ADIT (E), New Delhi V. M/s. Accurate Education & Research Society, Ghaziabad

ITA 5758/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4807 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 15-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 27-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISHA KANG SENIOR
• Assessee Lawyers: ANIL GOEL
• Keywords: Opportunity of being heard; Tax effect
• Section: 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE HONBLE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5758/DEL./2014 (ASSESSMENT YEAR : 2011-12) ADIT (E), VS. M/S. ACCURATE EDUCATION & RESEARCH S OCIETY, INV.CIRCLE 1, C 187, SURYA NAGAR, DELHI. GHAZIABAD 201 101. (PAN : AAAAA7866M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL GOEL, CA REVENUE BY : MS. MANISHA KANG, SENIOR DR DATE OF HEARING : 10.08.2017 DATE OF ORDER : 21.08.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, ADIT (E), INV. CIRCLE 1, NEW DELHI (HER EINAFTER REFERRED TO AS THE REVENUE), BY FILING THE PRESEN T APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 20.08.2014 PASSE D BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXI, NEW DELHI , FOR THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INTER ALIA T HAT :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.4,37,73,403/- ON ITA NO.5758/DEL./2014 2 ACCOUNT OF INCOME SHOWN IN THE PROFIT AND LOSS ACCOUNT AFTER ALLOWING EXEMPTION U/S. 11, SINCE SOCIETY IS NOT RUNNING EDUCATIONAL INSTITUTION WITHIN THE MEANING OF SECTION 2( 15) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT(A) HAS ERRED IN DELEING THE ADDITION OF RS.48,45,000/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF SALARY PAID TO RELATIVES IN CONTRAVENTION OF PROVISIONS OF SECTION 13(1)(C) READ WITH SECTION 13(3) OF THE INCOME TAX ACT,1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS RUNNING AN EDUCATIONAL INSTITUTION AND ALLOWING EXEMPTION U/S. 11 IGNORING THAT ASSESSEE'S CLAIM OF EXEMPTION IS HIT BY THE PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT, 1961. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE SOCIETY HAS BEEN GRANTED PERMISSIONS UNDER SECTION 12AA (1) OF THE INCOME-TA X ACT, 1961 (FOR SHORT THE ACT) ON 30.11.2006, WHICH IS RUNNI NG ENGINEERING AND MANAGEMENT COLLEGE IN THE NAME AND STYLE OF M/S . ACCURATE ITA NO.5758/DEL./2014 3 INSTITUTE OF MANAGEMENT & TECHNOLOGY AT 49, KNOWLED GE PART III, GREATER NOIDA (UP). ASSESSEE BEING IN THE FIELD OF EDUCATION CLAIMED TO HAVE PAID SALARY OF RS.16,00,000/- TO SH RI C.L. SHARMA, RS.4,00,000/- TO MRS. PUSHPA SHARMA (WIFE OF SHRI C .L. SHARMA), RS.6,20,000/- TO SHRI S.K. SHARMA (BROTHER IN LAW @ SALA), RS.14,25,000/- TO MS. POONAM SHARMA (DAUGHTER), RS. 4,00,000/- TO MS. MEERA SHARMA (DAUGHTER) AND RS.4,00,000/- TO MR S. ANUPAM SHARMA (DAUGHTER). ASSESSING OFFICER GOT CONDUCTED A DETAILED ENQUIRY THROUGH INCOME-TAX INSPECTOR WHO HAS STATED THAT THE SALARY PAID TO THE PERSON MATCHED WITH THE SERVICES PROVIDED BY THEM. HOWEVER, AO, BY TAKING INTO ACCOUNT PAST HIS TORY OF THE CASE AND THE FACT THAT THE SALARY HAS BEEN DISALLOW ED IN THE PRECEDING YEARS, DISALLOWED THE SALARY PAID TO THE AFORESAID PERSONS BEING EXCESSIVE AND PAID TO THE INTERESTED PERSONS U/S 13(1)(C) READ WITH SECTION 13 (3) OF THE ACT, AND CONSEQUENTLY DE NIED THE EXEMPTION U/S 11(1) OF THE ACT BY THE AO AND ADDED THE SAME BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING AN APPEAL WHO HAS ALLOWED THE APPEAL. FEELI NG AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF CHALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT. ITA NO.5758/DEL./2014 4 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1 & 3 5. THE LD. AR FOR THE ASSESSEE BY RELYING UPON THE ORDER DATED 22.01.2013 PASSED BY THE COORDINATE BENCH OF THE TR IBUNAL IN ITA NO.2682/DEL/2012 FOR AY 2006-07 IN ASSESSEES OWN C ASE (COPY AVAILABLE AT PAGES 1 TO 21 OF THE PAPER BOOK) CONTE NDED THAT THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASS ESSEE. 6. UNDISPUTEDLY, THE LD. CIT (A) DELETED THE ADDITI ON OF RS.4,37,73,403/- ON ACCOUNT OF INCOME SHOWN IN THE PROFIT & LOSS ACCOUNT AFTER ALLOWING EXEMPTION U/S 11 OF THE ACT BY FOLLOWING THE DECISIONS RENDERED BY LD. CIT (A) QUA ASSESSMEN T YEARS 2005- 06, 2006-07, 2008-09, 2009-10 AND 2010-11 AND THE D ECISION RENDERED BY THE CIT (A) HAS BEEN UPHELD BY THE TRIB UNAL IN AN APPEAL FILED BY THE REVENUE IN AY 2006-07 BY DISMIS SING THE APPEAL. LD. CIT (A) PASSED THE IMPUGNED ORDER BY T REATING THE SAME AS A COVERED ISSUE. 7. SINCE THIS ISSUE WAS CROPPED UP BEFORE THE COORD INATE BENCH OF THE TRIBUNAL IN AY 2006-07 AND HAS BEEN DETERMIN ED IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL FILED BY T HE REVENUE. SO, ITA NO.5758/DEL./2014 5 FOLLOWING THE ORDER PASSED BY THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2006-07, 2008-09, 2009-10 AND 2010- 11, GROUNDS NO.1 & 3 ARE DETERMINED AGAINST THE REVENUE AS THER E IS NO ILLEGALITY OR PERVERSITY IN THE FINDINGS RETURNED B Y THE LD. CIT (A). GROUND NO.2 8. LD. DR FOR THE REVENUE CONTENDED THAT THIS ISSUE HAS NEVER BEEN CROPPED UP OR DEALT WITH BY THE TRIBUNAL IN AY 2006-07 WHICH HAS BEEN CONTINUOUSLY FOLLOWED BY LD. CIT (A) AS WELL AS BY THE TRIBUNAL IN SUBSEQUENT ASSESSMENT YEARS AND REL IED UPON THE ORDER PASSED BY THE AO. 9. PERUSAL OF THE ORDER PASSED BY THE TRIBUNAL IN A SSESSEES OWN CASE FOR AY 2006-07, AVAILABLE AT PAGE 1 TO 21 OF T HE PAPER BOOK, SHOWS THAT THIS ISSUE HAS NEVER COME UP BEFORE THE TRIBUNAL. SO FAR AS ORDER PASSED BY LD. CIT (A) DATED 26.02.2013 FOR AY 2007-08 VIDE WHICH LD. CIT (A) HAS HELD THAT THE ASSESSEE H AS NOT VIOLATED SECTION 13(1)(C) READ WITH SECTION 13(3) OF THE ACT IS CONCERNED, THE SAID ORDER WAS CHALLENGED BEFORE THE COORDINATE BENCH OF THE TRIBUNAL VIDE ITA NO.2537/DEL/2013 (COPY AVAILABLE AT PAGES 22 & 23 OF THE PAPER BOOK) BUT THE SAID APPEAL WAS DIS MISSED ON ACCOUNT OF LOW TAX EFFECT VIDE ORDER DATED29.08.201 4, MEANING THEREBY THIS ISSUE HAS NEVER BEEN DEALT WITH ON MER ITS BY THE TRIBUNAL AND AS SUCH, CANNOT BE SAID TO HAVE ATTAI NED FINALITY. ITA NO.5758/DEL./2014 6 10. WHEN THE ISSUE RAISED BY THE REVENUE IN THE PRE SENT APPEAL BY IMPUGNING THE ORDER PASSED BY THE LD. CIT (A) HA S NEVER BEEN DECIDED ON MERITS BY THE TRIBUNAL, AS IS EVIDENT FO RM ORDER DATED 29.08.2014 VIDE WHICH APPEAL WAS DISMISSED ON ACCOU NT OF LOW TAX EFFECT, THE SUBSEQUENT ORDERS PASSED BY THE COORDIN ATE BENCHES OF THE TRIBUNAL FOR AYS 2008-09, 2009-10 AND 2010-11 C ANNOT BE TAKEN BY THIS BENCH TO TREAT THE ISSUE AS A COVERED ONE. 11. WHEN WE EXAMINE THE FACTS HIGHLIGHTED BY THE AO THAT THE ASSESSEE SOCIETY HAS BEEN PAYING SALARY OF RS.16,00 ,000/- TO SHRI C.L. SHARMA, DIRECTOR OF THE ASSESSEE SOCIETY, RS.4 ,00,000/- TO MRS. PUSHPA SHARMA (WIFE OF SHRI C.L. SHARMA), RS.6 ,20,000/- TO SHRI S.K. SHARMA (BROTHER IN LAW @ SALA), RS.14,25, 000/- TO MS. POONAM SHARMA (DAUGHTER), RS.4,00,000/- TO MS. MEER A SHARMA (DAUGHTER) AND RS.4,00,000/- TO MRS. ANUPAM SHARMA (DAUGHTER), IN ENTIRETY IN THE LIGHT OF THE FACT THAT ASSESSEE SOCIETY IS CHARITABLE SOCIETY, THERE IS NOT AN IOTA OF EVIDENCE PERUSED A ND RELIED UPON BY THE AO IF THE FAMILY MEMBERS OF SHRI C.L. SHARMA TO WHOM THE HUGE AMOUNT HAS BEEN PAID ON ACCOUNT OF SALARY HAVE RENDERED ANY SERVICES TO THE SOCIETY BUT HAS MERELY DISALLOWED T HE SALARY COMPONENT BY FOLLOWING ORDERS OF THE PRECEDING YEAR S. 12. WHEREAS AO WAS REQUIRED TO EXAMINE QUALIFICATIO NS OF ALL THE AFORESAID PERSONS DRAWING HUGE SALARY FROM THE ASSESSEE ITA NO.5758/DEL./2014 7 SOCIETY, NATURE OF THEIR DUTIES AND TO FURTHER EXAM INE WHETHER ALL THOSE AFORESAID PERSONS WERE ACTUALLY DISCHARGING T HEIR DUTIES OR NOT BUT HE HAS DISALLOWED THE SALARY COMPONENT BY P ASSING A CRYPTIC ORDER. AT THE SAME TIME, CIT (A) DELETED T HE ADDITION BY ALLOWING THE APPEAL BY MERELY RELYING UPON THE ORDE R PASSED BY CIT (A) IN AYS 2005-06, 2006-07, 2007-08, 2008-09, 2009-10 AND 2010-11 PASSED BY CIT (A) AND FURTHER RELIED UPON B Y THE TRIBUNALS ORDER FOR AY 2006-07 VIDE WHICH REVENUE S APPEAL WAS DISMISSED BY COMPLETELY IGNORING THE FACT THAT IN A Y 2006-07, NO SUCH ISSUE WAS THERE BEFORE THE TRIBUNAL AS TO DISA LLOWANCE OF THE SALARY PAYMENT. IN THESE CIRCUMSTANCES, LD. CIT (A ) PROCEEDED TO ALLOW THE APPEAL FILED BY THE ASSESSEE BY TREATING THE MATTER FULLY COVERED IN FAVOUR OF ASSESSEE BY LOSING SIGHT OF TH E FACT THAT THIS ISSUE HAS NEVER BEEN DEALT WITH BY THE TRIBUNAL ON MERITS. SO, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.48,45,000/- ON ACCOUNT OF SALARY PAID TO THE RELATIVES. 13. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT THIS ISSUE IS REQUIRED TO BE R EMANDED TO THE ASSESSING OFFICER TO DECIDE AFRESH BY EXAMINING QUA LIFICATION OF ALL THE PERSONS TO WHOM THE HUGE SALARY ARE SHOWN TO HA VE BEEN PAID, NATURE OF DUTIES PERFORMED BY THEM, THE REQUIREMENT OF THE ASSESSEE ITA NO.5758/DEL./2014 8 SOCIETY TO AVAIL OF THEIR SERVICES TO ACHIEVE THE O BJECT OF THE SOCIETY IN THE LIGHT OF THE PROVISIONS CONTAINED U/S 13(1)( C) READ WITH SECTION 13 (3) OF THE ACT. NEEDLESS TO SAY THAT TH E AO SHALL PROVIDE FAIR AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. CONSEQUENTLY, GROUND NO.3 IS DETERMINED IN FAVOUR O F THE ASSESSEE FOR STATISTICAL PURPOSES. 14. RESULTANTLY, THE APPEAL OF THE REVENUE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 21 ST DAY OF AUGUST, 2017. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) PRESIDENT JUDICIAL MEMBER DATED THE 21 ST DAY OF AUGUST, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.