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Income Tax Appellate Tribunal, Hyderabad ‘ A‘ Bench, Hyderabad
Before: Shri R.K. Panda & Shri K. Narasimha Chary
ITA No 146 of 2022 Ravi Rishi Educational Society Hyderabad
आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri K. Narasimha Chary, Judicial Member ITA No. 146/Hyd/2022 Assessment Year: 2017-18 Ravi Rishi Educational A.C.I.T. Society, Hyderabad Central Circle 2(4) PAN:AAAAR1952M Hyderabad (Appellant) (Respondent) Assessee by: Shri P. Murali Mohan Rao Revenue by: Shri Esthen N Hangal, DR Date of hearing: 07/06/2022 Date of pronouncement: 19/07/2022 ORDER Per R.K. Panda, A.M This appeal filed by the assessee is directed against the order dated 21/04/2022 of the learned CIT (A)-12, Hyderabad relating to A.Y.2017-18.
Facts of the case, in brief, are that the assessee is an AOP and registered u/s 12A of the I.T. Act vide proceedings of the Director of Income Tax (Exemption) Hyderabad in F.No.HQrs/I/15/12A/DIT(E) dated 27.02.2003. The assessee filed its original return of income for the A.Y 2017-18 on 06.11.2017 admitting total income of Rs.Nil. M/s. Ravi Rishi Educational Society is run by close family members Mr.N.Rajababu, Mr.Ramesh Babu, Mrs. N. Sulochana, Mrs. N. Yashoda, Mrs. N.
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Manjusha & Mr. N. Anudeep Aurora. They are also associated with other educational institutes, namely M/s. Aurora Educational Society, M/s. Taraka Rama Educational Society, M/s Karshak Vidya Parishad and M/s. Church Educational Society.
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.
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 assessee has purchased land at Nandigama admeasuring Acres 55.23 Guntas during the financial year 2016- 17. He, therefore, asked the assessee to explain as to why the amount of Rs.11,00,06,345/- which is not recorded in the financial statements should not be treated as unexplained investment and added to the total income. The assessee submitted that the society has purchased land at Nandigamaland Village admeasuring Acres 55.23 guntas for which the society has Page 2 of 18
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paid an amount of Rs.8,44,20,405/- through Bank and Rs.1,28,65,900 by cash i.e., total amount paid by the assessee is Rs.9,72,86,305/-. The source of the above amount was explained as sale of immovable properties of the society.
However, the Assessing Officer did not accept the contention of the assessee on the ground that the assessee could not explain as to how these amounts are arrived at and the assessee did not file the basis for the above calculation nor provided any supporting evidence. He noted that in the search proceedings, evidences were found regarding the extent of land, rate per acre, details of payments made through banking channel, excess amount paid, details of cash payments on different dates etc., which are seized vide Page Nos. 31 & 32 of the Annexure A/AES/OFF/01. From the seized documents, the Assessing Officer noted that the assessee society has purchased the following land at the rates mentioned against them:
S.No Extent of land Rate per Acre (Rs.) Total sale consideration (Rs.) 1 AC 35-34Gts 29,00,000 10,67,92,500 2 AC 08-00 Gts 35,00,000 2,80,000 3 AC 01-00 Gts 29,00,000 29,00,000 4 AC 10-20 Gts 40,00,000 4,29,00,000 AC 55-23 Gts 18,05,92,500
The Assessing Officer noted that out of the above total sale consideration, it is clearly mentioned that an amount of Rs.5,17,50,000 was paid through RTGS or A/c payee mode. Further an amount of Rs.6,62,50,000 was paid in cash. As per the seized document date of cash payment, place of cash paid and amount paid on 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
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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. 6,62,50,0001- 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 received in various property transactions by the society. Part of the cash received is utilised in making these cash payments for the purchase of property. The cash portion ;s not reflected in the books of accounts. " 7. He noted that Mr. N Ramesh Babu has reiterated that M/s Ravi Rishi Educational Society has paid Rs.6,62,50,000/-in cash towards purchase of above property in his sworn statement recorded on 21.05.2018 (Q.No.35). Now, all of a sudden, the assessee during the course of assessment proceedings, is stating that cash payment is only Rs.1 ,28,65,900/- without any basis nor supporting evidences. This clearly shows that assessee is producing false information with no substantial basis and is frequently changing its stand to cover up the suppression of investment made in immovable property. Rejecting the various explanation given by the assessee, the Assessing Officer made addition of Rs. 11,00,06,345/-as unexplained investment of the
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assessee as per provisions of Section 69 of the IT Act and added to the total income of the assessee.
Before the learned CIT (A), the assessee made two fold arguments. It was submitted that the amount paid for purchase of land was duly recorded in the books of account which can be seen from the registration payment a/c and also from the schedule of fixed asset in balance sheet. It was submitted that the land at Nandigama which was purchased by the assessee at Rs. Rs.18,05,92,500/- out of which the Assessing Officer had already given benefit of Rs. .4,65,50,000/- and Rs.2,40,36,155/- respectively. It was argued that the balance amount of Rs. 11,00,06,345/- has been duly recorded in the balance sheet under the head “advances for Nandigamaland” which can be verified from the group summary of advances for Nandigama land for the A.Y 2016-17. Therefore, no addition is called for.
In the 2nd plank of argument it was argued that since the society enjoys exemption right u/s 11 & 12 of the I.T. Act and the assessee is in compliance with the terms of the provisions of the Act, no other addition can be made in this regard. Therefore, any other addition would automatically get exempted by virtue of provisions of section 11 & 12 of the I.T. Act.
However, the learned CIT (A) was not satisfied with the arguments advanced by the assessee and upheld the addition made by the Assessing Officer by observing as under: “7.3 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 Page 5 of 18
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found. As per the evidences, society has paid a total amount of Rs.18,05,92,500/- out of which Rs.6,62,5O,OOO/- was paid in cash. The receipts and payments account of the assessee shows Rs.4,65,5O,OOO/- 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,O5,92,500/-, 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,OOO/-was said to have been paid in this transaction in the assessment order. Per contra, the AR contended that once exemption is restored to the appellant, there cannot be any addition as the income is exempt from tax. The AR further stated that the balance amount of Rs.11,00,06,345/-- was duly recorded in the Balance sheet under the head 'Advances for Nandigama Land. The AR enclosed Group summary of advance for Nandigama land for FY 2016-17 wherein an amount of Rs.11,02,06,345/- was shown as advance for Nandigama Land. The AR pointed out that the entry 'Loan given to inter societies' of Rs.19,23,77,700/- in the Balance sheet contains the advances for Nandigama Land of Rs.11,02,06,345/-. 7.3.1 I have perused the submissions of the AO & the AR. The seized material showed that the total amount paid towards the purchase of Nandigama Land was Rs.18,05,92,500/-. The AO has provided a table containing the extent of land, rate per' acre and total consideration at para 1004 of the assessment order. It is also a matter of record that the total investment on account of Nandigama Land shown in the books of account for both the years total to Rs.7,05,86,155/-. The argument of the AR that the balance Rs.ll,00,06,345/- is reflected in the Balance sheet under the head 'Loan given to inter societies' is an afterthought and not borne out from the records. It is difficult to accept that the head 'Loan given to inter societies' includes the advances given for purchase of land. Even if this is assumed to be true, the value of the land purchased in the books was only shown at Rs.7,05,86,l55/- and not Rs.18,O5,92,500/-. Therefore, the argument of the AR is not supported by evidences and cannot be accepted. Hence the addition of Rs.11,00,06,345/- is sustained Accordingly Ground No.5 of the appellant is Dismissed. 7.3.2 As regards the AR’s contention that sine the trust enjoys the benefit of exemption u/s 11, no addition can be made cannot be accepted. In this case evidence was found
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that cash over and above the registered sale consideration was paid to purchase Nandigama land. These transactions were outside the books and were discovered only through the search action. The cash payment outside the books cannot be treated as income applied for charitable purposes in India and given the benefit of exemption u/s 11(1)(a) of the Act. Hence this argument of the appellant has no basis and is rejected”.
Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal by raising the following grounds of appeal:
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 Technical Ground material having any financial and tax implication. 5. Ld. CIT(A) ought to have appreciated the fact that the Ld.AO is not justified in making an addition of Rs.11,00,06,345/- as unexplained investment u/s.69 of the Rs. Income Tax Act, 1961 without considering the facts of the case and material 8,15,80,705/- available on record. 6. The Ld. CIT(A) ought to have appreciated the fact that the alleged addition of Rs. 11,00,06,345/- is already part of books of accounts and hence invoking provisions above of Section 69 of the Act is not as per law. 7. The Ld. CIT(A) erred in upholding the addition and bringing it to tax without considering the legal position that as long as the assessee Page 7 of 18
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has 12AA registration, it enjoys the benefit of exemption u/s 11A of the Act. Thus, no such impugned As Stated addition shall be made taxable in the hands of assessee. 8. The Ld. CIT(A) erred in not properly appreciating that there is no charging provision of Income Tax Act i.e., as per provisions of sub section (4) of section 11 of the Income Tax Act,1961 where in it is stated that even if any income from "property held under trust is in excess of the income as per books of accounts no above surplus can be brought to tax under the act. 9. The Ld. CIT(A) erred in not appreciating the fact that the investment made by the Assessee stands duly explained being part of books of account and hence the impugned addition made treating it to be alleged unexplained investment is not as above per law. 10. The Ld. CIT(A) ought to have appreciated the fact that the Ld. AO has erred in passing the order u/s 153A of the Act without obtaining the prior approval of the competent authority JCIT/ Additional commissioner of income tax u/s 153D of the Act. 11. The Ld. CIT(A) ought to have appreciated the fact that the learned AO has not given proper opportunity of being heard to the appellant to represent the case and to submit all the relevant information in support of his case thereby denying natural justice and the therefore, the order passed by the Ld.AO is liable to be quashed. 12. The appellant may add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal”.
The ld.Counsel for the assessee reiterated the same submissions as made before the 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
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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 Bethala in ITA Nos.1383 & 1384/Bang./2019(Paper Book Pages 29-45).
The learned Counsel for the assessee in his second plank of argument referring to the various decisions submitted that the addition u/s 68 & 69 cannot be made when the assessee is eligible for benefit u/s 11A of the I.T, Act.
He submitted that the Assessing Officer in the instant case had made addition of Rs.21,19,21,411/- on the ground that the assessee failed to apply 85% of its receipts towards charitable purposes as mandated by section 11 of the I.T. Act and exemption granted u/s 11 was denied. The learned CIT (A) after obtaining the remand report from the Assessing Officer allowed the claim of exemption u/s 11 of the I.T. Act and deleted the addition by holding that the assessee has expended more than 85% of its gross receipts towards charitable purposes and is entitled to the benefit of exemption u/s 11(a) of the I.T. Act. He submitted that although the ld CIT (A) has deleted the addition of Rs. 21,19,21,411/- made by the Assessing Officer, the Revenue is not in appeal before the Tribunal. Therefore, once the assessee Page 9 of 18
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society enjoys the benefit u/s 11 of the I.T. Act, no addition u/s 68 & 69 can be made. For the above proposition, he relied on the following decisions: (i) Hon'ble Delhi High Court in the case of Director of Income Tax (Exemptions) vs. Raunaq Education Foundation, reported in 164 Taxman 266. (ii) ITAT Pune in the case of ACIT vs. Gurudatta Shikshan Sanstha in ITA Nos.843 & 844/PUN/2015 (iii) ITAT Cochin in the case of ACIT vs. Muslim Educational Society reported in 1 ITR(T) 527
The learned DR, on the other hand, heavily relied on the order of the learned CIT (A) and submitted that the learned CIT (A) has given justifiable reasons while upholding the addition made by the Assessing Officer as unexplained investment of Rs. 11,02,06,345/- in Nandigamaland. He accordingly submitted that the grounds raised by the assessee be dismissed.
We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case is an AOP running various educational institutions and is registered u/s 12A of the I.T. Act. The Assessing Officer in the order passed u/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 Page 10 of 18
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land on the ground that the society had paid a total amount of Rs. 18,O5,92,500/- 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 the I.T. Act. However, the learned CIT (A) sustained the addition of Rs.11,00,06,345/- made by the Assessing Officer u/s 69 of the I.T. Act as unexplained investment in Nandigama land, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the learned Counsel for the assessee that the amount of Rs. 11,00,06,345/- has already been recorded in the books of account under the head “Advances” and therefore, once the amount is recorded in the books of account, addition u/s 69 cannot be made for such transaction which is recorded in the books of account. It is his alternate argument that since the society is registered u/s 12A and enjoys the benefit of section 11 of the I.T. Act, 1961, therefore, no addition can be made u/s 68 & 69 of the I.T. Act.
We find some force in the above arguments advanced by the learned Counsel for the assessee. We find the assessee before the learned CIT (A) had filed the revised audited balance sheet on 31.3.2017 wherein the loans given to inter societies at Page 11 of 18
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Rs.19,23,77,700/- has been disclosed copies of which are available at Page 3 to 8 of the Paper Book. The assessee had also filed the details of loans and advances of Ravi Rishi Educational Society wherein advances for Nandigama land at Rs. 11,00,06,345/- was disclosed. Although these documents were filed before the learned CIT (A) and the CIT (A) called for a remand report from the Assessing Officer on the issue of disallowance of exemption u/s 11 of the I.T. Act, 1961, however, he himself conveniently ignored the same by either not going through the details himself or calling for a remand report from the Assessing Officer on this issue. Since the revised balance 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 of Rs. 11,00,06,345/- as advance for Nandigama land, therefore, addition of the same u/s 69 of the I.T. Act, 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
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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.
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. The Tribunal considered the provisions of section 4 & 5 of the Act rws 2(24) and 2(45) as well as section 10(22) of the Act and came to the conclusion that the use of word ‘income’ in sub-section (22) of section 10 of the Act is wide enough to include deemed income u/s 68 of the Act. When the Revenue challenged the order of the Tribunal, the Hon'ble Delhi High Court dismissed the appeal of the Revenue by observing as under: “6. We find that the words 'derived from' (or some other similar words) do not occur in section 10(22) of the Act and, therefore, the word 'income' as occurring in section 10(22) cannot be given restrictive meaning and must be given its natural meaning or the meaning ascribed to it in section 2(24) of the Act. 7. It is well-settled that exemption provision must be strictly construed but when it is found an exemption is available then it must be given its full play. This has recently been held by the Supreme Court in PR. Prabhakar v. CIT [2006] 284 JTR 548 2 in the following words :- " ... It is now a well-settled principle of law that although the exemption provisions are to be construed strictly as
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regards the applicability thereof to the case of the assessee once it is found that the same is applicable, the same are required to be interpreted liberally. (See Tata Iron and Steel Co. Ltd. v. State of Jharkhand [2005] 140 STC 284 (SC); [2005] 4 SCC 272; Government of India v. Indian Tobacco Association [2005] 7 SCC 396 and CCE v. Hira Cement [2006] 2 JT 369 (SC). It is also trite law that an exemption is to be granted unless it is expressly taken away. (See Adityapur Industrial Area Development Authority v. Union of India [2006] 283 ITR 97/158 Taxman 107 (SC)." 8. In view of the above, we do not find any infirmity in the decision of the Tribunal. No substantial question of law arises for consideration. Dismissed”.
We find the Pune Bench of the Tribunal in the case of ACIT vs. Gurudatta Shikshan Sanstha while deciding somewhat similar issue vide ITA No.843 & 844/PUN/2015 dated 22.09.2017 for the A.Ys 2010-11 & 2011-12 has observed as under:
“3. Briefly stated relevant facts are that the assessee filed the return of income declaring total income nil. Assessee is a Trust and engaged in educational activities. In respect of its income, assessee claimed exemption u/s.10(23C) r.w.s 12A of the 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 his order. Eventually, the CIT(A) held that the assessee is entitled to deduction u/s.10(23C)(v) in respect of income added u/s.68 of the Act. 4. Further, the CIT(A) made other disallowance too out of the donations invoking the provision of section 115 BBC of the Act. This
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issue shall be discussed when dealing with the Cross Objection by the assessee. 5. Aggrieved with the said relief given to the assessee, the Revenue filed the main appeal. Further, aggrieved with the invoking of the provisions of section 115 BBC of the Act, the assessee filed the Cross Objection before us. 6. In connection with the issue raised in the main appeal, Ld.D.R for the Revenue relied on the order of the AO and requested for reversing the finding of the CIT(A) on the issue of providing exemption/deduction u/s.10(23C)(v) of the Act in respect of the additions made u/s.68 of the Act. In the process, he relied on the decision of Hyderabad Bench of the Tribunal and fairly mentioned that it is a case of granting exemption/deduction in respect of the additions made u/s.69C of the Act. However, Ld.Counsel for the assessee relied heavily on the discussion given by the CIT(A) in para 11, 12.4, 12.5 & 12.6 of the order of the CIT(A). 7. On hearing both the parties, we perused the orders of the AO and CIT(A) and the decision cited by the CIT(A) while granting relief to the assessee u/s.10(23C)(v) of the Act. We find the ground raised by the Revenue revolves around the correctness in granting exemption u/s.10(23C) of the Act in respect of the additions made u/s.68 of the Act. In our view, the said issue is elaborately discussed by the CIT(A) in his speaking order in the above referred paragraphs. For the sake of completeness, we proceed to extract the said paragraphs 12.4 to 12.6 and the same read as under: "12.4 I have carefully considered the facts of the case and rival contentions. On perusal of the same it has been noticed that the appellant trust is registered u/s.12A, u/s.80G and is also notified by Hon'ble Chief Commissioner of Income-tax, Nashik u/s 10(23C)(v) of the Act vide order dated 3/12/2007. The said notification granting exemption u/s 10(23C)(v) of the Act is in force till date and has not been cancelled by Hon'ble Chief Commissioner of Income-tax, Nashik. A perusal of the assessment order dated 20/02/2015 for A.Y. 2012-13 reveals that the AO has 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
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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 by the A.O. by making addition u/s 68 shall also qualify for exemption. This proposition of law is supported by following decisions. i) Sri Krishna Educational and Social Trust Vs. ITO (2013) 351 ITR 178 (Mad) In this case it has been laid down that addition u/s.68 is not possible when the assessee's income was exempt u/s 10(22) of the Act, unless the Commissioner granting the exemption has withdrawn the same. ii) DIT Vs. Raunaq Education Foundation (2007) 294 ITR 76 (Del) The Hon'ble High Court has concluded that the word "income as occurring in section 10(22) cannot be given restrictive meaning and must be given its natural meaning or the meaning ascribed to it in section 2(24) and therefore, the use of the word 'income' in sub- section (22) of section 10 is wide enough to include deemed income under section 68 of the Act. The Hon'ble Court has held as under:- 6. We find that the words 'derived from' (or some other similar words) do not occur in s. 10(22) of the Act and, therefore, the word 'income' as occurring in s. 10(22) cannot be given restrictive meaning and must be given its natural meaning or the meaning ascribed to it in s. 2(24) of the Act. 7. It is well-settled that exemption provision must be strictly construed but when it is found that an exemption is available then it must be given its full play. This has recently been held by the Supreme Court in P.R.Prabhakar vs. CIT (2006) 204 (SC) 27 (2006) 284 ITR 548 (SC) in the following words: "It is now a well-settled principle of law that although the exemption provisions are to be construed strictl.yu as regards the applicability thereof to the case of assessee, once it is found that the same is applicable, the same are required to be interpreted liberally. [See Tata Iron & Steel. Co. Ltd. vs. State of Jharkhand (2005) 4 RC 641; (2005) 4 SCC 272; 5 RC 379; (2005) 7 SCC 396 and CCE vs. Hira Cement (2006) 6 RC 219; (2006) 2 JT 369 (SC)]. It is also trite law that an exemption is to be granted unless it is expressly taken away. [See Adityapur Industrial Area Development Authority vs. Union of India (2006) 5 Scale 321]" 8. In view of the above, we do not find any infirmity in the decision f the Tribunal. No substantial question of law arises for consideration". iii) ACIT Vs. Muslim Education Society (2010) 1 ITR 527 (Cochin- Trib) 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 Page 16 of 18
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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.e. 2012-13 AO has not denied exemption u/s 10(23C)(v) where facts are identical. Further, section 10(23C) starts with 'any income'. The case laws relied upon by appellant suggest that 'any income' also includes deemed income added u/s 68 or 69 of the I.T. Act, 1961. As long as the appellant trust enjoys exemption u/s 10(23C)(v), I am of the opinion that any addition made by the AO on account of unexplained cash credits u/s 68 of the Act would also be eligible for exemption u/s 10(23C)(v) of the I.T.Act, 1961. Further, it is also clear that the appellant trust has used the unsecured loans towards the objects of the trust. It has also been evident from the financial statements of the appellant trust the income even after addition results in deficit. As the AO's assessment orders dated 25/03/2013 and 25/03/2014 clearly mention that there was no dispute to the fact that the trust was notified under the provision of section 10(23C)(v) of the Act, I am of the considered opinion that the above referred judicial pronouncements including Director of IT(Exemption) v. Raunaq Education Foundation (supra) support the appellant's case. 12.6 In view of the above facts and discussion and respectfully following the ratio laid down by the above referred decisions, I hold that the appellant is entitled to exemption u/s. 10(23C) in respect of additions of Rs.1,09,79,321/- for A.Y. 2010-11 and Rs.1,71,00,000/- for A.Y.2011-12 made u/s 68 of the I.T. Act, 1961. The A.O. is directed accordingly. Ground No.2 is allowed." 8. Considering the above, we are of the view that the decision cited by the Ld.DR for the Revenue is distinctly on different facts and also on the different provisions of the Act. Therefore, the same are not applicable to the facts of the present case. The facts are not homologues of the facts in the present case. Therefore, we are of the opinion the order of CIT(A) is fair and reasonable and it does not call for any interference. In the result, the solitary ground raised by the Revenue in the appeals are dismissed. 9. In the result, Revenue appeal is dismissed.” 21. The various other decisions relied on by the learned Counsel for the assessee also support his case to the proposition that addition u/s 68 and 69 of the I.T.Act will be treated as deemed income eligible for benefit u/s 11 of the I.T. Act. In this view of the matter, the learned CIT (A), in our opinion, is not Page 17 of 18
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justified in sustaining the addition of Rs. 11,00,06,345/- made by the Assessing Officer u/s 69 of the I.T. Act as unexplained investment in Nandigama land by invoking the provisions of section 69 of the I.T. Act. Accordingly, the order of the learned CIT (A) is set aside and the Assessing Officer is directed to delete the addition. The grounds raised by the assessee are accordingly allowed.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the Open Court on 19th July, 2022. Sd/- Sd/- (K. NARASIMHA CHARY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated 19th July, 2022. Vinodan/sps Copy to: S.No Addresses 1 Ravi Rishi Educational Society C/o P. Murali Mohan Rao, C.A 6-3- 655/2/3 Somajiguda, Hyderabad 500082 2 ACIT Central Circle 2(4) Hyderabad 3 CIT (A)-12 ,Hyderabad 4 Pr. CIT-Central, Hyderabad 5 DR, ITAT Hyderabad Benches 6 Guard File By Order
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