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TMI Blog2017 (8) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... to comprehend that in the absence of any tangible material available with the A.O. for a reason to believe that the income of the assessee had escaped assessment, the learned CIT(A) ought to have filed the proceedings initiated were not sustainable in law, more particularly where the proceedings have admittedly been initiated. to make investigation by making roving and fishing enquiry. (See para 7 ofCIT(A)'s order). 3. That the learned CIT(A) having found that the A.D. had no tangible material in support of his reason to believe that any income has escaped assessment, ought to have held that the proceedings initiated u/s. 148 of the Act were untenable both on facts and in law and thus he ought to have held the proceedings initiated are bad in law. 4. The findings recorded by the CIT(A), "the information with the A.O. was having rational nexus or relevant material bearing on the inference" is wholly erroneous both on facts and in law. He has failed to appreciate that the A.O. could be said to have an information by itself cannot be regarded to be enough unless until there was any existence of tangible material in support of the inference. The learned CIT(A) has failed to ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome & Expenditure account and Balance Sheet for the year ending 31.3.2004, filed with the return of income, the total receipts were shown at Rs. 1,42,00,062/-. Application of income is shown at Rs. 1,52,17,236/-. In the facts and circumstances arising out of the external information received by the AO and in light of the apparent difference of Rs. 61,16,899/- between the receipts shown in the return of income and deposits in the bank account, proceedings u/s. 147 of the Act were initiated and notice u/s. 148 of the Act was issued on 11.5.2006. In response to the statutory notice issued u/s. 143(2) of the Act, the AR of the assessee appeared from time to time and filed the details and information called for. Meanwhile, the Ld. DIT(E), New Delhi vide office order no. 2 of 2007 dated 29.8.2007 assigned the jurisdiction over the case to Addl. DIT, Range-1, New Delhi. Thus, a fresh notice u/s. 143(2) and 142(1) of the Act alongwith questionnaire dated 24.9.2007 were issued. In response to the same, the AR of the assessee appeared from time to time Thereafter, the AO observed that assessee has failed to furnish documentary proof with regard to either the conduct of public / private fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, the assessment made of Rs. 16,77,870/- was untenable in law and deserve to be deleted. In support of his contention, he filed a Paper Book containing pages 1 to 139 in which he has attached the various copies of the decisions of the Hon'ble High Courts and the Hon'ble Supreme Court of India and stated that the issue in dispute is squarely covered by the said decisions. The case laws relied by the Ld. Counsel of the assessee are as under:- 1. Copy of judgment in the case of Ranbaxy Laboratories Ltd. vs. CIT, reported in 336 ITR 136. 2. Jet Airways India Ltd. reported in 331 ITR 236. 3. Mohinder Singh Gill reported in AIR 1978 Pg. 851. 4. 98 ITR 557 (All.) Shree Dwarkadheesh Charitable Trust vs. CIT. 5. 128 ITR 456 (Del.) CIT vs. Eternal Science of Man's Society. 6. 260 ITR 366 (Guj) CIT vs. Sthanakvasi Vardhman Vanik Jain Singh. 7. S.RM.M. CT. Tiruppani Trust vs. CIT reported in 230 ITR 636. 8. Sole Trustee Loka Shiksha Trust vs. CIT reported in 101 ITR 234 at page. 237. 9. ACIT vs. Surat City Gymkhana (2008) 300 ITR 214 (SC) 6. Ld. DR relied upon the order of the Ld. CIT(A) and stated that Ld. CIT(A) has passed a well reasoned order which does not need any i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately preceding year when the trust came into existence, it had filed its return of income showing an excess of receipts over expenditure of Rs. 26~ (Pg. 27). The source of receipts was either corpus donation or others donation i.e. other than corpus donation and an income from interest of Rs. 14,966/-. The AO made an order u/s 143(I) of the Act, and excess of receipts over expenditure was not brought to tax in view of the provisions of section II, which provides that any income of a trust is not to be included in the total income. And for the AY 2004-05, the assessee had likewise furnished its return of income on 31.10.2004, declaring similarly NIL income. Perusal of the income and expenditure account (Pg. 51) shows that for the instant assessment year, it had received a corpus donation of Rs. 1,41,93,101/-and others of Rs. 2,808/-i.e. total receipts aggregated to Rs. 1,42,00,062/-. After incurring the expenditure the net sum represented excess of receipts over expenditure which aggregates to Rs. 13,03,859/-, as against a sum of Rs. 26,51,305.95 of the preceding assessment year and brought to tax the excess of income over expenditure which aggregated to Rs. 13,03,859/- which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not in excess of fifteen per cent of the income from such property" 7.3 Thus In the instant case, the income of the assessee on the receipt side as has been reflected in the Income and Expenditure account aggregated to Rs. 1,42,00,062/- and as such in no case 15% thereof i.e. Rs. 35,50,155/- could not be included in the total income. In the instant case there was only an excess of income over expenditure of Rs. 13,03,859/-, which is far less than Rs. 21,30,009/-. In fact the learned CIT(A) has upheld the assessment as in his opinion assessee has not 'carried out' any charitable activity, which it is submitted is entirely misconceived. In fact there is no income derived by the assessee. Had there been an income, only than such a question could have been arisen. In fact the aforesaid sum has been held to be included in the total income since the CIT(A) has recorded a finding that the assessee had not established that it is engaged in charitable activities. It is submitted, despite the fact that assessee being a trust, a charitable institution, its income is to be computed u/s II of the Act, the AO went wrong in bringing to tax such excess of receipt over expenditure. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m income-tax. Section 11(2), in turn, provides that the restriction which is specified in clause (a) of subsection (1) as regards accumulation, shall not apply if the assessee gives notice as prescribed under section II (2)(a) and invests the amount accumulated in the Government securities as per section 11 (2)(b). The restriction specified in clause (a) of sub-section (1) is clearly the restriction of25 per cent of the accumulated income (or Rs. 10,000, whichever is higher) being exempt. If more than 25 per cent (or Rs. 10,000) is to be exempted then the assessee has to comply with the conditions prescribed under section 11(2). In the case of Addl. CIT v. A.L.N. Rao Charitable Trust [19951 2161TR 697/83 Taxman 252, this Court considered the provisions of section 11(1)(a) in the light of section 11(2) and held that section 11(2) does not in any manner restrict the operation of section II (I). The accumulated income which is exempt under section II (I lea) need not be invested in the Government securities. It is only in respect of any additional accumulated income beyond 25 per cent that, if the assessee wants exemption of this additional accumulated income also, the assessee is req ..... X X X X Extracts X X X X X X X X Extracts X X X X
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