AI Drafter 
TaxTMI 
TaxTMI 
2023 (9) TMI 148
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....ming the addition of Rs. 65,94,957/-on account of alleged difference in the "interest Income" as per Form No. 26AS and as per books of accounts as he failed to consider that higher interest income, has been disclosed in the earlier years and later years while filing the return of income. 3. Notwithstanding the above said grounds of appeals,, the CIT(A) have failed to appreciate the fact that even after the confirmation of above addition on account of embezzlement and difference of interest income as per 26AS, there is much more application of income as per the chart submitted to him during the course of appellate proceedings and, thus, the action of the Assessing in not allowing the exemption u/s 11 and taxing the income 'AOP' is not justified. 4. That the CIT(A) has failed to appreciate the fact that the assessee society is registered u/s 12A of the Income Tax Act by the CIT, Bathinda vide order, dated 30.05.2006 w.e.f. 1.4.2003. 5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off." 1.2 ITA No. 534/Chd/2019 is the Cross Appeal of the Department for the same year. 1.3 Th....
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....op that the Apex Court has only dismissed in 2019 the SLP filed by Revenue against a contrary judgement by the Hon'ble Gujarat High Court in the case of CIT(E) Vs. Bochasanwasi Shri Akshar Purushottam Public Charitable Trust reported in 102 taxmann.com 122(2019) which dismissal cannot be applied as res judicata in the instant case of the assessee." 2.0 The brief facts of the case are that the assessee is a Society registered under the Societies Registration Act (XXI of 1860), vide registration No. 328 of 1982-83, dated 19.08.1982. The Society is also registered u/s. 12AA of the Income Tax Act, 1961 (hereinafter called 'the Act'), vide order dated 30.05.2006. 2.1 As per the Memorandum of the Society, the main object of the society is to spread and propagate religious and spiritual teachings of 'Sant Baba Farid'. The Society is running a College under the name and style of 'Baba Farid Law College' at Faridkot and a school named 'Baba Farid Public School', Faridkot. The Society is also managing a Gurudwara in the name of 'Gurudwara Godri Sahib' at Faridkot. 2.2 The return for the captioned year was filed, declaring income at Rs. NIL. The case was picked up for scrutiny un....
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....f 94 years of age. It was further submitted that at the time of the embezzlement, he was of 87 years of age. It was further submitted that, although, he is still actively engaged in looking after the affairs of the society, two employees of the society manipulated certain bills of expenditure by manipulating the amounts payable to the various vendors by increasing them and got the cheques against those manipulated bills signed by the President of Society and managed to embezzle those funds during two Financial Years i.e. 2014-15 and 2015-16. 3.1 It was further submitted that this embezzlement was discovered only at a later stage when the two employees left their employment with the assessee-society and went on to settle abroad and new staff was appointed. The ld. AR of the assessee submitted that the assessee-society, thereafter, lodged an FIR and on the basis of such FIR, the two ex-employees were brought back by the Police from outside India and the recovery of funds were made from them during the captioned assessment year to the tune of Rs. 52,73,232/-, which was credited to the consolidated Income and Expenditure Account. Our attention was also drawn to Page 5 of the Paper B....
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.... of M/s Pawan Specialties (P) Ltd. in ITA No.809/JP/2016 and it was submitted that the aforesaid Circular of the Board has been relied upon by the Jaipur Bench in this case and the loss from embezzlement has been allowed as a deduction. Our attention was also drawn to the judgment of the Hon'ble Allahabad High Court in the case of Sheetla Prasad Ramlal vs. CIT reported in 188 ITR 514, wherein, in view of above mentioned Circular issued by the Board, the loss on account of embezzlement made by the employees was held to be as incidental to carrying out of business. 3.6 Drawing our attention to the order of the ld. First Appellate Authority on the issue, it was submitted that after considering the written submissions of the assessee, the ld. First Appellate Authority had called for a remand report and, thereafter, had also sought some clarifications from the Assessing Officer. In the remand report, the Assessing Officer has admitted that the assessee has submitted copies of embezzled bills. 3.7 The ld. Authorized Representative of the assessee submitted that as argued earlier, admittedly, the ld. First Appellate Authority has given a finding in Para 6.2 of the impugned order....
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....ot justified. 6.0 In response to the arguments advanced by the ld. AR, the ld. CIT (DR), who supported the orders of the Assessing Officer as well as of the ld. First Appellate Authority, argued that the assessee was not carrying out any business. It was engaged in charitable activities and, therefore, the loss on account of embezzlement cannot be allowed. 6.1 Regarding the arguments of the ld. AR with regard to interest income, the ld. CIT(DR) argued that each assessment year is an independent assessment year and the income earned or accrued is to be taxed in that particular assessment year only. It was submitted that even if the assessee had disclosed higher interest income in earlier assessment years on its own, the benefit of set off against interest income accrued during the captioned assessment year cannot be given. It was submitted that whatever income had accrued to the assessee as per Form-26AS, has to be assessed and taxed in that year only and that the ld. First Appellate Authority had rightly sustained the addition. 7.0 Arguing for the Departmental Appeal, the ld. CIT(DR) submitted that although the Department has raised as many as three grounds of appeal, but ....
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....so placed reliance on certain other judicial precedents, the copies of which have been filed in Paper Book. The same have been taken on record and the same will be duly considered while adjudicating the issue. The ld.AR submitted that in view of the various judicial precedents, the ld. CIT(A) had rightly deleted the addition. 9.0 We have heard the rival contentions and have also perused the records as well as the paper book and the judicial precedents filed by the assessee in support of the various contentions. We have also perused the orders of the lower authorities. We now take up the various grounds raised one by one. 9.1 As far as the assessee's appeal is concerned, Ground No.1 of the revised grounds of appeal challenges the confirmation of addition of Rs. 49,09,290/- on account of embezzlement of funds by the employees. As is evident from the orders of both the lower authorities, the fact of embezzlement has been accepted by the Assessing Officer as well as the ld. CIT(A). It is also a fact on record that the ld. CIT(A) has allowed relief in part on account of the recovery made against such embezzlement. It is seen that the ld. First Appellate Authority had called for tw....
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....y dacoity was an admissible deduction. Undisputedly, no doubt has been cast on the embezzlement of funds and we are of the considered view that loss of Rs. 49,09,290/- is a revenue loss and the same deserves to be allowed. Therefore, this ground of the assessee's appeal stands allowed. 9.4 As far as assessee's ground no.2 is concerned, this ground challenges the confirmation of addition of Rs. 65,94,957/- on account of difference in interest income as per Form-26AS and the income disclosed in the return of income. The difference, as pointed out by the Assessing Officer, has not been disputed by the ld. AR. The argument of the ld. AR that the assessee has declared higher interest income in earlier years, and, therefore, the same should be set off in this year does not find favour with us. All the same, as has been stated by the Authorized Representative that the assessee has moved application u/s. 154 of the Act for AYs. 2013-14 and 2014-15 before the Assessing Officer to assess the correct income/interest in accordance with Form-26AS, we direct the same may be considered sympathetically after due examination of the various evidences. However, for the captioned assessment year, w....