ITO, Madikeri V. Sri Sadguru Education Trust, Madikeri

ITA 549/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0703 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-11-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 01-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAVI K G SHRI JASON P BOAZ
• Keywords: Additional evidence
• Section: 194C; 201; 147

Judgement Text

PAGE 1 OF 11 ITA NO.549, 550 & 551/BANG/2 009 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A' BEFORE SHRI K P T THANGAL, VICE PRESIDENT AND SHRI N L KALRA, A.M. ITA NO.550 & 551/BANG/2009 (ASST. YEARS 2005-06 AND 2006-07) SRI SADGURU EDUCATION TRUST, 'SRINIKETAN'. NEAR PRIVATE BUS STAND, NO.421/9, BLK-9, MADIKERI. - APPELLANT VS THE INCOME TAX OFFICER, WARD-1, MADIKERI. - RESPONDENT ITA NO.549/BANG/2009 (ASST. YEAR 2006-07) (BY REVENUE) ASSESSEE BY : SHRI RAVI K G REVENUE BY : SHRI JASON P BOAZ O R D E R PER N L KALRA : THE ASSESSEE HAS FILED APPEALS AGAINST THE RESPECTIVE ORDERS OF THE LEARNED CIT(A) FOR THE ASS T. YEARS 2005-06 AND 2006-07. THE REVENUE HAS FILED APPEAL FOR THE ASST. YEAR 2006-07. 2. THE APPEALS WERE FIXED FOR THE FIRST TIME ON 20 THE AUGUST, 2009. THE SAME WAS ADJOURNED TO 31ST AUGUS T, 09 AT THE REQUEST OF DR BECAUSE THE APPEAL OF THE REVENUE WAS ALSO PAGE 2 OF 11 ITA NO.549, 550 & 551/BANG/2 009 2 TO BE CLUBBED WITH THE APPEALS OF THE ASSESSEE. ON 31ST AUGUST, 09, ADJOURNMENT WAS SOUGHT BY THE AR AND THE APPEALS WERE ADJOURNED TO 1ST SEPTEMBER, 09. ON 1ST SEPTEM BER, 09, THE AR PROMISED TO PAY THE AMOUNT OF DEMAND AS MENTI ONED IN THE ORDER OF THE TRIBUNAL WHILE DISPOSING OF THE ST AY PETITION. THE ASSESSEE WAS TO PAY RS.10 LAKHS EACH FOR THE ASS T. YEARS 2005-06 AND 2006-07. THE AR WAS REQUIRED TO PRODUC E CHALLAN IN RESPECT OF PAYMENT OF THE AMOUNT AS MENTIONED IN THE ORDER GRANTING STAY BEFORE THE NEXT DATE OF HEARING. THE HEARINGS WERE FIXED FOR 6TH OCTOBER, 09. THE ASSESSEE FAILE D TO PAY THE AMOUNT OF RS.10 LAKHS EACH FOR BOTH THE ASST. YEARS AND THEREFORE, THE STAY ORDER WAS VACATED. THE BENCH DI RECTED THE LEARNED DR TO INTIMATE THE ASSESSING OFFICER IN RES PECT OF VACATION OF STAY ORDER. ON 6TH OCTOBER, 09, THE AR SOUGHT TIME AND ACCORDINGLY, THE APPEALS WERE ADJOURNED TO 27TH OCTOBER, 09. ON 27TH OCTOBER, 09, AGAIN ADJOURNMEN T WAS SOUGHT AND THE APPEALS WERE ADJOURNED TO 25TH NOVEM BER, 09. ON 25TH NOVEMBER, 09, ADJOURNMENT WAS SOUGHT IN VIE W OF ADJOURNMENT APPLICATION FILED ON 24TH NOVEMBER, 09. IN THIS ADJOURNMENT APPLICATION, IT WAS MENTIONED THAT SINC E THE DR WILL BE SEEKING ADJOURNMENT, THEREFORE, ADJOURNMENT WAS SOUGHT FOR THE SECOND WEEK OF JANUARY, 2010. SINCE SUFFICIENT OPPORTUNITIES WERE ALREADY ALLOWED AND THE ASSESSEE HAS FAILED TO PAY THE DEMAND AS PER THE STAY ORDER PASSED BY THE TRIBUNAL, THE ADJOURNMENT APPLICATION FILED BY THE A SSESSEE'S PAGE 3 OF 11 ITA NO.549, 550 & 551/BANG/2 009 3 AR AS WELL AS BY THE REVENUE WERE REJECTED. HENCE W E ARE DISPOSING OF THE APPEALS ON THE BASIS OF THE MATERI AL ON RECORD. 3. FIRST WE SHALL DISPOSE OF THE APPEAL FOR THE AS ST. YEAR 2005-06. THE ASSESSEE HAS FILED CONCISE GROUND S OF APPEAL, WHICH ARE AS UNDER:- I) THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING ACTION OF THE LEARNED AO U/S 147 WHEN THE ESSENTIAL CONDITIONS FOR INVOKING THE AFORESAID SECTION DID NOT EXIST. II) THE LEARNED CIT(A) IS NOT JUSTIFIED IN IGNORING THE AFFIDAVIT FILED BY THE APPELLANT IN RESPECT OF CONFIRMATION OF VARIOUS PARTIES WITHOUT ANY REASON AND WITHOUT REFERRING TO THE SAID AFFIDAVIT IN HIS ORDER AT ALL. III) THE LEARNED CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT DOES NOT EXIST SOLELY FOR EDUCATIONAL PURPOSES BUT AS AN INSTRUMENT OF PROFIT MAKING. IV) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT, THE APPELLANT IS ELIGIBLE FOR EXEMPTION U/S 10(23C) UNDER CLAUSE (IIIAB) ALSO CONSIDERING THE FACT THAT THE ENTIRE REVENUE OF THE APPELLANT COMES FROM THE GOVERNMENT. V) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE BY THE LEARNED AO TO THE EXTENT OF RS.9,45,000/- MERELY ON THE BASIS THAT NO EVIDENCE WAS LED BY THE APPELLANT, DISMISSING THE CONTENTION OF THE APPELLANT THAT THE SERVICE PROVIDERS HAVE CONFIRMED THE RECEIPT OF THE SUMS IN RESPONSE TO LETTER DATED 28.6.2007 ISSUED BY THE THEN AO. PAGE 4 OF 11 ITA NO.549, 550 & 551/BANG/2 009 4 VI) THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE BY THE LEARNED AO TO THE EXTENT OF RS.4,75,000/- REPRESENTING COURSE FEE PAYABLE ON THE BASIS THAT THE APPELLANT IS FOLLOWING CASH SYSTEM OF ACCOUNTING. VII) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE COURSE FEE PAID BY THE APPELLANT TO VARIOUS PARTIES WAS NOT IN PURSUANCE OF ANY WORK CONTRACT SO AS TO FALL WITHIN THE MISCHIEF OF SECTION 194C. HE HAS FAILED TO APPRECIATE THAT THE COURSE FEE PAID BY THE APPELLANT FOR IMPARTING EDUCATION AND TRAINING PROGRAMME CANNOT BE REGARDED AS 'WORK'. VIII) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT EVEN IF THE APPELLANT IS REGARDED AS AN AOP, THE APPELLANT DOES NOT FALL WITHIN THE AMBIT OF SECTION 194C(1)(K) AS 'AOP OR BOI' WAS INSERTED IN THE AFORESAID SUB CLAUSE BY FINANCE ACT, 2008, WHICH CAME IN EFFECT FROM 01.06.2008 AND THE SAME WASN'T APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR. 4. GROUND NO.1 WE HAVE PERUSED THE RECORD. NEITHER THE ASSESSING OFFICER NOR THE LEARNED CIT(A ) HAS REPRODUCED THE REASONS FOR REOPENING OF THE ASSESSM ENT. THOUGH THE GIST OF REASONS IS AVAILABLE BUT IN ABSE NCE OF ACTUAL REASONS RECORDED, THIS GROUND OF APPEAL CANNOT BE D ISPOSED OF. THE HON'BLE APEX COURT IN THE CASE OF G K N DRIVESH AFTS (INDIA) LTD. V ITO (259 ITR 19) HAD PRESCRIBED A PR OPER PROCEDURE TO BE ADOPTED BY THE ASSESSEE IN CASE IN W HICH PAGE 5 OF 11 ITA NO.549, 550 & 551/BANG/2 009 5 ASSESSMENT IS REOPENED. IN CASE THE APPELLANT IS R EALLY INTERESTED IN PURSUING THE GROUND OF APPEAL NO.1, T HEN HE SHOULD ASK FOR THE COPY OF THE REASONS RECORDED AND MAY FILE OBJECTIONS BEFORE THE ASSESSING OFFICER. THE ASSES SING OFFICER WILL BE REQUIRED TO DISPOSE OF SUCH OBJECTI ONS BY A SPEAKING ORDER. WITH THIS OBSERVATION GROUND OF AP PEAL NO.1 IS DISPOSED OF. 5. GROUND NO.4 BEFORE THE LOWER AUTHORITIES, THE ASSESSEE HAS CONTENDED THAT INCOME IS EXEMPT U/S 10(23C)(IIIAB). BEFORE THE LOWER AUTHORITIES, THE ASSESSEE CLAIMED EXEMPTION UNDER CLAUSE (IIIAD) OF SECTION 1 0(23C). HOWEVER, THIS IS A LEGAL GROUND AND IT CAN BE RAISE D FOR THE FIRST TIME. SINCE THIS ISSUE HAS NOT BEEN DISPOSED OF BY THE ASSESSING OFFICER, THEREFORE, IN RESPECT OF THIS GR OUND OF APPEAL, THE MATTER IS RESTORED BACK ON THE FILE OF THE ASSESSING OFFICER. 6. GROUND NO.8 THIS ISSUE HAS ALSO NOT BEEN RAIS ED BEFORE THE LOWER AUTHORITIES, THEREFORE, THEY HAD NO OCCASION TO CONSIDER THE ISSUE. HENCE, THE ISSUE MENTIONED IN GROUND OF APPEAL NO.8 IS ALSO RESTORED BACK ON THE FILE OF TH E ASSESSING OFFICER. 7. GROUND NO.7 VIDE THIS GROUND OF APPEAL, IT IS MENTIONED THAT THE COURSE FEE PAID BY THE APPELLANT BY IMPARTING EDUCATION AND TRAINING PROGRAMME CANNOT B E REGARDED PAGE 6 OF 11 ITA NO.549, 550 & 551/BANG/2 009 6 AS 'WORK'. IN THE INSTANT CASE, THE ASSESSEE IS CO NDUCTING VOCATIONAL COURSES TO SC/ST AND OTHER SUCH CATEGORI ES OF CANDIDATES AS PER THE AGREEMENT ENTERED INTO WITH S OCIAL WELFARE DEPARTMENT, TRIBAL WELFARE DEPARTMENT AND D ISABILITY AND SENIOR CITIZENS DEPARTMENT, GOVT. OF KARNATAKA. SUCH VOCATIONAL TRAINING COURSES ARE CONDUCTED THROUGH O UT KARNATAKA STATE THROUGH THE ASSESSEE'S VARIOUS FRAN CHISEES. TO RUN VOCATIONAL COURSES, THE TRUST HAS GOT THE WO RK ORDER BY GIVING TENDER AS INVITED BY VARIOUS DEPARTMENTS BY RE MITTING EARNEST MONEY DEPOSIT. WHEN IT HAS GOT CONDUCTED VA RIOUS COURSES TO FRANCHISEE, THEN IT IS PAYING THE COURSE FEE TO SUCH FRANCHISEES. IT IS THE CONTENTION OF THE ASSESSEE THAT SUCH COURSE FEE PAID CANNOT BE REGARDED AS 'WORK'. 8. THE HON'BLE APEX COURT IN THE CASE OF ASSOCIATE D CEMENT CO. LTD. V CIT 201 ITR 435 HAD AN OCCASION T O CONSIDER THE MEANING OF THE WORD 'ANY WORK' AS MENTIONED IN S ECTION 194C OF THE I T ACT. BEFORE THE HON'BLE APEX COURT , IT WAS CONTENDED THAT THE MEANING OF CARRYING OUT A WORK SH OULD BE CONFINED TO 'WORKS CONTRACT'. THE HON'BLE APEX COU RT AT PAGE 440 OBSERVED AS UNDER:- 'WE SEE NO REASON TO CURTAIN OR TO CUT DOWN THE MEANING OF THE PLAIN WORDS USED IN THE SECTION. 'ANY WORK' MEANS ANY WORK AND NOT A 'WORKS CONTRACT', WHICH HAS A SPECIAL CONNOTATION IN THE TAX LAW. INDEED, IN THE SUB-SECTION, THE 'WORK' REFERRED TO THEREIN PAGE 7 OF 11 ITA NO.549, 550 & 551/BANG/2 009 7 EXPRESSLY INCLUDES SUPPLY OF LABOUR TO CARRY OUT A WORK. IT IS A CLEAR INDICATION OF THE LEGISLATURE THAT THE 'WORK' IN THE SUB- SECTION IS NOT INTENDED TO BE CONFINED TO OR RESTRICTED TO 'WORKS CONTRACT'. 'WORK' ENVISAGED IN THE SUB-SECTION, THEREFORE, HAS A WIDE IMPORT AND COVERS 'ANY WORK' WHICH ONE OR THE OTHER OF THE ORGANIZATIONS SPECIFIED IN THE SUB-SECTION CAN GET CARRIED OUT THROUGH A CONTRACTOR UNDER A CONTRACT AND FURTHER IT INCLUDES OBTAINING BY ANY OF SUCH ORGANIZATIONS SUPPLY OF LABOUR UNDER A CONTRACT WITH A CONTRACTOR FOR CARRYING OUT ITS WORK WHICH WOULD HAVE FALLEN OUTSIDE THE 'WORK', BUT FOR ITS SPECIFIC INCLUSION IN THE SUB-SECTION'. 9. CONSIDERING THE INTERPRETATION OF THE WORD 'WOR K' AS HELD BY THE HON'BLE APEX COURT, WE HAVE NO HESITA TION TO HOLD THAT THE COURSE FEE PAID BY THE ASSESSEE TO VAR IOUS FRANCHISEES IS COVERED UNDER THE WORD 'WORK'. HENCE , GROUND NO.7 IS DISMISSED. 10. GROUND NO.3 SINCE THE FINDING IN RESPECT OF SUCH GROUND OF APPEAL IS RELEVANT TO DISPOSE OF GROUND O F APPEAL NO.4 ON THE FILE OF THE ASSESSING OFFICER, THEREFORE, GR OUND OF APPEAL NO.3 IS ALSO RESTORED BACK ON THE FILE OF TH E ASSESSING OFFICER. 11. GROUND NOS.2, 5 AND 6 RELATE TO ALLOWABILITY OF EXPENSES. PAGE 8 OF 11 ITA NO.549, 550 & 551/BANG/2 009 8 11.1 BEFORE THE LEARNED CIT(A), THE ASSESSEE HAS F ILED AN AFFIDAVIT. IN THE AFFIDAVIT, IT HAS BEEN CONFIR MED THAT THE PAYMENT IS MADE BY CASH AFTER WITHDRAWING THE SUM FRO M THE BANK ACCOUNT. THE LEARNED CIT(A) HAS NOT GIVEN A F INDING AS TO WHETHER HE IS ADMITTING SUCH ADDITIONAL EVIDENCE. THE AO HAS ALSO NOT BEEN AFFORDED ANY OPPORTUNITY. WE THEREFORE FEEL THAT THE ISSUE OF ALLOWABILITY OF EXPENSES IS TO BE RESTORED BACK ON THE FILE OF THE AO. IT IS MADE CLEAR THAT ONUS IS ON THE ASSESSEE TO ESTABLISH THE INCURRING OF EXPENDITURE. THE REVENUE HAS ALREADY DISCHARGED THE ONUS BY CONFRONTI NG THE ASSESSEE THAT THE RECIPIENTS HAVE BEEN INFORMED THA T THEY HAVE NOT RECEIVED THE PAYMENT. THUS, THE ASSESSEE WILL BE ALLOWED OPPORTUNITY TO PLACE EVIDENCES IN SUPPORT OF THE INC URRING OF EXPENSES. HENCE, THE ISSUE OF DISALLOWANCE OF EXPE NSES AS MENTIONED IN GROUND NOS.5 & 6 ARE RESTORED BACK ON THE FILE OF THE ASSESSING OFFICER. 12. ASST. YEAR 2006-07 GROUNDS OF APPEAL NO.1 TO 8 ARE THE SAME AS PER THE ASST. YEAR 2005-06. HENCE, OUR FINDINGS ARE THE SAME IN RESPECT OF SUCH GROUNDS OF APPEAL AS PER OUR DISCUS SION FOR THE ASST. YEAR 2005-06. 13. THE 9TH GROUND OF APPEAL IS THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWAN CE MADE BY PAGE 9 OF 11 ITA NO.549, 550 & 551/BANG/2 009 9 THE ASSESSING OFFICER TO THE EXTENT OF RS.19,55,000 /- PAID TO SHRI SADGURU INDUSTRIAL TRAINING INSTITUTE. 13.1 IT IS MENTIONED IN THE GROUND OF APPEAL THAT THE AMOUNTS WERE DRAWN BY THE TRUSTEES FOR THE PURPOSE O F MEETING THE EXPENDITURE ON THE ACTIVITIES OF IMPART ING EDUCATIONAL OR VOCATIONAL PROGRAMME. SINCE IN RESP ECT OF DISALLOWANCE OF EXPENSES, WE HAVE RESTORED THE MATT ER, THEREFORE, THIS ISSUE IS ALSO RESTORED BACK ON THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE WILL BE ALLOWED AN OPPORTUNITY TO PLACE THE EVIDENCE TO SHOW THAT THE EXPENSES HAV E BEEN INCURRED OUT OF THE WITHDRAWALS MADE BY THE TRUSTEES . 14. GROUND OF APPEAL NO.10 IS AGAINST THE CONFIRMA TION OF DISALLOWANCE OF RS.11,95,000/-. 14.1 THIS ISSUE IS ALSO RESTORED BACK ON THE FILE OF THE ASSESSING OFFICER AS THE MATTER IS TO BE RECONSIDER ED BY THE ASSESSING OFFICER FOR CONSIDERING THE EVIDENCES, IF ANY, TO BE PLACED BY THE ASSESSEE. 15. THE 11TH GROUND OF APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE IN RESPECT OF DIFFEREN CE OF EARNEST MONEY DEPOSIT AS SHOWN BY THE ASSESSEE IN THE BALANCE SHEET AND AS SHOWN BY THE DEPARTMENT. PAGE 10 OF 11 ITA NO.549, 550 & 551/BANG/ 2009 10 15.1 THE ASSESSEE HAS SHOWN A SUM OF RS.11,97,379/ - AS EMD WHILE VERIFICATION CARRIED OUT BY THE ASSESSING OFFICER SHOWN THE EMD AT RS.8,95,000/-. SINCE THE SUM SHOW N BY THE ASSESSEE IS MORE AS COMPARED TO THE DETAILS COLLECT ED BY THE ASSESSING OFFICER, IT IS NOT UNDERSTANDABLE AS TO H OW THE DIFFERENT CAN BE TREATED AS INCOME. THE ISSUE HAS NOT BEEN PROPERLY APPRECIATED BY THE ASSESSING OFFICER; HENCE, THIS ISSUE IS ALSO RESTORED BACK ON THE FILE OF THE AO. 16. THE REVENUE IS AGGRIEVED IN RESPECT OF RELIEF ALLOWED BY THE LEARNED CIT(A) IN RESPECT OF COURSE F EE PAID TO THE EXTENT OF RS.8,35,000/- AND RS.1 LAKH TO ITS OW N BRANCH. 16.1 IN THE STATEMENT OF FACTS, IT IS MENTIONED TH AT THE ASSESSEE CONDUCTS VOCATIONAL AND EDUCATION TRAINING PROGRAMMES ENTRUSTED TO IT BY VARIOUS GOVERNMENT DEPARTMENTS THROUGH BIDDING PROCESS. SUCH VOCATION AL EDUCATION AND TRAINING PROGRAMMES ARE ADMINISTERED AND THE GOVERNMENT DEPARTMENTS THROUGH AWARDS SUCH WORK ALS O SUPERVISE AND MONITOR THE PROGRAMMES. AT PAGE 15 O F THE ORDER OF THE LEARNED CIT(A), THE LEARNED CIT(A) HAS ALLOWED THE EXPENDITURE OF RS.8,35,000/- ON THE GROUND THAT THE BRANCH HAS SOME ACTIVITIES AND SUCH ACTIVITIES HAVE NOT BEEN DOUBTED AND LOOKING TO SUCH FACT, THE EXPENDITURE I S REASONABLE CONSIDERING THE TURNOVER OF THE YEAR. WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). PAGE 11 OF 11 ITA NO.549, 550 & 551/BANG/ 2009 11 17. SIMILAR IS THE POSITION WITH RESPECT TO ALLOWI NG OF EXPENDITURE OF RS.1 LAKH. THUS, THE LEARNED CIT(A) , AFTER APPRECIATING THE FACT ON RECORD, HAS ALLOWED THE EX PENSES. WHEN THERE ARE NO DETAILS THEN ONE HAS TO MAKE ESTI MATE AND WE DO NOT FEEL THAT THE ESTIMATED EXPENDITURE ALLOW ED BY THE LEARNED CIT(A) IS UNREASONABLE. HENCE, THE ORDER O F LEARNED CIT(A) ON THE ISSUE RAISED BY THE REVENUE, IS CONFIR MED. 18. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E ARE PARTLY ALLOWED WHILE APPEAL FILED BY THE REVENUE IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON 30TH NOVEMBER, 2009. SD/- SD/- (K P T THANGAL) (N L KALRA) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DTD.30/11/2009 COPY TO : 1. THE ASSESSEE 2.THE REVENUE 3. THE CIT( A) CONCERNED.4. THE CIT CONCERNED. 5. THE DR 6. GUAR D FILE. 7. GF, ITAT, NEW DELHI. MSP/27.11. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.