AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 896
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....ional Society, M/s Karshak Vidya Parishad and M/s. Church Educational Society. 3. A search and seizure operation u/s 132 of the I.T. Act was conducted in the case of M/s. Aurora Educational Society & Others Group, in which the assessee was also covered. The warrant of authorization was executed on 23.03.2018. In response to notice u/s 153A of the Act issued on 24.12.2018, the assessee filed its return of income on 4.4.2019 declaring total income at Nil. The Assessing Officer in the order passed u/s 143(3) made an addition of Rs.21,19,21,411/- on the ground that the assessee failed to apply 85% of its income towards charitable purposes as mandated by section 11 of the I.T. Act. The learned CIT (A) deleted the addition and Revenue is not in appeal before us, therefore, we are not concerned with the same. However, the Assessing Officer made addition of Rs.11,00,06,345/- as unexplained investment which has been sustained by the learned CIT (A) which is the subject matter of appeal before us. 4. So far as the facts relating to the addition of the above amount of Rs.11,00,86,345/- is concerned, the Assessing Officer noted that the assessee has purchased land at Nandigama admeasuring Ac....
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....urora Educational Society, House No.1-8-27/20 Street No.12, Chikkadapally, Hyderabad. Please confirm and explain the contents? Yes. I confirm that Annexure A/AES/OFF/01 containing loose sheets seized in the premises of M/s. Aurora Educational Society, House No.1-8-27/20 Street No: 12, Chikkadpally, Hyderabad. The said paper contains payments made to land owners towards purchase of 55 acres land at Nandigama. Q.61. Please explain the sources for the above investment made. Ans. I submit that the total cash payments in this property transaction is Rs. 6,62,50,000/- and it is mostly paid during the FY 2016-17 & FY 2017-18. I have already admitted additional income of Rs. 51.33 Crores in response to Q.27 on account of cash receipts received in various property transactions by the society. Part of the cash received is utilised in making these cash payments for the purchase of property. The cash portion ;s not reflected in the books of accounts. " 7. He noted that Mr. N Ramesh Babu has reiterated that M/s Ravi Rishi Educational Society has paid Rs.6,62,50,000/-in cash towards purchase of above property in his sworn statement recorded on 21.05.2018 (Q.No.35). Now, all of a sudden, t....
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....d in cash. The receipts and payments account of the assessee shows Rs.4,65,50,000/- towards payment of Nandigama land in the current year and Rs.2,40,36,155/- in the next year i.e.., AY 2018-19. As per the AD, the total investment towards Nandigama land in both the years works out to Rs.7,05,86,155/-Rs.4,65,50,000/-+Rs.2,40,36,155/-). Since the total amount paid as per the seized document was Rs.18,05,92,500/- as against the amount reflected in the books of Rs.7,05,,86,155/- the AO made addition of difference of Rs.11,00,06,345/-(Rs.18,05,92,500/-, Rs.7,05,86,155/-) as unexplained investment u/s.69 of the Act. The AO has also extracted a copy of the seized document where cash of Rs.6,62,50,000/-was said to have been paid in this transaction in the assessment order. Per contra, the AR contended that once exemption is restored to the appellant, there cannot be any addition as the income is exempt from tax. The AR further stated that the balance amount of Rs.11,00,06,345/- was duly recorded in the Balance sheet under the head 'Advances for Nandigama Land. The AR enclosed Group summary of advance for Nandigama land for FY 2016-17 wherein an amount of Rs.11,02,06,345/- was shown a....
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....cer u/s 143(3) r.w.s. 153A of the Act, without executing the warrant of Authorisation Technical Ground u/s 132 of the Act by the DIT (lnv.). 3. On facts and in circumstances of the case and in law, the initiation of proceedings by the Assessing Officer u/s.153A in the case of the appellant is bad in law in as much as no warrant of search u/s 132 was executed in the case and no panchanama Ground is drawn and that therefore the assessment order passed by the learned AO ought to have been quashed by the Ld. CIT(A) as void abinitio. 4. The Ld. CIT(A) ought to have appreciated the fact that the AO erred in initiatin8 proceedings under section 153A of the act without there being any incriminating Technical Ground material having any financial and tax implication. 5. Ld. CIT(A) ought to have appreciated the fact that the Ld.AO is not justified in making an addition of Rs.11,00,06,345/- as unexplained investment u/s.69 of the Rs. Income Tax Act, 1961 without considering the facts of the case and material 8,15,80,705/- available on record. 6. The Ld. CIT(A) ought to have appreciated the fact that the alleged addition of Rs. 11,00,06,345/- is already part of books of accounts and hen....
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....same and sustained the addition made by the Assessing Officer treating the same as an afterthought. He submitted that when the learned CIT (A) has called for a remand report on the other issue, he could have also called for the remand report on this issue as well. However, he failed to do so. Therefore, once the payment is recorded in the books of account, addition of the same cannot be made u/s 69 of the I.T. Act. For the above proposition, he relied on the following decisions: (i) ITAT Delhi Bench in the case of ACIT vs.Yashovardhan Tyagi in ITA No.5998/Del/2014 (Paper Book Page 18 to 28) (ii) ITAT Bangalore Bench in the case of Income Tax Officer vs. Smt. Teena Bethala in ITA Nos.1383 & 1384/Bang./2019(Paper Book Pages 29-45). 13. The learned Counsel for the assessee in his second plank of argument referring to the various decisions submitted that the addition u/s 68 & 69 cannot be made when the assessee is eligible for benefit u/s 11A of the I.T, Act. 14. He submitted that the Assessing Officer in the instant case had made addition of Rs.21,19,21,411/- on the ground that the assessee failed to apply 85% of its receipts towards charitable purposes as mandated by section 11....
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....hich the assessee was able to explain only an amount of Rs. 7,05,86,155/- towards purchase of land and the balance amount was not recorded in the books of account and the assessee failed to explain the source of the same. We find in appeal, the learned CIT (A) deleted the addition of Rs. 21,19,21,411/- and allowed the benefit of section 11 of the I.T. Act on the ground that the assessee has applied more than 85% of the gross receipts towards its objects and is entitled to the benefit u/s 11 of the I.T. Act and the revenue is not in appeal before the Tribunal. Thus, the assessee is registered u/s 12A of the I.T. Act and enjoys the benefit of section 11 of the I.T. Act. However, the learned CIT (A) sustained the addition of Rs.11,00,06,345/- made by the Assessing Officer u/s 69 of the I.T. Act as unexplained investment in Nandigama land, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the learned Counsel for the assessee that the amount of Rs. 11,00,06,345/- has already been recorded in the books of account under the head "Advances" and therefore, once the amount is recorded in the books of account, addition u/s 69 cannot be made....
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....n be made since additional income will be treated as deemed income entitled to exemption u/s 11/12/12A of the I.T. Act. 19. We find the Hon'ble Delhi High Court in the case of DIT (E) vs. Raunaq Education Foundation reported in 294 ITR 76 has decided somewhat similar issue as to whether the assessee who is entitled to exemption u/s 10(22) of the I.T. Act, 1961 can claim the benefit thereof for the purpose of income deemed to be chargeable to tax u/s 68 of the I.T. Act. In that case, the Assessing Officer held that the undisclosed income could not be exempted u/s 10(22) of the Act and the CIT (A) upheld the view taken by the Assessing Officer. The Tribunal considered the provisions of section 4 & 5 of the Act rws 2(24) and 2(45) as well as section 10(22) of the Act and came to the conclusion that the use of word 'income' in sub-section (22) of section 10 of the Act is wide enough to include deemed income u/s 68 of the Act. When the Revenue challenged the order of the Tribunal, the Hon'ble Delhi High Court dismissed the appeal of the Revenue by observing as under: "6. We find that the words 'derived from' (or some other similar words) do not occur in section 10(22)....
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.... the CIT(A) granted such benefit of deduction/exemption u/s.10(23C)(v) of the Act in respect of such additions u/s.68 of the Act. The CIT(A) relied heavily on various judicial pronouncements while granting the exemption in respect of the entire enhanced income which includes additions made u/s.68 of the Act. The Madras High judgment in the case of Sri Krishna Educational and Social Trust 351 ITR 178 Madras, the Delhi High Court judgment in the case of Raunaq Education Foundation 294 ITR 76 (Delhi), the Cochin Bench of the Tribunal in the case of ACIT vs. Muslim Education Society 1 ITR 527 were cited by the CIT(A) in para 12.4 of his order. Eventually, the CIT(A) held that the assessee is entitled to deduction u/s.10(23C)(v) in respect of income added u/s.68 of the Act. 4. Further, the CIT(A) made other disallowance too out of the donations invoking the provision of section 115 BBC of the Act. This issue shall be discussed when dealing with the Cross Objection by the assessee. 5. Aggrieved with the said relief given to the assessee, the Revenue filed the main appeal. Further, aggrieved with the invoking of the provisions of section 115 BBC of the Act, the assessee filed the Cros....
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.... (23C)-Any income received by any person on behalf of - (v) -any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, [which may be approved by the prescribed authority], having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof;" The words used in the section is "any income" received by any trust is exempt. Therefore, the income of the appellant trust assessed by the A.O. by making addition u/s 68 shall also qualify for exemption. This proposition of law is supported by following decisions. i) Sri Krishna Educational and Social Trust Vs. ITO (2013) 351 ITR 178 (Mad) In this case it has been laid down that addition u/s.68 is not possible when the assessee's income was exempt u/s 10(22) of the Act, unless the Commissioner granting the exemption has withdrawn the same. ii) DIT Vs. Raunaq Education Foundation (2007) 294 ITR 76 (Del) The Hon'ble High Court has concluded that the word "income as occurring in section 10(22) cannot be ....
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.... find from the records that no action has been initiated by the AO to recommend withdrawal of exemption given to the appellant u/s 10(23C)(v) or cancellation its registration u/s 12A of the Act in the light of additions u/s 68 of the I.T. Act, 1961. The appellant trust enjoys the benefit of exemption u/s 10(23C)(v) for assessment years under appeal is an undisputed fact. The AO has not brought on record any material suggesting that the appellant trust was not meeting the conditions given in section 10(23C)(v) of the I.T. Act, 1961. In the assessment order for subsequent A.Y. i.e. 2012-13 AO has not denied exemption u/s 10(23C)(v) where facts are identical. Further, section 10(23C) starts with 'any income'. The case laws relied upon by appellant suggest that 'any income' also includes deemed income added u/s 68 or 69 of the I.T. Act, 1961. As long as the appellant trust enjoys exemption u/s 10(23C)(v), I am of the opinion that any addition made by the AO on account of unexplained cash credits u/s 68 of the Act would also be eligible for exemption u/s 10(23C)(v) of the I.T.Act, 1961. Further, it is also clear that the appellant trust has used the unsecured loans towar....