TaxTMI 
TaxTMI 
2016 (12) TMI 1567
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....tain documents were seized from the residence of Shri M.N. Navale which, according to the revenue, revealed that the assessee trust is taking huge donations for the purpose of admissions and quite a large part of the same is being appropriated by the trustees for their personal purposes. 4. The Assessing Officer further noted that in this case the registration of the trust has been cancelled by the CIT Central, Pune u/s.12AA(3) vide order dated on 16-11-2007. Since the registration has been cancelled the Assessing Officer held that the assessee is to be treated like any other assessee and cannot hide behind the shield of sections 11 and 12. Without prejudice to this, the Assessing Officer held that section 11, 12 and 13 grant privilege to the assessee in the sense that its income is exempt from taxation and there is no distinction between capital and revenue expenditure. According to the Assessing Officer in order to avail benefit of section 11 and 12, the assessee has to strictly comply with the conditions contained therein and should not be hit by the mischief of section 13. He noted that the opening line of section 13 clearly states that provisions of section 11 and 12 will n....
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....ts to the trustees was possible only because of the receipts on account of donations/capitation fee. The Assessing Officer further noted that the payment of rent to the related persons is also not reasonable. All this attract provisions of section 13(1)(c). These are the benefits derived by persons referred to in section 13(3) of the I.T. Act. Therefore, the assessee is hit by the mischief of section 13(1)(c). He accordingly held that in view of applicability of section 13(1)(c) also the assessee has to be assessed like any other assessee and no benefit of section 11 and 12 can be given. In view of the above, the Assessing Officer held that the status of the assessee has to be treated as AOP. 6. In view of the cancellation of registration and having regard to the complexities involved in the accounts the matter was referred to the Special audit u/s.142(2A) of the I.T. Act. The report of the Special Auditor was received by the Assessing Officer on 11-06-2008 who quantified the undisclosed income on account of donations arising out of seized material and worked out the surplus profit on the basis of recasted accounts. In view of applicability of provisions of section 13(1)(c) rega....
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.... page, then amounts against the names of some institutions controlled by the assessee in abbreviative forms like SKNCOE, SCOE etc. have been mentioned or in the names of courses like MBA, B Pharma etc. was mentioned. He inferred that these reflected receipts on account of admission in these institutes or in these courses. On analysis of documents in Para 5.3 of the order the Assessing Officer held that the payments were recorded on the right hand side, closing balance were worked out after deducting these payments/outgoings/deposits in bank accounts etc. and the same closing balance was also carried forward to the next day opening balance. It is therefore obvious that after mentioning various expenses/outgoings recorded in cash on the right hand side of the seized papers, the closing balances were worked out. It shows that these recordings were in the form of day to day cash book showing receipts and payments and the correctness of the entries was again proved on account of findings on verification of the huge cash deposits in various bank accounts. The Assessing Officer emphasized that while these large deposits in bank accounts were verifiable, the assessee has failed to explain ....
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.... stated that the above transactions have no relevance with the books of account. The Assessing Officer noted that huge amounts have been deposited in the bank account maintained with the Thane Janata Sahakari Bank and part of the above money has been paid into the books of account of the assessee trust. He referred to the statement of Shri Sharad Dattatraya Bhosale, employee of the assessee trust, which was recorded on oath on 07-10-2005 in which he had confirmed that the entries made on the various pages are in his handwriting. He observed that Shri Sharad D. Bhosale in his statement had given vague replies without answering specific questions and notings on the seized material. 13. On the basis of the various documents seized from the residence of Shri Maruti N. Navale, Present of the assessee trust and the statements recorded of various persons the Assessing Officer concluded that the assessee has received an amount of Rs. 22,45,06,500/- on account of donations for admission to its various courses in different institutes run by it. He further noted that even in the special audit report the assessee has also avoided to explain and answer the relevant seized material as per Ann....
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....ve recasted Income & Expenditure account and Balance sheet of the assessee by effecting changes in the following lines : i. All capital receipts including donations in the Balance sheet whether shown under corpus fund or any other fund have been treated as revenue receipts, amongst other things, in the Income & Expenditure A/c. ii. All instances of capital expenditure debited in the Income & Expenditure A/c were identified and capitalized for working out the allowable depreciation as per the provision of the I.T. Act. iii. Depreciation chart as per the provisions of I.T. Act has been prepared. iv. Various disallowance as laid down in Tax Audit Report u/s.44AB of the I.T. Act have been computed. v. Disallowances as per the Tax Audit Report, year wise, such as 40(a)(ia), 40A(2)(b), 40A(3), 43B and Explanation to 37(1) have been tabulated. vi. Violations as per Tax Audit Report such as TDS violations have been tabulated." 16. During the course of assessment proceedings the Assessing Officer observed that the special auditors in their audit report at Para 3.1 to 3.6 have mentioned that the assessee had itself capitalized part of ....
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....in order to create an impression that the assets found and seized pertain to the bigger HUF and out of the sources of the bigger HUF. The submission of the assessee that during the last 6 to 7 years the HUF had given cash amounting to Rs. 12,30,00,000/- to Shri M.N. Navale was disbelieved by the Assessing Officer on the ground that there was no proof of the expenses of the HUF and no income-tax and wealth-tax returns were filed by the HUF. Further, none of the property records have any reference to any HUF and there is nothing on record to show that the properties were indeed purchased from HUF fund. He therefore held that the HUF does not have the capacity to generate so much of cash and the assets said to be belonging to the HUF are actually the properties purchased/acquired by the trust over a period of time out of their income and this is clear from the record. 20. Similar was the position with regard to the jewellery valued at Rs. 40.90 lakhs. In absence of any proof to support the stand that Smt. Kashibai Navale who died on 08-04-1998 owned 4430 grams of gold jewellery because she came from a very rich family, the Assessing Officer held that the jewellery has been acquired....
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....f funds from the trust in the form of abnormally high rents. Rejecting the various explanations given by the assessee the Assessing Officer made addition of Rs. 24,55,015/-. In view of the above, the Assessing Officer determined the total income of the assessee at Rs. 34,79,98,520/- by concluding as under: "16. In view of the totality of facts and circumstances, discussed as above, under Part A and Part B of the order, following conclusions are reached. i) The assessee STES charged donations while granting admissions. ii) As the registration of the Trust is cancelled on the grounds that activities of the Trust are not genuine and also are not being carried out in accordance with the Trust Deed, the assessee STES will have to be assessed as an AOP. iii) Regardless of cancellation of registration, the benefits of sections 11 & 12 are denied in view of applicability of section 13(1)(c) on account of cash and jewellery seized, siphoning/diversion of money, creation of assets much more in value than the nominal incomes returned and known sources of income, payment of rent in excess of reasonable rent and other benefits. iv) In view of complex....
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....ore, the reasoning given by the Assessing Officer for denying the claim of exemption does not survive. 25. The Assessing Officer vide his letter dated 03-02-2009 pointed out that the assessee had violated the provisions of section 13(d)(i) by investing in shares of cooperative banks and also by making certain advances and deposits not permitted u/s.11(5). Since this aspect was not examined by the Assessing Officer the Ld.CIT(A) relying on various decisions held that the powers of the CIT(A) was coterminous with that of the Assessing Officer and u/s.250(4). He can make enquiries and adjudicate on any matter noticed by him during the appellate proceedings which related to the issue at hand. He further held that the CIT(A) was also empowered to improve an assessment order by taking a different line altogether than taken in the assessment order after due application of mind. He observed that similar findings and inferences were also followed in the appeal orders for A.Y. 2000-01 and A.Y. 2009-10 and in subsequent years till A.Y. 2005-06. 26. From the various details filed he noted that the assessee held the following shares of cooperative banks : A.Y. Name of the Cooperativ....
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.... of various management courses. Therefore, the provisions of section 13(1)(d) are not applicable. The assessee gave the list of various companies whose total cost is only Rs. 1,50,000/-. 30. Based on the arguments advanced by the assessee the Ld.CIT(A) called for a remand report from the Assessing Officer. After considering the remand report of the Assessing Officer and the submission of the assessee he observed that in view of the holding of shares in different companies by the assessee trust, it has violated provisions of section 13(1)(d)(iii) which prohibits the holding of shares whatsoever other than those of public sector undertakings. Therefore, the contention of the assessee that these were not investment is therefore not tenable in law. He held that although the total cost of purchase of the shares have been stated to be only Rs. 1,50,000/-, still in view of the clear prohibition under provisions of section 13(1)(d)(iii) towards holding of shares of companies other than provided therein, there is violation of this restriction and therefore the assessee has violated the provisions of section 13(1)(d)(iii) of the I.T. Act. 31. So far as the issue relating to violation o....
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....of Shri G.K.Shahani listed as per Bundle No.1. Various instances have been mentioned in the assessment order from the seized documents in which the authenticity and the correctness of the entries have been analysed and ascertained. The analysis of the entries on page Nos.31, 43, 45, 71, 83 & 87 of this bundle A-2 were made elaborately and the cash deposits mentioned on right hand side of these pages were duly verified from the various bank accounts in Thane Janata Bank or Central Bank of India, as discussed in para 4.3 of the order. The fact that these cash deposits were duly verifiable from the bank accounts, proves that the entries recorded in the seized documents reflected true and actual state of affairs. Moreover, some other entries on the right hand side like that of refund given as a result of cancellation of admission as mentioned in page 39 of AnnexureA2 was also admitted as correct by the appellant. In the written submission dated 4.2.2009, the assessee has admitted that these entries on right hand side of the seized papers showed outgoings, being cash deposits in bank accounts, fees refunded on cancellation of admissions and expenses incurred. Therefore, the inferences/c....
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....hat these were for the purpose of periodical review of financial position of the units - and were regarding fees collected, daily bank balance, expected generation of fees in next few days and commitment for financial outgoings etc. In the same paras, however, making a U-turn; it is also claimed to be merely 'Rough Work', and it is claimed that the entries on the left hand side do not necessarily mean any incomings. This explanation of the appellant is neither here nor there. It is only going half way and without giving necessary proof. General explanations are resorted to, without specific ones regarding each entry recorded on the left hand side of the seized documents. But the tenor of the explanation dated 4.2.2009 makes it abundantly clear that the appellant is not denying these entries altogether; as apparent from the above underlined portion. But, after going half way through, again the appellant goes into a denial mode and states that these are only rough workings etc. The assessee has repeatedly accepted the entries on right hand side such as cash deposits in Bank Account's; but the entries on left hand side of the same paper is being denied. The Assessing Offic....
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.... arrow mark reflects payment or outgoings; which the Assessing Officer has concluded to have been withdrawn by Shri M.N.Navale. 8.20 As would be seen from the seized documents and the discussion made above that most of the entries related to the period May to July, 2005 and in particular June and July, 2005. In the submission dated 17.9.2009 it has been claimed that the period comprising of May to June is when most of the old students in the earlier year are given admission for the next year, and the fresh admissions only take place during August onwards. This contention of the appellant is not acceptable. Admission process for the First year in various courses also starts during the month May/June itself and at July it is at its peak. Moreover, though the admission under the management quota, is given only during the period when the actual admissions on merits have taken place, still it is a matter of common knowledge that seats are booked much prior to the actual commencement of admissions. 8.21 The appellant has made a submission during appellate proceedings dated 4.2.2009 in which for the first time it was claimed that the recordings on the seized papers were ....
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....T (Central) no such explanation was given by the appellant. The Assessing Officer has, therefore, rightly pointed out that if this was the nature of these notings, what prevented the appellant from offering this clarification earlier. It is further stated that if the notings reflected the fees collected or other receipts, it is understood; but how could expected generation of fees during the next few days could be predicted unless the relevant amounts have actually been received. Further, it is admitted by the appellant that the financial position was being ascertained. However, if these recordings were only rough entries without meaning anything, how could any financial position be ascertained by it ? It is too naive on the part of the appellant to have submitted such an explanation. it is correctly stated by the Assessing Officer that the assessee had to bring in this thesis of 'expected generation of fees' since it failed to tally the receipts on the left hand side with the fees and other receipts actually shown in the Books of Accounts. A careful perusal of the entries on the seized papers would reveal that these were nothing but recordings for cash receipts and payments on....
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....ng nothing is acceptable. 8.24 The Assessing Officer has rightly pointed out that even admitting for a minute that the entries on the left hand side represented fee collected and to be collected, the assessee has not come forward to show how these correspond to the fees actually collected. If it was not so, the official who was making these numerous entries on a daily and regular basis was engaged in a futile exercise, and such irrelevant notings would not have given any fair idea of the fund position of the assessee. It is unacceptable therefore that such entries being made on a regular basis every day were irrelevant, random and rough notings. 8.25 The appellant's explanation for different pages on in the submission dated 4.2.2009 also reflects that in some cases the appellant has been admitting that the entries were real and therefore reflected the true state of affairs. For example, in respect of para 4 to 4.2 of the assessment order it is stated that these notings are of cash or bank balances that could be available with these units. However, in Remand report, the Assessing Officer states that if it was so, all the assessee had to do was to tally these am....
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.... Not available 5,00,000 This was amount marked for payment but not actually paid 95 Not available 2,00,000 Paid on 18-7-2005 in Tushar Construction Account Total 36,00,000 8.26 The above referred to explanation for entries in the seized documents also reflect that the appellant is not denying the correctness of the entries made on the right hand side in the name of 'Shende Saheb', and which is being explained as payment made by the appellant to him or his concern which are on account of various expenditures. It is only in respect of some of these payments that the comment given is that the amount was marked for payment but was not actually paid. This contention of the appellant is not acceptable, since what is being recorded in the seized documents on the right hand side has been found to be actual transactions on account of payments I outgoings, be it cash deposits in bank account like Thane Janata Bank or Central Bank of India; refund of fees given on account of cancellation of admissions; and payments made to 'Shende saheb' or his concerns or to others for expenditure incurred. Theref....
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....eposited by different units, was correct, then what prevented the appellant from getting it crossed verified from the bank accounts, and establish the veracity of its explanation? Even the dates were also mentioned on these pages. The appellant failed to explain the same during the assessment proceedings or proceedings u/s.12AA(3) before the CIT(Central), Pune inspite of being repeated asked. It is again pointed out that the appellant failed to get this verification done at the stage of Special Audit u/s.142(2A). The Assessing Officer had asked the auditor to do this verification and tallying, which the auditor could not do due to non-cooperation from the appellant. The Assessing Officer has rightly contended in the remand report that if these explanations were correct, this verification could have been done even at the appellage stage, from the figures of the cash available with the various units on the relevant dates and the deposits in the bank account by these respective units, which has not been done. Therefore, the assessee has failed to explain as to what happened to the huge amounts withdrawn/paid against the marking "->"; which totalled to Rs. 7,36,90,000/-. It was inferre....
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....are not being denied and it goes a long way to prove the authenticity of the recordings on the other seized documents also. It is only being explained that in some of the recommendations, concession in the fees is mentioned and no 'donation' word is indicated. Secondly, in some of these cases, it was stated that admission was not actually granted, or not granted from the management quota; therefore, there was no question of any donation etc. It is explained by the Assessing Officer in the remand report that these seized recommendation letters were not referred to in the assessment order to prove acceptance of donations from these very students; but merely to indicate that there was a tradition of collecting donations for admissions in the appellant's case. These seized papers have not been used for making specific additions either, but only used for the sake of buttressing the argument that admissions were being made after taking donations and the rates of donations were frequently being quoted. It is also noticed that the appellant has given explanation regarding seized papers 61 and 62 of bundle A-5 also in the submission dated 4.2.2009, whereas as the Assessing Offic....
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....e, because ultimately these students were studying in the same institutes who had control over the students future and career. It was also contended by the Assessing Officer that the reference to affidavit filed by the Principals of various institutes was also not relevant because it was not the department's case that the donations were being accepted by the principals of various institutes; but it were being collected by the Principal Trustee Shri M.N.Navale, or the persons appointed by him for this purpose, which is also revealed from the documents seized from his residence u/s.132. Therefore, the Assessing officer has correctly concluded that the affidavit from the Principals do not help the appellant. 8.32 In the written submission dated 4.2.2009, it is also contended by the appellant that the Assessing Officer has also made an addition of Rs. 10,15,22,340/- in the case of Shri M.N.Navale in his individual case on substantive basis, on the basis of the examination of the same seized documents in A.Y.2006-07 itself. It is explained by the Assessing Officer in the remand report that addition in respect of Shri M.N.Navale was of the amount which was found to have been....
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....Because of these reasons also the assessee was not entitled to exemption u/s.11 and 12 of the Act. Therefore, the appellant's explanation in this regard was not acceptable and the acceptance of capitation fee was sufficient to render the appellant ineligible for exemption u/s.11. 8.35 In accordance with this discussion made above from paras 8.16 onwards, it is held that the entries made on the left hand side of the seized documents pages 1 to 101 of Bundle A.2 and also bundle No.5 which have been tabulated in para 6.5 of the assessment order; along with Annexure-I to assessment order, reflect the amounts received on account of admissions granted to various institutes and courses, which are unaccounted. Reliance is placed on the ratio of the decisions of Hon'ble Apex Court in the cases of Sumati Dayal vs. CIT (1995) 214 ITR 801 (S.C) and CIT vs. Durga Prasad More (1971) 82 ITR 540, (S.C) pp 545, 547 in which it was laid down that apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the m....
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....the same and after considering the comments of the assessee to such remand report he had held that provisions of section 13(1)(c) are applicable to the assessee's case. Following his order for A.Y. 2005-06 the Ld.CIT(A) upheld the action of the Assessing Officer in invoking the provisions of section 13(1)(c) and made addition of Rs. 24,55,015/- u/s.40A(2)(b) to the total income of the assessee. Following his order for A.Y. 2005-06 he further held that the benefit has been derived by the persons referred to in section 13(3) of the I.T. Act on account of appropriation of unaccounted income of the assessee trust which was received for giving admission to students by accepting donation/capitation fee and investing the same in jewellery, assets and accumulation of huge cash balances. Therefore, the provisions of section 13(1)(c) are also applicable. 35. Before CIT(A) the assessee also contested the Assessing Officer's action in passing the assessment order on the findings of the special audit report u/s.142(2A) of the I.T. Act. The Ld.CIT(A) following his order for A.Y. 2000-01 dismissed the ground raised by the assessee on this issue. 36. So far as the action of the Assessing Off....
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....ct, 1961 clearly stipulate as under: "Provisions of section 40A shall so far as may be, apply in computing the income chargeable under the head "Income from Other Sources" as they apply in computing the income chargeable under the head "Profits and gains of business or profession." Therefore, the objection raised in respect of section 40A(2)(b) and 40A(3) was incorrect; even if for the sake of argument, the appellant's contention that in its case there cannot be any "Profits and Gains from Business or Profession" was presumed to be correct. In this assessment year, the Assessing Officer has made disallowance u/s.40A(2)(b) at Rs. 24,55,015/- out of the rent payments made to Shri M.N.Navale, the Principal Trustee. This issue has been discussed above in respect of reasonableness of the rent paid, for the purposes of section 13(1)(c) of the I.T. Act, under ground nos. 2 & 6 of the appeal. However, the appellant has not stated anything regarding the computation, applying provisions of section 40A(2)(b) on merits. The appellant had objected to considering 7% return on investment as reasonable rent considering Allahabad High Court decision reported in 125 ITR 134. Fu....
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....as found to be collection donations for admissions which revealed the commercial nature of the running of institutions by the appellant, with a view to earn income. It was, therefore, contended by the Assessing Officer that the Income was assessable under the head 'Profit and Gains from Business or Profession'. Further, in the order granting approval u/s.142(2A) dated 20.11.2007, the CIT (Central), Pune vide para 8 had observed as under: 'The Id. Counsel of the assessee has stated that disallowances u/s.43B, 40A(2), 40A(3) etc. can be made only while calculating the profit of business. It has further been argued that merely the legal status has been changed to A OP, it cannot be construed that the assessee is carrying out business activity. For the said purpose, the Id. Counsel of the assessee has relied upon the definition of business as given in section 2(13) of the I.T. Act, 1961. I am afraid that the contention of the ld. Counsel of the assessee is not correct. It has been held by the Supreme Court in the case of laxminarayan Ram Gopal vs. government of Hyderabad (1954) (25 ITR 449 (SC)] that - Business connotes some real, substantive and systematic course ....
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....plicable. Since during the appellate proceedings, the appellant has not stated anything regarding the disallowance made at Rs. 4,02,80,7701- on merits, apart from raising above legal proposition, this disallowance is hereby upheld. Therefore, ground No. 9 raised by the appellant is to be treated as partly allowed." 39. So far as the claim of the assessee that special auditor has erred in treating revenue expenditure as capital expenditure is concerned he held that assessee has not made any specific comments to the findings of the special auditor who has held that capital expenses were debited to the income and expenditure account. He noted that capital expenditure was not allowable even in case of "income from other sources" as provided u/s.57(iii) of the I.T. Act. In absence of any specific explanation given by the assessee on this issue of capital expenses he dismissed the ground raised before him. 40. So far as the ground relating to treating donations received towards corpus of the trust as revenue income is concerned he also upheld the action of the Assessing Officer and dismissed the ground raised by the assessee on this issue by observing as under : "13. Groun....
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....appreciating the established legal position that his power of enhancement is restricted to the subject matter of assessment which has been considered expressly or by clear implication by the Assessing Officer. Refer CIT vs. Raj Bahadhur Hardutroi Motilal Chamaria - 66 ITR 443 (SC). 4. On the facts and in the circumstances of the case the assessment order-passed u/s. 153C r.w.s. 143(3) is bad in law in as much as the same is based on the order of CIT passed u/s. 12AA(3) which order itself is invalid, mainly because the registration granted u/s. 12A(a) cannot be cancelled u/s. 12AA(3), as held by the ITAT. 5. On the facts and in the circumstances of the case the CIT(A) has erred in sustaining the addition of Rs. 22,45,06,500/- holding that the same represents the donations/capitation fees collected by the appellant for granting the admissions in various courses run by the appellant by misinterpreting the documents i.e. Loose papers seized from the residence of Mr. M.N. Navale, Principal trustee of the appellant and in doing so CIT (A) has disregarded without assigning any valid reason the detail explanation furnished by the appellant supported by documentary evidenc....
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....denial of exemption allowable u/s.11, the appellant's activity is being run in a commercial manner and has also erred by sustaining the disallowance : i. u/s.40(a)(ia) Rs.4,02,80,770/- ii. u/s.40A(3) Rs. 2,44,095/- iii. u/s.36(1)(va) Rs. 31,30,020/- 12. On the facts and in the circumstances of the case and without prejudice to Ground No. 1 to 4 above, CIT (A) has erred in sustaining the additions or disallowances made on the ground that capital expenses have been debited to Income & Expenditure A/c without applying his competent mind and in the process has further overlooked the fact that Special Auditors have themselves erred in treating the revenue expenditures as capital expenditures. 13. On the facts and in the circumstances of the case and without prejudice to the Ground No. 1 to 4 the CIT (A) has erred in sustaining the disallowance of Rs. 94,84,854/- made on account of Prior Period Expenditure disregarding the contention that these expenses materialized in the context of their liability in the year under consideration only." 42. The assessee has also raised the following additional grounds : Additional Ground No. 1:- ....
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....of the LT. Rules, 1960 in order to decide the reasonability of the rent paid by the appellant and the applicability of section 13(1)( c (ii) of the Income Tax Act, 1961. (Relevant to Ground No.6)" 43. The Ld. Counsel for the assessee relying on the decisions of Hon'ble Supreme Court in the case of NTPC Ltd. reported in 229 ITR 383, Jute Corporation of India Ltd. reported in 187 ITR 688 and the decision of Hon'ble Bombay High Court in the case of Ahmedabad Electricity Company reported in 199 ITR 351 submitted that the above grounds are purely legal grounds and all facts are available on record and no fresh facts are required to be investigated. Therefore, these additional grounds should be admitted for adjudication. 44. After hearing both the sides and considering the fact that the additional grounds are purely legal in nature the above grounds are admitted for adjudication. 45. So far as additional ground No.1 is concerned the Ld. Counsel for the assessee submitted that the search took place in the residence of Shri M.N. Navale and his wife Smt. Sunanda M.Navale on 20-07-2005. Certain loose papers belonging to the assessee trust were found. He submitted that the A....
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....atisfaction and failed to provide the certified true copies of the documents seized during the course of search from the residence of Shri M.N. Navale. The satisfaction note does not mention the loose papers being Nos. 1 to 101 of Bundle No.A-2. Therefore, there is no satisfaction that the loose papers belong to the assessee trust. Further, the Assessing Officer also failed to appreciate that the seized paper is not incriminatory in nature. He also relied on various other decisions filed in the paper book and alternatively submitted that assuming this assessment year is the search year, for the assessee, even then also the assessment should have been made u/s.153C. 47. The Ld. Departmental Representative on the other hand strongly opposed the arguments advanced by the Ld. Counsel for the assessee. He submitted that the assessee has filed the return of income on 04-01-2007 voluntarily, i.e. before recording of satisfaction note. The assessee filed the revised return on 13-08-2007. Therefore, the Assessing Officer has rightly assumed jurisdiction and issued notice u/s.143(2). Referring to the decision of the Hon'ble Supreme Court in the case of Dr. Pratap Singh and Another Vs. Dir....
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...., he submitted that the above provision clearly states that where a return of income has been furnished by such other person but no notice u/s.143(2) has been issued and limitation for serving a notice u/s.143(2) has expired, then only the Assessing Officer shall issue the notice and assess or reassess total income in the manner provided in section 153A. In the instant case, a valid notice u/s.143(2) was there and therefore there was no requirement of issuing any further notice u/s.153C as nowhere it is mentioned that even such proceedings are to be abated. The law also does not provide for initiation of parallel proceedings simultaneously. Therefore, the various decisions relied on by the Ld. Counsel for the assessee are not applicable to the facts of the present case. 49. Referring to the decision of Hon'ble Delhi High Court in the case of CIT Vs. Anil Kumat Bhatia reported in 24 taxmann.com 98 he submitted that post search reassessment in respect of all 6 years can be made even if original returns are already processed u/s.143(1)(1). Assessing Officer has power u/s.153A to make assessment for all six years and compute total income of assessee including undisclosed income, not....
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.... of the decisions relied on by him. He submitted that time limit has been provided for completion of assessment for the searched person as well as the non searched person. That distinguishes the provisions of section 153A and 153C. He submitted that the assessee is also categorically stating that notice u/s.153C should have been issued. Since no notice u/s.153C has been issued, therefore, the assessment order passed by the Assessing Officer has to be treated as void. 52. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case filed the original return of income on 04-01-2007. Search and seizure operation u/s.132 of the I.T. Act was carried out at the residence of Shri M.N. Navale on 20-07-2005 during which certain incriminating materials belonging to the assessee trust were found. Based on the seized documents a satisfaction note for proceeding u/s.153C of the I.T. Act in the case of the assessee was prepared on 18-04-2007, copy of which is placed at pages 5A and 5B of the paper ....
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....d to ACIT, Central Circle-1(1). Therefore, the DCIT, Central Circle-2(2), Pune had no locus standi/jurisdiction to pass this assessment order. He submitted that in the previous occasions when this case was being heard the Bench had directed the Departmental Representative to clarify the situation. The Departmental Representative had produced a copy of the corrigendum order dated 28-10-2005 which states that in the earlier order dated 10-10-2005 against the name of the assessee in Column No.4 the same should be read as ACIT, Central Circle1(1), Pune and not ACIT, Circle -1(1), Pune. This order has been passed by Shri Pradeep Sharma, CIT-III, Pune. However, this corrigendum order has not been communicated to the assessee. 54. In the proceedings taken u/s.12AA(3) the jurisdiction was challenged. The CIT produced the transfer order dated 10-10-2005 and did not enclose the corrigendum order nor referred to. The copy of the corrigendum order provided initially in the course of hearing before the Bench was not communicated to the assessee. The assessee sought information under the RTI Act, 2005 requesting to provide the names of the commissioners who held the charge of CIT-III, Pune du....
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.... giving a notice to the assessee containing reasons for transfer, without considering the objections of assessee and without communicating the order of transfer to the assessee is invalid. 58. Referring to the decision of the Hon'ble Calcutta High Court in the case of Subash Chandra Bhaniramka Vs. ACIT reported in 320 ITR 349 he submitted that the Hon'ble High Court in the said decision has held that without resorting to provisions of section 127, suo motu transfer of file from one Assessing Officer to another Assessing Officer was illegal. 59. Referring to the decision of Hon'ble Bombay High Court in the case of Fiat India Automobiles Ltd. Vs. CIT and others vide Writ Petition No.8657/2012 order dated 16-10-2012 he submitted that provisions of section 127(2) has to be strictly followed. He also relied on the following decisions : 1. Kusum Goyal Vs. ITO reported in 329 ITR 283 2. Smt. Jeevan Kumari Vs. UOI reported in 118 ITR 573 60. The Ld. Departmental Representative on the other hand submitted that as per the provisions of section 124(3) no person shall be entitled to call in question the jurisdiction of Assessing Officer where he has made a return und....
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....ee itself has made return of income u/s.139 voluntarily and as per the provisions of section 124(3)(a) if any challenge of the jurisdiction was there the same should have been made within one month of the service of notice, i.e. by 3004-2007 in the instant case. He accordingly submitted that this additional ground raised by the assessee should be dismissed. 63. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee through this additional ground has challenged the validity of the assessment order on the ground that the Assessing Officer who has passed the order had no jurisdiction over the case. The jurisdiction of the AOs are provided u/s.124 of the I.T. Act. As per the provisions of section 124(2) where a question arises as to whether the Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Principal Director General or Principal Chief CIT or the CCIT or the DGIT or the Principal Commissioner or Commissioner etc. as the case may be. As per the provision....
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.... companies. The above investment in shares of cooperative banks and listed companies are in contravention of section 13(1)(d). Similarly, the Assessing Officer in the body of the assessment order has considered the rent paid to Shri M.N. Navale and various other persons of his family as excessive and unreasonable for which he made addition of Rs. 24,55,015/- u/s.40A(2)(b). The above excess rent paid, according to the Assessing Officer, is in contravention of provisions of section 13(1)(c). Therefore, the exemption u/s.11 has been denied to the assessee. He submitted that violation of provisions of section 13(1)(c) or 13(1)(d), if any, cannot be a ground for denial of exemption of the entire income u/s.11 of the I.T. Act. At best the income that can be brought to tax is to the extent of excess amount of rent paid or income from those investment only and wholesale denial of exemption cannot be made. 66. Referring to the decision of Hon'ble Bombay High Court in the case of DIT (Exemption) Vs. Sheth Mafatlal Gagalbhai Foundation Trust reported in [2001] 249 ITR 533 (Bom) he submitted that the Hon'ble High Court in the said decision has held that in case of contravention of section 1....
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....rived from the property held under trust shall not be included in the income to the extent it is applied for the charitable or religious purposes (expenses incurred during the year) or accumulated/set apart to be applied for that purpose in future out of 75% to which the restriction u/s 11(5) applies. The Tribunal has relied upon its own decision on a similar issue rendered in ITA No. 644 to 646/Rjt/2003 dated 22.12.2003. We are in complete agreement with the reasonings adopted by the CIT(A) as well as Tribunal. 6. Even otherwise, the law on the subject is also well settled. In the case of Fr. Mullers Charitable Institutions (supra) the Karnataka High Court has held that a perusal of section 13(1)(d) of the Income-tax Act, 1961 makes it clear that it is only the income from such investment or deposit which has been made in violation of section 11(5) of the Act that is liable to be taxed and violation under section 13(1)(d) does not result in denial of exemption under section 11 to the total income of the assessee and that where the whole or part of the relevant income is not exempted under section 11 by virtue of violation of section 13(1) (d) of the Act, tax shall be levi....
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.... the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. The only question to be decided in this additional ground is as to whether for violation of provisions of section 13(1)(c) and 13(1)(d), exemption u/s.11 be denied to the whole of the income or will be confined to the extent of income which is in violation of provisions of section 13(1)(c) and 13(1)(d). 69. We find the Hon'ble Bombay High Court in the case of DIT (Exemption) Vs. Sheth Mafatlal Gagalbhai Foundation Trust. [2001] 249 ITR 533 (Bom) has observed as under : "7. . . . . . . . . . . . . . . However, the Legislature inserted a proviso by the Finance Act, 1984, with effect from April ,1985. By the said proviso, it is, inter alia, laid down that where the whole or part of the relevant income is not exempt by virtue of Section 13(1)(d), tax shall be charged on the relevant income or part of the relevant income at the maximum marginal rate, The phrase "relevant income or part of the relevant income" is required to be read in contradistinction to the phrase "whole income" under Section 161 (1A). This is only by way of comparison. Under Section 161 (A), whi....
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....quently, the Hon'ble Karnataka High Court in the case of CIT Vs. Karnataka Industrial Area Development Board has decided the issue in favour of the assessee by observing as under : "2. These two appeals were admitted on 2004.2010 and 16.7.2009 respectively. In ITA NO.557/2008, the following substantial question of law is framed for consideration: "Whether the Tribunal was correct in upholding the finding of the Appellate Commissioner thereafter directing a re-look in respect of the relief claimed u/s.11 of the Act and Section 13(1)(d) of the Act without considering the controversy before it'?" 3. In short, the question for consideration is when there is violation u/s.11 (5) and 13(1)(d) of the Act, whether the exemption is to be withdrawn for the entire income or the portion of the income. This issue is covered by the judgment of the Bombay High Court in the case reported in (2001) 249 ITR 533 (Born). Following the aforesaid judgment, this court in the case of Commissioner of Income Tax, Mangalore Vs. Fr. Mullers Charitable Institutions, Kankanady, Mangalore, in ITA Nos.588 and 589 of 2007 decided on 10.2.2014 has held the entire income of the assesse....
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....) of the I.T. Act. He submitted that this proposition has been accepted by the CIT(A) in the appeal filed for A.Yrs. 2007-08 and 2008-09. Relying on the decision of the Tribunal in the appeal of Shri M.N. Navale bigger HUF vide ITA No.149/PN/2010 order dated 30-03-2012, he submitted that the Tribunal found that these properties are included in the partition decree awarded by the Civil Court, Pandharpur. He submitted that the order of the Civil Court is binding on the Assessing Officer and therefore, in respect of these 2 properties there is no contravention of section 13(1)(c) and no addition can be made u/s.40A(2). 77. So far as the first property is concerned he submitted that the same is owned by Shri M.N. Navale, individual. He submitted that the approach of the lower authorities relying on the decision of Hon'ble Allahabad High Court in the case of Radha Devi Dalmia (Supra) is totally misplaced. In that case, the property was vacant. Therefore, for the purpose of section 22 the notional annual value was required to be decided u/s.23 to be taxed in the hands of the owner of the property. He submitted that if the proposition adopted by the Assessing Officer is accepted then i....
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....is Rs. 90,000/- per month as against Rs. 75,000/- per month paid by the assessee. He submitted that although the assessee has filed a copy of the approved valuer before the CIT(A), however, he has not admitted these additional evidences. He accordingly submitted that the additional ground No.4 be allowed and it be held that the assessee has not contravened the provisions of section 13(1)(c) by paying excess rent to Shri M.N. Navale and M.S. Navale (Bigger HUF). 81. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that since the HUF had never filed any return of income or return of wealth during all the years starting from 1950 till the time of search operation, therefore, the claim of the assessee that the properties belong to the HUF is not acceptable. He submitted that the Assessing Officer had correctly computed the fair rent. Since the assessee by giving excess rent has violated the provisions of section 13(1)(c), therefore, it falls under the mischief of section 13(1)(c). He accordingly submitted that since the orders of the Assessing Officer as well as the CIT(A) are in consonance with the provisions of the Act, ....
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....he existence of the M.N. Navale (Bigger HUF). In this regard it is pointed out that ITAT Pune in its order dated 30/03/2012 has since upheld the existence of the Bigger HUF and therefore, the very basis of the AO's reasoning in invoking the provisions of S. 13(1)(c) does not survive visavis these properties, namely, Flats No. 7,8 &9, Geeta Building, Sion, Mumbai and the property at Warje (NDA Road). I have given careful consideration to this contention of the appellant. The underlying facts have been discussed at great length in my order in the case of M.N.Navale (Individual) for AY 2008 - 09. As mentioned therein, the issue of existence of the M.N.Navale (Bigger HUF) as well as ownership of assets by the HUF had travelled to the ITAT (Pune Bench) in ITA No. 149/PN/2010. In their order dated 30/03/2012, in that case, the jurisdictional bench of Hon'ble. ITAT upheld the existence of the M.N.Navale (Bigger HUF) in the eyes of law, but left the issue of quantification of the income generated by the HUF out of its agricultural holdings to the Ld. AO. That exercise for quantification by the AO of income potentially earned by the HUF and the assets acquired by the HUF out of the same....
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....2(b) of appeal for AY. 2008-09. Hence, the ratio of decision for AY 2008-09 applies equally to this AY too. 6.1 In view of the detailed discussions in my order in the appellant's own case for AY 2008-09, the addition made by the Ld. AO vis-a-vis the properties at Flats No.7, 8 & 9, Geeta Building, Sion, Mumbai and Farm House at NDA Road, Warje, Pune are hereby deleted and the additions in respect of the remaining properties are confirmed. For the same reasons, the applicability of S.13(1)(c) in the appellant's case is hereby upheld since a part of the income of the institution was used during the PY for the benefit of a person referred to under section 13(1)(c). Accordingly, these grounds may be treated as partly allowed. 85. Since the impugned order of CIT(A) was prior to the order of CIT(A) for A.Y. 2007-08 and 2008-09 and since the Revenue has not challenged the order of CIT(A) on this issue for A.Y. 2007-08 and 2008-09, therefore, we hold that the assessee trust has not violated the provisions of section 13(1)(c) by giving rent to M.N. Navale (Bigger HUF) in respect of the properties stated at Flat No.7, 8 and 9, Geeta Building, Bombay and Property at Warje.....
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..... 88. In ground of appeal Nos. 1, 2, and 3 the assessee has challenged the power of Ld.CIT(A) in entertaining uncalled for information provided by the Assessing Officer without issuing notice u/s.251(2) of the I.T. Act. 89. The Ld. Counsel for the assessee submitted that the Assessing Officer in the guise of forwarding his comments on the revised statement of fact and grounds of appeal for A.Yrs. 1999-2000 to 2004-05 provided information about investments made in shares of cooperative banks and shares in public limited companies which are not arising from the assessment order. Further, this information was also not called for by the CIT(A). The Assessing Officer tried to improve upon his assessment order which is not permissible. He submitted that the CIT(A) has legally erred in entertaining this additional information without issuing statutory notice u/s.251(2) of the I.T. Act. He submitted that since the Assessing Officer has furnished the additional information about the contravention of section 13(1)(d) without being required by the CIT(A) which is unprecedented and thereby surpassing the other remedies available u/s.148, 154 and 263 and since the CIT(A) has exceeded his ....
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....rent case. He accordingly submitted that the above grounds raised by the assessee should be dismissed. 92. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the AO in the original order passed u/s.143(3) has not considered the violation of provision of section 13(1)(d) since he has computed the income of the assessee as an AOP and denied the benefit of section 11 and 12. We find the Ld.CIT(A) found that in the appeal order for A.Yrs. 2000-01 to 2005-06 and 1999-2000 it was observed that the assessee had violated provisions of section 13(1)(d) for which it was held to be not eligible for the benefit of section 11. While deciding the present appeal, we find the CIT(A) had given due opportunity of being heard to the assessee to which the assessee had replied. Therefore, the argument of the Ld. Counsel for the assessee that CIT(A) has not given any mandatory notice as per the provisions of section 251(2) is misleading. It is the settled proposition of law that the powers of the CIT....
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....d the seized material and concluded that assessee has received an amount of Rs. 22,45,06,500/- on account of donation for admission to its various courses in different institutes run by it. He submitted that no addition of this magnitude can be made on the basis of the papers found from the premises of Shri M.N. Navale. Referring to various decisions, he submitted that since these papers were found at the residence of Shri M. N. Navale, therefore, there can be no presumption u/s.132(4A) against the assessee trust. Further, no notice u/s.153C was issued to the assessee and the assessment was completed u/s.143(3). Therefore, addition cannot be made on this ground also. Referring to various loose papers bearing Nos. 1 to 101 in Bundle No.2 found and seized from the residence of Shri M.N. Navale, copies of which are placed at pages 23 and 74 of the paper book the Ld. Counsel for the assessee submitted that there is no such details in the seized papers giving the name of the students and for which courses admission has taken place. Therefore, the satisfactory note itself by the Assessing Officer is wrong. Since these papers are not stated in the satisfaction note, therefore, there is no....
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....ubmitted that out of 101 loose sheets there are only 12 pages on which dates are mentioned. The figures marked totalling to Rs. 7,36,90,000/- suggest that the amount is to be deposited in the bank. As explained earlier the amounts deposited was Rs. 35,00,13,395/-. 101. He submitted that the Assessing Officer referring to the letters of recommendation by the members of the public took support to hold that donations are collected. However, in none of these letters there is mention about donation. Only the requests are made for reduction in tuition fees etc. Nonetheless the assessee has no control on these persons. He submitted that even the students recommended in those letters have not been given admission under management quota. This fact is also supported by affidavits filed by the principals of the respective units. He submitted that admissions under the management quota have to be as per the strict procedure involving publication of notice in newspapers etc. He submitted that during May 2005 and July 2005 only old students admitted earlier renewed their admissions. New admissions start from August onwards for the meritorious and eligible students as per the Government directi....
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....sel for the assessee submitted that the auditors have expressed complete satisfaction about books of account maintained etc. The auditors did question the assessee about the alleged collection of donation as per the terms of reference. The assessee replied to the same stating categorically that no such donations at all are accepted. 105. Referring to the copy of the decision of Hon'ble Bombay High Court in assessee's own case for A.Yrs. 2000-01 to 2003-04 vide Income Tax Appeal No.941, 1044, 1045 and 1178 of 2013 order dated 25-03-2015 the Ld. Counsel for the assessee submitted that the Hon'ble High Court in the said case has upheld the decision of the Tribunal quashing the notice issued to the assessee trust u/s.153C. The Tribunal has held that incriminating material seized and stated to be pertaining to all six assessment years did not establish any correlation document-wise with the assessment years in question. The Hon'ble High Court held that if Shri M.N. Navale has invested money in the real estate which is not accounted, that is his return of income which is reflected in the satisfaction note. If there is reference made to some loose papers found and seized from his resid....
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....l the entries. Further, on 19-07-2005 cash collection was around Rs. 16 lakhs. If the cash deposited was Rs. 15 lakhs he could have explained. However, he has not done so. Referring to page 12 of the assessment order, the Ld. Departmental Representative referred to the bold portion at Para 4.4 where the Assessing Officer had mentioned that the explanation of the assessee furnished till date is not at all satisfactory and there is total failure on the part of the assessee to explain the seized material particularly when the relevance and correctness of the evidences contained in the seized material is clearly established. 109. Referring to Para 4.12 of page 15 of the assessment order the Ld. Departmental Representative drew the attention of the Bench to the reply given by the assessee. It was categorically mentioned that as against the total amount of the papers at Rs. 13.41 crores the assessee has deposited Rs. 22.28 crores in various bank accounts. Referring to the said paragraphs he submitted that the Assessing Officer on the contrary has given a finding that for the period from 01-04-2005 to 21-07-2005 the total cash deposits in the bank account was Rs. 8.90 crores while the ....
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....er he submitted that for mistake of one Shri Shahani the assessee cannot he held responsible. So far as the observations given by the Assessing Officer in page 18 of the assessment order is concerned he submitted that the assessee has never denied that those papers did not belong to it. However, it was always explained that these are the fee structure. He submit that all entries are explained. Therefore, there is no question of non-cooperation by the assessee. He accordingly submitted that the assessee has not only explained the various entries in seized document, has also fully cooperated for completion of the assessment. Therefore, the allegation of the Assessing Officer and the CIT(A) is not correct. He accordingly submitted that the addition made by the Assessing Officer and sustained by the CIT(A) should be deleted. 112. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find a search and seizure action u/s.132 of the I.T. Act was conducted at the residential premises of Mr. M. N. Navale, the President of t....
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....A) upheld the action of the Assessing Officer which has been already reproduced at Para 33 of this order. 113. It is the submission of the Ld. Counsel for the assessee that the documents were seized from the residence Shri M.N. Navale and therefore there can be no presumption u/s.132(2A) against the assessee. Further, these loose papers are not stated in the satisfaction note meaning thereby there is no finding of the Assessing Officer that these loose papers belong to the assessee. It is also his submission that a survey u/s.133A was carried out on the assessee trust and nothing incriminating was found or seized. Further, the assessee has explained each and every entry found in the seized documents. It is also his submission that on these loose papers, the figures are written in full digits which otherwise prove that these are informative in nature and no evidence whatsoever has been obtained by the revenue that the assessee has collected donation for giving admission. It is also the submission of the Ld. Counsel for the assessee that acceptance of donation or capitation fee is prohibited under the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987 w....
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....g admissions, we do not find that any inquiries were made. There is absolutely nothing to indicate as to in which educational course, the education is imparted and institution-wise. Whether the admissions are granted to the technical courses merit-wise or on the basis of marks obtained in XIIth Standard HSC exam. If any fee structure is approved and cash component is therefore collected over and above the sanctioned fees are matters which ought to have been gone into and there cannot be a general or vague satisfaction as is relied upon. 7. It is in these circumstances that though Mr. Singh strenuously wanted to reply on the satisfaction note and particularly paragraph 4 thereof, we do not find that reading thereof can carry the case of the revenue any further. Rather it would contradict completely, the stand taken by the authorities. Mr. Navale HUF and Mr. Navale individually as the president of the assessee institute cannot be confused. If Mr. Navale has invested money in the Real Estate and which is not accounted that is his return of income which is reflected in then satisfaction note. If there is reference made to some "on money" receipt during the admission process th....
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....served as under (short notes) : "Mere entries in the seized material are not sufficient to prove that the assessee has indulged in certain transactions. If certain documents were found from the possession of the assessee during the course of search operation, the burden lies on the assessee to explain the nature of the transactions recorded in the seized material. The assessee is duty bound to explain discrepancy, if found, on the basis of seized materials vis-a-vis the books of account. In a seized diary, the assessee had estimated and mentioned the figures for 66 shops at Rs. 2,38,77,000. The assessee had booked 35 shops as on the date of search. Because of the difference in rates as mentioned in the seized paper and the books of account, the Assessing Officer calculated the on-money. The Commissioner (Appeals) and the Tribunal held that on the basis of the loose papers no addition could be made. On appeal : Held, dismissing the appeal, that from the beginning the assessee was stating that the notings appearing in the diary were rough estimates and estimation was made for submission to the bank for obtaining a loan from the bank. The inference of the As....
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.... It is similar to the deposits made for electricity, water or telephone connection etc. These deposits are also not investment but application of income. 121. We find merit in the submission of the argument of the Ld. Counsel for the assessee. We find identical issue had come before the Hon'ble Bombay High Court in the case of CIT Vs. Dr. V.K. Patil Foundation. We find the Hon'ble High Court vide ITA No.1560/2013 order dated 03-12-2013 dismissed the appeal filed by the revenue wherein the Tribunal held that investment made by the assessee in the shares of cooperative bank was not in violation of provisions of section 11(5) and therefore section 13(1)(d) could not be attracted. The relevant observation of the Hon'ble High Court at para 9 of the order reads as under : "9. We find that the only basis of the revenue seeking to deny the benefit of exemption under section 11/12 of the Act is that the share subscription amount is shown as investments in the balance sheet and investments in shares not being a specified mode, the benefit of exemption cannot be granted. It is well settled that the depiction in Books of Accounts is not a determinative test but the factual nature w....
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....efore the proposed question of law could not be entertained. Comparable facts do not exist in the present case. Nevertheless, it is true that the Hon. High Court, which is the jurisdictional High Court, has categorically observed that investment in shares of co-operative banks which is a pre-condition for raising of loans is not an 'investment' as normally understood. It is also true that there is no adverse finding of fact in the impugned assessment order either as regards the fact that the investments were in fact made for raising loans and that loans so raised were utilized for the objects of the trust. In view of these facts, I find the contention of the appellant acceptable and accordingly, hold that section 13(1)(d) cannot be invoked vis-à-vis the investments in shares of cooperative society." 123. In the instant case also the Ld. Counsel for the assessee substantiated that the shares were obtained on account of loans availed. He has also filed a chart showing that after the loans were repaid, the shares were subsequently redeemed in May 2010 and July 2010. Therefore, considering the totality of the facts of the case and relying on the decision of Hon'ble Bombay Hig....
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....ratisthan Vs. DCIT and Vice versa vide ITA Nos. 289/PN/2011 and 312/PN/2011 order dated 31-12-2012 for A.Y. 2006-07 he submitted that the Tribunal in the said decision has examined the issue in detail at Para Nos.13 to 13.5 of the order and held that considering the petty amount in investment in shares it cannot be said that there is any violation of section 13(1)(d) of the I.T. Act. 126.1 In his alternate submission he submitted that at the most dividend earned on these shares only can lose the benefit of exemption. However, there cannot be wholesale denial of exemption. He submitted that this proposition has been accepted by the Tribunal in assessee's own case for A.Y. 1999-2000 in ITA No.113/PN/2010 order dated 18-03-2011. Following the same the CIT(A) decided the appeals for A.Y. 2007-08 and 2008-09 in favour of the assessee. He accordingly submitted that there should not be any denial of exemption u/s.11 for violation of the same. 127. The Ld. Departmental Representation on the other hand heavily relied on the order of CIT(A). 128. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf ....
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....ical observation of the jurisdictional Bench of the Tribunal in para 28 of ITA No.113/PN/2010 in the appellant's own case for 1999-2000. 7.10 The AO is directed accordingly. In view of the above decision with regard to investment in shares of co-operative society and shares of public limited companies, this ground of appeal may be treated as partly allowed." 130. We find the CIT(A) has also followed the same view in A.Y. 2007-08. It was brought to our notice by the Ld. Authorised Representative that the Revenue has not gone on appeal on this issue. 131. While deciding the additional ground No.3 we have already held that there cannot be wholesale denial of exemption of the entire income of the assessee and at the most dividend on shares would lose the benefit of exemption. In view of the above, we restore the issue to the file of the Assessing Officer with a direction to find out the dividend income, if any, out of these shares including that of value of bonus shares that were received/obtained during the year and bring the same to tax. We hold and direct accordingly. Ground of appeal No.8 by the assessee is accordingly partly allowed for statistical purposes. 132.....
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....ds its charitable object is proper application of income for charitable purpose in the hands of the donor trust and the donor trust will not lose exemption u/s.11 of the I.T. Act, 1961 merely because the donee trust did not spend the donation during the year of receipt itself. He accordingly submitted that this ground should be decided in favour of the assessee. 137. The Ld. Departmental Representative on the other hand strongly opposed the admission of this ground which was not raised before the CIT(A). 138. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the CBDT Circular 1132 dated 05-01-1978 cited before us. We find the Assessing Officer disallowed an amount of Rs. 2,50,000/- paid as donation to other educational institutions. The assessee had not challenged the same before the CIT(A) and for the first time the assessee has taken this ground before the Tribunal. In view of the decision of Hon'ble Bombay High Court in the case of Pruthvi Brokers and Shareholders Pvt. Ltd. (Supra) this ground by the assessee is admitted. Since the issue has not ....
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....bmitted that the disallowance made by the Assessing Officer and upheld by the CIT(A) be deleted. 142. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 143. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find on the basis of report of Special auditors the Assessing Officer disallowed an amount of Rs. 4,02,80,770/- on account of violation of provisions of section 40(a)(ia) which has been upheld by the CIT(A). It is the submission of the Ld, counsel for the assessee that disallowance u/s.40(a)(ia) can be made where the income is assessable under the head "profits and gains from business and profession" and it cannot be made since assessee's income is assessed/assessable under the head "income from other sources". 144. We find identical issue has been decided by the Hon'ble Bombay High Court in the case of Bombay Stock Exchange Ltd. Vs. DDIT (E) reported in 52 taxmann.com 29 in favour of the assessee. The relevant observation of the Hon'ble High Court extract....
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....ng followed since the last 15 years. The same explanation was also given by the petitioner in its letter dated November 25, 2011 objecting to the reopening of assessment for the assessment year 2005-06." 145. In view of the decision of Hon'ble jurisdictional High Court cited (Supra) we hold that disallowance u/s.40(a)(ia) of Rs. 4,02,80,770/- is not justified under the facts and circumstances of the case. We therefore set aside the order of the CIT(A) and direct the Assessing Officer to delete the disallowance made u/s.40(a)(ia) 146. So far as disallowance of Rs. 2,44,095/- u/s.40A(3) is concerned the Ld. Counsel for the assessee referring to page 2 of para 4 of paper book No.3 submitted that full details were given regarding the expenses. He submitted that not a single expense has exceeded Rs. 20,000/-. The genuineness of the expenditure has not been doubted. Even otherwise also, even if any item of any expenditure exceeds Rs. 20,000/- no disallowance is called for. For the above proposition, he relied on the decision of Hon'ble Gujarat High Court in the case of Anupam Tele Services reported in 43 taxmann.com 199. 147. The Ld. Departmental Representative on the other hand....
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.... Brokers and Shareholders Pvt. Ltd. (Supra) the ground is admitted. Since the issue has not been examined in the light of the decision of Hon'ble Supreme Court in the case Alom Extrusions reported in 319 ITR 306 and the recent decision of Hon'ble Bombay High Court in the case of Ghatge Patil Transport Ltd. reported in 368 ITR 749, we restore this issue to the file of the AO with the direction to verify the details of payment made to the Government treasury. In case the deposit has been made prior to the date of filing of the return, then in that case no disallowance is called for. The Assessing Officer shall decide the issue as per facts and law after giving due opportunity of being heard to the assessee. This ground by the assessee is accordingly allowed for statistical purposes. 152. Ground of appeal No.12 by the assessee relates to the order of CIT(A) in confirming the action of Assessing Officer in treating the revenue expenditure of Rs. 13,13,661/- as capital expenditure and disallowing the same. 153. The Ld. Counsel for the assessee referring to page 7 para 6 of the paper book drew the attention of the Bench to the details of expenditure. He submitted that all these exp....
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....6-07. For the above proposition, he relied on the following decisions: 1. Nagari Mills Co. Ltd. 33 ITR 681 2. Vishnu Industrial Cases Pvt. Ltd. order dated 06-05-2008 3. ACIT Vs. Hitachi Homes and Life Solutions Pvt. 41 taxmann.com 53 158. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 159. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find on the basis of the recasted final accounts by the special auditors the Assessing Officer disallowed an amount of Rs. 94,84,854/- on account of prior period expenses debited during the year. Since the assessee had not taken any ground before the CIT(A) the same was not adjudicated by him. Since the assessee has taken this ground for the first time before the Tribunal, therefore, following the decision of Hon'ble Bombay High Court in the case of Brokers and Shareholders Pvt. Ltd. (Supra) the same is admitted. 160. It is the case of the Ld. Counsel for the assessee that the assessee has given full details of ....