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TMI Blog2013 (10) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... rson whatsoever, which clearly establish that the element of charity is clearly absent from the activities of the trust, which is contrary to the provisions of section 2(15) of the Act amended w.e.f. 01.04.2009 and the Ld. CIT Bathinda has rightly issued show cause notice to the assessee-trust for canceling the registration already granted to the assessee-trust which the ld. CIT, Bathinda has the power under section 12AA(3) of the Act – Decided against the Assessee. Penalty u/s 271(1)(c) of the Income Tax Act – Held that:- The reasons for levying penalty by the A.O. on account of difference in valuation of closing stock, difference in sale receipts of land sold and other receipts, discrepancies in expenditure account and difference in Bank Balances which could not be explained by the assessee are therefore the concealment of income and therefore, Penalty u/s 271(1)(c) of the Income Tax Act is legal – Decided against the Assessee. - I.T.A. Nos.415 to 417 (Asr)/2013, I.T.A. Nos.409 to 410 (Asr)/2013 - - - Dated:- 14-10-2013 - Sh. H. S. Sidhu And Sh. B. P. Jain,JJ. For the Appellant : Sh. K. R. Jain, Advocate For the Respondent : Sh. Tarsem Lal, DR ORDER Per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt directed this Bench to decide the present appeals within one month from the date of order i.e. 19.09.2013 meaning thereby, we have to decide the present appeals on or before 19.10.2013. Therefore, we are unable to accept the request of the ld. counsel for the assessee. Therefore, the same is rejected and the cases are being decided ex-parte assessee after hearing ld. DR and on perusal of the material available on record. 3. Ld. DR Sh.Tarsem Lal, has filed written submissions dated 14.10.2013 and relied upon the orders passed by the Ld. CIT(A) and requested that the appeals filed by the assessee may be dismissed being covered by the decision of this Bench vide order dated 18.12.2012 in ITA No.366(Asr)/2012, in which this Bench has dismissed the appeal filed by the assessee. 4. Now, we proceed to decide the present five appeals which arise from the different orders of ld. CIT(A), Bathinda, each dated 19.03.2013 for the assessment years 2007-08 to 2009-10 in ITA Nos. 415 to 417(Asr)/2013 and for the assessment years 2005-06 2006-07 in ITA Nos. 409 410(Asr)/2013. Since the facts in ITA Nos. 415 to 417(Asr)/2013 being quantum appeals are identical and in ITA Nos. 409 410(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has raised following grounds of appeal: "1. That the order of the Ld. ACIT Circle-1, Bathinda is wrong illegal and against facts, likewise the ld. CIT(A), Bathinda is not justified while confirming the same. 2 That the Ld. ACIT has not appreciated the facts of the case explanation offered and proceeded to frame the assessment arbitrarily. 3 That the Ld. ACIT has erred in law and on facts while framing the assessment in the status of 'AOP" whereas the appellant has filed the return in the status of charitable trust. 4. That the Ld. ACIT has not appreciated the facts that the appellant is constituted under the provisions of Punjab Town Improvement Act, 1922 with the object to provide public utility services by way of roads, sewerage, water supply, electricity supply system etc. besides providing housing plots for all section of the society. Hence, the observation of the ACIT that the appellant is engaged in business is wrong and without justification. 5. That the Ld. ACIT has erred in law and on facts while making an addition of Rs.2,37,66,625/- on account of valuation of closing stock. The Ld. ACIT has not appreciate the system of accounting regularly employed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t amendment to the definition of charitable purpose u/s 2(15) of the Act came w.e.f. 01/04/2009 and as such not relevant to the year under assessment. 4. That the Ld. DCIT is not justified legally and on facts while imposing penalty in respect of disallowances/additions made in the assessment order." 9. In ITA No.410(Asr)/2013, for the A.Y. 2006-07 the assessee has raised following grounds of appeal: "1. That the Ld. DCIT, Circle-1, Bathinda has erred in law and on facts while imposing the penalty of Rs.3,87,03,163/- under section 271(1)(c). Likewise the ld. CIT(A), Bathinda without appreciating the submissions, facts and legal position have wrongly confirmed the imposition of penalty u/s 271(1)(c). 2. That the Ld. DCIT has not appreciate the facts of the case, explanation offered and proceeded to impose the penalty arbitrarily. 3. That the ld. DCIT CIT(A) has also failed to appreciate the fact that amendment to the definition of charitable purpose u/s 2(15) of the Act came w.e.f. 01/04/2009 and as such not relevant to the year under assessment. 4. That the Ld. DCIT is not justified legally and on facts while imposing penalty in respect of disallowances/additions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include any expenditure incurred on development of land, salary and other overhead expenses. That the assessee was engaged in the purchase of land, develop it by clearing and leveling it, cutting into plots, providing civic amenities such as roads, sewerage, water supply and street lights etc. and then shall sell the plots as a finished product. In the circumstances, such expenses incurred were required to be added to the cost of the land for evaluating the closing stock which has not been done by the assessee. That the assessee incurred Rs.3,72,34,691/- and RS.48,34,663/- for development of land under the heads - 'works and schemes' and 'cost of land enhancement' respectively. That the assessee had debited RS.51,76,786/- towards salary and wages and 10% thereof was also held by the AO to have been spent towards development of the land which worked out at Rs.5,17,679/-. In this way, the total amount of development worked out at Rs.4,25,87,033/-. That the assessee had shown valuation of opening and closing stock at RS.24,90,00,000/- and Rs.20,90,78,000/- respectively meaning thereby that 83.967% of the opening stock remained with the assessee as closing stock As such , an amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t explain the exceptional or compelling circumstances for making payments in cash in violation of the provisions of section 40A(3) of the Act and how they stood covered under Rule 6DD of the Income Tax Rules, 1962. Accordingly, the ld. CIT(A) dismissed the grounds of the assessee. 19. We have learned DR and perused the material available on record. As regards the arguments made by the Ld. DR that the issue is covered by the decision of this Bench in assessee's own case vide order dated 18.12.2012 in ITA No.366(Asr)/2012, it is relevant to reproduce the said order in para 7 to 8, for the sake of convenience as under: "7. We have heard the rival contentions and perused the material available with us as well as decisions cited by Ld. counsel for the assessee alongwith other documentary evidences filed by him. As per impugned order and submissions of the assessee, the main activities of the assessee trust at that to purchase land, to enhance and develop the land by cutting it into plots etc., to advertise for sale of plots in the developed land and to sell off the land through auction, meaning thereby that the assessee trust was buying undeveloped land at a low price and developed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are reproduced as under: (a) To develop sewerage in the city costing abut Rs.58.36 crores vide Resolution No.49 dated 05.09.2008 (without charges or recovery). (b) The trust has reserved 18.27 Acres Land for Bus Stand for General Public vide Resolution No.18, dated 03.10.2007 free of cost). (c) Land measuring 1.30 Acres for CIA staff (Police Department) vide Resolution No.71 dated 12.12.2008 (free of cost). (d) Community Hall, measuring 2000 sq.yds to be erected built in Rajiv Gandhi Nagar, Gurukul Road, Bathinda, vide Resolution No.75 dated 30.09.2005 (free of cost). (e) The trust is to provide Service lane 16 wide with parking and footparth. The amount to be spent is Rs. One crore vide Resolution No.48 dated 26.08.2008 (free of cost). (f) The trust has given as charity of town cleaning machine, (Vaccum Machine) to the Municipal Corporation, Bathinda for Rs.64.86 lakhs vide Resolution No.56 (app. Rs.Ten lacs) vide letter No.1146 dated 24.09.2007 (free of cost). (g) To provide land as well as construction of building for 14 plots measuring 1512 s. yds valuing Rs.45.2 lacs and construction cost Rs.64.86 lakhs vide Resolution No.56 dated 31.08.2006 and were handed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee trust is not merely a mediator in buying and selling of land to the general public. Rather it operates in a business oriented way on the well known principles of profit generation. Therefore, the activities of the assessee trust clearly constitute activities in the nature of trade, commerce or business because no plots are reserved for any socio- economically lower society, there is no element of donation or support to any cause, none of the land is earmarked to be sold at no profit, no loss basis to any person whatsoever, which clearly establish that the element of charity is clearly absent from the activities of the trust, which is contrary to the provisions of section 2(15) of the Act amended w.e.f. 01.04.2009 and the Ld. CIT Bathinda has rightly issued show cause notice to the assessee-trust for canceling the registration already granted to the assessee-trust which the ld. CIT, Bathinda has the power under section 12AA(3) of the Act. For the sake of convenience, provision of section 12AA(3) of the Act (Inserted by Finance (No.2) Act, 2004, w.e.f. 1.10.2004) is reproduced as under: [Procedure for registration. 12AA. [(3) Where a trust or an institution has been gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2010, w.e.f. 01.06.2010 has given the power to the Ld. CIT to cancel the registration if the activities are not genuine or not to be carried out in accordance with the objects of the trust or institution, as the case may be and also in the cases, where the assessee has obtained registration at any time u/s 12A even before the amendment made by the Finance (No.2) Act, 1996. 7.6. After going through the aims and objects of the assessee-trust and the activities carried out alongwith relevant provisions of law as reproduced above, we are of the considered opinion that the assessee- trust has been involved in carrying on various activities which are in the nature of trade, commerce or business. We have not found any activities done by the assessee-trust which the assessee-trust has done for advancement of general public utility. 7.7. Keeping in view the facts and circumstances of the case explained above, we are of the considered view that the ld. CIT, Bathinda has passed a well reasoned order as per law which need no interference and accordingly we uphold the impugned order dated 20.07.2012 by dismissing the present appeal filed by the assessee. 8. In the result, the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and he has not established how they stood covered under Rule 6DD of the Income Tax Rules, 1962. Accordingly, we find no infirmity in the order of the ld. CIT(A). Thus, ground No.7 of the assessee is dismissed. 19.6. As regards grounds No. 1 9, the same are part of grounds No. 3 4 of the assessee, which are dismissed in view of our decision dated 18.12.2012 (supra). 20. In the result, all the grounds of the assessee in ITA No.415(Asr)/2013 are dismissed. 21. Now, we take up appeal of the assessee in ITA No.416(Asr)/2013 for the A.Y. 2008-09. The facts in the present appeal are identical to the facts in assessee's own appeal in ITA No.415(Asr)/2013 except the variation in the amounts. Therefore, being identical facts in the present appeal, as mentioned hereinabove, our order in assessee's own case in ITA No.415(Asr)/2013 for the A.Y.2007-08 is identically applicable in the present appeal. Accordingly, all the grounds of the assessee in ITA No.416(Asr)/2013 are dismissed. 22. Now, we take up appeal of the assessee in ITA No.417 for the A.Y.2009-10. The facts in this case are identical as mentioned above in ITA No.416(Asr)/2013 except grounds No.6, which is being taken sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t less than 85% of its income, on the activities for which it has been granted registration u/s 12AA of the Act. Hence, the assessee is entitled for exemption of its income to the extent of 42.61% i.e. Rs.5,79,14,150/- instead of 85% i.e. Rs.11,55,23,366/-. Therefore, balance amount of Rs.5,76,09,216/- (Rs.11,55,23,366/- minus Rs.5,79,14,150/-) is taxable which was added back to the income returned by the assessee. Further, during assessment proceedings, it was transpired that the assessee had shown sale of land to the tune of Rs.3,98,89,561/- besides the receipts of Rs.1,04,13,300/- under different heads viz recovery of cess, fees fines and penalties, interest, sale of forms and enhancement etc. As the turnover in the case exceeded Rs.40 lacs, the assessee was under a legal obligation to get its accounts audited as per the provisions of section 44AB of the Act but the assessee failed to comply with the same. From the examination of account books, the AO found that it was not possible to arrive at true profits and accordingly special audit of the account books of assessee was got done in view of the provisions of section 142(2A) of the Act. The various additions made by the AO on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " for the year ending 31.03.2005. The assessee in its explanation explained that the difference ws for Rs.1257,801/- only as under: Amount as per intra department audit report Amount as per Income and Expenditure Account Difference Receipts of recovery or enhancement 5174032 3979485 1194547 Receipts of fee 2266624 2251507 15116 Receipts unclassified entries 48138 Nil 48138 Total difference 1257801 Accordingly, an addition of Rs.57,73,689/- (Rs.45,15,888/- + Rs.12,57,801/-) was made by the A.O. on account of difference in the receipts holding that the assessee has furnished inaccurate particulars of income to the said extent and subsequently imposed penalty u/s 271(1)(c), inter alia, on this account. C. Discrepancies in Expenditure Account During the assessment proceedings, the AO noticed that as per 'Audit and Inspection Report' for the year under consideration, total expenditure was at Rs.9,49,34,611/- while expenditure as per 'Income and expenditure account' annexed with the return was Rs.3,16,26,627/-. With regard to this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the AO holding the same an unexplained bank deposits and investments having been made outside the books of account. Subsequently, this amount was also considered for imposi9tion of penalty u/s 271(1)(c) by the A.O. 24. The Ld. CIT(A) confirmed the action of the Assessing Officer. 25. We have heard the rival contentions and perused the facts of the case. The reasons for levying penalty by the A.O. on account of difference in valuation of closing stock, difference in sale receipts of land sold and other receipts, discrepancies in expenditure account and difference in Bank Balances which could not be explained by the assessee are therefore the concealment of income and therefore, has rightly been confirmed by the Ld. CIT(A), as mentioned by the A.O. in his order which is well reasoned, as mentioned hereinabove and we find no infirmity in the order of the ld. CIT(A) in confirming the penalty. Thus, all the grounds of the assessee are dismissed. 26. Now, we take up appeal of the assessee in ITA No. 410(Asr)/2013 for the A.Y. 2006-07. The A.O. levied penalty identically as levied in ITA No.409(Asr)/2013 for the A.Y. 2005-06 on account of difference in receipts, difference in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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