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TMI Blog2016 (11) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... or the benefit of person referred to in subsection 3 of Section 13 and thus violated the provisions of section 13 - Held that:- Though the property was purchased by the assessee, but it could not be registered in the name of the assessee and the seller gave a power-of-attorney in the name of Sh. Surender Sharma. Moreover, the Government of Delhi also refused to transfer the property in the name of the assessee, because, the property was restricted for specific use of factory and not for the office. In view of the restriction on the use of the property and lack of title in the favour of the assessee, the assessee was compelled to transfer the property to Sh. Surender Sharma in absence of any buyer as stated by Sh. Dinesh Chand Gupta, President of the club at the time of assessment proceeding. In his statement recorded on 18/02/2005 under section 131 of the Act, he stated the facts and circumstances under which the property was sold to Sh. Surender Sharma and justified that the property was sold at market value. Relevant part of the statement has already been reproduced by the Assessing Officer in the assessment order . In view of above circumstances, we find that there is no violati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Dated:- 19-10-2016 - Sh. H. S. Sidhu, Judicial Member And Sh. O. P. Kant, Accountant Member Appellant by : Sh. Gautam Jain P.K. Kamal, Advocates Respondent by : Sh. F.R. Meena, Sr.DR ORDER Per O. P. Kant, A. M. This appeal by the assessee is directed against order dated 22/03/2010 passed by the learned Commissioner of Income-tax (Appeals)-XI, New Delhi, for assessment year 2002-03 raising following grounds: 1. The appellant, Rajasthan Club is engaged in charitable activity during the Financial year 2001-02. The appellant is a regular Income Tax assessee and assessed to Income Tax for the last several years. All income, assets and investments are disclosed to Income Tax Department in regular Income Tax returns. 2. On the facts and in the circumstances of the case and in law the learned Assessing Officer and Commissioner of Income Tax (Appeal) was incorrect and unjustified in making a reference of the property in this case to the valuation officer without any reason basis and evidence. 3. On the facts and in the circumstances of the case and in law the learned Assessing Officer and Commissioner of Income Tax (Appeal) was incorrect and unj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequently on miscellaneous petition filed by the assessee, the order has been recalled by the Tribunal in its order dated 01/02/ 2016. 3. The facts in brief of the case are that the assessee society has been registered under section 12A of the Income-tax Act, 1961 (in short the Act ). The assessee claimed its income as exempted under section 11 of the Act and filed its return of income on 05/09/2002, declaring nil income. The case was selected for scrutiny and the assessment under section 143(3) of the Act was completed on 30/03/2005 assessing the total income at ₹ 13,97,084/- in the status of Association of Persons (AOP). Aggrieved, the assessee filed appeal before the learned Commissioner of Income-tax (Appeals), however, the appeal of the assessee was dismissed. Aggrieved, the assessee is in appeal before the Tribunal, raising the grounds as reproduced above. 4. The grounds number No. 1, 2 and 6 are general in nature and, therefore, not required to be adjudicated upon by us. 5. The grounds No. 3 and 8 of the appeal are regarding addition made of ₹ 11,60,400/- on account of full value consideration enhanced by the Assessing Officer on sale of building on e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant minute books and copy of a resolution passed in respect of sale of the flat and the change in the name of purchaser from Sh. Surender Sharma to Sh. Ashish Sharma was done to avoid invoking of provisions of section 13(3) of the Act which affects the exemption availed by the assessee club. 5.5 The Assessing Officer observed that vide notice under section 55A of the Act, issued by the Assistant Valuation Officer dated 24/03/2005 addressed to the assessee club, he had estimated an interim value of the flat sold by the assessee club at ₹ 13,93,400/- and the final value was yet to come. On the basis of interim finding of the Asst. Valuation Officer, the Assessing Officer issued a final show cause notice wherein the assessee was asked, as why the estimated value of ₹ 13,93,400/- be adopted instead of ₹ 2,30,000/- declared by the club and as to why the provisions of section 13(3) not applied as the trust through this transaction had sold the property to an interested person and accordingly, why the exemption under section 11 of the Act be denied to the assessee. According to Assessing Officer, the assessee did not comply with the above notice, and thus, he comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident from the confirmation given by the buyer Sh. Ashish Sharma as well as the statement of Sh. Dinesh Chandra Gupta, who was president of the assessee club, at the time of assessment proceeding; (ii) that expression full value consideration denotes actual consideration and not notional or deemed consideration, placing reliance on the judgment reported in 309 ITR 233 (Del) in the case of CIT versus Smt. Nilofer I. Singh and other decisions; (iii) that the interim valuation of the District Valuation Officer (DVO) cannot be said to be full value consideration received or accrued to the assessee; (iv) that the DVO s Report, whether interim or final, cannot be made basis to enhance the full value consideration, placing reliance on 328 ITR 515 (Supreme Court) in the case of ACIT versus Dhariya construction company, 316 ITR 46(Del) in the case of CIT versus Shakuntala Devi and other decisions; (v) that no final report of DVO was submitted by the Assessing Officer in spite of the direction of the learned Commissioner of Income-tax (Appeals) in remand proceedings under section 250(4) of the Act; (vi) that the report of the Inspector also cannot be made basis for enhancing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue received by the assessee was higher than what is declared in the return of income. Thus respectfully, following the above decision, we delete the addition made by the Assessing Officer and sustained by the learned Commissioner of Income-tax (Appeals) on the issue in dispute. Since the addition has already been directed to be deleted on the first proposition of the assessee, we are not discussing the other proposition of the assessee on the issue in dispute. The grounds no. 3 8 of the appeal are accordingly allowed. 6. The ground Nos. 4 and 5 are related to denial of exemption under section 11 of the Act and the assessment in the status of AOP. According to the Assessing Officer, the flat sold to Sh. Surinder Sharma, who was the President of the assessee club at the time of sale and, therefore, provisions of section 13 of the Act were applied in the case of the assessee as the transaction of sale of the property was to an interested person. The learned Commissioner of Income-tax (Appeals), concurred with the finding of the Assessing Officer and upheld the denial of exemption and assessment in the status of AOP. 6.1 Before us, the learned Authorized Representative of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . d .. .. e .. .. f. If any share, security or other property is sold by or on behalf of the trust or institution to any person referred to in sub-section(3) during the previous year for consideration which is less than adequate; g h .. 6.4 In the case of the assessee the fact that property has been sold to the then President of the assessee club or his son is undisputed. The only issue whether the consideration on which it is transferred was adequate or not, in terms of the provisions of section 13(2)(f) of the Act . While deciding the ground Nos. 3 and 8 of the appeal, we have already held that there are no other materials or evidence which could establish that the property has been transferred at a value more than what is recorded in the return of income. We have already referred to the compelling circumstances shown by the assessee under which the property was transferred to Sh. Surender Sharma or his son. We have observed that though the property was purchased by the assessee, but it could not be registered in the name of the assessee and the seller gave a power-of-attorney in the name of Sh. Surender Sharma. Moreo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts were not produced before the Assessing Officer, therefore, he allowed 20% of the total expenses, which worked out to ₹ 3,44,614/-. The learned Commissioner of Income-tax( Appeals) also upheld the disallowance. 8.1 Before us, the learned Authorized Representative of the assessee referred to para 1 of the assessment order and submitted that books of accounts were produced before the Assessing Officer and same were examined on the test check basis. He also submitted that the Assessing Officer has not pointed out any specific expenses, vouchers corresponding to which, were not produced and he made disallowance in ad-hoc manner without pointing out any specific faults in the vouchers or the books of accounts of the assessee. In support, thereof, the learned Authorized Representative relied on the following decisions: 1. 76 ITR 690(SC) state of Orissa versus maharaja Sh. BP Singh Deo. 2. 60 ITR 239 (SC) state of Kerala versus C Velukutty 3. 288 ITR 10 (SC), Kachwala Gems versus CIT 8.2 On the other hand, the learned Sr. Departmental Representative, relied on the order of the lower authorities. 8.3 We have heard the rival submissions and perused th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing our findings, in case of ground No. 7 of the appeal, we hold that disallowance of expenses in arbitrary manner cannot be allowed, and thus same is deleted. The ground No. 9 of the appeal is accordingly allowed. 9. In ground No. 10, the assessee has challenged addition of ₹ 1,55,000/- on account of membership fees. Since the Assessing Officer, held the status of the assessee AOP and withdrawn the exemption, he added the membership fee amount of ₹ 1,55,000/- received by the assessee during the year as income of the assessee and added the same to the total income of the assessee. The learned Commissioner of Income Tax (Appeals) upheld the action of the Assessing Officer. 9.1 Before us, the learned Authorized Representative of the assessee submitted that there was no valid legal justification for making addition of membership fee as same was exempt from tax in view of the following judgments: 1. 138 DTR 145 (Bom) CIT Vs. Shree Parleshwar Cooperative Housing Society Ltd. 2. 209 ITR 396 (Bom) Trustees of Sh. Kot Hindu Stree Mandal Vs. Commissioner of Income Tax 9.2 On the other hand, the learned Sr. Departmental Representative relied on the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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