The Income-tax Officer, Srinagar V. M/s. The Jammu & Kashmir Bank, Srinagar

ITA 597/ASR/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5710 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-01-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 07-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M A MIR COST ACCOUNTANT
• Keywords: Charitable institution
• Section: 143(3); 142(1); 12A; 12; 144; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A NO.597(ASR)/2014 ASSES SMENT YEAR: 2011-12 INCOME TAX OFFICER WARD-3(3), SRINAGAR VS. M/S. THE JAMMU & KASHMIR BANK EMPLOYEES WELFARE SOCIETY POLO PLAZA POLO VIEW SRINAGAR, J&K (APPELLANT) [PAN: AADFT 7599Q] (RESPONDENT) APPELLANT BY : SMT BALWINDER KAUR (DR) RESPONDENT BY: SH. M. A. MIR (COST ACCOU NTANT) DATE OF HEARING: 31.01.2018 DATE OF PRONOUNCEMENT: 22.03.2018 ORDER PER SANJAY ARORA, A.M THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), JAMMU (CIT(A ) FOR SHORT) DATED 25.07.2014, PARTLY ALLOWING THE ASSESSEES APPEAL C ONTESTING ITS' ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREI NAFTER) DATED 10/3/2014 FOR THE ASSESSMENT YEAR (AY) 2011-12. 2. THE APPEAL RAISES, IN PRINCIPLE, A SINGLE ISSUE, I.E., THE MAINTAINABILITY OF THE ASSESSEES CLAIM FOR EXEMPTION U/S. 11 OF THE ACT A S WELL AS THE ALLOWABILITY OF THE DIFFERENT SUMS DISALLOWED AS EITHER EXPENSES OR A S APPLICATION OF INCOME, CLAIMED BY THE ASSESSEE PER ITS RETURN OF INCOME FOR THE Y EAR, I.E., IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.597/ASR/2014 (A.Y.2011-12) ITO VS. M/S J & K BANK EMPLOYEES WELFARE SOCIETY 2 3. IT WOULD BE RELEVANT TO FOR THE PURPOSE DELINEAT E THE BACKGROUND FACTS OF THE CASE. THE ASSESSEE IS AN EMPLOYEE WELFARE SOCIETY, FORMED (ON 19.07.2002) FOR THE BENEFIT OF THE EMPLOYEES OF JAMMU & KASHMIR BANK LT D., REGISTERED BOTH UNDER THE SOCIETIES REGISTRATION ACT, 1860 AS WELL AS UND ER SECTION 12A OF THE ACT. IT RETURNING NIL INCOME FOR THE RELEVANT YEAR (ON 14.1 1.2011), WAS CALLED UPON BY THE ASSESSING OFFICER (AO) IN THE VERIFICATION PROCEEDI NGS UNDER THE ACT TO SUBSTANTIATE ITS VARIOUS CLAIMS PREFERRED THUS. APA RT FROM FURNISHING A WRITTEN REPLY (TO THE QUESTIONNAIRE) AND LEDGER EXTRACTS OF SOME EXPENSES (DEBITED TO THE INCOME AND EXPENDITURE ACCOUNT) ON 18.07.2013 AND 26.07.20 13 (THROUGH ITS AUTHORISED REPRESENTATIVES (ARS), THE ASSESSEE DID NOT RESPOND TO THE VARIOUS (6) NOTICES U/S. 142(1) (FROM NOVEMBER, 2013 TO FEBRUARY, 2014), DET AILED AT PARA 2 (PAGE 2) OF THE ASSESSMENT ORDER, INCLUDING QUA PROPOSED DRAFT ASSESSMENT ORDER DATED 18.02.2014, SHOW CAUSING THE ASSESSEE FOR FRAMING THE ASSESSMEN T U/S. 144 ON THE BASIS OF THE INFORMATION AVAILABLE ON RECORD, DISALLOWING THE FO LLOWING EXPENDITURE CLAIMED, AGGREGATING TO RS. 99.13 LAKHS : I. SOCIETY SHARE : RS. 21,27,388/- II. BONUS TO EMPLOYEES : RS. 28,57,578/- III. PROVISIONS : RS. 43,57,578/- IV. SUBSISTENCE ALLOWANCE : RS. 5,70,000/- THE SAME, AS A DETAIL OF ALL EXPENDITURE, LISTED AT PARA 5 (PAGE 3) OF THE ASSESSMENT ORDER REVEALS, REPRESENT THE MAJOR EXPENDITURE CLAI MED THROUGH THE INCOME AND EXPENDITURE ACCOUNT, AT A TOTAL OF RS. 102.14 LAKHS . THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE SAID EXPENSES BY PRODUCING THE REL EVANT BOOKS OF ACCOUNT AND SUBSIDIARY RECORDS, CALLED FOR FROM TIME TO TIME. T HE SAME WERE ACCORDINGLY DISALLOWED; THE AO ADDING FURTHER COMMENTS IN SUP PORT OF THE SAID DISALLOWANCE FOR EACH OF THEM (AT PARA 7 (PAGES 5 -7) OF HIS ORDER), EVEN AS HE ABSTAINED FROM DISALLOWING EXPENDITURE ON SUBSIST ENCE ALLOWANCE. IN APPEAL, THE ASSESSEE RAISED THE FOLLOWING GROUNDS: ITA NO.597/ASR/2014 (A.Y.2011-12) ITO VS. M/S J & K BANK EMPLOYEES WELFARE SOCIETY 3 1. THE LD. AO HAS ERRED IN LAW AND FACTS BY DISALL OWING THE EXPENDITURE CLAIMED UNDER THE HEAD SOCIETY SHARE OF RS. 21,27 ,388/-. 2. THE LD. AO HAS ERRED IN LAW AND FACTS BY DISALLOWI NG THE EXPENDITURE CLAIMED UNDER THE HEAD BONUS TO EMPLOYEES AT RS. 28,57,578/-. 3. THE LD. AO HAS ERRED IN LAW AND FACTS BY DISALLOWI NG THE EXPENDITURE CLAIMED UNDER THE HEAD PROVISIONS AT RS. 28,57,57 8/-.(*) 4. THE LD. AO HAS ERRED IN LAW AND FACTS BY ALLOWING [ TO BE READ AS DISALLOWING, AS OTHERWISE IT IS WITHOUT ANY MEANI NG AND/OR CONSEQUENCE ] EXEMPTION UNDER SECTION 11 & 12 OF THE INCOME TAX A CT, 1961. 5. THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTER, D ELETE OR ADD ANY GROUND OF APPEAL. (EMPHASIS, BY UNDERLINING/ITALICS, OURS) [(*) THE CORRECT AMOUNT IS RS. 43,57,578/-) THE LD. CIT(A) ALLOWED THE ASSESSEES CLAIM IN RESP ECT OF SOCIETY SHARE AND BONUS TO EMPLOYEES, CONFIRMING THE DISALLOWANCE QUA PROVISIONS INASMUCH AS THE SAME (PROVISIONS) WAS NEITHER CREDITED TO THE A CCOUNT OF THE MEMBER/S NOR PAID THERETO DURING THE YEAR. THE SAME COULD, THEREFORE, NEITHER BE REGARDED AS A REAL EXPENDITURE NOR AS AN APPLICATION OF INCOME. THE DE LETION OF THE OTHER DISALLOWANCES WAS ON THE GROUND THAT THE SAME REPRE SENTED THE ASSESSEE- SOCIETYS SHARE (FOR THE WELFARE OF THE EMPLOYEES) AND, AS TH E CASE MAY BE, BONUS TO IN- SERVICE EMPLOYEES (IN THEIR CAPACITY AS MEMBERS OF THE ASSESSEE- SOCIETY), CREDITED TO THEIR RESPECTIVE ACCOUNTS. THE SAME IS ONLY IN A CCORDANCE WITH THE OBJECTS OF THE ASSESSEE-SOCIETY. AGGRIEVED, THE REVENUE IS IN APPE AL. 4. BEFORE US, BOTH THE PARTIES RELIED ON THE ORDER BY THE REVENUE AUTHORITIES AS FAVOURABLE TO THEM. ITA NO.597/ASR/2014 (A.Y.2011-12) ITO VS. M/S J & K BANK EMPLOYEES WELFARE SOCIETY 4 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. OUR FIRST OBSERVATION IN THE MATTER IS THAT THE AS SESSEE DID NOT CONTEST THE FRAMING OF THE BEST JUDGEMENT ASSESSMENT BY THE AO BEFORE THE FIRST APPELLATE AUTHORITY. THE MERITS OF A PARTICULAR EXPENDITURE/C LAIM COULD ONLY BE CONSIDERED ONCE IT STANDS SUBSTANTIATED, I.E., AS HAVING BEEN ACTUALLY INCURRED FOR THE STATED PURPOSE/S, WHICH THE ASSESSEE FAILED TO DESPITE BEI NG ALLOWED ABUNDANT OPPORTUNITY FOR THE SAME. THE ASSESSEE DID NOT EVEN RESPOND TO THE SHOW CAUSE NOTICE U/S. 144, ALSO COMMUNICATING THE DRAFT ASSESSMENT ORDER. WHY, THERE IS NO EXPLANATION BEFORE HIM EVEN WITH REGARD TO THE NON-COMPLIANCE B EFORE THE AO, EVEN AS IT IS BEFORE US. WE, IN FACT, OBSERVE NO FINDING IN THIS RESPECT (BY THE LD. CIT(A)) IN THE IMPUGNED ORDER. NO PLEADING IN THIS RESPECT SEEMS T O HAVE BEEN MADE BEFORE HIM NOR INDEED WAS BEFORE US. THE LD. AUTHORISED REPRES ENTATIVE (AR) WOULD, UPON BEING QUESTIONED IN THE MATTER, SUBMIT THAT THE ASS ESSMENT UNDER REFERENCE IS U/S. 143(3), AS MENTIONED IN THE CAUSE TITLE OF THE ASSE SSMENT ORDER. WE COULD NOT DISAGREE MORE. THERE HAS BEEN NO COMPLIANCE OR RESP ONSE TO THE VARIOUS NOTICES U/S. 142(1) AND, IN FACT, EVEN TO THE SHOW CAUSE N OTICE U/S. 144 (CONVEYING THE DRAFT ASSESSMENT ORDER), EVEN AS THE LAW OBVIATES T HE NEED FOR SUCH A NOTICE WHERE THERE HAS BEEN, AS IN THE PRESENT CASE, PROVISION O F OPPORTUNITY VIDE NOTICE U/S. 142(1) (REFER SECOND PROVISO TO S. 144(1)). HOW COULD THEN IT BE REGARDED AS AN ASSESSMENT U/S. 143(3), MENTION OF WHICH IN THE CAU SE TITLE (OF THE ASSESSMENT ORDER) IS CLEARLY A CLERICAL ERROR (ALSO REFER S. 292B IN THIS REGARD). FURTHER, EVEN CONSIDERING THAT THE ASSESSEE WAS MISLED THEREBY (O R CHOSE TO BE), THE FIRST APPELLATE AUTHORITY OUGHT TO HAVE TAKEN DUE COGNIZANCE OF THE SAME (REFER, INTER ALIA , KAPURCHAND SHRIMAL V. CIT [1981] 131 ITR 451 (SC)). THIS, IT MAY BE APPRECIATED, IS NOT MERELY ACADEMIC OR OTHERWISE OF LITTLE CONSEQUENCE AND EFFECT. AS CLARIFIED IN CIT VS. RAYALA CORPORATION PVT. LTD . [1995] 215 ITR 883 (MAD), THE QUESTION WHETHER THE AO HAS COMMITTED ANY ERROR IN HIS JUDGMENT U/S. 144 OF ITA NO.597/ASR/2014 (A.Y.2011-12) ITO VS. M/S J & K BANK EMPLOYEES WELFARE SOCIETY 5 THE ACT CAN BE DECIDED ONLY ON THE MATERIALS GATHER ED BY HIM AND NOT ON THE BASIS OF THE MATERIALS PRODUCED LATER BY THE ASSESSEE. IT IS (AFTER ALL) HIS BEST JUDGMENT AND NOT OF ANYONE ELSE. THERE CANNOT BE A PROCEDURE WHERE A BEST JUDGMENT OF THE ASSESSING AUTHORITY IS SUBJECTED TO THE DISCRETION OF THE ASSESSEE TO PRODUCE MATERIALS/EVIDENCE AT THE APPELLATE STAGE AND, THUS , CONVERT THE PROCEEDINGS OF A BEST JUDGMENT ASSESSMENT INTO PROCEEDINGS FOR REGUL AR ASSESSMENT. THAT IS, CONVERT A SECTION 144 ASSESSMENT INTO A SEC. 143(3) ASSESSM ENT! HOW COULD, FOR EXAMPLE, THE AOS FINDING IN THE PRESENT CASE OF THE IMPUGNE D EXPENDITURE BEING NON SUBSTANTIATED BE MET WHERE THERE HAS BEEN NO PRODUC TION OF ACCOUNT BOOKS (INCLUDING THE SUBSIDIARY MATERIAL ON WHICH THEY AR E BASED) BEFORE THE AO. AND, IN ANY CASE, WITHOUT PURSUING AND EXAMINING THE ASSESS EES RECORDS BY THE FIRST APPELLATE AUTHORITY? IN FACT, THE LD. CIT(A) ISSUES NO SUCH FINDING, SO THAT THE SAID FINDING BY THE AO TO THE CONTRARY REMAINS UN-REBUTT ED. HOW COULD, ONE MAY ASK, THE DEDUCTION OF SUCH UNSUBSTANTIATED EXPENDITURE/P AYMENT BE CONSIDERED, I.E., ON MERITS? THERE IS, EVEN AS OBSERVED BY THE BENCH DUR ING HEARING ITSELF, NO CONCEPT OF DISALLOWANCE PER SE IN RESPECT OF EXPENDITURE IN THE CASE OF A CHARITA BLE INSTITUTION, SO THAT WHERE (AND TO THE EXTENT) UNSU BSTANTIATED, OR NOT QUALIFYING AS AN ELIGIBLE EXPENDITURE, THE SAME WOULD LEAD TO AN INCREASE IN THE INCOME OF THE SOCIETY FOR THE YEAR, WHICH COULD BE CLAIMED AS EXE MPT ON ITS APPLICATION UNDER AND IN TERMS OF SS. 11& 12 OF THE ACT. THEN, AGAIN, WHI LE THE AO CLEARLY STATES OF THE NATURE OF THE PAYMENT UNDER SOCIETY SHARE BEING U NEXPLAINED, OR OF THE BONUS TO EMPLOYEES BEING NOT IN TERMS OF THE OBJECTS OF THE ASSESSEE-SOCIETY, THE LD. CIT(A) ALLOWS THE SAME. HIS CLARIFICATION ON THE FORMER CLEARLY SUGGESTS OF HIS CONSIDERATION OF THE ASSESSEES EXPLANATION, NOT AD VANCED BEFORE AND, THUS, CONSIDERED BY THE AO. FURTHER, HIS FINDING QUA THE LATTER, I.E., AS HAVING BEEN INCURRED IN ACCORDANCE WITH THE OBJECTS OF THE ASSE SSEE-SOCIETY, COULD ONLY BE UPON CONSIDERING THE EXPLANATION IN ITS RESPECT NOT BEFO RE THE AO INASMUCH AS THE ITA NO.597/ASR/2014 (A.Y.2011-12) ITO VS. M/S J & K BANK EMPLOYEES WELFARE SOCIETY 6 OBJECTS OF THE ASSESSEE-SOCIETY ARE THE SAME. THERE IS NO REFERENCE BY THE LD. CIT(A) AS TO THE NATURE OF THE PAYMENT, I.E., THE S ERVICE FOR WHICH THE EXPENDITURE ON BONUS STANDS INCURRED BY THE ASSESSEE-SOCIETY. T HERE IS ALSO NO REFERENCE TO THE OBJECT CLAUSE/S UNDER WHICH THE SAID PAYMENT/CREDIT CAN BE SAID TO, OR IS CONSIDERED AS FALLING UNDER. IN FACT, THE FINDING OF IT BEING IN ACCORDANCE WITH THE OBJECTS (OF THE ASSESSEE-SOCIETY) OR OTHERWISE, BOTH PROCEED ON THE BASIS OF THE SAME BEING AN APPLICATION OF INCOME. HOW COULD, WE WONDER, THE SA ME BE CLAIMED AS EXPENDITURE (THROUGH THE INCOME AND EXPENDITURE ACCOUNT)? ALL T HIS CLEARLY SHOWS OF THERE BEING A COMPLETE CONFUSION QUA THE SAID PAYMENT, AS INDEED OBSERVED IN RESPECT OF SOCIETY SHARE EXPENDITURE. CONTINUING FURTHER, IT MAY BE CLARIFIED THAT THE A O DOES NOT REGARD THE ASSESSEE-SOCIETY AS NOT A CHARITABLE INSTITUTION PER SE AND, THUS, NOT ENTITLED TO CLAIM EXEMPTION U/S. 11. HIS ONLY OBJECTION IS TO THE IMP UGNED EXPENDITURE BEING NOT SUBSTANTIATED, AND OF SOME OF THEM AS NOT REPRESENT ING AN EXPENDITURE/PAYMENT IN PURSUANCE OF A CHARITABLE ACTIVITY. THE REFERENCE B Y THE LD. CIT(A) TO VARIOUS CASE LAW IN THIS REGARD IS THEREFORE OF LITTLE CONSEQUEN CE. THE VERY FACT THAT THE ASSESSEE IS REGISTERED AS A CHARITABLE INSTITUTION UNDER THE ACT IMPLIES ITS OBJECTS TO BE CHARITABLE IN NATURE. WHY, THE LD. CIT(A) HIMSELF F INDS THE CLAIM FOR PROVISIONS AS NOT REPRESENTING A VALID CLAIM OF EXPENDITURE. T HE ASSESSEE, AS WAS CLARIFIED BY THE LD. AR DURING HEARING, IS NOT IN APPEAL. FURTHE R, THE LD. CIT(A) HAS REGARDED THE CLAIM FOR SOCIETY SHARE PAID/ALLOWED TO MEMBERS A S AN APPLICATION OF INCOME, AS WELL AS COVERED BY THE PRINCIPLE OF MUTUALITY. THE FORMER, WHERE SO (INASMUCH AS THE SAME IS UP TILL NOW UNSUBSTANTIATED), AS AFORE- NOTED, COULD ONLY BE ON THE BASIS OF AN EXPLANATION NOT FURNISHED BEFORE THE ASSESSIN G AUTHORITY FOR HIS EXAMINATION, CONSIDERATION AND/OR VERIFICATION. NOT ONLY IS THE PLEA AS TO MUTUALITY, TAKEN FOR THE FIRST TIME BEFORE HIM, CONSIDERED BY THE LD. CIT(A) , IT WAS, AS FOR OTHER EXPLANATIONS/MATERIALS LED BEFORE HIM, IN DISREGAR D OF RULE 46A OF THE INCOME TAX ITA NO.597/ASR/2014 (A.Y.2011-12) ITO VS. M/S J & K BANK EMPLOYEES WELFARE SOCIETY 7 RULES, 1962 (THE RULES). THE FINDING AS TO MUTUA LITY IS CLEARLY MISPLACED. THE REASON IS SIMPLE. FIRSTLY, THE SAME CANNOT BE, AS C LAIMED, AN EXPENDITURE, WHICH REPRESENTS A RESOURCE UTILIZED/EXPENDED FOR/TOWARD GENERATING REVENUE OR MAINTAINING AN ESTABLISHMENT, ONLY WHEREUPON IT CAN SURVIVE OR CONTINUE TO EXIST (FOR THE PURPOSE FOR WHICH IT IS FORMED). THAT IS, THE FINDING CONTRADICTS THE APPARENT CLAIM OF THE IMPUGNED SUM AS BEING AN EXPE NDITURE. TWO, THE INCOME OF THE SOCIETY IS PRIMARILY FROM BANK INTEREST (AT RS. 47.17 LACS, OUT OF THE TOTAL INCOME OF RS. 47.53 LAKHS) (REFER PARA 5 OF THE ASSESSMENT ORDER). IT IS THIS INCOME (AT NET OF EXPENDITURE) WHICH IS TO BE THEREFORE REGARDED A S EXEMPT (FROM TAX) ON ITS APPLICATION, I.E., WHERE PAID TO THE MEMBERS AS A P ART OF THEIR SHARE IN THE ASSESSEE- SOCIETYS INCOME. THAT IS, GOING BY THE EXPLANATION FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(A). IT IS ONLY THE INCOME BY WAY OF SUBSCRIPTION FROM THE MEMBERS (RS. 0.36 LAKHS), AGAIN AT NET OF THE EXPEN SES INCURRED, WHICH COULD ON PAYMENT TO MEMBERS - IRRESPECTIVE OF THEIR NEED FOR THE SAME (I.E., IF IT INDEED REPRESENTS A MONETARY HELP/CHARITABLE PURPOSE) OR N OT, BE REGARDED AS APPLIED IN DISBURSEMENT TO THE CONTRIBUTORS, I.E., AS A TRANSA CTION COVERED BY MUTUALITY (REFER, INTER ALIA , BANGLORE CLUB V. CIT [2013] 350 ITR 509 (SC)) FURTHER STILL, WHEN NO MATERIAL IS PLACED BY THE AS SESSEE IN SUPPORT, IT MAY NOT BY ITSELF LEAD TO THE CONCLUSION THAT NO EXPEND ITURE AT ALL HAS BEEN INCURRED, PARTICULARLY CONSIDERING THAT THE ACCOUNTS ARE AUDI TED. BUT THEN, IF THE ACCOUNTS, INCLUDING THE MATERIALS ON WHICH THEY ARE BASED, CO ULD BE PRODUCED BEFORE THE AUDITOR, WHY WE WONDER DOES THE ASSESSEE NOT FURNIS H THE RELEVANT RECORDS/EXPLANATIONS BEFORE THE ASSESSING AUTHORITY , WHOSE POWERS IN LAW ARE PLENARY, AND IS OBLIGED IN LAW TO BE SATISFIED TO V ERIFY THE SAME AND BE SATISFIED ABOUT THE GENUINENESS AND VERACITY OF THE CLAIM/S. HIS INFERENCE/S IN THE ABSENCE OF THE ASSESSEE FAILING TO FURNISH THE SAME, HOWEVER, IS TO BE JUDICIALLY PERMISSIBLE, AND CANNOT BE ARBITRARY. AS AFORE-EXPLAINED, THE CO ROLLARY TO AN EXPENDITURE OR, AS ITA NO.597/ASR/2014 (A.Y.2011-12) ITO VS. M/S J & K BANK EMPLOYEES WELFARE SOCIETY 8 THE CASE MAY BE, APPLICATION OF INCOME, BEING NOT S UBSTANTIATED, IS THAT IT WOULD RESULT IN INFLATION OF THE INCOME LIABLE TO BE APPL IED FOR CLAIMING EXEMPTION U/S. 11, WHICH SECTION ALSO CONTAINS PROVISIONS AS TO CARRY FORWARD FOLLOWING THE PROCEDURE PRESCRIBED IN ITS RESPECT (REFER: CIT V. NAGPUR HOTEL OWNERS ASSOCIATION [2001] 247 ITR 201 (SC). THE HONBLE APEX COURT IN STATE OF ORISSA VS. MAHARAJA B.P.SINGH DEO [1970] 76 ITR 690 (SC) CLARIFIED THAT THE FACT THA T THE MATERIAL PRODUCED BY THE ASSESSEE (BEFORE THE ADJUDICATING A UTHORITY) IS NOT RELIABLE DOES NOT ENTITLE THE SAID AUTHORITY TO MAKE AN ARBITRARY ASS ESSMENT, WHICH HAS TO BE BASED ON RELEVANT MATERIAL. THIS, IT EXPLAINED, IS AS THE B EST JUDGMENT IS NOT AN ARBITRARY POWER AND IS TO BE JUDICIALLY EXERCISED. WHAT, FOR EXAMPLE, IS THE BASIS OF THE BONUS TO EMPLOYEES, STATED TO BE FOR THE BENEFIT OF THE IN-SERVICE EMPLOYEES OF THE BANK. HOW ARE THESE MEMBERS DIFFERENTLY PLACED, OR THEIR STATUS ANY DIFFERENT FROM THAT OF THE EX-EMPLOYEES? EVERY EMPLOYEE WOULD RETI RE FROM SERVICE IN TIME, BUT THAT SHOULD NOT ALTER HIS STANDING AS A MEMBER OF T HE SOCIETY. FURTHER, IS THE PAYMENT AGAINST ANY SERVICES RENDERED BY THE PAYEES ? EVEN SO, HOW CAN THE SAID EXPENDITURE BE REGARDED AS INCURRED FOR EARNING REV ENUE BY THE ASSESSEE, WHICH IS PRINCIPALLY FROM BANK INTEREST? OR, IS THE BONUS, A S THE ACCOUNT NAME SUGGESTS, IN LIEU OF PROFIT, IN WHICH CASE IT IS AN APPROPRIATIO N OF PROFIT BY THE MEMBERS OR, AS THE CASE MAY BE, A CATEGORY OF MEMBERS. THEN, AGAIN , THE SAME MAY NOT BE IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY, BUT HIS ORDER DOES NOT, AS THAT OF THE FIRST APPELLATE AUTHORITY, SPECIFY OR EVEN INDICATE THE B ASIS FOR HIS SO STATING, AFTER GATHERING THE RELEVANT MATERIAL. THE BURDEN THUS CA ST BY LAW ON THE ASSESSING AUTHORITY IS ONEROUS. WHERE THOUGH THERE IS A RATIO NAL BASIS FOR ARRIVING AT A CONCLUSION, IT CANNOT BE LIGHTLY INTERFERED WITH, A S IT IS IN LAW HIS BEST JUDGMENT. THE ASSESSMENT, ACCORDINGLY, BOTH FROM THE STAND-PO INT OF LAW, AS WELL AS THE DICTATE OF JUSTICE, SHALL HAVE TRAVEL BACK TO THE F ILE OF THE AO. WE, IN DOING SO, DRAW SUPPORT FROM THE DECISION IN S.R. BATLIBOI & ASSOCIATES V. CIT [2015] 230 ITA NO.597/ASR/2014 (A.Y.2011-12) ITO VS. M/S J & K BANK EMPLOYEES WELFARE SOCIETY 9 ITR 433 (CAL). WE ARE CONSCIOUS, WHEN WE DO SO, OF THE ASSESSEES RECALCITRANCE, WHICH IS WHOLLY UNEXPLAINED, AND IS, AS IT OUGHT TO BE, DISCOUNTENANCED. THE SAME COULD THOUGH BE ADDRESSED BY IMPOSING AN APPROPRIAT E COST ON IT. IN THE PRESENT CASE WE ABSTAIN FROM DOING SO CONSIDERING THAT THE ASSESSEE IS A CHARITABLE ORGANIZATION. THE LD. AR WOULD BEFORE US ASSURE US THAT THE ASSESSEE SHALL COOPERATE IN THE SET ASIDE PROCEEDINGS. SURELY, IF THE ASSESSEE COULD FURNISH EXPLANATION/MATERIAL(S) BEFORE THE FIRST APPELLATE AUTHORITY, WHAT PREVENTS IT FROM DOING SO BEFORE THE ASSESSING AUTHORITY? WHERE THE ASSESSEE SO DOES, ADDUCING THE RELEVANT MATERIALS, THE AO SHALL FRAME A REGULAR AS SESSMENT ON MERITS IN ACCORDANCE WITH LAW. WHERE NOT, I.E., DESPITE THE A SSURANCE BEFORE US, THE AO MAY FRAME A BEST JUDGMENT ASSESSMENT ON SOME VALID BASI S, BOTH ON FACTS AND AS WELL IN LAW, DRAWING LEGITIMATE INFERENCES, I.E., IN ACCORD ANCE WITH LAW. THE LAW, IT MAY BE CLARIFIED PERMITS HIM TO DRAW ADVERSE INFERENCES, A S ADMISSIBLE UNDER THE CIRCUMSTANCES, WHERE THE RELEVANT MATERIAL IS NOT P RODUCED BEFORE HIM (REFER, INTER ALIA , METAL BOX POWDER CO. LTD. V. CIT [2002] 258 ITR 123 (MAD)). WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 22, 201 8 SD/- SD/- (N.K.CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22.03.2018 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S J & K BANK EMPLOYEES WELFARE SOC IETY, SRINAGAR. (2) THE INCOME TAX OFFICER, WARD-3(3), SRINAGAR (3) THE CIT(A), JAMMU (4) THE CIT, CONCERNED (5) THE SR DR, I.T.A.T. TRUE COPY BY ORDER