ACIT, Panipat v. M/s. K.R. Education Society, Panipat

ITA 3678/DEL/2009 | misc
Pronouncement Date: 28-01-2010 | Result: Dismissed

Appeal Details

RSA Number 367820114 RSA 2009
Assessee PAN AAATK8532K
Bench Delhi
Appeal Number ITA 3678/DEL/2009
Duration Of Justice 5 month(s)
Appellant ACIT, Panipat
Respondent M/s. K.R. Education Society, Panipat
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 28-01-2010
Date Of Final Hearing 27-01-2011
Next Hearing Date 27-01-2011
Assessment Year misc
Appeal Filed On 28-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES D: NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER ITA NOS. 3677 & 3678/DEL/2009 ASSESSMENT YEARS: 2005-06 & 2006-07 ACIT VS. K.R. EDUCATION SOCIETY PANIPAT CIRCLE 547 SECTOR-11 & 12 PANIPAT. PART-1 HUDA PANIPAT. AAATK8532K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. RAVI RAMCHANDARAN SR. D R RESPONDENT BY : SHRI VED JAIN C A ORDER PER I.P. BANSAL J.M. BOTH THESE APPEALS ARE FILED BY THE REVENUE. THEY ARE DIRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A) DA TED 19.06.2009 FOR ASSESSMENT YEARS 2005-06 & 06-07. 2. GROUNDS OF APPEAL IN BOTH THE APPEALS ARE IDENTI CAL AND READ AS UNDER: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING EXEMPTION U/S 1 1 OF THE INCOME TAX ACT ITA NOS. 3677 & 3678/D/09 2 DESPITE THE FACTS THAT THE SOCIETY HAS GIVEN INTERE ST FREE ADVANCES AND RENT TO THE PERSONS SPECIFIED U/S 13(3) OF THE INCOME TA X ACT. 2. THAT THE APPELLANT CRAVES FOR PERMISSION TO ADD DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. 3. THE ASSESSEE IS A SOCIETY REGISTERED U/S 12AA OF THE INCOME TAX ACT 1961 (ACT) AND IS RUNNING TWO EDUCATIONAL INST ITUTIONS NAMELY M/S K.R. HINDU HIGH SCHOOL PANIPAT AND M/S GEETA VIDYA MAND IR PUBLIC SCHOOL PANIPAT. THE ASSESSEE HAS CLAIMED EXEMPTION U/S 11 OF THE ACT AND ACCORDINGLY RETURN OF INCOME WAS FILED AT NIL. THE FACTS OF BOTH THE YEARS ARE IDENTICAL. HOWEVER THERE MAY BE SOME DIFFERENCE I N FIGURE. FOR THE SAKE OF CONVENIENCE FACTS FOR A.Y. 2005-06 ARE DISCUSSED. T HE AO FOUND THAT THREE INTEREST FREE ADVANCES WERE GIVEN TO THE FOUNDER ME MBERS THE DETAILS OF WHICH IS AS FOLLOWS: - 1. SH. RAJINDER JAIN RS. 1 00 000/- 2. MRS. ISHA BANSAL RS. 1 75 000/- 3. SH. S.P. BANSAL (HUF) RS. 2 00 000/- 4. IT WAS FOUND BY THE AO THAT CERTAIN RENTS WERE A LSO PAID TO OTHER FOUNDER MEMBERS. THE DETAILS OF WHICH ARE AS UNDER : - 1. SH. NISHANT BANSAL RS. 84 000/- 2. SH. S.P. BANSAL RS. 72 000/- 3. SMT. GEETA BANSAL RS. 48 000/- ITA NOS. 3677 & 3678/D/09 3 5. IT WAS FURTHER FOUND THAT CERTAIN ADVANCES WERE GIVEN TO SUCH MEMBERS I.E. A SUM OF RS. 60 000/- TO SH. ANKUSH BA NSAL AND RS. 72 000/- TO SH. S.P. BANSAL (HUF). IN ADDITION THERETO CERT AIN LAND A CAR AND A MARUTI VAN WERE ALSO PURCHASED. ALL THESE ACTIVITI ES WERE HELD BY THE AO TO BE VIOLATIVE OF THE PROVISION OF SEC. 11 AND 13 OF THE ACT AND THUS HE REJECTED THE CLAIM OF THE ASSESSEE REGARDING EXEMPT ION U/S 11(2) AND THE EXCESS OF INCOME OVER EXPENDITURE FOR BOTH THE SCHO OLS ALONG WITH DONATION WERE BROUGHT TO TAX. IT WAS CLAIMED BY THE ASSESSE E THAT THOSE ADVANCES WERE GIVEN AS ADVANCE FOR PURCHASE OF LAND AND ADVA NCE AGAINST RENT THEREFORE THERE WAS NO VIOLATION OF SEC. 13(1)(C) AND IT WAS CLAIMED THAT RENT HAS BEEN PAID AGAINST THE BUILDING OWNED BY THE MEM BERS IN WHICH THE SCHOOL IS BEING RUN BY THE ASSESSEE AND IT HAS BEEN TAKEN ON RENT. IT WAS CLAIMED THAT THERE WAS NO LAND PURCHASED AND MERELY AN ADVANCE FOR PURCHASE OF LAND WAS GIVEN TO M/S JINDAL POLYTECHNI C PVT. LTD. BUT THE DEAL COULD NOT BE MATERIALIZED AND ADVANCES WERE RECEIVE D BACK IN SUBSEQUENT YEAR. IT WAS SUBMITTED THAT CAR AND VAN WERE PURCH ASED FOR THE USE OF THE TRUST OFFICIALS AND CHILDREN IN CARRYING OUT OBJECT IVES AND ACTIVITIES OF THE SOCIETIES. ON THE BASIS OF THESE ARGUMENTS LD. CIT (A) HAS DELETED THE ADDITION AFTER CALLING THE COMMENTS OF THE AO. LD. CIT(A) HAS ALSO OBSERVED THAT IN THE CASE OF THE ASSESSEE FOR A.Y. 2004-05 THE FACT REGARDING ADVANCES MADE BY THE ASSESSEE TO THE FOUN DER MEMBERS CAME TO THE CONSIDERATION AND THE MATTER WAS DECIDED IN FAVOUR OF ASSESSEE AND IN THIS MANNER HE HAS DELETED ALL THE ADDITIONS MAD E BY THE AO AND HAS ITA NOS. 3677 & 3678/D/09 4 ALLOWED THE EXEMPTION TO THE ASSESSEE U/S 11 & 12 O F THE ACT. THE DEPARTMENT IS AGGRIEVED HENCE IN APPEAL. 6. AT THE OUTSET LD. AR OF THE ASSESSEE HAS PLACED BEFORE US THE ORDER OF TRIBUNAL IN THE CASE OF THE ASSESSEE DATED 11.6. 10 IN RESPECT OF A.Y. 2004-05 VIDE WHICH THE DECISION OF CIT(A) GIVEN IN THE CASE OF ASSESSEE FOR A.Y.2004-05 WAS UPHELD. IT WAS PLEADED BY LD. AR T HAT THE FACTS EXISTING IN 2004-05 AND IN THE PRESENT YEARS ARE IDENTICAL AND THEREFORE THE AFOREMENTIONED DECISION OF TRIBUNAL WILL BE EQUALLY APPLICABLE FOR THESE YEARS. HE HAS ALSO GIVEN A COPY OF THE SAID DECISI ON TO LD. DR. HOWEVER LD. DR RELIED UPON THE ORDER OF AO AND CONTENDED TH AT THE ORDER OF LD. CIT(A) SHOULD BE SET ASIDE AND THAT OF AO BE RESTOR ED. 7. AFTER GOING THROUGH THE SAID ORDER OF THE TRIBUN AL AND AFTER HEARING BOTH THE PARTIES WE FOUND THAT THIS ISSUE IS COVER ED IN FAVOUR OF ASSESSEE BY THE AFOREMENTIONED DECISION OF TRIBUNAL IN ASSES SEES OWN CASE. THE RELEVANT OBSERVATIONS ARE REPRODUCED BELOW: - 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSE D THE MATERIAL ON RECORD. IT IS SEEN THAT THE ADVANCES I N QUESTION WERE OF RS. 1 00 000/- TO SH. RAJINDER JAIN OF RS. 1 75 000/- TO ISHA BANSAL AND OF RS. 2 00 000/- TO SH. S.P. BA NSAL. THE ISSUE IS AS TO WHETHER SUCH ACTION OF THE ASSESSEE CAN BE CONSIDERED TO BE ADVANCEMENT OF LOANS U/S 13(1)(C) OF THE ACT. SECTION 13(1)(C) OF THE ACT PROVIDES INTER A LIA THAT THE INCOME OR THE PROPERTY OF THE TRUST OR AN INSTITUTI ON OR ANY ITA NOS. 3677 & 3678/D/09 5 PART OF SUCH INCOME OR PROPERTY SHALL FOR THE PURP OSES OF THE SECTION BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SUCH SEC. 13(3)( A) IF ANY PART OF THE INCOME OR PROPERTY OF THE TRUST OR INST ITUTION IS OR CONTINUES TO BE LENT TO ANY PERSON REFERRED TO IN SEC. 13(3) FOR ANY PERIOD DURING THE PREVIOUS YEAR WITHOUT OTH ER ADEQUATE SECURITY OR ADEQUATE INTEREST OR BOTH. THE CASE OF THE ASSESSEE HAS REMAINED THAT THE ASSESSEE SOCI ETY INTENDED TO BUY LAND FOR THE PURPOSES OF EXPANDING SCHOOL ACTIVITIES. THE LAND WAS TO BE BOUGHT FROM THESE P ERSONS. ACCORDINGLY DURING THE YEAR THE ASSESSEE SOCIETY PAID THE SAID AMOUNTS TO THE SAID PERSONS AS ADVANCES AGAINS T LAND. COPIES OF THE AGREEMENTS WERE FILED. THE TRANSACTI ONS WERE MADE DURING THE NORMAL COURSE OF THE WORKING OF THE ASSESSEE SOCIETY. THE AO DID NOT SHOW OTHERWISE. THE AO ALSO DID NOT DEMONSTRATE THE AMOUNTS TO HAVE BEEN ADVANCES DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF THE RECIPIENTS. THE ADVANCES WERE NOT LOANS. THEY WER E THE AMOUNTS ADVANCED AGAINST PURCHASE OF LAND. IT WAS THEREFORE THAT NO INTEREST WAS CHARGED THEREON. S ECTION 13(1)(C) OF THE ACT WAS NOT AT ALL ATTRACTED. PERT INENTLY SINCE THE DEAL COULD NOT BE FINALIZED OVER A LONG PERIOD OF TIME THE AGREEMENTS WERE RENEWED FROM TIME TO TIME AS IS AV AILABLE FROM THE COPIES OF AGREEMENTS FILED. THE AO HAD OB JECTED THAT IN THE AUDIT REPORT ATTACHED WITH THE RETURN O F INCOME AGAINST COLUMN NO.5 AS TO WHETHER ANY SHARE SECUR ITY OR OTHER PROPERTY WAS PURCHASED BY OR ON BEHALF OF TH E TRUST/INSTITUTION DURING THE PREVIOUS YEAR FROM ANY SUCH PERSON THE ENTRY WAS NO. TO THIS THE ASSESSEE CLARIFIED THAT THE TRANSACTION OF PURCHASE OF LAND COULD NOT MATERIALIZE DURING THE YEAR AND SO THE BALANCE PAYMENT WAS NOT MADE ITA NOS. 3677 & 3678/D/09 6 AND NO RIGHT WAS TAKEN BY THE ASSESSEE OVER THE LAN D DURING THE YEAR AND THAT IT WAS THEREFORE THAT IT COULD N OT BE SAID THAT ANY SHARE SECURITY OR OTHER PROPERTY HAD BEEN PURCHASED. THERE IS NO REBUTTAL BY THE AO TO THIS ARGUMENT OF THE ASSESSEE. 8. THE NEXT CONTENTION OF THE AO WAS THAT THE AGREEMENTS SHOWED THAT THEY HAD BEEN WRITTEN AND SI GNED WITHOUT MENTIONING ANY DATE WHICH IS ESSENTIAL FOR THE LEGAL VALIDITY OF A DOCUMENT. THIS HAS BEEN SHOWN TO BE INCORRECT. THE DATES HAVE BEEN RESPECTIVELY MENTI ONED AT THE BACK OF THE FIRST PAGE OF THE DOCUMENTS. IT IS SEEN THAT THE AGREEMENT HAS BEEN EXTENDED FROM TIME TO TIME. 9. THE NEXT OBJECTION OF THE AO WAS THAT ISHA BANSA L MADE AN AGREEMENT TO SELL PROPERTY FOR RS.10.50 LAK HS AND RECEIVED RS. 1.75 LAKHS ON 27.3.2004 AND THE DATE O F THE PAYMENT OF THE BALANCE AMOUNT WAS WRITTEN AS 15.8. 2004 BUT IN THE BALANCE SHEET AS ON 31.3.2005 FOR FIN ANCIAL YEAR 2004-05 ON THE ASSETS SIDE THE AMOUNT DUE FROM IS HA BANSAL HAS BEEN SHOWN AT RS. 1.75 LAKHS; THAT IF TH E AGREEMENT SUBMITTED BY THE ASSESSEE WAS TO BE CONSI DERED LEGAL AND CORRECT THE AMOUNT OF RS. 10.50 LAKHS OU GHT TO HAVE BEEN SHOWN BY THE ASSESSEE IN THE FIXED ASSETS ON ACCOUNT OF THE LAND PURCHASED AND NOT AS AMOUNT DUE FROM ISHA BANSAL; THAT IN THE BALANCE SHEET AS ON 31.3.2 006 FOR FINANCIAL YEAR 2005-06 ON THE ASSETS SIDE THE AMO UNT DUE FROM ISHA BANSAL HAS AGAIN BEEN SHOWN AS RS. 1.75 L AKHS; AND THAT THEREFORE IT WAS INCORRECT THAT THE AMOUN T OF RS. 1.75 LAKHS DUE FROM ISHA BANSAL HAD BEEN ADVANCED A GAINST THE PURCHASE OF LAND. 10. IN THIS REGARD THE ASSESSEE HAS MAINTAINED THA T ISHA BANSAL HAD MADE AN AGREEMENT TO SELL THE PROPERTY F OR RS. ITA NOS. 3677 & 3678/D/09 7 10.50 LAKHS ON 27.3.2004. SHE RECEIVED AN AMOUNT OF RS. 1.75 LAKHS. THE BALANCE AMOUNT WAS FIXED TO BE PA ID ON 15.8.2004. HOWEVER DUE TO CERTAIN UNAVOIDABLE CIRCUMSTANCES THIS DATE WAS POSTPONED TO 15.6.2005 BY MUTUAL AGREEMENT BETWEEN THE PARTIES AS ON 15.8.200 4 . ON 15.6.2005 AGAIN BY MUTUAL CONSENT THE DATE WAS POSTPONED TO 31.3.2006. ULTIMATELY WHEN THE TRANS ACTION COULD NOT BE FINALIZED ON 22.11.2006 THE AGREEMENT WAS CANCELLED AND THE ADVANCE WAS RETURNED TO THE ASSES SEE. THESE FACTS HAVE BEEN DEMONSTRATED FROM THE COPY OF AGREEMENT FILED. THUS AS ON 31.3.2005 THE ASSES SEE DID NOT HAVE ANY LEGAL RIGHT OVER THE PROPERTY. HOWEVE R SINCE THE ADVANCE WAS WITH ISHA BANSAL IT WAS SHOWN IN T HE BALANCE SHEET AS SUCH AND THERE WAS NO QUESTION OF MENTION OF LOAN IN THE BALANCE SHEET. THE OBJECTION OF TH E AO HAS THUS BEEN AMPLY MET WITH. 11. THE FURTHER OBJECTION OF THE AO WAS THAT IN THE CASE OF RAJINDER JAIN AS PER THE ASSESSEE RAJINDER JAIN H AD MADE AN AGREEMENT TO SELL THE PROPERTY FOR RS. 4 LAKHS; THAT HE HAD RECEIVED RS. 1 LAKH; THAT HOWEVER NO DATE OF RECEI PT WAS WRITTEN; THAT THE DATE OF PAYMENT OF BALANCE AMOUNT WAS WRITTEN AS 31.3.2004 BUT IN THE BALANCE SHEET AS O N 31.3.2004 FOR THE FINANCIAL YEAR 2003-04 ON THE AS SETS SIDE THE AMOUNT DUE FROM RAJINDER JAIN WAS SHOWN AT RS. 1 LAKH; THAT IF THE AGREEMENTS SUBMITTED BY THE ASSESSEE W ERE RIGHT THE AMOUNT OF RS. 4 LAKHS SHOULD HAVE BEEN S HOWN BY THE ASSESSEE AS A FIXED ASSET ON ACCOUNT OF THE LAN D PURCHASED AND NOT AS AMOUNT DUE FROM RAJINDER JAIN; THAT IN THE BALANCE SHEET AS ON 31.3.2005 FOR FINANCIAL YEA R 2005-06 AND IN THE BALANCE SHEET AS ON 31.3.2006 FOR FINANC IAL YEAR 2006-07 ALSO ON THE ASSETS SIDE THE AMOUNT SHOWN DUE ITA NOS. 3677 & 3678/D/09 8 FROM RAJINDER JAIN WAS AT RS. 1 LAKH; AND THAT THIS SHOWS THAT THE STAND OF THE ASSESSEE OF RS. 1 LAKH BEING DUE FROM RAJINDER JAIN WAS FALSE. 12. THE ASSESSEE CONTENDS THAT AS IN THE CASE OF IS HA BANSAL RAJINDER JAIN HAD ENTERED INTO AN AGREEMENT WITH THE ASSESSEE SOCIETY TO SELL PROPERTY FOR RS. 4 LAK HS ON 14.10.2002. THE ASSESSEE HAD PAID RS. 1 LAKH AS A DVANCE ON 14.10.2002. THE BALANCE WAS FIXED TO BE PAID O N 31.3.2004. THE TRANSACTION COULD NOT MATERIALIZE AND THE DATE WAS POSTPONED TO 31.3.2005. ON 31.3.2005 THE DATE WAS POSTPONED TO 31.3.2006. WHEN THE BALANCE AMOU NT COULD NOT BE MADE AVAILABLE THE AGREEMENT GOT ULT IMATELY CANCELLED ON 31.3.2006. AS SUCH NEITHER ON 31.3. 2005 NOR ON 31.3.2006 DID THE ASSESSEE HAVE ANY LEGAL RIGHT OVER THE PROPERTY AND IT WAS SO THAT THE AMOUNT WAS SHOWN IN THE BALANCE SHEET AS SUCH. THIS ARGUMENT AS DEMONSTR ATED EFFECTIVELY NEGATES THE AOS OBJECTION. 13. A SIMILAR OBJECTION WAS RAISED BY THE AO QUA TH E AMOUNT PAID BY THE ASSESSEE TO SATPAL BANSAL AND T HE ASSESSEE HAS SUCCESSFULLY DEMONSTRATED THAT SINCE I N THIS CASE ALSO THE TRANSACTION COULD NOT MATERIALIZE AN D THE AGREEMENT ULTIMATELY GOT CANCELLED THE AMOUNT WAS SHOWN AS SUCH IN THE BALANCE SHEET. AGAIN THE OBJECTIO N OF THE AO HAS BEEN EFFECTIVELY REBUTTED. 14. ALL THESE FACTS WERE DULY TAKEN INTO CONSIDERAT ION BY THE LD. CIT(A) WHILE ALLOWING THE EXEMPTION CLAIMED BY THE ASSESSEE. THE ASSESSEE WAS FOUND TO HAVE GIVEN ADVANCES TO THE THREE PERSONS FOR PURCHASE OF LAND FOR EXPANSION OF THE WORK OF THE ASSESSEE SOCIETY. IT WAS INDEED THAT THE COPIES OF THE AGREEMENTS SHOWED THA T THEY HAD BEEN RENEWED FROM TIME TO TIME. FURTHER THE EVIDENCE ITA NOS. 3677 & 3678/D/09 9 OF OWNERSHIP OF THE LAND BY THE THREE PERSONS WAS A LSO TAKEN INTO CONSIDERATION. IT WAS CORRECTLY FOUND THAT T HE AO DID NOT BRING ANYTHING ON RECORD THAT THE SAID AGREEMEN TS WERE SHAM. THE AO REMAINED UNABLE TO REBUT THE FACTUM OF THE AGREEMENTS HAVING FALLEN THROUGH AND THE DEALS NOT HAVING MATERIALIZED. AS SUCH THE ASSESSEE SOCIETY WAS R IGHTLY FOUND TO HAVE CONTENDED THAT IT HAD NOT ADVANCED AN Y LOANS TO ANY OF THE SAID THREE PERSONS AND THAT RATHER T HE MONEY HAD BEEN GIVEN AS ADVANCES TOWARDS THE PURCHASE OF LAND DUE TO WHICH FACT THE PROVISIONS OF SECTION 13(1)( C) OF THE ACT HAD NOT BEEN VIOLATED IN ANY MANNER. 15. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD . CIT(A) FOR THE ABOVE DISCUSSION. THE SAME IS HEREBY CONFI RMED REJECTING THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT. 16. IN THE RESULT THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. 8. IN THIS VIEW OF THE SITUATION RESPECTFULLY FOLL OWING THE AFOREMENTIONED ORDER WE FIND NO MERIT IN THE APPEALS FILED BY THE REVENUE AND THE SAME ARE DISMISSED. 9. IN THE RESULT BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.1.11 SD/- SD/- (K.G. BANSAL) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER * KAVITA DATED: ITA NOS. 3677 & 3678/D/09 10 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT