East Point Education Society, New Delhi V. ADIT (Exemptions), New Delhi

ITA 5452/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53478 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Keywords: Reopening of assessment; Gift; Depreciation; Principle of natural justice; Maximum Marginal Rate; Diversion of income; Difference of opinion; Validity of assessment; Reason to believe; Change of opinion
• Section: 148; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO.5452/DEL./2010 (ASSESSMENT YEAR : 2006-07) EAST POINT EDUCATION SOCIETY, VS. ADIT(EXEMPTION), TR UST CIRCLE, FC, VASUNDHARA ENCLAVE, NEW DELHI. DELHI . (PAN/GIR NO.AAATE2296E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL JAIN, CA REVENUE BY : SHRI SALIL MISHRA, SR.DR ORDER PER R.P. TOLANI: JM THE ASSESSEE HAS FILED CONCISE REVISED GROUNDS OF APPEAL F OR ADJUDICATION WHICH ARE AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, CI T(A) HAS ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER W HICH WAS BAD IN LAW AND VOID AB INITIO. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE CIT(A) ERRED IN UPHOLDING ASSESSING OFFICERS ACT OF DEN YING EXEMPTION U/S 11 OF THE I.T. ACT, 1961 TO THE APPELL ANT AND COMPLETING THE ASSESSMENT AT RS.18,26,010/- AS AGAINST NIL INCOME DECLARE BY THE APPELLANT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN UPHOLDING THE VALIDITY OF REASSESSMENT MADE BY ASSESSING OFFICER WHEN ASSESSING OFFICER HAD NO REASON TO BELIEVE THAT APPELLANTS INC OME HAS ESCAPED ASSESSMENT EXISTED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN UPHOLDING ASSESSING OFFICERS FINDING THAT APPELLANT HAD VIOLATED PROVISIONS OF SECT ION 13(1)(C) R.W.S. 13(3) OF THE I.T. ACT, 1961 AND HENC E IS NOT ELIGIBLE TO THE BENEFIT OF SECTIONS 11 & 12. I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 2 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LOWE R AUTHORITIES HAVE ERRED IN PENALIZING THE APPELLANT SO CIETY BY DENYING THE REQUISITE EXEMPTION FOR THE FAULT OF, IF ANY, OF ITS MEMBER/OFFICE BEARERS. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN UPHOLDING ASSESSING OFFICER ASSESSING OFFICERS ACT OF NOT GRANTING DEPRECIATION OF RS.5,43,110/- (1,57,208/- + 3,85,902/-) TO THE APPEL LANT ON ASSETS USED IN, ATTAINING ITS OBJECTS/EARNING INCOME. 2. FURTHER, ASSESSEE HAS FILED APPLICATION DATED 5.4.20 11RAISING FOLLOWING ADDITIONAL GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN UPHOLDING ASSESSING OFFICER S ACT IN REOPENING APPELLANTS ASSESSMENT FOR THE YEAR UND ER CONSIDERATION WHEN THE ENTIRE PROCEEDINGS WERE ILLEGA L AND VOID AB INITIO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN UPHOLDING THE VALIDITY OF REOPENING OF APPELLANT ASSESSMENT U/S 148/147 WHEN ASSESSING OFFICERS REASONS TO BELIEVE THAT APPELLANTS INCOME HA S ESCAPED ASSESSMENT EXISTED WERE EXTRANEOUS TO THE FACTS ON RECORD AND HAD NO LIVE LINK WITH THE BELIEVE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) FAILED TO DIRECT THE ASSESSING OFFICER TO ALLOW APPELLANT, EXEMPTION U/S 10(23C)(IIIAD). 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER ERRED IN NOT GRANTING EXEMPTION TO APPELLAN T U/S 10(23C)(IIIAD) WHEN IT EXISTED SOLELY FOR EDUCATIONAL PURPOSES, WITHOUT ANY PROFIT MOTIVE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE ASSESSING OFFICER ERRED IN LEVYING TAX ON THE APPELLANTS INCOME AT MAXIMUM MARGINAL RATE. 3. LD.COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ADDITION AL GROUNDS NOS.1 & 2 ARE NOT NEW AND ELABORATION OF GROUND NO. 3. OF THE REVISED I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 3 GROUNDS IN RESPECT OF REOPENING OF ASSESSMENT. GROUND NO S.3 & 4 ARE RELATING TO EXEMPTION ELIGIBLE TO THE ASSESSEE U/S 10(23 C)(IIIAD) OF THE ACT. THIS WAS RAISED BEFORE THE CIT(A) BY WAY OF WRIT TEN SUBMISSIONS. THE SAME HAS BEEN DEALT WITH BY CIT(A) ON PAGE 4 OF H IS ORDER, BUT NOT DECIDED. NO NEW FACTS ARE REQUIRED FOR ADJUDICATI ON OF THIS GROUND AND BEING LEGAL GROUND MAY BE ADMITTED. 4. GROUND NO.5 BEING ABOUT TAX RATE AND LEGAL IN NA TURE, THE SAME MAY BE ADMITTED. IT IS PLEADED THAT ALL THESE GROUND S WERE RAISED BEFORE CIT(A) AND ARE LEGAL IN NATURE THEY MAY BE A DMITTED IN THE INTEREST OF JUSTICE. 5. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENT FOR THE PROPOSITION THAT THE TRIBUNAL MAY ADMIT ADDITIONAL GROUND, IN THE COURSE OF APPEAL EVEN THOUGH THE SAME WAS NOT RAISED EARLIER BEFORE THE CIT(A) CIT VS. BHARAT GENERAL REINSURANCE CO. LTD., 81 I.T.R . 303(DEL.) PANDIT SHEO NATH PRASAD SHARMA VS. CIT, 66 I.T.R. 647 (ALL.) HONDO JAVA & CO. VS. IAC, 30 ITD 161 (SB) OOPPOOTIL KURIEN & CO. (P) LTD. VS. CIT, 266 I.T.R. 409 (KER.) CIT VS. JINDAL SAW PIPES LTD., 328 I.T.R. 338 (DEL.) 6. FURTHER RELIANCE IS PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF NTPC VS. CIT, 229 I.T.R. 383. 7. LD.DR. OPPOSED THE ADDITIONAL GROUND. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERU SED THE MATERIAL PLACED ON RECORD. THE FIRST TWO ADDITIONAL GROUNDS ABOUT REOPENING OF ASSESSMENT ARE ELABORATION OF GROUND NO.3 RAISED BY THE ASSESSEE ABOUT THE VALIDITY OF ASSESSMENT PROCEEDING. THE Y ARE NOT NEW GROUNDS AND ARE ADMITTED AS REQUESTED BY THE ASSESSE E. 9. GROUND NOS.3 & 4 PERTAIN TO ASSESSEES LEGAL CLAIM U/S 10(23C)((IIIAD) OF THE ACT WHICH HAS BEEN CONSIDERED BY THE CIT(A) ALSO. THE CLAIM BEING LEGAL AND CIT(A) HAVING CONSIDERED I T, WE ARE OF THE VIEW THAT THESE TWO ADDITIONAL GROUNDS SHOULD BE ADMIT TED. ADDITIONAL I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 4 GROUND NO.5 I.E. ABOUT THE RATE OF TAX, THE SAME BEI NG PURELY LEGAL IS ALSO ADMITTED. 10. COMING TO THE FACTS OF THE CASE, THE ASSESSEE IS A REG ISTERED SOCIETY WITH SOLE OBJECT OF IMPARTING EDUCATION WITHO UT ANY PROFIT MOTIVE. THE ASSESSEE IS RUNNING A SCHOOL AT UNDER NAME OF STAREX INTERNATIONAL SCHOOL WHICH IS FORMERLY KNOWN AS EAST P OINT SCHOOL. NO OTHER ACTIVITY EXCEPT EDUCATIONAL I.E. RUNNING THE SECONDARY SCHOOL ARE CLAIMED TO HAVE BEEN CARRIED ON BY THE ASSESSEE. 11. THE ASSESSEE FILED ITS RETURN OF INCOME AND CLAIMED DEDUCTION U/S 10(23C)(IIIAD) BEING THE INSTITUTION SOLELY ENGAGED I N THE ACTIVITY OF IMPARTING EDUCATION WITHOUT ANY PROFIT MOTIVE WHICH WAS ACCEPTED U/S 143(1) OF THE ACT. 12. IMMEDIATELY SUCCEEDING ASSESSMENT YEAR I.E. 2007-08 , THE ASSESSEES ANNUAL RECEIPTS CROSSED AT RS.1 CRORE LIMIT. CON SEQUENTLY, IT WAS REQUIRED TO SEEK APPROVAL FOR EXEMPTION U/S 10(23C )(IIIAD) OF THE ACT. THE SAID APPLICATION WAS DISMISSED BY DIT(E) BY EX PARTE ORDER ON THE GROUND THAT THE APPLICATION WAS FILED BELATEDLY AND OTHER REASONS. SINCE THE ASSESSEE WAS DENIED APPROVAL U/S 10(23)(IIIAD), THE ASSESSEE COMPLETED ASSESSMENTS FOR ASSESSMENT YEARS 2006-07 & 2007-08 WERE REOPENED. THE ASSESSING OFFICER RECORDED FOLLOWIN G COMMON REASONS DATED 26.03.2009 FOR REOPENING BOTH THE ASSESSMEN TS: EAST POINT EDUCATION SOCIETY A.Y. 2006-07 A RETURN HAS BEEN FILED DECLARING NIL INCOME. SCRU TINY OF THE RETURN REVEALS THAT THE AUDITOR HAS PREPARED THE AUDI T REPORT ON THE BASIS OF THE TEST CHECK OF VOUCHERS. THE AUDITOR I N HIS REPORT HAS STATED THAT ONE PARTNER HAS TAKEN CONSTRUCTION LOAN AND HAS ALSO CONSTRUCTED A BUILDING. LOAN AS WELL AS BUILDING HAS NOT BEEN CONSIDERED IN THE BALANCE SHEET, WHICH CLEARLY SH OWS THAT THE APPLICATION OF FUNDS IS NOT VERIFIABLE. THE ASSESSEE HAS FAILD TO PRODUCE THE BOOKS OF ACCOUNTS AND VOUCHERS BEFORE D GIT(E) I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 5 DURING THE PROCEEDINGS U/S 10(23C). IN THIS CASE, THE AUDITOR HAS NOT CERTIFIED IN HIS AUDIT REPORT U/S 10BB THAT HE HA D VERIFIED ALL THE VOUCHERS. I HAVE REASONS TO BELIEVE THAT IN THE F ACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE HAS NOT DECLARED TR UE INCOME SO FAR AS THE APPLICATION OF TRUST FUND IS NOT V ERIFIABLE. ISSUER NOTICE U/S 148. 13. THE ASSESSEE ATTENDED IN THE RE ASSESSMENT PROCEEDING A ND PRODUCED ALL THE BOOKS OF ACCOUNT WHICH ARE VERIFIED BY THE ASSESSING OFFICER. ASSESSING OFFICER OBSERVED THAT SHRI MOHINDER SINGH (MS) WAS ONE OF THE GOVERNING BODY MEMBERS OF STARLEX INTERNA TIONAL SCHOOL. AN AMOUNT OF RS.1,75,00,000/- WAS RECEIVED BY THE SCHO OL FROM SHRI MOHINDER SINGH (MS) IN THE YEAR 2003 BY WAY OF LOAN . THEREAFTER, IN ASSESSEES BALANCE SHEET IN THE YEAR 2003-04 IT WAS SHOWN A S DONATION TO THE SOCIETY. IN THE YEAR 2004-05, THE AMOUNT WAS CONVERTED INTO UNSECURED LOAN BEARING INTEREST RATE @ 12% P.A. TO BE DEBITED IN BOOK ON ACTUAL PAYMENT BASIS TO MS. THIS ENTRY WAS RATIFIED IN A GENERAL MEETING HELD ON 6.5.2005. THIS TREATMENT OF THE AMO UNT PERTAINING TO SHRI MOHINDER SINGH WAS CALLED IN QUESTION BY THE ASSE SSING OFFICER. IT WAS ALLEGED THAT THE ASSESSEE WAS USING THE TRUST FUND FOR THE BENEFIT OF A PERSON WHO WAS A SPECIFIED PERSON WITHIN MEANING O F SECTION 13(1)(C) R.W.S. 13(3) OF THE ACT, BEING A GOVERNMEN T BODY MEMBER. ACCORDING TO ASSESSING OFFICER ASSESSEE DID NOT FURNISH ANY COGENT REASON JUSTIFYING SUCH TREATMENT. THE ASSESSING OFFICER T HUS HELD AS UNDER: THE AR FAILED TO FURNISH ANY COGENT REASON IN SUPPORT OF SUCH CONVERSION, EXCEPT DIRECTION OF THE MOHINDER SINGH, THE DONOR. CLAUSE 2 OF THE MEETING CLEARLY, SHOWS THE ARBITRARY M ANNER, IN WHICH INTEREST WAS ALLOWED ON THAT SO CALLED LOAN. NO REASONING WAS GIVEN BEHIND FIXATION OF RATE OF INTEREST ON THAT LOAN. FURTHER VIDE THAT RESOLUTION, THE UTILIZATION OF TRUSTS SURPLU S IN FUTURE IS DIRECTED TOWARDS PAYMENT OF INTEREST AND REPAYMENT OF LOAN. THIS AMOUNTS TO TYING UP OF TRUST FUND FOR THE BENEFIT OF A REASON WHO IS A SPECIFIED PERSON WITHIN THE MEANING OF SECTION 13(3) OF THE I.T. ACT, 1961, IN RESPECT OF THE SOCIETY. SRI. MOHINDER SINGH I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 6 IS HERE A SPECIFIED PERSON WITHIN THE MEANING OF SECTIO N 13(3) OF THE I.T. ACT, 1961, IN RESPECT OF THE EAST POINT EDUC ATION SOCIETY, BY VIRTUE OF HIS BEING A SUBSTANTIAL CONTRIBUTOR TO T HE ASSESSEES TRUSTS CORPUS FUND, AND ALSO ON ACCOUNT OF BEING A GOV ERNING BODY MEMBER, RUNNING THE AFFAIRS OF THE TRUST. IN VIEW OF THE ABOVE, I AM OF THE OPINION THAT, I) THE ASSESSEE HAS VIOLATED PROVISIONS OF SECTION 13(1)(C) R.W.S. 13(3) BY REPAYMENT OF LOAN WITH INTEREST OUT OF CORP US FUND. II) THE CONVERSION OF CORPUS DONATION INTO LOAN TO BE REPAID TO MOHINDER SINGH, IS ILLEGAL, AND NOT A CHARITABLE ACT , III) BY FIXING INTEREST RATE PAYABLE TO THE LOAN, @ 12% P.A., THE ASSESSEE TRUST HAS DECIDED TO DIVERT FUND TO PERSON SPECIF IED U/S 13(3) AND HENCE VIOLATED PROVISIONS OF SECTION 13(1 )(C) OF THE I.T. ACT, 1961. IV) THE ASSESSEE TRUST FAILED TO JUSTIFY AFOREMENTIONED A CT OF ITS, IN THE COURSE OF PROCEEDING U/S 143(3)/147. ACCORDINGLY I DENY CLAIM FOR EXEMPTION U/S 11 TO THE ASSESSEE AND TAX ITS INCOME AS AN AOP AT THE MAXIMUM MARGINAL RAT E. 14. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL WHERE REO PENING OF THE ASSESSMENT WAS HELD TO BE VALID. THE ASSESSING OFFICER S DENIAL OF EXEMPTION U/S 11 WAS UPHELD AND THE ASSESSEE APPEAL WAS DI SMISSED. 15. AGGRIEVED, ASSESSEE IS BEFORE US. LD.COUNSEL FOR THE ASSESSEE FIRSTLY ADVERTED TO SECTION 10(23C) OF THE ACT AND PL EADED THAT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEES RECEIPT WERE LESS THAN RS.80 LAKHS WHICH WAS BELOW RE.1 CRORE. SECTION 10(23C) PR ESCRIBES AS UNDER: (IIIAD) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUT ION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR ED UCATIONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEI PTS AS MAY BE PRESCRIBED; IT IS PLEADED THAT THE TURNOVER IS PRESCRIBED BY RULE 2 BC AT RE.1 CRORE. I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 7 16. IT IS FURTHER CONTENDED THAT ASSESSING OFFICER HAS N OT BEEN DISPUTED THAT THE SOLE OBJECT AND ACTIVITY OF THE ASSE SSEE ARE EDUCATIONAL IN NATURE AND THE ASSESSEE IS AN EDUCATIONAL INSTITUTION SOLELY EXISTING AND OPERATING FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSES OF PROFIT. THEREFORE, OBSERVATIONS OF THE ASSESSI NG OFFICER IRRESPECTIVE OF SECTIONS 11 & 12 OF THE I.T. ACT, 1961 , THE ENTIRE INCOME OF THE ASSESSEE IS EXEMPT FROM INCOME TAX U/S 10(23C) OF THE ACT. THIS ISSUE WAS RAISED BEFORE CIT(A) BY WAY OF WRITTEN SUBMISSIO NS. THE CIT(A), HOWEVER, HAS FAILED TO CONSIDER THESE ASPECTS. THE ASSESSEES CLAIM BEING ELIGIBLE FOR DEDUCTION U/S 10(23C) OF TH E I.T. ACT, 1961. THERE WILL BE THUS NO TAX LIABILITY AND ASSESSEE DESERVES TO SUCCEED ON THIS GROUND. 17. COMING TO THE REMAINING GROUNDS, THE LD.COUNSEL F OR THE ASSESSEE ADVERTING TO REOPENING OF ASSESSMENT VEHEMENTLY A RGUES THAT THE ASSESSMENT WAS REOPENED ON THE SAME REASONS FOR ASSESSMENT YEARS 2006- & 07-08. THE REASONS MENTIONED FOR REOPENING ASSESSMENT FOR 2006-07 DID NOT EXIST AT ALL. 18. AS FAR AS ASSESSMENT YEAR 2006-07 IS CONCERNED, NO P ROCEEDINGS WERE PENDING FOR EXEMPTION U/S 10(23C) OF THE ACT. THERE IS A TOTALLY WRONG MENTION OF REASON ABOUT ASSESSEES PENDING PROCVEE DINGS U/S 10(23C) OF THE ACT WHICH IN FACT WERE PENDING IN ASSE SSMENT YEAR 2007-08. THERE WAS THUS NO SUCH FAILURE TO PRODUCE BO OKS OF ACCOUNTS FOR ASSESSMENT YEAR 2006-07, WHICH CLEARLY SHOWS NON-APPL ICATION OF MIND BY ASSESSING OFFICER, IN AS MUCH AS REASONS WHICH DID NOT EXIST IN THIS YEAR ARE RECORDED BY ASSESSING OFFICER AS REASON FOR REOPENING OF THE ASSESSMENT FOR ASSESSMENT YEAR 2006-07. 19. THUS, ASSESSING OFFICERS ACTION IN REOPENING THE ASSESSM ENT FOR ASSESSMENT YEAR 2006-07 IS TOTALLY ILLEGAL. THE REASONS F OR REOPENING ARE: I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 8 1. ONE MEMBER OF THE ASSESSEE HAS TAKEN A LOAN WITHOUT PERMISSION OF THE SOCIETY. THE EXECUTIVE COMMITTEE OF SOCIETY HAS DECIDED NOT TO ACCOUNT FOR IN THE BOOKS. THERE I S NEITHER MENTION OF THE MEMBER BEING COVERED U/S 13(1)(C) OF THE ACT NOR SUCH ADDITION IN THE ORDER. 2. IN THIS CASE, NO PROCEEDINGS FOR APPROVAL U/S 10(23 C) WAS PENDING AS THE RECEIPTS WERE BELOW RE.1 CRORE. 20. THE FIRST DISCLOSURE WAS CLEARLY MADE IN THE NOTE T O ACCOUNTS OF THE SOCIETY. THEREFORE, NO NEW MATERIAL WHATSOEVER HAS COME IN POSSESSION OF THE ASSESSING OFFICER TO COME TO REASONS TO BEL IEVE THAT INCOME HAD ESCAPED ASSESSMENT. 21. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS: PURITY TECHTEXTILE PRIVATE LIMITED VS. CIT (2010) 32 5 I.T.R. 459(BOM.) JINDAL PHOTO FILMS VS. DCIT, 234 I.T.R. 170 (DEL.) CIT VS. KELVINATOR OF INDIA LTD., 256 I.T.R. 1(DEL.) CIT VS. CHAMUNDESHWARI, 209 I.T.R. 583 (MAD.) CIT VS. BATRA BHATTA COMPANY (2010), 321 I.T.R. 526 (DEL.) ITO VS. DALUBRAND COAL CO. P. LTD., 217 I.T.R. 597 ( SC) RAYMOND WOOLLEN MILLS LTD. VS. ITO, 236 I.T.R. 34 (SC ). FURTHER RELIANCE IS PLACED ON DELHI HIGH COURT JUDGE MENT IN THE CASE OF RANBAXY LABORATORIES LTD. VS. CIT, 336 I.T.R. 136. I N THIS CASE, THE ASSESSEES RETURN OF INCOME WAS PROCESSED U/S 143(1)(A) OF T HE ACT. THEREAFTER THE NOTICE U/S 148 WAS ISSUED ON THE REASONS T HAT CLUB FEES, GIFTS AND PRESENTS AND PROVISION FOR LEAVE ENCASHMENT, O UGHT TO HAVE BEEN DISALLOWED. WHILE MAKING THE RE-ASSESSMENT NO ADDI TION ON THAT ACCOUNT WAS MADE. HOWEVER, DEDUCTION U/S 80HH AND 80 I WERE DISALLOWED. HONBLE JURISDICTIONAL HIGH COURT HELD A S UNDER : I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 9 THE VERY BASIS OF INITIATION OF PROCEEDINGS FOR WHICH REASONS TO BELIEVE WERE RECORDED WERE INCOME ESCAPING ASSESSMENT IN RESPECT OF ITEMS OF CLUB FEES, GIFTS AND PRESENTS, ETC., BUT THE SAME HAVING NOT BEEN DONE, THE ASSESSING OFFICER PROCEED ED TO REDUCE THE CLAIM OF DEDUCTION UNDER SECTIONS 80HH AND 80-I WHICH AS PER OUR DISCUSSION WAS NOT PERMISSIBLE. HAD THE ASSESSING OFFICER PROCEEDED TO MAKE DISALLOWANCE IN RESPE CT OF THE ITEMS OF CLUB FEES, GIFS AND PRESENTS, ETC. THEN IN VIEW OF OUR DISCUSSION AS ABOVE, HE WOULD HAVE BEEN JUSTIFIED AS PER EXPLANATION 3 TO REDUCE THE CLAIM OF DEDUCTION UNDE R SECTIONS 80HH AND 80-I AS WELL. 22. IN VIEW OF OUR ABOVE DISCUSSION, THE TRIBUNAL WAS R IGHT IN HOLDING THAT THE ASSESSING OFFICER HAD THE JURISDICTION TO REASSESS ISSUES OTHER THAN THE ISSUES IN RESPECT OF WHICH PROCEEDINGS ARE INIT IATED BUT HE WAS NOT SO JUSTIFIED WHEN THE REASONS FOR THE INITIATION OF THOSE PROCEEDINGS CEASES TO SURVIVE. CONSEQUENTLY, WE ANSWER T HE FIRST PAT OF QUESTION IN THE AFFIRMATIVE IN FAVOUR OF THE REVE NUE AND THE SECOND PART OF THE QUESTION AGAINST THE REVENUE. 23. IT IS CONTENDED THAT THE REASSESSMENT IS LIABLE TO BE QUASHED AS : 1. NO NEW MATERIAL CAME IN POSSESSION OF ASSESSING OFFICER IN ASSESSMENT YEAR 2007-08 AND NOT IN 2006-07. 2. NON EXISTENT REASONS WERE RECORDED BY ASSESSING OFFICER AND NO ADDITIONS ON THESE ACCOUNTS ARE MADE. ASSESSING OFFICER REOPENED THE ASSESSMENT ONLY ON THE BASIS OF ASSESSEES OWN DISCLOSURE. CONSEQUENTLY, THE ENTIRE BASIS FOR RECORDING THE REASON S IS UNJUSTIFIABLE WITHOUT ANY NEW MATERIAL ON RECORD AND WITH TOTAL N ON-APPLICATION OF MIND. THE ASSESSING OFFICER IN FACT WANTED TO REOPEN T HE ASSESSMENT FOR ASSESSMENT YEAR 2007-08 AND IN A SWEEP WITHOUT CARIN G TO SEE THAT NO SUCH REASONS EXISTED IN ASSESSMENT YEAR 2006-07, REOPENE D THE ASSESSMENT, WHICH IS BAD IN LAW. I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 10 24. LD.COUNSEL THUS CONTENDED THAT APPEAL OF THE ASSESSEE DESERVES TO SUCCEED ON BOTH THE COUNTS: (I) THE RE-ASSESSMENT IS TOTALLY BAD IN LAW AS HELD IN TH E CASE OF RANBAXY LABORATORIES LTD. VS. CIT (SUPRA). IN ANY CASE, EVEN IF IT IS ASSUMED OTHERWISE, IT HAS NOT BEEN DISPUTED THAT THE ASSESSEE IS AN EDUCATIONAL INSTITUTION ENGAGED ONLY IN THE CAUSE OF EDUCATION WITHOUT ANY PROFIT MO TIVE. (II) THE RECEIPTS BEING ADMITTEDLY LESS THAN RE.1 CROR E IN ASSESSMENT YEAR 2006-07, THE ENTIRE INCOME OF THE ASSESSEE IS EXEMPT. THE ASSESSEE HAS BEEN DENIED CLAIM OF DEDUCTION U/S 11 AND APPLIED MAXIMUM MARGINAL RAT E. THE INCOME HELD TO BE COVERED U/S 13(1)(C) OF THE AC T. 25. THE OBSERVATION OF LOWER AUTHORITIES NO COGENT RE ASONS FOR ENTRIES ABOUT MOHINDER SINGH WAS GIVEN IS BASELESS AS FOLL OWING EXPLANATION WAS CLEARLY GIVEN WHICH HAS NOT BEEN PERU SED BY HIM: TO. OVERCAME ITS LIQUIDITY CRISIS, APPELLANT IN THE F INANCIAL YEAR ENDING 31/03/03 RECEIVED A SUM AF RS 1.75 CRORE AS LOA N FROM ONE MR. MOHINDER SINGH WHO WAS ENGAGED IN THE ACTIVI TY OF RUNNING SCHOOL IN GURGAON. THE INCUMBENT MANAGEMENT IN ORDER TO ATTAIN THE OBJECTIVES OF THE SOCIETY MORE FRUITFU LLY MADE MR. MOHINDER SINGH ALONG WITH HIS ASSOCIATES AS MEMBERS OF TH E SOCIETY. IN FACT HE WAS MADE THE PRESIDENT OF THE SOCIE TY. HE IMMEDIATELY REPAID THE BANK LOAN TAKEN BY THE SOCIET Y FOR PURCHASE OF LAND, AND LIFTED THE SOCIETY FROM THE FI NANCIAL CRISIS IT WAS UNDERGOING. HOWEVER AFTER TAKING OVER HE SOON STAR TED LARGE EXPANSION PLANS BY INDULGING IN LARGE SCALE CONSTRUCTIO N OF SCHOOL BUILDING. ALL THE APPROVALS FOR EXPANSION WERE TAKEN BY HIM IN HIS PERSONAL NAME INSTEAD OF SOCIETYS NAME. WITHOUT HOLDI NG THE MEETING OF GOVERNING BODY HE PLEDGED THE TITLE DEED S OF THE SOCIETY TO THE BANK FROM WHOM HE HAD TAKEN HUGE LOAN . WHEN THE OTHER GOVERNING BODY MEMBERS CAME TO KNOW OF THI S FACT THEY IMMEDIATELY RAISED ABJECTIONS AGAINST THE SAME. IN THE ENSUING AGM HELD AN 04/07/2006 MR. MOHINDER SINGH WA S NOT REELECTED AS PRESIDENT. THIS LED TO LARGE SCALE LITIGAT ION BETWEEN THE GOVERNING BODY MEMBERS AND MR. MOHINDER SINGH. P RESENTLY A SUIT IS PENDING IN THE HIGH COURT AT DELHI. MR. MOH INDER SINGH HAS DEMANDED BACK THE AMOUNT OF RS 1.75 PAID BY HIM I NITIALLY FAR REPAYMENT OF BANK LOAN TAKEN BY THE SOCIETY. HE HAS FURTHER DEMANDED AN AMOUNT AT RS 4 CRORES SPENT BY HIM TOWARDS CONSTRUCTION OF ADDITIONAL BUILDING ALONG WITH INTER EST PLUS I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 11 VARIOUS OTHER UNSUBSTANTIATED CLAIMS. DURING HIS TENURE AS PRESIDENT OF THE SOCIETY MR. MOHINDER SINGH IN THE A CCOUNTS OF THE SOCIETY FOR THE YEAR ENDING 31/03/2003 REFLECTED THE AMOUNT OF RS 1.75 CRORE AS LOAN AND SUBSEQUENTLY FOR THE YEAR ENDED 31/03/04 REFLECTED IT AS DONATION. IT IS PERTINENT TO NOTE THAT ACCOUNTS FOR BATH THESE YEAR WERE SIGNED ONLY BY MR. M OHINDER SINGH AND HIS SAN, NONE OF THE OTHER GOVERNING BODY M EMBERS WERE AWARE OF THIS DEVELOPMENT. PERHAPS THIS WAS DONE T O SHOW A HEALTHY PICTURE TO THE BANK FROM WHOM HE GOT A LO AN SANCTION FOR THE SOCIETY FOR RS. 7.5 CRORE FAR EXECUTING EXPAN SION PLANS. THE GOVERNING BODY MEMBERS DUE TO DEMAND OF RETURN O F A SUM OF RS 1.75 CRORE FROM MR. MOHINDER SINGH REFLECTED T HAT AMOUNT AS LOAN. FURTHER LOAN TAKEN BY MR. MOHINDER SINGH FR OM THE BANK OF ABOUT RS. 4 CRORES FOR CONSTRUCTION OF BUILDING WAS NOT REFLECTED IN THE BOOKS AS MR. MOHINDER SINGH HAD NOT RENDERED THE ACCOUNT OF THE CONSTRUCTION EXPENDITURE. CONSEQUE NTLY NEITHER BUILDING NOR LOAN ON THAT ACCOUNT WAS REFLEC TED IN THE BOOKS. THIS FACT HAS BEEN DISCLOSED IN NOTE NO. 5 OF SCH EDULE 14 BEING NOTES OF ACCOUNTS OF SOCIETY. IT SHOULD BE NOTED THAT THE GOVERNING BODY IS CONSTRAINT IN THE MATTER AS NO DETAI LS HAVE BEEN HANDED OVER BY MR. MOHINDER SINGH IN THIS REGAR D. FURTHER HE HAS ALSO FILED LEGAL CASE AGAINST THE SOCIETY. IT SHOU LD BE NOTED THAT WHETHER THE SUM OF RS 1.75 CRORE WAS LOAN OR DONATION CAN BE ANSWERED BY MR. MOHINDER SINGH AND N OT BY THE PRESENT MANAGEMENT. IF THERE IS ANY LAPSE OR DEFAULT I N THE MATTER IT WAS BY MR. MOHINDER SINGH. IT SHOULD BE NOT ED THAT FOR THE FAULT OF SOME GOVERNING BODY MEMBER THE SOCIETY I TSELF CANNOT BE PUNISHED. THE APPELLANT IS EXISTING FOR THE WELFARE OF PEOPLE AT LARGE BY PUNISHING THE APPELLANT FOR THE F AULT OF MEMBER DOES NOT MEET THE END OF JUSTICE RATHER IT WOR KS THE REVERSE WAY. FOR THIS PROPOSITION RELIANCE IS PLACED IN THIS REGARD ON THE UNDER MENTIONED DECISIONS:- CIT V KARIMIA TRUST (2008) 302 ITR 57 (JHARKHAND) DCIT V COSMOPOLITAN EDUCATION SOCIETY 244 ITR 494 ( RAJ.) SLP DISMISSED (2000) 241 ITR (ST.) 132. THE LOAN WAS CONVERTED INTO DONATION THE GOVERNING B ODY MEMBERS ARE UNAWARE OF THIS FEATURE IN SUCH CIRCUMSTANC ES HOW CAN THE SAME BE EXPLAINED. THE BOOKS AND MINUTE BOOK FOR THAT YEAR ARE NOT AVAILABLE WITH THE MANAGEMENT. FIR HAS BEEN LODGED AGAINST THE SAME. MR. MOHINDER SINGH ADDRESS WAS PROVIDED TO THE AO AND CIT(A), HOWEVER NO EXPLANATI ON WAS SOUGHT FROM HIM. I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 12 THE ISSUE HERE ARISES WHETHER CONVERSION OF LOAN INTO DO NATION AND ITS SUBSEQUENT RECONVERSION INTO LOAN TANTAMOUNT TO VIOLATION OF THE PROVISIONS OF SECTION 13(1)(C) R.W.S 1 3(3). KINDLY NOTE THAT PRESENTLY, THE MATTER IS PENDING BEFORE THE DELHI HIGH COURT FOR ADJUDICATION, WHETHER THE AMOUNT GIVEN BY MR. MOHINDER SINGH IS LOAN OR DONATION AND HOW MUCH AMOU NT IS PAYABLE BY THE APPELLANT TO HIM ON ACCOUNT AMOUNT SP ENT ON BUILDING CONSTRUCTION. AS PER THE DECISION OF THE HON' BLE HIGH COURT THE MATTER WILL BE DECIDED. KINDLY NOTE THAT W.E.F. 06-05-05 MR. MOHINDER SINGH CEASED TO BE THE OFFICE BEARER OF THE SOCIETY. IF THE HIGH COURT DECIDES THAT THE AMOUNT OF RS 1.75 CORES IS LOAN AND NOT DONATION THAN THE QUESTION OF UTILIZATI ON OF TRUST FUNDS FOR THE BENEFIT OF SUBSTANTIAL CONTRIBUTOR DOES N OT ARISE FOR TWO REASONS. FIRST IN THAT SITUATION MR. MOHINDER SINGH WOULD NOT FALL INTO THE DEFINITION OF SUBSTANTIAL CONTRIBUTOR. ALTERNATIVELY, IF THE HIGH COURT HOLDS THAT THIS AMOU NT IS DONATION THEN IN THAT CASE APPELLANT WOULD NOT BE OBLIGED TO REPAY ANYTHING TO MR. MOHINDER SINGH. IN THAT SCENARIO THE QUESTION OF UTILIZATION OF TRUST FUNDS FOR THE BENEFIT OF SPECIFIE D PERSONS WOULD NOT ARISE. SECTION 13(1)(C) HAS TWO SUB-CLAUSES BOTH ARE NOT APPLI CABLE TO THE APPELLANT. CLAUSE ONE APPLIES WHERE UNDER THE TER MS OF RULES OF THE SOCIETY ANY PART OF THE INCOME ENURES FOR THE BENEFIT OF THE PERSONS SPECIFIED IN SECTION 13(3). KINDLY NOTE NO PART OF SOCIETY MOA OR RULES HAS SUCH CLAUSE THEREFORE NO VIOLA TION OF SUCH PROVISION ARISES. THE SECOND CLAUSE APPLIES IF ANY PA RT OF THE SOCIETY'S INCOME OR PROPERTY IS UTILIZED FOR THE B ENEFIT OF THE SPECIFIED PERSONS. KINDLY NOTE APPELLANT HAS NOT PAID A NY INTEREST TO MR. MOHINDER SINGH THEREFORE UTILIZING ANY FUND FOR THE BENEFIT OF SPECIFIED PERSONS DOES NOT ARISE. THE QUESTION OF PAYM ENT WOULD ARISE ONLY AFTER THE DECISION OF THE HIGH COURT . THUS IT IS A CASE WHERE AO HAS PREEMPTED EVERYTHING. THE DISALLOWAN CE BASED ON ASSUMPTION IS IN VIOLATION OF ALL THE PRINCIPL ES OF NATURAL JUSTICE AND LEGAL PROPRIETARY. LASTLY, NOTE THAT RATE OF INTEREST AS PROPOSED TO BE PA ID ON LOAN OF MR. MOHINDER SINGH WAS 12%. THE SAME WAS FIXED AS PE R THE PREVAILING MARKET RATES. THE PLR OF BANK FOR THAT PE RIOD WAS 10.5%. THEREFORE 12% WAS' MOST REASONABLE RATE. THE AO HAS NOT PLACED ANY MATERIAL ON RECORD AS TO HOW THE RATE OF 12% IS UNREASONABLE BUT FOR MAKING A BALD STATEMENT. IN ANY CASE HE CAN QUESTION ONLY EXCESS AMOUNT OF INTEREST PAID AND NO T THE ENTIRE AMOUNT. FURTHER MERE AGREEMENT TO PAY INTERE ST DOES NOT I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 13 VIOLATE ANY PROVISION UNLESS THERE IS ACTUAL PAYMENT. N O INTEREST HAS BEEN PAID TO MR. MOHINDER SINGH DURING THE YEAR. . 26. IN THIS CASE, THE EXEMPTION HAS BEEN DENIED WHEN T HE ASSESSEE IS FULLY COVERED U/S 10(23C) OF THE ACT, THE INCOME H AS TO BE EXEMPT. 27. APRPOS GROUND NO.6, IT IS PLEADED THAT THE ASSESSING OFFICER WITHOUT ASSIGNING ANY REASON HAS DISALLOWED THE DEPRECIA TION CLAIMED BY THE ASSESSEE. IT HAS NOT BEEN DISPUTED THAT THE FURNI TURE AND FIXED ASSETS, NAMELY, COMPUTER, FURNITURE AND FIXTURE, BUILD ING, LIBRARY, BOOKS, VEHICLES ETC. WERE UTILIZED FOR THE EQUITIES OF THE ASSESSEE. RELIANCE IS PLACED ON CBDT CIRCULAR NO.5(LXX-6) DATE D 19.6.1968. 28. APROPOS ADDITIONAL GROUND ABOUT MAXIMUM MARGINAL RATE, IT IS CONTENDED THAT THE ASSESSEES REGISTRATION U/S 11 HAS BEEN WRONGLY DENIED AND ALTERNATIVELY MAXIMUM RATE IS LEVIABLE, I NCOME BEING EXEMPT U/S 10(23C) OF THE ACT. 29. LD.DR. SUPPORTED THE ORDER OF THE LOWER AUTHORIT IES AND CONTENDS THAT THE HONBLE SUPREME COURT IN THE CASE OF RAJESH ZAVERI, 291 I.T.R. 500 HAS HELD THAT AN INTIMATION U/S 143(1)(A) CANNOT BE TREATED AS ORDER OF ASSESSMENT. THIS BEING SO, AUDITORS DISCLOSURE THA T A MEMBER OF THE SOCIETY HAD TAKEN LOAN FOR CONSTRUCTION OF BUI LDING WITHOUT PERMISSION OF THE SOCIETY WAS SUFFICIENT FOR THE ASSESSING O FFICER TO ISSUE NOTICE U/S 148 OF THE ACT. SINCE ASSESSING OFFICER FOUND THAT SPECIFIED PERSON COVERED U/S 13(3) HAS BEEN PROVIDED TH E FUNDS OF THE SOCIETY IN CONTRAVENTION OF SECTION 13(1)(C). THE RE GISTRATION U/S 11 WAS RIGHTLY REFUSED AND INCOME OF THE ASSESSEE WAS TAXED. IT IS PLEADED THAT HONBLE DELHI HIGH COURT JUDGMENT IN T HE CASE OF RANBAXY LABORATORIES LTD. VS. CIT (SUPRA) IS NOT APPLIC ABLE TO THE ASSESSEES CASE. I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 14 30. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. IT IS UNDISPUTED THAT THE ORIGI NAL ASSESSMENT WAS COMPLETED U/S 143(1) OF THE ACT. THE REVENUE PLEADE D THAT IN THIS CASE THE ASSESSING OFFICER POSSESSED WIDE POWERS OF REOPENIN G POWERS AND THE AUDITORS DISCLOSURE WHICH IS AS UNDER AMOU NTED TO INFORMATION: ONE MEMBER OF THE SOCIETY HAS TAKEN LOAN FOR CONSTRUC TION OF BUILDING AND BUILDING WAS PARTLY CONSTRUCTED. THE LO AN WAS TAKEN WITHOUT PERMISSION OF SOCIETY. THE EXECUTIVE COMMITTE E OF THE SOCIETY HAS DECIDED NOT TO ACCOUNT FOR ANY BOOKS THIS L OAN ACCOUNT AND CONSTRUCTION OF BUILDING FROM THIS LOAN. 31. ACCORDING TO THE REVENUE, THIS INFORMATION CONSTI TUTED SUFFICIENT REASONS FOR THE ASSESSING OFFICER TO ISSUE NOTICE U/S 148. ASSESSEE CONTENDS THAT THE ASSESSING OFFICERS POWER TO REOPEN THE ASSESSMENT, EVEN IN THE CASE OF SECTION 143(1) IS SUBJECT TO CONDIT IONS WHICH HAVE BEEN ENUNCIATED BY THE VARIOUS HIGH COURTS INCLUDING JURISDICTIONAL HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD. V S. CIT (SUPRA), WHEREIN IT HAS BEEN HELD IF THE REASONS FOR INITIATION OF PROCEEDINGS CEASE TO SURVIVE, ASSESSING OFFICER REASSESSMENT IS BAD IN LAW . THE POINT FOR CONSIDERATION BEFORE US IS WHETHER THE ASSESSING OFFICER HAD SUFFICIENT REASONS TO REOPEN PROCEEDINGS FOR ASSESSMENT YEA R 2006-07. THE REASONS RECORDED FOR BOTH THE YEARS I.E. ASSESSMENT YE ARS 2006-07 AND 07-08 ARE MECHANICALLY IDENTICAL. THE PROCEEDI NGS U/S 10(23C) WERE UNDISPUTEDLY TAKEN UP ONLY IN ASSESSMENT YEAR 2007- 08 AND THE FACTUM OF A LOAN DISPUTED CONVERSION OF DONATION OF O NE OF THE GOVERNING BODY MEMBERS, MOHINDER SINGH WAS EFFECTED I N THE BOOKS OF ACCOUNT IN ASSESSMENT YEAR 2005-06 AND NOT IN 2006-0 7. IN OUR VIEW, THE MERE NOTE ABOUT THE AUDIT BEING ON THE B ASIS OF TEST CHECK VOUCHER AND AUDITORS AUDIT DOES BECOME THE BASIS OF R EOPENING OF ASSESSMENT OF 2006-07 AS THE SAME IS THE STANDARD AUDITING PRACTICE. I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 15 32. IN CASE OF SECTION 143(1) ASSESSMENT, THE THEORY OF CHANGE OF OPINION MAY NOT BE APPLICABLE BUT THE NEXUS OF REASON S AND APPLICATION OF MIND ARE STILL IMPERATIVE FOR UPHOLDING THE ACTIO N TO REOPEN THE ASSESSMENT. THERE IS MENTION OF 2ND REASON IN THE ASSESSMENT ORDER ABOUT ANY MEMBER HAVING TAKEN ANY BUILDING LOAN. I N THE ORDER ONLY EXEMPTION U/S 11 IS DENIED. RESPECTFULLY FOLLOWING HO NBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF RANBAXY LABORATORIES LT D., WE ARE OF THE VIEW THAT AS FAR AS ASSESSMENT YEAR 2006-07 IS CONCERNED, THE REOPENING OF ASSESSMENT IS INVALID. 33. IN THE IMPUGNED ASSESSMENT YEAR I.E. 2006-07 BOTH T HE REASONS DO NOT SHOW ANY APPLICATION OF MIND OR MAKING RECORD OF REASONS ON ANY MATERIAL HAVING ANY OBJECTIVE BEARING. 34. WE CONSIDER IT APPROPRIATE TO CONSIDER THE MERIT OF THE CASE. IT HAS NOT BEEN DISPUTED BY THE LD.DR THAT THE ASSESSEE IS SOL ELY ENGAGED IN THE EDUCATION ACTIVITY AND EXCEPT RUNNIN G A CBSC RECOGNIZED SECONDARY SCHOOL, NO OTHER ACTIVITIES WERE CARRIED OUT. IN THESE CIRCUMSTANCES ALSO, WHAT SECTION 13 PRESCRIBES IS NOT TO CONSIDER THE AMOUNT OF DIVERSION OF INCOME AS APPLICATION OF I NCOME TOWARDS ITS CHARITABLE CAUSE. IT DOES NOT HOWEVER, HAS TO BE REFU SED EXEMPTION U/S 11. ASSUMING WORST AGAINST THE ASSESSEE EVEN IF THE REGI STRATION ALSO IS HELD TO BE REFUSED. THE ASSESSEE BEING ELIGIBLE U /S 10(23C), THE ENTIRE INCOME BECOME EXEMPT AS THE ASSESSEES RECEIPTS ARE IN THIS YEAR I.E. ASSESSMENT YEAR 2006-07 IS BELOW RE.1 CRORE. UNDER THESE CIRCUMSTANCES, ON MERITS ALSO ASSESSEE DESERVES ON ACCOUNT OF SECTION 10(23C) AND EDUCATIONAL INSTITUTION. ADDITIONAL GRO UND RAISED BY ASSESSEE IS ACCORDINGLY ALLOWED. 35. THE ISSUE ABOUT ENTRIES IN RESPECT OF MOHINDER SING H ALSO WAS FULLY EXPLAINED BEFORE LOWER AUTHORITIES. FROM THE PROCEEDINGS BEFORE I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 16 HONBLE DELHI HIGH COURT, IT CLEARLY EMERGES THAT TH ERE ARE DISPUTES AMONG THE MEMBERS OF THE SOCIETY. IN THE CIRCUMSTANCE S IT APPEARS THAT INSTEAD OF SOCIETYS FUNDS BEING USED BY SPECIFIED M EMBER THE SITUATION IS CONVERSED. AS DEPICTED BY LITIGATION, THE SITUATION IS MR. MOHINDER SINGH CLAIMS TO HAVE BORROWED THE HUGE LOAN S FROM BANK AND CONSTRUCTED BUILDING THE SOCIETY, THE LOANS ARE NOT BE ING ACKNOWLEDGED OR RECORDED BY SOCIETY. 36. IN OUR VIEW LOWER AUTHORITIES ON MERITS ALSO HAVE FAILED TO APPRECIATE THE RELEVANT EXPLANATION GIVEN BY THE ASSE SSEE . NO CASE HAS BEEN MADE OUT IN OBJECTIVE TERMS TO JUSTIFY BENEFI CIAL USE OF SOCIETIES FUND IN FAVOUR OF ANY MEMBER U/S 13(1)(C) R/ W SECTION 13(3). CONSEQUENTLY, WE HOLD THAT THE DENIAL OF REGISTRATION U/S 11 IS NOT JUSTIFIED WHICH IS RESTORED. 37. IN VIEW OF THESE OBSERVATIONS, THE ISSUE ON DEPRECIA TION AND MAXIMUM ORIGINAL RATE OF TAX BECOME INCONSEQUENTIAL AND THERE WILL BE NO TAXABLE INCOME. 38. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 16.12.2011. SD/- SD/- (K.D. RANJAN) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, DEC. 16, 2011. SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT I.T.A. NO.5452/DEL./2010 (A.Y. : 2006-07) 17