TMI Blog2011 (3) TMI 1720X X X X Extracts X X X X X X X X Extracts X X X X ..... valid, mainly because the registration granted u/s. 12A(a) cannot be cancelled u/s. 12AA(3) as has been held by ITAT. Ground No. 2(a): On the facts and in the circumstances of the case the order of CIT(A) is bad in law and invalid as he has not issued the mandatory notice as required by Sec. 251(2) of the Income Tax Act 1961, in order to enhance the assessment thereby making the appellant liable on the grounds different from those not considered by the AO. Ground No. 2(b): On the facts and in the circumstances of the case and without prejudice to the above ground no. 1 the order of CIT(A) is bad in law and invalid as he has decided the appeal by considering the issues which are not mentioned in the assessment order Refer CIT vs. Shapurji Palloji Mistri. 44 ITR 891 (SC). Ground No. 2(c): On the facts and in the circumstances of the case and without prejudice to the above ground no. 1 the learned CIT(A) has erred in not appreciating the established legal position that his power of enhancement is restricted to the subject mater of assessment which has been considered expressly or by clear implication by the Assessing Officer. Refer CIT vs. Raj Bahadhur Har ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20/07/05 in the case of Shri M.N. Navale who is the founder Trustee and the President of the assessee Educational Society. In the course of search operation, the search party found and seized certain loose papers. Simultaneously, the survey action was conducted on the Institute. However, on the basis of the loose papers at Bundle A-2 found with and seized from Shri M.N. Navale and the CIT issued the show Cause notice stating that in view of the findings in the search operation, he had reason to believe that the noting in the said loose papers are in respect of Capitation Fees/Donations and therefore, CIT proposed that the registration of the institution was to be cancelled on both the limbs, namely (i) the activity of the trust are not genuine and (ii) these are not being carried on in accordance with the object of the trust. After hearing the assessee, the CIT cancelled the registration U/s. 12AA(3) vide the order dated 09.10.2007. This order of the CIT was challenged before the Hon ble Income Tax Appellate Tribunal (ITAT) and the same was reversed on technical grounds ie the registration granted u/s 12A of the Act could not be cancelled under subsection (3) of 12AA of the Act, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the assessee on technical grounds ie the registration granted u/s 12A of the Act could not be cancelled u/s 12AA(3) of the Act. The reassessment was finalized determining the assessed income at ₹ 1,82,55,420 for the AY 1999-00 as per the discussion on paragraphs 7 and 8 of the reassessment order. The Assessing Officer completed the reassessment on 7/08/2008 relying on the revised computation of total income made by the special auditor and assessed the income at ₹ 1,82,55,422/- and denied the exemption claimed u/s. 11 of the Act. Order of the ITAT was not available to the AO during the making of the reassessment order and it was available to the CIT(A) during the first appellate proceedings. 3. Ist appellate proceedings: During the first appellate proceedings, assessee raised the grounds questioning the validity of the reopening proceedings. After filing of the appeal before the CIT(A), on receipt of the order of the Tribunal, which quashed the order of the CIT cancelling the registration, the assessee modified the grounds and statements. These documents were remanded to the AO. While submitting the remand report, the AO raised new reasons for denial of exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated recorded anterior to the date of issue of notice u/s 147 of the Act. (ii) Adequacy of the said reasons: On taking us through every word and line of the impugned reasons recorded by the AO, Ld Counsel summed them up into four separate heading, which led to formation of the reason to belief to the AO within the meaning of the section 147 of the Act and the assessee s written submissions in this regard are as follows. As per reason no. 1:- Assessing Officer states that donation of ₹ 1583100/- taken to the trust corpus needs verification. Submitted that in view of existence of appellant s registration on the date of issue of notice u/s. 148 i.e. on 29/03/2009 this verification of donation can have no impact on taxation. Assuming this donation could not have been claimed as exempt u/s. 11(1)(d), it would have been certainly taken to the gross income and due benefits allowable u/s. 11, 12 could have been availed by the appellant. The appellant in his return of income for A.Y 1999-2000 has declared the deficit of ₹ 15,38,161/-. As per reason No. 2 Assessing Officer states that the rental income of ₹ 2,74,06,500/- should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with order of the Tribunal granting the registration and quashing the order of the CIT. Further, he mentioned the AO did not make any addition to the income of the assessee for the reasons it was reopened. In addition to the above, Ld Counsel also relied on various decisions and also the submissions made before the revenue authorities. Finally, the counsel for the assessee summed up stating that reassessment order needs to be held invalid. 5. SUBMISSIONS OF THE CIT-DR : Per contra, Sri A S Singh, Ld CIT DR for the revenue relied on the orders of the AO. Further, he narrated lists of items discoveries during survey action on the assessee and the search and seizure action on Mr M N Navale, the founder Trustee of the assessee and also submitted the significant event of disclosure of undisclosed income of ₹ 1.25 cr and retraction of the same in subsequent times. Ld DR is of the opinion that all the circumstances need to be considered and evaluated before deciding the allegation of the assessee. If considered, the AO validly issued the notice u/s 148 of the Act after duly recoding the reasons as per the statute. Mentioning that the notice was issued after lapse of 4 (fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was covered under the provisions of section 133A in the context of search and seizure operation on its managing and Founder trustee ie M N Navale. This exercise resulted in discovery of various incriminating information about the prohibited collection of capitation fee from the students, who seek admissions in to various courses. Further, there exist other issues as mentioned in the reasons recorded by the AO. Ld DR also mentioned that the AO successfully made additions on account of corpus donations, which is one of the reasons for reopening. Further, DR mentioned that the adequacy of the reasons is a non issue in view of various judgments on this issue. What is required is the reasons to believe about the escapement of the concealment of income for validly assuming jurisdiction u/s 147 of the Act and the AO has plenty of reasons to believe that there is escapement of concealed income. Further, he narrated that the relevant circumstances also play vital role in matters of formation of the reason to believe and relied on various judgments on this subject. Pointing to the entries in columns 2, 3 etc in the above document, DR mentioned that they constitute typographical mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and hence interest there on has to be capitalized. In this regard, the assessee made submission and the gist of the as per the CIT(A) as mentioned in para 6 of the impugned order are as under: As far as donations of ₹ 15,83,100/- are concerned if for any reason these are not towards the corpus, these very well do represent the income derived from property held under trust, offcourse with a rider that it has to be utilized or applied for the object of the trust, to the extent of 85%. And at the time i.e. on 29/03/2006 when the notice U/s. 148 was issued the appellant did held the registration U/s. 12A(a). (The CIT cancelled the registration on 09/10/2007). Therefore these donations were exempt U/s. 11. Hence there was no reason to hold that there is an escapement of income. As regards rental income it cannot be assessed under the head Income from Other Sources of Business Income as stated by the Assessing Officer. In fact there is no such head of income prescribed U/s. 14. It is however admitted that rental income should be assessed as Income from House Property. Even then how can it be said that there was escapement of income on this ground. And appellant did h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also, the submissions of the assessee is that irrespective of the head under which it is to be taxed it would have been exempt u/s. 11. I have already dealt with the claim of exemption u/s. 11. As the income was not computed under the proper head, the Assessing Officer had reason to believe that there would be escapement of income if the income is computed under the proper head. As regards the capitalization of interest of ₹ 1,11,42.827/-, it is submitted by the assessee that such capitalization will be within the meaning of section 36(1)(iii) which is a section that would apply only while computing the income under the head Profits and gains of Business or Profession. It is submitted that the assessee does not carry on any business and, therefore, its income is assessable under the head other than the head of profits and gains of business or profession. In reply to the above submission of the assessee, it should be mentioned that in the reasons recorded, the Assessing Officer has not refereed to section 36(1)(iii). Even if the assessee s income is to be computed under the head other than the head Profits and gains of business or profession , the interest paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appellant for this year. It is noticed that one of the reasons recorded was that on a perusal of the Balance Sheet enclosed along with the return of income, it was found that the donations of ₹ 15,83,100/- have been added to the corpus, while there was nothing on record to suggest that the donation received were corpus donations. The original return of the appellant was filed for this assessment year on 27.7.1999, in Form No. 3A, which pertain to assessees claiming exemption u/s. 11 of the I.T. Act, 1961. On a perusal of this return, it is noticed that in part-I, against column 8(v) of this return which pertained to Amount eligible for exemption u/s. 11(1)(d) , it is mentioned No Now, section 11(1)(d) of I.T. Act states as under: Section 11(1) Subject to the provisions of section 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipts of the income- a) -- b) -- c) -- d) Income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. 6.8 Therefore, in accordance with these provisions, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y from 1.4.2004 and prior to this, such interest on borrowings even for business and profession was allowable as revenue expenditure. 6.10 I have considered the above referred to arguments put forth by the appellant and the Assessing Officer. The contention of the appellant is that even if there would be some income it would have been exempt u/s. 11. It is mentioned here that such exemption u/s. 11 and 12 of the I.T. Act, 1961 was not automatic but subject to fulfillment of certain conditions laid down u/s. 11 to 13 which have to be examined during the assessment proceedings. It is also a case where the original return was processed u/s. 143(1) on 21.11.2000 and it is not a case where any scrutiny assessment u/s. 143(3) of the I.T. Act, 1961 had been completed for this year. In this case, the recent decision of the Hon ble Supreme Court in the case of ACIT Vs. Rajesh Zhaveri Stock Brokers (P) Ltd., (2007) 291 ITR 500 (S.C) was applicable in which the Hon ble Supreme Court had held that u/s. 147, as substituted w.e.f. 1.4.1989, if the Assessing Officer, for what ever reason, has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no dispute either about the recording of the reasons or about the issue or service of notice u/s 148 of the Act. 9. Disputed Fact: The reasons are good enough for formation of reasons to believe that there is escapement of income both qualitatively and quantitatively. The impugned reasons were recorded anterior in time to the timing of the issue of notice. 10. Timing Issue: In this regard, we have perused the document from the records of the Revenue containing the impugned reasons recoded by the AO an the same undisputedly with out any date by the AO. For the sake completeness, the scanned document of the Form for recording Reasons for Initiating Proceedings u/s 148 of the Act and for Obtaining the Approval of the CIT an it is reproduced as under. 11. From the above, it is the case of the DR that there is date (27/3/06) mentioned in ink by the Controlling Authority of the AO before the proposal is finally approved by the concerned CIT. It is evident from the comments against column 12 of above scanned extract that the AO recorded the below mentioned reasons certainly on or prior to 27th March, 2006 and certainly not after that date. Subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR for the Revenue have merits and consequently, the arguments put forwarded by the assessee s counsel in this regard have to be dismissed. Further, we place on record our appreciation towards both the parties for an excellent approach exhibited by Sri A S Singh CIT-DR for revenue in supply of the evidences and Shri Doshi in garnering huge material by way of assisting the Bench to arrive at the judicious conclusions. Having dismissed this part of the arguments, we shall now proceed to decide the other arguments relating to the adequacy of the reasons. 14. Qualitative and Quantitative Character of the Reasons: We have extracted the document containing the impugned reasons and they are four reasons mentioned by the AO for deriving the reason to believe that there is an escapement of income. Concise argument of the AR in this regard are that (i) reasons are improper and they did not result in making of any additions at the end of the reassessment proceedings; (ii) there is no material before the AO to conclusively demonstrate the existence of the concealment of income; (iii) there is no failure on part of the Assessee by way of true and full disclosure of primary facts withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration is 1999-00 and notice was dated 29th March 2006. Therefore, the notice under consideration was issued beyond the period of four years from the end of the relevant AY and consequently, the issue has to be decided in accordance with the provisions of the proviso to section 147 of Act. So far as the adequacy of the reasons are concerned, we find that it is a settled issue that as long as the AO s has reason to believe that there is escapement of income, the adequacy is not a relevant factor. Therefore, what is left for us to decide here is if there exists reasons to believe for the AO to validly issue notice u/s 148 of the Act. Thus, relevant information considered by us for deciding the issue of validity of the notice revolve around the following and they are: (i) other circumstances; (ii) contents of the documents containing the reasons four issues; (iii) out come of the reassessment proceedings. 16. Other circumstances: In this regard, the relevant circumstances include the discoveries of the search and survey proceedings on the assessee and its founder trustee. At the relevant point of time of recording of the reasons, which gave rise the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is in the words of Supreme Court. CIT(A)-I stand need not necessarily be capable of absolute conviction or inference, but it is sufficient if the stand are such creating cause to believe by generating of probable reasoning leading to the conclusion about the nature of the thing. The circumstances must gave rise to knowledge about the thing and reason to believe about the thing. From the above, in our opinion, the circumstances do play role in formation of reason to believe and these constitute relevant information. 17. Contents of the document containing the reasons four issues: We have earlier discussed that reasons recorded by the AO revolve around four issues based which the AO derived the reason to believe that there is escapement of income within the meaning of the provisions of section 147 of the Act. From the perusal of the assessment order and the impugned order, we have noticed that the AO has not made any additions on account of three recorded reasons. However, the AO made addition in the reassessment on account of donation of ₹ 1583100/- taken to the trust s corpus . In the process, the AO rejected the submission of the assessee that in view of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) On the facts and in the circumstances of the case the order of CIT(A) is bad in law and invalid as he has not issued the mandatory notice as required by Sec. 251(2) of the Income Tax Act 1961, in order to enhance the assessment thereby making the appellant liable on the grounds different from those not considered by the Assessing Officer. Ground No. 2(b) On the facts and in the circumstances of the case and without prejudice to the above ground no. 1 the order of CIT(A) is bad in law and invalid as he has decided the appeal by considering the issues which are not mentioned in the assessment order Refer CIT vs. Shapurji Palloji Mistri. 44 ITR 891 (SC). Ground No. 2(c) On the facts and in the circumstances of the case and without prejudice to the above ground no. 1 the learned CIT(A) has erred in not appreciating the established legal position that his power of enhancement is restricted to the subject mater of assessment which has been considered expressly or by clear implication by the Assessing Officer. Refer CIT vs. Raj Bahadhur Hardutroi Motilal Chamaria 66 ITR 443 (SC). Ground No. 3: On the facts and in the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CIT(A) after calling for remand report of the AO. It is in these remand proceedings, the AO came up with new reasons for denial of exemption ie violation of the provisions of section 13(1)(d) r w s 11(5) of the Act ie acquisition of shares of a cooperative bank as part of the deal for availing the loan from Cooperative Banks. It is an admitted fact that the CIT(A) gave an opportunity of being heard to the assessee before entertaining the AO s new reasons relating to violation of the provisions of section 13(1)(d) of the Act r w section 11(5) of the Act as remarked by the AO in the remand proceedings. CIT(A) entertained the AO s request for invoking the said provision of the Act successfully for the first time during the first appellate proceedings. In the background of the above, the assessee raised the above grounds before us in the present form. Otherwise, it is undisputed fact that the assessee raised objection against the invoking the provisions of section 13(1)(d) of the Act for the first time before the CIT(A). However, there was no ground in Form 35 about the issue of notice u/s 251(2) of the Act. In any case, it is an admitted fact that the CIT (A) did not issue any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but found to be not tenable in law. The CIT (A) has got wide powers, co-terminus with the AO. He can do himself what the A.O can do and also direct the AO to do what he has failed to do. This principle has been enunciated by the Hon ble Supreme Court in CIT v Kanpur Coal Syndiate (1964) 53 ITR 225 (SC). Relying upon this judgment, the Hon ble Apex Court in another case of Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688 (SC) has held as under: The power of the AAC is co-terminus with that of the ITO .. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an appellate authority while hearing appeal against the order of a sub-ordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitation, if any, prescribed by the statutory provisions. In the absence of any statutory provision the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. In the case of Smt Prabhavati S. Shah v CIT (1998) 231 ITR 1 (Bom), the jurisdictional Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded within the ambit of investment , as there is no reason to restrict the meaning of this term. It does not matter that such investment in shares of co-operative banks was not for the benefit of persons mentioned in section 13(3).It is, therefore, held that the purchases of shares of co-operative bank for ₹ 49,750/- was a violation of section 13(1)(d)(i) of the I.T. Act, 1961, which renders the appellant ineligible for the exemption u/s 11. Ground No. 2 is, therefore, dismissed. As seen from the above paragraphs, CIT(A) did not entertain the assessee s objections and proceeded to deny any exemption u/s 11 of the Act. 23. During the proceedings before the Tribunal, Ld Counsel for the assessee passionately explained the facts of the case and mentioned that the impugned order has the effect of enhancement on the assessment. In this regard, he mentioned that confirming the order of the AO by the CIT(A) with every addition made by the AO, who failed to reverse his decision of the invoking of the provisions of section 13(1)(d) r w s 11(5) of the Act consequent to the order of the Tribunal, amounts to the enhancement of assessment. As per his arguments, but for these newl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, he mentioned that the assessee never raised the issue of notice u/s 251(2) of the Act as assessee must of the opinion that there is no real enhancement of the assessment. Ld DR brought to our notice the fact of CIT(A) granting the opportunity of being heard to the assessee with reference to the developments during the remand proceedings in general and invoking of the provisions of section 11(1)(d) of the Act. 25. In short, regarding the issue of notice u/s 251(2) of the Act, the case of the DR is that there is no enhancement in the assessment as what is added by the AO is confirmed by the CIT(A) and not a rupee of income extra and therefore, there is no need for issue of such notice. Further, without prejudice to the above, Ld DR mentioned that the said provisions of section 251(2) essentially relates to the principles of natural justice and no further addition at the level of the CIT(A) without granting opportunity and in this case, the CIT(A) cannot be found faulty as CIT(A) granted adequate opportunity to the assessee undisputedly. Further, relying on the contents of the impugned order, the DR reiterated that the if the CIT(A) has the power of enhancement of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; (iv) whether the granting of the reasonable opportunity by the CIT(A) in this case of notional enhancement of assessment would meet the requirements of the subsection (2) of section 251 in the case of this kind where enhancement of the assessment is far stretched etc. All these issues have both legal and factual sides. To start with, we find it relevant to examine the legal scope in the matter of issue of notice, enhancement of the assessment etc. 27. For this, we have examined the provisions of section 13(1)(d) of the Act. A. Relevant portions of section 13(1)(d) of the Act are as follows. Section 11 not to apply in certain cases. 13. Nothing containing in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- (1) (a).. (b).. (c).. (d). in the case of trust for charitable or religious purposes or a charitable or religious institutions, any income thereof, if for any period during the previous year- (i) any funds of the trust or institution are invested or deposited after the 28th day of February 1983 otherwise than in any one or more of the forms or mode ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee shall not lose exemption in respect of the entire total income of the trust have to be addressed on its merits independent of the said Apex court s judgment. Otherwise, the said clause (c) and (d) have to be interpreted in the light of the specific provisions of the proviso to section 164(2) of the Act as explained by the Jurisdictional High Court of Bombay in the case of Sheth Mafatlal Gagalbhai Foundation Trust (249 ITR 533) (Bom), where it is held that the effect of contravention of the said clause (d) to section 13(1) if any is not complete denial of exemption u/s 11 of the Act to the trust or institution and the denial is restricted to relatable income earned out of such shares acquired by depositing or investing of any trust funds. The dividend income if any received on the shares only can be tax at maximum marginal rate . Further, we have taken note of the fact that the violation if any of the assessee revolve around clause (d) of section 13(1) of the Act. Further, the clauses (c) and (d) share the common expressions ie Nothing containing in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act and held that the trust shall not lose exemption granted u/s 11 of the act and disallowance is restricted to relatable income to the such shares acquired by way of purchase by depositing or investing of the any trust funds. The dividend income if any received on the shares only can be tax at maximum marginal rate. Out the above, it is evident that the judgment in the case of Sheth Mafatlal Gagalbhai Foundation Trust (supra) has proximity to the facts of the instant case and with only difference that the assessee acquired the shares of the Cooperative Bank unlike the shares of the Mafatlal group companies in the said case. Therefore, the ratio of the said judgment of the jurisdictional High Court has applicability to the instant case. 28. Further, from the overall discussions narrated above, it is conveniently decipherable that the acquisition of shares by depositing or advancing the funds of the trust amounts to contravention of the provisions of section 13(1)(d) r w s 11(5) of the Act. So far as the effect of such contravention is concerned, denial of exemption has to be restricted to the relatable income in view of the specific provisions of the proviso to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to discuss the related issues on enhancement in the succeeding paragraphs. 30. Whether there is enhancement of the assessment at all? In our opinion, whether there is enhancement in the assessment in the instant case is a matter of fact. This fact has to be arrived after the considering the established concepts of merger theory of the orders of the AO and the CIT(A) one side and the powers of the CIT(A) in admitting the fresh grounds for denial of exemption u/s 11 of the Act. On facts of this case when the assessment order was not given effect to the order of the Tribunal, admittedly there is no quantitative enhancement of total assessed income during the proceedings before the CIT(A). The argument of the assessee is that the but for these newly found reasons relating to u/s 13(1)(d) of the Act, there would not have any taxable income remained sustained at the level of the CIT(A) in view of the said order of the Tribunal restoring the registration u/s 12A of the Act. Thus, the case of the assessee is that entertaining of the newly discovered reasons during the remand proceedings relating to deemed income led to not only to the denial of otherwise entitled relief to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said section and thus makes an assessment/reassessment as the case may be. Of course, the orders passed u/s 154 of the Act get merged with the said assessment. Thus, the assessment or reassessment constitutes the determination of total income/loss of the assessee for an AY and further determination of tax payable by the assessee or refundable to the assessee. 33. Meaning of enhancement: This expression is not defined in the Income tax, 1961. Nevertheless, dictionary meaning of the said expression means increase in quality, value, or extent of. Thesaurus of the same is increase, add to, intensify, heighten, magnify, amplify, inflate, strengthen, build up, supplement, augment, boost, raise, lift, elevate, exalt; improve, enrich, complement. The provisions of the Explanation provides additional powers to the CIT(A) in disposing of the appeals. It is the additional duties given to the Commissioner (Appeals) to consider and decide any matter arising out of the assessment proceedings. In this context, we have examined if the matter of invoking of the provisions of section 13(1)(d) falls within the expressions any matter arising out of the proceedings in which the order appealed aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the matter gets covered with the scope of the Explanation. However, next issue relates to if the matters, which are otherwise covered by the Explanation, demands the issue of the show cause notice expressly proposing the enhancement. 35. Show Cause: We shall now proceed to examine if there is enhancement in the instant case and if the issue of show cause notice to the assessee is the requirement of the law u/s 251(2) of the Act. The fact of the case is that the assessed income by the AO and the sustained income at the level of the CIT(A) is one and the same. There is no enhancement but for the ifs and buts that are raised by the AR s counsel for the first time before us. Otherwise, it is the established law that the issue of notice u/s 251(2) of the Act is the essentiality in case of the enhancement provided there is enhancement. Therefore, we need to examine if there is enhancement. During the proceedings, it is brought to our notice that the assessee requested the AO to give effect to the order of the Tribunal, which revoked the Registration u/s 12A of the Act. We are not aware of the developments relating to this correspondence. However, the same becomes relevant as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank has the origin in the other funds of the trust or out of the loan disbursement given by the Cooperative Bank. For this, there is need for examining the concern loan accounts. It goes without mentioning that he shall grant reasonable opportunity of being heard to the assessee. Accordingly, relevant ground 2 and 3 along with its sub grounds are set aside pro-tanto. 37. Ground No. 4 On the facts and in the circumstances of the case and without prejudice to the above ground no. 1 to 4 the CIT(A) has erred in sustaining the addition of ₹ 2,66,187/- proposed and made by the special auditors by invoking the provisions of section 36(1)(va) of the Act on account of delay in payment of employees share of provident fund rws section 2(24). In this regard, both the parties have agreed that the issue has to be decided in line with the judgment of the Apex Court in the case of Alom Extrusions Ltd (319 ITR 306), which was not available to the CIT(A) at the relevant point of time. 38. We have heard the both the parties and perused the orders of the revenue. From the above ground it is evident that the issue goes in to the applicability of the provisions of section 43B and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds of the assessee s appeal is covered by the decision of the Hon ble Supreme Court in the case of Alom Extrusions Ltd (supra) and in favour of the assessee. Accordingly, the grounds of the appeal are allowed. 40. Ground no. 5: On the facts and in the circumstances of the case and without prejudice to the above ground no. 1 to 4, the CIT(A) has erred in sustaining the disallowance of ₹ 86,909/- made u/s 40A(3) of the Income Tax Act 1961. Amount involved is ₹ 86,909/- and para 14 is relevant for this ground. Assessee submitted that the provisions of section 40A(3) are applicable to the income chargeable to tax under the head profits and gains from business or profession and not to the assessee-trust. On merits, it is mentioned that the assessee neither violated the said provisions not the assessee made the single payment at any given point of time exceeding the permitted limits. As per him the payments involved include the salaries paid (Rs 20,599/-), exam fee paid to Pune University etc and the provisions of section 40A are inapplicable to the assessee. CIT(A) dismissed the above legal contentions considering the express provision of subsection (2) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . During the proceedings before us, Ld Counsel for the assessee took us through the contents of page 23 of the paper book and mentioned the AO unmindfully adopted the recommendations of the Special Auditors without going into the merits of the recommendations and disallowed ₹ 38,642/-which was actually spent towards purchase of curtains and other furnishings. Further, taking us through the contents of para 15 of the impugned order, Ld Counsel mentioned that the CIT(A) has dismissed the ground without going into the merits of expenditure and merely on technical grounds. Further, he relied on the Kerala High court judgment to strengthen his argument that expenditure on curtains and furnishing is an allowable revenue expenditure as such expenditure does not yield any enduring benefits. On the other hand, Ld DR merely relied on the comments on para 15 of the impugned order. 44. We have heard the parties and perused the orders of the revenue. So far as the order of the AO is concerned, it is deficient of any discussion on this issue. It appears he symbiotically adopted the recommendation of the special auditors. On perusal of the para 15 of the impugned order, it is evident the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onors to demonstrate his case. These evidences cannot be brushed aside without disproving the credibility of these evidences. Ideally, concern donors would have already been examined. In any case, it is unfair to examine them after lapse of 12 years now as the donations pertains to the year ending March 1999. In our opinion, without straight away allowing the ground, in view of the requirement of the fairness in administration of the justice, CIT(A) is directed to pass a speaking order giving his finding on merits too after according the opportunity of being heard to the assessee. We also find there is some discrepancy noted by the revenue in making furnishing the details in the return relating to the details of the corpus donations as discussed in preceding paragraphs of this order while dealing with the other grounds. 46. Considering the fact, this ground is raised without prejudice to the ones, which have been set aside for the reasons given in the above paragraphs, in our opinion, this ground must also be set aside to the files of the CIT(A) for fresh adjudication after granting reasonable opportunity of being heard to the assessee. Accordingly, the ground is set aside. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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