M/s RKDF Education Society, Bhopal V. The ACIT-2(1), Bhopal

ITSSA 72/Ind/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8726 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-03-2021
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S MANTRI
• Assessee Lawyers: PIYUSH PARA
• Keywords: Bogus purchase; Unexplained expenditure; Depreciation; Charitable institution; Principle of natural justice; Opportunity of cross examination; Maximum Marginal Rate; Earning of tax free income; Wrong claim; Accommodation entries; Notional interest; Benefit of exemption; Documents seized; Capital expenditure; TDS; Set aside; Audi alteram partem; Capital Gains
• Section: 69C; 143(3); 142(1); 153A; 133(6); 12A; 12AA; 201; 143(2); 139(1); 64; 113; 43; 48; 73; 72; 13(2); 13; 153; 22; 153C; 10(23C); 147; 131; 132; 12; 11; 139; 15

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE MANISH BORAD, ACCOUNTANT MEMBER AND HONBLE MADHUMITA ROY, JUDICIAL MEMBER IT(SS)A NO.69 TO 73/IND/2019 ASSESSMENT YEARS 2004-05, 2006-07 TO 2009-10 RKDF EDUCATION SOCIETY, : APPELLANT 202, GANGA JAMUNA COMPLEX, ZONE-1, M.P. NAGAR, BHOPAL PAN : AATR1026R V/S ACIT-2(1), BHOPAL : RESPONDENT IT(SS)A NO.126 TO 128/IND/2019 ASSESSMENT YEARS 2008-09 TO 2010-11 ACIT (EXEMPTION), BHOPAL : APPELLANT V/S RKDF EDUCATION SOCIETY, : RESPONDENT 202, GANGA JAMUNA COMPLEX, ZONE-1, M.P. NAGAR, BHOPAL PAN : AATR1026R IT(SS)A NO.74 TO 76/IND/2019 ASSESSMENT YEARS 2008-09 TO 2010-11 AYUSHMATI EDUCATIONAL & SOCIAL SOCIETY, : APPELLANT 202, GANGA JAMUNA COMPLEX, ZONE-1, M.P. NAGAR, RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 2 BHOPAL PAN : AAAAA3026D V/S ACIT-2(1), BHOPAL : RESPONDENT IT(SS)A NO.129 & 130/IND/2019 ASSESSMENT YEARS 2009-10 & 2010-11 ACIT (EXEMPTION), BHOPAL : APPELLANT V/S AYUSHMATI EDUCATIONAL & SOCIAL SOCIETY, : RESPONDENT 202, GANGA JAMUNA COMPLEX, ZONE-1, M.P. NAGAR, BHOPAL PAN : AAAAA3026D REVENUE BY SHRI S. S . MANTRI , CIT - DR ASSESSEE BY S/SHRI SUMIT NEEMA, SR. ADV WITH GAGAN TIWARI & PIYUSH PARASHAR, ADVOCATES DATE OF HEARING 24 .0 6 .2021 DATE OF PRONOUNCEMENT 28.07. 2021 O R D E R PER MANISH BORAD, A.M THE ABOVE CAPTIONED APPEALS/CROSS APPEALS FOR ASSES SMENT YEARS 2004-05 TO 2010-11 ARE DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-2 (IN SHORT LD . CIT], BHOPAL RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 3 DATED 31.03.2019 AND 25.03.2019 WHICH ARE ARISING OUT OF THE ORDER U/S 153A R.W.S. 143(3) OF THE INCOME TAX ACT 1961( IN SHORT THE ACT) EVENLY DATED 16.05.2014 FRAMED BY ACIT-2(1), BHOPAL . 2. IN THE CASE OF RKDF EDUCATION SOCIETY BOTH ASSES SEE AND REVENUE ARE IN APPEAL BEFORE US (I) ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- ITSS(A) NO.69/IND/2019 ASSESSMENT YEAR 2004-05 1 THERE IS NO JURISDICTION EITHER IN LAW OR ON FAC TS FOR THE LD CIT (A) TO SUSTAIN THE ADDITION OF RS 15,00,000/- AS ALLEGED U NEXPLAINED EXPENDITURE FOR AN AMOUNT ALLEGEDLY PAID BY DR. SUNIL KAPOOR TO S.N SHARMA. 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE ADDITION OF RS 15 LACS AS ALLEGED' UNEXPLAINED EXPENDITURE IS NOT SUS TAINABLE IN LAW BECAUSE NO INCRIMINATING MATERIAL SEIZED FROM THE A PPELLANT DURING THE COURSE OF SEARCH AND FURTHER NO ASSESSMENT WAS PEND ING ON THE DATE OF SEARCH AND THEREFORE THE IMPUGNED ADDITION IS BEYON D THE SCOPE OF SECTION 153 A. 1.2 THAT THE ADDITION OF RS 15 00,000/- WAS BASED ON A PAPER SEIZED FROM THE RESIDENCE OF S.N SHARMA AND WAS NOT SEIZED FROM THE APPELLANT SOCIETY AND THUS THE PRESUMPTION U/S 292C CANNOT BE APPLY AGAINST THE APPELLANT SOCIETY. 1.3 THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONCLU DING THAT THE AMOUNT WAS NOT RECORDED IN THE BOOKS OF THE APPELLANT SOCIETY. THAT SAID FINDING IS CONTRARY TO THE MATERIAL PLACED ON RECORD BEFORE TH E LD. AO AND LD. CIT (A). 1.4 THAT THE ENTIRE ADDITION OF RS 15,00,000/- IS BASED ON MATERIAL SEIZED FROM THE PREMISES OF A THIRD PERSON AND TO SUCH SEIZED MATERIAL FROM A THIRD PERSON THE PROVISIONS OF SECTION 153C ARE APPLICABLE AND NOT THE PROVISIONS OF SECTION 153A AND ON THIS COUNT ALONE ADDITION OF RS 15,00,000/- DESERVE TO BE DELETED AS BEING WITHOUT JURISDICTION. 1.5 THAT LD. CIT(A) WAS NOT JUSTIFIED EITHER IN LAW OR ON FACTS IN ARRIVING AT A CONCLUSION THAT NO OPPORTUNITY OF CROSS EXAMINAT ION OF S.N SHARMA WAS REQUIRED. THIS FINDING IS NOT JUSTIFIED BOTH IN L AW & ON FACTS. THAT THE ADDITION IS BASED ON HIND THE BACK OF THE APPELLANT WITHOUT ANY OPPORTUNITY RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 4 OF HEARING BEING PROVIDED OF CROSS- EXAMINATION MAKES SUCH ADDITION IN COMPLETE BREACH OF PRINCIPLE OF NATURAL JUSTICE AND ON THIS GROUND ALONE THE IMPUGNED ADDITION OF RS.15,00,000/- DESERVES TO BE DELETED. 1.6 THAT THE FINDING OF CIT(A) THAT BY MAKING THE PAYMENT OF RS. 15,00,000 THE APPELLANT SOCIETY USED /MISAPPLIED THE FUNDS OF THE SOCIETY IS PERVERSE AND DESERVES TO BE DELETED. 1.7 THAT THE LD. CIT(A) HAS INCORRECTLY ARRIVED AT THE FINDING THAT BY DEBITING SOCIETY HAS REDUCED RECEIPT OVER EXPENDITURE. THE S AID AMOUNT WAS DEBITED TO BUILDING CONSTRUCTION ACCOUNT WHICH WAS A BALAN CE SHEET ITEM AND NOT CLAIMED AS EXPENDITURE AND THUS SUCH A FINDING BY T HE LD. CIT(A) IS PERVERSE. 2. THAT WITHOUT PREJUDICE TO AFORESAID GROUND SINCE THE ADDITION OF RS 15 LAC HAS BEEN CONFIRMED IN THE ASSESSMENT/APPEAL ORDER O F S.N. SHARMA AS BEING UNEXPLAINED THEN THE SAME ADDITION CANNOT BE AGAIN MADE IN THE HANDS OF APPELLANT SOCIETY AS UNEXPLAINED EXPENDITURE AS THA T WOULD AMOUNT TO DOUBLE TAXATION BOTH IN THE HANDS OF PAYEE AND THE PAYER. ITSS(A) NO.70/IND/2019 ASSESSMENT YEAR 2006-07 1. THAT THE IS NO JURISDICTION EITHER IN LAW OR ON FAC TS FOR THE LD. CIT (A) TO SUSTAIN THE ADDITION OF RS39, 77,200 (BEING 40% OF PURCHASE DISALLOWED OF RS 99,43,000/--) ALLEGED BOGUS PAYMENT MADE TO M/S SALUJA ENTERPRISES AND M/S PRATEEK ENTERPRISES 1.1 THAT THE LD. CIT (A) WAS NOT JUSTIFIED EITHER I N LAW OR IN FACTS IN SUSTAINING THE ADDITION OF RS 39,77,200 WHICH IS CL EARLY NOT BASED ON ANY INCRIMINATING MATERIAL SEIZED FROM THE PREMISES OF THE APPELLANT AND MOREOVER ON THE DATE OF SEARCH THE ASSESSMENT FOR A . Y 2006-07 WAS NOT PENDING AND THUS THE ADDITION IS BEYOND THE SCOPE O F SECTION 153A. 1.2 THAT THE LD. CIT (A) ERRED IN UPHOLDING THE IMP UGNED ADDITION OF RS 39,77,200 ON ACCOUNT OF PURCHASE OF CBT BARS FROM M /S PRATEEK ENTERPRISES AND M/S SALUJA ENTERPRISES BY MAKING RELIANCE' ON T HE PRE-SEARCH AFFIDAVIT SUBMITTED BY SUNIL KHANDEWAL & NARENDRA SHARMA IN THE SEARCH CASE OF BHARAT KOTHARI GROUP WHEREIN INFACT THE SAID SUNIL KHANDEWAL AND NARENDRA SHARMA WERE NOT A KEY PERSON OF M/S SALUJA ENTERPRISES AND M/S PRATEEK ENFERPRISES RESPECTIVELY AND ALSO THE SAID AFFIDAVITS DO NOT MENTION THE NAME OF APPELLANT SOCIETY. 1.3 THAT THE LD CIT (A) FAILED TO APPRECIATE THE SE TTLED PRINCIPLE THAT ADDITION CAN ONLY BE ON BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING COURSE OF SEARCH WHICH WAS NOT PRODUCED OR NOT ALREADY DIS CLOSED OR MADE KNOWN IN COURSE OF ORIGINAL ASSESSMENT AND IN THE PRESENT CASE THE PURCHASE OF CBT BARS FROM M/S PRATEEK ENTERPRISES AND M/S SALUJA EN TERPRISES WAS DULY RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 5 RECORDED IN BOOKS OF ACCOUNT OF APPELLANT FOR A. Y 2006-07 AND COPIES OF LEDGER ACCOUNT OF BOTH VENDORS, BANK STATEMENT, COP IES OF PURCHASE BILL OF CBT BARS, COPIES OF WEIGHING SLIP, CERTIFICATE FROM CONTRACTOR, SUB CONTRACTOR AND PURCHASE ORDER WAS DULY PLACED DURING PROCEEDIN G BEFORE LD. AO AND LD. CIT (A) TO PROVE GENUINENESS OF TRANSACTION. 1.4 THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN CONCL UDING THAT A MATERIAL SEIZED FROM A THIRD PARTY CAN ALSO BE TERMED AS INCRIMINAT ING DOCUMENTS FOR THE PURPOSE OF SECTION 153A ADDITION. SUCH A FINDING BY THE LD. CIT(A) IS CONTRARY TO THE PROVISION OF SECTION 153C AND SECTI ON 292C OF THE ACT. IF AT ALL SUCH MATERIAL WAS TO BE USED THEN THE ONLY POSSIBLE PROVISION WAS SECTION 153C AND NOT SECTION 153A. 1.5 THAT THE LD. CIT (A) WAS NOT JUSTIFIED EITHER I N LAW OR ON FACTS IN ARRIVING AT A CONCLUSION THAT NO OPPORTUNITY OF CROSS EXAMIN ATION OF SHRI SUNIL KHUNDEWAL AND SHRI NARENDRA SHARMA WAS REQUIRED, TH IS FINDING IS NOT JUSTIFIED BOTH IN LAW & ON FACTS. THAT THE ADDITION IS BASED OIL AFFIDAVIT GIVEN SHRI SUNIL KHANDEWAL SHRI NARENDRA SHARMA IN CASE O F THIRD PERSON AND USING THAT AFFIDAVITS BEHIND THE BACK OF THE APPELL ANT WITHOUT ANY OPPORTUNITY OF REBUTTING SUCH AFFIDAVITS AND CROSS EXAMINATION OF SHRI SUNIL KHANDEWAL AND SHRI NARENDRA SHARMA MAKES SUCH ADDIT ION IN COMPLETE BREACH OF PRINCIPLE OF NATURAL JUSTICE AND ON THIS GROUND ALONE THE IMPUGNED ADDITION DESERVES TO BE DELETED. 2. THAT WITHOUT PREJUDICE TO AFORESAID GROUND, THE QUA NTUM OF ADDITION SUSTAINED BY THE LD. CIT (A) IS ARBITRARY, EXCESSIV E, &. HIGH UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THERE IS NO JUSTIFIC ATION FOR THE LD. CIT(A) TO SUSTAIN ADDITION @ 40%. THERE IS NO JUSTIFICATION E ITHER IN LAW OR ON FACTS TO SUSTAIN ADDITION @40%. THERE IS NO JUSTIFICATION E ITHER IN LAW OR ON FACTS TO ARRIVE @40% DISALLOWANCE. ITSS(A) NO.71/IND/2019 ASSESSMENT YEAR 2007-08 1. THAT. THE IS NO JURISDICTION EITHER IN LAW OR ON FA CTS FOR THE LD. CIT (A) TO SUSTAIN THE ADDITION OF RS 2,10,800 (BEING 40% OF PURCHASE DISALLOWED OF RS 5,27,000/-) ALLEGED BOGUS PAYMENT MADE TO M/S SALUJ A ENTERPRISES AND M/S PRATEEK ENTERPRISES 1.1 THAT THE LD. CIT (A) WAS NOT JUSTIFIED EITHER I N LAW OR IN FACTS IN SUSTAINING THE ADDITION OF RS 2,10,800 WHICH IS CLE ARLY NOT BASED ON ANY INCRIMINATING MATERIAL SEIZED FROM THE PREMISES OF THE APPELLANT AND MOREOVER ON THE DATE OF SEARCH THE ASSESSMENT FOR A . Y 2007-08 WAS NOT PENDING AND THUS THE ADDITION IS BEYOND THE SCOPE O F SECTION 153A. 1.2 THAT THE LD. CIT (A) ERRED IN UPHOLDING THE IMP UGNED ADDITION OF RS 2,10,800 ON ACCOUNT OF PURCHASE OF CBT BARS FROM M/ S PRATEEK ENTERPRISES AND M/S SALUJA ENTERPRISES BY MAKING RELIANCE ON TH E PRE-SEARCH DATED RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 6 AFFIDAVIT SUBMITTED BY ONE SUNIL KHANDEWAL & NARENDRA SHARMA IN THE SEARCH CASE OF BHARAT KOTHARI GROUP WHEREIN INFACT THE SAID SUNIL KHANDEWAL AND NARENDRA SHARMA WERE NOT KEY PERSONS OF M/S SALUJA ENTERPRISES AND M/S PRATEEK ENTERPRISES RESPECTIVEL Y AND ALSO THE SAID AFFIDAVITS DO NOT MENTION THE NAME OF APPELLANT SOC IETY. 1.3 THAT THE LD CIT (A) FAILED TO APPRECIATE THE SE TTLED PRINCIPLE THAT ADDITION CAN ONLY BE ON BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING COURSE OF SEARCH WHICH WAS NOT PRODUCED OR NOT ALREADY DIS CLOSED OR MADE KNOWN IN COURSE OF ORIGINAL ASSESSMENT AND IN FACT OF PRE SENT CASE THE PURCHASE OF CBT BARS FROM M/S PRATEEK ENTERPRISES AND M/S SALUJ A ENTERPRISES WAS DULY RECORDED IN BOOKS OF ACCOUNT OF APPELLANT FOR A. Y 2007-08 AND COPIES OF LEDGER ACCOUNT OF BOTH VENDORS, BANK STATEMENT, COP IES OF PURCHASE BILL OF CB T BARS, COPIES OF WEIGHING SLIP, CERTIFICATE FROM C ONTRACTOR, SUB CONTRACTOR AND PURCHASE ORDER WAS DULY PLACED DURING PROCEEDING BE FORE LD. AO AND LD. CIT (A) TO PROVE GENUINENESS OF TRANSACTION. 1.4 THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN CONCL UDING THAT A MATERIAL SEIZED FROM A THIRD PARTY CAN ALSO BE TERMED 'AS INCRIMINA TING DOCUMENTS FOR THE PURPOSE OF SECTION 153A ADDITION. SUCH A FINDING BY THE LD. CIT(A) IS CONTRARY TO THE PROVISION OF SECTION 153 AND SECTION 292C OF THE ACT. IN FACT SUCH MATERIAL SEIZED FROM THE PREMISES OF A THIRD P ERSONS SEARCH CAN ONLY BE USED AS PER _THE PROVISIONS CONTAINED IN SECTION 15 3C AND NOT U/S 153A. 1.5 THAT THE LD. CIT (A) WAS NOT JUSTIFIED EITHER I N LAW OR ON FACTS IN ARRIVING AT A CONCLUSION THAT NO OPPORTUNITY OF CROSS EXAMIN ATION OF SHRI SUNIL KHANDEWAL AND SHRI NARENDRA SHARMA WAS REQUIRED. THIS FINDING IS NOT JUSTIFIED BOTH IN LAW & ON FACTS. THAT THE ADDITION IS BASED ON AFFIDAVIT G IVEN SHRI SUNIL KHANDEWAL SHRI NARENDRA SHARMA IN CASE O F THIRD PERSON AND USING THAT AFFIDAVITS BEHIND THE BACK OF THE APPELL ANT WITHOUT ANY OPPORTUNITY OF REBUTTING SUCH AFFIDAVITS AND CROSS EXAMINATION OF SHRI SUNIL KHANDEWAL AND SHRI NARENDRA SHARMA MAKES SUCH ADDITION IN COMPLETE BREACH OF PRINCIPLE OF NATURAL JUSTICE AND ON THIS GROUND ALONE THE IMPUGNED ADDITION OF RS 2,10,800 DESERVES TO BE DELETED. 2. THAT WITHOUT PREJUDICE TO AFORESAID GROUND, THE QUANTUM OF ADDITION SUSTAINED BY THE LD. CIT (A) IS ARBITRARY, EXCESSIV E, &. HIGH UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THERE IS NO JUSTIFIC ATION FOR THE LD. CIT(A) TO SUSTAIN ADDITION @ 40%. THERE IS NO JUSTIFICATION E ITHER IN LAW OR ON FACTS TO SUSTAIN ADDITION @40% DISALLOWANCE. ITSS(A) NO.72/IND/2019 ASSESSMENT YEAR 2008-09 1. THAT. THE IS NO JURISDICTION EITHER IN LAW OR ON FACTS FOR THE LD. CIT (A) TO SUSTAIN THE ADDITION OF RS 1,14,000/- (BEING 40% OF PURCHASE DISALLOWED OF RS 2,85,000/-) ALLEGED BOGUS PAYMENT MADE TO M/S SA LUJA ENTERPRISES AND M/S PRATEEK ENTERPRISES RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 7 1.1 THAT THE LD. CIT (A) WAS NOT JUSTIFIED EITHER I N LAW OR IN FACTS IN SUSTAINING THE ADDITION OF RS 1,14,000/- WHICH IS C LEARLY NOT BASED ON ANY INCRIMINATING MATERIAL SEIZED FROM THE PREMISES OF THE APPELLANT AND MOREOVER ON THE DATE OF SEARCH THE ASSESSMENT FOR A . Y 2007-08 WAS NOT PENDING AND THUS THE ADDITION IS BEYOND THE SCOPE O F SECTION 153A. 1.2 THAT THE LD. CIT (A) ERRED IN UPHOLDING THE IMP UGNED ADDITION OF RS 1,14,000/- ON ACCOUNT OF PURCHASE OF CBT BARS FROM M/S PRATEEK ENTERPRISES AND M/S SALUJA ENTERPRISES BY MAKING RE LIANCE ON THE PRE- SEARCH DATED AFFIDAVIT SUBMITTED BY ONE SUNIL KHANDEWAL & NARENDRA SHARMA IN THE SEARCH CASE OF BHARAT KOTHARI GROUP W HEREIN INFACT THE SAID SUNIL KHANDEWAL AND NARENDRA SHARMA WERE NOT KEY PE RSONS OF M/S SALUJA ENTERPRISES AND M/S PRATEEK ENTERPRISES RESPECTIVEL Y AND ALSO THE SAID AFFIDAVITS DO NOT MENTION THE NAME OF APPELLANT SOC IETY. 1.3 THAT THE LD CIT (A) FAILED TO APPRECIATE THE SE TTLED PRINCIPLE THAT ADDITION CAN ONLY BE ON BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING COURSE OF SEARCH WHICH WAS NOT PRODUCED OR NOT ALREADY DIS CLOSED OR MADE KNOWN IN COURSE OF ORIGINAL ASSESSMENT AND IN FACT OF PRE SENT CASE THE PURCHASE OF CBT BARS FROM M/S PRATEEK ENTERPRISES AND M/S SALUJ A ENTERPRISES WAS DULY RECORDED IN BOOKS OF ACCOUNT OF APPELLANT FOR A. Y 2008-09 AND COPIES OF LEDGER ACCOUNT OF BOTH VENDORS, BANK STATEMENT, COP IES OF PURCHASE BILL OF CBT BARS, COPIES OF WEIGHING SLIP, CERTIFICATE FROM CONTRACTOR, SUB CONTRACTOR AND PURCHASE ORDER WAS DULY PLACED DURING PROCEEDIN G BEFORE LD. AO AND LD. CIT (A) TO PROVE GENUINENESS OF TRANSACTION. 1.4 THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN CONCL UDING THAT A MATERIAL SEIZED FROM A THIRD PARTY CAN ALSO BE TERMED 'AS INCRIMINA TING DOCUMENTS FOR THE PURPOSE OF SECTION 153A ADDITION. SUCH A FINDING BY THE LD. CIT(A) IS CONTRARY TO THE PROVISION OF SECTION 153 AND SECTION 292C OF THE ACT. IN FACT SUCH MATERIAL SEIZED FROM THE PREMISES OF A THIRD P ERSONS SEARCH CAN ONLY BE USED AS PER _THE PROVISIONS CONTAINED IN SECTION 15 3C AND NOT U/S 153A. 1.5 THAT THE LD. CIT (A) WAS NOT JUSTIFIED EITHER I N LAW OR ON FACTS IN ARRIVING AT A CONCLUSION THAT NO OPPORTUNITY OF CROSS EXAMIN ATION OF SHRI SUNIL KHANDEWAL AND SHRI NARENDRA SHARMA WAS REQUIRED. THIS FINDING IS NOT JUSTIFIED BOTH IN LAW & ON FACTS. THAT THE ADDITION IS BASED ON AFFIDAVIT G IVEN SHRI SUNIL KHANDEWAL SHRI NARENDRA SHARMA IN CASE O F THIRD PERSON AND USING THAT AFFIDAVITS BEHIND THE BACK OF THE APPELL ANT WITHOUT ANY OPPORTUNITY OF REBUTTING SUCH AFFIDAVITS AND CROSS EXAMINATION OF SHRI SUNIL KHANDEWAL AND SHRI NARENDRA SHARMA MAKES SUCH ADDITION IN COMPLETE BREACH OF PRINCIPLE OF NATURAL JUSTICE AND ON THIS GROUND ALONE THE IMPUGNED ADDITION OF RS 1,14,000/- DESERVES TO BE DELETED. 2. THAT WITHOUT PREJUDICE TO AFORESAID GROUND, THE QUANTUM OF ADDITION SUSTAINED BY THE LD. CIT (A) IS ARBITRARY, EXCESSIV E, &. HIGH UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THERE IS NO JUSTIFIC ATION FOR THE LD. CIT(A) TO RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 8 SUSTAIN ADDITION @ 40%. THERE IS NO JUSTIFICATION E ITHER IN LAW OR ON FACTS TO SUSTAIN ADDITION @40% DISALLOWANCE. ITSS(A) NO.73/IND/2019 ASSESSMENT YEAR 2009-10 1. THAT THERE IS NO JUSTIFICATION EITHER IN LAW OR IN FACTS FOR THE LD. CIT (A) TO SUSTAIN THE ADDITION OF RS 17,00,000/- AS ALLEGED B OGUS PAYMENT MADE TO S.D TOMAR. 1.1 THAT THE LD. CIT (A) WAS NOT JUSTIFIED EITHER I N LAW OR IN FACTS IN CONCLUDING THAT OPPORTUNITY OF CROSS EXAMINATION OF ANEES KHAN WAS NOT REQUIRED TO BE GIVEN TO THE APPELLANT. THE SAID FIN DING IS CONTRARY TO THE SETTLED PRINCIPLES OF NATURAL JUSTICE AND FAIR PLAY . 1.2 THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN CONCL UDING THAT A MATERIAL SEIZED FROM A THIRD PARTY CAN ALSO BE TERMED AS INCRIMINAT ING DOCUMENTS FOR THE PURPOSE OF SECTION 153A ADDITION. SUCH A FINDING BY THE LD. CIT(A) IS CONTRARY TO THE PROVISION OF SECTION 153 AND SECTION 292C OF THE ACT. IN FACT SUCH EVIDENCE SEIZED FROM A THIRD PERSONS SEARCH CA N ONLY BE USED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153C AND NOT SECTION 153A. 1.3 THAT THE LD. CIT (A) WAS NOT JUSTIFIED EITHER IN LAW OR ON F ACTS IN CONCLUDING THAT THE PAYMENT OF RS 17,00,000 WAS AGA INST THE PURPOSE OF THE APPELLANT SOCIETY. 1.4 THAT WITHOUT PREJUDICE TO THE AFORESAID GROUNDS , THE ALTERNATIVE CLAIM PUT BY THE APPELLANT SOCIETY BEFORE THE LD. CIT (A) REG ARDING THE ALLOWABILITY OF PAYMENT OF RS 17, 00,000/- AS PAYMENT FOR PROTECTING THE ASSESSEE SO CIETY FROM PROLONGED LITIGATION SHOULD HAVE BEEN ALLOWED BY THE LD. CIT (A) AS THE NECESSARY EVIDENCE & DOCUMENTS PERTAINING TO THE SAID SUBMISSION WERE ACCEPTED AS GENUINE BY THE LD. CIT (A) AND LD. AO. 2. THAT THERE IS NO JUSTIFICATION EITHER IN LAW OR ON FACTS FOR THE LD. CIT (A) TO CONFIRM THE ADDITION OF RS 36,08,666/- AS ALLEGED B ENEFIT GIVEN TO M/S SIDDHARTH KAPOOR INFRASTRUCTURE PVT LTD IN VIOLATIO N OF SECTION 13(I)(C). 2.1 THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACT ION OF LD. AO IN DENYING THE EXEMPTION U/S. 11 BY HOLDING THAT THE CASE OF APPELLANT HIT BY SECTIO N 13(I)(C) READ WITH SECTION 13(2)(A) AND SECTION 13( I)(D) AND THAT TOO DISREGARDING THE FACT THAT THE M/S AYUSHMATI EDUCAT IONAL SOCIETY, DOES NOT FALL IN THE CATEGORY OF (HE PERSON REFERRED UNDER S ECTION 13(I)(C) READ WITH SECTION 13(2)(A) AND SECTION 13(I)(D) OF THE ACT. 2.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS 36,08,6661- ON ACCOUNT OF LOAN GIVEN TO M/S AYUSHMATI EDUCATIONAL SOCIETY REGISTERED UNDER SECTION12A IN FORM OF RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 9 MAKING PAYMENT TO FARMERS AGAINST THE PURCHASE OF L AND BY MLS SIDDHARTH KAPOOR INFRASTRUCTURE BY TAKING COGNIZANCE OF SECTION 13 (3) OF THE ACT WITHOUT LOOKING INTO CRUCIAL FACT THAT THE APPELLAN T AND M/LS AYUSHMATI EDUCATIONAL SOCIETY BELONG TO SAME GROUP CONCERN AN D SUCH PAYMENTS ARE NOT VIOLATED AND HIT BY THE PROVISION CONTAIN UNDER SECTION 13(3) OF THE ACT. 2.3 THE LD. LOWER AUTHORITY ERRED IN TAKING THE VIE W THAT APPELLANT BY MAKING PAYMENT OF RS 36,08,666/- TO FARMERS ON BEHA LF OF M/S AYUSHMATI EDUCATIONAL SOCIETY HAS BENEFITED DIRECTLY TO THE P ERSONS REFERRED TO IN SECTION 13 (3) OF THE ACT WITHOUT GOING INTO THE REAL AND PIVOTAL REASON THAT THE SAID TRANSACTION WAS ACTUALLY A LOAN TRANSACTIO N BETWEEN APPELLANT AND M/S AYUSHMATI EDUCATIONAL SOCIETY BOTH ENJOYING REG ISTRATION U/S 12AA AS EDUCATION ORGANIZATION. 2.4 THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN MAKING THE IMPUG NED ADDITION OF RS.36,08,666/- IN AS MUCH AS THE ASSESSMENT ORDER H AS BEEN FRAMED IN VIOLATION AND UTTER DISREGARD TO THE PRINCIPLES OF NATURAL JUSTICE IN AS MUCH AS, AMONGST OTHERS, THE ASSESSING OFFICER HAS NOT GIVEN THE DOCUMENTS/STATEMENTS OF FARMERS TAKEN ON OATH BY TH E LD. A.O TO THE APPELLANT FOR REBUTTAL, WHICH ARE IN HIS POSSESSION AND ON WHICH HE HAS RELIED UPON AND HAS NOT GIVEN AN OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE THE FARMERS WHOSE STATEMENT THE ASSESSING O FFICER HAS RELIED UPON. (II) IN THE CASE OF ASSESSEE RKDF EDUCATION SOCIETY , REVENUE IS IN APPEAL FOR A.Y. 2008-09 TO 2010-11 RAISING FOLLO WING GROUNDS IT(SS) A NO.126/2019 ASSESSMENT YEAR 2008-09 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS CORRECT IN ALLOWING RELIEF TO THE EXTENT OF 60 OF T HE BOGUS PURCHASES, THOUGH SUCH BOGUS EXPENSES ARE HELD TO BE FOR THE BENEFIT OF THE MEMBERS OF THE SOCIETY THEREBY VIOLATING THE PROVISIONS U/S 13(1)( C) R.W.S 13(3) OF THE ACT? 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) IS CORRECT IN DIRECTING THE AO TO ALLOW EXEMPTION U/S 11 OF THE ACT, EVEN THOUGH THE ASSESSEE SOCIETY HAS VIOLATED THE PROVISIONS OF 13(1)(C) R.W.S 13(3) OF THE ACT, THEREBY THE PROVISIONS OF SEC 11 OR 12 ARE NOT APPLICABLE TO THE CASE OF ASSESSEE SOCIETY? 3. ON FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) IS CORRECT IN DIRECTING THE AO TO ALLOW DEDUCTION U/S 11(1)(A) OF THE ACT, EVEN THOUGH THE ASSESSEE HAS VIOLATED THE PROVISIONS U/S 13(1)(C) R .W.S 13(3) OF THE ACT AND THE PROVISIONS OF SECTION 11 & 12 ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE SOCIETY? 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) IS CORRECT IN DIRECTING THE AO TO ALLOW DEDUCTION ON A CCOUNT OF CAPITAL EXPENDITURE EVEN THOUGH THE ASSESSEE HAS VIOLATED T HE PROVISIONS OF SECTION RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 10 13(1)(C) R.W.S 13(3) OF THE ACT AND THE PROVISIONS OF SECTION 11 AND 12 ARE NOT APPLICABLE TO THE CASE OF ASSESSEE SOCIETY? 5. ANY OTHER GROUNDS MAY BE ADDUCED AT THE TIME OF HEA RING. IT(SS) A NO.127/2019 ASSESSMENT YEAR 2009-10 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) IS CORRECT IN DIRECTING THE AO TO ALLOW EXEMPTION U/S 11 OF THE ACT, EVEN THOUGH THE ASSESSEE SOCIETY HAS VIOLATED THE PROVISIONS OF 13(1)(C) R.W.S 13(3) OF THE ACT, THEREBY THE PROVISIONS OF SEC 11 OR 12 ARE NOT APPLICABLE TO THE CASE OF ASSESSEE SOCIETY? 2. ON FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) IS CORRECT IN DIRECTING THE AO TO ALLOW DEDUCTION U/S 11(1)(A) OF THE ACT, EVEN THOUGH THE ASSESSEE HAS VIOLATED THE PROVISIONS U/S 13(1)(C) R.W.S 13(3) OF THE ACT AND THE PROVISIONS OF SECTION 11 & 12 ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE SOCIETY? 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) IS CORRECT IN DIRECTING THE AO TO ALLOW DEDUCTION ON A CCOUNT OF CAPITAL EXPENDITURE EVEN THOUGH THE ASSESSEE HAS VIOLATED T HE PROVISIONS OF SECTION 13(1)(C) R.W.S 13(3) OF THE ACT AND THE PROVISIONS OF SECTION 11 AND 12 ARE NOT APPLICABLE TO THE CASE OF ASSESSEE SOCIETY? 4. ANY OTHER GROUNDS MAY BE ADDUCED AT THE TIME OF HEA RING. IT(SS) A NO.128/2019 ASSESSMENT YEAR 2010-11 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) IS CORRECT IN DIRECTING THE AO TO ALLOW EXEMPTION U/S 11 OF THE ACT, EVEN THOUGH THE ASSESSEE SOCIETY HAS VIOLATED THE PROVISIONS OF 13(1)(C) R.W.S 13(3) OF THE ACT, THEREBY THE PROVISIONS OF SEC 11 OR 12 ARE NOT APPLICABLE TO THE CASE OF ASSESSEE SOCIETY? 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) IS CORRECT DELETING THE ADDITIONS OF RS.153,30,530/- B EING INCOME IN THE FORM OF FDR IS UTILIZED BY THE SOCIETY FOR THE BENEFITS OF ITS MEMBERS? 3. ON FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) IS CORRECT IN DIRECTING THE AO TO ALLOW DEDUCTION U/S 11(1)(A) OF THE ACT, EVEN THOUGH THE ASSESSEE HAS VIOLATED THE PROVISIONS U/S 13(1)(C) R.W.S 13(3) OF THE ACT AND THE PROVISIONS OF SECTION 11 & 12 ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE SOCIETY? 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) IS CORRECT IN DIRECTING THE AO TO ALLOW DEDUCTION ON A CCOUNT OF CAPITAL EXPENDITURE EVEN THOUGH THE ASSESSEE HAS VIOLATED T HE PROVISIONS OF SECTION 13(1)(C) R.W.S 13(3) OF THE ACT AND THE PROVISIONS OF SECTION 11 AND 12 ARE NOT APPLICABLE TO THE CASE OF ASSESSEE SOCIETY? 6. ANY OTHER GROUNDS MAY BE ADDUCED AT THE TIME OF HEA RING. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 11 3. IN CASE OF ANOTHER ASSESSEE I.E. M/S AYUSHMATI E DUCATIONAL & SOCIAL SOCIETY, BOTH ASSESSEE AND REVENUE ARE IN AP PEAL BEFORE US (I) ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- IT(SS) A NO.74/IND/2019 ASSESSMENT YEAR 2008-09 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) AND LD. AO ERRED IN CONFIRMING THE DISALLOWA NCE OF LEGITIMATE DEPRECIATION AMOUNTING RS. 7,71416/- (AS PER SLM ME THOD) ON ALLEGED BOGUS ASSET IN THE APPELLATE PROCEEDING AND IN ASSESSMENT PROCEEDINGS ULS.153A OF THE I. T. ACT BECAUSE DURING SEARCH PROCEEDINGS NO INCRIMINATING MATERIAL OR EVIDENCE W AS FOUND OR SEIZED REGARDING THE ACQUISITION OF ASSET DURING MERGER WITH M/S VEDICA EDUCATION SOCIETY WHICH COULD JUSTIFY DISALL OWING SUCH DEPRECIATION. THIS ADDITION IS CONTRARY TO THE PROVISIONS OF SECTION 153A. IT(SS) A NO.75/IND/2019 ASSESSMENT YEAR 2009-10 1. THE LEARNED CIT (APPEALS) ERRED IN. LAW AND ON FACT S IN CONFIRMING THE ACTION OF THE LEARNED AO IN DENYING THE BENEFIT OF EXEMPTION U/S 10 (23C) (VI) OF THE ITA, 1961 . 1.1 THE LEARNED CIT (APPEALS) FAILED TO APPRECIATED THAT THE APPELLANT SOCIETY FOR THE YEAR UNDER CONSIDERATION WAS EXEMPT ED U/S 10 (23C) (VI) OF THE INCOME TAX ACT, 1961 AND THE APPELLANT HAD SPECIFICALLY MENTIONED THE FACTUM OF AVAILABILITY OF SUCH EXEMPT ION IN ITS RETURN OF INCOME. 1.2 THAT THE CIT (A) ERRED IN HOLDING THAT FOR THE YEAR UNDER CONSIDERATION THE BENEFIT UNDER SECTION 11 AND U/S 10 (23C) (VI) CANNOT BE CLAIM SIMULTANEOUSLY WITHOUT APPRECIATING THE FA CT THAT THE AMENDMENT FOR TAKING BENEFIT EITHER UNDER SECTION 11 OR U/S 10 (23C) WAS INTRODUCED ONLY BY FINANCE (NO.2) ACT, 2014 R/W (CIRCULAR NCJ112015, DATED: 21.1.2015) AND THUS PRIOR TO 201 4 THE APPELLANT COULD CLAIM EXEMPTION BOTH U/S 10(23C)(VI) AND SECT ION 11. 1.3 THAT THE LD. CIT (A) ERRED IN NOT TAKING INTO COGNIZANCE THAT FOR THE YEAR UNDER CONSIDERATION APPELLANT SOCIETY WAS ENTITLED FOR EXEMPTION U/S 10 23C (VI) OF THE ACT AND THUS THE TOTAL INCOME OF TH E APPELLANT SOCIETY IS EXEMPTED AND HENCE THE ADDITIO N OF RS RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 12 1,99,21,499/. IS ILLEGAL, ARBITRARY AND WITHOUT JUR ISDICTION. 2. WITHOUT PREJUDICE TO ABOVE GROUND, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN DENY ING THE EXEMPTION U/S. 11 BY HOLDING THAT THE CASE OF APPELLANT IS HIT BY SEC TION 13(1)(C) READ WITH SECTION 13(2)(A) AND SECTION 13(1)(D) AND THAT TOO DISREGARDING THE FACT THAT THE REASON FOR MAKING PA YMENT OF RS 1,99,21,499/- TO FARMERS ON BEHALF OF M/S SIDDHARTH KAPOOR INFRASTRUCTURE WAS FOR TAKING THAT PARTICULAR LAND ON LEASE FROM M/S SIDDHARTH KAPOOR INFRASTRUCTURE FOR THE PURPOSE OF SPORT RELATED ACTIVITY AND THE SAID FACT WAS EVIDENT FROM THE LEA SE DEED REGISTERED ON 20/02/2009 FOR 20 YEARS FOR USING OF SAID LAND FOR THE PURPOSE OF SPORT RELATED ACTIVITY. 2.1 THE. LD. CIT(A) ERRED IN TAKING THE VIEW THAT APPEL LANT BY MAKING PAYMENT OF RS 1,99,21,499/- TO FARMERS HAS BENEFITED DIRECTLY TO THE PERSONS REFERRED TO IN SECTION 13 (3) OF THE ACT WITHOUT GOING INTO THE REAL AND PIVOTAL REASON FOR MAKING PAYMENT WHICH WA S FOR BONAFIDE USE OF THE SAID LAND BY THE, APPELLANT SOCIETY. 2.2. THE LD. CIT(A) ERRED IN UPHOLDING THE ACTION O F THE ASSESSING OFFICER IN MAKING THE IMPUGNED ADDITION OF RS 1,99, 21,499/- INASMUCH AS THE ASSESSMENT ORDER HAS BEEN FRAMED IN VIOLATION O F THE PRINCIPLES OF NATURAL JUSTICE INASMUCH AS, AMONGST OTHERS, THE ASSESSING OFFICER HAS NOT GIVEN THE DOCUMENTS/STATE MENTS OF FARMERS TAKEN ON OATH BY THE LD. AO TO THE APPELLANT FOR REBUTTAL, WHICH ARE IN HIS POSSESSION AND ON WHICH HE HAS RELIED UPON AND HAS NOT GIVEN AN OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE THE F ARMERS WHOSE STATEMENT THE ASSESSING OFFICER HAS RELIED UPON. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) AND LD. AO ERRED IN CONFIRMING THE DISALLOWANCE OF LEGITIMATE DEPRECIATION AMOUNTING RS.7,71416/- (AS PER SLM METHOD) ON ALLEGED BOGUS ASSET IN E APPELLATE PROCEEDING AND IN ASSESSMENT PROCEEDINGS S.153A OF E I. T. ACT BECAUSE DURING SEARCH PROCEEDINGS NO INCRIMINATING MATERIAL OR EVIDENCE WAS FOUND OR SEIZED REGARDING THE ACQUISITION OF ASSET DURING MERGER WITH M/S VEDICA EDUCATION SOCIETY WHICH COULD JUSTIFY DISALLOWING SUCH DEPREC IATION. IT(SS) A NO.76/IND/2019 ASSESSMENT YEAR 2010-11 1. THE LEARNED CIT (APPEALS) ERRED IN LAW END ON FACTS IN CONFIRMING THE ACTION OF THE LEARNED, AO IN DENYING THE BENEFIT OF EXEMPTION U/S 10 (23C) (VI) OF THE ITA, 1961 . 1.1 THE LEARNED CIT (APPEALS) FAILED TO APPRECIATED THAT THE APPELLANT RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 13 SOCIETY FOR THE YEAR UNDER CONSIDERATION WAS EXEMPT ED U/S 10 (23C) (VI) OF THE INCOME TAX ACT, 1961 AND THE APPELLANT HAD SPECIFICALLY MENTIONED THE FACTUM OF AVAILABILITY OF SUCH EXEMPTION IN ITS RETURN OF INCOME. 1.2 THAT THE CIT (A) ERRED IN HOLDING THAT FOR THE YEAR UNDER CONSIDERATION THE BENEFIT UNDER SECTION 11 AND U/S 10 (23C) (VI) CANNOT BE CLAIM SIMULTANEOUSLY WITHOUT APPRECIATING THE FA CT THAT THE AMENDMENT FOR TAKING BENEFIT EITHER UNDER SECTION 11 OR U/S 10 (23C) WAS INTRODUCED ONLY BY FINANCE (NO.2) ACT, 2014 R/W (CIRCULAR NO.112015, DATED: 21.1.2015) AND THUS PRIOR TO 2014 THE APPELLANT COULD CLAIM EXEMPTION BOTH U/S 10(23C)(VI) AND SECT ION 11. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) AND LD. AO ERRED IN CONFIRMING THE DISALLOWANCE OF LEGITIMATE DEPRECIATION AMOUNTING RS. 7,71416/- (AS PER SLM METHOD) IN THE APPELLATE PROCEEDING AND IN ASSESSMENT PROCEEDINGS U/S.153A OF THE I. T. ACT BECAUSE DURING SEARCH PROCEEDINGS NO INCRIMINAT ING MATERIAL OR EVIDENCE WAS FOUND OR SEIZED WHICH COULD HAVE JUSTI FIED SUCH A DISALLOWANCE U/S 153A. (II) REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- IT(SS) A NO.129/IND/2019 ASSESSMENT YEAR 2009-10 1. WHETHER ON FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS CORRECT IN DELETING THE DENIAL OF EXEMPTION U/S 11 OF RS. 34,07,25,659/- FOR A.Y. 2009- 10 EVEN THOUGH THE ASSESSEE SOCIETY HAS APPLIED INC OME OF THE SOCIETY FOR THE BENEFIT OF THE PERSONS REFERRED TO SECTION 13(3) OF THE ACT AND THE SAID VIOLATION IS HELD TO BE CORRECT IN VIEW OF THE SECT ION 13(1)(C) OF THE ACT? 2. WHETHER ON FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS CORRECT IN DIRECTING THE A.O TO ALLOW DEDUCTION OF RS. 8,27,57 ,688/- IN A.Y 2009-10 U/S 11(1)(A) OF THE ACT, EVEN THOUGH THE ASSESSEE SOCIE TY HAS VIOLATED THE PROVISIONS OF SEC 13(1)(C) R.W.S 13(3) OF THE ACT AND HENCE EXEMPTION U/S 11 ARE NOT APPLICABLE TO THE ASSESSEE SOCIETY? 3. WHETHER ON FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS CORRECT IN DIRECTING THE A. O TO ALLOW DEDUCTION OF RS. 11,19,28,121/- IN A. Y 2 009-10 AS APPLICATION OF INCOME AS CAPITAL EXPENDITURE, EV EN THOUGH THE ASSESSEE SOCIETY HAS VIOLATED THE PROVISIONS OF SEC 13(1)(C) R.W.S 13(3) OF THE ACT AND HENCE EXEMPTION U/S 11 ARE NOT APPLICABLE TO THE ASSESSEE SOCIETY? 4. WHETHER ON FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS CORRECT IN DELETING THE ADDITION OF RS. 25,83,030/- FOR THE A .Y 2009-10 ON INTEREST FREE LOAN GIVEN TO SISTER CONCERN VIOLATING THE PROVISIO N OF SEC 13(1)(C) R. W.S 13(3) RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 14 OF THE ACT EVEN THOUGH NO PROPER EXPLANATION OR DET AILS SUBMITTED BEFORE THE A. O DURING THE ASSESSMENT PROCEEDINGS? 5. ANY OTHER GROUND MAY BE ADDUCED AT THE TIME OF HEAR ING IT(SS) A NO.130/IND/2019 ASSESSMENT YEAR 2010-11 1.WHETHER ON FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS CORRECT IN DELETING THE DENIAL OF EXEMPTION U/S 11 OF RS. 20,35.53.275/- FOR A.Y. 2010- 11 EVEN THOUGH THE ASSESSEE SOCIETY HAS APPLIED INC OME OF THE SOCIETY FOR THE BENEFIT OF THE PERSONS REFERRED TO SECTION 13(3) OF THE ACT AND THE SAID VIOLATION IS HELD TO BE CORRECT IN VIEW OF THE SECT ION 13(1)(C) OF THE ACT? 2.WHETHER ON FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS CORRECT IN DIRECTING THE A.O TO ALLOW DEDUCTION OF RS. 7,83,19 ,820/- IN A.Y 2010-11 U/S 11(1)(A) OF THE ACT, EVEN THOUGH THE ASSESSEE SOCIE TY HAS VIOLATED THE PROVISIONS OF SEC 13(1)(C) R.W.S 13(3) OF THE ACT AND HENCE EXEMPTION U/S 11 ARE NOT APPLICABLE TO THE ASSESSEE SOCIETY? 3. WHETHER ON FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS CORRECT IN DIRECTING THE A. O TO ALLOW DEDUCTION OF RS. 17,41,75,826/- IN A. Y 2 010-11 AS APPLICATION OF INCOME AS CAPITAL EXPENDITURE, EV EN THOUGH THE ASSESSEE SOCIETY HAS VIOLATED THE PROVISIONS OF SEC 13(1)(C) R.W.S 13(3) OF THE ACT AND HENCE EXEMPTION U/S 11 ARE NOT APPLICABLE TO THE ASSESSEE SOCIETY? 4.WHETHER ON FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS CORRECT IN DELETING THE ADDITION OF RS. 9,39,890/- FOR THE A. Y 2010-11 ON INTEREST FREE LOAN GIVEN TO SISTER CONCERN VIOLATING THE PROVISIO N OF SEC 13(1)(C) R. W.S 13(3) OF THE ACT EVEN THOUGH NO PROPER EXPLANATION OR DET AILS SUBMITTED BEFORE THE A. O DURING THE ASSESSMENT PROCEEDINGS? ANY OTHER GROUND MAY BE ADDUCED AT THE TIME OF HEAR ING 3. 4. AS THE ISSUE RAISED IN ALL THESE APPEALS ARE MOS TLY COMMON AND THE ASSESSEE(S) RELATE TO SAME GROUP, THESE WERE HEARD TOGETHER AT THE REQUEST OF ALL THE PARTIES AND ARE BEING DISPOSED O FF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. WE W ILL FIRST TAKE UP THE APPEALS AT THE INSTANCE OF ASSESSEE AND REVENUE IN THE CASE OF RKDF EDUCATION SOCIETY WHEREIN THE ASSESSEE IS IN APPEAL FOR A.YS. 2004- RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 15 05, 2006-07, 2007-08, 2008-09 & 2009-10 AND REVENUE IS IN APPEAL FOR A.YS. 2008-09 TO 2010-11. 5. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS ARE THAT THE ASSESSEE IS A REGISTERED SOCIETY WITH THE REGISTRAR OF SOCIETIES AND ALSO REGISTERED U/S 12AA OF THE INCOM E TAX ACT 1961 (IN SHORT THE ACT) SINCE 13.08.1999. THE ASSES SEE SOCIETY IS RUNNING FOLLOWING EDUCATIONAL INSTITUTIONS UNDER ITS AEGIS:- S.NO. NAME OF THE INSTITUTIONS 1 RKDF INSTITUTE OF SCIENCE & TECHNOLOGY 2 RKDF COLLEGE OF TECHNOLOGY 3 RKDF (POLYTECHNIC) PHARMACY 4 RKDF INSTITUTE OF MANAGEMENT 5 RKDF COLLEGE OF NURSING 6 RKDF DENTAL COLLEGE & RESEARCH CENTRE 7 RKDF INSTITUTE OF SCIENCE & TECHNOLOGY (MCA) 8 RKDF HOMOEOPATHIC MEDICAL COLLEGE & HOSPITAL 6. SEARCH ACTION U/S 132 OF THE ACT WAS CARRIED OUT ON 23.07.2009 AT VARIOUS BUSINESS PREMISES OF THE ASSE SSEE SOCIETY, SISTER CONCERN AND OTHERS. VARIOUS INCRIMI NATING MATERIAL WERE FOUND AND SEIZED. NOTICE U/S 153A OF THE ACT WAS ISSUED FOR A.YS.2004-05 TO 2010-11 TO FILE THE RE TURN. 7. THE DETAILS OF DATE OF FILING RETURNS U/S 139(1) AND U/S 153A OF THE ACT AND INCOME DECLARED THEREIN ARE MENTIONE D BELOW:- RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 16 S. NO. A.Y. DATE OF FILING OF ORIGINAL RETURN U/S 139(1) DATE OF FILING OF RETURN U/S 153 RETURNED TOTAL INCOME (IN RS.) 1 2004 - 05 01.11.2004 17.10.2011 NIL 2 2005 - 06 30.10.2005 17.10.2011 NIL 3 2006 - 07 31.10.2006 17.10.2011 NIL 4 2007 - 08 25.10.2007 17.10.2011 NIL 5 2008 - 09 30.09.2008 17.10.2011 NIL 6 2009 - 10 23.03.2010 17.10.2011 NIL 7 2010 - 11 14.10.2010 17. 10.2011 NIL 8. DURING THE PENDENCY OF ASSESSMENT PROCEEDINGS AS SESSEE FILED WRIT PETITION BEFORE HON'BLE JURISDICTIONAL HI GH COURT CHALLENGING THE ASSESSMENT PROCEEDINGS BUT THE SAME WAS SUBSEQUENTLY DISMISSED AS WITHDRAWN BY THE HON'BLE C OURT VIDE ORDER DATED 21.03.2014. IN THE PAST FOR A.Y. 2 004-05 & 2005-06 CERTAIN ADDITIONS WERE MADE BY THE LD. AO U/S 143(3) OF THE ACT VIDE ORDER DATED 29.12.2006 AND 2 8.12.2007 AND THE ISSUE RELATING TO THE ADDITIONS WENT UP TO THE HON'BLE JURISDICTIONAL HIGH COURT AND SAME WERE DECIDED IN FAVOUR OF THE ASSESSEE. 9. IN THE INSTANT APPEAL AT THE INSTANCE OF ASSESSE E PERTAINING TO A.YS.2004-05, 2006-07 TO 2009-10, DURING THE COURSE OF ASSESSMENT PROCEEDINGS VARIOUS OBSERVATIONS WERE MA DE BY THE LD. AO ALLEGING THAT THE ASSESSEE SOCIETY HAS DI RECTLY OR INDIRECTLY USED OR APPLIED THE SCIETYS, FUND FOR T HE BENEFIT OF RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 17 PERSONS REFERRED TO IN SECTION 13(3) OF THE ACT, WH ICH THUS DISENTITLES THE ASSESSEE TO CLAIM BENEFIT OF EXEMPT ION U/S 11 OF THE ACT. LD. AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE WAS OF THE VIEW THAT THE ASSESSEE IS NOT E NTITLED TO CLAIM BENEFIT OF EXEMPTION U/S 11 OF THE ACT IN VIE W OF THE FOLLOWING ADDITIONS MADE FOR VARIOUS AYS: I) ADDITION AT RS.15 LAKHS TOWARDS UNEXPLAINED EXP ENSES DEBITED IN THE NAME OF SHRI S. N. SHARMA FOR A.Y. 2 004- 05 II) ADDITIONS FOR UNEXPLAINED EXPENSES/BOGUS PURCHA SE FROM M/S. PRATEEK ENTERPRISES & M/S. SALUJA ENTERPRI SES AT RS.1,09,43,000/-, RS.5,27,000/- & RS.2,85,000/- FOR A.YS. 2006-07, 2007-08 & 2008-09. III) ADDITION AT RS.28,51,523/- TOWARDS BOGUS PAYMEN T TO SHRI S.N. REDDY FOR A.Y. 2008-09 IV) ADDITION AT RS.36,08,666/- FOR EXCESS PAYMENT MA DE ON BEHALF OF AYUSHMATI EDUCATION & SOCIAL SOCIETY TO M/S. SIDDHARTH KAPOOR INFRASTRUCTURE PVT. LTD. (IN SHORT SKIPL) DURING A.Y. 2009-10 V) ADDITION AT RS.17,00,000/- ON ACCOUNT OF BOGUS PAYMENT TO SHRI S.D. TOMAR DURING A.Y. 2009-10 VII. ADDITION AT RS. 2,18,048/- AND RS.41,84,920/- FO R RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 18 A.Y. 2009-10 & 2010-11 TOWARDS BENEFIT OF INTEREST PASSED ON TO HOME BOUND TRAVELS PVT. LTD. (IN SHORT HBTPL) VIII. ADDITION OF RS.1,53,30,530/- ON ACCOUNT OF EXC ESS BENEFIT GIVEN TO HBTPL AND BENEFIT OF INTEREST AT RS.41,84,920/- PASSED TO HBTPL DURING A.Y. 2010-11 10. AFTER MAKING ABOVE ADDITIONS AND DENIAL OF BENE FIT OF EXEMPTION U/S 11 OF THE ACT, INCOME OF THE ASSESSEE WAS ASSESSED AS UNDER: AY INCOME ASSESSEE 2004 - 05 NIL 200 5 - 0 6 NIL 200 6 - 0 7 1,09,43,000/ - , 200 7 - 0 8 5,27,000/ - 2008 - 09 11,44,48,454/ - 2009 - 1 0 12,73,44,852/ - 2010 - 11 14,56,33,595/ - 11. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A) RAISING VARIOUS GROUNDS BOTH ON LEGAL AS WEL L AS MERITS AND PARTLY SUCCEEDED. BEFORE US ASSESSEE IS IN APPE AL FOR A.YS. 2004-05 TO 2006-07 & 2009-10 AND REVENUE IS IN APPEAL F OR A.Y. 2008-09 TO 2010-11. 12. LD. SENIOR COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED REFERRING TO SUBMISSION MADE BY THE ASSESSEE BEFORE LOWER RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 19 AUTHORITIES, PAPER BOOK FILED ON 23.03.2021 RUNNING FROM PAGES 1 TO 211 AND ALSO ANOTHER PAPER BOOK RUNNING FROM PAGES 1 TO 245. THE RELIANCE WAS ALSO PLACED ON VAR IOUS JUDGMENTS AND DECISIONS REFERRED IN THE SUBMISSIONS WHICH ARE DEALT IN THE SUBSEQUENT PARAS WHILE DEALING WIT H THE RELEVANT ISSUES. 13. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE (DR) APART FROM SUPPORTING THE FINDING OF THE LD. AO AND LD. CIT(A) WHERE THE ISSUES HAVE BEEN DECIDED IN FAVOUR OF TH E REVENUE AND FINDING OF LD. AO, WHERE LD. CIT(A) HAS GIVEN RE LIEF TO ASSESSEE, ALSO REFERRED TO PAPER BOOK DATED 11 TH JUNE 2021 CONTAINING LETTER DATED 3 RD JUNE 2019 AND VARIOUS DOCUMENTS FILED BY THE REVENUE IN SUPPORT OF THE GROUNDS RAIS ED IN THEIR APPEALS. 14. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DETAILED S UBMISSIONS FILED BY THE BOTH THE PARTIES AND ALSO CONSIDERED THE JUD GMENTS REFERRED AND RELIED BY LD. SR. COUNSEL FOR THE ASSESSEE. WE WILL FIRST TAKE UP ISSUES RAISED IN THE ASSESSEE S APPEAL RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 20 15. FIRST ISSUE RAISED BY THE ASSESSEE FOR A.Y. 200 4-05 RELATES TO ADDITION OF RS.15,00,000/- FOR ALLEGED UNEXPLAINED EXPENDITURE FOR THE AMOUNT PAID TO SHRI S.N. SHARMA. 16. FACTS PERTAINING TO THIS ISSUE ARE THAT DURING THE SEARCH A LOOSE PAPER ANNEXING A-1/1/6, PAGE NO.38 WAS SEIZED FROM THE RESIDENCE OF SHRI S.N. SHARMA WHICH WAS A DEPOSIT SLIP OF STATE BANK OF INDORE IN THE ACCOUNT IN THE NAME OF SHRI S.N. SHARMA WHEREIN CHEQUE NO.072347 DATED 30.01.2004 FOR RS.15 LAKHS WAS DEPO SITED. THIS CHEQUE WAS ISSUED BY THE ASSESSEE SOCIETY (RKDF EDU CATION SOCIETY). MR. S.N. SHARMA STATED THAT THIS AMOUNT WAS TAKEN A S LOAN. LD. AO HOWEVER, NOTICED THAT ASSESSEE SOCIETY HAS CLAIMED THIS AMOUNT AS EXPENDITURE. DURING THE ASSESSMENT PROCEEDINGS IT W AS SUBMITTED BY THE ASSESSEE THAT THIS WAS A LOAN BUT INADVERTENTLY DEBITED UNDER BUILDING CONSTRUCTION ACCOUNT AND SUBSEQUENTLY, WHE N THE LOAN WAS REPAID BY MR. S.N. SHARMA, THE SAME WAS CREDITED IN THE BUILDING CONSTRUCTION ACCOUNT AND THEREFORE, THE FINDING THA T PAYMENT WAS NOT RECORDED IS FACTUALLY INCORRECT. LD. AO WAS NOT CON VINCED AND MADE THE ADDITION. LD. CIT(A) ALSO APPRECIATED THE FINDI NG OF LD. AO. 17. BEFORE US LD. SR. COUNSEL FOR THE ASSESSEE (IN SHORT LD. AR) SUBMITTED THAT FIRSTLY THE ALLEGED INCRIMINATING MA TERIAL WAS NOT RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 21 SEIZED FROM THE ASSESSEE SOCIETYS PREMISES. THEREF ORE, IN VIEW OF THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA [2016] 380 ITR 573(DEL) NO ADDITION COULD BE MADE FOR A.Y. 2004-05 WHICH IS NON-ABATED ASSESSMENT SINCE FOR A. Y. 2004-05 REGULAR ASSESSMENT PROCEEDINGS STOOD ALREADY CARRIE D OUT VIDE ORDER DATED 29.12.2006. ON MERIT IT WAS SUBMITTED THAT TH E PAYMENT HAS BEEN MADE BY CHEQUE AND THERE WAS A MISTAKE IN THE ACCOUNTING OF TRANSACTION WHICH WAS SUBSEQUENTLY RECTIFIED. FURTH ER THERE IS NO EFFECT ON COMPUTATION OF INCOME AT ALL SINCE THE TO TAL EXPENDITURE WAS MUCH MORE THAN THE GROSS RECEIPTS. EVEN OTHERWISE A SSESSEE IS ELIGIBLE FOR EXEMPTION U/S 11(1)(A) OF THE ACT AS T HE EXPENDITURE WAS MORE THAN 85% OF THE RECEIPTS. 18. WE FIND THAT THE ISSUE PERTAINS TO A.Y.2004-05 FOR WHICH. ORIGINAL RETURN OF INCOME FILED ON 01.11.2004. CASE SELECTED FOR SCRUTINY BY SERVING NOTICE U/S 143(2) AND FINANCIALLY ASSESSED U/S 143(3) ON 29.12.2006. THE ALLEGED INCRIMINATING MATERIAL WAS NOT FOUND FROM THE ASSESSEE PREMISES AND IT WAS FOUND FROM THE PRO MISES OF MR. S.N. SHARMA. THE ALLEGED ENTRY WAS RECORDED IN THE BOOK AND SINCE A.Y.2004-05 IS NON-ABATED ASSESSMENT YEAR, NO ADDIT ION WAS CALLED FOR, IN VIEW OF THE SETTLED RATIO LAID DOWN BY HON' BLE DELHI HIGH COURT RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 22 IN THE CASE OF CIT V. KABUL CHAWLA (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE ASSESSMENT PROCEEDINGS FOR THE RELEVANT AS SESSMENT YEARS WHICH ARE NOT PENDING AND NO INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH, THE ADDITION IS BEYOND THE SC OPE OF SECTION 153A. THUS, IN OUR VIEW ON THIS LEGAL ASPECT ITSELF THE IMPUGNED ADDITION OF RS.15,00,000/- DESERVES TO BE DELETED. 19. HOWEVER, FOR ACADEMIC PURPOSE, WE WILL DEAL ON THE MERITS OF THIS ISSUE. WE, NOTE THAT THE FACTS REMAIN UNDISPUTED TH AT THE ALLEGED TRANSACTION IS THROUGH BANKING CHANNEL. ACCOUNTS OF THE SOCIETY ARE REGULARLY AUDITED AND INCOME TAX RETURNS STOOD FILE D ON 01.11.2004 WHICH WAS SUBSEQUENTLY ASSESSED U/S 143(3) ON 29.12 .2006. THE FACT IS THAT THE ALLEGED AMOUNT WAS GIVEN ON LOAN TO SHR I. S.N. SHARMA IS ACCEPTED BY S.N. SHARMA ALSO IN HIS STATEMENT. THIS AMOUNT WAS REPAID BY THE MR. S.N. SHARMA TO THE ASSESSEE SOCIE TY SUBSEQUENTLY. IT IS CONTENDED THAT THERE WAS A MISTAKE IN PUNCHIN G THE TRANSACTION IN THE ACCOUNT BOOKS AS THE ACCOUNTANT INADVERTENTL Y DEBITED THE BUILDING CONSTRUCTION ACCOUNT, RATHER THEN DEBITING THE ACCOUNT OF S.N. SHARMA TO BE SHOWN AS LOAN GIVEN TO MR. S.N. S HARMA. THIS MISTAKE WAS SUBSEQUENTLY RECTIFIED. 20. WE, FIND MERIT IN THE SUBMISSION OF THE LD. SR. COUNSEL FOR THE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 23 ASSESSEE AND ARE OF THE CONSIDERED VIEW THATSINCE T HERE WAS A MISTAKE ON THE PART OF ACCOUNTANT AND TRANSACTION CARRIED O UT THROUGH BANKING CHANNEL AND AMOUNT RECORDED IN BOOKS OF ACC OUNT, NO DISALLOWANCE OF RS.15,00,000/- PAID TO SHRI S.N. SH ARMA WAS CALLED FOR. THE FINDING OF LD. CIT(A) IS THUS SET ASIDE AN D THE ADDITION FOR UNEXPLAINED EXPENSES DEBITED TO MR. S.N. SHARMA AT RS.15,00,000/- IS DELETED. GROUND NO.1 (GROUND NO.1.1 TO 1.7) RAIS ED BY THE ASSESSEE IS ALLOWED. THE ALTERNATE GROUND NO.2 RAISED BY THE ASSESSEE BECOMES INFRUCTUOUS AND THUS DISMISSED AS INFRUCTUOUS. 21. THE APPEAL OF THE ASSESSEE FOR A.Y. 2004-05 IS ALLOWED. 22. NOW WE TAKE UP THE COMMON ISSUE RELATING TO ADD ITION FOR ALLEGED BOGUS PURCHASE FROM M/S. PRATEEK ENTERPRISES AND M/ S. SALUJA ENTERPRISES FOR WHICH ADDITION MADE BY THE LD. AO W ERE PARTLY DELETED BY THE LD. CIT(A) SUSTAINING THE ADDITION @ 40% OF TOTAL PURCHASE OF CTD(STEEL) MADE FROM M/S. PRATEEK ENTERPRISES AND M /S SALUJA ENTERPRISES. THE ASSESSEE HAS CHALLENGED THE ADDITI ONS SUSTAINED BY THE LD. CIT(A) FOR A.YS. 2006-07, 2007-08 & 2008-09 AT RS.39,77,200/-, RS.2,10,800/- & RS.1,14,000/- RESPE CTIVELY. REVENUE HAS ALSO RAISED THIS ISSUE FOR THE ADDITION DELETED BY LD. CIT(A) THE SAME WILL BE DEALT WHILE DEALING WITH TH E REVENUES APPEAL RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 24 SUBSEQUENTLY. 23. BRIEF FACTS RELATING TO THIS ISSUE AS OBSERVED BY LD. CIT(A) IN THE IMPUGNED ORDER WILL BE RELEVANT AND THE SAME IS ABS TRACTED BELOW: 14.1 THE BRIEF FACTS OF THE ADDITIONS AS DISCUSSED BY THE A.O. IN ASSESSMENT ORDER ARE THUS THAT IN ANOTHER SEARCH OP ERATION CONDUCTED BY THE INCOME TAX DEPARTMENT IN CASE OF BHARAT KOTHARI GROUP, INDORE PRIOR LU SEARCH OPERATION ON RKDF GROUP, TWO BUSINESS ENTERPRISES NAMELY M/ S PRATEEK ENTERPRISES(KEY PERSON- SHRI SUNIL KHANDELWAL) AND M/ S SALUJA ENTERPRISES (KEY PERSON- SHRI NARENDRA SHARMA) WERE FOUND INVOLVED IN ACTIVI TIES OF PROVIDING SPURIOUS BILLS OF BOGUS SALE OF IRON AND STEEL. THESE PERSONS SUBMITTED AFFIDAVITS TO THE DEPARTMENT THAT THEY HAD BEEN ENGAGING IN PROVIDING BOGUS BILLS ON COMMISSION BAS IS AND ACTUALLY NO STEEL ETC. WAS SUPPLIED BY THEM. AS PER ASSESSMENT ORDER, THESE PERSONS USED TO RECEIVE PAYMENT OF SAL E THROUGH CHEQUES AND REPAID BACK THE MONEY TO THE PERSONS TO WHOM BOGUS SALES WERE MADE AFTER CHARGING COMMISSION. THEY BOT H WERE ASSESSED U/S 153A R.W.S. 143(3) BY ACIT-5(1) INDORE . AS PER THE A.O., NO BOOKS OF ACCOUNT AND BILLS/VOUCHERS WERE M AINTAINED BY THESE PERSONS. THE A.D. HAS FURTHER STATED THAT APPELLANT SOCIETY MADE PAYMENTS TO THESE PERSONS TO OBTAIN BILLS OF BOGUS PURCHASES. IN F.Y. 2005-06 APPELLANT SHOWED PURCHASE OF CTD BARS OF RS. 40,77,000/- FROM M/ S. PRATEEK ENTERPRI SES AND RS. 68,66,000/- FROM M/S. SALUJA ENTERPRISES. IN F.Y. 2 006-07, ASSESSEE SHOWED PURCHASE OF RS. 5,27,000/- FROM M/S . SALUJA ENTERPRISES AND IN F.Y. 2007-08, APPELLANT SHOWED P URCHASE OF CTD BARS OF RS. 2,85,000/- FROM M/S. PRATEEK ENTERP RISES. THESE FIGURES HAGE BEEN ROUNDED OFF TO THE NEAREST MULTIP LE OF RS.1,000/- BY THE A.O. AS PER CONTENTS OF ASSESSMENT ORDER, TH E A.O. SUPPLIED THE APPELLANT THE COPIES OF AFFIDAVITS FILED BY THE M. THE A.O. HAS DISCUSSED IN ASSESSMENT ORDER THAT THE APPELLANT, D URING RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 25 ASSESSMENT PROCEEDINGS, SUBMITTED THAT IT HAD PURCH ASED CTD BARS IRORN M/~ PRATEEK ENTERPRISES & M/'$ SALUJA ENTERPRISES FUR CONSTRUCTION WORK IN THE COLLEGE PREMISES OF APPELLANT SOCIETY. THE APPELLANT FURTHER CONTENDED THAT COPY OF AFFIDAVIT BELONGED TO SHRI SUNIL KHANDELWAL WHO WAS NEITHER PROPRIETOR NOR KEY MANAGERIAL PERSON IN THE FIRM AND THE NAME OF SOCIETY WAS NOWH ERE MENTIONED IN HIS STATEMENT. THE APPELLANT RAISED BEFORE THE A .A. THAT DEPARTMENT HAD NOT MADE ANY ENQUIRY FROM THE APPELL ANT U/S 133(6) OF THE ACT. THE APPELLANT CLAIMED THAT SOCIE TY GENUINELY PURCHASED THE MATERIAL AND PAYMENTS WERE MADE THROU GH BANK ACCOUNT. APPELLANT PRODUCED VARIOUS DOCUMENTS BEFOR E THE A.O. INCLUDING COPIES OF LEDGER ACCOUNT OF THESE FIRMS, BANK STATEMENTS, COPIES OF BILLS, COPIES OF WEIGHING SLIPS, CERTIFIC ATES FROM CONTRACTOR, SUB-CONTRACTOR, ARCHITECT, PURCHASE ORDER, QUOTATIO N ETC. THE A.A. RELIED UPON THE STATEMENTS OF SHRI SUNIL KHANDELWAL & SHRI NARENDRA SHARMA AND DISALLOWED THE RELEVANT EXPENSE S AND MADE ADDITION OF THE SAME TREATING NON-APPLICATION OF TH E INCOME. ACCORDINGLY THE A.A. MADE ADDITIONS OF RS. 1,09,43, 000/- IN A.Y. 2006-07, RS. 5,27,000/- IN A.Y. 2007-08 AND RS. 2,85,000/- IN A.Y. 2008-09. 24. WE NOTE THAT DURING THE ASSESSMENT PROCEEDINGS ASSESSEE FILED COMPLETE DETAILS OF BOTH THE PARTIES NAMELY M/S PRA TEEK ENTERPRISES & M/S. SALUJA ENTERPRISES IN ORDER TO SATISFY THE LD. AO THAT THE PURCHASES ARE GENUINE AND ACTUAL QUANTITY CTD BARS (STEEL) WERE USED FOR THE BUILDING CONSTRUCTION. WE FURTHER NOTE THAT THE ASSESSEE CHALLENGED THE ADDITION FOR BOGUS PURCHASE BEFORE L D. CIT(A) AND MADE FOLLOWING SUBMISSION BEFORE LD. CIT(A):- 14.2 DURING THE APPELLATE PROCEEDINGS, THE APPELLAN T HAS REITERATED RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 26 THE SAME FACTS WHICH THE APPELLANT SUBMITTED BEFORE THE A.O. DURING ASSESSMENT PROCEEDINGS. THE APPELLANT HAS ALSO QUESTIONED THE ADMISSIBILITY OF AFFIDAVITS DT. 30.09.2008 BY THESE PERSONS WHEREAS THE SEARCH ON THE RKDF GROUP WAS CONDUCTED ON 23.07.2009. APPELLANT HAS FURTHER SUBMITTED THAT TH E SAID AFFIDAVITS ARE CONCOCTED TO BE USED AGAINST THE APP ELLANT. HENCE, THE APPELLANT HAS REQUESTED THAT THE ADDITIONS MADE IN THESE ASSESSMENT YEARS BE DELETED. THE APPELLANT HAS FURT HER SUBMITTED A CERTIFICATE OF THE ARCHITECT SPECIFICALLY MENTION ED THAT DURING F.Y. 2005-06 TO 2007-08, TOTAL 3,36,764.3 SQFT. AREA OF BUILDING PREMISE OF APPELLANT WAS CONSTRUCTED AND IN THIS CONSTRUCTI ON 8,31,910.76 KG CTD BARS WERE CONSUMED WHICH IS WELL WITHIN THE NORMS OF STANDARD STRUCTURE VALUE. S.N O FINANCIAL NAME OF PARTY WEIGHT TOTAL YEAR (IN KG) WEIGHT CONSUMED (IN %) 1. 2005-06 PRATIK ENTERPRISES LIJ.S387.63 23..35% SALUJA 209400.93 32.96% ENTERPRISES OTHERS 277460.66 43.67% TOTAL 635249.22 100% 2. 2006-07 SALUJA 17583 8.85% ENTERPRISES OTHERS 181087.78 91.15% TOTAL 198670.78 100% 3. 2007-08 PRATIK ENTERPRISES 7990.76 100% TOTAL 7990.76 100% CONSOLIDATED CHART FINANCIAL NAME OF PARTY WEIGHT TOTAL YEAR (IN KG) WEIGHT CONSUMED (IN %) 2005 - 06 PRATIK 156378.39 18.58% TO 2007 - 08 EN TERPRISES SALUJA 226983.93 26.96% ENTERPRISES OTHERS 458548.44 54-46% TOTAL 841910.76 100% 25. AFTER CONSIDERING THE ASSESSEES SUBMISSION LD. CIT(A) PARTLY RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 27 ALLOWED THE CLAIM OF 60% OF BOGUS PURCHASE AND SUST AINED THE REMAINING 40% OBSERVING AS FOLLOWS: 14.9 I HAVE CAREFULLY OBSERVED THE WRITTEN SUBMISSI ON OF THE APPELLANT, THE CASE LAWS QUOTED BY IT AND ORAL ARGU ME/NTS PUT- FORTH IN THE MATTER. IT IS WELL KNOWN FACT THAT THE CONSUMPTION OF THE CTD BARS IN ANY CONSTRUCTION BEARS A LARGE PART OF COST. EVEN IN THE CASE, THE APPELLANT-IS FOUND TO BE IN P OSSESSION OF BOGUS BILLS, THE FACT THAT IT MAY HAVE CONSUMED LAR GE QUANTITY OF CTD BARS IN CONSTRUCTION CANNOT BE DENIED. HOWEVER TWO CASE LAWS QUOTED ABOVE ARE ALSO RELATED TO THE BHARAT KO THARI GROUP IN WHICH M/S PRATEEK ENTERPRISES & M/ S SALUJA ENTERPRISES WERE FOUND TO BE BOGUS FIRMS. THE FACTS OF THE CASE LAWS QUOTED BY THE APPELLANT AND THAT OF PRESENT CASE ARE DIFFEREN T. IN THESE CASE LAWS, THE ASSESSEE IS A TRADER AND THE APPELLA TE AUTHORITY JUSTIFIES NET PROFIT @ 6% ON ASSUMPTION BASIS ON THE GROUND THAT A TRADER WHO SELLS PRODUCT MUST HAVE SURELY PURCHAS ED THE MATERIAL. BUT IN THE PRESENT CASE, THE A PPE1LANT IS THE END USER OF THE MATERIAL I.E. C TD BARS AND GENUINENESS OF ITS PURCHASES FROM CERTAIN FIRMS IS IN QUESTION. THEREF ORE THE DECISION OF THESE CASE LAWS CANNOT BE APPLIED IN TH IS CASE MUTATIS MUTANDIS. HOWEVER THIS FACT IS ALSO TRUE TH AT THE APPELLANT MAY HAVE CONSUMED OF CTD BARS IN HIGH QUA NTITY IF THE CONSTRUCTION HAS TAKEN PLACE IN THE RELEVANT PE RIODS. 14.10 ON PERUSAL OF THE AUDIT REPORTS OF RELEVANT F INANCIAL YEARS I.E. FOR F.Y. 2005-06, 2006-07 & 2007-08, I HAVE OBSERVED THAT IN ONE BUILDING NAMELY - BUILDING (JATKHERI) - THE APPELLANT HAS SHOWN ADDITIONS OF RS. 2,72,82,075/-, RS. 1,41,18,5 57/- AND RS. 38,02,078/ - RESPECTIVELY. TO TAKE A FAIR ASSUM PTION OF CONSUMPTION OF BARS IN ANY BUILDING CONSTRUCTION, T HE COST OF BARS WITH REGARD TO COMPLETE COST OF BUILDING @ 30%, IN MY VIEWS, MAY BE NATURALLY JUSTIFIED. DURING F.Y. 2005 -06, 2006-07 AND 2007-08, THE APPELLANT HAS PURCHASED CTD BARS F ROM OTHER RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 28 PARTIES ALSO BESIDES THAN M/S PRATEEK ENTERPRISES A ND M/S SALUJA ENTERPRISES. THE FOLLOWING TABLE REPRESENTS THE CONSUMPTION OF CTD BARS IN THE CONSTRUCTION OF BUIL DING YEAR WISE F.Y. ADDITION IN BUILDING (JATKHERI) IN RS.) PURCHASE FROM SALUJA (IN RS.) PURCHASE FROM PRATEEK (IN RS.) PURCHASE FROM OTHERS (IN RS.) 2005-06 2,72,82,075/- 58,65,750/- 40,76,845/- 58,66 ,370/- 2006-07 1,41,18,557/- 5,27,015/- -- 15,66,027/- 2007-08 38,02,078/- -- 2,85,000/- -- TOTAL 4,52,02,710/- 63,92,765/- 43,61,845/- 74,32,3 97/- THE VALUE OF ESTIMATED CONSUMPTION OF CTD BARS @ 30% ADDITION IN BUILDING FROM F.Y. 2005-06 TO 2007-08 ARRIVES TO RS. 1,35,60,813/- (30% OF 4,52,02,710/-). OUT OF PURCHA SE OF CTD BARS RS. 1,35/60,813/-, THE APPELLANT HAD PURCHASED RS. 74,32,397/- FROM OTHER PARTIES, THE PURCHASES FROM WHOM HAVE BEEN ALLOWED BY THE A.O. THUS, THE REMAINING CONSUMPTION OF CTD BARS IS LEFT OF RS. 61,28,416/- (RS. 1,35,60,81 3/- LESS RS. 74,32,397/-). THEREFORE, IT MAY BE PRESUMED THAT TH E APPELLANT MAY HAVE CONSUMED RS. 61,28,416/- IN CTD BARS, THE CONSUMPTION OF WHICH STILL REMAINS UNALLOWABLE. THE TOTAL PURCHASE FROM M/ S PRATEEK ENTERPRISES AND M/ S SAL UJA ENTERPRISES'' IN. F.Y. 2005-06 TO 2007-08 ARNVES TO RS. 1,07,54,610/-. THEREFORE, THE APPELLANT IS ALLOWED TO TAKE CREDIT OF PURCHASES MADE FROM M/ S PRATEEK ENTERPRISES AND M/ S SALUJA ENTERPRISES @ 56.98% (RS. 61,28,416/- MULTIPLIED BY 100, DIVIDED BY RS. 1,07,54,610/-). TO ADOPT THE LIBERAL APPROACH, THE PURCHASES MADE ~ROM M/ S PRATEEK ENTERPRISES AN D M/ S SALUJA ENTERPRISES IS ALLOWED TO THE EXTENT OF 60% AND THE PURCHASES ARE DISALLOWED @ 40%. IN VIEW OF THE ABOVE DISCUSSION, THE TRUSTEES OF THE APPELLANT TRUST OBT AINED BOGUS PURCHASE BILLS FROM THE ABO~~_ CONCERNS IN INN~TT.~D RATES WITH A MOTIVE TO TAKE BACK CASH IN UNACCOUNTED MANNER FO R THE PERSONAL BENEFIT. THEREFORE. THE APPELLANT HAS BENE FITED RELATED PERSONS WHICH IS NOT ALLOWABLE AS PER THE PROVISION S OF 13(1) (C) R.W.S .. 13(3) OF THE ACT. THEREFORE, THE ADDITIONS MADE BY THE A.O. ARE RESTRICTED TO RS. 39,77,200/- (40% OF PURCHASES OF RS. 1,09,43,000/- AFTER DEDUCTING RS. 10,00,000/- ON ACCOUNT OF TWO DDS OF RS. 5,00,000/- EACH BEING CANCELLED) IN A.Y. 2006- 07, RS. 2,10,800/- (40% OF RS. 5,27,000/-) IN A.Y. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 29 2007-08 AND RS. 1,14,000/- (40% OF RS. 2,85,000/-) IN A.Y. 2008-09. CONSEQUENTLY, THE APPEAL ON THESE GROUNDS IS PARTLY ALLOWED. 26. NOW BEFORE US LD. SR. COUNSEL FOR THE ASSESSEE FIRSTLY RAISED THE LEGAL GROUNDS RELYING ON THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA(SUPRA) THAT THE IMPUGNED ADDITION IS BEYOND THE SCOPE OF SECTION 153A OF THE ACT AS NO INCRIMIN ATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH FROM THE ASSESSEE PREMISES. THE ALLEGED ADDITIONS WERE BASED ON THE INFORMATION FRO M 3 RD PARTY. ON MERITS IT WAS CONTENDED THAT ALL THE DOCUMENTARY EV IDENCES TO PROVE THE GENUINENESS OF PURCHASES WERE FILED BEFORE BOTH THE LOWER AUTHORITIES AND THAT THE BUILDING WAS ACTUALLY CONS TRUCTED IS NOT IN DISPUTE. THE CERTIFICATE OF ARCHITECT AND CONTRACTO RS WITH REGARD TO CONSUMPTION OF CTD BARS ARE ALSO ON RECORD. THE PUR CHASES ARE GENUINE AND DULY RECORDED IN THE REGULAR BOOKS OF A CCOUNTS AND THUS NO DISALLOWANCE WAS CALLED FOR. IT WAS ALSO SUBMITT ED THAT THE IMPUGNED ADDITIONS MADE BY THE LD. AO ARE MERELY BA RED ON SURMISES AND CONJECTURE AND IT WAS ALSO WRONGLY OBS ERVED BY LD. AO THAT THE PROPRIETORS OF THE ALLEGED TWO CONCERNS NA MELY M/S PRATEEK ENTERPRISES AND M/S SALUJA ENTERPRISES HAVE ADMITTE D ON AFFIDAVIT TO HAVE PROVIDED BILLS TO THE ASSESSEE SOCIETY ON COMM ISSION BASIS AND LD. AO ALSO WRONGLY ASSUMED THAT NO MATERIAL WAS AC TUALLY SUPPLIED. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 30 27. LD. SR. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT NO CONSTRUCTION CAN BE DONE WITHOUT IRON AND STEEL WHI CH ARE ONE OF THE MAJOR COMPONENTS OF THE CONSTRUCTION COST. BUILDING HAS BEEN CONSTRUCTED IS NOT IN DISPUTE. RELIANCE PLACED ON T HE JUDGMENT OF HON'BLE SUPREME COURT DECISION IN THE CASE OF DHAKESHWARI COTTON MILLS VS. CIT REPORTED IN (1954) 26 ITR 775 WHERE IT HAS BEEN HELD THAT EVEN THOUGH THE STRICT RULES OR EVIDENCE ACT DID N OT APPLY TO INCOME TAX PROCEEDINGS, IT DOES NOT MEAN THAT ASSESSMENTS CAN BE MADE ONLY ON THE BASIS OF GUESS WORKS AND IMAGINATIONS. 28. WE NOTE THAT LD. AO INITIATED THE EXAMINATION O F THIS ISSUE ON THE BASIS OF INDEPENDENT INQUIRIES CARRIED OUT BY THE I NVESTIGATION WING OF THE INCOME TAX DEPARTMENT IN SOME OTHER CASES WHERE IN IT WAS ALLEGED THAT TWO BUSINESS ENTERPRISES NAMELY M/S PR ATEEK ENTERPRISES AND M/S SALUJA ENTERPRISES ARE PROVIDING SPURIOUS B ILLS OF BOGUS SALE OF IRON AND STEEL. BASED ON THIS INFORMATION ASSESS EE WAS ASKED TO FURNISH FOLLOWING DETAILS: IT HAS BEEN FOUND FROM ENQUIRIES THAT YOU HAVE MAD E PAYMENTS ACCOUNTING TO RS.38 LACS DURING F.Y. 2005-06 TO M/S SALUJA ENT ERPRISESS, INDORE AND M/S PRATEEK ENTERPRISESS OF INDORE THROUGH YOUR BAN K ACCOUNT AT IDBI BANK. COPIES OF LETTERS OF THE IDBI BANK IN THIS REGARD G IVING DETAILS OF THE PAYMENTS ARE ENCLOSED WHEREWITH AS ANNEXURE A. IT H AS BEEN CONFIRMED BY THE PROPRIETORS OF M/S SALUJA ENTERPRISES AND M/S P RATEEK ENTERPRISESS ON AFFIDAVIT TO THE DEPARTMENT THAT THEY HAD BEEN ENGA GED IN PROVIDING BOGUS PURCHASE BILLS ON COMMISSION BASIS AND NO STEEL ETC . HAD BEEN ACTUALLY RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 31 SUPPLIED BY THEM TO THE PARTIES. COPIES OF SAME AFF IDAVIT ARE ENCLOSED HEREWITH AS ANNEXURE A. YOU ARE, THEREFORE, ENQUIRE D TO EXPLAIN/JUSTIFY THE SAID TRANSACTIONS WITH M/S. SALUJA ENTERPISES, INDO RE AND M/S PRATIK ENTERPRISES, INDORE AND RECONCILE THE SAME WITH YOU R REGULAR BOOKS OF ACCOUNTS. YOU ARE ALSO REQUIRED TO GIVE DETAILS OF ALL TRANSACTIONS MADE WITH AFORESAID PARTIES I.E. M/S SALUJA ENTERPRISES, INDO RE AND M/S PRATIK ENTERPRISES FROM F.Y. 2003-04 TO F.Y. 2009-10. YOU ARE ALSO REQUIRED TO SHOW CAUSE AS TO WHY BOGUS PURCHASES, IF ANY DEBITED BY YOU SHOULD NOT BE DISALLOWED AND ADDED TO YOUR TOTAL INCOME FOR THE C ONCERNED ASSESSMENT YEAR. 29. WE FURTHER NOTICE THAT ASSESSEE GAVE DETAILED S UBMISSIONS AND DOCUMENTARY EVIDENCES FOR BOTH THE PARTIES TO THE L D. AO SUBMITTING AS FOLLOWS: 'DURING THE F Y. 2005-06, THE ASSESSEE SOCIETY HAD PURCHASED CTD BAR S FROM MIS PRATEEK ENTERPRISES, INDORE WORTH &.40. 77 LACS AND DURING THE F Y.2007-08 OF &.2.85 LACS. THE SAME WAS PURCHASED FOR US IN CONSTRUCTION WORK GOING IN THE COLLEGE PREMISES OF THE ASSESSEE SOCIETY. PURCHASE ORDER WA S ISSUED TO THE PARTY AFTER RECEIVING PROPER QUOTATION. ALL THE PAYMENTS TO MIS PRATEEK ENTERPRISES WERE MADE THROUGH BANK ACCOUNT NO. 121165 OF SRI SA TYA SUI NAGRIK SUHAKARI BANK MYDT, BHOPAL. COPY OF AFFIDAVIT ENCLOSED AT ANNEXURE A OF THE NOT ICE U/S 142(1) BELONGS TO SOME SHRI SUNIL KHANDELWAL WHO IS NEITHER THE PROPR IETOR 1101' KEY MANAGERIAL PERSON OF THE FIRM. IN THE AFFIDAVIT, HE HIMSELF HAS STATED THAT HE WAS MERELY AN EMPLOYEE OF THE FIRM IE. M/S PRATEEK ENTERPRISES AND WAS INVOLVED IN THE WORK OF PROVIDING BOGUS BILLS TO PA RTIES AGAINST SOME COMMISSION. THE NAME OF THE ASSESSEE SOCIETY IS NOWHERE MENTIONED .IN HIS STATEMENT. HE HAS NOWHERE MENTIONED THAT HE HAS PRO VIDED BOGUS BILLS TO THE ASSESSEE SOCIETY. AS IS CLEAR THAT THE ENQUIRIES ON MRS PRATEEK ENTER PRISES WAS HELD DURING F Y.200 F.Y. 2005-06 SINCE THEN THE DEPARTMENT HAS NOT RAISED ANY QUEST ION TO THE ASSESSEE SOCIETY. IF THE MATTER WAS SO GRAVE , THE DEPARTMENT WOULD HAVE ENQUIRED THE ASSESSEE SOCIETY U/S 133(6) OF THE IT ACT THEN AND THERE ONLY. NO INFORMATION WAS SOUGHT DURING THAT PERIOD AND NOW DURING THE ASSESSMENT PROCEEDINGS OF THE ASSESSEE SOCIETY, TH IS MATTER HAS BEEN RAISED. IT SEEMS AS IF THE DEPARTMENT HAS UNREASONA BLY EXTENDED THE ISSUE TO THE ASSESSEE SOCIETY. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 32 ON THE BASIS OF VAGUE STATEMENT OF ANY PERSON, THE INTEGRITY AND ACCOUNTABILITY OF THE ASSESSEE SOCIETY CANNOT BE CH ALLENGED. THE ACTUAL PURCHASES MADE BY SOMEONE CANNOT BE TREATED AS BOGU S JUST BECAUSE SOME OTHER PERSON OR PARTIES ARE INVOLVED IN SUCH KIND O F ILLEGAL 3. TRANSACTIONS. MOREOVER STATEMENT OF ANY PERSON WHO IS NEITHER' THE PROPRIETOR NOT THE PARTNER IN THE FIRM STANDS ILLEGAL. WE HUMBLY REQUEST THE HONORABLE ASSESSING OFFICER T O KINDLY PROVIDE US AN OPPORTUNITY TO CROSS EXAMINE SHRI SUNIL KHANDELWAL IN YOUR PRESENCE SO THAT WE CAN ALSO DISCUSS SPECIFICALLY OUR MATTER WITH HI M. ON THE LAW POINT, JUSTICE CAN ONLY BE DONE WHEN BOTH THE PARTIES ARE GIVEN TH E CHANCE TO CROSS EXAMINE. ONCE AGAIN WE WOULD LIKE TO REITERATE THAT THE ASSE SSEE SOCIETY HAS GENUINELY PURCHASED THE MATERIAL AND ALL THE PAYMEN TS HAVE BEEN MADE THROUGH ITS BANK ACCOUNT. FOLLOWING DOCUMENTS ARE ATTACHED AT ANNEXURE-A FOR YOUR READY REFERENCE. CERTIFIED COPY OF LEDGER ACCOUNT OF MIS PRATEEK ENT ERPRISES IN THE BOOKS OF ASSESSEE SOCIETY FOR THE F. Y 2005-06 AND 2007-08 AT ANNEXUR E A-I. COPY OF BANK STATEMENT REFLECTING ALL THE PAYMENTS AT ANNEXURE A-2. COPY OF BILLS OF MRS PRATEEK ENTERPRISES AT ANNEXUR E A-J. COPY OF WEIGHING SLIPS ISSUED BY THE WEIGH BRIDGE A T ANNEXURE A-4. CERTIFICATE FROM THE MAIN CONTRACTOR MOHD. ANEE~ KH AN ABOUT THE CONSUMPTION OF CTD BARS DURING F. Y 2005-06 TO 2007 -08 AT ANNEXURE A-5. CERTIFICATE FROM THE SUB-CONTRACTOR AMEEN KHAN ABOU T THE CONSUMPTION OF CTD BARS DURING F.Y 2005-06 TO 2007-08 AT ANNEXURE A-6. CERTIFICATE FROM THE ARCHITECT MR.MANOJ MISHRA ABOUT THE CONSUMPTION OF CTD BARS DURING F. Y 2005-06 10 2007-08 FOR CONSTRUCTION OF BUILDING OF COLLEGES RUNNING UNDER RKDF EDUCATION SOCIETY AT AN NEXURE A-7. COPY OF APPROVED PLAN OF BUILDING BY NAGAR NIGAM, B HOPAL AT ANNEXURE ..1- 8. LEDGER ACCOUNT OF'AMEEN KHAN CLEARLY SHOWING THE AM OUNT OF BILL BOOKED DURING THE YEAR ON WHICH TDS HAS BEEN PROPERLY DONE AND DEPOSITED IN THE ACCOUNT OF INCOME TAX DEPARTMENT AT ANNEXURE A-9. PURCHASE ORDER AND QUOTATION AT ANNEXURE A-I0. QUOTATION AT ANNEXURE A-II. . REGARDING M/S SALUJA ENTERPRISES: ' DURING THE F. Y 2005-06, THE ASSESSEE SOCIETY HAD P URCHASED CTD BARS FROM M/S SALUJA ENTERPRISES, INDORE WORTH &.68.66 LACS AND DURING F. Y2006-07, OF &.5.27 LACS. THE SAME WAS PURCHASED FOR USE IN CONSTRUCTIO N WORK GOING IN THE COLLEGE PREMISES. PURCHASE ORDER WAS ISSUED TO THE PARTY AFTER RECEIVING PROPER QUOTATION. ALL THE PAYMENTS TO MIS SALUJA ENTERPRISES WERE MADE THROUGH BANK ACCOUNT NO. 121165 OF SRI SATYA S AI NAGRIK SAHAKARI BANK MYDT, BHOPAL. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 33 WE HUMBLY REQUEST THE HONORABLE ASSESSING OFFICER T O KINDLY PROVIDE US AN OPPORTUNITY TO CROSS EXAMINE. SHRI NARENDRA SHARMA IN YOUR PRESENCE SO THAT WE CAN ALSO DISCUSS SPECIFICALLY OUR MATTER WI TH HIM BECAUSE JUST ON THE BASIS OF VAGUE STATEMENT OF ANY PERSON, THE INTEGRI TY AND ACCOUNTABILITY OF THE ASSESSEE SOCIETY CANNOT BE CHALLENGED. MOREOVER ON THE LAW POINT, JUSTICE CAN ONLY BE DONE WHEN BOTH THE PARTIES ARE GIVEN TH E CHANCE TO CROSS EXAMINE. THE ACTUAL PURCHASES MADE BY SOMEONE CANNOT BE TREA TED AS BOGUS JUST BECAUSE SOME OTHER PERSON OR PARTIES ARE INVOLVED I N SUCH KIND OF ILLEGAL TRANSACTIONS. MOREOVER THE NAME OF THE ASSESSEE SOC IETY IS NOWHERE MENTIONED IN HIS STATEMENT. IT HAS NOT BEEN MENTION ED IN THE STATEMENT THAT BOGUS BILLS WERE ISSUED TO THE ASSESSEE SOCIETY. AS IS CLEAR THAT THE ENQUIRIES ON MIS SALUJA ENTERP RISES WAS HELD DURING F.Y.2005-06. SINCE THEN THE DEPARTMENT HAS NOT RAIS ED ANY QUESTION TO THE ASSESSEE SOCIETY. IF THE MATTER WAS SO GRAVE, THE D EPARTMENT WOULD HAVE ENQUIRED THE ASSESSEE SOCIETY U/S 133(6) OF THE IT ACT THEN AND THERE ONLY. NO INFORMATION WAS SOUGHT DURING THAT PERIOD AND NO W DURING THE ASSESSMENT PROCEEDINGS OF THE ASSESSEE SOCIETY, THI S MATTER HAS BEEN RAISED. IT SEEMS AS IF THE DEPARTMENT HAS UNREASONA BLY EXTENDED THE ISSUE TO THE ASSESSEE SOCIETY. ONCE AGAIN WE WOULD LIKE TO REITERATE THAT THE ASSE SSEE SOCIETY HAS GENUINELY PURCHASED THE MATERIAL AND ALL THE PAYMEN TS HAVE BEEN MADE THROUGH ITS BANK ACCOUNT. FOLLOWING DOCUMENTS ARE ATTACHED AT ANNEXURE- B FOR YOUR READY REFERENCE. CERTIFIED COPY OF LEDGER ACCOUNT OF MIS SALUJA ENTE RPRISES IN THE BOOKS OF ASSESSEE SOCIETY AT ANNEXURE- B-L. COPY OF BANK STATEMENT REFLECTING ALL THE PAYMENTS ANNEXURE- B-2. COPY OF BILLS OF MIS SALUJA ENTERPRISES ANNEXURE- B-3. COPY OF WEIGHING SLIPS ISSUED BY THE WEIGH HRIDGE A T ANNEXURE B-4. CERTIFICATE FROM THE MAIN CONTRACTOR MOHD. ANEES KH AN ABOUT THE CONSUMPTION OF CTD BARS DURING F. Y. 2005-0610 2007 -08 ANNEXURE- B-5, CERTIFICATE FROM THE SUB-CONTRACTOR AMEEN KHAN ABOU T THE CONSUMPTION ~F CTD BARS DURING F. Y 2005-06 TO 2007-08 ANNEXURE- B -6. CERTIFICATE FROM THE ARCHITECT JVIR.MANOJ JVJISHRA ABOUT THE CONSUMPTION OF CTD BARS DURING F. Y 2005-06 TO 2007-08 ANNEXURE- B -7. COPY OF APPROVED PLAN OF BUILDING BY NAGAR NIGAM, B HOPAL ANNEXURE- A-8. LEDGER ACCOUNT OF AMEEN KHAN CLEARLY SHOWING THE AM OUNT OF BILL BOOKED DURING THE Y~ WHICH TDS HAS BEEN PROPERLY DONE AND DEPOSITED IN THE ACCOUNT OF INCOME TAX DEPARTMENT ANNEXUREB-8 ANNEXURE- B-S. PURCHASE ORDER AND QUOTATION AT ANNE XURE B-9.' QUOTATION AT ANNEXURE B-1O.' 30. THE ABOVE DETAILS PRIMA FACIE SHOWS THAT ALL THE RELEVANT INGREDIENTS NECESSARY TO PROVE THE PURCHASES ARE GE NUINE HAS BEEN RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 34 FILED BY THE ASSESSEE. WEIGHING SLIPS ARE ALSO ANNE XED IN THE PAPER BOOK ALONG WITH OTHER DOCUMENTS. CERTIFICATE FROM A RCHITECT AND CONTRACTOR SUPPORTING THE PURCHASE OF CTD BARS HAVE BEEN FILED. THE FACTS THAT THE BUILDING HAS BEEN CONSTRUCTED IS NOT IN DISPUTE AS THERE IS AN APPROVED PLAN OF BUILDING BY NAGAR NIGAM BHOP AL. COMPLETE QUANTITATIVE DETAILS ALONG WITH BILLS AND BANK STAT EMENT IS ON RECORD. FOR TOTAL CONSTRUCTION 841910.76 KG CTD BARS (PB PA GE 85) WERE CONSUMED DURING A.Y. 2006-07 TO 2008-09 FOR THE CON STRUCTION OF 3,36,764.3 SQ FEET AREA OF BUILDING PREMISE AND SAM E IS CERTIFIED BY ARCHITECT MR. MANOJ MISHRA. LD. CIT(A) HAS ALSO APP RECIATED THAT THE ACTUAL CONSTRUCTION ACTIVITY WAS CARRIED OUT FOR WH ICH CTD BARS WERE UTILIZED. DISALLOWING OF 40% OF PURCHASE BY LD. CIT (A) MERELY SEEMS TO BE ON ASSUMPTION AS HE HAS NOT REFERRED TO ANY M ATERIAL IN SUPPORT OF THIS FINDING. 31. WE ALSO NOTE THAT TOTAL 841910.76 KG CTD BARS W ERE USED FOR THE CONSTRUCTION OF BUILDING, OUT OF WHICH AROUND 73% O F THE CTD BARS WERE PURCHASED FROM THESE TWO PARTIES. SINCE THE CO NSTRUCTION HAS BEEN DONE IS ON RECORD AND HAS NOT BEEN OBJECTED OR ADVERSELY COMMENTED IN ANY MANNER BY BOTH THE LOWER AUTHORITI ES AND IT IS AN ESTABLISHED FACT THAT CONSTRUCTION OF THE BUILDING CANNOT BE DONE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 35 WITHOUT IRON AND STEEL WHICH IS CRUCIAL AND MAJOR C OMPONENTS OF CONSTRUCTION COST, THE ALLEGED DISALLOWANCE SEEMS T O BE MADE MERELY ON ASSUMPTION BASIS AS THERE IS NO DIRECT EVIDENCE TO SHOW THAT ANY SUCH DISALLOWANCE WAS EVEN CALLED FOR. 32. HON'BLE BOMBAY HIGH COURT IN THE CASE OF DCIT VS. VAMAN INTERNATIONAL PVT. LTD. DATED 29.01.2020 HAS HELD THAT: THUS, FROM THE ABOVE, IT IS SEEN THAT TRIBUNAL HAD RETURNED A FNDING OF FACT THAT THE ASSESSEE HAD FLED COPIES OF PURCHASE BILLS , COPIES OF PURCHASE/ SALE INVOICES, CHALLAN CUM TAX INVOICES IN RESPECT OF THE PURCHASES, EXTRACTS OF STOCK LEDGER SHOWING ENTRY/EXIT OF THE MATERIALS PURCHASED, COPIES OF BANK STATEMENTS TO SHOW THAT PAYMENT FOR SUCH PURCHASES WERE MADE THROUGH REGULAR BANKING CHANNELS, ETC., TO EST ABLISH THE GENUINENESS OF THE PURCHASES. THEREAFTER, TRIBUNAL HELD THAT ASSESSING OFFICER COULD NOT BRING ON RECORD ANY MATERIAL EVID ENCE TO SHOW THAT THE PURCHASES WERE BOGUS. MERE RELIANCE BY THE ASSESSIN G OFFICER ON INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT OR THE STATEMENTS OF TWO PERSONS MADE BEFORE THE SALES TAX DEPARTMENT WO ULD NOT BE SUFFICIENT TO TREAT THE PURCHASES AS BOGUS AND THER EAFTER TO MAKE ADDITION UNDER SECTION 69C OF THE ACT. TRIBUNAL HAS ALSO HEL D THAT IF THE ASSESSING OFFICER HAD DOUBTED THE GENUINENESS OF THE PURCHASE S, IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO HAVE CAUSED FURTHER E NQUIRIES IN THE MATTER TO ASCERTAIN GENUINENESS OR OTHERWISE OF THE TRANSA CTION AND TO HAVE GIVEN AN OPPORTUNITY TO THE ASSESSEE TO EXAMINE /CR OSS EXAMINE THOSE TWO PARTIES VIS--VIS THE STATEMENT MADE BY THEM BE FORE SALES TAX DEPARTMENT. WITHOUT CAUSING SUCH FURTHER ENQUIRIES IN RESPECT OF THE PURCHASE, IT WAS NOT OPEN TO THE ASSESSING OFFICER TO MAKE THE ADDITION UNDER SECTION 69C OF THE ACT. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 36 18. WE ARE IN AGREEMENT WITH THE VIEW EXPRESSED BY THE TRIBUNAL. IN FACT, TRIBUNAL HAS ONLY AFFIRMED THE FINDING OF THE FIRST APPELLATE AUTHORITY. THUS, THERE IS CONCURRENT FINDING OF FACT BY THE TW O LOWER APPELLATE AUTHORITIES. 33. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE AND RESPECTFULLY FOLLOWING ABOVE DECISIONS ARE OF T HE VIEW THAT ON MERITS THE ASSESSEE DESERVE TO SUCCEED AS THE DOCUM ENTS FILED BEFORE LOWER AUTHORITIES AND BEFORE US, ARE SUFFICIENT ENO UGH TO DEMONSTRATE THAT THE ALLEGED PURCHASE FROM M/S. PRATEEK ENTERPR ISES AND M/S SALUJA ENTERPRISES ARE GENUINE AND CTD BARS PURCHAS ED THROUGH BILLS ISSUED BY BOTH THESE CONCERNS HAVE BEEN UTILIZED IN THE CONSTRUCTION OF THE BUILDING OF THE SOCIETY. THUS, LD. AO WAS NO T JUSTIFIED IN MAKING ADDITION OF RS.1,09,43,000/-, RS.5,27,000/- & RS.2,85,000/- FOR A.Y. 2006-07, 2007-08 & 2008-09 RESPECTIVELY. FINDING OF LD. CIT(A) IS SET ASIDE AN D THE GROUNDS RAISED BY THE ASSESSEE FOR A.YS. 2006-07, 20 07-08 & 2008-09 CHALLENGING THIS ISSUE OF BOGUS PURCHASE ARE ALLOWED. ALTERNATE GROUND NO.2 RAISED FOR ALL THESE THREE YE ARS ARE DISMISSED AS INFRUCTUOUS. 34. AS REGARDS THE LEGAL ISSUE RAISED BY THE ASSESS EE THAT NO ADDITION WAS CALLED FOR SINCE NO INCRIMINATING MATE RIAL RELATING RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 37 TO THE ALLEGED BOGUS PURCHASE WAS FOUND DURING THE SEARCH U/S 132 OF THE ACT AT ASSESSEE PREMISES, ADDITIONS MADE ONLY ON THE BASIS OF 3 RD PARTY INFORMATION AND OPPORTUNITY OF CROSS EXAMINATION WAS NOT PROVIDED, WE OBSERVE THAT THIS IS AN ADMITTED FACT THAT THE LD. AO DOUBTED THE GENUINENES S OF THE PURCHASE OF CTD BARS FROM M/S PRATEEK ENTERPRISES & M/S. SALUJA ENTERPRISES ON THE BASIS OF THE INVESTIGATIO N CARRIED OUT BY THE INVESTIGATION WING INDEPENDENTLY AND THE INF ORMATION WAS FORWARDED TO THE LD. AO. NO INCRIMINATING MATERI AL HAS BEEN REFERRED BY THE LD. AO DURING THE ASSESSMENT PROCEEDINGS WHICH WAS FOUND DURING THE COURSE OF SE ARCH. ASSESSMENT YEAR 2006-07 & 2007-08 ARE NON-ABATED ASSESSMENT SINCE THE TIME LIMIT OF ISSUANCE OF NOTI CE U/S 143(2) OF THE ACT EXPIRED BEFORE THE DATE OF CONDUC T OF SEARCH. FOR SUCH NON-ABATED ASSESSMENT ADDITIONS COULD BE M ADE ONLY IF INCRIMINATING MATERIAL IS FOUND DURING SEAR CH PROCEEDINGS AS HELD BY HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA(SUPRA) . THUS, IN VIEW OF THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA (SUPRA) THE ADDITION FOR A.Y.2006-07 & 2007-08 DESERVES TO BE DELE TED. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 38 FURTHER WE FIND THAT THE ASSESSEE WAS NOT PROVIDED ANY OPPORTUNITY TO CROSS EXAMINE THESE TWO PARTIES WHIC H CERTAINLY DEFIES THE PRINCIPLES OF NATURE JUSTICE AS THE INFO RMATION OF THE 3 RD PARTY HAS BEEN USED AGAINST THE ASSESSEE. THE DECI SION OF COORDINATE BENCH MUMBAI IN THE CASE OF ACIT VS. TRISTAR JEWELLERY EXPORT PVT. LTD. ITANO.7593/MUM/2011 SUPPORTS THIS VIEW THAT THE ASSESSEE SHOULD BE PROVIDED AN O PPORTUNITY OF CROSS EXAMINATION, IF ADDITION IN ITS HANDS IS B ASED ON 3 RD PARTY INFORMATION. THE RELEVANT FINDING OF THE COOR DINATE BENCH READS AS FOLLOWS: 8. HAVING HEARD THE PARTIES AND HAVING PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE COMPLETED ASSESSMENT OF THE ASSESS EE WAS REOPENED ON THE BASIS OF THE STATEMENT OF SHRI HITEN L. RAWAL, THE PROPRIETOR OF M/S ZALAK IMPEX. IN THIS STATEMENT RECORDED U/S 131 OF THE ACT, SHRI RAWAL CONFESSED TO HAVE PROVIDED ACCOMMODATION ENTRIES IN THE FORM OF SALES AND PURCHASES, TO VARIOUS PARTIES. THE ASSESSEE WAS STATED TO HAVE OBTAINED BILLS FOR NON EXISTING PARTIES, AMOUNTING TO RS. 4,09,12,718/-, DURING THE YEAR UNDER CONSIDERATION. THE ASSESSMENT ORDER DATED 21-12- 2010 WAS PASSED PURSUANT TO THE SAID REOPENING. 9. IT REMAINS UNDISPUTED THAT THE ASSESSEE WAS NEVE R PROVIDED ANY OPPORTUNITY TO CROSS EXAMINE SHRI HITEN L. RAWAL, T HOUGH HE SPECIFICALLY ASKED FOR SUCH CROSS EXAMINATION. ON THE OTHER HAND , THE BURDEN WAS SOUGHT TO BE SHIFTED ON THE ASSESSEE BY THE A.O., B Y ASKING HIM TO PRODUCE SHRI RAWAL, EVEN THOUGH IT WAS THE A.O. WHO HAD RELIED ON THE STATEMENT OF SHRI RAWAL, WITHOUT EITHER CONFRONTING THIS STATEMENT TO THE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 39 ASSESSEE, OR PROVIDING OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI RAWAL. THEREFORE, THE REASSESSMENT ORDER IS AS A RE SULT OF VIOLATION OF THE NATURAL PRINCIPLE OF AUDI ALTERAM PARTEM. A STATEME NT RECORDED AT THE BACK OF A PARTY CANNOT BE USED AGAINST SUCH PARTY W ITHOUT CONFRONTING SUCH STATEMENT TO THE PARTY. HENCE, ON THIS SCORE A LONE, THE REASSESSMENT ORDER IS UNSUSTAINABLE IN THE EYE OF LAW AND WE HER EBY CANCEL THE SAME. AS A CONSEQUENCE, THE ORDER OF THE LD. CIT(A) IS AL SO CANCELLED IN TOTO. 35. SIMILAR VIEW WAS ALSO TAKEN IN CASE OF AQUATIC REMEDIES PVT. LTD. VS. DCIT ITANO.6356/MUM/2014 HON'BLE COORDINATE BENCH OF MUMBAI OBSERVING AS FOLLOWS: 24. SO ONE THING IS CLEAR THAT ASSESSEE WAS ACTUALL Y PURCHASING GOODS AND SELLING THEM. WE HAVE ALSO GONE THROUGH THE AUD ITED STATEMENT OF ACCOUNTS. WE FIND THAT THE TRADING RESULTS ARE QUAN TIFIED AND SO ALSO THE CLOSING STOCK. NO ADVERSE INFERENCES HAVE BEEN DRAW N IN THESE RESPECT. THE ADDITIONS HAVE BEEN MADE PURELY ON PRESUMPTIONS AND SURMISES AND THE STATEMENT OF THIRD PARTY I.E. M/S. GLOBE PHARMA AND OTHERS WHO MAY BE PROVIDING ACCOMMODATION BILLS BUT THE TRADING AC COUNT OF THE PRESENT ASSESSEE DO NOT SHOW ANYTHING WHICH COULD SUGGEST T HAT THE PURCHASES ARE BOGUS AS THERE IS NO ADVERSE INFERENCES IN SO F AR AS SALES ARE CONCERNED. WITHOUT PURCHASES THERE CANNOT BE ANY SA LES. CONSIDERING ALL THESE FACTS IN TOTALITY, WE DO NOT FIND ANY MERIT I N RESPECT OF THE ADDITIONS MADE ON ACCOUNT OF ALLEGED BOGUS PURCHASES WHICH AR E BASED MERELY ON THE STATEMENTS BACKED BY NO COGENT/DEMONSTRATIVE MA TERIAL EVIDENCES ON RECORD. WE, THEREFORE, SET ASIDE THE FINDINGS OF TH E LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITIONS MADE ON ACCOUNT OF B OGUS PURCHASES/ACCOMMODATION BILLS FROM ALL THE ASSESSME NT YEARS UNDER THIS APPEAL. 36. THEREFORE, IN VIEW OF THE JUDGMENT OF KABUL CHAWLA (SUPRA) RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 40 AND THE DECISION OF COORDINATE BENCH MUMBAI REFERRE D HEREINABOVE, ON LEGALITY ALSO THE IMPUGNED ADDITIO N MADE BY THE LD. AO FOR ALLEGED BOGUS PURCHASES FOR A.Y. 200 6-07 TO 2008-09 DESERVES TO BE DELETED. WE, ACCORDINGLY ORDE R SO AND THUS ASSESSEES APPEAL FOR A.Y. 2006-07 TO A.Y. 200 8-09 ARE ALLOWED. 37. AS REGARDS THE ADDITION OF RS.17,00,000/- FOR TH E ALLEGED UNEXPLAINED PAYMENT TO SHRI S.D. TOMAR DURING A.Y. 2 009-10 RAISED BY ASSESSEE IN GROUND NO. 1, FACTS IN BRIEF ARE THAT THE SUM OF RS.17,00,000/- WAS PAID BY THE ASSESSEE SOCIE TY TO SHRI ANEES KHAN. LD. AO ENQUIRED ABOUT THIS TRANSACT ION AND FOUND THAT SHRI ANEES KHAN AFTER RECEIVING THE PAYM ENTS OF RS.17,00,000/- FROM ASSESSEE SOCIETY ON 14.12.2008 IMMEDIATELY GAVE THIS SUM OF RS.17,00,000/- TO MR. S .D. TOMAR. WHEN ASKED ABOUT THIS TRANSACTION, THE ASSES SEE SUBMITTED THAT SUM WAS PAID TO MR. ANEES KHAN FOR CONSTRUCTION AND THE AMOUNT IS DEBITED IN CONSTRUCT ION ACCOUNT. LD. AO WAS NOT SATISFIED AS HE WAS OF THE V IEW THAT THE ALLEGED SUM IS NOT SPENT FOR THE OBJECTS OF THE ASSESSEE SOCIETY. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 41 38. WHEN THE MATTER CAME UP BEFORE THE LD. CIT(A) A SSESSEE SOCIETY WAS NOT ABLE TO SATISFY HIM WITH THE SUBMIS SIONS AND ADDITION MADE BY THE LD. AO WAS CONFIRMED. 39. BEFORE US LD. SR. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ALLEGED SUM WAS A PAYMENT TOWARDS CONTRACT CHAR GES FOR CONSTRUCTION. TAX HAD BEEN DEDUCTED AT SOURCE AND T HE RELEVANT TRANSACTION ARE DULY RECORDED IN ACCOUNT B OOKS AND FORMS PART OF THE AUDITED FINANCIAL STATEMENT. COPI ES OF BILLS ISSUED BY MR. ANEES KHAN ARE PLACED IN THE PAPER BO OK. 40. WE OBSERVE THAT THESE DOCUMENTS FILED BY THE AS SESSEE TOWARDS INCURRING CONSTRUCTION EXPENSES DURING THE YEAR AND THE BILLS ISSUED BY MR. ANEES KHAN HAS NOT BEEN CLA IMED TO BE BOGUS BY THE REVENUE AUTHORITIES EXCEPT FOR THE PAY MENT OF RS.17 LAC. THE ALLEGED SUM HAS BEEN PAID THROUGH BA NKING CHANNEL AND TAX HAS BEEN DEDUCTED AT SOURCE. LEDGER ACCOUNT OF MR. ANEES KHAN, CONTRACTOR FOR F.Y. 2008-09 IN TH E BOOKS OF RKDF EDUCATION SOCIETY IS PLACED AT PAGE 163 WHEREIN IT APPEARS THAT AGAINST BILLS RECEIVED FROM MR. ANEES KHAN, RS.1.04 CR. HAS BEEN PAID BY THE ASSESSEE SOCIETY. EXCEPT FOR THE TRANSACTION OF RS.17,00,000/- PAID BY THE ASSESS EE TO MR. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 42 ANEES KHAN ON 24.12.2008, THERE IS NO CONTRARY FIND ING BY BOTH THE LOWER AUTHORITIES FOR REMAINING TRANSACTIO N WHICH ITSELF PROVES THAT MR. ANEES KHAN IS A CIVIL CONTRA CTOR AND HAS SIMULTANEOUSLY PROVIDED THE SERVICES TO ASSESSEE S OCIETY. LD. CIT(A) OUGHT TO HAVE APPRECIATED THE TRANSACTION BE TWEEN ANEES KHAN AND ASSESSEE SOCIETY IN ENTIRETY. WE, AR E THUS SATISFIED WITH THE TRANSACTIONS BETWEEN ASSESSEE SO CIETY AND MR. ANEES KHAN CONTRACTOR AND ARE OF THE CONSIDERED VIEW THAT ALLEGED SUM OF RS.17,00,000/- IS PART OF THE CONSTRU CTION COST INCURRED DURING THE YEAR AND HAS BEEN RIGHTLY DISCL OSED UNDER THE HEAD OF CONSTRUCTION EXPENSES IN THE AUDITED BO OKS. THE INFERENCE DRAWN BY BOTH LOWER AUTHORITIES ALLEGING THAT THIS SUM OF RS. 17 LAC IS NOT INCURRED FOR THE OBJECTS O F THE SOCIETY HAS NO MERITS. THUS, THE FINDING OF LD. CIT(A) IS SET ASIDE AND GROUND NO.1 (1.1 TO 1.4) RAISED BY THE ASSESSEE FOR A.Y. 2009- 10 IS ALLOWED. 41. AS REGARDS GROUND NO.2 RAISED BY THE ASSESSEE F OR A.Y. 2009-10 IS CONCERNED THE SAME RELATES TO ADDITION OF RS. 36,08,666/- FOR THE ALLEGED BENEFIT GIVEN TO M/S. SI DDHARTH KAPOOR INFRASTRUCTURE PVT. LTD. (IN SHORT SKIPL) IN VIOLATION OF RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 43 SECTION 13(1)(C) OF THE ACT. FACTS IN BRIEF RELATIN G TO THIS ISSUE ARE THAT SKIPL ENTERED INTO TRANSACTION FOR PURCHAS E OF LAND FROM VARIOUS FARMERS WHICH WAS INTENDED TO BE LEASE D OUT TO M/S AYUSHMATI EDUCATION & SOCIAL SOCIETY (IN SHORT A ESS). THE PAYMENTS WERE REQUIRED TO BE MADE TO FARMERS. O UT OF THE TOTAL PURCHASE CONSIDERATION A SUM OF RS.36,08,666/ - WAS PAID BY THE ASSESSEE SOCIETY DIRECTLY TO THE FOLLOW ING FARMERS FOR THE PURCHASE OF LAND MADE BY SKIPL SR. NO. NAME OF SELLER(FRAMER) DATE CHEQUE NO. AMOUNT IN RS. 1 PRATAP SINGH 20.01.2009 184672 1,00,000 2 OM PRAKASH 2 3 .01.2009 184671 1,00,000 3 OM PRAKASH 2 2 . 11 .200 8 223110 11,000 4 MANNU LAL 17 .01.2009 227431 21,000 5 MANNU LAL 2 3 .0 3 .2009 186968 3,18,000 6 MANNU LAL 2 2 .0 3 .2009 186862 17,55,000 7 ANOKHI PRAS AD 2 5 .0 3 .2009 186965 6,01,833 8 BRIJMOHAN 2 3 .0 3 .2009 186966 7,01,833 TOTAL 36,08,666 42. LD. AO WAS OF THE VIEW THAT THE ASSESSEE SOCIET Y HAS VIOLATED THE PROVISION OF SECTION 13(3) OF THE ACT BY MAKING PAY MENT TO FARMERS ON BEHALF OF THE SKIPL. ASSESSEE FAILED TO GET ANY REL IEF BY LD. CIT(A) AS HE WAS ALSO OF THE VIEW THAT THE ALLEGED SUM IS ONLY F OR THE BENEFIT OF SKIPL IN WHICH MR. R.N. KAPOOR AND HIS GRANDSON SHR I SIDDHARTH KAPOOR ARE HAVING EQUAL SHARES AND THUS THERE IS A CLEAR VIOLATION OF RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 44 PROVISION OF SECTION 13(1)(C) R.W.S 13(3) OF THE AC T. 43. BEFORE US, LD. SR. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE LAND PURCHASED BY SKIPL HAS BEEN LEASED TO AESS FOR IMPARTING EDUCATION TO CARRY CHARITABLE ACTIVITIES. THE ASSES SEE SOCIETY BEING THE GROUP CONCERN HAS GIVEN THE ALLEGED SUM TO THE FARM ERS ON BEHALF OF AESS AND THE SAID SUM IS NEITHER INVESTMENT NOR DEP OSITS AND IS MERELY A LOAN TO AESS WHICH IS ALSO A SOCIETY DUL Y REGISTERED U/S 12AA OF THE ACT AND ALSO HOLDS TO CERTIFICATE U/S 1 0(23C)(VI) OF THE ACT. HE ALSO MENTIONED THAT SUM OF RS.1,99,21,499/- PAID BY AESS TO SKIPL WAS ALSO ADDED BY THE LD. AO IN THE HANDS OF AESS WHICH IS UNDER CHALLENGED IN ITANO.75/2019. 44. LD. SR. COUNSEL FOR THE ASSESSEE ALSO SUBMITTE D THAT IN ASSESSEES OWN CASE AND ON IDENTICAL FACTS I.E. AMOUNTS WERE G IVEN AS LOAN TO ANOTHER CHARITABLE SOCIETY, HON'BLE JURISDICTIONAL HIGH COURT IN ITANO.236/2012 VIDE ORDER DATED 14.09.2015 DISMISSE D THE REVENUES APPEAL BY REFERRING TO THE JUDGMENT OF HO N'BLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) V. ACME EDUCATION SOCIETY (2010) 326 ITR 146 (DELHI) AND THE JUDGMENT OF DIVISION BENCH OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MAA VAISHNAV EDUCATION SOCIETY, (2013) 218 TAXMAN 152 ( MP) . PLACING RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 45 RELIANCE ON THE ABOVE SATED JUDGMENT IT WAS SUBMITT ED THAT THE ALLEGED SUM WAS A LOAN TO AESS AND LD. CIT(A) WAS N OT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE LD. AO WITHOUT LOOKING INTO THE CRUCIAL FACT THAT THE APPELLANT SOCIETY AESS BELONG S TO SAME GROUP CONCERNS. HOWEVER, LD. DR SUPPORTED THE FINDING OF BOTH LOWER AUTHORITIES. 45. WE NOTE THAT ALLEGED TRANSACTION IS OF PURCHASE OF LAND BY SKIPL FROM GROUP OF FARMERS. LAND WAS PURCHASED AND IN OW NED BY SKIPL AND SUBSEQUENTLY HAS BEEN LEASED TO AESS. AGAINST T HE TOTAL PURCHASE CONSIDERATION OF LAND, ONLY A SUM OF RS.36 ,08,666/- WAS PAID BY ASSESSEE SOCIETY DIRECTLY TO THE FARMERS. P ERUSAL OF RECORDS SHOWS THAT THE ALLEGED AMOUNT WAS PAID BY ASSESSEE SOCIETY ON BEHALF OF THE AESS AND THE SAID SUM HAS BEEN DISCLOSED AS LOAN TO AESS. THERE ARE NO RECORDS AVAILABLE TO SHOW THE CONNECT ION OF THE ASSESSEE SOCIETY, WHATSOEVER WITH THE ALLEGED PURCHASE OF LA ND AND THE SAME BEING LEASED OUT BY SKIPL TO AESS. THIS TRANSACTION IN SIMPLE TERMS IS A LOAN GIVEN BY ASSESSEE SOCIETY TO AESS BY MAKI NG PAYMENT ON BEHALF OF AESS TO THE FARMERS. SUCH LOAN IS NOT IN THE NATURE OF ANY INVESTMENT OR DEPOSITS IN LIGHT OF THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF ACME EDUCATIONAL SOCIETY (SUPRA) WHEREIN HON'BLE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 46 COURT HAVE MADE REFERENCE TO OTHER JUDGMENTS NAMELY DIRECTOR OF INCOME TAX (EXEMPTION) VS. ALARIPPU, (2000) 244 ITR 358, BAIDYA NATH PLASTIC INDUSTRIES (P) LTD. & ORS. VS. K.L. AN AND, (1998) 230 ITR 522 (DELHI) AND THE JUDGMENT IN THE CASE OF DIRECTOR OF INCOME- TAX (EXEMPTION) VS. PRIWAR SEWA SANSTHAN, (2002) 254 IT R 268 WHEREIN IT WAS HELD THAT INTEREST FREE LOAN OF RS. 90,50,000/- GIVEN BY THE ASSESSEE SOCIETY TO NAV BHARTI EDUCATIONAL SOCIETY DOES NOT VIOLATE SECTION 13(1)(D) READ WITH SECTION 11(5) OF ACT, 1961 AS THE SAID LOAN WAS NEITHER AN 'INVESTMENT' NOR A 'DEPOSI T. 46. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE AND RESPECTFULLY FOLLOWING THE JUDGMENT OF JURISDIC TIONAL HIGH COURT IN THE ASSESSEES OWN CASE IN ITANO.236/2012 DATED 14. 09.2015, AND THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CA SE OF ACME EDUCATIONAL SOCIETY, (SUPRA), ARE OF THE CONSIDERED VIEW THAT THE ALLEGED SUM OF RS.36,08,666/- IS NOT A PAYMENT TO S KIPL BUT ACTUALLY IT IS IN THE NATURE OF LOAN BY ASSESSEE SOCIETY TO THE OTHER GROUP SOCIETY AESS WHICH IS RUNNING EDUCATION INSTITUTION AND IS REGISTERED U/S 12AA OF THE ACT AND THE SAME BEING NOT IN THE N ATURE OF INVESTMENT AND DEPOSIT IS NOT HIT BY THE PROVISION OF SECTION 13(3) OF THE ACT AND THUS NO ADDITION/DISALLOWANCE OF THE SA ID SUM WAS CALLED RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 47 FOR BY THE LD. AO. WE, THUS, SET ASIDE THE FINDING OF LD. CIT(A) AND DELETE THE ADDITION OF RS.36,08,666/- AND ALLOW GRO UND NO.2 (2.1 TO 2.4) RAISED BY THE ASSESSEE. THUS, APPEAL OF THE AS SESSEE FOR A.Y. 2009-10 STANDS ALLOWED. 47. NOW WE TAKE UP REVENUES APPEALS IN THE CASE OF RKDF EDUCATION SOCIETY VIDE IT(SS) NO.126 TO 128/IND/2019 PERTAINS TO A.YS. 2008-09 TO 2010-11. 48. WITH REGARD TO VARIOUS GROUNDS RAISED BY THE RE VENUE LD. DR VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF THE LD. AO. WHEREAS LD. SR. COUNSEL FOR THE ASSESSEE APART FROM RELYING THE FINDING OF LD. CIT(A) ALSO REFERRED TO THE WRITTEN SUBMISSIONS AN D PAPER BOOK FILED AND CONTENDED THAT THE LD. CIT(A) HAS RIGHTLY GIVEN RELIEF , IN VIEW OF THE FACTS OF THE CASE AND SETTLED JUDICIAL PRECEDEN TS. 49. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DECISIONS REFERRED AND RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. 50. AS REGARDS GROUND NO.1 RAISED BY THE REVENUE CH ALLENGING THE FINDING OF LD. CIT(A) ALLOWING RELIEF TO THE EXTENT OF 60% OF THE BOGUS PURCHASES AND NOT CONSIDERING THE FACT THAT SUCH BO GUS EXPENSES ARE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 48 HELD TO BE FOR THE BENEFIT OF THE MEMBERS OF THE SO CIETY THEREBY VIOLATING PROVISIONS OF SECTION 13(1)(C) RW.S. 13(3 ) OF THE ACT, WE OBSERVE THAT THIS ISSUE RELATES TO THE PURCHASE OF CTD BARS MADE BY THE ASSESSEE FROM M/S PRATEEK ENTERPRISES AND M/S S ALUJA ENTERPRISES. LD. AO BASED ON INVESTIGATION REPORT, OBSERVED THAT THESE TWO SUPPLIERS ARE BOGUS AND ACCORDINGLY HELD THE TO TAL PURCHASES OF CTD BARS FROM THESE TWO PARTIES AS BOGUS. LD. CIT(A ) GAVE THE RELIEF BY SUSTAINING THE ADDITION TO 40% OF THE TOTAL PURC HASES. 52. WE FURTHER OBSERVE THAT THE ASSESSEE RAISED SIM ILAR ISSUE FOR THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) @ 40% OF T HE ALLEGED BOGUS PURCHASE IN ITANO. 70 TO 72/IND/2019 FOR A.YS. 2006 -07 TO 2008-09. WE HAVE ADJUDICATED THIS ISSUE IN THE PRECEDING PAR AS AND AFTER EXAMINING THE FACTS AND DETAILS HAD COME TO A CONCL USION THAT THE ALLEGED PURCHASE OF CTD BARS FROM M/S PRATEEK ENTER PRISES & M/S SALUJA ENTERPRISES ARE NOT BOGUS AND THE PURCHASE O F CTD BARS HAVE BEEN ACTUALLY USED IN THE CONSTRUCTION OF BUILDING AND THUS HAVE HELD THAT M/S PRATEEK ENTERPRISES & M/S SALUJA ENTERPRIS ES ARE NOT BOGUS CONCERNS. DISALLOWANCE OF PURCHASE OF CTD(BARS) FOR VARIOUS YEARS WAS DELETED BOTH ON MERIT AS WELL AS LEGALITY. SIN CE, WE HAVE ALREADY DECIDED THIS ISSUE, OUR FINDING SHALL APPLY MUTATIS MUTANDIS ON THIS RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 49 COMMON ISSUE RAISED BY THE REVENUE FOR A.Y. 2008-09 AND ACCORDINGLY HOLD THAT SINCE PURCHASE OF CTD BARS AR E NOT BOGUS, NO DISALLOWANCE WAS CALLED FOR BY THE LD. AO. FINDING OF LD. CIT(A) IS SET ASIDE AND GROUND NO.1 OF THE REVENUE FOR A.Y. 2008-09 IS DISMISSED. 53. NOW WE TAKE UP GROUND NO.2 OF REVENUES APPEAL FOR A.Y. 2010-11 IN ITANO.127 & 128/IND/2019 CHALLENGING THE FINDING OF LD. CIT(A) DELETING THE ADDITION OF RS.1,53,30,530/- WHICH WAS MADE BY THE LD. ASSESSING OFFICER OBSERVING THAT THE INCOME OF THE SOCIETY IN THE FORM OF FIXED DEPOSIT WITH BANK WAS UTILIZED BY THE SOCI ETY FOR THE BENEFIT OF ITS MEMBERS. WE NOTE THAT DURING THE YEAR UNDER APP EAL THE ASSESSEE SOCIETY ENTERED INTO TRANSACTIONS OF PROVIDING SCHO OL BUSES ON HIRE WITH A COMPANY NAMELY HOMEBOUND TRAVELS PVT. LTD. ( IN SHORT HTPL) SMT. SADHNA KAPOOR WHO IS A MEMBER OF THE SOCIETY A ND ALSO RELATIVE OF OTHER MEMBERS/OFFICE BEARERS OF THE ASSESSEE SOC IETY, IS DIRECTOR IN THE COMPANY HTPL, HOLDING MORE THAN 20% SHARE IN THE COMPANY. THERE WAS A FIXED DEPOSIT OF RS.1,53,30,530/- OWNED BY THE ASSESSEE SOCIETY. HTPL OBTAINED TERM LOAN FROM THE UNION BAN K OF INDIAN TO PURCHASE 50 BUSES. THE MATURITY PROCEEDS OF THREE F DRS OF THE SOCIETY WORTH OF RS.1,53,30,530/- IS ALLEGED TO HAV E BEEN DEPOSITED IN THE TERM LOAN OF HTPL. LD. ASSESSING OFFICER ALLEGE D THIS TRANSACTION RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 50 AS VIOLATION OF SECTION 13 OF THE ACT. 54. BEFORE THE LD. ASSESSING OFFICER WHEN THE ASSES SEE WAS CONFRONTED WITH THEIR TRANSACTION IT WAS SUBMITTED THAT THE HT PL HAS NOT AVAILED ANY LOAN ON THE FDRS OF THE SOCIETY. THE LOAN IS OB TAINED ON HYPOTHECATION OF BUSES WHICH WERE USED AS SCHOOL BU SES FOR ASSESSEE SOCIETY AND M/S. AYUSHMATI EDUCATION & SOCIAL SOCIE TY. LD. ASSESSING OFFICER WAS NOT SATISFIED AND DISALLOWED THE SUM OF RS. 1,53,30,530/-. LD. CIT(A) AFTER EXAMINING THE FACTS DELETED THIS ADDITION OBSERVING AS FOLLOWS: 20. THIS GROUND IS AGAINST THE ADDITION OF RS. 1,53,30,530/- FOR THE ALLEGED BENEFIT TO HOMEBOUND TRAVELS PVT. LTD. THE A.O. HAS STATED IN THE ASSESSMENT ORDER THAT HTPL OBTAINED A TERM LOAN (TL A/C NO. 537106390000012) FOR PURCHASE OF 50 BUSES FROM UNION BANK OF INDIA, BHOPAL AND AS LIEN FOR THIS AC COUNT, THE APPELLANT HAD GIVEN CERTAIN FDRS WORTH RS. 2,00,00,000/- FOR OBTAINING THIS TERM LOAN. THE LOAN ACCOUNT WAS OPEN ED ON 06.03.2008 AND CLOSED ON 24.09.2009. THE A.O. HAS ALLEGED THAT THE MATURITY PROCEEDS OF 3 FDRS OF THE APPELLANT WORTH RS. 1,53,30,530/- WAS DEPOSITED IN THIS TERM LOAN ACCOUNT OF HTPL. AS PER TABLE PREPARED BY THE A.O. IN THE ASSESSMENT ORDER, THE PRE - MATURITY VALUE OF FDR ACCOUNT NO. 537103030002079 OF RS. 1,07,78,792/-,573803030000192 OF RS. 22,51,177/- AND 537103030001750 OF RS. 23,00,561/- OF APPELLANT'S SOCIETY WAS DEPOSITED IN HTPL TERM LOAN ACCOUNT NO. 537106300000012. 20.1 THE APPELLANT HAS SUBMITTED DURING . APPELLATE PROCEEDINGS THAT MATURITY VALUE OF RS. 23,00,561/- IS RELATED T O M/S AYUSHMATI EDUCATION AND SOCIAL SOCIETY AND NOT TO T HE APPELLANT SOCIETY. THE APPELLANT HAS PRODUCED LEDGER OF M/ S AYUSHMATI EDUCATION AND SOCIAL SOCIETY IN THE BOOKS OF HTPL F OR F.Y. 2009- 10. ACCORDING TO THIS LEDGER, ON 27.07.2009, HTPL H AS CREDITED AYUSHMATI EDUCATION AND SOCIAL SOCIETY FOR AN AMOUN T OF RS. 23,00,561/- THROUGH BANK. THE APPELLANT HAS PRODUCE D BANK RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 51 ACCOUNT STATEMENT OF MJ S AYUSHMATI EDUCATION AND SOCIAL SOCIETY IN WHICH IT IS CLEARLY VISIBLE THAT ON 27.0 7.2009, TWO AMOUNTS RS. 22,63,759/- AND 36,802/- (EQUIVALENT TO RS. 23,00,561/-) ARE VISIBLE AS WITHDRAWAL WITH THE NAR RATION AS CLOSER PROCEEDS: 537106390000012 WHICH IS THE TERM LOAN ACCOUNT OF HTPL. THEREFORE, IT IS CLEAR THAT THE PR OCEEDS OF CLOSED FDR OF RS. 23,00,561/- IN THE TERM LOAN ACCOUNT OF HTPL WAS CREDITED BY M/S AYUSHMATI EDUCATION AND SOCIAL SOCI ETY AND NOT BY THE APPELLANT'S SOCIETY. 20.2 REGARDING OTHER TWO AMOUNTS OF RS. 1,07,78,792 /- AND RS. 22,51,177/-, IT HAS BEEN SUBMITTED BY THE APPELLANT THAT THE SAID AMOUNTS HAVE BEEN SHOWN DEBITED IN THE LEDGER OF HTPL IN THE BOOKS OF THE APPELLANT. ON PERUSAL OF THIS LEDG ER, IT IS OBSERVED THAT ON 27.07.2009 TWO ENTRIES OF SIMILAR AMOUNTS HAVE BEEN SHOWN DEBITED AS 'INTEREST RECEIVED'. REG ARDING THE NARRATION 'INTEREST RECEIVED', IT IS SUBMITTED BY APPELLANT THAT THIS IS DUE TO THE FACT THAT IN TALLY SOFTWARE , THE NARRATION OF ONLY ONE ENTRY APPEARS IN CASE OF MULTIPLE ENTRIES. TO EXPLAIN THE SAME ASSESSEE HAS PRODUCED TWO COPIES OF JOURNAL VO UCHERS DATED 27.07.2009 IN THE BOOKS OF APPELLANT WHICH IN CLUDES THE VALUE OF INTEREST RECEIVED ON CLOSER OF THE FDRS. I N THESE TWO JOURNAL VOUCHERS, HTPL HAS BEEN SHOWN DEBITED FOR R S. 1,07,78,792/- AND RS.22,51,177/- IN THE LEDGER OF H TPL FOR F.Y.2009-10, THE CLOSING DEBIT BALANCE IS 3,48,74,3 33/-. IN AUDIT REPORT OF THE APPELLANT AND HTPL, IT MAY BE CROSS V ERIFIED THAT THE APPELLANT HAS GIVEN LOAN/ADVANCE TO HTPL OF RS. 3,48,74,333/-. IT IS THEREFORE, CLEAR THAT' THE PRE -MATURE PROCEEDS OF TWO FDRS OF RS. 1,07,78,792/- AND RS. 2 2,51,177/- WERE INCLUDED IN THE LOAN/ADVANCE AMOUNT OF RS. 3,4 8,74,333/- 20.3 IN VIEW OF THE DISCUSSION HELD ABOVE, THE ADDITION OF RS. 1,53,30,530/- IS HEREBY DELETED AND CONSEQUENTLY TH IS GROUND OF APPEAL IS ALLOWED. 55. WE NOTE THAT M/S HTPL PROVIDED THE SERVICES BY WAY OF GIVING BUSES ON HIRE TO THE SCHOOL AND COLLEGES RUN BY THE ASSESSEE SOCIETY. DURING THE YEAR THE TOTAL BUSES A ND CARS HIRE CHARGES BOOKED BY THE ASSESSEE SOCIETY IN THE INCOME AND EXPENDITURE ACCOUNT IS RS. 77,10,342/- AND ADVA NCE TO HTPL AS ON 31.03.2010 STOOD AT RS.3,48,74,333/-, RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 52 INTEREST INCOME OF RS.43,59,500/- RECEIVED FROM HTP L IS SHOWN BY THE ASSESSEE SOCIETY AS APPEARING IN THE I NTEREST RECEIVED ACCOUNT PLACED AT PAGE 177 OF THE PAPER BO OK. 56. NOW OUT OF THE TOTAL SUM OF RS.1,53,30,530/- RE CEIVED FROM ENCASHMENT OF FDR OF RS.1,07,78,792/- AND RS.22,51,177/- WAS PAID TO THE HTPL BY ASSESSEE SO CIETY. THIS FACT IS APPEARING FROM THE LEDGER ACCOUNT OF H TPL IN THE BOOKS OF ASSESSEE SOCIETY FOR F.Y. 2009-10. THI S LEDGER ACCOUNT ALSO REVEALS THAT MONTHLY BUSES HIRE CHARGE S ARE CREDITED IN THE ACCOUNT OF HTPL AND VARIOUS PAYMENT S ARE MADE AGAINST THE SAME. HOWEVER, AT THE END OF YEAR THERE IS DEBIT BALANCE OF RS.3,48,74,333/- AND FOR THE AD VANCE SO GIVEN INTEREST OF RS.43,59,500/- HAS BEEN CHARGED. THEREFORE, THIS FACT IS CLEAR FROM THE AUDIT REPORT THAT THE PART OF THE PROCEEDS OF FDRS AT RS.1,30,29,969/- H AS BEEN GIVEN AS LOAN TO HTPL AND INTEREST HAS BEEN CHARGED THEREON AND IT IS ALSO AN ESTABLISHED FACT THAT THE HTPL IS PROVIDING SERVICES OF GIVING SCHOOL BUSES TO THE AS SESSEE SOCIETY. THE REMAINING PORTION OF THE FDR ENCASHMEN T AT RS.23,00,561/- IS GIVEN TO M/S AYUSHMATI EDUCATION RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 53 SOCIETY AND THIS FACT IS PROVED WITH THE NECESSARY LEDGER ACCOUNT AND FINANCIAL STATEMENTS PLACED ON RECORD I N THE PAPER BOOK. WE ALSO NOTE THAT LD. AO MADE ADDITION FOR NOTIONAL INTEREST ON THE SUM ADVANCED TO HTPL AT RS.2,18,048/- AND RS.41,84,920/- FOR A.Y. 2009-10 & 2010-11. WE ARE ALSO OF THE VIEW THAT LD. CIT(A) HA S RIGHTLY DELETED BOTH THESE ADDITIONS ON OBSERVING THAT THER E WAS NO UNSECURED LOAN GIVEN TO HTPL DURING A.Y. 2009-10 AND FOR THE ADVANCE/LOANS GIVEN DURING A.Y. 2010-11. AS SESSEE SOCIETY HAS ALREADY CHARGED INTEREST OF RS.43,59,50 0/- WHICH IS DULY REFLECTED IN THE BOOKS OF ACCOUNT. TH OUGH LD. CIT(A) HAS RIGHTLY DELETED BOTH THESE ADDITIONS BUT REVENUE HAS NOT CHALLENGED THIS ISSUE OF ADDITION O F NOTIONAL INTEREST BEFORE US. 57. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE FIND NO JUSTIFICATION IN THE ACTION OF THE LD. AO MAKING ADDITION OF RS.1,53,30,530/- IN THE HANDS OF ASSESSEE AND THUS THE FINDING OF LD. CIT(A) STAND S CONFIRMED. ACCORDINGLY GROUND NO.2 OF REVENUES APPE AL FOR A.Y. 2010-11 IS DISMISSED. 58. NOW WE TAKE UP THE COMMON ISSUE RAISED BY THE R EVENUE FOR RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 54 A.YS. 2008-09, 2009-10 & 2010-11 CHALLENGING THE FI NDING OF LD. CIT(A) ALLOWING THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT. WE OBSERVE THAT THE ASSESSEE SOCIETY IS REGISTERED U/S 12AA OF THE ACT SINCE 13.08.1999. IT WAS ORIGINALLY REGISTERED W.E.F. 01. 04.2000 BUT SUBSEQUENTLY THIS TRIBUNAL VIDE ITS ORDER ITANO. 98 /IND/2007 DATED 11.08.2007 GRANTED REGISTRATION U/S 12AA W.E.F. 13. 08.1999. THE ASSESSEE SOCIETY IS RUNNING VARIOUS EDUCATION INSTI TUTIONS IN THE FIELD OF SCIENCE & TECHNOLOGY, PHARMACY, MANAGEMENT, NURS ING AND DENTAL COLLEGE & HOMOEOPATHIC MEDICAL COLLEGE & HOSPITAL, THAT ASSESSEE SOCIETY IS RUNNING TO CARRY AT CHARITABLE AND EDUCATIONAL PURPOSES AND ITS FULFILLING THE OBJECTS U/S 2(15) OF THE ACT IS NOT IN DISPUTE BY THE REVENUE AUTHORITIE S AT ANY STAGE. 59. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. AO BASED ON HIS OBSERVATION MADE SOME ADDITIONS AND DISALLOWANCES ALLEGING THAT THE ASSESSEE HAD MADE V IOLATION U/S 13 OF THE ACT AND THEREFORE NOT ELIGIBLE TO CLA IM THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT. WHEN THIS MATTER WA S CARRIED BEFORE THE LD. CIT(A), HE THOUGH CONFIRMED SOME OF THE ADDITIONS AND DISALLOWANCES BUT WAS OF THE FIRM VIE W BASED ON RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 55 THE JUDICIAL PRECEDENTS AND CIRCULAR ISSUED BY CBD T THAT ONLY THE DISALLOWANCES/ADDITIONS SHOULD BE TAXED TO MAXI MUM MARGINAL RATE BUT FOR THE REMAINING PROFITS EARNED BY THE CHARITABLE SOCIETY BENEFIT U/S 11 OF THE ACT SHOULD NOT BE DENIED. 60. NOW THIS FINDING OF LD. CIT(A) IS IN CHALLENGE BEFORE US BY THE REVENUE AUTHORITIES FOR THE BENEFIT GRANTED U/S 11 OF THE ACT. WE NOTE THAT THE BENEFIT U/S 11 OF THE ACT WAS DENIED BY TH E LD. ASSESSING OFFICER BASED ON OBSERVATIONS AND FINDINGS ABOUT TH E VARIOUS ADDITIONS AND DISALLOWANCES MADE IN THE HANDS OF AS SESSEE ALLEGING THAT THE ASSESSEE HAD MADE VIOLATION U/S 13 OF THE ACT. WHILE DEALING WITH ASSESSEES APPEAL AND REVENUES APPEAL IN TH E PRECEDING PARAS, WE HAVE DEALT WITH EACH OF DISALLOWANCES AND ADDITI ONS MADE BY THE LD. ASSESSING OFFICER AND HAVE HELD THAT THE ACTION OF THE LD. ASSESSING OFFICER WAS NOT JUSTIFIED AND THERE WAS N O MERIT IN MAKING SUCH ADDITIONS/DISALLOWANCES. SINCE THE VERY BASIS OF DENYING THE BENEFIT OF SECTION 11 OF THE ACT DOES NOT STAND FOR AS THE ADDITIONS/DISALLOWANCES HAVE BEEN DELETED BY US AND BOTH THE LOWER AUTHORITIES HAVE NEVER DISPUTED THE ACTIVITIES OF A SSESSEE SOCIETY WHICH ARE BEING SOLELY CARRIED OUT FOR CARRYING CHA RITABLE AND EDUCATIONAL RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 56 ACTIVITIES FOR WHICH IT IS REGISTERED U/S 12AA OF T HE ACT, AUTOMATICALLY THE ASSESSEE BECOMES ELIGIBLE TO CLAIM BENEFIT U/S 11 OF THE ACT AND THUS THIS COMMON GROUND RAISED BY THE REVENUE PERTA INING TO ALLOWING OF BENEFIT U/S 11 OF THE ACT BECOMES INFRU CTUOUS, SINCE THERE REMAINS NO DISALLOWANCE U/S 13 OF THE ACT. 61. HOWEVER, FOR ACADEMIC PURPOSE WE WILL DEAL WITH THIS ISSUE RAISED BY THE REVENUE. WE OBSERVE THAT LD. CIT(A) WHILE GR ANTING THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT, LD. CIT(A) REFERRED TO VARIOUS JUDGMENTS AND DECISIONS AND CBDT CIRCULAR OBSERVING AS FOLLOWS: 17.11 NOW I TAKE UP ANOTHER ISSUE BY WHICH ASSESSIN G OFFICER DENIED EXEMPTION U/S 11 TO THE APPELLANT SOCIETY FROM AY20 09-10 AND AY 2010-11 AND BY VIRTUE OF THIS, WHOLE EXCESS OF INCOME OVER EXPENDITURE AMOUNTING TO RS.11,18,18,138/- IN AY 2009-10 & RS.12,61,18,145/- IN A.Y. 2010-11 HAVE BEEN BROUGHT TO TAX. THE APPELLANT HAS QUOTED SEC 1 3(1)(C), 13(2), SEC 164(2), CIRCULAR NO. 387 DT. 06.07.1984 ISSUE BY CBDT UNDER THE HEADING LEVY OF INCOME TAX AT MAXIMUM MARGINAL RATE IN THE CASE OF CHARITABLE AND RELIGIOUS TRUSTS WHICH FORFEIT TAX EXEMPTION AND VARIOUS LEG AL PRECEDENTS IN ITS FAVOUR. 17.12 FOR THE SAKE OF CONVENIENCE AND TO ANALYSE AP PLICABILITY OF SEC 13(1)(C), RELEVANT PROVISION OF SEC 13(1)(C) ARE REPRODUCED A S UNDER_ NOTHING CONTAINED IN SECTION 11 3 OR SECTION 12] SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF- (A) (B) . (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THEREOF- (I) IF SUCH TRUST OR INSTITUTION HAS BEEN CREATED OR E STABLISHED AFTER THE COMMENCEMENT OF THIS ACT AND UNDER THE TERMS OF THE TRUST OR THE RULES GOVERNING THE INSTITUTION, ANY PART OF SUCH INCOME ENURES, OR RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 57 (II) IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION (WHENEVER CREATED OR ESTABLISHED) IS DURING THE PRE VIOUS YEAR USED OR APPLIED, DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB- SECTION (3): SECTION 13(1) RESTRICTS THE EXEMPTION TO THE ASSESS EE OF THE INCOME WHICH IS USED/APPLIED IN VARIOUS FORMS DESCRIBED IN CLAUSE ( A) TO CLAUSE (D), MEANING THEREOF THE ASSESSEE WOULD NOT BE ENTITLED FOR EXEM PTION OF IT USES/APPLIED INCOME IN VIOLATION OF FUNDAMENTAL PRINCIPLES FOR W HICH THE ASSESSEE IS REGISTERED U/S 11 OR 12. THE ASSESSING OFFICER IN T HIS CASE HAS FOUDNT HAT APPELLANT SOCIETY MISUSED/MISAPPLIED ITS INCOME TO THE TUNE OF RS.36,08,666/- FOR THE BENEFIT OF INDIVIDUALS RESPO NSIBLE TO RUN THE SOCIETY. CHAIRMAN OF SOCIETY SHRI R N KAPOOR AND HIS GRANDSO N SHRI DIDDHARTH KAPPOR, VICE-CHAIRMAN OF THE SOCIETY HAD 50% STAKE IN SKIPL, THUS HAVING SUBSTANTIAL INTEREST IN SKIPL, BOTH ARE COVE RED UJS 13(3) OF THE ACT. FURTHERMORE, SKIPL ITSELF IS COVERED UJ S 13(3) BY VIRTUE OF PROVISIONS OF CLAUSE 'E' OF SEC 13(3). TAKING NO TE OF THIS' MISAPPROPRIATION OF FUNDS, ASSESSING OFFICER DENIED EXEMPTION TO THE APPELLANT UJ S 11 OF THE ACT. THE APPELLANT IN ITS SUBMISSION HAS SUBMITTED THAT THE BENEFIT OF EXEMPTION UNDER S ECTION 11 OF THE ACT, WILL NOT BE AVAILABLE TO THE TRUST, IN RES PECT OF SUCH INCOME. THEREFORE THE APPELLANT SUBMITTED THAT EXEM PTION IN RESPECT OF ONLY SUCH INCOME WHICH IS MISAPPROPRIATE D BY THE APPELLANT SHOULD BE BROUGHT TO TAX, NOT THE WHOLE E XCESS INCOME OVER EXPENDITURE WHICH WAS DONE BY A.O. IN THIS CAS E. 17.13 IN SUB CLAUSES (I) AND (II) OF CLAUSE (C) OF SUB SECTION (1) OF SECTION 13, 'ANY PART OF SUCH INCOME' PHRASE HAS BE EN USED. THEREFORE, I AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE INTENTION OF THE LAW FRAMERS IS TO TAX ONLY SUCH IN COME WHICH IS DIRECTLY OR INDIRECTLY USED FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB SECTION(3). 17.14 IN SUB SECTION (2) OF SECTION 13 EVEN, 'ANY P ART OF SUCH INCOME OR PROPERTY' PHRASE HAS BEEN USED WHICH ALSO SUPPORTS THE CLAIM OF THE APPELLANT. 17.15 THE APPELLANT HAS ALSO QUOTED SEC 164(2) IN F AVOUR OF ITS CLAIM. SEC 164(2) IS REPRODUCED AS BELOW- (((2) IN THE CASE OF RELEVANT INCOME WHICH IS DERIVED FROM PROPERTIJ HE~D UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURP OSE OR WHICH IS OF THE NATURE REFERRED TO IN SUB-CLAUSE (IID) OF CLAUSE (24) OF SECTION 2, OR WHICH IS OF THE NATURE REFERRED TO IN SUB SECTION (4A) OF SECTION 11, TAX. SHALL BE CHARGED ON SO MUCH OF THE RELEVANT INCOME AS IS NOT EXEMPT UNDER SECTION 11 OR SECTION 12 AS IF THE RELEVANT INCOME NOT SO EXEMPT WERE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 58 THE INCOME OF AN ASSOCIATION OF PERSONS. PROVIDED THAT IN A CASE WHERE THE WHOLE OR ANY PART OF THE RELEVANT INCOME IS NOT EXEMPT U/ S 11 OR SECTION 12 BY VIRTUE OF THE PREVISIONS CONTAINED IN CLAUSE (C) OR CLAUSE (D) OF SUB- SECTION (1) OF SECTION 13, TAX SHALL BE CHARGED ON THE RELEVANT INCOME OR PART OF RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE.' ACCORDING TO SECTION 164(2), IN CASE WHICH IS OF TH E NATURE REFERRED TO IN SUB-CLAUSE (IIA) OF CLAUSE (24) OF S ECTION 2 (AS IN THE CASE OF APPELLANT), TAX SHALL BE CHARGED ON SO MUCH OF THE RELEVANT INCOME AS IS NOT EXEMPT U/S 11 OR 12, AS I F THE RELEVANT INCOME NOT SO EXEMPT WERE THE INCOME OF ASSESSEE. IT IS VERY CLEAR FROM THE SECTION 164(2), THAT IN THIS CASE, T AX ON THE RELEVANT INCOME OF RS. 36,08,666/- SHOULD BE CHARGE D AND NOT ON THE WHOLE EXCESS INCOME OVER EXPENDITURE. HOWEVE R, THE TAX ON SUCH RELEVANT INCOME SHOULD BE ,CHARGED AT THE M AXIMUM MARGINAL RATE. 17.16 THE APPELLANT HAS ALSO RELIED UPON CIRCULAR N O. 387 DT. 06.07.1984 ISSUED BY CBDT TITLED AS 'LEVY OF INCOME -TAX AT MAXIMUM MARGINAL RATE IN THE CASE OF CHARITABLE AND RELIGIOUS TRUSTS WHICH FORFEIT TAX EXEMPTION'. THE RELEVANT P ORTION OF THIS CIRCULAR IS APPENDED BELOW: '28.6 IT MAY BE NOTED THAT NEW SUB-SECTION (LA) INS ERTED IN SECTION 161 OF THE IT ACT, WHICH PROVIDES FOR TAXATION OF THE E NTIRE INCOME RECEIVED BY TRUSTS AT THE MAXIMUM MARGINAL RATES IS APPLICABLE ONLY IN THE CASE OF PRIVATE TRUSTS HAVING PROFITS AND GA INS OF BUSINESS. SO FAR AS PUBLIC CHARITABLE AND RELIGIOUS TRUSTS ARE C ONCERNED, THEIR BUSINESS PROFITS ARE NOT EXEMPT FROM TAX, EXCEPT IN THE CASES FALLING UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 11 (4A) OF THE IT ACT. AS THE MAXIMUM MARGINAL RATE OF TAX UNDER THE NEW PROVISO TO SECTION 164(2) APPLIES TO THE WHOLE OR A PART OF THE RELEVA NT INCOME OF A CHARITABLE OR RELIGIOUS TRUST WHICH FORFEITS EXEMPT ION BY VIRTUE OF THE PROVISIONS OF THE IT ACT IN REGARD TO INVESTMENT PA TTERN OR USE OF THE TRUST PROPERTY FOR THE BENEFIT OF THE SETTLOR, ETC. , CONTAINED IN SECTION 13(L)(C} AND (D) OF THE ACT, THE SAID RATE WILL NOT APPLY TO THE BUSINESS PROFITS OF SUCH TRUSTS WHICH ARE OTHERWISE CHARGEAB LE TO TAX. IN OTHER WORDS, WHERE SUCH A TRUST CONTRAVENES THE PROVISION S OF SECTION 13(1 HC} OR (D) OF THE ACT, THE MAXIMUM MARGINAL RATE OF INCOME TAX WILL APPLY ONLY TO THAT PART OF THE INCOME WHICH HAS FOR FEITED EXEMPTION UNDER THE SAID PROVISIONS.' RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 59 17.17 THE APPELLANT HAS ALSO QUOTED VARIOUS CASE LA WS IN SUPPORT OF ITS CLAIM. THE GIST OF DECISION OF THESE CASE LAWS IS SUMMARIZED AS UNDER- (I) COMMISSIONER OF INCOME TAX VIS FR. MULLERS CHARITAB LE INSTITUTIONS [2014J 44 TAXMANN.COM 275(KAMATAKAJ- ONLY THE NON EXEMPT INCOME PORTION WOULD FALL IN THE NET OF TAX AS IF I T WAS THE INCOME OF AN A.O. P. THE PHRASE 'RELEVANT INCOME OR PART O F THE RELEVANT INCOME' IN THE PROVISO IS REQUIRED READ IN CONTRADI STINCTION TO THE PHRASE 'WHOLE INCOME' UNDER S. 161(LA). IN THIS CASE, THE SLP FILED BY THE REVENUE IN SUPRE ME COURT WAS DISMISSED. CITATION- COMMISSIONER OF INCOME TAX, MA NGALORC VIS FR. MULLCRS CHARITABLE INSTITUTIONS [2014) 51 TAXMANN.COM378(SC ) (II) DIRECTOR OF INCOME TAX(EXEMPTIONS) VIS SHETH MAFATLA L GAGALBHAI FOUNDATION TRUST P001J 114 TAXMAN 0019, BOMBAY- IN CASE OF CONTRAVENTION OF S. 13(1)(D), MAXIMUM MARGINAL RATE OF TAX UNDER S. 164(2), PROVISO IS APPLICABLE ONLY TO THAT PART OF INCOME OF THE TRUST WHICH HAS FORFEITED EXEMPTION AND NOT THE ENT IRE INCOME. (III) JAMSHETJI TATA TRUST VIS JOINT DIRECTOR OF INCOME T AX(EXEMPTION) , ITAT, BOMBAY, [2014J 148 LTD 0388(MUMJ BREACH OF SECTION 13(1)(D) AND 13(2)(H) WOULD LEAD TO FORFEITURE OF EXEMPTION OF INCOME DERIVED FROM SUCH INVESTMENT AND NOT ENTIRE INCOME WOULD BE SUBJECTED TO MAXIMUM MARGINAL RATE OF TAX ULS 164(2). (IV) COMMISSIONER OF INCOME TAX VIS RED ROSE SCHOOL [2007J 75 CCH 0138 ALL HC- PROFIT EARNING OR MISUSE OF THE INCOME DERIVED BY CHARITABLE INSTITUTION FROM ITS CHARITABLE ACTIVITI ES, MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT OF THAT PART OF THE INCOME BUT CANNOT BE TAKEN TO BE A SYNONYM }O THE G ENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION. 17.18 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND IN VIEW OF THE DECISIONS CITED BY THE APPELLANT ON SUBJECTED MATTER AND CIRCULAR OF CBDT (SUPRA), THE ADDITIONS O F RS. 1,13,11,931/- IN A.Y. 2008-09, RS. 12,18,18,138/- IN A.Y, 2009-10 & RS. 12,61,18,145/- IN A.Y. 2010-11 FOR BRINGING WHOLE EXCESS OF INCOME OVER EXPENDITURE TO TAX NET ARE HEREBY DELETED. CONSEQUENTLY, THESE GROUNDS OF APPEAL ARE ALLOWED. 62. HONBLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS FR. MULLERS CHARITABLE INSTITUTIONS [2014] 363 ITR 230 (KARN ) HAS HELD THAT , PERUSAL OF SECTION 13(1)(D) OF THE ACT, MAKES IT RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 60 CLEAR THAT IT IS ONLY THE INCOME FROM SUCH INVESTME NT OR DEPOSIT, WHICH HAS BEEN MADE IN VIOLATION OF SECTION 11(5) OF THE ACT, THAT IS LIABLE TO BE TAXED AND VIOLATION OF SECTION 13(1)(D) DOES NOT RESULT IN DENIAL OF EXEMPTION UNDER SECTION 11 TO THE TOTAL INCOME OF T HE ASSESSEE TRUST . [ 63. FURTHER IN THE PRESENT CONTEXT, THE PROVISIONS OF SECTION 164, PARTICULARLY SECTION 164(2) AND PROVISO THERETO, AR E ALSO RELEVANT. IT MAY ALSO BE STATED HERE THAT IN VIEW OF THE PROVISO TO SECTION 164(2) AND CIRCULAR NO.387, DT.6.7.1984, ISSUED BY THE CBD T, ALL THE LEGAL PRECEDENTS APPLICABLE TO THE VIOLATIONS UNDER SECTI ON 13(1)(D) OF THE ACT, WILL EQUALLY APPLY TO THE VIOLATIONS UNDER SEC TION 13(1)(C) OF THE ACT. 64. BEFORE PROCEEDING TO DEAL WITH THE RELEVANT LEG AL PRECEDENTS IN SUPPORT OF THE AFORESAID STAND, IT WOULD BE APPROPR IATE TO REFER TO THE RELEVANT PROVISIONS OF SECTIONS 13 AND 164 OF THE A CT. THE SAME ARE DISCUSSED AS FOLLOWS: SECTIONS 13(1)(C) AND 13(2) OF THE ACT. IN THE PRESENT CONTEXT, THE PROVISIONS OF SECTIONS 13(1)(C) AND 13(2) OF THE ACT, ARE RELEVANT. THE SAME ARE DISCUSSED AS FOLLOWS : PROVISIONS OF SECTIONS 13(1)(C) OF THE ACT FOR THE SAKE OF READY REFERENCE, THE RELEVANT PART OF SECTION 13(1)(C) OF THE ACT, IS REPRODUCED AS FOLLOWS : RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 61 13. SECTION 11 NOT TO APPLY IN CERTAIN CASES. (1) NOTHING CONTAINED IN SECTION 11 OR SECTION 12 S HALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGI OUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THEREOF (I) IF SUCH TRUST OR INSTITUTION HAS BEEN CREATED O R ESTABLISHED AFTER THE COMMENCEMENT OF THIS ACT AND UNDER THE TERMS OF THE TRUST OR THE RULES GOVERNING THE INSTITUTION, ANY PART OF SUCH INCOME ENURES , OR (II) IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION (WHENEVER CREATED OR ESTABLISHED) IS DURING THE PRE VIOUS YEAR USED OR APPLIED, DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSO N REFERRED TO IN SUB-SECTION (3) : THUS FROM THE AFORESAID PROVISIONS OF SECTION 13(1) (C)(II), IT MAY BE SEEN THAT IF ANY PART OF INCOME OR ANY PROPERTY OF THE TRUST IS APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY TRUSTEE, ETC, THEN THE BENEF IT OF EXEMPTION UNDER SECTION 11 OF THE ACT, WILL NOT BE AVAILABLE TO THE TRUST, IN RESPECT OF SUCH INCOME. PROVISIONS OF SECTION 13(2) OF THE ACT. IN THE PRESENT CONTEXT, SECTION 13(2) OF THE ACT IS ALSO RELEVANT. FOR THE SAKE OF READY REFERENCE, SECTION 13(2) OF THE ACT, IS REPRO DUCED AS FOLLOWS: 13.SECTION 11 NOT TO APPLY IN CERTAIN CASES. (2) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROV ISIONS OF CLAUSE (C) AND CLAUSE (D) OF SUB-SECTION (1), THE INCOME OR THE PR OPERTY OF THE TRUST OR INSTITUTION OR ANY PART OF SUCH INCOME OR PROPERTY SHALL, FOR THE PURPOSES OF THAT CLAUSE, BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SUB-SECTION (3), (A) IF ANY PART OF THE INCOME OR PROPERTY OF THE TR UST OR INSTITUTION IS, OR CONTINUES TO BE, LENT TO ANY PERSON REFERRED TO IN SUB-SECTION (3) FOR ANY PERIOD DURING THE PREVIOUS YEAR WITHOUT EITHER ADEQ UATE SECURITY OR ADEQUATE INTEREST OR BOTH; (B) IF ANY LAND, BUILDING OR OTHER PROPERTY OF THE TRUST OR INSTITUTION IS, OR CONTINUES TO BE, MADE AVAILABLE FOR THE USE OF ANY PERSON REFERRED TO IN SUB- SECTION (3), FOR ANY PERIOD DURING THE PREVIOUS YEA R WITHOUT CHARGING ADEQUATE RENT OR OTHER COMPENSATION; (C) IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWAN CE OR OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON REFERRED TO IN SUB-SECT ION (3) OUT OF THE RESOURCES OF THE TRUST OR INSTITUTION FOR SERVICES RENDERED B Y THAT PERSON TO SUCH TRUST OR RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 62 INSTITUTION AND THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES; (D) IF THE SERVICES OF THE TRUST OR INSTITUTION ARE MADE AVAILABLE TO ANY PERSON REFERRED TO IN SUB-SECTION (3) DURING THE PREVIOUS YEAR WITHOUT ADEQUATE REMUNERATION OR OTHER COMPENSATION; (E) IF ANY SHARE, SECURITY OR OTHER PROPERTY IS PUR CHASED BY OR ON BEHALF OF THE TRUST OR INSTITUTION FROM ANY PERSON REFERRED TO IN SUB-SECTION (3) DURING THE PREVIOUS YEAR FOR CONSIDERATION WHICH IS MORE THAN ADEQUATE; (F) IF ANY SHARE, SECURITY OR OTHER PROPERTY IS SOL D BY OR ON BEHALF OF THE TRUST OR INSTITUTION TO ANY PERSON REFERRED TO IN SUB-SEC TION (3) DURING THE PREVIOUS YEAR FOR CONSIDERATION WHICH IS LESS THAN ADEQUATE; (G) IF ANY INCOME OR PROPERTY OF THE TRUST OR INSTI TUTION IS DIVERTED DURING THE PREVIOUS YEAR IN FAVOUR OF ANY PERSON REFERRED TO I N SUB-SECTION (3): PROVIDED THAT THIS CLAUSE SHALL NOT APPLY WHERE THE INCOME, OR THE VALUE OF THE PROPERTY OR, AS THE CASE MAY BE, THE AGGREGATE OF THE INCOME AND THE VALUE OF THE PROPERTY, SO DIVERTED DOES NOT EXCEED ONE THOUSAND RUPEES; (H) IF ANY FUNDS OF THE TRUST OR INSTITUTION ARE, O R CONTINUE TO REMAIN, INVESTED FOR ANY PERIOD DURING THE PREVIOUS YEAR (NOT BEING A PERIOD BEFORE THE 1ST DAY OF JANUARY, 1971), IN ANY CONCERN IN WHICH ANY PERS ON REFERRED TO IN SUB- SECTION (3) HAS A SUBSTANTIAL INTEREST. FROM THE AFORESAID PROVISIONS OF SECTION 13(2), IT MAY BE SEEN THAT IN RESPECT OF VARIOUS CIRCUMSTANCES REFERRED TO IN CLAUSES (A) TO (H) THEREOF, THE INCOME OR PROPERTY OF THE TRUST OR INSTITUTION OR ANY PART OF SUCH INCOME OR PROPERTY SHALL, FOR THE PURPOSES OF SECTION 13(1)(C) AND 13( 1)(D), BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF THE TRUSTEE , ETC. IT CLEARLY IMPLIES THAT SECTION 13(2) IS NOTHING BUT AN EXTENSION OF SECTIO N 13(1)(C) / 13(1)(D). SECTION 164(2) OF THE ACT. IN THE PRESENT CONTEXT, THE PROVISIONS OF SECTION 1 64(2) ARE ALSO RELEVANT, WHICH ARE REPRODUCED AS FOLLOWS : 164.CHARGE OF TAX WHERE SHARE OF BENEFICIARIES UNK NOWN. (2) IN THE CASE OF RELEVANT INCOME WHICH IS DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, OR WHICH IS OF THE NATURE REFERRED TO IN SUB-CLAUSE (IIA) OF CLAUSE (24) OF S ECTION 2 OR WHICH IS OF THE NATURE REFERRED TO IN SUB-SECTION (4A) OF SECTION 1 1 TAX SHALL BE CHARGED ON SO MUCH OF THE RELEVANT INCOME AS IS NOT EXEMPT UNDER SECTION 11 OR SECTION 12, RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 63 AS IF THE RELEVANT INCOME NOT SO EXEMPT WERE THE IN COME OF AN ASSOCIATION OF PERSONS : PROVIDED THAT IN A CASE WHERE THE WHOLE OR ANY PART OF THE RELEVANT INCOME IS NOT EXEMPT UNDER SECTION 11 OR SECTION 12 BY VIRTUE OF THE PROVISIONS CONTAINED IN CLAUSE (C) OR CLAUSE (D) OF SUB-SECTIO N (1) OF SECTION 13, TAX SHALL BE CHARGED ON THE RELEVANT INCOME OR PART OF RELEVA NT INCOME AT THE MAXIMUM MARGINAL RATE. FROM THE AFORESAID PROVISIONS OF SECTION 164(2), IT MAY BE SEEN THAT IN THE CASE OF RELEVANT INCOME REFERRED TO THEREIN, TAX SH ALL BE CHARGED ON SO MUCH OF THE RELEVANT INCOME, AS IS NOT EXEMPT UNDER SECT ION 11 OR 12, AS IF THE RELEVANT INCOME NOT SO EXEMPT WERE THE INCOME OF AN ASSOCIATION OF PERSONS (AOP). IT CLEARLY IMPLIES THAT ONLY THAT PART OF TH E RELEVANT INCOME WHICH IS NOT EXEMPT UNDER SECTION 11 OR SECTION 12 IS BROUGHT TO TAX, AS THE INCOME OF AN AOP AND THE BALANCE OF INCOME OF THE CHARITABLE TRU ST / INSTITUTION, WILL REMAIN EXEMPT. FURTHER, AS PER THE PROVISO TO SECTION 164(2), WHER E THE WHOLE OR ANY PART OF THE RELEVANT INCOME IS NOT EXEMPT UNDER SECTION 11 OR SECTION 12, BY VIRTUE OF THE PROVISIONS OF SECTION 13(1)(C) OR SECTION 13(1) (D), TAX SHALL BE CHARGED ON THE RELEVANT INCOME OR PART OF RELEVANT INCOME, AT THE MAXIMUM MARGINAL RATE. 65. IN VIEW OF THE AFORESAID PROVISO TO SECTION 164 (2), HON'BLE COURTS IN THE JUDGMENTS REFERRED BY LD. CIT(A) IN THE IMPU GNED ORDER HAVE HELD THAT IN CASE OF VIOLATION OF THE CONDITIONS UN DER SECTION 13(1)(C) OR 13(1)(D) OF THE ACT, ONLY THE RELEVANT INCOME OR PART OF SUCH RELEVANT INCOME IS LIABLE TO BE TAXED AT MAXIMUM MA RGINAL RATE. IT IS ALSO HELD THAT THE VIOLATION OF SECTION 13(1)(C) OR 13(1)(D) DOES NOT RESULT IN DENIAL OF EXEMPTION UNDER SECTION 11, IN RESPECT OF THE TOTAL INCOME OF THE ASSESSEE. IN OTHER WORDS, ONLY THE NO N-EXEMPT INCOME, IN VIEW OF THE PROVISIONS OF SECTION 13(1)(C) WOULD FALL IN THE TAX-NET RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 64 AND THE OTHER INCOME OF THE CHARITABLE TRUST / INST ITUTION WOULD REMAIN EXEMPT UNDER THE PROVISIONS OF SECTION 11 OF THE ACT. 66. IN VIEW OF THE ABOVE DISCUSSIONS, RELEVANT PROV ISIONS, THE CBDT CIRCULAR NO.387 DATED 06.07.1984 AND THE JUDGMENT R EFERRED BY LD. CIT(A) IN THE IMPUGNED ORDER WE OBSERVE THAT WHERE A TRUST/SOCIETY CONTRAVENES THE PROVISIONS OF SECTION 13(1)(C) OF T HE ACT, THE MAXIMUM MARGINAL RATE OF INCOME TAX WILL APPLY ONLY TO THAT PART OF THE INCOME FOR WHICH CONTRAVENTION IS MADE UNDER TH E PROVISION OF SECTION 13 AND NOT ON THE REMAINING INCOME OF TRUST /SOCIETY. THIS VIEW ALSO STANDS TAKEN IN THE FOLLOWING JUDGMENTS/D ECISIONS: 1. DIT(E) VS SHETH MAFATLAL GAGALBHAI FOUNDATION TR UST [2001] 249 ITR 533 (BOM). 2. JAMSETJI TATA TRUST VS JDIT (E) [2014] 101 DTR ( TRIB) 305 (MUM 3. CIT VS. RED ROSE SCHOOL [2007] 163 TAXMAN 19 (AL L.) 4. ITO VS. VIRENDRA SINGH MEMORIAL SHIKSHA SAMITI [ 2009] 18 DTR (TRIB.) 502 (LUCKNOW). 5. ARVIND BHARTIYA VIDHYALYA SAMITI VS. ACIT [2008] 115 TTJ 351 (JP.) 6. DY.CIT VS. COSMOPOLITAN EDUCATION SOCIETY [2000] 244 ITR 494 (RAJ.) RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 65 67. WE, THEREFORE, IN VIEW OF THE SETTLED JUDICIAL PRECEDENTS FIND MERIT IN THE FINDING OF LD. CIT(A) HOLDING THAT IF THERE IS SOME MIS-UTILIZATION OR MISMANAGEMENT OF THE INCOME/FUND OF THE CHARITAB LE SOCIETY, THE EXEMPTION U/S 11 OF THE ACT CANNOT BE DENIED TO THE ASSESSEE TRUST ON THE REMAINING INCOME. THUS, IT IS CLEARLY ESTABLISH ED THAT ONLY THE RELEVANT INCOME FALLING WITHIN THE MISCHIEF U/S 13( 1)(C)/13(1)(D) WILL LOSE THE BENEFIT OF EXEMPTION UNDER SECTION 11 OF T HE ACT AND THE BALANCE OF THE TOTAL INCOME OF THE TRUST WILL REMAI N ELIGIBLE FOR THE BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE ACT . ACCORDINGLY THIS COMMON ISSUE RAISED BY THE REVENUE FOR A.Y. 2009-10 & 2010-11 AGAINST THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT ALLOWED BY THE LD. CIT(A) IS DISMISSED. RELEVANT GROUNDS RAISED PERTAI NING TO THIS ISSUE IN THE THREE ASSESSMENT YEARS STANDS DISMISSED. 68. NEXT COMMON ISSUE RAISED BY THE REVENUE IN GROU ND NO.4, GROUND NO.3 & GROUND NO.5 OF A.Y. 2008-09 TO 2010-1 1 RESPECTIVELY ARE AGAINST THE FINDING OF LD. CIT(A) ALLOWING DEDU CTION OF CAPITAL EXPENDITURE OF RS.2,43,75,990/- FOR A.Y. 2008-09 TO 2010-11 AS APPLICATION OF INCOME. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 66 69. BRIEF FACT RELATES TO THIS ISSUE ARE THAT THE A SSESSEE SOCIETY CLAIMED DEDUCTION OF VARIOUS AMOUNTS FOR THE YEAR U NDER APPEAL AS APPLICATION OF INCOME FOR THE CAPITAL EXPENDITURE I NCURRED DURING THE YEAR. HOWEVER, LD. ASSESSING OFFICER WHILE CONCLUDI NG THE ASSESSMENT AND DETERMINING THE TOTAL INCOME HAS NOT DEDUCTED T HE SAID AMOUNT. LD. CIT(A) AFTER APPRECIATING THIS FACT THAT THE LD . ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING IN THE ASSESSMENT ORDER ABOUT THE CAPITAL EXPENDITURE CLAIMED AS AN APPLICATION OF INCOME BY THE ASSESSEE DIRECTED THE LD. ASSESSING OFFICER TO ALLOW THE SAI D CLAIM. THE REVENUE HAS CHALLENGED THIS FINDING. 70. LD. DR COULD NOT BRING ANY CONTRARY MATERIAL ON RECORD TO OPPOSE THE FINDING OF LD.CIT(A) AND THUS RELIED ON THE ASS ESSMENT ORDER WHEREAS LD. SR. COUNSEL FOR THE ASSESSEE RELIED ON THE FINDING OF LD. CIT(A). 71. WE NOTE THAT THE ASSESSEE SOCIETY CLAIMED DEDUC TION FOR CAPITAL EXPENDITURE AS APPLICATION OF INCOME DURING A.Y. 2 008-09 TO 2010-11 AT RS. 2,43,75,990/-, RS. 11,06,15,735/- & RS.2,00, 48,975/- AGAINST THE TOTAL INCOME EARNED BY THE ASSESSEE SOCIETY. LD . ASSESSING OFFICER MADE VARIOUS ADDITIONS AND DISALLOWANCES ALLEGING T HAT ASSESSEE VIOLATED THE PROVISION OF SECTION 13 BUT WHILE DETE RMINING THE TOTAL RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 67 INCOME DENIED THIS CLAIM BUT MADE NO DISCUSSION/ ME NTION IN THE ASSESSMENT ORDER. IT THUS TRANSPIRES THAT SINCE THE LD. ASSESSING OFFICER HELD THAT AS THE ASSESSEE HAS VIOLATED THE PROVISION OF SECTION 13 OF THE ACT, THEREFORE, ASSESSEE IS NOT ENTITLED TO ANY BENEFIT U/S 11 OF THE ACT AND THUS DID NOT GIVE THE BENEFIT OF DED UCTION OF CAPITAL EXPENDITURE INCURRED DURING THE YEAR AS APPLICATION OF INCOME. 72. WE OBSERVE THAT LD. CIT(A) HAS ALLOWED THIS CLA IM OBSERVING AS FOLLOWS: 22. THESE GROUNDS ARE RAISED AGAINST NOT ALLOWING T HE DEDUCTION OF RS. 2,43,75,990/- IN A.Y. 2008-09, RS. 11,06,15, 735/- IN A.Y. 2009-10 AND RS .. 2,OO!48,975/- IN A.Y. 2010-11 AS A PPLICATION OF INCOME AS CAPITAL EXPENDITURE. 22.1 APPELLANT IN THE RETURN OF INCOME/COMPUTATION OF INCOME CLAIMED THE DEDUCTION OF SIMILAR AMOUNTS AS APPLICA TION OF INCOME AS CAPITAL EXPENDITURE. IN THE ASSESSMENT OR DER, THE A.O. HAS STATED NOTHING ABOUT THIS DEDUCTION. ON PERUSAL OF THE TABLES PREPARED IN THE ASSESSMENT ORDER WHILE CONCLUDING T HE ASSESSMENT ORDER FOR DETERMINATION OF THE TOTAL INC OME, THE A.O. HAS NOT DEDUCTED THE SAID AMOUNTS. FOR A.Y. 2008-09, AS DISCUSSED IN THE PRECEDING PARAS, THE A.O. HAS NOT DENIED EXEMPTION U/S 11 TO THE APPELLANT. THEREFORE THE AP PELLANT IS ALSO ENTITLED FOR DEDUCTION OF RS. 2,43,7~990/-, FOR A.Y . 2009-10 & A.Y. 2010-11, THE A.O. DENIED THE EXEMPTION VI] S 11 OF THE ACT TO THE APPELLANT AND THEREFORE, ADDED THE EXCESS OF IN COME OVER EXPENDITURE (GROSS RECEIPTS LESS REVENUE EXPENSES) I.E. RS. 12,18,18,138/- IN A.Y. 2009-10 AND RS. 12,61,18,145 /- IN A.Y. 2010-11. IT IS, THEREFORE CLEAR, THAT WHILE ASCERTA INING THE, AMOUNT OF EXCESS OF INCOME OVER EXPENDITURE, THE A. O. DID NOT CONSIDER THE CAPITAL EXPENDITURE INCURRED BY APPELL ANT. 22.2 CERTAIN GROUNDS RAISED BY APPELLANT DURING APP ELLATE PROCEEDINGS HAVE BEEN ALLOWED IN THE PRECEDING PARA S WHICH HAVE THE EFFECT OF ALLOWING EXEMPTION U/ S 11 OF TH E ACT TO THE APPELLANT AND ACCORDINGLY ADDITIONS MADE BY THE A.O . BRINGING WHOLE EXCESS OF INCOME OVER EXPENDITURE HAVE BEEN D ELETED. THEREFORE, APPELLANT IS ALSO ENTITLED FOR DEDUCTION IN RESPECT OF APPLICATION OF INCOME FOR CAPITAL EXPENDITURE. HENC E, THESE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 68 GROUNDS OF APPEAL ARE ALLOWED. 73. WE FURTHER OBSERVE THAT IN THE PRECEDING PARAS, AFTER EXAMINING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE SET TLED JUDICIAL PRECEDENTS WE HAVE DELETED THE DISALLOWANCE AND ADD ITIONS MADE BY THE LD. ASSESSING OFFICER. THUS, SINCE THE VERY BAS IS FOR DENYING THE BENEFIT U/S 11 OF THE ACT HAS BEEN REMOVED/DELETED AND THERE IS NOTHING CONTRARY ON RECORD BROUGHT BY THE REVENUE T O SHOW THAT THE ASSESSEE IS NOT CARRYING ON THE ACTIVITIES FOR CHAR ITABLE AND EDUCATIONAL ACTIVITIES AS PER THE OBJECTS FOR WHICH IT IS ESTABLISHED, THERE REMAINS NO HURDLE FOR THE ASSESSEE SOCIETY TO CLAIM BENEFIT OF EXEMPTION U/S 11 OF THE ACT. THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR CONSIDERED VIEW A SSESSEE HAS RIGHTLY CLAIMED CAPITAL EXPENDITURE AS APPLICATION OF INCOM E DURING THE YEAR AND THEREFORE THE FINDING OF LD. CIT(A) NEEDS NO IN TERFERENCE. THIS COMMON ISSUE RAISED BY THE REVENUE IN GROUND NOS.4, 3 & 5 FOR A.Y. 2008-09 TO 2010-11 ARE DISMISSED. 74. IN THE RESULT, IN THE CASE OF RKDF APPEALS OF T HE ASSESSEE FOR A.Y. 2004-05, 2006-07 TO 2009-10 ARE A LLOWED AND APPEALS OF THE REVENUE FOR A.Y.2008-09 TO 2010- 11 ARE DISMISSED. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 69 NOW WE TAKE UP THE APPEALS IN THE CASE OF ASSESSEE NAMELY AYUSHMATI EDUCATION & SOCIAL SOCIETY (IN SHORT AESS ) WHEREIN ASSESSEE IS IN APPEAL FOR A.YS. 2008-09 TO 2010-11 AND CROSS APPEALS BY REVENUE ARE FOR A.Y. 2009-10 & 2010-11. 75. BRIEF FACTS RELATING TO THIS CASE AVAILABLE FRO M RECORDS ARE THAT THE ASSESSEE SOCIETY IS REGISTERED WITH TH E REGISTRAR OF SOCIETIES VIDE REGISTRATION NUMBER 740 7/99 EFFECTIVE FROM 15.10.1999. IT IS ALSO REGISTERED U/ S 12AA OF THE INCOME TAX ACT 1961 VIDE REGISTRATION NO.56/445 W.E.F. 01.04.2004. IT IS RUNNING VARIOUS EDUCATIONAL INSTI TUTIONS. THE ASSESSEE SOCIETY FILED AN APPLICATION SEEKING A PPROVAL U/S 10 (23C)(VI) OF THE ACT FROM A.Y. 2006-07 BUT WAS FINALLY ACCORDED APPROVAL U/S 10(23C)(VI) OF THE A CT FROM A.Y. 2009-10 AND ONWARDS. ASSESSEE SOCIETY IS RUNNI NG AROUND 26 EDUCATIONAL INSTITUTIONS (LIST MENTIONED IN THE ASSESSMENT ORDER AT PAGE 3 & 4) WHICH ARE ENGAGED I N IMPARTING EDUCATION IN THE FIELD OF PHARMACY, ENGIN EERING, RESEARCH & TECHNOLOGY, HOTEL MANAGEMENT, POLYTECHNI C COLLEGE AND OTHERS. AS PER THE BYLAWS /RULES & REGU LATIONS RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 70 OF THE SOCIETY FILED WITH THE REGISTRAR OF SOCIETIE S, M.P. AT THE TIME OF REGISTRATION, THE OBJECTIVES OF THE SOC IETY ARE SOCIAL SERVICE ACTIVITIES, EDUCATIONAL ACTIVITIES, IMPORT MEDICAL, PARAMEDICAL, NURSING, DENTAL & SCHOOL EDUC ATION BY OPENING OF MEDICAL, PARAMEDICAL, NURSING, DENTAL , AYURVEDIC, HOMEOPATHIC COLLEGES HOSPITALS AND SCHOO LS. 76. SEARCH ACTION U/S 132 OF THE ACT WAS CARRIED OU T ON 23.07.2009 AT VARIOUS PREMISES OF RKDF GROUP WHICH ALSO INCLUDED THE ASSESSEE SOCIETY (AESS) WHICH IS PART OF THE SAME GROUP. ASSESSMENT PROCEEDINGS WERE INITIATED B Y SERVING NOTICE U/S 153A OF THE ACT TO FILE THE RETU RN FOR A.YS. 2004-05 TO 2009-10. IN COMPLIANCE TO THE NOTI CE U/S 153A OF THE ACT ASSESSEE STATED THAT RETURNS ORIGIN ALLY FILED MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTIC E U/S 153A OF THE ACT. THE DATES OF ORIGINAL RETURN FILED FOR A.Y. 2004-05 TO 2010-11 AND THE RETURN FILED U/S 153A OF THE ACT ARE MENTIONED BELOW: S.NO. A.Y. DATE OF FILIN G OF ORIGINAL RETURN U/S 139(1) DATED OF FILING OF RETURN U/S 153A RETURNED INCOME/LOSS (IN RS.) 1 2004 - 05 23.12.04 17.10. 1 1 NIL 2 2005 - 06 28 .1 0 .0 5 17.10.11 NIL 3 2006 - 07 27.10 .06 17.10.11 NIL RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 71 4 2007 - 08 29 .1 0 .07 17.10.11 NIL 5 2008 - 09 30.09 .08 17.10 .11 NIL 6 2009 - 10 31 . 03 . 1 0 17.10.11 NIL 7 2010 - 11 14.10.20 17.10.11 NIL NOTICE U/S 143(2) & 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE DULY SERVED UPON THE ASSESSEE. 77. FIRST ISSUE RAISED BY THE LD. AO WAS FOR A.Y. 2009- 10WITH REGARD TO UTILIZATION OF SOCIETY FUND AT RS. 1,99,21,499/- BY GIVING IT TO THE BENEFIT OF PERSON S REFERRED U/S 13(3) OF THE ACT WHICH IN THIS CASE WAS A COMPA NY NAMELY M/S. SIDDHARTH KAPOOR INFRASTRUCTURE PVT. LTD. (IN SHORT SKIPL') WHICH WAS RUN BY FOUNDER MEMBER OF THE SOCIETY, SHRI R.N. KAPOOR AND HIS GRANDSON SHRI SID HARTH KAPOOR. LD. AO ALLEGED THAT SKIPL PURCHASED 10.17 HECTARE LAND LOCATED AT GONDARMAU, VIDE REGISTRY DA TED 20.03.2009 FROM VARIOUS FARMERS. LD. AO INITIATED E NQUIRY INTO THIS TRANSACTION BASED ON DOCUMENTS SEIZED DUR ING THE COURSE OF SEARCH ACTION BEARING NUMBERS THE LPS NO .8B (PANCHNAMA DATED 24.07.2009) WHICH IS A PHOTOCOPY O F A REGISTERED SALE DEED OF A LAND PURCHASE BY THE SKIP L. LD. AO AFTER DISCUSSING VARIOUS INFORMATION FOUND FROM THE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 72 SEIZED MATERIAL, FINALLY DISCUSSED IN THE ASSESSMEN T ORDER THAT SUM OF RS.1,99,21,499/- WAS PAID BY AESS TO 10 FARMERS THROUGH ACCOUNT PAYEE CHEQUE DURING THE MON TH OF MARCH 2009. THE ASSESSEE SOCIETY SUBMITTED THAT THE LAND PURCHASED BY SKIPL WAS LEASED TO THE ASSESSE E SOCIETY FOR NIL RENT AND AGAINST THE CONSIDERATIO N OF ADVANCE PAID TO FARMERS AND NIL RENT ASSESSEE WAS REQUIRED TO DEVELOP THE LAND FOR SPORTS ACTIVITIES AND VARIOUS OTHER RELATED FACILITIES. THE SAID LAND IS USED FOR THIS PURPOSE ONLY. THE LD. AO HOWEVER, ALLEGED THAT THE SAID LAND WAS PURCHASED BY SKIPL IN ITS NAME AND ASSESSEE SOCIETY DIVERTED THE FUNDS OF THE SOCIETY TO MADE PAYMENT TO THE FARMERS WHICH WAS A CLEAR VIOLATION OF PROVISION OF SECTION 13 OF THE ACT. LD. AO ACCORDIN GLY MADE THE ADDITION FOR RS.19921,499/- TO THE INCOME OF AS SESSEE AND ALSO DENIED BENEFIT OF EXEMPTION U/S 11 FOR THE ALLEGED VIOLATION OF SECTION 13 OF THE ACT FOR DIRECTLY USI NG OR APPLYING THE INCOME OF THE ASSESSEE SOCIETY FOR THE BENEFIT OF PERSON REFERRED TO IN SECTION 13(3) OF THE ACT. 78. SECOND ISSUE RAISED BY THE LD. AO TO A.Y. 2008- 09 WAS RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 73 REGARDING THE PAYMENT OF RS.15,00,000/- TO SHRI ANE ESH KHAN. LD. AO ALLEGED THAT THERE WAS A TRANSACTION O F PURCHASE OF LAND FROM SHRI GYAN CHAND JAIN & SHRI A MAR CHAND JAIN. THE AMOUNT WAS GIVEN BY CHEQUE BY THE SOCIETY FOR THE AMOUNT APPEARING IN THE REGISTERED SALE DEED BUT THE ON MONEY WAS PAID THROUGH SHRI ANEES KHAN BY WAY OF ISSUING BEARER CHEQUE WHICH WERE ENCASED BY THE POWER OF ATTORNEY HOLDER NAME OF SHRI SHYAM LAL PATIDAR AND TULSIRAM PATIDAR ON BEHALF OF SHRI GYAN CHAND JAIN & SHRI AMAR CHAND JAIN. THE ASSESSEE HOWEVER CONTENDED THAT MR. ANEES KHAN IS A CONTRACT OR AND HAD CARRIED OUT CONSTRUCTION ACTIVITIES ROUND T HE YEAR. PAYMENTS WERE MADE AGAINST BILLS ISSUED AND TAX AT SOURCE WAS DEDUCTED. LD. AO WAS NOT SATISFIED WITH THIS RE PLY AND DISALLOWED A SUM OF RS.15,00,000/- AS UNEXPLAINED EXPENDITURE. 79. LD. AO ALSO RAISED DOUBT ON THE TRANSACTION WIT H HTPL OBSERVING THAT THE ASSESSEE HAD GIVEN INTEREST FREE LOAN TO THIS COMPANY WHICH IS RUN BY SMT. SAKHANA KAPOOR WH O IS MEMBER AND ALSO RELATIVE OF OTHER MEMBERS OF SOCIET Y. LD. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 74 AO CALCULATED NOTIONAL INTEREST OF RS.25,83030/- AN D RS. 9,39,890/- FOR A.Y. 2009-10 & 2010-11 AND MADE THE ADDITION IN THE HANDS OF ASSESSEE. 80. LD. AO ALSO OBSERVED THAT THERE WAS A BOGUS CLA IM OF ASSET IN THE CASE OF VEDICA EDUCATION SOCIETY FOR A .Y. 2004-05 TO 2007-08 AND THE DEPRECIATION WAS CLAIMED ON STRAIGHT LINE METHOD (SLM) ON SUCH BOGUS CLAIM OF A SSETS. SUBSEQUENTLY, VADICA EDUCATION SOCIETY WAS MERGED W ITH AYUSHMATI EDUCATION & SOCIAL SOCIETY. THE ASSETS WE RE CARRIED OVER BY THE LATER AND THE DEPRECIATION ON S UCH BOGUS ASSETS WERE CLAIMED DURING A.Y. 2008-09 TO 2 010- 11 AT RS.7,71,416/- IN EACH YEAR AND THE SAME WAS DISALLOWED AND ADDED TO THE INCOME OF RESPECTIVE ASSESSMENT YEAR. 81. FURTHER LD. AO ALSO OBSERVED THAT FOR A.Y. 2009 -10 THOUGH THE ASSESSEE HAS BEEN GRANTED THE APPROVAL F OR EXEMPTION U/S 10(23C)(VI) OF THE ACT, ASSESSEE IS N OT ELIGIBLE TO CLAIM THE SAME AS IT EXISTS FOR THE PUR POSE OF PROFIT AND FUND OF THE SOCIETY WERE GROSSLY MIS-UTI LIZED FOR THE FAMILY CONCERNS OF OFFICE BEARERS AND THUS HELD THAT RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 75 THE SOCIETY CANNOT BE HELD AS RUNNING SOLELY FOR ED UCATION PURPOSES FOR A.Y.2009-10 AND SUBSEQUENT YEAR. OBSER VING SO LD. AO DENIED THE BENEFIT OF EXEMPTION U/S 10(23 C)(VI) OF THE ACT ALONG WITH DENYING THE EXEMPTION U/S 11 OF THE ACT. 82. INCOME OF THE ASSESSEE FOR A.Y.2004-05 TO 2007- 08 WAS ASSESSED AT NIL INCOME AND FOR A.Y. 2008-09 TO 2010 -11 WAS COMPUTED IN THE FOLLOWING MANNER: A.Y. 2008-09 (COMPUTATION OF APPLICATION OF INCOME GROSS RECEIPTS ADD. UNEXPLAINED EXPENSES DEBITED TO ANEES KHAN ON ACCOUNT OF PAYMENT OF TULISRAM PATIDAR AND SHYAM LAL PATIDAR AS DISCUSSED IN PARA 10.3 ADD. ON ACCOUNT DEPRECIATION ON BOGUS ASSET AS DISCUSSED IN PARA 10.5 RS. 24,82,75,281/- 15,00,000/- 7,71,416/- GROSS RECEIPTS 25,05,46,697/ - LESS. TOTAL EXPENDITURE 28,40,33,255/ - TOTAL INCOME ASSESSED NIL BECAUSE APPLICATION OF INCOME MORE 248275281/- A.Y. 2009-10 IN COME SHOWN IN THE RETURN ADD: EXCESS OF INCOME OVER EXPENDITURE ADD: ADDITION ON ACCOUNT OF EXCESS PAYMENTS TO FARMERS ON BEHALF OF FAMILY CONCERN SKIPL AS DISCUSSED IN PARA 10.2 ADD: BENEFIT OF INTEREST PASSED ON TO HOME RS. NIL 34,07,25,659/- RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 76 BOUND TRAVELS PRIVATE LIMITED AS D ISCUSSED IN PARA 10.4 ADD. ON ACCOUNT DEPRECIATION ON BOGUS ASSET AS DISCUSSED IN PARA 10.5 1,99,21,499/ - 25,83,030/- 7,71,416/- TOTAL INCOME ASSESSED RS. 36,40,01,604/ - A.Y. 2010-11 INCOME SHOWN IN THE RETURN ADD: EXCESS OF INCOME OVER EXPENDITURE ADD: BENEFIT OF INTEREST PASSED ON TO HOME BOUND TRAVELS PRIVATE LIMITED AS DISCUSSED IN PARA 10.4 ADD. ON ACCOUNT DEPRECIATION ON BOGUS ASSET AS DISCUSSED IN PARA 10.5 RS. NIL 20,35,53,275/- 9,39,890/- 7,71,416/- TOTAL INCOME ASSE SSED RS. 20 , 52 , 64 , 581 / - 83. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) AND PARTLY SUCCEEDED AND NOW THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL FOR A.Y. 2008-09 TO 201 0-11 BY THE ASSESSEE AND CROSS APPEALS FOR A.Y. 2009-10 & 2 010-11 BY THE REVENUE. FIRST WE TAKE UP ASSESSEES APPEAL 84. THE FIRST COMMON ISSUE RAISED IN GROUND NO.1 FO R A.Y. 2008-09, GROUND NO.3 FOR A.Y. 2009-10 AND GROUND NO .2 FOR A.Y. 2010-11 FOR DISALLOWANCE OF DEPRECIATION E XPENSES AT RS.7,71,146/-. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 77 85. LD. AO DISALLOWED THE EXPENSES TREATING IT AS W RONG CLAIM ON THE BOGUS ASSETS PURCHASED IN THE CASE OF VEDICA EDUCATION SOCIETY DURING A.Y. 2004-05 TO 2007-08. L D. CIT(A) CONFIRMED THE VIEW OF THE LD. AO. 86. BEFORE US LD. SR. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT NO INCRIMINATING MATERIAL WAS FOUND FOR THE AL LEGED CLAIM OF ASSETS DURING SEARCH PROCEEDINGS AND SUCH ADDITIONS DESERVES TO BE DELETED IN VIEW OF RATIO LAID BY HON'BLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA (SUPRA). 87. PER CONTRA LD. DR VEHEMENTLY ARGUED SUPPORTING THE ORDER OF LOWER AUTHORITIES. 88. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE COMMON ISSUE RAISED BY THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF DEPRECIATION AT RS.7,71,416/- FOR E ACH YEAR FROM A.Y. 2008-09 TO 2010-11. THIS DISALLOWANCE WAS COMPUTED BY THE LD. AO BASED ON THE BOGUS CLAIM OF ASSETS IN CASE OF VEDIC A EDUCATION SOCIETY DURING A.Y. 2004-05 TO 2007-08. SUBSEQUENTL Y VEDICA EDUCATION SOCIETY WAS MERGED WITH AESS. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 78 89. WE NOTE THAT WITH REGARD TO BOGUS ASSETS THERE IS NO REFERENCE TO ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. THE ALLEGED BOGUS CLAIM OF ASSETS IS DURING A.Y. 2004-0 5 TO 2007-08. RETURNS FOR ALL THESE THREE YEARS WERE DULY FILED U /S 139(1) OF THE ACT. TIME LIMIT FOR ISSUANCE OF NOTICE U/S 143(2) OF THE ACT HAS EITHER EXPIRED BEFORE THE DATE OF SEARCH OR THE YEARS WERE ASSESSED U/S 143(3) OF THE ACT. IN VIEW OF THE RATIO LAID DOWN B Y THE HON'BLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA(SUPRA) WHICH HAVE BEEN SUBSEQUENTLY FOLLOWED IN VARIOUS OTHER DECISION OF THIS TRIBUNAL THAT FOR NON-ABATED ASSESSMENT ADDITION CANNOT BE MADE B Y LD. AO IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. 90. WE ARE OF THE CONSIDERED VIEW THAT SINCE LD. AO HAD MADE THE DISALLOWANCE OF DEPRECIATION ONLY ON THE BASIS OF B OGUS CLAIM OF ASSETS PURCHASED DURING A.Y. 2004-05 TO 2007-08 BUT WITHOUT GIVING REFERENCE TO ANY INCRIMINATING MATERIAL FOUND DURIN G SEARCH NOR GIVING ANY OTHER DETAILS IN THE ASSESSMENT ORDER AN D THEREFORE MAKING DISALLOWANCE ON THE BASIS OF SUCH BOGUS CLAI M FOR A.Y. 2004- 05 TO 2007-08, HAS NO FOUNDATION TO STAND FOR. MORE OVER ASSESSEE SOCIETY ACQUIRED VEDICA EDUCATION SOCIETY SUBSEQUEN T TO A.Y. 2007- RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 79 08. THERE IS NO EVIDENCE ON RECORD TO SHOW THE DETA ILS OF SUCH BOGUS CLAIM IN CASE OF VADICA EDUCATION SOCIETY. 91. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE ABSENCE OF ANY FINDING FOR THE ALLEGED BOGUS ASSETS FOUND DURING A.Y. 2004-05 TO 2001-08 AND RESPECTFULLY FOLLOWING THE J UDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA(SUPRA ) ARE OF THE CONSIDERED VIEW THAT LD. AO ERRED IN MAKING DIS ALLOWANCE FOR DEPRECIATION AT RS.7,71,416/- FOR EACH YEAR FROM A. Y. 2008-09 TO 2010-11. THE FINDING OF LD. CIT(A) IS SET ASIDE AND THIS COMMON ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. THUS GROUND N O1, GROUND NO.3 AND GROUND NO.2 OF ASSESSEES APPEAL FOR A.Y. 2008- 09 TO 2010-11 ARE ALLOWED. 92. NOW WE TAKE UP GROUND NO.1 & 2 FOR A.Y.2009-10 WHEREIN THE ASSESSEE HAS RAISED TWO FOLD CONTENTIONS, FIRSTLY T HAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD. AO BY MAKING AD DITION AT RS. 1,99,21,499/- ON ACCOUNT OF LAND PURCHASED BY SKIPL FOR THE AMOUNT GIVEN BY THE ASSESSEE SOCIETY. SECONDLY IT IS CONTE ND THAT THE ASSESSEE SOCIETY WAS GRANTED THE APPROVAL U/S 10(23C)(VI) OF THE ACT AND LD. AO DENIED THE BENEFIT EXEMPTION WITHOUT FOLLOWING THE PROCEDURE PROVIDED IN PROVISO TO SECTION 143(3)(E) OF THE A CT. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 80 93. WE WILL FIRST DEAL WITH THE QUANTUM ADDITION LD . SR. COUNSEL FOR THE ASSESSEE REFERRING TO WRITTEN SUBMISSIONS FILED BEFORE US AND LOWER AUTHORITIES AS WELL AS RELEVANT DOCUMENTS PLA CED IN THE PAPER BOOK SUBMITTED THAT THE ALLEGED SUM OF RS.1,99,21,4 99/- IS PAYMENTS MADE THROUGH ACCOUNT PAYEE CHEQUE AND DULY ACCOUNTE D FOR IN THE BOOKS OF ACCOUNT AND SHOWN IN THE BALANCE SHEET. TH ERE IS NO ELEMENT OF ON MONEY WHICH CAN BE ALLEGED UPON TH E ASSESSEES SOCIETY. ASSESSEE WAS NOT PROVIDED ANY OPPORTUNITY OF CROSS EXAMINATION OF ALL THOSE FARMERS/PARTIES WHO HAVE S TATED AGAINST THE ASSESSEE. REFERENCE WAS MADE TO THE LEASE AGREEMENT BETWEEN THE APPELLANT AND SKIPL PLACED AT PAPER BOOK PAGE 16 TO 18, AS PER WHICH LAND OWNED BY SKIPL MEASURING 10.147 HECTARE SITUAT ED AT GONDARMAU, WAS AGREED TO BE USED BY THE ASSESSEE SOCIETY FOR ITS EDUCATIONAL INSTITUTIONS BY WAY OF DEVELOPMENT OF T HE LAND FOR MAKING SPORT GROUND AND INCURRING EXPENDITURE ON LAND LEVE LING TEMPORARY CONSTRUCTION AND LANDSCAPING ETC. THIS LAND IS BEIN G USED BY THE ASSESSEE SOCIETY FOR THIS PURPOSE ONLY. REGARDING T HE ALLEGATION THAT LEASE DEED IS UNREGISTERED AND THEREFORE, NOT ADMIS SIBLE EVIDENCE REFERENCE WAS MADE TO SECTION 2(47) OF THE ACT AND SUBMITTED THAT THE EXPRESSION TRANSFER DEFINED U/S 2(47) OF THE ACT INCLUDES A NY RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 81 TRANSACTION ENTERED INTO IT ANY MANNER WHICH HAS TH E EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF, ANY IMM OVABLE PROPERTY . RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE PUNJ AB AND HARYANA HIGH COURT IN THE CASE OF RAM KISHAN VS. BIJEDER MANN. (2013) 1 PLR 195. IT WAS ALSO SUBMITTED THAT IF IN CASE SKIPL REFUSE D TO HONOUR THE LEASE AGREEMENT, THE APPELLANT HAS A RIGHT TO GET H IS AGREEMENT ENFORCED BY WAY OF SUIT FOR SPECIFIC PERFORMANCE. 94. IN CASE OF G.BALAKISHTIAH VS. B. RANGA REDDY AIR 1960 AP 112 , IT WAS HELD THAT UNREGISTERED LEASE DEED CAN BE ADMISS IBLE AS EVIDENCE FOR PROVING APPELLANTS (WHO WAS OWNER OF THE LAND IN DISPUTE) TITLE TO THE LEASED PROPERTY. 95. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HON 'BLE SUPREME COURT IN THE CASE OF SHIBANI BASU V. SANDIP RAY AIR 2011 SC 509 (SC) WHEREIN HON'BLE COURT HAS HELD THAT NON-REGIST RATION OF A RENT NOTE DID NOT DEBAR USE OF A DOCUMENT THAT WAS TO BE COMPULSORILY REGISTERED FOR COLLATERAL PURPOSES. 96. AS REGARD THE SECOND CONTENTION THAT LD. AO OUG HT TO HAVE ALLOWED THE BENEFIT OF EXEMPTION U/S 10(23C)(VI) OF THE AC T IT WAS SUBMITTED THAT LD. AO FAILED TO COMPLY TO THE PROCEDURE LAID DOWN IN PROVISO TO SECTION 143(3) OF THE ACT AND DENIED THE BENEFIT OF EXEMPTION U/S RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 82 10(23C)(VI) OF THE ACT WITHOUT INTIMATING CENTRAL GOVERNMENT OR THE PRESCRIBED AUTHORITY ABOUT THE CONTRAVENTION IF ANY OF U/S 10(23C)(VI) OF THE ACT. IT IS ONLY AFTER SUCH INTIMATION THAT E XEMPTION U/S 10(23C)(VI) OF THE ACT CAN BE WITHDRAWN. NO SUCH CO NTRAVENTION OF THIS PROVISION HAS BEEN STATED BY LD. AO OR LD. CIT(A). ACTIVITIES OF THE ASSESSEE SOCIETY RUNNING PRIMARILY FOR EDUCATIONAL ACTIVITIES HAVE NOT BEEN DOUBTED. ONLY ON THE BASIS OF SOME DISALLOWANC ES BENEFIT OF SECTION 11 OF THE ACT HAS BEEN DENIED. HOWEVER, LD. AO HAS NOT GIVEN ANY REASON AS WHY THE ASSESSEE IS NOT ENTITLED TO T HE BENEFIT OF EXEMPTION U/S 10(23C)(VI) OF THE ACT. IT WAS ALSO S UBMITTED THAT PRIOR TO FINANCE ACT 2020, THE APPELLANT CAN CLAIM THE EX EMPTION BOTH U/S 10(23C)(VI) AND SECTION 11 OF THE ACT SIMULTANEOUSL Y. THIS AMENDMENT IS PROSPECTIVE IN NATURE. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: 1. PEOPLES EDUCATION SOCIETY [2014] 42 TAXMANN.COM 353 (KARNATAKA) 2. COMMISSIONER OF INCOME-TAX V. JEEVAN DEEP CHARITABLE TRUST [2012] 28 TAXMANN.COM 242 (ALL.) 3. COMMISSIONER OF INCOME TAX VS. MAHASABHA GURUKUL VIDYAPEETH HARYANA (2010) 326 ITR 25 (PUN), 97. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE (DR) RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 83 VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF BOTH LOW ER AUTHORITIES AND RELIED ON THE FOLLOWING FINDING OF LD. CIT(A) WITH REGARD TO QUANTUM ADDITION OF RS.1,99,21,499/- MENTIONED IN PARA 13 OF THE IMPUGNED ORDER AND WITH REGARD TO THE DENIAL OF EXEMPTION U/S 10(23C)(VI) OF THE ACT REFERRED TO THE FINDING OF LD. CIT(A) IN PARA 12 OF THE IMPUGNED ORDER. RELEVANT PART IS EXTRACTED BELOW: FINDING CONFIRMED THE ADDITION OF RS.1,99,21,499/- 13.10CAREFULLY CONSIDERING THE ABOVE MENTIONED FAC TS, I SEE NO REASON TO RELY ON THE CLAIM OF THE APPELLANT THAT T HE APPELLANT SOCIETY POSSESSED RIGHT TO ENJOY OVER THE LAND. THE APPELLANT SOCIETY MADE PAYMENT OF RS.1,99,21,499/- TO FARMERS ON BEHALF OF SKIPL TO ENJOY NO BENEFIT. IN FACT, IN THESE TRA NSACTIONS, THE ONLY BENEFICIARY IS SKIPL, IN WHICH SHRI R.N. KAPOO R, CHAIRMAN OF THE APPELLANT SOCIETY AND SHRI SIDDARTH KAPOOR, VICE CHAIRMAN & GRAND SON OF SHRI R.N. KAPOOR HELD EQUAL SHARE. THEREFORE, THE ADDITION OF RS.1,99,21,499/- MADE BY THE AO IN A.Y. 2009-10 ON THIS COUNT IS CONFIRMED AS THIS IS VIOLATION OF PROVISIONS OF SECTION. 13(1) READ WITH SECTION. 13 (3) OF THE ACT. CONSEQUENTLY, THIS GROUND OF APPEAL IS DISMISSED. FINDING DENYING THE BENEFIT OF SECTION 10(23C(VI) O F THE ACT 12. THESE GROUNDS ARE RAISED BY THE APPELLANT FOR C LAIMING EXEMPTION IN RESPECT OF ENTIRE INCOME U/S 10(23C)(V I) OF THE ACT. APPELLANT CLAIMED EXEMPTION U/S 11 IN ITRS FILED FO R A.Y. 2004- 05 TO A.Y. 2010-11. THE AO HAS ALSO PASSED ASSESSME NT ORDER- UYS 153A R.W.S. 143(3) KEEPING IN MIND THE EXEMPTION U/ S 11 AVAILABLE TO THE ASSESSEE FOR ALL ASSESSMENT YEARS 2004-05 TO 2010-11. APPROVAL U/S 1 0(23C) (VI) HAS BEEN ACCORD ED TO THE APPELLANT ON 24.03.2009 FOR AY 2009-10 ONWARDS. SIN CE, SEARCH OPERATION WAS CONDUCTED ON 23.07.2009 AND RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 84 CONSEQUENTLY MANDATORY ASSESSMENT WAS CONDUCTED FOR AY 2004-05 TO 2010-11. THE MAJOR PART OF THE ASSESSMEN T PERIOD IS PRIOR TO DATE OF APPROVAL U/S 10(23C)(VI) AND AO HA S ALSO RELIED UPON EXEMPTION U/S 11 AS CLAIMED BY THE APPELLANT I N RETURNS OF INCOME/COMPUTATION OF INCOME FILED U/S 139(1) BE FORE OBTAINING APPROVAL II] 1 0(23C) (VI) AND ALSO U/S 153A AFTER OBTAINING APPROVAL U/S 1 0(23C) (VI) AS APPELLANT SUBMITTED BEFORE A.O. DURING THE ASSESSMENT PROCEEDINGS THAT RETURNS FILED BY IT ULS 139(1) MAY BE TREATED AS RETURNS FILED IN RESPONSE TO NOTICE U/ S 153A. 12.1 IN VIEW OF THE AFORESAID POINTS MENTIONED IN T HE PRECEDING PARA, I AM OF THE VIEW THAT APPELLATE PROCEEDINGS S HOULD ALSO BE CONCLUDED ON THE BASIS OF EXEMPTION CLAIM U/S 11 BY THE APPELLANT FOR ALL ASSESSMENT YEAR 2004-05 TO 2010-1 1, IN RESPECT OF WHICH A COMPOSITE ASSESSMENT ORDER HAS B EEN PASSED BY THE AO. HOWEVER, BENEFIT U/S 11 AND U/S 1 0(23C)(VI) OF THE ACT CANNOT BE CLAIMED SIMULTANEOUSLY. HENCE, THESE GROUNDS OF APPEAL ARE HEREBY DISMISSED . 98. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DECISION R EFERRED BY LD. COUNSEL FOR THE ASSESSEE AND THE FINDING OF LD. CIT REFERRED BY LD. DR. 99. AS REGARDS THE QUANTUM ADDITION OF RS.1,99,21,4 99/- CONFIRMED BY LD. CIT(A) ON ACCOUNT OF LAND PURCHASE BY SKIPL MEASURING 10.17 HECTARE LOCATED AT VILLAGE- GONDARMAU, REGISTERED ON 20.03.2009, WE NOTE THAT THIS PROPERTY IS PURCHASED BY SKIPL. A SUM OF RS.1,99,21,499/- WAS PAID BY THE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 85 ASSESSEE SOCIETY TO THE FOLLOWING FARMERS WHO SOLD THE LAND TO SKIPL. NAME OF SELLER DATE CHEQ.NO. AMOUNT(IN RS.) PAID FROM LAXMAN SINGH 28.3.2009 232389 10,15,333 A/C NO.12/ 940 SSS NAGRIK BANK PRATAP SINGH 25.3.2009 232391 91,52,333 A/C NO.12/940 SSS NAGRIK BANK GOPAL SINGH 25.3.2009 232390 10,15,333 A/C NO.12/940 SSS NAGRIK BANK OM PRAKASH 24.3.2009 232386 8,89,000 A/C NO.12/940 SSS NAGRIK BANK PREM NARAYAN 23.3.2009 232 387 34,77,750 A/C NO.12/940 SSS NAGRIK BANK NIRBHAY SINGH 23.3.2009 231554 3,46,650 A/C NO.12/120 SSS NAGRIK BANK KAMAL 23.3.2009 231555 22,85,250 A/C NO.12/120 SSS NAGRIK BANK GANGA RAM 23.3.2009 231556 32,52,750 A/C NO.12/120 SSS NAGRIK BANK HARI SIN GH 23.3.2009 231557 12,95,250 A/C NO.12/120 SSS NAGRIK BANK DHAN SINGH 23.3.2009 231558 23,09,000 A/C NO.12/120 SSS NAGRIK BANK TOTAL 1,99,21,499 100. THE ABOVE STATED SUM PAID TO FARMERS IS DULY A PPEARING IN THE BALANCE SHEET OF ASSESSEE SOCIETY FOR F.Y. 2008-09 AS LAND DEVELOPMENT AND ADVANCES. UNDER THIS SCHEDULE TOTAL SUM OF RS.3,63,41,058/- IS SHOWN WHICH ALSO COMPRISES OF T HE NAME OF PERSONS AND THE AMOUNT OF RS.1,99,21,499/- GIVEN TO SOME PERSONS DURING F.Y. 2008-09. WE ALSO NOTE THAT A LEASE AGRE EMENT WAS ENTERED BETWEEN THE ASSESSEE AND SKIPL ON 28.02.2009 AND AS SESSEE SOCIETY AGREED THAT IN LIEU OF ADVANCE GIVEN TO FARMERS AT RS.1,99,21,499/- AND DEVELOPING THE SAID LAND FOR SPORTS RELATED ACT IVITIES UNDER CSR, RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 86 MAKING CONSTRUCTION, LANDSCAPING LAND LEVELING AND OTHER LAND DEVELOPMENT WORK, NIL RENT WILL BE PAID FOR 20 YE ARS COMMENCING FROM 20 TH APRIL 2009. 101. THOUGH IT IS ALLEGED BY THE REVENUE AUTHORITIE S THAT THE LEASE DEED IS UNREGISTERED AND NOT ADMISSIBLE AS EVIDENCE , WE HOWEVER, OBSERVE THAT DEFINITION OF EXPRESSION 'TRANSFER' PR OVIDED IN SECTION 2(47) IS MORE WIDER THAN IN THE GENERAL LAW. THE EXPRESS ION 'TRANSFER' EMPLOYED IN SECTION 2(47) INCLUDES ANY TRANSACTION ENTERED INTO IN ANY MANNER WHICH HAS THE EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY . IN THESE TWO EVENTUALITIES, PROFITS ON ACCOUNT OF CAPITAL GAINS WOULD BE TAXABL E IN THE YEAR IN WHICH SUCH TRANSACTIONS ARE ENTERED INTO, EVEN IF A TRANSFER OF IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETED UN DER THE GENERAL LAW. IN THE PRESENT CASE, THERE IS A FINE DISTINCTI ON WHICH REMAINED UN-NOTICED AT THE END OF THE LD. AO. ACCORDING TO T HE APPELLANT, THE RIGHTS WHICH HAVE BEEN ACQUIRED BY IT BY VIRTUE OF LEASE AGREEMENT ARE THE RIGHTS OF CAPITAL NATURE. THESE RIGHTS HAVE BEE N ALIENATED IN FAVOUR OF THE APPELLANT BY SKIPL. THE LD.AO HAS REF ERRED TO SECTIONS 17 AND 49 OF THE INDIAN REGISTRATION ACT, BUT, FAIL ED TO NOTICE THE PROVISO APPENDED TO SECTION 49 WHICH HAS BEEN INCORPORATED BY WAY RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 87 OF AMENDMENT SUBSEQUENTLY. THUS, IT IS PERTINENT TO TAKE NOTE OF SECTION 49 ALONG WITH PROVISO WHICH READS AS UNDER: '49. EFFECT OF NON-REGISTRATION OF DOCUMENTS REQUIR ED TO BE REGISTERED.--NO DOCUMENT REQUIRED BY SECTION 17 OR BY ANY PROVISION OF THE TRANSFER OF PROPERTY ACT , 1882 (4 OF 1882), TO BE REGISTERED SHALL-- (A) AFFECT ANY IMMOVABLE PROPERTY COMPRISED THEREIN , OR (B) CONFER ANY POWER TO ADOPT, OR (C) BE RECEIVED AS EVIDENCE OF ANY TRANSACTION AFFE CTING SUCH PROPERTY OR CONFERRING SUCH POWER, UNLESS IT HAS BE EN REGISTERED : PROVIDED THAT AN UNREGISTERED DOCUMENT AFFECTING IM MOVABLE PROPERTY AND REQUIRED BY THIS ACT OR THE TRANSFER OF PROPERTY ACT , 1882 (4 OF 1882), TO BE REGISTERED MAY BE RECEIVED AS EVIDENCE OF A CONTRACT IN A SUIT FOR SPECIFIC PERFORMANCE UNDER CHAPTER II OF THE SPECIFIC RELIEF ACT, 1877 (1 OF 1877), OR AS EVIDEN CE OF PART PERFORMANCE OF A CONTRACT FOR THE PURPOSES OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882) OR AS EV IDENCE OF ANY COLLATERAL TRANSACTION NOT REQUIRED TO BE EFFECTED BY REGISTERED INSTRUMENT.' 102. IN THE CASE OF RAM KISHANVS. BIJEDER MANN . THE HON'BLE P&H HIGH COURT HAS RESOLVED THE CONTROVERSY AND HELD TH AT SUCH UNREGISTERED AGREEMENT CAN BE PRODUCED AS EVIDENCE IN SUIT FOR SPECIFIC PERFORMANCE. IT CAN BE MADE BASIS OF SUIT FOR SPECIFIC PERFORMANCE. THE FINDING RECORDED BY THE HON'BLE PU NJAB & HARYANA HIGH COURT IN THIS CASE REPORTED IN (2013) 1 PLR 19 5 AS UNDER: '11. A CONJOINT APPRAISAL OF SECTIONS 53A OF THE TRANSFER OF PROPERTY ACT, 1882, SECTIONS 17(1A) AND 49 OF THE I NDIAN REGISTRATION ACT, 1908, PARTICULARLY THE PROVISO TO SECTION 49 OF THE INDIAN REGISTRATION ACT, IN OUR CONSIDERED OPINION, LEAVES NO RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 88 AMBIGUITY THAT, THOUGH, A CONTRACT ACCOMPANIED BY D ELIVERY OF POSSESSION OR EXECUTED IN FAVOUR OF A PER- SON IN P OSSESSION, IS COMPULSORILY REGISTRABLE UNDER SECTION 17(1A) OF THE REGISTRATION ACT, 1908, BUT THE FAILURE TO REGISTER SUCH A CONTR ACT WOULD ONLY DEPRIVE THE PERSON IN POSSESSION OF ANY BENEFIT CON FERRED BY SECTION 53A OF THE 1882 ACT. THE PROVISO TO SECTION 49 OF THE INDIAN REGISTRATION ACT CLEARLY POSTULATES THAT NON -REGISTRATION OF SUCH A CONTRACT WOULD NOT PROHIBIT THE FILING OF A SUIT FOR SPECIFIC PERFORMANCE BASED UPON SUCH AN AGREEMENT OR THE LEA DING OF SUCH AN UNREGISTERED AGREEMENT INTO EVIDENCE. 12. A SUIT FOR SPECIFIC PERFORMANCE BASED UPON AN U NREGISTERED AGREEMENT TO SELL ACCOMPANIED BY DELIVERY OF POSSES SION OR EXECUTED IN FAVOUR OF A PERSON WHO IS ALREADY IN PO SSESSION, CANNOT, THEREFORE, BE SAID TO BE BARRED BY SECTION 17(1A) OF THE REGISTRATION ACT, 1908. 13. SECTION 17(1A) MERELY DECLARES THAT SUCH AN UNREGISTERED CONTRACT SHALL NOT BE PRESSED INTO SERVICE FOR THE PURPOSE OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882. SECTION 17(1A) OF THE REGISTRATION ACT, 1908, DOES NOT, WHETHER I N SPECIFIC TERMS OR BY NECESSARY INTENT, PROHIBIT THE FILING O F A SUIT FOR SPECIFIC PERFORMANCE BASED UPON AN UNREGISTERED AGR EEMENT TO SELL, THAT RECORDS DELIVERY OF POSSESSION OR IS EXE CUTED IN FAVOUR OF A PERSON TO WHOM POSSESSION IS DELIVERED AND THE IT A NO.2414/AHD/2013 PROVISO TO SECTION 49 OF THE INDIA N REGISTRATION ACT, 1908, PUT PAID TO ANY ARGUMENT TO THE CONTRARY. 14. WE, THEREFORE, HOLD THAT : (A) A SUIT FOR SPECIFIC PERFORMANCE, BASED UPON AN UNRE GISTERED CONTRACT/AGREEMENT TO SELL THAT CONTAINS A CLAUSE R ECORDING PART PER- FORMANCE OF THE CONTRACT BY DELIVERY OF POSSES SION OR HAS BEEN EXECUTED WITH A PERSON, WHO IS ALREADY IN POSS ESSION SHALL NOT BE DISMISSED FOR WANT OF REGISTRATION OF THE CONTRACT/AGREEMENT; (B) THE PROVISO TO SECTION 49 OF THE REGISTRATION ACT, LEGITIMISES SUCH A CONTRACT TO THE EXTENT THAT, EVEN THOUGH UNR EGISTERED, IT CAN FORM THE BASIS OF A SUIT FOR SPECIFIC PERFORMAN CE AND BE LED RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 89 INTO EVIDENCE AS PROOF OF THE AGREEMENT OR PART PER FORMANCE OF A CONTRACT.' 103. THUS, IF SKIPL REFUSED TO HONOUR THE LEASE AGR EEMENT THE APPELLANT HAS A RIGHT TO GET THIS AGREEMENT ENFORCE D BY WAY OF SUIT FOR SPECIFIC PERFORMANCE. THE VALIDITY OF THIS AGREEMEN T UNDER GENERAL LAW VIZ. SPECIFIC RELIEF ACT AS WELL AS INDIAN REGISTRA TION ACT HAS NOT BEEN EFFECTED. THIS ASPECT HAS NOT BEEN APPRECIATED BY T HE LD.AO AND BY THE LD CIT (A) WHILE HOLDING THAT SINCE THE AGREEME NT IS UNREGISTERED, THEREFORE, THEY ARE NON-GENUINE. WE FIND SUPPORT TO OUR VIEW FROM THE FOLLOWING CASE LAWS:- A) IN G. BALAKISHTIAH VS. B. RANGA REDDY AIR 1960 AP 112IT WAS HELD THAT UNREGISTERED LEASE DEED CAN BE ADMISSIBLE IN EVIDENCE FOR PROVING APPELLANTS (WHO WAS OWNER OF THE LAND IN DISPUTE) TITLE TO THE LEASED PROPERTY. B) SIMILARLY IN HEMANTAKUMARI DEBI V. MIDNAPURZAMINDARI CO. AIR 1919 PC 79, PRIVY COUNCIL HAD HELD THAT THE ADMISSI ON OF TITLE IN THE UNREGISTERED LEASE DEEDS CAN BE ADMISSIBLE AS E VIDENCE. C) MORE RECENTLY IN SHIBANIBASU V. SANDIP RAY AIR 2011 SC 509 SUPREME COURT HELD THAT NON-REGISTRATION OF A RENT NOTE DID NOT DEBAR USE OF A DOCUMENT THAT WAS TO BE COMPULSORILY REGISTERED, FOR COLLATERAL PURPOSES. 104. IN VIEW OF THE ABOVE DISCUSSION RELATING TO TH E ASPECT THAT RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 90 WHETHER UNREGISTERED LEASE DEED CAN BE ADMITTED AS AN EVIDENCE WE FIND THAT IN VIEW OF THE JUDGMENTS REFERRED ABOVE, THE LEASE AGREEMENT DATED 20.02.2009 BETWEEN THE ASSESSEE AND SKIPL IS VALID DOCUMENTS AND RIGHTLY ACTED UPON BY BOTH THE PARTIES. 105. WE ALSO NOTE THAT THE ASSESSEE SOCIETY IS RUNN ING AROUND 26 EDUCATIONAL INSTITUTIONS AND IMPARTING EDUCATION TO THOUSANDS OF STUDENTS. SPORT RELATED ACTIVITIES IS NECESSARY FOR THE OVERALL DEVELOPMENT OF THE STUDENTS, SERVICE FOR HEALTHY MI ND GOOD HEALTH IS NECESSARY. IT IS NOT IN DISPUTE THAT THE SAID LAND IS BEING USED FOR SUCH SPORTS RELATED ACTIVITIES. THE ALLEGED SUM IS DULY RECORDED IN THE BOOKS OF ACCOUNT. EVEN DURING THE COURSE OF SEARCH THE BOOKS MADE ON COMPUTER WERE ALSO IMPOUNDED AND THE ALLEGED AMO UNT WAS DULY REFLECTED IN THESE BOOKS. 106. WE ALSO NOTE THAT THERE IS A VIOLATION OF PRIN CIPLES OF NATURE JUSTICE AS THE ASSESSE WAS DENIED THE OPPORTUNITY O F CROSS EXAMINING THOSE PERSONS WHOSE STATEMENTS WERE USED AGAINST TH E ASSESSEE. LD. CIT(A) HAS HIMSELF MENTIONED IN THE IMPUGNED ORDER AT PAGE 19 THAT BECAUSE OF TIME BARRING ISSUE, I AM OF THE OPINIO N THAT AO WAS NOT IN POSITION TO AFFORD OPPORTUNITY OF CROSS EXAMINATION PROCEEDINGS TO RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 91 APPELLANT BEFORE LIMITATION. LD. CIT(A) ALSO HELD THAT ONLY FACT THAT APPELLANT DID NOT HAVE CROSS EXAMINATION OPPORTUNIT Y DOES NOT AFFECT OTHER FACTS/CIRCUMSTANCES OF THE CASE . THIS SHOWS THAT THE ASSESSEES REQUEST ON 12.05.2014 DEMANDING CROSS EXAMINATION O F THE SAID FARMERS WAS DENIED BY THE LD. AO AND THIS ACTION IN ITSELF LEAVE NO ROOM FOR THE LD. AO TO MAKE ADDITION IN THE HANDS O F ASSESSEE. WE FIND SUPPORT FROM VARIOUS JUDGMENTS INCLUDING THAT OF HON'BLE APEX COURT IN THE CASE OF ANDMAN TIMBER INDUSTRIES V. CCE (2015) 281 CIR 241 (SC). 107. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMST ANCES OF THE CASE AND FACTUAL MATRIX AND THE JUDICIAL PRECEDENTS ARE OF THE CONSIDERED VIEW THAT THE ALLEGED SUM OF RS.1,99,21,499/- HAS B EEN RIGHTLY AND LEGALLY UTILIZED FOR THE ATTAINMENT OF THE OBJECTS OF THE SOCIETY AND HAS BEEN SPENT FOR THE DEVELOPMENT OF LAND IN THE SPORT S ACTIVITIES AND OTHER LAND DEVELOPMENT IN THE INTEREST OF THE STUDE NTS STUDYING AT THE EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE SOCIET Y DULY SUPPORTED BY LEGAL TERM AND CONDITIONS PROVIDED IN LEASE DEED DATED 20.04.2009. 108. IN OUR CONSIDERED VIEW LD. AO ERRED IN MAKING THE ADDITION FOR RS.1,99,21,499/- TREATING IT AS AN AMOUNT GIVEN FOR THE BENEFIT OF RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 92 MEMBERS OF THE SOCIETY AND ALSO ERRED IN HOLDING TH AT THE ASSESSE HAD VIOLATED THE PROVISION OF SECTION 13(1)(C) R.W.S. 1 3(2)(A) AND SECTION 13(1)(D) OF THE ACT. THUS, THIS ISSUE RAISED ON QUA NTUM ADDITION RAISED IN GROUND NO.2 OF ASSESSEES APPEAL FOR A.Y. 2009-10 IS ALLOWED. 109. NOW COMING TO LEGAL ISSUE RAISED BY ASSESSEE I N GROUND NO.1 FOR A.Y. 2009-10 & 2010-11 CHALLENGING THE FINDING OF B OTH LOWER AUTHORITIES DENYING THE BENEFIT OF EXEMPTION FROM T AX OF TOTAL INCOME OF THE SOCIETY U/S 10(23C)(VI) OF THE ACT, CLAIMED BY IT IN RETURN OF INCOME AS IT EXISTS SOLELY FOR CARRYING EDUCATIONAL ACTIVITIES AND NOT FOR THE PURPOSE OF PROFIT. 110. WE NOTICE THAT FOR THE RELEVANT ASSESSMENT YEA R I.E. 2009-10 THE APPELLANT SOCIETY WAS GRANTED EXEMPTION CERTIFICATE UNDER SUB CLAUSE (VI) OF CLAUSE (23C) OF SECTION 10 THE INCOME TAX A CT, 1961 VIDE ORDER DATED 24/03/2009 PASSED BY CHIEF COMMISSIONER OF IN COME TAX, BHOPAL DEPARTMENT OF REVENUE MINISTRY OF FINANCE. T HAT AS PER ORDER DATED 24/03/2009 THE APPELLANT WAS ACCORDED APPROVA L TO AYUSHMATI EDUCATION & SOCIAL SOCIETY, BHOPAL FOR THE PURPOSE OF THE SAID SUB CLAUSE (SECTION 10 (23C) (VI) OF THE A CT) FOR A.Y 2009-10 AND FOR SUBSEQUENT YEARS, SUBJECT TO CERTAIN CONDITIONS TO BE FULFILLED RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 93 BY THE ASSESSEE-SOCIETY . 111. WE ALSO NOTE THAT AT THE TIME OF FILING OF RET URN OF INCOME THE APPELLANT HAD SPECIFICALLY MENTIONED THE FACTUM OF AVAILABILITY OF SUCH EXEMPTION IN ITS RETURN OF INCOME AND THEREOF IN VIEW OF EXEMPTION BEEN GRANTED U/ S 10(23C)(VI) THERE CAN'T BE ANY INCOME OF THE APPELLANT TRUST WHICH IS LIABLE TO TAX. HOWEVER THE LD AO WITHOUT APPRECIATING THE SUBMISSION OF APPELLANT AND WITHOU T ADJUDICATING THIS ISSUE DENIED THE BENEFITS OF THE AFORESAID EXE MPTION ON THE GROUND THAT APPELLANT IS NOT ELIGIBLE FOR BENEFITS OF SECTION 11 OR SECTION 10 (23C) (VI) AT THE SAME TIME AND SIMULTAN EOUSLY BENEFITS CANNOT BE GRANTED UNDER BOTH SECTION 11 AND U/S 10 (23C) AND FURTHER THE OBJECT OF SOCIETY CANT BE HELD AS SOLE LY FOR EDUCATION PURPOSE FOR THE A.Y 2009-10 & 2011-12. THE EXTRACT OF RELEVANT FINDING OF LD ASSESSING OFFICE IN ASSESSMENT ORDER IS RE-PRODUCED AS UNDER :----- B) THE CCIT, BHOPAL ACCORDED APPROVAL FOR EXEMPTION U/S 10 (23C) (VI) FOR A.Y 2009-10 AND FOR SUBSEQUENT YEARS. HOWEVER AS PER D ISCUSSION MADE IN THIS ASSESSMENT ORDER REVELS THAT APPLICANT SOCIETY EXIS TS FOR THE PURPOSES OF PROFIT & FUND OF THE SOCIETY WAS GROSSLY MISUTILIZE D FOR FAMILY CONCERNS OF THE OFFICE BEARER. THEREFORE, THE OBJECT OF SOCIETY CAN T BE HELD AS SOLELY FOR EDUCATION PURPOSE FOR THE A.Y 2009-10 AND FOR SUBSE QUENT YEAR. 112. WHEN THE MATTER CAME UP BEFORE LD CIT (A) HE A LSO CONFIRMED THE ACTION OF LD. AO STATING THAT IN VIEW OF THE AFORESAID POINTS RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 94 MENTIONED IN THE PRECEDING PARA, I AM OF THE VIEW T HAT APPELLATE PROCEEDINGS SHOULD BE CONCLUDED ON THE BASIS OF EXE MPTION CLAIMED U/S 11 BY THE APPELLANT FOR ALL THE ASSESSMENT YEAR S 2004-05 TO 2010- 11, IN RESPECT OF WHICH A COMPOSITE ASSESSMENT ORDE R HAS BEEN PASSED BY AO. HOWEVER, BENEFITS OF EXEMPTION U/S 11 AND U/ S 10 (23C) (VI) OF THE ACT CANNOT BE CLAIMED SIMULTANEOUSLY . 113. WE HOWEVER ON PERUSAL OF PROVISO TO SECTION 14 3(3) OF THE ACT FIND THAT THE LD AO IS NOT EMPOWERED TO DENY THE B ENEFITS OF SECTION 10 (23C) (VI) ONCE IT IS GRANTED AS PER THE PROCEDU RE PRESCRIBED UNDER THE STATUE. THE LD AO IS BOUND BY LAW TO GIVE EFFEC T TO THE EXEMPTION ORDER PASSED UNDER SECTION 10 (23C) (VI) OF THE ACT . FURTHER IF THE LD AO AT THE TIME OF ASSESSMENT PROCEEDINGS WAS OF OPI NION THAT APPELLANT SOCIETY HAS CONTRAVENE WITH OBJECT OF SOC IETY FOR MAKING PROFIT OR THE MAIN OBJECT AND THE PURPOSE OF THE SOCIETY WAS NOT IMPARTING EDUCATION FOR WHICH SUCH CERTIFICATE IS I SSUED, THEN IN SUCH CIRCUMSTANCES THE LD AO HAS TO FOLLOW THE PROCEDURE PRESCRIBED UNDER 1 ST PROVISO TO SECTION 143 (3) OF THE ACT. (3) 88 [ON THE DAY SPECIFIED IN THE NOTICE ISSUED UNDER] S UB-SECTION (2), OR AS SOON AFTERWARDS AS MAY BE, AFTER HEARING SUCH EVIDE NCE AS THE ASSESSEE MAY PRODUCE AND SUCH OTHER EVIDENCE AS THE ASSESSIN G OFFICER MAY REQUIRE ON SPECIFIED POINTS, AND AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIAL WHICH HE HAS GATHERED, THE ASSESSING OFFICER SHALL, BY AN ORDER IN WRITING, MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF THE ASSES SEE, AND DETERMINE THE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 95 SUM PAYABLE BY HIM OR REFUND OF ANY AMOUNT DUE TO H IM ON THE BASIS OF SUCH ASSESSMENT: PROVIDED THAT IN THE CASE OF A (A) RESEARCH ASSOCIATION REFERRED TO IN CLAUSE (21 ) OF SECTION 10 ; (B) NEWS AGENCY REFERRED TO IN CLAUSE (22B) OF SECTION 10 ; (C) ASSOCIATION OR INSTITUTION REFERRED TO IN CLAU SE (23A) OF SECTION 10 ; (D) INSTITUTION REFERRED TO IN CLAUSE (23B) OF SECTION 10 ; (E) FUND OR INSTITUTION REFERRED TO IN SUB-CLAUSE (IV) OR TRUST OR INSTITUTION REFERRED TO IN SUB-CLAUSE (V) OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION REFERRED TO IN SUB-CLAUSE (VI) OR ANY HOSPITAL OR O THER MEDICAL INSTITUTION REFERRED TO IN SUB-CLAUSE (VIA) OF CLAUSE (23C) OF SECTION 10 , WHICH IS REQUIRED TO FURNISH THE RETURN OF INCOME U NDER SUB-SECTION (4C) OF SECTION 139 , NO ORDER MAKING AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF SUCH RESEARCH ASSOCIATION, NEWS AGENCY, ASSOCIATION OR INSTITUTION OR FUND OR TRUST OR UNIVERSITY OR OTHER EDUCATIONAL INSTITUTIO N OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION, SHALL BE MADE BY THE ASSESSING OFFICER, WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION 10 , UNLESS (I) THE ASSESSING OFFICER HAS INTIMATED THE CENTR AL GOVERNMENT OR THE PRESCRIBED AUTHORITY THE CONTRAVENTION OF THE PROVI SIONS OF CLAUSE (21) OR CLAUSE (22B) OR CLAUSE (23A) OR CLAUSE (23B) OR SUB -CLAUSE (IV) OR SUB-CLAUSE (V) OR SUB-CLAUSE (VI) OR SUB-CLAUSE (VIA) OF CLAUS E (23C) OF SECTION 10 , AS THE CASE MAY BE, BY SUCH RESEARCH ASSOCIATION, NEWS AGE NCY, ASSOCIATION OR INSTITUTION OR FUND OR TRUST OR UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION, WHERE IN HIS VIEW SUCH CONTRAVENTION HAS TAKEN PLACE; AND (II) THE APPROVAL GRANTED TO SUCH RESEARCH ASSOCIA TION OR OTHER ASSOCIATION OR FUND OR TRUST OR INSTITUTION OR UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR HOSPITAL OR OTHER MEDICAL INSTITUTION HAS BEEN WITH DRAWN OR NOTIFICATION ISSUED IN RESPECT OF SUCH NEWS AGENCY OR FUND OR TR UST OR INSTITUTION HAS BEEN RESCINDED : PROVIDED FURTHER XXXXXXXXXXXXXXXXXXXXXXXXX 114. THAT AS PER PROVISO TO SECTION 143(3) IT IS EVIDENT NO ORDER MAKING AN ASSESSMENT SHALL BE MADE BY THE ASSESSING OFFICER WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION10 UNLESS THE ASSESSING OFFICER HAS INTIMATED THE CENTRAL GOVERNMENT OR THE PRESCRIBED AUTHORITY, THE CONTRAVENTION OF THE PROVISIONS OF C LAUSE (23C) RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 96 OF SECTION10. ONLY AFTER SUCH APPROVAL GRANTED HAS BEEN WITHDRAWN, HE CAN PROCEED TO PASS AN ORDER, DENYING THE BENEFI T OF EXEMPTION ON THE GROUND OF CONTRAVENTION. 115. IN LIGHT OF ABOVE, WE FIND THAT IN THE INSTAN T CASE THE LD. ASSESSING OFFICER WITHOUT GIVING INTIMATION OR RECO MMENDATION TO THE CENTRAL GOVERNMENT OR THE PRESCRIBED AUTHORITY TO W ITHDRAW THE ORDER UNDER SECTION 10 (23C) (VI) OF THE ACT ISSUED TO AP PELLANT, HAS DIRECTLY DENIED THE BENEFITS OF SECTION 10 (23C) (VI) OF THE ACT IN THE ASSESSMENT PROCEEDING, AND THIS FINDING OF LD. AO I S IN CONTRAVENTION TO 1 ST PROVISO TO SECTION 143 (3) OF THE ACT. 116. RELIANCE IS PLACED ON THE CASE OF COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, BANGALORE V. PEOPLES EDUCATION SOCI ETY [2014] 42 TAXMANN.COM 353 (KARNATAKA) [2014] 42 TAXMANN.COM 3 53 (KARNATAKA) WHEREIN HONBLE HIGH COURT HELD THAT :-- 7. FROM THE AFORESAID FACTS, IT IS NOT IN DISPUTE T HAT THE ASSESSEE IS A CHARITABLE SOCIETY RUNNING AN EDUCATIONAL INSTITUTI ON. THE DIT (EXEMPTION) REGISTERED THE ASSESSEE-SOCIETY UNDER SECTION 12AA OF THE ACT ON 5.5.2003. BY AN ORDER DATED 12.5.2004, THE CENTRAL BOARD OF D IRECT TAXES ACCORDED APPROVAL TO THE ASSESSEE-SOCIETY FOR THE PURPOSE OF SECTION10(23C)(VI) OF THE ACT, SUBJECT TO CERTAIN CONDITIONS TO BE FULFILLED BY THE ASSESSEE-SOCIETY. THE ASSESSEE HAD FILED ITS RETURN ON 21.9.1993 BEFORE G RANT OF SUCH APPROVAL AND EXEMPTION. THE PROCEEDINGS UNDER SECTION 147 WA S INITIATED ON 10.4.2003 AND NOTICE UNDER SECTION 148 WAS ISSUED O N 11.9.2003 AND THE RE-ASSESSMENT ORDER IS PASSED ON 28.3.2005, HOLDING THAT THE ASSESSEE HAS RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 97 NOT COMPLIED WITH THE CONDITIONS IMPOSED BY C.B.D.T . AND THEREFORE, HE IS NOT ENTITLED TO THE EXEMPTION. 8. THE PROVISO TO SECTION 143(3) WAS INSERTED BY WA Y OF FINANCE ACT, 2002 W.E.F. 1.4.2003. THE SAID PROVISION READS AS UNDER: 'PROVIDED THAT IN THE CASE OF A (A) TO (D)* ** ** (E) FUND OR INSTITUTION REFERRED TO IN SUB-CLAUSE ( IV) OR TRUST OR INSTITUTION REFERRED TO IN SUB-CLAUSE (V) OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION REFERRED TO IN SUB-CLAUSE (VI) OR ANY HOSPITAL OR M EDICAL INSTITUTION REFERRED TO IN SUB-CLAUSE (VII) OF CLAUSE (23C) OF SECTION10, WHICH IS REQUIRED TO FURNISH THE RETURN OF INCOME U NDER SUB-SECTION 4(C) OF SECTION 139, NO ORDER MAKING AN ASSESSMENT OF TH E TOTAL INCOME OR LOSS OF SUCH SCIENTIFIC RESEARCH ASSOCIATION, NEWS AGENCY, ASSOCIATION OR INSTITUTION OR FUND OR TRUST OR UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR ANY OTHER MEDICAL INSTITUTION, SHALL BE MADE BY THE ASSESSING OFFICER, WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION1 0 UNLESS - (I) THE ASSESSING OFFICER HAS INTIMATED THE CENTRAL GOV ERNMENT OR THE PRESCRIBED AUTHORITY THE CONTRAVEN TION OF THE PROVISIONS OF CLAUSE (21) OR CLAUSE (22B) OR CLAUSE (23A) OR CLAUSE (23B) OR SUB -CLAUSE (IV) OR SUB- CLAUSE (V) OR SUB-CLAUSE (VI) OR SUB- CLAUSE (VIA) OR CLAUSE (23C) OF SECTION10 AS THE CASE MAY BE, BY SUCH SCIENTIFIC RESEARCH ASS OCIATION, NEWS AGENCY, ASSOCIATION OR INSTITUTION OR FUND OR TRUST OR UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OT HER MEDICAL INSTITUTION, WHERE IN HIS VIEW SUCH CONTRAVENTION HAS TAKEN PLAC E, AND (II) THE APPROVAL GRANTED TO SUCH SCIENTIFIC RESE ARCH ASSOCIATION OR OTHER ASSOCIATION OR INSTITUTION OR UNIVERSITY OR OTHER E DUCATIONAL INSTITUTION OR HOSPITAL OR OTHER MEDICAL INSTITUTION HAS BEEN WITH DRAWN OR NOTIFICATION ISSUED IN RESPECT OF SUCH NEWS AGENCY OR FUND OR TR UST OR INSTITUTION HAS BEEN R ESCINDED)'. THE AFORESAID PROVISION MAKES IT CLEAR THAT NO ORDER MAKING AN ASSESSMENT SHALL BE MADE BY THE ASSESSING OFFICER W ITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION10 UNLESS THE ASS ESSING OFFICER HAS INTIMATED THE CENTRAL GOVERNMENT OR THE PRESCRIBED A UTHORITY, THE CONTRAVENTION OF THE PROVISIONS OF CLAUSE (23C) OF SECTION10. ONLY AFTER SUCH APPROVAL GRANTED HAS BEEN WITHDRAWN, HE CAN PRO CEED TO PASS AN ORDER, DENYING THE BENEFIT OF EXEMPTION ON THE GROUN D OF CONTRAVENTION. HAVING REGARD TO THE LANGUAGE EMPLOYE D, THE SAID PROVISION IS MANDATORY. WITHOUT COMPLYING WITH THE REQUIREMENT OF THE SAID PROVISION, THE ASSESSING AUTHORITY GETS NO JUR ISDICTION TO RE-OPEN THE ASSESSMENT MADE. THAT IS WHAT THE TRIBUNAL HAS HELD AND THEREFORE, THE SAID FINDING IS IN ACCORDANCE WITH LA W AND DO NOT SUFFER FROM ANY LEGAL INFIRMITY, WHICH CALLS FOR INTERFERE NCE. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 98 117. WE FURTHER OBSERVE THAT IN VIEW OF SETTLED JUD ICIAL PRECEDENCE ASSESSEE SOCIETY IS NOT REQUIRED TO FULFILL THE CONDITIONS MENTIONED UNDER SECTION 11 OF THE ACT WHILE CLAIMING EXEMPTIO N UNDER SECTION 10(23C) (VI) OF THE ACT. 118. RELIANCE IS PLACED CASE OF COMMISSIONER OF INCOME-TAX V. JEEVAN DEEP CHARITABLE TRUST [2012] 28 TAXMANN.COM 242 (AL L.) HONBLE HIGH COURT HELD THAT IN OUR CONSIDERED OPINION, EXEMPTION UNDER SECTION10(23C)(VI) OF THE ACT CAN BE CLAIMED BY AN ASSESSEE WITHOUT APPLYING FOR REGISTRATION UNDER SECTION 12A OF THE ACT AS IT IS NOT REQUIRED TO FULFILL THE CONDITIONS MENTIONED UN DER SECTION11 OF THE ACT WHILE CLAIMING EXEMPTION UNDER SECTION10(23C) ( VI) OF THE ACT. FURTHER IN THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX, THERE IS NO WHISPER THAT THE ASSESSEE HAS NOT FULFILLED A NY OF THE CONDITIONS OF THE SECTION11 OF THE ACT FOR CLAIMING IT TO BE A CHARITABLE INSTITUTION. HE HAD SOLELY RELIED ON THE ORDER OF THE CHIEF COMM ISSIONER OF INCOME TAX PASSED UNDER SECTION10(23C) (VI) OF THE ACT WHI LE DENYING THE EXEMPTION UNDER THE AFORESAID SUB-SECTION. WE ARE, THEREFORE, OF THE CONSIDERED OPINION THAT THE TRIBUNAL HAD RIGHTLY RE STORED THE REGISTRATION ON THE GROUND THAT IN THE ASSESSMENT Y EARS 2004-05 AND RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 99 2006-07 BENEFIT OF EXEMPTION/DEDUCTION UNDER SECTIO N11 OF THE ACT WAS ALLOWED TO THE RESPONDENT-ASSESSEE. 119. FURTHER SECTION 10(23C) DOES NOT PRESCRIBE ANY STIPULATION WHICH MAKES REGISTRATION U/S 12AA A MANDATORY CONDI TION. THE PROVISIONS OF SECTION 11 AND 10(23C) ARE TWO PARALL EL REGIMES AND OPERATE INDEPENDENTLY IN THEIR RESPECTIVE REALMS. T HUS FOR CLAIMING EXEMPTION UNDER SECTION 11, IT IS NOT NECESSARY THA T THE CONDITIONS U/S 10(23)(VI) MUST BE FULFILLED. OUR VIEW IS SUPPO RTED BY FOLLOWING: A) IN COMMISSIONER OF INCOME TAX VS. MAHASABHA GURU KUL VIDYAPEETH HARYANA (2010) 326 ITR 25 (PUN), IT WAS HELD THAT EXEMPTION UNDER S. 11 WAS ALLOWABLE TO THE ASSESSEE SOCIETY RUNNING AN ED UCATIONAL INSTITUTION WHICH WAS REGISTERED UNDER S. 12A, ONCE IT IS HELD THAT ALL REQUISITE CONDITIONS FOR EXEMPTION UNDER S. 11 HAVE BEEN MET, EVEN IF CONDITIONS UNDER S. 10(23C)(VI) HAVE NOT BEEN COMPLIED WITH, THERE W ILL BE NO BAR TO SEEK EXEMPTION UNDER S. 11. A) CONVERSELY, WHILE CLAIMING THE EXEMPTION U/S 10(23) (VI), IT IS NOT REQUIRED TO FULFILL THE CONDITIONS MENTIONED U/S 11 AS ALSO EXEMPTION U/S 10(23)(VI). EXEMPTION U/S 10(23)(VI) CAN BE CLAIMED BY THE ASSESSEE WITHOUT APPLYING FOR REGISTRATION US 12A. SEE COMMISSIONER OF INCOME TAX AND ANOTHER VS. SOCIETY OF ADVANCED MANAGEMENT STUDIES (2013) 352 ITR 269 (ALL) WHEREIN IT HAS BEEN HELD THAT EXEMPTION U/S 10(23C)(VI) OF THE ACT CAN BE CLAIMED BY AN ASSESSEE WITHOUT APPLYING FOR REGISTRATION U/S 12A OF THE ACT AS IT IS NOT REQUIRED TO FULFIL THE CONDITI ONS MENTIONED U/S 11 OF THE ACT WHILE CLAIMING EXEMPTION U/S 10(23C) (VI) OF TH E ACT. 120. FURTHER AS REGARDING THE ISSUE THAT WHETHER P RIOR TO FINANCE ACT 2020 THE ASSESSEE SOCIETY CAN CLAIM EXEMPTION BOTH U/S 10(23C)(VI) AND SECTION 11 SIMULTANEOUSLY. WE FIND THAT LD AO A ND CIT (A) WERE NOT JUSTIFIED IN REACHING A FINDING THAT FOR THE YE AR UNDER RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 100 CONSIDERATION THE BENEFIT UNDER SECTION 11 AND U/S 10 (23C) (VI) CANNOT BE CLAIMED SIMULTANEOUSLY WITHOUT APPRECIATI NG THE FACT THAT THE AMENDMENT FOR TAKING BENEFIT EITHER UNDER SECTI ON 11 OR U/S 10 (23C) WAS INTRODUCED ONLY B Y FINANCE (NO.2) ACT, 2020 R/W (CIRCULAR NO.1/2020, DATED: 27.03.2020) AND THUS PRIOR TO 202 0 THE APPELLANT COULD CLAIM EXEMPTION BOTH U/S 10(23C)(VI) AND SECT ION 11 . THAT AS PER FINANCE (NO.2) ACT, 2020 THE AMENDMENT WAS TO SECTION 11 OF THE ACT WHICH PROVIDES THAT IF THE INSTITUTION IS REGISTERE D FOR EXEMPTION U/S. 11 ETC. AS WELL AS APPROVED U/S. 10(23C) / NOTIFIED U/S. 10(46) THEN THE ABOVE REGISTRATION SHALL BECAME INOPERATIVE FRO M THE DATE OF COMING IN TO FORCE OF THE AMENDMENT. 121. THE RELEVANT AMENDMENT IN SUB-SECTION (7) OF S ECTION 11, WITH EFFECT THE 1ST DAY OF JUNE, 2020IS RE-PRODUCED AS UNDER :- (7) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTE D REGISTRATION 62 [UNDER SECTION 12AA OR SECTION 12AB] OR HAS OBTAINE D REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT S TOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1996 (33 OF 1 996)] AND THE SAID REGISTRATION IS IN FORCE FOR ANY PREVIOUS YEAR, THE N, NOTHING CONTAINED IN SECTION 10 [OTHER THAN 63 [CLAUSE (1), CLAUSE (23C) AND CLAUSE (46)] THEREOF] SHALL OPERATE TO EXCLUDE ANY INCOME DERIVE D FROM THE PROPERTY HELD UNDER TRUST FROM THE TOTAL INCOME OF THE PERSON IN RECEIPT THEREOF FOR THAT PREVIOUS YEAR:] [PROVIDED THAT SUCH REGISTRATION SHALL BECOME INOP ERATIVE FROM THE DATE ON WHICH THE TRUST OR INSTITUTION IS APPROVED UNDER CL AUSE (23C) OF SECTION 10 OR IS NOTIFIED UNDER CLAUSE (46) OF THE SAID SECTIO N, AS THE CASE MAY BE, OR THE DATE ON WHICH THIS PROVISO HAS COME INTO FORCE, WHICHEVER IS LATER: RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 101 PROVIDED FURTHER THAT THE TRUST OR INSTITUTION, WHO SE REGISTRATION HAS BECOME INOPERATIVE UNDER THE FIRST PROVISO, MAY APPLY TO G ET ITS REGISTRATION OPERATIVE 65 [UNDER SECTION 12AA] 66 [OR SECTION 12AB] SUBJECT TO THE CONDITION THAT ON DOING SO, THE APPROVAL UNDER CLAU SE (23C) OF SECTION 10 OR NOTIFICATION UNDER CLAUSE (46) OF THE SAID SECTION, AS THE CASE MAY BE, TO SUCH TRUST OR INSTITUTION SHALL CEASE TO HAVE ANY E FFECT FROM THE DATE ON WHICH THE SAID REGISTRATION BECOMES OPERATIVE AND T HEREAFTER, IT SHALL NOT BE ENTITLED TO EXEMPTION UNDER THE RESPECTIVE CLAUSES. ] 122. IN LIGHT OF ABOVE AMENDMENT THAT ONLY FROM FIN ANCE ACT, 2020 SIMULTANEOUS REGISTRATION FOR EXEMPTION UNDER SECTI ON 11 ETC AND APPROVAL FOR SECTION 10(23C) EXEMPTION IS NOT PERMI SSIBLE AND PRIOR TO THIS THE ASSESSEE CAN CLAIM EXEMPTION UNDER BOTH SECTION AS THERE WAS NO BAR FROM CLAIMING EXEMPTION UNDER BOTH PROVI SION AND FURTHER THERE WAS NO CONDITION PRIOR TO AMENDMENT INTRODUCE D BY FINANCE ACT 2020 TO CLAIM EXEMPTION UNDER EITHER OF THE TWO. 123. THUS IN LIGHT OF ABOVE WE HOLD THAT LEARNED CI T (APPEALS) FAILED TO APPRECIATE THAT THE INCOME OF APPELLANT SOCIETY FOR THE YEAR UNDER CONSIDERATION WAS EXEMPT U/S 10 (23C) (VI) OF THE I NCOME TAX ACT, 1961 AND THE APPELLANT HAD SPECIFICALLY MENTIONED T HE FACTUM OF AVAILABILITY OF SUCH EXEMPTION IN ITS RETURN OF INC OME AND HAS ALSO MADE SUBMISSION BEFORE THE LD ASSESSING OFFICER REG ARDING EXEMPTION U/S 10(23C)(VI). THUS, LD CIT (A) AND LD AO FAILED TO TAKE INTO CONSIDERATION THAT AFTER GIVING EFFECT TO EXEMPTION UNDER PROVISIONS OF SECTION 10(23C)(VI) THERE CANNOT BE ANY INCOME OF T HE APPELLANT TRUST RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 102 WHICH CAN BE CHARGED TO TAX. IN VIEW OF EXEMPTION B EEN ALREADY GRANTED U/ S 10(23C)(VI) THERE CAN'T BE ANY INCOME OF THE APPELLANT TRUST WHICH IS LIABLE TO TAX EVEN IGNORING THE PROV ISIONS OF SECTION 11 OF THE ACT. THEREFORE, EVEN IF THE BENEFITS OF SECT ION 11 IS DENIED THAN TOO THERE CAN BE NO INCOME OF THE APPEL1ANT TRUST O N WHICH TAX CAN BE COLLECTED FROM IT IN VIEW OF THE PROVISIONS OF S ECTION 10(23C)(VI) OF THE ACT CONSIDERING THE APPROVAL GRANTED TO THE APP ELLANT TRUST. THEREFORE, AFTER GIVING EFFECT TO EXEMPTION UNDER P ROVISIONS OF SECTION 10(23C)(VI) THERE CANNOT BE ANY INCOME OF THE APPEL LANT TRUST WHICH CAN BE CHARGED TO TAX AS THE TOTAL INCOME OF THE AP PELLANT SOCIETY IS EXEMPTED AND HENCE THE ADDITION OF RS 1,99,21,499/ SUSTAINED BY THE LD CIT (A) IS UNCALLED FOR AND THE SAME IS SET ASI DE. COMMON GROUND NO.1 RAISED BY THE ASSESSEE FOR A.Y. 2009-10 & 2010 -11 IS ALLOWED. 124. IN THE RESULT, APPEALS OF THE ASSESSEE FOR A.Y . 2009-10 & 2010- 11 ARE ALLOWED. NOW WE TAKE THE REVENUES APPEAL FOR A.Y. 2009-10 & 2010-11 125. THE FIRST COMMON ISSUE RAISED RELATES TO ADDIT ION OF NOTIONAL INTEREST ON THE AMOUNT ADVANCED TO HOMEBOUND TRAVEL PVT. LTD. (HTPL). THIS ISSUE HAS BEEN RAISED BY THE REVENUE I N GROUND NO.4 OF APPEAL FOR A.Y. 2009-10 & 2010-11 RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 103 126. FACTS IN BRIEF RELATING TO THIS ISSUE ARE THAT THE ASSESSEE COMPANY NEEDS SCHOOL BUSES ITS VARIOUS EDUCATIONAL INSTITUTIONS AND FOR THE SAME IT TAKES SERVICES FROM HTPL. LD. AO OBSERVED THAT IN THE INSTANT YEARS UNDER APPEAL APART FROM THE PAYMENT F OR BUSINESS HIRE CHARGES OTHER SUM HAS ALSO BEEN ADVANCED FOR WHICH NO INTEREST HAS BEEN CHARGED. LD. AO ALSO OBSERVED THAT HTPL IS R UN BY SMT. SADHANA KAPOOR WHO IS DIRECTOR OF THIS COMPANY AND ALSO MEMBER IN THE ASSESSEE SOCIETY. LD. AO WAS OF THE VIEW THAT S INCE HTPL IS SISTER CONCERN OF THE ASSESSEE SOCIETY. BENEFIT HAS BEEN G IVEN BY GIVING INTEREST FREE LOAN, THUS, FALLS UNDER THE PROVISION OF SECTION 13, LD. AO ACCORDINGLY MADE THE ADDITION FOR NOTIONAL INTEREST AT RS.25,83,030/- & RS.9,39,890/- FOR A.Y. 2009-10 & 2010-11 RESPECTI VELY. 127. LD. DR RELIED ON THE SUBMISSIONS MADE BEFORE L D.AO AND LD. SR. COUNSEL FOR THE ASSESSEE RELIED ON THE FINDING OF L D. CIT(A) AND ALSO SUBMITTED THAT THE INTEREST WAS DULY CHARGED AND RE CORDED IN THE BOOKS OF ACCOUNT ON THE AMOUNT ADVANCED TO HOMEBOUN D TRAVEL PVT. LTD. 128. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE SUBMISSION . DELETION OF NOTIONAL INTEREST BY LD. CIT(A) CALCULATED BY THE L D. AO ON THE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 104 AMOUNT ADVANCE TO HTPL IS IN CHALLENGE BEFORE US. O N PERUSAL OF THE LEDGER ACCOUNT OF HTPL IN THE BOOKS OF ASSESSEE S OCIETY WE OBSERVE THAT INTEREST HAS BEEN CHARGED AT RS.26,90,656/- AN D RS.9,50,000/- FOR A.Y. 2009-10 & 2010-11 RESPECTIVELY ON THE AMOU NT ADVANCED TO HTPL. THIS FACT REMAINS UN-REBUTTED BY THE LD. DR. THEREFORE, IN OUR CONSIDERED VIEW LD. AO FAILED TO APPRECIATE THE FAC TS OF THE CASE PROPERLY AND THEREFORE NO INTERFERENCE IS CALLED FO R IN THE FOLLOWING FINDING OF LD. CIT(A) DELETING THE IMPUGNED ADDITIO N: 16. THESE GROUNDS HAVE BEEN RAISED BY THE APPELLANT AGAINST THE ADDITIONS OF RS. 25,83,030/- IN A.Y. 2009-10 AND RS . 9,39,890/- IN A.Y. 2010-11 AS BENEFIT OF INTEREST PASSED ON TO M/S. HOMEBOUND TRAVELS PVT. LTD. THE A.O. HAS STATED IN THE ASSESSMENT ORDER THAT THE APPELLANT GAVE INTEREST F REE UNSECURED LOAN TO M/S. HOMEBO'\.MO TRAVELS PVT. LTD. (HEREIN AFTER CALLED HTPL). THE A.O. FOUND THAT SMT. SADHNA KAPOOR, A ME MBER OF THE APPELLANT SOCIETY WAS DIRECTOR IN THE HTPL HOLDING MORE THAN 20% SHARES. DURING ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT CLOSING. DEBIT BALANCE OF HTPL IN THE BOOKS OF APPELLANT SOCIETY AS ON 31.03.2009 AND 31.03.2010 WAS RS. 2,1 5,25,251/- AND RS. 78,32,406/RESPECTIVELY. THEREFORE, THE A.O . APPLIED NOTIONAL INTEREST RATE 12% ON CLOSING BALANCE AND M ADE ADDITIONS ACCORDINGLY. 16.1 DURING APPELLATE PROCEEDINGS, THE APPELLANT HA S SUBMITTED THE ADVANCE AMOUNT WAS NOT INTEREST FREE BUT WAS IN TEREST BEARING AND INTEREST OF RS. 26;90,656/- WAS CHARGED FROM HTPL IN A.Y. 2009-10 AND RS. 9,50,000/- IN A.Y. 2010-11. THE APPELLANT HAS PRODUCED COPY OF LEDGER ACCOUNT OF HT PL IN THE BOOKS OF THE APPELLANT FOR F.Y. 2008-09 & F.Y. 2009-10. IN THESE LEDGERS, APPELLANT HAS DEBITED INTEREST ON LOAN AMO UNTING TO RS.26,90,656/- ON 31.03.2009 AND RS. 9,50,000/- ON 31.03.2010. APPELLANT HAS ALSO PRODUCED LEDGER OF ' INTEREST ON TERM LOAN' IN THE BOOKS OF HTPL FOR THESE TWO F.YS. AS PER THESE LEDGERS, HTPL HAS DEBITED SUM OF RS. 26,90,656/- ON 31.03.2009 AND CREDITED THE APPELLANT SOCIETY FOR T HE SAME AMOUNT. SIMILARLY, HTPL DEBITED RS. 9,50,000/- ON 3 1.03.2010 CREDITING APPELLANT SOCIETY FOR THE SAME AMOUNT ON 31.03.2010. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 105 APPELLANT HAS ALSO PRODUCED AUDIT REPORTS INCLUDING P&L ACCOUNT AND BALANCE SHEET OF HTPL FOR F.Y. 2008- 09 & 2009- 10. ON PERUSAL OF THESE AUDIT REPORTS, IT IS NOTICED THAT HTPL HAS DEBITED RS. 34,65,685/- AS INTEREST ON TERM LOAN IN F.Y. 20 08-09 AND RS. 12,53,857/- IN F.Y. 2009-10 WHICH ARE CROSS VERIFIE D WITH THE LEDGERS OF 'INTEREST OF TERM LOAN' IN THE BOOKS OF HTPL. APPELLANT' SOCIETY HAS PRODUCED LEDGERS OF INDIRECT INCOMES, I NTEREST OF FDR AND INTEREST OF LOAN IN ITS BOOKS OF F.Y. 2008-09 & 2009-10. ACCORDING' TO THESE LEDGERS, THE INDIRECT INCOMES O F APPELLANT SOCIETY IS RS. 2,14,19,349.73/- IN F.Y. 2008-09 WHI CH INCLUDES INTEREST ON LOAN WHICH HAS RS. 26,90,656/- FROM HTP L. DURING F.Y. 2009-10 INDIRECT INCOMES OFTHE APPELLANT IS AM OUNTED TO RS. 4,34,65,056.49/- WHICH INCLUDES INTEREST ON LOAN RS . 9,50,000/- FROM HTPL. THE FIGURES OF INDIRECT INCOMES IN THE L EDGERS PRODUCED BY THE APPELLANT SOCIETY ARE MATCHED WITH THE FIGURES OF INCOME SHOWN IN THE P&L ACCOUNT IN AUDIT REPORTS OF APPELLANT FOR THE RELEVANT YEARS. APPELLANT HAS ALSO PRODUCED COP IES OF LEDGERS OF HTPL IN ITS BOOKS OF ACCOUNT; THE RELEVANT FIGUR ES OF CHARGING OF INTEREST MAY ALSO BE CROSS VERIFIED WITH THESE DOCU MENTS. 16.2 ON PERUSAL OF ALL THE COPIES OF LEDGERS PRODUC ED BY APPELLANT AND THE AUDIT REPORTS OF APPELLANT & HTPL , IT IS CLEAR THAT THE TERM LOAN PROVIDED BY APPELLANT TO HTPL IN F.Y. 2008-09 & 2009-10 WAS NOT INTEREST FREE AND -APPELLANT HAS CHARGED INTEREST ON THESE TERM LOAN GIVEN TO HTPL. THE AO C HARGED NOTIONAL INTEREST @ 12% AND ADDED RS. 25,83,030/- IN A.Y. 2009- 10 AND RS. 9,39,890/- IN A.Y. 2010-11 RESPECTIVELY WHEREAS THE APPELLANT HAS CHARGED INTEREST OF RS. 26,90,656/ L IN F.Y. 2008- 09 & RS. 9,50,000/- F.Y. 2009-10 RESPECTIVELY; THER EFORE, THE ADDITIONS OF RS. 25,83,030/- IN A.Y. 2009-10 AND RS . 9,39,890/- IN A.Y. 2010-11 ARE HEREBY DELETED. CONSEQUENTLY , THESE GROUNDS OF APPEAL ARE ALLOWED. 129. IN THE RESULT THIS COMMON ISSUE RAISED BY REVE NUE IN GROUND NO.4 IN APPEAL FOR A.Y. 2009-10 & 2010-11 ST ANDS DISMISSED. 130. NOW WE TAKE UP THE NEXT COMMON ISSUE RAISED IN GROUND NO.1 FOR A.Y. 2009-10 & 2010-11 CHALLENGING THE FINDING OF LD. CIT(A) ALLOWING THE BENEFIT U/S 11 O F THE ACT. RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 106 131. WE OBSERVE THAT THE LD. AO ON THE BASIS OF HIS EXAMINATION OF THE ISSUES MADE CERTAIN DISALLOWANCE AND ADDITIONS CONCLUDED THAT THE ASSESSEE SOCIETY HAS A PPLIED SOME OF ITS FUND FOR THE BENEFIT OF OFFICER BEARERS/MEMBERS/RELATIVE AND VIOLATED THE PROVISION S OF SECTION.13 OF THE ACT AND THEREFORE THE ASSESSEE SO CIETY IS NOT ELIGIBLE TO CLAIM EXEMPTION U/S 11 OF THE ACT. IT IS NOTEWORTHY THAT WHILE DENYING THIS EXEMPTION U/S 11 EXCEPT FOR THE ADDITIONS/DISALLOWANCES MADE IN THE ASSESSMENT ORDER. LD. AO HAS NOT REFERRED TO ANY OT HER INSTANCE WHICH COULD SHOW OR PROVE THAT THE ASSESSE E SOCIETY IS NOT WORKING SOLELY FOR THE PURPOSE OF IM PARTING EDUCATION TO STUDENTS IN VARIOUS STREAMS [WHICH IN ITSELF IS A CHARITABLE ACTIVITY PROVIDED IN SECTION.2(15) OF THE ACT]. 132. WHEN THE MATTER CAME UP BEFORE THE LD. CIT(A), HE BASED ON ORDER ISSUED BY CBDT NO.387 DATED 06.07.19 84 AND OTHER SETTLED JUDICIAL PRECEDENTS CAME TO CONC LUSION THAT THE BENEFIT OF EXEMPTION U/S 11 OR 12 OF THE A CT SHOULD BE DENIED ONLY ON THE ADDITION/ADVANCES MADE FOR VIOLATION OF PROVISION OF SECTION 13 OF THE ACT OR ANY OTHERS RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 107 PROVISIONS OF THE ACT BUT NOT ON THE REMAINING INCO ME OF THE SOCIETY UNDISPUTEDLY EARNED FROM CARRYING OUT CHARITABLE ACTIVITY U/S 2(15) OF THE ACT. 133. IN THE PROCEEDINGS BEFORE THIS TRIBUNAL LD. DR SUPPORTED THE ORDER OF THE LD. AO WHEREAS LD. SR. C OUNSEL FOR THE ASSESSEE RELIED ON THE FINDING OF LD. CIT(A ) AND IT WAS ALSO SUBMITTED THAT THE ASSESSEE WAS GRANTED AP PROVAL U/S 10(23C)(VI) OF THE ACT FROM A.Y. 2009-10 ONWARD S AND THEREFORE, THE TOTAL INCOME ALREADY STANDS EXEMPTED , SINCE LD. AO FAILED TO COMPLY TO THE 1 ST PROVISO TO SECTION 143(3) OF THE ACT BEFORE DENYING THE EXEMPTION U/S 10(23C )(VI) OF THE ACT. REFERENCE WAS ALSO MADE TO THE WRITTEN SUBMISSIONS FILED BEFORE US. 134. WE NOTE THAT THIS VERY ISSUE CAME UP BEFORE US IN THE CASE OF RKDF EDUCATION SOCIETY WHICH HAS BEEN DEAL T BY US IN THE PRECEDING PARAS AND THE FINDING OF LD. CI T(A) WAS CONFIRMED. IN THE INSTANT CASE ALSO THE FACTS AND I SSUE REMAINS THE SAME. WE NOTE THAT SOME ADDITION AND DISALLOWANCE WERE MADE BY THE LD. AO SHOWING THAT T HE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 108 ASSESSEE HAS UTILIZED FUNDS OF THE SOCIETY FOR THE BENEFIT OF ITS MEMBER AND WAS THUS HIT BY SECTION 13 OF THE AC T. AFTER DEALING WITH THESE ISSUES IN THE PRECEDING PARAS TH E IMPUGNED ADDITION HAVE ALREADY BEEN DELETED AND ONE OF THE REMAINING ADDITION OF RS.15,00,000/- MADE FOR A .Y. 2008-09 FOR THE PAYMENT MADE TO MR. ANEES KHAN, THO UGH LD. CIT(A) HAS DELETED THE ADDITION FOR THE YEAR IN WHICH THE ADDITION WAS MADE BUT HAD CONFIRMED THE SAME FO R A.Y. 2007-08. WE, HOWEVER, NOTE THAT SIMILAR TYPE OF PAY MENT TO SHRI ANEES KHAN WAS ALSO MADE IN THE CASE OF RKDF EDUCATION SOCIETY WHEREIN WE HAVE GIVEN A FINDING T HAT SHRI ANEES KHAN IS A CONTRACTOR AND DOES CONSTRUCTI ON WORK ON BEHALF OF SOCIETY. REGULAR TRANSACTION HAVE TAKEN PLACE ROUND THE YEAR AND INVOICES WERE REGULARLY RA ISED FOR WHICH PAYMENTS ARE MADE THROUGH BANKING CHANNEL AND TAX DEDUCTED AT SOURCE. THOUGH THIS ISSUE ADDITION OF RS.15,00,000/- IS NOT BEFORE US BY THE ASSESSEE SIN CE IT WAS DIRECTED BY LD. CIT(A) TO BE TAXED IN A.Y. 200 7-08. HOWEVER SINCE NO INCRIMINATING MATERIAL WAS FOUND W ITH REGARD TO THIS ADDITION AND THE ASSESSMENT FOR A.Y. 2007- RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 109 08 IS A NON-ABATED ASSESSMENT, THUS NO ADDITION WAS CALLED FOR BY THE LD. AO TOWARDS THE PAYMENT OF RS. 15, LACS TO ANEES KHAN IN VIEW OF THE JUDGMENT OF HON'BLE HI GH COURT IN THE CASE OF KABUL CHAWLA(SUPRA) . 135. IN THIS WAY ALL THE ADDITIONS/ DISALLOWANCES W HICH WERE THE FOUNDATION OF THE ACTION OF THE LD. ASSESS ING OFFICER DENYING BENEFIT U/S 11 OF THE ACT HAS ALREA DY BEEN HELD TO BE UNJUSTIFIED/DELETED BY US ON THE BASIS O F FACTS OF THE CASE AS OBSERVED IN THE PRECEDING PARAS. ACCORD INGLY THERE IS NO HURDLE LEFT FOR THE ASSESSEE TO CLAIM T HE BENEFIT OF EXEMPTION U/S 11 OF THE ACT. EVEN OTHERWISE FOR A.Y. 2009-10 & 2010-11 AS HELD BY US IN THE PRECEDING PA RAS WHILE DEALING WITH ASSESSEE APPEAL THAT IT IS ELIGI BLE FOR EXEMPTION OF INCOME EARNED DURING THE YEAR FROM EDUCATIONAL WORK AS IT HAS NECESSARY APPROVAL U/S 10(23C)(VI) OF THE ACT. 136. NOW THOUGH WE HAVE ALREADY DECIDED THAT THE ASSESSEE IS ELIGIBLE FOR BENEFIT OF EXEMPTION OF TO TAL INCOME EARNED DURING THE YEAR UNDER SECTION 11 & SECTION 10(23C)(VI) OF THE ACT BUT STILL FOR ACADEMIC PURPO SE WE DEAL RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 110 THIS ISSUE RAISED BY REVENUE IN GROUND NO.1 OF APPE AL FOR A.Y. 2009-10 & 2010-11, THAT IN CASE ANY ADDITIONS/DISALLOWANCES WERE MADE THE BENEFIT FOR EXEMPTION U/S 11 SHOULD NOT BE DENIED FOR THE REMAI NING INCOME WHICH IS NOT IN DISPUTE. IN THIS CONTEXT AND IN VIEW OF OUR FINDING MADE IN THE PRECEDING PARAS WHILE DE ALING WITH THE ISSUE IN CASE OF RKDF EDUCATION SOCIETY TH AT LD. CIT(A) HAS RIGHTLY DEALT WITH THIS ISSUE BY PLACING RELIANCE BY CIRCULAR ISSUED ON CBDT NO.387 DATED 06.07.1984 AND OTHER SETTLED JUDICIAL PRECEDENTS, WE FIND THAT LD. CIT(A) HAS GIVEN THE SIMILAR FINDING IN THE CASE OF ASSESS EE SOCIETY NAMELY AESS AS WAS GIVEN IN THE CASE OF RKDF EDUCAT ION SOCIETY. SINCE WE HAVE CONFIRMED THE FINDING OF LD. CIT(A) IN THE CASE OF RKDF EDUCATION SOCIETY AND THE FACTS AND ISSUES REMAINS THE SAME IN THE CASE OF AESS ALSO WH ICH HAS NOT BEEN DISPUTED BY LD. DR, WE THUS TAKING A CONSISTENT VIEW CONFIRM THE FINDING OF LD. CIT(A) I N THE INSTANT APPEAL ALSO AND DISMISS COMMON GROUND NO.1 RAISED BY THE REVENUE FOR A.Y. 2009-10 & 2010-11. 137. NOW WE TAKE UP GROUND NO.2 OF REVENUE APPEAL RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 111 WHEREIN ALLOWING OF DEDUCTION U/S 11(1)(A) (15 % OF THE GROSS RECEIPTS) BY LD. CIT(A) IS IN CHALLENGE. WE N OTE THAT LD. AO WHILE DENYING THE BENEFIT OF SECTION 11 OF T HE ACT DID NOT ALLOW THIS CLAIM OF DEDUCTION OF 15% OF GRO SS RECEIPTS. SINCE WE HAVE ALREADY DECIDED THAT ASSESS EE IS ELIGIBLE TO CLAIM EXEMPTION U/S 11 & SECTION 10(23C )(VI) OF THE ACT AND HAVE ALSO DELETED THE ADDITION/DISALLOW ANCE MADE BY THE LD. AO, THIS ISSUE RAISED BY THE REVENU E BECOMES INFRUCTUOUS AND THEREFORE, FOLLOWING THE FI NDING OF LD. CIT(A) NEEDS TO BE CONFIRMED. 17. THESE GROUNDS ARE RAISED AGAINST NOT ALLOWING T HE DEDUCTION OF RS. 8,27,57,688/- IN A.Y. 2009-10 AND RS. 7,83,1 9,820/- IN A.Y. 2010-11 AS APPLICATION OF INCOME U/S 11(I)(A) OF THE ACT (15% OF THE GROSS RECEIPTS IN THE RELEVANT FINANCIAL YEA R). 17.1 APPELLANT IN THE RETURN OF INCOME/ COMPUTATION OF INCOME CLAIMED THE DEDUCTION OF SIMILAR AMOUNTS AS APPLICA TION OF INCOME @ 15% OF GROSS RECEIPTS U/S 11(I)(A) OF THE ACT. IN T HE ASSESSMENT ORDER, THE A. O. HAS STATED: NOTHING ABOUT THIS DEDUCTION. ON PERUSAL OF THE TABLES PREPARED IN THE ASSESSMENT ORDER WHILE CONCLUDING THE ASSESSMENT ORDER FOR DET ERMINATION OF THE TOTAL INCOME, THE A. O. HAS NOT DEDUCTED THE SAID AMOUNTS. FOR A.Y. 2009-10 & A.Y. 2010-11, THE AO DENIED THE EXEMPTION U/S11 OF THE ACT TO THE APPELLANT AND THEREFORE, AD DED THE EXCESS OF INCOME OVER EXPENDITURE (GROSS RECEIPTS L ESS REVENUE EXPENSES) I.E. RS. 34,07,25,659/- (RS. 55,17,17,918 /- LESS RS. 21,09,92,259/-) IN A.Y. 2009-10 AND RS. 20,35,53,27 5/- (RS. 52,21,32,132/- LESS RS. 31,85,78,857/-) IN A.Y. 201 0-11. SINCE A.O. DISALLOWED EXEMPTION IX] S 11 TO THE APPELLANT, DEDUCTION ON THE AMOUNT OF APPLICATION OF MONEY II] S 11 (L)(A) WAS .NOT ALLOWED. 17.2 CERTAIN GROUNDS RAISED BY APPELLANT DURING APP ELLATE PROCEEDINGS HAVE BEEN ALLOWED IN THE PRECEDING PARA S WHICH HAVE EFFECT OF ALLOWING EXEMPTION U/ S 11 OF THE AC T TO THE APPELLANT AND ACCORDINGLY ADDITIONS MADE BY AO BRIN GING RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 112 WHOLE EXCESS OF INCOME OVER EXPENDITURE HAVE BEEN D ELETED. THEREFORE, APPELLANT IS ALSO ENTITLED FOR DEDUCTION U/S 11(1)(A) IN RESPECT OF APPLICATION OF INCOME. HENCE, THESE G ROUNDS OF APPEAL ARE ALLOWED. 138. ACCORDINGLY COMMON GROUND NO.2 RAISED BY THE REVENUE FOR A.Y. 2009-10 & 2010-11 IS DISMISSED. 139. AS REGARD COMMON GROUND NO. 3 RAISED BY REVENU E FOR A.Y. 2009-10 & 2010-11 CHALLENGING THE FINDING OF LD. CIT(A) ALLOWING DEDUCTION FOR CAPITAL EXPENDITURE F OR BOTH THE YEARS, WE OBSERVE THAT IN VIEW OF OUR FINDING T HAT LD. AO GROSSLY ERRED IN GIVING BENEFIT OF EXEMPTION U/S 11 & SECTION 10(23C)(VI) OF THE ACT HELD BY US, GROUND O F REVENUE ALSO BECOMES INFRUCTUOUS AS A SOCIETY WHICH IS REGI STERED U/S 12AA OF THE ACT IS ELIGIBLE TO CLAIM DEDUCTION OF CAPITAL EXPENDITURE INCURRED DURING THE YEAR FOR THE PURPOS E OF OBJECTS FOR WHICH IT IS REGISTERED AS AN APPLICATIO N OF INCOME. 140. SIMILAR ISSUE CAME BEFORE US IN THE CASE OF RK DF EDUCATION SOCIETY AND DECIDED BY US IN THE PRECEDIN G PARAS CONFIRMING THE VIEW TAKEN BY LD. CIT(A). SINC E THE ISSUE REMAINS THE SAME FOLLOWING FINDING OF LD. CIT (A) RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 113 NEEDS NO INTERFERENCE:- 18. THESE GROUNDS ARE RAISED AGAINST NOT ALLOWING T HE DEDUCTION OF RS. 11,19,28,121/- IN A.Y. 2009-10 AND RS. 17,41 ,75,826/- IN A. Y. 2010-11 AS APPLICATION OF INCOME AS CAPITAL E XPENDITURE. 18.1 APPELLANT IN THE RETURN OF INCOME/COMPUTATION OF INCOME CLAIMED THE DEDUCTION OF SIMILAR AMOUNTS AS APPLICA TION OF INCOME AS CAPITAL EXPENDITURE. IN THE ASSESSMENT OR DER, THE A. O. HAS, STATED NOTHING ABOUT THIS DEDUCTION. ON PERUSAL OF THE TABLES PREPARED IN THE ASSESSMENT ORDER WHILE CONCL UDING THE ASSESSMENT ORDER FOR DETERMINATION OF THE TOTAL INC OME, THE A. O. HAS NOT DEDUCTED THE SAID AMOUNTS. FOR A.Y. 2009-10 & A.Y. 2010-11, THE AO DENIED THE EXEMPTION U/S 11 OF THE ACT TO THE APPELLANT AND THEREFORE, ADDED THE EXCESS OF INCOME OVER EXPENDITURE (GROSS RECEIPTS LESS REVENUE EXPENSES) I.E. RS. 34,07,25,659/- (RS. 55,17,17,918/- LESS RS. 21,09,9 2,259/-) IN A.Y. 2009-10 AND RS. 20,35,53,275/- (RS. 52,21,32,1 32/- LESS RS. 31,85,78,857/-) IN A.Y. 2010-11. IT IS, THEREFO RE CLEAR, THAT WHILE ASCERTAINING THE AMOUNT OF EXCESS OF INCOME O VER EXPENDITURE, AO'DID NOT CONSIDER THE CAPITAL EXPEND ITURE INCURRED BY APPELLANT. 18.2 CERTAIN GROUNDS RAISED BY APPELLANT DURING APP ELLATE PROCEEDINGS HAVE BEEN ALLOWED IN THE PRECEDING PARA S WHICH HAVE EFFECT OF ALLOWING EXEMPTION VI] S 11 OF THE ACT TO THE APPELLANT AND ACCORDINGLY ADDITIONS MADE BY AO BRIN GING WHOLE EXCESS OF INCOME OVER EXPENDITURE HAVE BEEN DELETED . THEREFORE, APPELLANT IS ALSO ENTITLED FOR DEDUCTION IN RESPECT OF APPLICATION OF INCOME FOR CAPITAL EXPENDITURE. HENCE, THESE GROUND S OF APPEAL ARE ALLOWED. 141. IN VIEW OF THE ABOVE THIS COMMON GROUND NO.3 R AISED BY THE REVENUE STANDS DISMISSED. 142. IN THE RESULT, APPEALS FILED BY THE ASSESSEE IN CASE OF RKDF EDUCATION SOCIETY IN IT(SS)A NO.69 TO 73/IND/2019 & AYUSHMATI EDUCATION & SOCIAL SOCIETY IN IT(SS) A NO.74 TO 76/ IND/2019 ARE RKDF EDUCATION SOCIETY & ANR. IT(SS) A NO.69 TO 76 & 126 TO 130/IND/2019 114 ALLOWED AND APPEALS BY THE REVENUE IN IT(SS)ANO.126 TO 128/IND/2019 & IT(SS)A NO.129 TO 130/IND/2019 ARE D ISMISSED. ORDER WAS PRONOUNCED AS PER RULE 34 OF THE I.T.A.T. RULES 1963 ON 28.07.2021 SD/- SD/- (MADHUMITA ROY) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 28.07..2021 PATEL/PS COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE