M/S VAJDI EDUCATION SOCIETY, Indore V. THE ITO-EXEMPTION, Indore

ITA 574/IND/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2293 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-08-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALCHAND
• Assessee Lawyers: DESHPAN D E
• Keywords: Charitable institution
• Section: 143(3); 12A; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.574/IND/2016 ASSESSMENT YEAR: 2010-11 M/S. VAJDI EDUCATION SOCIETY, F-12, JHOOMER GHAT RAU, INDORE / VS. ITO - EXEMPTION, INDORE ( APPELLANT ) ( REVENUE ) P.A. NO. AAAAC1063F ITA NO.05/IND/2017 ASSESSMENT YEAR: 2012-13 M/S. VAJDI EDUCATION SOCIETY, F-12, JHOOMER GHAT RAU, INDORE / VS. ITO - EXEMPTION, INDORE (APPELLANT) (REVENUE ) P.A. NO.AAAAC1063F APPELLANT BY SHRI DESHPANDE, CA RESPONDENT BY SHRI LALCHAND CIT - DR DATE OF HEARING: 01.03.2018 DATE OF PRONOUNCEMENT: 20.03.2018 / O R D E R PER KUL BHARAT, J.M: THESE TWO APPEALS BY THE ASSESSEE WERE TAKEN UP TOG ETHER AND ARE BEING DISPOSED OF BY WAY OF CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. V AJDI EDUCATION SOCIETY 2 FIRST, WE TAKE UP ASSESSEES APPEAL IN ITA NO.574/I ND/2016 FOR A.Y. 2010-11 THIS APPEAL IS AGAINST CONFIRMATION OF PENALTY IMP OSED U/S 271(1)(C) OF THE ACT. THE ASSESSEE HAS RAISED FOLLO WING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED IN MAINTAINING THE PEN ALTY ON THE GROUND THAT THE ASSESSEE HAS CONCEALED THE PARTICUL ARS OF INCOME. 1.1 COMPLETE DETAILS WERE FILED BEFORE THE LD. AO & THE LD. CIT(A). IT WAS PROVED BEFORE THEM THAT THE ADDITION S MADE ARE PURELY ON ESTIMATES AND ASSUMPTIONS AND AS SUCH THE RE WAS NO QUESTION OF ANY CONCEALMENT. 1.2 THE PENALTY LEVIED BEING ILLEGAL AND BAD IN LAW , MAY PLEASE BE CANCELLED. 2. BRIEFLY STATED THE FACTS THE ASSESSING OFFICER LEV IED PENALTY ON THE ADDITIONS CONFIRMED BY THE LD. CIT(A) I.E. ADDITION OF RS.15,36,486/-, OF RS.30,00,000/- AND RS.45,81,092/ -. AGAINST THIS THE ASSESSEE FILED AN APPEAL BEFORE LD. CIT(A) WHO ALSO SUSTAINED THE PENALTY. NOW THE ASSESSEE IS IN APPEA L BEFORE THIS TRIBUNAL. 3 . AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT IN THE QUANTUM PROCEEDINGS THE MATTER REACHED UP TO THE ST AGE OF THE TRIBUNAL IN ITANO.653/IND/2013. IN QUANTUM THE TRIB UNAL HAS DELETED THE ADDITION IN RESPECT OF THE ADDITION OF RS. 15,36,486/- AND IN RESPECT OF THE ADDITION OF RS.30,00,000/- IS SUE WAS RESTORED TO THE FILE OF THE AO AND SIMILARLY THE ISSUE OF AD DITION OF RS.45,81,092/- WAS ALSO RESTORED FOR DECISION AFRES H. HE SUBMITTED THEREFORE, THE PENALTY ON THESE ADDITIONS CANNOT BE SUSTAINED. V AJDI EDUCATION SOCIETY 3 4. LD. DR HAS CONCEDED THE FACT THAT IN THE QUANTUM P ROCEEDINGS THE ISSUES I.E. ADDITION OF RS. 15,36,486/- HAS BEE N DELETED AND THE ISSUES RELATING TO ADDITIONS IN RESPECT OF LOAN TAK EN FROM K.K. PATEL FINANCE LTD. AND JAYANT SECURITY & FINANCE LTD. HAV E BEEN RESTORED TO THE FILE OF THE AO. HENCE THE PENALTY C ONFIRMED BY THE LD. CIT(A) WOULD NOT SURVIVE. 5 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED M ATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN ITANO.653/IND/ 2013 IN QUANTUM PROCEEDINGS IN RESPECT OF ADDITION HAS BEEN DELETED BY THE TRIBUNAL BY OBSERVING AS UNDER: 10. THERE IS NO DISPUTE WITH REGARD TO THE FACT TH AT THE ACCOUNTS OF THE ASSESSEE ARE AUDITED. THE AUDITORS HAVE NOT MADE ANY ADVERSE OBSERVATION REGARDING THE LABOUR EXPENDITURE. BOTH THE AUTHORITIES BELOW HAVE MADE A DDITION AND SUSTAINED THE SAME ON THE BASIS OF GUESS WORK W HICH IN OUR VIEW IS NOT A PROPER APPROACH, THEREFORE, SUCH ADDITION CANNOT BE SUSTAINED. THE ASSESSING OFFICER IS DIREC TED TO DELETE THE SAME. THUS GROUND NO.3 AND 3.1 OF ASSESSEES AP PEAL ARE ALLOWED. 6. FURTHER, WE FIND THAT IN RESPECT OF ADDITION OF RS . 45,81,092/- AND RS.30,00,000/- ISSUE ARE RESTORED TO THE FILE O F AO FOR DECISION AFRESH. THEREFORE, UNDER THESE UNDISPUTED FACT THE PENALTY WAS LEVIED AND CONFIRMED BY THE LD. CIT(A) DOES NOT SUR VIVE. WE HOLD ACCORDINGLY, AO IS DIRECTED TO DELETE THE PENALTY H OWEVER WE MAY IT CLEAR THAT AO WOULD AT LIBERTY TO INITIATE THE PENA LTY PROCEEDINGS IN RESPECT OF THE ISSUES RESTORED FOR FRESH DECISION. NOW WE TAKE UP ASSESSEES APPEAL IN ITANO.05/IND/20 17 FOR A.Y. 2012-13 THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE LD. CIT(A) IS BAD IN LAW. V AJDI EDUCATION SOCIETY 4 2.THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITIO N AND IN NOT CONSIDERING THE FACT THAT THE ASSESSEE IS AN EDUCAT IONAL INSTITUTION REGISTERED U/S 12A AND HENCE THE PROVIS IONS OF SECTION 12 TO 13 WHERE APPLICABLE AND NO DEMAND COU LD BE RAISED, IF THE INCOME IS APPLIED FOR THE OBJECTS OF THE TRUST. 2.1 ALL THE ADDITIONS MAINTAINED BY THE LD. CIT(A) AND THE DEMAND RAISED MAY PLEASE BE CANCELLED. 3. THE LD. CIT(A) HAS ERRED IN MAINTAINING THE ADDI TION OF RS.48,00,000/- BEING THE CASH CREDIT I THE NAME OF JAYANT SECURITIES AND FINANCE LTD. 3.1 COMPLETE DETAILS WITH BANK STATEMENT, CONFIRMAT ION AND THE BALANCE SHEET WERE FILED BEFORE THE AUTHORITIES AND AS SUCH PROVISIONS OF SECTION.68 ARE NOT ATTRACTED. 3.1 THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE CASE LAWS CITED BEFORE HIM REGARDING THE APPLICATION OF SECTI ON. 11 TO 13 IN WHICH IT HAS BEEN HELD THAT ONCE THE INCOME IS APPL IED FOR THE OBJECT OF THE TRUST NO ADDITION COULD BE MADE. THE LD. CIT(A) HAS BASED HIS CONCLUSION ON IRRELEVANT CASE LAWS WHICH ARE NOT APPLICABLE TO THE CASE OF CHARITABLE TRUST. 4. THE LD. CIT(A) HAS ERRED IN MAINTAINING THE ADDI TION OF RS.49,52,090/- BEING THE INTEREST PAID FOR THE LOA NS TAKEN BY THE ASSESSEE ON THE GROUND THAT THE LOANS TAKEN IN EARLIER YEAR WERE NOT GENUINE AS SUCH THE INTEREST EXPENSES CANN OT BE ALLOWED. THE ADDITIONS MADE MAY PLEASE BE DELETED. 7. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE AUTHORITIES BELOW HAVE FOLLOWED THEIR ORDE R PERTAINING TO THE A.Y.2010-11. HE SUBMITTED IN EARLIER YEAR THE M ATTER HAD REACHED UP TO THE STAGE OF THE TRIBUNAL AND THE TRI BUNAL IN ITANO.653/IND/2013 PERTAINING TO THE A.Y. 2010-11, WAS PLEASED TO RESTORE THE ISSUES TO THE FILE OF THE AO FOR DECISI ON AFRESH. THE LD. DR OPPOSED THE SUBMISSIONS OF THE LD. COUNS EL AND SUPPORTED THE ORDERS OF AUTHORITIES BELOW. V AJDI EDUCATION SOCIETY 5 8. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) HA S DECIDED THE ISSUE IN PARA 5.1 OF HIS ORDER AS UNDER: 5.1 THE AO HAS PRIMARILY RELIED ON THE ASSESSMENT FRAMED U/S 143(3) FOR A.Y.2010-11 AND THE CLAIM OF THE APPELLA NT REGARDING LOAN TAKEN FROM THE VERY SAME COMPANY I.E. M/S. JAY ANT SECURITY & FINANCE LTD. WAS NOT FOUND TO BE GENUINE . MY PREDECESSOR HAD CONFIRMED THE ABOVE ADDITION IN APP EAL NO.IT- 245/12-13 VIDE ORDER DATED 20.09.2013. RESPECTFULLY , FOLLOWING THE ORDER OF MY PREDECESSOR AND THE DETAILED REASON S MENTIONED THEREIN, I HEREBY CONFIRM THE ADDITION SO MADE ON ACCOUNT OF LOAN TAKEN RS.48 LAKHS AND ON ACCOUNT OF DISALLOWANCE OF INTEREST OF RS.49,52,090/-. BOTH TH E GROUNDS OF APPEALS ARE DISMISSED. 9. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT SIMILAR ADDITIONS WAS MADE IN THE A.Y. 2010-11 AS WELL AND THE TRIBUN AL IN ITANO.653/IND/2013 PERTAINING TO A.Y. 2010-11 HAS DECIDED AS UNDER: 13. THE CONTENTION OF THE ASSESSEE IS THAT THE OPI NION OF AO THESE COMPANIES BELONG TO LUNKAD GROUP. THE ASSESSE HAD FILED THE CONFIRMATIONS FROM THE CREDITORS, THE BAL ANCE SHEET, THE COPY OF BANK STATEMENT AND COPY OF INCOME TAX RETUR N OF THE SAID CREDITORS. IT IS CONTENDED ON BEHALF OF THE AS SESSEE THAT THE COMPANIES DO NOT BELONG TO LUNKAD GROUP. THE CONFIR MATION ALONG WITH BALANCE SHEET AND THE INCOME TAX RETURNS WITH THE BANK STATEMENT WERE FILED IN THE CASE OF M/S. K.K. PATEL FINANCE LTD. AND M/S. JAYANT SECURITIES FINANCE LTD . AND IF THE LD. COUNSEL DREW OUR ATTENTION TO PAPER BOOK PAGE N OS. 62 TO 68 AND 95 TO 99 IN SUPPORT OF THIS CONTENTION. THERE I S NO DISPUTE WITH REGARD TO THE FACT THAT THE LAW IS WELL SETTLE D. THE ASSESSEE IS REQUIRED TO PROVE IDENTITY OF THE CREDITORS GENU INENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS. IN THE PRESENT CASE, THE REVENUE HAS DOUBTED ABOUT THE GEN UINENESS OF THE TRANSACTIONS. IT IS STATED BY THE LD. COUNSE L FOR THE ASSESSEE THAT THE COMPANY FROM WHOM LOAN WAS TAKEN DOES NOT V AJDI EDUCATION SOCIETY 6 BELONG TO THE LUNKAD GROUP WHICH WAS INVOLVED INTO THE BUSINESS OF ENTRY PROVIDING. THE COUNSEL FOR THE AS SESSEE HAS DEMONSTRATED THAT THE COMPANIES WERE HAVING SUFFICI ENT AMOUNT FOR GIVING SUCH LOANS, HOWEVER, WE FIND THAT THE LD. CIT(A) DOUBTED THE GENUINENESS OF THE TRANSACTIONS, ON THE BASIS THAT THE ASSESSEE HAD NO REQUIREMENT OF LOAN AS THE ASSESSEE ITSELF HAVING SUFFICIENT FUND AVAILABLE WI TH IT. IN OUR VIEW THIS SUSPICION OF THE LD. CIT(A) IS JUSTIFIED, NO SANE PERSON WOULD TAKE LOAN THUS MAKE HIMSELF LIABLE FOR INTER EST EXPENDITURE WHEN HE IS HIMSELF HAVING SUFFICIENT FU ND, HOWEVER, CONTENTION OF THE ASSESSEE IS THAT WAS REQUIRED FOR CONSTRUCTION OF BUILDING. WE THEREFORE, CONSIDERING THE TOTALITY OF THE FACT, DEEM IT PROPER TO SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO VERIFY WHETHER THE COMPANIES FOR WHICH LOAN HAS BEE N TAKEN BELONG TO LUNKAD GROUP AND GIVE A SPECIFIC FINDING WHETHER THE TRANSACTIONS IN THE QUESTION WERE EXECUTED THROUGH CIRCUITOUS ROUTE SUGGESTING THAT MONEY BELONGING TO THE ASSESS EE IS ROUTED THROUGH THE CHANNEL OF LOAN. WITH THESE OBSERVATION S THE ISSUE IS RESTORED TO THE FILE OF THE AO FOR DECISION AFRE SH. THE GROUND NOS. 4 TO 4.2 ARE ALLOWED FOR STATISTICAL PURPOSES. WE THEREFORE, TAKING A CONSISTENT VIEW RESTORE THE ISSUES RAISED IN THERE GROUNDS TO THE FILE OF AO AND DECIDE THE S AME AFRESH IN THE LIGHT OF THE ABOVE DIRECTION IN ITANO.653/IND/2013( SUPRA). 10 . IN THE RESULT, BOTH THE APPEAL OF ASSESSEE IN ITA NO.574 /IND/2016 & ITANO.05/IND/2017 ARE PARTLY ALLOWED F OR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20 .03.2018. SD/- (MANISH BORAD) SD/- (KUL BHARAT) CCOUNTANT MEMBER JUDICIALMEMBER INDORE; DATED : 20 / 03/2018 CTX? P.S/. . . V AJDI EDUCATION SOCIETY 7 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER PRIVATE SECRETARY/DDO, INDORE