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Maharishi Markandeshwar Education Trust, Versus Commissioner of Income Tax (Central) , Ludhiana.

ITA No. 277/Chd/2008 - Dated:- 23-3-2012 - SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER Assessee by: Shri Ashwani Kumar, CA Revenue by : Shri Alok Singh, Sr.DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER This is an appeal filed by the assessee. It is directed against the order passed by the CIT, (Central), Ludhiana dated 31st January, 2008 u/s 12AA (3) of the Income Tax Act, 1961 (the Act). The grounds of appeal read as under:- 1. That order u/s 12AA(3) of the Income Tax A .....

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e conclusions without application of mind and solely relying on the conclusions drawn by the ld. Assessing Officer framing the assessment for A.Y.2006-07. 4. That the order passed is against principles of natural justice and no reasonable opportunity was provided to the appellant to explain its case. 2. The assessee is a trust running nine educational institutions under various names catering to different kind of education like Management, Engineering, Medial Sciences, Nursing, Pharmacy, etc. It .....

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the objects for which it was set up. Accordingly, he initiated proceedings u/s 12AA(3) of the Act and issued show cause notice to the assessee as to why the registration should not be cancelled. The ld. CIT after referring to the examination of the pages 1 to 7 of the bunch of documents captioned as A-37 seized during the course of search has found that the assessee had made payments in cash to the doctors of medical and dental colleges run by the assessee. Such payments were calculated at a su .....

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e said documents were signed by Shri Tarsem Garg being the Chairman of the assessee trust. On perusal of all these documents ld. CIT has come to the conclusion that there is a manipulation in the books of account and cash transactions have been made outside the books of account. He referred to the fact that total cash found at the time of search was a sum of ₹ 13,98,476/- as against the cash available as per books of account of ₹ 26,61,781/- and, thus, he arrived at a conclusion that .....

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t only if it is engaged in genuine charitable activities and referring to these discussions ld. CIT has cancelled the registration. The assessee is aggrieved, hence, has raised the aforementioned grounds of appeal. 3. After narrating the facts, it was submitted by the learned AR that upon receiving the impugned order from CIT which is dated 31st January, 2008, the assessee again submitted the application for registration in prescribed proforma on 10th March, 2008 and the very same CIT vide his o .....

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rovisions contained in 12A(2) of the IT Act, this registration shall have effect from Assessment Year 2008-09 onwards. 4. He further stated that in the impugned order ld. CIT has rejected the registration of the assessee on two grounds: firstly, regarding the payment of salary to the doctors aggregating to a sum of ₹ 45,66,372/-. He submitted that this issue was considered by the Tribunal for Assessment Year 2006-07 in the case of the assessee and the Tribunal vide its order dated 30th Oct .....

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g details:- S.No. Page No. Relevant Date & content Total Amount of payments mentioned. 1 Page 1/A-37 Payment to doctors of medical college on 01.07.05. Rs.9,26,450/- 2 Page 2/A-37 Payment to doctors of dental college on 01.07.05 Rs.5,27,245/- 3 Page 3/A-37 Payment to doctors of medical college on 01.08.05 Rs.9,62,335/- 4 Page 4/A-37 Payment to doctors of medical college on 01.08.05 Rs.6,82,375/- 5 Page 5/A/37 Payment to doctors of medical college on 01.09.05 Rs.8,27,617/- 6 Page 6/A-37 Payme .....

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or cross-examination of the Accountant and Principal. The Accountant and Principal retracted their statements and filed affidavits explaining as to how their statements were recorded which are not correct. The Assessing Officer however, observed that affidavits are self-serving documents which could have no evidentiary value. They have retracted from their statements under the influence of their pay-master. Accordingly, the amounts stated in the seized material were treated as unexplained expend .....

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ments of only two doctors were recorded. All these doctors have filed affidavits during assessment proceedings denying any cash payment. Therefore, there is no justification for making addition in respect of 72 doctors ignoring their affidavits. Though the statements recorded during search have evidentiary value but the statement was not that of the assessee himself but of the third parties. Therefore, admission by third parties when retracted, cannot be admitted in evidence. He accordingly dele .....

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h. They are the witnesses on behalf of revenue and not on behalf of the assessee. The statement is not of the assessee or its principal officer. When the Chairman of the assessee trust sought for cross-examination, both these witnesses have retracted from their statements and filed affidavits also. The Assessing Officer has not examined any of the doctors stated to have received extra remuneration. Even when 2 of the doctors were examined, they have denied having received extra remuneration. The .....

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assessee has incurred expenditure and he offers no explanation about the source of such expenditure or the explanation offered is not in the opinion of the Assessing Officer satisfactory, the amount covered by such expenditure may be deemed to be the income of the assessee for such financial year. Therefore, even if it is to be held that the assessee has incurred certain expenditure and the source of expenditure remains unexplained, the amount can be added under section 69C of the Act. However, .....

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mp; 12 of the Act. Thus on one hand, income derived from property held under trust is chargeable to tax, to the extent the amount spent or applied for the charitable or religious purposes shall not form part of the total income of the assessee. The income of a trust is not computed under the various heads of income as prescribed in section 14 of the Act. Therefore, the Proviso to section 69C which bars allowability of deduction of such unexplained expenditure under any head of income will not ap .....

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ddition made by the Assessing Officer to the returned loss of ₹ 22,03,50,033/- was a sum of ₹ 44,70,372/- reducing the loss of the assessee to ₹ 21,58,79,661/-. He submitted that the aforementioned addition of ₹ 44,70,372/- was out of the aforementioned amount of ₹ 45,66,372/- referred by the CIT. 6. He further submitted that the second allegation of the CIT in his order is regarding shortage of cash found at the time of search in the hands of the trust. He submitte .....

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ppeal before the Tribunal and the Tribunal vide order dated 30th November, 2009 in ITA No.2490/Del/2008 in the case of Shri Tarsem Garg and in ITA No.2491/Del/2008 in the case of Shri Sanjeev Garg has confirmed the deletion. The learned AR referred to the relevant portion of this decision which is reproduced below and copy of which is placed at pages 8-13 of the paper book:- 7. We have heard both the counsels and perused the records. As per the admitted fact of the case the impugned cash were fo .....

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7.1 We find that Shri DK Bansal has himself accepted that he was not handling the cash and four other persons were handling cash. Now we refer the statement, of Shri DK Bansal that due to cash shortages in the accounts of the trust and the on the advice of trustees, he used to put in fictitious credit entries. These statements only show that there may be expenditure out of unaccounted cash of the trust at the instance of trustees/assesses. Hence, the preponderances of the probability shows that .....

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s lying with the assesses. 7.2 In the background of the aforesaid discussion and precedent, we do not find that as per the circumstances, it can not be concluded that the sums are unaccounted income of the assessees themselves. The revenue having accepted the return of MMET and the audited accounts therein displaying the fact that these cash belong to the trust and were lying with the assesses, cannot again subject to tax the same cash in the hands of the assessee as their undisclosed income. Ac .....

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