Income Tax Appellate Tribunal - Lucknow
Maharana Pratap Education Centre, ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH "B", LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA Nos.533 & 534/LKW/2010 A.Yrs.:2006-07 & 2007-08 Dy.C.I.T.-1, Kanpur. Vs. M/s Maharana Pratap Education Centre, 117/Q/66, Sharda Nagar, Kanpur. PAN:AABTM5254H (Appellant) (Respondent) C.O.Nos.42 & 43/Lkw/2010 (in ITA Nos.533 & 534/LKW/2010) A.Yrs.:2006-07 & 2007-08 M/s Maharana Pratap Education Centre, 117/Q/66, Sharda Nagar, Kanpur. PAN:AABTM5254H Vs. Dy.C.I.T.-1, Kanpur. (Objector) (Respondent) Revenue by Shri Manoj Kumar Gupta, CIT, D.R. Assessee by Shri P. K. Kapoor, C.A. Shri Ashish Bansal, Advocate Date of hearing 26/12/2013 Date of pronouncement 07/02/2014 O R D E R PER A. K. GARODIA, A.M.
Both the appeals are filed by the Revenue and both the Cross Objections are filed by the assessee, which are directed against two separate orders of learned CIT(A)-II, Kanpur dated 19/05/2010 for assessment year 2006-07 and dated 25/05/2010 for assessment year 2007-08. All the appeals and Cross Objections were heard together and are being disposed of by this common order for the sake of convenience.
2. First we take up the Cross Objections filed by the assessee. The grounds raised by the assessee in its Cross Objection for assessment year 2006-07 are as under:
"1. The learned CIT(A) should have cancelled/annulled the assessment order as the assessment order made by the Assessing Officer is bad and invalid in law because the status taken as 'Society' was not a 'person' as contemplated u/s 2(31) of the I.T. Act and no assessment can be made in this status.
2. That the appellant craves leave to add, to delete or amend the ground of Cross Objection as mentioned herein before."
3. The grounds raised by the assessee in its Cross Objection for assessment year 2007-08 are also reproduced as under:
"1. The learned CIT(A) should have held that the assessment made by the Assessing Officer in the status of AOP disregarding the status shown in the return is ab initio illegal & invalid and the same deserves to be cancelled/annulled.
2. That the appellant craves leave to add, to delete or amend the ground of Cross Objection as mentioned herein before."
4. It was submitted by learned A.R. of the assessee that as per the provisions of section 2(31) of the Act, there is no status such as society because it is not a person as contemplated in section 2(31) of the Act and, therefore, the assessment completed by the Assessing Officer with the status of the assessee as society should be held to be invalid.
5. Learned D.R. of the Revenue supported the order of learned CIT(A).
6. We have considered the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that there is no such ground raised by the assessee before the learned CIT(A) on this aspect and the only ground which can be considered as near to this aspect is ground No. 1 raised before the learned CIT(A) and for the sake of ready reference, the same is reproduced below:
"1. That the Dy. CIT-I, Kanpur (hereinafter referred to as 'AO') has erred in law and facts in making an assessment on MPEC in the status of 'Society' on an income of Rs.4,97,73,340/- as against 'Nil' income shown discarding the tax exempt status of MPEC under section 11 of the I.T. Act."
6.1 From the above ground raised by the assessee before learned CIT(A), we find that as per this ground, the assessee is not disputing the status of the assessee taken by the Assessing Officer as society but in fact, the assessee is disputing the assessment of assessee's income at Rs.4,97,73,340/- as against nil income shown by the assessee in the return of income by discarding the tax exemption status of the assessee u/s 11 of the Act. As per the ground raised by the assessee before us, the issue raised by the assessee is altogether different and this issue is not arising out of the order of learned CIT(A). Moreover, it is also not shown by the assessee before us as to what was the status indicated by the assessee in the return of income filed by it. The assessee has also not submitted copy of Tax Audit Report for the present year although learned A.R. of the assessee was specifically directed to produce the same in the course of hearing. Hence, it is also not possible to examine as to what is the status indicated by the auditors in the Tax Audit Report. Be that as it may, but still, merely because wrong term is indicated by the Assessing Officer in the assessment order towards the status of the society, the assessment order cannot be held to be invalid and it is not an illegality but at the best, it may be considered as irregularity and in our considered opinion, the status of the assessee should be considered as an AOP as has been taken by the Assessing Officer in assessment year 2007-08. Accordingly, we direct the Assessing Officer to take the status of the assessee as AOP in assessment year 2006-07 also. Ground No. 1 of the assessee's Cross Objection in assessment year 2006-07 is decided accordingly. In assessment year 2007-08, the Assessing Officer has taken the status of the assessee as AOP and the plea of the assessee is that the Assessing Officer has taken status of the assessee as AOP disregarding the status shown in the return of income. Even for this year, the copy of the return of income filed by the assessee is not made available to us in the paper book although the assessee has submitted paper book of 119 pages. Under these facts, we do not find any merit in this ground of the Cross Objection raised by the assessee.
7. In the result, both the Cross Objections are dismissed.
8. Now we take up the appeal of the Revenue for assessment year 2006-07 i.e. I.T.A. No.533/Lkw/2010.
9. First we decide Ground No.5 because this ground has direct bearing on the eligibility of the assessee for exemption u/s 11. Ground No. 5 is as under:
"5. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts of the case in deleting the addition of Rs.28,77,000/- on account of capitation fee without appreciating the facts and material brought on record by the Assessing Officer."
10. Brief facts regarding this issue till the assessment stage are noted by the learned CIT(A) in Para 8.1 of his order, which is reproduced below for the sake of ready reference:
"8.1 The assessing officer has discussed this issue at pages 3 to 22 of the assessment order. From page 5 onwards the assessing officer has reproduced the observations made by the Ld. CIT -1 Kanpur in his order u/s 12AA(3) dated 15.12.08. At the very outset, the appellant has stated that the assessing officer has mainly relied upon the order of the Ld. CIT which was quashed by the Hon'ble ITAT vide their order dated 17.04.09 in ITA no. 64 / LUC /2009. Copy of the order of ITAT has been filed. The finding given by the AO in this regard contained in pages 3 to 5 (Para 6.1 to 6.4) and also in the last paragraph at page 22 of the order, are reproduced hereunder:
"Capitation fees A Survey u/s 133A was conducted on 13.11.2007 at the business as well as office premises. During the course of survey conducted by the Department, the documentary evidence in shape of Annexure B-8, B-9 and B-10 were found and impounded. On perusal of these documents, it has been noticed that the assessee had been receiving systematically capitation fees as recorded in these documents for giving admission to the students in Management Quota. During the course of survey operation as well as subsequently during the course of assessment proceedings for A.Y. 2005-06 and also proceedings u/s 12AA(3), the assessee tried to give evasive replies till complete details of donations received during A.Yrs. 2006-07 and 2007-08 as per the impounded documents and consolidated as per Annexure -I & II has not been provided to it. These annexure were provided by the Ld.CIT-l, Kanpur to the assessee on 19.6.2008 and the same were provided to the assessee by this office along with notice u/s 142(1) dated 10.10.2008. The Ld.CIT-1, Kanpur has made detailed observation in pares 12.1 to 12.4 & 13 and held that the assessee society had been found guilty of taking capitation fees which has not been recorded in its regular books of accounts.
6.2 During the course of assessment proceedings, the assessee took several adjournments and tried to avoid the compliance of notice u/s 142(1) dated 10.102.008. In the meantime notice u/s 144 dated 4.12.2008 was issued requiring the assessee to furnish its explanation and documents by 10.12.2008. Ultimately, in response to above notices and order sheet entries dated 15.12.2008 and 22.12.2008, the assessee has submitted written reply dated 24.12.2008 and produced two students of BDS courses namely Shri Vinay Kumar and Km. Rachika Sachdeva for examination on 23.12.2008, whose statements were recorded and a copy thereof was supplied to the assessee. In nutshell, the assessee has given a list of 40 students from whom capitation fees of Rs.28,77,000/- as per Annexure-B had been received during A.Y. 2006-07. This list has been prepared from impounded documents marked Annexure B-8. It has been admitted that the cash amount of Rs.28,77,000/- received from the students admitted in various courses under Management quota has not been recorded in its regular books of accounts on the basis of which return of income was filed. It has also been admitted that this amount has been received in addition to the amount of fee which has been shown in separate column of Annexure B-8 and such fee has been accounted for in its regular books of accounts. !t has also been admitted that it has been recorded against each entry of payment received that the amount has been received on a/c of capitation fees. These facts could be verified from the certified zerox copy of Annexure B-8 enclosed and formed part of this order. Despite these facts, the assessee has claimed that these amounts represent advance security money refundable to the students after he had taken admission in the College. The submission made by the assessee to this effect is false as the assessee had admitted that no receipt whatsoever has been given to the students in support of taking capitation fees from them. Similarly, no receipt was taken at the time of its claim that the money was refunded to them as claimed by the assessee. It has been specifically recorded that the amount has been received on a/c of capitation fees. In many cases, the payment of capitation fees and fees had been taken on the same date and therefore, it could not be said that the capitations fees was refunded on receipt of fees from the students. The assessee's submission to the extent that the amount of fee received from these students and accounted for in the books of account has been admitted. Similarly, the amount of advance fee received from Shri Jayant Kumar and Tilak Raj Pathak is also verifiable from the fee account and advance fee account. Therefore, the expiration to this extent has been admitted. However, it is held that the assessee had taken capitation fees of Rs.28,77,000/- out of its books of accounts which was not recorded in its regular books of accounts. The statement given by the two students namely, by Shri Vinay Kumar and Km. Rachika Sachdeva, who has deposited Rs.2 lacs and Rs.1 lac respectively as per Annexure-B could not be given credence as they had no explanation for not taking receipts at the time of making cash payment. Further, when they had to deposit admission fee in the bank, then there was no occasion for making cash payment without taking receipts from the institution. The statement given by these two students are collusive in nature and were given under the influence of management which could affect their career in many ways. Even otherwise they could not justify the amount of cash payment without getting a receipt from the society. The practice of charging capitation fees or receiving handsome amount of cash without giving any receipts is not only in violation of provisions of Income tax Act but such practice made by a charitable institution cannot be recognized by the Court of Law.
6.3 The submissions made by the assessee vide its letter dated 24.12.2008 is reproduced as under:-
Query about capitation fee/plus amount/case amount:
Detailed explanation on this point has already been furnished from time to time and various confirmations have also been filed. Two students Vinay Kumar and Km. Rachika Sachdeo whose names are appearing in Annexure B-8 have appeared before your good self and their statements were also recorded. They have clarified the position of fee and money given as advance refundable and refunded to them. At present various examinations of students are being conducted at various centers and students are busy in their examination and they could not attend your office. As stated earlier we had not received any capitation money. The notings available in annexure B-8, 9 & 10 represent the amount of fees and advance security refundable amount received from some students. We have already filed a detailed chart explaining the entries & notings of these annexures. Copies of fee due a/c & advance fee for A.Y. 2006-07 have already been filed. Copy of fee a/c is also enclosed. Copy of advance fee a/c for A. Y. 2006-07 & 2007-2008 are also enclosed. The amount of fee received are duly accounted for in Fee A/c and shown as income in Income & Expenditure A/c. We have already filed a chart of amounts received as security refundable. No addition is therefore called for Fee & advance fee received from Jayant Kumar & Tilak Raj Pathak as noted in annexure B-8 are verifiable from fee due a/c & advance fee a/c and detailed chart showing adjustment of amounts received from them in various years is also enclosed.
6.4 The assessee was requested to produce the students from whom capitation fees was received . No compliance was made except as mentioned earlier nor any other evidence in support of its explanation was produced. In view of this, it is held that the assessee has taken capitation fees of Rs.28,77,000/- out of its books of accounts which was not recorded in its regular books of accounts. Therefore, the unaccounted capitation fees of Rs.28,77,000/- represents its undisclosed income of the assessee and added to the income of the assessee. Since the assessee has furnished inaccurate particulars and concealed its income to the extent of addition made under this head, penalty proceedings u/s 271(1)(c) read with section 274 of the Act is being initiated. The annexure -I & II, Annexure-B, Annexure B-8 (page NO.49 to 58- Session-2005-06) are enclosed and formed part of this order.
(Addition of Rs.28,77,000/- on a/c of undisclosed income)"
11. Being aggrieved, the assessee carried the matter in appeal before learned CIT (A) who has deleted this addition and now the Revenue is in appeal before us.
12. Learned D.R. of the Revenue supported the assessment order. He also submitted that the only explanation of the assessee is that as per imprest book, this entire amount was in the nature of refundable security and not capitation fees and the same was refunded afterwards but such imprest book was not found at the time of survey. It was also submitted that the regular cash book does not contain any entry regarding such receipt either as capitation fees or as refundable security. Reliance was placed on the decision of Hon'ble Madras High Court rendered in the case of P. S. Govindasamy Naidu and Sons Vs Assistant Commissioner of Income-tax [2010] 324 ITR 44.
13. As against this, learned A.R. of the assessee supported the order of learned CIT(A). A specific query was raised by the Bench as to whether any letter was issued by the assessee asking the students for refundable security deposit and whether any receipt was issued to the students for this alleged refundable security and whether any receipt was obtained from the students at the time of refund of security as claimed and in reply, it was categorically stated by learned A.R. of the assessee that neither any letter was issued to the students asking for refundable security deposit nor any receipt was issued to the students at the time of receiving the refundable security nor any receipt was obtained from the students at the time of refund of the security. He submitted that even then, the claim of the assessee cannot be rejected because giving or taking receipt is between the assessee and the students and even in the absence of receipt, the character of the receipt does not change. A further query was raised as to whether after granting admission subsequent to the receipt of refundable security, as has been explained by the assessee, whether the entire amount of such refundable security was refunded or only the balance amount being in excess of fees (if any) was refunded and in case such refundable security was less than such fees payable then whether only short amount was received or full amount was received and in reply, it was submitted that entire fees was received and entire refundable security was refunded without any adjustment of one against the other. He also submitted that confirmation of students/guardians about security refundable amount are available on page 52 to 67 of the paper book and the copy of the imprest cash book is also available on pages 68 to 97 of the paper book. Reliance was placed on the following judicial pronouncements:
ACIT vs. U.P. State Road Transport Corporation Ltd. [2009] 13 MYC 1114 (Trib) Sheo Narain Duli Chand Vs Commissioner of Income-tax [1969] 72 ITR 766 (All) Director of Income-tax (Exemption) Vs Keshav Social and Charitable Foundation [2005] 278 ITR 152 (Del) Manockjee Cowasjee Petit Charities vs. DIT (Exemption) [20012] 136 ITD 355 (TM) 13.1 He also submitted that on page No. 164 of the paper book is the details of application of fund and from the same, it can be seen that the total utilization of cash is Rs.1186.94 lacs as against gross income of Rs.1110.66 lacs.
14. We have considered the rival submissions, perused the material available on record and the judgments cited by both the sides. First of all, we examine the facts of the present case. We find that the copy of impounded diary marked as Annexure-B8 is annexed by the Assessing Officer with the assessment order and in the same, we find that noting is there that certain amount was received towards college fees and other amount was received towards capitation fees. Inspite of this clear evidence found in course of survey that the assessee was collecting capitation fees from the students, the assessee is trying to explain such entries noted in impounded diary that the person noting the diary has wrongly mentioned capitation fees instead of refundable security. In addition to this, the assessee has tried to explain this receipt of capitation fees/refundable security in the manner that such receipts are accounted for in imprest cash book and same was refunded also afterwards as per the same imprest cash book. In our considered opinion, the assessee has tried to build a story to nullify the hard evidence found in course of survey regarding receipt of capitation fees but such story is far away from the facts and it is not realistic and hence not acceptable. First of all, it is not acceptable that any person will note the term capitation fees against a particular receipt instead of refundable security because the term capitation fees is less popular and prevalent as compared to the term refundable security and hence, unless a person is knowing exactly that receipt is on account of capitation fees, it is difficult to accept that the person will write this term by way of mistake. Moreover, the story made out by the assessee that such receipt of money was refundable security and the same was credited in imprest cash book is also highly improbable and not acceptable because if some refundable security is received in normal course, the same will find credit in the regular cash book and not in imprest cash book. This explanation of the assessee is also unrealistic that neither any receipt was issued to the students at the time of receipt of this amount nor any receipt was obtained from the students at the time of refund of this amount. How a person will give a huge amount in cash without obtaining receipt, if the same is refundable security and not capitation fees and how the college authority will refund the amount in cash without obtaining the receipt from the concerned recipient. Moreover, it is also improbable that if Rs.1 lac is taken as security and the fees is Rs.90,000/- that instead of refunding the balance amount of Rs.10,00/- to the student on account of refundable security after adjusting the fees of Rs.90,000/-, the student will pay the full fees of Rs. 90,000/- again and the assessee will refund the entire amount of Rs.1 lac in cash and if the fees is suppose Rs.1,20,000/-, then instead of paying Rs.20,000/- only, the student will pay Rs.120,000/- again and thereafter take refund of Rs.1 lac from the assessee. Considering all these aspects, this story of the assessee that this amount is wrongly noted in the diary as capitation fees but in fact, it is refundable security, which was subsequently refunded, is not acceptable in the facts of the present case.
14.1 Now in the light of the above facts of the present case, we examine the applicability of various judgments cited by learned A.R. of the assessee.
14.2 The first judgment is the Tribunal decision rendered in the case of ACIT vs. U.P. State Road Transport Corporation Ltd. (supra). We find that there was no dispute involved in that case regarding the capitation fees and therefore, this Tribunal decision is not relevant in the present case.
14.3 The second decision cited by learned A.R. of the assessee is the judgment of Hon'ble Allahabad High Court rendered in the case of Sheo Narain Duli Chand Vs Commissioner of Income-tax (supra). In this case, it was held that all the oral and documentary evidence produced by the assessee were rejected by the Tribunal mainly on suspicion and conjectures and therefore, the decision of the Tribunal is not legally sustainable. In our considered opinion, this judgment is not applicable in the facts of the present case. In the present case, hard evidence is brought on record by the Revenue in the form of impounded diary as per which receipt of capitation fees is established and the same could not be controverted by the assessee and a story has been framed by the assessee to nullify this hard evidence brought on record by the Revenue but the same is without any merit for various reasons as discussed in above Para and therefore, the rejection of such explanation of the assessee is not on the basis of suspicion and conjectures but the fact is that the explanation given by the assessee that entire amount was refunded and the entire fees was collected separately without adjusting the refundable security against the fees is highly improbable. We have also seen that neither any letter was issued asking for security nor any receipt was issued at the time of deposit nor any receipt was obtained at the time of refund. Hence, in the facts of the present case, this judgment of Hon'ble Allahabad High Court is also not rendering any help to the assessee.
14.4 The third judgment cited by learned A.R. of the assessee is the judgment of Hon'ble Delhi High Court rendered in the case of Director of Income-tax (Exemption) Vs Keshav Social and Charitable Foundation (supra). In this case, the issue in dispute was whether for the reason that the details of donors was incomplete, such donation can be treated as unaccounted money. This judgment is not relevant regarding this issue of receipt of capitation fees and, therefore, the same is not rendering any help to the assessee in the present case.
14.5 The last judicial pronouncement cited by learned A.R. of the assessee is the decision of Third Member of the Tribunal rendered in the case of Manockjee Cowasjee Petit Charities vs. DIT (Exemption) (supra). This Tribunal decision is also on a different issue and not on the issue of capitation fees and therefore, the same is not applicable in the present case. As per the above discussion, we have seen that none of the judgments cited by learned A.R. of the assessee is rendering any help to the assessee in the present case. As against this, the judgment of Hon'ble Madras High Court cited by learned D.R. rendered in the case of P. S. Govindasamy Naidu and Sons Vs Assistant Commissioner of Income-tax [2010] 324 ITR 44 is directly on the issue because in this case also, the issue in dispute was receipt of capitation fees although the same was in respect of the provision of section 10(22) of the Act. In that case, it was held that the Tribunal rightly came to the conclusion that the amounts were in fact paid only by way of capitation fee and not towards corpus account of the assessee and, therefore, the assessee was not entitled to exemption u/s 10(22) of the Act. In addition to this, it is also observed by Hon'ble Madras High Court in Para 6 of this judgment that the CIT(A) has merely applied the decision made in earlier years to grant the relief and considered the payment as a voluntary contribution and hence exempted under section 11(1)(d) of the Act. Although section is different in that case, being section 10(22), but still it has to be accepted that when the Revenue has been able to establish the receipt in question a capitation fees, the same cannot be considered as exempt income u/s 11 also. Regarding the claim of learned A.R. of the assessee that confirmation from the students are brought on record in which they have stated that this amount was paid towards refundable security, we would like to observe that when the students and parents are under obligation to the assessee, who has granted admission to them and they were continuing their studies, the assessee can easily obtain such confirmations but on the basis of such confirmations alone, the noting found in the course of survey in the impounded diary cannot be overlooked and these confirmations are self-serving documents obtained by the assessee and therefore, on the basis of these confirmations alone, the noting in the impounded diary found during survey cannot be ignored.
14.6 It is also seen that the students/parents were not produced by the assessee before the Assessing Officer in support of these confirmations and we could have restored the matter to the file of the Assessing Officer to examine those students/parents but it was submitted by learned A.R. of the assessee that it is not possible for them to produce the students/parents if the matter is restored back because all the students have passed out and it is not possible to trace them.
15. As per above discussion, we have seen that hard evidence has been brought on record by the Revenue in the form of impounded diary as per which the assessee noted that the amount was towards capitation fees and the explanation furnished by the assessee are highly improbable and not acceptable and, therefore, we hold that in the facts of the present case, this receipt of Rs.28.77 lac was on account of capitation fees and, therefore, we reverse the order of learned CIT(A) on this issue and restore that of the Assessing Officer. This ground of the Revenue's appeal is allowed.
16. Now, we take up Ground No. 1, which is as under:
"1. The learned Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts of the case in directing the Assessing Officer to compute the income of the assessee under section 11 & 12 of the Income Tax Act, 1961 by ignoring the fact that the Department has not accepted the order of the Hon'ble ITAT regarding grant of registration under section 12A of the Income Tax Act, 1961 to the assessee in A.Y. 2005-06 and filed an appeal under 260A of the Act, before the Hon'ble High Court, Allahabad."
17. Learned D.R. of the Revenue supported the assessment order whereas learned A.R. of the assessee supported the order of learned CIT(A).
18. We have considered the rival submissions, perused the material available on record and gone through the orders of the authorities below. Although for this reason that registration u/s 12A was not granted initially and this issue is pending before Hon'ble High Court, we do not find any merit in this ground of the Revenue because when admittedly registration u/s 12A is granted by the I.T.A.T., the assessment has to be completed u/s 11 & 12 of the Act until and unless such order of the Tribunal is reversed by Hon'ble High Court. However, in view of our decision for Ground No.5 as per above Para, we would also like to observe that once this issue is decided in favour of the Revenue, the assessee is not eligible for exemption u/s 11 as has been held by the A.O. in Para 13 of the assessment order and we hold so because this issue is also raised by the revenue as to whether the asessee is eligible for exemption u/s 11 or not. As per section 13 (1) (c) (ii), if any part of income is applied for the benefit of any person referred to in section 13 (3), no benefit is allowable u/s 11 or 12 and since the receipt of capitation fees is not accounted for, it stands established that income of the assessee to that extent stands utilized for the benefit of one or more persons specified u/s 13 (3). This aspect is consequential to the finding in respect of receipt of capitation fees particularly when it is so held by the A.O. also in Para 13 of the assessment order. We hold that this has to be accepted that the assessee is not eligible for exemption u/s 11. We, therefore, allow this ground of Revenue's appeal with these observations.
19. Ground No. 2 is as under:
"2. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts of the case in deleting the addition of Rs.5,40,000/- on account of salary paid to the specified persons covered under section 13(3)/40A(2)(b) of Income Tax Act, 1961 without appreciating the facts brought on record by the Assessing Officer."
20. Learned D.R. of the Revenue supported the assessment order whereas learned A.R. of the assessee supported the order of learned CIT(A).
21. We have considered the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that it is noted by learned CIT(A) in Para 13.1 of his order that identical point was involved in assessment year 2005-06 and the same has been decided by the Tribunal in favour of the assessee. This finding of learned CIT(A) could not be controverted by learned D.R. of the Revenue and hence, we do not find any reason to interfere in the order of learned CIT(A) on this issue also. This ground is also rejected.
22. Ground No. 3 is as under:
"3. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts of the case in deleting the addition of Rs.10,79,421/- relating to items of previous year debited in the Income & Expenditure a/c and to compute the income of the assessee as per the provisions of section 11 & 12 of the Income Tax Act, 1961 without appreciating the facts that the Department has not accepted the order of Hon'ble ITAT regarding grant of registration under section 12 of the Income Tax Act 1961 to the assessee and filed an appeal under section 260A of the Act, before the Hon'ble High Court, Allahabad."
23. Learned D.R. of the Revenue supported the assessment order whereas learned A.R. of the assessee supported the order of learned CIT(A).
24. We have considered the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that this issue has been decided by learned CIT (A) as per Para 17.1 of his order, which is reproduced as under:
"Since the appellant's income has to be computed in accordance with the provisions of section 11 & 12 of the Act, disallowance of any expenditure has no meaning except for computing that threshold of 85%. The Assessing Officer is directed to compute the threshold of application of income without considering this expenditure."
24.1 From the above Para of the order of learned CIT(A), we find that this issue was decided by learned CIT(A) on the basis that the Assessing Officer has to compute the application of income without considering this expenditure but in view of our decision in respect of Ground No. 5 that the assessee is not eligible for exemption u/s 11, the order of learned CIT (A) on this issue is not sustainable because now, application of income is not relevant because now the income is to be assessed and for that deduction is not allowable in respect of a prior year. Hence, we reverse the order of learned CIT (A) on this issue and restore that of the A.O. This ground of the Revenue's appeal is allowed.
25. Ground No. 4 is as under:
"4. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts of the case in deleting the addition of Rs.42,21,000/- made by the Assessing Officer under section 68 of the Income Tax Act, 1961 on account of corpus donation, without appreciating the material brought on record by the Assessing Officer. Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has also erred in law and on facts in ignoring the fact that the assessee could not prove creditworthiness and genuineness of such corpus donations."
26. Brief facts regarding this issue till the assessment stage are noted by learned CIT(A) in Para 7 of his order, which is reproduced below for the sake of ready reference:
"7. GROUND RELATING TO ADDITION OF CORPUS DONATION AMOUNTING TO Rs.42,21,000/-
The assessing officer while making the addition has observed as under:
"Vide this office notice u/s 142(1) dated 10.10.2008, the assessee was requested to furnish details of corpus donation received during the year under consideration and to prove its genuineness by furnishing information and documents as under:-
Corpus Donation Please furnish details of corpus donation received during the A.Y. 2001-02 as under:-
SI. No., Name & complete postal address of the donors, date of donation, amount of donation, mode of donation (cash or cheque) Please also specify the amount of donation in cash and the amount received through banking channel.
Please furnish confirmatory letters from the donors giving his complete postal address, PAN No., Ward/Circle, date, amount and mode of donation. In case the donation is made through banking channel please furnish cheque No./Draft No., date, amount and name & address of bank/branch.
After taking several adjournments and also after issue of notice u/s 144 dated 4.12.2008, the assessee vide its letter dated 24.12.2008 has submitted details of corpus donation as per Annexure-A of forming part of this order. It has been submitted that the total corpus donation of Rs.4,221,000/- has been received during the year which consists of cash donation of Rs.40,00,000/- from 14 donors in support of which affidavits are filed. Remaining amount of donation of Rs.2,21,000/- has been stated to have been received by cheque from various persons . The assessee has not given the name and address of the persons nor the details of cheque No., date, amount etc. Regarding affidavits filed in support of cash donation from 14 persons, the assessee had not given the source of income, source of donation and details of PAN No., Ward, etc. of the donors. Cash donation by each donor ranging from Rs.2 lacs to Rs.4 lacs was claimed to have been received. The assessee had shown similar amount of cash donation received in previous years also. The assessee delayed furnishing of confirmation letters and the same were furnished only at the fag end of the limitation period to avoid further proof. In view of this, the assessee vide order sheet entry dated 24.12.2008 on which date the affidavits were filed, was requested to produce the donors along with the documents in support of genuineness of donation made by them. The assessee could not make compliance to this query. The assessee also failed to furnish the details of donation of Rs.2,21,000/- received by cheque. In view of this, it is held that corpus donation of Rs.42,21,000/- represents undisclosed income of the assessee and I am satisfied that the amount of Rs.42,21,000/- shall be charged to income tax as income of the assessee of the previous year under consideration u/s 68 of IT. Act.
Without prejudice to the findings recorded in Para 5.1 above, entire amount of corpus donation of Rs,42,21,000/- represents income of the assessee in view of provisions being made 2/(24) (iia)/u/s 68 of IT. Act and added to the total income of the assessee. Since the assessee has furnished inaccurate particulars and concealed its income to the extent of addition made under this head, penalty proceedings u/s 271(1)(c) read with section 274 of the Act is being initiated.
(Addition of Rs.42,21,000/- u/s 2(24) (iia)/ u/s 68 of the Act on a/c of undisclosed income)
27. Being aggrieved, the assessee carried the matter in appeal before the learned CIT(A), who has deleted this addition and now the Revenue is in appeal before us.
28. It was submitted by learned D.R. of the Revenue that confirmations were filed by the assessee on 24/12/2008 whereas the assessment was getting time barred on 31/12/2008 and, therefore, there was no time available with the Assessing Officer to verify and make enquiries in respect of these confirmations. He also submitted that the amount received, as per these donations, was not utilized for charitable purposes. Reliance was placed by learned D.R. on the judgment of Hon'ble Jharkhand High Court rendered in the case of Mukesh Shaw vs. ITO, 246 CTR 82. He also submitted that the affidavits submitted by the assessee in respect of these donors are available on pages 32 to 45 of the paper book and from the same, it can be seen that some of the affidavits were notarized on 26/12/2008 and therefore, the same could not be submitted on 24/12/2008 also.
28.1 As against this, learned A.R. of the assessee supported the order of learned CIT(A). He also submitted that the details of corpus fund received is available on page No. 31 of the paper book and from the same, it can be seen that affidavit of all the donors were filed before the Assessing Officer. He placed reliance on the judgment of Hon'ble Delhi High Court rendered in the case of Director of Income-tax (Exemption) Vs Keshav Social and Charitable Foundation [2005] 278 ITR 152. He further submitted that in this case, it was held by Hon'ble Delhi High Court that the addition of donations as cash credit and denying benefit u/s 11 & 12 is not justified. He also placed reliance on the Tribunal decision in assessee's own case for assessment year 2005-06 in I.T.A. No.821/Lkw/08 and I.T.A. No.34/Lkw/09 dated 18/11/2009. He submitted that the copy of the Tribunal decision is available on pages 217 to 278 of the paper book and the relevant portion is on pages 269 to 274 of the paper book.
29. We have considered the rival submissions, perused the material available on record and the judgments cited by both the sides. We find that in view of our decision in respect of Ground No. 5 that the assessee is not eligible for exemption u/s 11, the order of learned CIT (A) on this issue is also not sustainable because now, even corpus donation is not exempt u/s 11. Hence, we reverse the order of learned CIT (A) on this issue and restore that of the A.O. This ground of the Revenue's appeal is allowed.
30. Ground No. 6 is as under:
"6. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts of the case in deleting the addition of Rs.9,580/- on account of interest on TDS without appreciating the fact that the Department has not accepted the order of the ITAT regarding grant of registration under section 12A of the Act, and filed an appeal before Hon'ble High Court of Allahabad, which is pending for adjudication."
31. Learned D.R. of the Revenue supported the assessment order whereas the learned A.R. of the assessee supported the order of learned CIT(A).
32. We have considered the rival submissions. In view of our decision in respect of Ground No. 5 that the assessee is not eligible for exemption u/s 11, the order of learned CIT (A) on this issue is also not sustainable every income is taxable as the assessee is not eligible for exemption. Hence, we reverse the order of learned CIT (A) on this issue also and restore that of the A.O. This ground of the Revenue's appeal is allowed.
33. In the result, the appeal of the Revenue is partly allowed.
34. Now we take up the appeal of the Revenue for assessment year 2007-08 i.e. I.T.A. No.534/Lkw/2010. In this appeal, the Revenue has raised the following grounds:
"1. The learned Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts of the case in directing the Assessing Officer to compute the income of the assessee under section 11 & 12 of the Income Tax Act, 1961 by ignoring the facts that the Department has not accepted the order of the Hon'ble ITAT regarding grant of registration under section 12A of the Income Tax Act, 1961 to the assessee in A. Y.2005-06 and filed an appeal under 260A of the Act, before the Hon'ble High Court, Allahabad.
2. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts of the case in deleting the addition of Rs.5,40,000/- on account of salary paid to the specified persons covered under section 13(3)/40A(2)(b) of Income Tax Act, 1961 without appreciating the facts and material brought on record by the Assessing Officer.
3. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts of the case in deleting the addition of Rs.72,28,450/- on account of capitation fee without appreciating the facts and material brought on record by the Assessing Officer.
4. That the order of the Ld. CIT (A)-II, Kanpur dated 25.05.2010 needs to be quashed and the order passed by the Assessing Officer dated 31.12.2009 be restored.
5. That the appellant craves leave to modify any of the grounds of appeal mentioned above and/or to add any fresh grounds as and when it is required to do so."
35. It was agreed by both the sides that ground Nos. 1 & 2 are identical with ground Nos. 1 & 2 in assessment year 2006-07 and Ground No. 3 is identical to Ground No. 5 in A.Y. 2006 - 07and therefore, the same may be decided on similar lines. In assessment year 2006-07, Ground No. 2 was rejected and Ground No. 1 and 5 were allowed. Hence, in this year also, Ground No. 2 is rejected and Ground No. 1 and 3 are allowed on similar lines.
36. In the result, this appeal of the Revenue is also partly allowed.
37. In the combined result, both the Cross Objections of the assessee are dismissed and both the appeals of the Revenue are partly allowed.
(Order was pronounced in the open court on the date mentioned on the caption page) Sd/. Sd/.
(SUNIL KUMAR YADAV) ( A. K. GARODIA )
Judicial Member Accountant Member
Dated:07/02/2014
*C.L.Singh
Copy of the order forwarded to :
1.
The Appellant
2.
The Respondent.
3.
Concerned CIT
4.
The CIT(A)
5.
DR, ITAT, Lucknow
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