TMI Blog2004 (11) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... owed in asst. yr. 1994-95. 4. The learned representatives of both the parties have accordingly argued only in ITA No. 4260/Del/2003 for asst. yr. 1995-96. ITA No. 4260/Del/2003 (Assessee s appeal) Asst. yr. 1995-96 5. This appeal by the assessee is filed on the following grounds: "1. The learned CIT(A) s order is vitiated and is not tenable in law on account of wrong recording of several facts and arguments of the appellant on the grounds of appeal/issues raised during the appellate proceedings, and on account of omitting and not dealing with some of the important points relevant to the grounds of appeal as made out by the appellant, which shall be enlisted and explained at the time of hearing this appeal. 2. The learned CIT(A) has erred in law in holding that Addl. CIT had no jurisdiction under s. 144A to deal with the question of validity of initiating the proceeding under s. 147 and that, on the facts and in the circumstances of the case, the latter was right in ignoring the appellant s application on the question of the validity of the proceeding under s. 147 and scope thereof. 3. On the facts and in the circumstances of the case, the learned CIT(A) erred in upho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether assessee was entitled for exemption under s. 10(22) of the IT Act? 8. The facts as taken from the assessment order are that: 8.1 In this case return of income was filed in the status of AOP on25th Oct., 1995, declaring nil income. Since assessee-trust was running educational institution, surplus of Rs. 14,56,373 was claimed as exempt under s. 10(22) of the IT Act. The case was processed under s. 143(1)(a) on21st Nov., 1995, without making any adjustment. The case was finally completed under s. 143(3) on24th Sept., 1996, on nil income. 8.2 Survey under s. 133A was conducted on 30th Dec., 1999 and among other things, statements of Shri R.C. Singhal, principal, S.S. Bisht, accounts officer, Mahadeo Sahi, estate superintendent, were recorded whereby they were primarily questioned about payments made to certain non-existent persons towards civil repairs and maintenance and interest-free advances to Stepping Stone School, concern being run under proprietorship of Smt. Chandra Raj Laxmi, and also president of Cambrian Hall Educational Trust. The relevant portions of their statements are reproduced which are recorded by the AO in the assessment order: "Shri R.C. Singhal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no proper care was taken by concerned officials to scrutinise such payments and these were probably being allowed to happen with deliberate consent of the persons concerned. Regarding interest-free advances toSteppingStoneSchool, the principal stated that forSteppingStoneSchoolalso perhaps the president was Chandra Raj Laxmi and payments were made as loan to the said school for the purpose of construction or extension of school. He was unaware as to whether interest is being charged or not on the amount advanced. Shri S.S. Bisht, Accounts Officer: When asked about certain payments having been made to S/Shri K.B. Singh, Devesh Sharma, Banwari Lal, Kanwar Pal Singh, Sanjay Goyal, Sudhir Gupta, Balraj Suri, Prem Bahadur Singh, Balwant Singh, Shishu Pal Singh, Hem Raj Sahni, Vinod Jain, Pawan Kumar, Jai Kishan, Mohan Singh and to produce their bills related to the work done, he stated bill details in respect of Shri K.B. Singh only. About Shri Prem Bahadur Singh, it was stated that he was a petty contractor and takes some work of minor repair and maintenance. His address was stated to be 5,Guru Road, Dehradun,. In fact, 5,Guru Roadis address ofSteppingStoneSchooland Shri Prem B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, 1999, and was asked to clarify when these amounts were adjusted against the bills. He replied that bills were not received by them and amount was outstanding against their names. About specific questions that as per current ledger, Rajendra Kumar and Pranav Pandya have been shown as debtors for amounts of Rs. 85,760, Rs. 75,200, Rs. 62,400, Rs. 67,280, he stated that he did not have bills, therefore, these amounts were pending as sundry debtors. Shri S.S. Bisht also stated that M/sSteppingStoneSchoolis an affiliated institute wherefrom children above class 2 are automatically admitted in this school. Accordingly, payment is made to them according to their need as loan without interest. Shri Mahadeo Sahi, Estate Superintendent: Shri Sahi stated that all petty works are to be attended by daily wage labour but comparatively bigger contracts are awarded to certain contractors like Mr. Jai Prakash and Nand Lal. About major repairs works of last 5 years, Shri Sahi stated that grouting of Shashi Block 1996-97, roof replacement 1998 (auditorium), Septic tank 1997-98, water tank 1998, plaster of boundary wall 1998, electric wiring and cable change 1998, were done but no other maj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he did not know any person other than Shri Krishan Bhatt, who was employed with him for the last 10 years. Sh. Prem Bahadur and K.B. Singh were stated to be closely known to the president/other members of the trust. Shri Singhal was informed that a survey was conducted in the school trust and after the survey, the enquiries have revealed that the abovenamed persons (except Shri Krishna Bhatt) are not traceable at the given addresses and the payments made by the trust through cheques have been credited in the bank account of such non-existent persons and from there either the money has been withdrawn in cash (through self cheques) by Shri Krishn Bhatt or the money has been converted into a FDR which on maturity has been transferred in the accounts of his (I.C. Sanghal) family members/family concerns. Being an auditor of the school, he was asked to state whether these facts came to his knowledge and whether he had seen that there were proper vouchers and bills in respect of the payments made by the trust because during the course of survey, in many cases, there were no bills available with the trust in respect of the payments made to the said persons. Shri I.C. Sanghal replied that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal purposes. Details of money siphoned to non-existent persons are as given below: S. No. Name of the recipient Cheque No. Date Amount (Rs.) Issuing Bank a/c Recipient bank a/c 1. Abhinav Prakash 263065 28-3-1994 1,37,357 CH-6,Young Road 1367, PNB, Indiranagar 2. Lokesh Singh 263073 28-3-1994 1,26,062 -do- 1373, -do- 3. Onkar Singh 263066 28-3-1994 1,27,850 -do- 1366, -do- 4. Onkar Singh 254 23-5-1998 50,000 CH-1 PNB, Indiranagar 5. Onkar Singh 856 29-5-1998 73,528 CH-1 -do- 6. Shree Krishan 263070 29-5-1998 1,54,656 CH-6 1370, -do- 7. Hem Raj Sahni 263068 -do- 132,396 CH-6 1365, -do- 8. Ram Kumar 263067 -do- 1,29,141 -do- 1364, -do- 9. Bir Singh 263069 -do- 1,33,785 -do- 1371, -do- 10. Anurag Garg 263072 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od Jain, Rajendra Kumar, Jai Kishan, H.K. Mittal and Prem Bahadur. While investigating the issue of siphoning out of school funds in convenience with the members of the school trust, it came up during the proceedings that huge amount of money has been siphoned to benefit the school, Stepping Stone, which is the proprietorship concern of Mrs. Chandra Raj Laxmi, who has got substantial interest in it. The AO was of the view that since trust was getting benefit under s. 10(22) of the IT Act, therefore, cannot siphon its money to any person where he or she (president of the trust) has got substantial interest. 8.4 The assessee initially tried to question the bona fides of enquiry into the siphoning of money toSteppingStoneSchoolon the ground that the reasons recorded for s. 148 did not carry the siphoning of money toSteppingStoneSchool. However, the AO rejected the contention of the assessee as after amendment no such plea could be taken. The AO on getting the sanction from CIT, Meerut, issued notice under s. 148 of the IT Act on 24th Aug., 2000. The learned counsel for the assessee requested for inspection of the file prior to proceeding under s. 148 which was allowed by the AO. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposed additions were as under: 1. Denial of exemption under s. 10(22) and taxing the surplus of Rs. 14,56,373. 2. Adding the bogus expenditure of Rs. 7,99,500 on account of civil repairs and maintenance as mentioned above. Again submission was made that proceedings are pending before Addl. CIT under s. 144A of the IT Act. However, the AO supplied the statements of the persons, i.e., R.C. Singhal, Shri S.S. Bisht and Shri I.C. Sanghal to the assessee. The representatives of the assessee were also asked to furnish the copy of the account ofSteppingStoneSchool. The AO further observed that there had been no efforts on the part of the assessee-trust to establish the genuineness of the payments allowed against civil repairs and maintenance to non-existent persons. The assessee has all along contested the validity of s. 148 proceedings. About these payments it has been stated that they were producing details of payments made to the contractors, copy of bank statement in support of the payment, copy of TDS return and copy of bill in support of genuineness of expenditure. Reliance was also placed on the statement of Shri I.C. Sanghal. The AO however observed that to prove the genuinen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... address is shown by the assessee as Mittal Co. 18, Patel Nagar, Dehradun. Enquiries conducted by the Department reveal that no such person exists. Shri Mahadev Sahi, estate superintendent, has verified the bills submitted by alleged Shri H.K. Mittal. On the contrary, Shri Mahadev Sahi, estate superintendent, stated in the course of statement recorded on oath that he never knew Shri H.K. Mittal. Also, it was stated by him that Shri H.K. Mittal was never related to the school. The bills so submitted is, therefore, bogus. In the circumstances, the amount of Rs. 2,67,000 is established to be bogus and is being disallowed and is added to the income of the assessee-trust. 5. Shri Prem Bahadur Singh, who has been allowed payment of Rs. 50,000 is resident of 5B,Guru Road, Dehradun. Assessee has not submitted any bill of Shri Prem Bahadur Singh. Shri Mahadev Sahi, estate superintendent, has stated that he never knew Shri Prem Bahadur Singh. Enquiries conducted by the Department reveal that Shri Prem Bahadur Singh is employed with M/sSteppingStoneSchool, a proprietorship concern of the president of the assessee-trust and is not engaged in any contract work. In the circumstances, payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ambrian Hall at a concessional rate. This was accepted by the board. Since the trust had no fund in surplus, to pay the cost of land, it was decided that trust should pay a sum of Rs. one crore in lieu of land to be transferred in it over a period of ten years or such involved period as mutually decided. Honorary Secretary authorised to formalise and sign all legalities as per terms of agreement discussed." 8.6.2 It was also stated that property at 12,Lytton Road, Dehradun, has been taken over by police department since November, 2000, and legal proceedings are pending against them. Therefore, Smt. Chandra Raj Laxmi has returned a sum of Rs. 50,00,000 to the assessee-trust in April, 2001. In this background, it was stated that the transaction with M/sSteppingStoneSchoolhas been beneficial to the trust and there has been no siphoning of funds for non-educational purposes. 8.6.3 The AO referred to minutes-referred property at 12, Lytton Road, Dehradun, being taken over by Cambrian Hall Educational Trust as concessional rate by paying a sum of Rs. one crore spread over a period of ten years. The minutes are dt.19th Aug., 1988. The MoU dt.29th Nov., 1988, has been filed which is be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto necessary legal document to enforce the terms and conditions as laid down herein." 8.6.4 The AO also observed that after the receipt of the notice from the Department, there was a hurried effort to formalise an agreement between Shri Rishi Rana through his, attorney Smt. Chandra Raj Laxmi, and Shri Krishna Rana with Cambrian Hall Educational Trust. The agreement is dt.21st March, 2002. The assessee-trust was to purchase land as per details given in the agreement from the first party in lieu of the cancellation of deal mentioned earlier. 8.6.5 The AO considering the facts and circumstances of the case concluded that these agreements were hurriedly made agreements having all sorts of contradictions and discrepancies within itself showing clearly that the name of M/s Banu Sons (P) Ltd. is being projected to cover up the illegal siphoning of the money toSteppingStoneSchool. Careful consideration of these documents reveals many infirmities. According to the AO, the MoU dt.29th Nov., 1988is an afterthought and concocted story in order to prove the transactions between the Cambrian Hall Educational Trust andSteppingStoneSchool. The AO noted the points of contradictions in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payments toSteppingStoneSchoolwere meant against the land to be acquired, then why there has been repayment fromSteppingStoneSchoolto Cambrian Hall Educational Trust. This only means that funds were given toSteppingStoneSchoolas per its business needs. 7. There has been deliberate intention on the part of the trust to conceal the transaction withSteppingStoneSchool. As per the balance sheet of M/s Banu Sons (P) Ltd., there appears no advance received from Cambrian Hall Educational Trust which has duly been audited by the chartered accountant vide report dt.30th Sept., 1995, while as per the details submitted by Cambrian Hall Educational. Trust, theSteppingStoneSchoolis debited by an amount of Rs. 4,37,020 at the end of the year. 8. Notwithstanding board minutes dt.19th Aug., 1988, MoU dt.29th Nov., 1988, the fact is that the money given toSteppingStoneSchoolas interest-free has given undue benefit to the president of the trust who is the proprietor of the said school and is having substantial interest in the trust. 9. The principal of the school, accounts officer and the auditor of the school have confirmed in their statements that money given toSteppingStoneSchoolwas in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order and was, therefore, not considered as relevant. The CIT(A) also held that since agreement of sale dt.21st March, 2002, has already been considered by the AO, therefore, there is no need to admit additional evidence. All the pleas of the assessee were rejected on both the issues regarding reopening of the assessment under s. 147 of the IT Act as well as regarding exemption claimed under s. 10(22) of the IT Act. The appeal of the assessee, therefore, was dismissed vide impugned order. 10. The assessee is in appeal before us against the impugned order on the grounds mentioned above. 11. Though many grounds are taken in the grounds of appeal but these raise two issues mainly, that is, reopening of the assessment under s. 147 of the IT Act and claim of the exemption under s. 10(22) of the IT Act. We, therefore, take both the issues separately. Reopening of the assessment under s. 147 of the IT Act 12. The learned counsel for the assessee relied upon ground No. 3 of the appeal and argued that CIT(A) erred in upholding the invoking of the provision of s. 147 and reopening the assessment under the said section and extending its scope to cover the transaction withStep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not applicable to this case. 14. We have considered the rival submissions and observations of the authorities below and details submitted in the paper book and case law relied upon by the learned representatives of both the parties. 14.1 In the present case, the IT authorities conducted survey under s. 133A of the IT Act in the premises of the assessee-trust. The IT authorities found that payments have been made to certain non-existent persons towards civil repairs and maintenance. They also found that interest-free advances have been made toSteppingStoneSchool. During the survey statement of four persons, that is, R.C. Singhal, principal, S.S. Bisht, accounts officer, Mahadev Sahi, estate superintendent and I.C. Sanghal, chartered accountant, of the assessee-trust were recorded. From the survey proceedings and further proceedings and investigations carried into the matter, the Revenue Department decided to reopen the assessment proceedings and, as such, proposal was sent to the competent authority who has granted sanction to initiate proceedings under s. 147 of the IT Act. Sec. 147 of the IT Act has been amended w.e.f. 1st April, 1989, and now it is provided that "If the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed; it was, however not disclosed as to what was the opinion of the auditor as to what is reasonable allocation of share of the assessee having regard to the amount of work done on behalf of assessee-company onLondonoffice expenses. It was also held that there is no conclusive evidence that at the time of filing the return before assessment, such opinion about reasonableness was there. In view of the above facts, Hon ble Supreme Court held that assessee was not guilty for disclosing the basic facts, therefore, reopening was not justified. In the case of Lakhmani Mewal Das, Hon ble Supreme Court held that the reasons for the formation of the belief contemplated by s. 147(a) of the IT Act, for the reopening of an assessment must have rational connection or relevant bearing on the formation of the belief. In the case of Bhanji Lavji, the Hon ble Supreme Court held that when primary facts necessary for assessment are fully and truly disclosed to the ITO at the stage of assessment of the original assessment proceedings, he is not entitled on change of opinion to commence proceedings for reassessment. In the case of Hindustan Lever Ltd., it was held that facts disclosed and accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for five rupees and won a prize of rupees one crore. The notice of reassessment on such facts to AOP was held to be valid. Hon ble Allahabad High Court in the matter of Pradeep Kumar Har Saran Lal vs. AO (1997) 141 CTR (All) 37 : (1998) 229 ITR 46 (All), held that "the only requirement of s. 147 is that the AO must have good reason to believe that some income had escaped assessment. Once this belief is well found, recourse to reassessment proceedings cannot be said to be illegal. So long as the ingredients of s. 147 are fulfilled, the AO is free to initiate reassessment proceedings". In the matter of Phool Chand Bajrang Lal Anr. vs. ITO Anr. (1993) 113 CTR (SC) 436 : (1993) 203 ITR 456 (SC), Hon ble Supreme Court considered the facts that cash loan claimed to be taken by assessee from company, accepted as genuine and original assessments made allowing interest thereon as deduction. Subsequent information from officer of the assessing company that its managing director had confessed that company had not advanced any loan to any person during period covering date of cash loan. Subsequent information (being) definite, specific and reliable, Hon ble Supreme Court on such facts he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these four persons have been recorded in this order as well as in the assessment order. The AO also held that there was siphoning of the funds of the assessee-trust toSteppingStoneSchool. The AO recorded 12 reasons in support of his findings in the assessment order at pp. 16 to 18. The reasons for making addition of Rs. 5,99,500 have been recorded by AO at pp. 12 and 13 of the assessment order. We have reproduced the reasons and findings of the AO above. The CIT(A) confirmed the findings of the AO on both the issues as well as confirmed the reasons given by the AO for rejecting the claim of the assessee. The CIT(A) dismissed the application of the assessee under r. 46A of the IT Rules in which assessee had made a request for admission of the additional document, that is, registered sale deed dt.6th May, 2002, which is with regard to transfer of land in village Khairi Kurd, Pargana Parwa Doon, District Dehradun, in favour of the assessee by Rishi Rana and Krishna Shamsher Rana. The CIT(A) held that this deed was executed after the assessment order and that assessee has failed to prove sufficient cause for not producing this document before the AO. The CIT(A) also held that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Prem Bahadur, towards civil repairs and maintenance and payments were made through cheque upon which TDS was deducted and details are available in support of the payments. The learned counsel for the assessee pointed out to the reply filed before the AO dt.15th Feb., 2002, copy of which is filed at p. 33 of the paper book. The learned counsel for the assessee also pointed out towards the copies of the bills through whom payments have been made to the contractors. The copies of the bills have been filed in the paper book. The learned counsel for the assessee submitted that statement of Mahadeo Sahi was recorded under s. 131 of the IT Act when no proceeding was pending before the AO and no right to cross-examination is given to the assessee, therefore, such statement cannot be relied on at the assessment stage. The learned counsel for the assessee relied upon the following case law : (i) Decision of Bombay High Court in the matter of G.M. Braveries Ltd. vs. Union of India Ors. (2001) 161 CTR (Bom) 33 : (2000) 108 Taxman 547 (Bom) in which it was held that power under s. 131(1) can be exercised only if proceedings are pending before concerned authority. (ii) Decision of Allah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced and TDS have been deducted, therefore, payment to them is genuine payment and should not be doubted by AO. He has relied upon decision of Hon ble Supreme Court in the matter of CIT vs. Orissa Corpn. (P) Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC) in which the assessee produced letters of confirmation and also gave details and particulars of the creditors who were also assessed to tax. Therefore, addition for cash credit was deleted, the decision of Patna High Court in the matter of Addl. CIT vs. Bahri Brothers (P) Ltd. (1984) 42 CTR (Pat) 66 : (1985) 154 ITR 244 (Pat) in which facts were that lenders making payments to the assessee by account payee cheque and assessee also repaid loan and interest and brokerage through account payee cheque, and assessee produced certificate from the bank, therefore, it was held that assessee discharged onus and cash credit cannot be treated as income. The learned counsel for the assessee further submitted that the assessee made advance to M/s Stepping Stone School during 10 years through MoU for the purchase of land but the deal was cancelled as the land was taken into possession forcibly by the police department so another land was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons whose statements have been recorded during survey. The learned Departmental Representative further submitted that payment to Prem Bahadur is not proved by any evidence and he was found to be employed withSteppingStoneSchool, therefore, payments made to them are bogus. The learned Departmental Representative submitted that findings of AO are not rebutted by the assessee. As regards transactions with M/s Stepping Stone School is concerned, the learned Departmental Representative submitted that the alleged MoU is fabricated and concocted document as ownership was not with Smt. Chandra Raj Laxmi. It was with the company, M/s Banu Sons (P) Ltd., but payment is taken in the account of M/s Stepping Stone School, therefore, the whole story is made to cover siphoning of the funds systematically from assessee-trust to M/s Stepping Stone School as Smt. Chandra Raj Laxmi is proprietor of M/s Stepping Stone School as well as president of the assessee-trust. The learned Departmental Representative submitted that, therefore, the story of purchase of the land and making advance is clearly afterthought and has rightly been rejected by the authorities below. The learned Departmental Representa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried on by the educational institution, it will not cease to be one existing solely for educational purposes since the object is not one to make profit. The decisive or acid test is whether on an overall view of the matter, the object is to make profit." The IT authorities in this case conducted survey under s. 133A of the IT Act at the premises of the assessee-trust and during survey found that assessee has made payments to non-existent persons. The IT authorities also recorded statements of four persons connected with the assessee-trust, Shri R.C. Singhal, principal, S.S. Bisht, accounts officer, Mahadeo Sahi, estate superintendent and I.C. Sanghal, chartered accountant, during survey. They have made statements, which were incriminating in nature and were made against the assessee and clearly proved in their statements that payments were made to non-existent persons. The IT authorities further gave opportunity to the assessee not only at the stage of survey but at the assessment stage also to prove the genuineness of payments to the non-existent persons. The assessee did not avail of any of the opportunities to prove the genuineness of the payments allowed to non-existent persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he accounts officer. He has further stated that normally no payment is made without proper bill. He has further stated in his statement that he did not remember exactly as to for what purposes, payments were made to these persons individually, but these payments have been made against repair and maintenance charges, as the matter was very old. The IT authorities raised a query in statement to explain for what purposes these payments were made and why these have not been so far adjusted. Also state as to the work for which the payments have been made and whether the bills for all such payments have been received or not ? In reply to query, Shri R.C. Singhal, principal, stated that these are for general repair and maintenance. Regarding the bills, why these have not been received, it is not in his knowledge. He has further stated in his statement that the estate superintendent or the dealing accountant got the cheques signed from him after showing that either the work has been completed or the bills have been obtained. Relying upon their submissions, the principal signed the cheques. We have reproduced the substance of this statement which was taken from assessment order in the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such questions. However, he has explained that since his father has been looking accounts of all the family members and he was also associated with the school for getting the contract work executed, it is only (he) who may be knowing as to how the money reached from these persons to the bank accounts of his family members/family concern. The above statement of all the persons recorded in this order as well as by the AO in the assessment order and the facts discovered by the IT authorities during survey have not been clarified by the assessee at any stage. Therefore, it is a specific fact came on record that the assessee-trust issued certain cheques in the name of four non-existent persons and from their accounts the amounts are withdrawn by Krishna Bhatt who is working in the office of I.C. Sanghal, chartered accountant of the assessee-trust, and from there, amount is transferred to the family members/family concern of the chartered accountant. The assessee never proved before the authorities below that payments were made genuinely to all the contractors; rather, it came on record that the money paid by the assessee ultimately came in the hands of the chartered accountant of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to the cash credits and that too on different facts in which the cash creditors were found to be taxpayers and payments have been received through cheques as well as paid through cheques and confirmations have been filed. However, such is not the case before us as no explanation is offered before the IT authorities to prove genuineness of the payment. 22.3 The AO found that assessee-trust has been advancing interest-free advances to Stepping Stone School which is the proprietary concern of Smt. Chandra Raj Laxmi who is also president of the assessee-trust wherein she has substantial interest as per provisions of s. 13(1)(c) of the IT Act. The AO vide letter dt.15th March, 2002, asked the assessee if the transactions of the assessee withSteppingStoneSchoolhave been approved by members of the society and directed to furnish copies of the minutes. The AO specifically asked as to why it should not be taken that the money of the assessee-society has been utilised for the purposes of other than educational by siphoning of the funds. In the same query AO specifically mentioned that copy of the statement of I.C. Sanghal, chartered accountant, has been made available to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, Lytton Road, Dehradun, either from Banu Sons (P) Ltd. or from Stepping Stone School. Therefore, authorities below were justified in rejecting the claim of the assessee. The AO has given 12 reasons for disputing the correctness of the claim of the assessee which have been recorded above in this order as already mentioned at pp. 16, 17 and 18 of the assessment order. The assessee has not filed any convincing explanation to prove that transaction withSteppingStoneSchoolwas bona fide transaction or for any necessity. The amount given toSteppingStoneSchoolwas without any valid/lawful reason. The assessee also tried to explain that when deal through MoU was cancelled then Smt. Chandra Raj Laxmi offered another land for assessee-trust for which agreement was executed on 21st March, 2002, in between Rishi Rana, Krishna Shamsher Rana and the assessee-trust, and land was offered at the lesser price for which further sale deed was executed in favour of the assessee on 6th May, 2002, and assessee moved an application for admission of the additional evidence before the CIT(A). We find it is also after thought story of the assessee. This deal was not at all connected with MoU executed by Sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 (All) considered the fact that it was found by the ITO that even one crossed cheque issued in the name of the concern was really encashed by the partner of the assessee-firm. Therefore, it was found to be not genuine or existing entity. The High Court confirmed the findings of the authorities below. Same is the case before us in which though the amounts are credited in the account of four non-existent persons, but the same were either withdrawn by Krishna Bhatt, employee of the chartered accountant of the assessee, or the same were converted into FDRs which on maturity have been transferred in the accounts of his family members/family concern and father of the chartered accountant has filed a petition before Settlement Commission for settlement of the matter on the same issue. Therefore, the above cases are clearly applicable against the assessee. The case law relied upon by the counsel for the assessee are, therefore, not applicable. 22.4 It is an admitted fact that all the four persons, that is, principal, etc. of the assessee-trust who have been examined during survey, are still in the service of the assessee-trust. It is also, admitted fact that all the copies of their stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute about legal proposition decided in the case law referred to by counsel for the assessee, but in the case before us, IT authorities recorded statements of the employees of the assessee during survey under s. 133A(3)(iii) of the IT Act, therefore, such case law as relied upon by the counsel for the assessee, are clearly distinguishable. The learned counsel for the assessee lastly relied upon the decision of Delhi High Court in the case of Lagan Kala Upvan. In this case certain loans were given by the assessee to the persons having substantial interest in the assessee-trust which were also repaid. The Hon ble High Court dismissed the appeal of the Revenue mainly on the reasons that the contentions laid down in s. 11 and 13 are not relevant for the purposes of s. 10(22) of the IT Act. In the case before us, no advancing of the loan is alleged. What is stated is that amount was advanced toSteppingStoneSchoolfor the purchase of land but the explanation of the assessee is not found to be correct and explanation of the assessee appears to be afterthought and based upon the documents which according to the authorities below were concocted subsequently to cover up the explanation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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