ACIT, Sonepat v. The Market Committee, Sonepat

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E : NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI B.P. JAIN ACCOUNTANT MEMBER I.T.A. NO.1754/DEL/2009 ASSESSMENT YEAR : 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX THE MARKET COM MITTEE SONEPAT CIRCLE SONEPAT. VS. DISTT. SONEPAT. I.T.A. NOS.1755/DEL/2009 ASSESSMENT YEARS : 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX THE MARKET COM MITTEE GANAUR CIRCLE SONEPAT. VS. DISTT. SONEPAT. I.T.A. NOS.1756/DEL/2009 ASSESSMENT YEARS : 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX THE MARKET COM MITTEE GOHANA CIRCLE SONEPAT. VS. DISTT. SONEPAT. (APPELLANT) (RESPONDENTS) APPELLANTS BY : SSH. G.S. SAHOTA SR. DR & JAYANT MISHRA CIT(DR) RESPONDENTS BY : SHRI R.K. AGGARWAL ADV OCATE. O R D E R PER B.P. JAIN ACCOUNTANT MEMBER THESE 3 APPEALS BY THE REVENUE ARE DIRECTED AGAINST THREE DIFFERENT ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS) ROHTAK ALL DATED 23.02.2009 FOR ASSESSMENT YEAR 2006-07. ALL T HE APPEALS ARE BEING 2 DECIDED BY THIS CONSOLIDATED ORDER BEING THE ISSUES IN ALL THE APPEALS ON IDENTICAL FACTS. ITA NO.1754/DEL/2009: 2. GROUNDS RAISED IN THIS APPEAL ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE A DDITION OF RS.11136230/- ON THE FALSE STATEMENT OF THE ASSESSE E THAT IT HAD PRODUCED THE BILLS AND VOUCHERS OF THE EXPENDITURE INCURRED ON CONSTRUCTION AND REPAIRS OF RURAL ROADS BEFORE THE A.O. THE CIT(A) HAS ALSO IGNORED THE FACTS THAT THIS EXPENDI TURE ARE NOT COVERED BY ITS AIMS AND OBJECTS AS THE RURAL ROADS ARE COVERED BY THE DEFINITION OF APPROACH ROAD BETWEEN MANDIS A ND MAIN ROAD. IT IS PERTINENT TO NOTE THAT THE ASSESSEE DI D NOT SPENT THE ABOVE AMOUNT AS PER ITS AIMS AND OBJECTS AS THERE IS NO PROVISIONS TO REPAIR AND CONSTRUCT THE RURAL AND PW D ROADS IN SECTION 28 OF PUNJAB AGRICULTURAL MARKETING PRODUCE ACT 1961 WHICH THE MARKETING COMMITTEE IS GOVERNED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE A DDITION OF RS.759289/- ON ACCOUNT OF UNUTILIZED CONTRIBUTION T O BOARD WHEREAS THE ASSESSEE DID NOT UTILIZE THE SAME FOR I TS AIMS AND OBJECTS. 3. WE HAVE HEARD THE PARTIES. THE BRIEF FACTS OF T HE CASE ARE AS PER PARA 3 4 & 5 OF ASSESSING OFFICERS ORDER AT PAGES 1 & 2 AS UNDER:- 3. THE ASSESSEE HAS CLAIMED ITS STATUS AS OF LOCAL AUTHORITY IN THE RETURN OF INCOME FILED BY IT. SINCE IT IS NO T COVERED AS PER THE PROVISIONS OF SECTION 10(20) OF THE I.T. ACT T HEREFORE IT WOULD BE TAXED AS AN AOP. FROM THE RECORD IT IS S EEN THAT THE ASSESSEE AHS APPLIED FOR REGISTRATION U/S 12A OF IN COME TAX ACT WHICH WAS REFUSED BY THE LD. COMMISSIONER OF INCOME TAX ROHTAK. THE ASSESSEE WENT IN APPEAL BEFORE THE HON BLE ITAT NEW DELHI. THE HONBLE ITAT VIDE ITS COMBINED ORDE R IN 251 3 CASES OF DIFFERENT MARKET COMMITTEES DATE 14.03.200 5 ALLOWED REGISTRATION U/S 12AA OF THE I.T. ACT TO THE ASSESS EE TREATING IT AS CHARITABLE WITHIN THE MEANING OF SECTION 2(15) O F I.T. ACT. CONSEQUENT TO THE ORDER OF ITAT THE LD. CIT ROHTAK REGISTERED THE ASSESSEE U/S 12A OF THE I.T. ACT. 4. AS PER ANNEXURE TO FORM 10-B SUBMITTED ALONG WI TH THE INCOME TAX RETURN THE ASSESSEE HAS CLAIMED INCOME APPLIED FOR CHARITABLE NATURE IN COL. 1 AT RS.38264142/- INCLUD ING FOLLOWING EXPENDITURE:- REPAYMENT OF LIABILITIES 15850918/- REVENUE EXPENSES 21930760/- CAPITAL EXPENSES 482464/- TOTAL 38264142/- THE MARKET COMMITTEE HAS COLLECTED INCOME OF RS.222 68106/ ONLY AS PER INCOME & EXPENDITURE STATEMENT. IN THE TOTAL EXPENDITURE CLAIMED BY THE MARKET COMMITTEE AT RS.38264142/- THE EXPENDITURE MADE BY THE MARKETIN G BOARD ON BEHALF OF MARKET COMMITTEE AT RS.14149082/- WAS ALSO INCLUDED. THE COMMITTEE HAS SHOWN THIS EXPENDITURE MADE BY MARKETING BOARD IN BALANCE SHEET AS LIABILITIES UND ER THE HEAD HSAMB CAPITAL WORK AT RS.89593888/- WHICH IS AGGREGATED UPTO 31.03.2005 NET OF DEBIT AND CREDIT. THIS AMOUNT WAS STATED TO BE SPENT ON MANDI WORKS AT RS. 3012852/- AND ON CONSTRUCTION OF INTER VILLAGES ROAD AND REPA IR OF VARIOUS RURAL ROADS AT RS.11136230/-. THESE ROADS ARE NOT COVERED BY THE DEFINITION OF APPROACH BETWEEN MANDIS AND MAIN ROAD. IT IS PERTINENT TO NOTE THAT THE ASSESSEE DID NOT SPENT T HE ABOVE AMOUNT AS PER ITS AIMS AND OBJECTS AS THERE IS NO PROVISIONS TO REPAIR AND CONSTRUCT THE RURAL AND PWD ROADS IN SEC TION 28 OF PUNJAB AGRICULTURAL MARKETING PRODUCE ACT 1961 WH ICH THE MARKETING COMMITTEE IS GOVERNED. SINCE NEITHER TH E ASSESSEE SPENT THIS AMOUNT OUT OF ITS FUNDS NOR PRODUCED ANY VOUCHERS FOR VERIFICATION OF EXPENDITURE THEREFORE NO DEDU CTION IS ADMISSIBLE TO THE ASSESSEE IN RESPECT OF FUNDS OF R S.11136230/- SPENT ON CONSTRUCTION AND REPAIRS OF INTER VILLAGES ROADS. HENCE AN ADDITION OF RS.11136230/- IS MADE TO THE INCOME OF THE ASSESSEE ON THIS ACCOUNT. PENALTY PROCEEDINGS U/S 271(1)(C ) ARE 4 ALSO BEING INITIATED FOR FURNISHING OF INACCURATE P ARTICULARS OF INCOME AND CONCEALMENT OF INCOME OF RS.11136230/-. 5. FURTHER THE ASSESSEE HAS TO PAY RS.5982418/- ON ACCOUNT OF CONTRIBUTION TO BOARD IN THE INCOME & EXPENDITUR E ACCOUNT. BESIDES THE ASSESSEE HAS SHOWN OPENING LIABILITY UN DER THIS HEAD AT RS.30853/-. THE ASSESSEE WAS ASKED TO EXPL AIN THE NATURE AND PURPOSE OF CONTRIBUTION TO BOARD. THE A SSESSEE STATED THAT IT IS REQUIRED TO GIVE TO MARKETING BOA RD @ 30% OF MARKET FEES BEING SHARE OF THE MARKETING BOARD OUT OF WHICH THE AMOUNT OF SALARY TA LIVERIES AND MEDICAL RE- IMBURSEMENTS TO CLASS III EMPLOYEES POSTED IN THE A REAS OF SONEPAT MARKET COMMITTEE TO BE REIMBURSED. THE TOT AL EXPENSES U/S 27 SHOWN AT RS.5223129/-. THE AMOUNT UTILIZED IS LESS THAN CONTRIBUTION BY AN AMOUNT OF RS.759289 /- (5982418-5223129). SINCE THE ASSESSEE HAS UTILIZED LESS THAN THE AMOUNT CONTRIBUTED TO THE BOARD U/S 27(2) AN A DDITION OF RS.759289/- IS MADE ON ACCOUNT OF UNUTILIZED CONTRI BUTION. 4. THE LEARNED CIT(A) VIDE PARA 3 AND 4 OF HIS ORDE R OBSERVED AS UNDER:- 3. IN RESPONSE TO NOTICE UNDER SECTION 250 SH. SA NJEEV KUCHHAL CA & SH. CHANDER PARKASH SECRETARY ATTENDE D THE PROCEEDINGS AND FILED WRITTEN SUBMISSIONS. THE WRI TTEN SUBMISSIONS WERE REFERRED TO THE AO FOR HIS COMMENT S AS PER HIS LETTER DATED 2.2.2009; THE AO GAVE HIS COMMENTS AS PER THIS LETTER DATED 10.02.2009. THE REPORT OF THE AO AND THE VERSION OF THE APPELLANT HAVE BEEN DULY CONSIDERED ALONG WI TH THE ASSESSMENT ORDER VIS-A-VIZ THE ISSUES INVOLVED. 4. IT HAS BEEN SEEN THAT THE AO HAS DISALLOWED EXPE NSES ON REPAIR AND CONSTRUCTION OF RURAL ROADS ETC. BECAUS E THE APPELLANT HAD NOT PRODUCED VOUCHERS FOR VERIFICATION OF THE E XPENDITURE; ON THE OTHER HAND THE APPELLANT HAD CATEGORICALLY S TATED THAT THE VOUCHERS WERE PRODUCED DURING ASSESSMENT PROCEEDING S AND AGAIN IN COMPLIANCE WITH THE DIRECTIONS GIVEN BY TH E UNDERSIGNED AS PER THE ABOVE MENTIONED LETTER DATED 2.2.2009. KEEPING IN VIEW THE AFORESAID FACTS THE DISALLOWANC E MADE BY THE AO ON ACCOUNT OF CONSTRUCTION AND REPAIR OF RUR AL ROADS IS DELETED. AS REGARDS THE CONTRIBUTION PAID TO THE B OARD THE 5 SAME IS ALSO ALLOWED ON THE SAME LINES AS IN THE AP PEAL FOR THE A.Y. 2004-05 & 2005-06. IT MAY ALSO BE MENTIONED T HAT CONTRIBUTION IS PAID BY THE APPELLANT TO THE BOARD NOT ONLY TO MEET THE EXPENSES OF CLASS III EMPLOYEES BUT THE FU ND IS USED FOR OTHER PURPOSES ALSO MENTIONED IN SECTION 27 OF HSAMB ACT. THE VIEW TAKEN BY THE UNDERSIGNED ON ADMISSIB ILITY OF DEDUCTION ON ACCOUNT OF CONTRIBUTION TO THE BOARD A ND EXPENSES ON CONSTRUCTION AND REPAIR OF RURAL ROADS ETC. HAS BEEN CONFIRMED BY THE HONBLE ITAT CHANDIGARH AS WELL AS DELHI. THE GROUNDS OF APPEAL PERTAINING TO THESE ISSUES AR E ALLOWED. 5. WE HAVE PERUSED THE FACTS OF THE CASE AND MATERI AL AVAILABLE ON RECORD. AS REGARDS GROUND NO.1 THE A.O. HAS OBSERV ED THAT THE ASSESSEE HAS DECLARED AN EXPENDITURE OF RS.3 82 64 142/- INCLUDI NG RS.1 41 49 082/- INCURRED BY MARKETING BOARD ON BEHALF OF THE ASSESS EE AGAINST THE COLLECTION OF INCOME OF RS.2 22 68 106/-. THE EXPENDITURE INC LUDES RS.30 12 852/- BEING SPENT ON MANDI WORKS AND ON CONSTRUCTION OF I NTER-VILLAGES ROAD AND REPAIR OF VARIOUS RURAL ROADS AT RS.1 11 36 230/-. IT WAS OBSERVED BY THE A.O. THAT THESE ROADS ARE NOT COVERED BY THE DEFINI TION OF APPROACH BETWEEN MANDIS AND MAIN ROAD THE AMOUNT HAS NOT BEEN SPENT FOR THE AIMS AND OBJECTS OF THE ASSESSEE AS PER SECTION 28 OF PUNJAB AGRICULTURAL MARKETING PRODUCE ACT 1961 UNDER WHICH THE ASSESSEE IS GOVER NED. THE ASSESSEE HAS NOT PRODUCED ANY VOUCHERS FOR VERIFICATION. WHEREA S THE LEARNED CIT(A) HAS MENTIONED IN HIS ORDER ABOUT THE REMAND REPORT DATE D 10.02.2009. THE LEARNED CIT(A) HAS NO WHERE DEALT WITH THE REMAND R EPORT TAKEN FROM AO. HOW THE OBJECTIONS OF THE AO HAVE BEEN MET IN THE R EMAND REPORT HAVE NOT 6 BEEN DEALT BY THE LEARNED CIT(A) I.E. REGARDING THE GENUINENESS OF THE VOUCHERS THE ROADS ON WHICH EXPENSES HAVE BEEN INC URRED ARE NOT COVERED UNDER THE AIMS AND OBJECTS OF THE ASSESSEE I.E. THE SAID ROADS ARE NOT COVERED BY THE DEFINITION OF APPROACH BETWEEN MANDIS AND MA IN ROAD. THE LEARNED CIT(A) RELIED UPON THE STATEMENT OF THE ASSESSEE TH AT THE VOUCHERS WERE PRODUCED DURING ASSESSMENT PROCEEDINGS AND AGAIN WH EN THE DIRECTIONS GIVEN BY THE LEARNED CIT(A) WHEREAS THE AO HAS CLE ARLY MENTIONED THAT NO VOUCHERS HAVE BEEN PRODUCED FOR VERIFICATION OF EXP ENDITURE. THE REMAND REPORT HAS NOT BEEN DEALT WITH BY THE LEARNED CIT(A ) ON THE VARIOUS OBJECTIONS MENTIONED HEREINABOVE. THE ORDERS OF TH E LEARNED CIT(A) IN DELETING THE ADDITION IS WITHOUT ANY BASIS. IN THE CIRCUMSTANCES AND FACTS OF THE CASE ALL THE OBJECTIONS OF THE ASSESSEE MENTIO NED HEREINBEFORE INCLUDING GENUINENESS OF EXPENDITURE REMAIN TO BE VERIFIED BY THE AO. IN THE INTEREST OF JUSTICE WE RESTORE THE MATTER TO THE FILE OF THE AO WHO WILL EXAMINE THE ISSUE DE NOVO BUT BY PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS GROUND NO.1 OF THE REVENUE IS ALLOW ED FOR STATISTICAL PURPSOESE. 6. AS REGARDS GROUND NO.2 THE LEARNED CIT(A) HAS R ELIED UPON THE ORDER OF THE LEARNED CIT(A) IN ASSESSEES OWN CASE FOR A. Y. 2004-05 AND 2005-06 AND DECISION OF ITAT CHANDIGARH BENCH. THE CONTENT S OF THE SAID ORDERS 7 HAVE NOT BEEN DEALT IN THE IMPUGNED ORDER OF THE LE ARNED CIT(A). THEREFORE THERE ARE NO BASIS ON RECORD AS TO HOW THE SAID ADD ITIONS HAVE BEEN DELETED AND THE SAID ORDER OF THE LEARNED CIT(A) IS NOT A S PEAKING ORDER. IN THE INTEREST OF JUSTICE THE MATTER IS RESTORED TO THE FILE OF THE LEARNED CIT(A) WHO WILL PASS A SPEAKING ORDER. THUS GROUND NO.2 OF TH E REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ITA NO.1755/DEL/2009 8. GROUND NO.1 RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE A DDITION OF RS.76465858/- ON THE FALSE STATEMENT OF THE ASSESSE E THAT IT HAD PRODUCED THE BILLS AND VOUCHERS OF THE EXPENDITURE INCURRED ON CONSTRUCTION AND REPAIRS OF RURAL ROADS BEFORE THE A.O. THE CIT(A) HAS ALSO IGNORED THE FACTS THAT THIS EXPENDI TURE ARE NOT COVERED BY ITS AIMS AND OBJECTS AS THE RURAL ROADS ARE COVERED BY THE DEFINITION OF APPROACH ROAD BETWEEN MANDIS A ND MAIN ROAD. IT IS PERTINENT TO NOTE THAT THE ASSESSEE DI D NOT SPENT THE ABOVE AMOUNT AS PER ITS AIMS AND OBJECTS AS THERE IS NO PROVISIONS TO REPAIR AND CONSTRUCT THE RURAL AND PW D ROADS IN SECTION 28 OF PUNJAB AGRICULTURAL MARKETING PRODUCE ACT 1961 WHICH THE MARKETING COMMITTEE IS GOVERNED. ITA NO.1756/DEL/2009 9. GROUND NO.1 & 2 RAISED BY THE REVENUE IN THIS AP PEAL READ AS UNDER:- 8 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE A DDITION OF RS.13494695/- ON THE FALSE STATEMENT OF THE ASSESSE E THAT IT HAD PRODUCED THE BILLS AND VOUCHERS OF THE EXPENDITURE INCURRED ON CONSTRUCTION AND REPAIRS OF RURAL ROADS BEFORE THE A.O. THE CIT(A) HAS ALSO IGNORED THE FACTS THAT THIS EXPENDI TURE ARE NOT COVERED BY ITS AIMS AND OBJECTS AS THE RURAL ROADS ARE COVERED BY THE DEFINITION OF APPROACH ROAD BETWEEN MANDIS A ND MAIN ROAD. IT IS PERTINENT TO NOTE THAT THE ASSESSEE DI D NOT SPENT THE ABOVE AMOUNT AS PER ITS AIMS AND OBJECTS AS THERE IS NO PROVISIONS TO REPAIR AND CONSTRUCT THE RURAL AND PW D ROADS IN SECTION 28 OF PUNJAB AGRICULTURAL MARKETING PRODUCE ACT 1961 WHICH THE MARKETING COMMITTEE IS GOVERNED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE A DDITION OF RS.9607167/- ON ACCOUNT OF UNUTILIZED CONTRIBUTION TO BOARD WHEREAS THE ASSESSEE DID NOT UTILIZE THE SAME FOR I TS AIMS AND OBJECTS. 10. THE FACTS IN BOTH THE APPEALS HEREINABOVE ARE I DENTICAL TO THE FACTS IN BOTH THE GROUNDS IN ITA NO.1756/DEL/2009 AND IN ONE GROUND IN ITA NO.1755/DEL/2009 TO THE FACTS IN REVENUES APPEAL I N ITA NO.1754/DEL/2009 IN THE CASE OF ACIT VS. MARKET COM MITTEE SONEPAT HEREINABOVE. THEREFORE FOLLOWING THE ORDERS OF TH E SAME BEING ON IDENTICAL FACTS GROUND NO.1 IN BOTH THE APPEALS IS RESTORED TO THE FILE OF THE AO AND GROUND NO.2 RAISED IN ITA NO.1756/DEL/2009 IS RESTO RED TO THE FILE OF THE LEARNED CIT(A) I.E. OUR ORDER IN THE CASE OF ACIT V S. MARKET COMMITTEE SONEPAT (SUPRA) SHALL APPLY ON THE SAME LINES IN TH ESE APPEALS. THUS GROUND 9 NO.1 IN BOTH THE APPEALS AND GROUND NO.2 IN ITA NO. 1756/DEL/2009 ARE ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT REVENUES APPEAL IN ITA NOS.1754 1755 & 1756/DEL/2009 ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21ST JANUARY 2010. SD/- SD/- (C.L. SETHI) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21 ST JANUARY 2010. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.