Dayanand Anglo Vedic Collage Trust and Management Society, New Delhi V. Dy. CIT Tax(E), Inv. Circle-II,

ITA 51/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4058 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 15-02-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 07-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KARAN KHANNA
• Keywords: Unexplained cash credit; Rejection of books of accounts; Charitable institution; Reasonable cause; Capital receipt; Cancellation of registration; Capital expenditure
• Section: 43B; 143(3); 12A; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI R.C. SHARMA I.T.A. NOS.51 AND 52/DEL/2009 ASSESSMENT YEARS: 2003-04 & 2004-05 DAYANAND ANGLO VEDIC COLLEGE TRUST VS. DEPUTY C IT, AND MANAGEMENT SOCIETY, TRUST CIRCLE-II, CHITRA GUPTA ROAD, PAHAR GANJ, NEW DELHI NEW DELHI. (APPELLANT) (RESPONDENT) I.T.A. NOS. 90 & 91/DEL/09 ASSESSMENT YEARS: 2003-04 & 2004-05 DEPUTY DIRECTOR OF INCOME-TAX (E), VS. DAV CO LLEGE TRUST AND INV. CIR.-II, MANAGEMENT SOCIETY, NEW DELHI. CHITRA GUPTA ROAD, PAHARGANJ, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI KARAN KHANNA, ADV. DEPARTMENT BY: SHRI STEPHEN GEORGE , CIT(DR) ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 2 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THESE ARE FOUR APPEALS FILED BY THE ASSESSEE AND R EVENUE AGAINST THE SEPARATE ORDERS OF LEARNED CIT(APPEALS) DATED 0 6.10.2008 PASSED FOR ASSESSMENT YEARS 2003-04 AND 2004-05 UNDER SECT ION 143(3)/253(2) OF THE INCOME-TAX ACT, 1961. 2. FIRST WE TAKE THE APPEALS FILED BY THE DEPARTMEN T IN ASSTT. YEAR 2003-04, HOWEVER ANY GROUND OF APPEAL TAKEN BY RESP ECTIVE PARTIES IN ASSTT. YEAR 2004-05, FOUND TO BE INTERCONNECTED OR COMMON WITH GROUNDS OF THIS ASSTT. YEAR THEN WE WILL TAKE THEM TOGETHER . GROUND NO. 1 & 2 TAKEN BY THE REVENUE IN BOTH THE ASSTT. YEARS ARE V ERBATIM SAYING. FOR THE FACILITY OF REFERENCE WE ARE PRODUCING THE GROU NDS TAKEN IN ASSTT. YEAR 2003-04 WHICH READ AS UNDER :- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN GRANTING EXEMPTION U/ S. 11 & 12 WHEN SEVERAL INSTANCES OF APPLICATION OF INCOME FOR NON-CHARITAB LE PURPOSES WERE NOTED BY THE ASSESSING OFFICER IN THE ASSESSEES ORDER AND H ONBLE ITAT IN THEIR ORDER DATED 26.04.2006 IN ITA NOS.3145, 3146 & 3147 OF 20 05 FOR A.Y. 1999-2000, 2000-2001 & 2001-2002 HAD OBSERVED THAT THERE IS DI VERSION OF FUND FOR NON- CHARITABLE PURPOSES AND INCOME OF THE ASSESSEE IS B EING UTILIZED FOR BENEFIT OF PERSONS SPECIFIED IN SECTION 13(3) OF THE IT ACT. ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 3 (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) OUGHT TO HAVE DIRECTED THAT THE INCOME OF ASSESSEE SHOULD BE COMPUTED AS REQUIRED FOR CHARITABLE PURPOSES AND NO T AS PER CHAPTER-IV OF I.T. ACT AS REQUIRED FOR COMMERCIAL PURPOSES. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED ITS RETURN OF INCOME IN ASSTT. YEAR 2003-04 ON 31 ST MARCH, 2004 DECLARING NIL INCOME AT (-)801942997. SIMILARLY FOR ASSTT. YEAR 2004-05 IT HAS FILED THE RETURN ON 1 ST NOVEMBER, 2004 DECLARING NIL INCOME. THE COMPUTATI ON OF INCOME WAS REVISED BY THE ASSESSEE AT RS. (-) 57682 7235/- AND SUBSEQUENTLY REVISED AT RS. (-) 597274978/- IN ASST T. YEAR 2003-04. IN ASSTT. YEAR 2004-05 ALSO, THE ASSESSEE HAS REVISED THE COMPUTATION OF INCOME AT RS. (-) 562594527/-. SINCE IN THESE GROUN DS OF APPEAL THE DISPUTE IS WHETHER ASSESSEE HAS DIVERTED ITS INCOME IN ANY MANNER OR USED THE INCOME IN ANY MANNER CONTRARY TO SECTION 1 1 AND PAYMENTS HAVE BEEN MADE TO THE PERSONS COVERED U/S 13(3) OF THE ACT WHICH WOULD DISENTITLE IT TO CLAIM THE EXEMPTION. THEREFO RE BEFORE ADVERTING TO THE SPECIFIC REASONING ASSIGNED BY THE AO AND CONSI DERED BY THE LD. CIT(A) WE DEEM IT NECESSARY TO TAKE NOTE OF THE BRI EF BACKGROUND OF THE ASSESSEE AS CONSIDERED BY THE LD. CIT(A). THE ASSES SEE, DAV COLLEGE TRUST AND MANAGEMENT SOCIETY IS A SOCIETY SET UP WA Y BACK IN 1886 WITH THE SOLE OBJECT TO PROVIDE EDUCATION TO THE CHILDRE N OF THE COUNTRY. ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 4 ACCORDING TO THE ASSESSEE DURING THE LAST 50 YEARS IT HAS SET UP MORE THAN 600 INSTITUTIONS COMPRISING OF SCHOOLS, COLLEG E, TECHNICAL INSTITUTIONS, VEDIC RESEAR CH CENTERS, DENTAL AND AYURVEDIC COLLEGE AND NURSING COLLEGES. IT WAS SUBMITTED BEFORE THE AO T HAT THERE HAS BEEN NO CHANGE IN THE AIMS AND OBJECTS OF THE SOCIETY FOR W HICH IT HAS BEEN CONSTITUTED TO CARRY ON ITS ACTIVITIES IN THE FIELD OF EDUCATION AS IN THE PAST. THE ASSESSEE HAS BEEN ALLOWED EXEMPTION U/S 1 0 (22), 10 (23C) (VI) OF THE INCOME TAX ACT. THESE SECTIONS INTERALI A PROVIDES THAT IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR OF AN Y PERSON, ANY INCOME RECEIVED ON BEHALF OF UNIVERSITY OR OTHER EDUCATION AL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PUR POSE OF PROFIT SHALL NOT BE INCLUDED. ACCORDING TO THE ASSESSEE SECTION 10 ( 22) AND 10 (23C) (VI) STIPULATES THE SAME CONDITION EXCEPT THE CHANGE BRO UGHT OUT BY INTRODUCTION OF SECTION 10(23C)(VI) OF THE INCOME T AX ACT W.E.F. 1.4.1999 WHICH CONTEMPLATES THAT SUCH EXEMPTION COULD ONLY B E ALLOWED TO THE INSTITUTION IF SUCH INSTITUTION IS APPROVED BY THE AUTHORITY. THERE IS NO DISPUTE THAT ASSESSEE HAS BEEN ALLOWED EXEMPTION UN DER THESE SECTIONS. IT HAS ALSO BEEN ALLOWED REGISTRATION U/S 12A OF THE ACT FOR THESE ASSTT. YEARS. THE ASSESSEE HAS BEEN MAINTAINI NG PROPER BOOKS OF ACCOUNTS. THESE BOOKS OF ACCOUNTS WERE AUDITED BY Q UALIFIED CHARTERED ACCOUNTANT AS REQUIRED U/S 288 OF THE INCOME TAX AC T. ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 5 4. THE AO DURING THE COURSE OF ASSTT. PROCEEDING FE LT THAT ASSESSEE IS NOT COOPERATIVE AND ITS BOOKS OF ACCOUNTS ARE NOT C OMPLETE. THEREFORE HE MADE A REFERENCE FOR SPECIAL AUDIT U/S 142 A(2) OF THE ACT. THE SPECIAL AUDITOR HAS GIVEN THE AUDIT REPORT. ON AN A NALYSIS OF THE ACCOUNTS SUBMITTED BY THE ASSESSEE AND THE AUDIT RE PORT AO ARRIVED AT A CONCLUSION THAT THERE ARE VARIOUS DISCREPANCIES IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE. ON THE STRENGTH OF SPEC IAL AUDIT REPORT HE POINTED OUT IRREGULARITIES IN THE ACCOUNTS OF ASSES SEE IN PARAGRAPH 10 OF THE ASSTT. ORDER. THE FIRST IRREGULARITY POINTED OU T BY THE AO IS THAT FIXED ASSET REGISTER WAS NOT PROPERLY MAINTAINED AT HQS. OF THE TRUST. ACCORDING TO THE AO THE SPECIAL AUDITOR HAS POINTED OUT THAT FIXED ASSETS PURCHASED BY THE OFFICE OF DAVCMC HAS BEEN CHARGED TO INCOME AND EXPENDITURE ACCOUNTS IN THE YEAR AND EVEN THE ASSET S PURCHASED ON ACCOUNT OF DAV INSTITUTE OF EDUCATION IS CHARGED TO INCOME AND EXPENDITURE ACCOUNT. ON SPECIFIC INQUIRIES ABOUT TH E LOCATION AND RECORDS OF THE ASSETS OF THE DAV INSTITUTE OF EDUCA TION, NO RECORD IS PRODUCED BY THE ASSESSEE. SIMILARLY HE POINTED OUT THE IRREGULARITIES IN THE DETAILS OF MONEY CHARGED BY THE PROFESSIONAL CO LLEGES RUN BY THIS ORGANIZATION AND DETAILS OF STUDENTS ADMITTED AGAIN ST PAID SEATS (NRI /MANAGEMENT QUOTA). THE ASSESSEE HAS NOT INCLUDED T HE BALANCE SHEET OF CLOSED INSTITUTION AND AUDITOR COULD NOT VERIFY THE LATEST STATUS. ON THE ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 6 BASIS OF THESE DEFECTS THE AO WHILE MAKING QUANTUM ADDITIONS ON THESE ISSUES HAS OBSERVED THAT ASSESSEE WILL NOT BE ENTIT LED EXEMPTION U/S 11 OF THE ACT. 5. THE LD. CIT(A) HAS DEALT THE ISSUE OF THE ADDITI ON OF ALL ITEM INDEPENDENTLY IN THE IMPUGNED ORDER AND THEN HELD T HAT EXEMPTION IS AVAILABLE TO THE ASSESSEE EXCEPT FEW ADDITIONS WHIC H WERE NOT TREATED TO BE COVERED FOR THE EXEMPTION OF 11 OF THE ACT. 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET SUBMITTED THAT ASSESSEE TRUST HAS A HISTORY OF 120 YEARS. IT HAS MORE THATN 600 INSTITUTIONS THROUGHOUT THE COUNTRY AND HAS SURVIVE D ITS STATUS FROM THE LAST MORE THAN ONE CENTURY. THE TRUST HAS CONTRIBUT ED ENORMOUSLY IN THE EDUCATIONAL FIELD IN THE COUNTRY AND HAS PROVIDED E DUCATION WHICH IS THE REQUIREMENT OF OUR COUNTRY EVEN TODAY. THE AO HAS P OINTED OUT THAT CERTAIN INACCURACIES AND INFIRMITIES IN THE BOOKS O F ACCOUNTS MAINTAINED BY THE TRUST. SUCH INFIRMITIES MAY DUE TO THE REASO N THAT TRUST IS BEING RUNNING ONLY BY EDUCATIONALISTS, EITHER RETIRED PRI NCIPALS, PROFESSORS ETC. THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS OF TH E ASSESSEE. HE HAS NOWHERE POINTED OUT THAT THE TRUST HAS DEVIATED FRO M ITS PATH AND AN OBJECTIVE FOR WHICH IT WAS SET UP. HE FURTHER POINT ED OUT THAT THE AO HIMSELF ADMITTED IN THE ASSTT. ORDER THAT ASSESSEE HAS PRODUCED BOOKS AND DOCUMENTS RELATING TO 434 BRANCHES OUT OF 440 S CHOOLS. IT HAS ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 7 PRODUCED THE AUDIT REPORT TO 395 INSTITUTIONS WHICH WERE PERUSED BY THE SPECIAL AUDITOR. ACCORDING TO THE AO ASSESSEE SHOUL D HAVE PREPARED BALANCE SHEET OF SCHOOLS/INSTITUTIONS AS PER MERCAN TILE SYSTEM OF ACCOUNTS. THE ASSESSEE HAS BEEN FOLLOWING REGULARLY THE RECEIPT AND PAYMENT METHOD OF ACCOUNTING. ON THE DIRECTION OF S PECIAL AUDITOR AS WELL AS OF THE AO THE ASSESSEE HAS REQUISITIONED BA LANCE SHEETS, INCOME AND EXPENDITURE ACCOUNT FROM ALL THE INSTITU TIONS AS PER MERCANTILE SYSTEM OF ACCOUNTING ALONGWITH CERTIFICA TES SHOWING HEAD WISE INCOME AND EXPENDITURE AS PER MERCANTILE SYSTE M OF ACCOUNTING. HE ALSO POINTED OUT THAT SPECIAL AUDIT REPORT WAS S UBMITTED TO AO ON 4 TH SEPTEMBER, 2006. THE QUESTIONNAIRE WAS CALLED ON 22 ND SEPTEMBER 2006 AND ASSESSEE WAS GIVEN 5 DAYS TIME TO EXPLAIN THESE QUESTIONS AND SUBMIT THE DETAILS. 7. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT A SIMILAR SITUATION AROSE IN ASSTT. YEARS 1999-2000, 2000-01 AND 2001-02. THE AO HAS REJECTED THE BOOK RESULT. HE HAS APPOINTED SPEC IAL AUDITOR AND MADE SEVERAL ADDITIONS TO THE SURPLUS SHOWN BY THE ASSES SEE IN THE INCOME AND EXPENDITURE ACCOUNTS. THE DISPUTE TRAVELED UP T O THE TRIBUNAL IN ITA NO. 3145 3147/D/2005. TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION VIDE ORDER DATED 28 TH APRIL, 2006. THE AO IN PURSUANCE OF THE TRIBUNALS ORDER PASSED THE FRESH ASSTT. ORDER ON ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 8 17.12.2008 IN THESE ASTT. YEARS. HE HAS ACCEPTED TH E BOOK RESULT. HE HAS ACCEPTED THE RECONCILIATION SUBMITTED BY THE AS SESSEE AND DETERMINED THE TAXABLE INCOME AT NIL. THE ASSESSEE HAS PLACED ON RECORD ALL THESE ORDERS ON PAGES NO. 15-44 OF THE PAPER BOOK. LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TOWARDS THE OBSERVATION OF AO IN ASSTT. YEAR 2001-02 AVAILABLE AT PAGE 43 OF T HE PAPER BOOK WHICH READ AS UNDER :- THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE CHARITA BLE IN NATURE AND WITHIN THE MEANING OF SECTION 2(15) OF THE INCOME T AX ACT, 1961. THERE IS NO VIOLATION OF PROVISION OF SECTION 11 AN D 13 OF THE I.T. ACT, 1961, AS SUCH EXEMPTION IS ALLOWED TO THE ASSE SSEE U/S 11 OF THE INCOME TAX ACT, 1961. 8. THE LD. COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT ON THE BASIS OF OBSERVATIONS MADE BY THE AO IN THE ORIGINA L ASST. ORDERS PASSED IN 1999-2000 AND 2001-02. DIRECTOR OF INCOME TAX EX EMPTION SOUGHT TO WITHDRAW THE REGISTRATION GRANTED TO THE ASSESSEE U /S 12A OF THE ACT. HE HAS ISSUED A SHOW CAUSE NOTICE ON 4 TH SEPTEMBER, 2008. COPIES OF THESE NOTICE HAVE BEEN PLACED ON RECORD. THE REASON S ASSIGNED IN THIS NOTICE WERE SIMILAR TO THE ONE CONSIDERED BY THE AO WHILE PASSING ASSTT. ORDER IN THESE ASSTT. YEARS U/S 143(3). THE LD. DIR ECTOR OF INCOME TAX EXEMPTION MADE A REFERENCE TO THE ORDER OF THE ITAT IN THESE ASSTT. YEARS. HOWEVER ON EXPLANATION OF THE ASSESSEE THE P ROCEEDING INITIATED ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 9 FOR CANCELLATION OF THE REGISTRATION HAS BEEN DROPP ED VIDE ORDER DATED 16 TH JULY, 2009. HE POINTED OUT THAT THERE IS NO DISPAR ITY ON FACTS AS FAR AS THE FULFILLMENT OF OBJECTS OF THE SOCIETY ARE CO NCERNED. THE PERIPHERAL DEFECTS POINTED OUT BY THE AO IS IN THE ORIGINAL AS STT. PROCEEDINGS IN ASSTT. YEAR 1999-2000, 2001-02 WERE ON ACCOUNT OF C ERTAIN DEFICIENCY IN RECONCILIATION. THESE HAVE BEEN EXPLAINED BY THE AS SESSEE AND NO DISPUTE HAS BEEN RAISED BY THE AO INSPITE OF SPECIA L AUDIT REPORT. THE ASSESSMENT IN ASSTT. YEAR 2005-06 AND 2006-07 HAVE ALSO BEEN COMPLETED ON 28 TH DECEMBER, 2007 AND 19.12.2008. IN THESE YEARS ALSO AO HAS ACCEPTED THE ACCOUNTS OF ASSESSEE AND DETERM INED THE TAXABLE INCOME AT NIL. THE ASSESSEE HAS PLACED ON RECORD CO PIES OF THESE ORDERS ON PAGES NO. 45-52 OF THE PAPER BOOK. 9. THE LD. DR ON THE OTHER HAND UNABLE TO CONTROVER T THE FACTS POINTED OUT BY THE ASSESSEE. HOWEVER HE RELIED UPO N THE ORDER OF THE AO. HE COULD NOT DISPUTE THAT AO IN ASSTT. YEAR 199 9-2000 UPTO 2001-02 HAS DETERMINED THE INCOME OF ASSESSEE AT NIL. SIMIL ARLY HE COULD NOT DENY THE FACT THAT PROCEEDING INITIATED FOR CANCELL ATION OF REGISTRATION U/S 12A (3) OF THE INCOME TAX AT BY THE DIRECTOR INCOME TAX EXEMPTION HAS BEEN DROPPED. 10. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AN D GONE THROUGH THE RECORD CAREFULLY. IN ASSTT. YEAR 1999-2000 AND 2001-02 TRIBUNAL FOR ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 10 ILLUSTRATION PURPOSES HAS OUTLINED CERTAIN DISCREPA NCIES POINTED OUT BY THE SPECIAL AUDITOR AND CONSIDERED BY THE AO FOR RE JECTING THE BOOKS OF ACCOUNTS. THESE ILLUSTRATIONS REFERRED AT PAGE 2 AN D 3 OF THE ORDER READ AS UNDER :- I) THE BANK ACCOUNTS WERE NOT PROPERLY RECONCILED AND FIXED ASSET REGISTERS OF VARIOUS UNITS WERE NOT PROPERLY MAINTA INED. II) THE ACCOUNTS OF DAV SCHOOL SHRESHTHA VIHAR SHOW ED PURCHASE OF ONE IBM COMPUTER FROM M/S. COMPUSOFT INDIA, WHICH WAS F OUND TO BE NON EXISTENT. THE IBM HAD CONFIRMED THAT THEY DID NOT H AVE ANY SUCH DEALER/DISTRIBUTOR. THE ACCOUNTS ALSO SHOWED PURCHA SE OF COMPUTER FROM M/S. SNARC COMPUTER WHICH WAS ALSO NOT FOUND I N EXISTENCE ON THE ADDRESSES GIVEN. THESE CONCERNS WERE ALSO RELAT ED TO THE HUSBAND AND THE SON OF THE EX PRINCIPAL. III) EXPENSES TOTALING RS.1384602 PERTAINING TO VAR IOUS SCHOOLS WERE NOT VOUCHED. IV) THE MARUTI VAN PURCHASED FOR RS.2.85 LACS WAS N OT FOUND PHYSICALLY. V) IN CASE OF DAV PUSHPANJALI ENCLAVE, MONEY RUNNIN G INTO LACS WAS SHOWN TO HAVE BEEN SPENT FOR DEVELOPMENT OF SCHOOL BUT WAS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. VI) IN CASE OF DAV HANSRAJ MODEL SCHOOL, RS.346686/ - WAS SHOWN TO HAVE BEEN PAID TO DAILY WORKERS BUT NO ATTENDANCE R EGISTER/RECORD OF WORKERS WERE MAINTAINED. VII) THE FIGURES OF ONLY 383 OUT OF 393 SCHOOLS WER E FURNISHED WITH SPECIAL AUDITOR. THE BALANCE SHEET/STATEMENT OF REMAINING S CHOOLS COULD NOT BE FURNISHED. ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 11 VIII) IN ASSESSMENT YEAR 1999-2000 LEASE CHARGES IN RESPECT OF 11 VEHICLES AMOUNTING TO RS.2086222 WERE CLAIMED TWICE AS E4XPE NDITURE. IX) MONEY WITHDRAWN FROM THE BANK NOT ACCOUNTED PRO PERLY INDICATING SIPHONING OF FUNDS. X) LIABILITIES AMOUNTING TO RS.3395568 EXPLAINED AS AMOUNT DUE TO CONTRACTOR FOR THE PERIOD PRIOR TO 1997-98 REMAINED UNCLAIMED. XI) IN RELATION TO FUNCTION EXPENSES, NO PROPER EVI DENCE PRODUCED IN RESPECT OF EXPENDITURE OF RS.2.16 CRORES SHOWN UNDE R THE HEAD OTHER EXPENSES. XII) APPROPRIATION OF CAPITAL EXPENDITURE FILED IN CASE OF DAV CMC BUT NO DETAILS OF SUCH EXPENSES WERE FILED FROM YEAR TO YE AR. 11. INSPITE OF THESE ILLUSTRATIONS THE TRIBUNAL DEE M IT FIT TO SET ASIDE THE ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION, BEC AUSE TRIBUNAL FELT THAT DISCREPANCY POINTED OUT BY THE SPECIAL AUDITOR COUL D BE FOR LACK OF RECONCILIATION OF DIFFERENT ACCOUNTS. IN THE FRESH PROCEEDING AO WAS SATISFIED ON ALL THESE ISSUES EXCEPT ONE OR TWO. HE DETERMINED THE TAXABLE INCOME OF THE ASSESSEE AT NIL. HE ALSO OBSE RVED THAT ACTIVITIES OF THE ASSESSEE ARE GENUINE AND CHARITABLE IN NATUR E. HE DID NOT FIND ANY VIOLATION OF SECTION 11 AND 13 AS OBSERVED BY US FR OM ASTTT. ORDER OF 01- 02. TAKING INTO CONSIDERATION THE STAND OF AO IN TH E FRESH ASSTT. PROCEEDING COUPLED WITH THE PROCEEDING DROPPED IN R ESPECT OF CANCELLATION OF REGISTRATION U/S 12A AND THE SUBSEQ UENT ASSTT. ORDERS PASSED U/S 143(3) IN ASSTT. YEAR 2005-06, 2006-07 W HEREIN AO HAS NOT ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 12 DISPUTED SUCH TYPE OF ISSUES AND DETERMINED THE TAX ABLE INCOME AT NIL WE ARE OF THE OPINION THAT ASSESSEE HAS NOT BEEN DE VIATED FROM ITS OBJECT OF PROVIDING EDUCATION. THERE MAY BE SMALL D ISCREPANCY IN THE ACCOUNTS WHICH IS POSSIBLE ONE, BECAUSE OF MANAGEME NT OF 600 INSTITUTION BUT THAT WOULD NOT BE SUFFICIENT TO SAY THAT IT IS NOT A CHARITABLE SOCIETY, WORKING FOR THE PUBLIC AT LARGE. WE WILL B E DEALING WITH EACH ADDITIONS MADE BY THE AO WHILE TAKING UP THE GROUND S OF APPEAL RAISED BY THE REVENUE. IN THE PRESENT GROUNDS WE ARE REQUI RED JUST TO EVALUATE THE STATUS OF ASSESSEE I.E WHETHER ITS ACTIVITIES ARE GENUINE AND ITS OBJECTS ARE FOR CHARITABLE PURPOSE. AFTER LOOKING I NTO THE HISTORY OF THE DEVELOPMENT IN SET ASIDE ASSESSMENT IN ASSTT. Y EAR 1999-2000 TO 2001-02 AND SUBSEQUENT ASSESSMENTS IN 05-06 ETC. WE ARE SATISFIED THAT INCOME OF THE ASSESSEE DESERVE TO BE ASSESSED AS REQUIRED TO BE COMPUTED FOR CHARITABLE PURPOSE. 12. GROUND NO. 3 IN ASSTT. YEAR 2003-04. IN THIS GR OUND THE GRIEVANCE OF REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 23179869/-. THE BRIEF FACTS OF THE CASE ARE THAT DU RING THE COURSE OF ASSTT. PROCEEDING LD. AO FOUND THAT ASSESSEE HAS BE EN MAINTAINING ACCOUNTS OF DIFFERENT INSTITUTIONS I.E. CURRENT ACC OUNT FOR DAY TO DAY TRANSACTION, LOAN ACCOUNT FOR FUNDS GIVEN BY THE AS SESSEE TO THE ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 13 INSTITUTION FOR LONG TERM PURPOSES ON INTEREST 3) C APITAL DEPOSIT FUND WHICH REPRESENT THE FUNDS DEPOSITED BY THE INSTITUT ION WITH DAV CMC ON INTEREST. THE SPECIAL AUDITOR WHILE EXAMINING THESE ACCOUNTS AND THE IMPACT OF OUTCOME FROM THESE ACCOUNTS ON INCOME, EX PENDITURE AND UTILISATION OF FUNDS HAS OBSERVED THAT THE BALANCE IN CURRENT ACCOUNT ALWAYS DIFFERS WITH THE INSTITUTION ON ACCOUNT OF V ARIOUS REASONS. THE SPECIAL AUDITOR ALSO STATED THAT A SUM OF RS. 23179 868/- IS AVAILABLE IN THE ACCOUNTS WITHOUT ANY DETAIL. WHEN THE OBSERVAT ION OF SPECIAL AUDITOR CONTAINED AT PAGES NO. 10 19 WERE CONFRON TED TO THE ASSESSEE BY THE AO THEN IT WAS CONTENDED BY THE ASSESSEE THA T STATEMENT OF SPECIAL AUDITOR IS NOT CORRECT. THE ASSESSEE HAS PR OVIDED A STATEMENT OF BALANCE WITH DIFFERENT SCHOOLS, EXHIBITING DEBIT BA LANCE ON RS. 37077442/- AND CREDIT BALANCE AT RS. 13897573/-. AC CORDING TO THE ASSESSEE NET BALANCE OF RS. 23179868/- WAS AVAILABL E AS ON F.Y.1989- 90. WHEN THE EXPLANATION OF ASSESSEE WAS CONFRONTED TO THE SPECIAL AUDITOR THEY POINT OUT THAT NO SUCH DETAILS WERE PR OVIDED DURING THE PROCESS OF AUDIT. THE AO DID NOT EXCEPT THE CONTENT ION OF ASSESSEE AND OBSERVED THAT THESE BALANCES ARE NOT FORMING PART O F RECONCILIATION WITH THE SCHOOLS CURRENT ACCOUNT WHICH INDICATE THAT TH E AMOUNT REMAINED ACCOUNTED IN THE BOOKS OF DAV SCHOOLS FINANCIAL YEA R 1989-90 WHILE THESE BALANCES STAND UNACCOUNTED IN THE RESPECTIVE ALLEGED BRANCHES. ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 14 THE AO HAS OBSERVED THAT INCOME / BENEFIT THERE FRO M REMAINED UNACCOUNTED IN THE ABSENCE OF CONFIRMATION HE TREAT ED THIS BALANCE AS UNEXPLAINED CASH CREDIT IN THE BOOKS OF THE ASSESSE E. 13. BEFORE LD. CIT(A) IT WAS CONTENDED BY THE ASSES SEE THAT DAV COLLEGE MANAGING COMMITTEE (HQS.) MAINTAINED CURREN T ACCOUNTS FOR EVERY SCHOOL/INSTITUTION IN SUBSIDIARY LEDGER BESI DES MAINTAINING THE GENERAL LEDGER, THE SCHOOL/ INSTITUTION MAINTAIN ON E BANK ACCOUNT WHICH IS OPERATED BY THE PRINCIPAL AND ANOTHER SEPARATE B ANK ACCOUNT IN THE NAME OF DAV COLLEGE MANAGING COMMITTEE IS OPENED AT THE RESPECTIVE STATION WHICH IS OPERATED BY ACCOUNTS SECTION / PUB LIC SCHOOL CELL OF DAV COLLEGE MANAGING COMMITTEE AND INTIMATION IS SE NT TO DAV COLLEGE MANAGING COMMITTEE. THESE ACCOUNTS ARE RECO NCILED AFTER THE CLOSER OF THE YEAR WITH RESPECT TO THE DEPOSITS OR WITHDRAWAL OF THE PREVIOUS YEAR. NON RECONCILIATION OF ACCOUNTS IS DU E TO THE FACT THAT ENTRIES IN THE CURRENT ACCOUNT LOAN ACCOUNT AND CAP ITAL ACCOUNT ARE ENTERED BY ONE INSTITUTION IN ONE ACCOUNT AND OTHER INSTITUTION IN SOME OTHER ACCOUNTS, LEADING TO NON RECONCILIATION BALAN CES ONE WITH THE OTHER OR WITH THE DAV COLLEGE MANAGING COMMITTEE WHICH IN FACT HAS NO IMPACT ON INCOME / EXPENSES OR UTILISATION OF FUNDS EXCEPT INTEREST INCOME NOT CONSIDERED BY DAV COLLEGE MANAGING COMMI TTEE AS THERE ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 15 CAN BE NO INCOME FROM SELF. IT WAS ALSO POINTED OUT THAT ALL THE INSTITUTIONS ARE PART OF THE PARENT BODY. THESE ARE OLD OUTSTANDING BALANCES. THERE IS NO TRANSACTION IN THIS ACCOUNT D URING THE CURRENT YEAR. THE ASSESSEE HAS REFUTED THE OBSERVATION OF SPECIAL AUDITOR THAT ACCOUNTS SECTION (HQS.) HOLDS BALANCE WITHOUT ANY D ETAILS, DETAILS OF THE INSTITUTIONS WERE SUBMITTED TO SPECIAL AUDITOR BY THE ACCOUNT OF DAV MAIN SECTION. THEY RETURNED THE SAME AFTER GOING TH ROUGH THE DETAILS. THESE DETAILS WERE AGAIN SUBMITTED TO THE AO AS PER ASSESEES LETTER DATED 25.10.2006. IT WAS CONTENDED BEFORE THE LD. C IT(A) THAT THE ALLEGED DEBIT BALANCE DOES NOT RELATE TO ANY PARTIC ULAR INDIVIDUAL INSTITUTION. THIS IS A DIFFERENCE OF CREDIT AND DEB IT BALANCE OF CURRENT ACCOUNT. 14. LD. CIT(A) HAS GONE THROUGH THE CONTENTIONS OF ASSESSEE. HE CONSIDERED THE BACKGROUND OF THE ASSESSEE BEING A S OCIETY RUNNING EDUCATION INSTITUTION FOR THE LAST MORE THAN 120 YE ARS. HE OBSERVED THAT ASSESSEE HAS DEMONSTRATED ON THE RECORD THAT IN ASS TT. YEAR 1989-90 IT HAS DIVIDED ITS COMPOSITE ACCOUNTS INTO TWO HEADS I .E ACCOUNTS SECTION AND PUBLIC SCHOOL CELL. IT HAS SUBMITTED THE DETAIL S OF DEBIT AND CREDIT ENTRIES OF THE INSTITUTION WHEREIN THE DEBIT BALANC E OF COMPOSITE ACCOUNT CAME TO RS. 2379868/-. THE LD. CIT(A) ON VERIFICATI ON OF THESE DETAILS ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 16 RECORDED A FINDING THAT THIS AMOUNT DOES NOT RELATE TO ANY PARTICULAR INSTITUTION. THIS IS A DIFFERENCE OF CREDIT AND DEB IT BALANCE OF CURRENT ACCOUNT. ACCORDING TO THE LD. CIT(A) THE OLD BALAN CES OF UN-RECONCILED CURRENT ACCOUNT OF INSTITUTIONS WHICH WERE CONTINUI NG FROM EARLIER YEARS HAS BEEN ERRONEOUSLY TREATED AS NON APPLICATION OF FUNDS FOR CHARITABLE PURPOSES. ACCORDINGLY LD. CIT(A) HAS DELETED THE AD DITION. 15. LD. DR RELIED UPON THE ORDER OF AO WHEREAS LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF LD. CIT(A). 16. WE HAVE GONE THROUGH THE RECORD. TO OUR MIND TH E ADDITION MADE BY THE AO IS THE RESULT OF THE APPROACH HE ADOPTED WHILE APPRECIATING THE ACCOUNTS OF ASSESSEE. THERE IS NO CONCRETE DISC REPANCY POINTED OUT FROM THE ACCOUNT WHICH CAN LEAD UNACCOUNTED BALANCE S. HE TREATED THE SPECIAL AUDIT REPORT AS A GOSPEL TRUTH WITHOUT GIVI NG ANY HEED TO THE EXPLANATION OFFERED BY THE ASSESSEE, IF WE LOOK THE ASSTT. ORDER BACKGROUND OF ASSTT. ORDER PASSED IN ASSTT. YEAR 19 99-2000 TO 2001-02 AND THE SUBSEQUENT ORDERS MADE IN ASSTT. YEAR 2005- 06 AND 2006-07 VIS A VIS THE FINDING OF THE LD. CIT(A) THEN THE SCALE WOULD TILT IN FAVOUR OF THE FINDINGS RECORDED BY THE LD. CIT(A) . THE ASSESSEE HAS DEMONSTRATED THE ALLEGED REASON FOR THE DISCREPANCY OR NON RECON CILIATION OF THE ACCOUNT. ACCORDING TO IT IT HAS BIFURCATED ITS COMP OSITE ACCOUNTS INTO TWO ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 17 HEADS IN THE YEAR 1989-90. THERE ARE LARGE NUMBER O F INSTITUTIONS WHICH HAVE MADE DIFFERENT ENTRIES IN THE CURRENT ACCOUNT, LOAN ACCOUNT AND CAPITAL ACCOUNT. THIS HAS RESULTED THE ALLEGED DEBI T BALANCE ONLY ON PAPERS. THE AO HAS TREATED IT AS UNEXPLAINED CASH C REDIT ON THE GROUND THAT CONFIRMATION HAS NOT BEEN FILED. WHEREAS ACCOR DING TO THE ASSESSEE THIS DEBIT BALANCE OF THE COMPOSITE ACCOUNT IS CONT INUING FROM THE LAST MANY YEARS AND DOES NOT RELATE TO THIS ASSTT. YEAR. THUS TAKING INTO CONSIDERATION THE FINDING OF THE LD. CIT(A) WE DO NOT SEE ANY REASON TO INTERFERE IN IT. GROUND NO. 3 IS REJECTED. 17. GROUND NO. 4. IN THIS GROUND OF APPEAL GRIEVANC E OF REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 21495771/-. THE AO WHILE MAKING THE ADDITION HAS MADE FOLLOWING OBSERV ATIONS:- THE AUDITOR VIDE SAID ANNEXURE HAS STATED THAT RS. 2,14,95,771/- MAY BE TREATED AS INCOME ON ACCOUNT OF PAYMENT TO D AV CMC BY DEBITING TO INCOME & EXPENDITURE A/C RS. 65,00,000/ - & RS. 7,00,000/-. DONATION RECEIVED ON ACCOUNT OF WEAKER SECTION RS. 21,23,500/- AND OTHER DONATION SHOWN AS ADVANCE DON ATION IN THE BALANCE SHEET OF RS. 11,16,400/- AND RS. 13,29,000/ - AND OTHER SMALL AMOUNT WERE WRONGLY DEBITED TO INCOME & EXPEN DITURE A/C OR NON-REFUNDABLE LIABILITIES WITHOUT DETAILS. THIS AMOUNT OF RS. 2,14,95,771/- IS BEING TREATED AS NON-APPLICATION O F MONEY FOR CHARITABLE PURPOSES. 18. BEFORE LD. CIT(A) THE ASSESSEE HAS SUBMITTED T HAT THE AO DID NOT AFFORD ANY OPPORTUNITY TO EXPLAIN THE NATURE OF THE SE AMOUNTS, BEFORE TREATING THESE DEBIT AMOUNTS AND REFUNDABLE LIABILI TIES AS INCOME OF THE ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 18 ASSESSEE. THE ASSESSEE HAS FILED DETAILS IN ANNEXUR E 5 WHICH WAS PLACED IN THE PAPER BOOK. THE LD. CIT(A) HAS GONE T HROUGH THE EXPLANATION OF THE ASSESSEE CONTAINED IN ANNEXURE 5 TO THE PAPER BOOK. ACCORDING TO THE LD. CIT(A) EACH OF ENTRIES REFERRE D T IN THE SPECIAL AUDIT REPORT HAS BEEN DULY EXPLAINED BY THE ASSESSEE AND THEREFORE HE DELETED THE ADDITION. 19. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HA VE GONE THROUGH THE ASST. ORDER AS WELL THE ORDER OF THE LD. CIT(A) . FROM THE PERUSAL OF FINDING OF AO IT IS NOT DISCERNABLE WHAT TYPE OF EX PLANATION ASSESSEE FAILED TO OFFER. ACCORDING TO THE LD. CIT(A) ASSESS EE HAS SUBMITTED ITS EXPLANATION IN ANNEXURE 5 APPENDED TO THE PAPER BOO K FILED BEFORE THE FIRST APPELLATE AUTHORITY. THESE DETAILS EXPLAINED THE NATURE OF ENTRIES AS WELL AS THE AMOUNTS. IT IS THE APPEAL OF REVENUE. I T SHOULD HAVE FILED THE PAPER BOOK CONTAINING THE OBJECTION OF THE AUDITOR AS WELL AS THE EXPLANATION OF ASSESSEE. THE REVENUE WANTS THAT TRI BUNAL SHOULD REVERSE THE FINDING OF THE LD. CIT(A) BUT IN OUR OP INION IT FAILED TO BRING ANY MATERIAL ON RECORD WHICH CAN PERSUADE US TO REV ERSE THE FINDING OF THE LD. CIT(A). THE LD. FIRST APPELLATE AUTHORITY I S ON THE HIGHER PEDESTRIAL IN THE HIERARCHY OF TAX ADMINISTRATION . ON THE BASIS OF EXPLANATION GIVEN BY THE ASSESSEE HE WAS SATISFIED THAT NO ADDITION DESERVES TO BE MADE THEN SUCH A VIEW COULD HE DISPE LLED AT OUR END IF IT ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 19 IS DEMONSTRATED ON THE RECORD THAT SUCH VIEW IS NOT POSSIBLE OR CONTRARY TO THE FACTS AND CIRCUMSTANCES. FROM THE BRIEF FIND ING OF THE AO WE ARE NOT CONVINCED HOW ADDITION CAN BE MADE IN RESPECT O F THIS AMOUNT. THEREFORE WE DO NOT SEE ANY REASON TO INTERFERE IN THE FINDING OF THE LD. CIT(A). GROUND NO. 4 IS REJECTED. 20. GROUND NO. 5 :- GROUND NO. 5 IS INTERCONNECTED WITH GROUND NO. 1 IN THE CASE OF ASSESSEE. WE TAKE BOTH THESE GROUNDS TOGETHER. THE GRIEVANCE OF THE REVENUE IN ITS IS GROUND IS LD. CI T(A) HAS ERRED IN DELETING THE ADDITION OF RS. 54010430/- WHEREAS THE GRIEVANCE OF ASSESSEE IN ITS GROUND IS THAT LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 22633700/-. 21. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE H AS A PUBLICATION DIVISION WHERE IT USED TO PUBLISH SCHOOL BOOKS, NOT E BOOKS ETC. THE BOOKS AND MAGAZINES PUBLISHED BY THE ASSESSEE ARE M EANT FOR SALES IN ITS SCHOOLS. THEY ARE NOT BE SOLD IN THE MARKET. IN OTHER WORDS THE ITEMS PUBLISHED IN ITS PUBLICATION DIVISION ARE MEANT FOR THE CONSUMPTION OF THE STUDENTS STUDYING IN THE INSTITUTIONS MANAGED BY TH E ASSESSEE. ACCORDING TO THE AO THE SPECIAL AUDITOR HAD NOTICED A DEBIT BALANCE OF RS. 76644130/- RECOVERABLE BY PUBLICATION DIVISION ON 31 ST MARCH, 20003 FROM DIFFERENT INSTITUTIONS, ON ACCOUNT OF BOOKS SU PPLIED. ACCORDING TO THE ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 20 AO IT IS AN INCOME UTILIZED FOR NON CHARGEABLE PURP OSE HENCE DESERVES TO BE ADDED. ACCORDINGLY HE MADE AN ADDITION OF RS. 76644130/-. 22. BEFORE LD. CIT(A) IT WAS CONTENDED THAT PUBLICA TION DIVISION DISPATCHED THE BOOKS FROM THE MONTH OF DECEMBER TO 31 ST MARCH OF FINANCIAL YEAR FOR THE NEXT SESSION AND AT TIMES EX TENDS TO APRIL ALSO. THESE BOOKS REMAIN UNSOLD ON 31 ST MARCH OF THE FINANCIAL YEAR. THESE BOOKS ARE SENT TO THE REGIONAL DIRECTOR AND SCHOOLS ON CONSIGNMENT BASIS BUT ON SALE OF BOOKS THE PAYMENTS ARE REMITTE D TO THE PUBLICATION DIVISION AND ARE DULY ACCOUNTED FOR IN THE ACCOUNTS BOOKS OF PUBLICATION DIVISION. ACCORDING TO THE ASSESSEE THE DIFFERENCE IS MAINLY DUE TO SALE OF MAGAZINES ETC. WHICH WERE ACCOUNTED AT THE TIME OF MAKING PAYMENTS BY SOME SCHOOLS TO THE REGIONAL DIRECTOR. THE SPECI AL AUDITOR HAS ASKED FOR THE DETAILS OF THE SCHOOLS TO WHOM THE BO OKS WERE SUPPLIED BUT THE PAYMENT WAS RECEIVED DURING THE CURRENT YEAR. T HE ASSESSEE HAS SUBMITTED THAT AS PER DETAILS THERE WERE ONLY FEW S CHOOLS FROM WHICH ALL THE PAYMENTS AGAINST THE SALE OF BOOKS WERE REMITTE D TO PUBLICATION DIVISION IN THE NEXT FINANCIAL YEAR. IT WAS ALSO CO NTENDED BY THE ASSESSEE THAT THERE IS NOT A SINGLE INSTANCE OF ANY RECEIPT NOT ACCOUNTED FOR IN THE PUBLICATION DIVISION. THE ASSESSEE HAS SUBMITTED TH E RECONCILIATION STATEMENT. ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 21 23. THE LD. CIT (A) HAS GONE THROUGH THE CONTENTION S RAISED BY THE ASSESSEE AND WAS SATISFIED WITH RECONCILIATION OF R S. 54010435/-. HE DELETED THE ABOVE TO THIS EXTENT. AS FAR AS THE REM AINING AMOUNT IS CONCERNED LD. CIT(A) IS OF THE OPINION THAT ASSESSE E FAILED TO GIVE RECONCILIATION / CONFIRMATION ABOUT THIS AMOUNT AND HE CONFIRMED THE ADDITION. 24. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HA VE GONE THROUGH THE RECORD CAREFULLY. THE BOOKS AND MAGAZINES PUBLI SHED BY THE PUBLICATION DIVISION WERE FOR THE CONSUMPTION OF AS SESEES OWN INSTITUTIONS AND NOT FOR SALE TO GENERAL PUBLIC. IT IS NOT EARNING PROFIT FROM THIS ACTIVITY. EVEN IF SOME INCIDENTAL PROFIT AS AC CRUED TO THE ASSESSEE IN THIS DIVISION THEN ALL THESE ACTIVITIES ARE MEANT F OR FURTHERING THE CAUSE OF EDUCATION. WE FAIL TO UNDERSTAND HOW THIS ITEM SHOU LD NOT BE CONSTRUED AS INCOME APPLIED FOR CHARITABLE PURPOSE OR FOR TH E OBJECT OF IMPARTING EDUCATION. THE DEPARTMENT HAS NOT PLACED ANYTHING O N THE RECORD WHICH CAN PERSUADE US TO DISPUTE THE FINDING OF FACT RECO RDED BY THE LD. CIT(A) TO THE EXTENT OF RECONCILIATION OF RS. 5,40,10,435/ - IS CONCERNED. AS FAR AS THE ADDITION CONFIRMED BY THE LD. CIT (A) AND I MPUGNED BY THE ASSESSEE IN ITS APPEAL IS CONCERNED WE REMIT THIS M ATTER TO THE FILE OF AO TO LOOK INTO, WITH AN ANGLE, HOW IT COULD NOT BE CO NSTRUED AS UTILIZATION FOR THE PURPOSE OF EDUCATION. IT IS NOT THE CASE OF ASS ESSEE OR OF THE AO THAT ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 22 IT IS GENERATING PROFIT FROM THE ACTIVITY OF PUBLIC ATION. LD. AO SHALL DECIDE THE ASPECT WHETHER IT AMOUNTS TO THE APPLICATION OF INCOME FOR THE PURPOSE OF EDUCATION OR NOT. THE GROUND OF APPEAL R AISED BY REVENUE IS THUS REJECTED AND THE GROUND OF APPEAL RAISED BY TH E ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 25. GROUND NO. 6 :- IN THIS GROUND GRIEVANCE OF THE REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 36 26573/- AND RS. 1754828/-. THE AO WHILE MAKING THIS ADDITION HAS MA DE FOLLOWING OBSERVATION IN PARA 19 OF THE ASSTT. ORDER :- THE AUDITOR HAS PROVIDED VIDE ANNEXURE-9 RECONCILI ATION OF BANK A/C . AS PER THE RECONCILIATION PROVIDED UP TO THE 30 TH AUGUST, 2006, THAT THE BALANCE OF UNFORESEEN DEBIT REMAINED RS. 3 6,26,573/- AND DIFFERENCE IN RECONCILIATION RS. 17,54,828/-, THE S AME IS ADDED TO THE INCOME OF THE ASSESSEE. THE UNFORESEEN DEBIT IN DICATE THAT THE WITHDRAWALS ARE MADE FROM THE BANK A/C WHICH WERE N OT PROPERLY ACCOUNTED FOR INSPITE OF ALL OPPORTUNITIES THE SAID AMOUNT REMAINED UNEXPLAINED . IT WAS ALSO NOTICED THAT THE DEPOSIT S OF THE ASSESSEE ALSO WERE NOT RESPONDED AND CONFIRMED IN THE BANK S TATEMENT. THESE AMOUNTS UNRESPONDED ARE AS UNDER :- PUBLIC SCHOOLS CELLS AS ON 31.3.2006 RS. 13,84,94 4/- ACCOUNT SECTION PART-A RS. 3,14,86,844/- ACCOUNT SECTION PART-B RS. 10,56,86,355/- THE MANAGEMENT HAS NOT OFFERED ANY EXPLANATION FOR THESE DIFFERENCES AND DIFFERENCE IN THE BANK A/C LEADS TO THE DOUBT OF SIPHONING OFF THE MONEY OF THE TRUST. IT IS ALSO PO INTED OUT THAT THE SPL. AUDITOR HAD CONSIDERED THE STATUS OF BANK RECO NCILIATION AS ON 30.08.2006 IN RESPECT TO ENTRY RELATED TO 31.3.2003 . ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 23 26. BEFORE LD. CIT(A) IT WAS CONTENDED BY THE ASSES SEE THAT OBSERVATION OF THE AO THAT ASSESSEE FAILED TO SUBMI T ANY EXPLANATION ON THIS ISSUE ARE FACTUALLY INCORRECT. THE ASSESSEE HA S SUBMITTED RECONCILIATION IN RESPECT OF THE BANK ACCOUNT PERTA INING TO THE CURRENT ACCOUNT. ACCORDING TO THE ASSESSEE THERE WAS NO DIF FERENCE AS IN THESE STATEMENTS PERTAINING TO THE CURRENT ACCOUNT. THE A LLEGED UNRECONCILED AMOUNT OF RS. 3626573/- AND RS. 1754828/- PERTAINS TO OLD ENTRIES AND NO ADDITION IS CALLED FOR IN THE YEAR UNDER CONSIDE RATION. THE ASSESSEE HAS ALSO PRODUCED RECONCILIATION STATEMENT IN RESPE CT OF BANK DEBIT FOR RS. 881471.19. THE LD. CIT(A) HAS EXAMINED THE LIST ATTACHED AS ANNEXURE 6 TO THE PAPER BOOK AND ARRIVED AT A CONCL USION THAT THE ALLEGED UNRECONCILED AMOUNT OF RS. 3626573/- AND RS . 1754828/- PERTAINS TO EARLIER YEARS. LD. CIT(A) ALSO OBSERVED THAT ADDITION RELATING TO THESE ENTRIES IS PENDING BEFORE ITAT. HENCE IT I S NOT SUSTAINABLE IN THE PRESENT ASSTT. YEAR. 27. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON TH E FINDING OF THE LD. CIT(A) WHEREAS LD. DR RELIED UPON THE ORDER OF AO. THE ISSUES IN EARLIER YEAR HAVE BEEN SET ASIDE BY THE ITAT AND TH E AO DID NOT MAKE ANY ADDITION IN THE EARLIER YEAR. HE HAS DETERMINED THE INCOME OF THE ASSESSEE IN ASSTT. YEARS 1999-2000 UPTO 2001-02 AT NIL. FROM THE ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 24 FINDING OF THE AO IT IS NOT DISCERNABLE WHETHER THE SE UN-RECONCILED DEBIT ENTRIES RELATE TO THIS ASSTT. YEAR OR THEY ARE PERT AINING TO OTHER YEAR. AT THE TIME OF HEARING NO DETAILS WERE POINTED OUT TO US WHICH CAN DEMONSTRATE THAT THESE AMOUNTS RELATABLE TO THE PRE SENT ASSTT. YEAR. THEREFORE WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE AND GROUND NO. 6 IS REJECTED. 28. GROUND NO. 7 :- IN THIS GROUND THE GRIEVANCE O F REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 21 57954/-. 29. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS BEEN RUNNING A SCHOOL NAMELY KABIRMATH SEEWAN SCHOOL IN A RENTED PREMISES. IT HAS BEEN PAYING RENT OF RS. 8000/- PER MONTH WHICH WAS TO BE INCREASED 10% AFTER EVERY THREE YEARS. THE SCHOOL HAD PAID A SUM OF RS. 2151974/- TO MR. KAPUR CHAND PRASAD OWNER OF LAND F OR CONSTRUCTING NEW CLASS ROOMS WHICH WERE REQUIRED BY THE ASSESSEE . THE ADVANCE WAS TO BE ADJUSTED AGAINST THE LEASE RENT. THE AO T REATED SUCH ADVANCE AS NON APPLICATION OF FUNDS FOR CHARGEABLE PURPOSES . THE ADVANCE WAS GIVEN FOR RAISING CONSTRUCTION OF NEW CLASS ROOMS A ND IT WAS TO BE ADJUSTED AGAINST LEASE RENT REQUIRED TO BE PAID BY THE ASSESSEE. IT INDICATE THAT AMOUNTS WERE SPENT FOR FULFILLING THE OBJECT OF EDUCATION. LD. CIT(A) HAS CONSIDERED THIS ASPECT WHILE DELETING TH E ADDITION AND WE DO ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 25 NOT SEE ANY REASON TO INTERFERE IN THIS FINDING. TH IS GROUND OF APPEAL IS REJECTED. 30. GROUND NO. 8 IN THIS GROUND OF APPEAL THE GRIE VANCE OF REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 49097954/-. THE AO WHILE MAKING THIS ADDITION HAS MADE FOLLOWING OB SERVATION IN PARA 21 OF THE ORDER :- THE SPL. AUDITOR HAS POINTED OUT THAT SUM SCHOOLS/ INSTITUTIONS HAD DIRECTLY CREDITED BUILDING FUND DEVELOPMENT OR OTHE R FUND TO BALANCE SHEET WITHOUT ROUTING THROUGH INCOME & EXPE NDITURE A/C WHEREAS ALL OTHER SCHOOLS HAD ROUTED THROUGH INCOME & EXPENDITURE A/C WHICH IS APPEARING IN THE INCOME. T HUS THE AMOUNT OF RS. 4,90,47,002/- CAN NOT BE TREATED AS U SED FOR CHARITABLE PURPOSES. 31. ON DUE CONSIDERATION OF THIS FINDING OF AO IN T HE LIGHT OF OBSERVATION MADE BY. LD. CIT(A) WE FAIL TO APPRECIA TE HOW ONE TIME PAYMENT RECEIPT FROM THE STUDENTS FOR SPECIFIC PURP OSE I.E BUILDING FUND TO BE UTILISED FOR THE CONSTRUCTION OF BUILDING AND BEING UTILISED FOR THE SAME PURPOSE FOR THAT SCHOOL ONLY, CAN BE CONSIDERE D AS NON UTILISATION FOR CHARITABLE PURPOSE, SIMPLY BECAUSE THIS CAPITAL RECEIPT HAS BEEN TRANSFERRED TO THE BALANCE SHEET WITHOUT ROUTING TH ROUGH INCOME AND EXPENDITURE ACCOUNT. THE AMOUNT WAS RECEIVED FROM T HE STUDENTS TOWARDS BUILDING FUNDS. IT WAS USED FOR THE PURPOSE OF THE CONSTRUCTION OF BUILDING. NOTHING WAS POINTED IN ASSESSMENT ORDER O R AT THE TIME OF ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 26 ARGUMENT TO DISPUTE THE FACT THAT IT WAS USED FOR C ONSTRUCTION OF BUILDING. HENCE IT INDICATE THAT IT WAS USED FRO CHARITABLE PURPOSE AND NOT FOR ANY OTHER PURPOSE. THE AO HAS NOT HIGHLIGHTED ANY CIRCU MSTANCE IN THE FINDING EXTRACTED SUPRA WHICH CAN INDICATE ITS NON UTILISATION FOR CHARITABLE PURPOSE. THIS GROUND OF APPEAL IS REJECT ED. 32. GROUND NO. 9 GROUND NO. 9 TAKEN BY THE REVENUE IN ASSTT. YEAR 2003-04 IS INTERCONNECTED WITH THE GROUND NO. 2 RAI SED BY THE ASSESSEE IN ASSTT. YEAR 2003-04 AND THE SOLITARY GROUND OF A PPEAL RAISED BY THE ASSESSEE IN ASSTT. YEAR 2004-05. IN THESE GROUNDS O F APPEAL THE ISSUE RELATES TO ALLOWABILITY / DISALLOWABILITY OF GRATUI TY AMOUNTS DEBITED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. 33. THE BRIEF FACTS OF THE CASE ARE THAT IN ASSTT. YEAR 2003-04 AO HAS FOUND THAT ASSESSEE HAS DEBITED A SUM OF RS. 818516 27/- . INCOME AND EXPENDITURE ACCOUNT ON ACCOUNT OF GRATUITY FUND, LE AVE ENCASHMENT AND EDLI. SIMILARLY IN ASSTT. YEAR 2004-05 A SIMILAR AM OUNT HAS BEEN DEBITED. THE SPECIAL AUDITOR HAS REPORTED THAT SOME OF SCHOOLS HAVE DEBITED A SUM OF RS. 1,15,16,286/- RELATING TO EARL IER YEARS AND THE SAID AMOUNT WAS ALREADY FORMING PART OF A LIABILITY IN D AV CMC BALANCE SHEET. THE AO ON THE BASIS OF SPECIAL AUDITOR REPOR T MADE AN ADDITION OF RS. 9,33,67,913/- IN ASSTT. YEAR 2003-04 BY TREATIN G THIS AMOUNT AS NON ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 27 APPLICATION OF FUND DURING THE YEAR FOR CHARITABLE PURPOSE. IN ASSTT YEAR 2004-05 HE MADE AN ADDITION OF RS. 8,18,51,627/-. 34. ON APPEAL LD. CIT(A) HAS DELETED THE ADDITION O F RS. 1,15,16,286/- ON THE GROUND THAT THIS MUCH OF AMOUNT WAS ACTUALLY PAID BY THE ASSESSEE TO EMPLOYEES. IN RESPECT TO OTHER AMOUNT I.E. RS. 8,18,51,627/- HE CONFIRMED THE ADDITION ON THE GROU ND THAT IT WAS ONLY A PROVISION MADE BY THE ASSESSEE WHICH IS NOT ALLOWAB LE IN VIEW OF SECTION 36 (1)(IV), 40 A(7) AND SECTION 43B OF THE ACT. 35. THE ASSESSEE IS IMPUGNING THE CONFIRMATION OF A DDITION AT RS. 8,18,51,627/- IN ASSTT. YEAR 2003-04, 2004-05 AND REVENUE IS IMPUGNING THE DELETION OF RS. 1,15,16,286/- IN ASST. YEAR 200 3-04. 36. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HA VE GONE THROUGH THE RECORD CAREFULLY. ACCORDING TO THE ASSESSEE GRA TUITY IS A KNOWN ASCERTAINED LIABILITY FOR EACH YEAR IN TERMS OF PRO VISION OF PAYMENT OF GRATUITY ACT. THIS IS A STATUTORY AND KNOWN LIABILI TY WHICH HAS TO BE DISCHARGED BY THE TRUST ON THE RETIREMENT OR RESIGN ATION OF THE EMPLOYEE. EACH YEARS LIABILITY IS ASCERTAINED AT THE CUMULAT IVE LEVEL AND PUT INTO A RESERVE GRATUITY FUND AND THE AMOUNT SO COLLECTED F ROM THE INSTITUTION TO MEET THIS OBLIGATION IS AT ONCE INVESTED IN GOVT. S ECURITIES AND APPROVED BONDS. THIS WAS ALSO PLEADED BY THE ASSESSEE THAT T HIS AMOUNT WAS NOT ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 28 KEPT IN CASH EXCEPT TO THE AMOUNT DISBURSABLE IMMED IATELY DURING THE YEAR. THE EMPHASIS OF THE ASSESSEE IS THAT IT IS NO T A MERE BOOK ENTRY AND THUS IT SHOULD NOT BE CONSTRUED AS A PROVISION ACCOUNT OF UN ASCERTAINED AND UNKNOWN LIABILITY BUT IT SHOULD BE CONSTRUED RESERVE FOR A KNOWN STATUTORY LIABILITY. ACCORDING TO SECTION 3 6 (1)(VI) ANY SUM PAID BY AN ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTIO N TOWARDS AN APPROVED GRATUITY FUND CREATED BY HIM FOR EXCLUSIVE BENEFIT OF HIS EMPLOYEES UNDER THE APPROVED TRUST IS ALLOWABLE DED UCTION. THE PROVISION MADE ON A SCIENTIFIC AND ACTUARIAL BASIS FOR PAYMENT OF FUTURE GRATUITY HAS BEEN ALLOWABLE UNDER THE GENERAL PRINC IPLES. SECTION 40A (7) HAS BEEN INSERTED BY FINANCE ACT 1975 WHICH PUT AN EMBARGO ON ALLOWANCE OF A DEDUCTION IN RESPECT OF A MERE PROVI SION MADE BY AN EMPLOYER IN THEIR BOOKS OF ACCOUNTS FOR PAYMENT TO THEIR EMPLOYEES ON THEIR RETIREMENT OR ON TERMINATION. BUT IF ANY PROV ISION IS MADE BY THE ASSESSEE FOR THE PURPOSE OF PAYMENT OF A SUM BY WAY OF ANY CONTRIBUTION TOWARDS AN APPROVED GRATUITY FUND FOR THE PURPOSE OF PAYMENT OF ANY GRATUITY , THEN THAT HAS BECOME PAYA BLE DURING THE PREVIOUS YEAR AND SUCH PROVISION WILL CONTINUE TO B E ELIGIBLE FOR DEDUCTION. THIS SECTION 40A(7) SUPERSEDES THE GEN ERAL PRINCIPLE AS REGARD THE LIABILITY FOR GRATUITY. THE GRATUITY IN THE CASE OF ASSESSEE CAN BE ALLOWED EITHER ON ACTUAL PAYMENT AS PER 43B OF T HE ACT OR IF THE ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 29 ALLEGED PROVISION WAS CONTRIBUTED TOWARDS AN APPROV ED GRATUITY FUND. THE ALLEGED PROVISION CANNOT BE ALLOWED TO THE ASSE SSEE IN VIEW OF RESTRICTION PUT BY SECTION 40A(7) OF THE ACT BECAUS E THERE IS NO APPROVED GRATUITY FUND MANNED BY THE ASSESSEE. THE LD. CIT(A ) HAS ALREADY TAKEN COGNIGANCE OF THE AMOUNT ACTUALLY PAID BY THE ASSESSEE WHILE DEDUCTION OF RS. 1,15,16,286/-. THIS PAYMENT IS AN ALLOWABLE EXPENSE WITHIN THE MEANING OF SECTION 43B WHICH HAS BEEN M ADE APPLICABLE WEF 1.4.1984. THUS TAKING INTO CONSIDERATION SECTION 40 A (7) ASSESSEE CANNOT CLAIM THE DEDUCTION OF AMOUNT WHICH HAS BEEN MADE AS A PROVISION FOR PAYMENT OF GRATUITY FUND ETC. TAKING INTO CONSIDERATION THE DETAILED FINDING OF LD. CITS ON THIS ISSUE . THE GROUND OF APPEAL RAISED BY THE ASSESSEE IN BOTH THE ASSTT. YEARS ARE REJECT ED. SIMILARLY LD. CIT(A) HAS ALLOWED THE DEDUCTION OF ACTUAL PAYMENT OF GRATUITY WHICH IS BEING IMPUGNED BY THE REVENUE. IN VIEW OF THE ABOVE DISCUSSION THIS GROUND OF REVENUES PART IS ALSO REJECTED. 37. GROUND NO. 10 IN THIS GROUND GRIEVANCE OF THE REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 86 ,87,238/-. THE BRIEF FACTS OF THE CASE ARE THAT AO ON THE STRENGTH OF OB SERVATION MADE BY THE SPECIAL AUDITOR HAS OBSERVED THAT ASSESSEE FAILED T O RECONCILE THE AMOUNT OF RS. 86,87,328/- AVAILABLE IN THE LOAN AC COUNT. ACCORDING TO ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 30 THE AO ASSESSEE HAS GIVEN LOAN TO ITS INSTITUTION. IT COULD NOT RECONCILE THE LOAN SHOWN IN THE BOOKS VIS A VIS THE CONFIRMAT ION GIVEN BY SUCH INSTITUTION. THE AO WAS OF THE OPINION THAT MANAGEM ENT IS TAKING ADHOC DECISION IN RESPECT OF SUCH AMOUNT AND THEREFORE IT HAS COMMITTED A DEFAULT WITHIN THE MEANING OF SECTION 13 OF THE INC OME TAX ACT. 38. ON APPEAL BEFORE LD. CIT (A) IT WAS CONTENDED BY THE ASSESSEE THAT THESE ENTRIES ARE VERY OLD ENTRIES. THEY WERE OUTSTANDING IN THE BOOKS OF DAV CMC. KEEPING IN VIEW THE LONG BACK OUT STANDING ENTRIES THE MANAGEMENT HAS RECTIFIED THESE ENTRIES AFTER TR EATING THESE AMOUNT AS GRANT TO ITS OWN INSTITUTION. THE SANCTION WAS G RANTED BY THE GENERAL SECRETARY. THE LIST OF INSTITUTION WITH ADDRESS AND COPIES OF THE GENERAL SECRETARYS PERMISSION WERE SUBMITTED TO THE AO. IT WAS ALSO CONTENDED THAT THERE IS NO VIOLATION OF PROVISION OF SECTION 13 OF THE ACT. THE LD. CIT(A) AFTER TAKING INTO CONSIDERATION THE EXPLANAT ION OF ASSESSEE DELETED THE ADDITION. 39. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HA VE GONE THROUGH THE RECORD CAREFULLY. THE AO HAD JUST MADE A REFERE NCE OF THE OBSERVATION OF LD. SPECIAL AUDITOR. HE HAS NOWHERE POINTED OUT AS TO HOW ASSESSEE HAS VIOLATED SECTION 13 IN RESPECT OF TREATING THE OUTSTANDING LOAN AS GRANT TO ITS OWN INSTITUTION. S ECTION 13 (1)(C) OF THE ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 31 ACT PROVIDE THAT WHERE A PART OF THE INCOME OF A CH ARITABLE OR RELIGIOUS INSTITUTION IS USED OR APPLIED DIRECTLY OR INDIRECT LY FOR THE BENEFIT OF SETTLER, FOUNDER AND CERTAIN OTHER SPECIFIED PERSONS THEN SU CH PART WOULD NOT BE CONSIDERED AS APPLICATION OF MONEY FOR CHARITABLE P URPOSE. THE ASSESSEE HAS GRANTED LOAN TO ITS OWN INSTITUTION. W HEN THE INSTITUTION FAILED TO REPAY THE LOAN THE ASSESSEE HAS TREATED IT AS A GRANT TO THOSE INSTITUTIONS. IT IS NOT THE CASE OF AO THAT ANY BEN EFIT WAS EXTENDED EITHER TO THE SETTLER FOUNDER OR ANY OTHER SPECIFIED PERSO NS. THE LIST OF INSTITUTION ALONG WITH COPY OF THE SECRETARYS APP ROVAL FOR TREATING SUCH LOAN AS A GRANT WAS SUPPLIED TO THE AO. LD. CIT(A) HAS DELETED THE ADDITION AFTER CONSIDERING ALL THESE ASPECTS. WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) ON THI S ISSUE. THIS GROUND OF APPEAL IS REJECTED. 40. GROUND NO. 11 :- IN THIS GROUND OF APPEAL GRIE VANCE OF THE REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS. 79,89,834/-. THE BRIEF FACTS OF THE CASE ARE THAT D URING THE COURSE OF ASSTT. PROCEEDING ON THE BASIS OF SPECIAL AUDITORS REPORT LD. AO HAS OBSERVED THAT ASSESSEE FAILED TO RECONCILE THE CAPI TAL FUND ACCOUNT. HE FOUND A DEBIT ENTRY OF RS. 79,89,834/-. IN THE CAPI TAL FUND ACCOUNT AND ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 32 ACCORDINGLY HE MADE THE ADDITION OF THIS DEBIT ENTR Y BECAUSE ASSESSEE FAILED TO EXPLAIN THE ENTRY. 41. BEFORE LD. CIT (A) IT WAS CONTENDED BY THE ASSE SSEE THAT IT HAS BEEN MAINTAINING CAPITAL FUND ACCOUNT OF ALL THE IN STITUTIONS AND SCHOOLS AS PER THE DETAILS CAPITAL FUND OF PUBLIC SCHOOL I N THE ACCOUNTS BOOKS WAS EXISTING AT RS. 57,67,187.37 AS ON 31 ST MARCH, 1991. IT ROSE UPTO 210,38,900.50 AS ON 31 ST MARCH 1994 AND CONTINUED AT THIS VERY FIGURE UPTO 31 ST MARCH 2000. IN F.Y 2000-01 AN AMOUNT OF RS. 59,9 0,497.92 WAS DEBITED TO THE PUBLIC SCHOOL CELL. AFTER REDUCI NG THIS AMOUNT THERE WAS A CREDIT BALANCE OF RS. 1,50,48,602.68 AS ON 31 ST MARCH, 2001. AN INTEREST OF RS. 27,39,251.95 WAS CREDITED TO THIS A CCOUNT AND THUS THE AMOUNT WAS INCREASED TO RS. 1,77,87,654.63 IN THE C APITAL FUND OF PUBLIC SCHOOL. THIS ASPECT WAS CONSIDERED BY THE SPECIAL A UDITOR DURING THE COURSE OF SPECIAL AUDIT FOR ASSTT. YEAR 1999-2000 T O 2001-02. THE AO HAS MADE THE ADDITION OF THE TOTAL AMOUNT IN ASSTT. YEAR 1999-2000. THIS ISSUE WAS SET ASIDE BY THE ITAT. THE AO HAS MADE TH E ADDITION OF RS. 79,89,834/- IN THIS YEAR ALSO. 42. ON AN ANALYSIS OF ALL THESE FACTS LD. CIT(A) HA S DELETED THE ADDITION ON THE GROUND THAT THIS ADDITION HAS BEEN MADE IN EARLIER YEAR ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 33 AND LAW DOES NOT PERMIT THE ADDITION TO BE MADE TWI CE IN RESPECT OF ALL THE SAME AMOUNT. 43. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AN D GONE THROUGH THE RECORD. FROM PERUSAL OF ASSTT. ORDER PASSED IN ASSTT. YEAR 1999- 2000 IN PURSUANCE OF THE ITATS DIRECTION WE DO NO T FIND ANY SUCH ADDITION MADE BY THE AO. HE HAS MADE AN ADDITION O F RS. 9866835/- WHICH IS IN RESPECT OF BUILDING FUND AND DEVELOPMEN T FUND TAKEN DIRECTLY TO THE BALANCE SHEET. THE SECOND ADDITION IS MADE O F RS. 2433600/-. THIS AMOUNT IS IN RESPECT OF CAPITAL FUND. AGAIN IT WAS TAKEN DIRECTLY TO THE BALANCE SHEET THEREFORE THIS HAS BEEN ADDED BY THE AO. ON PERUSAL OF THE ASSTT. ORDER DATED 17.12.2008 IN ASSTT. YEAR 1999-2000 WHERE AO HAS NOT MADE ADDITION ON ACCOUNT OF DEBIT ENTRIES O UT OF CAPITAL FUND. WE ARE OF THE OPINION THAT THIS ISSUE IS REQUIRED TO B E EXAMINED AT THE LEVEL OF AO. THE CAPITAL FUND ACCOUNT PERTAINS TO EARLIER YEARS. ADDITIONS WERE MADE IN ASSTT. YEAR 1999-2000 THOSE HAVE BEEN SET A SIDE BY THE ITAT AND IN THE SECOND ROUND NO ADDITION HAS BEEN MAD E. LD. AO SHALL CONSIDER ALL THESE ASPECTS AND THEN READJUDCIATE TH IS ISSUE. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 44. GROUND NO. 12 THE GRIEVANCE OF ASSESSEE IN THI S GROUND IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 18 ,95,363/-. THE ADDITION ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 34 WAS MADE BY THE AO ON THE GROUND THAT ASSESSEE HAS WRITTEN OFF THIS MUCH OF AMOUNT AND FAILED TO SUBMIT DETAILS OF PERS ONS FROM WHOM AMOUNT WAS RECOVERABLE. HE WAS OF THE OPINION THAT SANCTION TO WRITTEN OFF THESE AMOUNTS GIVEN BY THE GENERAL SECRETARY WA S ALSO NOT SUBMITTED. THE LD. CIT(A) HAS DELETED THE ADDITION ON THE GROUND THAT THESE WERE OLD BALANCES AND OUTSTANDING IN THE ACCO UNTS BOOKS OF THE SOCIETY. THE RECIPIENTS WERE INSTITUTIONS TO WHOM L OANS WERE ADVANCED BY THE SOCIETY. THE APPROVAL OF GENERAL SECRETARY W AS GRANTED BEFORE WRITING OFF THESE OUTSTANDING AMOUNT. LD. CIT(A) DI D NOT SEE ANY REASONS HOW THESE AMOUNTS CAN BE CONSIDERED OF NON APPLICAT ION OF FUNDS FOR THE CHARITABLE PURPOSE. THE AMOUNTS WERE GIVEN TO THE A SSESSEES OWN INSTITUTION. ON DUE CONSIDERATION OF THE FINDING O F LD. CIT(A) WE DO NOT SEE ANY REASON TO INTERFERE IN HIS ORDER. 45. GROUND NO. 13 IN THIS GROUND OF APPEAL GRIEVANC E OF THE REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 51,19,518/-. THE SPECIAL AUDITOR HAS FOUND RECOVERABLE OUTSTANDING O F RS. 2,31,79,868/- AND RS. 1,94,82,783/- FROM ASSESSEES OWN INSTITUTI ON IN THE CURRENT AMOUNT AND LOAN ACCOUNT . ACCORDING TO THE AO AN IN TEREST @ 12% OUGHT TO HAVE BEEN SHOWN ON THESE OUTSTANDING AMOUN TS. THE AO IS OF ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 35 THE OPINION THAT ASSESSEE OUGHT TO HAVE CHARGED INT EREST AND SHOWN IT IN THE INCOME. 46. DISSATISFIED WITH THE ACTION OF AO ASSESSEE CAR RIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). IT CONTENDED THAT THE RE IS NO MISUSE OF TRUST MONEY. THE AO WAS NOT JUSTIFIED IN CONSIDERIN G THE EXPECTED MARKET RATE OF RETURN/INTEREST @ 12% P.A. AS TAXABL E INCOME ON THE NET AMOUNT OF CURRENT ACCOUNT AND LOAN ACCOUNT OUTSTAND ING AGAINST ASSESSEES OWN INSTITUTION. THE SOCIETY CANNOT BE D EEMED TO HAVE INCOME FROM INTEREST WHICH HAD NOT BEEN RECEIVED OR WAS NOT RECEIVABLE. LD. CIT(A) DELETED THE ADDITION BY OBSERVING THAT A SSESSEE CANNOT BE EXPECTED TO EARN INTEREST INCOME FROM ITS OWN INSTI TUTION. 47. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HA VE GONE THROUGH THE RECORD CAREFULLY. THE ADDITION WAS MADE BY THE AO ON THE GROUND THAT ASSESSEE SHOULD HAVE SHOWN INTEREST INCOME ON THE OUTSTANDING LOANS AS WELL AS AMOUNTS AVAILABLE IN THE CURRENT A CCOUNT GIVEN TO ITS OWN INSTITUTION. IN OUR OPINION IF WE ACCEPT THE LO GIC OF AO THEN IT WILL AMOUNT TO EARN INTEREST INCOME FROM SELF. THE INSTI TUTIONS ARE DEPENDANT UPON THE HEAD OFFICE. IT USED TO EXTEND GRANT FOR R UNNING THOSE INSTITUTIONS. THEREFORE THE LOGIC APPLIED BY THE AO IS NOT APPLICABLE IN THE PRESENT CASE. LD. CIT(A) HAS RIGHTLY CONSIDERED THI S ASPECT AND DELETED ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 36 THE ADDITION. WE DO NOT SEE ANY REASON TO INTERFERE IN HIS ORDER. THIS GROUND OF APPEAL IS REJECTED. 48. GROUND NO. 14 :- IN THIS GROUND OF APPEAL THE G RIEVANCE OF REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS. 16,33,417/- THE ASSESSEE HAD AN INTER UNIT BALANCES. AO HAS OBS ERVED THAT ASSESSEE COULD HAVE SHOWN INTEREST INCOME ON THE OU TSTANDING INTER UNIT BALANCES. THE SPECIAL AUDITOR HAS POINTED OUT A LON G LIST OF INTER UNIT DIFFERENCES TOTALLING TO RS. 13611809/-. THE AO HAS OBSERVED THAT INTEREST ON THIS INTER UNIT DIFFERENCE OF AMOUNTS W AS TO BE SHOWN AS INCOME. HE THEREFORE WORKED OUT AN INTEREST INCOME OF RS. 1633417/-. 49. LD. CIT(A) HAS DELETED THE ADDITION ON THE GROU ND THAT HE HAS GONE THROUGH THE OBSERVATION OF SPECIAL AUDITOR AS WELL AS LIST OF ALL SUCH DIFFERENCES. THERE IS NO ADVERSE IMPACT ON THE INCO ME OF SOCIETY EXCEPT POINTING OUT THAT NO INTEREST FACTOR WAS CONSIDERED . LD. CIT(A) HAS DELETED THE ADDITION. 50. ON DUE CONSIDERED OF THE FACTS AND CIRCUMSTANCE S WE ARE OF THE OPINION THAT LD. CIT(A) HAS RIGHTLY POINTED OUT THA T THERE IS NO ADVERSE IMPACT ON THE INCOME OF SOCIETY BECAUSE IF IN ONE U NIT THERE IS A DEBIT THEN IN OTHER UNIT THERE WILL BE A CREDIT. THESE AR E THE CERTAIN DIFFERENCES IN THE BALANCE OF THE AMOUNT. ON TAKING INTO CONSID ERATION ALL THESE ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 37 BALANCES AT THE LEVEL OF HEAD OFFICE THEY WILL SET OFF EACH OTHER AND THERE WOULD BE NO IMPACT ON THE INCOME OF THE ASSESSEE. T HIS ASPECT HAS BEEN CONSIDERED BY THE AO ALSO AND HE ONLY MADE THE ADDITION IN RESPECT OF INTEREST OUGHT TO HAVE SHOWN IN THE CONC ERNED UNIT ON THE CREDIT BALANCE WITH THE OTHER UNIT. THE LD. CIT(A) HAS DELETED THAT INTER UNIT ARE NOT SUPPOSE TO CHARGE INTEREST FROM EACH OTHER. THE LD. CIT(A) HAS RIGHTLY APPRECIATED THIS ASPECT. ASSESSEE HAS A LREADY DEMONSTRATED THAT IT IS NOT SUPPOSED TO CHARGE INTEREST FROM SEL F. AO FAILED TO APPRECIATE THE TRUE NATURE OF THESE TRANSACTIONS KE EPING IN VIEW THE BACKGROUND OF ASSESSEE, HENCE THIS GROUND OF APPE AL IS REJECTED. 51. GROUND 15 :- IN THIS GROUND OF APPEAL THE GRIE VANCE OF REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING ADDITION O F RS. 5208555/-. THE BRIEF FACTS OF THE CASE ARE DAV CMC (HQ.) HAS SHOWN GRANT TO DAYANAND FOUNDATION FUND OF RS. 8078555/- DAYANAND FOUNDATIO N FUND HAS SHOWN GRANT FROM THE HQ. AT RS. 2870000/-. THE DIFF ERENCE OF RS. 5208555/- HAS BEEN TREATED AS INCOME OF THE ASSESSE E ON THE GROUND THAT IT WAS NOT UTILISED FOR CHARITABLE PURPOSE. 52. LD. CIT(A) HAS DELETED THIS ADDITION ON THE GRO UND THAT SPECIAL AUDITOR HIMSELF HAS REPORTED THAT THERE IS NO ADVE RSE IMPACT ON INCOME AND EXPENDITURE IN THE BALANCE SHEET EXCEPT A DIFFE RENCE OF RS.20,000/-. ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 38 THE LD. CIT(A) FURTHER OBSERVED THAT DAYANAND FOUND ATION FUND IS ONE OF THE UNIT OF SOCIETY. THE FUNDS TRANSFERRED TO ON E UNIT CANNOT BE SAID TO BE UTILISED FOR NON CHARITABLE PURPOSE. SIMILARLY O NCE THE HEAD OFFICE HAS GRANTED AN AMOUNT AS A GRANT OF TO ONE ITS UNIT IT HAS TO BE TREATED AS UTILISATION OF THE FUND FOR CHARITABLE PURPOSE. IN ANY CASE IT CANNOT BE TREATED AS UNUTILISED AMOUNT WHICH GIVE RISE TO AN INCOME. 53. WE HAVE DULY CONSIDERED THE CONTENTIONS OF LD. REPRESENTATIVE AND PERUSED THE RECORD CAREFULLY. THE SPECIAL AUDIT OR HIMSELF HAS REPORTED THAT THERE IS NO ADVERSE IMPACT ON INCOME AND EXPENDITURE ACCOUNT OF THE ASSESSEE. THE HEAD OFFICE HAS GRANTE D A GRANT TO ONE OF ITS UNIT WHICH HAS DULY BEEN RECOGNISED. THUS IT CA NNOT BE TREATED AS UN UTILISED AMOUNT AND CANNOT GIVE RISE TO AN INCOME. THE GRANT WAS DULLY APPROVED BY THE APPROPRIATE AUTHORITY. THEREFORE LD . CIT(A) HAS RIGHTLY DELETED THE ADDITION. 54. GROUND NO. 16 IN THIS GROUND OF APPEAL THE GRIE VANCE OF REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 345,000/- AND RS. 50,000/-. THE AO HAS MADE FOLLOWING OBSERVATION S WHILE MAKING THESE ADDITIONS:- 17(I) A FURTHER COMMENT OF THE AUDITOR REGARDING EX PENSES OF RS. 50,000/- ALSO CONFIRM THAT THE MONEY OF PUBLICATION IS USED FOR NON-CHARITABLE PURPOSES. ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 39 A) MR. K.K. BUDHIRAJA RS. 50,000/- NARRATION OF EXPLANATION ATTACHED WITH THE VOUCHER READ AS UNDER:- A SUM OF RS. 50000/- MAY BE PAID IN THE NAME OF MR . K.K. BUDHIRAJA, TOWARDS MISCELLANEOUS EXPENSES TO BE INC URRED. THIS MAY BE TREATED AS A BILL. THE ABOVE AMOUNT MAY BE R ELEASED AGAINST THE AMOUNT RECEIVED FROM PUBLICATION DEPART MENT FOR THE ABOVE, A SUM OF RS. 100000/- HAS BEEN RECEIVED FROM THE PUBLICATION DEPARTMENT. SIGNED BY : GENERAL SECRETARY, DIRECTOR (ADMIN), ADMINISTRATIV E OFFICER THE ABOVE OBSERVATION GOES TO PROVE THAT THERE IS A SERIOUS LAPSE REGARDING ACCOUNTING OF PUBLICATION DIVISION AND ITS UTILISATION OF FUNDS FOR THE ACHIEVEMENT OF THE OBJ ECTIVES OF THE TRUST. THIS BEING DONE BY THE SPECIFIED PERSONS, TH E SAME IS TAXABLE U/S 13(3) OF THE INCOME TAX ACT, 1961. 23. ESTABLISHMENT EXPENSES RS. 3,45,000/- THE SPECIAL AUDITOR HAS POINTED OUT THAT NO DETAILS WERE PROVIDED TO FOR THE SAID AMOUNT OF EXPENSE. IT WAS STATED TH AT THIS AMOUNT WAS WRONGLY DEBITED AND HAS BEEN RECTIFIED IN FINAN CIAL YEAR 2005- 06. HENCE, ADMITTED BY THE ASSESSEE FOR TAXATION DU RING THIS YEAR. (ADDITION: RS. 3,45,000/-) 55. BEFORE LD. CIT(A) IT WAS CONTENDED BY THE ASSES SEE THAT IT NEVER AGREED FOR TAXATION OF ESTABLISHMENT EXPENSES. IT WAS CONTENDED BY THE ASSESSEE THAT THESE EXPENSES ARE DULY SUPPORTED BY VOUCHERS AND OTHER CORRESPONDENCE. THERE IS NO JUSTIFICATION TO MAKE T HE IMPUGNED ADDITION. LD. CIT(A) HAS DELETED THE ADDITION ON THE GROUND T HAT ASSESSEE HAS ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 40 FILED SUPPORTING VOUCHERS, BILLS AND CORRESPONDENCE IN SUPPORT OF THESE EXPENSES. 56. LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE O RDER OF LD. CIT(A) WHEREAS LD. DR RELIED UPON THE ORDER OF AO. ON DUE CONSIDERATION THE FINDING OF AO WE ARE OF THE OPINION THAT HE HAS MAD E THE ADDITION ONLY ON THE OBSERVATION OF SPECIAL AUDITOR AND DID NOT C ONSIDER THE CONTENTION OF ASSESSEE THAT EXPENSES ARE DULY SUPPORTED BY THE BILLS AND VOUCHERS. LD. CIT(A) HAS ACCEPTED THIS CONTENTION OF ASSESSEE . IT IS NOT BROUGHT TO OUR NOTICE, HOW THESE EXPENSES WERE NOT INCURRED FO R ADVANCEMENTS OF THE OBJECTIVES OF THE SOCIETY. THEREFORE WE DO NOT SEE ANY REASON TO INTERFERE IN THE FINDING OF LD. CIT(A). 57. GROUND NO. 17 IN THIS GROUND OF APPEAL GRIEVANC E OF REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1044300/-. THIS ADDITION WAS MADE BY THE AO ON THE STRENGTH OF OBSE RVATION MADE BY THE SPECIAL AUDITOR. ACCORDING TO THE OBSERVATIONS OF THE AUDITOR CERTAIN FDRS ARE ACCOUNTED FOR AT TWO PLACES ONE BY DAV CMC AND OTHERS BY RESPECTIVE INSTITUTIONS. DUE TO SOME COMMUNICATION GAP, INTER UNIT ENTRIES ARE PASSED BY THE OTHER INSTITUTIONS BUT IN CASE OF FDRS OF DAYANAND FOUNDATION FUND AT RS. 1044300/-, THEY ARE ACCOUNTED FOR AT ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 41 TWO PLACES WITHOUT INTER UNIT ENTRY. THE AO HAS MAD E AN ADDITION OF RS. 1044300/-. 58. DISSATISFIED WITH THE ACTION OF AO ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). IT WAS CONTENDED THAT ACCOUNTS SECTION OF DAYANAND FOUNDATION FUND ARE MAINTAINED BY THE DAV CMC (MAIN SECTION). ALL THE FDRS WERE PROCURED BY THE CONCERN ED PERSON OF MAIN ACCOUNTS BRANCH OF DAV CMC THAT IS WHY DUE TO OVERS IGHT FDRS WERE RECORDED IN THE BOOKS OF MAIN ACCOUNTS AND ALSO IN THE BRANCH ACCOUNT AND THE SAME ENTRIES OF FDRS WAS ALSO IN THE BOOKS OF DAYANAND FOUNDATION FUND. ACCORDING TO THE ASSESSEE THIS WAS DONE DUE TO OVERSIGHT. ON REALISING THE FACTS THE ENTRIES OF TH E FDRS HAVE BEEN REVERSED IN THE BOOKS OF MAIN AMOUNT DURING THE YEA R 2003-04. THIS ASPECT WAS EXPLAINED TO THE SPECIAL AUDITOR AS PER LETTER DATED 27 TH JULY, 2006. THE LD. CIT(A) HAS DELETED THE ADDITION ON TH E GROUND THAT SOCIETY HAS NOT CLAIMED ANY APPLICATION OF INCOME ON THIS A CCOUNT. THE AMOUNT HAS NOT BEEN CLAIMED AS APPLIED FOR CHARITABLE PURP OSE. THE MISTAKES IN THE ENTRIES HAVE BEEN RECTIFIED. ON DUE CONSIDERATI ON OF THE FACTS AND CIRCUMSTANCES WE ARE OF THE OPINION THAT THERE WAS A MISTAKE OCCURRED IN THE ACCOUNTS DUE TO HUMAN ERROR. IT WAS BROUGHT TO THE NOTICE OF ASSESSEE WHICH WAS RECTIFIED. THE ASSESSEE HAS NOT CLAIMED UTILISATION ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 42 OF THIS AMOUNT TWICE FOR CHARITABLE PURPOSE. THUS A O IS NOT JUSTIFIED TO SAY THAT EXEMPTION WILL NOT BE AVAILABLE ON THIS AM OUNT. LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION AND WE DO NOT SEE ANY REASON TO INTERFERE IN HIS ORDER. 59. GROUND NO. 18 IN THIS GROUND OF APPEAL THE GR IEVANCE OF THE REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS. 1.76 LACS. THE AO HAS MADE FOLLOWING OBSERVATION WHILE M AKING THIS ADDITION :- 24. THE SPECIAL AUDITOR HAS POINTED OUT THAT THE DA V CMC (HQ.) HAD CLAIMED AN AMOUNT OF RS. 1,73,586/- UNDER THE HEAD DAVCMC BHAWAN WAS WRITTEN OFF DURING THE YEAR WHICH REMAI NED UNEXPLAINED DURING THE ASSESSMENT PROCEEDINGS AS WE LL. IN THE ABSENCE OF ANY DETAIL AND EVIDENCE, THIS AMOUNT IS ASSESSED TO TAX AS MISUSED FUND COVERED U/S 13 OF THE INCOME TAX AC T, 1961. ALL THE ABOVEMENTIONED ADDITIONS & INFERENCES HAD T O BE DRAWN IN THE ABSENCE OF COMPLETE INFORMATION WITH EVIDENCES TO BE FILED BY THE ASSESSEE FOR PROPER VERIFICATION AFTER SPECIAL AUDIT IN THE CASE. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE W AS SPECIFICALLY COMMUNICATED VIDE MY QUESTIONNAIRE DATED 26.9.06 TH AT SINCE THE MATTER IS BARRED BY THE LIMITATION WITHIN 60 DAYS O F 142(2A) REPORT, ANY EXPLANATION/EVIDENCE NOT FILED SHALL BE TREATED AS DEEMED VIOLATION AND UNEXPLAINED AND UNVERIFIED UNDER THE INCOME TAX ACT, 1961. IN SUCH CIRCUMSTANCES, PROVISIONS OF THE TRUSTS AND EXEMPTION U/S. 11 AND 12 OF THE INCOME TAX ACT, 196 1 SHALL BE DENIED WITHOUT REPEATED OPPORTUNITIES. NO ADJOURNME NT SHALL BE GIVEN WITHOUT SUFFICIENTLY REASONABLE CAUSE, AS ALL THESE DISCREPANCIES HAVE ALREADY BEEN MADE KNOWN TO YOUR ORGANISATION WELL IN ADVANCE. ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 43 60. DISSATISFIED WITH THIS ADDITION ASSESSEE CARRIE D THE MATTER IN APPEAL BEFORE THE LD. CIT(A) IT WAS CONTENDED THAT A SUM OF RS. 1085772/- WERE APPEARING IN THE NAME OF DAV BHAWAN IN THE BOOKS OF ACCOUNTS OF DAV CMC WHEREAS THERE WAS SEPARATE ACCO UNT OF DAV BHAWAN SHOWING TO RS. 112186/- WHICH WERE ADJUSTED AGAINST THE INCOME OF THE SAME HEAD . ACCORDING TO THE ASSESSEE THERE WAS NO REQUIREMENT OF RESOLUTION OF DAV CMC FOR ADJUSTMENT OF ONE HEAD ACCOUNT LYING IN TWO HEADS SEPARATELY IN THE BOOKS OF SOCIETY. AFTER THE ADJUSTMENT THE EXCESS AMOUNT OF RS. 173586/- WAS TA KEN INTO ACCOUNT AS INCOME OF THE SOCIETY. ALL THESE FACTS WERE EXPL AINED TO THE SPECIAL AUDITOR AND THE AO. IT FAILED TO UNDERSTAND HOW THE AO HAS OBSERVED THAT THIS AMOUNT HAS BEEN MISUSED AND IT IS COVERED U/S 13 OF THE INCOME TAX ACT. LD. CIT(A) HAS GONE INTO THIS CONTE NTION OF THE ASSESSEE AND OBSERVED THAT THIS IS AN ACCOUNTING AD JUSTMENT WHICH IS CORRECTLY DONE BY THE SOCIETY. THERE IS NO NEED FOR RESOLUTION TO BE PASSED BY THE SOCIETY FOR SUCH ROUTINE ACCOUNTING A DJUSTMENT. 61. ON DUE CONSIDERATION OF THE FINDING OF LD. CIT( A) VIS A VIS THE FINDING OF THE AO EXTRACTED SUPRA WE ARE OF THE OPI NION THAT AO HAS NOT MADE OUT HOW SECTION 13 IS APPLICABLE ON THIS AMOUN T. SECTION 13 (1) (C) ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 44 IS APPLICABLE IF IT IS ESTABLISHED ON THE RECORD TH AT THE FUNDS HAVE BEEN USED OR APPLIED DIRECTLY INDIRECTLY FOR THE BENEFIT OF SETTLER, FOUNDER AND CERTAIN OTHER SPECIFIED PERSONS. NO SUCH THING HAS BEEN MENTIONED BY THE AO. ASSESSEE HAS ALREADY ACCOUNTED THE EXCESS O VER THE EXPENDITURE AS ITS INCOME WHICH WILL BE TAKEN INTO CONSIDERATION WHILE COMPUTING THE APPLICATION OF INCOME FOR THE PURPOSE OF CHARITABLE PURPOSE. THERE IS NO NEED TO MAKE A SEPARATE ADDITI ON AND BRAND IT AS NON APPLICATION FOR CHARITABLE PURPOSE U/S 13 OF T HE ACT. THIS GROUND OF APPEAL IS REJECTED. 62. NOW WE TAKE APPEAL OF REVENUE I.E ITA NO. 91/D/ 09 IN ASSTT. YEAR 2004-05. 63. GROUND NO. 1 & 2 HAVE ALREADY BEEN TAKEN BY US WHILE DISPOSING OFF GROUND NO. 1 AND 2 OF REVENUES APPEAL IN ASSTT . YEAR 2003-04. 64. GROUND NO. 3 :- IN THIS GROUND OF APPEAL THE GR IEVANCE OF REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS. 512219860/-. ON THE STRENGTH OF SPECIAL AUDITORS OBSERVATION AO HAS MADE THIS ADDITION AND HIS FIND IN PARA 2 ON PAGE 2 OF THE AS STT. ORDER READ AS UNDER :- 2. DIFFERENCE IN OPENING CAPITAL :- ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 45 IT IS SEEN FROM THE AUDITED BALANCE SHEET THAT THE OPENING CAPITAL IS RS. 3939862477 WHEREAS THE CLOSING CAPITAL AS ON 31 .3.2003 WAS RS. 3427642617 WHICH CAN BE SEEN FROM THE REVISED A UDITED BALANCE SHEET FILED ALONG WITH THE SPECIAL AUDIT RE PORT OF ASSESSMENT YEAR 2003-04. THE ASSESSEE HAS NOT FILED ANY RECONCILIATION / EXPLANATION OF SUCH DIFFERENCE, AS IN THE PAST ASSESSMENTS. IT IS OBSERVED THAT CERTAIN FUNDS OR INCOME IS DIRE CTLY CREDITED TO CAPITAL FUND ACCOUNT. THUS THE AMOUNT OF RS. 512219 860/- IS ADDED TO INCOME OF THE ASSESSEE, NOT INCLUDIBLE IN UTILIZATION OF FUNDS FOR CHARITABLE PURPOSE. 65. BEFORE LD. CIT(A) IT WAS CONTENDED BY THE ASSES SEE THAT AO FAILED TO APPRECIATE THE TRUE AFFAIRS. HE HAS TAKEN THE OP ENING BALANCE AS ON 1 ST APRIL, 2002 TO RS. 3427642617/- INSTEAD OF CLOSING BALANCE AS ON 31 ST MARCH, 2003 WHICH WAS RS. 394,32,53,063/-. THE ASS ESSEE HAS FILED COPY OF THE SCHEDULE BEFORE THE LD. CIT(A) AND SUBM ITTED THAT CAPITAL DIFFERENCE OF THESE BALANCES IS RS. 33,90,586/- AND NOT RS. 512219816/- AS CONSTRUED BY THE AO. IT WAS ALSO SUBMITTED THAT IN FACT THERE IS NO DIFFERENCE IN THE OPENING AND CLOSING BALANCE. THE DIFFERENCE IN THE CAPITAL FUND HAS ARISEN DUE TO CLOSURE OF 8 INSTITU TIONS DURING THE YEAR AND STARTING OF 6 NEW INSTITUTIONS. THE DETAILS OF ALL THE INSTITUTIONS WERE ALSO SUBMITTED BEFORE THE AO AS WELL AS BEFORE THE LD. CIT(A). 66. LD. CIT(A) HAS GONE THROUGH THIS CONTENTION OF THE ASSESSEE AND HELD THAT ACTUAL DIFFERENCE IS OF RS. 3390586/-. HE FURTHER OBSERVED THAT ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 46 THIS DIFFERENCE IS DUE TO CLOSING OF 8 SCHOOLS AND OPENING OF 6 NEW SCHOOLS. LD. CIT(A) DID NOT SEE ANY REASON TO SUSTA IN THE ADDITION OF RS. 512219860/- MADE BY THE AO. 67. LD. DR RELIED UPON THE ORDER OF AO WHEREAS LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF LD. CIT(A). ON DU E CONSIDERATION OF THE FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT IT IS THE APPEAL AT THE INSTANCE OF REVENUE. THE REVENUE DID NOT FILE ANY P APER BOOK DISPUTING THE FINDING OF FACT RECORDED BY THE LD. CIT(A). ON PERUSAL OF THE LD. CIT(A)S ORDER WE DO NOT SEE ANY REASON, HOW THE AC TUAL DIFFERENCE WORKED OUT BY THE ASSESSEE AT RS. 33,90,586/- HAS BEEN EXPLAINED. THE LD. CIT (A) HAS JUST MAKE A MENTION THAT IT IS BECA USE OF CLOSURE OF 8 SCHOOLS AND OPENING OF 6 NEW SCHOOLS. THERE IS NO F INDING DEMONSTRATING THE RECONCILIATION OF THIS DIFFERENCE IN THE ACCOUNTS. THEREFORE WE SET ASIDE THIS ISSUE TO THE FILE OF AO TO VERIFY THE DIFFERENCE OF RS. 3390586/- ONLY. THE AO SHALL ALSO EXAMINE WH ETHER THIS AMOUNT IS TOBE CONSIDERED TOWARDS APPLICATION OF INCOME FO R CHARITABLE PURPOSE. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 68. GROUND NO. 4 : IN THIS GROUND OF APPEAL THE GR IEVANCE OF REVENUE IS THAT LD. CIT(A) HAS DELETED ADDITION OF RS. 1,50,00,000/-. THE FACTS LEADING TO THIS ADDITION ARE THAT AO HAS OBSERVED THAT THE ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 47 DEBTORS FOR F.Y. 2002-03 APPEARING IN PUBLICATION D IVISION WERE NOT CORRESPONDINGLY APPEARING IN SCHOOLS AS CREDITOR A ND IN ABSENCE OF PROPER VERIFICATION OF DEBTOR ADDITION WAS MADE IN ASTT. YEAR 2003-04. HE ALSO OBSERVED THAT PART OF THE BALANCE IS CONFIRMED BY THE SCHOOLS REPRESENTATIVE WHO ARE SELLING THE BOOKS TO THE STU DENTS BUT NOT FULLY RECONCILED. ON THE ESTIMATE BASIS. AO HAS MADE ADDI TION OF RS. 150 LACS IN THIS ASSTT. YEAR ALSO. 70. ON APPEAL LD. CIT(A) DELETED THE ADDITION. 71. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HA VE GONE THROUGH THE RECORD CAREFULLY. WE HAVE DEALT WITH THIS ISSUE IN ASSTT. YEAR 2003-04 WHILE DEALING WITH THE GROUND OF APPEAL NO. 1 RAISE D BY THE ASSESSEE AND GROUND NO. 5 RAISED BY THE REVENUE. IN ASSTT. Y EAR 2003-04 LD. AO HAS MADE AN ADDITION OF RS. 76644130/-, AND BEING A MOUNTS RECOVERABLE BY PUBLICATION DIVISION FROM DIFFERENT SCHOOLS ON S UPPLY OF BOOKS AND MAGAZINES. THE LD. CIT(A) HAS DELETED THE ADDITION OF RS. 5,40,10,430/- IN ASSTT. YEAR 2003-04 ON THE GROUND THAT ASSESSEE HAS RECONCILED THE OUTSTANDING AMOUNTS IN THE BOOKS OF INSTITUTIONS / SCHOOLS AS WELL AS IN THE PUBLICATION DIVISION. IN THIS YEAR AO HAS MADE THE ADDITION SIMPLY ON THE GROUND THAT IN THE BOOKS OF ASSESSEE, THOSE WHO WERE SHOWN AS DEBTOR WERE NOT SHOWING THE ASSESSEE AS IN THEIR AC COUNTS. HE MADE ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 48 AN ESTIMATED ADDITION OF RS. 1.50 CRORE ON THE GROU ND THAT THIS MUCH BENEFIT MUST HAVE BEEN GIVEN TO THOSE INSTITUTIONS. IN 2003-04 WE HAVE HELD THAT PUBLISHED MATERIAL WAS NOT MEANT FOR SALE . IT WAS FOR THE CONSUMPTION FOR ASESSEES OWN INSTITUTION. SUPPLY O F BOOKS AND STUDY MATERIAL IS A STEP IN FURTHERANCE OF OBJECT OF EDUC ATION. THE ASSESSEE USED TO GIVE GRANTS TO ITS INSTITUTIONS AND SCHOOLS . THUS SUPPLY OF MATERIAL CAN BE AT THE MOST ONE OF SUCH GRANT ETC. FOR ACHIEVEMENT OF THE OBJECT OF EDUCATION. IT CANNOT BE SAID THAT THE SUP PLY OF STUDY MATERIAL WAS TO BE CONSTRUED AS A BENEFIT TO ANY SPECIFIED P ERSON OR TO THE SETTLER / FOUNDER OF THE TRUST. THE AO HAS NOT GIVEN ANY SP ECIFIC REASON FOR ESTIMATING THIS INCOME IN THE ASTT. ORDER. LD. CIT( A) HAS RIGHTLY DELETED THE ADDITION. WE DO NOT SEE ANY REASON TO INTERFER E IN HIS ORDER. 72. GROUND NO. 5 IN THIS GROUND OF APPEAL GRIEVANC E OF THE REVENUE IS LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF R S. 21 CRORE. THE FINDING OF THE AO WHILE MAKING THIS ADDITION REPRESENT AS U NDER :- 1.BANK ACCOUNT :- THE ASSESSEE FILED BANK RECONCILIATION STATEMENT IN THREE PARTS. (A)PUBLIC SCHOOL CELL : INDICATE THE DIFFERENCE RE LATES TO EARLIER YEAR WHICH HAS BEEN EXPLAINED AND RELATES TO A.Y. 2 003-04. (B)ACCOUNT SECTION GROUP A :- THE ASSESSEE FILED DE TAILED RECONCILIATION & COPY OF BANK STATEMENTS OF DIFFERE NT ACCOUNT. ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 49 (C)ACCOUNT SECTION GROUP B :- THE ASSESSEE HAS FILED ONLY A SOCALLED BANK RECONCILIATION STATEMENT, WITHOUT ANY DETAILS/CLARIFICATION OF DIFFERENCES IN THE BANK ST ATEMENT. IT WAS NOTICED THAT THERE WAS UNEXPLAINED DEBIT IN BANK AC COUNT IN ASSESSMENT YEAR 2003-04. FROM THE RECONCILIATION ST ATEMENT, IT IS NOTICED THAT THERE IS AN AMOUNT OF RS. 11.73 CRORES UNDER THE HEAD OUR DEPOSIT NOT SHOWN BY THE BANK. THIS AMOUNT WA S NEVER RECONCILED EVEN AFTER THE SPECIAL AUDIT IN THE CASE FOR THE A.Y. 2003-04. IT APPEARS THE ASSESSEE IS NOT WILLING TO COME CLEAN & CLEAR ON ACCOUNT OF RECONCILIATION OF BANK ACCOUNT GROUP B. THE EXPLANATIONS AS FILED IN RESPECT OF BANK ACCOUNT OF GROUP A DOES NOT COMMENSURATE WITH GROUP B FILED DURING THE CURR ENT YEAR RECONCILIATION. THEREFORE, IN ABSENCE OF PROPER DET AILS/CLARIFICATIONS, I ESTIMATE THE AMOUNT OF RS. 2 CRORE WHICH DOES NOT QUALIFY FOR APPROPRIATION IN THIS YEAR AND IS, THEREFORE, DISAL LOWED. 73. LD. CIT(A) HAS DELETED THE ADDITION ON THE GROU NDS THAT DEPOSITS MADE AT THE END OF THE F.Y. MIGHT HAVE NOT BEEN CRE DITED BY THE BANK IN THE SAME F.Y. AND THEREFORE SUCH DEPOSITS REMAIN UN CREDITED IN THE BOOKS OF BANK. ASSESSEE HAS SHOWN SUCH DEPOSITS IN HIS BANK RECONCILIATION AS THE DEPOSITS NOT SHOWN BY THE BAN K. THE LD. CIT(A) FURTHER OBSERVED THAT ASSESSEE HAS MADE GROSS RECEI PT OF RS. 402 CRORE AND THE AMOUNT WHICH DID NOT TALLY FIGURE TO FIGURE IS ONLY 0.44% OF THE TOTAL GROSS RECEIPT AND THAT TOO OF 450 INSTITUTION S. 74. ON DUE CONSIDERATION OF THE ABOVE FACTS AND CIR CUMSTANCES WE DO NOT FIND ANY ERROR IN THE ORDER OF LD. CIT(A). THE EXPLANATION OF THE ASSESSEE IS THAT IT HAS MADE DEPOSIT OF RS. 402 CRO RES IN THE BANK ON DIFFERENT DATES. THERE IS SOME RECONCILIATION DISCR EPANCY IN RESPECT OF RS. 11.703 CRORE WHICH ACCORDING TO THE ASSESSEE IT HAS SHOWN AS ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 50 DEPOSITS IN THE BANKS WHEREAS BANK HAS NOT CONSIDER ED IT UPTO TO THE END OF F.Y. WHICH MIGHT HAVE BEEN TAKEN IN THE NEXT F.Y. BUT IT CANNOT BE SAID THAT THIS AMOUNT HAS BEEN TAKEN OUT FROM TH E BOOKS OF ASSESSEE OR APPLIED FOR NON CHARITABLE PURPOSES. IN VIEW OF THE ABOVE THIS GROUND OF APPEAL IS REJECTED. 75. GROUND NO. 6 IN THIS GROUND OF APPEAL REVENUE IS IMPUGNING THE ADDITION OF RS. 5119518/- THE AO HAS MADE THIS ADDI TION ON AN ESTIMATE BASIS. HE HAS OBSERVE THAT THERE WAS DISCREPANCY IN THE DEBIT BALANCE OF THE INSTITUTIONS IN ASSTT. YEAR 2003-04. ACCORDING TO THE AO ASSESSEE SHOULD HAVE CHARGED INTEREST FROM THE INSTITUTION O N THE ADVANCES GIVEN TO THEM. HE ESTIMATED AN INTEREST INCOME OF RS. 511 9518/- IN ASSTT. YEAR 2003-04 AND MADE THE ADDITION. THE LD. CIT(A) HAS D ELETED THAT ADDITION AND WE HAVE REJECTED THE GROUND OF APPEAL BEARING N O. 13 RAISED BY THE REVENUE IN THAT ASSTT. YEAR. IN THE PRESENT YEAR ON THE BASIS OF PAST HISTORY AO PRESUMED INTEREST INCOME OF RS. 5719518/ - ALSO. KEEPING IN VIEW OUR FINDING ON GROUND NO. 13 IN ASSTT. YEAR 20 03-04 WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL AND IT IS REJECT ED. 76. GROUND NO. 7 : IN THIS GROUND OF APPEAL GRIEVAN CE OF REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10 LACS. THE BRIEF FACTS FOR MAKING THIS ADDITION ARE THAT AO HA S NOTICED THAT CERTAIN ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 51 INSTITUTIONS WERE CLOSED DURING THE YEAR 2002-03. H E ESTIMATED THE VALUE OF ASSETS IN THOSE INSTITUTIONS AT RS. 10 LACS AND OBSERVED THAT THIS MANAGEMENT FAILED TO ACCOUNT FOR THOSE ASSETS. HENC E HE MADE AN ADDITION OF RS. 10 LACS U/S 13 OF THE ACT. 77. LD. CIT(A) HAS DELETED THE ADDITION ON THE GROU ND THAT ONE OF THE INSTITUTIONS CLOSED WAS DAV ACADEMY KANINA. THIS I NSTITUTION WAS HAVING ASSETS LIKE BUS, CAR, COMPUTER ETC. ALL THES E ASSETS WERE DULY ACCOUNTED AND RETAINED BY THIS INSTITUTION. A NEW I NSTITUTION IN THE NAME OF DAV COLLEGE OF ENGINEERING AND TECHNOLOGY KANINA HAD COMMENCED FROM THIS PREMISES. ALL THESE ASSETS HAVE BEEN TAK EN AWAY BY THIS COLLEGE. ON ACCOUNT OF THESE RECONCILIATION LD. CIT (A) HAS DELETED THE ADDITION. ON DUE CONSIDERATION OF THE ORDER OF LD. CIT(A) AS WELL AS AO WE ARE OF THE OPINION THAT AO DID NOT MAKE ANY INVE STIGATION OF FACTS OR CONSIDERED THE EXPLANATION OF ASSESSEE. HE SIMPLY PROCEEDED ON THE STRENGTH OF SPECIAL AUDITORS REPORT AND DID NOT BO THER TO LOOK INTO OTHER ASPECTS. THE DEPARTMENT IS UNABLE TO POINT OUT ANY CIRCUMSTANCE WHICH CAN PERSUADE US TO TAKE DIFFERENT OPINION THEN THE ONE TAKEN BY THE LD. CIT(A) . THIS GROUND OF APPEAL IS REJECTED. 78. IN THE RESULT WE SUMMARISE THE RESULT AS UNDER :- ITA NO. 51 APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D ITA NOS.51,52, 90,91/DEL/09 ASSTT. YEARS 2003-04 & 2004-05 52 ITA NO. 52 APPEAL OF THE ASSESSEE IS DISMISSED ITA NOS. 90 AND 91 APPEAL OF THE REVENUE ARE PARTLY ALLOWED THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 26.4. 2010. [R.C.SHARMA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER VEENA DATED: COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT