The Income tax Officer, Kashmir V. Sh. Haji Ghulam Nabi Wani Prop., Kashmir

ITA 665/ASR/2013

• Counselvise Citation: 66520914 RSA 2013
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Charitable institution
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 665(ASR)/2013 ASSESSMENT YEAR: 2006-07 PAN: INCOME TAX OFFICER, VS. SH. HAJI GHULAM NABI WA NI, ANANTNAG, KASHMIR (J&K) PROP. M/S AL-SARWAT H IGH SCHOOL, K.P. ROAD, ANANTNAG, KASHMIR (APPELLANT) (RESPONDENT) APPELLANT BY: SH. MAHAVIR SINGH, SR.DR RESPONDENT BY: NONE DATE OF HEARING: 05.05.2014 DATE OF PRONOUNCEMENT: 19.05.2014 ORDER PER BENCH 1. THE REVENUE HAVE FILED THE PRESENT APPEAL AGAINST IMPUGNED ORDER DATED 29.08.2013 FOR THE ASSESSMENT YEAR 2006 -07 ON THE FOLLOWING GROUNDS: I. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN ALLOWING THE ADDITION AMOUNTING TO RS. 20, 31,400/- ON ACCOUNT OF UNEXPLAINED CREDIT IN THE OPENING CAPITA L BALANCE. II. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN ALLOWING THE ADDITION AMOUNTING TO RS. 18, 16,326/- ON ACCOUNT OF ADDITION UNEXPLAINED CREDIT IN THE RESER VED AND SURPLUS BUILD UP. III. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MOR E GROUNDS OF APPEAL. 2 I.T.A. NO. 665(ASR)/2013 ASSESSMENT YEAR: 2006-07 2. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT I N THE NAME OF ASSESSEE AS PROP. AL-SARWAT HIGH SCHOOL ON THE BASIS OF RETURN FILED BY THE INDIVIDUAL. AS PER THE ASSESSMENT ORDER, THE ASSESSEE IS A NON-PROFIT MARKETING SOCIE TY EXCLUSIVE FOR EDUCATIONAL, SOCIAL AND CHARITABLE PURPOSES AND IS RUNNING AN EDUCATIONAL INSTITUTION BY THE NAME OF AL SARWAT CONVENT HIGH SCHOOL WHICH IS A UNIT OF AN N.G.O. BY THE NAM E OF AL SARWAT STUDENTS CO-ORDINATION FOR ENVIRONMENTAL PLA NNING (ASSCEP). 3. A COPY OF THE REGISTRATION BY THE REGISTRAR OF S OCIETY J&K GOVT. WAS SUBMITTED ALONG WITH A COPY OF THE CONSTITUTION OF THE MANAGING COMMITTEE APPOINTED BY DIRECTOR OF EDUCATION J&K GOVT. TO MANAGE THE AFFAI RS OF THE SCHOOL W.E.F. 1999-98 ONWARDS. THE MANAGING COMMITT EE WAS AUTHORIZED TO RUN THE SCHOOL/EDUCATIONAL INSTITUTIO N FOR ACADEMIC PURPOSES ONLY. THE ASSESSEE IS A NON-PROFI T MARKETING ORGANIZATION AND IS RUNNING AN EDUCATIONA L INSTITUTION SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PROFIT WHOSE INCOME IS EXEMPT UNDER SECTION 10(23C)IIIAD O F THE INCOME-TAX ACT, 1961( IN SHORT THE ACT). THESE FA CTS WERE 3 I.T.A. NO. 665(ASR)/2013 ASSESSMENT YEAR: 2006-07 NOT DENIED BY THE REVENUE AUTHORITY. THE ASSESSING OFFICER HAS MADE SCRUTINY ASSESSMENT IN THE CASE OF THE ASS ESSEE FOR THE ASSESSMENT YEAR 2010-11 IN THE STATUS OF A SOCI ETY AND HAS EXTENDED BENEFITS OF SECTION 10(23C)IIIAD OF THE AC T. 4. AS REGARDS TO THE ADDITION OF RS. 20,31,400/-, T HE ASSESSING OFFICER HAS MADE THIS ADDITION BY TREATIN G THE OPENING CORPUS/CAPITAL FUND AS INCOME. THE SAID OPE NING CAPITAL OF CHARITABLE EDUCATION INSTITUTION CLEARLY DOES NOT PERTAIN TO CURRENT YEAR BUT TO PREVIOUS YEARS THE S AME CAN BE TAXED AT ALL AND PARTICULARLY IN THE ASSESSMENT YEA R UNDER CONSIDERATION. THE ASSESSEE HAS FILED THE BALANCE S HEET, INCOME AND EXPENDITURE STATEMENT ALONG WITH ANNEXUR E W.E.F. 1997-98 AND STATEMENT OF ROLL OF STUDENTS AND TOTAL TUITION FEES DERIVED YEAR-WISE (ENCLOSED FOR REFERENCE BEFORE TH E REVENUE AUTHORITY) AND SUBMITTED THAT THE SCHOOL HAS BEEN F UNCTIONING SINCE EARLY NINETIES AND CAPITAL & SURPLUS HAS BEEN GENERATED OVER THE YEARS AS IS REFLECTED AS PER BALANCE SHEET S AND INCOME AND EXPENDITURE ACCOUNTS. 5. AS REGARDS TO THE ADDITION OF RS. 18,16,326/- ON ACCOUNT OF UNEXPLAINED CREDITS IN RESERVES AND SURP LUS, THIS 4 I.T.A. NO. 665(ASR)/2013 ASSESSMENT YEAR: 2006-07 ADDITION HAS BEEN MADE IN THE CASE OF THE ASSESSEE AS UN- EXPLAINED CREDITS TREATING THE OPENING BALANCE OF R ESERVES AND SURPLUS AS INCOME FROM UNEXPLAINED CREDITS. ACCORDI NG TO THE ASSESSEE, IT REPRESENTS THE OPENING RESERVES; HENCE THERE IS NO APPLICABILITY OF SECTION 68 OF THE ACT IN THE CASE OF THE ASSESSEE. THE SAID OPENING RESERVE CLEARLY DOES NOT PERTAIN TO CURRENT YEAR BUT TO PREVIOUS YEARS THE SAME CANNOT BE TAXED AT ALL PARTICULARLY IN THE ASSESSMENT YEAR UNDER CONSI DERATION. ON BOTH COUNT, THE ASSESSING OFFICER DID NOT ACCEPT TH E EXPLANATION OF THE ASSESSEE AND MADE THE ADDITION I N DISPUTE. BUT IN THE APPEAL FILED BY THE ASSESSEE, LEARNED FI RST APPELLATE AUTHORITY AFTER SEEKING THE REMAND REPORT FROM THE ASSESSING OFFICER, DELETED THE ADDITION IN DISPUTE VIDE IMPUG NED ORDER DATED 29.08.2013. NOW, BEING AGGRIEVED WITH THE IMP UGNED ORDER, THE REVENUE HAS FILED THE PRESENT APPEAL. 6. NOTICE OF HEARING WAS ISSUED TO THE ASSESSEE BY RPAD IN SPITE OF THE SAME NEITHER THE ASSESSEE NOR ITS A UTHORIZED REPRESENTATIVE APPEARED NOR FILED ANY APPLICATION F OR ADJOURNMENT. 5 I.T.A. NO. 665(ASR)/2013 ASSESSMENT YEAR: 2006-07 7. KEEPING IN VIEW THE ISSUE IN DISPUTE AND THE ORD ERS PASSED BY THE REVENUE AUTHORITY, WE ARE OF THE VIEW THAT NO USEFUL PURPOSE WOULD BE SERVED TO ADJOURN THE MATTE R AND ISSUE NOTICE AGAIN AND AGAIN TO THE ASSESSEE. THERE FORE, WE PROCEED TO DECIDE THE ISSUE EX-PARTE ASSESSEE AFTER HEARING LEARNED DR. 8. LEARNED DR RELIED UPON THE ORDER PASSED BY THE LEARNED FIRST APPELLATE AUTHORITY. 9. WE HAVE HEARD LEARNED DR AND PERUSED THE ORDERS PASSED BY THE REVENUE AUTHORITY. THE LEARNED FIRST APPELLATE AUTHORITY HAS GIVEN ITS FINDINGS REGARDING THE ISSU E INVOLVED IN THE PRESENT APPEAL IN PARA NOS. 4, 4.1 & 4.2 (PAGE NOS. 8 & 9), THE SAME ARE REPRODUCED AS UNDER FOR THE SAKE OF CO NVENIENCE: 4. DETERMINATION 4.1 GROUND OF APPEAL NO. 1 IS GENERAL IN NATURE, R EQUIRE NO ADJUDICATION AND ACCORDINGLY DISMISSED. 4.2 GROUND OF APPEAL NO. 2 & 3 RELATES TO AN ADDIT ION OF RS. 20,31,400/- & RS. 18,16,326/- ON ACCOUNT OF OPE NING CAPITAL AND OPENING RESERVE AND SURPLUS. IT IS OBSE RVED THAT THE A.O. HAS ADDED THE OPENING CAPITAL AND OPENING RESE RVED & SURPLUS TO THE INCOME OF THE APPELLANT SINCE THE AP PELLANT HAS FILED THE RETURN FOR THE FIRST TINE AND ON REPEATED NOTICES BY THE A.O., THE APPELLANT FAILED TO PROVIDE THE REQUIRED EXPLANATION REGARDING THE OPENING BALANCES. 6 I.T.A. NO. 665(ASR)/2013 ASSESSMENT YEAR: 2006-07 IT IS OBSERVED THAT SINCE THE APPELLANT WAS RUNNING A SCHOOL SOLELY FOR THE PURPOSE OF EDUCATION AND HAS NOT TAK EN OUT ANY MONEY FROM THE SCHOOL BY WAY OF DRAWINGS OR OTHERWI SE AND FURTHER THE TURNOVER OF THE SCHOOL WAS LESS THAN RS . 1 CRORE, THE APPELLANT WAS NOT REQUIRED TO FILE THE RETURN O F INCOME BEFORE THE ASSESSMENT YEAR 2006-07 AND THE INCOME W AS EXEMPT U/S 10(23C)(IIIAD) OF THE ACT. IT IS AFTER T HE AMENDMENTS IN THE PROVISIONS OF THE ACT THAT THE AP PELLANT FILED ITS RETURN IN THE ASSESSMENT YEAR 2006-07 FOR THE FIRST TIME. THUS THE CONTENTION OF THE A.O. THAT THE OPEN ING CAPITAL AND RESERVE AND SURPLUS TO BE TREATED AS THE INCOME OF THE YEAR UNDER CONSIDERATION SINCE THE APPELLANT HAVE NOT FI LED RETURNS IN THE EARLIER YEAR IS NOT RIGHT AS THE APPELLANT W AS NOT LEGALLY REQUIRED TO FILE THE RETURN OF INCOME BEFORE THE AS SESSMENT YEAR 2006-07. AS THE APPELLANT HAD NOT PRODUCED THE FINANCIAL STA TEMENTS OF EARLIER YEARS AND OTHER DOCUMENTS BEFORE THE A.O. D URING THE COURSE OF ASSESSMENT, THE SAME WERE FORWARDED TO TH E A.O. ALONG WITH OTHER DETAILS SUBMITTED BY THE APPELLANT FOR VERIFICATION AND COMMENTS THEREON. THE A.O. IN HIS REMAND REPORT HAS NOT POINTED OUT ANY DEFICIENCIES IN THES E DOCUMENTS NOR HAS POINTED OUT ANY SPECIFIC VIOLATION OF ANY P ROVISIONS OF THE ACT AS TO WHY THE OPENING CAPITAL OR RESERVE AN D SURPLUS SHOULD BE TREATED AS UNEXPLAINED. FURTHER, THE A.O. HAS ALSO NOT POINTED OUT ANY SPECIFIC VIOLATION OF THE ACT A S TO WHY THE PROVISIONS OF SECTION 10(23)(IIIAD) SHOULD NOT HAVE BEEN APPLIED TO THE APPLICANT. HOWEVER, THE A.O. MENTION ED THAT THESE DOCUMENTS WERE NOT PRODUCED AT THE TIME OF AS SESSMENT PROCEEDINGS AND THE APPELLANT HAS NOT FILED ITS RET URN OF INCOME FOR THE EARLIER YEARS. FROM THE PERUSAL OF THE BALANCE SHEETS OF EARLIER Y EARS, CERTIFICATION OF GRANT OF RECOGNITION OF SCHOOL DAT ED 23.07.1996, VALUATION CERTIFICATION OF BUILDING OF SCHOOL AS ON 31 ST MARCH 2005 ISSUED BY THE OFFICE OF EXECUTIVE ENGIN EERS R & B DIVISION, KOKERNAG CLEARLY ESTABLISHES THAT THE SCHOOL IS IN EXISTENCE FOR LAST MANY YEARS. THE OPENING CAPIT AL BALANCE AND OPENING RESERVE AND SURPLUS IS MAINLY SHOWN AGA INST THE 7 I.T.A. NO. 665(ASR)/2013 ASSESSMENT YEAR: 2006-07 BUILDING OF THE SCHOOL IN THE FINANCIAL STATEMENTS OF THE APPELLANT. THE BUILDING OF THE SCHOOL IS CLEARLY ES TABLISHED AS AN OLD BUILDING FROM THE CERTIFICATES OF GOVERNMENT AUTHORITIES, THEREFORE, IT IS NOT JUSTIFIED TO HOLD THAT THE OPENING BALANCE OF CAPITAL AND RESERVE AND SURPLUS REPRESENTS THE UNEXPLAINED INCOME OF THE YEAR UNDER CONSIDERAT ION. THEREFORE, THESE GROUNDS OF APPEAL ARE ALLOWED AND RELIEF OF RS. 20,31,400/- AND RS. 18,16,326/- IS ALLOWED. 10. KEEPING IN VIEW THE AFORESAID FINDINGS, WE ARE OF THE VIEW THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS DECIDED THE ISSUE IN DISPUTE ON THE BASIS OF WRITTEN SUBMISSION FILED BY THE ASSESSEE AND THE DOCUMENTARY EVIDENCE, MENTIONED IN THE IMPUGNED ORDER. LEARNED FIRST APPELLATE AUTHORITY H AS ALSO TAKEN THE REMAND REPORT ON THE WRITTEN SUBMISSION A S WELL AS ON THE DOCUMENTARY EVIDENCE ALREADY FILED BEFORE TH E ASSESSING OFFICER AND THE ASSESSING OFFICER HAS NOT RAISED ANY SERIOUS OBJECTION ON THE PLEA OF THE ASSESSEE. THE LEARNED FIRST APPELLATE AUTHORITY HAS ACCEPTED THE EXPLANATION OF THE ASSESSEE ON THE ADDITION IN DISPUTE AND DELETED THE SAME. 11. AFTER THOROUGHLY GOING THROUGH THE FINDINGS OF LEARNED FIRST APPELLATE AUTHORITY, WE ARE OF THE VI EW THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORD ER PASSED BY LEARNED FIRST APPELLATE AUTHORITY. ACCORDINGLY, WE UPHOLD THE 8 I.T.A. NO. 665(ASR)/2013 ASSESSMENT YEAR: 2006-07 IMPUGNED ORDER DATED 29.08.2013 PASSED BY LEARNED C IT(A), JAMMU. 12. IN THE RESULT, THE PRESENT APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH MAY, 2014 SD/./- SD/./- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19 TH MAY, 2014 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: SH. HAJI GHULAM NABI WANI, PROP. M/S AL-SARWAT HIGH SCHOOL, K.P. ROAD, ANANTNAG, KASHMIR 2. ITO, ANANTNAG, KASHMIR (J&K) 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.