MAHARISHI MARKANDESHWAR UNIVERSITY TRUST ,AMBALA CANTT vs. PR.CIT, CENTRAL , GURGAON

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES ‘G’, NEW DELHI Before Sh. H. S. Sidhu, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 2475/Del/2019 : Asstt. Year : 2012-13 ITA No. 2476/Del/2019 : Asstt. Year : 2013-14 ITA No. 2477/Del/2019 : Asstt. Year : 2014-15 ITA No. 2478/Del/2019 : Asstt. Year : 2015-16 Smt. Santosh Garg, Vs Pr. CIT, W/o Sh. Tarsem Garg, Central, Gurugram, C/o Rajiv Goel and Associates, Haryana-122016 179, Bank Road, Ambala Cantt. Haryana-133001 (APPELLANT) (RESPONDENT) PAN No. AAWPG9894J ITA No. 2479/Del/2019 : Asstt. Year : 2011-12 ITA No. 2480/Del/2019 : Asstt. Year : 2012-13 ITA No. 2481/Del/2019 : Asstt. Year : 2013-14 ITA No. 2482/Del/2019 : Asstt. Year : 2014-15 ITA No. 2483/Del/2019 : Asstt. Year : 2015-16 Sh. Tarsem Garg, Vs Pr. CIT, S/o Sh. Inder Pal Garg, Central, Gurugram, C/o Rajiv Goel and Associates, Haryana-122016 179, Bank Road, Ambala Cantt. Haryana-133001 (APPELLANT) (RESPONDENT) PAN No. ADEPG1240P ITA No. 1594/Del/2019 : Asstt. Year : 2009-10 ITA No. 1595/Del/2019 : Asstt. Year : 2010-11 ITA No. 1596/Del/2019 : Asstt. Year : 2011-12 ITA No. 1597/Del/2019 : Asstt. Year : 2012-13 ITA No. 1598/Del/2019 : Asstt. Year : 2013-14 ITA No. 1599/Del/2019 : Asstt. Year : 2014-15 ITA No. 1600/Del/2019 : Asstt. Year : 2015-16

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 2 Maharishi Markandeshwar Vs Pr. CIT, University Trust, Central, Gurugram, C/o Rajiv Goel and Associates, Haryana-122016 179, Bank Road, Ambala Cantt. Haryana-133001 (APPELLANT) (RESPONDENT) PAN No. AACTM0573G Assessee by : Sh. Ashwani Kumar, CA, Sh. Rohit Goel, CA, Revenue by : Sh. S. S. Rana, CIT DR Date of Hearing: 03.07.2019 Date of Pronouncement:19.08.2019 ORDER Per Dr. B. R. R. Kumar, Accountant Member: *Commentary on the case laws submitted by the ld. DR is applicable to all the cases. In ITA No. 1594/Del/2019, the assessee has raised following grounds of appeal: ”1. That the Principal CIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying, the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 1.1 That the learned Principal CIT has erred in alleging that assessee had siphoned money from trust by booking bogus expenditure in form of mess charges and payment to contractors without conducting any independent inquiry and formed his opinion on the basis of suspicions, surmises and conjectures. 1.2 That the learned Principal CIT has erred in stating that assessee was diverting trust money in hands of trustees, family members on account of salaries, interest and rent paid to trustees solely on the basis of suspicion.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 3 1.3 That the learned Principal CIT has erred in stating that trustees had obtained other benefits in the form of services of employees of trust. 1.4 That the learned Principal CIT has erred in facts in alleging that assessee trust has violated MCI Guidelines in admission of students without providing cogent reasons for the same and solely on suspicion and surmises. 1.5 That the learned Principal CIT has erred on facts and in law in concluding that AO has not conducted proper enquiries in respect of payment of salaries to teachers solely on the basis of suspicion, surmises and conjectures. 1.6 That learned Principal CIT has erred on facts and in law in alleging that vehicle purchased in the name of trustees has been used for siphoning of funds of assessee Trust and in violation of s. 13 ignoring the facts on record. 1.7 That learned Principal CIT has erred on facts in alleging that trustees have purchased vehicles from assessee trust at discounted value in violation of provisions of s. 13 of IT Act ignoring the facts on records. 1.8 That learned Principal CIT has erred on facts and in law in stating that funds of the trust have been diverted to the trustees and their relatives in the garb of rent of Santosh Hostel ignoring the facts on record. 2. That the learned PCIT has erred in ignoring the facts that entire issues raised in 263 show cause notice has already been examined in detail as per record by learned DCIT (CC) Karnal and assessment had been completed by forming an opinion on all the issues now raised in the 263 order. 3. That the learned PCIT has erred in law in not adhering to the principles of natural justice by not providing the documents as per records of AO to establish the fact that entire issues raised in 263 show cause notice has been examined by DCIT (CC) during assessment proceedings. 4. That the learned Principal CIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course of search u/s 132 conducted on 31-10-2014 in the present case.”

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 4 2. In ITA No. 1595/Del/2019, the assessee has raised following grounds of appeal: ”1. That the Principal CIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying, the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 1.1 That the learned Principal CIT has erred in alleging that assessee had siphoned money from trust by booking bogus expenditure in form of mess charges and payment to contractors without conducting any independent inquiry and formed his opinion on the basis of suspicions, surmises and conjectures. 1.2 That the learned Principal CIT has erred in stating that assessee was diverting trust money in hands of trustees, family members on account of salaries, interest and rent paid to trustees solely on the basis of suspicion. 1.3 That the learned Principal CIT has erred in stating that trustees had obtained other benefits in the form of services of employees of trust. 1.4 That the learned Principal CIT has erred in facts in alleging that assessee trust has violated MCI Guidelines in admission of students without providing cogent reasons for the same and solely on suspicion and surmises. 1.5 That the learned Principal CIT has erred on facts and in law in concluding that AO has not conducted proper enquiries in respect of payment of salaries to teachers solely on the basis of suspicion, surmises and conjectures. 1.6 That learned Principal CIT has erred on facts and in law in alleging that vehicle purchased in the name of trustees has been used for siphoning of funds of assessee Trust and in violation of s. 13 ignoring the facts on record. 1.7 That learned Principal CIT has erred on facts in alleging that trustees have purchased vehicles from assessee trust at discounted value in violation of provisions of s. 13 of IT Act ignoring the facts on records.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 5 1.8 That learned Principal CIT has erred on facts and in law in stating that funds of the trust have been diverted to the trustees and their relatives in the garb of rent of Santosh Hostel ignoring the facts on record. 2. That the learned PCIT has erred in ignoring the facts that entire issues raised in 263 show cause notice has already been examined in detail as per record by learned DCIT (CC) Karnal and assessment had been completed by forming an opinion on all the issues now raised in the 263 order. 3. That the learned PCIT has erred in law in not adhering to the principles of natural justice by not providing the documents as per records of AO to establish the fact that entire issues raised in 263 show cause notice has been examined by DCIT (CC) during assessment proceedings. 4. That the learned Principal CIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course of search u/s 132 conducted on 31-10-2014 in the present case.” 3. In ITA No. 1596/Del/2019, the assessee has raised following grounds of appeal: ”1. That the Principal CIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying, the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 1.1 That the learned Principal CIT has erred in alleging that assessee had siphoned money from trust by booking bogus expenditure in form of mess charges and payment to contractors without conducting any independent inquiry and formed his opinion on the basis of suspicions, surmises and conjectures. 1.2 That the learned Principal CIT has erred in stating that assessee was diverting trust money in hands of trustees, family members on account of salaries, interest and rent paid to trustees solely on the basis of suspicion.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 6 1.3 That the learned Principal CIT has erred in stating that trustees had obtained other benefits in the form of services of employees of trust. 1.4 That the learned Principal CIT has erred in facts in alleging that assessee trust has violated MCI Guidelines in admission of students without providing cogent reasons for the same and solely on suspicion and surmises. 1.5 That the learned Principal CIT has erred on facts and in law in concluding that AO has not conducted proper enquiries in respect of payment of salaries to teachers solely on the basis of suspicion, surmises and conjectures. 1.6 That learned Principal CIT has erred on facts and in law in doubting the construction payments of Rs.29,71,865/- to Tarsem Garg for mansonry work comprising PCC, PR masonry etc. at MMU Solan on the basis of suspicion, surmises and conjectures. 1.7 That learned Principal CIT has erred on facts and in law in alleging that vehicles purchased in the name of trustees has been used for siphoning of funds from assessee Trust and in violation of s.13 ignoring the facts on record. 1.8 That learned Principal CIT has erred on facts in alleging that trustees have purchased vehicles from assessee trust at discounted value in violation of provisions of s.13 of IT Act ignoring the facts on records. 1.9 That learned Principal CIT has erred on facts and in law in stating that funds of the trust have been diverted to the trustees and their relatives in the garb of rent of Santosh Hostel ignoring the facts on record. 2. That the learned PCIT has erred in ignoring the facts that entire issues raised in 263 show cause notice has already been examined in detail as per record by learned DCIT (CC) Karnal and assessment had been completed by forming an opinion on all the issues now raised in the 263 order. 3. That the learned PCIT has erred in law in not adhering to the principles of natural justice by not providing the documents as per records of AO to establish the fact that

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 7 entire issues raised in 263 show cause notice has been examined by DCIT (CC) during assessment proceedings. 4. That the learned Principal CIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course of search u/s 132 conducted on 31-10-2014 in the present case.” 4. In ITA No. 1597/Del/2019, the assessee has raised following grounds of appeal: ”1. That the Principal CIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying, the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 1.1 That the learned Principal CIT has erred in alleging that assessee had siphoned money from trust by booking bogus expenditure in form of mess charges and payment to contractors without conducting any independent inquiry and formed his opinion on the basis of suspicions, surmises and conjectures. 1.2 That the learned Principal CIT has erred in stating that assessee was diverting trust money in hands of trustees, family members on account of salaries, interest and rent paid to trustees solely on the basis of suspicion. 1.3 That the learned Principal CIT has erred in stating that trustees had obtained other benefits in the form of services of employees of trust. 1.4 That the learned Principal CIT has erred in facts in alleging that assessee trust has violated MCI Guidelines in admission of students without providing cogent reasons for the same and solely on suspicion and surmises. 1.5 That the learned Principal CIT has erred on facts and in law in concluding that AO has not conducted proper enquiries in respect of payment of salaries to teachers solely on the basis of suspicion, surmises and conjectures.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 8 1.6 That learned Principal CIT has erred on facts and in law in alleging that vehicle purchased in the name of trustees has been used for siphoning of funds of assessee Trust and in violation of s. 13 ignoring the facts on record. 1.7 That learned Principal CIT has erred on facts in alleging that trustees have purchased vehicles from assessee trust at discounted value in violation of provisions of s. 13 of IT Act ignoring the facts on records. 1.8 That learned Principal CIT has erred on facts and in law in stating that funds of the trust have been diverted to the trustees and their relatives in the garb of rent of Santosh Hostel ignoring the facts on record. 2. That the learned PCIT has erred in ignoring the facts that entire issues raised in 263 show cause notice has already been examined in detail as per record by learned DCIT (CC) Karnal and assessment had been completed by forming an opinion on all the issues now raised in the 263 order. 3. That the learned PCIT has erred in law in not adhering to the principles of natural justice by not providing the documents as per records of AO to establish the fact that entire issues raised in 263 show cause notice has been examined by DCIT (CC) during assessment proceedings.” 5. In ITA No. 1598/Del/2019, the assessee has raised following grounds of appeal: ”1. That the Principal CIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying, the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 1.1 That the learned Principal CIT has erred in alleging that assessee had siphoned money from trust by booking bogus expenditure in form of mess charges and payment to contractors without conducting any independent inquiry and formed his opinion on the basis of suspicions, surmises and conjectures.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 9 1.2 That the learned Principal CIT has erred in stating that assessee was diverting trust money in hands of trustees, family members on account of salaries, interest and rent paid to trustees solely on the basis of suspicion. 1.3 That the learned Principal CIT has erred in stating that trustees had obtained other benefits in the form of services of employees of trust. 1.4 That the learned Principal CIT has erred in facts in alleging that assessee trust has violated MCI Guidelines in admission of students without providing cogent reasons for the same and solely on suspicion and surmises. 1.5 That the learned Principal CIT has erred on facts and in law in concluding that AO has not conducted proper enquiries in respect of payment of salaries to teachers solely on the basis of suspicion, surmises and conjectures. 1.6 That learned Principal CIT has erred on facts and in law in alleging that vehicle purchased in the name of trustees has been used for siphoning of funds of assessee Trust and in violation of s. 13 ignoring the facts on record. 1.7 That learned Principal CIT has erred on facts in alleging that trustees have purchased vehicles from assessee trust at discounted value in violation of provisions of s. 13 of IT Act ignoring the facts on records. 1.8 That learned Principal CIT has erred on facts and in law in stating that funds of the trust have been diverted to the trustees and their relatives in the garb of rent of Santosh Hostel ignoring the facts on record. 2. That the learned PCIT has erred in ignoring the facts that entire issues raised in 263 show cause notice has already been examined in detail as per record by learned DCIT (CC) Karnal and assessment had been completed by forming an opinion on all the issues now raised in the 263 order. 3. That the learned PCIT has erred in law in not adhering to the principles of natural justice by not providing the documents as per records of AO to establish the fact that entire issues raised in 263 show cause notice has been examined by DCIT (CC) during assessment proceedings.”

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 10 6. In ITA No. 1599/Del/2019, the assessee has raised following grounds of appeal: ”1. That the Principal CIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying, the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 1.1 That the learned Principal CIT has erred in alleging that assessee had siphoned money from trust by booking bogus expenditure in form of mess charges and payment to contractors without conducting any independent inquiry and formed his opinion on the basis of suspicions, surmises and conjectures. 1.2 That the learned Principal CIT has erred in stating that assessee was diverting trust money in hands of trustees, family members on account of salaries, interest and rent paid to trustees solely on the basis of suspicion. 1.3 That the learned Principal CIT has erred in stating that trustees had obtained other benefits in the form of services of employees of trust. 1.4 That the learned Principal CIT has erred in facts in alleging that assessee trust has violated MCI Guidelines in admission of students without providing cogent reasons for the same and solely on suspicion and surmises. 1.5 That the learned Principal CIT has erred on facts and in law in concluding that AO has not conducted proper enquiries in respect of payment of salaries to teachers solely on the basis of suspicion, surmises and conjectures. 1.6 That learned Principal CIT has erred on facts and in law in doubting the construction payments of Rs.29,71,865/- to Tarsem Garg for mansonry work comprising PCC, PR masonry etc. at MMU Solan on the basis of suspicion, surmises and conjectures. 1.7 That learned Principal CIT has erred on facts in alleging that trustees have purchased vehicles from assessee trust at discounted value in violation of provisions of s.13 of IT Act ignoring the facts on records.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 11 1.8 That learned Principal CIT has erred on facts and in law in alleging that vehicles purchased in the name of trustees has been used for siphoning of funds from assessee Trust and in violation of s.13 ignoring the facts on record. 1.9 That learned Principal CIT has erred on facts and in law in stating that funds of the trust have been diverted to the trustees and their relatives in the garb of rent of Santosh Hostel ignoring the facts on record. 2. That the learned PCIT has erred in ignoring the facts that entire issues raised in 263 show cause notice has already been examined in detail as per record by learned DCIT (CC) Karnal and assessment had been completed by forming an opinion on all the issues now raised in the 263 order. 3. That the learned PCIT has erred in law in not adhering to the principles of natural justice by not providing the documents as per records of AO to establish the fact that entire issues raised in 263 show cause notice has been examined by DCIT (CC) during assessment proceedings. 4. That the learned Principal CIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course of search u/s 132 conducted on 31-10-2014 in the present case.” S. No. Assessment Year Effective Grounds 1. 2010-11 1. NRI quota 2. Payments or vehicle purchase 3. Salary to teachers 4. Other benefits to trustees 5. Construction Work- Tarsem Garg 6. Rent paid to trustees 7. Interest paid to trustees 8. Salary paid to trustees 9. Santosh Hostel 10. Bogus expenditure- mess charges 11. FDR –loan – IP Garg

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 12 7. A search & seizure operation u/s 132 and survey operation u/s 133A were conducted at the premises of M/s Maharishi Markandeshwar University Trust group of cases, Mullana and their trustees on 31.10.2014.

Tarsem Garg × Santosh Garg

Seema Garg × Sanjeev Garg Vishal Garg × Deepika Garg Meenakshi Garg Anuradha Garg

NRI Quota: 11. The distribution of seats in MBBS and BDS are as under: Sr. Name of the Name of Sanctioned General Seats Management Seats No. Institution the intake for Open 3% For For NRI course F.Y. 2014- locomotive Residents 15 disability 1. MM Institute of MBBS 150 70 5 63 12 Medical Science & Research, Mullana

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 13 2. MM College of Dental BDS 100 47 3 42 8 Science & Research, Mullana

Sr. Name of the Father Name Course Quota Section in which Date No. student statement has been recorded 1. Ms. Gurpreet Inderjit Singh S/o MBBS NRI u/s 131 09.01.2015 Kaur Sh. Shingra Singh 2. Ms. Rashika Malik Dr. Sanjay Malik -do- NRI u/s 131 08.01.2014 S/o Rajinder Mohan Malik 3. Amandeep Singh Sh. Jagmit Singh -do- NRI u/s 131 08.01.2014 S/o Jagjit Singh 4. Chahat Bansal Dr. Ashwani Kumar -do- NRI u/s 131 08.01.2014 S/o Sukhdev Singh 5. Kanwarvir Singh Sh. Amrik Sinqh S/o -do- NRI u/s 131 08.01.2014 Avtar Singh 6. Rupinder Sinqh Sh. Paramjit Sinqh -do- Management u/s 131 29.12.2014 7. Ms. Chaitnya Sh. Varinder -do- -do- u/s 131 18.12.2014 Prabhakar 8. Himanshu. Gupta Sh. Harish Gupta -do- -do- u/s 131 18.12.2014 9. Ms. Kirti Garg Sh. Tarsem Garg -do- -do- u/s 131 18.12.2014 S/o Om Prakash Garq 10. Ms. Tanya Sh. Gopal Nath -do- -do- u/s 131 18.12.2014 Aggarwal Aggarwal S/o Sh. Kartar Chand 11. Kanau Sehgal Sh. Ravinder Sehgal -do- -do- u/s 131 18.12.2014 S/o Narender Nath 12. Ms. Shiwangi Sh. Suman Mittal -do- -do- u/s 131 18.12.2014 Mittal S/o Brij Mohan Mittal

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 14 13. The examination of the parents in these cases u/s 131 showed that trust is admitting students in NRI quota without any NRI background of the students or their family members.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 15 issued show cause notice dated 06.10.2016 pertinent to this issue at page no. 162 of the paper book. The assessee has replied vide letter dated 04.11.2016 on this issue which is placed at page no. 217, 218 of the paper book. The guidelines of the MCI and the gazette publication is as under: Gazette publication “Admission of NRIs/Foreign students - Private medical colleges shall be permitted to admit the NRIs/Foreign students upto a maximum of 10% of the total sanctioned intake capacity. From the academic year 1994-95. The 10% will be out of “payment seats”. The NRIs/Foreign students shall be admitted on the basis of merit. But in view of different backgrounds they come from. It is for the management of the college concerned to judge the merit of these candidates having regard to the relevant factors. No quotas for Management – There shall be no quota of seats or the management or for any family, caste or community which may have established such a college or institution. However, the Management may fill at their discretion any seats that remain unfilled in the 10% quota under clause (b) above. The MCI guidelines – In response to the RTI query MCI replied that the Admission of NRI in professional courses is to be made in accordance with the law declared by the Hon’ble Supreme Court in P.A. Inamdar’s case – (2005) 6 SCC 537 in para 131 has held as under: “….A limited reservation of such seats, not exceeding 15%, may be made available to NRIs depending on the discretion off the management subject to two conditions. First, such seats should be utilized bonafide by NRIs only and for their children or wards. Second, within this quota, merit should not be given a complete go-by….” 19. When the question was posed to the Revenue as well as the ld. AR regarding any adverse finding by any regulatory authority or any sanctions levied by MCI, the reply from both the parties was negative. Similarly, they were no violations of RBI and the foreign currency received from the

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 16 students admitted in NRI quota has been duly accounted in the P&L account. During the hearing, another specific query was raised to the Revenue as to how the admission to NRI ward or children in the absence of any documents or evidence regarding any unaccounted funds received by the trust will make the assessment completed by the Assessing Officer prejudicial to the interest of the Revenue.

Payments for vehicles 22. The ld. PCIT held that as per the bank statement of OBC a/c no. 51822010000010 FY 008-09, Sh. Tarsem Garg had purchased a Toyota Innova vehicle (HR-09F-0006) in his name after obtaining a loan from the ICICI bank, for which he was making payment of EMI of Rs.25,520/- to the bank. It was noted that an amount of Rs. 21,520/- is being reimbursed by the assessee trust to Sh. Tarsem Garg every month in clear violation of section 13 of the Act. Before the ld. PCIT, the AR submitted that the assessee trust has purchased an Innova car (engine no. 9790694 and chasis no. 7066668) registration no. HR09F0006 from M/s JCBL Auto

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 17 Pvt. Ltd., Karnal for a sum of Rs.8,37,940/- on 05.02.2007. During that period getting finance in the name of individual was much easier at lesser interest than to obtain loan in the name of trust. The vehicle was purchased in the name of Sh. Tarsem Garg but was used for the assessee trust. The cost of Innova vehicle was debited in the block of fixed assets of the assessee trust and depreciation was claimed. During the proceedings before ld. PCIT, the AR furnished unsigned confirmation from Sh. Tarsem Garg that Innova car (engine no. 9790694 and chasis no. 7066668) registration no. HR09F0006 was used by the trust for official purposes only. The AR referred to a certain appointment letter of Dr. L.C. Gupta, Managing Director of the trust dated 01.03.2007 wherein it was mentioned that the said Innova car (HR09F0006) has been given to Sh. Tarsem Garg for official purposes only. The ld. PCIT held that the assessee has not submitted any evidence to prove that the vehicle has been given to Sh. Tarsem Garg for official purposes only. It was held that it is a make believe story and the above modus operandi was adopted to siphon the funds of the assessee trust in violation of the provisions of section 13 of the Act. On perusal of records and the bank statement of Sh. Tarsem Garg for OBC a/c no. 51822010000350 for the period 01.04.2014 to 31.03.2015, the ld. PCIT held that another Innova car bearing the same registration no. HR09F0006 has been purchased by Sh. Tarsem Garg on 18.06.2014 from M/s Global Automobile Pvt. Ltd. for which payment of Rs. 13,62,290/- was made. Hence, it was held that the confirmation of Sh. Tarsem Garg and the purported appointment letter is nothing but bogus evidences created only for the purpose of justifying the payments made by the trust for a vehicle which was purchased in individual name by the main trustee, Sh. Tarsem Garg.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 18 23. The details of some other payments relating to the vehicle recorded in the bank statement of Sh. Tarsem Garg as taken into consideration by the ld. PCIT are listed as under: Date Nature of transaction Debit Credit Bank (Rs.) (Rs.) a/c no. 13.04.2011 Capital a/c Innova Insurance refund 9045 OBC-010 Chq no. 001353 16.07.2011 Cheque no. 001755 received from the 5820 OBC-010 New India Assurance Co. Ltd. claim of HR-37B- 8342 26.03.2012 Repair & maintenance 8690 OBC-010 The New India Assurance Co. Ltd. claim of HR- 09F-0006 14.09.2012 Excess amount of Audi car insurance 72639 - OBC-010 paid to the New India Assurance refund through NEFT 14.09.2012 Excess amount of Audi car insurance 2329 - OBC-010 paid to the New India Assurance refund through NEFT 22.10.2012 Chq no. 446199 Excess of Insurance 74968 OBC-010 amount wrongly received in SB1 instead of MMU 15.03.2013 Repair & maintenance- NEFT The New 172144 OBC-010 India Assurance 15.03.2013 Insurance Innova 0006 Chq. No. 19626 OBC-010 905952 03.05.2013 Cash deposit from MMU for car sale 535000 - OBC-010 06.05.2013 MMU Chq. No. 905154 amount of car - 535000 OBC-010 sale 27.03.2014 Insurance a/c 20553 OBC-010 The New India Assurance Chq. No. 905973 Insurance of Innova 0006 18.06.2014 Paid to Global Automobile Pvt. Ltd. for - 1362290 OBC-350 purchase of Innova car-HR09F-0006 03.09.2014 Chq. No.477737 Paid to MMU for - 1500000 OBC-010 purchase of Mercedes HR-18C-0005 09.09.2014 Chq. No.477738 Paid to MMU for - 3600000 OBC-010 purchase of- Audi HR-01-K-0006

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 19 does not have a license and he does not require a vehicle for personal use then it is not logical as to why he has purchased 3 cars during FY 2014-15.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 20 purchase of vehicle cannot be matter of revenue concern as long as no unaccounted income is determined or tax evasion is pointed out, which is absent in the order of the ld. PCIT. Hence, it cannot be said that Sh. Tarsem Garg in any way benefited by the trust in purchase of the vehicle in his own name. We hereby hold that the order u/s 263 of the Act cannot be upheld on this ground.

Salary to Teachers: 29. The entire portion of the ld. PCIT’s order on this issue is as under: “5.4 Salary paid to the teachers: The AO has not conducted proper enquiries in respect of payment of salaries as mentioned in para 6.4 to 6.14 of the questionnaire dated 29.11.2016 issued by him. He has merely obtained the submissions of the assessee trust in the matter and kept it on record.” 30. During arguments before us, the ld. AR submitted his arguments in writing which are as under: “The learned PCIT has simply observed that AO has not conducted proper enquiries in respect of payment of salaries as mentioned in para 6.4 to 6.14 of the questionnaire dated 29-11- 2016, the complete details were furnished to AO through written submissions filed at page 243 to 271 along with affidavits of each doctor and other educational certificates and evidence of working with MMU and copy of their Income Tax return. Investigation Wing of Income Tax has recorded statement of a few doctors out of the total employees of Medical College who confirmed the payments and working with the college. The entire salary received from College was declared by these doctors in their Income Tax returns. All the payments were made through bank transfers only and there is no adverse finding was there about any wrong doings.” 31. The ld. DR vehemently argued that the statements of Doctors were recorded wherein they have admitted to the fact of not taken any classes.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 21 32. Heard the arguments of both the parties and perused the material available on record.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 22 Sr. Name Address Remarks Date of No. Summon 1 Dr. Rakesh Arora 22.01.2016 46/2, Passy Road, Patiala, Punjab Statement recorded on 05.02.2016 2 Dr. Gurdeep Singh 9, Hem Bagh, Patiala, Punjab 22.01.2016 Reply received 3 Dr. Chander Mohini 58, Ajit Nagar, Patiala, Punjab 22.01.2016 Reply received 4 22.01.2016 Statement recorded on Dr. Devinder Jit Singh Dr. Walia’s Clinic, Pakhowal Road, 09.02.2016 Walia Green Field, Ludhiana 5 Dr. Rajeev Aggarwal 22.01.2016 1-E, New Lai Bagh Colony, Opp. Polo Statement recorded on Ground, The Mall, Patiala 05.02.2016 6 22.01.2016 Not attended Dr. Vikram Jeet Singh J-2/11, Gobind Colony, Rajpura, Patiala, Punjab Dhingra 7 Dr. Kulwant Singh 11-D, Kichlu Nagar, Ludhiana, Punjab 22.01.2016 Statement recorded on 25.02.2016 8 22.01.2016 Dr. Shyam Sunder Sood H.No. 930, Sector 40-A, Chandigarh Statement recorded on 02.02.2016 9 SCF-28, Sector-23, Chandigarh 22.01.2016 Not attended Dr. Ashootosh Sharma 10 Dr. Anand Kumar Jindal I.P. Urban Estate, Ambala City, 22.01.2016 Reply received Haryana 11 Dr. Naresh Garg 22.01.2016 Reply received 7, Dhillon Marg, Model Town, Patiala, Punjab 12 Dr. Dinesh Kumar 22.01.2016 H.No. 9760, UCO Bank Street, Statement recorded on Sharma Ludhiana 01.02.2016 13 Dr. Asha Negi Dyerton Cottage-Ill, Khalini, Shimla, 22.01.2016 H.P. 14 Dr. Amit Kapila 8, Malwa Colony, Patiala, Punjab 22.01.2016 Statement recorded on 02.02.2016 15 Dr. Rajeev Kumar Jain H.No. 1157-C/32-B, Chandigarh 03.02.2016 Statement recorded on 29.02.2016 16 Dr. Rupinder Singh 62/10-A, Chandigarh 03.02.2016 Statement recorded on 15.02.2016 17 Dr. Surinder Kumar 1009/30-B, Chandigarh 03.02.2016 Not attended Gupta 18 Dr. Praveen Mohan H.No. 1886-A, Sector-21 (Partill) 03.02.2016 Statement recorded on Behind Alchemist Hospital, Panchkula 15.02.2016 19 Dr. Ajata Shatru Kapoor H.No. 12-A, Ranbir Marg, Model 03.02.2016 Statement recorded on Colony, Patiala, Punjab 15.02.2016 20. Dr. Meena Garg 7-Dhillon Marg, Model Town, Patiala 03.02.2016 Reply received Punjab 21 Dr. Vishal Kharbanda 25-A, Bharpur Garden, Opposite New 03.02.2016 Statement recorded on Moti Bagh, Palace 16.02.2016 22 Dr. Sarita Aggarwal 1-E, New Lai Bagh, Opposite Appolo 03.02.2016 Statement recorded on Ground, Patiala, Punjab 16.02.2016 23. Dr. Kalpna Flat No. 5, Mansa Cottage, Lower 03.02.2016 Not attended Kaithu, Shimla 24 Dr. Barinder Pal Singh 410-R, Model Town, Ludhiana, Punjab 03.02.2016 Reply received

6.12 In response to above summons, only 13 doctors were attended and their statements were also recorded, name of the doctors are as under:-

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 23 Name Address Remarks Sr. Date of Summon No. Dr. Rakesh Arora Statement recorded on 1 22.01.2016 46/2, .Passy Road, Patiala, Punjab 05.02.2016 Dr. Devinder Jit Singh Dr. Walia’s Clinic, Pakhowal Road, Statement recorded on 2 22.01.2016 09.02.2016 Walia Green Field, Ludhiana 3 Dr. Rajeev Aggarwal 1-E, New Lai Bagh Colony, Opp. Polo Statement recorded on 22.01.2016 Ground, The Mall, Patiala 05.02.2016 4 Dr. Kulwant Singh Statement recorded on 11-D, Kichlu Nagar, Ludhiana, Punjab 22.01.2016 25.02.2016 5 Statement recorded on 22.01.2016 Dr. Shyam Sunder Sood H.No. 930, Sector 40-A, Chandigarh 02.02.2016 Dr. Dinesh Kumar H.No. 9760, UCO Bank Street, Statement recorded on 6 22.01.2016 01.02.2016 Sharma Ludhiana 7 Dr. Amit Kapila Statement recorded on 22.01.2016 8, Malwa Colony, Patiala, Punjab 02.02.2016 H.No. 1157-C/32-B, Chandigarh 03.02.2016 Statement recorded on 8 Dr. Rajeev Kumar Jain 29.02.2016 9 Dr. Rupinder Singh 62/10-A, Chandigarh 03.02.2016 Statement recorded on 15.02.2016 10 Dr. Praveen Mohan 03.02.2016 H.No. 1886-A, Sector-21 (Partill) Statement recorded on Behind Alchemist Hospital, Panchkula 15.02.2016 03.02.2016 H.No. 12-A, Ranbir Marg, Model Statement recorded on 11 Dr. Ajata Shatru Kapoor Colony, Patiala, Punjab 15.02.2016 03.02.2016 25-A, Bharpur Garden, Opposite New Statement recorded on 12 Dr. Vishal Kharbanda Moti Bagh, Palace 16.02.2016 13 Dr. Sarita Aggarwal 1-E, New Lai Bagh, Opposite 03.02.2016 Statement recorded

6.13 During the statement various aspect of this issue have been examined like relation with your trust, process of appointment in Mullana, terms and conditions of appointment as faculty, number of classes per day allotted to them, logistic problems between practice and teaching, accommodation facility provided by the Mullana, Salary structure of Mullana, mode of payment of salary etc. All the statement recorded by Investigation Wing are enclosed herewith marked as Annexure-D. 6.14 In view of the above and perusal of the statement of the persons given before Investigation Wing, it is found that the your trust is showing on its rolls even those doctors which are not actually working for it. The independent enquiries-conducted by the PMC, Mohali have authenticated and proved that the enquiries conducted by the Investigation Wing are correct. An analysis of the above paras following conclusion comes:-

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 24 i. Most of the doctors are belongs to Ludhiana, Patiala, Chandigarh, Panchkula and Mohali and these places are located from 70 to 100 KM away from Mullana/Kumarhatti. ii. Most of the doctors have their established hospitals/clinics. They are showing handsome professional income- from his hospital/clinics. Therefore, it is not possible to them to attend the classes to Mullana/Kumarhatti on regular basis. iii. As per the finding of PMC, some doctors have parallel entries of the same month from two different sources of work in two different towns. The Department has also collected information, as per which the doctors have multiple addresses. Some of the addresses are at faraway places, from where, it is not generally possible to take up to and from journey in a day. iv. The MCI does not allow part time faculty. The PMC has found that most of such doctors are available to the group (i.e. MMUT) only at the time of inspectionby the Medical Council of India or they visit the place once or twice a week. v. The information collected by the Department regarding booking of bogus expenses includes the payment of bogus salary. Of course ghost teachers are one of such methods through which the bogus expenditure (in the shape of salary) has been claimed. In this regard, this office collected information (refer to above table) wherein the MMUT has paid salaries, to such doctors who have been identified by the PMC as ghost teachers working in various private Medical Colleges. vi. As per the information of PMC, narrated in the above noted table, some of the doctors have denied having worked for the group (i.e. MMUT) vii. During the course of statement before this office some of the doctors have admitted that they have not taken any classes in the relevant periods, but they have received salary. viii. In some of the cases even they are also not aware of the terms and condition of their appointment. Most of the

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 25 doctors are also residing in their home town i.e. 70 to 100 KM away from Mullana/Kumarhatti. Keeping in view of the above detailed discussion regarding issue of ghost teachers, it is clear that you have manipulated the expenditure by way of bogus/excess salary paid to ghost teacher/doctors. In this connection, you are requested to explain it with substantial documentary evidence, if you failed to do so, no further opportunity will be given and decision will be made as per facts and material available with this office.” 34. The reply of the assessee dated 30.12.2016 is as under: “The payments were received in bank only. We are unable to find anything wrong in the statement still if your honor feels that there is something wrong in the statement, Trust would like to cross examine S L Maini as the statement recorded by Investigation Wing was at the back of MMUT and no opportunity was allowed for cross examination. 1.4 With reference to para 6.6 of your questionnaire regarding payments made to doctor Prinka Shahi d/o Sh V.D Shahi r/o H No 1145, Sector 42B, Chandigarh, who had been working as Senior lecturer in MM Institute of Dental Sciences & Research Mullana since 2011. Her statement was recorded by Investigation Wing on 27.01.2016. In reply to question no 3, question no 5 and question no 6, she has admitted that she is working with trust from 2011 and receiving salary on monthly basis in her bank account which is same as per our books and records. The perusal of above statement clearly proves the genuineness of the doctor that he is actually working as senior lecturer. The payments were received in bank only. We are unable to find anything wrong in the statement still if your honor feels that there is something wrong in the statement, Trust would like to cross examine Prinka as the statement recorded by Investigation Wing was at the back of MMUT and no opportunity was allowed for cross examination. 1.5 Employment of ghost teacher by private medical colleges With reference to para 6.8, para 6.9 and para 6.10, your honor has relied on the on the findings of Punjab

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 26 Medical Council, the Doctors working in MM Institute of Medical Sciences & Research Mullana and MM Medical College and Hospital Kumarhatti Solan, have been identified by the PMC as not being the genuine teachers only on the basis of facts that they have registered with only Punjab Medical Council. The above observation of PMC is not correct that Doctors registered with Punjab Medical Council and working in this College are not genuine one because there is no such rule of MCI that Doctor registered in Punjab cannot work in Haryana and any other State. It is compulsory for the Doctors to get themselves registered with only one Medical Council as per MCI norm. It is surprised to note that the Doctors working in Mullana (Ambala) and Solan (H.P.) are declared as ghost faculty only on the basis of fact that they are registered with Punjab Medical Council. It is not mandatory for the faculty to have registration with each State Branch of Medical Council if they are already registered with one State branch. It is also a point of question that in case, any faculty member resigns from MM Medical College & Hospital at Kumarhatti- Solan and joins MM Institute of Medical Sciences and Research, Mullana, is he required to have registration with Haryana Medical Council before joining without getting NOC from Himachal Pradesh Medical Council or not? Is he required to have registration time and again with each State Medical Council at every instance of joining in every state or he can join in other state immediately after submitting request to have registration with the new State Medical Council without waiting for issuance of registration certificate? Further, most of the faculty members are retired from Govt, sector and residing at the College campus. Only on the basis that they are registered with Punjab Medical Council are considered as ghost faculty/not working in assessee medical colleges. TDS certificates (salary Certificate) of all doctors identified by Punjab Medical Council, and a copy of the list provided to us under Annexure C of questionnaire is attached at Annexure - ---------for your kind perusal. A summary list of such employees of 160 doctors clearly mentioning their PAN, Date

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 27 of Joining and date of reliving is applicable and brief summary of his duties performed. All the persons are having PAN and assessed to Tax as such there is no justification to hold these employees as GHOST (which do not exist). 1.6 With reference to para 6.11, para 6.12 in the questionnaire your honor has relied on the statements of the some Doctors and alleged that these Doctors were not actually working with trust and payment to these doctors are suspicious. The fact of statements of doctors is as under: 1.6.1 Dr. Rakesh Arora S/o Dr. Sh. Dharamveer, aged 53years, R/o 46/2, Passi Road, Patiala With reference to payments made to doctor Mr. Rakesh Arora S/o Sh Dharam veer who had been working in MM Institute of Medical Sciences St Research Mullana as Senior Resident from 01.06.2008 to 30.11.2012 and as an Assistant Professor from 01.12.2012 to 31.01.2015 and has resigned on 31.01.2015. His statement was recorded by Investigation Wing on 05-02-2016 and in his statement he has admitted as under: In reply to question no 10, he has admitted that he is working with trust since Oct 2008 and receiving salary on monthly basis which is same as per our books and records. In reply to Q No. 11 he has stated that he got the money from MM in bank account only and the same is duly reflected by in his bank statements. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no . 1.6.2 Devinder Singh Walia, S/o Dr. Sh. Dharamveer, aged 53years, R/o 46/2, Passi Road, Patiala With reference to payments made to doctor Devinder Singh Walia, who had been working in AM College & Hospital Kumarhatti Solan as assistant professor for a period of 20 months since 01/03/2013 and as senior resident for a period of 4 months thus tenure for 24 months and thereafter he has resigned from his duties w.e.f. 28.02.2015. His statement was recorded by Investigation Wing on 09.02.2016.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 28 In reply to Q No. 11 he has stated that he got the money through bank transfer in his SBI saving account. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no .1.6.3Rajeev Aggarwal, S/o late Dr. N.D. Aggarwal, aged 61years, R/o 1-E, The Maill, Opp. Polo Ground, Patiala With reference to payments made to doctor Rajeev Aggarwal, who had been working in MM Institutes of Medical Science and Research Mullana as professor in orthopaedics department since 2008 to November 2014. His statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 10, he has admitted that he has worked for MMU group till Nov. 2014 which is same as per our books and records. In reply to Q No. 11 he has stated that he got the money in his bank account and detail has been shown in his bank statements. Copy of PAN, qualification, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no.1.6.4 Kulwant Singh, S/o Sh. Sardar Pratap Singh, aged 57years, R/o 11/D, Kitchlu Nagar, Ludhiana With reference to payments made to doctor Kulwant Singh, who had been working in MM Medical College & Hospital, Kumarhatti, Solan as assistant professor for 21 months since 01.03.2013 and as a senior resident for a period of 2 months and has resigned from his duties w.e.f. 27.01.2015. His statement was recorded by Investigation Wing on 09.02.2016. In reply to Q No. 11 he has stated that he got the money in his bank account and has also produced appointment letter before your office for verification. In Q No. 14 he admitted that he was residing in Flat no 12 residential complex of MMU, Solan during his service. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 29 faculty is attached at page no .1.6.5Shyam Sunder Sood, S/o Sh. Suresh Kumar Sood, R/o 930, Sector-40A, Chandigarh With reference to payments made to doctor Shyam Sunder Sood, who has been working as associates professor in department of obstetrics and gynecology of MM Institutes of Medical Science & research Mullana from 05.04.2010 to 31.12.2013 and as a Professor from 01.01.2014 to 20.06.2016 and has resigned on 20.06.2016 from his service. His statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 10, he has admitted that he has been working for MMU Mullana from 04.04.2010 to till date (i.e 09.02.2016 date of statement) which is same as per our books and records. In reply to Q. No. 11 he has stated that he got the money in his bank account and has form-16 also with him which would be submitted to your office by 10.02.2016. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no .1.6.6Dinesh Kumar, S/o Sh. Nand Kumar Sharma, aged 43years, R/o 9706, UCO Bank Street, Habowal Kalan, Ludhiana With reference to payments made to doctor Dinesh kumar, who has been working in MM college of Medical College & Hospital Kumarhatti, Solan as Assistant Professor/ Senior Resident from 01.03.2013 to 28.02.2015. His statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 10, he has admitted that he has worked for MMU from 01.03.2013 to 28.02.2015, which is same as per our books and records. In reply to Q No. 15 he answered that he was residing in Campus at Kumarhatti, Solan. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no .1.6.7Amit Kapila, S/o Sh. A.K. Kapila, aged 38years, R/o 8, Malwa Colony, Patiala

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 30 With reference to payments made to doctor Amit, who has been working for MM Institute of Medical and Research, Mullana as assistant professor/ associate professor in the department of Orthopedics from 18.08.2009 to 19.01.2015. His statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 10, he has admitted that he was working in orthopedics department, MMU, Mullana from August 2009 to January 2015, which is same as per our books and records. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no . 1.6.8 Rajeev Kumar Jain, S/o Sh. Ratan Lai Jain, aged 41years, R/o 1157-C, Sector-32B, Chandigarh With reference to payments made to Doctor Rajeev Kmar Jain, who has worked in MM Institute of Medical Science & Research Mullan, as assistant professor from 16.05.2011 to 20.05.2012 and as associate professor from 21.05.2012 to 30.06.2015 resigned from his duties w.e.f. 30.6.2015. His statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 10 and question no 11, he has admitted that he has worked for MMU, Mullana as assistant professor and associate professor professor from 16.05.2011 to 30.06.2015, which is same as per our books and records. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no .1.6.9Rupinder Singh, S/o Sh. Ujjal Didar Singh, R/o H.No.62, Sector-10A, Chandigarh With reference to payments made to doctor rupinder singh, who has been workiog in MM medical Hospital & Hospital, Kumarhatti Solan as an Associate professor in radio diagnosis department from 25.02.2013 to 30.06.2015. His statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 11, he has admitted that he has worked for MMU, Solan and also submitted form-16 issued by

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 31 Solan has already been submitted to your office for verification. In reply to Q No. 13 he admitted that he was an Associate Professor in MMU Solan, which is same as per our books and records. Copy of PAN, qualification, relieving letter and copy attendance sheet of the above said faculty is attached at page no . 1.6.10 Praveen Mohan, w/o Sh. Harsh Mohan, aged 63years, R/o H.No. 1886A, Sector-21, Behind Alchemist Hospital, Panchkula With reference to payments made to doctor Praveen M.ohan, who has been working in MM Institutes of Medical Science & Research Mullana as professor & head in the department of OBG from 01.03.2013 to 30.06.2015 and resigned from her duties w.e.f. 30.6.2015. Her statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 10, she has admitted that she has worked for MMU Mullana from 01.03.2013 to 30.06.2015, which is same as per our books and records. In reply to Q No. 11 she admitted that she was selected through recruitment process only and form16 stands verified by your office. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no . 1.6.11 Ajata Shatru Kapoor, S/o Sh. Vishav Mittar Kapoor, aged 44years, R/o H.No. 12. Ranbir Mark, Model Town. Patiala With reference to payments made to Doctor Ajata Shatru Kapoor, who has been working in MM Institutes of Medical Science & Research Mullana as assistant professor from 01.01.2013 to 30.06.2015 and has resigned from his duties w.e.f. 30.06.2015. His statement was recorded by Investigation Wing on 09.02.2016.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 32 In reply to question no 10, he has admitted that he was working in MMU, Mullana from 01.01.2013 to 30.06.2015, which is same as per our books and records. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no . 1.6.12 Vishal Kharbanda, S/o Sh. Narender Kumar Kharbanda, aged 43years, R/o H.No. 25A, Bharpur Garden, Opp. New Moti Bagh Palace, Patiala With reference to payments made to doctor Vishal Kharbanda, who has worked in MM Medical College & Hospital Kumarhatti, Solan as a assistant professor form 01.01.2014 and resigned from his duties w.e.f. 01.07.2015. His statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 11, he has admitted that he has worked for MMU, Kumarhatti Solan from 01.01.2014 to 30.06.2015, which is same as per our books and records. Copy of PAN, qualification, relieving letter, Form 16 (Salary Certificate) and copy attendance sheet of the above said faculty is attached at page no . 1.6.13 Sarita Aggarwal, w/o Sh. Rajeev Aggarwal, aged 56years, R/o 1E, The Mall, Opp. Polo Ground, Patiala, Punjab With reference to payments made to doctor Sarita Aggarwal, who has been working in MM Institutes of Medical Science fit Research Mullana as an assistant professor/ associate professor from 01.01.2008 to 30.11.2014 and resigned from her duties w.e.f. 01.12.2014. Her statement was recorded by Investigation Wing on 09.02.2016. In reply to question no 10, she has admitted that he has worked for MMU, Mullana from 01.01.2008 to 30.11.2014, which is same as per our books and records. Copy of PAN, qualification, appointment letter, relieving letter, Form 16 (Salary Certificate) and copy of ledger of salary register of the above said faculty is attached at page no .

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 33 1.6.14 With reference to payments made to doctor Chander Mohini D/o Shri Om Parkash r/o Ajit Nagar Patiala, who has been working in MM Institutes of Medical Science fit Research Mullana as senior resident/ assistant professor from 01.12.2010 to 31.01.2015 and resigned from her duties w.e.f. 31.01.2015. She has already submitted her reply to Investigation Wing as also mention in para 6.11 of your questionnaire. Affidavit from above doctor regarding working with /AMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no . 1.6.15 With reference to payments made to doctor Vikram Jeet Singh Dhingra S/o Sh Surinder Singh r/o J 2/11, Gobind Colony, Rajpura, Distt Patiala, who has been working in MM Institutes of Medical Science & Research Mullana as an assistant professor/ associate professor from 20.10.2007 to 31.03.2015. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no . 1.6.16 With reference to payments made to doctor Ashotosh Sharma S/o Sh Pawan Kumar Sharma r/o H No 3928, Sector, 2D, Chandigarh, who has been working in MM Medical College & Hospital, Kumarhatti, Solan as an assistant professor from 01.12.2012 to 30.11.2015. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no . 1.6.17 With reference to payments made to doctor Anand Kumar Jindal S/o Sh Bhagat Ram Jindal r/o H No 1, Sector, Jail Land, Ambala City, who has been working in MM Institutes of Medical Science & Research Mullana as an assistant professor from 01.07.2010 to 31.12.2015 and

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 34 again joined his job w.e.f 01.08.2016. He has already submitted his reply to department as also mention in para 6.11 of your questionnaire. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no . 1.6.18 With reference to payments made to doctor Naresh Garg S/o Sh Prem Paul Garg r/o H No 7, Dhillon Marg Town, Patiala, who has been working in MM Institutes of Medical Science St Research Mullana as senior resident / assistant professor from 01.12.2010 to 31.01.2015. He has already submitted his reply to Investigation Wing as also mention in para 6.11 of your questionnaire. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no . 1.6.19 With reference to payments made to doctor Asha Nagi D/o Sh Gopi Chand Negi r/o Dyerton cottage no 3, Below Tallend, Shimla, who has been working in MM Medical College & Hospital Kumarhatti, Solan as professor from 15.04.2013 to 31.05.2013 and again joined as on 02.05.2016. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no . 1.6.20 With reference to payments made to doctor Surinder Kumar Gupta S/o Sh Barkat Ram r/o H no 99P, Mansa Devi Complex, Sector 4, Panchkula, who has been working in MM Medical College & Hospital Kumarhatti, Solan as an assistant professor from 01.04.2014 to 31.07.2015. Affidavit from above doctor regarding working with v.v.U. Copy of PAN, qualification, copy of joining report, relieving

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 35 lette' rorm 16 (Salary Certificate) and copy of attendance sheet of the abc-e : faculty as per our books and records is attached at page no 1.6.21 With reference to payments made to doctor Meena Garg D/o Sh Naresh Garg r/o H No 7, Dhillown Marg, Patiala, who has been working in MM Medical College Et Hospital Kumarhatti, Solan as an assistant professor from 01.01.2013 to 31.01.2015. She has already submitted her reply to Investigation Wing as also mention in para 6.11 of your questionnaire. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no 1.6.22 With reference to payments made to doctor Kalpana D/o Sh Dina Nath Katoch r/o Flat No 4, Mansa Cottage, Lower Kaitu, Shimla (HP), who has been working in MM Medical College & Hospital Kumarhatti, Solan as an assistant professor from 15.04.2013 to 30.06.2013. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no . 1.6.23 With reference to payments made to doctor Barinder Pal Singh S/o Sh Harbir Singh r/o H No 410 R, Model Town, Ludhiana, who has been working in MM Medical College & Hospital Kumarhatti, Solan as senior resident/ assistant professor from 01.03.2013 to 28.02.2015. He has already submitted his reply to Investigation Wing as also mention in para 6.11 of your questionnaire. Affidavit from above doctor regarding working with MMU, Copy of PAN, qualification, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no .

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 36 1.6.24 With reference to payments made to doctor Gurdeep Singh S/o Sh. Udham Singh, who has been working in MM Institute of Medical Sciences & Research Mullana as professor from 08.09.2008 to 30.04.2014. He has died and not possible to give his statement or affidavit to department. Copy Qualification, copy of PAN, copy of joining report, relieving letter, Form 16 (Salary Certificate) and copy of attendance sheet of the above said faculty as per our books and records is attached at page no The perusal of above statements recorded by Investigation Wing of Income Tax Department during post search enquiries clearly proves the genuineness of the doctors that all of them were regularly employed by MMUT. They have also defined the duties performed for the Trust. The payments were received in bank only. We are unable to find anything wrong in the statement still if your honor feels that there is something wrong in the statement, Trust would like to cross examine these doctors as their statements were recorded by Investigation Wing at the back of MMUT and no opportunity was allowed for cross examination. In view of the above and perusal of the statement of the persons given before Investigation Wing and affidavits of other faculties now submitted for your perusal and verification, it is quite evident salary to the doctors are paid for their actual working with trust. That all asked doctors were residing at Mullana campus or Solan campus or were commuting on daily basis from their residence by college bus or own conveyance within the distance permissible by MCI. A para wise reply to observations under Para 6.14 is as under: i. In reference to your observations that most of the doctors are residing in Ludhiana etc. it is submitted that complete details of all the doctors were filed at Annexure where it is quite evident that most of the doctors were residing in college campus at Mullana or Kumarhatti and some doctors are commuting daily by college bus or their own conveyance from their residence as distance limit permissible by MCI. The observations of your honor are against the facts on records.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 37 ii. With reference to doctors having established practice and earning substantial income from their personal practice; it is submitted that as per the terms of appointment MMUT or MCI do not debar a doctor employed in Medical College / Dental College for private practice after their specified assigned duty hours in Hospital / College time or on holiday. That without commenting the income earned by these doctors from their practice cannot be commented by us. However, salary paid to these doctors are strictly on the basis of their working and their bio metric attendance calculated through 100% automated systems in place. iii. With reference to observation of PMC that some doctors have parallel entries in the same month from two different sources of work in two different towns, that not even a single such instance was provided to us wherein a doctor is employed in two Colleges in the same month as such their no truth in the allegation. Further your honor has observed that department has collected information as per which the doctors have multiple addresses. Some of the addresses are at faraway places, from where, it is not generally possible to take upto and from journey in a day. This is totally allegation and in contrary to your observation under para i) above wherein you have stated that some of the doctors are residing around 70-100Km from college campus. It is submitted that it is a normal practice adopted by the employees to daily commute for such a distance not only in Medical College rather in Income Tax Department and all other Government offices. There is no justification in such allegation. Though no specific instance was given where daily commutation is from a much larger distance, however it is important to mention that majority of faculties are residing at college campus, they have always two address one is their permanent address of their home town and other is correspondence address of College Campus address. iv. With reference to your observation that PMC has observed that most of the doctors are part time and MCI do not allow part time faculties it is submitted that PMC is of the view that when a doctor is doing is his part time practice after college hours then he is a part time faculty which is not correct. That most of the state Governments of the country have permitted Government employed doctors for practice after Government working hours. Moreover, MCI do not restrict practice after college working hours. However, MMUT do not

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 38 maintain such records of private practice carried out by any of the faculties, at the same time MMUT do not debar its faculties. v. With reference to bogus expenditure of salary of doctors as identified by PMC, it is submitted that during the course of search and post search enquiries your office has recorded statement of large number of doctors and each of them has confirmed the receipt of salary and all payments made to employees by MMUT is through bank transfer of salary. That due taxes has been deducted at sources and all the employees have shown the salary as part of their Income in Income Tax returns filed as per records. The question of bogus salary is totally a baseless and false allegation on MMUT. It is also not understood that a Doctors working in the college, received salary in bank, filing his Income Tax returns and still is a ghost. The same is once again strongly denied and there appears a serious lapse in understanding of “ghost” definition. A payment can be regarded as ghost payment if the recipient do not exist. The complete details along with all relevant paper connected with Annexure- A, Annexure- B, Annexure- C and Annexure- D of your questionnaire is attached. As such there is no justification in suspicion of existence of any ghost teacher. vi. With reference to your observations that PMC has some information that some of the doctors have denied having worked for the group MMUT, it is submitted that yes this is correct that a few of the doctors listed under Annexure C do not work MMUT. The same is clarified by PMC as well as the same is confirmed that they are not our employees at any point of time and no salary was ever paid to such persons. These persons are specifically marked in our reply and depicted under sr. no. . vii. With reference to your observation that some of the doctors have admitted that they have not taken any classes in the relevant periods but they have received salary, it is strongly denied. Before commenting on this observation it is submitted that as a principle of interpretation it is neither expected nor desirable to pick certain phrases from a statement. The statement of any person has to accepted or read as a whole. Assessee understand that there is only one statement of Dr. Devinder Singh Walia recorded on 9.2.2016 by Investigation Wing who was employed at Medical College

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 39 Solan in between 1-3-2013 to 27-10-2014 as Assistant Professor and Senior Resident from 28-10-2014 to 28-2- 2015 and after that he had resigned. In reply to Q.14 he has stated that “I have not taken any class since the medicine classes are supposed to be taken in the 4" year of MBBS but because the college has just started with the first year therefore no classes were required to be taken by me. However, he was regular in attending Hospital during the working in MMU Kumarhatti. Thus the concerned Doctor himself has clarified the context of not taking class in 1st year of establishment. The observation of your office is contrary to the statement of the concerned Doctor. viii. With reference to your observations that in some of cases the staff were not aware of the terms and conditions of their appointment. Most of the doctors are residing in their home town i.e. 70 to 100KM. It is once again reiterated that knowledge of terms and conditions by a particular person cannot be commented as no such details is made available to us. Moreover, residence of doctors at a distance of 70- 100 KM has been explained under para i) above. It is surprised to note that the Doctors working in Mullana (Ambala) and Solan (H.P.) are declared as ghost faculty by PMC and Department only on the basis of fact that they are registered with Punjab Medical Council. It is also relevant to mention that both Medical College Mullana and Soan are subject to regular inspections by Medical Council of India, State Governments and Ministry of Health.” 35. From the above, we find that the directions u/s 263 of the Act cannot be given as there is no infarction of law as per Explanation 2 to Section 263 of the Act.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 40 they have been attaining regular hospital work at Kumarhatti. The statement of the Doctors recorded cannot be read partially but has to be read fully and wholly so as to come to a conclusion which the ld. PCIT seems to have misdirected himself. The issues flagged by the ld. PCIT have already been examined by the Assessing Officer at length before conclusion of the assessment proceedings. The assessee has replied to Assessing Officer about high deduction from gross salary to employees which pertains to the TDS deducted from salary. The doctors registered with the chapter of Punjab Medical Council are not barred from working in Haryana, Himachal Pradesh Hospitals maintained by the assessee trust. The genuineness of the doctors have been established, the complete details like PAN, Form 16, qualifications of the doctors, attendance of the doctors and their declaration the amounts received from the assessee trust by the doctors in their ITRs have all been submitted before the Revenue authorities. Considering all the facts, we hold that no case of the assessment order being erroneous so far as it is prejudicial the Revenue can be made on this ground. The Assessing Officer during the proceedings has had full application of mind before coming to the conclusion that no undisclosed income can be determined on this issue. Moreover, in the absence of any prima facie evidence that the amounts paid have been received back by the assessee trust, no action under the provisions of Section 263 of the Act is attracted.

Other Benefits to trustees: 37. The entire portion of the ld. PCIT’s order on this issue is as under: “5.2.5 Other benefits taken by trustees from MMU trust: During the search, it was found that there are number of servants working at the residence of Sh. Tarsem Garg, Sh. Sanjeev Garg & Sh. Vishal Garg. Their statements were recorded and it was found that most of the servants are employees of assessee trust but providing the services at the

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 41 residences of the trustees. The AO has accepted the submission of the assessee without making any enquiries.” 38. During arguments before us, the ld. AR submitted his arguments based on the reply filed before the ld. PCIT during the proceedings. The ld. DR relied on the statements recorded u/s 132(4) of the Act during the search proceeding which have been duly perused in detail.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 42 amounting Rs. 5,400/- per month in cash on monthly basis from his personal funds. No payment was made to Goverdhan Singh by Maharishi Markandeshwar University. He was hired from 1/03/2013 to 31/12/2014. In fact, this watchman was earlier working with MMU upto 19-9-2014 at a monthly salary of Rs.5,400/- per month and xi 19-9-2014 he was paid a salary of Rs.3,307/- by the Trust and was relieved from MMU. Thereafter he joined at the residence of Sanjeev Garg and no salary thereafter was paid by MMU. In reply to QNo.2 Goverdhan Singh confirmed the above fact that for last 1 ½ month he was working with Sanjeev Garg and before that at MMU. A certificate from MMUT along with salary payment filed before AO during assessment proceedings is attached at page 460-461. No payment was made by MMU for working at residence of Sanjeev Garg as such no contravention to any provisions. iv. Suraj Kishan son of Charan Pass who is acting as a Driver and is being paid Rs.7500/- per month. The salary paid to Suraj Kishan is personal expenditure of Sanjeev Garg. No payment to Suraj Kishan was paid by Maharishi Markandeshwar University. As such no benefit is derived on this account by Sanjeev Garg. A certificate from MMU that no salary is paid for Suraj Kishan is attached at page 461. v. Som Nath son of Kartar Ram In fact as per the statement of Som Nath who works as Mali at Maharishi Markandeshwar University where he draws a salary of Rs. 5,100/- per month. That apart from above he maintain flower pots at the residence of Tarsem Garg on weekly basis, where he is paid Rs. 1,200/- per month. The salary of Rs. 1,200/- per month paid for domestic working is over and above the salary paid by the college and the same is paid by Tarsem Garg individually. As such no benefit drawn by the Trustee. That no specific question was raised by Investigation Wing about salary received for house working. An affidavit from Som Nath was filed before AO and copy of the same attached at page 462. vi. Sanjay Kumar son of Prahlad He acts as a helper in kitchen at Medical College and draws a salary of Rs. 5,000/- per month from College. As per facts, around 15 persons had assembled at the residence of Tarsem Garg cum office of Trust. The search lasted for 4 days as such Sanjay Kumar was being called to attend Income Tax Staff

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 43 during their stay of 4 days. It was not possible for the ladies of the family to attend around 10-15 persons including police personnel. As such his temporary shifting to the residence was not for the benefit of Tarsem Garg rather to assist the team of Income Tax officials. There is no benefit derived from Sanjay Kumar by any Trustee as he is deputed at college. This was confirmed by Sanjay Kumar in his statement. He acts as a helper in kitchen at Medical College and draws a salary of Rs. 5,000/- per month from College. He further clarified in reply to QNo.4 that he acts as care taker to shift the patients in Medical College. In reply to QNo.5. In reply to QNo. 7 he has further clarified that at the residence of Tarsem ji, Tirlok who is resident of Uttrakhand acts as a cook, and he is temporarily shifted as no cook was available. As per facts, around 15 persons had assembled at the residence of Tarsem Garg cum office of Trust. The search lasted for 4 days as such Sanjay Kumar was being called to attend Income Tax Staff during their stay of 4 days. It was not possible for the ladies of the family to attend around 10- 15 persons including police personnel. As such his temporary shifting to the residence was not for the benefit of Tarsem Garg rather to assist the team of Income Tax officials. There is no benefit derived from Sanjay Kumar by any Trustee as he is deputed at college. This was confirmed by Sanjay Kumar in his statement. An affidavit from Sanjay Kumar clarifying the above facts is attached at page 463. It is highly unjustified that a person was called to assist Income Tax Staff and that too was used otherwise. Your attention is further invited to the fact a similar show cause notice was issued by AO under Para 5.4 page 25 of the questionnaire dated 6.10.2016 (copy attached at page 464) and in response to the same assessee has filed a detailed reply dated 25-10-2016 and 5-12- 2016 (copy attached at page1916-1939) and after considering the correct facts and explanation the learned officer has taken a one possible view.” 40. From the above, on a concurrent reading of the questionnaire issued the Assessing Officer dated 06.10.2016 (page no. 159), reply of the

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 44 assessee dated 05.12.2016 (page no. 239), statements of the driver, security guard and watchman, we find that the provisions of Section 263 of the Act and Explanation 2 of Section 263 of the Act are not applicable to this ground.

Construction payment made to Sh. Tarsem Garg 41. The ld. PCIT held that the contractual payment of Rs.29,71,865/- made to Sh. Tarsem Garg cannot be allowed as the payments received from the trust have been withdrawn immediately and also for the reason that Sh. Tarsem Garg is not a regular contractor but Chancellor of the MM University. We find that Sh. Tarsem Garg has been registered Government contractor for about 20 years and the said contract was given by the assessee to Sh. Tarsem Garg for RR Masundry Work, Excavation work and Boulder Packing work. The work order has been perused and the profits earned thereof have been determined u/s 44AD of the Act. This issue has been dealt by this Tribunal in the case of Sh. Tarsem Garg in ITA No. 2479/Del/2019 for the assessment year 2011-12. Since, the facts reminds same no action u/s 263 of the Act is called for on this ground.

Rent paid to trustees 42. The detail of rent paid by MMU Trust to individuals i.e. trustees and their family member are as under: A.Y. A.Y. A.Y. Name of the A.Y. 2009- A.Y. 2010- A.Y. 2011- A.Y. 2012- Total 2013-14 2014-15 2015-16 persons 10 11 12 13 Sh. Tarsem 4,80,000 4,80,000 4,80,000 4,80,000 4,80,000 4,80,000 4,80,000 33,60,000 Garg Sh. Vishal Garg 3,60,000 2,60,000 2,40,000 1,16,000 0 0 0 9,76,000 Smt. Deepika 0 2,20,000 2,40,000 0 0 0 0 4,60,000 Garg Smt. Santosh 4,20,000 4,20,000 4,20,000 4,20,000 4,20,000 4,20,000 0 25,20,000 Kumari Total 12,60,000 13,80,000 13,80,000 10,16,000 9,00,000 9,00,000 4,80,000 73,16,000

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 45 43. On perusal of this chart, it is seen that the trustees are getting rent from trust for letting out of H.No. 55, Model Town, Ambala City. During the search operation, this premise was also covered and there was no single evidence regarding the use of this premises by the Trust. This house is in the name of Sh. Tarsem Garg & Smt. Santosh Kumar and occupied by them only. During the search operation, Sh. Tarsem Garg was asked to explain as to how the above-mentioned premise was being used by the Trust.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 46 Q. 42 Please state how many guests usually stay here in a month (guest of M.M. Education Trust) and also state whether any record of this is being maintained or not? Ans. At present, it is not possible for me to tell how many guests of M.M. University Trust usually stay here in a month. No records of guests who stay here is being maintained as only special persons/guests of M.M. Education Trust stay here and they also stay at here occasionally. ” 45. Ld. PCIT purported that from the above statement, it is clear that this premise is not being used by the assessee trust. This premise is residence of Sh. Tarsem Garg & Smt. Santosh Garg and their daughter. The rent is being paid by trust. Same condition was found in case of Smt. Deepika and Sh. Vishal Garg. They are showing rental income from the trust for letting out their H.No. 127, Sector-1, Jail Land, Ambala City. During the search of this premise it as found that this was occupied by them only. There was no evidence of letting out this building to the trust. Hence, directed that the issue be taken up in the fresh assessment proceeding.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 47 mentioned that a room is used for photo cum copier cum fax machine and the other rooms are used for visiting guest of the assessee University. The issue has been examined vide letter dated 06.10.2016 by the Assessing Officer which has been duly replied by the assessee vide reply dated 05.12.2016 wherein it was categorically mentioned that the rented premises was used as office and guest house. Further, as per the record and the details filed before the Revenue, the house pertaining to Sh. Vishal Garg and Ms. Deepika Garg who has allotted to Director General, MMU, RP Bajpayee for his stay purpose. The value of the perquisite was also added to the salary of Sh. RP Bajpayee and Form 16 reflects such addition. It was also a matter of record that the premises was led to ICICI Bank, later on, at a monthly rent of Rs.69,000/-, hence, the arguments of the ld. DR that the rent paid was in excess of market rate cannot be held to be valid. Further, the rental premises leased from Ms. Santosh Garg were used as urban slum centres at Vikas Vihar, Ambala to MM Medical College. Under these circumstances, its futile to say that that the Assessing Officer has not inquired into the issue and hence the provisions of Explanation 2 to Section 263 of the Act are not applicable. Since, the premises found to have been let out as office cum guest house, residence of the Director General and urban slum centres, keeping in view, the fact that the rental income have been taxed duly, the perquisite value have been added to income of the occupant and also keeping in view that fact that District Immunization Officer has allotted Urban Slum Centre for the Vikas Vihar premises, we hereby hold that the order of the Assessing Officer is not erroneous so far as it is prejudicial to the interest of the Revenue on this ground.

Interest paid to trustees 49. The entire part of the order of the ld. PCIT on this issue is as under:

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 48 Name of the persons A.Y. A.Y. A.Y. A.Y. A.Y. A.Y. A.Y. 2015-16 Total 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Sh. Vishal Garg 0 43,562 1,55,881 84,827 0 0 0 2,84,270 Sh. Sanfeeu Garg 0 0 1,44,658 1,34,610 0 1,03,500 0 3,82,768 Smt. Deepika Garg 3,51,457 4,38,700 2,76,377 1,05,520 0 0 0 11,72,054 Smt. Meenakshi Garg 0 26,137 1,73,748 10,704 0 0 0 2,10,589 Smt. Seema Garg 0 0 0 27,525 0 0 0 27,525 Smt. Santosh Kumari 0 0 51,082 0 0 0 0 51,082 Total 3,51,457 19,34,426 32,23,054 4,69,380 0 1,03,500 0 60,81,817 “On perusal of the above details of interest paid to trustees by MMU Trust, it is clear that trust is paying huge amount to trustees against the payments made to trust by trustees. It is clear that trust is diverting its income in the form of interest to trustees.” 50. The ld. PCIT held that the assessee has paid 15% rate of interest to the trustees of the society on the loans received which is in excess of the interest paid to bank on term loan @12.75%.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 49 whether these lenders received interest from you and are shown in their return, tax paid thereon or not. A Complete date wise copy of account of the persons from whom the loans are raised along with utilization in the books of MMUT is attached and a summarized as under: 7.2 Tarsem Garg: In AY 2010-11 a sum of Rs. 90,00,000/- was received from him on 3-4-2009 and the same was deposited in OBC Account No. 51822011002927 and the same was immediately used for repayment outstanding Loan totaling Rs.1,47,10,000/-. Similarly Rs. 5,00,000/- and Rs. 15,00,000/- was received from him on 15-12-2009 which was again deposited in the same OBC Account and the same was adjusted against OD account immediately as on that date a sum of Rs. 68,57,116.90 was payable to bank. During the year Interest of Rs.12,83,424/- was paid to Tarsem Garg and the same was included in his Income Tax return. In AY 2011-12 a sum of Rs. 8,00,000/- on 6-4-2010 was received and deposited in same OBC Account and the same was used in clearing different payments Outstanding. A sum of Rs. 7,00,000/- and Rs. 60,00000/- was received on 19-8- 2010 and the same was adjusted in outstanding OD of Rs. 2,29,88, 829.06/- from OBC Account. Deepika Garg: In AY 2009-10 a sum of Rs. 26,00,000/- was received from on 14-7-2008 and the same was deposited in SBI Account No. 30402893812 and the same was immediately adjusted against the SBl Term Loan Installment of Rs.65,00,000/-. During the year interest of Rs.3,51,457/- was paid to Vishal Garg and the same was included in her Income Tax return. Vishal Garg: In AY 2010-11 a sum of Rs. 10,00,000 /- was received from him on 15-12-2009 and the same was deposited in OBC Account No. 51822011002927 and the same was immediately adjusted against the opening balance of Rs. 68,57,116.90 payable to bank. During the year Interest of Rs.39,206/- was paid to Vishal Garg and the same was included in his Income Tax return.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 50 Meenakshi Garg: In AY 2010-11 a sum of Rs.6,00,000/- was received on 15-12-2009 and the same was deposited in OBC Account No. 51822011002927 and the same was immediately adjusted against the opening balance of Rs. 68,57,116.90 payable to bank. During the year Interest of Rs.23,526/- was paid to Vishal Garg and the same was included in his Income Tax return and copy of return of Income is attached at page with payments of Rs. 3,00,000/- on 6-4-2010 adjusted against outstanding OD on that date and Rs. 4,00,000/- on 26-8-2010 against outstanding OD of Rs.1,85,55, 360.06/-. It is also relevant to mention that all the persons to whom interest is paid is assessable at maximum marginal rate of tax. In the light of above submissions and more specifically that each and every payment raised from these specified persons were utilized in bank loan repayments clearly reflects the expediency of funds required and utilization thereof. In the light of above there is no justification in holding that there is any benefit u/s 13(1) on account of interest paid on deposit raised from trustees.” 52. We find that during the year under consideration, a sum of 40.68 crores was spend on the project under consideration out of which Rs.18.98 crores were disbursal for the bank loan and the remaining as unsecured loans. Interest @ 18 to 24% is being charged if the loans are received from non-trustees. The rate of interest of 15% on a private loan cannot be said to be excessive compared to the bank term loan interest rate of 12.20% to 12.75%. The unsecured loans received from private individuals would certainly carry one or two per cent more than the bank rates. Further, the interest received by the individuals has been duly offered to taxation. It has been also shown that the loans received have been used for the purpose of assessee trust for repayment of outstanding loan, adjustment against OD account, payment of outstanding dues, repayment of SBI term loan installment etc. Thus, it is proved that the loans have

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 51

been taken from the trustees for meeting immediate purposes of the trust and meet up the impending financial requirements. Further, the ld. PCIT observation that depositors have not furnished their personal balance sheet in their assessment is also not correct, since, is source of deposit in bank account of these individuals stands examined by the Assessing Officer during the assessment proceedings. Hence, the ld. PCIT conclusion that the trustees have been benefited by way of receipt of higher interest cannot hold good. Hence, no action u/s 263 of the Act is called for on this ground.

Salary paid to Trustees 53. The snap shot of the salaries is paid to the trustees is as under: Name of A.Y. A.Y. A.Y. A.Y. 2012- A.Y. 2013 A.Y. 2014 15 A.Y. 2015 16 Total the 2009-10 2010-11 2011-12 13 14 persons Sh. Tarsem 24,00,000 29,50,000 33,60,000 63,60,000 63,60,000 63,60,000 63,60,000 3,41,50,000 Garq Sh. Vishal 14,25,000 17,75,000 18,00,000 18,00,000 18,00,000 18,00,000 18,00,000 1,22,00,000 Garg Sh. 0 0 0 0 18,00,000 18,00,000 18,00,000 54,00,000 Sanjeev Garg Smt. 4,65,060 5,17,724 5,80,858 6,28,740 8,43,755 13,46,274 14,58,114 58,40,525 Deepika Garq Smt. 11,25,000 15,00,000 15,00,000 .15,00,000 15,00,000 15,00,000 15,00,000 1,01,25,000 Meenakshi Garq Total 54,15,060 67,42,724 72,40,858 1,02,88,740 1,23,03,755 1,28,06,274 1,29,18,114 6,77,15,525

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 52 City is enclosed as Annexure A3. Further, statement of driver, Sh. Kuldeep Singh S/o Sh. Bachchan Singh R/o Vill. MotaMajra, Distt. Ambala recorded on 01.11.2014 u/s 131 of Income Tax Act, 1961 during the course of search at H.No. 127, Sector-1, Ambala City is enclosed as Annexure A4.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 53 Phd 5. Sh. Tarsem Garg Job-Chancellor Paid marginally higher than Vice Chancellor 58. In the case of Ms. Deepika Garg, the biometric attendance, time table of IT department in MM Engineering College has been submitted before the authorities which has been perused by us too. The letter from the Deputy Registrar of MMU has been submitted wherein it was mentioned that the biometric attendance system has been adopted for all the employees of the university. The biometric attendance status report has also been filed before us showing her regular attendance in the college. Similarly, the salary paid to Vishal Garg who is a Ph.d holder and CFO, Sh. Sanjeev Garg who is the Secretary of the University, Smt. Meenakshi Garg who is also a Ph.d holder and SAP analyst cannot be said to be excessive. The ld. PCIT observation that the payments are not genuine is not established by way of the material or investiagion or by any cogent reasoning. These individuals have shown their income received as salary in their individual returns also. Hence, keeping in view the evidences, we hold that the conclusion of the ld. PCIT is not on true appreciation of the facts.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 54 60. By going through the chart above, it cannot be said that Sh. Tarsem Garg has been paid huge salaries which has given any undue advantage as he is a trustee of the assessee.

Santosh Hostel: 62. On this issue, the ld. PCIT held as under: “During the search proceedings, it was found that ** there are 14 hostels in Mullana campus of the assessee trust out of which 4 hostels known as Santosh Hostel are owned by the trustees, Smt. Santosh Kumari Garg, Smt. Seema Garg and Smt. Deepika Garg. The land for Santosh Hostel was acquired in 2007 jointly by them. In his statement recorded u/s 132(4) on 31.10.2014, Sh. Tarsem Garg stated that about 600- 700 rooms are available in these hostels. The students of the University who are residing/staying at Santosh Hostel pay their fees/dues directly to the hostel. He did not remember where the books of account relating to the hostel were lying or maintained. During the post-search enquiries, the information regarding investment in the hostel, room details, booking status etc. were not provided. On perusal of account no. 30762463072 in SBI Mullana, it was found that there are huge cash deposits amounting to Rs.80.60 crore in the bank account, which is as under: FY Deposits (Rs. in cr.) 2009-10 9.68 2011-12 15.36 2012-13 22.65 2013-14 10.97 2014-15 14.66 2015-16 7.27 Total 80.60 The AO did not refer the buildings of Santosh Hostel for valuation to the DVO u/s 142A despite the same being mentioned in the appraisal report. In respect of the deposits,

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 55 certain details were submitted by the assessee vide reply dated 07.04.2015 for FYs 2009-10 to 2013-14, the summary of which is as under: Deposit in SBI a/c and OBC a/c Rs. 75.86 crore Less: Duplicate entries Rs. 21.49 crore Transferred from auto-sweep Rs. 17.15 crore Unsecured Loan and self-investment Rs. 10.83 crore Others Rs. 0.76 crore Refund Rs. 1.10 crore Net of advance rent Rs. 1.73 crore Rs.53.06 crore Rs. 22.80 crore Other hostel receipts (received from MMU directly) Rs. 1.60 crore Total Rs. 24.40 crore

These details are unverified details and no supporting documents were found or furnished during the proceedings. In reply the AR submitted that there are 1060 rooms in these 4 hostels which are known as Hostel no. 10, 11, 12 & 13. It was further submitted that the amount of Rs.24.40 crore was offered in the hands of 3 co-owners for taxation under the head Income from House Property. On the basis of the bank accounts the assessee has prepared a tentative P&L a/c and balance sheet as per which an amount of Rs. 16.73 crore has been invested in construction of hostel whereas total receipt of hostel rent from these hostels by 3 co-owner trustees for the period starting from FY 2009-10 to FY 2014-15 is about Rs. 30.02 crore, which is quite disproportionate considering the amount of investment. The rate ot return on the investment is varying from 30-40% per year. It was also noted that the co-owners of Santosh Hostel have given only the buildings on rent whereas the facilities of wi-fi, electricity, purified water, furniture such as table, chair, almirah and bed, security facilities and mess etc. are being borne by the trust. Further, as per the information provided during the assessment proceedings, the co-owners are not incurring even a single paisa expenditure on repair and maintenance of the 4 hostel buildings, which is apparently being borne by the assessee trust. Further, a term loan of Rs. 7.50 crore has been sanctioned to the co-owners for construction of hostel buildings. One of the terms & conditions of the said credit facility is that an MOU was to be entered into between the co-borrowers and MMU trust whereby the former will let out the hostel building to the latter for payment of annual rentals @ Rs.2.50 crore w.e.f.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 56 01.04.2009 with 5% increase each year. The MOU is to remain valid during the currency and tenor of the term loan with a minimum guaranteed amount of Rs.2.50 crore per annum. These facts clearly indicated that the services of the trust have been made available to the persons mentioned in Section 13(3) in violation of the provisions of Section 13 of the Act. 5.6.1 In response the AR submitted that construction of hostels no. 10, 11 & 12 was started on 25.02.2009 and completed on 09.09.2009 whereas hostel no. 13 was constructed by the assessee during FY 2012-13 & 2013-14. It was submitted that trust has not incurred any expenditure on repair/construction. While recording the transaction, the entire cost is grouped under building head and not bifurcated under repair expense and capital cost. Regarding agreement referred to by the SBI while extending credit, it was submitted that no such agreement was executed and acted upon. The hostel rooms were let out to the students directly and rent was received from them. It was also submitted that for allied services, the assessee trust is separately charging from the students. The AR has also given the details of room rent charged by the co-owners of Santosh Hostel from the students and the fees charged by the MMUT for allied services such as wi-fi, electricity, purified water, furniture such as table, chair, almirah and bed, security facilities and mess etc. The details as furnished are not based on any evidence. However, the same are reproduced as under: AY Room rent charged by Fees charged by MMUT (in Rs.) Santosh Hostel (in Rs.) 2010-11 25,000 18,000 2011-12 25,000 18,000 2012-13 31,000 18,000 2013-14 31,000 21,000 2014-15 32,000 28,000 2015-16 32,000 28,000 It was also submitted that if the depreciation is taken into account the return on investment will be lower. 5.6.2 The submission of the AR was considered. It is noted that even if allowance on account of depreciation is allowed

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 57 to the assessee then also the return on investment is more than 30%, which is totally unrealistic. Further, there is no evidence that the repair expenditure is included in the cost incurred on hostel. Hostel no. 13 was constructed by the assessee trust during FY 2012-13 & 2013-14. After completion of construction it may be noted that during FY 2014-15 relevant to AY 2015-16, the cost incurred on the hostel building remained same at Rs. 16 73 crore as that in AY 2014- 015 indicating that no expenditure was incurred on repair at least during FY 2014-15. The assessee has also not furnished any confirmation from the SBI that the credit of Rs. 7.5 crore was extended without any agreement being signed between the co-owners and the assessee trust and the same being given to them as a requirement for extending the loan. Further, it is noted that rent of about Rs. 1.60 crore was received directly by the co-owners from the assessee trust which is against the submissions made by the AR that rent was received by the co-owners from the students directly and no rent was received from the trust at any point of time. It is also noted that the amount paid as rent to the co- owners is significantly more than the amount charged as fees by the assessee trust for bearing all the expenses on facilities such as wi-fi, electricity, purified water, furniture such as table, charir, almirah and bed, security facilities and mess etc. All these facts indicate that the assessee has violated the provisions of Section 13 of the Act and the AO has not conducted any enquiry in respect of the issues raised in respect of Santosh Hostel. 5.6.3 On the basis of details of room rent per student received, number of students in 4 hostels of Santosh Hostel (Hostel no. 10, 11, 12 & 13) has been worked out as under: Particulars AY AY AY AY 2013- AY 2014- AY 2015- 2010-11 2011-12 2012-13 14 15 16 Hostel rent for Santosh Hostel by 200.62 337.27 517.99 672.88 709.69 564.40 coowners (Rs.in lakh) No. of students in Santosh Hostel 1605 1349 1671 2170 2217 1764

As per statement of Sh. Tarsem Garg, there are about 600- 700 rooms in these 4 hostels, which means in every room at least 3 students are staying. The AR of the assessee has also given the details of mess charges for these 4 hostels for AY 2013-14 & 2014-15 which are as under:

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AY Hostel No. Average number of Mess Charges (Rs. in students lakh) 2013-14 10 590 91.30 11 590 85.00 12 618 88.00 13 290 25.56 Total 2088 289.86 2014-15 10 590 ' 87.97 11 590 93.59 12 622 94.82 13 300 50.17 Total 2102 326.55

Hence, as per submission of the AR about 2100 students are staying in these 4 hostels and using the mess facilities. As mentioned earlier it was submitted by the AR that construction of hostel no. 10, 11 & 12 was completed on 09.09.2009 whereas hostel no. 13 was constructed by the assessee trust during FYs 2012-13 & 2013-14 relevant to AYs 2013-14 & 2014-15. Hence, apparently construction of hostel no. 13 has been completed during FY 2013-14 relevant to AY 2014-15. Under the circumstances, sudden jump of no. of students and corresponding hostel fee during FY 2012-13 relevant to AY 2013-14 remained unexplained. Further, as per the details of mess charges furnished by the AR about 300 persons only are staying in hostel no. 13 during AY 2013-14 and AY 2014-15. But on perusal of the number of students in the table, it may be seen that number of students, on completion of hostel no. 13, has jumped by more than 500. The findings above can be summarized as under: “a. The return on investment is ranging between 30-40%, which totally unrealistic. An amount of Rs. 16.73 crore has been invested in construction of hostel whereas total receipt of hostel rent from these hostels by 3 co-owner trustees for the period starting from FY 2009-10 to FY 2014-15 is about Rs.30.02 crore, which is quite disproportionate. b. The co-owners are charging room rent from the students which is varying between Rs.25.000- Rs.32.000 p.a. per student (on triple sharing basis) whereas the fees charged by the MMUT for allied services such as wi-fi, electricity, purified

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 59 water, furniture such as table, chair, almirah and bed, security facilities and mess etc. is much lesser amount varying between Rs.18,000- Rs.28,000 p.a. per student. c. No confirmation was furnished from the SBI that the credit of Rs. 7.5 crore was extended without any agreement being signed between the co-owners and the assessee trust and the same was given to the bank as a requirement for extending the loan. Further, it may also be noted that rent of about Rs. 1.60 crore was received by the co-owners directly from the assessee trust which is against the submissions made by the AR that rent was received by the co-owners from the students directly and no rent was received from the trust at any point of time. d. The co-owners have not incurred even a single paisa expenditure on repair and maintenance of the 4 hostels having more than 700 rooms. The submission of the AR that the repair expenditure has been capitalized in the cost of building is not supported by any evidence. It may be noted that during FY 2014-15 relevant to AY 2015-16, the cost incurred on the hostel building remained same at Rs. 16.73 crore as that of AY 2014-15 indicating that no expenditure was incurred on repair during FY 2014-15. e. The assessee has not submitted any completion certificate of the hostel buildings. However, as per the submission the construction of hostel no. 13 was completed during FY 2013- 14 relevant to AY 2014-15. Under the circumstances the sudden jump in gross rent from Rs. 5.17 crore to Rs.6.72 crore from AY 2012-13 to AY 2013-14 remained unexplained. The details of mess charges also indicate that about 300 students were staying in hostel no. 13 during AY 2013-14 which remained unexplained. Further, on perusal of the hostel rent it is noticed that the number of students staying in the 4 hostels has increased by 500 during AY 2013-14 & AY 2014-15 whereas as per the details of mess charges only 300 students are staying in hostel no. 13. f. The co-owners have not maintained any books of account for Santosh Hostel. The P&L a/c and balance sheet for various years of the hostel have been prepared on the basis of entries in the bank accounts of Santosh Hostel, which are mostly in cash. The AR has arbitrarily given explanation in respect of the entries which are not supported by any

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 60 documentary evidence. The assessee trust has not furnished the details of room-wise allotment list of the students, date & amount received from them and whether the amount was received directly or through the trust. In absence of these details the gross rent receipt shown by the co-owners has no veracity. In view of the facts discussed as above, it is apparent that the hostel rent which has been transferred to the co-owners by the assessee trust did not reflect the true picture and the fund has been diverted by the assessee trust in garb of hostel rent for the benefits of the trustees and their relatives in violation of section 13 of the Act.” 63. Santosh Hostel is owned by Sh. Santosh Garg, Smt. Deepika Garg and Smt. Seema Garg. The Santosh Hostel consists of four blocks namely, hostel No. 10, 11, 12 & 13. The total investment as per page no. 691 of the paper book was Rs.16.73 crores under the head purchase of land and construction of building, repair & maintenance. The details of the fees received directly from the students has been reflected at page no. 692 to 721 amounting to approximately 1.60 crores.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 61 authorities have listed the hostel and made physical enquiries too. The revenue authorities also recorded the statements of students and staff. The Assessing Officer has issued questionnaire regarding the Santosh Hostel on 29.08.2016 and also subsequently made enquiries on 15.11.2016. The replies have been filed by the assessee on 25.10.2016 and on 05.12.2016. The ld. AR argued about the points raised by the ld. PCIT along with the documentary evidences.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 62 Reference to DVO is not a routine matter and in the absence of any primary reasons to suspect that the cost of contruction has been altered against the interest of the revenue no action u/s 263 of the Act is invited. Not referring to DVO as suggested by the Investigation Wing in their report cannot make the assessment a subject matter of action u/s 263 of the Act. Regarding the reconciliation of gross deposits, we find that Assessing Officer has raised these issues and similar queries have been raised by the Assessing Officer and no discrepancies suggesting leakage of revenue have been brought out by the Revenue authorities. Regarding the high return of 30% to 40%, we find that the profit varied from 1.9% to 31% and has been offered to tax at maximum marginal rate. Thus, the observation of the ld. PCIT that the profits were 30% to 40% is factually incorrect and since the higher profits were also offered to tax fully the interest of the Revenue is not compromised. Hence, no action u/s 263 of the Act arises on this issue. Further, we find that MMUT has also earned profit of 25 to 30%, there is no exaggeration of profits by the Santosh Hostel. Regarding the confirmation of the loan from SBI, we find that the loan in question was sanctioned for construction of building and not against rent agreement. The loan secured against land and building in question and also collaterally secured against the properties SCF4, Vikas Vihar Ambala City owned by Smt Santosh Garg, LPG Godown village Jandli owned by Vishal Garg and Santosh Garg, HNO 157, Sector 1 Ambala City owned by Sanjeev Garg and Seema Garg, HNO 127 Sector 1, Ambala City owned by Vishal Garg Deepika Garg and also HNo. 155, Sector 1 owned by Seema Garg. This loan was further secured against personal guarantees of Santosh,Seema and Deepika Garg, Vishal Garg and Sanjeev Garg. It was found that no rent was received by the Santosh Hostel from the assessee MMUT. Hence, there was no confirmation from SBI regarding the loan agreement against the rent received from MMUT. Similarly, it was matter of record that the amount of Rs.1.60 crores was received directly from the

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 63 students but not from the trust. The ld. PCIT observation that completion certificate for the hostel building is a passive query which really do not effect the provisions of taxation and especially when the ld. PCIT himself has formed that the profits earned by the hostel are more than the market averages and the receipt on account of rent received from the students have duly offered to tax. As to the query regarding the increase of students from year to year it has been explained that owing to completion of more rooms, more number of students have been admitted to hostel and the rents received from them have duly offered to tax and hence, it cannot be held that the order of the Assessing Officer is erroneous or prejudicial to the interest of the Revenue. We also find that the conclusion of the ld. PCIT regarding the maintenance of account is not on correct fact as no amount was received by Santosh Hostel from the assessee trust, rather the fee was corrected directly by the Santosh Hostel from the students. The Santosh Hostel is found to be maintaining all the records and shown the rental receipts in their books of accounts and offered to tax. No discrepancy was found by the revenue with regard to the receipt of rent. Keeping in view, the entire factum of the events, we hold that no action u/s 263 of the Act is called for on this ground.

Bogus Expenditure Mess Charges: 69. The entire part of the ld. PCIT order on this issue is as under: “1.1 The assessee M/s Maharishi Markandeshwar University Trust (MMUT) has been making huge payments to various mess contractors and other contractors after deducting TDS. The details of total expenses claimed against mess contractors in the last six years are as under: Nature of A.Y. A.Y. A.Y. A.Y A.Y. A.Y. Total Expenses 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Mess 3,46,10,773 3,90,56,625 5,27,12,397 6,33,31,386 8,46,12,784 9,83,53,839 37,26,77,804 Contractors

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 64 The above table shows that the assessee has claimed Rs. 37.26 crores as mess expenses to contractors. The search proceedings and post search enquiries have established that out of this amount of Rs.37.26 crores, Rs. 8.20 crores are bogus expenses. The evidences gathered which lead to this conclusion are enumerated below: 1. The address provided by these concerns in ITRs/Bills/TDS returns was found to be non-genuine. No existence of these parties was found during the search and post-search enquiries. 2. They had claimed the entire TDS deducted by MMUT as refund in their ITRs. 3. These contractors work only for MMUT and none else. 4. The analysis of fresh statements in these cases showed that the entire amount paid by cheque by MMUT has been withdrawn in cash on the same date. 5. The introducers of these persons in the bank are the employees of MMUT. 6. All bank accounts are in the same bank branch in which MMUT group maintains its bank accounts. 7. In the statements recorded, these persons have admitted that the entire show was managed by Sh. Sanjeev Kumar, the pass books were maintained by him, the cheques for withdrawal were handed over to them by Sh. Sanjeev Kumar etc. 8. The assessee in spite of repeated opportunities would not produce any bill/ vouchers etc. in support of these expenses. 1.2 The year wise details of payments to these contractors by assessee MMUT, which were identified as suspicious, are as under: (Amt. in Lakh) Sr. Name of Address PAN A.Y A.Y A.Y A.Y A.Y A.Y Total Remarks No. the 09- 10- 11- 12- 13- 14 persons 10 11 12 13 14 15 1. Dinesh MMU Trust AUNPC8913F - 3 35 37 75 Mess Chand S/o Campus Contractor Prem Lal

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 65

Other Contractors Payments Details: (Amt. in Lakh) Sr. Name of the Address PAN A.Y A.Y A.Y A.Y A.Y A.Y Total Remarks No. persons 09- 10- 11- 12- 13- 14- 10 11 12 13 14 15 1 Anju Kumar Village Barara, BZRPK2319H - 9 7 8 24 -- Mullana 2 Azad Builders MMU Trust AAPFA2076H 12 - “ -- - - 12 -- Campus 3 B.S. 211, AAFFB4872L 43 6 49 -- Construction Harbanspura, Yamuna Naqar 55 6 -- 9 7 8 85

1.3 The investigations, statements etc. in details are as follows:

During the course of search action, the assessee was asked to produce relevant documents, bills & vouchers relating to payment/expenditure in those cases. Inspite of repeated opportunities, the assessee could not produce any supporting document, bills, vouchers etc. during search operation. The relevant extracts of the statement of Sh. Tarsem Garg,

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 66 President of MMU Trust recorded u/s 132 of the I.T. Act, 1961 on 02.11.2014 is reproduced as under: “Q. 13 As per the information obtained during the course of search, Sh. Dinesh Chand S/o Sh. Prem Lai, who is residing at Hostel No. 1, MMU Campus, Mullana, is one of the persons who is providing contractual services and running mess no. 1 in MMU Campus. As per his statement recorded on oath, he has mentioned that he has not been maintaining any books of accounts regarding expenditure incurred for providing contractual services. Further, he has stated to have been staying in the hostel without paying any rent. He is also not declaring any income on the business being run by him. Since, he has not been able to substantiate the genuineness of his business, how can the payments made by the trust be considered as genuine? Please explain. Ans. Mr. Dinesh Chand S/o Prem Lal is running mess no. 1, catering around 200 students. As regard to non- maintenance of books of accounts, we do not have any control over maintenance of books of accounts and payment of taxes by our vendors.” Summons u/s 131 of I.T. Act, 1961 were issued to the above-mentioned persons for further verification. Sh. Rajeev Kumar, Sarwan Singh, Ramesh Chand and M/s Azad Builders were not found at the given address and it has been reported by Sh. Mohammad Salim, Inspector of this office that Sh. Ramesh Chand, Rajeev Kumar and Sarwan Singh have left the given address and nobody knows their present address. The report of Sh. Mohammad Salim, Inspector of this office is as under: “As per your directions I visited the house no. 67, Pooja Vihar, Ambala Cantt and Maharishi Markandeshwar University, Mulana for service of summons u/s 131 of the Income Tax Act, 1961 in respect of Sh. Rajiv Kumar, Sharwan Kumar and Ramesh Kumar. It was noticed from Pooja Vihar that no house exists at 67 Pooja Vihar. And all the three persons were not present in MMU Mulana. It was revealed from local enquiries that these persons have gone to some unknown destination.”

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 67 The address of M/s Azad Builders, H.No. 134, Sector-17, HUDA, Jagadhari was found to be not genuine. The premise was found to be occupied by one Sh. Ravinder Mohan. The reply of Sh. Ravinder Mohan is as under: “It is to certify that I Ravinder Mohan S/o Sh. Joginder Singh is the sole owner of I myself constructed this house and I don’t know the firm/ person name of Azad Builders.” In this regard, the report of Sh. Mohammed Salim, Inspector is also as under- "As per your direction I visited house no. 134, Sector-17, HUDA, Jagadhari to serve the summons 131 of the Income Tax Act, 1961 in respect M/s Azad Builders. It was noticed that Sh. Ravinder Rathor is residing in the given address who is serving as XEN in the Panchayati Raj Department. He showed the allotment letter of the plot by HUDA in his name and he given in written that no Azad Builder ever exist at his house.” Notice was issued to M/s B.S. Construction at the given address 211, Harbanspura, Yamuna Nagar vide letter no. 2494 dated 19.12.2014. A reply was received explaining the transactions with MMU Trust on 19.01.2015 by post. On perusal of the reply, it was found that M/s B.S. Construction has not submitted any bills/vouchers regarding the payments received from MMU Trust. To further investigate the issue, the Inspector of this office, Sh. Mohammad Salim was sent to the above-mentioned premises. His report is as “As per your directions I visited house no. 211 Harbanspura, Yamuna Nagar to serve the summon u/s 131 of the Income Tax Act, 1961 in respect M/s B.S. Construction. The firm or its partners were not present at the given address. It was revealed from local enquiries that at present no such firm exists at this address.” From the perusal of the above report of Inspector regarding the genuineness and existence of the above-mentioned persons-Sh. Rajeev Kumar, Sarwan Singh, Ramesh Chand and Azad Builders and M/s B.S. Construction, it is evident that the above-mentioned persons are not existing and the transactions between MMUT and the above-mentioned persons are not genuine. So, the payments made to them by MMUT are bogus and need to be disallowed.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 68

Out of the above list, only 3 persons namely Jit Singh, Dinesh Chand, Jagga Singh attended this office in response to the summons issued. Their statements have been recorded u/s 131 of the I.T. Act, 1961 on 30.12.2014. 1.5 From the statements of these persons, it is concluded that these are labourers themselves. The bank statements and sworn statements of these labourers reveal that the bank accounts were opened by the employees of MMU Trust. Mr. Arora and Sh. J.S. Sharma (employees of MMU Trust) are the introducers for their bank accounts. All the above labourers have their bank account in OBC, MMU Campus, Mullana, which is the same bank in which MMU Trust group maintains all its bank accounts. From the bank statements, it is noticed that assessee has made payments by cheque and immediately thereafter cash is withdrawn on the same date. In the statements they have accepted that Sh. Sanjeev Garg maintained their bank book and whenever they needed money then Sh. Sanjeev Garg gave the cheque for withdrawal of money from bank. From the above facts, it is clear that all the financial transactions were managed and controlled by the MMU Trust group only. The details of entries in bank accounts of Sh. Jagga Singh and Sh. Jeet Singh are enclosed as Annexure-Al and Annexure A2. The perusal of the above bank account clearly shows that there are osits and cash withdrawals regularly. There are no cheque payments inst the expenditure claimed by these contractors. The same pattern is Iso shown in the bank account of Sh. Rajeev Kumar, Sarwan Singh, Ramesh Chand, M/s Azad Builders and M/s B.S. Construction. The above- mentioned contractors also accepted in their statements that they are doing the work under the directions of Sh. Sanjeev Garg, secretary in trust and MMU Trust Management. In fact, they were merely earning Rs. 8,000/- per month from this job. They have also failed to give any reasons for cash withdrawals immediately after the deposits. It is also not clear that when all the payments have been made to vendors on monthly basis, then what is the necessity of cash withdrawals on day to day basis. 1.7 It is noticed that these labourers have filed their Income Tax Return and have claimed the tax deducted at source (TDS) by the assessee group as refund. It is also seen

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 69 from the 26AS that these persons are working for assessee group MMU Trust only. At the time of recording statements u/s 131 of I.T. Act, 1961, it was revealed that the above labourers didn’t know about their income details, they also didn’t know that how much income-they were showing in their ITRs. They have also failed to recognize their address mentioned in their ITRs. From their statements, it is clear that the address in their ITRs relates to Sh. Harish Bansal, ex-employee of MMU Trust. Further, all these persons resided at the business premises of MMU Trust. From the above facts, it is clear that the claim of contractual expenditure of Rs. 8.20 Cr. (7.35 Cr. + 0.85 Cr.) out of Rs. 37.26 Cr. (total payments of mess expenses) by assessee MMU Trust is bogus.” 70. The ld. PCIT further held that payment of Rs. 735 lakh to 6 mess contractors and Rs. 85 lakh to 3 construction contractors were identified as bogus/inflated by the Investigation Directorate for the reasons mentioned in the notice.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 70 submit that genuineness of such expenses cannot be doubted. The AR has not submitted any reply in respect of evidences gathered and conclusion drawn which are listed as 1 to 8 in para no. 1.1 of the show cause notice. In answer to question no. 13 Jeet Singh has submitted that he has no idea about the return filed. In answer to question no. 15 he stated that he used- to give the list of expenditure to Sh. Sanjeev Garg regarding the required expenditure and got the money in his bank account. In answer to question no. 16 he has submitted that he did not maintain any books of account. In answer to question no. 21 and 22 he submitted that the cheque book is maintained by Sh. Sanjeev Garg which he used to sign and withdraw the money from the bank account. In answer to question no. 26 he stated that he did not know the address 67, Pooja Vihar mentioned in the return. Regarding his earning he stated that his income is around 5-7 thousand per month. Jeet Singh had no idea regarding introducer of the bank account and filing of return by Sh. Harish Bansal.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 71 the bills are signed in English by Sarwan Singh, which create doubt about genuineness of such bills.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 72 78. Azad Builders: Azad Builders was not found at the address given by the Investigation Directorate. However, during the assessment proceedings, the AO has not made any enquiry in this regard.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 73 82. The ld. PCIT held that the AO has not made any enquiry in respect of the above issue. We hereby hold that any excess payment by Bhagwati Gas Agency to Sh. Sanjeev Garg, Sh. Vishal Garg and Smt. Seema Garg is a subject matter of proceedings in the case of Bhagwati Gas Agency. Further, it is to be seen whether the amounts received from Bhagwati Gas Agency have been duly offered to tax or not has to be examined in the case of the receipents only.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 74 87. Dinesh Chand S/o Sh Prem Lai was working as a mess contractor since 2012 in mess no.1 (after death of Sarwan Singh Mess Contrator who died in 2012) serving approximately 233 students as of 31.10.2014. Dinesh Chand is neither related to any of the trustees or any of their relative nor any financial transaction between them had ever taken place.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 75 related to any of the trustee or any of their relative nor any financial transaction between them had ever taken place.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 76 confirmed that he purchased vegetables from the vendor Kuldeep Singh at Barara and purchased the kirana from Jagat Singh at Mullana and made the payment to him month wise. In reply to Q No.21 he has confirmed that he went to Sanjeev Garg and got the cheque from him and submit the cheque to bank and withdraw the money. In reply to QNo.22 he states Sanjeev Garg maintain the cheque book of MMU. In reply to Q No 27 of statement, he has confirmed that he withdrew the money for payment to various vendors. In reply to Q No 29 of statement, he answered that his income from business is 5000-7000 per month. There is not much income from this business. That every assessee says that he is not having much income. However, he is an Income Tax assessee and his income tax return filed is attached at page 365-370. Income declared in AY 12-13 was Rs. 1,48,879/-, AY 13- 14 Rs. 1,08,440/-, 2014-15 Rs. 2,19,908/-. In reply to Q.No 31 of statement, he has admitted that he was filing his income tax return regularly through advocate Sh. Harish Bansal.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 77 96. Ramesh Chand son of Kanshi Ram permanent resident of village Nangda Tehsil and District Una (Himachal Pardesh) having PAN: AKNPC8883C

Late Sarwan Singh son of Hakam Ram VPO Dehlan Tehsil and District Una (Himachal Pardesh) having PAN: BHRPS7345M. With reference to payment to Mr Sarwan Singh, it is submitted that he was working as mess contractor during AY 2009-10 to AY 2012-13 in mess no 1 of trust which was serving approximately 243 students of Hostel no.1. However, unfortunately he died during the AY 2012-13 and after that the same mess had given to Mr Dinesh Chand.

As the contractor had died in AY 2012-13 as such there is no question of him appeared before Investigation Wing on 1-10-2014 and thereafter. The complete bills, attendance sheet of Mess were filed to PCIT which were ignored. The learned PCIT has observed that since Sarwan Singh has

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 78 signed in English which creates doubt about genuineness of the bill such an imagination of PCIT is totally unjustified and cannot be a ground for 263. PAN form was with department and before doubting the fact can be subject to verification. It is totally uncalled for.

Rajeev Kumar son of Manga Ram resident of village Lawana PO Alipur District Yamuna Nagar having PAN: BBOPK7561C

Rajeev Kumar, was working as contractor for construction and earth filling work during AY 2009-10 to AY 2012-13 at various sites of the MMU trust. He had supplied building material including core sand, soil and other material etc. and also given service of earth filling for building construction in MMU trust.

Jagga Singh is a mess contractor of mess no. 7 which was serving approxiamately 432 students of Hostel no. 7 of the trust as of 31.10.2014. Jagga Singh is neither related to any of the trustee or any of their relative nor any financial transaction between them had ever taken place.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 79 101. That during the course of post search inquiries by then DDIT, his statement was recorded on 30-12-2014 (copy attached at page 391-398). In the statement so recorded he has confirmed that he is working as Mess contractor, giving number of students being served by him, source of procurement of ration and vegetables, milk, gas etc required for running of Mess, name of workers, salary paid by them to their workers. There is nothing unusual in their statement if read as a whole. The learned PCIT has tried to pick a word or a line from a sentence and tried to create a hype around that word. It is a settled law that a document is to be read as a whole.

That the key highlights of his statement is as detailed hereunder:

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 80 and in reply of QNo.9 monthly salary paid to these workers were given which was stated to be approximately Rs. 39,500/- per month. In reply to Q No. 15 he confirmed that Mess charges Rs. 1700/- per month per student for providing per day meals w.e.f. July 2014 and that before that Mess Charges were Rs. 1500/- per month per student. He has also stated that he used to submit details of his requirement of money for monthly expenditure to MMU and he later on received such money from MMU in bank via cheque from time to time. In reply to Q 17, he states that initially the payment for milk purchase is being made by MMU and that LPG was purchased directly by him. In reply to QNo. 18 he states that he served 471 Girls student in Mess No. 7. In reply to QNo. 21 he has confirmed that he purchased vegetables from the vendor Kuldeep Singh at Barara and made the payment to him month wise and purchase the kirana from Jagga Singh at Mullana and made the payment to him month wise. In reply to QNo.22 he has confirmed that he went to Sanjeev Garg and got the cheque from him and submit the cheque to bank and later withdraw the money. In reply to QNo.23 he states Sanjeev Garg maintain the cheque book of MMU. In reply to Q No 31 of statement, he answered that his income from business is 5000-7000 per month and that there is not much income from this business. That every assessee says that he is not having much income. However, he is an Income Tax assessee & Income declared in AY 10-11 was Rs. 5,44,776/-, AY 11-12 Rs. 3,54,722/-, AY 12-13 Rs. 2,91,398/-, AY 13-14 Rs. 3,08,039/-, 2014- 15 Rs. 3,08,964/-. In reply to QNo. 29 of statement, he has admitted that he has received the amount through cheque from trust and has made withdrawal from his bank for payment to vendors of vegetables and cereals etc (kiryana). In reply to QNo.30 of statement, he has admitted that he had received the tender for serving mess services in trust without any reference and he was continuing the same. In reply to Q.No 24 & 31 of statement, he has

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 81 admitted that Sh. Harish Bansal, Advocate has filed his Income Tax Return.

Anuj Kumar son of Suresh Kumar resident of Balmiki Basti village Barara District Ambala having PAN: BZRPK2319H

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 82 Azad Builders, H.No. 134, Sector-17, HUDA, Jagadhari - 135003, having PAN AAPFA2076H assessed at Ward-1/Ambala

With reference to M/s Azad Builders (PAN AAPF2076H & assessed with ITO Ward-1, Ambala) having Regd. Office at H.No. 134, Sector-17, HUDA, it is submitted that Azad Builders is a Partnership firm and Mr. Charan Singh S/o Sh. Vikram Singh R/o Chander Shekhar Azad Gali, Delhi and Sh. Rakesh Kumar S/o Sh. Ram Prasad R/o Village Budion, Tehsil Barara, Distt. Ambala are the two partners in the firm. The said firm was providing construction service to the MMU trust during AY 2009-10 and had constructed the building of University block and Engineering block during such period. That none of the partner of the firm are relative of any of the trustees or firm /partners have any transactions with the trustees.

With reference to M/s B.S. Construction (PAN AAFFB4872L & assessed with ITO Ward-2, Yamunanagar) having Regd. Office at 211, Harbanspura, Near ITI, Yamuna Nagar, it is submitted that it is a Partnership firm and Mr. Sudershan Kumar R/o B6/1504, Model Town Colony, Near ITI, Yamuna Nagar and Mr. Balraj Sethi S/o Sh. Bansi Lai Sethi R/o 211, Ward No. 22, Harbanspura, Yamuna Nagar are the two partners in the firm. The said firm was providing construction service to the MMU trust from AY 2009-10

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 83 and had worked in the construction of the building of University block, School Block and Engineering block of MMU Trust during the period of AY 2009-10 and AY 2010-11. However, such firm was not related to any of the trustees and neither any financial transaction was entered with the firm by any of the trustees.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 84 lines it was mentioned that in Pooja Vihar no such house exists at 67, Pooja Vihar. A copy of Aadhar Card of Harish Bansal 67, Pooja Vihar submitted at page 582 proves contrary to the observation of the revenue authorities. In fact, Advocate Harish Bansal who happened to be an ex- employee of MMU and left job on 02-4-2011 copy at page 583. In fact, these contractors have filed their IT returns of their own and Trust has no control and connection in filing their tax returns. It can be said that having filed the returns the claim of refund of TDS is not in control of MMUT. The scale of these petty contractors is not that large to cater different locations at same time. The contractors have explained that how the withdrawn cash is used to make payments of their outstanding salary, grocery & vegetable bills, hence, it cannot be said that the cash on withdrawal has been given back to the assessee trust. The provision of the food to students cannot be disputed and it cannot be held that the amounts received by the contractors have been withdrawn and paid to the assessee trust. Accounts are held in the campus branch of OBC/SBI catering to MMU employees, students, vendors only as such introduced by these persons. The introduction of the contractors to the bank authorities to open the bank accounts cannot be treated as a device to facilitate siphoning of money. In the statement nowhere it was stated that the business of Mess contractors were managed by Sanjeev Garg, in fact Mess operations on behalf of MMUT is managed and controlled by Sanjeev Garg.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 85 been duly filed before the Assessing Officer during the assessment proceedings.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 86 117. Keeping in view, the submissions, records, affidavits, statements recorded, we hereby hold that the Assessing Officer has well appreciated the evidence on record properly and also the ld. PCIT has not brought anything on record to prove siphoning of money from the trust by booking bogus expenditure in the form of mess charges and payments to contractors. Hence, no action u/s 263 of the Act is called for on this ground.

Pledging of FDRs- benefit to Inderpal Garg

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 87 India in this respect is attached for your kind perusal at page 4. 1.3 With reference to your observation of source of deposit on 1-3-2016 amounting Rs. 2,00,00,000/- and Rs. 1,83,00,000/- it is submitted that amount in question was deposited in AY 2016-17 out of loan received back, advanced to Proview Estate Private Limited. A copy of loan account advanced to Proview Estates Private Limited is attached at page 1-3……” 119. It was held that Sh. Inder Pal Garg had raised a bank loan of Rs. 3,50,00,000/- from the Bank of India against 3rd party guarantee of bank FDR owned by the assessee trust. The amount in question was advanced to Proview Estates Private Limited as unsecured loan by Sh. Inder Pal Garg. The major portion of loan has been re-paid on 01.03.2016 and the OD account has been closed on 13.07.2016. Sh. Inder Pal Garg is the founder trustee of M/s M.M. University Trust. Hence, it is a clear-cut case of misuse of trust fund to raise loans for personal use without any interest, security or compensation. It was held that the assessee has violated the provisions of section 13 (1) (c) (ii), read with section 13(2)(b) and 13(3)(cc) in as much as fixed deposits in name of the assessee trust were pledged as security with bank enabling Sh. Inder Pal Garg, one of the founder trustees, to avail loan without adequate security and consideration, thus mis-utilizing funds of the Trust. Hence, the ld. PCIT assumed that the assessee has been wrongly allowed exemption u/s 11 and since the provisions of section 13(1)(c)(ii) read with section 13(3) have not been followed, the trust would lose its exemption in entirety, with result that assessment of its income was required to be made according to provisions of the Act.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 88 assessee that since other trustees have given their personal guarantees or mortgaged their properties to the bank for raising of loans by the assessee trustee, Sh. Inder Pal Garg can be allowed to use the property of the trust and derive benefit from it. The assessee trust has also not charged any compensation or guarantee commission for making available the FDRs belonging to it as third-party guarantee for use of the trustee, Sh. Inder Pal Garg. In this regard he placed reliance on the following judgments: a. Society for Integrated Development in Urban and Rural Areas (SIDUR) v. DCIT [2004] 90 ITD 493 (HYD.)

“Section 13 of the Income-tax Act, 1961 - Charitable or religious trust - Denial of exemption - Assessment year 1997-98 - Assessee was a registered society under Act - It claimed exemption under section 11 - It was found that secretary of society and founder-executive secretary, who were wife and j husband, had used FDRs of society for obtaining loans other than for society itself without compensation to society - Assessing Officer denied exemption on ground of violation of provisions of section 13(1)(c) and made assessment taxing all receipts of concerned year - On appeal, Commissioner (Appeals) confirmed action of Assessing Officer - Whether since secretary and executive secretary were not only founder- members of society but also were executive committee members and secretary herself had signed and pledged FDRs of society, they fell under class of persons specified in section 13(3) - Held, yes - Whether, therefore, provisions of section 13(l)(c) read with sections 13(2)(b) and 13(2)(cc) were attracted - Held, yes - Whether assessee-society had violated those provisions and, consequently, was not entitled to exemption under section 11- Held, yes

Section 4, read with section 2(24) of the Income-tax Act, 1961 - Income - Chargeable as - Assessment year 1997-98 - On violation of section 13(l)(c), Revenue authorities denied exemption to assessee society given

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 89 under section 11 and charged entire receipts of voluntary contribution to tax - Whether though by virtue of section 2(24)(iia) voluntary contributions are income, but that by itself does not entitle tax authorities to ignore all other well-settled principles of taxation and general law and to levy tax on gross receipts without considering claim for deductions - Held, yes - Whether only surplus or profit can be brought to tax and same has to be computed in manner laid down in Act applying normal principles of accountancy and taxation laws - Held, yes”

b. Action for Welfare & Awakening in Rural Environment (AWARE) v. DCIT [2003] 130 Taxman 82 (AP) c. Ram Bhawan Dharamshala v. State of Rajasthan [2002] 124 Taxman 149 (Raj.) d. Agappa Child Centre [1997] 226 ITR 211 (Ker.) e. Director of Income-tax (Exemption) v. Charanjiv Charitable Trust [2014] 43 taxmann.com 300 (Delhi)

“Section 13, read with section 11, of the Income-tax Act, 1961 -Charitable or religious trust - Denial of exemption (Benefit to prohibited persons - Sub-section (l)(c)) - Assessment years 2006-07 and 2007-08 -Whether where in case of a charitable trust, it is found that provisions of section 13(1)(c)(ii) read with section 13(3) are not followed, trust would lose its exemption in entirety, with result that assessment of its income will be made according to provisions of Act - Held, yes”

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 90 i.e. Maharishi Markandeshwar University Trust. The amount in question was advanced to Proview Estates Private Limited as unsecured loan. 1.1 It is also relevant to mention that interest charged on bank loan is the personal liability of Inder Pal Garg. However, the interest paid to Bank of India against this loan was not claimed in Income Tax return against any other income because as per the understanding with the concerned company the entire amount paid to Bank is to be reimbursed by them as such the same stands recovered from such company with no profit / loss on account of this transaction. 1.2 Further, interest earned against FDR is not the Income of Inder Pal Garg as the same is related to Maharishi Markandeshwar University Trust and is part of their Income of respective year. 2. With reference to your observation of source of deposit on 1-3-2016 amounting Rs.2,00,00,000/- and Rs. 1,83,00,000/- it is submitted that amount in question was deposited in AY 2016-17 out of loan received back, advanced to Proview Estate Private Limited.” 122. Thus, we find that this issue has been duly inquired by the Assessing Officer during the assessment proceedings.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 91 2015-16 respectively, given as guarantee by the trust, was shown as income of the assessee trust.

Section 11 not to apply in certain cases. 126. Section 13(1)(c) reads as under: “Sec.13. (1) Nothing contained in section 1133[or section 12] shall operate so as to exclude from the total income of the previous year of the person in receipt thereof— (a) any part of the 34income from the property held under a trust for private religious purposes which does not ensure for the benefit of the public; (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste; (bb) [***] (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof— (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 92 the trust or the rules governing the institution, any part of such income ensures, or (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit36 of any person referred to in sub-section (3) : Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution: Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub- section (3) in so far as such use or application relates to any period before the 1st day of June, 1970; [(d) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year— (i) any funds38 of the trust or institution are invested or deposited after the 28th day of February, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11; or (ii) any funds of the trust or institution invested or deposited38 before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983; or

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 93 [(iii) any shares in a company, other than— (A) shares in a public sector company ; (B) shares prescribed as a form or mode of investment under clause (xii) of sub-section (5) of section 11, are held by the trust or institution after the 30th day of November, 1983:] Provided that nothing in this clause shall apply in relation to— (i) any assets held by the trust or institution where such assets form part of the corpus of the trust or institution as on the 1st day of June, 1973 [***]; [(ia) any accretion to the shares, forming part of the corpus mentioned in clause (i), by way of bonus shares allotted to the trust or institution;] (ii) any assets (being debentures issued by, or on behalf of, any company or corporation) acquired by the trust or institution before the 1st day of March, 1983; [(iia) any asset, not being an investment or deposit in any of the forms or modes specified in sub-section (5) of section 11, where such asset is not held by the trust or institution, otherwise than in any of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, [1993], whichever is later;] (iii) any funds representing the profits and gains of business, being profits and gains of any previous year relevant to the assessment year commencing on the 1st day of April, 1984 or any subsequent assessment year. Explanation.—Where the trust or institution has any other income in addition to profits and gains of business, the provisions of clause (iii) of this proviso shall not apply unless the trust or institution maintains separate books of account in respect of such business.]

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 94 [Explanation.—For the purposes of sub-clause (ii) of clause (c), in determining whether any part of the income or any property of any trust or institution is during the previous year used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to this section by section 7 [other than sub-clause (ii) of clause (a) thereof] of the Finance Act, 1972.] (2) Without prejudice to the generality of the provisions of clause (c) [and clause (d)] of sub-section (1), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3),— (a) if any part of the income or property of the trust or institution is, or continues to be, lent to any person referred to in sub-section (3) for any period during the previous year without either adequate security or adequate interest or both; (b) if any land, building or other property of the trust or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation; (c) if any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services; (d) if the services of the trust or institution are made available to any person referred to in sub-section (3) during the previous year without adequate remuneration or other compensation; (e) if any share, security or other property is purchased by or on behalf of the trust or institution from any person referred to in sub-section (3) during the previous year for consideration which is more than adequate;

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 95

(f) if any share, security or other property is sold by or on behalf of the trust or institution to any person referred to in sub-section (3) during the previous year for consideration which is less than adequate; [(g) if any income or property of the trust or institution is diverted during the previous year in favour of any person referred to in sub-section (3): Provided that this clause shall not apply where the income, or the value of the property or, as the case may be, the aggregate of the income and the value of the property, so diverted does not exceed one thousand rupees;] (h) if any funds of the trust or institution are, or continue to remain, invested for any period during the previous year (not being a period before the 1st day of January, 1971), in any concern in which any person referred to in sub-section (3) has a substantial interest. (3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely:— (a) the author of the trust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution, [that is to say, any person whose total contribution up to the end of the relevant previous year exceeds [fifty] thousand rupees]; (c) where such author, founder or person is a Hindu undivided family, a member of the family; [(cc) any trustee of the trust or manager (by whatever name called) of the institution;] (d) any relative of any such author, founder, person, [member, trustee or manager] as aforesaid; (e) any concern in which any of the persons referred to in clauses (a), (b), (c) [,(cc)] and (d) has a substantial interest. (4) Notwithstanding anything contained in clause (c) of sub- section (1) [but without prejudice to the provisions contained in clause (d) of that sub-section], in a case where the aggregate of the funds of the trust or institution invested in a concern in which any person referred to in sub-

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 96 section (3) has a substantial interest, does not exceed five per cent of the capital of that concern, the exemption under section 11 [or section 12] shall not be denied in relation to any income other than the income arising to the trust or the institution from such investment, by reason only that the [funds] of the trust or the institution have been invested in a concern in which such person has a substantial interest. [(5) Notwithstanding anything contained in clause (d) of sub-section (1), where any assets (being debentures issued by, or on behalf of, any company or corporation) are acquired by the trust or institution after the 28th day of February, 1983 but before the 25th day of July, 1991, the exemption under section 11 or section 12 shall not be denied in relation to any income other than the income arising to the trust or the institution from such assets, by reason only that the funds of the trust or the institution have been invested in such assets if such funds do not continue to remain so invested in such assets after the 31st day of March, 1992.] [(6) Notwithstanding anything contained in sub-section (1) or sub-section (2), but without prejudice to the provisions contained in sub-section (2) of section 12, in the case of a charitable or religious trust running an educational institution or a medical institution or a hospital, the exemption under section 11 or section 12 shall not be denied in relation to any income, other than the income referred to in sub-section (2) of section 12, by reason only that such trust has provided educational or medical facilities to persons referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3).] [(7) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof, any anonymous donation referred to in section 115BBC on which tax is payable in accordance with the provisions of that section.] [(8) Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso* to clause (15) of section 2

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 97 become applicable in the case of such person in the said previous year.] [(9) Nothing contained in sub-section (2) of section 11 shall operate so as to exclude any income from the total income of the previous year of a person in receipt thereof, if— (i) the statement referred to in clause (a) of the said sub- section in respect of such income is not furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year; or (ii) the return of income for the previous year is not furnished by such person on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the said previous year.] [Explanation 1.—For the purposes of sections 11, 12, 12A and this section, "trust" includes any other legal obligation and for the purposes of this section "relative", in relation to an individual, means— (i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother or sister of the spouse of the individual; (iv) any lineal ascendant or descendant of the individual; (v) any lineal ascendant or descendant of the spouse of the individual; (vi) spouse of a person referred to in sub-clause (ii), sub- clause (iii), sub-clause (iv) or sub-clause (v); (vii) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.] Explanation 2.—A trust or institution created or established for the benefit of Scheduled Castes, backward classes, Scheduled Tribes or women and children shall not be deemed to be a trust or institution created or established for the benefit of a religious community or caste within the meaning of clause (b) of sub-section (1). Explanation 3.—For the purposes of this section, a person shall be deemed to have a substantial interest in a concern,—

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 98 (i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than twenty per cent of the voting power are, at any time during the previous year, owned beneficially by such person or partly by such person and partly by one or more of the other persons referred to in sub-section (3); (ii) in the case of any other concern, if such person is entitled, or such person and one or more of the other persons referred to in sub-section (3) are entitled in the aggregate, at any time during the previous year, to not less than twenty per cent of the profits of such concern.]” 127. In the instant case, we find that the trustees have given personal guarantee for raising loans from the banks and also have mortgaged their residential property for the purpose. The loan received of Rs.350,00,000/- against the pledging of FDRs has been repaid on 01.03.2016 and the OD account has been closed on 13.07.2016. The interest accrued on the FDRs of Rs.82.96 lakhs has been duly received by the assessee trust itself and duly shown as income. Thus, no benefit was accrued to the trustee nor any loss was incurred by the assessee trust. The trustee could be deemed to have been benefited if any loss of interest to the trust in the rate of FDRs or any forfeiture of FDRs in default of the loan has taken place. None of these events has happened in this transaction. Hence, keeping in view, the provisions of Section 13(1)(c) and 13(1)(d) of the Act and read with Section 13(2)(b), 13(2)(c), we do not find any loss of revenue in this transaction. Hence, the order of the Assessing Officer cannot be said to be erroneous so far as it is prejudicial to the interest of the Revenue. We have also gone through the case laws and its applicability to the facts of this case. � Society for Integrated Development in Urban and Rural Areas (SIDUR) Vs DCIT (2004) 90 ITD 493 (Hyd.)- In this case the FDRs did not earn interest, and have been encashed against the repayment of loan. Hence, not applicable to the instant case.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 99 � Action for Welfare & Awakening in Rural Environment (AWARE) Vs DCIT (2003) 130 Taxman 82 (AP)- In this case loan repaid out of funds of trust. Hence, not applicable to the instant case. � Ram Bhawan Dharamshala Vs State of Rajasthan (2002) 124 Taxman 149 (Raj.)- In this case profit of the trust was let to trustee at concessional rent. Hence, not applicable to the instant case. � Agappa Child Centre (1997) 226 ITR 211 (Ker.)- In this case, the asset of the trust is being utilized by the trustee without any consideration. Hence, not applicable to the instant case. � Director of Income-tax (Exemption) Vs Charanjiv Charitable Trust (2014) 43 Taxman 300 (Del.)-In this case it held that the Assessing Officer noted that assessee in furtherance of its objects to open a school, entered into agreements with APIL for purchase of land and paid 95 per cent of price as advance money - However, even after lapse of more than one year from date of agreement to sell, sale was not completed and no registered document was executed - Assessing Officer took a view that real motive of assessee was to advance its surplus monies to APIL without charging any interest and since APIL was a prohibited person within meaning of section 13(3), provisions of section 13(1)(c)(ii) were attracted with result that assessee could not be allowed exemption under section 11 - Whether, on facts, and in absence of any explanation as to why sale agreement was cancelled after a long time of paying advance money, impugned finding recorded by Assessing Officer was to be upheld. Hence, not applicable to the instant case. 128. Hence, keeping in view, the enquiries conducted by the Assessing Officer from the banks which shows full application of mind on the part of the Assessing Officer , the allegation of the ld. PCIT, the reply of the AR and the arguments of the ld. DR, provisions of the Act in the judgments

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 100 quoted above, we hereby hold that in the absence of any loss to the trust or benefit to the trustee or loss of revenue, the order of the ld. PCIT cannot be upheld on this ground.

Tarsem Garg 129. In ITA No. 2479/Del/2019, the assessee has raised following grounds of appeal: ”That the PCIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 2. That the learned PCIT has erred in alleging that the contractual receipts of Rs.29,71,865/- disclosed under head "Profits or gains from Business and Profession" was liable to be taxed under head Income from other sources and forming his opinion on the basis of suspicions, surmises and conjectures. 3. That the learned PCIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course of search u/s 132 conducted on 31-10-2014 in the present case. 4. That the learned PCIT has erred in stating that the AO did not carry out any enquiry in respect of issues mentioned in the showcause notice u/s 263 ignoring the detailed questionnaires issued during the course of assessment proceedings.”

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 101 2.1 That the learned PCIT has erred in alleging that the rental receipts of Rs. 8,80,000/- were an arrangement devised by the assessee for capital accretion and forming his opinion on the basis of suspicions, surmises and conjectures. 2.2 That the learned PCIT has erred in law and on facts in observing that the Annual Letting Value amounting Rs. 8,80,000/- of the property situated at House no. 526, Sector- 16, Chandigarh is to be taxed under head income from other sources. 3.1 That the learned PCIT has erred in alleging that the receipts of Rs. 9,50,000/- disclosed under head "Income from other sources" were liable to be taxed as income from undisclosed sources. 3.2 That the learned PCIT has erred in invoking revisionary powers u/s 263 in relation to the service receipts of Rs. 9,50,000/ 1gnoring that the said receipts had already been taxed at the maximum marginal rate and as such no prejudice was caused to the revenue. 4. That the learned PCIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course of search u/s 132 conducted on 31-10-2014 in the present case. 5. That the learned PCIT has erred in stating that the AO did not carry out any enquiry in respect of issues mentioned in the show-cause notice u/s 263 ignoring the questionnaires issued during the course of assessment proceedings.” 131. In ITA No. 2481/Del/2019, the assessee has raised following grounds of appeal: “That the PCIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 2.1 That the learned PCIT has erred in alleging that the rental receipts of Rs. 9,60,000/- were an arrangement devised by the assessee for capital accretion and forming his opinion on the basis of suspicions, surmises and conjectures.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 102

2.2 That the learned PCIT has erred in law and on facts in observing that the Annual Letting Value amounting Rs. 9,60,000/- of the property situated at House no. 526, Sector- 16, Chandigarh is to be taxed under head income from other sources. 3.1 That the learned PCIT has erred in alleging that the receipts of Rs. 9,00,000/- disclosed under head "Income from other sources" were liable to be taxed as income from undisclosed sources u/s 69A r.w. sec 115BBE. 3.2 That the learned PCIT has erred in invoking revisionary powers u/s 263 in relation to the service receipts of Rs. 9,00,000/- ignoring that the said receipts had already been taxed at the maximum marginal rate and as such no prejudice was caused to the revenue. 4. That the learned PCIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course of search u/s 132 conducted on 31-10-2014 in the present case. 5. That the learned PCIT has erred in stating that the AO did not carry out any enquiry in respect of issues mentioned in the show-cause notice u/s 263 ignoring the questionnaires issued during the course of assessment proceedings.” 132. In ITA No. 2482/Del/2019, the assessee has raised following grounds of appeal: “That the PCIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 2.1 That the learned PCIT has erred in alleging that the rental receipts of Rs. 9,60,000/- were an arrangement devised by the assessee for capital accretion and forming his opinion on the basis of suspicions, surmises and conjectures. 2.2 That the learned PCIT has erred in law and on facts in observing that the Annual Letting Value amounting Rs. 9,60,000/- of the property situated at House no. 526, Sector-

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 103 16, Chandigarh is to be taxed under head income from other sources. 3. That the learned PCIT has erred in alleging that the receipts of Rs. 1,79,77,600/- disclosed under head "Profit or gains from Business and Profession" were liable to be taxed as income from undisclosed sources u/s 69A r.w. sec 115BBE without allowing deduction of expenses of Rs.28,94,472/-. 4. That the learned PCIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course of search u/s 132 conducted on 31-10-2014 in the present case. 5. That the learned PCIT has erred in stating that the AO did not carry out any enquiry in respect of issues mentioned in the show- cause notice u/s 263 ignoring the questionnaires issued during the course of assessment proceedings.” 133. In ITA No. 2483/Del/2019, the assessee has raised following grounds of appeal: “That the PCIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 2.1 That the learned PCIT has erred in alleging that the rental receipts of Rs. 9,60,000/- were an arrangement devised by the assessee for capital accretion and forming his opinion on the basis of suspicions, surmises and conjectures. 2.2 That the learned PCIT has erred in law and on facts in observing that the Annual Letting Value amounting Rs. 9,60,000/- of the property situated at House no. 526, Sector- 16, Chandigarh is to be taxed under head income from other sources. 3.1 That the learned PCIT has erred in alleging that the receipts of Rs. 33,50,000/- disclosed under head "Income from other sources" were liable to be taxed as income from undisclosed sources u/s 69A r.w. sec 115BBE.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 104 3.2 That the learned PCIT has erred in invoking revisionary powers u/s 263 in relation to the service receipts of Rs. 33,50,000/- ignoring that the said receipts had already been taxed at the maximum marginal rate and as such no prejudice was caused to the revenue. 4. That the learned PCIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course of search u/s 132 conducted on 31-10-2014 in the present case. 5. That the learned PCIT has erred in stating that the AO did not carry out any enquiry in respect of issues mentioned in the show-cause notice u/s 263 ignoring the questionnaires issued during the course of assessment proceedings.” S. No. Assessment Year Effective Grounds 1. 2011-12 Rs.29,71,865/- to be assessed as business income or IOS 2. 2012-13 Rental Receipt of Rs.880,000/- Rs.950,000/- business income or IOS 3. 2013-14 Rental receipts of Rs.960,000/- Rs.900,000/- business income or IOS 69A/115BBE 4. 2014-15 Rental receipts of Rs.960,000/- Rs.179,77,600/- business income or IOS 69A/115BBE and deduction of Rs.28,94,472/-

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 105 5. 2015-16 Rental receipt of Rs.960,000/- Consultancy of Rs.33,50,000/- business income or IOS 69A/115BBE

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 106 136. Before us, during the hearing, the ld. AR has repeated the arguments taken before the Assessing Officer and the ld. PCIT. The ld. DR submitted written arguments and judgments which were common for the appeals in the case of Sh. Santosh Garg (mentioned above in this order) and for that of the assessee.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 107 satisfied himself regarding the deemed profits declared as per Section 44AD of the Act.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 108 the deduction in respect of the depreciation for each of the relevant assessment years. [(4) Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1). (5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee to whom the provisions of sub-section (4) are applicable and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.] [(6) The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to— (i) a person carrying on profession as referred to in sub- section (1) of section 44AA; (ii) a person earning income in the nature of commission or brokerage; or (iii) a person carrying on any agency business.] Explanation.—For the purposes of this section,— (a) "eligible assessee" means,— (i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a 20limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); and (ii) who has not claimed deduction under any of the sections 10A, 10AA, Special provisions in respect of newly established hundred per cent export-oriented undertakings10B, 10BA or deduction under any provisions of Chapter VIA under the heading "C. - Deductions in respect of certain incomes" in the relevant assessment year;

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 109 (b) "eligible business" means,— (i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and (ii) whose total turnover or gross receipts in the previous year does not exceed an amount of [two crore rupees].]” Sec. 139(9): [(9) Where the [Assessing] Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the 67[Assessing] Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return : Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the [Assessing] Officer may condone the delay and treat the return as a valid return. Explanation.—For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely:— (a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in; (aa) [***] (b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return; [(bb) the return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report;] (c) the return is accompanied by proof of— (i) the tax, if any, claimed to have been deducted [or collected] at source [***] and the advance tax and tax on self-assessment, if any, claimed to have been paid :

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 110

[Provided that where the return is not accompanied by proof of the tax, if any, claimed to have been deducted 74[or collected] at source, the return of income shall not be regarded as defective if— [(a) a certificate for tax deducted or collected was not furnished under section 203 or section 206C to the person furnishing his return of income;] (b) such certificate is produced within a period of two years specified under sub-section (14) of section 155;] (ii) the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974); (d) where regular books of account are maintained by the assessee, the return is accompanied by copies of— (i) manufacturing account, trading account, profit and loss account or, as the case may be, income and expenditure account or any other similar account and balance sheet; (ii) in the case of a proprietary business or profession, the personal account of the proprietor; in the case of a firm, association of persons or body of individuals, personal accounts of the partners or members; and in the case of a partner or member of a firm, association of persons or body of individuals, also his personal account in the firm, association of persons or body of individuals; (e) where the accounts of the assessee have been audited, the return is accompanied by copies of the audited profit and loss account and balance sheet and the auditor's report [and, where an audit of cost accounts of the assessee has been conducted, under section 233B77 of the Companies Act, 1956 (1 of 1956), also the report under that section]; (f) where regular books of account are not maintained by the assessee, the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year.]” 143. It was argued that as per the provisions the stipulation that details of the sundry debtors have to be filed is not mandated by the provisions of

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 111 the Act. At the same time, the details of the sundry debtors and creditors were not provided in the ITR due to the reason that the debtors were Nil and the creditors were Zero and the same has been duly mentioned in the return as “0”. Hence, the allegation of the ld. PCIT is proved to be not correct. 2. As per the bank account no. 5182201000010/ OBC of the assessee the amounts received on account of construction work from MMU or withdrawn to the extent of Rs.28,90,000/- on the same dates. With regard to the withdrawals, it was explained that the same amount has been used for the purpose of execution of the contract works. 3. Assessee is not in the business of construction and the construction receipts have been received for the first time from MMU to which he is the Chancellor. It was submitted that the assessee before becoming the Chancellor of MMU, has been a Government contractor for about 20 years, hence, the allegation of the ld. PCIT is proved to be wrong and against the facts on record. 4. No evidence for purchase of construction material were provided. Since, no books of account need to be maintained for presumptive profits u/s 44AD @ 8%, the assessee has not maintained and withdrawals of amount, the running bills and the payments received adequately support the execution of the work. The ld. PCIT has not given any finding regarding any error in the order of the Assessing Officer and instead mentioned that Assessing Officer should make necessary inquiries which is against the mandate of the revisionary provisions of the Section. The ld. PCIT has not determined the loss of revenue by the assessment order so as to make it fit for revision. Reliance is placed on the judgment of the Hon’ble High Court of

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 112 Delhi in the case of Kanda Rice Mills 178 ITR 446 and Hindustan Marketing & Advertising Company Ltd. 341 ITR 180 5. Since, the Assessing Officer has conducted sufficient inquiries prior to completion of the assessment, the Explanation 2 to Section 263 of the Act also could not have been invoked. 144. Regarding the prejudice caused to the Revenue, we find that the ld. PCIT has not disputed the factum that the work has been executed. At the same time, the ld. PCIT has held that the Assessing Officer did not carry out any inquiry are raised any query in respect of construction receipts. The ld. PCIT observation was based on the suspicion that the assessee has not undertaken any contractual work it is against the facts on record. The ld. PCIT has not given any finding regarding what is the error in the order of the Assessing Officer and not even approximately quantified or mention any possible loss of revenue by conducting independent enquires. The judgments quoted by the ld. PCIT are perused and found to be not applicable to the facts of this case.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 113 PCIT has not brought anything on record about the erroneous nature of the assessment order or loss of revenue by the order of the Assessing Officer.

Rental Receipts: (as per the chart at page nos. 104 & 105)

Professional Receipts: (as per the chart at page nos. 104 & 105) 148. The relevant portion of the order of the ld. PCIT pertaining to professional receipt is as under:

“The assessee had shown Rs.9,50,000/- under head income from other sources from M/s Nexgen Financial Solutions Pvt. Ltd. (‘Nexgen’) as per From 26AS u/s 194J of the Act on account of fees for professional & technical services. The said income shown by the assessee was not found to be genuine as per post-search enquiries conducted by the Investigation Directorate. It is pertinent to mention here that summons u/s 131 of the Act were issued to M/s Nexgen Financial Solutions Pvt. Ltd. by the DDIT(Inv.) for producing the bills & vouchers in support of genuineness of such fees for professional & technical services paid to the assessee which remained uncomplied with. Moreover, the assessee is not having any professional qualification/specialization in the field. This shows that the assessee has taken entries for creating the fictitious source of income under the head income from other sources and the same was accepted by the A.O. without making any enquiry, whereas this amount of Rs.9,50,000/- was required to be taxed as income from undisclosed sources. Based on the above discussion it was inferred that the assessment order dated 23.12.2016 passed by the A.O. or the assessment years 2012-13 u/s 143(3) read with Section 153A(1)(b) is erroneous in so far as it is prejudicial to the interest of revenue in view of the provisions of Section 263 r/w Explanation 2 of the Act.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 114 Further, as regards the amount of Rs.9,50,000/- received from Nexgen, no enquiry was conducted by the Assessing Officer to verify the source of such income. As per the bill submitted during the proceedings u/s 263 of the Act, the amount was received from Nexgen, being the professional fee for client introduction for raising debt funds. The name of the client is mentioned as Moser Baer Energy & Development Ltd. Solar Power Company (MBEDL). The entire payment was received on 23.03.2012. The assessee failed to produce any evidence to prove that the services have been rendered by him. Further there is no basis for making the payment of Rs.9,50,000/-. It is also to be noted that the assessee has no expertise to render services to Nexgen. It is an arrangement adopted by the assessee only for capital accretion.” 149. The amount involved for all the periods is as under: S.No. Assessment Amount Amount Received Date of Tax rate Year received offered to tax from filing of return 1. 2012-13 950,000 950,000 Nexgen 18.04.2016 MMR* 2. 2013-14 900,000 900,000 Nexgen 18.04.2016 MMR 3. 2014-15 179,77,000 150,83,128** Nexgen, 31.08.2015 MMR Ajnara 4. 2015-16 33,50,000 33,50,000 Nexgen 31.08.2015 MMR *Maximum Marginal Rate ** Total receipt = 160,00,000 Service Tax = 19,77,600 Expenses = 916,872 150. For the sake of convenience, the assessment year 2014-15 is taken as the lead for the adjudication.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 115 amounts are ought to have been assessed u/s 69A of the Act and have to be rightly assessed to tax u/s 115BBE of the Act.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 116 156. To the above query of the Assessing Officer, the assessee has submitted as under: “With reference to expenses at Rs.28,94,472/- against professional receipts copy of profit and loss account is attached at page 9. The copy of account of major expenses is attached at page 10-16. With reference to loan & advances to M/s Nexgen Financial Solutions Pvt. Ltd. it is submitted that this amount is outstanding amount against bill raised to party and no interest on this amount was charged. Copy of account of M/s Nexgen Financial Solutions Pvt. Ltd. is attached at page 17. Copy of bank accounts with narration of each entry is attached at page.” 157. We find from record that the amounts have been received from Nexgen on 28.02.2014, 18.03.2014, 20.03.2014 and 30.03.2014 on account of introduction of client for raising funds and towards retainership fee. The service tax @12.36% has been duly paid on these amounts. We have also taken into consideration, the arguments of ld. DR, Sh. S. S. Rana, wherein he extensively quoted the judgments in the case of Subhalaxmi (ITAT Kol.) The relevant part of the orders is as under: “It is imperative for the Assessing Officer to conduct enquiry to satisfy himself about the genuineness of transactions. Scope of the term 'enquiry' can be diverse in different circumstances. There cannot be straitjacket formula to positively conclude as to conducting or non-conducting of enquiry by the Assessing Officer. It depends on the facts and circumstances of each case. Where the facts are just ordinary and prima facie there is nothing untoward the recorded transaction, in Such circumstances, the obtaining of the documents and the application of mind thereon, without a further outside enquiry, may mean that the Assessing Officer did conduct enquiry, leaving the question open as to whether it was a proper or an improper enquiry. But, where the factual scenario of a case prima facie indicates abnormalities and cry for looking deep into it, then a mere collection of documents cannot be held as conducting enquiry, leave aside, adequate or inadequate. In such later cases, only when the Assessing Officer, after collection of the initial documents, embarks upon further investigation, that it can be said that he initiated enquiry. Where the facts of a

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 117 particular transaction cry hoarse about its non-genuineness and even a casual look at such facts, prima facie, divulges foul play, then the alarm bell must ring in the mind of the Assessing Officer for making further examination. Collection of papers on record in such circumstances cannot be construed as conducting a proper enquiry. If in such circumstances, the Assessing Officer simply gathers documents and keeps them on record, then such nominal enquiry falls within the overall category of no enquiry because of the inaction on the part of the Assessing Officer to read a writing on the wall. [Para 19.a.) Thus, the instant case is a glaring example of not making relevant enquiry, which amounts to no enquiry and hence it becomes a case of non-application of mind by the Assessing Officer.” 158. We find that the judgment is not applicable to the facts of the case as prima facie no red flag can be invited on going through the submissions of the assessee and also keeping in view the fact that the Assessing Officer has conducted relevant enquiries as mentioned in the order.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 118 Assessing Officer to suspect anything contra. Further, in the case of Infosys Technologies the Hon’ble Court has held that the Commissioner can invoke provisions of Section 263 of the Act in case of erroneous approach of the Assessing Officer on merits where there was no enquiry has been conducted at all or the so-called enquiry conducted by the Assessing Officer is as good as no enquiry. We find such is not the position in the instant case. Further, we find that the ld. PCIT has not shown proper application of mind as it was directed that and amount of Rs.179,77,600/- was required to be taxed under income from undisclosed sources and it was also directed that the expenses of Rs.28,94,472/- are to be disallowed disregarding the fact on record that the amount of Rs.19,77,600/- has been paid on account of service tax and only an amount of Rs.916,872/- has been claimed by the assessee towards the expenses.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 119 162. There is no primary evidence or proof before the ld. PCIT to come to a conclusion that the order is erroneous so far as the prejudicial to the interest of the revenue. Or this is not a case of lack of enquiry by the Assessing Officer. The ld. PCIT observations that the assessee does not possess any professional qualification or specialization to receive the consultancy amount do not stand the test of appeal as the record shows that the assessee has acted as an intermediary, liaison person for obtaining funds to Nexgen and booking of flats for Ajanara Group. In all fairness, we hold that no specialized professional qualification is required for such an activity. The allegation of the ld. PCIT that the assessee has taken entries for creating fictitious source of income cannot hold good as the company paid the amount by paying 12.6% service tax, TDS as per the provision, the recipient assessee has paid tax at the maximum margin rate, has not claimed any deduction (except Rs.917,872) in any assessment year.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 120 Santosh Garg 164. In ITA No. 2475/Del/2019, the assessee has raised following grounds of appeal: ”1. That the PCIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying the twin conditions off the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 2.1 That the learned PCIT has erred in alleging that the rental receipts off Rs.8,80,000/- were an arrangement devised by the assessee for capital accretion and forming his opinion on the basis of suspicions, surmises and conjectures. 2.2 That the learned PCIT has erred in law and on facts in observing that the Annual Letting Value amounting Rs.8,80,000/- of the property situated at House no. 526, Sector-16, Chandigarh is to be taxed under head income from other sources. 3. That the learned PCIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course off search u/s 132 conducted on 31.10.2014 in the present case.” 165. In ITA No. 2476/Del/2019, the assessee has raised following grounds of appeal: ”1. That the PCIT has erred on facts and fin law in exercising revisionary powers u/s 253 of the Act without satisfying the twin conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 2.1 That the learned PCIT has erred in alleging that the rental receipts of Rs. 9,60,000/- were an arrangement devised by the assessee for capital accretion and forming his opinion on the basis of suspicions, surmises and conjectures. 2.2 That the learned PCIT has erred in law and on facts in observing that the Annual Letting Value amounting Rs. 9,60,000/- of the property situated at House no. 526, Sector-

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 121 16, Chandigarh is to be taxed under head income from other sources. 3.1 That the learned PCIT has erred in alleging that the receipts of Rs. 50,00,000/- disclosed by the assessee under head "Income from other sources" was an accommodation entry required to be taxed u/s 69A r.w. sec. 115BBE of the Act. 3.2 That the learned PCIT has erred in invoking revisionary powers u/s 263 in relation to the income amounting to Rs. 50,00,000/ disclosed under head "Income from other sources" ignoring that the same had already been taxed at the maximum marginal rate and as such no prejudice was caused to the revenue. 4. That the learned PCIT has erred in invoking revisionary powers u/s 263 on issues regarding which no incriminating materials were found during the course of search u/s 132 conducted on 31-10-2014 in the present case. 5. That the learned PCIT has erred in stating that the AO did not carry out any enquiry in respect of issues mentioned in the show-cause notice u/s 263 ignoring the questionnaires issued during the course of assessment proceedings.” 166. In ITA No. 2477/Del/2019, the assessee has raised following grounds of appeal: ”1. That the PCIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act without satisfying the twin conditions off the assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue and consequently, the impugned order is illegal and bad in law. 2.1 That the learned PCIT has erred in alleging that the rental receipts off Rs.9,60,000/- were an arrangement devised by the assessee for capital accretion and forming his opinion on the basis of suspicions, surmises and conjectures. 2.2 That the learned PCIT has erred in law and on facts in observing that the Annual Letting Value amounting Rs.9,60,000/- of the property situated at House no. 526, Sector-16, Chandigarh is to be taxed under head income from other sources.

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ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 123 filed return of income in due course which has been assessed by the DCIT, Central Circle, Karnal.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 124 proceedings u/s 263, the assessee was specifically asked to furnish all the evidences including electricity bill/house tax bill, rent agreement, receipts, correspondences etc. in support of premises given on rent to Trishala. However, no evidence except few combined electricity & water bills and Xerox copy of rent agreement was furnished by the assessee. On perusal of the same, it is seen that there is no electricity consumption during this period, which supports the fact that the premises was never let out to Trishala. Further, it is to be mentioned that H.No. 526, Sector-16, Chandigarh is a residential premises and could not be used for commercial purpose of liaisoning and promotion of sales as stated by Mr. Harish Gupta in his statement. The Assessing Officer did not carry out any enquiry from the tenant, Trishala or third parties to verify the fact that the premises was ever used by Trishala. The financial transaction between the assessee and Trishala appears to be an arrangement adopted by the assessee for capital accretion. It is strange to note that the tenancy is for the period starting from 01.06.2011 to 31.03.2012 and instead of making monthly payment, the entire rent was paid on 27.09.2011 by Trishala to the assessee. It is also noted that Trishala has paid commission to various persons of MMTU group and passed on entries of profit to the group in garb of buying back the flats. The AO has not made proper enquiries in respect of the transactions with Trishala.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 125 5. Rental income reflected in the returns is dubious and shown with the intent to create capital and the name of the individual assessee 6. The rent was paid in lump sum instead of monthly payment 7. The assessee claimed loss under the head “income from house property” on this asset. 8. No electricity and water bills were paid 9. The PCIT held that the ALV of the property amounting to Rs.880,000/Rs.960,000 was required to be taxed under the head “income from other sources” 171. Against the these observations of the ld. PCIT, the ld. AR during the arguments before us has argued that the assessee received rental income from four properties out of which only one property was leased to Trishala group. The rental incomes have been duly offered to tax by the assessee for a period of four years even before the conduct of search. The ld. AR has argued that the rent deed and the rent receipts have already been submitted before the ld. PCIT vide letter dated 30.10.2018. He has submitted various documents to prove that the case has been examined at length by the Assessing Officer. Hence, no action u/s 263 of the Act is called for.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 126 2. Malabar Industrial Co. Ltd. Vs CIT [2000] 109 Taxman 66 (SC)/[2000] 243 ITR 83 (SC)/[2000] 159 CTR 1 (SC) 3. Gee Vee Enterprises Vs CIT 99 ITR 375 (Delhi) 4. CIT Vs Toyota Motor Corp. 306 ITR 49 (Delhi) 5. Rajalakshmi Mills Ltd Vs ITO 121 ITD 343 (Ch.) (SB) 6. CIT Vs Seshasayee Paper and Boards Ltd 242 ITR 490 (Madras) 7. CIT Vs Infosys Technologies Ltd 341 ITR 293 (Kar.) It is further submitted that Explanation 2 has been inserted in Section 263 of I.T. Act by Finance Act 2015 w.e.f 01.06.2015 which is reproduced below: Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if in the opinion of the Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. The case of the assessee is squarely covered by above amendment since the order is passed without making inquiries or verification which should have been made and allowed relief without inquiring into the claim. In the above case, it is humbly submitted that the following decision may kindly be considered with regard to validity of proceedings u/s 263 of I.T. Act: 1. Hon’ble Supreme Court in the case of Deniel Merchants Pvt. Ltd. vs. ITO(Appeal No. 2396/2017) dated 29.11.2017. (copy enclosed). In this group of cases, Hon’ble Supreme Court has dismissed SLPs in cases where AO did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry.

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The relevant judgement of Hon’ble Calcutta High Court in this case is also enclosed. 2. Malabar Industrial Co. Ltd. Vs CIT f20001 109 Taxman 66 (SC)/r20001 243 ITR 83 (SC)/r20001 159 CTR 1 (SC) (Copy Enclosed) where Hon’ble Supreme Court held that where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263(1) was justified 3. Rajmandir Estates (P.) Ltd. Vs PCIT |70 taxmann.com 124 (Calcutta)/[2016] 240 Taxman 306 (Calcutta)/[2016] 386 ITR 162 (Calcutta)/[2016] 287 CTR 512] (Copy enclosed) Where Hon’ble Calcutta High Court held that where assessee with a small amount of authorised share capital, raised a huge sum on account of premium and chose not to go in for increase of authorised share capital merely to avoid payment of statutory fees and Assessing Officer passed assessment order without carrying out requisite enquiry into increase of share capital including premium received by assessee, Commissioner was justified in treating assessment order as erroneous and prejudicial to interest of revenue. 4. Rajmandir Estates (P.) Ltd. Vs PCIT T20171 77 taxmann.com 285 (SC)/r20171 245 Taxman 127 (SC) Hon’ble Supreme Court has dismissed SLP against High Court's ruling that where assessee with a small amount of authorised share capital, raised huge sum on account of premium, exercise of revisionary powers by Commissioner opining that this could be a case of money laundering was justified. In the above case, it is humbly submitted that assessment was made by DCIT Karnal and hence jurisdictional High Court is Punjab & Haryana High Court. Hence, decision of CIT Vs Kabul Chawla is not squarely applicable. In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to validity of proceedings u/s 153A:

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 128 1. Satpal Goyal Vs CIT 2016-TIOL-2559-HC-P&H-IT (Copy Enclosed) where Hon’ble P&H High Court held that addition made u/s 68 towards unexplained credits deserves to be sustained, where the assessee has failed to prove the identity of the creditors, their capacity and genuineness of the transactions in the matter. The assessment was made u/s 153A 2. E.N. Gopakumar Vs CIT T20161 75 taxmann.com 215 (Kerala)/f20171 244 Taxman 21 (Kerala)/r2017l 390 ITR 131 (Kerala) (Copy Enclosed) where Hon’ble Kerala High Court held that assessment proceedings generated by issuance of a notice under section 153A(1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a). The above order has been passed after considering cases of (i) CIT v. Kabul Chawla [20161 380 ITR 573/120151 234 Taxman 300/61taxmann.com 412 (Delhi) (para 4), (ii) CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [20151 374 ITR 645/232 Taxman 270/58 taxmann.com 78 (Bom.) (para 4), (iii) Principal CIT v. Kurele Paper Mills (P.) Ltd. [2016] 380 ITR 571 (Delhi) (para 4), (iv) CIT v. Lancy Constructions [2016] 383 ITR 168/237 Taxman 728/66 taxmann.com 264 (Kar.) (para 4), (v) CIT v. ST. Francies Clay Decor Tiles [2016] 240 Taxman 168/70 taxmann.com 234 (Ker.) (para 5) and (vi) CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker.) (para 5). 3. DR. A. V. Sreekumar Vs CIT r20181 90 taxmann.com 355 (Kerala)/r2018l 253 Taxman 428 (Kerala)/r20181 404 ITR 642 (Kerala) (Copy Enclosed) where Hon’ble Kerala High Court held that where pursuant to search and enquiry unaccounted consideration from purchaser had been unearthed, it could not be said that other material already available with Department had been relied upon in proceedings. CIT Vs Kabul Chawla considered. 4. CIT Vs Raj Kumar Arora f2014l 52 taxmann.com 172 (Allahabad)/r20141 367 ITR 517 (Allahabad)

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where Hon’ble Allahabad High Court held that Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment. 5. CIT Vs Kesarwani Zarda Bhandar Sahson Alld. flTA No. 270 of 20141 (Allahabad) where Hon’ble Allahabad High Court held that Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment. 6. Kishore Kumar Vs CIT [2015] 62 taxmann.com 215 (SC)/[2015] 234 Taxman 771 (SC) (Copy Enclosed) where Hon’ble Supreme Court dismissed SLP against High Court's order where it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents. B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High Court confirmed (Copy Enclosed) 7. Bhagirath Aqqarwal Vs CIT [2013] 31 taxmann.com 274 (Delhi)/[2013] 215 Taxman 229 (Delhi)/[2013] 351 ITR 143 (Delhi) (Copy Enclosed) where Hon’ble Delhi High Court held that an addition in assessee's income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect. Reliance is placed upon following judgments to show that additions can be made u/s 153A on the basis of incriminating statements: 1. Video Master Vs JCIT 66 taxmann.com 361 (SC)/[2015] 378 ITR 374 (SC)/[2016] 282 CTR 221 (Copy Enclosed) where Hon’ble Supreme Court held that where addition on account of undisclosed income was based on statement of partner of assessee-firm, it could not be said that addition was based on no evidence

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 130 2. B Kishore Kumar Vs CIT (62 taxmann.com 215, 234 Taxman 771) (Copy Enclosed) where Hon’ble Supreme Court dismissed SLP against High Court's order where it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents. B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High Court confirmed (Copy Enclosed) 3. Bhagirath Aqqarwal Vs CIT (31 taxmann.com 274, 215 Taxman 229, 351 ITR 143) (Copy Enclosed) where Hon’ble Delhi High Court held that an addition in assessee's income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect. 4. CIT Vs M. S. Aqqarwal [2018] 93 taxmann.com 247 (Delhi) (Copy Enclosed) where Hon’ble Delhi High Court held that where in course of block assessment proceedings, AO made addition to assessee's undisclosed income in respect of gift, in view of fact that assessee did not even know donor personally and, moreover, he himself in presence of his Chartered Accountant had made a statement under sec. 132(4) admitting that said gift was bogus, impugned addition was to be confirmed. 5. Smt Dayawanti Vs CIT T20161 75 taxmann.com 308 (Delhi)/[2017] 245 Taxman 293 (Delhi)/[2017] 390 ITR 496 (Delhi)/[2016] 290 CTR 361 (Delhi) (Copy Enclosed) where Hon’ble Delhi High Court held that where inferences drawn in respect of undeclared income of assessee were premised on materials found as well as statements recorded by assessee's son in course of search operations and assessee had not been able to show as to how estimation made by Assessing Officer was arbitrary or unreasonable, additions so made by Assessing Officer by rejecting books of account was justified 6. M/s Pebble Investment and Finance Ltd Vs ITO (2017-TIQL- 238-SC-IT) (Copy Enclosed) where Hon’ble Supreme Court dismissed SLP challenging the judgment, whereby the High Court had held that

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 131 statement made u/s 133A could be relied upon for purposes of assessment, in absence of any contrary evidence or explanation as to why such statement made was not credible. M/s Pebble Investment and Finance Ltd Vs ITO (2017-TIOL- 188-HC-MUM-IT) Bombay High Court confirmed (Copy Enclosed) 7. Raj Hans Towers (P.) Ltd. Vs CIT (56 taxmann.com 67, 230 Taxman 567, 373 ITR 9) (Copy Enclosed) where Hon’ble Delhi High Court held that where assessee had not offered any satisfactory explanation regarding surrendered amount being not bona fide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified (SURVEY CASE) 8. PCIT Vs Avinash Kumar Setia [2017] 81 taxmann.com 476 (Delhi) (Copy Enclosed) where Hon’ble Delhi High Court held that Where assessee surrendered certain income by way of declaration and withdraw same after two years without any satisfactory explanation, it could not be treated as bona fide and, hence, addition would sustain (SURVEY CASE)” 173. Heard the arguments of both the parties and perused the material available on record. At the outset, the provisions of Section 263 of the Act stipulates The [Principal Commissioner or] Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 132 The fundamental principles underlying the provisions of this Section are that (a) there has to be error the order (b) and the error has to be prejudicial or leading to loss of revenue.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 133 into for which the assessee replied that a sum of Rs.421,00,000/- was raised as loan from Punjab National Bank on 18.05.2011 and unsecured loans of Rs.199,25,000/- from relatives. The ld. PCIT observation that the house is not a commercial premises and hence cannot be used for commercial purposes is also found to be incorrect as it was stated that the house was used as a liaison office by the tenant, Harish Gupta of Trishala group for promotion of sales. This fact can be gauged from the statement of Sh. Harish Gupta mentioned in the order u/s 263 of the Act. Further, the observation of the ld. PCIT that electricity bills and water bills have not been paid is also contrary to the facts on record wherein such expenses duly examined by the Assessing Officer. Sh. Harish Gupta has also categorically stated in response to the question no. 35 during the statement recorded during the survey u/s 133A of the Act conducted as the business premises of Trishala Build Tech Pvt. Ltd. that their company had taken on rent a building at Chandigarh (owned by the assessee) and paid rent of Rs.36,00,000/- through cheque and TDS has been duly deducted. The ld. PCIT observation that this rental payment is convoluted is influenced by the fact that the rent has been paid in lump sum which cannot be accepted as a reason for revision of the assessment order u/s 263 of the Act. Any kind of loss of Revenue or non examination of the issue by the Assessing Officer before allowing the claims has not been brought out by the ld. PCIT which was discussed above. Hence, we hereby hold that the order u/s 263 of the Act cannot be upheld on this ground.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 134 provisions of Sections 22, 23 & 24 of the Act which cover the scheme of taxation under head house property. The same can be summarized as under: 1. As per Section 22, annual value of the property is chargeable under head house property. Annual value, as per Section 23, is the higher of: a. Annual Letting Value (ALV) or expected rent of the property or b. Actual rent received 2. While Section 24(a) allows a standard deduction of 30% to all assessees, Section 24(b) allows deduction of interest paid for construction of house property from the annual value as per Section 22 r.w.s. 23. 176. As the property in question is not a self occupied property as such the provision of Section 23(4) of the Act will apply to this property. As per the summarized provisions of Sections 22-23, Income of such property is chargeable to tax which is higher value of rent received or expected rent. Assuming, but not conceding that the property in question is not let out, even in such case its annual letting value will be subjected to tax under Sections 22-24. Such annual value being undisputedly Rs.8,80,000/-, full deduction u/s 24(a) of the Act of Rs.2,64,000/- and Section 24(b) of Rs.42,25,000/- will be allowable and the resulting loss under head house property of Rs.36,09,000/- will be fully eligible for set off from other heads of income. Thus, the action of ld. PCIT would be a revenue in neutral exercise.

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Receipt of Rs.50,00,000/- on sale of share in property : 178. Brief facts of the issue are that the assessee had shown income earned on booking of plot amounting to Rs.50,00,000/- under the head income from other sources during the assessment year 2013-14. It was claimed that she had entered into an agreement to sell with M/s Gulmohar Township India Pvt. Ltd. for purchase of 15% share of property No. 1003, Sector-44B, Chandigarh for consideration of Rs.50,50,000/- on 30.05.2012 for which advance of Rs.7,00,000/- was paid. The said property was sold on 13.12.2012 for consideration of Rs.1,00,50,000/- resulting into a profit of Rs.50,00,000/-.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 136 183. We find that the Assessing Officer vide notice dated 14.07.2016 at para no. 3 as inquired about the booking of plot for Rs.50,00,000/- and asked to furnish the details of this transactions along with confirmed copy of account of such person. The assessee vide reply dated 23.08.2016 explained that assessee has entered into an agreement to sell with Gulmohar Township India Pvt. Ltd. for purchase of 15% share in Property No. 1003. Sector 44B, Chandigarh at a total consideration of Rs.50,50,000/- on 30.05.2012 against which Rs.7,00,000/- was paid as advance, and the above said property was sold on 13.12.2012 for Rs.100,50,000/- resulting into a profit of Rs.50,00,000/- which was disclosed in the return of income.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 137 187. We have gone through the case laws quoted by the ld. DR in relation to all the three appeals dealt above. The ld. AR has also submitted as to how the case laws are applicable or not applicable to the instant case. The case laws relied by the ld. DR dealing with the seized material and the assessment thereof and the submission of the AR in response to such case laws is not being dealt, as the assessment order and the order u/s 263 of the Act passed by the ld. PCIT has been examined to the issues with relation to the fact whether assessment order being erroneous and prejudicial to the interest of the revenue, whether the Assessing Officer has acted in accordance with the explanation 2 of the Section 263 of the Act and by the ld. PCIT has brought in anything on record to prove the leakage to revenue to the exchequer in the assessment by the way of passing any erroneous order by the Assessing Officer. The facts of the case laws relied and its applicability to the instant case is as under:

S.No. Case law Facts of the case Remarks 1. SC in Malabar In the said case, the The said case law Industrial Co. Ltd. Vs Hon'ble Supreme actually supports the CIT [2000] 243 ITR Court has laid down case of assessee as 83 (SC) neither of the 4 the law as to what would constitute conditions of erroneous order have been shown erroneous order and prejudicial to to be satisfied by the revenue. The court PCIT. Neither there was any incorrect assumption categorized following orders as erroneous: of facts or law nor the a) Incorrect principles of justice were violated. The AO has assumption of facts considered all materials b) Incorrect held on record, applied application of law his mind and then c) Without formed an opinion application of permissible as per law. mind d) Without following Therefore, clearly the principles of learned PCIT has failed

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 138 natural justice to show as to how AO's order u/s 153A was Further, the court prejudicial to revenue or held that an order erroneous in nature. would not be held to be prejudicial to revenue if the A.O. had taken a view permissible as per law. 2. Delhi HC in CIT vs In the said case, the In the present case, all Gee Vee Enterprises AO did not make any issues raised by the PCI T were enquired vs CIT (Addl.) [1975] enquiries at all 99 ITR 375 (Del) regarding issues dealt upon by the AO during the course of assessment with by the CIT and proceedings and as such during enquiries by CIT it was found that the decision relied upon by PCIT which is related such non enquiry lead to loss to revenue. As to a case of total lack of such, the HC held enquiry would be distinguishable on facts. that the CIT was correct in invoking powers u/s 263 as The Delhi HC in case of DIT vs Jyoti Foundation the AO had failed to seek any [2013] 357 ITR 388 in Para 14 has held that details/conduct any enquiry from decision in case of Gee assessee. Vee Enterprises (supra) would only apply in case of total lack of enquiry and has to be distinguished in other cases. 3. Delhi HC in CIT vs In the said case, In the present case, Toyota Motor Corpn the HC held that detailed enquiries [2008] 306 ITR 49 the penalty order of regarding all issues (Del) the AO merely raised by the PCIT have mentioning that been made by the AO at penalty proceedings the assessment stage were being dropped and all relevant was cryptic and evidences were obtained erroneous as it before competing

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 139 could not be seen assessment. Therefore, from the the case law relied upon assessment records by the PCIT which relates that he had to penalty order is clearly conducted due distinguishable on facts. enquiries. It was The same has also been held that the ITAT held by the ITAT Delhi in had itself assumed Para 4.2 of its decision in that AO had case of Lala Harbhagwan bonafide reasons Dass & Memorial Vs CIT, for his order ITA 2555 of 2012. and therefore CIT was correct in invoking section 263.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 140 482. 5. Madras HC in CIT vs In the said case, In the present case, Seshasayee Paper & the CIT held that the learned PCIT has Boards Ltd [2000] AO's order was not pointed out any 242 ITR 490 (Mad.) erroneous and instance where upon prejudicial to enquiries conducted by revenue as the AO him or any new had not conducted materials obtained by any enquiry him, he has concluded regarding issues that the view taken by raised in the show AO was incorrect. cause notice and Instead, the PCIT has upon enquiry raised the same issues conducted by CIT again, examined the himself he same evidences and concluded that formed a different number of claims opinion without allowed to assessee pointing any were incorrect. The shortcoming or error in High court held that the materials available there had been during assessment. proper application of mind by CIT and Since, there is a lack of conclusions in 263 finding of order being order were correct erroneous and instead reliance is placed on suspicions of wrongdoing, it is submitted that case law relied upon by PCIT is distinguishable in the present case. 6. ITAT Kolkata in the In the said case, The present case is of case of Subhlakshmi assessment order a trust the A.O. has Vanijya Pvt Ltd & u/s 147 of the AO raised all possible Others vs CIT & was found to be issues in his show Others, [2015] 43 erroneous by CIT as cause notices and full ITR (Trib.) 489 (ITAT A.O. had only compliance to same Kol) obtained was made by assessee confirmations fromk with detailed only 8 out of 21 evidences. shareholders to The PCIT has re-

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 141 whom the assessee examined the same had issued share issues capital at huge and evidences and premium of Rs. formed 490/- and because a different opinion. The AO had not verified case law relied upon huge involved a company investment of 8 alleged to be used for crores bogus share capital made by assessee investment regarding in which no enquiries different private were made by the AO companies. which is not the case in the present instance. The ITAT held that the AO had failed to conduct enquiries as to why assessee company had issued premium at huge amount and further invested same in different other companies and since the modus operandi was similar to the Bogus share capital scam, the order u/s 263 of CIT was correct as order of AO was passed in undue haste. 7. Karnataka HC in the In the said case, the The issue in the present case of CIT vs assessee had claimed case is not related to Infosys Technologies DTAA relief in its ITR computation of any relief Ltd 341 ITR 293 which was allowed by but regarding the view of the AO by merely the CIT on various issues stating that same raised by the AO during

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 142 was assessment proceedings. allowable as per DTAA., CIT held that The PCIT has failed to the AO had not show there had been any studied leakage of revenue in the the extent of present case and how allowability of the assessee's claim as AO had formed an per the specific incorrect opinion or had clauses of DTAA and not obtained any had simply allowed relevant what was claimed by detail. Therefore, the assessee without said case is clearly obtaining any details. distinguishable on facts. The HC held that the order of the CIT seeking re- computation was correct as the AO had failed to make any calculation before allowing such important tax relief.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 143 � CIT Vs Amitabh Bachhan (69 Taxmann.com 170,240 Taxman 221, 384 ITR 200, 286 CTR 113) � SatpalGoyal Vs (CIT) 2016-TIOL-2559-HC-P&H-IT � E.N. Gopakumar Vs CIT [2016] 75 Taxmann.com 216 (Kerala)/[2017] 244 Taxman 21(Kerala)/[2017] 390 ITR 131 (Kerala) � DR. A.V. Sreekumar Vs CIT [2018]90 Taxmann.com 355 (kerala)/[2018] 253 Taxman 428 (Kerala)/[2018] 404 ITR 642 (Kerala) � CIT Vs Rajkumar Arora [014] 52 Taxmann.com 172 (Allahabad) / [2014] 36 ITR 517 (Allahabad) � CIT Vs Kesarwani Zarda Bhandar Sahson Alld. [ITA No 270 of 2014] (Allahabad) � Kishore kumar Vs CIT [2015] 62 Taxmann.com 215(SC) /[2015] 234 Taxman 771(SC) � Bhagirath Aggarwal Vs CIT [2013] 31 taxmann.com 274 (Delhi) / [2013] 215 Taxman 229 (Delhi) / [2013] 351 ITR 142 (Delhi) � Video Master Vs JCIT 66 Taxmann.com 361(SC)/[2015] 378 ITR 374 (SC)/[2016] 282 CTR 221 � B. Kishore Kumar Vs CUT (62 Taxmann.com 215, 234 Taxman 771 � Bhagirath Aggarwal Vs CIT ( 31 taxrnann.com 449) Madras High Court confirmed � CIT Vs M.S. Aggarwal [2018] 93 Taxmann.com 247 (Delhi) � Smt. Dayawanti Vs CIT [2016] 75 Taxmann.com 308 (Delhi)/[2017] 245 Taxman 293 (Delhi)/[2017] 390 ITR 493 (Delhi)/[2016] 290 CTR 361 (Delhi) � M/s Pebble Investment and Fiannce Ltd. Vs ITO (2017-TIOL-238-SC- IT) � Raj Hans Towers (P) Ltd. Vs CIT (56 Taxmann.com 67, 230 Taxman 567, 373 ITR 9) � PCIT Vs Avinash Kumar Setia (2017) 81 taxmann.com 476 189. The case laws relied by learned DR are discussed as under: In the case of Deniel Merchants (supra), the Hon'ble Supreme Court dismissed the SLP tiled by the assessee against earlier decision of the Calcutta High Court in case of the assessee by stating as under: "In all these cases, we find that the Commissioner of Income Tax had passed an order under Section 263 of the Income Tax Act, 1961 with the observations that the Assessing Officer did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 144 concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry. It is this order which is upheld by the High Court. We see no reason to interfere with the order of the High Court."

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 145 share holders is also not established because they did not have any money of their own. Each one of them received from somebody and that somebody received from a third person. Therefore, prima facie, the share-holders are mere name lenders."

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 146 194. Therefore, we hold that the decision of the Supreme Court would have any application in the present case in light of clear difference in the factual position.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 147 the said case the Court laid down that the CIT while exercising powers u/s 263 is not bound to be confined to the issues stated in his show cause notice and that the mandate of the provisions of law is restricted to only giving an opportunity of being heard to the assessee. These observations can be found in Para 14 of the Hon'ble Court's judgment.

ITA Nos. 2475 to 2483 & 1594 to 1600/Del/2019 148 201. In the result, the appeals of the assessees are allowed. (Order Pronounced in the Open Court on 19/08/2019).

Sd/- Sd/- (H. S. Sidhu) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 19/08/2019 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR