TaxTMI 
TaxTMI 
2026 (5) TMI 459
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....was disallowed. The assessee society was directed not to carry forward any loss from the AY 2008-09 as the total income assessed was at NIL. That the aforesaid assessment order is dated 24.12.2010 which is herein after referred to as "Impugned Assessment Order". 2.2 The assessee is a society registered under MP societies Act. The objectives of the society have been stated to be to develop awareness & to bring out the inherent quality/talent in the youth & children in the field of art dance & music etc. The aim of the society is not profit making/earning & that the same should be treated as a charitable in the nature as profit is not a main object. 2.3 The assessee society is not registered u/s. 12A of the act. 2.4 It is recorded in the "Impugned Assessment Order" that "further from the perusal of list for members of the assessee society (as submitted) it is seen that all the members belong to the same family/close friend/relative & it is seen that the same is being run as business concern & by No stretch of imagination, the activities of the assessee society can be said to be charitable in nature." 2.5 It is also recorded in the "Impugned Assessment Order" that "in the ....
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....he assessee being aggrieved by the aforesaid "Impugned Assessment Order" prefers the first appeal u/s. 246A of the act before the Ld. CIT(A) who by the "Impugned Order" has dismissed the first appeal of the assessee on the grounds & reasons stated therein. The core grounds & reasons for the dismissal of the first appeal was as under:- "6.3 I have gone through the grounds of appeal, assessment order and the submissions of the appellant. Remand report submitted by the AO and the rejoinder of the appellant have also been perused. The appellant society is not registered u/s. 12A of the IT Act. The AO observed that the activities of the assessee society in conducting workshops and regular classes are clearly business oriented and not for a charity. Most of the expenditure debited to Income and Expenditure are advertisement expenses and garba expenses. It is clear from the nature of expenditure that the appellant is running the classes only for business purpose. In the remand report, the AO submitted that the appellant failed to justify various expenses. The AO arrived at the logical conclusion after thorough investigation and after providing sufficient opportunities to the asse....
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.... the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs. 40,28,561/- made by the AO in the appellant's income, by making ad-hoc disallowance of certain expenditure incurred by the appellant, over and above the receipts shown by it in its Income & Expenditure Account for the relevant previous year, merely on guess work, surmises, presumptions and extraneous considerations. 3. That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs. 40,28,561/- made by the AO in the appellant's income, by making disallowance of expenditure, without considering and appreciating the material fact that the appellant had actually and genuinely incurred such expenditure during the course of carrying out its principal activities for which it had got constituted and incurrence of such expenditure was duly vouched and open to verification. 4. That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs. 40,28,561/- made by the AO in the appellant's income by making disallowance of expense....
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....were as the income was Rs. 94,00,008/- 3.7 The Ld. AR then readout page 1 & page 2 of the Impugned Order". 3.8 The Ld. AR then interalia submitted that the findings & conclusions in the "Impugned assessment Order" is a very generic finding. The books of accounts of the assessee society are audited one. The assessee society has not made any profit. The object of the society is not profit motive. Since last few years and currently the assessee society is focussing mainly on Garba events mostly in the MP at Bhopal, Jaipur, Indore & Jabalpur. 3.9 In so far the "Impugned Order" of the Ld. CIT(A) is concerned the assessee society had filed the additional evidence before the first appellate authority. The remand report was filed by the Ld. AO. The Ld. AR then readout para 6.3,6.4,6.5 of the "Impugned Order" which we have already reproduced above. 3.10 Books of accounts are not rejected by the Ld. AO anywhere, contended the ld. AR emphatically. 3.11 The "Impugned Order" is too generic in nature & NO specific allegations of related party transactions have been successfully established basis any evidence. The PB now filed was before the Ld. CIT(A) including the additional evid....
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.... after hearing & further upon examining the rival contentions of the Ld. AR & the Ld. DR canvassed before us, are of the considered opinion that the assessee society is duly registered under MP societies registration act 1973. Page 65 of the PB is registration certificate as proof thereof. The main object of the assessee society basis page 69 of PB is mainly to develop the interest of young boys & girls towards the various forms of art's like paintings, drawings, English speaking, dance, Music etc. In brief the assessee society has been formed for developing various cultural, social, & educational activities so as to develop awareness so as to bring out the inherent qualities/talent of the youth & the children in the various field of arts, dance, Music etc. The Bye laws are placed on paper book & same were perused by us. We also observe & note that the assessee society has not opted for registration u/s. 12A/12AA of the Act. In the ROI page 27 of PB gross total income is NIL. Current year loss is of Rs. 40,28,561/-. TDS is of Rs. 31161/-. Refund of 31,161/- is claimed. As per the computation of income page 28 net loss as per the "income & expenditure account" is Rs. 40,28,561/-. To....
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....e assessee society. No empirical analysis is done in this regard too where by any inference logically could be drawn for disallowance of loss. 4.5 The assessee society has shown "Garba" expenses of Rs. 99,74,871/- as against Garba income of Rs. 94,00,008/- thus there is debiting of excess expenditure of Rs. 5,74,863/- in the income & expenditure account. At this stage Ld. AO observes that huge advertisement expenses of Rs. 43, 22,036/- has been incurred by the assessee society which is said to be paid to the business concern run by members of the assessee society. No proper explanation/justification has been given by the assessee society with respect to the huge advertisement expenses paid to group concerns where members are directors/owner of majority shareholding. In this regard we hold that merely because the payments have gone to the group concerns by itself is not proof to disallow the loss. Further mere fact that the assessee society founder members are directors/owner of majority shareholding of group concerns to whom the payments for advertisement have been effected ipso facto dose not establish that excessive loss is shown or excess expenditure are made in the absence o....
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....A) basis AO report & "Impugned Assessment Order" has observed that assessee's had incurred Rs. 43,22,036/- towards advertisement as against total receipts from all the activities at Rs. 36,37,577/-. The assessee submission on the advertisement is not convincing. Assessee failed to submit bills & vouchers for the said expenditure. Assessee also failed to establish that these advertisement Expenses fetched any new business in the subsequent years. Moreover the advertisement expenses were paid to the business concern run by the members of the society. They are related party transactions though legal can create conflict of interest. The transaction must be executed in a fair & transparent manner. Despite opportunities by Ld. AO assessee has failed to provide verifiable documentary evidence in this regard. Loss of Rs. 40,28,561/- was sustained by FAA. We after carefully perusing above para 6.5 are of the view that the Ld. AR is correct in making submissions that orders are passed by the lower authorities in a very generic manner. Merely observing assessee submission on advertisement expenses are not convincing is not sufficient exercise in law as department should state in their respect....