M/S. K.D.JAIN EDUCATIONAL SOCIETY,MADANGANJ vs. ITO (EXEMPTION), AJMER

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oaJh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No.1248/JP/2019 fu/kZkj.k o"kZ@Assessment Year : 2016-17 M/s.K.D. Jain Educational Society cuke The ITO (Exemption) Bhagchand Vidhya Bhawan Vs. Ajmer Main Chouraha, Madanganj LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAATK 9709 Q vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Nikhilesh Kataria, CA jktLo dh vksj ls@Revenue by: Shri A.S. Nehra, Addl. CIT lquokbZ dh rkjh[k@Date of Hearing : 24/03/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 05 /04/2022 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM The assessee is aggrieved by the order of the Commissioner of Income Tax, (Appeals), Ajmer [ hereinafter referred to as Ld. CIT(A) ], passed for Assessment Year 2016-2017 on 07.08.2019. The Ld. CIT(A) has dismissed the appeal and thus this appeal is filed against the said order by the assessee. 2. The hearing of the appeal was concluded through audio-visual medium on account of Government guidelines on account of prevalent situation of Covid-19 Pandemic, both the parties have placed their written as well as oral arguments during this online hearing process.

2 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer

i. The assessment order passed u/s 143(3) is bad in law as well as on facts of the present case and hence, the same may please be quashed. ii. Rs.4988846/- The ld. Assessing Officer erred in law as well as on the facts of the present case in making disallowance of depreciation though the same is duly allowable under provisions of the Act. iii. Rs.5000000/- The ld. Assessing Officer erred in law as well as on the facts of the present case in making disallowance of revenue expenses claimed by the assessee without pointing out any valid reason. 4. Before proceeding further, it is necessary to understand the basic facts about the assessee to deal with this appeal. The assessee is a trust engaged in imparting education and running an educational institute for which it has been granted certificate u/s. 10(23C)(vi) of the Income Tax Act, 1961 by Chief Commissioner of Income Tax, Udaipur vide letter No. CCIT/ITO/(Tech)/UDR/2012-13/31 dated 04.04.2012. This certificate was effective from A. Y. 2011-12 onwards. 4.1 Return of income was filed by the assessee trust on 22.09.2016 declaring nil income. The case was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). The assessee was issued notices calling for details and allowed an opportunity to produce evidence / information in support of the return of income filed. In para 3 of the assessment order it has been noted by the Assessing Officer [ hereinafter referred as AO ] that :

3 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer “Vide letter dated 06.08.2018 certain details / information in respect of its activities, income earned and expenses incurred for charitable purposes during the year under assessment, along with supporting evidence, have been called for through e-portal. In response, financial statements have been furnished. Printouts thereof have been taken and placed on record. Thereafter, certain details/ information has been furnished on e-portal from time to time and the same have been examined and placed on record.” 5. During the course of hearing the learned authorized representative [ here in after referred as “ld AR” ] has stated that he prefers not to press the ground no. 1 and 2 raised in the grounds of appeal filed. Therefore, the same is dismissed as ld AR chose not to take up those grounds and thus, the Ground no. 1 and 2 taken by the assessee is dismissed. 6. Now, the only grounds remained to be adjudicated upon is ground no. 3 which is in relation to lumpsum disallowance of Rs. 50,00,000/- made by the AO while finalizing the assessment of the assessee trust. 7. While making the said disallowance in the assessment order the observation of the AO is appearing at para 6 on page 2 of his assessment order. The same is extracted here in below for the sake of brevity of the facts;

“6. On examination, it was also seen that the ‘A’ Trust has claimed revenue Expenses of Rs. 3,99,64,735/- including depreciation of Rs. 49,88,846/- which seems very excessive. Therefore, a lumpsum amount of Rs. 70,00,000/- from Revenue Expenses of Rs. 3,49,75,889/- (Rs. 3,99,64,735 - 49,88,846) are hereby disallowed. “ 7.1 Though, the para 6 talks for disallowance of Rs. 70,00,000/- but while computing the total assessed income of the assessee trust the same is considered

4 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer at Rs. 50,00,000/- by the AO and the assessee in this appeal also taken a ground for an amount of Rs. 50,00,000/- and the ld. DR remained to be silent on the issue the disallowance amount made by the AO is considered at Rs. 50,00,000/- only. 8. The Ld. AR of the assessee has drawn our attention that there is not a single line written by the AO showing the defects in the records produced before the AO in the assessment proceeding in respect of the assessee trust. The disallowance is purely an adhoc and lumpsum basis and that too the amount at para 6 & 7 both are not matching. This shows the casual approach taken by the AO while finalizing the assessment. 9. The assessee trust has carried this matter before the ld CIT(A) by filling an appeal against the impugned order of the AO. The ld CIT(A) instead of deleting the addition, it sent the matter for remand report. Even in the remand report, no specific items of disallowance were pointed out and the assessee has duly submitted its response on the same. However, the ld. CIT(A) sustained the addition and therefore, this appeal by the assessee is before ITAT. 10. During the proceeding before the Ld. CIT(A), the Ld. AR of the assessee filed a detailed submission in the appellate proceeding. The Ld. CIT(A) forwarded the said written submission vide his office letter no. CIT(A)/AJM/2019-20/421 dated 03.06.2019 and called for a remand report from the AO. In the remand report, the AO submitted as under

5 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer

"Kindly refer to your office letter No. CIT(A)/AJM/2019-20/421 dated 03.06.2019 on the above narrated subject. In this regard, it is submitted that the submission made by the Assessee Society in support of Ground raised have been gone through carefully. The Assessee Society was given an opportunity of being heard on 17.06.2019 vide this office letter No. ITO(E)/ Ajm/ Remand/ 2019-20/85 dated 07.06.2019. In response, Shri Manish Jain, Authorized Representative has attended on the scheduled date and furnished a copy of the submission which had already been submitted to your good office. In its submissions, the A/R itself has stated that the Assessee Society has not claimed depreciation in Computation of income and no question of disallowance arises. As per submission as well as Computation of income, the Assessee Society has claimed Revenue Expenditure of Rs. 3,49,75,889/- & Capital Expenditure ofRs. 1,16,75,928/- respectively which have already been given to the Assessee Society while framing the assessment order. Further, the Assessee Society has stated that huge expenses of Rs. 50,00,000/ have been disallowed without any basis. In this regard, it is submitted that the case was selected under limited scrutiny to examine whether the large deductions against income from Other Sources have been correctly shown in the return of income. On examination of Income & Expenses Account of the Assessee Society for theyear under assessment have been gone through and following heavy expenseshave been claimed – 1. Computer repairing of Rs. 17,07,200/- Total cost of Computers at the beginning of the year was approximately Rs. 9,000/- and during the year, Computers of Rs. 15,54,000/- have been purchased (after September). Thereafter, the Assessee Society has claimed such a huge amount of Rs. 17,07,200/- on repairing. Thus, the expenses do not seem genuine are excessive. 2. Furniture repairing of Rs. 12,94,127/-Total cost of Old furniture was Rs.15,54,065/- and during the year, Furniture of Rs. 16.68 was purchased. Onthis head, the Assessee Society has claimed such a huge amount of 12,94,127/- on repairing which are not genuine and seems excessive.

6 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer

In view of the above facts, a lump sum amount of Rs. 50,00,000/- had been disallowed and it is approximately 11% of the total receipts of the AssesseeSociety earned during the year under assessment. I humbly pray before your good self for not entertaining or accepting the arguments put forth by the Assessee Society before your honour."

7 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer "2. Disallowance of expenses: We have already submitted that the ld. AO has made disallowance of Rs.50 lakhs on lump sum basis without pointing out any specific item of disallowable nature nor there was any case that such expenses has not been incurred in respect of the activities of the assessee. A perusal of remand report submitted by the ld. AO very well proves the contention of the assessee submitted before your goodself as there is no credible basis with the ld. AO except suspicion that some of the expenses are not genuine. Even in this remand report, there is not a single item of disallowance hasbeen pointed out nor the ld. AO has been able to justify the disallowanceidentifying separate head of expenses. Therefore, the disallowance is notsustainable in the eyes of the law. Our submission on each of the expenses pointed out by the ld. AO is as under (i) Rs. 1707200/ Computer Repairing Expense: The Ld. AO merely stated that the expenses do not seem to be genuine and are excessive. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non-genuine or excessive. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (ii) Rs. 1294127/- Furniture Repairing Expense: The ld. AO merely stated that the expenses do not seem to be genuine and are excessive. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non genuine or excessive. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (iii) Rs. 17583 - Photostat Expense: The ld. AO merely stated that the expenses do not seem to be genuine. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non genuine or excessive. Absolutely no comparison of such expense has been made with reference to the requirement of the

8 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (iv) Rs. 38955 Van Repairing Expenses: It has been alleged by the ld. AO that the assessee did not have any Van during the year under consideration however it is submitted that this observation of the ld. AO is totally incorrect and the facts on record. It would be seen from the depreciation chart already submitted that the assessee was having two tata ace vehicles and on the same these expenses have been incurred. (v) Rs. 900594/ Conveyance Expense, Rs. 43062/- Travelling Expense: In this case also, absolutely no justification has been given for making of disallowance & the ld. AO merely stated that the assessee society is having only 2 buses and a car. We may submit that the assessee is a very big education society and huge running has to be done by the buses and car. Complete expenses are supported with vouchers & bills and the ld. AO has not been able to point out that why he is treating these expenses as huge expenses without making any comparison with any other education society or assessee's past expenses. The observation of the ld. AO is nothing but based on its own assumptions and presumptions on which no disallowance can be made. (vi) Rs. 15353032/- Salary & Daily Wages, Rs. 5889585 Wages: The Id. AO merely stated that the expenses do not seem to be genuine. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non-genuine or excessive. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (vii) Rs. 43567 Library Expenses: No proper justification has been given by the ld. AO while treating library expenses as not genuine and he has simply stated that library is a part of building. It is humbly submitted that all the library expenses are fully vouched and the ld. AO has not been able to point out even a single rupee expense out of the same. Therefore no disallowance is required to be made out of the same.

9 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer (viii) Rs. 3633465/ Building Repairing Expense: The ld. AO merely stated that the expenses do not seem to be genuine. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non-genuine or excessive. Absolutely no comparison of such expense has beenmade with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. Thus, considering the above facts and submissions it would be seen that the disallowance has been made by the ld. AO without brining any credible evidences or facts on record but rather on its own assumptions and presumptions. Even in remand report nothing new has been stated by the ld. AO while justifying the disallowance on its own estimation and it is completely silent on the basis or comparison which led to such a huge disallowance. Hence, such disallowance cannot stand in the eyes of the law and the same deserves to be deleted. Therefore, we again pray to delete the disallowances made by the ld. AO."

‘’5.3 I have gone through the assessment order, statement of facts, grounds of appeal, written submission, remand report and rejoinder carefully. It is seen that either during the course of assessment proceedings or appellate proceedings, the appellant has not been able to prove with the help of documentary evidences that entire revenue expenses debited the income and expenses account were incurred wholly and exclusively for the purpose of Trust. In view of the facts discussed by

10 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer the AO in the assessment order, I am of the-considered opinion that the disallowance made by the AO is quite reasonable and fair. Accordingly, disallowance of Rs. 50 lac made by the AO is hereby confirmed.’’

(i) We have examined the Balance Sheet as at 31/03/2016 and the Income and Expenditure or Profit and Loss Account for the year ended on that date attached herewith of K. D. JAIN EDUCATION

11 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer SOCIETY (PAN No AAATK97090) (name of fund or trust or institution or any university or other educational institution or any hospital or other medical institution). (ii) We certify that the Balance Sheet and the Income and Expenditure Account or Profit and Loss Account are in agreement with the books of account maintained by the head office at KISHANGARH and branches. (iii) Subject to comments below : (a) We have obtained all the information and explanations which to the best of our Knowledge and belief were necessary for the purpose of the audit. (b) In our opinion, proper books of account have been kept by the head office and branches of the above-named fund, or trust, or institution or any university or other educational institution or any hospital or other medical institution so far as appears from our examination of the books of account. (c) In our opinion and to the best of our information and according to the information given to us the said accounts read with notes thereon, if any, give a true and fair view – (1) In the case of the Balance Sheet, of the state of affairs of the above-named fund, or trust, or institution or any university or other educational institution or any hospital or other medical institution as at 31/03/2016 and (2) In the case of Income and Expenditure Account or Profit and Loss Account, surplus ordeficit or profit or loss for the year ended on that date.

13.2 The ld. AR argued that there is not a single adverse remark of the independent auditor is appearing in the report who has undertaken audit of books of accounts regularly maintained by the assessee. The auditor has also satisfied that he has received all the information and explanation and has also commented that proper books account have been kept and maintained by the assessee based on this observations he has given his

12 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer finding as true and fair view of the accounts and he has reported this fact in his report and based on these observations he has certified the Balance Sheet and Income and Expenditure account as true and correct. The AO as well as Ld. CIT(A) are unable to find any single mistake about the maintenance of the accounts in relation to the result of the assessee trust based on which the income tax return was filed by the assessee. In the absence of such finding, no lumpsum, arbitrary disallowance of expenses should sustain.

13.3 In addition, he has filed a detailed submission and the same is extracted for to taking into consideration their contention while deciding the specific ground for an addition of Rs. 50,00,000/- taken by the assessee.

Submission of the assessee 1.1.1 Complete books of accounts maintained including bills and vouchers: At the outset, we may submit that the assessee has maintained the complete books of accounts. including ledger, cash book, bank book, bills and vouchers. This fact of maintaining books of accounts is also appearing at PB 3 of the paper book. These books of accounts were duly produced before the ld. AO during the course of assessment proceedings. Further this was duly submitted before the ld. CIT(A) as would appear from the submission of the assessee as appearing at para 1 of page 4 of CIT(A) order. 1.1.2 Books of accounts duly audited as per law: We may submit that these books of accounts as maintained by the assessee were duly audited as per requirement of the law. The audit report obtained by the assessee in prescribed format in form no. 10BB is enclosed at PB 3-16 along with the audited financial statements.

13 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer 1.1.3 Books of accounts not rejected by the lower authorities: It is notable that the books of accounts maintained by the assessee were not rejected by any of the lower authorities. In such circumstances, such a huge addition was unjustified and uncalled for specially when the ld. AO could not point out even a single defect. 1.2.1 Entire expenses incurred for the objects of the trust: At the outset, we may submit that the entire expenses were incurred by the assessee for the purposes of objects of the trust. The trust is set up for educational purposes and it is working towards the same for the past several years. It is notable that the auditor has duly mentioned the total expenses incurred wholly and exclusively for the purposes of the object of the trust as appearing in clause 9 of the annx. of the audit report at PB 4. The ld. AO has also not found any expenses which were not for the objects of the trust and hence, no expenses could be disallowed by the ld. AO. 1.3.1 Huge disallowance made without any basis: We may submit that the ld. AO has made a huge disallowance of Rs.5000000/- without any basis at all and it has just observed that the expenses claimed by the assessee "seems to be excessive". We may submit that while making disallowance, the ld. AO has not shown any basis that why the expenses claimed by the assessee have been found to be excessive. Even what heads of expenses have been found to be excessive is not stated by the ld. AO. No comparison of expenses has been made by the ld. AO to reach to such conclusion and thus the entire disallowance made by the ld. AO was baseless, unjustified and uncalled for. 1.3.2 No specific instance of expenses of disallowable nature: We may also submit that though the ld. AO has made such a huge disallowance but at the same time not a single stance of any expense of disallowable nature has been identified. The assessee has maintained the complete books of accounts with complete supporting of expenses and hence, the ld. AO could not have made any disallowance without giving specific finding. 1.3.3 No comparison with past history or any other assessee: The ld. AO made absolutely no comparison with the past history of the assessee nor made any efforts to compare the expenses claimed by the assessee with any other similar assessee. In such circumstances, the disallowance was bad in law and uncalled for. 1.4.1 Change of stand by the ld. AO: While there was no basis given in the assessment order for disallowing of expenses. The ld. AO changed its stand and pointedout certain expenses in the remand report. But surprisingly he concluded in its remand report as under:

14 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer

"In view of the above facts, a lump sum amount of Rs.5000000/- had been disallowed and it is approximately 11% of the total receipts of the assessee society earned during the year under consideration" Thus, he changed its stand of disallowance as being % of receipts and not the expenses claimed by the assessee. This approach clearly indicates that the disallowance was absolutely without any basis, unjustified and uncalled for and hence, deserves to be deleted in totality. 1.4.2 Allegation in remand report clearly explained: In reply to the remand report, the assessee has duly explained the some of the observations pointed out by the ld. AO which are appearing at page 6-8 of the CIT(A) order. We are again making a submission on the same

(i) Rs. 1707200/- Computer Repairing Expense: The ld. AO compare the expenses with that the WDV of computers which is very surprising. Computers are depreciated at 60% and in 4-5 years, WDV becomes negligible and therefore such comparison is misleading. In fact the observation supports the case of the assessee that the computers being old, the require more maintenance and upgradation in fast changing technology. The ld. AO merely stated that the expenses do not seem to be genuine and are excessive. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non genuine or excessive. With around 1500 students, there are around 300 computers with the society and due to fast changing technology, the computer repairs expenses has to be higher. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified.

15 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer (ii) Rs. 1294127/- Furniture Repairing Expense: The Id. AO merely stated that the expenses do not seem to be genuine and are excessive. The AO wrongly stated the fact as well as the WDV of only one branch was considered and the audited depreciation chart are enclosed at PB 14-16. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non genuine or excessive. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (iii) Rs. 175831/- Photostat Expense: The ld. AO merely stated that the expenses do not seem to be genuine. Not a single item of disallowance has been pointed out and even there is no basis of holding such expenses as non genuine or excessive. Absolutely no comparison of such expense has been made with reference to the requirement of the assessee in its operations nor has any evidence been brought on record to justify his action in making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of the trust and hence no disallowance out of such expense claimed by the assessee would be justified. (iv) Rs. 38955 Van Repairing Expenses: It has been alleged by the ld. AO that the assessee did not have any Van during the year under consideration however it is submitted that this observation of the ld. AO is totally incorrect and the facts on record. It would be seen from the depreciation chart already submitted that the assessee was having two tata ace vehicles and on the same these expenses have been incurred. (v) Rs. 900594/- Conveyance Expense, Rs. 43062/- Travelling Expense: In this case also, absolutely no justification has been given for making of disallowance & the ld. AO merely stated that the assessee society is having only 2 buses and a car. We may submit that the assessee is a very big education society and huge running has to be done by the buses and car. Complete expenses are supported with vouchers & bills and the ld. AO has not been able to point out that why he is

16 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer treating these expenses as huge expenses without making any comparision with any other education society or assessee's past expenses. The observation of the ld.AO nothing but based on own assumptions and presumptions on which disallowance can made. (vi) Rs. 15353032/-Salary Daily Wages, Rs. 5889585 Wages: The ld. merely stated that expenses do seem to genuine. Not single item disallowance has been pointed out even there is basis of holding such expenses non genuine excessive. Absolutely no comparison of such expense has been made with reference to the requirement of assessee in operations nor has any evidence been brought on record justify his action making of such huge disallowance. Complete expenses have been incurred during the course of regular operations of trust and hence disallowance out such expense claimed by assessee would justified. (vii) Rs. 43567 Library Expenses: proper justification has been given the ld. while treating library expenses as genuine and has simply stated that library is part building. It humbly submitted that all library expenses fully vouched and the ld. AO has been able point out even single rupee expense out of same. Therefore disallowance required to made out of same. (viii) Rs. 3633465/- Building Repairing Expense: The ld. merely stated that expenses do seem to genuine. Not single item disallowance has pointed out even there is no basis holding such expenses as genuine excessive. Absolutely comparison such expense been made with reference to requirement of assessee in operations nor has evidence been brought record justify his action making such huge disallowance. Complete expenses have been incurred during course regular operations the trust hence disallowance out of expense claimed assessee would justified. 1.5.1 Reasonable expenses considering the large set up: We submit educational society is very reputed society in the field education. It following set KD Jain College KD Jain Public School KD Jain Higher Secondary School KD Jain Primary School KD Jain Kinder Garden School

17 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer Notably almost 1500 students studying in different branches of the society and it has huge infrastructure for different type of studies. Considering the same expenses claimed by the assessee is reasonable and a the same time duly supported by the documentary evidences on record. 1.6.1 Wrong finding of ld. CIT(A): The ld. CIT(A) merely stated that the assessee has not been able to prove the expenses with documentary expenses. The assessee has maintained complete books of accounts and the same were produced before the lower authorities. There is not a single stance pointed out by the lower authorities of any expenses of disallowable nature. There is no rejection of books of accounts by the AO or Id. CIT(A). In such circumstances, the sustaining of disallowance was baseless and uncalled for. 1.7 Case laws: Please refer 1. Goodwill Impex Limited vs. DCIT in ITA No.544/JP/2018 dt. 18-3-2019 (Jaipur ITAT) 2. Soni Hospital Private Limited vs. ACIT in ITA no.756/JP/2019 dt.8-4-2021 (Jaipur ITAT) In view of above facts and circumstances of the case, the disallowance made by theId. AO and sustained by the ld. CIT(A) may please be deleted in toto.’’

13.4 In addition to the written submission the ld. AR of the assessee argued that there is only 3-line observation of the AO based upon that comment a lump sum addition to the extent of Rs. 50,00,000/- is made which is purely based on surmises, conjectures and without finding any single defects, in the accounts, vouchers and details submitted. The addition is made for sake of making addition. He has written Rs. 70,00,000 and then while determining the income he has added Rs. 50,00,000. This itself shows the causal approach of the AO

18 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer and the same is made hurriedly without any clear-cut finding. Thus, the order of the AO is non-speaking order against the principles of natural justice. He has also submitted that there is no show cause notice issued by the AO while proposing the disallowance and he adopted a short cut method to disallow substantial amount without any basis or finding. Even the Ld. CIT(A) has not taken seriousness of the disallowance which are made without any basis. The Ld. CIT(A) based on the unclear remand report confirmed the addition that too writing that the disallowance made by AO is quite reasonable and fair. This finding of the Ld. CIT(A) is unfair and is against the principles of natural justice. He has further stated that the assessee is registered educational institute, no defect in books of account found by auditor, not a single defect found in the assessment proceeding as well as in the remand proceeding so as the records maintained by the assessee including the supporting bills and vouchers are not correct. He has drawn our attention to audit report and its annexure wherein the auditor has reported that expenses incurred are for the purpose of the object of the trust. Not a single voucher is found to be incorrect or having any defect of the claim of expenses. He has submitted that there are around 1500 students and 300 computers are installed to impart the education to the students and looking to the facts and circumstances placed on record the lumpsum disallowance is required to be deleted.

19 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer 14. On the contrary the Ld. DR reiterated on the finding of the orders of the lower authorities and finding of the AO in remand report. He has further argued that the assessee has incurred around 4 cr as revenue expenditure which is substantial in sum. He has further argued that since the assessee has contended that the finding of the lower authorities is not clear the matter may please be remanded back to the file of the AO. He has based on the finding of the remand report drawn our attention to point 4 of the remand report wherein the AO has contended that no van is shown in the Balance sheet whereas Van repairing expenses of Rs. 38,955 have been claimed, this itself proves that the assessee has claimed the expenditure on higher side. He has further drawn our attention that in the asset side computer block is of only 8475 and an addition in computer hard ware is made at Rs. 15,45,580/- not only that an expenses of Rs. 17,07,200/- is claimed as computer repair expenses this itself proves that the accounts are not showing the correct results and therefore, the addition should sustain relying on the orders of the lower authorities.

20 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer having 300 computer and repairs and maintenance considering the 1500 student it average comes to Rs. 1138/- per student and 300 computers if we considered it comes to Rs. 5690 per computer which itself proves that the same is fair and reasonable expenditure claimed. The AO has not pointed out or made such an exercise to judge the figure at excessive. As regards the non appearance of Van as per AO’s version the ld. AR of the assessee submitted that there is two VAN as appearing in the balance sheet TATA LP 407 & 709 and considering the amount expended in the two vehicle the same is also fair and reasonable. As regards the photocopy expenses he has argued that the same is incurred to in the best interest of the student when the one machine could not reach to the job looking to the urgency of the matter. As regards the furniture repairing he has stated that there are as many as 1500 student undergoing education and looking to the size of the institution and in the absence of any bills / voucher found defective the addition could not be made merely on such expenditure being at higher figure. He has not given any comparison with that of the assessee or with other assessee while doing so. He further argued that income of the assessee trust is totally exempt from tax whether the expenditure is shown excess or less will not make any difference to the revenue even otherwise.

21 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer expenses by the assessee. It is not disputed by the both the parties that there is not a single instance observed in the original assessment proceeding and in the remand proceeding about the correctness and completeness of the records maintained by the assessee. The only contention raised by the revenue that the expenditure shown by the assessee is on higher side/ excessive. We also found force in the argument of the ld. AR of the assessee that when the income of the assessee is exempt from tax what it will make a difference about the claim of the expenditure this is also confirmed by the AO, on page 3 of the assessment order the wherein the AO has observed that “As the ‘A’ Trust is registered u/s. 10(23C(vi) of the I. T. Act, 1961, income earned during the year under consideration is exempt and hence assessed at Rs. Nil”. We also found force in the argument of ld AR of the assessee that assessee has discharged its complete onus producing and appearing in both the proceedings. Not only that the entire addition has been made purely on the basis of the assumptions and surmises is purely devoid of any merit. Even the ld. CIT(A) also did not consider the contentions of the assessee on merit despite the submission and remand report placed before him by submitting the written contentions and ld CIT(A) also chose to remain silent while dealing with the appeal of the assessee. It is not disputed that the assessee has maintained regular books of accounts, which are audited by an independent Charted Accountant, in his report the auditor nowhere discussed any defects in the set of records

22 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer maintained by the assessee, the books were presented before the AO in original as well as in remand proceeding, no specific defect or bogus vouchers/bills are observed. Whatever arguments made by the Ld DR in the hearing has also been dealt with convincing answer and on that there are no further comments required after considering the submission of the ld. AR of the assessee. 17. The ld AR of the assessee has relied upon the two judgements of the co- ordinate bench of this ITAT where in the recent judgment of Soni Hospitals Pvt. Ltd., Jaipur Vs. ACIT, Jaipur in ITA No. 756/JP/2019 where in para 6 it has been observed that “6.Now, coming to disallowance of travel, conveyance and business promotion expenses, the AO has disallowed a sum of Rs 450,000/- holding that some of the expenses are not fully supported by proper bills/vouchers and thus not subject to verification. On appeal, the ld CIT(A) upheld the finding of the AO and at the same time, holding that the disallowance seems to be bit excessive has restricted the disallowance to Rs 250,000/-. We find that the AO is well within his right and jurisdiction to examine the claim of the expenses and adopt an appropriate methodology of determining the nature and sample size of expenses and on examination thereof, where he find that the expense are not genuine or have not been incurred for the purposes of business, the same can be disallowed. However, before arriving at such a finding, he has to record specific finding highlighting particular expenditure which accordingly to him is not allowable and the reasons for the same which in the instant case is conspicuously absent and thus, the disallowance so made and sustained by the ld CIT(A) is clearly in the nature of an adhoc disallowance which cannot be sustained in the eyes of law. Similar view has been taken by the Coordinate Bench in case of Meghalaya Construction and Supply Company vs ACIT.

23 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer recorded in the books of accounts which are audited as per requirement of the act and auditor has specifically reported that all the expenses incurred by the assessee is per the object of the society. The ld CIT(A) as well as AO has not pointed out any single defects in the records maintained by the assessee while making an adhoc disallowance neither the AO nor the ld. CIT(A) before arriving at such a finding, recorded specific finding highlighting particular expenditure which accordingly to him is not allowable, a general observation for all the expenditure disallowance of lump sum out of all expenses cannot be disallowed. The observations of AO in the remand proceeding is duly explained in the arguments and considering the explanations the ld. DR has not pointed out any strong rebuttal on the version of the ld AR of the assessee in respect of each of expenses. We apt that the expenditure based on the arguments are not disallowable. In the remand proceeding, the reasons for disallowance of lumpsum amount is also missing in this case. The AO failed to prove even in the remand proceeding that why and what count a sum of Rupees 50,00,000/- which is 11 % as per his version in remand proceeding should sustain. In the instant case, it is palpably clear that neither the AO nor ld CIT(A) observed any specific expenditure as excess or unreasonable, and their action of confirming lump sum disallowance at Rs. 50,00,000/- out of all the expenses cannot be sustained on a Lum sump amount in the eyes of law considering the

24 ITA No.1248/JP/2019 M/s. K.D. Jain Educational Society vs ITO(Exemption), Ajmer findings and observations made hereinabove and thus, the same is hereby deleted and ground no 3 of the assessee’s appeal is allowed. 19. In the result the appeal of the assessee is partly allowed.

Order pronounced in the open court on 05/04/2022.

Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼lanhi xkslkbZ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 05 /04/2022 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- M/s. K.D. Jain Educational Society, Madanganj. 2. izR;FkhZ@ The Respondent- The ITO (Exemption), Ajmer. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 1248/JP/2019) vkns'kkuqlkj@ By order,