The DCIT, 1(1), Bhopal V. M/s Tapasya Shiksha Samiti, Bhopal

ITA 46/IND/2011

• Counselvise Citation: 4622714 RSA 2011
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 23-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Keywords: Capital asset; Charitable institution
• Section: 12A; 12AA; 12; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NOS. 46 & 47/IND/2011 A.YS. 2006-07 & 2007-08 DCIT-1(1), BHOPAL ... APPELLANT VS M/S. TAPASYA SHIKSHA SAMITI, BHOPAL PAN AAAAT 6145 J ... RESPONDENT APPELLANT BY : SHRI ARUN DEWAN, SR. DR RESPONDENT BY : SHRI PRAKASH JAIN, CA DATE OF HEARING : 15.12.2011 DATE OF PRONOUNCEMENT : 15.12.2011 O R D E R PER JOGINDER SINGH AGGRIEVED BY THE DIFFERENT ORDERS DATED 6.1.2011 O F THE LD. CIT(A)-I, BHOPAL, THE REVENUE IS IN APPEAL FOR ASSE SSMENT YEARS 2006-07 & 2007-08, ON THE COMMON GROUND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. FIRST APPELLATE 2 AUTHORITY ERRED IN HOLDING THAT THE ASSESSING OFFIC ER WAS NOT JUSTIFIED IN INVOKING THE PROVISION OF SECTION 13, DENYING EXEMPTION U/S 11 & 12 OF THE ACT, AS IT IS NOT THE CASE OF ANY PAYMENT OR UNDUE BENEFIT BY THE ASSESSEE TO ITS CHA IRMAN, MR. SANJEEV SAXENA, WHO ALREADY HAS SUBSTANTIAL CREDIT BALANCES IN THE UNSECURED LOAN ADVANCED BY HIM TO THE SOCIET Y BY FURTHER HOLDING THAT THERE IS NO VIOLATION OF PROVI SIONS SECTION 13 AND DELETION OF RESULTANT ADDITIONS BY PRESSING REL IANCE UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASS ESSEE FOR ASSESSMENT YEAR 2005-06 AND FURTHER ALLOWING RELIEF ON THE ISSUE OF DIVERSION OF FUNDS FOR THE BENEFIT OF THE PERSON COVERED U/S 13 (1) (D) OF THE ACT. 2. DURING HEARING OF THESE APPEALS, AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE IMPUGN ED ISSUE IS COVERED IN THE CASE OF THE ASSESSEE ITSELF VIDE ORD ER DATED 15.1.2010 IN ITA NO.346/IND/2008. THIS FACTUAL MATR IX WAS NOT CONTROVERTED BY THE REVENUE EXCEPT CONTENDING THAT THE ASSESSEE HAS PREFERRED THE APPEAL AGAINST THE ORDER OF THE TRIBUNAL BEFORE THE HON'BLE HIGH COURT. 3 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON FILE. IN VIEW OF THE ABOV E, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE O RDER DATED 15.1.2010 (SUPRA) WHICH IS AVAILABLE AT PAGES 42 TO 49 OF THE PAPER BOOK FILED BY THE ASSESSEE: THE REVENUE HAS FILED THIS APPEAL AND CROSS OBJECTI ON BY THE ASSESSEE, AGAINST THE ORDER OF THE LEARNED CIT( A) DATED 4.4.2008. DURING HEARING, WE HAVE HEARD SMT. APARN A KARAN, LEARNED ADDL. CIT DR AND SHRI PRAKASH JAIN, LEARNED COUNSEL FOR THE ASSESSEE. AT THE OUTSET, THE LEARN ED COUNSEL FOR THE ASSESSEE PLEADED THAT HE MAY BE PERMITTED T O WITHDRAW THE CROSS OBJECTION FILED BY THE ASSESSEE. THE LEARNED DR HAS NO OBJECTION TO SUCH REQUEST. WE, THEREFORE, DISMISS THE CROSS OBJECTION OF THE ASSES SEE AS NOT PRESSED. 2. NOW WE SHALL TAKE UP THE APPEAL OF THE REVENUE W HEREIN THE FIRST GROUND RAISED IS THAT THE LEARNED CIT(A) ERRED IN ALLOWING RELIEF ON THE ISSUE OF VIOLATION OF SECTIO N 11(5) OF THE ACT EVEN AS THE ASSESSEE ITSELF HAS ADMITTED TH AT THE REVERSE ENTRY WAS PASSED IN THE BOOKS IN THE YEAR 2 006-07 WHILE THE SAME DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. THE LEARNED SENIOR DR DEFENDED THE ASSESSMENT ORDER WHEREAS THE LEARNED COUNSEL FOR TH E ASSESSEE SUPPORTED THE IMPUGNED ORDER. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON FILE. BRIEF FACTS ARE TH AT THE ASSESSEE IS A CHARITABLE TRUST REGISTERED U/S 12A O F THE ACT AND EX FACIE ENTITLED TO BE ASSESSED U/S 11 OF THE ACT. THE ASSESSEE ADVANCED RS. 6 LACS TO BETWA GRAH NIRMAN S AHKARI SANSTHA MARYADIT, BHOPAL, ON 25.9.2001. AS PER THE REVENUE, SHRI SANJIV SAXENA, PRESIDENT OF THE ASSES SEE, WAS ALSO PRESIDENT OF THE SAID SANSTHA CONSEQUENTLY COM MITTED BREACH OF SECTION 13(1)(C )(II) OF THE ACT. WE ARE OF THE VIEW 4 THAT THIS STAND OF THE REVENUE IS NOT JUSTIFIED BEC AUSE THE LANGUAGE USED IN SECTION 13(1)(C )(II) IS ANY PART OF SUCH INCOME OF THE TRUST DURING THE PREVIOUS YEAR USED O R APPLIED. IN THE PRESENT APPEAL, THE AMOUNT WAS GIV EN ON 25.9.2001 AND NOT DURING THE PREVIOUS YEAR. EVEN OTHERWISE, THERE IS NO ALLEGATION THAT SHRI SANJIV SAXENA HAS SUBSTANTIAL INTEREST IN THE AFORESAID SANSTHA AS IT WAS A LIMITED COOPERATIVE SOCIETY REGISTERED WITH THE REG ISTRAR OF SOCIETIES UNDER THE M.P. COOPERATIVE SOCIETIES ACT FOR THE BENEFIT OF ITS MEMBERS FOR CONSTRUCTION OF THEIR HO USES. THEREFORE, IT CAN BE SAID THAT SHRI SANJIV SAXENA HAD NO PERSONAL INTEREST IN THE SOCIETY. THE REGISTRATION U/S 12AA WAS GRANTED TO THE SOCIETY ON 18.10.2004 WITH EFFEC T FROM 1.4.2003 WHEREAS THE IMPUGNED ADVANCE WAS GIVEN TO THE SANSTHA ON 25.9.2001 I.E. MUCH PRIOR TO THE DATE OF REGISTRATION, CONSEQUENTLY, THERE IS NO MERIT IN TH E STAND OF THE REVENUE, THEREFORE, THIS GROUND IS DISMISSED. 3. THE NEXT GROUND RAISED BY THE REVENUE IS THAT TH E LEARNED CIT(A) ERRED IN ALLOWING RELIEF TO THE ASSE SSEE ON THE ISSUE OF DIVERSION OF FUNDS OF THE SOCIETY FOR THE BENEFIT OF THE PERSONS COVERED U/S 13(1)(D) EVEN THOUGH IT WAS ESTABLISHED BY THE REVENUE THAT THE FUNDS WERE TRAN SFERRED TO THE ACCOUNT OF THE PRESIDENT FOR WHICH NO SATISF ACTORY REPLY WAS FURNISHED BY THE ASSESSEE. THE LD. DR DEF ENDED THE ASSESSMENT ORDER WHEREAS THE LEARNED COUNSEL FO R THE ASSESSEE SUPPORTED THE IMPUGNED ORDER. ON CONSIDERATION OF RIVAL SUBMISSIONS WE HAVE FOUN D THAT THERE WAS A DEBIT BALANCE OF RS. 9,64,047/- IN THE ACCOUNT OF SANJIV SAXENA, PRESIDENT OF THE ASSESSEE TRUST. THE SUSPICION OF THE AO IS THAT UNDER WHAT CIRCUMST ANCES THE SAID DEBIT BALANCE CAME AND CONCLUDED THAT IT W AS DIVERSION OF FUNDS FOR THE BENEFIT OF ITS PRESIDENT WHICH IS VIOLATIVE OF SECTION 13(I)(D) OF THE ACT. ADMITTED LY, THE FEE IS COLLECTED BY THE EDUCATIONAL INSTITUTION, MANAGE D BY THE SANSTHA AS IS EVIDENT FROM RECEIPT ISSUED FOR THE P URPOSE. THE IMPUGNED AMOUNT WAS DEBITED TO THE SUSPENSE ACCOUNT IN THE BOOKS OF THE TRUST, MEANING THEREBY THE AMOUNT WAS TO BE RECOVERED FROM THE PERSONS AT FAUL T AS THE ACCOUNTANT DID NOT FULLY DEPOSIT THE AMOUNT IN THE 5 ACCOUNT OF THE TRUST. AT THE END OF THE YEAR THE SU SPENSE ACCOUNT IS SQUARED UP BY DEBITING THE LIABILITY AND BY FIXING THE RESPONSIBILITY OF THE DEFAULTER, IF ANY, FOR SH ORT DEPOSIT. EVEN THE AO DID NOT ASSIGN ANY REASON. IN ANY SITU ATION, IT CANNOT BE TREATED AS ADVANCE TO THE PRESIDENT. THE RE IS A FINDING IN THE IMPUGNED ORDER THAT IT IS A CASE OF RECOVERY AND NOT OF PAYMENT AS THE AO HAS NOWHERE STATED IN THE ASSESSMENT ORDER THAT THE IMPUGNED PAYMENT WAS MADE TO SHRI SANJIV SAXENA. THIS FINDING WAS NOT CONTROVERT ED BY THE REVENUE. IN VIEW OF THESE FACTS, IT CAN BE SAID THA T NO UNDUE FAVOUR HAS BEEN MADE TO ANY PERSON AS SPECIFIED U/S 13(1)(D) OF THE ACT, CONSEQUENTLY, THE TRANSACTION OF RECOVERY OF ANY AMOUNT FROM ANYONE CANNOT BE CONCLU DED AS PAYMENT. THE STAND OF THE LD. CIT(A) IS, THEREFO RE, AFFIRMED. 4. THE LAST GROUND RAISED IS THAT THE LEARNED CIT(A ) ERRED IN DELETING THE ADDITION OF RS. 3,48,341/- MADE BY DIS ALLOWING THE EXPENSES CLAIMED UNDER THE HEAD ELECTRICITY B Y ADMITTING FRESH EVIDENCE IN VIOLATION OF RULE 46A O F THE IT RULES, 1962. THE LD. DR SUPPORTED THE ASSESSMENT O RDER WHEREAS THE LD. COUNSEL FOR THE ASSESSEE DEFENDED T HE IMPUGNED ORDER. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. BRIEFLY, THE FACT S OF THE CASE ARE THAT THE ASSESSEE CLAIMED EXPENSES OF RS. 3,48,341/- UNDER THE HEAD ELECTRICITY EXPENSES. THE AO REQUIRED THE ASSESSEE TO PRODUCE BILLS FOR THE SAME BUT THE ASSESSEE FAILED TO PRODUCE THE SAME. THE AO, THERE FORE, DISALLOWED THE ELECTRICITY EXPENSES OF RS. 3,48,34 1/-. ON APPEAL BEFORE THE LEARNED CIT(A) IT WAS PLEADED BY THE ASSESSEE THAT THE ELECTRICITY EXPENSES ARE MAND ATORY IN NATURE AND THE GENUINENESS OF EXPENSES COULD NOT B E DOUBTED BECAUSE IT WAS IMPRACTICABLE TO RUN THREE EDUCATIONAL INSTITUTIONS WITHOUT ELECTRICITY. IT W AS ALSO SUBMITTED THAT SINCE THE EDUCATIONAL INSTITUTIONS A RE BEING RUN IN THE RURAL AREAS WHERE REGULAR SUPPLY OF ELEC TRICITY WAS NOT AVAILABLE, THE REQUIREMENT OF ELECTRICITY W AS BEING MANAGED BY THE ASSESSEE THROUGH SUPPLIES BY HIRING DG SETS. SINCE THE HIRING OF DG SET WAS A COSTLIER A FFAIR, THE 6 ASSESSEE SOCIETY APPROACHED THE MP ELECTRICITY BOAR D WITH A PROPOSAL TO SUPPLY THE TRANSFORMERS TO THEM, WHIC H PROPOSAL WAS ACCEPTED BY THE MP ELECTRICITY BOARD AND THE SUPPLY OF ELECTRICITY WAS MADE POSSIBLE IN THIS WAY . THE ASSESSEE SUBMITTED COPIES OF BILLS AND ACCOUNTS IN THIS BEHALF BEFORE THE LEARNED CIT(A). THE LEARNED CIT( A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D THAT THE EXPENSES SO MADE BY THE ASSESSEE ARE REASONABLE AND JUSTIFIED AND IN A SITUATION WHERE IT IS NOT POSSIB LE TO TREAT AS ASSETS ON ACCOUNT OF PURCHASE OF CAPITAL ASSETS, THESE EXPENSES COULD BE SHOWN AS DEFERRED REVENUE EXPENDI TURE. HE, HOWEVER, OBSERVED THAT IN THE EDUCATIONAL INSTI TUTIONS, DEFERRED REVENUE EXPENSES COULD NOT BE WRITTEN OFF OVER A PERIOD OF TIME. IN THE OPINION OF THE LEARNED CIT (A), WRITING OFF OF THE DEFERRED REVENUE EXPENSES IN A SINGLE GO IS JUSTIFIED, CONSEQUENTLY WE HAVE NOT FOUND ANY INFIR MITY IN THE STAND OF THE LD. CIT(A) AS HE HAS RIGHTLY OBSER VED THAT IN THE EDUCATIONAL INSTITUTIONS, DEFERRED REVENUE EXPE NSES COULD NOT BE WRITTEN OFF OVER A PERIOD OF TIME, THE REFORE, WRITING OFF THE SAME IN A SINGLE GO IS JUSTIFIED, C ONSEQUENTLY, THE ORDER OF THE LEARNED CIT(A) IS UPHELD AND THI S GROUND OF APPEAL OF THE REVENUE IS ALSO DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF BOTH THE PARTIES AT THE CONCLUSION OF HEARING ON 13 TH JANUARY, 2010. IN THE AFORESAID ORDER, THAT TOO, IN THE CASE OF TH E ASSESSEE FOR ASSESSMENT YEAR 2005-06, A DETAILED DELIBERATION HA S BEEN MADE BY THE TRIBUNAL WITH RESPECT TO SHRI SANJEEV S AXENA, WHO HAPPENED TO BE THE PRESIDENT OF THE SOCIETY. THE SO CIETY WAS GRANTED REGISTRATION U/S 12AA OF THE ACT ON 18.10.2 004 W.E.F. 1.4.2003. THE CONTENTION OF THE REVENUE IS THAT THE SOCIETY 7 GAVE RS.3,06,633/- TO SHRI SANJEEV SAXENA FOR HIS P ERSONAL BENEFIT. THE COPY OF THE LEDGER ACCOUNT OF SHRI SAN JEEV SAXENA IN IRTS & RCP WAS EXAMINED BY THE LD. CIT(A). BEFOR E THE LD. CIT(A), THE CLAIM OF THE ASSESSEE WAS THAT SHRI SAN JEEV SAXENA PAID OUT SEVERAL EXPENSES OUT OF HIS OWN SOU RCES WITHOUT TAKING ANY ADVANCE FROM THE SAMITI AND ASSI ST THE SAMITI FOR NUMBER OF YEARS WITH TAKING ANY ADVANCE. THERE IS UNCONTROVERTED FINDING IN THE IMPUGNED ORDER (AT PA GE 8) THAT THE SAMITI OPENED A SEPARATE ACCOUNT AS TEMPORARY L OAN ACCOUNT AND SEPARATE ACCOUNT FOR UNSECURED LOAN FOR SHRI SANJEEV SAXENA. MR. SANJEEV SAXENA GRANTED INTEREST FREE LONG TERM UNSECURED LOAN TO THE SAMITI AND THE BALA NCE AT THE BEGINNING OF THE FY 2005-06 WAS RS.42,97,174/- WHIC H IS UNAFFECTED AND THE SAMITI HAD CONTINUOUSLY USED THE FUNDS RAISED BY SHRI SANJEEV SAXENA WITHOUT ANY INTEREST AND ANY INSTALMENT OF REPAYMENT. THERE IS A FURTHER FINDING (AT PAGE 11) THAT SHRI SANJEEV SAXENA ADVANCED INTEREST FREE LON G TERM UNSECURED LOAN TO THE ASSESSEE SOCIETY TO THE TUNE OF RS.43,40,000/- WHICH STOOD AS CREDIT BALANCE IN HIS NAME IN THE 8 BOOKS OF THE ASSESSEE AND EVEN AFTER, REDUCING THE ADVANCE OF RS.3,06,633/-, THE UNSECURED LOAN CREDIT BALANCE WA S RS.40,33,367/- ON WHICH NO INTEREST HAS BEEN CHARGE D FROM THE SOCIETY. CONSEQUENTLY, THE ASSESSING OFFICER WAS NO T JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 13 OF THE ACT . THE STAND OF THE LD. CIT(A) WAS AFFIRMED BY THE TRIBUNAL FOR ASS ESSMENT YEAR 2005-06 VIDE ORDER DATED 13.1.2010. SINCE THE FACTS & CIRCUMSTANCES OF THE ABOVEMENTIONED CASE ARE SIMILA R TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT APPEALS AND NO CONTRARY FACTS WERE BROUGHT TO OUR NOTICE, THEREFORE, WE ARE SUPPOSED TO FOLLOW THE DECISION OF A COORDINATE BENCH. SO FAR A S THE CONTENTION OF THE REVENUE THAT APPEAL HAS BEEN FILE D AGAINST THE ORDER OF THE TRIBUNAL, NO CONTRARY DECISION WAS PRODUCED BEFORE US. THEREFORE, FOLLOWING THE ORDER OF THE TR IBUNAL, THAT TOO, IN THE CASE OF THE ASSESSEE, WE FIND NO INFIRM ITY IN THE STAND OF THE LD. CIT(A). THUS, THE APPEALS OF THE R EVENUE ARE HAVING NO MERIT, CONSEQUENTLY, DISMISSED. FINALLY, THE APPEALS OF THE REVENUE ARE DISMISSED. 9 ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE O F LEARNED REPRESENTATIVES FROM BOTH THE SIDES AT THE CONCLUSION OF THE HEARING. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15.12.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYS!