M/s. All India J.D. Educational Society, New Delhi V. DDIT (E), New Delhi

ITA 3317/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87127 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 24-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DANKANUNGNA
• Assessee Lawyers: P K JAINCA
• Keywords: Unexplained cash credit; Depreciation; Charitable institution; Competent authority; Benefit of exemption; Cancellation of registration
• Section: 143(3); 12A; 12AA; 68; 37; 11

Judgement Text

ITA NO.3317/DEL/2013 AY: 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `A NEW DELHI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.3317/DEL/2013 ASSESSMENT YEAR : 2006-07 M/S ALL INDIA J.D. EDUCATIONAL SOCIETY, VS DY. DIRECTOR OF INCOME TAX, NU-23A, PITAMPURA, INV. CIRLE-1, DELHI. NEW DELHI-110034 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI P.K. JAIN,CA RESPONDENT BY : SHRI P. DANKANUNGNA, DR DATE OF HEARING: 22.1.2015 DATE OF PRONOUNCEMENT: 23.3.2015 O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THE ABOVE APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-XII, NEW DELHI DATED 25.03.2013 PERTAINING TO AY 2006-07 IN APPEAL NO.194/08-09 FOR AY 2006-07. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER :- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT -A HAS ERRED IN LAW AND ON FAC TS BY UPHOLDING THE ORDERS OF THE DEPUTY DIRECTOR OF INCO ME TAX -E, ITA NO.3317/DEL/2013 AY: 2006-07 2 INV CIR-I, NEW DELHI PASSED U/S 143(3) RESULTING IN HUGE DEMAND. 2. THAT THE AUTHORITIES BELOW HAS RELIED UPON THE FINDINGS OF THE LEARNED DGIT (E) FOR REJECTING THE APPLICATION OF THE APPELLANT FILED U/S 10(23)(C) OF THE IT ACT, 1962; WHEREAS IN THE APPELLANT'S CASE HON'BLE APEX COURT VIDE THEIR ORDER DATED 2-4-2012, HAS HELD THAT THE FINDINGS OF THE ORDER OF DGIT(E) ARE RESTRICTED TO AY 2007-08 AS THE HON'BLE BENCH COMPRISING CHIEF JUSTICE HAS ELABORATED IN THEIR OR DER THAT; 'WE UPHOLD THE ORDER OF REJECTION ON THE GROUNDS OF LIMITATION AS ALSO ON MERITS FOR ASSESSMENT YEAR 20 07-08. HOWEVER WE MAKE IT CLEAR THAT THE ORDER PASSED BY U S TODAY IN THIS CASE WILL NOT PRECLUDE THE ASSESSEE FROM MAKIN G APPLICATION FOR APPROVAL UNDER SECTION 10(23C)(VI) OR SECTION 11 OF THE ACT IN FUTURE AND IF SUCH AN APPLICATION IS MADE, THE COMPETENT AUTHORITY WILL DECIDE THE MATTER UNINFLUE NCED BY THIS ORDER. ' IN VIEW OF THE SAID ORDER OF THE HON'BLE SUPREME CO URT, CIT -A'S ORDER UPHOLDING THE CONTENTION OF THE AO U NDER THE INFLUENCE OF THE ORDER OF DGIT -(E) IS BEYOND THE J URISDICTION AND AGAINST THE DIRECTIONS OF HON'BLE SUPREME COURT , THEREFORE, THE IMPUGNED ORDER IN APPEAL IS LIABLE T O BE QUASHED AS BAD IN LAW AND ALSO CONTRARY TO THE DIRECTIONS O F HON'BLE APEX COURT. 3. LD. CIT -A ERRED IN UPHOLDING THE CONTENTION OF LD. DDIT(E) THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE FOUND TO BE FOR PROFIT AND NOT FOR CHARITABLE PURPOSES AND I S NOT JUSTIFIED IN DECLINING THE EXEMPTIONS VIS 11 & 12 O F THE INCOME TAX ACT WHEREAS THE EXEMPTION VIS 11 & 12 IS STILL AVAILABLE AND NOT CANCELLED AS ON THE DATE OF THE ASSESSMENT. THAT THE LD CIT -A ON THE ONE HAND ADMITTED AT PARA 1 ON PAGE 6 THAT; 'THE ACTION OF AO NOT ALLOWING EXEMPTION U/S 11 & 1 2 IS BEYOND THE JURISDICTION EXERCISED BY HIM DURING THE ASSESSMENT PROCEEDINGS' WHEREAS ON THE OTHER HAND THE CIT -A U PHELD THE ORDER OF AO, THEREFORE, THE ORDER OF CIT -(A) IS LI ABLE TO BE QUASHED AS NOT LEGAL AND CONTRARY TO HER OWN FINDIN G AS WELL. 4. THAT HAVING THE REGARD TO THE FACTS AND CIRCUMST ANCES OF THE CASE, LD. CIT -(A) ERRED IN UPHOLDING THE ADDIT ION OF RS. 75,05,000/- AS UNEXPLAINED CASH CREDIT' IN THE HAND S OF THE ITA NO.3317/DEL/2013 AY: 2006-07 3 ASSESSEE SOCIETY U/S 68 OF THE INCOME TAX ACT, 1961 . FURTHER A SUM OF RS. 4,05,000/- WAS ALSO UPHELD TO BE ADDED AS OTHER DONATION TO THE INCOME OF THE SOCIETY WHICH IS ALRE ADY INCLUDED IN TOTAL DONATION FIGURE OF RS. 75,05,000/ - WHEREAS THE APPELLANT HAS SUBMITTED ALL THE DOCUMENTS WITH REGARDS TO EACH DONOR. THE ASSESSEE HAS ALREADY DISCHARGED ITS ONUS BY PROVIDING THE DETAILS REGARDING IDENTITY OF THE DON OR INDICATING NAME, ADDRESS, PAN AND INCOME TAX PARTIC ULARS OF THE PERSON MAKING SUCH DONATION. THEREFORE, THE DIS ALLOWANCE OF THE DONATION AND CHARGING THE SAME TO TAX U/S 68 IS ALSO NOT SUSTAINABLE IN LAW AND LIABLE TO BE DELETED. 5. THAT HAVING THE REGARD TO THE FACTS AND CIRCUMST ANCES OF THE CASE, LD. CIT-A ERRED WHILE UPHOLDING THE CONTE NTION OF THE DDIT(E) REGARDING EXCESS SALARIES BEING CHARGED WITH THE INTENT OF SIPHONING OFF FUNDS OF THE APPELLANT. WHE REAS THE APPELLANT CONTENDED THAT SUBSEQUENT TO THE SCRUTINY OF SALARY REGISTERS OF SOCIETY BY THE DGIT(E), THE APPELLANT GOT THE INFORMATION ABOUT THE EMBEZZLEMENT AND FRAUD OF RS. 1,59,9421-, WHICH MIGHT HAVE TAKEN PLACE AND IT IS NOT AN ACT WITH THE INTENT OF SIPHONING OFF FUNDS. THE FINDING OF DGIT(E) WERE ALSO NOT CONCLUSIVE BEING DECIDED WITHOUT THE EXPERT ADVICE. THE EMBEZZLEMENT AND FRAUD SO STATED DOES N OT IN ANY WAY ESTABLISH THE INTENT OF SIPHONING OF FUNDS BY THE APPELLANT AND ACCORDINGLY THE SAID FINDINGS ARE TO BE QUASHED . 6. THAT HAVING REGARDS TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD CIT -A HAS ERRED IN LAW AND ON FACTS BY UP HOLDING THE CONTENTION OF LD. DDIT(E) BY NOT ALLOWING THE VEHIC LE HIRING CHARGES OF RS.230001- PER MONTH, WHICH WERE PAID ON THE RATES LOWER THAN THE MARKET VALUE OF THE SERVICES A ND TO AVOID THE HUGE CAPITAL COST IN THE VEHICLES. THE DDIT (E) WITHOUT VERIFYING THE FACTUAL DETAILS DISALLOWED THE EXPENS E. 7. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S O F THE CASE, THE LD. CIT -A ERRED WHILE UPHOLDING THE ORDE R OF DDIT(E) ALLEGING THAT THE EXPENDITURE SHOWN ON ACC OUNT OF CONSTRUCTION OF COLLEGE AND HOSPITAL BUILDING AND H OSTEL EXPENSES ARE INFLATED AND THE ALLEGATION THAT TRUST FUNDS HAVE BEEN SIPHONED OFF. WHEREAS ALL THE EXPENDITURES ARE PROPERLY VOUCHED AND FIND PLACE IN THE BOOKS OF ACCOUNTS OF THE APPELLANT AND DULY PRODUCED FOR VERIFICATION DURING THE REMAND REPORT BEFORE THE ASSESSING OFFICER AS WELL. THEREFORE, ITA NO.3317/DEL/2013 AY: 2006-07 4 THE CONTENTION OF THE AO IS OUT OF PROPORTION AND T O BE QUASHED. 8. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT -A HAS ERRED IN LAW AND ON FAC TS BY UPHOLDING THE CONTENTION OF LD. DDIT(E) IN PASSING THE ORDER BY NOT ALLOWING THE DEPRECIATION CLAIM. 9. THAT HAVING REGARDS TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD CIT-A HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF THE DDIT(E) ESTIMATING THE INCOME OF T HE APPELLANT SOCIETY AT RS.59,60,363/- CALCULATED AT 5 0% OF THE GROSS RECEIPTS OF THE SOCIETY FOR RS.L,19,20,725/-, WHICH IS WHOLLY UNJUSTIFIED AND BAD IN LAW. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL, AS NOTED BY THE FIRST APPELLATE AUTHORITY VIZ. CIT(A), ARE THAT THE ASSES SEE WAS SOCIETY REGISTERED ON 14.8.2002 WITH THE MAIN OBJECT OF SETTING UP AND RU NNING HOSPITALS AND TO SET UP EDUCATIONAL INSTITUTION, WHICH WAS GRANTED REGISTRA TION UNDER SECTION 12-A OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AS A C HARITABLE ORGANIZATION VIDE APPROVAL LETTER DATED 03.09.2004 W.E.F. 1.4.2003 AN D WAS ALSO GRANTED REGISTRATION AS CHARITABLE ORGANIZATION U/S 80-G OF THE ACT VIDE ORDER DATED 26-11- 2007 VALID UPTO 31-03-2010. FOR THE YEAR U NDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCOME AND THE CASE WA S SELECTED FOR SCRUTINY AND A NOTICE U/S 143(2) OF THE ACT ON 24.09.2007 AND 9.7. 2008 WERE ISSUED TO THE ASSESSEE. THE ASSESSEE SOCIETY HAD ALSO APPLIED F OR EXEMPTION U/S 10(23C) (VI) BEFORE THE DIRECTOR GENERAL OF INCOME TAX(EXEMPTION ), DELHI ON 05-11-2007, WHICH WAS REJECTED ON 28-11-2008 BY THE LEARNED DGI T(E) FOR ALLEGED SIPHONING OF THE FUNDS OF THE SOCIETY. ITA NO.3317/DEL/2013 AY: 2006-07 5 4. DURING THE ASSESSMENT PROCEEDINGS FOR THE YEAR U NDER CONSIDERATION, THE AO MADE CERTAIN ADVERSE REMARKS IN RESPECT OF THE C ORPUS DONATIONS, SALARY, AND CASH EXPENSES FOR CONSTRUCTION & HOSTEL EXPENSE S, VEHICLE HIRING CHARGES AND THE DEPRECIATION ON FIXED ASSETS AND RE JECTED THE BOOKS OF ACCOUNTS. THE AO FRAMED THE ASSESSMENT OF INCOME, BY APPLYING RATE OF DEPRECIATION AND ASSESSED THE INCOME ON ESTIMATE BA SIS BY APPLYING RATE OF 50% OF THE GROSS RECEIPTS OF RS.1,19,20,725/-, BY ESTIM ATING NET TAXABLE INCOME AT RS. 59,60,363/- AND ALSO DISALLOWED THE CLAIM OF D EPRECIATION. THE AO COMPLETED THE ASSESSMENT AT THE TAXABLE INCOME OF R S.1,38,70,363/- AS AGAINST NIL INCOME RETURNED BY THE ASSSSEE. 5. BEING AGGRIEVED WITH THE ABOVE ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHICH WAS ALSO DISMISSED B Y PASSING THE IMPUGNED ORDER. NOW, THE EMPTY HANDED ASSESSEE IS BEFORE TH IS TRIBUNAL WITH THE GROUNDS AS REPRODUCED HEREINABOVE. GROUND NO. 1, 2 AND 3 6. APROPOS THESE GROUNDS, LD. AR SUBMITTED THAT THE LD. CIT-A HAS ERRED IN LAW AND ON FACTS BY UPHOLDING THE ORDERS OF THE DGI T(E), DATED 31.12.2008 PASSED U/S 143(3) RESULTING IN UNSUSTAINABLE HUGE D EMAND. LD. AR FURTHER CONTENDED THAT THE AUTHORITIES BELOW HAVE RELIED UP ON THE FINDINGS OF THE LEARNED DGIT (E) FOR REJECTING THE APPLICATION OF T HE APPELLANT FILED U/S 10(23C) OF THE ACT, IGNORING THE DIRECTIONS OF HON 'BLE SUPREME COURT IN THE ITA NO.3317/DEL/2013 AY: 2006-07 6 ORDER DATED 2-4-2012, WHEREIN IT WAS HELD THAT THE FINDINGS OF THE ORDER OF DGIT(E) ARE RESTRICTED ONLY TO AY 2007-08. LD. AR HAS DRAWN OUR ATTENTION TOWARDS PAPER BOOK PAGE NO. 41 AND 42 OF THE ASSESS EE AND SUBMITTED THAT HONBLE SUPREME COURT, WHILE UPHOLDING THE ORDER OF REJECTION ON THE GROUND OF LIMITATION AND MERITS FOR AY 2007-08 MADE IT CLEAR THAT THE ORDER PASSED BY THEIR LORDSHIPS IN THAT CASE WILL NOT PRECLUDE THE ASSESSEE FROM MAKING AN APPLICATION FOR APPROVAL U/S 10(23C)(VI) OR SECTION 11 OF THE ACT IN FUTURE AND IF SUCH AN APPLICATION IS MADE, THEN THE COMPETENT AUT HORITY WILL DECIDE THE MATTER WITHOUT BEING INFLUENCED BY THE ORDER OF THE HONBL E APEX COURT. LD. AR FURTHER CONTENDED THAT THE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE CONTENTION OF THE AO WHICH WAS PURELY INFLUENCED BY THE ORDER OF THE DGIT(E) AND WAS AGAINST THE DIRECTIONS OF THE HONBLE SUPREME COURT AND, THEREFORE, THE IMPUGNED ORDER IS CONTRARY TO THE DIRECTIONS OF THE HONBLE SUPREME COURT LIABLE TO BE QUASHED. 7. LD. AR FURTHER SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE CONTENTION OF LD. DGIT(E) THAT THE ACTIVITIES OF TH E ASSESSEE SOCIETY ARE FOUND TO BE FOR EARNING PROFIT AND NOT FOR CHARITABLE PURPOS ES AND IS NOT JUSTIFIED IN DECLINING THE EXEMPTIONS U/S 11 & 12 OF THE INCOME TAX ACT, SPECIALLY WHEN REGISTRATION U/S 12A OF THE ACT IS STILL IN FORCE A ND AVAILABLE FOR THE ASSESSEE AND WHICH HAS NOT CANCELLED AS ON THE DATE OF THE ASSES SMENT. LD. AR HAS ALSO DRAWN OUR ATTENTION TOWARDS FIRST PARAGRAPH AT PAGE 6 OF THE IMPUGNED ORDER AND ITA NO.3317/DEL/2013 AY: 2006-07 7 SUBMITTED THAT WHILE THE CIT(A) HAS HELD THAT ACTIO N OF THE AO IN ALLOWING EXEMPTION U/S 11 AND 12 OF THE ACT IS BEYOND THE JU RISDICTION EXERCISED BY HIM DURING THE ASSESSMENT PROCEEDING, THEN THE FIRST AP PELLATE AUTHORITY WAS NOT CORRECT IN UPHOLDING THE ORDER OF THE AO WHICH WAS LIABLE TO BE QUASHED AS NOT LEGAL AND CONTRARY TO THE FINDINGS OF THE CIT(A). 8. TO SUPPORT ABOVE CONTENTIONS, LD. AR HAS PLACED RELIANCE ON THE DECISION OF ITAT ALLAHABAD BENCH IN THE CASE OF SUNBEAM ENGLIS H SCHOOL SOCIETY VS 129 ITD 299 (ALLAHABAD TRIBUNAL), DECISION OF ITAT JAIPUR BENCH IN THE CASE OF ARYA SANSTHA VS CIT (2012) 013 ITR 0491 ( TRIBUNAL JAIPUR) AND DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DE LHI IN THE CASE OF DIT(E) V MOTI BAGH MUTUAL AID EDUCATION 298 ITR 019 0 (DEL), DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS BHAR AT KALYAN PRATISHTHAN (2002) 257 ITR 0609 (DEL), DIT(E) VS KESHAV SOCIAL AND CHARITABLE FOUNDATION (2005) 278 ITR 152 (DEL), DECISION OF HO NBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS INSTITUTE OF BANKING (2 003) 264 ITR 110 (BOMBAY) AND DECISION OF ITAT DELHI IN THE CASE OF ARYAN ED UCATIONAL SOCIETY VS CIT 281 ITR AT 0072 (ITAT DELHI). 9. APROPOS GROUND NO. 1, 2 AND 3, LD. DR, SUPPORTIN G THE ASSESSMENT ORDER, SUBMITTED THAT THE AO WAS QUITE JUSTIFIED IN TAKING COGNIZANCE OF THE ORDER OF THE DGIT(E) AND HOLDING THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE NOT GENUINE AND ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE ITA NO.3317/DEL/2013 AY: 2006-07 8 TRUST. LD. DR FURTHER CONTENDED THAT THE AO ALSO N OTED THAT THE ASSESSEE SOCIETY WAS FOUND TO HAVE VIOLATED THE PROVISIONS O F SECTION 12AA(3) OF THE ACT AND THAT THE PROPOSAL FOR WITHDRAWAL OF REGISTRATIO N U/S 12A OF THE ACT HAS ALREADY BEEN SENT TO DIT(E) ON 2.12.2008 AND THEREF ORE THE PROCEEDING FOR CANCELLATION OF REGISTRATION WAS STARTED BY DIT(E) BY ISSUING NOTICE DATED 4.12.2008. LD. DR FURTHER CONTENDED THAT, UNDER TH ESE FACTS AND CIRCUMSTANCES THE AO RIGHTLY PROCEEDED TO ASSESS THE INCOME OF TH E ASSESSEE WITHOUT ALLOWING THE BENEFIT OF EXEMPTION AS PROVIDED IN SECTION 11 AND 12 OF THE ACT AND THE ASSESSEE SOCIETY WAS RIGHTLY ASSESSED IN THE STATUS OF ASSOCIATION OF PERSONS (AOP). 10. LD. AR ALSO PLACED REJOINDER TO ABOVE SUBMISS IONS OF THE DEPARTMENT AND SUBMITTED COPIES OF THE DECISION OF ITAT A BENCH IN ITA NO. 1647/DEL/2009 DATED 17.6.2011 AND IN ITA NO. 1607/DEL/2013 FOR AY 2009-10 DATED 18.7.2014 AND SUBMITTED THAT THE REGISTRATION US/ 1 2AA OF THE ACT WAS GRANTED TO THE ASSESSEE SOCIETY VIDE ORDER DATED 3.9.2004 W HICH WAS CANCELLED BY THE DIT(E) AND THE SAME WAS SET ASIDE BY THE TRIBUNAL W ITH A FURTHER DIRECTION TO DECIDE THE MATTER AFRESH. LD. AR VEHEMENTLY CONTEN DED THAT THE DEPARTMENT HAS NOT PASSED ANY ORDER IN THE SECOND ROUND OF PROCEED INGS AS PER DIRECTIONS OF THE TRIBUNAL ORDER DATED 17.06.2011 (SUPRA) AND THE ORD ER GRANTING REGISTRATION U/S 12AA R/W SECTION 12AA(1)(V) OF THE ACT DATED 3.9.20 04 W.E.F. 1.4.2003 IS IN FORCE TILL DATE. LD. AR HAS FURTHER DRAWN OUR ATTE NTION TOWARDS ORDER OF THE ITA NO.3317/DEL/2013 AY: 2006-07 9 ITAT A BENCH DELHI FOR AY 2009-10 DATED 18.7.2014 (SUPRA) AND SUBMITTED THAT THE TRIBUNAL HAS HELD THAT AS THE REGISTRATION OF ASSESSEE U/S 12A OF THE ACT IS IN FORCE, THEREFORE, THE ORDER OF THE AO, AS CON FIRMED BY THE CIT(A) FOR THAT ASSESSMENT YEAR VIZ. 2009-10, IS NOT SUSTAINABLE AN D THE MATTER HAS BEEN RESTORED TO THE FILE OF AO FOR FRESH ADJUDICATION I N ACCORDANCE WITH LAW AND THE AO HAS BEEN DIRECTED TO COMPUTE THE INCOME TO THE A SSESSEE SOCIETY BY GRANTING EXEMPTION U/S 11 OF THE ACT. 11. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS OF BOTH THE SIDES AND PERUSAL OF THE RELEVANT MATERIAL PLACED BEFORE US, INTER ALIA ASSESSMENT ORDER, IMPUGNED ORDER OF THE CIT(A), ORDER OF THE TRIBUNAL DATED 17.6.2011 (SUPRA) AND RECENT ORDER OF THE TRIBUNAL FOR AY 2009-10 DA TED 18.7.2014 (SUPRA), AT THE VERY OUTSET, WE NOTE THAT THE ORDER OF CANCELLATION OF REGISTRATION U/S 12A OF THE ACT HAS BEEN SET ASIDE BY THE TRIBUNAL AND THE ISSU E WAS RESTORED TO THE FILE OF DIT(E) FOR A FRESH ADJUDICATION BUT WE ARE UNABLE T O SEE OR NOTE ANY FACT THAT REGISTRATION DATED 4.9.2003 GRANTED FOR THE ASSESSE E W.E.F. 1.4.2003 HAS BEEN CANCELLED OR WITHDRAWN BY THE DEPARTMENT BY FOLLOWI NG PROCEDURE U/S 12AA(3) OF THE ACT. ON A SPECIFIC QUERY FROM THE BENCH, LD. DR FAIRLY ACCEPTED THAT TO THE BEST OF HIS KNOWLEDGE, REGISTRATION GRANTED TO THE ASSESSSEE U/S 12AA OF THE ACT HAS NOT BEEN CANCELLED OR WITHDRAWN DURING THE SECOND ROUND OF PROCEEDINGS BEFORE THE DIT(E). IN THIS SITUATION, WE CAN SAFELY PRESUME THAT THE REGISTRATION U/S 12A R/W 12AA(1) OF THE ACT DATED 3 .9.2004 W.E.F. 1.4.2003 IS ITA NO.3317/DEL/2013 AY: 2006-07 10 STILL IN FORCE AND THE DIT(E) HAS NOT TAKEN ANY ACT ION IN PURSUANCE TO THE ORDER OF THE TRIBUNAL DATED 17.6.2011 (SUPRA). 12. FROM THE FIRST AND SECOND PARA AT PAGE 6 OF THE IMPUGNED ORDER, WE NOTE THAT THE CIT(A) HAS HELD THAT THE ACTION OF THE AO IN NOT ALLOWING THE EXEMPTION U/S 11 AND 12 OF THE ACT IS BEYOND THE JURISDICTION EXERCISED BY HIM DURING THE ASSESSMENT PROCEEDINGS. THE RELEVANT OBSERVATIONS AND CONCLUSION OF THE CIT(A) IN THESE OPERATIVE PARAGRAPHS READ AS UNDER: - THE APPELLANT SUBMITTED THAT THE ORDER OF THE A.O WAS PRIMA FACIE, INFLUENCED BY THE ORDER OF DGIT(E) AS STATED IN THE SUBMISSION. FURTHER, IT IS ALSO SUBMITTED THAT ORDER OF DGIT U/S 10(23C)(VI) CANNOT BE THE BASIS OF CANCELL ATION OF CERTIFICATE REG. U/S-12A AS DECIDED BY THE HON'BLE ALLAHABAD HC IN THE CASE OF SUNBEAM ENGLISH SCHOOL SOCIETY VS CIT,129 ITD 299(ALL) WHEREIN IT WAS HELD 'THAT THE LEARNED CCIT, ALLAHABAD HAD REJECTED THE APPLICATION FOR GRANT OF EXEMPTION UNDER SECTION 10(23C)(VI) OF THE ACT. IN THE PRESEN T CASE, AS WE HAVE ALREADY POINTED OUT THAT THE ASSESSEE WAS ENGA GED IN THE ACTIVITIES OF PROVIDING THE EDUCATION SINCE ITS INC EPTION AND THE SAID ACTIVITY COMES UNDER THE PURVIEW OF CHARITABLE ACTIVITIES AS PER THE PROVISIONS CONTAINED IN SECTION 2( 15) O F THE ACT. SECONDLY THE REJECTION OF APPLICATION UNDER SECTION 10(23C)(VI) OF THE ACT CANNOT BE A REASON TO CANCEL THE REGISTRATION UNDER SECTION 12AA(3) OF THE ACT. ON GOING THROUGH THE DETAILED SUBMISSION, I CONSIDE RED THAT THE FINDINGS OF THE DGIT(E) WERE FOLLOWED BY T HE AO DURING THE ASSESSMENT PROCEEDINGS WITHOUT FURTHER E XAMINING THE SAME. THE ASSESSING OFFICER IS DUTY BOUND TO MA KE PROPER EXAMINATION AND INQUIRY IN SUCH MATTERS. THE CONCLU SIONS DRAWN BY THE DGIT WERE IN THE NATURE OF CREATION OF DOUBTS WHICH ALSO COULD NOT BE PROPERLY ESTABLISHED AND TH E AO JUST FOLLOWED THOSE REMARKS. THE SALARY REGISTERS WERE A LSO IMPOUNDED FOR FURTHER VERIFICATION AND EXAMINATION BY FORENSIC DEPARTMENT, WHEREAS THE SAID ACTION WAS AL SO INCOMPLETE AND WITHOUT THE REPORT FROM EXPERT, THE APPELLANT ITA NO.3317/DEL/2013 AY: 2006-07 11 WAS HELD AS GUILTY. THE ASSESSMENT PROCEEDINGS ARE INDEPENDENT PROCEEDINGS WHERE THE FINDINGS ARE TO B E OF THE ASSESSING OFFICER. THEREFORE I CONSIDER THE ALLEGAT IONS OF THE DGIT SHOULD BE EXCLUDED FROM THE ASSESSMENT ORDER A ND THE EFFECT OF WITHDRAWAL OF EXEMPTION U/S 11 & 12 WAS P REMATURE, AS THE AR PLACE BEFORE ME THAT THE ORDER OF CANCELL ATION OF REGISTRATION DATED 16-03-2009 (AFTER THE DATE OF AS STT ORDER 31.12.2008) HAS ALSO BEEN SET ASIDE BY THE HON'BLE ITAT, NEW DELHI VIDE THEIR ORDER DATED 17-06-2011. THEREFORE THE ACTION OF THE AO NOT ALLOWING THE EXEMPTION U/S 11 & 12 IS BEYOND THE JURISDICTION EXERCISED BY HIM DURING THE ASSESS MENT PROCEEDINGS. 13. AT THIS STAGE, WE ALSO RESPECTFULLY TAKE COGNIZ ANCE OF THE DECISION OF ITAT A BENCH DELHI FOR AY 2009-10 DATED 18.7.2014 (SUPRA) WHEREIN IT HAS BEEN HELD THUS:- 5. THE ORDER GRANTING REGISTRATION U/S 12A READ WI TH SECTION 12AA(1)(V) OF THE ACT ON 3RD SEPTEMBER,2004 W.E.F. 01/04/2003 IS IN FORCE. THE DIT(E)S HAS NOT TAKEN ANY ACTION AFTER THE ORDER OF THE TRIBUNAL ITAT IN ITA NO. 164 7(DEL) OF 2009 DATED 17/06/2011. AS THE REGISTRATION OF THE A SSESSEE U/S 12A IS IN FORCE, WE SET ASIDE THE ORDER OF THE AO A S CONFIRMED BY THE LD. CIT(A) AND RESTORE THE MATTER TO THEN FI LE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. AS T HE REGISTRATION U/S 12A IS IN FORCE, THE AO IS DIRECTE D TO COMPUTE THE INCOME BY GRANTING EXEMPTION U/S 11 TO THE ASSE SSEE. 14. WE FURTHER TAKE NOTE OF THE ORDER OF THE SUPREM E COURT AVAILABLE AT PAGES 41 AND 42 OF THE PAPER BOOK OF THE ASSESSEE WHEREIN THE ORDER OF THE DGIT(E) REJECTING THE APPLICATION OF THE ASSESSEE FILED U/S 10(23C)(VI) OF THE ACT HAS BEEN UPHELD FOR AY 2007-08 BUT THEIR LORDSHIPS HAVE ALSO MADE IT CLEAR THAT THE ORDER PASSED BY HONBLE APEX COURT IN THAT CASE WIL L NOT PRECLUDE THE ASSESSEE FROM MAKING AN APPLICATION FOR APPROVAL U/S 10(23C) (VI) OR SECTION 11 OF THE ACT IN FUTURE AND IF SUCH AN APPLICATION IS MADE, T HEN THE COMPETENT AUTHORITY ITA NO.3317/DEL/2013 AY: 2006-07 12 WILL DECIDE THE MATTER WITHOUT BEING INFLUENCED BY THIS ORDER OF HONBLE APEX COURT. IN THIS SITUATION, WE RESPECTFULLY NOTE THA T EVEN THE HONBLE SUPREME COURT HAS ALLOWED THE ASSESSEE TO FILE APPLICATION U/S 10(23C)(VI) OR SECTION 11 OF THE ACT AND THE REVENUE AUTHORITIES HAVE BEEN DI RECTED TO DECIDE THE SAME WITHOUT BEING INFLUENCED BY THE ORDER OF SUPREME CO URT FOR AY 2007-08. 15. UNDER THE ABOVE NOTED FACTS AND CIRCUMSTANCES O F THE PRESENT CASE, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) ERRED IN UPH OLDING THE CONTENTION OF THE AO IN THE ASSESSMENT ORDER WHICH WERE INFLUENCED BY THE ORDER OF DGIT(E). AT THE COST OF REPETITION, WE ARE INCLINED TO HOLD THA T SINCE THE REGISTRATION GRANTED FOR THE ASSESSEE ON 3.9.2004 W.E.F. 1.4.2003 IS STI LL IN FORCE AND THE DIT(E) HAS NOT TAKEN ANY ACTION IN PURSUANCE TO THE ORDER OF T HE TRIBUNAL DATED 17.6.2011 (SUPRA), THEN IT IS AN OBVIOUS FACT THAT THE REGIST RATION OF THE ASSESSEE SOCIETY U/S 12A OF THE ACT IS IN FORCE, THEREFORE, THE CLAIM OF THE ASSESSEE FOR GRANT OF EXEMPTION U/S 11 OF THE ACT CANNOT BE REJECTED MERE LY ON THE BASIS OF ORDER OF THE DGIT(E) WHICH REJECTED APPLICATION FOR REGISTRA TION U/S 10(23C)(VI) OF THE ACT. AT THE SAME TIME, WE ALSO CONCLUDE THAT THE E XEMPTION U/S 11 AND 12 OF THE ACT CANNOT BE DENIED ONLY ON THE BASIS OF REJEC TION OF APPLICATION OF THE ASSESSEE FILED U/S 10(23C) OF THE ACT. BEFORE WE P ART, WE MAY POINT OUT THAT THE CIT(A) IN THE IMPUGNED ORDER HAS CLEARLY HELD THAT ACTION OF THE AO IN ALLOWING EXEMPTION U/S 11 AND 12 OF THE ACT IS BEYOND JURISD ICTION EXERCISED BY HIM DURING THE ASSESSMENT PROCEEDINGS AND AT THE SAME T IME, THE CIT(A) HAS UPHELD ITA NO.3317/DEL/2013 AY: 2006-07 13 THE ACTION OF THE AO WHICH REJECTED THE CLAIM OF TH E ASSESSEE FOR EXEMPTION U/S 11 OF THE ACT, THIS CONTRADICTORY OBSERVATION AND C ONCLUSION OF FIRST APPELLATE AUTHORITY IS NOT PERMISSIBLE AND SUSTAINABLE. THER EFORE, ACTION OF THE AUTHORITIES BELOW IS NOT SUSTAINABLE. ACCORDINGLY, GROUNDS NO. 1, 2 AND 3 OF THE ASSESSEE ARE HEREBY ALLOWED. GROUND NO.4 16. APROPOS GROUND NO.4, LD. AR SUBMITTED THAT THE AO WRONGLY HELD THAT THE CORPUS DONATIONS AND MISCELLANEOUS DONATIONS AR E BOGUS AND THE AO WAS NOT JUSTIFIED IN MAKING ADDITION U/S 68 OF THE ACT ON THE ASSUMPTION THAT EITHER THE SAID DONORS ARE NOT EXISTENT OR THEIR ADDRESSES ARE NOT AVAILABLE. LD. AR HAS FURTHER DRAWN OUR ATTENTION TOWARDS REMAND REPORT O F THE AO DATED 4.3.2013 AVAILABLE AT PAPER BOOK PAGE 89-90 AND SUBMITTED TH AT THE AO IN THE REMAND REPORT, SUBMITTED TO THE CIT(A), HAS ACCEPTED THAT THE ASSESSEE RECEIVED CORPUS DONATIONS OF RS.71 LAKH AND PETTY DONATION OF RS.4, 05,000 AND THE ASSESSEE HAD FURNISHED THE INCOME TAX RETURN ACKNOWLEDGMENT, COP Y OF ANNUAL ACCOUNTS AND BANK STATEMENT WITH MEMORANDUM OF ASSOCIATION OF AL L THE DONORS COMPANIES AND OBTAINED CONFIRMATIONS OF ALL THE PETTY DONATIO NS WITH THEIR IDENTIFICATIONS. THE AR VEHEMENTLY CONTENDED THAT THE AO IS OBJECTIN G TO THE GENUINENESS OF THE CORPUS DONATIONS AS WELL AS PETTY DONATIONS ON WRONG PREMISE THAT THE ASSESSEE COULD NOT PRODUCE IN PERSON THE DONOR PART IES DURING THE ASSESSMENT PROCEEDINGS, THEREFORE, ENTIRE AMOUNT OF DONATION W AS WRONGLY TREATED AS ITA NO.3317/DEL/2013 AY: 2006-07 14 UNEXPLAINED CASH CREDIT WITHOUT ANY SOUND FOOTING. LD. AR FURTHER CONTENDED THAT THE AO HAS NOT RAISED ANY DOUBT OR HAS NOT BRO UGHT OUT ANY ADVERSE MATERIAL OR FACT TO SUPPORT HIS CONTENTION THAT THE DONORS ARE EITHER NOT AVAILABLE AT THE GIVEN ADDRESS OR DO NOT HAVE THE CAPACITY TO MAKE SUCH DONATIONS AND THE VERACITY OF THE CORPUS DONATION REMAINED UNVERIFIED . 17. LD. AR FURTHER POINTED OUT THAT DESPITE REMAND REPORT OF THE AO DATED 4.3.2013 (SUPRA), THE CIT(A) DID NOT PAY ANY ATTENT ION TOWARDS PARAGRAPH 4 OF THE REMAND REPORT AND SIMPLY AFTER REPRODUCING THE OBSERVATIONS OF THE AO HAS HELD THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY AR E NOT GENUINE AND THE REGISTRATION GRANTED TO THE ASSESSEE U/S 12A OF THE ACT SHALL BE CANCELLED IN DUE COURSE OF TIME AND, THEREFORE, DECISION TAKEN BY TH E AO IS CORRECT. LD. AR VEHEMENTLY CONTENDED THAT THE APPROACH OF THE CIT(A ) WAS NOT JUDICIOUS AND THE CIT(A) SIMPLY UPHELD THE CONCLUSION OF THE AO W ITHOUT ADDRESSING TO THE CONTENTION OF THE AO AND SUBMISSIONS OF THE ASSESSE E AND EVEN THE COMMENTS OF THE AO IN THE REMAND REPORT WHICH ALSO SUPPORT THE CASE OF THE ASSESSEE. 18. PLACING RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF DIT(E) VS BHARAT KALYAN PRA TISTHAN (SUPRA) AND DECISION IN THE CASE OF DIT(E) VS KESHAV SOCIAL AND CHARITABLE FOUNDATION (SUPRA) AND DECISION OF THE ITAT, JAIPUR IN THE CAS E OF ARYA SANSTHA VS CIT (SUPRA) AND SUBMITTED THAT WHEN THE ASSESSEE HAD FURNISHED LIST OF DONORS, THEIR INCOME TAX RETURN ACKNOWLEDGEMENT, COPIES OF THEIR ANNUAL ACCOUNT AND ITA NO.3317/DEL/2013 AY: 2006-07 15 BANK STATEMENT ALONG WITH MEMORANDUM OF ASSOCIATION OF ALL THE DONOR COMPANIES AND ALSO OBTAINED CONFIRMATION OF ALL TH E PETTY DONATION WITH THEIR IDENTIFICATION, THEN THE AO CANNOT MAKE ADDITION U/ S 68 OF THE ACT, TREATING THE AMOUNT OF CORPUS DONATIONS AND PETTY DONATION AS CA SH CREDITS. THE AR FURTHER POINTED OUT THAT THE AO OR THE CIT(A) HAS NOT BROUG HT OUT ANY ADVERSE MATERIAL OR FACT THAT EITHER THE CORPUS DONATIONS OR PETTY D ONATIONS WERE INTRODUCED BY THE ASSESSEE SOCIETY TO ROTATE ITS UNEXPLAINED INCO ME AND THE SAME WAS NOT SPENT FOR CHARITABLE PURPOSES, THEN THE ADDITION U/S 68 O F THE ACT IS NOT SUSTAINABLE. 19. REPLYING TO THE ABOVE, LD. DR SUBMITTED THAT WH EN THE AO HAD DRAWN A CONCLUSION THAT THE ACTIVITIES OF THE ASSESSEE ARE FOUND TO BE FOR PROFIT AND NOT FOR CHARITABLE PURPOSE, THEN THE ASSESSEE CANNOT BE ALLOWED BENEFIT OF EXEMPTION U/S 11 AND 12 OF THE ACT AND THEREFORE, THE AO WAS QUITE JUSTIFIED IN TREATING THE CORPUS DONATIONS AS UNEXPLAINED CASH CREDIT. THE D R RELYING ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE C ASE OF KANHAYA LAL PUNJ CHARITABLE TRUST VS DIT(E) (2008) 297 ITR 6 (D EL) SUBMITTED THAT ONCE EXEMPTION U/S 11 AND 12 OF THE ACT IS WITHDRAWN, AL L RECEIPTS OF THE TRUST OR SOCIETY EITHER BY WAY OF VOLUNTARY CONTRIBUTION OR INCOME DERIVED FROM IT WOULD BE IN THE NORMAL COURSE AND IS CHARGEABLE TO TAX. LD. DR FURTHER SUBMITTED THAT WHEN THE DEPARTMENT WAS IN THE PROCE SS OF CANCELLING REGISTRATION GRANTED TO THE ASSESSEE U/S 12A OF THE ACT, THEN TH E EXEMPTION U/S 11 AND 12 OF THE ACT WAS RIGHTLY DENIED AND, THEREFORE, CORPUS A ND PETTY DONATIONS WHICH ITA NO.3317/DEL/2013 AY: 2006-07 16 COULD INTO BE SUBSTANTIATED BY THE ASSESSEE ARE RIG HTLY HELD TO BE THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND T HE ADDITION MADE U/S 68 OF THE ACT IS SUSTAINABLE. 20. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, AT THE VERY OUTSET, WE NOTE THAT IN THE RECENT DECISION OF THE TRIBUNAL IN APPELLANT SOCIETYS CASE FOR AY 2009-10 DATED 18.7.2014 (SUPRA), IT HAS BEEN HEL D THAT AS THE REGISTRATION OF THE ASSESSEE U/S 12A OF THE ACT IS IN FORCE, THEREF ORE, THE AO WAS DIRECTED TO COMPUTE THE INCOME BY GRANTING EXEMPTION U/S 11 OF THE ACT TO THE ASSESSEE. WE MAY ALSO POINT OUT THAT DURING THE ARGUMENTS, LD . DR COULD NOT SATISFY US THAT THE REGISTRATION GRANTED TO THE ASSESSEE ON 3. 9.2004 W.E.F. 1.4.2003 EITHER STANDS CANCELLED OR IS NOT IN FORCE. IN THIS SITUA TION, WE CAN SAFELY PRESUME THAT THE REGISTRATION GRANTED TO THE ASSESSEE U/S 12A OF THE ACT IS IN FORCE AND, THEREFORE, IT IS NOT OPEN TO THE REVENUE AUTHORITIE S TO DISCARD OR DISMISS THE CLAIM OF THE ASSESSEE MERELY BECAUSE THE DEPARTMENT IS IN THE PROCESS OF CANCELLING REGISTRATION GRANTED TO THE ASSESSEE U/S 12A OF THE ACT SINCE LAST 3-4 YEARS I.E. AFTER ORDER OF THE TRIBUNAL DATED 17.6.2 011 (SUPRA). 21. WE FURTHER TAKE COGNIZANCE OF THE REMAND REPORT DATED 4.3.13 SUBMITTED BY THE AO TO THE CIT(A) DURING FIRST APPELLATE PROC EEDINGS WHEREIN ON THE ISSUE OF CORPUS AND PETTY DONATIONS, THE AO HAS ACCEPTED SOME VITAL FACTS SUPPORTING THE CLAIM OF THE ASSESSEE WHICH READ AS UNDER:- ITA NO.3317/DEL/2013 AY: 2006-07 17 CORPUS DONATIONS: THE ASSESSES OBJECTION REGARDING CONTENTS QUOTED FROM THE LETTER DATED 04.08.2008; I T IS CORRECT THAT THE ASSESSEE HAD STATED THAT IT HAD ALSO RECEI VED CORPUS DONATIONS ALONG WITH THE INCOME FROM OPERATIONS OF AYURVEDIC COLLEGE BY WAY OF FEES, HOSPITAL DEVELOPMENT FEES. HOSTEL FEES, AND RECEIPTS FROM THE PATIENTS IN THE HOSPITAL. FURTHER THE ASSESSEE HAS STATED THAT CORPUS DONATIO N OF RS . 71,00,000/- AND RS 4,05.000/- (PETTY DONATIONS) WERE RECEIVED AND ASSE SSEE HAD FURNISHED THE INCOME TAX RETURN ACKNOWLEDGMENT, COP Y OF ANNUAL ACCOUNTS AND BANK STATEMENTS WITH MEMORANDUM OF ASSOCIATION OF ALL THE DONOR COMPANIES AND OBTAINED CONFIRMATIONS OF ALL THE PETTY DONATIONS WITH THEIR IDENTIFICATIONS BUT THE ASSESSEE COULD NOT PRODUCE IN PERSON THE DONOR PARTIES DURING THE ASSESSMENT PROCEEDINGS THEREFORE THE AO MADE THE ADDITIONS CONSIDERING THE AMOUNT AS UNEXPLAINED CASH CREDIT WHICH IS BASED ON SOUND FOO TING. THE ASSESSEE RELIED ON THE JUDICIAL PRONOUNCEMENTS IN S UPPORT OF ITS CONTENTION THAT THE ASSESSEE SOCIETY NEED NOT P RODUCE THE PERSONA WHEREAS ASSESSEE HAS FILED THE NECESSARY PA PERS AS STATED ABOVE IN THE PAPER BOOK ALSO. THE ASSESSEE S SUBMISSION IS NOT TENABLE. 22. IN VIEW OF ABOVE FACTS SUBMITTED BY THE AO TO THE C IT(A), WE NOTE THAT THE ASSESSEE SOCIETY HAD FURNISHED INCOME TAX RETUR N, ACKNOWLEDGEMENT, COPIES OF THE ANNUAL ACCOUNT AND BANK STATEMENTS OF THE DONOR S ALONG WITH MEMORANDUM OF ASSOCIATION OF ALL THE CORPUS DONOR COMPANIES AND O BTAINED CONFIRMATIONS OF ALL PETTY DONATIONS WITH THEIR IDENTIFICATION BEFORE TH E AO. THE AO ALSO NOTED THAT THE ASSESSEE COULD NOT PRODUCE CORPUS DONORS DURING THE ASSESSMENT PROCEEDINGS AND THEN AO MADE THE ADDITIONS CONSIDERING THE AMOU NT AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. FURTHER, FROM THE IMPUGN ED ORDER, WE NOTE THAT THE CIT(A) AFTER REPRODUCING THE RELEVANT PART OF THE A SSESSMENT ORDER MERELY NOTED THAT IT IS ESTABLISHED THAT THE ACTIVITIES OF THE A SSESSEE SOCIETY ARE NOT GENUINE AND ITA NO.3317/DEL/2013 AY: 2006-07 18 ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OB JECTS OF THE TRUST AND THE ASSESSEE IS FOUND TO HAVE VIOLATED THE PROVISIONS O F SECTION 12AA(3) OF THE ACT AND THE REGISTRATION GRANTED TO THE ASSESSEE U/S 12 A OF THE ACT SHALL BE CANCELLED IN DUE COURSE OF TIME, THEREFORE, CONCLUSION OF THE AO IS CORRECT AND THE CIT(A) UPHELD THE ADDITION. SINCE WHILE DEALING WITH GROU ND NO. 1, 2 AND 3 OF THE ASSESSEE IN THE EARLIER PART OF THIS ORDER, WE HAVE HELD THAT THE CIT(A) AT PAGE 6 NOTED THAT THE ACTION OF THE AO NOT ALLOWING EXEMPT ION U/S 11 AND 12 OF THE ACT IS BEYOND JURISDICTION, THEN ON THE SAME FACT, IT W AS NOT OPEN TO THE CIT(A) TO UPHOLD THE ACTION OF THE AO WHICH DENIED THE BENEFI T OF EXEMPTION U/S 11 AND 12 OF THE ACT TO THE ASSESSEE. THEREFORE, THE CONCLUS ION OF THE CIT(A) WAS NOT ONLY SELF-CONTRADICTORY BUT ALSO PERVERSE AS PER FACTUAL MATRIX OF THE CASE, HENCE, WE SET ASIDE AND DISMISS THE SAME. 23. TURNING TO THE ISSUE OF GENUINENESS AND ALLOWAB ILITY OF CORPUS AND PETTY DONATIONS, AT THE VERY OUTSET, WE NOTE THAT THERE W AS A CONFUSION ABOUT THE QUANTUM OF THE CORPUS AND PETTY DONATIONS, IT WAS C LARIFIED BY THE AO HIMSELF IN ITS REMAND REPORT PARA 4, AS REPRODUCED HEREINABOVE , WHEREIN THE AO EXPLAINED THAT THE CORPUS DONATION WAS OF RS. 71 LAKH AND AMO UNT OF PETTY DONATION WAS RS.4,05,000 DURING THE YEAR UNDER CONSIDERATION. A T THIS JUNCTURE, WE RESPECTFULLY TAKE GUIDANCE FROM THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF DIT VS BHARAT KALYAN PRATISTHAN (SUPRA) WHEREIN IT HAS BEEN HELD THAT WHERE THE CIT(A) RECORDED A CATE GORICAL FINDING THAT THE ITA NO.3317/DEL/2013 AY: 2006-07 19 TRUST HAD FURNISHED ALL DETAILS REQUIRED BY THE AO AND HAVING DONE SO, IT WAS NOT FOR THE TRUST TO PRODUCE THE DONORS BEFORE THE AO AS DESIRED BY HIM. ON THIS ISSUE, WE FURTHER TAKE COGNIZANCE OF THE DECIS ION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF DIT(E) VS KESHAV SOCIAL AND CHARITABLE FOUNDATION (SUPRA) WHEREIN THEIR LORDSHIPS HELD THA T WHEN THE ASSESSEE HAD FURNISHED THE LIST OF DONORS AND THE AO DISALLOWED THE CLAIM STATING THAT THE ASSESSEE COULD NOT FURNISH DETAILS REGARDING THE DO NORS AND THAT IT WAS JUST A WAY OF INTRODUCING UNACCOUNTED MONEY INTO THE BOOKS OF THE ASSESSEE TRUST AND THUS, THE AO TREATED THE SAME AMOUNT AS CASH CREDIT MAKIN G ADDITION U/S 68 OF THE ACT. IN THIS CASE, DISMISSING THE APPEAL OF THE REV ENUE, HONBLE HIGH COURT HELD THAT TO OBTAIN THE BENEFIT OF EXEMPTION US/ 11 OF T HE ACT, THE ASSESSEE WAS REQUIRED TO SHOW THAT THE DONATIONS WERE VOLUNTARY AND THE ASSESSEE HAD NOT ONLY DISCLOSED ITS DONATIONS BUT HAD ALSO SUBMITTED A LIST OF DONORS. IN THIS CASE, SPEAKING FOR THE HONBLE JURISDICTIONAL HIGH COURT, THEIR LORDSHIPS ALSO HELD THAT EVEN A COMPLETE LIST OF DONORS HAD NOT BEEN FILED O R THE DONORS HAD NOT BEEN PRODUCED DID NOT NECESSARILY LEAD TO THE INFERENCE THAT THE ASSESSEE HAD TRIED TO INTRODUCE ITS UNACCOUNTED MONEY BY WAY OF DONATION RECEIPTS. 24. AS PER FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE AND THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER AS WELL AS IN THE RE MAND REPORT SUBMITTED TO THE CIT(A), IT IS CLEAR THAT THE ASSESSEE TRUST SUBMITT ED ALL THE REQUIRED DETAILS BEFORE THE AUTHORITIES BELOW BUT THE AO OBJECTED TO THE CL AIM OF ASSESSEE ONLY ON THIS ITA NO.3317/DEL/2013 AY: 2006-07 20 PREMISE THAT THE ASSESSEE COULD NOT PRODUCE IN PERS ON THE DONOR PARTIES DURING THE ASSESSMENT PROCEEDINGS. ON SIMILAR LIENS, THE CIT(A) UPHELD THE ACTION OF THE AO WITHOUT ADDRESSING TO THE EXPLANATION AND CO NTENTIONS OF THE ASSESSEE AND REMAND REPORT OF THE AO DATED 4.3.2013, MERELY OBSERVING THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE NOT GENUINE AND REGISTRATION GRANTED TO THE ASSESSEE U/S 12A OF THE ACT SHALL BE CANCELLED IN F UTURE IN DUE COURSE OF TIME. THIS IS NOT JUDICIOUS AND PROPER APPROACH FOR A QUA SI-JUDICIAL AUTHORITY WHO ARE DUTY BOUND TO ADDRESS AND ADJUDICATE ALL THE ISSUES AND GROUNDS RAISED BY THE ASSESSEE. THE AO AND THE CIT(A) ARE NOT ADJUDICATO RS BUT THEY ARE ALSO INVESTIGATORS AND EXAMINERS. 25. IN VIEW OF ABOVE, WE REACH TO A CONCLUSION THAT GROUND NO. 4 OF THE ASSESSEE IS SQUARELY COVERED IN FAVOUR OF THE ASSES SEE BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE C ASE OF DIT VS BHARAT KALYAN PRATISTHAN (SUPRA) AND DIT(E) VS KESHAV SOCIAL AND CHARITABLE FOUNDATION (SUPRA) AND THEREFORE, WE SET ASIDE THE ORDERS OF T HE AUTHORITIES BELOW AND DIRECTED THE AO TO DELETE THE IMPUGNED ADDITION MAD E U/S 68 OF THE ACT. GROUND NO. 5 26. APROPOS GROUND NO. 5, LD. AR SUBMITTED THAT THE CIT-A ERRED WHILE UPHOLDING THE CONTENTION OF THE DDIT(E) REGARDING E XCESS SALARIES BEING ALLEGEDLY CHARGED WITH THE INTENT OF SIPHONING OFF FUNDS OF THE APPELLANT. THE LD. AR FURTHER CONTENDED THAT SUBSEQUENT TO THE SCRUTIN Y OF SALARY REGISTERS OF ITA NO.3317/DEL/2013 AY: 2006-07 21 SOCIETY BY THE DGIT(E), THE APPELLANT GOT THE INFOR MATION ABOUT THE EMBEZZLEMENT AND FRAUD OF RS. 1,59,9421-, WHICH MIG HT HAVE TAKEN PLACE AND IT IS NOT AN ACT OF EITHER MANAGEMENT OR TRUSTEES WITH THE INTENT OF SIPHONING OFF FUNDS. LD. AR FURTHER SUBMITTED THAT THE FINDING OF DGIT(E) WERE ALSO NOT CONCLUSIVE BEING DECIDED WITHOUT THE EXPERT ADVICE AND THE EMBEZZLEMENT AND FRAUD SO STATED DOES NOT IN ANY WAY ESTABLISH THE I NTENT OF SIPHONING OF FUNDS BY THE ASSESSEE SOCIETY OR ITS OFFICE BEARERS OR ITS M ANAGEMENT OFFICERS. THEREFORE, THE CONCLUSION OF THE AO DESERVES TO BE QUASHED. T HE AR FURTHER POINTED THAT THE REVENUE AUTHORITIES HAVE NOT BROUGHT OUT ANY EV IDENCE TO SHOW THAT THE EMBEZZLEMENT OR FRAUD HAVE TAKEN PLACE BY THE OFFIC ERS OR MANAGERS OF THE ASSESSEE SOCIETY OR WITH THEIR HELP AND THEREFORE, THE CONCLUSION OF THE AO ON THIS ISSUE IS NOT SUSTAINABLE. 27. LD. AR FURTHER POINTED OUT THAT THE MANAGEMENT OF THE TRUST HAS TAKEN A SERIOUS ACTION AGAINST THE CULPRIT EMPLOYEES FOR TH EIR ACT OF FRAUD, THEREFORE IT WAS WRONGLY CONCLUDED THAT THE MONEY HAS BEEN SIPHO NED OFF BY THE TRUSTEES/MEMBERS OF THE APPELLANT SOCIETY. 28. LD. DR REPLIED THAT WHEN THE AO OBSERVED THAT T HERE WAS EXCESS SALARY CLAIM OF RS.1,59,942 WHICH WAS DEBITED TO THE EXPEN DITURE ACCOUNT, THEN THERE WAS A SERIOUS INFIRMITY IN THE DETAILS OF SALARY PA YMENT SUBMITTED BY THE ASSSESSE TRUST BEFORE THE AO AND IT WAS FOUND BY TH E ASSESSING OFFICER IN CERTAIN CASES THAT THE SALARY WAS CHARGED AND PAID EVEN AFT ER THE RESIGNATION DATE OF THE ITA NO.3317/DEL/2013 AY: 2006-07 22 RESPECTIVE ALLEGED EMPLOYEE, THEREFORE, THE AO WAS CORRECT IN HOLDING THAT THERE WAS SIPHONING OF FUNDS BY THE TRUSTEES/MEMBERS OF T HE ASSESSEE SOCIETY AND, THEREFORE, OBSERVATIONS AND CONCLUSION OF THE AO ON THIS POINT ARE SUSTAINABLE. 29. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE NOTE THAT THE ASSESSEE SOCIETY SUBMITTED BEFORE THE AO THAT THE EMBEZZLEME NT WAS PLANNED ON THE EMPLOYEES WHO HAD LEFT THE ORGANISATION AND THE SAL ARIES WERE POCKETED BY THE PERSON IN CHARGE OF THE DAY-TODAY AFFAIRS OF THE SO CIETY. THE AO DID NOT ACCEPT THE EXPLANATION AND SUBMISSION OF THE ASSESSEE TRUS T BY HOLDING THAT THE ASSESSEE SOCIETY IN ITS RETURN OF INCOME HAS NOT MADE ANY CL AIM OF LOSS ON ACCOUNT OF EMBEZZLEMENT, THEREFORE, THE EMBEZZLEMENT THEORY SU BMITTED BY THE ASSESSEE WAS AN AFTERTHOUGHT EXPLANATION WHICH CANNOT BE ACC EPTED. THE AO CONCLUDED THAT THE SALARY PAYMENTS HAVE BEEN MADE IN CASH AND FOUND TO BE BOGUS WHICH INDICATE THAT THE SIPHONING OFF OF THE TRUST FUND H AVE TAKEN PLACE. 30. DURING THE FIRST APPELLATE PROCEEDINGS BEFORE T HE CIT(A), THE ASSESSEE SOCIETY SUBMITTED DETAILED SUBMISSIONS REITERATING AND ELABORATING THE EXPLANATION AND SUBMISSIONS MADE BEFORE THE AO AND IT WAS ALSO SUBMITTED THAT THE ABOVE ALLEGED SALARY PAYMENTS WERE MADE BY THE PERSON-IN-CHARGE, WHICH CAME TO THE KNOWLEDGE OF THE MANAGEMENT ONLY DURING THE PROCEEDINGS U/S 10(23C)(VI) OF THE ACT. IT WAS ALSO SUBMITTED, ON BEHALF OF THE ASSESSEE, THAT THE MANAGEMENT HAS INITIATED INQUIRY AGAINST THE EM PLOYEES RESPONSIBLE FOR EMBEZZLEMENT DONE BY THEM DURING THE RELEVANT PERIO D, AMOUNTING TO ITA NO.3317/DEL/2013 AY: 2006-07 23 RS.2,35,942. IN PRELIMINARY INVESTIGATION HE WAS FO UND GUILTY, THEREFORE, MANAGEMENT HAS TERMINATED THE SERVICES OF THE SAID EMPLOYEES WITH IMMEDIATE EFFECT WITH FORCEFUL AND SINCERE EFFORTS TO RECOVER THE SAME AMOUNT FROM THE ACTUAL CULPRITS. LD. AR FURTHER SUBMITTED THAT HAD THE INTENTION OF THE MANAGEMENT OF THE SOCIETY BEEN FRAUDULENT, IT WOUL D HAVE CERTAINLY NEITHER PROVIDED THE AFFIDAVITS OF THE EMPLOYEES NOR THESE PERSONS WOULD HAVE BEEN PRODUCED FOR CROSS EXAMINATION BEFORE THE DGIT(E). LD. AR FURTHER SUBMITTED THAT THE DGIT IMPOUNDED THE SALARY REGISTER AND SEN T IT TO CENTRAL FORENSIC SCIENCE LABORATORY (CFSL), NEW DELHI AND DESPITE TH E FACT THAT THE CFSL EXPERTS EXPRESSED THEIR INABILITY TO GIVE REPORT BY 30.11.08, THE DGIT(E) PROCEEDED TO ADJUDICATE THE APPLICATION OF THE ASSE SSEE FOR GRANT OF REGISTRATION U/S 10(23C) OF THE ACT WITHOUT ASSISTANCE OF EXPERT REPORT AND HENCE SERIOUS CRIMINAL ALLEGATION OF EMBEZZLEMENT AGAINST MEMBERS AND TRUSTEES CANNOT BE LABELLED MERELY ON THE SURMISES AND CONJECTURES. T HE LD. AR STRENUOUSLY CONTENDED THAT IT WAS NOT OPEN FOR THE AO TO BORROW AND APPLY ABOVE BASELESS CONCLUSION OF THE DGIT(E) FOR MAKING IMPUGNED DISAL LOWANCE ABOUT A PART OF THE SALARY PAYMENT CLAIM OF THE ASSESSEE. 31. LD. DR REPLIED THAT THE CASH PAYMENT OF SALARY TO THE EMPLOYEES HAVE LEFT THE ORGANISATION MUCH EARLIER IS A SERIOUS ACT WHIC H RESULTED INTO EMBEZZLEMENT AND SIPHONING OF THE FUNDS BY THE MEMBERS/OFFICERS AND TRUSTEES OF THE SOCIETY AS THE SALARY PAYMENTS HAVE BEEN MADE IN CASH FOR T HE PERIOD AFTER RESIGNATION ITA NO.3317/DEL/2013 AY: 2006-07 24 OF RESPECTIVE EMPLOYEES AND HAVE BEEN FOUND TO BE B OGUS BY DGIT(E) AND THERE WAS NO ACTION BY THE ASSESSEE SOCIETY THEN IT MAY B E INFERRED THAT THE ASSESSEE SOCIETY IS RESPONSIBLE FOR SIPHONING OF FUNDS. 32. LD. AR PLACED REJOINDER TO THE ABOVE SUBMISSION S OF THE DEPARTMENT AND SUBMITTED THAT EVEN THE AO IN THE OPERATIVE PARA AT PAGE 7 HAS HELD THAT THE SALARY PAYMENT HAS BEEN MADE IN CASH AND HAVE BEEN FOUND TO BE BOGUS WHICH INDICATED THAT SIPHONING OF THE TRUST FUND HAS TAKE N PLACE BUT THERE IS NO FINDING THAT THE SIPHONING OF FUNDS WAS DONE BY THE TRUST O R TRUSTEES OR MANAGEMENT OF THE SOCIETY. LD. AR, PLACING RELIANCE ON THE DECIS ION OF JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF DIT(E) VS MOTI BAGH M UTUAL AID EDUCATION (SUPRA), SUBMITTED THAT EVEN IF THERE WERE MINOR CO NTRADICTIONS OR DEVIATIONS IN THE ACCOUNTS OF THE ASSESSEE THAT, BY ITSELF, DID N OT SUBSTANTIATE THE ALLEGATION THAT THE ASSESSEE DID NOT EXIST SOLELY FOR EDUCATIO NAL PURPOSES OR THAT IT EXISTED MAINLY FOR A PROFIT MOTIVE. LD. AR FURTHER CONTEND ED THAT THE WHEN THE ASSESSEE SOCIETY SUBMITTED COMPLETE DETAILS WITH REGARD TO P AYMENT OF SALARY INCLUDING SALARY REGISTERS, COPY OF APPOINTMENT AND AFFIDAVIT S OF THE EMPLOYEES WITH THEIR PERSONAL PRESENCE BEFORE THE DGIT(E), THEN THE MANA GEMENT OR TRUSTEES OF THE ASSESSEE SOCIETY CANNOT BE HELD LIABLE FOR EXCESS P AYMENT OF SALARY WHICH CAME TO THE KNOWLEDGE OF THE MANAGEMENT DURING PROCEEDIN GS BEFORE THE DGIT(E). THE AR FURTHER POINTED OUT THAT THE MANAGEMENT OF T HE TRUST HAS TAKEN SERIOUS ACTION AGAINST THE EMPLOYEES FOR MISAPPROPRIATION O F FUNDS, THEREFORE, IT CAN NOT ITA NO.3317/DEL/2013 AY: 2006-07 25 BE CONCLUDED THAT THE MONEY HAS BEEN SIPHONED OFF B Y THE TRUSTEES/MEMBERS, SPECIALLY WHEN THE EMBEZZLEMENT OR FRAUD DOES NOT E STABLISH INTENTION OF SIPHONING OF FUNDS BY THE TRUSTEES OR THE MANAGEMEN T. 33. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE NOTE THAT IN OPERATIVE PARA 2 AT PAGE 7 OF ASSESSMENT ORDER, THE AO HAS TA KEN COGNIZANCE OF THE CONCLUSION OF THE DGIT(E) AND HAS HELD THAT THE SAL ARY PAYMENTS HAVE BEEN MADE IN CASH AND HAVE BEEN FOUND BOGUS WHICH INDICA TES THAT SIPHONING OF THE TRUST FUND HAS TAKEN PLACE. FROM THE IMPUGNED ORDE R AT PAGE 17-18, WE NOTE THAT PRIOR TO RECORDING THE FINDINGS, THE CIT(A) RE PRODUCED THE OBSERVATIONS AND CONCLUSION OF THE AO ON THIS ISSUE AND AT THE LAST UPHELD THE SAME BY SIMPLY HOLDING THAT THE AO IS CORRECT AND THE ADDITION MAD E BY THE AO FOR SIPHONING OF FUNDS IS HEREBY CONFIRMED BUT THE CIT(A) HAS ALSO N OT CONCLUDED THAT THERE WAS A SIPHONING OFF OF FUNDS BY THE MEMBERS AND TRUSTE ES OF THE ASSESSEE SOCIETY. AT THIS POINT, WE ALSO FIND THAT THE CONCLUSION OF THE DGIT(E), WHICH WAS NOTICED BY THE AO, WAS BASED ON HIS CONCLUSION WITH OUT WAITING FOR THE REPORT OF THE CFSL AND WITHOUT EXPERTS ADVICE. HENCE, WE ARE INCLINED TO HOLD THAT ALTHOUGH THE AUTHORITIES BELOW HAVE HELD THAT THERE WAS SIPHONING OF FUNDS FROM THE FUNDS OF THE SOCIETY BUT THERE IS NO FINDING OR CONCLUSION THAT THE SIPHONING OF FUNDS WAS MADE BY THE MEMBERS AND TRUSTEES OF TH E SOCIETY. WE MAY ALSO POINT OUT THAT WHEN THE ACT OF EMBEZZLEMENT WAS NOT ICED BY THE MANAGEMENT DURING THE PROCEEDINGS BEFORE THE DGIT(E), THEN THE MANAGEMENT PROCEEDED TO ITA NO.3317/DEL/2013 AY: 2006-07 26 TAKE ACTION AGAINST THE RESPONSIBLE EMPLOYEE AND TH E MANAGEMENT ALSO SUBMITTED DOCUMENTS PERTAINING TO APPOINTMENT, RESI GNATION AND AFFIDAVITS OF THE ALLEGED EMPLOYEES AND ALSO SOME OF THEM WERE AL SO PRODUCED BEFORE THE DGIT(E), THEREFORE, ACT OF SIPHONING OF FUNDS CANNO T BE ATTRIBUTED TO THE MANAGEMENT OR TRUSTEES OF THE SOCIETY. 34. AT THIS JUNCTURE, WE RESPECTFULLY TAKE COGNIZAN CE OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF D IT(E) VS MOTI BAGH MUTUAL AID EDUCATION (SUPRA) WHEREIN THEIR LORDSHIPS HAVE HELD THUS:- WE VIEW THAT EVEN IF THERE ARE MINOR CONTRADICTION S OR DEVIATIONS IN THE ACCOUNTS OF THE ASSESSEE, THAT BY ITSELF CANNOT SUBSTANTIATE THE ALLEGATION THAT THE ASSESSEE DOES NOT EXIST SOLELY FOR EDUCATIONAL PURPOSES OR THAT IT EXISTS P ARTLY FOR A PROFIT MOTIVE. THE FACT THAT THE ASSESSEE HAD BEEN GRANTED EXEMPTION UNDER SECTION 10(22) OF THE ACT SINCE 196 0 AND EVEN SUBSEQUENT TO THE ASSESSMENT YEAR IN QUESTION IS A FACTOR THAT CANNOT BE EASILY OVERLOOKED. IT IS NOT POSSIBLE TO ACCEPT THE VIEW, IN THE ABSENCE OF ANY COGENT REASON, THAT FOR ONE PARTICULAR YEAR MERELY ON THE BASIS OF SOME DISCREP ANCY IN THE ACCOUNTS OF THE ASSESSEE, ITS OBJECTS CHANGED FROM EDUCATIONAL PURPOSES TO MAKING A PROFIT. WE MAY ALSO NOTE A DECISION OF THIS COURT REPORTED IN CIT V. LAGAN KALA UPVAN (2003) 259 ITR 489 WHEREIN -A DIVISION BENCH ACCEPTED THE VIEW OF THE STATUTORY AUTHORITIES UNDER THE ACT TO THE EFFECT THAT A CLAIM OF DEPRECI ATION IN RESPECT OF CERTAIN ASSETS OF THE ASSESSEE DOES NOT PER SE SHOW THE BUSINESS/PROFIT MOTIVE OF THE ASSESSEE OR DISEN TITLE IT FROM EXEMPTION UNDER SECTION 10(22) OF THE ACT. SIMILAR LY, IN THIS CASE, EVEN IF IT IS ASSUMED THAT THERE ARE SOME DIS CREPANCIES IN THE ACCOUNTS OF THE ASSESSEE, THAT WOULD NOT PER SE LEAD TO ANY CONCLUSION REGARDING A CHANGE IN THE OBJECT OF THE ASSESSEE. ITA NO.3317/DEL/2013 AY: 2006-07 27 35. ON THE BASIS OF FOREGOING DISCUSSION AND IN THE LIGHT OF FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE INCLINED TO HOLD THAT THERE WAS NO SIPHONING OF FUNDS BY THE MANAGEMENT OR TRUSTEES OF THE ASSESSEE SOCIETY, THEREFORE, THE MANAGEMENT OR TRUSTEES OF THE ASSESS EE SOCIETY CANNOT BE HELD LIABLE FOR THE ACT OF SIPHONING OF FUNDS. ACCORDIN GLY, CONCLUSION OF THE AUTHORITIES BELOW IS QUASHED UP TO THIS EXTENT ONLY AND HENCE GROUND NO. 5 OF THE APPELLANT IS ALLOWED AS INDICATED ABOVE. GROUND NO. 6 36. APROPOS GROUND NO. 6, LD AR SUBMITTED THAT THE AO WRONGLY HELD THAT IN ABSENCE OF MAINTENANCE OF LOG BOOK, IT IS NOT POSSI BLE TO VERIFY THE USE OF HIRED VEHICLES BY THE ASSESSEE SOCIETY AND THE ASSESSEE F AILED TO SUBMIT ANY EVIDENCE TO PROVE THAT VEHICLES WERE NOT BEING USED BY DR. S UNIL MITTAL FOR HIS PERSONAL PURPOSE. LD. AR VEHEMENTLY CONTENDED THAT MERELY O N THE BASIS OF BASELESS ALLEGATION OF SIPHONING OF FUNDS OF THE TRUST, THE CLAIM OF EXPENDITURE OF VEHICLE HIRING CHARGES CANNOT BE HELD AS NOT GENUINE. LD. AR ALSO SUBMITTED THAT THE REVENUE AUTHORITIES OUGHT TO HAVE CONSIDERED THAT I F THE ASSESSEE SOCIETY HAD HIRED VEHICLES FROM THE MARKET, IT WOULD HAVE COST HIGHER THAN THE ACTUAL EXPENSES WHICH HAS BEEN INCURRED BY THE ASSESSEE SO CIETY. LD. AR SUBMITTED THAT THE EXPENSES CLAIMED BY THE ASSESSEE SOCIETY A RE GENUINE AS THE VEHICLES WERE USED ONLY FOR THE PURPOSE OF THE DAY TO DAY WO RK OF THE SOCIETY AND DR. SUNIL MITTAL DID NOT USE THE VEHICLE FOR HIS PERSON AL PURPOSE. LD. AR FURTHER ITA NO.3317/DEL/2013 AY: 2006-07 28 SUBMITTED THAT THE REVENUE AUTHORITIES SHOULD HAVE VERIFIED WHETHER THE VEHICLE WAS USED FOR THE PURPOSE OF ACTIVITIES OF THE ASSES SEE SOCIETY OR NOT. 37. LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ONUS WAS ON THE ASSESSEE TO SHOW THAT THE CLAIM OF VEHICLE HIRING EXPENSES IS GENUINE AND ON FAILURE TO SUBSTANTIATE THIS FACT, T HE AO WAS RIGHT IN REJECTING THE CLAIM OF THE ASSESSEE AND THE CIT(A) WAS ALSO JUSTI FIED IN UPHOLDING THE CONCLUSION OF THE AO. 38. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE ARE OF THE CONSIDERED VIEW THAT FOR VERIFICATION AND ALLOWABILITY OF CLAI M OF EXPENSE OF VEHICLE CHARGES, THE PRIME ISSUE TO BE ADJUDICATED IS THAT WHETHER THE VEHICLE WAS USED FOR THE PURPOSE AND ACTIVITIES OF THE ASSESSEE SOCI ETY AND THE PAYMENT MADE BY THE ASSESSEE SOCIETY WAS IN ACCORDANCE WITH THE PRE VAILING FAIR MARKET PRICE OF THE VEHICLE HIRING CHARGES. ALTHOUGH THE REVENUE A UTHORITIES CAN ALSO VERIFY THE FACT OF PERSONAL USE OF THE VEHICLE OWNER BUT THIS IS A SECONDARY ISSUE WHICH CANNOT BE A BASIS FOR REJECTING THE ENTIRE CLAIM OF THE ASSESSEE SOCIETY. 39. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT T HE REVENUE AUTHORITIES HAD NOT ADJUDICATED THIS ISSUE AS PER SECTION 37 AND OT HER RELEVANT PROVISIONS OF THE ACT AND, THEREFORE, THEIR FINDINGS ARE SET ASIDE AN D THE ISSUE IS RESTORED TO THE FILE OF THE AO TO ADJUDICATE THE SAME IN ACCORDANCE WITH THE PROVISIONS OF THE LAW AND KEEPING IN VIEW OUR AFORESAID OBSERVATIONS AND AFTER AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE AND WITHOUT BEING PREJUDICED OR ITA NO.3317/DEL/2013 AY: 2006-07 29 INFLUENCED BY THE EARLIER ORDERS ON THIS ISSUE. BE FORE WE PART WITH THE ISSUE, WE MAY ALSO MAKE IT CLEAR THAT THE EXPENSES CLAIMED IN REGARD TO VEHICLE HIRING CHARGES ARE ALLOWABLE IF IT IS FOUND THAT THE HIRED VEHICLE WAS USED FOR THE PURPOSE OF ACTIVITIES OF THE SOCIETY AND INCURRED E XPENSES IS IN ACCORDANCE WITH PREVAILING FAIR MARKET PRICE OF THE SERVICE AND NO PART OF CLAIM CAN BE REJECTED WITHOUT BRING OUT ANY FACT THAT ANY PART OF SERVICE WAS USED OTHERWISE BEYOND THE ACTIVITIES OF THE APPELLANT TRUST. ACCORDINGLY , GROUND NO. 6 OF THE ASSESSEE TRUST IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPO SES WITH THE AFORESAID DIRECTIONS TO THE AO. GROUND NO. 7 40. APROPOS GROUND NO.7, WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON R ECORD. LD. AR CONTENDED THAT THE CIT-A ERRED IN UPHOLDING THE ORDER OF AO THAT T HE EXPENDITURE SHOWN ON ACCOUNT OF CONSTRUCTION OF COLLEGE AND HOSPITAL BUI LDING AND HOSTEL EXPENSES ARE INFLATED AND THE THAT TRUST FUNDS HAVE BEEN SIP HONED OFF. LD. AR FURTHER CONTENDED THAT WHEREAS ALL THE EXPENDITURES ARE PRO PERLY VOUCHED AND FIND PLACE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE SOCIETY WH ICH WERE DULY PRODUCED FOR VERIFICATION DURING THE REMAND PROCEEDINGS BEFORE T HE ASSESSING OFFICER, THEN THE CONCLUSION OF THE AO IS NOT SUSTAINABLE. 41. REPLYING TO THE ABOVE LD. DR SUPPORTED THE ACTI ON OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO RIGHTLY HELD THAT T HE TRUST HAD PASSED BOGUS ITA NO.3317/DEL/2013 AY: 2006-07 30 ENTRIES OF RS.85,25,300 OUT OF RS.2,62,79,888 ON AC COUNT OF CONSTRUCTION EXPENSES AND RS.9,51,664 ON ACCOUNT OF HOSTEL EXPEN SES BECAUSE TO SUPPORT THESE CLAIMS, RELEVANT CASH MEMOS, BILLS OR VOUCHER S HAD NOT BEEN PROVIDED BY THE ASSESSEE TRUST. THE DR FURTHER POINTED OUT THA T THE ASSESSEE TRUST COULD NOT DEMOLISH THE ALLEGATIONS OF THE AO THAT THE PURCHAS E OF TIMBER, TILES AND IRON AS SHOWN IN A VERY SHABBY MANNER AND WERE NOT HAVING C ORRECT UNITS AS PER ITEMS APPEARING IN SL. NO. 139, 140 AND 141 AND LABOR PAY MENT APPEARING AT SL. NO. 38 & 145. LD. DR FURTHER SUBMITTED THAT THE AO WAS QU ITE JUSTIFIED IN HOLDING THAT ALL THE HOSTEL EXPENSES ARE BEING PAID IN CASH AND THE SAME HAVE VARIED FROM MONTH TO MONTH AND FOUND TO BE ERRATIC IN NATURE AN D THEREFORE, THE SAME ARE NOT ALLOWABLE. 42. LD. AR ALSO SUBMITTED REJOINDER TO THE ABOVE AL LEGATION OF THE DEPARTMENT AND SUBMITTED THAT CASH MEMOS AND VOUCHERS OF CONST RUCTION EXPENSES AND HOSTEL EXPENSES WERE VERY WELL AVAILABLE BEFORE THE AO AND ASSESSEE TRUST HAD NOT BEEN GIVEN ANY OPPORTUNITY TO EXPLAIN THE ALLEG ED VAGUE AND INCORRECT NARRATIONS AS POINTED OUT BY THE AO AND THE AO COMP LETED THE ASSESSMENT PROCEEDINGS IN A HASTY MANNER KEEPING HIS OFFICE OP EN ON A HOLIDAY IN THE NAME OF SHORTAGE OF TIME. THE AR STRENUOUSLY CONTENDED THAT IN THIS SITUATION, HOW THE AO CAN JUSTIFY PROPER CONSIDERATION OF ALL VOUC HERS AND RECORDS WITH DETAILS OF CONSTRUCTION AND HOSTEL EXPENSES WHICH WAS VERY WELL VERIFIABLE FROM THE VOUCHERS PLACED BEFORE HIM. LD. AR VEHEMENTLY CONT ENDED THAT THE AO AS WELL ITA NO.3317/DEL/2013 AY: 2006-07 31 AS THE CIT(A) IGNORED THIS MATERIAL FACT THAT THE H OSPITAL, COLLEGE AND THE HOSTEL OF THE SOCIETY IS SITUATED IN RURAL AREA WHICH IS 1 0 TO 11 KM AWAY FROM DISTRICT HEADQUARTER ALIGARH AND ALL THE NEEDS OF STUDENTS A RE TO BE FULFILLED BY NEARBY OR OTHER ADJACENT VILLAGES, THEREFORE, IT WAS NOT PRAC TICALLY POSSIBLE TO GET PRINTED BILLS FOR THE SUPPLY OF MILK, VEGETABLES ETC. WITH VOUCHERS FOR SATISFACTION OF THE AO. THE AR ALSO CONTENDED THAT IN SPITE OF THIS PR ACTICAL PROBLEM, THE ASSESSEE TRUST MAINTAINED DETAILS OF ALL THE EXPENSES ALONG WITH INTERNAL VOUCHERS AND CASH MEMOS. LD. DR FURTHER POINTED OUT THAT THE VA RIATION IN MONTH TO MONTH HOSTEL EXPENSES WAS CAUSED DUE TO GET TOGETHER AND FUNCTIONS OF THE STUDENTS WHICH WERE ORGANISED IN THE MONTH OF OCTOBER AND JA NUARY, THUS, THE VARIATION IN MONTH TO MONTH HOSTEL EXPENSES OCCURRED DUE TO G ENUINE REASONS WHICH CANNOT BE DOUBTED ON THE BASIS OF SURMISES AND CONJ ECTURES. 43. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMIS SIONS AND CAREFUL PERUSAL OF THE RELEVANT MATERIAL PLACED BEFORE US, AT THE O UTSET, FROM THE ASSESSMENT ORDER, WE NOTE THAT THE AO HAS NOTED THAT THE CASH PAYMENTS IN RESPECT OF CONSTRUCTION ARE NOT FOUND SUPPORTED WITH CASH MEMO S AND BILLS AND THE ASSESSEE EVEN DOES NOT FOLLOW SYSTEM OF PREPARING I NTERNAL CASH PAYMENT VOUCHERS, THEREFORE, TRUST FUNDS HAVE SIPHONED OFF AND THE CASH PAYMENTS ARE EITHER BOGUS OR GROSSLY INFLATED. ON THE ISSUE OF INFLATED HOSTEL EXPENSES, THE AO HAS HELD THAT THE ASSESSEE DOES NOT HAVE ANY SUP PORTING CASH MEMO OR EVEN INTERNAL CASH VOUCHERS IN RESPECT OF THESE PAYMENTS , THEREFORE, GENUINENESS OF ITA NO.3317/DEL/2013 AY: 2006-07 32 THESE PAYMENTS COULD NOT BE VERIFIED. WE ALSO NOTE THAT THE AO ALSO NOTICED THAT NO EXPLANATION WAS SUBMITTED BY THE ASSESSEE W ITH REGARD TO THIS ERRATIC BEHAVIOUR OF HOSTEL EXPENDITURE AS THERE WAS A VARI ATION IN THE EXPENDITURE REPORTED IN MONTH WISE DETAILS OF EXPENDITURE. 44. DURING THE FIRST APPELLATE PROCEEDINGS, THE CIT (A) SIMPLY UPHELD THE CONCLUSION OF THE AO WITHOUT ADDRESSING AND ADJUDIC ATING THE CONTENTION OF THE AO AS WELL AS EXPLANATION OF THE ASSESSEE AND THE F IRST APPELLATE AUTHORITY JUMPED TO A CONCLUSION THAT THE ADDITION MADE BY TH E AO FOR SIPHONING OFF TRUST FUND OF RS. 85,25,300 OUT OF CLAIMED EXPENDITURE OF RS.2,62,79,888 ON ACCOUNT OF CONSTRUCTION AND RS.9,51,664/- ON ACCOUNT OF HO STEL EXPENSES IS SUSTAINABLE AND THE SAME WAS CONFIRMED BY THE CIT(A). 45. FIRST OF ALL, WE MAY POINTED OUT THAT THE AO DO ES NOT RAISE ANY DOUBT ABOUT THE ENTIRE EXPENDITURE INCURRED ON CONSTRUCTI ON OF COLLEGE AND HOSPITAL BUILDING AND THE AO RAISED DOUBT ONLY ABOUT UNSUPPO RTED PAYMENT OF RS.85,25,300 OUT OF TOTAL EXPENDITURE OF RS.2,62,79 ,888. MEANING THEREBY THE AO WAS SATISFIED ABOUT THE CORRECTNESS OF THE REMAI NING PAYMENT WHICH WAS NOT OBJECTED NEITHER DURING THE ASSESSMENT PROCEEDINGS NOR DURING THE FIRST APPELLATE PROCEEDINGS. FROM THE NARRATION OF THE ASSESSMENT ORDER, WE NOTE THAT THE AO HAS POINTED OUT CERTAIN DEFECTS IN ANNEXURE A SUBMI TTED BY THE ASSESSEE AND AFTER THAT THE AO NOTED THAT NO EXPLANATION WAS FIL ED BY THE ASSESSEE WHEN CONFRONTED WITH THE DETAILS OF UNSUPPORTED CASH PAY MENTS BUT THIS NOTING DOES ITA NO.3317/DEL/2013 AY: 2006-07 33 NOT SHOW THAT THE AO PROVIDED DUE OPPORTUNITY OF HE ARING TO THE ASSESSEE TO EXPLAIN DISCREPANCIES AND INCONSISTENCIES NOTED AND OBJECTED BY THE AO. 46. DURING THE FIRST APPELLATE PROCEEDINGS, THE CIT (A) HAS SIMPLY REPRODUCED THE DETAILED CONTENTIONS OF THE AO RUNNING INTO 3-4 PAGES AND AFTER REPRODUCING CONCLUSION OF THE AO, THE CIT(A) HAS CONFIRMED THE OBSERVATIONS AND ADDITIONS MADE BY THE AO ON ACCOUNT OF CONSTRUCTION AND HOSTE L EXPENSES WITHOUT ADDRESSING, EVALUATING AND ADJUDICATING THE CONTENT IONS OF THE AO IN THE LIGHT OF SUBMISSIONS AND EXPLANATION OF THE ASSESSEE. IN TH IS SITUATION, IT CAN SAFELY BE PRESUMED THAT THE AO DID NOT AFFORD OPPORTUNITY TO THE ASSESSEE TO EXPLAIN DISCREPANCIES AND INCONSISTENCIES NOTED BY HIM DURI NG THE ASSESSMENT PROCEEDINGS. WE MAY ALSO NOTE THAT DURING FIRST AP PELLATE PROCEEDINGS, THE CIT(A) HAS REPRODUCED AND MENTIONED DETAILED SUBMIS SION OF THE ASSESSEE ON THIS ISSUE BUT CONFIRMED THE ALLEGATION AND UPHELD BOTH THE ADDITIONS MADE BY THE AO, WITHOUT ADDRESSING AND ADJUDICATING THE EXP LANATION AND SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF PARA 6 AT PAGE 2 OF RE MAND REPORT OF THE AO DATED 04.03.2013. HENCE, WE FIND IT APPROPRIATE TO RESTO RE BOTH THE ISSUES TO THE FILE OF THE AO FOR PROPER VERIFICATION AND EXAMINATION. THEREFORE THE ISSUES OF ALLOWABILITY OF EXPENSES ON CONSTRUCTION OF HOSPIT AL AND HOSTEL BUILDING OF RS. 85,25,300 AND HOSTEL EXPENSES OF RS. 9,51,664 ARE R ESTORED TO THE FILE OF AO WITH A DIRECTION THAT THE AO SHALL ADJUDICATE BOTH THE ISSUES AFRESH, AFTER CONSIDERING SUBMISSIONS AND EXPLANATION OF THE ASSE SSEE ALONG WITH REMAND ITA NO.3317/DEL/2013 AY: 2006-07 34 REPORT OF THE AO (SUPRA), AFTER AFFORDING DUE OPPOR TUNITY OF HEARING FOR THE ASSESSEE AND WITHOUT BEING PREJUDICED AND INFLUENCE D BY THE EARLIER ORDERS ON THIS ISSUE. ACCORDINGLY, GROUND NO. 7 OF THE ASSES SEE IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES FOR LIMITED INQUIRY UP TO THE EXTENT AS INDICATED ABOVE. GROUND NO.8 47. APROPOS GROUND NO. 8, LD. AR SUBMITTED THAT THE LD. CIT-A ERRED IN UPHOLDING THE ORDER OF AO THAT THE INCOME OF THE A SSESSEE TRUST CANNOT BE COMPUTED ON THE BASIS OF SUCH INCOMPLETE, UNVERIFIA BLE AND UNRELIABLE BOOKS OF ACCOUNTS, THEREFORE, CLAIM OF DEPRECIATION IS NOT A LLOWABLE. LD. AR CONTENDED THAT THE CLAIM OF DEPRECIATION IS ALLOWABLE ON THE ASSETS, THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME U/S 11 OF THE ACT IN THE EARLIER OR PAST YEARS. 48. PLACING RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS INSTITUTE OF BANKING (2003) 264 ITR 110 (BOMBAY) , LD. AR SUBMITTED THAT THE ASSESSEE SOCIETY IS ENTITLED FOR DEPRECIATION ON ASSETS, THE COST OF WHICH HAD BEEN FULLY ALLOWED AS APPLICATION OF I NCOME U/S 11 OF THE ACT DURING THE EARLIER ASSESSMENT PROCEEDINGS HELD FOR THE PAST YEARS. LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND S UBMITTED THAT THE ASSESSEE HAS BEEN ALLOWED THE BENEFIT OF APPLICATION OF FUNDS IN THE YEAR IN WHICH ASSETS WERE PROCURED AND WRITTEN DOWN VALUE OF THESE ASSETS HAS BEEN REDUCED TO NIL, THEREFORE, CLAIM OF DEPRECIATION OF THE ASSESSEE SO CIETY IS NOT ALLOWABLE SPECIALLY ITA NO.3317/DEL/2013 AY: 2006-07 35 WHEN THERE WAS HUGE INFLATION SHOWN IN EXPENDITURE ON ACCOUNT OF CONSTRUCTION OF COLLEGE AND HOSPITAL BUILDING AND ALSO FOR HOSTE L EXPENSES. 49. AT THE VERY OUTSET, WE RESPECTFULLY TAKE COGNIZ ANCE OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS INS TITUTE OF BANKING (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE TRIBUNAL WAS RIGH T IN LAW IN DIRECTING THE AO TO ALLOW DEPRECIATION ON THE ASSETS, THE COST OF WH ICH HAD BEEN FULLY ALLOWED AS APPLICATION OF INCOME U/S 11 IN THE PAST YEAR. THE OPERATIVE PART OF THIS ORDER IS BEING REPRODUCED FOR THE SAKE OF CLARITY IN OUR CON CLUSIONS WHICH READS AS UNDER:- IT WAS HELD BY THE BOMBAY HIGH COURT THAT SECTION 11 OF THE INCOME TAX ACT MAKES PROVISION IN RESPECT OF COMPUTATION OF INCOME OF THE TRUST FROM THE PROPERL Y HELD FOR CHARITABLE OR RELIGIOUS PURPOSES AND IT ALSO PROVID ES FOR APPLICATION AND ACCUMULATION OF INCOME. ON THE OTHE R HAND, SECTION 28 OF THE INCOME TAX ACT DEALS WITH CHARGEA BILITY OF INCOME FROM PROFITS AND GAINS OF BUSINESS AND SECTI ON 29 PROVIDES THAT INCOME FROM PROFITS AND GAINS OF BUSI NESS SHALL BE COMPUTED IN ACCORDANCE WITH SECTION 30 TO SECTIO N 43C, THAT, SECTION 32(1) OF THE ACT PROVIDES FOR DEPRECI ATION IN RESPECT OF BUILDING, PLANT AND MACHINERY OWNED BY T HE ASSESSEE AND USED FOR THE BUSINESS PURPOSES. IT FUR THER PROVIDES FOR DEDUCTION SUBJECT TO SECTION 34. IN TH AT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, W AS ADVANCED ON BEHALF OF THE REVENUE, NAMELY, THAT DEPRECIATION CAN BE ALLOWED AS DEDUCTION ONLY UNDER SECTION 32 OF THE I NCOME TAX ACT AND NOT UNDER GENERAL PRINCIPLES. THE COURT REJ ECTED THIS ARGUMENT. IT WAS HELD THAT NORMAL DEPRECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING T HE REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES OR UND ER SECTION 11(1)(A) OF THE INCOME TAX ACT. THE COURT REJECTED THE ARGUMENT ON BEHALF OF THE REVENUE THAT SECTION 32 O F THE INCOME TAX ACT WAS THE ONLY SECTION GRANTING BENEFI T OF ITA NO.3317/DEL/2013 AY: 2006-07 36 DEDUCTION ON ACCOUNT OF DEPRECIATION. IT WAS HELD T HAT INCOME OF A CHARITABLE TRUST DERIVED FROM BUILDING, PLANT AND MACHINERY AND FURNITURE WAS LIABLE TO BE COMPUTED I N NORMAL COMMERCIAL MANNER ALTHOUGH THE TRUST MAY NOT BE CAR RYING ON ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF DEPR ECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CAS ES, SECTION 32 OF THE INCOME TAX ACT PROVIDING FOR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROF ESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED UNDER SECTION 11 ON COMMERCIAL PRINCIPL ES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. I N VIEW OF THE AFORESTATED JUDGMENT OF THE BOMBAY HIGH COURT, WE ANSWER QUESTION NO. 1 IN THE AFFIRMATIVE I.E., IN F AVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 50. ON CAREFUL CONSIDERATION OF ABOVE, WE NOTE THAT THE AO HAS DENIED THE CLAIM OF DEPRECIATION BY HOLDING THAT THE WHOLE EXP ENDITURE ON ACCOUNT OF ADDITION TO FIXED ASSETS HAS READY BEEN ALLOWED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES IN THE EARLIER YEARS IN EFFECT THE WRITTEN DOWN VALUE OF THE ASSETS WOULD BE ZERO. THE AO FURTHER HELD THAT THE CLAIM OF DEPRECIATION IS NOT ALLOWABLE EVEN WHEN THE INCOME OF THE ASSESSEE IS T O BE COMPUTED AS PROVIDED UNDER CHAPTER 4 AS THE BENEFIT OF SECTION 11 AND 12 HAS BEEN DENIED TO THE ASSESSEE. THE FIRST APPELLATE AUTHORITY I.E. CIT(A ) UPHELD THE CONCLUSION OF THE AO WITHOUT ANY DETAILED ADJUDICATION AND IGNORING T HE RATIO OF THE DECISION OF HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT VS INS TITUTE OF BANKING (SUPRA). 51. DURING THE FIRST APPELLATE PROCEEDINGS, LD. AR OF THE ASSESSEE SOCIETY ALSO SOUGHT ATTENTION AND CONSIDERATION OF THE CIT(A) TO THE DECISION OF ITAT BENCH H DELHI IN THE CASE OF DIT VS VISHWA JAGRITI MISS ION DATED 13.5.2011 IN ITA NO.3317/DEL/2013 AY: 2006-07 37 ITA NO. 3877/DEL/2010 FOR AY 2006-07, WE NOTE THAT THE CLAIM OF CHARITABLE INSTITUTION FOR DEPRECIATION WAS ALLOWED BY THE TRI BUNAL BY HOLDING AS UNDER:- 4. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE CIT (A) HAS GRANTED THE RELIEF TO THE ASSESSEE BY HOLDING A S UNDER :- 7. IN GROUND NO.6 THE APPELLANT HAS RAISED ISSUE REGARDING NOT ALLOWING DEDUCTION OF RS.36,53,818/- ON ACCOUNT OF DEPRECIATION ON FIXED ASSETS UTILIZED FOR CHARIT ABLE OBJECTS OF THE TRUST, IN AS MUCH AS, DEPRECIATION IS A LEGITIM ATE DEDUCTION IN COMPUTING THE INCOME OF THE TRUST. I AM ALSO OF THE OPINION THAT THE APPELLANT IS ENTITLED TO THE CLAIM OF DEPR ECIATION. THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F ESCORTS LTD VS. UNION OF INDIA 199 ITR 43, OFTEN RELIED UPO N BY THE AOS, IS IN RESPECT OF CLAIM OF DEDUCTION MADE U/S.3 5(2)(IV) AS WELL AS U/S.32 OF THE IT ACT. SECTION 35(2)(IV) SPE CIFICALLY LAYS 3 ITA NO.3877/DEL/2010 DOWN THAT WHERE THE DEDUCTIO N IS ALLOWED FOR ANY PREVIOUS YEAR U/S.35 IN RESPECT OF AN EXPENDITURE REPRESENTED WHOLLY OR PARTLY BY AN ASSE T, NO DEDUCTION SHALL BE ALLOWED UNDER CLAUSE (2) OF SUB- SECTION (1) OF SECTION 32 FOR THE SAME PREVIOUS YEAR IN RESPECT OF THAT ASSET. THUS, THE RATIO LAID DOWN IN THE ABOVE CASE IS NOT APPLICABLE IN THE CASE OF ASSESSMENTS OF INCOME DER IVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE. THE SECTIONS DEALING WITH SUCH ASSESSMENTS DO NOT SPECIFICALLY DEBAR DEDUCTION ON ACCOUNT OF DEPRECIA TION AS PROVIDED FOR U/S.35(2)(IV). THERE HAS NEVER BEEN A DISPUTE THAT IN CASE OF CHARITABLE TRUST, THE INCOME SHOULD BE C OMPUTED ON COMMERCIAL PRINCIPLES. FURTHERMORE, IN MY VIEW THE APPELLANT HAS NOT CLAIMED ANY DOUBLE DEDUCTION SO AS TO MAKE THE OBSERVATION OF 'FUNDAMENTAL AXIOM' SPELT OUT IN THE ABOVE JUDGEMENT OF SUPREME COURT APPLICABLE IN THE INSTAN T CASE. THE PROVISIONS RELATING TO COMPULSORY APPLICATION O F INCOME IS ALTOGETHER A DIFFERENT CONCEPT, AND WOULD COME INTO PLAY ONLY AFTER THE INCOME IS DETERMINED. APPLICATION OF INCO ME IS NOT COMPUTATION OF INCOME OF CHARITABLE INSTITUTION, TH EREFORE, THE QUESTION WHETHER THE DEPRECIATION IS ALLOWED OR NOT HAS NOTHING TO DO WITH THE APPLICATION OF INCOME. THE I NCOME IS ALWAYS TO BE COMPUTED ON COMMERCIAL PRINCIPLES AS P ER THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE SUBJE CTED OF COURSE, AS ALWAYS TO THE STATUTORY PROVISION. APPLI CATION OF ITA NO.3317/DEL/2013 AY: 2006-07 38 INCOME IS A CONDITION FOR ALLOWING BENEFIT OF EXEMP TION TO A CHARITABLE INSTITUTION. IT HAS NOTHING TO DO WITH C OMPUTATION OF INCOME AND IS NOT A DEDUCTION. THEREFORE, THE ARGUM ENT PROFFERED BY THE AO'S THAT THE APPELLANT IS CLAIMIN G DOUBLE DEDUCTION HAS NO SUBSTANCE AND IS TO BE REJECTED. I N COMING TO THIS CONCLUSION, RELIANCE IS PLACED ON THE JUDGMENT OF HON'BLE ITAT, DELHI BENCH, 'H', NEW DELHI IN THE CASE OF AC IT VS. TINY TOTS EDUCATION SOCIETY, IN ITA NO.3182/DEL/200 8, ASSESSMENT YEAR 2006-07 DATED 2.6.2009, AS ALSO THE FOLLOWING CASES:- (I) ITO VS.TRUSTEES OF MARATHI MISSION AND VICE VERSA (1982) 1 ITD (BOM) 539 (II) DIRECTOR OF INCOME TAX (EXEMPTION) VS.FRAMJEE CAWASJEE INSTITUTE (1993) 10 9 CTR (BOM) 464 (III) CIT VS. INSTITUTE OF BANKING PERSON NEL SELECTION (2003)264 ITR (BOM.) 110 4 ITA NO.3877/DE L/2010 7.1 THUS, IN LIGHT OF THE ABOVE DISCUSSION, THE CL AIM OF THE APPELLANT IN RESPECT OF DEPRECIATION AMOUNTING TO RS.36,53,818/- IS ALLOWED. SINCE THE RELIEF HAS BEEN GRANTED ON THE BASIS OF VARIOUS JUDGMENTS OF ITAT, DELHI BENCH, RESPECTFULLY FOLLOW ING THE SAME, WE SUSTAIN THE ORDER OF THE CIT (A) AND DISMI SS THE APPEAL OF THE REVENUE. 52. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE CLAIM OF DEPRECIATION OF THE ASSESSEE SOCIETY IS LEGALLY ALL OWABLE IN THE MANNER AS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS INSTITUTE OF BANKING (SUPRA) AND THE AO IS DIRECTED TO EXAMINE, VERIFY A ND TO ALLOW THE SAME, KEEPING IN VIEW THE LEGAL PROPOSITIONS AS REPRODUCE D HEREINABOVE. ACCORDINGLY, GROUND NO. 8 OF THE ASSESSEE IS ALLOWED. GROUND NO. 9 53. APROPOS GROUND NO. 9, THE LD. AR CONTENDED THA T THE LD CIT-A HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF THE A O, WHEREIN THE AO DENIED EXEMPTION U/S 11 AND 12 OF THE ACT TO THE ASSESSEE AND ESTIMATED THE INCOME OF ITA NO.3317/DEL/2013 AY: 2006-07 39 THE ASSESSEE SOCIETY AT RS.59,60,363/- CALCULATED A T 50% OF THE GROSS RECEIPTS OF THE SOCIETY FOR RS.L,19,20,725/-, TREATING THE ASSE SSEE IN THE STATUS OF ASSOCIATION OF PERSONS (AOP). THE LD. AR PLACING RELIANCE ON T HE DECISION OF ITAT DELHI A BENCH IN ASSESSEES OWN CASE FOR AY 2009-10 DATED 18.7.2014 (SUPRA) SUBMITTED THAT AS THE REGISTRATION GRANTED U/S 12A OF THE ACT TO THE ASSESSEE ON 3.9.2004 W.E.F. 1.4.2003 IS IN FORCE, THEREFORE, TH E AO MAY KINDLY BE DIRECTED TO COMPUTE THE INCOME BY GRANTING EXEMPTION U/S 11 OF THE ACT. REPLYING TO THE ABOVE SUBMISSIONS OF THE ASSESSEE, THE LD. DR SUPPO RTED THE ACTION OF THE AO AND SUBMITTED THAT WHEN HUGE SIPHONING OF FUNDS AND INFLATED CLAIM HAS BEEN NOTICED BY THE AO, THEN THE AO WAS RIGHT IN DENYING EXEMPTION US/ 11 OF THE ACT FOR THE ASSESSEE AND CONSEQUENTLY ESTIMATING TH E INCOME OF THE ASSESSEE AT 50% OF GROSS RECEIPTS OF THE SOCIETY FOR THE YEAR U NDER CONSIDERATION. 54. SINCE, WHILE ADJUDICATING GROUND NO. 1, 2 AND 3 OF THE ASSESSEE IN THIS APPEAL, WE HAVE HELD THAT THE ACTION OF THE AO IN D ISALLOWING EXEMPTION US/ 11 AND 12 OF THE ACT IS BEYOND JURISDICTION EXERCISED BY HIM DURING THE ASSESSMENT PROCEEDINGS BECAUSE REGISTRATION U/S 12A OF THE ACT GRANTED TO THE ASSESSEE ON 3.9.2004 W.E.F. 1.4.2003 IS STILL IN FORCE. WE MAY ALSO POINT OUT THAT THE DEPARTMENT HAS NOT CONCLUDED THE PROCEEDINGS IN PUR SUANCE TO THE ORDER OF THE ITAT A BENCH DATED 17.6.2011 (SUPRA) AND IN THIS SITUATION, AT THE COST OF REPETITION, WE ARE INCLINED TO HOLD THAT THE REGIST RATION GRANTED FOR THE ASSESSEE U/S 12A OF THE ACT ON 3.9.2004 IS IN FORCE AND, THE REFORE, EXEMPTION US/ 11 OF ITA NO.3317/DEL/2013 AY: 2006-07 40 THE ACT CANNOT BE DISALLOWED MERELY ON THE PREMISE THAT THE DEPARTMENT HAS INITIATED PROCEEDINGS U/S 12AA(3) OF THE ACT FOR CA NCELLATION OF REGISTRATION U/S 12A OF THE ACT WHICH ARE STILL PENDING WITHOUT ANY OUTCOME. WE ALSO HOLD THAT IN THIS SITUATION, THE AO WAS NOT CORRECT IN D ENYING CLAIM OF EXEMPTION U/S 11 OF THE ACT ESTIMATING THE INCOME OF THE ASSESSEE SOCIETY AT RS.59,60,363 CALCULATED AT 50% OF THE GROSS RECEIPTS OF THE SOCI ETY DURING THE YEAR UNDER CONSIDERATION. 55. HOWEVER, BEFORE WE PART WITH THE ORDER, WE MAKE IT CLEAR THAT THE AO IS EMPOWERED TO EXAMINE AND VERIFY THE CLAIM OF THE AS SESSEE U/S 11 OF THE ACT WITHIN THE AMBIT OF RELEVANT PROVISIONS OF THE ACT INCLUDING SECTION 11 OF THE ACT. THEREFORE, DISALLOWANCE OF EXEMPTION U/S 11 O F THE ACT AS WELL AS ESTIMATION OF INCOME OF THE APPELLANT SOCIETY IN TH E STATUS OF AOP AS MADE BY THE AO IS NOT SUSTAINABLE AND WE SET ASIDE THE SAME . ACCORDINGLY, GROUND NO. 9 OF THE ASSESSEE IS ALLOWED WITH THIS DIRECTION TO T HE AO THAT THE ASSESSMENT OF THE ASSESSEE TRUST FOR THE YEAR UNDER CONSIDERATION I.E. 2006-07 BE REFRAMED BY GRANTING EXEMPTION U/S 11 OF THE ACT TO THE ASSESSE SOCIETY. 56. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED ON GROUND NO. 1 TO 5 AND 9 OF THE ASSESSEE AND PARTLY ALLOWED FOR S TATISTICAL PURPOSES ON GROUND NO. 6 TO 8 OF THE ASSESSEE AS PER OUR DISCUSSION AN D CONCLUSION RECORDED HEREINABOVE. ITA NO.3317/DEL/2013 AY: 2006-07 41 ORDER PRONOUNCED IN THE OPEN COURT ON 23.3.2015. SD/- SD/- (PRAMOD KUMAR) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 23RD MARCH, 2015 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER AS STT. REGISTRAR