ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTION) CIRCLE-1, BENGALURU vs. COSMOPOLIS EDUCATIONAL TRUST, BENGALURU

The facts in brief are that the assessee (Cosmopolis Educational) is a trust came into existence as on 24th May 2019 with the object of imparting education and started a school known as The Cambridge International School (hereafter TCIS). The year under consideration is the second year of its operation.

During the year under consideration, a kindred trust namely M/s Cosmopolitan Education Trust (hereafter M/s CET) which was running 2 educational institutions namely The Cambridge Public School -HSR and Embassy Public School -Magadi (hereafter- EPS) decided to help out the assessee trust. M/s CET vide transfer agreement dated 4th February 2021 transferred its running school namely EPS- Magadi to the assessee trust w.e.f. 1st February 2021 for a consideration of Rs. 5,32,35,693/- only. Furthermore, M/s CET transferred a sum of Rs. 47,17,52,440/- to the assessee trust on 4th February 2021. The assessee Trust out of impugned receipt of Rs. 47,17,52,440/- repaid back an amount of Rs. 5,32,35,693/- to M/s CET against the purchase consideration of school EPS and remaining amount of Rs. 41,85,16,746/- was transferred or credited to corpus/capital found account.

In addition to the above, the assessee trust has received inter- trust funds of Rs. 20,22,96,029/- throughout the year from the schools Page 3 of 24

There assessee trust paid an amount of Rs. 17.1 crores from the corpus/capital fund to M/s New Cosmo Education Society as donation. The corpus/capital fund account included following amount and year end balance: - Opening balance as on 1st April 2020

The return of the assessee was selected for scrutiny under the CASS on account of large corpus donation. During the assessment proceedings, various notices were issued by the AO requiring the assessee to explain the nature and sources of receipts and application of the receipts towards the object.

The assessee explained that during the year it received corpus donation of Rs. 41,85,16,746/- only from M/s CET but the due to inadvertent error the corpus donation was shown in ITR at Rs. 50,60,49,193/-. As the amount declared in return was nothing but the closing balance of the ledger Corpus/capital fund less opening corpus donation of Rs. 6 thousand. The assessee explained out of corpus donation of Rs. 41,85,16,746/-an amount of Rs. 17.1 crore was donated to another trust namely New Cosmo Education Trust and remaining amount was applied towards the construction of school buildings. The assessee in support of receipt of corpus furnished confirmation letter from M/s CET.

1 The assessee regarding inter trust fund of Rs. 20,22,96,029/- explained that in construction of school building, it incurred various expenses which was paid by the schools runs by M/s CET and the same Page 5 of 24

2 The assessee explained that the during the year it received total fund of Rs. 66,27,07946/- from the following sources: - School Fee

3 Out of the above receipt an amount of Rs. 58,47,65,595/- applied towards the charitable object in the following manner: - Donation

However, the AO rejected the explanation of the assessee. The AO held that the assessee failed to establish that the amount of corpus receipt declared in the returnof income for Rs. 50,60,49,193/- was difference between opening and closing balance of corpus fund. Hence, the AO disallowed the claim of exemption for Rs. 50,60,49,193/- and added the same to the total income of the assessee.

1 The AO further added the amount of inter trust fund of Rs. 20,22,96,029/ to the total income of the assessee. The AO held that the impugned amount was liability of the assessee which it was liable to pay. However, the impugned liability ceased to exist for the assessee after Page 6 of 24

The aggrieved assessee preferred an appeal before the learned CIT(A). The learned CIT(A) after considering the facts in totality deleted the addition/disallowances made by the AO by observing as under: 4. Decision: In this case, the order u/s.143(3) r.w.s 144B of the AO for the AY 2021-22 and the written submission of the appellant has been considered. A report has been called for from Juri ictional Assessing Officer with regard to additional submissions of assessee, and the reply dated 5/6/2023 has also been considered. Following are the issues: 4.1 Corpus Fund Donations treated as Income - Rs.50,60,49,193/-: Assessee vide responses dated 17/11/2022 has submitted to AO that there were clerical errors while filing the Return of Income and corpus fund donation was wrongly taken as Rs.50,60,49,193/- instead of Rs.41,85,16,746/-. Further assessee submitted that a Capital Fund balance appearing in the balance sheet of 31-03-2021 was taken in the Computation of Income. However, Assessing Officer has rejected the response and has held that as assessee has not shown the balance amount as the Opening Balance in the Return of Income the same cannot be considered as exemptions claimed u/s 11(1)(d) and added the Corpus fund donation as Income. In order to verify if the appellant is eligible for exemption u/s.11, the relevant section is reproduced below: “Section 11(1)(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 64[,subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified in sub- section (5) maintained specifically for such corpus]]”. Appellant has submitted that the Corpus Fund Donations received with a specific direction is to be excluded from the total income of the Trust in terms of u/s.11[1][d] of the Act and on account of sheer inadvertence an erroneous sum of Rs.50,60,49,193/- [being the closing balance of Corpus Fund as per financials] was entered in the return of income. Further appellant has accepted that error in filing the return of income but stated that the financials for the year ended 31/03/2020 and 31/03/2021 were uploaded and available on record and the same reveals the correct position of the corpus funds. On considering the reply of the AO and applicant it is seen that mistake in filing the return cannot be a reason for denial of exemptions claimed by assessee hence this ground of the appellant is allowed for the AY 2021-22. 4.2 Inter-trust balance transfer of Rs.20,22,96,029/- treated as Income :- A.O has held that the assessee has not submitted the confirmation for the treatment of Rs.20,22,96,029/- as corpus donation earlier during the assessment proceedings and that after perusing the submissions of the Page 7 of 24

The learned DR before us supported the order of the AO by reiterating the findings contained in the assessment order.

The learned AR before us filed a paper book running from pages 1 to 203 and submitted that the corpus donations received during the year were wrongly reflected in the income tax return because of an inadvertent error. The return showed ₹50,60,49,193/- as corpus donation, but in reality, the actual corpus donations received were ₹41,85,16,746/- from donors and ₹20,22,96,029/- by way of inter-trust transfer from M/s Cosmopolitan Educational Trust. Both these amounts were directly credited to the corpus account in the audited financial statements. The assessee furnished reconciliation statements, confirmation letters from donors, and ledger extracts to prove that these sums were corpus in nature and duly accounted for. Page 8 of 24

2 During the assessment proceedings, the AO treated the corpus donations as income. The assessee clarified that as per section 11(1)(d) of the Act, such corpus donations are exempt and cannot be considered as part of income. The learned CIT(A), after examining the confirmations and reconciliation statements, accepted the assessee’s submissions and deleted the additions.

3 The learned AR argued that the Revenue’s objections are misplaced. The reconciliations filed at various pages of the paper book, as well as confirmations from M/s Cosmopolitan Educational Trust, establish beyond doubt that the sums were corpus donations only. The assessee pointed out that the Revenue ignored later clarifications and continued to rely only on an erroneous initial statement. It was emphasized that the audited financials, reconciliation statements, and donor confirmations are consistent and support the assessee’s case.

4 In conclusion, the assessee submitted that since the donations of ₹41,85,16,746/- and ₹20,22,96,029/- are corpus in nature and have Page 9 of 24

5 Besides the above, the ld. counsel for the assessee has filed additional synopsis dated 19 September 2025 along with the remand report of the ld. ACIT wherein it was agreed that the sum of ₹ 47,17,52,440.00 represents the corpus donation received from Cosmopolitan Education Trust. It was submitted by the ld. AR that during the course of hearing before the learned Commissioner of Income Tax (Appeals), the Assessing Officer had issued notices calling upon the assessee to produce supporting documents and details in relation to the claims made. In response, the assessee, through its authorised representatives, appeared before the Assessing Officer and furnished all the required documents and explanations. After detailed verification, the Assessing Officer submitted a remand report to the learned CIT(A), which has also been placed on record.

6 From the said remand report, it is evident that the Assessing Officer has accepted the contention of the assessee that the sum of ₹47,17,52,440/- received during the financial year 2020-21 represented a corpus donation from Cosmopolitan Education Trust. The breakup of the said amount consists of ₹41,85,16,746/- towards corpus fund donation and ₹5,32,35,694/- being the source of funds used for the takeover of Embassy Public School, totalling ₹47,17,52,440/-.

7 During the course of assessment, the Assessing Officer had earlier raised a query regarding the corpus donation shown in the income-tax Page 10 of 24

8 Similarly, the amount of ₹5,32,35,694/- utilised for the takeover of Embassy Public School from Cosmopolitan Education Trust has been verified and accepted by the Assessing Officer as being sourced from corpus fund donations. Therefore, no appeal could be filed by the income-tax department on this issue, and the earlier addition made under section 69C of the Income-tax Act for unexplained expenditure no longer survives.

9 The assessee further places reliance on the judgment of the Hon’ble Karnataka High Court in the case of CIT v. D.M. Purnesh (ITA No. 346 of 2010 dated 17.02.2020), a copy of which has been enclosed. Based on the remand report and the appeal records, the position of various additions made in the assessment order is summarised as follows: (i) the corpus fund donation of ₹50,60,49,193/- has been accepted as corpus donation by the Assessing Officer; (ii) the addition towards inter-trust balance transfer of ₹20,22,96,029/- and disallowance of revenue expenditure of ₹3,44,44,734/- remain under appeal before the Tribunal; and (iii) the other additions under section 69C relating to donation paid, difference in revenue expenditure, and takeover of Embassy Public School have either been deleted by the ld. CIT(A) or accepted by the Assessing Officer. Page 11 of 24

11. Without prejudice to the above contentions, the assessee further submits that even if the sum of ₹20,22,96,029/- is not treated as corpus donation, the resultant income would still be nil, as the Assessing Officer is bound to grant reduction for the application of income in excess of total receipts. The computation statement evidencing this position is enclosed. In view of the above facts and circumstances, the assessee prays that this Hon’ble Tribunal may be pleased to dismiss the appeal filed by the appellant-revenue and pass such other orders as may be deemed fit in the interest of justice.

We have heard the rival contentions of both the parties and perused the materials placed on record. The central dispute in the present appeal relates to the treatment of (i) the corpus donation of ₹50,60,49,193/- shown in the return of income, and (ii) the inter-trust balance transfer of ₹20,22,96,029/-. The AO treated both sums as taxable income of the assessee, whereas the learned CIT(A) deleted the additions by accepting the assessee’s explanations.

1 On facts, it is clear that the figure of ₹50,60,49,193/- shown in the return was not the actual corpus donation received during the year Page 12 of 24

2 As regards the sum of ₹20,22,96,029/-, the assessee has established that the same represented amounts initially paid by schools of M/s Cosmopolitan Education Trust for construction of the assessee’s school building, which were subsequently converted into corpus donations upon mutual agreement. Confirmation from the donor trust and reconciliation of accounts have been placed on record, and these were rightly accepted by the ld. CIT(A). We hold that such directed voluntary contributions, being towards the corpus of the assessee trust, fall squarely within section 11(1)(d) of the Act.

3 The apprehension of the AO that cessation of liability cannot be treated as corpus donation is misplaced. Once the donor trust itself resolved to treat the advances as corpus donations and confirmations to this effect were furnished, the character of the receipt stands determined. There is no dispute that the sums have been credited to the Page 13 of 24

4 We also note that the assessee has applied substantial funds towards its charitable objects, including capital expenditure on school infrastructure and donation to another educational trust. This clearly demonstrates that the assessee has acted in line with its stated objects and within the framework of law.

5 It is also pertinent to note that the learned ACIT (exemption) circle 1 of Bengaluru 1, in his remand report has already accepted the sum of ₹ 47,17,52,440.00 represents the corpus donation received from Cosmopolitan Education Trust. The relevant extract of the remand report is reproduced as under: REMAND REPORT IN THE CASE OF COSMOPOLIS EDUCATIONAL TRUST (AACTC5342H) FOR THE A.Y.2021-22: As directed, report is being submitted in the case of the above assessee for the A.Y.2021-22 as under: 2. In order to examine the claim of the assessee Cosmopolis Educational Trust, made in the additional evidence submitted before the Ld. CIT(A) for the A.Y.2021-22, a letter had been issued by this office on 02.05.2023 and 19.05.2023 requesting the assessee to produce the details and documents in support of the claim. 3. In response, K.V. Narayanan C.A. and Sri. Govindarajan. J., C.A., Authorised Representatives of the assessee appeared and submitted the details and documents. The case was heard on 29.05.2023 and 01.06.2023. A letter had been filed on 22.05.2023 making a detailed submission and enclosing the relevant documents. The submissions of the assessee are discussed as under: In the additional evidence produced before the Ld. CIT(A) the assessee had claimed that during the F.Y. 2020-21 it had received Rs. 47,17,52,440/- as corpus donation. It was explained that the Cosmopolitan Education Trust had donated the above sum through the assessee’s Axis bank account No. 92102000004081421. The donation was split into three transfers on 04.02.2023 of Rs. 5,32,35,693/-, Rs. 41,69,19,676/- and Rs. 15,97,071/- totalling to Rs. 47,17,52,440/-. The bank statements as well as the ledger accounts of the assessee as well as Cosmopolitan Education Trust were produced. 4. On verification of the details and documents submitted by the assessee, it is found that the claim of the assessee that during the F.Y. 2020-21 it had Page 14 of 24

6 In these circumstances, we find no infirmity in the well-reasoned order of the learned CIT(A) deleting the additions. The assessee has furnished confirmations, reconciliations, and audited accounts which conclusively prove that the amounts of ₹41,85,16,746/- and ₹20,22,96,029/- are corpus donations and not taxable income. We, therefore, uphold the order of the learned CIT(A) and dismiss the ground of appeal raised by the Revenue.

The next issue raised by the Revenue is that the ld. CIT-A erred in deleting the disallowance of claim made by the assessee for the revenue expenditure of Rs. 3,44,44,374/- without calling for remand report.

The relevant facts are the assessee during the assessment proceedings was asked by the AO to furnish the supporting evidence with respect to the revenue expenditure of Rs. 3,44,44,374/- along with the nature of such expenses. The assessee in response submitted that the required documentary supporting evidence and detail of each and every expenses as per the required format cannot be provided due to high volume of transactions. The assessee explained that revenue expenditure broadly categorizes into establishment & administrative expenses and other expenses. The establishment and administrative expenses include expenses such as staff salary, staff benefit expenses, school building rent, school building repair and maintenance, vehicle running and maintenance etc. whereas other expenses include electricity Page 15 of 24

1 The assessee in response submitted that due to inadvertent reason annexure for revenue expenses for subsequent year being A.Y. 2022-23 was furnished instead of for the year under consideration. The assessee claimed the expenses for year under consideration stand at Rs. Rs. 3,44,44,374/- only.

2 The AO after considering the submission of the assessee held that the assessee failed to substantiate the claim of revenue of expenses of Rs. 3,44,44,374/- by providing supporting evidence such as vouchers, invoices, proof of payment of salary etc. Further the assessee has frequently altered the submission. Hence, the AO disallowed the same and added to the total income of the assessee as unexplained expenditure.

The aggrieved assessee preferred an appeal before the learned CIT(A). Page 16 of 24

1 The learned CIT(A) after considering the facts in totality deleted the addition made by the AO by holding as under: On considering the reply of the AO and applicant, it is seen that the applicant has admitted the mistake in filing the return and has also revised the same and provided the relevant books. Vide reply filed on 24/12/2022, the assessee also submitted that it had filed Form – 10B on 15/02/2022 and a revised Form – 10B on 07/11/2022 and there were errors and inconsistent figures mentioned therein. Ultimately, the assessee needs to be assessed on correct income by application of the provisions contained in the Act and not based on any erroneous return / Form 10B filed in course of the assessment proceedings. In my considered view, therefore this ground of the appellant is allowed for the AY 2021-22. 20. Being aggrieved by the order of the learned CIT(A), the revenue is in appeal before us.

The learned DR before us supported the order of the AO by reiterating the findings contained in the assessment order. Page 17 of 24

The learned AR before us submitted that the AO wrongly disallowed revenue expenditure of ₹3,44,44,734/- only on the ground that vouchers, invoices, and proofs of payments were not uploaded on the income tax portal. It was explained that the expenditure was genuine, verifiable, and incurred wholly for running the schools, including salary and wages, rent, professional charges, and statutory taxes. The ld. AR pointed out that due to the large volume of documents, the assessee could not upload all the details online and had even written to the AO on 24.12.2022 seeking guidance in this regard. Despite this, the AO did not verify the expenses even on a sample basis and simply disallowed the entire claim.

1 The learned AR further argued that the assessee had already furnished extracts of the expenses placed at pages 50–64 of Paper book No.2 and sample copies of invoices at pages 65–124. It was emphasized that such expenses are necessary for the day-to-day functioning of schools, and it is not possible to run schools without incurring such costs. The ld. CIT(A) had rightly accepted the assessee’s explanation and deleted the addition, holding that the assessee should be assessed on its real income.

2 The learned AR also highlighted that in subsequent years, the department itself has accepted similar revenue expenditure. For example, in the assessment for AY 2022–23, the returned income was accepted under section 143(3) r.w.s. 144B, which fortifies that these expenses are routine and genuine. The ld. AR contended that once such Page 18 of 24

3 Lastly, the ld. AR opposed the Revenue’s suggestion to remand the matter back to the AO. It was argued that the assessee has already produced details of the expenditure which are tabulated at page 23 of the assessment order and furnished sample invoices in the paper book. Since the nature of expenses like salary, rent, and taxes is self-evident and unavoidable, sending the matter back would serve no purpose and only prolong the litigation. Therefore, the ld. AR urged the Tribunal to uphold the order of the ld. CIT(A) and dismiss the Revenue’s appeal.

We have heard the rival contentions of both the parties and perused the materials available on record. The AO disallowed the assessee’s revenue expenditure of ₹3,44,44,374 on the ground that complete vouchers/invoices and proofs of payment were not uploaded on the portal and that the assessee’s submissions showed a higher figure due to an annexure mix-up. The learned CIT(A) deleted the disallowance after noting that the assessee had corrected the inadvertent error, produced the relevant books and details, and that the assessment must be based on correct income rather than on mistakes. The Revenue’s primary grievance is procedural. It says that the learned CIT(A) deleted the disallowance “without calling for a remand report.” On facts, we find no violation warranting interference. The ld. CIT(A) has specifically recorded that both the AO and the assessee were heard and that the assessee’s mistake (filing the annexure of A.Y. 2022-23 instead of the year in question) stood explained and corrected. The order itself notes the AO’s reply was considered. Thus, the AO had an opportunity to Page 19 of 24

Coming to merits of the assessee, the assessee runs schools. The expenditure is of a routine, revenue nature such as salaries, rent, repairs, electricity, water, printing, stationery, uniforms, etc.—and is inherent to day-to-day operations. The assessee placed tabulated details, extracts from books, and sample vouchers/invoices on record and explained that, due to very high volume, the entire set could not be uploaded online. The payments were made through banking channels. The AO did not point out any specific instance of a bogus bill, any inflation in a head of expense after the correction, any violation of law, or any defect in the books. Instead, the AO relied on the initial annexure discrepancy (which arose because the annexure of the subsequent year was mistakenly filed) and proceeded to disallow the whole claim. Such blanket disallowance, without a test-check or identification of concrete defects, is not sustainable.

It is a settled principle that additions cannot rest on suspicion, estimates, or procedural lapses alone when primary facts and books are available. Once the assessee furnishes books, bank statements, head- wise break-ups, and sample vouchers, the correct course for the AO is to verify on a test basis and identify specific unverifiable items, if any. The AO has not done so. The inadvertent mix-up of an annexure for A.Y. 2022-23 was brought to notice, explained, and corrected before the Page 20 of 24

The assessee also pointed out that in the immediately following year (A.Y. 2022-23), in the scrutiny assessment under section 143(3) r.w.s. 144B of the Act, the Revenue accepted similar heads of expenditure. While each year is separate, this consistency, coupled with the absence of any specific defect in the impugned year, strengthens the assessee’s case that these are genuine, recurring costs necessary to run the schools. The Revenue has not shown any change in facts to justify a different view. In these circumstances, we hold that the learned CIT(A) was justified in deleting the disallowance of ₹3,44,44,374/- only. We therefore uphold the order of the learned CIT(A). Hence, the ground of appeal raised by the revenue is hereby dismissed.

The next and last issue raised by the revenue is that the learned CIT(A) erred in deleting the addition made on account of unexplained expenditure for Rs. 5,32,25693/- without calling for remand report.

The relevant facts are that the AO observed that as per the undertaking transfer agreement furnished during the proceeding, the assessee has acquired school namely EPS from M/s CET for a consideration of Rs. 5,32,35,693/-. However, the assessee has not claimed the impugned amount of consideration as expenditure or application of income. Further, there were no detail provided by the assessee in relation to determination of consideration to be paid, the actual consideration paid and how the same was paid. Page 21 of 24

The aggrieved assessee preferred an appeal before the learned CIT(A) who deleted the addition made by the AO by observing as under: A.O has treated the consideration of Rs. 5,32,35,693/- for acquiring “Embassy Public School” as unexplained expenditure u/s 69C of the Act on the ground that the consideration paid is not reflected in the books of the assessee and that no details in this regard were furnished during the course of assessment proceedings. Further, A.O held that the assessee has not submitted complete copy of the Undertaking Transfer Agreement for the Transfer of an Undertaking of Cosmopolitan Educational Trust between Cosmopolitan Educational Trust and Cosmopolis also assessee has not claimed this amount of consideration paid as expense/application of income. A.O also concluded that the assessee has furnished no information regarding the consideration paid to Cosmopolitan Educational Trust amounting to Rs. 5,32,35,693/- and by invoking the provisions of section 69C of the I.T Act enhanced the income of the appellant by Rs. 5,32,35,693/- as unexplained expenditure. Appellant has submitted as under:- “It is submitted that the provisions of section 69C of the Act have no application in so far as the aforesaid sum of Rs. 5,32,35,693/- is concerned. The assessee has set-out the background relating to the acquisition of EPS in Para 5 above. Briefly, it may be mentioned here that a sum of Rs. 47,17,52,440/- was given to the trust by M/s. Cosmopolitan Education Trust on 04/02/2021 and deposited in the bank account bearing No. 921020004081421 opened in Axis Bank. From this account, a sum of Rs. 5,32,35,693/- was paid / returned by the appellant to M/s. Cosmopolitan Education Trust as consideration payable for acquiring the educational institution EPS as per the agreement dated 04/02/2021. Proper entries were passed in the books of accounts of TCIS in this regard by first crediting the amounts received in first instance to the account of M/s. Cosmopolitan Education Trust and thereafter debiting the amounts paid for acquiring EPS and corpus fund donations transferred to the regular bank account of TCIS in the name ledger account of M/s. Cosmopolitan Education Trust. Accordingly, the consideration actually paid for acquiring EPS is from out of the funds received from M/s. Cosmopolitan Education Trust and the same is verifiable. Hence, the learned A.O. is not justified in invoking the provisions of Section 69C of the Act. The provisions of section 69C of the Act deal with cases of unexplained expenditure i.e., where source for incurring the expenditure is not explained or Page 22 of 24

Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us.

The learned DR before us supported the order of the AO by reiterating the findings contained in the assessment order.

On the hand, the learned AR before us submitted that the AO wrongly invoked section 69C of the Act by treating ₹5,32,35,693/- spent for acquiring Embassy Public School as unexplained expenditure. It was explained that this amount was not revenue expenditure but part of the acquisition of net assets of Embassy School, which were duly incorporated in the consolidated books and reflected as corpus, as shown in the assessment order. The ld. CIT(A), after considering the submissions and evidence, rightly deleted the addition. The ld. AR argued that there is no unexplained expenditure, as the transaction is fully recorded, verifiable, and supported by documents in the paper book, including the consolidated balance sheet. The ld. AR also opposed the Revenue’s request for remand, stating that it would serve no purpose since all facts are already on record and relief has been rightly given by the ld. CIT(A).

We have heard the rival contentions of both the parties and perused the materials available on record. The AO had invoked section Page 23 of 24

1 On appeal, the ld. CIT(A) deleted the addition after verifying the explanation and supporting evidence furnished by the assessee. The assessee had clearly demonstrated that the consideration for acquiring Embassy Public School was not incurred from unexplained sources but was adjusted out of the funds received from M/s Cosmopolitan Education Trust. The books of account show that a larger amount of ₹47.17 crores was transferred by CET to the assessee which was duly credited. Out of this amount, ₹5.32 crores were paid back to CET towards acquisition of the educational institution, in terms of the agreement dated 04.02.2021. These transactions were routed through regular banking channels, properly accounted, and verifiable from the ledger accounts and consolidated financial statements. Thus, the source of the expenditure stood fully explained.

2 We are also conscious to the fact that the provision of section 69C of the Act applies only where the source of an expenditure is not explained or satisfactorily established. In the present case, the assessee has explained the source beyond doubt. The amount was neither claimed as application of income nor debited as revenue expenditure in the income and expenditure account. Rather, it was part of the acquisition of assets, duly reflected in the balance sheet and supported Page 24 of 24

3 We also find merit in the contention of the assessee that remanding the matter back to the Assessing Officer is not necessary. All relevant facts, agreements, bank statements, and entries are already on record and have been examined. The ld. CIT(A) has rightly concluded that there is no case of unexplained expenditure. We see no infirmity in this conclusion.

4 Accordingly, we hold that the addition of ₹5,32,35,693/- made by the AO under section 69C of the Act is unsustainable in law and on facts. Therefore, we hereby uphold the finding of the learned CIT(A). Hence, the ground of appeal raised by the revenue is hereby dismissed. 35. In the result, the appeal filed by the Revenue is hereby dismissed.