DCIT, Kollam V. M/s.Podikunju Musaliar Educational & Charitable Trust, Kollam

ITA 40/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73882 (ITAT-COCHIN)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: N S RAJAGOPAL
• Keywords: Unexplained investment; Capital asset; Depreciation; Search and seizure; Charitable institution; Competent authority; Revenue expenditure; Capital expenditure
• Section: 12AA; 132

Judgement Text

1 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NOS. 40 TO 43/COCH/2013 (ASSESSMENT YEARS 2006-07 TO 2009-10) DY.CIT, CENT.CIR VS M/S PODIKUNJU MUSALIAR KOLLAM EDUCATIONAL & CHARITABLE TRUST CHANDANATHOPE, KOLLAM PAN : AAATP8905H (APPELLANT) (RESPONDENT) I.T.A NOS. 65 TO 68/COCH/2013 (ASSESSMENT YEARS 2006-07 TO 2009-10) M/S PODIKUNJU MUSALIAR EDUCATIONAL VS DY.CIT, CENT . & CHARITABLE TRUST KOLLAM CHANDANATHOPE, KOLLAM PAN : AAATP8905H (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M ANIL KUMAR ASSESSEE BY : SHRI N.S. RAJAGOPAL DATE OF HEARING : 29-11-2013 DATE OF PRONOUNCEMENT : 31-01-2014 O R D E R PER N.R.S. GANESAN (JM) BOTH THE REVENUE AND THE ASSESSEE FILED THE APPEAL S AGAINST THE RESPECTIVE ORDERS OF THE CIT(A)-III, KOCHI FOR THE ASSESSMENT YEARS 2006- 2 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 07 TO 2009-10. SINCE COMMON ISSUES ARISE FOR CONSI DERATION WE HEARD ALL THE APPEALS TOGETHER AND DISPOSE OF THE SAME BY THI S COMMON ORDER. 2. LET US FIRST TAKE THE DEPARTMENTAL APPEALS FIRST . THE ONLY ISSUE ARISES FOR CONSIDERATION IS GRANT OF DEPRECIATION @15% OF THE TOTAL TURNOVER. 3. SHRI M. ANIL KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE TRUST ESTABLISHED FOR MAINTAINING AND RUNNING MEDICAL, DE NTAL AND NURSING COLLEGES. THE ASSESSEE WAS NOT GRANTED REGISTRATIO N U/S 12AA OF THE ACT AND ALSO NO APPROVAL WAS GRANTED U/S 10(23C) OF THE ACT. THERE WAS SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT ON 06-01-2009 IN THE PREMISES OF THE ASSESSEE. CONSEQUENT TO THE SEARCH , THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT SINCE THE EXP ENDITURE WAS NOT PROPERLY ACCOUNTED FOR AND ESTIMATED THE GROSS PROF IT AFTER TAKING INTO CONSIDERATION ALL THE ACTIVITIES OF THE ASSESSEE AT 40% OF THE TOTAL TURNOVER. ACCORDING TO THE LD.DR, THE ASSESSING OFFICER, AFTE R TAKING INTO CONSIDERATION ALL THE INDIRECT EXPENSES AND DEPRECI ATION HAS ESTIMATED NET PROFIT AT 15% OF THE GROSS RECEIPTS. HOWEVER, ON A PPEAL, THE CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER WITH REGARD TO R EJECTION OF BOOKS OF ACCOUNT AND THE ESTIMATION OF GROSS PROFIT AT 40%. THE COMMISSIONER (APPEALS) HAS ALSO FOUND THAT ESTIMATION OF NET PRO FIT AT 15% IS QUITE 3 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 REASONABLE AND FAIR. HOWEVER, HE DIRECTED THE ASS ESSING OFFICER TO GRANT 15% DEPRECIATION ON THE TOTAL TURNOVER AFTER REFERR ING TO THE CIRCULAR ISSUED BY CBDT AND JUDGMENT OF THE RAJASTHAN HIGH COURT IN THE CASE OF SHRI RAM JHANWAR LAL VS ITO 321 ITR 400 (RAJ). ACCORDIN G TO THE LD.DR THE CIRCULAR ISSUED BY CBDT AND JUDGMENT OF THE RAJASTH AN HIGH COURT IN THE CASE OF SHRI RAM JHANWAR LAL (SUPRA) HAS BEEN FULLY FOLLOWED BY THE ASSESSING OFFICER. THEREFORE, FURTHER ALLOWANCE OF 15% OF THE TOTAL TURNOVER TOWARDS DEPRECIATION IS NOT JUSTIFIED. ACCORDING T O THE LD.DR, DEPRECIATION HAS TO BE ALLOWED ON THE COST OF CAPITAL ASSET AND NOT ON THE TOTAL TURNOVER. IN THIS CASE, THE ASSESSEE IS NOT DOING ANY BUSINES S. HE IS RUNNING AN EDUCATIONAL INSTITUTION. THEREFORE, ALLOWING DEPRE CIATION ON THE GROSS RECEIPTS MAY NOT BE JUSTIFIED AT ALL. AT THE BEST, THE ASSESSEE MAY BE ENTITLED FOR DEPRECIATION ON THE INVESTMENT MADE IN THE CAPITAL ASSET INCLUDING THE INFRASTRUCTURE AND MACHINERY. HOWEVE R, THIS WAS TAKEN CARE OF BY THE ASSESSING OFFICER WHILE ESTIMATING THE NE T PROFIT AT 15%. THEREFORE, FURTHER ALLOWANCE BY THE CIT(A) IS NOT J USTIFIED. 4. ON THE CONTRARY, SHRI N.S. RAJAGOPAL, THE LD.REP RESENTATIVE FOR THE ASSESSEE SUBMITTED THAT WHILE ESTIMATING THE PROFIT , THE DEPRECIATION HAS TO BE SEPARATELY ALLOWED. REFERRING TO THE CIRCULAR I SSUED BY THE CBDT DATED 31-03-1965, THE LD.REPRESENTATIVE SUBMITTED THAT DE PRECIATION HAS TO BE 4 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 WORKED OUT SEPARATELY EVEN THOUGH THE PROFIT WAS ES TIMATED. THE LD.REPRESENTATIVE HAS ALSO PLACED HIS RELIANCE ON T HE JUDGMENTS OF THE ALLAHABAD HIGH COURT IN CIT VS BISHAMBHAR DAYAL & C O 210 ITR 118 (ALL); RAJASTHAN HIGH COURT IN THE CASE OF CIT VS JAIN CON STRUCTION CO & OTHERS 245 ITR 527 (RAJ); SHRI RAM JHANWARLAL VS ITO 321 I TR 400 (RAJ); PUNJAB & HARYANA HIGH COURT IN CIT VS BHULLAR BUILDERS (P) LTD 286 ITR 686 (P&H); AND THE DECISION OF THIS BENCH OF THIS TRIBU NAL IN C.G. PAUL & CO VS ITO 52 ITD 276 (COCH); AND JUDGMENT OF ALLAHABAD HI GH COURT IN ALLAHABAD GLASS WORKS VS CIT 42 ITR 439 (ALL) AND S UBMITTED THAT ALLOWANCE OF DEPRECIATION DOES NOT DEPEND UPON THE GENUINENESS OF THE BOOKS OF ACCOUNT. ACCORDING TO THE LD.REPRESENTATI VE, EVEN THOUGH THE BOOKS OF ACCOUNT WERE REJECTED AND THE PROFIT WAS E STIMATED, THE ASSESSEE IS ENTITLED FOR DEPRECIATION. THEREFORE, THE DEPRE CIATION HAS TO BE DEDUCTED FROM THE ESTIMATED PROFIT. 5. WE HAVE CONSIDERED THE SUBMISSIONS ON EITHER SID E AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE MATERIAL AVAILABLE ON RECORD IT APPEARS THAT THE EXPENDITURE, BOTH REVENU E AND CAPITAL WAS NOT RECORDED IN THE BOOKS OF ACCOUNT PROPERLY. THIS WA S UNEARTHED DURING THE COURSE OF SEARCH OPERATION. THEREFORE, THIS TRIBUN AL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY REJE CTED THE BOOKS OF ACCOUNT. 5 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 WHEN THE BOOKS OF ACCOUNT WERE REJECTED THE ASSESSI NG OFFICER HAS TO RESORT TO ESTIMATION OF PROFIT ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. FROM THE ORDER OF THE LOWER AUTHORITIES IT APPEARS THAT THE ASSESSING OFFICER ESTIMATED GROSS PROFIT AT 40% OF THE GROSS RECEIPTS. AFTER THAT THE NET PROFIT WAS ESTIMATED AT 15% OF THE GRO SS RECEIPTS. THOUGH IT IS NOT CLEARLY DISCUSSED IN THE ASSESSMENT ORDER IT IS APPARENT THAT WHILE ESTIMATING THE GROSS PROFIT AT 40%, THE ASSESSING O FFICER HAS TAKEN THE DIRECT EXPENSES IN MIND AND ESTIMATED THE GROSS PRO FIT. SUBSEQUENTLY, AFTER TAKING INTO CONSIDERATION OF THE INDIRECT EXP ENSES AND THE DEPRECIATION, HE ESTIMATED THE GROSS PROFIT AT 15%. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFF ICER HAS TAKEN CARE OF THE DEPRECIATION WHILE ESTIMATING THE NET PROFIT. 6. THE ASSESSEE IS NOT IN THE BUSINESS OF TRADING. IF IT IS A CASE OF TRADING, THEN THE COST OF RAW MATERIALS INCLUDING T HE DIRECT EXPENSES IN PURCHASING THE RAW MATERIALS OR THE TRADING GOODS I S TO BE ALLOWED WHILE COMPUTING THE GROSS PROFIT. THEREAFTER, THE ASSESS ING OFFICER WOULD CALCULATE THE INDIRECT EXPENSES WHILE ESTIMATING TH E NET PROFIT. IN THIS CASE, THE ASSESSEE IS IN THE ACTIVITY OF IMPARTING EDUCAT ION IN MEDICAL COURSE. THE ACTIVITY OF THE ASSESSEE IS ON PAR WITH SERVICE INDUSTRY. THEREFORE, THE ENTIRE GROSS RECEIPT HAS TO BE TAKEN AS GROSS RECEI PTS WITHOUT ANY 6 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 DEDUCTION BECAUSE THERE IS NO COST INVOLVED. THE E XPENDITURE FOR ESTABLISHING THE INFRASTRUCTURE LIKE BUILDING, LABO RATORY, ETC. CANNOT BE ALLOWED AS REVENUE EXPENDITURE. THE EXPENDITURE LI KE SALARY TO THE PROFESSORS AND OTHER TEACHING STAFF AND NON TEACHIN G STAFF AND ADMINISTRATIVE EXPENSES HAS TO BE DEDUCTED FROM THE GROSS RECEIPT. APART FROM THIS, THE DEPRECIATION ON THE BUILDING AND THE MACHINERY INSTALLED HAS TO BE ALLOWED AS PER THE DEPRECIATION TABLE. THERE FORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT ESTIMATING 40% AS GROSS PROFIT ON THE GROSS RECEIPT IS VERY FAIR AND JUSTIFIED. AFTER THAT TH E ASSESSING OFFICER HAS ESTIMATED THE NET PROFIT ONLY AT 15%. THIS, APPARE NTLY IS, AFTER TAKING INTO CONSIDERATION THE INDIRECT EXPENDITURE AND THE DEPR ECIATION. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE ASSESSING OFFICER IN ESTIMATING THE NET PROFIT AT 15%. 7. WE HAVE CAREFULLY GONE THROUGH THE CIRCULAR ISSU ED BY THE CBDT DATED 31-03-1965. THE CIRCULAR CLARIFIED THAT WHEN THE INCOME WAS PROPOSED TO BE ESTIMATED AND THE ASSESSEE FURNISHED ALL THE PARTICULARS FOR DEPRECIATION, THE DEPRECIATION SHALL BE WORKED OUT SEPARATELY. AFTER ESTIMATING THE GROSS PROFIT, DEDUCTIONS AND OTHER A LLOWANCES INCLUDING DEPRECIATION HAS TO BE ALLOWED SEPARATELY FROM THE GROSS PROFIT. THIS IS WHAT EXACTLY DONE BY THE ASSESSING OFFICER IN THIS CASE. AFTER ESTIMATING 7 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 THE GROSS PROFIT HE ALLOWED A FURTHER ALLOWANCE OF 25% TOWARDS OTHER DEDUCTION / ALLOWANCES INCLUDING DEPRECIATION. THE REFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICE R HAS ESTIMATED THE NET INCOME AT 15% OF THE GROSS RECEIPT AS INSTRUCTED BY THE CBDT IN THE CIRCULAR DATED 31-03-1965. 8. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN THE CASE OF BISHAMBAR DAYAL & CO (SUP RA). IN THE CASE BEFORE THE ALLAHABAD HIGH COURT, THE ASSESSING OFFI CER REJECTED THE BOOKS OF ACCOUNT AND COMPUTED THE INCOME BY APPLYING AVER AGE RATE. THE ASSESSEE CLAIMED DEPRECIATION, HOWEVER, IT WAS NOT ALLOWED. ON THOSE FACTUAL CIRCUMSTANCES, THE ALLAHABAD HIGH COURT FOU ND THAT IN VIEW OF THE CIRCULAR ISSUED BY THE CBDT DATED 31-03-1965 DEPREC IATION SHOULD BE ALLOWED SEPARATELY AFTER ESTIMATION OF GROSS PROFIT . AS OBSERVED BY US EARLIER, THIS IS WHAT EXACTLY DONE BY THE ASSESSING OFFICER IN THIS CASE. THEREFORE, THE JUDGMENT OF THE ALLAHABAD HIGH COURT , IN FACT, SUPPORTS THE CASE OF THE REVENUE. 9. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN JAIN CONSTRUCTION CO (SUPRA). THE RA JASTHAN HIGH COURT AFTER CONSIDERING THE CIRCULAR ISSUED BY CBDT FOUND THAT ONCE THE GROSS 8 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 PROFIT IS ESTIMATED ALL ALLOWANCES INCLUDING DEPREC IATION SHALL BE ALLOWED SEPARATELY. WE HAVE ALSO CAREFULLY GONE THROUGH T HE JUDGMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BHULLAR BUILDERS (P) LTD (SUPRA); AND RAJASTHAN HIGH COURT IN RAM JHANWARLAL (SUPRA) AND ALLAHABAD HIGH COURT IN ALLAHABAD GLASS WORKS (SUPR A). IN THESE JUDGMENTS, THE COURTS HELD THAT WHEREVER GROSS PROF IT WAS ESTIMATED THE OTHER ALLOWANCES AND DEPRECIATION HAS TO BE ALLOWED FROM THE GROSS PROFIT. THE ALLOWANCES AND DEPRECIATION DOES NOT DEPEND UPO N THE GENUINENESS OF THE BOOKS OF ACCOUNT. IN THIS CASE, AS DISCUSSE D EARLIER, THE GROSS PROFIT WAS ESTIMATED AT 40% AND THE ASSESSING OFFICER THER EAFTER ESTIMATED THE NET PROFIT AT 15%. THEREFORE, THE OTHER ALLOWANCES AND DEPRECIATION HAS BEEN TAKEN CARE OF BY THE ASSESSING OFFICER. HENCE , THE ABOVE JUDGMENTS RELIED UPON BY THE LD.REPRESENTATIVE FOR THE ASSESS EE MAY NOT BE OF ANY ASSISTANCE TO THE ASSESSEE. 10. IN VIEW OF THE ABOVE DISCUSSION, WE ARE UNABLE TO UPHOLD THE ORDER OF THE CIT(A). ACCORDINGLY, THE ORDER OF CIT(A) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 11. NOW COMING TO THE ASSESSEES APPEALS, THE FIRST GROUND OF APPEAL IN ALL THE YEARS IS WITH REGARD TO REJECTION OF BOOKS OF ACCOUNT. 9 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 12. SHRI N.S. RAJAGOPAL, THE LD.REPRESENTTIVE FOR T HE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER REJECTED THE BOOKS OF AC COUNT ON THE GROUND THAT HUGE UNACCOUNTED INVESTMENTS WERE FOUND. ACCORDING TO THE LD.REPRESENTATIVE, THERE IS NO SUCH UNACCOUNTED INV ESTMENTS. THE LD.REPRESENTATIVE SUBMITTED THAT THE REASONS STATED BY THE ASSESSING OFFICER FOR REJECTING THE BOOKS OF ACCOUNT IS NOT CONVINCIN G. ESTIMATION OF NET PROFIT AT 15% IS NOT JUSTIFIED AT ALL. 13. ON THE CONTRARY, SHRI M ANIL KUMAR, THE LD.DR S UBMITTED THAT DURING THE COURSE OF ASSESSMENT IT WAS FOUND THAT THE TOTA L RECEIPTS OF THE ASSESSEE EXCEEDED RS.40 LAKHS. THEREFORE, THE ASSE SSEES BOOKS OF ACCOUNT ARE LIABLE FOR COMPULSORY AUDIT U/S 44AB OF THE ACT. ADMITTEDLY, THE BOOKS OF ACCOUNT WERE NOT AUDITED AS REQUIRED U /S 44AB OF THE ACT. THE ASSESSEE IS ALSO CLAIMING HUGE AMOUNT OF EXPEND ITURE BOTH ON REVENUE AND CAPITAL ACCOUNT. THE EXCESS OF EXPEND ITURE OVER THE INCOME WAS FOUND TO BE UNRELIABLE. THE MATERIAL FOUND DUR ING THE COURSE OF SEARCH OPERATION SHOWS A LOT OF INVESTMENT IN THE C ONSTRUCTION OF THE BUILDING IN EXCESS OF WHAT HAS BEEN DISCLOSED IN TH E BALANCE-SHEET. THEREFORE, THE ASSESSING OFFICER FOUND THAT THE FIN ANCIAL STATEMENT AND LEDGER ACCOUNT MAINTAINED BY THE ASSESSEE IS NOT RE LIABLE; HENCE, THE 10 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 ASSESSING OFFICER HAS NO OTHER ALTERNATIVE EXCEPT T O REJECT THE BOOKS OF ACCOUNT AND ESTIMATE A REASONABLE PROFIT ON THE ACT IVITY OF THE ASSESSEE. HENCE, ACCORDING TO THE LD.DR, THE ASSESSING OFFICE R HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THOUGH T HE ASSESSEE CLAIMS THAT THERE IS NO UNACCOUNTED INVESTMENT, THE FACT I S THAT THE EXCESS EXPENDITURE OVER THE INCOME AFTER SETTING OFF OF RE VENUE AND CAPITAL EXPENDITURE WAS FOUND TO BE UNRELIABLE. THE ASSESS EE HAS NOT RECORDED THE EXPENDITURE IN THE BOOKS OF ACCOUNT PROPERLY. THE COST OF CONSTRUCTION WAS FOUND TO BE FAR IN EXCESS THAN WHAT WAS DISCLOS ED IN THE BALANCE- SHEET. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT BOTH THE AUTHORITIES BELOW HAVE RIGHTLY FOUND THAT THE FINAN CIAL STATEMENT AND THE LEDGER ACCOUNT MAINTAINED BY THE ASSESSEE ARE NOT R ELIABLE; HENCE, THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(A) HAS RI GHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT. 15. THE NEXT GROUND OF APPEAL IS WITH REGARD TO CLA IM OF EXEMPTION U/S 10(23C) OF THE ACT. 11 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 16. SHRI N.S. RAJAGOPAL, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE APPLIED FOR APPROVAL U/ S 10(23C) OF THE ACT. HOWEVER, NO ORDER HAS BEEN PASSED SO FAR. ACCORDIN G TO THE LD.REPRESENTATIVE, SINCE THE APPLICATION WAS NOT RE JECTED, THE APPROVAL IS DEEMED TO HAVE BEEN GRANTED. THE LD.REPRESENTATIVE PLACED HIS RELIANCE ON THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUN AL IN BHGWAD SWARUP SHRI SHRI DEVRAHA BABA MEMORIAL SHRI HARI PARMARTH DHAM TRUST VS CIT (2008) 111 ITD 175 (DEL)(SB); JUDGMENT OF THE MADRA S HIGH COURT IN DIT (EXEMPTION) VS ANJUMAN-E-KHYRIKHAH-E-AAM 237 CTR (M AD) 509 AND CIT VS SHEELA CHRISTIAN CHARITABLE SOCIETY 92 DTR 287 ( MAD). THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10(23C) OF THE ACT. 17. ON THE CONTRARY, SHRI M ANIL KUMAR, THE LD.DR S UBMITTED THAT UNLESS AND UNTIL THE APPROVAL WAS GRANTED U/S 10(23C) OF T HE ACT BY THE COMPETENT AUTHORITY, THE ASSESSEE IS NOT ENTITLED F OR EXEMPTION. ACCORDING TO THE LD.DR, THE CONSEQUENCE OF NON DISPOSAL OF AP PLICATION BY THE COMPETENT AUTHORITY IS NOT PROVIDED IN THE INCOME-T AX ACT, AND THEREFORE, THERE IS NO QUESTION OF ANY DEEMED APPROVAL AS CLAI MED BY THE ASSESSEE. 12 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSEE CLAIMS THAT IT HAD FILED AN APPLICATION FOR APPROVAL U/S 10(23C) OF TH E ACT. HOWEVER, NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE ASSESSEE HAS ALREADY APPLIED FOR APPROVAL U/S 10(23C) OF THE ACT. MOREO VER, THE COMPETENT AUTHORITY FOR APPROVAL IS THE CHIEF COMMISSIONER OF INCOME-TAX. IF THE ASSESSEE REALLY FILED THE APPLICATION FOR APPROVAL U/S 10(23C), THE CCIT BEING THE COMPETENT AUTHORITY OUGHT TO HAVE DISPOSE D OF THE APPLICATION ONE WAY OR THE OTHER WITHIN A REASONABLE PERIOD. T HE ASSESSEE NOW CLAIMS THAT THE NON DISPOSAL OF THE APPLICATION FIL ED BY THE ASSESSEE FOR APPROVAL U/S 10(23C) WOULD AMOUNT TO DEEMED GRANT O F APPROVAL. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT AS HELD BY THE MADRAS HIGH COURT IN THE CASE OF CIT VS SHEELA CHRISTIAN CHARITABLE T RUST (2013) 354 ITR 478 (MAD), THE CONSEQUENCE OF NON DISPOSAL OF APPLICATI ON IS NOT PROVIDED IN THE INCOME-TAX ACT, THEREFORE, THERE IS NO QUESTION OF ANY DEEMED REGISTRATION. THE FACT REMAINS IS THAT FOR THE ASS ESSMENT YEAR UNDER CONSIDERATION, NO APPROVAL WAS GRANTED U/S 10(23C) OR THE TRUST WAS REGISTERED U/S 12AA OF THE ACT. THEREFORE, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS NOT ENTITLE D FOR EXEMPTION EITHER U/S 10(23C) OR 11 OF THE ACT. ACCORDINGLY, THE ORD ER OF THE LOWER AUTHORITY ON THIS ISSUE IS UPHELD. 13 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 19. THE NEXT GROUND OF APPEAL IS WITH REGARD TO EST IMATION OF PROFIT AT 15%. ACCORDING TO THE LD.REPRESSENTATIVE FOR THE A SSESSEE THAT ESTIMATION OF NET PROFIT AT 15%IS HIGHLY ARBITRARY. THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT ESTIMATION OF NET PROFIT AT 15% IS FAI R AND REASONABLE. THIS FACT WAS DISCUSSED IN THE DEPARTMENTAL APPEAL AND FOUND THAT AFTER DIRECT AND INDIRECT EXPENSES AND DEPRECIATION, ESTIMATION OF N ET PROFIT AT 15% IS VERY REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE CA SE. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY MERIT IN THE CONTENTION OF THE ASSESSEE FOR ESTIMATION OF NET PROFIT AT 15% OF THE GROSS RECEIP TS. 20. THE NEXT GROUND IS WITH REGARD TO ADDITION OF R S.30 LAKHS FOR THE ASSESSMENT YEAR 2007-08. 21. SHRI N.S. RAJAGOPAL, THE LD.REPRESENTATIVE SUBM ITTED THAT THE ASSESSING OFFICER MADE ADDITION ON THE BASIS OF THE SEIZED MATERIAL KJJ 11(3) DATED 06-01-2007. ACCORDING TO THE LD.REPRES ENTATIVE, THIS IS A COMPUTER PRINT OUT TAKEN OUT ON THE DATE OF SEARCH ON 06-01-2009. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THER E CANNOT BE ANY ADDITION FOR THE YEAR UNDER CONSIDERATION. 14 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 22. WE HAVE HEARD THE LD.DR, SHRI M ANIL KUMAR ALSO . ACCORDING TO THE LD.DR, THE ASSESSEE HAS RECEIVED RS.30 LAKHS ON 06- 01-2007 FROM MBBS STUDENT NAMED A ANITHA. ACCORDING TO THE LD.DR, TH E TOTAL AMOUNT RECEIVABLE WAS RS.45 LAKHS FROM THE STUDENT AS PER THE SEIZED MATERIALS. ACCORDING TO THE LD.DR, THE SEIZED MATERIAL CLEARLY INDICATES THE RECEIPT OF RS.30 LAKHS ON 06-01-2007. THE ASSESSEE CLAIMS THA T IT IS AN ADVANCE FEE FROM THE STUDENT. IT IS NOT KNOWN HOW IT COULD BEC OME AN ADVANCE FEE. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. SEIZED D OCUMENT CLEARLY INDICATES THE RECEIPT OF RS.30 LAKHS FROM A ANITHA ON 06-01-2007. THE CLAIM OF THE ASSESSEE IS THAT IT IS FEES RECEIVED F ROM THE STUDENT IN ADVANCE. THIS TRIBUNAL IS OF THE CONSIDERED OPINIO N THAT EDUCATIONAL INSTITUTIONS ARE NOT AUTHORIZED TO COLLECT THE FEES IN ADVANCE. THEY ARE EXPECTED TO COLLECT THE FEES FOR THE ACADEMIC YEAR- WISE. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAS RECEIVED ANY F EES IN ADVANCE. EVEN FOR ARGUMENT SAKE, IF THE ASSESSEE HAS RECEIVED THE ADVANCE FEES FROM ANY STUDENT, THE SAME SHALL BE DEPOSITED IN THE SEP ARATE ACCOUNT AND THE INTEREST ACCRUED ON SUCH DEPOSIT SHALL BE CREDITED TO THE ACCOUNT OF THE RESPECTIVE STUDENT. IT IS NOT THE CASE OF THE ASSE SSEE THAT THE ADVANCE FEE RECEIVED WAS CREDITED IN THE SEPARATE ACCOUNT AND T HE INTEREST ACCRUED 15 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 THEREON WAS GIVEN TO THE RESPECTIVE STUDENT. THIS VIEW OF OURS IS FORTIFIED BY THE JUDGMENT OF THE APEX COURT IN ISLAMIC ACADEM Y OF EDUCATION VS STATE OF KARNATAKA (2003) 6 SCC 697. THEREFORE, TH E MONEY RECEIVED ON 06-01-2007 FROM A ANITHA, AN MBBS STUDENT HAS TO BE TREATED AS INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07. 24. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF RS.289,80,927 TOWARDS UNEXPLAINED INVESTMENT IN PLA NT AND MACHINERY FOR THE ASSESSMENT YEAR 2009-10. 25. SHRI N.S. RAJAGOPAL, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE DIFFERENCE IN WRITTEN DOWN VALUE AS ON 31-03-2008 AND 31-03-2009 WAS ADOPTED TO FIND OUT THE ACTUAL INVES TMENT. ACCORDING TO THE LD.REPRESENTATIVE, THE ACTUAL ADDITION / INVEST MENT DURING THE YEAR SHOULD HAVE BEEN CONSIDERED TO FIND OUT THE UNEXPLA INED INVESTMENT. THEREFORE, THE ASSESSING OFFICER MAY BE DIRECTED TO VERIFY THE FACT. WE HEARD, SHRI M ANIL KUMAR, THE LD.DR ALSO. 26. TO MAKE ANY ADDITION ON ACCOUNT OF INVESTMENT, IT IS OBLIGATORY ON THE PART OF THE ASSESSING OFFICER TO FIND OUT THE A CTUAL INVESTMENT SAID TO BE MADE BY THE ASSESSEE. IN THIS CASE, THE ASSESSING OFFICER HAS TAKEN THE 16 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 DIFFERENCE BETWEEN THE WRITTEN DOWN VALUE AS ON 31- 03-2008 AND 31-03- 2009. THE DIFFERENCE BETWEEN THE WRITTEN DOWN VALU E BETWEEN 31-03-2008 AND 31-03-2009 MAY NOT REFLECT THE ACTUAL INVESTMEN T. THE ACTUAL INVESTMENT IN BUILDING, PLANT AND MACHINERY HAS TO BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF FINDING OUT THE UN EXPLAINED INVESTMENT. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE LOWER AUTHORITIES ARE NOT CORRECT IN TAKING THE DIFFERENC E BETWEEN THE WRITTEN DOWN VALUE AS ON 31-03-2008 AND 31-03-2009. ACCORD INGLY, THE ORDERS OF LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE IS RE MITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL VERIFY THE RECORD AND WILL FIND OUT THE ACTUAL INVESTMENT IN BUILDING, PLANT A ND MACHINERY FOR THE PURPOSE OF ASCERTAINING THE UNEXPLAINED INVESTMENT. 27. IN THE RESULT, ALL THE DEPARTMENTAL APPEALS ARE ALLOWED AND HE ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 2006-07 , 2007-08 AND 2008- 09 ARE DISMISSED WHEREAS THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST JANUARY, 2014. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 31 ST JANUARY, 2014 PK/- 17 ITA NO.40 TO 43/COCH/2013 ITA NO.65 TO 68/COCH/2013 COPY TO: 1. M/S PODIKUNJU MUSLIAR EDUCATIONAL & CHARITABLE T RUST, CHANDANATHOPE, KOLLAM 2. DY.CIT, CENT.CIR., KOLLAM 3. THE COMMISSIONER OF INCOME-TAX (CENTRAL), KOCHI 4. THE COMMISSIONER OF INCOME-TAX(A)-III, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH