Dy. Commissioner of Income Tax-1, Kanpur V. M/s. Hilizer Borden Education Centre, Kanpur

ITA 378/LKW/2012

• Counselvise Citation: 37823714 RSA 2012
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 09-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Keywords: Charitable institution; Benefit of exemption
• Section: 143(3); 133A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 378/LKW/2012 ASSESSMENT YEAR: 2008 - 09 DY. CIT - 1 KANPUR V. M/S HILIZER BORDEN EDUCATION CENTRE KANPUR PAN: AAATG5414P (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. ALOK MITRA, D.R. RESPONDENT BY: SHRI. RAKESH GARG, ADVOCATE DATE OF HEARING: 23 0 7 2014 DATE OF PRONOUNCEMENT: 05 0 9 2014 O R D E R PER SUNIL KUMAR YADAV: THIS APPEA L IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON VARIOUS GROUNDS, WHICH ARE AS UNDER: - 1 . THAT THE LD COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR, HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE SOCIETY IS WORKI NG FOR CHARITABLE PURPOSES AND IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE INCOME TAX ACT, 1961, WITHOUT APPRECIATING THE FACT THAT DURING THE COURSE OF SURVEY U/S 133A DT. 03.03.2009 IN ASSESSEE'S CASE VARIOUS FINANCIAL IRREGULARITIES WERE FOUND, AS BROUGHT ON RECORD BY THE AO IN HIS ASSESSMENT ORDER TO ESTABLISH THAT ASSESSEE WAS NOT A GENUINE CHARITABLE SOCIETY. 2 . THAT THE LD COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR, HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 17,53,084/ - MADE ON ACCOUNT OF UNVERIFIABLE EXPENDITURE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS NOT ABLE TO FURNISH FULL AND SATISFACTORY EVIDENCES OF SUCH EXPENDITURE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3 . THAT THE LD COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR, HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.8 ,0 0,000 / - MADE OUT OF SALARY AND MISCELLANEOUS EXPENSES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT FURNISH EVIDENCE IN SUPPORT OF THESE EXPENSES DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 4 . THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR, DATED 23.3.2012 NEEDS TO BE QUASHED AND THE ORDER U/S 143(3) OF THE I.T. ACT. 1961 PASSED BY THE ASSESSING OFFICER DATED 31.12.2010 TO BE RESTORED. 2 . APROPOS GROUND NO.1, IT IS NOTICED THAT THE ASSESSING OFFICER HAD DENIED THE BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') ON THE BASIS OF REPORT OF THE SURVEY CONDUCTED ON 3.3.2009 IN THE VARIOUS PREMISE S OF THE ASSESSEE. DURING THE COURSE OF SURVEY, IT WAS NOTICED THAT THE ASSESSEE - SOCIETY IS RUNNING AN ENGINEERING COLLEGE IN THE NAME OF BHABHA GROUP OF INSTITUTIONS AT ANOHA, R ASOOLABAD, KANPUR DEHAT IN ASSOCIATION WITH TWO OTHER SOCIETIES, M/S NAV UDAL SHIKSHAN EVAM JAN KALYAN SEWA SAMITI AND M/S ABHINAV SHIKSHAN EVAM JAN KALYAN SEWA SAMITI. IT WAS ALSO NOTICED THAT THE MANAGEMENT OF THESE SOCIETIES ARE COMMON AND BEING RUN IN THE JOINT VENTURE IN THE NAME OF BHABHA GROUP OF INSTITUTIONS. HAVING NOTED THE DISCREPANCIES IN THE MAINTENANCE OF ACCOUNTS, EXEMPTION UNDER SECTION 11 OF THE ACT WAS DENIED. FOR THE SIMILAR REASONS, EXEMPTION WAS ALSO DENIED IN ASSESSMENT YEAR 2007 - 08, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE LD. CIT(A) AND THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO GRANT BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE ACT, HAVING CONVINCED WITH THE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : EXPLANATIONS FURNISHED BY THE ASSESSEE, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE TRIBUNAL AND THE TRIBUNAL ALSO CONFIRMED THE ORDER OF THE LD. CIT(A) GRANTING BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE ACT. THE ORDER OF THE TRIBUNAL IS PLACED ON RECORD. ONCE THE TRIBUNAL HAS GRANTED BENEFIT OF EXEMPTION TO THE ASSESSEE UNDER SECTION 11 OF THE ACT IN THE IMMEDIATELY PRECEDING YEAR ON A SIMILAR SET OF FACTS, WE FIND NO REASON TO TAKE A CONTRARY VIEW IN THIS ASSESSMENT YEAR. FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN I.T.A. NO.559/LKW/2010 AS UNDER: - 4.2 FROM THE ABOVE P ARAS OF CIT(A), WE FIND THAT THIS ISSUE WAS DECIDED BY LEARNED CIT(A) AFTER GIVING THIS FINDING THAT IN THE ENTIRE ASSESSMENT ORDER, THE ASSESSING OFFICER HAD NOT DISPUTED THE FACT THAT THE ASSESSEE SOCIETY IS IMPARTING EDUCATION. REGARDING THE ALLEGED FI NANCIAL IRREGULARITIES, IT IS NOTED BY CIT(A) THAT THE ALLEGATION OF THE ASSESSING OFFICER THAT THE ASSESSEE SOCIETY IS RUNNING ENGINEERING COLLEGE IN THE NAME OF BHABHA GROUP OF INSTITUTIONS AT ANOHA, RASOOLABAD, KANPUR DEHAT IN ASSOCIATION WITH TWO OTHER SOCIETIES NAMELY NAV UDAI SHIKSHA EVAM JAN KALYAN SEWA SAMITI AND ABHINAV SHIKSHA EVAM JAN KALYAN SEWA SAMITI WITH A COMMON MANAGEMENT AS A JOINT VENTURE IN THE NAME OF 'BHABHA GROUP OF INSTITUTIONS' IS MISPLACED. HE HAS GIVEN A FINDING THAT THE TWO SOCI ETIES AS REFERRED TO BY THE AO IN THE ASSESSMENT ORDER ARE TWO DISTINCT AND INDEPENDENT SOCIETIES IN THEMSELVES DULY REGISTERED BOTH WITH THE REGISTRAR OF THE SOCIETIES AND WITH THE COMMISSIONER OF INCOME TAX KANPUR. HE HAS ALSO GIVEN A FINDING THAT THEY HAVE THEIR OWN MEMORANDUM AND ARE SEPARATELY ASSESSED TO INCOME TAX. HE HAS ALSO GIVEN A FINDING THAT THE TWO SOCIETIES ARE INDEPENDENTLY RECOGNIZED BOTH BY UPTU AND AITCE AND HAVE DIFFERENT COURSES AND CURRICULUM. THIS FINDING IS ALSO GIVEN BY THE CIT(A) THAT EVEN THE STUDENTS AND THE FACULTY ARE NOT COMMON. THEREAFTER, HE HAS GIVEN A FINDING THAT MERELY BECAUSE SOME OF THE MEMBERS OF THE SOCIETY ARE COMMON, IT CANNOT BE CONCLUDED THAT THE SOCIETIES ARE NOT GENUINE. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : THEREAFTER, HE HAS REFERRED THE JUDGM ENT OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CITY MONTESSORI SCHOOL REPORTED IN 315 ITR 48 WHEREIN IT WAS HELD THAT IT WAS NOT OPEN FOR THE CHIEF COMMISSIONER OF INCOME TAX TO GO INTO THE CONSTITUTIONAL VALIDITY OF THE SOCIETY AS THE SOCIETY IS REGI STERED UNDER THE SOCIETIES REGISTRATION ACT 1860, WHICH IS A SELF CODE. 4.3 THE CIT(A) HAS ALSO GIVEN A FINDING THAT THESE TWO SOCIETIES ARE MAINTAINING SEPARATE BOOKS OF ACCOUNT WHICH ARE AUDITED ALSO AND RETURN OF INCOME HAS BEEN FILED BY THEM. REGARDIN G THE CONSOLIDATED BOOKS OF ACCOUNT, WHICH WERE FOUND FROM THE POSSESSION OF SHRI GAURAV, A COMMON MEMBER OF THE SOCIETIES, IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE SAME WAS FOR SHRI GAURAV TO EXPLAIN AND IN ANY CASE, IT HAD NOTHING TO D O WITH THE SOCIETY. 4.4 THESE FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE. MOREOVER, MERELY BECAUSE A CONSOLIDATED BOOKS OF ACCOUNT WAS FOUND FROM THE POSSESSION OF A COMMON MEMBER OF TWO SOCIETIES, IT CANNOT BE CONCLUDED T HAT BOTH THESE SOCIETIES ARE NOT EXISTING INDEPENDENTLY. WHEN THE OTHER FACTS, SUCH AS SEPARATE REGISTRATION, SEPARATE BOOKS OF ACCOUNT, SEPARATE AUDIT REPORT, SEPARATE INCOME - TAX RETURN FILED BY THEM ARE PROVING THAT BOTH THE SOCIETIES ARE INDEPENDENT HA VING SEPARATE STUDENTS, SEPARATE FACULTIES AND ARE INDEPENDENTLY RECOGNIZED BY UPTU & AITCE. BY IGNORING THESE FACTS IN SUPPORT OF SEPARATE EXISTENCE OF THESE SOCIETIES, IT CANNOT BE CONCLUDED ON THE BASIS OF MERE CONSOLIDATED BOOKS OF THESE SOCIETIES FOU ND FROM THE POSSESSION OF A COMMON MEMBER OF THESE SOCIETIES THAT THESE SOCIETIES ARE NOT PROPER AND INDEPENDENT. 4.5 REGARDING THE BALANCE SHEET FOUND IN COURSE OF SURVEY FROM THE ASSESSEE SOCIETY SHOWING DIFFERENT FIGURES AS COMPARED TO AUDITED BALANCE S HEET FILED WITH THE RETURN OF INCOME, IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE SAME WAS PROJECTED BALANCE SHEET AND IT WAS FOUND IN THE FILE OF AICTE. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : REGARDING THE DIFFERENCES IN THE FIGURES IN THESE TWO BALANCE SHEETS, IT IS NOTED BY CIT(A) THAT THE BALANCES APPEARING IN THE PROJECTED BALANCE SHEET ARE NOWHERE EVEN REMOTELY CONNECTED WITH THE ACTUAL BALANCES. HE HAS GIVEN A FINDING THAT EVEN THE FIGURES OF FDRS AS MENTIONED IN THE PROJECTED BALANCE SHEET ARE NOT CORRECT. HE HAS ALSO GIVEN A FINDING THAT ENQUIRY WAS MADE BY THE ASSESSING OFFICER FROM THE BANKS AND BANKS HAVE CONFIRMED THAT THE ACTUAL BALANCES IN THE ACCOUNTS MAINTAINED WITH THE BANKS ARE AS PER THE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME. THESE FINDINGS OF LEARNED CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND FROM THESE FINDINGS, IT BECOMES CLEAR THAT THE BALANCE SHEET FOUND DURING THE COURSE OF SURVEY IN THE FILE OF AICTE WAS IN FACT A PROJECTED BALANCE SHEET ONLY AND THEREFORE, NO AD VERSE INFERENCE CAN BE DRAWN. 4.6 REGARDING ONE MORE REASONING GIVEN BY THE ASSESSING OFFICER FOR HOLDING THAT THE ASSESSEE SOCIETY IS NOT ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT BY ALLEGING THAT THE ASSESSEE SOCIETY IS HIT BY THE PROVISIONS OF SECTION 13 (1)(C) BECAUSE OF LOANS AND ADVANCES APPEARING IN THE NAME OF RAJ KUSHWAHA, IT WAS EXPLAINED BEFORE THE CIT(A) THAT RAJ KUSHWAHA IS NEITHER A FOUNDER OR A MEMBER OF THE SOCIETY NOR IS IN ANY MANNER RELATED TO THE MEMBERS OF THE SOCIETY. IT WAS ALSO EXPLAI NED THAT HE WAS APPOINTED AS A FACULTY AND FUNDS WERE ADVANCED TO HIM FOR SETTING UP THE INFRASTRUCTURE OF THE FACULTY. HE HAS ALSO GIVEN A FINDING THAT RAJ KUSHWAHA ABANDONED THE INSTITUTION WITHOUT INFORMING AND HAS NOT BOTHERED TO RETURN THE FUNDS NOR HAS HE GIVEN ITS DETAILS AND FOR THIS REASON, THE AMOUNT IS RECOVERABLE FROM HIM. NOTHING IS SHOWN BY LEARNED D.R. BEFORE US THAT RAJ KUSHWAHA IS EITHER A FOUNDER OR A MEMBER OF THE SOCIETY OR IS IN ANY MANNER RELATED TO THE MEMBERS OF THE SOCIETY. H ENCE, ON THIS ASPECT ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 4.7 FROM THE ABOVE DISCUSSION, WE FIND THAT ALL THE OBJECTIONS RAISED BY THE ASSESSING OFFICER WERE PROPERLY DEMOLISHED BY CIT(A) PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 6 - : BY GIVING CLEAR FINDING ON EACH ASPE CT AND THESE FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. AND HENCE, ON THIS ASPECT, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 3 . ACCORDINGLY, THE ORDER OF THE LD. CIT(A) WITH REGARD TO THE GRANT OF EXEMPTION UNDER SECT ION 11 OF THE ACT IS CONFIRMED. 4 . GROUNDS NO.2 AND 3 RELATE TO THE ADDITION MADE ON ACCOUNT OF UNVERIFIABLE EXPENDITURES ON AD HOC BASIS. 5 . THE ASSESSEE CLAIMED AN EXPENDITURE OF RS. 87,65,423/ - UNDER VARIOUS HEADS. THE ASSESSING OFFICER DISALLOWED 20% OF THE SAME ON AD HOC BASIS, HAVING OBSERVED THAT THE EXPENDITURES ARE NO T OPEN FOR VERIFICATION AND THE MATTER WENT TO THE LD. CIT(A). THE LD. CIT(A) OBSERVED THAT NO PARTICULAR DOCUMENT HAS BEEN POINTED OUT TO BE UNVERIFIABLE BY THE ASSESSING OFFICER AND H E MA DE AN AD HOC DISALLOWANCE. THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS.8 LAKHS FOR VARIOUS REASONS, HAVING OBSERVED THAT IT WOULD MEET THE ENDS OF JUSTICE. 6 . AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL, BUT COULD NOT POINT OUT AN Y SPECIFIC EXPENDITURE WHICH IS NOT OPEN FOR VERIFICATION. 7 . THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A). 8 . HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE ASSESSIN G OFFICER MADE ADDITION ON AD HOC BASIS HAVING OBSERVED THAT THE EXPENDITURES CLAIMED BY THE ASSESSEE ARE NOT OPEN FOR VERIFICATION, WITHOUT POINTING OUT A SPECIFIC EXPENDITURE WHICH IS UNVERIFIABLE. THE LD. CIT(A), TAKING INTO ACCOUNT ALL ASPECT S OF THE MATTER, RESTRICTED THE DISALLOWANCE TO RS.8 LAKHS IN WHICH WE DO NOT FIND ANY PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 7 - : INFIRMITY AND ACCORDINGLY WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 9 . IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT O N THE DATE MENT I ONED ON THE CAPTION PAGE. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5 TH SEPTEMBER , 2014 JJ: 2908 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )