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TMI Blog2018 (3) TMI 1522X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case - 1. The Hon. Commissioner of Income Tax (Appeals) Mumbai -1, has erred in sustaining the additions of Rs. 51,50,000/- made by the ld. Assessing officers, on account of alleged non-application of funds accumulated u/s 11(2). 2. The Hon. Commissioner of Income Tax (Appeals) Mumbai-3, has erred in disregarding the payments of Rs. 1,00,00,000/- made by the appellant of the builder and considering the same as application of funds accumulated u/s 11(2) of the Act. 3. The Hon. Commissioner of Income Tax (Appeals) Mumbai-1 has erred in uphelding the Ld. Assessing Officer's finding that the payments were made to the builder only after 31/03/2011, when the assesses had provided sufficient documentary evidence to prove to the contrary,and the action of the assesses has been held to be invalid. 4. The appellant craves leave to add to, alter, vary, amend or delete any or all of the above grounds of appeal." 3. The brief facts of the case are that the assessee trust is registered u/s. 12A of the Act and also the assessee is registered with Charity Commissioner, Mumbai. The assessee was asked by the AO to give details of the accumulations within provision of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a provision of advance payment in MOU which was found to be correct by the AO. The AO observed from the receipt of payment as well from the bank statement that the assessee has paid this amount of Rs. 1 crore to the builder in the form of Demand Draft which has been debited in the assessee bank account on 30.03.2011. The AO was of view that the assessee should have made the payment by way of cheque instead of Demand Draft. The assessee replied that it is the assessee's discretion to make payment by demand draft. The AO observed that the assessee has got the debit to his account instantly by getting the demand draft issued from his bank before 31-03-2011 which as per AO lead to conclusion that the amount was not utilised before 31-03-2011. The AO issued notices u/s. 133(6) dated 20.01.2014 to the builder which was duly served . The builder was asked to submit the details of the transaction made with the assessee during the FY 2010-11 and to produce certain documents to substantiate the transaction with the assessee . In response to the notice u/s. 133(6), the builder submitted reply dated 24.11.2014, as under:- "M/s. Deal Well Developers have entered into the agreement with M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for your record. 5. Since the bank has already debited the payments to our bank account on or before 31.03.2011 the amount is deemed to have been applied during the year as the money has gone out of the account. 6. Assessee has made payments by drafts to the builder by the end of March 2011 and the said drafts were cleared in the first of April 2011. Thereof, builder has recorded the receipts in April 2011 upon clearance of the drafts in his books which falls in FY 2011-12. 7. In view of the above explanations we request you treat the utilization of Rs. 1,18,07,699/- during the FY 2010-11, as having been spent by the assessee during FY 2010-11 as the money has actually gone out of the bank account of the assessee and therefore, it should be treated as utilized for the purpose. 8. Moreover, assessee is a charitable institution running an academic school, a charitable activity brightening the lives of thousands of students and therefore, we appeal to your goodselves to be reasonable and considerate with regard to the assessee favourably." The AO rejected the contention of the assessee as merely debiting the amount in the bank statement is not an application of the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be built by the Builder Deep-well was adjacent to the school already run by the assessee and was a viable proposal for the assessee to expand its school keeping in view increased demand from students in the vicinity. It was submitted that Demand Draft were honoured and duly cleared and they got credited in the builders account in the month of April 2011 itself although the AO is stating that the said demand drafts got credited in builder account in August 2011. It was submitted that ultimately in 2016, the three floor along with terrace were given to the assessee by the builder Deal Well Developers. The assessee also produced its audited account which is placed in paper book to show that advances were paid towards school premises as is appearing in the assessee audited books of accounts of Rs. 1 crore. The Ld. DR on the other hand relied upon the order of the authorities below and also submitted that notices u/s. 133(6) were issued to the builder and inspector was deputed to visit the builder. It was submitted that builder had confirmed that during financial year 2010-11, no payment was received from the assessee by the Builder while it is only in the financial year 2011-12, the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Construction/Repairs of Bldg. And addition to fixed assets Building & Fixed Assets 6652301 The assessee had contended that it had given drafts of Rs. 1 crore consisting of four drafts of Rs. 25,00,000/- each to the builder M/s. Deal-Well Developers for acquiring three floors and open terrace in a commercial building to be constructed by the said builder to be used for running school in Thane, which building to be constructed was adjacent to the existing school run by the assessee and was considered most viable by the assessee to expand its educational activities by enrolling more students keeping in view increased demand from students . The assessee has produced bank statement to evidence that the amount was debited to the tune Rs. 1 crore in its bank statement on 30.03.2011 for issuance of drafts in favour of the builder Deal-Well Developers . The assessee also produced receipts issued by the said builder dated 05.04.2011 to evidence that three floors along with open terrace were booked and advance were paid towards booking amount for purchasing three floors and open terrace in a building to be constructed by the said builder in Thane. The assessee entered into MOU in October ..... 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