The ACIT,3(1), V. M/s Noble Friends Foundation,

ITA 454/IND/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1476 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-11-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 17-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T K SHAH
• Keywords: Unexplained cash credit; Depreciation; Charitable institution; Bonafide belief
• Section: 143(3); 12AA; 131; 68

Judgement Text

1 IN THE INCOME TAX APPELATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI V.K. GUPTA, AM ITA NO. 454/IND/07 A.Y. 2004-05 ASSTT. COMMR. OF INCOMETAX 3(1) INDOREL APPELLANT VS M/S NOBLE FRIENDS FOUNDATION, INDORE RESPONDENT PAN AAATN-3869-J APPELLANT BY SHRI T.K. SHAH, CIT DR RESPONDENT BY SHRI ANIL KAMAL GARG, CA O R D E R PER JOGINDER SINGH, JM THIS APPEAL IS BY THE REVENUE CHALLENGING THE ORDE R OF THE CIT(A)-I, INDORE, DATED 29.5.2007. DURING HEARI NG OF THIS APPEAL WE HAVE HEARD SHRI T.K. SHAH, LEARNED CIT DR AND SHRI ANIL GARG, LEARNED COUNSEL FOR THE ASSESSEE. 2 2. THE FIRST GROUND RAISED BY THE REVENUE IS THAT I N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED C IT(A) ERRED IN DELETING THE ADDITION OF RS.5 LACS MADE BY THE A O ON ACCOUNT OF CASH CREDIT. 3. THE LEARNED CIT DR CONTENDED THAT THE ASSESSEE T OOK UNSECURED LOAN OF RS. 7 LACS FROM SHRI M.L. MANGAL DURING THE A.Y. 2004-05 AND ON ASKING BY THE DEPARTMENT, THE A DDRESS OF SHRI M.L. MANGAL WAS NOT FURNISHED BY THE ASSESSEE. CONSEQUENTLY, IT WAS PLEADED THAT THE IMPUGNED LOAN WAS BOGUS, THEREFORE, IT WAS RIGHTLY ADDED AS UNEXPLAIN ED CREDIT UNDER SECTION 68 OF THE ACT. ON THE OTHER HAND, TH E LEARNED COUNSEL FOR THE ASSESSEE STRONGLY CONTROVERTED THE ASSERTIONS OF THE REVENUE BY PLEADING THAT NECESSARY CONFIRMAT ION OF SUCH LOANS WAS DULY FURNISHED BY THE ASSESSEE VIDE LETTER DATED 31.9.2006 FOR WHICH OUR ATTENTION WAS INVITED TO THE PAPER BOOK OF THE ASSESSEE. THE IMPUGNED ORDER WAS STRONGLY DEFENDED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE BRIEF FACTS A RE THAT THE 3 ASSESSEE IS A PUBLIC CHARITABLE TRUST CREATED ON 14 .2.1994 AND ALSO REGISTERED UNDER THE MADHYA PRADESH PUBLIC TRU ST ACT, 1951 AS IS EVIDENT FROM THE MATERIAL AVAILABLE ON R ECORD. THE MAIN OBJECT OF THE ASSESSEE IS TO RUN EDUCATIONAL I NSTITUTION UNDER THE NAME AND STYLE OF 'NATIONAL PUBLIC SCHOO L'. DURING THE RELEVANT PERIOD THE ASSESSEE TOOK A LOAN OF RS. 5 LACS FROM ONE SHRI MANOHARLAL MANGAL, RESIDENT OF INDORE, THR OUGH ACCOUNT PAYEE CHEQUE. ADMITTEDLY, THE ASSESSEE FUR NISHED THE DETAILS OF VARIOUS UNSECURED LOANS TAKEN BY THE ASSESSEE AS IS EVIDENT FROM PAGE 94 OF THE PAPER BOOK FILED BY THE ASSESSEE. WE HAVE ALSO FOUND THAT THE ASSESSEE FUR NISHED CONFIRMATION OF LOANS SO OBTAINED BY IT. THE IMPUG NED ADDITION WAS MADE MERELY ON THE PLEA THAT THE ADDRE SS OF THE CREDITOR WAS NOT MENTIONED IN THE LETTER OF CONFIRM ATION. EVEN THERE IS AN UNCONTROVERTED FINDING IN THE IMPUGNED ORDER ABOUT THE NECESSARY DETAILS OF LOANS FROM SHRI MANOHARLAL MANGAL SHOWING THE OPENING BALANCE OF RS. 2 LACS, THEREFOR E, FRESH LOAN OF RS. 5 LACS, INTEREST OF RS. 32,500/- AND RE PAYMENT OF LOAN ALONG WITH INTEREST, ALONGWITH CLOSING BALANCE WAS DULY 4 FURNISHED BY THE ASSESSEE. THE ASSESSEE ALSO FURNIS HED THE DETAILS LIKE ADDRESS AND PAN OF THE CREDITOR. THE CREDITOR DULY CONFIRMED THE TRANSACTION OF LOAN AND ITS REPAYMENT AS IS EVIDENT FROM PAGE 96. THE CREDITOR SHRI MANOHARLA L MANGAL IS REGULARLY ASSESSED TO TAX (PAN ABWPM 2546A). COPIES OF INCOME TAX RETURN AND COMPUTATION OF INCOME OF THE CREDITOR ARE AVAILABLE AT PAGES 97 TO 99 OF THE PAPER BOOK. THE AMOUNT OF RS. 5 LACS WAS TAKEN THROUGH ACCOUNT PAYE E CHEQUE NO. 07995 DATED 9.5.2003 DRAWN AT BANK OF BA RODA, INDORE. IN VIEW OF THIS FACT, WE DO NOT FIND ANY I NFIRMITY IN THE CONCLUSION DRAWN BY THE LEARNED FIRST APPELLATE AUT HORITY, THEREFORE, THIS GROUND OF THE REVENUE IS HAVING NO MERIT, CONSEQUENTLY, THE SAME IS DISMISSED. 5. THE NEXT GROUND IS THAT THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF LUNCH EXPENSES. THE LEARNED CIT DR, MR. SHAH, SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE DEFEND ED THE IMPUGNED ORDER. MR. SHAH FURTHER POINTED OUT THAT A N AMOUNT OF RS.11,08,596/- WAS PAID TO ONE SMT. KAMLA MANGA L FOR 5 PROVIDING LUNCH TO NATIONAL PUBLIC SCHOOL. ON ASKI NG BY THE DEPARTMENT, SMT. KAMLA MANGAL COULD NOT BE PRODUCED AS IT WAS CLAIMED THAT SHE WAS NOT IN TOUCH WITH THE ASSE SSEE FOR THE LAST ABOUT ONE YEAR. THE IMPUGNED AMOUNT WAS AR GUED TO BE RIGHTLY CONSIDERED AS BOGUS EXPENDITURE. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT NECESSARY DET AILS WERE DULY FURNISHED BY THE ASSESSEE BY CLAIMING THAT THE RE WERE ABOUT 470 STUDENTS IN THE SCHOOL ITSELF FOR WHICH A CONTRACT WAS GIVEN TO SMT. KAMLA MANGAL FOR PROVIDING LUNCH. TH E ASSESSEE WAS CHARGING LUNCH FEES FROM THE STUDENTS WHO WERE AVAILING SUCH FACILITY. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE SCH OOL WAS RUNNING FROM 7.00 AM TO 3.00 PM AND WAS CHARGING LU NCH FEES FROM THE STUDENTS AVAILING SUCH FACILITY. DURING A SSESSMENT PROCEEDINGS THE LEARNED AO ASKED THE ASSESSEE TO FU RNISH COPY OF THE WRITTEN AGREEMENT WITH THE CONTRACTOR. HOWEVER, THE ASSESSEE VIDE LETTER DATED 11.9.2006 (PAPER BOO K PAGE 6 49) CLAIMED THAT NO SUCH WRITTEN AGREEMENT WAS ENTE RED INTO. HOWEVER, THE ASSESSEE SUBMITTED MONTHLY BILLS OF TH E CONTRACTOR (PAGES 82 TO 91 OF THE PAPER BOOK). THE CONTRACTOR ALSO FURNISHED A CERTIFICATE DATED 28.7.2003. THE ASSESSEE ALSO FURNISHED A COPY OF BANK STATEMENT OF THE CONT RACTOR FOR THE RELEVANT PERIOD (PAGE 81 OF THE PAPER BOOK). H OWEVER, THE SUMMONS ISSUED UNDER SECTION 131 OF THE ACT TO THE CONTRACTOR WERE RETURNED UNSERVED. CONSEQUENTLY, THE AMOUNT OF RS.11,08,596/- WAS HELD TO BE BOGUS. IT IS AN UNCON TROVERTED FACT THAT IN EARLIER YEARS ALSO IDENTICAL LUNCH CHA RGES WERE PAID BY THE ASSESSEE AND THE SAME WERE DULY ALLOWED BY T HE AO EVEN AFTER MAKING SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT. IT IS ALSO A FACT THAT THE ASSESSEE WA S PROVIDING LUNCH FACILITY TO ITS STUDENTS AND COLLECTED LUNCH FEE OF RS. 16,48,950/- (PAGE 78 OF THE PAPER BOOK) AND AFT ER MAKING THE PAYMENT OF RS.10,92,721/- (AND NOT RS.11,08,596 /- STATED IN THE ASSESSMENT ORDER) TO THE CONTRACTOR, THE REM AINING SURPLUS OF RS.5,40,354/- WAS DULY SHOWN AS INCOME F ROM OTHER SOURCES (PAGE 33 OF THE PAPER BOOK). THE ASSESSEE W AS 7 MAKING MONTHLY PAYMENT TO THE CONTRACTOR AND THE CO NTRACTOR WAS DULY ASSESSED TO INCOME TAX (PAN ABUPM 7840B). THE ENTIRE PAYMENT TO CONTRACTOR WAS MADE THROUGH ACCOU NT PAYEE CHEQUE ONLY (PAGES 81 AND 92 TO 93 OF THE PAPER BOO K). IT IS ALSO AN UNDISPUTED FACT THAT THE CONTRACTOR WAS NOT RELATED TO THE ASSESSEE TRUST OR ITS TRUSTEES. IN VIEW OF THE SE FACTS, WE ARE SATISFIED THAT THE GENUINENESS OF THE PAYMENT I S ESTABLISHED. CONSEQUENTLY, THE LEARNED FIRST APPELL ATE AUTHORITY IS QUITE JUSTIFIED IN DELETING THE IMPUGNED ADDITIO N. THIS GROUND OF REVENUE IS, THEREFORE, DISMISSED. 7. THE NEXT GROUND PERTAINS TO DELETING OF THE ADDI TION MADE IN RESPECT OF UNEXPLAINED REFUNDABLE DEPOSIT. THE LEARNED CIT DR SUPPORTED THE ASSESSMENT ORDER WHERE AS THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUG NED ORDER. THE CRUX OF THE ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE ACCEPTED DEPOSITS FROM VARIOUS PE RSONS AT THE TIME OF SETTING UP OF THE ASSESSEE TRUST IN 198 6. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. ON PERUSAL OF RE CORD AND 8 AFTER CONSIDERING THE RIVAL SUBMISSIONS, IT IS SEEN THAT THE REFUNDABLE DEPOSIT OF RS. 43,09,500/- WAS AVAILABLE IN THE BALANCE SHEET OF THE ASSESSEE. THE ASSESSEE WAS AS KED TO EXPLAIN THE NATURE OF THESE DEPOSITS ALONG WITH PRO OF THEREOF. THE ASSESSEE VIDE REPLY DATED 27.8.2006 CLAIMED THA T SUCH REFUNDABLE DEPOSITS WERE ACCEPTED BY THE ASSESSEE T RUST IN EARLIER YEARS FROM PARENTS OF THE STUDENTS, FRIENDS , RELATIVES AND OTHER ASSOCIATES OF TRUSTEES. THE ASSESSEE DULY MAINTAINED A SEPARATE REGISTER IN WHICH NECESSARY D ETAILS SUCH AS NAMES AND ADDRESSES, DATE AND AMOUNT, ETC. ARE MENTIONED. SUCH DEPOSITS WERE TAKEN WITHOUT PAYMEN T OF INTEREST. IN THE PREVIOUS YEAR RELEVANT TO THE ASSE SSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS NOT RECEIVED ANY AMO UNT OF SUCH REFUNDABLE DEPOSIT. THE REGISTER COULD NOT BE PRODUCED BEFORE THE AO FOR WHICH THE ASSESSEE HAS SOUGHT SOM E TIME FOR PRODUCTION OF THE SAME. HOWEVER, THE LEARNED A O MADE THE IMPUGNED ADDITION ON THE PLEA THAT SINCE THE AS SESSEE HAS NOT PRODUCED THE REGISTER, HE HAD NO OPTION BUT TO CONSIDER THE SAME AS TRADE LIABILITY WHICH WAS ADDED TO THE RETU RNED 9 INCOME. THE IMPUGNED AMOUNT AMOUNT WAS TAKEN BY TH E TRUST YEARS BACK FOR CONSTRUCTION PURPOSES AS CAUTION MON EY. THE LEARNED AO MADE THE ADDITION BY PLACING RELIANCE ON SECTION 41(1) OF THE ACT. THE SUBMISSIONS OF THE ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY ARE AS UNDER :- I) THAT, DURING THE YEAR UNDER REVIEW, THE APPELLANT TRUST HAS ACCEPTED NOT ANY SUM UNDER THE HEAD OF REFUNDABLE DEPOSIT AND THE ENTIRE SUM WAS RECEIVED BY IT IN EARLIER YEARS FROM THE PARENTS OF THE STUDENTS AND FRIENDS, RELATIVES AND OTHER ASSOCIATES OF THE TRUSTEES. II) THAT, DURING THE ENTIRE ASSESSMENT PROCEEDINGS, THE APPELLANT WAS ASKED ONLY ONCE I.E. BY NOTICE DATED 11-08-2006, TO EXPLAIN THE NATURE OF REFUNDABLE DEPOSIT AND TO GIVE THE NAME AND ADDRESS OF THE PERSONS FROM WHOM SUCH REFUNDABLE DEPOSIT WAS TAKEN. ACCORDINGLY, THE APPELLANT VIDE ITS SUBMISSION LETTER DATED 27.08.2006 HAD EXPLAINED THE NATURE OF REFUNDABLE DEPOSIT. IT WAS FURTHER EXPLAINED THAT DURING THE RELEVANT PREVIOUS YEAR NO SUM WAS TAKEN ON ACCOUNT OF REFUNDABLE DEPOSIT. SINCE THE REGISTER CONTAINING THE NAME AND ADRESS OF SUCH DEPOSITORS WAS NOT TRACEABLE AT THE RELEVANT TIME AND THEREFORE SOME FURTHER TIME FOR PRODUCING THE REGISTER WAS SOUGHT. HOWEVER, THE LEARNED ASSESSING OFFICER DURING THE COURSE OF SUBSEQUENT PROCEEDINGS HAD NOT INSISTED FOR PRODUCTION OF SUCH REGISTER AND THEREFORE THE APPELLANT WAS UNDER BONAFIDE BELIEF THAT BECAUSE OF NON-ACCEPTANCE OF ANY FRESH DEPOSIT DURING THE YEAR UNDER REVIEW SUCH REGISTER WAS NOT OF MUCH CONCERN TO THE 10 LEARNED ASSESSING OFFICER AND THEREFORE THE SAME COULD NOT BE PRODUCED BEFORE THE LEARNED ASSESSING OFFICER DURING THE COURSE OF ENTIRE ASSESSMENT PROCEEDINGS. SIR, NOW SINCE THE APPELLANT COULD BE ABLE TO TRACE OUT SUCH REGISTER AND THEREFORE THE SAME IS BEING PRODUCED HEREWITH FOR KIND PERUSAL OF YOUR HONOUR. III) THAT, SUCH DEPOSITS ARE IN FACT IN THE NATURE OF REFUNDABLE DEPOSITS AND THE SAME ARE REQUIRED TO BE REFUNDED TO THE PERSONS FROM WHOM IT WAS TAKEN BY THE APPELLANT TRUST IN EARLIER YEARS. HOWEVER, DUE TO THE PAUCITY OF FUNDS AND ADVERSE FINANCIAL POSITION (WHICH IN ITS TURN WAS A RESULT OF CONTINUOUS HEAVY LOSSES SUSTAINED BY THE APPELLANT) THE SAME COULD NOT BE REFUNDED BY THE TRUST. A STATEMENT SHOWING LOSSES BY THE APPELLANT TRUST IN EARLIER YEARS IS BEING SUBMITTED FOR KIND PERUSAL AND RECORD OF YOUR HONOUR AS ANNEXURE A-5.00 (PAGE NO. 59). IV) THAT, MOST OF SUCH DEPOSITS WERE TAKEN BY THE APPELLANT FROM THE FRIENDS AND RELATIVES OF THE TRUSTEES AND VERY MEAGER AMOUNT WAS TAKEN FROM SOME OF THE PARENTS OF THE STUDENTS. IT WOULD BE WORTHWHILE TO NOTE THAT THE DEPOSIT BY PARENTS OF THE STUDENTS WERE NOT GIVEN IN LIEU OF ANY TUITION FEES OR OTHER CHARGES OF THE SCHOOL BUT THE SAME WERE GIVEN BY THEM PURELY TO PROVIDE NEED BASED FUNDS TO THE APPELLANT TRUST AND ITS EDUCATIONAL INSTITUTION AS LOANS. IT WOULD ALSO BE PERTINENT T O NOTE THAT VERY FEW PARENTS OF THE STUDENTS HAVE GIVEN SUCH DEPOSIT TO THE TRUST AND FURTHER THERE WAS NO CONDITION IMPOSED BY THE TRUST ON SUCH PARENTS FOR PROVIDING THE DEPOSITS AND SUCH DEPOSIT WERE SUO-MOTTO PROVIDED BY THEM TO THE TRUST. 11 V) THAT, DURING THE PRECEDING YEARS THE APPELLANT T RUST HAD REFUNDED SOME PART OF THE DEPOSITS ACCEPTED BY IT. A STATEMENT SHOWING YEARWISE DETAILS OF DEPOSITS REFUNDED BY THE APPELLANT IN EARLIER YEARS IS BEING SUBMITTED HEREWITH FOR YOUR HONOURS KIND PERUSAL AND RECORD AS ANNEXURE A-6.01 (PAGE NO. 60.01). FURTHER, X-EROX COPY OF THE CHEQUES ISSUED TO VARIOUS DEPOSITORS DURING THE FINANCIAL YEAR 2006-07 ARE ALSO BEING SUBMITTED HEREWITH FOR YOUR KIND PERUSAL AND RECORD AS ANNEXURE A-6.02 (PAGE NO. 60.02 TO 60.17) VI) THAT, STILL THE APPELLANT TRUST IS INCURRING HE AVY LOSSES BUT IT IS UNDER TREMENDOUS PRESSURES FROM ALL THE PERSONS FOR REFUND OF SUCH LOAN AND DURING THE CURRENT YEAR THE APPELLANT TRUST HAS PLANNED TO REFUND SUCH DEPOSITS BY MAKING SOME CREDIT FACILITY ARRANGEMENTS WITH ITS BANKERS. IN ORDER TO SUBSTANTIATE THE CLAIM OF THE APPELLANT THAT DEPOSITORS ARE INSISTING FOR REFUND OF THEIR DEPOSI TS, WE ARE SUBMITTING HEREWITH SPECIMEN COPY OF SOME OF THE LETTERS WRITTEN BY SUCH DEPOSITORS TO THE APPELLANT TRUST (ANNEXURE A-7.01 TO A-7.05) (PAGE NO. 61 TO 65). IN ONE OR TWO CASES, THE APPELLANT HAS EVEN RECEIVED LEGAL NOTICES FROM SUCH DEPOSITORS. VII) THAT, THE LEARNED ASSESSING OFFICER GROSSLY ER RED IN ASSUMING THAT THE ENTIRE AMOUNT OF REFUNDABLE DEPOSIT WAS TAKEN FROM PARENTS OF THE CHILDREN WITHOUT BRINGING ANY MATERIAL ON RECORD. THE FACTS REMAINED THAT ONLY A PART OF SUCH DEPOSIT WAS TAKEN FROM SOME OF THE PARENTS OF THE STUDENTS AND SUCH PARENTS HAPPENS TO BE FRIENDS OF THE TRUSTEES OF THE TRUST AND UNDER CONSIDERATION OF FRIENDSHIP THEY HAD HELPED THE APPELLANT TRUST BY PROVIDING INTEREST FREE LOANS. THE LEARNED ASSESSING OFFICER 12 ALSO ERRED IN GIVING A FINDING MERELY ON GUESS WORK THAT THE APPELLANT WAS NOT INTENDED TO RETURN BACK SUCH DEPOSITS TO THE PARENTS. IT HAS BEEN PRONOUNCED BY THE HON. MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. DEORA PU CANBEON MFG. CO. (P) LTD. (1985) 47 CTR (MP) 324 THAT UNLESS AND UNTIL A POSITIVE FINDING IS BROUGHT ON RECORD THAT THE SUM IS NOT REFUNDABLE NO ADDITION U/S 41(1) CAN BE MADE. VII) THAT, THE LEARNED ASSESSING OFFICER GROSSLY ER RED IN HOLDING THE AMOUNT OF THE REFUNDABLE DEPOSITS AS THE TRADING LIABILITY OF THE APPELLANT. YOUR HONOUR, IT APPEARS THAT THE LEARNED ASSESSING OFFICER HAS MISCONSTRUED THE FACTS OF THE CASE. THE LEARNED ASSESSING OFFICER OUGHT TO HAVE CONSIDERED THAT THE AMOUNT LYING UNDER THE HEAD REFUNDABLE DEPOSIT WAS NOT REPRESENTING ANY LIABILITY ARISING FROM CLAIM OF ANY EXPENDITURE BY THE APPELLANT IN PAST AND THEREFORE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 41 OF THE INCOMETAX ACT, 1961 WAS NOT APPLICABLE IN INSTANT CASE. IT WOULD BE APPRECIATED BY YOUR HONOUR THAT THE FIRST AND FOREMOST CONDITION FOR INVOKING PROVISIONS OF SECTION 41(1) IS THAT ANY ALLOWANCE O R DEDUCTION SHOULD HAVE BEEN ALLOWED BY WAY OF LOSS OR EXPENDITURE TO THE ASSESSEE IN RESPECT OF THE REMISSION OR CESSATION OF THE SUBJECT LIABILITY . IN THE INSTANT CASE IT IS AN UNDISPUTED FACT THAT T HE APPELLANT HAD NOT CLAIMED ANY LOSS OR EXPENDITURE IN RESPECT OF THE IMPUGNED LIABILITY AND THEREFORE THE QUESTION OF INVOKING PROVISIONS OF SECTION 41(1 ) DOES NOT APPLY TO THE APPELLANTS CASE. RELIANCE I S PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS : A)CIT V. CHETAN CHEMICALS(P)LTD.(2004) 188 CTR(G UJ) 572) B)CIT V. PHOOLCHAND JIWANRAM(1981) 131 ITR 37 (DEL ) C)MAHINDRA & MAHINDRA LTD.V.CIT(2003) 182 CTR (BOM ) 34 D)CIT V. A.V.M.LTD. (1986) 56 CTR (MAD) 171 E)CIT V. THAKURDAS JAIPRAKASH & CO.(1985) 45 CTR(M P) 301 F)NAUBRAM NANDRAM V.CIT (1972) 86 ITR 805 (MP) 13 G)PRISM CEMENT LTD. V.JCIT(2006) 103 TTJ (MUM) 63 H)CIT V. INDIAN CEMENTS LTD.(1975)98 ITR 69 (MAD) I)CIT V. NATHUBHAI DESABHAI (1981) 130 ITR 238 (MP ) VIII) THAT, SINCE THE AMOUNT OF DEPOSIT WAS NOT COLLECTED BY THE APPELLANT DURING THE COURSE OF ITS TRADING ACTIVITY BUT THE SAME WAS TAKEN AS LOAN ONLY AND THEREFORE SUCH AMOUNT COULD NOT BE REGARDED AS PART OF THE REVENUE RECEIPTS. IN SUCH CASE THE RATIO OF HON. APEX COURT IN THE MATTER OF CIT V. THIRUMALASWAMY & SONS (1998) 146 CTR (SC) 529 WOULD HAVE NO APPLICATION. IX) THAT, THE LEARNED ASSESSING OFFICER OUGHT TO HA VE CONSIDERED THAT THE ASSESSMENT OF THE APPELLANT TRUST FOR THE IMMEDIATELY PRECEDING YEAR WAS ALSO MADE U/S 143(3) OF THE INCOMETAX ACT, 1961. DURING THE COURSE OF ASSESSMENT FOR SUCH YEAR THE FACT OF REFUNDABLE DEPOSIT HAVING BEEN ACCEPTED BY THE APPELLANT IN EARLIER YEARS, WAS ALSO BEFORE THE THEN LEARNED ASSESSING OFFICER. SINCE FOR SUCH ASSESSMENT YEAR NO ADVERSE VIEW IN RESPECT OF SUCH DEPOSIT WAS TAKEN AND THEREFORE IN ABSENCE OF ANY FRESH ADVERSE MATERIAL ON RECORD OR ANY UNILATERAL OR BILATERAL ACT ON PART OF THE APPELLANT TO WRITE-OFF SUCH AMOUNT IN ITS BOOKS OF ACCOUNTS FOR THE YEAR UNDER REVIEW, THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED TO HOLD THAT THERE WAS CESSATION OF THE ENTIRE AMOUNT OF REFUNDABLE DEPOSIT IN THE YEAR UNDER REVIEW ONLY. AT LAST, AS AN ALTERNATE ARGUMENT IT IS SUBMITTED THAT DESPITE OUR ABOVE SUBMISSIONS THE ADDITION SO MADE U/S 41(1) IS UPHELD EVEN IN SUCH A CASE IT WOULD BECOME AN INCOME OF THE EDUCATIONAL INSTITUTION AND THEREFORE ITS ENTIRE INCOME WOULD QUALIFY FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT IN THE LIGHT OF OUR SUBMISSIONS MADE IN RESPECT OF GROUND NO. 6 14 SUPRA. 9. IF THE SUBMISSIONS OF THE ASSESSEE AND THE ARGUM ENTS ADVANCED BY THE LEARNED RESPECTIVE COUNSELS ARE ANALYSED, WE ARE OF THE VIEW THAT THE FOREMOST CONDITION FOR INVOKING THE PROVISIONS OF SECTION 41 (1) OF THE ACT IS THAT ANY ALLOWANCE OR DEDUCTION SHOUL D HAVE BEEN ALLOWED BY WAY OF LOSS OR EXPENDITURE TO THE ASSESSEE IN RESPECT OF REMISSION OR CESSATION O F THE LIABILITY. IN THE PRESENT APPEAL, IT IS AN UNDI SPUTED FACT THAT THE ASSESSEE NEITHER CLAIMED ANY LOSS NOR ANY EXPENDITURE IN RESPECT OF SUCH LIABILITY. THEREFORE, THERE IS NO QUESTION OF INVOKING SECTION 41(1) OF THE ACT. THE JUDICIAL PRONOUNCEMENTS MENTIONED IN THE SUBMISSIONS OF THE ASSESSEE SUPPORTS THE CASE OF THE ASSESSEE. IN VIEW OF THE ABOVE, SINCE THE AMOUNT OF DEPOSIT WAS NOT COLLECTE D AS TRADE ACTIVITY RATHER TAKEN AS A LOAN, THE IMPUG NED AMOUNT CANNOT BE REGARDED AS PART OF REVENUE RECEIPT. EVEN OTHERWISE, FOR MAKING THE ASSESSMENT 15 FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR THAT TOO UNDER SECTION 143(3) OF THE ACT, SUCH REFUNDABL E DEPOSITS HAVE BEEN ACCEPTED. THEREFORE, THE DEPARTMENT IS NOT PERMITTED TO TAKE A CONTRARY STAN D WITHOUT BRINGING ANY COGENT MATERIAL ON RECORD. EV EN OTHERWISE,FOR THE SAKE OF CONSISTENCY, THE DEPARTME NT IS NOT PERMITTED TO TAKE A STAND WHICH CANNOT BE SUBSTANTIATED BY DOCUMENTARY EVIDENCE ESPECIALLY WHEN THERE WAS NO FRESH OR ADVERSE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THESE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER. CONSEQUENTLY, ON THIS ISSUE ALSO THE STAND OF THE LEARNED FIRST APPELLATE AUTHORITY IS AFFIRMED. 10. THE LAST GROUND RAISED BY THE REVENUE PERTAINS TO GRANTING EXEMPTION UNDER SECTION 10(23C) OF THE ACT ON THE PLEA THAT THE OBSERVATION OF THE AO WAS NOT APPRECIATED PROPERLY. THE LEARNED CIT DR INVITED OU R ATTENTION TO PAGE 4 OF THE ASSESSMENT ORDER ALONG WITH PARA 4.5 OF THE IMPUGNED ORDER. THE LEARNED 16 COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO T HE WRITTEN SUBMISSIONS REPRODUCED IN THE IMPUGNED ORDER. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS THAT THE OBSERVATION OF THE AO HAS NOT BEEN PROPERLY APPRECIATED WHILE GRANTING EXEMPTION UNDER SECTION 10(23C) OF THE ACT. THE ASSESSEE CLAIMED THAT IT W AS RUNNING AN EDUCATIONAL INSTITUTION. THEREFORE, THE ENTIRE INCOME WAS EXEMPT UNDER SECTION 10(23C)(IIIAD) OF THE ACT AND THIS WAS ALSO MENTION ED WHILE FILING THE RETURN OF INCOME ALONG WITH COMPUTATION OF INCOME ACCOMPANYING SUCH RETURN. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO EXPLAIN THE AMOUNT OF RS.5,40,345/-. THE STAND OF THE AO AS WELL AS THE ASSERTION OF THE LEARNED CIT DR IS THAT SINCE THE ASSESSEE CLAIMED BOGUS EXPENDITURE ON ACCOUNT OF LUNCH CHARGES, 17 CREDITED UNEXPLAINED CREDITS IN THE BOOKS OF ACCOUN TS AND HAS CHARGED HIGHER RATE OF DEPRECIATION ON BUSE S AND HAS NOT REFUNDED THE DEPOSITS, CONSEQUENTLY THE ASSESSEE IS NOT ENTITLED TO SUCH EXEMPTION UNDER SECTION 10(23C) OF THE ACT. HOWEVER, WE ARE OF THE VIEW THAT FOR CLAIMING EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT, THE ONLY REQUIREMENT IS THAT THE EDUCATIONAL INSTITUTION OR THE UNIVERSITY, AS T HE CASE MAY BE, SHOULD SOLELY EXIST FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROFIT. FROM A PERUSAL OF INCOME AND EXPENDITURE ACCOUNT AS AVAILABLE IN THE PAPER BOOK, WE HAVE FOUND THAT THE ASSESSEE TRUST WAS NOT CREATED FOR PROFIT RATHER ACTIVITIES ARE TO IMPART EDUCATION TO STUDENTS. TH E INSTITUTION IS RUN BY THE CHARITABLE TRUST. THE TR USTEES ARE NOT ALLOWED TO TAKE ANY DIVIDEND OR PROFIT FROM THE TRUST AND THE INSTITUTION IS BEING RUN WITH NO PROF IT MOTIVE AND ON THE CONTRARY IT IS INCURRING HEAVY LO SSES FROM YEAR TO YEAR AND THE RESULTANT LOSS IS TO THE 18 EXTENT OF RS. 10,92,823/-. THERE IS ACCUMULATION O F LOSSES OF RS.1,07,39,367/- AS ON 31.3.2004 AS AGAIN ST THE ACCUMULATED SURPLUS ACCUMULATED AT RS.7,19,139/- IN THE BOOKS OF THE SCHOOL. AS PER T HE BOOKS OF ACCOUNTS, THE GROSS RECEIPTS ARE RS.88,55,617/- FOR THE YEAR ENDING ON 31.3.2004 AND ADMITTEDLY ARE BELOW THE LIMIT OF RS.1 CRORE. THE ASSESSEE WAS SUBSEQUENTLY GRANTED REGISTRATION UNDER SECTION 12AA OF THE ACT BY THE LEARNED CIT ALSO. IN VIEW OF THESE FACTS, WE ARE NOT IN AGREEM ENT WITH THE STAND OF THE REVENUE (AO) BECAUSE MERELY ON THE GROUND THAT CERTAIN EXPENSES WERE CLAIMED BY THE ASSESSEE OR TRUST OR DISALLOWED, THE ASSESSEE CANNOT BE DEPRIVED OF ITS RIGHT TO CLAIM THE LEGITI MATE EXEMPTION CONFERRED UNDER SECTION 10(23C)(IIIAD) OF THE ACT. EVEN OTHERWISE, THE ISSUE OF GRANT OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT H AS ATTAINED FINALITY IN THE CASE OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 2003-04 AS IS EVIDENT FROM PAGES 19 101 TO 110 OF THE PAPER BOOK. IN VIEW OF THESE FAC TS, THIS GROUND OF THE REVENUE IS ALSO HAVING NO MERIT. THE STAND OF THE LEARNED CIT(A) IS AFFIRMED. 12 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON 25 TH NOVEMBER, 2009. SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER NOVEMBER 25 , 2009. COPY TO APPELLANT/RESPONDENT/CIT/CIT(A)/DR D/