Nathaniel Junior Education Society, New Delhi V. DDIT, New Delhi

ITA 5028/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4126 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 25-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: CHANDER SHEKHAR
• Keywords: Income from undisclosed sources; Charitable institution
• Section: 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A. NO.5028/DEL/2010 ASSESSMENT YEAR : 2006-07 NATHANIEL JUNIOR EDUCATION SOCIETY, VS. DY. DIT (E), AD-54, SHALIMAR BAGH, INV. CIRCLE 11, DELHI NEW DELHI PAN NO.AAATN 5143 P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CHANDER SHEKHAR, CA RESPONDENT BY : MS. Y. KAKKAR, SR. DR ORDER PER K.G. BANSAL, AM: THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED NIL RETURN ON 27.03.2008. THE RETURN WAS PROCESSED U/S 143(1), OF THE INCOME-TAX ACT, 1961 (THE ACT). THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING ST ATUTORY NOTICE U/S 143(2) ON 19.09.2008. 1.1 IT IS MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSES SEE WAS UNABLE TO PRODUCE THE BOOKS OF ACCOUNT, BILLS AND VOUCHERS, ALTH OUGH A NUMBER OF OPPORTUNITIES WERE FURNISHED TO THE ASSESSEE IN THIS BEHALF. IN THESE CIRCUMSTANCES, THE RECEIPT OF `1,16,663/- WAS ADDED TO THE TOTAL INCOM E. IT IS ALSO MENTIONED THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 11. THEREFORE, FROM VARIOUS EXPENSES CLAIMED, DEDUCTION OF `3,000/- ONLY WAS GRANTED IN RESP ECT OF EXPENDITURE INCURRED FOR EARNING THE INCOME, BEING THE DONATIONS. 2 2. THE MATTER WAS AGITATED BEFORE THE LEARNED CIT(A)-XXI, N EW DELHI. HE CONFIRMED THE ADDITION OF AN AMOUNT OF `1,16,663/- BY HOLDING THAT NO EVIDENCE WAS FILED REGARDING SALE OF STOCK OF BOOKS. THE DEDUCTI ON U/S 11 WAS ALSO DENIED. THE ACTION OF THE ASSESSING OFFICER IN ALLOWING EXPENDIT URE OF `3,000/- ONLY WAS ALSO UPHELD. AGGRIEVED BY THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A SSESSEE-SOCIETY HAD BEEN CARRYING ON EDUCATIONAL ACTIVITIES FOR THE LAST 30 YEARS. IN THIS YEAR, THE BUILDING WAS DEMOLISHED WITH A VIEW TO CONSTRUCT A NEW BUILDING FOR THE SCHOOL. THEREFORE, NO EDUCATIONAL ACTIVITY WAS CARRIED ON IN THI S YEAR. THE ASSESSEE HAD OLD STOCK OF BOOKS, WHICH WAS SOLD IN CASH FOR A SUM OF `1,16,663/-. THE ASSESSEE HAD RECEIVED DONATIONS OF `26,350/-. EXPENSES WERE INCURRED T O KEEP THE SOCIETY AFLOAT. THIS INCLUDES HOUSE-TAX OF `6,074/-, ELECTRIC ITY & WATER CHARGES `10,161/-, AUDIT FEE OF `5,612/-, CONVEYANCE EXPENSES OF `2,587/- ETC . THE NET SURPLUS OF `993/- HAS BEEN CARRIED OVER TO THE BALANCE SHEET. OUR ATT ENTION HAS BEEN DRAWN TOWARDS THE ORDER OF THE LOWER AUTHORITIES. IT IS SUBM ITTED THAT THERE WAS NO APPLICATION OF INCOME TOWARDS EDUCATIONAL OBJECTS AND , THEREFORE, THERE IS NO QUESTION OF ANY DEDUCTION U/S 11. ON COMPARISON OF T HE BALANCE SHEET OF THIS YEAR WITH THE BALANCE SHEET OF IMMEDIATELY PRECEDING YEAR, IT W ILL BE SEEN THAT THE ASSESSEE HAD STOCK OF BOOKS AND STATIONERY OF `1,16,663 /-, WHICH HAS BEEN SOLD IN THIS YEAR AT BOOK VALUE. THEREFORE, THERE IS NO QUESTION O F ANY ADDITION TO THE INCOME ON THIS GROUND. THE EXPENSES ARE SUCH BUT FOR WHI CH THE SOCIETY COULD NOT HAVE BEEN MAINTAINED. THEREFORE, THE EXPENSES ARE REQUIRED TO BE DEDUCTED FOR FINDING THE SURPLUS, WHICH IS LIABLE TO TAX AS PER SCH EDULED RATE U/S 164(2). 4. IN REPLY, THE LEARNED DR SUBMITTED THAT THE VALUE OF BU ILDING, FURNITURE AND FIXTURE AND OTHER ASSETS SHOWN IN THIS YEAR IS THE SAME A S IN ASSESSMENT YEAR 2005- 3 06. THERE IS NO EVIDENCE REGARDING SALE OF THE STOCK OF BO OKS AND STATIONERY AND, THEREFORE, THE AMOUNT OF `1,16,663/- ENTERED IN THE ACCOUN TS REPRESENTS INCOME FROM UNDISCLOSED SOURCES. IT IS FURTHER SUBMITTED THAT THE QUESTION REGARDING RATE OF TAX WAS NOT RAISED BEFORE THE LEARNED CIT(A). 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION S MADE BEFORE US. IT IS SEEN THAT THE ASSESSEE HAD STOCK OF BOOKS AND STATI ONERY OF `1,16,663/- AS ON 31.03.2005. THIS POSITION HAS NOT BEEN DISPUTED BY AN Y OF THE AUTHORITIES BELOW OR THE LEARNED DR. IT IS ALSO A FACT THAT NO SUCH ASSET F INDS PLACE IN THE BALANCE SHEET AS ON 31.03.2006. IN THIS YEAR, THE ASSESSEE MADE ADVAN CE OF `2,50,000/- TO THE CONTRACTOR, POSSIBLY FOR THE PURPOSE OF CONSTRUCTION OF NEW BUILDING. IN VIEW OF VARIOUS FACTS ON RECORD, SOME OF THE AVERMENTS MADE BY T HE LEARNED COUNSEL BEFORE US ARE INCORRECT. THE VALUE OF THE BUILDING, FURNITURE A ND FIXTURE AND OTHER ASSETS FINDS PLACE IN THE BALANCE SHEET AND, THEREFORE, IT CANNOT BE SAID THAT THE BUILDING HAS BEEN DEMOLISHED. NONETHELESS, BOOKS AND STATIONERY DO NOT FIND A PLACE IN THE BALANCE SHEET. THE ONLY REASONABLE CONCLUSION WHICH CAN BE DRAWN IS THAT THIS ASSET HAS BEEN LIQUIDATED LEADING TO RECEIPT OF `1,16,663/ -. THEREFORE, THE CREDIT OF THIS AMOUNT CANNOT BE SAID TO BE UNEXPLAINED U/S 68. A CCORDINGLY, THIS ADDITION IS DELETED. THE RESULT IS THAT GROUND NO.1 OF THE APPEAL IS ALLOWED. 5.1 ADMITTEDLY, THE ASSESSEE HAS NOT CARRIED OUT ANY CHAR ITABLE ACTIVITY. THEREFORE, GROUND NO.2 REGARDING DEDUCTION OF ANY AMOUNT U/S 11 AS APPLICATION OF AMOUNT FOR CHARITABLE PURPOSES IS MISCONCEIVED. THEREFOR E, THE SAME IS DELETED. 6. GROUND NO.3 REGARDING CARRYING ON BUSINESS ACTIVIT IES IS INFRUCTUOUS AS THE REALIZATION OF `1,16,663/- WAS IN RESPECT OF BOOKS AN D STATIONERY, WHICH IS AN 4 INCIDENTAL ACTIVITY. WE HAVE HELD THAT NO PROFIT HAS BEEN EARNED ON THIS ACTIVITY. THEREFORE, THIS GROUND IS DISMISSED AS INFRUCTUOUS. 7. IT IS NO DOUBT TRUE THAT THE ASSESSEE HAS NOT PRODUCED VOUCHERS AND BILLS BEFORE THE ASSESSING OFFICER. HOWEVER, MAJOR EXPENDITURE REGA RDING HOUSE-TAX, ELECTRICITY AND WATER CHARGES AND AUDIT FEE IS MUCH LOWER THAN THE EXPENDITURE INCURRED LAST YEAR. THE LEARNED COUNSEL SUBMITTED THAT TH ESE ARE THE MINIMUM EXPENSES, WHICH HAD TO BE INCURRED. THEREFORE, THESE EXPENSES A RE ALLOWED AND OTHER EXPENSES ARE DISALLOWED IN ABSENCE OF VERIFICATION. T HUS, GROUND NO.4 IS PARTLY ALLOWED. 8. THE ASSESSEE HAS NOT CARRIED OUT ANY CHARITABLE ACTIVI TY IN THIS YEAR. THEREFORE, THE SURPLUS CALCULATED AFTER ALLOWING EXPENDITUR E MENTIONED ABOVE IS LIABLE TO BE TAXED AS IF THE RELEVANT INCOME IS THE INCOME O F AN ASSOCIATION OF PERSONS U/S 164(2). NO CASE HAS BEEN MADE OUT BY THE L OWER AUTHORITIES THAT PROVISIONS CONTAINED IN SECTION 11, 12 OR 13 HAVE BEEN V IOLATED. THEREFORE, ACCEPTING THE SUBMISSION OF THE ASSESSEE, IT IS HELD THAT THE INCOME IS LIABLE TO TAX AS IF IT IS AN INCOME OF ASSOCIATED OF PERSONS. ACCORDIN GLY, GROUND NO.5 IS PARTLY ALLOWED. 9. IN RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 29.04.2011. SD/- SD/- ( I.P. BANSAL ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTA NT MEMBER 5 NS DT.29.04.2011. COPY FORWARDED TO:- 1. NATHANIEL JUNIOR EDUCATION SOCIETY, AD-54, SHALIMAR BAG H, DELHI. 2. THE DY. DIT(E), INV. CIRCLE 11, DELHI. 3. THE RESPONDENT 4. THE CIT 5. THE CIT (A)-, NEW DELHI. 6. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).