Income Tax Appellate Tribunal - Patna
Acit, Central Circle, Muzaffarpur vs M/S Safdar Hashmi Educational & ... on 19 September, 2019
आयकर अपीलीय अधिकरण,पटना न्यायपीठ,पटना IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA श्री चन्द्र मोहन गगग, न्द्याययक सदस्य एवं श्री एल.पी.साहु, लेखा सदस्य के समक्ष। BEFORE SHRI CHANDRA MOHAN GARG, JM & SHRI L.P. SAHU, AM IT(SS)A Nos.05 & 06/PAT/2017 (ननिाारण वर्ा / Assessment Years :2011-2012 & 2012-2013) ACIT, Central Circle, Muzaffarpur Vs. M/s Safdar Hashmi Educational & Charitable Society, Chandmari, Motihari, East Champaran-845401 स्थायी ले खा सं . /PAN No. : AARFS 3483 J (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) AND Cross Objection Nos.08 & 09/PAT/2017 (ननिाारण वर्ा / Assessment Years : 2011-2012 & 2012-2013) M/s Safdar Hashmi Vs. ACIT, Central Circle, Educational & Charitable Muzaffarpur Society, Chandmari, Motihari, East Champaran-845401 स्थायी ले खा सं . /PAN No. : AARFS 3483 J (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) निर्धा रिती की ओर से /Assessee by : Shri Nishant Maitin, CA राजस्व की ओर से /Revenue by : Shri Inderjit Singh, CIT-DR सुनवाई की तारीख / Date of Hearing : 19/09/2019 घोषणा की तारीख/ Date of Pronouncement : 19/09/2019 आदे श / O R D E R Per Bench:
The Revenue has filed above mentioned two appeals against separate the order passed by learned CIT(A)-3, Patna, both dated 27.02.2017 for the assessment years 2011-2012 & 2012-2013. The assessee has also filed cross objections.2
IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017
2. In grounds of appeal for A.Y.2011-2012 in IT(SS)A No.05/PAT/2017, the Revenue has agitated against the impugned order of CIT(A) in confirming the additions made by the Assessing Officer on account of undisclosed receipt at Rs.2,13,98,150/-, consumable expenditure of Rs.20,00,000/- and establishment expenditure expenses of Rs.47,24,200/-. Similarly, the Revenue for A.Y.2012-2013 in IT(SS)A No.06/PAT/2017, has agitated against the impugned order of CIT(A) in confirming the additions made by the Assessing Officer on account of undisclosed receipt at Rs.1,29,27,600/-, consumable expenditure of Rs.25,00,000/- and establishment expenditure expenses of Rs.65,04,000/-.
3. Since similar grounds have been raised in the appeal of Revenue for both the assessment years under consideration but difference in figures, therefore, with the consent of both the parties, we shall take up the facts and grounds mentioned in the appeal of Revenue for A.Y.2011-2012 in IT(SS)A No.05/PAT/2017 to decide both the appeals.
4. Facts of the case are that the assessee is an educational institution and charitable society, owned by Sri Alok Kumar. A search and seizure operations u/s.132 of the Act was carried out at the residence of Shri Alok Kumar s/o Shri Narayan Sharma and at various educational institutions relating to Sri Alok Kumar. During search and 3 IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017 seizure proceedings, it is alleged that Sri Alok Kumar has devised a mechanism to evade tax by concealing actual receipts and misusing the provision of Section 12A of the Act granting registration of trust under the ITI Act. It is also alleged that by suppressing the actual receipts made from the students enrolled in the institutes, Sri Alok Kumar amassed huge money for his personal purposes viz. in making investments in immovable/movable, either in his name or in the name of his family members. During the course of survey voluminous papers and documents were found and the same were seized and impounded from which the Assessing Officer formed an opinion that the assessee is involved in financial irregularities in the affairs of the trust. Subsequently, the Assessing Officer issued notice to the assessee requiring to file return, however, the assessee did not file his return. Thereafter the Assessing Officer issued notice u/s.142(1) of the Act which was served on the assessee and the assessee filed return on 11.03.2014. Upon issuance of notice u/s.143(2) & 142(1) of the Act, the assessee appeared and filed balance sheet and a statement showing computation of income. The Assessing Officer after verification and analysis of seized document and considering the information on record, framed assessment u/s.153A/143(3) of the Act assessing total income of the assessee at Rs.3,49,13,022/- making various additions for the 4 IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017 assessment year 2011-2012. Similarly, the Assessing Officer for the assessment year 2012-2013 has various additions assessing the total income of the assessee at Rs.2,66,46,605/-.
5. In appeal, the CIT(A) after considering the detailed written submissions filed by the assessee and the findings recorded by the Assessing Officer, has deleted the additions so made by the Assessing Officer and allowed appeals of the assessee for both the assessment years under consideration. Against which the Revenue is in further appeals before the Tribunal, whereas the assessee has filed cross objections supporting to the order passed by the CIT(A). Ground No.1:
6. In respect of this ground, ld. Sr. Departmental Representative (DR) submitted that the CIT(A) has erred in confirming the addition made by the Assessing Officer on account of undisclosed receipts, as the AO during the course of scrutiny proceedings, on analysis of seized documents and other information brought on record concluded that in each year under consideration the receipt of the assessee as per seized documents and as shown in the accounts differ and the assessee's explanation in this regard is not acceptable by the Assessing Officer and made addition on undisclosed receipt. However, the Ld. CIT(A) came to the decision that the addition on this ground has made on the basis of 5 IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017 mere suspicion only without considering the facts brought on record by the search that the total receipt by the assessee from educational institutions as per seized documents and information available on record differs in each year and the balance amount has rightly been added as undisclosed receipt in the hands of the assesssee. To support his contentions, ld. DR relied on the decision of Hon'ble Karnataka High Court in the case of CIT Vs. S.Rudramuniyappa [2015] 64 taxmann.com 411 (Karnataka). Therefore, the ld. DR submitted that the addition made by the Assessing Officer may kindly be sustained.
7. Replying to the above, ld.AR reiterated the submissions as were made before both the authorities below and submitted that assessee is a society incorporated on 31.12.2001 and was running Safdar Hashmi Industrial Training Institute (SHITI), Bihar Industrial Training Institute (BITI) and Krishna Industrial Training Institute (KITI). During the relevant period, the assessee was operating Electrical & Fitter courses at all the three ITIs. Further the ld. AR submitted that the Assessing Officer has computed the undisclosed receipt of Rs.2,13,98,150/- on the pretext that the actual receipts of the assessee stand at Rs.5,15,81,450/- whereas a sum of Rs.3,01,83,300/- has been shown in the audited financial statements. The assessee has adopted the method as per the AS-9 issued by the ICAI and as per the provisions of this 6 IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017 accounting standard, the revenue in case of tuition fees should be recognized over the period of instruction. It was also the contention of ld. AR that though the Assessing Officer has made an observation to this effect and has arbitrarily made addition of Rs.20.00 lakh by disallowing expenditure on account of consumables and Rs.47.24 lakh on account of establishment. Finally, the ld. AR submitted that the CIT(A) has rightly deleted the addition made by the Assessing Officer. To support his contention, ld. AR relied on the following judgments :-
i) CIT Vs. M/s Woodward Governor India Pvt. Ltd. [2009] 312 ITR 254 (SC);
ii) CIT Vs. Builders & Services Ltd. [2008] 170 TAXMAN 218 (SC);
iii) Dhakeswari Cotton Mills Ltd. Vs. CIT, 27 ITR 126;
iv) Omar Salay Mohammed Sait Vs. CIT, 37 ITR 151;
v) Victoria Technical Institute Vs. Adl. CIT AIR 1991 SC 997; and
vi) Pinegrove International Charitable Trust Vs. UOI & Ors., [2010] 230 CTR (P&H) 477.
8. We have given our thoughtful consideration to the rival submissions advanced by both the parties and carefully perused the entire material available on the record of the Tribunal as well as the orders of authorities below. First of all, the claim of the Revenue is that the CIT(A) deleted the addition made by the Assessing Officer on account of undisclosed receipts merely on the basis of suspicion without considering the facts brought on record by the search team. We find that the Assessing Officer has held that the society is not eligible for exemption u/s.12A of the Act and disallowed its status of 7 IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017 exemption by changing the status from trust to AOP. We find that the CIT(A) while dealt with the issue has observed that since the assessee is society registered under Society's Act, it is mandatory on its part to file audit report to the statutory body like Assistant Inspector General of Registration and Labour Department. In the course of appellate proceeding, submission of audit report filed with the department has been found to be filed with statutory body. Therefore, the CIT(A) was of the view that it cannot be said that the assessee has got prepared to sets of audit report to manipulate and manage the affairs of the society other than for charitable purposes. From the assessment order, we find that during the course of assessment proceedings, on analysis of seized documents and other information brought on record concluded that in each year under consideration the receipt of the assessee as per seized documents and as shown in the accounts differ and the assessee's explanation in this regard is not acceptable by the AO. Further, the CIT(A) has observed that the AO has not made out the case that the assessee has not disclosed the entire course fee in the subsequent year as well. From the above observations of the CIT(A), we are of the view that the issue needs further verification and examination on the part of the CIT(A). Accordingly, we set aside this issue to the file of CIT(A) to pass a speaking and reasoned order after 8 IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017 seeking remand report from the Assessing Officer in this regard. Needless to say, the assessee shall be given adequate opportunity. The assessee is also directed to cooperate with the CIT(A) producing proper documents and evidence to substantiate its claim. Thus, ground No.1 of the Revenue is allowed for statistical purposes. Ground No.2:
9. With regard to ground No.2, ld.DR strongly supported the assessment order and submitted that the assessing officer during the scrutiny proceedings concluded that the assessee claimed an expenditure under the head consumables for the three institutions in all the relevant years except 2006-07 and 2007-08 against which details , evidences has not been filed by the assessee during assessment proceedings. The AO has made ad-hoc disallowances on estimate basis. It was also the contention of ld. DR that while allowing relief to the assessee under this head the Ld. CIT (A)-3, Patna stated that "the AO himself on page 3 and 4 in the assessment order has categorically observed that AR of the assessee had appeared and had filed balance sheet, statement showing computation of income, receipts and payment statements, audit reports, etc which have been gone through by the AO at the time of assessment proceeding. In spite of this verification the AO has not pointed out discrepancy in this regard nor 9 IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017 brought on record inflation of expenses on this head. However this observation of the Ld. CIT(A) is not correct as the assessee has failed to produce the books of accounts and other related evidences in support of the return and the AO has made partial disallowance only. Accordingly, the ld. DR submitted that the disallowance made by the Assessing Officer deserves to be sustained.
10. Replying to the above, ld. AR relied on the order of CIT(A) and submitted that the adhoc addition made by the Assessing Officer is without any basis and merely on the guess work and lacks from any pith and substance, therefore, the CIT(A) has rightly deleted the addition.
11. On careful consideration of the above rival submissions of both the parties and on perusal of assessment order as well as the first appellate order, we, at the outset, are of the opinion that the CIT(A) while dealing with the issue has neither sought any remand report from the Assessing Officer nor made a categorical observations taking into consideration of the factual aspects as well as the exercise done by the Assessing Officer. Therefore, without going much into merits of the case, we remit the issue to the file of CIT(A) to pass a speaking and reasoned order after seeking remand report from the Assessing Officer in this regard. Needless to say, the assessee shall be given adequate 10 IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017 opportunity. The assessee is also directed to cooperate with the CIT(A) producing proper documents and evidence to substantiate its claim. Thus, ground No.2 of the Revenue is allowed for statistical purposes. Ground No.3:
12. With regard to ground No.3, ld.DR strongly supported the assessment order and submitted that the assessee had claimed establishment expense but the details of such administrative expenses were not produced during the course of scrutiny proceedings. In absence of Books of Accounts and other documents the administrative expenditure was partially disallowed by the AO in each year (2009-10 to 2012-13) separately. The Ld. CIT (A)-3, Patna while allowing relief to the assessee under this head stated that "the AO has estimated the allowance of expenditure. Ld. DR further submitted that the said seized document contained part of the expenditure details for part of the institutes managed by the society. The society is running and managing five institutes where as the seized document contained part expenditure details for three institutes only which cannot form basis for restriction and estimation of expenditure by the AO. Moreover, there are several statutory items of expenditure like electricity, payment of salary, etc which has also not been taken into account. The Ld. CIT (A)-3, Patna has not considered the fact while deleting the 11 IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017 above addition that the assessee did not produce Books of Account and other documents to substantiate the claim of expenditure and hence, a part of the expenses claimed under this head was rightly disallowed out of the total claim for want of evidences. Accordingly, the ld. DR submitted that the disallowance made by the Assessing Officer deserves to be sustained.
13. Replying to the above, ld. AR relied on the order of CIT(A) and submitted that the assessee has produced necessary registers containing particulars of staff and salary paid to them during the course of assessment proceedings and the Assessing Officer has not noted any instance where the salary to any employee was excessive or that the said employee was a ghost employee, bringing the amount of salary paid within the ambit of inflated expenses, therefore, the CIT(A) has rightly deleted the addition.
14. On careful consideration of the above rival submissions of both the parties and on perusal of assessment order as well as the first appellate order, we find that during the course of assessment proceedings the Assessing Officer noted that as such in absence of books of accounts and other documents the administrative expenditure to the tune of Rs. 50 lakh is allowed to the assessee. Accordingly, the Assessing Officer added the balance amount of Rs. 47,24,200/- to the 12 IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017 total income of the assessee. In appeal the CIT(A) observed that no evidence or documents in support of inflation of expenditure has been found in the course of search and survey operation at the premises of the assessee and directed the Assessing Officer to delete the addition made on account of excessive administrative expenses. However, the Assessing Officer in the assessment order noted that the seized document contained part of the expenditure details for part of the institutes managed by the society. We have gone through the observations made by the CIT(A) in this regard and we do not find any justification in arriving at the above conclusion by the CIT(A) neither any categorical discussion made by the CIT(A) in this regard. Therefore, without going much into merits of the case, we remit the issue to the file of CIT(A) to pass a speaking and reasoned order after seeking remand report from the Assessing Officer in this regard. Needless to say, the assessee shall be given adequate opportunity. The assessee is also directed to cooperate with the CIT(A) producing proper documents and evidence to substantiate its claim. Thus, ground No.3 of the Revenue is allowed for statistical purposes.
15. The grounds raised in appeal of the Revenue for A.Y.2012-2013 in IT(SS)A No.06/PAT/2017 being similar to the grounds raised by the Revenue in its appeal for A.Y.2011-2012, therefore, our findings and 13 IT(SS)A Nos.05&06/PAT/2017 & CO Nos.08&09/PAT/2017 observations given in the appeal of Revenue for A.Y.2011-2012 will apply mutatis mutandis to this appeal for A.Y.2012-2013 also. Accordingly, this appeal of the Revenue is allowed for statistical purposes.
16. Since, we have remitted the appeals of the Revenue to the file of CIT(A), therefore, the cross objections of the assessee supporting to the order of CIT(A) are also allowed for statistical purposes in terms as indicated above.
17. In the result, the appeals of the Revenue and cross objections of the assessee are allowed for statistical purposes.
Order pronounced in the open court on 19/09/2019.
Sd/- Sd/-
(L.P.SAHU) (C.M.GARG)
लेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER
पटना /Patna; ददनांक Dated 19/09/2019
Prakash Kumar Mishra, Sr.P.S.(on tour)
आदे श की प्रनिललपप अग्रेपर्ि/Copy of the Order forwarded to :
1. अपीलाथी / The Appellant-
2. प्रत्यथी / The Respondent-
3. आयकि आयु क्त(अपील) / The CIT(A),
4. आयकर आयक् ु त / CIT
5. निभधगीय प्रनतनिनर्, आयकि अपीलीय अनर्किण, पटना / DR, ITAT, Patna
6. गार्ग फाईल / Guard file. आदे शानुसार/ BY ORDER, सत्यापपत प्रयत //True Copy// (Senior Private Secretary) आयकर अपीलीय अधिकरण, पटना / ITAT, Patna