TMI Blog2022 (7) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... ce sheet, duly signed by the auditors filed by the assessee has not been rejected and the balance sheet shows loans given to inter societies and the ledger a/c clearly shows the amount as advance for Nandigama land, therefore, addition of the same u/s 69 in our opinion, cannot be made. It has been held in various decisions that section 69 of the I.T. Act does not apply to transactions recorded in the books of account. The various decisions relied on by the learned Counsel for the assessee to the above proposition support his case. We therefore, hold that the addition u/s 69 cannot be made since the amount is already recorded in the books of account. Even otherwise also, it is an admitted fact that the assessee society is registered u/s 12A of the I.T. Act and the benefit of deduction u/s 11 denied by the Assessing Officer has been restored by the CIT (A) by holding that the assessee has spent more than 85% of its gross receipts towards its object and is entitled to the benefit of exemption u/s 11 and the Revenue is not in appeal before the Tribunal. Therefore, once the assessee society is eligible for benefit u/s 11 no addition u/s 68 69 can be made since additional income wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urora Educational Society, M/s. Taraka Rama Educational Society, M/s Karshak Vidya Parishad and M/s. Church Educational Society. 3. A search and seizure operation u/s 132 of the I.T. Act was conducted in the case of M/s. Aurora Educational Society Others Group, in which the assessee was also covered. The warrant of authorization was executed on 23.03.2018. In response to notice u/s 153A of the Act issued on 24.12.2018, the assessee filed its return of income on 4.4.2019 declaring total income at Nil. The Assessing Officer in the order passed u/s 143(3) made an addition of Rs.21,19,21,411/- on the ground that the assessee failed to apply 85% of its income towards charitable purposes as mandated by section 11 of the I.T. Act. The learned CIT (A) deleted the addition and Revenue is not in appeal before us, therefore, we are not concerned with the same. However, the Assessing Officer made addition of Rs.11,00,06,345/- as unexplained investment which has been sustained by the learned CIT (A) which is the subject matter of appeal before us. 4. So far as the facts relating to the addition of the above amount of Rs.11,00,86,345/- is concerned, the Assessing Officer noted that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such date were clearly written. When the same is confronted with Mr. N. Ramesh Babu, in his sworn statement dated 24.03.2018, he had admitted that Rs.6,62,50,000 cash is paid to the landowners, with respect to the purchase of 55 Acres of land. The Assessing Officer reproduced the relevant questions and answers which are as under: Q.6. I am showing you the page No.31 and 32 Annexure A/AES/OFF/01 which is seized in the premises of M/s. Aurora Educational Society, House No.1-8-27/20 Street No.12, Chikkadapally, Hyderabad. Please confirm and explain the contents? Yes. I confirm that Annexure A/AES/OFF/01 containing loose sheets seized in the premises of M/s. Aurora Educational Society, House No.1-8-27/20 Street No: 12, Chikkadpally, Hyderabad. The said paper contains payments made to land owners towards purchase of 55 acres land at Nandigama. Q.61. Please explain the sources for the above investment made. Ans. I submit that the total cash payments in this property transaction is Rs. 6,62,50,000/- and it is mostly paid during the FY 2016-17 FY 2017-18. I have already admitted additional income of Rs. 51.33 Crores in response to Q.27 on account of cash receipts rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3 I have carefully considered the submissions of the appellant, the order of the Assessing Officer, the evidence filed by the appellant's AR and thereon. Briefly, the facts are, the assessee purchased Ac.55.23 gts of land at Nandigama village. During the course of search a detailed working of payments for the purchase of the property. was found. As per the evidences, society has paid a total amount of Rs.18,05,92,500/- out of which Rs.6,62,50,000/- was paid in cash. The receipts and payments account of the assessee shows Rs.4,65,50,000/- towards payment of Nandigama land in the current year and Rs.2,40,36,155/- in the next year i.e.., AY 2018-19. As per the AD, the total investment towards Nandigama land in both the years works out to Rs.7,05,86,155/-Rs.4,65,50,000/-+Rs.2,40,36,155/-). Since the total amount paid as per the seized document was Rs.18,05,92,500/- as against the amount reflected in the books of Rs.7,05,,86,155/- the AO made addition of difference of Rs.11,00,06,345/-(Rs.18,05,92,500/-, Rs.7,05,86,155/-) as unexplained investment u/s.69 of the Act. The AO has also extracted a copy of the seized document where cash of Rs.6,62,50,000/-was said to have been paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no basis and is rejected . 11. Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal by raising the following grounds of appeal: 1. On the facts and in the circumstances of the case the appellate order passed by the CIT(A) is erroneous both on facts and in law to the extent the order is prejudicial t General Ground the interest of the appellant. 2. The Ld. CIT(A) has erred in upholding the order passed by the Assessing, Officer u/s 143(3) r.w.s. 153A of the Act, without executing the warrant of Authorisation Technical Ground u/s 132 of the Act by the DIT (lnv.). 3. On facts and in circumstances of the case and in law, the initiation of proceedings by the Assessing Officer u/s.153A in the case of the appellant is bad in law in as much as no warrant of search u/s 132 was executed in the case and no panchanama Ground is drawn and that therefore the assessment order passed by the learned AO ought to have been quashed by the Ld. CIT(A) as void abinitio. 4. The Ld. CIT(A) ought to have appreciated the fact that the AO erred in initiatin8 proceedings under section 153A of the act without there being any incriminating Technica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned CIT (A). Referring to the copy of the balance sheet filed at Page No.7 of the Paper Book, he drew the attention of the Bench to the revised balance sheet as on 31.03.2017 and submitted that the loan given to the inter societies has been shown at Rs.19,23,77,700/- which includes the advance for Nandigama land at Rs.11,02,06,345/-. He submitted that although this fact was brought to the notice of the learned CIT (A) by filing the relevant details, however, the learned CIT (A) conveniently ignored the same and sustained the addition made by the Assessing Officer treating the same as an afterthought. He submitted that when the learned CIT (A) has called for a remand report on the other issue, he could have also called for the remand report on this issue as well. However, he failed to do so. Therefore, once the payment is recorded in the books of account, addition of the same cannot be made u/s 69 of the I.T. Act. For the above proposition, he relied on the following decisions: (i) ITAT Delhi Bench in the case of ACIT vs.Yashovardhan Tyagi in ITA No.5998/Del/2014 (Paper Book Page 18 to 28) (ii) ITAT Bangalore Bench in the case of Income Tax Officer vs. Smt. Teena Bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 143(3) rws 153A made addition of Rs.21,19,21,411/- on the ground that the assessee failed to apply 85% of the income towards charitable purposes as mandated by section 11 of the I.T. Act and therefore, denied exemption granted to it u/s 11 of the I.T. Act. Similarly, the Assessing Officer made another addition of Rs.11,00,06,345/- u/s 69 of the I.T. Act being unexplained investment in Nandigama land on the ground that the society had paid a total amount of Rs. 18,05,92,500/- for purchase of land as per the seized document out of which the assessee was able to explain only an amount of Rs. 7,05,86,155/- towards purchase of land and the balance amount was not recorded in the books of account and the assessee failed to explain the source of the same. We find in appeal, the learned CIT (A) deleted the addition of Rs. 21,19,21,411/- and allowed the benefit of section 11 of the I.T. Act on the ground that the assessee has applied more than 85% of the gross receipts towards its objects and is entitled to the benefit u/s 11 of the I.T. Act and the revenue is not in appeal before the Tribunal. Thus, the assessee is registered u/s 12A of the I.T. Act and enjoys the benefit of section 11 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of account. 18. Even otherwise also, it is an admitted fact that the assessee society is registered u/s 12A of the I.T. Act and the benefit of deduction u/s 11 denied by the Assessing Officer has been restored by the CIT (A) by holding that the assessee has spent more than 85% of its gross receipts towards its object and is entitled to the benefit of exemption u/s 11 and the Revenue is not in appeal before the Tribunal. Therefore, once the assessee society is eligible for benefit u/s 11 of the I.T.Act, no addition u/s 68 69 can be made since additional income will be treated as deemed income entitled to exemption u/s 11/12/12A of the I.T. Act. 19. We find the Hon'ble Delhi High Court in the case of DIT (E) vs. Raunaq Education Foundation reported in 294 ITR 76 has decided somewhat similar issue as to whether the assessee who is entitled to exemption u/s 10(22) of the I.T. Act, 1961 can claim the benefit thereof for the purpose of income deemed to be chargeable to tax u/s 68 of the I.T. Act. In that case, the Assessing Officer held that the undisclosed income could not be exempted u/s 10(22) of the Act and the CIT (A) upheld the view taken by the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. At the end of the assessment proceedings Assessing Officer made various additions and determined the assessed income at Rs.1,09,79,320. During the first appellate proceedings, after considering the assessee's submissions, the CIT(A) held that the additions made by the AO u/s.68 in both the years are sustainable. The contents of para 11 are relevant in this regard. However, on finding that the assessee is entitled to the deduction/exemption u/s.10(23C)(v) of the Act and also on finding AO denied such a deduction to the assessee in both the years, the CIT(A) granted such benefit of deduction/exemption u/s.10(23C)(v) of the Act in respect of such additions u/s.68 of the Act. The CIT(A) relied heavily on various judicial pronouncements while granting the exemption in respect of the entire enhanced income which includes additions made u/s.68 of the Act. The Madras High judgment in the case of Sri Krishna Educational and Social Trust 351 ITR 178 Madras, the Delhi High Court judgment in the case of Raunaq Education Foundation 294 ITR 76 (Delhi), the Cochin Bench of the Tribunal in the case of ACIT vs. Muslim Education Society 1 ITR 527 were cited by the CIT(A) in para 12.4 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not initiated any action for revocation or cancellation of exemption granted to the appellant u/s 10(23C)(v) of the Act in the light of huge additions u/s 68 of the Act. In fact, he has certified that the trust has complied with the relevant provisions of sec. 10(23C)(v) of the Act. The provisions of section 10(23C)(v) of the Act are to be followed for deciding the issue under appeal and hence the same are reproduced below: 10. In computing the total income of a previous year of any person, any income falling within any of the follows clauses shall not be included. (23C)-Any income received by any person on behalf of - (v) -any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, [which may be approved by the prescribed authority], having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof; The words used in the section is any income received by any trust is exempt. Therefore, the income of the appellant trust assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) In this case the assessee's income was subject to exemption u/s.10(23C)(v) being educational institution. The A.O. has made additions u/s.68 on account of unexplained cash credits. The Hon'ble ITAT has followed the decision of Hon'ble Delhi High Court in the case of DIT Vs. Raunaq Education Foundation (207) 294 ITR 76 and has held that what is entitled for exemption u/s.10(23C) is any income ; the word 'income cannot be given restrictive meaning but its natural meaning, therefore the assessee is entitled to benefit u/s. 10(23C) even in respect of income covered u/s.68 of the Act. 12.5 I find from the records that no action has been initiated by the AO to recommend withdrawal of exemption given to the appellant u/s 10(23C)(v) or cancellation its registration u/s 12A of the Act in the light of additions u/s 68 of the I.T. Act, 1961. The appellant trust enjoys the benefit of exemption u/s 10(23C)(v) for assessment years under appeal is an undisputed fact. The AO has not brought on record any material suggesting that the appellant trust was not meeting the conditions given in section 10(23C)(v) of the I.T. Act, 1961. In the assessment order for subsequent A.Y. i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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