Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2019 (9) TMI 1179

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... brought by the ld. PCIT, we hereby hold that no action u/s 263 of the Act is called for on this ground. Payments for vehicles - two cars with the same registration No. HR09F0006 - as alleged that Sh. Tarsem Garg is maintaining three cars and questions its utility and also related the use of cars with the absence of driving license to Sh. Tarsem Garg - HELD THAT:- We find that the imputation of the ld. PCIT is devoid of merit and sans any reason. It was matter on record that the vehicle was purchased by Sh. Tarsem Garg by obtaining loan in his personal name and the installments paid by Sh. Tarsem Garg are being reimbursed by the assessee trust at regular intervals. The ledger copy of ICICI Innova loan in the books of MMU have been produced before us wherein it can be observed, the cheques have been issued at regular intervals, the vehicle is taken in the block of fixed assets of the trust and depreciation is also charged. Having or not having driving licence and purchase of vehicle cannot be matter of revenue concern as long as no unaccounted income is determined or tax evasion is pointed out, which is absent in the order of the ld. PCIT. Hence, it cannot be said that Sh. Tarse .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... his ground. Other Benefits to trustees - On a concurrent reading of the questionnaire issued the Assessing Officer dated 06.10.2016 (page no. 159), reply of the assessee dated 05.12.2016 (page no. 239), statements of the driver, security guard and watchman, we find that the provisions of Section 263 of the Act and Explanation 2 of Section 263 of the Act are not applicable to this ground. Construction payment made to Sh. Tarsem Garg - PCIT held that the contractual payment made to Sh. Tarsem Garg cannot be allowed as the payments received from the trust have been withdrawn immediately and also for the reason that Sh. Tarsem Garg is not a regular contractor but Chancellor of the MM University - HELD THAT:- Sh. Tarsem Garg has been registered Government contractor for about 20 years and the said contract was given by the assessee to Sh. Tarsem Garg for RR Masundry Work, Excavation work and Boulder Packing work. The work order has been perused and the profits earned thereof have been determined u/s 44AD of the Act. - no action u/s 263 of the Act is called for on this ground. Rent paid to trustees - The value of the perquisite was also added to the salary of Sh. RP Bajpay .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... cer during the assessment proceedings. Hence, the ld. PCIT conclusion that the trustees have been benefited by way of receipt of higher interest cannot hold good. Hence, no action u/s 263 of the Act is called for on this ground. Salary paid to Trustees - Sh. Tarsem Garg has been paid huge salaries which has given any undue advantage as he is a trustee of the assessee. Hence, keeping in view the facts and circumstances of the issue, we hold that no action u/s 263 of the Act on this ground Sum received by Santosh Hostel from the assessee trust - PCIT observation that completion certificate for the hostel building is a passive query which really do not effect the provisions of taxation and especially when the ld. PCIT himself has formed that the profits earned by the hostel are more than the market averages and the receipt on account of rent received from the students have duly offered to tax. As to the query regarding the increase of students from year to year it has been explained that owing to completion of more rooms, more number of students have been admitted to hostel and the rents received from them have duly offered to tax and hence, it cannot be held that the order .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... nefit to the trustee or loss of revenue, the order of the ld. PCIT cannot be upheld on this ground. Taxing profits u/s 44AD - PCIT has not disputed the factum that the work has been executed. At the same time, the ld. PCIT has held that the Assessing Officer did not carry out any inquiry are raised any query in respect of construction receipts. The ld. PCIT observation was based on the suspicion that the assessee has not undertaken any contractual work it is against the facts on record. The ld. PCIT has not given any finding regarding what is the error in the order of the Assessing Officer and not even approximately quantified or mention any possible loss of revenue by conducting independent enquires. The judgments quoted by the ld. PCIT are perused and found to be not applicable to the facts of this case. PCIT s reliance on the judgment of CIT Vs Infosys Technologies Ltd. [ 2012 (1) TMI 76 - KARNATAKA HIGH COURT] as held that provisions u/s 263 of the Act is intended to plug leakages to the revenue by the erroneous order passed by the lower authorities cannot be applicable and in the instant case as the ld. PCIT has not determined, proved any leakage to revenue on this is .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Sh. Harish Gupta mentioned in the order u/s 263 of the Act. Any kind of loss of Revenue or non examination of the issue by the Assessing Officer before allowing the claims has not been brought out by the ld. PCIT which was discussed above. Hence, we hereby hold that the order u/s 263 of the Act cannot be upheld on this ground. PCIT in the order ultimately held that Annual Letting Value (ALV) of the property amounting to ₹ 880,000/- was required to be taxed under head income from other sources while holding that the rental income of ₹ 880,000/- shown in respect of the property let out to Trishala was found to be bogus does not stand on any legal principles for the simple reason as the provisions of Sections 22, 23 24 of the Act which cover the scheme of taxation under head house property. As the property in question is not a self occupied property as such the provision of Section 23(4) of the Act will apply to this property. As per the summarized provisions of Sections 22-23, Income of such property is chargeable to tax which is higher value of rent received or expected rent. Assuming, but not conceding that the property in question is not let out, even in .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... hands of trustees, family members on account of salaries, interest and rent paid to trustees solely on the basis of suspicion. 1.3 That the learned Principal CIT has erred in stating that trustees had obtained other benefits in the form of services of employees of trust. 1.4 That the learned Principal CIT has erred in facts in alleging that assessee trust has violated MCI Guidelines in admission of students without providing cogent reasons for the same and solely on suspicion and surmises. 1.5 That the learned Principal CIT has erred on facts and in law in concluding that AO has not conducted proper enquiries in respect of payment of salaries to teachers solely on the basis of suspicion, surmises and conjectures. 1.6 That learned Principal CIT has erred on facts and in law in alleging that vehicle purchased in the name of trustees has been used for siphoning of funds of assessee Trust and in violation of s. 13 ignoring the facts on record. 1.7 That learned Principal CIT has erred on facts in alleging that trustees have purchased vehicles from assessee trust at discounted value in violation of provisions of s. 13 of IT Act ignoring the facts on records. .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... T has erred on facts and in law in concluding that AO has not conducted proper enquiries in respect of payment of salaries to teachers solely on the basis of suspicion, surmises and conjectures. 1.6 That learned Principal CIT has erred on facts and in law in alleging that vehicle purchased in the name of trustees has been used for siphoning of funds of assessee Trust and in violation of s. 13 ignoring the facts on record. 1.7 That learned Principal CIT has erred on facts in alleging that trustees have purchased vehicles from assessee trust at discounted value in violation of provisions of s. 13 of IT Act ignoring the facts on records. 1.8 That learned Principal CIT has erred on facts and in law in stating that funds of the trust have been diverted to the trustees and their relatives in the garb of rent of Santosh Hostel ignoring the facts on record. 2. That the learned PCIT has erred in ignoring the facts that entire issues raised in 263 show cause notice has already been examined in detail as per record by learned DCIT (CC) Karnal and assessment had been completed by forming an opinion on all the issues now raised in the 263 order. 3. That the learned .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... purchased in the name of trustees has been used for siphoning of funds from assessee Trust and in violation of s.13 ignoring the facts on record. 1.8 That learned Principal CIT has erred on facts in alleging that trustees have purchased vehicles from assessee trust at discounted value in violation of provisions of s.13 of IT Act ignoring the facts on records. 1.9 That learned Principal CIT has erred on facts and in law in stating that funds of the trust have been diverted to the trustees and their relatives in the garb of rent of Santosh Hostel ignoring the facts on record. 2. That the learned PCIT has erred in ignoring the facts that entire issues raised in 263 show cause notice has already been examined in detail as per record by learned DCIT (CC) Karnal and assessment had been completed by forming an opinion on all the issues now raised in the 263 order. 3. That the learned PCIT has erred in law in not adhering to the principles of natural justice by not providing the documents as per records of AO to establish the fact that entire issues raised in 263 show cause notice has been examined by DCIT (CC) during assessment proceedings. 4. That the learn .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... of Santosh Hostel ignoring the facts on record. 2. That the learned PCIT has erred in ignoring the facts that entire issues raised in 263 show cause notice has already been examined in detail as per record by learned DCIT (CC) Karnal and assessment had been completed by forming an opinion on all the issues now raised in the 263 order. 3. That the learned PCIT has erred in law in not adhering to the principles of natural justice by not providing the documents as per records of AO to establish the fact that entire issues raised in 263 show cause notice has been examined by DCIT (CC) during assessment proceedings. 5. In ITA No. 1598/Del/2019, the assessee has raised following grounds of appeal: 1. That the Principal CIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying, the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 1.1 That the learned Principal CIT has erred in alleging that assessee had siphoned money from trust by booking bogus expenditure in form of mess charges and paymen .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... in exercising revisionary powers u/s 263 of the Act without satisfying, the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 1.1 That the learned Principal CIT has erred in alleging that assessee had siphoned money from trust by booking bogus expenditure in form of mess charges and payment to contractors without conducting any independent inquiry and formed his opinion on the basis of suspicions, surmises and conjectures. 1.2 That the learned Principal CIT has erred in stating that assessee was diverting trust money in hands of trustees, family members on account of salaries, interest and rent paid to trustees solely on the basis of suspicion. 1.3 That the learned Principal CIT has erred in stating that trustees had obtained other benefits in the form of services of employees of trust. 1.4 That the learned Principal CIT has erred in facts in alleging that assessee trust has violated MCI Guidelines in admission of students without providing cogent reasons for the same and solely on suspicion and surmises. 1.5 That the learned Prin .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 10. Bogus expendituremess charges 11. FDR loan IP Garg 7. A search seizure operation u/s 132 and survey operation u/s 133A were conducted at the premises of M/s Maharishi Markandeshwar University Trust group of cases, Mullana and their trustees on 31.10.2014. 8. The following persons are trustees of the assessee trust: Sr. No. Name Designation PAN Address 1. Tarsem Kumar Garg President ADEPG1240P 55, Model Town, Ambala City 2. Sanjeev Garg Secretary ADEPG1215C 157, Jail Road, Ambala City 3. Vishal Garg Treasurer AJRPG5973E 55, Model Town, Ambala City 4. Santosh Kumari Member AAWPG9894J 55, Model Town, Ambala City 5. Meenakshi Garg Member ADPPG1352H 55, Model .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... u/s 131 09.01.2015 2. Ms. Rashika Malik Dr. Sanjay Malik S/o Rajinder Mohan Malik -do- NRI u/s 131 08.01.2014 3. Amandeep Singh Sh. Jagmit Singh S/o Jagjit Singh -do- NRI u/s 131 08.01.2014 4. Chahat Bansal Dr. Ashwani Kumar S/o Sukhdev Singh -do- NRI u/s 131 08.01.2014 5. Kanwarvir Singh Sh. Amrik Sinqh S/o Avtar Singh -do- NRI u/s 131 08.01.2014 6. Rupinder Sinqh Sh. Paramjit Sinqh -do- Management u/s 131 29.12.2014 7. Ms. Chaitnya Sh .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... vide para 5 and argued that the statements of the parent of the students were recorded u/s 131(1) of the Act which proved that the students admitted in NRI quota were without NRI status of any off the family members. He has taken us to the statements of the students at page no. 282 to 341 of the paper book. 17. Heard the arguments of both the parties and perused the material available on record. 18. We find that complete details pertaining to NRI quota were filed before the Assessing Officer and ld. PCIT which consists of FIRC, affidavit of parents, students and norms of MCI. We find the Assessing Officer has issued show cause notice dated 06.10.2016 pertinent to this issue at page no. 162 of the paper book. The assessee has replied vide letter dated 04.11.2016 on this issue which is placed at page no. 217, 218 of the paper book. The guidelines of the MCI and the gazette publication is as under: Gazette publication Admission of NRIs/Foreign students - Private medical colleges shall be permitted to admit the NRIs/Foreign students upto a maximum of 10% of the total sanctioned intake capacity. From the academic year 1994-95. The 10% will be out of payment seats . The .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... guidelines which allow the wards of the NRIs to be admitted under the NRI quota and keeping in view the fact, that anything prejudicial to the interest of Revenue has been brought by the ld. PCIT, we hereby hold that no action u/s 263 of the Act is called for on this ground. Payments for vehicles 22. The ld. PCIT held that as per the bank statement of OBC a/c no. 51822010000010 FY 008-09, Sh. Tarsem Garg had purchased a Toyota Innova vehicle (HR-09F-0006) in his name after obtaining a loan from the ICICI bank, for which he was making payment of EMI of ₹ 25,520/- to the bank. It was noted that an amount of ₹ 21,520/- is being reimbursed by the assessee trust to Sh. Tarsem Garg every month in clear violation of section 13 of the Act. Before the ld. PCIT, the AR submitted that the assessee trust has purchased an Innova car (engine no. 9790694 and chasis no. 7066668) registration no. HR09F0006 from M/s JCBL Auto Pvt. Ltd., Karnal for a sum of ₹ 8,37,940/- on 05.02.2007. During that period getting finance in the name of individual was much easier at lesser interest than to obtain loan in the name of trust. The vehicle was purchased in the name of Sh. Tarsem .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Repair maintenance The New India Assurance Co. Ltd. claim of HR- 09F-0006 8690 OBC-010 14.09.2012 Excess amount of Audi car insurance paid to the New India Assurance refund through NEFT 72639 - OBC-010 14.09.2012 Excess amount of Audi car insurance paid to the New India Assurance refund through NEFT 2329 - OBC-010 22.10.2012 Chq no. 446199 Excess of Insurance amount wrongly received in SB1 instead of MMU 74968 OBC-010 15.03.2013 Repair maintenance- NEFT The New India Assurance 172144 OBC-010 15.03.2013 Insurance Innova 0006 Chq. No. 905952 19626 OBC-010 03.05.2013 Cash deposit from MMU for car sale .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... is maintaining three cars and questions its utility and also related the use of cars with the absence of driving license to Sh. Tarsem Garg. We find that the imputation of the ld. PCIT is devoid of merit and sans any reason. It was matter on record that the vehicle was purchased by Sh. Tarsem Garg by obtaining loan in his personal name and the installments paid by Sh. Tarsem Garg are being reimbursed by the assessee trust at regular intervals. The ledger copy of ICICI Innova loan in the books of MMU have been produced before us wherein it can be observed, the cheques have been issued at regular intervals, the vehicle is taken in the block of fixed assets of the trust and depreciation is also charged. Having or not having driving licence and purchase of vehicle cannot be matter of revenue concern as long as no unaccounted income is determined or tax evasion is pointed out, which is absent in the order of the ld. PCIT. Hence, it cannot be said that Sh. Tarsem Garg in any way benefited by the trust in purchase of the vehicle in his own name. We hereby hold that the order u/s 263 of the Act cannot be upheld on this ground. Salary to Teachers: 29. The entire portion of the ld .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ve been drawing hefty salaries as full time faculty from your trust. The rules and regulations of MCI prescribed that the doctors can either accept whole time employment as medical professionals/teaching faculty or they can indulge in private practice as medical professional. Thus, the ghost doctors are violating the norms and rules of regulations of MCI by working as teaching faculty while simultaneously also running their medical practice. Some of such doctors were being shown on the rolls of your trust, but who were actually working and practicing in different places hundreds of kilometers away. As per findings of PMC, Mohali, the list of doctors who have been identified as non genuine teachers working with your trust marked as Annexure -C. 6.11 Further, based on information gathered during the course of search seizure and information received from the MCI, Punjab summons have been issued by this office to 24 doctors for personal attendance, whose are associated with the your trust/group as Assistant Professor/Professor. The name of the faculties, whom summons were issued by Investigation Wing are as under:- Sr. No. Name .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Statement recorded on 01.02.2016 13 Dr. Asha Negi Dyerton Cottage-Ill, Khalini, Shimla, H.P. 22.01.2016 14 Dr. Amit Kapila 8, Malwa Colony, Patiala, Punjab 22.01.2016 Statement recorded on 02.02.2016 15 Dr. Rajeev Kumar Jain H.No. 1157-C/32-B, Chandigarh 03.02.2016 Statement recorded on 29.02.2016 16 Dr. Rupinder Singh 62/10-A, Chandigarh 03.02.2016 Statement recorded on 15.02.2016 17 Dr. Surinder Kumar Gupta 1009/30-B, Chandigarh 03.02.2016 Not attended 18 Dr. Praveen Mohan H.No. 1886-A, Sector-21 (Partill) Behind Alchemist Hospital, Panchkula 03.02.2016 Statement recorded on 15.02.2016 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... .02.2016 5 Dr. Shyam Sunder Sood H.No. 930, Sector 40-A, Chandigarh 22.01.2016 Statement recorded on 02.02.2016 6 Dr. Dinesh Kumar Sharma H.No. 9760, UCO Bank Street, Ludhiana 22.01.2016 Statement recorded on 01.02.2016 7 Dr. Amit Kapila 8, Malwa Colony, Patiala, Punjab 22.01.2016 Statement recorded on 02.02.2016 8 Dr. Rajeev Kumar Jain H.No. 1157-C/32-B, Chandigarh 03.02.2016 Statement recorded on 29.02.2016 9 Dr. Rupinder Singh 62/10-A, Chandigarh 03.02.2016 Statement recorded on 15.02.2016 10 Dr. Praveen Mohan H.No. 1886-A, Sector-21 (Partill) Behind Alchemist Hospital, Panchkula .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... is not generally possible to take up to and from journey in a day. iv. The MCI does not allow part time faculty. The PMC has found that most of such doctors are available to the group (i.e. MMUT) only at the time of inspectionby the Medical Council of India or they visit the place once or twice a week. v. The information collected by the Department regarding booking of bogus expenses includes the payment of bogus salary. Of course ghost teachers are one of such methods through which the bogus expenditure (in the shape of salary) has been claimed. In this regard, this office collected information (refer to above table) wherein the MMUT has paid salaries, to such doctors who have been identified by the PMC as ghost teachers working in various private Medical Colleges. vi. As per the information of PMC, narrated in the above noted table, some of the doctors have denied having worked for the group (i.e. MMUT) vii. During the course of statement before this office some of the doctors have admitted that they have not taken any classes in the relevant periods, but they have received salary. viii. In some of the cases even they are also not aware of the terms .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... y on the basis of facts that they have registered with only Punjab Medical Council. The above observation of PMC is not correct that Doctors registered with Punjab Medical Council and working in this College are not genuine one because there is no such rule of MCI that Doctor registered in Punjab cannot work in Haryana and any other State. It is compulsory for the Doctors to get themselves registered with only one Medical Council as per MCI norm. It is surprised to note that the Doctors working in Mullana (Ambala) and Solan (H.P.) are declared as ghost faculty only on the basis of fact that they are registered with Punjab Medical Council. It is not mandatory for the faculty to have registration with each State Branch of Medical Council if they are already registered with one State branch. It is also a point of question that in case, any faculty member resigns from MM Medical College Hospital at Kumarhatti- Solan and joins MM Institute of Medical Sciences and Research, Mullana, is he required to have registration with Haryana Medical Council before joining without getting NOC from Himachal Pradesh Medical Council or not? Is he required to have registration time a .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 3years, R/o 46/2, Passi Road, Patiala With reference to payments made to doctor Devinder Singh Walia, who had been working in AM College Hospital Kumarhatti Solan as assistant professor for a period of 20 months since 01/03/2013 and as senior resident for a period of 4 months thus tenure for 24 months and thereafter he has resigned from his duties w.e.f. 28.02.2015. His statement was recorded by Investigation Wing on 09.02.2016. In reply to Q No. 11 he has stated that he got the money through bank transfer in his SBI saving account. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no .1.6.3Rajeev Aggarwal, S/o late Dr. N.D. Aggarwal, aged 61years, R/o 1-E, The Maill, Opp. Polo Ground, Patiala With reference to payments made to doctor Rajeev Aggarwal, who had been working in MM Institutes of Medical Science and Research Mullana as professor in orthopaedics department since 2008 to November 2014. His statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 10, he has admitted that he has worked for MMU group till Nov. 2014 which .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ing in MM college of Medical College Hospital Kumarhatti, Solan as Assistant Professor/ Senior Resident from 01.03.2013 to 28.02.2015. His statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 10, he has admitted that he has worked for MMU from 01.03.2013 to 28.02.2015, which is same as per our books and records. In reply to Q No. 15 he answered that he was residing in Campus at Kumarhatti, Solan. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no .1.6.7Amit Kapila, S/o Sh. A.K. Kapila, aged 38years, R/o 8, Malwa Colony, Patiala With reference to payments made to doctor Amit, who has been working for MM Institute of Medical and Research, Mullana as assistant professor/ associate professor in the department of Orthopedics from 18.08.2009 to 19.01.2015. His statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 10, he has admitted that he was working in orthopedics department, MMU, Mullana from August 2009 to January 2015, which is same as per our books and records. Copy of PAN, qualificatio .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ords. In reply to Q No. 11 she admitted that she was selected through recruitment process only and form16 stands verified by your office. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no . 1.6.11 Ajata Shatru Kapoor, S/o Sh. Vishav Mittar Kapoor, aged 44years, R/o H.No. 12. Ranbir Mark, Model Town. Patiala With reference to payments made to Doctor Ajata Shatru Kapoor, who has been working in MM Institutes of Medical Science Research Mullana as assistant professor from 01.01.2013 to 30.06.2015 and has resigned from his duties w.e.f. 30.06.2015. His statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 10, he has admitted that he was working in MMU, Mullana from 01.01.2013 to 30.06.2015, which is same as per our books and records. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no . 1.6.12 Vishal Kharbanda, S/o Sh. Narender Kumar Kharbanda, aged 43years, R/o H.No. 25A, Bharpur Garden, Opp. New Moti Bagh Palace, Pat .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... to 31.03.2015. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no . 1.6.16 With reference to payments made to doctor Ashotosh Sharma S/o Sh Pawan Kumar Sharma r/o H No 3928, Sector, 2D, Chandigarh, who has been working in MM Medical College Hospital, Kumarhatti, Solan as an assistant professor from 01.12.2012 to 30.11.2015. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no . 1.6.17 With reference to payments made to doctor Anand Kumar Jindal S/o Sh Bhagat Ram Jindal r/o H No 1, Sector, Jail Land, Ambala City, who has been working in MM Institutes of Medical Science Research Mullana as an assistant professor from 01.07.2010 to 31.12.2015 and again joined his job w.e.f 01.08.2016. He has already submitted his reply to department as also ment .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... para 6.11 of your questionnaire. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no 1.6.22 With reference to payments made to doctor Kalpana D/o Sh Dina Nath Katoch r/o Flat No 4, Mansa Cottage, Lower Kaitu, Shimla (HP), who has been working in MM Medical College Hospital Kumarhatti, Solan as an assistant professor from 15.04.2013 to 30.06.2013. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no . 1.6.23 With reference to payments made to doctor Barinder Pal Singh S/o Sh Harbir Singh r/o H No 410 R, Model Town, Ludhiana, who has been working in MM Medical College Hospital Kumarhatti, Solan as senior resident/ assistant professor from 01.03.2013 to 28.02.2015. He has already submitted his reply to Investigation Wing as also mention in para 6 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ations of your honor are against the facts on records. ii. With reference to doctors having established practice and earning substantial income from their personal practice; it is submitted that as per the terms of appointment MMUT or MCI do not debar a doctor employed in Medical College / Dental College for private practice after their specified assigned duty hours in Hospital / College time or on holiday. That without commenting the income earned by these doctors from their practice cannot be commented by us. However, salary paid to these doctors are strictly on the basis of their working and their bio metric attendance calculated through 100% automated systems in place. iii. With reference to observation of PMC that some doctors have parallel entries in the same month from two different sources of work in two different towns, that not even a single such instance was provided to us wherein a doctor is employed in two Colleges in the same month as such their no truth in the allegation. Further your honor has observed that department has collected information as per which the doctors have multiple addresses. Some of the addresses are at faraway places, from where, it is .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... t do not exist. The complete details along with all relevant paper connected with Annexure- A, Annexure- B, Annexure- C and Annexure- D of your questionnaire is attached. As such there is no justification in suspicion of existence of any ghost teacher. vi. With reference to your observations that PMC has some information that some of the doctors have denied having worked for the group MMUT, it is submitted that yes this is correct that a few of the doctors listed under Annexure C do not work MMUT. The same is clarified by PMC as well as the same is confirmed that they are not our employees at any point of time and no salary was ever paid to such persons. These persons are specifically marked in our reply and depicted under sr. no. . vii. With reference to your observation that some of the doctors have admitted that they have not taken any classes in the relevant periods but they have received salary, it is strongly denied. Before commenting on this observation it is submitted that as a principle of interpretation it is neither expected nor desirable to pick certain phrases from a statement. The statement of any person has to accepted or read as a whole. Assessee underst .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... be read partially but has to be read fully and wholly so as to come to a conclusion which the ld. PCIT seems to have misdirected himself. The issues flagged by the ld. PCIT have already been examined by the Assessing Officer at length before conclusion of the assessment proceedings. The assessee has replied to Assessing Officer about high deduction from gross salary to employees which pertains to the TDS deducted from salary. The doctors registered with the chapter of Punjab Medical Council are not barred from working in Haryana, Himachal Pradesh Hospitals maintained by the assessee trust. The genuineness of the doctors have been established, the complete details like PAN, Form 16, qualifications of the doctors, attendance of the doctors and their declaration the amounts received from the assessee trust by the doctors in their ITRs have all been submitted before the Revenue authorities. Considering all the facts, we hold that no case of the assessment order being erroneous so far as it is prejudicial the Revenue can be made on this ground. The Assessing Officer during the proceedings has had full application of mind before coming to the conclusion that no undisclosed income can be .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ome back with him. He works for the University during day time for the different activities for the trust. He is used for the University Purposes and is paid by the University directly to his bank accounts. In any sense, the same is not a benefit derived by Trustee. The services of driver is availed for the working of University. iii. Goverdhan Singh son of Raj Kumar who is acting as a watchman and has been paid salary by Sanjeev Garg amounting ₹ 5,400/- per month in cash on monthly basis from his personal funds. No payment was made to Goverdhan Singh by Maharishi Markandeshwar University. He was hired from 1/03/2013 to 31/12/2014. In fact, this watchman was earlier working with MMU upto 19-9-2014 at a monthly salary of ₹ 5,400/- per month and xi 19-9-2014 he was paid a salary of ₹ 3,307/- by the Trust and was relieved from MMU. Thereafter he joined at the residence of Sanjeev Garg and no salary thereafter was paid by MMU. In reply to QNo.2 Goverdhan Singh confirmed the above fact that for last 1 month he was working with Sanjeev Garg and before that at MMU. A certificate from MMUT along with salary payment filed before AO during assessment proceedings is .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... khand acts as a cook, and he is temporarily shifted as no cook was available. As per facts, around 15 persons had assembled at the residence of Tarsem Garg cum office of Trust. The search lasted for 4 days as such Sanjay Kumar was being called to attend Income Tax Staff during their stay of 4 days. It was not possible for the ladies of the family to attend around 10- 15 persons including police personnel. As such his temporary shifting to the residence was not for the benefit of Tarsem Garg rather to assist the team of Income Tax officials. There is no benefit derived from Sanjay Kumar by any Trustee as he is deputed at college. This was confirmed by Sanjay Kumar in his statement. An affidavit from Sanjay Kumar clarifying the above facts is attached at page 463. It is highly unjustified that a person was called to assist Income Tax Staff and that too was used otherwise. Your attention is further invited to the fact a similar show cause notice was issued by AO under Para 5.4 page 25 of the questionnaire dated 6.10.2016 (copy attached at page 464) and in response to the same assessee has filed a detailed reply dated 25-10-2016 and 5-12- 2016 (copy attached at page19 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 0 9,76,000 Smt. Deepika Garg 0 2,20,000 2,40,000 0 0 0 0 4,60,000 Smt. Santosh Kumari 4,20,000 4,20,000 4,20,000 4,20,000 4,20,000 4,20,000 0 25,20,000 Total 12,60,000 13,80,000 13,80,000 10,16,000 9,00,000 9,00,000 4,80,000 73,16,000 43. On perusal of this chart, it is seen that the trustees are getting rent from trust for letting out of H.No. 55, Model Town, Ambala City. During the search operation, this premise was also covered and there was no single evidence regarding the use of this premises by the Trust. This house is in .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... arg and their daughter. The rent is being paid by trust. Same condition was found in case of Smt. Deepika and Sh. Vishal Garg. They are showing rental income from the trust for letting out their H.No. 127, Sector-1, Jail Land, Ambala City. During the search of this premise it as found that this was occupied by them only. There was no evidence of letting out this building to the trust. Hence, directed that the issue be taken up in the fresh assessment proceeding. 46. The ld. AR relied on the submissions made before the Assessing Officer and the ld. PCIT while ld. DR has argued that the rent payment for letting out of H.No. 55 is huge and it was proved during the search by the way of statement of Sh. Tarsem Garg that the premises is not been used by the trust. He also argued that the payments made to H.No. 127 was also excessive compared to the prevailing rates. 47. Heard the arguments of both the parties and perused the material available on record. 48. We find that the monthly rent paid to the house of Sh. Tarsem Garg, is ₹ 40,000/- and ₹ 35,000/- to Ms. Santosh Kumari, ₹ 30,000/- to Sh. Vishal Garg, ₹ 20,000/- to Ms. Deepika Garg. In the statement, .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 0 0 2,84,270 Sh. Sanfeeu Garg 0 0 1,44,658 1,34,610 0 1,03,500 0 3,82,768 Smt. Deepika Garg 3,51,457 4,38,700 2,76,377 1,05,520 0 0 0 11,72,054 Smt. Meenakshi Garg 0 26,137 1,73,748 10,704 0 0 0 2,10,589 Smt. Seema Garg 0 0 0 27,525 0 0 0 27,525 Smt. Santosh Kumari 0 0 51,082 0 0 0 0 51,082 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 0/-. Similarly ₹ 5,00,000/- and ₹ 15,00,000/- was received from him on 15-12-2009 which was again deposited in the same OBC Account and the same was adjusted against OD account immediately as on that date a sum of ₹ 68,57,116.90 was payable to bank. During the year Interest of ₹ 12,83,424/- was paid to Tarsem Garg and the same was included in his Income Tax return. In AY 2011-12 a sum of ₹ 8,00,000/- on 6-4-2010 was received and deposited in same OBC Account and the same was used in clearing different payments Outstanding. A sum of ₹ 7,00,000/- and ₹ 60,00000/- was received on 19-8- 2010 and the same was adjusted in outstanding OD of ₹ 2,29,88, 829.06/- from OBC Account. Deepika Garg: In AY 2009-10 a sum of ₹ 26,00,000/- was received from on 14-7-2008 and the same was deposited in SBI Account No. 30402893812 and the same was immediately adjusted against the SBl Term Loan Installment of ₹ 65,00,000/-. During the year interest of ₹ 3,51,457/- was paid to Vishal Garg and the same was included in her Income Tax return. Vishal Garg: In AY 2010-11 a sum of ₹ 10,00,000 /- was received from him on 15-12-200 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... eting immediate purposes of the trust and meet up the impending financial requirements. Further, the ld. PCIT observation that depositors have not furnished their personal balance sheet in their assessment is also not correct, since, is source of deposit in bank account of these individuals stands examined by the Assessing Officer during the assessment proceedings. Hence, the ld. PCIT conclusion that the trustees have been benefited by way of receipt of higher interest cannot hold good. Hence, no action u/s 263 of the Act is called for on this ground. Salary paid to Trustees 53. The snap shot of the salaries is paid to the trustees is as under: Name of the persons A.Y. 2009-10 A.Y. 2010-11 A.Y. 2011-12 A.Y. 2012-13 A.Y. 2013-14 A.Y. 2014-15 A.Y. 2015-16 Total Sh. Tarsem Garq 24,00,000 29,50,000 33,60,000 63,60,000 63,60,000 63,60,000 63,60,000 3,41,50,000 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... .Tech. On the same qualification nobody gets this high salary in open market. It was held that other trustees, Sh. Vishal Garg, Sh. Tarsem Garg and Sh. Sanjeev Garg are also getting high salary from the MMU Trust which is not genuine and all these persons are running their personal business through group concern M/s Bhagwati Gas Services and real estate business. The ld. PCIT concluded that this shows that the funds of the trust are being siphoned off by the family members of the trustees. 56. Heard the arguments of both the parties and perused the material available on record. 57. We find that this issue has been examined by the Assessing Officer vide notice dated 06.10.2016 and reply of the assessee dated 05.12.2016. S.No. PCIT observations Fact Remarks 1. Ms. Deepika Garg is simply B.Tech She is B.Tech, M.Tech, PhD No question was put to Ms. Deepika Garg by revenue 2. Sh. Vishal Garg, He is B.Tech, M.Tech, PhD Working as CFO 3. Sh. Sa .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... essee. 61. Hence, keeping in view the facts and circumstances of the issue, we hold that no action u/s 263 of the Act on this ground. Santosh Hostel: 62. On this issue, the ld. PCIT held as under: During the search proceedings, it was found that ** there are 14 hostels in Mullana campus of the assessee trust out of which 4 hostels known as Santosh Hostel are owned by the trustees, Smt. Santosh Kumari Garg, Smt. Seema Garg and Smt. Deepika Garg. The land for Santosh Hostel was acquired in 2007 jointly by them. In his statement recorded u/s 132(4) on 31.10.2014, Sh. Tarsem Garg stated that about 600- 700 rooms are available in these hostels. The students of the University who are residing/staying at Santosh Hostel pay their fees/dues directly to the hostel. He did not remember where the books of account relating to the hostel were lying or maintained. During the post-search enquiries, the information regarding investment in the hostel, room details, booking status etc. were not provided. On perusal of account no. 30762463072 in SBI Mullana, it was found that there are huge cash deposits amounting to ₹ 80.60 crore in the bank account, which is as under: .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... and MMU trust whereby the former will let out the hostel building to the latter for payment of annual rentals @ ₹ 2.50 crore w.e.f. 01.04.2009 with 5% increase each year. The MOU is to remain valid during the currency and tenor of the term loan with a minimum guaranteed amount of ₹ 2.50 crore per annum. These facts clearly indicated that the services of the trust have been made available to the persons mentioned in Section 13(3) in violation of the provisions of Section 13 of the Act. 5.6.1 In response the AR submitted that construction of hostels no. 10, 11 12 was started on 25.02.2009 and completed on 09.09.2009 whereas hostel no. 13 was constructed by the assessee during FY 2012-13 2013-14. It was submitted that trust has not incurred any expenditure on repair/construction. While recording the transaction, the entire cost is grouped under building head and not bifurcated under repair expense and capital cost. Regarding agreement referred to by the SBI while extending credit, it was submitted that no such agreement was executed and acted upon. The hostel rooms were let out to the students directly and rent was received from them. It was also submitted that f .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... the co-owners from the students directly and no rent was received from the trust at any point of time. It is also noted that the amount paid as rent to the coowners is significantly more than the amount charged as fees by the assessee trust for bearing all the expenses on facilities such as wi-fi, electricity, purified water, furniture such as table, charir, almirah and bed, security facilities and mess etc. All these facts indicate that the assessee has violated the provisions of Section 13 of the Act and the AO has not conducted any enquiry in respect of the issues raised in respect of Santosh Hostel. 5.6.3 On the basis of details of room rent per student received, number of students in 4 hostels of Santosh Hostel (Hostel no. 10, 11, 12 13) has been worked out as under: Particulars AY 2010-11 AY 2011-12 AY 2012-13 AY 2013-14 AY 2014-15 AY 2015-16 Hostel rent for Santosh Hostel by co-owners (Rs.in lakh) 200.62 337.27 517.99 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... y are staying in hostel no. 13 during AY 2013-14 and AY 2014-15. But on perusal of the number of students in the table, it may be seen that number of students, on completion of hostel no. 13, has jumped by more than 500. The findings above can be summarized as under: a. The return on investment is ranging between 30-40%, which totally unrealistic. An amount of ₹ 16.73 crore has been invested in construction of hostel whereas total receipt of hostel rent from these hostels by 3 co-owner trustees for the period starting from FY 2009-10 to FY 2014-15 is about ₹ 30.02 crore, which is quite disproportionate. b. The co-owners are charging room rent from the students which is varying between ₹ 25.000- ₹ 32.000 p.a. per student (on triple sharing basis) whereas the fees charged by the MMUT for allied services such as wi-fi, electricity, purified water, furniture such as table, chair, almirah and bed, security facilities and mess etc. is much lesser amount varying between ₹ 18,000- ₹ 28,000 p.a. per student. c. No confirmation was furnished from the SBI that the credit of ₹ 7.5 crore was extended without any agreement being signed .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... bove, it is apparent that the hostel rent which has been transferred to the co-owners by the assessee trust did not reflect the true picture and the fund has been diverted by the assessee trust in garb of hostel rent for the benefits of the trustees and their relatives in violation of section 13 of the Act. 63. Santosh Hostel is owned by Sh. Santosh Garg, Smt. Deepika Garg and Smt. Seema Garg. The Santosh Hostel consists of four blocks namely, hostel No. 10, 11, 12 13. The total investment as per page no. 691 of the paper book was ₹ 16.73 crores under the head purchase of land and construction of building, repair maintenance. The details of the fees received directly from the students has been reflected at page no. 692 to 721 amounting to approximately 1.60 crores. 64. Before us, the ld. AR argued that the details of investments in construction, repair and renovation have been duly enquired by the Assessing Officer and by the ld. PCIT and no discrepancy have been filed by both the authorities. Hence, it cannot be said that the order is erroneous as even the ld. PCIT could not point out the leakage of revenue on this issue. Further, he also led us to page no. 722 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... the interest of the revenue no action u/s 263 of the Act is invited. Not referring to DVO as suggested by the Investigation Wing in their report cannot make the assessment a subject matter of action u/s 263 of the Act. Regarding the reconciliation of gross deposits, we find that Assessing Officer has raised these issues and similar queries have been raised by the Assessing Officer and no discrepancies suggesting leakage of revenue have been brought out by the Revenue authorities. Regarding the high return of 30% to 40%, we find that the profit varied from 1.9% to 31% and has been offered to tax at maximum marginal rate. Thus, the observation of the ld. PCIT that the profits were 30% to 40% is factually incorrect and since the higher profits were also offered to tax fully the interest of the Revenue is not compromised. Hence, no action u/s 263 of the Act arises on this issue. Further, we find that MMUT has also earned profit of 25 to 30%, there is no exaggeration of profits by the Santosh Hostel. Regarding the confirmation of the loan from SBI, we find that the loan in question was sanctioned for construction of building and not against rent agreement. The loan secured against land .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... actors and other contractors after deducting TDS. The details of total expenses claimed against mess contractors in the last six years are as under: Nature of Expenses A.Y. 2009-10 A.Y. 2010-11 A.Y. 2011-12 A.Y 2012-13 A.Y. 2013-14 A.Y. 2014-15 Total Mess Contractors 3,46,10,773 3,90,56,625 5,27,12,397 6,33,31,386 8,46,12,784 9,83,53,839 37,26,77,804 The above table shows that the assessee has claimed ₹ 37.26 crores as mess expenses to contractors. The search proceedings and post search enquiries have established that out of this amount of ₹ 37.26 crores, ₹ 8.20 crores are bogus expenses. The evidences gathered which lead to this conclusion are enumerated below: 1. The address provided by these concerns in ITRs/Bills/TDS returns was found to be non-genuine. No existence of these parties was found during the search and post-sear .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 24 16 17 21 102 -do- 3. Ramesh Chand C/o Harsh Bansal, H.No. 67, Pooja Vihar, Kardhan Road, Ambala Cantt. AKNPC8883C 11 15 4 30 -do- 4. Sarwan Singh MMU Campus Trust C/o Harsh Bansal, H.No. 67, Pooja Vihar, Kardhan Road, Ambai.a Cantt. BHRPS7345M 35 26 18 20 99 -do- 5. .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Azad Builders MMU Trust Campus AAPFA2076H 12 - -- - - 12 -- 3 B.S. Construction 211, Harbanspura, Yamuna Naqar AAFFB4872L 43 6 49 -- 55 6 -- 9 7 8 85 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Vihar. And all the three persons were not present in MMU Mulana. It was revealed from local enquiries that these persons have gone to some unknown destination. The address of M/s Azad Builders, H.No. 134, Sector-17, HUDA, Jagadhari was found to be not genuine. The premise was found to be occupied by one Sh. Ravinder Mohan. The reply of Sh. Ravinder Mohan is as under: It is to certify that I Ravinder Mohan S/o Sh. Joginder Singh is the sole owner of I myself constructed this house and I don t know the firm/ person name of Azad Builders. In this regard, the report of Sh. Mohammed Salim, Inspector is also as under- As per your direction I visited house no. 134, Sector-17, HUDA, Jagadhari to serve the summons 131 of the Income Tax Act, 1961 in respect M/s Azad Builders. It was noticed that Sh. Ravinder Rathor is residing in the given address who is serving as XEN in the Panchayati Raj Department. He showed the allotment letter of the plot by HUDA in his name and he given in written that no Azad Builder ever exist at his house. Notice was issued to M/s B.S. Construction at the given address 211, Harbanspura, Y .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... MU Trust group only. The details of entries in bank accounts of Sh. Jagga Singh and Sh. Jeet Singh are enclosed as Annexure-Al and Annexure A2. The perusal of the above bank account clearly shows that there are osits and cash withdrawals regularly. There are no cheque payments inst the expenditure claimed by these contractors. The same pattern is Iso shown in the bank account of Sh. Rajeev Kumar, Sarwan Singh, Ramesh Chand, M/s Azad Builders and M/s B.S. Construction. The abovementioned contractors also accepted in their statements that they are doing the work under the directions of Sh. Sanjeev Garg, secretary in trust and MMU Trust Management. In fact, they were merely earning ₹ 8,000/- per month from this job. They have also failed to give any reasons for cash withdrawals immediately after the deposits. It is also not clear that when all the payments have been made to vendors on monthly basis, then what is the necessity of cash withdrawals on day to day basis. 1.7 It is noticed that these labourers have filed their Income Tax Return and have claimed the tax deducted at source (TDS) by the assessee group as refund. It is also seen from th .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... answer to question no. 15 he stated that he used- to give the list of expenditure to Sh. Sanjeev Garg regarding the required expenditure and got the money in his bank account. In answer to question no. 16 he has submitted that he did not maintain any books of account. In answer to question no. 21 and 22 he submitted that the cheque book is maintained by Sh. Sanjeev Garg which he used to sign and withdraw the money from the bank account. In answer to question no. 26 he stated that he did not know the address 67, Pooja Vihar mentioned in the return. Regarding his earning he stated that his income is around 5-7 thousand per month. Jeet Singh had no idea regarding introducer of the bank account and filing of return by Sh. Harish Bansal. 73. Ramesh Chand: As mentioned in the show cause Ramesh Chand could not be traced at the address provided which is 67, Pooja Vihar. In respect of Sh. Ramesh Chand, the AR claimed to produce copies of certain bills and aadhar card. Copy of aadhar card was not found in the documents submitted by him. Further, on perusal of the bills it is seen that it is sometimes signed as Ramesh Kumar, sometimes as Prem Chand, sometimes as Ramesh Chand. .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... has not made any enquiry in this regard. 79. B.S. Construction: B.S. Construction was not found at the address given by the Investigation Directorate. However, during the assessment proceedings, the AO has not made any enquiry in this regard. 80. It was held by the ld. PCIT that during the survey u/s 133A conducted at M/s Bhagwati Gas Agency Prop. Jagir Singh SCF- 20, GF, Vikas Vihar, Ambala City on 31.10.2014, it was found that the trustees of the assessee trust, Sanjeev Garg, Seema Garg Vishal Garg are receiving huge sums from the gas agency in form of salary, rent, loan advances. The details of the same for FY 2013-14 are as under: S. No. Name of the person Payment for FY 2013-14 1. Sanjeev Garg 60,41,229 2. Seema Garg 49,90,000 3. Vishal Garg 12,32,000 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ving PAN: AUNPC8913F. 85. Statement of Dinesh Chand recorded on 1/11/2014 u/s 132 during the course of search and is lying at page 298-304, another statement of Dinesh Chand is recorded by Investigation Wing on 30/12/2014 u/s 131 and placed at 305-310. These statements were confronted to Assessee by AO and assessee has obtained an affidavit from Dinesh Chand dated 8/11/2016 and filed to DCIT CC Karnal and copy attached at page 314- 315. 86. In fact, during search/post search statement of Mess contractors were recorded wherein they have confirmed that they are working as Mess contractor, giving number of students being served by them, source of procurement of ration and vegetables, milk, gas etc required for running of Mess, name of workers, salary paid by them to their workers. There is nothing unusual in their statement if read as a whole. The learned PCIT has tried to pick a word or a line out of entire statement and build a story around that sentence. It is a settled law that a document is to be read as a whole. 87. Dinesh Chand S/o Sh Prem Lai was working as a mess contractor since 2012 in mess no.1 (after death of Sarwan Singh Me .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... at he got the money from MM through cheque for various expenditure such milk, vegetables etc, when he got the money from bank till that he borrow the items from the shopkeepers. He further confirmed that his educational qualification is 5th Standard. In reply to question no 6 and 9 of statement, he has admitted that he was having team of 6 workers and further explained the salary paid to workers and the activity performed by them. He has given the names and permanent residence of these workers and in reply of QNo.9 and also detail of monthly salary paid to these workers were given which amounted to about ₹ 29,000/- per month. In Reply to QNo 14 he has provided his PAN No. BMNPS6466A and confirmed that he has filed Income tax return through an advocate from Ambala. In reply to QNo. 15 he confirmed that Mess charges ₹ 1700/- per month per student for providing per day meals and that before July 2014 the amount of Mess Charges were ₹ 1500/- per month per student. He has further confirmed that he gave details of his requirement of money for expenditure on mess and he accordingly got money from MMU representative Sanjeev Garg in his bank. In reply to Q 17, he states th .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ess Security as evident from his copy of account attached at Page 293-299. 99. The learned PCIT has observed that Ramesh Chand could not found at his address of 67, Pooja Vihar and copy of aadhar also not found. In fact during proceedings before PCIT it was alleged that address 67, Pooja Vihar do not exist and in order to support the same copy of Aadhar Card of Harish Bansal Advocate who has filed the return of Ramesh Chand and has given his address in the return of Income of Ramesh Chand is attached at page 582. Late Sarwan Singh son of Hakam Ram VPO Dehlan Tehsil and District Una (Himachal Pardesh) having PAN: BHRPS7345M. With reference to payment to Mr Sarwan Singh, it is submitted that he was working as mess contractor during AY 2009-10 to AY 2012-13 in mess no 1 of trust which was serving approximately 243 students of Hostel no.1. However, unfortunately he died during the AY 2012-13 and after that the same mess had given to Mr Dinesh Chand. As the contractor had died in AY 2012-13 as such there is no question of him appeared before Investigation Wing on 1-10-2014 and thereafter. The complete bills, attendance shee .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... a word or a line from a sentence and tried to create a hype around that word. It is a settled law that a document is to be read as a whole. 102. With reference to Mess No. 1 allotted to Dinesh Chand and Jagga Singh both it is submitted that Mess No.1 was run by Jagga Singh for an intervening period from October 2011 as evident from page No. 416 419 after death of Sarwan Singh and thereafter from August 2012 Dinesh Chand was allotted Mess No.1 That the key highlights of his statement is as detailed hereunder: 103. In reply to QN.2 Jagga Singh has confirmed that he is doing working in MMU Mess no. 7 and prepared the food and serve to the students and he is working here since 2008. In reply to QNo3. he has clarified that before here he is working in mess at Govt. College, Near Jawahar Nagar, Hisar and worked there for 15 years. In reply to Q No. 4 he has stated that he got the money from MM through cheque for various expenditure such milk, vegetables etc, when he got the money from bank till that he borrow the items from the shopkeepers. He further confirmed that his educational qualification is 6th Standard. In reply to question no 6 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... course of assessment proceeding and on receipt of show cause notice, the assessee has also obtained an affidavit from Jagga Singh (copy attached at page 404-405) Anuj Kumar son of Suresh Kumar resident of Balmiki Basti village Barara District Ambala having PAN: BZRPK2319H 105. It is submitted that Anuj Kumar s/o Sh Suresh Kumar was a Man power contractor who provided approximately 25 sweepers to MM Institute of Medical Science and Research running under MMU Trust beginning from AY 2012-13 for housekeeping service. As per practice being followed by AAMUT, it did not recruit class 4 staff directly on their roll but instead it took these services on contract basis from several contractors including Sh. Anuj Kumar. However, such person was not related to any of the trustees and neither any financial transaction was entered with him by any of the trustees. 106. A sweeper wise report of the sweepers supplied by Anuj Kumar and copy of bill for December 2013 and January 2014 is attached at page no 382-385. Further specimen of sweeper wise monthly report maintained by the trust is also attaxched at Page 386. All the payments were made to the .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ruction service to the MMU trust from AY 2009-10 and had worked in the construction of the building of University block, School Block and Engineering block of MMU Trust during the period of AY 2009-10 and AY 2010-11. However, such firm was not related to any of the trustees and neither any financial transaction was entered with the firm by any of the trustees. 109. It is submitted that all the payments to such firm were made by cheque only from trust after making appropriate deductions on account of TDS. Furthermore, such payments were only made on the basis of the bills received from the said firm and after approval of such bills by the Chairman of the Board of the trust. A copy of ledger account for AY 2009- 10 2010-11, bills received and approval letters of such payments for construction work for the AY 2009- 10 and AY 2010-11 is attached at page no 405-415 for your perusal. In last para at page 4 of your show cause notice it was admitted that notice issued to the said party was compiled and reply was received by the office of DDIT. 110. Moreover, such firm had also filed its ITR for AY 2009-10 declaring therein total income of ₹ 4,76,150/ .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... the ld. PCIT. The reply of the assessee dated 05.12.2016 before the Assessing Officer has also been perused. It contains the complete details of hostel and mess charges received from the students and paid to the contractor. The mess expenses constitute about 25% of the gross mess receipts which have been duly filed before the Assessing Officer during the assessment proceedings. 115. The ld. DR has also filed the investigation conducted by the Revenue and argued that the siphoning of funds can be determined based on the statements of the mess workers, contractors recorded during the such proceedings. 116. We find that if the statements are read as a whole, no evidence of siphoning is determinable on the basis of these statements. Selective picking of the statement, disregarding the entire context is against the settled law which directs that a document has to be read as a whole. For example, the statement of Sh. Dinesh Chand confirms that he is running mess no. 1 having 234 students and getting ₹ 1700/- per month as mess charges per student to provide three meals a day. He explained that he employed 14 workers and the total salary expenses were .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... claimed in Income Tax Return against any other income because as per the understanding with the concerned company the entire amount paid to Bank is to be reimbursed by them as such the same stands recovered from such company with no profit/loss on account of this transaction. 1.2 Further, interest earned against FDR is not the income of Inder Pal Garg as the same is related to Maharishi Markandeshwar University Trust and is part of their income of respective year. A certificate from Bank of India in this respect is attached for your kind perusal at page 4. 1.3 With reference to your observation of source of deposit on 1-3-2016 amounting ₹ 2,00,00,000/- and ₹ 1,83,00,000/- it is submitted that amount in question was deposited in AY 2016-17 out of loan received back, advanced to Proview Estate Private Limited. A copy of loan account advanced to Proview Estates Private Limited is attached at page 1-3 119. It was held that Sh. Inder Pal Garg had raised a bank loan of ₹ 3,50,00,000/- from the Bank of India against 3rd party guarantee of bank FDR owned by the assessee trust. The amount in question was advanced to .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... enied exemption on ground of violation of provisions of section 13(1)(c) and made assessment taxing all receipts of concerned year - On appeal, Commissioner (Appeals) confirmed action of Assessing Officer - Whether since secretary and executive secretary were not only founder-members of society but also were executive committee members and secretary herself had signed and pledged FDRs of society, they fell under class of persons specified in section 13(3) - Held, yes - Whether, therefore, provisions of section 13(l)(c) read with sections 13(2)(b) and 13(2)(cc) were attracted - Held, yes - Whether assessee-society had violated those provisions and, consequently, was not entitled to exemption under section 11- Held, yes Section 4, read with section 2(24) of the Income-tax Act, 1961 - Income - Chargeable as - Assessment year 1997-98 - On violation of section 13(l)(c), Revenue authorities denied exemption to assessee society given under section 11 and charged entire receipts of voluntary contribution to tax - Whether though by virtue of section 2(24)(iia) voluntary contributions are income, but that by itself does not entitle tax authorities to ignore all other well-set .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... eshwar University Trust and is part of their Income of respective year. 2. With reference to your observation of source of deposit on 1-3-2016 amounting ₹ 2,00,00,000/- and ₹ 1,83,00,000/- it is submitted that amount in question was deposited in AY 2016-17 out of loan received back, advanced to Proview Estate Private Limited. 122. Thus, we find that this issue has been duly inquired by the Assessing Officer during the assessment proceedings. 123. During the hearing, before us the AR of the assessee trust repeated the arguments that Sh. Inder Pal Garg along with his family members are the founder trustees of the assessee trust and the trustee family had donated some land for establishment of educational institutes under the trust at the time of its inception and also donated towards corpus of trust. Sh. Tarsem Kumar Garg, Smt. Santosh Garg, Sh. Vishal Garg Sh. Sanjeev Garg have given personal guarantee for raising loans from the banks and Sh. Tarsem Garg Smt. Santosh Garg and Sh. Vikas Garg have mortgaged their residential properties for the purpose. Interest on loan raised was paid by Sh. Inder Pal Garg and interes .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... cement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution: Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in subsection (3) in so far as such use or application relates to any period before the 1st day of June, 1970; [(d) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year- .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... respect of such business.] [Explanation.-For the purposes of sub-clause (ii) of clause (c), in determining whether any part of the income or any property of any trust or institution is during the previous year used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to this section by section 7 [other than sub-clause (ii) of clause (a) thereof] of the Finance Act, 1972.] (2) Without prejudice to the generality of the provisions of clause (c) [and clause (d)] of sub-section (1), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3),- (a) if any part of the income or property of the trust or institution is, or continues to be, lent to any person referred to in sub-section (3) for any period during the previous year without either adequate security or adequate interest or bot .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... the relevant previous year exceeds [fifty] thousand rupees]; (c) where such author, founder or person is a Hindu undivided family, a member of the family; [(cc) any trustee of the trust or manager (by whatever name called) of the institution;] (d) any relative of any such author, founder, person, [member, trustee or manager] as aforesaid; (e) any concern in which any of the persons referred to in clauses (a), (b), (c) [,(cc)] and (d) has a substantial interest. (4) Notwithstanding anything contained in clause (c) of subsection (1) [but without prejudice to the provisions contained in clause (d) of that sub-section], in a case where the aggregate of the funds of the trust or institution invested in a concern in which any person referred to in sub- section (3) has a substantial interest, does not exceed five per cent of the capital of that concern, the exemption under section 11 [or section 12] shall not be denied in relation to any income other than the income arising to the trust or the institution from such investment, by reason only that the [funds] of the trust or the institution have been .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... -section (1) of section 139 for furnishing the return of income for the previous year; or (ii) the return of income for the previous year is not furnished by such person on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the said previous year.] [Explanation 1.-For the purposes of sections 11, 12, 12A and this section, trust includes any other legal obligation and for the purposes of this section relative , in relation to an individual, means- (i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother or sister of the spouse of the individual; (iv) any lineal ascendant or descendant of the individual; (v) any lineal ascendant or descendant of the spouse of the individual; (vi) spouse of a person referred to in sub-clause (ii), subclause (iii), sub-clause (iv) or sub-clause (v); (vii) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.] Explanation 2.-A trust or .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Society for Integrated Development in Urban and Rural Areas (SIDUR) Vs DCIT (2004) 90 ITD 493 (Hyd.)- In this case the FDRs did not earn interest, and have been encashed against the repayment of loan. Hence, not applicable to the instant case. Action for Welfare Awakening in Rural Environment (AWARE) Vs DCIT (2003) 130 Taxman 82 (AP)- In this case loan repaid out of funds of trust. Hence, not applicable to the instant case. Ram Bhawan Dharamshala Vs State of Rajasthan (2002) 124 Taxman 149 (Raj.)- In this case profit of the trust was let to trustee at concessional rent. Hence, not applicable to the instant case. Agappa Child Centre (1997) 226 ITR 211 (Ker.)- In this case, the asset of the trust is being utilized by the trustee without any consideration. Hence, not applicable to the instant case. Director of Income-tax (Exemption) Vs Charanjiv Charitable Trust (2014) 43 Taxman 300 (Del.)-In this case it held that the Assessing Officer noted that assessee in furtherance of its objects to open a school, entered into agreements with APIL for purchase of land and paid 95 per cent of price as advance money - .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... led questionnaires issued during the course of assessment proceedings. 130. In ITA No. 2480/Del/2019, the assessee has raised following grounds of appeal: 1. That the PCIT has erred on facts and fin law in exercising revisionary powers u/s 253 of the Act without satisfying the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 2.1 That the learned PCIT has erred in alleging that the rental receipts of ₹ 8,80,000/- were an arrangement devised by the assessee for capital accretion and forming his opinion on the basis of suspicions, surmises and conjectures. 2.2 That the learned PCIT has erred in law and on facts in observing that the Annual Letting Value amounting ₹ 8,80,000/- of the property situated at House no. 526, Sector- 16, Chandigarh is to be taxed under head income from other sources. 3.1 That the learned PCIT has erred in alleging that the receipts of ₹ 9,50,000/- disclosed under head Income from other sources were liable to be taxed as income f .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... als were found during the course of search u/s 132 conducted on 31-10-2014 in the present case. 5. That the learned PCIT has erred in stating that the AO did not carry out any enquiry in respect of issues mentioned in the show-cause notice u/s 263 ignoring the questionnaires issued during the course of assessment proceedings. 132. In ITA No. 2482/Del/2019, the assessee has raised following grounds of appeal: That the PCIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 2.1 That the learned PCIT has erred in alleging that the rental receipts of ₹ 9,60,000/- were an arrangement devised by the assessee for capital accretion and forming his opinion on the basis of suspicions, surmises and conjectures. 2.2 That the learned PCIT has erred in law and on facts in observing that the Annual Letting Value amounting ₹ 9,60,000/- of the property situated at House no. .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... rred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course of search u/s 132 conducted on 31-10-2014 in the present case. 5. That the learned PCIT has erred in stating that the AO did not carry out any enquiry in respect of issues mentioned in the show-cause notice u/s 263 ignoring the questionnaires issued during the course of assessment proceedings. S. No. Assessment Year Effective Grounds 1. 2011-12 ₹ 29,71,865/- to be assessed as business income or IOS 2. 2012-13 Rental Receipt of ₹ 880,000/- ₹ 950,000/- business income or IOS 3. 2013-14 Rental receipts of ₹ 960,000/- ₹ 900,000/- business income or IOS 69A/115BBE 4. 2014-15 Rental receipts of .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... t of ₹ 29,71,865/- through cheque made withdrawals of ₹ 28,90,000/- from bank and a surplus of ₹ 81,865/- whereas the returned income declared in the return @8% u/s 44AD of the Act was ₹ 237,749/-. 139. We find that the Assessing Officer vide notice dated 26.07.2016 at para no. 3 as inquired about the profit from business and profession at ₹ 273,749/- and also inquired about the nature of the business through which the said income was earned along with source of investment made. The assessee vide reply dated 23.08.2016 explained that the assessee has earned business income of ₹ 237,749/- which was declared and under the provisions of Section 44AD of the Act being 8% profit earned and declared on Civil Construction work of ₹ 29,71,865/- on contractual basis from M.M. University Solan. With reference to source of expenditure it was submitted that 92% expenditure has been incurred against the work. The amount under consideration is withdrawn from disclosed sources from time to time. 140. From the questionnaire of the Assessing Officer and the reply of the assessee, we hold that the Explanation 2 of Section 263 o .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1). (5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee to whom the provisions of sub-section (4) are applicable and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.] [(6) The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to- (i) a person carrying on profession as referred to in subsection (1) of section 44AA; (ii) a person earning income in the nature of commission or brokerage; or (iii) a person .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in; (aa) [***] (b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return; [(bb) the return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report;] (c) the return is accompanied by proof of- (i) the tax, if any, claimed to have been deducted [or collected] at source [***] and the advance tax and tax on self-assessment, if any, claimed to have been paid : [Provided that where the return is not accompanied by proof of the tax, if any, claimed to have been deducted 74[or collected] at source, the return of income shall not be regarded as defective if- [(a) a certificate for tax deducted or collected was not furnished under section 203 or section 206C to the person furnishing his return of inco .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 201000010/ OBC of the assessee the amounts received on account of construction work from MMU or withdrawn to the extent of ₹ 28,90,000/- on the same dates. With regard to the withdrawals, it was explained that the same amount has been used for the purpose of execution of the contract works. 3. Assessee is not in the business of construction and the construction receipts have been received for the first time from MMU to which he is the Chancellor. It was submitted that the assessee before becoming the Chancellor of MMU, has been a Government contractor for about 20 years, hence, the allegation of the ld. PCIT is proved to be wrong and against the facts on record. 4. No evidence for purchase of construction material were provided. Since, no books of account need to be maintained for presumptive profits u/s 44AD @ 8%, the assessee has not maintained and withdrawals of amount, the running bills and the payments received adequately support the execution of the work. The ld. PCIT has not given any finding regarding any error in the order of the Assessing Officer and instead mentioned that Assessing Officer should make necessary inquir .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... age nos. 104 105) 147. The issue is identical to the issue dealt in the case of Ms. Santosh Garg. Hence, the adjudication in the case of Ms. Santosh Garg is applicable mutatis mutandis. Professional Receipts: (as per the chart at page nos. 104 105) 148. The relevant portion of the order of the ld. PCIT pertaining to professional receipt is as under: The assessee had shown ₹ 9,50,000/- under head income from other sources from M/s Nexgen Financial Solutions Pvt. Ltd. ( Nexgen ) as per From 26AS u/s 194J of the Act on account of fees for professional technical services. The said income shown by the assessee was not found to be genuine as per post-search enquiries conducted by the Investigation Directorate. It is pertinent to mention here that summons u/s 131 of the Act were issued to M/s Nexgen Financial Solutions Pvt. Ltd. by the DDIT(Inv.) for producing the bills vouchers in support of genuineness of such fees for professional technical services paid to the assessee which remained uncomplied with. Moreover, the assessee is not having any professional qualification/specialization in the field. This .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 2014-15 179,77,000 150,83,128** Nexgen, Ajnara 31.08.2015 MMR 4. 2015-16 33,50,000 33,50,000 Nexgen 31.08.2015 MMR *Maximum Marginal Rate ** Total receipt = 160,00,000 Service Tax = 19,77,600 Expenses = 916,872 150. For the sake of convenience, the assessment year 2014-15 is taken as the lead for the adjudication. 151. Before us, during the hearing, the ld. AR has repeated the arguments taken before the Assessing Officer and the ld. PCIT. The ld. DR submitted written submission judgments which have been quoted above. The ld. DR on merits of the issue argued that there was no enquiry done by the Assessing Officer while accepting the claim of the assessee and the consultancy fees received but nothing but an ac .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... attached at page 10-16. With reference to loan advances to M/s Nexgen Financial Solutions Pvt. Ltd. it is submitted that this amount is outstanding amount against bill raised to party and no interest on this amount was charged. Copy of account of M/s Nexgen Financial Solutions Pvt. Ltd. is attached at page 17. Copy of bank accounts with narration of each entry is attached at page. 157. We find from record that the amounts have been received from Nexgen on 28.02.2014, 18.03.2014, 20.03.2014 and 30.03.2014 on account of introduction of client for raising funds and towards retainership fee. The service tax @12.36% has been duly paid on these amounts. We have also taken into consideration, the arguments of ld. DR, Sh. S. S. Rana, wherein he extensively quoted the judgments in the case of Subhalaxmi (ITAT Kol.) The relevant part of the orders is as under: It is imperative for the Assessing Officer to conduct enquiry to satisfy himself about the genuineness of transactions. Scope of the term 'enquiry' can be diverse in different circumstances. There cannot be straitjacket formula to positively conclude as to conducting or non-conducting of e .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 160. From the action of the Assessing Officer, we cannot hold that the Assessing Officer did not conduct any enquiries. In this case, the Assessing Officer after obtaining the details has examined the service tax payment and also the income tax paid on this receipt. The assessee has offered the entire amount received as consultancy to tax and has not claimed any deductions. The 12.6% service tax and 30% income tax paid on this transaction could not have rang any bell in the mind of the Assessing Officer to suspect anything contra. Further, in the case of Infosys Technologies the Hon ble Court has held that the Commissioner can invoke provisions of Section 263 of the Act in case of erroneous approach of the Assessing Officer on merits where there was no enquiry has been conducted at all or the so-called enquiry conducted by the Assessing Officer is as good as no enquiry. We find such is not the position in the instant case. Further, we find that the ld. PCIT has not shown proper application of mind as it was directed that and amount of ₹ 179,77,600/- was required to be taxed under income from undisclosed sources and it was also directed that the expenses of ₹ .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... inancial capability or involved in providing of any accommodation entry or any investigation leading to credence that these companies are aiding in fictitious capitalization, and keeping in view, the entire gamut of activities and evidences mentioned in the preceding paras, we hereby decline to hold that the ld. PCIT is legally correct in holding that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of Revenue and hence, the order u/s 263 of the Act is not sustainable. Santosh Garg 164. In ITA No. 2475/Del/2019, the assessee has raised following grounds of appeal: 1. That the PCIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying the twin conditions off the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 2.1 That the learned PCIT has erred in alleging that the rental receipts off ₹ 8,80,000/- were an arrangement devised by the assessee for capital accretion and forming his opinion on the basis of suspi .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... in respect of issues mentioned in the show-cause notice u/s 263 ignoring the questionnaires issued during the course of assessment proceedings. 166. In ITA No. 2477/Del/2019, the assessee has raised following grounds of appeal: 1. That the PCIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying the twin conditions off the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 2.1 That the learned PCIT has erred in alleging that the rental receipts off ₹ 9,60,000/- were an arrangement devised by the assessee for capital accretion and forming his opinion on the basis of suspicions, surmises and conjectures. 2.2 That the learned PCIT has erred in law and on facts in observing that the Annual Letting Value amounting ₹ 9,60,000/- of the property situated at House no. 526, Sector-16, Chandigarh is to be taxed under head income from other sources. 3. That the learned PCIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... r the remaining assessment years in appeal. The assessee has claimed deductions u/s 24A and 24B of the Act resulting in loss of ₹ 36,09,000/- and the same was set-up against income from other house properties. The Assessing Officer accepted the loss declared under the head income from house property while finalizing the assessment. The ld. PCIT held that the assessee is one of the trustees of Maharishi Markandeshwar University Trust ( MMUT ) and her entire income consists of rent etc. from MMUT. The assessee has purchased large number of properties during the block period of six search assessment years. The rental income, certain other income etc. also reflected in the returns of these years appear to be dubious and shown with intent to create capital in the name of individual assessee. The bank accounts maintained by the assessee in several banks such as Oriental Bank of Commerce, Punjab National Bank etc. reflect the transactions in these assessment years which are mostly related with MMUT. The assessee during the assessment proceedings did not submit the statement of affairs and cash flow statement for any of the search assessment years. The assessee s r .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... shown with the intent to create capital and the name of the individual assessee 6. The rent was paid in lump sum instead of monthly payment 7. The assessee claimed loss under the head income from house property on this asset. 8. No electricity and water bills were paid 9. The PCIT held that the ALV of the property amounting to ₹ 880,000/₹ 960,000 was required to be taxed under the head income from other sources 171. Against the these observations of the ld. PCIT, the ld. AR during the arguments before us has argued that the assessee received rental income from four properties out of which only one property was leased to Trishala group. The rental incomes have been duly offered to tax by the assessee for a period of four years even before the conduct of search. The ld. AR has argued that the rent deed and the rent receipts have already been submitted before the ld. PCIT vide letter dated 30.10.2018. He has submitted various documents to prove that the case has been examined at length by the Assessing Officer. Hence, no action u/s 263 of the Act is called for. 172. The ld. .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... by above amendment since the order is passed without making inquiries or verification which should have been made and allowed relief without inquiring into the claim. In the above case, it is humbly submitted that the following decision may kindly be considered with regard to validity of proceedings u/s 263 of I.T. Act: 1. Hon ble Supreme Court in the case of Deniel Merchants Pvt. Ltd. vs. ITO(Appeal No. 2396/2017) dated 29.11.2017. (copy enclosed). In this group of cases, Hon ble Supreme Court has dismissed SLPs in cases where AO did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry. The relevant judgement of Hon ble Calcutta High Court in this case is also enclosed. 2. Malabar Industrial Co. Ltd. Vs CIT f20001 109 Taxman 66 (SC)/r20001 243 ITR 83 (SC)/r20001 159 CTR 1 (SC) (Copy Enclosed) where Hon .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... y issuance of a notice under section 153A(1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a). The above order has been passed after considering cases of (i) CIT v. Kabul Chawla [20161 380 ITR 573/120151 234 Taxman 300/61taxmann.com 412 (Delhi) (para 4), (ii) CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [20151 374 ITR 645/232 Taxman 270/58 taxmann.com 78 (Bom.) (para 4), (iii) Principal CIT v. Kurele Paper Mills (P.) Ltd. [2016] 380 ITR 571 (Delhi) (para 4), (iv) CIT v. Lancy Constructions [2016] 383 ITR 168/237 Taxman 728/66 taxmann.com 264 (Kar.) (para 4), (v) CIT v. ST. Francies Clay Decor Tiles [2016] 240 Taxman 168/70 taxmann.com 234 (Ker.) (para 5) and (vi) CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker.) (para 5). 3. DR. A. V. Sreekumar Vs CIT r20181 90 taxmann.com 355 (Kerala)/r2018l 253 Taxman 428 (Kerala)/r20181 404 ITR 642 (Kerala) .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 2. B Kishore Kumar Vs CIT (62 taxmann.com 215, 234 Taxman 771) (Copy Enclosed) where Hon ble Supreme Court dismissed SLP against High Court's order where it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents. B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High Court confirmed (Copy Enclosed) 3. Bhagirath Aqqarwal Vs CIT (31 taxmann.com 274, 215 Taxman 229, 351 ITR 143) (Copy Enclosed) where Hon ble Delhi High Court held that an addition in assessee's income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect. 4. CIT Vs M. S. Aqqarwal [2018] 93 taxmann.com 247 (Delhi) (Copy Enclosed) where Hon ble Delhi High Court held that where in course of block assessment proceedings, AO made addition to assessee's undisclosed income in respect of gift, in view of fact that assessee did not even know donor personally and, moreover, he himself in presence of .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. The fundamental principles underlying the provisions of this Section are that (a) there has to be error the order (b) and the error has to be prejudicial or leading to loss of revenue. 174. Not carrying suitable inquiries which may not carrying out proper inquiry while making the assessment which may lead to loss of revenue can also be a case for revision u/s 263 of the Act. All the decisions quoted by the ld. DR which are mentioned above have been duly perused. In the instant case, the copy of the rent agreement, details of the tenant with period of occupation, bank statement showing the receipt of the rent, details of the loans received, interest paid thereon have been dul .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... igarh (owned by the assessee) and paid rent of ₹ 36,00,000/- through cheque and TDS has been duly deducted. The ld. PCIT observation that this rental payment is convoluted is influenced by the fact that the rent has been paid in lump sum which cannot be accepted as a reason for revision of the assessment order u/s 263 of the Act. Any kind of loss of Revenue or non examination of the issue by the Assessing Officer before allowing the claims has not been brought out by the ld. PCIT which was discussed above. Hence, we hereby hold that the order u/s 263 of the Act cannot be upheld on this ground. 175. We also find that the ld. PCIT in sub-para v of para 3.2 of the order ultimately held that Annual Letting Value (ALV) of the property amounting to ₹ 880,000/- was required to be taxed under head income from other sources while holding that the rental income of ₹ 880,000/- shown in respect of the property let out to Trishala was found to be bogus does not stand on any legal principles for the simple reason as the provisions of Sections 22, 23 24 of the Act which cover the scheme of taxation under head house property. The same can be summarized as und .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ,000/-. 179. The ld. PCIT held that no documentary evidence in support of her claim was furnished by the assessee and the A.O. accepted the version of the assessee without making any further enquiry. In absence of any documentary evidence to prove the genuineness of the said transaction, the income of ₹ 50,00,000/- declared by the assessee should be considered as income from undisclosed sources and was required to be taxed u/s 69A read with Section 115BBE of the Act. 180. The ld. PCIT held that it can be inferred that the assessment order dated 23.12.2016 passed by the Assessing Officer for the assessment year 2013-14 is erroneous in so far as it is prejudicial to the interest of revenue in view of the provisions of Section 263 r/w Explanation 2 of the Act. 181. The ld. AR relied on the submissions given before the ld. PCIT while the ld. DR strongly supported the order of the ld. PCIT. 182. Heard the arguments of both the parties and perused the material available on record. 183. We find that the Assessing Officer vide notice dated 14.07.2016 at para no. 3 as inquired about the booking of plot for .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... st of the revenue, whether the Assessing Officer has acted in accordance with the explanation 2 of the Section 263 of the Act and by the ld. PCIT has brought in anything on record to prove the leakage to revenue to the exchequer in the assessment by the way of passing any erroneous order by the Assessing Officer. The facts of the case laws relied and its applicability to the instant case is as under: S.No. Case law Facts of the case Remarks 1. SC in Malabar Industrial Co. Ltd. Vs CIT [2000] 243 ITR 83 (SC) In the said case, the Hon'ble Supreme Court has laid down the law as to what would constitute erroneous order and prejudicial to revenue. The court categorized following orders as erroneous: a) Incorrect assumption of facts b) Incorrect application of law c) Without application of mind d) Without following principles of natural justice Further, the court held that an order would not be held to be prejudi .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ompeting assessment. Therefore, the case law relied upon by the PCIT which relates to penalty order is clearly distinguishable on facts. The same has also been held by the ITAT Delhi in Para 4.2 of its decision in case of Lala Harbhagwan Dass Memorial Vs CIT, ITA 2555 of 2012. 4. ITAT Chennai in Rajlakshmi Mills Ltd vs ITO [2009] 121 ITD 343 (Ch.) In the said case, the assessee had claimed deduction of provision of gratuity regarding which no enquiry was done by the AO. The CIT on examination found that the said claim was disallowable u/s 40A(7) and passed an order u/s 263. The ITAT held that since the said claim of assessee was incorrect and no enquiry was done by AO regarding the same, order u/s 263 was as per law. In the present case, the learned PCIT has not brought about any instance of assessee's claim being incorrect. Further, all issues raised by the PCIT were examined by the AO by way of separate show cause notices. As such, clearly this was not a case of no enquiry or incorrect claim, as in the case relied upon by the PCIT, as such the same is distinguisha .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ll possible issues in his show cause notices and full compliance to same was made by assessee with detailed evidences. The PCIT has re- examined the same issues and evidences and formed a different opinion. The case law relied upon involved a company alleged to be used for bogus share capital investment regarding which no enquiries were made by the AO which is not the case in the present instance. 7. Karnataka HC in the case of CIT vs Infosys Technologies Ltd 341 ITR 293 In the said case, the assessee had claimed DTAA relief in its ITR which was allowed by the AO by merely stating that same was allowable as per DTAA., CIT held that the AO had not studied the extent of allowability of assessee's claim as per the specific clauses of DTAA and had simply allowed what was claimed by assessee without obtaining any details. The HC held that the order of the CIT seeking recomputation was correct as the AO had failed to make any calculation before allowing such important tax relief. The issue in the present case is not related to computation of .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... CIT Vs M.S. Aggarwal [2018] 93 Taxmann.com 247 (Delhi) Smt. Dayawanti Vs CIT [2016] 75 Taxmann.com 308 (Delhi)/[2017] 245 Taxman 293 (Delhi)/[2017] 390 ITR 493 (Delhi)/[2016] 290 CTR 361 (Delhi) M/s Pebble Investment and Fiannce Ltd. Vs ITO (2017-TIOL-238-SCIT) Raj Hans Towers (P) Ltd. Vs CIT (56 Taxmann.com 67, 230 Taxman 567, 373 ITR 9) PCIT Vs Avinash Kumar Setia (2017) 81 taxmann.com 476 189. The case laws relied by learned DR are discussed as under: In the case of Deniel Merchants (supra), the Hon'ble Supreme Court dismissed the SLP tiled by the assessee against earlier decision of the Calcutta High Court in case of the assessee by stating as under: In all these cases, we find that the Commissioner of Income Tax had passed an order under Section 263 of the Income Tax Act, 1961 with the observations that the Assessing Officer did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... e, the share-holders are mere name lenders. 192. The court in Para 28 while holding the order of the CIT u/s 263 to be valid, made the following observations: in the present case we have tabulated the evidence which was before the assessing officer which should have provoked him to make further investigation. The assessing officer did not attach any importance to that aspect of the matter as discussed above by us. The judgement in the case of Leisure Wear Exports Pvt. Ltd. (supra) relied upon by Mr. Poddar has no applicability because the evidence furnished by the assessee in this case does suggest a cover up. We also have held prima facie that neither the transaction appears to be genuine nor are the applicants of share are creditworthy 193. Therefore, clearly the views expressed by the Hon'ble High Court were based on the appreciation of the peculiar facts of the said case. In the present case, it is not the case of the PCIT that the assessee has not proved genuineness or identity of its credits. Instead, it is alleged that the payments made by the assessee trust to its trustees and other payments were not genuine or exces .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 198. Referring to the decision of Hon'ble Supreme Court in the case of Amitabh Bachchan (supra), the learned DR has correctly mentioned that in the said case the Court laid down that the CIT while exercising powers u/s 263 is not bound to be confined to the issues stated in his show cause notice and that the mandate of the provisions of law is restricted to only giving an opportunity of being heard to the assessee. These observations can be found in Para 14 of the Hon'ble Court's judgment. 199. Addressing the facts of the present case, it is evident that the assessee has not claimed that proper opportunity of being heard was not given to it and neither is it claimed that any illegality had been committed by the PCIT in not being restricted to the issues raised in his show cause notice. Therefore, clearly the ratios of the said decision of the Supreme Court though entirely correct, but not applicable to the case at hand. 200. The reliance of learned DR has also placed reliance upon decision of the jurisdictional High Court in the case of Satpal Goyal(supra). As per facts of the case narrated in Para 3 of the judgment, assessing Officer ma .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates