Income Tax Appellate Tribunal - Amritsar
J.K. Public Shcool, Srinagar vs Department Of Income Tax on 11 September, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
BEFORE SH. A.D. JAIN, JUDICIAL MEMBER
AND SH. B.P.JAIN, ACCOUNTANT MEMBER
I.T.A. No.387(Asr)/2013
Assessment year:2009-10
PAN :AABTJ1255B
Income Tax Officer, vs. M/s. J.K. Public School,
Ward-1, Srinagar. Humhama, Srinagar
(Appellant) (Respondent)
Appellant by:Sh.Tarsem Lal,
Respondent by:Sh.M.A.Mir, Cost Accountant
Date of hearing: 04/09/2014
Date of pronouncement:11/09/2014
ORDER
PER B.P.JAIN, AM ;
This appeal of the Revenue arises from the order of the CIT(A), Jammu dated 18.03.2013 for the assessment year 2009-10 .The Revenue has raised following grounds of appeal:
"1. On the facts and circumstances whether the ld. CIT(A) was right in allowing exemption u/s 10(23C) (iiiad) of the I.T.Act, 1961, when the gross receipt of the assessee as per the books of account impounded during survey conducted on 03.03.2009 exceed Rs. 1 crore which included Tuition Fee receipts, bus fee receipt and Hostel fee receipts and the assessee was under
obligation to apply and obtain registration from Worthy CCIT, Amritsar u/s 10(23C)(iiiad) of the Income Tax Act, 1961.2 ITA No.387(Asr)/2013
2. On the facts and circumstances whether the ld. CIT(A) was right in allowing exemption u/s 10(23C) (iiiad) of the I.T.Act, 1961 on the ground that there is no hostel building and no such hostel income whereas the documents impounded during survey operation on 03.03.2009 mention hostel income of Rs.9,25,000/-.
3. On the facts and circumstances whether the ld. CIT(A) was right in allowing exemption u/s 10(23C) (iiiad) of the I.T.Act, 1961, on the ground that the bus fee receipt is included in the tuition fee of Rs.74,08,292/- where as per the books of account impounded during survey conducted on 03.03.2009 mention Tuition fee receipts at Rs.64,49,700/- & Bus fee receipts at Rs.28,80,750/-.
4. On the facts and circumstances whether the ld. CIT(A) was right in allowing exemption u/s 10(23C) (iiiad) of the I.T.Act, 1961 when the assessee has failed to disclose rental income earned by it for letting out of shops at Rs.6,27,300/-.
5. On the facts and circumstances whether the ld. CIT(A) was right in allowing exemption u/s 10(23C) (iiiad) of the I.T.Act, 1961 when the assessee had failed to furnish explanation regarding nature and to whom the loan and advances of Rs.19,12,293/- have been made.
6. The appellant craves to amend of add any one more grounds of appeal."
2. The brief facts of the case are that survey under section 133A of the Income Tax Act, 1961 was conducted on 03.03.2009 at the business premises of the assessee. Books of account and other documents were impounded including loose papers, budget file and other misc. documents. The assessee had declared 'Nil' income after claiming Rs.26,82,387/- 3 ITA No.387(Asr)/2013 exempt u/s 10(23C)(iiiad) of the Act. The assessee was required to explain the difference in total receipts and expenditure as per the impounded documents and as per books of account furnished. The assessee is a school, not registered as a charitable trust u/s 12A(a) of the Act and not registered u/s 10(23C) with the Chief Commissioner of Income Tax. In the return of income, the assessee had declared gross receipts at Rs.74,08392/-, which represents only tuition fee. However, the Annexure AS-4 titled as 'Budget File' of the impounded material and another Annexure BS-1 which is a register of monthly summary of fee, depict total receipts in excess of Rs. 1 crore. As per the impounded documents, the AO worked out the gross receipts as under:
S.No. Nature of receipt Amount in Rs.
1. Gross receipts declared in the return 74,08,392/-
(Tuition fee)
2. Bus fee 28,80,750/-
3. Hostel Income 9,25,000/-
Rental Income 6,27,300/-
Gross receipts for the year 1,18,41,442/-
4 ITA No.387(Asr)/2013
2.1. In the absence of any explanation by the assessee, the AO observed that there is no proper maintenance of books of account and accordingly, he invoked the provisions of section 145(3) of the Act. 2.2. On the gross receipts declared at Rs.74,09,392/-, the assessee has declared excess of income over expenditure at Rs.26,82,387/-. From the impounded documents, the AO observed that the assessee has earned Bus receipts of Rs.28,80,750/- and Hostel receipts of Rs.9,25,000/-, totaling Rs.38,10,750/- and the AO after allowing reasonable expenditure worked out net profit @ 20% at Rs.7,62,150/- and added the same to the income of the assessee.
2.3. From the impounded documents, the AO observed that the assessee has not declared rental income from letting out of shops at Rs.6,27,000/- and accordingly, the AO after allowing deduction u/s 24(a) @ 30% at Rs.1,88,190/- computed the income from house property at Rs.4,39,110/- and added the same to the income of the assessee.
2.4. The assessee had advanced loans of Rs.19,12,293/- and no explanation to that extent was furnished by the assessee and accordingly the same was added to the income of the assessee. The AO also added Rs.49,028/- u/s 68 of the Act being excess credit in the balance sheet vide para 5.4 of his order and assessed the income at Rs.58,44,968/-. The AO 5 ITA No.387(Asr)/2013 ultimately denied the assessee the benefit of section 10(23C)(iiiad) of the Act, as claimed .
3. Before the Ld. CIT(A), the assessee made submissions dated 21.02.2013 and 07.03.2013. In the submissions dated 21.02.2013, the assessee submitted that the documents impounded are budgeted figure and therefore, the AO was not justified in rejecting the books of account. Further, the AO was not justified in not allowing exemption u/s 10(23C)(iiiad) of the Act. As regards hostel income, the assessee submitted before the ld. CIT(A) vide para 3B.3 of CIT(A)'s order that the AO has relied on the budgeted estimates of bus and hostel, which is unwarranted. But vide submissions dated 07.03.2013, the assessee submitted that the total fees includes tuition fee aalongwith the bus fee and assessee did not maintain any hostel during the impugned year.. As regards the income from house property, the assessee submitted that it pertains to different assessees. Regarding addition of Rs.19,12,293/-, the assessee submitted that the said amount is for advance for purchase of fixed assets and Rs.49028/- is the difference in the loan account and balance as per bank statement. 3.1. The Ld. CIT(A) after considering the submissions of the assessee has allowed exemption u/s 10(23C) of the Act by accepting the explanation of 6 ITA No.387(Asr)/2013 the assessee and the relevant findings of the ld. CIT(A) in paras 4.1 to 4.3. are reproduced for the sake of convenience as under:
"I have considered the submission of the appellant and findings of the AO in the assessment order. The entire addition and withdrawal of exemption u/s 10(23C) is based on the interpretation of the document discovered during the survey operation on the appellant. The AO in the assessment order page 3 has observed that if gross receipts of Rs.74,08,392/- (declared in the return as Tuition fee) Bus fee of Rs.28,80,750/-, Hostel income of Rs.9,25,000/- and Rental income of Rs.6,27,300/-) are taken into account, the gross receipts for the year under consideration comes to Rs.1,18,41,442/-. Perusal of the document obtained during the survey operation clearly reveals that these are budgeted figures for the year 2008-09. It is very clearly written on the top of the document as school budget 2008-09. This is apparently a projection and not the real income. The budgeted figure of income and expenditure for various heads are as under:
1. School Budget:Income of Rs.64,49,700/-, Expenditure of Rs.64,81,784/-
2. Bus Budget" Income of Rs.28,80,750/-, Expenditure of Rs.33,33,600/-
3. Hostel Buydget"Income of Rs.9,25,000/-, Expenditure of Rs.10,16,800/-.
The AO has ignored the expenditure figures which are higher that income while completing the assessment.
4.2. The school budget figure stated above reveals total income of Rs.64,49,700/- whereas the appellant has shown receipt of Rs.74,08,392/-. The AO has taken the higher figure and added on top of it the budget estimate of Bus Income and Hostel Income and arrived at the figure of receipt beyond Rs.1 crore and denied exemption. Taking two figures from two different baskets does not appeal to logic. The appellant in his submission dt. 07.03.2013 has stated that the tuition fee receipt of Rs.74,08,392/- included bus fee but not hostel fee because no hostel was maintained. Due to this reason the school budget figure is lesser than the total fee shown. I find force in his 7 ITA No.387(Asr)/2013 submission. Further, perusal of receipt and payment account of J.K.Public School for the year ending 31.03.2009 reveals that the appellant has shown expenditure on hiring of vehicle for Rs.8,40,530/- which is expenditure on bus charges. This suggest that the appellant has reflected Rs.74,08,392/- as total fee receipt including Tuition fee and Bus Fee. Since corresponding expenditure on bus charges is debited I the income expenditure account his make sense that the amount of tuition fee is inclusive of bus charges. Regarding hostel charges and other receipts, they together can not make the figure exceed Rs.1 crore. Moreover, the appellant denied to have mentioned any hostel and the outcome of survey also did not indicate the existence of any hostel building. From above discussion it is inferred that the budget document is not the real income and expenditure account. Every head whether it be school budget, bus budget or hostel budget had deficit because expenditure was more than the income. Placing reliance on the impounded budgeted document during survey is not enough to disallow exemption u/s10(23C)(iiiad) unless corroborated by independent enquiry. The AO has not established through enquiry that the impounded document reflected real income and not a mere projection. I am of the opinion that withdrawal of exemption is not in order on the basis of a document from which no conclusive proof can be arrived at and I hold accordingly. This ground of the appellant is allowed. 4.3. When the exemption is denied, the AO has made several addition on account of receipt from Bus fee, Hostel Fee, Income from House Property, unaccounted expenditure and cash credit. Since the exemption is restored the other grounds of additions become irrelevant and not required to be discussed. In effect the appeal is allowed."
4. The Ld. DR, Mr. Tarsem Lal, submitted a paper book containing copies of impounded documents and pointed out that all the papers are signed by the Accountant, Office Incharge and Secretary of the assessee- school. By no stretch of imagination, the said figure can be said to be 8 ITA No.387(Asr)/2013 budgeted figure even if at the front page it is mentioned as budget estimates. The document with regard to bus income refers to the number of students carried by the bus from different places and charges against each route. The Ld. CIT(A) has accepted the submission of the assessee simply without rebutting the same to the A.O. or without making any enquiry of whatsoever kind. The controversy in the submission made by the assessee, which is part of Ld. CIT(A)'s order where the assessee has submitted that it does not maintain any hostel whereas in the findings by the ld. CIT(A) in para 4.1, the assessee has incurred expenditure of Rs.33,33,600/- as against income from Bus at Rs.28,80,750/-, expenditure of Rs.10,16,800/- against income of Hostel at Rs.9,25,000/- and Rs.64,81,874/- as against income of school at Rs.64,49,700/-. The total expenditure of school, bus and hostel in para 4.1 of Ld. CIT(A)'s order comes at Rs.1,08,32,184/-, which is the actual expenditure incurred by the assessee, apart from advances of Rs.19,12,293/- made and remained unexplaned. This itself shows that the assessee is having receipt of more than Rs. 1 crore. On one hand, the assessee has submitted that it does not maintain any hostel and on the other hand, it is having expenditure on Hostel at Rs.33,33,600/- during the year vide para 4.1 of Ld. CIT(A)'s order. The Ld. DR argued that the order of the ld. CIT(A) is perverse and prayed to reverse the same and restore that of the A.O. 9 ITA No.387(Asr)/2013 5 The Ld. Counsel for the assessee, Mr. M.A. Mir, on the other hand, argued that the impounded documents are having many pages and the first page refers to budgeted figures and therefore, the AO is not justified in treating the same as actual figure especially after rejecting the books of account. The assessee does not maintain any hostel in the impugned year. Mr. M.A. Mir, the ld. counsel for the assessee supported the order of the Ld. CIT(A).
6. We have heard the rival contentions and perused the facts of the case. During the course of survey, Income Tax Department impounded certain documents which included loose papers and the front page of the loose paper was titled as "Budget File'. In fact, during assessment proceedings no explanation has been given by the assessee to the query raised by the AO. In the facts and circumstances, the AO had to consider the figures in the impounded documents as actual figures for computing the income of the assessee, especially when the figures in the impounded documents were not reconciled from the books of account maintained by the assessee, though he had the option to make enquiries but the same was not done. 6.1. Thereafter, the assessee made submission before the ld. CIT(A) where it was submitted that the assessee is not maintaining any hostel and bus fee is included in the tuition fee. The submissions made by the assessee has 10 ITA No.387(Asr)/2013 been accepted by the ld. CIT(A) and exemption u/s 10(23C)(iiiad), as claimed by the assessee was allowed to the assessee without making any enquiry or without documentary evidence on record and even without rebutting the submissions of assessee to AO. As regards the submission of the assessee before the ld. CIT(A) the total receipts as tuition fee is Rs.74,08,392, which includes bus receipts, was accepted as it is without making any enquiry. Before the ld. CIT(A), the assessee submitted that income from house property amounting to Rs.4,39,110/- pertains to different assessees has also been accepted without bringing on record which income pertains to which assessee and the order of Ld. CIT(A) is non- speaking in this regard. The Ld. CIT(A) also accepted the submission of the assessee with regard to the addition of Rs.19,12,293/-, which has been submitted by the assessee that the same is advanced for purchase of fixed assets, in the absence of evidence on record to prove that the advance has actually been given as claimed and the order is non-speaking to this extent. With regard to addition of Rs.49,028/-, it was submitted that it is a reconciliation of the difference in the loan amount and as per bank statement without bringing on record reconciliation statement, submission has been accepted by the Ld. CIT(A), without speaking a word in his order. From the reading of the submissions of the assessee, reproduced in the order of the ld. 11 ITA No.387(Asr)/2013 CIT(A) and findings of the Ld. CIT(A), it appears that the ld. CIT(A) has accepted the submissions of the assessee in toto without passing a speaking order and without making any inquiry of whatsoever kind. 6.2. Moreover, the Ld. CIT(A) has given a finding in para 4.1 of his order with regard to the expenditure incurred during the year as under:
i) School expenditure Rs.64,81,784/-
ii) Bus expenditure Rs.33,33,600/-
iii) Hostel Budget Rs.10,16,800/-
Total : Rs.1,08,32,184/-
Apart from this, the Ld. CIT(A) has accepted Rs.19,12,293/- given as advance for the purchase of fixed assets and in the absence of any finding to the contrary, the same can be presumed to have been given during the impugned year, which makes the total out go at Rs.1,27,44,477/- during the impugned year. Therefore, to this extent, the assessee can be presumed to have earned the gross receipts during the impugned year. This finding of the expenditure by the ld. CIT(A) clearly shows the receipts of the assessee's school are more than Rs. 1 crore. Also, as per the submission of the assessee dated 07.03.2013 in para 3C of Ld. CIT(A)'s order, the assessee submitted of not having maintained any hostel whereas the ld. CIT(A) in para 4.1 reproduced and discussed hereinabove shows the hostel expenditure during the impugned year is at Rs.10,16,800/-. It appears that the ld. CIT(A) has allowed the relief of just accepting the submission of the assessee. 12 ITA No.387(Asr)/2013 Accordingly, the ld. CIT(A) is not justified in allowing exemption u/s 10(23C)(iiiad) of the Act, as claimed by the assessee . However, decision have been made by the Ld. CIT(A) without making any enquiry and without rebutting the AO on the submissions made by the assessee before him, it will be in the interest of justice, if the matter is remanded to the file of the Assessing Officer, who will make the enquiry with regard to the tuition fee, bus fee and hostel fee etc., in detail and decide the issue accordingly denovo but after affording adequate opportunity of being heard to the assessee. Accordingly, the matter is set aside to the file of the Assessing Officer for deciding the issue denovo in terms of our findings, hereinabove.
7. In the result, the appeal of the assessee in ITA No.387(Asr)/2013 is allowed for statistical purposes.
Order pronounced in the open court on 11th September, 2014.
Sd/- Sd/-
(A.D.JAIN) (B.P. JAIN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 11th September, 2014
/SKR/
Copy of the order forwarded to:
1. The Assessee:M/s. J.K. Public School, Srinagar.
2. The ITO Ward 3(1), Sgr.
3. The CIT(A), Jammu.
4. The CIT, Jammu
5. The SR DR, ITAT, Amritsar.
True copy By order