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TMI Blog2022 (8) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer erred in law as well as on the facts of the present case in making disallowance of depreciation though the same is duly allowable under provisions of the Act. iii. Rs.5000000/- The ld. Assessing Officer erred in law as well as on the facts of the present case in making disallowance of revenue expenses claimed by the assessee without pointing out any valid reason. 4. Before proceeding further, it is necessary to understand the basic facts about the assessee to deal with this appeal. The assessee is a trust engaged in imparting education and running an educational institute for which it has been granted certificate u/s. 10(23C)(vi) of the Income Tax Act, 1961 by Chief Commissioner of Income Tax, Udaipur vide letter No. CCIT/ITO/(Tech)/UDR/2012-13/31 dated 04.04.2012. This certificate was effective from A. Y. 2011-12 onwards. 4.1 Return of income was filed by the assessee trust on 22.09.2016 declaring nil income. The case was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). The assessee was issued notices calling for details and allowed an opportunity to produce evidence / information in support of the return of income filed. In para 3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis and that too the amount at para 6 & 7 both are not matching. This shows the casual approach taken by the AO while finalizing the assessment. 9. The assessee trust has carried this matter before the ld CIT(A) by filling an appeal against the impugned order of the AO. The ld CIT(A) instead of deleting the addition, it sent the matter for remand report. Even in the remand report, no specific items of disallowance were pointed out and the assessee has duly submitted its response on the same. However, the ld. CIT(A) sustained the addition and therefore, this appeal by the assessee is before ITAT. 10. During the proceeding before the Ld. CIT(A), the Ld. AR of the assessee filed a detailed submission in the appellate proceeding. The Ld. CIT(A) forwarded the said written submission vide his office letter no. CIT(A)/AJM/2019-20/421 dated 03.06.2019 and called for a remand report from the AO. In the remand report, the AO submitted as under "Kindly refer to your office letter No. CIT(A)/AJM/2019-20/421 dated 03.06.2019 on the above narrated subject. In this regard, it is submitted that the submission made by the Assessee Society in support of Ground raised have been gone through car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses have been claimed. 5. Conveyance Expenses of Rs. 9,00,594/- and Traveling Expenses of Rs. 43,062/-During the year under assessment, the Assessee Society claimed sucha huge expenses in these heads whereas the Assessee Society was having 2Buses and a Car. 6.Salary & Daily wages of Rs. 1,53,53,032/- and Wages of Rs. 58,89,585/- The Assessee Society claimed Rs. 1,53,53,032/- under the Salary & Daily Wages during the year. Simultaneously, expenses of Rs. 58,89,585/- were claimed under the head Wages which seems not genuine. 7. Library Expenses of Rs. 43,567/-The Assessee Society claimed Rs. 43,567/ under the head of Library Expenses during the year under assessment. These expenses are not genuine owing to the reasons that Library is a part of building. Further all expenses such as electricity and other facilities being given in Library have been claimed in expenses. 8. Building repairing of Rs. 36,33,465/-During the year under assessment, the Assessee Society acquired Land/Building of Rs. 63,37,435/-. Apart from this, such huge expenses have been claimed on repairing which do not seem genuine In view of the above facts, a lump sum amount of Rs. 50,00,000/- had been disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (iii) Rs. 17583 - Photostat Expense: The ld. AO merely stated that the expenses do not seem to be genuine. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non genuine or excessive. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (iv) Rs. 38955 Van Repairing Expenses: It has been alleged by the ld. AO that the assessee did not have any Van during the year under consideration however it is submitted that this observation of the ld. AO is totally incorrect and the facts on record. It would be seen from the depreciation chart already submitted that the assessee was having t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. Thus, considering the above facts and submissions it would be seen that the disallowance has been made by the ld. AO without brining any credible evidences or facts on record but rather on its own assumptions and presumptions. Even in remand report nothing new has been stated by the ld. AO while justifying the disallowance on its own estimation and it is completely silent on the basis or comparison which led to such a huge disallowance. Hence, such disallowance cannot stand in the eyes of the law and the same deserves to be deleted. Therefore, we again pray to delete the disallowances made by the ld. AO." 12. Based on the set of arguments on both the sides, the ld. CIT(A) has given his finding at page 8 para 5.3 which reads as under : ''5.3 I have gone through the assessment order, statement of facts, grounds of appeal, written submission, remand report and rejoinder carefully. It is seen that either during the course of assessment proceedings or appellate proceedings, the appellant has not been abl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of the audit. (b) In our opinion, proper books of account have been kept by the head office and branches of the above-named fund, or trust, or institution or any university or other educational institution or any hospital or other medical institution so far as appears from our examination of the books of account. (c) In our opinion and to the best of our information and according to the information given to us the said accounts read with notes thereon, if any, give a true and fair view - (1) In the case of the Balance Sheet, of the state of affairs of the above-named fund, or trust, or institution or any university or other educational institution or any hospital or other medical institution as at 31/03/2016 and (2) In the case of Income and Expenditure Account or Profit and Loss Account, surplus ordeficit or profit or loss for the year ended on that date. 13.2 The ld. AR argued that there is not a single adverse remark of the independent auditor is appearing in the report who has undertaken audit of books of accounts regularly maintained by the assessee. The auditor has also satisfied that he has received all the information and explanation and has also commented ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... past several years. It is notable that the auditor has duly mentioned the total expenses incurred wholly and exclusively for the purposes of the object of the trust as appearing in clause 9 of the annx. of the audit report at PB 4. The ld. AO has also not found any expenses which were not for the objects of the trust and hence, no expenses could be disallowed by the ld. AO. 1.3.1 Huge disallowance made without any basis: We may submit that the ld. AO has made a huge disallowance of Rs.5000000/- without any basis at all and it has just observed that the expenses claimed by the assessee "seems to be excessive". We may submit that while making disallowance, the ld. AO has not shown any basis that why the expenses claimed by the assessee have been found to be excessive. Even what heads of expenses have been found to be excessive is not stated by the ld. AO. No comparison of expenses has been made by the ld. AO to reach to such conclusion and thus the entire disallowance made by the ld. AO was baseless, unjustified and uncalled for. 1.3.2 No specific instance of expenses of disallowable nature: We may also submit that though the ld. AO has made such a huge disallowance but at the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be higher. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (ii) Rs. 1294127/- Furniture Repairing Expense: The Id. AO merely stated that the expenses do not seem to be genuine and are excessive. The AO wrongly stated the fact as well as the WDV of only one branch was considered and the audited depreciation chart are enclosed at PB 14-16. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non genuine or excessive. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance out such expense claimed by assessee would justified. (vii) Rs. 43567 Library Expenses: proper justification has been given the ld. while treating library expenses as genuine and has simply stated that library is part building. It humbly submitted that all library expenses fully vouched and the ld. AO has been able point out even single rupee expense out of same. Therefore disallowance required to made out of same. (viii) Rs. 3633465/- Building Repairing Expense: The ld. merely stated that expenses do seem to genuine. Not single item disallowance has pointed out even there is no basis holding such expenses as genuine excessive. Absolutely comparison such expense been made with reference to requirement of assessee in operations nor has evidence been brought record justify his action making such huge disallowance. Complete expenses have been incurred during course regular operations the trust hence disallowance out of expense claimed assessee would justified. 1.5.1 Reasonable expenses considering the large set up: We submit educational society is very reputed society in the field education. It following set KD Jain College KD Jain Public School KD Jain Higher Seconda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A) is unfair and is against the principles of natural justice. He has further stated that the assessee is registered educational institute, no defect in books of account found by auditor, not a single defect found in the assessment proceeding as well as in the remand proceeding so as the records maintained by the assessee including the supporting bills and vouchers are not correct. He has drawn our attention to audit report and its annexure wherein the auditor has reported that expenses incurred are for the purpose of the object of the trust. Not a single voucher is found to be incorrect or having any defect of the claim of expenses. He has submitted that there are around 1500 students and 300 computers are installed to impart the education to the students and looking to the facts and circumstances placed on record the lumpsum disallowance is required to be deleted. 14. On the contrary the Ld. DR reiterated on the finding of the orders of the lower authorities and finding of the AO in remand report. He has further argued that the assessee has incurred around 4 cr as revenue expenditure which is substantial in sum. He has further argued that since the assessee has cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r figure. He has not given any comparison with that of the assessee or with other assessee while doing so. He further argued that income of the assessee trust is totally exempt from tax whether the expenditure is shown excess or less will not make any difference to the revenue even otherwise. 16. We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also meticulously gone through the contentions raised in the hearing by ld. DR as regards the claim of various expenses by the assessee. It is not disputed by the both the parties that there is not a single instance observed in the original assessment proceeding and in the remand proceeding about the correctness and completeness of the records maintained by the assessee. The only contention raised by the revenue that the expenditure shown by the assessee is on higher side/ excessive. We also found force in the argument of the ld. AR of the assessee that when the income of the assessee is exempt from tax what it will make a difference about the claim of the expenditure this is also confirmed by the AO, on page 3 of the assessment order the wherein the AO has observed that "As the 'A' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cific finding highlighting particular expenditure which accordingly to him is not allowable and the reasons for the same which in the instant case is conspicuously absent and thus, the disallowance so made and sustained by the ld CIT(A) is clearly in the nature of an adhoc disallowance which cannot be sustained in the eyes of law. Similar view has been taken by the Coordinate Bench in case of Meghalaya Construction and Supply Company vs ACIT. 18. In the result, based on the arguments, submissions and decisions relied upon we find that the claim of the assessee is supported bills and vouchers recorded in the books of accounts which are audited as per requirement of the act and auditor has specifically reported that all the expenses incurred by the assessee is per the object of the society. The ld CIT(A) as well as AO has not pointed out any single defects in the records maintained by the assessee while making an adhoc disallowance neither the AO nor the ld. CIT(A) before arriving at such a finding, recorded specific finding highlighting particular expenditure which accordingly to him is not allowable, a general observation for all the expenditure disallowance of lump sum out of all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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