TaxTMI 
TaxTMI 
2019 (9) TMI 765
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.... of convenience 2. At the time of hearing, the Ld A.R did not press the Cross objections and accordingly all the Cross objections filed by the assessee are dismissed as Not Pressed. In all the appeals filed by the assessee, the grounds numbered as 7 to 9(b) relate to certain legal issues. At the time of hearing, the Ld A.R did not press those grounds. Accordingly, those grounds are also dismissed as Not pressed. The Grounds numbered as 10 & 11 in all the appeals of the assessee relate to charging of interest, which are consequential in nature. The Ground Nos.1, 12 and 13 are General in nature. The remaining grounds urged by the assessee relate to the following additions sustained by Ld CIT(A):- (a) Rejection of claim to exclude income offered by the assessee in the statement taken u/s 132(4) for Asst. year 2010-11 - Rs. 4,00,00,000/- Asst. year 2011-12 - Rs. 6,00,00,000/- Asst. year 2012-13 - Rs. 7,50,00,000/- Asst. year 2013-14 - Rs. 7,50,00,000/- (b) Direction of the Ld CIT(A) to disallow depreciation @ 10% of the above said amounts. 3. In the appeals filed by the revenue, the common issue urged in all the years is - Whether the Ld CIT(A) was just....
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....t aside and that of the assessing officer may be restored." 4. The revenue has also raised specific issues in certain years as detailed below:- Assessment Year: 2012-13:- (a) Whether the Ld CIT(A) was justified in deleting the addition of Rs. 703.00 lakhs and Rs. 554.50 lakhs made for violation of provisions of sec.13(1)(c) of the Act.*** (b) Addition of Rs. 993.00 lakhs relating to payment made for non-specified purposes in cash to contractor, other related concerns, promoters etc. Assessment Year : 2013-14:- (a) Whether the Ld CIT(A) was justified in deleting the addition of Rs. 703.00 lakhs and Rs. 554.50 lakhs made for violation of provisions of sec.13(1)(c) of the Act. (b) Addition of Rs. 4333.00 lakhs relating to payment made for non-specified purposes in cash to contractor, other related concerns, promoters etc. Assessment year : 2014-15:- (a) Whether the Ld CIT(A) was justified in deleting the addition of Rs. 703.00 lakhs and Rs. 554.50 lakhs made for violation of provisions of sec.13(1)(c) of the Act.*** (b) Addition of Rs. 476.00 lakhs relating to payment made for non-specified purposes in cash to contractor, other related concerns, promoters ....
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.... Rs. 25.00 crores may be disallowed from the amount of "application of income" in assessment years 2010-11 to 2013-14 as detailed below:- Assessment years Amount 2010-11 4,00,00,000 2011-12 6,00,00,000 2012-13 7,50,00,000 2013-14 7,50,00,000 ---------------- 25,00,00,000 ============ Consequently, the assessee agreed for disallowance of above said amount from the claim of "Application of income" for the purposes of sec.11(1)(a) of the Act, vide its letter dated 13.09.2013. The assessee also furnished to the AO a revised computation of total income on 14.12.2015excluding the above amounts from the claim of "application of income" alongwith following explanations:- "The Trust has incurred certain expenditures towards construction of building and has made cash payments to contractors and other suppliers. In the search proceedings, on these findings of the department, we have agreed for the disallowance of sum of Rs. 25.00 Crores, out of application of funds of the trust in the capital and other related expenditures. However, we would like to further state that, the above application of funds have been actually incurred towards co....
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....12-13 9,93,00,000 2013-14 43,33,00,000 2014-15 4,76,00,000 ------------------ 58,02,00,000 ============ Since the AO added the above said amount of Rs. 58.02 crores to the total income in the three years cited above respectively, there was no necessity to make addition of Rs. 25.00 crores voluntarily offered by the assessee in AY 2010-11 to 2013-14, since it formed part of the above said amount of Rs. 58.02 crores. It is also pertinent to note that the AO made the above said additions u/s 69C of the Act as unexplained expenditure. 9. The AO noticed that the assessee has paid following amount as unsecured loans to the following related persons in the year relevant to AY 2013-14:- Srinivasa Enterprises - 133 lakhs Sri G Dayanand - 570 lakhs --------- 703 lakhs ===== The AO took the view that the above payments have been made by the assessee in violation of sec.13(1)(c) r.w.s. 13(3) of the Act. The AO also noticed that the assessee has withdrawn cash from bank to make payments to the following persons, which was considered by him as violation of the objects of the trust:- Srinivasa Enterpris....
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....ecisions to hold that the collection of capitation fee is not a charitable activity:- a. Miss Mohini Jain vs. State of Karnataka (1992)(2 SCC 666) b. Islamic Academy of Education vs. State of Karnataka (2003)(6 SCC 697) Accordingly, he took the view that the collection of capitation fee is against constitutional scheme and prohibited by State enactment. Further, as discussed in the earlier paragraphs, the AO had held that the assessee has violated the provisions of sec.13(1)(c) r.w.s 13(3) of the Act. Accordingly, the AO held that the assessee could not be considered as a charitable institution as per the provisions of Income tax Act. Accordingly, he held that the assessee is not eligible for exemption u/s 11 of the Act. In this regard, he also took support of the decision rendered by Hyderabad bench of ITAT in the case of Vodithala Education Society vs. ADIT (2008)(20 SOT 353). Accordingly, the AO did not allow exemption u/s 11 of the Act in all the years under consideration. 13. Before Ld CIT(A), the assessee challenged the validity of search, validity of assessments done u/s 153A of the Act and the validity of approval granted for the assessment. The Ld CIT(A) rejected....
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....e Ld CIT(A) took support of following decision in this regard:- (a) CIT vs. O. Abdul Razak (2013)(350 ITR 071)(Ker) (b) Bhagirath Aggarwal vs. CIT (2013)(351 ITR 0143)(Del) Before Ld CIT(A), the assessee contended that the additions were inadvertently agreed by its trustee on a mistaken notion on both facts and law. However, the Ld CIT(A) rejected the same by observing that the assessee has not retracted from its Statement and by making such a voluntary offer, the assessee has estopped the AO from probing the matter further. Accordingly, the Ld CIT(A) sustained addition to the extent of Rs. 25.00 crores as per the voluntary offer made by the assessee in aggregate, which was spread between assessment years 2010-11 to 2013-14. 16. The Ld CIT(A) further expressed the view that the above said addition of Rs. 25.00 crores represent expenditure for which no bill/voucher was produced, in which case it may also be presumed that the above said amountare in the nature of inflated expenses or amount which was not spent on construction of building at all. Accordingly, the Ld CIT(A) expressed the view that the assessee should not be allowed depreciation on the above said amount of Rs.....
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....he AO has also noticed that the assessee has collected capitation fee under the name of Development Fee, which was in violation of constitutional scheme. Collection of capitation fee has been held to be non-charitable activity. In view of the above cumulative facts, the AO has rejected the exemption claimed by the assessee u/s 11 of the Act. Accordingly, the Ld D.R submitted that the Ld CIT(A) was not justified in allowing exemption u/s 11 of the Act to the assessee. 21. The Ld D.R further submitted that the assessing officer has made addition of Rs. 58.02 crores in aggregate in AY 2012-13 to 2014-15, since the assessee could not prove the application of income of the above said amount before the search officials and also before the assessing officer. The payments have been made by way of cash, which is not susceptible for verification. Further the assessee did not maintain proper vouchers also for the above said payments. Hence the AO has treated the above said amount as application of income for non-specified purposes and accordingly added the same to the total income of the assessee. He submitted that the Ld CIT(A) has deleted the above said additions by making general observa....
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.... with the AO in order to hold so. He submitted that the tax authorities cannot accept part of construction expenses recorded in the books of accounts as genuine and reject part thereof on the reasoning that some portion of construction expenses have been incurred in cash. He submitted that the aggregate amount of construction expenses incurred by the assessee during the financial year relevant to AY 2013-14 was only Rs. 1921 lakhs only, whereas the assessing officer has added a sum of Rs. 4333 lakhs in that year. He submitted that the Ld CIT(A) has rightly appreciated the above said fact and has also noticed that the assessing officer has not furnished the basis for arriving at the figures of above said additions. The Ld CIT(A) has expressed the following view in this regard:- "....The AO should have listed the expenses where the cash has been spent and no supporting vouchers are produced. If the cash payment has been made only to some specified concerns and no bills are produced, the same should have been specified. Without pointing out any particular violation in respect of any particular item of expenditure, it is not possible to sustain the addition. No addition can be made ....
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....ed the explanations given by the assessee in its letter dated 14-12-2015, at least in respect of AY 2010-11 and 2011-12. The ld CIT(A) has recorded a finding that the addition of Rs. 58.02 crores made by the AO in AY 2012-13 to 2014-15 does not have any basis. Hence the very basis on which the AO sought to deny exemption u/s 11 of the Act to the assessee has failed. 28. The Ld A.R submitted that the AO has also taken the view that the assessee has violated the provisions of sec.13(1)(c) of the Act in making payment of Rs. 703.99 lakhs and Rs. 554.50 lakhs. Accordingly, he has added both the above said amounts in AY 2013-14. Accordingly, he has held that these additions will make the assessee to lose exemption u/s 11 of the Act.The Ld A.R submitted that the Ld CIT(A) has accepted the fact that the transactions pertaining to Rs. 703.99 lakhs were related to a group concern and outsiders, i.e., they do not pertain to the assessee. The Ld A.R further submitted that there is no violation of Rule 46A as alleged by Ld CIT-DR, since the assessee did not produce any additional evidence before the AO and has offered explanations on the basis of seized materials only. He submitted that the ....
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....ment fee was not collected from all the students. The Ld CIT(A) has also given finding that the assessee has issued receipts for collection of voluntary donations and has also accounted for the same. Hence the Ld CIT(A) has taken support of the decision rendered by Hon'ble Madras High Court in the case of CIT vs. Balaji Educational and Charitable Public Trust (2015)(374 ITR 0274) in order to hold that the voluntary donations do not partake the character of Capitation fee. He submitted that the facts available in the case of Balaji Educational and Charitable Public Trust is in parity with the facts of the assessee. Accordingly, he submitted that the finding of the assessing officer on alleged collection of Capitation fee is based on surmises and conjectures, without conducting any enquiry. Accordingly, the Ld A.R submitted that this reasoning of the AO given for denying exemption u/s 11 also would fail. 30. The Ld A.R submitted that the assessee has been registered as Charitable Institution u/s 12AA of the Act by Ld DIT(E). The certificate of registration granted to the assessee has not been cancelled by Ld DIT(E). Hence there is no reason for the AO to deny exemption u/s 11 o....
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.... buildings have been duly accounted for in the books of accounts and further they are also supported by the vouchers. (e) The Ld A.R submitted that the assessee has clarified before the AO, in its letter dated 14.12.2015, that there is no reason for agreeing for surrender of Rs. 25.00 crores. The AO also did not make addition, out of the above said amount, in AY 2010-11 to 2013-14. He submitted that it is the Ld CIT(A), who has made the above said addition of Rs. 25.00 crores on the reasoning that the assessee has agreed for the same. (f) Even if it is taken that the addition of Rs. 58.02 crores made by the AO (in AY 2012-13 to 2014-15) would include the amount of Rs. 25.00 crores surrendered by the assessee (in AY 2010-11 to 2013-14), yet the fact would remain that the AO did not make any addition in AY 2010-11 and 2011- 12. Hence the addition made by the Ld CIT(A) in the above said two years would amount to enhancement of income by the Ld CIT(A), which he could have made only after serving notice of enhancement upon the assessee. (g) The explanations given by the assessee in its letter dated 14-12-2015 would amount to retraction. Accordingly, the Ld A.R submitted that ....
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....s the aggregate amount of the amount applied for objects of the trust and the amount accumulated u /s 11(1)(a) not exceeding 15% of income. Under the Explanation given below section 11(1) of the Act, the assessee could postpone the application of income, if it is not able to apply its income for the reasons stated in the above said Explanation. It is also pertinent to note that the provisions of sec.11(2) enables the assessee to accumulate the income, if assessee is not able to apply 85% of its income or is not deemed to have been applied. It can be seen that even if the assessee is not able to apply 85% of its income for charitable purposes, the Act permits the assessee to apply the shortfall in the subsequent years, in which case, the amount so postponed/accumulated is deemed to be income applied to charitable purposes during the year in which the income was derived. Hence, the object of the provisions of sec.11(1), Explanation given under sec.11(1) and sec.11(2) is to enable the assessee to apply its income for charitable purposes only. 36. In the instant case, the assessee was subjected to search operations on 18-07-2013. The assessee is running an Engineering College and a M....
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....and hence non-charitable in nature. All the above said observations and additions made by the AO has led him to come to the conclusion that the assessee is not entitled to exemption u/s 11 of the Act. Accordingly he held that the assessee is not entitled to exemption u/s 11 of the Act. 37. As observed earlier, the Ld CIT(A) held that the addition of Rs. 58.02 crores was not justified, but made the addition of Rs. 25.00 crores surrendered by the assessee. The Ld CIT(A) also held that the assessee would not be eligible for depreciation on the above said amount of Rs. 25.00 crores. The Ld CIT(A) deleted the additions made u/s 13(1)(c) of the Act. With regard to allegation of collection of Capitation fee, the Ld CIT(A) held that the development fee collected by the assessee represents voluntary donation. In view of the decision taken by him on the above said issues, the Ld CIT(A) held that the assessee cannot be denied exemption under section 11 of the Act.Accordingly, the Ld CIT(A) allowed exemption u/s 11 of the Act to the assessee. 38. We shall first take up the appeals filed by the revenue.Before deciding the issue relating to rejection of exemption claimed by the assessee u/s ....
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....ll vouchers and bills which were incurred in cash. The major part of the expenditure stated to have been incurred in cash appears to be for the "Buildings". There is no indication in the assessment order that the Assessing officer attempted to obtain the evidence by issue of notice u/s 142(1). The assessing officer has relied upon the outcome of search proceedings only. The basis for arriving at the figures for disallowance is not discernible from the assessment order. When compared to the expenditure on addition to the building in the Balance Sheet of the appellant and the disallowance made by the Assessing Officer, some peculiar results emerge. Though the caption for addition in the assessment order is "Payment for non-specified purposes in cash to contractors, other related concerns, to promoters etc.", the ultimate addition appears to be only for moneys spent on buildings. No other particular expenditure has been referred to, nor has the concerns to whom payments are made have been mentioned. Quoting of the statement recorded from the Managing Director during search demonstrates that the Assessing Officer concentrated on cash spent for construction only. No other purpose for wh....
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....depreciation is allowed thereon at prescribed rates. The focus in respect of a charitable trust is that it should apply its income for charitable purposes only. Only in case of violation of provisions of sec.13, then the charitable trust shall be liable to lose exemption u/s 11 of the Act and would be liable to pay tax on its total income as computed u/s 11 to 13 of the Act. 41. In the instant case, there is no dispute that the assessee was constructing buildings for its medical college during the years relevant to AY 2010-11 onwards. We have noticed that the amount spent on construction is treated as application of income for the objects of the trust and hence would qualify for exemption u/s 11 of the Act. We have noticed that the assessee has spent its income derived from property held under the trust on construction of buildings and accordingly claimed the same as application of income. The case of the assessing officer is that, during the course of search proceedings, several instances of payments made in cash to contractors, other related concerns, to promoters etc., were found. The AO has taken the view that the cash payments so made represent income applied for non-specifi....
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....deficiency in the maintenance of accounts and vouchers. We notice that the assessee has made above said submissions before the AO, but the AO could not controvert the same by bringing any material on record. 44. During the course of hearing, the Ld A.R submitted that it is not discernible as to how the AO has quantified the amount of Rs. 9.93 crores, Rs. 43.33 crores and Rs. 4.76 crores. The Ld CIT(A) has also observed so. Hence the revenue was asked to furnish the details as to how the above said amounts were arrived. As noticed earlier, the revenue could not furnish the details. 45. Hence, we are of the view that the Ld CIT(A) was justified in holding that the addition of Rs. 9.93 crores, Rs. 43.33 crores and Rs. 4.76 crores made in AY 2012-13 to 2014-15 respectively is without any basis and without pointing any particular violation in respect of any particular item of expenditure. We have also noticed that the assessing officer has not rejected the books of accounts. The submission of the assessee is that its books of accounts have been audited and the auditors have not found out any deficiency in the maintenance of books of accounts or vouchers. In our view, there is merit ....
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....be considered as income not deemed to have been applied for charitable purposes. In that case, it is required to apply the provisions of Explanation given under sec. 11(1) and sec.11(2) of the Act while determining the total income of the assessee, i.e., the assessee should have been given an opportunity to avail the benefits given in the Explanation under sec.11(1) and sec.11(2), since it is the AO who has held that the payments made in cash should be considered as payment for "non-specified purposes."It is also pertinent to note that the provisions of sec. 13 of the Act are not applicable to the alleged application for non-specified purposes". Accordingly, we are of the view that the AO was not justified in assessing the income so considered as spent for "nonspecified purposes", as it is against the scheme of taxation of Charitable trusts. 47. In the instant case, the AO has added the impugned amount of Rs. 58.02 crores, as if it were undisclosed income of the assessee, which is not legally correct.In our view, the amount so applied for purposes other than the objects of the trust shall not represent "undisclosed income" of the assessee, since there is difference between "recei....
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....the record. The Ld D.R contended that the Ld CIT(A) has violated the provisions of Rule 46A by admitting additional evidences. However, the Ld A.R submitted the assessee has ascertained the correct nature of contents of seized materials only subsequently and accordingly, it could offer proper explanations before the Ld CIT(A), i.e, the transactions recorded in the seized material represent transactions entered between M/s Hotel Solitaire and above said persons. We also notice that the assessee has produced bank statement of Hotel Solitaire to show that the transactions recorded in the seized material matches with the transactions entered in the bank statement. Hence the purpose of producing bank statement was only to show that the seized materials do not belong to the assessee. 51. We notice that the Ld CIT(A) has given a clear finding that the transactions recorded in the seized materials do not belong to the assessee. However, since the bank statements were not available before the AO, for the limited purpose of examining the bank statement we are restoring this issue to the file of Assessing officer. However, in principle, we agree with the view taken by Ld CIT(A) on this issu....
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....en the amount was paid to the parties are all missing. Whether the cash withdrawal was made on a single day or is it the aggregate of the amounts withdrawn in a week, a month or a year has also not been specified. To cap it all, the Assessing Officer has made the addition with the caption "Payments made to related persons". But in the discussion part, there is no mention about the purpose of alleged payments. Without such basic details, the Assessing Officer could not have put across to the appellant, whether the same have been entered in the books of account, much less question the violation of the provisions of sec.13(1)(c) and 13(3) of the Act. The withdrawal of cash from the bank is not unusual feature, that too for an institution of the size of the appellant. It is for the Assessing Officer to first find out the link between the cash withdrawal and the possible purpose for which the same has been utilized which has enured to the benefit of specified persons of the appellant. The appellant cannot be asked to answer a bland question. Without doing any such exercise, the Assessing Officer cannot jump to the conclusion that the appellant has failed to explain the transactions. Str....
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....r not. The AO could have also asked explanations from the assessee by furnishing the breakup details. The AO has not carried out any of the above said steps. On the contrary, it is the submission of the assessee that all cash withdrawals made from the bank have been duly accounted for in the books of accounts and no payment, as alleged by the AO, has been made to the above said three persons during the year relevant to AY 2013-14. According to the assessee, it has furnished the above said explanations on the basis of books of accounts. Hence we are of the view that there is merit in the contention of the assessee that the AO has made the impugned addition on surmises and conjectures.Accordingly, we are of the view Ld CIT(A) was justified in deleting this addition. 56. The next issue relates to the rejection of exemption claimed by the assessee u/s 11 of the Act. The AO held so by considering the disallowances made by him, which were discussed above, and also by holding that the assessee has collected Capitation fee under the garb of Development fee. Even though the AO added the development fees collected by the assessee to the total income, it was stated that the AO has rectified....
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....t in his rectification order passed later, which will be adverted to in the subsequent part of this order. With regard to siphoning off of funds in violation of Section 13, the same has been dealt with in the latter part of this order. There is no doubt there is a prohibition contained in Karnataka Educational Institutions (Prohibition of Capitation Fees) Act, 1984 to collect capitation fees by educational institutions and the authorities have been empowered to inspect, enquire and investigate as to whether an institution is collecting capitation fee in contravention of the provisions of the said Act. But the power of inspection etc., is vested with Government of Karnataka. The Income tax Act does not refer to the source of income, but prescribes the manner in which income has to be applied to meet the objects of the Trust. The benefit of Section 11 of the Act can be rejected only when the income of the Trust is applied for the purpose other than the objects of the Trust. The benefit of Section 11 of the I T Act, in so far as the income derived from property held as a Trust, is given on a stipulation that the income shall be applied for the purposes of objects of the Trust and if 8....
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.... faculty etc., to run the institutions to the requisite standard. The Assessing Officer has further referred to the decision of ITAT Hyderabad in the case of Vodithala Education Society vs. ADIT (2008)(20 SOT 353), wherein the ITAT has referred to the decision of the Madras High Court in the case of T.Devasahaya Nadar vs. CIT (51 ITR 20). The appellant has brought out in its written submissions a plethora of case laws to meet the points raised by the Assessing Officer. The very same Madras High Court in the case of COMMISSIONER OF INCOME TAX vs. BALAJI EDUCATIONAL AND CHARITABLE PUBLIC TRUST (2015) 374 ITR 0274 (Mad) has held that so long as there is no involuntary nature of collection, exemption to the trust cannot be denied. The observation of the Madras High Court is extracted below: 7.7 In our considered opinion, based on the loose sheets and cash seized, which have been held as irrelevant to the present issue, it cannot be held that for all the assessment years the assessee received capitation fee for admission of students in the management quota. This is a perverse inference. Without conducting any enquiry in this regard to make allegation is unsustainable. The information....
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.... If the Assessing Officer has tallied the figures then the assessees case of actual contribution to Trust has to be accepted. It has been shown in the return of income. A bald statement in paragraph (7) of the assessment order that the assessee is not carrying on charitable activities for the purpose of Section 13 read with Section 11 of the Act appears to be the mainstay of the department's case. 7.10 In effect, it is clear that the authority has confused himself with the admission of students in management quota with the carrying on activities of the trust. The distinction is obvious that if the department wanted to make out a case of violation of Section 13 of the Act by the trust, it cannot be based on the perception of the Assessing Officer that donations to the trust are not voluntary. We hasten to add that there is no material to support the plea that the donations are not voluntary. 7.11 Having invoked Section 13, the mainstay of the case of the department should be based on the activities of the trust to plead that the same are not in consonance with Section 13 of the Act and, therefore, exemption under Section 11 of the Act should be denied, which we find is aby....
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....n to another. In the instant case, the AO has not brought on record any credible material to prove that the donations were not voluntary. The AO had placed his reliance on the statement given by two persons named Shri K J Pramod and Sri Shivarame Gowda. However, the AO has not allowed the opportunity of cross examining them. Further the statements so given by them is contrary to the books of accounts, i.e., no evidence was found to show that the assessee has collected money outside the books of accounts. It is stated that all the amounts collected by the assessee has been duly accounted for in the books of account. Hence the AO could not have placed his reliance on the statements so given by them. The Ld CIT(A) has observed that the prohibition to collect capitation fee has been implemented by the Government of Karnataka under Karnataka Educational Institutions (Prohibition of Capitation Fees) Act, 1984. The AO has not brought any material on record that any action has been taken upon the assessee under the above Act. All these facts would show that it is the AO, who has taken the view that the development fee collected by the assessee is in the nature of Capitation fee and said vi....
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....y not be able to prove satisfactorily the utilization of funds which have been made in cash. Over all, I wish to admit an amount of Rs. 25 crores being disallowance of expenses and amounts made for construction in the hands of the trust for the different assessment years on the basis of cash withdrawals made and other cash expenses......" Consequent to the admission so made, the assessee furnished a letter dated 14-12-2015 along with a revised computation of income for assessment years 2010-11 to 2013-14 reducing following amounts from "application of income". Asst. Year Amount 2010-11 Rs. 4.00 crores 2011-12 Rs. 6.00 crores 2012-13 Rs. 7.50 crores 2013-14 Rs. 7.50 crores ------------ Rs. 25.00 crores ========= In the letter, the assessee has, inter alia, stated as under:- "The above said disallowance has been accepted by the assessee, since at the time of search, they could not provide all the related evidences in connection with the expenditure made for construction of the college and hospital. We once again reiterate that the above expenditures are actually spent by the assessee and recorded the same in the books of account....
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.... that depreciation is not admissible on the above said addition. Accordingly, he directed the AO to add 10% of the addition agreed towards building for various years towards depreciation disallowance. He also directed the AO to levy tax at maximum marginal rate on the addition of Rs. 25.00 crores and disallowance of depreciation. 66. It is the case of the assessee that its Chairman admitted that he may not be able to prove the utilization of funds spent in cash and he agreed that a sum of Rs. 25.00 crores may be excluded from the amount of "application of income", i.e., it is no undisclosed income warranting a separate addition. The Ld A.R submitted that the assessee has maintained its accounts properly and all the amount spent on construction of building, whether incurred in cash or by way of cheque, have been duly accounted for in the books of accounts. He submitted that the Chairman had agreed to surrender the impugned amount of Rs. 25.00 crores only on an apprehension that he may not be able to prove the utilization. The Ld A.R submitted that the books of accounts, however, depicts actual utilization and hence the apprehension of the Chairman no longer exists. The Ld A.R plac....
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....rations conducted. The explanation of the assessee that the said expenditures were actually spent by the assessee and recorded the same in the books of accounts of the trust maintained in the regular course of operations and that it has agreed for disallowance for the sake of buying peace with the department is not plausible, without any basis and hence is not acceptable. The findings during the course of search operations and the admission of the assessee company that it was not in a position to prove expenses to the tune of Rs. 25,00,00,000/- for various assessment years proves that the funds received were not utilized for the objects of the trust, in clear violation of the provisions of sec.11 of the Income tax Act, 1961. The assessee has also not been able to provide the said supporting documentary evidences even during the course of the assessment proceedings." 69. We noticed that the AO has observed that the assessee has not furnished supporting documentary evidences even during the course of assessment proceedings. The Ld CIT(A), while adjudicating the issue relating to the addition of Rs. 58.02 crores, has observed in paragraph 47 of his order, that there is no indication....
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....and agreed to have their discharged debts excluded from the assets side in the balance-sheet subject to the condition that subsequent recoveries by them would be taxable income, they are now precluded, on the principle of "approbate and reprobate", from pleading that the income they derived subsequently by realization of the revived debts is not taxable income. The doctrine of "approbate and reprobate" is only a species of estoppel; it applies only to the conduct of parties. As in the case of estoppel, it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either eligible to tax under the taxing statute or it is not. If it is not, the Income tax Officer has no power to impose tax on the said income." Hence, mere admission of additional income would not automatically entitle the assessing officer to assess the same, if the assessee disputes the same subsequently with corroborative evidences. 72. The Hon'ble Bombay High Court has dealt with this issue in case of Balmukund Acharya ....
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....unt should be lawfully assessed. An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can be lawfully assessed under the Act. The law empowers the ITO to assess the income of an assessee according to law and determine the tax payable thereon. In doing so he cannot assess an assessee on an amount, which is not taxable in law, even if the same is shown by an assessee. There is no estoppel by conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic). It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law. The Tribunal, therefore, in our view did not commit any error in directing to fix the correct annual letting value of the premises in question, in accordance with the provisions of section 23 of the said Act with reference to the municipal valuation, although such sum was lower than the figure shown by the assessee in his returns of total income." 74. In the instant cases, the Chairman has agreed that an amount of Rs. 25.00 crores may be disa....