Chawara Education Trust, Dhule V. Income-tax Officer,

ITA 849/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2842 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 28-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K JADHAV
• Assessee Lawyers: V L JAIN
• Keywords: Reason to believe
• Section: 143(3); 142(1); 68; 148; 12; 11; 139

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.849/PN/2014 ASSESSMENT YEAR : 2004-05 CHAWARA EDUCATIONAL TRUST, 80, FEET ROAD, NEAR HOTEL AMOL, NASHIK. PAN : AAATC8665R . APPELLANT VS. THE INCOME TAX OFFICER, WARD-3(1), DHULE. . RESPONDENT / APPELLANT BY : SHRI V. L. JAIN / RESPONDENT BY : SHRI S. K. JADHAV, JCIT / DATE OF HEARING : 29.12.2015 / DATE OF PRONOUNCEMENT: 20.01.2016 % / ORDER PER PRADIP KUMAR KEDIA, AM : THE PRESENT APPEAL PREFERRED BY THE ASSESSEE IS AGA INST THE ORDER OF CIT(A)-I, NASHIK DATED 11.03.2014 RELATING TO ASSES SMENT YEAR 2004-05 PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME-TAX A CT, 1961 (IN SHORT THE ACT). 2. BRIEFLY STATED, THE RELEVANT FACTS OF THE CASE A RE THAT THE ASSESSEE IS A TRUST ENGAGED IN EDUCATIONAL ACTIVITIES. THE ASSES SEE FILED BELATED RETURN OF INCOME ON 09.03.2007 RELEVANT TO ASSESSMENT YEAR 20 04-05 DECLARING TOTAL TAXABLE INCOME AT NIL. THE ASSESSING OFFICER REOPE NED THE ASSESSMENT IN THE CASE OF THE ASSESSEE BY ISSUANCE OF NOTICE UNDER SE CTION 148 OF THE ACT DATED 01.09.2008 AND COMPLETED THE ASSESSMENT BY MAKING F OLLOWING ADDITIONS :- A. UNEXPLAINED ADVANCES : RS.13,00,000/- B. AMOUNT NOT SPENT ON OBJECTS OF TRUST : RS. 9 ,48,585/- 2 ITA NO.849/PN/2014 3. THE ASSESSEE ASSAILED THE ORDERS OF THE ASSESSIN G OFFICER AND THE CIT(A) BEFORE THE PUNE BENCH OF THE TRIBUNAL IN ITA NO.127 /PN/2011; ORDER DATED 27.02.2013. BEFORE THE TRIBUNAL, THE ASSESSEE QUES TIONED THE LEGALITY AND VALIDITY OF THE ASSESSMENT ORDER ITSELF. THE ASSES SEE ALSO FILED ADDITIONAL GROUND QUESTIONING THE LEGALITY OF THE RE-ASSESSMEN T ON THE GROUND THAT THE ASSESSMENT ORDER DATED 03.12.2009 PASSED UNDER SECT ION 143(3) R.W.S. 147 OF THE ACT IS WITHOUT JURISDICTION IN THE ABSENCE OF S ERVICE OF STATUTORY NOTICE UNDER SECTION 143(2) OF THE ACT. THE CO-ORDINATE B ENCH OF THE TRIBUNAL SET- ASIDE THE ADDITIONAL GROUND RAISED BEFORE IT CONCER NING IMPUGNED LEGAL ISSUE AND RESTORED IT BACK TO THE FILE OF THE CIT(A) TO D ECIDE THE SAME AFTER EXAMINATION OF RECORDS. PURSUANT THERETO, THE CIT( A) VIDE ORDER DATED 11.03.2014 DECIDED THE LEGAL ISSUE AGAINST THE ASSE SSEE AND HELD THAT THE IMPUGNED ASSESSMENT MADE BY THE ASSESSING OFFICER U NDER SECTION 143(3) R.W.S. 147 OF THE ACT IS VALID AND CANNOT BE SET-AS IDE MERELY ON THE GROUND THAT NOTICE UNDER SECTION 143(2) WAS NOT SERVED HAVING R EGARD TO THE FACTS OF THE CASE. THIS LIMITED ISSUE DECIDED BY THE CIT(A), TH EREFORE, STANDS MERGED WITH THE PREVIOUS ORDER OF THE CIT(A) DATED 02.12.2010. 4. ACCORDINGLY, THE ASSESSEE IS ONCE AGAIN IN APPEA L BEFORE US AGAINST THE ORDERS OF THE AUTHORITIES BELOW AS PER THE GROUNDS OF APPEAL TAKEN HEREUNDER :- 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ASSESSMENT MADE BY THE AO ON 03.12.2009 U/S 143(3) R.W.S. 147 WHICH IS WITHOU T JURISDICTION IN THE ABSENCE OF NOTICE U/S 143(2) WAS NOT SERVED. 2. IN THE ABSENCE OF CONDITION PRECEDENT FOR ISSUAN CE OF NOTICE U/S 148 OF THE INCOME TAX ACT, 1961, THE IMPUGNED ASSESSMENT ORDER IS BAD IN LAW, NULL, AND VOID AB INITIO AND WITHOUT JURISDICTION AND HENCE THE SA ME MAY PLEASE BE VACATED/ ANNULLED. 3. THE LEARNED CIT(A) ERRED IN HOLDING A LOAN GIVEN OF RS.13,00,000/- AS INCOME OF THE APPELLANT TREATING THE TRANSACTION AS NON-GENUINE. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL OR ADD TO THE SAME, IF DEMAND NECESSARY. 5. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE, AT THE OUTSET, SUBMITTED THAT NOTICE UNDER SECTION 143(2) HAS NOT BEEN SERVED UPON THE ASSESSEE AND THEREFORE IMPUGNED RE-ASSESSMENT ORDER DATED 03.12.2009 FRAMED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT IS VOID AB INITIO AND IS WITHOUT JURISDICTION. HE ADVERTED OUR ATTENTION TO PAGE 7 OF THE PAPER BOOK WHEREIN 3 ITA NO.849/PN/2014 THE REASONS FOR REOPENING THE ASSESSMENT IS RECORDE D AND SUBMITTED THAT THE NOTICE UNDER SECTION 142(1) HAS BEEN ISSUED WITH RE FERENCE TO RETURN FILED ON 09.03.2007 WITHOUT ANY NOTICE UNDER SECTION 143(2) OF THE ACT. ON A QUERY FROM THE BENCH, HE SUBMITTED THAT THE IMPUGNED RETU RN DATED 09.03.2007 IS NEITHER A BELATED RETURN FILED WITHIN THE LIMITATIO N PROVIDED UNDER SECTION 139(4) NOR IS A RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 147/148 OF THE ACT. HE FURTHER CLARIFIED THAT NO RETURN HAS BEEN FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT PER SE . NO LETTER HAS BEEN SUBMITTED TO THE ASSESSING OFFICER TO TREAT THE RETURN FILED DATED 0 9.03.2007 AS A RETURN IN RESPONSE TO NOTICE UNDER SECTION 148 EITHER. THE L D. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE EMPHASIZED THAT ISS UANCE OF NOTICE UNDER SECTION 143(2) IS A SINE QUA NON FOR PROCEEDINGS UNDER SECTION 147 TO GET UNDERWAY. IF THE REQUIREMENTS OF SECTION 143(2) AR E NOT MET WITH, IT AFFECTS THE VALIDITY OF THE ASSESSMENT ORDER ITSELF. HE CONTEN DED THAT SECTION 143(2) IS NOT MERELY PROCEDURAL BUT IS A MANDATORY PROVISION. HE CITED THE VARIOUS DECISIONS IN THE CASE OF ACIT VS. HOTEL BLUE MOON, (2010) 321 ITR 362 (SC) AND CIT VS. RAJEEV SHARMA, (2011) 336 ITR 678 (ALL.) AND AL SO CWT VS. HUF OF H.H. LATE SHRI J.M. SCINDIA, (2008) 300 ITR 193 (BOM) TO SUPPORT HIS CONTENTION THAT IN THE ABSENCE OF NOTICE UNDER SECTION 143(2), THE IMPUGNED RE-ASSESSMENT ORDER IN APPEAL STANDS VITIATED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(A) AND SUBMI TTED THAT NON-ISSUANCE OF NOTICE UNDER SECTION 143(2) BY ITSELF WILL NOT INVA LIDATE THE RE-ASSESSMENT ORDER. HE SUBMITTED THAT THE ASSESSEE HAS FULLY CO OPERATED IN THE RE-ASSESSMENT PROCEEDINGS AND FULL OPPORTUNITY HAS BEEN PROVIDED TO THE ASSESSEE. THEREFORE, MERE NON-ISSUANCE OF NOTICE UNDER SECTION 143(2) IS MERE TECHNICAL AND THEREFORE STANDS CURED BY SECTION 292BB OF THE ACT. 7. SINCE THE ASSESSEE HAS QUESTIONED THE LEGALITY O F THE ASSESSMENT ORDER ITSELF WHICH AFFECTS THE JURISDICTION AND GOES TO T HE ROOT OF THE MATTER, WE CONSIDER IT NECESSARY TO ADJUDICATE THE GROUNDS NO. 1 AND 2 CONCERNING THIS BASIC ISSUE FIRST. TO BEGIN WITH, THE SHORT QUESTI ON BEFORE US IS WHETHER NON- 4 ITA NO.849/PN/2014 ISSUANCE OF NOTICE UNDER SECTION 143(2) WILL INVALI DATE THE RE-ASSESSMENT ORDER FRAMED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT I N THE FACTS OF THE CASE SET OUT OR NOT. WE NOTICE THAT THE RETURN OF INCOME FI LED DATED 09.03.2007 IS NOT A RETURN UNDER SECTION 139(1) OR UNDER SECTION 139(4) OF THE ACT. THE RETURN HAS BEEN FILED BEYOND THE TIME LIMIT AVAILABLE UNDER TH E SCHEME OF THE ACT AND IS THEREFORE NONEST AND INVALID IN THE EYES OF LAW. THIS POSITION OF LAW IS SUPPORTED BY JUDICIAL PRECEDENT IN THE CASE OF KUMA R JAGDISH CHANDRA SINHA VS. CIT, (1996) 220 ITR 67 (SC). 7.1 IN THE CONTEXT OF THE FACTS OF THE CASE, IT WOU LD BE PERTINENT TO REFER TO SECTION 143(2) WHICH READS AS UNDER :- [ ASSESSMENT 143. [(1) XXXXX [(2) WHERE A RETURN HAS BEEN FURNISHED UNDER SECTIO N 139, OR IN RESPONSE TO A NOTICE UNDER SUB-SECTION (1) OF SECTION 142, T HE ASSESSING OFFICER SHALL, (I) WHERE HE HAS REASON TO BELIEVE THAT ANY CLAIM O F LOSS, EXEMPTION, DEDUCTION, ALLOWANCE OR RELIEF MADE IN T HE RETURN IS INADMISSIBLE, SERVE ON THE ASSESSEE A NOTICE SPE CIFYING PARTICULARS OF SUCH CLAIM OF LOSS, EXEMPTION, DEDUC TION, ALLOWANCE OR RELIEF AND REQUIRE HIM, ON A DATE TO B E SPECIFIED THEREIN TO PRODUCE, OR CAUSE TO BE PRODUCED, ANY EV IDENCE OR PARTICULARS SPECIFIED THEREIN OR ON WHICH THE ASSES SEE MAY RELY, IN SUPPORT OF SUCH CLAIM: [ PROVIDED THAT NO NOTICE UNDER THIS CLAUSE SHALL BE SERVED O N THE ASSESSEE ON OR AFTER THE 1ST DAY OF JUNE, 2003; ] (II) NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE ( I), IF HE CONSIDERS IT NECESSARY OR EXPEDIENT TO ENSURE THAT THE ASSESSEE HAS NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDER-PAID THE TAX IN ANY MANNER, S ERVE ON THE ASSESSEE A NOTICE REQUIRING HIM, ON A DATE TO BE SP ECIFIED THEREIN, EITHER TO ATTEND HIS OFFICE OR TO PRODUCE, OR CAUSE TO BE PRODUCED, ANY EVIDENCE ON WHICH THE ASSESSEE MAY RELY IN SUPPORT OF THE RETURN: [ PROVIDED THAT NO NOTICE UNDER CLAUSE (II) SHALL BE SERVED O N THE ASSESSEE AFTER THE EXPIRY OF SIX MONTHS FROM TH E END OF THE FINANCIAL YEAR IN WHICH THE RETURN IS FURNISHED.]] 7.2 IT IS ALSO APPROPRIATE TO SIMULTANEOUSLY READ T HE RELEVANT PROVISIONS OF SECTION 148 ALSO IN THIS CONTEXT WHICH IS READ AS U NDER :- [ ISSUE OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMENT . 5 ITA NO.849/PN/2014 148. [(1)] BEFORE MAKING THE ASSESSMENT, REASSESSME NT OR RECOMPUTATION UNDER SECTION 147, THE ASSESSING OFFICER SHALL SERVE ON T HE ASSESSEE A NOTICE REQUIRING HIM TO FURNISH WITHIN SUCH PERIOD, [* * * ] AS MAY BE SPECIFIED IN THE NOTICE, A RETURN OF HIS INCOME OR THE INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DU RING THE PREVIOUS YEAR CORRESPONDING TO THE RELEVANT ASSESSMENT YEAR, IN T HE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED; AND THE PROVISIONS OF THIS ACT S HALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN R EQUIRED TO BE FURNISHED UNDER SECTION 139 :] [ [UNDERLINED FOR EMPHASIS BY US] 7.3 ON A COMBINED READING OF THESE AFORESAID TWO PR OVISIONS, WE OBSERVE THAT WHEN THE ASSESSING OFFICER SERVES NOTICE UNDER S. 148 OF THE ACT, THE ASSESSEE IS REQUIRED TO FILE RETURN IN RESPONSE THE RETO. THE PROVISIONS OF S. 148 SEEKS TO TREAT THE RETURN FILED IN RESPONSE TO NOTI CE SERVED UNDER S. 148 AS RETURN FILED UNDER S. 139 OF THE ACT. THIS IS FOLLO WED BY NOTICE UNDER MACHINERY PROVISIONS OF S. 143(2) AND S. 142(1) TO ENABLE THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT. WE FIND THAT NE ITHER ANY RETURN WAS FILED UNDER 148 OF THE ACT NOR ANY FORMAL REQUEST WAS MA DE TO TREAT THE EARLIER RETURN FILED AFTER LAPSE OF STATUTORY TIME AS RETUR N IN RESPONSE TO SUCH NOTICE. THUS, NO VALID RETURN IS ON RECORD FROM THE ASSESSE E EITHER UNDER S. 139(1) OR UNDER S. 139 (4) OR UNDER S. 148 OF THE ACT. IT IS A CASE OF THE REVENUE THAT SINCE THE REQUIREMENTS OF SECTION 147/148 ARE DULY MET WITH, THE PROVISIONS OF SECTION 143(2) ARE RENDERED PROCEDURAL AND DOES NOT AFFECT THE VALIDITY OF THE ASSESSMENT. AS NOTED ABOVE, RETURN FILED IN RESPON SE TO NOTICE UNDER SECTION 148 IS DEEMED TO RETURN FILED UNDER SECTION 139 AND ALL THE PROVISIONS OF THE ACT SHALL APPLY ACCORDINGLY. AS A CONSEQUENCE, THE NOTICE FOR ASSESSMENT HAS TO BE NECESSARILY ISSUED AS MANDATED UNDER SECTION 143(2) OF THE ACT IN SO FAR AS THE RETURN FILED IN RESPONSE TO S. 148 IS CONCER NED. 7.4 AS CAN BE SEEN, SECTION 143(2) PROVIDES THAT WH ERE A RETURN WERE MADE IN SECTION 139 OR IN RESPONSE TO NOTICE UNDER SECTI ON 142(1), THE PROVISIONS OF SECTION 143(2) WILL COME INTO PLAY IN APPROPRIATE C ASES. HOWEVER, IN THE SAME VAIN, WE NOTICE THAT THE ASSESSEE HAS NOT FILED ANY RETURN FALLING WITHIN THE AMBIT OF SECTION 139 AT ALL. THE RETURN FILED WAS N OT UNDER S. 142(1) OF THE ACT EITHER. THE RETURN FILED EARLIER ON 09.03.2007 IS A DMITTEDLY BEYOND THE STATUTORY TIME LIMIT AND IS THUS NONEST IN THE EYES OF LAW. THE ASSESSEE HAS NEITHER FILED 6 ITA NO.849/PN/2014 ANY RETURN IN RESPONSE TO NOTICE U/S 148 NOR HAS RE QUESTED THE ASSESSING OFFICER TO TREAT THE IMPUGNED NONEST RETURN TO BE TAKEN AS FILED AGAINST NOTICE UNDER SECTION 148 OF THE ACT. THEREFORE, IMPUGNED NONEST RETURN DID NOT GET VALIDATED AT ANY STAGE. 7.5 SECTION 143(2) OF THE ACT MANDATES ISSUANCE OF NOTICE UNDER THIS SECTION ONLY WHEN THE RETURN IS FILED U/S 139 OR U/S 142(1) OF THE ACT. THE RETURN FILED IN RESPONSE TO NOTICE U/S 148 IS ALSO TREATED AS RE TURN FILED U/S 139 BY DEEMING FICTION. IN THE PRESENT CASE, SINCE THE RETURN HAS NOT BEEN FILED UNDER SECTION 139(1); OR UNDER SECTION 139(4); OR IN RESPONSE TO SECTION 148; OR IN RESPONSE TO SECTION 142(1); THE PROVISIONS OF SECTION 143(2) DO ES NOT GET TRIGGERED AT ALL. 7.6 WE FIND THAT JUDICIAL PRECEDENTS RELIED UPON ON BEHALF OF THE ASSESSEE IS OF BEREFT OF ANY ASSISTANCE AND ARE DISTINGUISHABLE ON FACTS. THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HOTEL BLUE MOO N (SUPRA) AND ALL OTHER DECISIONS RELIED UPON BY THE LD. AUTHORIZED REPRESE NTATIVE FOR THE ASSESSEE, THE RETURN WAS DULY FILED IN RESPONSE TO SECTION 14 8 OR A VALID UNDER SECTION 139 WAS IN EXISTENCE AND ON THESE FACTS THE HONBLE COURTS HAVE HELD THAT ISSUANCE OF NOTICE U/S 143(2) IS MANDATORY AND CANN OT BE DISREGARDED AND BYPASSED. 7.7 IN THE PRESENT CASE, AS NOTED EARLIER, LAW ITSE LF DOES NOT OBLIGE THE ASSESSING OFFICER TO ISSUE NOTICE U/S 143(2) IN THE ABSENCE OF RETURN U/S 139 OR U/S 142(1). CONCURRENTLY, WE NOTICE THAT THE IMPUGN ED ASSESSMENT WAS FRAMED AFTER PROPER OPPORTUNITY WERE AFFORDED TO THE ASSES SEE BY ISSUING NOTICE UNDER SECTION 142(1) IN SYNC WITH PRINCIPLES OF NATURAL J USTICE. THEREFORE, WE DO NOT FIND ANY FORCE IN THE CONTENTION OF THE LD. AUTHORI ZED REPRESENTATIVE FOR THE ASSESSEE THAT NON ISSUANCE OF NOTICE UNDER SECTION 143(2) IS FATAL AND HAS VITIATED THE RE-ASSESSMENT ORDER AND RENDERED IT BA D IN LAW. TO REITERATE, WE TAKE NOTE OF THE FACT THAT THE ASSESSEE HAS APPEARE D BEFORE THE ASSESSING OFFICER AND WAS IN ACQUIESCENCE AND PRIVY TO THE RE -ASSESSMENT PROCEEDINGS. THUS, INTEREST OF THE ASSESSEE IS NOT JEOPARDIZED I N ANY MANNER. OMISSION TO SERVE OR ANY DEFECT IN THE SERVICE OF THE NOTICE NO T STATUTORILY REQUIRED IN THE 7 ITA NO.849/PN/2014 FACTS OF THE CASE WILL NOT, IN OUR VIEW, IMPINGE UP ON THE LEGALITY OF IMPUGNED RE-ASSESSMENT ORDER. 7.8 LD. AR ALSO ADVANCED THAT AO HAS NOT COMPLETED THE ASSESSMENT ON THE PREMISE THAT NO RETURN WAS FILED AT ALL. AS PER THE LD. AR, THE AO HAS PROCEEDED ON THE BASIS OF RETURN FILED ON 09/03/200 7. WE FIND NO VIRTUE IN SUCH ARGUMENTS. MERELY BECAUSE AN INVALID RETURN FILED P REVIOUSLY HAS BEEN REFERRED BY AO, THIS WOULD NOT VALIDATE SUCH RETURN WITH TAK ING RECOURSE PROVIDED UNDER LAW. THE AO IS NOT PRECLUDED IN LAW FROM TAKI NG NOTE OF FACTS PROVIDED IN AN INVALID RETURN SO LONG AS RE-ASSESSMENT ORDER IS FRAMED IN ACCORDANCE WITH LAW. 7.9 IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT IN THE ABSENCE OF RETURN FILED IN ACCORDANCE WITH LAW OR ANY VALID RETURN BEING ON RECORD, THE OBJECTIONS RAISED BY THE ASSESSEE IS NO T SUSTAINABLE IN LAW AND IS THUS WITHOUT ANY MERIT. 8. IN THE RESULT, THE GROUNDS NO.1 AND 2 OF THE APP EAL OF THE ASSESSEE ARE DISMISSED. 9. HAVING DEALT WITH THE LEGAL OBJECTION RAISED ON BEHALF OF THE ASSESSEE, WE SHALL NOW PROCEED TO ADJUDICATE THE ISSUE ON MER ITS AS PER GROUND NO.3 OF THE APPEAL. 10. AS PER PARA 3 OF THE ASSESSMENT ORDER, IT IS OB SERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS INTER-ALIA STATED TO HAVE ADVANCED AN AMOUNT OF RS.13,00,000/- TO ONE M/S VISEA TRUST MALAD, MUMBAI , A SISTER CONCERN. THE ASSESSING OFFICER WAS OF THE OPINION THAT INSTEAD O F USING THE FUND ON THE OBJECT OF THE TRUST, THE ASSESSEE HAD GIVEN ADVANCE S TO ITS SISTER CONCERN AND HAD VIOLATED THE CONDITIONS AS LAID DOWN IN SECTION 11(2) OF THE ACT. HE ACCORDINGLY RESORTED TO SECTION 68 OF THE ACT AND M ADE ADDITION OF RS.13,00,000/- AS UNEXPLAINED ADVANCES IN THE HANDS OF THE ASSESSEE. 8 ITA NO.849/PN/2014 11. ON MERITS, THE ASSESSEE CONTENDED BEFORE THE CI T(A) IN FIRST ROUND OF PROCEEDINGS THAT THE AMOUNT OF LOAN GIVEN TO VISEA TRUST WAS DULY APPEARING IN THE AUDITED STATEMENT OF ACCOUNTS AND AUDIT REPO RT FILED IN FORM NO.10B. THE ASSESSEE ALSO CONTENDED BEFORE THE CIT(A) THAT THE OBJECT OF THE VISEA TRUST WAS SIMILAR TO THAT OF THE ASSESSEE TRUST AND THE AMOUNT OF RS.13,00,000/- GIVEN TO THE SAID TRUST BY THE ASSES SEE WAS NOT IN THE NATURE OF INVESTMENT OR DEPOSIT AND HENCE THE EXEMPTION U NDER SECTION 11(2) CANNOT BE DENIED TO THE ASSESSEE. IT WAS NEXT CONTENDED B EFORE THE CIT(A) THAT ADDITION MADE UNDER SECTION 68 IS NOT TENABLE IN LA W SINCE THE ASSESSEE HAS GIVEN THE ADVANCE OF THE IMPUGNED AMOUNT WHEREAS SE CTION 68 DEALS WITH THE OPPOSITE SITUATION I.E. RECEIPT OF UNEXPLAINED CRED IT AND NOT PAYMENT THEREOF. THE CIT(A) AGREED WITH THE CONTENTION OF THE ASSESS EE ABOUT THE NON- APPLICABILITY OF SECTION 68. THEREAFTER, THE ISSUE WAS EXAMINED BY THE CIT(A) IN ITS FIRST ORDER DATED 02.12.2010 IN THE LIGHT OF PROVISIONS OF SECTION 11(2) R.W.S. 11(3)(A) OF THE ACT. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) IS REPRODUCED HEREUNDER :- 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE. THE AO HAS GIVEN THE FOLLOWING FINDING FOR THE IMPUGNED ADDITION:- IT IS ALSO NOTICED THAT; THE TRUST HAS FAILED TO I NCURRED EXPENDITURE MORE THAN 85% ON THE OBJECT OF THE TRUST AND THE TRUST H AS FAILED TO SUBMIT FORM NO.10 BEFORE THE DUE DATE OF FILING OF RETURN, HENC E AN AMOUNT OF RS.9,48,585/- I.E. (85% OF TOTAL RECEIPT OF RS.45,4 3,948/- COMES TO RS.38,62,356/- (-) AMOUNT ACTUALLY SPENT ON OBJECT RS.29,13,771/-) IS ADDED TO THE TOTAL INCOME OF THE TRUST. AS MAY BE SEEN THE AO HAS MADE THE IMPUGNED ADDITIO N ON THE GROUND THAT THE APPELLANT HAS FAILED TO FILE FORM NO.10B BEFORE THE DUE DATE OF FILING THE RETURN. DUE DATE WAS 31/07/2004 WHEREAS THE RETURN WAS FILE D ON 09/03/2007. ANOTHER REASON GIVEN BY THE AO IS THAT THE APPELLANT HAS FA ILED TO SPEND MORE THAN 85% OF THE INCOME THIS YEAR ON THE OBJECTS OF THE TRUST. FROM THE INCOME AND EXPENDITURE ACCOUNT THE TOTAL INCOME ADMITTED THIS YEAR IS RS.4 5,43,948/-, THE APPELLANT HAS GIVEN THE FOLLOWING PARTICULARS OF THE EXPENDITURE INCURRED DURING THE YEAR. TOTAL INCOME-------------------------------------- -- RS.4543948/- INCOME & EXPENDITURE RS.29,13,771/- AS PER ASSTT. ORDER. TAXES, RENT, ETC. RS. 35,698/- FIXED ASSETS (EDUCATION) BUILDING CONSTRUCTION RS.38,03,965/- FURNITURE FIXTURES, ETC. RS.13,65,354/- RS.51,74,319/- RS.51,74,319/- TOTAL EXPENDITURE RS.81,23,788/- 9 ITA NO.849/PN/2014 A COPY OF THE FORM NO.10B THAT WAS FILED ALONGWITH THE RETURN OF INCOME HAS BEEN PLACED BEFORE ME AND THE ABOVE PARTICULARS OF INCOM E AND EXPENDITURE HAVE BEEN VERIFIED AND FOUND TO BE CORRECT. FROM THE ABOVE P ARTICULARS IT IS THUS CLEAR THAT THE APPELLANT HAS INCURRED TOTAL EXPENDITURE OF RS.29,1 3,771/- ON THE REVENUE ACCOUNT AND RS.45,79,474/- ON CAPITAL ACCOUNT. THEREFORE, THE AMOUNT SPENT BY THE APPELLANT FOR THE CONSTRUCTION OF THE BUILDING THAT WAS FOR I TS STATED PURPOSE I.E. EDUCATION AND HAS BEEN RIGHTLY CLAIMED AS UTILIZED FOR THE PURPOS E OF THE OBJECT OF THE TRUST. THE ABOVE EXPENDITURE HAS BEEN PROPERLY VERIFIED AND CE RTIFIED BY THE ACCOUNTANT IN FORM NO.10B. WITH REGARD TO THE AOS OBSERVATION TH AT THE FORM NO.10B WAS NOT FILED WITHIN DUE TIME IS SEEN THAT THE SAID FORM WA S AVAILABLE BEFORE THE AO AT THE TIME OF PASSING THE IMPUGNED ASSESSMENT ORDER, WHIC H THE AO HAS ALSO MENTIONED WHILE DEALING WITH THE ISSUE. THE LD. AR HAS BROUG HT TO MY NOTICE CERTAIN JUDICIAL PRONOUNCEMENTS CIT V. ANDHRA PRADESH STATE ROAD TRA NSPORT CORPN, (2006) 285 ITR 147 (AP); CIT V. HARDEODAS AGARWALLA TRUST (199 2) 198 ITR 511 (CAL.); CIT V. BAHADUR BISSESSWARMAL MOTILAL TRUST (1992) 195 ITR 825 (CAL.) IN SUPPORT OF HIS CONTENTION THAT IN CASES WHERE THERE WAS SOME DELAY IN FILING THE REPORT U/S 10B, THE DEDUCTION U/S 11 OR 12 MAY NOT BE DENIED. THIS HAS BEEN CONSIDERED BY ME. WHILE DEALING WITH THE ISSUE THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT V. NAGPUR HOTEL OWNERS ASSOCIATION (2001) 247 ITR 201 (S.C.). THE APEX COURT HAS OBSERVED THAT IT IS REASONABLE TO PRESUME THAT THE INTIMATION U/S 11 HAS TO BE FURNISHED BEFORE THE ASSESSING AUTHORITY COMPLETING THE CONCERNED ASSESSMENT, THEREFORE, THE COMPLIANCE OF THE REQUIREMENT OF THE ACT WILL HAVE TO BE ANY TIME BEFORE THE ASSESSMENT PROCEEDINGS. AS MAY BE SEEN FROM THE FACTS IN THE PRESENT CASE THE FORM NO.10B WAS FILED BY THE APPELLANT ALO NGWITH THE RETURN OF INCOME ON 09/03/2007 THAT WAS BEFORE THE COMPLETION OF THE IM PUGNED ASSESSMENT ORDER. THEREFORE, IT WAS AVAILABLE TO THE AO AND HE SHOULD HAVE CONSIDERED THE INFORMATION PROVIDED BY THE APPELLANT REGARDING THE ACCUMULATIO N OF THE INCOME CARRYING OUT ITS AUTHORIZED ACTIVITIES. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE ABOVE CASES, IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN NOT CONSIDERED PROPERLY THE SAID FORM NO.10B BEFORE FINALIZING THE IMPUGNED ASSESSME NT ORDER. THE AO'S ACTION THEREFORE IN NOT CONSIDERING THE PARTICULARS OF INC OME AND EXPENDITURE GIVEN IN THE SAID FORM IS NOT JUSTIFIED IN VIEW OF THE DIRECT JU DGEMENT ON THE ISSUE BY THE HONBLE SUPREME COURT IN THE CASE CIT VS. NAGPUR HOTELS OWN ERS ASSOCIATION (SUPRA). THE APPELLANT IS FOUND TO HAVE SPENT THIS YEAR MORE THA N 85% AS REQUIRED UNDER THE LAW. CONSEQUENTLY, THE IMPUGNED ADDITION OF RS.9,48,585/ - IS UNJUSTIFIED AND THE SAME IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 12. WE FIND OURSELVES IN AGREEMENT WITH THE REASONI NGS PROVIDED BY THE CIT(A) NOTED ABOVE, WHICH IS SELF EXPLANATORY. FRO M THE AFORESAID FINDINGS RETURNED BY CIT(A), WE NOTICE THAT THE ASSESSEE TRU ST HAS CORRECTLY UTILIZED THE FUNDS FOR THE PURPOSE OF THE OBJECT OF TRUST. WHEN THE AMOUNT HAS BEEN SPENT BY THE ASSESSEE FOR THE CONSTRUCTION OF THE BUILDIN G THAT WAS FOR ITS STATED EDUCATION PURPOSE, THEN THE AMOUNT CLAIMED CAN BE C ONSIDERED AS UTILIZED FOR THE PURPOSE OF THE OBJECT OF TRUST AND THE REQUIREM ENTS OF SECTION 11(2) R.W.S. 11(3)(A) OF THE ACT STANDS FULFILLED. THUS, THE RE LIEF CLAIMED UNDER SECTION 11(2) OF THE ACT HAS BEEN RIGHTLY ALLOWED BY THE CI T(A) AS NOTED ABOVE. THE ADVANCE OF RS.13,00,000/- MADE TO VISEA TRUST THERE FORE CAN BE SAID TO BE OUT OF SURPLUS ACCUMULATED AND REMAINED AT THE DISP OSAL OF THE ASSESSEE AND 10 ITA NO.849/PN/2014 DOES NOT OFFEND PROVISIONS OF SECTION 11(2) OF THE ACT IN ANY MANNER. HENCE, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE CIT(A) 13. IN THE RESULT, THE GROUND NO.3 OF THE ASSESSEE S APPEAL IS ALLOWED. 14. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED ON THIS 20 TH DAY OF JANUARY, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 20 TH JANUARY, 2016. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, NASHIK; 4) THE CIT-I, NASHIK; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE