DCIT, Lucknow V. M/s Swami Janki Saran Public School, Lucknow

ITA 535/LKW/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7642 (ITAT-LUCKNOW)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 09-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Opportunity of being heard
• Section: 147; 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B : LUCKNOW BEFORE SHRI S. K. YADAV, JUDICIAL MEMBER AND SHRI B. R. JAIN, ACCOUNTANT MEMBER I.T.A. NO S . 535 & 536 /LKW/1 1 ASSESSMENT YEAR S : 05 - 06 & 07 - 08 DY. C.I.T., VS. M/S SWAMI JANKI SARAN RANGE - I, PUBLIC SCHOOL, LUCKNOW. INDIRA NAGAR, LUCKNOW. (APPELLANT) (RESPONDENT) C.O. NO.06 & 07/LKW/12 (IN I.T.A. NO S . 535 & 536 /LKW/1 1) ASSESSMENT YEAR S : 05 - 06 & 07 - 08 M/S SWAMI JANKI SARAN VS. DY. C.I.T., PUBLIC SCHOOL, RANGE - I, LUCKNOW. LUCKNOW. (OBJECTOR) (RESPONDENT) REVENUE BY : SHRI V. V. SINGH, SR. D. R. ASSESSEE B Y : SHRI SURENDRA KOHLI, ADVOCATE DATE OF HEARING : 1 0/02/2012 DATE OF PRONOUNCEMENT : 24/02/2012 ORDER PER BENCH: THESE APPEALS BY REVENUE AND CROSS OBJECTIONS BY ASSESSEE ARE AGAINST THE ORDERS DATED 22/06/2011 OF LEARNED CIT(A) - II, LUCKNOW RAISING FOLLOWING GROUNDS: 2 I.T.A. NO.535/LKW/2011 (ASSESSMENT YEAR 2005 - 2006) 1. WHETHER ON GIVEN FACTS AND CIRCUMSTANCES OF LEARNED CIT(A) WAS CORRECT I N ALLOWING THE EXEMPTION U/S 10(23C)(IIIAD) OF THE I.T. ACT, 1961, THE BOOKS OF ACCOUNT OF WHICH ARE NOT FOUND RELIABLE BY THE ASSESSING OFFICER ? 2. WHETHER ON GIVEN FACTS AND CIRCUMSTANCES THE LEARNED CIT(A) WAS CORRECT IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND OF ` 9,60,031/ - ? 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY ONE OR MORE OF THE GROUNDS OF APPEAL AS STATED AS AND WHEN NEED OF DOING SO ARISES WITH THE PRIOR PERMISSION OF THE HON'B LE BENCH. C.O.NO.06/LKW/12 1. THAT THE CROSS OBJECTOR RELIES ON THE ORDER PASSED BY THE CIT(A) HOLDING THAT BEING AN 'EDUCATIONAL INSTITUTION' ALSO ADMITTED BY THE A.O. THE CASE FALLS WITHIN THE AMBIT AND DEFINITION OF THE PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE I.T.ACT 1961 ON THE BASIS OF VARIOUS DOCUMENTS AND MATERIAL EVIDENCES BROUGHT ON RECORD, SUPPORTED BY VARIOUS JUDGMENTS / DECISIONS. 2. THAT THE CROSS - OBJECTOR DISPUTES THE FACT THAT THE ACTIVITIES OF THE SCHOOL HAS PROFIT MAKING MOT IVE AS ALLEGED BY THE A.O. AND THE CIT(A) IS PERFECTLY JUSTIFIED IN PASSING A REASONABLE AND CONCRETE ORDER ON THE BASIS OF FINDINGS GIVEN IN THE BODY OF THE APPELLATE ORDER. 3 3. THAT THE A.O. FAILED TO APPRECIATE THAT THE BOOKS OF A/C WERE DULY AUDITED AN D ACCEPTED BY THE A.O. IN SCRUTINY CASES PARTICULARLY FOR THE A.Y. 2006 - 07 AND THE RECENT ONE FOR THE A.Y. 2009 - 10 FINALIZED ON 26 - 12 - 2011 ALLOWING THE BENEFITS U/S 10(23C)(IIIAD). 4. THAT THE PROCEEDING AND COMPLETION OF ASSESSMENT WAS DONE IN A BIASED M ANNER ITSELF PROVE TO THE HILT AND BEYOND THE SHADOW OF DOUBT ON ACCOUNT OF FISHING AND ROVING INQUIRIES WHICH UNCALLED FOR AND NOT RELEVANT. 5. THAT THE CIT(A) WAS PERFECTLY JUSTIFIED IN DELETING THE ADDITION OF ` 9,60,031/ - AS UNEXPLAINED INVESTMENT FOLL OWING THE DECISION OF THE HON'BLE ITAT IN THE CASE OF I.T.O. VS VIRENDRA SINGH MEMORIAL SHIKSHA SAMITI (2009) 18 DTR (LKO) ITAT 502 ON SOLID GROUNDS. 6. THAT THE CROSS - OBJECTOR CRAVES LEAVE TO ADD, ALTER AND DELETE ANY GROUND OR GROUNDS AT THE TIME OF HEAR ING OF THE APPEAL PETITION. I.T.A. NO. 536 /LKW/2011 (ASSESSMENT YEAR 200 7 - 200 8 ) 1. WHETHER ON GIVEN FACTS AND CIRCUMSTANCES OF LEARNED CIT(A) WAS CORRECT IN ALLOWING THE EXEMPTION U/S 10(23C)(IIIAD) OF THE I.T. ACT, 1961, THE BOOKS OF ACCOUNT OF WHICH ARE NOT FOUND RELIABLE BY THE ASSESSING OFFICER ? 2. WHETHER ON GIVEN FACTS AND CIRCUMSTANCES OF LEARNED CIT(A) ERRED IN IGNORING THE FACTS AND FINDINGS OF ASSESSING OFFICER REGARDING PROFIT MAKING ACTIVITIES OF THE SCHOOL MENTIONED IN THE ASSESSMENT ORDE R. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY ONE OR MORE OF THE GROUNDS OF APPEAL AS STATED AS AND WHEN NEED OF DOING SO ARISES WITH THE PRIOR PERMISSION OF THE HON'BLE BENCH. C.O.NO.0 7 /LKW/12 4 1. THAT THE CROSS OBJECTOR RELIES ON THE ORDER PASSED BY THE CIT(A) HOLDING THAT BEING AN 'EDUCATIONAL INSTITUTION' ALSO ADMITTED BY THE A.O. THE CASE FALLS WITHIN THE AMBIT AND DEFINITION OF THE PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE I.T.ACT 1961 ON THE BASIS OF VARIOUS DOCUMENTS AND MATERIAL EVI DENCES BROUGHT ON RECORD, SUPPORTED BY VARIOUS JUDGMENTS / DECISIONS. 2. THAT THE CROSS - OBJECTOR DISPUTES THE FACT THAT THE ACTIVITIES OF THE SCHOOL HAS PROFIT MAKING MOTIVE AS ALLEGED BY THE A.O. AND THE CIT(A) IS PERFECTLY JUSTIFIED IN PASSING A REASONA BLE AND CONCRETE ORDER ON THE BASIS OF FINDINGS GIVEN IN THE BODY OF THE APPELLATE ORDER. 3. 3. THAT THE A.O. FAILED TO APPRECIATE THAT THE BOOKS OF A/C WERE DULY AUDITED AND ACCEPTED BY THE A.O. IN SCRUTINY CASES PARTICULARLY FOR THE A.Y. 2006 - 07 AND TH E RECENT ONE FOR THE A.Y. 2009 - 10 FINALIZED ON 26 - 12 - 2011 ALLOWING THE BENEFITS U/S 10(23C)(IIIAD). 4. THAT THE PROCEEDING AND COMPLETION OF ASSESSMENT WAS DONE IN A BIASED MANNER ITSELF PROVE TO THE HILT AND BEYOND THE SHADOW OF DOUBT ON ACCOUNT OF FISHIN G AND ROVING INQUIRIES WHICH UNCALLED FOR AND NOT RELEVANT. 5. THAT THE CROSS - OBJECTOR CRAVES LEAVE TO ADD, ALTER AND DELETE ANY GROUND OR GROUNDS AT THE TIME OF HEARING OF THE APPEAL PETITION. 2. BRIEFLY, THE FACTS OF THE CASE IN ASSESSMENT YEAR 2007 - 2008 ARE THAT THE ASSESSEE IS A REGISTERED SOCIETY WITH THE REGISTRAR OF SOCIETIES UNDER RENEWAL NUMBER 1515/10 AND IS RUNNING AN EDUCATIONAL INSTITUTE IN THE DISTRICT OF RAEBARELI. THE ASSESSING OFFICER DURING THE COURSE OF ASSESS MENT PROCEEDINGS FINDING VARIOUS DEFECTS IN THE BOOKS OF ACCOUNT AND ASSESSEE HAVING NOT CO - OPERATED IN PROVIDING DETAILS OF FEE RECEIPTS ETC. FOUND THAT THE ASSESSEE HAS SUPPRESSED ITS INCOME, INFLATED EXPENSES AND THE CASH SO GENERATED HAS BEEN 5 INTRODUCE D IN THE BOOKS OF ACCOUNT AS INTEREST FREE LOANS TAKEN FROM THE MEMBERS OF THE MANAGING COMMITTEE. IT ALSO FOUND THAT THE ASSESSEE IS CARRYING ACTIVITIES SUCH AS RUNNING OF COACHING CLASSES WHICH ARE NOT ITS ACTIVITIES FOR EDUCATIONAL PURPOSE. IT ALSO FO UND THAT THE PART OF SCHOOL FUNDS ARE BEING UTILIZED FOR PERSONAL PURPOSE OF THE MEMBERS OF THE SOCIETY . CERTAIN PAYMENTS MADE ARE NOT FOUND RECORDED IN THE BOOKS OF ACCOUNT. INSTANCES THEREOF ALONG WITH SCANNED COPY OF THE VOUCHERS HAVE BEEN MADE INTEGR AL PART OF THE ASSESSMENT ORDER. FOR INSTANCE, A DONATION OF ` 5,000/ - MADE TO JCIT, RAEBARELI ON 22/03/2007 IN CASH IS NOT FOUND ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THE MAJORITY OF EXPENSES CLAIMED UNDER CERTAIN HEADS DO NOT MATCH WITH THE AMOUNT OF E XPENSES WRITTEN IN THE VOUCHERS. AMOUNT OF CAUTION MONEY IS ALSO NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. SIMILARLY, ADVANCE PAYMENT OF OMNI MARUTI (WHITE) HAS NOT BEEN ACCOUNTED IN THE BALANCE SHEET. HE, THEREFORE, RECORDED A FINDING THAT THE SOCIETY DOES NOT EXIST SOLELY FOR EDUCATIONAL PURPOSE BUT IS RUNNING FOR THE PURPOSE OF PROFIT AND THUS DENIED EXEMPTION CLAIMED U/S 10(23C)(IIIAD) OF THE ACT AND ESTIMATED INCOME AT ` 15,00,000/ - . FOR SIMILAR DEFECTS, THE EXEMPTION U/S 10(23C)(IIIAD) FOR ASSESSMENT YEAR 2005 - 2006 HAS ALSO BEEN DENIED AND ASSESSMENT HAS BEEN COMPLETED BY ESTIMATING INCOME AT ` 14,27,537/ - WITH FURTHER ADDITION OF ` 9,60,031/ - BEING UNACCOUNTED INVESTMENT FOR PURCHASE OF LAND U/S 69 OF THE ACT. 6 3. THE LEARNED CIT(A) FOUND THAT THE AGGREGATE ANNUAL RECEIPT FOR THE SCHOOL FOR ASSESSMENT YEAR 2007 - 2008 ARE ` 94,67,820/ - . THE ASSESSING OFFICER HAS BROUGHT NO EVIDENCE ON RECORD TO SHOW THAT THE ACTIVITY OF THE APPELLANT HAS BEEN CARRIED OUT TO EARN PROFIT. THERE IS NO MATERIAL ON RECORD TO PROVE THAT THERE WAS ANY ELEMENT OF PERSONAL PROFIT. THE FINDING OF THE ASSESSING OFFICER ARE BASED ON MERE SUSPICION WHICH ARE WITHOUT ANY BASIS OR EVIDENCE ON RECORD. FUR THERMORE, THE FINDINGS OF THE ASSESSING OFFICER HAVE BEEN MOTIVATED BY THE PRECONCEIVED EXAMINATION OF ACCOUNTS AND EXPENSES IN 24 HEADS AS SUMMARIZED IN PARA 5.1 OF HIS ORDER, MORE FROM THE ANGLE OF HOW AN EDUCATIONAL INSTITUTION SHOULD HAVE BEEN RUN BY T HE ASSESSEE THAN FROM THE ANGLE OF PROVING THE FACTS LEADING TO DENIAL OF APPLICABILITY OF THE PROVISIONS OF SECTION U/S 10(23C)(IIIAD) OF THE ACT TO THE APPELLANT. VIDE PARA 7.3(II) OF HIS ORDER HE ALSO OBSERVED THAT THE ACTIVITIES UNDER VARIOUS HEADS A RE SQUARELY IN THE NATURE OF EDUCATION AND ANY SHORTCOMING OF THE NATURE POINTED OUT BY THE ASSESSING OFFICER WILL NOT TANTAMOUNT TO THE INFERENCE THAT THE PURPOSE OF RUNNING THE SCHOOL IN AFFILIATION WITH CBSE BOARD WAS NOT EDUCATION. HE, THEREFORE, ALLO WED THE EXEMPTION CLAIMED BY THE ASSESSEE AS THE DECISION TAKEN BY THE ASSESSING OFFICER WAS NOT TAKEN AS LEGALLY JUSTIFIED. 4. THERE BEING SIMILARITY IN FACTS FOR ASSESSMENT YEAR 2005 - 2006, HE HELD THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23C)( IIIAD) OF THE ACT FOR ASSESSMENT YEAR 2007 - 200 8 AS WELL AND ALLOWED THE APPEAL. AS A RESULT OF THIS, 7 ACTION TAKEN U/S 147 OF THE ACT AND COMPLETION OF ASSESSMENT U/S 144 OF THE ACT FOR THAT YEAR HAS BEEN TREATED AS INFRUCTUOUS AS EXEMPTION U/S 10(23C)(III AD) OF THE ACT STOOD ALLOWED TO THE ASSESSEE. 5. HAVING HEARD PARTIES AND UPON CAREFUL PERUSAL OF THE ENTIRE MATERIAL ON RECORD, WE FIND THAT THE RUNNING OF EDUCATION BY THE APPELLANT IS NOT DISPUTED BY THE ASSESSING AUTHORITY ALSO. THE CASE OF THE ASSES SING AUTHORITY IS THAT THE RECEIPTS ARE SUPPRESSED, EXPENSES ARE INFLATED, CERTAIN PAYMENTS ARE NOT RECORDED IN THE ACCOUNTS OR IN THE BALANCE SHEET AND ALSO THAT THE EXPENSES CLAIMED UNDER VARIOUS HEADS DO NOT MATCH WITH THE EXPENSES CHARGED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE ASSESSING OFFICER HAS GIVEN INSTANCES OF EACH AND EVERY ISSUE RAISED BY HIM AND SCANNED COPY OF THE VOUCHERS FOR THE PAYMENTS MADE BUT NOT REFLECTED IN THE BALANCE SHEET AND ITS ANNEXURES HAS BEEN MADE INTEGRAL P ART OF THE ASSESSMENT ORDER. HE THUS, REACHED A FINDING THAT THE ASSESSEE DOES NOT EXIST SOLELY FOR EDUCATION PURPOSES BUT THE INSTITUTION IS BEING RUN WITH A PROFIT MOTIVE AND THUS DENIED EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. THE LEARNED CIT(A), HOWE VER, DID NOT DEAL WITH EACH AND EVERY ISSUE SO RAISED BY THE ASSESSING AUTHORITY AND WITHOUT DUE AND PROPER APPLICATION OF MIND AND WITHOUT ASSIGNING ANY GOOD REASONS, RECORDED FINDING THAT THE ASSESSEE SOCIETY EXISTS FOR EDUCATION PURPOSE ONLY AND THUS PROCEEDED TO ALLOW EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. HIS ORDER THUS CANNOT BE TERMED A SPEAKING ORDER AS THE SAME DOES NOT CONTAIN REASONING FOR REACHIN G FINDINGS 8 REFERENCE TO THE RELEVANT MATERIAL ON RECORD. IT IS NOW WELL SETTLED LAW THAT WHERE AN AUTHORITY MAKES AN ORDER IN EXERCISE OF A QUASI - JUDICIAL FUNCTION, IT MUST RECORD ITS REASONS IN SUPPORT OF THE ORDER IT MAKES. EVERY QUASI - JUDICIAL ORDER MUST BE SUPPORTED BY REASONS . AFORESAID VIEW IS SU PPORTED BY THE FOLLOWING ORDERS: SIEMENS ENGINEERING & MFG. CO. OF INDIA LTD. VS. UNION OF INDIA AIR 1976 SC 1785, 1789; N. M. DESAI VS. TESTEELS LTD. CA NO. 245 OF 1970, DECIDED ON 17/12/1975 (SC); MOOL CHAND MAHESH CHAND VS. CIT [1978] 115 ITR 1,8 (ALL). IN THIS VIEW OF THE MATTER, A QUASI - JUDICIAL AUTHO RITY MUST PASS A SPEAKING ORDER: BHAGAT RAJA VS. UNION OF INDIA, AIR 1967 BOM 227, 244 - 45; DARSHAN LAL VS. UNION OF INDIA AIR 1996 DEL 53,54; GENDALAL VS. DEENNATH AIR 1996 MP 3, 4; VASANT D. BHAVSAR VS. BAR COUNCIL OF INDIA, [1999] 1 SCC 45, 47. WE, THEREFORE, SET ASIDE HIS ORDER IN BOTH THE YEARS UNDER APPEAL AND REMIT THE MATTER BACK TO HIM WITH A DIRECTION TO EXAMINE AND DEAL WITH AFRESH EACH AND EV ERY ISSUE RAISED BY THE ASSESSING AUTHORITY IN BOTH THE YEARS UNDER APPEAL AND STATE REASONING AS TO HOW THE ASSESSING AUTHORITY IS NOT CORRECT ON FACTS OR FOR LAW IN RECORDING FINDING LEADING TO THE DENIAL OF EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT SO THA T WHEN THE MATTER, IF BROUGHT TO THE HIGHER FORUM, THE CORRECTNESS OF THE REASONING TAKEN BY THE LEARNED CIT(A) IS TESTED JUDICIOUSLY. IT HOWEVER, REMAINS THAT ALL THE GROUNDS RAISED BEFORE HIM BY THE ASSESSEE SHALL REMAIN OPEN FOR ADJUDICATION BY HIM IN THE REMAND PROCEEDINGS. NEEDLESS TO ADD, HE SHALL ALLOW REASONABLE 9 OPPORTUNITY OF BEING HEARD TO THE ASSESSING AUTHORITY AS WELL AS TO THE APPELLANT BEFORE TAKING DECISION IN ACCORDANCE WITH LAW. 6. IN THE RESULT, BOTH THE APPEALS BY REVENUE STAND ALLOWE D FOR STATISTICAL PURPOSES ONLY AND THE CROSS OBJECTIONS OF THE ASSESSEE BEING IN SUPPORT OF THE ORDER OF LEARNED CIT(A) BECOME INFRUCTUOUS . (ORDER PRONOUNCED IN THE OPEN COURT ON 24/02/2012 ) SD/. SD/. ( S. K. YADAV ) ( B. R. JAIN ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24/02/2012 *SINGH 16 02 COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR