The ACIT, 1 (1), Bhopal V. M/s. R K D F Education Society, Bhopal

ITA 402/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2967 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-04-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 28-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Assessee Lawyers: H P VERMA
• Keywords: Unexplained cash credit; Search and seizure; Notional interest; Benefit of exemption; Revised return
• Section: 12A; 12; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER ITA NOS. 400 TO 403/IND/2008 A.YS. 2000-01 TO 2003-04 AND 2005-06 ASSTT. COMMISSIONER OF INCOMETAX 1(1) BHOPAL APPELLANT VS M/S RKDF EDUCATION SOCIETY BHOPAL PAN AAATGR-1026-R RESPONDENT APPELLANT BY : SHRI K.K. SINGH, CIT DR RESPONDENT BY : SHRI H.P. VERMA AND SHRI ASHISH GOYAL O R D E R PER JOGINDER SINGH, JM THESE APPEALS ARE BY THE REVENUE AGAINST DIFFERENT ORDERS OF THE LEARNED CIT(A) DATED 6.6.2008 WHEREIN FOLLOWING COM MON GROUNDS HAVE BEEN RAISED :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN (I) DELETING THE ADDITIONS OF RS. 80,76,771/-, RS.2 ,69,53,713/-, RS.2,45,03,596/- AND RS.6,69,62,472/- FOR THE ASSES SMENT 2 YEARS 2000-01, 2001-02, 2002-03 AND 2005-06, RESPEC TIVELY MADE ON ACCOUNT OF EXCESS OF INCOME OVER EXPENDITUR E UNDER NORMAL PROVISIONS AND THEREBY ALLOWED THE BEN EFIT OF EXEMPTION U/S 11 AND 12 OF THE ACT WHICH IS NOT AVA ILABLE TO THE ASSESSEE FOR THE REASONS MENTIONED IN THE ASSES SMENT ORDER (II) DELETING THE ADDITIONS OF RS. 30,545/-, RS. 69 ,480/-, RS. 36,802/- AND RS. 33,378/-, FOR THE ASSESSMENT YEARS 2000- 01, 2001-02, 2002-03 AND 2005-06, RESPECTIVELY MADE ON ACCOUNT OF EXCESS PAYMENT MADE TO SHRI ANIS KHAN IN CONTRAVENTION OF THE PROVISIONS OF SECTION 13(1) RE AD WITH SECTION 13(3) OF THE ACT. (III) DELETING THE ADDITION OF RS.4,37,585/-, RS. 1 1,43,267/- ,RS.3,77,422/- AND RS.27,81,766/- FOR THE ASSESSMEN T YEARS 2000-01, 2001-02, 2002-03 AND 2005-06, RESPECTIVELY MADE ON ACCOUNT OF BENEFIT OF INTEREST PASSED ON TO CLOS ELY CONNECTED SOCIETIES. 2. DURING HEARING OF THESE APPEALS, WE HAVE HEARD S HRI K.K. SINGH, LEARNED CIT DR AND SHRI H.P. VERMA ALONG WITH SHRI ASHISH GOYAL, LD. COUNSEL FOR THE ASSESSEE. AT THE OUTSET IT WAS CLA IMED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THESE APPEALS ARE COV ERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL FOR AS SESSMENT YEARS 3 2003-04 AND 2004-05 VIDE ORDER DATED 26 TH NOVEMBER, 2009 (ITA NOS. 426 AND 439/IND/2007). THE LEARNED CIT DR THOUGH DID NOT CONTROVERT THE ASSERTION OF THE ASSESSEE BUT CONTENDED THAT EA CH YEAR IS INDEPENDENT AND HAS TO BE ADJUDICATED IN THE LIGHT OF THE FACTS OF THE IMPUGNED ASSESSMENT YEARS, 3. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE LEARNED RESPECTIVE COUNSELS AND ALSO PERUSED THE MATERIAL A VAILABLE ON THE FILE. THE FIRST GROUND RAISED BY THE REVENUE PERTAINS TO DELETING THE ADDITIONS ON ACCOUNT OF EXCESS OF INCOME OVER EXPENDITURE AND ALLOWING THE BENEFIT OF EXEMPTION UNDER SECTIONS 11 AND 12 OF TH E ACT. WE FIND THAT A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN THE CA SE OF THE ASSESSEE VIDE ORDER DATED 26 TH NOVEMBER, 2009 IN ITA NOS. 426 AND 439/IND/2007 AND THE TRIBUNAL AFTER CONSIDERING THE SAME, DISMIS SED THE APPEALS OF THE REVENUE WITH THE FOLLOWING OBSERVATIONS :- 7. GROUND NO. 1 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 3,70,48,502/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS OF INCOME OVER EXPENDITURE. 8. GROUND NO. 1 IS DISMISSED, AT THE VERY OUTSET, AS THE IMPUGNED ADDITION HAS BEEN MADE FOR THE REASON THAT THE ASSESSEE SOCIETY WAS NEITHER ELIGIBLE FOR EXEMPTION U/S 10(23C)(VI) OF THE ACT NOR HAVING REGISTRATION U/S 12A OF THE ACT, IN VIEW OF THE SUBSEQUENT DECISION OF THE TRIBUNAL WHEREIN REGISTRATION GRANTED TO THE ASSESSEE SOCIETY U/S 12 A HAS BEEN RESTORED. 4 4. THE NEXT GROUND PERTAINS TO DELETING THE RESPECT IVE ADDITIONS ON ACCOUNT OF EXCESS PAYMENT MADE TO SHRI ANIS KHAN IN CONTRAVENTION TO THE PROVISIONS OF SECTION 13 (1) R.W.S. 13(3) OF TH E ACT. WE FIND THAT A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN THE CA SE OF THE ASSESSEE VIDE ORDER DATED 26 TH NOVEMBER, 2009 IN ITA NOS. 426 AND 439/IND/2007 AND THE TRIBUNAL AFTER CONSIDERING THE SAME, DISMIS SED THE APPEALS OF THE REVENUE WITH THE FOLLOWING OBSERVATIONS :- 9. GROUND NO. 2 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 31,120/- MADE BY THE ASSESSING OFFICER ON ACCOUNT O F EXCESS PAYMENT MADE TO SHRI ANEES KHAN. 10. IN RESPECT OF ISSUE RAISED IN GROUND NO.2, IT IS NOTED THE ASSESSEE SOCIETY MADE A PAYMENT OF RS. 2,11,000/- TO MR. ANEES KHAN AS BUS PLYING CHARGES AND A PAYMENT WAS RS. 5,06,780/- ON ACCOUNT OF CONTRACT OF CIVIL CONSTRUCTION ENTERED INTO BY THE SOCIETY WITH HIM. THE LEARNED COUNSEL HAS DRAWN OUR ATTENTION TO PAGE 67 (BACK SIDE) (INTERNAL PAGE 8 O F THE TRIBUNAL ORDER) PARA 3.9 AND FINDINGS OF THE TRIBUN AL IN PARA 5.6 AT PAGE 76, WHEREIN THE TRIBUNAL HAD HE LD THAT SHRI ANEES KHAN NEVER GOT ANY UNUSUAL BENEFIT FROM THE ASSESSEE SOCIETY, AFTER ANALYZING THE COMPARATIVE CHART OF OTHER PARTIES PROVIDING THE SA ME SERVICES TO THE ASSESSEE. HENCE, THIS ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE. 11.WE HAVE ALSO PERUSED MATERIAL ON RECORD AND IT I S NOTED THAT THE IMPUGNED SERVICES HAVE BEEN OBTAINE D BY THE ASSESSEE SOCIETY FROM MR. ANEES KHAN AT COMPARABLE RATES. HENCE, THERE IS NO QUESTION OF AN Y DISALLOWANCE AND APPLICATION OF PROVISIONS OF SECTI ON 13 OF THE ACT. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A) IN THIS REGARD. 5 5. THE NEXT GROUND PERTAINS TO DELETING THE RESPECT IVE ADDITIONS ON ACCOUNT OF BENEFIT OF INTEREST PASSED ON TO CLOSELY CONNECTED SOCIETIES. WE FIND THAT A SIMILA R ISSUE WAS DECIDED BY THE TRIBUNAL IN THE CASE OF THE ASSE SSEE VIDE ORDER DATED 26 TH NOVEMBER, 2009 IN ITA NOS. 426 AND 439/IND/2007 AND THE TRIBUNAL AFTER CONSIDERING THE SAME, DISMISSED THE APPEALS OF THE REVENUE WITH THE FOLL OWING OBSERVATIONS :- 18. GROUND NOS. 7 & 8 READ AS UNDER :- (7) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 1,97,121/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST DISALLOWED. (8) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 10,79,259/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF BENEFIT OF INTEREST PASSED ON TO OTHER SOCIETIES . 19. AS REGARDS TO ISSUE RAISED IN GROUND NOS. 7 & 8, W E FIND THAT THE ASSESSEE HAS GIVEN LOANS TO VARIOUS SOCIETIES, WITHOUT INTEREST FOR A SHORT PERIOD. IT IS ALSO NOTED THAT SUCH SOCIETIES ARE PURELY EDUCATIONAL AN D CHARITABLE, HAVING REGISTRATION U/S 12A OF THE INCO ME- TAX ACT, 1961. IT IS ALSO NOTED THAT THE ASSESSEE INSTITUTION IS NOT CARRYING ON ANY ACTIVITY OF PROF IT AND, THEREFORE, NO INTEREST WAS CHARGED FROM THE SA ID SOCIETIES. IT IS FURTHER NOTED THAT THE TRIBUNAL, W HILE RESTORING THE REGISTRATION U/S 12A TO THE ASSESSEE SOCIETY ALSO TOOK NOTE OF THE FACT OF INTEREST FREE LOAN GIVEN BY THE ASSESSEE TO VARIOUS SOCIETIES HAVING REGISTRATION U/S 12A AND ALSO OBSERVED THAT THE LD. CIT WHILE CANCELLING THE REGISTRATION U/S 12A, DID NOT 6 CONTROVERT THIS FACT, WHICH IMPLIEDLY MEANS THAT TH ESE ADVANCES HAVE BEEN FOUND BY THE TRIBUNAL TO HAVE BEEN MADE IN CONSONANCE WITH THE OBJECT OF THE ASSESSEE SOCIETY. FURTHER, THE LD. CIT(A) HAS ALSO GIVEN RELIEF AFTER CONSIDERING VARIOUS JUDICIAL DECISIONS. THE ASSESSEE HAS ALSO RELIED ON THE DECI SION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TRUSTEES OF JADI TRUST, AS REPORTED IN 133 ITR 494 AND OTHER JUDICIAL DECISIONS WHICH ALSO SUPPORT ITS CLAIM. ACCORDINGLY, WE HOLD THAT NO DISALLOWANCE IS WARRANTED OUT OF INTEREST PAID NOR ANY NOTIONAL INTEREST IS TO BE CHARGED AS INCOME. WE FURTHER HOL D THAT THE ASSESSEES INCOME IS LIABLE TO EXEMPTION U /S 11 & 12 OF THE ACT. THUS, THESE GROUNDS OF THE REVENUES APPEAL IS ALSO DISMISSED. 20. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 6. THE TRIBUNAL IN THE AFORESAID ORDER HAS ALSO DIS CUSSED THE BRIEF FACTS WHICH ARE ALSO REPRODUCED HEREUNDER :- 3. FIRST, WE SHALL TAKE UP REVENUES APPEAL IN I.T .A.NO. 426/IND/2007 FOR ASSESSMENT YEAR 2003-04. 4. THE GENERAL FACTS ARE THAT THE ASSESSEE IS A RE GISTERED SOCIETY, WHICH WAS GRANTED REGISTRATION U/S 12-A ON 2.5.2001, WITH EFFECT FROM 1.4.2000. HOWEVER, THE SAME WAS CANCELLED VIDE ORDER DATED 9.3.2006 BY THE LD. CIT(A), BHOPAL, SUBSEQUENT TO DENIAL OF EXEMPTION U /S 10(23-C)(VI), THE ASSESSEE FILED REVISED RETURN, WH EREIN INCOME WAS CLAIMED AS EXEMPT U/S 11/12 OF THE ACT, AS THE SOCIETY WAS HAVING A VALID REGISTRATION U/S 12A A AT THAT POINT OF TIME. HOWEVER, THE A.O. EXAMINED SUCH REVISED RETURN IN THE BACKGROUND OF THE FACT THAT T HE ASSESSEE WAS NOT HAVING EXEMPTION U/S 10(23C)(VI) A ND EXEMPTION U/S 11 & 12 WAS ALSO NOT AVAILABLE AT THA T POINT OF TIME AS THE SAME HAD ALSO BEEN CANCELLED SUBSEQUENT TO FILING OF REVISED RETURN. THEREAFTER, THE A.O. EXAMINED THE PAYMENT MADE BY THE SOCIETY TO SH RI ANIS KHAN IN REGARD TO BEST SERVICES PROVIDED BY ME TO ASSESSEE AND CIVIL CONTRACT GIVEN TO HIM BY THE SO CIETY. 7 THE A.O., AFTER EXAMINING THESE EXPENSES REFERRED T O THE PROVISIONS OF SECTION 13(3) READ WITH SECTION 13(2) (C) AND HELD THAT SINCE THE PERSON HAD BEEN BENEFITTED IN PERSONAL CAPACITY, HENCE, THE ASSESSEE WAS NOT ENTI TLED FOR EXEMPTION U/S 11/12 ON THE EXCESS PAYMENT OF RS. 31,120/-, THE AMOUNT OF EXTRA PROFIT. THE A.O. ALSO EXAMINED THE TRANSACTIONS OF MONEY GIVEN TO SHRI B.L.KHURANA, WHEREON NO INTEREST HAD BEEN CHARGED, WHICH, IN THE OPINION OF THE A.O., ATTRACTED THE PR OVISIONS OF SECTION 13. HENCE, HE HELD THAT COMPUTATION OF T OTAL INCOME OF ASSESSEE HAD TO BE DONE UNDER THE NORMAL PROVISIONS OF LAW. FURTHER, THE A.O. ALSO EXAMINED THE CREDIT ENTRY OF RS. 10 LAKHS APPEARING IN THE BANK ACCOUNT OF THE SOCIETY, WHICH WAS EXPLAINED BY THE ASSESSEE AS THE DIRECT PAYMENT BY ONE SHRI ROHIT JAIN, WHO HAD BEEN GIVEN AN ADVANCE OF RS. 10 LAKHS BY DR. SUNIL KAPOO R OUT OF HIS PERSONAL FUNDS. THE A.O., ACCORDINGLY, HELD THAT THE PAYMENT OF A SUM OF RS. 10 LAKHS TO DR. KAPOOR WAS A CASE OF UTILIZATION OF FUNDS OF THE SOCIETY BY HI M FOR PERSONAL BENEFIT. HENCE, FOR THIS REASON ALSO, THE PROVISIONS OF SECTION 13(1) WERE ATTRACTED AND, CONSEQUENTLY, THE ASSESSEE WAS NOT AN ELIGIBLE FOR EXEMPTION U/S 11 & 12. THE A.O. FURTHER ADDED A SUM OF RS. 10 LAKHS AS UNEXPLAINED CASH CREDIT. THE A.O. A LSO ADDED A SUM OF RS. 8,25,000/- BEING AMOUNT RECEIVED BY THE SOCIETY ON SALE OF A PART OF THE BUILDING FOR WANT OF PROPER EXPLANATION. SIMILARLY, THE ASSESSEE HAD GIV EN CERTAIN DONATIONS, WHICH WERE ALSO ADDED BACK TO TH E INCOME OF THE SOCIETY. THE A.O. ALSO ADDED PRELIMIN ARY EXPENSES WRITTEN OFF BY THE ASSESSEE. FINALLY, THE A.O. EXAMINED THE VARIOUS LOANS GIVEN BY THE ASSESSEE TO VARIOUS SOCIETIES WITHOUT INTEREST AND FOUND THAT FOUNDERS/MEMBERS OF THOSE SOCIETIES WERE ALSO OFFIC E BEARERS OF THIS SOCIETY, HENCE, HE HELD THAT IT WAS A CASE OF DIVERSION OF FUND WITHOUT INTEREST AND, THEREFORE, HE, NOT ONLY DISALLOWED THE INTEREST ON BORROWED FUNDS, BUT ALSO ADDED A SUM OF RS. 10,79,259/- AS NOTIONAL INTEREST , WHICH COULD HAVE BEEN EARNED BY THE ASSESSEE ON SUC H INTEREST FREE LOANS. THEREAFTER, HE ALSO ADDED THE EXCESS OF INCOME OVER EXPENDITURE, IN ADDITION TO THE SPECIFI C DISALLOWANCES/ADDITIONS AND COMPUTED THE TOTAL INCO ME OF THE ASSESSEE AT RS. 4,02,89,190/-. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A), 8 WHO PASSED THE APPELLATE ORDER ON 25.4.2007, AFTER TAKING INTO CONSIDERATION, THE ORDER OF THE TRIBUNAL DATED 19.1.2007, WHEREIN THE TRIBUNAL HAD RESTORED REGIST RATION U/S 12-A TO THE ASSESSEE, THEREBY ENABLING THE ASSE SSEE TO CLAIM EXEMPTION U/S 11/12 OF THE ACT. THE LD. CIT(A ), THEREAFTER, EXAMINED EACH AND EVERY ISSUE AND DELET ED ALL THE ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THIS, THE REVENUE IS IN APPEA L BEFORE US. 5. THE LD. CIT DR, NARRATED THE FACTS AND SUBMITTED THAT IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN I.T.A.NO. 235/IND/2008 AGAINST THE ORDER OF LD. CIT CANCELLING REGISTRATION TO THE ASSESSEE U/S 12A , WHEREIN THE TRIBUNAL HAD CONSIDERED ALMOST ALL THE ISSUES ON MERITS AND THAT DECISION OF THE TRIBUNAL, BEING BINDING AT THE MOMENT, HENCE, HE WAS PREFERRING TO RELY ON THE ORDER OF A.O. HE, HOWEVER, ARGUED THAT THE TRIBUNAL HAD THOUGH RESTORED THE REGISTRATION U/S 12A, BUT THE T RIBUNAL HAD ALSO OBSERVED THAT THE REVENUE DEPARTMENT WAS F REE TO EXAMINE CLAIMS OF THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS AS PER LAW AND IN THE PRESEN T CASE, THE A.O. HAD NOT GOT THIS OPPORTUNITY. WE ARE AFRAID THAT THIS CONTENTION OF THE LD. CIT DR DOES NOT HAV E ANY MERIT, BECAUSE THE A.O. HAS MADE SPECIFIC DISALLOWANCES/ADDITIONS BY APPLYING PROVISIONS OF SECTION 13 OF THE ACT, WHICH, BY ITSELF, MEANS THAT THE A.O. HAS EXERCISED SUCH AUTHORITY EVEN WITHOUT THE IMPUGNED ORDER OF THE TRIBUNAL IN THE COURSE OF FRA MING OF THE ASSESSMENT. ACCORDINGLY, THE SAME IS REJECTE D. 7. IN THE LIGHT OF THE ABOVE UNCONTROVERTED FACTS A ND THE DECISION OF THE TRIBUNAL (SUPRA), WE HAVE NO HESITA TION IN DISMISSING THE APPEALS OF THE REVENUE AND REFRAININ G OURSELVES FROM REPEATING THE SAME FACTS AGAIN. 9 RESULTANTLY, THE IMPUGNED GROUNDS RAISED BY THE REVENUE ARE DISMISSED, THEREFORE, THESE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES OF BOTH THE SIDES AT THE CO NCLUSION OF HEARING ON 15 TH APRIL, 2010. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER APRIL 15 TH , 2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE *DBN/