THE DCIT(CENTRAL)-I, BHOPAL vs. M/S. SHRINIWAS EDUCATION SOCIETY, BHOPAL

आदेश / O R D E R

Per Bench:

Feeling aggrieved by a consolidated appeal-order dated 19.10.2016 passed by Commissioner of Income-tax (Appeal)-3, Bhopal [“CIT(A)”] which in turn

Page 1 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

arises out of a consolidated assessment-order dated 27.03.2014 passed by

DCIT(Central), Bhopal [“AO”] u/s 153A/143(3) of the Income-tax Act, 1961

[“the Act”] for assessment-years [“AY”] 2011-12 & 2012-13, the revenue has

filed captioned two appeals and the assessee has filed captioned two cross-

objections. Since all these matters emanate from common orders of lower-

authorities and involve identical issues, they were heard together at the

request of both sides and are being disposed of by this consolidated order.

records perused.

the assessee is a society registered u/s 12A of Income-tax Act, 1961 engaged

in educational activity. It is claiming exemption u/s 11/12 of Income-tax

Act, 1961. A search u/s 132 was conducted upon assessee on 01.06.2011 in

pursuance of which the assessments of assessee for 7 years from AY 2006-

07 to 2012-13 were framed u/s 153A/143(3). Presently, we are concerned

with AY 2011-12 and 2012-13 in these matters wherein the AO, while

finalising assessments, made certain additions. Aggrieved, the assessee

carried matters in first-appeal and got substantial relief. Now, the revenue

as well as assessee have come in next appeals before us on their respective

grievances emanating from order of first-appeal.

Page 2 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

Revenue’s IT(SS)A No. 2/Ind/2017 for AY 2011-12:

Page 3 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

Assessee’s C.O. In the discussions to follow, we shall be taking grounds of

both AY 2011-12 and 2012-13 analogously since identical issues are

involved. During arguments, Ld. AR for assessee took lead to make

presentations with the consent of Ld. DR for revenue and Bench. The

request was allowed.

Page 4 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

Revenue’s Appeals:

Ground No. 1 for both years:

wrong in giving benefit of certain decisions of non-jurisdictional High Courts

to assessee and at the same time ignoring the decision of non-jurisdictional

High Court in CIT Vs. Raj Kumar Arora 367 ITR 517 (Allahabad High Court)

favouring revenue.

conducted on 01.06.2011 and the AY 2011-12 & AY 2012-13 with which we

are concerned in present-appeals were falling within the category of ‘pending

years’ as on the date of search whereas the decision in CIT Vs. Raj Kumar

Arora 367 ITR 517 (Allahabad High Court) was pertaining to

‘completed/unabated years’ wherein it was held that the addition can be

made in ‘completed/unabated years’ even in absence of incriminating

material. Ld. AR submitted that the Raj Kumar Arora decision has no

relevance to assessee’s case and the ground raised by revenue should not

arise for AY 2011-12 and 2012-13 under consideration before us. Further,

the decision in Raj Kumar Arora is not valid after subsequent decision of

Hon’ble Supreme Court in PCIT Vs. Abhishar Buildwell Pvt. Ltd. (Civil Appeal

No. 6580 of 2021. Therefore, the grounds raised by revenue are meritless

and liable to be dismissed. After consideration, we find sufficient strength in

Page 5 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

Ld. AR’s submission which could not even be rebutted by Ld. DR for

revenue. Therefore, these grounds are dismissed.

Ground No. 2 for both years:

erred in deleting the addition of Rs. 1,28,000/- and Rs. 1,44,000/- in AY

2011-12 and 2012-13 respectively and thereby not approving AO’s action of

holding violation of section 13 of the Act by assessee.

Basically, the AO has observed that the assessee-society has given its office

premise on rent to three concerns, namely (i) M/s Bansal Construction

Works, (ii) M/s S.D. Bansal Construction Pvt. Ltd., and (iii) M/s Bansal

Extraction & Export Pvt. Ltd., wherein the members of society were

directors/shareholders/partners/substantially interested. The AO further

noted that the assessee charged rent of Rs. 5,40,000/- and Rs. 7,20,000/-

in AY 2011-12 and 2012-13 respectively yielding Rs. 7.50 and Rs. 10/- per

square feet of rent in those respective years which was less than prevalent

rates of rent. The AO also got an enquiry report from departmental inspector

informing that the prevailing rent was minimum Rs. 10/- and Rs. 12/- in

those respective years. Accordingly, the AO computed fair rent of Rs.

7,20,000/- and Rs. 8,64,000/- in those years on the basis of Rs. 10/- and

Rs. 12/- per square feet for 6,000 square feet area of the premise. On that

Page 6 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

basis, the AO made addition of differential of Rs. 1,28,000/- (the AO has

incorrectly added Rs. 1,28,000/- though differential comes Rs. 1,80,000/-)

and Rs. 1,44,000/-. Further, the AO held this as a violation of section 13 of

the Act. During first appeal, the CIT(A), however, reversed AO’s order.

reply-letter dated 24.03.2014 filed by assessee to AO in response to show-

cause notice dated 20.03.2014 issued by AO qua this issue during

assessment-proceeding. Simultaneously, Ld. AR also carried us to Para No.

11.2 and 11.3 of assessment-order wherein the AO has, though mentioned

that the reply of assessee was considered but neither re-produced the

assessee’s reply nor considered the same correctly. Ld. AR iterated the

contents of para No. 5 to 8 of assessee’s reply in which the assessee

informed to AO that (i) out of the area of 6,000 square feet, only an area of

400 square feet was provided to each of the three concerns, (ii) the major

portion of premise was used for assessee-society’s own activities, and (iii) the

rent of Rs. 20,000/- per month charged from each of those concerns for 400

square feet was yielding a very high rent to assessee more than the

prevailing market rent. Ld. AR submitted that despite such correct, clear-cut

and to-the-point submission, the AO has ignored to discuss the assessee’s

submission in assessment-order. That apart, Ld. AR submitted, the AO has

wrongly assumed that the entire 6,000 square feet area was let out to three

concerns as against the aggregate area of approx. 1,200 square feet (400

Page 7 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

square feet to each concern). Ld. AR carried us to the order of CIT(A) and

submitted that the CIT(A) has correctly appreciated the assessee’s reply

made before AO and therefore deleted the addition, his order is very much

correct and must be upheld.

provided any document to show that only 1,200 square feet of area was let

out. She submitted that the submission made by assessee in reply letter

filed to AO is self-serving and not supported by any evidence. She submitted

that the CIT(A) is wrong in giving credence to assessee’s submission.

orders of lower-authorities. We find that when the AO show-caused assessee

on this issue vide notice dated 20.03.2014, the assessee immediately filed

reply dated 24.03.2014, copy of the same is filed in the Paper-Book at Page

about filing of reply by assessee. Hence, the reply filed by assessee cannot

be disputed. In the said reply, as demonstrated by Ld. AR, the assessee has

categorically mentioned that only 400 square feet of area was used by each

of three concerns, which means total area used by them was 1,200 squre

feet. The assessee submitted that rest of the area was used by assessee-

society itself. The AO has, however, not re-produced this submission of

assessee in his order and went on making comments of lesser rent being

Page 8 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

charged by assessee as if the assessee had let out entire 6,000 area. Since

there is no discussion by AO rebutting the assessee’s submission of 1,200

square area provided to three concerns, we find that the CIT(A) has passed

an apt order in this regard. The order passed by CIT(A) is being re-produced

here for an immediate reference:

“19. From the facts on records it can be gathered that the AO has completely misunderstood the relevant facts in spite of those having been specifically pointed out by the appellant at the time of assessment proceedings vide explanation dated 24.03.2014, that the area which was given on rent was 1200 sq.ft. @ 50/- per sq.ft. per month, out of the total available area with the appellant comprising of 6000 sq.ft.; whereas the AO has assumed that the entire area was given on rent by the appellant of 6000 sq.ft. @ Rs. 7.50 per sq.ft. per month. In the reply given to the AO during the assessment proceedings, the appellant had specified the area given on rent and the rate at which it was given. The AO has not rebutted this claim of the appellant in the assessment order. In fact the AO has assumed incorrect rate as well as incorrect area given on rent without contradicting the claim of the appellant in the assessment order. The AO estimated the fair rental of Rs. 10 per sq.ft. per month for 6000 sq.ft. for A.Y. 2011-12 and @ Rs. 12 per sq.ft. per month for A.Y. 2012-13. However, as per the submissions given, the rent shown by the appellant @ Rs. 50 per sq.ft. per month was in excess of the estimation done by the AO. Given these facts, the AO’s invocation of section 13 would not be justified as the market rents assumed by him were less than what were charged by the appellant. In any case the unilateral reliance of the AO on the inspector’s report which is just on estimate cannot be treated as the ‘arms length price’ for the rental in the area which can be a good reason to invoke section 13 of the Act. Besides it cannot be disputed that rentals can never be determined in absolute and precise terms as it can vary on number of factors like the condition of the property, floor on which property is located and various factors including who the prospective tenant is. The appellant society in any case was not set up for the primary purpose for giving properties on rent.” 13. The submission of Ld. DR for revenue that the assessee’s submission

in letter dated 24.03.2014 was self-serving is not convincing because of the

reason that when the assessee made such a categorical submission, it was

Page 9 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

the minimum duty of AO to discuss the assessee’s submission in

assessment-order and to rebut or contradict the same. But the AO has kept

silence on assessee’s submission and went ahead to make adjudication

against assessee. In the situation, we are inclined to accept CIT(A)’s order

which takes into account assessee’s categorical submission and thereby

hold that the rent charged by assessee was fair, rather higher than

prevailing rent and further holding that there was no violation of section 13

of the Act. Faced with this situation, we are not inclined to make any

interference with the order of CIT(A); the same is hereby upheld. These

grounds are therefore dismissed.

Ground No. 3 for both years:

deleting addition of Rs. 9,28,06,233/- and Rs. 9,70,52,488/- for AY 2011-12

and AY 2012-13 respectively.

order. Basically, due to alleged violation of section 13 on account of charging

of lesser rent from three concerns as discussed in foregoing paras, the AO

came to a further conclusion that the assessee was not entitled to the

benefit of exemption u/s 11/12 of the Act. Accordingly, the AO denied

exemption u/s 11/12 fully to assessee and considered the net surplus of Rs.

Page 10 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

9,28,06,233/- and Rs. 9,70,52,488/- for AY 2011-12 and AY 2012-13

respectively shown by assessee as taxable income.

in foregoing paras. Since we have already agreed with CIT(A)’s order that

there was no violation of section 13, this issue automatically comes to an

end. Consequently, the grounds raised by revenue do not have any worth

and are being dismissed.

Ground No. 4 of AY 2011-12 and Ground No. 5 of AY 2012-13:

deleting addition of Rs. 8,62,52,994/- + Rs. 1,60,40,891/- + Rs.

15,66,571/- in AY 2011-12 and Rs. 3,94,27,706/- + Rs. 1,85,49,777/- in AY

2012-13 made by AO u/s 69B on account of unexplained investments in

buildings.

additions. It is submitted by Ld. AR that the AO has made these additions

by making a reference dated 02.08.2013 to Departmental Valuation Officer

(DVO) u/s 142A and after taking into account the final report dated

03.12.2013 submitted by DVO to him, on the basis of difference in the cost

of construction recorded in books of account of assessee and the valuation

thereof reported in DVO’s report. Thereafter, during first-appeal, the CIT(A)

Page 11 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

deleted addition by holding the reference made by AO u/s 142A as non-

maintainable. The reasoning adopted by Ld. CIT(A) is that prior to

amendment in section 142A from 01.10.2014, the AO could not have make

such a reference without finding any defect in books of account and without

rejecting books of account. In accepting this, Ld. CIT(A) relied upon several

judicial rulings including the decision of Hon’ble Apex Court in Sargam

Cinema Vs. CIT (2010) 328 ITR 513 (SC). Ld. AR submitted that the same

view has also been taken by ITAT, Indore in assessee’s own case for AY

2013-14 & 2014-15 in ITA No. 479 & 480/Ind/2018, order dated

15.12.2023. Therefore, Ld. AR contended that this issue is already settled

in favour of assessee by Hon’ble Apex Court as followed by ITAT, Indore in

assessee’s own case and the same view should be applied here also.

could not contradict the submissions made by Ld. AR.

orders of lower-authorities. After a careful consideration, we find that the

assessee’s case is directly covered by the decision of ITAT, Indore in

assessee’s own case read with the decision of Hon’ble Supreme Court in

Sargam Cinema (supra). Respectfully, following the same, we are inclined to

uphold the order of CIT(A) and dismiss these grounds of revenue.

Ground No. 4 of AY 2012-13:

Page 12 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

1 Shriniwas Education Society, Anand Nagar, Bhopal 32,279/-

2 Sushila Devi College, Indore 1,09,800/-

Total 2,35,474/-

During assessment-proceeding, when the AO asked assessee to explain sources of such cash found, the assessee submitted in reply letter dated 18.03.2014 that the cash found with various colleges was normal petty cash balance maintained at each college to run day to day activities and the same was duly reflected in normal books. However, the AO rejected assessee’s reply by stating that at the time of search, the assessee has not explained such cash with books of account. Ld. AR submitted that the AO has made full addition of cash physical found as if there was Nil cash balance in books of assessee; this approach of AO itself shows that the addition has been made in utter disregard to assessee’s factual submission. Ld. AR went on submitting that during first-appeal, the CIT(A) has rightly deleted addition holding that the AO has not pointed out any specific error in the cash-book and also holding that the AO has not pointed out difference between books of account vis-à-vis cash found. He submitted that the order passed by CIT(A) is very much correct and must be upheld.

Page 13 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

the appeals are dismissed.

Assessee’s C.O. for both years:

grounds. Basically, the assessee’s grievance is that the CIT(A) has erred in

not adjudicating Ground No. 3 and Ground No. 13 to 19 of the first-appeal

raised by assessee before him in both years even though the CIT(A) has

granted relief to assessee on primary grounds. Ld. AR submitted that the

assessee needs such an adjudication for any litigation which may ensue.

The request of assessee is not objected by Ld. DR. In view of this, we direct

the CIT(A) to adjudicate assessee’s grounds appropriately after giving

Page 14 of 15

Shriniwas Education Society, Bhopal IT(SS)A Nos.02 & 13/Ind/2017 & C.O.Nos 29 & 30/Ind/2017 A.Ys.2011-12 & 2012-13

necessary opportunity to assessee. The assessee is also directed to extend

full co-operation to CIT(A) for disposal of those grounds. Consequently, the

assessee’s Cross-Objections are allowed.

cross-objections are allowed.

Order pronounced in open court on 29.02.2024

Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Indore िदनांक / Dated : 29.02.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore

Page 15 of 15