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Facts
The Assessing Officer denied exemption under Section 11 of the Income Tax Act to the assessee for AY 2014-15 and 2015-16, alleging misuse of funds and diversion for business activities, citing violations of Section 13(1)(d). The CIT(A) upheld the assessment order.
Held
The Tribunal allowed the request to remit the matter to the Assessing Officer for fresh adjudication. The assessee's non-compliance with notices before the CIT(A) was noted, and costs were imposed. The Assessing Officer is to provide a reasonable opportunity for the assessee to be heard.
Key Issues
Whether the assessee's transactions constituted a misuse of trust funds violating Section 13(1)(d), and if the assessee was denied a proper opportunity to be heard during assessment and appellate proceedings.
Sections Cited
13(1)(d), 11, 164(2), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 485 & 486/JPR/2023
ORDER PER: Narinder Kumar, Judicial Member, This common order is to dispose of the above captioned two appeals, one relating to the assessment year 2014-15, and other relating to the assessment year 2015-16. Both the appeal are interconnected and arise out of the same facts, Ld. AR for the appellant and Ld. DR for the department have argued the appeals raising their submission simultaneously as regard each appeal.
Learned CIT(A) has dismissed the appeal filed by the assessee challenging the assessment order dated 20.12.2019. Vide said assessment order, the Assessing Officer computed the income of the assessee as under:- “Subject of the above remarks the total income of the assessee is computed as under:- Sr. No. Particulars Amount 1. Income as per Income & Expenditure Account Rs.14,13,51,866/- 2. Less revenue expenditure Rs.11,60,71,208/- 3. Taxable income Rs.2,52,82,658/- 4. Rounded off Rs. 2,52,80,660/- 3. In nut shell, the Assessing Officer was of the view that provisions of section 13(1)(d) of the Act were attracted, and, accordingly, he denied benefit of exemption u/s 11 of the Act to the assessee and raised tax liability on the surplus, at MMR, while resorting to the provisions of section 164(2) of the Act .
The assessment proceedings were initiated on receipt of information from DDIT (Investigation)-III, Jaipur vide letter dated 11/12.01.2014 to ITO, Ward-1, Sikar, who in turn, communicated the said information to DCIT (Exemption), Circle, Jaipur. The information was that the assessee had taken loan of Rs. 15,00,00,000/- from M/s Gruh Finance Limited out of which Rs. 8,00,00,000/- were transferred by the assessee to M/s Balaji Borewell Pvt. & 486/JPR/2023 BPS Shikshan Sansthan, Sikar. Ltd. for purchase of land and construction, and further that M/s Balaji Borewell Pvt. Ltd. had transferred Rs. 8 Cr. to various persons for supply of building material and purchase of land. The information further was that actually neither any land was purchased nor any construction was raised. As per information, the persons, to whom the above said amount was transferred, were even not in construction activity/property business, and as such, it was found that the said amount had been given to other persons for business activity, vide diverting the same, and further that it was a case of misuse of the funds of the trust, which resulted in loss of interest to the trust and funds so diverted for other activities.
The Assessing Officer, after conducting enquiry in the assessment proceedings, concluded that this is not a case of advance in the ordinary working of the society; that from this advance, the society diverted the funds benefit and further that this investment was in violation of the provisions of Section 13(1)(d) of the Act.
It may be mentioned here that in the assessment order, the Assessing Officer also denied to the assessee deduction of depreciation of capital asset on the ground that the assessee had taken benefit of capital expenditure as application of income in the earlier years.
& 486/JPR/2023 BPS Shikshan Sansthan, Sikar.
Feeling aggrieved by the above said order, the assessee was in appeal, but the same came to be dismissed by Learned CIT(A), NFAC, thereby upholding the assessment order, in toto. That is how, the assessee is before this Appellate Tribunal.
It may be mentioned here that out of the grounds mentioned in Form 36, Ld. AR for the appellant did not press ground no.
As regards, other two grounds i.e. ground No. 2 and 3, on finding that the appellant remain non compliance with certain notices served upon the appellant u/s 250 of the Act, we enquired about non compliance, and thereupon Ld. AR for the appellant has submitted that the matter may be remanded to the Assessing Officer so as to afford an opportunity to the assessee of being heard.
As find mentioned in para 6 of the impugned order, 5 notices u/s 250 of the Act were issued by the office of Learned CIT(A), NFAC and duly served upon the assessee. Out of the said notices, the appellant responded on 22.01.2021 i.e. only to the first mentioned notice dated 06.11.2021. In other words, the appellant remained non complaint as regards other four notices dated 27.03.2023, 17.04.2023, 25.04.2023 and 04.05.2023. That is how, Learned CIT(A) was of the view that there was no cause in interfering with the assessment order dated 20.12.2019.
& 486/JPR/2023 BPS Shikshan Sansthan, Sikar.
It may be mentioned here that before this Appellate Tribunal, Ld. AR for the appellant has submitted a paper book. Admittedly, the assessee is a society registered under Rajasthan society Registration Act, 1958, as per certificate dated 25.08.2001. Its constitution, legal rules and memorandum were admittedly framed.
At page 60 of the paper book is available, copy of loan sanctioning letter as regards loan of Rs. 15 Cr. Ld. DR for the department has drawn our attention to the said loan sanctioning letter, and its terms and conditions as available from para 1 to 16. In para No. 1, there is detail of the nature of loan of the property under finance, names of the owners of the said property, rate of interest and EMIs, in respect of three loans i.e. loan-I , loan- II and loan III.
Clause (b) of para 8 of the said loan sanctioning letter is one of the conditions for grant of loan that the assessee will to have write a letter to Tata Capital Limited informing its willingness to switch over the loan along with security to the lender company i.e. M/s Gruh Finance Limited.
We have also gone through the copy of the ledger account by M/s Balaji Borewell Pvt. Ltd. as available in the accounts book of the assessee, i.e. page 69 of the paper book. The first entry, as per this document is dated 01.04.2013( relating to TDS payable) Rs. 43,520/-. In view of this entry, the nature of the transaction, which led to deduction of TDS was of significance, in order to & 486/JPR/2023 BPS Shikshan Sansthan, Sikar. appreciate the genuineness of the transaction of lending of Rs. 8,00,00,000/- by the assessee, as per subsequent three entries dated 27.03.2014 and 28.03.2014 i.e. for a sum of Rs. 2,00,00,000, Rs. 4,00,00,000/- and Rs. 2,00,00,000/-.
Having record to the issues involved, to which we have referred to above, though, in brief, we deem it a fit case, to allow the request for Ld. AR for the appellant to remit of the matter, so as to enable the appellant to put forth its case and the entire material relating to the issues involved. Even Ld. DR for the department agrees to the remitting of the matter to the Assessing Officer, for effective adjudication of all the issues,.
In the given facts and circumstances, Assessing Officer for decision afresh, after taking providing reasonable opportunity to the assessee of being heard.
As regards non compliance by the appellant before Learned CIT(A), as regards four notices, we deem it a fit case, to burden the appellant with costs of Rs.2,000/-, to be deposited in Prima Minister’s National Relief Fund, and produce the receipt before Learned Assessing Officer. We may add that while so conducting the assessment proceedings the Assessing Officer shall also take into consideration the provisions of section & 486/JPR/2023 BPS Shikshan Sansthan, Sikar. 13(1(a), Section 11, Section 164(2) of the Act as well as settled legal proposition as to the extent of the liability of tax, if any.
By way of this appeal, the assessee society has challenged order dated 31.05.2023, relating to the assessment year 2015-16, whereby Learned CIT(A), NFAC has upheld the assessment order dated 31.10.2017, whereby computation of total income of the assessee and making addition of Rs. 63,82,046/- has been uphold.
It may be mentioned here that the Assessing Officer made the said addition, while observing that the funds of the society were found to have been misused, resulting in loss of interest to the assessee society because of diversion of funds. The Assessing Officer also disallowed exemption claimed by the assessee u/s 11 and 12 of the Act, and as regards surplus shown in the income and expenditure account, the Assessing Officer assessed the same as income from business and profession in the hands of the society.
For the reasons already given above, while deciding in Learned CIT(A) is set aside.
& 486/JPR/2023 BPS Shikshan Sansthan, Sikar. As regards non compliance by the appellant before Learned CIT(A), as regards four notices, we deem it a fit case, as regards four notices, we deem it a fit case, to burden the appellant with costs of Rs.2,000/-, to be deposited in Prima Minister’s National Relief Fund, and produce the receipt before Learned Assessing Officer.
We may add that while so conducting the assessment proceedings the Assessing Officer shall also take into consideration the provisions of section 13(1(a), Section 11, Section 164(2) of the Act as well as settled legal proposition as to the extent of the liability of tax, if any. Files be consigned to the record room after the needful is done by the office. Copy of common order be also placed in the connected appeal file. Order pronounced in the open court on 11/09/2025. Sd/- Sd/- ¼jkBkSM+ deys'k t;UrHkkbZ ½ ¼ujsUnz dqekj½ (RATHOD KAMLESH JAYANTBHAI) (NARINDER KUMAR) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 11/09/2025 *Santosh आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू The Appellant- BPS Shikshan Sansthan, Sikar. 1. 2. izR;FkhZ@ The Respondent- DCIT (Exemption), Circle, Jaipur. 3. vk;dj vk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत सहायक पंजीकार@Aेेजज. त्महपेजतंत