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TMI Blog2015 (1) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... e photographs and the evidence filed with regard to the quality of constructions of the building and rooms constructed by certain donors and it is quite evident from the photographs that the quality of construction was not as suggested by the DVO in his report which is available on record. Most of the walls are not even plastered and the floors are also made of bricks. Also carefully examining the findings of the ld. CIT(A) in this regard and of the view that the ld. CIT(A) has examined each and every aspect and quality of construction and after giving credit of self-supervision charges, etc., the ld. CIT(A) did not find much difference in the valuation declared by the assessee and estimated by the DVO. Therefore, we confirm the order of the ld. CIT(A) deleting the additions made by the Assessing Officer. Since we do not find any infirmity in the order of the ld. CIT(A), we confirm the same. - Decided in favour of assessee. Entitlement to exemption u/s 10(23C)(iiiad) - Held that:- In the absence of any specific assertion, it cannot be held that the assessee was engaged in profit making activities in the light of the fact that the assesseetrust is running an educational instituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence were not filed and in the absence of evidence, the Assessing Officer treated the receipts of ₹ 7.65 lakhs received from remaining six persons as unexplained cash credit and made addition of the same under section 68 of the Act. 3. The assessee preferred an appeal before the ld. CIT(A) with the submission that most of the persons who have contributed the aforesaid amount of ₹ 8.15 lakhs were Members of the assessee-society. The Assessing Officer has ignored the contentions of the assessee. The ld. CIT(A) vide order sheet entry dated 23.1.2013 asked the assessee to file details of PAN and other relevant details of cash creditors. The assessee has filed details along with written submissions. The ld. CIT(A) has examined the details and in the light of the confirmation letters and the documentary evidence with regard to the land holdings and the ld. CIT(A), being convinced with the source of contributions of the various persons, has deleted the addition made under section 68 of the Act. The relevant observations of the ld. CIT(A) in this regard are extracted hereunder:- 5(4) I have examined the facts and circumstances of the case. I have considered the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablishes the identity, credit-worthiness and genuineness of the transactions. Moreover, the appellant is running a educational institution and its receipts are ₹ 39,80,576/-. The appellant is eligible for exemption under section 10(23c)(iiiad) of the Act. The decision of Hon'ble Delhi High Court in the case of DIT(Exemption) vs. Raunaq Education Foundation, 294 ITR 76 (Del.), laid down that - The words derived from (or some other similar words) do not occur in section 10(22) of the Incometax Act, 1961, and, therefore, the word Income as occurring in section 10(22) cannot be given a restrictive meaning and must be given its natural meaning or the meaning ascribed to it in section 2(24). Hence, an assessee who is entitled to exemption under section 10(22) can claim the benefit thereof for the purpose of income deemed to be chargeable to tax under section 68. 5(5)(ii) Similarly a reference may also be made to the decision of Hon'ble ITAT, Agra in the case of Swami Atmdev Gopalanand Shiksha... Vs Department Of Income Tax on 21 September, 2012 in ITA No. 74 218/Agra/2011 wherein it was laid down that - This provision contained in section 10(22) has been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded sufficient opportunity to produce the confirmation letters and the Revenue record in order to prove the creditworthiness of the contributors, but the assessee could not file the same. The additional evidence was filed before the ld. CIT(A) and the ld. CIT(A) has accepted the same without confronting the additional evidence to the Assessing Officer, therefore, there is a gross violation of the provisions of rule 46A of the Income-tax Rules. The ld. D.R. has further contended that in the interest of justice, the matter may be restored back to the Assessing Officer for re-adjudication of the issue. 5. The ld. counsel for the assessee has contended that before the Assessing Officer assessee has filed copies of Khatoni of some of the persons and sought time to file copy of Khatoni and confirmation letters of the remaining persons, but time was not granted by the Assessing Officer. 6. During the appellate proceedings, the ld. CIT(A) has asked the assessee vide order sheet entry dated 23.1.2013 to file the details of PAN and other relevant details of the cash creditors. Once the requisite information were furnished before the ld. CIT(A) on his demand, there is no violation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) Where the appellant was prevented by sufficient cause from producing before the [Assessing Officer]; or (d) Where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (3) The [Dy. Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outrightly rejected the objections of the assessee and accepted the valuation made by the Assessing Officer made addition of ₹ 53,91,660/- being the difference of cost of investment estimated by the Assessing Officer in the impugned assessment year at ₹ 62,47,575/- (-) actual investment shown by the assessee at ₹ 8,56,015/-. 11. Aggrieved, the assessee has preferred an appeal before the ld. CIT(A) with the submission that while estimating the cost of construction, the DVO has not taken into account the quality of construction and the locality in which construction was made. The written submissions were filed before the ld. CIT(A) which was extracted in his order in para 6(3). For the sake of reference, we extract the same as under:- due and sufficient opportunity was not afforded to the Appellant Society to have its say or make comments upon the same and even the comments made by the ossessee were not taken into consideration by the DVO and AO on flimsy grounds. In framing the present order the Ld. A.O. was not at all justified in blindly adopting the valuation made by the DVO as the appellant had submitted the objections to the said Report during the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration of ₹ 64,000/- incurred on water pump etc. This fact was also brought to the knowledge of the Ld. AO during assessment proceedings and has been discussed by the Ld. AO in the assessment order at page 13 para 5.6. Despite this the Ld. AO in mechanical manner proceeded with the assessment without giving any benefit of this amount. During the course of assessment proceedings it was brought to the knowledge of the Ld. AO that three class rooms were sponsored by individuals in memory of their relatives. . The confirmation letters of these individuals is also attached herewith. The intention letter to construct these classes, their ID proof, Khasra and Khatauni to prove their source of income have all been attached to prove the same. Moreover the stones wherein the names of the donors as well as of the inauguration ceremony are being attached herewith. Moreover as per the decision of the Ahmedabad Tribunal in the case of Rajhans Builders vs. Deputy CIT reported in 41 SOT 331 the difference upto 20% should be ignored as the valuation is only an estimation and thus cannot be substituted with the actual figures. 12. It was contended before the ld. CIT(A) that duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 64,000/- should be considered as part of the cost of construction. The AO rejected the claim of the assessee observing at paragraph 5.6 of the assessment order that since the valuation has been completed by the DVO no modification in the investment made by the assessee can be accepted at this stage. Further, the assessee also filed a letter dated 19.12.2011 in which the cost of construction recorded in books of accounts relevant to subsequent assessment years was claimed. The AO simply ignored the letter dated 19.12.2011 of the assessee without assigning any reasons for not accepting the cost of construction reported in books of accounts for subsequent years. The details are as under - Cost of construction as mentioned by the Assessing Officer : ₹ 28,03,052/- Cost of pump : ₹ 64,000/- Investment recorded in books of accounts for financial year 2010-2011 relevant to assessment year 2011-2012 : ₹ 36,74,303/- Investment recorded in books of accounts for financial year 2011-2012 relevant to assessment year 2012-2013 upto 30.09.2011 : ₹ 13,97,010/- Investment recorded in books of accounts for financial year 2011-2012 relevant to assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction of building which was donated by the three individuals out of their own sources of income. This cost of construction is evidently not recorded in the books of accounts of the assessee as the amount was not spent by it though the construction got made by the three persons aforesaid is part of the building valued by the DVO. In view of above I find that the cost of construction of ₹ 7,34,000/- is to be reduced as the amount has been spent by the sponsors. 6(7)(i) The next claim which needs to be specifically examined goes into the very root of the estimation made by the DVO. Some of the objections raised by the assessee on the valuation report as reproduced by the AO in the assessment order are as under - In the valuation report the DVO has valued the entire structure as RCC whereas the roofs of ground floor and first floor of the three storied building are RB (Reinforced Brick) and not RCC as claimed by the assessee. In the valuation report the DVO has adopted cost index of 326.227 over 01.01.1992 rates whereas the rates of all materials do not vary in the same proportion and Marble Stone Flooring, Ceramic tile work etc. should be worked out on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the DVO which I find is in any case full of factual discrepancies one such being the valuation having been made for RCC when photographs filed show that the rooms are without plaster and are RBC roofs. I am of the considered view that the report of the registered valuer does take into account the various factors such as cheaper labour in rural areas of Barabanki where the building is located, the differences in valuation of porch canopy roof treatment, aluminum work RCC projections and the main objection with regard to RBC roof as against valuation being done for RCC roof. The point that also needs to be considered is that both reports adopt CPWD rates for valuation. 6(7)(iv) A reference may be made to the decision of the Punjab Haryana High Court in the case of Dina Nath v. CED [1970] 77 ITR 193 that the valuation report of the DVO was not binding. On referring to the decision I find in that case the valuation had been made by a registered valuer on behalf of the assessee and it was held that the report was both inaccurate and unreliable. In these circumstances, it was held that it could be rejected. Similarly, applying the ratio of the case to the facts of the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed for the difference in CPWD rates and PWD rates and deductions have also to be allowed for self supervisions and minor differences in valuations which are necessarily estimates. The DVO has valued the cost of construction of the building at ₹ 2,04,58,237/- while the registered valuer after taking into account the specifications and structural objections estimated the cost of construction at ₹ 1,27,85,000/-. The average valuation as discussed by me in paragraphs above is Rs, 1,66,21,500/-. Now if the allowance of 45% is allowed for various factors as above, the cost of construction will be ₹ 83,10,750/-. As per the report of the DVO, the total estimated cost of ₹ 2,04,58,237/- has been allocated to the year under consideration in the same ratio as the cost of construction has been recorded in the books of accounts. The cost of construction recorded in the books of accounts for the year under consideration is Rs. S.56,015/- as compared to total cost of construction recorded in books of accounts at Rs. T9 80,745/- as discussed in paragraphs supra. The ratio of cost incurred to cost for the year under consideration is 10.73%. In the same ratio, the average co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT(A). 14. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the authorities below, we find that in the assessment order the Assessing Officer did not adjudicate the objections raised by the assessee against the DVO s report. He has simply reproduced the objections raised by the assessee and comments made by the DVO. In one small para, he has made addition on account of unexplained investment in the building having relied upon the report of the DVO. For the sake of reference, we extract the observations of the Assessing Officer recorded in para 5.7 of his order:- 5.7 In view of the reply of the VO it is clear that investment of ₹ 8,56,015/- shown by the assesse is incorrect and he actually made investment of ₹ 62,47,675/-. Therefore difference of ₹ 53,91,660/- (62,47,675/- - 8,56,015/-) is made by assessee from other than charitable activities and is treated as unexplained investment u/s 69B of I.T. Act,1961 and added in the income of the assessee. Tax shall be charged at maximum marginal rate under the provision of section 167B of the IT. Act, 1961. On the basis of these findings, penalty p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case. I have considered the findings of the AO and the submissions of the appellant. I have also called for and examined the records of assessment proceedings. I find that the AO has relied upon the decisions of Hon'ble Uttarakhand High Court in the case of CIT Vs Queens Educational Trust (2009) 319 ITR 160 wherein relying on the Apex Court judgment in the case of MCD Vs Childrens Book Trust (1992) 3 SCC 390 it has been held that no Exemption under section 10(23C) of the Act is eligible to educational institute if It earns huge profits and not receiving any government grant. The issue therefore needs examination in light of provisions of section 10(23c)(iiiad) of the Act which lay down as under - (Iliad) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed; or 7(5) In the impugned case the appellant is running an educational institution whose receipts are ₹ 39,80,576/- and there is surplus of only ₹ 39,153/-. There is no finding of the AO as regards ..... X X X X Extracts X X X X X X X X Extracts X X X X
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