TIRUPATI COLLEGE OF TECHNICAL EDUCATION SOCIETY,JAIPUR vs. CIT(EXEMPTIONS), JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 452/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2012-13 cuke Tirupati College of Technical Education The CIT (Exemption) Jaipur Society, M-2, Mahesh Nagar, Jaipur Vs. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAATT 6183 D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Sharvan Kumar Gupta, Advocate jktLo dh vksj ls@ Revenue by : Shri B.K. Gupta, (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 26/09/2019 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 03/10/2019 vkns'k@ ORDER PER: SANDEEP GOSAIN, J.M. The present appeal has been filed by the assessee against the order of CIT(A)- (Exemptions) Jaipur dated 04.03.2016 for the assessment year 2012-13. The assessee vide letter dated 23-09-2019 has filed the following revised, modified and additional grounds of appeal. ‘’1. The ld. CIT(E) has erred in law as well as on the facts of the case in withdrawing the approval granted u/s 10(23C)(vi) vide show cause notice dated 31-12-2015 with

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

retrospective effect from A.Y. 2010-11 onwards on the basis of proposal of Assessing Officer. The approval so withdrawn u/s 10(23C)(vi) is contrary to the provisions of law and facts of the case the same kindly be quashed.

2.1 The ld.AR of the assessee vide application dated 08-02-2018

adduced the following additional evidences.

‘’The assessee would like to pray your honour to permit for adducing the additional evidences being:-

(a) The show cause is issued on31-12-2015 for giving the reply on 11-01-2016 and in short span of time the

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

assessee is unable to collect the necessary evidene from outside agency or persons..

(b) Your honours are the first appellate authority

The list of evidence alongwith reasons are as under:-

(1) Copy of certificates from Bank (Outside Agency) regarding cash deposited or withdrawals from bank. Such certificates are the summary of bank transactions and save the time of court for verifying the transactions.

(2) Sale/ Purchase agreement, the same is already produced before the AO during the assessment proceeding.

(3) Letter from IDBI Bank (Outside Agency) showing list of original documents held with bank, being your honours are the first appellate authority regarding the impugned order and it is necessary to verify that the members of managing committee pledged their property in the interest of educational institution i.e. the assessee.

(4) Statement of staff recorded by AO evident to prove that the assessee is only running educational institution.

(5) Assessment order u/s 143(3) of the I.T. Act, 1961 for the A.Y. 2015-16 dated 15-12-2017 i.e. event occurring after issuing of impugned order. It also proves that the assessee is only running education institution. © As decided in the cse of R.S.S. Shanmugam Pillai & Sons vs CIT , 95 ITR 109 (Mad.) the High Court dwelled on the powers of the Appellate Tribunal to submit additional evidence at the appellate stage in the following manner.:-

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

‘’It is no doubt true that the Tribunal has got a discretion either to admit the documents as additional evidence or to reject the same at the stage of the appeal. But the said discretion cannot be exercised in an arbitrary manner. If the Tribunal finds that the documents filed are quite relevant for the purpose of deciding the issue before it, it would be well within its powers to admit the evidence, consider the same or remit the matter to the lower authorities for the purpose of finding out the genuineness of the letters considering the relevancy of the same. But if the Tribunal fins that the evidence adduced at the stage of the appeal is not quite relevant or that it is not necessary for the proper disposal of the appeal before it, in that case, the Tribunal could straightaway reject the evidence, which was sought to be produced for the first time at the state of appeal.’’

In the case of R Dalmia vs CIT 113 ITR 522 (Del). The court repelled this challenge holding that the Appellate Tribunal has a discretion to decide whether to admit the additional evidence or not in the absence of any suggestion that it had acted on any wrong principle, no question of law can arise from the Tribunal’s decision to admit the additional evidence and remand the case back to the Asstt. Commissioner to give the Revenue an opportunity to produce the additional evidence as the Revenue might wish to produce and forward it to the Tribunal. The Court also observed that no prejudice whatsoever caused to the assessee as he was given full chance to rebut the additional evidence produced by the Revenue and a chance was given to the assessee also to produce his own evidence.

In the case of CIT vs Text Hundred India Pvt. Ltd. (Delhi High Court) – the Court said that it is thus clear that the Tribunal found the requirement of the said evidence for proper adjudication of the matter and in the interest of

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

substantial cause. Rule 29 of the Income Tax (Appellate Tribunal) Rules categorically permits the Tribunal to allow such documents to be produced for any substantial cause. Once, the Tribunal has predicted its decision on that basis, we do not find any reason to interfere with the same.

In the light of the above and in the interest of justice the assessee would like to pray before your honour to accept the additional evidence adduced alongwith the grounds of appeal.’’

However, the ld.AR of the on the date of hearing of appeal on 26-09-2019

submitted that he does not want to press the additional evidence before

the Bench and wish to withdraw the same for which the ld. DR has no

objection. Thus the additional evidence raised by the assessee is treated as

withdrawn.

3.1 Now we take up the revised grounds No. 1 and 2 of the assessee

raised before the Bench as under for adjudication.

‘’1. The ld. CIT(E) has erred in law as well as on the facts of the case in withdrawing the approval granted u/s 10(23C)(vi) vide show cause notice dated 31-12-2015 with retrospective effect from A.Y. 2010-11 onwards on the basis of proposal of Assessing Officer. The approval so withdrawn u/s 10(23C)(vi) is contrary to the provisions of law and facts of the case the same kindly be quashed.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

which have no bearing with the registration u/s 10(23C)(vi) namely diversion of cash in hand and alleged unsecured loan, application of provision 13th of Section10(23C)(vi) etc. vide show cause notice dated 31-12-2015 with retrospective effect from A.Y. 2010-11 onwards on the basis of proposal of Assessing Officer. Hence, the impugned order so passed and approval so withdrawn u/s 10(23C)(vi) by the ld. CIT(E) are contrary to the provisions of law and facts of the case as above the same kindly be quashed.’’

4.1 Apropos Ground No. 1 and 2 of the assessee, brief facts of the case

are that the assessee is an educational institute and registered under the

Society Registration Act 1860 on 27.12.2001 and trust having main

objects of setting up of educational institutions and operating them for the

promotion of education (PB15-16) under the name of Tirupati College of

Technical Education Society. The institute is also registered u/s 12A of

the IT Act vide registration certificate dated 26/29.10.2010 (PB17), also

registered u/s 80G of the IT Act vide registration certificate dated

26/29.10.2010(PB18), thereafter approval under section 10 (23C) (vi) of

the tax Act. 1961 vide notification No. 18/2010-11 endorsed vide letter no

CCIT/ Addl. CIT (H.qrs)/JPR/10 (23C) (vi)/2010-11/3049 dated

23/25.11.2010 has also been granted to the assessee. The assessee society

is filling its return of income regularly and assessment has also been

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

completed u/s 143(3) for A.Y. 2010-11 and 2011-12(PB41-44). The

Society has also trust filed its return of income on dated 01.10.2012 for

A.Y.2012-13 showing income as NIL after claiming exempt income for

Rs. 4,33,338/- under section 10 (23C) (vi) and under section 10, 11 & 12

of the IT Act. For A.Y. 2012-13, the case of the assessee was selected

for Scrutiny assessment u/s 143 (3) of the Act and the ACIT, Circle -1

issued the notice u/s 143(2) dated 09.09.2013, thereafter the case has been

transferred to ACIT (Exemption) vide order dated 15.11.2014. During

the course of assessment, the AO has raised query and details of which

has been furnished by the assessee. However at the last end of

assessment, the AO has sent a proposal to the ld. CIT(E) on

25/26.03.2015 on the issue of alleged diversion of cash in hand and

unsecured loans. The AO stated that the opening cash in hand as on

01.04.2015 was of Rs.16,35,968/- and the closing cash in hand as on

31.03.2011 amounting to Rs. 50,54,193/- was found unreasonable and

more or less in the entire year is same. Regarding the unsecured loan AO

stated that there were discrepancies in the details of furnished of

unsecured loan and the same are anonymous receipts of the assessee and

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

kept the assessment pending which was to be completed till 31.03.2015.

After 9 Month of proposal the DCIT(E) has issued notice on dated

31.12.20015 for withdrawal of approval granted under section 10 (23C)

(vi) of the Income tax Act 1961 vide notification No. 18/2010-11

endorsed vide letter no CCIT/ Addl. CIT (H. qrs)/JPR/10 (23C)

(vi)/2010-11/3049 dated 23/25.11.2010. Thereafter the DCIT (HQs)

(exemption) has issued show cause for rescinding the notification under

section 10 (23C) (vi) of the Act on 31.12.2015. The assessee had replied

to this show cause on 19.01.2016 vide page 5-7 of ld. CIT(E) order and

after that the ld. CIT (Exemption) has withdrawn the approval granted

under section 10 (23C) (vi) of the IT Act vide order dated 04.03.2016

holding that the huge cash balance is available with the assessee society

throughout the year and assessee was having heavy debit balance in the

overdraft account and loan account maintained with IDBI Bank and the

assessee is paying heavy interest on these overdraft and loan account

despite the sufficient cash in hand available with the assessee and there is

no justification for withdrawal of cash from bank when cash in hand is

available. The ld. CIT(E) alleged and presumed that cash has been

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

utilized by the members of management committee for their personal uses. The ld. CIT(E)has further stated that as per 13th proviso of the Sec.

10(23C) of the Act the trust was supposed to invest the surplus funds as per the 3rd proviso of Sec. 10(23C). This condition has been totally

violated by the Society. Regarding the unsecured loan, the ld. CIT(E) has

stated that assessee could not file the PAN in five cases vide para 6.1 at

page 9 of his order and no complete address have been furnished in the

18 cases discussed at para 2.2 © of the show cause letter dated

31.12.2015. The ld. CIT(E) has alleged that the source of fund collected

by the society remains unexplained. The ld. CIT(E) further alleged that

the books of accounts maintained by the institution are not found subject

to verification and in the absence of the same, the activities of the institution cannot be held genuine and the 13th proviso of Sec. 10(23C) is

attracted and withdrawn the Approval u/s 10(23C)(vi) from A.Y. 2010-11

onwards. The relevant extract of the ld. CIT(E)’s observations regarding

not granting exemption to the assessee u/s 10(23C)(vi) of the Act w.e.f.

A.Y. 2010-11 are as under:-

‘’5.3 The assessee is paying heavy interest on these overdraft and loan account despite the fact that sufficient

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

cash in hand is availale with the assessee. In normal course, one will prefer to deposit the cash in bank account in order to decrease the investment liability. But no such thing happened in this case.

5.4 As regards the emergency need of cash during day to day working that cannot be in lacs of rupees on regulr basis and there is no justification for withdrawal of cash from bank when cash to the tune of Rs. 60 lacs is available in hand. This clearly establishes that the cash has been utilized by the members of management committee for their personal use.

5.5 In normal course, the Trustee can hold only such cash balance in hand which is sufficient to meet the day to day expenses for running the trust. If there are excess funds available with the trustees then such moneyhas to be invested as per the provision of the Act. In the matter of Ratilal Panchand Ganshi vs State of Bombay on 12 Sept. 1952 Equivalent Citation: AIR 1953 Bom 242 (1953) 55 BOMLR 86, ILR 1953 BOM, 1187, it was held that such section requires that the trust funds which consist of money and which cannot be applied immediately or at any early date to the purpose of the public trust shall be invested by the trustees in public securities. Attention is invited to the 13th proviso of the 5.6 section 10(23C) of the Income Tax Act, 1961 as per this proviso the trust was supposed to invest surplus funds as per the 3rd proviso of Section 10(23C). But as discussed in place of keeping the funds in prescribed modes, the society has kept the funds in cash only. The strict measure to keep the funds to the society only in prescribed mode was mainly to curb the misuse of funds by the management. This condition has been totally violated by the society.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

6.1 As regards confirmations of unsecured loans, the submission of the assessee is that the confirmation of ussecured loans have already been furnished during assessment proceedings. On examination of assessment records the contention is found incorrect. Even during the proceedings in hand, the assessee could not file the PAN in the following cases.

S.N. Name Amount 1. Mittal Impex 2,00,000 2. Hari Narayan 10,00,000 3. Lalit Galav 1,50,000 4. Sarai Brothers 5,00,000 5. Surrabh Verma 1,40,365/-

Further no complete address shave been furnished in the 18 cases discussed at para 2.2© of the show cause letter dated 31-12-2015.

6.2 From the above, it can be seen that the source of funds collected by the society remains unexplained. The proviso 2 to the Section10(23C) empowers the prescribed authority to call for such document (including audited annual accounts) or information, as it thinks necessary in order to satisfy itself about the genuineness of the activities of institution in this behalf. Therefore, the books of accounts maintained by the institution are not found subject to verification and in absence of same the activities of the institution can be held genuine and the 13th proviso of section 10(23C) is attracted.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

this section w.e.f. 2010-11. Therefore, the approval granted vide Notification No. 18/2010-11 endorsed vide letter No. CCIT/Addl.CIT (Hqrs)/JPR/10(23C)(vi)/10-11/30-49 dated 23/25.11.2010 from A.Y. 2010-11 and onward is hereby withdrawn.’’

4.2 During the course of the hearing the ld.AR of the assessee has

prayed that the ld. CIT(E) has erred in withdrawing the approval u/s

10(23C)(vi) of the Act for which the ld.AR of the assessee filed following

the written submission.

‘’SUBMISSIONS: 1. Show cause Notice issued dt. 31.12.2015 is invalid and consequent proceedings also bad in law and invalid: 1.1 At the very outset it is submitted that the impugned order passed by Hon'ble CIT (E), Jaipur is bad in law and invalid as the show cause notice dated 31- 12-2015, u/s 10 (23C) (vi) was issued and signed by the Ld DCIT (Hqs.) (Exemption) as it should have been signed by Hon'ble CIT(E) himself who is Prescribed Authority. Thus, show cause notice was not issued by the competent authority and the proceedings based on such illegal show cause notice and consequential proceedings and order passed by the Id. CIT (E) are not valid and hence liable to be quashed. Because the power and jurisdiction to withdraw the approval granted u/s 10 (23C)(vi) of the Act is provided under 13th proviso to the said section which reads as under. " Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) is notified by the central Government 7 [or is approved by the prescribed authority, as the case may be,] or any university or other educational institution referred to in sub-clause (vi),or any hospital or other educational institute referred to in sub-clause (via)is approved by the prescribed authority and subsequently that government or the prescribed authority is satisfied that-

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

(i) such find or institution or trust or any university or other educational institution or any hospital or other medical institution has not- (A) applied its income in accordance with the provision contained in clause (a) of the third provision, or (B) Invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso or (ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution. (A) are not genuine; or (B) are not being carried out in accordance with al or any of the conditions subject to which it was notified or approved.

it may, at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the assessing Officer" 1.2 Thus for initiation of proceedings to withdraw the approval the mandatory pre-condition is the satisfaction of the prescribed authority. Undisputedly here the prescribed authority is the Hon'ble CIT (E) and the satisfaction of the prescribed authority is a must before issuing the show cause notice for withdrawal of the approval granted u/s 10 (23C) (vi) of the Act. Therefore, what is material and mandatory condition is the satisfaction of the prescribed authority and non-else. In the case of assessee the impugned show cause notice dated 31-12-2015 was signed by the DCIT (Hqs.) and issued as per directions of the Hon'ble CIT (E). The same can be proved by the paras 2 and 3 of the show cause notice (copy enclose) (PB1-4) to the issue and the same are reproduced as under.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

2.2 Further the department has also filled the MA in this case and the MA filed by the department has also been rejected by the Honble Bench on dt 24.07.2018 (MA no. 53/JP/2018)(PB73-87 case law index). 2.3 Against the order of the Honble ITAT the department had filled appeal before the Honble Raj. High Court and the Honble Raj. High Court has dismissed the appeal of the Revenue vide order in CIT(E) v/s Modern School Society in DBIT No.172/2018 dated 31.07.2018 (PB88-96 case law index). 2.4 Thereafter, against the order of the Honble Raj. High Court the department had also filled SLP before the Honble Supreme Court and the Honble Supreme Court has also dismissed the SLP of the Revenue vide order in CIT(E) v/s Modern School Society in SLP(C) No.5241/2019 dated 18.02.2019 Copy of the same is enclosed herewith as Annexure-2 2.5 Thus the issue on the legality of Notice is directly covered and has been affirmed, confirmed, settled and decided by the Honble Supreme Court and now there remains nothings and covered matter. "Thus, it is settled legal proposition of law that the notice issued by the authority other than the prescribed authority is not valid and consequential order passed by the Ld CIT (E) is without Jurisdiction. The show cause notice confers the jurisdiction to proceed and to pass the order. In case the notice itself is not valid then the jurisdiction assumed by the prescribed authority based on the invalid notice become invalid and consequential order passed by the authority is invalid and void abinitio for want of jurisdiction, Further, invalid show cause notice vitiates the proceeding and consequential order. Hence, we are of the considered opinion that the impugned order passed by the Id. CIT (E) is invalid and liable to quash on this ground." 2.6 Further the finding and plea taken in the order of the Modern School Society, Delhi vs CIT (Exemption),(Supra) may also be read as part of our WS being the same issue and applicable in our case.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

signed by the competent authority as a funding has been recorded by the Tribunal that the notice has been issued under the signature of Income- tax (technical), whereas in view of the provisions of powers under Section 263 (I), it is only the commissioner of income-tax to issue notice." Thus on this ground alone the order of the ld. CIT(E) is liable to be quashed. 4. Regarding the additional grounds of appeal we have to submit that the additional ground is legal in nature and all relevant facts are available on record as emerging out of the notice issued by the DCIT (Hqs.) (Exemption) u/s 10 (23C) (vi) of the Act. Since, no new facts are required to the evaluated nor any further enquiry is needed and the issue raised in the additional ground can be adjudicated on the basis of the facts and material available on record and by applying the provisions of law, therefore, the additional ground raised by the assessee be admitted for adjudicated. The Hon'ble Supreme Court in case of National Thermal Power Co. Ltd. vs. CIT 229 ITR 283 has held that u/s 254, the Tribunal may, after giving both the parties to the appeal an opportunity of being head, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeal is thus expressed in the widest possible terms. There is no reason why the assessee should be prevented from raising the question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. Both the assessee as well as Department have a right to file an appeal/cross objection before the Tribunal and therefore, there is no reason why the Tribunal should be prevented from considering the questions of law arising in assessment proceedings although not raised earlier. Also refer Modern School Society, Delhi vs CIT (Exemption), Jaipur in ITA no. 1118/JP/2016 dated 20.12.2017 Thus the assessee would like to request to accept the additional ground and may be admitted for adjudication. 5. Action for withdrawing of approval u/s 10(23C)(vi) on the Proposal of the Assessing Officer itself to the ld. CIT is invalid: Because at the very outset it is submitted that the proceeding or action of withdrawing approval u/s 10(23C)(vi) in the present case itself

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

invalid. Because as per the order of ld. CIT(E) it is very clear from above facts on record that the action in the present case has been taken on the proposal of the ld. AO on the same very issues in the proposal letter. He has not made any amendments on the issues. Thus, the action has not been taken by the ld. CIT Su-Moto and on the prior satisfaction of CIT(E). The action can only be taken by the CIT(E) when he has found any violation of provision and satisfied. The AO itself can not propose to take any action for withdrawal of approval. And in act and 13rd (now 15) provision of Sec.10(23C)(vi) no where it has been provided that on the proposal of the AO the CIT can/may take action for withdrawals of approval u/s 10(23C)(vi). Hence the Action taken by the ld. CIT(E) on the proposal of AO itself is invalid and liable to be quashed. On these very exact same facts, circumstances the Honble ITAT Jaipur Bench Jaipur Struck down or quashed the action u/s 263 taken by the same CIT Kota In the case of Sh. Kishore Madnani V/s The CIT Kota in ITA No. 508/Jp/2013 dt. 31.01.2014 vide page 2 and para 2.6 of page 16-17 of this order and also in the case of Sh. Giriraj Gupta v/s The CIT Kota in ITA No. 426/Jp/13 dt. 28.02.2014 vide para 3-4 page 3-4 and para 8 page 17-19 of this order. Also Kindly refer Jheendu Ram v/s CIT 130 TTJ 82(Luck.) and Rajeev Arora v/s CIT 135 TTJ 01(Jp). Although these judgments are on 263 but applicable here also. 6. No satisfaction of the ld. CIT(E): Further the ld. CIT(E) office has not issued the on his own satisfaction but on the proposal of the ld. AO, his office has issued the notice for withdrawing the approval and after issuing the show cause notice the assessee has also filed the reply and details but the ld. CIT(E) has not make further inquiry and verification regarding our contention and evidence he simply proceed on the proposal and have not bring any adverse material to rebut our contention and material evidences. The ld.CIT(E) has not recorded his own satisfaction. When in the 13rd Provision (now 15th) itself stated that if the Prescribed Authority is satisfied. And assumption, presumption and suspicion cannot be called a satisfaction as clear from the impugned order and action. 7.1 No retrospective effects should be given: Further the Hon CIT (Exemptions) withdrawal such approval from A Y 2010-11, through the assessee has already assessed for A Y 2010-11 under section

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

143(3) of the Income Tax Act and the Assessing Officer had not found any violation of the provisions of section 11(5) or 13 (3) or any other provisions of the Act while completing the scrutiny assessment. Copy or order is hereby enclosed. (Page No. 38 to 44) The Hon'ble Supreme Court in case of State of Rajasthan and others vs Basant Agrotech India Ltd. and other 388 ITR 81(SC) decided that only a legislation can make a low retrospective and prospectively subject justifiability and acceptability within the constitutional para-meters. The subordinate legislation can be given with retrospective effect if a power in this behalf is contained in the principle Act. In the absence of such conferment of power the Government the delegated authority has no power to issue a notification with retrospective effect. Therefore, in the absence of any provision contained in legislative Act the delegatee cannot make a delegated legislation with retrospective effect. When no power has been conferred by the act on the competent authority to withdraw the approval retrospectively, then the withdraw of the approval u/s 10(23C)(vi) of the Act can only be prospective. Hence such withdrawal of approval gentled under section 10(23C) from back date are also not according to the law and facts of the case and at the worst after the year of notice it can be done if any. In the case of CIT V/s Manav Vikas Avam Sewa Sansthan 336 ITR 250 (All) it has been held that “9. We have heard the learned counsel for the appellant and perused the record, the sole argument which is advanced by the learned counsel for the appellant is wholly misconceived and contrary to judgment and order passed by a Division Bench of this Court vide judgment and order dt. 11th Dec., 2008 in Writ Petn. No. 147 of 2004 (MB) Oxford Academy for Career Development vs Chief CIT & Ors. (2009) 226 CTR (All) 606 : (2009) 29 DTR (All) 160 wherein this Court has held that : "Regarding cancellation of registration which was granted on 1st April, 1999 under s. 12A of the Act, it is true that there was no express provision in s. 12A of the Act for cancellation of the Registration. The applicability of s. 21 of the General Clauses Act, 1897 was discussed by the Uttaranchal High Court in the case of Welham Boy’s School Society (supra), where it was observed that any order passed by the CIT(A) under s. 12A is a quasi-judicial order, which does not fall in the

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

category of ‘orders’ mentioned in s. 21 of the General Clauses Act, 1897 by relying the ration laid down in the case of Ghaurul Hasan vs. State of Rajasthan AIR 1987 SC 107. The High Court observed that by virtue of s. 21 of the General Clauses Act, the CIT had no power to rescind the order passed earlier by the CIT granting registration to the petitioner’s society. It may be mentioned that s. 12AA(3) was incorporated w.e.f. 1st Oct., 2004 to empower the CIT to cancel the registration granted to a trust or institution. The same is not applicable retrospectively and in the assessee’s case for the assessment years under consideration. The object of this provision is not clarification or explanatory, so prior to that date, the authorities granting registration had not inherent power to withdraw or revoke the registration already granted. The order canceling the registration granted to a trust or institution under s. 12AA of the Act being a quasi-judicial order does not fall within the category of orders mentioned under s. 21 of the General Clauses Act, 1897, which provides that the power conferred on an authority empower to issue orders including the power to rescind such orders and the CIT would not have power to rescind the order passed by the CIT earlier granting the registration to a trust or institution. Even assuming, the CIT has power to rescind the order registration on the ground that the registration had been obtained by practicing fraud or forgery, there was nothing in the show cause notice or in the impugned order dt. 9th March, 2004 alleging that the petitioner had obtained the registration by practicing fraud or forgery." 10. Further admittedly in the present case, the sub-s. (3) of s. 12AA of the Act has came into force w.e.f. 1st Jan., 2004 by the Finance (2) Act, 2004. As such while passing the order dt. 13th March, 2009, the CIT-II, Lucknow had no power whatsoever to review or recall the order dt. 29th Sept., 2003 by which the assessee was granted the registration under s. 12A of the IT Act, 1961. 11. It is well settled proposition of law that the judicial/quasi- judicial authority cannot review its own order, unless the power of review is expressly conferred on it by the statute under which it derive its jurisdiction (see Dr. Smt. Kuntesh Gupta vs. Management of Hindu Kanya Mahavidyalaya, Sitapur & Ors. reported in AIR 1987 SC 2186) and Full Bench decision of this Court in the case of Smt. Anarkali & Ors. vs. Dy. Director of Consolidation & Ors. reported in 1997(15) so the order passed by CIT-II, Lucknow dt. 13th March, 2009 is without jurisdiction and void ab initio and the appeal (ITA No. 304/Luck/2009)

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

filed by the assessee before the Tribunal, Lucknow Bench, Lucknow was correctly and rightly allowed by the said authority by order dt. 10th July, 2009.” 7.2 No withdrawal of Approval u/s 10(23C)(vi) can be made of all years: Further the ld. DR in his WS page 9 para last(v) has held that in income tax matters each assessment years is a separate unit i.e year and therefore res-judicata is not applicable is support our case. Because the ld. AO and CIT(E)or PA has found or made allegation or objection or diversion of cash in hand and unsecured loan, if any only in A.Y. 2012-13 not in other years either prior years or later years, if so then how the withdrawal of Approval u/s 10(23C)(vi) can be made for other years except 2012-13 if any. Hence at the worst no withdrawal can be made except for the year 2012-13 if any. And for the mistake if any of one year the other years cannot be suffered, which is against the principal of natural justice. 8. Further on merit we have to submit as under 8.1 On diversion of cash in hand: The ld. CIT(E) has assumed that there was cash in hand and also withdraw cash from the bank and there was much cash in hand which is diversion of cash in hand. However the ld. CIT(E)has only taken some choose and pick cash details and ignored overall position of the entire years. The position of total cash withdrawals from banks and total cash deposit with bank from various banks are as under: Name of bank Cash withdrawals Rs. in lacs) Cash deposit (Rs. in lacs) BOB M I Road 24.65 18.63 Axis Bank 57.58 169.41 Bob sitapura 33.27 15.96 IDBI Current 0.00 27.25 UCO Bank 0.00 01.50 DIBI overdraft 0.00 26.98 Total 115.50 259.45

The above position of cash withdrawals and deposits from various banks shown the assessee has withdrawals cash from bank Rs. 115.50 lacs though the amount deposited by cash in banks Rs. 259.45 i.e. more than double of withdrawal amount. The same can be verified

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

from the copy of certificate from banks are enclosed here with (PB 19 to 23). This has been not considered by the CIT(E). 9. Mere suspicion: The Hon CIT (Exemptions) have also mentioned at para 5.4 Page 8 of the order that the cash in hand was used by the members of managing committee for their personal uses are only on assumption, presumption and suspicion. Though Mr. Amit Goyal (Secretary) has invested Rs. 14.50 lacs during the year on which interest was also not charged. Copy of account is hereby enclosed for your perusal. (Page No. 24, 25). Further Sh. K.S. Goyal (Member) has also given donation of Rs.34,00,000/- in last year i.e in F.Y.10-11. If the funds have been utilized by the members they could not have given such donation or not invested. Hence it is not correct to state that fund of trust was used by the persons having control over the affairs of society. And only on assumption presumption and suspicion no adverse inference can be drawn. A bare reading of the order of the CIT(E) shall reveal that the allegations has been made simply on mere suspicion, surmises and conjectures, without verifying or looking to the nature of Society and material. No single specific instance of any nature whatsoever has been given by the CIT(E) in the impugned order to support his contention with the help of documentary evidence that the funds of the institute has been diverted and utilized by the members of the society and by which members, how much amount and when. There is no corroborative evidence available with the Hon CIT (exemption) for utilisation of funds by the managing committee. An allegation remains a mere allegation unless proved. Suspicion may be strong however cannot take the place of reality, are the settled principles kindly refer Dhakeshwari cotton Mills 26 ITR 775 (SC), Uma Charan Shaw v/s CIT 37 ITR 271 (SC). All the disallowances deserve deletion on this submission alone. 10.1 The assessee has some other reason to kept cash in hand. The assessee wants to purchase the land for further extension of educational institution and for that it entered into an agreement on dt. 11.04.2011 for purchase the land for Rs.46,80,000/- for which the assessee needs to kept cash in hand. The copy of agreement is hereby enclosed. (PB 31 to 34). At the time of agreement the assessee has paid only Rs.2,00,000/- in cash and balance amount was to be paid after the regularize and getting patta form JDA and at the time of Registry for that the seller has assured that he is trying to get the land regulerize and

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

patta from JDA and thereafter remaining amount was to be given. And the seller wants to take the amount in cash. But by one and other reason in the whole year the matter could not be finalized that is why in the April 2012 the assessee has started to deposit cash in the bank. But the ld. CIT(E) has ignored the same. 10.2 Further the fees of the students was collected in cash and some time when the cashier and controlling person of cash in hand was out of office then on requirement the cash has been withdrawn from banks. 11.1 Figures mentioned at para 4 are only for that days on which cash withdrawals by the assessee from bank. The Ld. AO has not mentioned the dates on which cash was deposited by the asseesee in bank. Figures mentioned as above makes the position clear that assessee deposited cash more than withdrawals. And only on choose and pick items no inference can be drawn on suspicion. 11.2 The assessee has term loan account on which it is not possible to deposit the cash, being if once the cash was deposited by the borrower, the bank cannot give the term loan again when funds was required by the assessee. The assessee also have an overdraft account on which the bank also put a condition that OD limit cannot be utilised by excess cash withdrawals. Hence it is not useful for assessee to depositing the cash in OD account. Further the said term loan and OD accounts are also secured by the personal property of Mr. Amit Goyal who manages the affairs of the assessee. Copy of letter received from IDBI bank regarding list of original documents held with Bank is herby enclosed to prove the same. (PB 35 to 36). Hence it is not correct to state that fund was utilised by the members of managing committee for their personal uses. Rather they are giving so much to the institute. The lower authority has ignored the same. 11.3 The Hon (CIT) exemption only assume that cash in hand was utilised by the members of managing committee. There is no corroborative evidence available with the Hon CIT (exemption) for utilisation of funds by the managing committee. If they want funds the same can be withdrawn as repayment of unsecured loan, being

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

managing committee members given unsecured loan to institution balance of them as on 31.3.2012 are as under. a. Amit Goyal : Rs. 2905641.00 (PB24) b. Manju Goyal : Rs. 3385314.00 (PB 25) c. Subhash Chand goyal : Rs. 286328.00 (PB 27) d. Priyanka Goyal : Rs. 401750.00 (PB 71) e. Kripa Shanker Goyal : Rs. 263500.00 (PB 26) f. Subhash chand Goyal & Sons : Rs. 429452.00 g. Ity Goyal : Rs. 35000.00 (PB29) Total : Rs. 7706985.00 Copy of confirmation of accounts from all the above persons enclosed at Page no shown as above. 12.1 In case of Delhi Bench of ITAT in Sanjeev Kapoor case: ITA 209/De/2010 dated 29.10.2010 Held "It is bit unusual that a person withdraws cash from bank in installments and redeposit the same into bank without using the cash but still in the absence of any evidence regarding any other use of cash by the assessee, it cannot be alleged that such cash was used by the assessee for some other purpose and it was not available with the assessee on the date when the assessee deposited the cash in to bank. There is no evidence brought on record by Ld AO in this regards... The facts in the case of Shri Sanjeev Chadha (supra) were also similar.... 12.1 The Hon'ble CIT (exemption) mentioned at para 5.6 page 8 of the order (decided para) that " attention is invited to the 13th proviso of the section 10 (23C) of the IT Act 1961 as per this proviso the trust supposed to invest surplus funds as per 3rd proviso of the section 10(23C), But as discussed in place of keeping the funds in prescribed modes, The society has kept the funds in cash only." 12.2 3rd Proviso of section 10(23C) of 1 Tax Act read as under:

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

Provided also that the fund or trust or institution [or any university or other educational institution or any hospital or other medical institution] referred to in sub clause (iv) or sub-clause (v) [or sub-clause(vi) or sub-clause (via)]- (a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after the 1st day of April,2002, the period of the accumulation of the amount exceeding fifteen percent of its income shall in no case five years ;and ] (b) does not invest or deposit its funds, other than - (i) any assets held by the fund, trust or institution [or any university or other educational institution or any hospital or other medical institution] where such assets form part of the corpus of the fund, trust or institution [or any university or other educational institution or any hospital or other medical institution] as on the 1st day of June, 1973; (ia) any asset, being equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1998; (ii) any assets (being debentures issued by ,or on behalf of, any company or corporation),acquired by the fund, trust or institution [or any university or other educational institution or any hospital or other medical institution ] before the 1st day of march, 1983;

(iii) any accretion to the shares, forming part of the corpus mentioned in sub-clause (i)[and sub-clause(ia)], by way of bonus shares allotted to the fund, trust or institution [or any university or other educational institution or any hospital or other medical institution]; (iv) voluntary contributions received and maintained in the form of jeweler, furniture or any other article as the Board may, by notification in the Official Gazette, specify, for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11:]

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

12.3 Now the assessee would like to give the summery of source of fund and investment of fund as on 31.03.2012 as under: Copy of Balance Sheet as on 31.03.2012 is here by enclosed to prove the same. (PB 37)

Source of fund Amount Investment of Amount fund Capital 5132716.00 Fixed asset (for 4834489.00 college) Development 6725293.00 Investment in 5834947.00 fund FDR Secured Loan 31701392.00 Current Assets 9295486.00 (OD & Term Loan Unsecured loan 22255386.00 Cash in Hand 5054193.00 Current 2918116.00 Cash at Bank 203788.00 Liabilities & provision

Form the above the assessee would like to clarify that trust fund are invested in accordance with the provisions contained in clause (b) of the third proviso as under Fund of Trust

Capital Fund : 5132716.00

Development Fund : 6725293.00

Total : 11858009.00

Investment of Fund (as per clause b of third proviso of sec 10(23C)

Fixed Assets of the Trust (After Depreciation): 48344489.00

(Annexure D to Balance Sheet)

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

Less: Term Loan & OD (Secured on the above fixed Assets) : (31701392.00)

Net Assets (A) : 16643097.00

Investment in FDR (B) : 5834947.00

Cash at Bank (C) : 203788.00

Total (A+B+C) : 22681832.00

The above figure clearly explains that the assessee had surplus funds only for Rs. 118.58 lacs though the trust had invested Rs. 226.82 lacs in eligible funds. Hence it clearly established that whole funds were invested in accordance with the provisions contained in clause (b) of the third proviso of Sec 10(23C). If the position as above clear then how it can be said that the assessee has diverted the funds and misutilized the funds, without any evidence no adverse view should be taken. There must of a concrete evidence on record for diversion and misutilization of funds. 12.4 Unsecured Loans (Mainly brought from Managing committee, their friend & relatives)& Current liabilities are not the funds of trust. These are the current liabilities of trust and can be payable immediately on demand. In the above calculation Current assets and cash in hand also not considered as investment of funds of trust. From the above it is established that the assessee has – A. applied its income in accordance with the provisions contained in clause (a) of the third proviso ; or B. invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso:

So the application of 13th proviso of the section 10 (23C) by the ld. CIT(E) are not according to the law and facts of the case and withdrawal of approval granted under section 10 (23C) are not genuine, should be again sustained.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

12.5 Further although we are not admitting and if once it is thinks that the cash in hand has been utilized by the members. In this regard we have to submit that as per AO and CIT(E) in the entire years the cash in hands about Rs.50.00 lacks and normally cash in hand should be Rs.10.00 and the interest on this at the worst comes to Rs.4,00,000/- and in place of the same the Secretary Smt. Amit Goyal Goyal who has looking after all the management and affairs has withdrawing the salary only of Rs. 3.23 Lacs and the other members namely Miss Priyanka Goyal Member was also MBA and working as a faculty and not drawing any salary and other members are giving free service and not withdrawing any remuneration from the society and as Sh. K.S. Goyal Donation of Rs.34,00,000/- in the earlier years for the betterment of society, all these facts should also be considered. In the case of Kashatriya Sabha Maharana Partap Bhawan vs. UOI & ANR. (2010) 78 CCH 0100 PHHC (2010) 0194 TAXMAN 0442 It has been held that Exemption under s. 10(23C)(vi)— Grant/Renewal of approval—Relevant consideration—Applications for grant/renewal of approval for exemption under s. 10(23C)(vi) filed by various petitioner-institutions rejected by the Chief CIT on the grounds that the petitioners were generating substantial surplus year after year which was utilised on capital investment and not for educational purposes, some of the petitioners had advanced loans to the principal of its school or members of the society and in some cases audit reports in Form No. 10BB were not filed along with the returns—Not justified— While considering the application for grant of approval, it is obligatory on the part of the prescribed authority to examine whether the expenditure incurred as capital investment is for educational purpose or not—As regards lending of loan to the principal of the institution, the competent authority is required to consider the same in its proper perspective—Lending of loans to the employees of the institution cannot be regarded as misapplication of funds as good service conditions are necessary to attract talented persons to an educational institution— Likewise, remuneration paid to the director of a school and to his wife in their capacity as employees rendering services to the school as director or teacher has to be treated as payments for educational purposes—As regards filing of audit report, submission of audit report in Form No. 10BB along with return is not mandatory and it could be filed even after the filing of return—Hence, impugned orders passed by

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

the Chief CIT refusing to grant/renew exemption under s. 10(23C)(vi) are quashed The same principal is also applicable in the present case. 13. On unsecured Loans: 13.1 In this regard it is submitted that the sources of Fund explained, books of accounts maintained, genuine institution activities: The Hon CIT (Exemptions) has stated at para 6.1 of the order that the assesse has not furnished PAN of 5 persons. The PAN has already been updated with Hon CIT (Exemptions). The same has also given her under : a. Mittal Impex : AETPK3007Q b. Hari Narayan : AHDPN1423C c. LalitaGalav : AJFPG9645R d. Sarai Brothers : BVMPS3693H e. Saurabh Verma : ACGPV307IL The above Pan's are also submitted during assessment proceedings.

Regarding address of 18 person the assessee would like to state that when PAN of all the person has been furnished to the Ld AO on behalf of Hon CIT (exemptions) then addresses can be verified from PAN. Again copy of letter dated 11.02.2016 has been filled before the ld. CIT(E)(PB 45-48). Further the assessee would like to state that whatever address given by the assessee, incorporated by the Ld CIT (E) at Page no. 5 & 6 of the order. Assessee has also filled the route chart taken from google map (PB 48 & 49) only by typing the address mentioned at page 6 of the order regarding Aryabhatt academy Ajmer and Kuber Finance Company Jaipur mentioned at S No 1 & S No 5 . And the assessee had given all the address and Pan to the ld. CIT(E) despite that he is not tried to verify the same. 13.2 The assessee had also filled the confirmed copy of accounts, PAN and address of all the persons (As per Annexure A) mentioned at para 4 of the order of withdrawal of exemption. In addition to these the assessee would also like to enclosed copy of Form 16A, where tax was

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

deducted by assessee, in Few cases copy of ITR and in the case of Mr. Amit Yadav and Sushila Devi copy of bank statement also filled. 13.3 The assessee would also like to state that all the transactions from unsecured loan accounts are thought only account payee cheques. The assessee has also paid interest to them and TDS was also deducted thereon and when PAN were provided for all the persons and all the amounts received from them through accounts payee cheques then treating them as not genuine transactions are harsh on assessee. 13.4 The Ld. AO as well as Hon CIT (Exemptions) did not made any further enquiry of the concerned persons, nor had issued summons under sections 131 of the Act, nor made any spot enquiries on the address given by assessee, nor taken any effort of seeking address from PAN given by us. The assessee has discharged the onus of genuineness by furnishing PAN as also decided in ITAT Ahmedabad. "A" Bench in DCIT , Central Circle-I, Baroda Vs. Shri Gaurag Manibhai Patel (HUF) ITA No 322/AHD/2013 A Y 2009-10). 13.5 Further the assessee would like to submit that the assessee has only running the educational institution. The Ld AO has also recorded the statement of Institutional staff to justify the same. Certified true copy of statement recorded is hereby enclosed. (PB 88-91). Hon’ble Jaipur Bench of Income Tax Appellate Tribunal has also decided in the case of ACIT (Exemption), Jaipur v Mahima Shiksha Samiti (2017) 79 taxman. com 38 (Jaipur-Trib.) that where main objects of assessee-society was setting up of educational institutions and operating it for promotion of education, assessee society generating surplus year after year would not be a deciding factor to determine whether it ineligible for exemptions or not. 13.6 Further we would like to submit that the assessee trust registered under section 12AA wef 01.04.2010 and thereafter almost in every year the trust was assessed under section 143 (3) of the IT Act. In all the Assessments done by the various Assessing Officers except in the case of A Y 2012-13, the Assessing Officers neither find any discrepancies in the books of accounts maintained by the trust nor find any activities which were not genuine, done by the trust, They all

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

mentioned in the Assessment Orders that the trust is running an educational institution. We would like to submit the detail of assessment order in the tabular form as under : Ass Year Date of Remark Order 2010-11 25.03.2013 The Ld AO mentioned in the order that book of accounts produced and the main object of the assessee society is study and develops the students. (PB38-44) 2012-13 02.05.2016 Order related to year in question 2014-15 29.12.2016 The Ld AO mentioned in the order that Books of accounts produced and assesse is running educational institution. Assessed at returned income NIL (PB 106-108) 2015-16 15.12.2017 The Ld AO mentioned in the order that Books of accounts produced and assessee is running educational institution. Assessed at returned income (PB110-112.) 2016-17 04.12.2018 E Assessment was done by the Ld AO and assessed at returned income (PB 113-119) Copy of All the above said Assessment Order is hereby enclosed for your perusal as above and from the all the above said Assessment Order it is clearly Proved that the activities of the institution are genuine and according to the objects of the trust. Hence the action of the CIT(E) is contradictory and against the admitted law and facts of the revenue itself. 13.7 Hence in the light of discussion as above and all the transaction through account payee cheques, geniuses of unsecured loan has proved, book of accounts produced, no discrepancies has been noticed in books of accounts. it is proved that the activities of educational institution are genuine and on the basis of additional ground produced before your honours, the 13th proviso of the section 10(23C) is not legible on assess and withdrawal of approval granted under section 10(23C) are not genuine, should be again sustained.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

14.1 Further It is submitted that the AO & CIT(E) has drawn inference u/s 68 as appearing from the assessment order and S.68 says- 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.

14.2. Sources Explained with Evidence and not rebutted by the AO and CIT(A): Both the lower authorities have alleged that the appellant could not file PAN in some of the cases and the address are incomplete hence the source of funds remains unexplained. However the appellant had filled all the Address and PAN vide reply dt. 11.02.2016 (PB45-47) and fully explained the sources of such cash credit and also creditworthiness. In support assessee had filed I.T return in some cases, , confirmation, bank statement of the person in some cases. The person duly accepted of giving money to the appellant and as also appearing from the above documents. From these documents it is not appearing that the same is bogus. When the person who had given the loan has confirmed all the thing. The lower authority merely proceeded on their own suspicion and presumption. And these persons are being assessed. The ld. CIT(A) has not spoken a single word on the genuineness and creditworthiness and the identity itself proved from the PAN and address of the creditors. 14.3. Assessing Officer must form opinion by applying his mind - A bare reading of section 68 suggests that there has to be credit of amounts in the books maintained by the assessee, that such credit has to be of a sum during the previous year, and that the assessee offers no explanation about the nature and source of such credit found in the books or the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression ‘the assessee offers no explanation’ means where the assessee offers no proper, reasonable and acceptable

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

explanation as regards the sums found credited in the books maintained by the assessee. It is true that the opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion - CIT v. P. Mohanakala [2007] 161 Taxman 169 / 291 ITR 278 (SC).

On perusal of assessment order and other evidences it is clear that the AO did not consider various material evidences available on record. 14.3.2 In the Case of CIT v/s Real Time Marketing (P) Ltd 306 ITR 35 (Del) it has been held that “AO made the addition towards unexplained cash credit on the basis that it was the assessee’s money (Rs. 22,97,000/-) which was deposited in cash in the account of FBSL and routed through different accounts and was received as unsecured loan by the assessee- on appeal, concurrent findings of facts recorded by the CIT(A) and Tribunal that there is no material to link the assessee with the amount deposited in cash in the bank account of FBSL and thus no case is made out for making addition” Here is the same facts and position. 15.1 The above matter is covered by the decision of Honble Supreme Court in the case of CIT v/s Lovely Exports (P) Ltd 216 CTR 195(SC), wherein it has been held that “If the share application money is received by the assessee company from alleged bogus share holders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessment in accordance with law, but it cannot be regarded as undisclosed income of assessee company”

Further we may submit that the present case is also directly covered by the decision of CIT vs. First Point Finance Ltd 286 ITR 477 (Raj.) by holding that It is not denied that all the share holders/share applicants are genuinely existing persons. It is also not denied that each of them is an income tax assessee and the copies of the return of their income were also placed before the AO by the assessee which facts is

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also not denied . In these circumstances, no material has been brought on record except inferring that the investor in the opinion of the AO was not creditworthy to link the assessee with such investment of money made by those persons. There is no presumption that the assessee is the benami owner of the investment made by the existing persons. The share holder filed their confirmation from such investors has been obtained and their statement were also recorded. The assessee did discharge the initial onus cast upon in this case. Further in the case of CIT vs. First Point Finance Ltd (Supra) the Honble High Court followed the following observation of the Hon'ble Delhi High Court in the case of Steller Investment Ltd. 192 ITR 287 which has now been affirmed by the Hon'ble Supreme Court also in the case of Steller Investment 251 ITR 263. The ratio laid down in this case was that Sec.68 shall not apply on share application money.

"13 We have considered the rival contentions, relevant material on record, as also the cited decisions. In 192 ITR 287 Steller Investment Ltd., Honble Delhi High Court has laid down as under: "It is evident that even if it be assumed that the subscribers to (the subscribers to) the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself." 16. Initial Onus Discharged: Further it is submitted that even assuming, S. 68 applies, it is only initial onus, which lay upon the assessee to prove the identity and the capacity of the creditor and the genuineness of the transaction and once this initial onus is discharged, it shifts to the AO to rebut/ disprove the same for making a valid addition u/s 68. kindly refer CIT vs Shree Barkha Synthetics 182 CTR 175 (Raj). The Hon’ble RHC again reiterated the same view in CIT vs. First Point Finance Ltd 286 ITR 477 (Raj.) holding that this court

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

held after referring to the aforesaid decisions, that once the initial burden has been discharged in respect of the identity of investors, about their existence, and the confirmation from such investors has been obtained, the burden shifts to the Revenue to prove otherwise not only that the invested amount did not belong to the creditors but further it has to prove the said amount belonging to the assessee. The assessee did discharge the initial onus cast upon in this case as under. i. Identity Established: Admittedly the identity of the persons stood proved in as much as the PAN and address of the persons have filled, and confirmation of the persons also filled thus identity is verifiable admittedly, the ld. CIT(E) has made wrong allegation without making any inquiry, if he was having any doubt he could have issued the summon or verified the PAN either own or through AO but he failed to do so and rather made wrong allegations. In the case of Sophia Finance Ltd. 205 ITR 98 (Del.) is held applicable, i. e . what is required is only to establish that there existed a shareholder and the payment was really made by it, which stands established in the present case, as would appear from the above documents enclosed. ii. Genuine Transaction: Genuineness of transaction is also duly and fully established under the peculiar facts and circumstances of the case in as much as the receipt of the subjected amounts were admittedly duly have been received by Account Payee cheques from them and admittedly there is no cash transactions and also not doubted by the ld. AO and CIT(E) and no comments have been made on the same. Thus the genuineness is proved.

iii. Capacity Proved: The persons are having income PAN ITR etc is and having sufficient earning and funds as also appearing from the documents of the person and also not doubted by the ld. AO and CIT(E) and no comments have been made on the same. Thus the capacity is proved or admitted otherwise he could have made observation on the same and not speak a single word on the same. The assessee thus, duly discharged the initial burden lay upon it, to which extent only it was responsible, as held earlier in CIT vs. Orissa Credit Corp. Ltd. 159 ITR 78 (SC) and recently referred in CIT vs P. Mohan Kala 291 ITR 279 (SC).

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

Thus identity, geneuiness and creditworthiness of the person stood established beyond doubt only due to the wrong dissatisfaction of the AO it cannot be denied when they have not brought on record any material evidence. 17. Onus was to be discharged by the AO/CIT(E): On the other hand when the onus now shifted on the ld. AO/CIT(E) the same was to be discharged by him. The ld. AO/CIT(E) despite having all the relevant information’s /material available could not rebut the same with the evidence. Despite these the ld.AO has proceeded only on assumption, presumptions and suspicion. An allegation remains a mere allegation unless proved. Suspicion cannot take the place of reality, are the settled principles kindly refer Dhakeshwari Cotton Mills 26 ITR 775 (SC) also refer R.B.N.J. Naidu v/s CIT 29 ITR 194 (Nag), Kanpur Steel Co. Ltd. v/s CIT 32 ITR 56 (All). All the addition deserves deletion on this submission alone. The AO neither speak a single word on the evidences filed by the appellant nor rebutted the same with the help of any supporting evidence. Also refer CIT v/s Kulwant Rai 291 ITR 36( Del). 18.1 Kindly refer decision in Labhchand Bohra V/s ITO (2008) 8 DTR 44 (Raj.)- Held: cash credit- burden of proof- identity of the creditors established and they confirmed the credit. This discharged the burden of assessee to prove genuineness. However capacity of the lender to advancement money to assessee was not a matter which the assessee could be required to establish and that would amount to calling upon him to establish the source of source. Hence addition cannot be sustained. 18.2 Also refer Kanhaialal Jangid vs. ACIT (2008) 8 DTR 38 (RAJ.), ( 217 CTR 354) held Income –cash credit –Burden of proof – Assessee having filed confirmation from the creditor and having produced the creditor before AO where the creditor affirmed advancement of loan to assessee, no addition under s. 68 could be made in the hands of assessee on the ground that the creditor could not satisfactorily explain the source of loan- Burden on the asssessee in such cases does not extend to prove the source of the creditor from where he made the advance to the assessee.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

18.3 Also refer Aravali Trading Co. v/s ITO 8 DTR 199 held that once the existence of the creditors is proved and such persons own the credits which are found in the books of the assessee, the assessee's onus stand discharged and the latter is not further required to prove the sources from which the creditors could have acquired the money deposited with him and, therefore the addition u/s 68 cannot be sustained in the absence of anything to establish that the sources of the creditors deposits flew from the assessee itself.

18.4 In the case of CIT vs. Varinder Rawlley (2014) 366 ITR 232 (P&H) held that It has come on record that the assessee-respondent received the amount by way of an account payee cheque. The amount was returned by way of an account payee cheque. The transactions were reflected in the bank accounts of the assessee as well as the creditor. The firm M/s Vishnu Jewellers was an income tax assessee. Its PAN card was placed on record. The assessee had filed the copy of the account of M/s Vishnu Jewellers in his books of account. The assessee had on three occasions informed that the firm was not under his control and he is unable to produce it before the Assessing Officer. He had requested the Assessing Officer to directly make enquiries. It appears that no enquiry was made by the Assessing Authority. If the Assessing Officer had any doubts about the entry, instead of drawing any inference, the Assessing Officer could have summoned the proprietor of the firm. No attempt was made by the Assessing Officer to ascertain the factum of clearance of cheque from the bank and subsequent refund of the amount. Once it is so, in our view the assessee had sufficiently discharged the burden which lay upon it to explain the nature and source of the credit entry appearing in its accounts and the burden clearly shifted in the present case on to the department to prove to the contrary and hold that in spite of the assessee’s explanation, the entries could still be held to represent the assessee’s income. The Assessing Officer failed to invoke the provisions under Section 131 of the Act, the Tribunal has rightly concluded that it was sufficient to delete the addition. Also refer CIT v/s Fair Finvest Pvt. Ltd 357 ITR 146(Del)

18.5 In CIT V/S Abdul Aziz 72 DTR 216(Chhattisgarh)- Held that no independed inquiry was made by the a AO to disprove the creditworthiness of the creditors, as established by the affidavits and

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

statement showing source of income. Hence CIT(A) was justified in deleting the additions.

18.6 In the case of Prakash Chand Nahata v/s CIT 301 ITR 134(MP) held that “In the obtaining factual matrix the seminal question is whether the said statement of Mohd. Rashid could have been utilised against the assessee without calling him for cross- examination. It is of immense significance that Mohd. Rashid has filed an affidavit in variance of his original statement. That apart, the AO has ignored the affidavit and ascribed reasons how the transaction with said Mohd. Rashid was not worth giving credence. The genuineness of bills produced by the assessee has not been accepted exclusively on the basis that the said Mohd. Rashid was a small businessman and was not assessed to income- tax. The aforesaid circumstances eloquently speak that the addition in the order of assessment has been made on the basis of the statement made by Mohd. Rashid. There is no cavil that a prayer was made under s. 131 of the Act to summon said Mohd. Rashid for cross-examination. That has not been done. The language employed under s. 131 of the Act empowers the AO to ensure the attendance of any person. When the statement of Mohd. Rashid was used against the assessee and an affidavit was filed controverting the same, we are disposed to think, it was obligatory on the part of the AO to allow the prayer for cross- examination. That would have been in the fitness of things and in compliance of principles of natural justice.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

20.1 CIT(E) invoked the 13th and 3rd provision in wrong footing which is not applicable: Further in the provision 13th and 3rd are only to prove by the Prescribed Authority ,CIT(E) that the income of the trust has not applied and does not invest or deposits its fund accordingly. However on perusal of the proposal or order of the CIT(E) both the things are absent. Because the cash in hand and unsecured loan taken both are neither application of income nor deposits or investment of funds, and unsecured loan is source of fund not deposit or investment, if show then how the ld. CIT(E) invoked the 13th and 3rd provision of Sec. 10(23C) of the Act blindly. Thus taking unsecured loan and cash in hand is violation of 13th and 3rd provision and not provided in the said provisions. 20.2. The ld. CIT(E) has neither asked to produce the books of accounts nor examined the same then how he can said that the books of accounts are not subject of verification and how in absence of the same it can be said that the activity of the institution not genuine. No allegation can be made without any evidence or verification. He only asked the query regarding the cash in hand and unsecured loans. If books of accounts are not genuine then how he can rely upon on the figures of the same books for invoking the provisions of 13th and 3rd, which shows the contradictory approach of the ld. CIT(E) and the action of the ld. CIT(E) itself illegal. There was no allegation that the institute is not an education institute nor profit making, no excess surplus found, no huge cash in hand in next years and at the time of notice.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

4.3 On the other hand, the ld. DR supported the order of the lower

authorities and filed the following written submission.

‘’Sub: Appeal filed by the assessee against the order of Ld. CIT(E), Jaipur withdrawing the approval granted u/s.10(23C)(vi) w.e.f. A.Y. 20010-11 -reg-

Kindly refer to the applications dated 08.02.2018 of the assessee adducing the additional ground and additional evidence filed before the Hon'ble Bench along with the statement of facts and grounds of appeal dated 08.02.2018. In support of Ld. CIT(E), Jaipur's order dated 04.03.2016 and with reference to the above, the submissions are as under: 1. Submissions on the merits :

The Ld.CIT(E), Jaipur has withdrawn the approval granted u/s 10(23C) (vi) in view of the following reasons discussed in brief:

(i) Diversion of cash in hand: As on 31.03.2012, the cash in hand was shown at Rs. 50,54,193 and after verifying the day to day cash in hand from the cash book vis-a-vis the daily cash withdrawal and cash deposit made in bank accounts, it was noticed that throughout the year, even when there was substantial cash in hand to the tune of Rs. 40,00,000 to 60,00,000 as per the cash book , still cash withdrawal of Rs. 1,00,000 or 2,00,000 was made from the bank accounts and whereas no corresponding payments requiring such huge cash in hand were made which made it evident that the cash in hand shown as per the cash book was not really available with the assessee society but was used by the persons having control over the affairs of the society.

In the grounds of appeal dated 08.02.2018 filed by the assessee before the Hon'ble Bench, on the issue of diversion of cash in hand, the assessee has made reference to Para 4 and Para 5.1 Page 7 of the Ld.CIT(E) order(Copy enclosed at Page no. 1) as under :

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

'The Hon CIT(Exemptions) mentioned at para 4 and para 5.1 page 7 of the order that during the year the assessee has withdrawn cash from bank by which cash in hand increased are not according to the facts of the case."

The above submission of the assessee is totally wrong and misleading which is evident from the clear and speaking order of the Ld.CIT(E) where it was held that the huge cash balance as per the cash book of an average of Rs 40,00,000 during the entire year was not really available with the assessee but was being used by the persons of the managing committee and only to prove that the huge cash balance as per the cash book was not physically available, the comparison of the day to day cash book and bank cash withdrawals and deposits was made.

Further, the assessee has tried to justify the huge cash in hand throughout the year by claiming that it wanted to purchase land for further extention of educational institution and has submitted the alleged agreement dated 11.01.2011 for purchase of land as a proof thereof. However, the claim is not tenable in view of the fact that out of the total value as per the agreement of Rs. 46,80,000 only Rs. 2,00,000 was paid to Sh. Parmendra Sharma. It is worthwhile to mention here that after a lapse of more than 8 years registry has not been executed in respect of this agreement till date. Further, during the course of assessment proceedings for A.Y. 2012-13, the assessee was required to produce Sh. Parmendra Sharma but the assessee had failed to produce him before the A.O.

To prove that there was no diversion of cash, the assessee has submitted that the managing committee members had given unsecured loans and if they wanted funds, they could have withdrawn the funds as repayment of unsecured loans. The submission is not acceptable since they are earning interest on the unsecured loans which can be verified from the copies of account filed by the assessee in paper book at page number 29 and 30. (Copy enclosed at page no. 2 & 3). (ii) Unsecured loans: The CIT(E) has categorically held that the submission of the assessee regarding confirmations of unsecured loans furnished during assessment proceedings is incorrect and assessee could not file copies of confirmation of accounts in respect of the unsecured loans which have been claimed to be brought from managing committee, their friends and relatives as per page No. 5 of the statement of facts and grounds of appeal dated 08.02.2018 filed before the Hon'ble Bench.(Copy enclosed at page no. 4)

Further, PAN and complete addresses were not furnished to establish the identity and genuineness of transaction. Even before the Hon'ble Tribunal the assessee has not furnished complete postal addresses of persons and entities at Sr. No 3,5,8,9,10,11,13,14,16. (Copy enclosed on page no. 5)

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

Out of 18 persons and entities where complete addresses were not provided by the assessee, the assessee has now filed route chart from Google maps in case of Sr. No. 1 and 5 only whereas the assessee has failed to provide complete postal address for verification as mentioned above. Verification letters can only be sent if there is proper and complete postal address since the postman does not deliver letters by looking at route chart from Google maps. Further, at Sr. No. 1, the assessee has shown unsecured loan from Arya Bhatt Academy whereas the Google map provided by the assessee shows Aryabhatta college of Engineering and Aryabhatta College.

It is pertinent to mention here that this is not a case of public issue of shares where the assessee can claim that he has discharged his onus by providing PAN since on one hand the assessee has categorically stated that unsecured loan has been brought from managing committee, its friends and relatives and on the other hand is unable to furnish confirmations or complete postal addresses of the persons or entities to prove identity and genuineness of transaction. 2. Submissions on Additional Ground of appeal raised vide application dated 08.02.2018:

Regarding the additional ground of appeal raised by the assessee, it is submitted that the notification u/s 10(23C) (vi) was withdrawn as per the 13th proviso of the said section. The said proviso reads as under:

"Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) is notified by the Central Government 1 [or is approved by the prescribed authority, as the case may be,] or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), is approved by the prescribed authority and subsequently that Government or the prescribed authority is satisfied that—

(i) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not— (A) applied its income in accordance with the provisions contained in clause (a) of the third proviso; or (B) invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso; or (ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution— (A) are not genuine; or

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

(B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved,

it may, at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer" In view of the above proviso, all the conditions which were required for withdrawing approval u/s 10(23C)(vi) in the case of the assessee have been duly fulfilled which is evident from the fact that since the Prescribed Authority i.e. CIT(E) was satisfied that the assessee has not invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso and the sources of the funds collected by the assessee remained unexplained therefore the activities carried out with such funds could not be held genuine, the CIT(E), passed a detailed and speaking order withdrawing the approval after giving reasonable opportunity to the assessee to show-cause against the proposed action by issuing a detailed show-cause notice. The contention of the assessee by raising this additional ground of appeal that the show cause notice was not issued by the competent authority and the proceedings based on illegal show cause notice and consequential order passed by the Ld. CIT(E) is not valid is not acceptable in view of the following facts:

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

and satisfaction of the Ld.CIT(E) which again shows that the CIT(E) after being satisfied and after due application of mind directed the DCIT(Hq) to fix the hearing before the CIT(E) for giving an opportunity of being heard to the assessee and therefore, the notice issued and the consequential order passed by the CIT(E) are strictly as per law. 4. The satisfaction and application of mind of the CIT(E) before directing the DCIT (Hq) to issue show-cause notice is also evident from the fact that after being satisfied that it was a fit case for rescinding the notification issued u/s 10(23C) (vi), the CIT(E) wrote a letter seeking directions/clarification from the CCIT(E), Delhi office in the case of the assessee regarding the appropriate Prescribed Authority for rescinding notifications u/s 10(23C) (vi) received before 15.11.2014, vide letter dated 20.08.2015 (Copy enclosed at page no. 7 & 8).

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

"5. Even on merits, the trip which was conducted was an educational trip and only the Director was picked up. In that view of the matter, no substantial question of law arises" Thus, the order of Hon'ble High Court as quoted above cannot be cited as a binding precedent on the issue of validity of Show-Cause notice. Further, the Hon'ble ITAT's order which has been quoted by the Hon'ble High Court while upholding the said findings states as under (Copy enclosed at page no.14): "The matter would have been different if the show cause notice brings out the thought process and application of mind by the Ld. CIT(E) but was only signed by the DCIT(Hq)," In view of the above, the above case law relied upon by the assessee is distinguished on facts since here it is evident that the CIT(E) after being satisfied and after due application of mind directed the DCIT(Hq) for issuing show cause notice after carefully perusing and approving the draft show cause notice. Moreover, the Department has filed appeal in the Hon'ble Supreme Court against the order of Hon'ble Rajasthan High Court dated 31.07.2018 passed in the case of Modern School Society. 3. Submissions on additional Evidences filed before the Hon'ble Bench vide application dated 08.02.2018:

(i) The copies of certificates from banks regarding cash deposited and cash withdrawals from bank: These certificates are summary of bank transactions showing cash deposited and withdrawn during the entire F.Y. However, the issue raised by the CIT(E) is regarding the huge cash in hand as per the cash book and still cash withdrawals made by the assessee on those days which made it clear that actual cash was not available with the assessee but was used by the persons in control of the management. Further, the certificates from IDBI Bank do not even specify the year for which they allegedly have been issued.

(ii) Sale/Purchase Agreement : The assessee has tried to justify the huge cash in hand throughout the year by claiming that he wanted to purchase land for further extention of educational institution and has submitted this alleged agreement dated 11.01.2011 for purchase of land as a proof thereof. However, the claim is not tenable in view of the fact that out of the total value as per the agreement of Rs. 46,80,000 only Rs. 2,00,000 was paid to Sh. Parmendra Sharma. It is worthwhile to mention here that after a lapse of more than 8 years registry has not been executed

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

in respect of this agreement till date. Further, during the course of assessment proceedings for A.Y. 201213, the assessee was required to produce Sh. Parmendra Sharma but the assessee had failed to produce him before the A.O.

(iii) Letter from IDBI Bank: The letter has no relevance since it does not prove the requirement of huge cash in hand or justifies the diversion thereof.

(iv) Statement of Staff recorded: The assessee is running an educational institution but is diverting the funds of the educational institution for the benefit of persons specified u/s 13(3) and not keeping the funds as per the prescribed modes and therefore is not eligible for approval u/s 10(23C) (vi).

(v) Assessment order u/s 143(3) for A.Y.2015-16: In Income Tax matters each assessment year is a separate unit and therefore Res-Judicata is not applicable. To this effect, the ld. DR relied on the order dated 31-12-2018 of

Coordinate Bench in the case of Shri Hari Ram Yadav vs Pr.CIT in ITA

No.215/JP/2018 for the Assessment Year 2013-14.

4.4 We have heard the rival contentions and perused the materials

available on record. We have taken into consideration the orders of the

lower authorities and the judgements cited by both the parties. From the

records, it is noticed that the ld. CIT(E), Jaipur had withdrawn the

approval granted to the assessee u/s 10(23C)(vi) of the I.T. Act, 1961 by

holding that the assessee had misused the funds by diversion of cash in

hand also held that source of funds collected by the assessee society

remained unexplained as the assessee received unsecured loans. Thus in

that eventuality, the approval was withdrawn by the ld. CIT(E) w.e.f.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

A.Y. 2010-11. After considering the arguments and documents placed by

both the parties, we noted that the ld. CIT(E) has disallowed the claim of

the assessee on the ground of diversion of cash in hand. The assessee has

submitted the position of total cash withdrawals from banks and cash

deposit with bank from various banks as under:-

Name of bank Cash withdrawals Rs. in lacs) Cash deposit (Rs. in lacs) BOB M I Road 24.65 18.63 Axis Bank 57.58 169.41 Bob sitapura 33.27 15.96 IDBI Current 0.00 27.25 UCO Bank 0.00 01.50 DIBI overdraft 0.00 26.98 Total 115.50 259.45

It is thus noted that the assessee has shown cash withdrawal from the

bank amounting to Rs. 115.50 lacs while the deposit in the bank was

amounting to Rs. 259.45 lacs. This shows the amount that the amount was

more than double the withdrawal of the amount which is verifiable from

the copy of Bank Certificates available at pages19 to 23 of Assessee's

paper book. It appears that ld. CIT (E) has not taken into consideration. It

is noted that ld. CIT (E) at para 5.4 page 8 of his order has mentioned

that cash in hand was used by the members of the managing committee

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

for their personal usages. The ld.AR of the assessee submitted the copy of

account at pages 24 and 25 showing that Shri Amit Goyal, Secretary had

invested Rs. 14.50 lacs during the year on which interest was not charged.

It is also noted that Shri K.S. Goyal, Member had also given donation of

Rs. 34.00 lacs in the F.Y. 2010-11 to the society. If the funds had been

utilized by the members then they could not have given such donation or

made investment in the society. It does not indicate that the members of

the society had diverted the funds for personal use and the ld. CIT(E) has

not given any specific instance in his order to support his contention for

diversion and utilization of the funds by the society members. It is also

noted from the records that the fees of the students were collected in cash

and sometimes when the cashier was out of office then on requirement

the cash had been withdrawn from the bank. The assessee had also a term

loan account with the bank. The assessee had an overdraft account on

which the bank also puts a condition that OD limit cannot be utilized by

excess cash withdrawals. It is noted that there is no corroborative

evidence before the ld. CIT(E) that cash in hand was utilized by the

members of the managing committee. The assessee has filed the

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

confirmation of accounts in respect of the members of the managing

committee.

(a) Amit Goyal : Rs. 2905641.00 (PB24) (b) Manju Goyal : Rs. 3385314.00 (PB 25) (c) Subhash Chand goyal : Rs. 286328.00 (PB 27) (d) Priyanka Goyal : Rs. 401750.00 (PB 71) (e) Kripa Shanker Goyal : Rs. 263500.00 (PB 26) (f)Subhash chand Goyal & Sons : Rs. 429452.00 (g)Ity Goyal : Rs. 35000.00 (PB29) Total : Rs. 7706985.00 It is noted from the records that the assessee had given following

summary of source of funds and investment of funds as on 31-03-2012

and also filed copy of balance sheet as on 31-03-2012 which is placed at

PBP 37 of the assessee's paper book.

Source of fund Amount Investment of Amount fund Capital 5132716.00 Fixed asset (for 4834489.00 college) Development 6725293.00 Investment in 5834947.00 fund FDR Secured Loan 31701392.00 Current Assets 9295486.00 (OD & Term Loan Unsecured loan 22255386.00 Cash in Hand 5054193.00 Current 2918116.00 Cash at Bank 203788.00 Liabilities & provision

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

The ld.AR of the assessee also submitted that the funds are invested in

accordance with the provisions contained clause (b) of third proviso as

under:-

Fund of Trust

Capital Fund : 5132716.00 Development Fund : 6725293.00 Total : 11858009.00

Investment of Fund (as per clause b of third proviso of sec 10(23C) Fixed Assets of the Trust (After Depreciation): 48344489.00 (Annexure D to Balance Sheet)

Less: Term Loan & OD (Secured on the above fixed Assets) : (31701392.00)

Net Assets (A) : 16643097.00

Investment in FDR (B) : 5834947.00

Cash at Bank (C) : 203788.00

Total (A+B+C) : 22681832.00

The ld.AR of the assessee thus submitted that above figure clearly

explains that the assessee had surplus funds only for Rs. 118.58 lacs

though the trust had invested Rs. 226.82 lacs in eligible funds. Hence it

clearly established that whole funds were invested in accordance with the

provisions contained in clause (b) of the third proviso of Sec 10(23C). If

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

the position as above is clear then how it can be said that the assessee has

diverted the funds and misutilized the funds without any evidence and no

adverse view should be taken. There must of a concrete evidence on

record for diversion and misutilization of funds. It is noted that there was

no concrete evidence before the ld. CIT(A) as to the diversion of funds

4.41 As regards unsecured loans, it is noted that ld. CIT (E) at para 6.1

had stated that the assessee had not furnished PAN of 5 persons. The

ld.AR of the assessee submitted that the assessee had already submitted

the PAN of 5 persons before the DCIT (E), Jaipur on 19-1-2016 vide its

letter dated 11-01-2016 and the same was stamped by the CIT(E) office.

However, the details of these five persons are as under:-

a. Mittal Impex : AETPK3007Q b. Hari Narayan : AHDPN1423C c. LalitaGalav : AJFPG9645R d. Sarai Brothers : BVMPS3693H e. Saurabh Verma : ACGPV307IL

It is further noted that the assessee had filed the confirmation copy of

account, PAN and address of all the persons as per Annexure 1 mentioned

at para 4 of the order of withdrawal of exemption. The ld.AR of the

assessee further submitted all the transactions from unsecured loan

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

account are through account payee cheques only. The assessee has paid

interest to them and TDS was also deducted thereon. The PAN of all the

persons were provided and payments were made through account payee

cheques. Therefore, there are no non-genuine transactions. It is noted that

ld. CIT(E) did not make any enquiry from the concerned persons nor

issued summons u/s 131 of the Act. Thus the assessee had discharged its

onus of genuineness by providing PAN. It is also noted that the assessee

has been running the educational institution for which the AO had

recorded the statement of institution staff for which the ld.AR of the

assessee filed the certified copy of statement recorded vide paper book

pages 88 to 91. The ld.AR of the assessee further submitted that the

assessee trust is registered u/s 12AA of the Act w.e.f. 01-04-2010 and

thereafter in every year the trust was assessed u/s 143(3) of the Act. The

ld.AR further submitted that in all the assessments made by the AO

except in the case of A.Y. 2012-13, the AO never found any

discrepancies in the books of accounts maintained by the assessee trust

nor any activities of the trust were found non-genuine. The AO in the

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

assessment orders mentioned that the assessee trust is running an

educational institution whose details are as under:-

Ass Year Date of Remark Order 2010-11 25.03.2013 The Ld AO mentioned in the order that book of accounts produced and the main object of the assessee society is study and develops the students. (PB38-44) 2012-13 02.05.2016 Order related to year in question 2014-15 29.12.2016 The Ld AO mentioned in the order that Books of accounts produced and assesse is running educational institution. Assessed at returned income NIL (PB 106-108) 2015-16 15.12.2017 The Ld AO mentioned in the order that Books of accounts produced and assessee is running educational institution. Assessed at returned income (PB110-112.) 2016-17 04.12.2018 E Assessment was done by the Ld AO and assessed at returned income (PB 113-119) The ld.AR of the assessee enclosed the copy of all the above Assessment

orders for our perusal which shows that the activities of the assessee trust

are genuine according to the objects of the trust. The ld.AR of the

assessee submitted that the action of the ld. CIT(E) is contradictory. The

ld.AR of the assessee in support of his contentions has relied on following

case laws.

(i) CIT v. P. Mohanakala [2007] 161 Taxman 169 / 291 ITR 278 (SC).

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

(ii) CIT v/s Real Time Marketing (P) Ltd 306 ITR 35 (Del) (iii) CIT v/s Lovely Exports (P) Ltd 216 CTR 195(SC), wherein it has been held that “If the share application money is received by the assessee company from alleged bogus share holders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessment in accordance with law, but it cannot be regarded as undisclosed income of assessee company” (iv) CIT vs. First Point Finance Ltd 286 ITR 477 (Raj.) (v) Steller Investment Ltd. 192 ITR 287 (vi) CIT vs Shree Barkha Synthetics 182 CTR 175 (Raj). (vii) Sophia Finance Ltd. 205 ITR 98 (Del.) (viii) Dhakeshwari Cotton Mills 26 ITR 775 (SC) (ix) R.B.N.J. Naidu v/s CIT 29 ITR 194 (Nag), (x) Kanpur Steel Co. Ltd. v/s CIT 32 ITR 56 (All). (xi) CIT v/s Kulwant Rai 291 ITR 36( Del). (xii) Labhchand Bohra V/s ITO (2008) 8 DTR 44 (Raj.)- Held: -cash credit- burden of proof- identity of the creditors established and they confirmed the credit. This discharged the burden of assessee to prove genuineness. However capacity of the lender to advancement money to assessee was not a matter which the assessee could be required to establish and that would amount to calling upon him to establish the source of source. Hence addition cannot be sustained. (xiii) Kanhaialal Jangid vs. ACIT (2008) 8 DTR 38 (RAJ.), ( 217 CTR 354) held Income –cash credit –Burden of proof – Assessee having filed confirmation from the creditor and having produced the creditor before AO where the creditor affirmed advancement of loan to assessee, no addition under s. 68 could be made in the hands of assessee on the ground that the creditor could not satisfactorily explain the source of loan- Burden on the asssessee in such cases does not extend to prove the source of the creditor from where he made the advance to the assessee.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

(xiv) Aravali Trading Co. v/s ITO 8 DTR 199

(xv) CIT vs. Varinder Rawlley (2014) 366 ITR 232 (P&H) (xvi) Also refer CIT v/s Fair Finvest Pvt. Ltd 357 ITR 146(Del) (xvii) CIT V/S Abdul Aziz 72 DTR 216(Chhattisgarh) (xviii) Prakash Chand Nahata v/s CIT 301 ITR 134(MP)

4.4.2 Taking into consideration the facts, circumstances of the case and

case laws relied on by both the parties, it is observed that CIT(E) has wrongly invoked the 13th and 3rd provision which is not applicable here because the provisions 13th and 3rd are only to prove by the Prescribed

Authority i.e. CIT(E) that the income of the assessee trust has not been

applied and it did not invest or deposits its fund accordingly. On perusal

order of the ld. CIT(E) and material placed by the ld. DR it is clearly

proves that the ld. CIT(E) has neither asked the assessee to produce the

books of accounts nor examined the same by him. In absence of the

same as to how a Prescribed Authority can state that the books of

accounts are not subject of verification and the activity of the institution

not genuine. It is noted that for want of PAN of some persons and

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

alleged incomplete address which is not proved by the CIT(E) then how

a Prescribed Authority can make adverse remarks and put a question on

the whole institute and not a single proof has been brought on record by

him in his support before passing the order and when the books of

accounts are genuine. Thus in view of the above facts and legal

position of law, it is held that the assessee is an educational institute and

charitable trust where no violation of provision of Sec. 10(23C)(vi) are

found. The order of the CIT(E) or Prescribed Authority of rescinding or

withdrawals of exemption granted u/s 10(23C)(vi) is liable to be quashed

and CIT(E) is directed to continue the exemption of approval granted

vide Notification No. 18/2010-11 vide letter No.

CCIT/Add.CIT(Hqrs.)/Jpr/10(23C)(vi)/10-11/3049 dated 23/25.11.2010

from the year for which it has been granted. Thus the ground No. 1 and 2

of the assessee are allowed.

5.0 Since, we have allowed Ground No. 1 and 2 of the assessee,

therefore, there is no need to adjudicate upon the Ground No. 3 of the

assessee which is in academic in nature. Thus Ground No. 3 of the

assessee is dismissed.

ITA No. 452/JP/2016 M/s.Tirupati College of Technical Education Society vs LD. CIT( Exemption), Jaipur

6.0 In the result, the appeal filed by the assessee is partly allowed with

no order as to cost.

Order pronounced in the open court on 03/10/2019.

Sd/- Sd/- ¼lanhi xkslkbZ½ ¼foØe flag ;kno½ (Sandeep Gosain) (Vikram Singh Yadav) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 03/10/2019. *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Tirupati College of Technical Education Society, Jaipur izR;FkhZ@ The Respondent-The CIT, (Exemptions), Jaipur 2. 3. vk;dj vk;qDr@ CIT विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 4. xkMZ QkbZy@ Guard File {ITA No. 452/JP/2016} 5. vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेजज. त्महपेजतंत