THE SIKH EDUCATIONAL SOCIETY,PATIALA vs. ADDL. CIT, RANGE, PATIALA

आयकर अपीलीय अिधकरण,च"ीगढ़ "ायपीठ “बी” , च"ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: HYBRID MODE "ी िव"म िसंह यादव, लेखा सद" एवं "ी परेश म. जोशी, "ाियक सद" BEFORE: SHRI. VIKRAM SINGH YADAV, AM & SHRI. PARESH M. JOSHI, JM आयकर अपील सं./ िनधा"रण वष" / Assessment Year : 2010-11 The Sikh Educational Society बनाम The Addl. CIT Shiromani Budha Dal, Punjawan Patiala Range Takhat (Regd.), Lower Mall, Patiala Patiala(Punjab) "ायी लेखा सं./PAN NO: AADTS3991B अपीलाथ"/Appellant ""थ"/Respondent आयकर अपील सं./ ITA NO. 874/Chd/2018 िनधा"रण वष" / Assessment Year : 2010-11 The Jt. CIT(OSD) बनाम The Sikh Educational Society Circle-1(Exemption), Shiromani Budha Dal, Punjawan Chandigarh Takhat (Regd.), Lower Mall, Patiala(Punjab) "ायी लेखा सं./PAN NO: AADTS3991B अपीलाथ"/Appellant ""थ"/Respondent िनधा"रती की ओर से/Assessee by : Shri Vibhor Garg, C.A राज" की ओर से/ Revenue by : Smt. Kusum Bansal, CIT, DR सुनवाई की तारीख/Date of Hearing : 08/05/2024 उदघोषणा की तारीख/Date of Pronouncement : 21/06/2024 आदेश/Order PER PARESH M. JOSHI, J.M. :

This is an appeal filed by the Assessee called Sikh Educational Society Patiala, Punjab. The Assessment Year is 2010-11.

Factual Matrix Return declaring NIL income by availing exemption u/s 11 of the 3. Income Tax Act, 1961 was filed on 15/10/2010 by the assessee wherein exemption under section 11 of the Income Tax Act, 1961 was sought and claimed. Section 11 of the Income Tax Act, 1961 which falls under Chapter III and broadly deals with income which do not form part of total income. In specific section 11 falls under heading Income from Property held for charitable or religious purposes. The return of income was processed under section 143(1) of the Income Tax Act.

4. Thereafter, the above return of income was selected under scrutiny as per the guidelines issued by the CBDT and after seeking the prior approval of the Commissioner of Income Tax, Patiala. Statutory notice u/s 143(2) was issued on 22.09.2011 which was duly served upon the assessee on 27.09.2011. Subsequently, a detailed questionnaire alongwith notices u/s 143(2) & 142(1) were issued on 29.08.2012. In response to which Sh. Ajay Garg, C.A., Sh. K.P. Bajaj, Advocate alongwith Sh. Ravinder Singh Accountant attended the assessment proceedings from time to time and the case was discussed with them. Detailed information and the documents, as called for, were filed which were examined and placed on record.

5. That during the year under consideration the assessee society was found to be running schools at Patiala, Zirakpur ad Samana.

6. In the income and expenditure account of the assessee society gross receipt of Rs. 6,04,44,999/- is shown. This gross receipt is inclusive of income transferred from Patiala and Samana schools to the extent of Rs. 4,63,77,474/- and Rs. 75,26,662/- respectively.

7. The assessee society has shown the net income of Rs. 3,66,78,419/-. The assessee claimed exemption under section 11 of the Income Tax Act, 1961.

9. The assessee society was called upon to justify and substantiate the aforesaid capital expenditure as claimed by them in the computation sheet with the documentary evidence in support thereof.

10. During the Financial Year 01/04/2009 to 31/03/2010 relevant to the A.Y. 2010-11 the gross receipts and expenditure of the society from various sources as worked out is as under: Expenditure including Expenditure Income Gross Capital Expenditure depreciation. receipts. Samana 11427470 18954132 1130287 Patiala 37699750 84077224 6664172 Zirakpur 3373077 2651392 8076586 Society 22974168 7733275 47476722 75474465 113416023 63347767

(i) Despite affording number of opportunities , you have failed to produce the books of accounts for the period relevant to assessment year under consideration i.e. A.Y. 2010-11. (ii) You have produced bills/ vouchers only. A perusal of these bills/ vouchers reveals that on most of the bills no mode of transportation has been mentioned. (iii) From the purchase bills of various items , which you have claimed for the construction of school building, it is noticed that in the column where name of purchaser is mentioned , in that column name of station is mentioned Mohali, Fatehgardh , Damdama Sahib etc. (iv) Till date, you have failed to produce the approved plan prepared by an architect for the construction of the school buildings under taken by you at different places i.e. zirakpur, Samana, Patiala. (v) Enquiries made from the Municipal Corporation, Patiala reveals that the civic body never got any application for approval of site/ building plan in respect of any construction carried out by you during the Assessment years 2008-09, 2009-10, 2010-11 .

(vi) No details such as name and address of the persons/ contractors from whom you have got constructed the school buildings for verification in respect of your claim in respect of expenditure incurred by you on the construction of buildings have been filed. (vii) No details of persons engaged as electricians, carpenters, plumbers, interior-decorators, painters, polishers & any other work related to execution of construction of school building have been furnished. (viii) As per assessment records during the year under consideration you have claimed the additions made in the building accounts as per details given below :-

Sr.No. Place of Building/ authority incurring the Amount for additior made expenditure. during the yea under consideration. 1 Budha Dal Public School Patiala. Rs. 87,58,302/- 2 Budha Dal Public School Samana. Rs. 6,32,238/- 3 Budha Dal Public School Zirakpur Rs. 51,80,286/- 4 Sikh Education society. Rs. 4,68,38,055/- Rs. 6,14,08,881/- Further no documentary evidence of having made payments to these persons has been adduced which means you have not done any construction of the building amounting to Rs. 6,14,08,881/- claimed by you.

Further, it is ironical that such a huge expenditure on account of building construction has been claimed by you but no corroborative or contemporaneous records have been produced by you. At the rate of Rs. 800/- per sq. Ft.( The average rate of construction of building of good quality), by spending Rs. 6,14,08,881/- , your covered areas of the building should have been about 76,760 sqt ft. You have not been able to offer the undersigned to inspect the building physically claimed to have been constructed by you during the period under consideration at any stage of the assessment proceedings. During the course of assessment proceedings, no log books, with the complete names and address and contact number of drivers have been provided in respect of Car utilized by the society. You have also failed to intimate about of purpose for which these cars have been utilized . Even the identity of the persons who utilized these cars have not been furnished by you with documentary evidence. Since, you have failed to produce the documentary evidence in respect of expenditure incurred by the society amounting to Rs. 6,14,08,881/- as detailed above , towards the construction of building, you are required to show cause as to why the difference of surplus in excess of 15% as envisaged u/s 11 read with section 12 i.e. 33% ( 85% minus %age of application of income in the year under consideration ) should not be added in your return of income. Your reply should reach to the office of the undersigned on or before 26-03-2013 at 3.30 P.M.

(i) It is incorrect to say that the books of account have not been produced. It is a fact that the case was fixed many a times and the information filed was examined vis a vis the books of account by Mr. Kapil Kumar, Inspector, to whom the dealing with the proceedings was entrusted. The undersigned appeared before your goodself in the month of December, 2012 when various vouchers were examined qua the books of account. It may be submitted that the assessee is a educational society and operates through three schools, Budha Dal Public School, Patiala, Samana and Zirakpur. Separate books of account for each institutin are maintained. A chart showing the books of account maintained in each institution is separately enclosed. The car load of books of account is being produced for necessary examination.

(ii) A very general statement has been given in the query vide which it is noted that on most of the vouchers the mode of transportation of material has not been mentioned. No such bill has been pointed out in the notice. The goods are purchased FOR destination in some cases in which case there is no requirement of any bill of transportation. A statement showing the bills received in connection with material supplied and transportation charges debited to the respective account is enclosed. The fact can be verified from the books of account produced for your examination in 2(i) above. (iii) The purchases of material made is supported by duly drawn bills, detail of which is enclosed separately. To cut short, the seller of the goods might have mentioned the name of the station only but it is a fact that the material reached the premises and used on construction of the building. (iv) Copies of the plans of school building as prepared by the architect were supplied during the course of assessment proceedings which might have escaped your notice. The fact is clear from reply to query No.2 of notice dated 11.02.2013. The copy of the reply filed is enclosed. However, another copy of the plans is also enclosed for your kind perusal. (v) It may be clarified that the additions and alternations were made within the boundary wall and the management was advised that no sanction or permission from the Municipal Corporation Authorities was required. However, to substantiate the fact certificate from the Architech under whose supervisions the work was carried out is enclosed alongwith the photographs of the new and altered structures. (vi) It is incorrect to say that the names and addresses of persons/contractors. (vii) Who were engaged in the construction of the building were not supplied. In fact the details were filed twice, copies of which are again enclosed. It may be reminded that some of the artisans were also called for examination by your office. It may be further submitted that tax was deducted at source from the payments made to them. Copies of the TDS returns filed for different quarters are enclosed. Almost all the artisans are regular income-tax assessees and their PAN's have been mentioned on the returns filed before the respective wing of the Department. (viii) It is admitted that the expenditure to the tune of Rs.6,14,08,881/- was incurred on construction. Almost all the payments to various artisans are made by account by account payee cheques which can be verified from the books of account produced and also the bank account therein. The inference that that no construction was done involving the expenditure of the volume shown by the assessee is perverse to the facts on record which are enumerated below:-

(ix) Copies of the plans drawn by Mr. L.R. Gupta, Architect. a) Copies of various bills of material purchased. b) Certificate from the Architect that he made the plans and supervised the construction. c) Copies of account of various artisans to whom the payments were made. d)The payments to the artisans were made by account payee cheques. e) That the payments so made are verifiable from the copy of bank account called for by your office from the banker. f) The TDS returns showing payments made to various artisans containing their PAN's. g) The books of account maintained in the regular course of business. The newly constructed buildings are still there. Your goodself is most welcome to inspect the same. Even otherwise, the inspection of the building by your goodself does not depend on the invitation of the assessee. It can be done under the provisions of law. (ix) The vehicles owned are either buses or cars meant for the purpose of carrying out the activity of the Schools. It has already been stated that the assessee operates through three educational institutions and the internal control mechanism is such that the misuse of the vehicles is not possible. However, it is not possible to maintain the log books as it would require deployment of the employees causing avoidable expenditure. It may be noticed from the books of account, audit report and above discussion that the institution is purely charitable institution and no employee would bungle the charity. In view of the above discussion, the inference that the construction was not carried out and that the application income was not for the objects of the institution is completely misplaced and in the interest of equity, good conscious and facts on record, the claim of the assessee may kindly be allowed, more so, when on the same facts and circumstances, the claims have been allowed in earlier years also. Although the principle of res-judicata is not applicable in income-tax proceedings, yet similar decision on the similar facts cannot be disturbed on whims and fancies." Findings of AO 17. The Ld. AO based on above factual matrix has given the findings which are as below:

(iii) Except claiming that the material reached the premises of the assessee, the assessee could not bring anything on record to substantiate the same. No stock register/gate register or name of the person delivering the material at the site has been disclosed.

(i) The assessee could not adduce any documentary evidence as to who advised the management of the school that no permission was required from the Municipal Authorities.

(ii) The assessee's contention that only alterations, additions were made within the boundary wall is self-contradictory on the facts discernible from the plans submitted by the assessee. The plans show that the assessee has made got sketch plan for 25,189.86 sq.ft. at Patiala and 13,316.66 sq.ft. at Zirakpur. When the information was called for from Municipal Corporation, Patiala and Zirakpur, they confirmed that no building plan has been got approved by the assessee during the year under consideration. It is needless to mention that approval for construction , alternation Addition and structural modification is mandatory as per Town Planning ACT and the assessee in way is exempted from the same.

k. Further no purchase of timber has been shown. The assessee has shown purchase of plywood for Rs. 2,09,595/- which again is not sufficient to account for the construction of 38,506.52 sq. ft. of covered area. l. The assessee has claimed to have constructed 13,316.66 sq. ft of covered area at Zirkpur but it is astonishing that no material has been shown to have been purchase from Zirkpur. No explanation furnished how the material was transported from Patiala to Zirkpur.

Budha Dhall Public School, Patiala.(Senior Wing) Administrative Block Covered Area in Sq. feet 5000 Date of commencement. 2009 Date of Completion 2010 and 2011 Transformer and Generator Set Room. Covered Area in Sq. feet 1200 Date of commencement 2009 Date of Completion 2010 & 2011 Construction Area at Samana : 7700 Sq. Feet approximate. ( 50% area of the building i.e. 3850 sq. feet is deemed to be constructed by the assessee during the financial year 2009-10 as completion took place in the financial year 2012) Date of Start : 2010 Date of Completion : 2012 Construction Area at Zirakpur : 7000 Sq. Feet approximate. (Ist and 2nd Floor) Date of Start : 2009-10 As per above chart, the total allowable constructed area during the financial year works out to 17050 sq. Feet. Shri L.R. Gupta has deposed in this statement that the approximate rate of construction of the building under his supervision was between Rs. 600 to 700 per sq. feet. However, for the sake of natural justice and equity , I estimate the cost of construction of buildings in questions, by applying the rate of Rs. 800/- sq. feet. Therefore, the allowable expenditure during the financial year 2009-10, for the purpose of section 11 of the Income-tax Act, 1961 comes to Rs. 1,36,40,000/- on account of application of income for the construction of building. vii) “The assessment records reveals that the assessee has not applied for in Form No. 10 as presecribed in Section 11(2) of the Income Tax Act, 1961 before the A.O. to accumulate and set apart of its funds in the succeeding years. Core Findings of AO viii) a) The Ld. AO further has held “Without prejudices to the above, as discussed in the preceding paragraphs, against the claim of capital expenditure of Rs. 6,33,47,767/- on account of construction of buildings, the actual expenditure have been found to Rs. 1,36,40,000/- . Hence, it is held that the capital expenditure of Rs. 4,97,07,767/- ( 6,33,47,767/- - 1,36,40,000/-) has actually not been applied for the purposes of construction of buildings and to avail the benefit of section 11 of the I.T. Act, 1961..” b) Expenditure not eligible for exemption on account of donation paid by the society: During the course of assessment proceedings, it was noticed that the assessee society has debited an amount of Rs. 46,000/- in the Income and Expenditure Account under the head donation account. As per details of the donation account , the assessee has paid donation of Rs. 31,000/- for water cooler to Smt. Harjit Kaur and donation of Rs. 15,000/- to M/s Hrinder of AAKAR Foundation, Chandigarh. The donation paid by the society is not related to the expenditure incurred for Education Purposes. There is no provisions in the bye laws of the society that it will make donation to the other persons. As the expenditure is not incurred to achieve the Aims and Objects of the society, therefore, this expenditure of Rs. 46,000/- is not a allowable expenditure. The same is accordingly disallowed and added to the income of the assessee. c) Addition on account of conveyance allowance: During the course of assessment proceedings, it was noticed that the assessee debited the expenditure of Rs. 12,70,000/- to the Income and Expenditure Account under the head 'Conveyance Allowance'. The perusal of details of conveyance allowance furnished by the assessee during the course of assessment proceedings, revealed that it had paid conveyance allowance of Rs. 6,70,000 to Mrs. Sukhdvinerjit Kaur, Member of the AOP and President of the Society and Rs.3,36,000 to Smt. Paraminderjit Kaur Brara, Member of the AOP and Administrative Officer of the Society. According to the provisions of Section 13(l)(c)(ii ) of the Income-tax Act, 1961, the provisions of section 11 of the Income- tax Act, 1961 are not applicable to the cases where any part of the income directly or indirectly paid to the persons specified in Sub-section 3 of Section 13 of the I. T. Act, 1961. The relevant provisions of section are reproduced below :- 13. Section 11 not to apply in certain cases. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- (a) -- (b)-- (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof- (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income ensures, or (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied,directly or indirectly .for the benefit of any person referred to in sub- section (3): Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution:

Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3),in so far as such use or application relates to any period before the 1st day of June, 1970; Provisions of Section 13(3) are reproduced as under: (3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely:- (a) the author of the trust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees; (c) where such author, founder or person is a Hindu undivided family, a member of the family; (cc) any trustee of the trust or manager (by whatever name called) of the institution; (d) any relative of any such author, founder, person , member, trustee or manager as aforesaid; (e) any concern in which any of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest. Since both the above noted persons namely Mrs. Sukhdvinerjit Kaur, Member of the AOP and President of the Society and Smt. Paraminderjit Kaur Brara, Member of the AOP and Administrative Officer of the Society, are a specified persons in view of the provisions of section 13(3) of the Income-tax Act, 1961, as such the expenditure of Rs. 10,06,000/- debited by the assessee under the Head 'Conveyance Allowance" is not allowable for the purpose of Section 11 of the Income-tax Act, 1961. Therefore, the amount of Rs. 10,06,000/- is disallowed and added to the income of the assessee. ix) Disallowance of expenditure claimed by the Assessee under the head depreciation on account of building under construction : The perusal of the depreciation Chart furnished by the assessee during the course of assessment proceeding reveals that it claimed depreciation on the buildings under construction as per details given below :-

Buildings in the books of :

Society 30992365 Buda Dal public, Patiala 269576 Buda Dal public, Zirakpur 560901 Buda Dal public, Samana 255181 Buda Dal public, Patiala (Primary 110704 Building, Patiala) Rs. 3,21,88,727/- As the assets/ buildings are not put to use in the year under consideration, therefore, this amount of Rs. 3,21,88,727/- is reduced from the expenditure incurred for the purposes of section 11 of the Income-tax Act, 1961 and accordingly the same is disallowed. Keeping in view, the above facts, the income of the Society for the purpose of section 11 is computed as under :- Particulars Income 1. Gross receipts 113416023 2. Expenditure- Total expenditure 43285738 70130285 75474465/- Rs. 3,21,88,727/- (Depreciation claimed on building under construction) 3. 85% of Rs. 11,34,16,023/- Rs. 9,64,03,619/- 4. Amount utilized by the Society Rs. 4,32,85,738/- 5. Difference Rs. 5,31,04,881/- 6. Less allowable capital expenditure 49,38,863 other than buildings under construction as shown by the assessee.

Conditions for applicability of section 11 and 12. 12A(1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:-

(b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub- section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.

According to rule 17B, of the Income-tax Rules, 1962, the report is required to be furnished in Form 10B prescribed in the Rules. The relevant provision of this section Rule is reproduced as under :-

Audit report in the case of Charitable or religious Trust etc.

17B. The report of the audit of the accounts of Trust or institution which is required to be furnished under clause (b) of Section 12A shall be in Form No. 10B.

The assessee has furnished in the Income-tax Return in the ITR-7 on 15-10-2010. The assessee has not enclosed the audit report of the Chartered Accountant in the prescribed form 10B alongwith other particulars required in that form. The perusal of the return reveals that the column relating to number of documents/ statements attached has been left blank. The assessee was asked to file a copy of prescribed Audit report for the relevant year as per notice issued u/s 142(1) of the I. T.Act, 1961 by the Income-tax Officer, Ward-l, Patiala. Again, the ITO Ward-l,Patiala has requested to submit the Audit report vide notice dated 18.4.2012. Again, the A.O., made request to the assessee vide letter dated 16-7-2012 to submit the copy of audit report. The assesse has not made compliance to the notices/letter issued by the A.O. Vide this office notices dated 29-8-2012, the assessee was asked to furnish the audit report. However, on 7-9-2012, the assessee has submitted the audit report on form no. 3CB under section 44AB of the Income-tax Act, 1961 prepared by Sh. Ajay Kumar Garg, and Associates, Chartered Accountants, Patiala on 22-9-2010. Since, the assessee claimed the Exemption under section 11 of the Income- tax Act, 1961, as such it was required to furnish the Prescribed Audit report of the Chartered Accountant in the prescribed form 10B as discussed supra. The assessee has also not filed the audit report in the prescribed form No. 10B during the course of assessment proceedings. Therefore, according to the provisions of section 12A(1) (b) of the Income –tax Act, 1961, the provisions of section 11 are not applicable in the case of the assessee . Accordingly, the claim of the assessee for exemption u/s 11 and 12 are hereby rejected. Without prejudice to the above, against the gross receipts of Rs. 11,34,16,023/- the assessee has claimed to have utilized Rs. 7,54,74,465/- for the purpose of application of funds . 85% of the gross receipts works out to be Rs. 9,64,03,619/- which means the assessee has accumulated Rs. 2,09,29,154/- in excess of 15% of its gross receipts which is liable to be taxed as the assessee has not given any notice to the concerned Assessing Officer in form No. 10 before the expiry of time allowed under section 139(1) in respect of any income accumulated or set apart in excess of 15% of the gross receipts of the assessee earned during the year under consideration. Keeping in view the facts stated above, the taxable income of the society is computed as under :-

1 Income as per Income and Expenditure account of the 3,66,78,419/- Society 2 Add: Depreciation on building under construction as 3,21,88,727/- discussed above 3 Addition on account donations as discussed above Rs. 46,000/- 4 Addition on account of conveyance allowance as Rs. 10,06,000/- discussed above. 5 Total assessed income. Rs. 6,99,19,146/- Order under section 154 of the Income Tax Act, 1961 18. Upon application of the assessee on 03/04/2013 following rectification order was passed : 7. Keeping in view of the above discussion, the addition on account of depreciation on building under construction is required to be made at Rs. 72,33,282/- instead of Rs. 3,21,88,727/-. With this observation, the income of the assessee society is recomputed as under :-

1 Income as per Income and Expenditure Rs. 3,66,78,419/- account of the Society. 2 Add: Depreciation on building under Rs. 72,33,282/- construction as discussed above. 3 Addition on account donations as disused above. Rs. 46,000/- 4 Addition on account of conveyance Rs. 10,06,000/- allowance as discussed above. 5 Total assessed Income. Rs. 4,49,63,701/- The application of the filed by the assessee u/s 154 on 3-4-2013 is partly accepted. Proceedings before CIT(A) 19. Being aggrieved by the aforesaid AO’s order, the assessee moves before Ld. CIT(A) and interalia set forth facts as under: i) Return of income was filed claiming NIL income after availing exemption u/s 11 of the Income Tax Act, 1961. The exemption claimed under section 11 was denied for reasons recorded in AO’s order. ii) Assessment under section 143(3) on net income of Rs. 6,99,19,150/-. iii) In arriving at assessed iocme, expenditure on construction of school building claimed at Rs. 6,14,08,881/- has been restricted to Rs. 1,36,40,000/- and the balance amount of Rs. 4,77,68,881/- has been ignored for purpose of application of the income for the objects of the trust for purposes of Section 11. The exemption is denied for more than one reason i.e; less than 85% application for the objects of the Trusts, Non filing of Form No. 10 etc. The income has consequently been worked out under the provisions of Sections 28 to 44 of the Income Tax Act-1961 at Rs. 6,99,19,150/-. The depreciation on building under construction has been worked out on page 32 of the AO’s order by taking the figure of the same in society at Rs. 3,09,92,365/- against correct figure of Rs. 60,36,920/-. In fact total claim of depreciation has been made in the books of account at Rs. 1,45,34,972/- which comprises depreciation on building as such and building under construction aggregating to Rs. 1,00,74,990. An application for rectification is pending. Disallowance of donation made by assessee to a charitable institution at Rs. 46,000/- conveyance allowance paid to employees has been curtailed by Rs. 10,06,000/-. Hence appeal before the Ld. CIT(A).

before CIT(A) read as under:

1. The assessment as it stands is bad in law and against the facts of the case.

2. That the assessment is liable to be annulled as the Ld. A.O. has relied upon the statements of S/Shri Naresh Jain, Avtar Singh and L.R. Gupta without confronting the same to the assessee or allowing right of cross examination.

3. That without prejudice to above, the Ld. A.O was not justified in holding that the exemption u/s 11 is not allowable in the case of the assessee.

4. That the Ld. A.O has erred in working out the amount applied for the objects of the institution as the expenditure on construction of building to the extent of Rs. 4,77,68,881/- has been held to be not allowable.

5. That the Ld. A.O is not justified in bringing to charge the income of Rs. 6,99,19,150/-.

6. That without prejudice to above, the working of income is incorrect.

7. That the Ld. A.O was not justified in disallowing donations made to charitable institution which are within the objects of the institution.

8. That the Ld. AO is not justified in disallowing claim of conveyance allowance to the extent of Rs. 10,06,000/- departing from the past history of the case.

21. The Ld. CIT(A) has identified ground of appeal no. 1 and 6 as general and ground nos. 5 & 6 as consequential, ground no. 3 is taken after disposing other grounds as it involves to denial of deduction u/s 11 of the Act; ground no. 2 is a question of fact on recording of statement on which separate finding is given. Ground nos. 4,5,6 are taken up separately.

4. The appellant is a society registered in Punjab with the