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TMI Blog2024 (6) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of sec. 13(2)(a) thus cannot be triggered on such transactions. Thus when the advances made towards purchase of land has been accepted by the revenue in earlier year and also in the relevant year and no addition qua the advances was proposed in the assessment in impugned orders. Impugned advances were further held as genuine and normal business transaction by the Ld CIT(E), Bhopal by dropping the proceedings of cancellation of registration u/s 12AA. Addition on account of notional interest is uncalled for, much less, on the basis of such addition denial of exemption claimed u/s 11 is a farfetched application of mind which cannot be permitted under the law. Set aside the findings of Ld. CIT(A) on the issue and direct the AO to vacate the additions made - Decided in favour of assessee. - SHRI RAVISH SOOD , JM And SHRI ARUN KHODPIA , AM For the Assessee : Shri S. R. Rao , Adv For the Revenue : Shri Ram Tiwari , Sr. DR ORDER Per Arun Khodpia , AM : The Captioned appeal is filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals), Raipur, dated 05.07.2023 for the assessment year 2016-17, which in turn is arose from the order u/s 143(1) Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equate security or interest hence violated provisions of sec. 13(1)(c) r.w.s. 13(2)(a) of the Act. h) Major part of advance was made in FY 2013-14 and regular assessment was completed for AY 2014-15 on 17/12/2016 and no adverse inference was drawn [PB- pg. 07-08] nor any proceedings were initiated in AY 2015-16 or in AY. 2017-18, i.e., preceding, and succeeding years. i) The registration of transfer could not be executed for want of sufficient funds with appellant. j) The transaction was commercial in nature hence no interest was charged, especially in the light of the fact that sale price was fixed hedging price rise. k) Subsequently, conveyance for transfer of part of the land was executed against the advance. [PB- pg. 24-85] l) The Id. CIT(E), Bhopal had initiated proceedings for withdrawal of registration u/s.12A on same grounds and said proceedings were dropped after accepting appellant's submissions. [PB- pg. 104- 114] m) Hence, the action of Id. AO is against the position admitted by Id. CIT(E). n) The charging of interest @12% p.a. is notional - interest income on notional basis cannot be subjected to tax. o) Appellant relies on following cases: (i) Satna Diocesan Socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gorical mention about the agreement dated 04.11.2013 with Shri Shashank Rastogi (specified person u/s 13(3)) for purchase of land admeasuring 5.21 acres at Model Town, Bhilai for Rs. 15,50,00,000/- to be used for construction of college premises. The advances were made during FY 2013-14, also the regular Assessment of the said FY relevant to AY 2014- 15 was completed u/s 143(3) on 17.12.2016. This fact was duly considered and accepted by the Ld CIT(E), Bhopal. Copies of replies of assessee are placed at page no. 105 to 111 of the Assessee s paper book. Ld. AR further drew our attention to page no. 104 of the paper book showing order by Ld. CIT(E), Bhopal, wherein considering the merits in response by the assessee the proceedings for withdrawal of registration u/s 12AA of the Income Tax Act, 1961 in the case of assessee society has been dropped, copy of the said order of Ld. CIT(E), Bhopal is extracted as under : 6. It was the further submission of Ld. AR that, once the Ld. CIT(E), Bhopal, has rejected the proposal of department for cancellation of registration u/s 12AA of the I.T. Act in favour of the assessee, after considering the impugned transaction of advances to the specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reconsideration of an issue for a subsequent assessment year if the same fundamental aspect permeates in different assessment years. iii. Highways Construction co. vs. CIT [199 ITR 702- (Gau)]- interest income on notional basis cannot be subjected to tax. iv. ClT vs. Shoorji Vallabhdas and co., [1962] 46 ITR 144 (SC)- income-tax cannot be levied on hypothetical income. 7. In terms of aforesaid submissions, it was the prayer of Ld. AR that the addition made by the Ld. AO which has been sustained by Ld. CIT(A) denying the exemption u/s 11 of the Act was bad in law rather mis interpretation of the law. The advance extended were towards purchase of land, thus, commercial in nature duly accepted and approved by the Ld. CIT(E), Bhopal by accepting contentions of the assessee, resultantly dropping the proceedings initiated for withdrawal of registration u/s 12AA, this itself supports the contentions of the assessee that, the addition of notional interest by treating the advance to specified person, as diversion of funds of the society, thus covered by the provisions of section 13(1)(c) r.w.s. 13(2)(a) was an error on the part of Ld AO, which further misconstrued and upheld by the Ld CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, he concluded that the appellant has diverted the funds to specified person in violation of provisions of section 13(1)(c) r.w.s. 13(2)(a) of the Act, the observations of AO were accordingly held as correct, appeal of the assessee is thus, dismissed. 10. On a thoughtful consideration of the overall facts and circumstances, we are of the considered view that, the observations of Ld. CIT(A) and the findings cannot be concurred with for the reason that the impugned transaction of advances which were the sole basis of controversy, have been duly examined by the Ld. CIT(E) and the same was treated as genuine transactions, thus are not recognized as a valid ground for cancelling the registration of the assessee society u/s 12AA. 11. In backdrop of aforesaid facts and observations, considering the overall circumstances of the case, since the advances extended to specified person, pertaining to transaction of purchase were accepted as genuine business deal, no adverse inference was drawn by the Ld. CIT(E) and proceedings for cancellation of 12AA were dropped, the same cannot be treated as a transaction in violation of sec. 13(1)(c). Regarding adequate security and interest as mandated by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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