Appeal Details
Counselvise Citation
[2017] 128 COUNSELVISE.COM (IT) 3116 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 8 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-05-2017
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
G
Next Hearing Date
02-05-2017
Assessment Year
2009-2010
Appeal Filed On
29-08-2012
Judgement Text
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4622/DEL/2012 (ASSESSMENT YEAR: 2009 - 10 ) ACIT, CIRCLE - 2, MEERUT VS. SPACE AGE RESEARCH & TECHNOLOGY FOUNDATION, CHARITABLE TRUST, RAILWAY ROAD, MEERUT PAN: AABTS7321M (APPELLANT) (RESPONDENT) CO NO. 448/DEL/2012 ITA NO. 4622/DEL/2012 (ASSESSMENT YEAR: ) SPACE AGE RESEARCH & TECHNOLOGY FOUNDATION, CHARITABLE TRUST, RAILWAY ROAD, MEERUT PAN: AABTS7321M ACIT, CIRCLE - 2, MEERUT (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SANJEEV SAPRA, ADV REVENUE BY: SH. SS RANA, CIT DR DATE OF HEARING 02/05 / 2017 DATE OF PRONOUNCEMENT 23 / 05 / 2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. IT A NO. 4622/DEL/2012 IS FILED BY THE REVENUE AGAINST THE ORDER OF LD CIT(A), MEERUT DATED 01.06.2012, PASSED IN APPEAL AGAINST ORDER DATED 29.12.2011 OF ADDL. CIT, RANGE - II, MEERUT, WHEREIN THE INCOME OF THE ASSESSEE IS ASSE SSE D AT RS. 70369090/ - AGAINST RETURNED INCOME OF RS. NIL. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - (1) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION ON ACCOUNT OF SURPLUS OF THE TRUST OF RS.6,54,58,5997 - IN VIEW OF THE PROVISIONS OF SEC 13(2) OF THE IT ACT, 1961 WHEREBY SEC 11 OF THE ACT WAS NOT APPLICABLE TO IT. (2) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW IN HOLDING: - PAGE 2 OF 34 (A) THAT THE ADVANCE OF RS.26,57,000/ - TO THE CONTRACTOR FOR CONSTRUCTION OF THE INSTITUTE BUILDING MAY BE TAKEN INTO CONSIDERATION AS APPLICATION OF THE FUNDS U/S LL(5)_OF THE I.T. ACT, 1961. (B) THAT THE FUNDS AT RS 3,23,47,187/ - BORROWED FOR CONSTRUCTION OF THE INSTITUTE BUILDING MAY BE TA KEN AS APPLICATION OF THE FUNDS AND THERE WAS NO VIOLATION OF THE PROVISIONS OF THE SECTION 13(2) OF THE I.T ACT 1961. (3) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS 20,50,491/ - BEING EXORBITANTLY HIGH RATE OF INTEREST PAID TO THE PERSONS SPECIFIED IN SECTION 13(3) OF THE I.T. ACT WHICH WAS DIVERSION OF THE TRUST FUNDS TO SPECIFIED PERSONS U/S 13(3) OF THE I.T ACT 1961. (4) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.28,60,000/ - ON ACCOUNT OF CASH CREDITS IGNORING THE VITAL FACT THAT ALL THE ALLEGED CASH CREDITORS HAD NO REGULAR SOURCE OF INCOME EXCEPT THE INTEREST INCOME AS ALLEGEDLY RECEIVED FROM THE AS SESSEE TRUST. THERE WAS NO CASH ACCRUALS AND WAS NOT APPARENT HOW THEY WERE MAINTAINING THEMSELVES. THUS THE CREDITWORTHINESS OF THE CREDITORS WAS NOT PROVED. THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE DONO RS AND DID NOT DISCHARGE THE ONUS CAST ON IT U/S 68 OF IT CT, 1961. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS: - I. CIT VS. ASHOK TIMBER INDUSTRIES (CAL) 125 ITR 336 II. BASANTIPUR TEA CO. (P) LTD. VS. CIT (CAL) 180 ITR 261 III. CIT V/S KORLAY TRADING CO. LTD. (CAL.) 232 ITR 820. IV. 'KRISHAN KUMAR JHANB V/S ITO AND ANR (PUNJAB & HARYANA) 17 DTR 249' V. M/S SEJAI INTERNATIONAL LTD V/S CIT MEERUT (ALL.) APPEAL NO.306 OF 2010. VI. CIT VS DURGA PRASAD MORE, 82 ITR 540(SC) VII. CIT VS P. MOHN AKALA, 291 ITR 278 (SC) VIII. CIT VS SUMATI DAYAL, 214, ITR 801 (SC) I.. ITO VS DIZA HOLDINGS PVT. LTD. 255 ITR 573 (KERLA) 5. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN ADMITTING THE ADDITIONAL EVIDENCES WHILE DELETING THE ADDITION MADE BY THE A.O. U/S 68 OF THE IT. ACT 1961 IN VIOLATION OF THE PRINCIPLES LAID DOWN AS PER RULE 46A OF IT RULES, 1962 AS NONE OF THE CONDITIONS OF SUB CLAUSES (A), (B), (C) & (D) OF CLAUSE 1 OF THE RUL E WAS SATISFIED, PROVISIONS OF CLAUSE (2) WERE NOT FOLLOWED AND AO WAS NOT GIVEN ANY OPPORTUNITY UNDER CLAUSE (3) OF THE SAID RULE. RELIANCE IS PLACED ON THE FOLLOWING CASES: - CIT VS. VALI MOHMED AHAMAD BHAI (GUJ.) 134 ITR 214 ACIT VS. MOHAR SINGH (IT AT, JD.) 32 DTR 497 CIT VS. JAIPUR UDYOG LTD, (RAJ.) 227 ITR 345 VELJI DEORAJ & CO. VS. CIT (BOM) 68 ITR 708 JYOTSNA SURI VS. DCIT (ITAT, DEL) 61ITD 139 PAGE 3 OF 34 A.K.BABU KHAN VS. CIT (AP) 102 ITR 757 DCIT VS. VIRA CONSTRUCTION CO. (ITAT,MUM, TM) 61 ITD 33 RAMPRASAD SH ARMA VS. CIT (ALL.)119 ITR 867 DINESH B. PARIKH VS. CIT (CAL) 202 TAXMAN (MAG) 110 (6) THAT THE APPELLANT CRAVES LEAVE TO ADD, MODIFY AND/OR DELETE ANY GROUND(S) OF APPEAL. (7) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) MAY BE SET ASIDE AND THAT OF THE A.O. RESTORED. 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION NO. 448/DEL/2012 IN THE ABOVE APPEAL RAISING FOLLOWING GROUNDS: - 1. THAT THE APPEAL FILED BY THE REVENUE DESERVES TO BE DISMISSED BECAUSE THE GROUND OF APPEAL AS RAISED VIOLATE RULE 8 OF ITAT RULES. 2. (A) THAT THE GROUND OF APPEAL NO. 2(A) AS RAISED BY THE REVENUE IS WHOLLY MISCONCEIVED BECAUSE OF THE FINDINGS OF THE LD CIT(A) WITH REGARD ADVANCES OF RS. 2657000/ - TO THE CONSTRUCTION CONTRACTORS FOR THE CONSTRUCTION OF THE INSTITUTES BUILDING ARE FULLY JUSTIFIED. (B) THIS GROUND AS RAISED IS ALSO MISCONCEIVED BECAUSE THE ASSESSEE HAD NOT BORROWED FUNDS AMOUNTING TO RS. 32347687/ - . THIS FIGURE OF RS. 32347687/ - REPRESENTED ADDITIONS MADE BY THE ASSESSEE TO THE FIXED ASSETS AS WAS ALSO EVIDENCE FROM THE DETAILS GIVEN BY THE AO HIMSELF AT PAGE 2 OF THE ASSESSMENT ORDER AT PAGE 3 OF CIT(A) ORDER. 3.. THAT THERE WAS NO DI VERSION OF TRUST FUNDS TO SPECIFIED PERSONS U/S 13(3) OF THE IT ACT AS ALLEGED IN GROUND NO. 3 AND THEREFORE THE LD CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 2050491/ - ON ACCOUNT OF INTEREST OF LOANS. 4. GROUND NO. 4 AS RAISED BY THE REVENUE ALSO DESERVES TO BE DISMISSED BECAUSE THE LD CIT(A) HAD DELETED THE ADDITIONS AGGREGATING TO RS. 2860000/ - AFTER CONSIDERING THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE. THE CASE LAWS CITED BY THE REVENUE HAD ABSOL UTELY NO RELEVANCE TO THE FACTS OF ASSESSEES CASE. 5. GROUND NO. 5 AS RAISED BY THE REVENUE IS AGAIN MISCONCEIVED AND MISLEADING BECAUSE THE LD CIT(A) HAD ADMITTED ADDITIONAL EVIDENCE AS FILED BY THE ASSESSEE U/S 46A AFTER GIVING PROPER OPPORTUNITY TO TH E LD AO AND THERE WAS ABSOLUTELY NO VIOLATION OF RULE 46A. CASE LAWS AS RELIED UPON ON THE ABOVE ISSUE HAS ALSO NO RELEVANT TO THE FACTS OF ASSESSEES CASE. 3. THE CROSS OBJECTION FILED BY THE ASSESSEE IS SUPPORTIVE OF THE ORDER OF THE LD CIT (A) AS WELL A S AGAINST THE VARIOUS GROUNDS RAISED BY THE REVENUE. NO SPECIFIC ARGUMENTS WERE RAISED BEFORE US IN THE CROSS OBJECTION AND AS WE ARE DEALING WITH THE GROUNDS OF APPEAL OF THE REVENUE IN DETAIL, THEREFORE THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISM ISSED. 4. THE BRIEF FACTS OF THE CASE IS THAT THE APPELLANT IS A TRUST CREATED ON 27.08.1999 BY 7 TRUSTEES AND IS ALSO REGISTERED U/S 12A OF THE INCOME TAX ACT RUNNING 3 EDUCATIONAL INSTITUTES. IT FILED ITS RETURN OF INCOME ON 29.09.2009 DECLARING NIL INCOME AND CLAIMED EXEMPTION U/S 11 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDING PAGE 4 OF 34 THE AO NOTED THAT THE ASSESSEE HAS PAID INTEREST @18% ON UNSECURED LOANS FROM SPECIFIED PERSONS U/S 13(3) OF THE ACT . THEREFORE, HE HELD THAT ASSESSEE HAS CONTRAVENE D T HE PROVISIONS OF SECTION 13( 3 ) OF THE ACT AND HENCE, IT IS NOT ELIGIBLE FOR BENEFIT OF PROVISIONS U/S 11 OF THE ACT AND THE ASSESSEE TRUST WAS TREATED AS AN ASSOCIATION OF PERSON AND DISALLOWED THE INTEREST OF RS. 2050491/ - . FURTHER , DURING THE YEAR ASSESS EE HAS TAKEN A LOAN OF RS. 29.10 LAKHS FROM 8 PERSONS , LD ASSESSING OFFICER HELD THAT OUT OF THAT , LENDERS OF LOAN OF RS. 28.60 LAKHS ARE MERELY NAME LENDERS AND HENCE, ADDITION U/S 68 WAS MADE. FURTHER, THE ASSESSEE HAS GIVEN CONTRACT TO VARIOUS CONTRACTORS AND ADVANCE PAYMENT OF RS. 26051000/ - WAS MADE . THE LD AO TREATED THE ADVANCE AS VIOLATION OF PROVISIONS OF SECTION 11(5) OF THE ACT. THEREFORE, ACCORDING TO THE ASSESSING OFFICER ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13 OF TH E INCOME TAX ACT, THE SURPLUS DERIVED BY THE ASSESSEE OF RS. 65458599/ - WAS ALSO TREATED AS INCOME. CONSEQUENTLY, THE TAXABLE INCOME OF RS. 70369090/ - WAS DETERMINED AGAINST THE RETURNED INCOME OF RS. NIL. 5. THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE LD A SSESSING OFFICER PREFERRED APPEAL BEFORE THE LD CIT(A). DURING THE APPELLATE PROCEEDINGS THE LD ASSESSING OFFICER WAS DIRECTED TO SUBMIT REMAND REPORT AND ASSESSEE WAS ASKED TO FILE REJOINDER. CONSEQUENT TO THAT THE LD CIT(A) DELETED THE ADDITION ON ACCOUN T OF UNSECURED LOAN OF RS. 28.60 LAKHS AND ALSO THE DISALLOWANCE OF RS. 2050491/ - ON ACCOUNT OF INTEREST HOLDING THAT THERE IS NO CONTRAVENTION OF SECTION 13(3) OF THE ACT. IT WAS FURTHER HELD THAT THERE IS NO VIOLATION OF SECTION 11 AND 12 OF THE ACT IN G IVING ADVANCES TO THE CONTRACTORS AND THEREFORE, THE ACTION OF THE LD ASSESSING OFFICER TO BRING TO TAX THE ENTIRE SURPLUS OF RS. 65458599/ - WAS QUASHED. THEREFORE, THE REVENUE AGGRIEVED WITH THE ORDER OF LD CIT(A) HAS PREFERRED APPEAL BEFORE US. 6. ON READI NG OF THE GROUNDS OF APPEAL IT IS APPARENT THAT TWO ISSUES HAVE BEEN RAISED TO HOLD THAT THERE IS A VIOLATION OF PROVISIONS OF SECTION 11 AND 13 OF THE INCOME TAX ACT AND THEREFORE, THE ASSESSEE LOSSES THE EXEMPTION GRANTED THEREIN. A. PAYMENT OF INTEREST OF RS. 2050491/ - TO THE RELATED PARTY @ 18% B. AMOUNT OF RS. 2657000/ - GIVEN TO THE CONTRACTOR IN VIOLATION OF SECTION 11(5) OF THE ACT 7. FURTHER, A SUM OF RS. 28.60 LAKHS HAS BEEN ADDED INTO THE HANDS OF THE ASSESSEE U/S 68 OF THE ACT. 8. FIRSTLY WE DEAL WITH T HE ISSUE OF ADDITION OF RS. 28.60 LAKHS IN THE HANDS OF THE ASSESSEE . DURING THE YEAR ASSESSEE HAS TAKEN A LOAN OF RS. 29.10 LAKHS FROM 8 PERSONS WHICH ARE DISCUSSED AT PAGE NO. 4 TO 8 OF THE ORDER OF THE LD ASSESSING OFFICER AS UNDER: - PAGE 5 OF 34 IN VIEW OF ABOVE ASSESSEE HAS CONTRAVENED OF PROVISION OF SECTION 13 OF I.T. ACT, HENCE, IT IS NOT ELIGIBLE FOR BENEFIT OF PROVISION OF SECTION 11 , ASSESSEE TRUST FOR THE PURPOSE OF ASSESSMENT IS TREATED AS AN AOP AND PROVISION OF AOP SHALL APPLY ACCORDIN GLY. FURTHER INTEREST PAID TO UNSECURED LOAN IS DISALLOWED AMOUNTING TO RS. 2 .50,491/ - ( ADDITION OF RS. 20,50,491/ - ) UNSECURED LOANS NAME OF LENDER AMOUNT OF FRESH LOAN(RS.) DOCUMENT FILED IN SUPPORT INCOME DISCLOSED IN ITR REMARK MR. ANUBHAV JAIN 400000A COPY OF BANK A/C, COPY OF COMPUTATION OF INCOME AND COPY OF INTIMATION U/S 143(1) OF I.T.ACT RS.1,18,758/ - I)INCOME OF MR. ANUBHAV JAIN IS VERY LOW TO GIVE THIS BIG AMOUNT OF LOAN OF RS. 4,00,000/ - II)BEFORE GIVING LOAN, THERE WAS A CREDIT ENTRY OF RS. 5,49,617 - IN HIS S/B A/C SHOWING ITS NARRATION AS USA - WHICH IS UNABLE TO DISCLOSE THE NATURE OF RECEIPT MS POOJA JAIN 80000/ - COPY OF BANK A/C, COPY OF COMPUTATION OF INCOME AND COPY OF INTIMATION U/S 143(1) OF LT. ACT RS. 171190/ - IN COMPUTATION OF INCOME AN INCOME OF RS,69722/ - WAS SHOWN UNDER THE HEAD INCOME FROM SALARY , RECEIVED FROM GOLDEN STRAND (P) LTD AND IN STATEMENT OF INCOME SHE HAD SHOWN HER OFFICE ADDRESS AS KISHAN FLOOR MILLS PAGE 6 OF 34 COMPOUND AND THE SAME ADDRESS IS SHOWN AS HER RESIDENTIAL ADDRESS WHICH CREAT A SUSPICION AND BEFORE GIVING LAON OF RS. 80,0007 - SHE HAD DEPOSITED CASH OF RS.20,000/ - ON 04.07.2008 AND CASH OF R S.40,000/ - ON 09.07.2008 IN HER S/B A/C WHICH SEEMS A GENERATION OF ENTRY ONLY AND NOT ALLOWABLE. SH SHARAD KR HUF 495000/ - COPY OF BANK A/C, AND COPY OF INTIMATION U/S 143(1) OF I.T. ACT RS.144854/ - I) INCOME OF SH SHARAD KR HUF IS VERY LOW TO GIVE THIS BIG AMOUNT OF LOAN OF RS. 4,95,000/ - II)ON PERUSAL OF ENTRIES IN HIS BANK A/C IT WAS FOUND THAT THERE ALMOST ENTRIES WHICH ONLY ROUTED FROM HERE AND THERE PAGE 7 OF 34 ON THIS ISSUE ASSESSEE FILED THE FOLLOWING REPLY; - 1) UNSECURED LOANS; IN THE CAPTIONED MATTER IT IS POINTED OUT THAT THE ASSESSEE TRUST HAS RAISED FRESH UNSECURED LOANS TO THE TUNE OF RS. 29.10 LACS WHEREUPON INTEREST AT THE RATE OF 18% P.A. HAS BEEN GIVEN. IT IS ALSO POINTED OUT THAT THE SAID LENDERS ARE THE RELATIVES OF THE FOUNDERS - TRUSTEES OF THE ASSESSEE TRUST. IN THE MATTER THIS IS TO SUBMIT THE FOLLOWING FACTS : SH SHARAD KRJAIN (IND) 100000/ - COPY OF BANK A/C, COPY OF COMPUTATION OF INCOME AND COPY OF INTIMATION U/S 143(1) OF I.T.ACT RS. 148150/ - ASSESSEE TRUST FILED COPY OF BANK A/C OF MR SHARAD KUMAR JAIN WITH PUNJAB NATIONAL BANK WHICH IS FROM12.03. 2009 NOT F ROM 1.04.200 8 AS REQUIRED AND THIS LOAN IS UNVERIFIABLE SMT ABHA JAIN 85000/ - CCPYOFBANK I RS.1,47,050/ - I) A SUM OF A/C,COPY OF COMPUTATION OF INCOME AND COPY OF INTIMATION U/S 143(1) OF I.T.ACT RS.35000/ - 06.06.2008 WAS ADVANCED TO ASSESSEE TRUST .ON PERUSAL OF BANK A/C IT IS NOTICED THAT RS 35000/ - IS CASH WITHDRAW! AND ANOTHER ENTRY OF RS. 50000/ - IS ALSO CASH WITHDRAW! SMT BEENU GUPTA 1000000A NO COPY OF BANK A/C IS FILED. ONLY COPY OF ITR ACKNOWLEDGEMENT FILED. RS. 2,44,9307 - GENUINENESS AND CREDIT WORTHINESS OF LOAN IS UNPROVED. SMT MEGHA JAIN 50000/ - COPY OF BANK A/C, COPY OF COMPUTATION OF INCOME RS. 1 ,48,53 7/ - SMT SARITA AGARWAL 700000/ - NO DOCUMENT FILED IN SUPPORT OF LOAN . TOTAL 2910000/ - PAGE 8 OF 34 (I) THAT THE SAID FRESH UNSECURED LOANS OF RS. 29.10 LACS ARE FROM EIGH T LENDERS WHO ARE THE OLD DEPOSITORS WITH THE TRUST AND DURING THE YEAR THEY HAVE INTRODUCED SMALL - SMALL AMOUNTS IN THE TRUST AGAINST WHICH THE TRUST HAS MADE REPAYMENTS OF UNSECURED LOANS TO THE EXTENT OF RS. 28,36,635 AS PER DETAILS AVAILABLE ON THE FAC E OF DETAILED CHART ALREADY FURNISHED DURING THE PROCEEDINGS - AFRESH COPY OF THE SAME IS ALSO FURNISHED HEREWITH FOR READY REFERENCE. (II) THAT FROM THE ABOVE THIS IS TO SUBMIT THAT DURING THE YEAR UNDER ASSESSMENT IT IS A FACT THAT THERE IS AN ADDITION O F FRESH UNSECURED LOAN TO THE EXTENT OF RS. 29.10 LACS BUT IT IS ALSO A FACT AVAILABLE ON THE FACE OF THE SAID STATEMENT THAT THERE ARE REPAYMENTS ALSO DURING THE YEAR UNDER ASSESSMENT TO THE EXTENT OF RS 28,36,635 RESULTING IN NET ADDITION OF RS 73,365 ON LY. (III) AS REGARDS TO THE GENUINENESS OF THE SAID FRESH UNSECURED LOANS, TO SUPPORT THEIR IDENTITY, CREDIT WORTHINESS AND NATURE OF TRANSACTIONS, THE ASSESSEE HAS ALREADY FURNISHED ((A) COPIES OF THEIR RESPECTIVE ACCOUNTS DULY CONFIRMED BY THE LENDERS W ITH THEIR COMPLETE ADDRESSES ; (B) COPIES OF THEIR INCOME TAX RETURNS WITH COMPUTATION OF INCOME ; (C) COPIES OF THEIR RESPECTIVE BANK ACCOUNTS ETC).FURTHER THIS IS TO MENTION THAT ALL THESE TRANSACTIONS ARE THROUGH BANKS ONLY. REPLY OF THE ASSESSEE CONSI DERED. ASSESSEE TRIED TO DEMONSTRATE THE REASON FOR HIGHER RATE OF INTEREST AND FRESH LOAN TAKEN DURING THE YEAR UNDER CONSIDERATION. IN REPLY TO INTEREST PAID ON UNSECURED LOAN ( SUPRA) ASSESSEE SUBMITS THAT LOAN WAS RAISED DUE TO FRESH LOAN TAKE FROM BAN K AND BANK IMPOSES THE CONDITIONS TO RAISE THE FRESH LOAN AND LOAN SHALL NOT BE REPAID TILL THE FINAL PAYMENT OF BANKS. BUT ON THIS POINT ASSESSEE REPLIED THAT LOAN WAS RECEIVED FOR RS. 29.10 LACS , REPAYMENT OF RS 28,36,635 RESULTING IN NET ADDITION OF RS 73,365 ONLY. THE STATEMENT IS CONTRARY TO THE STATEMENT MADE ABOVE. IF THERE WAS BANK CONDITION TO RAISE THE FRESH LOAN AND UNDERTAKING WAS GIVEN NOT TO REPAY THE LOAN UNTIL REPAYMENT OF LOAN OF BANK IS MADE THEN HOW THE REPAYMENT CAN BE MADE IN VIOLATION OF BANK CONDITION. IT IS OBVIOUS THAT ASSESSEE IS TRYING TO BEFOOL THE REVUE BY FILING CONTRADICTORY REPLIES. FURTHER ALMOST UNSECURED LOAN CREDITORS ARE FILING THEIR INCOME TAX RETURN BY SHOWING INTEREST INCOME AND NO OTHER REGULAR SOURCE OF INCOME IS EA RNED/ SHOWN BY ALL UNSECURED LOAN CREDITORS. NO CASH ACCRUALS IS AVAILABLE WITH THE UNSECURED LOAN CREDITORS AND HOW THEY ARE MAINTAINING THEMSELVES IS ALSO NOT CLEAR. ACTUALLY THEY ALL ARE NAME LENDER AND TRUST IS DIVERTING THE TRUST FUND FOR THE BENEFIT OF PERSONS SPECIFIED UNDER SECTION 13(3) OF THE OMETAX ACT 1961. IN VIEW OF THE ABOVE IT IS CLEAR THAT LOAN TAKEN FROM THE AFORESAID PARTIES ACCEPT SMT. MEGHA JAIN ARE NOTHING BUT ONLY NAME LENDING. ASSESSEE TRUST FAILED TO DISCHARGE INITIAL ONUS U/S 68 OF I.T. ACT. THE ADDITION OF RS. 28,60,0007 - IS BEING MADE. 9. THE LD CIT(A) HAS DELETE THE ABOVE ADDITION VIDE PARA NO. 10.1 OF HIS ORDER AT PAGE NO. 8 TO 18 OF HIS ORDER AS UNDER: - PAGE 9 OF 34 10.1. AS REGARDS THE ADDITION OF RS.28,60,000/ - , THE AO HAS GIVEN THE RELEVANT DETAILS OF SUCH UNSECURED LOANS AT PAGES 4 - 6 OF THE IMPUGNED ASSESSMENT ORDER HAVING BEEN RAISED FROM THE FOLLOWING PARTIES: A. MR. ANUBHAV JAIN - RS. 4,00,000/ - ON ACCOUNT OF FRESH LOAN. THE AO HAS STATED THE FACT THAT THE APPELLANT TRUST HAD FIL ED COPY OF BANK ACCOUNT AND COMPUTATION OF INCOME ALONG WITH INTIMATION U/S 143(1) IN THE CASE OF SHRI ANUBHAV JAIN BUT HE WAS OF THE VIEW THAT THE INCOME OF SHRI ANUBHAV JAIN WAS VERY LOW TO GIVE THIS BIG AMOUNT OF LOAN OF RS.4,00,000/ - AND THAT BEFORE GI VING THIS LOAN, THERE WAS A CREDIT ENTRY OF RS.5,49,617/ - IN HIS SB A/C SHOWING ITS NARRATION AS USA FROM WHICH THE NATURE OF RECEIPT WAS NOT CLEAR. 10.1.1. THE ARS HAVE MADE THE FOLLOWING SUBMISSIONS BEFORE ME: I. COPY OF HIS CONFIRMATORY LETTER FILED BEFORE THE AO IS PLACED AT PAGE 419 FROM WHICH IT IS EVIDENT THAT HE HAD ADVANCED THE LOAN BY ACCOUNT PAYEE CHEQUE WHICH DULY STANDS SUPPORTED BY HIS BANK ACCOUNT. HE WAS ASSESSED TO TAX. COPY OF HIS COMPUTATION OF INCOME AND INTIMATION U/S 143(1) ARE AT P AGES 416 - 418. THE MERE FACT THAT INCOME OFSH. ANUBHAV JAIN WAS LOW WAS NO GROUND ON THE PART OF THE AO TO TREAT THE SAME AS UNDISCLOSED INCOME OF THE APPELLANT IN VIEW OF DOCUMENTARY EVIDENCE FILED BEFORE THE AO WHICH PROVED HIS SOURCES. II. AS REGARDS THE CREDIT ENTRY OFRS.5,49,617/ - DATED 27/05/2008 IN HIS SB A/C, IT IS SUBMITTED THAT SH. ANUBHAV JAIN REMITTED THIS AMOUNT BY DRAFT NO. 9$5406 DATED 20/05/2008 ON CITI BANK AS PER PHOTOCOPY PLACED AT PAGE 425A OF THE PAPER BOOK, FROM WHICH IT IS EVIDENT T HAT THE REMITTANCE WAS MADE FROM HIS BANK ACCOUNT IN USA TO HIS A/C NO. 03599208 WITH PUNJAB NATIONAL BANK, MEERUT WHICH STANDS CREDITED ON 27/05/2008. COPY OF LETTER DATED 20/05/2008 RECEIVED FROM THE TIMES GROUP OF SH. ANUBHAV JAIN SHOWING REMITTANCE OF RS.5,49,617/ - THROUGH DRAFT IS PLACED AT PAGE 425B OF THE PAPER BOOK. A CERTIFICATE DATED 25/09/2009 ISSUED BY UNITED AIRLINES IN WHICH SH. ANUBHAV JAIN IS EMPLOYED DRAWING SALARY OF APPROX USD 78,600 IS ALSO PLACED AT PAGE 425C OF THE PAPER BOOK. THE ABOV E DOCUMENTARY EVIDENCE CLEARLY EXPLAINS AND PROVES THE CREDIT ENTRY OF RS.5,49,617/ - DATED 27/05/2008 IN SB A/C OFSH. ANUBHAV JAIN. III. COPY OF HIS ACCOUNT AS STANDING IN THE BOOKS OF THE TRUST IS AT PAGE 419 '. 10.1.2. FROM THE COPY OF A/C OF SH. ANUBHAV JAIN PLACED AT PAGE 419 OF THE PAPER BOOK, I FIND THAT THERE WAS AN OPENING CREDIT BALANCE OF RS.7,50,000/ - . ON 06/06/2008, THERE IS FURTHER DEPOSIT OF RS.3,50,000/ - WITH THE NARRATION 'PNB OD A/C NO. 501561' AND THEREAFTER, THERE IS CREDIT ENTRY O F RS.38,065/ - AND THEN THREE ENTRIES OF RS.49,500/ - EACH REPRESENT INTEREST CREDITED AND PAID BY THE APPELLANT TRUST AND THE LAST ENTRY OF RS.50,000/ - ON 31/03/2009 REPRESENTED ADJUSTMENT ENTRY FROM THE ACCOUNT OF SMT. ABHA JAIN WITH CLOSING BALANCE OF RS. 11,50,000/ - AS ON 31/03/2009. THE AO HAS MADE ADDITION OF RS.4,00,000/ - BEING THE DIFFERENCE OF CLOSING BALANCE AT RS.11,50,000/ - AND OPENING BALANCE OF RS.7,50,000/ - THEREBY IGNORING THE FACT THAT CONFIRMED COPY OF A/C HAD BEEN FILED BY THE APPELLANT GIVIN G THEREIN PAN NO. OF SH. ANUBHAV JAIN AS ACGPJ - 1222M ALONGWITH COPY OF BANK STATEMENT WITH STATE BANK OF PATIALA PLACED AT PAGES 420 - 422 OF THE PAPER PAGE 10 OF 34 BOOK AND WITH PUNJAB NATIONAL BANK (PNB) COPY PLACED AT PAGES 423 - 425 OF THE PAPER BOOK. THE APPELLANT H AD ALSO FILED A CERTIFICATE DATED 25/09/2009 ISSUED BY UNITED AIRLINES IN WHICH SH. ANUBHAV JAIN WAS AN EMPLOYEE DRAWING SALARY OF APPROX. USD 78,600A PLACED AT PAGE 425C OF THE PAPER BOOK. 10.1.3. THE DOCUMENTARY EVIDENCE FILED BY THE APPELLANT HAD NEITHER BEEN CONTROVERTED/DISPROVED BY THE AO IN THE ASSESSMENT ORDER NOR IN HIS REMAND REPORT AND THEREFORE, I HAVE NO HESITATION IN HOLDING THAT THE APPELLANT HAD PROVED THE GENUINENESS OF LOAN AND ALSO CREDIT WORTHINESS OF SH. ANUBHAV JAIN. IT IS AN OLD ACCOUNT WITH AN OPENING BALANCE OF RS.7,50,000/ - WHICH STANDS ACCEPTED AS GENUINE IN THE PRECEDING YEAR. THEREFORE, THIS ADDITION OF RS.4,00,000/ - IS DELETED. B. MS. POOJA JAIN - RS. 80,000/ - . THE AO HAS MADE THIS ADDITION BY SAYING THAT THE EVIDENCE FIL ED BY THE APPELLANT CREATED A SUSPICION AND THAT SHE HAD DEPOSITED CASH OF RS.20,000/ - ON 04/07/2008 AND RS.40,000/ - ON 09/07/2008 IN HER SB A/C WHICH SEEMS TO BE GENERATION OF ENTRY ONLY. 10.1.4. THE ARS HAVE DRAWN MY ATTENTION TO THE FOLLOWING SUBMISSIO NS/DOCUMENTARY EVIDENCE AS FILED BEFORE THE AO: I. CONFIRMATORY LETTER, COPY PLACED AT PAGE 429 WHICH ALSO GIVES HER PAN NO. AGRPJ1958M. II. COPY OF HER BANK ACCOUNT WITH STATE BANK OF PATIALA MEERUT AT PAGE 430 - 431. III. COMPUTATION OF INCOME FILED WITH HER RETURN ALONGWITH INTIMATION OF INCOME U/S 143(1), COPY PLACED AT PAGES 426 - 428. IV. COPY OF HER ACCOUNT AS STANDING IN THE BOOKS OF THE TRUST AT PAGE 429. V. FROM THE REMARKS GIVEN BY THE AO AT PAGE 4 OF THE ASSESSMENT ORDER AGAINST THE ABOVE CREDITOR, IT IS EVIDENT THAT THE AO HAD ADDED THE AMOUNT ON MERE SUSPICION. IT IS BY NOW WELL SETTLED LAW THAT SUSPICION HOWSOEVER GREAT, CANNOT TAKE THE PLACE OF EVIDENCE AS HELD BY P & H HIGH COURT IN THE CASE 224 ITR 180, CIT VS. RAM NARAIN GOEL VI. AS REGARDS THE DEPOSIT OF CASH OF RS.20,000/ - ON 04/07/2008 AND RS.40,000/ - ON 09/07/2008 IN HER ABOVE SB A/C, IT IS SUBMITTED THAT SHE IS WORKING WITH M/S GOLDEN STRAND (P) LTD. NEW DELHI DRAWING SALARY OF RS.14,000/ - PM VIDE CERTIFICATE PLACED AT PAG E 43 IB OF THE PAPER BOOK. A COPY OF HER STATEMENT OF AFFAIRS FOR F.Y. 2008 - 09 AS FILED BY HER WITH HER INCOME - TAX RETURN IS PLACED AT PAGE 431A, FROM WHICH IT IS EVIDENT THAT SHE HAD SHOWN DEPOSIT OF RS.60,000/ - WITH STATE BANK OF PATIALA. THEREFORE, BOTH THE DEPOSITS OF RS.20,000/ - AND 40,OOOA AGGREGATING AT RS.60,000/ - STAND PROVED. 10.1.5.THE AO HAD NEITHER CONTROVERTED NOR DISPROVED THE ABOVE DOCUMENTARY EVIDENCE. HE HAS MADE THE ADDITION ON SUSPICION AND, THEREFORE, THE ADDITION OF RS.80,0007 - IS DELE TED. I MAY MENTION HERE THAT THE ONUS WAS SQUARELY ON THE AO TO PROVE BY BRINGING SOME EVIDENCE ON THE RECORD TO SUPPORT HIS OBSERVATIONS THAT DEPOSITS IN HER SB A/C APPEARED TO BE ENTRIES ONLY WHICH HAD NOT AT ALL BEEN DISCHARGED. PAGE 11 OF 34 C. SH. SHARAD KUMAR JA IN (HUF) - RS. 4,95,000/ - . THE AO HAS MADE THIS ADDITION BY MAKING THE FOLLOWING OBSERVATIONS: '(I) INCOME OFSH. SHARAD KR. HUF IS VERY LOW TO GIVE THIS BIG AMOUNT OF LOAN OF RS.4,95,000/ - . (II) ON PERUSAL OF ENTRIES IN HIS BANK A/C IT WAS FOUND THAT T HERE ALMOST ENTRIES WHICH ONLY ROUTED FROM HERE AND THERE '. IN SUPPORT OF THE ABOVE LOAN, THE APPELLANT HAS RELIED ON THE FOLLOWING EVIDENCE: I. COPY OF CONFIRMATORY LETTER AT PAGE 436. II. COPY OF BANK ACCOUNT AT PAGE 437 - 442. III. COPY OF COMPUTATION OF INCOME AND INTIMATION U/S 143(1) TO PROVE THAT IT WAS ASSESSED TO TAX AT PAGE 432 - 435. IV. COPY OF ITS ACCOUNT AS STANDING IN THE BOOKS OF THE TRUST AT PAGE 436. V. THE MERE FACT THAT THAT THE INCOME OF THIS HUF CREDITOR WAS LOW WAS NO GROUND TO TREAT THE SAME AS UNDISCLOSED INCOME OF THE APPELLANT TRUST WHEN IT HAD THE RESOURCES TO GIVE LOAN OF RS.4,95,000/ - . THE FOLLOWING OBSERVATIONS OF THE AO IN THE REMARK COLUMN ARE FACTUALLY AND LEGALLY INCORRECT: 'ON PERUSAL OF ENTRIES IN HIS BANK A/C IT WAS FOUND THAT THERE ALMOST ENTRIES WHICH ONLY ROUTED FROM HERE AND THERE '. FROM THE ABOVE OBSERVATIONS, IT IS NOT CLEAR AS TO WHAT ACTUALLY THE AO WANTS TO CONVEY. AT ANY RATE, HIS OBSERVATIONS ARE INCORRECT AND UNTENABLE 10.1.6. THE APPELLANT HAD FILED CONFIRMED COPY OF ACCOUNT OF SHARAD KR. JAIN HUF IN THE BOOKS OF THE APPELLANT TRUST, COPY OF WHICH IS PLACED AT PAGE 436 OF THE PAPER BOOK WHICH SHOWS THAT THERE WAS AN OPENING CREDIT BALANCE OF RS.2,50,000/ - WHILE CLOSING BALANCE WAS RS.7,45,000/ - . HERE AGAIN THE AO HAS ADDED THE DIFFERENCE BETWEEN THE CLOSING BALANCE AND THE OPENING BALANCE AMOUNTING TO RS.4,95,000/ - WITHOUT GIVING ANY VALID AND SUSTAINABLE REASONS. PAN NO. OF THE CREDITOR IS DULY GIVEN IN THE CONFIRMATORY LETTER AS AAEHS 1640A. COPIES OF THE SB A/C OF SHARAD KR. JAIN HUF WITH STATE BANK OF PATIALA ARE PLACED AT. PAGES 437 - 439 AND WITH PUNJAB NATIONAL BANK AT PAGES 440 TO 442 OF THE PAPER BOOK. IT IS NOT IN DISPUTE THAT THIS HUF IS ASSESSED TO TAX AND THER EFORE, I DO NOT FIND ANY JUSTIFICATION FOR THE ABOVE ADDITION WHICH IS HEREBY DELETED BECAUSE THE APPELLANT HAD PROVED THE CREDITS IN THIS ACCOUNT SATISFACTORILY. D. SH. SHARAD KUMAR JAIN (INDIVIDUAL) - RS. 1,00,000/ - . THE AO HAS MADE THIS ADDITION BY S AYING THAT COPY OF BANK A/C OF MR. SHARAD KUMAR JAIN WITH PNB HAS BEEN FILED FROM 12/03/2009 AND NOT FROM 01/04/2008 AND, THEREFORE, THE LOAN WAS UNVERIFIABLE EVEN THOUGH HE ACKNOWLEDGES THAT COPY OF COMPUTATION OF INCOME AND INTIMATION U/S 143(1) WERE FIL ED. 10.1.7. FOLLOWING SUBMISSIONS/ DOCUMENTARY EVIDENCES WERE FILED BY THE APPELLANT TO PROVE THE GENUINENESS OF THE ABOVE LOAN: (I) 'CONFIRMATORY LETTER AT PAGE 448. (II) COPY OF HIS BANK ACCOUNT AT PAGE 449 - 451. PAGE 12 OF 34 (III) COPY OF COMPUTATION OF INCOME AND INTIMATION U/S 143(1) TO SHOW THAT HE WAS ASSESSED TO TAX AT PAGE 443 - 447. (IV) COPY OF HIS ACCOUNT AS STANDING IN THE BOOKS OF THE TRUST AT PAGE 448. (V) FOLLOWING OBSERVATIONS OF THE AO IN THE REMARK COLUMN ARE ALSO NOT CLEAR AS TO WH AT HE WANTS TO CONVEY AND AT ANY RATE, THEY ARE NOT JUSTIFIED: 'ASSESSEE TRUST FILED COPY OF BANK A/C OF MR. SHARAD KUMAR JAIN WITH PUNJAB NATIONAL BANK WHICH IS FROM 12/03/2009 AND NOT FROM 01/04/2008 AS REQUIRED AND THIS LOAN IS UNVERIFIABLE . THE LD. AO COULD HAVE ASKED THE ASSESSEE TO FILE COPY OF BANK ACCOUNT W.E.F. 01/04/2008. HOWEVER, THE SAME IS NOW FILED AT PAGE 450 OF THE PAPER BOOK'. 10.1.8. FROM THE COPY OF A/C FILED BY THE APPELLANT TRUST PLACE.D AT PAGE 448 OF THE PAPER BOOK, I FIND THAT IT WAS DULY CONFIRMED BY THE DEPOSITOR AND HE HAD ALSO GIVEN HIS PAN NO. AASPJ6280B. IT IS ALSO AN OLD A/C WITH OPENING BALANCE OF RS.4,00,000/ - . IN THIS CASE ALSO, THE AO HAS ADDED THE DIFFERENCE BETWEEN CLOSING BALANCE OF RS.5,00,000/ - AND OPENING BALANCE OF R S.4,00,000/ - . COPY OF BANK STATEMENT WITH PUNJAB NATIONAL BANK IS PLACED AT PAGE 449 - 451 OF THE PAPER BOOK. KEEPING IN VIEW THE ABOVE DOCUMENTARY EVIDENCE, I HOLD THAT THERE WAS NO JUSTIFICATION ON THE PART OF THE AO TO HAVE MADE ADDITION OF RS. 1,00,00 07 - WHICH HAS BEEN EXPLAINED SATISFACTORILY. THE ADDITION OF RS 1,00,0007 - IS THEREFORE DELETED E. SMT. BEENU GUPTA - RS.10,00,000/ - . THE' AO HAS MADE THE ADDITION BY SAYING THAT COPY OF BANK A/C HAD NOT BEEN FILED AND THE ASSESSEE HAD FILED ONLY COPY OF HER INCOME - TAX RETURN ACKNOWLEDGMENT AND THEREFORE, GENUINENESS AND CREDITWORTHINESS OF LOAN WAS UNPROVED. 10.1.9. COPY OF CONFIRMATORY LETTER OF SMT. BEENU GUPTA IS PLACED AT PAGES 455 OF THE PAPER BOOK ALONG WITH STATEMENT OF HER BANK A/C WITH PUNJAB NATIONAL BANK AT PAGE 456 WHICH SHOWS THAT SHE IS ASSESSED TO TAX WITH PAN NO. AEQPG2755L. THE AO HAS HIMSELF MENTIONED THAT IN THE INCOME - TAX RETURN, SHE HAD DECLARED NET INCOME OF RS.2,44,930/ - . FROM HER COPY OF A/C WITH THE APPELLANT TRUST, I FIND THAT THERE ARE OTHER CREDIT ENTRIES ALSO WHICH HAVE BEEN ACCEPTED BY THE AO. AGAINST THE DEPOSIT OF RS.10,00,000/ - ON 01/05/2008, IT IS SPECIFICALLY MENTIONED THAT PNB OD A/C NO. 501561 WAS DEBITED WHICH STANDS PROVED FROM HER BANK STATEMENT PLACED AT PAGE 456 OF THE PAPER BOOK. SHE IS ALSO ASSESSED TO TAX. THEREFORE, THE AO WAS NOT JUSTIFIED IN HOLDING THAT GENUINENESS OF LOAN AND CREDITWORTHINESS WERE UNPROVED. CONSEQUENTLY, THE ADDITION OF RS.10,00,000/ - IS DELETED. F. SMT. SARITA AGARWAL - RS.7,00,000/ - ADDE D BY THE AO BY SAYING THAT NO DOCUMENTS WERE FILED IN SUPPORT OF THE LOAN. 10.1.10. FOLLOWING DOCUMENTARY EVIDENCES WERE FILED BEFORE ME TO PROVE THE GENUINENESS OF THE ABOVE LOAN: . (I) 'CONFIRMATORY LETTER WHICH MENTIONS HER PAN NO. ADDPA2824N AT PAG E 460. (II) COPY OF HER BANK ACCOUNT AT PAGE 461 - 463. PAGE 13 OF 34 (III) COPY OF COMPUTATION OF INCOME, WITH ACKNOWLEDGMENT AND INTIMATION U/S 143(1) TO SHOW THAT SHE WAS ASSESSED TO TAX AT PAGE 457 - 458. (IV) COPY OF HER ACCOUNT AS STANDING IN THE BOOKS OF THE TRUST AT PAGE 460. ' 10.1.11 THE APPELLANT HAD MADE FURTHER SUBMISSIONS AS UNDER WITH REGARD TO THE ABOVE DOCUMENTARY EVIDENCE; 'THE LD. AO HAD ISSUED SHOW CAUSE NOTICE OF 6 PAGES ON 28/12/2011 COPY AT PAGES 405 - 410 IN WHICH SHE HAD MENTIONED AT PAGE 408 THAT NO DOCUMENTS WERE FILED IN SUPPORT OF THE LOAN. THE FACT REMAINS THAT THE LD. AO HAD NOWHERE ASKED THE ASSESSEE EARLIER TO FILE DOCUMENTARY EVIDENCE TO PROVE THE LOAN. THEREFORE, THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING T HE ABOVE DOCUMENTARY EVIDENCE. AN APPLICATION UNDER RULE 46 - A IS BEING FILED SEPARATELY AT PAGE 533 REQUESTING YOUR HONOUR TO ENTERTAIN THE ABOVE EVIDENCE. ' 10.1.12. I MAY MENTION HERE THAT AN APPLICATION UNDER RULE 46A OF I.T. RULES WAS FILED BEFORE ME PRAYING FOR ADMITTANCE OF ADDITIONAL EVIDENCE WITH REGARD TO THE FOLLOWING DEPOSITS AS REPRODUCED BELOW: 'PERMISSION IS HEREBY SOUGHT TO FILE THE FOLLOWING DOCUMENTARY EVIDENCE: 1. COPY OF BANK A/C OF SMT. BEENU GUPTA PLACED AT PAGES 452 - 456 OF THE PAPER BOOK. IT COULD NOT BE FILED BEFORE THE AO BECAUSE THE BANK HAD NOT ISSUED THE SAME WITHIN SHORT TIME ALLOWED BY THE AO. IT IS PERTINENT TO POINT OUT HERE THAT THE AO HIMSELF HAD NOT MADE ANY ADDITION IN THE CASE OF SMT. MEGHA JAIN ON THE BASIS OF HE R COPY OF BANK ACCOUNT AND COMPULATION OF INCOME FILED BY HER ALONGWITH HER RETURN REGARDING HER LOAN OF RS. 50,000/ - . 2. COPY OF ACCOUNT OFDTI BANK OF SH. ANUBHAV JAIN AT PAGE 425A. 3. COPY OF LETTER DATED 20/05/2008 RECEIVED FROM TIMES GROUP OF SH. ANUBHAV JAIN SHOWING REMITTANCE OFRS. 5,49,6111 - THROUGH DRAFT PLACED AT PAGES 425B. 4. CERTIFICATE DATED 25/09/2009 ISSUED BY UNITED AIRLINES IN WHICH SH. ANUBHAV JAIN IS EMPLOYED DRAWING SALARY OF APPROXIMATELY USD 78,600 PAGE 425C. 5. CERTIFICATE DA TED M/S GOLDEN STRAND PVT. LTD. NEW DELHI WITH WHOM SH. 'POOJA JAIN IS EMPLOYED PLACED AT PAGES 431B. 6. COPY OF HER STATEMENT OF AFFAIRS FOR F.Y. 2008 - 09 AS FILED BY HER WITH HER INCOME TAX RETURNS PLACED AT PAGE 431'A THE DOCUMENTARY EVIDENCE MENTIONED AT SR. NO. 2 TO 6 ABOVE, COULD' NOT BE FILED BEFORE THE AO BECAUSE THE AO HAD NOT GIVEN REASONABLE OPPORTUNITY IN THE COURSE OF ASSESSMENT PROCEEDINGS. ' 7. COPY OF BANK ACCOUNT OF SH. SHARAD KUMAR JAIN (INDIVIDUAL) PLACED W.E.F. 01/04/2008 AT PAGE 450 WHICH COULD NOT BE FILED BEFORE THE AO BECAUSE THE AO DID NOT ASK FOR THE SAME THOUGH COPY OF HIS BANK ACCOUNT ADMITTEDLY WAS FILED FROM 12/03/2009 ONWARDS. PAGE 14 OF 34 8. IN THE CASE OF LOAN OFSMT. SARITA AGGARWAL AMOUNTING TO RS. 7 LACS, FOLLOWING DOCUMENTARY EVI DENCE MAY KINDLY BE ENTERTAINED UNDER RULE 46A: (I) CONFIRMATORY LETTER WHICH MENTIONS HER PAN NO. ADDPA2824N AT PAGE 460. (II) ' COPY OF HER BANK ACCOUNT AT PAGE 461 - 463. (III) COPY OF COMPUTATION OF INCOME, WITH ACKNOWLEDGMENT AND INTIMATION U/S 143(1) TO SHOW THAT SHE WAS ASSESSED TO TAX AT PAGE 457 - 458. (IV) COPY OF HER ACCOUNT AS STANDING IN THE BOOKS OF THE TRUST AT PAGE 460. THE LD. AO HAD ISSUED SHOW CAUSE NOTICE OF 6 PAGES ON 28/12/2011 COPY AT PAGES 405 - 410 IN WHICH SHE HAD MENTI ONED AT PAGE 408 THAT NO DOCUMENTS WERE FILED IN SUPPORT OF THE LOAN. THE FACT REMAINS THAT THE LD. AO HAD NOWHERE ASKED THE ASSESSES EARLIER TO FILE DOCUMENTARY EVIDENCE TO PROVE THE LOAN. THEREFORE, THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRO DUCING THE ABOVE DOCUMENTARY EVIDENCE. THEREFORE, THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE IN FILING THE ABOVE DOCUMENTARY EVIDENCE BEFORE THE AO. - THE ABOVE DOCUMENTARY EVIDENCE MAY KINDLY BE ENTERTAINED AND TAKEN INTO CONSIDERATION WHI LE DECIDING THE APPEAL'. 10.1.13. IT IS WORTH MENTIONING HERE THAT IN THE REMAND REPORT SUBMITTED BY THE AO, HE HAD OBSERVED THAT 'GOOD AND SUFFICIENT OPPORTUNITY HAS ALREADY BEEN ALLOWED TO THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, IT IS REQUESTED THAT THE SAME MAY NOT BE ADMITTED.' THE AO RELIED UPON THE FINDINGS/OBSERVATIONS RECORDED IN THE ASSESSMENT O RDER. 10.1.14. IN THE REJOINDER FILED BY THE APPELLANT TRUST, IT WAS SUBMITTED .THAT THE AO HAD NOT CONTROVERTED OR DISPROVED THE FACTS STATED AND THE DOCUMENTARY EVIDENCE RELIED UPON WITH REGARD TO ADDITIONS AGGREGATING AT RS.28,60,000/ : AND THAT ALL SUC H PERSONS/DEPOSITORS WERE INCOME - TAX ASSESSEES AND THEY HAD ALSO CONFIRMED TO HAVE GIVEN SUCH LOANS TO THE APPELLANT AND THEREFORE, THE ONUS WHICH LAY ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE LOANS AND THE CREDITWORTHINESS OF THE DEPOSITORS STOOD PR OVED. AS REGARDS THE ADDITIONAL EVIDENCE SUBMITTED UNDER RULE 46A OF I.T. RULES, IT HAS BEEN SUBMITTED IN THE REJOINDER THAT THE APPELLANT HAD GIVEN REASONS DUE TO WHICH IT WAS PREVENTED BY SUFFICIENT CAUSE IN NOT PRODUCING SUCH EVIDENCE BEFORE THE AO AND THAT THE SAME HAVING NOT BEEN CONTROVERTED OR DISPROVED COUPLED WITH THE FACT THAT THE AO HAD NOT OBJECTED TO THE ADMITTANCE OF SUCH EVIDENCE, THE SAME DESERVE TO BE ENTERTAINED AND TAKEN INTO CONSIDERATION WHILE DECIDING THE APPEAL. 10.1.15 ON THIS ISSUE , I AGREE WITH THE ARS THAT THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE IN PRODUCING THE EVIDENCE NOW FILED BEFORE ME AS ADDITIONAL EVIDENCE WITH REGARD TO DEPOSITS IN THE ACCOUNT OF SMT. BEENU GUPTA, SHARAD KUMAR JAIN (INDIVIDUAL) AND SMT. SARITA AGAR WAL AND THEREFORE PAGE 15 OF 34 THE SAME IS ADMITTED UNDER RULE 46A OF I.T. RULES. IN THE APPLICATION U/S 46A PLACED AT PAGES 533 - 34 OF THE PAPER BOOK, THE APPELLANT HAS GIVEN VALID REASONS WHICH PREVENTED IT TO FILE THE ADDITIONAL EVIDENCE, WITH WHICH I AGREE. FURTHER, THE AO HAD BEEN GIVEN AN OPPORTUNITY FOR SUBMITTING HIS REMAND REPORT IN WHICH HE COULD NOT GIVE ANY VALID REASONS FOR NON - ADMITTANCE OF SUCH DOCUMENTARY EVIDENCE AND THEREFORE, I ADMIT THE ADDITIONAL EVIDENCE AS FILED BY THE APPELLANT 10.1.16. I MAY ALSO MENTION HERE THAT DEPOSIT OF RS.50,000/ - MADE BY SMT. MEGHA JAIN WAS ACCEPTED BY THE AO HIMSELF ON THE BASIS OF COPY OF BANK A/C AND COMPUTATION OF HER INCOME. IT IS ALSO PERTINENT TO POINT OUT THAT IN PARA (III) AT PAGE 7, THE AO HIMSELF HAS OBSERVED AS UNDER: 'AS REGARDS TO THE GENUINENESS OF THE SAID FRESH UNSECURED LOANS, TO SUPPORT THEIR IDENTITY, CREDIT WORTHINESS AND NATURE OF TRANSACTIONS, THE ASSESSEE HAS ALREADY FURNISHED ((A) COPIES OF THEIR RESPECTIVE ACCOUNTS DULY CONFIRMED BY THE LENDERS WI TH THEIR COMPLETE ADDRESSES; (B) COPIES OF THEIR INCOME TAX RETURNS WITH COMPUTATION OF INCOME (C) COPIES OF THEIR RESPECTIVE BANK ACCOUNTS ETC.). FURTHER THIS IS TO MENTION THAT ALL THESE TRANSACTIONS ARE THROUGH BANKS ONLY. ' IN VIEW OF THE ABOVE OBSERVATIONS OF THE AO HIMSELF, NO JUSTIFICATION SUBSISTED TO MAKE THE IMPUGNED ADDITIONS. 10.1.17, I FIND FROM THE ASSESSMENT RECORD THAT THE APPELLANT HAD EXPLAINED THE REASONS FOR TAKING THE FRESH LOANS VIDE FOLLOWING LETTERS FILED BEFORE THE AO: A) LETTER DATED 4/2/2006 COPY PLACED AT PAGES 479 - 482 B) LETTER DATED 6/6/2007 COPY PLACED AT PAGES 483 - 485 C) LETTER DATED 10/08/2005 COPY PLACED AT PAGES 480 & 486 - 490 D) LETTER DATED 6/5/2008 COPY PLACED AT PAGES 491 - 494 10.1.18 FURTHER, I FIND THAT AT PAGE 7, THE AO HAS OBSERVED THAT THE ASSESSEE HAD RECEIVED FRESH LOANS OF RS.29.10 LACS AND HAD MADE REPAYMENT OF THE LOANS AGGREGATING AT RS.28,36,635/ - , RESULTING IN A NET ADDITION OF RS.73,365/ - ONLY. IT WAS NOT REALLY INTELLIGIBLE. THE APPELLAN T HAD TAKEN FRESH LOANS BECAUSE IT WAS ASKED TO PAY BACK THE OLD LOANS. FURTHER, SUCH WAS ALSO THE REQUIREMENT OF PNB FROM WHOM OVERDRAFT/TERM LOAN HAD BEEN TAKEN. SIMILARLY, I AGREE WITH THE ARS THAT THE FOLLOWING OBSERVATIONS MADE BY THE AO IN LAST PARA AT PAGES 7 - 8 OF THE IMPUGNED ORDER ARE INCORRECT OR WERE - NOT LEGALLY TENABLE. IT IS OBVIOUS THAT ASSESSEE IS TRYING TO BEFOOL THE REVENUE BY FILING CONTRADICTORY REPLIES. FURTHER ALMOST UNSECURED LOAN CREDITORS ARE FILING THEIR INCOME TAX RETURN BY SHOWIN G INTEREST INCOME AND NO OTHER REGULAR SOURCE OF INCOME IS EARNED/SHOWN BY ALL UNSECURED LOAN CREDITORS. NO CASH ACCRUALS IS AVAILABLE WITH THE UNSECURED LOAN CREDITORS AND HOW THEY ARE MAINTAINING THEMSELVES IS ALSO NOT CLEAR. ACTUALLY THEY ALL ARE NAME L ENDER AND TRUST IS DIVERTING THE TRUST FUND FOR THE BENEFIT OF PERSONS 'SPECIFIED UNDER SECTION 13(3) OF THE INCOME TAX ACT, 1961.' 10.1.19. THE AO HAD NOT DEMONSTRATED AS TO HOW THE ASSESSEE IS TRYING TO BEFOOL THE REVENUE BY FILING CONTRADICTORY REPLIES OR THAT THE REPLIES FILED BY PAGE 16 OF 34 THE ASSESSEE WERE CONTRADICTORY. HIS FURTHER OBSERVATIONS AS TO HOW THE CREDITORS WERE MAINTAINING THEMSELVES WERE ALSO NOT AT ALL RELEVANT PARTICULARLY WHEN ALL OF THEM WERE REGULAR INCOME TAX PAYERS & HAD DECLARED INTEREST IN COME EARNED FROM APPELLANT ON SUCH LOANS IN THEIR RESPECTIVE INCOME TAX RETURNS AND HAD BEEN ASSESSED TO TAX ON SUCH INTEREST INCOME. 10.1.20. I NEED NOT DISCUSS VARIOUS CASE LAWS RELIED UPON BY THE APPELLANT WITH REGARD TO THE ADDITIONS ON ACCOUNT OF DEP OSITS OR CREDITS IN THE ACCOUNTS OF VARIOUS PERSONS AS DISCUSSED ABOVE BECAUSE I HAVE DELETED THEM ON MERITS THOUGH THE SAME FULLY SUPPORT THE APPELLANT'S CASE. 10.1.21.IN VIEW OF MY FINDINGS GIVEN ABOVE, THE ADDITIONS ON ACCOUNT OF DEPOSITS AGGREGATING A T RS.28,60,000/ - BEING WHOLLY UNJUSTIFIED ARE DELETED 10. BEFORE US THE LD DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LD ASSESSING OFFICER. 11. THE LD AR SUBMITTED THAT THE ASSESSEE HAS PRODUCED THE COMPLETE DETAILS OF THE LOAN AND THE CONFIRMATION WHICH WERE NO T CONTROVERTED AND HENCE, THE ORDER OF THE LD CIT(A) DELETING THE ABOVE ADDITION IS IN ORDER. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES. BEFORE THE LD ASSESSING OFFICER , ASSESSEE HAS SUBMITTED WITH RESPECT TO CREDITORS, THE COPIES OF BANK ACCOUNT, COMPUTATION OF TOTAL INCOME AND COPY OF INTIMATION U/S 143(1) OF THE ACT. THE LD ASSESSING OFFICER DID NOT CONFRONT ANY OF THE EVIDENCES SUBMITTED BY THE ASSESSEE AND MERELY REJ ECTED THE DETAILS FURNISHED. THE LD CIT(A) HAS EXAMINED EACH OF THE LOAN IN DETAIL AFTER OBTAINING THE REMAND REPORT AS WELL AS ADMITTED THE ADDITIONAL EVIDENCE WITH RESPECT TO THE OTHER CREDITORS AND HENCE DELETED THE ADDITION. THE LD DR COULD NOT SHOW US ANY INFIRMITY IN THE ORDER OF THE LD CIT(A) IN DELETING THE ABOVE ADDITION. WE ARE ALSO OF THE VIEW THAT THE ASSESSEE HAS SUBMITTED THE COMPLETE DETAILS OF UNSECURED LOAN PROVING IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE ABOVE TRANSACTION. IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) IN DELETING THE ABOVE DISALLOWANCE. THEREFORE, GROUND NO. 4 AND 5 OF THE APPEAL OF THE REVENUE IS DISMISSED. 13. NOW WE COME TO GROUND NO. 3 OF THE APPEAL OF THE REVENUE WHICH CHALLENGES THE ORDE R OF THE LD CIT(A) ON THE FACT THAT INTEREST PAID BY THE ASSESSEE @18% OF RS. 2050491/ - RESULTS INTO VIOLATION OF THE PROVISIONS OF SECTION 13(3) OF THE INCOME TAX ACT. THE BRIEF FACT OF THE ISSUE IS THAT DISCUSSED BY THE LD ASSESSING OFFICER AT PAGE NO. 2 TO 4 OF ASSESSING OFFICER AS UNDER: - INTEREST ON UNSECURED LOAN ASSESSEE FILED THE DETAIL OF UNSECURED LOANS VIDE REPLY DT.23.12.2011.AUDIT REPORT FILE IN FORM 10B DO NOT CONTAIN LIST OF PERSONS SPECIFIED U/S 13(3) OF I.T. ACT 1961 IN PART II OF FORM 1 0B NO COMMENT FOR DETAILS IS OFFERED AND AGAINST EACH CLAUSE NIL IS WRITTEN AS ON 01.04.2008 OPENING BALANCE OF UNSECURED PAGE 17 OF 34 LOANS WAS RS L,26,40,243/ - .ADDITION MADE DURING THE YEAR 51,80,0007 - REPAYMENT WAS MADE FOR RS.31 S 90,000/ - INTEREST AMOUNTING TO RS.20,50,4917 - WAS PAID DURING THE YEAR. SECURED LOAN OF RS. 83350717/ - WAS OUTSTANDING AS ON 01.04.2008 CLOSING BALANCE OF SECURED LOAN WAS RS. 1000435387 - RESULTING THE NET INCREASE OF RS 16692821/ - AS DETAIL FILED BY THE ASSESSEE IT IS SEEN THAT SURPLU S OF RS 853958827 - WAS GENERATED DURING THE YEAR AND THERE WAS NO REQUIREMENT TO RAISE THE FURTHER UNSECURED LOANS IT IS ALSO WORTHWHILE TO MENTION HERE THAT INTEREST ON SECURED LOAN WAS PAID RS 950595 L/ - AVERAGE COST OF SECURED LOAN COMES 11.4% ON OPENING BALANCE WHILE ON UNSECURED LOAN INTEREST IS PAID @ 18%. IN VIEW OF THE FACTS UNSECURED LOANS CREDITORS ARE THE FOUNDERS7OFFICE BEARER AND THEIR RELATIVES U7S 13(3) OF I.T. ACT IT IS CLEAR IF ANY INCOME OR PROPERTY OF THE TRUST OR INSTITUTION IS DIVERTED D URING THE PREVIOUS YEAR IN FAVOUR OF ANY PERSON REFERRED TO IN SUB SECTION (3) OR IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWANCE OR OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON REFERRED TO IN SUB - SECTION (3) OUT OF THE RESOURCES OR THE TRUST OR INST ITUTION FOR SERVICES RENDERED BY THAT PERSON TO SUCH TRUST OR INSTITUTION AND THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES; IT IS CLEAR THAT ASSESSEE TRUST IS IN ADEQUATE SURPLUS OF THE FUND THERE WAS NO NEED TO TAKE UN SECURED LOANS ON HIGHER RATE I.E @ 18% WHILE BANK OD LIMIT OF RS.4.5 CRORE UNDER UTILIZED WHICH WAS AVAILABLE ON VERY LOWER RATE AS COMPARED TO INTEREST PAID ON UNSECURED LOANS. ON SPECIFICALLY ASKED FOR ABOUT THE PAYMENT OF HIGHER RATE OF INTEREST TO UNSE CURED LOAN CREDITORS AND IN SPITE OF AVAILABILITY OF CASH FLOW WHY UNSECURED LOAN WAS FURTHER RAISED ASSESSEE SUBMITTED THE FOLLOWING REPLY: - AS REGARDS TO INTEREST PAYR: 3R. THE RATE OF INTEREST OF 12% CH LOANS EXTENDED TO THE ASSESSEE TRUST, THIS IS TO S UBMIT THAT IT IS FACT THE ASSESSEE IS ENJOYING SECURED O/D LIMITS FROM BANKS, WHICH AT TIMES ARE FULLY UTILIZED DURING THE YEAR BUT AT TIMES IT IS LESSER UTILIZED AS PER THE DAY TO DAY AND TIME TO TIME CASH FLOW WITH THE ASSESSEE. WHEN THE LIMITS ARE FULLY UTILIZED THESE UNSECURED LOANS ARE REGULARLY AVAILABLE TO THE ASSESSEE. AS AGAINST THE TOTAL OPERATIONS OF THE ASSESSEE THESE ARE A SMALL QUANTUM OF UNSECURED LOANS AS ON 01.04.08 RS. 1,28,40,243 WHICH HAS GROWN TO RS. 1,47,32,279 AS ON 31.03.09 BASICALLY DUE TO APPLICATION OF INTEREST OF RS. 20,02,054 WHICH IS WELL SUBJECT TO TDS AND ALL SUCH LENDERS ARE REGULARLY ASSESSED TO INCOME TAX AND PAYING TAXES AS PER THE LAWS OF THE LAND. FURTHERMORE AS REGARDS TO HIGHER RATE OF INTEREST TO UNSECURED LENDERS, T HIS IS PERTINENT TO MENTION THAT FOR TAKING AND AVAILING CREDIT FACILITIES FROM THE BANKS, THERE ARE NUMBER OF FORMALITIES TO BE COMPLIED WITH, NUMBER OF NORMS TO BE KEPT IN ORDER WHICH ULTIMATELY COST TO THE ASSESSE FOR CARRYING OUT ACTIVITIES SMOOTHLY. FURTHERMORE, WHILE SANCTIONING THE FINANCIAL ASSISTANCE THE BANKING INSTITUTIONS ALSO PUT SPECIFIC CONDITIONS IN THEIR TERMS AND CONDITIONS FOR SANCTION OF LOAN THAT THE PROMOTER TRUSTEES SHALL MAINTAIN THEIR LENDING'S WITH THE ASSESSEE TRUST AND ALSO AT T IMES REQUIRE TO INCREASE SUCH LENDING'S TO BRIDGE THE GAP / TO MAINTAIN THE MARGIN AND THEREFORE SUCH BORROWINGS BECOME MANDATORY FOR THE ASSESSEE TRUST. NOT ONLY THIS, AT TIMES THE LENDING BANKS HAVE ALSO PUT THE CONDITION ON THE BORROWER ASSESSEE TRUST T HAT SUCH PAGE 18 OF 34 DEPOSITS SHALL NOT BE WITHDRAW WITHOUT WRITTEN PERMISSION FROM THE BANKS AND THE TOTAL QUANTUM OF SUCH DEPOSITS ARE MANDATORILY REQUIRED TO BE MAINTAIN. FEW SUCH STIPULATIONS OF THE BANKS IN THEIR SANCTION ADVISES ARE FURNISHED HEREWITH. THEREFOR E THE UNSECURED LOANS WHICH ARE AVAILABLE REGULARLY WITHOUT ANY REGULATORY MEASURES BY THE BANKERS ARE THE NEED BASED REQUIREMENT OF THE ASSEESSE AND CONSIDERING THE SMALL QUANTUM COMING SINCE NUMBER OF EARLIER YEARS, WHICH ARE ALSO WELL ASSESSED UNDER SCR UTINY ASSESSMENTS FOR IMMEDIATE EARLIER YEARS. UNDER THE FACTS AND CIRCUMSTANCES STATED HEREIN ABOVE THE SAME DESERVES TO BE ALLOWED. REPLY OF THE ASSESSEE CONSIDERED. ASSESSES TRIED TO DEMONSTRATE THE REASON FOR HIGHER OF INTEREST PAID TO PERSONS SPECIFIED UNDER SECTION 13(3) BY COMMENDATORY, BUT IN SUPPORT NO DOCUMENTARY PROOF IS FILED. IT IS OBVIOUS THAT BANK MAY ASKED FOR INCREASE TH E CAPITAL/ GENERAL FUND FOR DEBT EQUITY RATIO, BUT IN THIS CASE NO GENERAL FUND IS INCREASED. SECONDLY TERM LOAN AND WORKING CAPITAL LOAN WAS UNDER UTILIZED. THIRDLY ALMOST UNSECURED LOAN ARE FILING THEIR INCOME TAX RETURN BY SHOWING INTEREST INCOME AND NO OTHER REGULAR OF INCOME IS EARNED/ SHOWN BY ALL UNSECURED LOAN CREDITORS. NO CASH ACCRUALS IS WITH THE UNSECURED LOAN CREDITORS AND HOW THEY ARE MAINTAINING THEMSELVES IS ALSO TA CKAR. ACTUALLY THEY ALL ARE NAME LENDER AND TRUST IS DIVERTING THE TRUST FUN D FOR THE BENEFIT JF PERSONS SPECIFIED UNDER SECTION 13(3) OF THE INCOME TAX ACT, 1961. 14. THE LD CIT(A) HAS DEALT WITH THIS ISSUE AT PAGE NO. 10.2 OF HIS ORDER FROM PAGE NO. 18 TO 22 AS UNDER: - 10.2. GROUND NO. 2(B) IS AGAINST THE ADDITION OF RS.20,50,491/ - ON ACCOUNT OF DISALLOWANCE OF INTEREST ON UNSECURED LOANS. 10.2.1. THE APPELLANT HAS REPRODUCED THE RELEVANT OBSERVATIONS OF THE AO AND THEN HAS MADE ITS SUBMISSIONS WITH REGARD TO THIS ADDITION AS UN DER: 'THE AO HAS DISCUSSED THIS ISSUE AT PAGE 2 - 4 OF THE IMPUGNED ASSESSMENT ORDER. THE AO HAS AT PAGE 2 OF THE ASSESSMENT ORDER OBSERVED AS UNDER: 'ASSESSEE FILED THE DETAIL OF UNSECURED LOANS VIDE REPLY DT. 23.12.2011. AUDIT REPORT FILED IN FORM JOB DO NOT CONTAIN LIST OF PERSONS SPECIFIED U/S 13(3) OF IT. ACT, 1961 IN PART 11 OF FORM 10B NO COMMENT FOR DETAILS IS OFFERED AND AGAINST EACH CLAUSE NIL IS - WRITTEN '. COPY OF AUDITED REPORT IN THE CASE OF THE APPELLANT AS FILED BEFORE AO IS PLACED AT PAGES 499 - 516 OF THE PAPER BOOK. THE AUDITORS HAD CORRECTLY PREPARED THEIR REPORT. SECTION 13(3) OFL.T. ACT HAD NO APPLICATION TO THE FACTS OF - APPELLANT'S CASE. THE AO HAS FURTHER OBSERVED AS UNDER: . PAGE 19 OF 34 'AS PER DETAIL FILED BY THE ASSESSEE, IT IS SEEN THAT SU RPLUS OF RS.8,53,95,882/ - WAS GENERATED DURING THE YEAR AND THERE WAS NO REQUIREMENT TO RAISE THE FURTHER UNSECURED LOANS IT IS ALSO WORTHWHILE TO MENTION HERE THAT INTEREST ON SECURED LOAN WAS PAID RS,95,05,9511 - AVERAGE COST OF SECURED LOAN COMES 11.4% ON OPENING BALANCE WHILE ON UNSECURED LOAN INTEREST IS PAID @ 18%. IN VIEW OF THE FACTS UNSECURED LOANS CREDITORS ARE THE FOUNDERS/OFFICE BEARER AND THEIR RELATIVES U/S 13(3) OFL. T. ACT. IT IS CLEAR IF ANY INCOME OR PROPERTY OF THE TRUST OR INSTITUTION IS D IVERTED DURING THE PREVIOUS YEAR IN FAVOUR OF ANY PERSON REFERRED TO IN SUB SECTION (3) OR IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWANCE OR OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON REFERRED TO IN SUB - SECTION (3) OUT OF THE RESOURCES OF THE TRUS T OR INSTITUTION FOR SERVICES RENDERED BY THAT PERSON TO SUCH TRUST OR INSTITUTION AND THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICE. IT IS CLEAR THAT ASSESSEE TRUST IS IN ADEQUATE SURPLUS OF THE FUND THERE WAS NO NEED TO TAKE UNSECURED LOANS ON HIGHER RATE I.E. @ 18% WHILE BANK OD LIMIT OFRS. 4.5 CRORE WAS UNDER UTILIZED WHICH WAS AVAILABLE ON VERY LOWER RATE AS COMPARED TO INTEREST PAID ON UNSECURED LOANS '. THE ABOVE OBSERVATIONS OF THE LD. AO ARE ALSO INCORRECT. A COP Y OF SANCTION LETTER DATED 10/08/2005 OFPNB MEERUT FROM WHOM LOAN WAS RAISED IS AT PAGE 480 - 481. CLAUSE 4 AT PAGE 481 OF THIS LETTER READS AS UNDER: 'BORROWER SHALL UNDERTAKE NOT TO ALLOW THE WITHDRAWAL OF UNSECURED LOANS FROM FRIENDS/RELATIVES OF PROMO TERS WITHOUT PRIOR PERMISSION OF THE BANK IN WRITING'. . CLAUSE 8 OF PUNJAB NATIONAL BANK'S LETTER DATED 10/08/2005 AT PAGE 487 READS AS UNDER: 'ESCALATIONS: THE BORROWER SHALL MEET SUCH COSTS, IF ANY, FROM ITS OWN SOURCES AND SHALL NOT ASK FOR ANY ADDIT IONAL TERM LOAN FROM THE BANK. THE PROMOTERS WILL ALSO INCREASE THEIR MARGIN CONTRIBUTION FROM RS. 189.99 LAKHS TORS.!99.99LAKH'. FURTHER THE AO OVERLOOKED TO APPRECIATE THAT RAISING OF LOANS FROM THE BANKS BESIDES INTEREST RATE ALSO COSTS THE APPELLANT PR OCESSING FEE OF 1.25% AND OTNER CHARGES COUPLED WITH THE FACT THAT THE APPELLANT HAD TO GIVE PERSONAL SECURITIES OF ITS TRUSTEES ALSO. IN OTHER WORDS, RAISING OF LOAN FROM THE BANK WAS NOT EASY BUT ALSO BECAUSE OF PERSONAL GUARANTEES OF THE TRUSTEES. THER EAFTER, THE AO HAS REPRODUCED ASSESSEE'S REPLY DATED 29/12/2011 FILED BEFORE AO, COPY PLACED AT PAGES 411 - 415 JUSTIFYING THE INTEREST PAYMENT @ 18% TO THE DEPOSITORS. HOWEVER, THE SAME HAS BEEN REJECTED BY THE AO BY MAKING THE FOLLOWING OBSERVATIONS AT P AGE 3 - 4 OF THE IMPUGNED ORDER: PAGE 20 OF 34 ''REPLY OF THE ASSESSEE CONSIDERED. ASSESSEE TRIED TO DEMONSTRATE THE REASON FOR HIGHER RATE OF INTEREST PAID TO PERSONS SPECIFIED UNDER SECTION 13(3) BY COMMENTARY, BUT IN SUPPORT NO DOCUMENTARY PROOF IS FILED. IT IS OBVIOU S THAT BANK MAY ASKED FOR INCREASE THE CAPITAL/GENERAL FUND FOR DEBT EQUITY RATIO, BUT IN THIS CASE NO GENERAL FUND IS INCREASED. SECONDLY TERM LOAN AND WORKING CAPITAL LOAN WAS UNDER UTILIZED. THIRDLY ALMOST UNSECURED LOAN CREDITORS ARE FILING THEIR INC OME TAX RETURN BY SHOWING INTEREST INCOME AND NO OTHER REGULAR SOURCE OF INCOME IS EARNED/SHOWN BY ALL UNSECURED LOAN CREDITORS. NO CASH ACCRUALS IS AVAILABLE WITH THE UNSECURED LOAN CREDITORS AND HOW THEY ARE MAINTAINING THEMSELVES IS ALSO NET CLEAR. ACTU ALLY THEY ALL ARE NAME LENDER AND TRUST IS DIVERTING THE TRUST FOUND FOR THE BENEFIT OF PERSONS SPECIFIED UNDER SECTION 13(3) OF THE INCOME TAX ACT, 1961'. FROM THE ABOVE OBSERVATIONS OF THE AO, IT IS EVIDENT THAT WITHOUT DISPROVING THE DOCUMENTARY EVIDEN CE FILED BY THE ASSESSEE IN SUPPORT OF THE UNSECURED CREDITORS/LOAN, THE AO HAS DISALLOWED THE INTEREST ON MERE SUSPICION AND SURMISES THEREBY IGNORING THE LEGAL POSITION THAT THE APPELLANT HAD DULY PROVED THE SOURCE OF LOANS/DEPOSITS AND IT WAS NOT REQUIR ED TO PROVE SOURCE OF SOURCE AS HELD IN THE FOLLOWING CASE LAWS: A) 49 ITR 274, 279, H. HASTI MAL VS. C1T, (MAD) B) 87ITR 349, CIT VS. DAULAT RAM RAWAT MAL, (SC) C) 103 ITR 344, SAROGI CREDIT CORPORATION V. CIT, (PATNA) FURTHER IT IS BY NOW WELL SETTLED PROPOSITION OF LAW THAT APPARENT IS REAL UNLESS CONTRARY IS PROVED AND THE ONUS TO PROVE THAT SUCH CREDITORS WERE MERELY NAME LENDER WAS ON THE REVENUE AS HELD BY HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. DAULAT RAM RA WATMULL 87ITR 349. THERE WAS ABSOLUTELY NO CONTRAVENTION OF PROVISION OF SECTION 13(3) OF I.T. ACT AS ALLEGED BY THE AO. THEREFORE, THERE WAS NO JUSTIFICATION TO MAKE DISALLOWANCE/ADDITION OFRS. 20,50,491 WHICH DESERVE TO BE DELETED. AT ANY RATE, WITHOU T PREJUDICE, THE DISALLOWANCE AS MADE IS VERY EXCESSIVE. ' 10.2.2. IN THE REMAND REPORT, THE AO HAS RELIED ON THE REASONS GIVEN IN THE ASSESSMENT ORDER FOR THE ABOVE ADDITION. 10.2.3. I HAVE GONE THROUGH THE AUDIT REPORT FILED BY THE APPELLANT ALONG WI TH THE RETURN COPY PLACED AT PAGES 499 - 516 OF THE PAPER BOOK AND I DO NOT FIND ANY INFIRMITY IN THE SAME. THE AUDITORS HAD PREPARED THEIR REPORT CORRECTLY. 10.2.4. AS REGARDS THE OBSERVATIONS OF THE AO THAT KEEPING IN VIEW THE SURPLUS GENERATED DURING TH E YEAR, THERE WAS NO REQUIREMENT TO RAISE FURTHER UNSECURED LOAN, THE SAME WERE NOT AT ALL JUSTIFIED FIRSTLY BECAUSE IT WAS THE PAGE 21 OF 34 APPELLANT TRUST WHICH HAD TO DECIDE ABOUT THE SAME KEEPING IN VIEW ITS REQUIREMENTS AND SECONDLY BECAUSE I FIND FROM THE SANCTIO N LETTER DATED 10/08/2005 OF PNB, MEERUT FROM WHOM LOAN WAS RAISED, COPY OF WHICH HAS BEEN PLACED AT PAGE 480 - 481 THAT THE BANK HAD IMPOSED CERTAIN RESTRICTIONS. IT IS APPROPRIATE TO REPRODUCE CLAUSE 4 OF THE SAID LETTER: 'BORROWER SHALL UNDERTAKE NOT TO ALLOW THE WITHDRAWAL OF UNSECURED LOANS FROM FRIENDS/RELATIVES OF PROMOTERS WITHOUT PRIOR PERMISSION OF THE BANK IN WRITING'. FURTHER CLAUSE 8 OF THE SAID LETTER AT PAGE 487 READS AS UNDER: 'ESCALATIONS: THE BORROWER SHALL MEET SUCH COSTS, IF ANY, FROM ITS OWN SOURCES AND SHALL NOT ASK FOR ANY ADDITIONAL TERM LOAN FROM THE BANK. THE PROMOTERS WILL ALSO INCREASE THEIR MARGIN CONTRIBUTION FROM RS. 189.99 LAKHS TO RS. 199.99 LAKH'. FURTHER, THE AO HAD OVERLOOKED TO APPRECIATE THAT FOR RAISING OF LOANS FROM THE BANKS, THE APPELLANT WAS TO PAY PROCESSING FEE OF RS.1.25% AND OTHER CHARGES BESIDES INTEREST COUPLED WITH THE FACT THAT THE TRUSTEES HAVE TO GIVE PERSONAL SECURITIES, WHICH GOES TO SHOW THAT RAISING OF LOANS FROM THE BANK WAS NOT EASY AND WAS FRAUGHT WITH DIRE CONSEQUENCES. MOREOVER, IF SUCH TERM LOAN AS SANCTIONED BY PNB WAS UNDERUTILIZED, THE SAME COULD NOT ENTITLE THE AO TO DRAW ANY ADVERSE INFERENCE AGAINST THE APPELLANT. THE AO HAS DISALLOWED THE INTEREST WITHOUT GIVING ANY VALID AND SUSTAINABLE REASONS. 10.2.5. I ALSO FIND THAT THE APPELLANT HAD PAID INTEREST ON ALMOST SIMILAR RATES IN THE PRECEDING YEAR WHICH STANDS ALLOWED BY THE AO. IF AT A PARTICULAR TIME, TERM LOAN AND WORKING CAPITAL LOAN WERE UNDERUTILIZED, IT COULD NOT ENTITLE THE AO TO D RAW ANY ADVERSE INFERENCE. I HAVE ALREADY HELD THAT THE ONUS TO PROVE THAT SUCH CREDITORS/DEPOSITORS WERE NAME LENDERS AND THE TRUST WAS DIVERTING THE TRUST FUND FOR THE BENEFIT OF PERSONS SPECIFIED U/S 13(3) OF THE I.T. ACT WAS ON THE AO WHICH HAD NOT AT ALL BEEN DISCHARGED. THE AO COULD NOT WITHOUT DISPROVING THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF UNSECURED CREDITORS/LOAN DISALLOW THE INTEREST ON MERE SUSPICION AND SURMISES PARTICULARLY WHEN THE APPELLANT TRUST HAD DULY PROVED THE SO URCE OF LOANS/DEPOSITS.. 10.2.6. IN MY CONSIDERED OPINION, THERE WAS ABSOLUTELY NO CONTRAVENTION OF PROVISIONS OF SECTION 13(3) OF THE I.T. ACT AS ALLEGED BY THE AO. THEREFORE, THERE WAS NO JUSTIFICATION TO MAKE DISALLOWANCE/ADDITION OF RS.20,50,491/ - WH ICH IS DELETED. 15. BEFORE US THE LD DR SUBMITTED THAT ACCORDING TO THE PROVISIONS OF SECTION 13(3) IF ANY PART OF THE INCOME AND PROPERTY OF THE TRUST IS DEEMED TO HAVE BEEN APPLIED FOR THE BENEFIT OF THE PERSON IF ANY INCOME OF THE TRUST IS DIVERTED IN FAVOUR OF PERSONS WHO ARE THE TRUSTEE, FOUNDER OR THEIR RELATIVES. IT WAS SUBMITTED THAT THE AMOUNT OF INTEREST IS EXORBITANT AND THEREFORE, THE PROVISIONS OF SECTION 13(2)(G) IS VIOLATED. HE FURTHER REFERRED TO THE PROVISIONS OF 13(1) (A) OF THE ACT ALSO. HE FURTHER REFERRED THAT LD ASSESSING OFFICER HAS HELD THAT THE PROVISIONS OF SECTION 13 IS VIOLATED. PAGE 22 OF 34 16. THE LD AR RELIED UPON THE ORDER OF LD CIT(A) . HE FURTHER REFERRED THAT 2010 - 11 THIS ISSUE WAS EXAMINED DURING THE SCRUTINY ASSESSMENT U/S 143(3) OF THE A CT AND HAS NOT TAKEN ANY ADVERSE VIEW DESPITE NOTING THAT ASSESSEE HAS PAID INTEREST ON ABOVE UNSECURED LOANS FROM 12 TO 18 %. HE THEREFORE STATED THAT IN EARLIER AND SUBSEQUENT YEAR THE CLAIM OF THE ASSESSEE IS ACCEPTED, THEREFORE, THIS ISSUE CANNOT BE AG ITATED NOW. 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS . THE LD ASSESSING OFFICER HAS STATED THAT INTEREST HAS BEEN PAID @18% TO VARIOUS PARTIES AND THEREFORE, HE PRESUMED THAT THESE ARE THE PARTIES SPECIFIED U/S 13(3) OF THE ACT AND HENCE, HELD THAT PROVISIONS OF SECTION 13 ARE VIOLATED . THE LD CIT(A) HAS CONSIDERED THE RELEVANT BANKING RATES AND HAS HELD THAT THE RATE OF INTEREST ARE REASONABLE AND AO HAS NOT GIVEN AN Y VALID AND SUSTAINABLE REASONS WITH RESPECT TO THE APPLICABIL ITY OF SECTION 13(3) OF THE ACT HE EMPHATICALLY STATED THAT THERE IS NO CONTRAVENTION OF PROVISION OF SECTION 13(3) OF THE ACT. 18. THE PROVISIONS OF SECTION 13 PROVIDES THAT IN CERTAIN CIRCUMSTANCES SECTION 11 WHICH GIVEN BENEFICIAL TREATMENT TO INCOME FROM P ROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES DOES NOT APPLY. THEREFORE, IF THE CONDITIONS MENTIONED U/S 13 ARE TRIGGERED THE PROVISIONS OF SECTION 11 DO NOT APPLY. ACCORDING TO SECTION 13(2) PROVIDES AS UNDER: - 13 (1) NOTHING CONTAINED IN SECTION 11 O R SECTION 12 SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THERE OF - (A) ANY PART OF THE INCOME FROM THE PROPERTY HELD UNDER A TRUST FOR PRIVATE RELIGIOUS PURPOSES WHICH DOES NOT ENURE FOR THE BENEFIT OF THE PUBLIC ; (B) IN THE CASE OF A TRUST FOR CHARITABLE PURPOSES OR A CHARITABLE INSTITUTION CREATED OR ESTABLISHED AFTER THE COMMENCEMENT OF THIS ACT, ANY INCOME THEREOF IF THE TRUST OR INSTITUTION IS CREATED OR ESTABLISHED FOR THE BENEFIT OF ANY PARTICUL AR RELIGIOUS COMMUNITY OR CASTE ; (BB) OMITTED BY THE FINANCE ACT, 1983, W.E.F. 1 - 4 - 1984. (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THEREOF - (I) IF SUCH TRUST OR INSTITUTION HAS BEE N CREATED OR ESTABLISHED AFTER THE COMMENCEMENT OF THIS ACT AND UNDER THE TERMS OF THE TRUST OR THE RULES GOVERNING THE INSTITUTION, ANY PART OF SUCH INCOME ENURES, OR (II) IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR INSTITUTION (WHENEVER CREATED OR ESTABLISHED) IS DURING THE PREVIOUS YEAR USED OR APPLIED, DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB - SECTION (3) : PROVIDED THAT IN THE CASE OF A TRUST OR INSTITUTION CREATED OR ESTABLISHED BEFORE THE COMMENCEMENT OF THIS ACT, THE PROVISIONS OF SUB - CLAUSE (II) SHALL NOT APPLY TO ANY USE OR APPLICATION, WHETHER DIRECTLY OR INDIRECTLY, OF ANY PART OF SUCH INCOME PAGE 23 OF 34 OR ANY PROPERTY OF THE TRUST OR INSTITUTION FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB - SECTION (3), IF SUCH USE OR APPLICATION IS BY WAY OF COMPLIANCE WITH A MANDATORY TERM OF THE TRUST OR A MAN DATORY RULE GOVERNING THE INSTI TUTION : PROVIDED FURTHER THAT IN THE CASE OF A TRUST FOR RELIGIOUS PURPOSES O R A RELIGIOUS INSTITUTION (WHEN EVER CREATED OR ESTABLISH ED) OR A TRUST FOR CHARITABLE PURPOSES OR A CHARITABLE INSTITUTION CREATED OR ESTABLISHED BEFORE THE COMMENCEMENT OF THIS ACT, THE PROVISIONS OF SUB - CLAUSE (II) SHALL NOT APPLY TO ANY USE OR APPLICATION, WHETHER DIRECTLY OR INDIRECTLY, OF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR INSTITUTION FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB - SECTION (3), IN SO FAR AS SUCH USE OR APPLICATION RELATES TO ANY PERIOD BEFORE THE 1ST DAY OF JUNE, 1970 ; 1(D) IN THE CASE OF A TRUST FOR CHARITABLE OR REL IGIOUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITU TION, ANY INCOME THEREOF, IF FOR ANY PERIOD DURING THE PREVIOUS YEAR - (I) ANY FUNDS OF THE TRUST OR INSTITUTION ARE INVESTED OR DEPOSITED AFTER THE 28TH DAY OF FEBRUARY, 1983, OTHERWISE THAN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SUB - SECTION (5) OF SECTION 11 ; OR (II) ANY FUNDS OF THE TRUST OR INSTITUTION INVESTED OR DEPOSITED BEFORE THE 1ST DAY OF MARCH, 1983, OTHERWISE THAN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SUB - SECTION (5) OF SECTION 11 CONTINUE TO REMAIN SO INVESTED OR DEPOSITED AFTER THE 30TH DAY OF NOVEMBER, 1983 ; OR (III) ANY SHARES IN A COMPANY, OTHER THAN - (A) SHARES IN A PUBLIC SECTOR COMPANY ; (B) SHARES PRESCRIBED AS A FORM OR MODE OF INVESTMENT UNDER CLAUSE ( XII) OF SUB - SECTION (5) OF SECTION 11, ARE HELD BY THE TRUST OR INSTITUTION AFTER THE 30TH DAY OF NOVEMBER, 1983 : PROVIDED THAT NOTHING IN THIS CLAUSE SHALL APPLY IN RELATION TO - (I) ANY ASSETS HELD BY THE TRUST OR INSTITUTION WHERE SUCH ASSETS FORM PART O F THE CORPUS OF THE TRUST OR INSTITUTION AS ON THE 1ST DAY OF JUNE, 1973, ;(IA) ANY ACCRETION TO THE SHARES, FORMING PART OF THE CORPUS MENTIONED IN CLAUSE (I), BY WAY OF BONUS SHARES ALLOTTED TO THE TRUST OR INSTITUTION ;(II) ANY ASSETS (BEING DEBENTURES ISSUED BY, OR ON BEHALF OF, ANY COMPANY OR CORPORATION) ACQUIRED BY THE TRUST OR INSTITUTION BEFORE THE 1ST DAY OF MARCH, 1983 ;(IIA) ANY ASSET, NOT BEING AN INVESTMENT OR DEPOSIT IN ANY OF THE FORMS OR MODES SPECIFIED IN SUB - SECTION (5) OF SECTION 11, WHE RE SUCH ASSET IS NOT HELD BY THE TRUST OR INSTITUTION, OTHERWISE THAN IN ANY OF THE FORMS OR MODES SPECIFIED IN SUB - SECTION (5) OF SECTION 11, AFTER THE EXPIRY OF ONE YEAR FROM THE END OF THE PREVIOUS YEAR IN WHICH SUCH ASSET IS ACQUIRED OR THE 31ST DAY OF MARCH, 19932, WHICHEVER IS LATER ;(III) ANY FUNDS REPRESENTING THE PROFITS AND GAINS OF BUSINESS, BEING PROFITS AND GAINS OF ANY PRE?VIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1984, OR ANY SUBSEQUENT ASSESSMENT YEAR : E XPLANATION WHERE THE TRUST OR INSTITUTION HAS ANY OTHER INCOME IN ADDITION TO PROFITS AND GAINS OF BUSINESS, THE PROVISIONS OF CLAUSE (III) OF THIS PROVISO SHALL NOT APPLY UNLESS THE TRUST OR INSTI TUTION MAINTAINS SEPARATE BOOKS OF ACCOUNT IN RESPECT OF SU CH BUSINESS. EXPLANATION FOR THE PURPOSES OF SUB - CLAUSE (II) OF CLAUSE (C), IN DETERMINING WHETHER ANY PART OF THE INCOME OR ANY PROPERTY OF ANY TRUST OR INSTITUTION IS DURI NG THE PREVIOUS YEAR USED OR AP PLIED, DIRECTLY OR INDIRECTLY, FOR THE BENEFIT OF AN Y PERSON REFERRED TO IN SUB - SECTION (3), IN SO FAR AS SUCH USE OR APPLICATION PAGE 24 OF 34 RELATES TO ANY PERIOD BEFORE THE 1ST DAY OF JULY, 1972, NO REGARD SHALL BE HAD TO THE AMENDMENTS MADE TO THIS SECTION BY SECTION 7 OTHER THAN SUB - CLAUSE (II) OF CLAUSE (A) THEREO F OF THE FINANCE ACT, 1972. (2) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF CLAUSE (C) 4AND CLAUSE (D) OF SUB - SEC TION (1), THE INCOME OR THE PROPERTY OF THE TRUST OR INSTITUTION OR ANY PART OF SUCH INCOME OR PROP ERTY SHALL, FOR THE PURPOSES OF THAT CLAUSE, BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SUB - SECTION (3), - (A) IF ANY PART OF THE INCOME OR PROPERTY OF THE TRUST OR INSTITUTION IS, OR CONTINUES TO BE, LENT TO ANY PERSON REFERRED TO IN SUB - SECTION (3 ), FOR ANY PERIOD DURING THE PREVIOUS YEAR WITHOUT EITHER ADEQUATE SECURITY OR ADEQUATE INTEREST OR BOTH ; (B) IF ANY LAND, BUILDING OR OTHER PROPERTY OF THE TRUST OR INSTITUTION IS, OR CONTINUES TO BE, MADE AVAILABLE FOR THE USE OF ANY PERSON REFERRED TO IN SUB - SECTION (3 ) FOR ANY PERIOD DURING THE PRE VIOUS YEAR WITHOUT CHARGING ADEQUATE RENT OR OTHER COMPENSATION ; (C) IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWANCE OR OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON REFERRED TO IN SUB - SECTION (3) OUT O F THE RESOURCES OF THE TRUST OR INSTITUTION FOR SERVICES RENDERED BY THAT PERSON TO SUCH TRUST OR INSTITUTION AND THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES ; (D) IF THE SERVICES OF THE TRUST OR INSTITUTION ARE MADE AV AILABLE TO ANY PERSON REFERRED TO IN SUB - SECTION (3) DURING THE PREVIOUS YEAR WITHOUT ADEQUATE REMUNERATION OR OTHER COMPENSATION ; (E) IF ANY SHARE, SECURITY OR OTHER PROPERTY IS PURCHASED BY OR ON BEHALF OF THE TRUST OR INSTITUTION FROM ANY PERSON REFERR ED TO IN SUB - SECTION (3) DURING THE PREVIOUS YEAR FOR CONSIDERATION WHICH IS MORE THAN ADEQUATE ; (F) IF ANY SHARE, SECURITY OR OTHER PROPERTY IS SOLD BY OR ON BEHALF OF THE TRUST OR INSTITUTION TO ANY PERSON REFERRED TO IN SUB - SECTION (3) DURING THE PREVI OUS YEAR FOR CONSIDERATION WHICH IS LESS THAN ADEQUATE ; (G) IF ANY INCOME OR PROPERTY OF THE TRUST OR INSTITUTION IS DIVERTED DURING THE PREVIOUS YEAR IN FAVOUR OF ANY PERSON REFERRED TO IN SUB - SECTION (3) : PROVIDED THAT THIS CLAUSE SHALL NOT APPLY WHERE THE INCOME, OR THE VALUE OF THE PROPERTY OR, AS THE CASE MAY BE, THE AGGREGATE OF THE INCOME AND THE VALUE OF THE PROPERTY SO DIVERTED DOES NOT EXCEED ONE THOUSAND RUPEES ; (H) IF ANY FUNDS OF THE TRUST OR INSTITUTION ARE, OR CONTINUE TO REMAIN, INVESTED FOR ANY PERIOD DURING THE PREVIOUS YEAR (NOT BEING A PERIOD BEFORE THE 1ST DAY OF JANUARY, 1971) IN ANY CONCERN IN WHICH ANY PERSON REFERRED TO IN SUB - SECTION (3) HAS A SUBSTANTIAL INTEREST. (3) THE PERSONS REFERRED TO IN CLAUSE (C) OF SUB - SECTION (1) AND SUB - SECTION (2) ARE THE FOLLOWING, NAMELY : - (A) THE AUTHOR OF THE TRUST OR THE FOUNDER OF THE INSTITUTION ; (B) ANY PERSON WHO HAS MADE A SUBSTANTIAL CONTRIBUTION TO THE TRUST OR INSTITUTION, THAT IS TO SAY, ANY PERSON WHOSE TOTAL CONTRIBUTION UP TO THE E ND OF THE RELEVANT PREVIOUS YEAR EXCEEDS FIFTY THOUSAND RUPEES ; (C) WHERE SUCH AUTHOR, FOUNDER OR PERSON IS A HINDU UNDIVIDED FAMILY, A MEMBER OF THE FAMILY ; PAGE 25 OF 34 (CC) ANY TRUSTEE OF THE TRUST OR MANAGER (BY WHATEVER NAME CALLED) OF THE INSTITUTION ; (D) ANY RELATIVE OF ANY SUCH AUTHOR, FOUNDER, PERSON, MEMBER, TRUSTEE OR MANAGER AS AFORESAID ; (E) ANY CONCERN IN WHICH ANY OF THE PERSONS REFERRED TO IN CLAUSES (A), (B), (C), (CC) AND (D) HAS A SUBSTANTIAL INTEREST. 19. SECTION 13(1)(C) PROVIDES THAT SECTION 11 AND 12 SHALL NOT APPLY IF ANY INCOME OF THE TRUST ENURES OR USED OR APPLY DIRECTLY OR INDIRECTLY, FOR THE BENEFIT OF PERSONS SPECIFIED UNDER SUB - SECTION 3 OF THE ACT. SUB - SECTION PROVIDES THAT WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 13(1) (C) THE INCOME OF THE TRUST SHALL BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF PERSONS SPECIFIED IN SUB - SECTION 3. THIS SUB - SECTION LISTS 9 BROAD KINDS OF VARIOUS TRANSACTIONS. SUB - SECTION 3 PROVIDES THE LIST OF SUCH PERSONS IF ANY DIRECT OR I NDIRECT BENEFIT OR INCOME IS DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF SUCH PERSONS. IN THE PRESENT CASE AS ON 01.04.2008 THE ASSESSEE WAS HAVING OPENING UNSECURED LOANS OF RS. 12840243/ - AND DURING THE YEAR FURTHER LOAN WAS TAKEN OF RS. 29.1 0 LAKHS AND OUT OF WHICH RS. 28.36 LAKHS WERE REPAID. INTEREST AMOUNTING TO RS. 2002054/ - WAS ALSO PAID ALONG WITH TDS OF RS. 183383/ - AT THE END OF THE YEAR UNSECURED LOAN OF RS. 14732279/ - . THE TRUST WAS HAVING A CORPUS RS. 15.20 CRORES AND SPECIFIC FUN DS OF RS. 1 CRORE. FURTHER, SECURED LOAN OF RS.10 CRORES IS ALSO TAKEN FROM PUNJAB NATIONAL BANK. ON LOOKING AT THE LOAN STATEMENT WHICH IS PLACED AT PG NO. 400 OF PAPER BOOK SHOWS THAT THE ASSESSEE HAS BORROWED FROM 27 PERSONS WHO ARE FROM JAIN, MITTAL, G OEL, AGGARWAL AND GUPTA FAIMLY. FURTHER, THE LOAN TAKEN FROM THEM WAS ALSO IN THE RANGE OF RS. 30000/ - TO RS. 25 LAKHS. FURTHER DURING THE YEAR THE ASSESSEE HAS BORROWED FROM THESE PERSONS IN THE RANGE OF RS. 50000/ - TO RS. 10 LAKHS. THE LOANS TAKEN DURING THE YEAR ARE ALSO DISCUSSED WH ILE DECIDING GROUND NO. 4 AND 5 OF THIS APPEAL. THOUGH RELEVANT FACTS MENTIONED THEREIN DO NOT WARRANT JUSTIFICATION FOR ADDITION U/S 68 OF THE ACT, BUT TELLS A STORY WHICH IS EVIDENT THAT SPARE FUNDS OF THE FAMILY ARE BEING PARKED IN THIS TRUST AND IT CAR RIES INTEREST @18% PER ANNUM. THE PROVISIONS OF SECTION 13(1)(C) SPEAKS THAT PROVISIONS OF SECTION 11 AND SECTION 12 DOES NOT APPLY IN CASE OF THE TRUST IF ANY PARTY OF THE INCOME DURING THE YEAR USED OR APPLIED FOR THE BENEFIT WITH DIRECT OR INDIRECT OR S PECIFIED PERSONS. IT IS NOT THE DISPUTE BETWEEN THE PARTIES THAT THE PERSONS WHOM INTEREST HAVE BEEN PAID ARE NOT THE PERSONS SPECIFIED UNDER SECTION 13(3) OF THE ACT. THEREFORE, NOW IT IS REQUIRED TO BE EXAMINED WHETHER INTEREST PAID TO THESE PARTIES @18 % DIRECTLY OR INDIRECTLY RESULTS IN BENEFIT TO THESE PERSONS IN TERMS OF SECTION 13(1)(C) OR 13(2) OF THE ACT. THE LD ASSESSING OFFICER HAS PAGE 26 OF 34 STATED THAT IN VIEW OF THE HUGE SURPLUS GENERATED BY THE ASSESSEE OF RS. 8.53 CRORES DURING THE YEAR THERE WAS NO RE QUIREMENT TO RAISE THE FURTHER UNSECURED LOANS. ADMITTEDLY, DURING THE YEAR ASSESSEE HAS RAISED LOAN OF SUM OF RS. 50000/ - ALSO. FURTHER, LOANS RAISED BY THE ASSESSEE ARE OF THE SMALL AMOUNT EXCEPT IN CASE OF BINU GUPTA OF RS. 10 LAKHS. LOOKING TO THE NAT URE OF TRANSACTION AND THE SCHEDULE OF THE REPAYMENT IT IS APPARENT THAT ALL THESE PARTIES HAVE USED THIS TRUST FOR PARKING OF THE FUNDS AND EARNED INTEREST @18% PER ANNUM. THE LD ASSESSING OFFICER HAS FURTHER STATED THAT TERM LOAN AND WORKING CAPITAL LOAN S REMAINS UNDER UTLISED. IT IS FURTHER STATED BY THE AO THAT ON LOOKING TO THE INCOME TAX RETURN OF THESE PERSONS IT IS APPARENT THAT THEY ARE ONLY EARNING INTEREST INCOME FROM THESE TRUSTS AND THERE IS NO OTHER REGULAR SOURCE OF INCOME AVAILABLE WITH THE DEPOSITORS. THE LD CIT(A) HAS STATED THAT AO IS NOT ENTITLED TO DRAW ANY ADVERSE INFERENCE OF THE FACT THAT DEPOSITORS DO NOT HAVE ANY OTHER INCOME AND TERM LOAN AND WORKING CAPITAL LOANS ARE UNUTILISED. ACCORDING TO THE LD CIT(A) THE REASONS GIVEN BY THE AO ARE NOT VALID AND SUSTAINABLE. A BENEFIT ACCRUES TO THE PERSON IF HE EARNS HIGHER THAN WHAT HE WOULD HAVE NORMALLY EARNED. IN THE PRESENT CASE ALL THESE DEPOSITORS HAVE EARNED 18% RATE OF INTEREST ON THEIR CAPITAL INVESTED WHICH THEY WOULD NOT HAVE EARN ED FROM ANY OTHER SOURCE. THE FINDING OF THE LD CIT(A) THAT IT IS FOR THE TRUST TO DECIDE WHETHER TO BORROW MONEY OR NOT IS THOUGH CORRECT BUT IF IT ENURES DIRECT BENEFIT TO THOSE DEPOSITORS OF HIGHER RATE OF INTEREST WHICH THE ASSESSEE COULD NOT JUSTIFIED BY COMPARISION WITH RATE OF INTEREST IN SIMILAR CIRCUMSTANCES. MERELY SAYING THAT BECAUSE OF THE SANCTIONED LETTER OF THE BANK MENTIONING THAT BORROWER SHALL NOT UNDERTAKEN WITHDRAWAL OF UNSECURED LOAN CANNOT BE SAID THAT PAYMENT OF INTEREST @18% TO THEM IS AT MARKET RATE. ALL THOSE ASSERTIONS AND SUBMISSIONS OF ASSESSEE WOULD HAVE SUM SEMBLANCE OF ACCEPTANCE IF IT COULD HAVE DEMO NSTRATED THAT SUCH RATE OF INTEREST IS AT LESSER THAN COMPETITIVE RATES ON SIMILAR TERMS AND CONDITIONS AND FOR SUCH SMALLER QUANTUM ALSO. IN ABSENCE OF PLAUSIBLE EXPLANATION FROM THE ASSESSEE WE ARE OF THE OPINION THAT LD CIT(A) HAS WRONGLY DELETED THE AB OVE ADDITIONS. FURTHER IT HAS BEEN SUBMITTED BEFORE THAT IN THE PAST AND IN THE SUBSEQUENT YEARS THE ASSESSEE IS PAYING INTEREST TO THE ABOVE PERSONS WHICH HAVE NOT BEEN DISPUTED BY THE REVENUE . THE ASSESSEE HAS PRODUCED THE ASSESSMENT ORDERS AS UNDER: - P RECEDING YEARS A. ASSESSMENT YEAR 2003 - 04 B. ASSESSMENT YEAR 2004 - 05 C. ASSESSMENT YEAR 2005 - 06 PAGE 27 OF 34 D. ASSESSMENT YEAR 2006 - 07 E. ASSESSMENT YEAR 2007 - 08 F ASSESSMENT YEAR 2008 - 09 SUBSEQUENT YEARS A. ASSESSMENT YEAR 2010 - 11 B. ASSESSMENT YEAR 2011 - 12 C. ASSESSMENT YEAR 2012 - 13 WE HAVE CAREFULLY EXAMINED THESE ORDERS AND EXCEPT FOR AY 2010 - 11 WE NOTE THAT THIS ISSUE HAS NOT BEEN EXAMINED. FOR AY 2010 - 11 THE LD AO HAS STATED THAT ASSESSEE TRUTS HAS PAID INTEREST ON UNSECURED LOAN RANGING FROM 12% TO 18 % AND THE QUEERY RAISED WAS WITH RESPECT TO ALLOWABILOITY OF INTEREST AND NOT APPLICABILITY OF SECTION 13 OF THE ACT. THEREFORE WE REJECT THE ARGUMENT OF THE ASSESSEE THAT IN PAS AND SUBSEQUENT YEARS THE REVNUE HAS ACCEPTED THE ABOVE STAND OF THE ASSESSEE THAT NO BENEFIT HAS RESULTED TO THE SPECIFIED PERSONS. FURTHER IN THAT YEAR RATE OF INTEREST IS ALOS VARYING. IN VIEW OF THIS WE ARE OF THE OPINION THAT PROVISIONS OF SECTION 13(1)(C) READ WITH SECTION 13(2) HAS TRIGGERED IN THE CASE OF THE ASS ESSEE. IN THE RESULT THE GROUND NO. 3 OF THE APPEAL OF THE REVENUE IS ALLOWED. 20. COMING TO GROUND NO. 2(A) AND 2(B) WHICH IS AGAINST GRANTING OF ADVANCE TO THE CONTRACTOR FOR THE CONSTRUCTION OF THE INSTITUTE BUILDING WAS CONSIDERED BY THE ASSESSING OFFICER AS APPLICATION OF THE FUNDS IN VIOLATION OF SECTION 11(5) OF THE ACT. 21. THE LD ASSESSING OFFICER HAS DEALT WITH THIS ISSUE VIDE PAGE NO. 8 TO 13 AS UNDER: - CONSTRUCTION OF BUILDING ASSESSEE IS RUNNING EDUCATION INSTITUTE AND SHOWN EXPENDITURE ON LAND AND BUILDING AS PER DETAIL FOLLOWS: - HEAD OF ACCOUNT OPENING BALANCE AS ON 01.04.2008 ADDITION DURING THE YEAR CLOSING BALANCE AS ON 31.03.2009 LAND 21457424/ - 4542350/ - 2 5 999774/ - BUILDING 120209897/ - 32347 187/ - 152557084/ - ROADS AND SITE DEVELOPMENT, FURNITURE & FIXTURE SHOWN SEPARATELY FROM WHICH IT IS CLEAR THAT BUILDING AND CIVIL WORK IS ONLY ON ACCOUNT OF BUILDING STRUCTURE. FOR ESTABLISHING CONSTRUCTION COST, ASSESSEE FURNISHES COPY OF APPROVED MAP, NAME OF CONTRACTOR, COPY OF LEDGER ACCOUNT ON LOOKING TO THE LEDGER ACCOUNT OF STEEL SUPPLIERS ALONG WITH COPY OF BILLS FILED BY ASSESSEE CERTAIN BILLS ARE ACCOMPANYING WITH SLIP OF DHARMA KANTA. PAGE 28 OF 34 ON 21.12.2011 REF ERENCE TO DEPARTMENTAL VALUATION OFFICER IS BEING MADE FOR A CERTAIN CORRECT VALUE OF INVESTMENT AND AFTER RECEIVING THE REPORT OF VALUATION OFFICER APPROPRIATE ACTION SHALL BE TAKEN. FURTHER SUMMON U/S 133(1) WAS ISSUED ON 21.12.2011 TO MAKE THE COMPLIANC E ON 27.12.2011 TO M/S DESIGN CELL AND SHUBHAM CONSTRUCTIONS BUT NO COMPLIANCE IS BEING MADE BY THE PARTIES. ASSESSEE SUBMIT THAT ALL INSTITUTIONS ARE UNDER ONE CAMPUS. FROM DETAIL FILED BY ASSESSEE IN A TABULAR FORM IN WHICH BLOCK WISE TOTAL ESTIMATE VALU E OF CONSTRUCTION WAS GIVEN THIS INFORMATION SHOWS THAT TOTAL AREA OF CONSTRUCTION UNDER TAKEN IS 2,29,214 SQUARE FT. AVERAGE CONSTRUCTION COST IS SHOWN AT RS. 476/ - PER SQUARE FEET EXCLUDING STEEL, CEMENT AND SANITARY ITEMS. OTHER THAN STEEL, CEMENT AND S ANITARY ITEMS COST OF RS. 476/ - PER SQUARE FEET IS UNREASONABLY HIGH AND NOT JUSTIFIED. SUMMARY OF EXPENDITURE AS FILED BY ASSESSEE ON BUILDING CONSTRUCTION IS GIVEN BELOW: - S. NO. PARTICULAR AMOUNT 1 CONTRACTOR 17965662.00 2 CEMENT 5242384.00 3 STEEL 15029974.00 4 OTHER MATERIAL 951992.00 5 MISC. BUILDING REPAIR & MAINT. 1136944.00 TOTAL 24126956.00 APART FROM IT ASSESSEE ALSO SUBMIT THE AWARD OF CONTRACT TO VARIOUS CONTRACTORS FOR CONSTRUCTION OF INSTITUTE BUILDING AS PER FOLLOWING DETAILS: - ' CONTRACTOR NAME BLOCKWISE AREA RATE EXCLUDING STEEL, CEMENT AND SANITARY ITEMS TOTAL ESTIMATED VALUE ADVANCE PAYMENT DURING F.Y. 2008 - 09 SHUBHAM CONSTRUCTIONS 33029.02 SQ. FT RS. 476 PER SQ. FT. 1,57,21, 814 SHUBHAM CONSTRUCTIONS 33029.02 SQ. FT RS. 476 PER SQ. FT. 1,57,21, 814 97,00,0 00 SHUBHAM CONSTRUCTIONS 25074.50 SQ. FT RS. 476 PER SQ. FT. 1,19,35, 462 PAGE 29 OF 34 DESIGN CELL 25074.50 SQ. FT RS. 476 PER SQ. FT. 1,19,35, 462 20,00,0 00 SHRI SHANNI CONSTRUCTIONS 48061.74 SQ. FT RS. 490 PER SQ. FT. 2,35,50, 253 1,18,51, 000 VERMA CONSTRUCTIONS 64947.38 SQ. FT RS. 490 PER SQ. FT. 3,18,24, 216 25,00,0 00 TOTAL 229216.16 SQ. FT. 11,06,8 9,021 2,,60,51 ,0007 OPENING VALUE OF BUILDING WAS RS. 12,02,09,897/ - ADDITION DURING THE YEAR AMOUNTING TO RS. 3,23,47,187/ - IS SHOWN. ASSESSEE HAS NOT FILED ANY DETAIL FOR CONSTRUCTION MADE IN EARLIER YEARS TO JUSTIFY HOW MUCH AREVWAS CONSTRUCTED. ASSESSEE HAS ALSO NOT FILED DETAIL OF TOTAL LAND, PERMISSIBLE CONSTRUCTION IN SQUARE FEET. ADVANCE GIVEN OF RS. 2,60,51,0007 IS ALSO NOT INCLUDED. IN THE FIGURE OF ADDITION MADE DURING THE YEAR BUT IT IS SHOWN UNDER THE HEAD LOANS AND ADVANCE (ETC), COPY OF CONTRACT WITH CONTRACTOR CONFIRMED COPY OF ACCOUNT, DETAIL OF AREA CONSTRUCTED DURING THE YEAR UNDER ASSESSMENT IS ALSO FILED BY THE ASSESSEE. IT IS APPARENT THAT ADVANCES TO CONTRACTOR IS GIVEN TO DIVERT THE SECURED LOAN TAKEN FROM BANKS TO UTILIZE THE BANK LOAN ADVANCES ARE GIVE N TO VARIOUS CONTRACTORS AND IN THE ABSENCE OF ANY DETAIL ACTUAL UTILIZATION OF FUNDS CANNOT BE JUDGED. ASSESSEE FURTHER SUBMITS AMOUNT THE CONSTRUCTION OF BUILDING AS FOLLOWS: - CONSTRUCTION OF BUILDING: THIS HEAD CONSISTS OF TWO SUB - HEADS VIZ LAND AND B UILDING - CIVIL CONSTRUCTION. AS REGARDS TO LAND, THE ASSESSEE HAS ACQUIRED SOME LAND ADJACENT TO THE EXISTING CAMPUS FOR EXTENSION, IN RESPECT OF WHICH COPIES OF REGISTERED PURCHASE DEEDS OF / AND IN THE NAME OF ASSESSEE TRUST - COPIES OF WHICH HAVE BEEN F ILED DURING THE ASSESSMENT PROCEEDINGS AND ALSO FILED AFRESH HEREWITH FOR READY REFERENCE. AS REGARDS TO BUILDING - CIVIL CONSTRUCTION THERE IS AN ADDITION OF RS. 3,23,47,187, DETAILS OF WHICH ARE AS UNDER: S NO. PARTICULARS AMOUNT (IN RS.) 1. MDA FEE FOR DEVELOPMENT CHARGES: FOR APPROVAL OF FRESH - NEW MAP VIDE MDA LETTER DATED 29.05.08 ( RS. 80,78,852 + RS. 1,43,179 = RS. 82,20,231). IN SUPPORT OF THE SAME COPIES OF RELEVANT LETTERS FROM MDA, COPIES OF DD'S FAVOURING MDA AND RECEIPT THEREOF ARE FURNI SHED HEREWITH. 82,20,231 PAGE 30 OF 34 AMOUNT (IN RS.) 2. PAYMENT TO PETTY CONTRACTORS: THESE ARE FOR CARRYING OUT MISCELLANEOUS - ALLIED CONSTRUCTION ACTIVITIES IN RESPECT OF WHICH A CHART SHOWING THEIR COMPLETE NAMES, ADDRESSES, PANOS., QUANTUM OF PAYMENT HAS ALREADY BEEN FURNISHED - A COPY OF WHICH IS FURNISHED AFRESH HEREWITH. ALL SAID PAYMENTS ARE ALSO SUBJECT TO DUE IDS. THEY ARE NOT THE REGULAR - MAIN CONTRACTORS TO WHOM DURING THE YEAR ONLY ADVANCES ARE GIVEN ON THEIR RUNNING BILLS - WORK CARRIED OUT SUBJ ECT TO TDS AND SHOWN AS SUCH AS ADVANCES. 1765662 3. CEMENT: IN RESPECT OF THE SAME ITS DETAILED COPY OF ACCOUNT WITH COPIES OF ALL BILLS HAVE ALREADY BEEN FURNISHED DURING THE PROCEEDINGS, WHICH MAY BE TAKEN ON RECORD. 5242384 4. STEEL: IN RESPECT OF THE SAME ITS DETAILED COPY OF ACCOUNT WITH COPIES OF ALL BILLS HAVE ALREADY BEEN FURNISHED DURING THE PROCEEDINGS, WHICH MAY BE TAKEN ON RECORD. 15029974/ - 5. OTHER MATERIAL: IN RESPECT OF THE SAME ITS DETAILED COPY OF ACCOUNT WITH COPIES OF ALL BILLS HAV E ALREADY BEEN FURNISHED DURING THE PROCEEDINGS, WHICH MAY BE TAKEN ON RECORD. 951992/ - 06. MISCELLANEOUS BUILDING REPAIR AND MAINTENANCE IN RESPECT OF THE SAME DETAILED COPY OF ACCOUNT HAS ALSO BEEN FURNISHED WHICH ON ACCOUNT OF VARIOUS REPAIR, ALTERATION, MODIFICATION ACTIVITIES IN BUILDING AND CIVIL WORKS AND HAS BEEN CAPITALIZED BY ADDING TO THE COST OF BUILDING AND CIVIL WORKS FINALLY. ` PAGE 31 OF 34 FURTHERMORE, AS POINTED OUT THAT THE ADVANCES HAVE BEEN TAKEN AS APPLICATION OF INCOME, THIS IS TO CLARIFY THAT NO SUCH ADVANCES HAVE BEEN TAKEN AS APPLICATION OF INCOME U/S 11(5) OF THE INCOME TAX ACT AS PER COMPLETE DETAILS AVAILABLE ON THE FACE OF THE STATEMENT OF INCOME. THESE ADVANCES OR OTHER ADVANCES WITH DEBIT BALANCES HAVE NEVER BEEN TAKEN AS APPLICATION OF INCOME SINCE INCEPTION AND ALSO DURING THE LAST COMPLETED ASSESSMENT YEARS. REPLY OF ASSESSEE CONSIDERED AND VERIFIED FROM THE RECORD. IT IS SEND THAT OPENING CONSTRUCTION VALUE IN BOOKS IS RS. 12,02,09,897/ - ( AFTER CLAIMING THE DEPRECIATION) ADDITION DURING THE YEAR IS SHOWN RS. 32347187/ - TOTAL VALUE AS ON 31.3.2009 SHOWN BY ASSESSEE IS RS. 15,25,57,0847 - . THE ABOVE ADVANCE GIVEN FOR RS. 2,60,51,0007 - IS NOT INCLUDED IN THE COST OF CONSTRUCTION. THE ABOVE ADVANCE IS NOT ALLOWABLE UNDER SECTION 11(5) OF THE ACT IN VIEW OF THE FACT THAT THIS IS NOT AN PERMISSIBLE INVESTMENT. FURTHER NO COMPLETE DETAILS ARE FILED. IT IS SEEN THAT DURING THE YEAR ONE OF THE TRUSTEE RETIRED AND IN HER PLACE NEW TRUSTEE JOINED THE TRUST. RETIRED TRUSTEE OBVIOUSLY WITHOUT TAKING HANDSOME AMOUNT WILL NOT RETUNED FROM THE TRUST. IT IS APPARENT THAT FRESH TERM LOAN RAISED IN THE GARB OF CONSTRUCTION OF BUILDING AND SAME AMOUNT IS TRANSFERRED TO SOME CONTRACTORS BY CHEQUE. AMOUNT SHOWN UNDER THE HEAD ADVANCES. THEIR DETAILS IS NOT FILED. IT APPEARS THAT AMOUNT TRANSFERRED TO CONTRACTOR HAS TAKEN BACK IN CASH AND WHICH COULD NOT BE VERIFIED IN ABSENCE OF COMPLETE DETAI LS OF THE CONTRACTORS. THEY NOT TURNED UP IN SUMMON PROCEEDINGS. IT IS APPARENT THAT TOTAL CONTRACT WAS GIVEN FOR FURTHER CONSTRUCTION OF 229216.16 SQ. FT.. NO DETAILS ABOUT HOW MUCH AREA HAS ALREADY BEEN CONSTRUCTED AS ON 1.4.2009 ARE ALSO NOT PROVIDED. C OST OF CONSTRUCTION OF 146? - PER SQ. FT. IS SHOWN EXCEPT STEELS, CEMENT, SANITARY ITEMS. DETAILS OF CONTRACT SIGN BETWEEN CONTRACTOR AND TRUST IS ALSO NOT PRODUCED TO SHOW UNDER RS. 476? - WHAT IS INCLUDED. PAYMENT TO OTHER CONTRACTORS ATES ALSO BEEN PAID. THE SAID ADVANCE IS NOTHING BUT TO SIPHONING OFF THE FUND SO THE TRUST TAKEN AS BANK LOAN. THE SAID ADVANCE CANNOT BE ALLOWED AS APPLICATION. SINCE ALL SURPLUS IS ADDED IN THE HANDS OF ASSESSEE IN VIEW OF PROVISION OF SECTION 11 READ WITH SECTION 13(2) SO THIS ADDITION IS NOT TAKEN WHILE CALCULATING THE TAXABLE INCOME. IT IS FURTHER TO POINT OUT THAT THE SOCIETY HAS CLAIMED FOR PAYMENT OF ADVANCES AGAINST CONSTRUCTION TO M/S SHUBHAM CONSTRUCTIONS, M/S DESIGN CELL, SHRI SHANNI CONSTRUCTIONS AND M/S VERMA CON STRUCTIONS. IN ORDER TO INQUIER ABOUT GUNINIETY THE SUMMON U/S 131WAS ISSUED FOR CALLING DETAILS TO M/S DESIGN CELL, 7 - 2 ND FLOOR,TIRUPATI PLAZA, BEGUM BRIDGE ROAD, MEERUT & TO M/S SHUBHAM CONSTRUCTIONS, 18 - FIRST FLOOR, K.N.MODI COMPLEX, MODINAGAR, GHAZIA BAD. THE FINDING OF THE SAME OF REPORTED AS UNDER : - M/S DESIGN CELL: IN COMPLIANCE OF NOTICE ISSUED U/S 131 OF THE T. ACT, 1961, THE PARTNER OF THE FIRM SHRI VED PRAKASH NOT APPEARED. HE SENT HIS SON SHRI RAJESH AGRAWAL ON 29.12.2011 FOR COMPLIANCE.. ON G ORING THROUGH THE P & L ACCOUNT OF THE FIRM SUBMITTED FOR A.Y. 2009 - 10 & 2010 - 11, IT IS FOUND THAT IN A.Y. 2009 - 10 , THE ASSESSEE HAS PURCHASED CEMENT FOR RS. 66,000/ - AND LABOUR CHARGES CLAIMED RS. 6,00,000// - . SIMULTANEOUSLY, IN A.Y. 2010 - 11, THE ASSESSEE HAS PURCHASED CEMENT FOR RS. 39,440/ - AND LABOUR CHARGES CLAIMED RS. 22, 20,5507 - .. SHRI RAJESH AGAERWAL HAS ASKED THAT HOW IS IT POSSIBLE TO CONSUME CEMENT PURCHASED FOR RS. 39,4407 - FOR LABOUR CHARGE RS. 22, 20,5507 - . SHRI, RAJESH AGARWAL HAS LEFT WITHO UT SIGN ON THEIR STATEMENT. 2. M/S SHUBHAM CONSTRUCTIONS: ON 30.12.2011 SHRI DEVENDER KUMAR TYAGI PROP, OF M/S SHUBHAM CONSTRUCTIONS HAS SENT HIS ACCOUNTANT SHRI NAFEES PAGE 32 OF 34 AALAM S/O SHRI ANOES AKHTAR, G - 3, SECTOR - 23, SANJAY NAGAR, GHAZIABAD. SHRI NAFEES AAL M STATED THAT M/S BHARAT INSTITUTE OF TECHNOLOGY & MANAGEMENT HAS SUPPLIED STEEL & CEMENTS TO OUR FIRM WHICH WERE ENTERED IN OUR BOOKS OF ACCOUNTS OF THE FIRM AS PURCHASES. PERUSAL OF ABOVE SHOWS THAT THE ASSESSEE HAS MADE BOGUS ENTRIES FOR PAYMENT TO CONTR ACTORS IN HIS BOOKS OF ACCOUNT. IT IS CLEARLY SHOWS THAT THE MANAGEMENT OF M/S SPACE AGE RESEARCH & CHARITABLE TRUST, MEERUT IS SIPHONING THE FOUND OF THE SOCIETY BY MISAPPROPRIATION OF ACCOUNTS BY WAY OF MAKING ADVANCE PAYMENT UNDER THE HEAD OF CONSTRUCTI ON OF BUILDINGS. HERE ALSO THERE IS CLEAR - CUT OF VIOLATION THE PROVISION OF SECTION 13(2) OF IT. FURTHER IT IS ALSO CLEAR THAT CONSTRUCTION OF BUILDING CAN NOT BE ALLOWED AS APPLICATION BECAUSE CONSTRUCTION IS TAKEN OUT OF THE CANNOT BE ALLOWED. ADDITION TO THE FIXED ASSET AMOUNTING TO RS. 32347187/ - CANNOT BE ALLOWED AS APPLICATION. SINCE ASSESSEE HAS VIOLATED THE PROVISION OF SECTION 13(2) OF I.T, ACT, 1961 SO BENEFIT UNDER SECTION 11 SHALL NOT BE ALLOWED TO ASSESSEE. HENCE SURPLUS OF RS. 6,54,58,589.00 SHOWN UNDER INCOME EXPENDITURE ACCOUNT SHALL BE ADDED TO THE INCOME OF ASSESSEE. INCOMES OF THE ASSESSEE IS COMPUTED A FOLLOWS: - INCOME SHOWN BY ASSESSEE NIL ADD: - INTT. ON UNSECURED LOAN DISALLOWED: RS. 20,50,491/ - ADD: - UNSECURED LOAN ADDED - RS. 28,60,000/ - ADD: - SURPLUS TREATED AS INCOME TAXABLE INCOME RS. 6,54,58,599/ (ADDITION OF RS. 6,54,58,589.00) - RS. 7,03,69,090/ - ASSESSED ON AN INCOME OF RS. 7,03,69,0907 - ISSUE NOTICE OF DEMAND. CHARGED INTEREST UNDER SECTION 23 4B, 234C, 234D ACCORDINGLY. ISSUE NOTICE UNDER SECTION 271(L)(C ) OF THE INCOME - TAX ACT, 1961 SEPARATELY FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHING THE INACCURATE PARTICULARS OF INCOME. TO ASSESSEE 22. THE LD CIT(A) HAS HELD VIDE PARA NO. 11.5 OF THIS ORDER THAT SUCH ADVANCES GIVEN TO THE CONSTRUCTION CONTRACTOR DO NOT VIOLATE THE PROVISIONS OF SECTION 11(5) OF THE ACT. THE LD DR RELIED ON THE ORDER OF THE LD ASSESSING OFFICER AND THE LD AR RELIED ON THE ORDER OF CIT(A). 23. WE HAVE CAREFULLY CONS IDERED THE RIVAL CONTENTIONS. IT IS APPARENT THAT ALL THESE PARTIES HAVE BEEN GIVEN CONTRACT WORK OF 229216 SQ FT AND THE ESTIMATED CONTRACT VALUE OF RS. 11.06 CRORES. THE MAIN REASON GIVEN BY THE LD ASSESSING OFFICER IS THAT ABOVE ADVANCE IS NOT A PERMISS IBLE INVESTMENT. FOR THE REASONS GIVEN BY THE LD CIT(A) IN PARA NO. 11.5 ARE EXHAUSTIVE AND SAME WERE NOT CONTRAVERTED BY THE LD DR. BEFORE US IT COULD NOT BE POINTED OUT BY THE REVENUE THAT ASSESSEE HAS NOT GOT CONTRACTION NONE FROM THESE CONTRACTS AND FURTHER THESE CONTRACTORS ARE ANY WAY PAGE 33 OF 34 PERSONS COVERED U/S 13(3) OF THE ACT. SECTION 11(5) APPLIES ONLY IN CASE OF INVESTMENT AND DEP OSIT AND REVENUE COULD NOT BRING ANY THING ON RECORD TO SAY THAT THE ABOVE SUM GIVEN AS AN ADVANCE TO THE CONTRACTOR ARE NOT PART OF REGULAR TERMS OF THE CONTRACT OF THE CONSTRUCTION ACTIVITY OR CONTRACTORS HAVE NOT DONE ANY WORK ON BEHALF OF THE TRUST BUT MERELY ENJOYED THE ADVANCES. THEREFORE, WE ARE OF THE OPINION THAT BY GIVING ADVANCES TO THOSE CONTRACTORS THE TRUST HAS VIOLATED PROVISIONS OF SECTION 11(5) OF THE ACT. IN VIEW OF THIS GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS DISMISSED. 24. NOW WE COME TO THE ISSUE THAT WHENEVER THERE IS VIOLATION OF PROVISIONS OF SECTION 11, 12 AND 13 WHETHER THE TRUST LOSSES THE FULL EXEMPTION OR ONLY TO THE EXTENT IMPUGNED INCOME OR BENEFIT ON INVESTMENT. BEFORE US THE LD DR HAS STRONGLY RELIED UPON THE DECISION OF TH E HON'BLE DELHI HIGH COURT IN CASE OF DIT (E) VS. CH R ANJ I V CHARITABLE TRUST , DELHI 223 TAXMAAN 71 (43 TAXMANN.COM 300 (DEL) WHEREIN, IT HAS BEEN HELD THAT IF IN CASE OF A TRUST IT IS FOUND THAT PROVISIONS OF SECTION 13(1)(C)(II) READ WITH SECTION 13(3) ARE NOT FOLLOWED TRUST WOULD LOOSE ITS EXEMPTION IN ITS ENTIRETY, WHICH RESULT THAT THE ASSESSMENT OF ITS INCOME WILL BE MADE ACCORDING TO THE PROVISIONS OF THE ACT. 25. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND WE HAVE ALSO NOTED THAT AGAINST THE A BOVE SAID DECISION THE HON'BLE SUPREME COURT HAS ADMITTED SPECIAL LEAVE PETITION OF THE ASSESSEE AS REPORTED IN 52 TAXMAN.COM 243 (S.C), HOWEVER, ABOVE DECISION HAS NOT BE STAYED THEREFORE, FOLLOWING THE BINDING PRECEDENT OF THE JURISDICTION HIGH COURT WH EREIN PARA NO. 22 IT HAS BEEN HELD THAT EVEN IF THERE IS ONE INSTANCE OF APPLICATION OR USE OF THE INCOME OR PROPERTY OF THE TRUST DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PROHIBITED PERSONS, THE TRUST WILL LOSE EXEMPTION IN RESPECT OF ITS ENTIRE INCO ME AND RESULTANTLY THE ASSESSMENT OF ITS INCOME WILL BE MADE ACCORDING TO THE PROVISIONS OF THE ACT. IN VIEW OF THIS WE ARE OF THE OPINION THAT WHOLE SURPLUS OF THE TRUST AMOUNTING IN ALL TO RS. 64548599/ - SHALL BE CHARGEABLE TO TAX UNDER THE NORMAL PROVI SIONS OF THE INCOME TAX ACT AND NOT U/S 11, 12 AND 13 OF THE ACT SPECIFICALLY APPLICABLE TO THE TRUST. IN VIEW OF THIS BY ALLOWING GROUND NO. 3 OF THE APPEAL OF THE REVENUE WE HAVE HELD THAT PROVISIONS OF SECTION 13 OF THE ACT ARE VIOLATED AND HENCE, TRUST LOSSES EXEMPTION U/S 11, 12 AND 13 OF THE ACT. IN THE RESULT GROUND NO. 1 AND 3 OF THE APPEAL OF THE REVENUE IS ALLOWED AND GROUND NO. 2, 4,5, 6 AND 7 OF THE APPEAL OF THE DISMISSED. 26. IN THE RESULT THE APPEAL OF THE REVENUE IS PARTLY ALLOWED AND CROSS OBJ ECTION OF THE ASSESSEE IS DISMISSED. ORDER PRO NOUNC ED IN THE OPEN COURT ON 2 3 / 05 / 2017 . PAGE 34 OF 34 - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 3 / 05 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI
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