TMI Blog2022 (2) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 143(3) of the Act it cannot be disturbed by the AO by framing assessment under section 153A/153C of the Act unless incriminating material qua the issue in question has been unearthed during the search operation. Undisputedly, no such incriminating material has come on record. Revenue has raised this issue just to generate unnecessary litigation on the pretext that since Department has not accepted the decision rendered by the Hon ble Supreme Court in the case of M/s. Subros Educational Society [ 2018 (4) TMI 1622 - SC ORDER] the outcome of which has not been brought on record by theD.R. during the course of argument, which is not permissible under law. So in view of what has been discussed above, the CIT(A) has validly and legally decided this issue in favour of the assessee by relying upon the decision rendered by the Tribunal, Hon ble Bombay High Court and Hon ble Supreme Court. - ITA Nos.1033, 1034 And 1035/M/2021 - - - Dated:- 11-2-2022 - Shri Pramod Kumar, Vice President And Shri Kuldip Singh, Judicial Member For the Assessee : Shri Satyaprakash Singh, A.R. For the Revenue : Shri Sandeep Raj, D.R. ORDER PER KULDIP SINGH, JUDICIAL MEM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been filed before the Hon'ble apex Court with Diary No. 20745/2020. 5. The appellant craves leave to amend or alter any ground and/or add new| grounds which may be necessary. 3. Briefly stated facts necessary for adjudication for the controversy at hand are : the assessee trust being a society registered under section 12A of the Income Tax Act (for short the Act) with approval under section 80G of the Act is running an Engineering, Agriculture, Polytechnic, Architecture, MBA, MCA, Jr. College at Pune/Ambi/Navi Mumbai. Shri Vijay D Patil is the President and Shri Ajinkya D Patil (brother) is the Vice-President of the assessee trust M/s D Y Patil Educational Academy. 4. On the basis of search and seizure operation conducted on 27.07.2016 under section 132 of the Act on the office/university/business franchise of M/s. Ajeenkya D.Y. Patil University others, proceedings under section 153C have been initiated. 5. On the basis of relevant seized material unearthed during the course of search and statement recorded during search operation, a satisfaction note under section 153C of the Act was received from the Assessing Officer (for short the AO ) of the searched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue has challenged the addition/disallowances on merits only . It is also not in dispute that while disallowing the brought forward losses claimed by the assessee trust to be carried forward no reliance on any incriminating material has been placed by the AO. It is also not in dispute that such disallowance made by the AO in original assessment proceedings has already been allowed by the Ld. CIT(A) vide order dated 07.06.2018 28.03.2018 for A.Y. 2013-14 2014-15 respectively. 10. In the backdrop of the aforesaid undisputed facts, the grounds raised by the Revenue in the aforesaid appeals are determined as under: Ground No.1 2 of ITA No.1033/M/2021 for A.Y. 2011-12 Ground No.1 2 of ITA No.1034/M/2021 for A.Y. 2012-13 Ground No.1 2 of ITA No.1035/M/2021 for A.Y. 2013-14 11. The AO by invoking provisions contained under section 11(1)(d) of the Act proceeded to decide that the assessee trust has shown development fee as corpus donation received during the various years which is not permissible and thereby made addition of ₹ 53,07,564/-, ₹ 1,02,69,738/- and ₹ 1,48,51,509/- for A.Y. 2011-12, 2012-13 2013-14 respectively. 12. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there should be some reference of seized material for making addition in the case of an unabated assessment, but the seized material should also be incriminating in nature. Needless to say, that in an unabated assessment where the AO is revisiting an issue, it is incumbent upon him to identify the incriminating material found during the course of search to assume jurisdiction to revisit the issue in the assessment u/s 153A/153C of the Act. This onus cannot be said to have been discharged by making only vague and unsubstantiated statement that there were 'books of account' and receipts of payment to support the addition. I am, therefore, construed to hold that the Id. AO failed to substantiate the claim made in the remand report and, hence, there is nothing on record to hold a view that the impugned addition was made on the basis of any incriminating material found and seized during the course of search. In the given facts and circumstances of the case, the addition made by the Id.AO on this account cannot be upheld. The addition made on account of Development Fee received by the Trust is accordingly directed to be deleted. The Grounds No. 2 and 3 are accordingly all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the aforesaid appeals raised by the Revenue goes to show that these appeals have been filed just for the sake of appeals on the ground that the decision rendered by the Hon ble Bombay High Court in the case of All Cargo Global Logistics Ltd. (supra), on the similar issue has not been accepted by the Department as Special Leave Petition (SPL) has been filed which is pending adjudication by ignoring the settled principle of law that mere filing of SLP in the Hon ble Supreme Court would not disturb the legal issue settled by the Hon ble Bombay High Court. So finding no perversity and illegality in the impugned findings on ground No.1 2, the same are decided against the Revenue. Ground No.3 4 of ITA No.1033/M/2021 for A.Y. 2011-12 Ground No.3 4 of ITA No.1034/M/2021 for A.Y. 2012-13 Ground No.3 4 of ITA No.1035/M/2021 for A.Y. 2013-14 15. The AO disallowed the set off of brought forward deficits/losses, being excess of expenditure over receipts, of prior years against the income of the current years without relying upon any incriminating material, if any, found during the course of search. However, the Ld. CIT(A) allowed the set off of carried forward losse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw forward the deficit of earlier year and set it off against the surplus of subsequent years when the same was not allowable in the case of assessee trust in whose case income exempted under section 11 of the Income Tax Act, 1961. In this case, the Hon'ble Bombay High Court decided the aforesaid substantial question of law in favour of the assessee by holding as under: - 5. Now coming to question No. 3, the point which arises for consideration is : whether excess of expenditure in the earlier, years can be adjusted against the income of the subsequent year and whether such adjustment should be treated as application of income in subsequent year for charitable purposes? It was argued on behalf of the Department that expenditure incurred in the earlier years cannot be met out of the income of the subsequent year and that utilization of such income for meeting the expenditure of earlier years would not amount to application of income for charitable or religious purposes. In the present case, the Assessing Officer did not allow carry forward of the excess of expenditure to be set off against the surplus of the subsequent years on the ground that in the case of a Charit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set off against income of subsequent years by invoking Section 11 of the Income Tax Act, 1961? .... To this extent, Mr. K. Radhakrishnan, learned senior counsel appearing on behalf of the applicant/appellant is correct. Therefore, we have heard him on the aforesaid question of law as well but did not find any merit therein. In the case of CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal reported in 211 ITR 293, Hon ble High Court of Gujarat had decided that :- There is nothing in the language of s. 11(1)(a) to indicate that the expenditure incurred in the earlier year cannot be met out of the income of the subsequent year and utilization of such income for meeting the expenditure of the earlier year, would not amount to such income basing applied for charitable or religious purposes. That apart income derived from trust property has to be determined on commercial principles and if commercial principles for determining the income are applied, it is but natural that the adjustment of the expenses incurred by the trust for charitable and religious purposes in the earlier year against income earned by the trust in the subsequent year will have to be regarded as ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT vs. Maharana of Mewar Charitable Foundation (1987) 60 CTR (Raj) 40 : (1987) 164 ITR 439 (Raj) : TC 23R.1198 and CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal (1994) 119 CTR (Guj) 144 : (1995) 211 ITR (Guj) 293 : TC 23R.1228 respectively, both Rajasthan High Court and Gujarat High Court have answered the questions in favour of the assessee and against the Revenue. 6. Following the aforesaid decisions of Rajasthan and Gujarat High Courts, we answer the second question referred to us in favour of the assessee and against the Revenue. In the case of Gonvindu Naicker Estate vs. ACIT reported in 248 ITR 368, Hon'ble High Court of Madras had decided that:- The expenditure, if incurred in an earlier year is adjusted against the income of a later year, it has to be held that the trust had incurred expenditure on religious and charitable purposes from the income of the subsequent year, even though the actual expenditure was in the earlier years, if in the books of account of the trust such earlier expenditure had been set off against the income of the subsequent year. The expenditure that can be so adjusted can only be expenditure on religious and charitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered by the Id. CIT(A) in the case of the assessee during original assessment proceedings and the same was allowed to the assessee. Hence, this being an unabated assessment year, in any case the AO did not have jurisdiction to revisit the issue when it was not based on any incriminating material found during the course of search as held in the multiple judicial decisions referred to previously while adjudicating previous grounds of appeal. Ground No.4 for Assessment Year 201112 is accordingly Allowed. 8.3.9. So far as this issue is concerned, facts of the case related to AY 2012-13 and AY 2013-14 are identical to the facts for AY 2011-12 and accordingly the Ground No. 4 for Assessment Year 2012-13 and Ground No. 3 for Assessment Year 2013-14 are also allowed. 16. Moreover, this issue has already been decided in favour of the assessee trust for A.Y. 2011-12, 2012-13 2013-14 in the completed assessment framed under section 143(3) of the Act. Again it is a settled principle of law that in case of completed assessment framed under section 143(3) of the Act it cannot be disturbed by the AO by framing assessment under section 153A/153C of the Act unless incriminating mate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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