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TMI Blog2022 (8) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ld AR of the assessee that assessee has discharged its complete onus producing and appearing in both the proceedings. Not only that the entire addition has been made purely on the basis of the assumptions and surmises is purely devoid of any merit. Even the CIT(A) also did not consider the contentions of the assessee on merit despite the submission and remand report placed before him by submitting the written contentions and ld CIT(A) also chose to remain silent while dealing with the appeal of the assessee. As not disputed that the assessee has maintained regular books of accounts, which are audited by an independent Charted Accountant, in his report the auditor nowhere discussed any defects in the set of records maintained by the assessee, the books were presented before the AO in original as well as in remand proceeding, no specific defect or bogus vouchers/bills are observed. Whatever arguments made by the Ld DR in the hearing has also been dealt with convincing answer and on that there are no further comments required after considering the submission of the ld. AR of the assessee. We find that the claim of the assessee is supported bills and vouchers recorded in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing process. 3. The appellant has taken following grounds in this appeal; i. The assessment order passed u/s 143(3) is bad in law as well as on facts of the present case and hence, the same may please be quashed. ii. Rs.4988846/- The ld. Assessing Officer erred in law as well as on the facts of the present case in making disallowance of depreciation though the same is duly allowable under provisions of the Act. iii. Rs.5000000/- The ld. Assessing Officer erred in law as well as on the facts of the present case in making disallowance of revenue expenses claimed by the assessee without pointing out any valid reason. 4. Before proceeding further, it is necessary to understand the basic facts about the assessee to deal with this appeal. The assessee is a trust engaged in imparting education and running an educational institute for which it has been granted certificate u/s. 10(23C)(vi) of the Income Tax Act, 1961 by Chief Commissioner of Income Tax, Udaipur vide letter No. CCIT/ITO/(Tech)/UDR/2012-13/31 dated 04.04.2012. This certificate was effective from A. Y. 2011-12 onwards. 4.1 Return of income was filed by the assessee trust on 22.09.2016 declaring nil income. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R of the assessee has drawn our attention that there is not a single line written by the AO showing the defects in the records produced before the AO in the assessment proceeding in respect of the assessee trust. The disallowance is purely an adhoc and lumpsum basis and that too the amount at para 6 7 both are not matching. This shows the casual approach taken by the AO while finalizing the assessment. 9. The assessee trust has carried this matter before the ld CIT(A) by filling an appeal against the impugned order of the AO. The ld CIT(A) instead of deleting the addition, it sent the matter for remand report. Even in the remand report, no specific items of disallowance were pointed out and the assessee has duly submitted its response on the same. However, the ld. CIT(A) sustained the addition and therefore, this appeal by the assessee is before ITAT. 10. During the proceeding before the Ld. CIT(A), the Ld. AR of the assessee filed a detailed submission in the appellate proceeding. The Ld. CIT(A) forwarded the said written submission vide his office letter no. CIT(A)/AJM/2019-20/421 dated 03.06.2019 and called for a remand report from the AO. In the remand report, the AO su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the year under assessment. After this, the Assessee Society has claimed such a huge amount of Rs. 1,75,831/ on Photostat Expenses which seems not genuine. 4 Van Repairing of Rs. 38,955/-No Van was shown in Balance Sheet of the Assessee Society whereas Van repairing expenses have been claimed. 5. Conveyance Expenses of Rs. 9,00,594/- and Traveling Expenses of Rs. 43,062/-During the year under assessment, the Assessee Society claimed sucha huge expenses in these heads whereas the Assessee Society was having 2Buses and a Car. 6.Salary Daily wages of Rs. 1,53,53,032/- and Wages of Rs. 58,89,585/- The Assessee Society claimed Rs. 1,53,53,032/- under the Salary Daily Wages during the year. Simultaneously, expenses of Rs. 58,89,585/- were claimed under the head Wages which seems not genuine. 7. Library Expenses of Rs. 43,567/-The Assessee Society claimed Rs. 43,567/ under the head of Library Expenses during the year under assessment. These expenses are not genuine owing to the reasons that Library is a part of building. Further all expenses such as electricity and other facilities being given in Library have been claimed in expenses. 8. Building repairing of Rs. 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and even there is no basis of holding such expenses as non genuine or excessive. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (iii) Rs. 17583 - Photostat Expense: The ld. AO merely stated that the expenses do not seem to be genuine. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non genuine or excessive. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (iv) Rs. 38955 Van Repairing Expenses: It has been allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no basis of holding such expenses as non-genuine or excessive. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. Thus, considering the above facts and submissions it would be seen that the disallowance has been made by the ld. AO without brining any credible evidences or facts on record but rather on its own assumptions and presumptions. Even in remand report nothing new has been stated by the ld. AO while justifying the disallowance on its own estimation and it is completely silent on the basis or comparison which led to such a huge disallowance. Hence, such disallowance cannot stand in the eyes of the law and the same deserves to be deleted. Therefore, we again pray to delete the disallowances made by the ld. AO. 12. Based on the set of arguments on both the sides, the ld. CIT(A) has given his finding at page 8 para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure Account or Profit and Loss Account are in agreement with the books of account maintained by the head office at KISHANGARH and branches. (iii) Subject to comments below : (a) We have obtained all the information and explanations which to the best of our Knowledge and belief were necessary for the purpose of the audit. (b) In our opinion, proper books of account have been kept by the head office and branches of the above-named fund, or trust, or institution or any university or other educational institution or any hospital or other medical institution so far as appears from our examination of the books of account. (c) In our opinion and to the best of our information and according to the information given to us the said accounts read with notes thereon, if any, give a true and fair view (1) In the case of the Balance Sheet, of the state of affairs of the above-named fund, or trust, or institution or any university or other educational institution or any hospital or other medical institution as at 31/03/2016 and (2) In the case of Income and Expenditure Account or Profit and Loss Account, surplus ordeficit or profit or loss for the year ended on that date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. AO could not point out even a single defect. 1.2.1 Entire expenses incurred for the objects of the trust: At the outset, we may submit that the entire expenses were incurred by the assessee for the purposes of objects of the trust. The trust is set up for educational purposes and it is working towards the same for the past several years. It is notable that the auditor has duly mentioned the total expenses incurred wholly and exclusively for the purposes of the object of the trust as appearing in clause 9 of the annx. of the audit report at PB 4. The ld. AO has also not found any expenses which were not for the objects of the trust and hence, no expenses could be disallowed by the ld. AO. 1.3.1 Huge disallowance made without any basis: We may submit that the ld. AO has made a huge disallowance of Rs.5000000/- without any basis at all and it has just observed that the expenses claimed by the assessee seems to be excessive . We may submit that while making disallowance, the ld. AO has not shown any basis that why the expenses claimed by the assessee have been found to be excessive. Even what heads of expenses have been found to be excessive is not stated by the ld. AO. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses do not seem to be genuine and are excessive. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non genuine or excessive. With around 1500 students, there are around 300 computers with the society and due to fast changing technology, the computer repairs expenses has to be higher. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (ii) Rs. 1294127/- Furniture Repairing Expense: The Id. AO merely stated that the expenses do not seem to be genuine and are excessive. The AO wrongly stated the fact as well as the WDV of only one branch was considered and the audited depreciation chart are enclosed at PB 14-16. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non genuine or excessive. Absolutely no comparison ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s non genuine excessive. Absolutely no comparison of such expense has been made with reference to the requirement of assessee in operations nor has any evidence been brought on record justify his action making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of trust and hence disallowance out such expense claimed by assessee would justified. (vii) Rs. 43567 Library Expenses: proper justification has been given the ld. while treating library expenses as genuine and has simply stated that library is part building. It humbly submitted that all library expenses fully vouched and the ld. AO has been able point out even single rupee expense out of same. Therefore disallowance required to made out of same. (viii) Rs. 3633465/- Building Repairing Expense: The ld. merely stated that expenses do seem to genuine. Not single item disallowance has pointed out even there is no basis holding such expenses as genuine excessive. Absolutely comparison such expense been made with reference to requirement of assessee in operations nor has evidence been brought record justify his action making such huge disallowance. Complete expenses have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adopted a short cut method to disallow substantial amount without any basis or finding. Even the Ld. CIT(A) has not taken seriousness of the disallowance which are made without any basis. The Ld. CIT(A) based on the unclear remand report confirmed the addition that too writing that the disallowance made by AO is quite reasonable and fair. This finding of the Ld. CIT(A) is unfair and is against the principles of natural justice. He has further stated that the assessee is registered educational institute, no defect in books of account found by auditor, not a single defect found in the assessment proceeding as well as in the remand proceeding so as the records maintained by the assessee including the supporting bills and vouchers are not correct. He has drawn our attention to audit report and its annexure wherein the auditor has reported that expenses incurred are for the purpose of the object of the trust. Not a single voucher is found to be incorrect or having any defect of the claim of expenses. He has submitted that there are around 1500 students and 300 computers are installed to impart the education to the students and looking to the facts and circumstances placed on record th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he one machine could not reach to the job looking to the urgency of the matter. As regards the furniture repairing he has stated that there are as many as 1500 student undergoing education and looking to the size of the institution and in the absence of any bills / voucher found defective the addition could not be made merely on such expenditure being at higher figure. He has not given any comparison with that of the assessee or with other assessee while doing so. He further argued that income of the assessee trust is totally exempt from tax whether the expenditure is shown excess or less will not make any difference to the revenue even otherwise. 16. We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also meticulously gone through the contentions raised in the hearing by ld. DR as regards the claim of various expenses by the assessee. It is not disputed by the both the parties that there is not a single instance observed in the original assessment proceeding and in the remand proceeding about the correctness and completeness of the records maintained by the assessee. The only contention raised by the revenue that the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd jurisdiction to examine the claim of the expenses and adopt an appropriate methodology of determining the nature and sample size of expenses and on examination thereof, where he find that the expense are not genuine or have not been incurred for the purposes of business, the same can be disallowed. However, before arriving at such a finding, he has to record specific finding highlighting particular expenditure which accordingly to him is not allowable and the reasons for the same which in the instant case is conspicuously absent and thus, the disallowance so made and sustained by the ld CIT(A) is clearly in the nature of an adhoc disallowance which cannot be sustained in the eyes of law. Similar view has been taken by the Coordinate Bench in case of Meghalaya Construction and Supply Company vs ACIT. 18. In the result, based on the arguments, submissions and decisions relied upon we find that the claim of the assessee is supported bills and vouchers recorded in the books of accounts which are audited as per requirement of the act and auditor has specifically reported that all the expenses incurred by the assessee is per the object of the society. The ld CIT(A) as well as AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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