DCIT, Kanpur V. M/s. Hilizer Borden Education Centre, Kanpur

ITA 559/LKW/2010

• Counselvise Citation: 55923714 RSA 2010
• Duration Of Justice: 3 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 25-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK MISHRA
• Keywords: Unexplained expenditure; Charitable institution
• Section: 69C; 12AA; 68; 12; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.559/LKW/2010 ASSESSMENT YEAR:2007 - 08 DY.C.I.T. - 1, KANPUR. VS. M/S HILIZER BORDEN EDUCATION CENTRE 117/K/30, SARVODAYA NAGAR, KANPUR. PAN:AAATH5414P (APPELLANT) (RESPONDENT) APPELLANT BY SHRI VIVEK MISHRA, CIT, D.R. RESPONDENT BY SHRI RAKESH GARG, ADVOCATE DATE OF HEARING 06/03/2014 DATE OF PRONOUNCEMENT 2 3 /05/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT (A) - II, KANPUR DATED 15/06/2010 FOR ASSESSMENT YEAR 2007 - 2008. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE SOCIETY IS WORKING FOR CHARITABLE PURPOSES AND IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF INCOME TAX ACT, 1961, WITHOUT APPRECIATING THE FACTS THAT DURING THE CO URSE OF SURVEY VARIOUS FINANCIAL IRREGULARITIES WERE FOUND AND ESTABLISHED DURING THE ASSESSMENT PROCEEDINGS. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.82,75,876/ - MADE U/S 69C OF THE INCOME TAX ACT, 1961, ON ACCOUNT OF UNEXPLAINED EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS NOT 2 ABLE TO PROVE THE SOURCE OF SUCH EXPENDITURE INCURRED BY THE ASSESSEE. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.38,00,000/ - AND RS.79,42,000/ - MADE UNDER SECTION 68 OF THE INCOME TAX ACT, 1961, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT PROVE THE SOURCE OF THESE DEPOSITS IN THE BANK ACCOUNTS THROUGH CHEQUES. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.4,23,39,659/ - MADE UNDER SECTION 69A OF THE INCOME TAX ACT, 1961, BY IGNORING THE MATERIAL AND DOCUMENTA RY EVIDENCE FOUND AND IMPOUNDED DURING THE COURSE OF SURVEY PROCEEDINGS. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN IGNORING THE EVIDENTIARY VALUE OF THE MATERIAL FOUND AND IMPOUNDED DURING THE COURSE SURVEY PROCEEDING IN VIOLATION OF THE SPIRIT OF THE DECISION GIVEN BY THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF SRI M. VISVESWARAYA EDUCATIONAL TRUST REPORTED AT 319 ITR 425 (2009). 6. THAT THE ORDER OF THE LD. CIT (A) - II, KANPUR DATED 15.06.2010 NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFICER DATED 29.12.2009 BE RESTORED. 7. THAT THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF APPEAL MENTIONED ABOVE AND/OR TO ADD ANY FRESH GROUNDS AS AND WHEN IT IS REQUIRED TO DO SO. 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED LEARNED A.R. OF THE ASSESSEE OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THERE WERE THREE ADDITIONS MADE BY THE ASSESSING OFFICER TOTALING TO 3 RS. 6,40,36,810/ - COMPRISING OF RS.82 ,75,876/ - BEING ADDITION MADE BY THE ASSESSING OFFICER U/S 69C ON ACCOUNT OF ALLEGED UNEXPLAINED EXPENDITURE, RS.1,18,44,650/ - U/S 68 AND RS.4,23,39,659/ - U/S 69A OF THE ACT. WHEN THE MATTER WAS CARRIED BY THE ASSESSEE IN APPEAL BEFORE THE CIT(A), ALL THE THREE ADDITIONS WERE DELETED BY CIT(A) AND AGAINST THIS ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4.1 REGARDING GROUND NO. 1 I.E. REGARDING DECISION OF CIT(A) THAT THE ASSESSEE SOCIETY IS ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT, WE FIND THAT THIS ISSUE WAS DECIDED BY CIT(A) AS PER PARA NO. 5 TO 7 OF HIS ORDER AND THESE PARAS ARE REPRODUCED HEREIN BELOW FOR THE SAKE OF READY REFERENCE: 5. IN THE ENTIRE ASSESSMENT ORDER THE A.O. HAS NOT DISPUTED THE FACT THAT THE SOCIETY IS IMPARTING EDUCATION. THERE IS NO MENTION IN THE ENTIRE ORDER THAT THE ASSESSEE SOCIETY IS NOT RUNNING EDUCATIONAL INSTITUTIONS. AS A MATTER OF FACT, THE AO ADMITS THAT THE ASSESSEE SOCIETY IS RUNNING EDUCATIONAL INSTITUTIONS. AS FAR AS THE OBJECTS OF THE ASSESSEE SO CIETY ARE CONCERNED THE AO HAS NOWHERE OBJECTED THAT THE SAME ARE NOT OF CHARITABLE NATURE AND AS FAR AS THE ACTIVITIES ARE CONCERNED THE AO HIMSELF HAS ADMITTED IN THE ORDER THAT THE ASSESSEE WAS RUNNING EDUCATIONAL INSTITUTIONS I.E. ENGINEERING COLLEGE, WHICH IS IN CONFORMITY AND CONSONANCE AND IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY WHICH WERE CHARITABLE IN NATURE. AS A MATTER OF FACT THE AO HIMSELF IN THE ASSESSMENT ORDER HAS DESCRIBED THE NATURE AND THE ACTIVITIES OF THE SOCIETY IN PARA 03 AS UND ER: '03.DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE HAS SHOWN INCOME FROM RUNNING OF HILIZER BORDEN EDUCATION CENTRE AT 608 - C, PANKI, KANPUR AND HAD ALSO STARTED CONSTRUCTION OF 'BHABHA INSTITUTE OF TECHNOLOGY' WHICH STARTED FUNCTIONING IN SUBSEQUENT Y EARS. WHILE MAKING INVESTMENT IN DEVELOPING THE INFRASTRUCTURAI FACILITIES OF BHABHA INSTITUTE OF TECHNOLOGY, IT WAS INTENDED TO START VARIOUS COURSES SUCH AS B.TECH., MBA, ETC. AFTER OBTAINING PRIOR APPROVALS OF UTTAR PRADESH TECHNICAL UNIVERSITY AND ALL INDIA COUNCIL OF TECHNICAL EDUCATION (FOR SHORT, AICTE 4 HEREINAFTER). THE ASSESSEE IS A SOCIETY REGISTERED WITH THE REGISTRAR OF SOCIETIES, U.P. (KANPUR) VIDE REGISTRATION NO. 345/2000 - 01 DATED 03.08 - 2000. HOWEVER, THE APPLICATION FOR REGISTRATION UNDER SEC TION 12AA WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT - 1, KANPUR ONLY DURING THE F.Y. 2006 - 07 IN TERMS WHEREOF THE REGISTRATION WAS GRANTED TO THE ASSESSEE WITH EFFECT FROM 03.10.2006 VIDE LETTER F.NO. 388 / 1093/EXEMP./CIT - L/12AA/REG./JUL/KNP/122 DATED 1 .04.2007 AS SUCH IN VIEW OF THE PROVISO (II) TO THE PROVISIONS CONTAINED UNDER SECTION 12A(1) OF THE ACT, THE PROVISIONS OF SECTION 11 AND 12 ARE APPLICABLE SUBJECT TO DISCUSSION MADE IN THE SUCCEEDING PARAGRAPHS'. 5.1 IT UNDISPUTEDLY REMAINS THAT THE PREDOMINANT OBJECT OF THE ASSESSEE BEING EDUCATION AND THE ASSESSEE SOCIETY HAVING CARRYING ON ITS ACTIVITIES IN ACCORDANCE TO ITS OBJECTS CANNOT BE SAID TO BE CARRYING NON - CHARITABLE ACTIVITY. 5.2 EDUCATION FALLS WITHIN THE DEFINITION OF CHARITABLE PURPO SES. SECTION 2(15) DEFINES CHARITABLE PURPOSES AS UNDER: 2(15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY . 5.3 IN VIEW OF THE ABOVE FACT, THE FINDING OF THE A.O. THAT THE ASSESSEE SOCIETY IS NOT CARRYING OUT ANY CHARITABLE ACTIVITY IS MISPLACED. THE ASSESSEE SOCIETY IS ADMITTEDLY RUNNING EDUCATIONAL INSTITUTIONS. 6. THE OTHER REASON, THAT IS OF FINANCIAL IRREGULARITIES. DETAILED WRITTEN SUBMISSIONS HAV E BEEN FILED EXPLAINING THAT THERE IS NO FINANCIAL IRREGULARITIES. IT HAS BEEN EXPLAINED BY THE ASSESSEE APPELLANT THAT THE ALLEGATION OF THE AO THAT THE ASSESSEE SOCIETY IS RUNNING ENGINEERING COLLEGE IN THE NAME OF BHABHA GROUP OF INSTITUTIONS AT ANOHA, RASOOLABAD, KANPUR DEHAT IN ASSOCIATION WITH TWO OTHER SOCIETIES NAMELY NAV UDAI SHIKSHA EVAM JAN KALYAN SEWA SAMITI AND ABHINAV SHIKSHA EVAM JAN KALYAN SEWA SAMITI WITH A COMMON MANAGEMENT AS A JOINT VENTURE IN THE NAME OF 'BHABHA GROUP OF INSTITUTIONS' I S MISPLACED. THE TWO SOCIETIES AS REFERRED TO BY THE AO IN THE ASSESSMENT ORDER ARE TWO DISTINCT AND INDEPENDENT SOCIETIES IN THEMSELVES DULY REGISTERED BOTH WITH THE REGISTRAR OF THE SOCIETIES AND WITH THE COMMISSIONER OF INCOME TAX KANPUR. THEY HAVE THEI R OWN 5 MEMORANDUM AND ARE SEPARATELY ASSESSED TO INCOME TAX. THE TWO SOCIETIES ARE INDEPENDENTLY RECOGNIZED BOTH BY UPTU AND AITCE AND HAVE DIFFERENT COURSES AND CURRICULUM. NOT ONLY THIS THEY ARE INDEPENDENT IN EVERY RESPECT HAVING SEPARATE PREMISES AND SE PARATE BANK ACCOUNTS. EVEN THE STUDENTS AND THE FACULTY ARE NOT COMMON. MERELY BECAUSE THE SOME OF THE MEMBERS OF THE SOCIETY ARE COMMON IT CAN NEVER BE CONCLUDED THAT THE SOCIETIES ARE NOT GENUINE. THE ALLAHABAD HIGH COURT IN THE CASE OF CITY MONTESSORI S CHOOL 315 ITR 48 ON PAGE 65 HAS HELD 'IT WAS NOT OPEN FOR THE CHIEF COMMISSIONER OF INCOME TAX TO GO INTO THE CONSTITUTIONAL VALIDITY OF THE SOCIETY AS THE SOCIETY IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860, WHICH IS A SELF CODE.' THUS, THE SO CIETIES ACT IN ITSELF IS AN INDEPENDENT SELF - CODE AND THERE BEING NO RESTRICTION IN THE FORMATION OR CONSTITUTION OF A SOCIETY/SOCIETIES WITH COMMON MEMBERS, NO ADVERSE INFERENCE CAN BE DRAWN. 6.1 THE TWO SOCIETIES AS REFERRED TO ABOVE MAINTAIN SEPARATE B OOKS OF ACCOUNTS AND THE SAME ARE SUBJECT TO AUDIT. THE RETURN OF INCOME HAS BEEN FILED AND IT HAS NOT BEEN REFUTED BY THE AO. AS FAR AS THE CONSOLIDATED BOOKS OF ACCOUNTS ARE CONCERNED, WHICH WERE FOUND FROM THE POSSESSION OF SHRI GAURAV A COMMON MEMBER O F THE SOCIETY IT WAS EXPLAINED THAT THE SAME WAS FOR SHRI GAURAV TO EXPLAIN AND IN ANY CASE IT HAD NOTHING TO DO WITH THE SOCIETY. IT IS ENTIRELY A DIFFERENT MATTER AS TO WHICH MEMBER IS MAINTAINING WHAT RECORD AND FOR WHAT PURPOSES. EVEN OTHERWISE NOTHING INCRIMINATING HAS BEEN FOUND IN THE SAME. ONLY A PRESUMPTION HAS BEEN INFERRED THAT THE AFFAIRS OF THE SOCIETY ARE NOT GENUINE. SUSPICION HOW SO EVER GRAVE CANNOT FORM PART OF PROOF. 6.2 AS REGARDS THE TWO DIFFERENT BALANCE SHEETS WHICH WERE FOUND AT THE TIME OF SU RVEY UNDER SECTION 133A, ONE AS FILED WITH AICTE AND THE OTHER WITH THE INCOME - TAX RETURN IT WAS REPEATEDLY EXPLAINED BY THE ASSESSEE THAT THE BALANCE SHEET FILED WITH THE AICTE IS A PROJECTED BALANCE SHEET AND WAS FOUND IN THE FILE OF AICTE. THE ONE ATTACHED WITH THE INCOME - TAX RETURN IS THE ACTUAL BALANCE SHEET AS PER THE BOOKS OF ACCOUNTS MAINTAINED. THE A.O. MADE ENQUIRIES FROM A I CTE ALSO. HOWEVER, NO REPLY AS SUCH WAS RECEIVED. IT HAS BEEN ALSO SUBMITTED THAT THE LD. CIT WHILE EXAMINING T HE PETITION FOR REGISTRATION UNDER SECTION 12AA, OF THE TWO SOCIETIES NAMELY, NAV UDAI SHIKSHA EVAM JAN KALYAN SEWA SAMITI AND ABHINAV SHIKSHA EVAM JAN KALYAN SEWA SAMITI, HAD CONSIDERED THIS ASPECT AND HAD DENIED REGISTRATION TO THE SAID 6 SOCIETIES. THE HO N'BLE TRIBUNAL WHILE GRANTING THE REGISTRATION UNDER SECTION 12AA VIDE ITS ORDER DATED APRIL 13, 2010 IN PARA 10.1 HAS HELD AS UNDER: 'SO FAR AS THE ALLEGATION OF MANIPULATING AND FORGING VITAL DOCUMENTS IS CONCERNED WE ARE OF THE OPINION THAT THE ALLEGAT IONS SEEMS TO HAVE BEEN MADE SIMPLY ON THE BASIS OF AN UNSIGNED BALANCE SHEET IN THE CASE OF NAV UDAI SHIKSHA EVAM JAN KALYAN SEWA SAMITI FOUND DURING THE COURSE OF SURVEY BUT SINCE THE ASSESSEE HAD, TIME AND AGAIN STATED THAT THESE DOCUMENTS WERE SHOWING THE PROJECTED FIGURES AND THE REVENUE HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THESE DOCUMENTS WERE THE CORRECT STATE OF AFFAIRS, THE ASSESSEE'S PLEA THAT THE BALANCE SHEETS FILED ALONG WITH THE RETURNS OF INCOME WERE THE CORRECT STATE OF AFFAIR S HAS TO BE ACCEPTED AND THEREFORE, THIS ALLEGATION IS NOT SUSTAINABLE' 6.3 THE ASSESSEE ON ITS PART HAS FILED A STATEMENT BROADLY EXPLAINING THE DIFFERENCES IN THE TWO BALANCE SHEETS. MY ATTENTION HAS BEEN DRAWN TO THE STATEMENT OF BANK ACCOUNTS FILED B EFORE THE A.O. EXPLAINING THAT THE BALANCES APPEARING IN THE PROJECTED BALANCE SHEET ARE ALL ARTIFICIAL AND INFLATED BALANCES. IN FACT THE BALANCES APPEARING IN THE PROJECTED BALANCE SHEET ARE NOWHERE EVEN REMOTELY CONNECTED WITH THE ACTUAL BALANCES. EVEN THE FIGURES OF FDRS AS MENTIONED IN THE PROJECTED BALANCE SHEET ARE NOT CORRECT. THE A.O. ON HIS PART HAD ENQUIRED DIRECTLY FROM THE BANKS. THE BANK HAS CONFIRMED THAT THE ACTUAL BALANCES IN THE ACCOUNTS MAINTAINED WITH THE BANKS ARE AS PER THE BALANCE SHE ET FILED ALONG WITH THE RETURN OF INCOME. THE INQUIRY FROM THE BANK ITSELF SUPPORTS THE ASSESSEE'S CASE. IN VIEW OF THE ABOVE FACTUAL POSITION, THE SUBMISSION ADVANCED BY THE ASSESSEE DOES CARRY WEIGHT AND CANNOT BE BRUSHED ASIDE. THERE CAN BE NO DOUBT THA T THE BALANCE SHEET FOUND AT THE TIME OF SURVEY IN THE FILE CAPTIONED FOR AITCE PURPOSES IS NOTHING BUT A PAPER PREPARED FOR SEEKING APPROVALS FROM DIFFERENT BODIES. THIS IS A CASE QUITE AKIN TO THAT OF DECLARING HIGHER VALUE OF STOCK TO BANK FOR OBTAINING LARGE AMOUNT OF LOAN. 6.4 THE ASPECT OF LOANS AND ADVANCE APPEARING IN THE NAME OF RAJ KUSHWAHA AND THAT BEING HIT BY THE PROVISIONS OF SECTION 13( 1 )(C) IT HAS BEEN EXPLAINED THAT RAJ KUSHWAHA IS NEITHER A FOUNDER OR A MEMBER OF THE SOCIETY NOR IS IN ANY MANNER TO THE MEMBERS OF THE SOCIETY. HE WAS APPOINTED AS A FACULTY AND FUNDS 7 TO HIM FOR SETTING UP THE INFRASTRUCTURE OF THE FACULTY. HE ABANDONED THE INSTITUTION WITHOUT INFORMING AND HAS NOT BOTHERED TO RETURN THE FUNDS NOR HAS HE GIVEN ITS DETAILS. THE AMOUNT IS RECOVERABLE FROM HIM. FURTHER, NO FUNDS HAVE BEEN LENT TO ANY MEMBER OF THE MANAGEMENT COMMITTEE OF THE SOCIETY. THERE IS NO VIOLATION OF SECTION 13 OF THE INCOME TAX ACT. 7. ACCORDINGLY, I HOLD THAT THE ASSESSEE SOCIETY HAS BEEN ESTABLISHED FOR CHARITABLE PURPOSES IN AS MUCH AS ITS PRIME OBJECT IS IMPARTING OF EDUCATION WHICH HAS BEEN HELD TO BE A CHARITABLE PURPOSE AS PER THE INCOME TAX ACT AND IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. 4. 2 FROM THE ABOVE PARAS OF CIT(A), WE FIND THAT THIS ISSUE WAS DECIDED BY LEARNED CIT(A) AFTER GIVING THIS FINDING THAT IN THE ENTIRE ASSESSMENT ORDER, THE ASSESSING OFFICER HAD NOT DISPUTED THE FACT THAT THE ASSESSEE SOCIETY IS IMPARTING EDUCATION. REGARDING THE ALLEGED FINANC IAL IRREGULARITIES, IT IS NOTED BY CIT(A) THAT THE ALLEGATION OF THE ASSESSING OFFICER THAT THE ASSESSEE SOCIETY IS RUNNING ENGINEERING COLLEGE IN THE NAME OF BHABHA GROUP OF INSTITUTIONS AT ANOHA, RASOOLABAD, KANPUR DEHAT IN ASSOCIATION WITH TWO OTHER SOC IETIES NAMELY NAV UDAI SHIKSHA EVAM JAN KALYAN SEWA SAMITI AND ABHINAV SHIKSHA EVAM JAN KALYAN SEWA SAMITI WITH A COMMON MANAGEMENT AS A JOINT VENTURE IN THE NAME OF 'BHABHA GROUP OF INSTITUTIONS' IS MISPLACED. HE HAS GIVEN A FINDING THAT THE TWO SOCIETIE S AS REFERRED TO BY THE AO IN THE ASSESSMENT ORDER ARE TWO DISTINCT AND INDEPENDENT SOCIETIES IN THEMSELVES DULY REGISTERED BOTH WITH THE REGISTRAR OF THE SOCIETIES AND WITH THE COMMISSIONER OF INCOME TAX KANPUR. HE HAS ALSO GIVEN A FINDING THAT T HEY HAVE THEIR OWN MEMORANDUM AND ARE SEPARATELY ASSESSED TO INCOME TAX. HE HAS ALSO GIVEN A FINDING THAT THE TWO SOCIETIES ARE INDEPENDENTLY RECOGNIZED BOTH BY UPTU AND AITCE AND HAVE DIFFERENT COURSES AND CURRICULUM. THIS FINDING IS ALSO GIVEN BY THE CIT(A) THA T E VEN THE STUDENTS AND THE FACULTY ARE NOT COMMON. THEREAFTER, HE HAS GIVEN A FINDING THAT M ERELY BECAUSE SOME OF THE MEMBERS OF THE SOCIETY ARE COMMON , IT CANNO T BE CONCLUDED THAT THE SOCIETIES ARE NOT 8 GENUINE. THEREAFTER , HE HAS REFERRED THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CITY MONTESSORI SCHOOL REPORTED IN 315 ITR 48 WHEREIN IT WAS HELD THAT I T WAS NOT OPEN FOR THE CHIEF COMMISSIONER OF INCOME TAX TO GO INTO THE CONSTITUTIONAL VALIDITY OF THE SOCIETY AS THE SOCIETY IS REGISTER ED UNDER THE SOCIETIES REGISTRATION ACT 1860, WHICH IS A SELF CODE. 4.3 THE CIT(A) HAS ALSO GIVEN A FINDING THAT THESE TWO SOCIETIES ARE MAINTAINING SEPARATE BOOKS OF ACCOUNT WHICH ARE AUDITED ALSO AND RETURN OF INCOME HAS BEEN FILED BY THEM. REGARDING T HE CONSOLIDATED BOOKS OF ACCOUNT, WHICH WERE FOUND FROM THE POSSESSION OF SHRI GAURAV, A COMMON MEMBER OF THE SOCIET IES , IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE SAME WAS FOR SHRI GAURAV TO EXPLAIN AND IN ANY CASE , IT HAD NOTHING TO DO W ITH THE SOCIETY. 4.4 THESE FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE. MOREOVER, MERELY BECAUSE A CONSOLIDATED BOOKS OF ACCOUNT WAS FOUND FROM THE POSSESSION OF A COMMON MEMBER OF TWO SOCIETIES, IT CANNOT BE CONCLUDED THAT BOTH THESE SOCIETIES ARE NOT EXISTING INDEPENDENTLY. WHEN THE OTHER FACTS, SUCH AS SEPARATE REGISTRATION, SEPARATE BOOKS OF ACCOUNT, SEPARATE AUDIT REPO RT, SEPARATE INCOME - TAX RETURN FILED BY THEM ARE PROV ING THAT BOTH THE SOCIETIES ARE INDEPENDENT HAVING SEPARATE STUDENTS, SEPARATE FACULTIES AND ARE INDEPENDENTLY RECOGNIZED BY UPTU & AITCE. BY IGNORING THESE FACTS IN SUPPORT OF SEPARATE EXISTENCE OF THE SE SOCIETIES, IT CANNOT BE CONCLUDED ON THE BASIS OF MERE CONSOLIDATED BOOKS OF THESE SOCIETIES FOUND FROM THE POSSESSION OF A COMMON MEMBER OF THESE SOCIETIES THAT THESE SOCIETIES ARE NOT PROPER AND INDEPENDENT. 4.5 REGARDING THE BALANCE SHEET FOUND IN C OURSE OF SURVEY FROM THE ASSESSEE SOCIETY SHOWING DIFFERENT FIGURES AS COMPARED TO AUDITED BALANCE SHEET FILED WITH THE RETURN OF INCOME, IT WAS EXPLAINED BY THE ASSESSEE BEFORE 9 THE CIT(A) THAT THE SAME WAS PROJECTED BALANCE SHEET AND IT WAS FOUND IN THE F ILE OF AICTE. REGARDING THE DIFFERENCES IN THE FIGURES IN THESE TWO BALANCE SHEETS, IT IS NOTED BY CIT(A) THAT THE BALANCES APPEARING IN THE PROJECTED BALANCE SHEET ARE NOWHERE EVEN REMOTELY CONNECTED WITH THE ACTUAL BALANCES. HE HAS GIVEN A FINDING THAT EVEN THE FIGURES OF FDRS AS MENTIONED IN THE PROJECTED BALANCE SHEET ARE NOT CORRECT. HE HAS ALSO GIVEN A FINDING THAT ENQUIRY WAS MADE BY THE ASSESSING OFFICER FROM THE BANKS AND BANKS HAVE CONFIRMED THAT THE ACTUAL BALANCES IN THE ACCOUNTS MAINTAINED W ITH THE BANKS ARE AS PER THE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME. THESE FINDINGS OF LEARNED CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND FROM THESE FINDINGS , IT BECOMES CLEAR THAT THE BALANCE SHEET FOUND DURING THE C OURSE OF SURVEY IN THE FILE OF AICTE WAS IN FACT A PROJECTED BALANCE SHEET ONLY AND THEREFORE, NO ADVERSE INFERENCE CAN BE DRAWN. 4.6 REGARDING ONE MORE REASONING GIVEN BY THE ASSESSING OFFICER FOR HOLDING THAT THE ASSESSEE SOCIETY IS NOT ELIGIBLE FOR EXE MPTION U/S 11 OF THE ACT BY ALLEGING THAT THE ASSESSEE SOCIETY IS HIT BY THE PROVISIONS OF SECTION 13(1)(C) BECAUSE OF LOANS AND ADVANCES APPEARING IN THE NAME OF RAJ KUSHWAHA, IT WAS EXPLAINED BEFORE THE CIT(A) THAT RAJ KUSHWAHA IS NEITHER A FOUNDER OR A MEMBER OF THE SOCIETY NOR IS IN ANY MANNER RELATED TO THE MEMBERS OF THE SOCIETY. IT WAS ALSO EXPLAINED THAT HE WAS APPOINTED AS A FACULTY AND FUNDS WERE ADVANCED TO HIM FOR SETTING UP THE INFRASTRUCTURE OF THE FACULTY. HE HAS ALSO GIVEN A FINDING THAT RAJ KUSHWAHA ABANDONED THE INSTITUTION WITHOUT INFORMING AND HAS NOT BOTHERED TO RETURN THE FUNDS NOR HAS HE GIVEN ITS DETAILS AND FOR THIS REASON , THE AMOUNT IS RECOVERABLE FROM HIM. NOTHING IS SHOWN BY LEARNED D.R. BEFORE US THAT RAJ KUSHWAHA IS EITHE R A FOUNDER OR A MEMBER OF THE SOCIETY OR IS IN ANY MANNER RELATED TO THE MEMBERS OF THE SOCIETY. HENCE, ON THIS ASPECT ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 10 4.7 FROM THE ABOVE DISCUSSION, WE FIND THAT ALL THE OBJECTIONS RAISED BY THE ASSESSING OFFICER WERE PROPERLY DEMOLISHED BY CIT(A) BY GIVING CLEAR FINDING ON EACH ASPECT AND THESE FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. AND HENCE, ON THIS ASPECT , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 5. NOW WE DISCUSS AND DECIDE ON THE MERIT OF THREE ADDITIONS MADE BY THE ASSESSING OFFICER AND DELETED BY CIT(A). 5.1 THE FIRST ADDITION IS OF RS.82,75,876/ - MADE BY THE ASSESSING OFFICER U/S 69C OF THE ACT ON ACCOUNT OF ALLEGED UNEXPLAINED EXPENDITURE. THIS ISSUE WAS DECIDED BY CIT(A) ON THE BASIS THAT HE HAS PERSONALLY VERIFIED THE DIFFERENCES IN THE TWO STATEMENTS OF INCOME AND EXPENDITURE AND HE FOUND THAT THE DIFFERENCE IS INDEED BECAUSE OF SOFTWARE GLITCHES WHEREIN THE SOFTWARE FAILED TO TAKE THE OPENING FIGURES WHICH HAD CAUSED ALL THE CONFUSION. HE HAS ALSO GIVEN A FINDING THAT UNDER SUCH CIRCUMSTANCES, THE AMOUNT OF RS.82,75,876/ - CANNOT BE TREATED AS UNEXPLAINED. THIS CLEAR FINDING OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D .R. AND HENCE, ON THIS ASPECT ALSO , WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LEARNED CIT(A). 5.2 THE SECOND ADDITION MADE BY THE ASSESSING OFFICER WAS OF RS.1,18,44,650/ - WHICH INCLUDED THREE AMOUNTS OF RS.1,02,650/ - , RS.38 LAC AND RS.79.42 LAC . REGARDING THE ADDITION OF RS.1,02,650/ - , IT IS NOTED BY LEARNED CIT(A) IN PARA 8.5 OF HIS ORDER THAT THIS AMOUNT HAS ALREADY BEEN ACCOUNTED FOR AS DONATION RECEIVED IN THE INCOME AND EXPENDITURE ACCOUNT AND THEREFORE, NO ADDITION OF THIS AMO UNT CAN BE MADE U/S 68. IN FACT , NO GROUND HAS BEEN RAISED BY THE REVENUE BEFORE US IN RESPECT OF DELETION OF THIS ADDITION BY CIT(A). BEFORE US , THE REVENUE HAS RAISED THE ISSUE FOR ONLY TWO AMOUNTS REGARDING DELETION OF ADDITION OF RS.38 LAC AND RS.79. 42 LAC. REGARDING THE ADDITION OF RS.38 LAC, WE FIND THAT THIS ADDITION WAS DELETED BY 11 LEARNED CIT(A) ON THE BASIS THAT IT WAS EXPLAINED BY THE ASSESSEE BEFORE HIM AND ALSO BEFORE THE ASSESSING OFFICER THAT FIVE CHEQUES OF DIFFERENT AMOUNTS AS DETAILED IN THE ASSESSMENT ORDER WERE DEPOSITED IN THE BANK ACCOUNT NO.10387987422 WITH STATE BANK OF INDIA, USMANPUR, KANPUR BUT THE SAME WERE NOT ENCASHED AND WERE RETURNED AS UNCLEARED. HE HAS ALSO GIVEN A FINDING THAT THE REVERSAL ENTRY IS EXACTLY BELOW THE CRE DIT ENTRIES IN THE SAME BANK STATEMENT ON THE VERY DAY UNDER THE CAPTION CHEQUE RETURNED. UNDER THIS FACTUAL POSITION , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) REGARDING DELETION OF THIS ADDITION OF RS.38 LAC. 5.3 THE THIRD ADDITION MADE BY THE ASSESSING OFFICER US/ 68 OF RS.79.42 LAC WAS DELETED BY CIT(A) ON THE BASIS THAT OUT OF THIS AMOUNT OF RS.79.42 LAC , CHEQUES AMOUNTING TO RS.65.75 LAC WERE RETURNED UNPAID AND REMAINING CHEQUE OF RS.13.67 LAC REPRESENTS TRANSFER OF FUNDS FROM BANK ACC OUNT NO. 05. FOR UNCLEARED CHEQUES AND FOR TRANSFER OF FUNDS FROM ONE ACCOUNT TO OTHER ACCOUNT OF THE ASSESSEE, NO ADDITION IS JUSTIFIED U/S 68 AND THEREFORE, WE DO NOT INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE ALSO. IN THIS MANNER THE ENTIRE ADDITI ON MADE BY THE ASSESSING OFFICER U/S 68 STANDS DELETED. 5.4 THE LAST ADDITION MADE BY THE ASSESSING OFFICER OF RS.4,23,39,659/ - HAS BEEN DELETED BY CIT(A) ON THE BASIS THAT APART FROM POINTING OUT THE DIFFERENCE IN FIGURES AS APPEARING IN THE SO CALLED PROJECTED BALANCE SHEET SUBMITTED TO THE AICTE AND THE FIGURES GIVEN IN THE BALANCE SHEET FILED WITH THE RETURN OF INCOME, NOTHING HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO PROVE THAT THE FIGURES GIVEN IN THE BALANCE SHEET SUBMITTED TO THE AIC TE REPRESENTS THE CORRECT PICTURE ESPECIALLY WHEN THE BANK STATEMENTS CONFIRM THAT THE BALANCES WITH THE BANKS WHICH WERE FOUND IN THE BALANCE SHEET FILED ALONG WITH THE RETURN WERE THE CORRECT BALANCES. THE CIT(A) HAS GIVEN A FINDING THAT THERE IS NO BET TER THIRD PARTY PROOF THAN THAT OF THE BANKS. WE ALSO FIND THAT ON PAGE NO. 16 OF THE ORDER, THE CIT(A) HAS REPRODUCED THE 12 COMPARATIVE CHART OF BALANCE SHEET FILED WITH RETURN OF INCOME AND ONE IMPOUNDED FROM THE PREMISES DURING COURSE OF SURVEY. IN THIS COMPARATIVE CHART, WE FIND THAT IN THE AUDITED BALANCE SHEET FILED WITH THE RETURN OF INCOME, THE ASSESSEE IS SHOWING CAPITAL FUNDS OF RS.23,40,973/ - , SECURITY FUND OF RS.1,98,647/ - , SECURED LOAN OF RS.73,12,873/ - , OTHER LOAN FUNDS BEING BANK OF INDIA 005 RS.6,00,901/ - AND BANK OF INDIA 006 RS.1,24,53,484/ - TOTALING TO RS.2,29,06,878/ - . AS AGAINST THESE FIGURES , IN THE PROJECTED BALANCE SHEET, THE SECURITY FUND HAS BEEN SHOWN AT RS.6.75 LAC, NIL AMOUNT HAS BEEN SHOWN AGAINST SECURED LOAN AND LOAN FUNDS FR OM BANK OF INDIA005 AND BANK OF INDIA 006. A BALANCE OF RS.20.15 LAC HAS BEEN SHOWN AGAINST SUNDRY CREDITORS AND RS.4.50 LAC AGAINST ADVANCE FEES RECEIVED WHEREAS NO BALANCE WAS SHOWN IN THE AUDITED BALANCE SHEET AGAINST THESE TWO HEADINGS. AGAINST CAPIT AL FUND, AN AMOUNT OF RS.5,13,58,779/ - HAS BEEN SHOWN IN THE PROJECTED BALANCE SHEET AND THE DIFFERENCE IN THE CAPITAL FUND A LON E WAS RS. 490.18 LAC. WE ALSO FIND THAT ON PAGE NO. 15 , IT IS NOTED BY CIT(A) THAT PROFIT DURING THE YEAR WAS RS.15,76,623/ - AS PER THE BALANCE SHEET FILED WITH THE RETURN OF INCOME BUT AS PER PROJECTED BALANCE SHEET , THE PROFIT WAS RS.1,10,02,882/ - . ON THE SAME PAGE, IT IS ALSO NOTED BY CIT(A) THAT THE LOANS & ADVANCES IN THE NAME OF RAJ KUSHWAHA WAS SHOWN AT RS.13,21,500/ - AS PER THE BALANCE SHEET FILED WITH THE RETURN OF INCOME BUT IN THE PROJECTED BALANCE SHEET , NIL BALANCE WAS SHOWN AGAINST LOANS & ADVANCES TO RAJ KUSHWAHA. WHILE REJECTING THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 11, THE ASSESSING OFFICER HAS CONSIDERED THAT THE BALANCE SHEET FILED WITH RETURN OF INCOME IS CORRECT BECAUSE HE HAS MADE A POINT THAT SINCE THE ASSESSEE HAS SHOWN LOANS & ADVANCE TO RAJ KUSHWAHA, THE ASSESSEE SOCIETY IS HIT BY THE PROVISION OF SECTION 13(1)(C) OF THE ACT. IT MEANS THAT THE ASSESSING OFFICER HIMSELF IS ACCEPTING TH IS BALANCE SHEET AS CORRECT, THEN HOW HE CAN HOLD FOR MAKING OTHER ADDITIONS THAT THE PROJECTED BALANCE SHEET FILED WITH AICTE I S CORRECT BALANCE SHE ET. WE ALSO FIND THAT THE DIFFERENCE IN FIGURE OF PROFIT DURING THE YEAR AS PER PROJECTED 13 BALANCE SHEET AND AS PER BALANCE SHEET FILED WITH THE RETURN OF INCOME IS RS.94,26,259/ - AS HAS BEEN NOTED BY CIT(A) ON PAGE NO. 15 OF HIS ORDER, THEN THE DIFFERENCE IN CAPITAL FUNDS OF RS.4,90,17,806/ - NOTED BY CIT(A) ON PAGE 16 OF HIS ORDER CANNOT BE THE DIFFERENCE OF THE PRESENT YEAR BECAUSE OVER AND ABOVE, THE DIFFERENCE IN PROFIT OF THE PRESENT YEAR, THE REMAINING DIFFERENCE HAS TO BE OF THE PRECEDING YEAR ONLY E VEN IF IT IS FOUND AND ACCEPTED THAT THE BALANCE SHEET FILED IN THE FILE OF AICTE IS CORRECT BALANCE SHEET. CONSIDERING ALL THESE FACTS, AS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE FINDING GIVEN BY CIT(A) WITH THE BALANCE SHEET FOUND IN COURSE OF SURVEY IN THE FILE OF AICTE IS PROJECTED BALANCE SHEET AND DOES NOT REPRESENT THE CORRECT STATE OF AFFAIRS OF THE ASSESSEE IS A FINDING, WHICH COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND IN VIEW OF THE FACTS OF THE PRESENT CASE AS DISCUSSED ABOVE , WE DO NOT FIND ANY INFIRMITY IN THIS FINDING OF CIT(A) AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER CIT(A) ON THIS ISSUE ALSO. 6. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 3 /05/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR