ITO, EXEMPTION CIRCLE, GHAZIABAD V. IDEAL INSTITUTE OF TECHNOLOGY, GHAZIABAD

ITA 4257/DEL/2017

AI Insights

The case involves the Deputy Commissioner of Income Tax (DCIT), Exemption Circle, Ghaziabad as the appellant and Ideal Institute of Technology Society as the respondent. The Revenue appealed against the order of the CIT(A) which had allowed the appeal of the assessee on various grounds including the disallowance of depreciation, deletion of additions on unsecured loans, cessation of liability, and disallowance of expenses on luxury cars. The Tribunal examined the findings of the CIT(A) and the submissions of both parties, ultimately deciding in favor of the respondent, the Ideal Institute of Technology Society.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772371 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2010-2011
• Other Referred Cases: DIT vs. Indraprasth Cancer Society, CIT vs. Karnataka Reddy Jansangh, Bhardwaj Welfare Trust, Arihant Charitable Hospital Trust
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: ROHIT TIWARI
• Keywords: Set aside; Additional evidence; Unexplained cash credit; Depreciation; Capital expenditure; Charitable institution
• Section: 143(3); 131

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: C : NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No.4257/Del/2017 Assessment Year: 2010-11 DCIT, Exemption Circle, Ghaziabad. Vs Ideal Institute of Technology Society, 46, 1st Floor, Navyug Market, Ghaziabad. PAN: AAATI3380F (Appellant) (Respondent) Assessee by : Shri Rohit Tiwari, Advocate Revenue by : Shri Daya Inder Singh Sidhu, CIT-DR Date of Hearing : 20.08.2025 Date of Pronouncement : 27.08.2025 ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the Revenue against the order dated 24.03.2017 of the Commissioner of Income-tax (Appeals), Muzaffarnagar (hereinafter referred to as the Ld. First Appellate Authority or ‘the Ld. FAA’, for short) in Appeal No.91/2013-14/GZB arising out of the appeal before it against the order dated 22.03.2013 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the JCIT, Range-2, Ghaziabad (hereinafter referred to as the Ld. AO). Printed from counselvise.com ITA No.4257/Del/2017 2 2. Heard and perused the record. The assessee is a society registered under the Societies Registration Act and is running engineering, MBA and MCA colleges. The return was filed declaring nil income. However, the ld. AO completed the assessment at Rs.10,93,79,835/- by making four principal additions:- Sl. No. Nature of addition/disallowance Section relied upon Amount (Rs.) 1. Unsecured loans treated as unexplained cash credits 68 6,49,00,000 2. Student security deposits treated as cessation of liability 41(1) 93,16,000 3. Cost of four cars (Skoda Laura, Toyota Fortuner, Audi, BMW) plus 50% of running expenses 11 & 37 1,21,09,875 4. Depreciation on fixed assets disallowed as alleged “double deduction” 32 r.w. 11 2,90,25,168 3. The grounds as raised by revenue are reproduced below:- “1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in allowing the appeal of the assessee on the issue of disallowance of depreciation of Rs.2,90,25,168/- ignoring the facts that depreciation on account of application of income for charitable purpose is not allowable as the capital expenditure on acquiring fixed assets has already been allowed in respective years. 2. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.6,49,00,000/- on account of unsecured loan. 3. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.93,16,000/- on account of cessation of liability. 4. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,21,09,875/- on account of luxury cars.” Printed from counselvise.com ITA No.4257/Del/2017 3 4. On hearing both the sides, we find that primarily the ld. DR has relied the findings of the AO while the ld. AR has relied the findings of the ld.CIT(A). The ground wise findings are as follows. 5. Ground No.1: The ld. AO held that the capital expenditure is to be treated as application of income for exemption purposes and accordingly, depreciation on the same assets cannot again be allowed as deduction and the entire claim of depreciation was disallowed. The case of the assessee is that the source of capital outlay is 67% funded from secured loans and corpus donations and 18% is from accumulation, only 15% from current year income application. It is also the assertion that the Society has been claiming expenditure as application of income in earlier years. We find that the ld. CIT(A) has considered the decisions of the Hon’ble Delhi High Court in the case of DIT vs. Indraprasth Cancer Society ITA No.240 of 2014 and Hon’ble Karnataka High Court in the case of CIT vs. Karnataka Reddy Jansangh 389 ITR 229 (2016) where they have held that depreciation claimed does not amount to double deduction in the case of a charitable registered u/s l2AA of the Income tax Act, 1961. Similar view has been expressed by the Hon’ble ITAT, Delhi in the case of Bhardwaj Welfare Trust (ITA No. 1979, 2564/Del/2013) dated 13-02-2015, Arihant Charitable Hospital Trust, Ghaziabad (ITA No.5019/Del/2015) dated 17-11-2015. We find that the ld.CIT(A) has set aside this issue to AO to examine the issue in the light of the aforesaid judgments and there is no reason to interfere in the same. Printed from counselvise.com ITA No.4257/Del/2017 4 6. Ground No.2; Ground arises out of addition made by the AO by relying on report of the ADIT (Inv.), Meerut where the AO has held that five lenders to be accommodation entry providers lacking credit worthiness. Summons issued u/s 131 of the Act could not be served upon the said lenders and Inspector’s report dated 15.03.2013 was relied wherein it was stated that the parties were not found at the given address. The AO also noted cash deposit in lenders’ bank accounts and discrepancies between turnover declared to Income- tax and Commercial Tax Departments. It was also observed that Shri Madnesh Garg, Joint Treasurer of the assessee society was directly or indirectly connected with three of the lending entities. Concluding that the money represented the assessee’s own unaccounted funds routed back as loans, Rs.6.49 crore was added u/s 68 of the Act. 7. In this regard, we find that the following are the disputed deposits:- S.No. Name of the lender Amount of loan raised during the year Documents filed in support of the claim 1. Sh. Ajeet Singh Rs.15,00,000/- Copy of confirmation and bank statement 2. K.M. Garg Rs.5,50,000/- Copy of confirmation, bank statement and copy of ITR acknowledgement 3. Meerut Steel Rs.1,19,00,000/- Copy of confirmation, bank statement and copy of ITR acknowledgement 4. Sunder Traders and suppliers Rs.3,02,50,000/- Copy of confirmation, bank statement and copy of ITR acknowledgement 5. Sunder Engg. Works Rs.2,07,00,000/- Copy of confirmation, bank statement and copy of ITR acknowledgement Printed from counselvise.com ITA No.4257/Del/2017 5 8. We find that the ld.CIT(A) has taken into consideration the evidences filed by the assessee including the additional evidences including remand report sought where the AO has admitted the genuineness of these transactions and found key documents like confirmation of repayment of loans and the transaction occurring from banking mode to delete the addition. The ld.CIT(A) has given a very detailed narration of all the evidences of the assessee. We find that the AO has primarily relied the Investigation Wing report only and, further, the Inspector’s Report. There is substance in the contention of the ld. AR that on the one hand the financials of these lenders show quantitative details of sales allegedly suppressed and on the other hand, the concerns were alleged to be non-existent. Merely because of Shri Madnesh Garg being the party to the lenders and also the assessee company that cannot be the basis to allege the transactions to be sham. Infact it is only when there is some credible reference a lender would advance money to any institution. 9. Examining the disputed entries specifically we find that in regard to the deposits of Rs.15 lakhs received from Mr. Ajeet Singh, apart from confirmation and the bank statement, the ld.CIT(A) has appreciated that the statements of account from the books of the assessee were filed where an amount of Rs.15 lakh was deposited on 23.04.2009 by way of cheque drawn on savings bank account with Canara Bank. This amount has been established to be transferred in the account of Shri Ajeet Singh on 20.04.2009 after being withdrawn from his deposits with Habitat Infrastructure Pvt. Ltd. The ld.CIT(A) has appreciated Printed from counselvise.com ITA No.4257/Del/2017 6 that Shri Ajeet Singh had deposits of around Rs.60 lakhs with Habitat Infrastructure Pvt. Ltd. out of which Rs.15 lakhs were withdrawn on 16.04.2009. That being the source to make advances to assessee. 9.1 In case of deposits of Rs.5,50,000/- in the name of Shri K.M. Garg, again apart from confirmation, copy of ITR and bank statement, the ld.CIT(A) has appreciated that the statement of account of Shri K.M. Garg from his books were filed wherein there was an opening balance deposit of Rs.1,88,14,476/- in the name of Shri K.M. Garg with the society as on 01.04.2009. Further, a sum of Rs.5,50,000/- was received on 01.03.2010 by way of cheque drawn on Andhra Bank. The ld.CIT(A) has relied the photocopy of assessment of Shri K.M. Garg wherein he has declared income of Rs.5,99,280/- and aggregate amount of Rs.1,93,64,476/- stands paid by the society on 11.08.2010 by issue of cheque drawn on HDFC Bank account of the society, 9.2. In regard to deposit of Rs.1,19,00,000/- in the name of Meerut Steel, again, apart from confirmation, copy of ITR and bank statement, the ld.CIT(A) has appreciated that during the year under consideration, the deposits were received by way of cheques and out of Rs.1,19,00,000/-, Rs.39 lakhs were repaid by the assessee on 11.07.2009 leaving a net deposit of Rs.80 lakhs as on 31.03.2010. Printed from counselvise.com ITA No.4257/Del/2017 7 9.3 In regard to deposit of Rs.3,02,50,000/- in the name of Sunder Traders & Suppliers, the ld. CIT(A) has relied the copy of confirmation, copy of ITR and bank statement. Further, the ld.CIT(A) has appreciated that during the year under consideration there was an opening deposit of Rs.1,01,48,318/- and, during the year under consideration, the deposits were received by way of cheque and out of the gross deposit of Rs.3,02,50,000/-, Rs.3,03,98,000/- were paid back by the society on different dates leaving a net deposit of Rs.1 crore on 31.03.2010. 9.4 Lastly, in regard to deposit of Rs.2,07,00,000/- in the name of Sunder Engineering Works, again, the ld.CIT(A) has relied confirmation, copy of ITR and bank statement of the lender. It is further appreciated by the ld.CIT(A) that there was an opening deposit of Rs.32,02,000/- during the year under consideration, deposits were received by way of banking transactions and out of gross receipt of Rs.2,07,00,000, Rs.78,52,000/- was paid of by the society on different dates leaving the net deposit of Rs.1,60,50,000/- as on 31.03.2010. 9.5 It appears that tax evasion report from Investigation Wing have been over-relied by the AO and in the light of the facts and circumstances appearing from the evidences filed by the assessee, the same was not sustainable. The findings of the ld.CIT(A), thus, require no interference. The ground no.2 deserves to be rejected. Printed from counselvise.com ITA No.4257/Del/2017 8 10. Ground No.3: The ground arises out of the conclusion of the ld. AO that course durations were two to four years old students who jointed upto AY 2006- 07 and they must have passed out before July 2009, yet, corresponding security deposits remained unpaid and treating the sums as liabilities that had ceased, AO taxed the entire balance u/s 41(1) of the Act. The ld. AR has relied the material on record to show that there were substantive refunds during the year and subsequent two years. Thus, the theory of cessation was not sustainable. The ld.CIT(A) has appreciated that every year there are fresh deposits and refunds for securities and a chart submitted in this regard was relied by the ld.CIT(A). The remand report from the AO was also considered where these were not disputed. The ld.CIT(A) also concluded that the assessee society is claiming exemption u/s 10(23C) and found eligible for the same. Thus, there was no reason to invoke the provisions of section 41 of the Act. We find no error in the findings of the ld.CIT(A). This ground no. 3 is accordingly stands rejected. 11. Ground No.4: This ground arises out of disallowance of cost of expenses of cars. Four luxury cars stand purchased in the name of the society/college. Holding that such vehicles were not required for charitable activities, the AO had disallowed their full cost as non-application of income and added 50% of vehicle running expenses to income of the assessee. The ld. AR has submitted that hospitality is one of the essential business need of the Printed from counselvise.com ITA No.4257/Del/2017 9 assessee society which has to cater to recruiters. We find that nowhere there is any allegation of any personal benefit being drawn by any office bearer or other persons. The case of the assessee is that the vehicles were used for faculty mobility, airport pick-ups, student industrial tours, placement drives, CEO/CXO campus recruitment heads, VIP guest lectures, AICTE inspection. We find that ld.CIT(A) has duly appreciated the expediency of the expenditures and appreciating same has rightly held that merely on presumption a disallowance cannot be made more particularly when the fact is that in other assessment years there was no such disallowance. The findings of the ld.CIT(A) require no interference. The ground no. 4 is rejected. 12. In the light of the aforesaid discussion, we find no substance in the appeal of the Revenue and the same is dismissed. Order pronounced in the open court on 27.08.2025. Sd/- Sd/- (AVDHESH KUMAR MISHRA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27th August, 2025. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Printed from counselvise.com "