Appeal Details
Counselvise Citation
[2016] 122 COUNSELVISE.COM (IT) 1960 (ITAT-INDORE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 7 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
17-05-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
DB
Next Hearing Date
07-04-2016
Assessment Year
2007-2008
Appeal Filed On
04-10-2013
Judgement Text
H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER A ND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER IT(SS)A NOS. 273, 274 AND 275/IND/2013 AND ITA NOS. 596 AND 597 /IND/2013 A.YS. 2007-08 TO 2009-10 AND A.YS. 2010-11 & 2006-07 H.K. KALCHURI EDUCATION TRUST, BHOPAL PAN AAATH 3738 E ::: APPELLANT VS ACIT-2(1), BHOPAL ::: RESPONDENT IT(SS)A NOS. 309, 310 & 311/IND/2013 AND ITA NO. 637/IND/2013 A.YS. 2007-08 TO 2009-10 AND A.Y. 2010-11 ACIT-2(1), BHOPAL ::: APPELLANT VS H.K. KALCHURI EDUCATION TRUST, BHOPAL PAN AAATH 3738 E ::: RESPONDENT ASSESSEE BY SHRI YASHWANT SHARMA & SHRI VINEET MATTHA RESPONDENT BY SHRI RAJEEV VARSHNEY IT(SS)A NOS. 280 TO 281/IND/2013 AND ITA NOS. 594/IND/2013 A.YS. 2008-09 TO 2009-10 AND A.Y. 2010-11 HAI HAY KSHATRIYA EDUCATION SOCIETY, BHOPAL PAN AAAAH 1557 N ::: APPELLANT VS ACIT-2(1), BHOPAL ::: RESPONDENT H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 2 IT(SS)A NOS. 304 TO 305/IND/2013 AND ITA NO. 636/IND/2013 A.YS. 2008-09 TO 2009-10 AND A.Y. 2010-11 ACIT-2(1), BHOPAL ::: APPELLANT VS HAI HAY KSHATRIYA EDUCATION SOCIETY, BHOPAL PAN AAAAH 1557 N ::: RESPONDENT ASSESSEE BY SHRI YASHWANT SHARMA & SHRI VINEET MATTHA RESPONDENT BY SHRI RAJEEV VARSHNEY IT(SS)A NOS. 268 TO 269/IND/2013 AND ITA NOS. 595/IND/2013 A.YS. 2008-09 TO 2009-10 AND A.Y. 2010-11 RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY, BHOPAL PAN AAATR 6468 F ::: APPELLANT VS ACIT-2(1), BHOPAL ::: RESPONDENT IT(SS)A NOS. 316 TO 317/IND/2013 AND ITA NO. 635/IND/2013 A.YS. 2008-09 TO 2009-10 AND A.Y. 2010-11 ACIT-2(1), BHOPAL ::: APPELLANT VS RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY, BHOPAL PAN AAATR 6468 F ::: RESPONDENT ASSESSEE BY SHRI GIRISH AGRAWAL, SHRI HITESH CHIMNANI AND SHRI VIVEK KHANDELWAL RESPONDENT BY SHRI RAJEEV VARSHNEY H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 3 IT(SS)A NOS. 292 TO 293/IND/2013 AND ITA NOS. 598/IND/2013 A.YS. 2008-09 TO 2009-10 AND A.Y. 2010-11 JAI NARAIN SHIKSHA SAMITI, BHOPAL PAN AAAAJ 2542 F ::: APPELLANT VS ACIT-2(1), BHOPAL ::: RESPONDENT IT(SS)A NOS. 322 TO 323/IND/2013 AND ITA NO. 638/IND/2013 A.YS. 2008-09 TO 2009-10 AND A.Y. 2010-11 ACIT-2(1), BHOPAL ::: APPELLANT VS JAI NARAIN SHIKSHA SAMITI, BHOPAL PAN AAAAJ 2542 F ::: RESPONDENT IT(SS)A NOS. 282 TO 287/IND/2013 AND ITA NO. 599/IND/2013 A.YS. 2004-05 TO 2009-10 AND A.Y. 2010-11 RISHIRAJ MEMORIAL EDUCATION WELFARE SOCIETY, BHOPAL PAN AAAAR 5568 F ::: APPELLANT VS ACIT-2(1), BHOPAL ::: RESPONDENT IT(SS)A NOS. 294 TO 299/IND/2013 AND ITA NO. 639/IND/2013 A.YS. 2004-05 TO 2009-10 AND A.Y. 2010-11 ACIT-2(1), BHOPAL ::: APPELLANT VS RISHIRAJ MEMORIAL EDUCATION WELFARE SOCIETY, BHOPAL PAN AAAAR 5568 F ::: RESPONDENT ASSESSEES BY SHRI YASHWANT SHARMA & SHRI VINEET MATTHA RESPONDENT BY SHRI RAJEEV VARSHNEY H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 4 DATE OF HEARING 17.05.2016 DATE OF PRONOUNCEMENT 17.05.2016 O R D E R PER SHRI D.T. GARASIA, JM THESE APPEALS RELATING TO FIVE ASSESSEES, FILED BY THE ASSESSEES AND REVENUE, EMANATE FROM THE CONSOLIDATED ORDERS O F THE LEARNED CIT(A)-1, BHOPAL, DATED 12.8.2013 AND 13.8.2013 FOR THE ABOVE ASSESSMENT YEARS IN RESPECT OF EACH OF THE ASSESSEE . BOTH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN THES E APPEALS AND THE LEAD CASE IS THAT OF H K KALCHURI EDUCATION TRUST. HENCE , IN ORDER TO AVOID REPETITION AND FOR THE SAKE OF BREVITY, WE ARE DECI DING ALL THE APPEALS THROUGH THIS CONSOLIDATED ORDER BY TAKING THE FACTS FROM THE CASE OF H K KALCHURI EDUCATION TRUST BUT OUR FINDINGS IN CASE O F H.K. KALCHURI EDUCATION TRUST ON SIMILAR ISSUES SHALL PREVAIL IN CASE OF OTHER FOUR ASSESSEES ALSO. HOWEVER, WHEREVER INDEPENDENT ISSUE S ARE INVOLVED, THE SAME ARE DEALT WITH SEPARATELY. THE BACKGROUND OF THE CASE IS THAT THE ASSESSEE TRU ST/SOCIETIES WERE GRANTED REGISTRATION U/S 12A OF THE ACT ON VAR IOUS DATES AS UNDER : S.NO. NAME PAN REGISTRATION U/S 12A GRANTED FROM THE DATE 1. HK KALCHURI EDUCATION TRUST AAATH3738E 13.1.1999 H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 5 2. RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY AAAAR5568F 17.7.2000 3. JAI NARAIN SHIKSHA SAMITI AAAAJ2542F 01.4.2003 4. HAI HAY KSHATRIYA EDUCATION SOCIETY AAAAH1557N 01.4.1996 5. RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY, AAATR6468F 01.4.2004 THE SEARCH AND SEIZURE OPERATIONS WERE CONDUCTED IN THE CASE OF ALL THE ASSESSEES ON 23.07.2009 ALONGWITH OTHER PER SONS OF THE GROUP POPULARLY KNOWN AS CHOUKSEY GROUP, EXCEPT RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY WHICH WAS COVERED U/S 1 53C OF THE INCOME TAX ACT. ALL THE ASSESSEES ARE RUNNING EDUCATIONAL INSTITUTIONS/HOSPITALS AND ARE MANAGED BY FAMILY MEMBERS OF THE CHOUKSEY G ROUP IN MADHYA PRADESH AND CHATTISGARH. THE DETAILS IN RESPECT OF EDUCATIONAL INSTITUTIONS RUN BY THE TRUST/SOCIETIES ALONGWITH L IST OF OFFICE BEARERS ARE GIVEN IN THE APPELLATE ORDER OF CIT(APPEALS). IN VIEW OF THE FACT THAT SEARCH U/S 132 WAS CARRIED OUT IN THE CASE OF THE ASSESSEES, AS AFORESAID, ON 23.07.2009, THE AO ISSUED NOTICES U/S 153A FOR A.YS. 2004-05 TO 2009-10 ASKING THE AS SESSEES TO FURNISH ITS RETURN OF INCOME U/S 153A OF THE ACT. IN THE RE TURNS OF INCOME FILED IN RESPONSES TO THE SAID NOTICES, ALL THE ASSESSEES DE CLARED NIL INCOME CLAIMING EXEMPTION U/S 11 OF THE IT ACT. AFTER CONS IDERING THE FACTS OF THE CASE AND SUBMISSION OF THE ASSESSEE, THE AO PASSED THE ASSESSMENT H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 6 ORDERS U/S 153A R.W.S 143(3) FOR AYS 2004-05 TO 200 9-10 AND ASSESSMENT ORDER U/S 143(3) FOR A.Y. 2010-11 ON 13. 08.2012. IN THE ASSESSMENT ORDERS FOR A.YS. 2004-05 TO 2010-11, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 11 AND ASSE SSED THE TOTAL INCOME AS BUSINESS INCOME. SIMILARLY, NOTICE U/S 15 3C WAS ISSUED TO RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY (PAN AAAAR5568F) . AFTER CONSIDERING THE FACTS OF THE CASE AND SUBMISSION OF THE ASSESSEE, THE AO PASSED THE ASSESSMENT ORDERS U/S 153A R.W.S 153C FOR AYS 2004-05 TO 2009-10 AND ASSESSMENT ORDER U/S 143(3) FOR A.Y. 2010-11 ON 14.08.2012. IN THE ASSESSMENT ORDERS FOR A.YS. 2004 -05 TO 2010-11, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR EXEMPTI ON U/S 11 AND ASSESSED THE TOTAL INCOME AS BUSINESS INCOME. THE ASSESSEE AND REVENUE HAVE RAISED MULTIPLE GROUN DS OF THE APPEALS, THEREFORE, WE ARE DECIDING THESE APPEALS I SSUE-WISE AS UNDER: 1. THE ASSESSEES HAVE RAISED THE ISSUE OF LEGALITY OF ASSESSMENT U/S 153A. WE FIND THAT THIS ISSUE HAS BEEN ARGUED BY BOTH THE PARTIES FOR THE ASSESSMENT YEARS 2004-05 TO 2007-08 AT LENGTH, IN W HICH, THE ORDER IS PASSED BY US SEPARATELY. IN THE SAID ORDER, WE HAVE ALREADY HELD THAT THE ASSESSMENTS CANNOT BE REOPENED FOR ASSESSMENT YEARS 2004-05 TO 2007-08 IN ABSENCE OF INCRIMINATING MATERIAL AND TH EREFORE, APPEALS WERE ALLOWED FOR A.Y. 2004-05 TO 2007-08 (EXCEPT FO R A.Y. 2007-08 OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 7 H.K. KALCHURI EDUCATION TRUST WHICH WAS PENDING) DE LETING ALL THE ADDITIONS. HOWEVER, FOR THE ASSESSMENT YEAR 2008-09 , THE SEARCH TOOK PLACE ON 23.7.2009, THEREFORE, THE ASSESSMENT YEAR 2008-09 TO 2010-11, SEC. 153A DOES NOT APPLY. THEREFORE, ALL THE APPEAL S FOR THESE THREE YEARS A.Y. 2008-09 TO 2010-11 (FOUR YEARS IN CASE O F H K KALCHURI EDUCATION TRUST FROM A.Y. 2007-08 TO 2010-11) ARE D ECIDED ON MERITS. ACCORDINGLY, THE GROUNDS RELATING TO APPLICABILITY OF SECTION 153A ARE DISPOSED OF IN CASE OF H K KALCHURI EDUCATION TRUST , JAI NARAIN SHIKSHA SAMITI, RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND HAI HAY KSHATRIYA EDUCATION SOCIETY. 1.1 SIMILARLY, IN THE CASE OF RISHIRAJ MEMORIAL EDUCATI ON & WELFARE SOCIETY (PAN: AAAAR5568F), THE ASSESSEE HAS RAISED THE ISSU E OF LEGALITY OF ASSESSMENT U/S 153C. THE ASSESSEE HAS CHALLENGED THE ISSUE OF INITIATION OF PROCEEDINGS U/S 153C AND CONSEQUENTIAL ASSESSMENTS FOR ASSESSME NT YEARS 2004- 05 TO 2009-10 AND THROUGH ADDITIONAL GROUND FOR THE ASSESSMENT YEAR 2010-11. SINCE THIS ISSUE HAD ALREADY BEEN TAKEN BY THE ASSESSEE FOR ASSESSMENT YEARS 2004-05 TO 2009-10, THE ADDITIONAL GROUND BEING IDENTICAL WAS ADMITTED FOR HEARING AS ALSO BEING LE GAL IN NATURE. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THIS CASE, SEARCH WAS NOT CONDUCTED ON THE ASSESSEE, BUT IT WA S CONDUCTED ON H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 8 CHOUKSEY GROUP ON 23.7.2009. LEARNED COUNSEL FOR TH E ASSESSEE SUBMITTED THAT AS REGARDS THE REQUIREMENT OF RECORD ING SATISFACTION FOR THE PURPOSE OF INVOCATION OF SEC. 153C IS CONCERNED , THE ISSUE HAS BEEN SET AT REST BY THE CBDT VIDE ITS LATEST CIRCULAR NO . 24/2015 F.NO.279/MISC./140/2015/ITJ DATED 31.12.2015. IN VI EW OF THIS CIRCULAR, THE ENTIRE PROCEEDINGS U/S 153C ARE LIABLE TO BE QU ASHED BECAUSE ON REQUEST OF THE ASSESSEE, THE AO PROVIDED COPY OF SA TISFACTION NOTE FOR ISSUE OF NOTICE U/S 153C. BUT, WE FIND THAT THE SAT ISFACTION NOTE HAS BEEN ISSUED IN THE CASE OF ASSESSEE (NON-SEARCHED PERSON ) AND NOT IN THE CASE OF VARIOUS DIFFERENT ASSESSEES (SEARCHED PERSO NS) IN WHOSE CASE DOCUMENTS WERE FOUND. IT HAS BEEN ISSUED IN THE CAS E OF ASSESSEE, RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY ONLY, IS FURTHER SUPPORTED FROM THE FACT THAT AT THE TOP, IT CONTAINS PAN OF A SSESSEE AS AAAAR5568F AND NOT OF THOSE DIFFERENT SEARCHED PERS ONS AND IT VERY CATEGORICALLY, IN THE SUBJECT, CONTAINS AS REASONS RECORDED FOR ISSUE OF NOTICE U/S 153C OF THE I.T. ACT, 1961 IN THE CASE O F RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY. THE SATISFACTION NOTE NEITHER INDICATES THE ASSESSMENT YEAR WHICH IT RELATES TO NOR IT SPECIFIE S ANY INCOME, MUCH LESS UNDISCLOSED INCOME, BEARING THEREFROM. EVEN OT HERWISE, IT CANNOT BE LEGALLY CALLED AS A SATISFACTION NOTE CONTEMPLAT ED UNDER THE LAW BECAUSE IT IS NEITHER SIGNED BY THE INCUMBENT AO NO R IT IS DATED. IT IS, HENCE, ONLY A PIECE OF PAPER HAVING NO CREDENCE IN THE EYES OF LAW. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 9 THUS, THERE WAS NO APPLICATION OF MIND WHILE ISSUIN G NOTICE U/S 153C. LEARNED COUNSEL FOR THE ASSESSEE, IN SUPPORT OF THE CONTENTION, RELIED ON THE FOLLOWING DECISIONS: 1. CIT VS. SATKAR ROADLINES [2016] 175 TTJ 198 (ITA T, DELHI). 2. CIT V. SHETTYS PHARMACEUTICALS &BIOLOGICALS LTD. [2015] 57 TAXMANN.COM 282 (A.P.) 3. CIT VS. MECHMEN [2015] 60 TAXMANN.COM 484 (M.P.) 4. CHIRCHIND HYDRO POWER LTD. [IT(SS)A NOS. 171,172 AND 174/IND/2008, DATED 29-12-2010] (ITAT, INDORE) 5. ACIT V. GWALIOR TANKS & VESSELS LTD. [IT(SS) A N OS. 175 TO 181/IND/2008 DATED 29-12-2010] (ITAT, INDORE) (ALSO CONFIRMED BY HON'BLE M.P. HIGH COURT VIDE ITS ORDER NO. ITA NO. 52/2011 DATED 10.7.2015) 6. PEPSICO INDIA HOLDING PVT. LTD. VS. ACIT (2014) 270 CTR 467 (DEL. HC). 7. PR.CIT V. NIKKI DRUGS & CHEMICALS [2015] 64 TAXM ANN.COM 309 (DELHI HC) 8. CIT V. RRJ SECURITIES LTD. [2015] 62 TAXMANN.COM 391 (DELHI HC) 9. CIT V. GOPI APARTMENTS [2014] 365 ITR 411 (ALL H C). THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT AS PER THE INTENTION OF THE LEGISLATURE THE SCOPE OF S ECTION 153C IS MERELY TO ENABLE THE REVENUE TO ENSURE THAT TRANSACTION OR THE INCOME EMBEDDED IN THE SEIZED DOCUMENT FOUND HAS BEEN ACCO UNTED FOR IN THE CASE OF NON- SEARCHED PERSON TO WHOM IT BELONGS AND ONCE IT IS FOUND ACCOUNTED OR EXPLAINED, FURTHER PROCEEDINGS U/S 153 C WILL HAVE TO BE CLOSED AND NO FURTHER ADDITION CAN BE MADE BY MAKIN G ROVING AND FISHING ENQUIRIES SINCE THE ASSESSEE CANNOT BE PUT TO UNDUE HARASSMENT. IT WAS H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 10 CONTENDED THAT NONE OF THE ADDITIONS MADE BY THE AO IN ANY OF THE ASSESSMENT YEARS WERE CALLED FOR BECAUSE THE ASSESS EE HAS SATISFACTORILY EXPLAINED THAT THE ENTRIES RECORDED IN THE SEIZED DOCUMENTS ARE REFLECTED IN THE REGULAR BOOKS OF ACC OUNT. THEREFORE, FURTHER PROCEEDINGS U/S 153C SHOULD HAVE BEEN CLOSE D AND NO FURTHER ADDITION SHOULD HAVE BEEN MADE BY MAKING ROVING AND FISHING ENQUIRIES. THE LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THE STATUS OF DOCUMENTS BELONGING TO THE ASSESSEE FOUND DURING SE ARCH AND ADDITIONS MADE BY THE ASSESSING OFFICER. THUS, IT WAS ALSO CO NTENDED THAT SINCE NO DOCUMENT/ MATERIAL WAS FOUND FOR A.Y. 2004-05, 2 006-07 AND 2009- 10, NO NOTICE SHOULD HAVE BEEN ISSUED FOR THESE YEA RS AND HENCE, ASSESSMENT FOR A.Y. 2004-05, 2006-07 AND 2009-10, A RE BAD IN LAW. IT WAS FURTHER CONTENDED THAT SINCE ALL THE DOCUMENTS FOUND FOR OTHER YEARS NAMELY, ASSESSMENT YEARS 2005-06, 2007-08 & 2008-09 WERE DULY EXPLAINED TO HAVING BEEN ACCOUNTED FOR, FURTHER PRO CEEDINGS U/S 153C OUGHT TO HAVE BEEN CLOSED BY THE AO. THE LEARNED CO UNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT ADDITIONS MADE IN THE ASSESSMENT ORDERS ARE NOT ON THE BASIS OF ANY INCRIMINATING DOCUMENT FOUND AND SEIZED AND, HENCE, NO SUCH ADDITION COULD HAVE BEEN MADE I N ASSESSMENT ORDERS U/S 153A R.W.S. 153C. THE LEARNED COUNSEL FO R THE ASSESSEE ALSO TOOK A PLEA THAT THE AO HAS CONFRONTED SEIZED MATER IAL TO ASSESSEE AS LATE AS ON 12.12.2011, WHEREAS NOTICES U/S 153C HAD ALREADY BEEN H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 11 ISSUED PRIOR TO THAT DATE ON 17.10.2011 AND, THEREF ORE, THE ASSUMPTION OF JURISDICTION U/S 153C AND CONSEQUENT PROCEEDINGS AR E VITIATED. IT WAS, THUS, ARGUED THAT THE ASSUMPTION OF JURISDICTION AN D RECORDING OF SATISFACTION IN THE CASE OF ASSESSEE U/S 153C BY TH E AO SUFFERED FROM LEGAL INFIRMITY. IT WAS ALSO CONTENDED THAT SINCE, NOTICES U/S 153A AND 153C WERE ISSUED TO ALL RELEVANT SEARCHED & NON- SE ARCHED PERSONS IN F.Y. 2011-12 CORRESPONDING TO A.Y. 2012-13 ONLY, NO NOTICE COULD BE ISSUED U/S 153C FOR A.Y. 2004-05 AND A.Y. 2005-06 T O THE ASSESSEE BECAUSE THE HANDING OVER OF THE SEIZED MATERIAL OF ASSESSEE MUST BE IN A.Y.2012-13 (F.Y. 2011-12) AND IN THAT CASE, THE SI X PRECEDING ASSESSMENT YEARS AS PER THE FIRST PROVISO TO SECTIO N 153C(1) SHALL BE A.Y.2011-12, 2010-11, 2009-10, 2008-09, 2007-08 AND 2006-07. THUS, THE ASSESSMENTS U/S 153C FOR A.Y. 2004-05 AND 2005- 06 ARE BAD IN LAW. IT WAS ALSO SUBMITTED THAT IT IS BY NOW SETTLED LAW THAT IN ASSESSMENTS U/S 153C, ADDITION SHOULD BE MADE ONLY ON THE BASIS OF SEIZED MATERIAL. BUT SINCE ADDITIONS MADE BY AO ARE NOT BASED ON SEI ZED MATERIAL, RATHER THE ASSESSMENTS MADE BY AO WERE DENOVO OR LIKE REGU LAR ASSESSMENTS, THE SAME ARE NOT LEGALLY PERMISSIBLE. THE LEARNED C OUNSEL FOR THE ASSESSEE ALSO RELIED ON THE FOLLOWING DECISIONS: 1. SSP AVIATION VS. DCIT (2012) 346 ITR 177(DEL) 2. DR. D.Y. PATIL PRATISHTAN VS. DCIT (PUNE ITAT) I N ITA NOS. 1586 TO 161 L/PN/2011 3. ANANT STEELS VS. ACIT IN IT(SS)A NO.133/IND/2013 , ORDER DATED 01.12.2015 H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 12 4. ITO VS. SHRI RAM SVVAROOP GUPTA (AGRA ITAT), IN IT(SS) A. NO. 03/& 04/AGRA/2010. 5. RRJ SECURITIES LTD. VS. CIT [2015] 62 TAXMANN.CO M 391 (DELHI). IN VIEW OF THE ABOVE, IT WAS SUBMITTED BY THE LEARN ED COUNSEL FOR THE ASSESSEE THAT ASSESSMENTS MADE U/S 153C R.W.S. 153A FOR A.YS.2004-05 TO 2010-11 MAY BE DECLARED INVALID AND CANCELLED. ON THE OTHER HAND, LD. DR DEFENDED THE ORDER OF THE LD. CIT(A) SUBMITTING THAT LD. CIT(A) HAS DISCUSSED THE ISSUE IN DETAIL IN PARA 5.2 RELYING ON VARIOUS JUDICIAL PRONOUNCEMENTS AND REAC HED TO THE CONCLUSION THAT THE ASSESSING OFFICER HAS VALIDLY M ADE ASSESSMENT U/S 153C. THEREFORE, ORDER OF THE LD. CIT(A) ON THIS IS SUE MAY BE UPHELD. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS UNDISPUTED FACT THAT DURING THE COURSE OF SEARCH PROCEEDINGS IN CASE OF OTHER ASSES SEES, CERTAIN LOOSE PAPERS WERE FOUND AND SEIZED. THE ASSESSING OFFICER HAS ISSUED NOTICES U/S 153C OF THE ACT ON THE BASIS OF SEARCH U/S 132( 1) WHICH WAS CARRIED OUT IN THE CASE OF OTHER ASSESSEES. THE ASSESSING O FFICER ISSUED NOTICES U/S 153C AND REOPENED ASSESSMENTS FOR THE YEARS UND ER CONSIDERATION. THE PROVISIONS OF SEC. 153C CAN BE INVOKED ONLY AFT ER RECORDING A SATISFACTION IN THE CASE OF PERSONS SEARCHED QUA TH E ASSETS OR BOOKS OR DOCUMENTS SEIZED DURING THE COURSE OF SEARCH BELONG TO SOME OTHER H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 13 PERSON. IN THE INSTANT CASE, THE ASSESSING OFFICER OF OTHER CONCERNED ASSESSEES HAS NOT RECORDED ANY SATISFACTION QUA THE BELONGINGNESS OF THE SEIZED DOCUMENTS WITH THE ASSESSEE AND THERE WA S NO SATISFACTION RECORDED, THEREFORE, THE ASSESSMENTS ARE BAD IN LAW . THE SIMILAR ISSUE HAD COME UP BEFORE THE HONBLE JURISDICTIONAL HIGH COURT OF M.P. IN THE CASE OF CIT VS. MECHMEN [2015] 60 TAXMANN.COM 484 ( M.P.), WHEREIN HON'BLE HIGH COURT DISCUSSING THE VARIOUS JUDGMENTS HAS HELD THAT THE AO IS OBLIGED TO RECORD SATISFACTION (IN CASE OF TH E SEARCHED PERSON) THAT THE ASSETS OR DOCUMENTS DO NOT BELONG TO THE SEARCH ED PERSON AND THESE IN-FACT BELONG TO SOME OTHER PERSON OTHER THA N THE SEARCHED PERSON. THIS IS SINE QUA NON DESPITE THE FACT THAT THE AO OF SEARCHED AND NON-SEARCHED PERSON IS SAME. THEREAFTER, HE HAS TO HANDOVER THE MATERIAL TO THE AO OF NON SEARCHED PERSON HAVING JU RISDICTION OVER HIM (MAY BE THE SAME AO). AFTER RECEIPT OF THE MATERIAL AND DUE VERIFICATION, THE AO OF NON SEARCHED PERSON HAS TO ISSUE NOTICE U /S 153C AND TO PROCEED IN THE MATTER. THE RELEVANT OBSERVATIONS OF HON'BLE M.P. HIGH COURT ARE AS UNDER : 14. THUS, AS ENVISAGED BY SECTION 158BD, 'SATISFACT ION' OF THE ASSESSING OFFICER BEFORE HE TRANSMITS THE MATERIAL/ RECORDS TO OTHER ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON IS SINE QUA NON. SANS SUCH SATISFACTION, THE ASSESSING OFFICER CANNOT VALIDLY TAKE RECOURSE TO THE MACHINERY PROVISION. 15. WE MAY NOW TURN TO SECTION 153C. NO DOUBT, THE FORM OF SECTION 153C IS DISSIMILAR TO THAT OF SECTION 158BD. IT IS ALSO TRUE THAT THE TWO PROVISIONS ARE EMBEDDED UNDER DIFFERENT CHAPTERS. F OR, SECTION 153C H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 14 IS IN CHAPTER XIV PROVIDING FOR PROCEDURE FOR ASSES SMENT, WHEREAS SECTION 158BD IS FOUND IN CHAPTER XIV-B PROVIDING F OR SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES. FURTHER, SECTION 153C OPENS WITH NON-OBSTANTE CLAUSE. HOWEVER, THE NON-OB STANTE CLAUSE IN SECTION 153C IS NECESSITATED TO GIVE POWER TO THE A SSESSING OFFICER HAVING JURISDICTION TO PROCEED AGAINST THE PERSON O THER THAN THE PERSON REFERRED TO IN SECTION 153A, INSPITE OF THE ACTION UNDER SECTION 139, 147, 148, 149, 151 AND 153 OF THE I.T. ACT. HOWEVER , ON CLOSER SCRUTINY OF THE TWO PROVISIONS, IT IS INDISPUTABLE THAT, THE SE PROVISIONS ARE MACHINERY PROVISIONS AND HAVE BEEN PROVIDED FOR IN THE STATUTE BOOK FOR THE PURPOSE OF CARRYING OUT ASSESSMENT OF A PER SON OTHER THAN THE SEARCHED PERSON UNDER SECTION 132 OR 132A OF THE I. T. ACT IN RELATION TO SECTION 158BD; AND SECTION 153A IN RELATION TO SECT ION 153C. NOTABLY, THE PURPOSE UNDERLYING BOTH THESE PROVISIONS IS SIM ILAR, EVEN THOUGH SECTION 153C DOES NOT SPECIFICALLY REFER TO THE EXP RESSION 'UNDISCLOSED' INCOME. HOWEVER, IN BOTH THE SITUATIO NS, THE ASSESSING OFFICER ENGAGED IN CARRYING ON SEARCH OF THE ASSESS EE WITHIN HIS JURISDICTION, IF SEIZES OR REQUISITIONS THE ITEMS ( BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS FOR SECTION 158BD; AN D MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNT OR DOCUMENTS FOR SECTION 153C), IS EXPECTED TO HANDOVE R THOSE ITEMS TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THEREAFTER THE ASSESSING OFFICER HAVING JURISDICTIO N HAS TO PROCEED AGAINST SUCH OTHER PERSON WITHIN HIS JURISDICTION. EVEN FOR THE PURPOSE OF SECTION 153C, THE ASSESSING OFFICER BEFORE HANDI NG OVER THE ITEMS TO THE ASSESSING OFFICER HAVING JURISDICTION MUST B E 'SATISFIED' THAT THE ITEMS BELONGS OR BELONG TO THE PERSON OTHER THAN TH E PERSON REFERRED TO IN SECTION 153A. THAT SATISFACTION OF THE CONCERNED ASSESSING OFFICER IS A SINE QUA NON. THE CONSEQUENCES FLOWING FROM TH E ACTION TO BE TAKEN ON THE BASIS OF SUCH INFORMATION HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION, FOR THE ASSESSEE, WHO IS A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A, IS DRASTIC OF ASSESSMENT OR REASSESSMENT OF HIS INCOME FALLING WITHIN SIX ASSES SMENT YEARS. 16. SUFFICE IT TO OBSERVE THAT THE DISSIMILARITY OF THE FORM OF TWO PROVISIONS WOULD MAKE NO DIFFERENCE TO THE PURPOSE UNDERLYING. THE POWER BESTOWED ON THE ASSESSING OFFICER HAVING JURI SDICTION BE IT UNDER SECTION 153C OR SECTION 158BD IS IDENTICAL. 17. WE ARE NOT INCLINED TO ACCEPT THE ARGUMENT OF T HE DEPARTMENT THAT THE PURPOSE UNDERLYING THE TWO PROVISIONS IS DIFFER ENT. WE ALSO FIND THAT EVEN THE PROCEDURE IS NOT DIFFERENT. THE SUBJECT MA TTER OF THE ACTION WOULD DIFFER IN THE CONTEXT OF THE MACHINERY PROVIS ION INVOKED, IN THE GIVEN CASE. THAT, HOWEVER, CANNOT BE THE BASIS TO E XTRICATE THE ASSESSING OFFICER, WHO RESORTS TO POWER UNDER SECTI ON 153C OF HANDING OVER THE ITEMS REFERRED TO IN SECTION 153C TO THE ASSESSING OFFICER HAVING JURISDICTION, OF HIS DUTY TO BE SATI SFIED ABOUT THE JURISDICTIONAL FACT THAT THE ITEMS BELONGS OR BELON G TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 15 18. THE CONCOMITANT OF THIS CONCLUSION, IS THAT, TH E LEGAL POSITION AS APPLICABLE TO SECTION 158BD REGARDING SATISFACTION IN THE FIRST INSTANCE OF THE FIRST ASSESSING OFFICER FORWARDING THE ITEMS TO THE ASSESSING OFFICER HAVING JURISDICTION; AND IN THE SECOND INST ANCE OF THE ASSESSING OFFICER HAVING JURISDICTION WHILST SENDING NOTICE T O SUCH OTHER PERSON (OTHER THAN THE PERSON REFERRED TO IN SECTION 153A) , MUST APPLY PROPRIOVIGORE. THE FACT THAT INCIDENTALLY THE ASSES SING OFFICER IS COMMON AT BOTH THE STAGES WOULD NOT EXTRICATE HIM F ROM RECORDING SATISFACTION AT THE RESPECTIVE STAGES. IN THAT, THE ASSESSING OFFICER IS SATISFIED THAT THE ITEMS REFERRED TO IN SECTION 153 C BELONGS OR BELONG TO A PERSON (OTHER THAN THE PERSON REFERRED TO IN SECT ION 153A), BEING SINE QUA NON. HE CANNOT ASSUME JURISDICTION TO TRAN SMIT THOSE ITEMS TO ANOTHER FILE WHICH INCIDENTALLY IS PENDING BEFORE H IM CONCERNING OTHER PERSON (PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A). THE QUESTION AS TO WHETHER THAT MAY INFLUENCE THE OPINI ON OF THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON, ALSO CANNOT BE THE BASIS TO TAKE ANY OTHER VIEW. AS A MATTER OF FACT, THE OTHER ASSESSING OFFICER TO WHOM THE ITEMS ARE HANDED OVER, BEFORE I SSUING NOTICE MUST HIMSELF BE SATISFIED AFTER DUE VERIFICATION OF THE ITEMS RECEIVED AND THE DISCLOSURES MADE BY THE OTHER PERSON IN THE RETURNS FOR THE RELEVANT PERIOD ALREADY FILED BY THE OTHER PERSON BEFORE HIM . FOR THE SAME REASON, WE MUST REJECT THE ARGUMENT OF THE DEPARTME NT THAT THE DISCRETION OF THE ASSESSING OFFICER HAVING JURISDIC TION WILL BE IMPAIRED IN ANY MANNER, IF HE WERE TO HOLD A DIFFERENT VIEW. SI MILARLY, AS THERE IS NO PROVISION EITHER EXPRESS OR IMPLIED (IN THE ACT) TO DISPENSE WITH THE REQUIREMENT OF SATISFACTION, IF THE ASSESSING OFFIC ER HAPPENS TO BE THE SAME, AS IN THIS CASE, THE ARGUMENT OF THE DEPARTME NT MUST BE NEGATIVED. 19. AFTER RECEIPT OF THE MATERIALS, THE ASSESSING O FFICER HAVING JURISDICTION IS EXPECTED TO CONDUCT ENQUIRY AND DUE VERIFICATION OF THE RELEVANT FACTS; BEFORE FORMING HIS PRIMA FACIE SATI SFACTION. THE ASSESSING OFFICER HAVING JURISDICTION WILL BE WELL WITHIN HIS RIGHTS TO FORM AN INDEPENDENT VIEW BEFORE ISSUING NOTICE TO THE OT HER PERSON (PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A) UNDER HIS JURISDICTION ON THE BASIS OF HIS OWN ENQUIRY. IN OUR OPINION, TH E VIEW FORMED BY THE ASSESSING OFFICER AFTER HIS OWN ENQUIRY DOES NOT EN TAIL IN SEATING IN APPEAL OVER THE SATISFACTION OF THE FIRST ASSESSING OFFICER, WHO HAD HANDED OVER THE ITEMS TO HIM. IN THE ABOVE DECISION, IT HAS BEEN HELD THAT EVEN WHEN THE ASSESSING OFFICER OF THE PERSON SEARCHED AND THE OT HER PERSON IS COMMON, THE ASSESSING OFFICER OF THE PERSON SEARCHE D HAS TO NECESSARILY FORM A SATISFACTION THAT THE ITEM REFER RED TO IN SEC. 153C BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON SEARCHED. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 16 APPARENTLY, IN THE PRESENT APPEALS, NO SUCH SATISFA CTION BY THE ASSESSING OFFICER HAS BEEN FOUND RECORDED. WE HAVE ALSO TAKEN NOTE OF A CIRCULAR NO.24/2015 DATED 31.12.2015, ISSUED BY T HE CBDT, IN WHICH, THE BOARD, FOLLOWING THE DECISION OF HONBLE SUPREM E COURT IN CASE OF M/S. CALCUTTA KNITWEARS (CIVIL APPEAL NO. 3958 OF 2 014 DATED 12.3.2014), HAS DIRECTED THAT WHERE THE SATISFACTIO N BY THE ASSESSING OFFICER OF THE PERSON SEARCHED AND OTHER PERSON IS NOT FOUND RECORDED, THE DEPARTMENT SHOULD NOT PRESS THAT MATTER IN APPE AL. THUS, KEEPING IN VIEW RIVAL SUBMISSIONS IN LIGHT OF JUDICIAL PRONOUN CEMENTS AND PARTICULARLY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF M.P. (SUPRA) AND CBDT CIRCULAR (SUPRA), ASSESSMENTS FOR ASSESSMENT YEARS 2004-05 TO 2009-10 ARE HELD AS ILLEGAL AND VOID-AB- INITIO. ACCORDINGLY, FOR ASSESSMENT YEARS 2004-05 TO 2009-10 IN CASE OF RISH IRAJ MEMORIAL EDUCATION & WELFARE SOCIETY, THE GROUNDS RELATING T O APPLICABILITY OF SECTION 153C ARE ALLOWED. WE, HOWEVER, HOLD THAT OU R FINDINGS ON MERITS EQUALLY APPLY TO ALL THE FIVE ASSESSEES ON SIMILAR ISSUES EVEN IN RESPECT OF THOSE YEARS WHERE ADDITIONS HAVE BEEN DELETED BY US U/S 153A AS NO INCRIMINATING MATERIAL WAS FOUND AND ASSESSMENTS WE RE CONCLUDED OR NON-PENDING ON THE DATE OF SEARCH OR ASSESSMENTS HA VE BEEN QUASHED U/S 153C AS SATISFACTION WAS NOT RECORDED IN CASE O F SEARCHED PERSON. 2. THE ASSESSEE HAS RAISED THE ISSUE CHALLENGING TH E DIRECTION OF THE AO FOR SPECIAL AUDIT U/S 142(2A) OF THE IT ACT. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 17 THE FACTS OF THE ISSUE ALONGWITH SUBMISSIONS OF TH E ASSESSEE MADE BEFORE US ARE REPRODUCED AS UNDER : 1) SEARCH ON : 23/7/2009. 2) ASSESSMENT PERIOD A.Y. 2004-05 TO 2010-11. 3) ASSESSMENT TIME BARRING ON : 31/12/2011. ASSESSM ENT ORDER DATED 13/8/2012. 4) REFERENCE FOR SPECIAL AUDIT. 5) FIRST SHOW CAUSE NOTICE FOR DIRECTING SPECIAL AU DIT ON 14/11/2011 - PB 675-677 6) REPLY OF ASSESSEE OBJECTING TO FIRST SHOW CAUSE NOTICE U/S 142(2A) FILED ON 22/11/2011 - PB 678 -682 7) NO DISPOSAL BY AO OF ABOVE OBJECTIONS OF ASSESSE E PRIOR TO DIRECTION OF SPECIAL AUDIT. DISPOSAL OF OBJECTIONS ONLY ON 28.12.2011,WITHOUT O PPORTUNITY, ON THE DATE OF DIRECTION OF SPECIAL AUDIT (PB 694-710 ) ; THOUGH CAPTION OF THIS LETTER IS ORDER U/S 142(2A ) BUT INFACT THIS IS DISPOSAL OF OBJECTIONS. DIRECTION FOR SPECI AL AUDIT IS THROUGH SEPARATE ORDER DATED 28-12-2011. (PB 689-693) 8) IN THE MEANTIME, BEFORE DISPOSAL OF OBJECTIONS, AO PROCEEDED WITH/CONTINUED ASSESSMENT PROCEEDINGS BY ISSUING LETTER DATED 13.1 2.2011 - (PB 683 ) 9) ASSESSEE ATTENDED ASSESSMENT PROCEEDINGS AND FIL ED REPLY ON 14.12.2011- (PB 684- 688) 10) DIRECTION/ORDER OF AO FOR SPECIAL AUDIT ON 28.1 2.2011 (TIME BARRING: 31.12.2011) (PB 689-693) 11) LAST EXTENDED DATE FOR SUBMISSION OF SPECIAL AU DIT REPORT : 22/6/2012. 12) NO SPECIAL AUDIT COULD BE GOT DONE BY ASSESSEE IN ABSENCE OF BOOKS OF ACCOUNTS, AS STATED HEREINAFTER. 13) BOOKS OF ACCOUNTS NOT EVEN SEEN BY AO, WHAT TO TALK OF EXAMINING THE SAME : ALL BOOKS OF ACCOUNTS ARE MAINTAINED IN COMPUTER SY STEM. PRINTOUTS/ HARD COPY OF REGULAR BOOKS OF ACCOUNTS NOT FOUND OR SEIZED DURIN G SEARCH. ALL THE BOOKS OF ACCOUNTS / ACCOUNTING DATA CAPTURED IN COMPUTER HARD DISKS/LAP TOP SEIZED /IMPOUNDED BY DEPARTMENT DURING SEARCH. 14) SEIZED CPUS/COMPUTER HARD DISKS/LAPTOP WERE NOT OPERATED PRIOR TO 1.7.2013. COPY OF BOOKS OF ACCOUNTS/ACCOUNTING DATA SEIZED /IMPOUNDED BY DEPARTMENT WERENOT GIVEN TO THE ASSESSEE. ASSESSEE REQUESTED TIME AND AGAIN BEF ORE INVESTIGATION WING, AO, JCIT, CIT (A) AND CIT FOR SUPPLYING THE BOOKS OF ACCOUNTS / ACCOUNTING DATA IN SEIZED CPUS/COMPUTER HARD DISKS/LAPTOPBECAUSE, IN ABSENCE OF THE SAME, IT WAS NOTAT ALL POSSIBLE TO FILE REPLY ON THE ISSUES ON MERITS. COPY OF LETTER DATED 26-9-09 BEFOREITO (INVESTIGAT ION) AT PB 348 COPY OF LETTER DATED 14-12-11 BEFORE AO AT PB 349-351 H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 18 COPY OF LETTER DATED 10-4-2012 BEFORE AO AT PB 352 COPY OF LETTER DATED 18-10-12 BEFORE AO AT PB 353 COPY OF LETTER DATED 21-2-13 BEFORE AO AT PB 354 COPY OF LETTER DATED 28-3-13 BEFORE AO AT PB 355 COPY OF LETTER DATED 16-4-13 BEFORE AO AT PB 356-357 COPY OF LETTER DATED 23-4-13 BEFORE AO AT PB 358-359 COPY OF LETTER DATED 17-4-13 BEFORE JCIT/CIT(A)/CIT AT PB 360-365 15) SEIZED CPUS/COMPUTER HARD DISKS/LAPTOP WERE OPE RATED ONLY ON 1.7.2013 AND THE COPY OF SEIZED/IMPOUNDED BOOKS OF ACCOUNTS / ACCOUNTING DATA WERE GIVEN TO THE ASSESSEE ON 1.7.2013 ONLY, MUCH AFTER THE ORDER OF ASSESSMEN T(ASSESSMENT ORDER DATED 13.8.2012) AFTER DE-SEALING THE SEIZED/IMPOUNDED CO MPUTER HARD DISKS/LAPTOP AND THEREAFTER THESE CPUS WERE RESEALED. COPY OF PANCHN AMA FOR OPERATING THE CPUS/COMPUTER HARD DISKS/LAPTOPAND FOR SUPPLYING CO PY OF SEIZED/IMPOUNDED BOOKS OF ACCOUNTS / ACCOUNTING DATA TO ASSESSEE ON 1.7.2013 ARE ENCLOSED AT PB 271-275 . 16) AS PER AO, NO BOOKS OF ACCOUNTS WERE PRODUCED B Y ASSESSEE DURING ASSESSMENT PROCEEDINGS. AO HAS REITERATED THIS FACT IN HIS ASS ESSMENT ORDERS SO MANY TIMES. 17) ASSESSMENT ORDER PASSED BY AO ON 13/8/2012 ON T HE BASIS OF MATERIAL ON RECORD. 18) WITHOUT GIVING COPY TO THE ASSESSEE OF THE DATA SEIZED IN CPUS/COMPUTER HARD DISKS/LAPTOP, AO CAN NEVER OPEN AND USE THE SEIZED COMPUTER HARD DISKS/LAPTOP ON HIS OWN. THEN, HOW HE CLAIMS TO HAVE EXAMINED THE BOOKS OF ACCOUNTS AND FOUND THEM TO BE COMPLEX. IT IS LIKE THAT A DOCTOR HAS NOT EXAMIN ED THE PATIENT AND DIAGNOSED HIM AS HAVING SO AND SO DISEASES. BUT HERE IN THIS CASE, W HICH IS EVEN WORST, THE DOCTOR HAS NOT EVEN SEEN THE PATIENT AND CERTIFIED THAT HE HAS GOT COMPLEX DISEASES. 19) HENCE, THE BOOKS OF ACCOUNTS WERE NOT EVEN SEEN BY THE AO TILL THE DATE OF FRAMING THE ASSESSMENT ORDER, WHAT TO TALK OF EXAMINING THE SAM E BY HIM. IT WAS THE BOUNDEN DUTY OF THE AO TO EXAMINE THE BOOKS OF ACCOUNTS IN THE C PUS/HARD DISKS/LAPTOP BEFORE MAKING REFERENCE FOR SPECIAL AUDIT AND HENCE, THE R EFERENCE WAS ONLY TO GET THE LIMITATION EXTENDED FOR PASSING THE SEARCH ASSESSME NT ORDERS. COVERED ISSUE : IT IS A COVERED ISSUE IN FAVOUR OF ASSESSEE. IN THE SIMILAR CIRCUMSTANCE S, HON'BLE INDORE ITAT , IN THE CASE OF ACIT VS. RAJ HOMES PVT. LTD. IN IT(SS) A NO. 109/IND/2005 AND CO NO. 129/IND/2005 (INDORE) DATED 29.5.2009 PAR A 48 TO 87 (COPY SEPARATELY ENCLOSED) QUASHED THE ASSESSMENT ORDER BEING TIME-BARRED HOL DING THAT SINCE THE AO DID NOT EXAMINE THE BOOKS OF ACCO UNTS BEFORE DIRECTION FOR SPECIAL AUDIT WHICH WAS GIVEN MERELY FOR GETTING LIMITATION PERIOD EXTENDED, THE AO WOULD NOT BE ENTITLED TO GET THE LIMITATION EXTENDED FOR PASSING THE BLOCK ASSESSMENT ORDER. SIMILAR WERE THE VIEWS OF HON'BLE INDORE ITAT IN THE CASE O F PARAS HOUSING PVT. LTD. VS. DY. CIT (2009) 12 ITJ 131 (INDORE). 20) SIMILAR VIEWS HAVE BEEN EXPRESSED BY HON'BLE HIGH COURT OF ALLAHABAD IN THE LATEST CASE OF RPS ASSOCIATES VS. DIT (2015) 280 CTR 582 (ALL. HC) WHEREIN IT WAS HELD THAT COMPLEXITY OF ACCOUNTS CAN ONLY BE JUDGED UPON A PERUSAL OF BOOKS OF ACCOUNTS AFTER INVITING EXPLANATION FROM THE ASSESSEE AND IF THE BOOKS OF ACCOUNTS ARE NOT PERUSED, THE QUESTION OF COMPLEXITY CANNOT BE JUDGE D. IDENTICAL VIEWS HAVE ALSO BEEN EXPRESSED IN THE LATEST DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SUBHOJI RAO C.H. (2013) 355 ITR 320 (KAR. HC). IN THIS CASE ALSO, HON'BLE COURT HELD THAT WHERE ASSESSEE WAS NOT GRANTED OPPORTUNIT Y OF BEING HEARD BEFORE PASSING ON ORDER U/S 142(2A) AND MOREOVER SUCH A PROCEDURE WAS ADOPTED MERELY TO EXTEND PERIOD H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 19 OF LIMITATION FOR COMPLETING ASSESSMENT, TRIBUNAL W AS JUSTIFIED IN SETTING ASIDE SAID ASSESSMENT HOLDING IT TO BE BARRED BY LIMITATION. 21) IT WOULD BE RELEVANT TO MENTION THAT IN THE FOL LOWING DECISIONS ALSO, IT HAS BEEN HELD THAT IF THE REFERENCE U/S 142(2A) FOR SPECIAL AUDIT WAS MEANT FOR GETTING EXTENSION OF LIMITATION ONLY, THE ASSESSMENT ORDER WOULD BE BARR ED BY LIMITATION : ACIT VS. CLARIDGES INVESTMENT & FINANCE IN ITA NO. 34 75/MUM./2006 (MUM. ITAT) (COPY SEPARATELY ENCLOSED) ANANDIBEN B PATEL VS. ACIT IN ITA NO. 143/MUM./2006 (MU M.) ORDER DATED 26.2.2013/10.4.2013 (COPY SEPARATELY ENCLOSED) MEENAKSHI SUNDARAM AND A.S. RAJA SHEKHAR (MUM. ITAT) ORDER DATED 29.6.2011 A.S. RAJA SHEKHAR PROP. ASR CATERERS VS. ACIT (MUM.) ORD ER DATED 4.1.2012 [BOTH ABOVE DECISIONS REFERRED TO IN ANANDIBEN CASE ( SUPRA)] 22) IN THE CASE OF SWADESHI COTTON MILLS VS. CIT 171 ITR 634 (ALL. HC) , IT WAS HELD THAT THE POWER U/S 142(2A) CANNOT BE EXERCISED LIGHTLY. THE SATISFACTION OF THE AUTHORITIES SHOULD NOT BE SUBJECTIVE SATISFACTION. IT WOULD BE BASED ON OBJECTIVE ASSESSMENT, REGARD BEING HAD TO THE NATURE OF ACCOUNTS. IT WAS FURTHER HELD THAT, THEREFORE, SPECIAL AUDIT SHOULD NOT BE DIRECTED ON A CURSORY LOOK AT THE ACC OUNTS. THERE SHOULD BE AN HONEST ATTEMPT TO UNDERSTAND THE ACCOUNTS OF THE ASSESSEE. HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. BAJRANG TEXTILES, 205 CTR 287 (RAJ.HC) ALSO HELD THAT DIRECTION FOR SPECIAL AUDIT AT THE FAG END OF LIMITATION PERI OD TRIBUNAL CAME TO CONCLUSION THAT THE DIRECTION FOR SPECIAL AUDIT WAS MADE MERELY FOR GET TING EXTENSION OF PERIOD FOR COMPLETING THE ASSESSMENT AND HELD THAT DIRECTION FOR SPECIAL AUDIT WAS ILLEGAL AND CONSEQUENTLY THE ASSESSMENT WAS BARRED BY TIME ARE THE FINDINGS OF F ACT, THEREFORE, NO SUBSTANTIAL QUESTION OF LAW ARISES. 23) THE CIT(A) ASSERTED THAT REFERENCE U/S 142(2A) FOR SPECIAL AUDIT IS NOT APPEALABLE BECAUSE IT IS ADMINISTRATIVE IN NATURE AS OBSERVED IN THE CASE OF RAJESH KUMAR VS. DCIT (2006) 287 ITR 91 (SC). FOR THIS, THE LD. CIT(A) HAS RELIED ON THE FOLLOWIN G DECISIONS AND IN THESE DECISIONS RELIANCE HAS BEEN PLACED ON THE AFORESAID DECISION OF RAJESH KUMAR (SUPRA) : PROFESSIONAL WAREHOUSING CO. VS. DCIT (2008) 21 SOT57 (LUCK.) ACIT VS. BADRIRAM CHOUDHARY (2008) 118 TTJ 492 (JOD HPUR) TWENTY FIRST CENTURY FINANCE VS. DCIT (2008) 6 DTR 110 (DEL. ITAT) 24) IT IS SUBMITTED THAT THE RELIANCE PLACED BY LD. CIT(A) ON THE ABOVE DECISIONS AND ON THE DECISION OF RAJESH KUMAR (SUPRA)WAS TOTALLY MISPLAC ED. WITH DUE REGARD TO THE HON'BLE BENCHES, IT IS SUBMITTED THAT THE OBSERVATIONS OF H ON'BLE SUPREME COURT IN THE CASE OF RAJESH KUMAR (SUPRA) HAVE NOT BEEN TAKEN IN THE RIG HT CONTEXT OR PERSPECTIVE. RATHER, THESE HAVE BEEN USED IN A PICK AND CHOOSE MANNER. T HE HON'BLE SUPREME COURT WAS INFACT DECIDING ON THE ISSUE OF AFFORDING PROPER OP PORTUNITY WHILE MAKING REFERENCE FOR SPECIAL AUDIT WHICH OSTENSIBLY WAS MISSING FROM THE STATUTE BOOK. ON THE CONTRARY, THE HON'BLE SUPREME COURT HAS CLEARLY HELD AS UNDER : THE BOMBAY HIGH COURT AND THE DELHI HIGH COURT, WI TH RESPECT, IN OUR OPINION, ARE NOT CORRECT IN STATING THAT A DIRECTION ISSUED U/S 142(2A) OF THE ACT TO BE ADMINISTRATIVE IN NATURE. IN VIEW OF SECTION 136 OF THE ACT, THE ENTIRE PROCEEDINGS OF ASSESSMENT , BEFORE THE ASSESSING OFFICER BEING JUDICIAL, IT IS DIFFICULT TO UNDERSTAND HOW A PART THEREOF, WHICH INDISPUTABLY I S RESORTED TO IN AID OF THE ULTIMATE ORDER OF ASSESSMENT, WITHOUT ANY STATUTORY INTERDICT, WOULD BE CALLED TO H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 20 BE AN ADMINISTRATIVE ORDER. WHEN THE BOOKS OF ACCOU NTS HAVE BEEN PRODUCED AND EXAMINED, THE ASSESSING OFFICER WOULD BE PROCEEDING TO MAKE ULTIMATE ORDER OF ASSESSMENT. (PARA 36) 25) THUS, HON'BLE SUPREME COURT IN THE VERY CASE OF RAJESH KUMAR (SUPRA) HAS HELD THAT A DIRECTION U/S 142(2A) IS A QUASI-JUDICIAL ORDER AND NOT ADMINISTRATIVE IN NATURE; THIS IS BECAUSE WHEN THE ENTIRE PROCEEDINGS BEFORE AO IS JU DICIAL, A PART WHEREOF WHICH IS RESORTED TO IN AID OF MAKING ULTIMATE ORDER OF ASSE SSMENT, IT CANNOT BE CALLED AN ADMINISTRATIVE ORDER. 26) RAJESH KUMAR (SC) CASE HAS BEEN CONSIDERED BY HONBL E INDORE ITAT AND STILL ASSESSMENT WAS DECLARED AS TIME BARRED IN CASE OF VITIATED REF ERENCE FOR AUDIT : MOREOVER, THE CASE OF RAJESH KUMAR (SUPRA) HAS ALREADY BEEN DEALT WITH IN THE DECISION OF HONBLE JURISDICTIONAL BENCH OF INDORE ITAT AND OTHER FOLLOWING DECISIONS RELIED UPON BY ASSESSEE, AND IT WAS HELD THAT THE V ITIATED REFERENCE FOR SPECIAL AUDIT SHALL NOT AFFORD ANY EXTENSION OF TIME LIMIT AND THE ASSE SSMENT ORDER FRAMED BEYOND STIPULATED TIME LIMIT SHALL BE INVALID AND BARRED B Y LIMITATION : ACIT VS. RAJ HOMES PVT. LTD. IN IT(SS) A NO. 109/IND/2005 AND CO NO. 129/IND/2005 (INDORE) DATED 29.5.2009 PARA 48 TO 87 PARAS HOUSING PVT. LTD. VS. DY. CIT (2009) 12 ITJ 131 (INDORE) CIT VS. SUBHOJI RAO C.H. (2013) 355 ITR 320 (KAR. HC ) ACIT VS. CLARIDGES INVESTMENT & FINANCE IN ITA NO. 34 75/MUM./2006 (MUM. ITAT) (COPY SEPARATELY ENCLOSED) ANANDIBEN B PATEL VS. ACIT IN ITA NO. 143/MUM./2006 (MU M.) ORDER DATED 26.2.2013/10.4.2013 (COPY SEPARATELY ENCLOSED) MEENAKSHI SUNDARAM AND A.S. RAJA SHEKHAR (MUM. ITAT) O RDER DATED 29.6.2011 [REFERRED TO IN ANANDIBEN CASE (SUPRA)] A.S. RAJA SHEKHAR PROP. ASR CATERERS VS. ACIT (MUM.) ORD ER DATED 4.1.2012. [REFERRED TO IN ANANDIBEN CASE (SUPRA)] 27) INFACT, IN THE JURISDICTIONAL DECISION OF HON'BLE INDORE ITAT IN THE CASE OF ACIT VS. RAJ HOMES PVT. LTD. IN IT(SS) A NO. 109/IND/2005 AND CO NO. 129/IND/2005 (IN DORE) DATED 29.5.2009 IN PARA 51, IT WAS CLEARLY NARRATED BY HON'BLE ITAT THAT THE LD. DR SUBMITTED THAT REFERENCE U/S 142(2A) CANNOT BE CHALLENGED IN APPEAL AND RELIED ON DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAJESH KUMAR AND OTHERS, 287 ITR 91. THUS, T HE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAJESH KUMAR (SUPRA) HAS ALREADY BEEN DEALT W ITH BY HON'BLE INDORE ITAT IN THE ABOVE CASE AND AFTER CONSIDERING THE SAME ,THE ASSESSMENT WAS HELD AS TIME BARRED IN CASE OF VITIATED DIRECTION FOR SPECIAL AUDIT. WITH UTMOST RESPECT TO THE HON'BLE BENCH, THE ABOVE DECISIONS OF HON'BLE INDORE ITAT REQUIRE TO BE FOLLOWED, IN VIEW OF SIMILAR SET OF FACTS. 28) NO OPPORTUNITY - DISPARITY BETWEEN ISSUES IN THE SH OW CAUSE NOTICE VS. ORDER DIRECTING SPECIAL AUDIT : IN THE SHOW CAUSE NOTICE DATED 14/11/2011 REGARDING COMPLEXITY VIS A VIS PROPOSED SPECIAL AUDIT, OPPORTUNITY WAS GIVEN ONLY IN RESPEC T OF ONE LOOSE PAPER IN THE FORM OF AGREEMENT FOUND DURING SEARCH, WHEREAS WHILE PASSIN G ORDER ON 28.12.2011 DIRECTING SPECIAL AUDIT, AO HAS INCLUDED MANY MORE NEW ISSUES ALSO, WITHOUT GIVING ANY OPPORTUNITY IN RESPECT OF THESE NEW ISSUES. GIVEN A RE THE COMPARATIVE ISSUES RAISED BY AO IN SHOW CAUSE NOTICE U/S 142(2A) VIZ-A- VIZ ISSU ES MENTIONED IN THE ORDER U/S 142(2A): S NO. ISSUES IN NOTICE U/S 142(2A) DATED 14.11.2011 TERMED AS COMPLEX BY AO. ISSUES IN ORDER U/S 142(2A) DATED 28.12.2011 TERMED AS COMPLEX BY AO. 1. THE DOCUMENT PAGE NO. 52 OF LPS -29 SEIZED FROM THE RESIDENCE OF SHRI JAI NARAIN CHOUKSEY IS AN AGREEMENT DATED 24.06.2008 BETWEEN SHRI T .S. KEER AND SHRI JAI NARAIN CHOUKSEY REGARDING PAYMENT OF RS. 17 CRORES TO KEER GROUP FOR PURCHASE OF EDUCATION SOCIETY : PAGE NO. 52 OF LPS 29 SEIZED FROM THE RESIDENCE OF SHRI JAI NARAIN CHOUKSEY IS AN AGREEMENT DATED H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 21 TRANSFER OF SOCIETY / COLLEGES. AS PER THE AGREEMENT, SHRI T.S. KEER AND HIS FAMILY MEMBERS WILL WITHDRAW THEIR RIGHTS FROM RISHIRAJ MEMORIAL EDUCATION AND WELFARE SOCIETY AND ALSO FROM RISHIRAJ SINGH MEMORIAL SOCIETY AND HANDOVER THE CONTROL OF THE TWO SOCIETIES ALONG WITH ALL PROPERTIES TO CHOUKSEY GROUP ON TOTAL PAYMENT OF RS. 17 CRORES, IT IS FURTHER SEEN THAT PAYMENTS HAVE BEEN MADE TO VARIOUS INDIVIDUALS/ TRUST / COMPANY OF KEER GROUP AS PER THE ABOVE AGREEMENT. IT IS SEEN THAT PAYMENT OF RS. 4 CRORES HAS BEEN MADE BY YOU TO HARNAM SINGH KEER PUBLIC WELFARE TRUST, CONTROLLED AND MANAGED BY KEER GROUP ON THIS ACCOUNT. BESIDES, THERE ARE OTHER PAYMENTS BY WAY OF PAYMENTS FROM J K HOSPITAL AND MEDICAL RESEARCH CENTRE AND SOME BANKER'S CHEQUES WHEREIN THE IDENTITY OF THE PERSON MAKING THE PAYMENT COULD NOT BE ASCERTAINED FROM THE MATERIAL AVAILABLE ON RECORD. THUS THE SOURCES OF INVESTMENT CANNOT BE ASCERTAINED. THERE ARE MANY OTHER DOCUMENTS RELATING TO THE PAYMENTS MADE IN THIS REGARD AND ALSO DOCUMENTS WHICH CONFIRM THE ABOVE SALE / TRANSFER OF SOCIETIES / COLLEGES. THE VALUE OF THE ASSETS AND LIABILITIES ON THE DATE OF TRANSFER ARE NOT KNOWN. MOREOVER, IT IS NOT ASCERTAINED AS TO WHAT WAS THE MARKET PRICE OF THE ASSETS AS ON DATE OF TRANSFER. 24.06.2008 BETWEEN SHRI T S KEER AND SHRI JAI NARAIN CHOUSKEY. AS PER THE AGREEMENT SHRI T S KEER AND HIS FAMILY MEMBERS WILL WITHDRAW THEIR RIGHTS FROM RISHIRAJ MEMORIAL EDUCATION AND WELFARE SOCIETY AND ALSO FROM THE RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND HAND OVER THE CONTROL OF THE TWO SOCIETIES ALONG WITH ALL PROPERTIES TO CHOUKSEY GROUP ON TOTAL PAYMENT OF RS. 17 CRORES. AS PER THE SAID AGREEMENT, RS. 1 CRORES HAVE ALREADY BEEN PAID PRIOR TO THE AGREEMENT RS. 3 CRORES WAS TO BE PAID ON 24.06.2008 I. E THE DATE OF AGREEMENT AND THE REMAINING 13 CRORES WERE TO BE PAID BY 25- 08.2008. IT IS FURTHER MENTIONED THAT RS. 4 CRORES WERE TO BE PAID BY 13/07/2008. TILL THE DATE OF SEARCH, TOTAL PAYMENT OF RS. 15.62 CRORES WAS ALREADY MADE BY CHOUKSEY GROUP TO KEER GROUP FOR PURCHASE OF COLLEGE. THE ABOVE PAYMENTS HAVE BEEN MAINLY MADE FROM THE ACCOUNTS OF H K KALCHURI TRUST. IT IS SEEN THAT H K KALCHURI TRUST HAS PAID THE ABOVE SUMS TO THE ENTITIES OF KEER GROUP AGAINST PURCHASE OF RIGHTS AND PROPERTIES OF TWO SOCIETIES BY CHOUKSEY GROUP. THIS FACT HAS BEEN CONFIRMED BY SHRI J N CHOUKSEY IN HIS STATEMENT THAT THE PAYMENT OF RS. 17 CRORES TO VARIOUS ENTITIES OF KEER GROUP IS AGAINST PURCHASE OF SOCIETIES. THESE PAYMENT ARE PRIMA FACIE NOT FOR THE OBJECTS OF THE TRUST. THIS IS PRIMA FACIE VIOLATION OF THE OBJECTS OF THE TRUST AND THE PROVISIONS OF SEC. 13(2) OF THE INCOME TAX ACT 1961. PRIMA FACIE THE TRUST DOES NOT REMAIN ELIGIBLE FOR CLAIMING DEDUCTION EITHER U/S 11 OR U/S 10(23C) OF THE IT ACT 1961. THE ASSESSEE DID NOT FURNISH ANY SPECIFIC CLARIFICATION, DETAILS SUPPORTED BY DOCUMENTARY EVIDENCE TO EXPLAIN THE SAID TRANSACTION AND IMPACT THEREOF ON VARIOUS MEMBERS OF CHOUKSEY GROUP. IN ABSENCE OF ANY CLARIFICATION FROM THE ASSESSEE THE FOLLOWING COMPLEX ISSUES REMAINED UNANSWERED. 1. HOW A SOCIETY CAN BE SOLD? 2. WHO ARE THE BENEFICIARIES IN SUCH SALE OF SOCIETY? 3. WHO ARE THE ORIGINAL INTERESTED PERSONS / TRUSTEE IN THE SOCIETY BEFORE SALE AND WHO ARE THE PERSONS WHO SURRENDERED THEIR INTEREST IN THE SAID SOCIETY AND WHAT BENEFITS THEY GOT FOR SURRENDERING THEIR INTEREST? 4. WHO ARE THE PERSONS WHO GOT INTEREST IN THE SAID SOCIETY AS A RESULT OF PURCHASE THEREOF AND WHAT EXPENDITURE THEY INCURRED FOR GETTING THE INTEREST IN THE SAID SOCIETY? 5. IT IS SEEN THAT PAYMENTS HAVE BEEN MADE BY CERTAIN ENTITIES OF PURCHASE GROUP TO THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 22 CERTAIN ENTITIES OF SELLER GROUP. IN THIS REGARD, THE FOLLOWING ISSUES ARE UNANSWERED. A) WHETHER THE ENTITIES OF PURCHASER GROUP HAVE GOT ANY INTEREST IN THE SAID SOCIETY BY WAY OF MAKING PARTIAL PAYMENT, IF YOU, HOW? IF NOT, THEN WHAT IS THE REASON FOR MAKING SUCH PAYMENT AND ON WHOSE BEHALF SUCH PAYMENTS ARE MADE.? B) HOW AND UNDER WHICH HEAD THE SAID PAYMENT ARE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE SAID ENTITIES ?IF IT IS, OTHERWISE THAN FOR PURCHASING THE SOCIETY THEN HOW THE SAID PAYMENTS ARE FOR THE PURPOSE OF BUSINESS OF THE SAID ENTITIES FOR WHICH IT EXITS? 6. IT IS SEEN THAT PAYMENTS HAVE BEEN RECEIVED BY CERTAIN ENTITIES OF SELLER GROUP FROM CERTAIN ENTITIES OF PURCHASER GROUP. IN THIS REGARD THE FOLLOWING ISSUES ARE UNANSWERED. A) WHETHER THE ENTITIES OF SELLER GROUP HAVE RELINQUISHED ANY INTEREST IN THE SAID SOCIETY BY WAY OF RECEIVING PARTIAL PAYMENT. IF YES HOW? IF NOT, THEN WHAT IS THE REASON FOR RECEIVING SUCH PAYMENT AND ON WHOSE BEHALF SUCH PAYMENTS ARE RECEIVED.? B). HOW AND UNDER WHICH HEAD THE SAID RECEIPTS ARE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE SAID ENTITIES ?IF IT IS OTHERWISE THAN FOR SALE CONSIDERATION OF THE RIGHTS IN THE SOLD SOCIETY, THEN HOW THE SAID RECEIPTS ARE FOR THE PURPOSE OF BUSINESS OF THE SAID ENTITIES FOR WHICH IT EXISTS? 7. WHAT IS THE BASIS FOR TRANSFER OF ASSETS I.E WHETHER AT BOOKS VALUE OR AT MARKET VALUE? IF NOT AT MARKET THEN REASONS FOR THE SAME. WHETHER THE MARKET OF THE ASSETS WAS ASCERTAINED? (COPY OF VALUATION REPORT IS NOT FURNISHED) 2. SINCE THE COMPLETE SET OF BOOKS OF ACCOUNTS WERE NOT FOUND AND SEIZED AND SINCE YOU HAVE NOT FURNISHED ANY EXPLANATION THEREOF , THE ABOVE MENTIONED ISSUE NOTICED FROM THE AVAILABLE SEIZED BOOKS OF ACCOUNT AND DOCUMENTS ARE GIVING RISE TO A COMPLEX AND INCOMPLETE STATE OF AFFAIRS. 3. THERE ARE MANY OTHER ISSUES WHICH HAVE BEEN RAISED AND YOUR COMMENTS / SPECIFIC DETAILS SUPPORTED BY DOCUMENTARY EVIDENCES SOUGHT FOR VIDE THIS OFFICE NOTICES/ LETTER DATED 27.09.2011, 20.10.2011,21.10.2011 AND 09.11.2011. 4. RECEIPT ON ACCOUNT OF BUS FEES/HOSTEL CHARGES THE RECEIPT ON ACCOUNT OF TRANSPORTATION CHARGES AND HOSTEL CHARGES ARE PRIMA FACIE NOT REFLECTED IN THE BOOKS OF SOCIETY. THESE AMOUNTS ARE PRIMA FACIE FOUND TO BE DEPOSITED IN THE ACCOUNT OF PRIYADARSHAINI CREDIT CO- OPERATIVE SOCIETY AND FUNDS ARE USED FOR THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 23 BUSINESS ACTIVITIES OF CHOUKSEY GROUP. IT IS REQUIRED TO ASCERTAIN AS TO HOW MUCH AMOUNT IS COLLECTED BY THE ASSESSE TRUST EVERY YEAR UNDER THE HEAD TRANSPORTATION FEE, HOSTEL CHARGES AND PLACEMENT FEE ETC. AND HOW THE SAME ARE ACCOUNTED FOR AND SUBJECTED TO TAX. 5. INTEREST FREE ADVANCE TO SHRI SAI SAKH SAHAKARITA SAMITI: THE SEIZED DOCUMENTS PRIMA FACIE SHOW THAT HK KALCHURI EDUCATION TRUST HAS REGULARLY TRANSFERRED FUND TO THE ABOVE SAMITI. THE SAMITI IS ENGAGED IN PROVIDING LOAN TO THE MEMBERS AND IS EARNING INTEREST ON THE LOANS GIVEN. HOWEVER, PRIMA FACIE NO INTEREST HAS BEEN CHARGED BY H K KALCHURI EDUCATION TRUST ON THE FUNDS GIVEN TO THE SAMITI. THIS IS PRIMA FACIE IN VIOLATION OF THE OBJECTS OF THE TRUST AND THE PROVISION OF SECTION 13(2) OF THE INCOME TAX ACT. 6. INVESTMENT IN HOTEL NEENA PALACE : SHRI J N CHOUKSEY PURCHASED A PROPERTY AT HALALPUR BUS STAND IN SEPTEMBER 2008 FOR RS. 1.5 CRORE WHICH HAS BEEN CONVERTED INTO HOTEL. THE PAYMENT OF RS. 1.5 CRORES IS PRIMA FACIE MADE FROM ACCOUNT OF PRIYANKA BUILDER AN ENTITY OF CHOUKSEY GROUP. THE SOURCE OF FUND IN THE ACCOUNT OF PRIYANKA BUILDER IS PRIMA FACIE FROM JNCT COLLEGE , JAI NARAIN SHIKSHA SAMITI AND HK KALCHURI TRUST. THUS, THE FUNDS OF H K KALCHURI TRUST HAVE BEEN PRIMA FACIE UTILIZED FOR PURCHASING ASSETS IN THE NAME OF SHRI J N CHOUKSEY. THE EXPENDITURE IS PRIMA FACIE PERSONAL IN NATURE AND IT IS FOR THE BENEFIT OF PERSONS COVERED U/S 13(3) OF THE INCOME TAX ACT. 7. LAND OF TRUST USED FOR REAL ESTATE BUSINESS THE SEIZED DOCUMENT (AGREEMENT DATED 31- 10-2007) PRIMA FACIE SHOW THAT 55.11 ACRE LAND WAS PURCHASED BY NEW VALLABH GRIH NIRMAN SAHAKARI SAMITI AND 18 ACRE LAND AT KOLAR ROAD WAS PURCHASED BY SBI STAFF GRIH NIRMAN SAMITI THROUGH SHRI J N CHOUKSEY @ RS. 8 LACS PER ACRE FROM SMT SAKINA BEE AND SHRI ABDUL RASHEED. THE AMOUNT PAID TO SELLERS IS DEPOSITED IN THE ACCOUNT OF NEW VALLABH GRIH NIRMAN SAHAKARI SAMITI FROM THE ACCOUNT NO. 63013769031 OF J K HOSPITAL & MEDICAL RESEARCH CENTRE, A UNIT OF H K KALCHURI TRUST. THUS PRIMA FACIE, IT IS SEEN THAT THE PAYMENT FOR THE ENTIRE LAND HAS BEEN MADE BY H K KALCHURI EDUCATION TRUST HOWEVER ONLY PART OF THE LAND IS USED FOR HOSPITAL AND MEDICAL COLLEGE BUILDING AND THE REMAINING PART IS USED BY THE CHOUKSEY GROUP FOR REAL ESTATE BUSINESS. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 24 8. PAYMENT OF CONSULTANCY CHARGES TO FAMILY MEMBERS : IN THEIR STATEMENT RECORDED DURING THE COURSE OF SEARCH, THE MEMBERS OF CHOUKSEY FAMILY HAVE STATED THAT THEY ARE RECEIVING CONSULTANCY CHARGES FROM THE SOCIETIES OF CHOUKSEY GROUP. THE PAYMENT OF CONSULTANCY CHARGES IS AROUND RS. 40 LACS PER YEAR. 9. HUGE CASH WITHDRAWAL FROM BANK ACCOUNTS : FROM THE AVAILABLE RECORDS IT IS SEEN THAT THERE ARE HUGE CASH WITHDRAWAL FROM THE BANK ACCOUNT OF THE ASSESSEE TRUST MAINTAINED WITH VARIOUS BANKS. THE ASSESSEE WAS REQUESTED TO FURNISH THE NATURE AND PURPOSES OF THE SAID WITHDRAWALS AND TO SHOW AS TO HOW THE SAME WERE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. THE PURPOSES OF HUGE CASH WITHDRAWALS FROM BANKS IS REQUIRED TO BE THOROUGHLY VERIFIED. CONSIDERING THE FACT THAT IT INVOLVES LARGE SCALE VERIFICATION INVOLVING VERIFICATION OF BILLS, VOUCHERS, THE ENTRY APPEARING IN THE BANK AND THE ENTRY MADE IN THE REGULAR BOOKS OF ACCOUNTS, THE VERIFICATION IS COMPLEX. 10. UTILIZATION OF FUNDS OF THE SOCIETY FOR PURCHASE OF PROPERTY IN THE NAMES OF PERSONS COVERED U/S 13(3) OF THE IT ACT 1961: DURING THE COURSE OF ASSESSMENT PROCEEDINGS CERTAIN DOCUMENTS HAVE BEEN SEIZED WHICH INDICATE THAT THE PROPERTY 31, SHYAMLA HILLS, BHOPAL HAS BEEN PURCHASED IN THE NAME OF SHRI ANUPAM CHOUKSEY / SMT. POONAM CHOUKSEY AND ALSO AGRICULTURAL LAND AT JABALPUR HAS BEEN PURCHASED IN THE NAME OF SHRI ANUPAM CHOUKSEY. A SUM OF RS. 36,50,000/- HAS BEEN PAID BY CHEQUE BY SHRI ANUPAM CHOUKSEY FOR THE PROPERTY 31, SHYAMLA HILLS, BHOPAL. SHRI ANUPAM CHOUKSEY HAS NOT FURNISHED THE DETAILS AND SOURCES OF THE AMOUNTS PAID. ENCLOSED : AGREEMENT FOUND DURING SEARCH PB 711 SHOW CAUSE NOTICE OF AO DATED 14/11/2011 - PB 675-677 ORDER FOR SPECIAL AUDIT BY AO- PB 694-710 29) THE AFORESAID DWINDLING AND CAPRICIOUS APPROACH OF THE AO PROVES HIS LIGHT-HEARTEDNESS AND NON- APPLICATION OF MIND INVALIDATING THE VERY REFERENCE FOR SPECIAL AUDIT. 30) NON-APPLICATION OF MIND BY CIT- HIS APPROVAL WAS ME CHANICAL : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 25 THE REFERENCE FOR SPECIAL AUDIT ALSO SUFFERS FROM SE RIOUS ILLEGALITY IN AS MUCH AS THERE WAS NO APPLICATION MIND BY CIT WHILE GRANTING APPROVAL WHI CH WAS GRANTED IN A MECHANICAL WAY DISREGARDING THE LEGAL REQUIREMENTS. AS PER LAW, AO WAS OBLIGED TO GRANT REASONABLE OPPORT UNITY ENSHRINED IN SEC. 142(2A) BEFORE DIRECTING SPECIAL AUDIT. THIS WAS TO BE DONE AFTER INVITING REPLY/EXPLANATION FROM THE ASSESSEE ON THE SHOW CAUSE NOTICE ISSUED BY HIM AND THEN TO AFF ORD HIM OPPORTUNITY OF HEARING AS HELD BY HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF ISOLUX CORSAN (INFRA). AFTER DOING SO, AO WAS EXPECTED TO DISPOSE OF THE OBJECTIONS OF ASSESSEE R ECORDING OR FORMING AN OPINION THAT IT IS A FIT CASE FOR MAKING REFERENCE FOR SPECIAL AUDIT. HE WAS THUS OBLIGED TO SEND THE FOLLOWINGS TO CIT FOR OBTAINING HIS APPROVAL : SHOW CAUSE NOTICE CONTAINING REASONS FOR PROPOSING SPECIAL AUDIT. OBJECTIONS OF THE ASSESSEE EVIDENCE OF AFFORDING OPPORTUNITY OF BEING HEARD. HIS FINDINGS AFTER DISPOSAL OF OBJECTIONS OF THE A SSESSEE REGARDING COMPLEXITY OF THE ACCOUNTS, IF ANY, AFTER EXAMINING BOOKS OF ACCO UNTS, CONTAINING HIS FORMATION OF AN OPINION THAT IT IS A FIT CASE FOR DIRECTING SP ECIAL AUDIT ALL THE MATERIALS ON THE BASIS OF WHICH AO HAS FORMED OPINION FOR DIR ECTING SPECIAL AUDIT IT WAS THEN INCUMBENT UPON THE CIT TO OBJECTIVELY L OOK INTO THE ISSUE CRITICALLY EXAMINING ALL THE MATERIALS AND THEN TO ACCORD HIS APPROVAL. HIS APPR OVAL WAS NOT JUST A RITUAL OR FORMALITY, AS DONE IN THIS CASE, RATHER IT WAS A LEGAL NECESSITY FOR THE PURPOSE OF MAKING VALID REFERENCE FOR SPECIAL AUDIT AND TO AVOID ABUSE OF POWER BY AO. THE PROVISION OF SEC. 142(2A) HAS BEEN ELABORATELY C ONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF SAHARA INDIA VS CIT 169 TAXMAN 328 WHEREIN AT PARA-6, THE HONBLE SUPREME COURT OBSERVED AS UNDER: A BARE PERUSAL OF THE PROVISIONS OF SUB-SECTION (2A) OF THE ACT WOULD SHOW THAT THE OPINION OF THE ASSESSING OFFICER THAT IT IS NECESSAR Y TO GET THE ACCOUNTS OF ASSESSEE AUDITED BY AN ACCOUNTANT HAS TO BE FORMED ONLY BY HA VING REGARD TO : (I)THE NATURE AND COMPLEXITY OF THE ACCOUNTS OF THE ASSESSEE; AND (II) THE INTERESTS OF THE REVENUE. THE WORD 'AND' SIGNIFIES CONJUNCTION AND NOT DISJU NCTION. IN OTHER WORDS, THE TWIN CONDITIONS OF 'NATURE AND COMPLEXITY OF THE ACCOUNT S' AND 'THE INTERESTS OF THE REVENUE' ARE THE PREREQUISITES FOR EXERCISE OF POWER UNDER S ECTION 142(2A) OF THE ACT. UNDOUBTEDLY, THE OBJECT BEHIND ENACTING THE SAID PROVISION IS TO ASSIST THE ASSESSING OFFICER IN FRAMING A CORRECT AND PROPER ASSESSMENT BASED ON THE ACCOUNTS MAINTAINED BY THE ASSESSEE AND WHEN HE FINDS THE ACCOUNTS OF THE ASSESSEE TO BE CO MPLEX, IN ORDER TO PROTECT THE INTERESTS OF THE REVENUE, RECOURSE TO THE SAID PROVISION CAN BE HAD. THE WORD 'COMPLEXITY' USED IN SECTION 142(2A) IS NOT DEFINED OR EXPLAINED IN THE A CT. AS OBSERVED IN SWADESHI COTTON MILLS CO. LTD. V. CIT [1988] 171 ITR 634 1 (ALL.), I T IS A NEBULOUS WORD. ITS DICTIONARY MEANING IS: 'THE STATE OR QUALITY OF BEING INTRICAT E OR COMPLEX OR THAT IS DIFFICULT TO UNDERSTAND. HOWEVER, ALL THAT IS DIFFICULT TO UNDER STAND SHOULD NOT BE REGARDED AS COMPLEX. WHAT IS COMPLEX TO ONE MAY BE SIMPLE TO ANOTHER. IT DEPENDS UPON ONES LEVEL OF UNDERSTANDING OR COMPREHENSION. SOMETIMES, WHAT APPE ARS TO BE COMPLEX ON THE FACE OF IT, MAY NOT BE REALLY SO IF ONE TRIES TO UNDERSTAND IT CAREFULLY.' THUS, BEFORE DUBBING THE ACCOUNTS TO BE COMPLEX OR DIFFICULT TO UNDERSTAND, THERE HAS TO BE A GENUINE AND HONEST ATTEMPT ON THE PART OF THE ASSE SSING OFFICER TO UNDERSTAND ACCOUNTS MAINTAINED BY THE ASSESSEE; APPRECIATE THE ENTRIES MADE THEREIN AND IN THE EVENT OF ANY DOUBT, SEEK EXPLANATION FROM THE ASSESSEE. BUT OPINI ON REQUIRED TO BE FORMED BY THE ASSESSING OFFICER FOR EXERCISE OF POWER UNDER THE SA ID PROVISION MUST BE BASED ON OBJECTIVE CRITERIA AND NOT ON THE BASIS OF SUBJECTI VE SATISFACTION. THERE IS NO GAINSAYING THAT RECOURSE TO THE SAID PROVISION CANNOT BE HAD B Y THE ASSESSING OFFICER MERELY TO SHIFT HIS RESPONSIBILITY OF SCRUTINIZING THE ACCOUNTS OF AN ASSESSEE AND PASS ON THE BUCK TO THE SPECIAL AUDITOR. SIMILARLY, THE REQUIREMENT OF PREVIOUS APPROVAL OF T HE CHIEF COMMISSIONER OR THE COMMISSIONER IN TERMS OF THE SA ID PROVISION BEING AN INBUILT PROTECTION AGAINST ANY ARBITRARY OR UNJUST EXERCISE OF POWER BY THE ASSESSING OFFICER, CASTS A VERY HEAVY DUTY ON THE SAID HIGH RANKING AUTHORITY TO SE E TO IT THAT THE REQUIREMENT OF THE PREVIOUS APPROVAL, ENVISAGED IN THE SECTION IS NOT TURNED INTO AN EMPTY RITUAL. NEEDLESS TO EMPHASISE THAT BEFORE GRANTING APPROVAL, THE CHIEF COMMISSIONER OR THE COMMISSIONER, AS THE CASE MAY B E, MUST HAVE BEFORE HIM THE MATERIAL ON THE BASIS WHEREOF AN OPINION IN THIS BE HALF HAS BEEN FORMED BY THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 26 ASSESSING OFFICER. THE APPROVAL MUST REFLECT THE APPLICATION OF MIND TO THE FACTS OF THE CASE. SIMILARLY, THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. VS DCIT 236 ITR 671 HAS MADE THE FOLLOWING OBSERVATIONS WHICH ARE PERTINENT TO THE FACTS OF THE CASE IN HAND: THE CHIEF COMMISSIONER OF INCOME TAX BEFORE GRANTING SUCH APPROVAL MUST HAVE BEFORE HIM THE MATERIALS ON THE BASIS WHEREOF AN OP INION HAD BEEN FORMED. A PRIOR APPROVAL CAN BE GRANTED ONLY WHEN THE MATERIALS FOR APPOINTMENT OF THE EXTRAORDINARY PROCEDURE IS REQUIRED TO BE TAKEN BY THE ASSESSING OFFICER. THE ASSESSING OFFICER, THEREFORE, WAS REQUIRED TO PLACE ALL MATERIALS BEFORE THE COMMISSIONER OF INCOME-TAX OR THE CHIEF COMMISSIONE R OF INCOME- TAX, AS THE CASE MAY BE, TO SHOW THAT HE INTENDS TO TAKE RECOURSE TO THE SAID PROVISION HAVING REGARD TO THE NATURE AND COMPLEXITY OF THE ACCOUNTS OF THE ASSESSEE AND THE INTERESTS OF THE REVENUE. NO SUCH MATERIALS HAD BEEN PLACED BEFORE THE CHIEF COMMISSIONER OF INCOME-TAX. IT FURTHER APPEARS THAT EVEN NO PREVIOUS APPROVAL W AS SOUGHT FOR BUT MERELY A PROPOSAL WAS PLACED FOR PERUSAL OF THE CHIEF COMMISSIONER OF INCOME-TAX AND FOR APPOINTMENT OF A SPECIAL AUDITOR. THE CHIEF COMMISSIONER OF INCOME-T AX, THEREFORE, DID NOT APPLY HIS MIND AT ALL AS REGARDS THE PREREQUISITE FOR GRANT OF PRE VIOUS APPROVAL AND MECHANICALLY APPOINTED SRI G. P. AGARWAL, AS A SPECIAL AUDITOR. THE SAID ORDER DEPICTS A TOTAL NON- APPLICATION OF MIND ON THE PART OF THE ASSESSING OFF ICER AS ALSO THE CHIEF COMMISSIONER OF INCOME-TAX. SIMILARLY, HON'BLE SUPREME COURT IN THE SAME CASE OF RAJESH KUMAR (SUPRA) HELD AS UNDER : AN ORDER OF APPROVAL IS ALSO NOT TO BE MECHANICALLY GRANTED. THE SAME SHOULD BE DONE HAVING REGARD TO THE MATERIALS ON RECORD. THE EXPLA NATION GIVEN BY THE ASSESSEE, IF ANY, WOULD BE A RELEVANT FACTOR. THE APPROVING AUTHORITY WAS REQUIRED TO GO THROUGH IT. HE COULD HAVE ARRIVED AT A DIFFERENT OPINION. HE IN A SITUATION OF THIS NATURE COULD HAVE CORRECTED THE ASSESSING OFFICER IF HE WAS FOUND TO H AVE ADOPTED A WRONG APPROACH OR POSED A WRONG QUESTION UNTO HIMSELF. ( PARA 50) BUT, AS MAY BE SEEN, THE LD. CIT HAS ACCORDED HIS AP PROVAL IN A GROSSLY MECHANICAL AND RITUALISTIC WAY WITHOUT APPLICATION OF MIND. HE GAVE HIS APPROV AL ON 27.12.2011 EVEN PRIOR TO DISPOSAL OF OBJECTIONS OF ASSESSEE AND FORMING OF OPINION BY AO, VIOLATING LEGAL REQUIREMENT OF AFFORDING OPPORTUNITY, MUCH LESS REASONABLE OPPORTUNITY. HE MISERABLY FAILED TO TAKE NOTE THAT WHEN THE AO HAS NOT EVEN PEEPED INTO THE BOOKS OF ACCOUNTS, HOW COMPLEXITY IN THE BOOKS OF ACCOUNTS COULD BE JUDGED. WHEN AO SOUGHT HIS APPROVAL, THE ONLY REASON FOR DIRECTING SPECIAL AUDIT WAS AN AGREEMENT FOUND FOR F.Y. 2008-09 WHEREAS NO SUCH AGREEMENT WA S FOUND IN OTHER YEARS. LD. CIT CONSCIOUSLY REMAINED OBLIVIOUS TO THE ABOVE FACT THAT HOW SPECI AL AUDIT COULD BE DIRECTED FOR OTHER YEARS, OTHER THAN F.Y. 2008-09. IN VIEW OF ABOVE, EVEN APPROVAL GRANTED BY CIT WAS MECHANICAL AND WITHOUT APPLICATION OF MIND VITIATING REFERENCE FOR SPECIAL AUDIT. 31) IT IS ALSO INTERESTING TO NOTE THAT, ON THE BAS IS OF SAME AGREEMENT FOUND DURING SEARCH, CASES OF OTHER PARTIES TO THE TRANSACTION TO WHOM PAYMENTS W ERE MADE BY ASSESSEE AS PER SEIZED AGREEMENT VIZ. RISHIRAJ KMB EDUCATION SOCIETY, UPKAR C ONSTRUCTION PVT LTD AND SARDAR HARNAM SINGH KEER PUBLIC WELFARE TRUST WERE RE-OPENED U/S 153 C AND THEIR ASSESSMENT ORDERS WERE ALSO FRAMED WELL WITHIN TIME ON 9/12/2011 &13/12/2011 I.E . BEFORE 31/12/2011 WITHOUT REFERENCE FOR SPECIAL AUDIT IN THEIR CASE AND EVEN BEFORE PASSING THE ORDER FOR SPECIAL AUDIT IN THE CASE OF THE ASSESSEE ON 28/12/2011. ASSTT. ORDER OF RISHIRAJ KMB EDUCATION SOCIETY AT PB 712-729 (RELEVANT PAGES 716-724 , PARA 8 TO 8.15 ) ASSTT. ORDER OF SARDAR HARNAM SINGH KEER PUBLIC WELFAR E TRUSTAT PB 730- 748 (RELEVANT PAGES 736-745 , PARA 10 TO 10.15) H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 27 ASSTT. ORDER OF UPKAR CONSTRUCTION PVT. LTD. AT PB 74 9-761 (RELEVANT PAGES 750-759 , PARA 5 TO 5.15) 32) THAT MEANS AS REGARDS THE SAME SEIZED DOCUMENT, NO COMPLEXITY WAS FOUND IN CASE OF OTHER PARTY WHEREAS THE SAME WAS FOUND TO BE COMPLEX IN A SSESSEES CASE. THIS PROVES ARBITRARINESS AND NON-APPLICATION OF MIND BY AO. 33) DOCUMENT FOUND ONLY IN F.Y. 2008-09 AND NOT IN OTHER YEARS : WITHOUT PREJUDICE TO ABOVE, AND WITHOUT ACCEPTING, COMPLEXITY, IF ANY, SHOULD HAVE BEEN COMPREHENDED AT THE MOST IN F.Y. 2008-09 WHEREIN SE IZED AGREEMENT RELATING TO KEER GROUP AND ASSESSEE WAS ENTERED INTO AND PAYMENTS WERE FOUND T O HAVE BEEN MADE. BUT, IN ANY CASE, COMPLEXITY CANNOT BE ASSUMED OR PRESUMED FOR OTHER YEARS, AS DONE BY AO, AS NOTHING OF THE SORT WERE FOUND FOR OTHER YEARS, WHEREAS AO HAS UNLAWFULL Y DIRECTED SPECIAL AUDIT FOR ALL THE YEARS I.E. FROM F.Y. 2003-04 TO F.Y. 2009-10. THAT PROVES ILLE GAL, WHIMSICAL AND CAPRICIOUS APPROACH OF THE AO. 34) MAY IT ALSO BE NOTED THAT FIRST SHOW CAUSE NOTI CE FOR MAKING REFERENCE FOR SPECIAL AUDIT WAS GIVEN ON 14.11.2011 ( PB 675-677 ). THE ASSESSEE OBJECTED AGAINST THE PROPOSED REFER ENCE AND FILED DETAILED OBJECTIONS THIERAGAINST ON 22-11-2011. ( PB 678-682 ). BETWEEN THE INTERVENING PERIOD, NEITHER AO SENSED ANY COMPLEXITY IN THE BOOKS OF ACC OUNTS NOR HE DEALT WITH THE OBJECTIONS OF THE ASSESSEE. RATHER LD. AO ACCEPTED THE OBJECTIONS AS BEING CORRECT AND IN HIS WISDOM CHOSE TO CONTINUE WITH THE ASSESSMENT PROCEEDINGS BY ISSUING LETTER DATED 13.12.2011 ASKING FOR CERTAIN QUERIES ( PB 683 ), WHICH WERE DULY EXPLAINED/REPLIED TO. 35) BUT ALL OF A SUDDEN, THEREAFTER ON 28.12.2011, A FTER ALMOST ONE MONTH AND ONE WEEK, JUST THREE DAYS BEFORE TIME BARRING DATE OF 31.12.2011, THE AO PASSED ORDER U/S 142 (2A). 36) THE DIRECTION FOR SPECIAL AUDIT WAS MEANT ONLY F OR GETTING EXTENSION OF TIME FOR MAKING ASSESSMENT IS FURTHER SUPPORTED FROM THIS FACT THAT THE SEARCH TOOK PLACE IN JULY 2009 BUT AO TOOK 2 YEARS TO DIRECT SPECIAL AUDIT AND THAT TOO JUST 3 DAYS BEFORE THE DATE OF TIME-BARRING OF ASSESSMENT. 37) THE NON-APPLICATION OF MIND BY AO IS FURTHER MOR E PERCEPTIBLE FROM THE NON-ADHERENCE TO THE LEGAL REQUIREMENT IN THAT THE AO WAS LEGALLY OBLIGED TO FI RST DISPOSE OF THE OBJECTIONS OF THE ASSESSEE AND THEN OBTAIN THE APPROVAL OF CIT FOR MAKING REFE RENCE. ONLY THEREAFTER, HE WAS LEGALLY ENTITLED TO DIRECT THE ASSESSEE FOR GETTING SPECIAL AUDIT DO NE AND NOT EARLIER. BUT AS CAN BE SEEN, THE LD. AO DESIRED THE ASSESSEE TO FILE REPLY AGAINST FIRST SHOW CAUSE NOTICE DATED 14.11.2011 WHICH WAS DULY FILED BY THE ASSESSEE ON 22.11.2011. HE NEITHE R DISPOSED OF THE AFORESAID OBJECTIONS OF THE ASSESSEE NOR DID HE GRANT AN OPPORTUNITY OF BEING H EARD AFTER RECEIVING THE SAID REPLY, AS STATUTORILY REQUIRED U/S 142(2A), BEFORE ISSUING DIR ECTION FOR SPECIAL AUDIT ON 28.12.2011.THIS SHOWS TOTAL NON-APPLICATION OF MIND ON THE PART OF AO AND GROSS MISCARRIAGE OF JUSTICE, VITIATING THE REFERENCE FOR SPECIAL AUDIT ON THIS SCORE ALONE. IN THIS CONNECTION, WE RELY ON LATEST DECISION OF H ONBLE HIGH COURT OF PUNJAB & HARYANA IN WHICH IT WAS HELD AS UNDER : SECTION 142(2A) OF THE INCOME-TAX ACT, 1961 - SPECIAL AUDIT (BOOKS OF ACCOUNT) - ASSESSMENT YEAR 2011-12 - WHERE ASSESSING OFFICER GRANTED AN OP PORTUNITY TO FILE A REPLY BUT AFTER RECEIVING A REPLY DID NOT GRANT AN OPPORTUNITY OF B EING HEARD, ORDER PASSED CALLING UPON ASSESSEE TO GET ACCOUNTS AUDITED BY AN ACCOUNTANT N OMINATED BY ASSESSING OFFICER WOULD BE INVALID; SUCH DEFECT COULD NOT BE CURED BY REFERENC E TO QUERIES RAISED WITH RESPECT TO ACCOUNTS THAT PRECEDED SHOW CAUSE NOTICE. ISOLUX CORSAN INDIA ENGINEERING V. DCIT [2014] 52 TA XMANN.COM 400 (P&H HC) APPROVAL OF CIT OBTAINED PRIOR TO DISPOSAL OF OBJEC TIONS OF ASSESSEE SERIOUS INFIRMITY MOREOVER, THE ARBITRARINESS AND PERVERSITY IN THE A PPROACH OF AO IS ALSO PALPABLE FROM THE FACT THAT HE ABRUPTLY AND UNILATERALLY DISPOSED OF THE OBJECT IONS OF THE ASSESSEE ONLY ON THE DATE OF ISSUING DIRECTION FOR SPECIAL AUDIT ON 28.12.2011 ( PB 694-710 ) WHEREAS HE HAD ALREADY OBTAINED APPROVAL H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 28 OF CIT MUCH EARLIER ON 27.12.2011; THIS FACT IS DEM ONSTRATED FROM NOTINGS IN HIS LAST PARA IN THE VERY ORDER OF DIRECTION FOR SPECIAL AUDIT ( PB 710 ) WHICH IS REPRODUCED AS UNDER : THIS ORDER IS PASSED WITH THE PREVIOUS APPROVAL OF THE CIT, BHOPAL VIDE LETTER F. NO. CIT/BPL/AUDIT/142(2A)/2011-12 DATED 27.12.2011. 38) THIS SERIOUS INFIRMITY/LEGAL LAPSE GOES TO THE ROOT OF THE CASE AND WHOLLY VITIATES THE REFERENCE FOR SPECIAL AUDIT, DESERVING IT TO BE DECLARED AS BAD I N LAW AND INVALID. 39) DIRECTIONS TO SPECIAL AUDITOR WERE BEYOND POWERS OF AO : IT IS CLEAR FROM THE SCOPE OF AUDIT ASSIGNED TO THE SPECIAL AUDITOR BY AO VIDE LETTER DATED 28.12.2011 ( PB 689-693) THAT IT IS BEYOND THE KEN OF THE PROVISIONS ENUNCIA TED IN SECTION 142 (2A). IT IS CLEAR FROM THE SAID LETTER THAT THE LD. AO HAS DESIRED THE SPECIAL AUDITOR TO PERFORM THE FOLLOWING FUNCTIONS WHICH ARE BEYOND HIS POWERS: PARA NO. DIRECTIONS TO SPECIAL AUDITOR REMARK 2 (L) TO RECAST THE INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET OF THE ASSESSEE AS NORMAL BUSINESS ENTITY BY EFFECTING THE FOLLOWING ADJUSTMENTS. THE DUTY OF THE AUDITOR IS TO AUDIT THE BOOKS OF ACCOUNTS AND NOT TO PREPARE INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET, THAT TOO TREATING THE ASSESSEE AS NORMAL BUSINESS ENTITY. 2 (A) TO (K) TO PERFORM VARIOUS FUNCTIONS ENTRUSTED UPON THE AO BY THE STATUTE. THE AO, IN THE GARB OF SPECIAL AUDIT, CANNOT DELEGATE THE FUNCTION ENTRUSTED UPON HIM BY THE STATUTE. 40) AS HELD BY HON'BLE INDORE ITAT IN THE CASE OF ACIT VS. RAJ HOMES PVT. LTD. IN IT(SS) A NO. 109/IND/2005 AND CO NO. 129/IND/2005 (INDORE) DATED 29.5.2009 , (PARA 50 OF ORDER), THE AO CANNOT ASK THE SPECIAL AUDITOR TOPER FORM SUCH FUNCTIONS AND THIS TYPE OF REFERENCE INVALIDATES THE DIRECTION FOR SPECIAL AUD IT. IN VIEW OF ABOVE FACTS AND LEGAL PERVERSITIES, THE ENTIRE PURPOSE OF AO IN DIRECTING SPECIAL AUDIT AT THE FAG END OF LIMITATION PERIOD W AS ONLY TO EXTEND LIMITATION PERIOD FOR MAKING ASSESSMENT. SINCE, THE VERY REFERENCE FOR SPECIAL A UDIT WAS MISERABLY VITIATED, THE ASSESSMENTS ORDER SO HAVING BEEN FRAMED BEYOND THE LIMITATION PERIOD ARE TIME-BARRED AND DESERVE TO BE QUASHED. THE LD. CIT(A) DID NOT DECIDE THE ISSUE STATING THA T NO APPEAL LIES BEFORE THE CIT(A) AGAINST THE DIRECTIONS ISSUED FOR SPECIAL AUDIT U/S 142(2A) OF THE ACT. THE LD. DR HAS RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE RECORD. IN OUR CONSIDERED OPINION, THE SUBJECT MATTER IS H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 29 PENDING BEFORE THE HONBLE MP HIGH COURT, THEREFORE , THIS TRIBUNAL HAS NO LOCUS-STANDI TO PASS ANY ORDER ON THE ISSUE. HEN CE NO INTERFERENCE IS REQUIRED ON THIS ISSUE. ACCORDINGLY, GROUNDS OF ASS ESSEE RELATING TO SPECIAL AUDIT ARE REJECTED. BOTH THE PARTIES SUBMIT TED THAT IDENTICAL FACTS ARE INVOLVED IN CASE OF FOUR OTHER ASSESSEES NAMELY , JAI NARAIN SHIKSHA SAMITI, RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY, HA I HAY KSHETRIYA EDUCATION SOCIETY AND RISHIRAJ MEMORIAL EDUCATION A ND WELFARE SOCIETY. HENCE, OUR ABOVE FINDINGS WILL ALSO PREVAIL IN CASE OF THESE FOUR ASSESSEES. ACCORDINGLY, GROUNDS OF ASSESSEES RELATI NG TO SPECIAL AUDIT ARE REJECTED IN CASE OF ABOVE FOUR ASSESSEES. 3. THE ASSESSEE HAS CHALLENGED THE FINDING OF AO T HAT THE ASSESSEE HAD NOT COMPLIED WITH VARIOUS NOTICES ETC. SHORT FACTS OF THE ISSUE ARE THAT THE ASSESSEE CHA LLENGED THE FINDINGS OF THE LEARNED AO IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT COMPLIED WITH THE VARIOUS NOTICES AND NEVER PRODUCED THE BOOKS OF ACCOUNT ETC. AND REQUESTED THAT SUCH FINDING BE QUASHED. MATTER CARRIED TO LD. CIT(A), WHO DID NOT AGREE WIT H THE SUBMISSION OF THE ASSESSEE AND DISMISSED THE GROUND OF THE APP EALS OF THE ASSESSEE. THE OPERATING PART OF THE ORDER OF THE LD . CIT(A) IS AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT, REMAND REPORT FROM THE AO AND COUNTER COMMENTS OF THE APPE LLANT. ON PERUSAL OF THE LIST OF LETTERS MENTIONED BY THE APPELLANT IN ITS S UBMISSION, IT CAN BE NOTICED THAT ONLY THREE LETTERS DATED 26.09.2009, 14.12.201 1 & 10.04.2012 WERE PERTAINING TO THE PERIOD BEFORE THE COMPLETION OF A SSESSMENTS U/S 153A R.W.S. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 30 143(3) ON 13.08.2012. ALL THE OTHER LETTERS REFERRE D FROM S.NO. 4 TO 8 ARE PERTAINING TO THE PERIODS AFTER THE DATE OF ASSESSM ENT AND, THUS, HAD NO BEARING ON THE FINDINGS GIVEN IN THE ASSESSMENT ORD ERS BY THE ASSESSING OFFICER. IN REGARD TO THESE THREE LETTERS FILED BEF ORE THE COMPLETION OF ASSESSMENT ORDERS ALSO, THE LD. AO IN HIS REMAND RE PORT DATED 30.07.2013 STATED AS UNDER: . IT IS ALSO PERTINENT TO NOTE THAT THE APPELLANT HAD FILED ITS RETURN OF INCOME FOR A.Y. 2004- 05 TO 2008-09 BEFORE THE DATE OF SEARCH CLAIMED TO BE ON THE BASIS OF AUDITED ACCOUNTS. THUS, BOOKS OF ACCOUNT RELEVAN T FOR A.YS 2004-05 TO 2008-09 WERE ALWAYS AVAILABLE WITH THE APPELLANT AN D THERE WAS NO REASON NOT TO FULLY COMPLY WITH THE NOTICES AND FURNISH DE TAILS BEFORE THE AO. EVEN IN RELATION TO A.YS.2009-10 & 2010-11, THE APPELLANT H AD FURNISHED RETURNS OF INCOME OF THESE ASSESSMENT YEARS AFTER THE DATE OF SEARCH CLAIMED TO BE ON THE BASIS OF AUDITED BOOKS OF ACCOUNT, WHICH ALSO S HOWS THAT THE APPELLANT WAS IN POSSESSION OF REGULAR BOOKS OF ACCOUNT OF TH ESE ASSESSMENT YEARS ALSO. FURTHER, IT IS NOTICED THAT THE LD. AO IN HIS ASSESSMENT ORDER ON PAGE 4, SPECIFICALLY MENTIONED THAT - AS A MATTER OF FACT, COPIES OF ALL THE SEIZED MATERIAL AND DATA WERE ALREADY PROVIDED TO T HE ASSESSEE. HOWEVER, THROUGH THIS OFFICE LETTER DATED 19.04.201 2, THE ASSESSEE WAS SPECIFICALLY REQUEST TO OBTAIN COPY OF SEIZED MATERIAL, IF ANY, WHICH IS NOT PROVIDED TO IT, SO F AR. HOWEVER, NO SUCH REQUEST WAS MADE BY THE ASSESSEE TO PROVIDE CO PY OF ANY SEIZED MATERIAL/ RECORDS. IT CLEARLY ESTABLISHES TH AT COPIES OF ALL SEIZED RECORDS WERE ALREADY PROVIDED TO THE ASSESSE E. IT IS ALSO NOTICED ON PERUSAL OF ASSESSMENT ORDERS THAT THE AP PELLANT THOUGH FURNISHED WRITTEN SUBMISSIONS DATED 14.11.2011, 14.12.2011 & 03.07.2012 BEFORE THE LD. AO., BUT IN THESE WRITTEN SUBMISSIONS, THE APPE LLANT HAD NOT FULLY COMPLIED WITH THE NOTICES BY FURNISHING COMPLETE DETAILS/ IN FORMATION/ EVIDENCES AS REQUIRED IN THE STATUTORY NOTICES ISSUED BY THE AO DURING ASSESSMENT PROCEEDINGS. IT WILL NOT BE OUT OF PLACE TO MENTION HERE THAT IT IS AN ADMITTED FACT THAT THE APPELLANT HAD NOT COMPLIED WITH THE D IRECTIONS OF THE LD. AO ISSUED U/S 142(2A) TO GETS ITS ACCOUNTS AUDITED BY A CHARTERED ACCOUNTANT NOMINATED BY THE COMMISSIONER OF INCOME-TAX, BHOPAL AND, THUS, THERE WAS A CLEAR CUT NON-COMPLIANCE OF STATUTORY NOTICES/ DIRE CTIONS ISSUED BY THE LD. AO DURING ASSESSMENT PROCEEDINGS BY THE APPELLANT. THE REFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, IN MY CONSIDER ED OPINION, NO INTERFERENCE IS WARRANTED AS REGARDS OBSERVATIONS O F NON COMPLIANCE ON THE PART OF THE APPELLANT MADE BY THE AO IN THE ASSESSM ENT ORDER. HENCE, THIS GROUND OF APPEAL IS DISMISSED. THE LD. AR FOR THE ASSESSEE HAS SUBMITTED THAT THE AO HAD MADE OBSERVATIONS IN THE ASSESSMENT ORDER THAT - THERE W AS A FAILURE ON PART OF ASSESSEE TO ATTEND THE HEARINGS IN RESPONSE TO NOTI CE U/S 143(2)/ 142(1) H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 31 OF THE INCOME TAX ACT. THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS AND RELEVANT RECORDS FOR VERIFICATION. THE ASSESSEE DID NOT SUBMIT COMPLETE INFORMATION SUPPORTED BY DOCUMENTARY EVIDE NCES. IT WAS SUBMITTED BY THE ASSESSEE THAT DURING SEARCH, THE A SSESSEES BOOKS OF ACCOUNTS/ ACCOUNTING DATA FOR ABOVE YEARS WERE FOUN D AND SEIZED BY THE DEPARTMENT IN THE COMPUTER HARD DISKS FROM VARIOUS PREMISES. THE ASSESSEE ALSO ENCLOSED COPY OF PANCHNAMA IN THE PAP ER BOOK. IT WAS SUBMITTED THAT THE ASSESSEE REPEATEDLY REQUESTED BE FORE THE INVESTIGATION WING AND BEFORE THE AO DURING ASSESSM ENT PROCEEDINGS AND ALSO THEREAFTER FOR SUPPLYING THE SEIZED COMPLE TE DATA CAPTURED IN COMPUTER HARD DISKS AS UNDER: VIDE LETTER DATED 26.09.2009 FILED ON 29.09.2009 VIDE LETTER DATED 14.12.2011 FILED ON 15.12.2011 VIDE LETTER DATED 10.04.2012 FILED ON 11.04.2012 (L ETTER WRITTEN TO L K MAHESHWARI AND CO., SPECIAL AUDITOR AND COPY MARKED TO AO ) VIDE LETTER DATED 18.10.2012 FILED ON 19.10.2012 VIDE LETTER DATED 21.02.2013 FILED ON 22.02.2013 ST ATING THAT HONBLE HIGH COURT OF MP HAS DIRECTED TO GET THE APPEALS DI SPOSED OF WITHIN 4 MONTHS AND HENCE SUPPLY OF THESE DATA ARE NECESSARY FOR THE ASSESSEE FOR MAKING SUBMISSIONS BEFORE HONBLE CIT (APPEALS) . VIDE LETTER DATED 28.03.2013 FILED ON 30.03.2013 FU RTHER REMINDING THAT HONBLE HIGH COURT OF MP HAS DIRECTED TO GET THE AP PEALS DISPOSED OF WITHIN 4 MONTHS AND HENCE SUPPLY OF THESE DATA ARE NECESSARY FOR THE ASSESSEE FOR MAKING SUBMISSIONS BEFORE HONBLE CIT (APPEALS). VIDE LETTER DATED 16.04.2013 FILED ON 17.04.2013 FU RTHER REMINDING THAT HONBLE HIGH COURT OF MP HAS DIRECTED TO GET THE AP PEALS DISPOSED OF WITHIN 4 MONTHS AND HENCE SUPPLY OF THESE DATA ARE NECESSARY FOR THE ASSESSEE FOR MAKING SUBMISSIONS BEFORE HONBLE CIT (APPEALS). VIDE LETTER DATED 23.04.2013 FILED ON 23.04.2013 AG AIN REMINDING THAT HONBLE HIGH COURT OF MP HAS DIRECTED TO GET THE AP PEALS DISPOSED OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 32 WITHIN 4 MONTHS AND HENCE SUPPLY OF THESE DATA ARE NECESSARY FOR THE ASSESSEE FOR MAKING SUBMISSIONS BEFORE HONBLE CIT (APPEALS). IT WAS ALSO SUBMITTED THAT THE KIND INTERVENTION W AS ALSO SOUGHT IN THE MATTER VIDE LETTER DATED 16.04.2013 FILED ON 17 .04.2013 OF THE HONBLE CIT AND ID. JCIT FOR THIS PURPOSE. HOWEVER, THE ASSESSEE WAS PROVIDED A COPY OF BOOKS OF ACCOUNT / ACCOUNTING DA TA SEIZED IN THE HARD DISK BY THE LD. AO ONLY ON 01.07.2013. IT WAS ALSO CONTENDED THAT THE ASSESSEE ALSO FILED WRITTEN SUBMISSIONS DATED 14.11 .2011, 14.12.2011 AND 03.07.2012 BEFORE THE AO IN RESPONSE TO STATUTO RY NOTICES ON THE BASIS OF AVAILABLE RECORDS. THUS, IT WAS CONTENDED THAT THERE WAS NO NON-COMPLIANCE ON THE PART OF THE ASSESSEE AND, HEN CE, SUCH ADVERSE FINDINGS OF AO IN THE ASSESSMENT ORDER MAY KINDLY B E QUASHED. THUS, THE LD. CIT(A) DID NOT CONTROVERT THE FUNDAMENTAL O BJECTION OF THE ASSESSEE THAT THE PRINTOUTS OF THE BOOKS OF ACCOUNT S/ ACCOUNTING DATA WERE PROVIDED TO THE ASSESSEE ONLY ON 01.07.2013 AF TER THE PASSING OF ASSESSMENT ORDER AND NO PHYSICAL BOOKS OF ACCOUNTS WERE FOUND DURING THE COURSE OF SEARCH. HE CONVENIENTLY BRUSHED ASIDE THE ESSENTIAL FACT THAT IF THE BOOKS OF ACCOUNTS/ ACCOUNTING DATA SEIZ ED IN THE COMPUTER HAD ALREADY BEEN GIVEN TO THE ASSESSEE, AS CLAIMED BY HIM ON THE BASIS OF CERTAIN VERSIONS OF AO AT PG 50 OF HIS ORDER, TH EN WHY THESE DATA WERE AGAIN PROVIDED TO THE ASSESSEE ON 1.7.2013 BECAUSE IT IS QUITE NATURAL THAT THE AO WILL NOT PROVIDE SAME DATA TWICE, NOR T HERE IS ANY SUCH CLAIM H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 33 OF THE AO. HENCE, LD. AR FOR THE ASSESSEE CONTENDE D THAT ALL THE OBSERVATIONS AND CONCLUSIONS DRAWN BY THE LD. CIT(A ) ARE MERITLESS AND OPPOSED TO FACTS ON RECORDS, THE SAME MAY KINDLY BE REPELLED. THE LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTH ORITIES. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. AS WE HAVE ALREADY HELD THAT THE ASSESSEE TRUST IS ENTITLED FOR EXEMPTION U/S 11 R.W.SEC. 12 & 13 AND THE REGISTRATION U/S 12A HAS BEEN RESTORED BACK FROM THE DATE OF GRANTING OF THE ACT AND ASSESSMENTS HAVE ALREADY BE EN COMPLETED. MOREOVER, THE ASSESSING OFFICER HAS ALSO PROVIDED T HE BOOKS OF ACCOUNTS ON 1.7.2013, THEREFORE, WHEN THE ASSESSMEN T ORDERS HAVE ALREADY BEEN COMPLETED ON 13.8.2012, THERE IS NO QU ESTION THAT THE ASSESSEE DID NOT COMPLY WITH THE NOTICES. HENCE, TH IS ISSUE HAS BECOME ACADEMIC. 4. THE ASSESSEE HAS RAISED THE ISSUE CHALLENGING TH E MAKING OF ASSESSMENTS IN THE STATUS OF AOP AS AGAINST ARTIFIC IAL JURIDICAL PERSON. SHORT FACTS OF THE ISSUE ARE THAT THE LD. AO HAS DE NIED THE BENEFIT OF SECTION 11 BY HOLDING THAT THE ACTIVITIES OF THE APPELLANT ARE NOT CHARITABLE IN NATURE AS ENVISAGED IN SECTION 2(15) OF THE ACT AND ALSO THAT THE APPELLANT HAS VIOLATED THE CONDITIONS LAID DOWN U/S 13 OF THE ACT. ON THE BASIS OF AGREEMENTS FOUND DURING THE COURSE OF SEARCH, THE AO ALSO NOTICED THAT THE ASSESSEE IS RUNNING THE INSTI TUTIONS ON COMMERCIAL H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 34 BASIS AND THERE ARE SPECIFIC SHARES, AS DEMONSTRATE D IN THE AGREEMENTS, OF VARIOUS PERSONS/ PARTIES INVOLVED IN SETTING UP THESE INSTITUTIONS. ACCORDINGLY, THE AO AFTER DENYING THE APPELLANT'S C LAIM OF DEDUCTION U/S 11 HAS ASSESSED THE INCOME OF THE APPELLANT UNDER T HE HEAD BUSINESS INCOME IN THE STATUS OF ASSOCIATION OF PERSONS IN A .YS.2004-05 TO 2010- 11. MATTER CARRIED TO LD. CIT(A), WHO CONFIRMED THE ACT ION OF THE ASSESSING OFFICER. THE OPERATING PART OF THE ORDER OF THE LD. CIT(A) IS AS UNDER: 53.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION O F THE APPELLANT AND FACTS OF THE CASE. THOUGH THE SOCIETY IS REGISTERED AND A PPARENTLY IT IS A ARTIFICIAL JURIDICAL PERSON, BUT DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE AO WAS ABLE TO PIERCE THE VEIL OF THE REGISTERED SOCIE TY AND PROVE- THAT IN REALITY THE INSTITUTIONS ARE RUN LIKE JOINT VENTURE COMMERC IAL ORGANIZATIONS WHERE THE SHARES OF MEMBERS/ PARTIES HAVE BEEN DEFINED BEFORE SETTING UP THE SOCIETIES / INSTITUTIONS. THUS, THE AO, AFTER GIVING OPPORTUN ITY TO THE APPELLANT DURING ASSESSMENT PROCEEDINGS, HAS DECIDED THAT THE FORM O F REGISTERING THE CHARITABLE SOCIETY IS NOT REAL AND IN SUBSTANCE, TH ESE WERE JOINT COMMERCIAL VENTURES. THEREFORE, IN THESE CIRCUMSTANCES, WHEN T HERE IS A COMBINATION OF PERSONS FORMED FOR PROMOTION OF JOINT COMMERCIAL VE NTURE TO EARN PROFITS AND THEIR MUTUAL RIGHTS HAVE ALSO BEEN SPECIFIED IN THE AGREEMENTS, THE AO WAS JUSTIFIED IN ASSESSING THE APPELLANT AS AOP. HOWEVE R, IT IS AN ACADEMIC ISSUE BECAUSE THE RATE OF TAX APPLICABLE FOR CALCULATING THE TAX LIABILITY IS THE SAME FOR AN AOP AND ARTIFICIAL JURIDICAL PERSON AND IT W OULD NOT AFFECT THE TAX LIABILITY. IN VIEW OF THE ABOVE OBSERVATIONS, THIS ISSUE IS DISPOSED OF ACCORDINGLY. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ASSE SSEE TRUST WAS REGISTERED AS A PUBLIC CHARITABLE TRUST ON 13.01.19 99 BY REGISTRAR OF PUBLIC TRUST, BHOPAL VIDE REGISTRATION NO.3/98. THE ASSESSEE HAD FURNISHED ITS RETURNS FOR SUBJECT ASSESSMENT YEARS IN THE STATUS OF TRUST H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 35 U/S 2(31)(VII) OF THE ACT BY FILING STATUS CODE NO. 8 IN THE RETURNS. HOWEVER, THE AO HAS MADE THE ASSESSMENTS IN THE STA TUS OF ASSOCIATION OF PERSONS (AOP), WITHOUT GIVING ANY NO TICE OR REASON FOR SUCH CHANGE. IT WAS CONTENDED THAT THE ASSESSMENTS MADE IN THE STATUS OTHER THAN THE STATUS SHOWN IN THE RETURNS IS VOID AB-INITIO. THE ASSESSEE ALSO RELIED ON THE DECISIONS IN CASE OF CHANDRAVADA NI MAHILA SHIKSHA SAMITI, ITA NOS. 141 TO 143 AND 281/IND/2011, ORDER DATED 08.02.2012 (INDOREITAT) AND DEVI SHAKUNTALATHAKRAL IN ITA NOS .48 AND 49/IND/2012 DATED 01.06.2012 (INDOREITAT). THUS, T HE LD. AR FOR THE ASSESSEE CONTENDED THAT THE LD. CIT(A), ON THE BASI S OF MERE ALLEGATION OF AO, WAS NOT JUSTIFIED IN STATING THAT THE ASSESS EE IS NOT A CHARITABLE ORGANISATION. THE ASSESSEE IS A CHARITABLE ORGANISA TION CARRYING OUT CHARITABLE ACTIVITIES BY RUNNING EDUCATION INSTITUT IONS AND IMPARTING EDUCATION. IT HAS APPLIED ALL ITS INCOME/RECEIPTS T OWARDS THE FULFILMENT OF CHARITABLE PURPOSES ONLY ON YEAR-TO-YEAR BASIS. NOT HING ADVERSE ON THIS COUNT HAS BEEN PROVED EITHER BY THE AO OR BY THE CI T(A). HENCE, SUCH UNSUBSTANTIATED ALLEGATIONS DESERVE TO BE IGNORED A ND THE AO MAY KINDLY BE DIRECTED TO ASSESS THE ASSESSEE AS ARTIFI CIAL JURIDICAL PERSON IN PLACE OF AOP. THE LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTH ORITIES. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 36 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT WHILE DECIDING ISSUE OF CANCELLATION U/S 12AA(3) BY WAY O F SEPARATE ORDER IN ITA NOS. 386, 387, 388, 389 AND 390/IND/2014, WE HA VE HELD THAT THE CIT HAS WRONGLY CANCELLED THE REGISTRATION IN THE C ASE OF ASSESSEE ITSELF AND OTHERS. IN VIEW OF THIS, WE ALLOW THE APPEALS OF THE ASSES SEE ON THIS ISSUE HOLDING THAT ALL THE ACTIVITIES OF THE ASSESSEE ARE CHARITABLE ACTIVITIES. THEREFORE, ALL THE ASSESSMENTS HAVE TO BE MADE AS A RTIFICIAL JURIDICAL PERSON IN PLACE OF AOP. 5. THE ASSESSEE HAS CHALLENGED THE FINDINGS OF THE AO THAT ACTIVITIES OF ASSESSEE ARE IN THE NATURE OF BUSINESS AND NOT CHAR ITABLE UNDER SEC. 2(15) AND ARE FOR THE SOLE PURPOSE OF EARNING PROFITS. THEREF ORE, THE SURPLUS IS NOT ELIGIBLE FOR EXEMPTION/DEDUCTION U/S 10 OR 11/12. C OMMON GROUND TAKEN IN ALL THE ASSESSMENT YEARS IS AS UNDER: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A.O. AND LD. CIT(A) GROSSLY ERRED IN HIS FINDINGS THAT THE ACTIV ITIES OF THE ASSESSEE ARE IN THE NATURE OF BUSINESS AND, THEREFORE, ERRED IN ASSESSING THE SUR PLUS SHOWN IN THE INCOME & EXPENDITURE ACCOUNT AS THE BUSINESS INCOME OF THE ASSESSEE. SUC H FINDINGS OF THE A.O. AND LD. CIT(A) BE QUASHED AND IT BE HELD THAT THE ASSESSEE HAS NO INC OME FROM BUSINESS ASSESSABLE U/S.28 OF THE I.T. ACT. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO AND LD. CIT(A) GROSSLY ERRED IN HIS FINDINGS THAT THE ACTIVITIES O F THE ASSESSEE WERE NOT CHARITABLE WITHIN THE MEANING OF SECTION 2 (15) AND WERE FOR THE SOLE PUR POSE OF EARNING PROFITS. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, IT BE HELD THAT THE ACTIVITIES OF THE ASSESSEE ARE CHARITABLE WITHIN THE MEANING OF SECTION 2(15) OF THE ACT AND ARE GENUINE AND, THEREFORE, THE DENIAL OF EXEMPTION U/S.11 & 12 IS WHOLLY INJUD ICIOUS AND UNLAWFUL. THE DEDUCTIONS/EXEMPTIONS U/S.11 AS CLAIMED IN THE RETU RN BE ALLOWED. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 37 SHORT FACTS OF THE ISSUE ARE THAT THE AO CONTENDED THAT THE ACTIVITIES OF THE ASSESSEE WERE NOT SOLELY FOR CHAR ITABLE PURPOSE OF PROVIDING EDUCATION AS ENVISAGED IN SEC. 2(15) BUT WERE FOR THE SOLE PURPOSE OF EARNING PROFITS AND, THEREFORE, NOT ELIG IBLE FOR EXEMPTION/ DEDUCTION U/S 10 OR 11/12 OF THE IT ACT. IN SUMMARY , THE FOLLOWINGS ARE THE BASIS ON WHICH THE AFORESAID VIOLATIONS WERE SO UGHT TO BE ALLEGED: (I) RUNNING EDUCATIONAL INSTITUTIONS LIKE A BUSINESS OR GANIZATION SOLELY FOR THE PURPOSE OF PROFITS. (II) FILING OF TWO DIFFERENT SETS OF AUDITED ACCOUNTS BE FORE THE ADMISSION AND FEE REGULATORY COMMISSION (AFRC) AND INCOME-TAX DEPARTMENT FOR F.Y. 2009-10 AND ALSO TWO DIFFERENT ACKNOWLEDGEMENTS OF RETURN OF INCOME FOR THE SAME ASSESSMENT YEAR 2008-09. (III) GENERATION OF HUGE SURPLUS CONTINUOUSLY FROM THE AC TIVITIES OF THE SOCIETY ON YEAR TO YEAR BASIS. (IV) UNEXPLAINED HUGE AMOUNT OF CASH AND JEWELLERY FOUND AND SEIZED FROM THE RESIDENCES OF OFFICE BEARERS / MEMB ERS OF THE TRUST. (V) JOINT VENTURE BETWEEN D-5 AND H.K. KALCHURI EDUCATI ON TRUST AND FINANCING FROM PRIVATE FINANCIAL INSTITUTIONS I S IN THE NATURE OF PROFIT SHARING AGREEMENTS. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 38 MATTER CARRIED TO LD. CIT(A), WHO SUSTAINED THOSE C ONTENTIONS. THE OBSERVATIONS OF LD. CIT(A) ARE SUMMARISED AS UNDER: 1. THE AGREEMENTS FOUND DURING SEARCH ESTABLISHES T HE FACT THAT THE EDUCATIONAL INSTITUTIONS ARE SETUP AND RUN BY THE APPELLANT AS BUSINESS ORGANISATIONS WHERE DIFFERENT PERSONS/GROUPS HAVE JOINED HANDS TO SETUP THE SAID INSTITUTIONS SOLELY FOR SHARING THE ASSETS AND PROFITS OF THE EDUCATIONAL INSTITUTIONS. 2. THE CONTENTION OF THE APPELLANT THAT THE AGREEME NTS WERE NOT ACTUALLY IMPLEMENTED IS NOT BORNE FROM THE FACTS OF THE CASE, AS IS CLEAR F ROM ANOTHER AGREEMENT DATED 24.06.2008 & 13.07.2008 FOR TAKE OVER OF ENTIRE CON TROL OVER TWO SOCIETIES I.E. RISHIRAJ MEMORIAL EDUCATION AND WELFARE SOCIETY AND RISHIR AJ SINGH MEMORIAL WELFARE SOCIETY, BY THE CHOUKSEY FAMILY FOR A CONSIDERATION OF RS. 1 7.00 CRORES. HERE IT WILL BE PERTINENT TO NOTE THAT RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY WAS SET UP BY FIVE PARTIES I.E. (I) SHRI TANVEER SINGH KEER AND OTHERS, (II) SHRI JAI N ARAYAN (III) SHRI. K.K.KHAN (IV) SHRI. RAM SINGH DHAKRE & OTHER AND (V) SHRI UPENDRA SINGH AND OTHERS, AND THEY HAD 23 % ; 23 % ; 18% ; 18% ; & 18 % SHARES IN THE SOCIETY RESPECTIVELY AS IS EVIDENT FR OM THE AGREEMENT ENTERED BY THESE PARTIES AND FOUND DURING SEARCH AS DISCUSSED HEREINABOVE. SIMILARLY, THE SOCIETY RISHIRAJ MEMORIAL EDUCATION AND WELFARE SOCIETY WAS ALSO SET UP AS PER SHARE AGREEMENT DATED 27.10. 2004, WHEREIN SHARE OF EACH PARTY WAS CLEARLY SPECIFIED AS DISCUSSED HEREINABOVE. THU S, THESE SOCIETIES, AT THE BEGINNING ITSELF, WERE SETUP AS BUSINESS ORGANIZATIONS, WHERE IN DIFFERENT PARTIES HAVE DEFINITE SHARES IN ASSETS AND PROFITS OF THESE JOINT VENTURE S AND EVEN IT WAS PROVIDED THAT IN THE CASE OF ANY MEMBER WITHDRAWS FROM SOCIETY, HE SHALL BE PAID GOODWILL. ACCORDINGLY, WHEN SHRI TANWANT SINGH KEER GROUP HAD AGREED TO WI THDRAW FROM THE SOCIETIES I.E. RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY AND RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND TO HAND OVER THE ENTIRE CONTROL AND MANAGEMEN T OVER THE ASSETS OF THESE TWO SOCIETIES TO SHRI J. N. CHOUKSEYS FAM ILY, IT WAS AGREED TO PAY 17 CRORES TO SHRI TANWANT SINGH KEERS FAMILY AND THE AMOUNT OF RS. 15,83,87,434/- WAS ACTUALLY PAID OUT OF AGREED AMOUNT OF RS. 17.00 CRORES TILL THE DATE OF SEARCH. THIS CLEARLY ESTABLISHES THAT THE MEMBERS OF THE SOCIETY ARE ENJ OYING SHARES IN THE ASSETS AND PROFITS OF THE ORGANIZATIONS, WHICH WERE REGISTERED UNDER T HE GUISE OF CHARITABLE TRUSTS/ SOCIETIES. IN PURSUANCE OF THAT AGREEMENT, SUBSTANTIAL PAYMENT S AS MENTIONED BY THE AO IN THE ASSESSMENT ORDER HAS BEEN PAID TO SHRI TANVANT SING H KEER, HIS FAMILY MEMBERS AND OTHER INSTITUTIONS MANAGED BY KEER FAMILY AND THE M ANAGEMENT OF THESE TWO SOCIETIES WAS ALSO TAKEN OVER BY THE CHOUKSEY FAMILY. THE FAC T THAT THE AGREEMENTS ARE ACTUALLY ACTED UPON IS ALSO EVIDENTLY CLEAR FROM THE CONSTIT UTION OF THE MANAGING COMMITTEE OF BOTH THESE SOCIETIES I.E. RISHIRAJ MEMORIAL EDUCAT ION AND WELFARE SOCIETY AND RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY WHEREIN SHRI TANVEER SINGH KEER WHO WAS EARLIER CHAIRMAN AND OTHER MEMBERS OF HIS FAMILY WERE OTHER OFFICER BEARERS HAVE RESIGNED AND SHRI JAI NARAYAN CHOUKSEY HAS BECOME CHAIRMAN AND O THER MEMBERS OF HIS FAMILY HAVE BECOME OFFICE BEARERS IN THE MANAGING COMMITTEES OF THESE TWO SOCIETIES FROM 2008. THUS, THE ENTIRE CONTROL OVER THESE TWO SOCIETIES H AS ACTUALLY BEEN TAKEN OVER BY CHOUKSEY FAMILY IN ACCORDANCE WITH THE SAID AGREEME NTS. HENCE, THE SAID AGREEMENTS WERE DULY ACTED UPON. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 39 3. THE APPELLANT HAD FURNISHED ACCOUNTS BEFORE THE ADMISSION AND FEES REGULATORY COMMISSION AS WELL AS BEFORE THE INCOME TAX DEPARTM ENT ALONGWITH ITS RETURN OF INCOME FOR F.Y. 2009-10 CLAIMED TO BE BOTH DULY AUDITED BY THE CHARTERED ACCOUNTANT. THE VERY FACT THAT INCOME & EXPENDITURE ACCOUNT FURNISHED BE FORE THE BEFORE THE INCOME TAX DEPARTMENT WERE DULY AUDITED BY THE CHARTERED ACCOU NTANT AND CERTIFIED AS CORRECT BASED ON THE BOOKS OF ACCOUNT MAINTAINED BY THE APP ELLANT, GOES TO PROVE THAT THE APPELLANT HAD BEEN MAINTAINING TWO DIFFERENT SETS O F ACCOUNTS ONE FOR THE PURPOSE OF AFRC AND ANOTHER FOR FILING OF INCOME TAX RETURN TO ACHIEVE TWO DIFFERENT PURPOSES. THE APPELLANT HAD SHOWN LOSS/ DEFICIT IN THE INCOME & E XPENDITURE A/C. SUBMITTED BEFORE THE AFRC IN ORDER TO GET THE FIXATION OF FEES AT A HIGH ER AMOUNT TO BE RECEIVED FROM THE STUDENTS IN ORDER TO EARN MORE PROFITS FROM RUNNING OF EDUCATIONAL INSTITUTIONS AND THE PROFITS/ SURPLUS WERE SHOWN IN THE INCOME & EXPENDI TURE A/C. BEFORE THE INCOME TAX DEPARTMENT BECAUSE THE SAME WERE CLAIMED TO BE EXEM PTED U/S 11 AND NO TAX WAS CLAIMED TO BE PAYABLE. FURTHER, IT IS ALSO IMPORTANT TO MENTION THAT THE A O NOTICED FROM THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH THAT LPS 2/29 PA GE 52 SEIZED FROM THE PREMISES 31, SHYAMLA HILLS, BHOPAL IS A COPY OF THE ACKNOWLEDGEMENT OF RETURN OF INCOME OF THE APPELLANT TRUST FOR THE A.Y. 2008- 09 SHOWING GROSS TOTAL DEFICIT OF RS.(-) 8,95,55,525/- AND PAGE 53 IS A COPY OF TH E COMPUTATION OF TOTAL INCOME FOR THE A.Y. 2008-09 SHOWING THE SAME GROSS TOTAL D EFICIT OF RS. (-) 8,95,55,525/-. BOTH THE DOCUMENTS ARE DULY SIGNED BY THE OFFICE BE ARERS OF THE APPELLANT TRUST. HOWEVER, THE RETURN OF INCOME FILED BY THE APPELLAN T TRUST WITH THE DEPARTMENT FOR A.Y. 2008-09, AS AVAILABLE ON THE RECORDS, SHOW S A GROSS TOTAL INCOME OF RS.5,95,55,525/-. THUS, THERE IS HUGE VARIATION IN THE INCOME SHOWN IN THE TWO DOCUMENTS IN AS MUCH AS THE DOCUMENTS SEIZED SHOW A DEFICIT OF RS.8,95,55,525/-, WHEREAS THE RETURN OF INCOME FILE D WITH THE INCOME-TAX DEPARTMENT SHOWS A SURPLUS OF RS.5,95,55,525/-. 4. HUGE SURPLUS SHOWN BY ASSESSEE ON YEAR TO YEAR B ASIS PROVES THAT ASSESSEE IS NOT CHARITABLE ORGANIZATION. 5. THE APPELLANT HAS SET UP EDUCATIONAL INSTITUTION S AS PER PROFIT SHARING AGREEMENTS FOUND AND SEIZED DURING THE COURSE OF SE ARCH, WHICH ALSO BEING SUPPORTED BY THE FACT THAT THE APPELLANT HAS BEEN E ARNING REGULARLY AND CONSISTENTLY PROFITS FROM THE ACTIVITIES OF RUNNING EDUCATIONAL INSTITUTIONS. 6. DURING THE COURSE OF SEARCH CASH AND JEWELLERY W ERE FOUND FROM THE RESIDENCE AND LOCKERS OF THE OFFICE BEARERS OF THE APPELLANT. 7. LD CIT (A) CONCLUDED AT PG. 118, 2 ND PARA (LAST 5 LINES) AS UNDER : THEREFORE, CONSIDERING TOTALITY OF FACTS AND SURRO UNDING CIRCUMSTANCES, IN MY OPINION THERE IS SUBSTANCE IN THE FINDINGS OF THE A O REGARDING SIPHONING OFF FUNDS FROM THE INCOME OF EDUCATIONAL INSTITUTIONS BY OFFI CE BEARERS FOR THEIR PERSONAL BENEFITS AND CONCLUDING THAT THE APPELLANT SOCIETY IS NOT EXISTING FOR CHARITABLE PURPOSE 8. AN AGREEMENT OF JOINT VENTURE BETWEEN H.K. KALCH URI EDUCATION TRUST (HKKET) AND M/S DECEMBER FIFTH INVESTMENTS INTERNATIONAL LTD. B RITISH VIRGIN ISLANDS (D5) ENTERED ON 20.01.2007, WHICH CLEARLY PROVIDES THAT THIS AGREEM ENT WAS ENTERED FOR JOINT PARTICIPATION BY D5 & HKKET IN A PRIVATE BUSINESS VENTURE THE SHA RING OF THE PROFITS EARNED THEREFROM. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 40 THUS, THIS AGREEMENT ALSO THROWS LIGHT ON THE ACTUA L FACT THAT APPELLANT TRUST HAS BEEN ENTERING INTO PROFIT SHARING AGREEMENT WITH OTHER P ERSONS / PARTIES AND RUNNING THE EDUCATIONAL INSTITUTIONS AS A PRIVATE BUSINESS VENT URE FOR EARNING AND SHARING OF PROFITS FROM THESE EDUCATIONAL INSTITUTIONS. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WELL A S WRITTEN SUBMISSION AS UNDER: 1. RELIED ON THE SUBMISSIONS FILED BEFORE CIT(A) PG.514-522, 531-540, 552. 2. THE LD. CIT(A)/AO ALLEGED THAT THE EDUCATIONAL INST ITUTIONS ARE SETUP AND RUN AS BUSINESS ORGANISATIONS WHERE DIFFERENT PERSONS/GROU PS HAVE JOINED HANDS TO SETUP THE SAID INSTITUTIONS SOLELY FOR SHARING THE ASSETS AND SIPHONING PROFITS OF THE EDUCATIONAL INSTITUTIONS. IT IS SUBMITTED THAT THE OBSERVATIONS OF CIT(A)/AO ARE NOT ONLY MATERIALLY INCORRECT, OPPOSED TO THE FACTS ON RECORD BUT THESE ARE ALSO CONTRADICTORY TO HIS OWN FINDINGS AND UNSUBSTANTIATED ASSUMPTIONS. MAY PLEAS E BE NOTED THAT THE CIT(A) HAS STATED AT PG 113, PARA 12.3 (OPENING PART) THAT THE APPELLANT HAS SET UP EDUCATIONAL INSTITUTIONS AS PER PROFIT SHARING AGREEMENTS FOUND AND SEIZED DURING THE COURSE OF SEARCH, WHICH ALSO BEING SUPPORTED BY THE FACT T HAT THE APPELLANT HAS BEEN EARNING REGULARLY AND CONSISTENTLY PROFITS FROM THE ACTIVITIES OF RUNNING EDUCATIONAL INSTITUTIONS. ONE WONDERS AND FAILS TO HUMANLY COMPREHEND THAT HO W SHARING OF PROFITS COULD BE DONE WHEN THE ASSESSEE HAS SHOWN HUGE SURPLUS ON YEAR TO YEAR BASIS. IF SHARING OF PROFITS BY WAY OF SIPHONI NG OF FUNDS WAS RESORTED TO, AS CLAIMED BY CIT(A)/AO, HOW SUCH HUGE SURPLUS COULD ARISE AND COULD BE SHOWN IN THE INCOME & EXPENDITURE ACCOUNT ON YEAR TO YEAR BASIS BECAUSE I T IS A MATTER OF COMMON KNOWLEDGE THAT SHARING OF PROFITS/SIPHONING OF FUNDS WAS NEVE R POSSIBLE WITHOUT OVER-INFLATING CAPITAL EXPENDITURE AS WELL AS REVENUE EXPENDITURE IN THE B OOKS OF ACCOUNTS / FINANCIAL STATEMENTS, AS ALSO EXPLAINED IN DETAILS HEREINAFTE R. THUS, THE ADVERSE PRESUMPTION DRAWN BY THE LD. CIT(A)/AO AGAINST THE ASSESSEE TOT ALLY GO AGAINST THEIR OWN ALLEGATIONS, RATHER THE FACT OF HUGE SURPLUS SHOWN BY ASSESSEE ON YEAR TO YEAR BASIS PROVES BEYOND DOUBT AND SUPPORTS THE CASE OF THE AS SESSEE TO THE HILT THAT NO SUCH PROFIT SHARING WAS EVER DONE BECAUSE NO SUCH AGREEMENT WER E ACTUALLY IMPLEMENTED OR ENFORCED, AS EXPLAINED BY US IN DETAIL ELSEWHERE IN OUR PRESENT SUBMISSIONS. 3. TO SUPPORT HIS CASE, THE LD. CIT(A) HAS CITED THE P AYMENT OF RS. 15,83,87,434/- OUT OF AGREED AMOUNT OF RS. 17.00 CRORES AND CHANGE OVER I N THE COMPOSITION OF MEMBERS OF SOCIETY IN RISHIRAJ MEMORIAL EDUCATION & WELFARE SO CIETY & RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY. HERE ALSO, THE LD. CIT(A) MISERABL Y MISGUIDED HIMSELF BECAUSE HE CONVENIENTLY IGNORED THE RATIONALE AND REASONS BEHI ND THE AFORESAID PAYMENT AND CHANGE IN COMPOSITION OF MEMBERS, AS ADVANCED /EXPL AINED BY THE ASSESSEE FROM THE INCEPTION OF HIS ARGUMENTS. IT WAS DULY EXPLAINED T O THE CIT(A) THAT WE ARE IN COMPLETE AGREEMENT WITH THE LD. AO. THAT A SOCIETY / TRUST C ANNOT BE SOLD OR PURCHASED. SOCIETY / TRUST AND ITS MEMBERS/ TRUSTEES ARE INFACT ALTOGETH ER DIFFERENT ENTITIES AND THE MEMBERS OR THE TRUSTEES ARE NOT THE OWNERS OF THE SOCIETY OR T RUST AND THEY MANAGE THE PROPERTY OF THE SOCIETY/ TRUST. THEY ONLY ACT IN FIDUCIARY CAPA CITY; THEY COME AND GO. AND EXACTLY THIS IS WHAT WAS BEING DONE AND IS BEING DONE IN THE PRE SENT CASE. THE MEMBERS/ TRUSTEES OF DIFFERENT SOCIETIES AND TRUST WERE ACTING ONLY AND ONLY IN FIDUCIARY CAPACITY IN THE INTEREST H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 41 OF ITS BENEFICIARIES. HERE THE BENEFICIARIES WERE H UNDREDS AND HUNDREDS OF STUDENTS WHO FLOCKED MOSTLY FROM SMALL TOWNS AND REMOTE AREAS FR OM ACROSS THE COUNTRY, AGAIN MOST OF THEM FROM HUMBLE BACK GROUNDS. IT WAS ALSO EXPLAINED THAT IN FACT, DUE TO STEEP DI FFERENCES AMONGST THE MEMBERS/TRUSTEES OF THESE THREE SOCIETIES , IT WAS DAY TO DAY BECOMING PRACTICALLY VERY DIFFICULT, NAY IMPOSSIBLE, TO RUN THOSE COLLEGES / EDUCATIONAL INSTITUTIONS. BUT HERE THE CRUCIAL ISSUE AT STAKE W AS LIFE AND CAREER OF HUNDREDS OF STUDENTS WHO CAME MOSTLY FROM HUMBLE BACKGROUNDS, A S AFORESAID. IN ORDER TO TIDE OVER THIS UNPRECEDENTED CRISIS, A CONSENSUS WA S REACHED AT IN WHICH DIFFERENT SOCIETIES WERE DECIDED TO BE MANAGED BY E XISTING DIFFERENT FAMILY MEMBERS / TRUSTEES OF THE SOCIETIES / TRUST. THIS W AS INEVITABLE TO SAVE PRECIOUS CAREERS OF HUNDREDS OF STUDENTS UNDERGOING STUDIES IN THE COLLEGES/ INSTITUTIONS RUN BY THESE SOCIETIES/ TRUST. THIS IS BECAUSE ALL THE RELEVANT SOCIETIES/ TRUSTS WERE RUNNING EDUCATIONAL INSTITUTIONS THAT TOO ON T HE CHARITABLE BASIS. THE MAJOR DISPUTES WERE BETWEEN LATE MR. TANWANT SI NGH KEER AND MR. J. N. CHOUKSEY. BOTH WERE MEMBERS OF THE TWO SOCIETIES, N AMELY, RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND RISHIRAJ SINGH MEMORIA L EDUCATION AND WELFARE SOCIETY. LATE MR. TANWANT SINGH KEER WAS ALSO MANAG ING MEMBER OF THE SOME OTHER SOCIETIES RUNNING EDUCATIONAL INSTITUTIONS. T HE CONCILIATION FORMULA TO WIN OVER THE CRISIS AS SUGGESTED BY MR. KEER WAS THAT L ATE MR. TANWANT SINGH KEER WILL RESIGN AS MEMBER FROM THE ABOVE TWO EDUCATIONA L SOCIETIES VIZ. RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND RISHIRAJ SINGH M EMORIAL EDUCATION AND WELFARE SOCIETY AND RS. 17 CRORE SHALL BE PAID TO T HE INSTITUTIONS IN WHICH MR. TANWANT SINGH KEER IS MANAGING MEMBER. HOWEVER, SUC H AMOUNTS PAID SHALL BE UTILIZED ONLY FOR FURTHERANCE OF CHARITABLE PURPOSE S OF IMPARTING EDUCATION, AS DONE BY SOCIETIES / TRUST IN WHICH CHOUKSEY FAMILY IS MANAGING MEMBER /TRUSTEE. THE SEIZED LETTER / DOCUMENT DTD. 24.6.2008 WAS COE RCIVELY GOT PREPARED BY LATE MR. TANWANT SINGH KEER. MR. J N CHOUKSEY, ANOTHER M ANAGING MEMBER, WAS INSISTED UPON TO SIGN IT; THIS WAS INFACT USED AS P RIME CONDITION AND TOOL BY MR. TANWANT SINGH KEER TO RESIGN FROM MEMBERSHIP OF THO SE TWO SOCIETIES. FOR THIS PURPOSE, IT WAS ALSO INSISTED UPON BY LATE MR. TANW ANT SINGH KEER THAT CONSTRUCTION WORK OF RS. 2,00,00,000/- SHOULD ALSO BE GIVEN TO UPKAR CONSTRUCTION PVT. LTD. AND ACCORDINGLY ADVANCE OF R S. 2,00,00,000/- WAS GIVEN TO UPKAR CONSTRUCTION PVT. LTD. DUE TO DISPUTE, WORK C OULD NOT BE STARTED. UPKAR CONSTRUCTION PVT. LTD HAS ALSO CONFIRMED THESE FACT S BEFORE SAME AO DURING ITS ASSESSMENT U/S 153C WHICH WAS SIMULTANEOUSLY DONE B Y HIM ON 09.12.2011, COPY OF WHICH IS ON RECORD OF AO. IN THE AFORESAID CIRCUMSTANCES, IN ORDER TO SAVE TH E PRECIOUS CAREERS OF HUNDREDS OF STUDENTS, THE AFORESAID SUM OF RS. 17,0 0,00,000/- WAS TO BE PAID BUT NOT FOR THE PURPOSE OF PURCHASE OR SALE OF THE SOCI ETIES OR CONTROL OVER IT, AS WRONGLY APPREHENDED BY LD. CIT(A)/AO. THIS IS BECAU SE MONEY WAS GIVEN TO THE OTHER SOCIETIES REGISTERED U/S 12AA - NAMELY TO SAR DAR HARNAM SINGH KEER PUBLIC WELFARE TRUST, RISHIRAJ KMB EDUCATION SOCIET Y AND GURU GOVIND SINGH EDUCATION AND WELFARE SOCIETY AND NOT PERSONALLY TO ANY INDIVIDUAL OF KEER FAMILY. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 42 HENCE, THE ALLEGATION OF THE LD AO THAT THE SUBJECT SUM WAS PAID FOR THE BENEFIT OF INDIVIDUAL MEMBERS OF CHOUKSEY FAMILY IN VIOLATI ON OF SEC. 13(1)(E)(II)/ 13(2)(G) R.W.S 13(3) IS WHOLLY IMAGINARY, SPECULATI VE AND UNFOUNDED BECAUSE NONE OF THE PARAMETERS ENUNCIATED IN SEC. 13 HAVE B EEN VIOLATED. THIS ALLEGATION OF AO IS ALSO BASELESS THAT SUBJECT PAYM ENTS WERE MADE TO GAIN CONTROL BY INDIVIDUAL MEMBERS OF CHOUKSEY FAMILY OV ER THE PROPERTIES OF THE TWO SOCIETIES / COLLEGES BECAUSE ONLY A SOCIETY OWNS AN D HAS CONTROL OVER ITS PROPERTY AND NOT INDIVIDUAL MEMBER AS THEY ONLY MAN AGE IT AND THEY HAVE NO PERSONAL RIGHTS THEREIN WHATSOEVER. THE LD. AO OUGHT TO HAVE APPRECIATED THAT ANY CHARI TABLE INSTITUTION REGISTERED 12AA HAS STATUTORILY TO APPLY ITS RECEIPTS - BOTH R EVENUE AS WELL AS CAPITAL - ONLY TOWARDS CHARITABLE PURPOSES AND NOT FOR THE INDIVID UAL BENEFIT OF ANY INTERESTED PERSON OR OTHERWISE. AMOUNT RECEIVED BY OTHER CHARI TABLE SOCIETIES REGISTERED U/S 12AA, IN WHICH KEER FAMILY WERE MANAGING MEMBERS, S HALL ALSO HAVE TO BE SPENT BY THEM TOWARDS FULFILLMENT OF CHARITABLE PURPOSES OF THOSE SOCIETIES ONLY AND NOT FOR THE BENEFIT OF ANY INDIVIDUAL. AO HAS ALSO NOT ADVANCED ANY SUCH ALLEGATION NOR BROUGHT ON RECORD ANY SUCH FACT OR EVIDENCE OF ANY SUCH WITHDRAWAL BY KEER FAMILY FOR THEIR INDIVIDUAL BENEFIT. IT, THEREFORE, TRANSPIRES THAT THE APPREHENSIONS OF THE LD AO WAS GUIDED BY HIS MERE IMAGINATION AND GRAVE DOUBT THAT THE MANAGING MEMBERS / TRUSTEES WOULD WITHDRAW / SIPHON OUT THE SIMILAR OR MORE AMOUNTS FROM THE INSTITUTIONS FOR THEIR PERSONAL BE NEFIT. BUT IT IS HUMBLY SUBMITTED THAT, IT IS HIS MERE IMAGINATION AND GUESS WORK HAV ING NO LEGAL CREDENCE IN THE EYES OF LAW. THERE IS NO LEGITIMATE PLACE FOR SUCH IMAGINATIONS AND FANCIES IN THE FISCAL STATUTES. HERE, IT WOULD BE APT TO QUOTE THE DECISION OF HONBLE APEX COURT IN STATE OF KERALA V. M.M. MATHEW (1978) 42 STC 348 (S C) WHEREIN IT WAS HELD THAT 'STRONG SUSPICION, STRANGE COINCIDENCE AND GRAVE DO UBTS CANNOT TAKE THE PLACE OF LEGAL PROOF'. IT MAY BE PLACED ON RECORD THAT LATE MR. TANWANT SI NGH KEER AND HIS FAMILY ADOPTED DIFFERENT - DIFFERENT MALAFIDE TACTICS BY G ETTING LETTERS AND CHEQUES SIGNED FROM MR. J N CHOUKSEY AND IN SENDING LEGAL N OTICE. MOREOVER, MR. J N CHOUKSEY HAS NOWHERE STATED IN HI S STATEMENT RECORDED U/S 132(4) ON 22.08.2009 (COPY AT PG 248) THAT SUBJECT PAYMENTS WERE MADE FOR ACQUISITION OF SOCIETIES. RATHER HE STATED IN Q. 3 THAT- ' MY FAMILY AND FAMILY OF SHRI TANWANT SINGH KEER WER E JOINTLY MANAGING RISHIRAJ DENTAL COLLEGE, BHOPAL AND RISHIRAJ ENGINEERING COL LEGE, INDORE. DUE TO DISPUTE, IT WAS DECIDED THAT MR. KEER AND HIS FAMILY WOULD L IKE TO SEPARATELY MANAGE SIMILAR INSTITUTIONS. FOR TAKING THOSE INSTITUTIONS UPTO THIS STATUS, INSTITUTIONS MANAGED BY CHOUKSEY FAMILY HAS PAID BY WAY OF GRANT , DONATION AND PAYMENT A SUM OF AROUND RS. 15 CRORE 63 LAKHS BY RISHIRAJ MEM ORIAL SOCIETY AND H K SOCIETY AND OUR OTHER INSTITUTIONS TO SHRI KEER'S I NSTITUTIONS AND TRUST...'. (ENGLISH TRANSLATION OURS) FURTHER, THE PAYER- SOCIETIES / TRUST HAVE SHOWN TH E PAYMENTS AS ADVANCES BECAUSE THE PAYEE - SOCIETIES DID NOT ISSUE REQUIRE D RECEIPTS FOR THE NATURE OF PAYMENTS. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 43 THE LD. CIT(A)/AO HAVE ALSO GIVEN A PASSING REMARK THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY / TRUST ARE NOT GENUINE AND NOT FO R THE PURPOSE OF EDUCATION. THIS, IT IS SUBMITTED, IS ENTIRELY INCORRECT AND FA R FROM TRUTH BECAUSE UNDISPUTEDLY ASSESSEE IS GENUINELY DOING IT'S PREDOMINANT ACTIVI TY OF RUNNING EDUCATIONAL INSTITUTIONS, EVEN TODAY. 4. TO FURTHER DISPROVE AND REPEL THE ALLEGATION OF CIT (A) THAT THE EDUCATIONAL INSTITUTIONS ARE RUN BY THE APPELLANT AS PARTNERSHIP FIRMS, ON T HE BASIS OF THE SUBJECT AGREEMENT, FOR THE SOLE PURPOSE OF EARNING AND SHARING PROFITS AND SIPHONING FUNDS BY OFFICE BEARERS, IT IS FURTHER SUBMITTED THAT SUCH ALLEGATION IS WRONG, BASELESS, UNPROVED AND WITHOUT ANY CORROBORATIVE EVIDENCE, ALSO FOR THE FOLLOWING REAS ONS : IT WAS ALL ALONG SUBMITTED THAT THE SUBJECT AGREEM ENTS WERE NOT IMPLEMENTED OR ENFORCED BY THE TRUSTEE / OFFICE BEARERS REALIZING THAT IT IS NOT POSSIBLE TO IMPLEMENT THE SAME IN THE CHARITABLE SETUP OF AN ORGANIZATION NOR IT IS LEGITIMATE TO DO SO. THERE WAS NO ALLEGATION OR EVIDENCE, EVEN REMOTELY , BY THE DEPARTMENT REGARDING DIVERSION OF MONEY FROM ASSESSEE INSTITUTION TO TRU STEES/MEMBERS, EVEN FROM INCEPTION, AS STATED ABOVE, TO DISPROVE, CONTROVERT OR DISPEL THE ABOVE CLAIM OF THE ASSESSEE. WITHOUT PREJUDICE TO ABOVE AND WITHOUT CONCEDING, TRUSTEE/ OFFICE BEARER AND TRUST / SOCIETY ARE ALTOGETHER DIFFERENT ENTITIES AND SINCE THE TRUSTEES/ OFFICE BEARERS WERE NOT AUTHORIZED BY THE TRUST / SOCIETY TO ENTER INTO ANY SUCH AGREEMENT , NO ADVERSE VIEW CAN BE TAKEN IN THE CASE OF TRUST / SOCIETY BE CAUSE AS PER SETTLED LAW, IT IS AXIOMATIC THAT IF THERE IS ANY MISAPPLICATION OF FUNDS OR MIS MANAGEMENT, ACTION COULD LIE AGAINST THE PERSON RESPONSIBLE BUT IT IS NOT POSSIBLE TO SA Y THAT ANY AMOUNTS OF THE FUNDS OF THE SOCIETY WAS NOT UTILISED FOR EDUCATIONAL PURPOSES A ND FOR THAT REASON THE CHARITABLE INSTITUTION CANNOT BE DENIED EXEMPTION WHICH DEPEND S UPON OBJECTS OF THE TRUST. RELIED ON : (I) COSMOPOLITAN EDUCATION SOCIETY 244 ITR 494 (RAJ.) [SLP OF DEPARTMENT DISMISSED BY HONBLE SUPREME COURT AS REPORTED IN 241 ITR (ST.) 132] (II) DCIT VS. HAI HAY KSHATRIYA EDUCATION SOCIETY IN ITA NO. 51 TO 56 AND 510/IND/ 2007 FOR A.Y. 1998-99 TO 2004-05 - RELEVANT PAGE 54 (SUPRA) (III) HYNDAVI EDUCATION SOCIETY VS.ADIT(EXEMPTIONS)(2013) 86 DTR(HYD)196 AS PER BALANCE SHEET AND INCOME & EXPENDITURE ACCO UNT (PB 22-141), IT WOULD BE CLEAR THAT THERE IS NO SHARING OF PROFITS SHOWN IN INCOME & EXPENDITURE ACCOUNT LIKE DONE IN CASE OF PARTNERSHIP FIRMS/BUSINESSES. SINCE INCE PTION, ALL THE BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT OF ASSESSEE INSTITUTIO N ARE PREPARED IN ACCORDANCE WITH THE NORMS OF A CHARITABLE ORGANIZATION WHERE THE SU RPLUS IS TRANSFERRED TO TRUST FUND/SOCIETY FUND ACCOUNT IN THE BALANCE SHEET & CA RRIED OVER TO NEXT YEAR FOR THE PURPOSE OF ACCUMULATION AND APPLICATION/USE WHOLLY AND EXCLUSIVELY TOWARDS CHARITABLE PURPOSES ONLY. ALL THE RECEIPTS/ SURPLUS HAVE BEEN UTILIZED WHOLL Y AND EXCLUSIVELY TOWARDS THE OBJECTS OF THE INSTITUTION ONLY AND NOTHING ADVERSE HAVE BE EN EVEN STATED OR WHISPERED EITHER BY CIT OR BY AO. FINDINGS OF CIT(A) FULLY SUPPORTS THE CONTENTION OF THE ASSESSEE THAT NO BOGUS EXPENDITURE HAVE BEEN BOOKED AND NO SIPHONING OF FU NDS HAS TAKEN PLACE : MOST IMPORTANTLY, AS REGARDS THE ALLEGATION OF SHAR ING OR SIPHONING OF THE RECEIPTS/SURPLUS/MONEY OF ASSESSEE-TRUST/SOCIETY BY OFFICE BEARERS/TRUSTEES AS PER SO- H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 44 CALLED AGREEMENT FOUND, IT IS SUBMITTED THAT THE ON LY POSSIBLE WAY TO DO IT WAS TO INFLATE, THAT TOO EXORBITANTLY, THE CAPITAL AS WELL AS REVEN UE EXPENDITURES OF THE ASSESSEE- TRUST/SOCIETY TO UNSCRUPULOUSLY AND SILENTLY WITHDR AW MONEY. BUT VERY SURPRISINGLY, THERE IS NO WHISPER, MUCHLESS CORROBORATION, EITHER BY TH E CIT(A) OR BY THE AO OF ANY SUCH ASSERTION, CLAIM OR ALLEGATION AGAINST THE ASSESSEE -TRUST/SOCIETY OF HAVING INFLATED ANY CAPITAL OR REVENUE EXPENDITURES IN ANY OF THE ASSES SMENT YEARS. EVEN IN NEXT TWO ASSESSMENT YEARS, IN A.Y. 2011-12 & 2012-13, IN THE SCRUTINY ASSESSMENTS DONE U/S 143(3), AFTER VERIFYING IN DETAIL THE BOOKS OF ACCO UNTS, THERE IS NO SUCH ASSERTION OR CLAIM OF HAVING INFLATED CAPITAL OR REVENUE EXPENDITURE. THAT IN ITSELF PROVES BEYOND DOUBT THAT THE ALLEGATIONS OF THE REVENUE ARE TOTALLY FALLACIO US, WRONG AND CONJECTURAL ONLY. NOT ONLY THAT, THE LD. CIT(A) WHILE DECIDING THE ISSUE OF CASH WITHDRAWALS STATED AS BOGUS EXPENDITURE AT PAGE 216 TO 221, PARA 42 TO 42.3 HA S CATEGORICALLY STATED THAT THERE WAS NO EVIDENCE BROUGHT ON RECORD BY AO TO SUPPORT HIS CONCLUSION THAT THE APPELLANT HAS DEBITED ANY BOGUS OR UNEXPLAINED EXPENDITURE IN ITS INCOME & EXPENDITURE ACCOUNT. THE RELEVANT CONCLUDING PARA 42.3 OF CIT(A) IS REPRODUC E AS UNDER : I HAVE CAREFULLY CONSIDERED THE REASONS RECORDED B Y THE AO AND SUBMISSION OF THE APPELLANT. THE AO NOTICED THAT THE APPELLANT HAS MADE HUGE WITHDRAWALS IN CASH FROM BANK ACCOUNTS. WHEN THE AO ASKED THE APPELLANT TO EXPLAIN THE NATURE AND PURPOSE OF WITHDRAWAL OF HUG E CASH FROM THE BANK ACCOUNTS, THE APPELLANT FURNISHED EXPLANATION OF TH E WITHDRAWALS BEFORE THE AO STATING INTER-ALIA THAT WITHDRAWALS WERE MADE TO MEET EXPENSES OF THE TRUST SUCH AS REGISTRY OF LAND, LAND DEVELOPMENT, B UILDING CONSTRUCTION, ETC. BUT THE AO DID NOT ACCEPT THE SUBMISSION OF THE APP ELLANT AND CONCLUDED THAT THE HUGE CASH WAS WITHDRAWN JUST TO SIPHON OFF THE FUNDS OF THE APPELLANT TRUST FOR PERSONAL BENEFITS OF THE ED PERSONS AND TO BOOK BOGUS EXPENSES IN THE BOOKS OF ACCOUNT OF THE APPELLANT BUT ON PERUSAL OF THE ASSESSMENT ORDER, I T IS NOTICED THAT AO HAS NOT POINTED OUT ANY SINGLE ITEM UNEXPLAINED OF EXPE NDITURE WHICH WAS BOOKED BY THE APPELLANT AND/OR WAS FOUND BOGUS. ADMITTEDLY THE AMOUNTS WITHDRAWN IN CASH FROM THE BANKS ARE EXPLAINED AMOU NTS APPEARING IN THE REGULAR BOOKS FROM DECLARED SOURCES AND CANNOT BE S AID TO BE UNDISCLOSED AND NO ADDITION IS CALLED FOR SIMPLY ON THE FACT TH AT THE AMOUNTS WERE WITHDRAWN FROM THE BANK IN CASH. FURTHER, THE LD. AO HAS NOT BROUGHT ON RECORD ANY MATERIAL OR EVIDENCE TO SUPPORT HIS CONC LUSION THAT THE APPELLANT HAS DEBITED ANY BOGUS OR UNEXPLAINED EXPE NDITURE IN ITS INCOME & EXPENDITURE ACCOUNT. IT IS A TRITE LAW THAT SUSPICION HOWSOEVER STRONG IT MAY BE CANNOT TAKE THE PLACE OF EVIDENCE. THEREFORE IN THE ABSENCE OF ANY EVIDENCE, THE FINDINGS OF THE AO ON THE BASI S OF PRESUMPTION/ ASSUMPTION THAT THE HUGE CASH MUST HAVE BEEN WITHDR AWN TO BOOK BOGUS AND UNEXPLAINED EXPENDITURE CANNOT BE SUSTAINED. THUS, CONSIDERING THE FACTS AND CIRCUMSTANCES INVOLVED IN THIS ISSUE, I AM OF T HE CONSIDERED OPINION THAT THE FACTS AND MADE BY THE AO ARE NOT SUSTAINABLE. A CCORDINGLY, THE ADDITIONS OF RS. 17,00,000/- IN A.Y. 2007-08, RS. 1,16,36,000 /- A.Y. 2008-09, RS. 91,67,475/- IN A.Y. 2009-10 AND RS. 32,70,000/- IN A.Y. 2010-11 MADE BY THE AO ARE DELETED. THE AFORESAID CATEGORICAL FINDING OF CIT(A) LEAVES NO ROOM FOR DOUBT OR PRESUMPTION , EVEN FOR A MOMENT, AGAINST THE ASSESSEE AND EVIDENC ES TO THE HILT THAT NO SUCH SHARING OF PROFIT WAS DONE AND NO SIPHONING OF FUNDS WAS RE SORTED TO AND SUCH PERCEPTIONS WERE BASED ONLY ON SURMISES AND CONJECTURES. MOREOVER, T HE QUANTUM OF CASH WITHDRAWALS IS NOT SUCH TO SUPPORT THE ADVERSE PRESUMPTION OF AO / CIT(A). IT ALSO SUPPORTS THE CASE OF THE ASSESSEE. HUGE SURPLUS WAS SHOWN BY THE ASSESSEE-INSTITUTION ON YEAR TO YEAR BASIS WHICH SHOWS BONAFIDES OF THE ASSESSEE-INSTITUTION. HAD MO NEY BEEN SIPHONED OUT, THERE WAS NO NEED TO SHOW SURPLUS IN EACH YEAR. THIS IS BECAU SE SIPHONING OUT IS NOT POSSIBLE WITHOUT SUPPRESSING RECEIPTS OR INFLATING EXPENSES, AS AFORESAID. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 45 HAD THE TRUSTEES/MEMBERS INDULGED IN PROFIT SHARIN G, AS ALLEGED, AT LEAST AN IOTA OF EVIDENCE, EVEN WORTH THE NAME, SHOULD HAVE BEEN FOU ND IN THE SEARCH ON THE TRUSTEES/MEMBERS. THAT COULD BE IN THE FORM OF STAT EMENT OF PROFIT/INCOME PREPARED IN SOME WAY OR THE OTHER TO WORK OUT AND SETTLE ACCOUN TS WITH EACH OTHER FOR PROFIT SHARING OR IT COULD BE SOME CASH-RECEIPT IN ACKNOWLEDGMENT OF RECEIVING OF THE ALLEGED SHARE OF PROFIT OR SOME OTHER EVIDENCE OF THE SORT WITHOUT W HICH IT WAS NOT POSSIBLE TO DETERMINE, WORK OUT & SHARE PROFITS. BUT NO SUCH THING WAS FOU ND OR BROUGHT ON RECORD TO EVEN VAGUELY OR REMOTELY SUGGEST THAT. IN CASE OF ACTUAL IMPLEMENTATION OF THE AGREEMENT, SUCH ACKNOWLEDGMENT OF CASH PAYMENT, IF ANY, WAS NE CESSARY TO KEEP RECORD OF SUCH PAYMENT, FOR FUTURE; THIS MUST HAVE BEEN KEPT BY TR USTEES/MEMBERS BECAUSE LOADS OF PAPERS WERE OTHERWISE KEPT AND FOUND AND SEIZED FRO M THEM. THIS FACT WAS ALSO OVERLOOKED BY LD. CIT(A) THAT T HE ENTIRE FUNDS/PROPERTY OF THE INSTITUTION IS LYING IN THE NAME OF ASSESSEE-TRUST/ SOCIETY ONLY AND NOT IN THE NAME OF ITS TRUSTEES/MEMBERS. PAYMENTS TO TRUSTEES/MEMBERS IN LIEU OF THEIR SERV ICES WERE NOT EXTRAORDINARILY EXORBITANT OR EXCESSIVE. THE ASSESSEE-TRUST HAS MAINTAINED DETAILED AND CON TEMPORANEOUS BOOKS OF ACCOUNTS, WHICH ARE DULY AUDITED BY CHARTERED ACCOU NTANTS WITH NO ADVERSE REMARKS. THE FUNCTIONING AND MANAGEMENT OF THE EDUCATIONAL INSTITUTES RUN BY THE ASSESSEE- TRUST ARE UNDER STRICT MONITORING AND SUPERVISION O F ALL INDIA COUNCIL OF TECHNICAL EDUCATION (AICTE), A BODY CONSTITUTED BY MINISTRY O F HUMAN RESOURCE DEVELOPMENT, GOVERNMENT OF INDIA. THE SENIORS OFFICERS OF THE AI CTE CARRY OUT PERIODICAL DETAILED INSPECTION OF THE BOOKS OF ACCOUNTS AND FUNCTIONING OF THE EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE. THEY HAVE NEVER GIVEN ANY ADVERSE REP ORT OR COMMENT ON THE FUNCTIONING OF THE ASSESSEE. HAD THEY FOUND ANY SUCH LAPSES, AS UNILATERALLY CONCEIVED AND PRESUMED BY THE AO, THE APPROVAL OF THE ASSESSEE WO ULD HAVE BEEN TERMINATED LONG BACK. BUT THEN NOTHING OF THE SORT HAS BEEN FOUND B Y THEM AND ALL THE EDUCATIONAL INSTITUTES RUN BY ASSESSEE ARE VERY MUCH RUNNING AN D IMPARTING EDUCATION TO HUNDREDS OF STUDENTS IN PRESENT ALSO. IT IS NOWHERE PROVIDED IN THE BYE-LAWS THAT AT THE TIME OF DISSOLUTION OF TRUST/SOCIETY, THE FUNDS WILL VEST IN THE FAMILY OF THE TRUSTEES/ OFFICE-BEARERS. THE LD. CIT ALSO IGNORED THE FACT THAT THE ASSESSE E INSTITUTION IS NOT PARTY TO THE IMPUGNED AGREEMENTS, AND HENCE, NO ADVERSE VIEW COU LD BE TAKEN AGAINST THE TRUST/INSTITUTION WHICH IS AN INDEPENDENT IDENTITY FROM ITS TRUSTEES/MEMBERS. CIT(A)/ AO MISERABLY FAILED TO EVEN TRY TO POINT OU T, MUCH LESS PROVED WITH COGENT EVIDENCE, ANY DISPROPORTIONATE UNDISCLOSED ASSETS O R MONEY FOUND WITH THE TRUSTEES/MEMBERS TO EVEN REMOTELY SUGGEST THE CHARG E OF PERSONAL ENRICHMENT BY TRUSTEES/MEMBERS BY WAY OF SHARING OF SURPLUS/PROFI T. THE LD. CIT(A) ALSO COULD NOT PROPERLY APPRECIATE T HIS VITAL FACT THAT THE IMPUGNED AGREEMENT WAS IN RESPECT OF 2 COLLEGES ONLY WHEREAS THE ASSESSEE RUNS AS MANY AS 7 COLLEGES THAT TOO SINCE SO MANY YEARS, AS PER CHART FURNISHED ON PAGE 4 OF APPELLATE ORDER. OUR THIS SUBMISSION IS WITHOUT PREJUDICE TO OUR BASIC AND FUNDAMENTAL CLAIM THAT THE SAID AGREEMENTS WERE NOT IMPLEMENTED OR ENFORCE D AT ALL. THE PERVERSITY IN THE APPROACH OF THE CIT(A)/AO IS ALSO REFLECTED IN THAT THE ASSESSEE-TRUST/SOCIETY IS VERY OLD AND CAME INTO EX ISTENCE WAY BACK ON 13.1.1999 WHEREAS THE SO-CALLED IMPUGNED AGREEMENT WAS OF MUC H LATER DATE I.E. DATED 13-8-2002, H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 46 THAT TOO IN RESPECT OF 2 COLLEGES ONLY OUT OF 7 COL LEGES RUN BY TRUST AS AFORESAID, WHEREAS THE LD. CIT(A)/AO HAVE UNLAWFULLY DRAWN AND APPLIED THE ADVERSE ANALOGY ON THE ENTIRE TRUST. OUR THIS SUBMISSION IS ALSO WITHOUT PREJUDIC E TO OUR BASIC AND FUNDAMENTAL CLAIM THAT THE SAID AGREEMENTS WERE NOT IMPLEMENTED OR EN FORCED AT ALL. ONLY PHOTOCOPY OF AGREEMENTS WERE FOUND WHICH WERE NOT ACTED UPON : AS SUBMITTED, THE VERY AGREEMENT, ON THE BASIS OF W HICH THE BEDROCK OF ALLEGATION HAS BEEN BUILT-UP, WAS NOT ACTED UPON REALIZING THAT IT IS NEITHER LEGITIMATE NOR POSSIBLE TO DO IT UNDER THE CHARITABLE SET UP AND THE ALLEGATION O F ANY SUCH AGREEMENT HAVING BEEN ACTED UPON WAS ALL ALONG DENIED BY THE INSTITUTION AND TRUSTEES/OFFICE BEARERS. NEITHER CIT NOR AO HAS POINTED OUT ANY OF THE CLAUSE OF THE SUBJECT AGREEMENT TO HAVE BEEN ACTED UPON. IT MIGHT BE TAKEN NOTE OF THAT THE IMPU GNED AGREEMENTS FOUND IN SEARCH WERE MERELY PHOTOCOPIES AND NOT ORIGINAL. HAD THE O FFICE BEARERS/TRUSTEES ACTUALLY ACTED UPON ANY SUCH AGREEMENT, THEY WOULD HAVE KEPT THE O RIGINAL FOR THE PURPOSE OF SAFETY. WITHOUT PREJUDICE TO ABOVE AND WITHOUT ACCEPTING, C IT(A) /AO OUGHT TO HAVE REALIZED THAT IT WAS NOT A CASE OF SALE AND PURCHASE OF PROPERTY, RATHER IT WAS MERELY PROPOSAL TO PERFORM CERTAIN ACTIONS BUT THEY HAVE NOT TRIED TO PROVE, MUCH LESS PROVED, THAT ANY TRANSACTION PURSUANT TO THE SAID AGREEMENT HAS TAKE N PLACE. THEY OUGHT TO HAVE REALIZED THAT IT IS A SEARCH CASE WHERE ATLEAST AN IOTA OF O THER SUPPORTIVE EVIDENCE MIGHT HAVE BEEN FOUND, IF THE SAID AGREEMENT WAS ACTUALLY ACTE D UPON. BUT, NO SUCH EVIDENCE WAS FOUND IN SEARCH. NO CORROBORATION OR POST-SEARCH INVESTIGATION BY CI T OR AO : NO IOTA OF CORROBORATIVE EVIDENCE WAS FOUND IN SEAR CH OR BROUGHT ON RECORD BY AO, OR FOR THAT MATTER EVEN BY CIT(A) TO SUPPORT THEIR ALLEGA TIONS. FOR THIS PURPOSE, IT WAS INCUMBENT UPON CIT/AO TO HAVE CONDUCTED POST SEARCH INVESTIGATION/ENQUIRY BY SUMMONING THE CONCERNED PARTIES AND TO BRING ON REC ORD CLINCHING EVIDENCE TO PROVE THEIR ALLEGATIONS. BUT SURPRISINGLY, THE CONCERNED PARTIES TO THE AGREEMENT WERE NOT SUMMONED BY THEM AT ALL, WHAT TO TALK OF CROSS EXAM INATION, DESPITE THE FACT THAT THERE WAS CLEAR CUT DENIAL WITH REGARD TO THE SUBJECT AGR EEMENT, AS NOT HAVING BEEN ACTED UPON. WHO ALLEGES, HAS TO PROVE : IT IS A SETTLED LAW THAT WHO SO EVER ALLEGES, HAS T O PROVE. THIS IS PARTICULARLY IMPORTANT WHEN THE CONCERNED PERSON DENIES THE ALLEGATION. HE NCE, THE BURDEN ON AO WAS EVEN MUCH HEAVIER TO CONCLUSIVELY PROVE BY COGENT EVIDEN CE THAT THE SUBJECT AGREEMENT WAS INFACT ACTED UPON AND THAT THE TRUSTEES/MEMBERS HAV E SHARED SURPLUS OF THE INSTITUTION AND TO ENSURE THAT TRUSTEES/MEMBERS ARE BROUGHT TO TAX FOR SUCH SHARED PROFITS/SURPLUS. BUT, NOTHING OF THE SORT WAS DONE BY HIM AND THE CA NCELLATION WAS MADE ONLY ON THE BASIS OF PRESUMPTION, CONJECTURES AND SURMISES ONLY . IN CASE OF CIT VS. SMT. K.C AGNES (2003) 262 ITR 354 (KER.HC) WHERE AGREEMENT WAS FOUND FOR HIGHER AMOUNT BUT SALE DEED OF PROPERTY W AS FOUND FOR LESSER AMOUNT, HON'BLE HIGH COURT HELD AS UNDER :- EVEN IF IT IS ASSUMED TO BE SO , UNLESS IT IS PROVED THAT THE AGREEMENT WAS ACTED UPON AND UNLESS THE AMOUNT STATED IN THE AGREEMENT WAS PAID FOR THE SALE, THE COURT CANNOT COME TO CONCLUSION THAT THE PRICE MENTIONED IN SALE DEED IS NOT CORRECT. ALSO RELIED ON : IT IS A WELL-SETTLED RULE OF LAW THAT THE ONUS OF E STABLISHING THAT THE CONDITIONS OF TAXABILITY ARE FULFILLED IS ALWAYS ON THE REVENUE A ND THE SECOND CONDITION BEING AS MUCH A CONDITION OF TAXABILITY AS THE FIRST, THE BU RDEN LIES ON THE REVENUE TO SHOW THAT THERE IS UNDERSTATEMENT OF THE CONSIDERATION A ND THE SECOND CONDITION IS FULFILLED. MOREOVER, TO THROW THE BURDEN OF SHOWING THAT THERE IS NO UNDERSTATEMENT OF THE CONSIDERATION ON THE ASSESSEE WOULD BE TO CAST AN ALMOST IMPOSSIBLE BURDEN UPON HIM TO ESTABLISH A NEGATIVE, NAMELY, THAT HE DID NOT RECEIVE ANY CONSIDERATION BEYOND THAT DECLARED BY H IM. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 47 K.P. VERGHESE V.ITO 131 ITR 597 (SC) SIMILARLY, IN THE FOLLOWING DECISIONS ALSO IT HAS B EEN HELD THAT WHO SO EVER ALLEGES, HAS TO PROVE : SHYAMA CHARAN SAXENA VS. CIT (1984) 145 ITR 689 (A LL. HC) DOON VALLEY ROLLER FLOUR MILLS V. IAC (1989) 31 IT D 238 (DEL.ITAT) 5. AS REGARDS CONTENTIONS OF CIT(A)/AO REGARDING MAINT AINING TWO DIFFERENT SETS OF ACCOUNTS ONE FOR THE PURPOSE OF AFRC AND ANOTHER FO R FILING OF INCOME TAX RETURN, IT IS SUBMITTED THAT THE LD. CIT(A) HAS HERE ALSO IGNORED THE REASONS AND JUSTIFICATION GIVEN BY THE ASSESSEE. FIRST OF ALL, HE ADVANTAGEOUSLY IGNOR ED, WHAT TO TALK OF DISPROVING THE SAME, THIS IMPORTANT AND CRUCIAL FACT THAT THE SUBJ ECT TWO DIFFERENT SETS OF ACCOUNTS WERE FOUND ONLY FOR F.Y. 2009-10 IN THREE CASES NAMELY H K KALCHURI EDUCATION TRUST , JAI NARAYAN SIKSHA SAMITI AND RISHIRAJ MEMORIAL EDU CATION AND WELFARE SOCIETY WHEREAS IT WAS FOUND ONLY IN CASE OF ONE COLLEGE RU N BY RISHIRAJ MEMORIAL EDUCATION AND WELFARE SOCIETY FOR F.Y. 2008-09. BUT NO SUCH TWO DIFFERENT SETS OF AUDITED ACCOUNTS WERE FOUND IN ANY OF THE EARLIER FINANCIAL YEARS I. E FROM F.Y. 2003-04 TO 2008-09 IN EITHER THESE SOCIETIES OR IN ANY OTHER SOCIETIES / TRUST OF CHOUKSEY GROUP. THE DISPELS THE DOUBT OF THE CIT(A)/AO AS BEING MERITLE SS AND FAR FROM TRUTH. 6. MOREOVER, THE AO DID NOT CONFRONT THIS ISSUE OF TWO SETS OF ACCOUNTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO THE ASSESSEE AT ALL. HENCE ON THIS SCORE ALONE THE AVERSIONS OF AO ARE LIABLE TO BE QUASHED. 7. IT WAS ALSO EXPLAINED, WITHOUT PREJUDICE TO ABOVE, THAT IN SO FAR AS THE ASSESSEE TRUST /OTHER THREE SOCIETIES IN RESPECT OF WHICH DIFFEREN T SET OF ACCOUNTS WERE FOUND, IT WAS SUBMITTED THAT THE THESE SOCIETIES/ TRUST MAINTAINS ITS ACCOUNTS IN THE COMPUTER SYSTEM. ALL THEIR BOOKS OF ACCOUNTS WERE SEIZED BY THE DEPA RTMENT DURING SEARCH ON 23.07.2009. THE COPY OF THESE BOOKS OF ACCOUNTS / ACCOUNTING DA TA HAS BEEN GIVEN TO THEM ONLY AS LATE AS ON 01/07/2013. THIS ASPECT WAS ALSO BRUSHED ASIDE BY CIT(A). THESE SOCIETIES / TRUST RUN ENGINEERING COLLEGES, MEDICAL COLLEGES AN D HOSPITALS UNDER ALL INDIA COUNCIL OF TECHNICAL EDUCATIONAL RULES AND REGULATIONS. THEY H AD TO SUBMIT AUDITED ACCOUNTS TO THE ADMISSION AND FEES REGULATORY COMMITTEE (AFRC) AND AICTE WITHIN TIME BOUND MANNER SO AS TO OBTAIN YEARLY APPROVALS/AFFILIATION . SINCE SUBMISSION OF FINANCIAL STATEMENT TO AFRC IS A STATUTORY ANNUAL REQUIREMENT FOR GETTING APPROVAL AND FEES FIXATION, THE FINANCIAL STATEMENTS HAD TO BE SUBMIT TED TO AFRC ON THE BASIS OF TRIAL BALANCE / INFORMATION THEN AVAILABLE. FURTHER, THE SEARCH TOOK PLACE ON 23.07.2009 IN F.Y. 2009-10. DUE DATE OF FILING OF RETURN FOR F.Y. 2008-09 WAS 30.09.2009. AS ON THE DATE OF SEARCH, FINALIZATION OF ACCOUNTS FOR F.Y. 2 008-09 AND F.Y. 2009-10 WAS PENDING WHICH WERE FINALIZED VERY LATE AFTER LOT OF EFFORTS AND AFTER ANYHOW RECONSTRUCTING ACCOUNTS ON THE BASIS OF AVAILABLE DATA AND DATA CO LLECTED. THIS IS BECAUSE, AS ALREADY SUBMITTED, ENTIRE BOOKS OF ACCOUNTS (INCLUDING FOR F.Y. 2008-09 AND UPTO THE DATE OF SEARCH) WERE SEIZED BY THE DEPARTMENT AND THE COPY WHEREOF WERE NOT GIVEN TO US EVEN TILL THE DATE OF ASSESSMENT ORDER AND THE SAME WERE GIVEN TO US ONLY ON 01/07/2013. 8. BECAUSE OF THE ABOVE, THE DIFFERENCES OCCURRED IN T HE FIGURES IN THE AUDITED FINANCIAL STATEMENTS SUBMITTED EARLIER TO THE ADMISSION AND F EES REGULATORY COMMITTEE AND THE FIGURES IN THE AUDITED FINANCIAL STATEMENTS SUBMITT ED THEREAFTER BEFORE THE DEPARTMENT. 9. MOREOVER, IT WILL BE OBSERVED THAT AS PER THE AUDIT ED FINANCIAL STATEMENTS FILED BEFORE THE INCOME TAX DEPARTMENT IN THE INCOME TAX RETURN, THE ASSESSEE HAS SHOWN SURPLUS IN THE INCOME AND EXPENDITURE ACCOUNT AS AGAINST DE FICIT IN THE INCOME AND EXPENDITURE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 48 ACCOUNT IN THE AUDITED FINANCIAL STATEMENTS FILED B EFORE THE AFRC. THIS BONAFIDES ON THE PART OF THE ASSESSEE WAS ALSO IGNORED BY LD. CIT(A) . FURTHER, THE AO HAS ACCEPTED THE SURPLUS AS DECLARED BY THE ASSESSEE AS PER THE INCO ME & EXPENDITURE A/C FILED ALONGWITH THE RETURN OF TOTAL INCOME AS CORRECT, WHILE FRAMIN G THE ASSESSMENT ORDERS. THUS, BY RETURNING THE CORRECT SURPLUS IN THE INCOME & EXPEN DITURE A/C UNDER THE INCOME TAX ACT, THE ASSESSEE HAS NEITHER CONCEALED NOR SUPPRESSED I TS INCOME. 10. THE LD. CIT(A) HAS ALSO POINTED OUT TOWARDS THE NON -COMPLIANCE OF DIRECTIONS OF AO TO GET THE ACCOUNTS AUDITED BY SPECIAL AUDITO R U/S 142(2A). BUT, REFERENCE TO THAT WAS NEITHER WARRANTED NOR DESIRED IN THE PRESENT CO NTEXT IN AS MUCH AS THE VERY REFERENCE U/S 142(2A) WAS CHALLENGED BY ASSESSEE BE FORE HON'BLE HIGH COURT, AS SUBMITTED EARLIER. 11. FURTHER, THE CIT(A) /AO CONTENDED THAT HUGE SURPLUS SHOWN ON YEAR TO YEAR BASIS IS A POINTER THAT THE ASSESSEE IS NOT A CHARI TABLE ORGANIZATION. IT IS SUBMITTED THAT EDUCATION PER SE IS A CHARITABLE PURPOSE AS ENSHRIN ED IN SEC. 2(15) AND IS NOW SETTLED BY HONBLE SUPREME COURT IN QUEENS EDUCATIONAL SOCIETY VS CIT[2015] 372 ITR 699 (SC) THAT WHERE AN EDUCATIONAL INSTITUTION CARRIES ON T HE ACTIVITY OF EDUCATION PRIMARILY FOR EDUCATING PERSONS, THE FACT THAT IT MAKES A SURPLUS (WHICH WAS PLOUGHED BACK FOR EDUCATIONAL PURPOSES) DOES NOT LEAD TO THE CONCLUSI ON THAT IT CEASES TO EXIST SOLELY FOR EDUCATION PURPOSE AND BECOMES AN INSTITUTION FOR TH E PURPOSE OF MAKING PROFIT. 12. IN VIEW THE ABOVE, UNDISPUTEDLY, SINCE THE ASSESSEE IS IMPARTING EDUCATION THROUGH EDUCATIONAL INSTITUTIONS RUN BY IT QUALIFYI NG IT AS CHARITABLE ORGANIZATION U/S 2(15), HUGE SURPLUS SHOWN BY THE ASSESSEE ON YEAR TO YEAR BASIS DOES NOT LEAD TO THE CONCLUSION THAT IT CEASES TO EXIST SOLELY FOR EDUCA TION PURPOSE AND BECOMES AN INSTITUTION FOR THE PURPOSE OF MAKING PROFIT, AS PER THE ABOVE DECISION OF HONBLE SUPREME COURT IN QUEENS CASE . 13. CASH AND JEWELLERY FOUND FROM THE RESIDENCE AND LOC KERS OF THE OFFICE BEARERS OF THE APPELLANT HAS ALREADY BEEN DISCLOSED IN THE INCOME TAX AND WEALTH TAX RETURNS OF OFFICE BEARERS AND TAX WAS PAID THEREON, DISCLOSING THE SOURCE WHEREOF BEFORE AO. HENCE, NO ADVERSE VIEW SHOULD HAVE BEEN TAKEN AGAIN ST THE ASSESSEE TRUST. 14. AS REGARDS, LOAN AGREEMENT WITH D5, ALL THE OBSERVA TIONS OF CIT(A) AND AO ARE OTIOSE AND IRRELEVANT BECAUSE THE SAID AGREEMEN T WAS UNDISPUTEDLY NOT EXECUTED AND NO LOAN WAS TAKEN ON THE STRENGTH OF SUCH AGREE MENT. IT WAS DULY EXPLAINED THAT THE CIT(A)/AO HAS HARPED ON THE LANGUAGE OF THE AGREEME NT HOLDING THAT THE APPELLANT WAS ENTERING INTO A BUSINESS VENTURE AS WELL AS FOR PRO FIT SHARING. BUT, THE APPREHENSIONS OF THE CIT(A)/AO ARE GROSSLY MISPLACED BECAUSE IT IS T HE STANDARD AGREEMENT OF FOREIGN LENDERS USING THE LANGUAGE LIKE 'BUSINESS VENTURE' AND 'PROFIT SHARING'. IT HAS NOTHING TO DO WITH ENTERING INTO BUSINESS VENTURE AND PROFIT S HARING BY THE APPELLANT. THIS FACT IS CLEAR FROM SECTION 4.01 OF THE SAID AGREEMENT (PAGE 461 OF PAPER BOOK) WHERE THE LENDER IS SAID TO BE SHARING 0% AND THE ASSESSEE - BORROWER AT THE RATE 99%. THE BALANCE 1% WAS FOR INTERMEDIARY I.E. AGENT. BUT SUR PRISINGLY, ALL THESE POSITIVE ASPECTS WERE CONSCIOUSLY IGNORED BY THE LD CIT(A). IN VIEW OF ABOVE, THE OBSERVATIONS AND FINDINGS OF LD. CIT(A) ARE NOT ONLY INCORRECT BUT THESE ARE ALSO BASED ON UNPROVED ALLE GATIONS AND ARE DEVOID OF ANY MERITS AND SUBSTANCE AND MAY KINDLY BE VACATED. THE LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTH ORITIES. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 49 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. BO TH THE PARTIES HAVE STATED THAT ON THE ISSUE OF TREATING BY AO THE ACTI VITIES OF ASSESSEE IN THE NATURE OF BUSINESS AND NOT CHARITABLE UNDER SEC . 2(15) AND FOR THE SOLE PURPOSE OF EARNING PROFITS, THE FACTS INVOLVED ARE IDENTICAL IN ALL THE FIVE ASSESSEES UNDER APPEAL. THEREFORE, IN ORDER TO AVOID REPETITION AND FOR THE SAKE OF BREVITY, WE HOLD THAT OUR FINDINGS ON THIS ISSUE SHALL APPLY TO ALL FIVE TRUST/SOCIETIES. WE FIND THAT THE ASSESSING OFFICER AND LEARNED CIT( A) HAS DECIDED THE APPEALS IN CASE OF ALL FIVE ASSESSEES ON THE GR OUND THAT ASSESSEE HAS SET UP THE EDUCATIONAL INSTITUTIONS AS BUSINESS ORGANIZATION AND DIFFERENT PERSONS HAVE JOINED HANDS TO SET UP THE S AID INSTITUTIONS SOLELY FOR SHARING AND SIPHONING THE PROFITS OF EDUCATIONA L INSTITUTIONS. IT WOULD BE RELEVANT HERE TO MENTION THAT SO FAR AS THE ALLE GATION OF SHARING AND SIPHONING THE PROFITS OF EDUCATIONAL INSTITUTIONS O N THE BASIS OF VARIOUS AGREEMENTS FOUND DURING SEARCH ARE CONCERNED, WE HA VE EXTENSIVELY DEALT WITH THIS ISSUE IN FAVOUR OF ASSESSEE IN OUR SEPARATE APPEALS VIDE COMMON ORDER FOR ALL FIVE ASSESSEES IN ITA NO. 386, 387,388,389 & 390/IND/2014 WHILE DECIDING THE ISSUE OF CANCELATIO N OF REGISTRATION U/ S 12AA (3) OF THE INCOME TAX ACT. IN THOSE APPEALS, W E HAVE HELD THAT THE SUBJECT AGREEMENTS FOUND DURING SEARCH HAVE NOT BEE N PROVED OR H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 50 CORROBORATED TO HAVE BEEN IMPLEMENTED UPON AND THAT ALL FIVE ASSESSEES ARE CHARITABLE ORGANIZATIONS ELIGIBLE FOR EXEMPTION U/S 11, 12 AND 13 AND THE REGISTRATION WITHDRAWN BY CIT OF ALL THE FIVE ASSESSEES WAS NOT AS PER THE LAW. WE ALSO HELD THAT THE ACTIV ITIES OF ALL THE FIVE ASSESSEES ARE CHARITABLE IN NATURE, GENUINE AND IN ACCORDANCE WITH ITS CHARITABLE OBJECTS. THE REGISTRATION CANCELLED BY C IT OF ALL THE FIVE ASSESSEES WAS RESTORED BACK BY US FROM THE DATE OF GRANTING. IN ORDER TO AVOID REPETITION, WE ARE NOT REITERATING OUR THO SE OBSERVATIONS AND FINDINGS HERE AND HOLD THAT THE SAME PREVAIL IN CAS E OF ALL THE FIVE ASSESSEES IN THE PRESENT APPEALS ALSO. AS REGARDS ALLEGATION OF AO, CIT IN ORDER U/S 12AA (3) AND CIT(A) THAT PAYMENT OF RS . 15,83,87,434 OUT OF AGREED AMOUNT OF RS. 17 CRORES WAS MADE FOR PURC HASE AND SALE OF SOCIETY, IN OUR OPINION THIS ALLEGATION IS ALSO UNF OUNDED AND UNSUBSTANTIATED. WE FIND ENOUGH FORCE IN THE ARGUM ENTS OF THE ASSESSEE THAT THE ABOVE SUM WAS NOT PAID FOR THE PU RPOSE OF SALE AND PURCHASE OF SOCIETY, AS OBSERVED BY AO, CIT & CIT(A ) BECAUSE IT IS VERY IMPORTANT TO NOTE THAT THE AMOUNTS WERE GIVEN TO TH E CHARITABLE SOCIETIES REGISTERED U/S 12A THROUGH CHEQUES. THE AMOUNTS WER E NOT GIVEN TO ANY OF THE INDIVIDUAL OFFICE BEARER OR INTERESTED PERSO NS IN INDIVIDUAL CAPACITY AND CERTAIN PAYMENTS INDIVIDUALS, AS OBSERVED BY TH E ASSESSING OFFICER, WERE ONLY TOWARDS REPAYMENT OF THEIR UNSECURED LOAN S LYING OUTSTANDING IN THE BOOKS OF CONCERNED SOCIETY. THIS EXPLANATION OF THE ASSESSEE IS H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 51 FOUND PLAUSIBLE THAT DUE TO STEEP DIFFERENCES AMONG ST THE MEMBERS/TRUSTEES OF THESE TWO SOCIETIES , IT WAS DA Y TO DAY BECOMING PRACTICALLY VERY DIFFICULT, NAY IMPOSSIBLE, TO RUN THOSE COLLEGES / EDUCATIONAL INSTITUTIONS AND THE CRUCIAL ISSUE AT S TAKE WAS LIFE AND CAREER OF HUNDREDS OF STUDENTS WHO CAME MOSTLY FROM HUMBLE BACKGROUNDS. IN ORDER TO TIDE OVER THIS UNPRECEDENTED CRISIS, IT WA S EXPLAINED, A CONSENSUS WAS REACHED AT IN WHICH DIFFERENT SOCIETI ES WERE DECIDED TO BE MANAGED BY EXISTING DIFFERENT FAMILY MEMBERS / T RUSTEES OF THE SOCIETIES / TRUST. THIS WAS INEVITABLE TO SAVE PREC IOUS CAREERS OF HUNDREDS OF STUDENTS UNDERGOING STUDIES IN THE COLL EGES/ INSTITUTIONS RUN BY THESE SOCIETIES/ TRUST. THIS IS BECAUSE ALL THE RELEVANT SOCIETIES/ TRUSTS WERE RUNNING EDUCATIONAL INSTITUTIONS ON THE CHARIT ABLE BASIS. IT WAS EXPLAINED THAT THE MAJOR DISPUTES WERE BETWEEN LATE MR. TANWANT SINGH KEER AND MR. J. N. CHOUKSEY. BOTH WERE MEMBERS OF T HE TWO SOCIETIES, NAMELY, RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND RISHIRAJ MEMORIAL EDUCATION AND WELFARE SOCIETY. LATE MR. TANWANT SIN GH KEER WAS ALSO MANAGING MEMBER OF THE SOME OTHER SOCIETIES RUNNING EDUCATIONAL INSTITUTIONS. THE CONCILIATION FORMULA TO WIN OVER THE CRISIS AS SUGGESTED BY MR. KEER WAS THAT LATE MR. TANWANT SINGH KEER WI LL RESIGN AS MEMBER FROM THE ABOVE TWO EDUCATIONAL SOCIETIES VIZ. RISHI RAJ SINGH MEMORIAL WELFARE SOCIETY AND RISHIRAJ MEMORIAL EDUCATION AND WELFARE SOCIETY AND RS. 17 CRORE SHALL BE PAID TO THE INSTITUTIONS IN WHICH MR. TANWANT H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 52 SINGH KEER IS MANAGING MEMBER. HOWEVER, SUCH AMOUNT S PAID WAS TO BE UTILIZED ONLY FOR FURTHERANCE OF CHARITABLE PURP OSES OF IMPARTING EDUCATION, AS DONE BY SOCIETIES / TRUST IN WHICH CH OUKSEY FAMILY IS MANAGING MEMBER /TRUSTEE. THE ABOVE CONTENTION OF A SSESSEE WERE NOT DISPROVED OR REBUTTED BY REVENUE AUTHORITIES. THIS CONTENTION OF THE ASSESSEE WAS ALSO NOT PROVED AS WRONG THAT THE SEIZ ED LETTER / DOCUMENT DTD. 24.6.2008 WAS COERCIVELY GOT PREPARED BY LATE MR. TANWANT SINGH KEER. MR. J N CHOUKSEY, ANOTHER MANAG ING MEMBER, WAS INSISTED UPON TO SIGN IT; THIS WAS INFACT USED AS PRIME CONDITION AND TOOL BY MR. TANWANT SINGH KEER TO RESIGN FROM MEMBE RSHIP OF THOSE TWO SOCIETIES. FOR THIS PURPOSE, IT WAS ALSO INSISTED U PON BY LATE MR. TANWANT SINGH KEER THAT CONSTRUCTION WORK SHOULD ALSO BE GI VEN TO UPKAR CONSTRUCTION PVT. LTD. AND ACCORDINGLY ADVANCE WAS GIVEN TO UPKAR CONSTRUCTION PVT. LTD. DUE TO DISPUTE, WORK COULD N OT BE STARTED. UPKAR CONSTRUCTION PVT. LTD HAS ALSO CONFIRMED THESE FACT S BEFORE SAME AO DURING ITS ASSESSMENT U/S 153C WHICH WAS SIMULTANEO USLY DONE BY HIM ON 09.12.2011, COPY OF WHICH IS ON RECORD OF AO. IN THE AFORESAID CIRCUMSTANCES, IT WAS EXPLAINED, T HAT IN ORDER TO SAVE THE PRECIOUS CAREERS OF HUNDREDS OF STUDENTS, THE AFORESAID SUM OF RS. 17,00,00,000/- WAS TO BE PAID BUT NOT FOR THE P URPOSE OF PURCHASE OR SALE OF THE SOCIETIES OR CONTROL OVER IT, AS WRONGL Y APPREHENDED BY LD. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 53 CIT(A)/AO/ CIT. THIS IS BECAUSE MONEY WAS GIVEN TO THE OTHER SOCIETIES REGISTERED U/S 12AA - NAMELY TO SARDAR HARNAM SINGH KEER PUBLIC WELFARE TRUST, RISHIRAJ KMB EDUCATION SOCIETY AND G URU GOVIND SINGH EDUCATION AND WELFARE SOCIETY AND THROUGH CHEQUE AN D NOT PERSONALLY TO ANY INDIVIDUAL OF KEER FAMILY. HENCE, THE ALLEG ATION THAT THE SUBJECT SUM WAS PAID FOR THE BENEFIT OF INDIVIDUAL MEMBERS OF CHOUKSEY FAMILY IN VIOLATION OF SEC. 13(1)(E)(II)/ 13(2)(G) R.W.S 1 3(3) IS FOUND UNPROVED. THIS ALLEGATION OF AO IS ALSO FOUND UNPROVED THAT S UBJECT PAYMENTS WERE MADE TO GAIN CONTROL BY INDIVIDUAL MEMBERS OF CHOUK SEY FAMILY OVER THE PROPERTIES OF THE TWO SOCIETIES / COLLEGES BECAUSE ONLY A SOCIETY OWNS AND HAS CONTROL OVER ITS PROPERTY AND NOT INDIVIDUA L MEMBER AS THEY ONLY MANAGE IT AND THEY HAVE NO PERSONAL RIGHTS THEREIN WHATSOEVER. A CHARITABLE INSTITUTION REGISTERED U/S 12A HAS STATU TORILY TO APPLY ITS RECEIPTS - BOTH REVENUE AS WELL AS CAPITAL - ONLY T OWARDS CHARITABLE PURPOSES AND NOT FOR THE INDIVIDUAL BENEFIT OF ANY INTERESTED PERSON OR OTHERWISE. AMOUNT RECEIVED BY OTHER CHARITABLE SOCI ETIES REGISTERED U/S 12AA, IN WHICH KEER FAMILY WERE MANAGING MEMBERS, S HALL ALSO HAVE TO BE SPENT BY THEM TOWARDS FULFILLMENT OF CHARITABLE PURPOSES OF THOSE SOCIETIES ONLY AND NOT FOR THE BENEFIT OF ANY INDIV IDUAL. WE TAKE NOTE OF THE FACT THAT THE AO HAS ALSO NOT ADVANCED ANY SUCH ALLEGATION NOR BROUGHT ON RECORD ANY SUCH EVIDENCE OF ANY SUCH WI THDRAWAL BY KEER FAMILY FOR THEIR INDIVIDUAL BENEFIT. IN OUR VIEW, I T TRANSPIRES THAT THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 54 APPREHENSIONS OF THE LD AO WAS GUIDED BY HIS IMAGIN ATION AND GRAVE DOUBT THAT THE MANAGING MEMBERS / TRUSTEES WOULD WI THDRAW / SIPHON OUT THE SIMILAR OR MORE AMOUNTS FROM THE INSTITUTIONS F OR THEIR PERSONAL BENEFIT. BUT WE NOTE THAT THERE IS NO LEGITIMATE PL ACE FOR SUCH IMAGINATIONS AND FANCIES IN THE FISCAL STATUTES. HE RE, IT WOULD BE APT TO QUOTE THE DECISION OF HONBLE APEX COURT IN STATE O F KERALA V. M.M. MATHEW (1978) 42 STC 348 (SC) WHEREIN IT WAS HELD THAT 'STRONG SUSPICION, STRANGE COINCIDENCE AND GRAVE DOUBTS CAN NOT TAKE THE PLACE OF LEGAL PROOF'. MOREOVER, WE ALSO OBSERVE THAT MR. J N CHOUKSEY, O FFICE BEARER, HAS NOWHERE STATED IN HIS STATEMENT RECORDE D U/S 132(4) ON 22.08.2009 THAT SUBJECT PAYMENTS WERE MADE FOR ACQU ISITION OF SOCIETIES. INFACT HE STATED IN Q. 3 THAT- ' MY FAMILY AND FAMILY OF SHRI TANWANT SINGH KEER WER E JOINTLY MANAGING RISHIRAJ DENTAL COLLEGE, BHOPAL AN D RISHIRAJ ENGINEERING COLLEGE, INDORE. DUE TO DISPUTE, IT WAS DECIDED THAT MR. KEER AND HIS FAMILY WOULD LIKE TO SEPARATE LY MANAGE SIMILAR INSTITUTIONS. FOR TAKING THOSE INSTITUTIONS UPTO THIS STATUS, INSTITUTIONS MANAGED BY CHOUKSEY FAMILY HAS PAID BY WAY OF GRANT , DONATION AND PAYMENT A SUM OF AROUND RS. 15 CRORE 63 LAKHS BY RISHIRAJ MEMORIAL SOCIETY AND H K SOCIETY AND OUR OTHER INSTITUTIONS TO SHRI KEER'S INSTITUTI ONS AND TRUST...'. (ENGLISH TRANSLATION SUPPLIED) IN VIEW OF ABOVE, WE HOLD THAT THE SUBJECT PAYMENT OF RS. 15,83,87,434 OUT OF AGREED AMOUNT OF RS. 17 CRORES AS PER A LETTER FOUND DURING SEARCH CANNOT BE TREATED AS PAYMENT MADE FOR PURCHASE AND SALE OF SOCIETY. WE ALSO FIND THAT THE ASSESSING OF FICER HAS ASSESSED THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 55 SURPLUS SHOWN BY THE ASSESSEE IN VARIOUS YEARS IN T HE INCOME AND EXPENDITURE ACCOUNT AS BUSINESS INCOME. WHEN WE HAV E ALREADY HELD IN OUR SEPARATE ORDER ON CANCELLATION OF REGISTRATION U/S 12AA (3), AS AFORESAID, THAT ALL FIVE ASSESSEES NAMELY, H.K. KAL CHURI EDUCATION TRUST, JAI NARAIN SHIKSHA SAMITI, RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY, HAI HAY KSHETRIYA EDUCATION SOCIETY AND RISHIRAJ MEMORI AL EDUCATION AND WELFARE SOCIETY ARE CHARITABLE ORGANIZATION ELIGIBL E FOR EXEMPTION U/S 11, 12 AND 13, THEREFORE, THE SURPLUS OF INCOME & EXPEN DITURE HAS TO BE ASSESSED AS APPLICABLE TO CHARITABLE INSTITUTIONS. THEREFORE, WE ARE OF THE VIEW THAT ASSESSING OFFICER AND LEARNED CIT(A) ARE NOT JUSTIFIED IN ASSESSING THE INCOME AS BUSINESS INCOME, THEREFORE, WE DIRECT THE ASSESSING OFFICER TO CONSIDER AFRESH, IN CASE OF AL L ABOVE FIVE ASSESSEES, THE SURPLUS IN INCOME & EXPENDITURE ACC OUNT AS APPLICABLE TO CHARITABLE INSTITUTIONS, ALL EXPENSES INCURRED B Y ASSESSEE TREATING IT IS AS APPLICATION TOWARDS CHARITABLE PURPOSES AND INCO ME RECEIVED IN PURSUANCE OF CHARITABLE ACTIVITIES, FOR INSTANCE, D EVELOPMENT FEES, DONATION, MEETING AND SEMINAR EXPENSES, BANK LOAN/I NTEREST EXPENSES, EXPENDITURE ON GRANT, SITE AND CAMPUS DEVELOPMENT E XPENSES, DEPRECIATION ON BUILDING UNDER CONSTRUCTION (IN CAS E OF JAI NARAIN SIKSHA SAMITI ), SECURITY DEPOSIT FROM STUDENT, COMPUTER S OFTWARE EXPENDITURE, HEALTH CAMP AND SOCIAL WELFARE EXPENSE, ADVANCES WR ITTEN OFF, FREE MEDICAL CAMP EXPENSES, BOREWELL EXPENSES, BUS RENT AND HOSTEL H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 56 EXPENSES, EXPENDITURE ON PURCHASE OF BUILDING MATER IAL, EXPENDITURE ON CONSTRUCTION OF BUILDING, INVESTMENTS IN ALL FIXED ASSETS OF ANY NATURE ETC. AS APPLICATION OF INCOME AND THE DEPRECIATION ON TH E FIXED ASSETS HAVE TO BE ALLOWED AND SET OFF OF DEFICIT OF EARLIER Y EARS INCOME IN THE CURRENT YEARS HAS TO BE ALLOWED AND REPAYMENT OF BANK LOANS HAVE TO BE ALSO ALLOWED AS APPLICATION OF INCOME. THEREFORE, CONSID ERING THAT ALL THE INCOMES AS STATED ABOVE HAVE TO BE ASSESSED AS INCO ME FROM CHARITABLE ACTIVITIES , ASSESSING OFFICER IS DIRECT ED TO RECALCULATE THE SURPLUS/DEFICIT OF ALL THESE YEARS I.E. FOR ASSESSM ENT YEARS 2004-05 TO 2010-11 GRANTING EXEMPTION U/S 11, 12 & 13 IN RESPE CT OF ALL ABOVE FIVE ASSESSEES. 6. THE ASSESSEE HAS CHALLENGED OBSERVATIONS OF CIT( A)/AO ON ALLEGED VIOLATION OF PROVISION OF SEC. 13. AS REGARDS ALLEGED VIOLATION OF SEC. 13, BOTH THE P ARTIES HAVE SUBMITTED THAT MOST OF THE FACTS INVOLVED ARE IDENT ICAL. HENCE, IN ORDER TO AVOID REPETITION AND FOR THE SAKE OF BREVITY, WE AR E DEALING WITH THE ALLEGED VIOLATION OF ALL FIVE TRUST/SOCIETIES TOGET HER. INDEPENDENT ISSUES ARE DEALT WITH SEPARATELY. IN THE CASE OF H K KALCHURI EDUCATION TRUST SHORT FACTS OF THE ISSUE ARE THAT AO HAS CONTENDED THAT THE ASSESSEE HAS VIOLATED PROVISIONS OF SEC. 13 AND HEN CE IS NOT ELIGIBLE FOR H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 57 EXEMPTION CONTAINED IN SEC. 11 AND 12 OF THE I.T. A CT. THE LEARNED CIT(A) HAS SUSTAINED THOSE CONTENTIONS, AS BEING CO RRECT. BROADLY, THE FOLLOWINGS ARE THE BASIS ON WHICH THE AFORESAID VIO LATION WAS SOUGHT TO BE ALLEGED: (I) UNRELIABLE AUDIT REPORT IN FORM NO. 10B ON INCOMPLE TE FACTS. (II) INTEREST FREE ADVANCES TO VARIOUS SOCIETIES/ ENTITI ES OF THE SAME MANAGEMENT (III) INTEREST FREE ADVANCES TO VARIOUS PARTIES OTHER THA N INTERESTED PERSONS WITHOUT ANY SECURITY. (IV) USE OF VEHICLES OF THE SOCIETY BY THE MEMBERS OF CH OUKSEY FAMILY FOR PERSONAL PURPOSES. (V) EXCESSIVE PAYMENT OF SALARY/CONSULTANCY CHARGES TO MEMBERS OF CHOUKSEY FAMILY. (VI) PAYMENT MADE TO OFFICE BEARERS SHRI ANUPAM CHOUKSEY AND SMT. POONAM CHOUKSEY FOR PURCHASE OF HOUSE PROP ERTY 31, SHYAMLA HILLS, BHOPAL. (VII) PAYMENT TO NEW VALLABH GRIH NIRMAN SAHKARI SAMITI (A.Y.2008-09) (VIII) PAYMENT FOR PURCHASE OF HOTEL NEENA PALACE (A.Y.200 8-09) (IX) PURCHASE OF JEWELLERY FOR FAMILY MEMBERS OF THE TRU STEES. THE OBSERVATIONS OF CIT(A) ARE BROADLY AS UNDER : 1. THE ASSESSEE HAD NOT PROVIDED COMPLETE LIST OF I NTERESTED PERSONS AS SPECIFIED U/S 13(3) OF THE ACT TO THE AUDITORS AND, THEREFORE, THEY HAD NOT EXAMINED APPELLANTS TRANSACTIONS WITH THE INTEREST ED PERSONS AND, THUS, THE REPORT IN FORM NO. 10B BASED ON INCOMPLETE FACTS WA S UNRELIABLE AND, THUS, THE FINDINGS GIVEN IN AUDIT REPORT IN FORM NO. 10B MENTIONING THAT THERE WAS NO VIOLATION OF PROVISIONS U/S 13(2) WAS ALSO NOT R ELIABLE. 2. THAT ASSESSEE HAD GIVEN ADVANCES TO OTHER SOCIET IES, CONTROL AND MANAGEMENT OF THOSE SOCIETIES IS ALSO UNDER THE SAM E PERSONS WHO ARE MANAGING THE APPELLANT TRUST. THE APPELLANT HAS ALS O GIVEN ADVANCES TO SBI STAFF HOUSING SOCIETY AND PRIYADARSHINI CREDIT COOP ERATIVE SOCIETY WHICH ARE ALSO MANAGED BY THE OFFICE BEARERS OF THE APPELLANT AND THEY HAVE SUBSTANTIAL INTEREST IN THOSE SOCIETIES. AS MENTIONED BY THE AO , EVEN IN REGARD TO OTHER SOCIETIES WHICH ARE THOUGH REGISTERED U/S 12A BUT I T WAS FOUND THAT THOSE SOCIETIES ARE ALSO CONDUCTING THEIR ACTIVITIES AS A BUSINESS ORGANIZATION FOR H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 58 EARNING AND SHARING PROFITS AND NOT FOR CHARITABLE PURPOSES. THEREFORE, IT CANNOT BE SAID THAT THE ADVANCES WERE GIVEN BY THE APPELLANT SOLELY FOR THE PURPOSE OF FURTHERANCE OF ITS CHARITABLE OBJECTIVES OF PROVIDING EDUCATION. 3. SIMILARLY, INTEREST FREE ADVANCES TO VARIOUS PAR TIES OTHER THAN INTERESTED PERSONS WERE GIVEN WITHOUT ANY SECURITY. 4. THE VEHICLES OWNED BY THE APPELLANT ARE ALSO USE D BY THE PROHIBITED PERSONS MENTIONED IN SECTION 13(3) FOR THEIR PERSON AL USE. 5. CONSULTANCY CHARGES PAID TO TRUSTEES/OFFICE BEAR ERS ARE EXCESSIVE. 6. THAT FUNDS OF LAXMI NARAYAN COLLEGE OF TECHNOLOG Y, BHOPAL WERE USED FOR THE PURCHASE OF PROPERTY IN THE NAME OF IN TERESTED PERSONS SHRI ANUPAM CHOUKSEY AND SMT. POONAM CHOUKSEY. THUS, INC OME OF THE APPELLANT TRUST HAS BEEN USED DIRECTLY FOR THE BENE FIT OF SHRI ANUPAM CHOUKSEY AND SMT. POONAM CHOUKSEY, 7. THAT NEW VALLABH GRIH NIRMAN SAHKARI SAMITI HAS CLEARLY SHOWN LIABILITY OF RS.3,82,00,000/- IN ITS BALANCE SHEET AS ON 31.03.2008 REGARDING THE AMOUNT RECEIVED FROM THE APPELLANT TRUST. BUT THE APPELLA NT HAS NOT SHOWN ANY SUCH ADVANCE OR LOAN IN ITS BALANCE SHEET GIVEN TO NEW VALLABH GRIH NIRMAN SAHKARI SAMITI AND RATHER REFLECTED THIS AMO UNT AS ADDITION TO LAND. THE SAME LAND HAS BEEN SHOWN BY THE APPELLANT AS WE LL AS NEW VALLABH GRIH NIRMAN SAHKARI SAMITI AS ADDITION TO THEIR ASSETS O F LAND IN THEIR BALANCE SHEET AS ON 31.03.2008, WHICH IS NOT POSSIBLE AS TW O PERSONS COULD NOT BE ABSOLUTE OWNERS OF THE SAME LAND AT A PARTICULAR TI ME. THUS, IT IS ESTABLISHED THAT THE APPELLANT HAD GIVEN ADVANCE OR LOAN TO NEW VALLABH GRIH NIRMAN SAHKARI SAMITI IN WHICH OFFICE BEARERS OF THE APPEL LANT SOCIETY HAVE SUBSTANTIAL INTEREST WITHOUT CHARGING ADEQUATE INTE REST AND OBTAINING ADEQUATE SECURITY. 8. THE ASSESSEE FAILED TO FURNISH ANY COGENT EXPLAN ATION AS TO FOR WHICH PURPOSE THE AMOUNT OF RS. 14,00,000 (RS. 13,00,000 + RS. 1,00,000) HAS BEEN TRANSFERRED TO M/S PRIYANKA BUILDERS, INTEREST ED PERSONS, WHICH HAS BEEN USED FOR INVESTMENT IN NEENA PALACE IN THE NAM E OF SHRI J. N. CHOUKSEY. 9. FUNDS OF THE APPELLANT OF RS.5,00,000/- PAID TO M/S JOHARI SONS ON 13.04.2005 HAS BEEN UTILIZED FOR THE BENEFITS OF IN TERESTED PERSONSVIOLATING THE PROVISIONS OF SECTION 13 OF THE ACT. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WELL A S WRITTEN SUBMISSION AS UNDER: 1. RELIED ON THE SUBMISSIONS FILED BEFORE CIT(A), AS R EPRODUCED IN HIS ORDER . 2. THE OBSERVATIONS OF THE CIT(A) / AO REGARDING NON-F ILING OF LIST OF INTERESTED PERSONS SPECIFIED IN SEC. 13(3) WAS TOTALLY OUT OF CONTEXT, IRRELEVANT AND OPPOSED TO FACTS ON RECORDS. THIS IS BECAUSE ALL THE ISSUES PERTAINING TO SEC 13 HAVE BEEN ELABORATELY DEALT H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 59 WITH BY THE AO IN HIS ASSESSMENT ORDER. HENCE, THE GROUND OF NON-SUBMISSION OF LIST OF INTEREST PERSONS WAS TOTALLY MISPLACED AND OUT OF C ONTEXT. 3. FURTHER, ON OUR SUBMISSION THAT THE TRANSACTIONS WI TH PRIYADARSHINI CREDIT COOPERATIVE SOCIETY, SHIVAM BUILDERS AND ALL THE OTHER SOCIETIE S WERE DONE IN NORMAL COURSE OF SOCIETY'S CHARITABLE ACTIVITIES AND CARRIED OUT IN PURSUANCE OF EDUCATIONAL CHARITABLE OBJECTS OF THE ASSESSEE, NO COMMENT WAS OFFERED BY CIT(A). 4. THE SUBJECT ADVANCES WERE GIVEN TO CHARITABLE TRUST / SOCIETIES HAVING SIMILAR OBJECTS AND ALSO REGISTERED U/S 12A. THERE IS NO BAR IN ADVANCI NG INTEREST FREE ADVANCES TO SUCH CHARITABLE TRUST / SOCIETIES REGISTERED U/S 12A AS PER THE DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. RKDF EDUCATION SOCIETY IN ITA NO. 151/IND/2 010 DATED 1.8.2013 (INFRA). 5. SIMILARLY, AS REGARDS INTEREST FREE ADVANCES TO VA RIOUS PARTIES OTHER THAN INTERESTED PERSONS, IT IS SUBMITTED THAT IT IS CLEAR FROM THE VERSION OF AO / CIT(A) THAT THESE ADVANCES HAD NOT BEEN GIVEN TO ANY INTERESTED PERSONS SPECIF IED IN SEC 13(3). THESE ADVANCES WERE GIVEN IN THE NORMAL COURSE OF CHARITABLE ACTIV ITIES OF THE SOCIETY AND WHOLLY FOR THE PURPOSE OF THE SOCIETY. NEITHER, AO NOR CIT(A) HAS POINTED OUT ANY SPECIFIC INSTANCE WERE THESE WERE NOT GIVEN IN NORMAL COURSE OF THE CHARIT ABLE ACTIVITIES OF THE SOCIETY. HENCE, UNSUPPORTED OBSERVATION OF CIT(A) / AO WITHOUT PROV ING ANY VIOLATION OF PROVISION OF SEC 13(3), WERE TOTALLY UNCALLED FOR AND UNWARRANTED. 6. AS REGARDS THE PERSONAL USER OF VEHICLES BY THE TRUSTEES / OFFICE BEARERS, IT IS SUBMITTED THAT NO SUCH EVIDENCE WAS FOUND IN SEARCH AND THE DISALLOWANCE MADE BY AO / CIT(A) WAS ONLY ADHOC. THE REASONS AND THE CIRCUMSTANCES JUSTIFYING THE PURCHASE AND USE OF CAR IN THE ACTIVITIES OF THE TR UST / SOCIETY HAS BEEN FULLY NARRATED BY CIT(A) AT PG 139 TO 140, PARA 20.2 OF H IS ORDER. IT WAS DULY EXPLAINED THAT SINCE COLLEGES OF THE SOCIETIES ARE SITUATED A LMOST 10-12 KMS FROM THE MAIN CITY AREA IN FAR FLUNG AREAS, REGULAR CONNECTIVITY WITH THEM IS POSSIBLE ONLY WITH THE HELP OF VARIOUS VEHICLES. MOREOVER, THE TRUSTEES WE RE EXPECTED TO COMMUTE ON DAY-TO-DAY BASIS TO VARIOUS GOVERNMENT AGENCIES, BA NKS, AND OTHER ALLIED PLACES WHICH ARE SCATTERED ALL OVER THE VAST CITY OF BHOPA L AND THE APPELLANT IS EXPECTED TO EXTEND SUCH MINIMUM FACILITIES TO ITS TRUSTEES. MAINTENANCE OF LOG BOOK IS NOT PRACTICABLE FOR USE OF VEHICLES OF THE APPELLANT SO CIETY. HOWEVER, CIT(A), IN HIS WISDOM, CHOSE TO NOT TO COMMENT ON THE ABOVE JUSTIF ICATION GIVEN BY THE ASSESSEE. HE RATHER RESTED HIS CONCLUSION ON THE BA SIS THAT NO VEHICLE IS OWNED BY MEMBERS OF CHOUKSEY FAMILY AND THEY ARE MAN OF R EPUTE REQUIRING USE OF VEHICLE. IT IS SUBMITTED THAT THE OBSERVATION AND C ONCLUSIONS OF CIT(A) ARE BASELESS AND UNCALLED FOR. HE OUGHT TO HAVE APPRECI ATED THAT THE PROVISION OF CAR TO TRUSTEES/ OFFICE BEARERS IS MINIMUM FACILITY IN THE TODAYS WORLD WHEN THEY ARE REQUIRED TO COMMUTE TO VARIOUS GOVT. AGENCIES AND O THER PLACES SCATTERED ALL OVER THE VAST CITY OF BHOPAL. THIS CANNOT BE BRANDE D AT ANY STRETCH OF IMAGINATION THAT THE TRUSTEES HAVE BEEN PROVIDED WITH EXCESSIVE AMENITIES. RELIED ON : DEV RADHA MADHAVLALJI GENDA TRUST 125 ITR 531 (MP) DIT (EXEMPTION) VS. SHRI N.H. KAPADIA EDUCATION TRUST (2012) 74 DTR (AHD) (TRIB) 233 CIT VS. INDIA INSTITUTE OF COMPUTER TECHNOLOGY 244 ITR 371 (KER.) H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 60 DR. D Y PATILPRATISTHAN VS. DY. CIT (2013) 87 DTR 9 7 (PUNE 'B') RAJASTHAN VIKAS SANSTHAN VS. CIT (2012) 78 DTR 411( JODHPUR ) 7. THE CHARGE OF EXCESSIVENESS OF CONSULTANCY CHARG ES PAID TO TRUSTEES/OFFICE BEARERS DOES NOT HOLD GOOD BECAUSE THOUGH THE AO DI SALLOWED ENTIRE CONSULTANCY CHARGES PAID BY THE ASSESSEE BUT CIT(A) CONSIDERED CONSULTANCY CHARGES PAID FOR THE YEAR A.Y. 2004-05 TO 2009-10 A S REASONABLE BUT PARTLY CONFIRMED CONSULTANCY CHARGES IN A.Y. 2010-11. EVEN HIS PARTIAL DISALLOWANCE FOR A.Y. 2010-11 WAS NOT CORRECT BECAUSEIN THE EARLIER A.Y. 2009-10, TOTAL CONSULTANCY CHARGES PAID WAS 42,28,594/- WHICH WAS FOUND AS REASONABLE BY HIM WHEREAS IN THE ASSESSMENT YEAR 2010-11, HE HAS ONLY ALLOWED CONSULTANCY CHARGES TO THE TUNE OF RS. 30,00,000/- DESPITE THE FACT THAT IN THE F.Y. 2009-10 RELEVANT TO A.Y. 2010-11, THE ASSESSEE HAD ALSO STA RTED A MEDICAL COLLEGE & HOSPITAL, AS OBSERVED BY CIT(A). THIS SHOWS CASUAL AND CONTRADICTORY APPROACH OF THE CIT(A). 8. AS REGARDS PAYMENT OF RS. 3,82,00,000/- MADE BY THE ASSESSEE TO NEW VALLABH GRAH NIRMAN SHAKARI SAMITI FOR PURCHASE OF LAND FOR PUTTING UP MEDICAL COLLEGE & HOSPITAL, IT IS SUBMITTED THAT THE ISSUE WAS VERY S IMPLE, NOT PROPERLY COMPREHENDED BY CIT(A) / AO. CIT(A) HAS HIMSELF ST ATED AT PAGE 165, PARA 1, 3- 5 LINES OF HIS ORDER THAT BUT THE APPELLANT HAS N OT SHOWN ANY SUCH ADVANCE OR LOAN IN ITS BALANCE SHEET TO NEW VALLABH GRAH NIRMA N SHAKARI SAMITI AND RATHER REFLECTED THIS AMOUNT AS ADDITION TO LAND . HE HAS ALSO STATED AT SAME PAGE 165, TABLE THAT THE SAID PAYMENT OF RS. 3,82,00,000 /- WAS SHOWN BY NEW VALLABH GRAH NIRMAN SHAKARI SAMITI AS LIABILITY IN AMANATK HATA AS WELL AS IN ASSET ACCOUNT AS BHOOMIKRAY (LAND PURCHASE) TO THE EXT ENT OF RS. 3,80,88,000/-. INFACT, IT WAS AN ACCOUNTING ERROR ON THE PART OF N EW VALLABH GRAH NIRMAN SHAKARI SAMITI IN THAT THEY SHOULD HAVE ADJUSTED TH E LAND ACCOUNT FROM THE AMOUNT OF AMANATKHATA, REMOVING LAND ACCOUNT AS WEL L AS AMANATKHATA ACCOUNT FROM THEIR ACCOUNTS / FINANCIAL STATEMENT. BUT THE SAME WAS NOT DONE BY THEM AND THESE WERE SHOWN IN TWO SEPARATE ACCOUNTS SIMUL TANEOUSLY. THUS, SAME LAND WAS NOT SHOWN TWICE IN TWO TRUST / SOCIETIES, AS WRONGLY UNDERSTOOD BY CIT(A) /AO. THEREFORE, THE SUBJECT AMOUNT WAS USED FOR THE PURPOSE OF PURCHASE OF LAND BY ASSESSEE AND WAS RIGHTLY SHOWN IN ITS LA ND ACCOUNT, AS CORRECTLY OBSERVED BY CIT(A). HENCE, THE OBSERVATIONS OF CIT( A) / AO ARE EXTRANEOUS AND INCONGRUOUS. 9. REGARDING PAYMENT OF RS. 14,00,000/- TO PRIYANKA BUILDERS FOR NEENA PALACE HOTEL AND RS. 10,00,000/- TO MRS. RASHMI JAISWAL, R OHIT JAISWAL AND RAHUL JAISWAL, IT IS SUBMITTED THAT THE OBSERVATIONS OF C IT(A) /AO ARE MISPLACED AND EXTRANEOUS IN VIEW OF THE FACT THAT SHRI J N CHOUKS EY HAS ALREADY OFFERED TO TAX AMOUNT OF RS. 30,00,000/- AGAINST INVESTMENT IN HOT EL NEENA PALACE WHEREAS SHRI ANUPAM CHOUKSEY HAS OFFERED TO TAX AN AMOUNT O F RS.36,50,000/-OUT OF TOTAL ADVANCE OF RS.45,00,000/- IN HIS RETURN U/S 1 53A FOR A.Y.2007-08. SIMILARLY, SMT. POONAM CHOUKSEY HAS ALSO OFFERED RS.8,50,000/- OUT OF ADVANCE OF RS.45,00,000/- IN HER RETURN FILED U/S 153A FOR A.Y .2007-08. IT IS SUBMITTED THAT THE APPELLANT TRUST IS IMPART ING EDUCATION IN PURSUANCE OF ITS H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 61 CHARITABLE PURPOSES AND IT HAD NEITHER PAID NOR WAS THE BENEFICIARY OF THE SUBJECT TRANSACTION AND, HENCE, NO ADVERSE VIEW CAN BE TAKE N AGAINST THE APPELLANT. WITHOUT PREJUDICE TO ABOVE AND WITHOUT CONCEDING, IT IS SUBMITTED THAT IT IS AXIOMATIC LAW THAT IF THERE IS ANY MISAPPLICATION O F FUNDS OR MISMANAGEMENT, ACTION COULD LIE AGAINST THE PERSON RESPONSIBLE BUT IT IS NOT POSSIBLE TO SAY THAT ANY AMOUNTS OF THE FUNDS OF THE SOCIETY WAS NOT UTI LISED FOR EDUCATIONAL PURPOSES AND FOR THAT REASON THE CHARITABLE INSTITUTION CANN OT BE DENIED EXEMPTION WHICH DEPENDS UPON OBJECTS OF THE TRUST. RELIED ON THE FO LLOWING DECISIONS: I. COSMOPOLITAN EDUCATION SOCIETY 244 ITR 494 (RAJ. ) II. DCIT VS. HAI HAY KSHATRIYA EDUCATION SOCIETY IN ITA NO. 51 TO 56 AND 510/IND/ 2007 FOR A.Y. 1998-99 TO 2004-05 - RELEVANT PAGE 54 (SUPRA) III. HYNDAVI EDUCATION SOCIETY VS. ADIT (EXEMPTIONS)(201 3)86 DTR(HYD)196 10. AS REGARDS BILL OF RS. 1,56,600/- AND PAYMENT O F RS.5,00,000/- SAID TO HAVE BEEN MADE TO M/S JOHARI SONS ON 13.04.2005 BY LD CIT(A), FIRST OF ALL, WE CONCEDE THE MISTAKE THAT AS REGARDS BILL AND PAYMENT OF RS. 1,5 6,600/-CONFRONTED TO THE ASSESSEE BY AO , WE INCORRECTLY SUBMITTED BEFORE LD CIT(A) THAT NO SUCH PAYMENT WAS MADE. THIS WAS STATED BY US ON THE BASI S OF COPY OF BILL OF RS. 1,56,600/- ON WHICH IT WAS WRITTEN THAT BAKILENAR AHA. IN THE RUSH OF PREPARING HUGE SUBMISSIONS IN APPEAL FOR 19 ASSESSEES, THIS M ISTAKE OCCURRED BY COUNSELS FOR WHICH THE POOR ASSESSEE SHOULD NOT BE PENALIZED . HOWEVER, THE FACT REMAINS THAT AS REGARDS BALANCE BILLS OF RS. 3,43,400/- (5, 00,000 - 1,56,600) DETAILED AT PAGE 170 OF CIT(A) ORDER, NO SUCH BILLS HAVE BEEN CONFRONTED TO THE ASSESSEE BY CIT(A), WHO CLAIMS TO HAVE OBTAINED THE SAME AT THE BACK O F THE ASSESSEE. HENCE, NO ADVERSE VIEW CAN BE TAKEN AGAIN ST THE ASSESSEE TRUST WHICH EXIST SOLELY FOR CHARITABLE PURPOSES ONLY. FO R THIS PURPOSE RELIANCE IS PLACED ON THE DECISION OF KISHINCHAND CHELLARAM VS. C.I.T. 125 ITR 713 (SC) WHEREIN IT WAS HELD THAT AN ASSESSMENT BASED ON THE RESULT OF PRIVATE INQUIRIES CONDUCTED BEHIND THE BACK OF THE ASSESSEE WAS LIABLE TO BE S ET ASIDE BECAUSE THE EVIDENCE SO GATHERED WAS NOT PLACED BEFORE THE ASSESSEE. WIT HOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THAT THE SAID GOLD ITEMS WERE PURCHASED F OR SOUVINIERS, AS RIGHTLY SUBMITTED BEFORE AO, FOR THE PURPOSE OF AWARD /DIST RIBUTION AMONG MERITORIOUS STUDENTS ETC. AND THE JEWELLER MIGHT HAVE INCORRECT LY MENTIONED THE SAME AS GOLD JEWELLERY IN THE BILLS , AS BEING WRITTEN IN HIS RO UTINE COURSE OF BUSINESS. BUT, THE RIGHT COURSE OF ACTION, IN SUCH CASES WOULD HAVE BE EN THAT THE AO SHOULD HAVE SUMMONED THE JEWELLER TO VERIFY THE TRUTH, WHICH WA S NOT DONE BY HIM. HENCE, IN VIEW OF ABOVE, NO ADVERSE VIEW CAN BE TAKEN AGAINST THE ASSESSEE TRUST. THE LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTH ORITIES. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE CHARGE OF VIOLATION OF PROVISIONS OF SEC. 13 IS NOT CORREC T. THIS IS BECAUSE ALL THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 62 ALLEGED VIOLATIONS ARE FOUND TO HAVE BEEN SATISFACT ORILY EXPLAINED BY THE ASSESSEE AS BEING INCORRECT. THE AO HAS DISCUSSED TRANSACTIONS WITH INTERESTED P ERSONS AS SPECIFIED U/S 13(3) AND HENCE NON MENTIONING THEIR NAME IN THE AUDIT REPORT IN FORM NO. 10B CAN ONLY BE TERMED AS ACADEM IC BECAUSE THE ASSESSMENT ORDERS HAVE ALREADY BEEN FRAMED. IT IS FOUND THAT THE TRANSACTIONS WITH PRIYADARSHIN I CREDIT COOPERATIVE SOCIETY, SHIVAM BUILDERS AND ALL THE OT HER SOCIETIES WERE DONE IN NORMAL COURSE OF SOCIETY'S CHARITABLE ACTIV ITIES AND CARRIED OUT IN PURSUANCE OF EDUCATIONAL CHARITABLE OBJECTS OF THE ASSESSEE AND NO COMMENT WAS OFFERED BY CIT(A) ON ASSESSEES THIS CL AIM. SIMILARLY, AS REGARDS INTEREST FREE ADVANCES TO VAR IOUS PARTIES OTHER THAN INTERESTED PERSONS, IT IS CLEAR FROM THE VERSI ON OF AO / CIT(A) THAT THESE ADVANCES HAD NOT BEEN GIVEN TO ANY INTERESTED PERSONS SPECIFIED IN SEC 13(3). THESE ADVANCES WERE GIVEN IN THE NORM AL COURSE OF CHARITABLE ACTIVITIES OF THE SOCIETY AND WHOLLY FOR THE PURPOSE OF THE SOCIETY. NEITHER, AO NOR CIT(A) HAS POINTED OUT ANY SPECIFIC INSTANCE WHERE THESE WERE NOT GIVEN IN NORMAL COURSE OF THE CHARITABLE ACTIVITIES OF THE SOCIETY. HENCE, UNSUPPORTED OBSERVATION OF C IT(A) / AO WITHOUT PROVING ANY VIOLATION OF PROVISION OF SEC 13(3), AR E HELD TO BE TOTALLY UNCALLED FOR AND UNWARRANTED. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 63 AS REGARDS THE SUBJECT ADVANCES GIVEN TO CHARITABLE TRUST / SOCIETIES HAVING SIMILAR OBJECTS AND ALSO REGISTERED U/S 12A, THERE IS NO BAR IN ADVANCING INTEREST FREE ADVANCES TO SUCH CHARITABLE TRUST / SOCIETIES REGISTERED U/S 12A AS PER THE DECISION OF HONBLE M .P. HIGH COURT IN THE CASE OF CIT VS. RKDF EDUCATION SOCIETY IN ITA NO. 1 51/IND/2010 DATED 1.8.2013. AS REGARDS THE PERSONAL USER OF VEHICLES BY THE TRU STEES / OFFICE BEARERS, WE NOTE THAT NO SUCH EVIDENCE WAS FOUND IN SEARCH AND THE DISALLOWANCE MADE BY AO / CIT(A) WAS ONLY ADHOC. TH E REASONS AND THE CIRCUMSTANCES JUSTIFYING THE PURCHASE AND USE O F CAR IN THE ACTIVITIES OF THE TRUST / SOCIETY HAS BEEN FULLY NARRATED BY C IT(A) AT PG 139 TO 140, PARA 20.2 OF HIS ORDER. IT WAS DULY EXPLAINED THAT SINCE COLLEGES OF THE SOCIETIES ARE SITUATED ALMOST 10-12 KMS FROM THE MA IN CITY AREA IN FAR FLUNG AREAS, REGULAR CONNECTIVITY WITH THEM IS POSS IBLE ONLY WITH THE HELP OF VARIOUS VEHICLES. MOREOVER, THE TRUSTEES WERE EX PECTED TO COMMUTE ON DAY-TO-DAY BASIS TO VARIOUS GOVERNMENT AGENCIES, BANKS, AND OTHER ALLIED PLACES WHICH ARE SCATTERED ALL OVER THE VAST CITY OF BHOPAL AND THE APPELLANT IS EXPECTED TO EXTEND SUCH MINIMUM FACILI TIES TO ITS TRUSTEES. MAINTENANCE OF LOG BOOK IS NOT PRACTICABLE FOR USE OF VEHICLES OF THE ASSESSEE SOCIETY. WE ALSO FIND THAT CIT(A) HAS NOT COMMENTED ON THE ABOVE JUSTIFICATION GIVEN BY THE ASSESSEE. HE RATHE R RESTED HIS H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 64 CONCLUSION ON THE BASIS THAT NO VEHICLE IS OWNED BY MEMBERS OF CHOUKSEY FAMILY AND THEY ARE MAN OF REPUTE REQUIRIN G USE OF VEHICLE. WE AGREE WITH THE CONTENTIONS OF THE ASSESSEE THAT THE PROVISION OF CAR TO TRUSTEES/ OFFICE BEARERS IS MINIMUM FACILITY IN THE TODAYS WORLD WHEN THEY ARE REQUIRED TO COMMUTE TO VARIOUS GOVT. AGENC IES AND OTHER PLACES SCATTERED ALL OVER THE VAST CITY OF BHOPAL. THEREFORE, IN OUR OPINION, THIS CANNOT BE SAID THAT THE TRUSTEES HAVE BEEN PROVIDED WITH EXCESSIVE AMENITIES. FOR THIS PROPOSITION, WE ARE S UPPORTED BY THE FOLLOWING DECISIONS : MAINTENANCE OF TRUST PROPERTY, PAYMENT TO EMPLOYEES AND OTHER EXPENSES ARE INCIDENTAL AND CONNECTED WITH THE OBJECTS OF THE CHARITABLE TR UST. THE SAME THEREFORE CANNOT BE DISALLOWED. DEV RADHA MADHAVLALJI GENDA TRUST 125 ITR 531 (MP) WITH REGARD TO THE USE OF MOTOR CARS PROVIDED TO TH E TRUSTEES CANNOT ALSO BE CONSIDERED TO BE EXCESSIVE AMENITIES PROVIDED TO THEM. AS THEY WERE EXPECTED TO COMMUTE ON DAY- TO-DAY BASIS TO VARIOUS GOVERNMENT AGENCIES, AND OT HER ALLIED PLACES WHICH WERE SCATTERED ALL OVER THE VAST CITY OF AHMADABAD, THE ASSESSEE TRUST WAS EXPECTED TO EXTEND SUCH MINIMUM FACILITIES TO ITS TRUSTEES. THIS CANNO T BE BRANDED AT ANY STRETCH OF IMAGINATION THAT THE TRUSTEES HAVE BEEN PROVIDED WI TH EXCESSIVE AMENITIES. DIT (EXEMPTION) VS. SHRI N.H. KAPADIA EDUCATION TRUST (2012) 74 DTR (AHD) (TRIB) 233 MERELY BECAUSE THERE WOULD BE SOME TRANSACTION WITH THE MEMBERS OF THE FIRMS IN WHICH SOME MEMBERS MAY BE INTERESTED IN THE CASE OF THE S OCIETY RUNNING AN EDUCATIONAL INSTITUTES, EXEMPTION U/S 11 CANNOT BE DENIED AS LO NG AS THE PAYMENT WAS NOT FOUND TO BE UNREASONABLY LARGER AND NOT COMMENSURATE WITH THE S ERVICES. CIT VS. INDIA INSTITUTE OF COMPUTER TECHNOLOGY 244 ITR 371 (KER.) DR. D Y PATILPRATISTHAN VS. DY. CIT (2013) 87 DT R 97 (PUNE 'B') RAJASTHAN VIKAS SANSTHAN VS. CIT (2012) 78 DTR 4 11(JODHPUR ) REGARDING THE CHARGE OF EXCESSIVENESS OF SALARY/CO NSULTANCY CHARGES PAID TO TRUSTEES/OFFICE BEARERS, WE NOTE TH AT THE APPROACH OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 65 CIT(A) AS WELL AS AO ARE WRONG. THOUGH THE AO DISAL LOWED ENTIRE CONSULTANCY CHARGES PAID BY THE ASSESSEE BUT CIT(A) CONSIDERED CONSULTANCY CHARGES PAID FOR THE YEAR A.Y. 2004-05 TO 2009-10 AS REASONABLE BUT PARTLY CONFIRMED CONSULTANCY CHARGES IN A.Y. 2010-11. EVEN PARTIAL DISALLOWANCE BY CIT(A) FOR A.Y. 2010- 11 CANNOT BE SAID TO BE CORRECT BECAUSE IN THE EARLIER A.Y. 2009-10, TOT AL CONSULTANCY CHARGES PAID WAS 42,28,594/- WHICH WAS FOUND AS REA SONABLE BY HIM WHEREAS IN THE ASSESSMENT YEAR 2010-11, HE HAS ONLY ALLOWED CONSULTANCY CHARGES TO THE TUNE OF RS. 30,00,000/- DESPITE THE FACT THAT IN THE F.Y. 2009-10 RELEVANT TO A.Y. 2010-11, THE A SSESSEE HAD ALSO STARTED A MEDICAL COLLEGE & HOSPITAL, AS OBSERVED BY CIT(A). AS REGARDS PAYMENT OF RS. 3,82,00,000/- MADE BY TH E ASSESSEE TO NEW VALLABH GRAH NIRMAN SHAKARI SAMITI FOR PURCHASE OF LAND FOR PUTTING UP MEDICAL COLLEGE & HOSPITAL, IT IS FOUND THAT THE ISSUE WAS NOT PROPERLY COMPREHENDED BY CIT(A) / AO. CIT(A) HAS HIMSELF ST ATED AT PAGE 165, PARA 1, 3-5 LINES OF HIS ORDER THAT BUT THE APPEL LANT HAS NOT SHOWN ANY SUCH ADVANCE OR LOAN IN ITS BALANCE SHEET TO NEW VA LLABH GRAH NIRMAN SHAKARI SAMITI AND RATHER REFLECTED THIS AMOUNT AS ADDITION TO LAND. HE HAS ALSO STATED AT SAME PAGE 165, TABLE THAT THE SA ID PAYMENT OF RS. 3,82,00,000/- WAS SHOWN BY NEW VALLABH GRAH NIRMAN SHAKARI SAMITI AS LIABILITY IN AMANATKHATA AS WELL AS IN ASSET ACCOUNT AS BHOOMIKRAY (LAND PURCHASE) TO THE EXTENT OF RS. 3, 80,88,000/-. INFACT, H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 66 THIS EXPLANATION OF THE ASSESSEE IS FOUND ACCEPTABL E AND PRACTICAL THAT IT WAS ONLY AN ACCOUNTING ERROR ON THE PART OF NEW VAL LABH GRAH NIRMAN SHAKARI SAMITI IN THAT THEY SHOULD HAVE ADJUSTED TH E LAND ACCOUNT FROM THE AMOUNT OF AMANATKHATA, REMOVING LAND ACCOUNT AS WELL AS AMANATKHATA ACCOUNT FROM THEIR ACCOUNTS / FINANCIAL STATEMENT. BUT THE SAME WAS NOT DONE BY THEM AND THESE WERE SHOWN IN T WO SEPARATE ACCOUNTS SIMULTANEOUSLY. THUS, SAME LAND WAS NOT SH OWN TWICE IN TWO TRUST / SOCIETIES, AS WRONGLY UNDERSTOOD BY CIT(A) /AO. THEREFORE, THE SUBJECT AMOUNT WAS USED FOR THE PURPOSE OF PURCHASE OF LAND BY ASSESSEE AND WAS RIGHTLY SHOWN IN ITS LAND ACCOUNT, AS CORRECTLY OBSERVED BY CIT(A). HENCE, IN OUR OPINION, THE OBSE RVATIONS OF CIT(A) / AO ARE WRONG AND INCORRECT. FURTHER, REGARDING PAYMENT OF RS. 14,00,000/- TO P RIYANKA BUILDERS FOR NEENA PALACE HOTEL AND RS. 10,00,000/- TO MRS. RASHMI JAISWAL, ROHIT JAISWAL AND RAHUL JAISWAL, WE FIND THAT SHRI J N CHOUKSEY HAS ALREADY OFFERED TO TAX AMOUNT OF RS. 30,00,000/- AG AINST INVESTMENT IN HOTEL NEENA PALACE WHEREAS SHRI ANUPAM CHOUKSEY HAS OFFERED TO TAX AN AMOUNT OF RS.36,50,000/-OUT OF TOTAL ADVANCE OF RS.45,00,000/- IN HIS RETURN U/S 153A FOR A.Y.2007-08. SIMILARLY, SMT. PO ONAM CHOUKSEY HAS ALSO OFFERED RS.8,50,000/- OUT OF ADVANCE OF RS.45, 00,000/- IN HER RETURN FILED U/S 153A FOR A.Y.2007-08. AS REGARDS BILL OF RS. 1,56,600/- AND PAYMENT OF R S.5,00,000/- SAID H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 67 TO HAVE BEEN MADE TO M/S JOHARI SONS ON 13.04.2005 BY LD CIT(A), FIRST OF ALL, WE FIND THAT AS REGARDS RS. 1,56,600/, THE ASSESSEE HAS CONCEDED HIS MISTAKE BEING HUMAN AND INADVERTENT. HOWEVER, A S REGARDS BALANCE BILLS OF RS. 3,43,400/- (5,00,000 - 1,56,600) DETAI LED AT PAGE 170 OF CIT(A) ORDER, WE NOTE THAT NO SUCH BILLS HAVE BEEN CONFRONTED TO THE ASSESSEE BY CIT(A), WHO CLAIMS TO HAVE OBTAINED THE SAME AT THE BACK OF THE ASSESSEE. HENCE, NO ADVERSE VIEW CAN BE TAKE N AGAINST THE ASSESSEE TRUST IN VIEW OF THE DECISION OF KISHINCHA ND CHELLARAM VS. C.I.T. 125 ITR 713 (SC) WHEREIN IT WAS HELD THAT AN ASSESSMENT BASED ON THE RESULT OF PRIVATE INQUIRIES CONDUCTED BEHIND THE BACK OF THE ASSESSEE WAS LIABLE TO BE SET ASIDE BECAUSE THE EV IDENCE SO GATHERED WAS NOT PLACED BEFORE THE ASSESSEE. FURTHER, IN OUR OPINION, IT IS BY NOW AXIOMATIC LA W THAT IF THERE IS ANY MISAPPLICATION OF FUNDS OR MISMANAGEMENT, ACTIO N COULD LIE AGAINST THE PERSON RESPONSIBLE BUT IT IS NOT POSSIBLE TO SA Y THAT ANY AMOUNTS OF THE FUNDS OF THE SOCIETY WAS NOT UTILISED FOR EDUCA TIONAL PURPOSES AND FOR THAT REASON THE CHARITABLE INSTITUTION CANNOT BE DE NIED EXEMPTION WHICH DEPENDS UPON OBJECTS OF THE TRUST. FOR THIS PROPOSI TION, WE ARE SUPPORTED BY THE FOLLOWING DECISIONS: I. COSMOPOLITAN EDUCATION SOCIETY 244 ITR 494 (RAJ. ) II. DCIT VS. HAI HAY KSHATRIYA EDUCATION SOCIETY IN ITA NO. 51 TO 56 AND 510/IND/ 2007 FOR A.Y. 1998-99 TO 2004-05 - RELEVANT PAGE 54 (SUPRA)-INDORE ITAT III. HYNDAVI EDUCATION SOCIETY VS. ADIT (EXEMPTIONS)(20 13) 86 DTR(HYD)196 H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 68 IN THE CASE OF JAI NARAIN SHIKSHA SAMITI WE FIND THAT THE ISSUES WHICH ARE COMMON HAVE ALREA DY BEEN DEALT WITH BY US IN THE CASE OF H K KALCHURI EDUCAT ION TRUST, AS ABOVE. OUR FINDINGS IN THE ABOVE CASE WILL PREVAIL IN THIS CASE ALSO AND THE VIOLATION OF SEC. 13 ARE FOUND TO BE INCORRECT INDE PENDENT ISSUES ARE DEALT WITH AS UNDER: IN THIS CASE, THE CHARGE OF EXCESSIVENESS OF CONS ULTANCY CHARGES PAID TO TRUSTEES/OFFICE BEARERS IS NOT CORRECT BECA USE THOUGH THE AO DISALLOWED ENTIRE CONSULTANCY CHARGES PAID BY THE A SSESSEE BUT CIT(A) CONSIDERED CONSULTANCY CHARGES PAID FOR THE YEAR A. Y. 2004-05 TO 2009- 10 AS REASONABLE BUT PARTLY CONFIRMED CONSULTANCY C HARGES IN A.Y. 2010- 11. EVEN HIS PARTIAL DISALLOWANCE FOR A.Y. 2010-11 WAS NOT CORRECT ON THE FACTS OF THE CASE. THIS IS BECAUSE CONSULTANCY CHAR GES /SALARY WAS PAID TO MS. SWETA CHOUKSEY, MS. DHRITI CHOUKSEY AND MS. POOJA CHOUKSEY FOR THE FIRST TIME FOR EXTENSIVE SERVICES GIVEN BY THEM IN A.Y. 2010-11 WHICH SWELLED THE AMOUNT OF CONSULTANCY CHARGES /SA LARY. ALSO, THESE CONSULTANCY CHARGES /SALARY HAVE ALSO BEEN TAXED IN THEIR INDIVIDUAL HANDS ALONGWITH CONSULTANCY CHARGES /SALARY TO OTHE R FAMILY MEMBERS OF CHOUKEY GROUP BY THE SAME AO. MOREOVER, THE LD. CI T(A) HAS NOT GIVEN ANY BASIS OR JUSTIFICATION FOR TREATING THE S ALARY/CONSULTANCY CHARGES AS EXCESSIVE AND UNREASONABLE. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 69 REGARDING PURCHASE OF LAND , WE FIND THAT THE LD. CIT(A) HAS CONFIRMED THE ADDITION ON THE GROUND THAT EXCESSIVE NESS OR UNREASONABLENESS HAS NOT BEEN PROVED BY THE ASSESSE E. BUT, IN OUR OPINION, EXCESSIVENESS OR UNREASONABLENESS HAS TO B E PROVED BY THE LD AO ONLY AND NOT BY THE ASSESSEE. THE AO CAN NOT PRE SUME OR SIMPLY ALLEGE AS HE HAD FULL DETAILS OF THE LAND I.E. KHAS RA NO, PATWARI HALKA, LOCATION, AREA OF LAND ETC AS STATED BY HIMSELF AT PG. 53 PARA 6.1 OF HIS ORDER. WE NOTE THAT THE AO HAS SIMULTANEOUSLY ASSES SED BOTH THE SELLERS AND ACCEPTED THE TRANSACTION. IT IS ALSO NO TED THAT SUBJECT LANDS HAVE BEEN PURCHASED FOR SETTING UP COLLEGES / EDUCA TIONAL INSTITUTIONS WHICH WERE AND ARE UP AND RUNNING PURSUING THE PRED OMINANT OBJECTS OF THE ASSESSEE SOCIETY FULFILLING ITS EDUCATIONAL PUR POSE ONLY AND NOT FOR INDIVIDUAL BENEFIT OF ANY SUCH INTERESTED PERSONS. NATURALLY, WHEN THE AO HAS NOT PROVED THE EXCESSIVENESS BY BRINGING ANY SU PPORTING EVIDENCE, SUCH ACTION OF THE AO CANNOT BE UPHELD. IN THE CASE OF HAI HAY KSHATRIYA EDUCATION SOCIETY WE FIND THAT ALL THE ISSUES REGARDING VIOLATION OF SEC. 13 ARE COMMON AND HAVE ALREADY BEEN DEALT WITH BY US IN TH E CASE OF H K KALCHURI EDUCATION TRUST, AS ABOVE. OUR FINDINGS IN THE ABOVE CASE WILL PREVAIL IN THIS CASE ALSO AND THE VIOLATION OF SEC. 13 ARE HELD TO BE INCORRECT. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 70 IN THE CASE OF RISHIRAJ MEMORIAL EDUCATION & WELFAR E SOCIETY WE FIND THAT THE ISSUES WHICH ARE COMMON HAVE ALREA DY BEEN DEALT WITH BY US IN THE CASE OF H K KALCHURI EDUCAT ION TRUST, AS ABOVE. OUR FINDINGS IN THE ABOVE CASE WILL PREVAIL IN THI S CASE ALSO AND THE VIOLATION OF SEC. 13 ARE FOUND TO BE INCORRECT. IND EPENDENT ISSUES ARE DEALT WITH AS UNDER: AS REGARDS PURCHASE OF JEWELLERY, WE NOTE THAT ADDI TIONS OF RS. 45,000/- MADE BY AO IN A.Y. 2009-10 WAS DELETED BY CIT(A) AND HE DIRECTED AO TO MAKE ADDITIONS OF RS. 4,00,000/- (45 ,000 + 3,55,000) IN A.Y. 2010-11 WITHOUT GIVING ANY NOTICE OF ENHANCEME NT. MOREOVER, THE SAID ADDITION OF RS. 4,00,000/- WAS MADE IN A.Y. 20 10-11 ONLY ON THE BASIS OF ENQUIRIES CARRIED OUT BY AO DURING APPELLA TE PROCEEDINGS, AS CLAIMED BY CIT(A) ON PAGE 158,PARA 19, 7 TH LINE FROM TOP. IN OUR VIEW, SINCE, THE SO-CALLED ENQUIRY WAS MADE BEHIND THE BA CK OF THE ASSESSEE, THAT TOO DURING APPELLATE PROCEEDINGS, AND THE MATE RIAL COLLECTED WAS NOT CONFRONTED TO THE ASSESSEE, THE ADDITION BASED THER EON CAN NOT BE SUSTAINED IN VIEW OF THE APEX COURT DECISION IN KIS HICHAND CHALLARAM VS CIT(A) 125 ITR 713 (SC) AND NO CREDENCE CAN BE GIVE N TO SUCH FINDINGS. MOREOVER, THE EXPLANATION OF THE ASSESSEE WAS NOT R EBUTTED THAT THESE ITEMS HAVE BEEN PURCHASED FOR DISTRIBUTION TO MERITORIOUS STUDENTS H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 71 OF THE COLLEGES OF THE ASSESSEE SOCIETY AND HENCE W AS FOR THE CHARITABLE PURPOSE OF THE SOCIETY ONLY AND MAY BE THAT THE JE WELLER HAS INADVERTENTLY WRITTEN ROUTINE ITEMS OF JEWELLERY ON THE BILL AS PER HIS REGULAR AND ROUTINE PRACTICE. AO HAS NOT ENQUIRED THE SAME. AS REGARDS SALE OF LAND, WE FIND THAT THE ASSESSEE SOCIETY HAS NOT ENTERED INTO THE SAID AGREEMENT OF RS. 3.19 CRORES, AS STATED/CLAIMED BY CIT(A). WE ALSO NOTE THAT AS PER CLAUSE 4 OF THE S UBJECT AGREEMENT, IT WAS THE PRIME CONDITION OF AGREEMENT THAT BEFORE S ALE OF THIS LAND, THE SELLER SHALL OBTAIN PRIOR PERMISSION OF MEMBERS IN THE GENERAL BODY MEETING BUT NO SUCH PERMISSION OF GENERAL BODY WAS OBTAINED FOR SELLING LAND AT RS. 3,19,00,000/- AND NEITHER IT IS THE CASE OF THE AO. THAT AFFIRMS THE CONTENTION OF THE ASSESSEE AND LEN DS SUPPORT TO THE FACT THAT THE SUBJECT AGREEMENT WAS NOT ENTERED BY THE A SSESSEE SOCIETY BUT BY ITS MEMBERS WITHOUT HAVING BEEN AUTHORIZED BY TH E SOCIETY AND HENCE NO ADVERSE VIEW CAN BE TAKEN AGAINST THE ASSE SSEE SOCIETY WHICH EXISTS SOLELY FOR CHARITABLE PURPOSE AND ACTION, IF ANY, COULD LIE ONLY AGAINST ERRING MEMBERS/OFFICE BEARERS AS PER SETTLE D LAW. THIS ARGUMENT OF ASSESSEE WAS ALSO NOT REBUTTED BY AO OR CIT(A) THAT AT THE TIME OF SUBJECT SEIZED SALE-AGREEMENT, LATE MR. TANWANT SINGH KEER WAS PRESIDENT OF THE ASSESSEE SOCIETY AN D HE PERSONALLY WAS DOING SOME UNFAIR PRACTICES WHICH CREATED DISPU TES BETWEEN HIM H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 72 AND THE OTHER OFFICE BEARERS AND BECAME THE PRIME R EASON FOR SEPARATING MANAGEMENT OF DIFFERENT EDUCATIONAL SOCIETIES TO BE LOOKED AFTER BY DIFFERENT DIFFERENT FAMILY MEMBERS VIZ. KEER FAMI LY AND CHOUKSEY FAMILY. THIS FACT ALSO CANNOT BE IGNORED THAT THE IMPUGNED SALE- AGREEMENT IS UNDATED AND IT IS SIGNED BY THE THEN P RESIDENT OF THE SOCIETY LATE SHRI TANWANT SINGH KEER AND MR. ASHOK NANDA, TREASURER AS SELLERS AND MR. J N CHOUKSEY AS WITNESS. IT IS N OT SIGNED BY THE PROSPECTIVE PURCHASERS NAMELY MOHAMMAD ANIS, T M KH AN AND SAYYAD MASROR ALI. THEREFORE, SINCE THAT THE SUBJECT AGREE MENT HAS BEEN SIGNED BY THE SELLERS ONLY AND NOT BY THE PROSPECTIVE PURC HASERS, IT HAS NO LEGAL SANCTITY AND CREDENCE BECAUSE IT CANNOT BE ENFORCED IN LAW AND MOST IMPORTANTLY, THE AGREEMENT HAS BEEN FOUND FROM THE PARTY RELATED TO SELLERS AND NOT FROM THE PROSPECTIVE BUYERS AND HEN CE THIS FACT ASSUMES LOT OF LEGAL IMPORTANCE THAT THE ALLEGED AGREEMENT IS SIGNED ONLY BY SELLERS AND NOT BY THE PURCHASERS. THIS PROVES THAT AT LEAST THIS AGREEMENT WAS NOT EXECUTED AT ALL. IT IS SETTLED LA W THAT AN UNSIGNED DOCUMENT WHICH IS STATED TO HAVE NEVER BEEN ACTED U PON RIGHT FROM THE BEGINNING, CANNOT BE PRESUMED TO CONTAIN UNDISCLOSE D / UNACCOUNTED INCOME. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 73 THIS EXPLANATION OF THE ASSESSEE ALSO APPEARS PLAUS IBLE AND WAS ALSO NOT CONTROVERTED THAT THE PROSPECTIVE BUYERS W OULD HAVE THOUGHT THAT THE LAND USE OF THE SAID AGRICULTURE LAND CAN BE GOT EASILY CONVERTED INTO RESIDENTIAL USE FROM THE GOVT. AND HENCE WERE THINKING OF PAYING HIGHER PRICE BUT THEY BACKED OUT ON REALIZING THAT IT IS NOT EASY TO DO SO. THEY, THEREFORE, DID NOT SIGN THE AGREEMENT WHICH H ENCE REMAINED UNEXECUTED. WE ALSO NOTE THAT DESPITE SPECIFIC REQUEST BY ASSES SEE BEFORE CIT(A), CONTAINED AT PG. 165 PARA (VI) OF CIT(A) OR DER, FOR CALLING THE SO- CALLED PURCHASERS U/S 131 TO VERIFY THEIR CONTENTIO NS AND FACTS, THE SAME WAS NOT DONE. THEREFORE, AS DECIDED BY HON'BLE MP H IGH COURT IN CIT VS. RAMESH CHANDRA SHUKLA (2008) 10 ITJ 286(MP) IF THIS REQUEST WAS NOT ACCEDED TO, NO ADVERSE VIEW COULD BE TAKEN AGAI NST THE ASSESSEE. THIS FACT CAN ALSO NOT BE IGNORED THAT THE AO OR CI T(A) HAVE NOT CORROBORATED THEIR ALLEGATIONS BY CONDUCTING ANY IN QUIRY. WE ALSO NOTE THAT THE ASSERTION OF THE ASSESSEE THA T THEN PRESIDENT LATE SHRI T.S. KEER HAS DONE SOME MISDEEDS FOR WHIC H ASSESSEE SOCIETY SHOULD NOT BE PENALIZED, APPEARS PROPER AND ACCEPTA BLE IN VIEW OF THE FACT THAT THE THEN VICE PRESIDENT OF RCDC (DENTAL C OLLEGE) MR. SURESH CHOUKSEY LODGED A POLICE COMPLAINT BEFORE THANA IN- CHARGE, GANDHI NAGAR POLICE STATION, BHOPAL AS POINTED OUT BY AO I N PARA 7.2 ONWARDS H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 74 OF HIS ASSESSMENT ORDER, ALLEGING THE CONSPIRACY HA TCHED BY LATE SHRI T.S. KEER FOR DEFRAUDING THE SOCIETY. IT IS VERY IM PORTANT TO NOTE THAT THIS COPY OF POLICE COMPLAINT WAS ALSO SEIZED DURING SEA RCH AND HENCE ITS EVIDENTIARY VALUE CANNOT BE DENIED OR DILUTED AND R ATHER IT ASSUMES LOT OF SIGNIFICANCE BECAUSE IT CANNOT BE CONSIDERED AS AN AFTERTHOUGHT OR COOKED UP STORY. FIR CARRIES LOT OF LEGAL SIGNIFICA NCE AND CREDENCE EVEN IN CIVIL AND CRIMINAL LAWS AND HENCE CARRY EQUAL FO RCE AND IMPORTANCE IN THE INCOME TAX ALSO. IN VIEW OF ABOVE, WE ARE INCLINED TO ACCEPT THE ARG UMENT OF THE ASSESSEE THAT IN ANY CASE, AT LEAST THE ASSESSEE-S OCIETY CANNOT BE PENALIZED FROM THE WRONGDOING OF ITS MEMBERS/OFFICE BEARERS AND THE ACTION IF ANY COULD LIE AGAINST THE ERRING OFFICE B EARER. FOR THIS PROPOSITION, WE ARE SUPPORTED BY FOLLOWING DECISION S: IF THERE WAS ANY MISAPPLICATION OF FUNDS OR MISMANA GEMENT, ACTION COULD LIE AGAINST THE PERSON RESPONSIBLE BUT IT IS NOT POSSIB LE TO SAY THAT ANY AMOUNTS OF THE FUNDS OF THE SOCIETY WAS NOT UTILIZED FOR ED UCATIONAL PURPOSES AND FOR THAT REASON THE CHARITABLE INSTITUTION CANNOT BE DE NIED EXEMPTION WHICH DEPENDS UPON OBJECTS OF THE TRUST. COSMOPOLITAN EDUCATION SOCIETY 244 ITR 494 (RAJ.) WHERE THERE IS MISCONDUCT ON THE PART OF THE TRUSTE E, THE CHARITABLE INSTITUTION IS CERTAINLY EXPECTED TO TAKE APPROPRIATE ACTION AG AINST SUCH TRUSTEE FOR RECOVERY OF THE AMOUNT BUT DOES NOT MEAN THAT THE E XEMPTION GRANTED TO THE INSTITUTIONS SHOULD BE FORFEITED. ACCORDINGLY, THE AO WAS NOT JUSTIFIED IN DECLINING THE CLAIM OF EXEMPTION U/S 11 TO THE ASSE SSEE SOCIETY. DCIT VS. HAI HAY KSHATRIYA EDUCATION SOCIETY IN IT A NO. 51 TO 56 AND 510/IND/ 2007 FOR A.Y. 1998-99 TO 2004-05 - RELEVANT PAGE 54 (SUPRA)- ITAT INDORE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 75 HYNDAVE EDUCATION SOCIETY VS. ADIT (EXEMPTIONS) (20 13) 86 DTR (HYD) 196 WE ALSO DRAW SUPPORT FROM THE DECISION OF K.P. VERG HESE VS. ITO 131 ITR 597 (SC) FOR THE PROPOSITION THAT APPARENT TRANSACTION IS REAL TRANSACTION AND WITHOUT CORROBORATION ADDITION CANN OT BE MADE ON PRESUMPTIONS ON GUESS WORK. WE ALSO PLACE RELIANCE ON THE DECISION OF HONBLE APEX COURT IN STATE OF KERALA V. M.M. MATHE W (1978) 42 STC 348 (SC) WHEREIN IT WAS HELD THAT 'STRONG SUSPICION, STRANGE COINCIDENCE AND GRAVE DOUBTS CANNOT TAKE THE PLACE OF LEGAL PROOF'. IN THE CASE OF RISHIRAJ SINGH MEMORIAL WELFARE SOCI ETY WE FIND THAT THE ISSUES WHICH ARE COMMON HAVE ALREA DY BEEN DEALT WITH BY US IN THE CASE OF H K KALCHURI EDUCAT ION TRUST, AS ABOVE. OUR FINDINGS IN THE ABOVE CASE WILL PREVAIL IN THIS CASE ALSO AND THE VIOLATION OF SEC. 13 ARE FOUND TO BE INCORRECT. IND EPENDENT ISSUES ARE DEALT WITH AS UNDER: AS REGARDS ENTRIES ON LOOSE PAPERS TREATED AS PAYME NTS TO INTERESTED PERSONS, WE OBSERVE THAT THESE ENTRIES O N LOOSE PAPERS CANNOT BE TREATED AS PAYMENTS TO INTERESTED PERSONS FOR THE PURPOSE OF VIOLATION OF SEC.13. FIRSTLY, THESE PAPERS WERE FOU ND FROM THE PREMISES 31, SHYMLA HILLS, BHOPAL WHICH IS RESIDENCE OF MR. J N CHOUKSEY , OFFICE BEARER / TRUSTEE OF THE CHOUKSEY GROUP. HENCE THE E NTIRE LOOSE PAPER H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 76 BELONGS TO ASSESSEE SOCIETY, IS AN IRRATIONAL CONCL USION. WE ALSO NOTE THAT NO DETAILS HAVE BEEN GIVEN BY AO AS TO HOW HE HAS WORKED OUT TOTAL RECEIPTS AND TOTAL EXPENDITURE STATED TO BE WRITTEN ON THE SEIZED LOOSE PAPER. ALSO, SHRI J N CHOUKSEY, OFFICE BEARER, HIM SELF STATED IN THE STATEMENT THAT ALL THE ENTRIES AND TRANSACTIONS ARE DULY RECORDED IN THE BOOKS OF ACCOUNTS WHICH COULD NOT BE TALLIED BECAUS E THE SEIZED BOOKS OF ACCOUNTS WERE GIVEN TO THE ASSESSEE ON 01.07.201 3 AFTER FRAMING OF ASSESSMENT ORDER. IT WAS ALSO EXPLAINED THAT THE EN TRIES WERE WRITTEN BY ACCOUNTANT IN HIS WRITING PERTAINING TO VARIOUS COL LEGES / EDUCATIONAL INSTITUTIONS RUN BY ASSESSEE GROUP. HE HAD TO GIVE STATEMENT OF RECEIPTS AND EXPENSES OF COLLEGE / INSTITUTION AND FOR THIS PURPOSE, HE NOTED VARIOUS DETAILS FOR HIS MEMORANDUM PURPOSE. IT WAS ALSO EXPLAINED THAT NONE OF THE PERSONAL EXPENSES / WITHDRAWALS HAVE BE EN DEBITED IN THE BOOKS OF SOCIETY NEITHER THE AO HAS POINTED OUT ANY SUCH INSTANCE. IT WAS ARGUED THAT THE SETOFF OF INFLOW AND OUTFLOW W AS ALSO NOT GIVEN BY AO WHO ADDED ALL THE FIGURES NOTED ON THE LOOSE PAP ERS. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, VIOLATION OF SEC. 13 ON THIS ISSUE CANNOT BE PRESUMED BECAUSE IT WAS MERE UNSUBSTANTIATED PRESUM PTION OF AO, PARTICULARLY IN VIEW OF THE FACT THAT THE LOOSE PAP ER WAS FOUND FROM THE RESIDENCE OF OFFICE BEARER WHO HAS SURRENDERED SUFF ICIENT INCOME IN HIS HANDS. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 77 IN VIEW OF ABOVE, VIOLATIONS OF SEC.13 ARE FOUND IN CORRECT IN ALL THE FIVE ASSESSEES. 7. THE ASSESSEE AND REVENUE BOTH HAVE CHALLENGED TH E ISSUE OF DISALLOWANCE OF INTEREST ON ACCOUNT OF DIVERSION OF BORROWED FUNDS FOR NON- BUSINESS CONSIDERATION. SHORT FACTS OF THE ISSUE ARE THAT THE AO NOTICED ON PERUSAL OF INCOME & EXPENDITURE ACCOUNT THAT THE ASSESSEE HAS DEBITED EXPENSES ON ACCOUNT OF INTEREST ON LOAN AND ALSO SHOWN ADVAN CES AND LOANS GIVEN TO OTHERS AS UNDER: A.Y INTEREST ON LOAN (RS.) ADVANCES/LOANS GIVEN (RS.) 2004-05 85,43,019/- 4,17,70,542/- 2005-06 29,63,309/- 3,80,51,003/- 2006-07 48,57,681/- 4,32,82,542/- 2007-08 26,21,711/- 5,37,14,355/- 2008-09 1,27,82,908/- 4,91,07,674/- 2009-10 7,25,10,420/- 15,92,32,947/- 2010-11 6,89,39,154/- 18,90,62,520/- THE AO OBSERVED THAT THE ASSESSEE HAS GIVEN HUGE AM OUNT OF ADVANCE/ LOANS AS MENTIONED ABOVE BUT NO INTEREST I NCOME HAS BEEN CHARGED ON SUCH ADVANCES/LOANS GIVEN, WHEREAS THE A PPELLANT HAS DEBITED INTEREST EXPENSES ON LOANS TAKEN. THE AO OB SERVED THAT IT IS A CASE OF DIVERSION OF BORROWED FUNDS FOR NON-BUSINES S USE. THE AO ALSO STATED THAT THE APPELLANT FAILED TO FURNISH DETAILS OF INTEREST EXPENDITURE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 78 DEBITED AND ALSO THE NATURE AND PURPOSE OF HUGE ADV ANCES GIVEN TO OTHERS. THE AO OBSERVED THAT IT IS CLEAR FROM THE F ACTS OF THE CASE THAT ON ONE HAND THE APPELLANT HAS TAKEN HUGE AMOUNTS OF LO AN AND PAID SUBSTANTIAL INTEREST THEREON AND ON THE OTHER HAND THE APPELLANT HAS GIVEN HUGE AMOUNT OF ADVANCES/ LOANS, WITHOUT CHARG ING ANY INTEREST. THEREFORE, AS PER THE AO, IT IS A CASE OF DIVERSION OF BURROWED FUNDS FOR NON-BUSINESS CONSIDERATION. ACCORDINGLY, THE AO CON CLUDED THAT THE SUM BORROWED BY THE APPELLANT TRUST HAS BEEN DIVERTED T O OTHER SOCIETIES/ ENTITIES OF CHOUKSEY GROUP WITHOUT ANY BENEFIT TO I T AND, THUS THE INTEREST BEARING FUNDS HAS NOT BEEN UTILIZED FOR THE PURPOSE AND OBJECTS OF THE APPELLANT TRUST. THE AO ALSO RELIED OF THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. V.I.BABY & CO. 54 ITR 248 (KER.). THE AO HELD THAT SINCE THE INCOME OF THE APPELLANT IS BEIN G ASSESSED AS BUSINESS INCOME AND THE INTEREST BEARING FUNDS HAVE BEEN DIVERTED FOR NON-BUSINESS CONSIDERATION, THE INTEREST DEBITED IN THE INCOME & EXPENDITURE ACCOUNT IS NOT ALLOWABLE DEDUCTION. THU S, THE AO DISALLOWED THE INTEREST DEBITED IN THE INCOME & EXP ENDITURE ACCOUNT AND ADDED TO THE TOTAL INCOME OF THE APPELLANT. MATTER WAS CARRIED TO LD. CIT(A), WHO CONFIRMED THE ADDITIONS PARTLY. THE OPERATING PART OF THE ORDER LD. CIT(A) IS REPRODUCED HEREUNDER: H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 79 34.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. AT THE OUTSET, IT MAY BE MENTIONED THAT THE D ECISIONS RELIED UPON BY THE APPELLANT ARE IN RELATION TO CHARITABLE TRUST FOR DEDUCTION U /S 11 AND ARE, THEREFORE, NOT APPLICABLE IN THIS CASE BECAUSE THE INCOME OF THE APPELLANT IS CO MPUTED U/S 28 AS INCOME FROM BUSINESS. DEDUCTION OF INTEREST PAID ON FUNDS BORRO WED FOR BUSINESS PURPOSES IS ALLOWABLE U/S 36(1)(III) OF THE IT ACT. IN ORDER TO AVAIL DEDUCTION U/S 36(1)(III), THE ONUS IS UPON THE ASSESSEE TO PROVE THAT (I) CAPITAL HAS BEE N BURROWED, (II) THAT IT HAS BEEN BURROWED FOR THE PURPOSES OF BUSINESS AND (III) THA T THE AMOUNT OF INTEREST IS PAID. THEREFORE, THE ONUS IS ON THE ASSESSEE TO PROVE THA T CAPITAL BORROWED ON WHICH INTEREST HAS BEEN CLAIMED AS DEDUCTION HAS ACTUALLY BEEN USE D FOR BUSINESS PURPOSES. NOW, IN THIS CASE, AS MENTIONED BY THE LD. AO, THE APPELLAN T HAS NOT FURNISHED ANY DETAILS OF THE SAID INTEREST EXPENDITURE AS WELL AS THE NATURE AND PURPOSE OF SUCH HUGE ADVANCES GIVEN FREE OF INTEREST. THUS, THE APPELLANT FAILED TO PRO VE WITH COGENT MATERIAL BEFORE THE AO THAT INTEREST BEARING FUNDS HAD ACTUALLY BEEN USED ONLY FOR THE PURPOSES OF THE ACTIVITIES OF THE APPELLANT SOCIETY. IN THESE CIRCUMSTANCES, W HEN THE AO NOTICED THAT THE APPELLANT HAD GIVEN ADVANCES FREE OF INTEREST TO OTHER ORGANI ZATIONS/ PERSONS, WHEREAS THE APPELLANT HAD PAID HUGE INTEREST ON THE LOANS, HE W AS JUSTIFIED IN HOLDING THAT THE APPELLANT WAS NOT ENTITLED TO CLAIM DEDUCTION ON TH E FUNDS NOT UTILIZED FOR THE PURPOSE OF ITS ACTIVITIES. IN THIS REGARD, SUPPORT CAN BE DRAWN FROM THE DECIS ION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. ABHISHEK INDUSTRIES LTD.[2006] 28/6 ITR 0001 -[P &H], WHEREIN THE HON'BLE HIGH COURT OBSERVED THAT- SECTION 36(1) (III) OF THE INCOME- TAX ACT, 1961, PROVIDES FOR DEDUCTIONS OF INTEREST ON LOANS RAISED FOR BUSINESS PURPOSES. ONC E THE ASSESSEE CLAIMS ANY SUCH DEDUCTION IN THE BOOKS OF ACCOUNT, THE ONUS WI LL BE ON THE ASSESSEE TO SATISFY THE ASSESSING OFFICER THAT WHATEVER LOANS W ERE RAISED BY THE ASSESSEE WERE USED FOR BUSINESS PURPOSE. IF IN THE PROCESS OF EXAMINATION OF GENUINENESS OF SUCH A DEDUCTION, IT TRANSPIRES THAT THE ASSESSEE HAD ADVANCED CERTAIN FUNDS TO SISTER CONCERNS OR ANY OT HER PERSON WITHOUT ANY INTEREST, THERE WOULD BE A VERY HEAVY ONUS ON THE A SSESSEE TO DISCHARGE BEFORE THE ASSESSING OFFICER TO THE EFFECT THAT IN SPITE OF PENDING TERM LOANS AND WORKING CAPITAL LOANS ON WHICH THE ASSESSEE IS INCURRING LIABILITY TO PAY INTEREST, THERE WAS JUSTIFICATION TO ADVANCE LO ANS TO SISTER CONCERNS FOR NON- BUSINESS PURPOSES WITHOUT ANY INTEREST AND ACC ORDINGLY THE ASSESSEE SHOULD BE ALLOWED DEDUCTION OF INTEREST BEING PAID ON THE LOANS RAISED BY IT TO THAT EXTENT. THE ENTIRE MONEY IN A BUSINESS ENTITY COMES IN A CO MMON KITTY . MONIES RECEIVED AS SHARE CAPITAL OR AS TERM LOAN OR AS WOR KING CAPITAL LOAN OR AS SALE PROCEEDS DO NOT HAVE A DIFFERENT COLOUR . WHATEVER ARE THE RECEIPTS IN THE BUSINESS, HAVE THE COLOUR OF BUSINESS RECEIPTS AND HAVE NO SEPARATE IDENTIFICATION. THE ONLY THING SUFFICIENT TO DISALLOW THE INTEREST PAID ON THE BORROWING TO THE EXTENT THE AMOUNT IS LENT TO A SIS TER CONCERN WITHOUT CARRYING ANY INTEREST FOR NON-BUSINESS PURPOSES WOU LD BE THAT THE ASSESSEE HAS SOME LOANS OR OTHER INTEREST BEARING D EBTS TO BE REPAID . IN CASE THE ASSESSEE HAD A SURPLUS WHICH, ACCORDING TO IT, COULD NOT BE REPAID PREMATURELY TO ANY FINANCIAL INSTITUTION, IT WOULD EITHER BE REQUIRED TO BE CIRCULATED AND UTILIZED FOR THE PURPOSE OF BUSINESS OR TO BE I NVESTED IN A MANNER IN WHICH IT GENERATES INCOME AND NOT DIVERTED TOWARDS SISTER CO NCERNS FREE OF INTEREST. THIS WOULD RESULT IN NOT PRESENTING THE TRUE AND CORRECT PICTURE OF THE ACCOUNTS OF THE ASSESSEE AS AT THE COST BEING INCURRED BY THE ASSES SEE, THE SISTER CONCERN H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 80 WOULD BE ENJOYING THE BENEFITS THEREOF. THERE SHOUL D BE NEXUS BETWEEN THE USE OF BORROWED FUNDS FOR THE PURPOSE OF BUSINESS TO CL AIM DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT. THAT BEING THE POSITION, THE RE IS NO ESCAPE FROM THE FINDING THAT INTEREST BEING PAID BY THE ASSESSEE TO THE EXT ENT THE AMOUNTS ARE DIVERTED TO SISTER CONCERNS ON INTEREST FREE BASIS ARE TO BE DI SALLOWED. IF THE PLEA OF THE ASSESSEE IS ACCEPTED THAT THE IN TEREST FREE ADVANCES MADE TO THE SISTER CONCERNS FOR NON-BUSINESS PURPOSES WERE OUT OF ITS OWN FUNDS IN THE FORM OF CAPITAL INTRODUCED IN BUSINESS, THAT AGAIN WILL SHOW A CAMOUFLAGE BY THE ASSESSEE AS AT THE TIME OF RAISING OF LOAN, THE ASS ESSEE WOULD SHOW THE FIGURES OF CAPITAL INTRODUCED BY IT AS A MARGIN FOR LOANS B EING RAISED AND AFTER THE LOANS ARE RAISED, WHEN SUBSTANTIAL AMOUNTS ARE DIVERTED T O SISTER CONCERNS FOR NON- BUSINESS PURPOSES WITHOUT INTEREST, A PLEA WOULD BE RAISED THAT THE AMOUNT ADVANCED WAS OUT OF ITS CAPITAL, WHICH IN FACT STOO D EXHAUSTED IN SETTING UP OF THE UNIT. SUCH A PLEA MAY BE ACCEPTABLE AT A STAGE WHEN NO LOANS HAVE BEEN RAISED BY THE ASSESSEE AT THE TIME DISBURSEMENT OF FUNDS. THIS WOULD DEPEND ON THE FACTS OF EACH CASE. THE VIEW THAT WHERE THE AMOUNT IS ADVANCED FROM A M IXED ACCOUNT OR SHARE CAPITAL OR SALE PROCEED OR PROFITS, IT WOULD NOT BE DEEMED DIVERSION OF BORROWED CAPITAL OR THAT THE REVENUE HAD NOT BEEN ABLE TO ES TABLISH NEXUS OF THE FUNDS ADVANCED TO THE SISTER CONCERNS WITH THE BORROWED F UNDS, IS NOT CORRECT. ONCE IT IS BORNE OUT FROM THE RECORD THAT THE ASSESSEE HAD BORROWED CERTAIN FUNDS ON WHICH LIABILITY TO PAY TAX IS BEING INCURRED AND ON THE OTHER HAND, CERTAIN AMOUNTS HAD BEEN ADVANCED TO SISTER CONCERNS OR OTHERS WITH OUT CARRYING ANY INTEREST AND WITHOUT ANY BUSINESS PURPOSE, THE INTEREST TO THE E XTENT THE ADVANCE HAD BEEN MADE WITHOUT CARRYING ANY INTEREST IS TO BE DISALLO WED UNDER SECTION 36(1)(III) OF THE ACT. THE HON'BLE HIGH COURT HELD IN THIS CASE AS UNDER: HELD , (I) THAT THE SHARE CAPITAL IS MEANT TO BE USED FO R PRODUCTIVE USE IN THE BUSINESS. IF THE SHARE CAPITAL, ACCORDING TO THE AS SESSEE, WAS SURPLUS AND IT COULD PART WITH THE SAME TO ITS SISTER CONCERN FOR NOT-BUSINESS PURPOSE WITHOUT ANY INTEREST, THERE WAS NO NEED TO RAISE THE LOANS TO THAT EXTENT AND THE AMOUNT OF SUCH SHARE CAPITAL SHOULD HAVE BEEN UTILIZED FOR THE PROJECT ITSELF. IN CASE THE ASSESSEE HAD NOT ADVANCED LOANS TO ITS SISTER CONCE RN ON INTEREST-FREE BASIS, EVEN IF THE ALLEGED SURPLUS AMOUNT COULD NOT BE REP AID TO THE FINANCIAL INSTITUTION BEFORE THE SCHEDULED DATE AS FAR AS THE TERM LOAN W AS CONCERNED, THE INTEREST BEING PAID BY THE ASSESSEE ON THE WORKING CAPITAL C OULD HAVE CERTAINLY BEEN SAVED TO THAT EXTENT. THE BORROWING OF THE FUNDS BY THE COMPANY TO THAT EXTENT WAS NOT FOR THE PURPOSE OF BUSINESS AND THERE WAS N OTHING ON RECORD TO SUGGEST THAT AMOUNTS WERE ADVANCED TO THE SISTER CONCERNS T O ADVANCE SOME BUSINESS OBJECT. ACCORDINGLY, THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION OF THE INTEREST ON THE BORROWINGS TO THE EXTENT THOSE WERE DIVERTED TO SISTER CONCERNS OR OTHER PERSONS WITHOUT INTEREST. SIMILAR VIEW WAS EXPRESSED BY HON'BLE ITAT, DELHI I N THE CASE OF ACIT VS. PUNJAB STAINLESS STEEL INDUSTRIES (ITAT,DEL.) 128 I TAT 12. IN THIS CASE ALSO, H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 81 THE ASSESSEE CLAIMED THAT IT GAVE INTEREST FREE ADV ANCES FROM ITS OWN FUNDS AND THEN BORROWED FUNDS FROM BANK ON INTEREST FOR BUSIN ESS PURPOSES. BUT THE HON'BLE ITAT OBSERVED THAT SUCH BORROWING FROM BANK S CAN BE TREATED AS FOR SUPPLEMENTING CASH DIVERTED BY THE ASSESSEE WITHOUT BENEFIT OF IT AND HELD THAT CLAIM FOR DEDUCTION OF INTEREST ON BORROWING REQUIR ED TO BE DISALLOWED. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, WHERE THE APPELLANT ON ONE HAND, HAS PAID INTEREST ON THE BANK LOANS AND ON THE OTHER, HAS GIVEN INTEREST FREE LOANS/ ADVANCES TO OTHER OR GANIZATION, THE AO WAS JUSTIFIED IN DISALLOWING THE CLAIM OF INTEREST U/S 36(1)(III) WHILE COMPUTING BUSINESS INCOME OF THE APPELLANT. HOWEVER, IT IS NOTICED THA T AO HAS DISALLOWED IN SOME YEARS INTEREST IN EXCESS OF THE AMOUNT OF INTEREST RELATABLE TO THE INTEREST FREE ADVANCES GIVEN BY THE APPELLANT SOCIETY. CONSIDERIN G THE PERIOD INVOLVED, IT WOULD BE FAIR AND REASONABLE TO ESTIMATE THAT THE N ORMAL RATE OF INTEREST PAID BY THE APPELLANT WAS 12% PER ANNUM. THE AMOUNT OF INTE REST @12% ON THE INTEREST FREE ADVANCES GIVEN BY THE APPELLANT WOULD WORK OUT AS UNDER: A.Y. ADVANCES/LOANS GIVEN(RS.) INTEREST @ 12% 2004-05 4,17,70,542/- 50,12,465/- 2005-06 3,80,51,003/- 45,66,120/- 2006-07 4,32,82,542/- 51,93,906/- 2007-08 5,37,14,355/- 64,45,723/- 2008-09 4,91,07,674/- 58,92,921/- 2009-10 15,92,32,947/- 1,91,07,954/- 2010-11 18,90,62,520/- 2,26,87,502/- IN VIEW OF THE ABOVE, IT CAN BE SEEN THAT INTEREST DISALLOWED BY THE LD. AO IN SOME YEARS WAS MORE THAN 12% ON INTEREST FREE ADVAN CES GIVEN BY THE APPELLANT. THEREFORE, IN THE YEARS WHERE THE DISALL OWANCE IS MORE THAN 12% OF INTEREST FREE ADVANCES, DISALLOWANCE IS RESTRICTED TO 12% ON THE AMOUNT OF INTEREST FREE LOANS GIVEN AND THE EXCESS DISALLOWAN CE OVER 12% IS DELETED. ACCORDINGLY, THE POSITION OF DISALLOWANCE REQUIRED TO BE CONFIRMED WOULD WORK OUT AS UNDER: A.Y. INTEREST DISALLOWED BY AO INTEREST @ 12% DISALLOWANCE RESTRICTED TO 12% OR THE AMOUNT OF INTEREST DISALLOWED BY THE AO, WHICHEVER IS LOWER RELIEF ALLOWED 2004-05 85,43,019/- 50,12,465/- 50,12,465/- 35,30,5 54 2005-06 29,63,309/- 45,66,120/- 29,63,309/- NIL 2006-07 48,57,681/- 51,93,905/- 48,57,681/- NIL 2007-08 26,21,711/- 64,45,723/- 26,21,711/- NIL 2008-09 1,27,82,908/- 58,92,921/- 58,92,921/- 68,89,987 2009-10 7,25,10,420/- 1,91,07,954/- 1,91,07,954/- 5,34,02,466 2010-11 6,89,39,154/- 2,26,87,502/- 2,26,87,502/- 4,62,51,652 H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 82 THEREFORE, DISALLOWANCE OUT OF INTEREST PAID TO THE EXTENT OF RS. 50,12,465/- IN A.Y.2004- 05,RS.29,63,309/- IN A.Y. 2005-06, RS. 48,57,681/- IN A.Y.2006-07, RS. 26,21,711/- IN A.Y.2007-08, RS. 58,92,921/- IN A.Y.2008-09 RS. 1,9 1,07,954/- IN A.Y. 2009-10 AND RS. 2,26,87,502/- IN A.Y. 2010-11 IS CONFIRMED. IN THE RESULT, THE APPELLANT GETS RELIEF OUT OF DISALLOWANCE OF INTEREST MADE OF RS. 35,30,554/- IN A.Y. 2004-05, RS. 68,89,987/- IN A.Y. 2008-09, RS. 5,34,02,466/- IN A.Y. 2009-10 AND RS. 4,62,51,652/- IN A.Y. 2010-11 ACCORDINGLY, THIS ISSUE IS DISPOSED OF THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WELL A S WRITTEN SUBMISSION AS UNDER: 1. RELIED ON THE SUBMISSIONS FILED BEFORE CIT(A) AS REPRODUCED IN HIS APPELLATE ORDER. 2. THE ADDITION MADE BY AO IS UNCALLED FOR DUE TO F OLLOWING REASONS : A. THE SUBJECT ADDITION IS BEYOND THE PURVIEW OF SE ARCH ASSESSMENTS U/S 153A FOR A.Y. 2004-05 TO 2006-07 & 2008-09 BECAUSE ; NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJ ECT ADDITION SHOWING IT AS UNDISCLOSED INCOME. IT WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FI NANCIAL STATEMENTS PRIOR TO DATE OF SEARCH B. FIRSTLY, THE CONTENTIONS OF CIT(A)/AO ARE NOT TE NABLE BECAUSE THE SAME WERE IN THE CASE OF A BUSINESS CONCERN WHEREAS THE ASSESSEE SOC IETY IS A CHARITABLE ORGANIZATION RUNNING EDUCATION INSTITUTIONS AND IS REGISTERED U/ S 12A. C. SECONDLY, INTEREST FREE ADVANCES WERE GIVEN TO C HARITABLE TRUST / SOCIETIES HAVING SIMILAR OBJECTS AND ALSO REGISTERED U/S 12A. THERE IS NO BAR IN ADVANCING SUCH AMOUNTS U/S 13(1)(D). NEITHER GRANTING OF SUCH ADVANCE IS A DEPOSIT NOR INVESTMENT. HENCE, THERE WAS NO VIOLATION OF PROVISION OF SECTION 13(1)(D). NO INTEREST HAVE BEEN CHARGED AS THOSE SOCIETIES ARE NOT CARRYING ON ACTIVITIES FOR PROFIT AND IT IS NOT A COMMERCIAL TRANSACTION BETWEEN TWO BUSINESS ENTITIES RATHER IT IS A TRANSA CTION BETWEEN TWO CHARITABLE ORGANIZATIONS PROVIDING EDUCATION AND HAVING SIMILA R OBJECTS. IT IS A COVERED ISSUE IN FAVOUR OF ASSESSEE FROM THE DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. RKDF EDUCATION SOCIETY IN ITA NO. 151/IND/2010 DATE D 1.8.2013 (COPY OF ORDER ENCLOSED SEPARATELY) WHERE SIMILAR INTEREST FREE AD VANCE GIVEN BY ONE SOCIETY TO OTHER SOCIETY WERE HELD NOT VIOLATIVE OF SEC. 13(1)(D) R. W.S. 11(5), WHEN BOTH THE SOCIETIES WERE REGISTERED U/S 12A. D. LOAN WAS GIVEN TO ASSESSEE BY BANK FOR CONSTRUCT ION OF BUILDING, PURCHASE OF FIXED ASSET ETC. (COPY OF LOAN SANCTION LETTER ENCLOSED AT PG 480-51 6) . THE LENDER BANK ALWAYS ENSURES AND MONITORS PROPER END USE OF FUNDS GIVEN BY WAY OF TERM LOAN AND THE TERM LOAN TAKEN FROM BANK CAN NEVER BE UTILIZED FOR ANY OTHER PURPOSES NOR ANY BANK WOULD PERMIT THE SAME. HENCE, THE ALLEGATION OF DIV ERSION OF FUNDS IS MISCONCEIVED AND MISPLACED. E. ENCLOSED IS COPY OF BALANCE SHEETS SHOWING INVES TMENT IN FIXED ASSETS AND LAND ADVANCE TO PROVE THAT THE SAID LOANS WERE USED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 83 CONSTRUCTION OF BUILDING, PURCHASE OF FIXED ASSET E TC., FOR WHICH THE LOAN WAS GRANTED. THE FOLLOWING CHART SHOWS THE AMOUNT OF LOAN AND ITS US AGE IN BUILDING/FIXED ASSET ETC IN THE YEAR OF DISALLOWANCE : A.Y. AMOUNT OF LOAN INVESTMENT IN FIXED ASSETS 2004-05 3,45,84,722/- 12,74,72,396/- 2005-06 4,62,94,878/- 14,05,53,485/- 2006-07 642,59,941/- 21,18,87,547/- 2007-08 11,94,90,466/- 29,45,26,688/- 2008-09 32,86,26,987/- 56,35,48,389/- 2009-10 60,02,33,055/- 77,11,86,975/- 2010-11 60,18,78,900/- 86,88,93,040/- RELIED ON : ACIT VS. MAA VAISHNO EDUCATION SOCIETY (2010) 14 IT J 697 (INDORE) DIT (EXEMPTIONS) VS. ACME EDUCATIONAL SOCIETY (2010 ) 43 DTR 250 (DELHI) 251 DIRECTOR OF IT (EXEMPTION) VS. ALARIPPU (2000) 244 ITR 358 (DEL) BAIDYANATH PLASTIC INDUSTRIES (P) LTD. VS. K.L. ANA ND, ITO (1998) 230 ITR 522 (DEL) DIT VS. PARIWARSEWASANSTHAN (2002) 254 ITR 268 (D EL) CIT VS. THANTI TRUST, (1999) 239 ITR 502 (SC) CIT VS. SARLADEVI SARABHAI TRUST NO. 2, (1988) 172 ITR 698 (GUJ.) CIT VS. HINDUSTAN CHARITY TRUST (1983) 139 ITR 913 (CAL) DR. D Y PATIL PRATISTHAN VS. DY. CIT (2013) 87 DTR 97 (PUNE 'B') NATIONAL ENGG. CO-ORDINATION COMMITTEE VS. ACIT (19 92) 43 ITD 612 (PUNE) KANPUR SUBHASH SHIKSHA SAMITI VS. DCIT 11 ITR 23 ( LUCK) SARLA DEVI SARA BHAI TRUST 172 ITR 698 (GUJ HC ) WITHOUT PREJUDICE TO ABOVE AND WITHOUT LEGALLY CONC EDING, EVEN ON MERITS, AND THOUGH NOT REQUIRED, NO DISALLOWANCE OF INTEREST AS DONE BY AO WAS CALLED FOR ALSO OWING TO THE REASON THAT AS PER THE CHART ENCL OSED AT PG 314, THE ASSESSEE SOCIETY HAD OWN FUNDS FAR IN EXCESS OF AMOUNT ADVAN CED BY ASSESSEE TO VARIOUS CHARITABLE ORGANIZATION WITH SIMILAR OBJECTS AS UND ER : I. DEVELOPMENT FUND + RESERVE AND SURPLUS + LONG TE RM INTEREST FREE UNSECURED LOANS ARE MORE THAN ADVANCES GIVEN TO CHARITABLE TR UST / SOCIETIES. II. TERM LOAN FROM BANKS ARE EQUIVALENT TO INVESTME NT IN FIXED ASSET + LAND ADVANCE SHOWING END USE OF LOAN FUNDS FOR THE VERY PURPOSE OF INVESTMENT IN ASSETS. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 84 IF THE APPELLANT HAS OWN FUNDS MUCH HIGHER THAN THE AMOUNT ADVANCED TO THE SISTER CONCERNS, A PRESUMPTION WOULD ARISE THAT THE AMOUNT HAS BEEN ADVANCED OUT OF OWN FUNDS AND THE DISALLOWANCE OF I NTEREST WOULD NOT BE JUSTIFIED. CIT V/S RELIANCE UTILITIES & POWER LIMITED (2009) 3 13 ITR 340 (BOM.) AS AGAINST THE CONTENTIONS OF THE LD. CIT(A) FOR SU STAINING PART DISALLOWANCE, THE LD AR FILED FOLLOWING SUBMISSIONS : 1. THE ASSESSEE CARRIES ON THE ACTIVITY OF IMPARTIN G EDUCATION THROUGH VARIOUS EDUCATIONAL INSTITUTIONS AND HOSPITALS. THIS IS UND ISPUTED FACT. 2. THE LOAN WAS GIVEN BY BANKS FOR THE PURPOSE OF C ONSTRUCTION OF BUILDING, PURCHASE OF FIXED ASSET ETC., AS PER THE SANCTION LETTERS OF BA NK PLACED ON RECORD. THIS CRUCIAL FACT HAS NOT BEEN DENIED BY LD. CIT(A). 3. IT WAS EXPLAINED TO CIT(A) THAT THE ENTIRE LOAN AVAILED BY THE ASSESSEE HAS BEEN USED ONLY FOR THE PURPOSE OF ACQUISITION OF FIXED ASSETS , FOR WHICH THE LOAN WAS GRANTED. THE CHART HEREINBEFORE CLEARLY PROVES THIS FACT. EVEN T HIS IMPORTANT FACT HAS NOT BEEN DENIED OR DISPROVED BY HIM. 4. IT WAS ALSO EXPLAINED TO HIM, AS AFORESAID, THAT THE ASSESSEE HAD OWN FUNDS FAR IN EXCESS OF AMOUNT ADVANCED BY ASSESSEE TO VARIOUS CH ARITABLE ORGANIZATION WITH SIMILAR OBJECTS. EVEN THIS FACT WAS NOT CONTROVERTED BY LD. CIT(A). IN VIEW OF ABOVE, SINCE THE ENTIRE INTEREST BEARING LOAN FUNDS FROM BANKS HAVE BEEN UTILIZED ONLY FOR INVESTMENT IN FIXED ASSETS M AINLY IN COLLEGE BUILDING, EQUIPMENTS, FURNITURE ETC. FOR THE PURPOSE OF EDUCA TIONAL ACTIVITIES, NO DISALLOWANCE ON ACCOUNT OF INTEREST WAS WARRANTED A ND HENCE EVEN THE PART DISALLOWANCE OF INTEREST DONE BY LD. CIT(A) MAY KIN DLY BE DELETED BY YOURHONOUR AND THEREFORE THE DISALLOWANCE MADE BY THE AO MAY K INDLY BE HELD AS UNSUSTAINABLE AND UNWARRANTED. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR VIEW, FACTS INVOLVED IN CASE OF ALL FIVE ASSESSEES ARE IDENTICA L AND SINCE WE HAVE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 85 HELD THAT ALL THE FIVE ASSESSEES ARE CHARITABLE ORG ANIZATIONS ELIGIBLE FOR EXEMPTION U/S 11,12, & 13, THE ADDITION MADE BY AO ON ACCOUNT OF INTEREST AND THE PART ADDITION CONFIRMED BY CIT(A) TREATING ALL THE FIVE ASSESSEES AS BUSINESS ORGANIZATION ARE ACADEMIC AND UNCALLED FOR BECAUSE THIS INTEREST HAS BEEN PAID FOR ACQUISITION OF FIXED / CAPITAL ASSETS WHICH IS TREATED AS APPLICATION OF INCOME TO WARDS CHARITABLE PURPOSE ONLY. WE ACCORDINGLY DELETE THE ADDITION MA DE BY AO IN RESPECT OF ALL FIVE ASSESSEES UNDER APPEAL. HENCE, THE APPE ALS OF ALL AFORESAID FIVE ASSESSEES ON THIS ISSUE ARE ALLOWED AND THE AP PEALS OF DEPARTMENT ARE DISMISSED. 7.1 THE ASSESSEE AND REVENUE BOTH HAVE RAISED THE I SSUE OF UNEXPLAINED LOANS/CREDITS U/S 68. SHORT FACTS OF THE ISSUE RELATING TO H K KALCHURI E DUCATION TRUST ARE THAT THE AO, ON PERUSAL OF BALANCE SHEET OBSERV ED THAT THE ASSESSEE HAD SHOWN UNSECURED LOANS FROM VARIOUS PERSONS. THE DETAIL OF SUCH LOANS HAS BEEN GIVEN BY THE LD. AO IN THE ASSESSMEN T ORDER AS UNDER: A.Y. 2008-09 PARTICULARS BALANCE AS ON 31.03.2008 (RS.) BALANCE AS ON 31.03.2006 (RS.) NET INCREASE(RS.) J.N. CHOUKSEY 530000 265000 265000 S.K. CHOUKSEY 314300 300000 14300 TOTAL 279300 A.Y.2009-10 SI NO. PARTICULARS 31.03.2008 31.03.2009 INCREASE D URING H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 86 THE YEAR (RS.) 1 ASHISH JAISWAL 0 599326 599326 2 J N CHOUKSEY 530000 650000 120000 3 PRATAP VAHINI SAMAJ KALYAN 0 3270000 3270000 4 RISHIRAJ SINGH MEM. EDUCATION & WEL SOCIETY. 0 9660577 9660577 5 J K EDUCATION & WELFARE SOCIETY. 0 12394850 12394850 6 DATTATRAY SURESH PRAKASH EDUCATION SOCIETY. 0 5124070 5124070 TOTAL 31168823 A.Y. 2010-11 SI NO. PARTICULARS BALANCE AS ON 31.03.2009 BALANCE AS ON 31.03.2010 NET INCREASE DURING THE YEAR (RS.) 1 J.N. CHOUKSEY 650000 1672646 1022646 2 RISHIRAJ SINGH MEM. EDUCATION &WEL SOS. 9660577 25071421 15410844 3 H K EDUCATION SOC. 0 16993745 16993745 4 RISHIRAJ MEM. EDU. &WEL SOC. 0 35169081 35169081 TOTAL 68596316 IT WAS ALSO NOTICED BY THE AO THAT IN THE SCHEDULE OF THE BALANCE SHEET, NO DETAILS REGARDING THE SUMS SHOWN UNDER SU B-HEAD OTHERS DETAILING THE NAMES OF THE PERSONS FROM WHOM SUCH S UMS HAVE BEEN OBTAINED IS GIVEN. THE AO VIDE LETTER DATED 27.09.2 011 REQUESTED THE ASSESSEE TO FURNISH THE DETAILS OF UNSECURED LOANS THE APPELLANT VIDE REPLY DATED 15.11.2011 FILED ON 16.11.2011 SUBMITTE D BEFORE THE AO THAT THE DETAILS OF SECURED LOANS AND UNSECURED LOANS TA KEN BY THE TRUST AND COLLEGES/INSTITUTIONS RUM BY IT ARE GIVEN IN DULY A UDITED BALANCE SHEET. AGAIN VIDE LETTER DATED 21.11.2011 SERVED ON 21.11. 2011, THE AO CALLED FOR THE FOLLOWING SPECIFIC INFORMATION: H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 87 ON PERUSAL OF CONSOLIDATED BALANCE SHEET RELEVANT TO THE A.Y. 2004-05 TO A.Y. 2010- 11, IT IS SEEN THAT THERE ARE UNSECURED LOANS IN TH E ABOVE BALANCE SHEETS. IN THIS REGARD, PLEASE FURNISH THE FOLLOWING INFORMATION / DOCUMENTS: A) PAN NO. AND COPY OF RETURN OF INCOME OF THE RESP ECTIVE LENDER. B) COPY OF RELEVANT LEDGER ACCOUNT OF THE LENDER IN YOUR BOOKS OF ACCOUNTS. C) CONFIRMATION OF THE RESPECTIVE LENDER. D) COPY OF BALANCE SHEET ALONG WITH RELEVANT SCHEDU LE OF THE RESPECTIVE LENDER IN SUPPORT OF AMOUNT LENT. E) COPY OF RELEVANT BANK ACCOUNT OF THE LENDER FROM WHICH THE AMOUNT HAS BEEN LENT. THE ABOVE DOCUMENTS MAY ALSO BE FURNISHED IN RESPEC T OF SQUARED UP CREDITS, IF ANY. THE AO STATED THAT THE ASSESSEE TRUST HAS NOT FURNI SHED ANY DETAILS WHATSOEVER IN RESPONSE TO THE ABOVE SPECIFI C QUERY. THE AO OBSERVED THAT IT IS THE PRIMARY DUTY OF THE ASSESSE E TO EXPLAIN THE SOURCE OF ANY CREDIT ENTRY IN ITS BOOKS OF ACCOUNT BY FURN ISHING ALL RELEVANT INFORMATION SUPPORTED BY DOCUMENTARY EVIDENCES. THE ONUS LIES ON THE ASSESSEE TO ESTABLISH THE IDENTITY, CREDITWORTHINES S OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION. BUT THE APPELLANT H AS NOT FURNISHED ANY DETAILS SUPPORTED BY DOCUMENTARY EVIDENCE TO ESTABL ISH THE IDENTITY AND CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS O F THE TRANSACTIONS. IT WAS ALSO STATED BY THE AO THAT INSPIRE OF ALLOWING SUFFICIENT OPPORTUNITY, THE APPELLANT HAS NOT EVEN FURNISHED THE CONFIRMATI ONS FROM THE CREDITORS, THEIR PAN, BANK STATEMENTS AND COPY OF R ETURNS OF CREDITORS. ACCORDINGLY, THE AO CONCLUDED THAT THE UNSECURED LO ANS SHOWN BY THE APPELLANT ARE UNEXPLAINED. HOWEVER, IT NOTICED BY T HE AO THAT CERTAIN LOANS ARE SHOWN IN THE NAMES OF THE MEMBERS OF CHOU KSEY FAMILY I.E. SHRI JAI NARYAAN CHOUKSEY, SMT. POONAM CHOUKSEY, SH RI SURESH H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 88 KUMAR CHOUKSEY, SHRI ANUPAM CHOUKSEY AND SMT. PRATI BHA CHOUKSEY AND ON VERIFICATION; IT WAS FOUND THAT THEY HAVE AL SO SHOWN LOANS GIVEN TO THE APPELLANT. ACCORDINGLY, THE AO MADE SUBSTANT IVE ADDITION OF THE UNSECURED LOANS SHOWN TO BE GIVEN BY MEMBERS OF CHO UKSEY FAMILY IN THEIR HANDS AND PROTECTIVE ADDITION HAS BEEN MADE I N THE APPELLANTS HAND. ACCORDINGLY, THE POSITION OF SUBSTANTIVE ADDI TION AND PROTECTIVE ADDITION IN EACH ASSESSMENT YEAR MADE BY THE AO IS AS UNDER: A.Y. SUBSTANTIVE ADDITION (RS.) PROTECTIVE ADDITION ( RS.) TOTAL ADDITION ( RS.) 2004-05 68,79,844 13,66,738 82,46,582 2005-06 55,50,000, 37,06,010 92,56,010 2006-07 39,58,325 - 39,58,325 2007-08 46,77,847 - 46,77,847 2008-09 - 2,79,300 2,79,300 2009-10 3,10,48,823 1,20,000 3,11,68,823 2010-11 6,75,73,670 10,22,676 6,85,96,316 THUS, THE AO MADE ABOVE ADDITIONS. MATTER CARRIED TO LD. CIT(A), WHO PARTLY CONFIRMED ADDITIONS. THE OPERATING PART OF THE ORDER OF THE LD. CIT(A) IS AS UNDER: 36.3 I HAVE CAREFULLY CONSIDERED THE REASONS RECOR DED BY THE AO AND SUBMISSIONS MADE BY THE APPELLANT. IT IS PERTINENT TO NOTE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS GIVEN SUFFICIENT OPPORTUNITY TO THE APPELLANT TO FURNISH COGENT MATERIAL TO PROVE G ENUINENESS OF THE CREDITS SHOWN IN THE BALANCE SHEETS BUT THE APPELLANT HAS N OT FURNISHED ANY DETAIL WHATSOEVER AS REQUIRED BY THE AO. SIMILARLY, THE DU RING THE COURSE OF APPELLANT PROCEEDINGS, THE APPELLANT HAS BEEN PROVI DED MORE THAN SUFFICIENT OPPORTUNITIES AS IS CLEAR FROM THE NUMBER OF DATES OF HEARING GIVEN TO THE APPELLANT AS MENTIONED HEREINABOVE IN THE BEGINNING OF THIS ORDER. MOREOVER, THE ASSESSMENT ORDERS WERE PASSED BY THE AO ON 13.0 8.2012 AGAINST WHICH THE APPELLANT FURNISHED THE APPEALS ON 30.08.2012 A ND, THUS, THE APPELLANT HAD TIME FOR ABOUT 1 YEAR THEREAFTER AND STILL THE APPELLANT HAD NOT COLLECTED THE RELEVANT MATERIAL OR RECONCILE THE ACCOUNTS. TH EREFORE, THE CONTENTION OF THE APPELLANT THAT THERE WAS NO SUFFICIENT TIME TO COLLECT, COMPILE AND COLLATE THE REQUIRED INFORMATION IS NOT CONVINCING AND NOT ACCEPTABLE. IT IS, THUS, CLEAR FROM THE FACTS OF THE CASE THAT THE APPELLANT HAS N OT FURNISHED ANY EVIDENCE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 89 WHATSOEVER TO PROVE THE IDENTITY AND CREDITWORTHINE SS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS OF UNSECURED LOANS/ CREDITS. IN THESE CIRCUMSTANCES, THE AO HAS NO OPTION EXCEPT TO MAKE ADDITION U/S 68 OF THE ACT AS THE APPELLANT FAILED TO DISCHARGE ITS ONUS T O PROVE SATISFACTORILY GENUINENESS OF THESE TRANSACTIONS AS REQUIRED U/S 6 8 OF THE ACT. HOWEVER, IT IS NOTICED THAT THE LD. AO HAS CONSIDERED UNSECURED LOANS RECEIVED FROM MEMBERS OF CHOUKSEY FAMILY ALSO I.E. SHRI JAI NARYA AN CHOUKSEY , SMT. POONAM CHOUKSEY, SHRI SURESH KUMAR CHOUKSEY, SHRI A NUPAM CHOUKSEY AND SMT, PRATIBHA CHOUKSEY AS UNEXPLAINED AND MADE ADDITION ON PROTECTIVE BASIS IN THE HANDS OF THE APPELLANT. BUT IT IS NOTI CED THAT THESE PERSONS ARE ASSESSED WITH THE SAME AO AND HE HAS ALSO MADE SUBS TANTIVE ADDITION OF THE SAME AMOUNTS IN THEIR HANDS U/S 69 OF THE ACT. SINC E, THESE PERSONS HAVE DECLARED AND SHOWN LOANS GIVEN TO THE APPELLANT IN THEIR RETURNS OF INCOME AND, THUS ACCEPTED THE FACT OF GIVING TO THE APPELL ANT FIRM, THEY ARE LIABLE TO EXPLAIN THE SOURCE OF INVESTMENT MADE BY THEM. SINC E, SUBSTANTIVE ADDITIONS HAVE ALREADY BEEN MADE IN THEIR HANDS; THE PROTECTI VE ADDITION MADE IN THE HAND OF THE APPELLANT CANNOT BE SUSTAINED. THEREFOR E, THE PROTECTIVE ADDITIONS U/S 68 MADE IN DIFFERENT ASSESSMENT YEARS ARE DELET ED. THE OTHER ADDITIONS MADE U/S 68 ON SUBSTANTIVE BASIS ARE, THEREFORE, CO NFIRMED. IN THE RESULT, THE APPELLANT GETS FOLLOWING RELIEF IN THIS ISSUE: A.Y. PROTECTIVE ADDITION (RS.) 2004-05 13,66,738 2005-06 37,06,010 2008-09 2,79,300 2009-10 1,20,000 2010-11 10,22,676 THUS, THE ADDITIONS MADE U/S 68 IN A.YS.2004-05 TO 2007-08, A.Y. 2009-10 & A.Y. 2010-11 ARE CONFIRMED TO THE EXTENT OF AMOUNTS MENTIONED AGAINST EACH YEAR AS UNDER : A.Y. SUBSTANTIVE ADDITION ( RS.) 2004-05 68,79,844 2005-06 55,50,000 2006-07 39,58,325 2007-08 46,77,847 2009-10 3,10,48,823 2010-11 6,75,73,670 THUS, THIS ISSUE IS DECIDED AND DISPOSED OF ACCOR DINGLY. LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WELL AS WR ITTEN SUBMISSION AS UNDER: H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 90 AS REGARDS DEPARTMENTAL APPEAL, RELIED ON THE ORD ER AND FINDINGS OF CIT(A). 1. RELIED ON THE SUBMISSIONS FILED BEFORE CIT(A) REPRO DUCED IN HIS ORDER. 2. THE ADDITION MADE BY AO IS UNCALLED FOR DUE TO FOLL OWING REASONS : I) NO ADDITIONS COULD BE MADE UNDER SEC. 153A FOR A.Y. 2004-05 TO 2006-07 & 2008-09 BECAUSE : NO INCRIMINATING MATERIAL WAS FOUND IN THOSE YEARS REGARDING THESE UNSECURED LOANS SUGGESTING IT AS UNDISCLOSED INCOM E. THESE LOANS WERE DULY DISCLOSED IN THE RESPECTIVE AUDITED FINANCIAL STATEMENTS PRIOR TO DATE OF SEARCH 3. PROPER OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE AND HENCE THE ASSESSEE COULD NOT MAKE SUBMISSIONS ON THE ISSUE BEFORE AO BECAUSE BOOKS OF ACCOUNTS/ ACCOUNTING DATA CAPTURED IN THE SEIZED CO MPUTER HARD-DISK WERE NOT SUPPLIED TO THE ASSESSEE BY AO DESPITE REQUESTS WHI CH WAS SUPPLIED TO IT AS LATE AS ON 1ST JULY, 2013 ONLY. 4. SIMILARLY, PROPER OPPORTUNITY WAS NOT GIVEN EVEN BY LD. CIT(A ) AND HENCE ADEQUATE SUBMISSIONS AS WELL AS CONFIRMATION OF THE LOAN CREDITOR ESTABLISHING HIS IDENTITY AND CREDITWORTHINESS AND GENUINENESS O F TRANSACTIONS COULD NOT BE FILED BEFORE HIM ALSO BECAUSE, AS SUBMITTED, BOOKS OF ACC OUNTS/ ACCOUNTING DATA CAPTURED IN THE SEIZED COMPUTER HARD-DISK WERE SUPPLIED TO U S AS LATE AS ON 1ST JULY, 2013 ONLY. THE COUNSELS OF THE ASSESSEE THEN HAD TO SIMU LTANEOUSLY PREPARE SUBMISSIONS REGARDING 5 ASSESSEES COVERING 35 APPEALS (5X7YEARS ) AT A TIME INVOLVING VOLUMINOUS ISSUES. MOREOVER, BY THE TIME BOOKS AND SEIZED COMP UTER DATA WERE SUPPLIED TO US, MOST OF THE SUBMISSIONS HAD BEEN GIVEN BEFORE THE L D. CIT(A). THE LD. CIT(A) FRAMED HIS ORDER ON 12/8/2013 OR 13/8/2013 OF ALL THE ASSE SSEES. 5. MOREOVER, AND WITHOUT PREJUDICE TO ABOVE, EVEN OTHE RWISE, THE IMPUGNED ADDITIONS WERE NOT WARRANTED FOR THE FOLLOWING REAS ONS : BOOKS OF ACCOUNT OF ASSESSEE SOCIETY AS WELL AS OTH ER LOAN CREDITOR ARE DULY AUDITED. THE SUBJECT TRANSACTIONS WERE DULY SHOWN IN THE FIN ANCIAL STATEMENTS OF LOAN CREDITORS AS WELL AS THE ASSESSEE BEFORE SEARCH. ALL THE TRANSACTIONS ARE THROUGH CHEQUE. HOWEVER, EVEN IF SOME SMALL VARIATION IS THERE BETW EEN THE LOAN BALANCES, IT IS ONLY A MATTER OF RECONCILIATION INTER SE. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, SINCE WE HAVE SEPARATELY HELD IN OUR ORDER ON THE ISSUE OF A PPLICABILITY OF SECTION H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 91 153A THAT WHERE NO INCRIMINATING MATERIAL WAS FOUND AND ASSESSMENTS WERE CONCLUDED ON THE DATE OF SEARCH, NO ADDITION C OULD BE MADE ON THAT ISSUE. WE ACCORDINGLY HOLD THAT NO ADDITION WA S WARRANTED ON THE ISSUE OF UNEXPLAINED LOANS/CASH CREDIT IN RESPECT O F A.Y. 2004-05 TO 2006-07 (A.Y. 2007-08 WAS PENDING IN CASE OF H K KA LCHURI EDUCATION TRUST UNLIKE OTHER FOUR ASSESSEES WHICH WERE NON PE NDING AND CONCLUDED) AS THESE ASSESSMENTS WERE NON PENDING AN D CONCLUDED ON THE DATE OF SEARCH AND NO ADVERSE MATERIAL WAS FOUN D IN THOSE YEARS REGARDING THE IMPUGNED ISSUE. AS REGARDS A.Y. 2007- 08 TO 2010-11, SINCE THE BOOKS OF ACCOUNTS SEIZED BY THE DEPARTMEN T WERE GIVEN TO THE ASSESSEE ON 1.7.2013 AFTER COMPLETION OF ASSESSMENT AND HENCE PROPER OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE TO DO THE RECONCILIATION AND VERIFICATION FROM THE BOOKS OF ACCOUNTS, THE ISSUE IS SET ASIDE AND RESTORED BACK TO THE FILE OF AO WITH DIRECTIONS THA T HE WILL GIVE PROPER OPPORTUNITY TO THE ASSESSEE TO EXPLAIN. ACCORDINGLY , GROUNDS OF ASSESSEE ON THIS ISSUE ARE TREATED AS ALLOWED FOR S TATISTICAL PURPOSES AND THE GROUNDS OF THE DEPARTMENT FOR ALL THE YEARS ARE TREATED AS DISMISSED. BOTH THE PARTIES STATED THAT IDENTICAL FACTS ARE I NVOLVED ON THE ISSUE OF UNEXPLAINED LOANS/CASH CREDIT IN RESPECT OF OTHE R FOUR ASSESSEES NAMELY HAI HAY KSHATRIYA EDUCATION SOCIETY, JAI NAR AIN SHIKSHA SAMITI, H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 92 RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND RISHIRA J MEMORIAL EDUCATION & WELFARE SOCIETY. TO AVOID REPETITION, W E HOLD THAT OUR ABOVE FINDINGS WILL EQUALLY APPLY TO ABOVE FOUR ASSESSEES . HENCE, IN CASE OF ABOVE FOUR ASSESSEES, NO ADDITION WAS WARRANTED ON THE ISSUE OF UNEXPLAINED LOANS/CASH CREDIT IN RESPECT OF A.Y. 20 04-05 TO 2007-08 (A.Y. 2007-08 WAS PENDING ONLY IN CASE OF H K KALCH URI EDUCATION TRUST AND NOT IN THESE FOUR ASSESSEES) AS THESE ASSESSMEN TS WERE NON PENDING AND CONCLUDED ON THE DATE OF SEARCH AND NO ADVERSE MATERIAL WAS FOUND IN THOSE YEARS REGARDING THE IMPUGNED ISS UE. AS REGARDS REMAINING A.Y. 2008-09 TO 2010-11, SINCE THE BOOKS OF ACCOUNTS SEIZED BY THE DEPARTMENT WERE GIVEN TO THE ASSESSEE ON 1.7 .2013 AFTER COMPLETION OF ASSESSMENT AND HENCE PROPER OPPORTUNI TY WAS NOT GIVEN TO THE ASSESSEE TO DO THE RECONCILIATION AND VERIFI CATION FROM THE BOOKS OF ACCOUNTS, THE ISSUE IS SET ASIDE AND RESTORED BA CK TO THE FILE OF AO WITH DIRECTIONS THAT HE WILL GIVE PROPER OPPORTUNIT Y TO THE ASSESSEE TO EXPLAIN. ACCORDINGLY, GROUNDS OF ALL FOUR ASSESSEES ON THIS ISSUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES AND THE GROUNDS OF THE DEPARTMENT FOR ALL THE YEARS ARE TREATED AS DISMISS ED. 8. THE REVENUE HAS RAISED THE ISSUE OF UNACCOUNTED BUS/HOSTEL FEES. SHORT FACTS OF THE ISSUE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED BY THE AO TO FU RNISH THE DETAILS OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 93 BUS/ HOSTEL FEES ETC. COLLECTED FROM THE STUDENTS A LONGWITH DETAILS AS TO HOW THE SAID FEES ARE RECORDED IN THE BOOKS OF ACCO UNT AND CORRESPONDING EXPENSES INCURRED AGAINST SUCH RECEIP TS. THE ASSESSEE WAS ALSO REQUESTED TO EXPLAIN, IF THE SAME HAVE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE APPELLANT SOCIETY, THEN TO EXPLAIN AS TO HOW AND IN WHOSE BOOKS OF ACCOUNTS THE SAID RECEIPTS ARE RE CORDED. THE AO STATED THAT THE ASSESSEE HAS NOT FURNISHED ANY SPEC IFIC DETAILS SUPPORTED BY DOCUMENTARY EVIDENCES IN RESPONSE TO THE SAID SP ECIFIC QUERY FOR THE REASON BEST KNOWN TO APPELLANT ONLY. IT WAS ALSO NO TICED BY THE AO THAT, INSPITE OF ALLOWING SUFFICIENT OPPORTUNITIES, THE A SSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNTS FOR VERIFICATION. IT WAS FURTHER NOTED THAT DURING THE COURSE OF SEARCH, A CERTIFICATE OF LAXMI NARAYAN COLLEGE OF TECHNOLOGY AND SCIENCE ISSUED TO A STUDENT SHOWING THE ANNUAL FEES STRUCTURE FOR THE SESSION 2009-10 WAS FOUND. APART FROM COLLEGE AND UNIVERSITY FEE, BUS AND HOSTEL FEE HAS ALSO BEEN ME NTIONED SEPARATELY IN THE SAID ANNUAL FEES STRUCTURE. IT IS SIGNIFICAN T TO NOTE THAT WHILE COLLEGE AND UNIVERSITY FEE IS BEING ACCEPTED IN FAV OUR OF LAXMINARAYAN COLLEGE OF TECHNOLOGY AND SCIENCE, BUT BUS AND HOST EL FEE IS BEING ACCEPTED IN THE NAME OF PRIYADARSHINI COOPERATIVE C REDIT SOCIETY, A SOCIETY MANAGED AND CONTROLLED BY CHOUKSEY GROUP. T HE AO OBSERVED THAT IT IS, THEREFORE, APPELLANT THAT BUS AND HOSTE L FEE HAS BEEN DIVERTED TO PRIYADARSHINI COOPERATIVE CREDIT SOCIETY. FROM T HE PERUSAL OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 94 CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT OF THE TRUST, IT IS ALSO SEEN THAT NO BUS/ HOSTEL FEE HAS BEEN KEPT OUTSIDE THE BOOKS OF ACCOUNTS OF THE APPELLANT TRUST. THE AO CONCLUDED F ROM THESE FACTS THAT ALL THE RECEIPTS ON THE SAID ACCOUNT HAVE BEEN SIPH ONED OUT SYSTEMATICALLY. THE AO CONCLUDED THAT THE ASSESSEE TRUST HAS NOT DISCLOSED THE CORRECT RECEIPTS AND SUPPRESSED THE T RUE AND CORRECT FINANCIAL TRANSACTIONS OF THE TRUST, WHICH HAS BEEN DONE INTENTIONALLY WITH A MOTIVE OF DIVERTING THE FUND FOR THE BENEFIT OF TRUSTEES. THE AO FURTHER STATED THAT THE ABOVE MENTIONED SEIZED DOCU MENT RELATES TO LAXMI NARAYAN COLLEGE OF TECHNOLOGY AND SCIENCE, BH OPAL, RUN AND MANAGED BY THE APPELLANT TRUST, H.K. KALCHURI EDUCA TION TRUST, A SOCIETY OF THE CHOUKSEY GROUP FOR THE PERIOD RELEVANT TO A. Y. 2010-11 AND INDICATED THE PRACTICE OF NOT ACCOUNTING FOR THE FE E ON ACCOUNT OF BUS/ HOSTEL CHARGES. THEREFORE, THE AO HELD THAT THE ASS ESSEE TRUST HAS ALSO BEEN FOLLOWING THE SAME PRACTICE EVERY YEAR. THE AO FURTHER OBSERVED THAT SINCE THE ASSESSEE TRUST HAS NEITHER REPLIED T HE SPECIFIC QUERY NOR PRESENTED THE BOOKS OF ACCOUNTS FOR VERIFICATION FO R THE REASONS BEST KNOWN TO THE APPELLANT ONLY, HE WAS LEFT WITH NO CH OICE BUT TO REASONABLY ADOPT THE UNRECORDED FEE ON THE SAID ACCOUNT. THERE FORE, CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES, THE TOTAL UNACCO UNTED FEES ON ACCOUNT OF BUS/ HOSTEL CHARGES HAS BEEN ADOPTED BY THE LD. AO FOR EACH YEAR AS UNDER: H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 95 A.Y.2008-09 S.NO PARTICULAR AMOUNT(RS.) 1. BUS FEE- RS. 8,000/- PER ANNUM PER STUDENT FOR STUDENTS 3,12,00,000/- 2. HOSTEL FEE- RS. 18,000/- PER ANNUM PER STUDENT FOR 1950 STUDENTS 3,51,00,000/- TOTAL 6,63,00,000/ - A.Y. 2009-10 S.NO PARTICULAR AMOUNT(RS.) 1. BUS FEE- RS. 8,000 PER ANNUM PER STUDENT FOR 6000 STUDENTS 4,80,00,000/- 2. HOSTEL FEE RS. 18,000/- PER STUDENT FOR 3000 STUDENTS 5,40,00,000/- TOTAL 10,20,00,000/- A.Y.2010-11 S.NO PARTICULAR AMOUNT(RS.) 1. BUS FEE-RS. 8,000/- PER ANNUM PER STUDENT FOR 8400 STUDENTS 6,72,00,000/- 2. HOSTEL FEE RS. 18,000/- PER ANNUM PER STUDENT FOR 4200 STUDENTS 7,56,00,000/- TOTAL 14,28,00,000/ - ACCORDINGLY, THE AO MADE THE ABOVE ADDITIONS IN A.Y S. 2008-09 TO 2010-11 ON ACCOUNT OF UNACCOUNTED INCOME FROM BUS/H OSTEL CHARGES IN HANDS OF THE ASSESSEE. MATTER CARRIED TO LD. CIT(A), WHO DELETED THE ADDIT IONS. THE OPERATING PART OF THE ORDER OF THE LD. CIT(A) IS AS UNDER: 43.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. THE AO HAS MADE ADDITIONS ON ACCOUNT OF HOSTE L AND BUS FEES ON THE ASSUMPTION THAT THE APPELLANT MUST HAVE RECEIVED HO STEL FEE AND BUS FEE FROM STUDENTS IN COLLEGES RUN BY THE APPELLANT. IN THE A BSENCE OF DETAILS FURNISHED BY THE APPELLANT REGARDING NUMBER OF STUDENTS WHO HAVE PAI D HOSTEL FEES. IT MAY BE PERTINENT TO NOTE THAT THE AO HAS MADE WHO PAID BUS FEES AND HOSTEL FEES. IT MAY BE PERTINENT TO NOT THE AO HAS MADE ESTIMATED ADDITION AS NO EVIDENCES WHATEVER WAS FOUND DURING SEARCH WHICH SHOWS THAT THE APPELLANT HAS ACTUALLY RECEIVED HOSTEL FEE AND BUS FEE FROM STUDENTS. THE AO SIMPLY REFERRED T O A CERTIFICATE ISSUED BY LAMI NARAYAN COLLEGE OF TECHNOLOGY & SCIENCE (LNCTS) TO A STUDENT TO ENABLE HIM TO APPLY FOR EDUCATION LOAN IN WHICH FEE STRUCTURE FOR SESSION 2009-10 HAS BEEN H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 96 MENTIONED. BUT IT IS CLEARLY MENTIONED IN THAT CERT IFICATE THAT HOSTEL FEE AND BUS FEE IS ACCEPTED IN THE NAME OF PRIYADARSHINI COOPERATIVE CREDIT SOCIETY BHOPAL. THUS, IT RATHER CLARIFY THAT THE APPELLANT HAS NOT RECEIVED ANY HOSTEL FEE AND BUS FEE FROM THE STUDENTS. THERE IS NO MATERIAL ON RECORD TO DEMONSTRATE THAT THE APPELLANT HAS ACTUALLY RECEIVED HOSTEL FEE AND BUS FEE FROM STUDENTS EITHE R FOUND DURING SEARCH OR POST SEARCH INVESTIGATION. THERE IS NO CONTRARY MATERIAL AVAILABLE TO NEGATE THE SUBMISSION OF THE APPELLANT THAT THE APPELLANT HAS NOT MAINTAI NED HOSTEL FACILITY AND HAS ALSO NOT ARRANGED BUS FACILITIES FOR STUDENTS AND, THEREFORE HAS NOT RECEIVED ANY HOSTEL FEE AND BUS FEE. THE APPELLANT HAS ALSO PRODUCED COPY O F FEE RECEIPTS ISSUED TO STUDENTS ON SAMPLE BASIS WHICH CLEARLY SHOW THAT THE APPELLA NT HAS NOT RECEIVED ANY FEES FOR HOSTEL AND BUS FROM STUDENTS. IT IS ALSO RELEVANT T O NOTE THAT THE APPELLANT HAS NOT CLAIMED ANY EXPENSES INCURRED ON HOSTEL OR BUS SERV ICES IN ITS INCOME & EXPENDITURE ACCOUNTS. HAD THE APPELLANT ACTUALLY PROVIDED HOSTE L AND BUS SERVICES, IT WOULD HAVE INCURRED EXPENDITURE ALSO ON HOSTEL MAINTENANCE AND RUNNING OF BUSES. IT IS ALSO WELL KNOWN THAT STUDENTS OF PROFESSIONAL COLLEGES USE PR IVATE HOSTEL FACILITIES AND THAT IS THE REASON THAT THERE ARE MANY PRIVATE HOSTELS RUNN ING IN BHOPAL AND OTHER PLACES. SIMILARLY, MOST OF STUDENTS IN THESE DAYS USE PERSO NAL TWO WHEELERS AND CARS FOR ATTENDING COLLEGES. THUS, WITHOUT ANY EVIDENCE TO DEMONSTRATE THAT THE APPELLANT HAS ACTUALLY RECEIVED HOSTEL FEE AND BUS FEE FROM STUDENTS, THE ADDITION CANNOT BE MADE ON PURELY ASSUMPTION BASIS FOR SUPPRESSION OF HOSTEL FEE AND BUS FEE. THEREFORE, CONSIDERING THE FACTS OF THE CASE, IN MY OPINION, THE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF HOSTEL & BUS ASSUMI NG THAT THE APPELLANT MUST HAVE RECEIVED SUCH FEE IN THE ABSENCE OF ANY EVIDENCE GA THERED DURING SEARCH OR DURING INVESTIGATION AFTER SEARCH FROM THE APPELLANT OR ST UDENTS THAT THE APPELLANT HAS ACTUALLY RECEIVED HOSTEL FEE AND BUS FEES. THUS THE ADDITIONS OF HOSTEL FEE AND BUS FEE MADE BY THE AO CANNOT BE SUSTAINED. HENCE, THE ABOVE ADDITIONS ON ACCOUNT OF HOSTEL FEE AND BUS FEE MADE BY THE AO ARE DELETED. LD. DR RELIED ON THE ORDERS OF THE ASSESSING OFFIC ER. LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ADDITIO N MADE BY AO IS UNCALLED FOR AS IT IS BEYOND THE PURVIEW OF SEARCH ASSESSMENTS U/S 153A BECAUSE NO INCRIMINATING MATERIAL WAS FOUND REGARDI NG SAID ADDITION SHOWING IT AS UNDISCLOSED INCOME AND THAT WHATEVER RECEIPTS HAVE RECEIVED HAVE BEEN DISCLOSED IN THE RESPECTIVE AUDI TED FINANCIAL STATEMENTS PRIOR TO DATE OF SEARCH. ON MERITS, IT W AS SUBMITTED THAT THE ADDITION MADE BY THE AO ON ACCOUNT OF UNACCOUNTED B US FEE IS UNCALLED FOR DUE TO FOLLOWING REASON: H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 97 A. FIRST OF ALL, ASSESSEE HAS NOT PROVIDED ANY BUS FACILITY OR HOSTEL FACILITY TO ITS STUDENTS AND NO SUCH EXPENDITURE HAS BEEN CLAIMED IN THE BOOKS O F ACCOUNTS. IN THE COUNTER COMMENTS ON THE REMAND REPORT OF THE AO THE APPELLA NT ALSO FURNISHED SAMPLE COPY OF FEE RECEIPTS ISSUED BY ENGINEERING COLLEGE RUN BY T HE APPELLANT TO SHOW THAT APPELLANT HAD NOT ACTUALLY RECEIVED ANY HOSTEL FEE AND BUS FE E. IT WAS ALSO SUBMITTED THAT L.N. MEDICAL COLLEGE, BHOPAL WAS STARTED IN F.Y. 2009-10 ONLY AND THE APPELLANT STARTED TO ALLOT HOSTEL TO ITS STUDENTS IN THIS COLLEGES ONLY FROM ACADEMIC SESSION OF F.Y. 2010-11. B. FOR RESORTING TO ASSUMPTIONS ABOUT BUS FEE AND H OSTEL FEE, THE LD. AO HAS STRANGELY REFERRED SOME CERTIFICATE OF LAXMI NARAYAN COLLEGE OF TECHNOLOGY AND SCIENCE RUN BY H.K. KALCHURI EDUCATION TRUST. BUT HE HAS NEITHER R EFERRED THE LPS OR PAGE NO. OF SEIZED DOCUMENT NOR HE HAS CONFRONTED THE IMPUGNED DOCUMEN T TO THE ASSESSEE. THUS, THE ADDITION MADE BY THE AO IS WITHOUT ANY BASIS AND CA NNOT BE SUSTAINED ON THIS SCORE ALONE. C. WITHOUT PREJUDICE TO ABOVE, NO SUCH CERTIFICATE, MUCH LESS INCRIMINATING MATERIAL HAS BEEN FOUND DURING SEARCH RELATING TO ASSESSEE SOCIETY SU GGESTING ANY UNACCOUNTED RECEIPT OF BUS FEE/HOSTEL FEE. HENCE, NO ADDITION COULD BE MAD E BY THE AO ONLY ON UNPROVED SURMISES AND CONJECTURES. D. MOREOVER, AND WITHOUT FURTHER PREJUDICE TO ABOVE , AS PER ADMISSION AND FEE REGULATORY COMMITTEE (AFRC) NORMS, A STATUTORY BODY ESTABLISHE D THROUGH AN ACT OF GOVERNMENT OF MP, IT IS OPTIONAL FOR THE EDUCATIONAL INSTITUTIONS TO THEMSELVES PROVIDE BUS FACILITY AND HOSTEL FACILITY TO THEIR STUDENTS. HENCE, WHENEVER SUCH FACILITY IS NOT PROVIDED BY THE EDUCATIONAL INSTITUTION THEMSELVES, THESE FACILITIE S ARE OUTSOURCED. E. FURTHER, THE ID AO HIMSELF HAS AVERRED IN HIS AS SESSMENT ORDER IN THE SAME PARA THAT THE BUS AND HOSTEL FEE IS BEING ACCEPTED IN THE NAME OF PRIYADARSHINI CREDIT COOPERATIVE SOCIETY. IN VIEW OF ABOVE, IT WAS ARGUED THAT THE BASELESS E STIMATION OF UNACCOUNTED BUS FEES AND HOSTEL FEES ESTIMATING NUM BER OF STUDENTS AND AMOUNT OF FEE PER ANNUM WAS GROSSLY ARBITRARY A ND UNSUSTAINABLE AND MAY KINGLY BE DELETED. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT BEFORE US TOO, NO EVIDENCE TO PROVE THAT THE ASSESSEE HAS ACT UALLY RECEIVED HOSTEL FEE AND BUS FEE FROM STUDENTS WAS BROUGHT ON RECORD BY THE REVENUE TO CONTROVERT THE FACTUAL FINDING RECORDED BY THE LD. CIT(A). THE ADDITION CANNOT BE MADE ON ASSUMPTION & PRESUMPTION. THEREFO RE, IN THE ABSENCE OF ANY EVIDENCE GATHERED DURING SEARCH OR D URING INVESTIGATION H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 98 AFTER SEARCH, THE AO WAS NOT JUSTIFIED IN MAKING AD DITION ON ACCOUNT OF HOSTEL & BUS FEE ASSUMING THAT THE ASSESSEE MUST HA VE RECEIVED SUCH FEE. THUS, WE CONFIRM THE FINDING OF THE LD. CIT(A) BEING UNCONTROVERTED. ACCORDINGLY, THIS GROUND OF APPEAL TAKEN BY THE DEP ARTMENT IS DISMISSED. BOTH THE PARTIES SUBMITTED THAT IDENTICA L FACTS ARE INVOLVED IN CASE OF OTHER CONCERNED ASSESSEES. HENCE, OUR ABOVE FINDINGS WILL ALSO PREVAIL IN CASE OF THESE ASSESSEES. 9. THE ASSESSEE AND REVENUE BOTH HAVE RAISED THE IS SUE OF DISALLOWANCE OF CONSULTANCY EXPENSES. SHORT FACTS OF THE ISSUE IN RESPECT OF H K KALCHURI EDUCATION TRUST ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSEE WAS SPECIFICALLY REQUESTED TO FURNISH THE DETAILS O F CONSULTANCY CHARGES PAID TO THE FAMILY MEMBERS OF SHRI JAI NARAYAN CHOU KSEY, SHRI SURESH CHOUKSEY AND SHRI MUKESH CHOUKSEY ALONG WITH THE JU STIFICATION FOR THE PAYMENT OF THE SAME. IT WAS SEEN BY THE ASSESSING O FFICER THAT IN SPITE OF MAKING A SPECIFIC REQUEST, THE ASSESSEE HAS NOT FURNISHED ANY DETAILS. THE AO STATED THAT FROM THE AVAILABLE RECORD, IT IS SEEN THAT THE MEMBERS OF CHOUKSEY GROUP, ALL COVERED UNDER THE DE FINITION OF INTERESTED PERSONS AS GIVEN IN SECTION 13(3) OF THE I.T. ACT 1961, HAVE RECEIVED CERTAIN AMOUNTS ON ACCOUNT OF CONSULTANCY CHARGES FROM DIFFERENT SOCIETIES. THE AO STATED THAT FROM THE IN COME AND EXPENDITURE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 99 ACCOUNT OF THE ASSESSEE TRUST FOR THE YEARS UNDER C ONSIDERATION, IT IS SEEN THAT THE ASSESSEE TRUST HAS DEBITED SALARY TO STAFF AND ALSO DEBITED VISITING FACULTY EXPENDITURE. NO DETAILS OF THE P ERSONS TO WHOM SUCH SALARY/ REMUNERATION HAS BEEN PAID ARE FURNISHED BY THE ASSESSEE. IN THE ABSENCE OF ANY SPECIFIC DETAILS REGARDING THE C ONSULTANCY CHARGES PAID TO FAMILY MEMBERS, THOUGH SPECIFICALLY REQUEST ED, IT WAS INFERRED BY THE LD. AO THAT THE CONSULTANCY CHARGES RECEIVED BY THE ABOVE FAMILY MEMBERS WERE PARTLY OR FULLY FROM THE ASSESSEE TRUS T. FURTHER, NO DETAILS HAVE BEEN FURNISHED BY THE ASSESSEE REGARDING THE W ORK OR DUTIES PERFORMED BY THE SAID MEMBERS OF CHOUKSEY FAMILY AN D WHETHER THE COMPENSATION MATCHED THE MARKET VALUE OF THE SERVIC ES PROVIDED. THE DETAILS OF EDUCATIONAL QUALIFICATION OR EXPERIENCE OF THE MEMBERS OF CHOUKSEY FAMILY HAS ALSO NOT BEEN SUBMITTED. IN ABS ENCE OF THESE DETAILS, THE AO OBSERVED THAT IT WAS NOT POSSIBLE T O ASCERTAIN THE EXTENT AND NATURE OF SERVICES PROVIDED BY THE SAID MEMBERS OF CHOUKSEY FAMILY AND WHETHER THE COMPENSATION WAS EXCESSIVE O R UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVI CES FOR WHICH THE PAYMENT WAS MADE OR THE LEGITIMATE NEEDS OF THE BUS INESS OR PROFESSION OF THE APPELLANT TRUST OR THE BENEFIT DERIVED BY OR ACCRUING TO IT THEREFROM. THE AO, THEREFORE, OBSERVED THAT THE FUN DS OF THE ASSESSEE TRUST HAVE BEEN WITHDRAWN IN THE GUISE OF CONSULTAN CY CHARGES. IT WAS ACCORDINGLY INFERRED BY THE AO THAT THE AMOUNT PAID BY WAY OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 100 CONSULTANCY CHARGES DURING THE PREVIOUS YEARS RELEV ANT TO ASSESSMENT YEARS UNDER CONSIDERATION TO INTERESTED PERSONS REF ERRED TO IN SECTION 13(3) OUT OF THE RESOURCES OF THE TRUST FOR SERVICE S RENDERED BY THESE PERSONS TO THE TRUST, WAS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVICES FOR WHICH THE PAYMENT WAS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE TRUST OR THE BENEFIT DERIVED BY OR ACCRUING TO IT THEREFR OM AND, THUS, THE AO CONCLUDED THAT THE SAID PAYMENTS TO THE INTERESTED PERSONS ATTRACT THE PROVISIONS OF SECTION 13(L)(C)(II) R.W.S 13(3) OF T HE ACT. THE AO ALSO RELIED UPON THE DECISION OF HONBLE HIGH COURT OF MADRAS I N THE CASE OF COMMISSIONER OF INCOME-TAX VS. NAGARATHU VAISIYARGA L SANGAM [2001] 115 TAXMAN 62 (MAD.) IN WHICH THE HONBLE COURT HAS UPHELD THE ACTION OF AO BY HOLDING THAT THE ASSESSEE HAD MADE CERTAIN PAYMENTS TO ITS OFFICE BEARERS WHO WERE INTERESTED PERSONS AND, THE REFORE, THE PROVISIONS OF SECTION 13(L)(C)( II) WERE APPLICABLE . ACCORDINGLY, THE LD. AO HELD THAT THE TRUST IS NOT ENTITLED FOR ANY DEDUCTI ON U/S 11 OF THE I.T. ACT 1961 AND THAT THE INCOME OF THE APPELLANT IS LIABLE TO BE BROUGHT TO TAX AS NORMAL BUSINESS INCOME WITHOUT GIVING ANY DEDUCT ION//EXEMPTION U/S 11/10 OF THE I.T. ACT 1961. MATTER CARRIED TO LD. CIT(A), WHO DELETED THE ADDI TIONS IN ASSESSMENT YEARS 2008-09 & 2009-10 AND PARTLY CONFI RMED THE ADDITION H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 101 IN THE ASSESSMENT YEAR 2010-11. THE OPERATING PART OF THE ORDER OF THE LD. CIT(A) IS AS UNDER: I HAVE CAREFULLY CONSIDERED THE REASONS RECORDED BY THE AO AND SUBMISSION MADE BY THE APPELLANT ON THIS ISSUE. IT IS NOTICED THAT THE LD. AO HELD THAT THE FUNDS OF THE APPELLANT TRUST HAVE BEE N TRANSFERRED IN THE GUISE OF CONSULTANCY CHARGES TO THE INTERESTED PERSONS REFER RED TO IN SECTION 13(3), WHICH WAS EXCESSIVE AND UNREASONABLE HAVING REGARD TO FAIR MARKET VALUE OF THE SERVICES FOR WHICH THE PAYMENTS WERE MADE, MAIN LY ON THE BASIS THAT THE APPELLANT HAS NOT FURNISHED ANY DETAILS REGARDING T HE FAMILY MEMBERS TO WHOM SUCH SALARY/ CONSULTANCY CHARGES HAVE BEEN PAI D AND THEIR QUALIFICATIONS AND OTHER DETAILS. HOWEVER DURING TH E COURSE OF APPELLATE PROCEEDINGS, THE DETAILS REGARDING CONSULTANCY/ SAL ARY PAID BY THE APPELLANT TRUST TO THE VARIOUS PERSONS OF FAMILY MEMBERS AS W ELL AS THEIR QUALIFICATION HAVE BEEN FURNISHED BY THE APPELLANT AND IT WAS CON TENDED THAT THE SALARY COUSULTANCY PAID TO THE TRUSTEES AND THEIR FAMILY MEMBERS IS NOT EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE SERVICES RENDERED BY THEM FOR THE ACTIVITIES OF THE APPELLANT TRUSTS. IT WAS ALSO CON TENDED THAT LD. AO CAME TO CONCLUSION THAT THE CONSULTANCY PAID WAS EXCESSIVE AND UNREASONABLE, WITHOUT MAKING ANY COMPARISON REGARDING THE FAIR VA LUE OF SALARY/ CONSULTANCY PAID FOR SUCH SERVICES TO ANY OTHER PERSON. FROM THE DETAILS FILED BY THE APPELLANT, IT IS NOTI CED THAT THE FOLLOWING SEVEN MEMBERS OF CHOUKSEY FAMILY HAVE RECEIVED SALA RY/ CONSULTANCY CHARGES FROM DIFFERENT SOCIETIES RUN BY THE CHOUKSE Y FAMILY. THE QUALIFICATION OF THESE MEMBERS OF THE FAMILY AS SUBMITTED BY THE APPELLANT ARE AS UNDER: IN ORDER TO APPRECIATE AS TO WHETHER THE APPELLANT HAS PAID SALARY/CONSULTANCY CHARGES TO THE MEMBERS OF CHOUKS EY FAMILY COMMENSURATE TO THE SERVICES RENDERED BY THEM, IT W OULD BE FRUITFUL TO KNOW THE TOTAL AMOUNT OF CONSULTANCY/SALARY SHOWN TO BE RECEIVED BY EACH OF THE ABOVE MEMBERS OF THE FAMILY FROM DIFFERENT SOCIETIE S, WHICH IS AS UNDER (AS SUBMITTED BY THE APPELLANT AND DECLARED BY THESE PE RSONS IN THEIR INDIVIDUAL RETURNS OF INCOME): .. IT IS ALSO NOTICED THAT THE APPELLANT SOCIETY HAS M ADE PAYMENTS TO VARIOUS MEMBERS OF THE CHOUKSEY FAMILY AS UNDER: IT MAY BE NOTED THAT THE LD. AO HAS TAKEN THE AMOUN T OF CONSULTANCY CHARGES IN THE ASSESSMENT ORDER IN THE ABSENCE OF A NY DETAILS FURNISHED BY THE APPELLANT. DURING APPELLATE PROCEEDINGS, THE AB OVE DETAIL OF CONSULTANCY PAID TO INTERESTED PERSONS HAS BEEN FURNISHED BY TH E APPELLANT. FROM THE ABOVE DETAILS, IT CAN BE SEEN THAT THE APPELLANT SO CIETY HAS BEEN PAYING CONSULTANCY CHARGES TO FAMILY MEMBERS UPTO A MAXIMU M OF RS. 10,00,000/- TILL A.Y.2009-10, WHICH CAN BE CONSIDERED TO BE REA SONABLE KEEPING IN VIEW OF THE FACT THAT MEMBERS OF THE FAMILY ARE INVOLVED IN DAY TO DAY MANAGEMENT OF THE SEVEN COLLEGES RUN BY THE APPELLANT TRUST. THOU GH IN THE F.Y.2009-10 H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 102 RELEVANT TO A.Y. 2010-11, THE APPELLANT HAS ALSO ST ARTED A MEDICAL COLLEGE AND HOSPITAL, YET THE INCREASE IN PAYMENT OF CONSULTANC Y CHARGES IS ABNORMALLY HIGH COMPARED TO EARLIER YEARS. THE INCREASE IN CON SULTANCY CHARGES PAID TO FAMILY MEMBERS HAS INCREASED MANY FOLD BY FIVE TO T EN TIMES OF CONSULTANCY PAID IN EARLIER YEARS. THEREFORE, CONSIDERING THE F ACT THAT THE APPELLANT HAS ALSO STARTED A NEW MEDICAL COLLEGE AND HOSPITAL DUR ING THE YEAR UNDER CONSIDERATION, AT THE MAXIMUM THE REASONABLE CONSUL TANCY/SALARY TO THE FAMILY MEMBERS CAN BE CONSIDERED AT RS.24,00,000/- AS AGAINST CONSULTANCY/SALARY SHOWN TO BE PAID AT RS.54,00,000 /-. HENCE, THE APPELLANT HAS PAID EXCESSIVE AND UNREASONABLE CONSULTANCY CHA RGES TO THE EXTENT OF RS.30,00,000/- (RS.54,00,000 - RS.24,00,000) IN A.Y . 2010-11 TO THE INTERESTED PERSONS, WHICH WAS NOT COMMENSURATE TO T HE SERVICES RENDERED BY THEM TO THE APPELLANT. HERE IT MAY NOT BE OUT OF PL ACE TO MENTION, FOR EXAMPLE, THAT SHRI JAI NARAYAN CHOUKSEY HAS EARNED CONSULTANCY CHARGES IN EARLIER YEARS AT MAXIMUM OF RS.8,95,000/- IN A.Y. 2 008-09, WHEREAS IN THE A.Y. 2010-11 THE APPELLANT TRUST HAS PAID HIM CONSU LTANCY CHARGES OF RS.21,00,000/-, WHICH, THROW LIGHT ON THE FACT THAT CONSULTANCY CHARGES IN A.Y.2010-11 PAID WERE EXCESSIVE AND UNREASONABLE AN D NOT COMMENSURATE WITH THE SERVICES RENDERED BY THE INTERESTED PERSON S. HENCE, THERE WAS VIOLATION OF SECTION 13(2) (C) R.W.S. 13(3) OF THE ACT AND THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U/S 11 OF THE ACT. ACCORDING LY, THE SUBMISSION OF THE APPELLANT ON THIS ISSUE IS REJECTED. 49.2 FOR THE SAKE OF BREVITY, IT MAY BE MENTIONED T HAT THIS ISSUE HAS BEEN DISCUSSED BY ME IN DETAIL HEREINABOVE IN THIS ORDER WHILE DISCUSSING VIOLATION OF SECTION 13 AND HELD THAT THE APPELLANT HAS NOT M ADE ANY UNREASONABLE OR EXCESSIVE PAYMENT OF CONSULTANCY TO INTERESTED PERS ONS IN A.YS.2005-06 TO 2009-10. HOWEVER, IN A.Y.2010-11, THE APPELLANT HAS MADE EXCESSIVE AND UNREASONABLE PAYMENT OF CONSULTANCY CHARGES TO THE INTERESTED PERSONS TO THE EXTENT OF RS.30,00,000/- WHICH WAS NOT COMMENSU RATE WITH THE SERVICES RENDERED. ACCORDINGLY, THE ADDITIONS MADE BY THE AO IN A.YS.2005-06 TO 2009-10 ARE DELETED. AS REGARD A.Y.2010-11, THE ADD ITION IS RESTRICTED TO THE EXTENT OF RS.30,00,000/- AND, ACCORDINGLY, THE BALA NCE ADDITION OF RS.30,00,000/- (RS.60,00,000 RS.30,00,000) IS DEL ETED. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORI TIES. LD. AR FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE LD. CIT(A) SO FAR AS THE DELETIONS OF ADDITIONS ARE CONCERNED, HO WEVER, AS REGARDS CONFIRMATION OF ADDITION AT RS.30 LACS IN THE ASSES SMENT YEAR 2010-11, THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAS DISALLOWED RS. 30,00,000/- OUT OF TOTAL REMUNERATIO N OF RS. 60,00,000/- CLAIMED BY THE ASSESSEE, WITHOUT ASSIGNING ANY PLAU SIBLE REASON OR H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 103 JUSTIFICATION FOR THE SAME. THIS IS DESPITE THE FAC T THAT HE HIMSELF HAS STATED AT PG 155 OF HIS ORDER IN THE F.Y. 2009-10 R ELEVANT TO A.Y. 2010- 11, THE ASSESSEE HAD ALSO STARTED A MEDICAL COLLEGE & HOSPITAL. HE STATED THAT INCREASE IN THE PAYMENT OF CONSULTANCY CHARGES IS ABNORMALLY HIGH AS COMPARED TO EARLIER YEARS. HIS F INDINGS ARE CONTRARY TO FACTS ON RECORD. IT MAY BE SEEN THAT IN THE EARL IER A.Y. 2009-10, TOTAL CONSULTANCY CHARGES PAID WAS 42,28,594/- WHICH WAS FOUND AS REASONABLE BY HIM WHEREAS IN THE ASSESSMENT YEAR 20 10-11, HE HAS ONLY ALLOWED CONSULTANCY CHARGES TO THE TUNE OF RS. 30,00,000/- DESPITE THE FACT THAT IN THE F.Y. 2009-10 RELEVANT TO A.Y. 2010-11, THE ASSESSEE HAD ALSO STARTED A MEDICAL COLLEGE & HOSPITAL, AS OBSERVED BY CIT(A). MOREOVER, THE LD. CIT(A) HAS NOT GIVEN ANY BASIS OR JUSTIFICATION FOR TREATING THE SALARY/CONSULTANCY CHARGES AS EXCESSIV E AND UNREASONABLE. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE CIT(A) WAS CORRECT IN DELETING ENTIRE ADDITION ON THIS ISS UE IN A.Y. 2005-06 TO 2009-10 BY EXTENSIVELY DEALING THE SAME AND BY GIVI NG PROPER JUSTIFICATION. HOWEVER, WE FIND THAT HIS PART CONFI RMATION OF RS. 30,00,000/- OUT OF DISALLOWANCE OF RS.. 60,00,000/- IN A.Y. 2010-11 WAS NOT CORRECT AND THE ENTIRE DISALLOWANCE OF RS. 60,0 0,000/- MADE BY AO WAS LIABLE TO BE QUASHED. THIS IS BECAUSE HE HAS CO NFIRMED PART H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 104 DISALLOWANCE WITHOUT ASSIGNING ANY PLAUSIBLE REASON OR JUSTIFICATION FOR THE SAME. ALSO IT MAY BE SEEN THAT IN THE EARLIER A .Y. 2009-10, TOTAL CONSULTANCY CHARGES PAID WAS 42,28,594/- WHICH WAS FOUND AS REASONABLE BY HIM WHEREAS IN THE ASSESSMENT YEAR 20 10-11, HE HAS ONLY ALLOWED CONSULTANCY CHARGES TO THE TUNE OF RS. 30,00,000/- DESPITE THE FACT THAT IN THE F.Y. 2009-10 RELEVANT TO A.Y. 2010-11, THE ASSESSEE HAD ALSO STARTED A MEDICAL COLLEGE & HOSPITAL, AS OBSERVED BY CIT(A) HIMSELF. THEREFORE, THE ENTIRE ADDITION OF RS. 60,0 0,000/- MADE IN A.Y. 2010-11 IS ALSO DELETED. HENCE, ALL THE ADDITIONS M ADE BY AO ON ACCOUNT OF CONSULTANCY CHARGES ARE DELETED. ACCORDI NGLY, GROUNDS IN APPEAL OF ASSESSEE ARE ALLOWED WHEREAS THE GROUNDS OF THE DEPARTMENT ARE DISMISSED. BOTH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN THESE APPEALS IN RESPECT OF OTHER FOUR ASSESSEES NAMELY J AI NARAIN SHIKSHA SAMITI, HAI HAY KSHATRIYA EDUCATION SOCIETY, RISHIR AJ MEMORIAL EDUCATION & WELFARE SOCIETY AND RISHIRAJ SINGH MEMO RIAL WELFARE SOCIETY. HENCE, THESE APPEALS ARE ALSO DECIDED TOGE THER. AS REGARDS JAI NARAIN SHIKSHA SAMITI, WE FIND THAT THE CIT(A) WAS CORRECT IN DELETING ENTIRE ADDITION ON THIS ISSUE I N A.Y. 2007-08 TO 2009- 10 BY EXTENSIVELY DEALING THE SAME AND BY GIVING PR OPER JUSTIFICATION. HOWEVER, WE FIND THAT HIS CONFIRMATION OF ADDITION OF RS. 15,60,000/- AS H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 105 AGAINST DISALLOWANCE OF ONLY RS. 6,11,419/- IN A.Y. 2010-11 WAS NOT CORRECT AND WAS LIABLE TO BE QUASHED. THIS IS BECAU SE HE HAS MADE/CONFIRMED ADDITION OF RS. 15,60,000/- WHICH IS MORE THAN THE ADDITION OF RS. 6,11,419/- MADE BY AO WITHOUT GIVIN G ANY SUCH NOTICE OF ENHANCEMENT. FURTHER ALSO DISALLOWANCE MADE BY AO W AS NOT JUSTIFIED BECAUSE CONSULTANCY CHARGES/SALARY WAS PAID TO MS. SHWETA CHOUKSEY, MS. DHRITI CHOUKSEY AND MS. POOJA CHOUKSEY FOR THE FIRST TIME FOR SERVICES GIVEN BY THEM IN A.Y. 2010-11 SWELLING THE AMOUNT OF CONSULTANCY CHARGES/SALARY. WE ALSO NOTE THAT THESE CONSULTANCY CHARGES/SALARY HAVE BEEN TAXED IN THEIR INDIVIDUAL HANDS BY THE SAME AO. IN VIEW OF ABOVE, WE DELETE THE ADDITION OF RS. 6,11,419/- MADE BY AO AND ALSO RS. 15,60,000/- MADE/CONFIRMED BY CIT(A ). HENCE, GROUNDS IN ALL THE APPEALS OF ASSESSEE ARE ALLOWED AND GROUNDS OF THE DEPARTMENT ARE DISMISSED. AS REGARDS HAI HAY KSHATRIYA EDUCATION SOCIETY, RIS HIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY AND RISHIRAJ S INGH MEMORIAL WELFARE SOCIETY, WE FIND THAT THE CIT(A) WAS CORREC T IN DELETING ENTIRE ADDITION ON THIS ISSUE IN VARIOUS ASSESSMENT YEARS BY EXTENSIVELY DEALING THE SAME AND BY GIVING PROPER JUSTIFICATION . HENCE, GROUNDS IN ALL THE ABOVE APPEALS OF THE DEPARTMENT ARE DISMISSED. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 106 10. THE ASSESSEE AND REVENUE BOTH HAVE RAISED THE I SSUE OF DISALLOWANCE OF ADHOC VEHICLE MAINTENANCE EXPENSES & DEPRECIATIO N ON VEHICLE. SHORT FACTS OF THE ISSUE REGARDING H K KALCHURI ED UCATION TRUST ARE THAT THE AO NOTED THAT DURING THE COURSE OF SEARCH, IT WAS FOUND THAT 6 CARS WERE PARKED AT THE RESIDENCE OF SHRI JAI NARAY AN CHOUKSEY. ON BEING ASKED, IN REPLY TO QUESTION NO. 59 OF HIS STA TEMENT RECORDED ON 24.07.2009, SHRI J.N. CHOUKSEY STATED THAT ALL THE CARS ARE OWNED BY DIFFERENT TRUSTS AND SOCIETIES WHEREIN MYSELF AND F AMILY MEMBERS ARE OFFICE BEARERS AND AS SUCH THESE VEHICLES ARE USED BY FAMILY MEMBERS AND HENCE THEY ARE PARKED AT MY RESIDENCE. THE AO FURTHER STATED THAT AS PER THE AVAILABLE RECORDS, THE FAMILY MEMBERS OF CHOUKSEY GROUP DO NOT OWN ANY PERSONAL VEHICLE. IT WAS OBSERVED BY TH E AO THAT CONSIDERING THE SOCIAL STATUS OF MEMBERS OF CHOUKSE Y FAMILY, THE REQUIREMENT OF SUCH VEHICLES FOR PERSONAL PURPOSES CANNOT BE RULED OUT WHEN THEY DO NOT OWN ANY VEHICLE IN THEIR PERSONAL CAPACITY. THUS, THE MEMBERS OF CHOUKSEY FAMILY ARE USING VEHICLES OF TR USTS INCLUDING THE APPELLANT TRUST FOR THE PURPOSES OF SOCIETY AS WELL AS FOR PERSONAL PURPOSES. AT LEAST IT CAN SAFELY BE CONCLUDED THAT VEHICLES OF TRUSTS INCLUDING APPELLANT TRUST ARE AVAILABLE FOR THE USE OF MEMBERS OF CHOUKSEY FAMILY. THE ASSESSEE TRUST HAS ALSO NOT PR ODUCED LOG BOOK REQUIRED TO BE MAINTAINED FOR RUNNING OF VEHICLES O F THE TRUST, IF ANY, FOR VERIFICATION TO ESTABLISH CONCLUSIVELY THAT THE VEH ICLES OF THE TRUST ARE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 107 EXCLUSIVELY USED FOR THE OBJECTS OF THE TRUST ONLY AND NOT FOR ANY OTHER PURPOSES INCLUDING PERSONAL USE OF MEMBERS OF CHOUK SEY FAMILY. THE AO REFERRED TO THE PROVISIONS OF SECTION 13(2)(B) A ND OBSERVED THAT FROM THE PLAIN READING OF SECTION 13(2)(B), IT WOULD BE SEEN THAT THE LEGISLATIVE EMPHASIS IS ON AVAILABILITY OF PROPERTY FOR THE USE OF ANY PERSON REFERRED TO IN SUBSECTION (3) AND THAT TOO FOR ANY PERIOD DU RING THE PREVIOUS YEAR IN QUESTION WITHOUT CHARGING ADEQUATE RENT OR COMPE NSATION. IN THE INSTANT CASE, SHRI JAI NARAIN CHOUKSEY AND MEMBERS OF HIS FAMILY, AS ALSO HIS BROTHER NAMELY SHRI SURESH CHOUKSEY AND ME MBERS OF HIS FAMILY ARE FOUNDER MEMBERS/ TRUSTEES OF THE ASSE TR UST AND, THUS, PROHIBITED PERSONS AS PER THE PROVISIONS OF SECTION 13(3). THE VEHICLES PARKED IN THE RESIDENTIAL PREMISES OF SHRI JAI NARA IN CHOUKSEY REMAINED WITH THE SAID PROHIBITED PERSONS FOR PERSONAL USE T HEREOF ALSO BY SHRI JAI NARAIN CHOUKSEY, SHRI SURESH CHOUKSEY AND THEIR FAM ILY MEMBERS. AT LEAST, THE SAID VEHICLES ARE AVAILABLE FOR THEIR US E AS CONTEMPLATED IN THE PROVISIONS OF SECTION 13(2)(B) OF THE ACT. IT IS AL SO A FACT THAT THE ASSESSEE TRUST DID NOT CHARGE ANY RENT OR OTHER COM PENSATION WITH REGARD TO THE DEEMING USE OF THE SAID VEHICLES, MAY BE FOR ANY PERIOD. NOW, IF ANY PROPERTY OF THE TRUST (INCLUDING THE MO VABLE PROPERTIES LIKE VEHICLE ETC.) IS MADE AVAILABLE FOR THE USE OF INTE RESTED PERSONS, IT IS COVERED BY THE DEEMING PROVISION OF SECTION 13(2)(B ) OF THE I T ACT 1961. THE AO ALSO RELIED ON THE DECISION OF THE HONBLE H IGH COURT OF KERALA IN H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 108 THE CASE OF AGAPPA CHILD CENTRE VS. CIT [1997] 092 TAXMAN 327 (KER.). IN VIEW OF THE ABOVE, THE AO CONCLUDED THAT PROPERT Y OF THE TRUSTS HAVE BEEN USED/ MADE AVAILABLE FOR PERSONAL PURPOSES BY THE OFFICE BEARERS AND THEIR FAMILY MEMBERS WITHOUT CHARGING ANY RENT/ COMPENSATION. SINCE, THE PROPERTY/INCOME OF THE TRUST HAVE BEEN U SED FOR THE BENEFITS OF INTERESTED PERSONS AS PROVIDED U/S 13(3) OF THE I.T. ACT 1961, THE APPELLANT TRUST IS NOT ENTITLED FOR ANY DEDUCTION U /S 11 OF THE I.T. ACT 1961. MATTER CARRIED TO LD. CIT(A), WHO PARTLY CONFIRMED THE ADDITIONS. THE OPERATING PART OF THE ORDER OF THE LD. CIT(A) I S AS UNDER: I HAVE CAREFULLY CONSIDERED THE REASONS RECORDED BY THE AO IN THE ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. I T MAY BE NOTED THAT THE APPELLANT HAS HEAVILY RELIED ON THE DECISION OF THE HON'BLE ITAT, INDORE BENCH IN ITS OWN CASE FOR A.Y. 2002- 03 TO 2005-06 IN ITA NO.533 TO 535 /IND/2007 & 334/IND/2008 ORDER DATED 24.05.2011 IN WHICH THE HO N'BLE ITAT DELETED THE ADDITION MADE ON ACCOUNT OF PARTIAL USE OF VEHICLE BY THE TRUSTEES. THERE IS NO DOUBT IN THE PROPOSITION THAT THE DECISION OF HON'B LE ITAT IS BINDING ON THE CIT (A), IF THE FACTS INVOLVED ARE IDENTICAL. HOWEV ER, ON PERUSAL OF THE SAID DECISION OF THE HON'BLE ITAT DATED 24.05.2011, IT I S NOTICED THAT THE HON'BLE ITAT HAS DECIDED THIS ISSUE IN FAVOUR OF THE APPELL ANT INTERALIA CONSIDERING THE FACT PLACED BEFORE THE HON'BLE ITAT THAT MANAGING T RUSTEE OWNS HIS OWN CARS AND TELEPHONE AND WAS ALSO EMPLOYING PERSONAL SERVA NTS FOR HIS HOUSEHOLD WORK. THE RELEVANT OBSERVATIONS OF THE HON'BLE ITAT ON PAGE NO. 24 OF THE SAID ORDER ARE REPRODUCED AS UNDER: WE ALSO FOUND THAT MANAGING TRUSTEE OWNS HIS OWN C AR AND TELEPHONE AND WAS ALSO EMPLOYING PERSONAL SERVANTS FOR HIS HOUSEH OLD WORK. FROM THE ABOVE, IT IS CLEAR THAT THE HON'BLE ITAT C AME TO THE CONCLUSION THAT THERE WAS NO PERSONAL USE OF THE VEHICLES OF THE TR UST BY THE PROHIBITED PERSONS BECAUSE THE MANAGING TRUSTEE OWNS HIS OWN C AR FOR HIS PERSONAL USE. BUT DURING THE COURSE OF SEARCH ON 23.07.2009 THE FACT WHICH EMERGES WAS THAT ALL THE VEHICLES FOUND WERE OWNED BY THE T RUST AND THE INDIVIDUAL MEMBERS OF THE CHOUKSEY FAMILY DID NOT OWN ANY VEHI CLE. THIS FACT WAS ALSO NOT CONTROVERTED BY THE APPELLANT BEFORE THE AO OR DURING APPELLATE PROCEEDINGS. THUS, THE FACTS ACTUALLY FOUND ON SEAR CH INVOLVED IN ASSESSMENT YEARS UNDER CONSIDERATION WERE DIFFERENT FROM THE F ACTS STATED BY THE APPELLANT BEFORE THE HON'BLE ITAT IN APPEALS AGAINS T EARLIER YEARS. THEREFORE, H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 109 THE FACTS INVOLVED BEING DIFFERENT, THE RATIO OF TH E DECISION OF HON'BLE ITAT ORDER DATED 24.05.2011 IS NOT SQUARELY APPLICABLE I N THESE ASSESSMENT YEARS. ADMITEDLY, AT THE TIME OF SEARCH, IT WAS FOUND THA T SIX VEHICLES WERE PARKED AT THE RESIDENCE OF SHRI J.N. CHOUKSEY AND SIMILARLY VEHICLES OWNED BY SOCIETIES WERE ALSO FOUND PARKED AT THE RESIDENCE O F SHRI SURESH CHOUKSEY. IT IS ALSO ADMITTED FACT THAT INDIVIDUAL MEMBERS OF TH E CHOUKSEY FAMILY DO NOT OWN ANY VEHICLE. SINCE, NO VEHICLE IS OWNED BY ANY INDIVIDUAL MEMBER OF CHOUKSEY FAMILY, THE VEHICLES BELONGING TO THE SOCI ETIES ARE ONLY USED BY THE FAMILY MEMBERS FOR SOCIETY PURPOSES AS WELL AS FOR PERSONAL PURPOSES. IT MAY BE RELEVANT TO NOTE THAT CHOUKSEY FAMILY IS A VERY REPUTED AND SOCIAL FAMILY. IT MAY NOT BE OUT OF PLACE TO MENTION HERE THAT SHRI JAI NARAYAN CHOUKSEY HAD ALSO CONTESTED TWO STATE ASSEMBLY ELEC TIONS AND ONE PARLIAMENTARY ELECTION. THEREFORE, THERE IS NO DOUB T ABOUT THE FACT THAT THE MEMBERS OF CHOUKSEY FAMILY REQUIRED TO USE VEHICLES FOR THEIR PERSONAL USE. SINCE, IT IS AN ADMITTED FACT THAT INDIVIDUAL MEMBE RS OF THE CHOUKSEY FAMILY DO NOT OWN ANY VEHICLE, THEY ARE USING VEHICLES OWN ED BY THE TRUST FOR THEIR PERSONAL PURPOSES ALSO, OTHER THAN FOR THE ACTIVITI ES OF THE TRUST AND, THEREFORE, THERE IS VIOLATION OF PROVISIONS OF SECTION 13(2)(B ) R.W.S. 13(3) OF THE ACT. IN THIS REGARD SUPPORT IS DRAWN FROM THE DECISION O F HON'BLE HIGH COURT OF KERALA IN THE CASE OF AGAPPA CHILD CENTRE VS. CIT (1997) 92 TAXMAN 327 (KER.). IN THIS CASE, DURING THE ACCOUNTING YEAR DURING TH E A.Y. 1980-81, THE ASSESSEE, A PUBLIC CHARITABLE TRU ST PURCHASED A REFRIGERATOR, EVEN BEFORE THE TRUST BUILDING WAS READY, AND KEPT IT AT THE RESIDENCE OF ITS MANAGING TRUSTEE. AS THE TRUSTEE WAS ENJOYING THE U SE OF PROPERTY OF THE TRUST, THE ITO HELD THAT PROVISIONS OF SECTION 13(2)(B) WE RE ATTRACTED AND, HENCE, THE TRUST WAS NOT ENTITLED FOR DEDUCTION U/S 11. THE CI T (A) DECIDED IN FAVOUR OF THE ASSESSEE BUT THE ITAT HELD THAT REFRIGERATOR WA S USED FOR THE BENEFIT OF PROHIBITED PERSON MENTIONED IN SECTION 13(3) AND, H ENCE, THE TRUST WAS NOT ENTITLED TO THE PROTECTION OF SECTION 11. ON REFERE NCE, THE HON'BLE HIGH COURT HELD AS UNDER: HELD : PERUSAL OF SECTION 13 AFTER TAKING INTO CONSIDERAT ION THE SPIRIT OF SECTION 13(1) MAKES IF ABUNDANTLY CLEAR THAT THE LEGISLATIVE INTE NT OF OFFERING BENEFITS OF SECTION 11 RECQUIRED PASSING OF A RIGOROUS LITMUS TEST AVAILABLE IN THE STATUTORY PROVISIONSOF SECTION 13. APART FROM THE D IRECT INSTANCES PROVIDED FOR IN SECTION 13(1), SECTION 13(2) ADDITIONALLY DEALS WITH SITUATIONS WHICH ARE IN COMMON PARLANCE UNDERSTOOD AS 'DEEMING SITUATIONS'. SECTION 13(2) STATUTORILY PROVIDES THAT THE INCOME OR THE PROPERT Y OF THE TRUST OR ANY PART OF SUCH INCOME OR PROPERTY SHALL BE DEEMED TO HAVE BEE N USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SUB-SECTION (3). FROM A READING OF SECTION 13(2)(B ), IT WOULD BE SE EN THAT THE LEGISLATIVE EMPHASIS IS ON AVAILABILITY FOR THE USE OF ANY PERS ON REFERRED TO IN SUBSECTION (3) AND THAT TOO FOR ANY PERIOD DURING THE PREVIOUS YEAR IN QUESTION WITHOUT CHARGING ADEQUATE RENT OR COMPENSATION. IN THE INST ANT CASE, THE CHIEF TRUSTEE WAS ONE OF SUCH PROHIBITED PERSONS AS COULD BE UNDERSTOOD FROM SECTION 13(3). ALSO, THE REFRIGERATOR REMAINED WITH THE SAID PROHIBITED PERSON AND THERE WAS NO QUESTION OF EVEN A THOUGHT ON THE PART OF THE ASSESSEE, A PUBLIC CHARITABLE TRUST, TO CHARGE ADEQUATE RENT OR OTHER COMPENSATION WITH REGARD TO THE DEEMING USE OF THE SAID REFRIGERATOR, MAY BE FOR ANY PERIOD H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 110 BECAUSE THE DURATION OF THE PERIOD WAS NOT PLACED O N RECORD. IF ANY PROPERTY WAS MADE AVAILABLE FOR THE USE, IT WAS COVERED BY T HE DEEMING PROVISION. IF ALL THE CLAUSES OF SECTION 13(2) ARE ANALYSED, T HE WORD PROPERTY' WOULD HAVE TO BE UNDERSTOOD AS HAVING BEEN USED AGA IN IN ITS OWN GENERIC SENSE TO INCLUDE MOVABLE AND IMMOVABLE PRO PERTY' AND , THEREFORE, IN THE CON TEXT OF VARIOUS PROVISIONS OF SECTION 13(2), IT IS NOT POSSIBLE TO UNDERSTAND THE TERM 'ANY LAND . BUILDING OR OTHER PROPERTY OF THE TRUST', ESPECIALLY THE TERM 'OTHER PROPERTY' IN THE SAME SENSE OF THE TERM LAND AND BUILDING MEANING PROPERTY AS IMMOVAB LE AND NOT INCLUDING MOVABLE IN THE CONTEXT OF THE SITUATION. VARIOUS PROVISIONS OF SECTION 13(2) MAKES IT ABUNDANTLY CLEAR THAT THE PR OVISION SOUGHT TO PROTECT THE TRUST AND ITS BENEFIT OF EXEMPTION UNDE R SECTION/1 FROM EVERYTHING WHICH COULD BE UNDERSTOOD IN TERMS OF TH E AFFAIRS OF THE TRUST. IT PROTECTS THE INCOME, IT PROTECTS THE SALE AND PURCHASE, IT PROTECTS THE USER, IT ALSO PROTECTS VARIOUS OTHER A SPECTS. IN THE LIGHT OF THE ABOVE MANIFESTATION OF VARIOUS STATUTORY PROVIS IONS, IT IS NOT POSSIBLE TO UNDERSTAND THAT THE TERMS 'LAND, BUILDI NG AND OTHER PROPERTY OF THE TRUST' WOULD GO TO SHOW THAT THE PROVISIONS OF SECTION I3(2)(B) WOULD HAVE TO BE UNDERSTOOD TO BE RELATABLE TO IMMO VABLE PROPERTY ONLY AND WOULD NOT, THEREFORE, SEEK TO COVER THE RE FRIGERATOR IN QUESTION. THE TRIBUNAL WAS, THEREFORE, JUSTIFIED IN LAW IN HO LDING THAT THE PROPERTY OF THAT TRUST WAS USED FOR THE BENEFIT OF A PROHIBI TED PERSON MENTIONED IN SECTION 13(3) AND, HENCE, THE EXEMPTION TO THE T RUST SHOULD BE DENIED. NOW, IN THE INSTANT CASE ALSO, THE VEHICLES OWNED B Y THE SOCIETIES ARE ALSO USED BY THE PROHIBITED PERSONS MENTIONED IN SE CTION 13(3) FOR THEIR PERSONAL USE AND, HENCE, THERE WAS VIOLATION OF SEC TION 13(2)(B) OF THE ACT. HENCE, THE SUBMISSION OF THE APPELLANT IS DEVO ID OF ANY MERITS AND, THEREFORE, REJECTED. 33.2 FOR THE SAKE OF BREVITY, IT MAY BE MENTIONED T HAT THE ISSUE REGARDING PERSONAL USE OF VEHICLES OF THE TRUST HAS BEEN DISC USSED HEREINABOVE BY ME IN THIS ORDER IN DETAIL WHILE DISCUSSING THE VIOLAT ION OF PROVISIONS OF SECTION 13 OF THE ACT. THE APPELLANT HAS MADE THE SAME SUBMISS ION AGAINST THE DISALLOWANCE FOR PERSONAL USE AS HAS BEEN MADE AGAI NST THE ISSUE OF VIOLATION OF PROVISIONS U/S 13 OF THE ACT. I HAVE A LREADY HELD THAT THE VEHICLES OWNED BY THE TRUST HAVE BEEN USED FOR PERSONAL BENE FITS OF THE OFFICE BEARERS OTHER THAN USE FOR ACTIVITIES OF THE TRUST. SINCE, THE VEHICLES OF THE TRUST HAVE BEEN USED FOR PERSONAL AND NON- BUSINESS USE BY THE MEMBERS OF CHOUKSEY FAMILY; THE AO WAS JUSTIFIED IN MAKING A PARTIAL DI SALLOWANCE OUT OF EXPENSES CLAIMED FOR VEHICLE MAINTENANCE AND DEPRECIATION ON VEHICLE. IT IS ALSO NOTICED THAT IN REGULAR ASSESSMENT U/S 143(3) FOR A.Y. 2006 -07, THE AO HAD DISALLOWED 20% OF THE TOTAL EXPENSES CLAIMED FOR PE RSONAL USE OF VEHICLE THEREFORE CONSIDERING THE FACTS OF THE CASE, IN MY OPINION, IT WOULD BE FAIR AND REASONABLE IF A DISALLOWANCE OF 20% OF THE TOTAL EX PENDITURE IS MADE AS AGAINST 25% DISALLOWED BY THE AO. IT MAY BE RELEVAN T TO POINT OUT THAT STATUTORY SANCTIONED HAS BEEN ACCORDED IN SECTION 3 8(2) FOR MAKING PARTIAL DISALLOWANCE OF SUCH EXPENSES, IF THE ASSETS ARE NO T WHOLLY AND EXCLUSIVELY USED FOR BUSINESS PURPOSES. ACCORDINGLY, THE AO IS DIRECTED TO DISALLOW 20% H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 111 OUT OF VEHICLE MAINTENANCE AND DEPRECIATION ON VEHI CLE CLAIMED BY THE APPELLANT. HOWEVER, IT IS PERTINENT TO NOTE THAT TH E DISALLOWANCE MADE BY THE AO IN REGULAR ASSESSMENTS U/S 143(3) FOR A.YS. 2004 -05 AND 2005-06 HAS BEEN DELETED BY THE HON'BLE ITAT, THE AO IS DIRECT ED NOT TO MAKE ANY DISALLOWANCE IN A.YS. 2004-05 & 2005-06. SINCE, THE FACTS INVOLVED IN SUBSEQUENT ASSESSMENT YEARS FROM A.Y. 2006-07 TO 20 10-11 WERE DIFFERENT FROM THE FACTS CONSIDERED BY THE HON'BLE ITAT IN A .YS. 2004-05 & 2005-06 AS DISCUSSED IN DETAIL EARLIER IN THIS ORDER, THE AO I S DIRECTED TO RESTRICT THE DISALLOWANCE AT 1/5 TH I.E.20% OF TOTAL EXPENDITURE CLAIMED OF VEHICLE MAINTENANCE AND DEPRECIATION IN A.YS.2006-07 TO 201 0-11. THUS, THIS ISSUE IS DISPOSED OF ACCORDINGLY. LD. AR FOR THE ASSESSEE MADE ORAL AS WELL AS WRITT EN SUBMISSION AS UNDER: EVEN THE ADHOC ADDITION CONFIRMED BY CIT(A) IS UNC ALLED FOR DUE TO FOLLOWING REASONS : I) THE SUBJECT ADDITION IS BEYOND THE PURVIEW OF SEARCH ASSESSMENTS U/S 153A AS PER DETAILED CHART GIVEN IN CASE OUR SUBMISSIONS ON THE IMPROPRIETY AND ILLEGALITY OF ADDITIONS MADE UNDER SEC. 153A BECAUS E ; NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJ ECT ADDITION SHOWING IT AS UNDISCLOSED INCOME. IT WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FI NANCIAL STATEMENTS PRIOR TO DATE OF SEARCH II) FURTHER AND WITHOUT PREJUDICE TO ABOVE, THE AS SESSEE SUBMITS THAT THE TRUSTS OFFICE IS RUN FROM 31, SHYAMLA HILLS, BHOPAL WHICH CONSTITUTE S THREE ROOMS AND A LOBBY BESIDES TRUSTEES' CHAMBERS. THE OTHER PORTION OF THE HOUSE IS USED FOR LIVING PURPOSES OF THE TRUSTEES. IT IS SUBMITTED THAT COLLEGES ARE SITUATE D AT RAISEN ROAD/KOLAR ROAD/BERASIAROAD, WHICH ARE ALMOST 10-12 KMS FROM T HE MAIN CITY AREA. THUS, THERE WAS NEED FOR THE TRUST/ SOCIETY OFFICE AT 31, SHYAM LA HILLS WHICH IS SITUATED IN THE HEART OF THE CITY AND HAPPENS TO BE RESIDENCE OF THE TRUSTEE S. THIS FACT HAS BEEN ESTABLISHED AND ACCEPTED BY THE DEPARTMENT AND HONBLE INDORE ITAT IN ITS EARLIER YEARS APPELLATE ORDERS IN ITA NO. 51 TO 56 (SUPRA). III) NO RENT OR ANY COMPENSATION OF ANY NATURE IS BEING CHARGED BY THE TRUSTEES FROM EITHER THE TRUST OR COLLEGE FOR THE OFFICE SPA CE PROVIDED AT THEIR RESIDENCE. IV ) THIS FACT THAT 31, SHYAMLA HILLS, BHOPAL IS TR UST OFFICE CUM RESIDENCE OF TRUSTEES IS ALSO CLEAR FROM THE PANCHNAMA/ INVENTORY WHICH STAT E THE SAID LOCATION AS OFFICE OF THE TRUST/SOCIETY (COPY AT PG 341-347). IT IS FOR THIS REASON THAT THE VEHICLES BELONGING TO THE TRUST/SOCIETIES WERE FOUND PARKED AT 31, SHYAMLA HI LLS, BHOPAL. V) THIS CANNOT LEAD TO ANY ADVERSE INFERENCE THAT SINCE CARS BELONGING TO TRUST/SOCIETIES WERE FOUND PARKED AT 31, SHYAMLA HILLS, THEY ARE AL L USED FOR PERSONAL PURPOSES ONLY AND NOT FOR ACTIVITIES OF TRUST/SOCIETIES. MOREOVER, S HRI JAI NARAIN CHOUKSEY, SHRI SURESH CHOUKSEY AND FAMILY MEMBERS ARE OFFICE BEARERS OF T RUST/SOCIETIES OF CHOUKSEY GROUP AND HAVE DEDICATED THEIR ENTIRE LIFE IN SETTING UP EDUCATIONAL INSTITUTIONS AND PROVIDING TECHNICAL EDUCATION TO THOUSANDS OF STUDENTS IN MP AND CG AS PER POLICIES OF GOVERNMENT OF INDIA. SOME OF THE MEMBERS /OFFICE BE ARERS ARE FULL TIME INVOLVED AND H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 112 ENGAGED IN EDUCATIONAL INSTITUTIONS RUN BY THE TRUS T/SOCIETIES AND IT IS FOR THIS PURPOSE ONLY THAT VEHICLES OWNED BY THE TRUST/SOCIETIES ARE USED. VI) SINCE COLLEGES OF THE SOCIETIES ARE SITUATED A LMOST 10-12 KMS FROM THE MAIN CITY IN FAR FLUNG AREAS, REGULAR CONNECTIVITY WITH THEM IS POSSIBLE ONLY WITH THE HELP OF VARIOUS VEHICLES. MOREOVER, THE TRUSTEES WERE EXPECTED TO C OMMUTE ON DAY-TO-DAY BASIS TO VARIOUS GOVERNMENT AGENCIES, AND OTHER ALLIED PLACE S WHICH WERE SCATTERED ALL OVER THE VAST CITY OF BHOPAL AND THE ASSESSEE WAS EXPECTED T O EXTEND SUCH MINIMUM FACILITIES TO ITS TRUSTEES. MAINTENANCE OF LOG BOOK IS NOT PRACTI CABLE. THE VEHICLES ARE REGISTERED IN THE NAME OF ASSESSEE SOCIETY AND USE FOR THE ITS ACTIVI TIES, HENCE THE ASSUMPTION OF AO THAT 25% OF THESE EXPENSES ARE INCURRED FOR PERSONAL PU RPOSES OF TRUSTEES AND NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF CHARITABLE ACTI VITIES IS DEVOID OF ANY MERIT. VII) FURTHER, THE ADDITION IS NOT SUSTAINABLE ALSO FOR THE REASON THAT THE SAME HAS BEEN MADE ON PURELY ESTIMATED BASIS WITHOUT BRINGIN G ON RECORD ANY SPECIFIC EXPENDITURE FOR PERSONAL USER. VIII) WITHOUT PREJUDICE TO ABOVE, THE APPROACH OF THE AO IS CONTRADICTORY IN AS MUCH AS CORRESPONDING PERQUISITE VALUE FOR PERSONAL USER OF VEHICLE HAS NOT BEEN TAXED IN THE INDIVIDUAL HANDS OF TRUSTEES SIMULTANEOUSLY ASSESSED BY SAME AO. IX) RELIANCE IS PLACED ON THE DECISION OF THE CASE OF CIT VS. INDIA INSTITUTE OF COMPUTER TECHNOLOGY REPORTED AT 244 ITR 371 (KER.) WHEREIN IT WAS HELD THAT MERELY BECAUSE THERE WOULD BE SOME TRANSACTION WITH THE ME MBERS OF THE FIRMS IN WHICH SOME MEMBERS MAY BE INTERESTED IN THE CASE OF THE SOCIET Y RUNNING AN EDUCATIONAL INSTITUTES, EXEMPTION U/S 11 CANNOT BE DENIED AS LONG AS THE PA YMENT WAS NOT FOUND TO BE UNREASONABLY LARGER AND NOT COMMENSURATE WITH THE S ERVICES. ALSO RELIED ON : DCIT VS. HAI HAY KSHATRIYA EDUCATION SOCIETY - ASS ESSEE'S OWN CASE IN ITA NO. 51 TO 56 AND 510/IND/ 2007 FOR A.Y. 1998-99 TO 2004-05 (SUPRA) RELEVANT PAGE 54 WITH REGARD TO THE USE OF MOTOR CARS PROVIDED TO THE TRUSTEES CANNOT ALSO BE CONSIDERED TO BE EXCESSIVE AMENITIES PROVIDED TO TH EM. AS THEY WERE EXPECTED TO COMMUTE ON DAY-TO-DAY BASIS TO VARIOUS GOVERNMEN T AGENCIES, AND OTHER ALLIED PLACES WHICH WERE SCATTERED ALL OVER THE VAS T CITY OF AHMADABAD, THE ASSESSEE TRUST WAS EXPECTED TO EXTEND SUCH MINIMUM FACILITIES TO ITS TRUSTEES. THIS CANNOT BE BRANDED AT ANY STRETCH OF IMAGINATI ON THAT THE TRUSTEES HAVE BEEN PROVIDED WITH EXCESSIVE AMENITIES. DIT (EXEMPTION) VS. SHRI N.H. KAPADIA EDUCATION TRU ST (2012) 74 DTR (AHD) (TRIB) 233 MAINTENANCE OF TRUST PROPERTY, PAYMENT TO EMPLOYEES AND OTHER EXPENSES ARE INCIDENTAL AND CONNECTED WITH THE OBJECTS OF THE CH ARITABLE TRUST. THE SAME THEREFORE CANNOT BE DISALLOWED. DEV RADHA MADHAV LALJI GENDA TRUST 125 ITR 531 (MP) RAJASTHAN VIKAS SANSTHAN VS. CIT (2012) 78 DTR 411( JODHPUR) DR. D Y PATIL PRATISTHAN VS. DY. CIT, (2013) 87 DTR 97 (PUNE 'B') IN VIEW OF ABOVE, THE ADHOC DISALLOWANCE MADE BY AO AND CONFIRMED BY CIT(A) MAY KINDLY BE DELETED. THE LD. DR RELIED ON THE ORDERS OF THE REVENUE AUT HORITIES. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 113 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH T HE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. BO TH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN CASE OF ALL FIVE ASSESSEES NAMELY H K KALCHURI EDUCATION TRUST , JAI NARAIN SH IKSHA SAMITI, RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY, RISH IRAJ SINGH MEMORIAL WELFARE SOCIETY AND HAI HAY KSHATRIYA EDUCATION SOC IETY. HENCE, THESE APPEALS ARE DECIDED TOGETHER. WE FIND THAT IN CASE OF ALL THE FIVE ASSESSEES, ADHOC DISALLOWANCE @ 25% OUT OF VEHICLE EXPENSES AND DEPRECIATION ON VEHICLE WAS MADE BY AO WHICH WAS RE STRICTED TO 20% BY CIT(A). ALL THE FIVE ASSESSEES HAVE APPEALED AGAINS T THE TOTAL DISALLOWANCE OF 25% WHEREAS THE DEPARTMENT HAS APPE ALED AGAINST ALLOWANCE OF 5% BY CIT(A) [25% - 20%]. WE FIND THAT THE DISALLOWANCE WAS MADE BY AO AND PART CONFIRMED BY CIT(A) BY TREA TING, INTER-ALIA, ALL THE ASSESSEES AS BUSINESS ENTITIES. WE HAVE ALREAD Y HELD THAT ALL THESE FIVE ASSESSEES ARE CHARITABLE ORGANIZATION RUNNING EDUCATIONAL INSTITUTIONS AND ARE ELIGIBLE FOR EXEMPTION U/S 11, 12 AND 13 AND HENCE THERE IS NO QUESTION OF TREATING THEM AS BUSINESS E NTITIES AND MAKING DISALLOWANCE ON THAT BASIS. AS REGARDS EXCESS AMENI TIES PROVIDED TO OFFICE BEARERS, WE HAVE VERY EXTENSIVELY DEALT WITH THIS ISSUE WHILE DECIDING VIOLATION OF SEC. 13 WHICH EQUALLY PREVAIL HERE AND HENCE OUR OBSERVATIONS AND FINDINGS GIVEN THERE ARE NOT REPEA TED HERE. WE HAVE HELD THAT NO EXCESS AMENITIES WERE PROVIDED TO THE OFFICE BEARERS AND H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 114 THE AMENITIES PROVIDED ARE REASONABLE AND FOR THE P URPOSE OF CHARITABLE ACTIVITIES ONLY. WE ALSO NOTE THAT THE AO OR CIT(A) HAVE ALSO NOT POINTED OUT ANY INSTANCE OF SUCH EXPENDITURE INCURRED BY AL L THESE ASSESSEES FOR NON CHARITABLE PURPOSES. UNDER THESE CIRCUMSTANCES, ADHOC DISALLOWANCE MADE BY AO AND PART CONFIRMED BY CIT(A ) IN ALL THE YEARS ARE DELETED. HENCE, GROUNDS IN APPEALS OF ALL THE F IVE ASSESSEES FOR ALL THE YEARS ARE ALLOWED AND DEPARTMENTAL GROUNDS ARE DISMISSED. 11. THE REVENUE HAS RAISED THE ISSUE OF TREATING TH E CASH WITHDRAWALS AS UNEXPLAINED EXPENDITURE. SHORT FACTS OF THE ISSUE IN RESPECT OF H K KALCHURI EDUCATION TRUST ARE THAT THE AO NOTICED ON PERUSAL OF THE BANK ACCO UNT OF THE APPELLANT TRUST THAT HUGE WITHDRAWALS FROM THESE BANK ACCOUNT S HAVE BEEN MADE IN CASH. THE LD. AO HAS GIVEN BANK-WISE DETAILS OF SUCH INSTANCES AS UNDER: H.K. KALCHURI EDUCATION TRUST, 31 SHYAMLA HILLS, BHOPAL :- A/C NO. 30710200000157 BOB, INDRAPURI BPL. OF H K E DUCATION SOCIETY. TOTAL 9237475 A/C NO 53002832343 OF H.K KALCHURI EDUCATION. TOTAL 13436000 ACCOUNT NO. 04960200000270 OF LAXMINARAIN COLLEGE O F TECHNOLOGY, BHOPAL AT BANK OF BARODA, HAMIDIA ROAD, BHOPAL. TOTAL 3100000 THE AO ASKED THE ASSESSEE TO EXPLAIN THE NATURE AND PURPOSE OF WITHDRAWAL OF THE ABOVE AMOUNTS AND HOW THE SAME HA VE BEEN H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 115 ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. IN RESPONSE , THE ASSESSEE TRUST SUBMITTED IN ITS REPLY DATED 20.12.2011. HOWEVER, T HE AO STATED IN THE ASSESSMENT ORDER THAT ON CONSIDERATION OF THE REPLY SUBMITTED BY ASSESSEE, IT IS FOUND THAT THE ASSESSEE TRUST HAS N OT FURNISHED COMPLETE DETAILS REGARDING EACH CASH WITHDRAWALS SUCH AS WHY CASH PAYMENT WAS NECESSARY, WHAT MATERIAL/SERVICE WAS PURCHASED/OBTA INED, WHAT WAS THE CASH BALANCE IN THE BOOKS OF ACCOUNT ON THE RELEVAN T DATE, DOCUMENTARY EVIDENCE AND THE NATURE AND PURPOSE OF THE WITHDRAW ALS AS WELL AS HOW THESE HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNTS. THE AO STATED THAT THE REPLY SUBMITTED BY THE ASSESSEE TRUST WAS NOT O NLY VERY GENERAL IN NATURE BUT WAS VAGUE AND MISLEADING BY SIMPLY STATI NG THAT EACH TRANSACTION HAS BEEN RECORDED IN THE BOOKS OF ACCOU NTS. BUT INSPITE OF ALLOWING AMPLE OPPORTUNITIES, THE ASSESSEE NEVER PR ODUCED THE BOOKS OF ACCOUNTS FOR VERIFICATION OF ITS SUBMISSION. THE AO OBSERVED THAT THE PRIMARY ONUS WAS ON THE ASSESSEE TRUST TO SHOW THAT THE TRANSACTIONS WERE ENTERED IN ITS BOOKS OF ACCOUNT BY FURNISHING ALL RELEVANT INFORMATION SUPPORTED BY DOCUMENTARY EVIDENCES. THE ASSESSEE TRUST HAS NOT PRODUCED THE BOOKS OF ACCOUNT AND OTHER REL EVANT RECORDS FOR VERIFICATION INSPITE OF ALLOWING SUFFICIENT OPPORTU NITIES. THE AO OBSERVED THAT IT HAS BEEN CLEARLY ESTABLISHED IN THE CASH OF THE ASSESSEE TRUST THAT IT HAS INDULGED IN CLAIMING BOGUS EXPENDITURE IN ORDER TO SIPHON OFF THE FUNDS OF THE TRUST FOR THE PERSONAL BENEFITS OF THE TRUSTEES. THE AO H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 116 STATED THAT IN VIEW OF THE ABOVE FACTS, HE WAS LEFT WITH NO OPTION BUT TO CONCLUDE THAT THE CASH WITHDRAWALS HAVE BEEN USED F OR DEBITING BOGUS AND UNVERIFIED EXPENDITURES, WHICH ARE THEREFORE, D ISALLOWED. ACCORDINGLY, THE AO MADE ADDITIONS OF RS. 1,16,36,0 00/- IN A.Y. 2008- 09 RS. 91,67,475/- IN A.Y. 2009-10 AND RS. 32,70,00 0/- IN A.Y. 2010-11. MATTER CARRIED TO LD. CIT(A), WHO DELETED THE ADDI TIONS. THE OPERATING PART OF THE ORDER OF THE LD. CIT(A) IS AS UNDER: 42.3 I HAVE CAREFULLY CONSIDERED THE REASONS RECOR DED BY THE AO AND SUBMISSION OF THE APPELLANT. THE AO NOTICED THAT THE APPELLANT HAS MADE HUGE WITHDRAWALS IN CASH FROM BANK ACCOUNTS. WHEN THE AO ASKED THE APPE LLANT TO EXPLAIN THE NATURE AND PURPOSE OF WITHDRAWAL OF HUGE CASH FROM THE BANK AC COUNTS, THE APPELLANT FURNISHED EXPLANATION OF THE WITHDRAWALS BEFORE THE AO STATIN G INTER-ALIA THAT WITHDRAWALS WERE MADE TO MEET EXPENSES OF THE TRUST SUCH AS REGISTRY OF LAND, LAND DEVELOPMENT, BUILDING CONSTRUCTION, ETC. BUT THE AO DID NOT ACCE PT THE SUBMISSION OF THE APPELLANT AND CONCLUDED THAT THE HUGE CASH WAS WITHDRAWN JUST TO SIPHON OFF THE FUNDS OF THE APPELLANT TRUST FOR PERSONAL BENEFITS OF THE INTERE STED PERSONS AND TO BOOK BOGUS EXPENSES IN THE BOOKS OF ACCOUNT OF THE APPELLANT . BUT ON PERUSAL OF THE ASSESSMENT ORDER, IT IS NOTICED THAT AO HAS NOT POINTED OUT AN Y SINGLE ITEM UNEXPLAINED OF EXPENDITURE WHICH WAS BOOKED BY THE APPELLANT AND/O R WAS FOUND BOGUS. ADMITTEDLY THE AMOUNTS WITHDRAWN IN CASH FROM THE BANKS ARE EX PLAINED AMOUNTS APPEARING IN THE REGULAR BOOKS FROM DECLARED SOURCES AND CANNOT BE SAID TO BE UNDISCLOSED AND NO ADDITION IS CALLED FOR SIMPLY ON THE FACT THAT T HE AMOUNTS WERE WITHDRAWN FROM THE BANK IN CASH. FURTHER , THE LD. AO HAS NOT BROUGHT ON RECORD ANY MATERIAL OR EVIDENCE TO SUPPORT HIS CONCLUSION THAT THE APPELLANT HAS DE BITED ANY BOGUS OR UNEXPLAINED EXPENDITURE IN ITS INCOME & EXPENDITURE ACCOUNT. IT IS A TRITE LAW THAT SUSPICION HOWSOEVER STRONG IT MAY BE CANNOT TAKE THE PLACE OF EVIDENCE. THEREFORE IN THE ABSENCE OF ANY EVIDENCE, THE FINDINGS OF THE AO ON THE BASIS OF PRESUMPTION/ ASSUMPTION THAT THE HUGE CASH MUST HAVE BEEN WITHDR AWN TO BOOK BOGUS AND UNEXPLAINED EXPENDITURE CANNOT BE SUSTAINED. THUS, CONSIDERING THE FACTS AND CIRCUMSTANCES INVOLVED IN THIS ISSUE, I AM OF THE C ONSIDERED OPINION THAT THE FACTS AND MADE BY THE AO ARE NOT SUSTAINABLE. ACCORDINGLY, TH E ADDITIONS OF RS. 17,00,000/- IN A.Y. 2007-08, RS. 1,16,36,000/- A.Y. 2008-09, RS. 9 1,67,475/- IN A.Y. 2009-10 AND RS. 32,70,000/- IN A.Y. 2010-11 MADE BY THE AO ARE DELETED. THE LD. DR RELIED ON THE ORDERS OF THE ASSESSING OF FICER. THE LD. AR FOR THE ASSESSEE HAS RELIED ON THE SUBMI SSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTED THAT NO INCRIMI NATING MATERIAL WAS FOUND REGARDING SUBJECT ADDITIONS SHOWING IT AS UND ISCLOSED INCOME. IT H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 117 WAS DULY DISCLOSED IN THE RESPECTIVE FINANCIAL STAT EMENTS PRIOR TO DATE OF SEARCH. IT WAS FURTHER SUBMITTED THAT THE COMPUTERI ZED BOOKS OF ACCOUNT OF THE ASSESSEE WERE IN THE CUSTODY OF THE AO CONTA INING ALL DETAILS OF EXPENSES BUT HE HAS NOT POINTED OUT AS TO WHICH BOG US EXPENSES HAVE BEEN CLAIMED BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE DULY AUDITED AND ALL E XPENSES ARE DULY SUPPORTED WITH BILLS/ VOUCHERS. IT WAS CONTENDED TH AT THE AO HAS NOT RESORTED TO ADDITION ON THE BASIS OF DISALLOWANCE O F ANY BOGUS EXPENDITURE POINTED OUT BY HIM. RATHER HE HAS STRAN GELY MADE THE ADDITION ALLEGING THAT CASH WITHDRAWALS HAVE BEEN U SED FOR DEBITING BOGUS AND UNVERIFIABLE EXPENSES ONLY ON SURMISES AN D CONJECTURES WITHOUT POINTING OUT ANY SUCH EXPENDITURE. SUCH UNC ORROBORATED AND VAGUE ADDITION CANNOT BE SUSTAINED IN LAW, PARTICUL ARLY IN SEARCH ASSESSMENTS IN THE ABSENCE OF ANY INCRIMINATING MAT ERIAL. IT WAS, THUS, ARGUED THAT THE ADDITIONS MADE BY THE AO WERE PUREL Y IMAGINARY, PRESUMPTIVE AND GUIDED BY SURMISE AND CONJECTURES A ND, HENCE, THE ORDER OF THE LD. CIT(A) MAY BE CONFIRMED. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE CIT(A) WAS CORRECT IN DELETING THE ADDITION BY EXTENSIVELY DISCUSSING THE ISSUE WITH PROPER JUSTIFICATION. BEFORE US ALSO THE REVEN UE COULD NOT BRING ANY H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 118 MATERIAL FOR REBUTTING THE FINDINGS OF CIT(A). HENC E, IN OUR VIEW NO INTERFERENCE IS CALLED IN THE FINDINGS OF CIT(A) ON THIS ISSUE AND THE SAME IS CONFIRMED. THEREFORE, GROUNDS IN THE DEPARTMENTA L APPEALS ARE DISMISSED. BOTH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN CASE OF THREE OTHER ASSESSEES NAMELY JAI NARAIN SHIKSHA SAMITI, RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND HAI HAY KSHATRIY A EDUCATION SOCIETY. HENCE, THESE APPEALS ARE DECIDED TOGETHER AND OUR ABOVE FINDINGS WILL ALSO PREVAIL IN CASE OF THESE THREE A SSESSEES. ACCORDINGLY, NO INTERFERENCE IS CALLED IN THE FINDINGS OF CIT(A) ON THIS ISSUE AND THE SAME IS CONFIRMED. THEREFORE, GROUNDS IN THE DEPART MENTAL APPEALS OF ABOVE THREE ASSESSEES ARE ALSO DISMISSED. 12. THE REVENUE HAS RAISED THE ISSUE IN THE ASSESSM ENT YEAR 2008-09 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,38,34,800/- MADE BY AO BY TREATING IT AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. SHORT FACTS OF THE ISSUE IN CASE OF H K KALCHURI ED UCATION TRUST ARE THAT THE AO OBSERVED DURING THE COURSE OF SEARCH TH AT CERTAIN DOCUMENTS WERE SEIZED FROM THE PREMISES 31, SHYAMLA HILLS, BHOPAL. PAGE 63 TO 69 OF LPS 22 WERE INVOICES ISSUED BY GAL AXY COMPUTERS, BHOPAL FOR PURCHASE OF DESKTOP HP AND PRINTER HP 10 20 IN FAVOUR OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 119 JNCT COLLEGE, BHOPAL FOR RS.13,60,800/-, IN FAVOUR OF LKCT COLLEGE, INDORE FOR RS.31,75,200/-, IN FAVOUR OF JDCT COLLEG E, INDORE FOR RS.31,75,200/- , IN FAVOUR OF CEC COLLEGE, BILASPUR FOR RS.15,87,600/-, IN FAVOUR OF LNCT COLLEGE, INDORE FOR RS.6,80,400/-, I N FAVOUR OF LNCP COLLEGE, BHOPAL FOR RS.4,53,600/- AND IN FAVOUR OF LNCTS COLLEGE, BHOPAL FOR RS.34,02,000/-. THE DETAILS OF THE BILLS HAVE BEEN SUMMARIZED BY THE AO AS UNDER :- S.NO. BILL NO. DATE AMOUNT SEIZED PAPER 1 GLX 5628 23.04.2007 1360800 LPS 22, PAGE 63 2 GLX 5632 23.04.2007 3175200 LPS 22, PAGE 64 3 GLX 5633 23.04.2007 3175200 LPS 22, PAGE 65 4 GLX 5635 23.04.2007 1587600 LPS 22, PAGE 66 5 GLX 5636 23.04.2007 680400 LPS 22, PAGE 67 6 GLX 5638 23.04.2007 453400 LPS 22, PAGE 68 7 GLX 5626 23.04.2007 3402000 LPS 22, PAGE 69 TOTAL 13834800 THE AO STATED THAT SHRI JAI NARAYAN CHOUKSEY WAS RE QUESTED TO FURNISH COMMENTS/ EXPLANATION IN RESPECT OF THE SAID SEIZED DOCUMENTS IN THE CAPACITY OF TRUSTEE/OFFICE BEARER OF THE APPELLANT TRUST. BUT NO EXPLANATION HAS BEEN GIVEN BY THE APPELLANT. FURTHE R, FROM THE CONSOLIDATED BALANCE SHEET OF H.K. KALCHURI EDUCATI ON TRUST AS ON 31.03.2008, IT WAS NOTED BY THE AO THAT TO THE BLOC K OF COMPUTERS AND H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 120 PRINTERS, THE FOLLOWING ADDITIONS WERE MADE DURING THE YEAR UNDER CONSIDERATION:- ADDITION FROM APRIL TO SEPTEMBER 2007 RS. 3,47,081 /- ADDITION FROM OCTOBER 2007 TO MARCH 2008 RS. 14,57 ,969/- TOTAL RS. 18,05,050/- THE AO FURTHER STATED THAT INSPITE OF ALLOWING SUFF ICIENT OPPORTUNITIES; THE APPELLANT HAS NOT FURNISHED ANY EXPLANATION REGARDI NG THE SAID BILLS OF GALAXY COMPUTERS, BHOPAL. THE APPELLANT ALSO HAS NO T PRODUCED THE BOOKS OF ACCOUNTS AND OTHER RELEVANT MATERIAL TO ES TABLISH THE GENUINENESS OF THE SAID PURCHASES. THE AO ALSO OBSE RVED THAT THE SAID COMPUTERS AND PRINTERS WERE NOT APPEARING IN THE BA LANCE SHEET OF THE APPELLANT TRUST AS ON 31.03.2008. THE AO, ACCORDING LY, CONCLUDED THAT THE SAID PURCHASES WERE NOT RECORDED IN THE BOOKS O F ACCOUNTS AND ALSO THE SOURCES OF FUNDS FOR MAKING PAYMENT TO THE SAID PARTY WERE NOT EXPLAINED. THE AO, THUS, HELD THAT NEITHER THE SAID PURCHASES NOR THE RELEVANT PAYMENTS HAVE BEEN RECORDED IN THE BOOKS O F ACCOUNTS. ACCORDINGLY, THE AO STATED THAT HE WAS LEFT WITH NO OPTION BUT TO TREAT THE SAID PURCHASES AS UNEXPLAINED INVESTMENT AND ADDED THE SUM OF RS.1,38,34,800/- TO THE TOTAL INCOME OF THE APPELLA NT TRUST U/S 69 OF THE INCOME TAX ACT, 1961. MATTER CARRIED TO LD. CIT(A), WHO DELETED THE ADDI TION. THE OPERATING PART OF THE ORDER OF THE LD. CIT(A) IS AS UNDER: H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 121 45.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION O F THE APPELLANT AND FACTS OF THE CASE. AS MENTIONED BY THE AO THAT SEVEN INVO ICES DATED 23.04.2007 ISSUED BY GALAXY COMPUTER, BHOPAL (PAGES 63 TO 69 O F LPS-22) FOR THE PURCHASE OF DESKTOP HP AND PRINTER HP FOR VARIOUS C OLLEGES OF THE APPELLANT TOTALING TO RS.1,38,34,800/- WERE FOUND AND SEIZED. THE AO MADE ADDITION ON THE GROUND THAT APPELLANT FAILED TO EXPLAIN THAT TH E 'TRANSACTIONS RELATING TO PURCHASE OF COMPUTERS AND PRINTERS OF RS. 1,38,34,8 00/- AS PER THESE BILLS HAVE BEEN ACCOUNTED FOR IN THE REGULAR BOOKS OF ACC OUNT AND TREATED THE SAME AS UNEXPLAINED EXPENDITURE. BUT IT IS NOTICED THAT THE APPELLANT HAS CONTENDED THAT THE APPELLANT HAD NOT ACTUALLY PURCH ASED COMPUTERS AS PER THESE BILLS FROM M/S GALAXY COMPUTER, BHOPAL AND, H ENCE, NO PAYMENT WAS MADE TO THE SAID FIRM IN REGARD TO THESE BILLS. IT WAS CONTENDED THAT THE TRANSACTIONS REGARDING PURCHASE OF COMPUTERS AS PER THESE BILLS DID NOT MATERIALIZE DUE TO PROBLEMS RELATING TO PRICES AND LOGISTICS TO SEND THE GOODS TO VARIOUS PLACES AT THE SITES OF DIFFERENT COLLEGE S. IT IS ALSO NOTICED THAT THE AO ALSO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO P ROVE THAT THE APPELLANT HAD ACTUALLY MADE PURCHASES OF COMPUTERS AS MENTION ED IN THESE BILLS. THERE IS NO EVIDENCE ON RECORDS TO SUGGEST THAT SUCH COMP UTERS PURCHASED FROM M/S GALAXY COMPUTER, BHOPAL WERE PHYSICALLY FOUND A T THE PREMISES OF THE APPELLANT DURING THE COURSE OF SEARCH ON 23.07.2009 . IT IS ALSO NOTICED THAT WHEN THE AO ENQUIRED FROM M/S GALAXY COMPUTER, BHOP AL IN REGARD TO THESE BILLS, IT WAS INFORMED BY THE SAID PARTY THAT THE T RANSACTIONS AS PER THESE BILLS DID NOT MATERIALIZE. THE SAID PARTY FURTHER STATED THAT SINCE THE GOODS WERE NOT ACTUALLY PURCHASED BY THE APPELLANT, THE SAID P ARTY, M/S GALAXY COMPUTER, BHOPAL, HAS NOT RECEIVED ANY PAYMENT FROM THE APPEL LANT FOR THESE BILLS. NOW, IN THE ABSENCE OF ANY COGENT EVIDENCE ON RECORD, IT CANNOT BE PRESUMED THAT THE APPELLANT HAD ACTUALLY PURCHASED COMPUTERS FROM M/S GALAXY COMPUTER, BHOPAL FOR RS.1,38,34,800/- AND MADE PAYMENT THEREO F. IT IS ALSO CLEAR THAT THE APPELLANT HAS NOT RECORDED ANY PURCHASE OF SUCH COMPUTERS IN ITS BOOKS OF ACCOUNT, SO IT IS NOT A CASE OF CLAIMING A BOGUS EXPENDITURE ALSO. THEREFORE, CONSIDERING THE TOTALITY OF FACTS AND CI RCUMSTANCES, IT IS CLEAR THAT THE PROPOSED TRANSACTION FOR PURCHASE OF COMPUTER F ROM M/S GALAXY COMPUTER, BHOPAL DID NOT MATERIALIZE AND SINCE THE APPELLANT HAD NOT MADE ANY INVESTMENT IN THE PURCHASE OF SUCH COMPUTERS, T HERE IS NO QUESTION OF ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 6 9 OF THE ACT. HENCE, ADDITION OF RS. 1,38,34,800/- IS DELETED. THE LD. DR RELIED ON THE ORDERS OF THE ASSESSING O FFICER. THE LD. AR FOR THE ASSESSEE HAS RELIED ON THE ORDE R OF THE LD. CIT(A) AND SUBMITTED THAT ON THE BASIS OF SOME BILL S OF ALLEGED COMPUTER PURCHASE FROM M/S. GALAXY COMPUTER, BHOPAL SEIZED D URING SEARCH (PAGES 403 TO 409 OF PAPER BOOK), THE AO MADE ADDIT IONS OF HUGE SUM. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 1 22 IT WAS CONTENDED THAT NO SUCH PURCHASE OF COMPUTER FORM THE SAID FIRM WAS DONE BY ASSESSEE TRUST AND, HENCE, NO PAYMENT W AS MADE TO THE SAID FIRM. IT WAS SUBMITTED THAT IT WAS PROPOSED TO PURCHASE COMPUTERS FOR VARIOUS COLLEGES OF THE INSTITUTIONS SITUATED A CROSS THE STATE FROM THE ABOVE FIRM OF BHOPAL BUT THE IDEA WAS DROPPED BECAU SE OF PROBLEMS RELATING TO SHIPPING/ LOGISTICS FROM BHOPAL TO THOS E VARIOUS PLACES AND ISSUE OF PRICING/ RATES RESULTANT THERETO. IT WAS S TATED THAT THE SAID SUPPLIER HAD ISSUED THE BILL BUT DID NOT SUPPLY THE GOODS ULTIMATELY. IT WAS ALSO CONTENDED THAT NEITHER THE PURCHASE OF THO SE COMPUTER NOR ANY PAYMENT THEREOF HAVE BEEN ACCOUNTED FOR IN THE BOOK S OF ASSESSEE. IT WAS SUBMITTED THAT THE BOOKS OF ACCOUNT WERE IN THE CUSTODY OF THE AO IN THE SEIZED COMPUTERS AND WERE GIVEN TO THE ASSES SEE ONLY ON 1ST JULY, 2013 AND THAT IS WHY NO REPLY COULD BE FURNIS HED BY THE ASSESSEE EARLIER DURING ASSESSMENT PROCEEDINGS. IT WAS ARGUE D THAT THE AO MADE THE ADDITION SOLELY ON SPECULATIONS AND PRESUMPTION S WITHOUT BRINGING ON RECORD ANY CORROBORATIVE EVIDENCES. EVEN OTHERWISE AND WITHOUT PREJUDICE TO ABOVE, THE AO OUGHT TO HAVE UNDERSTOOD THAT THE APPELLANT TRUST, REGISTERED U/S 12AA, DID NOT HAVE ANY UNDISC LOSED INCOME TO SPEND AND ALSO THE FACT SHOULD HAVE BEEN TAKEN INTO CONSIDERATION THAT THE ASSESSEE HAD SUFFICIENT FUNDS OF ITS OWN AND WA S EVEN GETTING BANK LOANS EASILY, THERE WAS NO REASON THAT IT WOULD MAK E INVESTMENT IN CAPITAL EXPENDITURE OUT OF BOOKS BECAUSE EVEN CAPIT AL EXPENDITURE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 123 QUALIFIES FOR APPLICATION TOWARDS CHARITABLE PURPOS ES. IT WAS, THUS, SUBMITTED THAT THE ORDER OF THE LD. CIT(A) MAY BE C ONFIRMED. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH T HE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE CIT(A) WAS CORRECT IN DELETING THE ADDITION BY EXTENSIVELY DISCUSSING THE ISSUE WITH PROPER JUSTIFICATION. BEFORE US ALSO THE REVEN UE COULD NOT BRING ANY MATERIAL FOR REBUTTING THE FINDINGS OF CIT(A). HENC E, IN OUR VIEW NO INTERFERENCE IS CALLED IN THE FINDINGS OF CIT(A) ON THIS ISSUE AND THE SAME IS CONFIRMED. THEREFORE, THIS GROUND IN THE DEPARTM ENTAL APPEAL IS DISMISSED. 13. THE REVENUE HAS RAISED THE ISSUE IN THE ASSESSM ENT YEAR 2009-10 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10,00,00,000/ - IN PURCHASE OF SOCIETY MADE BY AO BY TREATING IT AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. SHORT FACTS OF THE ISSUE IN CASE OF H K KALCHURI ED UCATION TRUST ARE THAT THE AO ON THE BASIS OF SEIZED DOCUMENTS NOTED THAT THERE WAS A DEAL BETWEEN CHOUKSEY GROUP AND KEER GROUP FOR TRAN SFER OF SOCIETIES/COLLEGES FOR A TOTAL CONSIDERATION OF RS. 17,00,000/-. THE AO, ON THE BASIS OF THE CERTIFICATES ISSUED BY STATE BA NK OF INDORE, BARKHEDI BRANCH DATED 19.5.2009, PUNJAB NATIONAL BANK, HAMID IA ROAD BRANCH DATED 20.5.2008 AND STATE BANK OF INDORE, SONAGIRI BRANCH OBSERVED H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 124 THAT THE FOLLOWING PAYMENTS WERE MADE BY THE SOCIET IES OF CHOUKSEY GROUP TO KEER GROUP IN PURSUANCE OF THE SAID AGREEM ENT: S.NO. ENTITY/SOCIETY MAKING THE PAYMENT DATE OF PAYMENT AMOUNT(RS.) PAID TO 1 J.K. HOSPITAL (H.K. KALCHURI EDUCATION TRUST) 14.07.08 10000000 UPKAR CONST. CO. 2 J.K. HOSPITAL (H.K. KALCHURI EDUCATION TRUST) 14.07.08 10000000 SARDAR HARNAM SING KEER PUBLIC WELFARE TRUST 3 J.K HOSPITAL(H.K. KALCHURI EDUCATION TRUST) 14.07.08 10000000 RISHIRAJ KMB EDUCATION SOCIETY 4 LNCT INDORE(H.K. KALCHURI EDUCATION TRUST) 05.09.08 10000000 SARDAR HARNAM SING KEER PUBLIC WELFARE TRUST 5 LNCT, INDORE ( H.K. KALCHURI EDUCATION TRUST) 18.08.08 10000000 RISHIRAJ KMB EDUCATION SOCIETY 6 J.K. HOSPITAL ( H.K. KALCHURI EDUCATION TRUST) 21.04.08 10000000 GURU GOVIND SINGH EDUCATION AND WELFARE SOCIETY 7 LNCT, BHOPAL (H.K. KALCHURI EDUCATION TRUST) 06.08.08 10000000 GURU GOVIND SINGH EDUCATION AND WELFARE SOCIETY 8 LNCT, BHOPAL(H.K. KALCHURI EDUCATION TRUST) 11.08.08 10000000 SARDAR HARNAM SING KEER PUBLIC WELFARE TRUST 9 LNCT, BHOPAL(H.K. KALCHURI EDUCATION TRUST) 11.08.08 10000000 SARDAR HARNAM SING KEER PUBLIC WELFARE TRUST 10 LNCT,(H.K. KALCHURI EDUCATION TRUST) 11.08.08 10000000 SARDAR HARNAM SING KEER PUBLIC WELFARE TRUST 10,00,00,000 11 JNCT (JAI NARAYAN SHIKSHA SAMITI) 09.08.08 10000000 12 JNCT ( JAI NARAYAN SHIKSHA SAMITI) 09.08.08 10000000 13 RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY 12.08.08 8390723 14 RISHIRAJ MEMORIAL EDUCATION AND WELFARE SOCIETY 11.08.08 & 15.08.08 12754211 TOTAL 141144934 H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 125 FROM THE ABOVE, THE AO NOTED THAT PAYMENT TO THE TU NE OF RS. 10,00,00,000/- HAS BEEN MADE BY THE ASSESSEE TRUST DURING THE YEAR UNDER CONSIDERATION TO THE ENTITIES/CONCERNS CONTRO LLED BY KEER GROUP AS SUMMARIZED BELOW: SL.NO NAME OF ENTITY OF KEER GROUP TOTAL AMOUNT IN (RS.) 1 SARDAR HARNAM SINGH KEER PUBLIC WELFARE TRUST 5 C RORES 2 GURU GOVIND SINGH EDUCATION AND WELFARE SOCIETY 2 CRORES 3 RISHIRAJ KMB EDUCATION SOCIETY 2 CRORES 4 UPKAR CONSTRUCTION CO. PVT. LTD. 1 CRORE TOTAL 10 CRORES THE AO REQUESTED THE ASSESSEE TO EXPLAIN THE NATURE OF TRANSACTIONS AND PURPOSE OF ABOVE PAYMENTS MADE TO THE CONCERNS/ SOCIETIES OF KEER GROUP. BUT THE AO NOTED THAT THE ASSESSEE HAS NOT F URNISHED ANY SPECIFIC DETAILS/REPLAY EXPLAINING AS TO HOW THE WH OLE TRANSACTION HAS TAKEN PLACE, HOW AND WHO HAD MADE THE PAYMENTS AND HOW THE SAID PAYMENTS WERE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE RESPECTIVE CONCERNS. NO RELEVANT BOOKS OF ACCOUNT WERE PRODUCE D FOR VERIFICATION. IN ABSENCE OF ANY CLARIFICATIONS, THE AO STATED THA T HE WAS LEFT WITH NO OPTION BUT TO DRAW AN INFERENCE BASED ON THE MATERI AL AVAILABLE BEFORE HIM. THE AO ON PERUSAL OF THE CONSOLIDATED BALANCE SHEET OF THE ASSESSEE TRUST AS ON 31.03.2009, NOTED THAT ONLY TH E FOLLOWING AMOUNTS HAD BEEN SHOWN UNDER THE HEAD LOANS AND ADVANCES IN SCHEDULE -11 OF THE BALANCE SHEET. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 126 S.NO. NAME AMOUNT (RS.) 1 SARDAR HARNAM SING KEER PUBLIC WELFARE TRUST 4,00,00,000 2 GURU GOVIND SINGH EDUCATION AND WELFARE SOCIETY 1,00,00,000 TOTAL 5,00,00,000 IT WAS FURTHER NOTED THAT OUT OF THE TOTAL PAYMENT MADE BY THE ASSESSEE TRUST DURING THE YEAR UNDER CONSIDERATION TO VARIOU S ENTITIES OF KEER GROUP, AN AMOUNT OF RS. 5,00,00,000/- MAY BE THE AM OUNT AS ADVANCES APPEARING IN THE BALANCE SHEET. HOWEVER, AGAIN, THE QUESTION ARISES WHEN THE PAYMENTS ARE MADE FOR PURCHASE OF SAID SOC IETIES, THEN WHY THE SAID PAYMENTS OF RS. 5,00,00,000 SHOULD BE REFL ECTED AS A CAPITAL PAYMENT BY WAY OF ADVANCES? THEREFORE THE SAID ADVA NCES MAY BE GIVEN FOR PURPOSE OTHER THAN FOR THE PURCHASE OF TH E SOCIETIES MENTIONED EARLIER. IT IS ALSO SEEN THAT THE PAYMENT OF RS. 10 , 00,00,000/- MENTIONED ABOVE HAS NOT BEEN REFLECTED IN THE INCOME AND EXPE NDITURE ACCOUNT OF THE APPELLANT TRUST. MOREOVER, IT IS ALSO SEEN THAT WHILE SARDAR HARNAM SINGH KEER PUBLIC WELFARE TRUST HAS SHOWN THE AMOUN T OF RS. 4,00,00,000/- RECEIVED FROM THE ASSESSEE AS CORPUS DONATION, THE ASSESSEE HAS SHOWN THE SAME AS LOANS AND ADVANCES . THE AO FURTHER OBSERVED THAT FROM THE AVAILABLE RECORD, IT WAS SEEN BY HIM THAT HE APPELLANT TRUST HAS MADE THE SAID PAYMENT FOR PU RCHASE OF TWO SOCIETIES/COLLEGES NAMELY RIT I.E. RISHIRAJ INSTITU TE OF TECHNOLOGY RUN BY RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND RDC I.E . RISHIRAJ DENTAL H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 127 COLLEGE RUN BY RISHIRAJ MEMORIAL EDUCATION AND WELF ARE SOCIETY. IN THE SAID TRANSACTION, THE INDIVIDUAL MEMBERS OF CHOUKSE Y GROUP VIZ. SHRI JAI NARAIN CHOUKSEY AND OTHER BECOME THE TRUSTEES OF TH E TWO COLLEGES/ SOCIETIES IN PLACE OF INDIVIDUAL MEMBERS OF KEER GR OUP AT THE COST OF FUNDS OF THE APPELLANT TRUST AND OTHER SOCIETIES OF CHOUKSEY GROUP. THE PAYMENT OF RS. 10 CRORES IS, THEREFORE NOT FOR THE OBJECT OF THE TRUST. FURTHER, NO CLARIFICATION WHATSOEVER HAS BEEN FURNI SHED BY THE APPELLANT TRUST IN RESPECT OF THE SAID TRANSACTION AS WELL AS NOTHING MADE IN THE SEIZED RECORDS IN RESPECT OF THE SAID TRANSACTIONS. IT IS SIGNIFICANT TO MENTION HERE THAT IN SPITE OF ALLOWING SUFFICIENT O PPORTUNITIES, THE APPELLANT HAS ALSO NOT PRODUCED THE BOOKS OF ACCOUN T AND OTHER RELEVANT RECORDS FOR VERIFICATION. THE AO NOTED THAT IN ABSE NCE OF ANY CLARIFICATION FROM THE APPELLANT TRUST IN THIS REGARD, HE WAS LEF T WITH NO ALTERNATIVE BUT TO TREAT THE SAID PAYMENT OF RS. 10,00,00,000/- AS UNEXPLAINED INVESTMENT NOT FOR THE OBJECTS OF THE TRUST, AND TH EREFORE, ADDED TO THE TOTAL INCOME DECLARED OF THE ASSESSEE TRUST U/S 69 OF THE INCOME TAX ACT, 1961. MATTER CARRIED TO LD. CIT(A), WHO DELETED THE ADDI TION. THE OPERATING PART OF THE ORDER OF THE LD. CIT(A) IS AS UNDER: 44.3 I HAVE CAREFULLY CONSIDERED THE REASONS RECO RDED BY THE AO AND SUBMISSION OF THE APPELLANT ON THIS ISSUE. IT IS A PROVED FACT THAT THE APPELLANT SOCIETY HAS MADE PAYMENT OF RS.10.00 CRORES TO VARI OUS SOCIETIES / PERSONS OF KEER GROUP IN PURSUANCE OF AGREEMENT TO TAKE OVE R THE ENTIRE CONTROL AND H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 128 MANAGEMENT ON TWO SOCIETIES I.E. RISHIRAJ SINGH MEM ORIAL WELFARE SOCIETY AND RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY. THE PAYMENT WAS MADE AS A CONSIDERATION FOR TRANSFER OF RIGHTS OF KEER F AMILY IN THE ASSETS, PROFITS AND GOODWILL OF THESE TWO SOCIETIES. IT IS NOTICED THAT THE APPELLANT HAD MADE PAYMENTS OF RS.5.00 CRORES TO SARDAR HARNAM SINGH K EER PUBLIC WELFARE TRUST, RS.2.00 CRORE TO GURU GOVIND SINGH EDUCATIO N AND WELFARE SOCIETY, RS.2.00 CRORES TO RISHIRAJ K.M.B. EDUCATION SOCIETY AND RS.1.00 CRORE TO M/S UPKAR CONSTRUCTION CO. PVT. LTD. HOWEVER, IT IS NOT ICED FROM BALANCE SHEET AS ON 31.03.2009 OF THE APPELLANT AND OTHER DOCUMEN TS THAT THE APPEL IT HAD SHOWN DIRECT PAYMENT OF RS.4.00 CRORES TO SARDAR HA RNAM SINGH KEER PUBLIC WELFARE TRUST AND RS.1.00 CRORES TO M/S GURU GOVIND SINGH EDUCATION & WELFARE SOCIETY AND THE BALANCE RS.5.00 CRORES HAS BEEN SHOWN AS LOAN AND ADVANCE TO RISHIRAJ MEMORIAL EDUCATION & WELFARE SO CIETY, WHICH IN TURN HAS PAID TO THE SOCIETIES / CONCERN OF KEER GROUP MENTI ONED ABOVE. THUS, ADMITTEDLY THE APPELLANT HAD MADE THE TOTAL PAYMENT OF RS.10.00 CRORES IN PURSUANCE OF THIS AGREEMENT. THE APPELLANT HAD SHOW N THESE AMOUNTS AS LOANS AND ADVANCES GIVEN TO SOCIETIES, WHEREAS THE RECIPIENT SOCIETIES OF KEER GROUP HAD SHOWN THESE AMOUNTS RECEIVED AS CORP US DONATION, WHICH MEANS THESE AMOUNTS WERE RECEIVED BY THEM ON NON-RE TURNABLE BASIS AND NOT AS LOANS AND ADVANCES. THUS, THE CONTENTION OF THE APPELLANT THAT THESE AMOUNTS WERE GIVEN AS LOANS & ADVANCES TO OTHER SOC IETIES HAVING SIMILAR OBJECTIVES FOR FURTHERANCE OF CHARITABLE PURPOSE IS NOT TENABLE. THUS, THERE IS A CLEAR CUT VIOLATION OF SECTION 11 TO 13. FURTHER IT IS ALSO RELEVANT TO MENTION HERE THAT IT HAS BEEN DECIDED HEREIN ABOVE IN THIS ORDER THAT THE APPELLANT IS NOT ENTITLED FOR ANY BENEFITS U/S 11 OF THE ACT. IT MAY NOT BE OUT OF PLACE TO MENTION HERE THAT EVEN IF THE APPELLANT IS ENTITLED TO BENEFIT U/S 11, THIS AMOUNT OF RS.10.00 CRORES CANNOT BE CONSIDERED AS A PPLICATION FOR THE PURPOSES OF OBJECTIVES OF THE APPELLANT SOCIETY. HOWEVER, THE AO HAS MADE ADDITION OF RS.10.00 CRORE S WHILE COMPUTING THE TOTAL TAXABLE INCOME OF THE APPELLANT UNDER THE HEAD 'PROFITS OR GAINS OF BUSINESS'. BUT IT IS RELEVANT TO NOTE THAT THE APPELLANT HAD NOT DEBITED ANY EXPENDITURE RELATING TO THIS PAYMENT OF RS.10.0 0 CRORES IN ITS INCOME & EXPENDITURE ACCOUNT. SINCE NO EXPENDITURE HAS BEEN CLAIMED IN THE INCOME &EXPENDITURE ACCOUNT, THERE IS NO QUESTION OF MAKIN G ANY DISALLOWANCE OF SUCH AMOUNT AS EXPENDITURE. FURTHER, THE APPELLANT HAS SHOWN THIS AMOUNT AS LOAN AND ADVANCE IN ITS BALANCE SHEET ON ASSETS SID E IN THE NAMES OF SARDAR HARNAM SINGH KEER PUBLIC WELFARE TRUST OF RS.4.00 C RORES, GURU GOVIND SINGH EDUCATION AND WELFARE SOCIETY OF RS.1.00 CROR ES AND IN THE NAME OF RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY OF RS .5.00 CRORES. THUS, THIS AMOUNT OF RS.10.00 CRORES IS APPEARING AS A CAPITAL ITEM IN THE BALANCE SHEET AS CURRENT ASSETS. THESE LOANS AND ADVANCES OF RS.1 0.00 CRORES HAS BEEN DULY REFLECTED IN THE BOOKS OF ACCOUNT AND HAS BEEN PAID OUT OF DECLARED SOURCES. THUS, THE LOANS AND ADVANCES APPEARING IN BALANCE SHEET ARE ALSO NOT FROM UNDISCLOSED SOURCES. THEREFORE, CONSIDERIN G THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED O PINION THAT NO ADDITION OF THIS AMOUNT OF RS.10.00 CRORES PAID DIRECTLY OR IND IRECTLY BY THE APPELLANT SOCIETY TO OTHER SOCIETIES / PERSONS OF KEER GROUP CAN BE MADE IN COMPUTING H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 129 THE INCOME FROM BUSINESS OF THE APPELLANT. HENCE, A DDITION OF RS.10.00 CRORES IS DELETED. THE LD. DR RELIED ON THE ORDERS OF THE ASSESSING OF FICER. THE LD. AR FOR THE ASSESSEE HAS RELIED ON THE ORDE R OF THE LD. CIT(A) AND SUBMITTED THAT AS REGARDS PAYMENT OF RS. 10,00,00,000/- TO FOUR ENTITIES NAMELY, SARDAR HARNAM SINGH KEER PUBL IC WELFARE TRUST AND THREE OTHERS, THE OBSERVATIONS OF THE AO AND TH E FINDINGS REACHED AT BY HIM ON THE IMPUGNED ISSUE ARE HIS PURE GUESSWORK , SURMISES AND CONJECTURES. IT WAS SUBMITTED THAT THE ASSESSEE IS IN COMPLETE AGREEMENT WITH THE ASSESSING OFFICER THAT A SOCIETY / TRUST CANNOT BE SOLD OR PURCHASED. SOCIETY/TRUST AND ITS MEMBERS/ TRUSTE ES ARE INFECT ALTOGETHER DIFFERENT ENTITIES AND THE MEMBERS OR TH E TRUSTEES ARE NOT THE OWNERS OF THE SOCIETY OR TRUST AND THEY MANAGE THE PROPERTY OF THE SOCIETY/ TRUST. THEY ONLY ACT IN FIDUCIARY CAPACITY ; THEY COME AND GO. AND EXACTLY THIS IS WHAT WAS BEING DONE AND IS BEING DO NE IN THE PRESENT CASE. THE MEMBERS/ TRUSTEES OF DIFFERENT SOCIETIES AND TRUST WERE ACTING ONLY AND ONLY IN FIDUCIARY CAPACITY IN THE INTEREST OF ITS BENEFICIARIES. HERE THE BENEFICIARIES WERE HUNDREDS AND HUNDREDS OF STU DENTS WHO FLOCKED MOSTLY FROM SMALL TOWNS AND REMOTE AREAS FROM ACROS S THE COUNTRY, AGAIN MOST OF THEM FROM HUMBLE BACK GROUNDS. IT WAS ALSO SUBMITTED THAT IN FACT, DUE TO STEEP DIFFERENCE OF OPINION AM ONGST THE MEMBERS/TRUSTEES OF VARIOUS SOCIETIES/ TRUSTS, IT W AS DAY TO DAY BECOMING PRACTICALLY VERY DIFFICULT, MAY IMPOSSIBLE , TO RUN THOSE COLLEGE/ H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 130 EDUCATIONAL INSTITUTIONS. BUT, HERE THE CRUCIAL ISS UE AT STAKE WAS LIFE AND CAREER OF HUNDREDS OF STUDENTS WHO CAME MOSTLY FROM HUMBLE BACKGROUNDS, AS AFORESAID. THEREFORE, IN ORDER TO T IDE OVER THIS UNPRECEDENTED CRISIS, A CONSENSUS WAS REACHED AT IN WHICH DIFFERENT SOCIETIES/ TRUSTS WERE DECIDED TO BE MANAGED BY EXI STING DIFFERENT FAMILY MEMBERS/ TRUSTEES OF THE SOCIETIES/TRUST. THIS WAS INEVITABLE TO SAVE PRECIOUS CAREERS OF HUNDREDS OF STUDENTS UNDERGOING STUDIES IN THE COLLEGES/INSTITUTIONS RUN BY THESE SOCIETIES/ TRUST . THIS IS BECAUSE ALL THE RELEVANT SOCIETIES/ TRUSTS WERE RUNNING EDUCATIONAL INSTITUTIONS THAT TOO ON THE CHARITABLE BASIS. THE MAJOR DISPUTES WERE BETWE EN LATE MR. TANWANT SINGH KEER AND MR. J.N. CHOUKSEY. BOTH WERE MEMBERS OF THE TWO SOCIETIES, NAMELY, RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND RISHIRAJ SINGH MEMORIAL EDUCATION AND WELFARE SOCIETY. LATE MR. TANWANT SINGH KEER WAS ALSO MANAGING MEMBER OF THE SOME OTHER SOC IETIES RUNNING EDUCATIONAL INSTITUTIONS. THE CONCILIATION FORMULA TO WIN OVER THE CRISIS AS SUGGESTED BY MR. KEER WAS THAT LATE MR. TANWANT SIN GH KEER WILL RESIGN AS MEMBER FROM THE ABOVE TWO EDUCATIONAL SOCIETIES VIZ. RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND RISHIRAJ SINGH MEMORIA L EDUCATION AND WELFARE SOCIETY AND RS. 17 CRORES SHALL BE PAID TO THE INSTITUTIONS IN WHICH MR. TANWANT SINGH KEER IS MANAGING MEMBER. HO WEVER, SUCH AMOUNTS PAID SHALL BE UTILIZED FOR FURTHERANCE OF C HARITABLE PURPOSE OF IMPARTING EDUCATION, AS DONE BY SOCIETIES / TRUST I N WHICH CHOUKSEY H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 131 FAMILY IS MANAGING MEMBER/ TRUSTEE. IT WAS CONTENDE D THAT THE SEIZED LETTER/ DOCUMENT DATED 24.6.2008 WAS COERCIVELY GOT PREPARED BY LATE MR. TANWANT SINGH KEER. MR. J.N CHOUKSEY, ANOTHER M ANAGING MEMBER, WAS INSISTED UPON TO SIGN IT. THIS WAS INFACT USED AS PRIME CONDITION AND TOOL BY MR. TANWANT SINGH KEER TO RESIGN FROM MEMBE RSHIP OF THOSE TWO SOCIETIES. FOR THIS PURPOSE IT WAS ALSO INSISTED UP ON BY LATE MR. TANWANT SINGH KEER THAT CONSTRUCTION WORK OF RS. 1,00,00,00 0/- SHOULD ALSO BE GIVEN TO UPKAR CONSTRUCTION PVT. LTD. BY ASSESSEE S OCIETY. DUE TO DISPUTE, WORK COULD NOT BE STARTED. M/S UPKAR CONST RUCTION PVT. LTD HAS ALSO CONFIRMED THESE FACTS BEFORE THE SAME AO DURIN G ITS ASSESSMENT U/S 153C WHICH WAS SIMULTANEOUSLY DONE BY THE LD. A O ON 09.12.2011. IT WAS ARGUED THAT IN THE AFORESAID CIRCUMSTANCES, IN ORDER TO SAVE THE PRECIOUS CAREERS OF HUNDREDS OF STUDENTS, THE AFORE SAID SUM OF RS. 17,00,00,000/- WAS TO BE PAID AND NOT FOR THE PURPO SE OF PURCHASE OR SALE OF THE SOCIETIES OR CONTROL OVER IT AS WRONGLY APPREHENDED BY THE AO. THIS IS BECAUSE MONEY WAS GIVEN TO THE OTHER SO CIETIES REGISTERED U/S 12AA- NAMELY TO SARDAR HARNAM SINGH KEER PUBLIC WELFARE TRUST, RISHIRAJ KMB EDUCATION INDIVIDUAL OF KEER FAMILY. I T WAS CONTENDED THAT THE ALLEGATION OF THE AO THAT THE SUBJECT SUM WAS P AID FOR THE BENEFIT OF INDIVIDUAL MEMBERS OF CHOUKSEY FAMILY IN VIOLATION OF SEC. 13(1)(E)(II)/13(2)(G) R.W.S 13(3) IS WHOLLY IMAGINA RY, SPECULATIVE AND UNFOUNDED BECAUSE NONE OF THE PARAMETERS ENUNCIATED IN SEC.13 HAVE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 132 BEEN VIOLATED. THIS ALLEGATION OF AO IS ALSO BASELE SS THAT SUBJECT PAYMENTS WERE MADE TO GAIN CONTROL BY INDIVIDUAL ME MBERS OF CHOUKSEY FAMILY OVER THE PROPERTIES OF THE TWO SOCIETIES/ CO LLEGES BECAUSE ONLY A SOCIETY OWNS AND HAS CONTROL OVER ITS PROPERTY AND NOT INDIVIDUAL MEMBERS AS THEY ONLY MANAGE IT AND THEY HAVE NO PER SONAL RIGHTS THEREIN WHATSOEVER. IT WAS SUBMITTED THAT THE LD. A O OUGHT TO HAVE APPRECIATED THAT ANY CHARITABLE INSTITUTION REGISTE RED 12AA HAS STATUTORILY TO APPLY ITS RECEIPTS- BOTH REVENUE AS WELL AS CAPI TAL- ONLY TOWARDS CHARITABLE PURPOSES AND NOT FOR THE INDIVIDUAL BENE FIT OF ANY INTERESTED PERSON OF OTHERWISE. AMOUNT RECEIVED BY OTHER CHARI TABLE SOCIETIES REGISTERED U/S 12AAA IN WHICH KEER FAMILY WERE MANA GING MEMBERS, SHALL ALSO HAVE TO BE SPENT BY THEM TOWARDS FULFILL MENT OF CHARITABLE PURPOSES OF THOSE SOCIETIES ONLY AND NOT FOR THE BE NEFIT OF ANY INDIVIDUAL. THE AO HAS ALSO NOT ADVANCED ANY SUCH ALLEGATION NO T BROUGHT ON RECORD ANY SUCH FACT OR EVIDENCE OF ANY SUCH WITHDR AWAL BY KEER FAMILY FOR THEIR INDIVIDUAL BENEFITS. THUS, THE APPREHENSI ON OF THE AO WAS GUIDED BY HIS MERE IMAGINATION AND GRAVE DOUBT THAT THE MANAGING MEMBERS/ TRUSTEES WOULD WITHDRAW/ SIPHON OUT THE SI MILAR OR MORE AMOUNTS FROM THE INSTITUTIONS FOR THEIR PERSONAL BE NEFIT. IT WAS ALSO SUBMITTED THAT IT IS HIS MERE IMAGINARY AND GUESS W ORK HAVING NO LEGAL CREDENCE OR EVIDENCE. THERE IS NO LEGITIMATE PLACE FOR SUCH IMAGINATIONS AND FANCIES IN THE FISCAL STATUTES. HERE, IT WOULD BE APT TO QUOTE THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 133 DECISION OF HON'BLE APEX COURT IN STATE OF KERALA VS. M.M. MATHEW(1978)42 STC 348(SC) WHEREIN IT WAS HELD THAT STRONG SUSPICION, STRANGE COINCIDENCE AND GRAVE DOUBTS CAN NOT TAKE THE PLACE OF LEGAL PROOF. IT WAS ALSO SUBMITTED THAT LATE MR . TANWANT SINGH KEER AND HIS FAMILY ADOPTED DIFFERENT-DIFFERENT MALAFIDE TACTICS BY GETTING LETTERS AND CHEQUES SIGNED FROM MR. J N CHOUKSEY AN D IN SENDING LEGAL NOTICE. MOREOVER, MR. J N CHOUKSEY HAS NOWHERE STAT ED IN HIS STATEMENT RECORDED U/S 132(4) ON 22.08.2009 THAT TH E SUBJECT PAYMENTS WERE MADE FOR ACQUISITION OF SOCIETIES. RATHER HE S TATED IN Q. 3 THAT- 'MY FAMILY AND FAMILY OF SHRI TANWANT SINGH KEER WERE J OINTLY MANAGING RISHIRAJ DENTAL COLLEGE, BHOPAL AND RISHIRAJ ENGINE ERING COLLEGE, INDORE. DUE TO DISPUTE, IT WAS DECIDED THAT MR. KEE R AND HIS FAMILY WOULD LIKE TO SEPARATELY MANAGE SIMILAR INSTITUTIONS. FOR TAKING THOSE INSTITUTIONS UPTO THIS STATUS, INSTITUTIONS MANAGED BY CHOUKSEY FAMILY HAS PAID BY WAY OF GRANT, DONATION AND PAYMENT A SU M OF AROUND RS.15 CRORE 63 LAKHS BY RISHIRAJ MEMORIAL SOCIETY AND H K SOCIETY AND OUR OTHER INSTITUTIONS TO SHRI KEER'S INSTITUTIONS AND TRUST ' (ENGLISH TRANSLATION BY THE ASSESSEE). IT WAS STATED THAT THE PAYER, SOCIETIES/ TRUSTS, HA VE SHOWN THE PAYMENTS AS ADVANCES BECAUSE THE PAYEE-SO CIETIES DID NOT ISSUE REQUIRED RECEIPTS FOR THE NATURE OF PAYMENTS. IT WAS ALSO SUBMITTED THAT THE AO HAS ALSO GIVEN A PASSING REMARK THAT TH E ACTIVITIES OF THE APPELLANT SOCIETY/ TRUST ARE NOT GENUINE AND NOT FO R THE PURPOSE OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 134 EDUCATION. THIS IS ENTIRELY INCORRECT AND FAR FROM TRUTH BECAUSE INDISPUTABLY APPELLANT IS GENUINELY DOING IT'S PRED OMINANT ACTIVITY OF RUNNING EDUCATIONAL INSTITUTIONS, EVEN TODAY. WITHO UT PREJUDICE TO ABOVE AND WITHOUT CONCEDING, IT WAS SUBMITTED THAT IT IS AXIOMATIC LAW THAT IF THERE WAS ANY MISAPPLICATION OF FUNDS OR MISMANAGEM ENT, ACTION COULD LIE AGAINST THE PERSON RESPONSIBLE BUT IT IS NOT PO SSIBLE TO SAY THAT ANY AMOUNTS OF THE FUNDS OF THE SOCIETY WAS NOT UTILIZE D FOR EDUCATIONAL PURPOSES AND FOR THAT REASON THE CHARITABLE INSTITU TION CANNOT BE DENIED EXEMPTION WHICH DEPENDS UPON OBJECTS OF THE TRUST. IN THIS REGARD, THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS: (I) COSMOPOLITAN EDUCATION SOCIETY 244 ITR 494 (RAJ .) (II) DCIT VS. HAI HAY KSHATRIYA EDUCATION SOCIETY I N ITA NO. 51 TO 56 AND 510/IND/ 2007 FOR AN. 1998-99 TO 2004-05 - RELEVANT PAGE 54 (SUPRA) (III) HYNDAVE EDUCATION SOCIETY VS. ADIT (EXEMPTION S) (2013) 86 DTR (HYD) 196 IN VIEW OF ABOVE, IT WAS AVERRED THAT THE ASSESSEE SOCIETY/ TRUST EXISTS SOLELY FOR CHARITABLE PURPOSES OF IMPARTING EDUCATI ON THROUGH ITS INTUITIONS AND NOT FOR PROFITS AND HENCE THE INCORR ECT OBSERVATIONS AND CONCLUSIONS OF AO REGARDING ALLEGED VIOLATION OF SE C. 13 MAY KINDLY BE HELD AS REDUNDANT AND THE UNLAWFUL ADDITION OF RS.1 0,00,00,000/- MAY KINDLY BE DELETED. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE CIT(A) H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 135 WAS CORRECT IN DELETING THE ADDITION BY EXTENSIVELY DISCUSSING THE ISSUE WITH PROPER JUSTIFICATION. BEFORE US ALSO THE REVEN UE COULD NOT BRING ANY MATERIAL FOR REBUTTING THE FINDINGS OF CIT(A). HENC E, IN OUR VIEW NO INTERFERENCE IS CALLED IN THE FINDINGS OF CIT(A) ON THIS ISSUE AND THE SAME IS CONFIRMED. THEREFORE, THIS GROUND IN THE DEPARTM ENTAL APPEAL IS DISMISSED. BOTH THE PARTIES SUBMITTED THAT IDENTICA L FACTS ARE INVOLVED IN CASE OF OTHER THREE ASSESSEES NAMELY, JAI NARAIN SH IKSHA SAMITI (ADDITION RS.2,00,00,000/-), RISHIRAJ SINGH MEMORIA L WELFARE SOCIETY (ADDITION RS.85,60,348/-), AND RISHIRAJ MEMORIAL ED UCATION AND WELFARE SOCIETY (ADDITION RS.6,29,25,540/-). HENCE, OUR ABO VE FINDINGS WILL ALSO PREVAIL IN CASE OF THESE ASSESSEES ALSO. THEREFORE, DEPARTMENTAL GROUND OF APPEAL IN CASE OF PAYMENT FOR PURCHASE OF SOCIET Y OF THE ABOVE THREE ASSESSEES IS ALSO DISMISSED. 14. THE ASSESSEE HAS RAISED THE ISSUE OF TREATING D EVELOPMENT FEE AS REVENUE RECEIPT. SHORT FACTS OF THE ISSUE IN CASE OF H K KALCHURI ED UCATION TRUST ARE THAT THE AO TREATED THE RECEIPTS SHOWN UNDER THE HE AD DEVELOPMENT FEES AS PART OF THE FEES COLLECTED FROM THE STUDENT S AND, THUS, HELD IT TO BE REVENUE RECEIPT WHEREAS THE ASSESSEE HAD TAKEN THE SAME DIRECTLY TO BALANCE SHEET TREATING IT AS CAPITAL RECEIPT. ADDITIONS MADE BY AO WERE AS UNDER : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 136 A.Y. AMT (RS.) 2004-05 1,38,83,870/- 2005-06 1,61,20,910/- 2006-07 1,55,21,106/- 2007-08 85,84,055/- 2008-09 98,99,935/- 2009-10 45,500/- 2010-11 36,22,310/- 2006-07 (ITA 596/IND/2013) 1,55,21,106/- (WRONGLY TAKEN AS 1,38,83,870) MATTER CARRIED TO LD. CIT(A), WHO CONFIRMED THE ADD ITION BY OBSERVING THAT SINCE FEES RECEIPTS UNDER THE DEVELO PMENT FUND IS RECEIVED EVERY YEAR THE SAME ARE REVENUE RECEIPTS A ND SHALL BE INCLUDED IN INCOME. LD. AR FOR THE ASSESSEE MADE ORAL AS WELL AS WRITTE N SUBMISSION AS UNDER: THE ADDITION MADE BY AO IS UNCALLED FOR DUE TO FOL LOWING REASONS : I) NO ADDITIONS COULD BE MADE UNDER SEC. 153A FOR A .Y. 2004-05 TO 2006-07 & 2008-09 BECAUSE : NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJ ECT ADDITION SHOWING IT AS UNDISCLOSED INCOME. DEVELOPMENT FUND FEE WAS DULY DISCLOSED IN THE RES PECTIVE AUDITED FINANCIAL STATEMENTS PRIOR TO DATE OF SEARCH II) THE APPELLANT SUBMITS THAT THE COLLEGES OF THE ASSESSEE SOCIETY ARE GOVERNED BY ALL INDIA COUNCIL FOR TECHNICAL EDUCATION (AICTE ), NEW DELHI AND THE TECHNICAL UNIVERSITY OF MADHYA PRADESH, RGPV. THE APPELLANT I S REQUIRED TO COMPLY THE MINIMUM NORMS FOR CONTINUANCE OF THEIR RECOGNITION UNDER AICTE ACT, 1987. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 137 III) AS PER GUIDELINES ISSUED BY AICTE FOR MAINTA INING FINANCIAL STATEMENTS AND RECORDS, THE DEVELOPMENT FUND IS TO UTILIZED ONLY F OR DEVELOPMENT AND INFRASTRUCTURE FACILITY OF THE COLLEGE AND NOT FOR ANY REVENUE EXP ENDITURE OR FOR ANY OTHER PURPOSE SIMILARLY, THE TECHNICAL UNIVERSITY OF MADHYA PRADE SH, RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA (RGPV), ESTABLISHED BY GOVERNMENT O F MADHYA PRADESH HAS ALSO INSTRUCTED ON THE SIMILAR LINES THROUGH ITS COMMITT EE FOR FEES FIXATION AND ADMISSION PROCEDURES FOR PROFESSIONAL INSTITUTIONS. THE ORDER OF THE FEES FIXATION COMMITTEE IS ENCLOSED AT PG. 276-293. IV) THEREFORE, THE DEVELOPMENT FUND FEES ARE NOT IN COME OF THE TRUST AND IS IN THE NATURE OF CAPITAL RECEIPT IN TERMS OF SECTION 1 1(1)(D) OF THE INCOME TAX ACT, 1961. V) WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THAT IN ANY CASE EVEN IF THE DEVELOPMENT FUND FEES ARE TREATED AS REVENUE IN NAT URE, THE SAME WILL QUALIFY FOR EXEMPTION U/S 11 OF THE I. TAX ACT AS IT FALLS WITHIN 85% LIMIT OF APPLICATION TOWARDS CHARITABLE PURPOSE. RELIANCE IS ALSO PLACED ON THE FOLLOWING DECISIONS WHEREIN IT HAS BEEN HELD THAT WHERE CONTRIBUTION HAS BEEN RECEIVED TOWARDS S PECIFIC PURPOSE, THE SAME WOULD NOT FORM PART OF THE TOTAL INCOME OF THE SOCIETY. CIT V/S STANAKRASI VARDHMAN VANIK JAIN SANGH 260 IT R 366 (GUJ.) NASSCOM V/S DDIT (EXEMPTIONS) 38 DTR 105 (DEL. IT AT ) CIT V/S VANCHI TRUST 127 ITR 227 (KER.) VI) THE LD. CIT(A) CONFIRMED THE TREATMENT OF THE R ECEIPTS OF DEVELOPMENT FUND FEES AS REVENUE RECEIPTS AS NO APPEAL WAS FILED BY THE ASSESSEE ON THIS ISSUE AGAINST THE ORDER OF LD. CIT(A) IN REGULAR ASSESSMENT U/S 1 43(3) IN A.Y. 2004-05 TO 2005-06. CIT(A ) , HOWEVER, SKIPPED THE IMPORTANT DIRECTION OF LD. C IT(A) THAT THOUGH THE DEVELOPMENT FUND FEE BE TREATED AS REVENUE INCOME, SINCE THE APPELLANT TRUST IS EXEMPT U/S 11, THE AO SHALL ALLOW EXEMPTION U/S 11 OF THE ACT ( BY TREATING IT WITHIN 85% LIMIT OF APPLICATION TOWARDS CHARITABLE PURPOSE). IN VIEW OF OUR SUBMISSION ABOVE, THE DEVELOPMENT FU ND MAY KINDLY BE TREATED AS CAPITAL RECEIPT. HOWEVER, IT IS PRAYED THAT IN CASE THIS ISSUE IS DECIDED AGAINST THE ASSESSEE, THE LD. AO MAY BE DIRECTED TO GRANT EXEMP TION U/S 11 OF THE ACT ( BY TREATING IT WITHIN 85% LIMIT OF APPLICATION TOWARDS CHARITABLE PURPOSE), AS DIRECTED BY PREVIOUS CIT(A) FOR A.Y. 2004-05 & 2005-06. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE CIT(A) WAS CORRECT IN CONFIRMING THE ADDITION BY EXTENSIVE LY DISCUSSING THE ISSUE WITH PROPER JUSTIFICATION. HOWEVER, WE AGREE WITH THIS CONTENTION OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 138 THE ASSESSEE THAT SINCE NO INCRIMINATING MATERIAL W AS FOUND IN RESPECT OF THIS ISSUE IN A.Y. 2004-05 TO 2006-07 AND THESE ASS ESSMENTS WERE NON PENDING AND CONCLUDED ON THE DATE OF SEARCH HENCE N O ADDITION WAS WARRANTED IN A.Y. 2004-05 TO 2006-07 AND IS DELETED . ALSO WHEN WE HAVE HELD THAT THE ASSESSEE IS A CHARITABLE ENTITY ELIGIBLE FOR EXEMPTION U/S 11, 12 AND 13 HENCE, IN OUR VIEW IT WOULD BE P ROPER TO TREAT THE FEES FOR DEVELOPMENT FUNDS AS REVENUE RECEIPTS BUT THE A SSESSEE SHALL BE ENTITLED TO HAVE THE BENEFIT OF EXEMPTION U/S 11 RE AD WITH SECTION 12 AND 13 OF THE ACT ( BY TREATING IT WITHIN 85% LIMIT OF APPLICATION TOWARDS CHARITABLE PURPOSE AND ACCUMULATION AS PER LAW). HE NCE, IN A.Y. 2007- 08 TO 2010-11, THE FEES FOR DEVELOPMENT FUNDS IS TR EATED AS REVENUE RECEIPTS BUT THE ASSESSEE SHALL BENEFIT OF EXEMPTIO N U/S 11 READ WITH SECTION 12 AND 13 OF THE ACT ( BY TREATING IT WITHI N 85% LIMIT OF APPLICATION TOWARDS CHARITABLE PURPOSE AND ACCUMULATION AS PER LAW). THEREFORE, THIS GROUND IN THE ASSESSEE APPEAL IS PARTLY ALLOWE D. BOTH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN CASE OF OTHER THREE ASSESSEES NAMELY, JAI NARAIN SHIKSHA SAMITI, RISHIR AJ SINGH MEMORIAL WELFARE SOCIETY AND HAI HAY KSHETRIYA EDUCATION SOC IETY. THEREFORE, THIS GROUND OF APPEALS OF OTHER THREE ASSESSEES IS ALLOWED. 15. THE ASSESSEE HAS RAISED THE ISSUE OF FEES DIREC TLY CREDITED TO BALANCE SHEET. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 139 SHORT FACTS OF THE ISSUE IN CASE OF H K KALCHURI ED UCATION TRUST ARE THAT THE AO TREATED THE EXCESS RECEIPTS ON ACCOUNT OF COLLEGE AND UNIFORM FEE (REFUNDABLE) OF RS. 2,38,355/- AS REVEN UE RECEIPTS WHEREAS THE ASSESSEE HAD TREATED THE SAME AS LIABILITY AND CREDITED TO BALANCE SHEET AS PAYABLE. MATTER CARRIED TO LD. CIT(A), WHO CONFIRMED THE SAM E BY OBSERVING THAT THIS EXCESS FEES CLAIMED TO BE RECEIVED WAS SU BSEQUENTLY REFUNDED TO STUDENTS OR ADJUSTED IN THE ACCOUNTS WAS NOT EXP LAINED BY THE ASSESSEE. THEREFORE, THE EXCESS FEES OF RS. 2,38,35 5/- ADDITION WAS TREATED AS REVENUE RECEIPTS BY HIM. LD. AR FOR THE ASSESSEE MADE ORAL AS WELL AS WRITTE N SUBMISSION AS UNDER: 1. NO INCRIMINATING MATERIALS HAVE BEEN FOUND REGAR DING SUBJECTS ADDITIONS AND HENCE IT IS OUT OF PURVIEW OF SEC. 153A. 2. THE FEES REFUNDABLE IN NATURE AND HENCE CANNOT B E TREATED AS INCOME / RECEIPT OF ASSESSEE. IN VIEW OF OUR SUBMISSION ABOVE, THE ABOVE FEE MAY KINDLY NOT BE TREATED AS INCOME. HOWEVER, IT IS PRAYED THAT IN CASE THIS ISSUE IS DE CIDED AGAINST THE ASSESSEE, THE LD. AO MAY BE DIRECTED TO GRANT EXEMPTION U/S 11 OF THE ACT ( BY TREATING IT WITHIN 85% LIMIT OF APPLICATION TOWARDS CHARITABLE PURPOSE). LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE AGREE WITH THIS CONTENTION OF THE ASSESSEE THAT SINCE NO INCRIMINAT ING MATERIAL WAS H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 140 FOUND IN RESPECT OF THIS ISSUE IN A.Y. 2005-06 AND THIS ASSESSMENT WAS NON-PENDING AND CONCLUDED ON THE DATE OF SEARCH HEN CE NO ADDITION WAS WARRANTED IN A.Y. 2005-06 AND IS DELETED. THER EFORE, THIS GROUND IN THE ASSESSEE APPEAL IS ALLOWED. 16 THE ASSESSEE HAS RAISED THE ISSUE OF DISALLOWANC E OF BANK LOAN EXPENSES. SHORT FACTS OF THE ISSUE IN CASE OF HK KALCHURI EDU CATION TRUST ARE THAT THE ASSESSEE DEBITED RS. 14,30,000/- AS BANK L OAN EXPENSES IN THE INCOME AND EXPENDITURE ACCOUNT. THE AO STATED THAT THE APPELLANT HAS NOT FURNISHED ANY DETAILED AND HAS NOT EXPLAINED AS TO HOW IT WAS FOR BUSINESS/ACTIVITIES OF ASSESSEE AND THAT FUNDS OF T RUST HAVE BEEN DIVERTED FOR NON BUSINESS CONSIDERATIONS. MATTER CARRIED TO LD. CIT(A), WHO CONFIRMED THE SAM E BY TREATING THE ASSESSEE AS BUSINESS ENTITY BY OBSERVING THAT I T IS NOT WHOLLY AND EXCLUSIVELY USE FOR BUSINESS PURPOSES OF ASSESSEE. LD. DR RELIED ON ORDERS OF REVENUE AUTHORITIES. THE LD. AR MADE ORAL AS WELL AS WRITTEN SUBMISSIONS AS UNDER : I) THE SUBJECT ADDITION IS BEYOND THE PURVIEW OF SE ARCH ASSESSMENTS U/S 153A BECAUSE NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJE CT ADDITION SHOWING IT AS UNDISCLOSED INCOME. II) IT WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FINANCIAL STATEMENTS PRIOR TO DATE OF SEARCH H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 141 III) THE ADDITION CONFIRMED BY CIT(A) IS UNCALLED F OR DUE TO FOLLOWING REASONS : INTEREST FREE ADVANCES WERE GIVEN TO CHARITABLE TR UST / SOCIETIES HAVING SIMILAR OBJECTS AND ALSO REGISTERED U/S 12A. THERE IS NO BA R IN ADVANCING SUCH AMOUNTS U/S 13(1)(D). NEITHER GRANTING OF SUCH ADVANCE IS A DEP OSIT NOR INVESTMENT. HENCE, THERE WAS NO VIOLATION OF PROVISION OF SECTION 13(1 )(D). NO INTEREST HAVE BEEN CHARGED AS THOSE SOCIETIES ARE NOT CARRYING ON ACTI VITIES FOR PROFIT AND IT IS NOT A COMMERCIAL TRANSACTION BETWEEN TWO BUSINESS ENTITIE S RATHER IT IS A TRANSACTION BETWEEN TWO CHARITABLE ORGANIZATIONS PROVIDING EDUC ATION AND HAVING SIMILAR OBJECTS. IT IS A COVERED ISSUE IN FAVOUR OF ASSESSEE FROM THE DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. RKDF EDUCATION SOCIETY IN ITA NO. 151/IND/2010 DATED 1.8.2013 (COPY OF ORDER ENCLOSED SEPARATELY) WHERE SIMILAR INTEREST FREE ADVANCE GIVEN BY ONE SOCIETY TO OTHER SOCIETY WERE HELD NOT VIOLATIVE OF SEC. 13(1)(D) R.W.S. 11(5), WHEN BOTH THE SOCIETIES WERE REGISTERED U/S 12A. OTHER ADVANCES WERE GIVEN FOR THE CHARITABLE ACTIV ITIES OF THE ASSESSEE TRUST AS SUBMITTED ELSEWHERE IN OUR SUBMISSIONS. LOAN WAS GIVEN TO ASSESSEE BY BANK FOR CONSTRUCTIO N OF BUILDING, PURCHASE OF FIXED ASSET ETC., AS EXPLAINED ELSEWHERE IN OUR SUBMISSIO NS. THE LENDER BANK ALWAYS ENSURES AND MONITORS PROPER END USE OF FUNDS GIVEN BY WAY OF TERM LOAN AND THE TERM LOAN TAKEN FROM BANK CAN NEVER BE UTILIZED FOR ANY OTHER PURPOSES NOR ANY BANK WOULD PERMIT THE SAME. HENCE, THE ALLEGATION O F DIVERSION OF FUNDS IS MISCONCEIVED AND MISPLACED. IN OUR EARLIER SUBMISSIONS ON DISALLOWANCE OF INTE REST ON ACCOUNT OF DIVERSION OF BORROWED FUNDS FOR NON-BUSINESS CONSIDERATION, WE ENCLOSED COPY OF BALANCE SHEETS SHOWING INVESTMENT IN FIXED ASSETS AND LAND ADVANCE TO PROVE THAT THE SAID LOANS WERE USED WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF CONSTRUCTION OF BUILDING, PURCHASE OF FIXED ASSET ETC., FOR WHICH THE LOAN WA S GRANTED. WE ALSO APPENDED A CHART IN OUR EARLIER SUBMISSIONS ON DISALLOWANCE OF INTEREST ON ACCOUNT OF DIVERSION OF BORROWED FUNDS FOR NON-BUSINESS CONSIDERATION S HOWING THAT THE AMOUNT OF LOAN WAS USED IN BUILDING/FIXED ASSET ETC ONLY. RELIED ON : U/S. 11 OF THE INCOME-TAX ACT, 1961 - INTEREST FEE LOAN TO OTHER SOCIETIES COVERED U/S 12AA- AO DISALLOWED INTEREST PAID TO BA NK AND HELD THAT BENEFIT WAS GIVEN TO PARTIES COVERED U/S 13 - HELD- SOCIETI ES ARE NOT CARRYING ON ACTIVITIES FOR PROFIT - SAID INVESTMENT IS COVERED U/S 11(5) - FURTHER, THERE IS NO VIOLATION OF SECTION 13 - EXPENDITURE IS ALLOWAB LE. ACIT VS. MAA VAISHNO EDUCATION SOCIETY (2010) 14 IT J 697 (INDORE) IN VIEW OF ABOVE, SINCE THE ENTIRE INTEREST BEARING LOAN FUNDS FROM BANKS HAVE BEEN UTILIZED ONLY FOR INVESTMENT IN FIXED ASSETS M AINLY IN COLLEGE BUILDING, EQUIPMENTS, FURNITURE ETC. FOR THE PURPOSE OF EDUCA TIONAL ACTIVITIES, NO DISALLOWANCE ON ACCOUNT OF LOAN EXPENSES WAS WARRAN TED AND HENCE THE UNLAWFUL DISALLOWANCE OF LOAN EXPENSES MAY KINDLY B E DELETED BY YOURHONOUR. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 142 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE AGREE WITH THIS CONTENTION OF THE ASSESSEE THAT SINCE NO INCRIMINAT ING MATERIAL WAS FOUND IN RESPECT OF THIS ISSUE IN A.Y. 2005-06 AND THIS ASSESSMENT WAS NON-PENDING AND CONCLUDED ON THE DATE OF SEARCH HEN CE NO ADDITION WAS WARRANTED IN A.Y. 2005-06 AND IS THEREFORE DELE TED. THEREFORE, THIS GROUND IN THE ASSESSEE APPEAL IS ALLOWED. BOTH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN CASE OF OTHER ASSESSEE I.E. RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY. HENCE, OUR ABOVE FI NDINGS WILL ALSO PREVAIL IN CASE OF THIS ASSESSEE ALSO. THEREFORE, T HIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 17. THE ASSESSEE HAS RAISED THE ISSUE OF DISALLOWAN CE OF DONATION IN VARIOUS YEARS SHORT FACTS OF THE ISSUE ARE THAT THE AO OBSERVED T HAT THE APPELLANT IS NOT ENTITLED FOR ANY RELIEF U/S 11 OF THE IT ACT AND ITS INCOME IS COMPUTED AS BUSINESS INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS, THE DONATIONS MADE BY THE APPELLANT ARE NOT ALLOWABLE DEDUCTIONS U/S 37 AS THESE WERE GRATUITOUS IN NATUR E AND THE EXPENDITURE INCURRED IS NOT WHOLLY AND EXCLUSIVELY FOR THE ACTIVITIES OF THE APPELLANT TRUST. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 143 MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME BY TREATING THE ASSESSEE AS BUSINESS ENTITY. LD. DR RELIED ON ORDERS OF REVENUE AUTHORITIES. THE AR MADE ORAL AS WELL AS WRITTEN SUBMISSIONS AS UNDER : THE ADDITION MADE BY AO IS UNCALLED FOR DUE TO FOL LOWING REASONS : I) THE SUBJECT ADDITION IS BEYOND THE PURVIEW OF S EARCH ASSESSMENTS U/S 153A FOR A.Y. 2004-05 TO 2006-07 & A.Y. 2008-09 BEC AUSE : NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJ ECT ADDITION SHOWING IT AS UNDISCLOSED INCOME. IT WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FI NANCIAL STATEMENTS PRIOR TO DATE OF SEARCH. II) MOREOVER, AND WITHOUT PREJUDICE TO ABOVE AND O UR SUBMISSIONS HEREINAFTER, THE BOOKS OF ACCOUNTS WERE IN THE CUST ODY OF AO AND HAVE BEEN GIVEN TO ASSESSEE ONLY ON 1ST JULY, 2013. THE REPLI ES FOR 35 APPEALS ARE TO BE PREPARED AND SUBMITTED AT A STRETCH WITHIN SHORT SP AN OF TIME FROM THE BOOKS OF ACCOUNTS, RELEVANT RECORDS, MAINTAINED AND KEPT AT VARIOUS COLLEGES SPREAD AT DIFFERENT AND FAR FLUNG LOCATION FOR ALL THE ASS ESSMENTS YEARS FROM THE COPY OF SEIZED HARD DISKS WHEREOF PROVIDED TO US AS LATE AS ON 1ST JULY, 2013. THE DATA BEING VOLUMINOUS AND SCATTERED FOR MORE THAN 7 -8 ASSESSMENT YEARS, YOURHONOUR WILL APPRECIATE THAT IT WILL TAKE LOT OF TIME TO PREPARE. III) THE LD. CIT(A) DID NOT CONTROVERT ABOVE FACTS AND CONFIRMED THE ADDITION ON THE GROUND THAT INCOME OF THE ASSESSEE IS COMPUTED AS BUSINESS INCOME AND HENCE DONATION IS NOT AN ALLOWABLE DEDUC TION U/S 37. IV) IT IS SUBMITTED THAT THE ASSESSEE TRUST IS A C HARITABLE ORGANISATION CARRYING OUT CHARITABLE ACTIVITIES BY IMPARTING EDUCATION AND HE NCE THE OBSERVATION CIT(A) ARE TOTALLY WRONG. FURTHER, THE DONATIONS GIVEN BY THE ASSESSEE SOCIETY ARE ONLY TO CHARITABLE INSTITUTIONS FOR CHARITABLE OBJECTS OF T HE ASSESSEE. HENCE, THE SAME MAY KINDLY BE ALLOWED AS APPLICATION OF INCOME TO THE A SSESSEE SOCIETY BY YOURHONOUR. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE AGREE WITH THIS CONTENTION OF THE ASSESSEE THAT SINCE NO INCRIMINAT ING MATERIAL WAS FOUND IN RESPECT OF THIS ISSUE IN A.Y. 2005-06 TO 2 006-07 (A.Y. 2007-08 H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 144 WAS PENDING) AND THIS ASSESSMENT WAS NON PENDING AN D CONCLUDED ON THE DATE OF SEARCH HENCE NO ADDITION WAS WARRANTED IN A.Y. 2005-06 TO 2006-07 AND IS THEREFORE DELETED. AS REGARDS REMAI NING A.Y. 2007-08 TO 2010-11, SINCE WE HAVE TREATED THE ASSESSEE AS CHAR ITABLE ORGANISATION ELIGIBLE EXEMPTION U/S 11, HENCE IN OUR VIEW ADDITI ON MADE BY AO IN A.Y. 2007-08 TO 2010-11 ARE NOT CORRECT BECAUSE DONATION HAS BEEN GIVEN TOWARDS CHARITABLE PURPOSES ONLY. THEREFORE, THIS G ROUND OF THE ASSESSEE IS ALLOWED. BOTH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN CASE OF OTHER FOUR ASSESSEES NAMELY JAI NARAIN SHIKSHA S AMITI, RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY, RISHIRAJ SING H MEMORIAL WELFARE SOCIETY AND HAI HAY KSHATRIYA EDUCATION SOCIETY. HE NCE, OUR ABOVE FINDINGS WILL PREVAIL FOR THESE FOUR ASSESSEES ALSO . THEREFORE, GROUNDS IN THE APPEALS OF FOUR ASSESSEES ARE ALLOWED. 18. THE ASSESSEE HAS RAISED THE ISSUE OF DISALLOWAN CE OF MEETING AND SEMINAR EXPENSES IN VARIOUS YEARS SHORT FACTS OF THE ISSUE ARE THAT THE AO DISALLOWED ADHOC 25% EXPENSES ON MEETING AND SEMINARS ON THE GROUND THAT BOOKS OF ACCOUNTS AND OTHER RECORDS WERE NOT PRODUCED FOR VE RIFICATION. MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME ON SIMILAR GROUNDS. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 145 LD. DR RELIED ON ORDERS OF REVENUE AUTHORITIES. THE AR MADE ORAL AS WELL AS WRITTEN SUBMISSIONS AS UNDER : THE ADDITION MADE BY AO IS UNCALLED FOR DUE TO FOL LOWING REASONS : I. THE SUBJECT ADDITION IS BEYOND THE PURVIEW OF SEARCH ASSESSMENTS U/S 153A FOR A.Y. 2004-05 TO 2006-07 & 2008-09 BECAUSE : NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJ ECT ADDITION SHOWING IT AS UNDISCLOSED INCOME. IT WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FI NANCIAL STATEMENTS PRIOR TO DATE OF SEARCH IV. BOOKS OF ACCOUNTS OF THE ASSESSEE ARE DULY AUDI TED AND SUPPORTED BY VOUCHERS. NO SPECIFIC EXPENDITURE OF DISALLOWANCES WAS POINTED OUT BY AO. THE EXPENSES ON MEETINGS AND SEMINAR ARE GENUINE AND RO UTINE IN NATURE. V. THE SEIZED BOOKS OF ACCOUNTS AND COMPUTER DATA WERE GIVEN TO THE ASSESSEE AS LATE AS ON 01.07.2013 AFTER PASSING OF THE ASSESSMENT ORDER AND HENCE IS NOT POSSIBLE TO FURNISH DETAILS EITHER BEFORE AO OR BEFORE CIT(A). VI. NO BASIS OF ADHOC DISALLOWANCE WAS BROUGHT ON R ECORD BY AO/ CIT(A). VII. IT IS A SEARCH CASE WHERE ADDITION CANNOT BE M ADE ON ESTIMATION DEVOID OF ANY EVIDENCE. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE AGREE WITH THIS CONTENTION OF THE ASSESSEE THAT SINCE NO INCRIMINAT ING MATERIAL WAS FOUND IN RESPECT OF THIS ISSUE IN A.Y. 2005-06 TO 2 006-07 (A.Y. 2007-08 WAS PENDING) AND THIS ASSESSMENT WAS NON PENDING AN D CONCLUDED ON THE DATE OF SEARCH HENCE NO ADDITION WAS WARRANTED IN A.Y. 2005-06 TO 2006-07 AND IS THEREFORE DELETED. AS REGARDS REMAI NING A.Y. 2007-08 TO 2010-11, SINCE WE HAVE TREATED THE ASSESSEE AS CHAR ITABLE ORGANISATION ELIGIBLE EXEMPTION U/S 11, HENCE IN OUR VIEW ADDITI ON MADE BY AO IN A.Y. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 146 2007-08 TO 2010-11 ARE NOT CORRECT BECAUSE THE ASSE SSEE IS A CHARITABLE ORGANISATION IMPARTING EDUCATION WHERE THESE KINDS OF EXPENDITURE ARE ROUTINE IN NATURE AND NECESSARY. SEIZED BOOKS OF AC COUNTS WERE IN THE CUSTODY OF DEPARTMENT WHICH WERE GIVEN ONLY ON 1.7. 2013 BUT NO ITEM OF DISALLOWABLE EXPENSES WAS POINTED BY AO. THEREFORE, THIS ADDITION CANNOT BE SUSTAINED AND IS DELETED IN RESPECT OF A. Y. 2007-08 TO 2010- 11 ALSO. THIS GROUND OF THE ASSESSEE IS ALLOWED. BOTH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN CASE OF OTHER FOUR ASSESSEES NAMELY JAI NARAIN SHIKSHA S AMITI, RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY, RISHIRAJ SING H MEMORIAL WELFARE SOCIETY AND HAI HAY KSHATRIYA EDUCATION SOCIETY. HE NCE, OUR ABOVE FINDINGS WILL PREVAIL FOR THESE FOUR ASSESSEES ALSO . THEREFORE, GROUNDS IN THE APPEALS OF FOUR ASSESSEES ARE ALLOWED. 19. THE ASSESSEE HAS RAISED THE ISSUE OF DISALLOWAN CE OF EXPENDITURE ON ACCOUNT OF GRANT SHORT FACTS OF THE ISSUE ARE THAT THE THE AO OBSERV ED THAT APPELLANT HAD DEBITED AN AMOUNT OF RS. 52,00,000/- IN ITS INC OME & EXPENDITURE ACCOUNT ON ACCOUNT OF GRANT. THE WORD GRANT ITSEL F REFLECT THAT PAYMENT MADE WAS GRATIOUS IN NATURE. THE INCOME OF THE APPE LLANT IS ASSESSED AS INCOME FROM BUSINESS. THE APPELLANT FAILED TO PR OVE THAT THIS EXPENDITURE ON GRANT WAS MADE IN COMMERCIAL EXPEDIE NCY WITH ANY COGENT EVIDENCE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 147 THE MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME . LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES THE AR MADE ORAL AS WELL AS WRITTEN SUBMISSIONS AS UNDER : I) THE SUBJECT ADDITION IS BEYOND THE PURVIEW OF SEARCH ASSESSMENTS U/S 153A FOR A.Y. 2004-05 TO 2006-07 & 2008-09 BECAUSE : NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJ ECT ADDITION SHOWING IT AS UNDISCLOSED INCOME. IT WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FI NANCIAL STATEMENTS PRIOR TO DATE OF SEARCH II) THAT THE SUBJECT GRANT OF RS. 52,00,000/- WAS P AID TO JAI NARAIN SHIKSHA SAMITI THROUGH CHEQUE, SIMULTANEOUSLY ASSESSED BY S AME AO, WHICH IS REGISTERED U/S12A. JAI NARAIN SHIKSHA SAMITI HAS ALSO SHOWN TH E SAME AS RECEIPT/ INCOME AND CREDITED THE SAME AS GRANT RECEIVED FROM H K KALC HURI TRUST RS. 52,00,000/-. (COPY OF INCOME AND EXPENDITURE A/C OF JAI NARAIN S HIKSHA SAMITI AT G 37 OF THEIR PAPER BOOK). III) CIT(A) CONFIRMED THE ADDITION STATING THAT IT WAS GRATUITOUS IN NATURE AND INCOME OF ASSESSEE ASSESSED AS INCOME FROM BUSINESS . IV) THE ASSESSEE TRUST IS A CHARITABLE ORGANISATION CARRYING OUT CHARITABLE ACTIVITIES BY IMPARTING EDUCATION AND HENCE THE OBS ERVATION CIT(A) ARE TOTALLY WRONG. FURTHER, THE GRANT GIVEN BY THE ASSESSEE SOCIETY AR E ONLY TO CHARITABLE INSTITUTIONS FOR CHARITABLE OBJECTS OF THE ASSESSEE. HENCE, THE SAME MAY KINDLY BE ALLOWED AS APPLICATION OF INCOME TO THE ASSESSEE SOCIETY BY YO URHONOUR. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE AGREE WITH THIS CONTENTION OF THE ASSESSEE THAT SINCE NO INCRIMINAT ING MATERIAL WAS FOUND IN RESPECT OF THIS ISSUE IN A.Y. 2006-07 AND THIS ASSESSMENT WAS NON-PENDING AND CONCLUDED ON THE DATE OF SEARCH HEN CE NO ADDITION WAS WARRANTED IN A.Y. 2006-07 ON THIS ISSUE AND IS THEREFORE DELETED. EVEN OTHERWISE IT IS A CASE OF GRANT GIVEN BY ONE S OCIETY/TRUST TO ANOTHER H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 148 SOCIETY, BOTH REGISTERED U/S 12A AND HENCE IS ALLOW ABLE. THIS GROUND OF THE ASSESSEE IS ALLOWED. 20. THE ASSESSEE AND DEPARTMENT HAVE RAISED THE ISS UE OF ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE BASED ON LOOSE P APERS FOUND FROM 48, GOMANTIKA PARISAR. SHORT FACTS OF THE ISSUE IN CASE OF HK KALCHURI EDU CATION TRUST ARE THAT SOME LOOSE PAPER WERE FOUND 48, GOMANTIKA PARI SAR. THE AO MADE ADDITIONS ON THE BASIS OF ENTRIES WRITTEN ON THESE LOOSE PAPERS TREATING IT AS UNDISCLOSED INCOME OF THE ASSESSEE. THE MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME ON SIMILAR GROUNDS AND ALLOWED PART RELIEF. LD. DR RELIED ON ORDERS OF REVENUE AUTHORITIES THE AR MADE ORAL AS WELL AS WRITTEN SUBMISSIONS AS UNDER : 1. RELIED ON SUBMISSION BEFORE CIT(A) PG. 5105-51 08. 2. COPY OF SEIZED LOOSE PAPERS PG. 378-384. 3. THE ADDITION CONFIRMED BY CIT(A) IS NOT JUSTIFIE D BROADLY FOR THE FOLLOWING REASONS : I. THE SUBJECT CHIT OF LOOSE PAPERS ARE HAVING ROUG H JOTTINGS ONLY. THESE ARE NEITHER SIGNED BY NOR IS IN THE HANDWRITING OF ANY OF THE O FFICE BEARER OF THE TURST/SOCIETY. II. IT IS A MERE DUMB DOCUMENT WHICH DOES NOT EVEN SHOW THE NATURE OF SCRIBBLING AS TO WHETHER IT IS RECEIPT OR PAYMENT OR THE LIKE. III. THE AUTHOR OF THE ROUGH JOTTINGS HAS NOT BEEN EXAMINED BY AO. IV. NONE OF THE OFFICE BEARER HAS EVER ACCEPTED THE SE ROUGH JOTTINGS AS UNDISCLOSED INCOME/ UNACCOUNTED PAYMENT OF THE ASSESSEE SOCIETY . THE ASSESSEE TRUST, REGISTERED U/S 12AA, DOES NOT HAVE ANY UNDISCLOSED INCOME TO SPEND. EVEN OTHERWISE, SINCE ALL ITS RECEIPTS ARE DULY ACCOUNTE D FOR ALONG WITH EXPENSES WHICH ARE ELIGIBLE FOR APPLICATION TOWARDS CHARITABLE PURPOSE S, THERE IS NO REASON THAT IT WILL INCUR ANY UNEXPLAINED EXPENDITURE, AS PRESUMED BY AO. V. NO CORROBORATIVE EVIDENCE WAS BROUGHT TO SUPPORT THE ALLEGATION OF AO. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 149 VI. THE ADDITION IS BASED ON SURMISES AND CONJECTUR ES AND IS WITHOUT CORROBORATIVE EVIDENCE AND HENCE CANNOT BE SUSTAINED. 4. THE ABOVE ARE OUR GENERAL SUBMISSIONS AND OUR SU BMISSION ON INDIVIDUAL ADDITIONS CONFIRMED BY CIT(A) ARE AS UNDER : ADDITION OF RS. 7,00,000/- A.Y. 2010-11 AO ORDER PAGE 69-72 PARA 16-16.22 I. THE SUBJECT CHIT OF LOOSE PAPER (COPY AT PG. 378-379) IS HAVING ROUGH JOTTINGS ONLY. IT IS NOT DATED; NEITHE R IT IS SIGNED BY NOR IS IN THE HANDWRITING OF ANY OF THE OFFICE BEARER OF THE SOCI ETY. II. THE TOP PORTION OF THE ROUGH NOTING HAVING TOTA L OF RS. 6,00,000/- DOES NOT CONTAIN EVEN NAME OF ANY PERSON . ON THE FACE OF IT, THE WORKING OF RS. 6,00,000/- APPEAR TO BE DETAILS OF NOTES OF RS. 500/-, 100/- AND RS. 50/- COUNTED AND NOTED BY ASHOK SITOKE WHO WAS ACCOUNTAN T AS WELL AS CASHIER OF HK KALCHURI EDUCATION TRUST. HE MIGHT HAVE COUNTED THE FEE RECEIPTS/ CASH IN HAND ON ANY PARTICULAR DAY WHICH WAS NOTED ON THE ROUGH PAP ER BY HIM, IT APPEARS. SINCE HK KALCHURI EDUCATION TRUST WAS REGULARLY RECEIVING FE E IN CASH FROM STUDENTS AND WAS HAVING SUFFICIENT CASH IN HAND, IT IS MOST LIKELY T HAT IT WAS COUNTING OF FEE RECEIPTS/ CASH IN HAND ON ANY PARTICULAR DAY WHICH IS NOT UNU SUAL, THOUGH NO DATE IS WRITTEN ON THE SAID PAPER. HENCE THE ADDITION MADE WAS UNWARRA NTED. III. OTHERWISE, IT IS A MERE DUMB DOCUMENT WHICH DO ES NOT SHOW THE NATURE OF SCRIBBLING AS TO WHETHER IT IS R ECEIPT OR PAYMENT OR THE LIKE. THE AUTHOR OF THE ROUGH JOTTINGS HAS NOT BEEN EXAMINED BY AO. IV. NONE OF THE OFFICE BEARER HAS EVER ACCEPTED THE SE ROUGH JOTTINGS AS UNDISCLOSED INCOME/ UNACCOUNTED PAYMENT OF THE ASSESSEE SOCIETY. THE ASSESSEE TRUST, REGISTERED U/S 12AA, DOES NOT HAVE ANY UNDISCLOSED INCOME TO SPEND. EVEN OTHERWISE, SINCE ALL ITS RECEIPTS ARE D ULY ACCOUNTED FOR ALONG WITH EXPENSES WHICH ARE ELIGIBLE FOR APPLICATION TOWARDS CHARITABLE PURPOSES, THERE IS NO REASON THAT IT WILL INCUR ANY UNEXPLAINED EXPENDITU RE, AS PRESUMED BY AO. V. THE ADDITION IS BASED ON SURMISES AND CONJECTURE S AND IS WITHOUT CORROBORATIVE EVIDENCE AND HENCE CANNOT BE SUSTAINED. ADDITION OF RS. 26,680/- (COPY AT PAGE 379) A.Y. 2010-11 AO ORDER PAGE 69-72 PARA 1 6-16.22 AS EXPLAINED TO LD. AO, AND REFERRED IN PARA 16.11 OF HIS ORDER, IT IS SALARY PAYMENT DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT LYING SEIZED WITH AO ONLY, SINCE THE SEIZED BOOKS OF ACCOUNTS HAVE BEEN GIVEN TO US ONLY ON 1ST JULY, 2013, THE ASSESSEE REQUESTED CIT(A) TO KINDLY GRANT US TIME T O SHOW IT FROM THE BOOKS OF ACCOUNT. THIS REQUEST IS MADE IN VIEW OF PAUCITY OF TIME AND CONSIDERING THE FACT THAT REPLIES FOR 35 VOLUMINOUS APPEALS ARE TO BE PREPARE D BY US AT A STRETCH WITHIN SHORT TIME GIVEN BY YOURHONOUR. HOWEVER, NO TIME WAS GIVE N BY CIT(A) NOT PROVIDING ADEQUATE OPPORTUNITY , HENCE ADDITION MAY PLEASE BE DELETED. ADDITION OF RS. 90,000/- A.Y. 2010-11 AO ORDER PAGE 69-72 PARA 16 -16.22 THOUGH THIS LOOSE PAPER (COPY AT PG. 380) APPARENTL Y RELATES TO LNCT COLLEGE, BUT NO ADDITION CAN BE MADE ON THE BASIS OF LOOSE PAPER BE CAUSE OF THE FOLLOWINGS : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 150 I. THE SUBJECT CHIT OF LOOSE PAPERS ARE HAVING ROUG H JOTTINGS ONLY. THESE ARE NEITHER SIGNED BY NOR IS IN THE HANDWRITING OF ANY OF THE OFFICE BEARER OF THE TURST/SOCIETY. II. IT IS A MERE DUMB DOCUMENT WHICH DOES NOT EVEN SHOW THE NATURE OF SCRIBBLING AS TO WHETHER IT IS RECEIPT OR PAYMENT O R THE LIKE. III. THE AUTHOR OF THE ROUGH JOTTINGS HAS NOT BEEN EXAMINED BY AO. IV. NONE OF THE OFFICE BEARER HAS EVER ACCEPTED THE SE ROUGH JOTTINGS AS UNDISCLOSED INCOME/ UNACCOUNTED PAYMENT OF THE ASSE SSEE SOCIETY. THE ASSESSEE TRUST, REGISTERED U/S 12AA, DOES NOT HAVE ANY UNDIS CLOSED INCOME TO SPEND. EVEN OTHERWISE, SINCE ALL ITS RECEIPTS ARE DULY ACCOUNTE D FOR ALONG WITH EXPENSES WHICH ARE ELIGIBLE FOR APPLICATION TOWARDS CHARITABLE PURPOSE S, THERE IS NO REASON THAT IT WILL INCUR ANY UNEXPLAINED EXPENDITURE, AS PRESUMED BY AO. V. NO CORROBORATIVE EVIDENCE WAS BROUGHT TO SUPPORT THE ALLEGATION OF AO. VI. THE ADDITION IS BASED ON SURMISES AND CONJECTUR ES AND IS WITHOUT CORROBORATIVE EVIDENCE AND HENCE CANNOT BE SUSTAINE D. FOR THE ADDITION FOR JOTTINGS ON A LOOSE PAPER, WE RELY ON THE FOLLOWING DECISIONS: IT IS SETTLED LAW THAT IN CASE OF JOTTINGS ON A LOO SE PAPER, PRESUMPTION AT THE MOST WAS ATTRACTED TO THE FIGURES AND FURTHER PRESU MPTION THEY THE REPRESENT INCOME LIABLE TO TAX IS NOT PERMISSIBLE U/S 132 (4A ). RELIED ON : MADAN LAL NARENDRA KUMAR VS. ACIT 31 ITC 123, 146-1 47 (INDORE, ITAT) ADDITIONS BASED ON CHIT OF PAPER ON SURMISES, CONJE CTURES, ETC, COULD NOT BE SUSTAINED IN THE ABSENCE OF ANY CORROBORATIVE MATER IAL EVIDENCE SUPPORTING IT. ATUL KUMAR JAIN VS, DY. CIT (1999) 64 TTJ (DEL-TRIB ) 786 THERE WAS NO MATERIAL ON RECORD TO SHOW ON WHAT BAS IS THE AO HAD REACHED THE CONCLUSION THAT THE FIGURE '48' WAS TO BE READ AS R S. 48 LAKHS. THE DOCUMENTS RECOVERED DURING THE COURSE OF SEARCH WAS A DUMB DO CUMENT AND LED NO WHERE. THE TRIBUNAL HAD RIGHTLY DELETED THE ADDITION OF RS. 48 LAKHS MADE BY THE AO AND THE ORDER OF THE TRIBUNAL DID NOT GIVE RISE TO A QUESTION OF LAW, MUCH LESS THE SUBSTANTIAL QUESTION OF LAW. CIT VS. GIRISH CHAUDHARY (2008) 296 ITR 619 (DEL. H C) NO DECODING IS PERMISSIBLE ON SUSPICION, SURMISE , CONJECTURE AND IMAGINATION. II. AMAR NATWARLAL SAHA VS. ACIT (1997) 60 ITD 560,564- 565 (AHD.) IN THE INSTANT CASE, THE ONLY KNOWN FACTS ARE THAT CERTAIN PAPERS WERE FOUND IN THE BUSINESS PREMISES OF THE ASSESSEE (AT PLACE AND UND ER THE CONDITIONS NOT KNOWN) AND NO INTELLIGIBLE INFERENCE THERE FROM CAN BE DRA WN. NO SENSIBLE INFERENCE OF ANY FACT CAN BE DRAWN FROM SUCH KNOWN FACTS. IN THIS VI EW OF THE MATTER, ALL THE ADDITIONS MADE APPEAR IMAGINARY AS A RESULT OF SUSPICION. BRIJLAL ROOPCHAND VS. ITO (1991) 40 TTJ 668 (INDORE ) THE CRUX OF THESE DECISIONS IS THAT A DOCUMENT FOUN D DURING THE COURSE OF SEARCH MUST BE A SPEAKING ONE AND WITHOUT ANY SECOND INTER PRETATION, MUST REFLECT ALL THE DETAILS ABOUT THE TRANSACTION OF THE ASSESSEE IN TH E RELEVANT ASSESSMENT YEAR. ANY GAP IN VARIOUS COMPONENTS AS MENTIONED IN SECTION 4 OF THE IT ACT MUST BE FILLED UP BY THE AO THROUGH INVESTIGATIONS AND CORRELATIONS W ITH OTHER MATERIAL FOUND EITHER H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 151 DURING THE COURSE OF THE SEARCH OR ON INVESTIGATION . AS A RESULT, WE HOLD THAT DOCUMENT NO. 7 IS A NON-SPEAKING DOCUMENT. ACIT VS. SATYAPAL WASSAN (2008) 10 ITJ 216; 5 DTR 2 02 (JAB. ITAT) - PARA 28 ALSO RELIED ON : BANSAL STRIPS PVT. LTD VS. ACIT (2006) 99 ITD 177 ( DEL. ITAT) ASHWANI KUMAR VS ITO (1991) 39 ITD 183 (DEL. ITAT) SMT. NEENA SYAL VS. ACIT (1999) 70 ITD 62 (CHANDIGA RH ITAT) WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, THOUGH WE AGREE THAT THESE DOCUMENTS ARE MERE DUMB DOCUMENT W HICH DO NOT SHOW THE NATURE OF SCRIBBLING AS TO WHETHER IT IS R ECEIPTS OR PAYMENTS OR THE LIKE. THESE ARE FOUND NEITHER SIGNED NOR ARE IN THE HANDWRITING OF ANY OF THE OFFICE BEARERS OF THE SOCIETY. THEREFORE, TH ESE SHOULD NOT BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE WHICH IS A CHARITABLE ORGANISATION. HOWEVER, WE NOTE THAT THE ASSESSEE IS A CHARITABLE ORGANISATION AND ALL ITS EXPENSES EITHER CAPITAL OR REVENUE ARE TREATED AS APPLICATION OF INCOME TOWARDS CHARITABLE PURPOSES H ENCE THESE AMOUNTS MAY BE TREATED AS INCOME OF THE ASSESSEE TRUST SUBJ ECT TO THE CONDITION THAT BENEFIT OF EXEMPTION U/S 11 R.W.S. 12 AND 13 C ONSIDERING 85% EXPENSES AND ACCUMULATION TO BE CARRIED FORWARD AS PER LAW SHALL BE GIVEN TO THE ASSESSEE. ACCORDINGLY GROUNDS ARE DISP OSED OF FOR STATISTICAL PURPOSES. 21. THE ASSESSEE HAS RAISED THE ISSUE OF EXPENDITUR E ON PURCHASE OF BUILDING MATERIAL H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 152 SHORT FACTS OF THE ISSUE IN CASE OF HK KALCHURI EDU CATION TRUST ARE THAT AS PER THE AO THE ASSESSEE HAD MADE PURCHASE O F STEEL IN CASH OF RS.3,78,25,047/- VIDE LPS PAGES 410-413. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHEN THE AO ASKED THE APPEL LANT TO GET THE TRANSACTION VERIFIED FROM THE REGULAR BOOKS OF ACCO UNT TO ASCERTAIN AS TO WHETHER THESE TRANSACTIONS HAVE BEEN RECORDED IN TH E BOOKS OF ACCOUNT OR NOT, THE APPELLANT FAILED TO FURNISH ANY SATISFA CTORY EXPLANATION AND HAS NOT PRODUCED THE RELEVANT BOOKS OF ACCOUNT AND SUPPORTING VOUCHERS TO DEMONSTRATE BEFORE THE AO THAT THESE TR ANSACTIONS HAVE ACTUALLY BEEN ACCOUNTED FOR IN REGULAR BOOKS OF ACC OUNT. THE MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME ON SIMILAR GROUNDS. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES THE AR MADE ORAL AS WELL AS WRITTEN SUBMISSIONS AS UNDER : 1. THE ASSESSEE-SOCIETY IS A CHARITABLE ORGANIZATION A ND IT HAS NO UNDISCLOSED INCOME/FUNDS WHICH COULD BE USED TO MAKE ANY OUT OF BOOKS PURCHASES, AS WRONGLY PRESUMED BY HIM. 2. NO CORROBORATIVE EVIDENCE WAS BROUGHT AGAINST THE A SSESSEE. 3. THE LD. AO HAS ON THE ONE HAND SAID IN PARA 18.8 TH ERE FACTS (OUT OF BOOKS PURCHASE OF STEEL) ESTABLISH THAT THE FUNDS OF THE TRUST ARE SIPHONED OFF FOR PERSONAL BENEFIT BY THE TRUSTEES BY DEBITING CORRESPONDING A MOUNT UNDER DIFFERENT HEADS WITHOUT ACTUAL EXPENSES. I.E. BOGUS AND EXPLAINED E XPENDITURE. ON THE OTHER HAND, IN PARA 15.9, HE HAS TREATED ALLEGED VERY PURCHASE OF STEEL AS UNEXPLAINED AND BOGUS. THE OBSERVATIONS OF THE AO ARE VAGUE AND CONTRADICT ORY. SINCE STEEL IS USED FOR BUILDING CONSTRUCTION, THERE IS NO REASON AS TO WHY ANY PURCHASE SHALL BE BOOKED IN SOME OTHER HEADS BECAUSE CAPITAL EXPENSES ALSO QUAL ITIES FOR APPLICATION TOWARDS CHARITABLE PURPOSES FOR ASSESSEE SOCIETY WHICH IS R EGISTERED U/S 12AA. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 153 4. HOWEVER, STILL IT IS SUBMITTED THAT P ROPER OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE AND HENCE THE ASSESSEE COULD NOT MAKE SUBMISSIONS O N THE ISSUE BEFORE AO BECAUSE BOOKS OF ACCOUNTS/ ACCOUNTING DATA CAPTURE D IN THE SEIZED COMPUTER HARD-DISK WERE NOT SUPPLIED TO THE ASSESSE E BY AO DESPITE REQUESTS WHICH WAS SUPPLIED TO IT AS LATE AS ON 1ST JULY, 2013 ONL Y. HENCE, IT WAS IMPOSSIBLE TO COMMENT ON THE VERACITY OR OTHERWISE OF THE PAPER I N THE ABSENCE OF BOOKS OF ACCOUNTS. 5. SIMILARLY, PROPER OPPORTUNITY WAS NOT GIVEN EVEN BY LD. CIT(A ) AND HENCE ADEQUATE SUBMISSIONS COULD NOT BE FILED BEFOR E HIM ALSO BECAUSE, AS SUBMITTED, BOOKS OF ACCOUNTS/ ACCOUNTING DATA CAPTU RED IN THE SEIZED COMPUTER HARD- DISK WERE SUPPLIED TO US AS LATE AS ON 1ST JULY, 20 13 ONLY. THE COUNSELS OF THE ASSESSEE THEN HAD TO SIMULTANEOUSLY PREPARE SUBMISS IONS REGARDING 5 ASSESSEES COVERING 35 APPEALS (5X7YEARS) AT A TIME INVOLVING VOLUMINOUS ISSUES. MOREOVER, BY THE TIME BOOKS AND SEIZED COMPUTER DATA WERE SUPPLI ED TO US, MOST OF THE SUBMISSIONS HAD BEEN GIVEN BEFORE THE LD. CIT(A). T HE LD. CIT(A) FRAMED HIS ORDER ON 12/8/2013 OR 13/8/2013 OF ALL THE ASSESSEES. IN VIEW OF ABOVE, NO ADDITION WAS WARRANTED ON THIS ISSUE. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, PROPER OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE TO EXPLAI N THE TRANSACTIONS BECAUSE SEIZED BOOKS OF ACCOUNTS OF THE ASSESSEE WE RE IN THE POSSESSION OF THE DEPARTMENT IN COMPUTER AND WERE G IVEN TO HIM ONLY ON 1.7.2013 AFTER MAKING OF THE ASSESSMENT ORDER. THER EFORE IN THE FITNESS OF THE MATTER IT WOULD BE FAIR TO RESTORE THIS ISSU E TO THE FILE OF THE AO WITH DIRECTION THAT HE SHOULD AFFORD REASONABLE OPPORTUN ITY TO THE ASSESSEE TO EXPLAIN THE TRANSACTIONS, IF ANY. ACCORDINGLY, FOR STATISTICAL PURPOSES, THIS GROUND OF THE ASSESSEE IS TREATED AS ALLOWED. 22. THE ASSESSEE HAS RAISED THE ISSUE OF EXPENDITUR E ON CONSTRUCTION OF BUILDING OF J K HOSPITAL, BHOPAL. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 154 SHORT FACTS OF THE ISSUE IN CASE OF HK KALCHURI EDU CATION TRUST ARE THAT AS PER THE AO DURING SEARCH, VIDE PAGE 5 TO 8 OF LPS -1 (COPY AT PG. 386-389) SEIZED FROM 31, SHYAMLA HILLS, BHOPAL FEW RUNNING BILLS WERE SEIZED. THESE CONTAIN DETAILS OF WORK DONE BY CONTRACTORS / AGENCIES ISSUING BILLS. AO STATED THAT IT IS APPARE NT THAT THE SAID WORK HAS BEEN DONE UPTO THE DATE OF VERIFYING AND SIGNIN G BILLS, BY PROJECT MANAGER I.E. JULY, 2009 AND THIS SHOULD HAVE BEEN C APITALIZED IN THE BOOKS OF ACCOUNTS ON OR NEAR THIS DATE I.E IN THE F IRST HALF OF THE YEAR. ACCORDING TO HIM SINCE IN THE FIRST HALF UPTO SEPTE MBER, 2009 ADDITION IN THE BLOCK OF BUILDING WAS ONLY RS. 2,01,81,480/- AS PER CONSOLIDATED BALANCE SHEET IT IS INFERRED THAT THE SAID BILLS, AMOUNTING TO RS. 10,45,82,650/- HAVE NOT BEEN REFLECTED IN THE SAID ADDITION IN THE BLOCK OF BUILDING I.E THESE RUNNING BILLS HAVE NOT BEEN A CCOUNTED FOR IN THE BOOKS OF ACCOUNT OF ASSESSEE TRUST. HE TREATED RS. 10,45,82,650/- AS UNDISCLOSED INCOME OF THE ASSESSEE. THE MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME ON SIMILAR GROUNDS. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES THE AR MADE ORAL AS WELL AS WRITTEN SUBMISSIONS AS UNDER : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 155 1. DURING SEARCH, VIDE PAGE 5 TO 8 OF LPS -1 (COPY AT PG. 386-389) SEIZED FROM 31, SHYAMLA HILLS, BHOPAL FEW RUNNING BILLS WE RE SEIZED. THESE CONTAIN DETAILS OF WORK DONE BY CONTRACTORS / AGENCIES ISSUING BILLS. 2. AO STATED THAT IT IS APPARENT THAT THE SAID WORK HAS BEEN DONE UPTO THE DATE OF VERIFYING AND SIGNING BILLS, BY PROJECT MAN AGER I.E. JULY, 2009 AND THIS SHOULD HAVE BEEN CAPITALIZED IN THE BOOKS OF ACCOUNTS ON O R NEAR THIS DATE I.E IN THE FIRST HALF OF THE YEAR. 3. BUT ACCORDING TO HIM SINCE IN THE FIRST HALF UPT O SEPTEMBER, 2009 ADDITION IN THE BLOCK OF BUILDING WAS ONLY RS. 2,01,81,480/- AS PER CONSOLIDATED BALANCE SHEET IT IS INFERRED THAT THE SAID BILLS, AMOUNTING TO RS. 10,45,82,650 /- HAVE NOT BEEN REFLECTED IN THE SAID ADDITION IN THE BLOCK OF BUIL DING I.E THESE RUNNING BILLS HAVE NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF ASSES SEE TRUST. 4. HE ALSO STATED THAT THE ASSESSEE HAS NOT FURNISH ED THE EXTRACTS OF ACCOUNTS OF THE SAID CONTRACTORS IN ITS BOOKS TO ES TABLISH THE EXTENT OF EXPENDITURE INCURRED THROUGH THESE CONTRACTORS FOR CONSTRUCTION OF SAID BUILDINGS. 5. IT IS MOST HUMBLY SUBMITTED THAT THE ADDITION MA DE BY AO WAS UNJUSTIFIED AND UNLAWFUL. THE DOCUMENTS FOUND DURING SEARCH WER E RUNNING BILLS FOR THE PURPOSES OF CONSTRUCTIONS WORK. THE IMPUGNED BILLS CONTAIN A MOUNT OF TOTAL WORK DONE. FROM THE AMOUNT OF TOTAL WORK DONE, THEY HAVE DEDUCTED F OLLOWING: FOR DEPOSIT - WITHHELD BY ASSESSEE FRO M BILLS TO BE RELEASED ON POSSESSION / FINAL PAYMENT. ADVANCES - ADVANCE GIVEN. FOR MATERIAL (STEEL, CEMENT ETC) - THE SE ITEMS ARE SUPPLIED BY ASSESSEE, HENCE DEDUCTION THE RESULTANT FIGURES IS BALANCE DUE AMOUNT WHICH IS UNPAID. 6. HOWEVER, THE LD. AO HAS ADDED ENTIRE BILLED AMOU NT OF WORK DONE IGNORING THE FACT THAT THE ONLY AMOUNT WHICH COULD BE TREATE D AS PAID WAS ADVANCE GIVEN THAT TOO AFTER DUE VERIFICATION FROM BOOKS OF ACCOUNT - OF CONTRACTOR AS WELL AS CONTRACTEE - TO ASCERTAIN AS TO WHETHER CONTRACTORS HAVE MENTION ED CORRECT AMOUNT OF ADVANCE OR NOT. THE SIGNATURE OF MR. RAJIV RAI ON THE SUBJECT BILLS WAS ONLY FOR ACKNOWLEDGMENT FOR SUBMISSION / RECEIPT OF RUNNING BILLS; IT NOWHE RE MENTIONS THAT HE HAS CERTIFIED THE ABOVE DETAILS AS BEING CORRECT, AS WRONGLY PRESUMED BY AO. AS PER NORMAL PROCEDURE, ON SUBMISSION OF BILLS, SOMEBODY HAS NOT ACKNOWLEDGE IT FROM CONTRACTEE SIDE; SO IS THE CASE HERE. HENCE THE VERSION OF THE AO THAT BILLS ARE VERIFIED BY PROJECT MANAGER MR. RAJIV RAI IS OPPOSED TO FACTS ON RECORD S. 7. IN THE WAKE OF ABOVE, ATLEAST NO ADDITION SHOULD HAVE BEEN RESORTED TO BY AO OTHER THAN FOR ADVANCES SHOWN THEREIN. HOWEVER, EVEN THOSE ADVANCES SHOWN BY CONTRACTOR OR HIS STAFF NEEDS TO BE VERIFIED FROM O UR BOOKS ALSO TO ASCERTAIN ITS CORRECTNESS. FOR THIS, WE PRAYED LD. CIT(A) FOR SO ME TIME TO BE GIVEN TO US IN VIEW OF PAUCITY OF TIME AS BOOKS OF ACCOUNTS HAVE BEEN GIVE N TO US ONLY ON 1ST JULY, 2013 AS BROUGHT OUT IN OUR PRESENT SUBMISSION. BUT NO TIME WAS GIVEN TO US. 8. NATURALLY, IT WAS IMPOSSIBLE TO COMMENT ON THE V ERACITY OR OTHERWISE OF THE PAPER IN THE ABSENCE OF BOOKS OF ACCOUNTS. 9. HOWEVER, IN VIEW OF ABOVE, NO ADDITION IS WARRAN TED IN VIEW OF FACT THAT THE TOTAL ADDITION SHOWN IN THE BUILDING ACCOUNT AS PER CONSOLIDATED BALANCE SHEET OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 156 ASSESSEE IN F.Y. 2009-10 (A.Y. 2010-11) IS RS. 10,9 4,27,790/-AND TOTAL INVESTMENT IN J K HOSPITAL AND MEDICAL COLLEGE BUILDING IS RS. 54 ,28,51,381/- AS ON 31.03.2010. COPY OF AUDITED FIXED ASSET SCHEDULE AT PG. 130-131 . 10. HERE IT IS IMPORTANT THAT P ROPER OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE AND HENCE THE ASSESSEE COULD NOT MAKE SUBMISSIONS O N THE ISSUE BEFORE AO BECAUSE BOOKS OF ACCOUNTS/ ACCOUNTING DATA CAPTURE D IN THE SEIZED COMPUTER HARD-DISK WERE NOT SUPPLIED TO THE ASSESSEE BY AO D ESPITE REQUESTS WHICH WAS SUPPLIED TO IT AS LATE AS ON 1ST JULY, 2013 ONLY. 11. SIMILARLY, PROPER OPPORTUNITY WAS NOT GIVEN EVEN BY LD. CIT(A ), AS AFORESAID, AND HENCE ADEQUATE SUBMISSIONS COULD NOT BE FILED BEFORE HIM ALSO BECAUSE, AS SUBMITTED, BOOKS OF ACCOUNTS/ ACCOUNTIN G DATA CAPTURED IN THE SEIZED COMPUTER HARD-DISK WERE SUPPLIED TO US AS LATE AS O N 1ST JULY, 2013 ONLY. THE COUNSELS OF THE ASSESSEE THEN HAD TO SIMULTANEOUSLY PREPARE SUBMISSIONS REGARDING 5 ASSESSEES COVERING 35 APPEALS (5X7YEARS) AT A TIM E INVOLVING VOLUMINOUS ISSUES. MOREOVER, BY THE TIME BOOKS AND SEIZED COMPUTER DAT A WERE SUPPLIED TO US, MOST OF THE SUBMISSIONS HAD BEEN GIVEN BEFORE THE LD. CIT(A ). THE LD. CIT(A) FRAMED HIS ORDER ON 12/8/2013 OR 13/8/2013 OF ALL THE ASSESSEE S. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, PROPER OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE TO EXPLAI N THE TRANSACTIONS BECAUSE SEIZED BOOKS OF ACCOUNTS OF THE ASSESSEE WE RE IN THE POSSESSION OF THE DEPARTMENT IN COMPUTER AND WERE G IVEN TO HIM ONLY ON 1.7.2013 AFTER MAKING OF THE ASSESSMENT ORDER. THER EFORE IN THE FITNESS OF THE MATTER IT WOULD BE FAIR TO RESTORE THIS ISSU E TO THE FILE OF THE AO WITH DIRECTION THAT HE SHOULD AFFORD REASONABLE OPPORTUN ITY TO THE ASSESSEE TO EXPLAIN THE TRANSACTIONS, IF ANY. ACCORDINGLY DISPO SED OF. FOR STATISTICAL PURPOSES, THIS GROUND OF THE ASSESSEE IS TREATED AS ALLOWED. 23. THE ASSESSEE HAS RAISED THE ISSUE OF ON ACCOUNT OF PURCHASE OF JEWELLERY. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 157 SHORT FACTS OF THE ISSUE IN CASE OF HK KALCHURI EDU CATION TRUST AS PER AO ARE THAT A BILL FOR PURCHASE OF GOLD JEWELLE RY OF RS. 1,56,000/- FROM M/S JOHARI SONS JEWELLERS, BHOPAL WAS SEIZED D URING SEARCH. AO TREATED THIS AS PERSONAL PURCHASE FOR OFFICE BEARER S. THE MATTER CARRIED TO CIT(A) WHO ENQUIRED FROM THE JEWELLER AND CAME TO KNOW THAT TOTAL PAYMENTS OF RS. 5,00,000/- WAS MADE TO HIM BY THE ASSESSEE BY CHEQUE ON 1.4.2005. HE ACCORDINGLY DELETED ADDITION OF RS. 1,56,000/- AND MADE ADDITION OF RS. 5,00,000/- IN PLACE THEREOF. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES THE AR MADE ORAL AS WELL AS WRITTEN SUBMISSIONS AS UNDER : 1. AS REGARDS BILL OF RS. 1,56,600/- AND PAYMENT OF RS.5,00,000/- SAID TO HAVE BEEN MADE TO M/S JOHARI SONS ON 13.04.2005 BY LD CIT(A), FIRST OF ALL, WE CONCEDE THE MISTAKE THAT AS REGARDS BILL AND PAY MENT OF RS. 1,56,600/- CONFRONTED TO THE ASSESSEE BY AO , WE INCORRECTLY S UBMITTED BEFORE LD CIT(A) THAT NO SUCH PAYMENT WAS MADE. THIS WAS STATED BY US ON THE BASIS OF COPY OF BILL OF RS. 1,56,600/- ON WHICH IT WAS WRITTEN T HAT BAKILENARAHA. IN THE RUSH OF PREPARING HUGE SUBMISSIONS IN APPEAL FOR 19 ASSE SSEES, THIS MISTAKE OCCURRED BY COUNSELS FOR WHICH THE POOR ASSESSEE SH OULD NOT BE PENALIZED. HOWEVER, THE FACT REMAINS THAT AS REGARDS BALANCE B ILLS OF RS. 3,43,400/- (5,00,000 - 1,56,600) DETAILED AT PAGE 170 OF CIT(A ) ORDER, NO SUCH BILLS HAVE BEEN CONFRONTED TO THE ASSESSEE BY CIT(A), WHO CLAIMS TO HAVE OBTAINED THE SAME AT THE BACK OF THE ASSESSEE. HENC E, NO ADVERSE VIEW CAN BE TAKEN AGAINST THE ASSESSEE TRUST WHICH EXIST SOL ELY FOR CHARITABLE PURPOSES ONLY. FOR THIS PURPOSE RELIANCE IS PLACED ON THE DE CISION OF KISHINCHAND CHELLARAM VS. C.I.T. 125 ITR 713 (SC) WHEREIN IT WAS HELD THAT AN ASSESSMENT BASED ON THE RESULT OF PRIVATE INQUIRIES CONDUCTED BEHIND THE BACK OF THE ASSESSEE WAS LIABLE TO BE SET ASIDE BE CAUSE THE EVIDENCE SO GATHERED WAS NOT PLACED BEFORE THE ASSESSEE. WITHOU T PREJUDICE TO ABOVE, IT IS SUBMITTED THAT THE SAID GOLD ITEMS WERE PURCHASE D FOR SOUVINIERS, AS RIGHTLY SUBMITTED BEFORE AO, FOR THE PURPOSE OF AWARD /DIST RIBUTION AMONG MERITORIOUS STUDENTS ETC. AND THE JEWELLER MIGHT HA VE INCORRECTLY MENTIONED THE SAME AS GOLD JEWELLERY IN THE BILLS , AS BEING WRITTEN IN HIS ROUTINE COURSE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 158 OF BUSINESS. BUT, THE RIGHT COURSE OF ACTION, IN SU CH CASES WOULD HAVE BEEN THAT THE AO SHOULD HAVE SUMMONED THE JEWELLER TO VE RIFY THE TRUTH, WHICH WAS NOT DONE BY HIM. HENCE, IN VIEW OF ABOVE, NO ADVERS E VIEW CAN BE TAKEN AGAINST THE ASSESSEE TRUST. IN VIEW OF ABOVE, ADDITION MADE/CONFIRMED BY CIT(A) WAS WRONG. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, THE ADDITION CONFIRMED BY CIT(A) IS PROPER AND NO INTER FERENCE IS CALLED. THIS GROUND OF THE ASSESSEE IS REJECTED. 24. THE ASSESSEE HAS RAISED THE ISSUE OF - NON ALLOWANCE OF ACQUISITION/ PURCHASE OF FIXED ASS ETS AS APPLICATION OF INCOME CLAIM OF DEPRECIATION AS APPLICATION OF INCOME SET OFF OF DEFICIT OF EARLIER YEARS AGAINST INCOME OF THE CURRENT YEAR ALLOWANCE OF REPAYMENTS OF BANK LOANS AS APPLICATIO N OF INCOME SHORT FACTS ABOVE ISSUES IN CASE OF H K KALCHURI ED UCATION TRUST ARE THAT THE ASSESSEE HAS RAISED ABOVE ISSUES IN DI FFERENT GROUNDS OF APPEAL. THE ABOVE ISSUES HAVE ARISEN BECAUSE THE AS SESSEE WAS TREATED AS BUSINESS ENTITY. BUT WE HAVE ALREADY HEL D THAT THE ASSESSEE IS A CHARITABLE ORGANIZATION ELIGIBLE FOR EXEMPTION U/S 11, 12 AND 13 AND WE HAVE ALREADY DEALT WITH THIS ISSUE IN DETAIL IN POINT NO. 5 OF THIS ORDER DIRECTING THAT ACQUISITION OF FIXED ASSETS, DEPRECI ATION ON ASSETS AND REPAYMENT OF BANK LOAN SHOULD BE TREATED AS APPLICA TION OF INCOME. ALSO SET OFF OF DEFICIT OF EARLIER YEARS AGAINST INCOME OF THE CURRENT YEAR H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 159 SHOULD BE ALLOWED AS APPLICATION OF INCOME. OUR OBS ERVATIONS AND CONCLUSIONS IN PARA NO. 5 DEALING WITH SEC. 2(15) W ILL PREVAIL HERE. ACCORDINGLY, DISPOSED OF WITH DIRECTION TO THE AO T O RECALCULATE SURPLUS/LOSS CONSIDERING ABOVE. THE ABOVE GROUNDS O F THE ASSESSEE ARE ALLOWED IN TERMS AS INDICATED. . BOTH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN THESE APPEALS ON THE ABOVE ISSUES IN RESPECT OF OTHER FOU R ASSESSEES NAMELY RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY, HAI HAY KSHATRIYA EDUCATION SOCIETY, JAI NARAIN SHIKSHA SAMITI AND RI SHIRAJ SINGH MEMORIAL WELFARE SOCIETY. HENCE OUR ABOVE FINDINGS WILL PREVAIL IN APPEALS OF ABOVE ASSESSEES ALSO. ACCORDINGLY, DISPO SED OF WITH DIRECTION TO THE AO TO RECALCULATE SURPLUS/LOSS CON SIDERING ABOVE. THE ABOVE GROUNDS OF THE ABOVE FOUR ASSESSEES ARE ALSO ALLOWED. 25. THE ASSESSEE HAS RAISED THE ISSUE OF ALLOWANCE OF DEDUCTION /APPLICATION INCOME ON THE TOTAL INCOME FINALLY ASS ESSED SHORT FACTS APPLICABLE TO ALL FIVE ASSESSEES NAMELY HK KALCHURI EDUCATION TRUST, RISHIRAJ MEMORIAL EDUCATION & WELF ARE SOCIETY, HAI HAY KSHATRIYA EDUCATION SOCIETY, JAI NARAIN SHIKSHA SAMITI AND RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY ARE IDENTICAL. IT WA S SUBMITTED THAT THE THE AO MAY BE DIRECTED TO WORKOUT AND ALLOW DEDUCTI ON/APPLICATION OF INCOME/ ACCUMULATION OF INCOME ON THE TOTAL INCOME FINALLY ASSESSED H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 160 AND GRANT EXEMPTION U/S 11 THEREON (QUALIFYING THE SAME WITHIN PERMISSIBLE LIMIT OF 85% AND OR ACCUMULATION FOR CA RRYING TO SUBSEQUENT YEARS). IN OUR VIEW, THE CONTENTION OF THE ASSESSEE IS ACCE PTABLE. THIS IS BECAUSE WHEN WE HAVE TREATED THE ASSESSEE AS CHARIT ABLE ORGANISATION ELIGIBLE FOR EXEMPTION U/S 11 R.W.S. 12 AND 13, IT WOULD BE APPROPRIATE THAT THE BENEFIT OF EXEMPTION U/S 11 R.W.S. 12 AND 13 SHOULD ALSO BE GIVEN ON THE ADDITIONS CONFIRMED IN APPEAL OR ON TH E INCOME FINALLY ASSESSED QUALIFYING THE SAME WITHIN PERMISSIBLE LIM IT OF 85% AND OR ACCUMULATION FOR CARRYING TO SUBSEQUENT YEARS. THE AO IS DIRECTED ACCORDINGLY. THIS DIRECTION IS APPLICABLE IN CASE O F ALL FIVE ASSESSEES AS ABOVE. 26. THE ASSESSEE HAS RAISED THE ISSUE OF LEVY OF IN TEREST 234A, 234B, 234C SHORT FACTS IN CASE OF HK KALCHURI EDUCATION TRUST ARE THAT THE ASSESSEE HAS CHALLENGED LEVY OF INTEREST U/S 234A, 234B AND 234C ON THE GROUNDS MENTIONED IN HIS WRITTEN SUBMISSIONS AS GIVEN HEREINAFTER. MATTER CARRIED TO CIT(A) WHO STATED THAT IT IS CONS EQUENTIAL IN NATURE. LD. DR RELIED ON THE ORDER OF THE REVENUE AUTHORITI ES. THE AR MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 161 1. THE AO HAS SIMPLY MENTIONED IN THE SECOND LAST P ARA OF HIS ORDER TO CHARGE INTEREST APPLICABLE AS PER RULE. 2. IN THE ITNS PREPARED ALONGWITH THE ASSESSMENT O RDER, INTEREST U/S 234A, & 234B HAS BEEN CHARGED. HOWEVER, THE AO HAS NOT SPEC IFICALLY MENTIONED IN THE ASSESSMENT ORDER UNDER WHICH SECTIONS INTEREST SHOU LD BE CHARGED. THEREFORE, CHARGING OF INTEREST IS ILLEGAL AND BAD IN LAW AND MAY KINDLY BE DELETED. 3. WITHOUT PREJUDICE TO ABOVE, IN ALL THE ASSESSMEN T YEARS, THERE WAS NO LIABILITY OF TAX AS PER RETURN BECAUSE ASSESSEE CLAIMED EXEMP TION U/S 11. 4. HENCE, THERE WAS NO DEFAULT OF THE ASSESSEE IN PAYING ADVANCE TAX IN THE REGULAR ASSESSMENT AS WELL AS LIABILITY TO PAY INTE REST U/S. 234B. THE INCOME WAS MADE TAXABLE BY AO ONLY IN THE ASSESSMENT ORDER FRAMED U/S 153A AS A CONSEQUENCE OF SEARCH. 5. HOWEVER, THE LD. AO HAS CHARGED INTEREST U/S 23 4B ON THE ENTIRE INCOME DETERMINED AS TAXABLE FROM THE FIRST DAY OF ASSESSM ENT YEAR. THE SAME IS UNLAWFUL BECAUSE NO INTEREST U/S 234B SHOULD HAVE B EEN CHARGED IN VIEW OF DATAMATICS LTD U/S ACIT (2008) 299 ITR 286 (AT) (MU M ITAT) WHERE THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE IN PAYME NT OF ADVANCE TAX AND HE WAS NOT HELD LIABLE TO PAY INTEREST U/S 234B IN REG ULAR ASSESSMENT. HON'BLE ITAT MUMABI BENCH IN THE CASE OF DATAMATICS LTD (SUPRA) HELD AS UNDER: 'THE CHARGING OF INTEREST U/S 234B IS MANDATORY. MA NDATORY DOES NOT MEAN THAT IT IS MANDATORY UNDER ALL CIRCUMSTANCES. IT IS MANDATORY WHEN THE CONDITIONS ARE FULFILLED. THE CONDITION IS THAT THE ASSESSEE SHOULD HAVE DEFA ULTED. A READING OF SECTION 234B(3) MAKES IT CLEAR THAT WHERE, AS A RESULT OF AN ORDER OF ORDER OR REASSESSMENT OR RE- COMPUTATION UNDER SECTION 147 OR SECTION 153A,THE A MOUNT ON WHICH INTEREST WAS PAYABLE UNDER SUB-SECTION (1) IS INCREASED, THE ASS ESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE RATE OF ONE PERCENT. THE SECTION FU RTHER MAKES IT CLEAR THAT FIRST OF ALL THERE SHOULD BE A DEFAULT ON THE PART OF THE ASSESS EE IN THE REGULAR ASSESSMENT AND THE ASSESSEE SHOULD HAVE BEEN HELD LIABLE TO PAY INTERE ST UNDER SECTION 234B. IN THAT CASE, IF THERE WAS REASSESSMENT OR RE-COMPUTATION U/S 147 OR 153A, THE LIABILITY OF THE ASSESSEE IS INCREASED AND NOT OTHERWISE. IN THE INS TANT CASE, THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE IN PAYING THE ADVANCE TAX. FOR THE FIRST TIME, THE DISPUTE AROSE CONSEQUENT TO THE REASSESSMENT DONE U/S 143(3) READ WITH SEC. 147, INTEREST COULD NOT BE CHARGED UNDER SEC. 234B.' 6. WITHOUT PREJUDICE TO ABOVE, HAD THERE BEEN DEF AULT IN PAYMENT OF ADVANCE TAX AND ASSESSEE WAS LIABLE TO PAY INTERES T U/S 234B IN THE REGULAR ASSTT., EVEN IN THAT CASE, THE INCREMENTAL INTEREST U/S 234B SHOULD HAVE BEEN CHARGED ONLY ON THE ADDITIONAL INCOME ASSESSED U/S 153A, FROM THE DATE OF DETERMINATION OF INCOME U/S 143(1) / 143(2) TO THE DATE OF RE-COMPUTATION U/S 153A, AS PER PROVISIONS OF SEC. 234B(3), WHEREAS TH E AO HAS CHARGED INTEREST ON THE ENTIRE TOTAL INCOME DETERMINED U/S 153A FROM THE FIRST DAY OF ASSESSMENT YEAR, AS AFORESAID, IN ALL THE ASSESSMENT YEARS WHI CH IS AGAINST THE LAW AND IMPERMISSIBLE. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 162 7. THE ISSUE IS COVERED BY THE DECISION OF JURISD ICTIONAL ITAT IN THE CASE OF M G CHERIAN AND OTHERS VS. ACIT IN APPEAL NO. 173 T O 178/IND /2012 & OTHERS. COPY OF DECISION SEPARATELY FURNISHED. WHILE DELIVERING THE ABOVE JUDGMENT, HONBLE INDORE ITAT RELIED ON FOLLOWING DECISION : INTEREST U/S 234B VS. 153A - WHERE ORIGINAL ASSESSM ENT COMPLETED UNDER SEC. 143 IS REVISED EITHER U/S 147 PR U/S 153A, THEN INT EREST FOR NON-PAYMENT OR SHORT PAYMENT OF ADVANCE TAX IS PAYABLE ONLY FOR THE PERI OD MENTIONED IN SEC. 234B (3), WHICH PROVIDES FOR INTEREST FROM THE DATE OF COMPLE TION OF REGULAR ASSESSMENT U/S 143(1) TILL THE DATE OF COMPLETION OF REASSESSMENT. CIT VS. B. LAKSHMIKANTHAN (2011) 198 TAXMAN 485 (KE R HC) 8. FURTHER, IN ALL THE ASSESSMENT YEARS, THERE WAS NO LIABILITY OF TAX AS PER RETURN BECAUSE ASSESSEE CLAIMED EXEMPTION U/S 11, A S AFORESAID. 9. NO CALCULATIONS WERE PROVIDED TO US NEITHER WER E MENTIONED IN THE ITNS REGARDING PERIOD AND WORKING OF INTEREST CHARGED U/ S 234A & 234B. IN VIEW OF ABOVE, IT IS MOST HUMBLY PRAYED THAT THE LD. AO MAY KINDLY BE DIRECTED BY YOURHONOUR TO CHARGE INTEREST U/S 234A ONLY WHERE THERE WAS DELAY IN FILING RETURN IN RESPONSE TO U/S 153A AND NOT OT HERWISE. IN OUR OPINION, ON THE FACTS OF THE CASE, THIS ISSU E IS ONLY ACADEMIC AS WE HAVE TREATED THE ASSESSEE AS CHARITABLE ENTIT Y ELIGIBLE FOR EXEMPTION U/S 11, 12 AND 13. HOWEVER, FOLLOWING THE DECISIONS OF INDORE ITAT IN M G CHERIAN AND OTHERS VS. ACIT IN APPEAL N O. 173 TO 178/IND /2012 & OTHERS, IT IS HELD THAT INCREMENTAL INTEREST U/S 234B SHOULD BE CHARGED ONLY ON THE ADDITIONAL INCOME ASSESSED U/S 153A AND INTEREST U/S 234A SHOULD BE CHARGED ONLY WHERE THERE WAS DELAY I N FILING RETURN IN RESPONSE TO U/S 153A AND NOT OTHERWISE. WE DIRECT A CCORDINGLY. BOTH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN CASE OF FOUR OTHER ASSESSEES NAMELY, JAI NARAIN SHIKSHA SAMITI, RISHIR AJ SINGH MEMORIAL WELFARE SOCIETY, HAI HAY KSHETRIYA EDUCATION SOCIET Y AND RISHIRAJ H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 163 MEMORIAL EDUCATION AND WELFARE SOCIETY. HENCE, OUR ABOVE FINDINGS WILL ALSO PREVAIL IN CASE OF THESE FOUR ASSESSEES ALSO. THEREFORE, THIS GROUND OF APPEALS OF THE ABOVE FOUR ASSESSEES IS DISPOSED OF IN TERMS INDICATED HEREINABOVE. 27. THE ASSESSEE HAS RAISED THE ISSUE OF ADDITION M ADE IN ORIGINAL ASSESSMENT ORDER U/S 143(3) SHORT FACTS IN CASE OF HK KALCHURI EDUCATION TRUST ARE THAT THE AO AGAIN MADE ADDITIONS U/S 153A WHICH WERE ALREADY MA DE BY HIM IN ORIGINAL SCRUTINY ASSESSMENTS DONE U/S 143(3) WHICH HAS BEEN CHALLENGED BY ASSESSEE. MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME ON SIMILAR LINE. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES. THE AR MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER : 1. THE AO AGAIN MADE ADDITIONS U/S 153A WHICH WERE ALREADY MADE BY HIM IN ORIGINAL SCRUTINY ASSESSMENTS DONE U/S 143(3). 2. CIT(A) DELETED THOSE ADDITIONS MADE IN ORIGINAL ASSESSMENT ORDER U/S 143(3) WHICH WERE DELETED BY HONBLE ITAT BUT MAINTAINED T HE ONES NOT CHALLENGED BY THE ASSESSEE BEFORE ITAT. THESE ADDITIONS WERE NOT CHAL LENGED BEFORE THE HONBLE ITAT BECAUSE THE ASSESSEE HAD 12A REGISTRATION AND ITS A PPLICATION OF EXPENSES, EVEN AFTER THE SAID ADDITIONS, WERE MORE THAN THE INCOME /RECEIPTS, HAVING NO IMPACT ON THE TAXABILITY. 3. IT IS SUBMITTED THAT THE ADDITION MAINTAINED BY CIT(A) ARE UNCALLED FOR DUE TO FOLLOWING REASONS : I. THESE ADDITIONS HAVE BEEN MADE IN A.Y. 2004-05, 2005-06 AND 2006-07. THE ASSESSMENT FOR THESE ASSESSMENT YEARS STOOD COM PETED AND WERE NON-PENDING ON THE DATE OF SEARCH. IT IS SETTLED LAW THAT IN RE SPECT OF THOSE ASSESSMENT YEARS WHICH WERE NON-PENDING ON THE DATE OF SEARCH AND NO INCRIMINATING MATERIALS WERE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 164 FOUND REGARDING SUBJECTS ADDITIONS FOR THOSE YEARS, NO ADDITION COULD BE MADE WHICH ARE NOT BASED ON ANY INCRIMINATING MATERIAL. II. IN VIEW OF ABOVE, SINCE NO INCRIMINATING MATERI ALS WERE FOUND REGARDING SUBJECTS ADDITIONS IN THOSE YEARS, FURTHER ADDITION OF THE SAME U/S 153A TANTAMOUNT TO DOUBLE ADDITION NOT PERMITTED IN LAW. III. WITHOUT PREJUDICE TO ABOVE, EVEN OTHERWISE, TH E SUBJECT ADDITION SHOULD BE COUNTED AS APPLICATION OF INCOME TOWARDS CHARITABLE PURPOSES, HAVING NO IMPACT ON THE TAXABILITY. IN VIEW OF ABOVE THE ADDITION CONFIRMED BY CIT(A) M AY KINDLY BE DELETED BY YOURHONOUR. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, IT NOW SETTLED LAW THAT CONCLUDED ASSESSMENTS OR NON PENDI NG ASSESSMENTS SHALL NOT BE DISTURBED UNTIL ANY INCRIMINATING MATE RIAL IS FOUND RELATING TO THE ISSUE. WE NOTE THAT ASSESSMENT FOR A.Y. 2004-05 , 2005-06 AND 2006-07 WERE CONCLUDED AND NOT PENDING ON THE DATE OF SEARCH AND NO INCRIMINATING MATERIAL WERE FOUND IN RESPECT OF THE ISSUES ON WHICH ADDITION IS MADE. HENCE, NO ADDITION COULD BE MADE U/S 153A IN RESPECT OF THE ISSUES ARISING IN THE REGULAR ASSESSMENT U/S 143(3) FOR WHICH ADDITION HAS ALREADY BEEN MADE. EVEN OTHERWISE WE H AVE HELD THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 11 R.W.S. 12 AND 13 ON THE ASSESSED INCOME. EVEN OTHERWISE, THE REGULAR APPEAL OF ASSESSEE OF A.Y. 2006-07 WAS SEPARATELY DECIDED BY CIT(A) IN TH E CONSOLIDATED ORDER. THE SAME IS ALSO SEPARATELY DECIDED BY US. I N VIEW OF ABOVE, ADDITION MADE BY AO AND CONFIRMED BY CIT(A) U/S 153 A IN A.Y. 2004-05, H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 165 2005-06 AND 2006-07 ARE HEREBY DELETED. ACCORDINGLY , FOR STATISTICAL PURPOSES, THIS GROUND OF THE ASSESSEE IS TREATED AS ALLOWED. 28. ITA NO. 596/2013 IN THE CASE OF H K KALCHURI ED UCATION TRUST [REGULAR ASSESSMENT U/S 143(3)] A.Y. 2006-07: THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN RESPECT OF REGULAR ASSESSMENT U/S 143(3) OF A.Y. 2006-07 AGAINST THE O RDER OF THE CIT(A) AS UNDER: I. NOT ALLOWING EXEMPTION U/S 11 DESPITE REGISTRATI ON U/S 12A AND ASSESSING THE INCOME AS BUSINESS. II. TREATING DEVELOPMENT FUND FEE OF RS. 1,38,26,87 9/- AS REVENUE BY AO WHERE ASSESSEE TREATED THE SAME AS CAPITAL RECEIPT. III. DISALLOWANCE OF PURCHASE OF LAB EQUIPMENT AND CONSUMABLES TO THE EXTENT OF RS. 1,59,576/-. IV. DISALLOWANCE OF RS. 29,09,622/- OUT OF EXPEND ITURE INCURRED ON BUILDING CONSTRUCTION AND DEPRECIATION OF RS. 1,45, 481/-. V. DISALLOWANCE OF VEHICLES MAINTENANCE AND DEPRECI ATION ON VEHICLES @20% AMOUNTING TO RS. 2,78,235/-. WE FIND THAT IDENTICAL ISSUES HAVE ALREADY BEEN DEA LT WITH BY US EXTENSIVELY IN THIS APPEAL AND IN ORDER TO AVOID RE PETITION, WE ARE NOT REITERATING THOSE OBSERVATION AND FINDINGS AGAIN WH ICH WILL PREVAIL HERE ALSO. WE HAVE HELD THAT THE ASSESSEE IS CHARITABLE ENTITY ELIGIBLE FOR EXEMPTION U/S 11 R.W.S. 12 & 13 AND HENCE AO IS DIR ECTED TO RECOMPUTE THE SURPLUS TREATING THE ASSESSEE AS CHARITABLE ORG ANIZATION GRANTING EXEMPTION U/S 11,12 & 13 OF THE I.T. ACT. SIMILARLY , AS HELD BY US, DEVELOPMENT FUND FEE OF RS. 1,38,26,879/- IS DIRECT ED TO BE TREATED REVENUE RECEIPT. DISALLOWANCE OF VEHICLE EXPENSES A ND DEPRECIATION ON VEHICLES IS DELETED. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 166 DISALLOWANCE OF PURCHASE OF LAB EQUIPMENT AND CONSU MABLES TO THE EXTENT OF RS. 1,59,576/- AND DISALLOWANCE OF RS . 29,09,622/- OUT OF EXPENDITURE INCURRED ON BUILDING CONSTRUCTION AND D EPRECIATION OF RS. 1,45,481/- ARE CONFIRMED. HOWEVER, AS ALREADY HELD BY US, THE ASSESSEE SHALL BE ENTITLED TO HAVE THE BENEFIT OF EXEMPTION U/S 11 READ WITH SECTION 12 AND 13 OF THE ACT ( BY TREATING IT WITHI N 85% LIMIT OF APPLICATION TOWARDS CHARITABLE PURPOSE AND ACCUMULATION AS PER LAW) ALSO ON THE ADDITION CONFIRMED OR ON THE INCOME FINALLY ASSESSE D, BEING A CHARITABLE ORGANIZATION. 29. IN THE CASE OF RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY AS REGARDS A.Y. 2004-05 TO 2009-10, WE HAVE ALREADY HELD THAT SINCE NECESSARY SATISFACTION WAS NOT RECORDED BY AO REGARDING THE SEIZED MATERIAL IN THE CASE OF SEARCHED PERSONS AND WAS ONLY RECORDED IN CASE OF NON-SEARCHED PERSON (ASSESSEE), THE ASSE SSMENTS MADE FOR THESE SIX YEARS U/S 153C ARE UNLAWFUL AND QUASHED. WE, HOWEVER, HOLD THAT OUR FINDINGS ON MERITS ON ALL THE ISSUES DECID ED BY THIS ORDER EQUALLY PREVAIL FOR A.Y. 2004-05 TO 2009-10 OF THIS ASSESSE E. THEREFORE, FOLLOWING INDEPENDENT GROUNDS RELATING TO ABOVE SOC IETY FOR YEAR OF SEARCH I.E. A.Y. 2010-11 ARE DEALT WITH HERE IN AFT ER. 29.1 THE ASSESSEE HAS RAISED THE ISSUE OF CAPITATI ON FEES FOR ADMISSION IN DENTAL COLLEGE TAKEN IN CASH. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 167 SHORT FACTS OF THE ISSUE IN CASE OF RISHIRAJ MEMORI AL EDUCATION AND WELFARE SOCIETY ARE THAT A REGISTER IN LPS 1/14 WAS FOUND DURING SEARCH CONTAINING THE DETAILS OF ADMISSION TO STUDENTS IN BDS IN RISHIRAJ DENTAL COLLEGE, BHOPAL AND FEES TAKEN IN CHEQUE AND CASH F ROM STUDENTS. THE SAID REGISTER PERTAINS TO JULY, 2007 AND THE TOTAL AMOUNT OF FEES TAKEN IN CASH WORKS OUT TO RS. 77.05 LACS. THE AO OBSERVED T HAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE FEES RECEIPT FROM THE STUDENTS HAS BEEN ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT OF RI SHIRAJ DENTAL COLLEGE , THE SAID RECEIPTS ON ACCOUNT OF FEES WAS TREATED AS UNDISCLOSED INCOME IN A.Y. 2008-09. THE AO FURTHER OBSERVED THAT THE A SSESSEE MUST HAVE FOLLOWED THE SAID PRACTICE IN A.Y. 2007-08 TO 2010- 11 ALSO AND MADE ESTIMATED ADDITIONS IN THESE YEARS. THE MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME . THE OPERATIVE PART OF CIT(A) ORDER ARE AS UNDER : 34.3 I HAVE CAREFULLY CONSIDERED THE REASONS RECO RDED BY THE AO IN ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. IT IS AN ADMITTED FACT THAT APPELLANT IS RUNNING A DENTAL COLLEGE AND HAS GIVE ADMISSION TO THE STUDENTS IN B.D.S. TH E APPELLANT HAS ALSO ADMITTED THAT THE FEE RECORDED IN THE SEIZED REGISTER LPS-1/14 IN CASH AS WELL AS IN CHEQUE HAVE BEEN RECEIVED BY THE APPELLANT SOCIETY FROM THE STUDENTS OF B.D.S. H OWEVER, THE APPELLANT CONTENDED THAT THE TOTAL AMOUNT OF FEES RECEIVED BY CHEQUE AS WELL AS IN CASH HAVE BEEN ACCOUNTED FOR IN REGULAR BOOKS OF ACCOUNT AS TUITION FEES AND THE FE ES RECORDED IN THIS REGISTER IS INCLUDED IN THE TOTAL FEE OF RS. 1,56,00,470/- CREDITED AS TUIT ION FEE IN AUDITED INCOME & EXPENDITURE ACCOUNT OF A.Y.2008-09. BUTTHE APPELLANT FAILED TO PRODUCE BOOKS OF ACCOUNT OR RELEVANT LEDGER TO DEMONSTRATE THAT THE FEES RECORDED IN THE SEIZED REGISTER LPS-1/14 HAS BEEN DULY ENTERED IN THE REGULAR BOOKS OF ACCOUNT. ON PERUSAL OF THE TRANSACTIONS RECORDED IN THE SEIZED REGISTER LPS-1/14 ON PAGES 89 & 90, IT IS NOTICED T HAT FINAL LIST OF BDS ADMISSION HAS BEEN GIVEN ALONGWITH THE TOTAL PACKAGE OF FEES FINALIZED FROM STUDENTS, WHICH IS MENTIONED AGAINST THE NAME OF EACH STUDENT. THE AGGREGATE AMOUNT OF T OTAL FEES (`TOTAL PACK' OR 'TP') MENTIONED AGAINST THE NAME OF EACH STUDENT IN THIS REGISTER IS AS UNDER : FINAL LIST OF B.D.S. ADMISSION H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 168 S.NO NAME OF STUDENT/ CANDIDATE TOTAL PACKAGE (RUPEES IN LAKHS) 1 SHWETA SAJJAN 9.40 2 ADITYA PEHIYA 9.00 3 SAURABH AGARWAL 9.50 4 JITENDRA RAGHUWANSHI 9.50 5 ANJANA SHARMA 9.50 6 ANKITA PRADHAN 9.40 7 DEEPIKA YADAV 9.40 8 SONENDRA SHARMA 8.00 9 CHANGNLAL GAUR 8.90 10 VIJETA KATIYA 8.00 11 RAJDEEP SINGH DARGI 8.00 12 NEELAM SINGHROLE 9.00 13 DEEP KUMARI 8.50 14 15 RICHA JAISWAL 9.50 16 17 SWATI PARSAI 8.90 18 PRIYANKA TRIPATHI 10.00 19 PRABHUTA SINGH BADORIYA 10.00 20 VANI SHRIVASTAVA 9.75 21 ANANDITA GUPTA 9.50 22 ABHILASHA MISHRA 10.00 23 APKSHA SHUKLA 9.00 24 PRATIKSHA PAL 10.00 25 UPENDRA NATH PATHAK 9.00 26 ANSHUL CHAUKSEY 7.40 27 NIDHI GUPTA 7.40 28 NAMITA SHRIVASTAVA TOTAL PACKAGE (`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`TP') IN RESPECT OF SOME OF THE STUDENTS IS NOT MENTIONED IN THE REGISTER THOUGH PART PAYMENTS RECEIVED FROM THE M IN CASH AND CHEQUE HAS BEEN MENTIONED. THE AGGREGATE AMOUNT OF RECEIPTS FROM 25 STUDENTS (WHERE `TI'S AMOUNT IS MENTIONED IN THE REGISTER) WORKS OUT TO RS.226.55 L AKHS. THIS AMOUNT DOES NOT INCLUDE TOTAL FEES RECEIVED FROM FIVE STUDENTS TO WHOM ADMISSION HAS BEEN GIVEN, BUT AMOUNT OF TP IS NOT MENTIONED IN THE REGISTER. NOW, IT MAY BE NOTED THA T THE APPELLANT HAS ACCOUNTED FOR TOTAL TUITION FEE OF RS. 1,56,00,470/- ONLY IN ITS INCOME & EXPENDITURE ACCOUNT FOR A.Y.2008-09. THUS, IT IS EVIDENTLY CLEAR THAT THE APPELLANT HAS NOT ACCOUNTED FOR IN ITS REGULAR BOOKS OF ACCOUNT THE TOTAL FEES RECEIVED FROM THE STUDENTS. THUS, THE FINDINGS OF THE AO THAT FEES OF RS.77,05,000/- SHOWN TO BE RECEIVED IN CASH FROM ST UDENTS HAS NOT BEEN RECORDED IN THE REGULAR BOOKS OF ACCOUNT IS FOUND TO BE CORRECT AND THE ADDITION MADE ON ACCOUNT OF H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 169 UNACCOUNTED FEE/CAPITATION FEE RECEIVEDOVER AND ABO VE THE FEE RECORDED IN THE BOOKS OF ACCOUNT BY THE APPELLANT IS, THEREFORE, REASONABLE AND DESERVES TO BE CONFIRMED. NOW, THE SECOND POINT INVOLVED IN THIS ISSUE IS REG ARDING THE INFERENCE DRAWN BY THE AO THAT THERE WERE SIMILAR PRACTICE OF RECEIVING CAPITATION FEES FROM STUDENTS FOR ADMISSION IN BDS WHICH WERE NOT ACCOUNTED FOR THROUGHOUT IN OTHER AS SESSMENT YEARS COVERED BY SECTION 153A I.E. A.YS. 2007-08, 2009-10 & 2010-11. THE APPELLAN T CONTENDED THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION IN THESE ASSESSMENT YEARS BECAUS E NO SUCH DOCUMENT OR PAPER WAS FOUND IN RELATION TO THESE YEARS. BUT THE CONTENTION OF T HE APPELLANT IS FOUND TO BE DEVOID OF ANY MERIT. IT MAY BE NOTED THAT THE IDENTICAL ISSUE CAM E FOR CONSIDERATION BEFORE THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. CHETAN DAS LACHMAN DAS (2012) 25 TAXMANN.CO M 227 (DEL.), WHEREIN IT WAS HELD THAT SEIZED MATERIAL CAN ALSO BE RELIED UPON TO DRAW INFERENCE THAT THERE CAN BE SIMILAR TRANSACTIONS THROUGHOUT P ERIOD OF SIX YEARS COVERED BY SECTION 153A OF THE ACT. IT WOULD BE RELEVANT TO REPRODUCE THE R ELEVANT PORTION OF THE DECISION OF THE HON'BLE HIGH COURT ON THIS ISSUE AS UNDER : 'HELD SEIZED MATERIAL CAN BE RELIED UPON TO ALSO DRAW INF ERENCE THAT THERE CAN BE SIMILAR TRANSACTIONS THROUGHOUT PERIOD OF SIX YEARS COVERED BY SECTION 153A UNLIKE CHAPTER X1V-B WHICH PROVIDED FOR A SPECIAL P ROCEDURE FOR ASSESSMENT OF SEARCH CASES, SECTION 153A WHICH PROV IDES FOR AN ASSESSMENT IN CASE OF SEARCH, AND WAS INTRODUCED BY THE FINANCE A CT, 2003 WITH EFFECT FROM 1- 6-2003, DOES NOT PROVIDE THAT A SEARCH ASSESSMENT H AS TO BE MADE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR OTHER DO CUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE .WITH THE ASSESSING OFFICER AND RELATABLE TO THE EVIDENCE FOUND. THE EARLIER SECTION 158BB WH ICH IS NOT APPLICABLE IN CASE OF A SEARCH CONDUCTED AFTER 31-5-2003, PROVIDED THA T THE COMPUTATION OF THE UNDISCLOSED INCOME CAN ONLY BE ON THE BASIS OF THE EVIDENCE FOUND AS A RESULT OF SEARCH OR OTHER DOCUMENTS AND MATERIALS OR INFORMAT ION ASARE AVAILABLE WITH THE ASSESSING OFFICER, PROVIDED THEY ARE RELATABLE TO T HE EVIDENCE FOUND. SECTION 153A(1)(B ) PROVIDES FOR THE ASSESSMENT OR REASSESS MENT OF THE TOTAL INCOME OF THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH TOOK PLACE. T O REPEAT, THERE IS NO CONDITION IN THIS SECTION THAT ADDITIONS SHOULD BE STRICTLY ' WIDE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH OR OTHER POST-SEA RCH MATERIAL OR INFORMATION AVAILABLE WITH THE ASSESSING OFFICER WHICH CAN BE R ELATED TO THE EVIDENCE FOUND. THE QUESTION, HOWEVER, IS WHETHER THE SEIZED MATERI AL CAN BE RELIED UPON TO ALSO DRAW THE INFERENCE THAT THERE CAN BE SIMILAR TRANSA CTIONS THROUGHOUT THE PERIOD OF SIX YEARS COVERED BY SECTION 153A. IT IS IN THIS CO NTEXT IT IS RELEVANT TO NOTE THE JUDGMENT OF THE SUPREME COURT IN H.M. ESUFALI H.M. ABDULALI (SUPRA). IT IS TO BE NOTICED THAT WITH THE ADVENT OF SECTION 153A ONE IS TAKEN BACK TO THE PRE-CHAPTER XIV-B SITUATION, WHERE ASSESSMENTS WERE MADE ON THE BASIS OF MATERIAL AND EVIDENCE COLLECTED DURING SEARCH. THE CONTENTION OF THE ASSESSEE IN THAT CASE WAS THAT THE ACTION OF THE SALES TAX OFFICER WAS AR BITRARY INASMUCH AS HE HAD NO EVIDENCE OF ESCAPED TURNOVER FOR THE ENTIRE ACCOUNT ING PERIOD AND HE WAS NOT LEGALLY CORRECT IN ESTIMATING OR INFERRING THAT THE ASSESSEE WOULD HAVE INDULGED IN SALES OUTSIDE THE BOOKS OF ACCOUNT FOR THE ENTIRE A CCOUNTING PERIOD. THE SUPREME COURT REJECTED SUCH A CONTENTION AND HELD THAT THE ASSESSEE HAS NEITHER PLEADED NOR ESTABLISHED ANY JUSTIFIABLE REASON FOR NOT ENTE RING IN HIS ACCOUNTS THE DEALINGS NOTED IN THE BILL BOOK SEIZED. IT IS OBVIOUS THAT H E WAS MAINTAINING FALSE ACCOUNTS TO EVADE PAYMENT OF SALES TAX. IN SUCH A SITUATION, IT WAS NOT POSSIBLE FOR THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 170 SALES TAX OFFICER TO FIND OUT PRECISELY THE TURNOVE R SUPPRESSED. HE COULD ONLY MAKE AN ESTIMATE OF THE SUPPRESSED TURNOVER ON THE BASIS OF THE MATERIAL BEFORE HIM. SO LONG AS THE ESTIMATE MADE BY HIM IS NOT ARB ITRARY AND HAS NEXUS WITH FACTS DISCOVERED, THE SAME CANNOT BE QUESTIONED [PA RA 11]. FROM THE ABOVE DECISION OF HON'BLE DELHI HIGH COURT FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF H.M. ESUFALI H.M. ABDU LALI (1973) 90 ITR 271 (SC), THE PROPOSITION OF LAW IS CLEAR THAT AO CAN DRAW INFERE NCE FROM THE SEIZED MATERIAL THAT THERE CAN BE SIMILAR TRANSACTION THROUGHOUT PERIOD OF SIX YEA RS COVERED BY SECTION 153A. HERE IN THE INSTANT CASE, THE AO NOTICED THAT THE APPELLANT HAS GIVEN ADMISSIONS TO STUDENTS IN BDS FROM A.Y. 2007-08. THE DOCUMENTS FOUND AND SEIZED RELATI NG TO UNACCOUNTED CAPITATION FEE PERTAINED TO A.Y.2008-09. THEREFORE.THE AO WAS JUST IFIED TO DRAW INFERENCE FROM THE SEIZED MATERIAL THAT THERE WERE SIMILAR TRANSACTIONS IN EA RLIER A.Y.2007-08 AND IN SUBSEQUENT A.YS.2009-10 & 2010-11. IT IS ALSO NOTICED THAT THE ESTIMATE MADE BY THE AO IS NOT ARBITRARY AND IT HAS NEXUS WITH THE FACTS DISCOVERED FROM THE SEIZED DOCUMENTS. ACCORDINGLY, THE ADDITIONS MADE BY THE AO IN A.YS.2007-08, 2009-10 & 2010-11 ALSO DESERVE TO BE CONFIRMED. THEREFORE, CONSIDERING THE TOTALITY OF FACTS AND CI RCUMSTANCES INVOLVED IN THIS CASE, THE ADDITIONS MADE BY THE AO OF RS.62,50,000/- IN A.Y.2 007-08; OF RS.77,05,000/- IN A.Y.2008- 09; OF RS.62,50,000/- IN A.Y. 2009-10 AND OF RS.75, 00,000/- IN A.Y.2010-1 1 ON ACCOUNT OF UNACCOUNTED FEES ARE CONFIRMED. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WELL AS WR ITTEN SUBMISSION AS UNDER: AS REGARDS THE CONTENTIONS OF AO, IN ORDER TO AVOI D REPETITION, WE RELY ON THE SUBMISSIONS MADE BEFORE HIM AND CIT(A), AS REPRODUCED AT PAGE 218 TO 219 IN PARA 34.2 OF CIT(A) ORDER. REGARDING FINDINGS OF CIT(A), IT IS SUBMITTED THAT THE SAME ARE GROSSLY ARBITRARY AND UNJUSTIFIED. AS REGARDS HIS RELIANCE ON THE CASE OF CIT VS. CHETAN DAS LAXMAN DAS (2012) 25 TAXMAN 227 (DELHI HC), IT IS SUBMITTED THAT THE SAM E IS TOTALLY MISPLACED AS THE FACTS OF THE ABOVE CASE ARE TOTALLY DISTINGUISHABLE FROM THE FAC TS OF OUR CASE. IN THE CASE OF CHETAN DAS (SUPRA), THE SAID ASSESSEE HAD CATEGORICALLY ACCEPT ED IN SEARCH AS HAVING BEEN INVOLVED IN OUT OF BOOKS TRANSACTIONS AS HIS ROUTINE PRACTICE O F HIS BUSINESS, KEEPING PART TRANSACTIONS ALWAYS OUT OF BOOKS. BUT, THIS IS NOT THE CASE HERE . HERE, NEITHER THE ASSESSEE NOR THE STUDENTS OR THEIR PARENTS HAVE EVER ADMITTED TO HAV E PAID CAPITATION FEE IN ANY OF THE YEAR. EVEN THE AO HAS NOT BROUGHT ANY SUCH CORROBORATION ON RECORD, EVEN REMOTELY. FURTHER, ALL THE BOOKS OF ACCOUNTS WERE BEFORE THE AO, AS SEIZE D DURING SEARCH, AND HE HAS NOT COUNTERED OR PROVED THAT THE SAID FEE WAS NOT ACCOU NTED FOR IN THE BOOKS AS SUBMITTED BEFORE HIM. UNDER THESE CIRCUMSTANCES, NO ADDITION WAS WARRANTE D AT ALL FOR A.Y. 2007-08, 2009-10 & 2010-11 ON SURMISES AND CONJECTURES DEVOID OF ANY M ATERIAL FOUND IN SEARCH AND CORROBORATION FOR THESE YEARS. SIMILARLY, ADDITION WAS NOT CALLED FOR IN A.Y. 2008-09 BECAUSE THE IMPUGNED FEES WAS DULY ACCOUNTED FOR IN THE BOO KS OF ACCOUNTS IMPOUNDED IN THE CUSTODY OF AO, WHICH HE DID NOT DISPROVE THOUGH HE WAS REQU IRED TO DISPROVE THE SAME TO SUPPORT HIS H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 171 ALLEGATIONS BECAUSE THE SEIZED BOOKS WERE IN HIS CU STODY AND WERE GIVEN TO ASSESSEE MUCH AFTER ASSESSMENT ON 1 ST JULY, 2013 ONLY. WITHOUT PREJUDICE TO ABOVE, EVEN FOR A.Y. 2008-09 N O ADDITION IS WARRANTED IN THE CASE OF ASSESSEE SOCIETY BECAUSE THE ADDITION FOR THE SAM E HAS ALREADY BEEN MADE IN THE HANDS OF MR. SURESH CHOUKSEY PROTECTIVELY AND THE AO HAS NOT MENTIONED THE SUBJECT ADDITION IN SOCIETYS HANDS AS SUSTENTATIVE. IN VIEW OF ABOVE, ALL THE ADDITIONS MADE BY AO MAY KINDLY BE DELETED. AS REGARDS ADDITION FOR A.Y. 2010-11, WE FIND THAT THE RELIANCE OF CIT(A) ON THE CASE OF CIT VS. CHETAN DAS LAXMAN DAS (2012) 25 TAXMANN.COM 227 (DELHI HC), IS MISPLACED AS THE FAC TS OF THE ABOVE CASE ARE DISTINGUISHABLE FROM THE FACTS OF PRESENT CASE. IN THE CASE OF CHETAN DAS (SUPRA), CLEAR CUT MATERIAL WAS FOUND IN SEARCH SHOWING UNDERINVOICING IN BILLS FOR SOME PERIOD AND THE PAR TNER OF THE FIRM HAD CATEGORICALLY ACCEPTED DURING SEARCH AS HAVING BEEN INVOLVED IN OUT OF BOOKS TRANSACTIONS AS HIS ROUTINE PRACTICE OF HIS B USINESS, KEEPING PART TRANSACTIONS ALWAYS OUT OF BOOKS. BUT, THIS IS NOT THE CASE HERE. HERE, NEITHER THE ASSESSEE NOR THE STUDENTS OR THEIR PARE NTS HAVE EVER ADMITTED TO HAVE PAID ANY CAPITATION FEE IN ANY OF THE YEAR. ALSO THE AO HAS NOT BROUGHT ANY SUCH CORROBORATION ON RECORD EV EN REMOTELY. EVEN FOR A.Y. 2008-09 FOR WHICH THE PAPER WAS SEIZED, TH E ASSESSEE STATED THAT THE ENTRIES HAVE BEEN ACCOUNTED FOR IN THE BOO KS OF ACCOUNTS AND HE COULD NOT GET IT VERIFIED BECAUSE THE SEIZED BOO KS OF THE ASSESSEE WERE GIVEN TO HIM BY AO ONLY AFTER MAKING OF ASSESS MENT ON 1.7.2013. THE AO OR CIT(A) DID NOT DISPROVE THIS CLAIM OF ASS ESSEE THOUGH SEIZED H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 172 BOOKS OF ACCOUNTS WERE IN THE POSSESSION OF DEPARTM ENT. IN VIEW OF ABOVE, IN OUR OPINION NO ADDITION SHOULD HAVE BEEN MADE ALSO FOR A.Y. 2010-11 WITHOUT CORROBORATION AND HENCE ADDITION FO R A.Y. 2010-11 IS DELETED ON MERITS AS IT WAS BASED ON SURMISES AND C ONJECTURES. IN VIEW OF ABOVE, GROUNDS OF ASSESSEE ON THIS ISSUE IN APPEAL FOR A.Y. 2010-11 ARE TREATED AS ALLOWED. 29.2 THE REVENUE AND ASSESSEE BOTH HAVE RAISED THE ISSUE OF UNEXPLAINED/ EXAGGERATED EXPENSES OF SALARY SHORT FACTS OF THE ISSUE IS THAT PAGE 48 OF A-2/LS- 3 WAS FOUND DURING SEARCH CONTAINING DETAILS CHART SHOWING LARG E SUM PAID IN CASH AS SALARY TO THE DOCTORS. THE TOTAL SALARY PAID AS PER THE CHART IS RS. 5.05 LACS OUT OF WHICH PAYMENT BY CASH IS RS. 2.40 LACS WHICH WORKS OUT TO 48% OF THE TOTAL EXPENDITURE. AO OBSERVED THAT THE BOGUS EXPENDITURE BY WAY OF CASH PAYMENTS TO DOCTORS IN SHAPE OF SALA RY HAS BEEN CLAIMED. THE AO FURTHER OBSERVED THAT THOUGH THE AB OVE MENTIONED SEIZED DOCUMENT RELATES TO A.Y. 2007-08, THE ASSESS EE WOULD BE FOLLOWING THE SAME PRACTICE EVERY YEAR OF CLAIMING EXCESSIVE SALARY AND MADE ADDITIONS IN A.Y. 2008-09 TO 2010-11 ALSO. THE MATTER CARRIED TO CIT(A) WHO PARTLY CONFIRMED T HE SAME AND ALLOWED PART RELIEF. THE OPERATIVE PART OF CIT(A) O RDER IS AS UNDER : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 173 35.3 I HAVE CAREFULLY CONSIDERED THE REASONS RECO RDED BY THE AO IN ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. AS PER SEIZED DOCUMENT A-2/LS-3 PAGE 48, IT IS NOTICED THAT THE APPELLANT HAS PAID SALARY TO DOCTORS BY CHEQUE AS W ELL AS IN CASH. ADMITTED FACT IN THIS ISSUE INVOLVED IS THAT THE APPELLANT HAS ADMITTED THAT IT HAD PAID SALARY TO THE DOCTORS IN CHEQUE AS WELL AS IN CASH. THE APPELLANT FURTHER CONTENDED TH AT THE TOTAL SALARY PAID TO DOCTORS/ EMPLOYEES HAS BEEN ACCOUNTED FOR IN THE REGULAR BOO KS OF ACCOUNT AND, THEREFORE, THE SALARY DEBITED IN THE BOOKS INCLUDES THE SALARY PAID IN CA SH ALSO. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS, INSPITE OF OPPORTUNITIES GIVEN BY THE AO, THE APPELLANT HAS NOT PRODUCED BOOKS OF ACCOUNT BEFORE THE AO FOR VERIFICATION. THE APPE LLANT HAS NOT EVEN PRODUCED THE COPY OF RELEVANT LEDGER OF SALARY TO DEMONSTRATE THAT THE C OMPONENT OF SALARY PAID IN CASH HAS ALSO BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THE AO HAS ALSO SPECIFICALLY ASKED THE APPELLANT TO FURNISH COPIES OF FORM NO.16 ISSUED TO EMPLOYEES / DOCTORS TO SHOW THAT TAX HAS BEEN DEDUCTED FROM THE TOTAL SALARY PAID TO THE EMPLOYEE S BUT THE APPELLANT HAS NOT FURNISHED COPIES OF FORM NO.16 ISSUED TO THE EMPLOYEES. THUS, THE APPELLANT FAILED TO SUBSTANTIATE ITS CLAIM THAT THE CASH COMPONENT OF THE SALARY PAID, A S IS MENTIONED IN THE SAID SEIZED DOCUMENT A-2/LS-3 PAGE 48, HAS BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. IN THESE CIRCUMSTANCES, THE AO WAS JUSTIFIED IN CONCLUDING T HAT THE APPELLANT FAILED TO SATISFACTORILY EXPLAIN WITH ANY COGENT EVIDENCE THAT THE CASH COMP ONENT OF SALARY PAID BY THE APPELLANT HAS ALSO BEEN DULY RECORDED IN THE REGULAR BOOKS OF ACC OUNT BY THE APPELLANT. THEREFORE, THE AO WAS JUSTIFIED IN MAKING ADDITION ON THIS ACCOUNT ON ESTIMATE BASIS IN A.Y.2007-08 AND ALSO MAKING ADDITIONS IN OTHER ASSESSMENT YEARS 2008-09 TO 2010-11 DRAWING THE INFERENCE FROM THIS DOCUMENT. IN ORDER TO PROPERLY APPRECIATE THE ISSUE INVOLVED, IT WOULD BE FRUITFUL TO REPRODUCE THE RELEVANT PORTION OF THE DOCUMENT A-2/LS-3 PAGE 48 SEIZED AS UNDER : S.NO NAME DESIGNATION SALARY ADVANCE SALRY UPTO BY CHEQUE BY CASH TOTAL PAID BALANCE 1 DR. R.S. MADAN PRINCIPAL 45000 55000 100000 480000 330000 TO BE PAID NOW DUE AUGUST & SEPTEMBER 2 DR. ILA SHAH PROFESSOR 45000 55000 100000 390000 DUE SINCE JUNE 06. ONE MONTH ON LEAVE 3 DR. SUNIL RAO READER 30000 25000 55000 300000 NIL DUE SINCE AUGUST 06 4 DR.JYOTI READER READER 26000 29000 55000 174000 BALANCE 1.74 WILL BE DUE IN NOV DUE SEPTEMBER 06 5 DR.MEENAKSHI READER 25000 20000 45000 120000 BALANCE ADVANCE 1.20 LACS IS TO BE NOW PAID DUE SINCE SEPTEMBER 06 6 DR.SMITA AGRAWAL READER 20000 15000 35000 92000 DUE SINCE AUGUST 06 7 DR. SHESH GIRI MUTTAGI READER 20000 5000 30000 30000 30000 TO BE PAID IN NOV.06 DUE SINCE SEPTEMBER 06 8 DR. NIKHLESH VAID SR. LECTURER 18000 12000 30000 72000 - DUE SINCE AUGUST 06 9 DR. ATUL GULATI SR. LECTURER 18000 12000 30000 72000 - DUE SINCE AUGUST 06 10 DR.HINGORANI SR. LECTURER 18000 12000 30000 72000 - . FROM THE ABOVE, IT IS EVIDENTLY CLEAR THAT THE APPE LLANT HAS PAID SALARY BY CHEQUE AS WELL AS IN CASH TO ITS EMPLOYEES AND THIS FACT HAS ALSO BEEN A DMITTED BY THE APPELLANT IN ITS SUBMISSION, H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 174 WHEREIN IT HAS BEEN STATED THAT THE TOTAL SALARY PA ID BY CHEQUE AS WELL AS IN CASH HAS BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. SINCE, THE APPELLANT HAS NOT FURNISHED ANY DOCUMENT TO SUBSTANTIATE ITS CLAIM THAT CASH COMPON ENT OF SALARY PAID TO DOCTORS/ EMPLOYEES HAS BEEN ACTUALLY RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND ALSO NOT PRODUCED COPIES OF FORM NO.16 ISSUED FOR TDS TO THE EMPLOYEES, THE RET URNS OF TDS FILED BY THE APPELLANT FOR THE RELEVANT PERIOD WERE ALSO EXAMINED DURING APPELLATE PROCEEDINGS. ON PERUSAL OF TDS RETURNS FURNISHED BY THE APPELLANT, IT IS NOTICED THAT APPE LLANT HAS SHOWN SALARY IN THE BOOKS OF ACCOUNT OF THE AMOUNTS PAID BY CHEQUE ONLY AND THE SALARY PAID IN CASH HAS NOT BEEN ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT. THIS IS EVIDENT FROM THE FOLLOWING EXAMPLES: (I) IN THE CASE OF MR. R.S. MADAN, THE APPELLANT H AS PAID SALARY TO HIM BY CHEQUE OF RS.45,000/- AND IN CASH OF RS.55,000/- I.E. RS.1,00 ,000/- PER MONTH. THUS, THE TOTAL SALARY FOR THE YEAR WORKS OUT AT RS.12,00,000/-. WHEREAS ON VE RIFICATION OF TDS RETURN OF F.Y.2006-07. IT IS FOUND THAT THE APPELLANT HAD SHOWN PAYMENT OF TO TAL SALARY TO MR. R.S. MADAN OF RS.4,95,000/- ONLY, WHICH WORKS OUT TO BE SALARY OF 11 MONTHS PAID BY CHEQUE ONLY. THUS, THE APPELLANT HAS ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT ONLY SALARY PAID BY CHEQUE AND COMPONENT OF CASH OF SALARY HAS NOT BEEN ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT. (II) IN THE CASE OF DR. ILA SHAH, THE APPELLANT HA S PAID SALARY TO HER BY CHEQUE OF RS.45,000/- AND IN CASH OF RS.55,000/- I.E. RS.1,00 ,000/- PER MONTH. THUS, THE TOTAL SALARY FOR THE YEAR WORKS OUT AT RS.12,00,000/-, WHEREAS ON VE RIFICATION OF TDS RETURN OF F.Y.2006-07, IT IS FOUND THAT THE APPELLANT HAD SHOWN PAYMENT OF TO TAL SALARY TO DR. ILA SHAH OF RS.4,50,000/- ONLY, WHICH WORKS OUT TO BE SALARY OF 10 MONTHS PAI D BY CHEQUE ONLY. THUS, THE APPELLANT HAS ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT ONLY SALARY PAID BY CHEQUE AND THE CASH COMPONENT OF SALARY HAS NOT BEEN ACCOUNTED FOR IN T HE REGULAR BOOKS OF ACCOUNT. (III) IN THE CASE OF DR. SUNIL RAO, THE APPELLANT HAS PAID SALARY TO HIM BY CHEQUE OF RS.30,000/- AND IN CASH OF RS.25,000/- I.E. RS.55,0 00/- PER MONTH. THUS, THE TOTAL SALARY FOR THE YEAR WORKS OUT AT RS.6,60,000/-, WHEREAS ON VER IFICATION OF TDS RETURN OF F.Y.2006-07, IT IS FOUND THAT THE APPELLANT HAD SHOWN PAYMENT OF TO TAL SALARY TO DR. SUNIL RAO OF RS.3,60,000/- ONLY, WHICH WORKS OUT TO BE SALARY OF 12 MONTHS PAID BY CHEQUE ONLY. THUS, THE APPELLANT HAS ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT ONLY SALARY PAID BY CHEQUE AND THE CASH COMPONENT OF SALARY HAS NOT BEEN ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT. SIMILAR IS THE SITUATION IN CASE OF OTHER EMPLOYEES / DOCTORS IN WHOSE CASES ALSO, THE APPELLANT HAS ONLY ACCOUNTED FOR THE PAYMENTS MADE TO THEM BY CHEQUE AS SALARY AND THE CASH COMPONENT OF SALARY PAID HAS NOT BEEN ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT. THUS, THE ABOVE FACTS CLEARLY ESTABLISH AND DEMONST RATE THAT THE CASH COMPONENT OF SALARY PAID BY THE APPELLANT TO ITS DOCTORS/ EMPLOYEES HAS NOT BEEN RECORDED IN ITS REGULAR BOOKS OF ACCOUNT AND, THEREFORE, THE EXPENDITURE INCURRED ON CASH SALARY REMAINED UNEXPLAINED. NOW, THE TOTAL AMOUNT OF CASH SALARY PAID TO 10 EMPLOYEE S MENTIONED IN THE SEIZED DOCUMENT A- 2/LS-3 PAGE 48 WORKS OUT AT RS.2.40.000/- PER MONTH I.E. APPROX. RS.28,80,000/-. IT MAY PERTINENT TO MENTION THAT THIS SEIZED LOOSE PAPER C ONTAINS THE DETAILS OF 10 EMPLOYEES ONLY AND THERE ARE OTHER EMPLOYEES ALSO WORKING WITH THE APPELLANT SOCIETY AS IS EVIDENT FROM THE TDS RETURN FILED BY THE APPELLANT. THEREFORE, CONSI DERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, AND GENERAL PRACTICE OF THE APPELLANT REGARDING PAYING OF PART OF SALARY IN CASH OUTSIDE THE BOOKS OF ACCOUNT, IT WOU LD BE FAIR AND REASONABLE TO ESTIMATE UNACCOUNTED PAYMENT OF SALARY IN CASH FOR THE F.Y.2 006-07 AT RS.30,00,000/-. ACCORDINGLY, THE AO IS DIRECTED TO MAKE ADDITION OF RS.30,00,000 /- IN A.Y. 2007-08 ON ACCOUNT OF UNEXPLAINED CASH COMPONENT OF SALARY PAID FROM UNDI SCLOSED SOURCES BY THE APPELLANT. NOW, IT IS ALSO SEEN FROM THE TDS RETURN OF F.Y.2008-09 THAT THE APPELLANT HAD SHOWN SALARY PAYMENT IN ITS BOOKS OF ACCOUNT ONLY TO THE EXTENT THE SALARY WAS PAID BY CHEQUE TO ITS EMPLOYEES/ DOCTORS AND CASH COMPONENT OF SALARY HAS NOT BEEN ACCOUNTED FOR. CONSIDERING H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 175 ALL THESE FACTS, THE INFERENCE CAN SAFELY BE DRAWN IN THIS CASE THAT THE APPELLANT HAS ADOPTED THE SAME PRACTICE IN ALL THE ASSESSMENT YEARS INVOL VED I.E. SUBSEQUENT A.YS. 2008-09 TO 2010-11. ON THIS PROPOSITION OF LAW, RELIANCE CAN B E PLACED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. CHELAN DAS LACHMA N DAS (2012) 25 TAXMAN.COM 227 (DELHI), WHEREIN IT WAS HELD THAT SEIZED MATERIAL C AN ALSO BE RELIED UPON TO DRAW INFERENCE THAT THERE CAN BE SIMILAR TRANSACTIONS THROUGHOUT PERIOD OF SIX YEARS COVERED BY SECTION 153A OF THE ACT. HOWEVER, CONSIDERING THE NORMAL INCREMENT GIVEN TO AN EMPLOYEE ON YEARLY BASIS AND THAT THE TOTAL SALARY EXPENDITURE CLAIMED BY TH E APPELLANT INCREASED FROM YEAR TO YEAR, IN MY OPINION, IT WOULD BE FAIR AND REASONABLE TO ESTI MATE UNACCOUNTED PAYMENT OF CASH COMPONENT OF SALARY FOR A.Y.2008-09 AT RS.33,00,000 /-; FOR A.Y.2009-10 RS.36,00,000/-; AND FOR A.Y.2010-11 AT RS.40,00,000/-. ACCORDINGLY, ADD ITION ON ACCOUNT OF UNEXPLAINED CASH COMPONENT OF SALARY PAID FOR EACH ASSESSMENT YEAR F ROM A.YS.2007-08 TO 2010-11 IS CONFIRMED AS UNDER : A.Y. 2007-08 2008-09 2009-10 2010-11 AMOUNT OF ADDITION CONFIRMED (RS.) 30,00,000 33,00,000 36,00,000 40,00,000 IN THE RESULT, THE APPELLANT GETS RELIEF IN EACH AS SESSMENT YEAR AS UNDER: A.Y. 2007-08 2008-09 2009-10 2010-11 ADDITIONS MADE BY AO (RS.) 47,86,551 52,68,768 81,56,914 68,04,486 AMOUNT OF ADDITION CONFIRMED (RS.) 30,00,000 33,00,000 36,00,000 40,00,000 RELIEF (RS.) 17,86,551 1968768 45,56,914 28,04,486 LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WELL AS WR ITTEN SUBMISSION AS UNDER: 1. AS REGARDS DEPARTMENTAL APPEAL, RELIED ON THE OR DER AND FINDINGS OF CIT(A). 2. COPY OF SEIZED DOCUMENT RELATING TO A.Y. 2007-08 . 3. THE SAID DOCUMENT RELATE TO A.Y. 2007-08 (F.Y. 2006 -07). TOTAL SALARY PAID IN THE SEIZED CHART WAS RS. 5.05 LACS OUT OF WHICH PAYMENT IN CASH WAS RS. 2.4 LACS. THE LD. AO WORKED OUT % OF CASH SALARY TO THE TOTAL SALARY AT 48% (2.4/ 5.05 X 100) AND PRESUMED THAT THE SUBJECT CASH SALARY HAS NOT BEEN ACCOUNTED FOR IN THE BOOKS OF THE ASSESSEE. THIS FORMULA OF 48% UNACCOUNTED CASH SALA RY WAS APPLIED BY HIM IN NEXT ASSESSMENT YEARS I.E. 2008-09, 2009-10 & 2010-11 OB SERVING THAT THE ASSESSEE IS INFERRED TO HAVE FOLLOWED THE SAME PRACTICE IN SUBS EQUENT YEARS. HOWEVER, TO OUR SURPRISE, WHY THIS FORMULA WAS NOT APPLIED IN EARLI ER YEARS I.E. A.Y. 2004-05 TO 2006-07 FOR THE REASONS BEST KNOWN TO HIM. THIS SPE AKS VOLUMES FOR ITSELF AND H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 176 SHOWS CASUAL APPROACH OF THE AO AS WELL AS OF CIT(A ) WHO IN PRINCIPLE APPROVED THE BASELESS PRESUMPTION DRAWN BY AO. 4. THE ABOVE PRESUMPTION WAS ENTERTAINED BY THE LD. AO DESPITE THE FACT THAT THE ASSESSEE ALL ALONG STATED THAT THESE PAYMENTS HAVE BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS WHICH WERE IMPOUNDED BY HIM AND WERE UN DER HIS CONTROL ONLY AND WERE GIVEN TO THE ASSESSEE ONLY ON 1.7.2013. NATURALLY, ASSESSEE COULD NOT TRACE THESE PAYMENTS FROM THE BOOKS OF ACCOUNTS PRIOR TO 1.7.20 13 WHEREAS THE AO HAD FRAMED THE ASSESSMENT ORDER ON 14/8/2012. 5. THE LD. CIT(A) WENT A STEP FURTHER AND STATED THAT CASH COMPONENT OF SALARY PAID BY ASSESSEE TO ITS DOCTORS/EMPLOYEES HAVE NOT BEEN REC ORDED IN THE BOOKS OF ACCOUNTS AND THE SEIZED PAPER CONTAINS DETAILS OF ONLY TEN E MPLOYEES AND THERE ARE OTHER EMPLOYEES ALSO WORKING WITH THE ASSESSEE AND SINCE IT IS THE GENERAL PRACTICE OF THE ASSESSEE TO PAY PART SALARY IN CASH OUTSIDE THE BOO KS OF ACCOUNTS, IT WOULD BE FAIR AND REASONABLE TO ESTIMATE UNACCOUNTED PAYMENT OF CASH SALARY AT RS. 30,00,000 /- FOR A.Y. 2007-08, RS. 33,00,000/- FOR A.Y. 2008-09, RS. 36,00,000/- FOR A.Y. 2009-10 AND RS. 40,00,000/- FOR A.Y. 2010-11. WHILE ENTERT AINING THIS PRESUMPTION, THE LD. CIT(A) RELIED ON THE DECISION OF HON'BLE DELHI COUR T IN THE CASE OF CIT VS. CHETAN DAS LACHMAN DAS (2012) 25 TAXMANN.COM 227 (DELHI) F OR THE PROPOSITION THAT SEIZED MATERIAL CAN ALSO BE RELIED UPON TO DRAW INFERENCE THAT THERE CAN BE SIMILAR TRANSACTIONS THROUGHOUT PERIOD OF SIX YEARS COVERED BY SECTION 153A OF THE ACT. 6. IT IS SUBMITTED THAT, WITHOUT PREJUDICE TO OUR SUBM ISSIONS TO FOLLOW, IT IS BEYOND HUMAN UNDERSTANDING AS TO WHY A SOCIETY OR TRUST WOULD SU PPRESS HIS SALARY OUTGO OR FOR THAT MATTER ANY EXPENSES, MAY BE IN CASH OR CHEQUE, WHEN THE SAME QUALIFIES AS EXPENDITURE TO BE NECESSARILY INCURRED FOR MEETING THE REQUISITE 85% OF TOTAL RECEIPTS. 7. THE RATIO OF THE DECISION IN THE CASE OF CHETAN DAS LACHMAN DAS (SUPRA) RELIED UPON BY CIT(A) IS NOT APPLICABLE TO THE FACTS OF THE CAS E BECAUSE IN THAT CASE THERE WAS CATEGORICAL ADMISSION OF THE ASSESSEE THAT IT IS HI S PRACTICE TO MAKE SALES OUT OF BOOKS OF ACCOUNTS WHEREAS IN OUR CASE, FROM THE VER Y INCEPTION WE HAVE BEEN STATING THAT THESE EXPENSES HAVE BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. 8. THEREFORE, SINCE NO SUCH PAPER WAS FOUND IN RELA TION TO OTHER YEARS, NO ADDITION COULD BE MADE FOR THOSE YEARS ONLY ON THE BASIS OF PRESUM PTION SINCE IT IS A SEARCH CASE WHERE ADDITION HAS TO BE MADE ONLY ON THE BASIS OF EVIDENCE AND NOT OTHERWISE. FURTHER, ESTIMATING SUCH PAYMENTS FOR SOME YEAR AND LEAVING THE OTHER YEARS GOES ON TO PROVE THAT THE ACTION OF THE AO AS WELL AS OF TH E CIT(A) WAS ARBITRARY AND UNJUSTIFIABLE. 9. NO BASIS OR JUSTIFICATION WAS GIVEN BY THE CIT(A) F OR HIS ESTIMATES WHICH WERE BASED ON ONLY SURMISES AND CONJECTURES, NOT PERMITTED IN LAW. IN VIEW OF ABOVE, THE ADHOC ADDITION MADE BY AO AND CONFIRMED BY CIT(A) BE KINDLY DELETED. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. NO W DEALING WITH THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 177 CASE ON MERITS OF A.Y. 2010-11 ONLY, FOR THE REASON S AS AFORESAID, WE FIND THAT THE SEIZED PAPER RELATED TO A.Y. 2007-08 BUT THE FORMULA OF 48% UNACCOUNTED CASH SALARY WAS APPLIED BY AO ONLY IN N EXT ASSESSMENT YEARS I.E. 2008-09, 2009-10 & 2010-11 OBSERVING THA T THE ASSESSEE IS INFERRED TO HAVE FOLLOWED THE SAME PRACTICE IN SUBS EQUENT YEARS BUT THIS FORMULA WAS NOT APPLIED BY HIM IN EARLIER YEARS I.E . A.Y. 2004-05 TO 2006-07. SIMILARLY, CIT(A) HAS PART CONFIRMED THE A DDITION FOR A.Y. 2007- 08 TO 2010-11 ON THE BASIS OF ESTIMATION ONLY FOR A LL EMPLOYEES OTHER THAN DOCTORS WITHOUT ANY CORROBORATION. SUCH ARBITR ARY APPROACH OF AO AND CIT(A) IN OUR VIEW ARE NOT CORRECT AND NOT AS P ER LAW. IN OUR OPINION IN THIS ISSUE ALSO, THE DECISION OF CHETANDAS LACHM ANDAS (SUPRA) RELIED UPON BY CIT(A) IS DISTINGUISHABLE. WE FIND THAT IN THIS CASE ALSO NEITHER THE OFFICE BEARERS OF THE ASSESSEE NOR ANY DOCTOR O R ANY OTHER EMPLOYEE HAS ACCEPTED TO HAVE RECEIVED UNACCOUNTED SALARY IN CASH. THE AO OR CIT(A) HAVE ALSO NOT CORROBORATED THEIR FINDINGS BY ANY EVIDENCE. IN VIEW OF ABOVE, ADDITION FOR A.Y. 2010-11 ON THIS IS SUE IN THE CASE OF APPEAL OF ASSESSEE IS DELETED. THIS GROUND OF APPEA L OF ASSESSEE IS ALLOWED AND THE GROUND OF THE DEPARTMENT IS DISMISS ED. 29.3 THE ASSESSEE HAS RAISED THE ISSUE OF ADDITION ON ACCOUNT OF SEIZED DOCUMENT/LOOSE PAPERS H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 178 AS REGARDS ADDITION OF A.Y. 2004-05, AS WE HAVE ALR EADY HELD THAT SINCE NECESSARY SATISFACTION WAS NOT RECORDED BY AO REGARDING THE SEIZED MATERIAL IN THE CASE OF SEARCHED PERSONS, TH E ASSESSMENTS MADE FOR SIX YEARS U/S 153C FOR A.Y. 2004-05 TO 2009-10 ARE UNLAWFUL AND QUASHED. THEREFORE, WE ARE DEALING WITH FOLLOWING GROUND FOR A.Y. 2010- 11 ONLY. SHORT FACTS OF THE ISSUE IS THAT ADDITION HAS BEEN MADE BY AO ON THE BASIS OF SOME LOOSE PAPERS FOUND FROM 48, GO MANTIKA PARISAR, JAWAHAR CHOWK, BHOPAL. THE MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME . THE OPERATIVE PART OF THE CIT(A) ORDER IS AS UNDER : 42.3 I HAVE CAREFULLY CONSIDERED THE REASONS REC ORDED BY THE AO IN ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. ON PERUSAL O F PAGE NO16 & 17 SEIZED FROM 48, GOMANTIKA PARISAR, JAWAHAR CHOWK, BHOPAL, IT CAN BE SEEN THAT IT CONTAINS NAMES AS WELL AS AMOUNTS PAID TO EACH PERSON. THUS, THE TRANSACTIONS RECORDED IN THESE LOOSE PAPERS PERTAIN TO PAYMENTS MADE BY THE APPELLANT SOCIETY TO VARIOU S PERSONS AS MENTIONED IN THESE LOOSE PAPERS. DESPITE SUFFICIENT OPPORTUNITIES GIVEN BY T HE AO DURING ASSESSMENT PROCEEDINGS, THE APPELLANT HAS NOT FURNISHED ANY EXPLANATION REGARDI NG THE NATURE OF THESE TRANSACTIONS AND ALSO NOT SHOWN THAT THESE TRANSACTIONS HAVE BEEN DU LY RECORDED IN THE REGULAR BOOKS OF ACCOUNT. EVEN DURING APPELLATE PROCEEDINGS, THE APP ELLANT HAS NOT ADDUCED ANY COGENT EVIDENCE TO DEMONSTRATE THAT THE TRANSACTIONS RECOR DED IN THESE LOOSE PAPERS HAVE BEEN ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT. THES E LOOSE PAPERS CANNOT BE SAID TO BE DUMB DOCUMENTS BECAUSE IT CONTAINS NAMES OF THE PERSONS AND AMOUNT PAID TO THEM. IN THESE CIRCUMSTANCES, THE AOWAS JUSTIFIED IN MAKING ADDITI ON OF RS.8,88,700/-. ACCORDINGLY, THE ADDITION OF RS.8,88,700/- IN A.Y.2010-11 IS CONFIRM ED. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WELL AS WR ITTEN SUBMISSION AS UNDER: ADDITION OF RS. 8,88,700/- (2,63,100 + 6,25,600) / A.Y. 2010-11 : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 179 THE ADDITION OF RS. 8,88,700/- CONFIRMED BY CIT(A) IS ALSO NOT CORRECT BECAUSE : I THE SUBJECT CHITS OF LOOSE PAPERS ARE NOT DATED. BOTH THE PAGES ARE NEITHER SIGNED BY NOR ARE IN THE HANDWRITING OF ANY OF THE OFFICE BEA RER OF THE SOCIETY. II CIT(A) HAS STATED THAT THESE LOOSE PAPERS CANNOT BE CALLED DUMB DOCUMENT BECAUSE IT CONTAINS NAME OF THE PERSON AND THE AMOUNT PAID TO THEM. BUT HE CONVENIENTLY IGNORED THE FACT THAT THESE LOOSE PAPERS VIDE FIRST PAGE NO . 16 CONTAINING TOTAL JOTTINGS OF RS. 2,63,100/- ARE MERE DUMB DOCUMENT WHICH DO NOT EV EN SHOW THE NATURE OF SCRIBBLING AS TO WHETHER IT IS RECEIPT OR PAYMENT OR THE LIKE. THAT IS HOW THESE NEED TO BE BRANDED AS DUMB. III SIMILARLY, THE SECOND PAGE NO. 17 HAVING TOTAL JOTTINGS OF RS. 6,25,600/- DO NOT CONTAIN ANY INCOME, MUCH LESS UNDISCLOSED INCOME AND ARE ON LY PROPOSED /ESTIMATED PAYMENT/ OUTFLOW FOR THE PURPOSE OF CASH FLOW MANAGEMENT NOT ED IN THE ORDINARY COURSE OF ACTIVITY WHICH ANY PERSON WOULD MAKE NOTE OF AS TO WHAT ARE ESTIMATED PAYMENTS TO BE MADE AND IT HAS NOTHING TO DO WITH ACTUAL TRANSACTIONS. THIS IS BECAUSE HAD IT BEEN SO, SOME OTHER CORROBORATIVE MATERIAL IN THE FORM OF CASH RE CEIPT GIVEN BY DOCTORS ETC. WOULD HAVE BEEN FOUND DURING THE SEARCH. BUT NOTHING OF THE SO RT WAS FOUND. NEITHER ANY ADVERSE WAS PROVED AGAINST THE ASSESSEE. THE CIT(A) ALSO IG NORED THESE FUNDAMENTAL ASPECTS. IV THE AUTHOR OF THE ROUGH JOTTINGS HAS NOT BEEN EX AMINED BY AO. V NONE OF THE OFFICE BEARER HAS EVER ACCEPTED THESE ROUGH JOTTINGS AS UNDISCLOSED INCOME/ UNACCOUNTED PAYMENT OF THE ASSESSEE SOCIETY. VI THE ADDITION IS BASED ON SURMISES AND CONJECTURE S AND IS WITHOUT CORROBORATIVE EVIDENCE. IT IS SETTLED LAW THAT IN CASE OF JOTTINGS ON A LOO SE PAPER, PRESUMPTION AT THE MOST WAS ATTRACTED TO THE FIGURES AND FURTHER PRESUMPTION TH EY THE REPRESENT INCOME LIABLE TO TAX IS NOT PERMISSIBLE U/S 132 (4A). IN VIEW OF ABOVE, BOTH THE ADDITION MADE BY AO OF R S. 1,15,00,000/- AND RS.8,88,700/- ON THE BASIS OF PRESUMPTION AND ASSUM PTIONS MAY KINDLY BE DELETED BY YOURHONOUR. RELIED ON : MADAN LAL NARENDRA KUMAR VS. ACIT 31 ITC 123, 146-1 47 (INDORE, ITAT) ATUL KUMAR JAIN VS, DY. CIT (1999) 64 TTJ (DEL-TRIB ) 786 CIT VS. GIRISH CHAUDHARY (2008) 296 ITR 619 (DEL. H C) AMAR NATWARLAL SAHA VS. ACIT (1997) 60 ITD 560,564- 565 (AHD.) BRIJLAL ROOPCHAND VS. ITO (1991) 40 TTJ 668 (INDORE ) ACIT VS. SATYAPAL WASSAN (2008) 10 ITJ 216; 5 DTR 2 02 (JAB. ITAT) - PARA 28 BANSAL STRIPS PVT. LTD VS. ACIT (2006) 99 ITD 177 ( DEL. ITAT) ASHWANI KUMAR VS ITO (1991) 39 ITD 183 (DEL. ITAT) SMT. NEENASYAL VS. ACIT (1999) 70 ITD 62 (CHANDIGAR H ITAT) H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 180 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, AO WAS NOT CORRECT IN MAKING THIS ADDITION BECAUSE THE SUB JECT CHITS OF LOOSE PAPERS ARE NOT DATED AND ALSO BOTH THE PAGES ARE N EITHER SIGNED BY NOR ARE IN THE HANDWRITING OF ANY OF THE OFFICE BEARER OF THE SOCIETY. WE NOTE THAT THESE LOOSE PAPERS VIDE FIRST PAGE NO. 16 CONT AINING TOTAL JOTTINGS OF RS. 2,63,100/- ARE MERE DUMB DOCUMENT WHICH DO NO T EVEN SHOW THE NATURE OF SCRIBBLING AS TO WHETHER IT IS RECEIPT OR PAYMENT OR THE LIKE. AS REGARDS THE SECOND PAGE NO. 17 HAVING TOTAL JOTTING S OF RS. 6,25,600/- WE AGREE THAT IT DO NOT CONTAIN ANY INCOME, MUCH LE SS UNDISCLOSED INCOME AND ARE ONLY PROPOSED /ESTIMATED PAYMENT/ OU TFLOW FOR THE PURPOSE OF CASH FLOW MANAGEMENT NOTED IN THE ORDINA RY COURSE OF ACTIVITY WHICH ANY PERSON WOULD MAKE NOTE OF AS TO WHAT ARE ESTIMATED PAYMENTS TO BE MADE AND IT HAS NOTHING TO DO WITH A CTUAL TRANSACTIONS. THIS IS BECAUSE NO CORROBORATIVE MATERIAL IN THE FO RM OF CASH RECEIPT GIVEN BY DOCTORS ETC. WAS FOUND DURING THE SEARCH. NEITHER ANY ADVERSE WAS PROVED AGAINST THE ASSESSEE THROUGH CORROBORATI VE EVIDENCE. WE ALSO NOTE THAT THE AUTHOR OF THE ROUGH JOTTINGS HAS NOT BEEN EXAMINED BY AO NOR ANY OF THE OFFICE BEARER HAS EVER ACCEPTED T HESE ROUGH JOTTINGS AS UNDISCLOSED INCOME/ UNACCOUNTED PAYMENT OF THE A SSESSEE SOCIETY. HENCE, THE ADDITION IS BASED ON SURMISES AND CONJEC TURES AND IS WITHOUT H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 181 CORROBORATIVE EVIDENCE AND IS DELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. 29.4 THE ASSESSEE HAS RAISED THE ISSUE OF ADDITION ON A/C OF PURCHASE OF JEWELLERY SHORT FACTS OF THE ISSUE IN CASE OF RISHIRAJ MEMORI AL EDUCATION & WELFARE SOCIETY AS PER AO ARE THAT A BILL FOR PURC HASE OF GOLD JEWELLERY OF RS. 45,000/- FROM M/S SAJAWAT JEWELLERS, BHOPAL WAS SEIZED DURING SEARCH. AO TREATED THIS AS PERSONAL PURCHASE FOR OF FICE BEARERS. THE MATTER CARRIED TO CIT(A) WHO ENQUIRED FROM THE JEWELLER AND CAME TO KNOW THAT TOTAL PAYMENTS OF RS. 4,00,000/- WAS MADE TO HIM BY THE ASSESSEE BY CHEQUE ON 24.4.2009. HE ACCORDINGLY DELETED ADDITION OF RS. 45,000/- AND MADE ADDITION OF RS. 4,00,000/- IN PLACE THEREOF. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WELL AS WR ITTEN SUBMISSION AS UNDER: THE ASSESSEE AGITATED AGAINST ADDITIONS OF RS. 45,0 00/- IN A.Y. 2009-10 WHICH WAS DELETED BY CIT(A) AND HE DIRECTED AO TO MAKE ADDITIONS OF R S. 4,00,000/- (45,0000 + 3,55,000) IN A.Y. 2010-11 WITHOUT GIVING ANY NOTICE OF ENHANCEME NT, AS COMPULSORY REQUIRED IN LAW. MOREOVER, THE SAID ADDITION OF RS. 4,00,000/- WAS M ADE IN A.Y. 2010-11 ONLY ON THE BASIS OF ENQUIRIES CARRIED OUT BY AO DURING APPELLATE PROCEE DINGS, AS CLAIMED BY CIT(A) ON PAGE 158,PARA 19, 7 TH LINE FROM TOP. SINCE, THE SO-CALLED ENQUIRY WAS MA DE BEHIND THE BACK OF THE ASSESSEE, THAT TOO DURING APPELLATE PROCEEDINGS WHI CH HE WAS NOT LEGALLY ENTITLED TO, AND THE MATERIAL COLLECTED, IF ANY, WAS NOT CONFRONTED TO T HE ASSESSEE, THE ADDITION BASED THEREON IS TOTALLY UNLAWFUL IN VIEW OF THE APEX COURT DECISION IN KISHICHAND CHALLARAM VS CIT(A) 125 ITR 713 (SC). MOREOVER, THESE ITEMS HAVE BEEN PURCHASED FOR DISTR IBUTION TO MERITORIOUS STUDENTS OF THE COLLEGES OF THE ASSESSEE SOCIETY AND HENCE WAS FOR THE CHARITABLE PURPOSE OF THE SOCIETY ONLY. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 182 MAY BE THAT THE JEWELLER HAS INADVERTENTLY WRITTEN ROUTINE ITEMS OF JEWELLERY ON THE BILL AS PER HIS REGULAR AND ROUTINE PRACTICE. AO OUGHT TO HAVE ALSO APPRECIATED THAT THE MEMBERS WILL NOT BUY SUCH ITEMS FOR THEIR PERSONAL USE FROM THE FUNDS OF ASSESSEE SOCIETY AND THAT TOO THROUGH CHEQUE WHEN THEY HAVE SACRIFICED THEIR LIVES IN THE INTEREST OF SOCIETY A ND THEY ARE NOT EVEN CHARGING RENT FOR THE OFFICE GIVEN TO THE SOCIETY AT THEIR RESIDENCE 31 SHYMLA H ILLS, BHOPAL. IN VIEW OF ABOVE, ADDITION MADE BY AO MAY KINDLY BE DELETED . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, THE ADDITION CONFIRMED BY CIT(A) IS PROPER AND NO INTER FERENCE IS CALLED. THIS GROUND OF THE ASSESSEE IS REJECTED. 29.5 THE DEPARTMENT HAS RAISED THE ISSUE OF UNEXPLA INED INVESTMENT U/S 69 OF RS. 2.68 CRORES IN A.Y. 2005-06. SHORT FACTS OF THE ISSUE IN CASE OF RISHIRAJ MEMORI AL EDUCATION & WELFARE SOCIETY IS THAT AO TREATED RS 2.68 CRORES AS UNEXPLAINED EXPENDITURE /INVESTMENT ON THE BASIS OF PAGE 13 OF LPS A-3 /LS-10 AS UNEXPLAINED INVESTMENT. THE AO NOTED THAT DURING TH E COURSE OF SEARCH CERTAIN DOCUMENTS HAVE BEEN SEIZED FROM PREMISES AT MANSAROVAR COMPLEX, BHOPAL. PAGE NO. 13 OF LPS A-3/LS-10 IS A HISAB OF 2.68 CRORES BETWEEN VARIOUS GROUPS HOLDING STAKE IN THE APPELLANT SOCIETY IN ACCORDANCE WITH THEIR PROFIT SHARING RATIOS AS UNDE R : NAME PAY BALANCE A GROUP KEER (26%) 60 18 B GROUP CHOUKSEY (26%) 20 58 C GROUP D+S (26%) - 78 TSK (8%) 4 8 H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 183 K. KHAN (8%) 4 8 NANDA (3%) 7.5 1.5 SOOD (3%) 7.5 1.5 TOTAL 103 165 AT THE END OF THIS TABLE, DETAILS OF PAYMENT OF RS. 1.65 CRORES HAVE ALSO BEEN MENTIONED. NAME PAYMENT RAJAK 27 RVAJ 15 FDR 53 INSP 25 CONTRACT 15 ELEC + ROAD 10 PRE OPERATION 10 BANK INTEREST 10 TOTAL 165 THE AO NOTED THAT THE SHARE AGREEMENT OF THE APPELL ANT SOCIETY (LPS 2/17 PAGE 23 TO 25), ALSO SHOWS THE SAME PROFI T SHARING ARRANGEMENT BETWEEN THE ABOVE STAKE HOLDERS. THE A O ASKED THE APPELLANT TO EXPLAIN THE TRANSACTIONS RECORDED IN T HIS LOOSE PAPER AND THE APPELLANT WAS ALSO ASKED TO FURNISH FINAL ACCOUNT A ND BALANCE SHEET ALONGWITH THE RECONCILIATION WITH THE SEIZED DOCUME NTS. FURTHER, THE APPELLANT WAS ALSO ASKED TO EXPLAIN THAT '(A) IF THE SEIZED DOCUMENT/ PAPER PERTAINS TO / BE LONGS TO ANY CONCERN IN -WHICH YOU ARE INTERESTED BY WAY OF BEING PRESIDENT, CHAIRMAN, MANAGING DIRECTOR, SHAREHOLDER, TRUSTEE ETC., PLEASE FURNISH THE INFORMATION/CLARIF ICATION ON BEHALF OF THE SAID CONCERN. IN ITS REPLY DATED 15.12.2011, IT WAS SUBMITTED BEF ORE THE AO AS UNDER:- ' THESE PAPERS ARE RELATED TO RISHIRAJ MEMORIAL EDUCA TION WELFARE SOCIETY AND DATTATREYA SURESH PRAKASH EDUCATION AND SOCIAL WELF ARE SOCIETY. BOTH SOCIETIES ARE SEPARATE INCOME TAX ASSESSEE AND ITS PAN NO. IS AAA AR5568 AND AAAJDO705B RESPECTIVELY.' H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 184 FROM THE ABOVE, THE AO STATED THAT THE APPELLANT HA S NOT FURNISHED ANY SPECIFIC DETAILS REGARDING THE NATURE AND PURPO SE OF THE SAID HISAB OF RS.1.65 CRORES AS WELL AS HOW THESE TRANSACTIONS HA VE BEEN RECORDED IN THE BOOKS OF ACCOUNTS. NO RECONCILIATION HAS BEEN P RODUCED AS WELL. THE REPLY SUBMITTED BY THE APPELLANT SOCIETY IS VERY GE NERAL IN NATURE. THE AO ALSO REFERRED TO THE PROVISIONS OF SECTION 132(4 A)/292C(L) OF THE INCOME TAX ACT 1961. WHICH PROVIDES THAT IN CASE OF ANY BOOKS OF ACCOUNTS OR OTHER DOCUMENT FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON DURING THE COURSE OF SEARCH, IT MAY BE MED D URING THE COURSE OF SEARCH AND THE ASSESSMENT PROCEEDINGS THAT THE SAID BOOKS OF ACCOUNTS OR OTHER DOCUMENT BELONGS TO SUCH PERSON AND THAT T HE CONTENTS OF SUCH BOOKS OF ACCOUNTS OR DOCUMENTS ARE TRUE. THE AO OBS ERVED THAT IT IS THE PRIMARY DUTY OF THE APPELLANT TO EXPLAIN THE NOTING IN THE SAID DOCUMENT AND THE TRANSACTIONS MENTIONED THEREIN. THE AO STAT ED THAT THE APPELLANT HAS NOT PRODUCED THE BOOKS OF ACCOUNTS AN D OTHER RELEVANT MATERIALS FOR VERIFICATION IN SPITE OF ALLOWING SUF FICIENT OPPORTUNITY. NO SPECIFIC EXPLANATION REGARDING THE TRANSACTIONS MEN TIONED IN THE SAID SEIZED DOCUMENT IS GIVEN BY THE APPELLANT. UNDER TH E CIRCUMSTANCES, THE AO STATED THAT HE WAS LEFT WITH NO OPTION BUT TO DR AW INFERENCE ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. THE AO N OTED FROM THE SAID SEIZED DOCUMENT THAT A TOTAL INVESTMENT OF RS.2.68 CRORES WAS TO BE MADE BY THE VARIOUS STAKE HOLDERS AS PER THE SHARIN G AGREEMENT H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 185 DATED27.10.2004 BETWEEN VARIOUS STAKE HOLDERS OF TH E APPELLANT SOCIETY. OUT OF THE SAID RS.2.68 CRORES, RS.1.03 CRORES HAS ALREADY BEEN PAID BY THE SAID STAKE HOLDERS AND THE BALANCE OF RS.1.6 5 CRORES IS RECEIVABLE FROM THEM. THE TABLE FOLLOWING THE SAID HISAB OF RS.2.68 CRORES FURTHER SHOWS HOW RS.1.65 CRORES WILL BE INV ESTED OR SPENT BY THE SOCIETY. THE APPELLANT SOCIETY HAS NEITHER FURN ISHED ANY SPECIFIC DETAILS NOR PRODUCED THE BOOKS OF ACCOUNTS FOR VERI FICATION AND THEREFORE THE AO STATED THAT IT IS PRESUMED THAT THE SUM OF R S.1.03 CRORES HAS BEEN RECEIVED BY THE SOCIETY AND THE SAME IS EITHER INVESTED OR SPENT WITHOUT RECORDING IN THE BOOKS OF ACCOUNTS. SIMILAR IS THE CASE WITH RS.1.65 CRORES, MENTIONED IN THE SEIZED DOCUMENT DI SCUSSED ABOVE, WHICH IS PRESUMED TO HAVE BEEN RECEIVED BY THE SOCI ETY AND INVESTED/SPENT LATER. THE AO, IN THE ABSENCE OF ANY CLARIFICATION WHATSOEVER FROM THE APPELLANT TREATED THE SAID AMOU NT OF RS.2.68 CRORES (1.03 CRORE + 1.65 CRORE) AS UNEXPLAINED EXP ENDITURE/INVESTMENT AND ADDED TO THE TOTAL INCOME OF THE APPELLANT. MATTER CARRIED TO CIT(A) WHO DELETED THE ADDITION. THE OPERATIVE PART OF CIT(A) ORDER IS AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE A PPELLANT AND FACTS OF THE CASE. FROM THE ENTRIES RECORDED ON THIS LOOSE PAPER AS RE PRODUCED BY THE LD. AO IN THE ASSESSMENT ORDER, IT IS NOTICED THAT IT CONTAINS TH E ACCOUNT (HISAB) OF THE STAKE HOLDERS IN THE APPELLANT SOCIETY. IT SHOWS THAT THE DIFFERENT STAKE HOLDERS HAVE MADE PAYMENT OF CERTAIN AMOUNT AND THE BALANCE AMOUNT RE MAINED PAYABLE OUT OF THE TOTAL INVESTMENT AGREED TO BE MADE BY EACH STAKE HOLDER E .G. A GROUP KEER HAVING 26 % SHARE HAS TO INVEST RS.78 LACS, OUT OF WHICH THEY HAVE PAID RS.60 LACS AND H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 186 BALANCE AMOUNT REMAINS IS RS.18 LACS, IN CASE OF B GROUP CHOUKSEY ALSO HAVING 26 % SHARE HAS TO INVEST RS.78,LACS AND THEY HAVE P AID RS.20 LACS AND RS.58 LACS IS BALANCE. THIS PAGE ALSO CONTAINS THE DETAILS OF EXP ENDITURE LIKELY TO BE INCURRED FROM THE BALANCE AMOUNT OF RS.165 LACS. IT CLEARLY SHOWS THAT RS.15 LACS IS TO BE PAID TO RIYAZ AND RS.27 LACS TO RAFIQUE. IT MAY BE PERTINEN T TO NOTE THAT IN THE SHARE AGREEMENT DATED 27.10.2004 (LPS A-2/LS-6 PAGES 101 TO 105) FOR SETTING UP OF THE APPELLANT SOCIETY ALSO MENTIONS IN PARA 14 OF THE A GREEMENT THAT THE SOCIETY WILL RETURN INVESTMENT OF SHRI RIYAZ KHAN OF RS.15 LACS AND TO SHRI RAFIQUE KHAN OF RS.27 LACS. THUS, IT CLEARLY SHOWS THAT THIS LOOSE PAPER CONTAINS THE ACCOUNT (HISAB) REGARDING THE AMOUNT OF INVESTMENT PAID BY EACH STA KE HOLDER AND THE BALANCE AMOUNT OUT OF THE AGREED AMOUNT INVESTMENT IN THE A PPELLANT SOCIETY. SINCE INSPITE OF OPPORTUNITIES GIVEN BY THE LD.AO, THE APPELLANT HAS NOT PRODUCED BOOKS OF ACCOUNT AND RECONCILED THESE ENTRIES WITH THE TRANSACTIONS RECORDED IN BOOKS OF ACCOUNT, THE AO CONCLUDED THAT THE TRANSACTIONS RECORDED ON THIS LOOSE PAPER REMAINED UNVERIFIED AND, THEREFORE PRESUMED THAT THE SUM OF RS.1.03 CRO RES RECEIVED BY THE APPELLANT IS EITHER SPENT OR INVESTED, WITHOUT RECORDING THE SAM E IN THE REGULAR BOOKS OF ACCOUNT. SIMILARLY, IN THE CASE OF BALANCE SHOWN OF RS.1.65 CRORES, IT WAS ALSO PRESUMED TO HAVE BEEN RECEIVED BY THE SOCIETY AND SPENT OR INVE STED AND, THEREFORE, MADE ADDITION OF RS.2.68 CRORES. FROM THE ASSESSMENT ORD ER, IT IS CLEAR THAT THE LD. AO HAS MADE ADDITION OF RS.2.68 CRORES ON THE PRESUMPTION THAT THE TOTAL AMOUNT OF RS.2.68 CRORES HAS BEEN RECEIVED FROM THE STAKE HOLDERS BY THE APPELLANT AND HAS EITHER BEEN INVESTED IN THE APPELLANT SOCIETY OR SPENT BY IT BUT HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT AND BEING UNVERIFIABLE, THE SAME W AS LIABLE FOR TAX. BUT THIS CONCLUSION OF THE AO IS BASED ON ASSUMPTIONS AND PR ESUMPTIONS, WITHOUT ANY MATERIAL ON RECORD. EVEN OTHERWISE, IT MAY BE NOTED THAT IT IS NOT A CASE WHERE AN ASSESSEE HAS DEBITED ANY EXPENDITURE OR SHOWN INVES TMENT IN THE BOOKS OF ACCOUNT, WHICH REMAINED UNVERIFIED OR UNEXPLAINED. IT IS ALS O NOT A CASE, WHERE AN ASSESSEE HAS SHOWN LIABILITY IN THE NAME OF SOME PERSONS WHI CH REMAINED UNVERIFIED OR UNEXPLAINED. THEREFORE, EVEN IF IT IS PRESUMED THAT THE CONTRIBUTIONS MADE BY STAKE HOLDERS OF RS.2.68 CRORES HAVE NOT BEEN RECORDED IN BOOKS OF ACCOUNT AS CAPITAL OR LOAN AND ALSO THAT THE AMOUNT SPENT OR INVESTED HAS ALSO NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT, THOUGH THERE IS NO EVIDENCE FOR S UCH EXPENDITURE OR INVESTMENT ON RECORD, YET NO ADDITION IS CALLED FOR IN THE HANDS OF THE APPELLANT SOCIETY IN AS MUCH AS NEITHER THERE IS AN UNEXPLAINED INVESTMENT MADE BY THE APPELLANT SOCIETY NOR IS THERE ANY UNEXPLAINED EXPENDITURE MADE BY IT. IT MA Y NOT BE OUT OF PLACE TO MENTION HERE THAT THE AO HAS SEPARATELY EXAMINED AND DEALT WITH UNSECURED LOANS IN THE NAME OF THE STAKE HOLDERS APPEARING IN THE BALANCE SHEET AND WHEREVER REQUIRED, SEPARATE ADDITION HAS BEEN MADE. HENCE, ON THE BASI S OF ENTRIES ON THIS LOOSE PAPER, IN MY OPINION NO ADDITION WAS CALLED FOR IN THE INC OME OF THE APPELLANT SOCIETY. THUS, THE ADDITION OF RS.2.68 CRORES MADE ON PRESUMPTION BASIS IS DELETED. LD. DR RELIED ON THE ORDER OF REVENUE AUTHORITIES. THE AR RELIED ON THE SUBMISSIONS MADE BEFORE CIT(A) WHICH ARE REPRODUCED AT PAGES 183 TO 184 PARA NO. 25.2 OF CIT (A) ORDER. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 187 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT BEFORE US TOO, NO EVIDENCE TO PROVE THAT THE ASSESSEE HAS ACT UALLY MADE ANY INVESTMENT AS ALLEGED BY AO WAS BROUGHT ON RECORD B Y THE REVENUE TO CONTROVERT THE FACTUAL FINDING RECORDED BY THE CIT( A). THE ADDITION CANNOT BE MADE ON ASSUMPTION & PRESUMPTION. THEREFO RE, IN THE ABSENCE OF ANY EVIDENCE GATHERED DURING SEARCH OR D URING INVESTIGATION AFTER SEARCH, THE AO WAS NOT JUSTIFIED IN MAKING AD DITION ON ACCOUNT OF UNEXPLAINED INVESTMENT ASSUMING THAT THE ASSESSEE MUST HAVE MADE SUCH INVESTMENT. THUS, WE CONFIRM THE FINDING OF TH E LD. CIT(A) BEING UNCONTROVERTED. ACCORDINGLY, THIS ISSUE TAKEN BY TH E DEPARTMENT IS DISMISSED. 30. IN THE CASE OF JAI NARAIN SHIKSHA SAMITI THE FOLLOWING INDEPENDENT GROUNDS RELATING TO ABOVE SOCIETY ARE DEALT WITH HEREUNDER: 30.1 THE ASSESSEE HAS RAISED THE ISSUE OF RETURN OF INCO ME NOT FURNISHED U/S 139(4A) SHORT FACTS OF THE ISSUE IN CASE OF RISHIRAJ MEMORI AL EDUCATION AND WELFARE SOCIETY ARE THAT THE AO STATED THAT SINCE T HE ASSESSEE HAS FILED BELATED RETURN FOR A.Y. 2009-10, IT IS NOT ENTITLED TO EXEMPTION/ DEDUCTION H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 188 CLAIMED U/S 10 OR U/S 11 APPLYING RATIO OF JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA P. LTD. MATTER CARRIED TO CIT(A) AND CIT(A) HELD AS UNDER : 21.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THECASE. ADMITEDLY THE APPELLANT SOCIETY HAS NOT FI LED RETURN OF INCOME FOR A.Y. 2009- 10 AS REQUIRED U/S 139(4) OF THE ACT NEITHER WITHIN DUE TIME SPECIFIED U/S 139(1) AND NOT EVEN WITHIN THE PERMISSIBLE TIME FOR BELATED RE TURN U/S 139(4) OF THE ACT. SINCE, THE APPELLANT HAS NOT FILED ITS RETURN OF INCOME FO R A.Y.2009-10 WITHIN THE TIME PRESCRIBED U/S 139 OF THE ACT, THE APPELLANT HAS NO T FULFILLED THE CONDITION LAID DOWN IN THE REGISTRATION U/S 12AA GRANTED BY THE CIT TO THE APPELLANT AND, THEREFORE, THE APPELLANT CANNOT AVAIL BENEFIT OF REGISTRATION GRAN TED U/S 12AA BY THE CIT FOR CLAIMING EXEMPTION U/S 1 1 OF THE ACT FOR A.Y.2009-10. THE SUBMISSION OF THE APPELLANT THAT LD. CIT. WHILE ISSUING REGISTRATION U/S 12AA, CANNOT LEGALLY PUT CONDITIONS TO BE FULFILLED FOR A VAILING BENEFIT OF SECTION 1 I IS ALSO NOT TENABLE BECAUSE IF THE SUBMISSION OF THE APPELLANT IS ACCEPTED THAT THE CONDITION LAID DOWN IN REGISTRATION U/S 12AA BY THE CIT IS NOT LEG AL, IN THAT CASE THE REGISTRATION GRANTED BY THE LD. CIT ITSELF BECOMES ILLEGAL AND V OID, WHICH MEANS THAT APPELLANT WAS NOT GRANTED A VALID REGISTRATION U/S 12AA, AND IN THAT SITUATION ALSO THE APPELLANT WOULD NOT BE ELIGIBLE FOR EXEMPTION U/S 11 & 12 OF THE ACT. THE FURTHER SUBMISSION OF THE APPELLANT THAT NO TIME LIMIT HAS BEEN SPECIF IED IN SECTION 139(4A) FOR FILING RETURN IS ALSO NOT TENABLE BECAUSE IN SECTION 139(4 A) IT IS CLEARLY PROVIDED THAT ALL THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APP LY AS IF IT WERE A RETURN REQUIRED TO BE FURNISHED UNDER SUB-SECTION (1). THUS, THE TIME L IMIT PRESCRIBED FOR FURNISHING RETURN U/S 139(1) IS A FULLY APPLICABLE TO THE RETURN OF I NCOME TO BE FURNISHED U/S 139(4A) OF THE ACT. THUS, THE AO WAS JUSTIFIED IN DENYING THE APPELLANTS CLAIM OF EXEMPTION U/S 11 OF THE ACT FOR A.Y. 2009-10 ON THIS ACCOUNT ITSE LF. FURTHER, IT MAY ALSO BE RELEVANT TO MENTION HERE TH AT SECTION 12A PROVIDES CONDITIONS FOR APPLICABILITY OF SECTION 11 & 12 OF THE'ACT. ON E OF THE CONDITIONS LAID DOWN U/S 12A( 1 )(B) IS THAT THE ACCOUNTS OF THE CHARITABLE TRUST OR INSTITUTION HAS TO BE AUDITED BY AN ACCOUNTANT AND SUCH AUDIT REPORT HAS TO BE FURNISHE D ALONGWITH RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. THE PROVISIONS OF SEC TION 12A(L)(B) READS AS UNDER: CONDITIONS FOR APPLICABILITY OF SECTIONS 11 AND 12 12A. (1) THE PROVISIONS OF SECTION 11 AND SECTION 1 2 SHALL NOT APPLY IN RELATION TO THE INCOME OF ANY TRUST OR INSTITUTION UNLESS THE FOLLO WING CONDITIONS ARE FULFILLED, NAMELY :- (A) (AA) (B) WHERE THE TOTAL INCOME OF THE TRUST OR INSTITUT ION AS COMPUTED UNDER THIS ACT WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION 11 AND SECTION 12 EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TA X IN ANY PREVIOUS YEAR, THE ACCOUNTS OF THE TRUST OR INSTITUTION FOR THAT YEAR HAVE BEEN AUDITED BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288 AND THE PERSON IN RECEIPT OF THE INCOME FURNISHES ALONGWITH THE RETUR N OF INCOME FOR THE RELEVANT H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 189 ASSESSMENT YEAR THE REPORT OF SUCH AUDIT IN THE PRE SCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAYBE PRESCRIBED NOW, IN THE INSTANT CASE, THE APPELLANT HAS NOT FU RNISHED RETURN OF INCOME FOR A. Y.2009- 10 U/S 139(4A) AND, THEREFORE, HAS ALSO NOT FURNISHED THE AUDIT REPORT BY AN ACCOUNTANT ALONGWITH THE RETURN OF INCOME AND, THUS , DID NOT FULFILL THE CONDITION LAID DOWN U/S 12A( L)(B) OF THE ACT. THEREFORE, THE APPE LLANT WAS NOT ELIGIBLE FOR EXEMPTION U/S 11 & 12 OF THE ACT FOR A. Y.2009-10. EVEN IN RESPECT OF A.Y.2010-11, THE APPELLANT HAS N OT FILED RETURN OF INCOME U/S 139(4A) WITHIN THE TIME SPECIFIED U/S 139(1) OF THE ACT AND, THUS, THE APPELLANT HAS NOT FULFILLED THE CONDITION LAID DOWN BY THE CIT IN THE REGISTRATION GRATED U/S 12A AS WELL AS THE CONDITION LAID DOWN U/S 12A(L)(B). THER EFORE, THE APPELLANT WAS NOT ELIGIBLE FOR EXEMPTION U/S 11 & 12 OF THE ACT FOR A. Y. 2010 -11 ALSO. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES. THE LD. AR HAS MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER: IT IS SUBMITTED THAT FIRST OF ALL, THE LD AO EXCEED ED IN HIS JURISDICTION IN HOLDING SO AS UNDER THE INCOME TAX ACT, THE POWER OF CANCELLATION OF REGISTRATION VESTS WITH THE CIT ONLY. SIMILARLY, CIT(A) WAS GROSSLY IN ERROR IN OB SERVING THAT IF THE CONDITION OF FILING RETURN AS PER SECTION 139 (4A) IS NOT LEGAL, AS CLA IMED BY ASSESSEE, THEN THE REGISTRATION GRANTED BY THE CIT ITSELF BECOME ILLEG AL AND VOID, WHICH MEANS THAT THE APPELLANT WAS NOT GRANTED A VALID REGISTRATION U/S 12AA AND IN THAT SITUATION ALSO THE APPELLANT WOULD NOT BE ELIGIBLE FOR EXEMPTIONS U/S 11 & 12 OF THE ACT. THIS IS BECAUSE SEC. 12AA NOWHERE CONFERS ANY SUCH CONDITION TO BE PUT BY CIT WHILE GRANTING REGISTRATION U/S 12AA WHICH IS NOT MANDATED BY THE STATUTE AS CIT CANNOT ENLARGE THE SCOPE OF ANY PROVISION WHICH HAS NOT BEEN ENACTED I N THE ENABLING PROVISION. THE LD. CIT GRANTS REGISTRATION IF THE INSTITUTION SATISFIE S TWIN CONDITION OF GENUINENESS AND CARRYING OUT OF ACTIVITIES IN ACCORDANCE WITH ITS O BJECTS. SIMILARLY, THE CANCELLATION OF REGISTRATION GRANTED U/S 12AA IS DONE BY HIM IF THE TWIN CONDITIONS ARE NOT SATISFIED. FURTHER, IT MAY ALSO BE KINDLY NOTED THAT SEC. 139( 4A) NOWHERE STIPULATES TIME LIMIT FOR FILING RETURN OF INCOME BY A CHARITABLE INSTITUTION . IT MERELY MANDATES THAT INCASE THE TOTAL INCOME OF THE INSTITUTION EXCEEDS EXEMPTION L IMIT, IT WILL HAVE TO FILE RETURN. FURTHER, THE LD. CIT(A) HAS STATED THAT AS PER SEC. 12A(1)(B), AUDIT REPORT HAS TO BE FURNISHED ALONGWITH RETURN OF INCOME AND SINCE THE ASSESSEE HAS NOT FURNISHED RETURN OF INCOME FOR A.Y. 2009-10 & 2010-11 AND HENCE ALSO NOT FURNISHED AUDIT REPORT ALONGWITH THE RETURN OF INCOME, HE HAS NOT FULFILLE D THE CONDITION LAID DOWN IN SEC 12A(1)(B) AND THEREFORE WAS NOT ELIGIBLE FOR EXEMPT ION U/S 11 & 12 FOR A.Y. 2009-10 AND 2010-11. IN THIS CONNECTION IT IS SUBMITTED THA T SINCE THERE WAS NO SUCH CONDITION OF FILING RETURN BEFORE DUE DATE PRIOR TO A.Y. 2016 -17, AS SUBMITTED BELOW, AND THE AUDIT REPORT HAS TO BE FURNISHED ALONGWITH THE RETU RN, THE EXEMPTIONS U/S 11 & 12 CANNOT BE HELD AS INELIGIBLE FOR SUBJECT A.Y. 2009- 10 AND 2010-11, AS WRONGLY CONTENDED BY AO AND CONFIRMED BY CIT(A) . MOREOVER, OUR ASSERTION THAT THERE WAS NO SUCH COND ITIONS OF FILING RETURN BEFORE DUE DATE FOR AVAILING EXEMPTION U/S 11 PRIOR TO A.Y. 20 16-17 IS FURTHER FORTIFIED FROM THE FACT THAT A NEW SUB-SECTION (9) OF SECTION 13 WAS I NSERTED BY THE FINANCE ACT, 2015 EFFECTIVE ONLY FROM 1-4-2016, ACCORDING TO WHICH IF RETURN IS NOT FILED BEFORE DUE DATE, NOTHING CONTAINED IN SEC. 11 SHALL OPERATE SO AS TO ALLOW EXEMPTION OF INCOME. THIS IS A NEW INSERTION IN THE SEC. WHICH CLEARLY DEMONSTRA TES THAT PRIOR TO A.Y. 2016-17, THERE WAS NO SUCH CONDITION ON THE STATUTE BOOK. TH E RELEVANT PORTION OF SUB-SECTION (9) IS REPRODUCED AS UNDER : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 190 NOTHING CONTAINED IN SUB-SECTION (2) OF SECTION 11 SHALL OPERATE SO AS TO EXCLUDE ANY INCOME FROM THE TOTAL INCOME OF THE PREVIOUS YEAR O F A PERSON IN RECEIPT THEREOF, IT- (I) THE STATEMENT REFERRED TO IN CLAUSE (A) OF THE SAID SUB-SECTION IN RESPECT OF SUCH INCOME IS NOT FURNISHED ON OR BEFORE THE DUE D ATE SPECIFIED UNDER SUB- SECTION (1) OF SECTION 139 FOR FURNISHING THE RETUR N OF INCOME FOR THE PREVIOUS YEAR ; OR (II) THE RETURN OF INCOME FOR THE PREVIOUS YEAR IS NOT FURNISHED BY SUCH PERSON ON OR BEFORE THE DUE DATE SPECIFIED UNDER SUB-SECTION (1) OF SECTION 139 FOR FURNISHING THE RETURN OF INCOME FOR THE SAID PREVIO US YEAR. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, THE AO WAS NOT CORRECT IN HOLDING THAT SINCE THE ASSESSEE HAS FILED BELATED RETURN FOR A.Y. 2009-10 AND 2010-11, IT IS NOT ENTI TLED TO EXEMPTION/ DEDUCTION CLAIMED U/S 10 OR U/S 11 APPLYING RATIO O F JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA P. LTD. THIS IS BECAUSE AS RIGHTLY POINTED OUT BY AR, THERE WAS NO SUCH CONDITIONS OF FILING RETURN BEFORE DUE DATE FOR AVAILING EXEMPTIO N U/S 11 PRIOR TO A.Y. 2016-17. THIS IS FORTIFIED FROM THE FACT THAT A NEW SUB-SECTION (9) OF SECTION 13 WAS INSERTED BY THE FINANCE ACT, 2015 EF FECTIVE ONLY FROM 1- 4-2016, ACCORDING TO WHICH IF RETURN IS NOT FILED B EFORE DUE DATE, NOTHING CONTAINED IN SEC. 11 SHALL OPERATE SO AS TO ALLOW E XEMPTION OF INCOME. HENCE, THE ABOVE FINDINGS OF AO FOR A.Y. 2009-10 AN D 2010-11 ARE NOT AS PER LAW AND ARE QUASHED. THIS GROUND OF THE ASSE SSEES IS ALLOWED. 30.2 THE ASSESSEE HAS RAISED THE ISSUE OF D EPRECIATION ON BUILDING UNDER CONSTRUCTION H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 191 SHORT FACTS OF THE ISSUE ARE THAT THE AO OBSERVED T HAT AS PER THE FIXED ASSETS SCHEDULE, THE BUILDING WAS UNDER CONST RUCTION, THEREFORE, NO DEPRECIATION CAN BE ALLOWED ON THE BUILDING. MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME. THE LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. THE LD. AR HAS MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER : I. THE SUBJECT ADDITION IS BEYOND THE PURVIEW OF SE ARCH ASSESSMENTS U/S 153A FOR A.Y. 2005-06 & 2006-07 BECAUSE ; NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJ ECT ADDITION SHOWING IT AS UNDISCLOSED INCOME. IT WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FI NANCIAL STATEMENTS PRIOR TO DATE OF SEARCH. II. MOREOVER, ON MERITS, THE ADDITION MADE BY AO IS UNCALLED FOR DUE TO FOLLOWING REASONS : 1. THE AO HAS DISALLOWED ENTIRE DEPRECIATION ON JNC T COLLEGE BUILDING. 2. INFACT JNCT COLLEGE WAS STARTED IN F.Y. 2004-05 CORRESPONDING TO A.Y.2005-06 AFTER THE BUILDING WAS CONSTRUCTED. THI S IS CLEAR FROM THE FEES OF OVER RS. 1 CRORE SHOWN AS RECEIPTS IN ITS INCOME AND EXPENDI TURE ACCOUNT. SINCE BUILDING WAS UNDER CONSTRUCTION IN F.Y. 2003-04 (A.Y. 2004-05), THE SAME NOMENCLATURE INADVERTENTLY CONTINUED IN NEXT F.Y. 2004-05 (A.Y. 2005-06) AND F.Y. 2005-06 (A.Y. 2006-07) IN THE AUDITED BALANCE SHEET. THAT THE BUI LDING WAS READY, HAS ALSO BEEN ACCEPTED BY THE THEN AO IN HIS SCRUTINY ASSESSMENT U/S 143(3) FOR A.Y. 2006-07 BY ALLOWING DEPRECIATION ON THE BUILDING. 3. THE STATUTORY AUDITOR HAS HIMSELF CERTIFIED AND APPROVED FINANCIAL STATEMENTS COMPUTING DEPRECIATION ON BUILDING AS IN THE FIXED ASSETS SCHEDULE, WHICH PROVES THE POINT. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, THE MISTAKE WAS HUMAN, AS POINTED OUT BY AR OF THE ASSE SSEE AND SINCE WE HAVE ALREADY HELD, WHEN ASSESSMENTS OF A.Y. 2005-06 AND 2006-07 H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 192 WERE COMPLETED ON THE DATE OF SEARCH AND WERE NOT P ENDING AND NO INCRIMINATING MATERIAL WAS FOUND REGARDING THE SUBJ ECT ISSUE, NO ADDITION COULD BE MADE IN A.Y. 2005-06 AND 2006-07 AND HENCE ARE DELETED. THIS GROUNDS OF ASSESSEE IN A.Y. 2005-06 AND 2006-0 7 ARE ALLOWED. 30.3 THE ASSESSEE HAS RAISED THE ISSUE OF SECUR ITY DEPOSIT FROM STUDENT RS.70,30,000/- SHORT FACTS OF THE ISSUE IS THAT THE LD AO HAS TREA TED SECURITY DEPOSIT FROM STUDENTS OF RS. 70,30,000/- AS UNEXPLA INED CREDIT STATING THAT IT IS NOT CLEAR AS TO UNDER WHICH CIRCUMSTANCE S THE SUM WAS RECEIVED FROM STUDENTS. THE ASSESSEE HAS NOT PRODUC ED BOOKS OF ACCOUNT AND RELEVANT RECORDS FOR VERIFICATION. MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME FOR SIMILAR REASONS . LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES. THE LD. AR HAS MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER: IT IS SUBMITTED THAT THE ADDITION MADE BY AO IS BEY OND THE PURVIEW OF SEARCH ASSESSMENT U/S 153A FOR A.Y. 2008-09 BECAUSE : NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJ ECT ADDITION SHOWING IT AS UNDISCLOSED INCOME. IT WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FI NANCIAL STATEMENTS PRIOR TO DATE OF SEARCH. 1. THAT DURING THE YEAR, SECURITY DEPOSIT WAS COLLE CTED FROM STUDENTS APART FROM FEES AS PER THE ACITE NORMS. THE SAME HAS BEEN DULY ACCOUNTED F OR IN THE BOOKS OF ACCOUNTS AVAILABLE BEFORE AO AND SHOWN AS LIABILITY IN THE A UDITED FINANCIAL STATEMENTS. IT IS REFUNDABLE IN NATURE. AS AND WHEN STUDENT LEAVES TH E COLLEGE AFTER COMPLETING THE EDUCATIONAL COURSE, THE SAME SHALL BE REFUNDED TO H IM/HER. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 193 2. THE SEIZED BOOKS OF ACCOUNTS AND COMPUTER DATA W ERE GIVEN TO THE ASSESSEE AS LATE AS ON 1-7-2013 AFTER PASSING OF THE ASSESSMENT ORDER A ND HENCE WAS NOT POSSIBLE TO FURNISH DETAILS EITHER BEFORE AO OR BEFORE CIT(A). WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, THE ADDITION CONFIRMED BY CIT(A) DOES NOT REQUIRE INTER FERENCE HOWEVER ASSESSEE BEING CHARITABLE ORGANIZATION, IT SHALL BE ENTITLED FOR EXEMPTION U/S 11 R.W.S. 12 AND 13 ( BY TREATING IT WITHIN 85% LIMIT OF APPLICATION TOWARDS CHARITABLE PURPOSE AND ACCUMULATION AS PER LAW). THIS APPEAL OF THE ASSESSEE IS DISMISSED. 30.4 THE ASSESSEE HAS RAISED THE ISSUE OF ALLOW ABILITY OF COMPUTER SOFTWARE EXPENDITURE SHORT FACTS OF THE ISSUE IS THAT THE AO OBSERVED TH AT COMPUTER SOFTWARE EXPENSES ARE CAPITAL EXPENDITURE AND IS NO T ALLOWABLE AS THE ASSESSEE IS A BUSINESS ENTITY. MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME FOR THE SAME REASON. THE LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. THE LD. AR MADE ORAL AND WRITTEN SUBMISSIONS AS UND ER: I) THE ADDITION MADE BY AO IS UNCALLED FOR DUE TO F OLLOWING REASONS : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 194 THE SUBJECT ADDITION IS BEYOND THE PURVIEW OF SEARC H ASSESSMENTS U/S 153A FOR A.Y. 2008-09 BECAUSE : NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJ ECT ADDITION SHOWING IT AS UNDISCLOSED INCOME. IT WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FI NANCIAL STATEMENTS PRIOR TO DATE OF SEARCH. II) MOREOVER, AND WITHOUT PREJUDICE TO ABOVE, THE A BOVE EXPENSES ARE VERY MUCH REVENUE IN NATURE AS PER SETTLED LAW. NOTWITHSTANDING THE SAME , EVEN IF THESE ARE TREATED AS CAPITAL EXPENDITURE, IT SHOULD ALSO BE CONSIDERED AS AND QU ALIFIES FOR APPLICATION OF INCOME FOR THE PURPOSE OF SEC. 11 OF THE INCOME TAX ACT. THEREFORE , THE CAPITAL EXPENDITURE DEBITED TO INCOME AND EXPENDITURE ACCOUNT BE KINDLY ALLOWED TO THE ASSESSEE. RELIED UPON : GAGAN EDUCATION SOCIETY V/S ADDL CIT (2011) 56 DTR 199 (AGRA) WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, WHEN WE HAVE ALREADY HELD IN OUR SEPARATE ORDER ON CANCELLA TION OF REGISTRATION U/S 12AA (3), AS AFORESAID, THAT THE ASSESSEE IS CH ARITABLE ORGANIZATION ELIGIBLE FOR EXEMPTION U/S 11, 12 AND 13 AND EXPEND ITURE ON COMPUTER SOFTWARE HAVE BEEN SPENT FOR CHARITABLE PURPOSES ON LY THEREFORE, AO IS DIRECTED TO TREAT THIS EXPENDITURE AS APPLICATION T OWARDS CHARITABLE PURPOSES. THIS GROUND OF ASSESSEE IS ALLOWED. 30.5 THE ASSESSEE HAS RAISED THE ISSUE OF ALLOW ABILITY OF SITE & CAMPUS DEVELOPMENT EXPENDITURE. SHORT FACTS OF THE ISSUE IS THAT THE AO OBSERVED TH AT ON CAMPUS DEVELOPMENT WERE CAPITAL EXPENDITURE AND IS NOT ALL OWABLE AS THE ASSESSEE IS A BUSINESS ENTITY. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 195 MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME FOR THE SAME REASON. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. THE LD. AR HAS MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER: I) THE ABOVE EXPENSES ARE VERY MUCH REVENUE IN NAT URE. NOTWITHSTANDING THE SAME, EVEN IF THESE ARE TREATED AS CAPITAL EXPENDIT URE, IT SHOULD ALSO BE CONSIDERED AS AND QUALIFIES FOR APPLICATION OF INCOME FOR THE PURPOSE OF SEC. 11 OF THE INCOME TAX ACT. RELIED UPON : APPLICATION OF THE INCOME FOR CHARITABLE PURPOSES S HOULD NOT BE DISTINGUISHED ON THE BASIS OF APPLICATION FOR REVENUE PURPOSES AND CAPIT AL PURPOSES. EVEN IF THE EXPENDITURE HAS BEEN INCURRED FOR ACQUIRING CAPITAL ASSET TO BE USED FOR THE OBJECT OF THE TRUST, THE ASSESSEE WILL BE ENTITLED FOR THE EX EMPTION AS THIS WILL TANTAMOUNT TO APPLICATION OF THE INCOME FOR CHARITABLE PURPOSES. GAGAN EDUCATION SOCIETY V/S ADDL CIT (2011) 56 DTR 199 (AGRA) WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, WHEN WE HAVE ALREADY HELD IN OUR SEPARATE ORDER ON CANCELLA TION OF REGISTRATION U/S 12AA (3), AS AFORESAID, THAT THE ASSESSEE IS CH ARITABLE ORGANIZATION ELIGIBLE FOR EXEMPTION U/S 11, 12 AND 13 AND EXPEND ITURE ON CAMPUS AND SITE DEVELOPMENT HAVE BEEN SPENT FOR CHARITABLE PUR POSES ONLY THEREFORE, AO IS DIRECTED TO TREAT THIS EXPENDITURE AS APPLICATION TOWARDS CHARITABLE PURPOSES. THIS GROUND OF ASSESSEE IS ALL OWED. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 196 31. IN THE CASE OF HAI HAY KSHATRIYA EDUCATION SOCIETY THE FOLLOWING INDEPENDENT GROUNDS RELATING TO ABOVE SOCIETY ARE DEALT WITH AS UNDER: 31.1 THE DEPARTMENT HAS RAISED THE ISSUE OF UNE XPLAINED CURRENT LIABILITY U/S 68 REPRESENTING BUS EXPENSES PAYABLE. SHORT FACTS OF THE ISSUE ARE THAT THE AO NOTED ON P ERUSAL OF THE AUDITED BALANCE SHEETS AS ON 31.03.2009 & 31.03.201 0 THAT A SUM OF RS.15,52,500/- AS ON 31.03.2009 (A.Y.2009-10) AND O F RS.28,16,588/- AS ON 31.03.201.0 (A.Y.2010-11) HAVE BEEN SHOWN AS 'BUS EXPENSES PAYABLE' UNDER THE HEAD 'CURRENT LIABILITIES AND PR OVISIONS'. THE AO NOTICED FROM THE INCOME AND EXPENDITURE ACCOUNT FOR A.YS.2009-10 & 2010-11 THAT NO EXPENDITURE UNDER THE HEAD 'BUS EXP ENDITURE' HAS BEEN DEBITED THEREIN AND ALSO, THERE IS NO OTHER MATCHIN G EXPENDITURE EXCEPT AN AMOUNT OF RS.1,01,850/- FOR A.Y. 2009-10 AND OF RS. I,25,839/- FOR A.Y.2010-11 ON ACCOUNT OF 'VEHICLE EXPENSES'. FURTH ER, IT WAS NOTICED FROM THE BALANCE SHEET AS ON 31.03.2008 RELEVANT TO A.Y. 2008-09 THAT NO SUCH LIABILITY ON ACCOUNT OF BUS EXPENSES PAYABL E WAS APPEARING IN THE SAID BALANCE SHEET. THE AO STATED THAT THE APP ELLANT HAS NOT FURNISHED ANY REPLY IN RESPONSE TO SPECIFIC QUERY M ADE VIDE THE ABOVE SAID QUESTIONNAIRE. THE AO NOTED THAT IT IS THEREFO RE APPARENT THAT IN THE ABSENCE OF ANY BUS EXPENSES IN THE INCOME EXPENDITU RE ACCOUNT, THERE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 197 CANNOT BE ANY PROVISION FOR THE SAID EXPENSES, PART ICULARLY WHEN THERE IS NO OPENING OUTSTANDING PROVISION FOR THE SAID EXPEN DITURE AS ON 01.04.2008. THUS, THE ENTRY APPEARING IN THE BALANC E SHEET OF THE APPELLANT REGARDING BUS EXPENSES PAYABLE OF RS.15,5 2,500/-AS ON 31.03.2009 (A.Y.2009-10) AND OF RS.12,64,088/- AS O N 31.03.2010 (A.Y.2010-11) ARE NOT GENUINE. THESE ARE CREDIT ENT RIES IN GUISE OF PROVISION SHOWN UNDER THE HEAD 'CURRENT LIABILITIES '. THE AO CONCLUDED THAT THE APPELLANT HAS FAILED TO DISCHARGE ONUS CAS T UPON IT TO ESTABLISH THE GENUINENESS OF THE SAID LIABILITY OF RS.15,52,5 00/- IN A.Y. 2009-10 AND OF RS.12,64,088/- IN A.Y.2010-11. MATTER CARRIED TO CIT(A) WHO CONFIRMED THE ADDITION . THE OPERATIVE PART OF THE ORDER OF CIT(A) IS AS UNDER : 39.3 FOR THE SAKE OF BREVITY, IT MAY BE MENTIONED THAT THIS ISSUE HAS ALSO BEEN DEALT BY ME WHILE DISCUSSING THE ADDITION MADE ON ACCOUNT OF BUS FEE HEREINABOVE IN THIS ORDER. IT HAS BEEN NOTICED THAT THE LIABILITY OF BUS EXPENSES PAYABLE OF RS.15,52,500/- IN A.Y. 2009-10 AND ACCRETION OF RS.12,64,088/- IN A.Y.2010-11 SHOWN IN THE BALANCE SHEETS RELEVANT TO A.YS.2009-10 & 2010-11 IS NOT LIABILITY BUT INFACT THESE AMOUNTS WERE PROFITS (SURPLUS) EARNED BY THE APPELLANT FROM PROVIDING BU S FACILITIES TO THE STUDENTS OF LNCT, JABALPUR. THEREFORE, IT HAS BEEN HELD THAT THE PROFITS OF RS.15,52,500/- IN A.Y.2009-10 AND OF RS.12,64,088/- IN A.Y. 2010-11 SHOULD HAVE BEEN CREDITED IN INCOME & EXPENDITURE. ACCOUNT S OF THE RELEVANT PERIODS AND, ACCORDINGLY, THE ADDITIONS TO THE EXTENT OF RS .15,52,500/- IN A.Y. 2009-10 AND OF RS.12,64,088/- IN A.Y.2010-I 1 HAVE BEEN CON FIRMED. SINCE, THE ADDITIONS IN RESPECT OF THESE AMOUNTS HAVE BEEN CON FIRMED ON ACCOUNT OF UNACCOUNTED BUS FEE IN AN EARLIER ISSUE, THOUGH ADD ITIONS OF THESE AMOUNTS ARE CALLED FOR IN A.YS.2009-10 & 2010-11, YET NO SE PARATE ADDITION UNDER THE HEAD UNEXPLAINED CURRENT LIABILITIES IS REQUIRED TO BE AGAIN MADE. ACCORDINGLY, THIS ISSUE IS DISPOSED OF. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 198 LD. DR RELIED ON THE ORDERS OF THE ASSESSING OFFICE R. THE SUBMISSION OF LD. AR OF THE ASSESSEE HAS BEEN REPRODUCED BY CIT(A) IN HIS ORDER AND HENCE NOT REPEATED HERE. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE DEPARTMENT HAS INADVERTENTLY APPEALED AGAINST THIS ISSUE WHEREAS THE CIT(A) HAD CONFIRMED THE ADDITION AND NO APPEAL WAS FILED BY ASSESSEE THEIR AGAINST. HENCE, THIS GROUND OF APPEAL OF DEPA RTMENT IS REJECTED BEING INFRUCTUOUS. 31.2 THE ASSESSEE HAS RAISED THE ISSUE OF DISAL LOWANCE OF ADVANCE WRITTEN OFF. SHORT FACTS OF THE ISSUE IN CASE OF ON PERUSAL OF T HE INCOME AND EXPENDITURE ACCOUNT OF THE ASSESSEE, IT IS SEEN THA T AN AMOUNT OF RS. 100000/- HAS BEEN CLAIMED AS ADVANCE WRITTEN OFF I N A.Y. 2005-06. NO DETAILS REGARDING THE NATURE OF ADVANCE, THE PURPOS E OF ADVANCE AND THE PERSON TO WHOM SUCH ADVANCE WAS GIVEN IS AVAILABLE ON RECORD. IN THE ABSENCE OF ANY RELEVANT DETAILS THE SAID SUM OF RS. 100000/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME. TH E OPERATIVE PART OF THE ORDER OF CIT(A) IS AS UNDER : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 199 28.3 I HAVE CAREFULLY CONSIDERED THE REASONS REC ORDED BY THE AO IN ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. I T MAY BE NOTED THAT THE APPELLANT HAS NOT FILED ANY DETAILS REGARDING NATUR E OF ADVANCE AND JUSTIFICATION FOR CLAIMING DEDUCTION ON ACCOUNT OF ADVANCE WRITTEN OFF OF RS.1,00,000/- DURING ASSESSMENT PROCEEDINGS AS WELL AS IN APPELLATE PROCEEDINGS. IN THESE CIRCUMSTANCES, NO INTERFERENC E IS WARRANTED IN THE ACTION OF AO DISALLOWING THE ADVANCE WRITTEN OFF OF RS.1,00,000/-. HENCE; ADDITION OF RS.1,00,000/- IN A.Y. 2005-06 ON THIS A CCOUNT IS CONFIRMED. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE SAID ADDITION IS BEYOND THE PURVIEW OF SEARCH ASSESSMENTS U/S 153A B ECAUSE ASSESSMENT OF SUBJECT A.Y.2005-06 WAS MADE U/S 143( 3) AND NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJECT ADDITION SHOWING IT AS UNDISCLOSED INCOME AND THAT ADVANCE WRITTEN OFF WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FINANCIAL STATEMENTS PRIOR T O DATE OF SEARCH. IT WAS CONTENDED THAT THE ADDITION MADE BY THE AO MAY BE D ELETED. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, AS ALREADY HELD, SINCE ASSESSMENT OF A.Y. 2005-06 WAS CONCLUDE D AND WAS NOT PENDING ON THE DATE OF SEARCH AND NO ADVERSE MATERI AL WAS FOUND REGARDING THE ISSUE, THE ADDITION IS UNCALLED FOR A ND HENCE DELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. 31.3 THE ASSESSEE HAS RAISED THE ISSUE OF DISAL LOWANCE OF FREE HOMEO CAMP EXPENSES AND MEDICAL CAMP EXPENSES : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 200 SHORT FACTS OF THE ISSUE IN CASE OF THE AO MADE THE DISALLOWANCE STATING THAT SINCE THE ACTIVITIES OF THE ASSESSEE H AVE BEEN HELD TO BE BUSINESS ACTIVITIES, THESE EXPENSES ARE NOT FOR BUS INESS PURPOSES. FURTHER THESE EXPENSES HAVE REMAINED UNVERIFIED MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME FOR SIMILAR REASONS. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES THE LD. AR HAS MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER: I. THE SUBJECT ADDITION IS BEYOND THE PURVIEW OF SE ARCH ASSESSMENTS U/S 153A FOR A.Y. 2004-05 TO 2008-09 BECAUSE: NO INCRIMINATING MATERIAL WAS FOUND REGARDING SUBJ ECT ADDITION SHOWING IT AS UNDISCLOSED INCOME. IT WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FI NANCIAL STATEMENTS PRIOR TO DATE OF SEARCH II. THE AO HAS HIMSELF ACCEPTED IN THE SAME PARA TH AT THE ABOVE EXPENSE IS APPARENTLY CHARITABLE IN NATURE. THE DISALLOWANCE W AS MADE BY HIM ONLY FOR THE REASON THAT HE HAS TREATED THE ASSESSEE AS CARRYING ON BUSINESS. III. BOOKS OF ACCOUNTS OF THE ASSESSEE ARE DULY AUD ITED AND SUPPORTED BY VOUCHERS. NO SPECIFIC EXPENDITURE OF DISALLOWANCES WAS POINTED O UT BY AO. THE EXPENSES ON MEETINGS AND SEMINAR ARE GENUINE AND ROUTINE IN NAT URE. IV. THE SEIZED BOOKS OF ACCOUNTS AND COMPUTER DATA WERE GIVEN TO THE ASSESSEE AS LATE AS ON 01.07.2013 AFTER PASSING OF THE ASSESSM ENT ORDER AND HENCE IS NOT POSSIBLE TO FURNISH DETAILS EITHER BEFORE AO OR BEF ORE CIT(A). V. IT IS A SEARCH CASE WHERE ADDITION CANNOT BE MAD E ON ESTIMATION DEVOID OF ANY EVIDENCE. SINCE THE ASSESSEE IS A CHARITABLE ORGANIZATION UND ISPUTEDLY RUNNING HOMEOPATHIC HOSPITAL AND COLLEGE, THE ADDITION MAY KINDLY BE DELETED. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 201 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE AGREE WITH THIS CONTENTION OF THE ASSESSEE THAT SINCE NO INCRIMINAT ING MATERIAL WAS FOUND IN RESPECT OF THIS ISSUE IN A.Y. 2004-05 TO 2 007-08 AND THESE ASSESSMENTS WERE NON PENDING AND CONCLUDED ON THE D ATE OF SEARCH HENCE NO ADDITION WAS WARRANTED IN A.Y. 2004-05 TO 2007-08 AND IS THEREFORE DELETED. AS REGARDS REMAINING A.Y. 2008- 09 TO 2010-11, SINCE WE HAVE TREATED THE ASSESSEE AS CHARITABLE ORGANIZA TION ELIGIBLE EXEMPTION U/S 11, HENCE IN OUR VIEW ADDITION MADE B Y AO IN A.Y. 2008- 09 TO 2010-11 ARE NOT CORRECT BECAUSE THE ASSESSEE IS A CHARITABLE ORGANIZATION IMPARTING EDUCATION WHERE THESE KIND O F EXPENDITURE ARE ROUTINE IN NATURE AND NECESSARY. SEIZED BOOKS OF AC COUNTS WERE IN THE CUSTODY OF DEPARTMENT WHICH WERE GIVEN ONLY ON 1.7. 2013 BUT NO ITEM OF DISALLOWABLE EXPENSES WAS POINTED BY AO. THEREFORE, THIS ADDITION CANNOT BE SUSTAINED AND IS DELETED IN RESPECT OF A. Y. 2008-09 TO 2010- 11 ALSO. THIS GROUND OF THE ASSESSEE IS ALLOWED. BO TH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN CASE OF OTHER ASSESSEES NAMELY RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIET Y AND RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY IN RESPECT OF HEALTH CAMP AND SOCIAL WELFARE EXPENSES. HENCE, OUR ABOVE FINDINGS WILL P REVAIL FOR THESE TWO ASSESSEES ALSO. THEREFORE, THIS GROUND OF THE THREE ASSESSEES ARE ALLOWED. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 202 31.4 THE ASSESSEE HAS RAISED THE ISSUE OF DISAL LOWANCE OF CAPITAL EXPENSES (A.Y.2007-08): SHORT FACTS OF THE ISSUE IN CASE OF AO ON GOING THR OUGH THE INCOME AND EXPENDITURE ACCOUNT OF THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION, OBSERVED THAT THE FOLLOWING EXPENSES HAVE BEEN DEBITED THEREIN IN A.Y. 2007-08 : I). SURGICAL EQUIPMENT EXPENSES RS. 43,771/- II). TUBEWELL EXPENSES RS. 27,800/- TOTAL RS. 71,571/- THE AO HELD THAT THE ASSESSEE HAS TREATED THE SAME AS REVENUE EXPENDITURE WHILE THE EXPENDITURES ARE CLEARLY CAPI TAL EXPENDITURE. HE SAID THAT THE SAID EXPENDITURE HAS BROUGHT INTO EXI STENCE AN ASSET THAT WOULD GIVE ENDURING BENEFIT TO THE ASSESSEE AND THE REFORE IT FALLS WITHIN THE FOUR CORNERS OF CAPITAL EXPENDITURE. MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME ON SIMILAR REASONS. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. THE LD. AR HAS MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER : (I) THE SUBJECT ADDITION IS BEYOND THE PURVIEW OF SEARCH ASSESSMENTS U/S 153A FOR A.Y. 2007-08 BECAUSE : ASSESSMENT OF SUBJECT A.Y. 2007-08 WAS MADE U/S 14 3(3) AND NO INCRIMINATING MATERIAL WAS FOUND REGARDING S UBJECT ADDITION SHOWING IT AS UNDISCLOSED INCOME. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 203 DISALLOWANCE OF CAPITAL EXPENSE WAS DULY DISCLOSED IN THE RESPECTIVE AUDITED FINANCIAL STATEMENTS PRIOR TO DA TE OF SEARCH. (II) THE ABOVE EXPENSES ARE VERY MUCH REVENUE IN NA TURE. NOTWITHSTANDING THE SAME, EVEN IF THESE ARE TREATED AS CAPITAL EXPENDITURE, IT SHOULD ALSO BE CONSIDERED AS AND QU ALIFIES FOR APPLICATION OF INCOME FOR THE PURPOSE OF SEC. 11 OF THE INCOME TAX ACT. THEREFORE, THE CAPITAL EXPENDITURE DEBITED TO INCOME AND EXPEN DITURE ACCOUNT BEKINDLY ALLOWED TO THE ASSESSEE. RELIED ON: GAGAN EDUCATION SOCIETY V/S ADDL. CIT (2011) 56 DTR 199 ITAT AGRA WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, WHEN WE HAVE ALREADY HELD IN OUR SEPARATE ORDER ON CANCELLA TION OF REGISTRATION U/S 12AA (3), AS AFORESAID, THAT THE ASSESSEE IS CH ARITABLE ORGANIZATION ELIGIBLE FOR EXEMPTION U/S 11, 12 AND 13 AND EXPEND ITURE ON SURGICAL EQUIPMENT AND TUBEWELL EXPENSES HAVE BEEN SPENT FOR CHARITABLE PURPOSES ONLY THEREFORE, AO IS DIRECTED TO TREAT TH IS EXPENDITURE AS APPLICATION TOWARDS CHARITABLE PURPOSES. THIS GROUN D OF ASSESSEE IS ALLOWED. 31.5 THE ASSESSEE HAS RAISED THE ISSUE OF ADDITIO N ON ACCOUNT OF UNEXPLAINED AND UNACCOUNTED EXPENSES ON THE BASIS O F LOOSE PAPER. SHORT FACTS OF THE ISSUE ARE THAT ADDITION HAS BEEN MADE BY AO ON THE BASIS OF SOME LOOSE PAPERS FOUND FROM 31, SHYAM LA HILLS, BHOPAL. THE MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME . THE OPERATIVE PART OF THE CIT(A) ORDER IS AS UNDER : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 204 37.3 I HAVE CAREFULLY CONSIDERED THE REASONS RECO RDED BY THE AO IN ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. A S MENTIONED BY THE AO PAGES 27,28 & AND PAGES 31 TO 40 OF LPS 2/4 SEIZED FROM THE PREMISES 31, SHYAMLA HILLS, BHOPAL CONTAIN UNBALANCE ACCOUNT OF VARIOUS RECEIPTS AS WELL AS AMOUNTS SPENT OR PAID FOR VARIOUS PURPOSES BY TH E APPELLANT. THERE IS NO DISPUTE REGARDING THE FACT THAT THESE DOCUMENTS BEL ONG TO THE APPELLANT SOCIETY AS IT WAS CLAIMED DURING ASSESSMENT PROCEED INGS BEFORE THE AO THAT ENTRIES RECORDED ON THESE PAPERS SEIZED HAVE BEEN D ULY RECORDED IN BOOKS OF ACCOUNT OF THE APPELLANT. THE CONTENTION OF THE APP ELLANT THAT THE INCOME RECORDED ON THESE DOCUMENTS HAS ALSO BEEN SURRENDER ED BY SHRI J.N. CHOUKSEY WHO HAS SURRENDERED RS.50,00,000/- IN A.Y. 2008-09 AND RS.20,00,000/- IN A.Y.2009- 10 IN RESPECT OF VARIOU S INCOME/ EXPENSES WRITTEN ON SEIZED LOOSE PAPERS, IS ALSO OF NO HELP TO THE A PPELLANT SOCIETY BECAUSE IT IS A TRITE LAW THAT INCOME HAS TO BE ASSESSED IN TH E HANDS OF THE WRITE PERSON. NOW, IN THIS CASE SINCE THERE IS NO DISPUTE THAT EN TRIES RECORDED ON THESE LOOSE PAPERS BELONG TO THE APPELLANT, ANY ADDITION OR DISALLOWANCE REQUIRED ON THE BASIS OF THESE PAPERS HAS TO BE MADE IN THE HAN DS OF THE APPELLANT. IT MAY BE NOTED THAT THE TOTAL OF EXPENSES AND RECEIPTS AS MENTIONED IN THE ASSESSMENT ORDER ARE PERTAINING TO THE CASH TRANSAC TIONS ONLY RECORDED ON THESE PAGES AS HAS BEEN SPECIFICALLY MENTIONED BY T HE AO IN THE ASSESSMENT ORDER, WHEREIN HE HAS CATEGORICALLY STATED THAT 'THE SUMMARY OF YEAR WISE RECEIPTS AND EXPENDITURE EXCLUDING THE RECEIPTS AND PAYMENTS BY CHEQUE AS MENTIONED IN THE SEIZED DOCUMENT IS AS UNDER'. THEREFORE, THE CONTENTION OF THE APPELLANT THAT THE LD. AO HAS ALSO TAKEN INTO A CCOUNT PAYMENTS BY CHEQUE IS NOT TENABLE. THE AO HAS ALSO POINTED OUT THE INSTANCES OF PAYMENTS IN THE NATURE OF BRIBE AND FOR OTHER ILLEG AL ACTS, WHICH ARE CERTAINLY NOT ALLOWABLE EXPENSES. THE APPELLANT HAS ALSO NOT PRODUCED BOOKS OF ACCOUNT BEFORE THEAO FOR VERIFICATION AND, THEREFOR E, THE APPELLANT FAILED TO DISCHARGE ITS ONUS TO SHOW THAT THE TRANSACTIONS RE CORDED IN THESE SEIZED DOCUMENTS WERE DULY ACCOUNTED FOR. THEREFORE, CONSI DERING THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM IN THE OPINION THAT THE AO WAS JUSTIFIED IN MAKING ADDITION OF RS.29,53,150/- IN A.Y.2008-09 AN D OF RS.36,47,697/- IN A.Y.2009-10 ON THE BASIS OF TRANSACTIONS RECORDED O N THESE SEIZED LOOSE PAPERS. HENCE, ADDITIONS OF RS.29,53,150/- IN , A.Y . 2008-09 AND OF RS.36,47,697/- IN A.Y.2009-10 MADE BY THE AO ARE CO NFIRMED. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. THE LD. AR HAS MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER : NO DETAILS HAVE BEEN GIVEN BY AO AS TO HOW HE HAS W ORKED OUT TOTAL RECEIPTS AND TOTAL EXPENDITURE STATED TO BE WRITTEN ON THE S EIZED LOOSE PAPER. THE SEIZED LPS WERE FOUND FROM THE PREMISES 31, SHYAMLA HILLS, BHOPAL WHICH IS RESIDENCE OF MR. J N CHOUKSEY. MR. J N CHOUKSEY OFF ICE BEARER/ TRUSTEE OF THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 205 CHOUKSEY GROUP HAS SURRENDERED TO PURCHASE PEACE, F OLLOWING AMOUNTS DURING COURSE OF SEARCH IN RESPECT OF VARIOUS EXPEN SES/ ENTRIES/NOTINGS WRITTEN ON SEIZED LOOSE PAPERS AND PAID TAX THEREON . THE DETAILS OF AMOUNT SURRENDERED ARE AS UNDER : F.Y. 2008-09 RS. 50,00,000/- F.Y. 2009-10 RS. 20,00,000/- (II) FIRST OF ALL THE ENTRIES / TRANSACTIONS ARE DU LY RECORDED IN THE BOOKS OF ACCOUNT, AS EXPLAINED TO AO. HOWEVER, WITHOUT PREJU DICE TO ABOVE, IN VIEW OF PAUCITY OF TIME AND WITHOUT ADMITTING, EVEN AFTER W ORKING OUT PEAK OF THE ENTRIES ON THE SAID LOOSE PAPERS, AS SPELT HEREINAF TER, STILL IF ANY MEAGER BALANCE AMOUNT REMAINS, THE SAME IS COVERED IN THE OVERALL AMOUNT OF RS. 70,00,000/-SURRENDERED BY MR. J N CHOUKSEY IN HIS I NDIVIDUAL HANDS, AS ABOVE. IT MAY PLEASE BE NOTED THAT THE AMOUNT SURRE NDERED BY MR. CHOUKSEY WAS COMPREHENSIVE, ADHOC AND WITHOUT REFERENCE TO A NY SPECIFIC ENTRIES ON LOOSE PAPERS AND HENCE ENTRIES ON THE SUBJECT LOOSE PAPER MAY BE COVERED IN AND MAY BE GIVEN SET OFF FROM THE AMOUNT SURRENDERE D BY MR. J N CHOUKSEY. THIS IS WITHOUT PREJUDICE TO OUR SUBMISSION THAT TH E ENTRIES / TRANSACTIONS ARE DULY RECORDED IN THE BOOKS OF ACCOUNTS. (III) THE AO HAS NOT WORKED OUT PEAK OF THE ENTRIE S ON LOOSE PAPERS; HE HAS ADDED ALL RECEIPTS (INFLOW) AS WELL AS EXPENDIT URE (OUTFLOW) BOTH WRITTEN ON THE SAME PAPER WITHOUT GIVING SET-OFF. (IV) HE HAS EVEN ADDED VARIOUS CHEQUE-TRANSACTIONS AS UNEXPLAINED CASH EXPENDITURE/RECEIPT DESPITE THE FACT THAT NO UNDISC LOSED BANK ACCOUNT OF SHRI J N CHOUKSEY OR OF THE ASSESSEE SOCIETY WAS FOUND. THE DETAILS OF SUCH CHEQUE-TRANSACTIONS ARE AS UNDER : LPS PAGE SR. NO AT LPS PAGE DATE AMOUNT WRITTEN NARRATION WRITTEN ON LPS 27 28 19.2.2009 1,00,000/- BY CASH DEPOSITED IN BOB . TO IN CASH THE CHEQUE OF RS. 5 LAKHS NO. 015727 AS THE AMOUNT IN BANK OF BARODA WAS LESS FOR ENCASEMENT OF ABOVE CHEQUE. 28 6 10.1.09 2,00,000/- BY CHEQUE OF UBI OF AKC ACC OUNT TO DHEERENDRA SINGH H.T. CONTRACTOR FOR PURCHASING H.T. CABLES & JOINT KITS 28 26 18.2.09 10,36,500 THE DRAFT RS, 10,36,500/- D T. 30.1.09 OF UBI BHOPAL DEPOSITED IN BANK ACCOUNT AT BOB MAIN 29 1 20.12.07 CHEQUE 17,350 CHEQUE OF NARAYAN SHREE COLLEGE FOR EXECUTION OF SALE DEED, GIVEN DANPATI STAMP VENDOR. 29 7 6.6.08 67,900 BY CHEQUE NO. 319611 DT. 10.2.08 OF J.K. HOSPITAL & RESEARCH CENTRE OF PNB, HAMIDIA ROAD, BPL FOR 5000/- CEMENT H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 206 BAG 29 10 6.6.08 CHEQUE 7,40,000 BY CHEQUE OF B.O. BY ANUPAM BHAI 29 12 BY TRANSFER 10,00,000 BY TRANSFER IN MY UBI A/C NO 305 29 13 BY TRANSFER 1,00,000 BY TRANSFER IN MY UBI A/C NO 305 29 16 3.12.08 4.12.08 BY TRANSFER 1,00,000 BY TRANSFER IN MY UBI A/C NO 305 29 17 28.1.09 29.1.09 251595 BY TRANSFER FROM BPL MY UBI A/C 29 18 19.2.08 200000 BY CHEQUE OF BOR. MAIN BRANCH BP SENT BY ANUPAM BHAI FROM BHOPAL FOR SALARY OF JAN 2009 OF DIVERSION ETC. 29 19 18.208 880000 DEMAND DRAFT DT. 30.1.09 OF UBI BHOPAL FOR REFUND OF AMOUNT BY RGPV. REPETITION OF ENTRY AT LPS PG. 28 SR. 26 ON EARLIER PAGE OF TABLE. HERE DATE IS WRONGLY WRITTEN AS 18.02.08 IN PLACE OF 18.02.09 30 19 17.12.0 MESS CHEQUE 10000000 BY ANAND CHOUKSEY (BOYS HOSTEL MESS) 32 190 29.12.08 BY CHEQUE OF MY A/C AT UBI. JBP. CHEQUE NO. 249001 DT. 29.12.08 GIVEN IN NAME OF HARI SINGH KHICHI AGAINST 3 MONTHS' RENT OF GIRLS HOSTEL FROM OCT. TO DEC. 2008 @ RS. 900/- EACH GIRL FOR 27 GIRLS 900X27= 24300X3 = 72900/-OUT OF THIS RENT RS. 5000 DEDUCTED FROM THE ADVANCES OF 30,000/- PAID ON 16.10.08 BECAUSE AS PER AGREEMENT ADVANCE DEPOSIT IS ONLY RS. 25,000/-. 33 156A 20.10.08 CHEQUE NO. 015704 SWAMI AVINASHBHARTIPAYMENTS AGAINST 20 ACRE LAND. 33 157A 20.10.08 CHEQUE NO. 015705 TO ANIL NANDWAN I PAYMENT AGAINST 20ACRE LAND 33 176U 6.12.08 BY CHEQUE OF MY A/C AT UBI DTD. 6. 12.08 CHEQUE NO. 200419 TO MR. DILIP KUMARNACHLINIDILIP FOR UNIFORM 34 149A 16.10.08 BY CHEQUE NO 015702 OF BOB TO DIL IP GARMENTS FOR UNIFORM 34 150A 16.10.08 CHEQUE NO 015703 TO ADINATH STEELS B ILL NO. CS. 156 DT. 1.10.08. MS-165 &166 .DT. 30.09.08 AND 02.10.08 35 136 24.9.08 BY CHEQUE OF UBI TO DHIRENDRA SINGH HT 39 26 12.2.2008 CHEQUE TO ADINATH STEELS FOR 5000 BAGS CEMENT. CHEQUE (BY CHEQUE) 4 1 20.12.07 BY CHEQUE GIVEN TO DANPATIJEE FOR H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 20 7 CHEQUE CHEQUE REGISTRATION OF SALE DEED RS. 732500. EXPENSES AND REMAINING RS. 267500 ADJUSTED ON 9.6.08 AFTER EXECUTION OF SALE DEED OF 2.42 ACRES OF LAND. (V) HOWEVER, INCASE YOURHONOUR DO NOT AGREE WITH O UR ABOVE SUBMISSIONS, FOR WORKING OUT PEAK FOR THE PURPOSE O F GIVING SET-OFF AND TO TRACE ENTRIES FROM THE BOOKS OF ACCOUNTS, WE REQUES T YOURHONOUR TO KINDLY GRANT US SUFFICIENT TIME TO ENABLE YOURHONOUR TO JU DICIOUSLY ADJUDICATE THE ISSUE AT HAND; ALTHOUGH, NO ADDITION, IS CALLED FOR IN VIEW OF RS.70,00,000/- SURRENDERED BY MR. J N CHOUKSEY AND OTHER FACTS BRO UGHT OUT AS ABOVE. (VI) WITHOUT PREJUDICE TO ABOVE AND WITHOUT CONCED ING, IT IS SUBMITTED THAT IF IS AXIOMATIC LAW THAT IS THERE WAS ANY MISAPPLIC ATION OF FUNDS OR MISMANAGEMENT, ACTION COULD LIE AGAINST THE PERSON RESPONSIBLE BUT IT IS NOT POSSIBLE TO SAY THAT ANY AMOUNTS OF THE FUNDS OF TH E SOCIETY WAS NOT UTILISED FOR EDUCATIONAL PURPOSES AND FOR THAT REASON THE CH ARITABLE INSTITUTION CANNOT BE DENIED EXEMPTION WHICH DEPENDS UPON OBJECTS OF T HE TRUST. THE APPELLANT RELIED ON THE FOLLOWING DECISIONS (I) COSMOPOLITAN EDUCATION SOCIETY 244 ITR 494 (RAJ .) (II) MEHTA PARIK VS. CIT (1956) 30 ITR 181 (SC) (III) HYNDAVI EDUCATION SOCIETY VS. ADIT (EXEMPTION S) (2013) 86 DTR (HYD) 196 IN VIEW OF THE ABOVE, IT WAS PRAYED THAT THE ABOVE ADDITIONS MADE IN A.YS.2008-09 & 2009-10 MAY KINDLY BE DELETED. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE SEIZED LOOSE PAPERS CONTAINED CASH RECEIPTS AS WELL AS PAY MENTS ALONG WITH TRANSACTIONS THROUGH CHEQUE AND THE ASSESSEE HAD RE QUESTED CIT(A) TO GRANT SUFFICIENT TIME FOR WORKING OUT PEAK AND FOR THE PURPOSE OF GIVING SET-OFF AND TO TRACE ENTRIES FROM THE BOOKS OF ACCO UNTS. WE NOTE THAT NO DETAILS WERE GIVEN BY THE ASSESSING OFFICER AS TO H OW HE HAS WORKED OUT H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 208 UNACCOUNTED EXPENDITURE/RECEIPTS. WE ALSO NOTE THAT THE LOOSE PAPERS HAVE BEEN FOUND FROM THE PREMISES 31, SHYAMLA HILLS , BHOPAL WHICH IS RESIDENCE OF MR. J N CHOUKSEY. MR. J N CHOUKSEY OFF ICE BEARER/ TRUSTEE OF THE CHOUKSEY GROUP WHO HAS SURRENDERED RS. 70,00 ,000/- TO PURCHASE PEACE. WE ALSO NOTE THAT THE ASSESSEE HAS CLAIMED THAT IT WAS EXPLAINED TO AO THAT ALL THE ENTRIES / TRANSACTIONS ARE DULY RECORDED IN THE BOOKS OF ACCOUNT BUT COULD NOT GET IT VERIFIED BECAUSE SEIZED BOOKS OF ACCOUNT WITH THE DEPARTMENT WERE GIVEN ON 01.07. 2013 AFTER THE ASSESSMENT WAS MADE. WE ALSO NOTE THAT THE AO HAS E VEN ADDED VARIOUS CHEQUE-TRANSACTIONS AS UNEXPLAINED CASH EXP ENDITURE/RECEIPT DESPITE THE FACT THAT NO UNDISCLOSED BANK ACCOUNT O F SHRI J N CHOUKSEY OR OF THE ASSESSEE SOCIETY WAS FOUND, WHICH WAS UNL AWFUL. HOWEVER, IN OUR OPINION, IT WOULD BE FAIR TO CONFIRM ADDITIONS OF RS. 3,13,000/- (RS.70,000 + RS.7000 + RS.1000 + RS.1,85,000 + RS.5 0,000) IN A.Y. 2008-09 AND RS.4,31,800/- IN A.Y. 2009-10 (RS.1,800 + RS.35,000 + RS.70,000 + RS.1,25,000 + RS.2,00,000) OUT OF THESE LOOSE PAPERS REGARDING CASH TRANSACTIONS. THIS GROUND OF ASSESSE E IS PARTLY ALLOWED. 31.6 THE DEPARTMENT HAS RAISED THE ISSUE OF SECURIT Y & DEPOSITS AS UNEXPLAINED CREDITS U/S 68 (A.Y. 2004-05) SHORT FACTS OF THE ISSUE ARE THAT THE AO NOTICED FR OM THE BALANCE SHEET OF THE APPELLANT AS ON 31.03.2004 THAT THE AP PELLANT HAS SHOWN 'SECURITY & DEPOSITS' AMOUNTING TO RS.38,07,000/- U NDER THE HEAD 'OTHER H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 209 LIABILITIES'. DURING THE ASSESSMENT PROCEEDINGS, TH E AO REQUIRED THE APPELLANT TO FURNISH THE NATURE OF THE LIABILITY AN D TO PROVE THE GENUINENESS OF THE SAID LIABILITY, BUT THE APPELLAN T HAS NOT FURNISHED ANY SATISFACTORY EXPLANATION. THEREFORE, THE AO TREATED THE AMOUNT OF RS.38,07,000/- SHOWN AS SECURITY & DEPOSIT AS UNEXP LAINED AND MADE ADDITION OF RS.38,07,000/- IN A.Y. 2004-05. MATTER CARRIED TO CIT(A) WHO DELETED THE ADDITION. THE OPERATIVE PART OF CIT(A) ORDER IS AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. ON VERIFICATION OF BALANCE SHEET FOR F.Y. 200 2-03 AS ON 31.03.2003, IT IS NOTICED THAT THE APPELLANT HAS SHOWN SECURITY & DEPOSIT OF RS.38,07,000/- UNDER THE HEAD 'OTHER LIABILITIES' IN ITS BALANCE S HEET AS ON 31.03.2003 AND THE SAME AMOUNT HAS BEEN SHOWN UNDER THE SAME HEAD IN T HE BALANCE SHEET FOR F.Y.2003-04 AS ON 31.03.2004. THUS, THERE WAS NO IN CREASE IN THE AMOUNT OF SECURITY & DEPOSIT SHOWN IN THE BALANCE SHEET AS ON .31.03.2004 DURING F.Y.2003-04. THEREFORE, NO ADDITION U/S 68 CAN BE M ADE IN A.Y.2004-05 ON ACCOUNT OF LIABILITY OF SECURITY & DEPOSIT OF RS.38 ,07,000/- SHOWN IN THE BALANCE SHEET AS ON 31.03.2004. HENCE, ADDITION OF RS.38,07,000/- MADE ON ACCOUNT OF UNEXPLAINED SECURITY & DEPOSIT IN A.Y. 2 004-05 IS DELETED. LD. DR RELIED ON THE ORDERS OF THE ASSESSING OFFICE R. THE LD. AR HAS MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER: THE SECURITY & DEPOSIT TO THE EXTENT OF RS.38,07,0 00/- HAS NOT BEEN RECEIVED DURING THE F.Y.2003-04, WHICH IS CLEAR FROM THE FACT THAT THE SAME AMOUNT APPEARED IN THE EARLIER YEAR BALANCE SHEET AS ON .1.03.2003 (F.Y. 2 002-03) UNDER THE SAME HEAD. THUS, THERE WAS NO INCREASE IN THE TOTAL AMOUNT OF SECURITY & DEPOSIT IN THE F.Y.2003- 04 VIS--VIS EARLIER F.Y.2002-03. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE SUBJECT DEPOSIT TO THE EXTENT OF RS.38,07,000/- HAS NOT BEE N RECEIVED DURING THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 210 F.Y.2003-04 BUT THE SAME WAS RECEIVED IN EARLIER F. Y. 2002-03 WHICH IS BEYOND THE SEARCH ASSESSMENT PERIOD AS PER FACTS BR OUGHT ON RECORD. HENCE NO INTERFERENCE IS CALLED IN THE DECISION OF CIT(A) AND THE SAME IS CONFIRMED. THIS GROUND OF APPEAL OF THE DEPARTMENT IS DISMISSED. 32. IN THE CASE OF RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY THE FOLLOWING INDEPENDENT GROUNDS RELATING TO ABOVE SOCIETY ARE DEALT WITH HERE UNDER. 32.1 THE ASSESSEE HAS RAISED THE ISSUE OF ADDITION ON ACCOUNT OF PAYMENT MADE TO INTERESTED PERSONS- SHORT FACTS OF THE ISSUE ARE THAT ADDITION HAS BEEN MADE BY AO ON THE BASIS OF CERTAIN DOCUMENTS FOUND FROM 31, SHYAM LA HILLS, BHOPAL. THE AO NOTED THAT THESE ARE VARIOUS PAYMENTS MADE T O SHRI JAI NARAIN CHOUKSEY, MS. SHWETA CHOUKSEY (WIFE OF SHRI ANUPAM CHOUKSEY), MR. ANUPAM CHOUKSEY (SON OF SHRI JAI NARAIN CHOUKSEY) & SMT. POONAM CHOUKSEY (WIFE OF SHRI JAI NARAIN CHOUKSEY), WHO AR E EITHER THE OFFICE BEARERS OF THE SOCIETY OR FAMILY MEMBERS OF THE OFF ICE BEARERS. AS DISCUSSED IN DETAIL HEREINABOVE WHILE DISCUSSING TH E VIOLATION OF SECTION 13, THE AO HELD THAT THE RECEIPTS AND EXPENDITURE W RITTEN ON THESE LOOSE PAPERS WERE NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT OF THE APPELLANT. ACCORDINGLY, THE AO MADE ADDITION OF RS. 58,26,700/- IN A.Y. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 211 2009-10 ON ACCOUNT OF UNEXPLAINED EXPENDITURE INCUR RED AND OF RS. 23,50,000/- IN A.Y. 2010-11 ON ACCOUNT OF UNACCOUNT ED RECEIPTS. THE MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME . THE OPERATIVE PART OF THE CIT(A) ORDER IS AS UNDER : FOR THE SAKE OF BREVITY, IT MAY BE MENTIONED THAT THIS ISSUE HAS BEEN DISCUSSED BY ME IN DETAIL HEREINABOVE WHILE DISCUSSING THE VIOLA TION OF SECTION 13 OF THE ACT ON ACCOUNT OF PAYMENT OF APPELLANT SOCIETY FUNDS TO TH E INTERESTED PERSONS AS REFERRED TO IN SECTION 13(3) AND IT WAS HELD THAT THE UNACCO UNTED RECEIPTS OF THE APPELLANT WERE DIVERTED TO THE FAMILY MEMBERS OF THE OFFICE B EARERS OF THE APPELLANT SOCIETY. IT MAY ALSO BE NOTED THAT THE APPELLANT FAILED TO DEMO NSTRATE WITH ANY COGENT EVIDENCE THAT THE EXPENSES RECORDED ON THESE PAGES HAVE BEEN DULY ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT. THEREFORE, THE ADDITION O F RS. 58,26,700/- IN A.Y. 2009-10 AND OF RS. 23,50,000/- IN A.Y. 2010-11 ARE CONFIRME D. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. THE LD. AR HAS MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER: A. THAT OUT OF ENTIRE LOOSE PAPERS FOUND AND SEIZED DU RING THE COURSE OF SEARCH, ONLY ONE PAPER SHOWED RECEIVED FROM RISHIRAJ COLLE GE WHICH IS DOES NOT DENOTE EVEN THE CORRECT AND FULL NAME OF CONCERNED ASSESSE E I.E. RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY, IN THE PRESENT CASE. B. ON THE BASIS OF THIS ENTRY ON THE SAID LOOSE PAPER, LD. AO PRESUMED THAT ENTIRE LOOSE PAPER BELONGS TO ASSESSEE SOCIETY WHIC H IS AN IRRATIONAL CONCLUSION. C. THAT NO DETAILS HAVE BEEN GIVEN BY AO AS TO HOW HE HAS WORKED OUT TOTAL RECEIPTS AND TOTAL EXPENDITURE STATED TO BE WRITTEN ON THE SEIZED LOOSE PAPER. D. THE SEIZED LPS WERE FOUND FROM THE PREMISES 31, SHY MLA HILLS, BHOPAL WHICH IS RESIDENCE OF MR. J N CHOUKSEY , OFFICE BEA RER / TRUSTEE OF THE CHOUKSEY GROUP. E. MR. J N CHOUKSEY HAS SURRENDERED AMOUNT OF RS. 50,0 0,000/- IN F.Y. 2008- 09 & RS. 20,00,000/- IN F.Y. 2009-10 IN HIS INDIVID UAL HANDS IN RESPECT OF VARIOUS EXPENSES / ENTRIES / NOTING WRITTEN ON SEIZED LOOS E PAPER AND PAID TAX THEREON. F. SHRI J N CHOUKSEY HIMSELF STATED IN THE STATEMENT T HAT ALL THE ENTRIES AND TRANSACTIONS ARE DULY RECORDED IN THE BOOKS OF ACCO UNTS. G. THE CONTENTION OF AO WAS NOT TENABLE THAT THE ASSES SEE DID NOT PRODUCE BOOKS OF ACCOUNTS AND OTHER RELEVANT MATERIALS. IT HAS ALREADY BEEN SUBMITTED IN EARLIER GROUNDS THAT BOOKS OF ACCOUNTS AND RELEVANT DOCUMENTS WERE ALREADY IN POSSESSION OF AO AND PROVIDED TO THE ASSESSEE AFTER THE DATE OF PASSING OF ASSESSMENT ORDERS. H. THAT NONE OF THE PERSONAL EXPENSES HAVE BEEN DEBITE D IN THE BOOKS OF THE SOCIETY NEITHER AO HAS POINTED OUT ANY SUCH SPECIFI C INSTANCE. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 212 I. THAT ALL THIS DETAILS HAVE BEEN MAINTAINED BY ACCOU NTANT IN HIS WRITING PERTAINING TO VARIOUS COLLEGES / EDUCATIONAL INSTIT UTIONS RUN BY ASSESSEE SOCIETY. J. WITHOUT PREJUDICE TO ABOVE, IN VIEW OF PAUCITY OF T IME AND WITHOUT ADMITTING , EVEN AFTER WORKING OUT PEAK OF THE ENTRIES ON THE S AID LOOSE PAPERS ONLY MEAGER BALANCE AMOUNT REMAINS, AND THE SAME IS COVERED IN THE OVERALL AMOUNT OF RS. 70,00,000/- SURRENDERED BY MR. J N CHOUKSEY IN HIS INDIVIDUAL HANDS. K. THE AO HAS NOT WORKED OUT PEAK OF THE ENTRIES ON LO OSE PAPERS, HE HAS ADDED ALL RECEIPTS AS WELL AS EXPENDITURE BOTH WRIT TEN ON THE SAME PAPER WITHOUT GIVING SET-OFF. L. WITHOUT PREJUDICE TO ABOVE AND WITHOUT CONCEDING, I T WAS SUBMITTED THAT IT IS AXIOMATIC LAW THAT IF THERE WAS ANY MISAPPLICATION OF FUNDS OR MISMANAGEMENT, ACTION COULD LIE AGAINST THE PERSON RESPONSIBLE. M. IT IS NOT POSSIBLE TO SAY THAT THE AMOUNTS OF THE F UNDS OF THE SOCIETY WAS NOT UTILIZED FOR EDUCATIONAL PURPOSES AND FOR THAT REAS ONS THE CHARITABLE INSTITUTION CANNOT BE DENIED EXEMPTION WHICH DEPENDS UPON OBJECTS OF T HE TRUST. N. SINCE THE AMOUNT MENTIONED IN LOOSE PAPERS HAS ALRE ADY BEEN OFFERED BY SHRI J N CHOUKSEY IN HIS INDIVIDUAL HANDS, THUS IT ESTABLISHED THAT THE FUND OF ASSESSEE SOCIETY WAS UTILIZED ONLY FOR THE EDUCATIO NAL PURPOSE. THUS, IN THE VIEW OF ABOVE DISCUSSION, IT IS MOST H UMBLY PRAYED THAT THE GROUND RAISED BY THE ASSESSEE MAY VERY KINDLY BE ACCEPTED. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE ASSESSEE HAD EXPLAINED BEFORE CIT(A) THAT ALL THE SE ENTRIES ARE WRITTEN BY ACCOUNTANT WHO HAS TO GIVE STATEMENT OF RECEIPT S AND EXPENDITURE OF VARIOUS COLLEGES /INSTITUTIONS RUN BY VARIOUS SOCIE TIES AND TRUST AND FOR THIS PURPOSE HE NOTED VARIOUS DETAILS FOR HIS MEMOR ANDUM PURPOSE. IT IS ALSO NOTED THAT MR. J N CHOUKSEY , OFFICE BEARER, HAS SURRENDERED RS. 70,00,000/- IN HIS INDIVIDUAL HANDS. WE ALSO NOTE THAT ALL RECEIPTS (INFLOW) AS WELL AS EXPENDITURE (OUTFLOW) WRITTEN O N SAME PAPER HAVE BEEN ADDED BY AO WITHOUT GIVING SETOFF. UNDER THESE CIRCUMSTANCES, IT WOULD BE FAIR IF THE ISSUE IS REMANDED BACK TO THE FILE OF AO FOR VERIFICATION AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE. ACCORDINGLY, H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 213 THIS ISSUE IS REMANDED TO THE FILE OF AO. THIS GROU ND OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 32.2 THE ASSESSEE HAS RAISED THE ISSUE OF DISALLOWA NCE OF BOREWELL EXPENSES RS.2,35,000/- SHORT FACTS OF THE ISSUE ARE THAT ADDITION HAS BEEN MADE BY HOLDING THAT SAID EXPENSES IS CLEARLY A CAPITAL EXPENSES. MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. THE LD. AR HAS MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER: A. THAT ADDITION MADE BY THE AO IN A.Y. 2004-05 TO 200 8-09 IS BEYOND THE PURVIEW OF SEARCH ASSESSMENT U/S 153A BECAUSE NO IN CRIMINATING MATERIAL WAS FOUND REGARDING SAID ADDITION SHOWING IT AS UNDISCLOSED I NCOME. B. THAT BOREWELL EXPENSES WERE DULY DISCLOSED IN THE R ESPECTIVE AUDITED FINANCIAL STATEMENTS PRIOR TO DATE OF SEARCH. C. THAT THE ASSESSING OFFICER HAS DISALLOWED THE ABOVE SAID AMOUNTS ONLY ON THE BASIS THAT ASSESSEE SOCIETY HAS NOT FURNISHED DETAI LS REGARDING THE ABOVE EXPENSES AND BOOKS OF ACCOUNTS AND OTHER RECORDS HAVE NOT BE EN PRODUCED FOR VERIFICATION. D. THE ASSESSEE SOCIETY HAS ALREADY SUBMITTED IN REPLY TO EARLIER GROUNDS THAT BOOKS OF ACCOUNTS WERE ALREADY IN POSSESSION OF ASS ESSING OFFICER AND HAVE BEEN GIVEN ONLY AFTER DATE OF PASSING OF ASSESSMENT ORDE R. E. THE AO HAS TREATED BOREWELL EXPENSES AS A CAPITAL E XPENDITURE WHEREAS THE SAID EXPENSES ARE REVENUE IN NATURE. F. WITHOUT PREJUDICE TO ABOVE IF THESE ARE TREATED AS CAPITAL EXPENDITURE, IT SHOULD ALSO BE CONSIDERED AS AND QUALIFIES FOR APPL ICATION OF INCOME FOR THE PURPOSE OF SECTION 11OF THE ACT. G. APPLICATION OF THE INCOME FOR CHARITABLE PURPOSE SH OULD NOT BE DISTINGUISHED ON THE BASIS OF APPLICATION FOR REVENUE PURPOSES AN D CAPITAL PURPOSES. H. EVEN IF THE EXPENDITURE HAS BEEN INCURRED FOR ACQUI RING CAPITAL ASSET TO BE USED FOR THE OBJECT OF THE TRUST, THE APPELLANT WIL L BE ENTITLED FOR THE EXEMPTION AS THIS WILL TANTAMOUNT TO APPLICATION OF THE INCOME FOR CH ARITABLE PURPOSE. THUS IN THE VIEW OF ABOVE, DISALLOWANCE MADE BY THE AO ON ACCOUNT OF BOREWELL EXPENSES MAY VERY KINDLY BE DELETED . H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 214 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, WHEN WE HAVE ALREADY HELD IN OUR SEPARATE ORDER ON CANCELLA TION OF REGISTRATION U/S 12AA (3), AS AFORESAID, THAT THE ASSESSEE IS CH ARITABLE ORGANIZATION ELIGIBLE FOR EXEMPTION U/S 11, 12 AND 13 AND EXPEND ITURE ON BOREWELL HAVE BEEN SPENT FOR CHARITABLE PURPOSES ONLY THEREF ORE, AO IS DIRECTED TO TREAT THIS EXPENDITURE AS APPLICATION TOWARDS CHARI TABLE PURPOSES. THIS GROUND OF ASSESSEE IS ALLOWED. 32.3 THE ASSESSEE HAS RAISED THE ISSUE OF ADDITION ON ACCOUNT OF UNVERIFIABLE EXPENSES OF RS. 57,47,889/- (A.Y. 2009 -10) SHORT FACTS OF THE ISSUE IS THAT THE AO NOTED THAT IN THE INCOME AND EXPENDITURE ACCOUNTS OF RISHIRAJ INSTITUTE OF TECHN OLOGY (BUS ACCOUNT), THE APPELLANT HAS CLAIMED EXCESS OF INCOME OVER EXP ENDITURE OF RS. 92340/- AS AGAINST GROSS RECEIPT OF RS. 13905307/- WHICH COMES TO 0.67%. THE GROSS RECEIPTS INCLUDES BANK INTEREST OF RS. 138263/-. IT, THUS SHOWS THAT THE EXCESS OF INCOME OVER EXPENDITURE IS ALMOST NIL FOR THE YEAR UNDER CONSIDERATION. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, NO DETAILS ARE REGARD VARIOUS EXPENSES DEBITED IN T HE SAID ACCOUNT HAVE BEEN FURNISHED. NO BOOKS OF ACCOUNTS AND OTHER RELE VANT RECORDS HAVE BEEN PRODUCED FOR VERIFICATION BEFORE THE AO. IN AB SENCE THE SAME, THE H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 215 AO STATED THAT THE BOOK RESULTS REGARDING BUS ACCOU NT CLAIMED BY THE APPELLANT WERE NOT AT ALL VERIFIABLE AND THEREFORE, CANNOT BE ACCEPTED. ON FURTHER VERIFICATION IT WAS SEEN BY THE AO THAT THE APPELLANT HAS SHOWN EXCESS OF INCOME OVER EXPENDITURE OF RS. 61,2 0,250/- AGAINST GROSS RECEIPTS OF RS. 1,45,86,175/- IN THE SAME BUS ACCOUNT FOR THE IMMEDIATE SUBSEQUENT F.Y. 2009-10 RELEVANT TO A.Y. 2010-11 WHICH COMES TO 42%. THE GROSS RECEIPTS INCLUDE THE BANK I NTEREST OF JUST RS. 26262/-. THE AO OBSERVED THAT IT WAS, THEREFORE, CL EAR THAT BOOKS RESULT IN THE BUS ACCOUNT CLAIMED BY THE APPELLANT FOR A.Y . 2009-10 WHERE NOT AT ALL COMPARABLE WITH THE SAME CLAIMED BY THE APPE LLANT FOR A.Y. 2010- 11. THE AO STATED THAT IN ABSENCE OF ANY DETAILS TH EREOF, HE WAS LEFT WITH NO CHOICE BUT TO REASONABLY ADOPT THE EXCESS OF INC OME OVER EXPENDITURE FOR THE A.Y. 2009-10. ACCORDINGLY, THE AO ADOPTED THE EXCESS OF INCOME OVER EXPENDITURE AT RS. 58,40,229/ - (42% OF THE GROSS RECEIPTS OF RS. 1,03,05,307/-) AS AGAINST RS. 92,34 0/- SHOWN BY THE APPELLANT. ACCORDINGLY THE AO MADE ADDITION OF RS. 57,47,889/- (RS. 58,40,229/- - RS. 92,340) ON THIS ACCOUNT TO THE TO TAL INCOME OF THE APPELLANT FOR A.Y. 2009-10. MATTER CARRIED TO CIT(A) WHO CONFIRMED THE SAME. TH E OPERATIVE PART OF THE CIT(A) ORDER IS AS UNDER : H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 216 I HAVE CAREFULLY CONSIDERED THE REASONS RECORDED B Y THE AO IN ASSESSMENT ORDER THE SUBMISSION OF THE APPELLANT. AS MENTIONED BY THE AO INSPITE OF SUFFICIENT OPPORTUNITY PROVIDED TO THE APPELLANT DURING ASSESSMENT PROCEED INGS, THE APPELLANT HAS NOT PRODUCED BOOKS OF ACCOUNT AND SUPPORTING VOUCHERS F OR EXPENSES ON BUS CLAIMED BEFORE THE AO FOR VERIFICATION. THEREFORE, THE AO W AS JUSTIFIED IN STATING THAT THE EXPENSES IN BUS ACCOUNT CLAIMED BY THE APPELLANT RE MAINED FOR UNVERIFIABLE. IN THESE CIRCUMSTANCES, THE AO WAS JUSTIFIED IN HOLDING THAT RESULTS SHOWN BY THE APPELLANT IN BUS ACCOUNT ARE NOT RELIABLE AS THE APPELLANT FAILE D TO SATISFACTORILY PROVE THE GENUINENESS OF EXPENSES DEBITED IN THE BUS ACCOUNT. IN THESE CIRCUMSTANCES, THE AO WAS LEFT WITH NO OPTION BUT TO MAKE ADDITION ON EST IMATE BASIS IN THIS ACCOUNT. FURTHER, ON VERIFICATION OF BALANCE SHEETS OF RISHI RAJ INSTITUTE OF TECHNOLOGY A COLLAGE RUN BY THE APPELLANT AS ON 31.03.2008 AND 31.03.200 9, SPECIALLY THE SCHEDULE OF ASSETS, IT IS NOTICED THAT THE APPELLANT HAS SHOWN ADDITION TO VEHICLES IN F.Y. 2009-10 OF RS. 3,67,714/- ONLY AND NO ADDITION WAS SHOWN IN F.Y. 2008-0+9. THERE IS NO SEPARATE ITEMS OF BUS IN THE SCHEDULE OF FIXED ASSE TS. EVEN IF IT IS ASSUMED THAT THE A APPELLANT HAS PURCHASED A BUS FOR RS. 367714/- THO UGH IT IS HIGHLY IMPROBABLE THAT A NEW BUS CAN BE PURCHASE FOR A CONSIDERATION OF RS.3 67714/- IT ALONE DOES NOT EXPLAIN THE REASON FOR INCREASE OF PROFIT TO THE TU NE OF RS. 6084723/- IN ONE YEAR I.E. IN THE IMMEDIATE SUCCEEDING F.Y. 2009-10 RELEVANT T O A.Y. 2010-11 AND ALSO CLAIM OF DISPROPORTIONATE EXPENSES OF RS. 12047677/- IN A.Y. 2009-10 AS COMPARED TO RS.. 7031603/- IN A.Y. 2010-11. THEREFORE, THE CONTENTIO N OF THE APPELLANT IS NOT TENABLE. SINCE, THE BUS ACCOUNT HAS BEEN VALIDLY REJECTED BY THE AO, HE HAS TO MAKE ESTIMATED DISALLOWANCE IN THIS ACCOUNT. ACCORDINGLY , THE AO HAS MADE DISALLOWANCE OF EXPENSES OF RS. 5747889/- BASED ON RESULTS SHOWN BY THE APPELLANT ITSELF IN THE IMMEDIATE SUCCEEDING YEAR, WHICH IS FAIR AND REASON ABLE CONSIDERED THE FACTS OF THE CASE. THUS, NO INTERFERENCE IS WARRANTED IN THE ACT ION OF THE LD. AO IN MAKING ADDITION OF RS. 57,47,889/-. HENCE ADDITION OF RS. 5747889/- IN A.Y. 2009-10 IS CONFIRMED. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. THE LD. AR HAS MADE ORAL AND WRITTEN SUBMISSIONS AS UNDER: A. THE AO HAS MADE ADDITION ON THE GROUND THAT ASSESSE E SOCIETY HAS NOT PRODUCE ANY DETAILS OF VARIOUS EXPENSES DEBITED IN THE SAID ACCOUNT AND NO BOOKS OF ACCOUNT AND OTHER RELEVANT RECORDS HAVE BEEN PRODUC ED FOR VERIFICATION BEFORE HIM. B. THE ASSESSEE SOCIETY HAS ALREADY SUBMITTED IN REPLY TO EARLIER GROUNDS THAT BOOKS OF ACCOUNTS WERE ALREADY IN POSSESSION OF ASS ESSING OFFICER AND HAVE BEEN GIVEN ONLY AFTER DATE OF PASSING OF ASSESSMENT ORDE R. C. THE LD. AO HAS MADE ADDITION ON GP/NP % CONCEPT WHI CH IS NOT PERMISSIBLE BECAUSE THE ASSESSEE IS A CHARITABLE ORGANIZATION R UNNING EDUCATIONAL INSTITUTES. D. THAT IN F.Y. 2008-09, BUSES WERE OUTSOURCED ON CONT RACT FOR TRANSPORTATION OF STUDENT AND HENCE THE EXPENSES WERE ON THE HIGHER S IDE. E. THAT IN F.Y. 2009-10 ASSESSEE SOCIETY PURCHASED OWN BUSES IN THE MIDDLE OF THE YEAR AND THEREFORE THE SURPLUS FROM BUS PLYING WAS MORE. HENCE, THE SURPLUS OF BOTH THE YEARS IS NOT COMPARABLE AND IN F.Y. 2009-1 0 BUS FEE INCREASED BY RS. 21,49,504. F. THE AO HAS NOT POINTED OUT ANY INFLATED EXPENDITURE OR SUPPRESSED RECEIPTS FOR THE A.Y. 2009-10. H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 217 G. THAT ACCOUNTS OF ASSESSEE WERE DULY AUDITED AND EXA MINED BY INDEPENDENT CHARTERED ACCOUNTANT AND EACH AND EVERY EXPENSES WE RE DULY SUPPORTED BY VOUCHERS AND BILLS. H. THE ASSESSING OFFICER HAS ALSO FAILED TO POINT OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. I. HENCE, THERE IS NO JUSTIFICATION FOR MAKING ANY DIS ALLOWANCES AND THAT TOO OUT OF THESE EXPENSES ON ESTIMATE J. IT IS IMPORTANT TO NOTE THAT THE AO HAD NOT REJECTE D BOOKS OF ACCOUNTS OF THE ASSESSEE SOCIETY U/S 145 AND ALSO NOT PASSED ORDER U/S 144 OF THE ACT. K. THUS IN THE VIEW OF ABOVE, ADDITION MADE BY THE AO ON ACCOUNT OF BUS EXPENSES MAY KINDLY BE DELETED. IN VIEW OF ABOVE, THE APPEALS OF ALL FIVE ASSESSEES ARE PARTLY ALLOWED AND THE APPEALS OF THE DEPARTMENT IN ALL THE ASSESSMENT YEARS ARE D ISMISSED. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. IN OUR OPINION, THE ADDITION MADE BY AO AND CONFIRMED BY CIT(A) ON ESTI MATED BASIS WAS NOT CORRECT. WE FIND THAT THIS EXPLANATION OF ASSES SEE THAT IN A.Y. 2009- 10, BUSES WERE OUTSOURCED ON CONTRACT FOR TRANSPORT ATION OF STUDENTS AND HENCE THE EXPENSES WERE ON THE HIGHER SIDE WHEREAS IN THE A.Y. 2010- 11 OWN BUSES WERE PLIED AND THAT IS WHY THE SURPLUS OF BOTH THE YEARS ARE NOT COMPARABLE, IS ACCEPTABLE. WE ALSO NOT THA T THE AO HAS NOTE POINTED OUT ANY INFLATED EXPENDITURE OR SUPPRESSED RECEIPTS FOR THE A.Y. 2009-10. ALSO THE ACCOUNTS OF ASSESSEE WERE DULY AU DITED AND EXAMINED BY INDEPENDENT CHARTERED ACCOUNTANT AND EX PENSES WERE DULY SUPPORTED BY VOUCHERS AND BILLS. WE FIND THAT THE ASSESSING OFFICER HAS ALSO FAILED TO POINT OUT ANY DEFECTS IN THE BOO KS OF ACCOUNT MAINTAINED BY THE ASSESSEE. HENCE, IN OUR VIEW, THE RE IS NO JUSTIFICATION FOR MAKING ANY DISALLOWANCES AND THAT TOO OUT OF TH ESE EXPENSES ON H.K. KALCHURI EDUCATION TRUST - (SS)27 3 OF 2013 AND OTHERS 218 ESTIMATE BASIS. ACCORDINGLY, THE ADDITION MADE BY A O IS DELETED. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. FINALLY, ALL THE APPEALS, FILED BY ABOVE FIVE ASSES SEES AND THE DEPARTMENT, ARE DISPOSED OF IN TERMS AS INDICATED H EREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2016. SD/- SD/- (B.C. MEENA) (D.T. GARASIA) (ACCOUNTANT MEMBER) JUDICIAL MEMBER DATED: 17 TH MAY 2016
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