TaxTMI 
TaxTMI 
2026 (1) TMI 8
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....d as Ground Nos. 1 to 13. The Ground Nos. 1 and 13 of the appeal are general in nature and do not require any separate adjudication. Hence, we dismiss the same. 4. The issue raised by the assessee through Ground No. 2 of the appeal is that the assessment order was passed beyond the statutory time limit prescribed under section 153B of the Act. Hence, the assessment order is void ab initio being barred by time. 5. The relevant facts of the case are that the assessee is a charitable trust incorporated under section 25 of the companies Act 1956 corresponding to section 8 of the companies Act 2013. The assessee trust was granted registration under section 12AA of the Act, which was subsequently migrated to section 12AB of the Act as per the amended provisions introduced by the Finance Act, 2020. The assessee operates educational institutions, including schools, medical colleges, and engineering colleges etc. 5.1 The assessee was subjected to search proceedings under section 132 of the Act, initiated as on 17th February 2021. The search was carried out on the following premises of the assessee: (1) Head office at GD House, 619/G, 36th Cross, 2nd Block, Rajajingar ....
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....bitory orders under section 132(3) were revoked, whereas in law, the search itself stood concluded much earlier when the authorized officer and the search team finally left the premises of the appellant on 19.02.2021 and 20.02.2021. The ld. AR emphasized that once the search party exits the premises after completing the operations under the warrant of authorization, the authorization gets fully exhausted and the search cannot be regarded as continuing. Any subsequent visit by the department, merely for the limited purpose of lifting a restraint order or making inspection of the materials already placed under prohibition, does not constitute a valid continuation of search and therefore it cannot extend the limitation period for making the assessment under section 153B of the Act. 8.1.1 The ld. AR further submitted that the concept of "temporary conclusion" of search as noted in the Panchnamas dated 19.02.2021 and 20.02.2021 is alien to the statutory scheme. In law, the search has to be regarded as concluded when the search team leaves the premises upon execution of the authorization. There is no provision permitting the department to keep the search proceedings in a state of susp....
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....oviso to section 153B(1) was inserted by the Finance Act, 2022, with retrospective effect from 01.04.2021. This proviso clarifies that when the last authorisation for search under section 132 is executed during the financial year commencing on 01.04.2020, the relevant assessment year for the purpose of completing the assessment shall be the assessment year commencing on 01.04.2021, and the time limit for completing such assessment shall be on or before 30.09.2022. 8.2.2 The ld. AR drew our attention to the CBDT Circular No. 23/2022 dated 03.11.2022, which contains the explanatory notes to the Finance Act, 2022. The circular clearly explains that the amendment was introduced to address situations where the search or requisition concluded during FY 2020-21 left very little time for the Assessing Officer to complete the assessment, especially in cases where returns were filed late. Hence, the sixth proviso extended the due date for completing such assessments up to 30.09.2022. 8.2.3 The ld. AR submitted that, as per the said proviso, the financial year in which the last authorization for search was executed is to be regarded as the year in which the search is conducted, and the ....
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....rders were issued without fulfilling the legal requirements laid down under section 132(3) of the Act. The learned AR explained that for a valid Prohibitory order to exist, there must be clear reasons showing impracticability to seize the materials at the time of search. However, in the present case, the prohibitory orders were issued mechanically and without any practical difficulty in seizing the documents or assets. 8.3.1 The ld. AR pointed out that in the head office premises of the trust at GD House, a prohibitory order was issued on 19.02.2021 and revoked only on 05.04.2021. But the panchanama clearly showed that only 159 pages of documents were seized at the time of revocation, while 1,315 pages had already been seized during the first visit. This, according to the learned AR, proves that there was no real "paucity of time" or "voluminous nature of documents" to justify restraint order under section 132(3) of the Act. The prohibitory order was, therefore, unjustified and invalid. Similarly, in the premises of Sapthagiri Institute of Medical Sciences, two prohibitory orders were issued - one in respect of a wooden almirah and another for a garage containing luxury cars. On....
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....f argument of the learned AR on the issue of assessment being time barred is that the revocation of the prohibitory orders issued under section 132(3) of the Act was done beyond the period of one month, which is in violation of the binding instruction of the CBDT. Therefore, the panchanamas drawn during the second visit in April 2021, after more than forty days from the date of the prohibitory orders, cannot be taken into consideration for computing the limitation under section 153B of the Act. 8.4.1 The ld. AR referred to paragraph 3.117 of the Search & Seizure Manual, 2007 (Volume-1) issued by the Directorate of Income Tax, wherein the CBDT had directed that search and seizure work should be completed as early as possible, and any restraint order issued under section 132(3) of the Act should be revoked within one month from the date of such order. The learned AR also referred to CBDT Instruction F No. 286/57/2002-IT (Inv-II) dated 03.07.2002, which clearly states that search and seizure operations should be completed quickly and any prohibitory order under section 132(3) should be lifted within one month from the date of passing the order. 8.4.2 The ld. AR submitted that th....
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....ssment orders are not time-barred under section 153B of the Income Tax Act. The learned DR submitted that the AO has correctly computed the limitation period strictly in accordance with the express provisions of section 153B read with section 132(3) and 132(8A) of the Act. It was emphasized that the computation of limitation is a matter of legislative mandate and not one of subjective interpretation. 9.1 The learned DR explained that section 153B(1) of the Act lays down the time limit for completion of assessment in cases of search. As per clause (a) of section 153B(1) of the Act, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted, the AO is required to complete the assessment within twelve months from the end of the financial year in which the last of the authorisations for search under section 132 of the Act was executed. Similarly, clause (b) prescribes the same limitation period for the relevant assessment year in which the search is conducted. Further, sub-section (2) of section 153B of the Act clearly provides that an authorisation shall be deemed to have been executed on the conclusio....
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....ot invalidate the search process, and that the final panchanama marks the true conclusion of the search. The Hon'ble Court clarified that the existence of restraint orders under section 132(3) of the Act keeps the search proceedings alive until such restraint is lifted. 9.1.4 The learned DR also relied on the decision of the Hon'ble Delhi High Court in VLS Finance Ltd. (2007) 159 Taxman 102 (Delhi) and reiterated that searches can be temporarily concluded for practical and logistical reasons, and there is no legal bar to the same warrant being executed on multiple occasions until the search is finally completed. The concept of "temporary conclusion" is a matter of administrative convenience and does not signify the end of the search. 9.1.5 The learned DR further argued that the assessee's reliance on earlier Hon'ble High Court decisions such as C. Ramaiah Reddy vs. ACIT (2012) 20 Taxmann.com 781 (Kar.) is misplaced and unsustainable in view of the binding judgment of the Hon'ble Supreme Court in VLS Finance Ltd. (Supra) and Anil Minda (supra). Further as per submission of the assessee itself, appeal filed by the revenue against decision of Karnataka High court in C. Ramaiah R....
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....the purpose of assessment, the determining event is the initiation of the search, not its conclusion. 9.2.3 The learned DR further explained that the phrases "initiated under section 132" and "requisitioned under section 132A" both refer to the first action taken under those provisions, which is the issuance and execution of the first warrant of authorisation. These terms do not refer to the conclusion or the last step of the search operation. The language used in the second proviso to section 153A of the Act further reinforces this point. It states that any pending assessment or reassessment for the relevant years shall abate from the "date of initiation of the search" and not from the date of completion. This statutory language unambiguously establishes that the initiation date is the decisive point for determining the "search year." 9.2.4 The learned DR stressed that the statute itself provides clarity on this matter, leaving no ambiguity. The date of initiation of the search under section 132 or requisition under section 132A is the correct and lawful date for reckoning the "search year." The "search assessment year" must therefore correspond to the financial year in whic....
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....e or legal value in interpreting the post-amendment provision. 9.4.2 The learned DR further clarified that the CBDT Circular No. F.No.286/57/2002-IT (Inv.II) dated 03.07.2002 was issued only to address issues arising under the pre-amendment regime where such extensions were permissible. The circular was administrative in nature and intended to guide departmental officers for internal compliance and planning. It did not confer any new power or override the statutory limitation fixed by the amended provision. 9.4.3 It was also pointed out that the circular referred to by the appellant pertained to orders under section 132(2) of the Act, whereas the present case concerns an order passed under section 132(3) of the Act. The learned DR stressed that the appellant has misunderstood the context and scope of the instruction. The CBDT circulars and instructions are meant for administrative guidance and cannot override or modify the provisions of the Income-tax Act. 9.4.4 The learned DR submitted that when the statute itself prescribes a 60-day limit, any 30-day time frame mentioned in the instruction can only be considered as an internal target for administrative convenience. Such ....
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....s of both the parties and perused the materials available on record. We have also perused the relevant panchnamas, prohibitory orders, and statutory provisions of sections 132(3), 132(8A), and 153B of the Act. The short but substantial question before us is whether the assessments made for Assessment Years (AYs) 2020-21 and 2021-22 are barred by limitation under section 153B of the Act. 10.1 The assessee has advanced four distinct limbs of argument on this issue. We deal with each of them separately in the following paragraphs. 11. First Limb: Date of Conclusion of Search and Execution of Authorisation 11.1 Under this limb, the key issue for adjudication is at what point of time search deemed to be concluded for the purpose of computation of statutory time limit under section 153B of the Act for framing the assessment. 11.2 The provision of section 153B(1) of the Act lays down the time limit for completion of assessment in search cases. The limitation is to be reckoned from the end of the financial year in which the last authorisation for search was executed. Sub-section (2) of section 153B of the Act provides that an authorisation shall be deemed to have been executed ....
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....ntemplates more than one authorisation, but for limitation purposes, only the execution of the last one is relevant. It was further observed that a search must be carried out continuously and concluded in one stretch; it may extend beyond a single day or even occur on holidays, but once the search party leaves the premises with the seized materials, the search stands completed and the authorization is fully executed. The authorized officer cannot keep the premises open for fresh or repeated searches by visiting over a time. In cases where physical seizure is impractical due to volume, weight, or other characteristics, the officer may pass a prohibitory or restraint order, but such orders cannot be used to extend the limitation period. After the search concludes, the officer may revisit only to inspect items covered by these orders and, if necessary, seize them; however, such subsequent inspections do not amount to new searches and do not reset the limitation clock. The detailed finding is recorded in para 63 to 80 of the said order, the relevant portion is reproduced as recorded in para 76 to 77 of the said order here under: 76. Once the authorised officer enters into the ....
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....f the Act. Merely because one more panchnama is drawn evidencing seizure of any material in the course of such inspection that cannot be construed as a last panchnama referred to in Explanation (2) to section 158BE. When once a warrant of authorisation has been issued for search before it is concluded as evidenced by the panchnamas, what is to be recorded in the panchnama is as under : (1) Whether the authorised officer entered and searched the premises ? (2) Broke open the lock of any door, box, locker, safe, almirah, etc. ? (3) Searched any person as provided under clause (iia) of sub-section (1) of section 132 ? (4) Afford the authorised officer necessary facility to look into the electronic record as provided under clause (iib) of sub-section (1) of section 132 ? (5) Seized any book of account, other documents, money, bullion, jewellery, etc. ? (6) Placed any marks of identification, on any books of account, other documents, etc. ? (7) Made a note of or an inventory of any such money, bullion, jewellery, other valuables, etc. ? (8) Whether any prohibitory order made under the second proviso to subsection (1) of section 132 amounti....
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....t up to morning hour of 23rd June 1998 and panchnama was drawn with the remark temporary concluded. The impugned search was followed by various visit by the search team which went on till 5th August 1998 on which date last panchnama was drawn for conclusion of search. The question before the Hon'ble Supreme Court that from which date the period of limitation is to be counted, i.e. from 22nd June, 1998 when the respondent authorities visited the premises of the appellants on the basis of Warrant of Authorisation dated 19th June, 1998 or 5th August, 1998, on which date the Revenue authorities last visited the premises of the appellants on the basis of the same Warrant of Authorisation dated 19th June, 1998 and conducted the search of the appellants premises. The Hon'ble Supreme court in these facts observe that the assessee has not challenged the subsequent visit of the search team on ground of absence of fresh search. Therefore, the Hon'ble Supreme court without going into the validity of subsequent visits by the search party held that the limitation period shall be computed from that date on which last panchnama was drawn which was drawn on 5^th august 1998. Accordingly, the Hon'bl....
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....dy (supra) contended that as per the provisions of the Act last authorization would be the starting point of limitation. It was submitted that even if the first authorization dated 13-3-2001 was executed on a later date i.e., on 11-4-2001, that would be of no consequence and for the purpose of reckoning the limitation period, the first authorization is irrelevant and it is the "last of the authorization" dated 26th March 2001 has to be kept in mind. However, the Hon'ble Supreme Court rejected the assessee's contention and affirmed the view taken in VLS Finance Ltd. (supra) that the last panchnama drawn during the execution of the authorisation is conclusive for determining limitation. 11.10 After considering the principles from the above decisions and facts on record, we note that in the present case, the search was actually concluded on 20.02.2021, when the authorised officer finally left the premises after completing the physical search. On that date, a panchnama was drawn, and all acts of search under section 132(1) of the Act were completed. The later visit on 20.04.2021 was only for lifting the prohibitory order under section 132(3) of the Act and for inspection of items al....
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.... involved in that case. There was no revocation of any restraint, no inspection under section 132(3) of the Act, and no later panchnama drawn merely to lift such order. 11.15 Thus, the entire reasoning in the case of Anil Minda (supra) was based on execution of multiple warrants, not on the legal effect of revoking a restraint order. In the present case, there is only one authorisation, and the later visit was solely for lifting the section order passed under section 132(3) of the Act. Therefore, in our considered view application of principle of Anil Minda (supra) to the present facts would be wholly inappropriate. 11.16 We also note that the coordinate bench of Mumbai Tribunal in recent case of Index Logistics Pvt Ltd vs. ACIT in ITA Nos. 3347, 3346, 3362, 3362 & 3360/Mum/2023 where identical facts were involved has decided the issue in assessee's favour after placing reliance on the ratio of Hon'ble Karnataka High Court in C. Ramaiah Reddy (supra). The coordinate bench also distinguishing the judgment of Hon'ble Supreme court in VLS Finance Ltd. (supra) and Anil Minda(supra). 11.17 In view of the above detailed discussion, we hereby hold that the valid and legally recog....
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....ing no scope to treat the conclusion date as relevant. 12.4 The language of section 153B(1) of the Act also supports this interpretation. The provision only prescribes the time limit for completing assessments and does not redefine what constitutes a "search year." Therefore, the determination of the "search year" must necessarily flow from section 153A of the Act, which identifies the initiation of search as the decisive event. Once the search is initiated by execution of the first authorisation, all further actions, including subsequent authorisations, are part of the same search proceeding and do not extend or alter the original point of initiation. 12.5 We also find merit in the Revenue's submission that adopting the assessee's interpretation-where the last authorisation determines the search year-would lead to administrative uncertainty and potential misuse. If every subsequent authorisation or minor action is treated as determining a fresh "search year," it would indefinitely extend the limitation period, defeating the very object of the limitation provision under section 153B of the Act. The legislative intent is to provide certainty by linking the limitation period to....
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....ear in which search was finally concluded. 12.9 Be that as may be, at this stage we restrain ourselves from giving final verdict whether the assessment is time-bared or not. As the assessee in the first and next limbs of arguments has challenged the validity of the Prohibitory order and revocation of prohibtory order after prescribed time limit. Fist limb of argument is already in favour of the assessee. If the outcome of the next limbs or argument is decided in favour of the assessee, then the observation made under this limb will become infructuous. 13. Third Limb - Validity and Legal Effect of Prohibitory Orders under section 132(3) of the Act. 13.1 The assessee has further contended that the prohibitory orders under section 132(3) of the Act were issued mechanically and without recording valid reasons of impracticability to seize the documents. It was argued that such orders were not based on any genuine constraint but were used merely to extend the limitation period. Therefore, the subsequent visits made for revocation and panchnamas drawn thereon cannot be considered for computation of limitation under section 153B of the Act. 13.2 On perusal of the records, we fi....
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....income. Then the word "search" used in the context loses its meaning. The search pre-supposes that the assessee is in possession of some undisclosed income or other material and the authorities want to lay their hand on such undisclosed income or other material. Once the search commences and if it is adjourned for a later date, without completing the search on the adjourned date if the search recommences, it ceases to be a search in the context in which the said word is used in section 132 of the Act. 73. The second proviso to section 132(1) deals with the "deemed seizure". When in the course of search, it is not possible to seize for the reasons set out in the aforesaid provisions. It is possible under four circumstances : (a) where it is not possible or practicable to take physical possession of any valuable article or thing ; (b) remove it to a safe place due to its volume, weight ; (c) other physical characteristics ; and (d) due to being its dangers nature. 74. Therefore, the law recognizes such a situation and has provided a remedy to tackle such problems. The authorised officer has been given a discretion for the reasons to be record....
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....2(3) was passed with respect to the said sealed cupboard and the seal was placed again. Thus, the Tribunal had rightly held that the proceedings on 26-10-1996 could not be considered as part of the execution of the search proceedings which concluded on 20-10-1996. Indeed, by simply stating in the panchanama that the search was temporarily suspended, the authorised officer could not keep the search proceedings in operation by passing a restraint order under section 132(3). Action under section 132(3) can be resorted to only if there is any practical difficulty in seizing the item which is liable to be seized. When there is no such practical difficulty, the officer is left with no other alternative but to seize the item, if he is of the view that it represents the undisclosed income. Power under section 132(3), thus, cannot be exercised so as to circumvent the provisions of section 132(3), read with section 132(5). The position has become much more clear after the insertion of the Explanation to section 132(3) effective from 1-7-1995, that a restraint order does not amount to seizure. Therefore, by passing a restraint order, the time-limit available for framing of the order ....
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....ol.-I), both categorically direct that any restraint order issued under section 132(3) of the Act should be revoked within one month from the date of such order. These instructions were framed to ensure that search and seizure operations are completed expeditiously and that the rights of taxpayers are not prejudiced by prolonged restraint on their property. The circulars and instructions issued by the Board under section 119(1) of the Act are binding on all income-tax authorities, as repeatedly held by the Hon'ble Supreme Court and various Hon'ble High Courts. The Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. v. CIT reported in 18 taxmann.com 282 held as under: 18. Now, we shall proceed to examine the effect of the circulars which are in force and are issued by the Central Board of Direct Taxes (for short, 'the Board') in exercise of the power vested in it under Section 119 of the Act. Circulars can be issued by the Board to explain or tone down the rigours of law and to ensure fair enforcement of its provisions. These circulars have the force of law and are binding on the income tax authorities, though they cannot be enforced adversely against the....
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....shows that the revocation was made after more than forty days, well beyond the one-month period prescribed by the CBDT instruction. The delay in revocation is contrary to the binding direction of the Board, which the Investigation Wing were duty-bound to follow. The contention of the Revenue that the CBDT instruction was issued in the context of the pre-amended section 132(8A) of the Act cannot be accepted, since the language of the instruction clearly applies to all prohibitory orders under section 132(3) of the Act, and the purpose of the instruction is administrative discipline and protection of taxpayer rights, not interpretation of statutory provisions. 14.5 It is also relevant to note that the Hon'ble ITAT, Visakhapatnam Bench, in Polisetty Somasundaram v. DCIT reported in (2023) 153 taxmann.com 591, has held that where a prohibitory order under section 132(3) of the Act is not revoked within one month as per the CBDT's directive, any panchanama drawn thereafter loses its legal validity and cannot be considered for computing limitation under section 153B of the Act. The relevant finding of the Tribunal in said case reads as follows: 26. In the instant case, the PO....
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....al precedents have consistently upheld the binding nature of CBDT circulars upon revenue authorities. 14.8 We therefore hold that the last valid panchanama in this case was drawn on 20.02.2021, when the actual search concluded. Any panchanama prepared thereafter, on the basis of belated revocation of restraint orders, cannot extend the limitation under section 153B of the Act. Consequently, the limitation for completion of assessment for A.Y. 2020-21 expired on 31.03.2022, and for A.Y. 2021-22 on 30.09.2022, as per the sixth proviso to section 153B(1) of the Act. The assessments completed on 24.11.2023 and 28.11.2023 are therefore barred by limitation and are invalid in law. 15. From the discussion above, we conclude as follows: 1. The first limb of the assessee's argument-regarding immediate conclusion of search upon leaving the search premises/ drawing the Panchama is hereby accepted. 2. The second limb-relating to identification of search year and computation of limitation from F.Y. 2020-21-is not accepted. But the same become infructuous in the light of finding given for 1st 3rd and 4th limb of argument. 3. The third limb-challenging the validit....
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....the very next day, on 24.11.2023. Likewise, for A.Y. 2021-22, the draft order was submitted on 28.11.2023 which was approved on the same day. The ld. AR argued that it is humanly impossible for the Addl. CIT to have examined such large volumes of seized material, statements, and assessment records covering multiple years dwithin one day. This clearly shows that the approval was mechanical and granted without any real application of mind. 17.4 It was further submitted that the letters of approval issued by the ld. Addl. CIT are totally silent on the factual or legal issues involved in the assessments. They do not refer to the seized documents, statements, or enquiries conducted by the AO. The letters merely state that approval is being granted u/s 153D and even direct the AO to "check returned income, 26AS reconciliation, penalty initiation etc." before finalising the orders. Such directions prove that the ld. Addl. CIT had not verified these crucial aspects himself, thereby abdicated his statutory duty and relegated the responsibilities back to the AO. This shows that the approval was not an independent judicial act but a mere formality done to meet procedural compliance before ....
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....sure the superior authority applies his mind on the seized material before granting approval. 17.8 Further reliance was placed on the Hon'ble Allahabad High Court's decisions in Principal CIT v. Subodh Agarwal (2023) reported in 149 taxmann.com 373 and Principal CIT v. Sapna Gupta reported in 147 taxmann.com 288 where it was held that the approval must be specific for each year and cannot be omnibus or casual. The Hon'ble Court also observed that it is humanly impossible to examine multiple cases in one day and still claim to have applied an independent mind. 17.9 Based on these facts and legal principles, the ld. AR contended that the approvals granted by the ld. Addl. CIT on 24.11.2023 and 28.11.2023 were mechanical, lacked judicial application of mind, and were rendered merely to meet the time limit. Therefore, the assessment orders passed under section 153A read with section 143(3) of the Act for A.Ys. 2020-21 and A.Y. 2021-22 are invalid and bad in law for want of valid approval under section 153D of the Act. 18. On the contrary, the learned DR strongly opposed the contention of the assessee that the approval granted under section 153D of the Act was mechanical and wi....
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....rs on a particular date does not mean that all assessments were prepared or approved mechanically on that single day. In the department's administrative process, the formal approval and order issuance may occur together for record-keeping purposes, but the ld. Addl. CIT reviews facts and materials as an ongoing process throughout the assessment. This is a practical and universal administrative system followed across quasi-judicial and judicial forums. 18.5 It was further argued that the allegations of mechanical approval are baseless and speculative. The assessee has not produced any evidence to prove that the ld. Addl. CIT did not apply his mind or failed to examine the records. The ld. DR submitted that the burden lies on the assessee to establish such claims with credible proof, which has not been done. On the contrary, the facts show that the ld. Addl. CIT was continuously involved in the assessment process and was in full knowledge of the seized materials, appraisal reports, and investigation findings. 18.6 The learned DR also highlighted that the provisions of section 153D of the Act are intended to maintain administrative efficiency and internal accountability, not to ....
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....by an AO below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) ... except with the prior approval of the Joint Commissioner." Thus, the legislature has clearly cast a duty on the approving authority to examine the draft order, seized material, appraisal report (where applicable) and satisfy himself that the safeguards envisaged under sections 153A/153C are properly followed. This legislative framework was introduced as a safeguard so that search assessments are not left solely to the AO, but are vetted at a higher level after examining the seized material and proposed additions. Therefore, the approval must not a mere formality but it should an independent check. In practice, the AO must prepare a detailed draft assessment order for each assessment year, along with computation sheets, discussion of seized/incriminating material, appraisal report, questionnaires issued, replies of the assessee and supporting evidence, and place this "153D proposal" before the JCIT/Addl. CIT well before the limitation date. This framework also ontemplated in the CBDT search manual and internal instructions. 20.2 The circular issued by the Board (Circular....
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....on". When approval is given, the approving authority must have full knowledge of what is being approved, must confirm authoritatively the order of the lower authority and cannot simply assume it. 20.6 In the present case the approval letter does not indicate that the ld. Addl. CIT examined the seized documents or appraisal report. There is no reference to any evidence. This shows that the approving authority has merely endorsed the draft orders placed before him by the AO without any meaningful scrutiny. As it is a settled law that if approval is granted as an empty formality, the assessment framed on such approval cannot survive. 20.7 Be that as may be, this Tribunal in the case of M/s Khoday Eswara and Sons bearing the ITA No. 1079/Bang/2024, involving similar facts and circumstances, held that the approval under section 153D of the Act is not proper. The case of the present assessee is covered by the decision in case M/s Khoday Eswara and Sons(supra). The finding of the Tribunal vide order dated 20th September 2024 in said case is extracted as under: 6. We have heard the rival contentions of both the parties and perused the materials available on record. The provi....
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....e prior approval of superior authority. As such, the higher authority should apply their mind on the materials gathered during search and other relevant circumstances based on which the officer is making the assessment. Furthermore, the AO should frame the assessment after due application of mind after evaluating the seized materials. Thus, the superior authority has to approve the Assessment order. The object of entrusting the duty of Approval of assessment in search cases is that the Joint CIT, with his experience and maturity of understanding should scrutinize the seized documents and any other material forming the foundation of Assessment. It is a trite law that whenever any statutory obligation is casted upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formally but after due application of mind. 6.3 Thus, the obligation of granting Approval by the superior authority to high tax quantum assessment orders in search and seizure assessments acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise of discretion by the AO. 6.4 The Hon'ble Delhi High Court in the case of PCIT Vs....
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.... substantial question of law arises for our consideration. The Tribunal was right that there was absence of application of mind by the ACIT in granting approval under Section 153D. It is not an exercise dealing with a immaterial matter which could be corrected by taking recourse to Section 292B of the Act. 16. We are not inclined to interdict the order of the Tribunal. 17. Accordingly, the appeal is closed. 6.5 The above view taken by the Hon'ble Delhi High Court in the case of PCIT Vs. Anuj Bansal reported in 165 taxmann.com 2 has been affirmed by the Hon'ble Apex Court reported in 165 taxmann.com 3 in the SLP filed by the Revenue. 6.6 In the light of the above stated discussion, there remains no ambiguity to the fact that there has to be an application of mind of the higher authority in granting the approval under the provisions of section 153D of the Act for the assessment in the search proceedings. 6.7 Now coming to the facts of the case on hand, we find important at the threshold, necessary to refer the observations made by the ld. CIT(A) in his order as detailed below: i. There is no manner prescribed under the Act for gra....
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....and that too under section 153A r.w.s. 143(3) r.w.s. 153D of the Act. 6.11 Likewise, the letter written by the AO for the approval under section 153D of the Act dated 30 March 2022 does not refer to any seized materials, statements, written submissions of the assessee except the checklist and draft assessment order whereas the ld. CIT(A) in his order had made reference that all these documents have been duly verified by the Additional Commissioner of income tax while granting the approval under section 153D of the Act. The relevant observation of the ld. CIT(A) to this effect reads as under: "5.1.4 It is apparent from the above that due procedure laid down under Section 153D of the Act has been followed by the AO as well as the Addl.CIT and therefore as discussed in the preceding paragraphs the conditions for giving approval ifs 153D have been met. Even otherwise it is evident from the above letter of the AO that a draft order for AY 2020-21 was submitted along with a detailed checklist which indicates that statements, seized materials and submissions filed by the appellant have been considered while preparing the draft order and same are sent for approval, made b....
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....ed for the year under consideration in response to the notice issued under section 153C of the Act. 6.14 Upon cumulative analysis of the facts stated above, it is transpired that the checklist was prepared considering the assessee on hand as the person other than search person and the proceedings were initiated under the provisions of section 153C of the Act. However, all these information containing in the checklist are far from the reality for the reasons as discussed above. All these facts clearly establish that the approval was obtained by the AO at the fag end of the assessment from the higher authorities which was subsequently granted in the mechanical manner in a day and without application of mind. 6.15 Regarding the contention of the ld. DR that the matter of valid approval under section 153D should not be taken up for hearing on the ground that the assessee has also raised issue of validity of assessment in the absence of DIN on 153D approval and the issue relating to the DIN is pending before the Hon'ble Supreme Court. As such, the Hon'ble Supreme Court stayed finding of Hon'ble Delhi High Court in the case of CIT v. BrandixMauritiusHoldingsLtd. [2023] ....
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....) wherein the dispute regarding approval under section 153D of the Act has been decided in favour of the assessee. In the said order it was held that single approval for multiple assessment years of the same assessee or various assessee can be granted. On the contrary, we note that the Hon'ble Delhi High Court in case of PCIT vs. Shiv Kumar Nayyar reported in [2024] 163 taxmann.com 9 has held approval mechanical is bad in law and on account of single approval for multiple assessment year. The relevant observation the Hon'ble Delhi High court reads as under: 17. Notably, the order of approval dated 30.12.2020 which was produced before us by the learned counsel for the assessee clearly signifies that a single approval has been granted for AYs 2011-12 to 2017-18 in the case of the assessee. The said order also fails to make any mention of the fact that the draft assessment orders were perused at all, much less perusal of the same with an independent application of mind. Also, we cannot lose sight of the fact that in the instant case, the concerned authority has granted approval for 43 cases in a single day which is evident from the findings of the ITAT, succinctly encapsulate....
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....the name of respective student. On further query, he sought time to file reconciliation statement and other relevant material. 22.5 The AO found that the assessee failed to provide the supporting evidence and treatment or mode of receipt in the books of accounts. Hence, the AO proposed to make addition of the impugned receipts. 22.6 The assessee during the assessment proceedings submitted that it had not received any donations in cash and had only collected development fees from students admitted under management quota. The assessee maintained that the trust had not received any additional receipts that were not accounted for in its books of accounts. It emphasized that the donations and receipts reflected in the records were genuine and that all cash receipts were either accounted for and supported by necessary documentation. Furthermore, the assessee provided a list of students and details from the parents to substantiate the sources of funds, asserting that these receipts were for the purpose of furthering the trust's charitable activities. 22.7 On the other hand, the AO's findings revealed significant discrepancies and inconsistencies in the assessee's records. The AO ....
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....ically, many of the receipts lacked the signature of either the donor or the donee, raising questions about their authenticity. Additionally, the ld. CIT(A) found the appellant's explanation - that cash was first deposited in the bank and the details were updated later - to be unacceptable. This is because if the cash deposits were genuine, they should have been reflected in the bank statements and reconciled properly in the accounts. The presence of mismatches between receipt dates and deposit dates was seen as a serious issue. Since, these concerns were not convincingly addressed by the appellant, the ld. CIT(A) ultimately rejected the appellant's arguments and upheld the findings of the Assessing Officer. 24. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 25. The learned AR before us submitted that the addition of Rs. 3,38,62,500/- made by the AO towards alleged unaccounted donation receipts in cash is unjustified and contrary to the facts and law. He explained that the amount in question represents fees and donations received from students by Sapthagiri College of Engineering (SCE), which is run by the appellant trust. These amoun....
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.... deposit and issuance, not that the receipts represent unaccounted money. 25.4 The learned AR further argued that the AO himself cited only two instances from earlier years i.e. FY 2015-16 and FY 2016-17, and none pertaining to the year under appeal. Therefore, even those minor discrepancies are irrelevant for the present assessment year. Once all the receipts are found deposited in the bank accounts and recorded in the books, there is no scope for any presumption of unaccounted cash donations. 25.5 It was further submitted that the learned CIT(A) failed to properly appreciate the factual explanations and mechanically confirmed the addition. The learned CIT(A) rejected the appellant's reconciliation on the wrong assumption that any mismatch in date implies unaccounted receipt. The learned AR argued that such reasoning is arbitrary and unsustainable because if the cash was actually deposited in the bank, it would automatically reflect in the bank statement, leaving no scope for concealment. The learned CIT(A)'s observation that the mismatch in dates shows unaccounted receipt is purely speculative and contrary to evidence. 25.6 The learned AR concluded by stating that the re....
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....ertain cases, the date of bank deposit preceded the date mentioned on the receipt. For example, receipt No. 2852 for Rs. 1,80,000 was dated 04.08.2015, while the corresponding bank deposit appeared on 10.06.2015. Similarly, receipt No. 133 for Rs. 1,75,000 was dated 01.06.2016, and the related bank deposit was dated 31.05.2016. Except for such differences in dates, there is no discrepancy regarding the amounts or their ultimate deposit in the bank, was found. 27.4 The explanation of the assessee that these differences arose because the students were required to deposit the money directly into the bank account of the trust and subsequently submits the deposit challans to the college's office, in our considered opinion, is plausible and in accordance with common institutional practice. The receipts were issued by the office only after verifying the deposit challans. Therefore, it is natural that the date of deposit would, in some cases, precede the date of issuance of receipt. This, by itself, cannot be a reason to infer unaccounted cash transactions. 27.5 It is also noteworthy that neither the AO nor the ld. CIT(A) has found any instance where the receipts discovered during th....
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...., the ld. CIT(A) failed to appreciate that all amounts had been deposited in the bank account of the trust, and once such deposits are verifiable from the bank statements, the allegation of unaccounted receipts loses its foundation. 27.10 It is a well-settled legal position that suspicion, however strong, cannot take the place of proof. The revenue authorities must bring positive material on record to demonstrate that the assessee has actually received income that is not recorded in its books. In the absence of such material evidence, the addition cannot be sustained merely based on assumptions or procedural variations. 27.11 In the case on hand, the receipts in question relate to admission and development fees collected from students under the management quota. Such fees are common in educational institutions and, as long as the funds are applied for the objects of the trust, they cannot be termed as unaccounted or diverted. There is no finding by the AO that the trust has misused these funds for personal benefit or purposes outside its charitable objects. Hence, the invocation of sections 13(1)(c) and 164(2) is not sustainable. 27.12 Considering the entire factual and le....
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....s and covid expenses at the instruction of chairman Shri GD Dayananda. He further stated that no supporting bill vouchers are available with him. He also provided the details of cash payment towards building construction since 1st April 2016 to 16th February 2022 as per the cash book. 29.3 The statement of Shri Balakrishna was confronted to the chairman Shri GD Dayananda who confirmed the same. He also expressed inability to provide the supporting evidences. 29.4 During the post search proceedings also, the assessee was asked to produce the details and evidences such as date of commencement of construction, completion date, completion certificate, identify the building which was constructed with supporting bills and voucher. To which, the assessee replied that the construction was carried out through hiring of daily labourer and materials were procured from different vendors. But the assessee failed to produce the required supporting documentary evidence. The assessee only submitted a valuation report from valuer M/s Mourya Concepts OPC Ltd. However, it was found that valuation report does not consist information regarding the date of commencement and completion of the constr....
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....ly numbered. Thus, it suggests that the impugned transporter only worked for assessee which is not possible. Accordingly, it was inferred that vouchers were made afterthought to satisfy the requirements. - Likewise hand-made vouchers from Kabbbalamma Earth Mover and Shivashree Traders were also submitted. On examination of the same, it was noticed that there was mismatch in serial No. and date of voucher. For example, a voucher serial No. 454 was issued as on 13-06-2015 whereas voucher serial No. 242 issued as on 09-07-2015. - The cash memos for transportation of goods were also submitted which contains vehicle number. On examination of vehicle number, it was found that vehicles were not registered on the date of issue of the vouchers. 29.9 In view of the above, the AO dismissed the assessee's claim and disallowed the entire claim of building construction expenses for Rs. 72,33,46,682/- only. The AO inferred that since the impugned expenditure were not incurred for the trust but diverted to the personal benefit of the person referred in section 13(1)(c) of the Act, the deduction under section 11 of the Act is not available and taxable as per the provisions of s....
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....ence the assessee argument is not acceptable. 30.3 The ld. CIT(A) observed that the AO, in order to verify the authenticity of the appellant's claims, rightly referred the matter to the District Valuation Officer (DVO). The DVO's report revealed that the major buildings (including those of National Public School, Sapthagiri Institute of Medical Science & Research Centre, and Sapthagiri Engineering College) had already been completed before 2014, directly contradicting the appellant's claim that the expenses were related to construction during 2014-2021. 30.4 During the appellate proceedings, the assessee was asked to provide local authority approvals and supporting documentation for the alleged construction activities, but it failed to furnish credible evidence. The ld. CIT(A) specifically noted that many of the vouchers and bills submitted were self-made cash vouchers, lacking independent verification, and were fraught with discrepancies - including mismatches in vehicle numbers, bills addressed to disconnected places, serial number duplications, and absence of vendor details. Additionally, many vouchers appeared suspicious because the same person prepared and signed them, a....
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....owing reasons: a) The assessee trust has shown own expenditure in cash to the extent of Rs. 33,86,76,950/-, out of the total expenditure of Rs. 72,33,46,682/- debited during the year towards building under construction. b) The bills/invoices pertaining to the said expenses were not available at the time of search. With regard to the expenditure incurred in cash, the assessee could submit only self-vouchers during post-search proceedings in support of such expenditure. c) The assessee furnished a Valuation report of the buildings prepared by M/s Mourya Concepts DPC Pvt Ltd during the post search proceedings. However, neither the assessee nor the valuer could furnish the details of date of commencement of construction, stage of construction, completion certificate, basis for the self-construction discount etc. The Director of M/s Mourya Concepts DPC Pvt Ltd, who was examined and recorded on 08.09.2021, stated that they were not given the commencement and completion certificates for any of the buildings. There is no mention of the self-construction discount factor and depreciation factor in the Valuation report for the period of 2014-21. The Valuation report....
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....imed by the appellant towards "application of income" for charitable purposes of the trust in the return of income. 27. The appellant has shown the "building under construction" under "Capital work-in-progress" in the balance sheet. The said expenditure is capitalised and added to the "buildings" asset periodically as and when some part of the construction is completed. Copy of the financial statements of the appellant for the A.Y 2020-21 is submitted at Page Nos.67 to 78 of PB-2. 28. It may be seen on perusal of the balance sheet as on 31.03.2020 that the Capital work-in-progress is shown at Rs. 64,28,44,828/- as on 31.03.2020 and at Rs. 42,14,06,628/- as on 31.03.2019 under the non-current assets. Further, It may be seen on perusal of Note No.19 to the financial statements containing the depreciation statement that "Building under construction" is shown therein with an opening balance as on 01.04.2019 at Rs. 42,14,06,628/-, additions during the year at Rs. 72,33,46,682/-, deletion during the year at Rs. 50,19,08,482/- and closing balance as on 31.03.2020 at Rs. 64,28,44,828/-. It is evident therefrom that the "Building under construction" shown in the depreciati....
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....he year as well as depreciation claimed on amount capitalised to the "buildings" asset during the year from such capital work-in-progress has not been included in the amount claimed as "application of income" for the purpose of claiming exemption u/s 11. 34. Since no exemption u/s 11 was claimed by the appellant in respect of the "building under construction" expenditure, the question of making disallowance of the said expenditure for determining the total income of the appellant trust does not arise at all. Hence, the appellant submits that the disallowance of "building under construction" expenses of Rs. 72,33,46,682/- made in the assessment order is arbitrary and wholly untenable on facts. 35. Notwithstanding the same, the appellant submits that the reasons cited by the AO for making disallowance of the said expenditure and for concluding that the income of the trust has been diverted to the trustees by booking bogus expenditure towards building under construction thereby attracting the provisions of section 13(1)(c) of the Act are unsustainable on the facts of the case. 36. The appellant submits that the conclusion of the AO that there is no evidence ....
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....pported by self- vouchers, is mainly towards labour expenses and purchase of sand, jelly etc., which are procured from the un-organized sector. Incurring of expenditure in cash for the said purposes is unavoidable in the prevailing business environment. In the said circumstances, incurring of said expenditure in cash and maintenance of self-made vouchers in support of the same is inevitable and the said feature does not justify the inference of the AO that whole of such expenditure is bogus or fictitious. 42. In his appellate order, the CIT(A) observed while concurring with the findings of the AO that the hand writing of the person who prepared the self- made voucher and the signature of the recipient in the voucher appears to be that of the same person in many self-made vouchers for expenditure incurred in cash. The CIT(A) cited four instances of such cases. The CIT(A) also cited one instance of purchase of electrical items and one instance of purchase of sanitary items in cash and observed that the recipients have affixed their thumb impression in the corresponding self-made vouchers, which normally happens when purchase is made from casual laborers. 43. In this....
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..../Registered valuer submitted by the appellant during the post search proceedings, in support of the cost of construction of buildings incurred during the period from 2014 to 2021 and the cost of construction of the buildings as on 01.04.2014. Copies of the valuation reports of the Registered valuer are submitted at Page Nos.135 to 148 and 149 to 165 of PB-2 respectively. 48. As per the valuation report for the period from 2014 to 2021, the cost of construction for the buildings constructed during the said period in SIM & RC, SCE and NPS of the trust was estimated by the Valuer at Rs. 321,78,96,805/-. The aggregate additions to the gross block of buildings shown in the books of account of the trust during the same period amounted to Rs. 320,90,76,995/-. 49. One of the reasons given by the AO for rejecting the said Registered Valuer's reports is that the CPWD parameters adopted for cost of construction by the registered valuer is arbitrary and without any basis, in the absence of furnishing of the details of date of commencement, date of completion, completion certificates etc., by the assessee to him. 50. However, the appellant submits that the said reason....
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....the period 2014 to 2021, the registered valuer has explained in his statement that the same was inadvertently missed out. The AO could have considered the registered valuer's report after making necessary adjustment of self- construction discount factor of 10% instead of rejecting the said report altogether. 54. The appellant accordingly submits that the rejection of the registered valuer's reports by the AO is not justified in the facts of the case. The evidentiary value of the registered valuer's report has been disregarded by the AO by citing reasons which are not tenable. 55. The AO placed strong reliance on DVO valuation reports dated 26.09.2023 in respect of the buildings in SIMS & RC, SCE and NPS of the appellant to conclude that no construction has taken place during the period from 2014 to 2021. However, the appellant submits that the DVO valuation reports lack legality and credibility since they were given without making physical inspection of the buildings. 56. Though approved plans and structural drawings were provided to the DVO, as acknowledged by the DVO himself in the valuation reports, the DVO did not make any valuation of the cost of con....
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.... the period from 01.04.20221 to 31.03.2022 is submitted at Page Nos.196 to 211 of PB-2. 61. On perusal of the said valuation report, it may be seen that the DVO has valued the gross construction cost of buildings of the appellant trust up to 31.03.2022, apart from valuation of the cost of construction of buildings for the F.Y 2021-22. It is seen that the gross construction cost of buildings up to 31.03.2022 has been valued by the DVO at Rs. 536,45,04,381/- and the cost of construction of buildings for the F.Y 2021-22 has been valued at Rs. 41,18,93,995/-. 62. On the basis of the same, the gross construction cost of buildings up to 31.03.2021 can be worked out backwards at Rs. 495,26,10,386/- (Gross construction cost of Rs. 536,45,04,381/- up to 31.03.2022 less the cost of construction for the F.Y 2021-22 of Rs. 41,18,93,995/-) 63. Compared to the same, the gross block of buildings shown in the balance sheet of the appellant as on 31.03.2021 is Rs. 492,89,29,417/- and the capital work- progress shown is Rs. 5,54,21,128/- as on 31.03.2021. This clearly shows that the genuineness of the building under construction expenses debited in the books of the appella....
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.... to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh (supra)." 68. Further, the appellant places reliance on the decision of the Hon'ble Supreme Court in the case of Umacharan Shaw & Bros v. CIT [1959] 37 ITR 271 (SC) (Copy submitted at Page Nos.37 to 44 of PB-3), wherein it was held that suspicion cannot take the place of proof and conclusion based on surmises and conjectures is not tenable. The appellant also places reliance on similar decision of Hon'ble Supreme Court in the case of CIT Vs. Daulatram Rawatmull [1964] 53 ITR 574 (SC) (Copy submitted at Page Nos.45 to 49 of PB-3). 69. The ratio laid down by the Hon'ble Apex court in the afore mentioned cases is squarely applicable to the facts of the appellant's case. The appellant submits that the finding of the AO regarding the diversion of the funds of the trust for the individual benefit of the trustees in violation of sectio....
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....2) of the Act. 32.3 The learned CIT(A) upheld the disallowance. He also observed that the assessee had failed to produce credible proof of any construction during the relevant period, that the vouchers were largely handwritten and internally generated, and that many documents exhibited serious discrepancies-such as mismatch of serial numbers, non-existent vehicle registrations, and fictitious vendor details. The DVO's conclusion that the major buildings existed prior to 2014 was found to be supported by local authority approvals and absence of new project documentation. Hence, the ld. CIT(A) held that the disallowance was justified and dismissed the assessee's appeal. 32.4 However, the learned AR for the assessee raised multiple arguments. The first argument of the learned AR is that the expenditure on "building under construction" was capitalized as "work-in-progress" and not claimed as "application of income" under section 11 neither the depreciation on the building was claimed as application hence, the disallowance itself was misconceived. 32.5 From the perusal of the financial statements and computation of income placed before us, we find that the "building under const....
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....the assessment for A.Y. 2022-23 which is evident from the assessment order available on record. Accordingly applying the backward calculation, the cost of construction of the building up to 31st March 2021 is arrived at Rs. 495,89,29,417/-, whereas the assessee in the books of accounts has capitalised the cost of construction for the period starting from F.Y 2014-15 to F.Y. 2020-21 at Rs. 492,89,29,417/- and showing Capital work in progress of Rs. 5,54,21,128/-. Thus, it is transpired that the amount of construction expenditure claimed by the assessee for F.Ys. 2014-15 to 2020-21 and valuation made by the DVO vide report dated 23-05-025 are somewhat similar to a great extent. Hence, in our considered opinion, the action of holding entire construction expenses incurred during the year as bogus and outright rejection of the assessee's claim based on DVO's report dated 26-09-2023 which was based on improper facts and information is not right. On contrary, the claim of the assessee for building construction is being supported by the subsequent valuation carried by the DVO and accepted by the AO himself. 32.8 The learned AR's further claimed that self-made vouchers and some discrepan....
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....O in subsequent assessment year, based on detailed verification has accepted construction activity carried out by the assessee. 32.12 Considering the overall facts and in the light of the above discussion, we hold that the expenditure towards "building under construction" which has been disallowed by the AO and sustained by the learned CIT(A) lacks legal basis. The DVO report, being inconclusive and beyond its statutory scope, cannot be relied upon to hold that no construction took place. The AO failed to bring any positive evidence of diversion or bogus expenditure and finding of diversion of fund in the garb of bogus expenses are based on surmise and conjecture and therefore unsustainable. Therefore, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the disallowance of Rs. 72,33,46,682/- made towards building construction expenses. Hence, the grounds of appeal raised by the assessee in this respect are allowed. 33. The next issue raised by the assessee through ground No. 7 of the appeal is that learned CIT(A) erred in confirming the disallowances of interest expenses of Rs. 1.68 crores attributable to lease deposit of Rs. 14 crores. 34. Th....
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.... the assessee as AOP and not as trust as the assessee has violated the provisions of section 13(1)(c) of the Act as held in previous issues. Therefore, the AO disallowed the proportionate interest @ 12% for Rs. 1.68 crores out of total finance cost of Rs. 18,79,17,598/- under the provisions of section 36(1) of the Act. 35. The aggrieved assessee preferred an appeal before the learned CIT(A) who after considering the facts in totality, confirmed the addition made by the AO by observing as under: 11.1 During the course of search proceedings, from concrete evidence it was found that, the appellant has given land advance of Rs. 14 Crores to Kalpana Dayanand and as per cash book, on 4th April 2016, cash payment of Rs. 14 crores were made to Kalpana Dayanand from SIMS & RC. This payment is purportedly with regard to the land lease agreement between SIMS & RC and Kalpana Dayanand dated 4th April 2016. The same day Kalpana Dayanand has given cash of Rs. 14 Crores to Srinivasa Enterprises as loan. 11.2 The flow of events of the cash payments is as below: From the ledger account found in Tally data, it is found that Rs. 100 Crores loan was taken from Corporation Bank on ....
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.... A scanned copy of the lease agreement, forming part of the assessment record, confirms that the said amount was a refundable lease deposit given in pursuance of the lease arrangement and not an interest-free advance. 36.3 The learned AR submitted that the AO wrongly treated the payment as "land advance." It was clarified that the deposit was made in compliance with the terms of the lease deed, and this fact is supported by the caretaker of the trust, Sri. G.D. Manoj, in his statement recorded under section 131(1A) dated 23.07.2021. The caretaker clearly stated that the Rs. 14 crores paid represented a refundable lease deposit. Copies of the statement were placed in the paper book to substantiate this position. 36.4 The ld. AR pointed out that the lease agreement specifies a period of 11 years and does not stipulate payment of any recurring lease rent. Hence, the lump-sum refundable deposit was the only consideration under the contract. Given the length of the lease period and the absence of annual rent, the payment of Rs. 14 crores as a refundable lease deposit was commercially justified and within the framework of a legitimate transaction. 36.5 It was further argued that....
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....ing evidence clearly establish that the payment was a refundable lease deposit made for the benefit of the trust. Hence, the disallowance of interest expenditure of Rs. 1,68,00,000/- made by the AO is unjustified both on facts and in law. The learned AR therefore prayed that the Tribunal be pleased to delete the disallowance and allow the appeal. 36.11 On the other hand, the learned DR vehemently supported the finding of the revenue authorities. 37. We have heard the rival contentions of both the parties and perused the materials available on record. The core issue for adjudication is whether the disallowance of Rs. 1.68 crores, being proportionate interest expenditure attributable to the lease deposit of Rs. 14 crores given to Smt. Kalpana Dayanand, is justified in law and on facts. 37.1 The undisputed facts are that the appellant trust had entered into a registered lease agreement dated 04.04.2016 with Smt. Kalpana Dayanand for taking 4.5 acres of land on lease. The payment of Rs. 14 crores was made by the trust as per the terms of this agreement. The AO, based on the flow of funds and certain surrounding circumstances, concluded that the transaction represented diversio....
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....y the provisions of sections 11 to 13 of the Act, and its income has to be computed based on the principle of "application" and "accumulation" of income, not under the regular business computation mechanism. Therefore, the disallowance of interest expenditure under section 36(1)(iii) has no legal basis in the context of a charitable trust. 37.5 We further note that the AO's observation that the market value of the land was Rs. 5.85 crores does not, by itself, render the lease deposit of Rs. 14 crores unreasonable. The fair market value and the lease consideration cannot be equated because lease transactions depend on several commercial factors such as tenure, location, future expansion needs, and proximity to existing operations. The assessee's explanation that the land was adjacent to its existing institution and was acquired for long-term operational needs appears reasonable and aligns with the trust's objectives. 37.6 As regards the allegation of violation of section 13(1)(c) of the Act, we find that the payment made under a valid lease agreement, was refundable in nature, and was supported by bank records. No evidence has been brought on record to show that the trustee de....
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....l through self/bearer cheque. Hence, it was inferred that cash was paid to "Thimme Gowda" after withdrawal from the bank however this withdrawal in the books was shown as building construction expenses. 39.2 Likewise, the sheet "Self CQH's Statistcks" contains columns such as S. No., party name, dates, Chq. No's, referred by, particulars. A/c No and amounts column. In this sheet there were 19 entries showing payment through self cheque against the name of various parties including Thimme Gowda which aggregates to Rs. 2,92,65,800/-. As per these 2 excel sheet being "SPR Thimme Gowda" and "Self CQH's Statistcks" these payments were made at the direction or reference of 'GD Sir' or 'GDM Sir'. 39.3 The above discussed seized material was confronted to Shri Griyappa Dayananda Manoj who is caretaker of the assessee trust and son of Chairman of assessee trust namely Shri Griyappa Dayananda while recording his statement under section 131(1) of the Act as on 10th August 2021. He confirmed that the name "Thimmegowda" mentioned therein referred to Shri Thimmegowda, who is a family friend and associated with the activities of the trust. On being asked about the references to "GD SIR" and....
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....rust fund. 40. The aggrieved assessee preferred an appeal before the learned CIT(A). However, the learned CIT(A) confirmed the AO's finding by observing as under: 12.2 It can be seen that; cash is withdrawn from the trust books by booking expenses in various entities of the appellant trust and booked under building construction head. The cash withdrawn is unlisted for cash payment to the person like Thimmegowda, Setu and others. This fact is evident from the seized material as has been reproduced in the assessment order above. 12.3 During the course of appeal proceedings the appellant has made the following submission in this regard: i. No cash received and no cash paid: On this it is held that, the seized material indicates that payments have been made to Setu, Thimmegowda and multiple parties, both in cheque as well as cash. Both these details are found in the same sheet and is part of the same seized material. ii. The AO has ignored cheque nos. mentioned in the same excel sheets: On this it is held that, there are both cash and bank payments and the fact that cheque nos. are also mentioned which can be verified independent....
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....d AR argued that these loose sheets, without any corroborative evidence, could not form the basis for a substantive addition, especially when the corresponding entries were already reflected in the regular books of account of the trust. 41.2 The learned AR contended that the entries showing payments to "Setu" amounting to Rs. 9.24 crore were wrongly treated as repayment of cash loans taken by Shri G.D. Dayananda from trust funds. It was pointed out that there was no material to prove that the loans of Shri G.D. Dayananda were repaid using trust money. The learned AR emphasized that this inference was purely based on presumption and conjecture, with no seized evidence to support it. Relying on established judicial precedents, it was argued that additions made merely on assumptions, without corroborative proof, cannot be sustained in law. 41.3 With regard to the entry of Rs. 1 crore allegedly paid to Shri Thimmegowda, the ld. AR clarified that it was a dumb entry, as the Excel sheet did not specify the identity of the payer, payee, or purpose of the transaction. Further, Shri G.D. Manoj, in his statement recorded under section 131(1A) of the Act, categorically denied having any....
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.... or misuse of trust resources, and that the entire addition of Rs. 20,92,65,800-comprising Rs. 9.24 crore, Rs. 1 crore, Rs. 7.75 crore, and Rs. 2.92 crore-was based solely on unverified, dumb data. The transactions were genuine, recorded in the regular accounts, and directly linked to the trust's charitable activities. Therefore, the AR prayed to delete the entire addition and allow the grounds of appeal in full. 41.8 On the contrary, the learned DR vehemently supported the order of the authorities below. 42. We have heard the rival contentions of both the parties and perused the materials available on record. The addition of Rs. 20,92,65,800/- has been made by the AO on the allegation that the assessee trust made cash payments out of trust funds to certain parties such as Shri Thimmegowda and others as repayment of personal loan. The basis for this conclusion was the Excel sheets titled "SPR Thimme Gowda" and "Self CHQ's Statistics" found during the course of search proceedings. It is an undisputed fact that the impugned Excel sheets were found in the computer of an accountant of the trust and not from the personal custody of any trustee. The entries therein, by themselves, ....
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.... trust buildings. The explanation of the assessee that the withdrawals were used for labour and material payments in cash, due to local constraints, remains uncontroverted. 42.5 In view of the above facts and circumstances, we are of the considered opinion that the addition of Rs. 20,92,65,800/- was made merely on suspicion and without any credible evidence of diversion of funds. The seized Excel sheets do not prove any unaccounted payment or personal benefit to the trustees. Since, the impugned payments have been duly recorded in the regular books as building construction expenses whose genuineness stands accepted, no separate addition is warranted. Hence the ground of appeal raised by the assessee is hereby allowed. 43. The issue raised by the assessee through Ground Nos. 10 & 11 of its appeal is that the learned CIT(A) erred in confirming the addition made by the AO for Rs. 25.52 crores on account of alleged repayment of cash loan of propriety concern of trustees. 44. The relevant facts are that during the search, various digital evidence in the form of excel sheet and tally backup data were found and seized and marked as Annexure A/SECT/BVB2/17. The seized material bei....
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....hus, the AO made an addition of Rs. 25.52 crores to the total income of the assessee trust on account of alleged generation of unaccounted receipts and diversion of same for the personal benefit of chairman. 45. The aggrieved assessee preferred an appeal before the learned CIT(A) who confirmed the finding of the AO by observing as under: 13.1 Based on evidence found during the search & seizure action u/s 132 of the IT Act, wherein it was found that, Shri Giyyappa Dayananda, proprietor of Srinivasa Enterprises received loans of Rs. 49.55 Crores from multiple individuals by banking channels and cash loans of Rs. 59.80 Crores from various parties from June 2018 to January 2021 and out of total loans an amount of Rs. 26.04 Crores have been repaid as of February 2021. Further, it is found that the loans taken via bank were reflected in the books of account, however the loan received through cash are not reflected in the books of account. Further, the loans worth Rs. 59.80 Crores taken in cash have been borrowed by Shri G. Dayanand in his individual capacity as the proprietor of Srinivasa Enterprises, however, the money used for the repayment of these loans is from the appell....
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....xx 13.5 Finally the appellant makes without prejudice contention by stating that this cash payments towards loan taken should be telescoped from the cash generation from building construction and covid expenses that have been disallowed by the AO. This contention of the appellant is a little premature as the nexus between the generation of cash and its application for cash loan repayment has not been established. Therefore, this ground of appeal is dismissed. 46. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 46.1 The learned AR before us submitted that the addition made by the AO towards repayment of cash loans is unjustified and unsustainable. He stated that the AO has made an addition of Rs. 25,52,00,000/- on the presumption that the assessee trust had diverted its unaccounted funds for repayment of cash loans taken by its trustee, Shri G. Dayanand, who is the proprietor of M/s. Srinivasa Enterprises. The learned AR pointed out that this finding has no basis in fact or evidence and is purely based on suspicion, surmises, and conjecture. 46.2 He argued that the seized excel sheet referred to by the AO was only a dumb doc....
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....He argued that the conclusion of the AO is based solely on assumptions arising out of seized data which itself is unreliable. 46.6 He also submitted that the conclusion of the AO and the Ld. CIT(A) that the appellant had used trust funds for repayment of cash loans is without any evidence. The learned AR stressed that the burden of proving such diversion lies on the department, and the AO has not discharged this burden. He further added that no statement of Shri G. Dayanand recorded during search to confirm that the repayment of cash loans was made from the trust's funds. 46.7 Accordingly, the learned AR concluded that, in the absence of any documentary evidence, the addition of Rs. 25,52,00,000/- made by the AO is unsustainable in law. He urged that the finding is based purely on suspicion and general allegations, which cannot be a substitute for proof. He relied on the settled principle laid down by the Hon'ble Supreme Court in Dhakeswari Cotton Mills Ltd 26 ITR 775 (SC)., Umacharan Shaw & Bros. 37 ITR 271 (SC), and Daulatram Rawatmull 53 ITR 574, that no addition can be made merely on the basis of surmises and conjectures. 46.8 In the light of these submissions, the lea....
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....be asked to prove a negative fact. In holding so, we draw support and guidance from the judgment of Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO (supra). The Hon'ble Supreme in para 13 of the said order observed that "It is a well-settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the revenue and the second condition being as much a condition of taxability as the first, the burden lies on the revenue to show that there is understatement of the consideration and the second condition is fulfilled. Moreover, to throw the burden of showing that there is no under-statement of the consideration on the assessee would be to cast an almost impossible burden upon him to establish a negative". Applying this principle, we find that the AO has not demonstrated the flow of funds from the trust's accounts to the alleged lenders. There is also no evidence of any cash withdrawal from the trust or any statement by Shri G. Dayanand confirming the diversion of trust funds for personal benefit. In the absence of such evidence, the addition cannot be sustained in the hand of the assessee trust. 47.3 In our considered view the r....
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....ough Ground No. 2 of the appeal is that the assessment order is time barred u/s 153B of the Act. 50.1 At the outset, we note that the issues raised by the assessee in its grounds of appeal for the AY 2021-22 is identical to the issue raised by the assessee in ITA No. 939/Bang/2025 for the assessment year 2020-21. Therefore, the findings given in ITA No. 939/Bang/2025 shall also be applicable for the assessment years 2021-22. The appeal of the assessee for the A.Y. 2020-21 has been decided by us vide paragraph Nos. 10 to 15 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2020-21 shall also be applied for the assessment years 2021-22. Hence, the ground of appeal filed by the assessee is hereby allowed. 51. The issue raised by the assessee through Ground No. 3 of the appeal is that the approval granted under section 153D of the Act is mechanical and without application of mind. 51.1 At the outset, we note that the issues raised by the assessee in its grounds of appeal for the AY 2021-22 is identical to the issue raised by the assessee in ITA No. 939/Bang/2025 for the assessment year 2020....
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..../2023. The Tribunal categorically held that the cancellation of registration was bad in law and directed the PCIT to restore the registration with immediate effect. A certified copy of this order was placed on record. 53.4 The AR pointed out that in light of the Tribunal's order restoring registration, the assessment made by the AO in the status of a company automatically becomes invalid. The appellant's status as an AOP (Trust) stands reaffirmed, and therefore, the total income of the appellant must be recomputed in accordance with the provisions of sections 11 to 13 of the Act. 53.5 The AR further submitted that the Hon'ble Tribunal in its order has specifically observed that the cancellation of registration was based on legally unsustainable grounds and the reference made by the AO to the ld. PCIT suffered from procedural infirmities. Hence, once the registration is restored, the denial of exemption under section 11 of the Act cannot survive. 53.6 In conclusion, the learned AR prayed us to hold that the assessment made by the AO in the status of a company as bad in law and that the appellant's correct status is that of an AOP (Public Charitable Trust). It was urged that....
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....aritable Trust) and the total income of the assessee shall be computed in accordance with the provision of sections 11 to 13 of the Act. 55.5 In the result, this ground of appeal is allowed for statistical purposes, with a direction to the AO to modify the assessment accordingly considering the restored registration of the assessee trust. 56. The issue raised by the assessee through Ground Nos. 5 & 6 of appeal is that the learned CIT(A) erred in confirming disallowances of building construction expenses. 56.1 At the outset, we note that the issues raised by the assessee in its grounds of appeal for the AY 2021-22 is identical to the issue raised by the assessee in ITA No. 939/Bang/2025 for the assessment year 2020-21. Therefore, the findings given in ITA No. 939/Bang/2025 shall also be applicable for the assessment years 2021-22. The appeal of the assessee for the A.Y. 2020-21 has been decided by us vide paragraph No. 32 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2020-21 shall also be applied for the assessment years 2021-22. Hence, the ground of appeal filed by the assessee is h....
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....urnish necessary documentary evidence in support of claim of covid expenses. But the assessee failed to furnish the required supporting documents and only stated all the detail already furnished to the investigation wing. 58.4 Accordingly, the AO held that the assessee failed to furnish authentic third-party evidence, such as original bills, supplier details, receipts, or proof of actual purchase of goods or availing of services. In light of these facts, the AO concluded that the assessee had booked bogus, false, and fictitious expenses in the name of Covid relief. The AO further observed that the cash withdrawn against these expenses appeared to have been utilized for the purposes other than the stated charitable objects of the assessee's trust deed. The entire amount of Rs. 17,05,46,680/- claimed under the head "Covid Expenses" was therefore disallowed and added back to the total income of the assessee under the head "Business or Profession." 59. The aggrieved assessee preferred an appeal before the learned CIT(A), who confirmed the finding of the AO by observing as under: 10.1 The appellant trust has claimed Covid Expenses to the tune of Rs. 17,05,46,680/- during ....
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....he appellant during covid period ii. List of volunteers along with the amounts received by them and the purposes for which the amounts were received iii. The purposes for which the amounts were received by the volunteers was for- a. Distribution of Provision kits b. Food distribution c. Ambulance d. Travel assistance e. Fruits & Vegetables Discrepancies noted in the second volume: i. All the 185 no. of volunteers have signed before the Notary Public on a single day i.e., 03.03.2025 ii. The volunteers have affirmed in the affidavit that they have performed voluntary activities without any financial gain or personal benefit iii. However, in the attached excel sheet, various sums have been mentioned against the name of each volunteer for having done the aforementioned work/services iv. The excel sheet shows that the covid expenses have been done over a period of six months April 2020 to September 2020 On careful appraisal of the submission of the appellant, the assessment order and material available on record the following key points emerge- A. First is that t....
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....unprecedented human crisis and relief works had to be undertaken by the Government and voluntary organisations in a swift manner in an emergency mode with no time to lose. The appellant trust is one such voluntary organisation which undertook extensive social service activities for providing urgent and timely covid relief to the needy and affected persons. 73. The relief activities were undertaken by the appellant by enlisting the services of large number of volunteers from various localities spread all over the city of Bengaluru and the procurement of food, PPE or masks for distribution to the needy persons by the volunteers had to be made in the respective localities in a decentralised manner to facilitate quick and timely delivery. In the said circumstances, cash was distributed to the volunteers to afford them the flexibility to incur the expenditure at any time at the local level in accordance with the contingencies of the situation which was constantly undergoing change. 74. The volunteers have accordingly incurred the expenses in cash and procured food packets, rations, fruits, masks etc., for the purpose of distribution. Wherever possible, they have also a....
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....h of September 2020 on a sample basis are submitted at Page Nos.307 to 326 of PB-2. Copies of scanned photographs depicting the social service / covid relief activities carried out by the appellant on a sample basis are submitted at Page Nos.327 to 339 of PB-2. 80. However, the CIT(A) observed in the appellate order that the claim of giving cash to the volunteers for the purpose of distribution of food is not acceptable since the photographs submitted by the appellant have revealed that food has been prepared communally in one kitchen or a few kitchens and there is no scope for purchase of food. The said observation of the CIT(A) does not reflect the correct appreciation of facts and is not justified. As already mentioned earlier, the volunteers have either purchased the food packets or got the food prepared in a local kitchen after buying the provisions with the cash distributed to them. The photographs revealing the food preparation in kitchens pertain to such preparation only and the CIT(A) has wrongly understood that the food preparation was done centrally in a community kitchen/few kitchens. 81. Further, the CIT(A) observed that all the 185 volunteers have si....
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....t under the statute, is not sustainable. As already mentioned earlier, the books of account of the appellant have been audited under the provisions of section 12A(b) of the Income-tax Act and audit report in form 10B has been submitted. Since the appellant trust is registered as a company with non-profit objectives under section 8 of the Companies Act, 2013, the accounts of the appellant have also been audited under the provisions of the said Act also. The appellant submits that the no deficiencies have been pointed out in the maintenance of the books of account and the audit reports. 86. In view of the foregoing submissions, the appellant submits that the disallowance of covid expenses and more particularly the disallowance of the said expenses in its entirety is not sustainable on the facts of the case. The appellant accordingly prays that the Hon'ble Tribunal may be pleased to allow the ground of appeal and delete the said disallowance. 60.2 On the contrary, the learned DR vehemently supported the finding of the revenue authorities. 61. We have heard the rival contentions of both the parties and perused the materials available on record. The central issue before u....
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.... audited under section 12A(b) of the Act, and no discrepancies were pointed out by the auditors regarding the maintenance of books or vouchers. The authorities below have not found any inflation or suppression of income in the books, nor have they rejected the books of account. Therefore, outright disallowance of the entire claim merely on the basis of imperfect or self-generated documentation appears excessive in the given facts and circumstances. 61.5 It is also relevant to consider that the charitable activities undertaken during an emergency situation like the Covid pandemic cannot be expected to have perfect documentation. In such exceptional circumstances, procedural lapses or informal evidence cannot alone negate the substance of charitable work performed. The existence of photographs, affidavits of volunteers, and overall consistency of the ledger entries in the seized Tally data lend reasonable support to the assessee's claim that relief activities were indeed carried out. 61.6 It is also pertinent to note that the presumption provided under section 132(4A) of the Act goes favouring assessee that the contents of the books and other documents found during search to be....
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....on 142(1) of the Act submitted that it has not booked expenses incurred on renovation of hotel/bar/restaurant. 63.3 However, the AO in light of seized documents, statement of various stakeholder recorded during the search and post search proceedings held the submission of the assessee as contradictory. As such, the AO observed that the examination of tally backup data of the trust established that the impugned expenses of Rs. 92,04,098/- has been claimed in the books of the assessee trust. Accordingly, the AO by invoking the provision of section 37 of the Act disallowed impugned amount by holding the same as personal expenditure. 64. The aggrieved assessee preferred an appeal before the learned CIT(A) who confirmed the finding of the AO. 65. Being aggrieved by the order of the authorities below, the assessee is in appeal before us. 65.1 The learned AR before us argued that AO had disallowed the renovation and civil work expenses of Rs. 92,04,908/- incurred in respect of Hotel Vividus on the ground that the expenditure was not connected with the charitable activities of the assessee trust and was wrongly debited in its books of accounts. The learned AR contended that thi....
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....learned AR finally submitted that the expenditure in question had no impact on the computation of income eligible for exemption under section 11 of the Act, since it was never included in the "application of income" and claimed in the return. Therefore, the addition made by the AO and confirmed by the CIT(A) was wholly unjustified and unsustainable in law and on facts. 65.6 On the contrary, the learned DR before us supported the finding of the AO and the learned CIT(A). 66. We have heard the rival contentions of both the parties and perused the materials available on record. The issue involved relates to the disallowance of renovation and civil work expenses amounting to Rs. 92,04,908/- incurred in respect of Hotel Vividus. The AO treated the expenditure as personal in nature and not connected with the objects of the assessee trust, thereby invoking section 37(1) of the Act and disallowing the same. The learned CIT(A) upheld this view by concurring with the reasoning of the AO. 66.1 On a careful examination of the record, it is evident that the seized materials referred to during the assessment were mainly loose sheets showing certain renovation expenses pertaining to Hote....
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....inable on both facts and law. The authorities below have failed to appreciate the explanation and evidences placed on record. The mistake in accounting was a clerical error subsequently rectified, and the amount was never claimed as an allowable expenditure by the trust. Accordingly, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the disallowance. In the result, Ground No. 8 of the appeal is allowed in favour of the assessee. 67. The issue raised by the assessee through Ground No. 9 of the appeal is that the renovation/civil work expenses were not claimed as application of income instead debited to the trustee account. 67.1 At the outset, we note that the issue raised through this ground of appeal has not been pressed before us. Hence, we hereby dismiss the same as not pressed. 68. The issue raised by the assessee through Ground No. 10 of the appeal is that the learned CIT(A) erred in confirming the addition of Rs. 19,17,64,623/- towards alleged unaccounted receipt of capitation fee. 68.1 At the outset, we note that the issues raised by the assessee in its grounds of appeal for the AY 2021-22 is identical to the issue raised by the ass....
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....usiness expense. He therefore concluded that the amount of Rs. 3,54,443/- claimed as expenditure on donations was to be disallowed. Accordingly, the AO added this sum back to the total income of the assessee. 71. The aggrieved assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A) the assessee submitted that the payment of Rs. 3,54,443/- to Chief Minister Fund during the covid-19 pandemic vide cheque no. 001039 was made. The AO arbitrary made disallowances of impugned claim. 71.1 However, the learned CIT(A) confirmed disallowances made by the AO by holding that the assessee has not provided supporting documentary evidence. 72. Being aggrieved by the finding of the learned CIT(A), the assessee is in appeal before us. 72.1 Before us, the learned AR of the assessee submitted as under: 11.2 In this regard, the appellant submits that the disallowance of donation made u/s 37(1) of the Act as applicable to company is not tenable since the assessment was made in the status of a company consequent to the cancellation of registration of the appellant trust by the PCIT. However, the said reason is no longer relevant as the registration of the tr....
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....al contribution of Rs. 5,00,000/- to the Chief Minister's Relief Fund, of which Rs. 3,54,443/- represented the trust's share and Rs. 1,45,557/- was the contribution of employees. The payment was made during the COVID-19 pandemic as a measure of public relief, which clearly falls within the charitable objectives of the trust. 73.3 We also observed that the said donation was included in the "application of income" for the year as disclosed in the return of income. The amount was duly certified in the audit report furnished in Form No. 10B, and no defect or inconsistency was pointed out by the revenue authorities. Hence, the genuineness of the expenditure could not be doubted merely for want of further confirmation. 73.4 In view of these facts, we hold that the disallowance made by the AO and upheld by the ld. CIT(A) was unjustified. The payment to the Chief Minister's Relief Fund was a genuine and verifiable expenditure made towards the charitable purpose of the trust. Therefore, it constituted a valid application of income under section 11 of the Act. Accordingly, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the disallowance of Rs. 3,54,443....
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.... the building block. The AO found that the assessee has booked bogus building construction expenses during year as well as in preceding 6 assessment years. Hence, the AO held that once the building construction is itself bogus, the depreciation on the same is not eligible. Hence AO disallowed the corresponding depreciation of Rs. 13,41,15,998/- and added to the total income of the assessee. 78. On appeal by the assessee, the learned CIT(A) confirmed the finding of the AO by observing as under: The AO has disallowed the depreciation of Rs. 13,41,15,998/- claimed during the F.Y.2020-21 on the asset, as building of Rs. 98,76,56,576/- holding that the appellant booked bogus expenses under the head building under construction. 19.2 These contentions of the appellant on this issue are not maintainable because of the facts of the case and detail reasoning based on evidence in the assessment order. Since, the AO has assessed the appellant as on AOP, the addition towards depreciation on buildings held as bogus is justified and is based on facts. The AO has rightly made this disallowance in its order on depreciation claim on the bogus assets. Hence, the disallowance made....
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....Rs. 148,25,88,940/- and loan repayment of Rs. 25,05,24,962/-. The depreciation and amortisation expenses of Rs. 24,40,91,858/- debited to the I&E statement were specifically excluded from the computation of application of income. Hence, there was no double deduction of the same amount. 79.5 The learned AR also pointed out that no exemption under section 11 of the Act was claimed by the assessee in respect of depreciation, including depreciation on buildings, for the purpose of determining total income. Thus, the AO's finding that depreciation results in double deduction is factually incorrect and legally untenable. When the depreciation debited to the I&E statement is not part of the application of income, there is no basis for disallowing it. 79.6 The learned AR also contended that the AO's assumption that additions to the building were bogus is without any supporting evidence. The assets are physically existing and used for the educational activities of the trust. The AO's conclusion is based merely on surmise and not on any tangible material. Moreover, depreciation is allowable on actual assets owned and used by the assessee, irrespective of the timing of the expenditure i....