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TMI Blog2016 (9) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... ff for the purpose other than the activities to achieve the objects of the assessee Society are not sustainable. In the present case nothing is brought on record to substantiate that the assessee was not running the educational institutions for imparting the education which is a charitable activity. In the present case, it is an admitted fact that the assessee had been granted registration u/s 12A of the Act, since the assessee Society is engaged in running of educational institution and it is not brought on record at any stage that the assessee was not engaged in educational activity through various educational institution established by it and if the ld. Pr. CIT or the AO was not satisfied for various expenses incurred by the assessee than proper action would have been taken u/s 11 or 13 of the Act. A search was conducted at the assessee’s premises, however, no evidence of receipt of donation or capitation fee was found during the search and the presumption u/s 292C of the Act were rebutted by denial of the assessee that the purchases of the material for construction of the building and computers/laptops for distribution amongst the students were made through some of assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jay Bansal had siphoned off the society s fund and the funds so siphoned off were utilized for acquiring properties by him and by his family members. He further observed that his wife Smt. Seema Bansal had opened following bank accounts in the name of the employees: A/c No. 61059655944, State Bank of Bikaner and Jaipur, Dehradun A/c No. 705020110000202, Bank of India, Dehradun A/c No. 3898002100021547, Punjab National Bank, Roorkee A/c No. 3898002100012538, Punjab National Bank, Ramnagar, Roorkee A/c No. 469002100000119, Punjab National Bank, Dehradun A/c No. 1175002100009790, Punjab National Bank, Kaulagarh, Dehradun 5. The ld. Pr. CIT was of the view that the said accounts were operated by the employees on behalf of Sh. Sanjay Bansal and there were huge deposits and withdrawals in those bank accounts for the purpose of claiming bogus expenditure. The ld. Pr. CIT was of the view that fictitious concerns and their bank accounts have been opened by Sh. Sanjay Bansal for booking bogus expenses in the books of the society to utilize the funds for personal purposes. He observed that the society had stated to have purchased computers/laptops f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th ₹ 393.12 lakhs to be distributed to the students of the institute from M/s CAD ARENA, near Hostel Royal Palace, Roorkee. According to the ld. Pr. CIT, M/s CAD ARENA was not an authorized distributor of HPISPL for supply of laptops in North India and the said company had not issued the proforma invoice No.J9AD109932 dated 19.08.2010 for the value of ₹ 3,93,12,000/- and that the letter issued by Sh. Naman Patil (Manager Sales-North India) of HPISPL confirming advance of ₹ 59,99,500/- on behalf of M/s CAD ARENA was found to be not genuine and fabricated one. He also observed that the reply of HPISPL revealed that only 251 laptops were purchased by Devbhoomi Institute of Technology and no computer/laptops were supplied by them against the purchase order dated 09.08.2010. Therefore, the three documents namely Proforma Invoice No. J9AD109932, the alleged letter by Sh. Naman Patil and purchase order No.DBIT/Order/09-10/198 dated 09.08.2010 were the only documents made available by the bank in support of purchase of 1050 laptops in support of the end term loan of ₹ 262 lakhs disbursed to the society. According to the ld. Pr. CIT, the assessee society had not purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The ld. Pr. CIT also mentioned that the purchases were made by the assessee on the basis of fake and fabricated bills. The relevant discussion has been made in para 17 of the impugned order for the cost of repetition, the same is not reproduced herein. The ld. Pr. CIT also stated that the documents seized during the course of search revealed that Sh. Sanjay Bansal had made cash payments of about ₹ 35 to 40 crores to the outgoing trustees for taking over the control and management of the institute and polytechnic college. He also mentioned that OD facility of ₹ 30 crores from PNB, Saharanpur was channeled through Delhi Parties and an amount of ₹ 292 lakhs was paid to the following parties by Sh. Sanjay Bansal mostly out of amount received from A/c No. 1709009300044883 by availing overdraft facility of ₹ 30 crores to PNB: Brij Mohan Goyal (Uncle) 50.00 Sunil Kumar Jalan (Anil) 500.00 + 50.00 = 550.00 Santosh Timber (Anil) 300.00 Aashwat Furniture Pvt. Ltd. (Vivek) 98.00 + 98.00 = 196.00 Wonder International (Vivek) 300.00 Chand Sons Pvt. Ltd. (Mamu) 308.27 CKSR (Mamu) 290.00 Manishi Towers (Ajay) 150.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o exclude either whole or part of income due to operation of sub-Section (1) of Section 13 of the Act. The ld. Pr. CIT asked the assessee to submit the explanation/clarification, if any, as to why registration u/s 12A of the Act, granted vide order dated 24.11.2007 not be cancelled. 12. In response the assessee submitted its reply dated 28.02.2015 which is reproduced verbatim as under: OBJECTS OF THE SOCIETY IN CONFORMITY WITH THE PROVISIONS OF SECTION 12AA OF THE INCME TAX ACT, 1961 : a) The above mentioned society i.e. Uttarakhand Uthan Samiti was registered under the Societies Registration Act, 1860 vide Registration Certificate No. 81/2004-05 dated 14/05/2004 with the Registrar of Societies, Uttarakhand. Further, the society was renewed by Registrar of Societies on 13/08/2014 for 5 years w.e.f. 14/05/2014. A copy of Registration Renewal Certificate is attached herewith as Annexure A Page 1. b) The name of the society has been framed as Uttarakhand Uthan Samiti which indicates that this Society will always endeavor for the growth of Educational base of this state Uttarakhand . Similary the name of the Institutes/Colleges have been titled as De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year Dehradun Saharanpur Campus 1 2005-06 34000 2 2006-07 71500 3 2007-08 40000 4 2008-09 115000 5 2009-10 80000 6 2010-11 193000 7 2011-12 76000 8 2012-13 18000 TOTAL 627500 Thus the total constructed area is approx 6,27,500 square feet and the cost incurred is approx ₹ 33 Crores, which is totally justified considering the average rate of construction per square feet which is in fact quite low as compared to what would have been charged by an outside Contractor, since the management has got the construction done themselves they have been able to keep the cost so low. Besides the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the society. The purchase consideration for the same was paid to him from the term loan Account No. 1175002100007941 with PNB Kaulagarh Raod, Dehradun, OD Account No. 1175009301046063 and Account No. 1175002100008302 of Dev Bhoomi Institute of Technology through account payee cheques. The computers/laptops and accessories were purchased from M/s Fortech Computers in bulk and later on the price quoted by the firm was paid through account payee cheques. Further, we shall like humbly submit that your goodself have mentioned in the notice that withdrawals from account of M/s Fortech Computers have been made by Sunil Dandriyal, Atul, Neeraj Tyagi and Sushil Kumar who have been alleged to be employees of Shri Sanjay Bansal in his concern M/s Bansal Associate Engineers, however, this is not true. Only Mr. Sunil Dandriyal was an employee and the others were neither the employees of Sanjay Bansal nor worked in Bansal Associate Engineers. In fact, Mr. Sushil Kumar was the employee of Society. These people had no connection with Sanjay Bansal or his concerns. As regards genuineness of business done by him, we shall like to submit that the society acted in good faith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ARANPUR Campus as Annexure C Page No. 41 to Page 179. We shall further like to submit that it has been alleged that Mr. Sanjay Bansal siphoned off society's funds which were alleged to have been utilized for acquiring properties by him and his family members. It is submitted that the allegations are incorrect and are without any basis, material and evidence. Detailed submission in this regard has also been made subsequently in the reply. 13. The assessee also gave reply for the queries relating to the various firms from whom the assessee made the purchases. The ld. Pr. CIT has mentioned the submissions of the assessee relating to those firms at page nos. 20 to 29, for the cost of repetition these are not reproduced herein. As regards to the query relating to term loan and the investments in the property, the submissions of the assessee before the ld. Pr. CIT were as under: OBSERVATION REGARDING TERM LOAN As regards your query related to Term Loan A/c No. 1175001C00000378, we shall like to submit that as alleged, the society, Uttarakhand Uthan Samiti has not submitted any fabricated invoice to the bank. Computers, Peripherals Accessories were purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y from M/s Hewlett Packard India Sales Private Limited, 24, Salarpuria, arena Hosur Main Road, Adugodi, Bangalore. Rest of the laptops have been received from M/s Cad Arena, Dharampur Danda, Dehradun. The allegation that the society has not purchased any laptops against the Term Loan of ₹ 262 Lacs is totally wrong and the sanctioning of loan by bank is totally justified. As regards your goodself s allegation that the accounts have been opened by Mr. Sanjay Bansal, in the name of Fortech Computer Systmes, M/s Rana Steels, Cad Arena, Pawan Kumar Co and Negi Builder Suppliers we deny the said allegation and confirm that no such account has been opened by Mr. Sanjay Bansal. We have already clarified above that these accounts do not pertain to the society or to Sh. Sanjay Bansal. Moreover, the society is not concerned of these entities and it has acted in good faith. As already mentioned above, it was in the best interest of the society to place order with the person who provided minimum and reasonable rates and the society has done the same. Therefore the society has correctly utilized the term loans for the purposes for which it was sanctioned and for the furtherance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k accounts of the fictitious concerns are from the term loan and OD accounts of Uttarakhand Uthan Samiti and bank account of DBIT College. The allegation is completely denied in light of the fact that the term loans and ODs were taken by the society for the advancement of objects of the society. These loan accounts have been utilized for incurring all the expenditure necessary for fulfillment of the objects of the society. To substantiate, a list of utilization of term loans of ODs is attached herewith as Annexure P page No. 569 to 578: From the above details it is clear that all the loans and OD accounts have been used for furtherance of objects of the society. The allegations made are without any basis, material or evidence. There are no credits in the bank account of any fictitious concerns much less from the Term Loans and OD of the society nor any expenditure in the nature of alleged bogus purchases were booked from such non-existing concerns. 15) In point no. 15 of your notice dated 30.01.2015, your goodself have mentioned details of payments made to some concerns. In this regard we have already submitted the complete details in respect of each such party in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the society. c) In reference to Rishiraj Building Material Supplier, we shall like to submit that we are not aware who has submitted these bills and for what purpose. Mr. Sanjay Bansal has not submitted any such bill to the bank nor has it been recorded in the books of accounts of society. Thus, the allegation is denied. d) In reference to your query no 17(c) on page 13 of questionnaire dated 30.01.2015 related to Pawan Kumar, we shall like to submit that we are not aware who has submitted these bills and for what purpose. Mr. Sanjay Bansal has not submitted any such invoice to the bank nor has it been recorded in the books of accounts. Since no such expenditure has been incurred and neither claimed in the books of accounts, the allegation that the society has claimed any bogus expenditure is incorrect and there is no question of disallowance of the same. We shall further like to submit that no details of alleged various bill of Pawan Kumar have been given by your goodself in the impugned notice, society is not in position to make further submission in this regard. 18) In respect of your query no. 18 on page 13 of questionnaire dated 30.01.2015 regarding OD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of account shows that ₹ 3 crores were further transferred to other accounts, however, in this respect we shall like to submit that the society paid amount for a project and it was not binding on the party to immediately utilize the amount for that project. When an advance is given, the party can utilize it for its business purpose. A copy of MOU executed with the parry and ledger Account evidencing return of payment is attached herewith as Annexure R, page No. 583 to 586. c) M/s Chand Sons Education City Pvt. Ltd. and M/s CKSR Impex International Pvt. Ltd.: The amounts of ₹ 3.66 crores and ₹ 3.44 crores were paid by Sh. Sanjay Bansal to M/s Chand Sons Education City Pvt. Ltd. and M/s CKSR Impax International Pvt. Ltd. respectively for setting up of school/college with the party. The MOU was executed for a time period and if the conditions were not fulfilled before the date of expiry of MOU, then only the party was required to return back the advance paid to it. A copy of MOU executed with the party and ledger Account evidencing return of payment is attached herewith as Annexure S, page No 587 to 598. d) M/s Santosh Timber Trading Pvt Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged. The society cannot comment on utilization of funds by the party. A copy of MOU executed with the party and ledger Account evidencing return of payment is attached herewith as Annexure W, page No. 622 to 625. h) Sh. Sunil Jalan : The advance of ₹ 5.5 crores was given for purchase of land in Delhi/Gurgaon region for setting up new colleges. It was only for the furtherance of objects of the society. A copy of MOU executed with the party and ledger Account evidencing return of payment is attached herewith as Annexure X, page No. 626 to 635. Based on the above submissions, we shall like to submit that the allegation imposed by your goodself that the funds of the society have been used for non-educational purposes is completely denied. No funds of the society have been siphoned off by Sh. Sanjay Bansal. It is evident from the above submissions that the society is being run in consonance with the objectives of the society for which it was established and all the conditions stipulated in section 11 12 of Income Tax Act, 1961 are being compiled by the society. Thus it is requested to your goodself that the registration granted u/s 12A by the CIT may not be can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een applied for the purpose of the objectives of the trust, it was, thus, clear that the trust was not being run in accordance with the aims and objectives for which registration was granted. The ld. Pr. CIT was of the view that the registration of the assessee can be cancelled even in the case when it is found that the certain income received by the assessee trust was not exempted u/s 11 of the Act, due to certain provisions of Section 13(1) of the Act becoming operative. The ld. Pr. CIT observed that the evidence found during the course of search were considered to be belonging to the assessee and the contents of such documents were true, the assessee had not been able to rebut any of the evidence or information found by the AO indicating that the funds of the assessee trust had been siphoned out for activity other than the objectives and it was evident that the funds of the assessee trust had been used for the purpose of other than education and the objectives of the trust. The ld. Pr. CIT, therefore, cancelled the registration granted u/s 12A of the Act. 15. Being aggrieved the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans were taken and utilized by the assessee for its objects of the assessee society as evidenced by the existing building, computers, laptops distributed to the students, inspection reports of the affiliating and approving authorities like AICTE etc. It was further submitted that the Bank loans were taken and utilized by the assessee for its object, were returned from the society s own funds and this fact would not have been interpreted against the assessee. It was also submitted that interest free advances to certain concerns and individuals were given under proper agreements for certain work which was essential for the promotion of the objects of the assessee Society, like provision of Hostel accommodation for students etc. It was contended that the assessee furnished overwhelming evidences for purchase of 800 laptops from M/s Fortech Computer System including bills, payments by account payee cheques receipt of 800 laptops and their distributions amongst students, intimation to the bank regarding receipt of 800 laptops and payments to M/s Fortech for the same etc. The aforesaid evidences were not contradicted by the ld. Pr. CIT who did not say that the payments were not made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction per sq. ft. was quite low as compared to what would have been charged by an outside contractor and similarly, the computers, accessories, peripherals were also purchased at reasonable rates and even lower than what would have been charged by other concerns. Therefore, the ld. Pr. CIT without looking into the aforesaid facts and without pointing out anything excessive, unreasonable or wrong, straightaway gave an unfounded and unsubstantiated findings that construction, purchases, etc. were bogus. It was submitted that even no benefit was derived by Sh. Sanjay Bansal or his associates from the above transactions, therefore, the provisions of Section 13 of the Act were not applicable. It was pointed out that the distribution of the laptops were duly confirmed on stamp paper and receipted/acknowledged, paid periodically by the students over a period of 4 years and those documents were shown to the AO/Competent Authority in the course of the proceedings u/s 12AA of the Act and 10(23C)(vi) of the Act but no proper notice was taken thereof and ignored in order to pass an adverse order with pre-conceived notions and to justify the search conducted in this case. It was further st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... si Catholic Education Society (2014) 225 Taxman 81 (All) CIT Vs Krishna Chandra Gandhi Jan Shiksha Nyas (2014) 222 Taxman 108 Tamila Nadu Cricket Association Vs DIT(E) (2014) 360 ITR 633 CIT Vs Babu Mohan Lal Arya Smarak Education Trust (2014) 42 Taxman.com 255 (All) CIT Vs Ved Niketan Dham, Public Charitable Trust (2013) 219 Taxman 115 (P H) 16. In his rival submissions the ld. CIT DR strongly supported the impugned order passed by the ld. Pr. CIT and reiterated the observations made in the said order. It was further submitted that the funds of the assessee Society were siphoned off by the promoters/trustee which was apparent from the documents found during the course of search. It was further submitted that the trustee of the assessee Society namely, Sh. Sanjay Bansal opened various bank accounts in the names of the employees or the concerns associated with them and all the withdrawals were through the bearer cheque which were diverted for activities other than the educational activities which was the main objectives of the assessee. It was also pointed out that Sh. Sanjay Bansal and his wife were the introducers for most of the bank accounts and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of that bank account, particularly when, the said account is operated by the person in whose name the bank account was opened. In the present case, the assessee constructed the building which was in existence and nothing was brought on record to establish that the assessee was not in possession of the building constructed by obtaining the term loan from various banks, even the loan was sanctioned and disbursed by the bank after proper verification and there was no allegation form the concerned bank that the loan was obtained by the assessee by making mis-representation or furnishing inaccurate particulars or documents. The ld. Pr. CIT also alleged that the assessee Society purchased the computers and laptops from the associated concerns of the trustees but nothing is brought on record to substantiate that those computers/laptops etc. were purchased at a higher rate than the market rate rather the claim of the assessee was that those were purchased at a lesser ate then the market rate which benefited the assessee Society. In the present case, it is also noticed that no verification was made from the students to substantiate that laptops/computers claimed to be distributed amongst th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in running of educational institution and it is not brought on record at any stage that the assessee was not engaged in educational activity through various educational institution established by it and if the ld. Pr. CIT or the AO was not satisfied for various expenses incurred by the assessee than proper action would have been taken u/s 11 or 13 of the Act. 18. On a similar issue the Hon ble Allahabad High Court in the case of CIT Vs Babu Mohan Lal Arya Smarak Educational Trust (supra) held as under: Where in course of search carried out at assessee s premises, certain documents were found indicating some receipt of cash against admission of students in various courses run by assessee trust, in view of act that presumption under section 292C was rebutted by denial of assessee as no evidence of actual receipt of donation or capitation fees was found in search, registration granted under section 12AA could not be cancelled on basis of seized documents. 19. Similarly, the Hon ble Allahabad High Curt in the case of CIT Vs Varansai Catholic Education Society (supra) held as under: From a perusal of section 12AA, it is clear that the Commissioner was req ..... X X X X Extracts X X X X X X X X Extracts X X X X
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