TaxTMI 
TaxTMI 
2016 (12) TMI 1567
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....f 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 not be applicable where provisions of section 13 a....
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....sessing 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) regardless of cancellation of registration u/s.12AA(3) the benefits of section 11 and 12 were denied by the Asses....
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....OE, 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 anything about the entries in the left hand side which actually reflected the name of various institutes/courses. The....
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....ounts 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 Annexure A-2, cash collection, credits in bank accounts, cash debited to Shri Shendesaheb, cash with marked (->) all tabulated....
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....ions 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 the interest on borrowed funds utilized for acquisition of assets, i.e. when proviso to section 36(1)(iii) was inserted w.e.f. 01-04-2004. In respect of the period prior to this, on being asked by the audit....
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....iven 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 out of the funds generated and siphoned off out of the receipts of the Trust. 21. The Assessing Officer analysed various immovable properties held by Shri M.N. Navale and his family members the details of which a....
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....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 complexity involved in the accounts and the changes to be effected on account of change in the status of the assessee to that of "AOP", special audit u/s.142(2A) has been conducted and the net taxable incomes, for A.Yrs 1999-2000 to 2006-07, have been worked out on the basis of recast accounts and taxed....
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....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 Cooperative Bank Value of shares 2006-07 Dombivali Nagari Sahakari Bank Ltd. 4,96,970 Rupee Cooperative Bank Ltd. 49,750 Sampada Sahakari Bank Ltd. 1,00,000 The Thane Janata Sahakari Bank Ltd. 1,00,000 Total 7,46,720 27. Similarly, the assessee had also made the following investments/advances in violation of section 13(1)(d....
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....ved 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 of provisions of section 13(1)(d)(i) on account of investments/advances made by the assessee to different institutions/trusts are concerned, he held that in view of his decision for A.Y. 2005-06 and the Boards instructions No.1132 the explanation of the assessee that such loans and advances given to others trusts/societies which have been duly registered under the Bombay Public Trust Act, Society Registration Act a....
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....he 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/conclusions drawn by the Assessing Officer regarding right hand side of these documents are being admitted in the assessee's submissions. 8.17 Now, coming to the left hand side of these seized papers; the analysis in the assessment order showed that opening balance of a particular page, then amounts against the names of some institutions controlled by the appellant in abbreviate forms like SKNCOE, SCOE etc. have been me....
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....on 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 Officer has correctly pointed out that unless there were cash receipts; how could there be huge cash deposits in the Bank Accounts and other expenditure etc. as recorded on right hand side of the seized papers. In reply dated 4.2.2009; in respect of bundle A-2, page Nos.31, 43, 45, 71, 83 & 87 (refer para 4.3 of assessment order), the assessee has categorically stated that the huge cash deposits are verifiable from Bank A/c's and also the ....
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....arlier 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 merely rough work or calculations regarding fees collected, daily bank balance, expected generation of money during the next few days and commitment for financial outgoings; which is collected at the various institutes for the sake of information of the management. It is claimed to have been made on a day to day basis, since the central office of the appellant trust for keeping effective control over the working of various units, has to keep a constant track ....
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....ceived. 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 a day to day basis, which could be roughly be termed as cash book only. No one would believe that the entries made on the left hand side of the seized papers which showed specific amounts against the names of various institutes or courses in abbreviated forms on a particular date would be merely a projection or rough calculation or expected generation of fees. For eg., On seized documents No.39 made as Annexure-III of the order, there are as many as 25 entries on the left....
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.... 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 amounts with the actual cash or bank balance of the concerned unit on particular date. However, it was not done. In this connection, it is pertinent to mention here that during Special Audit u/s.142(2A) also, the auditor was asked to tally such entries with respect to the respective Bank Account's. However, the appellant failed to explain anything to the auditor, and, in fact, refused to cooperate. Therefore, the appellant's explanation has rightly been rejected by the Assessing O....
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....n 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. Therefore, some of the payments against the name Shende Saheb cannot be denied by the appellant in the manner which has been mentioned in page No.135 of the paper book shown above. These entries may actually reflect unaccount payments made to Shende Saheb as stated by the Assessing Officer. However. the point being emphasised is that the appellant itself is admitting the correctness of the entries made on the seized documents by way of explaining the entries on the right hand side in the name of 'Shende Saheb', as it has done in respect of entries in seized documents Bundle A-2. page 25, 31. 43. 45. 71. 8....
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....uld 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 inferred by the Assessing Officer that the payment would have gone to the person who has absolute control over the monies collected towards admissions, be it by way of donations I capitation fees, and that person was Shri M.N.Navale, Principal Trustee of the appellant. It was, therefore, concluded that the amounts indicated against the '->' marks were actually taken out by Shri M. N. Navale out of the donations collected. 8.28 With regard to paras 4.12 & 4.13 of the assessment order where it was mentioned that the cash deposited in all the bank accounts of the appellant was Rs. 8.90 crores only whereas as per the seize....
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....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 Officer has not cited these seized papers. 8.30 In the remand report, the Assessing Officer has also met the argument of the appellant that these letters are mostly seeking concessions in fees and not donation. The Assessing Officer has rightly contended that fee concession was not a normal thing, which could have been done on request of a MLA, MP etc. but it was available only to certain categories of students under a very strict guidelines or frame work laid down by Government. It is contended that the normal fees was non-negotiable and it was also as per the Government Regulations therefore it was not the concession in fee whic....
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....ded 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 appropriated by him out of the donations collected by the appellant; which has been correctly treated as the appellant's income. 8.33 The appellant has made another surprising observation in the letter dated 4.2.2009 that if capitation fees was found to have been accepted, the appellant would be liable under Maharashtra Education Institution (Prohibition of Capitation Fee) Act, 1987; but it is of no relevance for the purposes of exemption u/s.11 of the I.T. Act, and since even the donations would constitute income derived from the property held under the trust, the same qualifies for exemption u/s. 11. In the remand report the Assessing Offi....
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.... 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 matter has to be considered by applying the test of human probabilities. Therefore, the Assessing Officer's conclusion that receipts shown in the name of institutes/courses on the left hand side of seized documents were on account of donations received for admissions; is held to be valid for the reasons discussed above, according to which the appellant's explanation was not found to be acceptable. The appellant could not explain these entries either during the assessment proceedings or appellate proceedings, while the majority of the entries on the right hand side of the seized documents were being admitted and also verifiable from the appellant's bank accou....
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....ng 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 Officer in capitalizing the interest and making disallowance u/s.40A(2)(b), 40(a)(ia) and 40A(3) etc. are concerned the Ld.CIT(A) partly allowed the grievance of the assessee regarding capitalization of interest towards the cost of the asset. The relevant observation of the CIT(A) at para 11.7 reads as under : "11.7 I have considered the explanation given with the letters dated 8.12.2009, 11.12.2009 and 19.12.2009 along with the details thereof. Out of the total amount of Rs. 12,58,58,634/- which has been capitalised towards the cost of assets in the assessment order, the amount of interest which is related to working capital loan, vehicle loan and bank commission and charges....
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....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. Further, as discussed above, the Gujarat High Court in the judgment reported in 208 ITR 1005 (Guj.) has upheld the adoption of 8.4% on cost of investments as the fair and reasonable rent. Here, the Assessing Officer has treated 7% as fair rent and disallowed the difference u/s.40A2(b). Though, these two decisions may give an indication for this purpose, these decisions have not been rendered in the context of section 40A(2)(b). Therefore, taking a reasonable view and considering the totality of the facts and circumstances of the matter, including the judicial pronouncements discussed above, it is considered fair reasonable to restrict the disallowance for the excess rent paid to that exceeding 9% of the ca....
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.... 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 of activity or conduct with a set purpose. The assessee is carrying out the activity of running schools and colleges in a regulated manner from which profit is being made in the commercial sense. The assessee is further charging money from the students who are desirous of taking admission. Some part of it is brought into the trust and some part of it is appropriated by the trustees. It is activity for profit. This activity of profit cannot be assessed as business income so long as the assessee has shelter u/s. 11, 12 & 13 of the I.T. Act. The moment this shelter is withdrawn, the income has to be computed in a normal manner as Business income." 11.12 It is further noticed that the appellant is itself claiming depreciation in....
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....ided 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. Ground No.11 relates to treating the donation received towards corpus of the trust as revenue income. It is further stated that denial of exemption u/s.11 cannot change the basic and true nature of the receipt. The appellant has not submitted any specific explanation in respect of this issue in the first submission dated 4.2.2009 except stating that since the registration was restored by the ITAT such disallowances/additions cannot be made. In the special audit report it has been pointed out that the total amount of donation received was Rs. 43,148/-. Though in the Balance sheet enclosed along with return of income this donation has been added, there was nothing on record to suggest that the donations received were corpus donations, so as to qualify....
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....s/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 evidences. 6. On the facts and in the circumstances of the case and without prejudice to the Ground No. 1 to 4 above, the CIT(A) has erred in holding that appellant institution has contravened the provision of section 13(1)(c), by paying excessive and unreasonable rent for the properties owned by Shri. M.N. Navale and M. N. Navale (Bigger HUF) and further holding that appellant has also contravened the provision of section 13(2)(a) and 13(2)(g) of the Act. 7. On the facts and in the circumstances of the case and without prejudice to Ground No.1 to 4 above, the CIT (A) has erred in treating the acquisition of shares in cooperative bank for Rs. 7,46,720/- as in contravention of provision of section 13(1)(d)(i) of the Income Tax Act, 1961 disregarding the fact that this acquisition of share is....
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....d 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:- 1. On the facts and in the circumstances of the case, the order of the Assessing Officer passed under Section 143(3) r.w.s. 153C is bad in law in as much as:- i. he has failed to issue the notice u/s. 153C and make the assessment u/s. 153C r.w.s. 143(3) inspite of stating so in the details of the assessment order, ii. without prejudice to (i) he has failed to record and inform the necessary satisfaction as well as failed to provide the certified true copies of the documents searched and seized in an action taken under Section 132 on Shri. M.N. Navale and iii. he has failed to appreciate that the seized paper is not incriminatory in nature. Additional Ground No.2: On the facts and in the circumstances of the case the order passed by the ACIT, Central Circle 2(2) Pune is invalid and bad in law as the case of the appellant which is with the ACIT Circle....
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....he 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 Assessing Officer issued notice u/s.153C for A.Yrs. 2000-01 to 2005-06 and 143(2) was issued for A.Y. 2006-07. He submitted that the assessment order for A.Y. 2000-01 to 2005-06 passed u/s.153C have been held as invalid by the Tribunal on the ground that no assessment year specific incriminating documents were found. Referring to the copy of the order of the Hon'ble Bombay High court vide order dated 25-03-2015, he submitted that the appeal filed by the revenue has been dismissed by the Hon'ble High Court. He submitted that in case of a non-searched person six preceding years are to be reckoned from the date of handing over of the relevant records, satisfaction note etc. of the said person to his Assessing Officer. Since satisfaction note is dated 18-04-2007, therefore relevant A.Y. is 2008-09. Therefore, six preceding years include A.Yrs. 2002-03 to 2007-08. He accordingly submitted that the assessment for the impugned assessment year should have been passed by....
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....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. Director of Enforcement and Others reported in 155 ITR 166 he drew the attention of the Bench to the following : "Illegality of a search does not vitiate the evidence collected during such illegal search. The only requirement is that the court or the authority before which such material or evidence is placed has to be cautious and circumspect in dealing with such material or evidence. Radha Kishan v. State of U.P. [1963] Supp. I SCR 408; AIR 1963 SC 822 relied on. Where the documents and other materials seized in a search under s.37 of the Foreign Exchange Regulation Act, 1971, do not provide sufficient material for taking further proceedings under the Act, but those documents and other materials are sealed under a warrant of authorization issued under s. 132A of the I.T. Act, 1961, the Enforcement Directorate may legitimately close its proceedings. Merely because no further proceedings are taken, the issuance of the search warrant or the search does not become illegal or invalid,....
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.... 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, notwithstanding that returns for these years have already been processed u/s.143(1)(a). He also relied on the following decisions : 1. Savesh Kumar Agarwal Vs. Union of India r3eported in 35 taxmann.com 85 (Allahabad) 2. Filatex India Ltd. Vs. CIT reported in 49 taxmann.com 465 (Delhi) 50. The Ld. Ld. Departmental Representative further submitted that while the assessee states that Assessing Officer has failed to issue notice u/s.153C but on the other side the assessee is stating in the revised return dated 13-08-2007 that the return is filed in response to notice u/s.153C. This shows that the assessee is not fair in its approach and concealing the facts of the case and presenting the facts in a distorted manner. Referring to the decision of Hon'ble Supreme Court in the case of Kishore Samrite Vs. State of U.P. and others in Criminal Appeal No.1406/2012 dated 18-10-2012 he submitted that the Hon'ble Supreme Court has categorically stated in para Nos. 29 to 36 of the said order that guilty of suppression of materi....
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....r 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 book. In the said satisfaction note, the Assessing Officer has mentioned that notice has been issued u/s.153C for six years, i.e. A.Yrs. 2000-01 to 2005-06 (both inclusive). In the said satisfaction note, he has also mentioned "issue notice u/s.143(2) for A.Y. 2006-07". Since the assessee in the instant case has filed the return of income voluntarily on 0401-2007 and has revised the same on 13-08-2007, therefore, he cannot take shelter of the lacunae on the part of the Assessing Officer for non issue of notice u/s.153C for the impugned assessment year. The various decisions relied on by the Ld. Counsel for the assessee are not applicable to the facts of the present case. Further, the assessee has never challenged for non issue of notice u/s.153C either before the Assessing Officer or before the CIT(A). Since after the search took place at the residence of Shri M.N. Navale, the assessee had voluntarily filed its return of income on 0401-2007 and has revised the same on 13-08-2007 stating that the same is filed in response to notice u/s....
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....e assessee sought information under the RTI Act, 2005 requesting to provide the names of the commissioners who held the charge of CIT-III, Pune during the period 01-04-2005 to 31-03-2006. The CIT-III, Pune by his order dated 06-05-2014 provided the names of those commissioners. In these names, the name of Shri Pradeep Sharma as CIT-III who has passed the corrigendum order dated 28-10-2005 has not been mentioned. 55. He submitted that the Ld. Departmental Representative in the course of hearing filed another copy of corrigendum order along with an enclosure which was not filed earlier. This enclosure shows the copies addressed to other parties including the assessee. The Ld. Departmental Representative also filed the order dated 10-10-2005 passed by the then CCIT, Pune to the effect that Shri Tejinder Sinha, CIT has been sanctioned leave and that Shri Pradeep Sharma, CIT-IV was given charge of CIT-III. This is to support the correctness of corrigendum order signed by Shri Pradeep Sharma. He submitted that in that case this corrigendum order should have been enclosed with the main order dated 10-10-2005 by the CIT in the proceedings conducted u/s.12AA(3). It is also not known as to ....
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....(3) no person shall be entitled to call in question the jurisdiction of Assessing Officer where he has made a return under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or after the completion of the assessment whichever is earlier. The provisions of section 124(4) clearly mentions that subject to the provisions of sub-section (3) where an assessee calls in question the jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section(2) before the assessment is made. He submitted that the assessee filed the return voluntarily and the issue of jurisdiction was never raised before the Assessing Officer or the CIT(A). Therefore, now he cannot question the validity of jurisdiction of the Assessing Officer. 61. As regards the justification of Shri Pradeep Sharma signing the corrigendum order he submitted that Shri Pradeep Sharma might have assumed charge during the leave of the concerned CIT. He submitted that provisions of section 127 does....
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....r the CCIT or the DGIT or the Principal Commissioner or Commissioner etc. as the case may be. As per the provisions of section 124(3) no person shall be entitled to call in question the jurisdiction of an Assessing Officer where he has made a return under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or after the completion of the assessment whichever is earlier. In the instant case the assessee has filed original return of income on 04-01-2007 which he had revised on 13-08-2007. The submission of the Ld. Departmental Representative that assessee has filed return of income on 04-01-2007 before the jurisdictional Assessing Officer who has passed the assessment order could not be controverted by the Ld. Counsel for the assessee. Notice u/s.143(2) was issued to the assessee on 31-03-2007. The assessee filed return of income for the year under consideration along with the returns for other years covered u/s.153C on 13-08-2007. Thereafter notice u/s.143(2) was issued to the assessee on 30-06-2008 which was duly served on the assessee on 01-07-2008. Fu....
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....bmitted that the Hon'ble High Court in the said decision has held that in case of contravention of section 13(1)(d), maximum marginal rate of tax u/s.164(2) is applicable only to that part of income of the trust which has forfeited exemption and not to the entire income. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Bai Dayambai Adamji Rangwala Charity Trust Vs. ADIT(Exemption) reported in 66 ITD 59 he submitted that the Tribunal in the said decision has held that simply because the assessee trust was holding debentures of 3 companies and continued to derive income from such debentures in contravention of section 11(5), exemption u/s.11 cannot be denied to it in a wholesale manner. Referring to the decision of the Hon'ble Madras High Court in the case of CIT Vs. Working Womens Forum reported in 365 ITR 353 he submitted that the Hon'ble High Court in the said decision has held that denial of exemption should only be to the extent of the income which was violative of section 13(1)(d) and not the total denial of exemption u/s.11. Referring to the decision of Hon'ble Allahabad High Court in the case of CIT Vs. Foundation for Social Care reported in 37 tax....
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....er section 11 by virtue of violation of section 13(1) (d) of the Act, tax shall be levied on the relevant income or part of the relevant income at the maximum marginal rate. Therefore, we do not see any reason in interfering with the impugned orders." He also relied on the following decisions : 1. Institute of Science & Management Vs. CIT reported in 25 taxmann.com 186 2. ACIT Vs. Idicula Trust Society reported in 21 taxmann.com 144 3. CIT Vs. Orpat Charitable Trust reported in 230 taxmann 66 4. Jamshedji Tata Trust Vs. Jt. DIT reported in 44 taxmann.com 147 5. Gurdayal Berlin Charitable Trust reported in 34 ITD 489 6. DCIT Vs. Help Age India reported in 133 TTJ 590 7. DCIT Vs. National Association of Software reported in 345 ITR 362 (Delhi) 8. S. Ramaswamy Iyer Vs. CIT reported in 110 ITR 364 (Madras) 9. DIT Vs. N.H. Kapadia Trust reported in 136 ITD 111 He accordingly submitted that there cannot be wholesale denial of exemption u/s.11 of the I.T. Act and only to the extent there is violation as per provisions of section 13(1)(c) and 13(1)(d) the same can be brought to tax at the maximum marginal rate. 67. The Ld. Departmental Representative on the other hand ....
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....d that where any income in respect of which a person is liable as a representative assessee consists of profits of business, then tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate. Therefore, reading the above two phrases show that the Legislature has clearly indicated its mind in the proviso to Section 164(2) when it Categorically refers to forfeiture of exemption for breach of Section 13(1)(d), resulting in levy of maximum marginal rate of tax only to that part of the income which has forfeited exemption. It does not refer to the entire income being subjected to maximum marginal rate of tax. This interpretation of ours is also supported by Circular No. 387, dated July 6, 1984 (see [1985] 152 ITR (St.) 1). Vide the said circular, it has been laid down in para. 28.6 that, where a trust" contravenes Section 13(1)(d) of the Act, the maximum marginal rate of income-tax will apply only to that part of the income which has forfeited exemption under the said provision and not to the entire income. We may also add that in law, there is a vital difference between eligibility for exemption and withdrawal of exemption/fo....
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....ith Sec.31(1)(d) of the Act and what would become the subject matter of assessment is only that income which is the subject matter of violation. In that view of the matter, as the substantial question of law has already answered in favour of the assessee and against the Revenue, we also answer it accordingly and dismiss these appeals." 71. We find the Hon'ble Supreme Court in the case of CIT Vs. Karnatak Industrial Area Development Board vide SLP (C) No.19422/2015 order dated 11-11-2016 has dismissed the SLP filed by the revenue. 72. In view of the above, we are of the considered opinion that whenever there is violation of section 11(5) and 13(1)(d) of the I.T. Act, exemption cannot be withdrawn for the entire income and income which is the subject matter of violation only can be brought to tax. Accordingly, additional ground No.3 by the assessee is allowed. 73. In additional ground No.4 and ground of appeal No.6 the grievance of the assessee is that CIT(A) did not accept certain additional evidences filed during the course of appeal hearing. Since they relate to the same issue, therefore the, above grounds are being decided simultaneously. 74. The Ld. Counsel for the assesse....
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....rmined the fair rent at Rs. 23,885/- per annum. He submitted that the area of the property was 2912 sq.ft. Therefore, the fair rent as per the Assessing Officer works out to Rs. 0.69 paise which is absurd. He submitted that incidentally Govind Chambers is vacated w.e.f. 01-04-2008 and it was subsequently let out to one Shri Sunil Yadav and others vide lease agreement dated 15-12-2010 for a monthly rent of Rs. 1,50,000/-. He submitted that the tenant paid rent for 3 months totalling to Rs. 4,50,000/- and thereafter, the said tenant had to cancel the lease agreement as the corporation did not grant the sanction for conducting the permit room in the said premises. Subsequently, Shri M.N. Navale sold the said premises on 11-03-2011 for a consideration of Rs. 211.60 lakhs. 78. He submitted that the Assessing Officer has not brought on record a single comparative instance to support his view. Therefore, in absence of any such comparable instance it is inconceivable to hold that the payment of rent is unfair or excessive. He submitted that the fair rent needs to be decided from the view point of the tenant who pays the rent. The tenant while giving rent will take into consideration the u....
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....be dismissed. 82. 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 Assessing Officer in the body of the assessment order has held that the assessee trust has given excess rent to Shri M.N. Navale on account of the 3 properties taken on rent. According to the Assessing Officer the assessee trust has taken on rent flat/office at Govind Chambers, Karve Road, Pune on a monthly rent of Rs. 75,000/-, the farm house at Warje, NDA Road, Pune on a monthly rent of Rs. 1,25,000/- and Flat Nos. 7,8, & 9 in Geeta Building, Sion, Mumbai on a monthly rent of Rs. 1,56,000/-. According to the Assessing Officer the fair rent should be equal to 7% per annum of the cost of the property in view of the decision of Hon'ble Allahabad High Court in the case of Radha Devi Dalmia reported in 125 ITR 134. We find the Ld.CIT(A) enhanced such fair rent to 9% of the cost of property. It is the submission of the Ld. Counsel for the assessee that the rent paid to M.N. Navale (Bigger HUF) in respect of the first two properties are outsi....
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....lly held that the Compromise Decree passed by the Civil Court, Pandharpur is sacrosanct and binding upon the department "so far as the quantity allocated by the Hon'ble Court, Pandarpur are concerned:". Having perused a copy of the said Compromise Decree, I find that the properties under contention namely, Flat No.7,8 & 9, Geeta Building, Sion, Mumbai and the property at Warje (NDA Road) are listed as properties of the M.N. Navale (Bigger HUF) which have been partitioned among the smaller HUFs. Such being the facts, respectfully following the decision of jurisdictional bench of ITAT which still holds the field notwithstanding the department's appeal before the Hon. High Court, I hereby uphold the appellant's contention and delete the addition worked out by the Ld. AO on account of excess rent paid to the bigger HUF. It is also correct that the said Bigger HUF does not stand in a relationship specified under section 13(3) of the Act. Therefore, the provisions of section 13(1)(c) will not be attracted vis-à-vis these properties. 6.9. . . . . . . . . . . . . . . . 6.17. In view of the detailed discussions above, the addition made by the Ld. Assessing Officer vis-&agra....
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....ant who pays the rent. Any tenant for that purpose will take into consideration utility, locality, availability, total area of the said property etc. Although the assessee has submitted certain details such as valuers report during the appellate stage, however, we find the CIT(A) has not accepted those additional evidences. It is also his submission that since the rent given to Shri M.N. Navale although may be higher according to the Assessing Officer, however, considering the services rendered by Shri M.N. Navale to the trust free of any remuneration should have also been considered. 87. We find the CIT(A) has directed the Assessing Officer to adopt 9% of the cost of the property at Karve Road as reasonable rent. While doing so, he has also relied on the decision of the Hon'ble Allahabad High Court in the case of Smt. Radha Devi Dalmia reported in 125 ITR 134. In our opinion, the above decision is not applicable to the facts of the present case. In that case, the property was vacant and for the purpose of section 22 of the I.T. Act the notional annual value was required to be decided u/s.23. Under these circumstances the annual value of the property was directed to be determined ....
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....bove proposition the Ld. Counsel for the assessee relied on the following decisions : 1. CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443 (SC) 2. CIT Vs. Shapoorji Pallonji Mistry 44 ITR 891 (SC) 3. CIT Vs. Union Tyres 240 ITR 556 (Delhi) 4. Lokenath Tolaram Vs. CIT 161 ITR 82 (Bombay) 5. S.M. Muzumbar Vs. Ninth ITO 3 ITD 33 6. Saheli Synthetics Ltd. Vs. CIT 302 ITR 126 7. ITO Vs. ACE Engineering Co. Ltd. 119 ITD 81 90. The Ld. Departmental Representative on the other hand strongly opposed the arguments advanced by the Ld. Counsel for the assessee. He submitted that there is absolutely no enhancement of income from what was assessed by the Assessing Officer. The CIT(A) has merely strengthened the order of the Assessing Officer by citing other provision of law including that of the provisions of section 13(2)(a) and (g) and absolutely there is no requirement of issue of any notice u/s.251(2) of the Act in this case. Referring to the decision of the Hon'ble Madras High Court in the case of CIT Vs. Namberumal Chetty reported in 1 ITR 32 he submitted that the Hon'ble High Court in the said decision has held that where income computed did not exceed the income determine....
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....ss such order in the appeal as he thinks fit. 93. The Hon'ble Supreme Court in the case of CIT Vs. Kanpur Coal Syndicate reported in 53 ITR 225 has held that the AAC has plenary powers in disposal of an appeal. The scope of his powers is coterminous with that of the Assessing Officer. He can do what the AO can do and also direct him to do what he has failed to do. Since in the instant case the CIT(A) has given due opportunity of being heard to the assessee on the issue of violation of provisions of section 13(1)(d) and since absolutely there is no enhancement of income by the CIT(A) in view of his decision on this issue, therefore, we find no merit in the above grounds raised by the assessee. The various decisions relied on by the Ld. Counsel for the assessee are distinguishable and not applicable to the facts of the present case. Therefore, the grounds of appeal No.1, 2 and 3 are dismissed. 94. In ground of appeal No.4 the assessee has challenged the order of CIT(A) in denying exemption on the ground of cancellation of registration u/s.12AA(3) by the CIT. 95. After hearing both the sides we find the registration u/s.12A(a) granted earlier by the CIT was cancelled by the CIT in ....
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.... was found or impounded. The President of the assessee trust Shri M.N. Navale and Accountant Shri Sharad D. Bhosale explained that these notings are informative in nature, about collection of tuition fee, hostel fee and other deposits etc. by the various units as well as such tuition fees etc. expected to be collected on the said date. The propriety was to decide and adhere to the schedule of repayment of bank loans for which escrow account is opened. Referring to the statement recorded u/s.131 of Shri Sharad D. Bhosale, copy of which is placed at pages 93 to 104 and the statement recorded u/s.132(4) of Shri M.N. Navale, copies of which are placed at pages 317 to 360 of the paper book, the Ld. Counsel for the assessee submitted that they have explained the admission process and the collection of fees. In their reply given there was no mention of any donation or capitation fee. No corroborative evidence whatsoever was found. There is no iota of evidence that the assessee was collecting donation for giving admission. 99. Referring to pages 121 to 144 of the paper book he submitted that the assessee in its letter dated 26-10-2005 addressed to DIT (Exemption) had explained about the n....
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....ion of Capitation Fee) Act, 1987. Such an act is punishable. However, no such instance has been pointed out by the Assessing Officer. 102. He submitted that although assumption is not allowed however the Assessing Officer made addition of Rs. 22,45,06,500/-. by assuming that the notings of the figures in the lefthand side are nothing but the donations collected while granting admission. Referring to mentioning of "CASH-M" in the bank statement, the Assessing Officer at para 5.12 of the order assumes that the word "M" appears to be identification mark for the cash deposited by Shri M.N. Navale. He submitted that this assumption is baseless since this noting is made by the bank and the said bank should be questioned as to what does it mean. He submitted that the Assessing Officer not only assumed that donations are collected but further alleges that receipts have not been issued and assumes that there is diversion of funds for the benefit of the trustees. While doing so, the Assessing Officer also refers to the payment of Rs. 40 lakhs to M/s. Tushar Fabricators assuming that such amount was not payable. Referring to the various replies given by the assessee during the course of asse....
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....he appeal filed by the revenue. 106. The Ld. Counsel for the assessee also relied on the following decisions : 1. CIT Vs. Khalsa Rural Hospital and Nursing Training Institute 304 ITR 20 2. DIT Vs. Belimaha Mahasamsthana Social Cultural Education Trust 336 ITR 694 3. CIT Vs. Malik Kumar Shah 307 ITR 137 4. CIT Vs. Girish Choudhary 163 taxmann 608 107. Referring to the decision of the Pune Bench of the Tribunal in the case of Pradeep Runwal Vs. TRO vide ITA No.334/PN/2010 order dated 3005-2014 and the decision of the Hyderabad Bench of the Tribunal in the case of DCIT Vs. K. Baburao vide ITA Nos. 329 to 335/Hyd/2012 order dated 2401-2014 he submitted that there cannot be any addition unless there is any corroborative evidence. He accordingly submitted that the addition made by the Assessing Officer should be deleted. 108. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that the papers were seized from the residence of the managing trustee Shri M. N. Navale at the time of search. During the course of search cash amounting to Rs. 1.25 crores was found which could not be explained by Shri M.N. Navale for which the cash....
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....ssessee was collecting donation for admission. If assessee is not charging donation why somebody would write letter to the assessee recommending for accepting reasonable donation or concession in fees. He submitted that the CIT(A) at para 8.19 onwards (page 50) of the order has given his categorical finding as to how the assessee was changing his stand from time to time. Since the order of the CIT(A) is a reasonable one he submitted that under the facts and circumstances of the case the order of the CIT(A) should be upheld and the ground raised by the assessee should be dismissed. 110. The Ld. Counsel for the assessee in his rejoinder submitted that assessee has not changed its stand. Cash of Rs. 1.2 crores seized from Shri M.N. Navale is nowhere concerned with that of the assessee trust. So far as the observation of the CIT(A) that the assessee could not explain the mark he submitted that the fact remains that assessee has deposited the money in the bank account. He submitted that without confronting the students or their parents or in absence of any positive evidence the Assessing Officer cannot make an allegation that assessee has charged donation/capitation fee for giving admi....
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....le A2 reflect the true state of affairs and the pages are genuine. He noted that in the said documents on the lefthand side the assessee has written the names of the institutions where admissions have taken place and from where the money has been received. These according to the Assessing Officer are the cash collections at the head office on case to case basis for admission in different courses. The cash deposits mentioned on righthand side were duly verified from the bank accounts in Thane Janata Sahakari Bank or Central Bank of India and these deposits were verifiable from the bank account. This according to the Assessing Officer proved that the entries recorded in the seized documents reflected the true state of affairs. Therefore, he inferred that the papers found during the course of search give true state of affairs of the assessee trust. Since the assessee was unable to explain the notings on the lefthand side the Assessing Officer inferred that assessee failed to explain anything about the entries in the lefthand side which actually reflected the names of various institutions/courses. The explanation of the assessee that these were for the purpose of periodical review of f....
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....sessment order and the order of the CIT(A) we find that not a single student/parent was examined to establish that assessee trust has received any amount as donation/capitation fee for giving admission to the students. There is absolutely no evidence whatsoever on record to suggest that assessee trust has given admission by accepting donation/capitation fee. There is also nothing on record to suggest that any student recommended by the members of the public whose letters recommending admission or reduction in fees/donation have been relied on by the AO has taken admission by giving Donation/Capitation fee. We find merit in the argument of the Ld. Counsel for the assessee that the assessee has no control about the manner of writing by the persons of the public while recommending for admission or reduction in tuition fees etc. Acceptance of donation or capitation fee is prohibited under the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. Therefore, accepting donation/capitation fee for giving admission to any of the courses is a punishable offence. However, nothing is found from the record to suggest that the Assessing Officer has made any such complai....
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....M.N. Navale has referred to the details of seized documents and has corrected the arithmetical error and concluded that the amount of donation comes to Rs. 10,15,22,340/- (as against Rs. 22,04,31,020/- held by him in the assessment order). From the various details furnished by the assessee in the paper book we find the amounts received during the period shown on all loose papers comes to Rs. 18,09,68,420/- whereas the total amount deposited during the same period in the bank accounts of various units comes to Rs. 24,05,96,921/- (as per para 76 of the paper book). This total deposit covers all the amounts which are marked with '->'. Therefore, the allegation of the Revenue that the Managing Trustee and other trustees have siphoned off money of the Trust is not correct. 117. We find the Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Khalsa Rural Hospital and Nursing Training Institute reported in 304 ITR 20 has observed as under (short notes) : "The assessee-trust was running a rural hospital and training institute for nurses. During the course of assessment proceedings u/s.143(3) of the Income-tax Act, 1961, for the assessment year 1997-98, the Assessing Officer notic....
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..... The Assessing Officer had no evidence with him to support his conclusion. The assessee has worked out the floor-wise rate of the shop on the seized paper but it was not possible that every shop could be sold at that price and while selling the shops, many purchasers may pay advance money. Therefore, the rates of all the shops at the time of actual sales could not be the same as estimated in the seized paper. The amount mentioned along with rates per square foot of different floors on the loose paper was in respect of an estimate for the loan from the bank. No other evidence had been shown to justify that these amounts were received from purchasers. The concurrent finding was that on the basis of these loose papers, no addition was justified. Thus, there was no interference called for in the order of the Tribunal. The Supreme Court has dismissed the special leave petition filed by the Department against this judgment." 118.1 In the light of the above discussion and relying on the decisions cited supra we are of the considered opinion that the Ld.CIT(A) was not justified in upholding the addition of Rs. 22,45,06,500/- made by the Assessing Officer on account of donation collecte....
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....an and the amounts so obtained were used for furtherance of the objects of the trust. There is also no dispute about the fact that loans taken from the said two cooperative banks were not completely repaid in the Assessment Year 2008-09 and, therefore, the assessee would be required to hold the shares to continue as member of the cooperative societies running the banking business. Besides, on identical facts, the revenue has granted the benefit of exemption under section 11/12 of the Act for the Assessment Years 2006-07, 2009-10, 2010-11 and 2011-12 on scrutiny assessment under section 143(3) of the Act. Thus there is no reason to deny the benefit of exemption under section 11 of the Act for Assessment Year 2008-09. Besides, the finding of the Tribunal is a finding of fact." 122. Similar view has been taken by the Tribunal in the case of Patangrao Kadam Pratisthan vs. DCIT and vice versa vide ITA No.289/PN/2011 and 312/PN/2011 dated 31-12-2012 and various other decisions relied on by the Ld. Counsel for the assessee. We further find the CIT(A) following the decision of Hon'ble Bombay High Court in the case of Vikhe Patil Foundation (Supra) has held in his order for A.Y. 2008-09 in....
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....tes to denial of exemption u/s.11 on account of contravention of provisions of section 13(1)(d) on account of investment of Rs. 1,50,000/- in shares of Public Limited Companies. 125. The Ld. Counsel for the assessee submitted at the outset submitted that this issue does not arise from the assessment order. The Assessing Officer had provided this uncalled for information and tried to improve upon his assessment order which is impermissible in law. The CIT(A) also has erroneously admitted this information. Referring to pages 101 to 108 of the paper book No.1 the Ld. Counsel for the assessee submitted that the assessee has purchased 220 shares in different companies. He submitted that the assessee conducts courses on business management namely, MBA, MCA, DBM etc. The syllabus include teaching and learning of provisions of Companies Act, 1956 relating to presentation and finalisation of accounts, audit, analysis of various statements, directors report, auditors report, relevant resolutions etc. which enable the students to prepare and present their projects. The assessee gets all these details from these companies including the annual reports which are kept in the library. Therefore, ....
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....sment years the CIT(A) observed that the assessee has violated the provisions of section 13(1)(d) of the I.T. Act by investing in shares in the listed blue chip companies. Therefore, the assessee is not entitled to the benefit of provisions of section 11. It is the submission of the Ld. Counsel for the assessee that the assessee trust is conducting courses on business management namely, MBA, MCA, DBM etc. for which the audited accounts of different companies are required for the benefit of the students and therefore considering the miniscule amount invested in the shares of these companies for Rs. 1,50,000/- it can be considered as application of income and not an investment. It is also his alternate submission that there cannot be wholesale denial of exemption u/s.11 and at the most the dividend earned on these shares should lose the benefit of exemption. 129. We find some force in the alternate argument of the Ld. Counsel for the assessee. The Pune Bench of the Tribunal in assessee's own case in ITA No.113/PN/2010 order dated 18-03-2011 for A.Y. 2009-10 at Para 28 of the order has held that denial of exemption has to be restricted to the relatable income in view of the specific ....
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....e of the considered opinion that the same will partake the character of revenue income. The ground raised by the assessee on this issue is accordingly dismissed. 134. In ground of appeal No.10 the assessee has challenged the order of CIT(A) in sustaining the disallowance of Rs. 2,50,000/- on account of donation paid. 135. The Ld. Counsel for the assessee submitted that this ground has remained to be taken before CIT(A). Referring to the decision of Hon'ble Bombay High Court in the case of CIT Vs. Pruthvi Stock Brokers and Shareholders Pvt. Ltd. reported in 349 ITR 336 he submitted that the Hon'ble High Court in the said decision has held that the assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. The appellate authorities have the discretion to permit such additional claims to be raised. They have the jurisdiction to deal not merely with additional grounds which became available on account of change of circumstances of law but with additional grounds which were available when the return was filed. The words "could not have been raised" must be construed liberally and n....
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....o.1132 dated 05-01-1978 and the order of the CIT(A) for A.Yrs. 2003-04 and 2007-08 to 2009-10. This ground by the assessee is accordingly allowed for statistical purposes. 139. Ground of appeal No.11 by the assessee relates to addition made on the basis of recasted final accounts by the Special auditors on account of violation of provisions of section 40(a)(ia) amounting to Rs. 4,02,80,770/-, u/s.40A(3) for Rs. 2,44,095/- and u/s.36(a)(va) for Rs. 31,30,020/-. 140. So far as the disallowance of Rs. 4,02,80,770/- u/s.40(a)(ia) is concerned the Ld. Counsel for the assessee referring to pages 51 to 71 of the paper book No.3 drew the attention of the Bench to the nature of disallowance u/s.40(a)(ia) as per the report of the special auditor. He submitted 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". Such disallowance cannot be made since the assessee's income is assessed/assessable under the head "income from other sources". 141. Referring to the decision of the Pune Bench of the Tribunal in the case of Vidya Pratisthan Vs. DCIT vide ITA No.1300/PN/2007 and bunch of other appeals for A.Y. 20....
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.... Chapter IV with the heading "Computation of total income". The relevant portion of section 40 of the Act reads as under: "40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business or profession'- (a) in the case of any assessee- ... (ia) any interest, commission or brokerage, (rent, royalty) fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 :" (Emphasis Supplied) It is clear that section 40 applies to deductions claimed in computing the income chargeable under the head "Profits and gains of business or profession In the present case, admittedly, the income of the petitioner is exempted under section 11 of the Act. The petitioner is not carrying on any ....
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....e Assessing Officer or CIT(A). Under these circumstances, we deem it proper to restore this issue to the file of the AO with a direction to verify the payments made to different persons. In case there is no payment exceeding Rs. 20,000/- at a time to any of the parties as stated by the Ld. Counsel for the assessee at the Bar, then provisions of section 40A(3) cannot be invoked. The Assessing Officer shall accordingly decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The above issue is accordingly allowed for statistical purposes. 149. So far as disallowance of Rs. 91,31,020/- u/s.36(1)(va) on account of delayed payment of PF is concerned the Ld. counsel for the assessee submitted that this ground was not taken before the CIT(A). Referring to the decision of the Hon'ble Bombay High Court in the case of Pruthvi Brokers and Shareholders Pvt. Ltd. (Supra) he submitted that this ground should be admitted. Referring to page 6 para 5 of paper book No. 3 he submitted that the PF due has been deposited before the due date of filing of the return. Referring to page 72 of the paperwork No. 3, he drew the attentio....
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....ofa cushions, curtains, mechanical lab consumables, expenses for rods, wires, screws etc. which have been treated as capital expenditure by the special auditor. Referring to the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Asahi Safety Glass reported in 15 taxmann.com 382 he submitted that these items cannot be treated as capital in nature. 154. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 155. After hearing both the sides, we find this issue has not been properly examined by the Assessing Officer. From the list of details we find some of the items which are revenue in nature has been treated as capital in nature. We therefore restore this issue to the file of the Assessing Officer with a direction to reexamine the issue in the light of the decision of Hon'ble Delhi High Court in the case of CIT Vs. Asahi Safety Glass (Supra). The Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. This ground by the assessee is accordingly allowed for statistical purposes. 156. In Ground of appeal No.13 the assessee has challenged the order of the CIT(A) in co....
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....unts on the mercantile basis did not make any entry towards bonus for the calendar year 1951, but, on a dispute regarding bonus payable to the workers for that year being referred to the conciliation board, the board, by its award in June, 1952, directed the company to pay bonus out of the profits for that year, and the company in making the return claimed to deduct for the year 1951, the bonus which it distributed in December, 1952, against the last item of Part IV of the income-tax return: Held, that as under section 10(5) of the Income-tax Act actual payment was not necessary for the purpose of deduction and it was sufficient if the liability to bonus was incurred according to the method of accounting upon the basis of which the profits or gains were computed, the company was entitled to the deduction under section 10(2)(x) of the bonus paid from the profits for the year 1951, even though the amount had not been entered in its accounts for that year. 161. We find the Ahmedabad Bench of the Tribunal in the case of Hitachi ACIT Vs. Home and Life Solutions (India) Ltd. reported in 41 taxmann.com while deciding an identical ground has observed as under : "14. For the ground no.....