ACIT Range-II, Faridabad v. Idicula Trust Society, Faridabad

ITA 2620/DEL/2008 | 2004-2005
Pronouncement Date: 21-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 262020114 RSA 2008
Bench Delhi
Appeal Number ITA 2620/DEL/2008
Duration Of Justice 1 year(s) 9 month(s) 16 day(s)
Appellant ACIT Range-II, Faridabad
Respondent Idicula Trust Society, Faridabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 21-05-2010
Date Of Final Hearing 04-03-2010
Next Hearing Date 04-03-2010
Assessment Year 2004-2005
Appeal Filed On 04-08-2008
Judgment Text
ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH C: NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER & SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NOS. 1769 2620 2621/DEL/08 & ITA NO. 4484/DEL/09 A.YRS. : 2003-04 2004-05 2005-06 & 2006-07 ASSTT. COMMISSIONER OF INCOME TAX VS. M/S IDICU LA TRUST SOCIETY RANGE-II BLOCK-I-B CGO COMPLEX M.C.F. 1827 S ANJAY MOHALLA NH-4 FARIDABAD SECTOR-23 FARIDABAD [PAN: AAATI-0524-P] (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPAT ADV. & SH. A.S. NAGPA L FCA. DEPARTMENT BY : SHRI D.N. KAR C.I.T.(DR) O R D E R PER BENCH THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESS MENT YEAR 2003-04 TO 2006-07. THE APPEALS HAVE BEEN CONSOLIDATED AND PO STED TOGETHER FOR HEARING. SINCE THE ISSUES INVOLVED ARE COMMON AND CONNECTED AND THE APPEALS WERE HEARD TOGETHER. THESE ARE BEING CONSOLIDATED AND DI SPOSED OFF TOGETHER BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. ONE OF THE COMMON ISSUE RAISED PERTAINS TO DE LETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF REMUNE RATION PAID TO THE MEMBERS OF THE TRUST. 3. DURING THE COURSE OF ASSESSMENT OF ASSESSMENT Y EAR 2003-04 THE ASSESSING OFFICER NOTED THAT PAYMENTS HAVE BEEN MA DE TO THE FOLLOWING PERSONS SPECIFIED U/S 40A(2B). ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 2 SALARY TO T.I. JOHN PRESIDENT OF GOVERNING BODY RS. 6 84 000/- SALARY TO JOSEPH JOHN SECRETARY OF GOVERNING BODY RS. 4 94 500/- SALARY TO MRS. A. JOHN MEMBER OF GOVERNMENT BODY R S. 5 88 000/- RS. 17 66 500/- IN ADDITION SALARY TO MRS. S. JOSEPH (RELATIVE OF MEMBER) HAS ALSO BEEN GIVEN. RS. 3 29 760/- TOTAL RS. 20 96 260/- 3.1 ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIF Y THE REASONABLENESS OF THESE PAYMENTS. HOWEVER THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD NOT SUBMITTED ANY RESPONSE. ASSESSING OFFICER WAS OF THE OPINION THAT PAYMENT TO THE ABOVE PERSONS ARE CLEARLY COVERED BY CLAUSES (CC) AND (D) OF SECTION 13. ASSESSING OFFICER ALSO OBSERVED THAT ITS MOA AND R ULES DO NOT CONTAIN ANY TERM FOR PAYMENT OF ABOVE AMOUNT TO THESE PERSONS A ND ASSESSEE HAS ALSO FAILED TO FURNISH ANY EVIDENCE WITH REGARD TO SERVI CES RENDERED BY THESE PERSONS. ASSESSING OFFICER WAS OF THE OPINION T HAT HENCE THE ASSESSE HAS BECOME INELIGIBLE FOR BENEFIT OF EXEMPTION U/S 11 AND 12 AND THE ASSESSEEMENT WAS BEING COMPLETED BY TREATING THE AS SESSEE AS A NORMAL BUSINESS ENTITY. ASSESSING OFFICER FURTHER HELD T HAT PRESUMING THAT THEY HAVE RENDERED SOME SERVICES FOR FUNCTIONING OF THE SOCI ETY 1/3 RD OF THE ABOVE AMOUNT TOTALING TO RS. 698753/- IS ALLOWED AND THE BALANCE IS DISALLOWED U/S 40A(2B AMOUNTING TO RS. 1397506/-. 4. FOR THE ASSESSMENT YEAR 2004-05 THE ASSESSING OF FICER OBSERVED THAT ASSESSEE HAS PAID A HUGE SUM OF RS. 1788000/- TO TH E FOLLOWING PERSONS AS MANAGERIAL REMUNERATION:- SALARY TO T.I. JOHN SECRETARY GOVERNING BODY R S. 6 84 000/- SALARY TO JOSEPH JOHN MEMBER OF GOVERNING BODY R S. 5 16 000/- SALARY TO MRS. A. JOHN MEMBER OF GOVERNMENT BODY RS. 5 88 000/- RS. 17 88 000/- ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 3 IN ADDITION SALARY TO MRS. S. JOSEPH (RELATIVE OF MEMBER) HAS ALSO BEEN GIVEN. RS. 3 54 000/- TOTAL RS. 21 94 000/- 4.1 ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTI FY THE ABOVE PAYMENTS. ASSESSEE SUBMITTED THE DETAILS OF THE PERSONS RECE IVING THE SALARY INCLUDING THEIR JOB PROFILE EXPERIENCE AND OTHER BIO-DATA. CONSIDERING THE ABOVE ASSESSING OFFICER REFERRED TO THE PROVISION OF SEC TION 13(1)(C). ASSESSING OFFICER ALSO FOUND THAT SOCIETY RULES DO NOT CONTAIN ANY P ROVISION OF PAYMENT TO THEM. ASSESSING OFFICER CONSIDERING THE ASSESSEES SUBMI SSION AND MADE COMPARATIVE ANALYSIS AS UNDER:- ON GOING THROUGH THE DETAILS FOLLOWING FACTS EM ERGE:- I) THAT ALL THE ABOVE PERSONS ARE MEMBERS OF ONE FAMILY. SHRI TI JOHN IS THE HUSBAND OF MRS. A. JOHN FATHER OF SHRI JOSEPH JOHN AND FATHER IN LAW OF MRS. SONIA JOSEPH; II) THE TWO MEMBERS OF SECRETARY OF GOVERNING BODY AND THEIR RELATIVE HAVE BEEN EMPLOYED ALONGWITH THE SECRETARY HIMSELF APPARENTLY BECAUSE ONE PERSON NAMELY SHRI TI JOHN IS A SECRE TARY. III) NO EVIDENCE ON RECORD HAS BEEN BROUGHT ON R ECORD AS TO WHAT SERVICES INDEED HAVE BEEN RENDERED BY THEM. NOT E VEN THEIR APPOINTMENT LETTERS AND TERMS OF EMPLOYMENT HAVE BE EN GIVEN. A DETOUR THEIR PROFILES REVEALS THAT ALL OF THEM ARE ALLEGEDLY CARRYING OUT ALMOST THE SAME JOBS; IV) IT WAS INFORMED THAT SHRI T.I. JOHN IS GRADUATE AND MRS. A. JOHN IS AN INTERMEDIATE. THESE STATEMENTS REMAIN UNCORROBO RATED AS NO EVIDENCE HAS BEEN ADDUCED; ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 4 V) IT IS STATED THAT SALARIES PAID TO HEM ARE COMPA RABLE WITH THAT OF PRINCIPAL AND VICE PRINCIPAL. HOWEVER A BRIEF LOOK AT COMPARATIVE DATA WOULD SHOW THAT THIS IS NOT THE CASE: STAFF SALARY I) SHRI DAVINDER SINGH PRINCIPAL : RS. 29 927/- P.M. II) SHRI S.K YOUNG PRINCIPAL : RS. 29 000/- P.M. III) SHRI R. MATTOO VICE PRINCIPAL : RS. 19 765/- P.M . IV) SMT. SADHANA SHARMA PRINCIPAL :RS. 20 358/- P.M. ON COMPARISON THE SALARY DRAWN BY THE MEMBERS AND R ELATIVES ARE AS UNDER:- 1. SH. T.I. JOHN (SECRETARY) : RS. 57 000/- PER MONT H 2. SMT. A. JOHN MEMBER : RS. 49 000/- PER MONTH 3. SH. JOHESF JOHN MEMBER : RS. 43 000/- PER MONTH 4. SMT. SONIA JOSEPH : RS. 29 500/- PER MONTH VI) SHRI JOSEPH JOHN DID HIS GRADUATION IN 1997 AND MRS. SONIA DID HER GRADATION IN 1998. VII) IT CAN BE CONTENDED THAT THE SALARIES OF THESE PERSONS HAVE GRADUALLY INCREASED OVER A PERIOD OF TIME. HOWEVER ON EXAMINING THE PAST RECORDS THE FOLLOWING POSITION EMERGES: A.Y. 2003-04 RS. 17 66 500/- A.Y. 2002-03 RS. 16 44 000/- A.Y. 2001-02 RS. 16 44 000/- THE ABOVE FIGURES DO NOT INCLUDE THE REMUNERATION PAID TO MRS. SONIA JOSEPH. IN A.Y. 2003-04 SHRI JOSEPH JOHN WAS PAID RS. 4 94 500/- @ RS. 41 208/- PER MONTH AS COMPARED TO RS. 43 000/- ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 5 P.M. NOW. THOUGH NO BREAK OF A.Y. 2002-03 AND 200 1-02 ARE AVAILABLE {CASES COMPLETED U/S 143(1)} YET KEEPING IN VIEW THE ABOVE GROSS FIGURES IT IS APPARENT THAT NOT MUCH CHANGE HAS TAKEN PLACE SINCE A.Y. 2001-02. THIS ALSO LEADS TO THE CONCLUSION THAT RIGHT FROM THE BEGINNING SH. JOSEPH JOHN IS D ERIVING HIGH REMUNERATION FROM THE ASSESSEE AND THE PRESENT LEVE L OF RS. 43 000/- PER MONTH IS NOT A GRADUAL EVOLUTIONARY PR OCESS EVENLY SPREAD OVER A PERIOD OF TIME BUT A CONGENITAL ATT RIBUTE OF ENTRY OF SHRI JOSEPH INTO EMPLOYMENT WITH ASSESSEE. THE I NFERENCE THAT THE SOCIETY IS BEING RUN WITH A PROFIT MOTIVE IS T HEREFORE INEVITABLE. 4.2 THE ABOVE FACTS CLEARLY SHOW THAT THE PAYMENTS MADE TO THE SPECIFIED PERSONS ARE NOT COMMENSURATE TO THEIR QUALIFICATIO N AND EXPERIENCE AND ALSO SERVICES RENDERED BY THEM. IT CAN BE CONTENDED AND IT WAS ARGUED AS WELL THAT AS COMPARED TO PRINCIPALS AND TEACHERS THESE PERSON S RENDERED MORE SERVICE BY MANAGING FIVE SCHOOLS. WHILE THIS CONTENTION TO S OME EXTENT MIGHT STAND EXPLAINED IN THE CASE OF SHRI T.I. JOHN (ASSOCIATED WITH SOCIETY SINCE LONG) IN RESPECT OF OTHER PERSONS THE FACTS AVAILABLE EITHER CONTRADICT THIS OR DO NOT ESTABLISH THIS. THUS AS PER PROFILE OF SHRI JOSE PH JOHN (IF TAKEN AT FACE VALUE) HE WORKED ONLY FOR SECTOR 7 SCHOOL FARIDA BAD. HIS WORKING EXPERIENCE IS STATED TO BE OF TEN YEARS WHEREAS HE GRADUATED ONLY IN 1997 AND AS ON 31.3.2004 COULD HAVE EXPERIENCE OF AT THE MOST OF SEVEN YEARS. SIMILARLY IN RESPECT OF MRS. JOSEPH JOHN (DRAWING A SALARY EQUI PMENT TO PRINCIPAL IN SOME CASES IT IS MORE THAN PRINCIPALS OF OTHER SCH OOLS RUN BY ASSESSEE) NO SUCH DETAILS HAVE BEEN FURNISHED TO JUSTIFY HER HA NDSOME SALARY. THEREFORE THE ONLY INFERENCE THAT CAN BE DRAWN FROM THIS IS T HAT THE ASSESSEE SOCIETY IS BEING RUN WITH PROFIT MOTIVE AND ITS GOVERNING BODY MEMBERS ARE BEING CONFERRED WITH BENEFITS NOT LEGITIMATELY DUE TO THE M. ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 6 4.3 ASSESSING OFFICER PROCEEDED TO HOLD THAT IN THESE CIRCUMSTANCES THEIR REMUNERATION PAID TO THEM CANNOT BE TERMED AS REASO NABLE KEEPING IN VIEW THE PROVISION OF SECTION 40A(2B). IN THE LAST ASSESSME NT YEAR COMPLETED UNDER SECTION 144 2/3 RD OF THE PAYMENTS MADE TO THESE PERSONS WERE DISALLO WED U/S 40A(2B). HOWEVER IN THIS YEAR SOME DETAILS AND IND IRECT EVIDENCES IN RESPECT OF SERVICES RENDERED BY SHRI T.I. JOHN HAVE BEEN FILED . HOWEVER THE CLAIMS IN RESPECT OF REMUNERATION TO OTHER PERSONS HAVE NOT B EEN JUSTIFIED. THEREFORE 2/3 RD OF THE EXPENDITURE AMOUNTING TO RS. 15 10 000/- IN CURRED ON THE REMUNERATION OF OTHER THREE PERSONS IS DISALLOWED U /S 40A(2B. I AM ALSO SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURA TE PARTICULARS OF INCOME. THEREFORE PENALTY PROCEEDINGS UNDER SECTION 271(1) (C) ARE SEPARATELY INITIATED. 5. FOR ASSESSMENT YEAR 2005-06 ASSESSING OFFICER C ONSIDERED THAT HUGE SUM OF RS. 24 60 000/- WAS PAID TO THE FOLLOWING PE RSONS AS MANAGERIAL REMUNERATION:- SALARY TO T.I. JOHN SECRETARY GOVERNING BODY R S. 7 20 000/- SALARY TO JOSEPH JOHN MEMBER OF GOVERNING BODY R S. 6 00 000/- SALARY TO MRS. A. JOHN MEMBER OF GOVERNMENT BODY RS. 6 60 000/- RS. 19 80 000/- IN ADDITION SALARY TO MRS. S. JOSEPH (RELATIVE OF MEMBER) HAS ALSO BEEN GIVEN. RS. 4 80 000/- TOTAL RS. 24 60 000/- 5.1 ON THE SAME REASON AS APPLICABLE TO THE ASSESS MENT YEAR 2004-05 ASSESSING OFFICER HOLD THAT 2/3 RD OF THE EXPENDITURE AMOUNTING TO RS. 17 40 000/- INCURRED ON THE REMUNERATION OF THREE PERSONS OTHER THAN SHRI T.I. JOHN. HE DISALLOWED U/S 40A(2B) I.E RS. 11 60 000/-. 6. FOR ASSESSMENT YEAR 2006-07 THE ASSESSING OFFICE R OBSERVED THAT A HUGE SUM OF RS. 27 36 000/- HAS BEEN PAID TO THE FO LLOWING MANAGERIAL PERSONS AS REMUNERATION:- SALARY TO T.I. JOHN SECRETARY GOVERNING BODY R S. 8 16 000/- SALARY TO JOSEPH JOHN MEMBER OF GOVERNING BODY R S. 6 60 000/- ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 7 SALARY TO MRS. A. JOHN MEMBER OF GOVERNMENT BODY RS. 7 20 000/- SALARY TO MRS. SONIA JOSEPH MEMBER OF GOVERNING BODY RS. 5 40 000/- TOTAL RS. 27 36 000/- 6.1 ON THE LINE OF THE SAME REASONING AND DISCUSSIO N AS IN THE EARLIER YEARS ASSESSING OFFICER HELD AS UNDER:- IN THESE CIRCUMSTANCES THEIR REMUNERATION PAID TO THEM CANNOT BE TERMED AS REASONABLE KEEPING IN VIEW THE PROVISION OF SECT ION 40A(2B). IN THE ASSESSMENT YEAR 2003-04 COMPLETED UNDER SECTION 144 2/3 RD OF THE PAYMENTS MADE TO THESE PERSONS WERE DISALLOWED U/S 40A(2B). HOWEVER IN ASSESSMENT YEAR 2004-05 SOME DETAILS AND INDIRE CT EVIDENCES IN RESPECT OF SERVICES RENDERED BY SHRI T.I. JOHN HAVE BEEN FILED. IN THE A.T. 2005-06 THE ASSESSEE TRUST HAS INCREASED THE SALARY OF ITS TRUSTEES/ MEMBERS BY 70%. HOWEVER THE CLAIMS IN RESPECT OF REMUNERATION TO OTHER PERSONS HAD NOT BEEN JUSTIFIED. THE POSITION IS T HE SAME IN THIS ASSESSMENT YEAR TOO. THEREFORE 2/3 RD OF THE EXPENDITURE AMOUNTING TO RS. 27 36 000/- INCURRED ON THE REMUNERATION OF OTH ER FOUR PERSONS IS DISALLOWED U/S 40A(2B) I.E. RS. 18 .24 000/-. I AM ALSO SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF I NCOME. THEREFORE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE SEP ARATELY INITIATED. 7. AGAINST THE ABOVE ORDER THE ASSESSING APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 8. FOR THE ASSESSMENT YEAR 2003-04 LD. LD. COMMIS SIONER OF INCOME TAX (APPEALS) ELABORATELY CONSIDERED THE ISSUE AND HEL D THAT ASSESSING OFFICER HAS NOT BEEN ABLE TO MAKE OUT THE CASE FOR THE REVENUE BY BRINGING OUT ANY NEW FACTS OR FINDINGS AGAINST THE ASESSEE. HE OBSERVE D THAT ASSESSING OFFICER HAS NOT PROPERLY GONE INTO THE EARLIER ASSESSMENT RECOR DS WHICH HAVE BEEN TAKEN INTO ACCOUNT BY FRAMING THE ASSESSMENT ON THE BASI S OF THE MATERIAL AVAILABLE ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 8 ON RECORD. HE FURTHER OBSERVED THAT ASSESSING OFF ICER HAS TREATED THE CHARITABLE INSTITUTION AS AOP ON THE ONE OF THE FOL LOWING GROUNDS. THE REMUNERATION PAID TO THE FOLLOWING EMPLOYEES WAS E XCESSIVE DURING THE YEAR UNDER CONSIDERATION:- I) MR. T.I. JOHN PRESIDENT OF GOVERNING BODY AT RS . 6 84 000/- OUT OF TOTAL SALARY PAID AT RS. 1 88 96 491/-. II) MRS. A. JOHN MEMBER OF GOVERNING BODY AT RS. 5 88 000/- III) MR. JOSEPH JOHN SECRETARY TO GOVERNING BODY AT RS. 4 94 500/-. IV) SMT. SONIA JOSEPH (RELATIVE OF MEMBER) AT RS. 3 29 760/-. 8.1 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PR OCEEDED TO HOLD AS UNDER:- I HAVE ENQUIRED INTO THE GENUINENESS OF THE REMUN ERATION PAID TO THE ABOVE TRUSTEE MEMBERS FROM SR. 1 TO 3 AND 1 FAMILY MEMBER AT SR. NO. 4 FROM THE DATA SUPPLIED BY THE LD. AUTHORISED REPRE SENTATIVE IN HIS WRITTEN SUBMISSIONS FOR THE FINANCIAL YEAR 2000-01 2001-02 AND 2002-03 FROM WHICH ;IT IS QUITE EVIDENT THAT COMPARED TO TH E EARLIER YEARS THE REMUNERATION HAS BEEN MORE OR LESS THE SAME AND IF THERE IS ANY INCREASE IN THE REMUNERATION OF MRS. S. JOSEPH IT IS DUE TO THE SERVICES RENDERED TO THE INSTITUTION IN THE DUAL CAPACITY OF A FULL TIME TEACHER AND ADMINISTRATOR THE RESPONSIBILITIES OF WHICH ARE INCREASING DAY-BY -DAY. MOREOVER THE ASSESSING OFFICER HAS POINTED OUT ONLY A NEEDLE O F SUSPICION TOWARDS THE MANAGERIAL REMUNERATION TO THE ABOVE PERSONS SPECI FIED U/S 13(3) OF THE IT ACT WHICH HAS BEEN CONFIRMED BY THE AUDITORS IN THE AUDIT REPORT IN FORM 3CD DATED 15.3.2003 BUT THE ASSESSING OFFICE R HAS NOT GIVEN A PROPER BASIS OR VALIDITY OF REMUNERATION FOR RESTRI CTING IT TO THE EXTENT OF RS. 6 98 753/- BEING 1/3 RD ALLOWABLE WORKED OUT BY HIM OUT OF TOTAL OF RS. 20 96 260/- ONLY AND DISALLOWING THE BALANCE AT RS. 13 97 506/- U/S ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 9 40A(2)(B) OF THE IT ACT AS IS EVIDENT FROM PARA 4 OF THE ASSESSMENT ORDER WHICH IS PATENTLY MERELY ON THE PRESUMPTION THAT T HE ABOVE PERSONS HAD RENDERED SOME SERVICES FOR THE FUNCTIONING OF THE S OCIETY. THE DISALLOWANCE HAS BEEN PURELY ON AN ARBITRARY BASIS WITHOUT BRINGING RATIONALE OR FINDINGS BY CONSULTING THE PREVIOUS AS SESSMENT RECORDS OF THE APPELLANT WHICH HE WAS REQUIRED TO IN ORDER TO M AKE AN ASSESSMENT ON THE BASIS OF MATERIAL AVAILABLE ON RECORDS. HE HAS JUST RESORTED TO THE EXPLANATORY STANDS OF THE SECTION 13(1)(3) AND 13(1 )(C) AND BRINGING THE ABOVE PERSONS UNDER THE CLAUSES (CC) AND (D) OF SEC TION 13(3) WITHOUT CONSULTING RULES AND REGULATIONS OF THE APPELLANT S OCIETY ALREADY AVAILABLE ON THE ASSESSMENT RECORDS THE TERMS AND RULES OF P AYMENTS OF THE ABOVE MENTIONED PERSONS BEING ALREADY AVAILABLE ON THE AS SESSMENT RECORDS WHICH IN THE YEAR UNDER CONSIDERATION HAVE NOT BEE N CONFRONTED WITH THE APPELLANT TO THE ASSESSING OFFICER MAKING DISALLO WANCE U/S 13(2)(C) OF THE IT ACT 1961. MOREOVER IN THE APPELLATE PROCEEDINGS NOW THE LD. AUTHORISED REPRESENTATIVES COMPARATIVE CHART OF THE SALARIES/ REMUNERATION FOR THE LAST FEW YEARS OF THE ABOVE PERSONS IN DISPUTE AND THE CASE OF HOLY CHILD SCHOOL FARIDABAD REFERRED TO BY HIM HAS BEEN CON FRONTED WITH THE ASSESSING OFFICER ON 13.2.2008 WHEN HE HAS STATED THAT THE TOTAL FACTS RELATING TO THE ASSESSMENT OF HOLY CHILD SCHOOL FA RIDABAD ASSESSED U/S 143(3) AND THE COMPARATIVE DETAILS BY THE LD. AUTHO RISED REPRESENTATIVE WERE FOUND TO BE AS PER THE RECORDS WHERE THESE SAL ARIES ON THE SAME CIRCUMSTANCES HAVE BEEN ACCEPTED. THE ASSESSING OFF ICER HAD NOTHING TO REBUT AS THERE IS NO MATERIAL ON RECORD REGARDING THE COMPARATIVE REMUNERATION QUOTED. 8.2 LD. COMMISSIONER OF INCOME TAX (APPEALS) OBSERV ED THAT HE FOUND THAT THE ARGUMENTS AGAINST THE DISALLOWANCE BY THE ASSES SING OFFICER WERE QUITE COGENT AND VERIFIABLE. HE OBSERVED THAT REQUISITE REMUNERATION HAVE BEEN DULY ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 10 DISCLOSED IN THE RETURN OF INCOME OF THE ABOVE PERS ONS. HE REFERRED TO THE FOLLOWING CASES LAWS :- I) C.I.T. VS. FEDERATION OF INDIAN CHAMBERS OF COMM ERCE AND INDUSTRY - 130 ITR 136 (SC) II) C.I.T. VS. TATA STEEL CHARITABLE TRUST 203 IT R 764 (PAT.) III) OIL NATURAL GAS CO. VS. ADDL. C.I.T. (1999) 69 ITD 69 (DELHI E BENCH ITAT ) IV) C.I.T. VS. EDWARD KEVENDER (P) LTD. (1978) 115 IT R 149 (SC). 8.3 LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHE R REFEREED TO THE CASE OF HOLY CHILD SCHOOL FARIDABAD RELIED BY THE LD. AUTH ORISED REPRESENTATIVE THAT THE SAME ASSESSING OFFICER HAS ALLOWED THE SALARY OF THREE PERSONS AT RS. 8 60 206/- U/S 13(3) OF THE IT ACT FOR THE ASSESSM ENT YEAR 2004-05. THEREAFTER LD. COMMISSIONER OF INCOME TAX (APPEALS) CONCLUDED AS UNDER:- ALL THE ABOVE FACTS AND CIRCUMSTANCED GO TO PROVE THAT THE ASSESSING OFFICER WAS NOT AT ALL JUSTIFIED TO MAKE AN ARBITR ARY DISALLOWANCE OUT OF THE SALARY OF RS. 20 96 260/- ALLOWED TO THE ABOVE 4 PERSONS WHEN THE GROSS RECEIPTS WERE MORE THAN RS. 4 CRORES. AGAIN T HE ASSESSING OFFICER HAS NOT EXAMINED THE OBJECTS O THE TRUST AS PER THE MEMORANDUM AND RULES AND REGULATIONS ALREADY LYING ON THE ASSE SSMENT RECORDS ON THE BASIS OF WHICH REGISTRATION WAS GRANTED TO THE TRUS T U/S 12A OF THE IT ACT. AGAIN VARIOUS DECISIONS AS RELIED UPON BY THE LD. AUTHORISED REPRESENTATIVE POINT OUT TO THE FACT THAT EVEN IF SOME DISCREPANCIES ARE FOUND IN THE WORKING OF THE TRUST BUT WHICH PRIMARI LY IS WORKING ON THE OBJECTS FOR WHICH IT WAS CREATED THE IDENTITY O F ITS BEING CHARITABLE CANNOT BE DISPUTED. MOREOVER EVEN WHEN AN INSTITUT ION HAS BEEN RECOGNIZED BY THE DEPARTMENT ONLY ON SIMPLE TECHNI CAL MATTER THE INSTITUTION CANNOT BE DISALLOWED TO BE NON-CHARITAB LE INSTITUTION IN THE ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 11 ABSENCE OF ANY PARTICULAR FACT AND FINDING AGAINST THE ASSESSEE. IN THIS CASE AS POINTED OUT ABOVE THE ASSESSING OFFICER HAS SIMPLY RAISED HIS SUSPICIONS ON THE SALARIES TO THE ABOVE 4 PERSONS A ND THEREFORE THE DISALLOWANCE WORKED OUT BY HIM IS PURELY ON SURMISE AND CONJECTURES. THEREFORE ON THESE GROUNDS THE APPELLANT CANNOT B E HELD TO BE A NON- CHARITABLE INSTITUTION AND THEREFORE THE DISALLOWA NCE OF RS. 1;3 97 506/- IS MERITLESS. THE OTHER ARGUMENT OF THE ASSESSING OFFICER IN TR EATING THE APPELLANT TRUST AS A NON-CHARITABLE TRUST IS THAT T HE PRESCRIBED AUDIT REPORT IN FROM NO. 10B WAS NOT SUBMITTED WITH THE RETURN O F INCOME. AS PLEADED BY THE LD. AUTHORISED REPRESENTATIVE ABOVE IT IS NOW JUDICIALLY ESTABLISHED BY THE VARIOUS JUDGEMENTS THAT THE FIL ING OF THE AUDIT REPORT IN FORM NO. 10B IS ONLY SECONDARY AND NOT MANDATORY AN D CAN BE SUBSEQUENTLY FILED OR RECTIFIED. IN ADDITION THE APPELLANT WAS FOLLOWING THE SAME METHOD OF ACCOUNTING AND SUBMITTING THE AU DIT REPORT IN FORM 10B AS IN EARLIER YEARS AND WAS ALLOWED THE STATUS OF THE SOCIETY AS CHARITABLE ONE WITHOUT A MURMUR. THE ASSESSING OFFICER WAS WELL WITHIN HIS RIGHTS TO DISPUTE THE STATUS OF THE INST ITUTION BUT THE REJECTION OF THE STATUS AND TREATING IT AS AOP ON THE ABOVE BASI S BY THE ASSESSING OFFICER IN VIEW OF ABOVE DISCUSSION CANNOT BE SUS TAINED BECAUSE THE STATUS OF THE INSTITUTION AS AN AOP CAN NOT SIMPLY BE DETERMINED SIMPLY ON THE BASIS THAT THE AUDIT REPORT IN FORM 10B WAS NOT SUBMITTED ALONGWITH THE RETURN OF INCOME. IN TOTALITY THEREFORE CONSIDERING ALL THE FACTS AND CIRCUMSTANCES AVAILABLE IN THE INSTANT CASE THE APPELLANT SOCIET Y IS A CHARITABLE INSTITUTION AND THE DISALLOWANCE MADE BY THE ASSESS ING OFFICER U/S 40A(2)(B) WAS UNWARRANTED BEING ARBITRARY AND THER EFORE DESERVES TO BE DELETED. 9. FOR ASSESSMENT YEAR 2004-05 AND 2005-06 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS PASSED A COMMON ORDER. LD . COMMISSIONER OF ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 12 INCOME TAX (APPEALS) PLACED RELIANCE HIS EARLIER OR DER FOR ASSESSMENT YEAR 2003-04. HE FURTHER HELD AS UNDER:- IT IS NOW ASCERTAINED THAT THE MEMBERS IN HONORARY CAPACITY OR OTHERWISE ARE HOLDING THEIR POSITION IN A DUAL CAPACITY. AS HONORARY SECRETARY OR MEMBERS OF THE TRUST THEY ARE NOT PAID ANYTHING BY THE TRUST. THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THE SALARY OF T.I. JOHN WHO IS HONORARY SECRETARY AS IT EVIDENT FROM THE ASSESSME NT ORDERS FOR THE A.Y. 2004-05 AND 2005-06. MEMBERS AND SECRETARY ARE PAI D FOR THEIR SERVICES AS TEACHERS IN THE CAPACITY OF EMPLOYER AND EMPLO YED RELATIONSHIP FOR SERVICES RENDERED THAT IS WHY THE REMUNERATION PA ID IS TITLED SALARY AND THE ASSESSING OFFICER HAS HIMSELF HAS ACCEPTE D IT AS SUCH IN HIS ORDERS. THIS IS ALSO EVIDENT FROM THE RETURNS OF I NCOME FILED BY ALL THE PAST MEMBERS WHERE THEY HAVE DISCLOSED SUCH SALARY INC OME AND ALSO THAT THEY HAVE NO OTHER SOURCE OF INCOME EXCEPT THE SALA RY WHICH IS NECESSARY TO SUPPORT OR SUSTAIN THEMSELVES OR THEIR FAMILIES. AND THEY ARE NOT PAID DIRECTLY FROM THE TRUST FUNDS BUT OUT OF THE FEES COLLECTED FROM THE STUDENTS OR OTHER FUNDS WHICH IS AT FIRST ON THEI R RECEIPT CREDITED TO THE TRUST FUND AND AS RESULT TEACHERS MANAGERS FOR T HEIR SERVICES ARE PAID AFTERWARDS. AND THIS IS ONE AS PER THE APPROVAL O F THE BOARD OF THE TRUST WHICH DECIDES THE EXTENT OF AMOUNTS/ SALARY TO BE P AID TO THEM AND THUS PAID AFTER ACCORDINGLY. AS THEY ARE MANAGING TH E ENTIRE SHOW SALARY IS PAID NOT IN THE CAPACITY OF A DESIGNATION IN THE TR UST AS PER ITS RULES AND REGULATIONS BUT IN THE EMPLOYER-EMPLOYEE RELATIONS HIP FOR SERVICES RENDERED. THE ASSESSING OFFICER HAS NOT DOUBTED TH E GENUINENESS OF THE EXPENDITURE PAID TO THEM FOR THE SERVICES RENDERED BY THEM BUT ONLY THEIR REASONABLENESS; HENCE THE CHARITABLE NATURE OF TH E TRUST IS HARDLY IN DOUBT OR IS CHALLENGED BY THE ASSESSING OFFICER. R EGARDING THE EVIDENCES THE LD. AUTHORISED REPRESENTATIVE HAS PLEADED THAT EVERYTHING LIKE BOOKS OF ACCOUNT VOUCHERS SALARY REGISTER WRITTEN SUBM ISSIONS SPECIFYING THE FUNCTIONS AND SERVICES /DUTIES WERE PRODUCED WHICH HAVE NOT BEEN ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 13 DISPUTED BY HIM AS THESE VERY MUCH CONSTITUTE EVID ENCES NOR HE HAS BROUGHT ANYTHING CONTRARY ON RECORD TO PROVE ADVERS ELY AGAINST THE APPELLANT. KEEPING IN VIEW THE ABOVE DETAILED DISCUSSION AND LEGAL OPINION IN THE CASE OF C.I.T. VS. THE 21 ST SOCIETY OF IMMACULATE CONCEPTION (SUPRA) AND MY DECISION IN A.Y. 2003-04 ON THIS ISSUE THE TRUST IS DECLARED TO BE A CHARITABLE TRUST FOR THE ELIGIBILITY OF EXEMPTI ON U/S 11 AND 12 OF THE IT ACT AND ACCORDINGLY THE ADDITIONS OF RS. 10 06 666 /- AND RS. 11 60 000/- WORKED OUT BY THE ASSESSING OFFICER U/S 40A(2B() F OR THESE YEARS RESPECTIVELY STAND DELETED. 10. FOR ASSESSMENT YEAR 2006-07 THE LD. COMMISSION ER OF INCOME TAX (APPEALS) PLACED RELIANCE UPON HIS EARLIER ORDERS A ND ALSO DECISION OF C.I.T. VS. THE 21 ST SOCIETY OF IMMACULATE CONCEPTION IN. AND DELETED THE ADDITION OF RS. 18 24 000/- IMPOSED BY THE ASSESSING OFFICE R. 11. AGAINST THESE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)S THE REVENUE IS IN APPEALS BEFORE US. 12. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. THE BASIC ISSUE BEFORE US IS THE DISALLOWANCE U/S 40A. SECT ION 40A(2)(A) MANDATES AS UNDER:- WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPEC T OF WHICH PAYMENTS HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB-SECTION AND THE ASSESSING OFFICER IS OF OPINI ON THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF T HE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREA SONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 14 13. SECTION 40A(2)(B) READS AS UNDER:- THE PERSONS REFERRED TO IN CLAUSE (A) ARE THE FOL LOWING NAMELY: (I) WHERE THE ASSESSEE IS AN ANY RELATIVE OF THE ASSE SSEE; INDIVIDUAL (II) WHERE THE ASSESSEE IS A ANY DIRECTOR OF THE COMPA NY COMPANY FIRM ASSOCIATION PARTNER OF THE FIRM OR MEMBER OF PERSONS OR HINDU OF THE ASSOCIATION OR FAMILY OR UNDIVIDED FAMILY ANY RELATIVE OF SUCH DIRECTOR PARTNER OR MEMBER; (III) ANY INDIVIDUAL WHO HAS AS SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THE ASSESSEE OR ANY RELATIVE OF SUC H INDIVIDUAL. (IV) A COMPANY FIRM ASSOCIATION OF PERSONS OR HINDU UN DIVIDED FAMILY HAVING A SUBSTANTIAL INTEREST IN THE BUSINESS OR PR OFESSION OF THE ASSESSEE OR ANY DIRECTOR PARTNER OR MEMBER OF SUCH COMPANY FIRM ASSOCIATION OR FAMILY OR ANY RELATIVE OF SUCH DIRE CTOR PARTNER OR MEMBER; (V) A COMPANY FIRM ASSOCIATION OF PERSONS OR HINDU UN DIVIDED FAMILY OF WHICH A DIRECTOR PARTNER OR MEMBER AS THE CASE MAY BE HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THE ASSESSEE; OR ANY DIRECTOR PARTNER OR MEMBER OF SUCH COMPANY FI RM ASSOCIATION OR FAMILY OR ANY RELATIVE OF SUCH DIRECTOR PARTNE R OR MEMBER; (VI) ANY PERSON WHO CARRIES ON A BUSINESS OR PROFESSON - (A) WHERE THE ASSESSEE BEING AN INDIVIDUAL OR ANY REL ATIVE OF SUCH ASSESSEE HAS A SUBSTANTIAL INTEREST IN THE BUSINE SS OR PROFESSION OF THAT PERSON; OR (B) WHERE THE ASSESSEE BEING A COMPANY FIRM ASSOCIATI ON OF PERSONS OR HINDU UNDIVIDED FAMILY OR ANY DIRECTOR OF SUCH COMPANY PARTNER OF SUCH FIRM OR MEMBER OF THE ASSO CIATION OR FAMILY OR ANY RELATIVE OF SUCH DIRECTOR PARTNER OR MEMBER HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THAT PERSON. 14. COMPARATIVE CHART OF THE SALARY PAID TO THE IMP UGNED PERSONS AS TAKEN OUT FROM THE LD. COMMISSIONER OF INCOME TAX (APPEAL )S ORDER IS A SUNDER:- ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 15 FINANCIAL YEAR MR. T.I. JOHN MRS. A. JOHN MR. JOSEPH JOHN MRS. SONIA JOSEPH 2000 - 01 6 24 000/ - 5 40 000/ - 4 80 000/ - 2 70 518/ - 2001 - 02 6 24 000/ - 5 40 000/ - 4 80 000/ - 2 86 740/ - 2002 - 03 6 84 000/ - 5 88 000/ - 4 94 500/ - 3 21 552/ - 2003 - 04 6 84 000/ - 5 88 000/ - 5 16 000/ - 3 63 662/ - 2004 - 05 7 56 000/ - 6 60 000/ - 6 00 000/ - 4 48 794/ - 2005 - 06 8 16 000/ - 7 20 000/ - 6 60 000/ - 5 40 000/ - 15. THE ASSESSEES SUBMISSIONS AS REGARDS THE CREDE NTIALS OF THESE PERSONS REGARDING JUSTIFICATION OF SALARY AS CULLED OUT FRO M ASSESSING OFFICERS ORDER IS AS UNDER:- MANAGER REMUNERATION PAYMENT OF SHRI T.I. JOHN SHRI TI JOHN MANAGER SECTOR-7 & KERALA SCHOOL REMUNERATION RS . 57000/- P.M. JOB PROFILE: SINCE MANY OF THESE ARE COMMON AND OVERLAPPING TO ALL FOR THE SAKE OF THE SAME ARE NOT BEING QUOTED SEPARATELY FOR EVERY INDIVIDUAL: O RECRUITMENT OF TEACHERS AND THEIR TRAINING. O ADMISSION AND POLICY FOR FEES STRUCTURE FOR ALL SC HOOLS. O ACADEMIC AND STUDY PROFILE OF THE SCHOOL. O CO-ORDINATION WITH CBSE BOARD AND THEIR SCHEDULES. O RECOGNITION OF SCHOOL WITH CBSE BOARD AND OTHER GOV ERNMENT BODIES. O TRAINING AND GUIDANCE OF TEACHING STAFF FOR IMPROVE MENT OF OVER ALL EDUCATION OF CHILDREN. O OVER ALL ADMINISTRATION OF THE RUNNING OF SCHOOL. O COORDINATION WITH STATE GOVERNMENT EDUCATIONAL AND OTHER AUTHORITIES. EXPERIENCE : O 40 YEARS EXPERIENCE OF TEACHING LINE. O STARTED CAREER WITH CAMBRIDGE SCHOOL FROM 1962 TO 1965. O EDUCATIONIST AND BOARD MEMBER FOR ENGINEERING COLLE GE AT KERALA. O HIGH EDUCATED PERSON WHO HAS DEVOTED HIS FULL LIFE IN EDUCATION FIELD. REMUNERATION OF RS. 57000/- PER MONTH IS JUSTIFIED FOR THE SERVICES RENDERED TO THE SCHOOL AS FULL TIME EMPLOYEE. HIS C ONTRIBUTION TO THE SCHOOL ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 16 IS LIKE A MAIN PILLAR AND HAS ALSO WORKED WITH SELF -LESS DEVOTION FOR THE UPLIFTMENT OF EDUCATION AMONG STUDENTS IN THE LOW-I NCOME GROUP PART OF THE SOCIETY. MANAGER REMUNERATION PAYMENT OF MRS. A. JOHN. MRS. A. JOHN: MANAGER SECTOR-23 & MIDDLE SCHOOL REMUNERATION RS. 49 000/- P.M. JOB PROFILE: SAME AS IN THE CASE OF MR. T.I. JOHN EXPERIENCE : O 35 YEARS EXPERIENCE OF TEACHING LINE. O STARTED CAREER WITH ST. JOHN SCHOLL IN THE YEAR 19 71. O WORKED IN VARIOUS IN THE SCHOOL HAVE OVER ALL EXPER IENCE OF ADMINISTRATION OF THE SCHOOL IN ALL DEPARTMENTS. REMUNERATION OF RS. 49 000/- PER MONTH IS JUSTIFIED FOR THE SERVICES RENDERED TO THE SCHOOL AS FULL TIME EMPLOYEE. HIS CONTRIBUTION TO THE SCHOOL IS LIKE A SUPPORT PILLAR AND HAS ALSO WORKED WITH SELF-LESS DEVOTION FOR THE UPLIFTMENT OF EDUCATION AMONG STUDENTS IN THE LOW INCOME GROUP PART OF THE SOCIETY. MANAGER REMUNERATION PAYMENT OF SHRI JOSEPH JOHN SH. JOSEPTH JOHN JOINT MANAGER SECTOR-7 REMUNERATION RS. 43 000/- P.M. JOB PROFILE : O COORDINATION WITH CBSE BOARD AND THEIR SCHEDULES. O RECOGNITION OF SCHOOL WITH CBSE BOARD AND OTHER GO VERNMENT BODIES. O MANAGEMENT OF CONSTRUCTION AND INFRASTRUCTURE FACIL ITIES OF SCHOOL. O MANAGEMENT OF FUNDS FROM BANK FOR NEW SCHOOL CONST RUCTION. EXPERIENCE 10 YEARS EXPERIENCE OF TEACHING AND ADMINISTRATION LINE. STARTED CAREER WITH TEACHING WITH SENIOR SECONDARY CLASSES IN ST. JOHN SCHOOL IN SECTOR-7. INFRASTRUCTURE AND LOGISTIC MANAGEMENT OF THE SCHOO L. YOUNG EDUCATED PERSON WHO HAS DEVOTED HIS LIFE FOR THE EDUCATION FIELD. ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 17 REMUNERATION OF RS. 43 000/- PER MONTH IS JUSTIFIED FOR THE SERVICES RENDERED TO THE SCHOOL AS FULL TIME EMPLOYEE. HIS CONTRIBUTION TO THE SCHOOL IS LIKE A MAIN SUPPORT FOR MANAGEMENT OF ALL SCHOOL AND HAS ALSO WORKED WITH SELF-LESS DEVOTION FOR THE UPLIFTMENT OF EDUCA TION AMONG STUDENTS IN THE LOW INCOME GROUP PART OF THE SOCIETY. WITH REGARD TO THE SALARY PAID TO MRS. SONIA JOSEPH IT HAS BEEN INFORMED THAT SHE IS WIFE OF SH. JOSEPH JOHN IS POSTGRADU ATE AND IS WORKING AS FULL TIME TEACHER CUM ADMINISTRATOR AND THEREFORE SALARY OF RS. 29 500/- PAID IS REASONABLE. 16. NOW AS REGARDS THE REMUNERATION TO MR. TI JOHN WE FIND THAT SHRI TI JOHN HAD BEEN ASSOCIATED WITH THE SCHOOL FROM THE V ERY BEGINNING . HE HAS ABOUT 44 YEARS EXPERIENCE IN TEACHING LINE AND HE IS OVERALL INCHARGE OF RUNNING AND ADMINISTRATION OF THE SCHOOL. ASSESSIN G OFFICER FOR A.Y. 2004-05 AND 2005-06 HAS HIMSELF ALLOWED THE REMUNERATION IN FULL. WE FURTHER FIND THAT REMUNERATION WAS ALSO PAID TO HIM IN A.Y. 2001-02 A ND 2002-03 WHICH WAS NOT DISALLOWED BY THE ASSESSING OFFICER. IN THESE C IRCUMSTANCES DISALLOWANCE OF HIS REMUNERATION FOR A.Y. 2003-04 AND 2005-06 IS NO T SUSTAINABLE. UNDER THE CIRCUMSTANCES WE HOLD THAT THERE NO INFIRMITY IN T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE 2 /3 RD DISALLOWANCE MADE BY THE ASSESSING OFFICER IN HIS SALARY FOR THE ASSESS MENT YEAR 2003-04 AND 2005- 06. WE FIND THAT ON THE SAME SET OF FACTS THE ASS ESSING OFFICER CANNOT TAKE CONTRADICTORY VIEWS. HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF C.I.T. VS. DALMIA PROMOTERS DEVELOPERS P LTD. 281 ITR 346 HAS HELD THAT FOR REJECTING THE VIEW TAKEN FOR EARLIER ASSESSMENT YEARS THERE MUS T BE MATERIAL CHANGE IN THE FACT SITUATION OR LAW. WE FIND FURTHER FIND TH AT HONBLE APEX COURT IN 193 ITR 321 IN THE CASE RADHASOAMI SATSAND VS. C.I.T. H AS HELD THAT IN THE ABSENCE OF ANY MATERIAL CHANGE JUSTIFYING THE REVEN UE TO TAKE THE DIFFERENT VIEW OF THE MATTER. REVENUE IS NOT JUSTIFIED IN TAKING DIFFERENT VIEW. 17. NOW WE COME TO THE REMUNERATION PAID TO MRS. A. JOHN. WE FIND THAT THAT THE JOB PROFILE OF MRS. A.JOHN IS SIMILAR TO T HAT OF SHRI TI JOHN. SHE HAS ALSO ASSOCIATED WITH THE SCHOOL FROM THE VERY BEGIN NING AND SHE HAS EXPERIENCE OF 35 YEARS IN TEACHING LINE. SHE IS JOINTLY RESPO NSIBLE SIMILAR TO THAT OF SHRI T ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 18 I JOHN FOR THE SMOOTH RUNNING AND ADMINISTRATION OF THE SCHOOL. HENCE FOR THE SAME REASONING AS THAT OF SHRI TI JOHN WE AFFIRM T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING TH E DISALLOWANCE MADE BY THE ASSESSING OFFICER FOR THE REMUNERATION FOR 2/3 RD FOR ALL THE ASSESSMENT YEARS. 18. NOW WE COME TO THE REMUNERATION PAID TO MR. JOS EPH JOHN AND MRS. SONIA JOSEPH. THE ASSESSEE HAD ONLY SUBMITTED THE JOB PROFILE AND EXPERIENCE OF SHRI JOSEPH JOHN. HE HAS BEEN SAID TO BE A JOI NT MANAGER. HE IS SAID TO HAVE 10 YEARS EXPERIENCE IN TEACHING AND ADMINISTRA TION LINE. AS REGARDS MRS. SONIA JOSEPH IT HAS BEEN CLAIMED THAT SHE IS WIFE OF SHRI JOSEPH JOHN IS A POSTGRADUATE AND IS WORKING FULL TIME TEACHER CUM A DMINISTRATOR. NOW IN THE CASE OF THE ABOVE TWO PERSONS WE FIND THAT YARDSTI CKS AS APPLICABLE TO TI JOHN AND MRS. A. JOHN CANNOT APPLY. SHRI JOSEPH JOHN D ID HIS GRADUATION IN 1997 AND MRS. SONIA JOSEPH DID HER GRADUATION IN 1998. IN OUR CONSIDERED OPINION THEIR REMUNERATION HAS TO BE OF THE SAME LEVEL AS THAT BEING GIVEN TO SENIOR TEACHERS/PRINCIPALS OF THE SCHOOLS. 19. FOR THE ASSESSMENT YEAR 2004-05 THE STAFF SAL ARY AND SENIOR TEACHERS SALARY IS AS UNDER:- I) SHRI DAVINDER SETHI PRINCIPAL : RS. 29 927/- P.M. II) SHRI S.K. YOUNG PRINCIPAL : RS. 29 000/- P.M . III) SHRI R. MATTOO VICE PRINCIPAL : RS. 19 765/ - P.M. IV) SMT. SADHANA SHARMA PRINCIPAL RS. 20 358/- P .M. HENCE IN OUR CONSIDERED OPINION THE SALARY PAID T O MR. JOSEPH JOHN SHOULD NOT EXCEED RS. 30000/-. KEEPING IN MIND TH E DIFFERENCE IN SALARY MAINTAINED BY THE ASSESSEE THE SALARY OF MRS. SO NIA JOSEPH SHOULD NOT EXCEED RS. 20000/- PER MONTH. HENCE WE RESTORE THE DISALLOWANCE TO THE EXTENT AS INDICATED IN THIS REGARD. . 20. ANOTHER ISSUE RAISED FOR THE A.YRS. 2004-05 AND 2005-06 IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT RIGHT IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TRAVEL LING EXPENSES. ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 19 21. ON THIS ISSUE ASSESSING OFFICER HAS MADE THE A DDITION HOLDING AS UNDER:- IT HAS BEEN FOUND THAT IN THE CLAIM OF TRAVELLING EXPENSES THAT SHRI T.I. JOHN AND SHRI JOSEPH JOHN HAVE BEEN PAID STAY CHARGES @ RS. 800/- AND RS. 500/- PER DAY RESPECTIVELY WHEREAS OTHER E MPLOYEES HAVE BEEN PAID @ LESS THEN RS. 100/- PER DAY. KEEPING IN VIEW FACTS AND CIRCUMSTANCES OF THE CLAIM AND DISCUSSION HELD ABOV E 50% OF THE AMOUNT PAID TO SHRI T.I. JOHN IS HELD EXCESSIVE AND IS DI SALLOWED U/S 40A(2B). SHRI T.I. JOHN HAS BEEN PAID RS. 1 65 600/- FOR STA Y OF 207 DAYS. 50% OF THIS COME TO RS. 82 800/-. IT HAS BEEN ALSO BEEN FOUND THAT SHRI JOSEPH JOHN HAS BEEN PAID FOR THIS STAYS AT CHENNAI (14 DAYS) AND KANPUR (2 D AYS). AS STATED ABOVE ASSESSEE IS NOT CARRYING ANY ACTIVITIES AT ANY THES E PLACES. THEREFORE THE EXPENDITURE INCURRED IN CONNECTION IN THESE VISIT S AMOUNTING TO RS. 36 161/- INCLUDING AIR FARE CANNOT BE HELD TO HAV E BEEN INCURRED IN CONNECTION WITH BUSINESS ACTIVITIES. THIS AMOUNT A LONGWITH RS. 82 800/- IS ACCORDINGLY DISALLOWED. 22. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCO ME TAX (APPEALS) DELETED THIS DISALLOWANCE HOLDING THAT THESE ADDITI ONS ARE ARBITRARY AND UNWARRANTED. 23. THE REVENUE IS IN APPEAL BEFORE US. 24. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT TH ESE EXPENSES ARE BOGUS. IN HIS OPINION THESE ARE EXCESSIVE WHEN COMPARED TO RATE ON WHICH THE CHARGES ARE PAID TO THE OTHER EMPLOYEES. ASSESSING OFFICER HAS MADE THE DISALLOWANCE IN A PURELY ARBITRARY MANNER. IT IS NOT THE CASE THA T THE EXPENDITURE IS ABNORMAL OR MORE THAN WHAT COULD NORMALLY BE SPENT ON SUCH STAY. UNDER SUCH CIRCUMSTANCES WE DO NOT SEE ANY REASON TO INTERFER E IN THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ASSESSING O FFICER HAS ALSO PRESUMED ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 20 THAT THERE COULD NOT BE ANY REASON TO VISIT CHENNAI AND KANPUR AS ASSESSEE DOES NOT HAVE SCHOOLS THERE. IN OUR CONSIDERED OPI NION WITHOUT ASKING ANY EXPLANATION REGARDING THE TRAVELLING TO THESE PLACE S NO PRESUMPTION CAN BE DRAWN THAT THESE ARE PLEASURE TRIPS OR PERSONAL TRI PS. UNDER THE CIRCUMSTANCES WE CONFIRM THE ORDER OF THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION ON THIS ACCOUNT . . 25. ANOTHER COMMON ISSUE RAISED FOR A.Y. 2004-05 2005-06 & 2006-07 IS THAT WHETHER LD. COMMISSIONER OF INCOME TAX (APPEA LS) WAS RIGHT IN TECHNICALLY CONFIRMING THE ADDITION ON ACCOUNT O F DONATION AND SALE OF FIXED ASSETS BUT AT THE SAME TIME HOLDING THAT EVEN AFT ER THE ADDITION THE ACCUMULATION IS LESS THAN 15% AND THE APPLICATION O F FUNDS I.E. EXPENDITURE IS MORE THAN 85% FOR THE CHARITABLE PURPOSE WITHOUT ADJUDICATING THE FACTS OF THE CASE ON MERITS. 26. FOR A.Y. 2004-05 2005-06 AND 2006-07 ASSESSIN G OFFICER HAS MADE THE ADDITIONS FOR THE FOLLOWING INCOME AND EXPENDITURE ACCOUNT:- ASSESSMENT YEAR DONATION LOSS ON DISCARDING OF FIXED ASSETS LOSS OF SALE OF CAR 2004 - 05 14 142/ - 35 346/ - - 2005 - 06 16 851/ - 400 000/ - - 2006 - 07 91 950/ - - 73 917/ - 27. FOR A.Y. 2004-05 AND A.Y. 2005-06 BEFORE THE LD . COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE COUNSEL PLEADED THAT THE ABOVE AMOUNTS WERE LEFT TO BE ADDED BACK BY THE ASSESSE THROUGH AN OVE RSIGHT. BUT IN PRINCIPLE HE HAD AGREED THAT THE ADDITION OF THE ASSESSEE IS INC OME OF THE ASSESSEE. LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THER EFORE TECHNICALLY THIS STAND CONFIRMED. IT IS FOUND THAT EVEN IF THEY AR E ADDED TO THE INCOME OF THE ASSESSEE STILL ACCUMULATION IS LESS THAN 15% I.E. APPLICATION OF FUNDS EXPENDITURE IS MORE THAN 85% FOR CHARITABLE PURPOSE . THUS THERE IS NO MATERIAL DIFFERENCE EVEN IF THEY ARE ADDED BACK IS EFFECTED. HOWEVER IN THE ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 21 CONCLUDING PARAGRAPHS LD. COMMISSIONER OF INCOME TA X (APPEALS) INCLUDED THESE AMOUNTS IN A AMOUNT OF RELIEF BEING GIVEN TO THE ASSESSEE. 27.1 LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR A SSESSMENT YEAR 2006-07 HELD AS UNDER:- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AUTHORISED REPRESENTATIVE AND PERUSED THE ORDER OF ASSESSMEN T. AS PER THE LD. AUTHORISED REPRESENTATIVE S CONTENTIONS AND THE AS SESSEE TRUSTS PAST HISTORY IT IS FOUND THAT EVEN IF THE ABOVE AMOUNT IS ADDED TO THE INCOME OF THE APPELLANT BECAUSE ACCUMULATION IS LESS THAN 15% OF FUNDS I.E. EXPENDITURE IS MORE THAN 85% FOR THE CHARITABLE PUR POSES THERE IS NO MATERIAL DIFFERENCE IF SUCH ADDITION IS MADE AS TH E TRUST STANDS ELIGIBLE AS A CHARITABLE INSTITUTION AS PER THE PROVISIONS O F SECTION 11 AND 12 OF THE INCOME TAX ACT 1961. 28. AGAINST THIS ORDER THE REVENUE IS IN APPEAL B EFORE US. 29. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. FOR A.Y. 2004-05 AND 2005-06 WE FIND THAT ASSESSEE HAS HIM SELF ACCEPTED THAT THESE AMOUNTS HAVE TO BE DISALLOWED. LD. COMMISSIONER OF INCOME TAX (APPEALS) IN HIS CONCLUDING PARA HAS INCLUDED THE IMPUGNED AMOUN TS IN RELIEF GRANTED. THIS IS CONTRARY TO ASSESSEE ADMISSION BEFORE THE LD. CO MMISSIONER OF INCOME TAX (APPEALS) ITSELF. ACCORDINGLY WE RESTORE THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. 29.1 FOR A.Y. 2006-07 LD. COMMISSIONER OF INCOME TA X (APPEALS) WAS NOT CORRECT FOR GRANTING RELIEF TO THE ASSESSEE ON THE ABOVE ACCOUNTS WITHOUT CONSIDERING THE MERIT O THE ISSUE. WE FIND THAT AS SESSING OFFICER HAS MADE THE ADDITION AND ASSESSEE HAS AGITATED AGAINST THE SAME BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IT WAS INCUMB ENT UPON THE LD. COMMISSIONER OF INCOME TAX (APPEALS) TO DECIDE THE ISSUE ON MERITS. HENCE WE SET ASIDE THIS ISSUE TO THE FILES OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) TO GIVE A FINDING ON THE ISSUE. ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 22 30. ANOTHER ISSUE RAISED FOR ASSESSMENT YEAR 2006- 07 READS AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS RIGHT ON FACTS AND IN LAW IN ADMITTING THE ADDITIONAL EVIDENCE IN FORM NO. 10B D URING THE COURSE OF APPEAL PROCEEDINGS DISREGARDING THE FACTS THAT FILI NG OF AUDIT REPORT DATED 15.9.2006 IN FORM NO. 10B IN BACK DATE AT TH E APPELLATE STAGE IS AN AFTER THOUGHT AND IS IN CONTRAVENTION OF THE JDU GEMENT OF HONBLE SUPREME COURT IN THE CASE OF C.I.T. VS. NAGPUR HOTE L OWNERS ASSOCIATION (2001) 247 ITR 201 (SC) WHEREIN IT HAS HELD THAT IT IS MANDATORY FOR THE PERSON CLAIMING THE BENEFIT OF SE CTION 11 TO INTIMATE TO THE ASSESSING AUTHORITY THE PARTICULARS REQUIRED U NDER RULE 17 IN FORM NO. 10 OF THE RULES IF DURING THE ASSESSMENT PROCE EDINGS THE ASSESSING OFFICER DOES NOT HAVE THE NECESSARY INFORMATION QU ESTION OF EXCLUDING SUCH INCOME DOES NOT ARISE AT ALL? 31. THE ASSESSING OFFICER IN THIS CASE OBSERVED T HAT IN THE YEAR UNDER CONSIDERATION EXCESS OF AMOUNT OVER EXPENDITURE AM OUNTING TO RS. 5336313/- AS EXEMPT U/S 10(23)(C). THE ASSESSEE WAS REQUIR ED TO FURNISH A COPY OF THE APPROVAL OF THE PRESCRIBED AUTHORITY U/S 10(23C)(VI ) BUT THE ASSESSEE FAILED TO DO SO. A NOTICE WAS ISSUED TO ASSESSEE IN THIS REG ARD. THE ASSESSEE GAVE THE WRONG REPLY THAT ASSESSEE BEING AN EDUCATIONAL /TR UST IS REGISTERED U/S 12A OF THE IT ACT AND COPY OF REGISTRATION LETTER HAS ALRE ADY BEEN SUBMITTED.. IT WAS FURTHER STATED THAT MENTIONING OF WRONG SECTION I.E. 10(23)(C) IN THE RETURN OF INCOME TO CLAIM THE EXEMPTION IS A CLERICAL MISTA KE WHICH MAY KINDLY BE TREATED AS RECTIFIED AS BE READ AS SECTION 11 A OF THE IT ACT. WHEREUPON THE ASSESSING OFFICER REFERRED THE PROVISION OF SECTIO N 12A AND HELD AS UNDER:- AS STATED ABOVE FOR CLAIMING EXEMPTION U/S 11 AN D FOR ENTITLEMENT TO GET REGISTRATION U/S 12A THE ASSESSEE WAS REQUIRED TO FULFILL THE CONDITIONS SPECIFIED IN CLAUSE (B) OF SECTION 12A. THE ASSESSEE WAS REQUIRED TO GET ITS ACCOUNTS AUDITED AND TO FURNISH THE TAX AUDIT REPORT IN ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 23 FORM 10B. AS STATED ABOVE TAX AUDIT REPORT IN THIS CASE HAS BEEN FURNISHED IN FORM NO. 3CB & 3CD AND NOT IN FORM NO. 10B. MOREOVER THE REQUISITE REPORTS HAS ALSO NOT BEEN FURNISHED A LONGWITH THE RETURN OF INCOME. MOREOVER THE SAME HAS NOT BEEN FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDING. ACCORDINGLY THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 10(23)(C) AND ALSO U/S 11(1)(A) OF TH E IT ACT. THEREFORE THE INCOME DECLARED AMOUNTING TO RS. 53 36 310/- IS TA XABLE. 32. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPE ALS) ASSESSEE FILED AN APPLICATION UNDER RULE 46A FOR ADMISSION OF ADDITI ONAL EVIDENCE IN THE SHAPE OF FORM NO. 10-B DATED 15.9.2006. ASSESSING OFFICE R HAD OBJECTED TO THE ADMISSION OF THE SAID ADDITIONAL EVIDENCE. HE CLAIM ED THAT ASSESSEE HAS BEEN GIVEN SUFFICIENT OPPORTUNITY AND OBSERVED THAT ASSE SSEE HAS OBTAINED A REPORT IN FORM NO. 10-B IN BACK DATE AND IS TRYING TO SUBM IT THE SAME AT ALTERNATE STAGE. HE CONTENDED THAT KEEPING IN VIEW ALL THE FACTS THERE IS NO SCOPE OF ACCEPTING THE AUDIT REPORT IN FORM NO. 10-B AFTER T HE COMPLETION OF THE ASSESSMENT. ASESSEE VEHEMENTLY ARGUED AGAINST TH IS OBSERVATION OF THE ASSESSING OFFICER. IT WAS CONTENDED THAT EARLIER ASSESSEES CASE WAS HANDLED BY ANOTHER CONSULTANT AND THE PRESENT CONSULTANT WA S UNDER A BONAFIDE BELIEF THAT SINCE ALL THE AUDIT REPORTS HAVE BEEN SUBMITTE D THE AUDIT REPORT IN FORM NO. 10-B WOULD ALSO HAVE BEEN THERE IN THE RETURN ITSELF. MOREOVER THE ASSESSING OFFICER DID NOT ASK FOR FORM 10-B SPECIF ICALLY IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS CLAIMED THAT ALL TH E SIX AUDIT REPORTS IN FORM NO. 3CB AND 3CD AND ANOTHER REPORT IN FORM NO. 10-B ALL DATED 15.9.2006 WERE VERY MUCH AVAILABLE. CONSIDERING THE ELABORA TE SUBMISSIONS OF THE ASSESSEE THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) ADMITTED THE ADDITIONAL EVIDENCE IN FORM NO. 10-B HOLDING AS UND ER:- I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE ASSESSING OFFICER AND THE COUNTER POINTS MADE BY THE LD. AUTHORISED REPRE SENTATIVE I HAVE ALSO GONE THROUGH THE VARIOUS DOCUMENTS IN THE ASSE SSMENT RECORDS AND ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 24 THE APPELLANTS PAST HISTORY IN THE MATTER OF SUBMI SSION OF REPORT IN FORM NO. 10B. IT IS FOUND THAT WHILE IN THE EARLIER Y EARS FORM NO. 10B WAS FURNISHED DURING THE ASSESSMENT PROCEEDINGS ON TH E REQUISITION OF THE ASSESSING OFFICER DURING THE YEAR UNDER CONTEXT NEITHER THE ASSESSING OFFICER DEMANDED THE FORM NO. 10B WHICH WAS ESSE NTIAL TO EXAMINE THE ASSESSEES CLAIM AS WAS DONE IN THE PREVIOUS Y EARS BY HER PREDECESSOR BUT WAS NOT ENTERTAINED DUE TO A DIFF ERENT POSITION OF FACTS OR LAW NOR THE COUNSEL OF THE ASSESSEE ON HIS OWN FURNISHED THIS FORM NO. 10B AS USUAL IN THE PREVIOUS YEARS. ON THESE F ACTS THE LD. A.R. HAS COGENTLY CORRECTLY REBUTTED THE CONTENTIONS OF THE ASSESSING OFFICER IN NOT ACCEPTING THE ADDITIONAL EVIDENCE IN FORM NO. 10B F ILED AFTER THE CLOSE OF THE ASSESSMENT PROCEEDINGS BY RELYING UPON THE APEX COURTS DECISION IN 247 ITR 2001 (SUPRA) THE FACTS AND CIRCUMSTANCES O F WHICH HAVE BEEN SUFFICIENTLY BROUGHT OUT TO BE DISTINGUISHABLE AND INAPPLICABLE TO THOSE OF THE INSTANT CASE. APART FROM THIS IT IS PRECISELY BECAUSE FORM NO. 10B COULD NOT BE SUBMITTED DURING THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER DUE TO ON E REASON OR THE OTHER THAT THE COUNSEL OF THE ASSESSEE HAS AVAILED OF THE PROVISIONS OF RULE 46A IN THE INTEREST OF EQUITY AND JUSTICE. THE ASSESSI NG OFFICER HAS EXAMINED SUCH ADDITIONAL EVIDENCES UNDER THE PROVI SIONS OF RULE 46A(3) AND HER OBJECTIONS ARE NOT FOUND TO BE CONVINCING O R TENABLE. KEEPING IN VIEW THE FACT THAT THE ISSUE WAS LIVE AND AVAILABLE BEFORE THE ASSESSING OFFICER AND KEEPING IN VIEW THE CIRCUMSTANCES WHIC H PREVENTED THE ASSESSEE TO SUBMIT THIS ADDITIONAL EVIDENCE IN FORM NO. 10B WHICH WAS SO CRUCIAL AND PIVOTAL TO ITS ENTIRE AFFAIRS AS THE CHARITABLE TRUST IN ACCORDANCE WITH MY PLENARY POWERS UNDER THE INCOME TAX ACT 1961 AND THE PROVISIONS OF RULE 46A(4) OF THE SAID RULES I HOLD THAT THE ASSESSEES CASE IS VALIDLY COVERED UNDER THE CLAUSE (C) OF RUL E 46A(1) OF THE INCOME TAX RULES 1962 AND HENCE THE FORM NO. 10B PRODUCE D UNDER THAT ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 25 CLAUSE IN THE APPEAL PROCEEDINGS IS ADMITTED FOR AD JUDICATION OF THE GROUNDS OF APPEAL INVOLVED IN THIS CASE. 33. AGAINST THE ABOVE ORDER THE REVENUE IS IN APP EAL BEFORE US. 34. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. WE FIND THAT A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT ASSESSING OFFICER HAS NOT ASKED FOR THE SAID FORM NO. 10-B DURING THE ASSESSM ENT PROCEEDINGS. IT IS THE ASSESSEES CLAIM THAT AUDIT REPORT IN FORM 10-B WAS VERY MUCH THERE BUT INADVERTENTLY MISSED OUT FROM FILING OF THE RETURN OF THE INCOME. WE FIND THAT IN ASSESSMENT YEAR 2003-04 IN ASSESSMENT ORDER THE ASSESSING OFFICER HAD OBSERVED IN PARA 3 THAT FORM 10-B REQUIRED TO BE FI LED ALONGWITH THE RETURN OF INCOME WAS FURNISHED ONLY ON REPEATED INSISTENCE BY LETTER DATED 28.2.2006. SIMILARLY FOR ASSESSMENT YEAR 2005-06 ASSESSING OF FICER HAD OBSERVED THAT FORM NO. 10-B REQUIRED TO BE FILED ALONGWITH THE R ETURN OF RETURN WAS FURNISHED ONLY BY LETTER DATED 28.11.2006. AND AG AIN SIMILARLY FOR ASSESSMENT YEAR 2004-05 THE ASSESSING OFFICER HAD OBSERVED TH AT FORM NO. 10-B REQUIRED TO BE FILED ALONGWITH THE RETURN WAS FURNISHED ON LY LETTER DATED 28.11.2006. 34.1 IN THIS BACKGROUND WE FIND CONSIDERABLE COGENC Y IN THE ASSESSEES SUBMISSIONS THAT ASSESSING OFFICER HAD NOT GIVEN I NADEQUATE OPPORTUNITIES TO THE ASSESSEE FOR THE PRESENT ASSESSMENT YEAR TO FI LE THE SAID FORM NO. 10-B. AS IN THE PRESENT ASSESSMENT ORDER WE DO NOT FIND AN Y RECORDS AS TO THE ENQUIRY OF THE ASSESSING OFFICER ON THE ISSUE OF FORM NO. 10-B TO THE ASSESSEE. IN THIS REGARD WE REFER TO THE CBDTS CIRCULAR NO. 14 (XL- 35) OF 1955 DATED 11.4.1955 WHICH STATES THAT OFFICER OF THE DEPARTMENT MUST NO T TAKE ADVANTAGE OF THE IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. WE FIND THAT IN THE ASSESSMENT PROCEEDINGS OF ASSESSMENT YEAR 2003-04 2004-05 AND 2005-06 THE ASSESSING OFFICER HAD ASKED FOR THE SAID FORM NO. 10-B. I N THOSE YEAR HE DID NOT MAKE ANY PRESUMPTION THAT THE AUDIT REPORT IN FORM 10-B IS BACK DATED. WE FAIL TO UNDERSTAND AS TO WHY THE SAME ENQUIRY WAS NOT DONE FOR THE ASSESSMENT YEAR 2006-07. UNDER THE CIRCUMSTANCES WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF ITA NOS. 1769 2620 2621/DEL/08 & 4484/DEL/09 A.YRS. 2003-04 2004-05 2005-06 & 2006-07 26 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN ADM ITTING THE SAID ADDITIONAL EVIDENCE IN FORM NO. 10-B DURING THE APPELLATE PROC EEDINGS. HENCE WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) ON THIS ISSUE. 35. ANOTHER COMMON ISSUE RAISED IS THAT LD. COMMISS IONER OF INCOME TAX (APPEALS) WAS NOT RIGHT IN DECLARING THE TRUST TO B E CHARITABLE TRUST FOR THE ELIGIBILITY OF EXEMPTION U/S 11 AND 12 OF THE IT A CT WITHOUT APPRECIATING THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13 OF THE IT ACT AS WELL AS CLAUSE 5 OF MEMORANDUM OF ASSOCIATION OF THE SOCIET Y. A RELATED ISSUE RAISED IS WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) WAS RIGHT IN ALLOWING THE BENEFIT OF EXEMPTION OF THE EXCESS OF INCOME OV ER EXPENDITURE TO THE ASSESSEE U/S 11 OF THE IT ACT. 36. WE FIND THAT THIS ISSUE IS CONSEQUENTIAL TO OUR FINDINGS ON OTHER ISSUES RAISED IN THESE APPEALS. WE HAVE UPHELD A PART OF T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL ACC ORDINGLY COMPUTE THE TOTAL APPLICATION OF FUND FOR CHARITABLE PURPOSE AND DE CIDE ACCORDINGLY. IN THE RESULT THESE APPEALS FILED BY THE REVENUE STAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/05/2010. SD/- SD/- [RAJPAL YADAV) [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 21/05/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. D R ITAT BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES