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TMI Blog2025 (1) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... d not filed any return of income for the year under consideration i.e AY 2017-18, therefore, the pre-condition is not satisfied by it. In fact, it transpires on a perusal of the CIT(A) order that the assessee society had in its written submissions filed before him stated that it had filed its audited financial statements only in the course of the assessment proceedings. As it is a matter of fact borne from the record that the assessee society had failed to file its return of income as required per the mandate of section 12A(1)(b) (as was applicable during the year under consideration), therefore, for the said reason it would stand disentitled for claiming exemption u/s 11 and 12 of the Act. The assessee society is disentitled from claiming exemption u/ss. 11/12 of the Act, therefore, we refrain from looking into the scope of 1st proviso to section 12A. The Ground of appeal No. 1 is dismissed. Entitlement for claim of depreciation on its fixed assets despite the fact that it had not raised a claim for the same in its return of income for the year under consideration i.e AY 2071-18 - HELD THAT:-Though the assessee society is not entitled for claiming exemption under Sec. 11 and Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.4: The appellant reserves the right to add, amend or alter any ground/s of appeal." 2. Succinctly stated, the AO gathered information that the assessee society had during the demonetization period though made cash deposits of Rs. 10,18,050/- in Specified Bank Notes (SBNs) in its bank account No.936020110000203 held with Bank of India but had not filed its return of income for the year under consideration, i.e A.Y 2017-18. The AO issued notice u/s 142(1) of the Act, dated 09.03.2018 calling upon the assessee society to file its return of income for the subject year. As the assessee society failed to file its return of income in compliance to the aforesaid notice, therefore, the AO was constrained to proceed with and frame the assessment to the best of his judgment u/s 144 of the Act. 3. The A.O, thereafter, issued a show cause notice (SCN) dated 18.06.2019, wherein the assessee society was queried about the source of the cash deposits in SBN's made in its bank account during the demonetization period. In reply, it was submitted by the assessee society that the subject cash deposits were sourced from the fees collected from the students, which was exempt from tax u/s 10(23C) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified Bank Notes) were withdrawn. * As per details provided by the bank, the assessee had deposited Cash in old currencies of denomination of Rs. 500/- and 1000/- valued to Rs. 10,18,050/- in Bank of India. * The pay-in-slip were obtained from the banks and were examined which clearly show that the assessee has deposited old currency notes (SBNs). * The sources of deposits of old currency notes (SBNs) were not explained. * It is apparently clear that the cash deposits made in the bank accounts of the assessee during F.Y. 2016-17 relevant to A.Y. 2017-18, during demonetization period, are unexplained and from undisclosed sources and the same were not offered for taxation purposes. * In this case, provisions of section 69A of I.T. Act, 1961 is clearly attracted. Section 69A of the Act deals with Money etc. owned by the assessee and found in possession including in the bank accounts of the assessee company which remained unexplained." 5. The AO, further observed, that the assessee society during the period other than the demonetization period had in its aforementioned bank account made cash deposits of Rs. 62,74,700/-. Also, it was observed by him that the assessee societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it was eligible to get benefit as per "1st proviso" to sub- section (2) of Sec. 12A of the Act, which contemplated that where registration has been granted to the trust or institution under Sec.12AA or Sec. 12AB then, the provisions of section 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid year for which assessment proceedings are pending before the AO as on date of such registration, subject to the conditions that the objects and activities of such trust or institution remain the same for such preceding assessment year, the CIT(A) did not find favor with the same. It was observed by him that as the assessee society was granted registration u/s 12AA of the Act on 29.09.2020 whereas the assessment was completed on 26.11.2019, hence, it was not entitled to take the benefit of the said concession. Accordingly, the CIT(A) held a firm conviction that the assessee society was not eligible to claim exemption u/s 11 & 12 of the Act. 7. Apropos the estimation of the business income by the AO @ 10% of the gross receipts i.e. at Rs. 17,62,790, the CIT(A) observed that as the "Income and expenditure acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so noted that the appellant had deposited cash amounting to Rs. 62,74,700/- in the period other than demonetization period and received amount other than cash of Rs. 29,39,301/- during the F.Y.2016-17 in its bank account. The appellant explained the above amounts also as being fees received from its students. However, in the absence of supporting documents regarding claim of exemption u/s. 10(23C), and failure to furnish books of accounts maintained for F.Y.2016-17, copy of Form 10B etc, the AO did not accept the appellant's explanation. Accordingly, the total amount received during the relevant financial year excluding the cash deposits during demonetization i.e Rs. 1,762790/- (1,86,45,939-10,18,050) was treated as business receipts of the assessee and profit @10% of the amount of Rs. 1,76,27,889/-i.e. 17,62,790/- was treated as total income of the appellant. In the course of proceedings u/s.250 the appellant submitted information regarding the details of cash deposits during demonetization period in its account with Bank of India. On remand, the A.O submitted that on verification of the record it was found that there was a calculation error in the assessment order and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct." From the above, it is clear that use of Specified Bank Notes (SBN) pursuant to 8th November, 2016 upto 31st December, 2016 was always allowed. It was never the intention of the Law to prohibit its use for transaction upto 31st December, 2016. This view was accepted by Bangalore ITAT in Prathamika Krushi Pattina (ITA No. 593/Bang/2021) and Bhageeratha Pattina Sahakara Sangha Niyamitha (ITA No.646/Bang/2021 dated 18-02-2022) and Anantpur Kalpana Vs ITO (ITA No.541/Bang/2021) wherein it was held that, in this case both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. In the present case, the appellant submitted that the cash deposits during demonetization were from out of fees collected from the students. There is no material on record or brought on record to indicate otherwise. Accordingly, as per above judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income and expenditure account for the F.Y 2016- 17 the appellant had shown net surplus of Rs. 2306282.79. The A.O. had accepted the gross receipts on account of tuition fees less the cash deposited during demonetization as the business receipts of the appellant and estimated profit at 10% of such receipts. It is pertinent to note that the appellant was maintaining books and the same were not rejected. In fact, the gross receipts forming the basis for estimation of profit have also been taken from its audited accounts. Hence, there is no rationale for estimating the profit. Accordingly, the surplus as declared by the appellant in its income and expenditure account is to be treated as its taxable income for the relevant A.Y. in the absence of any exemption u/s 10(230) or 12A. Thus, the appellant's taxable income for the A.Y.2017-18 is to be taken as per its audited financial statement at Rs. 23,06,283/- and not as estimated by the A.O. at Rs. 17,60,790/-. To this extent, the appellant's second ground of appeal is treated as allowed for statistical purpose. 8. In the result, the appeal filed by the appellant is partly allowed." 8. The assessee being aggrieved with the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced on record the "Notes to clauses" of the Finance Act, 2014 wherein the purpose for incorporating the "1st proviso" to section 12A(2) of the Act was explained. Alternatively, the Ld. AR submitted that in case of the assessee society claim of exemption u/ss 11/12 of the Act was not to be accepted, then, the AO be directed to allow depreciation on the "fixed assets" of the assessee society, though a claim for the same was raised in the "Income and expenditure account" The Ld. AR to buttress its entitlement for claim of depreciation on fixed assets had relied upon the "Explanation 5" of Sec. 32(1) of the Act. 10. Per contra, Dr. Priyanka Patel, Learned Senior Departmental Representative (for short, Sr. DR) relied upon the orders of the lower authorities. 11. I have heard the learned authorized representatives of both the parties, perused the orders of the lower authorities, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 12. The controversy involved in the present appeal hinges around two issues, viz., (i). that as to whether or not the assessee society per the "1st proviso" of sub-section (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below sub- section (2) of Sec. 288 [and the person in receipt of the income furnishes alongwith the return of income for the relevant assessment year] the report of such audit in the prescribed form duly signed and verified by such accountant as setting forth such particulars as may be prescribed. Accordingly, Sec. 12A(b) [as was available on the statute during the year under consideration i.e AY 2017-18] had for claiming of exemption under Sec. 11 or Sec. 12, inter alia, set out a pro- condition, as per which the trust or institution was statutorily required to cumulatively satisfy two conditions, viz. (i) to get its accounts audited by an accountant defined in the "Explanation" below sub-section (2) of Sec. 288; and (ii). to furnish alongwith the return of income for the relevant assessment year the report of audit in the prescribed form. Now, as the present assessee society had not filed any return of income for the year under consideration i.e AY 2017-18, therefore, the aforesaid pre-condition is not satisfied by it. In fact, it transpires on a perusal of the CIT(A) order that the assessee society had in its written submissions filed before him stated that it had filed its aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with reference to the revised income is justified. Rather, the CBDT vide its Circular No. 29D(XIX) of 1965, F.No. 45/239/65-ITC, dated 31st March, 1965, had, inter alia, observed that even where best judgment assessment is made and the income of the assessee is proposed to be estimated, then, in case the prescribed particulars have been furnished by the assessee, the depreciation allowance should be separately worked out. I, thus, in the backdrop of my aforesaid observations, am of a firm conviction, that though the assessee society is not entitled for claiming exemption under Sec. 11 and Sec. 12 of the Act, but, at the same time, as per "Explanation 5" to Sec. 32(1) of the Act, the deduction for depreciation on the "fixed assets", though not claimed, ought to be allowed while computing its income in a commercial manner. Accordingly, the A.O is directed to allow depreciation on the "fixed assets", though, after verifying satisfaction of the requisite conditions contemplated in Sec. 32(1) of the Act. The Ground of appeal No. 2 is allowed in terms of my aforesaid observations. 18. Apropos, the Ld. AR's claim that the CIT(A) had erred in carrying out enhancement of the income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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