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TMI Blog2018 (12) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the AO. iv. That the CIT (A) has erred on facts and in law in ignoring the fact that the appellant did not claim application of income for charitable purpose at the time of purchase of fixed assets and there is no dual claim of application of income as assumed by the AO. v. That the CIT (A) has erred on facts and in law in not giving any reasons as to how the case laws relied upon by the appellant are not applicable specially the dismissal of Special Leave Petition (SLP CC 9735/2010) by Supreme Court vide order dated 19.7.2010 filed by the revenue in Supreme Court challenging judgment dated 19.08.2009 (allowing claim of depreciation) of Punjab & Haryana High Court in ITA no. 450/2008 in the case of CIT v Manav Mangal Society which finally decided the claim of depreciation in favor of assessee. vi. That the CIT (A) erred on facts and in law in not giving any reasons on submissions made by the appellant in view of the insertion of section 11(6) inserted by the Finance Act, 2014 w.e.f. 1.4.2015 stipulating that in section 11 where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for certain details with respect to the employees. According to the learned AO there is a huge payment of the salary under the head salary and non-submission of required detailed by the assessee, he issued notices under section 133 (6) to the recipient of salary on test check basis. On the basis of the information received he analyzed that out of the list of 22 persons to whom salary payment was shown at Rs. 3440886/- and the identity proof submitted by the society, it is found that the society has made payment in cash amounting to Rs. 1569560/- to these persons. He noted that Rs. 1871379/- was paid through cheques to the above persons and the balance amount of Rs. 1569560/- was paid in cash, which is incomprehensible. Therefore, he issued a show cause notice to the assessee that why the above expenditure incurred in cash should not be added back to the income of the society being bogus expenditure. The assessee explained that assessee society is running school and college which require teaching staff for providing better educational facilities to the student and hence major expenditure is incurred on paying salary to the staff. It was further stated that expenditure on salary is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt shown to have been paid to them in cash. He further stated that in some of the cases blank cheques have been taken by the society from the employees. Therefore he held that the assessee has shown expenditure under the head salary of Rs. 16614502/- against the total receipt of Rs. 34906990/- which is 47.60% which is very excessive whereas the salary in other similar Institutes it ranges between 30% to 35%. Therefore he disallowed the sum of Rs. 1569560/-. 6. On appeal before the learned CIT Appeal, the above addition was confirmed. He upheld the addition holding that AO has proceeded logically in this case as the assessee could not furnish the details of identity proof of the teachers and the tax deduction at source made thereon. When these details were not forthcoming from the assessee, AO proceeded to make further investigation and found that there is discrepancy in the salary recorded by the assessee in its books of accounts and other records compared to what is confirmed by those employees. He further stated that the learned assessing officer has not disallowed the complete salary but has disallowed the part of the salary from every employee, which has been paid in cash. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to certain employees who did not receive the enquiry letter of the assessee. The lower authorities have stated that even in such cases the identity of those teachers is not proved by the assessee. Assessee did not make any effort to produce them before AO to show that they are working with the assessee and show the amounts paid to them duly confirmed. No doubt, the assessee can make payment in cash however it is for the assessee to show the authenticity and reliability of such payment. Whenever anybody questions the assessee about the genuineness of the payment, it is the duty of the assessee to discharge burden cast upon it by producing those employees or adequate details of those employees before the revenue authorities. It should not be forgotten that assessee is a charitable trust and is a property of public at large, therefore higher duties are cast on charitable trusts. On reading of the order of the learned assessing officer and the learned Commissioner of income tax appeals with respect to this addition, we do not find any infirmity in their findings. In view of this the addition of Rs. 1569560 which is part of the salary paid by the assessee in cash to the teachers whose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer and confirmed by the learned Commissioner of income tax appeals and therefore the assessee is not eligible for exemption under section 11, 12 and 13 of the income tax act as the activities of the assessee are not genuine. He further stated that the meeting the bogus salary in cash of the non-existent employees itself prove that the activity of the assessee is not genuine and therefore the learned assessing officer has correctly withdrawn the exemptions. 13. We have carefully considered the rival contention and perused the orders of the lower authorities. The lower authorities have held that the activities of the assessee are not genuine. For the reason that assessee has paid salary in cash to the employees which could not be proved to the satisfaction of the learned lower authorities as genuine payment. It is an admitted fact that registration granted to assessee under section 12AA of the income tax act has not been withdrawn nor such proposal has been sent by the AO to the Commissioner of income tax. Conditions for applicability of section 11 and 12 of the income tax act as provided under section 12 A of the income tax act. Further, additional conditions for nonapplicability ..... X X X X Extracts X X X X X X X X Extracts X X X X
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