TaxTMI 
TaxTMI 
2014 (2) TMI 514
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.... & loss account and the same was claimed as deduction. However, this was rejected by both the authorities below. According to the ld.representative, the CIT(A) confirmed the addition only on the ground that the assessee failed to explain the matter properly before the assessing officer. According to the ld.representative, it is not correct to say that the sales-tax collected was not routed through profit & loss account. According to the ld.representative, the sales-tax collected was debited to profit & loss account, therefore, the entire amount was claimed as deduction. 5. On the contrary, Shri M Anil Kumar, the ld.DR submitted that the assessee could not explain properly before the assessing officer even though adequate opportunity was given as to how the sales-tax collected and paid was routed through the profit & loss account. According to the ld.DR, the assessee claimed an amount of Rs.6,29,479 which was debited in the profit & loss account as sales-tax paid. The ld.DR submitted that in the auditor's report it was stated that the sales-tax collected was not routed through the profit & loss account. Therefore, the assessing officer disallowed the claim of the assessee which was....
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....rival submissions on either side and also perused the material available on record. Section 143(2)(ii) clearly says that no notice shall be served on the assessee after expiry of six months from the end of the financial year in which the return was furnished. In this case, the return in the regular course was furnished on 31-10-2005. Therefore, notice u/s 143(2) shall be issued on or before 30-09-2006. In this case, admittedly, no notice was issued u/s 143(2). In fact, the return was processed u/s 143(1) on 08-01-2006 and the income returned was accepted. Therefore, it is obvious that the assessment proceedings for the assessment year 2005-06 came to an end on 08-1-2006 when the intimation was issued or on 30-09-2006 by operation of law. Therefore, the issues concluded by operation of law cannot be reopened in view of the specific provisions contained in Second Proviso to section 153A(1) of the Act. In respect of other issues which were not reached finality by operation of law and incriminating materials were found during the course of search operation, the assessing authority is at liberty to make an assessment u/s 153A of the Act. The assessee specifically raised the issue in gro....
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....gh Court in CIT vs VI Baby & Co 254 ITR 248 the claim of the assessee cannot be allowed. Therefore, the CIT(A) is not justified in allowing the claim of the assessee. 13. On the contrary, Shri Iype Mathew, the ld.representative for the assessee submitted that for the assessment year 2003-04 as on 31-03-2003 the assessee had Rs. 49,04,32,057 towards non interest bearing funds. The loan as on 31-03-2003 is only Rs. 2,98,85,592. Therefore, there was interest free funds / own funds is available to the extent of Rs.48,85,62,967 out of which the non business advance and investment was made to the extent of Rs.25,63,550. Therefore, in view of the judgment of the Apex Court in the case of Munjal Sales Corporation vs CIT & Anr (2008) 298 ITR 298 (SC) the CIT(A) allowed the claim of the assessee. 14. Similarly, for the assessment year 2004-05 as on 31-03-2004 the assessee had non interest baring funds to the extent of Rs. 48,56,76,288; however, the loan was only to the extent of Rs.219 lakhs. The net non interest bearing funds was to the extent of Rs. 48,56,76,287 out of which the investment and advance to the extent of Rs. 25,33,550 alone was diverted. Therefore, what was diverted is not ....
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....ree / own funds were available for making advance to relatives and investment in shares. The assessee has also filed copies of the statement of accounts in respect of respective years to explain the availability of non interest bearing funds. This Tribunal is of the considered opinion that when the assessee had sufficient non interest bearing funds, advances made from and out of the non interest bearing funds cannot be a reason to disallow interest on the borrowed funds. The Apex Court in the case of Munjal Sales Corporation (supra) found that when the assessee has sufficient own funds and profit, it cannot be said that the borrowed funds were diverted. In view of the judgment of the Apex Court, this Tribunal is of the considered opinion that the CIT(A) has rightly deleted the addition. From the orders of the CIT(A) and the materials filed by the assessee before this Tribunal, it is obvious that non interest bearing funds were available with the assessee. Therefore, we do not find any infirmity in the order of the lower authority. Accordingly, the orders of the CIT(A) on this issue is confirmed. 21. For the assessment year 2007-08 the revenue has raised one more issue with regard ....
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.... present assessee. 27. We have considered the rival submissions on either side and also perused the material available on record. In the case of Quilon Medical Trust, this Tribunal found that the term "any income" referred in section 10(23C) does not include the money collected for admission of the students over and above the prescribed fee. This Tribunal found that the income generated in the course of running of the educational institution, the income generated from the property held under trust and any voluntary donation other than for admission of the students may fall within the term "any income" referred in section 10(23C) of the Act. However, the capitation fee for admission of the students over and above the prescribed fees as explained by the Apex court in the case of T.M.A. Pai Foundation & Ors vs State of Karnataka & Ors (2002) 8 SCC 481 and Islamic Academic Education vs State of Karnataka (2003) 6 SCC 677 may not fall within the term "any income". This Tribunal in the case of Quilon Medical Trust found that no material was available to suggest that any capitation fees or any money over and above the prescribed fee for admission of student was collected by the assessee.....
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....made by Smt. Hazeena with the assessee. According to ld.representative, the assessee has furnished the name and address of Smt. Hazeena to the assessing officer. In spite of that no enquiry was made with Smt. Hazeena. Therefore, according to the ld.representative, the assessing officer failed to make basic enquiry even though the complete name and address of Mrs. Hazeena was furnished to the assessing officer. Therefore, according to the ld.representative, the CIT(A) deleted the addition on the basis of the judgment of the Kerala High Court in CIT vs Lakshmi Hospital (2011) 245 CTR 471 (Ker). 31. We have considered the rival submissions on either side and also perused the material available on record. The revenue claims that a receipt voucher was found in the premises of Quilon Medical Trust which discloses receipt of Rs.47,25,000 by the assessee from Smt. Hazeena's QMC account. The assessee, however, denied the receipt of money and doubted the genuineness of the receipt. The assessee furnished the name and address of Smt. Hazeena so as to enable the department to make necessary enquiries. In spite of that the assessing officer has not made any enquiry. On identical circumstances,....
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....was furnished. In this case, the return in the regular course was furnished on 31-10-2005. Therefore, notice u/s 143(2) shall be issued on or before 30-09-2006. In this case, admittedly, no notice was issued u/s 143(2). In fact, the return was processed u/s 143(1) on 18-12-2006 and the income returned was accepted. Therefore, it is obvious that the assessment proceedings for the assessment year 2005-06 came to an end on 30-09-2006 by operation of law. Therefore, the issues concluded by operation of law cannot be reopened in view of the specific provisions contained in Second Proviso to section 153A(1) of the Act. In respect of other issues which were not reached finality by operation of law and incriminating materials were found during the course of search operation, the assessing authority is at liberty to make an assessment u/s 153A of the Act. This issue was specifically raised in ground No.5 before the CIT(A). However, the CIT(A) has not recorded any finding. This Tribunal is of the considered opinion that when the assessee raised a specific issue which goes to the root of the matter, it needs to be considered by the lower authority. The main issue with regard to payment of sal....
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....fore, this has to be allowed as revenue expenditure. Accordingly, the orders of the lower authorities are set aside and the assessing officer is directed to allow deduction for Rs.69,150 as revenue expenditure while giving effect to this order. 40. The appeals of the assessee are partly allowed. 41. Now coming to the departmental appeals in the case of Shri A Abdul Salam, ITA No.97/Coch/.2012 is the appeal for the assessment year 2003-04. The first ground in this appeal is with regard to addition of Rs.10 lakhs towards investment in Kamaliya Medical Institution on 22-07-2002. 42. Shri M Anil Kumar, the ld.DR submitted that as per the seized document MKG-5 (A-29), the assessee was found to have paid an amount of Rs.10 lakhs as loan to Kamaliya Medical Institution on 22-07-2002. In response to a query, the assessee contended before the assessing officer that the payment of Rs.10 lakhs was paid to Kamaliya Medical Institution during assessment year 2005-06 and not during the assessment year 2003-04. However, the assessee could not produce any material to support the claim of the assessee. After verifying the balance-sheet for the assessment year 2005-06 the assessing officer found ....
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....et. Mala Medical Centre Pvt Ltd and Kamalia Medical Institution are different and independent institutions. Therefore, it is not known how the assessee has discharged his obligation in respect of investment made in Kamalia Medical Institution which was run by Imran Rafi Muslim Educational Charitable Trust. This Tribunal is of the considered opinion that the CIT(A) might have misunderstood the investment disclosed in Mala Medical Centre Pvt Ltd as investment made in Kamalia Medical Institution. Therefore, this Tribunal is of the considered opinion that the factual aspect needs to be clarified as to whether there are two investments or only one investment. This Tribunal is of the considered opinion that the assessing officer has to verify the records and thereafter decide the issue in accordance with law. Accordingly, the orders of lower authorities are set aside and the issue of addition of Rs.10 lakhs is remitted back to the file of the assessing officer for verification. The assessing officer shall verify the material available on record and thereafter decide the same in accordance with law after providing sufficient opportunity of hearing to the assessee. 45. Now coming to the a....
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....e. Therefore, we do not find any infirmity in the order of the lower authority. Accordingly, the order of the CIT(A) on this issue is confirmed. 49. The next ground of appeal is with regard to addition of Rs.49,100 being unexplained deposits in South Indian Bank on 24-07-2004. 50. Shri M Anil Kumr, the ld.DR submitted that during the year under consideration the assessee has deposited an amount of R.49,100 with South Indian Bank Ltd on 24-07-2004. The assessee explained before the assessing officer that the fixed deposits totalling Rs. 7,77,822 with South Indian Bank was duly accounted in the books of account and the interest accrued therein has also been credited to the profit & loss account. However, on verification, the assessing officer found that the deposit of Rs.49,100 made on 24-07-2004 was not reflected. Therefore, in the absence of any further explanation regarding the source of deposit of Rs.49,100, the same was assessed as income of the assessee. However, on appeal, the CIT(A) found that the amount of Rs.49,100 is a reinvestment and that the material was filed before the assessing officer which was not considered. According to the ld.DR, the investment of Rs.49,100 wa....
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....e in Canara Bank, Marthandom Branch on 11-05-2005. Accordingly, the CIT(A) restricted the addition to Rs.20,312. According to the ld.DR, the assessee has not furnished any explanation before the assessing officer. 57. On the contrary, Shri Iype Mathew, the ld.representative for the assessee submitted that the assessee has explained the source of entire deposit before the assessing officer. A confirmatory letter was also filed from South Indian Bank. The CIT(A) further found that a deposit of Rs.10,20,000 referred by the assessing officer in the assessment order was, in fact, renewed during the year under consideration on account FBP proceeds. According to the ld.representative, all the fixed deposits were routed through the books of account and the materials were filed before the assessing officer. The fixed deposit was made to the extent of Rs.82,22,133 as shown in the balance-sheet as on 31-03-2006 which include the fixed deposit which has been renewed during the year to the extent of Rs.30,20,000. What remains to be explained is the deposit of Rs.20,312 in Canara Bank on 11-05-2005. Therefore, the CIT(A) has rightly restricted the addition to Rs.20,312. 58. We have considered ....
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....t free funds for non business purpose given by the assessee was out of the interest bearing funds and therefore relying on the judgment of the Apex Court in the case of Munjal Sales Corporation (supra) he deleted the disallowance. We do not see any reason to interfere with the factual finding recorded by the CIT(A). The order of the CIT(A) on this issue is confirmed. 63. The next ground of appeal pertains to deletion of protective addition of Rs.44,67,631 on account of 1/4th of the total unexplained investment in building construction in the case of M/s Quilon Medical Trust. 64. Shri M Anil Kumar, the ld.DR submitted that the CIT(A) deleted the addition only on the ground that the assessee is entitled for exemption u/s 10(23C)(vi) of the Act. According to the ld.DR, for claiming exemption u/s 10(23C)(vi) the income should be generated in the course of activity or it should be a voluntary donation. This fact was not examined in the case of Quilon Medfical Trust. Therefore, according to the ld.DR, the addition made in the hands of the trustee, the present assessee, has to be confirmed. 65. We heard, Shri Iype Mathew, the ld.representative for the assessee also. According to the ld....
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.... it was found that the assessee made deposit with South Indian Bank and Canara Bank. The total interest accrued on the deposit works out to Rs.2,27,800. This accrued interest was not taken as income. According to the ld.DR, the assessee admitted that the accrued interest on the fixed deposit was omitted to be included in the total income. However, the CIT(A) found that there is no material to show that the assessee admitted that the interest was omitted to be included. The CIT(A), therefore, deleted the addition. According to the ld.DR, when the assessee admitted that it was not included due to omission, the CIT(A) is not justified in deleting the addition. 69. On the contrary, Shri Iype Mathew, the ld.representative for the assessee submitted that the assessee never admitted before the assessing officer that the interest was not included due to omission. According to the ld.representative, in the pre-assessment notice issued by the assessing officer there is no mention about the interest income. According to the ld.representative, the interest income disclosed by the assessee in the profit & loss account far exceeds the interest income added by the assessing officer. Therefore, t....
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....is issue is confirmed. 73. The next ground of appeal is with regard to addition of Rs. 8,19,37,628 protectively assessed as 1/4th of the total unexplained investment in building construction in the case of M/s Quilon Medical Trust. 74. We heard the ld.DR and the ld.representative for the assessee. This issue has been elaborately discussed in the earlier paragraphs of this order. The substantive addition has been made in the hands of the assessee Quilon Medical Trust and addition in the hands of the present assessee has been made on protective basis. In the case of Quilon Medical Trust, this Tribunal found that the term "any income" referred in section 10(23C) does not include the money collected for admission of the students over and above the prescribed fee. This Tribunal found that the income generated in the course of running of the educational institution, the income generated from the property held under trust and any voluntary donation other than for admission of the students may fall within the them "any income" referred in section 10(23C) of the Act. However, the capitation fee for admission of the students over and above the prescribed fees as explained by the Apex court....
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....A) held that the interest free funds for non business purpose given by the assessee was not out of the interest bearing funds and therefore relying on the judgment of the Apex Court in the case of Munjal Sales Corporation (supra) he deleted the disallowance. We do not see any reason to interfere with the factual finding recorded by the CIT(A). Accordingly, the order of the CIT(A) on this issue is confirmed. 77. The next ground of appeal is with regard to addition of Rs.2,27,800 on account of accrued interest on the unexplained deposit. 78. This issue has also been dealt by us while dealing with the appeal for assessment year 2007-08. The case of the assessing officer is that the assessee has admitted before him that due to omission, the accrued interest on deposits remained to be disclosed. The assessee retracts that he has made any such admission before the assessing officer. The CIT(A), however, found that the addition made by the assessing officer on account of interest exceeds far the addition made by the assessing officer on account of accrued interest. This Tribunal has already found that when the assessee disclosed the interest in the profit & loss account which exceeds th....
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....o-called receipt voucher and denied the receipt of money, an enquiry ought to have been conducted by the assessing officer. The assessee, at the best, can produce the address of Mrs. Hazeera so as to facilitate the enquiry. Therefore, according to the ld.representative, the assessee has discharged his obligation., as has been found by the Kerala High Court in the case of Lakshmi Hospital (supra), the CIT(A) has rightly deleted he addition. 83. We have considered the rival submissions on either side and also perused the material available on record. The revenue found a receipt voucher in the premises of Quilon Medical Trust during the course of search operation which discloses a receipt of Rs.21,33,550 by the assessee. Admittedly, the receipt was not signed by the recipient. The assessee specifically denied the receipt of money. The assessee also doubted the genuineness of the voucher. Having denied the receipt of money and doubted the genuineness of transaction, the assessee has also furnished the address of Mrs. Hazeera. Therefore, as found by the Kerala High Court in the case of Lakshmi Hospital (supra), the assessee discharged his obligation. If at all, the assessing officer in....
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....onduct enquiry and find out whether the money has actually been paid or not. In view of this factual situation, according to the ld.representative, the CIT(A) has rightly deleted the addition after placing reliance on the judgment of the Kerala High Court in the case of Lakshmi Hospital (supra). 87. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the revenue authorities found during the course of search operation that payments were made to 12 concerns to the extent of Rs.79,29,450. The assessee claims that the payment with regard to stem pepper, Alangar Earth Supply, Quilon Medical Trust, Meeran Property, Nizam Ltd and Kerala Steel Associates did not take place at all. However, in respect of other five concerns, the assessee is not denying the payment. Only in respect of seven concerns, the assessee is denying the payment saying that the transaction did not take place at all. The assessee claims that the address of the recipient was furnished to the assessing officer; however, the department claims that the address was not furnished. In view of these circumstances that the payments made to five concerns were no....