SIDE THE ASSESSEE IS STAT ING IN THE REVISED RETURN DATED 13-08-2007 THAT THE RETURN IS FILED IN RESPON SE TO NOTICE U/S.153C. THIS SHOWS THAT THE ASSESSEE IS NOT FAIR IN ITS APPROACH AND CONCEALING THE FACTS OF THE CASE AND PRESENTING THE FACTS IN A DISTORTED MANNER. REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KI SHORE SAMRITE VS. STATE OF U.P. AND OTHERS IN CRIMINAL APPEAL NO.1406/2012 DATED 18-10-2012 HE SUBMITTED THAT THE HONBLE SUPREME COURT HAS CATEGO RICALLY STATED IN PARA NOS. 29 TO 36 OF THE SAID ORDER THAT GUILTY OF SUPP RESSION OF MATERIAL FACTS AND NOT APPROACHING THE COURT WITH CLEAN HANDS AND THER EBY ABUSING THE PROCESS OF COURT DOES NOT DESERVE ANY ADJUDICATION. THE OB JECTIONS RAISED ARE FOR THE FIRST TIME BEFORE THE ITAT AND THEREFORE THE SAME D ESERVES TO BE DISMISSED ON THIS ISSUE. THE SUBMISSION OF THE LD. COUNSEL F OR THE ASSESSEE THAT THE SEIZED PAPER IS NOT INCRIMINATING IN NATURE IS DEVO ID OF ANY MERIT AND A FALSE SUBMISSION. FURTHER NOTHING HAS BEEN BROUGHT ON RE CORD THAT ANY PREJUDICE HAS BEEN CAUSED TO THE ASSESSEE DURING THE ASSESSME NT PROCEEDINGS. RELYING ON VARIOUS DECISIONS HE SUBMITTED THAT PROC EEDINGS U/S.153A/153C ARE TO BE INITIATED FOR SIX ASSESSMENT YEARS ONLY. THE CURRENT YEAR SQUARELY FALLS UNDER THE PROVISIONS OF SECTION 143(3). THE LIMITATION TO COMPLETE PROCEEDING U/S.143(3) FOR THE CURRENT YEAR IS DETER MINED BY PROVISIONS OF SECTION 153B(1)(B). FOR THE CURRENT YEAR, THERE IS NO NEED TO INITIATE PROCEEDINGS U/S.153C BY VIRTUE OF SECTION 153C(2). ONLY IN CASE OF EVENTUALITY MENTIONED IN SECTION 153C(2) AND WHERE BOOKS ARE RECEIVED LATE THEN ONLY INITIATION OF THE PROCEEDINGS U/S.153C FO R THE CURRENT YEAR WILL BE REQUIRED. SUCH A SITUATION IS NOT IN THE PRESENT C ASE AND A VALID PROCEEDING U/S.143(3) WAS THERE. 40 ITA NO.320/PUN/2010 51. THE LD. AUTHORISED REPRESENTATIVE IN HIS REJOIN DER SUBMITTED THAT THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT REPLIED TO ANY OF THE DECISIONS RELIED ON BY HIM. HE SUBMITTED THAT TIME LIMIT HAS BEEN PROVIDED FOR COMPLETION OF ASSESSMENT FOR THE SEARCHED PERSON AS WELL AS THE NON SEARCHED PERSON. THAT DISTINGUISHES THE PROVISIONS OF SECTION 153A AND 153C. HE SUBMITTED THAT THE ASSESSEE IS ALSO CATEG ORICALLY STATING THAT NOTICE U/S.153C SHOULD HAVE BEEN ISSUED. SINCE NO NOTICE U/S.153C HAS BEEN ISSUED, THEREFORE, THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER HAS TO BE TREATED AS VOID. 52. 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 CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CAS E FILED THE ORIGINAL RETURN OF INCOME ON 04-01-2007. SEARCH AND SEIZURE OPERAT ION U/S.132 OF THE I.T. ACT WAS CARRIED OUT AT THE RESIDENCE OF SHRI M.N. N AVALE ON 20-07-2005 DURING WHICH CERTAIN INCRIMINATING MATERIALS BELONG ING TO THE ASSESSEE TRUST WERE FOUND. BASED ON THE SEIZED DOCUMENTS A SATISF ACTION NOTE FOR PROCEEDING U/S.153C OF THE I.T. ACT IN THE CASE OF THE ASSESSEE WAS PREPARED ON 18-04-2007, COPY OF WHICH IS PLACED AT PAGES 5A AND 5B OF THE PAPER BOOK. IN THE SAID SATISFACTION NOTE, THE ASS ESSING OFFICER HAS MENTIONED THAT NOTICE HAS BEEN ISSUED U/S.153C FOR SIX YEARS, I.E. A.YRS. 2000-01 TO 2005-06 (BOTH INCLUSIVE). IN THE SAID S ATISFACTION NOTE, HE HAS ALSO MENTIONED ISSUE NOTICE U/S.143(2) FOR A.Y. 20 06-07. SINCE THE ASSESSEE IN THE INSTANT CASE HAS FILED THE RETURN O F INCOME VOLUNTARILY ON 04- 01-2007 AND HAS REVISED THE SAME ON 13-08-2007, TH EREFORE, HE CANNOT TAKE SHELTER OF THE LACUNAE ON THE PART OF THE ASSE SSING OFFICER FOR NON ISSUE OF NOTICE U/S.153C FOR THE IMPUGNED ASSESSMENT YEAR . THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSE SSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. FURTHER, THE ASSESS EE HAS NEVER CHALLENGED 41 ITA NO.320/PUN/2010 FOR NON ISSUE OF NOTICE U/S.153C EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A). SINCE AFTER THE SEARCH TOOK PLA CE AT THE RESIDENCE OF SHRI M.N. NAVALE, THE ASSESSEE HAD VOLUNTARILY FILED ITS RETURN OF INCOME ON 04- 01-2007 AND HAS REVISED THE SAME ON 13-08-2007 STAT ING THAT THE SAME IS FILED IN RESPONSE TO NOTICE U/S.153C, A STATEMENT M ADE BY THE LD. DEPARTMENTAL REPRESENTATIVE AT THE BAR AND NOT CONT ROVERTED BY THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, WE FIND NO MER IT IN THE ADDITIONAL GROUND RAISED BY THE ASSESSEE ON THIS ISSUE. FURTH ER, WE DO NOT FIND ANY PREJUDICE THAT HAS BEEN CAUSED TO THE ASSESSEE FOR NON ISSUE OF NOTICE U/S.153C WHEN HE HAS FILED THE REVISED RETURN STATI NG THAT THE SAME HAS BEEN FILED IN RESPONSE TO NOTICE U/S.153C. IN THIS VIEW OF THE MATTER, THE FIRST ADDITIONAL GROUND RAISED BY THE ASSESSEE IS DISMISS ED. 53. SO FAR AS THE SECOND ADDITIONAL GROUND IS CONCE RNED THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE JURISDICTION. R EFERRING TO PAGE 5 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT BY TRANSFER ORDER DATED 10-10-2005 THE CASE OF THE ASSESSEE WAS TRANSFERRED FROM ACIT, CIRCLE-6, PUNE TO ACIT, CIRCLE-1(1), PUNE. R EFERRING TO PAGE 9 OF THE PAPER BOOK HE SUBMITTED THAT BY ANOTHER TRANSFER OR DER DATED 26-04-2006 THE CASE OF THE ASSESSEE WAS TRANSFERRED FROM ACIT, CENTRAL CIRCLE-1(1), PUNE TO DCIT, CENTRAL CIRCLE-2(2), PUNE. HE SUBMIT TED THAT FROM THE ORDER DATED 26-04-2006 IT IS EVIDENT THAT ASSESSEES CASE IS TRANSFERRED FROM ACIT, CENTRAL CIRCLE, PUNE WHEREAS AS PER THE TRANS FER ORDER DATED 10-10- 2005 THE ASSESSEES CASE WAS TRANSFERRED TO ACIT, C IRCLE-1(1), PUNE. IT WAS NEVER TRANSFERRED TO ACIT, CENTRAL CIRCLE-1(1). THEREFORE, THE DCIT, CENTRAL CIRCLE-2(2), PUNE HAD NO LOCUS STANDI /JURI SDICTION TO PASS THIS ASSESSMENT ORDER. HE SUBMITTED THAT IN THE PREVIOU S OCCASIONS WHEN THIS CASE WAS BEING HEARD THE BENCH HAD DIRECTED THE DEP ARTMENTAL REPRESENTATIVE TO CLARIFY THE SITUATION. THE DEPAR TMENTAL REPRESENTATIVE HAD PRODUCED A COPY OF THE CORRIGENDUM ORDER DATED 28-10-2005 WHICH 42 ITA NO.320/PUN/2010 STATES THAT IN THE EARLIER ORDER DATED 10-10-2005 A GAINST THE NAME OF THE ASSESSEE IN COLUMN NO.4 THE SAME SHOULD BE READ AS ACIT, CENTRAL CIRCLE- 1(1), PUNE AND NOT ACIT, CIRCLE -1(1), PUNE. THIS ORDER HAS BEEN PASSED BY SHRI PRADEEP SHARMA, CIT-III, PUNE. HOWEVER, THIS CORRIGENDUM ORDER HAS NOT BEEN COMMUNICATED TO THE ASSESSEE. 54. IN THE PROCEEDINGS TAKEN U/S.12AA(3) THE JURISD ICTION WAS CHALLENGED. THE CIT PRODUCED THE TRANSFER ORDER DATED 10-10-200 5 AND DID NOT ENCLOSE THE CORRIGENDUM ORDER NOR REFERRED TO. THE COPY OF THE CORRIGENDUM ORDER PROVIDED INITIALLY IN THE COURSE OF HEARING BEFORE THE BENCH WAS NOT COMMUNICATED TO THE ASSESSEE. THE ASSESSEE SOUGHT INFORMATION UNDER THE RTI ACT, 2005 REQUESTING TO PROVIDE THE NAMES OF TH E COMMISSIONERS WHO HELD THE CHARGE OF CIT-III, PUNE DURING THE PERIOD 01-04-2005 TO 31-03- 2006. THE CIT-III, PUNE BY HIS ORDER DATED 06-05-20 14 PROVIDED THE NAMES OF THOSE COMMISSIONERS. IN THESE NAMES, THE NAME O F SHRI PRADEEP SHARMA AS CIT-III WHO HAS PASSED THE CORRIGENDUM OR DER DATED 28-10-2005 HAS NOT BEEN MENTIONED. 55. HE SUBMITTED THAT THE LD. DEPARTMENTAL REPRESEN TATIVE IN THE COURSE OF HEARING FILED ANOTHER COPY OF CORRIGENDUM ORDER ALONG WITH AN ENCLOSURE WHICH WAS NOT FILED EARLIER. THIS ENCLOSURE SHOWS THE COPIES ADDRESSED TO OTHER PARTIES INCLUDING THE ASSESSEE. THE LD. DEP ARTMENTAL REPRESENTATIVE ALSO FILED THE ORDER DATED 10-10-2005 PASSED BY THE THEN CCIT, PUNE TO THE EFFECT THAT SHRI TEJINDER SINHA, CIT HAS BEEN SANCT IONED LEAVE AND THAT SHRI PRADEEP SHARMA, CIT-IV WAS GIVEN CHARGE OF CIT-III. THIS IS TO SUPPORT THE CORRECTNESS OF CORRIGENDUM ORDER SIGNED BY SHRI PRA DEEP SHARMA. HE SUBMITTED THAT IN THAT CASE THIS CORRIGENDUM ORDER SHOULD HAVE BEEN ENCLOSED WITH THE MAIN ORDER DATED 10-10-2005 BY TH E CIT IN THE PROCEEDINGS CONDUCTED U/S.12AA(3). IT IS ALSO NOT KNOWN AS TO WHY THE NAME OF SHRI PRADEEP SHARMA IS NOT APPEARING IN THE ORDER PASSED U/S.7 OF 43 ITA NO.320/PUN/2010 THE RTI ACT, 2005 BY THE CIT-III. HE SUBMITTED THA T MERE PARTICIPATION IN THE ASSESSMENT PROCEEDINGS IS NOT A BAR TO CHALLENGE TH E LOCUS STANDI/JURISDICTION OF THE ASSESSING OFFICER. FOR THE ABOVE PROPOSITION, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF DEEP CHAND KOTHARI VS. CI T REPORTED IN 171 ITR 381. 56. REFERRING TO THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF AJANTA INDUSTRIES AND OTHERS VS. CBDT REPORTED IN 1 02 ITR 281 HE SUBMITTED THAT IT IS MANDATORY TO RECORD REASONS IN THE ORDER OF TRANSFER ITSELF AND THE DEFECT CANNOT BE CURED BY SHOWING THE EXIST ENCE OF REASONS IN THE FILE. RECORDING OF REASONS AND DISCLOSURE THEREOF ARE NOT A MERE IDLE FORMALITY. NON-COMMUNICATION OF REASONS IN THE ORD ER U/S.127(1) WAS A SERIOUS INFIRMITY RENDERING THE ORDER INVALID. EVE NTHOUGH OPPORTUNITY OF HEARING AGAINST PROPOSED TRANSFER OF CASE FOR FACI LITY OF INVESTIGATION WAS GIVEN BUT NO REASONS WERE RECORDED OR COMMUNICATED IN THE ORDER SERVED ON THE ASSESSEE, THE ORDER WAS HELD AS INVALID. 57. REFERRING TO THE DECISION OF THE HONBLE ALLAH ABAD HIGH COURT IN THE CASE OF VINAYKUMAR JAISWAL AND OTHERS VS. CIT REPOR TED IN 221 ITR 568 HE SUBMITTED THAT TRANSFER OF A CASE WITHOUT GIVING A NOTICE TO THE ASSESSEE CONTAINING REASONS FOR TRANSFER, WITHOUT CONSIDERIN G THE OBJECTIONS OF ASSESSEE AND WITHOUT COMMUNICATING THE ORDER OF TRA NSFER TO THE ASSESSEE IS INVALID. 58. REFERRING TO THE DECISION OF THE HONBLE CALCUT TA HIGH COURT IN THE CASE OF SUBASH CHANDRA BHANIRAMKA VS. ACIT REPORTE D IN 320 ITR 349 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID D ECISION HAS HELD THAT WITHOUT RESORTING TO PROVISIONS OF SECTION 127, SUO MOTU TRANSFER OF FILE FROM ONE ASSESSING OFFICER TO ANOTHER ASSESSING OFFICER WAS ILLEGAL. 44 ITA NO.320/PUN/2010 59. REFERRING TO THE DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF FIAT INDIA AUTOMOBILES LTD. VS. CIT AND OTHERS VIDE WRIT PETITION NO.8657/2012 ORDER DATED 16-10-2012 HE SUBMITTED TH AT PROVISIONS OF SECTION 127(2) HAS TO BE STRICTLY FOLLOWED. HE ALS O RELIED ON THE FOLLOWING DECISIONS : 1. KUSUM GOYAL VS. ITO REPORTED IN 329 ITR 283 2. SMT. JEEVAN KUMARI VS. UOI REPORTED IN 118 ITR 573 60. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 124(3) NO PER SON SHALL BE ENTITLED TO CALL IN QUESTION THE JURISDICTION OF ASSESSING OFFICER W HERE HE HAS MADE A RETURN UNDER SUB-SECTION (1) OF SECTION 139, AFTER THE EXP IRY OF ONE MONTH FROM THE DATE ON WHICH HE WAS SERVED WITH A NOTICE UNDER SUB -SECTION (1) OF SECTION 142 OR SUB-SECTION (2) OF SECTION 143 OR AFTER THE COMPLETION OF THE ASSESSMENT WHICHEVER IS EARLIER. THE PROVISIONS OF SECTION 124(4) CLEARLY MENTIONS THAT SUBJECT TO THE PROVISIONS OF SUB-SECT ION (3) WHERE AN ASSESSEE CALLS IN QUESTION THE JURISDICTION OF AN ASSESSING OFFICER, THEN THE ASSESSING OFFICER SHALL, IF NOT SATISFIED WITH THE CORRECTNES S OF THE CLAIM, REFER THE MATTER FOR DETERMINATION UNDER SUB-SECTION(2) BEFORE THE A SSESSMENT IS MADE. HE SUBMITTED THAT THE ASSESSEE FILED THE RETURN VOLUNT ARILY AND THE ISSUE OF JURISDICTION WAS NEVER RAISED BEFORE THE ASSESSING OFFICER OR THE CIT(A). THEREFORE, NOW HE CANNOT QUESTION THE VALIDITY OF J URISDICTION OF THE ASSESSING OFFICER. 61. AS REGARDS THE JUSTIFICATION OF SHRI PRADEEP SH ARMA SIGNING THE CORRIGENDUM ORDER HE SUBMITTED THAT SHRI PRADEEP SH ARMA MIGHT HAVE ASSUMED CHARGE DURING THE LEAVE OF THE CONCERNED CI T. HE SUBMITTED THAT PROVISIONS OF SECTION 127 DOES NOT CONFER ANY POWER TO THE ASSESSING OFFICER BUT IT CONFERS POWER TO THE CIT AND OTHER AUTHORITI ES TO TRANSFER THE CASE FROM ONE ASSESSING OFFICER TO ANOTHER ASSESSING OFFICER. BY VIRTUE OF PROVISIONS OF SECTION 127 EITHER THE JURISDICTION OF THE CASE MAY LIE WITH THE ASSESSING 45 ITA NO.320/PUN/2010 OFFICER, EXERCISING JURISDICTION OVER THE CASE OR T O THE ASSESSING OFFICER TO WHOM JURISDICTION HAS BEEN CONFERRED U/S.127. IN T HIS CASE JURISDICTION HAS BEEN EXERCISED BY THE ASSESSING OFFICER WITH WHOM T HE ASSESSEE HAS FILED RETURN OF INCOME. THEREFORE THE QUESTION OF LEGALI TY OR ILLEGALITY OF THE ORDER FOR VIOLATION OF PROVISIONS OF SECTION 127 DOES NOT ARISE. 62. SO FAR AS THE VARIOUS DECISIONS RELIED ON BY TH E LD. COUNSEL FOR THE ASSESSEE ARE CONCERNED HE SUBMITTED THAT THOSE DECI SIONS ARE NOT AT ALL APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN TH OSE CASES THE JURISDICTION OF THE ASSESSING OFFICER HAD BEEN CHALLENGED BEFORE TH E ASSESSING OFFICER AS WELL AS THE APPELLATE AUTHORITIES. HOWEVER IN THE INSTANT CASE NO SUCH THING HAS BEEN DONE BY THE ASSESSEE. THEREFORE, THOSE DE CISIONS WILL NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. FURTH ER AS PER THE PROVISIONS OF SECTION 124(1) CHALLENGE IS TO BE MADE WITHIN ONE M ONTH FROM THE DATE ON WHICH HE WAS SERVED WITH THE NOTICE U/S.143(2). IN THIS CASE THE ASSESSEE ITSELF HAS MADE RETURN OF INCOME U/S.139 VOLUNTARIL Y AND AS PER THE PROVISIONS OF SECTION 124(3)(A) IF ANY CHALLENGE OF THE JURISD ICTION WAS THERE THE SAME SHOULD HAVE BEEN MADE WITHIN ONE MONTH OF THE SERVI CE OF NOTICE, I.E. BY 30- 04-2007 IN THE INSTANT CASE. HE ACCORDINGLY SUBMIT TED THAT THIS ADDITIONAL GROUND RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 63. 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 CITED BEFORE US. WE FIND THE ASSESSEE THROUGH THIS ADDITI ONAL GROUND HAS CHALLENGED THE VALIDITY OF THE ASSESSMENT ORDER ON THE GROUND THAT THE ASSESSING OFFICER WHO HAS PASSED THE ORDER HAD NO J URISDICTION OVER THE CASE. THE JURISDICTION OF THE AOS ARE PROVIDED U/S .124 OF THE I.T. ACT. AS PER THE PROVISIONS OF SECTION 124(2) WHERE A QUESTI ON ARISES AS TO WHETHER THE ASSESSING OFFICER HAS JURISDICTION TO ASSESS AN Y PERSON, THE QUESTION SHALL BE DETERMINED BY THE PRINCIPAL DIRECTOR GENER AL OR PRINCIPAL CHIEF CIT 46 ITA NO.320/PUN/2010 OR THE CCIT OR THE DGIT OR THE PRINCIPAL COMMISSION ER OR COMMISSIONER ETC. AS THE CASE MAY BE. AS PER THE PROVISIONS OF SECTION 124(3) NO PERSON SHALL BE ENTITLED TO CALL IN QUESTION THE JURISDICT ION OF AN ASSESSING OFFICER WHERE HE HAS MADE A RETURN UNDER SUB-SECTION (1) OF SECTION 139, AFTER THE EXPIRY OF ONE MONTH FROM THE DATE ON WHICH HE WAS S ERVED WITH A NOTICE UNDER SUB-SECTION (1) OF SECTION 142 OR SUB-SECTION (2) OF SECTION 143 OR AFTER THE COMPLETION OF THE ASSESSMENT WHICHEVER IS EARLIER. IN THE INSTANT CASE THE ASSESSEE HAS FILED ORIGINAL RETURN OF INCO ME ON 04-01-2007 WHICH HE HAD REVISED ON 13-08-2007. THE SUBMISSION OF TH E LD. DEPARTMENTAL REPRESENTATIVE THAT ASSESSEE HAS FILED RETURN OF IN COME ON 04-01-2007 BEFORE THE JURISDICTIONAL ASSESSING OFFICER WHO HAS PASSED THE ASSESSMENT ORDER COULD NOT BE CONTROVERTED BY THE LD. COUNSEL FOR THE ASSESSEE. NOTICE U/S.143(2) WAS ISSUED TO THE ASSESSEE ON 31- 03-2007. THE ASSESSEE FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ALONG WITH THE RETURNS FOR OTHER YEARS COVERED U/S.153C ON 13- 08-2007. THEREAFTER NOTICE U/S.143(2) WAS ISSUED TO THE ASSESSEE ON 30- 06-2008 WHICH WAS DULY SERVED ON THE ASSESSEE ON 01-07-2008. FURTHER NOTIC E U/S.142(1) FOR THE A.Y.2006-07 WAS ISSUED ON 07-09-2007. NOTICE U/S.1 43(2) WAS ISSUED ON 11-10-2007. THE ASSESSMENT ORDER WAS PASSED ON 07- 08-2008. TILL THE COMPLETION OF THE ASSESSMENT, THE ASSESSEE HAD NEVE R RAISED THE ISSUE OF JURISDICTION OF THE ASSESSING OFFICER. THEREFORE, IN VIEW OF THE CLEAR PROVISIONS OF SECTION 124(3), THE ASSESSEE NOW CANN OT CALL IN QUESTION THE JURISDICTION OF THE ASSESSING OFFICER. THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE AN D ARE NOT AT ALL APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN VI EW OF THE ABOVE DISCUSSION, THE ADDITIONAL GROUND NO.2 FILED BY THE ASSESSEE IS DISMISSED. 64. AS PER THE ADDITIONAL GROUND NO.3 THE GRIEVANCE OF THE ASSESSEE IS THAT THERE CANNOT BE WHOLESALE DENIAL OF EXEMPTION OF ENTIRE INCOME FOR CONTRAVENTION OF PROVISIONS OF SECTION 13(1)(C) AND 13(1)(D). 47 ITA NO.320/PUN/2010 65. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) ON THE BASIS OF INFORMATION PROVIDED BY THE ASSESSING OFFI CER DURING APPEAL PROCEEDINGS OBSERVED THAT ASSESSEE HAD VIOLATED PR OVISIONS OF SECTION 13(1)(D) SINCE THE ASSESSEE WAS HOLDING SHARES TO T HE EXTENT OF RS.7,46,720/- IN VARIOUS COOPERATIVE BANKS. SIMILA RLY, THE ASSESSEE HAD ALSO INVESTED AN AMOUNT OF RS.1,50,000/- IN SHARES OF DIFFERENT LISTED BLUE CHIP COMPANIES. THE ABOVE INVESTMENT IN SHARES OF COOPERATIVE BANKS AND LISTED COMPANIES ARE IN CONTRAVENTION OF SECTION 13 (1)(D). SIMILARLY, THE ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORD ER HAS CONSIDERED THE RENT PAID TO SHRI M.N. NAVALE AND VARIOUS OTHER PER SONS OF HIS FAMILY AS EXCESSIVE AND UNREASONABLE FOR WHICH HE MADE ADDITI ON OF RS.24,55,015/- U/S.40A(2)(B). THE ABOVE EXCESS RENT PAID, ACCORDI NG TO THE ASSESSING OFFICER, IS IN CONTRAVENTION OF PROVISIONS OF SECTI ON 13(1)(C). THEREFORE, THE EXEMPTION U/S.11 HAS BEEN DENIED TO THE ASSESSEE. HE SUBMITTED THAT VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OR 13(1 )(D), IF ANY, CANNOT BE A GROUND FOR DENIAL OF EXEMPTION OF THE ENTIRE INCOME U/S.11 OF THE I.T. ACT. AT BEST THE INCOME THAT CAN BE BROUGHT TO TAX IS TO TH E EXTENT OF EXCESS AMOUNT OF RENT PAID OR INCOME FROM THOSE INVESTMENT ONLY A ND WHOLESALE DENIAL OF EXEMPTION CANNOT BE MADE. 66. REFERRING TO THE DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF DIT (EXEMPTION) VS. SHETH MAFATLAL GAGALBHAI FOUNDA TION TRUST REPORTED IN [2001] 249 ITR 533 (BOM) HE SUBMITTED THAT THE HON BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT IN CASE OF CONTRAVENTIO N OF SECTION 13(1)(D), MAXIMUM MARGINAL RATE OF TAX U/S.164(2) IS APPLICAB LE ONLY TO THAT PART OF INCOME OF THE TRUST WHICH HAS FORFEITED EXEMPTION A ND NOT TO THE ENTIRE INCOME. REFERRING TO THE DECISION OF THE MUMBAI BE NCH OF THE TRIBUNAL IN THE CASE OF BAI DAYAMBAI ADAMJI RANGWALA CHARITY TRUST VS. ADIT(EXEMPTION) REPORTED IN 66 ITD 59 HE SUBMITTED THAT THE TRIBUNA L IN THE SAID DECISION HAS HELD THAT SIMPLY BECAUSE THE ASSESSEE TRUST WAS HOL DING DEBENTURES OF 3 48 ITA NO.320/PUN/2010 COMPANIES AND CONTINUED TO DERIVE INCOME FROM SUCH DEBENTURES IN CONTRAVENTION OF SECTION 11(5), EXEMPTION U/S.11 CA NNOT BE DENIED TO IT IN A WHOLESALE MANNER. REFERRING TO THE DECISION OF TH E HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. WORKING WOMENS FORUM R EPORTED IN 365 ITR 353 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT DENIAL OF EXEMPTION SHOULD ONLY BE TO THE EXTE NT OF THE INCOME WHICH WAS VIOLATIVE OF SECTION 13(1)(D) AND NOT THE TOTAL DENIAL OF EXEMPTION U/S.11. REFERRING TO THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. FOUNDATION FOR SOCIAL CARE REPORTED IN 37 TAXMA NN.COM 389 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID D ECISION HAS HELD THAT WHERE WHOLE OR PART OF RELEVANT INCOME IS NOT EXEMP TED U/S.11 BY VIRTUE OF VIOLATION OF SECTION 13(1)(D) TAX SHALL BE LEVIED ON RELEVANT INCOME OR PART OF RELEVANT INCOME AT MAXIMUM MARGINAL RATE. HE SUBMI TTED THAT THE HONBLE HIGH COURT WHILE RENDERING THE ABOVE DECISION HAS R ELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF FR. MUL LERS CHARITABLE INSTITUTIONS. THE LD. COUNSEL FOR THE ASSESSEE DRE W THE ATTENTION OF THE BENCH TO THE FOLLOWING OBSERVATION OF HONBLE HIGH COURT AT PARA7 OF THE ORDER : 7. HEARD, LEARNED COUNSEL FOR THE PARTIES AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDERS PASSED BY THE LEARNED CIT(A ) AND THE TRIBUNAL. AS STATED BY MR. PATEL, HEREIN ABOVE, THE I SSUES INVOLVED IN THIS MATTER ARE NO MORE RES INTEGRA AND WE HAVE ALREADY DECIDED THE SAME IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY OBSERVI NG AND HOLDING AS UNDER IN PARAS-5 AND 6 OF THE AFORESAID DECISION; 5. HAVING HEARD LEARNED ADVOCATES FOR THE PARTIES WE ARE OF THE OPINION THAT THE TRIBUNAL WAS JUSTIFIED IN UPHOLDING THE ORDER PASSED BY CIT(A). THE CIT(A) HAS VERY CLEARLY OBSERVED THAT THE PROVISIONS OF SECTION 11(1)(A) ARE VERY CLEAR AND PRO VIDE THAT THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST SHA LL NOT BE INCLUDED IN THE INCOME TO THE EXTENT IT IS APPLIED F OR THE CHARITABLE OR RELIGIOUS PURPOSES (EXPENSES INCURRED DURING THE YEAR ) OR ACCUMULATED/SET APART TO BE APPLIED FOR THAT PURPOSE IN FUTURE OUT OF 75% TO WHICH THE RESTRICTION U/S 11(5) APPLIES . THE TRIBUNAL HAS RELIED UPON ITS OWN DECISION ON A SIMILAR ISSUE RENDERED IN ITA NO. 644 TO 646/RJT/2003 DATED 22.12 .2003. WE ARE IN COMPLETE AGREEMENT WITH THE REASONINGS ADOPTED BY THE CIT(A) AS WELL AS TRIBUNAL. 49 ITA NO.320/PUN/2010 6. EVEN OTHERWISE, THE LAW ON THE SUBJECT IS ALSO WELL SETTLED. IN THE CASE OF FR. MULLERS CHARITABLE INSTITUTIONS (SUPRA) THE KARNATAKA HIGH COURT HAS HELD THAT A PERUSAL OF SECTIO N 13(1)(D) OF THE INCOME-TAX ACT, 1961 MAKES IT CLEAR THAT IT I S ONLY THE INCOME FROM SUCH INVESTMENT OR DEPOSIT WHICH HAS BEEN M ADE IN VIOLATION OF SECTION 11(5) OF THE ACT THAT IS LIABLE TO BE TAXED AND VIOLATION UNDER SECTION 13(1)(D) DOES NOT RESULT IN DE NIAL OF EXEMPTION UNDER SECTION 11 TO THE TOTAL INCOME OF TH E ASSESSEE AND THAT WHERE THE WHOLE OR PART OF THE RELEVANT IN COME IS NOT EXEMPTED UNDER SECTION 11 BY VIRTUE OF VIOLATION OF SECTION 13(1) (D) OF THE ACT, TAX SHALL BE LEVIED ON THE RELEVANT INCOME OR PART OF THE RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE. T HEREFORE, WE DO NOT SEE ANY REASON IN INTERFERING WITH THE IMPUGNE D ORDERS. HE ALSO RELIED ON THE FOLLOWING DECISIONS : 1. INSTITUTE OF SCIENCE & MANAGEMENT VS. CIT REPORTED IN 25 TAXMANN.COM 186 2. ACIT VS. IDICULA TRUST SOCIETY REPORTED IN 21 TAXMAN N.COM 144 3. CIT VS. ORPAT CHARITABLE TRUST REPORTED IN 230 TAXMAN N 66 4. JAMSHEDJI TATA TRUST VS. JT. DIT REPORTED IN 44 TAXMAN N.COM 147 5. GURDAYAL BERLIN CHARITABLE TRUST REPORTED IN 34 ITD 489 6. DCIT VS. HELP AGE INDIA REPORTED IN 133 TTJ 590 7. DCIT VS. NATIONAL ASSOCIATION OF SOFTWARE REPORTED IN 345 ITR 362 (DELHI) 8. S. RAMASWAMY IYER VS. CIT REPORTED IN 110 ITR 364 (MA DRAS) 9. DIT VS. N.H. KAPADIA TRUST REPORTED IN 136 ITD 111 HE ACCORDINGLY SUBMITTED THAT THERE CANNOT BE WHOLE SALE DENIAL OF EXEMPTION U/S.11 OF THE I.T. ACT AND ONLY TO THE EXTENT THERE IS VIOLATION AS PER PROVISIONS OF SECTION 13(1)(C) AND 13(1)(D) THE SAM E CAN BE BROUGHT TO TAX AT THE MAXIMUM MARGINAL RATE. 67. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND STRONGLY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED TH AT VIOLATION CANNOT BE HALF OR FULL. VIOLATION MEANS VIOLATION OF ANY KIND. E VEN FOR MINOR/MAJOR VIOLATION ENUMERATED IN PROVISIONS OF SECTION 13 OF THE I.T. ACT, THE ASSESSEE LOSES ITS EXEMPTION IN ENTIRETY. FOR THE ABOVE PROPOSITION TH E LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE FOLLOWING DECISIONS : 1. AGAPPA CHILD CENTRE VS. CIT [1997] 92 TAXMANN 327 (K ER.) 2. KANAHYA LAL PUNJ CHARITABLE TRUST VS. DIT (EXEMPTION) 297 ITR 66 (DELHI) 3. ADD.DIT (EXEMPTION) VS. CHIREC EDUCATION SOCIETY 20 TAXMANN.COM 115 50 ITA NO.320/PUN/2010 4. DIT (EXEMPTION)VS. CHIRANJIV CHARITABLE TRUST VS. 43 TAXMANN.COM 300 5. BUDHA VIKAS SAMITY VS. CIT-I 199 TAXMANN 395 (PATNA) 6. CIT VS. AUDH EDUCATION SOCIETY 15 TAXMANN.COM 235 7. ACTION FOR WELFARE & AWAKENING IN RURAL ENVIRONMENT (AWARE) VS. DCIT 263 ITR 13 (AP) 8. DIT (EXEMPTIONS) VS. SHARDABEN BHAGUBHAI MAFATLAL PUB LIC CHARITABLE TRUST 247 ITR 1 HE ACCORDINGLY SUBMITTED THAT ABOVE ADDITIONAL GROU ND FILED BY THE ASSESSEE SHOULD BE DISMISSED. 68. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. THE ONLY QUESTION TO BE DECIDED I N THIS ADDITIONAL GROUND IS AS TO WHETHER FOR VIOLATION OF PROVISIONS OF SECTIO N 13(1)(C) AND 13(1)(D), EXEMPTION U/S.11 BE DENIED TO THE WHOLE OF THE INCO ME OR WILL BE CONFINED TO THE EXTENT OF INCOME WHICH IS IN VIOLATION OF PROVI SIONS OF SECTION 13(1)(C) AND 13(1)(D). 69. WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF DIT (EXEMPTION) VS. SHETH MAFATLAL GAGALBHAI FOUNDATION TRUST. [2001] 249 ITR 533 (BOM) HAS OBSERVED AS UNDER : 7. . . . . . . . . . . . . . . HOWEVER, THE LEGISL ATURE INSERTED A PROVISO BY THE FINANCE ACT, 1984, WITH EFFECT FROM APRIL ,1985. BY THE SAID PROVISO, IT IS, INTER ALIA, LAID DOWN THAT WHERE THE WHOLE OR PA RT OF THE RELEVANT INCOME IS NOT EXEMPT BY VIRTUE OF SECTION 13(1)(D), TAX SHALL BE CHARGED ON THE RELEVANT INCOME OR PART OF THE RELEVANT INCO ME AT THE MAXIMUM MARGINAL RATE, THE PHRASE 'RELEVANT INCOME OR PART O F THE RELEVANT INCOME' IS REQUIRED TO BE READ IN CONTRADISTINCTION T O THE PHRASE 'WHOLE INCOME' UNDER SECTION 161 (1A). THIS IS ONLY B Y WAY OF COMPARISON. UNDER SECTION 161 ( A), WHICH BEGINS WITH A NON OBSTANTE CLAUSE, IT IS PROVIDED THAT WHERE ANY INCOME IN RESPEC T OF WHICH A PERSON IS LIABLE AS A REPRESENTATIVE ASSESSEE CONSISTS OF PRO FITS OF BUSINESS, THEN TAX SHALL BE CHARGED ON THE WHOLE OF THE INCOME IN RESPECT OF WHICH SUCH PERSON IS SO LIABLE AT THE MAXIMUM MARGINAL RATE. THEREFORE, READING THE ABOVE TWO PHRASES SHOW THAT THE LEGISLATURE HAS CLEARLY INDICATED ITS MIND IN THE PROVISO TO SECTION 164(2) WHEN IT CATEGORICALLY REFERS TO FORFEITURE OF EXEMPTION FOR BREACH OF SECTION 13(1)(D), RESULTING IN LEVY OF MAXIMUM MARGINAL RATE OF TAX ONLY TO THAT PART OF THE INCOME WHICH HAS FORFEITED EXEMPTION. I T DOES NOT REFER TO 51 ITA NO.320/PUN/2010 THE ENTIRE INCOME BEING SUBJECTED TO MAXIMUM MARGINA L RATE OF TAX. THIS INTERPRETATION OF OURS IS ALSO SUPPORTED BY CIRCULA R NO. 387, DATED JULY 6, 1984 (SEE [1985] 152 ITR (ST.) 1). VIDE THE SAID CIRCULAR, IT HAS BEEN LAID DOWN IN PARA. 28.6 THAT, WHERE A TRUST' CO NTRAVENES SECTION 13(1)(D) OF THE ACT, THE MAXIMUM MARGINAL RATE OF I NCOME-TAX WILL APPLY ONLY TO THAT PART OF THE INCOME WHICH HAS FORF EITED EXEMPTION UNDER THE SAID PROVISION AND NOT TO THE ENTIRE INCOME . WE MAY ALSO ADD THAT IN LAW, THERE IS A VITAL DIFFERENCE BETWEEN ELI GIBILITY FOR EXEMPTION AND WITHDRAWAL OF EXEMPTION/FORFEITURE OF EXEMPTION FOR CONTRAVENTION OF THE PROVISIONS OF LAW. THESE TWO CONC EPTS ARE DIFFERENT. THEY HAVE DIFFERENT CONSEQUENCES. IT IS INT ERESTING TO NOTE THAT ALTHOUGH THE LEGISLATURE WITHDREW SECTION 164(2 ) BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, WHICH PROVISION WAS RE INTRODUCED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1989, THE LE GISLATURE DID NOT TOUCH THE PROVISO TO SECTION 164(2) WHICH HAS BEEN ON THE STATUTE BOOK RIGHT FROM APRIL 1, 1985. THE SAID PROVISO WAS INSERTE D BY THE FINANCE ACT, 1984, THE PROVISO SPECIFICALLY REFERS TO VIOLATIO N OF SECTION 13 (1)( D) AND ITS CONSEQUENCES. IN THE CIRCUMSTANCES, WE FIND M ERIT IN THE CONTENTION OF THE ASSESSEE THAT IN THE PRESENT CASE, THE MAXIMUM MARGINAL RATE OF TAX WILL APPLY ONLY TO THE DIVIDEN D INCOME FROM SHARES IN MAFATLAL INDUSTRIES LIMITED AND NOT TO THE ENTIRE INCOME. THEREFORE, INCOME OTHER THAN DIVIDEND INCOME SHALL BE TAXED AT THE NORMAL RATE OF TAXATION UNDER THE ACT. 70. WE FIND THE HONBLE KARNATAKA HIGH COURT HAS FO LLOWED THE ABOVE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. FR. MULLERS CHARITABLE INSTITUTIONS REPORTED IN 363 ITR 230. S UBSEQUENTLY, THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. KARNATA KA INDUSTRIAL AREA DEVELOPMENT BOARD HAS DECIDED THE ISSUE IN FAVOUR O F THE ASSESSEE BY OBSERVING AS UNDER : 2. THESE TWO APPEALS WERE ADMITTED ON 2004.2010 AND 16.7.2009 RESPECTIVELY. IN ITA NO.557/2008, THE FOLLOWING SUBSTA NTIAL QUESTION OF LAW IS FRAMED FOR CONSIDERATION: 'WHETHER THE TRIBUNAL WAS CORRECT IN UPHOLDING THE F INDING OF THE APPELLATE COMMISSIONER THEREAFTER DIRECTING A RE-LOOK IN RESPECT OF THE RELIEF CLAIMED U/S.11 OF THE ACT AND SECTION 13(1)(D ) OF THE ACT WITHOUT CONSIDERING THE CONTROVERSY BEFORE IT'?' 3. IN SHORT, THE QUESTION FOR CONSIDERATION IS WHEN THE RE IS VIOLATION U/S.11 (5) AND 13(1)(D) OF THE ACT, WHETHER THE EXEMPTION IS TO BE WITHDRAWN FOR THE ENTIRE INCOME OR THE PORTION OF THE INCOME. THI S ISSUE IS COVERED BY THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE REPORT ED IN (2001) 249 ITR 533 (BORN). FOLLOWING THE AFORESAID JUDGMENT, THIS CO URT IN THE CASE OF COMMISSIONER OF INCOME TAX, MANGALORE VS. FR. MULLERS C HARITABLE INSTITUTIONS, KANKANADY, MANGALORE, IN ITA NOS.588 AND 589 OF 2007 DECIDED ON 10.2.2014 HAS HELD THE ENTIRE INCOME OF T HE ASSESSEE CANNOT BE ASSESSED FOR THE TAX, FOR VIOLATING UNDER SECTION 11(5) READ WITH SEC.31(1)(D) OF THE ACT AND WHAT WOULD BECOME THE SU BJECT MATTER OF ASSESSMENT IS ONLY THAT INCOME WHICH IS THE SUBJECT MATTER OF VIOLATION. 52 ITA NO.320/PUN/2010 IN THAT VIEW OF THE MATTER, AS THE SUBSTANTIAL QUESTIO N OF LAW HAS ALREADY ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENU E, WE ALSO ANSWER IT ACCORDINGLY AND DISMISS THESE APPEALS. 71. WE FIND THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. KARNATAK INDUSTRIAL AREA DEVELOPMENT BOARD VIDE SLP (C) NO.1 9422/2015 ORDER DATED 11-11-2016 HAS DISMISSED THE SLP FILED BY THE REVEN UE. 72. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT WHENEVER THERE IS VIOLATION OF SECTION 11(5) AND 13(1)(D) OF THE I.T. ACT, EXEMPTION CANNOT BE WITHDRAWN FOR THE ENTIRE INCOME AND INCOM E WHICH IS THE SUBJECT MATTER OF VIOLATION ONLY CAN BE BROUGHT TO TAX. ACC ORDINGLY, ADDITIONAL GROUND NO.3 BY THE ASSESSEE IS ALLOWED. 73. IN ADDITIONAL GROUND NO.4 AND GROUND OF APPEAL NO.6 THE GRIEVANCE OF THE ASSESSEE IS THAT CIT(A) DID NOT ACCEPT CERTAIN ADDITIONAL EVIDENCES FILED DURING THE COURSE OF APPEAL HEARING. SINCE THEY R ELATE TO THE SAME ISSUE, THEREFORE THE, ABOVE GROUNDS ARE BEING DECIDED SIMU LTANEOUSLY. 74. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE TRUST HAS TAKEN 3 PROPERTIES ON RENT, THE DETAILS OF WHIC H ARE AS UNDER : 1. OFFICE AT GOVIND CHAMBERS, KARVE ROAD, PUNE RS.75,000 /- PER MONTH 2. FARM HOUSE AT WARJE, NDA ROAD, PUNE RS.1,25,000/- PER MONTH 3. FLAT NOS.7, 8, & 9, GEETA BUILDING, BOMBAY RS.1,5 6,000/- PER MONTH 75. HE SUBMITTED THAT THE PROPERTY AT SL.NO.1 BELON GS TO SHRI M.N. NAVALE, INDIVIDUAL WHEREAS THE PROPERTY AT SL.NO.2 AND 3 ABOVE BELONG TO SHRI M.N.NAVALE, BIGGER HUF. HE SUBMITTED THAT THE ASSESSING OFFICER RELYING ON THE DECISION OF HONBLE ALLAHABAD HIGH C OURT IN THE CASE OF CIT VS. RADH DEVI DALMIA REPORTED IN 125 ITR 134 DETERM INED THE FAIR RENT OF 53 ITA NO.320/PUN/2010 THE PROPERTIES AT 7% P.A. OF THE COST OF THE PROPER TY. HE ACCORDINGLY DETERMINED THE BALANCE AMOUNT AS EXCESS RENT PAID T O SHRI M.N. NAVALE. IN APPEAL THE LD.CIT(A) ENHANCED SUCH FAIR RENT TO 9% OF THE COST OF THE PROPERTY. 76. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NARENDRA MOHAN FOUNDATION REPORTED IN 213 C TR 129 HE SUBMITTED THAT HUF IS NOT A PROHIBITED PERSON U/S.13(3) OF TH E I.T. ACT. HE SUBMITTED THAT THIS PROPOSITION HAS BEEN ACCEPTED BY THE CIT( A) IN THE APPEAL FILED FOR A.YRS. 2007-08 AND 2008-09. RELYING ON THE DECISIO N OF THE TRIBUNAL IN THE APPEAL OF SHRI M.N. NAVALE BIGGER HUF VIDE ITA NO.1 49/PN/2010 ORDER DATED 30-03-2012, HE SUBMITTED THAT THE TRIBUNAL FO UND THAT THESE PROPERTIES ARE INCLUDED IN THE PARTITION DECREE AWARDED BY THE CIVIL COURT, PANDHARPUR. HE SUBMITTED THAT THE ORDER OF THE CIVIL COURT IS B INDING ON THE ASSESSING OFFICER AND THEREFORE, IN RESPECT OF THESE 2 PROPER TIES THERE IS NO CONTRAVENTION OF SECTION 13(1)(C) AND NO ADDITION C AN BE MADE U/S.40A(2). 77. SO FAR AS THE FIRST PROPERTY IS CONCERNED HE SU BMITTED THAT THE SAME IS OWNED BY SHRI M.N. NAVALE, INDIVIDUAL. HE SUBMITTE D THAT THE APPROACH OF THE LOWER AUTHORITIES RELYING ON THE DECISION OF HO NBLE ALLAHABAD HIGH COURT IN THE CASE OF RADHA DEVI DALMIA (SUPRA) IS TOTALLY MISPLACED. IN THAT CASE, THE PROPERTY WAS VACANT. THEREFORE, FOR THE PURPOS E OF SECTION 22 THE NOTIONAL ANNUAL VALUE WAS REQUIRED TO BE DECIDED U/ S.23 TO BE TAXED IN THE HANDS OF THE OWNER OF THE PROPERTY. HE SUBMITTED T HAT IF THE PROPOSITION ADOPTED BY THE ASSESSING OFFICER IS ACCEPTED THEN I T GIVES AN ABSURD RESULT. THE ASSESSING OFFICER HAS TAKEN THE COST OF THE PRO PERTY AT RS.3,40,493/- AND HE HAS DETERMINED THE FAIR RENT AT RS.23,885/- PER ANNUM. HE SUBMITTED THAT THE AREA OF THE PROPERTY WAS 2912 SQ.FT. THERE FORE, THE FAIR RENT AS PER THE ASSESSING OFFICER WORKS OUT TO RS.0.69 PAISE W HICH IS ABSURD. HE SUBMITTED THAT INCIDENTALLY GOVIND CHAMBERS IS VACA TED W.E.F. 01-04-2008 54 ITA NO.320/PUN/2010 AND IT WAS SUBSEQUENTLY LET OUT TO ONE SHRI SUNIL Y ADAV AND OTHERS VIDE LEASE AGREEMENT DATED 15-12-2010 FOR A MONTHLY RENT OF RS.1,50,000/-. HE SUBMITTED THAT THE TENANT PAID RENT FOR 3 MONTHS T OTALLING TO RS.4,50,000/- AND THEREAFTER, THE SAID TENANT HAD TO CANCEL THE L EASE AGREEMENT AS THE CORPORATION DID NOT GRANT THE SANCTION FOR CONDUCTI NG THE PERMIT ROOM IN THE SAID PREMISES. SUBSEQUENTLY, SHRI M.N. NAVALE SOLD THE SAID PREMISES ON 11-03-2011 FOR A CONSIDERATION OF RS.211.60 LAKHS. 78. HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD A SINGLE COMPARATIVE INSTANCE TO SUPPORT HIS VIEW. T HEREFORE, IN ABSENCE OF ANY SUCH COMPARABLE INSTANCE IT IS INCONCEIVABLE TO HOLD THAT THE PAYMENT OF RENT IS UNFAIR OR EXCESSIVE. HE SUBMITTED THAT THE FAIR RENT NEEDS TO BE DECIDED FROM THE VIEW POINT OF THE TENANT WHO PAYS THE RENT. THE TENANT WHILE GIVING RENT WILL TAKE INTO CONSIDERATION THE UTILITY, LOCALITY, AVAILABILITY OF BASIC FACILITIES AND THE TOTAL AREA OF THE SAID PRO PERTY ETC. AS WELL AS ITS NECESSITY AND CONVENIENCE. FOR THE ABOVE PROPOSITI ON, HE REFERRED TO THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. EDWARD KELVINATOR PVT. LTD. REPORTED IN 86 ITR 370 WHICH H AS BEEN UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS.EDWARD KEVENTER PVT. LTD. REPORTED IN 115 ITR 149. 79. HE SUBMITTED THAT WHILE DECIDING THE BENEFIT GI VEN TO SHRI M.N. NAVALE IT IS EQUALLY NECESSARY TO EVALUATE THE SERV ICES RENDERED BY HIM WHICH HAS MAINLY BENEFITTED THE ASSESSEE TRUST. H E SUBMITTED THAT SHRI M.N. NAVALE HAS NOT BEEN PAID ANY REMUNERATION THOU GH THE ASSESSEE IS NOT BARRED FROM PAYING REMUNERATION TO THE TRUSTEE S. HE SUBMITTED THAT THESE SERVICES NEED TO BE EVALUATED AND IF SO DONE, IT IS THE ASSESSEE WHICH HAS BEEN MAINLY BENEFITTED AND THIS ASPECT CANNOT B E IGNORED. 80. REFERRING TO THE REPORT OF THE APPROVED VALUER, COPY OF WHICH HAS BEEN PLACED AT PAGE 45 OF THE PAPER BOOK, HE SUBMIT TED THAT THE FAIR RENT OF 55 ITA NO.320/PUN/2010 GOVIND CHAMBERS IS RS.90,000/- PER MONTH AS AGAINST RS.75,000/- PER MONTH PAID BY THE ASSESSEE. HE SUBMITTED THAT ALTH OUGH THE ASSESSEE HAS FILED A COPY OF THE APPROVED VALUER BEFORE THE CIT (A), HOWEVER, HE HAS NOT ADMITTED THESE ADDITIONAL EVIDENCES. HE ACCORDINGL Y SUBMITTED THAT THE ADDITIONAL GROUND NO.4 BE ALLOWED AND IT BE HELD TH AT THE ASSESSEE HAS NOT CONTRAVENED THE PROVISIONS OF SECTION 13(1)(C) BY P AYING EXCESS RENT TO SHRI M.N. NAVALE AND M.S. NAVALE (BIGGER HUF). 81. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED TH AT SINCE THE HUF HAD NEVER FILED ANY RETURN OF INCOME OR RETURN OF WEALT H DURING ALL THE YEARS STARTING FROM 1950 TILL THE TIME OF SEARCH OPERATIO N, THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE PROPERTIES BELONG TO THE HUF IS N OT ACCEPTABLE. HE SUBMITTED THAT THE ASSESSING OFFICER HAD CORRECTLY COMPUTED THE FAIR RENT. SINCE THE ASSESSEE BY GIVING EXCESS RENT HAS VIOLAT ED THE PROVISIONS OF SECTION 13(1)(C), THEREFORE, IT FALLS UNDER THE MIS CHIEF OF SECTION 13(1)(C). HE ACCORDINGLY SUBMITTED THAT SINCE THE ORDERS OF THE ASSESSING OFFICER AS WELL AS THE CIT(A) ARE IN CONSONANCE WITH THE PROVISIONS OF THE ACT, THEREFORE, THE SAME SHOULD BE UPHELD AND THE ADDITIONAL GROUND NO.4 AND GROUND OF APPEAL NO.6 RAISED BY THE ASSESSEE SHOULD BE DISMI SSED. 82. 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 CITED BEFORE US. WE FIND THE ASSESSING OFFICER IN THE BO DY OF THE ASSESSMENT ORDER HAS HELD THAT THE ASSESSEE TRUST HAS GIVEN EX CESS RENT TO SHRI M.N. NAVALE ON ACCOUNT OF THE 3 PROPERTIES TAKEN ON RENT . ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE TRUST HAS TAKEN ON R ENT FLAT/OFFICE AT GOVIND CHAMBERS, KARVE ROAD, PUNE ON A MONTHLY RENT OF RS. 75,000/-, THE FARM HOUSE AT WARJE, NDA ROAD, PUNE ON A MONTHLY RENT OF RS.1,25,000/- AND 56 ITA NO.320/PUN/2010 FLAT NOS. 7,8, & 9 IN GEETA BUILDING, SION, MUMBAI ON A MONTHLY RENT OF RS.1,56,000/-. ACCORDING TO THE ASSESSING OFFICER THE FAIR RENT SHOULD BE EQUAL TO 7% PER ANNUM OF THE COST OF THE PROPERTY I N VIEW OF THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF RADHA D EVI DALMIA REPORTED IN 125 ITR 134. WE FIND THE LD.CIT(A) ENHANCED SUCH FA IR RENT TO 9% OF THE COST OF PROPERTY. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE RENT PAID TO M.N. NAVALE (BIGGER HUF) IN R ESPECT OF THE FIRST TWO PROPERTIES ARE OUTSIDE THE PURVIEW OF SECTION 13(1) (C). IT IS ALSO HIS SUBMISSION THAT THE CIT(A) IN ASSESSEES OWN CASE F OR A.Y. 2007-08 AND 2008-09 HAS HELD THAT THERE IS NO VIOLATION OF PROV ISION OF SECTION 13(1)(C) ON ACCOUNT OF RENT PAID TO M.N. NAVALE (BIGGER HUF) IN RESPECT OF THE PROPERTIES BEING FLAT NO.7, 8 AND 9 AT GEETA BUILDI NG, BOMBAY AND THE FARM HOUSE AT WARJE. 83. WE FIND FORCE IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. WE FIND THE CIT(A) IN ASSESSEES OWN CAS E FOR A.Y. 2008-09 VIDE ORDER DATED 14-10-2014 AT PARA 6.8 OF THE ORDER HAS OBSERVED AS UNDER : 6.8 THE FIRST CONTENTION OF THE APPELLANT IS THAT THE FARM HOUSE AT WARJE AND THE FLATS AT SION, MUMBAI, WHICH ARE AMONG THE PROPERTIES IN RESPECT OF WHICH EXCESS RENT IS STATED TO HAVE BEEN PAID TO THE MANAGING TRUSTEE, SHRI M. N. NAVALE, IN FACT BELONGED NOT TO M. N. NAVALE (INDIVIDUAL) BUT TO THE M.N.NAVALA (BIGGER HUF) WHI CH WAS NOT ONE OF THE PERSONS SPECIFIED IN S.13(3). THE APPELLANTS CONT ENTION IN THIS REGARD IS THAT THE AO HAD REJECTED THE APPELLANTS CO NTENTION REGARDING THE EXISTENCE OF THE M.N. NAVALE (BIGGER HUF). IN T HIS REGARD IT IS POINTED OUT THAT ITAT PUNE IN ITS ORDER DATED 30/03/2012 HAS SINCE UPHELD THE EXISTENCE OF THE BIGGER HUF AND THEREFORE, THE VERY BASIS OF THE AOS REASONING IN INVOKING THE PROVISIONS OF S. 13(1)(C) DO ES NOT SURVIVE VIS- AVIS THESE PROPERTIES, NAMELY, FLATS NO. 7,8 &9, GEETA BUILDING, SION, MUMBAI AND THE PROPERTY AT WARJE (NDA ROAD). I HAV E GIVEN CAREFUL CONSIDERATION TO THIS CONTENTION OF THE APPELLANT. T HE UNDERLYING FACTS HAVE BEEN DISCUSSED AT GREAT LENGTH IN MY ORDER IN THE CASE OF M.N.NAVALE (INDIVIDUAL) FOR AY 2008 09. AS MENTIO NED THEREIN, THE ISSUE OF EXISTENCE OF THE M.N.NAVALE (BIGGER HUF) AS WE LL AS OWNERSHIP OF ASSETS BY THE HUF HAD TRAVELLED TO THE ITAT (PUNE B ENCH) IN ITA NO. 149/PN/2010. IN THEIR ORDER DATED 30/03/2012, IN T HAT CASE, THE JURISDICTIONAL BENCH OF HON'BLE. ITAT UPHELD THE EXI STENCE OF THE M.N.NAVALE (BIGGER HUF) IN THE EYES OF LAW, BUT LEFT THE ISSUE OF QUANTIFICATION OF THE INCOME GENERATED BY THE HUF O UT OF ITS AGRICULTURAL HOLDINGS TO THE LD. AO. THAT EXERCISE FOR QUANTIFICA TION BY THE AO OF INCOME POTENTIALLY EARNED BY THE HUF AND THE ASSETS AC QUIRED BY THE HUF OUT OF THE SAME, IS STILL UNDERWAY. FROM THE POIN T OF VIEW OF THE 57 ITA NO.320/PUN/2010 ISSUE AT HAND, HOWEVER, THE SIGNIFICANT FACT TO BE NOT ED IS THAT THE ITAT CATEGORICALLY HELD THAT THE COMPROMISE DECREE PASSED B Y THE CIVIL COURT, PANDHARPUR IS SACROSANCT AND BINDING UPON THE DEPARTME NT SO FAR AS THE QUANTITY ALLOCATED BY THE HON'BLE COURT, PANDAR PUR ARE CONCERNED:. HAVING PERUSED A COPY OF THE SAID COMPROMISE DECREE, I FIND THAT THE PROPERTIES UNDER CONTENTION NAMELY, FLAT NO.7,8 & 9, GEETA BUILDING, SION, MUMBAI AND THE PROPERTY AT WARJE (NDA ROAD) A RE LISTED AS PROPERTIES OF THE M.N. NAVALE (BIGGER HUF) WHICH HAV E BEEN PARTITIONED AMONG THE SMALLER HUFS. SUCH BEING THE FACTS, RESPECTF ULLY FOLLOWING THE DECISION OF JURISDICTIONAL BENCH OF ITAT WHICH STILL H OLDS THE FIELD NOTWITHSTANDING THE DEPARTMENTS APPEAL BEFORE THE HO N. HIGH COURT, I HEREBY UPHOLD THE APPELLANTS CONTENTION AND DELETE THE ADDITION WORKED OUT BY THE LD. AO ON ACCOUNT OF EXCESS RENT PA ID TO THE BIGGER HUF. IT IS ALSO CORRECT THAT THE SAID BIGGER HUF DOE S NOT STAND IN A RELATIONSHIP SPECIFIED UNDER SECTION 13(3) OF THE ACT. THEREFORE, THE PROVISIONS OF SECTION 13(1)(C) WILL NOT BE ATTRACTED V IS--VIS THESE PROPERTIES. 6.9. . . . . . . . . . . . . . . . 6.17. IN VIEW OF THE DETAILED DISCUSSIONS ABOVE, THE AD DITION MADE BY THE LD. ASSESSING OFFICER VIS--VIS THE PROPERTIES AT FL ATS NO.7,8 & 9, GEETA BUILDING, SION, MUMBAI AND FARM HOUSE AT NDA R OAD, WARJE, PUNE ARE HEREBY DELETED AND THE ADDITIONS IN RESPECT OF TH E REMAINING PROPERTIES ARE CONFIRMED. FOR THE SAME REASONS, THE AP PLICABILITY OF S.13(1)(C) IN THE APPELLANTS CASE IS HEREBY UPHELD SIN CE A PART OF THE INCOME OF THE INSTITUTION WAS USED DURING THE PY FOR T HE BENEFIT OF A PERSON REFERRED TO UNDER SECTION 13(1)(C). ACCORDING LY, THESE GROUNDS MAY BE TREATED AS PARTLY ALLOWED. 84. WE FIND FOLLOWING THE ABOVE ORDER THE CIT(A) IN ASSESSEES OWN CASE FOR A.Y. 2007-08 AT PARA 6 AND 6.1 OF THE ORDER HAS OBSERVED AS UNDER : 6. GROUNDS NO.1 (A) AND 2(C): UNDER THESE GROUNDS OF APPEAL IT IS CONTENDED THAT THE AO ERRED IN HOLDING THAT THE APP ELLANT HAD CONTRAVENED THE PROVISIONS OF SECTION 13(1)(C) BY REA SON OF PAYMENT OF EXCESS RENT TO SHRI M. N. NAVALE AND THAT NO DISALLOWA NCE UNDER SECTION 40A(2)(B) WAS CALLED FOR ON ACCOUNT OF THE RENTS PAID TO SHRI M.N.NAVALE. THIS GROUND IS IDENTICAL TO GROUND NO.1 (A) AND 2(B) OF APPEAL FOR AY. 2008-09. HENCE, THE RATIO OF DECISION FOR AY 2008-09 APPLIES EQUALLY TO THIS AY TOO. 6.1 IN VIEW OF THE DETAILED DISCUSSIONS IN MY ORDER IN THE APPELLANT'S OWN CASE FOR AY 2008-09, THE ADDITION MADE BY THE LD . AO VIS-A-VIS THE PROPERTIES AT FLATS NO.7, 8 & 9, GEETA BUILDING, SION , MUMBAI AND FARM HOUSE AT NDA ROAD, WARJE, PUNE ARE HEREBY DELETED AN D THE ADDITIONS IN RESPECT OF THE REMAINING PROPERTIES ARE CONFIRMED. FO R THE SAME REASONS, THE APPLICABILITY OF S.13(1)(C) IN THE APPELLANT'S C ASE IS HEREBY UPHELD SINCE A PART OF THE INCOME OF THE INSTITUTION WAS USED DURING THE PY FOR THE BENEFIT OF A PERSON REFERRED TO UNDER SECTION 13( 1)(C). ACCORDINGLY, THESE GROUNDS MAY BE TREATED AS PARTLY ALLOWED . 58 ITA NO.320/PUN/2010 85. SINCE THE IMPUGNED ORDER OF CIT(A) WAS PRIOR TO THE ORDER OF CIT(A) FOR A.Y. 2007-08 AND 2008-09 AND SINCE THE REVENUE HAS NOT CHALLENGED THE ORDER OF CIT(A) ON THIS ISSUE FOR A.Y. 2007-08 AND 2008-09, THEREFORE, WE HOLD THAT THE ASSESSEE TRUST HAS NOT VIOLATED TH E PROVISIONS OF SECTION 13(1)(C) BY GIVING RENT TO M.N. NAVALE (BIGGER HUF) IN RESPECT OF THE PROPERTIES STATED AT FLAT NO.7, 8 AND 9, GEETA BUIL DING, BOMBAY AND PROPERTY AT WARJE. 86. SO FAR AS THE FIRST PROPERTY IS CONCERNED IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE FAIR RENT NEEDS T O BE DECIDED FROM THE VIEW POINT OF THE TENANT WHO PAYS THE RENT. ANY TE NANT FOR THAT PURPOSE WILL TAKE INTO CONSIDERATION UTILITY, LOCALITY, AVAILABI LITY, TOTAL AREA OF THE SAID PROPERTY ETC. ALTHOUGH THE ASSESSEE HAS SUBMITTED CERTAIN DETAILS SUCH AS VALUERS REPORT DURING THE APPELLATE STAGE, HOWEVER, WE FIND THE CIT(A) HAS NOT ACCEPTED THOSE ADDITIONAL EVIDENCES. IT IS ALS O HIS SUBMISSION THAT SINCE THE RENT GIVEN TO SHRI M.N. NAVALE ALTHOUGH MAY BE HIGHER ACCORDING TO THE ASSESSING OFFICER, HOWEVER, CONSIDERING THE SERVICE S RENDERED BY SHRI M.N. NAVALE TO THE TRUST FREE OF ANY REMUNERATION SHOULD HAVE ALSO BEEN CONSIDERED. 87. WE FIND THE CIT(A) HAS DIRECTED THE ASSESSING O FFICER TO ADOPT 9% OF THE COST OF THE PROPERTY AT KARVE ROAD AS REASONABL E RENT. WHILE DOING SO, HE HAS ALSO RELIED ON THE DECISION OF THE HONBLE A LLAHABAD HIGH COURT IN THE CASE OF SMT. RADHA DEVI DALMIA REPORTED IN 125 ITR 134. IN OUR OPINION, THE ABOVE DECISION IS NOT APPLICABLE TO THE FACTS O F THE PRESENT CASE. IN THAT CASE, THE PROPERTY WAS VACANT AND FOR THE PURPOSE O F SECTION 22 OF THE I.T. ACT THE NOTIONAL ANNUAL VALUE WAS REQUIRED TO BE DE CIDED U/S.23. UNDER THESE CIRCUMSTANCES THE ANNUAL VALUE OF THE PROPERT Y WAS DIRECTED TO BE DETERMINED AT 7% OF THE COST OF THE PROPERTY. HOWE VER, IN THE INSTANT CASE THE ASSESSEE HAD FILED CERTAIN DETAILS BEFORE THE C IT(A) FOR CALCULATION OF 59 ITA NO.320/PUN/2010 FAIR RENT OF THE PROPERTY WHICH HAS BEEN IGNORED BY HIM. UNDER THESE CIRCUMSTANCES AND IN THE INTEREST OF JUSTICE, WE DE EM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE CIT(A) WITH A DIRECTION TO ADJUDICATE THIS ISSUE IN THE LIGHT OF FACTS AND SUBMISSIONS MADE AND THE ADDITIO NAL EVIDENCES FILED BEFORE HIM. THE CIT(A) SHALL GIVE DUE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE AS PER FACT AND LAW. WE HOLD AND DIRECT ACCORDINGLY. 87.1 WE MAY ALSO CLARIFY HERE THAT ONLY THE EXCESS FAIR RENT, IF ANY, WHICH IS DETERMINED WILL BE SUBJECT TO TAX AT THE MAXIMUM MA RGINAL RATE AND THERE CANNOT BE WHOLESALE DENIAL OF EXEMPTION FOR VIOLATI ON OF PROVISIONS OF SECTION 13(1)(C) ON ACCOUNT OF EXCESS RENT, IF ANY, PAID TO SHRI M.N. NAVALE. THE ADDITIONAL GROUND BY THE ASSESSEE IS ACCORDINGL Y ALLOWED AND GROUND OF APPEAL NO.6 IS ALLOWED FOR STATISTICAL PURPOSES. 88. IN GROUND OF APPEAL NOS. 1, 2, AND 3 THE ASSESS EE HAS CHALLENGED THE POWER OF LD.CIT(A) IN ENTERTAINING UNCALLED FOR INF ORMATION PROVIDED BY THE ASSESSING OFFICER WITHOUT ISSUING NOTICE U/S.251(2) OF THE I.T. ACT. 89. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER IN THE GUISE OF FORWARDING HIS COMMENTS ON THE REVISED STATEMENT OF FACT AND GROUNDS OF APPEAL FOR A.YRS. 1999-2000 TO 2004-05 PROVIDED INFORMATION ABOUT INVESTMENTS MADE IN SHARES OF COO PERATIVE BANKS AND SHARES IN PUBLIC LIMITED COMPANIES WHICH ARE NOT AR ISING FROM THE ASSESSMENT ORDER. FURTHER, THIS INFORMATION WAS AL SO NOT CALLED FOR BY THE CIT(A). THE ASSESSING OFFICER TRIED TO IMPROVE UPO N HIS ASSESSMENT ORDER WHICH IS NOT PERMISSIBLE. HE SUBMITTED THAT THE CI T(A) HAS LEGALLY ERRED IN ENTERTAINING THIS ADDITIONAL INFORMATION WITHOUT IS SUING STATUTORY NOTICE U/S.251(2) OF THE I.T. ACT. HE SUBMITTED THAT SINC E THE ASSESSING OFFICER HAS FURNISHED THE ADDITIONAL INFORMATION ABOUT THE CONT RAVENTION OF SECTION 13(1)(D) WITHOUT BEING REQUIRED BY THE CIT(A) WHICH IS UNPRECEDENTED AND 60 ITA NO.320/PUN/2010 THEREBY SURPASSING THE OTHER REMEDIES AVAILABLE U/S .148, 154 AND 263 AND SINCE THE CIT(A) HAS EXCEEDED HIS POWERS IN ENTERTA INING THIS ADDITIONAL INFORMATION WITHOUT ISSUING THE MANDATORY NOTICE U/ S.251(2) OF THE I.T. ACT., THEREFORE, THE ORDER OF CIT(A) IS BAD IN LAW AND IN VALID. FOR THE ABOVE PROPOSITION THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS : 1. CIT VS. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA 66 IT R 443 (SC) 2. CIT VS. SHAPOORJI PALLONJI MISTRY 44 ITR 891 (SC) 3. CIT VS. UNION TYRES 240 ITR 556 (DELHI) 4. LOKENATH TOLARAM VS. CIT 161 ITR 82 (BOMBAY) 5. S.M. MUZUMBAR VS. NINTH ITO 3 ITD 33 6. SAHELI SYNTHETICS LTD. VS. CIT 302 ITR 126 7. ITO VS. ACE ENGINEERING CO. LTD. 119 ITD 81 90. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND STRONGLY OPPOSED THE ARGUMENTS ADVANCED BY THE LD. COUNSEL F OR THE ASSESSEE. HE SUBMITTED THAT THERE IS ABSOLUTELY NO ENHANCEMENT O F INCOME FROM WHAT WAS ASSESSED BY THE ASSESSING OFFICER. THE CIT(A) HAS MERELY STRENGTHENED THE ORDER OF THE ASSESSING OFFICER BY CITING OTHER PROV ISION OF LAW INCLUDING THAT OF THE PROVISIONS OF SECTION 13(2)(A) AND (G) AND A BSOLUTELY THERE IS NO REQUIREMENT OF ISSUE OF ANY NOTICE U/S.251(2) OF TH E ACT IN THIS CASE. REFERRING TO THE DECISION OF THE HONBLE MADRAS HIG H COURT IN THE CASE OF CIT VS. NAMBERUMAL CHETTY REPORTED IN 1 ITR 32 HE SUBMI TTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT WHERE INCOME COMPUTED DID NOT EXCEED THE INCOME DETERMINED BY THE ASSESSING OFFIC ER NO ENHANCEMENT TOOK PLACE. SO FAR AS THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE ARE CONCERNED HE SUBMITTED THAT THOSE DECISIONS ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE ALSO RELIED ON VARIOUS DECISIONS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KANPUR COAL SYNDICATE REPORT ED IN 53 ITR 225 61 ITA NO.320/PUN/2010 91. AS REGARDS THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF SHAPOORJI PALLONJI MISTRY (SUPRA) IS CONCERNED HE S UBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT WH ILE THE AAC CAN ENHANCE THE ASSESSMENT BUT HE HAS NO POWER TO ENHAN CE THE ASSESSMENT BY DISCOVERING NEW SOURCE OF INCOME WHICH IS NEITHE R MENTIONED IN THE RETURN OF THE ASSESSEE NOR CONSIDERED BY THE ASSESS ING OFFICER IN THE ORDER APPEALED. HOWEVER, IN THE PRESENT CASE, THERE IS A BSOLUTELY NO DISCOVERY OF ANY NEW SOURCE OF INCOME. THE CASE LAW CITED IS TH EREFORE WHOLLY INAPPLICABLE TO THE CURRENT CASE. HE ACCORDINGLY S UBMITTED THAT THE ABOVE GROUNDS RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 92. 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 CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT TH E AO IN THE ORIGINAL ORDER PASSED U/S.143(3) HAS NOT CONSIDERED THE VIOLATION OF PROVISION OF SECTION 13(1)(D) SINCE HE HAS COMPUTED THE INCOME OF THE AS SESSEE AS AN AOP AND DENIED THE BENEFIT OF SECTION 11 AND 12. WE FIND T HE LD.CIT(A) FOUND THAT IN THE APPEAL ORDER FOR A.YRS. 2000-01 TO 2005-06 AND 1999-2000 IT WAS OBSERVED THAT THE ASSESSEE HAD VIOLATED PROVISIONS OF SECTION 13(1)(D) FOR WHICH IT WAS HELD TO BE NOT ELIGIBLE FOR THE BENEFI T OF SECTION 11. WHILE DECIDING THE PRESENT APPEAL, WE FIND THE CIT(A) HAD GIVEN DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO WHICH THE ASSESSEE H AD REPLIED. THEREFORE, THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE TH AT CIT(A) HAS NOT GIVEN ANY MANDATORY NOTICE AS PER THE PROVISIONS OF SECTI ON 251(2) IS MISLEADING. IT IS THE SETTLED PROPOSITION OF LAW THAT THE POWER S OF THE CIT(A) ARE COTERMINOUS WITH THAT OF THE POWERS OF THE AO. AS PER THE PROVISIONS OF SECTION 251 THE CIT(A) WHILE DISPOSING OF AN APPEAL HAS POWER TO CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT AND MAY PAS S SUCH ORDER IN THE APPEAL AS HE THINKS FIT. 62 ITA NO.320/PUN/2010 93. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS . KANPUR COAL SYNDICATE REPORTED IN 53 ITR 225 HAS HELD THAT THE AAC HAS PLENARY POWERS IN DISPOSAL OF AN APPEAL. THE SCOPE OF HIS POWERS I S COTERMINOUS WITH THAT OF THE ASSESSING OFFICER. HE CAN DO WHAT THE AO CAN D O AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. SINCE IN THE INSTANT CASE THE CIT(A) HAS GIVEN DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE ON T HE ISSUE OF VIOLATION OF PROVISIONS OF SECTION 13(1)(D) AND SINCE ABSOLUTELY THERE IS NO ENHANCEMENT OF INCOME BY THE CIT(A) IN VIEW OF HIS DECISION ON THIS ISSUE, THEREFORE, WE FIND NO MERIT IN THE ABOVE GROUNDS RAISED BY THE AS SESSEE. THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSE SSEE ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE . THEREFORE, THE GROUNDS OF APPEAL NO.1, 2 AND 3 ARE DISMISSED. 94. IN GROUND OF APPEAL NO.4 THE ASSESSEE HAS CHALL ENGED THE ORDER OF CIT(A) IN DENYING EXEMPTION ON THE GROUND OF CANCEL LATION OF REGISTRATION U/S.12AA(3) BY THE CIT. 95. AFTER HEARING BOTH THE SIDES WE FIND THE REGIST RATION U/S.12A(A) GRANTED EARLIER BY THE CIT WAS CANCELLED BY THE CIT IN THE ORDER PASSED U/S.12AA(3). THE CANCELLATION ORDER WAS IN FORCE A T THE TIME OF PASSING OF THE ORDER U/S.153C R.W.S.143(3). HOWEVER, SUBSEQUE NTLY THE TRIBUNAL VIDE ORDER DATED 19-09-2008 HAS RESTORED THE REGISTRATIO N GRANTED EARLIER. ALTHOUGH THE REVENUE HAS CHALLENGED THE ORDER OF TH E TRIBUNAL BEFORE THE HONBLE HIGH COURT, HOWEVER, THE SAME IS PENDING AN D THE ORDER OF THE TRIBUNAL RESTORING THE REGISTRATION IS IN FORCE AS ON TODAY. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT EXEMPTION CANNOT BE DENIED FOR WANT OF REGISTRATION U/S.12A. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY DECIDED IN THE ABOVE TERMS. 96. GROUND OF APPEAL NO.5 RELATES TO THE ADDITION O F RS.22,45,06,500/- MADE BY THE AO ON ACCOUNT OF DONATION COLLECTED FOR GRANTING ADMISSION. 63 ITA NO.320/PUN/2010 97. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DURING THE COURSE OF SEARCH AT THE PREMISES OF SHRI M.N. NAVALE ON 20-07 -2005 LOOSE PAPERS NUMBERING 1 TO 101 OF BUNDLE NO.A-2 WERE FOUND. TH E ASSESSING OFFICER ANALYSED THE SEIZED MATERIAL AND CONCLUDED THAT ASS ESSEE HAS RECEIVED AN AMOUNT OF RS.22,45,06,500/- ON ACCOUNT OF DONATION FOR ADMISSION TO ITS VARIOUS COURSES IN DIFFERENT INSTITUTES RUN BY IT. HE SUBMITTED THAT NO ADDITION OF THIS MAGNITUDE CAN BE MADE ON THE BASIS OF THE P APERS FOUND FROM THE PREMISES OF SHRI M.N. NAVALE. REFERRING TO VARIOUS DECISIONS, HE SUBMITTED THAT SINCE THESE PAPERS WERE FOUND AT THE RESIDENCE OF SHRI M. N. NAVALE, THEREFORE, THERE CAN BE NO PRESUMPTION U/S.132(4A) AGAINST THE ASSESSEE TRUST. FURTHER, NO NOTICE U/S.153C WAS ISSUED TO T HE ASSESSEE AND THE ASSESSMENT WAS COMPLETED U/S.143(3). THEREFORE, ADD ITION CANNOT BE MADE ON THIS GROUND ALSO. REFERRING TO VARIOUS LOOSE PA PERS BEARING NOS. 1 TO 101 IN BUNDLE NO.2 FOUND AND SEIZED FROM THE RESIDENCE OF SHRI M.N. NAVALE, COPIES OF WHICH ARE PLACED AT PAGES 23 AND 74 OF TH E PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO SUCH DETAILS IN THE SEIZED PAPERS GIVING THE NAME OF THE STUDENTS AND F OR WHICH COURSES ADMISSION HAS TAKEN PLACE. THEREFORE, THE SATISFACT ORY NOTE ITSELF BY THE ASSESSING OFFICER IS WRONG. SINCE THESE PAPERS AR E NOT STATED IN THE SATISFACTION NOTE, THEREFORE, THERE IS NO FINDING O F THE ASSESSING OFFICER THAT THESE LOOSE PAPERS BELONG TO THE ASSESSEE. 98. HE SUBMITTED THAT SURVEY U/S.133A OF THE I.T. A CT WAS CONDUCTED ON THE PREMISES OF THE ASSESSEE TRUST AND NOTHING INCR IMINATING WAS FOUND OR IMPOUNDED. THE PRESIDENT OF THE ASSESSEE TRUST SHR I M.N. NAVALE AND ACCOUNTANT SHRI SHARAD D. BHOSALE EXPLAINED THAT TH ESE NOTINGS ARE INFORMATIVE IN NATURE, ABOUT COLLECTION OF TUITION FEE, HOSTEL FEE AND OTHER DEPOSITS ETC. BY THE VARIOUS UNITS AS WELL AS SUCH TUITION FEES ETC. EXPECTED TO BE COLLECTED ON THE SAID DATE. THE PROPRIETY WA S TO DECIDE AND ADHERE TO THE SCHEDULE OF REPAYMENT OF BANK LOANS FOR WHICH E SCROW ACCOUNT IS 64 ITA NO.320/PUN/2010 OPENED. REFERRING TO THE STATEMENT RECORDED U/S.13 1 OF SHRI SHARAD D. BHOSALE, COPY OF WHICH IS PLACED AT PAGES 93 TO 104 AND THE STATEMENT RECORDED U/S.132(4) OF SHRI M.N. NAVALE, COPIES OF WHICH ARE PLACED AT PAGES 317 TO 360 OF THE PAPER BOOK, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THEY HAVE EXPLAINED THE ADMISSION PR OCESS AND THE COLLECTION OF FEES. IN THEIR REPLY GIVEN THERE WAS NO MENTION OF ANY DONATION OR CAPITATION FEE. NO CORROBORATIVE EVIDENCE WHATSOEV ER WAS FOUND. THERE IS NO IOTA OF EVIDENCE THAT THE ASSESSEE WAS COLLECTIN G DONATION FOR GIVING ADMISSION. 99. REFERRING TO PAGES 121 TO 144 OF THE PAPER BOOK HE SUBMITTED THAT THE ASSESSEE IN ITS LETTER DATED 26-10-2005 ADDRESS ED TO DIT (EXEMPTION) HAD EXPLAINED ABOUT THE NOTINGS/FIGURES ON THE SEIZ ED PAPERS. THE ASSESSEE HAD GIVEN PAGEWISE SUMMARY OF FEES COLLECT ED BY VARIOUS INSTITUTES FOR VARIOUS COURSES. IT WAS EXPLAINED T HAT THESE NOTINGS INCLUDE THE AMOUNT RECEIVED IN CASH, BY DEMAND DRAFT/CHEQUE S AND THE AMOUNTS LIKELY TO BE COLLECTED. THE FEES ACTUALLY COLLECTE D IN CASH/CHEQUE/DEMAND DRAFT HAVE BEEN DULY ACCOUNTED FOR IN THE BOOKS OF RESPECTIVE UNITS. IT WAS SUBMITTED THAT DURING THE RELEVANT PERIOD, I.E. 01- 04-2005 TO 21-07-2005 THE DEPOSITS OF CASH/DEMAND DRAFT/CHEQUE ARE MADE BY VA RIOUS UNITS IN THEIR RESPECTIVE BANKS. AS PER THESE DETAILS THE TOTAL D EPOSITS MADE ARE RS.35,00,13,395/- WHICH INCLUDE THE CASH DEPOSIT OF RS.7,21,88,315/-. ON THESE LOOSE PAPERS FIGURES ARE WRITTEN IN FULL DIGI TS WHICH PROVE THE EXPLANATION THAT THESE ARE INFORMATIVE IN NATURE. HE SUBMITTED THAT THERE IS ABSOLUTELY NO IOTA OF EVIDENCE EVEN REMOTELY SUGGES TING THAT THESE FIGURES REPRESENT THE DONATION. 100. REFERRING TO THESE LOOSE PAPERS HE SUBMITTED T HAT OUT OF 101 LOOSE SHEETS THERE ARE ONLY 12 PAGES ON WHICH DATES ARE M ENTIONED. THE FIGURES MARKED TOTALLING TO RS.7,36,90,000/- SUGGEST THAT THE AMO UNT IS TO BE 65 ITA NO.320/PUN/2010 DEPOSITED IN THE BANK. AS EXPLAINED EARLIER THE AM OUNTS DEPOSITED WAS RS.35,00,13,395/-. 101. HE SUBMITTED THAT THE ASSESSING OFFICER REFERR ING TO THE LETTERS OF RECOMMENDATION BY THE MEMBERS OF THE PUBLIC TOOK SU PPORT TO HOLD THAT DONATIONS ARE COLLECTED. HOWEVER, IN NONE OF THESE LETTERS THERE IS MENTION ABOUT DONATION. ONLY THE REQUESTS ARE MADE FOR RED UCTION IN TUITION FEES ETC. NONETHELESS THE ASSESSEE HAS NO CONTROL ON THESE PE RSONS. HE SUBMITTED THAT EVEN THE STUDENTS RECOMMENDED IN THOSE LETTERS HAVE NOT BEEN GIVEN ADMISSION UNDER MANAGEMENT QUOTA. THIS FACT IS ALS O SUPPORTED BY AFFIDAVITS FILED BY THE PRINCIPALS OF THE RESPECTIV E UNITS. HE SUBMITTED THAT ADMISSIONS UNDER THE MANAGEMENT QUOTA HAVE TO BE AS PER THE STRICT PROCEDURE INVOLVING PUBLICATION OF NOTICE IN NEWSPA PERS ETC. HE SUBMITTED THAT DURING MAY 2005 AND JULY 2005 ONLY OLD STUDENT S ADMITTED EARLIER RENEWED THEIR ADMISSIONS. NEW ADMISSIONS START FRO M AUGUST ONWARDS FOR THE MERITORIOUS AND ELIGIBLE STUDENTS AS PER THE GO VERNMENT DIRECTIVES. THE MANAGEMENT QUOTA ADMISSIONS ARE GIVEN FROM SEPTEMBE R ONWARDS UNDER STRICT PROCEDURE. HE SUBMITTED THAT ACCEPTANCE OF DONATION OR CAPITATION FEE IS PROHIBITED UNDER THE MAHARASHTRA EDUCATIONAL INS TITUTION (PROHIBITION OF CAPITATION FEE) ACT, 1987. SUCH AN ACT IS PUNISHAB LE. HOWEVER, NO SUCH INSTANCE HAS BEEN POINTED OUT BY THE ASSESSING OFFI CER. 102. HE SUBMITTED THAT ALTHOUGH ASSUMPTION IS NOT A LLOWED HOWEVER THE ASSESSING OFFICER MADE ADDITION OF RS.22,45,06,500/ -. BY ASSUMING THAT THE NOTINGS OF THE FIGURES IN THE LEFTHAND SIDE ARE NOT HING BUT THE DONATIONS COLLECTED WHILE GRANTING ADMISSION. REFERRING TO M ENTIONING OF CASH-M IN THE BANK STATEMENT, THE ASSESSING OFFICER AT PARA 5 .12 OF THE ORDER ASSUMES THAT THE WORD M APPEARS TO BE IDENTIFICATION MARK FOR THE CASH DEPOSITED BY SHRI M.N. NAVALE. HE SUBMITTED THAT THIS ASSUMPTIO N IS BASELESS SINCE THIS NOTING IS MADE BY THE BANK AND THE SAID BANK SHOULD BE QUESTIONED AS TO 66 ITA NO.320/PUN/2010 WHAT DOES IT MEAN. HE SUBMITTED THAT THE ASSESSING OFFICER NOT ONLY ASSUMED THAT DONATIONS ARE COLLECTED BUT FURTHER AL LEGES THAT RECEIPTS HAVE NOT BEEN ISSUED AND ASSUMES THAT THERE IS DIVERSION OF FUNDS FOR THE BENEFIT OF THE TRUSTEES. WHILE DOING SO, THE ASSESSING OFF ICER ALSO REFERS TO THE PAYMENT OF RS.40 LAKHS TO M/S. TUSHAR FABRICATORS A SSUMING THAT SUCH AMOUNT WAS NOT PAYABLE. REFERRING TO THE VARIOUS R EPLIES GIVEN BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S HE SUBMITTED THAT THE ASSESSEE HAS CONCLUSIVELY PROVED THAT THE AMOUN T PAYABLE TO M/S. TUSHAR FABRICATORS WAS RS.1,10,02,178/-. THIS PROV ES THAT THE ASSUMPTION OF THE ASSESSING OFFICER IS BASELESS. 103. AS REGARDS THE ASSUMPTION OF THE ASSESSING OFF ICER THAT AMOUNT OF RS.10,15,22,340/- OUT OF THE ALLEGED DONATION HAS B EEN SIPHONED OFF BY SHRI M.N. NAVALE, HE SUBMITTED THAT THE ASSESSING OFFIC ER HIMSELF HAS CORRECTED THIS FIGURE AT COLUMN NO.4 AND AS AGAINST THE ORIGI NAL FIGURE OF RS.22,04,31,020/- THE SAME HAS BEEN BROUGHT DOWN TO RS.10,15,22,340/-. HE SUBMITTED THAT BESIDES THESE BASELESS ASSUMPTION S THE ASSESSING OFFICER HAS GROSSLY ERRED IN ADDING THIS AMOUNT IN THE HANDS OF SHRI M.N. NAVALE AND IN THE HANDS OF THE ASSESSEE BOTH ON SUB STANTIVE BASIS. 104. REFERRING TO THE COPY OF THE AUDIT REPORT SUBM ITTED BY THE SPECIAL AUDITOR U/S.142(2A) OF THE I.T. ACT., COPY OF WHICH IS PLACED AT PAGES 12 TO 38 OF THE PAPER BOOK, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUDITORS HAVE EXPRESSED COMPLETE SATISFACTION ABOUT BOOKS OF ACCOUNT MAINTAINED ETC. THE AUDITORS DID QUESTION THE ASSE SSEE ABOUT THE ALLEGED COLLECTION OF DONATION AS PER THE TERMS OF REFERENC E. THE ASSESSEE REPLIED TO THE SAME STATING CATEGORICALLY THAT NO SUCH DONA TIONS AT ALL ARE ACCEPTED. 105. REFERRING TO THE COPY OF THE DECISION OF HONB LE BOMBAY HIGH COURT IN ASSESSEES OWN CASE FOR A.YRS. 2000-01 TO 2003-04 V IDE INCOME TAX APPEAL NO.941, 1044, 1045 AND 1178 OF 2013 ORDER DA TED 25-03-2015 THE 67 ITA NO.320/PUN/2010 LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE HON BLE HIGH COURT IN THE SAID CASE HAS UPHELD THE DECISION OF THE TRIBUNAL Q UASHING THE NOTICE ISSUED TO THE ASSESSEE TRUST U/S.153C. THE TRIBUNAL HAS H ELD THAT INCRIMINATING MATERIAL SEIZED AND STATED TO BE PERTAINING TO ALL SIX ASSESSMENT YEARS DID NOT ESTABLISH ANY CORRELATION DOCUMENT-WISE WITH TH E ASSESSMENT YEARS IN QUESTION. THE HONBLE HIGH COURT HELD THAT IF SHRI M.N. NAVALE HAS INVESTED MONEY IN THE REAL ESTATE WHICH IS NOT ACCOUNTED, TH AT IS HIS RETURN OF INCOME WHICH IS REFLECTED IN THE SATISFACTION NOTE. IF TH ERE IS REFERENCE MADE TO SOME LOOSE PAPERS FOUND AND SEIZED FROM HIS RESIDEN CE INDICATING SOME ON-MONEY RECEIPT DURING THE ADMISSION PROCESS, THE N THE ABOVE CORRELATION AND ASSESSMENT YEAR WISE OUGHT TO HAVE BEEN MADE. ACCORDINGLY, THE HONBLE HIGH COURT UPHELD THE ORDER OF THE TRIBUNAL AND DISMISSED THE APPEAL FILED BY THE REVENUE. 106. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED O N THE FOLLOWING DECISIONS : 1. CIT VS. KHALSA RURAL HOSPITAL AND NURSING TRAINING I NSTITUTE 304 ITR 20 2. DIT VS. BELIMAHA MAHASAMSTHANA SOCIAL CULTURAL EDUC ATION TRUST 336 ITR 694 3. CIT VS. MALIK KUMAR SHAH 307 ITR 137 4. CIT VS. GIRISH CHOUDHARY 163 TAXMANN 608 107. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRADEEP RUNWAL VS. TRO VIDE ITA NO.334/PN/2 010 ORDER DATED 30- 05-2014 AND THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. K. BABURAO VIDE ITA NOS. 329 TO 335/HYD / 2012 ORDER DATED 24- 01-2014 HE SUBMITTED THAT THERE CANNOT BE ANY ADDIT ION UNLESS THERE IS ANY CORROBORATIVE EVIDENCE. HE ACCORDINGLY SUBMITTED T HAT THE ADDITION MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 68 ITA NO.320/PUN/2010 108. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE PAPERS WERE SEIZED FROM THE RESIDENCE OF THE MANAGING TRUSTEE SHRI M. N. NA VALE AT THE TIME OF SEARCH. DURING THE COURSE OF SEARCH CASH AMOUNTING TO RS.1.25 CRORES WAS FOUND WHICH COULD NOT BE EXPLAINED BY SHRI M.N. NAV ALE FOR WHICH THE CASH AMOUNTING TO RS.1.20 WAS SEIZED. HE SUBMITTED THAT THE MANAGING TRUSTEE IS CONSTANTLY CHANGING HIS STAND ABOUT THE CASH FOUND. AS REGARDS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ASSESSMENT SHOULD HAVE BEEN COMPLETED U/S.153C OF THE I.T. ACT THE LD . DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THERE IS NO NEED TO I NITIATE PROCEEDINGS U/S.153C BY VIRTUE OF PROVISIONS OF SECTION 153C(2) . THE ASSESSING OFFICER HAS RIGHTLY COMPLETED THE ASSESSMENT BY ISSUE OF NO TICE U/S.143(2) AND THE ASSESSING OFFICER HAS RIGHTLY UTILIZED ALL THE EVID ENCES FOUND DURING THE COURSE OF SEARCH. HE SUBMITTED THAT THE MARK IS YET TO BE EXPLAINED TILL NOW AND NO RECONCILIATION HAS BEEN DONE TILL DATE. REFERRING TO THE ANNEXURE 1 OF THE ASSESSMENT ORDER HE SUBMITTED THAT IT IS O NLY FOR A SMALL DURATION SINCE THE DATE OF SEARCH WAS 20-07-2005 AND THE ENT RIES WERE FROM 13-06-2005 TO 19-07-2005. HE SUBMITTED THAT THE MA NAGING TRUSTEE SHOULD HAVE EXPLAINED ALL THE ENTRIES. FURTHER, ON 19-07- 2005 CASH COLLECTION WAS AROUND RS.16 LAKHS. IF THE CASH DEPOSITED WAS RS.1 5 LAKHS HE COULD HAVE EXPLAINED. HOWEVER, HE HAS NOT DONE SO. REFERRING TO PAGE 12 OF THE ASSESSMENT ORDER, THE LD. DEPARTMENTAL REPRESENTATI VE REFERRED TO THE BOLD PORTION AT PARA 4.4 WHERE THE ASSESSING OFFICER HAD MENTIONED THAT THE EXPLANATION OF THE ASSESSEE FURNISHED TILL DATE IS NOT AT ALL SATISFACTORY AND THERE IS TOTAL FAILURE ON THE PART OF THE ASSESSEE TO EXPLAIN THE SEIZED MATERIAL PARTICULARLY WHEN THE RELEVANCE AND CORRECTNESS OF THE EVIDENCES CONTAINED IN THE SEIZED MATERIAL IS CLEARLY ESTABLISHED. 109. REFERRING TO PARA 4.12 OF PAGE 15 OF THE ASSES SMENT ORDER THE LD. DEPARTMENTAL REPRESENTATIVE DREW THE ATTENTION OF T HE BENCH TO THE REPLY 69 ITA NO.320/PUN/2010 GIVEN BY THE ASSESSEE. IT WAS CATEGORICALLY MENTIO NED THAT AS AGAINST THE TOTAL AMOUNT OF THE PAPERS AT RS.13.41 CRORES THE A SSESSEE HAS DEPOSITED RS.22.28 CRORES IN VARIOUS BANK ACCOUNTS. REFERRIN G TO THE SAID PARAGRAPHS HE SUBMITTED THAT THE ASSESSING OFFICER ON THE CONT RARY HAS GIVEN A FINDING THAT FOR THE PERIOD FROM 01-04-2005 TO 21-07-2005 T HE TOTAL CASH DEPOSITS IN THE BANK ACCOUNT WAS RS.8.90 CRORES WHILE THE TOTAL CASH AS PER THE SEIZED DOCUMENTS IS MORE THAN RS.13.41 CRORES. REFERRING TO PARA 5 OF THE ASSESSMENT ORDER, THE LD. DEPARTMENTAL REPRESENTATI VE SUBMITTED THAT IT IS VERY MUCH CLEAR FROM THE FINDINGS GIVEN IN THE ASSE SSMENT ORDER THAT THE ASSESSEE WAS COLLECTING DONATION FOR ADMISSION. IF ASSESSEE IS NOT CHARGING DONATION WHY SOMEBODY WOULD WRITE LETTER TO THE ASS ESSEE RECOMMENDING FOR ACCEPTING REASONABLE DONATION OR CONCESSION IN FEES. HE SUBMITTED THAT THE CIT(A) AT PARA 8.19 ONWARDS (PAGE 50) OF THE OR DER HAS GIVEN HIS CATEGORICAL FINDING AS TO HOW THE ASSESSEE WAS CHAN GING HIS STAND FROM TIME TO TIME. SINCE THE ORDER OF THE CIT(A) IS A REASON ABLE ONE HE SUBMITTED THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE O RDER OF THE CIT(A) SHOULD BE UPHELD AND THE GROUND RAISED BY THE ASSESSEE SHO ULD BE DISMISSED. 110. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOIN DER SUBMITTED THAT ASSESSEE HAS NOT CHANGED ITS STAND. CASH OF RS.1.2 CRORES SEIZED FROM SHRI M.N. NAVALE IS NOWHERE CONCERNED WITH THAT OF THE A SSESSEE TRUST. SO FAR AS THE OBSERVATION OF THE CIT(A) THAT THE ASSESSEE COU LD NOT EXPLAIN THE MARK HE SUBMITTED THAT THE FACT REMAINS THAT ASSESS EE HAS DEPOSITED THE MONEY IN THE BANK ACCOUNT. HE SUBMITTED THAT WITHO UT CONFRONTING THE STUDENTS OR THEIR PARENTS OR IN ABSENCE OF ANY POSI TIVE EVIDENCE THE ASSESSING OFFICER CANNOT MAKE AN ALLEGATION THAT AS SESSEE HAS CHARGED DONATION/CAPITATION FEE FOR GIVING ADMISSION. HE S UBMITTED THAT THE ASSESSEE HAS ALSO EXPLAINED BEFORE THE AUDITORS THAT IT HAS NOT CHARGED ANY DONATION FROM ANY OF THE STUDENTS FOR GIVING ADMISSION. 70 ITA NO.320/PUN/2010 111. SO FAR AS THE OBSERVATION OF THE ASSESSING OF FICER AT PARA 6.3 OF HIS ORDER WHERE HE ALLEGES THAT SHRI R.S. YADAV WAS ACT ING AS AN ADMISSION AGENT FOR ARRANGING ADMISSION IN VARIOUS EDUCATIONA L INSTITUTIONS IN PUNE INCLUDING THE COLLEGES RUN BY THE ASSESSEE TRUST HE SUBMITTED THAT NO SUCH STATEMENT WAS RECORDED BY THE ASSESSING OFFICER OF SAID SHRI R.S. YADAV. IF AT ALL HE HAS RECORDED SUCH STATEMENT, THEN THE SAM E SHOULD HAVE BEEN PROVIDED TO THE ASSESSEE OR CONFRONTED THE SAME TO THE ASSESSEE. THE ASSESSEE COULD HAVE CROSS EXAMINED SHRI YADAV. HOW EVER, IT HAS NOT BEEN DONE. FURTHER, THEY HAVE NOT AT ALL PROVED THAT TH E ASSESSEE TRUST HAS GIVEN ADMISSION TO SUCH STUDENTS. THEREFORE, RELIANCE ON THOSE PAPERS IS NOT AT ALL CORRECT. REFERRING TO PAGE 17 OF THE ASSESSMENT OR DER HE SUBMITTED THAT FOR MISTAKE OF ONE SHRI SHAHANI THE ASSESSEE CANNOT HE HELD RESPONSIBLE. SO FAR AS THE OBSERVATIONS GIVEN BY THE ASSESSING OFFI CER IN PAGE 18 OF THE ASSESSMENT ORDER IS CONCERNED HE SUBMITTED THAT THE ASSESSEE HAS NEVER DENIED THAT THOSE PAPERS DID NOT BELONG TO IT. HO WEVER, IT WAS ALWAYS EXPLAINED THAT THESE ARE THE FEE STRUCTURE. HE SUB MIT THAT ALL ENTRIES ARE EXPLAINED. THEREFORE, THERE IS NO QUESTION OF NON- COOPERATION BY THE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT THE ASSESS EE HAS NOT ONLY EXPLAINED THE VARIOUS ENTRIES IN SEIZED DOCUMENT, H AS ALSO FULLY COOPERATED FOR COMPLETION OF THE ASSESSMENT. THEREFORE, THE AL LEGATION OF THE ASSESSING OFFICER AND THE CIT(A) IS NOT CORRECT. HE ACCORDIN GLY SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINE D BY THE CIT(A) SHOULD BE DELETED. 112. 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 CITED BEFORE US. WE FIND A SEARCH AND SEIZURE ACTION U/S .132 OF THE I.T. ACT WAS CONDUCTED AT THE RESIDENTIAL PREMISES OF MR. M. N. NAVALE, THE PRESIDENT OF THE ASSESSEE TRUST ON 20-07-2005 DURING WHICH CERTA IN DOCUMENTS WERE 71 ITA NO.320/PUN/2010 SEIZED FROM THE RESIDENCE OF SHRI M.N. NAVALE. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ANALYS ED THOSE SEIZED DOCUMENT AND NOTED THAT THE EVIDENCES AS PER BUNDLE A2 REFLECT THE TRUE STATE OF AFFAIRS AND THE PAGES ARE GENUINE. HE NOTE D THAT IN THE SAID DOCUMENTS ON THE LEFTHAND SIDE THE ASSESSEE HAS WRI TTEN THE NAMES OF THE INSTITUTIONS WHERE ADMISSIONS HAVE TAKEN PLACE AND FROM WHERE THE MONEY HAS BEEN RECEIVED. THESE ACCORDING TO THE ASSESSIN G OFFICER ARE THE CASH COLLECTIONS AT THE HEAD OFFICE ON CASE TO CASE BASI S FOR ADMISSION IN DIFFERENT COURSES. THE CASH DEPOSITS MENTIONED ON RIGHTHAND SIDE WERE DULY VERIFIED FROM THE BANK ACCOUNTS IN THANE JANATA SAHAKARI BAN K OR CENTRAL BANK OF INDIA AND THESE DEPOSITS WERE VERIFIABLE FROM THE B ANK ACCOUNT. THIS ACCORDING TO THE ASSESSING OFFICER PROVED THAT THE ENTRIES RECORDED IN THE SEIZED DOCUMENTS REFLECTED THE TRUE STATE OF AFFAIR S. THEREFORE, HE INFERRED THAT THE PAPERS FOUND DURING THE COURSE OF SEARCH G IVE TRUE STATE OF AFFAIRS OF THE ASSESSEE TRUST. SINCE THE ASSESSEE WAS UNABLE TO EXPLAIN THE NOTINGS ON THE LEFTHAND SIDE THE ASSESSING OFFICER INFERRED THAT ASSESSEE FAILED TO EXPLAIN ANYTHING ABOUT THE ENTRIES IN THE LEFTHAND SIDE WHICH ACTUALLY REFLECTED THE NAMES OF VARIOUS INSTITUTIONS/COURSES . THE EXPLANATION OF THE ASSESSEE THAT THESE WERE FOR THE PURPOSE OF PERIODI CAL REVIEW OF FINANCIAL POSITION OF THE UNITS AND WERE REGARDING FEES COLLE CTED, DAILY BANK BALANCE, EXPECTED GENERATION OF FEES IN NEXT FEW DAYS AND CO MMITMENT FOR FINANCIAL OUTCOME ETC. WAS DISBELIEVED BY THE ASSESSING OFFIC ER. AFTER CONSIDERING THE STATEMENT RECORDED OF VARIOUS PERSONS INCLUDING THAT OF SHRI M.N. NAVALE, THE MANAGING TRUSTEE OF THE ASSESSEE TRUST, THE ASSESSING OFFICER CONCLUDED THAT ASSESSEE HAS RECEIVED AN AMOUNT OF R S.22,45,06,500/- ON ACCOUNT OF DONATION FOR ADMISSION TO ITS VARIOUS CO URSES IN DIFFERENT INSTITUTES RUN BY IT WHICH ACCORDING TO HIM IS OVER AND ABOVE THE REGULAR FEE AGAINST GRANTING OF ADMISSION. HAD THERE BEEN NO SEARCH, T HE ASSESSEE WOULD NOT HAVE DISCLOSED THE SAME AS INCOME FOR A.Y. 2006-07. THE ASSESSING OFFICER, THEREFORE, TREATED THE AMOUNT OF RS.22,45, 06,500/- AS UNDISCLOSED 72 ITA NO.320/PUN/2010 INCOME OF THE ASSESSEE FOR A.Y. 2006-07 ON ACCOUNT OF COLLECTION OF DONATIONS FOR GIVING ADMISSION. WE FIND IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER WHICH HAS BEEN ALRE ADY REPRODUCED AT PARA 33 OF THIS ORDER. 113. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR TH E ASSESSEE THAT THE DOCUMENTS WERE SEIZED FROM THE RESIDENCE SHRI M.N. NAVALE AND THEREFORE THERE CAN BE NO PRESUMPTION U/S.132(2A) AGAINST THE ASSESSEE. FURTHER, THESE LOOSE PAPERS ARE NOT STATED IN THE SATISFACT ION NOTE MEANING THEREBY THERE IS NO FINDING OF THE ASSESSING OFFICER THAT T HESE LOOSE PAPERS BELONG TO THE ASSESSEE. IT IS ALSO HIS SUBMISSION THAT A SUR VEY U/S.133A WAS CARRIED OUT ON THE ASSESSEE TRUST AND NOTHING INCRIMINATING WAS FOUND OR SEIZED. FURTHER, THE ASSESSEE HAS EXPLAINED EACH AND EVERY ENTRY FOUND IN THE SEIZED DOCUMENTS. IT IS ALSO HIS SUBMISSION THAT O N THESE LOOSE PAPERS, THE FIGURES ARE WRITTEN IN FULL DIGITS WHICH OTHERWISE PROVE THAT THESE ARE INFORMATIVE IN NATURE AND NO EVIDENCE WHATSOEVER HA S BEEN OBTAINED BY THE REVENUE THAT THE ASSESSEE HAS COLLECTED DONATION FO R GIVING ADMISSION. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSE SSEE THAT ACCEPTANCE OF DONATION OR CAPITATION FEE IS PROHIBITED UNDER THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1 987 WHICH IS PUNISHABLE AND NO SUCH INSTANCE HAS BEEN POINTED OUT BY THE ASSESS ING OFFICER. 114. WE FIND SOME FORCE IN THE ABOVE ARGUMENT OF TH E LD. COUNSEL FOR THE ASSESSEE. FROM THE VARIOUS DETAILS FURNISHED IN TH E PAPER BOOK AS WELL AS A PERUSAL OF THE ASSESSMENT ORDER AND THE ORDER OF T HE CIT(A) WE FIND THAT NOT A SINGLE STUDENT/PARENT WAS EXAMINED TO ESTABLISH T HAT ASSESSEE TRUST HAS RECEIVED ANY AMOUNT AS DONATION/CAPITATION FEE FOR GIVING ADMISSION TO THE STUDENTS. THERE IS ABSOLUTELY NO EVIDENCE WHATSOE VER ON RECORD TO SUGGEST THAT ASSESSEE TRUST HAS GIVEN ADMISSION BY ACCEPTIN G DONATION/CAPITATION FEE. THERE IS ALSO NOTHING ON RECORD TO SUGGEST TH AT ANY STUDENT 73 ITA NO.320/PUN/2010 RECOMMENDED BY THE MEMBERS OF THE PUBLIC WHOSE LETT ERS RECOMMENDING ADMISSION OR REDUCTION IN FEES/DONATION HAVE BEEN R ELIED ON BY THE AO HAS TAKEN ADMISSION BY GIVING DONATION/CAPITATION FEE. WE FIND MERIT IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT T HE ASSESSEE HAS NO CONTROL ABOUT THE MANNER OF WRITING BY THE PERSONS OF THE PUBLIC WHILE RECOMMENDING FOR ADMISSION OR REDUCTION IN TUITION FEES ETC. ACCEPTANCE OF DONATION OR CAPITATION FEE IS PROHIBITED UNDER THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1 987. THEREFORE, ACCEPTING DONATION/CAPITATION FEE FOR GIVING ADMISSION TO ANY OF THE COURSES IS A PUNISHABLE OFFENCE. HOWEVER, NOTHING IS FOUND FROM THE RECORD TO SUGGEST THAT THE ASSESSING OFFICER HAS MADE ANY SUCH COMPLA IN TO THE CONCERNED AUTHORITIES FOR VIOLATION OF THE ABOVE PROVISION. T HERE IS ALSO NO EVIDENCE ON RECORD TO SUGGEST THAT ANY OF THE STUDENTS/PARENT H AS LODGED ANY COMPLAINT BEFORE THE APPROPRIATE AUTHORITIES FOR VIOLATION OF THE SAME. WE FURTHER FIND FROM THE SEIZED DOCUMENTS AS ANALYSED BY THE ASSESS ING OFFICER AND THE CIT(A) THAT THE AMOUNT WHATEVER HAS BEEN MENTIONED IN THE LEFTHAND SIDE HAS BEEN DEPOSITED IN VARIOUS BANK ACCOUNTS MAINTAI NED BY THE ASSESSEE AND AS REFLECTED IN THE RIGHT HAND SIDE OF THE SEIZ ED DOCUMENT. 115. WE FIND THE HONBLE BOMBAY HIGH COURT IN ASSES SEES OWN CASE IN THE APPEAL FILED BY THE REVENUE FOR A.YRS. 2000-01 TO 2003-04 WHILE DECIDING THE ISSUE OF COLLECTION OF DONATION/CAPITATION FEE FOR GIVING ADMISSION AND SIPHONING OFF THE SAME BY THE TRUSTEES FOR THEIR PE RSONAL USE HAS OBSERVED AS UNDER : .. WITH REGARD TO CASH AND STATED TO BE RECOVER ED FROM THE STUDENTS FOR GRANTING ADMISSIONS, WE DO NOT FIND THAT AN Y INQUIRIES WERE MADE. THERE IS ABSOLUTELY NOTHING TO INDICATE AS TO I N WHICH EDUCATIONAL COURSE, THE EDUCATION IS IMPARTED AND INSTITUTION-WISE. WHETHER THE ADMISSIONS ARE GRANTED TO THE TECHNICAL COURSES MERIT-WI SE OR ON THE BASIS OF MARKS OBTAINED IN XIITH STANDARD HSC EXAM. I F ANY FEE STRUCTURE IS APPROVED AND CASH COMPONENT IS THEREFORE COLLECTED OVER AND ABOVE THE SANCTIONED FEES ARE MATTERS WHICH OUGHT TO HAVE BE EN GONE INTO AND THERE CANNOT BE A GENERAL OR VAGUE SATISFACTION AS IS R ELIED UPON. 74 ITA NO.320/PUN/2010 7. IT IS IN THESE CIRCUMSTANCES THAT THOUGH MR. SINGH ST RENUOUSLY WANTED TO REPLY ON THE SATISFACTION NOTE AND PARTICUL ARLY PARAGRAPH 4 THEREOF, WE DO NOT FIND THAT READING THEREOF CAN CA RRY THE CASE OF THE REVENUE ANY FURTHER. RATHER IT WOULD CONTRADICT CO MPLETELY, THE STAND TAKEN BY THE AUTHORITIES. MR. NAVALE HUF AND MR. NA VALE INDIVIDUALLY AS THE PRESIDENT OF THE ASSESSEE INSTITUTE CANNOT BE CONFUSE D. IF MR. NAVALE HAS INVESTED MONEY IN THE REAL ESTATE AND WHICH IS NOT ACCOUNTED THAT IS HIS RETURN OF INCOME WHICH IS REFLECTED IN THEN SATISFA CTION NOTE. IF THERE IS REFERENCE MADE TO SOME ON MONEY RECEIPT DURING THE ADMISSION PROCESS THEN ABOVE CO-RELATION AND ASSESSMENT YEAR WISE OU GHT TO HAVE BEEN ESTABLISHED. IN THE CIRCUMSTANCES WE DO NOT THINK THAT THE TRIBUNALS ORDER RAISES ANY SUBSTANTIAL QUESTION OF LAW. 116. WE FIND THE ASSESSING OFFICER WHILE PASSING TH E ASSESSMENT ORDER IN THE CASE OF MR. M.N. NAVALE HAS REFERRED TO THE DET AILS OF SEIZED DOCUMENTS AND HAS CORRECTED THE ARITHMETICAL ERROR AND CONCLU DED THAT THE AMOUNT OF DONATION COMES TO RS.10,15,22,340/- (AS AGAINST RS. 22,04,31,020/- HELD BY HIM IN THE ASSESSMENT ORDER). FROM THE VARIOUS DET AILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK WE FIND THE AMOUNTS RECE IVED DURING THE PERIOD SHOWN ON ALL LOOSE PAPERS COMES TO RS.18,09,68,420/ - WHEREAS THE TOTAL AMOUNT DEPOSITED DURING THE SAME PERIOD IN THE BANK ACCOUNTS OF VARIOUS UNITS COMES TO RS.24,05,96,921/- (AS PER PARA 76 OF THE PAPER BOOK). THIS TOTAL DEPOSIT COVERS ALL THE AMOUNTS WHICH ARE MARK ED WITH . THEREFORE, THE ALLEGATION OF THE REVENUE THAT THE MANAGING TRU STEE AND OTHER TRUSTEES HAVE SIPHONED OFF MONEY OF THE TRUST IS NOT CORRECT . 117. WE FIND THE HONBLE PUNJAB & HARYANA HIGH COUR T IN THE CASE OF CIT VS. KHALSA RURAL HOSPITAL AND NURSING TRAINING INST ITUTE REPORTED IN 304 ITR 20 HAS OBSERVED AS UNDER (SHORT NOTES) : THE ASSESSEE-TRUST WAS RUNNING A RURAL HOSPITAL AND TRAIN ING INSTITUTE FOR NURSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/ S.143(3) OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 1997- 98, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED EX EMPTION U/S.11 OF THE ACT, ON THE INCOME DERIVED BY THE ASSESSEE . THE ASSESSING OFFICER DISALLOWED THE BENEFIT OF SECTION 11 AND 12 O F THE ACT TO THE ASSESSEE AND MADE AN ADDITION OF RS.40 LAKHS ON ACCOUNT O F CAPITATION FEE. THE CIT(A) HELD THAT THE ASSESSEE WAS ENTITLED TO E XEMPTION U/S.10(22) AND THIS WAS CONFIRMED BY THE TRIBUNAL. ON APPEAL TO THE HIGH COURT : 75 ITA NO.320/PUN/2010 HELD, DISMISSING THE APPEALS, THAT THERE WAS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE-TRUST WAS CHARGING ANY CAPITATION FEE. THE ASSESSING OFFICER HAD NOT FOUND ANY IRREGULARITY IN THE ACCOU NTS OF THE TRUST. THERE WAS NO DOCUMENT TO SHOW THAT THE TRUST WAS BEING RUN F OR ANY PURPOSE OF PROFIT EXCEPT THAT FOR EDUCATIONAL PURPOSES. THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S.10(22). 118. WE FIND THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MAULIKKUMAR K. SHAH REPORTED IN 307 ITR 137 HAS OBS ERVED AS UNDER (SHORT NOTES) : MERE ENTRIES IN THE SEIZED MATERIAL ARE NOT SUFFICIEN T TO PROVE THAT THE ASSESSEE HAS INDULGED IN CERTAIN TRANSACTIONS. IF CERTAIN DOCUMENTS WERE FOUND FROM THE POSSESSION OF THE ASSESSEE DURING THE COURSE OF SEARCH OPERATION, THE BURDEN LIES ON THE ASSESSEE TO EXPLAIN T HE NATURE OF THE TRANSACTIONS RECORDED IN THE SEIZED MATERIAL. THE ASSESSEE IS DUTY BOUND TO EXPLAIN DISCREPANCY, IF FOUND, ON THE BASIS OF SEIZE D MATERIALS VIS-A-VIS THE BOOKS OF ACCOUNT. IN A SEIZED DIARY, THE ASSESSEE HAD ESTIMATED AND MENTI ONED THE FIGURES FOR 66 SHOPS AT RS. 2,38,77,000. THE ASSESSEE HAD BOOKED 3 5 SHOPS AS ON THE DATE OF SEARCH. BECAUSE OF THE DIFFERENCE IN RATE S AS MENTIONED IN THE SEIZED PAPER AND THE BOOKS OF ACCOUNT, THE ASSESSING OFFI CER CALCULATED THE ON-MONEY. THE COMMISSIONER (APPEALS) AND THE TRIB UNAL HELD THAT ON THE BASIS OF THE LOOSE PAPERS NO ADDITION COULD BE M ADE. ON APPEAL : HELD, DISMISSING THE APPEAL, THAT FROM THE BEGINNING T HE ASSESSEE WAS STATING THAT THE NOTINGS APPEARING IN THE DIARY WERE ROUGH ESTIMATES AND ESTIMATION WAS MADE FOR SUBMISSION TO THE BANK FOR OBTAI NING A LOAN FROM THE BANK. THE INFERENCE OF THE ASSESSING OFFICER T HAT THE ASSESSEE HAD RECEIVED ON-MONEY, I.E., THE DIFFERENTIAL AMOUN T AS SHOWN IN THE SEIZED DIARY AND THE BOOKS OF ACCOUNT, WAS MERELY BASE D ON SUSPICION AND SURMISES AND THERE WAS NO MATERIAL TO SUPPORT THE CO NCLUSION OF THE ASSESSING OFFICER THAT THE ASSESSEE HAD IN FACT RECEIVED AN Y ON-MONEY. THE ASSESSING OFFICER HAD NO EVIDENCE WITH HIM TO SUPPOR T HIS CONCLUSION. THE ASSESSEE HAS WORKED OUT THE FLOOR-WISE RATE OF THE SHOP ON THE SEIZED PAPER BUT IT WAS NOT POSSIBLE THAT EVERY SHOP COULD BE SOLD AT THAT PRICE AND WHILE SELLING THE SHOPS, MANY PURCHA SERS MAY PAY ADVANCE MONEY. THEREFORE, THE RATES OF ALL THE SHOP S AT THE TIME OF ACTUAL SALES COULD NOT BE THE SAME AS ESTIMATED IN THE SEIZED PA PER. THE AMOUNT MENTIONED ALONG WITH RATES PER SQUARE FOOT OF DIFFERENT FLOORS ON THE LOOSE PAPER WAS IN RESPECT OF AN ESTIMATE FOR THE L OAN FROM THE BANK. NO OTHER EVIDENCE HAD BEEN SHOWN TO JUSTIFY THAT THESE AMOUNTS WERE RECEIVED FROM PURCHASERS. THE CONCURRENT FINDING WAS THAT ON THE BASIS OF THESE LOOSE PAPERS, NO ADDITION WAS JUSTIFIED. THUS, THERE WAS NO INTERFERENCE CALLED FOR IN THE ORDER OF THE TRIBUNA L. THE SUPREME COURT HAS DISMISSED THE SPECIAL LEAVE PETIT ION FILED BY THE DEPARTMENT AGAINST THIS JUDGMENT. 76 ITA NO.320/PUN/2010 118.1 IN THE LIGHT OF THE ABOVE DISCUSSION AND RELY ING ON THE DECISIONS CITED SUPRA WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS.22,45,06,500/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DONATION COLLECTED FOR GRANTI NG DONATION. ACCORDINGLY, THE ORDER OF LD.CIT(A) ON THIS ISSUE IS SET-ASIDE A ND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 119. GROUND OF APPEAL NO.7 BY THE ASSESSEE RELATES TO DENIAL OF EXEMPTION U/S.11 FOR CONTRAVENTION OF PROVISIONS OF SECTION 13(1)(D) ON ACCOUNT OF INVESTMENT IN SHARES OF COOPERATIVE BANK S. 120. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER HAS NOT MADE ANY SUCH DISALLOWANCE . IN APPEAL THE LD.CIT(A) BASED ON THE INFORMATION GIVEN BY THE ASS ESSING OFFICER HELD THAT ASSESSEE HAS VIOLATED PROVISIONS OF SECTION 13(1)(D ) BY INVESTING IN SHARES OF DIFFERENT COOPERATIVE BANKS THE DETAILS OF WHICH ARE ALREADY GIVEN IN THE PRECEDING PARAGRAPHS. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SHARES ARE ACQUIRED BEING PRECOND ITION FOR AVAILING OF LOANS FROM THE COOPERATIVE BANKS. IT IS SIMILAR TO THE DEPOSITS MADE FOR ELECTRICITY, WATER OR TELEPHONE CONNECTION ETC. THE SE DEPOSITS ARE ALSO NOT INVESTMENT BUT APPLICATION OF INCOME. 121. WE FIND MERIT IN THE SUBMISSION OF THE ARGUMEN T OF THE LD. COUNSEL FOR THE ASSESSEE. WE FIND IDENTICAL ISSUE HAD COME BEFORE THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DR. V.K. P ATIL FOUNDATION. WE FIND THE HONBLE HIGH COURT VIDE ITA NO.1560/2013 ORDER DATED 03-12-2013 DISMISSED THE APPEAL FILED BY THE REVENUE WHEREIN T HE TRIBUNAL HELD THAT INVESTMENT MADE BY THE ASSESSEE IN THE SHARES OF CO OPERATIVE BANK WAS NOT IN VIOLATION OF PROVISIONS OF SECTION 11(5) AND THE REFORE SECTION 13(1)(D) COULD NOT BE ATTRACTED. THE RELEVANT OBSERVATION O F THE HONBLE HIGH COURT AT PARA 9 OF THE ORDER READS AS UNDER : 77 ITA NO.320/PUN/2010 9. WE FIND THAT THE ONLY BASIS OF THE REVENUE SEEKING TO DENY THE BENEFIT OF EXEMPTION UNDER SECTION 11/12 OF THE ACT IS THAT THE SHARE SUBSCRIPTION AMOUNT IS SHOWN AS INVESTMENTS IN THE BALANC E SHEET AND INVESTMENTS IN SHARES NOT BEING A SPECIFIED MODE, THE B ENEFIT OF EXEMPTION CANNOT BE GRANTED. IT IS WELL SETTLED THAT THE DEPICTION IN BOOKS OF ACCOUNTS IS NOT A DETERMINATIVE TEST BUT THE F ACTUAL NATURE WHICH HAS TO BE CONSIDERED FOR THE PURPOSE OF TAXATIO N. IN THIS CASE, THE INVESTMENT IN SHARES OF COOPERATIVE BANKS WAS A PRE-COND ITION FOR RAISING OF LOANS AND IT WAS THEREFORE NOT AN INVESTMENT AS NORMALLY UNDERSTOOD. THE TRIBUNAL HAS RECORDED A FINDING OF F ACT THAT THE SHARES WERE SUBSCRIBED TO ONLY FOR PURPOSES OF OBTAINING THE L OAN AND THE AMOUNTS SO OBTAINED WERE USED FOR FURTHERANCE OF THE O BJECTS OF THE TRUST. THERE IS ALSO NO DISPUTE ABOUT THE FACT THAT LO ANS TAKEN FROM THE SAID TWO COOPERATIVE BANKS WERE NOT COMPLETELY REPAID IN THE ASSESSMENT YEAR 2008-09 AND, THEREFORE, THE ASSESSEE WOULD BE REQUIRED TO HOLD THE SHARES TO CONTINUE AS MEMBER OF THE COOPERATIVE SOCIETIES RUNNING THE BANKING BUSINESS. BESIDES, ON IDEN TICAL FACTS, THE REVENUE HAS GRANTED THE BENEFIT OF EXEMPTION UNDER SE CTION 11/12 OF THE ACT FOR THE ASSESSMENT YEARS 2006-07, 2009-10, 2010- 11 AND 2011- 12 ON SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE AC T. THUS THERE IS NO REASON TO DENY THE BENEFIT OF EXEMPTION UNDER SE CTION 11 OF THE ACT FOR ASSESSMENT YEAR 2008-09. BESIDES, THE FINDING OF THE TRIBUNAL IS A FINDING OF FACT. 122. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF PATANGRAO KADAM PRATISTHAN VS. DCIT AND VICE VERSA VIDE ITA N O.289/PN/2011 AND 312/PN/2011 DATED 31-12-2012 AND VARIOUS OTHER DECI SIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. WE FURTHER FIND THE CIT(A) FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F VIKHE PATIL FOUNDATION (SUPRA) HAS HELD IN HIS ORDER FOR A.Y. 2 008-09 IN ASSESSEES OWN CASE THAT SECTION 13(1)(D) CANNOT BE INVOKED, VIS- -VIS THE INVESTMENTS IN SHARES OF COOPERATIVE SOCIETY. THE RELEVANT OBSERV ATION OF LD.CIT(A) AT PARA 7.7 OF HIS ORDER READS AS UNDER : 7.7 IT IS EVIDENT FROM THE ABOVE EXTRACT THAT WHILE DISMISSING THE DEPARTMENTS APPEAL, THE HON. HIGH COURT KEPT IN VIE W (I) THAT TRIBUNAL HAS RECORDED A FINDING OF FACT THAT THE SHARES WERE SU BSCRIBED TO ONLY FOR PURPOSES OF OBTAINING THE LOAN AND THE AMOUNTS SO OBTAI NED WERE USED FOR FURTHERANCE OF THE OBJECTS OF THE TRUST, (II) ON IDENTICAL FACTS, THE REVENUE HAS GRANTED THE BENEFIT OF EXEMPTION UNDER SE CTION 11/12 OF THE ACT FOR THE ASSESSMENT YEARS 2006-07, 2009-10, 2010- 11 AND 2011- 12 ON SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT , AND MOST SIGNIFICANTLY, (III) THAT THE FINDING OF THE TRIBUNA L IS A FINDING OF FACT AND THEREFORE THE PROPOSED QUESTION OF LAW COULD NOT BE E NTERTAINED. COMPARABLE FACTS DO NOT EXIST IN THE PRESENT CASE. NE VERTHELESS, IT IS 78 ITA NO.320/PUN/2010 TRUE THAT THE HON. HIGH COURT, WHICH IS THE JURISDICT IONAL HIGH COURT, HAS CATEGORICALLY OBSERVED THAT INVESTMENT IN SHARES OF CO- OPERATIVE BANKS WHICH IS A PRE-CONDITION FOR RAISING OF LOANS IS NOT AN INVESTMENT AS NORMALLY UNDERSTOOD. IT IS ALSO TRUE THAT THERE IS NO ADVERSE FINDING OF FACT IN THE IMPUGNED ASSESSMENT ORDER EITHER AS REGARDS THE FACT THAT THE INVESTMENTS WERE IN FACT MADE FOR RAISING LOANS AND THA T LOANS SO RAISED WERE UTILIZED FOR THE OBJECTS OF THE TRUST. IN VIEW OF THESE FACTS, I FIND THE CONTENTION OF THE APPELLANT ACCEPTABLE AND ACCORDIN GLY, HOLD THAT SECTION 13(1)(D) CANNOT BE INVOKED VIS--VIS THE INVESTMENTS I N SHARES OF CO- OPERATIVE SOCIETY. 123. IN THE INSTANT CASE ALSO THE LD. COUNSEL FOR T HE ASSESSEE SUBSTANTIATED THAT THE SHARES WERE OBTAINED ON ACCO UNT OF LOANS AVAILED. HE HAS ALSO FILED A CHART SHOWING THAT AFTER THE LO ANS WERE REPAID, THE SHARES WERE SUBSEQUENTLY REDEEMED IN MAY 2010 AND J ULY 2010. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT CITED (SUPRA) , WE HOLD THAT THE ASSESSEE HAS NOT VIOLATED THE PROVISIONS OF SECTION 13(1)(D) BY INVESTING IN SHARES OF COOPERATIVE BANKS FROM WHICH IT HAD TAKEN LOANS. THEREFORE, THE ASSESSEE CANNOT BE DENIED THE BENEFIT OF SECTION 11 . GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 124. GROUND OF APPEAL NO.8 BY THE ASSESSEE RELATES TO DENIAL OF EXEMPTION U/S.11 ON ACCOUNT OF CONTRAVENTION OF PRO VISIONS OF SECTION 13(1)(D) ON ACCOUNT OF INVESTMENT OF RS.1,50,000/- IN SHARES OF PUBLIC LIMITED COMPANIES. 125. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED AT THE OUTSET SUBMITTED THAT THIS ISSUE DOES NOT ARISE FROM THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAD PROVIDED THIS UNCALLED FOR INFORMATION AND TRIED TO IMPROVE UPON HIS ASSESSMENT ORDER WHICH IS IMPERMISSIBLE IN LAW. THE CIT(A) ALSO HAS ERRONEOUSLY ADMITTED THIS INFORMATION. REFERRING T O PAGES 101 TO 108 OF THE PAPER BOOK NO.1 THE LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ASSESSEE HAS PURCHASED 220 SHARES IN DIFFERENT COMP ANIES. HE SUBMITTED THAT THE ASSESSEE CONDUCTS COURSES ON BUSINESS MANA GEMENT NAMELY, 79 ITA NO.320/PUN/2010 MBA, MCA, DBM ETC. THE SYLLABUS INCLUDE TEACHING A ND LEARNING OF PROVISIONS OF COMPANIES ACT, 1956 RELATING TO PRESE NTATION AND FINALISATION OF ACCOUNTS, AUDIT, ANALYSIS OF VARIOUS STATEMENTS, DIRECTORS REPORT, AUDITORS REPORT, RELEVANT RESOLUTIONS ETC. WHICH ENABLE THE STUDENTS TO PREPARE AND PRESENT THEIR PROJECTS. THE ASSESSEE GETS ALL THES E DETAILS FROM THESE COMPANIES INCLUDING THE ANNUAL REPORTS WHICH ARE KE PT IN THE LIBRARY. THEREFORE, IT IS AN EXPENDITURE INCURRED FOR FURTHE RANCE OF OBJECTS OF TRUST AND THEREFORE IS AN APPLICATION OF INCOME. HE SUBMITTE D THAT THE QUANTITY OF SHARES OF EACH OF THESE COMPANIES RANGES FROM 1 TO 5 SHARES ONLY WHICH ALSO PROVES THE ABSENCE OF PROFIT MOTIVE AND THEREF ORE NOT AN INVESTMENT. HE SUBMITTED THAT THE COST INVOLVED IS RS.1,50,000/ - ONLY WHICH IS TOO MINISCULE IN COMPARISON TO THE GROSS ASSETS OF THE ASSESSEE WHICH IS RS.301.55 CRORES. 126. REFERRING TO THE DECISION OF HONBLE MADRAS HI GH COURT IN THE CASE OF NACHIMUTHU INDUSTRIAL ASSOCIATION VS. CIT REPORTED IN 130 ITR 585 AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ALARIPPU REPORTED IN 244 ITR 358 HE SUBMITTED THAT THE COURTS HAVE EXPLAINED WHAT CONSTITUTES INVESTMENT. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PATANGRAO KADAM PRATISTHAN VS. DCIT AND VICE VERSA VIDE ITA NOS. 289/PN/2011 AND 312/PN/2011 ORDER DATED 31-12- 2012 FOR A.Y. 2006- 07 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECIS ION HAS EXAMINED THE ISSUE IN DETAIL AT PARA NOS.13 TO 13.5 OF THE ORDER AND HELD THAT CONSIDERING THE PETTY AMOUNT IN INVESTMENT IN SHARES IT CANNOT BE SAID THAT THERE IS ANY VIOLATION OF SECTION 13(1)(D) OF THE I.T. ACT. 126.1 IN HIS ALTERNATE SUBMISSION HE SUBMITTED THAT AT THE MOST DIVIDEND EARNED ON THESE SHARES ONLY CAN LOSE THE BENEFIT OF EXEMPTION. HOWEVER, THERE CANNOT BE WHOLESALE DENIAL OF EXEMPTION. HE SUBMITTED THAT THIS PROPOSITION HAS BEEN ACCEPTED BY THE TRIBUNAL IN AS SESSEES OWN CASE FOR 80 ITA NO.320/PUN/2010 A.Y. 1999-2000 IN ITA NO.113/PN/2010 ORDER DATED 18 -03-2011. FOLLOWING THE SAME THE CIT(A) DECIDED THE APPEALS FOR A.Y. 20 07-08 AND 2008-09 IN FAVOUR OF THE ASSESSEE. HE ACCORDINGLY SUBMITTED T HAT THERE SHOULD NOT BE ANY DENIAL OF EXEMPTION U/S.11 FOR VIOLATION OF THE SAME. 127. THE LD. DEPARTMENTAL REPRESENTATION ON THE OTH ER HAND HEAVILY RELIED ON THE ORDER OF CIT(A). 128. 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 FIND THE ASSESSEE IN THE INSTA NT CASE IS HOLDING 220 SHARES RANGING FROM 1 TO 15 IN DIFFERENT LIMITED BL UE-CHIP COMPANIES. ALTHOUGH THE ASSESSING OFFICER HAS NOT DISCUSSED TH E ISSUE IN THE BODY OF THE ASSESSMENT ORDER, HOWEVER, ON THE BASIS OF THE INFORMATION PROVIDED BY THE ASSESSING OFFICER IN THE REMAND REPORT FOR THE PRECEDING ASSESSMENT YEARS THE CIT(A) OBSERVED THAT THE ASSESSEE HAS VIO LATED THE PROVISIONS OF SECTION 13(1)(D) OF THE I.T. ACT BY INVESTING IN SH ARES IN THE LISTED BLUE CHIP COMPANIES. THEREFORE, THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF PROVISIONS OF SECTION 11. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE TRUST IS CONDUCTING COUR SES ON BUSINESS MANAGEMENT NAMELY, MBA, MCA, DBM ETC. FOR WHICH THE AUDITED ACCOUNTS OF DIFFERENT COMPANIES ARE REQUIRED FOR THE BENEFIT OF THE STUDENTS AND THEREFORE CONSIDERING THE MINISCULE AMOUNT INVESTED IN THE SHARES OF THESE COMPANIES FOR RS.1,50,000/- IT CAN BE CONSIDERED AS APPLICATION OF INCOME AND NOT AN INVESTMENT. IT IS ALSO HIS ALTERNATE SU BMISSION THAT THERE CANNOT BE WHOLESALE DENIAL OF EXEMPTION U/S.11 AND AT THE MOST THE DIVIDEND EARNED ON THESE SHARES SHOULD LOSE THE BENEFIT OF E XEMPTION. 129. WE FIND SOME FORCE IN THE ALTERNATE ARGUMENT O F THE LD. COUNSEL FOR THE ASSESSEE. THE PUNE BENCH OF THE TRIBUNAL IN AS SESSEES OWN CASE IN ITA NO.113/PN/2010 ORDER DATED 18-03-2011 FOR A.Y. 2009-10 AT PARA 28 OF 81 ITA NO.320/PUN/2010 THE ORDER HAS HELD THAT DENIAL OF EXEMPTION HAS TO BE RESTRICTED TO THE RELATABLE INCOME IN VIEW OF THE SPECIFIC PROVISIONS OF THE PROVISO TO SECTION 164(2) OF THE ACT AS EXPLAINED BY THE BINDING JURIS DICTIONAL HIGH COURT JUDGMENT IN THE CASE OF SHETH MAFATLAL GAGALBHAI FO UNDATION TRUST (SUPRA) AND IN PRINCIPLE THE DENIAL CANNOT BE EXTENDED TO O THER INCOME OF THE TRUST. IT WAS ALSO BROUGHT TO OUR NOTICE THAT RELYING ON T HE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2009-10 THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOR A.Y. 2008-09 BY OBSER VING AS UNDER : 7.9 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPE LLANT. IN VIEW OF THE FACTS MENTIONED IN PARA 7.8 ABOVE, I DO NOT FIND THE CONTENTION OF THE APPELLANT ACCEPTABLE ON THIS ISSUE. HOWEVER, THE ALTERNATE CONTENTION OF THE APPELLANT THAT DENIAL O F EXEMPTION HAS TO BE RESTRICTED TO THE RELATABLE INCOME ONLY HAS TO BE ACC EPTED IN VIEW OF THE CATEGORICAL OBSERVATION OF THE JURISDICTIONAL BENCH O F THE TRIBUNAL IN PARA 28 OF ITA NO.113/PN/2010 IN THE APPELLANTS OWN CASE FOR 1999- 2000. 7.10 THE AO IS DIRECTED ACCORDINGLY. IN VIEW OF TH E ABOVE DECISION WITH REGARD TO INVESTMENT IN SHARES OF CO-OPERATIVE SOC IETY AND SHARES OF PUBLIC LIMITED COMPANIES, THIS GROUND OF APPEAL MA Y BE TREATED AS PARTLY ALLOWED. 130. WE FIND THE CIT(A) HAS ALSO FOLLOWED THE SAME VIEW IN A.Y. 2007-08. IT WAS BROUGHT TO OUR NOTICE BY THE LD. AUTHORISED REPRESENTATIVE THAT THE REVENUE HAS NOT GONE ON APPEAL ON THIS ISSUE. 131. WHILE DECIDING THE ADDITIONAL GROUND NO.3 WE H AVE ALREADY HELD THAT THERE CANNOT BE WHOLESALE DENIAL OF EXEMPTION OF TH E ENTIRE INCOME OF THE ASSESSEE AND AT THE MOST DIVIDEND ON SHARES WOULD L OSE THE BENEFIT OF EXEMPTION. IN VIEW OF THE ABOVE, WE RESTORE THE IS SUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO FIND OUT THE DIVIDEND INCOME, IF ANY, OUT OF THESE SHARES INCLUDING THAT OF VALUE OF BONUS SH ARES THAT WERE RECEIVED/OBTAINED DURING THE YEAR AND BRING THE SAM E TO TAX. WE HOLD AND DIRECT ACCORDINGLY. GROUND OF APPEAL NO.8 BY THE A SSESSEE IS ACCORDINGLY PARTLY ALLOWED FOR STATISTICAL PURPOSES. 82 ITA NO.320/PUN/2010 132. IN GROUND OF APPEAL NO.9 THE ASSESSEE HAS CHAL LENGED THE ORDER OF THE CIT(A) IN TREATING THE DONATION OF RS.43,148/- RECEIVED TOWARDS CORPUS AS REVENUE INCOME. 133. THE LD. COUNSEL FOR THE ASSESSEE VERY FAIRLY A DMITTED THAT THERE IS NO LETTER FROM THE DONORS TO SUPPORT THE CLAIM THAT TH E DONATION HAS BEEN RECEIVED TOWARDS CORPUS OF THE TRUST. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE SAME WILL PARTAKE T HE CHARACTER OF REVENUE INCOME. THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY DISMISSED. 134. IN GROUND OF APPEAL NO.10 THE ASSESSEE HAS CHA LLENGED THE ORDER OF CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS.2,50,00 0/- ON ACCOUNT OF DONATION PAID. 135. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THIS GROUND HAS REMAINED TO BE TAKEN BEFORE CIT(A). REFERRING TO T HE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUTHVI ST OCK BROKERS AND SHAREHOLDERS PVT. LTD. REPORTED IN 349 ITR 336 HE S UBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD TH AT THE ASSESSEE IS ENTITLED TO RAISE NOT MERELY ADDITIONAL LEGAL SUBMI SSIONS BEFORE THE APPELLATE AUTHORITIES BUT IS ALSO ENTITLED TO RAISE ADDITIONA L CLAIMS BEFORE THEM. THE APPELLATE AUTHORITIES HAVE THE DISCRETION TO PERMIT SUCH ADDITIONAL CLAIMS TO BE RAISED. THEY HAVE THE JURISDICTION TO DEAL NOT MERELY WITH ADDITIONAL GROUNDS WHICH BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OF LAW BUT WITH ADDITIONAL GROUNDS WHICH WERE AVAILABL E WHEN THE RETURN WAS FILED. THE WORDS COULD NOT HAVE BEEN RAISED MUST BE CONSTRUED LIBERALLY AND NOT STRICTLY. THERE MAY BE SEVERAL FACTORS JUS TIFYING THE RAISING OF A NEW PLEA IN APPEAL AND EACH CASE MUST BE CONSIDERED ON ITS OWN FACTS. HE 83 ITA NO.320/PUN/2010 ACCORDINGLY SUBMITTED THAT IN VIEW OF THE ABOVE DEC ISION THIS GROUND BY THE ASSESSEE SHOULD BE ADMITTED. 136. REFERRING TO PAGE 16 OF PAPER BOOK NO.3 THE LD . COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DONATION OF RS.2,50,000 /- HAS BEEN PAID TO LONAVALA EDUCATIONAL SOCIETY VIDE CHEQUE NO.294237 DATED 15-11-2005 DRAWN ON CANARA BANK, LONAVALA. HE SUBMITTED THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE CIT(A) IN A.Y. 2003-04 AND A.YRS. 20 07-08 TO 2009-10 IN FAVOUR OF THE ASSESSEE. HE ALSO RELIED ON CBDT CIR CULAR NO.1132 DATED 05- 01-1978 WHERE IT HAS BEEN HELD THAT THE PAYMENT OF A SUM BY ONE CHARITABLE TRUST TO ANOTHER TRUST FOR UTILISATION BY THE DONEE TRUST TOWARDS ITS CHARITABLE OBJECT IS PROPER APPLICATION OF INCOME FOR CHARITAB LE PURPOSE IN THE HANDS OF THE DONOR TRUST AND THE DONOR TRUST WILL NOT LOSE E XEMPTION U/S.11 OF THE I.T. ACT, 1961 MERELY BECAUSE THE DONEE TRUST DID NOT SP END THE DONATION DURING THE YEAR OF RECEIPT ITSELF. HE ACCORDINGLY SUBMITT ED THAT THIS GROUND SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. 137. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND STRONGLY OPPOSED THE ADMISSION OF THIS GROUND WHICH WAS NOT RAISED BEFORE THE CIT(A). 138. 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 CBDT CIRCULAR 1132 DATED 05-01-1978 CITED BEFORE US. WE FIND THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.2,50,000/- PAID AS DONATION TO OTHER E DUCATIONAL INSTITUTIONS. THE ASSESSEE HAD NOT CHALLENGED THE SAME BEFORE THE CIT(A) AND FOR THE FIRST TIME THE ASSESSEE HAS TAKEN THIS GROUND BEFOR E THE TRIBUNAL. IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF PRUTHVI BROKERS AND SHAREHOLDERS PVT. LTD. (SUPRA) THIS GROUND BY T HE ASSESSEE IS ADMITTED. SINCE THE ISSUE HAS NOT BEEN EXAMINED BY THE ASSESS ING OFFICER IN THE LIGHT 84 ITA NO.320/PUN/2010 OF THE CIRCULAR NO.1132 DATED 05-01-1978 AND SINCE SIMILAR ISSUE HAS BEEN DECIDED BY THE CIT(A) IN THE PRECEDING A.YRS. 2003- 04 AND 2007-08 TO 2009-10 IN FAVOUR OF THE ASSESSEE, THEREFORE, WE DE EM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WIT H A DIRECTION TO READJUDICATE THIS ISSUE IN THE LIGHT OF THE CIRCULAR NO.1132 DAT ED 05-01-1978 AND THE ORDER OF THE CIT(A) FOR A.YRS. 2003-04 AND 2007-08 TO 2009-10. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTI CAL PURPOSES. 139. GROUND OF APPEAL NO.11 BY THE ASSESSEE RELATES TO ADDITION MADE ON THE BASIS OF RECASTED FINAL ACCOUNTS BY THE SPECIAL AUDITORS ON ACCOUNT OF VIOLATION OF PROVISIONS OF SECTION 40(A)(IA) AMOUNT ING TO RS.4,02,80,770/-, U/S.40A(3) FOR RS.2,44,095/- AND U/S.36(A)(VA) FOR RS.31,30,020/-. 140. SO FAR AS THE DISALLOWANCE OF RS.4,02,80,770/- U/S.40(A)(IA) IS CONCERNED THE LD. COUNSEL FOR THE ASSESSEE REFERRIN G TO PAGES 51 TO 71 OF THE PAPER BOOK NO.3 DREW THE ATTENTION OF THE BENCH TO THE NATURE OF DISALLOWANCE U/S.40(A)(IA) AS PER THE REPORT OF THE SPECIAL AUDITOR. HE SUBMITTED THAT DISALLOWANCE U/S.40(A)(IA) CAN BE MA DE WHERE THE INCOME IS ASSESSABLE UNDER THE HEAD PROFITS AND GAINS FROM B USINESS AND PROFESSION. SUCH DISALLOWANCE CANNOT BE MADE SINCE THE ASSESSEES INCOME IS ASSESSED/ASSESSABLE UNDER THE HEAD INCOM E FROM OTHER SOURCES. 141. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF VIDYA PRATISTHAN VS. DCIT VIDE ITA NO.1300/ PN/2007 AND BUNCH OF OTHER APPEALS FOR A.Y. 2004-05 TO 2006-07 ORDER DAT ED 30-06-2010 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HA S UPHELD THE ORDER OF THE CIT(A) WHO HAS HELD THAT PROVISIONS OF SECTION 40(A )(IA) ARE NOT APPLICABLE TO THE INCOME OF THE TRUST WHOSE INCOME IS FROM THE AC TIVITIES OF RUNNING OF INSTITUTION/SCHOOL SINCE THE INCOME FALLS UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT INCOME FROM BUSINESS. REFERRIN G TO THE DECISION OF THE 85 ITA NO.320/PUN/2010 MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MA HATMA GANDHI SEVA MANDIR VS. DDIT(E) VIDE ORDER DATED 11-05-2012 FOR A.Y. 2007-08 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HA S HELD THAT PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO THE CASE OF CHARITABLE TRUST OR INSTITUTION WHERE INCOME AND EXPENDITURE IS COMPUTE D IN TERMS OF SECTION 11. HE ACCORDINGLY SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) BE DELETED. 142. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 143. 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 VARI OUS DECISIONS CITED BEFORE US. WE FIND ON THE BASIS OF REPORT OF SPECI AL AUDITORS THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.4,02,80,770/- ON ACCOUNT OF VIOLATION OF PROVISIONS OF SECTION 40(A)(IA) WHICH HAS BEEN UPHE LD BY THE CIT(A). IT IS THE SUBMISSION OF THE LD, COUNSEL FOR THE ASSESSEE THAT DISALLOWANCE U/S.40(A)(IA) CAN BE MADE WHERE THE INCOME IS ASSES SABLE UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS AND PROFESSION AN D IT CANNOT BE MADE SINCE ASSESSEES INCOME IS ASSESSED/ASSESSABLE UNDE R THE HEAD INCOME FROM OTHER SOURCES. 144. WE FIND IDENTICAL ISSUE HAS BEEN DECIDED BY TH E HONBLE BOMBAY HIGH COURT IN THE CASE OF BOMBAY STOCK EXCHANGE LTD . VS. DDIT (E) REPORTED IN 52 TAXMANN.COM 29 IN FAVOUR OF THE ASSE SSEE. THE RELEVANT OBSERVATION OF THE HONBLE HIGH COURT EXTRACT READS AS UNDER : ( E) WE ALSO FIND FORCE IN THE SUBMISSION OF MR . DASTOOR THAT SECTION 40(A) WILL NOT APPLY TO THE PETITIONER AT ALL AS IT IS NOT CARRYING ON ANY BUSINESS . IT IS A CHARITABLE INSTITUTION WHOSE INCOME IS EXEMPT U NDER SECTION 11 OF THE ACT. SECTION 11 FULLS UNDER CHAPTER III WITH THE HEADING 'INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME' . ON THE OTHER HAND, SECTION 40(A) FULLS UNDER CHAPTER IV WITH THE HEADING 'COMPUTATION OF 86 ITA NO.320/PUN/2010 TOTAL INCOME' . THE RELEVANT PORTION OF SECTION 40 OF THE ACT READS AS UNDER : '40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECT IONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'- (A) IN THE CASE OF ANY ASSESSEE- ... (IA) ANY INTEREST, COMMISSION OR BROKERAGE, (RENT, ROYALTY) FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYAB LE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABO UR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTIO N, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTIO N (1) OF SECTION 139 :' (EMPHASIS SUPPLIED) IT IS CLEAR THAT SECTION 40 APPLIES TO DEDUCTIONS CLAIM ED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS O F BUSINESS OR PROFESSION IN THE PRESENT CASE, ADMITTEDLY, THE INCOME OF THE PETITIONER IS EXEMPTED UNDER SECTION 11 OF THE ACT. THE PETITION ER IS NOT CARRYING ON ANY BUSINESS AS HELD BY THE INCOME-TAX APPELLATE TRI BUNAL MUMBAI BENCH, IN ITS ORDER DATED AUGUST 22, 2006, IN RELATIO N TO THE ASSESSMENT YEARS 1991-92 TO 1996-97. THIS ORDER HAS NOT BEEN CH ALLENGED. IN THIS VIEW OF THE MATTER, WE HAVE NO HESITATION IN HOLDING THAT SECTION 40(A)(IA) HAS NO APPLICATION TO THE FACTS OF THE PRE SENT CASE AND THE IMPUGNED NOTICE ISSUED ON THE BASIS THEREOF WAS WHOLLY MISCONCEIVED. IT IS PERTINENT TO NOTE THAT IN THE REPLY DATED MARC H 13, 2009, FILED BY THE PETITIONER TO THE NOTICE DATED JANUARY 29, 2009, UN DER SECTION 154 OF THE ACT, THE PETITIONER HAD CLEARLY STATED THAT IT WAS ON LY OUT OF ABUNDANT CAUTION THAT THE PETITIONER USED TO GET ITS BOOKS OF A CCOUNT AUDITED UNDER SECTION 44AB OF THE ACT AND THAT THIS PRACTICE WAS BEING FOLLOWED SINCE THE LAST 15 YEARS. THE SAME EXPLANATION WAS ALSO G IVEN BY THE PETITIONER IN ITS LETTER DATED NOVEMBER 25, 2011 OBJ ECTING TO THE REOPENING OF ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06. 145. IN VIEW OF THE DECISION OF HONBLE JURISDICTIO NAL HIGH COURT CITED (SUPRA) WE HOLD THAT DISALLOWANCE U/S.40(A)(IA) OF RS.4,02,80,770/- IS NOT JUSTIFIED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESS ING OFFICER TO DELETE THE DISALLOWANCE MADE U/S.40(A)(IA) 146. SO FAR AS DISALLOWANCE OF RS.2,44,095/- U/S.40 A(3) IS CONCERNED THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PAGE 2 OF PARA 4 OF PAPER BOOK NO.3 SUBMITTED THAT FULL DETAILS WERE GIVEN REGARDI NG THE EXPENSES. HE SUBMITTED THAT NOT A SINGLE EXPENSE HAS EXCEEDED RS .20,000/-. THE GENUINENESS OF THE EXPENDITURE HAS NOT BEEN DOUBTED . EVEN OTHERWISE 87 ITA NO.320/PUN/2010 ALSO, EVEN IF ANY ITEM OF ANY EXPENDITURE EXCEEDS R S.20,000/- NO DISALLOWANCE IS CALLED FOR. FOR THE ABOVE PROPOSIT ION, HE RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF ANUPAM TELE SERVICES REPORTED IN 43 TAXMANN.COM 199. 147. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 148. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSE SSING OFFICER ON THE BASIS OF RECASTED FINAL ACCOUNTS BY THE SPECIAL AUD ITOR MADE THE DISALLOWANCE OF RS.2,44,095/- U/S.40A(3). IT IS TH E SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT NOT A SINGLE PAYMENT EXCEEDING RS.20,000/- HAS BEEN GIVEN TO ANY OF THE PARTIES. ALTHOUGH FULL DETAILS WERE GIVEN THE SAME WAS NOT PROPERLY APPRECIATED BY THE ASSESSING OFFICER OR CIT(A). UNDER THESE CIRCUMSTANCES, WE DEEM IT PROPER TO RES TORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY THE PAYME NTS MADE TO DIFFERENT PERSONS. IN CASE THERE IS NO PAYMENT EXCEEDING RS. 20,000/- AT A TIME TO ANY OF THE PARTIES AS STATED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE BAR, THEN PROVISIONS OF SECTION 40A(3) CANNOT BE INVOKED . THE ASSESSING OFFICER SHALL ACCORDINGLY DECIDE THE ISSUE AS PER FACT AND LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOL D AND DIRECT ACCORDINGLY. THE ABOVE ISSUE IS ACCORDINGLY ALLOWED FOR STATIST ICAL PURPOSES. 149. SO FAR AS DISALLOWANCE OF RS.91,31,020/- U/S. 36(1)(VA) ON ACCOUNT OF DELAYED PAYMENT OF PF IS CONCERNED THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS GROUND WAS NOT TAKEN BEFORE THE CIT(A). REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF PRUTHVI BROKERS AND SHAREHOLDERS PVT. LTD. (SUPRA) HE SUBMITTED THA T THIS GROUND SHOULD BE ADMITTED. REFERRING TO PAGE 6 PARA 5 OF PAPER BOO K NO. 3 HE SUBMITTED THAT THE PF DUE HAS BEEN DEPOSITED BEFORE THE DUE DATE O F FILING OF THE RETURN. REFERRING TO PAGE 72 OF THE PAPERWORK NO. 3, HE DR EW THE ATTENTION OF THE 88 ITA NO.320/PUN/2010 BENCH TO THE DATE WISE DEPOSIT OF THE EMPLOYEES CO NTRIBUTION TO PF AND EMPLOYERS CONTRIBUTION TO PF. REFERRING TO THE DE CISION OF HONBLE SUPREME COURT IN THE CASE ALOM EXTRUSIONS REPORTED IN 319 I TR 306 HE SUBMITTED THAT NO DISALLOWANCE U/S.36(1)(VA) IS CALLED FOR SINCE THE SAME HAS BEEN DEPOSITED BEFORE THE DUE DATE OF FILING OF THE RETU RN. 150. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 151. AFTER HEARING BOTH THE SIDES WE FIND THE ASSES SEE HAS ADMITTED THAT HE HAS NOT RAISED THIS GROUND BEFORE THE CIT(A). S INCE ASSESSEE HAS TAKEN THIS GROUND BEFORE THE TRIBUNAL FOR THE FIRST TIME, THEREFORE, FOLLOWING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F PRUTHVI BROKERS AND SHAREHOLDERS PVT. LTD. (SUPRA) THE GROUND IS ADMITT ED. SINCE THE ISSUE HAS NOT BEEN EXAMINED IN THE LIGHT OF THE DECISION OF H ONBLE SUPREME COURT IN THE CASE ALOM EXTRUSIONS REPORTED IN 319 ITR 306 A ND THE RECENT DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GHATGE PATIL TRANSPORT LTD. REPORTED IN 368 ITR 749, WE RESTORE THIS ISSUE TO T HE FILE OF THE AO WITH THE DIRECTION TO VERIFY THE DETAILS OF PAYMENT MADE TO THE GOVERNMENT TREASURY. IN CASE THE DEPOSIT HAS BEEN MADE PRIOR TO THE DATE OF FILING OF THE RETURN, THEN IN THAT CASE NO DISALLOWANCE IS CALLED FOR. TH E ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FACTS AND LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 152. GROUND OF APPEAL NO.12 BY THE ASSESSEE RELATES TO THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF ASSESSING OFFICE R IN TREATING THE REVENUE EXPENDITURE OF RS.13,13,661/- AS CAPITAL EXPENDITUR E AND DISALLOWING THE SAME. 153. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PAGE 7 PARA 6 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO THE D ETAILS OF EXPENDITURE. HE 89 ITA NO.320/PUN/2010 SUBMITTED THAT ALL THESE EXPENSES ARE REVENUE IN NA TURE AND SHOULD BE ALLOWED. HE SUBMITTED THAT EXPENSES FOR VARIOUS SO FTWARES WERE INCURRED AS THE SOFTWARES HAD BECOME OBSOLETE IN A SHORT TIME B ECAUSE OF ADVANCEMENT IN TECHNOLOGY. ASSESSEE DOES NOT DERIVE ANY ENDURI NG BENEFIT FROM THE SAME AND THEREFORE THE SAME CANNOT BE CAPITALIZED. HE SUBMITTED THAT THERE ARE CERTAIN EXPENSES SUCH AS OFFICE EXPENSES, ACCOM MODATION EXPENSES, CURTAINS AND MATS, LIGHTING AND FITTING MATERIALS, SOFA CUSHIONS, CURTAINS, MECHANICAL LAB CONSUMABLES, EXPENSES FOR RODS, WIRE S, SCREWS ETC. WHICH HAVE BEEN TREATED AS CAPITAL EXPENDITURE BY THE SPE CIAL AUDITOR. REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASAHI SAFETY GLASS REPORTED IN 15 TAXMANN.COM 382 HE SUBM ITTED THAT THESE ITEMS CANNOT BE TREATED AS CAPITAL IN NATURE. 154. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 155. AFTER HEARING BOTH THE SIDES, WE FIND THIS ISS UE HAS NOT BEEN PROPERLY EXAMINED BY THE ASSESSING OFFICER. FROM THE LIST OF DETAILS WE FIND SOME OF THE ITEMS WHICH ARE REVENUE IN NATURE HAS BEEN TREA TED AS CAPITAL IN NATURE. WE THEREFORE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO REEXAMINE THE ISSUE IN THE LIGHT OF TH E DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASAHI SAFETY GLAS S (SUPRA). THE ASSESSING OFFICER SHALL GIVE DUE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE AND DECIDE THE ISSUE AS PER FACT AND LAW. THIS GRO UND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 156. IN GROUND OF APPEAL NO.13 THE ASSESSEE HAS CHA LLENGED THE ORDER OF THE CIT(A) IN CONFIRMING DISALLOWANCE OF PRIOR PER IOD EXPENSES OF RS.94,84,854/-. 157. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THIS GROUND REMAINED TO BE TAKEN BEFORE CIT(A). REFERRING TO T HE DECISION OF HONBLE 90 ITA NO.320/PUN/2010 BOMBAY HIGH COURT IN THE CASE OF PRUTHVI BROKERS AN D SHAREHOLDERS PVT. LTD. (SUPRA) HE SUBMITTED THAT THIS GROUND SHOULD B E ADMITTED. HE SUBMITTED THAT THE ADDITION HAS BEEN MADE IN THE FINAL ACCOUN TS BY THE SPECIAL AUDITORS. REFERRING TO PAGE 14 OF THE PAPER BOOK NO.3 AND PAG ES 73 TO 110 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO T HE DETAILS OF PRIOR PERIOD EXPENSES. HE SUBMITTED THAT AS LONG AS THESE EXPEN SES ARE OTHERWISE ALLOWABLE IT DOES NOT MAKE ANY DIFFERENCE EVEN IF I T IS CLAIMED AND ALLOWED IN A.Y. 2006-07. FOR THE ABOVE PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS: 1. NAGARI MILLS CO. LTD. 33 ITR 681 2. VISHNU INDUSTRIAL CASES PVT. LTD. ORDER DATED 06-05-200 8 3. ACIT VS. HITACHI HOMES AND LIFE SOLUTIONS PVT. 41 TAXMANN.COM 53 158. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 159. 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 CITED BEFORE US. WE FIND ON THE BASIS OF THE RECASTED FI NAL ACCOUNTS BY THE SPECIAL AUDITORS THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.94,84,854/- ON ACCOUNT OF PRIOR PERIOD EXPENSES DEBITED DURING THE YEAR. SINCE THE ASSESSEE HAD NOT TAKEN ANY GROUND BEFORE THE CIT(A) THE SAME WAS NOT ADJUDICATED BY HIM. SINCE THE ASSESSEE HAS TAKEN T HIS GROUND FOR THE FIRST TIME BEFORE THE TRIBUNAL, THEREFORE, FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BROKERS AND SHAREH OLDERS PVT. LTD. (SUPRA) THE SAME IS ADMITTED. 160. IT IS THE CASE OF THE LD. COUNSEL FOR THE ASSE SSEE THAT THE ASSESSEE HAS GIVEN FULL DETAILS OF THE PRIOR PERIOD EXPENSES AS PER PAGES 14 AND 73 TO 110 OF THE PAPER BOOK NO.3. ACCORDING TO THE LD. C OUNSEL FOR THE ASSESSEE 91 ITA NO.320/PUN/2010 AS LONG AS THESE EXPENSES ARE OTHERWISE ALLOWABLE I T DOES NOT MAKE ANY DIFFERENCE EVEN IF THESE ARE CLAIMED AND ALLOWED IN A.Y. 2006-07. WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . NAGRI MILLS COMPANY LTD. REPORTED IN 33 ITR 681 THE HONBLE HIGH COURT HAS OBSERVED AS UNDER (SHORT NOTES) : WHERE A COMPANY WHICH MAINTAINED ITS ACCOUNTS ON THE MERCANTILE BASIS DID NOT MAKE ANY ENTRY TOWARDS BONUS FOR THE CALENDA R YEAR I95I, BUT, ON A DISPUTE REGARDING BONUS PAYABLE TO THE WORKERS FOR THA T YEAR BEING REFERRED TO THE CONCILIATION BOARD, THE BOARD, BY ITS AWARD I N JUNE, I952, DIRECTED THE COMPANY TO PAY BONUS OUT OF THE PROFITS FOR THAT YEAR , AND THE COMPANY IN MAKING THE RETURN CLAIMED TO DEDUCT FOR THE YEAR I9 5I, THE BONUS WHICH IT DISTRIBUTED IN DECEMBER, I952, AGAINST THE LAST ITEM O F PART IV OF THE INCOME- TAX RETURN: HELD, THAT AS UNDER SECTION 10(5) OF THE INCOME-TAX A CT ACTUAL PAYMENT WAS NOT NECESSARY FOR THE PURPOSE OF DEDUCTION AND IT WAS SU FFICIENT IF THE LIABILITY TO BONUS WAS INCURRED ACCORDING TO THE METH OD OF ACCOUNTING UPON THE BASIS OF WHICH THE PROFITS OR GAINS WERE COMPUTED, THE COMPANY WAS ENTITLED TO THE DEDUCTION UNDER SECTION 10(2)(X) OF THE BONUS PAID FROM THE PROFITS FOR THE YEAR I95I, EVEN THOUGH THE AMOUNT HA D NOT BEEN ENTERED IN ITS ACCOUNTS FOR THAT YEAR. 161. WE FIND THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF HITACHI ACIT VS. HOME AND LIFE SOLUTIONS (INDIA) LTD. REPO RTED IN 41 TAXMANN.COM WHILE DECIDING AN IDENTICAL GROUND HAS OBSERVED AS UNDER : 14. FOR THE GROUND NO.4 OF THE REVENUE IN THE PRESE NT YEAR, THE LEARNED DR SUPPORTED THE ASSESSMENT ORDER, WHEREAS THE LEARNED AR SUPPORTED THE ORDER OF THE LEARNED CIT(A). 15. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT I T IS OBSERVED BY THE LEARNED CIT(A) AT PAGE NO.11 OF HIS ORDER THAT T HIS REQUEST WAS ALSO MADE BY THE ASSESSEE BEFORE THE AO THAT THIS EXPENSE, RE LATED TO PRIOR PERIOD, SHOULD BE EITHER ALLOWED IN THE PRESENT YEAR OR IF IT IS NOT ALLOWED IN THE PRESENT YEAR, THEN THE SAME SHOULD BE ALLOWED IN THE EARLIER YEAR, TO WHICH SUCH EXPENSES ARE RELATED TO. HE ALSO NOTED THAT THE AO HAS TOTALLY IGNORED THIS ASPECT, ALTHOUGH, HE HAS PASSED THE ASSESSMENT ORDER FOR THE PRECEDING YEAR I.E. A.Y.2000-2 001 ON THE SAME DATE. WE ARE OF THE CONSIDERED OPINION THAT WHEN THE RE IS NO OTHER OBJECTION OF THE AO, REGARDING ALLOWABILILTY OF EXP ENSES RELATING TO PRIOR PERIOD, THE SAME SHOULD BE ALLOWED EITHER IN THE PRESE NT YEAR OR IN THE PRECEDING YEAR, TO WHICH SUCH EXPENSES ARE RELATED TO. THE ASSESSEE HAS DISCLOSED A LOSS OF RS.6,92,700/- IN THE PRESENT YEAR, A ND IN A.Y.2000- 2001, THE ASSESSEE HAS FILED RETURN OF INCOME DISCLOSING N IL INCOME AFTER SETTING OFF OF BROUGHT FORWARD LOSS OF EARLIER Y EARS TO THE EXTENT OF RS.303.11 LAKHS. HENCE, EVEN IF THIS EXPENSES ARE ALLOWE D IN THE EARLIER YEARS I.E. A.Y. 2000-2001, IT WILL ULTIMATELY BE ADJ USTED IN THE PRESENT YEAR, BY WAY OF SET OFF OF BROUGHT FORWARD LOSS, AND T HEREFORE, IT WILL 92 ITA NO.320/PUN/2010 MAKE NO DIFFERENCE EVEN IF DEDUCTION IS ALLOWED IN THE PRESENT YEAR. HENCE, WE FEEL THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LEARNED CIT(A) ON THIS ASPECT. THE GROUND NO.4 OF THE REVENUE IS REJECTED. 162. IN VIEW OF THE ABOVE DISCUSSION, WE DEEM IT PR OPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A D IRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DECISIONS CITED ABOVE. NEEDLESS TO SAY THE ASSESSING OFFICER SHALL GIVE DUE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE AND DECIDE THE ISSUE AS PER LAW. WE HOLD AND DIREC T ACCORDINGLY. GROUND OF APPEAL NO.13 BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 163. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED IN THE ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 14-12-2016. SD/- SD/- (VIKAS AWASTHY) (R.K . PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE; DATED : 14 TH DECEMBER, 2016. ) *#,! -! / COPY OF THE ORDER FORWARDED TO : / BY ORDER , /// // # % / TRUE COPY // // TRUE COPY // &' % * / SR. PRIVATE SECRETARY *, / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A) - II , PUNE 4. 5. THE CIT CENTRAL, PUNE # %%*, *, B BENCH / DR, ITAT, B BENCH PUNE; 6. 2 / GUARD FILE.
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