TaxTMI 
TaxTMI 
2004 (10) TMI 257
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....0 - 12,80,411 15,61,616 Inflation of expenses - 5,22,350 7,80,000 - - Other addition of infla- tion of exp. - 48,000 - - - Suppression of receipts - 25,000 2,06,000 62,700 5,85,400 Unexplained expenses - 91,354 29,400 15,750 40,000 Compulsory consideration for admission - 17,54,786 40,18,215 31,08,500 1,80,000 Unexplained cash credit - - - 22,96,385 9,17,500 ....
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....-2000 and Rs. 15,61,616 for asst. yr. 2000-01 5. At the time of hearing before us, it is submitted by the learned counsel that the search took place at the residential premises of Shri Ashak Ali Narsinh and Smt. Hamidaben Narsinh on 29th June, 1999, who are the trustees of the assessee-trust. In the block assessment of the aforesaid persons it was found that certain documents seized from the above named assessees were pertaining to the assessee-trust and, therefore, action under s. 158BD was taken against the assessee. That the due date for filing of the return for asst. yr. 1999-2000 was 31st Oct., 1999, while the search took place prior to the above date. Moreover, the accounting year relevant to the asst. yr. 2000-01 was not expired at the time of search. Therefore, obviously, the due date was much after the date of the search. That the regular returns for both the years were filed by the assessee and they were accepted under s. 143(1)(a). That the income disclosed by the assessee as per P&L a/c in the regular return of asst. yrs. 1999-2000 and 2000-01 were considered as undisclosed income in the block assessment. That the assessee-trust is running a school known as Divine Ch....
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....s of the assessee's case in the light of the above provision. It is undisputed that the due date for filing of the return under s. 139(1) has not expired for asst. yr. 1999-2000 as well as 2000-01. Thus, the only dispute is whether the income of the assessee was recorded in the books of account or other documents maintained in the normal course. In the normal course, the assessee has maintained cash book, ledger, receipt book for the fees received, salary register, vouchers for expenditure, etc. The cash book was written only upto July, 1998, while the search took place in June, 1999. However, admittedly, the receipt of the assessee was fees from the students which was duly recorded in the receipt book. Major expenses were on account of salary which was recorded in the salary register and other expenses by way of vouchers. At pp. 162 to 169, the assessee has given the xerox copy of inventory of the books of account, etc. found and seized. From the perusal of the seized documents, it is evident that the receipt book, salary register, fees account register and a large number of loose papers were found and seized. It was claimed by the learned counsel that after the date of search, th....
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....s for expenses. 10. After considering the facts of the case and the arguments of both the sides, we set aside the orders of authorities below and restore the matter back to the file of AO. We direct him to re-examine the whole issue with reference to salary register and other evidences namely, vouchers for expenses, etc. He will also consider the assessee's claim that when the two loose papers were found simultaneously, why only one loose paper should be considered ignoring the other loose paper specifically when the other loose paper which is being relied upon by the learned counsel records the receipt as well as expenses both as against loose paper No. 26 relied upon by the learned AO which records only expenses. IV. Regarding addition of Rs. 7,80,000 for inflation of expenses for asst. yr. 1998-99 11. It is submitted by the learned counsel that the AO has recorded that as per page No. 34, salary expenses for July, 1997, were Rs. 68,685. He, accordingly, calculated the salary for whole year and disallowed the salary which was in excess of the salary as worked out by him. The learned counsel stated that the loose paper No. 34 was in respect of the payment being made to Ri....
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....Rs. 2,06,000 for suppression of receipt for asst. yr. 1998-99 15. The AO has recorded the finding that from the receipt book found at the time of search, the total collection of the fees for financial year 1997-98 was Rs. 24,11,500. In para 5.3 of the assessment order, the AO has given the complete details of receipt book number, date of receipt and the amount. However, the total fees shown by the assessee for financial year 1997-98 was only Rs. 22,05,500. Therefore, the AO made the addition of Rs. 2,06,000 for suppression of receipts. At the time of hearing before us, it was explained by the learned counsel that for the fee received once the receipt has been issued twice. He has given the reconciliation of the same at p. 24 of the assessees paper book. However, the learned counsel could not satisfactorily explain how receipt can be issued twice if the fee was received only once. Therefore, we are unable to accept the assessee's explanation that the receipt was issued twice for the fees received once. Accordingly, we uphold the finding of the AO on this point. VIII. Regarding suppression of receipts of Rs. 62,700 for asst. yr. 1999-2000 16. The AO in para 5.4 of the assess....
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....dicate this matter in accordance with law. X. Regarding addition for unexplained expenses of Rs. 91,354, Rs. 29,400 and Rs. 15,750 relevant to asst. yrs. 1997-98, 1998-99 and 1999-2000 19. At the time of hearing before us, it is submitted by the learned counsel that the payment for the expenditure of Rs. 91,354 is made by the trustee, Shri Ashak Ali Narsinh. The above amount is already added in the block assessment of Shri Ashak Ali Narsinh and he has accepted the said addition. Similarly, the payment for the expenses of Rs. 29,400 and Rs. 15,750 is made by Smt. Hamidaben, trustee of the assessee-trust. The above amount has been considered in the assessment of Smt. Hamidaben. The learned Departmental Representative fairly admitted that if the above amounts have already been added in the hands of the trustees the same cannot be added in the hands of the assessee-trust. However, she stated that whether the amount has in fact been added in the case of the trustees and whether the trustees have accepted the above additions needs verification. The learned counsel for the assessee has no objection for sending the matter back to the file of the AO for verification. In view of above,....
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....below and that the donation was, in fact, the admission fee which is being collected by assessee-trust for admission of any child in the school and, therefore, it was in the nature of income. 23. We have heard both the parties and perused the material placed before us The assessment under consideration is the assessment of block period and Chapter XIV-B of the IT Act provides special procedure for assessment of search cases. As per Chapter XIV-B, the AO has to determine the undisclosed income of the block period. "Undisclosed income" has been defined under s. 158B(b) which reads as under: "(b) 'undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false." Thus, any money, bullion, jewellery or valuable article ....
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....in the normal regular assessment under s. 143(3). Where the AO makes an enquiry to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner and on the basis of the evidence produced by the assessee, the evidence obtained on the specific points and all relevant material which he has gathered assessee's the total income or loss and determines the sum payable thereon as per that assessment. This exercise under s. 143(2) and s. 143(3) for regular assessment stands in contrast to the exercise of the AO under s. 158BB r/w s. 158BC(b), where he has to assess only the undisclosed income of the block period on the basis of the evidence found and material available as a result of the search conducted by the authorised officer under s. 132 of the Act." From the above, it is evident that under Chapter XIV-B, the assessment of undisclosed income is to be made and not of total income. We have also extracted in para No. 7 the definition of undisclosed income under Chapter XIV-B. The receipt which is already disclosed by the assessee in its books of account cannot be said to be undisclosed income. The above decision wa....
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....he difference between the receipt of donation as per cash book and as per receipts is treated as unexplained cash credit. It is contended by the learned counsel that when the donation is already recorded in the cash book, it does not remain undisclosed income. While explaining the reasons for the difference he stated that sometimes the parents do not take the receipt immediately and some of the receipt books might have been lost, but the fact remains that the receipt is duly recorded in the book of account and merely because the receipt book is lost/misplaced, it cannot be said that it is undisclosed income. We have already considered this issue at length and after the detailed discussion in para 23 of this order, we have come to the conclusion that in the block assessment, the AO has to assess the undisclosed income. The receipt of donation is already recorded in the cash book under the head "donation towards building fund". Thus, it does not remain the undisclosed income for the purpose of block assessment. Therefore, respectfully following the decisions of the Hon'ble jurisdictional High Court in the cases of N.R. Paper & Board Ltd. and Shambhulal C. Bachkaniwala, we delete the ....
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....rsued by the assessee and, therefore, the denial of exemption under s. 10(22) on the ground that the object clause includes other objects is not justified. He further contended that the assessee-trust is running the educational institution as per the norms laid down by the Education Department and it has not violated any norms fixed by the State Government for running of the educational institutions. He pointed out that the education officer has conducted enquiry with regard to the allegation of compulsory donation being collected by the assessee. Copy of the letter of the education officer is placed at p. 195 of the assessee's paper book. The assessee gave reply on 29th July, 1998, copy of which is placed at pp. 192 and 193 of the assessee's paper book. After considering the above reply and the enquires conducted by the education officer, he was satisfied that the assessee has not violated the norms fixed by the Education Department for running of educational institutions and, therefore, no action was taken against the assessee. The assessee is still continuing to have the licence to run the educational institution from the Education Department of the State Government. Moreover, t....
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....) Secondary Board of Education vs. ITO (1972) 86 ITR 408 (Ori) (iv) CIT vs. Vidya Vikas Vihar (2004) 187 CTR (Bom) 446 : (2004) 265 ITR 489 (Bom) (v) Lancer Army School Society vs. Asstt. CIT; IT(SS)A No. 39/Ahd/2004. 28. The learned Departmental Representative, on the other hand, relied upon the orders of authorities below. She stated that the trust does not keep true and faithful record of its receipts and the expenditure. The trust has collected huge money while no regular records for such money collected by the assessee are kept. The settlor himself is a trustee and other trustees are also related to the settlor. In the building constructed by the assessee-trust on the ground, first and second floors, the school is being run while the trustees reside at the third floor of the school. Before the creation of this trust, the trustees were doing the tuition. The learned Departmental Representative contended that from the totality of the above facts, it is clear that the object of the trust is not the education but to make profit. 29. In the rejoinder, it is submitted by the learned counsel that the trustee had been interest in the educational activities. The trustee is ....
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.... main controversy for allowing or disallowing the exemption under s. 10(22). That the assessment under consideration is for a block period consisting of 1st April, 1989 to 29th June, 1999. The Hon'ble apex Court in the case of Aditanar Educational Institution has held as under: "The language of s. 10(22) is plain and clear and the availability of the exemption should be evaluated each year to find out whether the institution existed during the relevant year solely for educational purposes and not for the purposes of profit. After meeting the expenditure, if any surplus results incidentally from the activity lawfully carried on by the educational institution, it will not cease to be one existing solely for educational purposes since the object is not one to make profit. The decisive or acid test is whether on an overall view of the matter, the object is to make profit. In evaluating or appraising the above, one should also bear in mind the distinction/difference between the corpus, the objects and the powers of the concerned entity." Thus, whether the assessee is entitled to exemption under s. 10(22) or not should be evaluated each year and a decision for the whole block perio....
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....at different stages of interpreting it. When the question is whether a subject falls in the ambit of the exemption clause, then it being in the nature of exemption, is to be construed strictly. But once ambiguity about the applicability is visited, full play should be given to the exemption clause and it calls for a wider and liberal construction keeping in view the purpose underlying. Exemption from tax granted by the statute should be given full scope and amplitude and should not be whittled down by importing limitation not inserted by the legislature. Viewed in the backdrop of the aforesaid legal position, s. 10(22) clearly confers exemption on the income of an educational institution which is run for educational purposes and not for purposes of profit. The language of s. 10(22) is plain and clear and the availability of the exemption would essentially depend upon the objects of the institution being promotion of education and not personal benefit of the organisers. In the instant case of the assessee-trust, admitted facts are that the trust running the school is registered as a public charitable trust under the Bombay Public Trusts Act, 1850, and is also registered as a society....
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....rs and they are not well versed in maintaining the accounts. The job of maintenance of books of account was left to the clerical staff who committed certain irregularities. However, merely because there is some irregularity in the maintenance of accounts that by itself would not be sufficient to hold that the claim of exemption of the income under s. 16(22) was false. To conclude, we find that the assessee is an educational institution and its claim under s. 10(22) is not found to be false on the basis of search. Therefore, we hold that while adjudicating the income of the block period, the AO will follow the view taken by the Department in the assessments of respective assessment years, i.e., if in the regular assessments of any assessment year or years, exemption under s. 10(22) was allowed then while determining the income of the block period in respect of such assessment year/years exemption under s. 10(22) will be allowed and vice versa. XVI. Regarding exemption under s. 11 31. At the time of hearing before us, both the parties stated that their arguments with regard to exemption under s. 11 are the same as were made by them with regard to exemption under s. 10(22). We h....