2024 (6) TMI 794

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....n of the Ld. Assessing Officer denying exemption u/s.11 in the teeth of provisions of section 13(2)(a) of the Income-tax Act, 1961, which allows lending subject to adequate security and interest. 3. In the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax (Appeals) has erred in confirming addition of Rs. 45,26,830/- on the ground of non-charging of interest on advance paid for purchase of property. 4. The impugned order is bad in law and on facts. 5. The appellant reserves the right to addition, after or omit all or any of the grounds of appeal in the interest of justice. 2. The Brief facts of the case and submissions of the assessee, as furnished by the Ld. AR in the form of synopsis are extracted as under: a) The appellant is a charitable institution set up for advancement of education and registered u/s.12A and u/s.80G of the IT Act, 1961. b) Return of income for A.Y. 2016-17 was filed on 15/10/2016, declaring total income at Rs. NlL after claiming exemption u/s.11. c) Assessment u/s 143(3) was completed on 28/12/2018 and total income was assessed at Rs.2,36,88,981/-. d) The enhanc....

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....o allow the reconsideration of an issue for a subsequent assessment year if the same "fundamental aspect" permeates in different assessment years. (iii) Highways Construction co. vs. CIT [199 ITR 702- (Gau)]- interest income on notional basis cannot be subjected to tax. (iv) ClT vs. Shoorji Vallabhdas and co., [1962] 46 ITR 144 (SC)- income-tax cannot be levied on hypothetical income. Accordingly, it is humbly prayed that the appeal may kindly be allowed in the interest of justice. 3. Grounds of appeal no. 1, 2 and 3 raised by the assessee, are inter linked, thus are discussed and deliberated commonly as follows: 4. At the outset on this issue, it was the submission of Ld. AR that the entire surplus i.e., excess of income over the expenditure of the assessee society has been treated as assessable income. Ld. Assessing Officer, on the basis of certain disallowances on arbitrary basis without considering the facts that the interest on outstanding advances was not charged by the assessee from the person specified u/s 13(3), thus, the same was notionally calculated @12% p.a. amounting to Rs. 45,26,830/-. It is the submission of Ld. AR that whether the e....

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....the Ld AO are rendered arbitrary, without basis and bereft of any substance, expressly when the transaction was authorized by Ld CIT(E), Bhopal as commercial in nature. In back drop of such facts, charging of interest on such transaction is out of question, moreover, the calculation of notional interest on such transaction and to bring the same in the ambit of assessable has income is extraneous, thus, not justified. In support of contention raised by the Ld. AR following case laws were relied upon. i. Satna Diocesan Society vs. ACIT- ITA No.124/Nag/2018 dt. 08/11/2019- when payment for land was accepted by the Revenue in earlier years and in subsequent years, a different view in isolation is not called for- provisions of sec. 13(1)(d) cannot be invoked. Relevant observations of the Tribunal in the said order was as under: It is Assessee's contention that the advance for purchase of land was given in earlier years i.e., 2011-12, 2012-13 and 2013-14 and in the assessment framed u/s. 143(3) of the Act, the same has been accepted by the Revenue. It is further contention of assessee that for subsequent years also, advance paid by the assessee towards purchase of land ....

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....nd relied upon the order of Ld. AO and Ld. CIT(A) in this respect. 9. We have considered the rival submission, perused the material available on record and case laws placed before us for our consideration. Under the facts and circumstances of the present case, wherein certain advances were extended by the Assessee's society to specified person covered u/s 13(3) of the Act for the purchase of land without any interest or security, which according to Ld. AO was in the nature of transaction attracting provisions of section 13(1)(c) r.w.s. 13(2)(a). It is also an admitted fact that the transaction of purchase has been accepted by the department in the earlier years when the advance was actually provide, for which no disallowances was imposed either in the earlier AYs or in the relevant AY. Only a notional amount of interest @12% has been computed on the outstanding advance and added to the Income of the assessee, which for the year under consideration was Rs. 45,26,830/-, considering the transaction in violation of provisions of section 13(1)(c) r.w.s. 13(2)(a) of the Act. Ld AO under his on belief have utilized, such so called violation of provisions of section 13(1)(c) r.w.s. 13(2....

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....ed person, the provisions of sec. 13(2)(a) thus cannot be triggered on such transactions. 12. We, in view and aforesaid observations, are thus of the considered view that in terms of facts and circumstances of the present case when the advances made towards purchase of land has been accepted by the revenue in earlier year and also in the relevant year and no addition qua the advances was proposed in the assessment in impugned orders. Impugned advances were further held as genuine and normal business transaction by the Ld CIT(E), Bhopal by dropping the proceedings of cancellation of registration u/s 12AA. Addition on account of notional interest is uncalled for, much less, on the basis of such addition denial of exemption claimed u/s 11 is a farfetched application of mind which cannot be permitted under the law. 13. We, thus, in terms of aforesaid observations set aside the findings of Ld. CIT(A) on the issue and direct the AO to vacate the additions made. Consequently, the ground raised in the present appeal are decided in favor of the assessee. 14. In the result, appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced in the open cour....

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....6419 Document 2 the person referred to in section 13(3) of the act within the meaning of section 13(1)(c) of the Act. As per record, the advance of Rs. 2,10,56,000/- given for purchase of land which is not get registered till Dec. 2018 even after lapse of 4 years. The assessee Trust has diverted its income in respect of the person referred to in section 13(3) of the act within the meaning of section 13(1)(c) of the Act. 3.2 Also, it was found that the assessee society had paid consultancy charges to Smt. Pratibha Ballewar amounting to Rs. 9,00,000/- during the F.Y. 2015-16 deducting TDS u/s 194J of the Act. However, she had shown income u/s 44AD amounting to Rs. 6,10,000/- and consultancy income shown as NIL. Also smt. Patibha Ballewar not attended before the AO on issuing summon u/s 131. It was also unexplained what hostel maintenance facilities were provided by Pratibha Ballewar? Thus the assessee society is found to be engaged in claiming of such type of bogus expenses to attain the 85% of application of income for claiming 100% exemption and divert the income of the society by way of showing bogus expenses for other than charitable ....