9911796707
TMI Blog2018 (4) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... efore him (refer, inter alia, Metal Box Powder Co. Ltd. v. CIT [2002 (7) TMI 63 - MADRAS High Court] - Appeal of the revenue is allowed for statistical purposes X X X X Extracts X X X X X X X X Extracts X X X X ..... read as 'disallowing', as otherwise it is without any meaning and/or consequence] exemption under section 11 & 12 of the Income Tax Act, 1961. 5. The appellant reserves the right to amend, alter, delete or add any ground of appeal." (emphasis, by underlining/italics, ours) [(*) the correct amount is ₹ 43,57,578/-) The ld. CIT(A) allowed the assessee's claim in respect of 'society share' and 'bonus to employees', confirming the disallowance qua 'provisions' inasmuch as the same (provisions) was neither credited to the account of the member/s nor paid thereto during the year. The same could, therefore, neither be regarded as a real expenditure nor as an application of income. The deletion of the other disallowances was on the ground that the same represented the assessee- society's share (for the welfare of the employees) and, as the case may be, bonus to inservice employees (in their capacity as members of the assessee- society), credited to their respective accounts. The same is only in accordance with the objects of the assessee-society. Aggrieved, the Revenue is in appeal. 4. Before us, both the parties relied on the order by the Revenue authorities as favourable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the assessing authority is subjected to the discretion of the assessee to produce materials/evidence at the appellate stage and, thus, convert the proceedings of a best judgment assessment into proceedings for regular assessment. That is, convert a section 144 assessment into a sec. 143(3) assessment! How could, for example, the AO's finding in the present case of the impugned 'expenditure' being non substantiated be met where there has been no production of account books (including the subsidiary material on which they are based) before the AO. And, in any case, without pursuing and examining the assessee's records by the first appellate authority? In fact, the ld. CIT(A) issues no such finding, so that the said finding by the AO to the contrary remains un-rebutted. How could, one may ask, the deduction of such unsubstantiated expenditure/payment be considered, i.e., on merits? There is, even as observed by the Bench during hearing itself, no concept of 'disallowance' per se in respect of expenditure in the case of a charitable institution, so that where (and to the extent) unsubstantiated, or not qualifying 'as an eligible expenditure', the same would lead to an increase in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an application of income, as well as covered by the principle of mutuality. The former, where so (inasmuch as the same is up till now unsubstantiated), as afore-noted, could only be on the basis of an explanation not furnished before the assessing authority for his examination, consideration and/or verification. Not only is the plea as to mutuality, taken for the first time before him, considered by the ld. CIT(A), it was, as for other explanations/materials led before him, in disregard of rule 46A of the Income Tax Rules, 1962 ('the 'Rules'). The finding as to mutuality is clearly misplaced. The reason is simple. Firstly, the same cannot be, as claimed, an expenditure, which represents a resource utilized/expended for/toward generating revenue or maintaining an establishment, only whereupon it can survive or continue to exist (for the purpose for which it is formed). That is, the finding contradicts the apparent claim of the impugned sum as being an expenditure. Two, the income of the society is primarily from bank interest (at ₹ 47.17 lacs, out of the total income of ₹ 47.53 lakhs) (refer para 5 of the assessment order). It is this income (at net of expenditure) whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re these members differently placed, or their status any different from that of the ex-employees? Every employee would retire from service in time, but that should not alter his standing as a member of the society. Further, is the payment against any services rendered by the payees? Even so, how can the said expenditure be regarded as incurred for earning revenue by the assessee, which is principally from bank interest? Or, is the bonus, as the account name suggests, in lieu of profit, in which case it is an appropriation of profit by the members or, as the case may be, a category of members. Then, again, the same may not be in accordance with the objects of the society, but his order does not, as that of the first appellate authority, specify or even indicate the basis for his so stating, after gathering the relevant material. The burden thus cast by law on the assessing authority is onerous. Where though there is a rational basis for arriving at a conclusion, it cannot be lightly interfered with, as it is in law his best judgment. The assessment, accordingly, both from the stand-point of law, as well as the dictate of justice, shall have travel back to the file of the AO. We, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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