Bharat Educational & Social Welfare Society, Kurukshetra V. ACIT, Kurukshetra

ITA 603/CHANDI/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68415 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-07-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 29-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ROHIT JAIN
• Keywords: Charitable institution
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A,CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 602 & 603/CHD/2012 A.Y.: 2004-05 & 2005-06 BHARAT EDUCATIONAL & VS THE ACIT, SOCIAL WELFARE SOCIETY, CIRCLE, 154, SECTOR 13, KURUKSHETRA. KURUKSHETRA. PAN NO. AAATB-8901H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT JAIN RESPONDENT BY : SHRI AKHILESH GUPTA DATE OF HEARING : 31.07.2013 DATE OF PRONOUNCEMENT : 29.08.2013 O R D E R PER SUSHMA CHOWLA, JM THESE TWO APPEALS BY SAME ASSESSEE ARE FILED AGAINS T CONSOLIDATED ORDER OF COMMISSIONER OF INCOME-TAX-I KARNAL, DATED 19.03.2012 AGAINST THE SEPARATE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 602/CHD/2012 : 1. THAT LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS. 20,00,000/- ON ACCOUN T OF CASH DEPOSIT IN THE BANK. 2. THAT LEARNED CIT(A) HAS ERRED IN LAW, AND F ACTS IN CONFIRMING THE ACTION OF AO IN NOT ALLOWING THE DED UCTION U/S. 10(23C)(IIIAD). 2 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL IN ITA NO. 603/CHD/2012 : THAT LEARNED CIT(A) HAS ERRED IN LAW, AND FACTS IN CONFIRMING THE ACTION OF AO IN NOT ALLOWI NG THE DEDUCTION U/S. 10(23C)(IIIAD). 4. BOTH THE APPEALS RELATING TO THE SAME ASSESSEE W ERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 602/CHD/2012 (A.Y. 2004-05) 5. THE GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINS T THE ADDITION OF RS.20,00,000/-. 6. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSING OFFICER, ON THE PERUSAL OF THE BANK STATEMENT NOTED THAT THERE WAS DEPOSIT OF RS.20,00,000/- IN THE BANK ACCOUNT OF TH E ASSESSEE ON 29.12.2003. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF THE SAID DEPOSIT IN THE BANK ACCOUNT. IN REPLY, THE AS SESSEE EXPLAINED THAT DEPOSIT OF RS.20,00,000/- WAS MADE ON 29.12.20 03 AND SUM OF RS.20,00,000/- WAS WITHDRAWN ON 29.12.2003 ITSELF. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE SAID DEPOSIT AND W ITHDRAWAL OF RS.20 LACS IN THE BANK ACCOUNT OF THE ASSESSEE WERE NOT REFLECTED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. T HE LD. AR FOR THE ASSESSEE FURNISHED AN EXPLANATION BEFORE THE AS SESSING OFFICER WHICH IS INCORPORATED AT PAGES 10 & 11 OF THE ASSES SMENT ORDER. THE MAIN PLEA OF THE ASSESSEE WAS THAT IT HAD AN OP ENING CASH BALANCE OF RS.22,52,561/- ON 29.12.2003 OUT OF WHIC H THE SAID DEPOSIT WAS MADE INTO THE BANK ACCOUNT, THOUGH NOT REFLECTED IN ITS BOOKS OF ACCOUNT. SIMILARLY, THE CASH WITHDRAWAL O F RS.20 LACS WAS ALSO NOT REFLECTED IN THE BOOKS OF ACCOUNT OF T HE ASSESSEE 3 BECAUSE OF CERTAIN TECHNICALITIES. THE ASSESSING O FFICER, REJECTING THE EXPLANATION OF THE ASSESSEE MADE AN ADDITION OF RS.20 LACS. FURTHER, IN VIEW OF THE FACT THAT THE ASSESSEE HAD DECLARED SURPLUS DURING THE YEAR UNDER CONSIDERATION AND ALSO IN THE EARLIER YEARS, APPLYING THE RATIO LAID DOWN BY THE HON'BLE UTTRAKH AND HIGH COURT IN CIT VS QUEENS EDUCATIONAL SOCIETY 223 CTR 395 (U TTRAKHAND) HELD THE ASSESSEE NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE INCOME-TAX ACT. 7. THE CIT(APPEALS), REJECTING THE EXPLANATION OF T HE ASSESSEE UPHELD THE ADDITION OF RS.20 LACS. FURTHER, IT WAS HELD BY THE CIT(APPEALS) THAT THE ASSESSEE SOCIETY DOES NOT EXI ST SOLELY FOR THE PURPOSE OF EDUCATION ONLY AND HENCE, WAS NOT ELIGIB LE FOR EXEMPTION UNDER SECTION 10(23)(IIID) OF THE ACT. R ELIANCE WAS PLACED ON THE RATIO LAID DOWN IN CIT VS QUEENS EDUC ATIONAL SOCIETY (SUPRA) AND DR. MAHARAJ KRISHAN KAPUR EDUCA TIONAL CHARITABLE TRUST SOCIETY VS UNION OF INDIA AND ANOT HER IN CPW NO. 2047 OF 2009 (P&H) DECIDED ON 10.02.2009. 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE CIT(APPEALS) 9. SHRI ROHIT JAIN APPEARED FOR THE ASSESSEE AND SH RI AKHILESH GUPTA APPEARED FOR THE REVENUE AND PUT FORWARD THEI R CONTENTIONS. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE IN GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION OF RS.20 LACS RELATABLE TO THE CASH DEPOSI T IN THE BANK ACCOUNT. ADMITTEDLY, THE ASSESSEE ON 29.12.2003 HA D OPENING CASH BALANCE OF RS.22,52,561/-, WHICH WAS REFLECTED IN I TS BOOKS OF ACCOUNT. ON THE SAID DATE, THE BANK ACCOUNT OF THE ASSESSEE 4 REFLECTS CREDIT OF CASH DEPOSIT OF RS.20 LACS AND A LSO DEBIT OF CASH WITHDRAWAL OF RS. 20 LACS. BOTH ENTRIES OF RS.20 L ACS ON 29.12.2003 HAVE NOT BEEN ENTERED IN THE BOOKS OF AC COUNT OF THE ASSESSEE. HOWEVER, IT IS NOT DISPUTED THAT THE ASS ESSEE HAD SUFFICIENT CASH BALANCE ON THE SAID DATE TO MAKE TH E SAID DEPOSIT IN ITS BANK ACCOUNT. IN THE TOTALITY OF THE ABOVESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO MERIT IN THE ADDITION OF RS.20 LACS. ACCORDINGLY, WE DIRECT THE ASSESSING O FFICER TO DELETE THE ADDITION OF RS.20 LACS IN THE FACTS OF THE PRES ENT CASE WHERE THE ASSESSEE HAD THE REQUISITE CASH AVAILABLE WITH IT O N THE SAID DATE, THOUGH THE ENTRY OF BOTH CREDIT AND DEBIT OF RS.20 LACS EACH ON 29.12.2003 IS NOT REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THUS, THE GROUND NO. 1 RAISED BY THE ASSESSEE IS AL LOWED. 11. THE ISSUE RAISED VIDE GROUND NO.2 IS AGAINST TH E WITHDRAWAL OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE AC T. THE CASE OF THE REVENUE IS THAT IN VIEW OF THE SURPLUS GENERATE D BY THE ASSESSEE, THE ASSESSEE IS NOT ENTITLED TO THE BENEF IT OF DEDUCTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT IN VIEW OF THE RATIO LAID DOWN IN CIT VS QUEENS EDUCATIONAL SOCIETY (SUPRA) A ND DR. MAHARAJ KRISHAN KAPUR EDUCATIONAL CHARITABLE TRUST SOCIETY VS UNION OF INDIA AND ANOTHER (SUPRA). 12. THE LD. AR FOR THE ASSESSEE, HOWEVER POINTED OU T THAT ASSESSEE'S CASE STANDS COVERED BY THE RATIO LAID DO WN IN PINEGROVE INTERNATIONAL CHARITABLE TRUST VS. UNION OF INDIA 3 27 ITR 73 (P&H) WHICH HAD CONSIDERED BOTH THE DECISIONS RELIE D UPON BY THE ASSESSING OFFICER AND ALLOWED THE RELIEF TO THE ASS ESSEE THEREIN. 13. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON T HE ORDERS OF AUTHORITIES BELOW. 5 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING VIDE GROUND NO. 2 IS AGAINST DENI AL OF DEDUCTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. THE ASSES SEE ADMITTEDLY WAS RUNNING AN EDUCATIONAL INSTITUTION DURING THE Y EAR UNDER CONSIDERATION. THE GROSS RECEIPTS OF THE ASSESSEE FOR BOTH THE YEARS UNDER CONSIDERATION WERE BELOW RS. 1 CRORE. H OWEVER, THE ASSESSEE HAD DECLARED NET SURPLUS DURING BOTH YEARS UNDER CONSIDERATION. IN ASSESSMENT YEAR 2004-05, THE GROS S RECEIPTS WERE RS. 48.28 LACS AND SURPLUS DECLARED FOR THE YEAR WA S RS. 708,559/-. IN ASSESSMENT YEAR 2005-06, THE GROSS RECEIPTS WERE RS. 84.66 LACS AND THE SURPLUS WORKED OUT BY THE ASSESSEE WAS RS. 992,608/-. THE FIRST OBJECTION RAISED BY THE AUTHORITIES BELOW IN DENYING THE DEDUCTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT W AS THAT THE ASSESSEE HAD EARNED SURPLUS FROM YEAR TO YEAR AND I N VIEW OF THE RATIO LAID DOWN BY THE HON'BLE UTTRAKHAND HIGH COUR T IN CIT VS QUEENS EDUCATIONAL SOCIETY (SUPRA) WAS NOT ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. THE SECOND OBJECTION RAISED BY THE ASSESSING OFFICER WAS IN RE LATION TO THE AMOUNT WITHDRAWN BY SMT. KAILASO DEVI, THE THEN PRE SIDENT OF THE SOCIETY. ANOTHER OBJECTION RAISED IN ASSESSMENT YE AR 2004-05 WAS IN RESPECT OF THE CASH DEPOSIT AND CASH WITHDRAWAL OF RS. 20 LACS. BECAUSE OF THE CUMULATIVE REASONS, THE DEDUCTION CL AIMED UNDER SECTION 10(23C)(IIIAD) OF THE ACT WAS DENIED TO THE ASSESSEE. 15. THE CIT(APPEALS) VIDE PARA 1.13 TO 1.16 HAS GIV EN A FINDING IN RESPECT OF ASSESSMENT YEAR 2004-05. THE PERUSAL OF THE SAID FINDINGS REFLECT THAT THE OBJECTION RAISED BY THE C IT(APPEALS) IN DENYING THE EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT WERE TWO-FOLD I.E. (A) CASE OF SURPLUS FROM YEAR TO YEAR, AND (B) THE DEPOSIT AND WITHDRAWAL OF CASH OF RS. 20 LACS. IN RELATION TO 6 ASSESSMENT YEAR 2005-06, TWO ASPECTS WERE (I) CASE OF SURPLUS FROM YEAR TO YEAR; AND (II) WITHDRAWAL BY SMT.KAILASO DE VI IN EXCESS OF HER LOAN ADVANCED TO THE SOCIETY. THE FIRST ISSUE OF EARNING SURPLUS BY THE EDUCATIONAL SOCIETY HAS NOW BEEN SETTLED BY HON'BLE PUNJAB & HARYANA HIGH COURT IN PINEGROVE INTERNATIONAL CHA RITABLE TRUST VS UNION OF INDIA AND ORS. 327 ITR 73 (P&H). THE H ON'BLE HIGH COURT VIDE PARA 8.8 AT PAGES 62-63 OF THE JUDGEMENT OVERRULED THE RATIO LAID DOWN BY CIT VS QUEENS EDUCATIONAL SOCIET Y (SUPRA) AND DR. MAHARAJ KRISHAN KAPUR EDUCATIONAL CHARITABLE TR UST SOCIETY VS UNION OF INDIA AND ANOTHER AND HAD HELD THAT MERELY BECAUSE THE INSTITUTION HAS EARNED PROFIT, WOULD NOT BE DEC IDING FACTOR TO CONCLUDE THAT THE EDUCATIONAL INSTITUTION EXISTS FO R PROFIT. WHAT IS IMPORTANT IS TO BE ASCERTAINED WHETHER THE EDUCA TIONAL INSTITUTION HAS BEEN APPLYING ITS PROFIT WHOLLY AND EXCLUSIVELY TO THE OBJECT FOR WHICH THE INSTITUTION IS ESTABLISHED . 16. IN THE FACTS OF THE PRESENT CASE, THERE IS NO F INDING BY THE ASSESSING OFFICER THAT THE ASSESSEE SOCIETY HAD APP LIED ITS INCOME FOR ANY OTHER PURPOSE EXCEPT FOR EDUCATION. IN VIE W THEREOF, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. 17. THE SECOND ASPECT RAISED BY THE AUTHORITIES BEL OW IN ASSESSMENT YEAR 2004-05 IS IN RELATION TO THE CASH DEPOSIT AND WITHDRAWAL OF RS. 20 LACS EACH ON THE SAME DATE WHI CH WE HAVE ALLOWED IN THE PARAS HEREIN ABOVE AND HENCE, THE SA ME DOES NOT AFFECT THE GRANT OF EXEMPTION UNDER SECTION 10(23C) (IIIAD) OF THE ACT. 18. NOW COMING TO THE ISSUE RAISED IN ASSESSMENT YE AR 2005-06 IN RELATION TO THE CLAIM OF EXEMPTION UNDER SECTION 10 (23C)(IIIAD) OF 7 THE ACT. THE FIRST ASPECT IS THE EARNING OF SURPL US FROM YEAR TO YEAR WHICH STANDS SETTLED BY THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN PINEGROVE INTERNATIO NAL CHARITABLE TRUST VS UNION OF INDIA AND ORS. (SUPRA) . IN VIEW THEREOF, WHERE THERE IS NO FINDING BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD APPLIED ITS INCOME FOR ANY OTHER PURPO SE EXCEPT FOR EDUCATION, THERE IS NO MERIT IN DENIAL OF DEDUCTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. 19. THE SECOND ASPECT ON WHICH THE EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT WAS NOT ALLOWED TO THE AS SESSEE IN ASSESSMENT YEAR 2005-06 WAS THE ADVANCES MADE BY TH E ASSESSEE SOCIETY TO THE THEN PRESIDENT, MRS. KAILASO DEVI. THE ASSESSEE PLACED ON RECORD COPY OF THE ACCOUNT OF THE SAID LA DY, PERUSAL OF WHICH REFLECTS THAT THERE WAS AN OPENING CREDIT BAL ANCE OF RS. 257,272/- AND AT THE CLOSE OF THE YEAR, THERE WAS D EBIT BALANCE OF RS. 972,598/-. THE EXPLANATION OF THE ASSESSEE IN THIS REGARD WAS THAT MRS. KAILASO DEVI ALONG WITH HER FAMILY MEMBER S HAD CONTRIBUTED TO THE SOCIETY AND HAD PROVIDED UNSECUR ED LOANS WITHOUT CHARGING ANY INTEREST. TOTAL SUM OF RS. 20 ,67,500/- WAS THE BALANCE OF UN-SECURED LOANS CONTRIBUTED BY SHRI OM NATH HUSBAND, NIRMAL SAINI, SISTER, BALBIR SAINI, BROTHE R AND GIAN SINGH SAINI, BROTHER-IN-LAW AS AGAINST DEBIT BALANCE OF R S. 972598/- OF SMT. KAILASO DEVI. THE SAID EXPLANATION DID NOT FI ND FAVOUR WITH THE CIT(APPEALS) AND CONSEQUENTLY, THE EXEMPTION CL AIMED UNDER SECTION 10(23C)(IIIAD) OF THE ACT WAS DENIED TO THE ASSESSEE SOCIETY. 20. WE FIND NO MERIT IN THE ORDER OF THE CIT(APPEAL S) IN THIS REGARD IN VIEW OF THE FACT THAT UNSECURED LOANS HAV E BEEN RAISED 8 FROM ALL THE FAMILY MEMBERS INCLUDING THE LADY SMT. KAILASO DEVI, AS IS APPARENT FROM THE FACT THAT THERE WAS AN OPEN ING CREDIT BALANCE OF RS. 257,72/- IN HER ACCOUNT ALONGWITH TH E BALANCE OF HER FAMILY MEMBERS TOTALING RS. 20,67,500/-. THE DEBIT BALANCE AT THE CLOSE OF THE YEAR AT RS. 972,598/- IN THE ACCOUNT O F SMT. KAILASO DEVI STANDS OFF-SET AGAINST UNSECURED LOANS RAISED FROM THE FAMILY MEMBERS TOTALING RS. 20,67,500/-. REVERSING THE OR DER OF CIT(APPEALS), WE HOLD THAT THERE IS NO MERIT IN DEN IAL OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT O N THIS ACCOUNT. THE ASSESSING OFFICER IS THUS, DIRECTED TO ALLOW EX EMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT TO THE ASSESSEE R ELATING TO ASSESSMENT YEAR 2005-06. 21. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF AUGUST, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH AUGUST,2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH