9911796707
TMI Blog2004 (10) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... - Suppression of receipts - 25,000 2,06,000 62,700 5,85,400 Unexplained expenses - 91,354 29,400 15,750 40,000 Compulsory consideration for admission - 17,54,786 40,18,215 31,08,500 1,80,000 Unexplained cash credit - - - 22,96,385 9,17,500 Other addition of cash credit - - - 4,99,385 - Undisclosed 3,78,093 - - - - income (no return filed) Common grounds exemption under s. 11 exemption under s. 10(22) /10(23C) - - - - - ---------------------------------------------------------------- Both the parties agreed that the above chart covers the entire additions disputed by the assessee by way of grounds Nos. 1 to 26 and, therefore, they propose to argue the various additions as per the above chart. I. Regarding addition of Rs. 3,31,250 in asst. yr. 1997-98 3. At the time of hearing before us, it is submitted by the learned counsel that the above income was as per P L a/c enclosed along with the return of income for asst. yr. 1997-98 which was filed prior to the search. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-trust which was disclosed to the Revenue prior to the search. Similarly, the expenditure incurred by the trust was verifiable with reference to vouchers. That the cash book was complete upto July, 1998. However, the basic record, i.e., the receipt book, bank account and vouchers were available. With the help of these materials, the cash book was written and the P L a/c was prepared and the return was filed in the regular course. Thus, the income as per P L a/c is not undisclosed income. In support of this contention, he referred to the definition of "undisclosed income" under s. 158B(b) and s. 158BB(d). 6. The learned Departmental Representative, on the other hand, relied upon the orders of authorities below and she stated that the assessee has not maintained any regular book of account. During the course of search, the cash book found was written upto July, 1998, only while the search took place in the month of June, 1999. Thus, it is evident that the assessee has not maintained any books of account and, therefore, the assessee cannot claim that the income of the accounting year relevant to the asst. yrs. 1999-2000 and 2000-01 was recorded in the book of account prior t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove, we agree with the submission of the learned counsel that the receipt was duly recorded in the receipt book as well as fees register found and seized at the time of search. Therefore, the income which was by way of receipt of fees was found recorded in the other documents maintained in the normal course before the date of search and, therefore, as per s. 158BB(1)(d) the above income cannot be treated as undisclosed income. However, the Revenue is at liberty to consider the same in the regular assessment. Subject to the above remark, the additions of Rs. 12,80,411 and Rs. 15,61,616 for asst. yrs. 1999-2000 and 2000-01 are deleted. III. Regarding inflation of expenses of Rs. 5,22,350 for asst. yr. 1997-98 8. At the time of hearing before us, it is submitted by the learned counsel that the AO has concluded that as per p. 26 found at the time of search, the expenses were recorded at Rs. 7,11,400 while as per the audited income and expenses account, the expenses shown are at Rs. 12,33,750. It is explained by the learned counsel that at the time of search, two loose papers were found. As per one loose paper, only part of the expenses was recorded. He has referred to the xerox copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y register which was found and seized at the time of search. The learned Departmental Representative stated that let this contention of the assessee be verified at the end of the AO. 12. After considering the arguments of both the sides, wee set aside the orders of authorities below and restore the matter back to the file of AO and direct him to readjudicate this matter after proper verification. V. Regarding addition for inflation of expenses of Rs. 48,000 for asst. yr. 1997-98 13. At the time of hearing before us, it is submitted by-the learned counsel that this addition is double addition because the AO has already made the addition of Rs. 5,22,000 for inflation of expenses for asst. yr. 1997-98. The above addition made by the AO included this addition of Rs. 48,000 which was for snacks of Rs. 36,000 and cleaning expenses of Rs. 12,000. The learned Departmental Representative stated that this contention of the assessee also needs verification by the AO. In view of above, we set aside this matter back to the file of AO to be adjudicated as per our direction in para 12 above. VI. Regarding suppression of Rs. 25,000 for asst. yr. 1997-98 14. We have heard both the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollection of fees shown by the assessee was only Rs. 21,46,600. Therefore, the AO made the addition of Rs. 62,700. At the time of hearing before us, it is submitted by the learned counsel that the collection of Rs. 62,700 was towards building fund and the same is duly recorded in the building account. Thus, he stated that the receipt is duly disclosed in building fund account. However, this contention of the assessee needs verification at the end of the AO. We direct him to examine this contention of the assessee and thereafter readjudicate on this point. IX. Regarding addition of Rs. 5,85,400 for suppression of receipts for asst. yr. 2000-01 17. In para 5.5 of the assessment order, the AO has pointed out that the collection of fees as per the receipt book for the financial year 1999-2000 (i.e., asst. yr. 2000-01) was Rs. 19,45,000. However, as per the printout produced before the DDIT during the course of s. 131(1A) proceedings the collection of fees was shown at Rs. 13,59,600. Thus, there was suppression of fees to the extent of Rs. 5,85,400. At the time of hearing before us, it is submitted by the learned counsel that in the books of account the fees received at Rs. 19,45,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of the trustees and whether they have owned up the above payments. If so, the addition will not be made in the case of the assessee. XI. Regarding unexplained expenses ofRs. 40,000 20. The AO has made the above addition on the ground that the assessee has purchased 5 air-conditioners for a sum of Rs. 1,02,500 out of which only Rs. 62,500 were paid by cheque and balance amount of Rs. 40,000 was paid by cash. He, therefore, treated the above sum of Rs. 40,000 as unexplained expenses. It is contended by the learned counsel that the air-conditioners were purchased for the school and whatever was the cost of the air-conditioners was duly debited to the books of account and the same is paid by cheque. The learned Departmental Representative, on the other hand, relied upon the orders of authorities below on this point. 21. After considering the facts of the case and the arguments of both the sides, in our opinion, this matter also needs verification at the end of the AO. The AO will verify the details including the bill issued by the seller of the above air-conditioners and he will also verify from the sellers whether any cash payment was made by the assessee. Then he will cross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is duly disclosed by the assessee and recorded in the books of account/receipt books and credited in the bank account of the assessee. The only dispute is whether the donation is voluntary donation or it is a donation towards the corpus of the trust. However, this issue is relevant for working out the exemption under s. 11, if any, claimed by the assessee and allowed to it. So far as the block assessment is concerned, the limited issue before us whether it is undisclosed income or not. In our opinion, when the receipt of donation is duly recorded in the assessee's books of account it cannot be said to be undisclosed income. It is not the case of the Revenue either that the receipt is undisclosed. The dispute of the Revenue is with regard to the nature of the receipt. That the Hon'ble jurisdictional High Court has considered the identical issue in the case of N.R. Paper Board Ltd. Ors. vs. Dy. CIT (1998) 146 CTR (Guj) 612 : (1998) 234 ITR 733 (Guj). In that case, their lordships have clearly pointed out that block assessment under Chapter XIV-B and normal regular assessment under s. 143(3) are two separate proceedings and both are having different purpose. The AO has to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of N.R. Paper Boards Ltd. and observed as under: "...... that while framing the block assessment under s. 158BC of the Act, undisclosed income detected as a result of search can be taxed only on the basis of the material found during the course of search and the AO was not justified in recomputing the total income of the assessee for the various assessment years in the block assessment for which regular assessment is required to be made under s. 143(3) of the Act." Thus, under the block assessment, the AO is not permitted to determine the total income of the assessee but he has to determine only the undisclosed income. The learned Departmental Representative could not establish how the donation received by the assessee which is duly recorded in the books of account can be considered as undisclosed income. Therefore, respectfully following the above decision of Hon'ble jurisdictional High Court, we hold that the donations received by the assessee for the admission to the students which are recorded in the assessee's books of account are out of the purview of the block assessment. However, before we part with, we make it clear that as held by the Hon'ble jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the material placed before us. That as per the books of account found from the assessee's premises the income of the assessee-trust for the financial year 1995-96, i.e., relevant to the asst. yr. 1996-97 was Rs. 3,78,093. It is fairly admitted by the learned counsel that no return for asst. yr. 1996-97 was filed by the assesses. Since the assessee had taxable income in asst. yr. 1996-97 and it did not file any return of income, therefore, in our opinion, the above, income was rightly considered as undisclosed income by the AO for the purpose of block assessment. Accordingly, the addition of Rs. 3,78,093 for asst. yr. 1996-97 is upheld. XV. Regarding denial of exemption under s. 10(22)/10(23C) 26. The AO has denied the exemption to the assessee-trust under s. 10(22) and 10(23C) on the following grounds: (i) That from the objects of the trust it is clear that the trust does not exist solely for the purpose of education. (ii) That the income of the trust is not exclusively from educational activity because during the course of search, the assessee-trust was found to have had income from undisclosed sources which has been taxed under ss. 68 and 69C of the IT Act. (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-trust by the SMC clearly proves that the assessee-trust is running the educational institution as per the nouns fixed by the Education Department. The assessee has constructed the budding on the above land allotted by the SMC. That the donation was accepted by the assessee towards the building fund because it needed huge funds for the purchase of land from the SMC and for the construction of building thereon. However, such donation was wholly voluntary and not compulsory donation. That the education officer had informed the assessee that some of the parents have complained about the compulsory donation collected from them. However, the assessee has furnished the confirmation from all the parents before the education officer stating that the donation given by them was voluntary. He further submitted that the money received by way of donation was duly recorded and utilised for the purpose of purchase of land from SMC and construction of building thereon. The above building is utilised for running of the school. Thus, the donation is utilised for educational purposes and the allegation of the AO that the assessee has undisclosed income and, therefore, it is not existing for educ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not for the purpose of profit. Some surplus which arose was incidental to the educational activities and such amount was also utilised for the educational purposes. 30. We have carefully considered the arguments of both the parties and perused the material placed before us. In para 23 above, we have referred to the decision of the Hon'ble jurisdictional High Court in the case of N.R. Paper Board Ltd., wherein their lordships have held that under Chapter XIV-B, the AO has to determine the undisclosed income of the block period and not the total income of the previous year which is required to be assessed in the regular assessment under s. 143(3). In para 23 above, we have also extracted the definition of undisclosed income under s. 158B(b). The definition of undisclosed income was enlarged by the Finance Act, 2002, with retrospective effect from 1st July, 1995. By the above amendment the following words were included in the definition of undisclosed income: "or any expense, deduction or allowance claimed under this Act which is found to be false". Thus, after the amendment by the Finance Act, 2002, while making the assessment of undisclosed income, the AO may disallow any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed by the Revenue. In the block assessment, exemption can be denied only if it is found on the basis of material found at the time of search that the claim of the assessee for exemption under s. 10(22) is false. In the case under consideration before us, the Revenue has not been able to prove that the claim of exemption under s. 10(22) by the assessee was false. It is running an educational institution is not in dispute. In the regular assessment for which return was filed prior to the search, the Revenue has accepted that it is existing solely for educational purposes and not for the purpose of profit. In the block assessment, the AO is taking a different view than what was taken in the regular assessment and has come to the conclusion that it is existing for the purpose of profit. However, in our opinion, mere change of opinion will not bring the assessee's case within the ambit of "false" claim by the assessee. The Revenue has alleged that the assessee has charged compulsory donation. However, on the enquiry conducted by the Education Department this allegation is not found to be correct. It was also pointed out by the learned counsel that the assessee-trust is also registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration Act. Apart from this monitoring mechanism, the school is recognised by the Board of Secondary Education, Gujarat State, and is required to abide by the rules and regulations in the matter of fees structure as well fulfilling all the other requisites concerning the organisational infrastructure of the institution. From the facts on record, it is evidently clear that accounts of the school are being audited from year to year and audit reports along with the statement of accounts are duly filed with the returns of income by the assessee-trust from year to year. No allegations of embezzlement or misappropriation of funds by the trustees or principal appear to have been made either by the Charity Commissioner of by the Registrar of Societies. With regard to the veracity of the accounts also, audit reports prepared by the auditors do not bring out any such misappropriation on the part of the management. Regarding the reasons cited by the AO in support of denial of exemption, we feel that the block assessment order abounds in glaring contradictions and inconsistencies which directly impinge upon the correctness of the reasoning adopted by the AO. On the one hand, the AO records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., to allow exemption under s. 11 in the years in which it is allowed in regular assessments of such years. XVII. Regarding addition of Rs. 3,31,250 for asst. yr. 1997-98. 32. At the time of hearing before us, it is submitted by the leaned counsel that the above income was as per P L a/c enclosed along with the return of income for asst. yr. 1997-98 which was filed prior to the search. Therefore, it cannot be treated as undisclosed income. 33. The learned Departmental Representative, on the other hand, stated that in the assessment for asst. yr. 1997-98, the above income was treated as exempt under s. 10(22). Since in the block assessment, the exemption under s. 10(22) is denied, therefore, the addition is made for the above income. 34. We have carefully considered the arguments of both the parties and perused the material placed before us. While disposing of the ground with regard to exemption under s. 10(22), we have already concluded that if in the regular assessment exemption under s. 10(22) is allowed, the same cannot be withdrawn in the block period unless the claim of the assessee is found to be false. We have also come to the conclusion that the Revenue has not ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
