TMI Blog2016 (12) TMI 1567X X X X Extracts X X X X X X X X Extracts X X X X ..... additional ground raised by the assessee is dismissed. Jurisdiction of the Assessing Officer - Held that:- Notice u/s.143(2) was issued to the assessee on 31-03-2007. The assessee filed return of income for the year under consideration along with the returns for other years covered u/s.153C on 13-08-2007. Thereafter notice u/s.143(2) was issued to the assessee on 30-06-2008 which was duly served on the assessee on 01-07-2008. Further notice u/s.142(1) for the A.Y.2006-07 was issued on 07-09-2007. Notice u/s.143(2) was issued on 11-10-2007. The assessment order was passed on 07-08-2008. Till the completion of the assessment, the assessee had never raised the issue of jurisdiction of the Assessing Officer. Therefore, in view of the clear provisions of section 124(3), the assessee now cannot call in question the jurisdiction of the Assessing Officer. The various decisions relied on by the Ld. Counsel for the assessee are distinguishable and are not at all applicable to the facts of the present case. In view of the above discussion, the additional ground No.2 filed by the assessee is dismissed. Denial of exemption of entire income for contravention of provisions of section 13(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions cited above. Needless to say the Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per law - ITA No. 320/PUN/2010 - - - Dated:- 14-12-2016 - Vikas Awasthy (Judicial Member) And R. K. Panda (Accountant Member) For the Appellant : S. N. Doshi For the Respondent : J. P. Chandrakar, Nandita Kanchan ORDER R. K. Panda (Accountant Member) This appeal by the assessee is directed against the order dated 29-01-2010 of the CIT(A)-II, Pune relating to Assessment Year 2006-07. 2. Facts of the case, in brief, are that the assessee is a trust running various educational institutions which conduct various technical courses such as Engineering, Medicine, MBA etc. It was registered u/s.12A of the I.T. Act, 1961 and it had claimed exemption u/s.11 of the I.T. Act. It had filed original return of income on 4-01-2007 which was subsequently revised on 13-08-2007. 3. A search and seizure operation u/s.132 of the I.T. Act was carried out in the case of Shri M.N. Navale on 20-07-2005 who is the Principal trustee of the assessee trust. During the course of search operation certain documents were seized from the resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,00,000/- while the fair rent works out to ₹ 4,78,100/-. This is excess payment. 6. Rent paid per annum in respect of the property at Flat Nos. 7,8, 9, Geeta Building, Sion, Mumbai, owned by Shri M.N. Navale, is ₹ 25,44,000/- while the fair rent works out to ₹ 7,58,100/-. This is excess payment. 7. The farm house of Shri M.N. Navale, taken on rent unheard of, does not serve any purpose relating to objects of the trust and is only for the benefit of trustees. 8. Apart from the above, there are number of properties acquired by the Principal Trustee/other trustees and some of the details are discussed in the order and the detailed discussion is available in the copy of the order u/s.171 dated 06-12-2007, which is enclosed as Annexure VII to this order. 5. He observed that in the case of the assessee evidences show siphoning of money, diversion of amounts, creation of assets on which all assets are out of the receipts on account of donation. The assets created by Shri M.N. Navale and others are substantial in value and are much more than the known sources of income and the incomes returned. This and the benefits to the trustees was possible only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitutions in coded form are known and the names of the students do not become clear which prevents all the cross checking and further verification. Against these receipts the expenses are also written which are clearly identifiable and independent evidences exist to prove that the entries contained therein are true and correct. 9. The Assessing Officer analysed pages 31, 43, 45, 71, 83 and 87 of Bundle A-2 and observed that cash deposits mentioned on the right hand side of these pages were duly verified from the various bank accounts in Thane Janata Sahakari Bank or Central Bank of India as discussed in Para 4.3 of the order. According to him, the fact that these cash deposits were duly verifiable from the bank accounts prove that the entries recorded in the seized documents reflect the true and actual state of affairs. Moreover, some other entries on the right hand side like that of refund given as a result of cancellation of admission as mentioned in page 39 of Annexure A-2 was also admitted as correct by the assessee. 10. The Assessing Officer analysed the left hand side of the seized papers and noted that opening balance of particular page, then amounts against the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right hand side of the seized documents were found to be correct and accepted by the assessee, the remaining entries including those on the left hand side cannot be denied. He accordingly concluded that the entries on the left hand side were for the receipts or incomings and accordingly rejected the explanation of the assessee as unacceptable. 12. So far as right hand side is concerned, the Assessing Officer noted that there are certain amounts withdrawn against the name Shendesaheb which is totaling to ₹ 36 lakhs and the amount paid against the Arrow (- ) mark which is particularly very large and to the tune of ₹ 7,36,90,000/-. He observed that the assessee was unable to give any specific explanation to the query raised on this issue. He, therefore, concluded that all entries on the seized documents are real and reflect actual transactions. The Assessing Officer further noted that in view of abundant evidences clearly showing charging of donations, the assessee failed to explain the transactions in the light of books maintained. He referred to the statement of Shri Maruti N. Navale, the President of the assessee trust wherein he has stated that the above trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The correctness and relevance of the seized material to the case of the assessee is clearly established. 4. There is total failure on the part of the assessee to explain the seized material and also to explain the relevant evidences in the light of the books maintained. The relevance and correctness of the seized material is clearly established. 5. The sum of ₹ 22,45,06,500/- represents undisclosed income of the assessee, for A.Y. 2006-07, on account of collection of donations. 14. The Assessing Officer further noted that the registration of the trust has been cancelled by the CIT Central, Pune u/s.12AA(3) vide order dated 09-10-2007 as the activities of the trust are not found to be genuine and also that the activities of the trust are not being carried out in accordance with the trust deed. He, therefore, held that regardless of cancellation of registration the benefit of section 11 and 12 are denied to the assessee in view of applicability of section 13(1)(c) of the Act and the status of the assessee has to be treated as AOP. 15. The Assessing Officer noted that as per the terms of reference, the Special Auditors have recasted Income Expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 2,67,71,378/- and the interest debited to the income and expenditure was ₹ 13,29,66,251/-. Rejecting the various explanations given by the assessee the Assessing Officer capitalized the amount of ₹ 12,58,58,634/- out of the above amount of ₹ 13,29,66,251/- towards the cost of the asset by following the special audit report on the ground that relevant details of term loan, working capital loan etc and their utilization were not given. 19. The Assessing Officer noted that during the course of search at the residence of Shri M.N. Navale on 20-07-2005 cash of ₹ 1,26,81,775/- and jewellery of ₹ 45,92,610/- was found out of which cash amounting to ₹ 1,20,00,000/- and jewellery valued at ₹ 40,90,206/- was seized. He observed that Shri M.N. Navale could not explain the source of cash and in response to question No.15 he had surrendered a sum of ₹ 1,25,00,000/-. The Assessing Officer reproduced the relevant question and answer at Para 10.1 of the assessment order. He noted that subsequently Shri M.N. Navale had taken a different stand and retracted from the statement and created a bigger HUF and obtained a court decree in order to crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Owner of the property Cost of the property (Rs.) Period of lease covered in the audit period License fee paid for premises only (Per Annum) Fair rent as per Hon ble High Court of Allahabad @7% P.A. Office at Govind Chambers, Karve Road, Pune M.N. Navale 3,40,493 1-12-2004 to 31-3-2006 9,00,000 23,835 Farmhouse at NDA Road, Pune M.N. Navale 68,30,000 1-1-2005 to 31-3-2006 15,00,000 4,78,100 Flat No.7,8 9, Geeta Building, Sion, Mumbai M.N. Navale 1,08,30,000 6-10-2005 to 31-3-2006 25,44,000 7,58,100 23. According to the Assessing Officer the rent paid by the assessee to Shri M.N. Navale and his family members is not at all reasonable and therefore attracts the provisions of section 13(1)(c)(ii). According to the Assessing Officer the farm house does not service any purpose relating to the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f receipts on account of donations/capitation fee, are evident from the seized material. x) Number of assets of the Principal trustee/related persons have been found/seized as against nominal incomes returned and known sources of income. The assets/benefits derived are possible only because of receipts on account of donations/capitation fee. xi) The theory of bigger HUF and obtaining of decree from the Court is an effort only to escape the rigours of laws relating to taxation. The said decree of the Hon. Court has been obtained by misrepresentation and suppression of facts. The same is not accepted by the department and appropriate course of action is contemplated. xii) Siphoning of money, diversion of amounts, creation of assets, all out of the receipts on account of donations, and payment of rent which is not reasonable attract the provisions of section 13(1)(c). These are the benefits derived by persons referred to in section 13(3). 24. Before CIT(A) the assessee challenged the validity of the order passed u/s.153C r.w.s. 143(3) on the ground that the same is based on the order of the CIT passed u/s.12AA(3) for cancelling the registration which is invalid sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Mandal 1,81,63,948 (ii) Shrinath Shikshan Prasarak Mandal 99,91,659 28. The assessee filed detailed submissions and relied on various decisions. On the basis of the various submission filed by the assessee the Ld.CIT(A) called for a remand report from the Assessing Officer. After confronting the remand report to the assessee and considering the submission of the assessee to such remand report the Ld.CIT(A) relying on his order for A.Y. 2000-01 and onwards held that by investing in shares of cooperative banks to the tune of ₹ 7,46,720/- the assessee has violated the provisions of section 13(1)(d)(i) and therefore the assessee is not eligible for exemption u/s.l1 of the I.T. Act due to such violation. 29. The Ld.CIT(A) further noted that assessee had invested in shares of limited companies in violation of provisions of section 13(1)(d)(iii). On being confronted by the CIT(A) it was argued that each management institution of the assessee trust has initially acquired only one share of the public limited companies which are renowned and recognized as blue chip companies. The purpose of acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore provisions of section 13(1)(d)(i) would not be attracted is correct. He observed that during this year advances were made by the assessee to two different trust/institutions amounting to ₹ 2,81,55,607/-. Following his order for A.Y. 2005-06 he held that making these advances would not make the assessee ineligible for exemption. 32. So far as addition of ₹ 22,45,06,500/- on the basis of capitation fee/donations received for granting admissions to various courses run by different institutions of the assessee trust is concerned it was submitted that the Assessing Officer erred in interpreting the notings and recordings on the loose papers seized from Shri M.N. Navale as collection of capitation fee and donation for admissions and siphoning off the same. It was argued that the Assessing Officer has failed to prove that the assessee has siphoned off the money. The assessee made elaborate submissions to counter the allegation of the Assessing Officer that the assessee has received huge donation/capitation fee for giving admission to various students in different institutions run by it and that the trustees and their relatives have siphoned off the money for acquiring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A, B Pharma etc. was mentioned. It was inferred that these reflected receipts on account of admissions in these institutes or in these courses. It was also noticed from the analysis of documents in para 5.3 of the order, that the payments were recorded on the right hand side, closing balances were worked out after deducting these payments/outgoings/deposits in Bank Account's etc; and the same closing balance was also carried forward to the next day as opening balance. For example, from loose paper No.25 dated 17.6.2005, the closing balance after deducting all outgoings (including an amount of ₹ 57 Iakhs against arrow ( - ) mark), of Rs.Rs.77,000/- was carried forward to loose papers No.27 to 29 for 18.6.2005. It is, therefore, obvious that after mentioning various expenditures/outgoings recorded in cash on the right hand side of the seized papers, the closing balances were worked out. It shows that these recordings were in the form of day to day cash book showing receipts and payments, and the correctness of the entries was again proved on account of the findings of verification of the huge cash deposits in various bank accounts discussed above. 8.18 At different in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees on cancellation of admission were admitted as correct. if it is so, from where is the money coming for these outgoings? Obviously, on left hand side of these same papers the incomings or receipts in cash have been recorded, which are the sources of these payments and huge deposits in bank accounts etc. The Assessing Officer has thus rightly concluded that when a part of the entries on the right hand side of these seized documents were found to be correct and accepted by the appellant, the remaining entries including those on the left hand side cannot be denied. It is, therefore, correctly concluded that the entries on the left hand side were for the receipts or incomings; and the appellant's explanation in this regard is not acceptable. 8.19 Similarly, on the right hand side, in respect of the amounts withdrawn against the name 'Shende Saheb' or with the arrow ('- ') mark, which is particularly very large and to the tune of ₹ 7,36,90,000/- in total, (in accordance with the table of seized documents pages 1 to 101/A2,) the appellant has not been able to give any specific explanation in its letter dated 4.2.2009. It is stated by the appellant that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and ability to repay loan and liability for administrative expenses etc. It is contended that the monitoring of financial condition of various units for commitment of payments and expected generation of fees etc. is being done and, therefore, notings of these figures was only rough work. It is further explained that notings on the left hand side of the paper was an overall expected cash position inclusive of cheques/DDs, yet to be deposited, which do not represent any admission fee. So far as the outgoings are concerned, it is explained being in the nature of deposits to be made in the banks or fee refunded on cancellation of admission or expenses to be incurred etc. This has been discussed above in paras 8.18 and 8.19. 8.22 It is further contended that figures marked by '- ' on the pages seized may indicate the amount deposited into various bank accounts, or the approximate accounts required to be deposited and has no other significance. Similarly, the deposits in bank with the narration Cash-M , is explained as entry made by the bank in its books and only the bankers should know the relevance of this narration and the inference that this narration indicated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the abbreviated forms like SKNOE, SKNE, BBA, BCS, B Pharma, SCOE, MBA, MCA etc. On the right hand side, entries for admissions cancelled in the name of 3 persons totalling ₹ 42,000/-, cash paid to Shende Saheb ₹ 2 lakhs and amount withdrawn or paid against the '- ' mark, ₹ 70 lakhs are mentioned. Closing balance of ₹ 1,83,000/- has also been worked out on the right hand side and the total of the right hand side and the left hand side on this date has been tallied at ₹ 74,25,000/-. Similar entries are seen on the other seized documents. It is, therefore, not acceptable that such large number of individual entries would be made against the name of institutes or courses on a day to day basis regularly, which are meaningless or without any significance. Only when the right hand side shows a cash deposit in a particular bank account, like 'Thane Janata Sahakari Bank (CC-20) ₹ 45 lakhs' mentioned on the right hand side on the seized documents No.43 (Annexure-IV of the assessment order), the entry is accepted to be correct since it is verifiable from the bank account and the appellant cannot deny it. But it is pertinent to mention her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer. In respect of para 4.3. it is contended that these nothings suggested that the appellant had made these ::deposits in its various bank accounts and these cash deposits are duly accounted in the regular books of accounts. Further explanation has been given in respect of para 4.5 to 4.10 which basically related to the huge amounts of cash payments recorded in these seized documents against the arrow ( - ) mark, and also cash paid to Shende Saheb . Now, in respect of this cash payment of ₹ 36 lakhs which is worked out as per the tabulated chart given in Annexure-1 to assessment order; it is explained that vide page No.135 of the paper book, entry by entry explanation of the amount of ₹ 36 lakhs has been given by the appellant. The explanation given in this page No.135 is as under: Page No. Date of the document Amount Rs. Particulars 13 Not available 1,00,000 This is payment made to Quality Product Co. which is owned by Shri Shende. The payment relates to July 2013. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ane Janata Bank or Central Bank of India; refund of fees given on account of cancellation of admissions; and payments made to 'Shende saheb' or his concerns or to others for expenditure incurred. Therefore, some of the payments against the name Shende Saheb cannot be denied by the appellant in the manner which has been mentioned in page No.135 of the paper book shown above. These entries may actually reflect unaccount payments made to Shende Saheb as stated by the Assessing Officer. However. the point being emphasised is that the appellant itself is admitting the correctness of the entries made on the seized documents by way of explaining the entries on the right hand side in the name of 'Shende Saheb', as it has done in respect of entries in seized documents Bundle A-2. page 25, 31. 43. 45. 71. 83 87 discussed in paras 4 to 4.2 and para 4.3 of the assessment order. Many other examples have been cited by the Assessing Officer in para 5.3(a) to (d) in which entries on seized papers nos.25, 27 to 29, 49 and 83 84 of Bundle A12 have been discussed. The Assessing Officer has not submitted any explanation in the submission dated 4.2.2009 on these seized papers; which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units, which has not been done. Therefore, the assessee has failed to explain as to what happened to the huge amounts withdrawn/paid against the marking - ; which totalled to ₹ 7,36,90,000/-. It was inferred by the Assessing Officer that the payment would have gone to the person who has absolute control over the monies collected towards admissions, be it by way of donations I capitation fees, and that person was Shri M.N.Navale, Principal Trustee of the appellant. It was, therefore, concluded that the amounts indicated against the - marks were actually taken out by Shri M. N. Navale out of the donations collected. 8.28 With regard to paras 4.12 4.13 of the assessment order where it was mentioned that the cash deposited in all the bank accounts of the appellant was ₹ 8.90 crores only whereas as per the seized documents pages 1 to 101/Annexure-A2 it worked out to ₹ 13.41 crores, it is stated by the appellant that these entries on the loose papers have got no relevance. In the remand report it is stated by the Assessing Officer that during the course of assessment proceedings the appellant had tried to verify these amounts mentioned in the seized document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations were frequently being quoted. It is also noticed that the appellant has given explanation regarding seized papers 61 and 62 of bundle A-5 also in the submission dated 4.2.2009, whereas as the Assessing Officer has not cited these seized papers. 8.30 In the remand report, the Assessing Officer has also met the argument of the appellant that these letters are mostly seeking concessions in fees and not donation. The Assessing Officer has rightly contended that fee concession was not a normal thing, which could have been done on request of a MLA, MP etc. but it was available only to certain categories of students under a very strict guidelines or frame work laid down by Government. It is contended that the normal fees was non-negotiable and it was also as per the Government Regulations therefore it was not the concession in fee which these persons were seeking; and fees was only a terminology used for donation. The Assessing Officer has further analysed the seized documents from Shri G.K.Shahani, Director Projects which has been discussed in assessment order from paras 5.1 to 5.3. Many other examples from the seized documents have also been cited as per para 5.3, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the same seized documents in A.Y.2006-07 itself. It is explained by the Assessing Officer in the remand report that addition in respect of Shri M.N.Navale was of the amount which was found to have been appropriated by him out of the donations collected by the appellant; which has been correctly treated as the appellant's income. 8.33 The appellant has made another surprising observation in the letter dated 4.2.2009 that if capitation fees was found to have been accepted, the appellant would be liable under Maharashtra Education Institution (Prohibition of Capitation Fee) Act, 1987; but it is of no relevance for the purposes of exemption u/s.11 of the I.T. Act, and since even the donations would constitute income derived from the property held under the trust, the same qualifies for exemption u/s. 11. In the remand report the Assessing Officer stated that this was not correct since if the activities of the assessee was found to be illegal, they as would not be treated as genuine, and therefore the eligibility u/s.11 12 not survive because of appellant's activities not being genuine charitable activities. 8.34 In this connection, in the decision of the ITAT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. Therefore, the Assessing Officer's conclusion that receipts shown in the name of institutes/courses on the left hand side of seized documents were on account of donations received for admissions; is held to be valid for the reasons discussed above, according to which the appellant's explanation was not found to be acceptable. The appellant could not explain these entries either during the assessment proceedings or appellate proceedings, while the majority of the entries on the right hand side of the seized documents were being admitted and also verifiable from the appellant's bank accounts; or those for expenses paid to Shende Saheb, fees refunded for cancellation of admission etc. were admitted by the appellant. Therefore, it cannot be accepted that entries on the left hand side of the same seized documents signify nothing. When there was expenditure recorded on the right hand side of the seized documents an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al audit report u/s.142(2A) of the I.T. Act. The Ld.CIT(A) following his order for A.Y. 2000-01 dismissed the ground raised by the assessee on this issue. 36. So far as the action of the Assessing Officer in capitalizing the interest and making disallowance u/s.40A(2)(b), 40(a)(ia) and 40A(3) etc. are concerned the Ld.CIT(A) partly allowed the grievance of the assessee regarding capitalization of interest towards the cost of the asset. The relevant observation of the CIT(A) at para 11.7 reads as under : 11.7 I have considered the explanation given with the letters dated 8.12.2009, 11.12.2009 and 19.12.2009 along with the details thereof. Out of the total amount of ₹ 12,58,58,634/- which has been capitalised towards the cost of assets in the assessment order, the amount of interest which is related to working capital loan, vehicle loan and bank commission and charges will have to be allowed as revenue expenditure and is not required to be capitalised. In respect of the items included under interest paid on term loan which has not been capitalised by the appellant in its books of accounts, and, instead debited to Income and Expenditure Account, the Assessing Officer s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 40A(2)(b) on merits. The appellant had objected to considering 7% return on investment as reasonable rent considering Allahabad High Court decision reported in 125 ITR 134. Further, as discussed above, the Gujarat High Court in the judgment reported in 208 ITR 1005 (Guj.) has upheld the adoption of 8.4% on cost of investments as the fair and reasonable rent. Here, the Assessing Officer has treated 7% as fair rent and disallowed the difference u/s.40A2(b). Though, these two decisions may give an indication for this purpose, these decisions have not been rendered in the context of section 40A(2)(b). Therefore, taking a reasonable view and considering the totality of the facts and circumstances of the matter, including the judicial pronouncements discussed above, it is considered fair reasonable to restrict the disallowance for the excess rent paid to that exceeding 9% of the capital value (cost of investment) in the property. Therefore, the Assessing Officer shall recompute rent allowable for Karve Road office, taking the cost of investment at ₹ 3,40,493/-; NDA Road, Farm House purchased at a total cost of ₹ 63,30,000/- in the last year; and the thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t correct. It has been held by the Supreme Court in the case of laxminarayan Ram Gopal vs. government of Hyderabad (1954) (25 ITR 449 (SC)] that - Business connotes some real, substantive and systematic course of activity or conduct with a set purpose. The assessee is carrying out the activity of running schools and colleges in a regulated manner from which profit is being made in the commercial sense. The assessee is further charging money from the students who are desirous of taking admission. Some part of it is brought into the trust and some part of it is appropriated by the trustees. It is activity for profit. This activity of profit cannot be assessed as business income so long as the assessee has shelter u/s. 11, 12 13 of the I.T. Act. The moment this shelter is withdrawn, the income has to be computed in a normal manner as Business income. 11.12 It is further noticed that the appellant is itself claiming depreciation in its returns filed by it for various assessment years. Now, u/s.57 of the I.T. Act, depreciation is not to be allowed as a deduction from Income from other sources, except when the income is from hiring of plant and machinery or building inherently co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds corpus of the trust as revenue income is concerned he also upheld the action of the Assessing Officer and dismissed the ground raised by the assessee on this issue by observing as under : 13. Ground No.11 relates to treating the donation received towards corpus of the trust as revenue income. It is further stated that denial of exemption u/s.11 cannot change the basic and true nature of the receipt. The appellant has not submitted any specific explanation in respect of this issue in the first submission dated 4.2.2009 except stating that since the registration was restored by the ITAT such disallowances/additions cannot be made. In the special audit report it has been pointed out that the total amount of donation received was ₹ 43,148/-. Though in the Balance sheet enclosed along with return of income this donation has been added, there was nothing on record to suggest that the donations received were corpus donations, so as to qualify under the provisions of section 11(1)(d) of the I.T. Act. Even in the return of income, against the column given in Schedule F for mentioning the amount-eligible for exemption u/s.11 (1)(d), nothing has been mentioned. Moreover in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal trustee of the appellant and in doing so CIT (A) has disregarded without assigning any valid reason the detail explanation furnished by the appellant supported by documentary evidences. 6. On the facts and in the circumstances of the case and without prejudice to the Ground No. 1 to 4 above, the CIT(A) has erred in holding that appellant institution has contravened the provision of section 13(1)(c), by paying excessive and unreasonable rent for the properties owned by Shri. M.N. Navale and M. N. Navale (Bigger HUF) and further holding that appellant has also contravened the provision of section 13(2)(a) and 13(2)(g) of the Act. 7. On the facts and in the circumstances of the case and without prejudice to Ground No.1 to 4 above, the CIT (A) has erred in treating the acquisition of shares in cooperative bank for ₹ 7,46,720/- as in contravention of provision of section 13(1)(d)(i) of the Income Tax Act, 1961 disregarding the fact that this acquisition of share is neither the investment nor the deposit made out of the funds of the institution and such acquisition was necessary being a pre-condition for availing the loan from the said co-operative bank. 8. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (A) has erred in sustaining the disallowance of ₹ 94,84,854/- made on account of Prior Period Expenditure disregarding the contention that these expenses materialized in the context of their liability in the year under consideration only. 42. The assessee has also raised the following additional grounds : Additional Ground No. 1:- 1. On the facts and in the circumstances of the case, the order of the Assessing Officer passed under Section 143(3) r.w.s. 153C is bad in law in as much as:- i. he has failed to issue the notice u/s. 153C and make the assessment u/s. 153C r.w.s. 143(3) inspite of stating so in the details of the assessment order, ii. without prejudice to (i) he has failed to record and inform the necessary satisfaction as well as failed to provide the certified true copies of the documents searched and seized in an action taken under Section 132 on Shri. M.N. Navale and iii. he has failed to appreciate that the seized paper is not incriminatory in nature. Additional Ground No.2: On the facts and in the circumstances of the case the order passed by the ACIT, Central Circle 2(2) Pune is invalid and bad in law as the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45. So far as additional ground No.1 is concerned the Ld. Counsel for the assessee submitted that the search took place in the residence of Shri M.N. Navale and his wife Smt. Sunanda M.Navale on 20-07-2005. Certain loose papers belonging to the assessee trust were found. He submitted that the Assessing Officer issued notice u/s.153C for A.Yrs. 2000-01 to 2005-06 and 143(2) was issued for A.Y. 2006-07. He submitted that the assessment order for A.Y. 2000-01 to 2005-06 passed u/s.153C have been held as invalid by the Tribunal on the ground that no assessment year specific incriminating documents were found. Referring to the copy of the order of the Hon ble Bombay High court vide order dated 25-03-2015, he submitted that the appeal filed by the revenue has been dismissed by the Hon ble High Court. He submitted that in case of a non-searched person six preceding years are to be reckoned from the date of handing over of the relevant records, satisfaction note etc. of the said person to his Assessing Officer. Since satisfaction note is dated 18-04-2007, therefore relevant A.Y. is 2008-09. Therefore, six preceding years include A.Yrs. 2002-03 to 2007-08. He accordingly submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. before recording of satisfaction note. The assessee filed the revised return on 13-08-2007. Therefore, the Assessing Officer has rightly assumed jurisdiction and issued notice u/s.143(2). Referring to the decision of the Hon ble Supreme Court in the case of Dr. Pratap Singh and Another Vs. Director of Enforcement and Others reported in 155 ITR 166 he drew the attention of the Bench to the following : Illegality of a search does not vitiate the evidence collected during such illegal search. The only requirement is that the court or the authority before which such material or evidence is placed has to be cautious and circumspect in dealing with such material or evidence. Radha Kishan v. State of U.P. [1963] Supp. I SCR 408; AIR 1963 SC 822 relied on. Where the documents and other materials seized in a search under s.37 of the Foreign Exchange Regulation Act, 1971, do not provide sufficient material for taking further proceedings under the Act, but those documents and other materials are sealed under a warrant of authorization issued under s. 132A of the I.T. Act, 1961, the Enforcement Directorate may legitimately close its proceedings. Merely because no further proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that post search reassessment in respect of all 6 years can be made even if original returns are already processed u/s.143(1)(1). Assessing Officer has power u/s.153A to make assessment for all six years and compute total income of assessee including undisclosed income, notwithstanding that returns for these years have already been processed u/s.143(1)(a). He also relied on the following decisions : 1. Savesh Kumar Agarwal Vs. Union of India r3eported in 35 taxmann.com 85 (Allahabad) 2. Filatex India Ltd. Vs. CIT reported in 49 taxmann.com 465 (Delhi) 50. The Ld. Ld. Departmental Representative further submitted that while the assessee states that Assessing Officer has failed to issue notice u/s.153C but on the other side the assessee is stating in the revised return dated 13-08-2007 that the return is filed in response to notice u/s.153C. This shows that the assessee is not fair in its approach and concealing the facts of the case and presenting the facts in a distorted manner. Referring to the decision of Hon ble Supreme Court in the case of Kishore Samrite Vs. State of U.P. and others in Criminal Appeal No.1406/2012 dated 18-10-2012 he submitted that the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncriminating materials belonging to the assessee trust were found. Based on the seized documents a satisfaction note for proceeding u/s.153C of the I.T. Act in the case of the assessee was prepared on 18-04-2007, copy of which is placed at pages 5A and 5B of the paper book. In the said satisfaction note, the Assessing Officer has mentioned that notice has been issued u/s.153C for six years, i.e. A.Yrs. 2000-01 to 2005-06 (both inclusive). In the said satisfaction note, he has also mentioned issue notice u/s.143(2) for A.Y. 2006-07 . Since the assessee in the instant case has filed the return of income voluntarily on 0401-2007 and has revised the same on 13-08-2007, therefore, he cannot take shelter of the lacunae on the part of the Assessing Officer for non issue of notice u/s.153C for the impugned assessment year. The various decisions relied on by the Ld. Counsel for the assessee are not applicable to the facts of the present case. Further, the assessee has never challenged for non issue of notice u/s.153C either before the Assessing Officer or before the CIT(A). Since after the search took place at the residence of Shri M.N. Navale, the assessee had voluntarily filed its return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corrigendum order provided initially in the course of hearing before the Bench was not communicated to the assessee. The assessee sought information under the RTI Act, 2005 requesting to provide the names of the commissioners who held the charge of CIT-III, Pune during the period 01-04-2005 to 31-03-2006. The CIT-III, Pune by his order dated 06-05-2014 provided the names of those commissioners. In these names, the name of Shri Pradeep Sharma as CIT-III who has passed the corrigendum order dated 28-10-2005 has not been mentioned. 55. He submitted that the Ld. Departmental Representative in the course of hearing filed another copy of corrigendum order along with an enclosure which was not filed earlier. This enclosure shows the copies addressed to other parties including the assessee. The Ld. Departmental Representative also filed the order dated 10-10-2005 passed by the then CCIT, Pune to the effect that Shri Tejinder Sinha, CIT has been sanctioned leave and that Shri Pradeep Sharma, CIT-IV was given charge of CIT-III. This is to support the correctness of corrigendum order signed by Shri Pradeep Sharma. He submitted that in that case this corrigendum order should have been e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 118 ITR 573 60. The Ld. Departmental Representative on the other hand submitted that as per the provisions of section 124(3) no person shall be entitled to call in question the jurisdiction of Assessing Officer where he has made a return under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or after the completion of the assessment whichever is earlier. The provisions of section 124(4) clearly mentions that subject to the provisions of sub-section (3) where an assessee calls in question the jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section(2) before the assessment is made. He submitted that the assessee filed the return voluntarily and the issue of jurisdiction was never raised before the Assessing Officer or the CIT(A). Therefore, now he cannot question the validity of jurisdiction of the Assessing Officer. 61. As regards the justification of Shri Pradeep Sharma signing the corrigendum order he submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer has jurisdiction to assess any person, the question shall be determined by the Principal Director General or Principal Chief CIT or the CCIT or the DGIT or the Principal Commissioner or Commissioner etc. as the case may be. As per the provisions of section 124(3) no person shall be entitled to call in question the jurisdiction of an Assessing Officer where he has made a return under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or after the completion of the assessment whichever is earlier. In the instant case the assessee has filed original return of income on 04-01-2007 which he had revised on 13-08-2007. The submission of the Ld. Departmental Representative that assessee has filed return of income on 04-01-2007 before the jurisdictional Assessing Officer who has passed the assessment order could not be controverted by the Ld. Counsel for the assessee. Notice u/s.143(2) was issued to the assessee on 31-03-2007. The assessee filed return of income for the year under consideration along with the returns for other years covered u/s.15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of Hon ble Bombay High Court in the case of DIT (Exemption) Vs. Sheth Mafatlal Gagalbhai Foundation Trust reported in [2001] 249 ITR 533 (Bom) he submitted that the Hon ble High Court in the said decision has held that in case of contravention of section 13(1)(d), maximum marginal rate of tax u/s.164(2) is applicable only to that part of income of the trust which has forfeited exemption and not to the entire income. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Bai Dayambai Adamji Rangwala Charity Trust Vs. ADIT(Exemption) reported in 66 ITD 59 he submitted that the Tribunal in the said decision has held that simply because the assessee trust was holding debentures of 3 companies and continued to derive income from such debentures in contravention of section 11(5), exemption u/s.11 cannot be denied to it in a wholesale manner. Referring to the decision of the Hon ble Madras High Court in the case of CIT Vs. Working Womens Forum reported in 365 ITR 353 he submitted that the Hon ble High Court in the said decision has held that denial of exemption should only be to the extent of the income which was violative of section 13(1)(d) and not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) does not result in denial of exemption under section 11 to the total income of the assessee and that where the whole or part of the relevant income is not exempted under section 11 by virtue of violation of section 13(1) (d) of the Act, tax shall be levied on the relevant income or part of the relevant income at the maximum marginal rate. Therefore, we do not see any reason in interfering with the impugned orders. He also relied on the following decisions : 1. Institute of Science Management Vs. CIT reported in 25 taxmann.com 186 2. ACIT Vs. Idicula Trust Society reported in 21 taxmann.com 144 3. CIT Vs. Orpat Charitable Trust reported in 230 taxmann 66 4. Jamshedji Tata Trust Vs. Jt. DIT reported in 44 taxmann.com 147 5. Gurdayal Berlin Charitable Trust reported in 34 ITD 489 6. DCIT Vs. Help Age India reported in 133 TTJ 590 7. DCIT Vs. National Association of Software reported in 345 ITR 362 (Delhi) 8. S. Ramaswamy Iyer Vs. CIT reported in 110 ITR 364 (Madras) 9. DIT Vs. N.H. Kapadia Trust reported in 136 ITD 111 He accordingly submitted that there cannot be wholesale denial of exemption u/s.11 of the I.T. Act and only to the extent there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to be read in contradistinction to the phrase whole income under Section 161 (1A). This is only by way of comparison. Under Section 161 (A), which begins with a non obstante clause, it is provided that where any income in respect of which a person is liable as a representative assessee consists of profits of business, then tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate. Therefore, reading the above two phrases show that the Legislature has clearly indicated its mind in the proviso to Section 164(2) when it Categorically refers to forfeiture of exemption for breach of Section 13(1)(d), resulting in levy of maximum marginal rate of tax only to that part of the income which has forfeited exemption. It does not refer to the entire income being subjected to maximum marginal rate of tax. This interpretation of ours is also supported by Circular No. 387, dated July 6, 1984 (see [1985] 152 ITR (St.) 1). Vide the said circular, it has been laid down in para. 28.6 that, where a trust contravenes Section 13(1)(d) of the Act, the maximum marginal rate of income-tax will apply only to that part of the income which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aritable Institutions, Kankanady, Mangalore, in ITA Nos.588 and 589 of 2007 decided on 10.2.2014 has held the entire income of the assessee cannot be assessed for the tax, for violating under Section 11(5) read with Sec.31(1)(d) of the Act and what would become the subject matter of assessment is only that income which is the subject matter of violation. In that view of the matter, as the substantial question of law has already answered in favour of the assessee and against the Revenue, we also answer it accordingly and dismiss these appeals. 71. We find the Hon ble Supreme Court in the case of CIT Vs. Karnatak Industrial Area Development Board vide SLP (C) No.19422/2015 order dated 11-11-2016 has dismissed the SLP filed by the revenue. 72. In view of the above, we are of the considered opinion that whenever there is violation of section 11(5) and 13(1)(d) of the I.T. Act, exemption cannot be withdrawn for the entire income and income which is the subject matter of violation only can be brought to tax. Accordingly, additional ground No.3 by the assessee is allowed. 73. In additional ground No.4 and ground of appeal No.6 the grievance of the assessee is that CIT(A) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the owner of the property. He submitted that if the proposition adopted by the Assessing Officer is accepted then it gives an absurd result. The Assessing Officer has taken the cost of the property at ₹ 3,40,493/- and he has determined the fair rent at ₹ 23,885/- per annum. He submitted that the area of the property was 2912 sq.ft. Therefore, the fair rent as per the Assessing Officer works out to ₹ 0.69 paise which is absurd. He submitted that incidentally Govind Chambers is vacated w.e.f. 01-04-2008 and it was subsequently let out to one Shri Sunil Yadav and others vide lease agreement dated 15-12-2010 for a monthly rent of ₹ 1,50,000/-. He submitted that the tenant paid rent for 3 months totalling to ₹ 4,50,000/- and thereafter, the said tenant had to cancel the lease agreement as the corporation did not grant the sanction for conducting the permit room in the said premises. Subsequently, Shri M.N. Navale sold the said premises on 11-03-2011 for a consideration of ₹ 211.60 lakhs. 78. He submitted that the Assessing Officer has not brought on record a single comparative instance to support his view. Therefore, in absence of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 13(1)(c). He accordingly submitted that since the orders of the Assessing Officer as well as the CIT(A) are in consonance with the provisions of the Act, therefore, the same should be upheld and the additional ground No.4 and ground of appeal No.6 raised by the assessee should be dismissed. 82. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the body of the assessment order has held that the assessee trust has given excess rent to Shri M.N. Navale on account of the 3 properties taken on rent. According to the Assessing Officer the assessee trust has taken on rent flat/office at Govind Chambers, Karve Road, Pune on a monthly rent of ₹ 75,000/-, the farm house at Warje, NDA Road, Pune on a monthly rent of ₹ 1,25,000/- and Flat Nos. 7,8, 9 in Geeta Building, Sion, Mumbai on a monthly rent of ₹ 1,56,000/-. According to the Assessing Officer the fair rent should be equal to 7% per annum of the cost of the property in view of the decision of Hon ble Allahabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural holdings to the Ld. AO. That exercise for quantification by the AO of income potentially earned by the HUF and the assets acquired by the HUF out of the same, is still underway. From the point of view of the issue at hand, however, the significant fact to be noted is that the ITAT categorically held that the Compromise Decree passed by the Civil Court, Pandharpur is sacrosanct and binding upon the department so far as the quantity allocated by the Hon'ble Court, Pandarpur are concerned: . Having perused a copy of the said Compromise Decree, I find that the properties under contention namely, Flat No.7,8 9, Geeta Building, Sion, Mumbai and the property at Warje (NDA Road) are listed as properties of the M.N. Navale (Bigger HUF) which have been partitioned among the smaller HUFs. Such being the facts, respectfully following the decision of jurisdictional bench of ITAT which still holds the field notwithstanding the department s appeal before the Hon. High Court, I hereby uphold the appellant s contention and delete the addition worked out by the Ld. AO on account of excess rent paid to the bigger HUF. It is also correct that the said Bigger HUF does not stand in a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to M.N. Navale (Bigger HUF) in respect of the properties stated at Flat No.7, 8 and 9, Geeta Building, Bombay and Property at Warje. 86. So far as the first property is concerned it is the submission of the Ld. Counsel for the assessee that the fair rent needs to be decided from the view point of the tenant who pays the rent. Any tenant for that purpose will take into consideration utility, locality, availability, total area of the said property etc. Although the assessee has submitted certain details such as valuers report during the appellate stage, however, we find the CIT(A) has not accepted those additional evidences. It is also his submission that since the rent given to Shri M.N. Navale although may be higher according to the Assessing Officer, however, considering the services rendered by Shri M.N. Navale to the trust free of any remuneration should have also been considered. 87. We find the CIT(A) has directed the Assessing Officer to adopt 9% of the cost of the property at Karve Road as reasonable rent. While doing so, he has also relied on the decision of the Hon ble Allahabad High Court in the case of Smt. Radha Devi Dalmia reported in 125 ITR 134. In our opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is unprecedented and thereby surpassing the other remedies available u/s.148, 154 and 263 and since the CIT(A) has exceeded his powers in entertaining this additional information without issuing the mandatory notice u/s.251(2) of the I.T. Act., therefore, the order of CIT(A) is bad in law and invalid. For the above proposition the Ld. Counsel for the assessee relied on the following decisions : 1. CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443 (SC) 2. CIT Vs. Shapoorji Pallonji Mistry 44 ITR 891 (SC) 3. CIT Vs. Union Tyres 240 ITR 556 (Delhi) 4. Lokenath Tolaram Vs. CIT 161 ITR 82 (Bombay) 5. S.M. Muzumbar Vs. Ninth ITO 3 ITD 33 6. Saheli Synthetics Ltd. Vs. CIT 302 ITR 126 7. ITO Vs. ACE Engineering Co. Ltd. 119 ITD 81 90. The Ld. Departmental Representative on the other hand strongly opposed the arguments advanced by the Ld. Counsel for the assessee. He submitted that there is absolutely no enhancement of income from what was assessed by the Assessing Officer. The CIT(A) has merely strengthened the order of the Assessing Officer by citing other provision of law including that of the provisions of section 13(2)(a) and (g) and absolutely th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandatory notice as per the provisions of section 251(2) is misleading. It is the settled proposition of law that the powers of the CIT(A) are coterminous with that of the powers of the AO. As per the provisions of section 251 the CIT(A) while disposing of an appeal has power to confirm, reduce, enhance or annul the assessment and may pass such order in the appeal as he thinks fit. 93. The Hon ble Supreme Court in the case of CIT Vs. Kanpur Coal Syndicate reported in 53 ITR 225 has held that the AAC has plenary powers in disposal of an appeal. The scope of his powers is coterminous with that of the Assessing Officer. He can do what the AO can do and also direct him to do what he has failed to do. Since in the instant case the CIT(A) has given due opportunity of being heard to the assessee on the issue of violation of provisions of section 13(1)(d) and since absolutely there is no enhancement of income by the CIT(A) in view of his decision on this issue, therefore, we find no merit in the above grounds raised by the assessee. The various decisions relied on by the Ld. Counsel for the assessee are distinguishable and not applicable to the facts of the present case. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfactory note itself by the Assessing Officer is wrong. Since these papers are not stated in the satisfaction note, therefore, there is no finding of the Assessing Officer that these loose papers belong to the assessee. 98. He submitted that survey u/s.133A of the I.T. Act was conducted on the premises of the assessee trust and nothing incriminating was found or impounded. The President of the assessee trust Shri M.N. Navale and Accountant Shri Sharad D. Bhosale explained that these notings are informative in nature, about collection of tuition fee, hostel fee and other deposits etc. by the various units as well as such tuition fees etc. expected to be collected on the said date. The propriety was to decide and adhere to the schedule of repayment of bank loans for which escrow account is opened. Referring to the statement recorded u/s.131 of Shri Sharad D. Bhosale, copy of which is placed at pages 93 to 104 and the statement recorded u/s.132(4) of Shri M.N. Navale, copies of which are placed at pages 317 to 360 of the paper book, the Ld. Counsel for the assessee submitted that they have explained the admission process and the collection of fees. In their reply given there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts admitted earlier renewed their admissions. New admissions start from August onwards for the meritorious and eligible students as per the Government directives. The management quota admissions are given from September onwards under strict procedure. He submitted that acceptance of donation or capitation fee is prohibited under the Maharashtra Educational Institution (Prohibition of Capitation Fee) Act, 1987. Such an act is punishable. However, no such instance has been pointed out by the Assessing Officer. 102. He submitted that although assumption is not allowed however the Assessing Officer made addition of ₹ 22,45,06,500/-. by assuming that the notings of the figures in the lefthand side are nothing but the donations collected while granting admission. Referring to mentioning of CASH-M in the bank statement, the Assessing Officer at para 5.12 of the order assumes that the word M appears to be identification mark for the cash deposited by Shri M.N. Navale. He submitted that this assumption is baseless since this noting is made by the bank and the said bank should be questioned as to what does it mean. He submitted that the Assessing Officer not only assumed that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state which is not accounted, that is his return of income which is reflected in the satisfaction note. If there is reference made to some loose papers found and seized from his residence indicating some on-money receipt during the admission process, then the above correlation and assessment year wise ought to have been made. Accordingly, the Hon ble High Court upheld the order of the Tribunal and dismissed the appeal filed by the revenue. 106. The Ld. Counsel for the assessee also relied on the following decisions : 1. CIT Vs. Khalsa Rural Hospital and Nursing Training Institute 304 ITR 20 2. DIT Vs. Belimaha Mahasamsthana Social Cultural Education Trust 336 ITR 694 3. CIT Vs. Malik Kumar Shah 307 ITR 137 4. CIT Vs. Girish Choudhary 163 taxmann 608 107. Referring to the decision of the Pune Bench of the Tribunal in the case of Pradeep Runwal Vs. TRO vide ITA No.334/PN/2010 order dated 3005-2014 and the decision of the Hyderabad Bench of the Tribunal in the case of DCIT Vs. K. Baburao vide ITA Nos. 329 to 335/Hyd/2012 order dated 2401-2014 he submitted that there cannot be any addition unless there is any corroborative evidence. He accordingly submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graphs he submitted that the Assessing Officer on the contrary has given a finding that for the period from 01-04-2005 to 21-07-2005 the total cash deposits in the bank account was ₹ 8.90 crores while the total cash as per the seized documents is more than ₹ 13.41 crores. Referring to para 5 of the assessment order, the Ld. Departmental Representative submitted that it is very much clear from the findings given in the assessment order that the assessee was collecting donation for admission. If assessee is not charging donation why somebody would write letter to the assessee recommending for accepting reasonable donation or concession in fees. He submitted that the CIT(A) at para 8.19 onwards (page 50) of the order has given his categorical finding as to how the assessee was changing his stand from time to time. Since the order of the CIT(A) is a reasonable one he submitted that under the facts and circumstances of the case the order of the CIT(A) should be upheld and the ground raised by the assessee should be dismissed. 110. The Ld. Counsel for the assessee in his rejoinder submitted that assessee has not changed its stand. Cash of ₹ 1.2 crores seized from Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. We have also considered the various decisions cited before us. We find a search and seizure action u/s.132 of the I.T. Act was conducted at the residential premises of Mr. M. N. Navale, the President of the assessee trust on 20-07-2005 during which certain documents were seized from the residence of Shri M.N. Navale. During the course of assessment proceedings the Assessing Officer analysed those seized document and noted that the evidences as per Bundle A2 reflect the true state of affairs and the pages are genuine. He noted that in the said documents on the lefthand side the assessee has written the names of the institutions where admissions have taken place and from where the money has been received. These according to the Assessing Officer are the cash collections at the head office on case to case basis for admission in different courses. The cash deposits mentioned on righthand side were duly verified from the bank accounts in Thane Janata Sahakari Bank or Central Bank of India and these deposits were verifiable from the bank account. This according to the Assessing Officer proved that the entries recorded in the seized documents reflected the true state of aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing admission. It is also the submission of the Ld. Counsel for the assessee that acceptance of donation or capitation fee is prohibited under the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987 which is punishable and no such instance has been pointed out by the Assessing Officer. 114. We find some force in the above argument of the Ld. Counsel for the assessee. From the various details furnished in the paper book as well as a perusal of the assessment order and the order of the CIT(A) we find that not a single student/parent was examined to establish that assessee trust has received any amount as donation/capitation fee for giving admission to the students. There is absolutely no evidence whatsoever on record to suggest that assessee trust has given admission by accepting donation/capitation fee. There is also nothing on record to suggest that any student recommended by the members of the public whose letters recommending admission or reduction in fees/donation have been relied on by the AO has taken admission by giving Donation/Capitation fee. We find merit in the argument of the Ld. Counsel for the assessee that the assessee has no control abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the Real Estate and which is not accounted that is his return of income which is reflected in then satisfaction note. If there is reference made to some on money receipt during the admission process then above co-relation and assessment year wise ought to have been established. In the circumstances we do not think that the tribunal s order raises any substantial question of law. 116. We find the Assessing Officer while passing the assessment order in the case of Mr. M.N. Navale has referred to the details of seized documents and has corrected the arithmetical error and concluded that the amount of donation comes to ₹ 10,15,22,340/- (as against ₹ 22,04,31,020/- held by him in the assessment order). From the various details furnished by the assessee in the paper book we find the amounts received during the period shown on all loose papers comes to ₹ 18,09,68,420/- whereas the total amount deposited during the same period in the bank accounts of various units comes to ₹ 24,05,96,921/- (as per para 76 of the paper book). This total deposit covers all the amounts which are marked with - . Therefore, the allegation of the Revenue that the Managing Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the beginning the assessee was stating that the notings appearing in the diary were rough estimates and estimation was made for submission to the bank for obtaining a loan from the bank. The inference of the Assessing Officer that the assessee had received on-money, i.e., the differential amount as shown in the seized diary and the books of account, was merely based on suspicion and surmises and there was no material to support the conclusion of the Assessing Officer that the assessee had in fact received any on-money. The Assessing Officer had no evidence with him to support his conclusion. The assessee has worked out the floor-wise rate of the shop on the seized paper but it was not possible that every shop could be sold at that price and while selling the shops, many purchasers may pay advance money. Therefore, the rates of all the shops at the time of actual sales could not be the same as estimated in the seized paper. The amount mentioned along with rates per square foot of different floors on the loose paper was in respect of an estimate for the loan from the bank. No other evidence had been shown to justify that these amounts were received from purchasers. The concurrent f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd investments in shares not being a specified mode, the benefit of exemption cannot be granted. It is well settled that the depiction in Books of Accounts is not a determinative test but the factual nature which has to be considered for the purpose of taxation. In this case, the investment in shares of cooperative banks was a pre-condition for raising of loans and it was therefore not an investment as normally understood. The Tribunal has recorded a finding of fact that the shares were subscribed to only for purposes of obtaining the loan and the amounts so obtained were used for furtherance of the objects of the trust. There is also no dispute about the fact that loans taken from the said two cooperative banks were not completely repaid in the Assessment Year 2008-09 and, therefore, the assessee would be required to hold the shares to continue as member of the cooperative societies running the banking business. Besides, on identical facts, the revenue has granted the benefit of exemption under section 11/12 of the Act for the Assessment Years 2006-07, 2009-10, 2010-11 and 2011-12 on scrutiny assessment under section 143(3) of the Act. Thus there is no reason to deny the benefit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were repaid, the shares were subsequently redeemed in May 2010 and July 2010. Therefore, considering the totality of the facts of the case and relying on the decision of Hon ble Bombay High Court cited (supra), we hold that the assessee has not violated the provisions of section 13(1)(d) by investing in shares of cooperative banks from which it had taken loans. Therefore, the assessee cannot be denied the benefit of section 11. Ground raised by the assessee is accordingly allowed. 124. Ground of appeal No.8 by the assessee relates to denial of exemption u/s.11 on account of contravention of provisions of section 13(1)(d) on account of investment of ₹ 1,50,000/- in shares of Public Limited Companies. 125. The Ld. Counsel for the assessee submitted at the outset submitted that this issue does not arise from the assessment order. The Assessing Officer had provided this uncalled for information and tried to improve upon his assessment order which is impermissible in law. The CIT(A) also has erroneously admitted this information. Referring to pages 101 to 108 of the paper book No.1 the Ld. Counsel for the assessee submitted that the assessee has purchased 220 shares in di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the other hand heavily relied on the order of CIT(A). 128. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find the assessee in the instant case is holding 220 shares ranging from 1 to 15 in different limited blue-chip companies. Although the Assessing Officer has not discussed the issue in the body of the assessment order, however, on the basis of the information provided by the Assessing Officer in the remand report for the preceding assessment years the CIT(A) observed that the assessee has violated the provisions of section 13(1)(d) of the I.T. Act by investing in shares in the listed blue chip companies. Therefore, the assessee is not entitled to the benefit of provisions of section 11. It is the submission of the Ld. Counsel for the assessee that the assessee trust is conducting courses on business management namely, MBA, MCA, DBM etc. for which the audited accounts of different companies are required for the benefit of the students and therefore considering the miniscule amount invested in the shares of these companies for ₹ 1,50,000/- it can be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were received/obtained during the year and bring the same to tax. We hold and direct accordingly. Ground of appeal No.8 by the assessee is accordingly partly allowed for statistical purposes. 132. In ground of appeal No.9 the assessee has challenged the order of the CIT(A) in treating the donation of ₹ 43,148/- received towards corpus as revenue income. 133. The Ld. Counsel for the assessee very fairly admitted that there is no letter from the donors to support the claim that the donation has been received towards corpus of the trust. Under these circumstances, we are of the considered opinion that the same will partake the character of revenue income. The ground raised by the assessee on this issue is accordingly dismissed. 134. In ground of appeal No.10 the assessee has challenged the order of CIT(A) in sustaining the disallowance of ₹ 2,50,000/- on account of donation paid. 135. The Ld. Counsel for the assessee submitted that this ground has remained to be taken before CIT(A). Referring to the decision of Hon ble Bombay High Court in the case of CIT Vs. Pruthvi Stock Brokers and Shareholders Pvt. Ltd. reported in 349 ITR 336 he submitted that the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ground before the Tribunal. In view of the decision of Hon ble Bombay High Court in the case of Pruthvi Brokers and Shareholders Pvt. Ltd. (Supra) this ground by the assessee is admitted. Since the issue has not been examined by the Assessing Officer in the light of the Circular No.1132 dated 05-01-1978 and since similar issue has been decided by the CIT(A) in the preceding A.Yrs. 2003-04 and 2007-08 to 2009-10 in favour of the assessee, therefore, we deem it proper to restore this issue to the file of the Assessing Officer with a direction to readjudicate this issue in the light of the Circular No.1132 dated 05-01-1978 and the order of the CIT(A) for A.Yrs. 2003-04 and 2007-08 to 2009-10. This ground by the assessee is accordingly allowed for statistical purposes. 139. Ground of appeal No.11 by the assessee relates to addition made on the basis of recasted final accounts by the Special auditors on account of violation of provisions of section 40(a)(ia) amounting to ₹ 4,02,80,770/-, u/s.40A(3) for ₹ 2,44,095/- and u/s.36(a)(va) for ₹ 31,30,020/-. 140. So far as the disallowance of ₹ 4,02,80,770/- u/s.40(a)(ia) is concerned the Ld. Counsel for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentical issue has been decided by the Hon ble Bombay High Court in the case of Bombay Stock Exchange Ltd. Vs. DDIT (E) reported in 52 taxmann.com 29 in favour of the assessee. The relevant observation of the Hon ble High Court extract reads as under : (E) We also find force in the submission of Mr. Dastoor that section 40(a) will not apply to the petitioner at all as it is not carrying on any business. It is a charitable institution whose income is exempt under section 11 of the Act. Section 11 fulls under Chapter III with the heading Incomes which do not form part of total income . On the other hand, section 40(a) fulls under Chapter IV with the heading Computation of total income . The relevant portion of section 40 of the Act reads as under: 40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business or profession'- (a) in the case of any assessee- ... (ia) any interest, commission or brokerage, (rent, royalty) fees for professional services or fees for technical services payable to a resident, or amounts payable to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce is called for. For the above proposition, he relied on the decision of Hon ble Gujarat High Court in the case of Anupam Tele Services reported in 43 taxmann.com 199. 147. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 148. After hearing both the sides, we find the Assessing Officer on the basis of recasted final accounts by the Special Auditor made the disallowance of ₹ 2,44,095/- u/s.40A(3). It is the submission of the Ld. Counsel for the assessee that not a single payment exceeding ₹ 20,000/- has been given to any of the parties. Although full details were given the same was not properly appreciated by the Assessing Officer or CIT(A). Under these circumstances, we deem it proper to restore this issue to the file of the AO with a direction to verify the payments made to different persons. In case there is no payment exceeding ₹ 20,000/- at a time to any of the parties as stated by the Ld. Counsel for the assessee at the Bar, then provisions of section 40A(3) cannot be invoked. The Assessing Officer shall accordingly decide the issue as per fact and law after giving due opportunity of being heard to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 13,13,661/- as capital expenditure and disallowing the same. 153. The Ld. Counsel for the assessee referring to page 7 para 6 of the paper book drew the attention of the Bench to the details of expenditure. He submitted that all these expenses are revenue in nature and should be allowed. He submitted that expenses for various softwares were incurred as the softwares had become obsolete in a short time because of advancement in technology. Assessee does not derive any enduring benefit from the same and therefore the same cannot be capitalized. He submitted that there are certain expenses such as office expenses, accommodation expenses, curtains and mats, lighting and fitting materials, sofa cushions, curtains, mechanical lab consumables, expenses for rods, wires, screws etc. which have been treated as capital expenditure by the special auditor. Referring to the decision of the Hon ble Delhi High Court in the case of CIT Vs. Asahi Safety Glass reported in 15 taxmann.com 382 he submitted that these items cannot be treated as capital in nature. 154. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 155. After hearing bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal, therefore, following the decision of Hon ble Bombay High Court in the case of Brokers and Shareholders Pvt. Ltd. (Supra) the same is admitted. 160. It is the case of the Ld. Counsel for the assessee that the assessee has given full details of the prior period expenses as per pages 14 and 73 to 110 of the paper book No.3. According to the Ld. Counsel for the assessee as long as these expenses are otherwise allowable it does not make any difference even if these are claimed and allowed in A.Y. 2006-07. We find the Hon ble Bombay High Court in the case of CIT Vs. Nagri Mills Company Ltd. reported in 33 ITR 681 the Hon ble High Court has observed as under (short notes) : Where a company which maintained its accounts on the mercantile basis did not make any entry towards bonus for the calendar year 1951, but, on a dispute regarding bonus payable to the workers for that year being referred to the conciliation board, the board, by its award in June, 1952, directed the company to pay bonus out of the profits for that year, and the company in making the return claimed to deduct for the year 1951, the bonus which it distributed in December, 1952, against the last item of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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