Income Tax Appellate Tribunal - Pune
Maharashtra Academy Of Engineering And ... vs Dy. Cit, Cc-1(1), Pune on 10 February, 2017
आयकर अपील य अ धकरण, पुणे यायपीठ "ए" पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
ी आर. के. पांडा, लेखा सद य एवं
ी वकास अव थी, या"यक सद य के सम#
BEFORE SHRI R.K. PANDA, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA Nos.915 to 920/PUN/2012
"नधा%रण वष% / Assessment Years : 1999-2000 to 2004-05
Maharashtra Academy of .......... अपीलाथ /
Engineering and Educational Research,
Appellant
S.No.124, Ex-Serviceman Colony,
Paud Road,
Kothrud, Pune - 411 029
PAN :AAAAM1206F
बनाम v/s
DCIT, Central Circle-1(1), Pune
.......... यथ /
Respondent
अपीलाथ क ओर से / Appellant by : Shri Sunil Pathak &
Shri Nikhil Pathak
यथ क ओर से / Respondent by : Shri A.S. Singh
सुनवाई क तार ख / घोषणा क तार ख /
Date of Hearing : 03.01.2017 Date of Pronouncement: 10 .02.2017
आदे श / ORDER
PER R.K.PANDA, AM :
The above batch of 6 appeals filed by the assessee are directed against the common order dated 29-02-2012 of the CIT(A)-III, Pune relating to Assessment Years 1999-2000 to 2004-05 respectively. Since identical grounds have been taken by the assessee in all these appeals, therefore, these were heard together and are being disposed of by this common order.
2
ITA Nos.915 to 920/PUN/2012
2. First we take up ITA No.915/PUN/2012 for A.Y. 1999-2000 as the lead case. Facts of the case, in brief, are that the assessee is a trust incorporated in the year 1983 and is registered under The Bombay Public Trust Act, 1950. The trust runs several educational institutions. For the impugned assessment year the assessee trust filed its return of income on 30-06-2000 disclosing NIL income. According to the assessee the income of the trust is exempt u/s.10(23C)(vi) of the I.T Act, 1961. In the return of income, the assessee has shown income from other sources of Rs.17,97,33,097/-. The trust is also registered u/s.12AA(1) of the I.T. Act, 1961. It was claimed that the entire income from other sources of Rs.17,97,33,097/- which are the gross receipts of the trust for the impugned assessment year is exempt u/s.11 of the I.T. Act.
3. The Assessing Officer observed that there was a search u/s.132 of the I.T. Act, 1961 in the case of two of the trustees namely Shri Vishwanath D. Karad and Shri Bhaskar E. Avhad. Survey action u/s.133A of the I.T. Act was conducted in the case of the trust on 20-07- 2005. During the course of search at the residence of Shri Vishwanath D. Karad, jewellery worth Rs.4,49,562/- and certain documents were seized. Similarly, in the case of Shri B.E. Avhad jewellery worth Rs.41,01,317/- and cash of Rs.28,49,350/- and certain documents were seized. Action u/s.133A of the I.T. Act, 1961 was again taken in the case of the Trust on 26-08-2005 during which cash of Rs.8 lakhs and an incriminating document indicating on-money payment on account of purchase of land was found. Since the cash found at the time of survey could not be explained, one of the Executive Director Shri Mangesh Karad admitted the same as his income. However, after couple of months the Executive Director retracted from his commitment regarding unexplained cash found during survey. During the course of survey and 3 ITA Nos.915 to 920/PUN/2012 the post search/survey enquiry several discrepancies were noticed. Accordingly, the Assessing Officer issued notice u/s.148 of the Act to the assessee trust on 29-03-2006 which was served on the assessee on 01- 04-2006. The assessee objected to the issue of notice u/s.148 of the I.T. Act and such objections were disposed of by the Assessing Officer vide separate order dated 01-08-2008.
4. Subsequently, the Assessing Officer issued notice u/s.143(2) and 142(1) to which the assessee filed various details from time to time. The Assessing Officer noted the following irregularities as per pages 3 to 5 of his order which were noticed during the course of post survey enquiries conducted by the Investigation Wing of the Department and the enquiries done by him during the course of assessment proceedings :
"1. The trust had taken donation for admission from various persons which is for reservation of seats under Management Quota prohibited under Maharashtra Educational Institutes (Prohibition of Capitation Fees) Act, 1987.
2. Major portion of donation was in cash and against many such donations there was no addresses.
3. Out of the cases wherein there was addresses, there were instances wherein donors denied to have given the donation.
4. There were instances wherein donation for a bigger amount obviously received in lieu of admission out of management quota was split into donations of smaller denominations and multiple receipts were issued to the donors who were not traceable. E.g. on 25-08-2001 Rs.5,00,000/- in cash was taken from Dr. Ahmad Shaikh Belgam Bazar, Hyderabad and 12 receipts were issued. Dr. Ahmad Shaikh is not traceable as practically no addresses were given.
5. There were instances where in lieu of admission donation was taken, but it was split up in various names to hide the name of the donor.
E.g. (a) For the admission of Son of Daulatrao Jadhav donation of Rs.7,00,000/- was taken in the name of 16 unrelated persons to whom receipts for donation entitling them to get deduction u/s.80G were issued.
(b) In the case of Bansidhar D. Patil, Shirpur a donation of Rs.15,00,000/- was received for the admission of Vaibhav Patil and 14 receipts in different names were issued, entitling different donors to get deduction u/s.80G of the I.T .Act, 1961.4
ITA Nos.915 to 920/PUN/2012
6. There were instance of donations below Rs.10,000/- in cash in the name of various far off out station donors such as from Delhi, Kanpur, Loni, Hyderabad etc. within a span of couple of days which was most improbable. These are as per Annexures III,, IV and V, and VI to the order u/s.12AA(3) dtd.31-10-2007 passed by the CIT (C), Pune which are annexed.
7. Majority of the donations credited to the corpus of the Trust and claimed to be eligible for exemption u/s.11 of the I.T. Act, 1961 were not voluntary.
8. An instance was detected wherein the assessee Trust paid money to the tune of over Rs.69,50,000/- in cash for the purchase of property at Kelgaon over and above the purchase consideration stated in the registration deed thereby evading both the income tax and stamp duty.
9. There were instances wherein either receipt for cash donation was not given or the receipt was given for part of the donation received. Detailed discussion in this regard is contained in order u/s.12AA(3) of CIT (C), Pune's dtd.31-10-2007 which may please be read as part of this order.
E.g. (a) In the case of Shri Yashwardhan Sharma no receipt was given for cash donation of Rs.4 lakh.
(b) In the case of Kashinath Sarode receipt for only Rs.4 lakh was given against cash donation of Rs.5 lakhs.
(c) In the case of Mohd. Iqbal Mohd of Hyderabad receipt for only Rs.5.5 lakh was given against cash donation received of Rs.14 lakhs.
10. There was an instance where payment over and above regular fee was demanded and admission was denied for not fulfilling the demand E.g. Statement of Shri Bhivarao Dhamale discussed in order u/s.12AA(3) dtd. 31-10-2007.
11. The assessee has got donation receipt books printed on which even on blank pages it has put a stamp that the donation is on account of corpus and the donation is eligible for deduction u/s.80G of the I.T. Act, 1961.
12. There were violations of section 13 of I.T. Act, 1961."
5. The Assessing Officer further observed that the Ld.CIT Central, Pune while cancelling the registration u/s.12AA(3) of the Act has dealt with the above issues in detail. He noted that although the trust was constituted on 24-10-1983, it filed an application for registration u/s.12A(a) of the I.T. Act for the first time on 24-02-1999. The CIT-II, 5 ITA Nos.915 to 920/PUN/2012 Pune had granted registration u/s.12A(1) of the I.T. Act, 1961 for the first time w.e.f.01-04-1998. The assessee trust had also applied for approval for exemption u/s.10(23C)(vi) of the I.T. Act, 1961 for A.Yrs. 1999-2000 to 2001-02 and the approval was granted vide order dated 09-03-2004. In view of the approval for exemption u/s.10(23C)(vi) granted by CBDT, New Delhi and the registration granted by the CIT-II, Pune the assessee enjoyed the benefits of exemption u/s.10(23C)(vi) of the I.T. Act, 1961 w.e.f. 01-04-1998. The CIT-II, Pune was not aware of the true affairs of the trust. Therefore, the facts which came to the notice of the Department during post survey probe were brought to the notice of the CIT Central, Pune. The Ld.CIT Central, Pune after considering the facts of the case and submission of the assessee cancelled the registration granted to the trust vide his order dated 31-10-2007.
6. Similarly, the CBDT while granting exemption to the trust u/s.10(23C)(vi) vide its order dated 09-03-2004 was not aware of the true affairs of the trust. Therefore, the facts that came to the notice of the Department during post search/survey probe were reported to the DGIT (Investigation), Pune. The DGIT (Investigation), Pune vide his order u/s.10(23C)(vi) r.w. 13th proviso of the I.T. Act, 1961 order dated 08-02-2008 has withdrawn exemption granted u/s.10(23C)(vi) of the I.T. Act, 1961. Since the assessee trust has lost exemption u/s.12AA as well as exemption granted u/s.10(23C)(vi) r.w. 13th proviso of the I.T. Act, 1961 the Assessing Officer held that the assessee has to be assessed like any other assessee and provisions of section 10(23C)(vi) and 11 and 12 are not applicable in the case of the assessee. He accordingly proceeded to assess the income of the assessee like an AOP to whom totally different sets of income tax provisions are applicable. In view of the complexities involved in computing the income of the assessee AOP, the CIT Central, Pune approved special audit for the A.Yrs. 1999-2000 to 6 ITA Nos.915 to 920/PUN/2012 2006-07. Accordingly, the assessee was directed to get its accounted audited by the auditor appointed by the CIT Central, Pune. The assessee filed the audit report for the year under consideration on 13-06-2008.
7. The Assessing Officer examined the objects of the trust which he incorporated at pages 7 to 9 of the assessment order. He observed that although the objects are predominantly educational in nature, however, the assessee trust has subsequently amended the trust deed on its own and included 3 more objects, vide Resolution of Managing Committee dated 20-07-1997. According to him object No.13 is significant which reads as under :
"13. The institution aims to work towards the noble cause of World Peace and Harmony. It also aims and intends to establish the World Peace University/World Peace Centre and similar institutions singularly or jointly/at various places in India and all over the world."
8. The Assessing Officer noted that an application was moved to get the additional object regularised from the Charity Commissioner on 30- 08-1999. The trust applied for registration for the first time to the CIT-II, Pune on 24-02-1999. According to the Assessing Officer if the claim of the trust that the additional object approved vide resolution of managing committee on 20-07-1997 is true, then in that case, the assessee should have communicated to the CIT regarding the amendment of the object while applying for registration on 20-02-1999. No intimation was given to the CIT-II, Pune which is the authority granting registration u/s.12AA(1) of the I.T. Act. Therefore, he was of the opinion that the introduction of 13th object is after the grant of registration u/s.12AA(1) of the I.T. Act. He noted that the additional object was made operational even before filing the application before the Charity Commissioner to include this clause in the trust deed. From the books of account of the assessee, he 7 ITA Nos.915 to 920/PUN/2012 observed that till 31-03-1999, i.e. even before the communication of the 13th object to the Charity Commissioner the assessee had already spent a sum of Rs.1,11,41,532/- on this object. The Charity Commissioner allowed this clause to be included in the trust deed with retrospective effect vide approval dated 06-04-2005. The Assessing Officer held that for unilaterally amending the trust deed and without getting the approval of the Department to this amendment the assessee has to be denied registration. For the above proposition, he relied on the decision of Hon'ble Allahabad High Court in the case of Agricultural Institute and others Vs. UOI reported in 291 ITR 116. He further observed that the purpose of this amendment was apparently for increasing the social status of the trustees. He noted that there were huge expenses on World Philosophers Meet (in short 'WPM') at Geneva even prior to communicating the objects to the Charity Commissioner and the authority granting registration. Further during WPM at Geneva heavy expenditure was incurred outside India for which no approval was obtained from CBDT as laid down in proviso to section 11(1)(c) of the I.T. Act. In view of the above facts, the Assessing Officer held that since the object No.13 was not approved even by the Charity Commissioner, the expenses incurred is not on the objects of the trust. The Assessing Officer further noted that the assessee was granted registration u/s.12AA(1) as educational institution. The CBDT had also granted exemption u/s.10(23C)(vi) as educational institution. However, clause No.13 which was included has no education purpose whatsoever. Thus the assessee has violated not only the provisions of section 12AA(1) but also the provisions of section 10(23C)(vi) of the I.T. Act.
9. The Assessing Officer further noted that the assessee has violated the provisions of section 13 on account of the following facts : 8
ITA Nos.915 to 920/PUN/2012 a. Shri B.E. Avhad and his family members, i.e. Mrs. Kamal Avhad, Mr. A.B. Avhad, Ms. A.B. Avhad and Ms. P.B. Avhad went to Geneva during the period 15-08-1998 to 30-08-1998 for which expenditure on air fare of Rs.1,60,000/- and expenses on foreign exchange to the tune of Rs.4,40,000/- were incurred. The above expenditure was sponsored by the assessee trust and the expenses were debited in the books of the trust. On being confronted the trust came out with altogether a new version that B.E. Avhad is a trustee and so is his wife. His children were taken as volunteers for holding the conference on World Peace Centre at Geneva for 15 days. Further, he noted that no explanation was given as to how the foreign exchange of Rs.4,40,000/- was spent outside India. In view of the above, the Assessing Officer held that this is a violation of section 13(1)(c) of the I.T. Act.
b. The Assessing Officer further observed that the trust has extended several facilities to B.E. Avhad, President of the Trust by incurring substantial expenditure on account of the following :
a. Expenses on Toyota Camry Car
b. Credit cards expenses
c. Visit to Foreign Countries
d. Local visits
e. Hiring of taxis
10. On being asked by the Assessing Officer to justify the incurrence of above expenditure, it was stated by the assessee trust that Shri B.E. Avhad has been carrying out lot of functions relating to the trust.
However, the Assessing Officer observed from the statement recorded of Shri Avhad during the course of search u/s.132(4) that he is the Honorary President and not actively involved in the day to day activities of the trust. In the said statement he has admitted that the day to day administrative activities of the trust are attended by Shri Vishwanath Karad who is the Executive President. The activities at the level of individual institutions are looked after by a committee headed by the Principal and Staff. The role of Shri B.E. Avhad is limited to conducting 9 ITA Nos.915 to 920/PUN/2012 of board meetings and transactions which are mainly for taking policy decisions. The Assessing Officer further observed that Shri B.E. Avhad is an eminent Lawyer practicing in various courts including the Hon'ble Supreme Court of India. The assessee in its clarification explained that Shri Avhad was looking after the court matters relating to the trust in toto. In order to verify this claim, the Assessing Officer examined the legal expenditure incurred by the assessee which are as under :
Asst.Year Legal Expenses
(Rs.)
1999-00 5,12,640
2000-01 2,91,450
2001-02 2,26,200
2002-03 8,37,439
2003-04 20,45,423
2004-05 1,50,819
2005-06 3,60,283
2006-07 15,20,785
11. Looking at the magnitude of expenditure incurred by the assessee on legal charges and also the statement of Shri B.E. Avhad the Assessing Officer was of the opinion that Shri B.E. Avhad cannot be said to have been actively engaged in the day to day functioning of the trust. The Assessing Officer further noted that besides the car provided to the Honorary President, the assessee trust has also provided facilities such as personal computers, drives etc. The Trust bears the day-to-day maintenance of the car besides the interest on borrowed capital. Further, the assessee trust has been reimbursing the credit card expenditure on account of two credit cards held by Shri B.E. Avhad the details of which are as under :
Sr.No. Asst.Year Expenditure
1 1999-00 1,33,891.71
2 2000-01 1,42,529.03
3 2001-02 91,054.38
4 2002-03 2,42,566.85
5 2003-04 2,79,298.68
6 2004-05 1,78,264.29
7 2005-06 2,28,839.73
10
ITA Nos.915 to 920/PUN/2012
8 2006-07 2,10,636.97
Total 15,07,081.64
12. He observed that the amounts of the credit card expenses are on account of hotel bills for staying in Mumbai and Delhi where High court and Supreme Court are located. He observed that the assessee has also debited the air fare expenses of Shri B.E. Avhad. Looking at the expenditure incurred for hiring the legal professionals and the statement of Shri B.E. Avhad and on account of failure of the assessee to produce tour-wise justification for hotel bills and travel bills he was of the opinion that the expenditure incurred as shown above cannot be said to have been incurred on/for the objects of the trust. He further noted that salary of Rs.75,000/- was being paid to the President from 01-06-2006 which clearly indicates that the President was not involved in the day to day activities of the trust atleast prior to 01-01-2006. Similarly, he observed that the credit card expenses also included personal expenses like Insurance premium, purchase of clothes on various dates aggregating to Rs.37,605/-. Like-wise other expenses like travelling expenses for hiring vehicles to Mumbai was also found to have been incurred by the trust for Shri B.E. Avhad. He, therefore, came to the conclusion that all these expenses clearly point to the inevitable conclusion that there are gross violations of the provisions of section 13(1)(c) of the I.T. Act.
13. The Assessing Officer observed from the various details furnished by the assessee that the trustees and the members of their family have undertaken numerous trips to foreign countries. He noted that the trust had given foreign currency to the trustees/their family members at the time of their visit. However, no such details regarding the manner in which such foreign currency was spent were produced during the course of assessment proceedings. The assessee also failed to prove that the foreign currency taken abroad was spent on the objects of the 11 ITA Nos.915 to 920/PUN/2012 trust. Since the expenditure incurred on foreign tour was under the World Peace Centre activities and since the object of World Peace was not approved till 06-04-2005, therefore, he was of the opinion that the expenditure incurred on the foreign tour cannot be called as incurred for the objects of the trust. Thus, there was clear violation of the provisions of section 13(1)(c) of the I.T. Act.
14. Visit to Kathmandu - The Assessing Officer further noted that Shri Rahul Karad, Son of the principal trustee has undertaken visit to Kathmandu, the expenses of which were incurred by the assessee trust. On being questioned by the Assessing Officer it was explained that the purpose of the visit was to promote the brand name of MIT in Nepal in the course of educational exhibition there. Similarly, another visit was undertaken by Shri Rahul Karad at the expenses of the trust. This according to the Assessing Officer was in clear violation of the provisions of section 13(1)(c) of the I.T. Act.
15. Visit to Australia - The Assessing Officer noted that Shri Rahul Karad and Managing Trustee Shri Vishwanath Karad visited Australia during the period July to August 2002 for which air fare expenses of Rs.1,02,909/- and other expenditure of Rs.1,50,245/- was incurred by the above two persons. Instances of personal purchase by Shri Rahul were also noticed by the Assessing Officer. On being questioned by the Assessing Officer it was explained that these expenses were met by the sister of Shri Rahul Karad. However, according to the Assessing Officer the assessee could not substantiate the same. He further noted that although foreign currency to the tune of Rs.1,50,245/- was given by the trust, however, no details as to how such foreign exchange was utilized was furnished during the course of assessment proceedings. The Assessing Officer further opined that since the daughter of the Managing Trustee stays in Australia, therefore, this tour was undertaken to meet 12 ITA Nos.915 to 920/PUN/2012 her by her brother and father. This view of the Assessing Officer was further strengthened by the fact that no details of full stay and other arrangements etc were furnished by the assessee trust. He, therefore, concluded that this expenditure is also incurred in violation of section 13.
16. The Assessing Officer further noted on perusal of the accounts that expenditure of Rs.29,022/- has been incurred for purchasing 5 days Euro Rail pass for Shri Vishwanath D. Karad. Managing Trustee which according to him is solely for site seeing purposes and cannot be said to have been incurred for the object of the trust. Therefore, this according to the Assessing Officer is also violation of provisions of section 13(1)(c).
17. The Assessing Officer noted that Shri Mangesh Karad and Smt. Sunita Karad have travelled to Europe from 25-11-2000 to 04-12-2000. The Expenditure pertaining to Shri Mangesh Karad was met by the trust. Visit of Smt. Sunita Karad was stated to be as a representative of UNESCO chair. According to the Assessing Officer, visit of Shri Mangesh Karad along with Smt. Sunita Karad has nothing to do with the activities of the trust and therefore the expenditure incurred on the visit of Shri Mangesh Karad cannot be said to be incurred wholly and exclusively for the purpose of the trust. This according to the Assessing Officer is another instance of violation of section 13(1)(c) of the I.T. Act.
18. The Assessing Officer further noted that the trustees and the members of their family have undertaken tours to various places like Shirdi, Gondavale, Cochin, Madurai and Udaipur etc. expenses for which were borne by the trust. The Assessing Officer analysed the expenses incurred for such local tours at page 22 of the assessment order which comes to Rs.1,30,762/-. In absence of any justification whatsoever given by the assessee as to how these visits serve for the 13 ITA Nos.915 to 920/PUN/2012 purpose of the objects of the trust the Assessing Officer held that this is also a possible violation of section 13(1)(c) of the I.T. Act.
19. The Assessing Officer noted that interest free loan of Rs.18 lakhs to Shri Rahul Karad, Son of Principal trustee, Shri Vishwanath Karad was given without any security. No other person was found to have been extended such facility. According to the Assessing Officer higher education in a foreign country has only fetched personal gain to Shri Rahul Karad and Shri Vishwanath Karad and no purpose of the trust is served as such. This expenditure according to the Assessing Officer is in clear violation of section 13(1)(c) of the I.T. Act.
20. The Assessing Officer further noticed that the trust has been giving benefits to the Children/relatives of the trustees in the form of concession in fees for various courses. In order to verify and quantify such concessions the special auditor appointed by the Department was asked to furnish such details. The special auditor gave such details which have been incorporated by the Assessing Officer at pages 23 and 24 of the assessment order for A.Yrs. 1999-2000 according to which substantial concession in fee was granted to the wards of the trustees in various courses. On being questioned by the Assessing Officer, it was explained that it is the approved policy of the trust from its inception to grant concession to deserving children including the children of the founder trustees and other trustees and members of the managing committee who are constantly engaged in the overall development in day to day activities of the trust. According to the Assessing Officer although such policy of the trust is laudable, however, this is in violation of provisions of section 13(1)(c) of the I.T. Act.
14
ITA Nos.915 to 920/PUN/2012
21. The Assessing Officer observed that during the search operation it was found that the assessee was allegedly taking donations against admissions in many cases. Such instances have been brought out in the order passed by the CIT Central, Pune while cancelling registration granted u/s.12AA(1). Subsequent enquiries were also revealed names of other persons from whom donations were accepted. The Assessing Officer observed that 15 persons have admitted to have given donation for securing admission. The Assessing Officer analysed the donation received by the assessee trust for the last 10 years at pages 28 and 29 of the assessment order. He observed that there is sudden sharp decrease in the receipt of donation from Rs.10,05,24,966/- in A.Y. 2006- 07 to Rs.9,60,000/- in A.Y. 2007-08. According to the Assessing Officer this sudden reduction strikingly coincides with the introduction of section 115BBC which proposes to tax anonymous donations and which came into effect from A.Y. 2007-08. According to the Assessing Officer the assessee stopped bringing donations in its books since the introduction of the said provision which casts doubt on the genuineness of the donations already recorded in the books of account of the assessee. The receipt of donation according to the Assessing Officer are not voluntary and thus there is a clear violation of the provisions of section 11(1)(d) of the I.T Act.
22. In view of the above, i.e. cancellation of registration u/s.12AA, withdrawal of approval u/s.10(23C(vi), violation of provisions of section 13(1)(c) and 11(1)(d) the Assessing Officer adopted the profit of Rs.2,47,35,518/- as per the recasted income and expenditure account prepared by the special auditor as the profit of the assessee for computation of its taxable income.
15
ITA Nos.915 to 920/PUN/2012
23. The Assessing Officer observed that the assessee is running Vishwa Shanti Kendra as part of the trust activities and a lot of expenditure on this account has been debited in the books of account. In order to verify the details of this expenditure a separate reference was made to the auditor doing special audit who quantified such expenditure at Rs.1,11,41,532/- for the impugned assessment year. They have also observed that vouchers for an amount of Rs.79,06,691/- for the impugned assessment year was not produced. The Assessing Officer asked the assessee to produce the copy of vouchers in support of the above expenses to which the assessee produced all those vouchers. The Assessing Officer noted that out of the expenses of Rs.1,11,41,532/- incurred in F.Y. 1998-99 relevant to A.Y. 1999-2000 expenditure to the tune of Rs.60,75,006/- is on account of World Philosophers Meet (WPM) held at Geneva. Further, the vouchers in support of expenses on account of WPM at Geneva was not in the name of the trust. Since the World Peace was not one of the objects as on 31- 03-1999 the Assessing Officer asked the assessee to clarify as to how expenditure of World Peace activities was on the objects of the trust. Rejecting the various explanations given by the assessee the Assessing Officer disallowed the expenditure on the unapproved object of World Peace to the tune of Rs.1,11,41,532/-. Similarly, for violation of making cash payment in excess of Rs.20,000/- amounting to Rs.1,62,850/- and delayed payment of Provident Fund to the tune of Rs.12,58,017/- the Assessing Officer made addition of the above 2 amounts u/s.40A(3) and 43B respectively. The Assessing Officer also made addition of Rs.37,72,249/- on account of unexplained credits that appeared in the books of account. Thus, the Assessing Officer computed the total income of the assessee at Rs.4,10,70,270/- for A.Y. 1999-2000. The Assessing Officer has similarly computed the income of the assessee for the other years which are as under :
16
ITA Nos.915 to 920/PUN/2012 Asst. Year Assessed income 2000-2001 Rs.6,59,57,175/-
2001-2002 Rs.8,11,20,720/- 2002-2003 Rs.1,98,62,618/- 2003-2004 Rs.1,00,40,587/- 2004-2005 Rs.8,16,49,733/-
24. Before CIT(A) the assessee submitted that after the filing of the appeals for different assessment years, lot of developments have taken place. It was argued that the assessee is an "other educational institution" existing solely for educational purposes as contemplated u/s.10(23C)(vi) of the I.T. Act and was granted exemption by the CBDT u/s.10(23C)(vi) of the Act vide its order dated 09-03-2004 for A.Yrs.
1999-2000 to 2001-02. It was later withdrawn by the DGIT (Investigation), Pune vide his order under the 13th proviso to section 10(23C) of the Act dated 08-02-2008. A writ petition No.7708 of 2008 filed by the assessee before the Hon'ble Bombay High Court against the order of the DGIT has been disposed of by the Hon'ble High Court vide its order dated 28-07-2009 wherein the Hon'ble High Court has quashed/set aside the order of the DGIT. It was submitted that after setting aside/quashing of the impugned order of the DGIT, the exemption granted to the assessee u/s.10(23C)(vi) gets fully restored. As a result, the assessment of the trust is required to be made by treating its income as exempt u/s.10(23C)(vi) of the Act for A.Yrs. 1999- 2000 to 2001-02.
25. As regards the position with reference to the appeals for other years are concerned it was submitted that the applications for the renewal of exemption u/s.10(23C)(vi) for A.Yrs. 2003-04 to 2004-05 dated 24-12-2012 was filed in Form 56D before the prescribed authority. However, so far no order either granting or refusing the renewal of the exemption u/s.10(23C)(vi) of the Act has been passed. It was submitted that later on, a letter dated 19-08-2007 was furnished before the 17 ITA Nos.915 to 920/PUN/2012 prescribed authority, i.e. DGIT (Investigation), Pune bringing to his notice that applications in Form 56D for the renewal of exemption u/s.10(23C)(vi) of the Act for the period in relation to A.Yrs. 2002-03 to 2004-05 and 2005-06 to 2007-08 were filed and the DGIT was further requested to pass the orders for the renewal of the exemption u/s.10(23C)(vi) for the aforesaid period. It was pointed out that no order either granting or refusing the renewal of exemption u/s.10(23C)(vi) has yet been passed. It was accordingly argued that since the assessee has applied for renewal of exemption u/s.10(23C)vi) in Form 56D for the A.Yrs. 2002-03 to 2004-05 before the prescribed authority and also requested DGIT to dispose of the aforesaid applications and since no order was passed either granting or refusing the exemption u/s.10(23C)(vi) within a period of 12 months from the end of the month in which such application was received, therefore, such exemption u/s.10(23C)(vi) is deemed to have been granted as no order is passed in respect of the aforesaid application.
26. Relying on various decisions it was argued that the provisions of 9th proviso to section 10(23C)(vi) and the provisions of section 12AA(2) are pari materia since both the provisions lay down that the necessary order either granting or rejecting the application made under the respective sections shall be passed within 12 months and 6 months respectively from the end of the month in which the applications were made. It was thus vehemently argued that in the light of the various legal precedents relied upon the limitation laid down in the 9th proviso to section 10(23C) will apply to both the aforesaid applications dated 24- 12-2002 and 22-02-2005 made under Ist proviso and the said applications having not been disposed of within the period of limitation laid down under the 9th proviso, the exemption u/s.10(23C)(vi) is deemed to have been granted.
18
ITA Nos.915 to 920/PUN/2012
27. It was submitted that the assessment order for A.Y. 2003-04 in the case of the trust has been passed u/s.143(3) of the Act after due enquiries relating to all the aspects of the income of the trust. It was pointed out that in the said year exemption was claimed by the assessee u/s.10(23C)(vi) and also u/s.11 without prejudice to the claim u/s.10(23C) and the Assessing Officer has accepted the aforesaid claim of the trust and accordingly computed the income of the trust at NIL vide order dated 20-03-2006. It was accordingly argued that the above position strengthens the argument of the assessee that the exemption u/s.10(23C)(vi) is deemed to have been granted to the trust for the subsequent year also and thus all the conditions for exemption of income of the trust u/s.10(23C)(vi) has been fulfilled for all the assessment years, i.e. A.Y. 1999-2000 to 2004-05. The assessee submitted that all the conditions laid down in the order u/s.10(23C)(vi) passed by the CBDT dated 09-03-2004 for the A.Yrs. 1999-2000 to 2001-02 also stand satisfied by the assessee for the relevant assessment years and therefore the income of the trust has to be treated as exempt for all the aforesaid assessment years.
28. The assessee further submitted that the exemption available under clause 10(23C) of the Act is separate from and in addition to the exemption granted u/s.11 of the Act. It was accordingly argued that in respect of the income covered u/s.10(23C), the trust or institution will be entitled to exemption thereunder even if the same income also falls u/s.11 and the conditions for exemption u/s.11 are fulfilled. For the above proposition, the assessee relied on the decision of Hon'ble Madras High Court in the case of CIT Vs. Rao Bahadur C.C. Chetty Charities reported in 135 ITR 485. The assessee further argued that the assessment of the income of the assessee trust as an AOP is wrong 19 ITA Nos.915 to 920/PUN/2012 since the same is ab-initio void for all the aforesaid assessment years as the assessee trust is entitled to exemption u/s.10(23C)(vi) of the Act.
29. So far as the validity of notice u/s.148 is concerned it was argued that the reopening of assessment for A.Yrs. 1999-2000 to 2004-05 is bad in law. It was argued that the assessee has raised objections regarding the receipt of rental income by the trust which according to the assessee does not in any manner affect the exemption u/s.10(23C)(vi) of the I.T. Act. The objection dealt with by the Assessing Officer was brought to the notice of the CIT(A) and it was submitted that the arguments of the Assessing Officer are not only ridiculous but also highly objectionable.
30. The assessee also stated that the provisions of section 13 are not at all applicable to an educational institution which is entitled to exemption u/s.10(23C)(vi) of the Act. It was contended that the exemption u/s.10(23C) is separate from and in addition to the exemption u/s.11, therefore, the assessee trust will be entitled to exemption u/s.10(23C)(vi) of the Act irrespective of the fact whether the trust is registered u/s.12AA of the Act or not. It was argued that the provisions of section 13 of the Act are applicable only when a trust is claiming the benefit under sections 11 and 12 of the Act and therefore the provisions of section 13 will not at all be applicable to an educational institution like that of the assessee. It was contended that as per Circular No.557 dated 19-03-1990 issued by the CBDT provisions of section 11 and 13 are not applicable to institutions covered under clause (iv) and (v) of section 10(23C) of the Act.
31. The assessee subsequently brought to the notice of the CIT(A), the order of the Tribunal, Pune Benches, Pune while deciding the appeal filed by the assessee against the order of the CIT Central, Pune dated 20 ITA Nos.915 to 920/PUN/2012 31-10-2007 cancelling the registration granted to the assessee u/s.12A of the Act wherein the Tribunal has quashed the order of the CIT Central, Pune. It was accordingly submitted that in view of the order of the Tribunal restoring the registration granted earlier u/s.12A of the Act, the computation of total income of the assessee trust as an AOP is ab- initio null and void for all the assessment years, i.e A.Y.1999-2000 to 2004-05 and the same needed to be annulled/cancelled. It was brought to the notice of the CIT(A) that the Tribunal in the said order has clearly held that the CIT Central has failed to establish that any part of the income/receipt of the trust was, in any manner, misutilised by the trustees for their personal benefit, i.e. not in the fulfillment of the objects of the trust. It was accordingly argued that the findings of the Tribunal has established that the case of the trust falls totally out of the purview of section 13 of the Act which by implication suggests that the Assessing Officer has precluded from invoking the provisions of section 13 of the I.T. Act and in the case of the assessee trust in any manner whatsoever. It was however pointed out that the Assessing Officer has not made any addition in any of the aforesaid assessment years in the light of the provisions of section 13 of the I.T. Act.
32. Based on the arguments advanced by the assessee the Ld.CIT(A) called for a remand report from the Assessing Officer. The Assessing Officer in compliance to the letter addressed by the CIT(A) forwarded his comments stating that though the exemption u/s.10(23C) has been restored to the assessee for the A.Y. 1999-2000 to 2001-02, that does not by itself make the assessee automatically eligible for exemption u/s.11 and 12. He stated that cancellation of registration u/s.12A was only one of the grounds on which exemption u/s.11 was denied to the assessee and such exemption is further governed by the provisions of section 13 of the I.T. Act. He stated that though during the 21 ITA Nos.915 to 920/PUN/2012 assessment proceedings the Assessing Officers have pointed out several instances of violations of provisions of section 13 no disallowance on this count were made while passing the assessment orders. It was accordingly argued that such violations need to be considered while deciding the issues.
33. The Ld.CIT(A) confronted the comments of the Assessing Officer to the assessee who made elaborate submissions on the issues raised by the Assessing Officer. After considering the submissions of the assessee, remand report of the Assessing Officer and rejoinder of the assessee to such remand report the Ld.CIT(A) not only dismissed the appeals filed by the assessee but also enhanced the income for A.Y. 1999-2000 to 2003-04. While doing so, the Ld.CIT(A) upheld the validity of reopening of assessment u/s.147 of the Act for the A.Yrs. 1999-2000 to 2004-05. The argument of the assessee that there was no tangible material before the Assessing Officer to come to the conclusion that there is escapement of income from assessment and the Assessing Officer has got no power to review the assessment and such reopening was merely made on the basis of change of opinion was rejected by the CIT(A) as not legally tenable. According to him no assessment was made either under u/s.143(3) or section 147 before issue of notice u/s.148 to the assessee for the years in A.Yrs. 1999-2000 to 2002-03 and A.Y. 2004-05. According to him under the proviso to section 147, where an assessment was made u/s.143(3) or u/s.147 for the relevant assessment year no action shall be taken u/s.147 after the expiry of 4 years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to make a return u/s.139 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.
22
ITA Nos.915 to 920/PUN/2012
34. Referring to the decision of Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. reported in 291 ITR 500 he observed that the Hon'ble Apex Court has categorically held that the intimation u/s.143(1)(a) is not an order of assessment and therefore the question of change of opinion does not arise. Since in the instant case the return of income for the years under appeal except for A.Y. 2003-04 was processed only u/s.143(1) and no assessment was made u/s.143(3) prior to the issue of notice u/s.148, therefore, it cannot be said that the assessment was reopened on mere change of opinion.
35. So far as A.Y. 2003-04 is concerned he observed that an assessment was originally made u/s.143(3) prior to issue of notice u/s.148 but the assessment was reopened on 12-11-2007, i.e. within 4 years from the end of the relevant assessment year. Therefore, for this year also, the first proviso to section 147 has no application. According to him, even otherwise also it is well settled that merely because the claim of the assessee was accepted in original assessment for the relevant assessment year, it would not preclude the Assessing Officer to reopen the assessment of that year on the basis of his finding of fact made out of fresh material gathered after the completion of the assessment suggesting that a particular claim is not correct. He observed that in the instant case during the survey operation and post survey enquiries conducted by the Department, new material had come on record suggesting that all is not well with the claim made by the assessee for exemption of its income u/s.10(23C)(vi) or section 11. The Assessing Officer, who completed the original assessment u/s.143(3), did not have access to the adverse findings of the survey action in the case of the assessee and when such findings became known to him subsequently the Assessing Officer took due note of the same and reopened the assessment. In such circumstances it cannot be said that 23 ITA Nos.915 to 920/PUN/2012 it was merely a fresh application of mind by the Assessing Officer to the same sets of facts. Therefore, for A.Y. 2003-04 also it cannot be said that the assessment was reopened on mere change of opinion.
36. So far as the assessment record for other years are concerned he noticed that more or less similar reasons were recorded by the Assessing Officer for A.Yrs 2000-01, 2002-03, 2003-04 and 2004-05. For the assessment year 1999-00, the assessment was reopened on the ground that the assessee was receiving rental income, which is to be taxed as income from house property/business income separately as the object of the assessee was not letting out the properties on rent. He observed that in the present case, as is evident from the reasons recorded, the Assessing Officer noticed from the material found during the survey and the post survey enquiries conducted by the department that the Trust was involved in commercialization of education and taking donations for admission into courses in the institutions run by the assessee and also charging capitation fees, which are Prohibited under Maharashtra Educational Institutions (prohibition Of Capitation Fees) Act. It was also found by the Assessing Officer that the assessee was deriving substantial rental income from letting out its properties, which is contrary to its contention that the trust exists solely for educational purposes, Consequently, the Assessing Officer issued notice u/s. 148 of the I.T. Act for the above year as he had prima-facie reasons to believe that income chargeable to tax had escaped assessment within the meaning of sec. 147 of the I.T. Act. Thus, there was cause or justification for the Assessing Officer to invoke provisions of sec.147 and issue notice u/s.148 and there were not only reasons for formation of belief that Income escaped assessment but also the reasons have rational connection or intelligible nexus with the material that has come to the notice of the A.O. for formation of the belief. Referring to various 24 ITA Nos.915 to 920/PUN/2012 decisions he was of the opinion that at the initiation stage, what is required to be seen is whether there are prima-facie 'reasons to believe' but not the established fact of escapement of income. The justification for AO's belief is not to be judged from the standard of proof required for coming to a final decision. He noted that the Assessing Officer in the instant case has recorded proper reasons for formation of the belief that income has escaped assessment. Thus, all the conditions necessary for reopening of the assessment under the provisions of section 147 and for issue of notice u/s.148 are satisfied in the case of the assessee for the respective years.
37. So far as the contention of the assessee that Assessing Officer has not followed the procedure for assuming jurisdiction u/s.148 in the light of the decision in the case of GKN Drive shafts (India) Pvt. Ltd. reported in 259 ITR 19 is concerned the Ld.CIT(A) dismissed the contention on the ground that the Assessing Officer, before passing the assessment orders vide separate order dated 01-08-2008 for A.Yrs. 1999-2000 to 2002-03 and for A.Y. 2004-05, has considered and dealt with the preliminary objections raised by the assessee by passing a detailed speaking order.
38. As regards the contention of the assessee that the Assessing Officer erred in expanding the scope of reassessment beyond the reasons recorded for reopening the assessment is concerned the Ld.CIT(A) dismissed the same also on the ground that when the assessment is reopened on a valid ground u/s.147 the Assessing Officer can assess not only the escaped income which formed the basis for reopening but also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of assessment proceedings. According to him, reassessment proceedings are not confined to the grounds on which the assessment 25 ITA Nos.915 to 920/PUN/2012 was reopened. Since in the instant case the assessment was reopened on valid grounds and in the course of assessment proceedings the Assessing Officer scrutinized the seized materials and other documents and other issues which came to his knowledge during such scrutiny were also considered and dealt with in the assessment order, therefore, the contention of the assessee is not legally tenable. Rejecting the various explanation given by the assessee and relying on various decisions, the Ld.CIT(A) dismissed the grounds relating to validity of reassessment proceedings.
39. So far as the objection raised by the assessee that the directions issued by the Assessing Officer for special audit u/s.142(2A) are illegal and without jurisdiction is concerned he also rejected the same on the ground that the reference u/s.142 (2A) was made by the Assessing Officer after duly recording the reasons and after considering these reasons the CIT Central has passed a detailed order dated 05-12-2007 granting approval for the reference. Since the proposal of the Assessing Officer for reference to special audit u/s.142(2A) was duly approved by the CIT Central he held that the same cannot be agitated in ground of appeal before the CIT(A).
40. So far as the argument of the assessee that the Assessing Officer is not legally justified in denying the benefit of exemption of income claimed by the assessee u/s.10(23C)(vi) is concerned he rejected the same on the ground that before availing exemption under the above section the assessee must obtain approval from the prescribed authority. He examined the details and noted that as on date, i.e. the date of passing the order the assessee is not an approved institution u/s.10(23C)(vi) and in the absence of approval from the prescribed authority for the A.Yrs. 1999-2000 to 2004-05 the assessee is not entitled to the benefit of exemption of its income u/s.10(23C)(vi). He 26 ITA Nos.915 to 920/PUN/2012 also referred to the decision of the Hyderabad Bench of the Tribunal in the case of Vodithala Education Society reported in 20 SOT 353 wherein it has been held that where the assessee had not obtained the approval of the prescribed authority as required u/s.10(23C)(vi) and it also existed for profit and not solely for educational purpose, the assessee was not entitled to exemption u/s.10(23C)(vi). He accordingly upheld the action of the Assessing Officer in not allowing the claim of the assessee for exemption of its income u/s.10(23C)(vi).
41. So far as the issue relating to whether the assessee is entitled to exemption of its income u/s.11 of the Act for the years under appeal is concerned in view of the violation of provisions of section 13 of the Act the Ld.CIT(A) referred to the various findings given by the Assessing Officer in the body of the assessment order such as :
(a) Expenditure in providing facilities to Shri B.E. Avhad, Honarary President of the trust.
(b) Credit card expenses of Shri B.E. Avhad.
(c) Salary to Shri B.E. Avhad.
(d) Expenditure of foreign tours of Shri B.E. Avhad. And his family members and the various members of Karad family
(e) Concessional education to wards of trustees etc.
(f) Expenditure of Vishwa Shanti Kendra He concluded that the assessee is applying or using its funds for the individual benefit of the trustees and their relatives in violation of the provisions of section 13. According to him section 13 renders the entire income of the trust or charitable institution liable to tax even if only part of income is applied for the benefit of the specified persons. In such circumstances the Assessing Officer is justified in denying the exemption u/s.11 of the Act to the assessee trust and bringing its surplus income/profits to tax by treating the assessee like any other Association of Persons.27
ITA Nos.915 to 920/PUN/2012
42. So far as issue relating to donations which were credited to the income and expenditure account and partly credited to various development funds and directly reflected in the balance sheet is concerned the Ld.CIT(A) noted that the post survey enquiries conducted by the Investigation wing of the department and the enquiries conducted by the Assessing Officer indicated that the assessee used to take donations in cash against admission in many cases. It was found that there is large number of donations where only names of donors were written either in incomplete address or no addresses. Therefore, in these cases, it is difficult to establish the identity of the donors. He observed that in the course of enquiries out of the cases where there were addresses, 15 persons admitted that they have given donations to secure admissions. Although the assessee filed the confirmation letters subsequently from these persons that donations were given voluntarily yet the letters do not conclusively establish that donations were given voluntarily. He observed that in the following cases donors have denied to have given donations :
Sr.No. Name of the Receipt No. Date of Amount
donor donation
1. Rushikumar 7847 29-04-1998 15,000
V. Lokre 11223 04-05-1999 10,000
2. M.D. Bauskar 7771 22-08-1998 10,000
He observed that there were instances where donations for a bigger amount was received in lieu of admission under Management Quota but the same was split into donations of smaller denominations and multiple receipts were issued to the donors who were not traceable. Similarly, there were instances of donations all in the range of Rs.20,000/- to 22,000/- and just below Rs.10,000/- in cash in the names of various far off distant donors such as Delhi, Kanpur, Loni etc. within a span of couple of days which according to him was improbable. The Ld.CIT(A) gave certain instances at Para 18.2 and 18.3 of his order. He further 28 ITA Nos.915 to 920/PUN/2012 noted that the assessee has considered the entire donations credited in its books as donations received for the corpus of the trust. He noted that the assessee has got receipt book printed on which it has put a stamp that the donation is on account of corpus of the trust. However, according to the Ld.CIT(A) the same is not supported by any documentary evidence. According to him merely by issuing receipt for a particular amount it does not become donation and furthermore by affixing a stamp on it does not become corpus donation. He observed that the enquiries conducted by the department revealed that the donations are linked to admissions and such donations cannot be termed as voluntary. He further noted that from A.Y. 2007-08 there was a steep decline in the amount of donations shown in the books of account which according to him is in view of the introduction of the new section 115BBC.
43. So far as the donations claimed to have been received towards development funds is concerned he observed from the receipt books produced by the assessee before the Assessing Officer during the assessment proceedings for A.Y. 2001-02 that (a) all the donations were exactly for Rs.10,000/- and there is a striking similarity in all the receipts
(b) in all the receipts only the name of the so called donor is written, no address of the donor is given (c) all the donations are in cash only. He observed that the assessee also expressed its inability to provide the address or whereabouts of the persons whose name appears as donors. According to him when the assessee has received donations in cash of Rs.10,000/- in each case it is very strange that the assessee does not note the address or whereabouts of the persons donating to it. This according to him clearly indicate that the donations are not voluntary and not towards corpus and not received by virtue of property held by the trust. Since the trust is to be assessed as any other entity he held that 29 ITA Nos.915 to 920/PUN/2012 these are to be treated as revenue receipt and to be taxed in the hands of the trust like any other receipt since the provisions of section 11(1)(d) are not applicable to such contributions. He accordingly upheld the action of the Assessing Officer in bringing the donations shown by the assessee to tax in the assessment years for the respective years.
44. Based on the above observations the Ld.CIT(A) finally summarized the conclusions on main issue at Pages 124 and 125 of the order which read as under :
"(i) The appellant unilaterally amended the trust deed on its own by including three more objects, including aforesaid object No. 13.
For unilaterally amending the trust deed without getting the approval of the commissioner of Income Tax, the registration which was granted earlier on the basis of a particular representation or set of objects no longer holds good. (291 ITR 116)
(ii) The appellant has passed on various benefits to the trustees and their relatives in violation of provisions of sec. 13 of the I.T. Act. There are several instances as discussed above to show that private expenses of trustees have been debited to the accounts of the trust and the Trust has been effectively run as a private trust or a closely held business entity. Section 13 renders the entire income of trust or charitable institution liable to tax even if only part of income is applied' for the benefit of the specified persons.
(iii) The evidences found during the search and survey operations indicate receipt of donations by the appellant at the time of giving admission, which clearly shows that the payment thereof was not made voluntarily by the donors but as a quid pro quo for securing admission. The donations received are not voluntary, not towards corpus of the trust and not received by virtue of property held by the trust. Such donations are to be treated as revenue receipts and brought to tax as business income of the appellant. Even if the appellant is to be assessed as trust, the donations so received in lieu of admissions are to be taxed in the hands of the trust like any other receipt in the nature of income as there is clear violation of provisions of sec. 11(1)(d).
(iv) The appellant earned substantial surplus of income over expenditure over the years from running of its institutions. Despite such profits, the trust has not demonstrated any charitable intent through reduction of fees. This clearly indicates that the activity of the appellant was a commercial activity with a profit motive and therefore the same cannot be said to be of a charitable nature. It is well settled that not only the objects of the Trust as mentioned in the Trust Deed but also its real activities should be examined before the trust is considered as charitable. This is not a case where surplus is only incidental to the charitable activity.
30
ITA Nos.915 to 920/PUN/2012
(v) For the years under consideration, the appellant is not an approved institution by the prescribed authority as specified under sec. 10(23C)(vi). The approval granted earlier for A.Y.s 1999-00 to 2001-02 was since withdrawn by the prescribed authority.
(vi) The appellant is therefore not entitled to the benefit of exemption either under sec. 11 or sec. 10(23C)(vi) and the action of the Assessing Officer in denying the exemption claimed under these sections in respect of its profits/surplus as shown in the recast income and expenditure account and donations received in cash or kind for the respective years under appeal is upheld."
45. So far as the disallowance of expenditure on account of World Peace Centre is concerned the Ld.CIT(A) held that such expenditure is not towards approved objects of the trust. He observed that the World Peace Centre activities and the expenditure incurred abroad in no way further the interest of the objects of the trust in India nor can it can be said that the expenditure was incurred solely for educational purposes. Thus, the assessee has violated not only the mandate of section 12AA(1) but also provisions of section 10(23C)(vi) of the Act. He further noted that the assessee had commenced World Peace Centre activities even prior to communicating the additional object of World Peace to the Charity Commissioner. The Charity Commissioner approved the additional objects only on 06-04-2005 and till that time huge expenditure had been incurred on World Peace activities without any approval. No intimation was given to the CIT concerned regarding the inclusion of additional object and the amendment to the trust deed. Thus the object of the trust was amended without the knowledge of the Commissioner granting registration, i.e. CIT-II, Pune. Therefore such huge expenditure incurred on the activities was not in accordance with the objects of the trust. Further the assessee has not obtained any approval from CBDT, New Delhi for the expenses incurred outside India on account of World Peace Centre as laid down in the proviso to section 11(1)(c) of the I.T. Act, 1961. He accordingly upheld the action of the Assessing Officer in 31 ITA Nos.915 to 920/PUN/2012 disallowing the expenditure and added the same to the total income of the assessee for the respective years.
46. The Ld.CIT(A) also upheld the action of the Assessing Officer in making disallowance u/s.40A(3), 43B, unexplained credit, disallowance u/s.40A(7), disallowance of capital expenses, misappropriation of funds of employees, excess provision of refund of fees, unrecorded donations etc. as per his findings in Pages 137 to 147 of his order. He also upheld the action of the Assessing Officer in making addition under the head capital gains on protective basis for A.Y. 2004-05, addition made by the Assessing Officer on account of depreciation pertaining to earlier years for A.Y. 2004-05, addition on account of on-money payment for purchase of property.
47. The Ld. CIT(A) further noted that though the Assessing Officer has discussed the violations of section 13 in detail under various heads in the respective assessment years, however, he has not disallowed the corresponding expenditure in the respective assessment years even after the claim of exemption u/s.11 or section 10(23C)(vi) was denied to the assessee. He, therefore, issued a show cause notice u/s.251(2) of the I.T. Act calling upon the assessee to explain as to why the deduction claimed in respect of various expenditure should not be disallowed to the extent worked out in the show cause notice for the respective assessment years and why the income so determined by the Assessing Officer should not be enhanced. The assessment year-wise, quantification for such disallowance as worked out in the said show cause notice was as under :
32
ITA Nos.915 to 920/PUN/2012 A.Y. Expenditure Expenditure Expenditure Concessional Proportionate incurred on on on Foreign Education interest on WPC providing Tours loan given to facilities to Rahul Karad Shri B.E. & subsidy Avhad (scholarship) 1999-00 1,11,41,532 133891 671273 307845 2000-01 20,21,204 14259 0 213205 2001-02 42,80,000 91054 130492 154720 2002-03 47,81,702 557847 24700 88680 2003-04 43,28,098 640486 266154 91100 2004-05 12,95,304 861844 357442 0 2005-06 29,84,595 888294 71325 0 2006-07 51,69,521 906884 1057333 0 544797 2007-08 720000 0 0
48. In response to the said notice the assessee reiterated its submissions made earlier that the entire expenditure was incurred for charitable objects of the trust and solely for educational purposes and therefore the assessee is entitled to the benefit of exemption u/s.11 or section 10(23C) of the Act. It was further argued that Assessing Officer has not made any additions in the respective assessment order under appeal and therefore the appellate authority can only adjudicate upon the issues/additions covered in the assessment year under appeal. Therefore, there will be no occasion for the CIT(A) to adjudicate upon the issue in relation to the so called additions u/s.13 of the I.T. Act. However, the CIT(A) rejected the above contention of the assessee on the ground that the power of the CIT(A) is coterminous with that of the Assessing Officer as held in the case of Jute Corporation Ltd. reported in 180 ITR 688, 693 (SC) and the decision of Hon'ble Apex Court in the case of CIT Vs. Nirbheram Daluram reported in 224 ITR 610. Rejecting the various explanations given by the assessee and considering the disallowance already made in the assessment order the Ld.CIT(A) enhanced the income of the assessee by disallowing the following expenditure incurred for other than charitable activities, the details of which are as under :
33
ITA Nos.915 to 920/PUN/2012 A.Y. Expenditure Expenditure Concessional Proportionate Total on on Foreign Education interest on Enhancement providing Tours loan given to facilities to Rahul Karad Shri B.E. & subsidy Avhad 1999-00 133891 671273 307845 1113009 2000-01 14259 0 213205 355734 2001-02 Nil 130492 62,320 1,92,812 2002-03 557847 24700 88680 671227 2003-04 640486 266154 91100 997740 2004-05 861844 357442 0 1219286 2005-06 888294 71325 0 959619 2006-07 906884 1057333 0 544797 2509014 2007-08 720000 0 0 720000
49. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds :
"The following grounds are taken without prejudice to each other --
On the facts and in law, 1] The reasst. u/s 147 be held to be null and void as the notice u/s 148 is illegal and the reasons do not justify reopening of the asst.
2] The reasst. be held time barred as the limitation could not be extended in view of the illegal order for special audit u/s 142(2A).
3] The learned CIT(A) erred in confirming the various additions made by the A.O. and also erred in enhancing the income on certain issues and as a result, erred in computing the total income of Rs. 4,21,83,275/- as against the returned income of Rs. NIL.
4] The learned CIT(A) erred in holding that the appellant trust was not entitled to the exemption u/s 10(23C)(vi) of IT Act.
5] The learned CIT(A) erred in denying exemption u/s 11 to the appellant trust.
6] The learned CIT(A) erred in holding that the activity of the appellant is a commercial activity with a profit motive and it does not exist solely for charity and therefore, erred in denying the exemption u/s 10(23C)/11.
7] The learned CIT(A) erred in holding that the expenditure on World Peace Centre is not an expenditure on the objects of the trust and the same does not qualify for deduction and accordingly, erred in disallowing this expenditure.
8] The learned CIT(A) erred in holding that the appellant violated the conditions of section 13 of IT Act and accordingly, erred in denying exemption u/s 11 on the entire income of the appellant.34
ITA Nos.915 to 920/PUN/2012 9] The learned CIT(A) erred in confirming the additions of Rs.37,72,249/- made by the Ld. AO on account of the alleged unexplained entries.
10] The learned CIT(A) erred in confirming various additions u/s.43B, 40A(7) and 40A(3) etc. 11] The learned CIT(A) erred in enhancing the income of the appellant by the following amounts :
a. Credit card expenses of Shri B.E. Avad of Rs.1,33,891/- b. Foreign Tour Expenses of Rs.6,71,273/-
c. Concessional education to the trustee's relatives Rs.3,07,845/-
12] The appellant craves leave to add, amend, alter and/or delete any of the grounds of appeal."
50. The Ld. Counsel for the assessee strongly objected to the order of the CIT(A). So far as validity of reopening of assessment is concerned, the Ld. Counsel for the assessee referring to page 2 of the assessment order for A.Y. 1999-2000 drew the attention of the Bench to the notice issued u/s.148 on 29-03-2006. Referring to page 249 of the paper book Vol.2 the Ld. Counsel for the assessee drew the attention of the Bench to the reasons recorded by the Assessing Officer for reopening of assessment u/s.147 which read as under :
"Return of income for A.Y.1999-2000 was filed 30-06-2000 declaring NIL income. The assessment was completed u/s.143(1) of the I.T. Act on 18-09-2000. On perusal of return of income it was seen that the assessee has filed the income and Expenditure Account and Balance Sheet along with return. The assessee has shown the income from other sources of Rs.17,97,33,097/-, which includes rent income of Rs.1,92,34,679/-. The object of the assessee trust is to run educational institute and not giving the properties on rent. The rent income is to be taxed as income form house property/business income separately.
For the above reason there being escapement of the income, the income of the assessee is to be reassessed. Hence the assessment for A.Y. 1999-2000 is to be reopened issued notice u/s.148 for A.Y. 1999-2000, after getting approval of Addl.CIT."35
ITA Nos.915 to 920/PUN/2012
51. Referring to pages 250 to 259 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the objections raised by the assessee against the notice u/s.148 of the I.T. Act vide its letter dated 14-03-2007 addressed to the Assessing Officer. Referring to page 397 of the paper book Vol.2 he drew the attention of the Bench to the order passed by the Assessing Officer disposing of the objections against issue of notice u/s.148 of the I.T. Act vide order dated 01-08- 2008. Referring to Schedule No.18 of the balance sheet, copy of which is placed at page 260 of the paper book Vol.2 the Ld. Counsel for the assessee drew the attention of the Bench to the details of rent received by the assessee for A.Y. 1999-2000. Referring to page 261 of the paper book he drew the attention of the Bench to the statement showing rent adjustment entries for the F.Y. 1998-99. Referring to pages 287,303,311,319,346, 333,356,362,370 and 378 of the paper book he drew the attention of the Bench to the individual balance sheets of the respective units. Referring to page 427 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the assessment order for A.Y. 2003-04 passed u/s.143(3) on 13-08-2006 in which the Assessing Officer has not made any addition on account of rent for A.Y. 2003-04 which is the next day after recording the reasons u/s.147 for A.Y. 1999-2000.
52. Referring to the assessment order for A.Y. 1999-2000 he submitted that the Assessing Officer has not made any addition on account of rental income for which the assessment was reopened. Therefore, the Assessing Officer could not have made any other additions. Referring to the decision of Hon'ble Bombay High Court in the case of CIT Vs. Jet Airways Ltd. reported in 331 ITR 236 he submitted that the Hon'ble High Court in the said decision has held that if the Assessing Officer, after issuing a notice u/s.148, accepts the contention 36 ITA Nos.915 to 920/PUN/2012 of the assessee and holds that income, for which he had initially formed a reason to believe that it had escaped assessment, has, as a matter of fact, not escaped assessment, it is not open to him to independently assess some other income. If he intends to do so, a fresh notice u/s.148 is necessary. The power to assessee such other income is available only if income referred to in notice of reassessment has been assessed .
53. Referring to the decision of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. Vs. CIT reported in 336 ITR 137 he submitted that the Hon'ble High Court in the said decision has held that the Assessing Officer cannot make addition on issues other than issues on which reassessment proceedings were initiated if such items of income said to have escaped assessment on which reassessment was proposed was not added to the total income of the assessee.
54. Referring to the decision of Hon'ble Chattisgarh High Court in the case of ACIT Vs. Major Deepak Mehta reported in 346 ITR 641 he submitted that the Hon'ble High Court in the said decision has held that when the income mentioned in the notice issued u/s.148 has not escaped assessment then in that case the reassessment proceedings are not valid.
55. Referring to the decision of the Pune Bench of the Tribunal in the case of ITO Vs. M/s. Shri Vishwakalyan Jivraksha Pratishthan and vice versa vide ITA No.2013/PN/2014 and CO No.18/PN/2016 order dated 22-07-2016 for A.Y. 2011 he submitted that the Tribunal, following the decision of Hon'ble Bombay High Court in the case of Jet Airways India Ltd. (Supra), has held that the reassessment proceedings are bad in law when the Assessing Officer has added some other income other than the income which according to the Assessing Officer had escaped 37 ITA Nos.915 to 920/PUN/2012 assessment for which reassessment proceedings were initiated by issuing notice u/s.148. He also relied on the following decisions :
1. CIT Vs. ICICI Bank Ltd. reported in 349 ITR 482 (Bom.)
2. Hindustan Lever Ltd. Vs. R.B. Wadkar reported in 268 ITR 332 (Bom.)
3. Vijaykumar M. Hirakhanwala HUF Vs. ITO reported in 287 ITR 443
4. ACIT Vs. Major Deepak Mehta reported in 344 ITR 641
5. CIT Vs. Jet Speed Audio Pvt. Ltd. reported in 372 ITR 762 (Bom.)
56. So far as ground of appeal No.2 is concerned the Ld. Counsel for the assessee submitted that the department ordered special audit u/s.142(2A) in this case for all the years. However, no opportunity of being heard was given by the Assessing Officer and opportunity of being heard u/s.142(2A) was given by the Ld.CIT. Referring to page 136 and 137 of the paper book No.1 he submitted that Ld. CIT in his notice dated 23-11-2007 has mentioned that he has received a proposal from the Assessing Officer recommending compulsory audit in case of the assessee and thereby he has given an opportunity in view of proviso to section 142(2A) to show cause as to why compulsory audit should not be ordered in case of the assessee. He submitted that in the assessment order also the Assessing Officer does not mention that he has given any opportunity of being heard to the assessee.
57. Referring to pages 140 to 158 of the paper book No.1 the Ld. Counsel for the assessee drew the attention of the Bench to the detailed reply given to the CIT Central vide letter dated 03-12-2007 objecting to the special audit. Referring to pages 156 to 160 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the order dated 05-12-2007 passed by the Ld.CIT granting approval u/s.142(2A) of the I.T. Act. Referring to the said order he submitted that the CIT refers to the proposal of the Assessing Officer which does not 38 ITA Nos.915 to 920/PUN/2012 state anywhere that the Assessing Officer has given any opportunity of being heard to the assessee. Referring to pages 161 to 163 of the paper book No.1 the Ld. Counsel for the assessee drew the attention of the Bench to the order passed by the Assessing Officer in which he has asked the assessee to get the accounts audited through the nominated auditor u/s.142(2A) of the Act. The Ld. Counsel for the assessee further submitted that in the original order the CIT and the Assessing Officer had not included A.Y. 2001-02 and they have passed separate order for A.Y. 2001-02, a copy of which is placed at pages 164 to 167 of the paper book. He submitted that for this year also the Assessing Officer has not given any opportunity of hearing to the assessee under the proviso to section 142(2A).
58. The Ld. Counsel for the assessee submitted that under the proviso to section 142(2A) the Assessing Officer has to give an opportunity of being heard to the assessee. However, in the instant case the CIT has given an opportunity but the Assessing Officer has not given any such opportunity. Referring to the decision of Hon'ble Supreme Court in the case of Rajesh Kumar and others Vs. DCIT reported in 287 ITR 91 and the decision of Hon'ble Bombay High Court in the case of Nikunj Eximp Enterprises Pvt. Ltd. Vs. ACIT reported in 364 ITR 6 he submitted that the order passed u/s.142(2A) is illegal. Therefore, the limitation for completion of assessment could not be extended in view of the illegal order u/s.142(2A) of the I.T. Act. He submitted that the date of assessment order is 08-08-2008 whereas the assessments for A.Y. 1999-2000, 2000-01 and 2005-06 were getting time barred u/s.153(2) (2nd proviso) on 31-12-2007. Therefore, the assessments are time barred. Referring to the decision of the Pune Bench of the Tribunal in the case of ITO Vs. Vilsons Particle Board Industries Ltd. Vs. ITO vide ITA Nos. 448 & 449/PN/2013 order dated 39 ITA Nos.915 to 920/PUN/2012 21-12-2016 the Ld. Counsel for the assessee drew the attention of the Bench to the findings of the Tribunal from Para 21 onwards and submitted that the Tribunal in the said decision at para 41 has held that where no show cause notice was given to the assessee before making the order proposing conduct of special audit u/s.142(2A) of the Act and the CIT having approved the said proposal though after giving opportunity of being heard to the assessee, the order is vitiated because of non compliance with the principles of natural justice. Accordingly it was held that the assessment order passed was beyond the period of limitation and hence the same was held as invalid and bad in law. He also relied on the following decisions :
1. DCIT Vs. Muthoottu Mini Kuries reported in 266 ITR 213 (Kerala)
2. Rajendra C. Singh Vs. JCIT reported in 117 TTJ 885 (Mum. Trib.)
3. Kaka Carpets Vs. CIT reported in 266 CTR 485 (Allahabad HC)
59. So far as ground of appeal No.3 is concerned the Ld. Counsel for the assessee submitted that the same is general in nature and therefore does not require any argument.
60. So far as ground of appeal No.4 is concerned the Ld. Counsel for the assessee referring to pages 88 of the paper book drew the attention of the Bench to the approval granted by the CBDT u/s.10(23C)(vi) for A.Y. 1999-2000 and 2001-02 vide order dated 09-03-2004. He submitted that the DGIT (Investigation), Pune thereafter withdrew this exemption and the assessee it went in writ petition to Hon'ble Bombay High Court on the ground that the exemption granted by the Board cannot be withdrawn by the DGIT. Referring to pages 89 to 100 of the paper book he drew the attention of the Bench to the order passed by the Hon'ble Bombay High Court in Writ Petition No.7708/2008 order dated 28-07-2009 wherein the Hon'ble High Court allowed the contention of the assessee that exemption granted by the Board cannot 40 ITA Nos.915 to 920/PUN/2012 be withdrawn by the DGIT. Referring to page 101 of the paper book he submitted that the Hon'ble Supreme Court dismissed the SLP filed by the Department. Referring to page 103 of the paper book he submitted that the CBDT again withdrew the exemption on 30-01-2012 and the assessee has again gone in writ before the Hon'ble High court which is still pending as on date. He accordingly submitted that as on date the assessee does not have 10(23C)(vi) approval and therefore this ground of appeal No.4 has to be decided against the assessee.
61. So far as ground of appeal No.5 is concerned he submitted that provisions of section 11 flows from registration u/s.12A. He submitted that after the search the registration granted earlier was cancelled vide order dated 31-10-2007 passed u/s.12AA(3). Referring to pages 35 to 83 of the paper book No.1 he submitted that the Tribunal vide ITA No.1669.PN/2007 order dated 08-09-2009 has restored the registration.
Therefore, the CIT(A) was not justified in denying exemption u/s.11 to the assessee trust.
62. So far as ground of appeal No. 6 is concerned the Ld. Counsel for the assessee submitted that the assessee trust has received certain donations towards building fund etc. which were claimed as exemption u/s.11(1)(d) as corpus donation. Referring to page 120 of the order of the CIT(A) he drew the attention of the Bench to the year-wise donations received by the assessee from A.Yrs. 1997-98 to 2007-08. He submitted that all these donations are duly accounted for in the books of account of the assessee. Referring to the assessment order for A.Y. 2000-01 he drew the attention of the Bench to page 4 of the order wherein the Assessing Officer has stated that few persons have admitted to have given donations in cash for securing admission to the assessee trust in the statements recorded by Investigation wing of the department. The Assessing Officer accordingly made addition of Rs.4 41 ITA Nos.915 to 920/PUN/2012 lakhs and Rs.1 lakh in A.Y. 2004-05 and 2005-06 respectively as these donations are not recorded in the books of the assessee. He submitted that these donations being corpus donations are credited to various funds in the balance sheet and not routed through the income and expenditure account. He submitted that the assessee has issued the receipts to all the donors wherein the details like name, address of the donor are clearly mentioned. Referring to pages 26 to 30 of the assessment order for A.Y. 2000-01 he submitted that the Assessing Officer in the said order has alleged that these donations are nothing but capitation fee collected by the trust from students for granting admission in various institutes of the trust. For the above purpose the Assessing Officer relied upon the statements of parents of few students who have admitted to have given donations for securing admission in various institutes of the assessee trust. The Ld. Counsel for the assessee submitted that these donations according to the Assessing Officer are nothing but capitation fee for which the Assessing Officer as well as the CIT(A) have treated these donations as revenue receipt. They have also held that since the assessee is collecting donations for giving admission it has violated the Maharashtra Educational Institutes (Prohibition of Capitation Fees) Act, 1987. Further, they have held that the assessee trust exists for profit making activity and not for charity and therefore the exemption is not allowable.
63. The Ld. Counsel for the assessee submitted that it has taken donations which are duly accounted in the books of account and it is not a case that the donations are not accounted for. All these donations are credited to the earmarked funds account and has not routed the donation through income and expenditure account. Since the donors have given donations for specific purposes for construction of building, purchase of equipments etc., therefore, the donations are capital 42 ITA Nos.915 to 920/PUN/2012 receipts and accordingly exempt u/s.11(1)(d). However, he admitted that the assessee has not been able to produce any letter from the donors to the effect that the donations are corpus donation.
64. The Ld. Counsel for the assessee without prejudice to the above submitted that even if the donations are treated as revenue receipts the assessee has spent substantial amounts every year on the objects of the trust and the expenditure is more than the amount of receipts and therefore the income being exempt u/s.11, there is no tax liability which is attracted for any of these years, i.e. A.Yrs. 1999-2000 to 2004-05. He submitted that the assessee has considered the capital expenditure incurred for these years as expenditure on the objects of the trust. Therefore, the contention of the Assessing Officer that the assessee exists for profit is not correct as considering the donations as revenue receipts, there is always deficit for every year after considering the capital expenditure.
65. As regards the contention of the Assessing Officer and the CIT(A) that the assessee has violated the provisions of Maharashtra Educational Institutes (Prohibition of Capitation Fees) Act, 1987 he submitted that the same is not correct. He submitted that the donations are taken and they are duly recorded in the books. The educational authorities like Pune University, UGC and AICTE, Director of Technical Education who have a control on the activity of the assessee trust have not raised any objection in any of these years so far. He submitted that the Assessing Officer and the CIT(A) are not the authorities under the Anti Capitation Fee Act to hold that that the assessee has violated the provisions of that Act. Referring to the decision of the Tribunal in assessee's own case in ITA No.1669/PN/2007 order dated 08-09-2009 he submitted that the Tribunal in the order passed while restoring registration u/s.12AA(3) has observed that the revenue has not said 43 ITA Nos.915 to 920/PUN/2012 about any immoral activity of the appellant or the collection of fees was by wrongful means. Accordingly, they have restored the registration.
66. So far as the allegation of the Assessing Officer that the Donation of Rs.4 lakhs and Rs.1 lakh received from the students were not recorded by the assessee in its books of account is concerned he submitted that the assessee trust has not received any such donations from the said students. The allegation of the Assessing Officer is completely incorrect as the socalled students/their parents have denied to have given any such donations to the assessee trust in cash. Referring to pages 904 to 909 of Paper Book No.4 the Ld. Counsel for the assessee drew the attention of the Bench to the retraction letters of Shri Kashinath Sarode and Shri Yashovardhan Sharma.
67. The Ld. Counsel for the asseseee without prejudice to the above arguments submitted that assuming without admitting that the assessee has taken donations for admissions as per the charts made by the Assessing Officer as annexures to the assessment orders still the same is permissible. He submitted that the donations according to the Assessing Officer are relating to students who are given admission in the Management Quota. Referring to pages 1011 to 1013 of the paper book No. 5 which is the Government circular relating to granting of admission and charging of tuition fees under Management Quota, he submitted that the assessee is authorized to accept fee from the student admitted under the Management Quota to the extent of 5 times of the annual fees. Referring to the chart prepared by the Assessing Officer, copy of which is placed at page 1037 of the paper book No.5 he submitted that the same itself indicates that the fee including the donations does not exceed this figure in any case and therefore the assessee has not violated any law on this issue. Again referring to the copy of the order of the Tribunal in assessee's own case while restoring registration 44 ITA Nos.915 to 920/PUN/2012 u/s.12AA he submitted that the Tribunal has elaborately discussed this issue and held that assessee has charged donations within the limit prescribed under Management Quota and there is no mis-utilisation of funds. Further, the CIT is not authorized to deal with such offences, if any, under the Anti Capitation Fee Act. Accordingly the Tribunal has restored the registration u/s.12A to the assessee trust. He submitted that simply because the assessee trust has accepted donations from a few students, it does not mean that the assessee trust exists for profit making activity and not for purposes of education. He submitted that the Tribunal in order has stated that there are about 27000 students in the various institutes of the assessee trust and the activities of the trust are governed and approved by AICTE, Pune University, Medical Council of India, Director of Technical Education etc. and thus it cannot be held that assessee has violated any law or it exists as profit making body. Referring to pages 1006 to 1008 of the paper book No.5 he drew the attention of the Bench to the chart which indicates that the assessee has utilized entire surplus every year on its objects and the expenditure is more than the receipts including the donations. Referring to the said chart he submitted that the assessee does not work as a profit making body but it generates profit to sub serve its objects. Referring to the decision of Pune Bench of the Tribunal in the case of Deccan Education Society Vs. Addl.CIT vide ITA No.1480/PN/2014 order dated 13-07- 2015, copy of which is placed at pages 187 to 248 of the paper book (legal compilation) Vol.1 he submitted that under identical circumstances the Tribunal has held that the assessee trust is entitled to exemption as a charitable trust and there is no violation of the income-tax law by the trust.
45
ITA Nos.915 to 920/PUN/2012
68. Now coming to the Ground of appeal No.7 which relates to the expenses on World Peace Centre (WPC) is concerned, the Ld. Counsel for the assessee submitted that assessee has incurred various expenses on tour and travel of the trustees, officials, faculties of the trust for attending various seminars on World Peace activities abroad. Some of the seminars are arranged by the assessee trust also. He submitted that according to the Assessing Officer these activities do not fall in the category of education for which the assessee trust has been set up. It is also his allegation that the activity of WPC is not an educational activity. He, therefore, disallowed all these expenses and has also held that the object of World Peace Centre being not an educational activity, the expenditure there on is not an allowable expenditure. He accordingly denied exemption u/s.11 to the trust. The Assessing Officer while doing so further held that this object has been introduced in the trust deed by the assessee and assessee has not intimated the amended trust deed to the Assessing Officer. Further it is also his allegation that the assessee has incurred expenses abroad without permission from CBDT.
69. The Ld. Counsel for the assessee submitted that the objects of World Peace Centre is very much part of educational activities for which the assessee trust has been set up. Referring to pages 602 to 728 of Paper Book No.3 and pages 729 to 780 of Paper book No.4 he drew the attention of the Bench to various seminars and programmes arranged by the assessee on this topic, the list of wellknown speakers who addressed the participants, the appreciation by the Government of Maharashtra, the activities conducted and the guidelines by UGC for human rights education etc. He submitted that these documents clearly indicate that the World Peace studies form part of educational activities and even if the object was not introduced separately, still such activity could be a part of the objects of the assessee trust. He submitted that 46 ITA Nos.915 to 920/PUN/2012 the assessee arranged seminars and sent its faculties, trustees for such seminars in order to upgrade their knowledge in this field so that they can conduct the teaching of the subject and enhance their awareness for such courses being conducted abroad. Therefore, the expenditure was not personal in nature but for the expenditure on objects of the trust and therefore is an allowable deduction.
70. As regards the objection of the Assessing Officer that the expenditure is incurred outside India and therefore it is not allowable and it is for the personal benefit of the trustees on their visits to foreign countries is concerned, he submitted that the expenditure is very much on the objects of the trust in India as the courses on peace studies are to be started by the assessee in India and the expenditure was on training of the faculties including the trustees. Unless the management and the faculty are fully aware of the subject and are well versed with the subject the assessee could not start the educational programme. Therefore, this expenditure is on the object of the trust and not for the personal benefit of the trustees/faculty.
71. As regards the objection of the Assessing Officer that the object was introduced by the trustees on 20-07-1997 and the assessee trust did not inform the department about the amended trust deed is concerned he submitted that in reality this being a part of educational objects there was no need even to amend the trust deed and therefore by amending the trust deed nothing has virtually been changed in the objects of the trust. He submitted that since the object is part of educational objects only, non intimation thereof to the department has not resulted in any violation so as to deny the exemption u/s.11.
72. Referring to the decision of Mumbai Bench of the Tribunal in the case of ITO Vs. Bhansali trust reported in 155 ITD 736 he submitted 47 ITA Nos.915 to 920/PUN/2012 that the Tribunal in the said decision has held that mere non-intimation of amendments in trust deed to department cannot ipso facto lead to cancellation of registration because statutory requirement of cancellation of registration contained in section 12AA(3) of the Act prescribes that cancellation of registration cannot be effectuated unless a case is made out that the new objects did not fit in that existing objects or that activities are ingenuine.
73. Referring to the decision of Bangalore Bench of the Tribunal in the case of Kripanidhi Educational Trust Vs. DIT (Exemptions) reported in 152 TTJ 673 he submitted that the Tribunal in the said decision has held that mere finding that the objects of the educational trust have been amended without the consent of department would not be sufficient to exercise power u/s.12AA(3) without giving a finding that the appellant's objects are no longer charitable.
73.1 Referring to the decision of Hon'ble Madras High Court in the case of DIT Vs. Vallal M.D. Seshadri Trust reported in 79 CCH 443 he submitted that the Hon'ble High Court in the said decision has held that as far as the amendment made to the trust deed is concerned it is not the concern of the assessing authority and only the civil court is empowered to decide the said issue and in any event that cannot be the reason for denying the charitable nature of the institution, if it is otherwise charitable.
74. Referring to the decision of Mumbai Bench of the Tribunal in the case of Gem and Jewellery Export Promotion Council Vs. ITO reported in 68 ITD 95 he submitted that the Tribunal in the said decision has held that assessee having applied the income for charitable purpose in India, the mere fact that the expenditure had been incurred out of India did not disqualify the expenditure from exemption u/s.11(1)(a). 48
ITA Nos.915 to 920/PUN/2012
75. So far as violation of section 13 as per Grounds of appeal No.8 and 11 are concerned the Ld. Counsel for the assessee drew the attention of the Bench to the following chart which gives the year-wise details showing various additions made by the Assessing Officer and enhanced by Ld.CIT(A) on the ground of violation of section 13 :
Sr. Particulars Assessment year
No.
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
1. Expenditure on
providing facility to B E
Avhad
Vehicle Maintenance
(a) Addition by AO - - 21,850 - - -
(b) Enhancement by - - - 143,893 224,077 245,991
CIT(A)
Depreciation on car
(a) Addition by AO - - - - - -
(b) Enhancement by - - - 171,388 137,111 437,589
CIT(A)
Credit Card Expenses
(a) Addition by AO - - 180,004 - - -
(b) Enhancement by 133,891 142,529 - 242,566 279,298 178,264
CIT(A)
Other Expenses - - - - - -
Honorarium Paid - - - - - -
Sub-total (1) 133,891 142,529 201,854 557,847 640,486 861,844
2 Expenditure on foreign
tours
(a) Addition by AO - - 152,930 - - -
(b) Enhancement by 671,273 - 130,492 24,700 266,154 357,442
CIT(A)
Sub-total (2) 671,273 - 283,422 24,700 266,154 357,442
3 Concessional education
(a) Addition by AO - - 92,400 - - -
(b) Enhancement by 307,845 213,205 62,320 88,680 91,100 -
CIT(A)
Sub-total (3) 307,845 213,205 154,720 88,680 91,100 -
4 Scholarship given to - - - - - -
Rahul Karad
5 Notional Interest on - - - - - -
advance to Rahul Karad
Total (1+2+3+4+5) 1,113,009 355,734 639,996 671,227 997,740 1,219,286
76. So far as purchase of Camry Car, computers and reimbursement of credit card expenses of Shri B.E. Avhad is concerned he submitted that the main allegation of the Assessing Officer is that Shri B.E. Avhad has not provided his services on day to day basis. According to the Assessing Officer, if Mr. B.E. Avhad was looking after the legal work and no fees was charged then why huge amount is debited to income and expenditure account under the head legal expenses by the trust. 49
ITA Nos.915 to 920/PUN/2012 Further, there was no necessity of giving any salary to Shri B.E. Avhad from 01-01-2006 onwards.
77. He submitted that Shri B.E. Avhad is the founder member and is also an eminent lawyer by profession having knowledge in vast areas including legal and revenue matters. Although he was not engaged in day to day activities of the trust, he was associated with all the policy matters, developmental activities, legal matters including disputes in the courts etc. Besides this all the land matter concerning conveyance of land, conversion of the land, any assessment of the lands of the institution have been looked after by Shri B.E. Avhad. He submitted that Shri B.E. Avhad has used the facilities provided only for the official purposes of the trust. He was having his own car which was used for his personal work. The Assessing Officer nowhere in the assessment order has pointed out any instance where the facilities were used for personal purposes. He submitted that it is a regular practice to provide car facilities to the higher level authorities in every institution including Government offices. Therefore there should not be any objection for providing car facilities to the President of the trust for official work of the trust. Therefore, the allegation of the Assessing Officer is baseless and it does not lead to violation of section 13.
78. So far as legal expenses are concerned he submitted that the legal expenses also include court fees, stamp duty, fees of other lawyers on record etc. There were numerous litigations on different issues like land matters, labour matters, civil, criminal and revenue matters etc. for which the trust was benefitted because of the services of Shri B.E. Avhad. Apart from Shri B.E. Avhad the trust had also engaged some other counsels and their expenses are debited as legal expenses in the books of the trust. Therefore, it should not be said that Shri B.E. Avhad has not rendered any services to the trust. He submitted that many times 50 ITA Nos.915 to 920/PUN/2012 the trustees and the President are supposed to give courtesy gifts to Guests and Officials as token of appreciation or for promotional activities of the trust. The payments for such gifts occasionally were made by Advocate Shri B.E. Avhad through credit card. Thus the payments for clothing etc. were incurred for the purpose of the assessee trust and not for personal purpose. He submitted that Shri B.E. Avhad was having his own credit card which was used for incurring his personal expenses.
79. So far as hiring of taxies for trips of Advocate Shri B.E. Avhad to Mumbai is concerned he submitted that these trips were not for personal purposes but for official trips to attend various high court matters and to discuss case matters with lawyers on record. Even the credit card payments were also for the hotel bills at Mumbai and Delhi to which places Shri B.E. Avhad had to go for the matters concerning the trust. He submitted that the facilities did not constitute any personal benefit to Advocate Shri B.E. Avhad and therefore there is no violation of any of the provisions of section 13.
80. In his alternate contention he submitted that even if the above facilities were for the personal benefit of Shri B.E. Avhad there is no reason for denial of exemption u/s.11 and 12 in respect of the entire income of the assessee trust. At the best the disallowance may be restricted to the extent of the so called violation. For the above proposition the Ld. Counsel for the assessee relied on the following decisions :
1. CIT Vs. Karnataka Industrial Area Development Board - ITA No.557/2008 order dated 17-06-2014 (Kar. HC)
2. Sheth Mafatlal Gagalbhai Foundation Trust reported in 249 ITR 533 (Bom.)
3. CIT Vs. Fr. Mullers Charitable Institutions - ITA No.589/2007 order dated 10-02-2014 (Kar. HC)
4. CIT Vs. Fr. Mullers Charitable Institutions reported in (2014) 227 Taxmann 369 (SC)
5. Audyogik Sikshan Mandal Vs. ITO reported in (2016) 156 ITD 1 (Pune (TM) 51 ITA Nos.915 to 920/PUN/2012
6. Jamshetji Tata Trust Vs. JCIT (Exemption) reported in (2014) 148 ITD 388 (Mum)
81. So far as the foreign tour of family members of Shri B.E. Avhad, President of the trust are concerned, he submitted that Shri B.E. Avhad has visited Geneva for attending World Philosophers Meet in the year 1999 and all the family members had accompanied him. The Assessing Officer had considered the amount incurred on airfare of Rs.1,60,000/- and foreign currency expenses of Rs.4,40,000/- as violation of section
13. He submitted that the representatives of the assessee trust were organizers and participants. The participation was in the official capacity as trustees, staff or as the students. Mr. B.E. Avhad and Mrs. Kamal Avhad represented the assessee trust as trustees. Mrs. Kamal Avhad attended the meeting as part of protocol. The students participants included 3 children of Mr. B.E. Avhad. He submitted that only the expenditure incurred in relation to meet was debited by assessee trust. No expenditure for the personal benefit was made from the funds of the assessee trust. He submitted that amounts involved on this issue are very small as compared to the volume of gross receipts of the assessee trust.
82. In his alternate submission he submitted that at the most the amount incurred for relatives may be disallowed. In yet another alternate argument he submitted that if the foreign tour expenses were not in pursuance of the objects of the trust, in that case, there cannot be wholesale denial of exemption u/s.11 and 12 and the disallowance should be restricted to the extent of so called violation. For the above proposition, he relied on the decisions cited above. 52
ITA Nos.915 to 920/PUN/2012
83. So far as foreign tour of the trustees and their family members are concerned, he made similar arguments as argued while arguing for Mr. B.E. Avhad and his family.
84. As regards the visit to Katmandu by Shri Rahul Karad is concerned, he submitted that the International Education Centre of the assessee trust is entrusted with the job of promoting the educational programmes of the assessee trust. Such promotional activities necessitate appointment of representatives abroad in different countries and undertaking of the foreign tours by the concerned persons for the promotional activities. Shri Rahul Karad is the Executive Director of the MIT School of Management and also incharge of the MIT group of Management institutions. For the purpose of such promotional activities he had visited Katmandu in July 2002 along with professor Shri P.D. Chidgupkar, Director International Education Centre of the assessee trust. He submitted that the above trip to Katmandu was for the purpose of the assessee trust and not for any pleasure trip. In any case even if the same is treated as personal expenditure, even then there cannot be wholesale denial of exemption of section 11 and only the disallowance is to be restricted to the extent of so called violation. For the above proposition he relied on the decisions already cited above.
85. So far as the visit to Australia by Shri Rahul V. Karad and Prof. V.D. Karad during A.Y. 2003-04 is concerned he submitted that both of them visited Australia to attend the 13th Triennal conference of University Presidents which was held between 24th to 27th June 2002 and both the above delegates attended the conference during the period. He also referred to the invitation letters placed at pages 812 to 821 of the paper book. He submitted that as per the rules 2000 US dollars per delegate is allowable as allowance. However, the 2 delegates purchased only 3000 dollars, thus avoiding excess expenditure. The amounts were used for 53 ITA Nos.915 to 920/PUN/2012 the local conveyance, coolie charges and for the stay/food etc. There was no misuse of funds as alleged by the Assessing Officer. There was no personal expenditure incurred by the above 2 delegates. The sun glasses, perfumes or shirt etc. were received as gifts from relatives and friends and there was no connection with the amount spent out of the above-mentioned foreign currency. In his alternate submission he submitted that there cannot be wholesale denial of exemption u/s.11 and 12 in respect of the entire income of the assessee trust. The disallowance is to be restricted to the extent of so called violation.
86. So far as foreign tour of Mr. and Mrs. Mangesh Karad (i.e., related to A.Y. 2001-02 - Rs.1,30,492/-) is concerned he submitted that Mr. Mangesh Karad, Executive Director, Planning & Development of the Trust visited Europe in F.Y. 2000-01 to attend UNESCO conference on World Peace and Human Security representing the assessee trust. His wife Sunita Karad accompanied him as a protocol. However, her expenditure was not borne by the trust. Attending such high level conference by Mr. Mangesh Karad would definitely enrich the knowledge which in turn can be shared with students and colleagues in India. Thus, the trust is bound to gain from such activities. Therefore, it is not a personal expenditure but an expenditure for the objects of the trust.
87. In his alternate contention he submitted that there cannot be wholesale denial of exemption u/s.11 and 12 in respect of the entire income of the assessee trust. The disallowance should be restricted to the extent of so called violation.
88. So far as local tours by trustees and their family members to various places where the trust does not have any activity is concerned, the Ld. Counsel for the assessee submitted that the Assessing Officer has doubted the expenditure on various local travels of trustees and their 54 ITA Nos.915 to 920/PUN/2012 relatives amounting to Rs.25,650/- for A.Y. 1999-2000 and Rs.47,697/- for A.Y. 2004-05. He submitted that these expense are incurred on the objects of the trust. The details of the expenditure show that the tours are only by the trustees and in particular mainly by the President and the Managing trustee. These local tours were undertaken in connection with survey of different towns with a view to open new schools or colleges. Further, certain expenses are incurred for attending the conference or for administrative matter. Thus, there is no violation in this respect. Such expenditure has been incurred on the objects of the trust. He submitted that the Assessing Officer however has not made any addition on this account.
89. So far as interest free loan of Rs.18 lakhs to Shri Rahul V. Karad is concerned he submitted that the Assessing Officer has discussed the issue at Page 22 of the assessment order for A.Y. 1999-2000. According to the Assessing Officer higher education in a foreign university has given personal gain to Shri Rahul V. Karad and the expenditure is only for the advancement of personal career of Shri Rahul V. Karad and therefore it cannot be said to be for charitable purpose. Thus, there is violation of provisions of section 13 of the I.T. Act. He submitted that the educational loan and the subsidy given to Shri Rahul V. Karad were in his capacity as an employee in accordance with the rules and regulations of the assessee trust and not as a relative of the trustee. He submitted that Shri Rahul V. Karad was employed as Executive Director of MIT School of Management w.e.f. 01-01-2001. He was also the coordinator for the MIT School of Government. He submitted that out of the course fee of Rs.27 lakhs for his Post Graduate Course at Harward Business School, Mass, USA, the trust had sanctioned a loan of Rs.18 lakhs as per the loan agreement entered into on 05-01-2004. Referring to the said agreement, copy of which is placed 55 ITA Nos.915 to 920/PUN/2012 at pages 888 and 889 of the paper book No.4, he submitted that there was an undertaking by Shri Rahul V. Karad to serve the trust for a period of 5 years. The loan was given to Shri Rahul V. Karad on his own merit and the course undergone by him has been of great help to the trust in the expansion of the management courses. He submitted that the entire loan amount along with compounding interest has been recovered from the salary of Shri Rahul V. Karad. He submitted that at the request of Shri Rahul V. Karad financial support of Rs.5,44,797/- was sanctioned and paid in two instalments of Rs.2,72,102/- on 12-01-2006 and Rs.2,72,695/- on 31-03-2006. He used this amount for repayment of the loan and the amounts were repaid by cheque immediately thereafter. Referring to the loan account of Shri Rahul V. Karad he drew the attention of the Bench to the recovery of the same and submitted that the entire amount has been recovered and the contention of the Assessing Officer that the loan and interest have not been recovered is incorrect and false. He submitted that Shri Rahul V. Karad is not the only beneficiary of the educational loan and the subsidy. A number of other employees of the trust unconnected with the management have also availed such benefit.
90. So far as the claim of the Assessing Officer that the recovery of interest is an afterthought he submitted that this claim is factually incorrect. He submitted that charging of interest has been specifically recorded in the loan agreement dated 05-01-2004 itself. Therefore, advancement of loan and granting of subsidy to Shri Rahul V. Karad in his capacity as an employee of the trust is not in violation of provisions of section 13. In his alternate contention he submitted that there cannot be wholesale denial of exemption u/s.11 and 12 of the entire income of the assessee trust for violation of provisions of section 13. The disallowance 56 ITA Nos.915 to 920/PUN/2012 has to be restricted to the extent of so called violation. For the above proposition, he relied on the decisions already cited above.
91. So far as the free admissions and fee concessions to relatives of the trustees are concerned the Ld. Counsel for the assessee submitted that children of all employees and founder members are given concession in fees as a policy of the trust and also on the basis of merit only. He submitted that there is no prohibition for giving any fee concession and such concession would not amount to use of trust funds for non educational purposes. Referring to provisions of section 13(6) he submitted that the said provision specifically provides that in an educational institution there would be no prohibition as regards fee concession. Further such concession to relatives of employees is not covered in section 13 and therefore application of the same to the assessee trust is improper and unjust. In his alternate contention he submitted that there cannot be wholesale denial of exemption u/s.11 and 12 of the entire income of the assessee trust for violation of provisions of section 13. The disallowance has to be restricted to the extent of so called violation.
92. So far as addition on account of unexplained credits as per Ground of appeal No.9 is concerned the Ld. Counsel for the assessee submitted that this issue arises for A.Y. 1999-2000 for which addition of Rs.37,72,248/- has been made and for A.Y. 2003-04 it is Rs.17,58,354/-. He submitted that on account of certain missing credits in F.Y. 1997-98 the assessee passed a journal entry of Rs.37,72,248/- for A.Y. 1999- 2000 which the Assessing Officer treated as income for A.Y. 1999-2000. The special auditor noted that an amount of Rs.17,58,354/- was directly taken to balance sheet as on 01-04-2002 for which the Assessing Officer made the addition in A.Y. 2003-04. He relied on the submissions made on this behalf before the Assessing Officer and the CIT(A). In his 57 ITA Nos.915 to 920/PUN/2012 alternate contention, he submitted that even if the amounts are added as income for A.Y. 1999-2000 and A.Y. 2003-04 the application of income in these two years is still higher than the receipts and therefore after granting exemption u/s.11 there is no taxable income in the hands of the assessee.
93. So far as disallowance u/s.43B, 40A(3) and 40A(7) as per Grounds of appeal No.10 is concerned the Ld. Counsel for the assessee submitted that the Assessing Officer while computing the income of the assessee trust had added various disallowances u/s.40A(3), 43B and 40A(7) on the ground that registration u/s.12A has been cancelled and assessee does not have any exemption u/s.10(23C)(vi) of the I.T. Act. He submitted that since the Tribunal has already restored registration u/s.12A to the assessee trust, therefore, the income of the assessee trust has to be computed u/s.11. Referring to various decisions he submitted that income u/s.11 is to be computed in a commercial manner and not as per the provisions of I.T. Act. The various heads of income u/s.14 are not relevant in the case of a charitable trust, therefore, while computing the income u/s.11 the various disallowances cannot be made u/s.28 to 43. For the above proposition he relied on the following decisions :
1. CIT Vs. Rao Bahadur Calavala Cunnan reported in 135 ITR 485 (Mad.)
2. CIT Vs. Ganga Charity Trust Fund reported in (1986) 162 ITR 612 (Guj.) He also relied on the CBDT Circular No.5P(LXX-6) dated 19-06-1968.
94. So far as ground of appeal No.9 for A.Y. 2001-02 is concerned the Ld. Counsel for the assessee submitted that although the special auditor in his report u/s.142(2A) of the Act has observed that certain expenditure amounting to Rs.4,27,000/- was capital in nature, however, 58 ITA Nos.915 to 920/PUN/2012 the same was claimed as revenue expenditure in the income and expenditure account for A.Y. 2001-02. Accordingly, this amount was disallowed in the recasted income and expenditure account for A.Y. 2001-02. He submitted that the Assessing Officer while computing the taxable income has again disallowed the same amount in the assessment order even when the surplus computed by the auditor was considered as the base. This according to the Ld. Counsel for the assessee resulted into double addition. He submitted that this issue was raised before the CIT(A) vide ground of appeal No.14. However, no further discussion or decision is made on this issue in the entire order. He submitted that in case the assessee is held to be eligible for exemption u/s.11, then the issue whether a particular expenditure is revenue or capital in nature will not be relevant at all. The income in case of a charitable trust is to be computed in commercial manner and accordingly capital expenditure will also be considered as application of income. Without prejudice to above, he referred to pages 1006 to 1008 of paper book No.5 and submitted that even if the above amount is disallowed for A.Y. 2001-02, the application of income for this year is still higher than the income receipts.
95. So far as disallowance of income tax as per ground of appeal No.9 for A.Y. 2002-03 and 2003-04 are concerned he submitted that Assessing Officer has disallowed an amount of Rs.4,12,656/- and Rs.4,42,920/- respectively for A.Y. 2002-03 and 2003-04 on account of income tax debited in the books. He submitted that according to the Assessing Officer these amounts were debited to income and expenditure account of MIMER college and DBSR hospital, Talegaon which is one of the constituent units of the assessee. Since these amounts were debited as income tax the Assessing Officer disallowed the same. He submitted that there is no discussion in the assessment 59 ITA Nos.915 to 920/PUN/2012 order as well as the CIT(A)'s order on this issue. He submitted that since the assessee is a charitable trust claiming exemption u/s.11, therefore, there was no question of payment of any income tax. The amounts were not paid towards income tax but towards TDS arrears of earlier year which is an allowable deduction. Secondly, the income in case of a charitable trust is to be computed in commercial manner and accordingly even income tax expenditure will be considered as application of income. Without prejudice to the above the Ld. Counsel for the assessee referred to pages 1006 to 1008 of paper book No.5 and submitted that even if the above amounts are disallowed for A.Yrs. 2002- 03 and 2003-04 the application of income for these years are still higher than the income receipts and therefore after granting exemption u/s.11 there is no taxable income in the hands of the assessee.
96. So far as grounds of appeal No.12 for A.Y. 2003-04 is concerned which relates to disallowance of excess provision for refund of fees the Ld. Counsel for the assessee submitted that MIT SFS was one of the constituent units of the assessee trust which was closed during the A.Y. 2003-04. The assessee has made a provision of Rs.50 lakhs for refund of fees in A.Y. 2002-03 out of which certain amount was repaid and Rs.30,96,750/- was unpaid during A.Y. 2003-04. This amount was unpaid even upto 31-03-2006 and accordingly the Assessing Officer had added back the excess provision in the year of closure of unit, i.e. A.Y. 2003-04. The assessee while reiterating the same arguments as advanced before the Assessing Officer and the CIT(A) referred to pages 1006 to 1008 of paper book No.5 and submitted that even if the amount has been added to the income for A.Y. 2003-04 application of income for this year is still higher than the income receipts and therefore after granting exemption u/s.11 there is no taxable income in the hands of the assessee.
60
ITA Nos.915 to 920/PUN/2012
97. So far as ground of appeal No.9 for A.Y. 2004-05 is concerned the Ld. Counsel for the assessee submitted that the same relates to incorrect addition of Rs.4,62,41,042/-. Referring page 29 of the assessment order he submitted that the Assessing Officer has stated that the auditor has recasted the income and expenditure account of the assessee and arrived at surplus of Rs.7,23,46,742/- for the year. However, the same is incorrect. The auditor has computed surplus of Rs.2,61,05,700/- in his recasted income and expenditure account for the year A.Y. 2004-05, copy of which is placed at page 85 of the paper book for A.Y. 2004-05. Thus, there is typographical error on the part of the Assessing Officer which needs to be corrected. He submitted that the correct surplus being Rs.2,61,05,700/- and not Rs.7,23,46,742/- relief of Rs.4,62,41,042/- should be given.
98. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that search took place on the trustees of the assessee on 20-07-2005 and the survey action was conducted on the assessee trust on the same day. The 2nd survey on the assessee trust took place on 26-08-2005 during which cash amounting to Rs.8 lakhs and various incriminating documents were found. The notice u/s.148 was issued on 20-03-2006 for the A.Y. 1999- 2000 which was received by the assessee on 01-04-2006. Referring to the decision of Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Javeri Stock Brokers Pvt. Ltd. reported in 291 ITR 508 he submitted that 143(1) order is not an order of assessment and therefore there being no assessment u/s.143(3) the question of change of opinion does not arise. Referring to the decision of Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd. Vs. ITO reported in 236 ITR 34 he submitted that the Hon'ble Supreme Court in the said has held that reassessment proceedings initiated on the basis of information obtained 61 ITA Nos.915 to 920/PUN/2012 in assessment proceedings for a subsequent year is valid. He submitted that in the instant case the Ld.CIT(A) has already held that all the conditions necessary for reopening of the assessment under the provisions of section 147 and for issue of notice u/s.148 are satisfied. Therefore, the order of the CIT(A) on this be upheld.
99. So far as ground relating to validity of the assessment because of limitation is concerned he submitted that the Ld.CIT(A) has discussed the issue from page 58 onwards and has given justifiable reasons for special audit u/s.142(2A) of the Act based on the objective satisfaction of the Assessing Officer and the CIT Central that there was complexity in the books of account and the transactions recorded in the voluminous seized documents and therefore the reference made by the Assessing Officer for special audit in the interest of the revenue does not suffer from any legal infirmity. So far as the argument of the Ld. Counsel for the assessee that no opportunity was given by the Assessing Officer and therefore principle of natural justice has been violated he submitted that the CIT Central has already given adequate opportunity to the assessee to justify as to why directions for special audit u/s.142(2A) should not be given. Since in the instant case CIT Central has already given adequate opportunity and the assessee has responded to the same, therefore, the assessee now cannot take shelter of limitation.
100. So far as the ground relating to entitlement of exemption u/s.10(23C)(vi) is concerned the Ld. Departmental Representative supporting the order of the CIT(A) on this issue submitted that the assessee trust does not enjoy the status of an approved institution u/s.10(23C)(vi). Therefore, in absence of any approval from the prescribed authority for the assessment years 1999-2000 to 2004-05 the assessee is not entitled to the benefit of exemption on its income u/s.10(23C)(vi).
62
ITA Nos.915 to 920/PUN/2012
101. So far as denial of exemption u/s.11 to the assessee trust is concerned he submitted that the Ld.CIT(A) has given valid reasons for denying the same since the assessee has violated the provisions of section 13(1)(c). The Assessing Officer and the CIT(A) have categorically found that the funds of the trust have been diverted for the benefit of the trustees and their relatives. He submitted that the trustees and their relatives have visited foreign countries which is in no way connected with the activities of the assessee trust. The vehicles of the trust have been used for the personal use of the trustees. Therefore, in view of the violation of provisions of section 13(1)(c), the CIT(A) was fully justified in denying exemption u/s.11 to the assessee trust. He submitted that the assessee trust in the instant case has received donations in lieu of admission. Such donations were split into donations of smaller denominations and multiple receipts were issued to the donors who are not traceable. The assessee also expressed its inability to provide the address or whereabouts of the persons whose name appear as donors. The various instances brought on record by the Assessing Officer and CIT(A) clearly suggest that the assessee trust is running the institutions on commercial lines which indicates that the activity of the assessee is a commercial activity with profit motive and it does not exists solely for charity. Therefore, the CIT(A) was fully justified in denying the exemption u/s.10(23C)/section 11 of the I.T. Act.
102. So far as the corpus donation is concerned he submitted that the provisions of section 11(1)(d) are not applicable since the assessee could not give the details of whereabouts of the donors and the direction of the donors that the contribution shall form part of corpus of the trust.
103. So far as the reliance on the order of the Tribunal restoring registration u/s.12A is concerned he submitted that the said order restoring registration cannot be relied upon in view of the detailed 63 ITA Nos.915 to 920/PUN/2012 findings given by the Assessing Officer and the CIT(A). He submitted that the Ld.CIT(A) at para 17.3 onwards has clearly mentioned that the observations of the ITAT on application of income in the said order are only obiter-dicta and therefore do not have a binding force. He accordingly submitted that the arguments advanced by the Ld. Counsel for the assessee that the issues involved in the present appeal, i.e. application of income by the assessee and violation of provisions of section 13 were settled in view of decision of the ITAT, Pune in assessee's own case and therefore should not have been raised again and examined by the Assessing Officer has got no merit.
104. As regards the expenditure incurred on World Peace Centre as per Ground of appeal No.7 is concerned he submitted that the Ld.CIT(A) while discussing the issue has categorically held that the expenditure incurred on account of World Peace activities is not towards the approved objects of the trust. Further the World Peace activities and the expenditure incurred abroad in no way further the interest/objects of the trust in India nor can it be said that the expenditure was incurred solely for educational purposes. He submitted that when the assessee changed its objects the assessee has also not intimated the same to the department. No CBDT permission was obtained for incurring expenditure abroad. Therefore, there is clear violation of provisions of section 11(3) since the income has been applied for purposes other than charitable or religious purposes.
105. So far as Ground of appeal No.8 is concerned he submitted that since the assessee has violated the provisions of section 13, therefore, the CIT(A) was fully justified in denying exemption u/s.11 on the entire income of the assessee trust.
64
ITA Nos.915 to 920/PUN/2012
106. So far as Ground of appeal No.9 relating to addition of unexplained entries of Rs.37,72,249/- is concerned he submitted that the CIT(A) was fully justified in sustaining the addition in absence of any proper reconciliation by the assessee on this issue.
107. So far as ground relating to additions made by the Assessing Officer u/s.43B, 40A(7) and 40A(3) etc. and confirmed by the CIT(A) is concerned he submitted that since the income the assessee trust has been assessed like any other commercial organization such additions as per the findings of the special auditor is justified.
108. So far as enhancement of income by the CIT(A) as per Ground of appeal No.11 is concerned the Ld. Departmental Representative heavily relied on the order of the CIT(A). Referring to the decision of Hon'ble Kerala High Court in the case of Agappa Child Centre Vs. CIT reported in 226 ITR 211 he submitted that the Hon'ble High Court in the said decision has held that concession is not available where property of the trust has been made available for use of prohibited person. The property includes movable property. Since in the instant case the assessee has allowed the use of its motor car to one of the trustees and the trustees and their family members have undertaken foreign trips for which the funds of the assessee trust has been used and the children of the trustees and the employees were given concession in education the trust has violated provisions of section 13(1)(c). He accordingly submitted that the order of the CIT(A) being in consonance with law should be upheld and the grounds raised by the assessee for various years should be dismissed.
109. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions 65 ITA Nos.915 to 920/PUN/2012 cited before us. Ground of appeal No.1 which is common for all the appeals relates to validity of reassessment proceedings. However, the Ld. Counsel for the assessee argued this issue only for A.Y. 1999-2000 and did not press this issue for other years. Therefore, our findings on this issue are confined only to A.Y. 1999-2000.
110. From the copy of the reasons supplied by the Assessing Officer for reopening of assessment for A.Y. 1999-2000, the contents of which have already been reproduced at para 50 of this order, we find the reason for such reopening was that the assessee has shown income from other sources to the tune of Rs.17,97,33,097/- which includes rent income of Rs.1,92,34,679/-. Since the objects of the assessee trust is to run educational institution and not to give the properties on rent, therefore, the rental income should have been taxed as income from house property and not under the head 'income from other sources'/business income. However, a perusal of the assessment order shows that the Assessing Officer in the said order has not brought to tax such rental income as "income from house property". No addition on this account has been made. Under such circumstances we have to decide as to whether the Assessing Officer can make various other additions when no addition has been made on the issue on which the assessment was reopened.
111. We find the Hon'ble Bombay High Court in the case of Jet Airways India Ltd. (Supra) has held that if the Assessing Officer after issuing a notice u/s.148 accepts the contention of the assessee and holds that the income which he has initially formed a reason to believe has escaped assessment, as a matter of fact not escaped assessment, it is not open to him independently to asses some other income. The power to assess such other income vests on him only if income referred 66 ITA Nos.915 to 920/PUN/2012 to in notice of reassessment has been issued. The relevant observations of the Hon'ble High Court read as under :
16. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Explanation 3 by the Finance Act (No. 2) of 2009. However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.
17. We have approached the issue of interpretation that has arisen for decision in these appeals, both as a matter of first principle, based on the language used in section 147(1) and on the basis of the precedent on the subject. We agree with the submission which has been urged on behalf of the assessee that section 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also"
by the Rajasthan High Court in Shri Ram Singh's case (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147(1) as they stood after the amendment of 1-4-1989 continue to hold the field.67
ITA Nos.915 to 920/PUN/2012
18. In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall, accordingly, stand answered against the revenue and in favour of the assessee. The appeal is, accordingly, dismissed. There shall be no order as to costs."
112. We find the Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd.(Supra) has observed as under :
"17. Now, coming back to the interpretation which was given by the Bombay High Court to Sections 147 and 148 in view of the precedent on the subject. The Court held as under:-
"11. ... Interpreting the provision as it stands and without adding or deducting from the words used by Parliament, it is clear that upon the formation of a reason to believe under Section 147 and following the issuance of a notice under Section 148, the Assessing Officer has the power to assess or reassess the income which he has reason to believe had escaped assessment and also any other income chargeable to tax. The words "and also" cannot be ignored. The interpretation which the Court places on the provision should not result in diluting the effect of these words or rendering any part of the language used by Parliament otiose. Parliament having used the words "assess or reassess such income and also any other income chargeable to tax which has escaped assessment", the words "and also" cannot be read as being in the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the word "or". The Legislature did not rest content by merely using the word "and". The words "and" as well as "also" have been used together and in conjunction." ...
Evidently, therefore, what Parliament intends by use of the words "and also" is that the Assessing Officer, upon the formation of a reason to believe Under Section 147 and the issuance of a notice under Section 148(2) must assess or reassess: (i). 'such income'; and also (ii) any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason to believe that it has escaped assessment. Hence, the language which has been used by Parliament is indicative of the position that the assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings 68 ITA Nos.915 to 920/PUN/2012 under the section as having escaped assessment. If upon the issuance of a notice under Section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the provisions of Section 147 with effect from 1st April 1989 clearly stipulated that the Assessing Officer has to assessee or reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice during the proceedings. In the absence of the assessment or reassessment the former, he cannot independently assess the latter."
Section 147 has this effect that the Assessing Officer has to assessee or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings However, if after issuing a notice under Section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under Section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.
18. We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of Jaganmohan Rao (supra). We may also note that the heading of Section 147 is "income escaping assessment" and that of Section 148 "issue of notice where income escaped assessment". Sections 148 is supplementary and complimentary to Section 147. Sub-section (2) of Section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per explanation (3) if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under Section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under Section
148. 69 ITA Nos.915 to 920/PUN/2012
19. In the present case, as is noted above, the Assessing Officer was satisfied with the justifications given by the assessee regarding the items viz., club fees, gifts and presents and provision for leave encashment, but, however, during the assessment proceedings, he found the deduction under Section 80 HH and 80-I as claimed by the assessee to be not admissible. He consequently while not making additions on those items of club fees, gifts and presents, etc., proceeded to make deductions under Section 80HH and 80-I and accordingly reduced the claim on these accounts.
20. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under Section 80 HH and 80-I which as per our discussion was not permissible. Had the Assessing Officer proceeded not to make dis-allowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per explanation 3 to reduce the claim of deduction under Section 80 HH and 80-I as well.
21. In view of our above discussions, the Tribunal was right in holding that the Assessing Officer had the jurisdiction to reassess issues other than the issues in respect of which proceedings are initiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive. Consequently, we answer the first part of question in affirmative in favour of Revenue and the second part of the question against the Revenue.
22. The present appeal is accordingly allowed."
113. We find the Pune Bench of the Tribunal in the case of M/s. Shri Vishwakalyan Jivraksha Pratishthan (supra) while deciding an identical issue, following the decision of Hon'ble Bombay High Court in the case of Jet Airways India Ltd. (Supra) has held that when addition has been made for reasons different from what has been communicated to the assessee and no addition has been made on the ground for which the Assessing Officer had 'reason to believe' for reopening of assessment, the reassessment proceedings are invalid. The various other decisions relied on by the Ld. Counsel for the assessee also support the case of the assessee. The various decisions relied on by the Ld. Departmental Representative are not applicable to the facts of the present case and are distinguishable, as in none of those cases the validity of reassessment proceeding was challenged on the ground that additions 70 ITA Nos.915 to 920/PUN/2012 were made on the grounds other than the grounds on which the assessments were reopened on the basis of reason to believe by the Assessing Officer. Since in the instant case the Assessing Officer has not made any addition on the issue on which he had reopened the assessment and some other additions were made, therefore, following the decision of Hon'ble Bombay High Court in the case of Jet Airways India Ltd. (Supra) and the various other decisions cited (supra) we hold that the reassessment proceedings for the A.Y. 1999-2000 are bad in law. Ground of appeal No.1 by the assessee is accordingly allowed.
114. Since the assessee succeeds on the preliminary ground as per Ground of appeal No.1 for A.Y. 1999-2000, therefore, the other grounds have become academic in nature and therefore these are not being discussed. ITA No.915/PUN/2012 by the assessee is accordingly allowed.
115. Ground of appeal No.2 which is common for all the years relates to validity of the reassessment proceedings on the issue of limitation in view of the illegal order for special audit u/s.142(2A). However, the Ld. Counsel for the assessee restricted his arguments for A.Y. 1999-2000 and 2000-2001 only and did not press this ground for other years. Accordingly, this ground for other years are dismissed. Since we have already held in the preceding paragraphs that the order for A.Y. 1999- 2000 is void, therefore, we confine our discussion on this issue only for A.Y. 2000-2001.
116. It is the submission of the Ld. Counsel for the assessee that while directing for special audit u/s.142(2A) of the I.T. Act for A.Yrs. 1999-2000, 2000-01 and 2005-06 the Assessing Officer had not given opportunity of being heard as per the proviso to section 142(2A) and only the Ld.CIT has given the opportunity. Therefore, in view of the 71 ITA Nos.915 to 920/PUN/2012 decision of Hon'ble Supreme Court in the case of Rajesh Kumar (Supra) and the decision of Hon'ble Bombay High Court in the case of Nikunj Eximp Enterprises Pvt. Ltd. (Supra) the order u/s.142(2A) is illegal and invalid and therefore, the limitation for assessment could not be extended in view of the illegal order u/s.142(2A). It is also his submission that the assessments for A.Yrs. 1999-2000, 2000-01 and 2005-06 were getting time barred in view of second proviso to section 153(2) on 31-12-2007 whereas the assessment order is dated 08-08-2008. Therefore, such assessment orders are time barred and therefore are void.
117. We find merit in the above argument of the Ld. Counsel for the assessee. It is an admitted fact that the assessment order for A.Y. 2000-01 is dated 08-08-2008. It is also an admitted fact that the Assessing Officer while directing for special audit u/s.142(2A) has not given any opportunity of being heard to the assessee and the opportunity of being heard was granted only by the Ld. CIT Central who has passed a detailed order dated 05-12-2007 granting approval on the reference by the Assessing Officer for special audit u/s.142(2A). Under these circumstances we have to see where the Assessing Officer before sending a proposal for conducting special audit u/s.142(2A) of the Act has not given an opportunity of being heard to the assessee and in view of the proviso to section 142(2A) of the Act, whether the said proposal made without affording predecisional hearing to the assessee was valid and can the proceedings conducted thereafter be held to be vitiated.
118. We find an identical issue had come up before the Pune Bench of the Tribunal in the case of ITO Vs. Vilsons Particle Board Industries Ltd. and vice versa. We find the Tribunal in ITA No.447/PN/2013, ITA Nos. 309 & 310/PN/2013 and ITA Nos. 448 & 449/PN/2013 vide order 72 ITA Nos.915 to 920/PUN/2012 dated 21-12-2016 after considering the decision of Hon'ble Supreme Court in the case of Rajesh Kumar and others (supra) and various other decisions has held that where no show cause notice was given to the assessee before making the order proposing conduct of special audit u/s.142(2A) of the Act and such opportunity was given only by the CIT before approval for such special audit, such assessment is vitiated because of non-compliance of principle of natural justice. Hence the limitation for conclusion of assessment cannot be extended for such illegal order u/s.142(2A). The relevant observation of the Tribunal from para 40 onwards of the order read as under :
"40. The question which arises for adjudication before us is that in the present set of facts, where the Assessing Officer before sending a proposal for conducting special audit under section 142(2A) of the Act has not given an opportunity of being heard to the assessee and in view of the proviso to section 142(2A) of the Act, is the said proposal made without affording pre-decisional hearing to the assessee valid and can the proceedings conducted thereafter be held to be vitiated in law. The Hon'ble Supreme Court in Three Judge decision in Sahara India (Firm) Vs. CIT and Another (supra) had decided the issue of show cause notice to be given on pre- decisional stage and post-decisional stage of starting the proceedings under section 142(2A) of the Act and had also referred to the earlier decision of Apex Court in Rajesh Kumar and Others Vs. DCIT (supra). The principles laid down by the Hon'ble Supreme Court are that the principle of audi alteram partem cannot be ignored even at the stage of pre-decisional hearing. In other words, in case the Assessing Officer is of the view that having regard to the nature and complexity of the accounts and interests of revenue, it is necessary to get the accounts audited by an accountant, with previous approval of Principal Chief Commissioner, then he can do so. However, the proviso inserted by the Finance Act, 2007 w.e.f. 01.06.2007 has very categorically provided that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given an opportunity of being heard. In other words, the principles of natural justice that a person could not be condemned unheard, have been incorporated in section itself w.e.f. 01.06.2007. The Apex Court in Rajesh Kumar and Others Vs. DCIT (supra) had deliberated on the provisions of the Act before insertion of said proviso but had laid down the proposition that nobody could be unheard even at the stage of forming an opinion that in view of the nature and complexity of accounts and interest of revenue, special audit is to be conducted under section 142(2A) of the Act. The Apex Court in Sahara India (Firm) Vs. CIT and Another (supra) have upheld the said proposition laid down by the Hon'ble Supreme Court and has also taken note of the amendment w.e.f.
01.06.2007 and have held that the principles of natural justice have to be fulfilled even at the pre-decisional stage. In conclusion, the 73 ITA Nos.915 to 920/PUN/2012 Apex Court directed that the said proposition would be applicable prospectively. The case of the assessee before us relates to the period which is prospective to the decision of the Apex Court and is also after insertion by the Finance Act, 2007 w.e.f. 01.06.2007. Reasonable opportunity of being heard on pre-decisional stage to be allowed by the Assessing Officer to the assessee was on Statute when the proceedings were taken up against the assessee. However, as the facts reveal before submitting the proposal dated 11.09.2008 for conducting special audit under section 142(2A) of the Act to the CIT(C), no opportunity of hearing was given to the assessee. The requirement of the Act is that the Assessing Officer has to give finding that there is complexity of accounts and the interests of revenue would be affected, and in such circumstances, show cause notice needs to be given to the assessee to explain its case. Where the assessee was able to explain the nature of entries and also justify that the same are not complex, then there is no need to put the assessee to such hardship of conducting special audit. The Assessing Officer having failed to give any opportunity of hearing to the assessee before making the proposal for conducting special audit under section 142(2A) of the Act at the pre-decisional stage, then such proposal made by the Assessing Officer to the CIT(C), Pune is against the principles of natural justice and suffers from infirmity. The case of Revenue before us is that the CIT(C), Pune before passing his order of giving permission to the Assessing Officer to ask the assessee to get the special audit conducted had given fair opportunity of hearing to the assessee. The role of CIT(C) is the role of approving authority. The role is not that of adjudicating authority which had to be carried out by the Assessing Officer. The adjudicating authority in the present set of facts has failed to give any opportunity to the assessee before making proposal for special audit and the opportunity allowed by the approving authority, who in any case is enshrined with the duties of checking whether there is no arbitrariness in functioning of adjudicating authority, has to be satisfied before giving approval. Hence, the opportunity allowed by the CIT(C), Pune after proposal was made by the adjudicating authority does not absolve the non-allowance of reasonable opportunity of hearing by the Assessing Officer.
41. Applying the principles laid down by the Apex Court in Sahara India (Firm) Vs. CIT and Another (supra), we hold that where no show cause notice was given to the assessee before making the order proposing conduct of special audit under section 142(2A) of the Act, in the present case and the CIT having approved the said proposal though after giving opportunity of hearing to the assessee is vitiated because of non-compliance with the principles of natural justice. Accordingly, the assessment order passed in the facts of present case is beyond the period of limitation and hence, the same is invalid and bad in law.
42. Another point raised by both the authorities was in respect of extension granted. We are not going into the said factual aspects, in view of our holding that the initial order at the pre-decisional stage passed by the Assessing Officer without show causing the assessee as to whether any special audit should be conducted in his case under section 142(2A) of the Act is bad in law. Hence, consequential orders of extension, if any become of no consequence. Since, we have decided the jurisdictional issue on merits, the other grounds of appeal becomes academic."
74
ITA Nos.915 to 920/PUN/2012
119. Since in the instant case the Assessing Officer has not given any opportunity of being heard to the assessee before directing him to get its accounts audited u/s.142(2A) and such opportunity was granted only by the CIT, therefore, the limitation for completion of assessment cannot be extended in view of said illegal order passed u/s.142(2A). Since the assessment in the instant case was getting time barred under second proviso to section 153(2) on 31-12-2007 and since the Assessing Officer has passed the order on 08-08-2008, therefore, the assessment order passed u/s.143(3)/147 for the impugned A.Y. 2000-2001 is barred by limitation and accordingly the same is void and illegal. Ground of appeal No.2 for A.Y. 2000-2001 by the assessee is accordingly allowed.
120. Since the assessee succeeds on this technical ground, the other grounds for A.Y. 2000-20001 have become academic in nature and therefore do not require adjudication. The appeal filed by the assessee for A.Y. 2000-2001 is accordingly allowed.
121. The next issue that is common for all the years is Ground of appeal No.3. The Ld. Counsel for the assessee submitted that this ground for all the years is general in nature. Accordingly, the same need not be adjudicated.
122. So far as Ground of appeal No.4 is concerned which is common for all the years, the same relates to denial of exemption u/s.10(23C)(vi) of the I.T. Act.
123. After hearing both the sides, we find from page 88 of the paper book No.1 that the CBDT vide order dated 09-03-2004 had granted approval u/s.10(23C)(vi) for A.Y. 1999-2000 to 2001-02 subject to certain conditions as mentioned therein. We find subsequently the DGIT (Investigation), Pune withdrew this exemption and the assessee filed a Writ Petition before the Hon'ble Bombay High Court on the ground that 75 ITA Nos.915 to 920/PUN/2012 the exemption granted by the CBDT cannot be withdrawn by the DGIT. We find the Hon'ble Bombay High Court in Writ Petition No.7708/2008 vide order dated 28-07-2009, copy of which is placed at pages 89 to 100 of the paper book No.1, allowed the writ petition filed by the assessee. Subsequently, the revenue approached the Hon'ble Supreme Court and the Hon'ble Supreme Court vide order dated 04-10-2010 dismissed the SLP filed by the revenue. Copy of order of Hon'ble Supreme Court is placed at page 102 of the paper book No.1. We find subsequently the CBDT vide order dated 30-01-2012, copy of which is placed at pages 103 to 106 of the paper book No.1, withdrew the exemption for A.Yrs. 1999-2000 to 2001-02. Although the assessee has filed a writ petition before the Hon'ble Bombay High Court, however, the same is pending as on date. Therefore, in absence of any approval u/s.10(23C)(vi) as on the date for the A.Yrs. 1999-2000 to 2001-02 and for subsequent assessment years we do not find any infirmity in the order of the CIT(A) in holding that the assessee trust is not entitled to exemption u/s.10(23C)(vi) of the I.T. Act. Accordingly, the ground raised by the assessee on this issue for all the years is dismissed.
124. Ground of appeal No.7 which is common for all the years relates to allowability of expenditure on World Peace Centre.
125. After hearing both the sides, we find the assessee has incurred various expenses on tour and travel of the trustees, officials, faculties of the trust for attending various seminars on World Peace activities abroad. Some of the seminars are arranged by the assessee trust also. According to the Assessing Officer this activity does not fall in the category of education for which the assessee trust was set up. It is also his allegation that the activity of World Peace Centre is not an educational activity. Further, the assessee has amended the trust deed 76 ITA Nos.915 to 920/PUN/2012 but has not intimated such amendment to the Assessing Officer. It is also the allegation of the Assessing Officer that expenditure incurred abroad for such activity is not an allowable expenditure. He accordingly denied the exemption u/s.11 of the I.T. Act to the trust. We find in appeal the Ld.CIT(A) upheld the action of the Assessing Officer.
126. It is the submission of the Ld. Counsel for the assessee that the object of World Peace Centre is very much a part of the educational object for which the assessee trust has been set up. Even if the object was not introduced separately still such activity could be a part of the objects of the assessee. It is also the submission of the Ld. Counsel for the assessee that since the assessee was not aware that amendment to the trust deed was required to be intimated to the Assessing Officer, the assessee did not intimate the amendment to Assessing Officer. However, failure to intimate such amendment in the trust deed does not call for cancellation of the registration or denial of exemption. It is also his submission that expenditure on arranging the conference in Geneva does not mean that the expenditure is incurred abroad on the objects of the trust.
127. From the various details furnished by the assessee in the paper book we find the assessee has given the details of events with date and venue, speakers, subjects and the participants. We find the assessee in his letter addressed to the CIT (A) vide letter dated 28-01-2011 has given a note on the activities of World Peace Centre stating that the activities of Vishwa Shanti Kendra and World Peace Centre are educational in nature. The relevant portion of the said letter reads as under :
77
ITA Nos.915 to 920/PUN/2012 IV. World Peace Centre (WPC) World Peace, Centre (WPC) of MAEER is an umbrella under which programmes are conducted which are common, to schools and colleges of' the Trust. The benefit of these programmes is also availed by the other educational institutions. As the education should include intellectual; moral and social instructions", the activities of WPC are designed to cover the requirements of 'standards and norms' set by AICTE/University· The activities of WPC have been recognised as educational by the Government of India/UNESCO, which have sanctioned grants for such programmes. The object of WPC is to promote the cause of protection of Human Rights, Culture of Peace and Democratic values through Value Based Education and Training to the students community including the students of the institutions run by the Trust and also the society at large.
V. World Peace University It is worth noting that world over there are a large number of institutions and universities conducting various programmes in Peace Studies and Peace Research, Human Rights Education in addition to the education and research programmes in the fields of Arts, Science, Commerce, Engineering, Medical Management, Social Studies etc. To name a few Peace Universities in the world :
(a) World Peace Research University - Medical World Peace Research University - Faculties - Philosophy, Medical Sciences, Music, Musicology, etc.
(b) World Peace University, Costa Rica, USA - Under the UNESCO programme
(c) United Nations Peace University, Sri Lankta
(d) University of World Peace, Washington
(e) European International University for World Peace
(f) Global Open University for World Peace, Italy
(g) Berkley Center for Religion, Peace and World Affairs
(h) Rotary World Peace Fellowship
(i) International Peace University, South Africa The Trust has submitted a proposal to University Grants Commission (UGC), New Delhi for the establishment of MAEER"s MIT World Peace University on the same lines. Approval from the UGC is awaited.78
ITA Nos.915 to 920/PUN/2012 VI. Activities of WPC are purely educational In this context, it has to be emphatically stated that the real education is one which makes a student socially relevant. For this purpose, his greater interface with the society is required and besides, the education should also develop the knowledge, skill and character of the students. It may also be stated in this context that the education in its true sense, must be so oriented, as to encourage human values, which go into making a good human being, a good human society and a good life. Otherwise our educational institutions would be producing only educated illiterates, without acquiring any moral, ethical and spiritual values."
128. From the copy of the scheme of financial assistance for strengthening education in human values formulated by Government of India, Ministry of Human Resources Development, Department of Secondary and Higher Secondary Education, copy of which is placed at pages 624 to 647 of paper book No.3 the condition for grant is given which the assessee trust has fulfilled. Similarly, the 11th plan guidelines for Human Rights Education issued by UGC, copy of which is placed at pages 648 to 658 of paper book No.3, gives the details of financial support for the activities for promotion of Human Rights Standards, Social Concerns and Human Development for Research, Teaching etc. The syllabus and sample questions on the subject of Human Rights and Duties issued by the UGC, copy of which is placed at pages 659 to 663 of paper book No.3 and the agreement between UNESCO and the assessee for establishing UNESCO Chair at World Peace Centre, copy of which is placed at pages 664 to 668 of paper book No.3 clearly show that the objects of World Peace Centre are educational in nature.
129. We find form the details furnished by the assessee in the paper book at pages 1100 of paper book No.5 and free English translation at page 1101 that in the minutes of State cabinet meeting dated 04-08- 2016 a decision was taken to give permission to the bill to establish the self-financed Dr. Vishwanath Karad MIT World Peace University, Pune. Similarly, Higher Education Department of Government of Andhra 79 ITA Nos.915 to 920/PUN/2012 Pradesh vide letter dated 23-11-2016 copy of which is placed at page1 1002 of paper book No.5 has accepted the proposal given by the Maharashtra Academy of Engineering and Educational Research to establish the proposed Greenfield Private University at Visakhapatnam. Although these documents are additional evidences filed by the Ld. Counsel for the assessee during the course of hearing, however, these evidences being Government documents of the recent past which were not available at the time of hearing of the appeal proceedings are admitted for which separate application is filed. These documents conclusively show that the activities of World Peace Centre is education in nature. From the various details furnished by the assessee in the paper book we find some of the seminars were even financed by the UGC. We, therefore, find merit in the submission of the Ld. Counsel for the assessee that the World Peace Studies conducted by the assessee constitute a part of education so far as the trust is concerned and the activities are charitable in nature. The Assessing Officer has not given a finding that the same is non charitable in nature. We find merit in the submission of Ld. Counsel for the assessee since this is the only programme abroad and has taken place in the very first year the trustees and faculty members went to attend the seminar at Geneva to educate themselves. Therefore, we do not find any merit in the objection of the Assessing Officer for denying the exemption on the ground that object of World Peace Centre is not education in nature.
130. So far as the objection of the Assessing Officer that the change in the objects in the trust deed was not intimated to the Assessing Officer, we find the same is not fatal for denying exemption u/s.11 or allowing the expenditure for objects of the trust. The Mumbai Bench of the Tribunal in the case of ITO Vs. Bhansali Trust reported in 155 ITD 736 has held that mere non intimation of amendments in trust deed to 80 ITA Nos.915 to 920/PUN/2012 department cannot ipso facto lead to cancellation of registration because statutory requirement of cancellation of registration contained in section 12AA(3) of the Act prescribe that cancellation of registration cannot be effectuated unless a case is made out that new objects do not fit with existing objects or that activities are ingenuine. The relevant observation of the Tribunal at para 7.4 of the order reads as under :
"7.4 In our considered opinion, a mere non-intimation of the amendments in the Trust Deed to the Department cannot ipso-facto lead to cancellation of registration because the statutory requirement of cancellation of registration contained in section 12AA(3) of the Act prescribe that the cancellation of registration cannot be effectuated unless a case is made out that the new objects do not fit-in with the existing objects (i.e. new objects are 'non- charitable' in nature) or that the activities are in-genuine. A pertinent question is as to whether, on facts, can such a finding be reached in the present case. For this purpose, we have perused the amendments to the Trust Deed made in 1975 and 1979, which have been tabulated by the Assessing Officer in the assessment order and a comparative chart has also been placed in the Paper Book filed before us at pages 52 to 53. A perusal of the same shows that in the original Trust Deed the objects of the assessee are in the sphere of education purpose, medical purpose and relief of poverty, etc. In the context of the objects of medical purpose and relief to poverty, the activities enumerated inter-alia, included:-
"aid and relief in kinds such as giving clothes, grains and free distribution of medicines or providing free medical aid."
Subsequently, in the 1975 amendment, the activities of aid or relief in kind has been supplemented by enabling providing of loan and relief in cash also."
131. We find the Bangalore Bench of the Tribunal in the case of Kripanidhi Educational Trust Vs. DIT (Exemption) reported in 139 ITD 228 has held that mere finding that the objects of Educational Trust have been amended without the consent of department would not be sufficient to exercise power u/s.12AA(3) without giving a finding that the assessee's objects are initially charitable.
132. The Hon'ble Madras High Court in the case of DIT Vs. Vallal M.D. Seshadri Trust reported in 79 CCH 443 has held that as far as amendment made to the trust deed is concerned, it is not the concern of 81 ITA Nos.915 to 920/PUN/2012 the assessing authority and only the civil court is empowered to decide the said issue and in any event that cannot be the reason for denying the charitable nature of the institution if it is otherwise charitable. They have further held that the term 'charitable' u/s.2(15) includes "education" which connotes the process of training and developing the knowledge, skill, mind and character of students by normal schooling.
133. In view of the above discussion, we hold that the objection of the Revenue that since the assessee has not intimated the department about the amendment of the trust deed, therefore, the expenditure incurred is not for the object of the trust is not correct.
134. Now coming to the objection of the Revenue that expenditure has been incurred abroad and therefore, the assessee is not entitled to claim such expenditure is concerned, we find the same is also not correct as per law.
135. We find the Mumbai Bench of the Tribunal in the case of Gem and Jewellery Export Promotion Council vs. ITO 68 ITD 95 while deciding somewhat similar issue has observed as under :
"32. In our considered view, the assessee deserves to succeed. It may be useful to reproduce section 11(1)(a).
"11(1)(a) Income derived from property held under Trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty-five per cent of the income from such property;"
33. A bare reading of the sub-section 11(1)(a) does not leave us in doubt that the requirement under section 11 is for application of income for purposes in India and it does not restrict the application of income within the territory of India. The charitable purpose for which the income should be applied for claiming exemption under section 11(1)(a) should be in India. In this case, it is not disputed that the Trade Delegation had been sent abroad for the benefit of the entire trade in India. The exports are made from India 82 ITA Nos.915 to 920/PUN/2012 and the purpose for sending the Delegation was to increase the possibilities of exports out of India. We accordingly hold that since the assessee has applied the income for charitable purposes in India, the mere fact that the expenditure has been incurred out of India, does not disqualify the expenditure from exemption under section 11(1)(a)."
136. In view of the above decision, the expenditure incurred abroad for World Peace Centre cannot be held as not for objects of the trust and consequently exemption u/s.11 cannot be denied. 136.1 Ground of appeal No.7 is accordingly allowed.
137. The next issue that is common for all the years is regarding grounds of appeal No.5, 6, 8 and 11 wherein the assessee has challenged the order of the CIT(A) in denying exemption u/s.11 for violation of provisions of section 13(1)(c) and further holding that the activity of the assessee is a commercial activity with a profit motive and it does not exist solely for charity and therefore not eligible for exemption u/s.10(23C)/11.
138. After hearing both the sides we find the CIT Central vide order dated 31-10-2007 passed u/s.12AA(3) cancelled the registration granted earlier to the assessee trust on the basis of the Ist survey conducted u/s.133A on 20-07-2005 and the second survey on 26-08-2005 during which it was found that the assessee trust was accepting donation and capitation fee for admission though prohibited under Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. We find the Tribunal in assessee's own case vide ITA No.1669/PN/2007 order dated 09-09-2009 restored the registration by observing as under :
"11.12 Based upon the facts of this case, we now sum up above discussion; the sine qua non for cancellation of registration are two conditions prescribed in s. 12AA(3) needs to be satisfied are :
(a) That activities of the trust/institution are not genuine.83
ITA Nos.915 to 920/PUN/2012
(b) That activities of the trust are not carried out in accordance with the objects of the trust/institution.
Thus the findings of the learned CIT has not to be only conceptual or contextual but should be within the four corners of law so that not surpassing the power, as listed above, granted in sub-s. (3) of s. 12AA. But unfortunately the fallacy is writ large as gathered on perusing the impugned order. We can hold that the CIT's approach for deciding the eligibility of registration of a trust should be different from the angle by which an assessment of an income is made by the AO. We are afraid about the ramification if we approve the action of learned CIT because in that case it may adversely affect the imparting of education especially when the Revenue has not made out a case that the very purpose for creation of the trust was defeated. Rather we wonder that what purpose does it serve to Revenue by cancelling a registration if the activities are in public interest because in case of any breach of the laws the same is subject to tax under ss. 11 and 12 of IT Act. These two provisions and few other provisions are competent enough to tackle firmly a defaulter of philanthropic application of income or funds of the trust. The other adverse side of cancellation is that on refusal of registration the entire receipts shall be subject to assessment without granting benefit of s. 11 and s. 12 of IT Act to assess income which do not form part of total income though the factual position could be that major part might have been devoted towards achieving the objects i.e., imparting education, as in this case, but the AO shall be automatically forbidden to grant advantage of exemption consequent upon the cancellation as is mandatory in statute; relevant section already reproduced ante. The outcome of the deliberation made in detail hereinabove is that percurian opinion is to debar the CIT to enter into the area of investigation of source of income and also application of income, so that the amount of correct exempt income be not prejudged.
11.13 The aspect of morality as touched by the learned CIT is appreciable. Every vigilant and law abiding citizen has to be fair in his conduct and should refrain from immoral activities. But existing blue laws are derived from the numerous extremely rigorous laws designed to regulate morals and conduct. These laws are enacted in such a fashion that if implemented correctly and efficiently then there is no scapegoat for an offender. We are tempted to write an idiomatic language due to the sensitivity of the issue, that a CIT cannot be allowed to hold a baton of morality in his hand to hit an immoral; but the statute has given him a flexible stick for inflicting tax on defaulter; that includes a trust or educational institution. The gist is that if the CIT had an information of some wrongful means of earning fees in the form of a donation or the information tells about excessive charging of fees; then the CIT in his rights can pass on the information to the concerned office bearers working under the Maharashtra Capitation Fees (Prohibition) Act. These authorities have enough power to deal with such nature of default, side by side the CIT is to limit his jurisdiction within the ambits of provisions of the Act and expected to give a finding on facts that either the objects are not for general public utility or not achieved as prescribed under law. However presently the situation is that the Revenue has not said about any immoral activity of the appellant or the collection of fees was by wrongful means; hence deregistration 84 ITA Nos.915 to 920/PUN/2012 sans our approval. Nevertheless the list of fifteen cases, as highlighted by learned CIT, lack desired positive finding as it was left blank on the excuse that even the other authorities could not lay their hands on alleged defaults so it was also difficult for the Revenue authorities to trace the correct position. While dealing with the facts ante, it was found that after exhaustive enquiry few instances; fifteen in numbers; were noticed by the Revenue authorities wherein it was alleged to be the infringement of Capitation Fee Act. But the irony is that in the same breath the learned CIT has accepted the stand of the assessee that it can charge five times the normal fees in case of admission in the defined management quota. Thereupon there was a circumvent in the approach of the learned CIT that the amount of donation be considered together with the fees to find out the violation of prohibition of Capitation Fee Act. But on facts that too did not stand the test of those provisions since admittedly did not exceed the prescribed limit.
11.14 Facts of this appeal are peculiar, as already discussed in above paras in detail and thereupon can comment that prima facie no case was made out by the learned CIT so as to even vaguely demonstrate that the activities of the appellant were not genuine or activity of imparting of education, for which the trust was created, were not carried out. Even the learned CIT has failed to establish that any part of the income/receipt of the trust was in any manner misutilized by the trustees for their personal benefit i.e., not in fulfillment of the object of the trust. Otherwise also there are three ways to look at this problem. One is, that the donations are raised but not utilized for achieving the objects i.e., towards imparting education; then such an institution must bear the consequence of cancellation of registration since ipso facto infringed s. 12AA(3) condition. Second aspect is, that though the donations received are meant to fulfill the objects but together with fees have infringed Anti Capitation Prohibition Act; then comes within the clutches of that Act but definitely not under s. 12AA(3) provisions. The third aspect is, that the donation plus fees do not exceed the prescribed limit of Anti Capitation Fee Act i.e., five times the normal fees; further that no evidence of misutilization other than the prescribed activity then no action can be suggested under s. 12AA(3). The assessee's case falls under the third category. With the result, totality of the circumstances thus warrants, in the light of the foregoing discussion, not to endorse the view of the learned CIT; consequence there upon reverse those findings. The order of cancellation of registration is hereby revoked. Grounds allowed."
139. Since the registration cancelled earlier has been restored by the Tribunal, therefore, the assessee is entitled to the exemption u/s.11 subject to fulfilment of other conditions
140. So far as the denial of exemption u/s.11 on the ground that the activity of the assessee is a commercial activity with profit motive and it 85 ITA Nos.915 to 920/PUN/2012 does not exists solely for charity for which it is not eligible for exemption u/s.10(23C)/11 is concerned we have already held that in absence of approval u/s.10(23C)(vi) the assessee is not entitled to exemption under section 10(23C). However, we have to see whether the assessee trust is eligible for exemption or not u/s.11 for accepting donation and whether the activities of the assessee trust are commercial activity with profit motive and whether it exists solely for charity or not.
141. We find the assessee trust has received certain donations towards building fund etc. which it claimed as exempt u/s.11(1)(d) as corpus donation. According to the Assessing Officer these donations are nothing but the capitation fees collected by the trust from students for granting admissions in various institutes of the trust. While holding so, the Assessing Officer relied upon the statements of parents of few students who have admitted to have given the donations for securing admissions in various institutes of the assessee trust. The Assessing Officer treated these donations as revenue receipts. The Assessing Officer further held that since the assessee is collecting donations for admissions it has violated The Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. Since the assessee is collecting huge donations in lieu of admissions the Assessing Officer held that the assessee trust exists for profit making activity and not for charity and therefore exemption is not allowable.
142. It is the submission of the Ld. Counsel for the assessee that all these donations are duly accounted for in the books of account. So far as donation of Rs.4 lakhs in A.Y. 2004-05 and Rs.1 lakh in A.Y. 2005-06 made by the Assessing Officer on account of non recording of the donations in the books of account are concerned it is the submission of the Ld. Counsel for the assessee that these donations being corpus 86 ITA Nos.915 to 920/PUN/2012 donations are credited to various funds in the balance sheet and are not routed through the income and expenditure account. It is also his submission that assessee has accepted donations which are duly incorporated in the books of account and it is not a case that the donations are not accounted for. Wherever the donors have given the donations for specific purposes like construction of buildings, purchase of equipment etc. such donations are capital receipt and exempt u/s.11(1)(d).
143. It is also the submission of the Ld. Counsel for the assessee that none of the donors or any student or parent or the Assessing Officer has complained to appropriate authority against the assessee for violation of Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. It is also the submission of the Ld. Counsel for the assessee that if total expenditure including capital expenditure is considered as a whole there is deficit every year. However, the assessee does not have any surplus so as to treat the assessee trust as running on commercial activity with profit motive.
144. We find merit in the above submission of the Ld. Counsel for the assessee. There is no dispute to the fact that the assessee is a charitable trust running various educational institutions. It is the allegation of the revenue that the trust is collecting capitation fee in the garb of donation and was therefore running with a profit motive. However, we find neither the Assessing Officer nor any of the persons who have stated before the department that they have given donation for getting admission has complained to the Government or appropriate authority for any such violation under the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. Nothing has been brought on record that any student has been denied admission for not 87 ITA Nos.915 to 920/PUN/2012 giving donation. Therefore, merely because some of the donors have stated that they have given donation for admission, which have been retracted later on, the same in our opinion will not dis-entitle the assessee trust from getting exemption which is existing solely for educational purposes.
145. The Hon'ble Bombay High Court in the case of CIT Vs. Institute of Banking reported in 264 ITR 110 has upheld the decision of the Tribunal in directing the Assessing Officer to allow depreciation on the assets the cost of which had been fully allowed as application of income u/s.11 in the past years. Going by the ratio of decision of Hon'ble Bombay High Court cited (supra) we find from the various details furnished by the assessee that if the capital expenditure and depreciation thereon is considered as an application, then the assessee has got deficit in each year under appeal and therefore it cannot be said that the trust is existing solely for profit.
146. Even if the assessee has taken donation for admission the same are under the Management Quota. As per the Government Circular dated 17-10-1994, copy of which is placed at page 1011 (free English translation copy at page 1012 of paper book No.5) we find the assessee is authorised to accept fee from the students admitted under the Management Quota to the extent of 5 times of annual fee. From the chart filed by the assessee giving the names of students who have taken admission by giving donation, copy of which is placed at page 1037 of paper book No.5 in case of 9 students during the period from 1999 to 2004 we find the donation nowhere exceeds 5 times of the annual fees. Therefore, we concur with the argument of the Ld. Counsel for the assessee that simply because the assessee trust has accepted donations from few students it does not mean that the 88 ITA Nos.915 to 920/PUN/2012 assessee trust exists for profit making activity and not for purposes of education. Since there are about 27000 students in various institutes of the assessee and AICTE, Pune University, Medical council of India, Director of Technical Education etc. have a control on the activities of the assessee trust, therefore, it cannot be held that assessee has violated any law or it exists as a profit making body. It is also a fact that the donations have been entered in the books of account and it is not the case of the Revenue that such donations have been siphoned off by the trustees or the relatives.
147. We find somewhat similar issue had come up before the Tribunal in the case of Deccan Education Society. We find the Tribunal vide ITA No.1480/PN/2014 order dated 13-07-2015 from Para 66 onwards has observed as under :
"66. The second question that arises for our consideration as to whether the trust is for profit motive. It is the allegation of the Revenue that the assessee trust was collecting the capitation fee in the garb of donation and was therefore running with a profit motive. We find the Assessing Officer has not reported the violation, if any, by the assessee trust to the Government of Maharashtra for taking any action for violation of The Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. None of the persons who have deposed against the assessee by stating that they had given donation for the purpose of getting admission has complained to the Government for any such violation by the society. It is also to be noted that those persons have filled up the requisite proforma stating that they have given donation to the assessee voluntarily and not for seeking admission. Even some of them claimed deduction u/s.80G, a fact stated by Ld. Counsel for the assessee and not controverted by the Ld. Departmental Representative. Therefore, changing the stands after their wards completed their education from the institutions run by the assessee trust are contradictory. Further, it is also a fact that all donations received by the assessee trust are recorded in the books of account. There is no allegation by the Revenue that any part of such donation has been siphoned off for the benefit of any of the trustees or related persons. Nothing has been brought on record that any student has been denied admission for not giving donation. Merely because some of the donors stated that they have given the donation for admission the same in our opinion will not disentitle the society from getting exemption which is existing solely for educational purposes and which is otherwise entitled to the exemption.89
ITA Nos.915 to 920/PUN/2012
67. We find a somewhat similar issue had come up before the Hon'ble Rajasthan High Court in the case of Chief CIT and Another Vs. Geetanjali University Trust reported in 352 ITR 433. In that case the assessee-trust, for the assessment year 2008-09, filed an application seeking exemption of its income under section 10(23C)(vi) of the Income-tax Act, 1961. After exchange of several letters between the assessee and the authorities whereby several queries were raised and answered, the application of the assessee trust was rejected on the ground that the assessee trust did not satisfy the essential conditions for exemption under section 10(23C). For the assessment year 2010-11 and onwards, the assessee was granted approval under section 10(23C)(vi). On a writ petition the single judge allowed the writ petition by setting aside the order passed by the Chief Commissioner under section 10(23C) and directed the authority to decide afresh the proceedings for the assessment year 2008-09 and onwards till the assessment year 2010-11 by passing afresh speaking order after affording opportunity of hearing to the assessee. On appeal the Hon'ble High Court held as under (Head Notes):
"Held, dismissing the appeal, that under section 10(23C)(vi) and (via), what is required for the purpose of seeking approval is that the university or mother educational institution should exist ''solely for educational purposes and not for purposes of profit". It was nowhere the case or the finding of the Chief Commissioner that on account of the defect in the admission procedure, assessee ceased to exist solely for educational purposes or it existed for the purposes of profit. Further, it was not the case of the Revenue that the students who were admitted were not imparted education in the college in which they were admitted or the admissions granted were fake or non-existent or that the income generated by admitting the students was not used for the purpose of the assessee. The emphasis on the part of the Chief Commissioner that the purpose of education would not be served if the education is for students who have been illegally admitted and the purpose of education as contemplated in the section would be served only if the students have been legally admitted and not otherwise, went beyond the requirements of the section. Of course, the requirement of an educational institution to provide admissions strictly in accordance with the prescribed rules, regulations and statute needs to be adhered to in letter and spirit, but violation could not lead to its losing the character as an entity existing solely for the purpose of education. Therefore, there, was no interference with the order of the single judge."
68. We find the Pune Bench of the Tribunal in the case of Shikshana Prasaraka Mandali Vs. CIT Central Pune vide ITA Nos.1348 and 1349/PN/2010 order dated 27-03-2014 (where one of us - Accountant Member is a party) while dealing with denial of registration u/s.12A for violation of The Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987 by accepting donations has observed as under :
"8. We have considered the rival arguments made by both the sides, perused the order of the Ld.CIT and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find there is no dispute to the fact that the assessee trust is more than 100 years old and it runs more than 60 educational institutions imparting education to more than 70000 90 ITA Nos.915 to 920/PUN/2012 students in various fields. The trust was granted registration earlier u/s.12A. However, the Ld.CIT cancelled the registration granted earlier on the ground that the objects of the assessee trust are not genuine since the assessee trust is collecting huge donation from students for admission to the various institutes run by it in violation of the Maharashtra Educational Institutions (Prohibition of Capitation Fe) Act, 1987. The collection of such donations according to him is illegal and therefore the activities of the said society are not genuine. He further observed that the institutes are being run on commercial lines with profit motive. He also held that the assessee trust has violated provisions of section 11(5) r.w.s. 13(1)(d) by investing in shares of cooperative banks.
8.1 ...................
..........................
8.2 ...................
..........................
8.3 Now coming to the first issue on which the Ld.CIT has cancelled the registration u/s.12A, i.e. the assessee society is collecting huge donation from students for admission to various institutes which is in clear violation of the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987, we find there is no such complain before the Government of Maharashtra or AICTE or any other Government Department either by the Income Tax Department or by any of the student/parents stating that the assessee society has charged Capitation fee for giving admission which is in violation of the Maharashtra Educational Institutions (Prohibition of Capitation Fee Act) 1987. Even the CIT who is alleging that the assessee trust has collected huge donation for admission of students to various institutes run by it has not informed the Government of Maharashtra if he was serious about any such violation done by the society. The submission of the Ld. Counsel for the assessee that as against 70 Management Quota Seats it has collected donation from 9 students and such donation is within the permissible limit prescribed by the Government of Maharashtra and that all such receipts are reflected in the accounts could not be controverted by the Ld. Departmental Representative.
8.4. . . . . . . . . . . . .
8.5 . . . . . . . . . . . .
8.6 . . . . . . . . . . . .
8.7 We find the Hon'ble Delhi High Court in the case of Shanti Devi Progressive Education Society (Supra) has observed as under :
"26. We have considered all these opinions as well as the submissions made by learned counsel for the parties. We must at the inception itself note that the three components scrutinized by the Assessing Officer are the Admission Fee, Corpus Fund and the Loans taken from parents. Thus it really can't be disputed that even the source of funds is relatable to the activity of education. It may be noticed that there are factual findings on the loans having been availed of by the assessee from a nationalized bank for the purpose of creating additional infrastructure/schools and the three sets of amounts have been addressed only towards the object of creating additional infrastructure and easing the liability of the assessee 91 ITA Nos.915 to 920/PUN/2012 towards the interest burden of loan repayment. What is pertinent to be taken note of is that there is no finding or allegation of any diversion of these funds for the purpose other than carrying on educational activity. There is no diversion of funds to the individual members or taking away of profits for some other activity. It does appear to us that the Assessing Authority appears to have been weighed down by the factum of some questions being raised in the Parliament about the manner of collection of funds by the institutions. That alone, would not suffice to deny the exemption under Section 10(22) of the IT Act. There is in fact no material to show or a complaint that there has even been any coercive process to recover these amounts.
27. It cannot be lost sight of that if an institution has to expand, additional infrastructure has to be created, quality education has to be imparted, all these activities require funds. There may be an original corpus of the Society but thereafter the corpus for such activity can be created only through voluntary donations either from any philanthropist or through collection of funds in the process of admission. We are not concerned with the morality of the issue while deciding whether exemption has to be granted. Personal prejudices seem to have stepped in when allegations were made without any material against certain members (which have rightly been struck off by the majority opinion of Tribunal) alleging that these members were well known for making profit through educational institutions. We also fail to appreciate the doubts cast or the possibilities expressed about there being something more to it in view of the funds being deposited in private banks. The opinion is completely based on surmises and conjectures as it seems to suggest that merely because funds were in a private bank, there may have been divergence of funds to the members of the Society. Similarly, the factum of construction being carried out by Ahluwalia Construction Co. (P) Ltd., stated to be a family concern of the President, was not material as there was no allegation of any inflated cost of construction or unreasonable profits being derived from the same by third parties as a mode of divergence of funds."
8.8 We find the Pune Bench of the Tribunal in the case of Dr. D.Y. Patil Education society (Supra) has observed as under :
"13. Though the assessee has denied receipt of capitation fee/donations and running on commercial lines, however, without going into the merits of such plea, the pertinent question is the consequences of acceptance of capitation fee/donations by the assessee at the stage of examining assessee's application for registration under section 12AA of the Act. Somewhat similar situation arose 10 before the Mumbai Bench of the Tribunal in the case of Ramarao Adik Education Society (supra) wherein the Commissioner of income-tax was considering cancellation of registration on the basis of the plea that the assessee was accepting capitation fee/donations. Following discussion by our co-ordinate Bench is relevant:
"48. Now the question is the legal consequence of the assessee accepting capitation fees / donations from students seeking admission to various courses offered by the Institutions run by the 92 ITA Nos.915 to 920/PUN/2012 Assessee-Trust. Even in the matter of capitation fees / donations, the Commissioner of Income Tax has no case that the funds collected by the Assessee- Trust through capitation fees / donations have been used for the purposes other than running the Institutions managed by the Assessee Trust. It is to be seen that all the Institutions run and managed by the Assessee Trust are carrying on the activities envisaged in the Memorandum of Association the Assessee-Trust. It is stated by the Commissioner in his order itself that the moneys collected by the Assessee-Trust by way of capitation fees / donations are used for the purpose of not only by the Assessee-Trust but also for other Institutions of similar nature It is to be seen that application of funds for the charitable activities of another eligible Institution amounts to application of funds for charitable purposes. The law has made it very clear that the charitable activities may be carried out directly by an eligible Institution or through another eligible Institution for that matter. Therefore, those observations of the Commissioner stated to be adverse to the Assessee-Trust are not in fact prejudicial to the case of the Assessee-Trust.
49. The Karnataka High Court in the case of Sanjeevamma Hanumanthe Gowda Charitable Trust Vs. Director of Income Tax (Exemption) [285 ITR 327] has considered that in matters of registration and exemption of Charitable Institutions, the satisfaction of the Commissioner should be regarding the application of the income of the trust for the specified purposes, which only entitles the assessee to claim exemption. The Court observed that for arriving at such satisfaction primarily he has to look at the object of the trust, when the same is reduced into writing in the form of trust deed. If on the date of the application the trust has received income from its property, then find out how the said income has been expended, and whether it can be said that the income is utilized towards charitable and religious purposes. Therefore, for the purposes of registration u/s. 12AA of the Act, what the authorities have to satisfy is the genuineness of the activities of the trust or institution and how the income derived from the trust property is applied to charitable or religious purposes and not the nature of the activity by which the income was derived to the trust.
50. The above judgment proposes that what is to be looked into is the character of application of funds and the character of the activities carried out by an assessee and not the colour and nature of the sources out of which necessary funds were collected by the assessee. In other words, the source of funds is not an important ingredient in assessing the character of the activities carried on by a Charitable Institution. The Allahabad High Court in the case of CIT Vs. Red Rose School [163 Taxmann 19] has held that educational activities carried on by a Society are for charitable purposes and not against the public policy. Therefore, the activities carried on by the Assessee-Society in the present case cannot in any way held as opposed to public policy. The objection expressed by the Commissioner could at a maximum be attributed to the question of accepting capitation fees / donations. In this context, the Commissioner-DR has raised a contention that the donations received by the Assessee-Trust are not voluntary and that fact also should be contributed to justify the cancellation of the 93 ITA Nos.915 to 920/PUN/2012 registration." On the basis of the aforesaid decision of the Tribunal, which has been rendered after considering the judgments of the Hon'ble Karnataka High Court in the case 11 of Sanjevamma Hanumanthe Gowda Charitable Trust (supra) and that of the Allahabad High Court in the case of CIT v Red Rose School 163 Taxmann 19 (AIL), it is quite clear that the objection raised by the Commissioner with regard to the receipt of capitation fee/donations are factors to be considered at the time of assessments while examining the eligibility of the assessee trust for the benefit of section 11 & 12 and the same do not come into play in the course of the examination by the Commissioner for the purposes of grant of registration under section 12AA of the Act.
14. In view of the aforesaid discussion, in our considered opinion, the Commissioner has examined the application of the assessee on irrelevant considerations which were beyond the scope of enquiry envisaged under section 12AA of the Act. We, therefore, deem it fit and proper to set aside the order of the Commissioner and restore the matter back to his file to be examined afresh strictly in terms of the scope of the enquiry envisaged under section 12AA(1) of the Act."
8.9 We find the Pune Bench of the Tribunal in the case of Maharashtra Academy of Engineering & Educational Research (MAEER) Vs. CIT reported in (2010) 133 TTJ (Pune) 706 while adjudicating cancellation of registration u/s.12AA for taking donation and capitation fee has observed as under :
"(VI) Conclusion :
11. In the recent past the question of interpretation of newly inserted s. 12AA (w.e.f. 1st April, 1997) has always been perennial teaser not only to the trust or institutions but also to the Revenue Department as also faced by the judiciary. To get the answer we have heard both the sides at length, carefully perused the impugned order and also several correspondences filed in the compilation in the light of the case laws cited.
11.1 The law now introduced is to streamline the "Procedure for registration" and by saying so we do not want to enter into the controversy whether the applicability of s. 12AA(3) was retrospective or prospective in nature. Rather we can make an observation that this issue stood answered by Co-ordinate Benches.
We want to express that earlier to this section there was no guidelines in the statute for refusal of registration, therefore it was considered eminent to introduce in the statute the said procedure. What bothered the Tribunals and High Courts in the recent past is the scope and the purpose of introduction of s. 12AA in the statute. All those judgments as listed above, in agreement have said that the activities ought to be in fulfilment of the objects for which a trust is created. Sentiments should be in line with the purpose for which the trust is created. The purpose should be philanthropic, charitable, or for public general utility. Service without profit has to be the motive. As in the present case the objects are to undertake, to run and to improve the educational institution for imparting education in divergent fields; deliberated upon ante. 94
ITA Nos.915 to 920/PUN/2012 11.2 In any case we have to examine the purpose of enactment of ss. 12A, 12AA and 12AA(3), viz-a-viz ss. 11 and 12.
While reading several case laws as cited supra an important point of view of the Hon'ble Courts have come to our notice that mere registration under s. 12AA would not by itself be a ground for exclusion of such an income from the total income of a trust. To our understanding, also acknowledged in the precedents; the provisions of s. 12AA prescribes conditions for registration of a trust and therefore in the absence of registration disentitles any trust from claiming any benefit of the provisions of s. 11 and s. 12 of the Act in relation to its income. Therefore the conclusion is that s. 12AA prescribes certain conditions for the registration of a trust and thereupon obligates a trust or an institution to seek, rather obtain, a registration under s. 12AA if such trust intends to have the benefits of the exemption as prescribed under ss. 11 and 12 of the Act. It is not the other way round that the benefit of ss. 11 and 12 shall be automatic once the registration is granted. Thus the outcome is that these provisions make it clear that if the trust is not registered under s. 12AA it would not be able to claim any exemption or exclusion of its income from the total income of the previous year, even if such income is otherwise liable for exclusion under any of the clauses of s. 11 and s. 12 of the Act.
11.3 On due consideration of the rival arguments we can summarise the section of the Act governing the issue in hand. The purpose of framing the "Conditions for applicability of ss. 11 and 12" i.e., s. 12A and framing the rules of "Procedure for registration" i.e., s. 12AA is basically meant to open the door to a trust to enter into the framework of the provisions of the statute, in a way; an entitlement to enter into a room where the eligibility of exemptions is kept for adjudication. Thus in a case of refusal of registration, the trust would even not be allowed to enter the room to seek a claim of such exclusion of a receipt from the total income. In simple words; in case of no registration a trust is debarred by law to claim exemption. This is the first step to climb to the level where the exemptions are placed. At this first step the CIT is conferred with the powers to call for such documents and information in order to satisfy himself about the genuineness of the activities and also to enquire that those genuine activities are as per the objects of the trust for which it is seeking registration. The objects and activities should be philanthropic and not against the public interest must be for the benefit at large instead for the benefit of particular individual or group of individuals.
11.4 In the recent past sub-s. (3) was inserted in s. 12AA w.e.f. 1st Oct., 2004 which gives power of cancellation of registration to the CIT, if he finds that the activities are not genuine or not being carried out in accordance with the object of the trust. The need for the enactment had arisen due to belief of some quarter that in the absence of explicit law the CIT cannot exercise the power of cancellation of registration. To overcome this hurdle this sub- section is incorporated and now in operation. Naturally these powers are conferred with a view to ensure that if once a registration has been granted under s. 12AA, a trust or institution may not take any such liberty of misuse of the registration or the provisions by going haywire rather furthering the objects of the 95 ITA Nos.915 to 920/PUN/2012 trust or genuinely not pursuing the activities for which it was established.
11.5 Considering the arguments and the facts of this case we have noted that the most important feature of s. 12AA is, as also referred to us in this appeal for our adjudication, that this section has only laid down the procedure of registration and this section nowhere speaks that while considering the application of registration, the CIT shall also look into the procedure of earning of income and sources from where receipts are derived. The argument was, it also does not speak anywhere that while considering the registration the CIT shall also see the manner in which the receipts or the income is being spent by the trust. To our humble understanding of various related provisions, the power of enquiry, in respect of sources of receipts and the utilization of income is entrusted in separate sections as already discussed ante. The language thus used in this section only confines to enquire about the activities of the trust and its genuineness, which means, in consonance with the objects for which created and those objects as also activities should not be a camouflage but pure, sincere, charitable and for public utility at large. What is implicit is that the CIT has to sincerely examine that the objects as also the activities should not be prima facie against the basic structure for which beneficial law is made and also be not in conflict with the general public utility. Naturally an institution if established to carry out an illegal activity or activities are causing any type of nuisance not in the interest of the public at large should definitely lead to cancellation of registration. Therefore, this is the first requisite of the statute to mandate for the registration and in the absence of such registration disentitlement of exemption. So what is explicit is that though an institution may be doing charitable activities as prescribed but in the absence of registration cannot be entitled for the exemptions or benefits of ss. 11 and 12 of the Act. It is also explicit that registration ipso facto does not necessarily entitle an institution to get the receipts excluded from the income or exemption be granted automatically by just showing the registration certificate to the Revenue authorities. In no way the registration certificate is a license to do any type of activity and to get away from the ambits of the tax. An institution has to follow the norms as laid down in other related sections for availing prescribed benefits. 11.6 Procedure of registration is a first step and a preliminary stage where the CIT shall restrict the enquiries as to whether the trust is actually and whole heartedly performing all the duties and activities for which it was created. On careful reading of this section it was gathered that at this initial stage there is no scope of any apprehension of misutilization of funds or to judge the taxability income. The scheme of the Act otherwise does not subscribe and allow a trust to take the benefit of the provisions of ss. 11 and 12 unless it establishes the prescribed utilization of the income, even if, at all the trust holds the registration in its hands. Therefore at the stage of granting registration the CIT is not expected to bother himself about the other provisions of the Act and supposed to confine himself to the procedure of registration as laid down therein. For this view, we draw support from the order of the respected Co-ordinate Bench Tribunal, New Delhi pronounced in the case of Aggarwal Mitra Mandal Trust vs. Director of IT (Exemption) (supra), a portion reproduced below (p. 186 of paper book) : 96
ITA Nos.915 to 920/PUN/2012 "............In this situation, if the registration applied for under s. 12A is not granted to it for violation of the provisions of s. 13(l)(b) and it is ultimately found that the assessee-trust actually accomplished the objects as indicated in clause No. 3(4) only for the benefit of public at large without there being any activity undertaken as per object clause Nos. 3(1) and 3(2), it would be deprived of any benefits which otherwise were available to it under s. 11 or s. 12. This certainly is not the legislative intention as reflected in the scheme laid down in ss. 11, 12, 12A, 12AA and 13. On the contrary, the phraseology of s. 13, as already discussed, makes it explicitly clear that the said provisions become operative or relevant only at the stage of assessment when the AO is required to examine the claim of the assessee for benefits under s. 11 or s. 12 while computing the total income of the assessee of the relevant previous year. The application of s. 13 thus falls within the exclusive domain of the AO and the provisions contained therein can be invoked by him while framing the assessment and not by the CIT while considering the application for registration under s. 12AA."
11.7 An another feature of the impugned order of the learned CIT is in fact bothering us that nowhere he has taken any objection to the charitable and educational nature of the institution. In fact, the objects of the institution as declared in the trust deed, which are extracted earlier, does reflect that all are philanthropic or benevolent in nature, precisely for the purpose of imparting education. Strange enough there is no finding recorded by the learned CIT contrary to this fact. Be that as it may, the real and the only substantial objection for refusal of registration was that the institution has collected donations thus adopted some wrong means of collection of fees. But whether at this preliminary stage he had the right to draw an adverse inference so as to refuse registration or alternatively confine himself to the enquiry about the objects and the activities of the trust as per the limits of the jurisdiction of s.
12AA of the Act. Rather this is also not the case of the learned CIT that the institution is doing some other activity of earning profit other than the activity of running educational institutions. The established factual position is that the institution is not doing in any other activity except running educational institutions. In such circumstances, can we uphold the action of cancellation of registration ? Answer is obvious no.
11.8 While reading the precedents cited from the side of the appellant we come across a decision of a respected Co-ordinate Bench Tribunal, Kolkata pronounced in the case of Kalinga Institute of Industrial Technology (supra) and have found that almost on identical situation, as in the present appeal, it was held that consequence upon a search while the assessment proceedings are pending a cancellation of registration by invoking s. 12AA(3) is a premature action on the part of CIT, because it is expected from him to take precaution to let the assessment get completed, if possible expeditiously, instead of rushing to cancel the registration which shall effect and interrupt the other proceedings under the Act and so prematurely punish a person without judicious hearing as prescribed by the statute. Held portion is worth reproduction as did in para (xii) p. 35 ante.
97
ITA Nos.915 to 920/PUN/2012 11.9 We have also gone through a decision referred from the side of the Revenue namely the Jammu & Kashmir Bank Priority Sector Asset Risk Fund vs. CIT (ITA No. 61/Asr/2006 order dt. 1st Sept., 2006) (supra); cited in support of the argument that firstly the CIT has been vested with the powers vide s. 12AA(3), inserted w.e.f. 1st Oct., 2004, to enquire about the genuineness of the activities of a trust and to satisfy himself that such activities are being carried out in accordance with the objects of the trust. Secondly in case of dissatisfaction he is empowered to cancel the already granted registration. Thirdly in case it is found that the activities are not in conformity with the object that too is the good reason for cancellation of registration. Fourthly the sweep of the section is wide enough to empower the CIT to examine the nature of the object whether for general public utility and philanthropic in nature. In our conscientious view there is no disagreement about the above- mentioned four legal proposition as eruditely laid down by the respected Amritsar Bench. Undisputedly we have also to decide this appeal more or less within these parameters. But the basic question is that before stepping towards the cancellation of registration the heavy burden is on the learned CIT to conclusively demonstrate that all had gone haywire i.e., objects are meant for personal benefits; that engaged in immoral activities or that there is no element of public benefit. In the present appeal none of the above criteria for rejection of registration was in existence, however mainly confined to the finding that by charging donation the trust has infringed the rules of Prohibition of Capitation Fee Act.
11.10 Before we part with it is worth to cite an another latest decision pronounced by respected Co-ordinate Bench of Chandigarh in the case of Himachal Pradesh Environment Protection and Pollution Control Board vs. CIT (ITA No. 74/Chd/2009) [reported at (2009) 125 TTJ (Chd) 98 : (2009) 28 DTR (Chd)(Trib) 289--Ed.] wherein the worth noting observations were as follows :
"17. On a perusal of these objectives, as sanctioned by the statute, it is obvious that the activities performed by the assessee trust are regulatory functions for the public good, and any collection for fees or charges, in the course of discharging these regulatory functions, cannot be viewed as a consideration of rendering these services of pollution control measures. We are unable to see any substance in learned CIT's stand that the income earned by assessee as licence fees, consent fees and testing charges are receipts in consideration of rendering the services to trade, commerce or business. What is termed as consent fees is in fact fees accompanying the application for obtaining consent (i.e., permission) of the assessee Board to set up a new unit. It cannot be anybody's case that the processing of applications by itself has s commercial motive, or that fees for processing of applications is a fees collected for rendering of service of pollution control which is undisputed sole object of the assessee trust. Similarly, fees for testing charges and licence fees are not also towards rendering of any services of pollution control either. These are not the services with a profit motive but essentially only to recoup the cost of getting the samples tested or processing of licences. In any event, these activities, if these can be at all be construed as rendering of services, these are wholly subservient to the public utility objective of pollution control, and, it cannot be anyone's case that even though the State Pollution Boards like the assessee before us are set up under an Act of the Parliament, but, to 98 ITA Nos.915 to 920/PUN/2012 use the words employed in the CBDT circular (supra) 'the object of' general public utility' will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business'.
19. In any event, as a plain reading of s. 12AA(3) would indicate that a registration granted under s. 12AA can only be withdrawn when the CIT is satisfied that (a) the activities of the trust or the institution are not 'genuine'; or (b) the activities of the assessee are not being carried out in accordance with the objects of the trust or the institution. There cannot be any other legally sustainable reason for cancelling or withdrawing the registration granted under s. 12AA. By no stretch of logic, the activities of the assessee can be said to be not genuine and the assessee is admittedly pursuing the objects for which it was established. When the assessee is engaged in bona fide activities, with the framework of law, to pursue its objectives, it cannot be said that the activities of the assessee are not genuine. Learned CIT has also not brought on record any material to demonstrate activities of the assessee are not being carried out in accordance with the objects of the trust or the institution. Under these circumstances, the withdrawal of registration granted under s. 12AA cannot be sustained in law. Learned CIT has extensively referred to as to why the assessee is not eligible for exemption under s. 11 as the activities of the assessee cannot be said to be for 'charitable purposes' defined under s. 2(15), but then this aspect of the matter is relevant for the assessment proceedings and not in the context of exercise of CIT's powers under s. 12AA(3). The impugned order passed by the learned CIT is thus vitiated in law on this count as well.
20. For the detailed reasons set out above, we quash the order of the learned CIT and hold that the learned CIT did not have any good reasons, sustainable in law, to withdraw the registration. The impugned order is accordingly set aside."
On reading the above verdict it is gathered that if the objects as permissible in the eyes of law are carried out legally and the object of advancement of education as also the object of general public utility are carried out with due sincerity then the claim of registration is within the ambiguity of s. 12A of the Act. 11.11 As far as the objective of the appellant is concerned this is not the case of the Revenue that the assessee was not imparting education. As we know the term education means to teach subjects to students for the development of his mind and also to equip students to deal with reality. The training process is either theoretical or practical but student has to be taught the essentials of the selected subjects so as to develop his skill and knowledge for the subjects studied by him. The appellant institute, admittedly, fulfils the requirements of imparting formal education by a systematic teaching and instructions. Since the question about the imparting of education has not been doubted or challenged by the Revenue therefore. In our considered opinion the impugned order passed by the respondent is unsustainable in law. Strange enough there is nothing on record to prove sightlessly that the purpose of imparting of education was not fulfilled by this institute thus the Revenue 99 ITA Nos.915 to 920/PUN/2012 Department has hopelessly failed to establish that there was any illegal activity or infringement of any law so that to doubt the genuineness of the activities. If it was so then it can be held that the allegations of the Revenue as discussed above, remained unsupported thus deserves our dismissal.
11.12 Based upon the facts of this case, we now sum up above discussion; the sine qua non for cancellation of registration are two conditions prescribed in s. 12AA(3) needs to be satisfied are :
(a) That activities of the trust/institution are not genuine.
(b) That activities of the trust are not carried out in accordance with the objects of the trust/institution.
Thus the findings of the learned CIT has not to be only conceptual or contextual but should be within the four corners of law so that not surpassing the power, as listed above, granted in sub-s. (3) of s. 12AA. But unfortunately the fallacy is writ large as gathered on perusing the impugned order. We can hold that the CIT's approach for deciding the eligibility of registration of a trust should be different from the angle by which an assessment of an income is made by the AO. We are afraid about the ramification if we approve the action of learned CIT because in that case it may adversely affect the imparting of education especially when the Revenue has not made out a case that the very purpose for creation of the trust was defeated. Rather we wonder that what purpose does it serve to Revenue by cancelling a registration if the activities are in public interest because in case of any breach of the laws the same is subject to tax under ss. 11 and 12 of IT Act. These two provisions and few other provisions are competent enough to tackle firmly a defaulter of philanthropic application of income or funds of the trust. The other adverse side of cancellation is that on refusal of registration the entire receipts shall be subject to assessment without granting benefit of s. 11 and s. 12 of IT Act to assess income which do not form part of total income though the factual position could be that major part might have been devoted towards achieving the objects i.e., imparting education, as in this case, but the AO shall be automatically forbidden to grant advantage of exemption consequent upon the cancellation as is mandatory in statute; relevant section already reproduced ante. The outcome of the deliberation made in detail hereinabove is that percurian opinion is to debar the CIT to enter into the area of investigation of source of income and also application of income, so that the amount of correct exempt income be not prejudged.
11.13 The aspect of morality as touched by the learned CIT is appreciable. Every vigilant and law abiding citizen has to be fair in his conduct and should refrain from immoral activities. But existing blue laws are derived from the numerous extremely rigorous laws designed to regulate morals and conduct. These laws are enacted in such a fashion that if implemented correctly and efficiently then there is no scapegoat for an offender. We are tempted to write an idiomatic language due to the sensitivity of the issue, that a CIT cannot be allowed to hold a baton of morality in his hand to hit an immoral; but the statute has given him a flexible stick for inflicting tax on defaulter; that includes a trust or educational institution. The gist is that if the CIT had an information of some wrongful means of 100 ITA Nos.915 to 920/PUN/2012 earning fees in the form of a donation or the information tells about excessive charging of fees; then the CIT in his rights can pass on the information to the concerned office bearers working under the Maharashtra Capitation Fees (Prohibition) Act. These authorities have enough power to deal with such nature of default, side by side the CIT is to limit his jurisdiction within the ambits of provisions of the Act and expected to give a finding on facts that either the objects are not for general public utility or not achieved as prescribed under law. However presently the situation is that the Revenue has not said about any immoral activity of the appellant or the collection of fees was by wrongful means; hence deregistration sans our approval. Nevertheless the list of fifteen cases, as highlighted by learned CIT, lack desired positive finding as it was left blank on the excuse that even the other authorities could not lay their hands on alleged defaults so it was also difficult for the Revenue authorities to trace the correct position. While dealing with the facts ante, it was found that after exhaustive enquiry few instances; fifteen in numbers; were noticed by the Revenue authorities wherein it was alleged to be the infringement of Capitation Fee Act. But the irony is that in the same breath the learned CIT has accepted the stand of the assessee that it can charge five times the normal fees in case of admission in the defined management quota. Thereupon there was a circumvent in the approach of the learned CIT that the amount of donation be considered together with the fees to find out the violation of prohibition of Capitation Fee Act. But on facts that too did not stand the test of those provisions since admittedly did not exceed the prescribed limit.
11.14 Facts of this appeal are peculiar, as already discussed in above paras in detail and thereupon can comment that prima facie no case was made out by the learned CIT so as to even vaguely demonstrate that the activities of the appellant were not genuine or activity of imparting of education, for which the trust was created, were not carried out. Even the learned CIT has failed to establish that any part of the income/receipt of the trust was in any manner misutilized by the trustees for their personal benefit i.e., not in fulfillment of the object of the trust. Otherwise also there are three ways to look at this problem. One is, that the donations are raised but not utilized for achieving the objects i.e., towards imparting education; then such an institution must bear the consequence of cancellation of registration since ipso facto infringed s. 12AA(3) condition. Second aspect is, that though the donations received are meant to fulfill the objects but together with fees have infringed Anti Capitation Prohibition Act; then comes within the clutches of that Act but definitely not under s. 12AA(3) provisions. The third aspect is, that the donation plus fees do not exceed the prescribed limit of Anti Capitation Fee Act i.e., five times the normal fees; further that no evidence of misutilization other than the prescribed activity then no action can be suggested under s. 12AA(3). The assessee's case falls under the third category. With the result, totality of the circumstances thus warrants, in the light of the foregoing discussion, not to endorse the view of the learned CIT; consequence there upon reverse those findings. The order of cancellation of registration is hereby revoked. Grounds allowed."
101
ITA Nos.915 to 920/PUN/2012 8.10 In view of the above cited decisions, we hold that the finding given by the Ld.CIT that the assessee was collecting huge donation for admission of students to various institutes run by it in violation of provisions of Maharashtra Educational institutions (Prohibition of Capitation Fee) Act, 1987 for which the activities of the assessee trust are illegal and therefore the activities are not genuine is not correct. Further, the conclusion of the Ld. CIT that the institutes are being run on commercial lines with profit motive due to the substantial surplus created year after year is also not correct since the assessee has accumulated its surplus which is within the permissible limit of 15% u/s.11 and 12.
8.11 So far as the 2 decisions relied on by Ld.CIT are concerned we find the Ld. Counsel for the assessee has distinguished the same. We fully agree with his arguments. In any case since 2 views are possible on this issue, the view in favour of the assessee has to be adopted in view of the settled proposition of law. In this view of the matter, we hold that the Ld. CIT is not justified in cancelling the registration u/s.12A of the I.T. Act, 1961. We accordingly set-aside the order of the Ld.CIT and direct him to grant registration u/s.12A of the Income Tax Act. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed."
69. Although the above decision was rendered in the context of denial of registration u/s.12A of the I.T. Act we find the issue there was also denial of registration u/s.12A on the ground that the institutions are accepting capitation fee in guise of voluntary donations and are being run on commercial lines with profit motive. Therefore, the ratio that whether the institutions are being run on commercial lines with profit motive due to acceptance of capitalisation fee in guise of donation will be applicable to the facts of the present case.
70. We find the Bangalore 'C' Bench of the Tribunal in the case of Sadvidya Educational Institution Vs. Add.CIT while deciding an identical issue where assessee trust was collecting voluntary contributions, donations against building fund, development fund against admissions under Management Quota for which exemption u/s.11 was denied by the Assessing Officer has held as under (Head Notes) :
"Charitable or religious trust--Exemption u/s 11--Assessee-trust was a registered Society and ran several educational institutions in city of Mysore starting from nursery to PUC--Assessee trust was also registered u/s 12AA and had also obtained exemption u/s 11 and 12--Some of the educational institutions run by assessee were aided institutions, and as per norms fixed by State Government, assessee was entitled to give 50% of admissions under management quota in respect of PU Course--Assessee filed its returns of income, admitting 'Nil' income for AYs 2006-07 & 2008-09 and declaring a loss for AY 2007-08 after claiming exemption u/s 11(1)(a) and 11(1)(d)--In meanwhile, survey was conducted u/s 133A in assessee's premises and certain books and documents containing details of student wise donations collected by way of DDs and donation receipt books for admissions given during FYs 2005-06 and 2006-07 relating to fees and alleged donations collected from students who got admissions into the schools/college run by the assessee were impounded and statement of secretary of assessee 102 ITA Nos.915 to 920/PUN/2012 was also recorded--AO observed that assessee was collecting voluntary contributions/building fund/development funds against admissions given under management quota in institutions run by assessee and was not entitled to claim deduction u/s.11(1)(a) and 11(1)(d) -CIT(A) upheld findings of AO holding that there was a direct nexus between admissions granted under the management quota and voluntary contributions collected by assessee- Held, if educational institution has collected money in form of voluntary contributions from public and may be from parents of the students who are studying in institution and issued receipts acknowledging said amount towards building fund and made requisite entries in the books and deposited same in the bank, requirement of section 11(l)(d) is fulfilled-- Assessee was running several Schools starting from nursery to PUC and said fact has been endorsed by AO--No question of assessee collecting 'capitation fees' in guise of 'building fund or development fee--Further voluntary contributions received were for the specific purpose of 'building fund or development fee' - Further voluntary contributions received were for the specific purpose of 'building' and assessee had applied such contributions towards object of trust - Assessee had obtained the signatures of the parents of successful students in pre-printed letters before obtaining donation and shown instatement - Assessee was entitled to exemption u/s.11 in respect of 'building fund' as well as 'college development fund' - Assessee's appeal allowed.
Held :
In the present case, even if the fees collected were in violation of the norms subscribed by the State Government, the application of the funds were towards the objects of the assessee trust and as such, there was no violation of s.13 of the Act as ascribed by the Revenue, The assessee had obtained the signatures of the parents of the successful students in pre-printed letters without giving the details of amounts' donated, date of contributions etc., but contained the donors' names and their addresses. However, the assessing authority had chosen not to cross-examine such parents who have admitted their children to the institution of the assessee to verify the veracity of the assessee's claim."
71. We find the Chennai Bench of the Tribunal in the case of Padanilam Welfare Trust Vs. Dy.CIT reported in 10 ITR 479 has observed as under (Head Notes) :
"Charitable institution--Registration under s.12AA--CIT withdrawing registration alleging that capitation fees was collected by the trustees and there was diversion and misuse of funds-- Violation of Prohibition of Capitation Fees Act cannot be a ground to take away the registration of a charitable organization--Capitation fee per se is not in the nature of illegal income-There is nothing to show in the seized materials that the assessee had made any profit out of the activities carried on by it and any portion of that profit has been enjoyed by any of the trustees or the relatives. Surplus funds of the assessee-trust year to year have been used only for the purposes of furthering the objects of the assessee-trust--There is no distribution of profit or such other benefits to the trustees or relatives of the assessee-trust--Therefore action of the CIT in 103 ITA Nos.915 to 920/PUN/2012 withdrawing the registration granted to the assessee under s. 12AA is not sustainable in law Held :
It is found that the first ground pointed out by the CIT to cancel the registration granted to the assessee under s. 12A on the ground of accepting capitation fees is not sustainable in law. The CIT is not to conduct investigation into the sources of
72. We find the Hon'ble Supreme Court in the case of M/s. Queen's Educational Society vs. CIT vide Civil Appeal No.5167/2008 order dated 16-03-2015 has approved the decision of the Hon'ble Punjab and Haryana High Court in the case of Pine Grove International Charitable Trust Vs. Union of India reported in 327 ITR 73 has observed as under :
"23. The Punjab and Haryana High Court, by the impugned judgment dated 29th January, 2010 expressed its dissatisfaction with the view taken by the Uttarakhand High Court in the case of Queen's Educational Society as follows:
"8.8 We have not been able to persuade ourselves to accept the view expressed by the Division Bench of the Uttrakhand High Court in the case of Queens Educational Society (supra). There are variety of reasons to support our opinion. Firstly, the scope of the third proviso was not under consideration, inasmuch as, the case before the Uttrakhand High Court pertained to Section 10(23C)(iiiad) of the Act. The third proviso to Section 10(23C)(vi) is not applicable to the cases falling within the purview of Section 10(23C)(iiiad). Secondly, the judgment rendered by the Uttarkhand High Court runs contrary to the provisions of Section 10(23C)(vi) of the Act including the provisos thereunder. Section 10(23C)(vi) of the Act is equivalent to the provisions of Section 10(22) existing earlier, which were introduced with effect from 1st April, 1999 and it ignores the speech of the Finance Minister made before the introduction of the said provisions, namely. Section 10(23C) of the Act [See observations in American Hotel and Lodging Association Educational Institute's case (supra)]. Thirdly, the Uttrakhand High Court has not appreciated correctly the ratio of the judgment rendered by Hon'ble the Supreme Court in the case of Aditanar Educational Institution(supra) and while applying the said judgment including the judgment which had been rendered by Hon'ble the Supreme Court in the case of Children Book Trust (supra), it lost sight of the amendment which had been carried out with effect from 1st April, 1999 leading to the introduction of the provisions of Section 10(23C) of the Act. Lastly, that view is not consistent with the law laid down by Hon'ble the Supreme Court in American Hotel and Lodging Association Educational Institute (surpa)."
It then summed up its conclusions as follows:
"8.13 From the aforesaid discussion, the following principles of law can be summed up:--104
ITA Nos.915 to 920/PUN/2012 (1) It is obligatory on the part of the Chief Commissioner of Income Tax or the Director, which are the prescribed authorities, to comply with proviso thirteen (un-numbered). Accordingly, it has to be ascertained whether the educational institution has been applying its profit wholly and exclusively to the object for which the institution is established. Merely because an institution has earned profit would not be deciding factor to conclude that the educational institution exists for profit.
(2) The provisions of Section 10(23C)(vi) of the Act are analogous to the erstwhile Section 10(22) of the Act, as has been laid down by Hon'ble the Supreme Court in the case of American Hotel and Lodging Association (supra). To decide the entitlement of an institution for exemption under Section 10(23C)(vi) of the Act, the test of predominant object of the activity has to be applied by posing the question whether it exists solely for education and not to earn profit [See 5-Judges Constitution Bench judgment in the case of Surat Art Silk Cloth Manufacturers Association (supra)]. It has to be borne in mind that merely because profits have resulted from the activity of imparting education would not result in change of character of the institution that it exists solely for educational purpose. A workable solution has been provided by Hon'ble the Supreme Court in para 33 of its judgment in American Hotel and Lodging Association's case (supra). Thus, on an application made by an institution, the prescribed authority can grant approval subject to such terms and conditions as it may deems fit provided that they are not in conflict with the provisions of the Act. The parameters of earning profit beyond 15% and its investment wholly for educational purposes may be expressly stipulated as per the statutory requirement. Thereafter the Assessing Authority may ensure compliance of those conditions. The cases where exemption has been granted earlier and the assessments are complete with the finding that there is no contravention of the statutory provisions, need not be reopened. However, alter grant of approval if it comes to the notice of the prescribed authority that the conditions on which approval was given, have been violated or the circumstances mentioned in 13th proviso exists, then by following the procedure envisaged in 13th proviso, the prescribed authority can withdraw the approval.
(3) The capital expenditure wholly and exclusively to the objects of education is entitled to exemption and would not constitute part of the total income.
(4) The educational institutions, which are registered as a Society, would continue to retain their character as such and would be eligible to apply for exemption under Section 10(23C)(vi) of the Act. [See para 8.7 of the judgment-Aditanar Educational Institution case (supra)] (5) Where more than 15% of income of an educational institution is accumulated on or after 1st April, 2002, the period of accumulation of the amount exceeding 15% is not permissible beyond five years, provided the excess income has been applied or accumulated for application wholly and exclusively for the purpose of education.105
ITA Nos.915 to 920/PUN/2012 (6) The judgment of Uttrakhand High Court rendered in the case of Queens Educational Society (supra) and the connected matters, is not applicable to cases fall within the provision of Section 10(23C)(vi) of the Act. There are various reasons, which have been discussed in para 8.8 of the judgment, and the judgment of Allahabad High Court rendered in the case of City Montessori School (supra) lays down the correct law."
And finally held:
"8.15 As a sequel to the aforesaid discussion, these petitions are allowed and the impugned orders passed by the Chief Commissioner of Income Tax withdrawing the exemption granted under Section 10(23C)(iv) of the Act are hereby quashed. However, the revenue is at liberty to pass any fresh orders, if such a necessity is felt after taking into consideration the various propositions of law culled out by us in para 8.13 and various other paras.
8.16 The writ petitions stand disposed of in the above terms."
24. The view of the Punjab and Haryana High Court has been followed by the Delhi High Court in St. Lawrence Educational Society (Regd.) v. Commissioner of Income Tax & Anr., (2011) 53 DTR (Del)
130. Also in Tolani Education Society v. Deputy Director of Income Tax (Exemption) & Ors., (2013) 351 ITR 184, the Bombay High Court has expressed a view in line with the Punjab and Haryana High Court view, following the judgments of this Court in the Surat Art Silk Manufacturers Association Case and Aditanar Educational Institution case as follows:
".....The fact that the Petitioner has a surplus of income over expenditure for the three years in question, cannot by any stretch of logical reasoning lead to the conclusion that the Petitioner does not exist solely for educational purposes or, as that Chief Commissioner held that the Petitioner exists for profit. The test to be applied is as to whether the predominant nature of the activity is educational. In the present case, the sole and dominant nature of the activity is education and the Petitioner exists solely for the purposes of imparting education. An incidental surplus which is generated, and which has resulted in additions to the fixed assets is utilized as the balance-sheet would indicate towards upgrading the facilities of the college including for the purchase of library books and the improvement of infrastructure. With the advancement of technology, no college or institution can afford to remain stagnant. The Income-tax Act 1961 does not condition the grant of an exemption under Section 10(23C) on the requirement that a college must maintain the status-quo, as it were, in regard to its knowledge based infrastructure. Nor for that matter is an educational institution prohibited from upgrading its infrastructure on educational facilities save on the pain of losing the benefit of the exemption under Section 10(23C). Imposing such a condition which is not contained in the statute would lead to a perversion of the basic purpose for which such exemptions have been granted to educational institutions. Knowledge in contemporary times is technology driven. Educational institutions have to modernise, upgrade and respond to the changing ethos of education.106
ITA Nos.915 to 920/PUN/2012 Education has to be responsive to a rapidly evolving society. The provisions of Section 10(23C) cannot be interpreted regressively to deny exemptions. So long as the institution exists solely for educational purposes and not for profit, the test is met.
25. We approve the judgments of the Punjab and Haryana, Delhi and Bombay High Courts. Since we have set aside the judgment of the Uttarakhand High Court and since the Chief CIT's orders cancelling exemption which were set aside by the Punjab and Haryana High Court were passed almost solely upon the law declared by the Uttarakhand High Court, it is clear that these orders cannot stand. Consequently, Revenue's appeals from the Punjab and Haryana High Court's judgment dated 29.1.2010 and the judgments following it are dismissed. We reiterate that the correct tests which have been culled out in the three Supreme Court judgments stated above, namely, Surat Art Silk Cloth, Aditanar, and American Hotel and Lodging, would all apply to determine whether an educational institution exists solely for educational purposes and not for purposes of profit. In addition, we hasten to add that the 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance that the activities of such institutions be looked at carefully. If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. All these cases are disposed of making it clear that revenue is at liberty to pass fresh orders if such necessity is felt after taking into consideration the various provisions of law contained in Section 10(23C) read with Section 11 of the Income Tax Act."
73. From the submission of the Ld. Counsel for the assessee we further find that out of more than 47000 students the assessee trust has collected donations from only 1217 students out of which only 23 persons had admitted to have given donations for admission. We find out of the above 23 persons only 6 were available for cross examination. We find the relatives or parents of the students have filled up the declaration stating that they have given voluntary donations to the institutions, even some of them claimed deduction u/s.80G also. Nothing has been brought on record that any such amount of donation has not been accounted for in the books of account or has been utilised by any of the trustees or their relatives or has not been utilised for purposes other than education. Therefore, we are of the considered opinion that the assessee trust whose main object is imparting education, cannot be denied the benefit of provisions of section 10(23C)(iiiab) and (iiiac) merely on the basis of contradictory statements of a few donors. Neither any donor nor the Assessing Officer has lodged any complain before Government authorities for violation of the Act. Assessments of the trust have been completed in the past accepting the exemption u/s.10(23C) of the Act. Therefore, we find no reason to deviate in absence of any evidence brought on record for denying the exemption claimed u/s.10(23C) for the year. So far as the decision relied on by Ld. Departmental Representative is concerned, the same in our opinion is not applicable to the facts of the present case which was in context of section 10(23C)(iiiad). In view of our 107 ITA Nos.915 to 920/PUN/2012 reasons given above we hold that the Ld.CIT(A) is not justified in denying the exemption u/s.10(23C) (iiiab) of the I.T. Act. We accordingly set aside the same and the grounds raised by the assessee are allowed.
Although the appeal was decided on the issue of applicability of section 10(23C)(vi), however, it will have equal force while deciding the issue on eligibility for section 11/12A.
148. So far as denial of exemption u/s.11 for violation of provisions u/s.13(1)(c) are concerned, we find the Assessing Officer denied exemption u/s.11 for violation of provisions of section 13(1)(c) on account of use of trust funds by the trustees and their family members. Some of the issues which the Assessing Officer has narrated in the body of the assessment order for various years relate to facilities provided to Shri B.E. Avhad, Honorary President of the trust, foreign tour of family members of Shri B.E. Avhad, foreign tour expenditure of the trustees and their family members, visit to Katmandu by Shri Rahul V. Karad, Visit to Australia by Shri Rahul V. Karad and Prof. V.D. Karad, pleasure trip of Shri V.D. Karad to Europe, foreign tour of Mr. and Mrs. Mangesh Karad, local tour of trustees and their family members to places where trust does not have any activity. These are already discussed in the preceding paragraphs. Apart from the above, the Assessing Officer has also referred to the interest free loan of Rs.18 lakhs to Shri Rahul V. Karad who is the son of the Managing trustee, free admissions and fee concessions to relatives of the trustees, children of the employees. The details of such expenditure incurred by the trust for the benefit of the trustees and their family members which according to the Assessing Officer is violation of provisions of section 13(1)(c) are as under :
108
ITA Nos.915 to 920/PUN/2012 MAHARASTRA ACADEMY OF ENGINEERING AND EDUCATINAL RESEARCH YEARWISE CHART SHOWING DETAILS OF EXPENSES CONSIDERED AS VIOLATION OF SECTION 13 Sr. Particulars Assessment year Total No. 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
1. Expenditure on providing facilities to B E Avhad
-Vehicle Maintenance - - 21,850 143,893 224,077 245,991 635,811
-Depreciation on car - - - 171,388 137,111 437,589 746,088
-Other expenses- Local - - - - - - -
travel to Mumbai
-Honorarium Paid - - - - - - -
2 Expenditure on foreign 71,273 - 94,227 24,700 266,154 - 456,354 tours 3 Concessional education- 150,000 75,000 - - - - 225,000 Relatives of Employees 4 Scholarship given to - - - - - - -
Rahul Karad 5 Notional Interest on - - - - - - -
advance to Rahul Karad Sub Total(a) 221,273 75,000 116,007 339,981 627,342 683,580 2,063,253 6 Expenditure on providing facilities to B E Avhad
-Credit card Expenses 133,891 142,529 180,004 242,566 279,298 178,264 1,156,552 7 Expenditure on foreign - - - - - - -
tours 8 Concessional education- 157,845 138,205 154,720 88,680 91,100 - 630,550 Relatives of Trustee Sub Total(b) 291,736 280,734 334,724 331,246 370,398 178,264 1,787,102 9 Expenditure on foreign tours which be taken on pro-rata basis
-Mr. & Mrs B E Avhad & 2 600,000 - - - - - 600,000 childs- Geneva
-Mr. & Mrs.Mangesh - - 130,492 - - - 130,492 Karad- Europe
-Mr. & Mrs.V D Karad- - - 58,703 - - - 58,703 Australia
-Mr. & Mrs V.D Karad- - - - - - 357,442 357,442 Paris
-Mr. & Mrs B E Avhad- - - - - - - -
USA
-Mr. & Mrs V.D Karad-UK - - - - - - -
Sub Total(c) 600,000 - 189,195 - - 357,442 1,146,637
Total (a+b+c) 1,113,009 355,734 639,996 671,227 997,740 1,219,286 4,996,992
149. So far as facilities given to Shri B.E. Avhad is concerned, it is the submission of the Ld. Counsel for the assessee that Shri B.E. Avhad is a founder member. He is also an eminent lawyer by profession. Although he is not engaged in day to day activities of the trust he is associated with all the policy matters, developmental activity, legal matters including the disputes in the courts etc. It is also his submission that he is looking after all the land matters concerning conveyance of the land, conversion of land, assessment of lands of the trust etc. 109 ITA Nos.915 to 920/PUN/2012 Further, the facilities provided by the trust to Shri B.E. Avhad is only for official purpose and not for personal purposes. So far as the expenditure incurred of Rs.6 lakhs on account of foreign tour of family members of Shri B.E. Avhad is concerned it is his submission that the same was incurred on account of airfare Rs.1,60,000/- and foreign currency expenses of Rs.4,40,000/- for attending the World Philosophers Meet in the year 1998-99. So far as the various other foreign tour expenditure is concerned it is his submission that the entire expenditure is for the objects of the trust and no part of the expenditure relates to outside of the objects of trust. It is also his alternate contention that even if there is any violation of the provisions of section 13(1)(c) even then there cannot be wholesale denial of exemption and the disallowance should be restricted to the extent of the so called violation.
150. So far as free admissions and fee concessions to the children of the employees and relatives of the trustees are concerned it is the submission of the Ld. Counsel for the assessee that the children of the employees and founder members are given concession in fees as a policy of the trust and on the basis of merit only. It is also his submission that provisions of section 13(6) specifically provide that in an educational institution there would be no prohibition as regards fee concession is concerned. It is his alternate contention that there cannot be wholesale denial of exemption u/s.11 and 12 for violation of provisions of section 13. The disallowance may be restricted only to the extent of so called violation.
151. We find some merit in the above arguments of the Ld. Counsel for the assessee. So far as denial of exemption u/s.11 and 12 for violation of provisions of section 13(1)(c) are concerned the Pune Bench 110 ITA Nos.915 to 920/PUN/2012 of the Tribunal in the case of Sinhgad Technical Education Society Vs. ACIT vide ITA No.320/PUN/2010 order dated 14-12-2016 has held that whenever there is violation of provisions of section 13(1)(c) or 13(1)(d) of the Act, exemption cannot be withdrawn for the entire income and income which is the subject matter of violation only can be brought to tax. The relevant observation of the Tribunal from Para 68 onwards read as under :
"68. We have considered the rival arguments made by both the sides, perused the orders of the AO and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. The only question to be decided in this additional ground is as to whether for violation of provisions of section 13(1)(c) and 13(1)(d), exemption u/s.11 be denied to the whole of the income or will be confined to the extent of income which is in violation of provisions of section 13(1)(c) and 13(1)(d).
69. We find the Hon'ble Bombay High Court in the case of DIT (Exemption) Vs. Sheth Mafatlal Gagalbhai Foundation Trust. [2001] 249 ITR 533 (Bom) has observed as under :
"7. . . . . . . . . . . . . . . However, the Legislature inserted a proviso by the Finance Act, 1984, with effect from April ,1985. By the said proviso, it is, inter alia, laid down that where the whole or part of the relevant income is not exempt by virtue of Section 13(1)(d), tax shall be charged on the relevant income or part of the relevant income at the maximum marginal rate, The phrase "relevant income or part of the relevant income"
is required to be read in contradistinction to the phrase "whole income" under Section 161 (1A). This is only by way of comparison. Under Section 161 ( A), which begins with a non obstante clause, it is provided that where any income in respect of which a person is liable as a representative assessee consists of profits of business, then tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate. Therefore, reading the above two phrases show that the Legislature has clearly indicated its mind in the proviso to Section 164(2) when it Categorically refers to forfeiture of exemption for breach of Section 13(1)(d), resulting in levy of maximum marginal rate of tax only to that part of the income which has forfeited exemption. It does not refer to the entire income being subjected to maximum marginal rate of tax. This interpretation of ours is also supported by Circular No. 387, dated July 6, 1984 (see [1985] 152 ITR (St.) 1). Vide the said circular, it has been laid down in para. 28.6 that, where a trust" contravenes Section 13(1)(d) of the Act, the maximum marginal rate of income-tax will apply only to that part of the income which has forfeited exemption under the said provision and not to the entire income. We may also add that in law, there is a vital difference between eligibility for 111 ITA Nos.915 to 920/PUN/2012 exemption and withdrawal of exemption/forfeiture of exemption for contravention of the provisions of law. These two concepts are different. They have different consequences. It is interesting to note that although the Legislature withdrew Section 164(2) by the Direct Tax Laws (Amendment) Act, 1987, which provision was reintroduced by the Direct Tax Laws (Amendment) Act, 1989, the Legislature did not touch the proviso to Section 164(2) which has been on the statute book right from April 1, 1985. The said proviso was inserted by the Finance Act, 1984, The proviso specifically refers to violation of Section 13 (1)( d) and its consequences. In the circumstances, we find merit in the contention of the assessee that in the present case, the maximum marginal rate of tax will apply only to the dividend income from shares in Mafatlal Industries Limited and not to the entire income. Therefore, income other than dividend income shall be taxed at the normal rate of taxation under the Act.
70. We find the Hon'ble Karnataka High Court has followed the above decision of Hon'ble Bombay High Court in the case of CIT Vs. Fr. Mullers Charitable Institutions reported in 363 ITR 230. Subsequently, the Hon'ble Karnataka High Court in the case of CIT Vs. Karnataka Industrial Area Development Board has decided the issue in favour of the assessee by observing as under :
"2. These two appeals were admitted on 2004.2010 and 16.7.2009 respectively. In ITA NO.557/2008, the following substantial question of law is framed for consideration:
"Whether the Tribunal was correct in upholding the finding of the Appellate Commissioner thereafter directing a re-look in respect of the relief claimed u/s.11 of the Act and Section 13(1)(d) of the Act without considering the controversy before it'?"
3. In short, the question for consideration is when there is violation u/s.11 (5) and 13(1)(d) of the Act, whether the exemption is to be withdrawn for the entire income or the portion of the income. This issue is covered by the judgment of the Bombay High Court in the case reported in (2001) 249 ITR 533 (Born). Following the aforesaid judgment, this court in the case of Commissioner of Income Tax, Mangalore Vs. Fr. Mullers Charitable Institutions, Kankanady, Mangalore, in ITA Nos.588 and 589 of 2007 decided on 10.2.2014 has held the entire income of the assessee cannot be assessed for the tax, for violating under Section 11(5) read with Sec.31(1)(d) of the Act and what would become the subject matter of assessment is only that income which is the subject matter of violation.
In that view of the matter, as the substantial question of law has already answered in favour of the assessee and against the Revenue, we also answer it accordingly and dismiss these appeals."
112
ITA Nos.915 to 920/PUN/2012
71. We find the Hon'ble Supreme Court in the case of CIT Vs. Karnatak Industrial Area Development Board vide SLP (C) No.19422/2015 order dated 11-11-2016 has dismissed the SLP filed by the revenue.
72. In view of the above, we are of the considered opinion that whenever there is violation of section 11(5) and 13(1)(d) of the I.T. Act, exemption cannot be withdrawn for the entire income and income which is the subject matter of violation only can be brought to tax. Accordingly, additional ground No.3 by the assessee is allowed."
152. Following the above decision of Pune Bench of the Tribunal in the case of Sinhgad Technical Education Society (supra) (to which both of us are parties) we hold that there cannot be wholesale denial of exemption u/s.11 for violations of provisions of section 13(1)(c) and income which is subject matter of violation only can be brought to tax.
153. Now having held so, we have to see the extent of violation year- wise. So far as the issue relating to expenditure on account of vehicle maintenance is concerned we find from the details furnished by the assessee that the Assessing Officer has disallowed expenditure of Rs.21,850/- for A.Y. 2001-02, Rs.1,43,893/- for A.Y. 2002-03, Rs.2,24,077/- for A.Y. 2003-04 and Rs.2,45,991/- for A.Y. 2004-05. It is an undisputed fact that Shri B.E. Avhad is a lawyer and is also attending to the various works of the trust. Apart from using his own car he has also used the vehicle of the trust. Therefore, disallowance of the entire expenditure on account of vehicle maintenance under the facts and circumstances of the case is not justified. Considering the totality of the facts of the case, we hold that 50% of the vehicle maintenance expenses can be held as for the objects of the trust and the balance 50% is to be disallowed and brought to tax.
154. So far as the depreciation on motor car is concerned an amount of Rs.1,71,388/- for A.Y. 2002-03, Rs.1,37,111/- for A.Y. 2003-04 and Rs.4,37,589/- for A.Y. 2004-05 have been disallowed. Since the motor 113 ITA Nos.915 to 920/PUN/2012 car is owned by the trust, therefore, disallowance of depreciation in our opinion is uncalled for. Accordingly, it is held that such depreciation is for the objects of the trust and cannot be disallowed as a facility given to Shri B.E. Avhad.
155. As regards the expenditure on foreign tour is concerned, the visit to Katmandu by Shri Rahul V. Karad, in absence of full details given before the Assessing Officer and in absence of furnishing of the passport despite being asked to do so by the Assessing Officer, the expenditure is held to be not for the objects of the trust. So far as visit to Australia by Shri Rahul V. Karad and Shri V.D. Karad during A.Y. 2001-02 is concerned the Assessing Officer has made addition of Rs.1,52,930/-. Although the assessee has produced the plane tickets, however, there were purchases of personal articles like, sun glasses, perfumes, shirt etc. The assessee could not explain the source. It is also a fact that the daughter of Shri V.D. Karad was staying in Australia. Therefore, although the assessee has claimed that such expenditure is on account of attending the World Peace Tour, however, we do not find any merit in the argument of the Ld. Counsel for the assressee and the expenditure of Rs.1,52,930/- for A.Y. 2001-02 is held as not for the objects of the trust. Similarly, the foreign tour expenses of Rs.24,700/- for A.Y. 2002-03, Rs.2,66,154/- for A.Y. 2003-04 and Rs.3,75,442/- for A.Y. 2004-05 are held to be not for the objects of the trust and accordingly the same has to be brought to tax.
156. So far as the concession in education given to relatives of the employees are concerned, the same in our opinion cannot be disallowed for violation of provisions of 13(1)(c) and cannot be held as not for objects of the trust. We find the provisions of section 13(6) read as under :
114
ITA Nos.915 to 920/PUN/2012 "13(6) Notwithstanding anything contained in sub-section (1) or sub-section (2), but without prejudice to the provisions contained in sub-section (2) of section 12, in the case of a charitable or religious trust running an educational institution or a medical institution or a hospital, the exemption under section 11 or section 12 shall not be denied in relation to any income, other than the income referred to in sub-section (2) of section 12, by reason only that such trust has provided educational or medical facilities to persons referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3)."
157. From the above it is clear that there would be no prohibition as regards fee concession u/s.13(6) in case of an educational institution. We further find from the details given by the assessee that it is the policy of the trust to give concession in fee to the children of the employees. We also find merit in the argument of the Ld. Counsel for the assessee that provisions of section 13(1)(c) are not applicable to any concession in fee given to the relatives of the employees. However, the same in our opinion is not applicable to the relatives of the trustees as defined in explanation 1 to section 13. The Assessing Officer is accordingly directed to bring to tax the concession in fees given to the relatives of the trustees only. So far as interest free loan of Rs.18 lakhs given Mr. Rahul Karad is concerned, we find such interest does not relate to any of the years under appeal since nothing has been brought on record by the revenue that any such interest relate to any of the years under appeal. Even otherwise also, as held earlier there cannot be wholesale denial of exemption u/s.11.
158. So far as the expenditure incurred on account of credit card expenses of Shri B.E. Avhad is concerned, we find the Assessing Officer disallowed the same on the ground that the credit card was used for meeting expenses of hotel bills at Mumbai and New Delhi and air tickets to Mumbai and Delhi etc. It is also his allegation that the assessee being a Senior Advocate is regularly appearing before the Bombay High Court and Supreme Court and therefore his personal 115 ITA Nos.915 to 920/PUN/2012 expenses has been met through such credit card. It is an undisputed fact that the matter of the assessee has also gone before the Hon'ble Bombay High Court and Hon'ble Supreme Court. Therefore, it cannot be said that Shri B.E. Avhad had travelled to Bombay or Delhi only for his clients and not for the trust. However, in absence of full particulars given by the trust on account of each and every expenses we hold that 50% of such expenditure is for the objects of the trust and the balance 50% is towards his personal expenditure which has to be disallowed and brought to tax. We hold and direct accordingly.
159. So far as local tour by trustees and their family members to places where trust does not have activity is concerned, we find the assessee has incurred an amount of Rs.47,697/- for A.Y. 2004-05. We find the assessee has given details at Page 884 of the paper book No.4. A perusal of the same shows that the tours are only by the trustees and in particular mainly by the President and the Managing trustee. We further find from the details filed that the visits are to Nagar Pathardi near Shirdi where trust has started a school during 1999-2000. The visit to Gondavale, Cochin, Mumbai, Madurai and Trivendrum are for administrative matters. The visit to Udaipur is also to attend the conference at Mount Abu and the visit to Solapur and Akkalkot was in connection with purchase of land to start educational complex at Solapur. Therefore, the local tours by the trustees in our opinion is for the objects of the trust and cannot be held as not for the objects of the trust. In view of the above discussion the Assessing Officer is directed to compute the amount of disallowance that has to be brought to tax and there cannot be wholesale denial of exemption. The grounds of appeal No.5, 6, 8 and 11 are decided accordingly.
116
ITA Nos.915 to 920/PUN/2012
160. The next issue which is common for all the years is regarding disallowance u/s.43B, 40A(3) and 40A(7) etc.
161. Since in the instant case the Tribunal has restored the registration u/s.12A to the assessee trust, therefore, the income in our opinion has to be computed u/s.11. It has been held in various decisions that the income u/s.11 has to be computed in a commercial manner and not as per the provisions of I.T. Act. The various heads of income u/s.11 are not relevant in case of a charitable trust and therefore we find merit in the argument of the Ld. Counsel for the assessee that while computing the income u/s.11 the various disallowances/additions u/s.40A(3), 40A(7) and 43B etc. cannot be made u/s.28 to 43.
162. We find the Hon'ble Madras High Court in the case of CIT Vs. Rao Bahadur Calavala Cunnan Chetty Charities reported in 135 ITR 0485 has held that income for purposes of section 11(1)(a) has to be computed on normal commercial basis without reference to provisions attracted by section 14. The ground raised by the assessee on this issue for the respective assessment years under appeal are accordingly allowed.
163. The next issue that requires adjudication is ground of appeal No.9 for A.Y. 2001-02 where the assessee has challenged the addition of Rs.4,27,004/- on account of treating certain expenses as capital expenses.
164. After hearing both the sides, we find the special auditor in his report u/s.142(2A) has observed that expenditure amounting to Rs.4,27,004/- was capital in nature but was claimed as revenue in nature in the income and expenditure account. He, therefore, disallowed the same amount in the recasted income and expenditure 117 ITA Nos.915 to 920/PUN/2012 account. However, while computing taxable income for the year the Assessing Officer again disallowed the same which according to the assessee has resulted in double disallowance. Although the assessee had raised this issue before the CIT(A) as per grounds of appeal No.14, however, he has not made any further discussion or decision on this issue.
165. It is the submission of the Ld. Counsel for the assessee that since the CIT(A) has not discussed the issue the matter may be restored to the file of the CIT(A). It is also his first alternate contention that if the income of the assessee is held to be eligible for exemption u/s.11 then the issue whether a particular expenditure is revenue or capital in nature will not be relevant at all. According to him, the income in case of a charitable trust is to be computed in commercial manner and accordingly capital expenditure will also be considered as application of income. It is also his second alternate contention that even if the amount is disallowed for A.Y. 2001-02 the application of income for this year being higher than the receipts, therefore, after granting exemption u/s.11 there is no taxable income in the hands of the assessee.
166. We find merit in the above argument of the Ld. Counsel for the assessee. We find although the assessee has raised the ground before the CIT(A) as per ground of appeal No.14, however, he has not given any decision on this issue. Further, treating the expenses as capital or revenue will not be material since the income in the case of a charitable trust has to be computed in a commercial manner as held by us in the preceding paragraph. Accordingly, the capital expenditure will also be considered as application of income. Accordingly, this ground by the assessee is allowed. However, the Assessing Officer is directed to 118 ITA Nos.915 to 920/PUN/2012 make necessary verification and if there is double disallowance, make necessary correction. This ground is accordingly allowed for statistical purposes.
167. The next issue that requires adjudication is ground of appeal No.9 for A.Y. 2002-03 and A.Y. 2003-04 on account of disallowance of Rs.4,12,656/- for A.Y. 2002-03 and Rs.4,42,920/- for A.Y. 2003-04 on account of income tax debited.
168. After hearing both the sides we find the Assessing Officer disallowed the above amounts on account of income tax debited in the books of MIMER college and DBSR hospital, Talegaon which is one of the constituent units of the assessee trust. According to the Ld. Counsel for the assessee it is a charitable trust claiming exemption u/s.11 and therefore there was no question of payment of any income tax. The amounts were not paid towards income tax but towards TDS arrears of earlier year which is an allowable deduction. It is also his first alternate contention that the income in case of a charitable trust is to be computed in commercial manner and income tax expenditure will also be considered as application of income. It is his second alternate contention that even if the amount is disallowed for A.Y. 2002-03 and 2003-04 the application of income for these years being higher than the receipts, therefore, after granting exemption u/s.11 there is no taxable income in the hands of the assessee.
169. We find merit in the above submission of the Ld. Counsel for the assessee. Since we have already held that the assessee trust is eligible for claiming exemption u/s.11, therefore, the income of the assessee trust has to be computed in commercial manner and such expenditure which is on account of TDS arrears of earlier year will be considered as application of income. Even otherwise also according to 119 ITA Nos.915 to 920/PUN/2012 Ld. Counsel for the assessee, after disallowance of the same, application of income of the assessee trust for both the years will be higher than the income/receipts and therefore after granting exemption u/s.11 there will be no taxable income in the hands of the assessee. However, this needs verification at the level of the Assessing Officer. We therefore direct the Assessing Officer to make necessary verification and if the application is more than the income, there will be no taxable income. Accordingly, ground of appeal No.9 for A.Yrs. 2002-03 and 2003-04 are allowed for statistical purposes.
170. The next issue that requires adjudication is ground of appeal No.12 for A.Y. 2003-04 regarding disallowance of excess provision for refund of fees.
171. After hearing both the sides, we find the assessee has made a provision of Rs.50 lakhs for refund of fees in A.Y.2002-03 in respect of MIT SFS which is one of its constituent unit. The unit was closed during A.Y. 2003-04. Certain amount was repaid out of the provision of Rs.50 lakhs and an amount of Rs.30,96,750/- remained outstanding during A.Y. 2003-04 which remained unpaid even upto 31-03-2006. The Assessing Officer accordingly added back the excess provision in the year of closure of the unit, i.e. A.Y. 2003-04. It is the submission of the Ld. Counsel for the assessee that even if the amount is added as income for A.Y. 2003-04 the application of income in this year is still higher than the income/receipts and therefore after exemption u/s.11 there is no taxable income in the hands of the assessee.
172. Since we have already held that the assessee is entitled to exemption u/s.11, therefore, we restore this issue to the file of the Assessing Officer to find out as to whether after disallowance of the same the application of income is more than the receipt and if there is 120 ITA Nos.915 to 920/PUN/2012 no taxable income in the hands of the assessee. The Assessing Officer will pass appropriate order. The ground is accordingly allowed for statistical purpose.
173. The next issue that requires adjudication is ground of appeal No.9 for A.Y. 2004-05 which relates to incorrect addition of Rs.4,62,41,042/- by adopting wrong surplus.
174. After hearing both the sides, we find the Assessing Officer on page 29 of the assessment order for A.Y. 2004-05 has stated that the auditor has recasted the income and expenditure account of the assessee and arrived at surplus of Rs.7,23,46,742/- for the year. According to the Ld. Counsel for the assessee this figure is incorrect since the auditor has recasted the surplus of Rs.2,61,02,700/- in the recasted income and expenditure account for A.Y. 2004-05. According to him this typographical error needs to be corrected. In view of the above, we restore this issue to the file of the Assessing Officer with a direction to verify the records and if the contention of the assessee is correct then adopt the correct surplus of Rs.2,61,05,700/- and not Rs.7,23,46,742/-. This ground by the assessee is accordingly allowed for statistical purposes.
175. In the result, the appeals filed by the assessee for A.Yrs. 1999- 2000 and 2000-01 are allowed, and the remaining appeals are partly allowed for statistical purposes.
Pronounced in the open court on 10-02-2017.
Sd/- Sd/-
(VIKAS AWASTHY) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
पण
ु े Pune; दनांक Dated : 10 February, 2017.
th
सतीश
121
ITA Nos.915 to 920/PUN/2012
आदे श क( )"त+ल प अ,े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The CIT(A)-III, Pune
4. The CIT(A)-11, Pune
5.
#वभागीय %त%न*ध, आयकर अपील य अ*धकरण, " ए Bench" पुणे / DR, ITAT, "A Bench" Pune;
6. गाड2 फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, //स या#पत %त / True Copy // // True Copy // व&र'ठ %नजी स*चव / Sr. Private Secretary आयकर अपील य अ*धकरण, पुणे / ITAT, Pune