Income Tax Appellate Tribunal - Jaipur
Rajasthan Housing Board, Jaipur vs Acit, Jaipur on 20 January, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 862 to 866/JP/2014
fu/kZkj.k o"kZ@Assessment Year : 2005-06, 2006-07 & 2010-11 to 2012-13.
Rajasthan Housing Board,
Janpath, Jyoti Nagar,
Jaipur.
cuke
Vs.
Assistant Commissioner of Income Tax,
Circle-5,
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AAALR 0046 F
vihykFkhZ@Appellant
izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 902 to 906/JP/2014 & 21/JP/2013
fu/kZkj.k o"kZ@Assessment Year : 2005-06, 2006-07, 2010-11 to 2012-13 & 09-10.
Assistant Commissioner of Income Tax,
Circle-5,
Jaipur.
cuke
Vs.
Rajasthan Housing Board,
Janpath, Jyoti Nagar,
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AAALR 0046 F
vihykFkhZ@Appellant
izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) &
Shri Prakul Khurana (Advocate)
jktLo dh vksj ls@ Revenue by : Smt. Rolly Agarwal (CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 22.11.2016.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 20 /01/2017.
vkns'k@ ORDER
PER SHRI KUL BHARAT, JM.
This bunch of 11 appeals by the assessee and revenue are directed against the different orders of ld. CIT (Appeals)-II, Jaipur pertaining to assessment years 2005-06, 06-07 & 09-10 to 12-13. Since in all these appeals common issues are involved, they are therefore, taken up together and are being disposed off by this consolidated order, for the sake of convenience.
2. First we take up appeals pertaining to A.Y. 2005-06 in ITA No. 862 & 902/JP/2014.
ITA No. 862/JP/2014 (Assessee's Appeal) :3. The assessee has raised the following grounds of appeal :-
"The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of the AO in holding that notice u/s 148 and consequent order passed u/s 147/143(3) is in accordance with the provisions of the Act .
The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in holding that the contingency and equalization reserve is in the nature of provision made on estimate and not an ascertained liability and accordingly confirming disallowance of Rs. 2,16,00,123/- out of the disallowance of Rs. 5,27,66,150/- made by the AO.
The assessee craves right to add, alter or amend any of the grounds of the appeal.
The appropriate cost be awarded to the assessee."
4. Briefly stated the facts of the case are that the assessment under section 147 read with section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was framed vide order dated 28th March, 2013. While framing the assessment, the AO made disallowance of claim of Contingency and Equalization Reserve (in short CER) of Rs. 5,27,66,150/- and addition of undisclosed profit from auctioned property of Rs. 3,21,15,960/- thereby, computing the total income of Rs. 9,56,79,740/-. Aggrieved by this order, assessee preferred an appeal before ld. CIT (A), who after considering the submissions partly allowed the appeal. While partly allowing the appeal, the ld. CIT (A) rejected the ground raised against reopening of the assessment and restricted the disallowance of CER to Rs. 2,16,00,123/- and deleted the addition made on account of profit on sale of property through auction.
5. Now the assessee as well as revenue are in appeal before us.
6. Ground No. 1 is against reopening of the assessment.
6.1 The ld. Counsel for the assessee reiterated the submissions as made in the written synopsis and submitted that the reopening is a clear cut case of change of opinion. He submitted that admittedly, the reopening is made after the expiry of four years. The AO has not brought any material on record suggesting that the assessee has failed to disclose fully and truly all material facts necessary for assessment. He submitted that all material facts were before the AO in the original proceedings. He further submitted that although subsequently, the income is assessed at NIL as the assessee was declared as local authority under section 10(20) of the Act. But the legality of re-opening of assessment still remains under challenge.
6.2. On the contrary, the ld. D/R has supported the orders of the authorities below and submitted that there is no change of opinion. The AO has not made any query on this issue, therefore, it cannot be said that it was a case of change of opinion.
6.3. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. We find that the ld. CIT (A) has rejected this ground. However, it is also observed by the ld. CIT (A) that the exemption under section 10(20) has been allowed and total income has been computed at Nil. Since reopening is a legal issue and goes to the very root of the jurisdiction of the AO, undisputedly, the reopening was made after the expiry of 4 years of the original assessment, therefore, in terms of provisions of section 147, the AO was required to demonstrate that assessee has failed to disclose fully and truly all material facts. It is not disputed by the revenue that Balance Sheets and the Revenue account were before the AO during the original assessment as well. Therefore, it cannot be inferred that the assessee has failed to disclose all material facts which were necessary for assessment. The ld. Counsel has relied upon the judgments of Hon'ble Bombay High Court rendered in the case of CIT vs. Reliance Energy Ltd. 81 DTR 130 (Bom.) and also in the case of Dynacraft Air Controls vs. Sneha Joshi & Others, 355 ITR 102 (Bom.). The Hon'ble High Court in the case of Dynacraft Air Controls vs. Sneha Joshi & Others (supra) has held that under section 147 of the Act, for the AO to reopen an assessment, he must have reason to believe that income chargeable to tax has escaped assessment for any assessment year. Under the proviso to section 147, where an assessment has been made under section 143(3), no action shall be taken under that section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. This is a jurisdictional requirement which must be fulfilled where an assessment is sought to be reopened beyond a period of four years. The existence of the jurisdictional condition must be indicated in the reasons which are furnished to the assessee. The fulfillment of the condition is a pre-requisite and if it is absent, assessment cannot be reopened beyond four years. The AO cannot improve upon the reasons for reopening the assessment or bridge the lacunae later. If the reasons disclosed do not indicate the fulfillment of the jurisdictional requirement, the reopening is invalid. In the present case the reasons as recorded by the AO for reopening the case u/s 148 of the Act reads as under :-
" Facts of the case are that the assessee filed the return of income for the A.Y. 2005-06 on 29.10.2005 declaring total income at Rs. 1053790/- and the assessment was completed vide order u/ 143(3) dated 22.10.2007 at income of Rs. 40797633/-. The matter is before High Court on the issue of status. The department treated it as AOP while Tribunal has treated it as Local authority.
The case records were examined in connection with assessment proceedings for AY 2009-10.
As per the accounting system of the assessee (followed in AY 2005-06) also, income component of the assessee is loaded/added to the cost of land and construction to decide selling price of the property in respect of projects undertaken in a particular year. These income components are in the name of interest, maintenance and repairs of tools and plants and administrative expenses. These are shown in the debit side of the P&L account with negative sign instead of crediting in P & L account directly. Thus profit is included in sales. When properties are handed over these are shown as 'sales written off'.
As a matter of fact a sale price is determined on anticipation basis covering the cost of project. Thus the sale price which is accounted for in the P & L /Works account can be called anticipated sale price (ASP). Or in other words anticipated sale price (ASP) .................................... the current year is realized in the current year or subsequent year by way of adjusting of sale price in the work account.
The component of income/gross profit in the ales of property effected/accounted during the year along with net revenue surplus including income from other activities is displayed as under -
Sale of property effected/accounted for Rs. 1017157933/-
Factors loaded in cost Interest Rs. 89862655/- Maintenance and repairs of tools & plant Rs. 4825430/- Administrative expenses Rs. 98005444/- Gross profit comprised in sales Rs. 192693529/- Net revenue surplus for the year Rs. 1863511/- Claim of Contingency & Equalization Reserve (CER)
However, it was found that the assessee has been claiming Contingency & Equalization Reserve (CER) in works account. In this year also the assessee has debited Rs. 52766150/- as CER in works account.
CER Fund is created by the assessee by charging certain percentage on development/construction of works properties as per costing principles of RHB. The liability so created is utilized to compensate for various loses on account of unforeseen circumstances, on account of freezing of cost of property which may be necessitated in some cases, awards to be paid as result of litigation etc in property disposal, to compensate loses on account of sick contracts, if required. Thus this CER is not ascertained liability. It is contingent liability which I not allowable.
Thus apparently income to the extent of Rs. 52766150/- has escaped assessment. This escapement was on account of failure of the assessee to disclose the accounts in proper Income from auction of plots-
Besides this it is also seen that the assessee does not show profit from auction of plots. It is seen that substantial part of sale is from auction of properties. In auction, properties fetch more price than the normal price. As stated above, a sale price is determined by the Board on anticipation basis covering the cost of project. This sale price which is accounted for in the P&L/Works account can be called anticipated sale price (ASP). Or in other words ASP is the price realized on sale which includes profit. This profit on property constructed in the current year is realized in the current year or in subsequent year by way of adjusting of sale price in the works account. But in case of auction the profit is more which is not accounted for in P&L. Before auction properties, Reserve price is based on ASP which in normal circumstances would be more than ASP. In case of auction, the property will fetch much more price than the ASP as reserve price is fixed on considering the market value. During assessment proceedings for AY 2009-10 the assessee explained that the difference of reserve price and auction price of plots/shops is already considered/booked on market value under the head "sales written off" and accordingly net properties are shown in balance sheet. As long as sales are effected on ASP these contentions of the assessee is required to be accepted. However, if the auction is done assessee would be getting much more than the reserve price. As mentioned above reserve price itself would be more than ASP. Excess profit realized over ASP which is adjusted as sales written off does not go to P&L but it reduces the closing works valuation.
As per details filed/available in records the asseee earned sale proceeds from auctioned properties as under -
Auction of plots Rs. 84612516/-
Auction of shops Rs. 22440687/-
Rs.10,70,53,203/-
Since complete details are not available it would be reasonable to estimate that the assessee earned 30% on sale price in respect of auctioned property which is not accounted for in the P&L account. Thus there was suppression of income to the extent of R. 3,21,15,960/-.
This escapement was on account of assesee's failure to present account in transparent manner. The accounts submitted are prepared in convoluted manner and actual realization and costing involved are not reflected in normal style.
In view of above, I have reason to believe that income to the extent of Rs. 8,48,82,110/- (Rs. 52766150/- + 3,21,15,960/-) has escaped assessment on account of failure on the part of the assessee to present its accounts in transparent manner."
We find that the reasons are contrary to the records. The assessee has, during the course of original assessment furnished all its accounts, Balance Sheets and the Revenue account before the AO. Therefore, there is no material suggesting that the assessee has not disclosed the material facts fully and truly for his assessment. Therefore, respectfully following the judgment of the Hon'ble Bombay High Court rendered in the case of Dynacraft Air Controls vs. Sneha Joshi & Others, 355 ITR 102 (Bom.), we hereby quash the assessment being invalid. This ground of the assessee is allowed.
7. Ground No. 2 relates to confirming disallowance of Rs. 2,16,00,123/- out of disallowance of Rs. 5,27,66,150/- made by the AO.
7.1. This ground is not survived as the AO has already assessed the income at Nil. This ground is rejected as infructuous.
8. Ground Nos. 3 and 4 are general in nature and needs no adjudication.
9. The appeal of the assessee is partly allowed.
ITA No. 902/JP/2014 (Revenue's appeal ):10. This is revenue's appeal for the same assessment year 2005-06. As we have quashed the assessment in assessee's appeal in ITA No. 862/JP/2014, therefore, we dismiss this appeal of the revenue as the assessee succeeded in the ground of legality of re-opening of the assessment. Moreover, the AO subsequently has assessed the income at Nil, in favour of the assessee.
Now we take up appeals for the A.Y. 2006-07 :
ITA No. 863/JP/2014 (Assessee's Appeal) :11. First we take up assessee's appeal in ITA No. 863/JP/2014. The assessee has raised the following grounds of appeal :-
" 1. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of the AO in holding that the notice u/s 148 and consequent order passed u/s 147/143(3) is in accordance with the provisions of the Act.
2. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in holding that the contingency and equalization reserves is in the nature of provision made on estimate and not an ascertained liability and accordingly confirming disallowance of Rs. 93,73,063/- out of the disallowance of Rs.7,48,73,063/-made by the AO.
3. The assessee craves right to add, alter or amend any of the grounds of the appeal.
4. The appropriate cost be awarded to the assessee.
12. Briefly stated the facts of the case are that the assessment under section 147 read with section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was framed vide order dated 29th October, 2013. While framing the assessment, the AO made disallowance of claim of Contingency and Equalization Reserve (in short CER) of Rs. 7,48,73,063/- and addition of undisclosed profit from auctioned property of Rs. 2,75,35,863/- thereby computing the total income of Rs. 13,16,92,416/-. Aggrieved by this order, assessee preferred appeal before ld. CIT (A), who after considering the submissions partly allowed the appeal. While allowing the appeal, the ld. CIT (A) rejected the ground raised against reopening of the assessment and restricted the disallowance of CER to Rs. 93,73,063/- and deleted the addition made on account of profit on sale of property through auction.
13. Now the assessee as well as revenue are in appeal before us.
14. Ground No. 1 is against reopening of the assessment.
14.1 The ld. Counsel for the assessee reiterated the submissions as made in the written synopsis, which are reproduced as under :-
"It is submitted that the original assessment in this case was completed u/s 143(3). The assessment is reopened after the expiry of the four years. Hence the assessee's case falls in proviso to section 147 wherein the assessment can't be reopened unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year. In the present case, the assessee in the course of original assessment filed the Balance Sheet and the Revenue account (PB 67-69). In course of these proceedings, assessee furnished the works account in which sale value of auction of plots and the contingency charged to work is separately mentioned (PB 65-66). The contingency equalization and reserve fund is also appearing in the Balance Sheet (PB 67) where the opening balance in such fund, addition during the year, utilization from the same and the closing balance of the fund is reflected. The AO after considering the same has completed the assessment without drawing any adverse inference. In the reasons recorded, for issue of notice u/s 148, it is nowhere mentioned that these facts were not disclosed to the AO. Rather, the AO has taken these amounts from the details disclosed by the assessee itself in the course of original assessment proceedings. Even in the reassessment order, there is no finding of the AO that any income chargeable to tax has escaped assessment by reason of failure on part of the assessee to disclose fully and truly all material facts. Hence, proceedings u/s 147 initiated by the AO is simply on the basis of change of opinion without taking into consideration, the material on record which shows that income of the assessee is not chargeable to tax at all. Reliance in this connection is also placed on the following cases:-
CIT Vs. Eco Media (P) Limited 81 CCH 85 (Mad.)(HC) (2012) CIT Vs. Reliance Energy Ltd. 81 DTR 130 (Bom.) (HC) (2013) Dynacraft Air Controls Vs. Sneha Joshi &Ors. 355 ITR 102 (Bom.)(HC) (2013) Titanor Components Ltd. Vs. ACIT &Ors. 60 DTR 273 (Bom.) (HC) (2011) DCIT Vs. Convertech Equipment Pvt. Ltd. 32 CCH 136 (Del.)(Trib.) (2012) Qmax Test Equipments Pvt. Ltd. vs. ACIT 36 CCH 544 (Hyd.)(Trib.) (2013) Atomstroy export vs. Dy. Director of Income Tax (International Taxation) & Ors.77 DTR 134 (Bom.)(HC) Gemini Leather Stores Vs. ITO 100 ITR 1 (SC) Jindal Photo File Ltd. Vs. DCIT 234 ITR 170 (Del.) CIT Vs Bhanji Lavji 79 ITR 582(SC) Marudhar Hotels Pvt. Ltd. Vs. DCIT 259 ITR 509 (Raj.) CIT Vs Kelvinator of India Ltd [2002] 256 ITR 1 (Delhi-FB) It is submitted that assessee has filed detailed letter dt. 29.08.2013 objecting the issuance of notice u/s 148 (PB 36-66). However, the AO without disposing of those objections has proceeded to complete the assessment which is against the principle laid by the Supreme Court in case of GKN Driveshafts (India) Ltd. Vs. ITO & Ors. 259 ITR 0019. Further, in the reasons recorded by the AO there is no reference of the auction sale but the AO in reassessment proceedings has considered that this is also another reason for which income has escaped assessment. The law does not provide any power to the AO to record the reason in the assessment order and thereafter to proceed to complete the assessment by considering such issue as income escaping assessment.
It is also submitted that the Ld. CIT vide order dated 29.05.09 (PB 75) has granted registration to the assessee u/s 12AA of the Act w.e.f. 27.03.08. Both the order of ITAT and CIT was available with the AO before he initiated the proceedings u/s 148. It may also be noted that section 12A (PB 73-74) of the Act has been amended by Finance Act 2014 w.e.f. 01.10.2014 whereby a proviso is inserted to provide that where registration has been granted to the trust or institution u/s 12AA, then the provision of section 11 and 12 shall apply in respect of any income derived from the property held under trust for which assessment proceedings are pending before the AO on the date of such registration. Hon'ble ITAT, Jaipur Bench, Jaipur in case of Shyam Mandir Committee Vs. ACIT order dated 02.06.2016 reported at 138 DTR 367 has held that this proviso has retrospective application as it is inserted to remove the hardship of charitable trust/institutions and therefore assessee is entitled to benefit of section 11 and 12 for A.Y. 07-08 on account of the fact that assessment proceedings were pending though the Tribunal has granted registration w.e.f. 01.04.2008. Hon'ble Rajasthan High Court in case of CIT Vs. Jodhpur Development Authority 139 DTR 1 has also held that such authority are entitled to registration u/s 12A r.w.s. 12AA as they fall within the expression "advancement of any other object of general public utility". Therefore, once the provisions of section 12A is applied, there cannot be any income to the assessee chargeable to tax which can be said to have escaped assessment.
The Ld. CIT(A) without considering the above factual and legal position has simply held that AO has recorded proper reasons to believe that income chargeable to tax pertaining to contingency and equalization reserve has escaped assessment. The order passed by CIT(A) is therefore erroneous in as much as he has not given any reasoning on the submission of the assessee as to why the submission of the assessee is not acceptable.
In view of above, the assessment made by the AO is illegal and bad in law and be quashed."
14.2. On the contrary, the ld. D/R has supported the orders of the authorities below and submitted that there is no change of opinion. The AO has not made any query on this issue, therefore, it cannot be said that it was a case of change of opinion.
14.3. We have already dealt with this issue at length in the assessee's appeal in ITA No. 862/JP/2014 for the A.Y. 2005-06, and allowed the ground of the assessee after following the judgments of the various Hon'ble High Courts. No change into facts and circumstances is pointed out by the revenue. Therefore, following the decision arrived at in respect of this ground in ITA No. 862/JP/2014 (supra), we allow this ground of the assessee.
15. Ground No. 2 relates to confirming disallowance of Rs. 93,73,063/- out of disallowance of Rs. 7,48,73,063/- made by the AO.
15.1. This ground is not survived as the AO has already assessed the income at Nil. This ground is rejected as infructuous.
16. Ground Nos. 3 and 4 are general in nature and needs no adjudication.
17. The appeal of the assessee is partly allowed.
ITA No. 903/JP/2014 (Revenue's appeal) :18. This is Revenue's appeal for the A.Y. 2006-07. As we have quashed the assessment in assessee's appeal in ITA No. 863/JP/2014, therefore, we dismiss this appeal of the revenue. Moreover, the AO subsequently, has assessed the income at Nil, in favour of the assessee.
ITA No. 21/JP/2013 (Revenue's appeal) :19. Now we take up Revenue's appeal in ITA No. 21/JP/2013 for the Assessment Year 2009-10. The revenue has raised the following grounds of appeal :-
" On the facts and in the circumstances of the case and in law the ld. CIT (Appeals) has erred in :-
Allowing exemption u/s 11 of the I.T. Act, 1961 to the assessee without appreciating the fact that AO has given detailed reasons in the assessment order to establish that activities of the assessee are not charitable in view of amended provisions of section 2(15) of the I.T. Act, 1961 despite it being registered u/s 12AA by the CIT and therefore it is not entitled for benefit of exemption u/s 11.
Not appreciating the fact that even if the assessee was registered u/ 12AA by the CIT in pursuance of order of Hon'ble ITAT dated 31.03.2009 & 04.05.2012, the AO could deny to allow benefit of section 11 to the assessee in view of newly inserted proviso to section 2(15) and the AO did not allow benefit of section 11 observing that the assessee is hit by the proviso to section 2(15).
Deleting the disallowance of Contingencies and Equalization Reserve amounting to Rs. 26,99,65,069/- made by the AO.
Deleting the disallowance of depreciation of Rs. 1,73,53,269/- by the AO.
Deleting the addition of undisclosed profit from auctioned property amounting to Rs. 15,24,58,828/- made by the AO.
Deleting the disallowance of expenses on Haj Yatris amounting to Rs. 4,08,483/-.
20. Briefly stated the facts of the case are that the case of the assessee was picked up for scrutiny assessment and the assessment was framed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) vide order dated 30.12.2011. While framing the assessment, the AO held that the assessee is not a charitable organization, therefore, he disallowed the exemption u/s 11 and computed the income after making disallowance of CER, depreciation, undisclosed profit from auctioned property and expenses on Haz Yatri at Rs. 142,35,90,440/-. The assessee aggrieved by this order, preferred an appeal before ld. CIT (A), who after considering the submissions partly allowed the appeal. While partly allowing the appeal, the ld. CIT (A) held that the assessee is entitled for exemption u/s 11 and thereby, directed to delete the addition made on account of assessee's surplus of Rs. 98,34,04,791/- and also deleted the addition made on account of CER, depreciation and held that the disallowance of expenses on the Haz Yatris is not an expenditure as per objectives of the appellant Board. The ld. CIT (A) also deleted the disallowance made on account of estimated profit from auction of the plots.
21. Aggrieved by this, the revenue is in appeal before this Tribunal.
22. It is noticed that there is no ground no. (i).
23. Ground nos. (ii) & (iii) are against allowing exemption u/s 11 of the IT Act. The ld. D/R submitted that the ld. CIT (A) was not justified in granting the exemption. He submitted that the AO has given a finding of fact that the assessee is engaged in the activity of trade and commerce. The ld. D/R supported the order of the AO. The ld. D/R placed reliance on the judgment of the Hon'ble Jammu and Kashmir High Court rendered in the case of Jammu Development Authority vs. Union of India and Another in ITA No. 164/2012 (CMA No. 2/2012).
23.1. On the contrary, ld. Counsel for the assesee vehemently argued that the AO was not justified in declining the exemption. The action of the AO is based on whims and fancies and contrary to the settled principle of law. He submitted that there is no dispute with regard to the fact that the activity of the assessee falls within the ambit of general public utility. He submitted that the AO has failed to appreciate the facts of the case in right perspective. He submitted that from the objectives of the assessee, it can be gathered that the assessee is engaged in the charitable activity. He submitted that housing is one of the important aspect of a man's life. The assessee is providing housing to the citizen of India. The assessee is framing various housing accommodation schemes related to schedule castes, schedule tribes and other economically backward classes. These schemes are subsidized and in the entire activity there is no profit motive involved. The AO merely on the basis that the assessee is auctioning some of its plots, therefore, held that the assessee is engaged in the activity of trade and commerce. He submitted that such basis is fallacious as the AO ought to have appreciated the entire activities being undertaken by the assessee. He submitted that under the identical facts, the Hon'ble Jurisdictional High Court in the case of CIT vs. Jodhpur Development Authority, 139 DTR 1 (Raj.) has held that the authority is carrying out charitable activities. He further placed reliance on the decision of Coordinate Bench in the case of Hoshiarpur Improvement Trust & Others vs. ITO in ITA No. 200/Asr/2010. Therefore, he supported the order of ld. CIT (A).
23.2. We have heard rival contention, perused the material available on record and gone through the orders of the authorities below. We find that the Coordinate Bench has dealt with the identical issue elaborately in the case of Hoshiarpur Improvement Trust & Others vs. ITO in ITA No. 200/Asr/2010. The Coordinate Bench has considered various judgments and came to the conclusion that as long as broader public cause is served, whether by the State funding or by efficient regulation of the affairs, it is an object of general public utility. Authorities below were not justified in declining the benefit of section 11 read with section 2(15) to the assessee, and in holding that the assessee trust was not covered by advancement of any object of general public utility. The Coordinate Bench has held that even if the activities in the nature of trade, commerce or business etc. are undertaken in the course of actual carrying out of advancement of any object of general public utility, till the end of the previous year relevant to the assessment year 2016-17, the activities will continue to be covered by the scope of Section 2(15). The year under appeal is 2009-10, therefore, respectfully following the decision of the Coordinate Bench in the case of Hoshiarpur Improvement Trust & Others vs. ITO in ITA No. 200/Asr/2010, we do not see any reason to interfere in the order of ld. CIT (A). Ground Nos. (ii) and (iii) are rejected.
24. Ground No. (iv) is against deleting the disallowance of Contingencies and Equalization Reserve amounting to Rs. 26,99,65,069/-. The ld. D/R supported the order of the AO.
24.1. On the contrary, the ld. Counsel for the assesee supported the order of ld. CIT (A).
24.2. We have heard rival contention, perused the material available on record and gone through the orders of the authorities below. The ld. CIT (A) has decided the issue in para 13 of his order as under :-
" After going through rival submissions it is seen that CER of Rs. 26,99,65,069/- is not debited in the P&L account. The disallowance of the Reserve does not affect the appellant's eligibility of claiming exemption u/s 11. Section 11 states that 85% of the total income of the institution should be applied towards the objects for which it was created. As the application of income by the Board during the year of R. 232,59,28,849/- as specified in Form 10B Audit Report is much more than the total income of the appellant shown at Rs. 98,90,80,448/- in the statement of total income filed with the return. It was informed by the ld. ARs that source of application of R. 232 crores are Capital loans of R. 27 crores (approx) taken by the appellant and Deposits made by the persons interested in buying houses of Rs. 360 crores odd and alo income of Rs. 98 crore odd shown in the return. The appellant has been held as a charitable organization following Hon'ble ITAT Jaipur Bench order dated 4.5.2012 and its income to the extent of application as mentioned in section 11 is exempt from taxation u/s 11, therefore there is no justification for making the disallowance of Rs. 26,99,65,069/- specially when the Reserve has been informed created from the sale proceeds of houses and not appropriated from profit shown in the P&L account called Revenue account as presumed by the AO."
Since we have affirmed the view of the ld. CIT (A) regarding entitlement of exemption u/s 11, the ld. CIT (A) has given a finding of fact in respect of application of income by the Board. Therefore, we do not see any reason to interfere in the order of ld. CIT (A), which is hereby confirmed. The ground of the revenue is rejected.
25. Ground No. (v) is against deleting the disallowance of depreciation of Rs. 1,73,53,269/-. The ld. D/R supported the order of the AO and submitted that the ld. CIT (A) was not justified in allowing the depreciation.
25.1. The ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee by the judgment of the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Tiny Tots Education Society, 330 ITR 21. The ld. CIT (A) has given a finding of fact in para 15 of his order as under :-
" After going through rival submissions it is seen that the AO is allowing depreciation on assets created during the year, but as per IT Act depreciation is to be allowed on WDV of assets even if they were purchased not in the year under consideration. Hon'ble Punjab and Haryana High Court decision in the case of CIT vs. Tiny Tots Education Society, 330 ITR 21 has held as under :-
" In the present case, the assessee is not claiming double deduction on account of depreciation as has been suggested by learned counsel for the Revenue. The income of the assessee being exempt the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. Judgment of the Hon'ble Supreme Court in Escorts Ltd & Anr. (supra) is distinguishable for the above reasons. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purpose of s. 11."
The AO is directed to delete the disallowance of R. 1,73,53,269/- as depreciation is to be allowed on WDV of the accumulated assets. The AO is directed to delete the disallowance relying upon Hon'ble Punjab & Haryana High Court decision also, in the case of Tiny Tots Education Society (2011) 330 ITR 21 cited above where on the same issue Hon'ble Court held : "The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue."
25.2. We have heard rival contentions and perused the material available on record. We find that ld. CIT (A) has deleted the disallowance by following the judgment of the Hon'ble Punjab & Haryana High Court in the case of Tiny Tots Education Society (supra). Therefore, we do not see any reason to interfere in the order of ld. CIT (A), the same is hereby upheld.
26. Ground No. (vi) is against deleting the addition of undisclosed profit from auctioned property amounting to Rs. 15,24,58,828/-. The ld. D/R supported the order of AO and submitted that the ld. CIT (A) was not justified in deleting the disallowance.
26.1. On the contrary, the ld. Counsel for the assessee submitted that the AO has made the addition on the basis of conjectures and surmises without any basis and the profit is estimated @ 30% on sale price which as per the AO was not accounted for in the P&L account.
26.2. We have heard rival contentions and perused the material available on record. We find that the ld. CIT (A) has given a finding of fact that the addition has been made at 30% without any basis with the presumption that the profit of 30% should have been earned on auction of commercial properties by the Board. This finding of fact is not controverted by the revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere in the order of ld. CIT (A), which is hereby confirmed.
27. Ground No. (vii) is against deleting the disallowance of expenses on Haj Yatris amounting to R. 4,08,483/-. The ld. D/R supported the order of the AO and submitted that these expenditures are not related to the activities of the assessee and cannot be termed as expended for the charitable cause. He submitted that the AO disallowed this expenditure on the basis that the assessee lost its status as charitable organization.
27.1. On the contrary, the ld. Counsel for the assessee has supported the order of the ld. CIT (A).
27.2. We have heard rival contentions and perused the material available on record. We find that the ld. CIT (A) has accepted the contention of the assessee on the ground that it will not make any difference even if such addition Application of income by the Board during the year of Rs. 232,59,28,849/- as specified in Form 10B Audit Report is much more than the total income of the appellant shown at Rs. 98,90,80,448/- in the statement of total income filed with the return. This finding of fact is not controverted by the revenue. Therefore, we do not see any reason to interfere in the order of ld. CIT (A), which is hereby confirmed.
27.3. In the result, appeal of the revenue is dismissed.
ITA NO. 864/JP/2014 (Assesee) ITA NO. 904/JP/2014 (Revenue)
28. Now we take up assessee's appeal in ITA No. 864/JP/2014 and revenue's appeal in ITA No. 904/JP/2014 pertaining to assessment year 2010-11. First we take up assessee's appeal in ITA No. 864/JP2014. The assessee has raised the following grounds of appeal :-
The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of the AO in holding that notice u/s 148 and consequent order passed u/s 147/143(3) is in accordance with the provisions of the Act .
The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of the AO in holding that the case of the assessee is covered by the first proviso to section 2(15) of the I.T. Act and therefore its object of advancement of general public utility shall not be a charitable purpose and accordingly holding that surplus of Rs. 30,71,09,491/- is not eligible for exemption u/s 11 & 12.
2.1.The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in not distinguishing the various case laws relied by assessee in holding that the case of the assessee is covered by the first proviso to section 2(15).
The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in holding that the contingency and equalization reserves is in the nature of provision made on estimate and not an ascertained liability and accordingly confirming disallowance of Rs. 7,22,21,715/- out of the disallowance of Rs. 24,36,53,857/- made by the AO.
The assessee craves right to add, alter or amend any of the grounds of the appeal.
The appropriate cost be awarded to the assessee.
29. Ground no. 1 is against reopening of the assessment.
29.1. The ld. Counsel for the assessee reiterated the submissions as made in the written submissions. The contention of the assessee as made in the written submissions are reproduced herein below :-
1. "It is submitted that assessee filed the return declaring Nil income on 01.10.2010. There is no assessment made u/s 143(3). The notice u/s 148 was issued on 08.02.2013, i.e. before the expiry of 4 years from the end of the relevant AY. As per section 151 as applicable prior to its amendment w.e.f 01.06.15, in a case where assessment is not made u/s 143(3)/147 i.e., where assessment is made u/s 143(1), no notice shall be issued u/s 148 by an AO who is below the rank of JCIT after the expiry of 4 years from the end of the relevant AY, unless the JCIT is satisfied on reasons recorded by the AO that it is a fit case for issue of such notice. Therefore, where an assessment is made u/s 143(1), the notice before the expiry of four years from the end of relevant AY is to be issued by the AO himself and the satisfaction of JCIT is not required. In present case as mentioned in Para 1 of the assessment order, the notice is issued after taking prior approval from Add. CIT. Delhi High Court in case of CIT Vs. SPL'S Siddhartha Ltd. 345 ITR 223 has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether. The same is also not an irregularity curable u/s 292BB. Therefore, the notice issued u/s 148 is illegal and bad in law and thus the assessment so framed be quashed.
The AO as stated in the assessment order has reopened the assessment for the reason that in scrutiny assessment for AY 2011-12 & 2009-10, it was held that activities of the assessee are in the nature of trade, commerce or business and therefore provisions of section 2(15) are not applicable. It may be noted that assessment for AY 2011-12 was made on 18.03.2013. Therefore, how the AO could envisages that in AY 2011-12 the activity of the assessee has been held to be commercial while issuing notice u/s 148 on 08.02.2013. So far as AY 2009-10 is concerned, before the issue of notice u/s 148, the Ld. CIT(A) vide its order dt. 26.10.2012 (PB 110-128) has held that assessee is entitled to exemption u/s 11 & 12 and therefore stand of the AO in treating the assessee as not fulfilling charitable purpose is not at all justified. Thus, when before the issue of notice u/s 148, it is held by the Ld. CIT(A) that assessee is a charitable institution eligible for exemption u/s 11, the reopening of assessment is bad in law and the same be quashed.
It is submitted that assessee has filed detailed letter dt. Nil to the AO objecting the issuance of notice u/s 148 (PB 37-54). However, the AO without disposing of those objections has proceeded to complete the assessment which is against the principle laid by the Supreme Court in case of GKN Driveshafts (India) Ltd. Vs. ITO & Ors. 259 ITR 0019. Therefore, for this reason also, the reopening is bad in law.
It is also submitted that Hon'ble ITAT vide its order dt. 31.03.2009 (PB 95-102) directed the Ld. CIT to grant registration to the assessee u/s 12AA. Thereafter, the Ld. CIT vide order dated 29.05.09 (PB 103) has granted registration to the assessee u/s 12AA of the Act w.e.f. 27.03.08. Thereafter, because of insertion of proviso to sec. 2(15) w.e.f. 01.04.2009, the registration granted to the assessee was withdrawn from AY 2009-10 but the Hon'ble ITAT vide order dt. 04.05.2012 (PB 104-109) set aside the order of Ld. CIT and restored the registration already granted u/s 12AA of the Act. All these orders were with AO before he initiated the proceedings u/s 148. Therefore, the reasons given by him for reopening the assessment that activities of the assessee are in nature of trade, commerce or business and therefore provision of section 2(15) is not applicable on it is bad in law. It may be noted that Hon'ble Rajasthan High Court in case of CIT Vs. Jodhpur Development Authority 139 DTR 1 has also held that such authority are entitled to registration u/s 12A r.w.s. 12AA as they fall within the expression "advancement of any other object of general public utility". Therefore, once the provisions of section 12A are applied, there cannot be any income to the assessee chargeable to tax which can be said to have escaped assessment.
The Ld. CIT(A) without considering the above factual and legal position has simply held that AO has recorded proper reasons that income chargeable to tax has escaped assessment as in this case no order u/s 143(3)/147 was passed prior to issuance of notice u/s 148 and there is a failure on part of the assessee to disclose truly and fully all material facts even though the addition made in AY 2008-09 (should be 2009-10) has not been sustained in the first appeal. In holding so, the Ld. CIT(A) has not given any reason as to why the various contention of the assessee is not acceptable."
In view of above, the assessment made by the AO is illegal and bad in law and be quashed.
29.2. The ld. D/R opposed the submissions and supported the orders of the authorities below.
29.3. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. The basis of reopening of the assessment was that the proviso 1 & 2 to section 2(15) of the Act were held to be applicable to the facts of the case. As per section 147 of the Act, the assessment can be reopened if the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Therefore, the reason of the AO was based upon his belief that provisions of section 2(15) were applicable on the facts of the case. Therefore, in our considered view, the AO was justified in reopening the assessment. This ground of the assessee is dismissed.
30. Now coming to the merit of Ground nos. 2 and 2.1, the identical issue came up for hearing in the A.Y. 2009-10 in the revenue's appeal, wherein considering the submissions of the assessee, we have decided the issue as under :-
"23.2. We have heard rival contention, perused the material available on record and gone through the orders of the authorities below. We find that the Coordinate Bench has dealt with the identical issue elaborately in the case of Hoshiarpur Improvement Trust & Others vs. ITO in ITA No. 200/Asr/2010. The Coordinate Bench has considered various judgments and came to the conclusion that as long as broader public cause is served, whether by the State funding or by efficient regulation of the affairs, it is an object of general public utility. Authorities below were not justified in declining the benefit of section 11 read with section 2(15) to the assessee, and in holding that the assessee trust was not covered by advancement of any object of general public utility. The Coordinate Bench has held that even if the activities in the nature of trade, commerce or business etc. are undertaken in the course of actual carrying out of advancement of any object of general public utility, till the end of the previous year relevant to the assessment year 2016-17, the activities will continue to be covered by the scope of Section 2(15). The year under appeal is 2009-10, therefore, respectfully following the decision of the Coordinate Bench in the case of Hoshiarpur Improvement Trust & Others vs. ITO in ITA No. 200/Asr/2010, we do not see any reason to interfere in the order of ld. CIT (A). Ground Nos. (ii) and (iii) are rejected."
In the light of above facts, the grounds of the assessee are allowed.
31. Ground no. 3 relates to confirming disallowance of Rs. 7,22,21,715/- on account of Contingency and Equalization Reserve.
32. Briefly stated the facts of the case are that the assessee has debited Rs.18,05,31,330/- (Rs.24,36,53,857-Rs.6,31,22,527) towards Contingency and Equalization Reserve (CER) in works account by crediting Rs.18,05,31,330/- to the CER Fund A/c in the Balance Sheet in A.Y. 10-11. Out of the amount of Rs.18,05,31,330/- credited in the CER fund account, Rs.10,83,09,615/- in A.Y. 10-11 is utilised in making the payment to Nagar Nigam/Nagar Parisad on handing over the colonies to them for maintenance/freezing of cost. Thus, net amount of Rs.7,22,21,715/- in A.Y. 10-11 remained unutilised during the year consideration. This amount is meant for payment to Nagar Nigam/other expenses on freezing of cost/handing over of the colonies to Nagar Nigam. This is an ascertained liability though the amount is estimated. The AO observed that CER fund is created by assessee by charging certain percentage on development/ construction of works as per the costing principle of the appellant. This is not an ascertained liability but a contingent liability. The explanation furnished by the assessee in this connection is not found convincing. He, therefore, made addition of Rs. 24,36,53,857/- to the income of the assessee in A.Y. 10-11. The Ld. CIT(A) held that the CER is in the nature of provision which has been calculated on the basis of approximate rules of thumb by adopting certain percentages which have also varied over a period of time. The CER created in the preceding years has still not been utilized and there is a huge balance in this reserve of Rs.122.81 crores, for the previous year ending 31.03.2010. This shows that this provision is an estimate and not an ascertained liability. The net amount in the CER of the years which is carried forward is Rs.7,22,21,715/- which cannot be allowed as deduction since it has been made on an estimate basis, is not an ascertained liability and has not been incurred during the year. He, therefore, confirmed the addition of Rs.7,22,21,715/- and deleted the balance amount.
32.1. The ld. Counsel for the assessee reiterated the submissions as made in the written brief. The submissions of the assessee are reproduced herein below :-
"The applicant is engaged in providing and satisfying the housing needs of the public at large. For this purpose it works out the cost of housing project by adding to the cost of land, the cost of development, the cost of construction, other direct cost, interest cost, tools & plants charges, administrative charges and CER. The CER is added for working out the cost of the houses for different income groups as per the principal of costing approved by its Costing & Finance Committee as under:-
Income Group Rate of CER upto 2010 Rate of CER after 2010
(PB 74) (PB 88)
EWS NIL Nil
LIG 5% 2%
MIG - I 7% 7%
MIG - II 8% 7%
HIG 9% 8%
Commercial 10% 10%
The purpose for charging CER to the cost of the work is to cover the following exigencies in execution of the work:-
To compensate various losses on account of unforeseen circumstances;
For losses on account of freezing of cost of property which may be necessitated in some cases;
To compensate for concessions given to EWS and LIG Houses;
For development of Park, construction of Govt. primary schools, dispensaries and community centres, etc.;
Awards to be paid as a result of litigation, etc. in property disposal;
Maintenance and upkeep of colonies after handing over of houses to the allottes till the colony is handed over to municipality/ local bodies.
From the above, it can be noted that the contingency charged to works account by crediting to Contingency & Equalization Reserve Fund A/c is not a contingent liability but is a provision for meeting an ascertained liability for which amount is estimated on the basis of the past experience. This is all the more evident from the fact that against contingency of Rs.24.36 crores charged to works account, an amount of Rs.17.14 crores is utilised during the year itself i.e. A.Y. 10-11 and only Rs.7.22 crores remained unutilised during the year. Thus, it is not an amount set apart to any reserve without any corresponding liability to incur the expenditure. Hon'ble Supreme Court in the case of Calcutta Company Ltd. reported at 37 ITR 1 held that difficulty in estimation of value would not convert an accrued liability into a contingent one. In the present case incurring of expenditure is certain. Hence, amount debited under the head contingency to the works account cannot be added to the income.
We may further point out that the amount provided on account of contingencies to the works account is not claimed in the profit & loss account. The amount provided on this account is carried forward as a part of closing WIP. Infact the entire work account is a part of Balance Sheet under the head properties in the asset side. Thus, when such amount is not claimed in the revenue account, there is no question of its disallowance. This fact is ignored by both the lower authorities even when it is specifically pointed out to them.
Similar disallowance made in A.Y. 2009-10 was deleted by CIT(A) vide order dated 26-10-2012 by giving the following findings:-
"After going through rival submissions it is seen that CER of Rs.26,99,65,069 is not debited in the P&L Account. The disallowance of the reserve does not affect the appellant's eligibility of claiming exemption u/s 11. Section 11 states that 85% of the total income of the institution should be applied towards the objects for which it was created. The application of the income by the Board during the year of Rs.232,59,28,849 as specified in Form 10B audit report is much more than the total income of the appellant shown at Rs.98,90,80,448 in the statement of total income filed with the return. It was informed by the ld ARs that source of application of Rs.232 crores are capital loans of Rs.27 crores (approx) taken by the appellant and deposits made by the persons interested in buying houses of Rs.360 crores odd and also income of Rs.98 crores odd shown in the return. The appellant has been held as charitable organization following Hon'ble ITAT Jaipur Bench order dt. 04.05.2012 and its income to the extent of application as mentioned in section 11 is exempt from taxation u/s 11, therefore there is no justification for making the disallowance of Rs.26,99,65,069/- especially when the reserve has been informed created from the sale proceeds of houses and not appropriated from profit shown in the P&L Account called Revenue account as presumed by the AO."
In view of above, the disallowance confirmed by the CIT(A) be deleted and the ground of the department be dismissed.
32.2. On the contrary, the ld. D/R supported the order of the authorities below.
32.3. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. We have decided this issue in the revenue's appeal in ITA No. 21/JP/2013 in favour of the assessee by taking into consideration the order of ld. CIT (A). The ld. CIT (A) has decided the issue in para 13 of his order as under :-
" After going through rival submissions it is seen that CER of Rs. 26,99,65,069/- is not debited in the P&L account. The disallowance of the Reserve does not affect the appellant's eligibility of claiming exemption u/s 11. Section 11 states that 85% of the total income of the institution should be applied towards the objects for which it was created. As the application of income by the Board during the year of R. 232,59,28,849/- as specified in Form 10B Audit Report is much more than the total income of the appellant shown at Rs. 98,90,80,448/- in the statement of total income filed with the return. It was informed by the ld. ARs that source of application of R. 232 crores are Capital loans of R. 27 crores (approx) taken by the appellant and Deposits made by the persons interested in buying houses of Rs. 360 crores odd and alo income of Rs. 98 crore odd shown in the return. The appellant has been held as a charitable organization following Hon'ble ITAT Jaipur Bench order dated 4.5.2012 and its income to the extent of application as mentioned in section 11 is exempt from taxation u/s 11, therefore there is no justification for making the disallowance of Rs. 26,99,65,069/- specially when the Reserve has been informed created from the sale proceeds of houses and not appropriated from profit shown in the P&L account called Revenue account as presumed by the AO."
In the light of above facts, we set aside the order of ld. CIT (A) by deleting the disallowance. The ground of the assessee is allowed.
32.4. In the result, appeal of the assessee is partly allowed.
33. Now we take up the revenue's appeal in ITA No. 904/JP/2014. The revenue has raised the following grounds :-
" On the facts and in the circumstances of the case and in law the ld. CIT (Appeals) Jaipur-II Jaipur has erred in :-
1.(i) restricting the disallowance made on account of Contingencies and Equalization Reserve (CER) fund to Rs. 7,22,21.715/- in place of Rs. 24,36,53,857/-.
(ii) ignoring the fact that the Opening Balance of Contingencies and Equalization Reserve (CER) fund was first to be utilized and then further claim can be allowed.
(iii) ignoring the fact that the assessee has carried out an accounting mistake by not routing the current year credit & debit of CER through the existing CER provision account.
2.(i) deleting the addition made on account of disallowance of depreciation of Rs. 2,44,51,074/-.
(ii) ignoring the fact that the depreciation claimed needs to be examined in two parts (a) depreciation on assets purchased in current year (b) depreciation on assets purchased in earlier years when the assessee was enjoying benefit u/s 11 & 12.
(iii) ignoring the fact that in the year of benefit u/s 11 & 12 the cost of assets have been allowed as application and therefore any further deduction will amount to double deduction.
3. deleting the addition made on account of undisclosed Profit from auctioned property Rs. 7,66,87,588/-.
34. As regards Ground nos. 1(i) to (iii) of the revenue's appeal, we have already decided identical issue, in the assessee's appeal herein above by setting aside the order of the ld. CIT (A) thereby deleting the disallowance. As no change into facts and circumstances is pointed out by the Revenue, therefore, in conformity with the decision taken in the assessee's appeal in ITA No. 864/JP/2014, we dismiss the grounds of the revenue.
35. As regards Ground Nos. 2(i) to (iii) and Ground No. 3 of the revenue's appeal, we have already decided the identical issues in the Revenue's appeal in ITA No. 21/JP/2013 above by rejecting the grounds of the revenue. We, therefore, find no merit in the grounds raised the revenue. Accordingly, the same are dismissed.
36. In the result, appeal of the revenue is dismissed.
ITA NO. 865/JP/2014 (Assesee) ITA NO. 905/JP/2014 (Revenue)
37. These two cross appeals ITA No. 865/JP/2014 and ITA No. 905/JP/2014 by the assessee and revenue respectively arise against the order of ld. CIT (A)-II, Jaipur dated 21.10.2014 pertaining to assessment year 2011-12. First we take up assessee's appeal in ITA No. 865/JP2014. The assessee has raised the following grounds of appeal :-
The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of the AO in holding that the case of the assessee is covered by the first proviso to section 2(15) of the I.T. Act and therefore its object of advancement of general public utility shall not be a charitable purpose and accordingly holding that surplus of Rs. 46,83,15,889/- is not eligible for exemption u/s 11 & 12 of the Act.
1.1.The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in not distinguishing the various case laws relied by assessee in holding that the case of the assessee is covered by the first proviso to section 2(15) of the Act.
The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in holding that the contingency and equalization reserves is in the nature of provision made on estimate and not an ascertained liability and accordingly confirming disallowance of Rs. 15,76,30,855/- out of the disallowance of Rs. 28,07,03,370/- made by the AO.
The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confir4ming the disallowance of Haz Yatri Expenses claimed at Rs. 5,24,970/-.
The assessee craves right to add, alter or amend any of the grounds of the appeal.
The appropriate cost be awarded to the assessee.
38. Ground No. 1 and 1.1 relate to confirming the action of the AO by holding that surplus of Rs. 46,83,15,889/- is not eligible for exemption u/s 11 & 12 of the Act and also holding that the case of the assessee is covered by first proviso to section 2(15) of the Act. We have herein above in ITA No. 21/JP/2013 decided the identical issue came up for hearing in the A.Y. 2009-10 in the revenue's appeal, wherein considering the submissions of the assessee, we have decided the issue in favour of the assessee by upholding the order of ld. CIT (A). In the present appeal, the facts are same, therefore, following the decision taken in ITA No. 21/JP/2013, we set aside the order of ld. CIT (A) thereby allowing the grounds of the assessee.
39. Ground No. 2 relates to confirming the disallowance of Rs. 15,76,30,855/- on account of Contingency and Equalization Reserve. We have decided this issue in the revenue's appeal in ITA No. 21/JP/2013 in favour of the assessee by taking into consideration the order of ld. CIT (A). In the present appeal, the facts are same, therefore, following the decision taken in ITA No. 21/JP/2013, we set aside the order of ld. CIT (A) thereby deleting the disallowance. This ground of the assessee is allowed.
40. Ground No. 3 relates to confirming the disallowance of Haz Yatri expense claimed at Rs. 5,24,970/-. We have decided the identical issue in the revenue's appeal in ITA No. 21/JP/2013 by observing as under :-
27.2. We have heard rival contentions and perused the material available on record. We find that the ld. CIT (A) has accepted the contention of the assessee on the ground that it will not make any difference even if such addition Application of income by the Board during the year of Rs. 232,59,28,849/- as specified in Form 10B Audit Report is much more than the total income of the appellant shown at Rs. 98,90,80,448/- in the statement of total income filed with the return. This finding of fact is not controverted by the revenue. Therefore, we do not see any reason to interfere in the order of ld. CIT (A), which is hereby confirmed."
In the light of above decision, we are of the view that the ld. CIT (A) was not justified in confirming the disallowance. Therefore, we set aside the order of ld. CIT (A) in view of the benefit of section 11 allowed by us and thus the ground of the assessee is allowed.
41. In the result, appeal of the assessee is allowed.
42. Now we take up the revenue's appeal in ITA No. 905/JP/2014 pertaining to the assessment year 2011-12. The ground raised by the revenue are as under :-
" On the facts and in the circumstances of the case and in law the ld. CIT (Appeals) Jaipur-II Jaipur has erred in :-
1.(i) restricting the disallowance made on account of Contingencies and Equalization Reserve (CER) fund to Rs. 15,76,30,855/- in place of Rs. 28,07,03,370/-.
(ii) ignoring the fact that the Opening Balance of Contingencies and Equalization Reserve (CER) fund was first to be utilized and then further claim can be allowed.
(iii) ignoring the fact that the assessee has carried out an accounting mistake by not routing the current year credit & debit of CER through the existing CER provision account.
2.(i) deleting the addition made on account of disallowance of depreciation of Rs. 2,18,54,879/-.
(ii) ignoring the fact that the depreciation claimed needs to be examined in two parts (a) depreciation on assets purchased in current year (b) depreciation on assets purchased in earlier years when the assessee was enjoying benefit u/s 11 & 12.
(iii) ignoring the fact that in the year of benefit u/s 11 & 12 the cost of assets have been allowed as application and therefore any further deduction will amount to double deduction.
3. deleting the addition made on account of undisclosed Profit from auctioned property Rs. 41,19,06,949/-.
43. As regards Ground nos. 1(i) to (iii) of the revenue's appeal, we have already decided identical issue, in the assessee's appeal herein above by setting aside the order of the ld. CIT (A) thereby deleting the disallowance. In conformity with the decision taken in the assessee's appeal, we dismiss the grounds of the revenue.
44. As regards Ground Nos. 2(i) to (iii) and Ground No. 3 of the revenue's appeal, we have already decided the identical issues in the Revenue's appeal in ITA No. 21/JP/2013 above by rejecting the grounds of the revenue. We, therefore, find no merit in the grounds raised the revenue. Accordingly, the same are dismissed.
45. In the result, appeal of the revenue is dismissed.
ITA NO. 866/JP/2014 (Assesee) ITA NO. 906/JP/2014 (Revenue)
46. These two cross appeals ITA No. 866/JP/2014 and ITA No. 906/JP/2014 by the assessee and revenue respectively arise against the order of ld. CIT (A)-II, Jaipur dated 21.10.2014 pertaining to assessment year 2012-13. First we take up assessee's appeal in ITA No. 866/JP2014. The assessee has raised the following grounds of appeal :-
The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of the AO in holding that the case of the assessee is covered by the first proviso to section 2(15) of the I.T. Act and therefore its object of advancement of general public utility shall not be a charitable purpose and accordingly holding that surplus of Rs. 54,78,83,555/- is not eligible for exemption u/s 11 & 12 of the Act.
1.1.The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in not distinguishing the various case laws relied by assessee in holding that the case of the assessee is covered by the first proviso to section 2(15) of the Act.
The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in holding that the contingency and equalization reserves is in the nature of provision made on estimate and not an ascertained liability and accordingly confirming disallowance of Rs. 15,03,12,173/- out of the disallowance of Rs. 27,06,31,918/- made by the AO.
47. Ground No. 1 and 1.1 relate to confirming the action of the AO by holding that surplus of Rs. 54,78,83,555/- is not eligible for exemption u/s 11 & 12 of the Act and also holding that the case of the assessee is covered by first proviso to section 2(15) of the Act. We have herein above in ITA No. 21/JP/2013 decided the identical issue came up for hearing in the A.Y. 2009-10 in the revenue's appeal, wherein considering the submissions of the assessee, we have decided the issue in favour of the assessee by upholding the order of ld. CIT (A). In the present appeal, the facts are same, therefore, following the decision taken in ITA No. 21/JP/2013, we set aside the order of ld. CIT (A) thereby allowing the grounds of the assessee.
48. Ground No. 2 relates to confirming the disallowance of Rs. 15,03,12,173/- on account of Contingency and Equalization Reserve. We have decided this issue in the revenue's appeal in ITA No. 21/JP/2013 in favour of the assessee by taking into consideration the order of ld. CIT (A). In the present appeal, the facts are same, therefore, following the decision taken in ITA No. 21/JP/2013, we set aside the order of ld. CIT (A) thereby deleting the disallowance. This ground of the assessee is allowed.
49. In the result, appeal of the assessee is allowed.
50. Now we take up the revenue's appeal in ITA No. 906/JP/2014 pertaining to the assessment year 2012-13. The ground raised by the revenue are as under :-
" On the facts and in the circumstances of the case and in law the ld. CIT (Appeals) Jaipur-II Jaipur has erred in :-
1.(i) restricting the disallowance made on account of Contingencies and Equalization Reserve (CER) fund to Rs. 15,03,12,173/- in place of Rs. 27,06,31,918/-.
(ii) ignoring the fact that the Opening Balance of Contingencies and Equalization Reserve (CER) fund was first to be utilized and then further claim can be allowed.
(iii) ignoring the fact that the assessee has carried out an accounting mistake by not routing the current year credit & debit of CER through the existing CER provision account.
2.(i) deleting the addition made on account of disallowance of depreciation of Rs. 1,98,20,335/-.
(ii) ignoring the fact that the depreciation claimed needs to be examined in two parts (a) depreciation on assets purchased in current year (b) depreciation on assets purchased in earlier years when the assessee was enjoying benefit u/s 11 & 12.
(iii) ignoring the fact that in the year of benefit u/s 11 & 12 the cost of assets have been allowed as application and therefore any further deduction will amount to double deduction.
3. deleting the addition made on account of undisclosed Profit from auctioned property Rs. 33,16,88,919/-.
51. As regards Ground nos. 1(i) to (iii) of the revenue's appeal, we have already decided identical issue, in the assessee's appeal herein above by setting aside the order of the ld. CIT (A) thereby deleting the disallowance. In conformity with the decision taken in the assessee's appeal, we dismiss the grounds of the revenue.
52. As regards Ground Nos. 2(i) to (iii) and Ground No. 3 of the revenue's appeal, we have already decided the identical issues in the Revenue's appeal in ITA No. 21/JP/2013 above by rejecting the grounds of the revenue. We, therefore, find no merit in the grounds raised the revenue. Accordingly, the same are dismissed.
53. In the result, appeal of the revenue is dismissed.
54. In totality, the appeals of the assessee and revenue are decided as under :-
Assessee's Appeal in ITA No. 862/JP/2014 is partly allowed.
Assessee's Appeal in ITA No. 863/JP/2014 is partly allowed.
Assessee's Appeal in ITA No. 864/JP/2014 is partly allowed.
Assessee's Appeal in ITA No. 865/JP/2014 is allowed.
Assessee's appeal in ITA No. 866/JP/2014 is allowed.
Revenue's Appeal in ITA No. 902/JP/2014 is dismissed.
Revenue's Appeal in ITA No. 903/JP/2014 is dismissed.
Revenue's Appeal in ITA No. 21/JP/2013 is dismissed.
Revenue's appeal in ITA No. 904/JP/2014 is dismissed.
Revenue's appeal in ITA No. 905/JP/2014 is dismissed.
Revenue's appeal in ITA No. 906/JP/2014 is dismissed.
Order pronounced in the open court on 20/01/2017.
Sd/- Sd/-
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(VIKRAM SINGH YADAV) ( KUL BHARAT )
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Jaipur
Dated:- 20/01/2017.
Das/
vkns'k dh izfrfyfi vxzsf"kr@Copy of the order forwarded to:
1. The Appellant- Rajasthan Housing Board, Jaipur.
2. The Respondent- The ACIT, Circle-5, Jaipur.
3. The CIT,
4. The CIT (A)
5. The DR, ITAT, Jaipur
6. Guard File (ITA No. 862(11)/JP/2014)
vkns'kkuqlkj@ By order,
lgk;d iathdkj@ Assistant. Registrar
37
ITA Nos. 862(11)/JP/2014
Rajasthan Housing Board.