TMI Blog2019 (7) TMI 738X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in response to notice u/s 148. The Ld. CIT DR has referred to the words so far as may be to canvass the proposition that all the provision will not apply. This contention of the Ld. DR is not correct in view of our reasoning given above. The meaning of these words so far as may be will not mean to exclude provision of section 11 of the Act. Our above view gets further supported from the amendment made by the Finance Act, 2017 whereby a further clause (ba) has been inserted imposing a further condition that such return of income is to be furnished in terms of section 139(4A), within the time allowed under that section. Firstly, this requirement was not there before this amendment; and secondly, this insertion of additional clause clearly shows that such condition was not there in existing clause (b) of section 12A. Had such condition being there in clause (b) itself, then there was no need to insert a further clause (ba) by the Legislature for denying benefit of section 11 12 in case return is not filed in time as per provision of section 139 (4A). We are also not in agreement with the contention of the Ld. DR that this amendment is clarificatory in nature. As rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) in disallowing the same. However, this amount instead of making addition as income need to be excluded while considering application of income in terms of section 11t. This ground of appeal is disposed of accordingly. Addition of car insurance expenses - CIT (A) confirmed addition as the assessee has not been able to furnish any proper evidence in support thereof - HELD THAT:- In the absence of supporting evidence, the disallowance made by the CIT (A) is upheld. However, we have held in ground no.11 that while considering disallowances in the absence of supporting evidence that the income of the society is to be computed in terms of section 11 of the Act and accordingly such amount need to be excluded while computing total application of income. Following the same reasoning we direct the AO that this amount instead of making addition as income needs to be excluded while considering application of income in terms of section 11. This ground of appeal is disposed of accordingly. Addition in respect of work-in-progress - HELD THAT:- In the absence of any supporting evidence, the disallowance made by the CIT (A) is upheld. However, as held above in ground no.11 while c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this amount as application of income while computing income of the assessee society in terms of section 11. This ground of appeal is accordingly allowed. Addition on account of investment in fixed deposit - HELD THAT:- There cannot be any assumption that amount of ₹ 1,43,41,000/- and amount of ₹ 40,88,000/- are undisclosed investment. Accordingly, the addition made on this account is on incorrect appreciation of facts. As regards the observation of the special auditor in respect of the interest on matured FDR, it is seen that the assessee has accounted for the interest of ₹ 6,13,853/-. As regards the interest on the closing balance of FDR of ₹ 40,88,000/- the same having not been received during the year and assessee society following policy of accounting of interest accrued on FDRs on receipt basis no addition on this account otherwise can be made. In view of the above facts and analysis, we direct the AO to delete the addition of ₹ 1,82,92,536/. This ground of appeal is thus allowed. Addition on account of job work - HELD THAT:- In the absence of supporting evidence, we also confirm the disallowance made by the CIT (A). However, as we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 54,00,000/- and ₹ 49,46,000/- as these deposits in the bank account do not pertain to the year under consideration. As regards the balance the CIT (A) noted cash deposits reported by the AO have been duly recorded by the assessee in its books accounts as tuition fees and hence addition made by the AO is double addition. CIT (A) also noted that the Special auditor appointed by the AO has also not made any adverse observation about the cash deposited in the bank. DR could not controvert the above finding of the CIT (A). We are of the view that the CIT (A) has examined the issue. The deposit in the bank account having been made out of the books of accounts the same cannot be considered to be unexplained deposits in the bank account and accordingly we uphold the order of the CIT (A) and dismiss this ground of appeal. Disallowance of depreciation - alleged that building was under construction as on 31.03.2007 - HELD THAT:- CIT (A) has taken note of the fact that existence of the building was not in doubt as the valuation officer appointed by the AO itself has confirmed the same and the said report has also been relied upon by the AO subsequently. On this basis the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed those expenditure in respect of which assessee could not submit evidences. The finding of the CIT (A) has not been controverted before us. In view of these facts we uphold the order of CIT (A) Addition on account of investment in FDR - HELD THAT:- AO has simply picked up the figure from the balance sheet with the Syndicate Bank and has on that basis made addition ignoring the fact that the balance sheet submitted by the assessee was subject matter of special audit and assessment has to be completed on the basis of the said balance sheet. We have already held while adjudicating ground no.8 to 11 of the assessee s appeal that the basis for the assessment has to be the balance sheet and income and expenditure account which were subjected to special audit and not the balance sheet and income and expenditure account filed with the Syndicate Bank for collateral security for obtaining the loan. Accordingly, we uphold the order of the CIT (A) and this ground of appeal is dismissed. - ITA Nos. 2733, 2734/Del/2018 And ITA Nos. 3674, 3675/Del-2017, ITA Nos. 4563, 4564/Del/2018, ITA No. 4392/Del-2017 And ITA No. 4393/Del/2017 - - - Dated:- 28-6-2019 - SHRI AMIT SHUKLA, JUD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case, the ld. CIT (A) has erred, both on facts and in law in confirming the action of the AO in denying exemption under Section 11 of the Act. (ii) On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law in confirming the said action of the A.O. ignoring the fact that the failure to file return under Section 139(4A) can be a cause for levy of penalty u/s 272A(2)(e) not denying exemption u/s 11 of the Act. VII. On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and law in confirming the action of AO in taking ₹ 6,61,58,482/- as returned income of the Assessee. VIII. On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law in confirming the action of the AO in taking the financials with Syndicate Bank, Shastri Nagar, Ghaziabad as correct financials and determining the income on the basis of such figures without ascertaining the correctness of such finding. IX. (i) On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law in confirming the action of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , both on facts and in law in confirming the addition of ₹ 20,938/- made by A.O. on account of job work done. XVIII. On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law in disallowing an amount of ₹ 1,72,781/- on account of depreciation on building. XIX. On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee in computing the income by applying provisions of section 28 to 44 D for computing profits and gains from business profession, ignoring the fact that the assessee is a charitable institution and its income is to be computed on the basis of the provisions of sections 11 and 12 of the Act. XX. On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law in confirming the action of the A.O. in not computing the income in accordance with the provision of section 11 of the Act. XXI. On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law in not considering the capital expenditure incurred during the year w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Sheet, the assessing officer noticed that the society has made huge investment in Land Building and has not filed any return of income. Accordingly, the assessing officer issued notices under section 148 asking the assessee to file the return of income for the purpose of assessing the income which has escaped assessment. In response thereto the assessee filed the return of income showing nil taxable income after application of income as allowed under section 11 of the Income Tax Act. The computation of income declared by the assessee was as under:- Surplus as per Income Expenditure account; ₹ 1,02,20,504 Less: 15% set apart u/s 11(1)(a) ₹ 15,33,075.60 Balance 85% of above ₹ 86,87,428.40 Less: Fund utilization for charitable purpose Addition to fixed assets as pr scheduled ₹ 97,90,393 Addition to fixed D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easoning that assessee society has not filed the return as required under section 139(4A) reads with section 12A(b) of the Income Tax Act in time. Accordingly, the income was assessed as income from business/profession in the status of AOP. 8. Aggrieved by the order of the AO, assesse filed appeal before the CIT (A). In the first appeal, the assessee raised various grounds of appeal challenging the order of the AO. The assessee objected to the reopening of the assessment and also denial of exemption under section 11 in respect of the Income applied towards charitable purposes during the year besides the various additions and disallowances made while computing income. Before the CIT (A), the assessee had also filed additional evidences along with application for admission of such additional evidences under Rule 46(A). The CIT (A) admitted the additional evidences and called for a remand report from the assessing officer. The assessee in response to notices by the Assessing Officer had appeared before the assessing officer in the remand proceedings. Thereafter, a remand report dated 15.07.2013 was submitted by the assessing officer. In response to the remand report, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. Counsel submitted that there is no condition in section 11 to the effect that income will not be computed under this section if return is not filed in time. He further submitted that it does not make any difference whether such income is being computed in regular assessment or an assessment being made consequent to reopening of assessment under section 148. In this regard he invited our attention to the provisions of section 148, whereby the return filed in response to notice issued under section 148, is considered as if such return was a return required to be furnished under section 139 and all the provisions of this Act are to applied which will include section 11 also. On this basis, it was contended that the Act does not make any distinction in the return filed in response to notice under section 148 or a return furnished under section 139. In fact section 148 specifically provides that the provision of this Act shall apply which will include application of section 11 while computing income of the society. 11. The Ld. Counsel further submitted that assessee society fulfilled all the conditions prescribed in section 12A of the Act as it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sought to be achieved of getting the return filed in time. This clause having been inserted by the Finance Act, 2017, effective from A.Y- 2018-19 making it pre-requisite of filing return in time for claiming exemption under section 11 or 12 of the Act, the same cannot be applied to the assessment years under consideration. In support of the above contention, Ld. Counsel placed reliance on the judgment of ITAT Chandigarh in the case of Genius Education Society v. ACIT -ITA No. 238/Chd/2018 dated 20.08.2018, wherein similar issue has come up. 13. In counter, the Ld. CIT DR supported the order passed by the Authorities below and further submitted that the deduction under section 11 is conditional upon filing of return along with the audited account before the due date of filing return prescribed under section 139(4A)of the Act. The assessee having not filed the return, the benefit of exemption cannot be allowed in the assessment proceeding under section 148 of the Act which is only for the benefit of the Revenue as has been held by the Supreme Court in the case of Commissioner of Income-tax v. Sun Engineering Works (P.) Ltd. 198 ITR 297 (SC). She further contended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r commencing on or before the 1st day of April, 1992]; (h) an order cancelling the registration of a firm under sub-section (1) or under sub-section (2) of section 186 22{***] 23[in respect of any assessment for the assessment year commencing on or before the 1st day of April, 1992]; (i) an order under section 201; (j) an order under section 216 in respect of any assessment for the assessment year commencing on the 1st day of April, 1988 or any earlier assessment year; (k) an order under section 237; (l) an order imposing a penalty under- (i) section 221, or (ii) section 271, section 271A, section 271B, 24[***]25 section 272A, section 272AA or section 272BB]; (iii) 26[***] section 272, section 272B or section 273, as they stood immediately before the 1st day of April, 1989, in respect of any assessment for the assessment year commencing on the 1st day of April, 1988 or any earlier assessment years. * For limitation period sec. 153 Expl. 1 clause (iii) clearly stipulates that the period of special audit will be excluded from the lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at stage the assessee cannot put forward a case that power under section 142(2A) of the Act had wrongly been exercised and he has unnecessarily been saddled with a heavy expenditure. An appeal against the order of assessment, as noticed hereinbefore, would not serve any real purpose as the appellate authority would not go into such a question since the direction issued under section 142(2A) of the Act is not an appellate order. The order of Hon ble Supreme Court in the case of Rajesh Kumar (Supra) is also followed by Hon ble ITAT Jodhpur Bench in the case of ACIT v. Badri Ram Choudhary 355 ITR 223 (Jodhpur) order dated 25.10.2007 (copy enclosed). In this order Hon ble ITAT has discussed in a great length the jurisdiction of Tribunal to examine the validity of section 142(2A) which is as under :- Jurisdiction of the Tribunal to examine validity of s. 142(2A) order 3.5.1 The learned Authorised Representative has forcefully contended that the appointment of the special auditor be declared null and void as the due process of law has not taken place. We are not inclined to go into this question for the reason that the Tribunal is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 142(2A) of the IT Act, 1961 for special audit of the account of the assessee, there has to be a pre-decisional hearing and an opportunity has to be granted to the assessee for the purpose. A close reading of the decision shows that the observations in this regard appear to have been made in the context of the assessments in terms of s. 158BC (block assessment) of the Act. Such assessments are relatable to a case when raid has been conducted at the premises of an assessee. Had that been so, limited to the facts involved in that case, we would have negative the contentions of the learned counsel for the petitioner. But certain observations of general nature have been made. The effect of these observations appears to be that in every case where the AO issues a direction in terms of s. 142(2A) of the Act, the assessee has to be heard before such order is passed. This does not appear to us to be the correct position of law. Therefore, we refer the matter to a larger Bench. The records be placed before the Hon ble Chief Justice of India for constituting an appropriate Bench. 3.5. iii On a careful reading of this judgment, it is clearly deducible that the observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra). The scope of examining the issues by the Tribunal has been spelt in s. 253. The orders under the sections, which are not brought within the purview of s. 253 cannot be considered and adjudicated upon by the Tribunal. There are various sections, the orders under which are not appealable. To cite a few, the order passed by the CIT under s. 264 is not appealable before the Tribunal. Similarly, the order passed for transfer of case under s. 127 is also precluded from examination by the Tribunal. All such orders are outside the ambit of the Tribunal s jurisdiction. Our view is fortified by the recent decision in the case of Smt. Jaswinder Kaur Kooner v. CIT [2007] 211 CTR (P H) 200 : [2007] 291 ITR 80 (P H). In this case the assessee raised a plea that the order of transfer of It is further observed If no such challenge is made at the initial stage, the issue cannot be raised in appeal against the assessment order jurisdiction under s. 127 being void, the entire assessment proceedings should be annulled on that ground. The Tribunal came to the conclusion that since the assessee had not challenged such order at the relevant forum the assessment could not be set a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons for the belief. Further in the case of BawaAbhai Singh v. DCIT 117 Taxmann 12 Hon ble High Court of Delhi has held that After 1-4-1989 the position is somewhat different. Section 147 with effect from 1-4-1989 provides that where the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may apply the provisions of sections 148 to 153. He may assess or reassess the income which has escaped assessment. it is to be noted that section 147 as it stands with effect from 1-4-1989 not only merges clauses (a) and (b) of the pre-amended section 147 but also brings about a significant change in the preliminary requirement of certain conditions mandatory in character before reassessment proceedings should be initiated in the pre-amended section. Conditions precedent for initiation of action under section 147(a) or 147(b) of the pre-amended section are highlighted above. The amended provisions are contextually different and the cumulative conditions spelt out in clause (a) or (b) of section 147 prior to its amendment, are not present in the amended provision. The only condition for action is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have only to see whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency of correctness of the material is not a thing to be considered at the stage of notice u/s 148. C. In the case of DIT vs. Spic Educational Foundation 257 ITR 46 order of High Court of Madras has held that in the case of Section 12A(b) requires the trust which claims the benefit of sections 17 and 12, when it files a return of income, to file along with that return the report of the audit for that year in the Form prescribed under rule 17B of the Income-tax Rules, 1962. To the extent the return is not accompanied by that audit report in Form No. 10B, the assessee will not be eligible to claim the benefit of sections 11 and 12 . (Copy enclosed) D. In the case of Coimbatore Spinning Weaving Co. Ltd. v. CIT 95 ITR 375 order of High Court of Madras has held that The Tribunal was not inclined to accept the assessee s stand that the overall stock position should alone be considered. According to the Tribunal the assessee was in a fiduciary capacity in respect of the stock declared to the bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and insertion of section 12A(ba) which is w.e.f. A.Y. 2018-19. During the course of hearing a strong objection was taken by the Revenue on this issue as the appellant has never filed the return of income u/s 139(4A) and not entitled for grant of registration u/s 12A(b) of the Act. On this, Hon ble Members has directed for the clarification on the issue of introduction of section 12A(ba) in the Act which is w.e.f. A.Y. 2018-19. This written submission is with regard to this clarification which is as under:- The taxation of charitable trusts is governed by Chapter III of the Income-tax Act which contains sections 11, 12, 12A, 12AA and 13. Section 12A/12AA contains the provisions concerning the Registration and the Registration Procedure under the Income-tax Act. Sections 11 and 12 contains the provisions concerning the condition to be fulfilled by the charitable trusts in order to claim exemption from income tax. Section 13 stipulates the provisions concerning the trusts which are not eligible for exemption u/s. 11 12. Conditions for applicability of section 11 and section 12- The provision of section 12A of the Act is reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conditions of registration, in the prescribed form and manner, within a period of thirty days from the date of said adoption or modification, to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA;] (b) where the total income of the trust or institution as computed under this Act without giving effect to [the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year], the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the pres-cribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed;] [(ba) the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section.] The provision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to point out that in cases where the total income of the institution exceeds ₹ 50,000 in any previous year, its accounts are required to be audited by a qualified chartered accountant and the report obtained in the prescribed Form No. 10B. While in the case of institutions whose accounts are not required to be audited the due date for filing of return is 31st July of each year, in case of institutions whose accounts are to be audited, the due date is 31st October of each assessment year. Clarification on the issue of insertion of section 12A(ba) of the Act- During the course of appellate proceedings on 02.05.2019 it was argued by the Ld. AR that the registration cannot be denied on the ground of non-filing of return by the trust as this provision was inserted u/s 12A w.e.f. 01.04.2018 and the case of the appellant has been completed much before this date. The plea of Ld. AR is not acceptable as section 12A(1)(b) and section 139(4a) was there in the statute and the appellant has violated these provisions. The background of amendment made by the Finance Act 2017 is clarified by the following letter of CBDT which is self-explanatory- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent years. 3. Additionally, an excerpt of circular 02/2018 dated 15.02.2018 Explanatory Notes to the Provisions of the Finance Act, 2017 on insertion of clause (ba) in Sub section (1) of section 12A is quoted as under: the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income -tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income -tax Act. 3. Thus, for a trust registered U/s 12AA of the Act to avail the benefit of exemption u/s 11 shall inter- alia file its return of income within the time allowed u/s 139 of the Act. Accordingly, orders u/s 143(1)(a) in those cases in which demand has been rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 ITR 46, 47, 48 (Mad.)]. Provision of section 12A(b) about compulsory audit are mandatory for availing the trust must comply with the provision of section 11 and 12 - In order to claim the benefit of section 11 and 12, the trust must comply with the provisions of section 12A(b) requiring furnishing of an audit report in prescribed form along with the return of income. The fact is that assessee never filed return as per the stipulated legal provisions given u/s 139(4A) of the Act and it is only after the proceeding s u/s 147/148 of the Act that the Appellant eventually was forced to file the return. Thus, non-filing of Return is in itself a sufficient ground to deny the benefit u/s 11 12 of the Act which exacerbated and magnified by the fact that not only did the Appellant did not file the return which eventually happened only after issuance of Notice u/s 148 of the Act. In this case the Assessee has not even filed the return the Appellant and then went on rampantly flouting the law by doctoring the Balance sheet and submitting to the Syndicate Bank for obtaining loan. There is a clear and contumacious disregard of law in this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order. Thus, the assessee society is eligible for computing its income in accordance with the provision of section 11 of the Act. He was submitted that, it is a case of assessment under section 143(3) and the issue of notice under section 148 is only to call for the return of income and assessee having filed the return along with the audited balance sheet and profit and loss account, the assessment order has to be passed under section 143(3). In fact the order passed by the AO also states that this has been passed under section 148/143(3) and if that be so, the income has to be computed in accordance with the provisions of the Act which includes section 11. In the absence of any specific provision being applicable for the assessment year under consideration no new condition can be read into. 17. The Ld. Counsel further submitted that the reliance placed by the Ld. DR on the judgment of Sun Engineering Works Pvt. Ltd. (Supra) is misplaced. In fact, that judgment supports the case of the assessee. In the case of Sun Engineering, the assessee intended to re-agitate a claim which was denied in the original assessment in the re-assessment proceeding under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed today cannot apply to the events of the past. He also placed reliance on the judgment of Karnataka High Court dated 28.06.2016 in the case of PR. COMMISSIONER OF INCOME TAX VERSUS SRI. DICHUNCHUNAGIRI SHIKSHANA TRUST ADICHUNCHUNGIRI KSHETRA NAGAMANGALA TALUK MANDYA - ITA NO. 384 OF 2016. 19. We have heard the rival submissions and perused the relevant findings given in the impugned order. The core issues here is, whether the computation of income of the assessee society should be in accordance with section 11 or not; and whether, the filing of audit report alongwith the return filed in response to notice u/s 148 will entitle the assessee for benefit of computation of section 11. The AO has denied to compute the income in accordance with the provisions of section 11 of the Act on the reasoning that assessee has not filed the return under section 139 (4A) reads with section 12A (b) of the Act. Thus, what we have to adjudicate is, whether assessing officer was right in not applying the provisions of section 11 while computing income of the assessee. It is an admitted fact that the assessee is a society, who has been granted registration under section 12A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been filed in response to the notice issued under section 148, the provisions of this Act shall apply as if such return were a return required to be furnished under section 139. Thus, return filed under section 148 is treated as return filed under section 139, which will include sub section (4A) of section 139. Once, such return is treated as return filed under section 139, then all the provisions of Act shall apply which will, include section 11 of the Act. The phrase so far as may be in section 148, has to be interpreted in the manner that wherever conditions of applicability of any procedure prescribed in any section of the Act is required, then same has to be applied. If a return has been filed under section 148, then the relevant provisions of section 139 has to be applied and also the procedure of assessment and computation of income; and it cannot be interpreted in a restrictive manner to exclude any procedure. The Hon ble Apex Court, way back in the case of R Dalmia Anr vs. CIT, reported in (1999) 236 ITR 480, has clarified the interpretation of the phrase so far as may be used in section 148 in the following manner:- 13. By reason of s. 148, af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be excluded by reason of the use of the words so far as may be . Nor is there any other good reason to exclude it from the procedure to be followed subsequent to a notice under s. 148. 22. Thus, we are of the view that, whether it is a case of a regular assessment or it is a case of an assessment consequent to issue of notice under section 148, not only the procedure of return as given in section 139 has to be applied, but also such the income has to be computed on the basis of such return in accordance with the provision of the Act, which of course will be subject to any specific provision in the Act which itself bars a claim or an exemption. Thus, section 148 provides that all the provision of the Act has to apply on such return furnished in response to notice under section 148. The Ld. CIT DR has referred to the words so far as may be to canvass the proposition that all the provision will not apply. This contention of the Ld. DR is not correct in view of our reasoning given above. The meaning of these words so far as may be will not mean to exclude provision of section 11 of the Act. It is only such provision which are inconsistent with the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of section 11 12 shall not apply unless the accounts are audited and a return is filed along with the audited accounts. Thus, as and when computation is to be done these conditions need to be complied with. The issue whether return has been filed in time or not is not relevant for clause (b) of section 12A. Our above view is supported by the judgment of the Chandigarh bench of the ITAT in the case of Genius Education Society v. ACIT ITA No.238/Chd/2018 dated 20.08.2018 wherein the Tribunal has held as under:- 10. Undoubtedly the requirement of filing of return of income and the report of audit have been specified for being eligible for claiming exemption u/s 11 12 of the Act, alongwith the grant of registration u/s 12AA of the Act. In the case of the assessee, we find, that the return of income has been filed in response to notice u/s 148 of the Act. Therefore the condition of filing of return of income stands fulfilled. The section, we find, nowhere prescribes the filing of return by any due date, therefore the findings of the CIT(A) that the assessee having not filed its return within the prescribed time it had failed to comply with the requirement prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report along with the return has to be treated as procedural provision and, therefore, directory in nature. 12. Provisions of s. 80J(6A) and s. 12A of the Act are para materia. The ratio of the law laid down in Jaideep Industries case (supra) would have been applicable to the facts of the present case as well had the CBDT not issued the Circular dt. 9th Feb., 1978, reproduced in the earlier part of the judgment. As per this circular, it is not mandatory under. s. 12A(b) to file the audit report along with return of income. Normally, a charitable religious trust or institution is expected to file auditor s report along with the return but in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report, the ITO, for reasons to be recorded, has been authorised to condone the delay in furnishing the auditor s report and accepting the same at a belated stage. It has been clarified that the exemption available to the trust under s. 11 may not be denied merely on account of delay in furnishing the auditor s report. The word shall occurring in s. 12A cannot, under the circumstances, be read as a must making it mandatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the audit report at any point of time and hence the exemption cannot be granted in the absence of audit report. Thus, it was a case of complete failure to file the audit report which is not the case here. In the present case the assessee society has filed the return of income and has also filed audited accounts with the audit report in response to the notice under section 148 on the basis of which AO has completed the assessment under section 148/143(3). Thus, the audit report was before the AO. 25. Our above view gets further supported from the amendment made by the Finance Act, 2017 whereby a further clause (ba) has been inserted imposing a further condition that such return of income is to be furnished in terms of section 139(4A), within the time allowed under that section. Firstly, this requirement was not there before this amendment; and secondly, this insertion of additional clause clearly shows that such condition was not there in existing clause (b) of section 12A. Had such condition being there in clause (b) itself, then there was no need to insert a further clause (ba) by the Legislature for denying benefit of section 11 12 in case return is not filed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow s backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lexprospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre (1870) LR 6 QB 1, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 32. The obvious basis of the principle against retrospectivity is the principle of fairness , which must be the basis of every legal rule as was observed in the decision reported in L Office Cherifien des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors. The above judgment has been followed by the Karnataka High Court in its judgment dated 28.06.2016 in the case of PR. COMMISSIONER OF INCOME TAX VERSUS SRI. DICHUNCHUNAGIRI SHIKSHANA TRUST ADICHUNCHUNGIRI KSHETRA NAGAMANGALA TALUK MANDYA BEING ITA NO. 384 OF 2016 , While interpreting the amendment made by the Finance Act No. 2 of 2014 whereby section 11 (6) was inserted so as to exclude such assets while computing depreciation in respect of which deduction has been allowed as an application of income under section 11 of the Act. 27. In view of the above, we hold that AO was not justified in denying the benefit of the exemption under section 11 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on the ground as mentioned in the assessment order on page 3 that there are variation with the balance sheet and profit and loss account filed with the Syndicate Bank and filed during the course of the proceedings under section 148 of the Act which need to be reconciled. The Special Auditor having carried out the audit and having submitted the report the basis for computing income has to be on the basis of that report. 30. It was pointed out by the Ld. Counsel, that Ld. CIT (A) has duly taken note of the contention of the assessee at page 11 of his order to the effect that the AO was wrong in assuming the financials with the Syndicate Bank as correct financials without verification and corroboration with the material available with him without there being any evidence to establish the correctness of the various figures of the income/expenditure, assets and liabilities stated therein. The CIT (A) has also taken note of the contention of the assessee that the AO on the one hand has taken surplus from the financials with the Syndicate Bank but on the other hand has made disallowances/addition on the basis of the financials as submitted by the appellant. He submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l security for obtaining loan facilities. This balance sheet and income tax expenditure account was different then the income and expenditure account submitted with the return of income. In order to find out the authenticity of such balance sheet with the Syndicate bank, the AO had recorded the statement of Mr. K.P. Singh, the Chairman of the Society. In his statement as observed by the AO, Mr. K.P. Singh could not give satisfactory reply. The AO also recorded the statement of the bank manager. On the basis of the statements so recorded, it transpired that the financial statements submitted to the Syndicate Bank are by the Society itself. Since, there were wide differences in the two financials, the AO referred the matter to the special auditor. In the show cause notice issued to the assessee dated 18.12.2011, it has been stated by the Assessing Officer that the special audit is required as there are two set of profit and loss account and balance sheet and under these circumstances there is a complexity and at this stage income, surplus as well as application cannot be worked out correctly and hence, it is necessary to get the special audit done under section 142(2A) of the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute about the financial submitted to the bank and submitted by the assessee with the return of income has been got resolved by the AO by making a reference to the special auditor who after auditing has given its report proposing various additions and disallowances on the financials submitted by the assessee. The AO has also made addition and disallowances on the basis of such report. It is not the case where the AO has rejected the report of the special auditor. On the contrary he has accepted the report of the special auditor. 34. In view of the above reasoning, we are of the view that the income and expenditure account submitted by the assessee with the return of income which has been audited by the special auditor should be the basis for computing income as per provision of section 11 and 12 of the Act. We direct the AO accordingly. 35. As regards the alternative contention of the Ld. Counsel that in case balance sheet and income and expenditure account submitted with the Syndicate Bank as collateral security for obtaining bank loan is to be considered as the correct financial of the assessee society, we are of the view then the same has to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound no.12 is regarding addition of ₹ 19,965/- made by the AO on account of car insurance expenses. The AO has made addition of this amount and the Ld. CIT (A) has confirmed the same as the assessee has not been able to furnish any proper evidence in support thereof. In the absence of supporting evidence, the disallowance made by the CIT (A) is upheld. However, we have held in ground no.11 that while considering disallowances in the absence of supporting evidence that the income of the society is to be computed in terms of section 11 of the Act and accordingly such amount need to be excluded while computing total application of income. Following the same reasoning we direct the AO that this amount instead of making addition as income needs to be excluded while considering application of income in terms of section 11 of the Act. This ground of appeal is disposed of accordingly. 38. Ground no.13 is regarding an addition of ₹ 56,700/- made by the AO in respect of work-in-progress. The AO has made the addition of this amount and the CIT (A) has confirmed the same. In the absence of any supporting evidence, the disallowance made by the CIT (A) is upheld. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Society ITA No.759/Chd/2014 dated 11.05.2016 4. Singhad Technical Education Society v. ACIT ITA No.320/Pun/2010 dated 14.12.2016 5. Sree Education Society v. ACIT ITA No.49 ITR (Trib) 148 dated 11.03.2016 6. Jeppiaar Educational Trust v. ACIT ITA No.1333/Mds/2010 dated 15.06.2011 In view of the above, we direct the AO to delete the addition of ₹ 17,91,779/-.This ground of appeal is accordingly allowed. 40. Ground no.15 is regarding disallowance of ₹ 4,91,171/-and confirmed by the CIT (A) on the reasoning that the same is penalty levied by the bank for mortgaging a property without the permission of the prescribed authority by invoking Explanation to section 37 of the Act. On going through the facts stated in the assessment order it is apparent that this amount has not been paid for any purpose which is an offense or which is prohibited by law. As per Explanation -1 to section 37 such expenditure which is incurred for any purpose which is an offense or which is prohibited by law cannot be allowed as deduction while computing income. Even otherwise Explanation 1 to section 37, under whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1,43,41,000/-, FDR of ₹ 1,02,53,000/- has matured during the year on which interest of ₹ 6,13,853/- was accounted for and interest on balance FDR of ₹ 40,88,000/- has not been accounted for. It was clarified by the assessee that this interest was not accounted for as the assessee society is crediting interest only when interest is received from the bank. Thus, it was a case of a misinterpretation of the observation of the special auditor. The CIT (A) has confirmed the above addition on the reasoning that there is no clarity on the source of investment. 42. After perusing the special auditor s report and the assessment order, we are of the view that the AO and CIT (A) both have gone wrong in assuming that assessee has failed to explained the source of FDRs. The observation of the special auditors is arising from the FDRs recorded in the books of accounts itself. It is not the case of the Special Auditor that FDRs have not been recorded in the books of accounts. The special audit report mentions that FDR of ₹ 1,02,53,000/- got matured out of ₹ 1,43,41,000/- during the year. Thus, FDR of ₹ 1,43,41,000/- is appearing in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be computed in terms of section 11 of the Act and accordingly such amount need to be excluded while computing total application of income. Following the same reasoning we direct the AO that this amount instead of making addition as income needs to be excluded while considering application of income in terms of section 11 of the Act. This ground of appeal is disposed of accordingly. 45. Ground nos.19 20 are regarding computation of income in accordance with the provision of section 11 and 12 of the Act and not in accordance with the provisions of section 28 to 44 D of the Act. While adjudicating ground no.6, we have already held that income of the assessee society is to be computed in accordance with the provision of section 11 and 12 of the Act. Accordingly, we direct the AO to compute the income in accordance with the provision of section 11 and 12 of the Act and not in accordance with provision of section 28 to 44 D of the Act. 46. Ground No.21 is regarding not considering capital expenditure incurred during the year as application of income towards charitable purposes while computing income of the assessee society. As per section 11 income of a el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 51. Ground No.3 in Revenue s appeal is regarding deletion of addition of ₹ 58,026/- on account of work in progress. The AO had made a total addition of ₹ 1,14,726/-. During the remand proceedings the assessee submitted detailed explanation and after taking into consideration the CIT (A) give a partial relief deleting addition of ₹ 58,026/- out of the total addition of ₹ 1,14,726/-. Since, the disallowance has been deleted after considering the additional evidences and the remand report, we uphold the order of the CIT (A) and this ground of the Revenue is accordingly dismissed. 52. Ground No.4 in Revenue s appeal is regarding deletion of addition of ₹ 30,56,192/-made by the AO on the ground of unsupported expenditure. In the remand proceedings the appellant submitted analysis of these expenditures alongwith the supporting bills and vouchers. We note that the CIT (A) after examining the remand report noticed that a sum of ₹ 5,77,489/- is the double addition, a sum of ₹ 3,86,670/- is the capital expenditure and further, for ₹ 20,31,456/- the assessee has submitted bills and vouchers. Accordingly, the CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the CIT (A) has examined the issue. The deposit in the bank account having been made out of the books of accounts the same cannot be considered to be unexplained deposits in the bank account and accordingly we uphold the order of the CIT (A) and dismiss this ground of appeal. 55. In the result, appeal of the assessee is partly allowed for statistical purposes and that of the Revenue is dismissed. Assessment Year 2007-08 ITA No.3675/Del/2017 and ITA No.4393/Del/2017 56. First we take up the appeal of the assessee being ITA No.3675/Del/2017. 57. In this appeal the assessee has raised following grounds of appeal: 1. On the facts and circumstances of the case, the order passed by the learned CIT (A) is bad, both in the eye of law and on the facts. 2. On the facts and circumstances of the case, the learned CIT (A) has erred, both on facts and in law in confirming the proceedings under Section 147, read with Section 148, ignoring the fact that the same was bad in the eye of law as the conditions and procedure prescribed under the statute have not been satisfied an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in relying upon the balance sheet and Income and expenditure account filed before the bank. 10. On the facts and circumstances of the case, the learned CIT (A) has erred, both on facts and in law, in ignoring the fact that having got the accounts audited from the special auditor there was no justification to take into consideration the figure stated in the balance sheet submitted to the bank, to be the basis of assessment. 11. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in confirming the disallowance of an amount of ₹ 22,812/- out of various expenses. 12. On the facts and circumstances of the case the learned CIT (A) has erred both on facts and in law, in confirming the disallowance of an amount of ₹ 27,84,767/- invoking the provision of section 40A(3). 13. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts in law in confirming the disallowance of an amount of ₹ 73,58,134/- invoking the provision of section 40(a)(ia) of the Act. 14. (i) On the facts and circumstances of the case, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly stated that the outcome of the appeal in ITA No.3674/Del/2017 for assessment year 2006-07 would be squarely applicable to ground no.6 of this appeal. We have already decided the appeal for assessment year 2006-07 vide ITA No.3674/Del/2017 and, for the detailed discussion in that appeal we have held that AO was not justified in denying the benefit of the exemption under section 11 and 12 of the Act and we have directed the AO to allow the benefit of section 11 12 of the Act and compute the income accordingly. Following the same reasoning we hold that AO was not justified in denying the benefit of exemption under section 11 of the Act and direct the AO to compute the income in accordance with the provision of section 11 of the Act. Ground No.6 is accordingly allowed. 60. Ground Nos. 7 to 10 in assessee appeal are regarding computation of income by the AO on the basis of the Balance Sheet and Income Expenditure account submitted to the Syndicate Bank for the purpose of obtaining loan facilities. 61. At the time of hearing before us, both the parties agreed that these grounds raised and the facts in this appeal are identical to the facts and ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluded while computing total application of income. Following the same reasoning we direct the AO that this amount instead of making addition as income needs to be excluded while considering application of income in terms of section 11 of the Act. This ground of appeal is disposed of accordingly. 63. Ground Nos. 12 and 13 are regarding disallowances by invoking the provision of section 40A(3) and section 40(a)(ia). These grounds are identical to the ground no.14 in assessee s appeal for the A.Y. 2006-07. In the said appeal we have held that income of the charitable institution is to be computed under section 11 of the Act and hence provision of section 28 to 44 D are not applicable. Following the same reasoning we hold that no disallowance can be made while computing income under section 11 of a charitable institution by invoking provision of section 40A(3) and section 40(a)(ia). Accordingly, ground nos. 12 and 13 are allowed. 64. Ground No.14 is regarding disallowance of an amount of ₹ 5,60,975/- on account of penalty. This ground is identical to the ground no.15 in assessee s appeal for A.Y. 2006-07. In the said appeal we have deleted this di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount need to be excluded while computing total application of income. Following the same reasoning we direct the AO that this amount instead of making addition as income needs to be excluded while considering application of income in terms of section 11 of the Act. This ground of appeal is disposed of accordingly. 68. Ground no.17 and 18 are regarding computation of income in accordance with the provision of section 11 and 12 of the Act and not in accordance with the provisions of section 28 to 44 D of the Act. These grounds are identical to ground no.19 and 20 of assessee s appeal for A.Y. 2006-07. There we have held that income of the assessee society is to be computed in accordance with the provision of section 11 of the Act. Following the order passed by us for the A.Y. 2006-07, we direct the AO to compute the income in accordance with the provision of section 11 of the Act and not in accordance with provision of section 28 to 44 D of the Act. Ground no.17 and 18 are disposed of accordingly. 69. Ground no.19 in assessee s appeal is regarding not considering capital expenditure incurred during the year as application of income towards charitable p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (A) has taken note of the fact that existence of the building was not in doubt as the valuation officer appointed by the AO itself has confirmed the same and the said report has also been relied upon by the AO subsequently. On this basis the CIT (A) has restricted the disallowance in respect of the addition at year end. We are of the view that the fact building was in existence and was in use is not in dispute and hence the CIT (A) was correct in allowing depreciation on the building. The finding given by the CIT (A) is correct and we see no reason to interfere with the order of the CIT (A) and accordingly, this ground is dismissed. 72. Ground No. 2 in Revenue appeal is regarding deletion of addition of ₹ 11,16,725/- out of the total addition of ₹ 14,57,064/- made by the AO on account of the unexplained investment in FDRs. This addition has been made on the basis of interpretation of observation of the special auditors report and is common with ground no.15 in assessee s appeal whereby we have deleted the addition sustained by the CIT (A). Following the reasoning given in respect of ground no.15 in assessee s appeal, we hold that no addition is called f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (A) on this issue is upheld and this ground of Revenue s appeal is dismissed. 76. Ground No. 6 in Revenue s appeal is regarding deletion of addition of ₹ 8,49,930/- in respect of the cash deposited in the bank. The CIT (A) noted that cash deposits added by the AO have been duly recorded by the assessee in its books accounts. The CIT (A) also noted that the Special auditor appointed by the AO has also not made any adverse observation about the cash deposited in the bank. We are of the view that in the absence of any mismatch being pointed out by the special auditor about the amount shown in the books of account and the amount credited in the bank account, the AO was not justified in making this addition. From the assessment order it is evident that the AO has made the addition merely on the ground that cash has been deposited in the bank ignoring the fact that assessee receives tuition fees etc. from the students and mere deposit in the bank account cannot be a ground for making addition. The deposit in the bank account having been made out of the books of accounts the same cannot be considered to be unexplained deposits in the bank account and accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return under section 139(4A) can be a cause for levy of penalty under section 272(2)(e) and not denying exemption under section 11 of the Act. 8. On the facts and circumstances of the case, the Ld. CIT (A) has erred, both facts and law in confirming the action of AO in taking ₹ 7,02,85,035/- as returned income of the Assessee. 9. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law, in confirming the action of the AO in taking the financials with Syndicate Bank, Shastri Nagar, Ghaziabad as correct financials and determining the income on the basis of such figures without ascertaining the correctness of such finding. 10. (i) On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law, in ignoring the balance sheet and income and expenditure account prepared by the assessee and relying on the balance sheet submitted to the bank. (ii) In the absence of any supporting evidence, it was not justified in relying upon the balance sheet and Income and expenditure account filed before the bank. 11. On the facts and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and in law in confirming the action of the A.O. in not computing the income in accordance with the provision of section 11 of the Act. 20. On the facts and circumstance of the case, the learned CIT (A) has erred both on facts and in law, in not considering the capital expenditure incurred during the year while computing income of the assessee. 21. The appellant craves leave to add, amend or alter any of the grounds of appeal. 80. Ground Nos. 1 21 are general in nature and hence need no adjudication; and on ground No. 2 to 5, no arguments were addressed by the Ld. Counsel for the assessee and the same are considered as not pressed and hence, dismissed. 81. Ground Nos .6 7 are regarding denial of exemption under section 11 of the Act while computing income of the society. At the time of hearing before us, both the parties fairly agreed that this ground raised and the facts in this appeal is identical to the facts and ground no.6 raised in appeal for assessment year 2006-07 vide ITA No.3674/Del/2017. Therefore, both the parties fairly stated that the outcome of the appeal in ITA No.3674/Del/2017 for assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety, we are of the view then the same has to be considered in entirety. The AO cannot pick and choose certain figures from the financials which have been audited and certain figures from the balance sheet with Syndicate Bank. However, since, we have held that the balance sheet and income and expenditure account which has been audited by the special auditor shall be the basis for computation of income, this alternative contention become academic in nature. Ground Nos. 8 to 11 are accordingly allowed. 86. Ground Nos. 12 14 are in assessee s appeal is regarding confirmation of disallowance of an amount of ₹ 2,28,318/- and ₹ 3,61,855/- respectively. These grounds are identical to the ground no.11 in assessee s appeal for the A.Y. 2006-07 whereby we have upheld the disallowance of expenditure in respect of which assessee has not been able to submit evidences. However, as the assessee s income is to be computed in accordance with the provisions of section 11 of the Act, we have directed the same be excluded while computing income in terms of section 11 of the Act. Following the same reasoning as the assessee has not produced cogent evidence about these expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. This ground of appeal is disposed of accordingly. 90. Ground nos.18 and 19 are regarding computation of income in accordance with the provision of section 11 and 12 of the Act and not in accordance with the provisions of section 28 to 44 D of the Act. These grounds are identical to ground no.19 and 20 of assessee s appeal for A.Y. 2006-07. There we have held that income of the assessee society is to be computed in accordance with the provision of section 11 of the Act. Following the order passed by us for the A.Y. 2006-07 we direct the AO to compute the income in accordance with the provision of section 11 of the Act and not in accordance with provision of section 28 to 44 D of the Act. Ground no.18 and 19 are disposed of accordingly. 91. Ground no.20 in assessee s appeal is regarding not considering capital expenditure incurred during the year while computing income of the assessee society. This ground is identical to ground no.21 in assessee s appeal for A.Y. 2006-07. In the said appeal we have held that as per section 11 income of a eligible institution to the extent of which such income is applied to charitable purposes in India is not be includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of its claim of the depreciation. 8. That the Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 5,00,000/- on account of cash deposits in bank accounts as the assessee has failed to submit the source of cash deposits. 9. That the order of the Ld. CIT(A) be cancelled and the order of the A.O. be restored. 10. Appellant craves leave to modify/amend or add any one or more grounds of appeal. 93. Ground no.1 in Revenue appeal is regarding deletion of addition of ₹ 10,12,427/- made by the AO on the ground of unsupported expenditure. This addition was part of the total disallowance of ₹ 2,15,91,772/- made by the AO. In the remand proceedings the appellant submitted complete analysis of the above along with the supporting bills and vouchers. We note that the CIT (A) after examining the remand report noticed that a sum of ₹ 10,12,427/- is the double addition. Accordingly, the CIT(A) deleted this amount. Since, the disallowance has been deleted by the CIT (A) on the reasoning that this amount have been considered twice and after considering the details submitted by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the remand report submitted by the AO and after examination of the document and evidences submitted by the assessee has deleted the above addition. Thus, the deletion has been made by the CIT (A) taking into consideration all the facts and the details. Before us nothing has been produced to controvert the finding of the CIT (A) and accordingly we uphold the order of the CIT (A) deleting the above additions. Ground nos.3 and 4 are accordingly dismissed. 96. Ground no.5 is regarding deletion of addition of ₹ 65,69,360/- on account of the various expenses out of the total disallowance of ₹ 69,62,076/- made by the AO. The CIT (A) has deleted an amount of ₹ 9,29,193/- and ₹ 32,02,862/- on the reasoning that no such expenditure has been claimed in the income tax expenditure account and this was a book adjustment having no income element. The CIT (A) has also recorded a finding of the fact that the assessee has deposit with AICTE and it is required to maintain certain amount as security. The CIT (A) has also taken note of the fact that this payment is appearing on the asset side of the balance sheet and hence cannot be considered as a claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l auditor has not mentioned any investment outside the books of accounts. After perusing the order passed by the AO and the CIT (A) and also after going through the submission and the details submitted by the assessee we are of the opinion that the CIT(A) has rightly deleted the addition. The AO has incorrectly interpreted the observation of the special auditor. In the special audit report there is no allegation of any investment outside the books of accounts. It appears that AO has simply picked up the figure from the balance sheet with the Syndicate Bank and has on that basis made addition ignoring the fact that the balance sheet submitted by the assessee was subject matter of special audit and assessment has to be completed on the basis of the said balance sheet. We have already held while adjudicating ground no.8 to 11 of the assessee s appeal that the basis for the assessment has to be the balance sheet and income and expenditure account which were subjected to special audit and not the balance sheet and income and expenditure account filed with the Syndicate Bank for collateral security for obtaining the loan. Accordingly, we uphold the order of the CIT (A) and this ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is partly allowed for statistical purposes and appeal of the Revenue is dismissed. A.Y. 2009-10 ITA No.2734/Del/2018 and ITA No.4564/Del/2018 102. First we take up the appeal of the assessee being ITA No.2734/Del/2018.In this appeal the assessee has raised following grounds of appeal: 1. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the proceedings under Section 147, read with Section 148, ignoring the fact that the same was bad in the eye of law as the conditions and procedure prescribed under the statute have not been satisfied and complied with. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment proceedings initiated by the learned AO are bad in the eye of law as the reasons recorded for the issue of notice under Section 148 are bad in the eye of law and ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheet submitted to the bank, to be the basis of assessment. 12. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the disallowance of an amount of ₹ 14,86,474/- on account of unsupported expenditure. 13. On the facts and circumstances of the case the learned CIT(A) has erred both on facts and in law, in confirming the disallowance of an amount of ₹ 20,000/- invoking the provision of section 40A(3). 14. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts in law in confirming the disallowance an amount of ₹ 2,15,519/- on the account of various expenses on the basis of special audit report. 15. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts in law in confirming the disallowance of an amount of ₹ 1,04,74,647/- invoking the provision of section 40(a)(ia) of the Act. 16. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the disallowance of an amount of ₹ 3,89,845 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l is identical to the facts and ground no.6 raised in appeal for assessment year 2006-07 vide ITA No.3674/Del/2017. Therefore, both the parties fairly stated that the outcome of the appeal in ITA No.3674/Del/2017 for assessment year 2006-07 would be squarely applicable to grounds no.6 7 of this appeal. 105. We have already decided the appeal for assessment year 2006-07 vide ITA No.3674/Del/2017 and, for the detailed discussion in that appeal we have held that AO was not justified in denying the benefit of the exemption under section 11 of the Act and we have directed the AO to allow the benefit of section 11 of the Act and compute the income accordingly. Following the same reasoning we hold that AO was not justified in denying the benefit of exemption under section 11 of the Act and direct the AO to compute the income in accordance with the provision of section 11 of the Act. Ground no.6 7 are accordingly allowed 106. Ground Nos. 8 to 11 in assessee appeal are regarding computation of income by the AO on the basis of the Balance Sheet and Income Expenditure account submitted to the Syndicate Bank for the purpose of obtaining loan facilities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is to be computed in accordance with the provisions of section 11 of the Act, we have directed the same be excluded while computing income in terms of section 11 of the Act. Following the same reasoning as the assessee has not produced cogent evidence about these expenses of ₹ 14,86,474/- and ₹ 2,15,519/- respectively, we direct the AO that this amount instead of making addition as income need to be excluded while considering application of income in terms of section 11 of the Act. This ground of appeal is disposed of accordingly. 110. Ground no.13 and 15 are regarding disallowance of ₹ 20,000/- by invoking the provision of section 40A(3) and disallowance of ₹ 1,04,74,647/- by invoking provision of section 40(a)(ia) respectively. These grounds are identical to the ground no.14 in assessee s appeal for the A.Y. 2006-07. In the said appeal we have held that income of the charitable institution is to be computed under section 11 of the Act and hence provision of section 28 to 44 D are not applicable. Following the same reasoning we hold that no disallowance can be made while computing income under section 11 of a charitable institution by invok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er deducting income shown therein has confirmed the balance amount as unexplained investment. After perusing the order passed by the AO and the CIT(A) and also after going through the submission and the details submitted by the assessee we are of the opinion that the CIT(A) has gone wrong in drawing adverse inference on the basis of the balance sheet and income and expenditure account with Syndicate Bank ignoring the balance sheet and income and expenditure account which has been subject matter of special audit. In fact the AO has incorrectly interpreted the observation of the special auditor. In the special audit report there is no allegation of any investment outside the books of accounts. The observation was limited to computation of accrued interest on FDR. There is no allegation of any unexplained investment in FDR. The AO has simply picked up the figure from the balance sheet with the Syndicate Bank and has on that basis made addition ignoring the fact that the balance sheet submitted by the assessee was subject matter of special audit and assessment has to be completed on the basis of the said balance sheet. We have already held while adjudicating ground no.8 to 11 that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bank account cannot be a ground for making addition. The deposit in the bank account having been made out of the books of accounts the same cannot be considered to be unexplained deposits in the bank account and we direct the AO to delete this addition. This ground of appeal is accordingly allowed. 115. Ground nos.20 and 21 are regarding computation of income in accordance with the provision of section 11 and 12 of the Act and not in accordance with the provisions of section 28 to 44 D of the Act. These grounds are identical to ground no.19 and 20 of assessee s appeal for A.Y. 2006-07. There we have held that income of the assessee society is to be computed in accordance with the provision of section 11 and 12 of the Act. Following the order passed by us for the A.Y. 2006-07, we direct the AO to compute the income in accordance with the provision of section 11 and 12 of the Act and not in accordance with provision of section 28 to 44 D of the Act. Ground no.20 and 21 are disposed of accordingly. 116. Ground no. 22 in assessee s appeal is regarding not considering capital expenditure incurred during the year while computing income of the assessee soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 9,59,321/- on account of cash received from Campus Business School as the assessee has not submitted any documentary evidence to prove the genuineness the transaction. 7. That the Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 4,28,693/- as some of the bills of expenditure were in the name of other concern as the assessee has failed to substantiate the expenses claimed. 8. That the Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 13,51,97,096/- on account of investment in FDR under section 68 of the Act as the assessee failed to substantiate the source of income. 9. That the Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 2,07,61,955/- on account of depreciation on building as assessee was unable to file any document in support of its claim of the depreciation. 10. That the order of the Ld. CIT(A) be cancelled and the order of the A.O. be restored. 118. Ground no.1 in Revenue appeal is regarding deletion of addition of ₹ 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue s appeal is dismissed. 120. Ground nos.3 and 4 are regarding deletion of addition of ₹ 17,44,403/- and ₹ 67,06,750/- made by the AO on account of unsupported expenditure. During the appellate proceedings, the assessee submitted additional evidences along with details of each of the expenditure incurred by it. The CIT (A) on the basis of the additional evidences submitted by the assessee called for the remand report. The first remand report was submitted by the AO on 28.02.2013. In response thereto assessee filed a rejoinder. The CIT(A) called for the further remand report from the AO. Consequent, thereto the assessee again appeared before the AO in the remand proceedings and submitted various details and evidences. The AO submitted second remand report dated 15.07.2013. The assessee thereafter again submitted a rejoinder. On the basis of the rejoinder the CIT (A) again called for the remand report. In response thereto assessee again attended the proceedings before the AO and further remand report was submitted by the AO on 18.08.2015. The assessee during the remand proceeding has produced all possible evidences. The assessee has also produced eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has explained that it was a inadvertent error whereby the amount has been debited to a wrong head but the fact remains that the expenditure has been incurred. The CIT (A) has deleted the addition on the reasoning that mere wrong posting of an entry of expenditure in the books of accounts cannot be a ground to disallow the same. We are of the view the expenditure having been actually incurred the same cannot be disallowed merely because it has been debited under a different head of the expenditure. The CIT (A) accordingly was right in deleting the addition and this ground of appeal is accordingly dismissed. 124. Ground no.8 in Revenue s appeal is regarding deletion of addition of ₹ 13,51,97,096/- on account of investment in FDR. This ground is common with ground no.17 of assessee s appeal where part addition were sustained by the CIT(A). While adjudicating ground no.17 of the assessee s appeal we have held that addition made on the basis of the balance sheet with the Syndicate Bank for obtaining loan cannot be sustained. Following the same reasoning as given in ground no.17 of assessee s appeal this ground of the Revenue s appeal is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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