Manav Shiksha Samiti,, v. DCIT, CC-13,,

ITA 2185/DEL/2006 | 1997-1998
Pronouncement Date: 23-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 218520114 RSA 2006
Assessee PAN CEACT2002W
Bench Delhi
Appeal Number ITA 2185/DEL/2006
Duration Of Justice 4 year(s) 1 month(s) 7 day(s)
Appellant Manav Shiksha Samiti,,
Respondent DCIT, CC-13,,
Appeal Type Income Tax Appeal
Pronouncement Date 23-07-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 23-07-2010
Date Of Final Hearing 26-05-2010
Next Hearing Date 26-05-2010
Assessment Year 1997-1998
Appeal Filed On 15-06-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI A.K. GORADIA I.T.(SS)A. NO. 31/DEL/2005 BLOCK PERIOD 1989-90 TO 1999-2000 (UP T O 15.1.1999) M/S. MANAV SHIKSHA SAMITI VS. DEPUTY CIT BEHRA ENCLAVE CENTRAL CIR.13 PASCHIM VIHAR NEW DELHI. NEW DELHI. I.T.A. NO.2185/DEL/2006 ASSESSMENT YEAR: 1997-98 M/S. MANAV SHIKSHA SAMITI VS. DEPUTY CIT C/O. MANAV STHALI SCHOOL CENTRAL CIR.13 RAJINDER NAGAR NEW DELHI. NEW DELHI. (APPELLANTS) (RESPONDENT) I.T.(SS)A. NO.83/DEL /2005 BLOCK PERIOD 1989-90 TO 1999-2000 (UP T O 15.1.1999) ASSISTANT CIT VS. M/S. MANAV SHIKSHA SAMITI CENTRAL CIRCLE 13 BEHRA ENCLAVE NEW DELHI. PASCHIM VIHAR NEW DELHI. (APPELLANTS) (RESPONDENT) ASSESSEE BY : SHRI PC PARWAL FCA RESPONDENT BY: SHRI MK GAUTAM CIT (DR) ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE AND THE REVENUE ARE IN CROSS APPEALS AGAINST THE ORDER OF LEARNED CIT(APPEALS) DATED 24.11.2004 PASSED FOR TH E BLOCK PERIOD STARTING FROM ASSESSMENT YEAR 1989-90 AND ENDING ON 15.1.199 9 WHEREAS ITA NO.2185/DEL/06 IS DIRECTED AT THE INSTANCE OF ASSES SEE IN ASSESSMENT YEAR 1997-98 AGAINST THE ORDER OF LEARNED CIT(APPEALS) D ATED 14.3.06. WE HAVE 2 HEARD ALL THESE APPEALS TOGETHER THEREFORE WE DEE M IT FIT TO DISPOSE OF THEM BY THIS COMMON ORDER. 2. FIRST WE TAKE THE APPEAL OF REVENUE IN THE BLOC K ASSESSMENT AND IF ANY GROUND FOUND TO BE INTER-CONNECTED WITH THE GROUND OF APPEAL TAKEN BY THE ASSESSEE THEN WE WILL TAKE UP THOSE GROUNDS TOGETHE R. 3. IN THE FIRST GROUND OF APPEAL GRIEVANCE OF THE REVENUE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.1 11 90 903 WHICH WAS ADDED BY THE ASSESSING OFFICER ON THE GROUND THAT I T IS SURPLUS OF INCOME AND EXPENDITURE FOR ASSESSMENT YEARS 1990-91 TO 199 8-99 AND IT IS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. LEARNED CI T(APPEALS) INSTEAD OF CONFIRMING THIS ADDITION HAS DIRECTED THE ASSESSING OFFICER TO TAKE A NEGATIVE FIGURE OF RS.1 95 253 WHILE COMPUTING UNDISCLOSED I NCOME FOR THE BLOCK PERIOD. 4. BEFORE TAKING UP THIS ISSUE DIRECTLY IT IS PERT INENT FOR US TO TAKE NOTE OF BRIEF HISTORY OF ASSESSEE SOCIETY CIRCUMSTANCES LEADING TO SEARCH ACTION OVER THE ASSESSEE AND OTHER GROUP SOCIETIES EDUCAT IONAL INSTITUTIONS AND INDIVIDUALS PASSING OF BLOCK ASSESSMENT UNDER SEC. 158-BC ON 30.1.2001. 5. THE ASSESSEE IS A SOCIETY REGISTERED ON 4.2.1976 WITH THE REGISTRAR OF SOCIETIES UNDER THE SOCIETIES REGISTRATION ACT 196 0. ITS MAIN OBJECT IS TO RUN EDUCATIONAL INSTITUTIONS. IT WAS REGISTERED UNDER S EC. 12A OF THE INCOME-TAX ACT 1961. ACCORDING TO THE OBSERVATIONS OF THE ASS ESSING OFFICER IN THE ASSESSMENT ORDER THE DATE OF REGISTRATION ORDER IS NOT CLEAR. THE SOCIETY IS RUNNING TWO UNRECOGNIZED SCHOOLS NAMELY MANAV STH ALI SCHOOL DOUBLE STOREY REJINDER NAGAR NEW DELHI FOR CLASSES FOURT H TO SEVENTH MANAV 3 STHALI SCHOOL BEHRA ENCLAVE PASCHIM VIHAR NEW DE LHI FROM NURSERY TO SEVENTH. MS.VEENA RAMITRI IS THE HEAD MISTRESS OF R AJINDER NAGAR SCHOOL AND MRS. LATA SETH IS THE HEAD MISTRESS OF PASCHIM VIHAR SCHOOL. ACCORDING TO THE ASSESSING OFFICER SHRI VK BHATNAG AR MA(HONS) LLB IS THE MAIN PERSON AND THE BRAIN BEHIND THE GROUP. HE USED TO DERIVE INCOME AS A TEACHER AND STARTED ACTIVITIES OF RUNNING THE SCH OOL. INITIALLY PRIOR TO 1.1.1995 SOME OF THE SCHOOLS WERE RUN UNDER HIS PR OPRIETARYSHIP CONCERN. ASSESSING OFFICER HAS NOTICED THE DETAILS OF SUCH S CHOOLS ON PAGE 3 OF THE ASSESSMENT ORDER. ON 1.4.1994 BHATNAGAR INTERNATIO NAL SCHOOL PASCHIM VIHAR WAS UNDERTOOK BY THE SOCIETY NAMELY SANT VA SWANI EDUCATIONAL SOCIETY. EARLIER THIS SCHOOL WITH 491 STUDENTS WAS BEING RUN BY SHRI V.K. BHATNAGAR IN HIS PROPRIETARYSHIP CONCERN. SIMILARLY ON 01.01.1995 THREE MORE SCHOOLS WERE TOOK OVER BY DIFFERENT SOCIETIES. IN THIS WAY SEVEN SOCIETIES WERE RUNNING DIFFERENT SCHOOLS IN AND ARO UND DELHI. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED UNDER SEC.132 AT TH E PREMISES OF THE ASSESSEE ALONG WITH THE PREMISES OF OTHER SIX SOCIE TIES EDUCATIONAL INSTITUTIONS AND INDIVIDUALS WHO WERE MANAGING THE AFFAIRS OF THE SOCIETIES. IN THE CASE OF ASSESSEE AT MANAV STHALI SCHOOL DO UBLE STOREY A CASH OF RS.93 130 FOUND BUT NOT SEIZED AT THE MANAV STHALI SCHOOL BEHRA ENCLAVE 4 NO CASH WAS FOUND BUT DOCUMENTS AND A CPU WAS FOUND AND SEIZED. DOCUMENTS WERE INVENTORIZED AS A1 AND A20. 6. IN ORDER TO GIVE A LOGICAL END TO THE PROCEEDING S AO HAD ISSUED NOTICE UNDER SEC.158-BC UPON THE ASSESSEE ON 22.10.1999 WH ICH WAS SERVED ON 29.10.1999. IN RESPONSE TO THE NOTICE RETURN FOR T HE BLOCK PERIOD IN FORM NO.2B WAS FILED ON 10.12.1999. ACCORDING TO THE A.O . THE RETURN IS SINGED BY SMT. LATA SETH SECRETARY OF THE ABOVE SOCIETIES AS WELL AS HEAD MISTRESS OF MANAV STHALI SCHOOL BEHRA ENCLAVE PASCHIM VIHA R NEW DELHI. THE ASSESSEE HAS DISCLOSED NIL INCOME IN THE BLOCK RETU RN. IT WAS DISCLOSED BY THE ASSESSEE THAT IT HAS FILED REGULAR RETURNS FOR ASSE SSMENT YEARS 1992-93 TO 1997-98 IN TRUST CIRCLE-II WHEREAS RETURN FOR ASSE SSMENT YEAR 1998-99 WAS FILED IN CENTRAL CIRCLE-13 NEW DELHI. THE RETURNED INCOME IS NIL FOR ALL THE ASSESSMENT YEARS AND THESE HAVE BEEN ACCEPTED BY TH E REVENUE. THE A.O. HAS DISCUSSED GENERAL COMMON ASPECTS OF ALL THE SOCIETI ES AND CONDUCT OF CERTAIN INDIVIDUALS NAMELY SHRI V.K. BHATNAGAR ANURAG BH ATNAVAR AND VIKRAM BHATNAGAR WHO ARE MANAGING THE AFFAIRS OF THE SOCIE TIES. HE ALSO NOTICED THE INCOME DECLARED IN THEIR INDIVIDUAL HANDS THESE FI NDINGS ARE VERBATIM SAME IN THE PRESENT ASSESSMENT ORDERS AS WELL AS IN THE ASSESSMENT ORDERS PASSED FOR OTHER SOCIETIES NAMELY SANT VASWANI EDUCATION AL SOCIETY RAJINDER 5 NAGAR EDUCATION SOCIETY AND NAV MANAV SANSTHAN VIR ENDER BHATNAGAR SANSTHAN ETC. THE ONLY DIFFERENCE BETWEEN THE FACTS OF THE PRESENT APPEALS AND THE APPEAL OF RAJINDER EDUCATION SOCIETY NAV M ANAV SANSTHAN ETC. WHICH HAVE ALREADY BEEN DECIDED BY THE ITAT IN IT(S S) A NOS.31 84 32 77 29 & 85/DEL/05 IS THAT IN THOSE CASES NO REGULA R RETURNS WERE FILED BY THE ASSESSEE. IT HAS DECLARED UNDISCLOSED INCOME ON AN ESTIMATE BASIS AND ALSO PREPARED INCOME AND EXPENDITURE ACCOUNT ON THE BASI S OF SEIZED MATERIAL. THE A.O. DENIED EXEMPTION UNDER SEC. 10(22) IN THOS E CASES ALSO AND TREATED THE SURPLUS OVER INCOME AND EXPENDITURE ACCOUNT AS UNDISCLOSED INCOME OF THE ASSESSEE. IN THE PRESENT CASE THE ASSESSEE HAS FILED REGULAR RETURNS FOR ASSESSMENT YEARS 1992-93 UP TO 1998-99. IT HAS NOT SHOWN ANY UNDISCLOSED INCOME. 7. THE ASSESSING OFFICER IN THE PRESENT ASSESSMENT ORDER HAS DENIED EXEMPTION TO THE ASSESSEE UNDER SEC. 10(22) OF THE ACT. THE REASON ASSIGNED BY THE ASSESSING OFFICER FOR DENYING EXEMPTIONS UND ER SEC. 10(22) IN THE PRESENT ASSESSMENT ORDER ARE SIMILAR TO THE ONE ASS IGNED IN ASSESSMENT ORDERS OF THE OTHER SOCIETIES I.E. NEW RAJINDER NAGAR NAV MANAV SANSTHAN ETC. WHILE DECIDING THE APPEALS OF THOSE SOCIETY. THE IT AT TOOK COGNIZANCE OF 6 THOSE REASONS. WE WOULD BE REFERRING THESE REASONS WHILE REPRODUCING THE FINDING OF THE ITAT IN THOSE CASE IN THE SUBSEQUENT PARAS 8. THE SURPLUS IN THE INCOME AND EXPENDITURE ACCOUN T OF THE SOCIETY HAS BEEN WORKED OUT AT RS.1 11 14 903 THE DETAILS HAVE BEEN NOTICED BY THE AO ON PAGE 39 OF THE ASSESSMENT ORDER. THE MAIN GRIEVA NCE OF THE AO IS THAT ASSESSEE HAS BEEN RUNNING THE SCHOOL AS A COMMERCIA L ESTABLISHMENTS FOR A PROFIT MOTIVE. 9. LEARNED CIT(APPEALS) DID NOT CONCUR WITH THE VIE W POINT OF THE ASSESSEE AND HELD THAT ASSESSEE IS ENTITLED FOR EXE MPTION UNDER SEC. 10(22) OF THE ACT FOR THE YEARS ASSESSEE HAS FILED THE REGULA R RETURN AND SUCH EXEMPTION WAS ALLOWED TO IT BY THE A.O. ACCORDING TO THE LEAR NED CIT(APPEALS) ONCE CLAIM IS ACCEPTED IN REGULAR RETURN CANNOT BE DENIE D IN THE BLOCK PERIOD. 10. LEARNED DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT DURING THE COURSE OF SEARCH INCRIMINATING MATERIAL WAS FO UND EXHIBITING THAT ASSESSEE WAS RUNNING THE SCHOOL WITH A VIEW TO EARN PROFIT. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS FILED THE RETURN FOR ASSESSMENT YEARS 1992-93 TO 1998-99 IN RESPONSE TO THE NOTICES RECEIVED UNDER SEC 148/142(1) OF THE ACT. THESE RETURNS WERE FILED PRI OR TO THE DATE OF SEARCH. IT HAS NOT FILED ANY RETURN FOR ASSESSMENT YEARS 1989- 90 TO 1990-91 BUT RETURN FOR ASSESSMENT YEAR 1991-92 WAS FILED IN RESPONSE T O A NOTICE UNDER SEC. 148 7 ON 17.4.2001. THIS RETURN WAS FILED AFTER THE SEARC H. ASSESSING OFFICER HAS FRAMED THE ASSESSMENT UNDER SEC. 143 READ WITH SEC. 147 FOR ASSESSMENT YEARS 1992-93 TO 1997-98. HE HAS ALLOWED EXEMPTION UNDER SEC. 10(22) OF THE ACT. IN ASSESSMENT YEAR 1991-92 AO DID NOT CON SIDER THE SURPLUS AS TAXABLE. HE SUBMITTED THAT THERE IS NO DISPUTE AS T O THE FACT THAT ASSESSEE IS RUNNING EDUCATIONAL INSTITUTIONS. FOR ASSESSMENT YE ARS 1988-89 TO 1998-99 FALLING IN THE BLOCK PERIOD THE ENTIRE INCOME OF T HE SOCIETY WAS EXEMPT UNDER SEC. 10(22) AS THE EDUCATIONAL INSTITUTION WA S EXISTING SOLELY FOR EDUCATION PURPOSES AND NOT FOR THE PURPOSE OF THE P ROFIT. AN ASSESSEE WHOSE INCOME IS EXEMPT IS NOT REQUIRED TO FILE THE RETURN UNLESS REQUIRED OTHERWISE. THE REQUIREMENT FOR FILING THE RETURN FOR THE ASSES SEES CLAIM OF EXEMPTION UNDER SEC.10(22) WAS INTRODUCED BY THE FINANCE ACT 2002 W.E.F. 1.4.2003 WHEN SUB-SECTION (4C) WAS INTRODUCED IN SECTION 139 OF THE /ACT. HE FURTHER CONTENDED THAT RETURN FOR ASSESSMENT YEAR 91-92 WAS FILED IN RESPONSE TO THE NOTICE UNDER SEC. 148 ON 17.4.2001. THE AO HAS ASSE SSED THE INCOME AT RS.1 14 608 ON ACCOUNT OF VALUATION DIFFERENCE IN T HE SCHOOL BUILDING AFTER CONSIDERING THE SURPLUS OF THE SOCIETY EXEMPT UNDE R SEC. 10(22) OF THE ACT. THIS ADDITION WAS ALSO DELETED BY THE ITAT AFTER GI VING A DETAILED FINDING. HE DREW OUR ATTENTION TOWARDS PARA NOS. 7 & 8 OF TH E ITATS ORDER AVAILABLE 8 AT PAGE A113 TO 118 OF THE PAPER BOOK. HE FURTHER C ONTENDED THAT EXCEPT FROM ASSESSMENT YEAR 1997-98 THE AO ALLOWED THE EX EMPTION UNDER SEC. 10(22) IN ALL THE ASSESSMENT YEARS I.E. 1991-92 TO 1998-99 IN ASSESSMENT ORDERS PASSED UNDER SEC. 143(3)/147 OF THE ACT. IN THIS WAY THE SAME SURPLUS AMOUNT CANNOT BE A SUBJECT MATTER OF THE BLOCK ASSE SSMENT AS PER CLAUSE (A) OF SECTION 158BB(1) OF THE ACT. HE FURTHER CONTENDE D THAT FOR ASSESSMENT YEARS 1991-92 1997-98 AND 1998-99 THE SURPLUS CAN NOT BE CONSIDERED UNDER CLAUSE (B) OF SEC.158BB(1) OF THE ACT. SIMILA RLY FOR ASSESSMENT YEARS 1989-90 AND 1990-91 THE SURPLUS CANNOT BE TAXED IN THE BLOCK ASSESSMENT AS THE INCOME OF ASSESSEE WAS EXEMPT UNDER SEC. 10(22) AND IT WAS NOT UNDER ANY OBLIGATION TO FILE THE RETURN IN THOSE YEARS. A CCORDING TO THE LEARNED COUNSEL IT CANNOT BE THE CASE OF THE DEPARTMENT TH AT SUCH INCOME WOULD HAVE NOT BEEN DISCLOSED BY THE ASSESSEE BECAUSE AS SESSEE WAS NOT UNDER AN OBLIGATION TO FILE THE RETURN FOR THOSE ASSESSMENT YEARS. HE FURTHER RELIED UPON THE ORDERS OF THE ITAT IN THE CASES OF RAJINDE R NAGAR SOCIETY NAV MANAV SANSTHAN AND SANT VASWANI EDUCATION SOCIETY W HEREIN ASSESSEE HAS NOT FILED THE REGULAR RETURN. INCOME HAS BEEN WORKE D OUT ON AN ESTIMATE BASIS. THE AO HAS WORKED OUT THE SURPLUS IN THE INC OME AND EXPENDITURE ACCOUNT AND DENIED EXEMPTION UNDER SEC. 10(22) OF T HE ACT TO THE ASSESSEE. 9 THE ITAT IN ALL THOSE CASES CONSIDERED THIS ISSUE I N DETAIL AND DIRECTED THE AO TO ALLOW THE CLAIM OF ASSESSEE FOR EXEMPTION UND ER SEC. 10(22) IN YEAR OR YEARS FORMING PART OF THE BLOCK PERIOD HOWEVER IN CASE IT IS FOUND THAT ASSESSEE RECEIVED DONATION OUTSIDE THE BOOKS OF ACC OUNT AND SUCH AMOUNTS WERE NOT USED IN FURTHERANCE OF ITS OBJECTS OF RUNN ING THE EDUCATIONAL INSTITUTION OR FOR DEVELOPMENT OF INFRASTRUCTURE I N ANY OF THE ASSESSMENT YEAR OR ASSESSMENT YEARS FORMING PART OF THE BLOCK IN THAT YEARS ASSESSEE WILL NOT BE ENTITLED TO EXEMPTION UNDER SEC.10(22) OF TH E ACT. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER EXPLAINED THE CONC EPT OF BLOCK ASSESSMENT AND HOW INCOME IN THE BLOCK ASSESSMENT IS TO BE COM PUTED. 11. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. BEFORE CONSIDERING THE FACTS OF T HE PRESENT APPEAL ON THIS ISSUE WE DEEM IT APPROPRIATE TO APPRECIATE HOW THE INCOME IN A BLOCK ASSESSMENT HAS TO BE DETERMINED. EXPOUNDING THE SCO PE OF THE BLOCK ASSESSMENT AND INCLUSION OF UNDISCLOSED INCOME THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. RAVI KANT JAIN [2001] 167 CTR (DEL) 566 : [2001] 250 ITR 141 (DEL) HAS OBSERVED THAT THE SPECIAL PROCEDURE OF CHAPTER XIV-B IS INTENDED TO PROVIDE A MODE OF ASSESSMENT O F UNDISCLOSED INCOME WHICH HAS BEEN DETECTED AS A RESULT OF SEARCH. AS T HE STATUTORY PROVISIONS GO 10 TO SHOW IT IS NOT INTENDED TO BE A SUBSTITUTE FOR REGULAR ASSESSMENT. IT IS IN ADDITION TO THE REGULAR ASSESSMENT ALREADY DONE OR TO BE DONE. THE ASSESSMENT FOR THE BLOCK PERIOD CAN ONLY BE DONE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNTS OR DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAI LABLE WITH THE AO. EVIDENCE FOUND AS A RESULT OF SEARCH IS CLEARLY REL ATABLE TO SS. 132 AND 132A. SIMILARLY HON'BLE RAJASTHAN HIGH COURT HAS EXPLAINE D THE SCOPE OF BLOCK ASSESSMENT AND DETERMINATION OF UNDISCLOSED INCOME IN CIT V. RAJENDRA PRASAD GUPTA [2001] 166 CTR (RAJ) 83 : [(2001] 248 1TR 350 (RAJ) . THE FOLLOWING OBSERVATIONS ARE WORTH TO NOTE : 'HOWEVER UNDER THE SCHEME OF THE PROVISIONS FOR BL OCK ASSESSMENT IT IS APPARENT THAT IT RELATES TO ASSESSMENT OF 'UNDIS CLOSED INCOME' OF THE ASSESSEE EXCLUDING THE INCOME SUBJECTED TO REGULAR ASSESSMENT IN PURSUANCE OF THE RETURNS FILED BY THE ASSESSEE FOR SUCH PERIOD. IT IS ALSO APPARENT FROM THE PERUSAL OF S. 158BB THAT THE RETU RNS ARE ALSO REQUIRED TO BE FILED IN PURSUANCE OF THE NOTICE UND ER S. 158BC(A) AND THE ASSESSMENT IS TO BE FRAMED ON THAT BASIS IN THE LIGHT OF MATERIAL THAT HAS COME INTO POSSESSION OF THE ASSESSING AUTH ORITY DURING THE COURSE OF SEARCH WHICH IS THE FOUNDATION OF THE PRO CEEDINGS. THAT BEING SO THE CORRECTNESS OR OTHERWISE OF THE RETUR NS FILED IN PURSUANCE OF THE NOTICE UNDER S. 158BC (A) HAS TO BE EXAMINED WITH REFERENCE TO THE MATERIAL IN THE POSSESSION OF THE ASSESSING AUT HORITY HAVING NEXUS 11 TO ASSESSMENT OF 'UNDISCLOSED INCOME' WHICH IS WITH THE ASSESSING AUTHORITY AND PREMISE OF SUCH PROCEEDINGS. IF THE RETURNS FILED BY THE ASSESSEE DO NOT ACCORD WITH THE MATERIALS WHICH ARE ALREADY IN THE POSSESSION OF THE AUTHORITY IT CAN BE ESTIMATED TO THE BEST JUDGMENT BY THE ASSESSING AUTHORITY ON THE BASIS OF THE MATE RIAL IN HIS POSSESSION. HOWEVER THE ASSESSING AUTHORITY IS NOT CONFERRED WITH POWER TO MAKE ESTIMATION OF INCOME DE HORS THE MATERIAL IN HIS POSSESSION WHILE MAKING REGULAR ASSESSMENT ORDER U NDER S. 158BB. IT HAS TO BE BORNE IN MIND THAT PROCEEDINGS UNDER SS. 158BB AND 158BC ARE THAT OF UNDISCLOSED INCOME. THEREFORE THE PROC EEDING CARRIES WITH IT A PRESUMPTION THAT RETURNS FILED IN PURSUANCE OF SUCH PROCEEDINGS ARE OF UNDISCLOSED INCOME AND NOT NECESSARILY IN AC CORDANCE WITH THE BOOKS OF ACCOUNTS. ITS VERIFICATION HAS TO BE SEARC HED OUTSIDE REGULAR BOOKS WITH REFERENCE TO MATERIAL THAT HAS BEEN FOUN D DURING SEARCH. THAT MAKES IT IMPERATIVE TO ADJUDICATE THE RETURN W ITH REFERENCE TO MATERIAL THAT HAS COME IN THE POSSESSION OF THE ASS ESSING AUTHORITY DURING THE COURSE OF SEARCH PROCEEDINGS AND ON WHIC H BASIS THE BELIEF ABOUT THE EXISTENCE OF UNDISCLOSED INCOME IS ENTERT AINED BY THE ASSESSING AUTHORITY INVITING INVOCATION OF SS. 158B B AND 158BC. THE ENQUIRY INTO THE CORRECTNESS OF SUCH RETURNS WITH R EFERENCE TO MATERIAL SO FOUND HAS NEXUS WITH THE OBJECT OF THE SPECIAL P ROVISIONS TO ADJUDICATE WHETHER THE ASSESSEE IS STILL HONESTLY D ISCLOSING HIS INCOME CORRECTLY AFTER INCRIMINATING MATERIAL HAS BEEN FOU ND IN THE POSSESSION OF THE REVENUE AUTHORITY BEFORE SUCH RETURNS CAN BE REJECTED AND THEREAFTER TO FRAME -ASSESSMENT ESTIMATING THE INCO ME LIABLE TO TAX TO 12 THE BEST OF JUDGMENT ON THE BASIS OF THE MATERIAL T HAT IS AVAILABLE WITH HIM.' 12. THE HON'BLE BOMBAY HIGH COURT HAD ALSO AN OCCAS ION TO EXAMINE THE CONCEPT OF BLOCK ASSESSMENT IN CIT V. VINOD DANCHAND GHODAWAT [2000] 163 CTR (BORN) 432 : [2001] 247 ITR 448 (BOM) WHEREIN IT WAS FOUND THAT AN ASSESSEE HAD CONSTRUCTED A BUNGALOW AND INCURRED AN EXPENSE OF RS. 4 16 000. THEREAFTER SEARCH WAS CARRIED OUT AND THE AO REFERRED THE VALUATION OF THE BUNGALOW TO THE DEPARTMENTAL VALUE R WHO DETERMINED THE VALUE OF THE PROPERTY AT RS. 6 66 000 AND THE AO AD DED THE DIFFERENCE TO THE INCOME OF THE ASSESSEE AS UNDISCLOSED INCOME. THE T RIBUNAL HAS DELETED THE ADDITION ON THE GROUND THAT ADDITION WAS NOT MADE O N THE BASIS OF THE MATERIAL GATHERED DURING THE COURSE OF SEARCH RATH ER ALL THESE INFORMATION WERE AVAILABLE TO THE AO AT THE TIME OF REGULAR ASS ESSMENT. HE OBTAINED THE DVO'S REPORT SUBSEQUENT TO THE REGULAR ASSESSMENT THEREFORE ADDITION IS MADE BEYOND THE SCOPE OF BLOCK ASSESSMENT. THE HON' BLE JURISDICTIONAL HIGH COURT UPHELD THE DELETION MADE BY THE TRIBUNAL. 13. THE TRIBUNAL MUMBAI BENCH IN THE CASE OF SUNDER AGENCIES V. DY. CIT [1997] 59 TTJ (MUMBAI) 610 : [1997] 63 ITD 245 (MUMBAI) HAS MADE 13 EXTREMELY LUCID ENUNCIATION OF LAW ON THE SUBJECT A ND WE CANNOT DO BETTER THAN TO EXTRACT SOME OF THE OBSERVATIONS MADE IN TH AT DECISION; . '23. THERE ARE ADEQUATE SAFEGUARDS PRESENT AGAINST ANY POSSIBLE MISUSE OF THE PROVISION OF SEARCH AND SEIZURE. CHAP TER XIV-B WAS INTRODUCED IN ORDER TO MAKE PROCEDURE OF ASSESSMENT OF SEARCH AND FOR REQUISITION CASES MORE EFFECTIVE. UNDER THE PROVISI ONS OF THIS CHAPTER THE UNDISCLOSED INCOME DETECTED AS A RESULT OF SEAR CH INITIATED OR REQUISITION MADE AFTER 30TH JUNE 1995 BE ASSESSED SEPARATELY AS INCOME OF THAT BLOCK OF TEN PREVIOUS YEARS. THE PRO VISION WAS INTRODUCED TO STREAMLINE THE PROCEDURE CONCERNING T HE SEARCH MATTERS. IT IS ABUNDANTLY CLEAR FROM THE PERUSAL OF THE PRES CRIPTION OF S. 15SBA THAT WITHIN THE PALE OF CHAPTER XIV-B ASSESSMENT CO ULD BE MADE ONLY IN RESPECT OF THE UNDISCLOSED INCOME. SUCH UNDISCLO SED INCOME MUST COME AS A RESULT OF SEARCH. THIS SECTION DOES NOT P ROVIDE A LICENCE TO THE REVENUE FOR MAKING ROVING ENQUIRIES CONNECTED W ITH THE COMPLETED ASSESSMENT. IT IS BEYOND THE POWER OF THE AO TO REVIEW THE ASSESSMENTS COMPLETED UNLESS SOME DIRECT EVIDENCE C OMES TO THE KNOWLEDGE OF THE DEPARTMENT AS A RESULT OF SEARCH W HICH INDICATES CLEARLY THE FACTUM OF UNDISCLOSED INCOME. WITHOUT S UCH EVIDENCE OR MATERIAL THE AO IS NOT EMPOWERED TO DRAW ANY PRESUM PTION AS TO THE EXISTENCE OF UNDISCLOSED INCOME. A PRESUMPTION IS A N INFERENCE OF FACT DRAWN FROM OTHER KNOWN OR PROVED FACTS. IT IS RULE OF LAW UNDER WHICH COURTS ARE AUTHORISED TO DRAW A PARTICULAR IN FERENCE FROM A PARTICULAR FACT UNTIL AND UNLESS THE TRUTH OF SUCH INFERENCE IS DISPROVED BY OTHER EVIDENCE. WE FIND THAT THE SCHEME OF CHAPT ER XIV-B DOES 14 NOT GIVE POWER TO THE REVENUE TO DRAW THE PRESUMPTI ON IN REGARD TO THE UNDISCLOSED INCOME. THE AO COULD PROCEED ON THE BASIS OF MATERIAL DETECTED AT THE TIME OF SEARCH AND THE EVI DENCE GATHERED. UNDER S. 132(4) THE AUTHORISED OFFICER MAY DURING THE COURSE OF SEARCH OR SEIZURE EXAMINE ON OATH ANY PERSON WHO I S FOUND TO BE IN POSSESSION OR CONTROL OF ANY BOOKS OF ACCOUNT DOCU MENTS MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR TIL ING AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION MAY THE REAFTER BE USED IN EVIDENCE IN ANY PROCEEDING UNDER THE ACT. 14. THUS INCOME OF THE BLOCK ASSESSMENT HAS TO BE DETERMINED ON THE BASIS OF SEIZED MATERIAL. LEARNED AO HAS DENIED THE EXEMPTION TO THE ASSESSEE BY MAKING A REFERENCE TO A NUMBER OF CIRCU MSTANCES WHICH WE ARE NOTICING WHILE REPRODUCING THE FINDING OF THE ITAT IN THE CASE OF RAJINDER NAGAR SOCIETIES CASE AND NAV MANAV SANSTHAN CASE IN SUBSEQUENT PARAS. THE MAIN EMPHASIS OF THE AO IS THAT SHRI VK BHATNAG AR IS THE MAIN PERSON AND HE HAS BEEN CONTROLLING THE AFFAIRS OF ALL THE SOCIETIES. HE WAS A SIMPLE TEACHER PRIOR TO TAKING UP THE ACTIVITIES OF IMPART ING EDUCATION THROUGH THESE SOCIETIES. THE AO HAS AN APPREHENSION THAT SHRI VK BHAGTNAGAR HAS SIPHONED OF THE INCOME OF THE SOCIETIES FOR HIS PER SONAL GAIN. HE HAS FORCED THE PARENTS TO GIVE DONATION AND SUCH AMOUNTS WERE USED EITHER BY HIM OR BY HIS FAMILY MEMBERS. CONTRARY TO THESE FINDINGS LEA RNED CIT(APPEALS) HAS 15 OBSERVED THAT HE HAS GONE THROUGH THE CONSTITUTION OF THE BOARD OF GOVERNING COUNCIL AS WELL AS MEMBERS OF THE SOCIETI ES IN THE PRESENT CASE. ON PERUSAL OF RULES REGULATIONS OF THE SOCIETIES A S WELL AS CONSTITUTION OF THE BOARD LEARNED CIT(A) OPINED THAT SHRI VK BHATNAGAR IS NOT EVEN A MEMBER OF THE SOCIETY. IN THE CONSTITUTION OF THE SOCIETY AS ALSO ITS MANAGING COMMITTEE NOWHERE INDICATES THAT ANY MEMBERS OF TH E COMMITTEE INCLUDING THE SON OF SHRI VK BHATNAGAR IS VESTED WITH ANY SPE CIAL POWER GIVING THEM RIGHT TO CONTROL AND DIRECT THE RUNNING OF THE SOCI ETY. THE CONSTITUTION OF THE MEMBERSHIP OF THE SOCIETY IS VERY BROAD BASE NORMA LLY CONSISTING OF 8 TO 10 DIFFERENT PEOPLE NOT EVEN ALLEGED TO BE ALL CONNECT ED WITH SHRI VK BHATNAGAR. ACCORDING TO THE LEARNED CIT(A) AO HAS ONLY RAISED SUSPICION AND HIS REASONING ARE NOT SUPPORTED BY ANY SPECIFIC MATERIAL. HE HAS DISCUSSED THE OVERALL IMPRESSION ALLEGED TO HAVE BE EN GATHERED BY THE SEARCH PARTY. THE IMPORTANT QUESTION POSED BEFORE US IS WH ETHER EXEMPTION UNDER SEC. 10(22) CAN BE DENIED TO THE ASSESSEE ON THE SU RPLUS WORKED OUT BY THE A.O. AS DISCUSSED ABOVE THE INCOME OF THE BLOCK AS SESSMENT HAS TO BE DETERMINED ON THE BASIS OF THE SEIZED MATERIAL. THE ASSESSEE HAS ALREADY FILED THE RETURNS FOR THE ASSESSMENT YEARS 1992-93 UP TO 1998-99. THE EXEMPTION UNDER SECTION 10(22) HAS BEEN GRANTED TO THE ASSESS EE BY THE AO HIMSELF IN 16 ALL THESE ASSESSMENT YEARS EXCEPT IN ASSESSMENT YEA R 1997-98. THE ASSESSMENTS WERE ALSO FRAMED UNDER SEC.143(3) READ WITH SECTION 147 MEANING THEREBY THAT SOME MATERIAL SHOULD HAVE BEEN FOUND DURING THE COURSE OF SEARCH INDICATING THE FACT THAT CLAIM MAD E BY THE ASSESSEE FOR RUNNING EDUCATIONAL INSTITUTION WAS A BOGUS CLAIM. ONLY THEREAFTER ITS SURPLUS CAN BE TREATED AS UNDISCLOSED INCOME FOR TH E PURPOSE OF THE BLOCK ASSESSMENT. THERE IS NO SUCH MATERIAL FOUND DURING THE COURSE OF SEARCH. LD. CIT(APPEALS) HAS OBSERVED THAT ONCE THESE FACTS WER E BROUGHT TO THE NOTICE OF THE DEPARTMENT BY THE ASSESSEE IN ITS REGULAR RE TURNS OF INCOME AND AO HAS GRANTED EXEMPTION TO THE ASSESSEE THEN SUCH EXE MPTION CANNOT BE WITHDRAWN UNLESS INCRIMINATING MATERIAL DEMONSTRATI NG SUCH CLAIM OF EXEMPTION AS FALSE WAS FOUND BY THE SEARCH PARTY. T HE OTHER IMPORTANT FACTOR IS THAT LEARNED CIT(A) DID NOT GRANT EXEMPTION IN R ESPECT OF THE YEAR IN WHICH RETURN WAS NOT FILED BY THE ASSESSEE. HOWEVER AFTER TAKING INTO CONSIDERATION THE LOSS FOR ASSESSMENT YEAR 1999-00 HE WAS OF THE OPINION THAT POSITIVE FIGURE OF SURPLUS OF ASSESSMENT YEARS 1990-91 AND 1991-92 IS OF RS.6 58 184. IF THIS AMOUNT IS ADJUSTED AGAINST THE LOSS IN THE EXPENDITURE ACCOUNT FOR ASSESSMENT YEAR 1999-00 WORKED OUT AT RS 8 53 437 THEN THERE IS A NET LOSS OF RS.1 95 253. IN THIS EXERCISE NOT HING REMAINED IN THE ALLEGED 17 SURPLUS OUT OF INCOME AND EXPENDITURE ACCOUNT WHICH IS TO BE TREATED AS UNDISCLOSED INCOME OF THE BLOCK ASSESSMENT. 15. APART FROM THE ABOVE DISCUSSION WE FIND THAT I N THE CASES OF OTHER SOCIETIES ASSESSEE HAS NOT FILED THE RETURNS. THOS E ISSUES CAME UP BEFORE THE ITAT THE ITAT HAS HELD THAT THE SURPLUS COMPUTED F ROM INCOME AND EXPENDITURE ACCOUNT ON THE BASIS OF ESTIMATION OR O N THE BASIS OF BOOKS OF ACCOUNT PREPARED FROM THE SEIZED MATERIAL SUCH SUR PLUS IS TO BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PE RIOD. THE ITAT HOWEVER HAS HELD THAT ASSESSES ARE IMPARTING EDUCA TION AND RUNNING EDUCATIONAL INSTITUTION THEREFORE EVEN THOUGH THE Y HAVE NOT FILED HE REGULAR RETURN THEY ARE ENTITLED TO EXEMPTION UNDER SECTIO N 10(22) OF THE ACT. THE FINDINGS OF THE ITAT IN THE CASE OF SANT VASWANI E DUCATIONAL SOCIETY AND OTHER CASES READ AS UNDER: 9. FIRST WE TAKE THE APPEAL OF ASSESSEE HOWEVER ANY GROUND RAISED BY REVENUE IN ITS APPEAL IF FOUND TO BE INT ER-CONNECTED TO THAT OF ASSESSEE THEN SUCH GROUND WILL BE TAKEN UP TOGET HER. THE GROUND NO.1 RAISED BY THE ASSESSEE IN ITS APPEAL READS AS UNDER: THE LEARNED CIT(APPEALS) HAS ERRED IN FACTS AND IN LAW IN DENYING EXEMPTION U/S.10(22) AND THEREBY CONSIDERIN G THE SURPLUS AS PER INCOME AND EXPENDITURE AMOUNTING TO RS.1 17 08 798 FOR DIFFERENT YEARS FALLING IN THE B LOCK PERIOD AS 18 UNDISCLOSED INCOME. (A.Y 1993-94 RS.1 98 305 94-95 RS.5 94 432 95-96 RS.11 77 875 96-97 RS.20 44 160 97-98 RS.32 37 202 98-99 RS.27 58 013 99-00 RS.16 98 81 1). 10. AT THE TIME OF HEARING BOTH THE PARTIES HAVE CO NCEDED THAT VERBATIM SAME ISSUE AS WAS AGITATED BEFORE THE ITAT IN THE CASE OF M/S. NAV MANAV SANSTHAN WHICH IS ONE OF THE SOCIETY MEND BY SHRI V.K. BHATNAGAR EXCEPT VARIATION IN THE QUANTUM THE RE IS NO VARIATION IN OTHER FACTS AND CIRCUMSTANCES. THE DEFECTS POINT ED OUT BY THE ASSESSING OFFICER WHILE DENYING THE EXEMPTION UNDER SEC. 10(22) ON PAGE NOS. 25 TO 30 IN THE IMPUGNED ORDER ARE ALMOST SIMILAR IN THE CASE OF M/S. NAV MANAV SANSTHAN. APART FROM THIS ON E SOCIETY THE SIMILAR DISPUTE TRAVELED UP TO THE ITAT IN THE CASE OF M/S. V. BHATNAGAR SANSTHAN IN THE CASE OF RAJINDER NAGAR SO CIETY. THE ITAT HAS DISCUSSED THIS ISSUE IN THE CASE OF NAV MANAV S ANSTHAN AS UNDER: 9. GROUND NO.1 RAISED IN THE ASSESSEES APPEAL REL ATES TO THE ISSUE OF ITS CLAIM FOR EXEMPTION U/S 10(22) WHICH STANDS DISALLOWED BY THE AO AS WELL AS BY THE LEARNED CIT(A). 10. DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDIN GS ITS ENTIRE INCOME FOR THE PREVIOUS YEARS FORMING PART OF THE BLOCK PERIOD WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE U/S 10(22) ON THE GROUND THAT IT EXIST ED DURING THE SAID YEARS SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSES O F PROFIT. ACCORDING TO THE AO THE CONCEPT OF PROFIT MAKING HAS BEEN JUDICIALLY RE VIEWED IN VARIOUS JUDICIAL PRONOUNCEMENTS AND THE POSITION WHICH EMERGES OUT O F THE SAME WAS THAT IF ANY PERSON OR INDIVIDUAL IS GETTING PERSONAL BENEFIT FR OM THE EDUCATIONAL INSTITUTION THEN THERE IS A PROFIT MOTIVE IN RUNNING THE SAID E DUCATIONAL INSTITUTION. IN THE 19 LIGHT OF THIS LEGAL POSITION HE EXAMINED THE FACTS OF THE CASE OF THE ASSESSEE AND RECORDED THE FOLLOWING OBSERVATIONS :- 1. AS MENTIONED EARLIER PHOTOCOPY OF ALL THE SEIZ ED MATERIAL RELATING TO ALL THE TEN SCHOOLS AND DOCUMENTS FOUND FROM THE RESIDENCES HAVE ALREADY BEEN GIVEN TO THE ASSESSEE BY THE DDIT INV. ITSELF. PHOTOCOPY OF ALL THE INVESTIGATION MA TERIAL BANK ENQUIRY COPY OF STATEMENT FROM PAGE NO.481 TO 561 ATTACHED WITH THE APPRAISAL REPORT HAVE ALREADY BEEN GIVEN TO THE ASSESSEE MUCH EARLIER. SIMILARLY LIST OF PARTIES WHO HAVE BEEN EXAMINED BY THE DDIT INV. MENTIONED AT PAGE NO.19 AND 20 OF THE A PPRAISAL REPORT HAVE ALSO BEEN GIVEN TO THE ASSESSEE. ALL THE SEIZED DOCUMENTS HAVE BEEN DISCUSSED PAGE-WISE WITH THE AS SESSEE RELATING TO ALL THE SCHOOLS AND FOUND FROM THE RESI DENCES AND THE COMMENTS OF THE DDIT INV. RUNNING INTO TWO VOLUME S HAVE ALSO BEEN DISCUSSED WITH THE ASSESSEE AND ALL THE POINTS MENTIONED IN THE APPRAISAL REPORT HAVE ALSO BEEN NOTED BY THE AS SESSEE. FROM THE SEIZED DOCUMENTS THERE ARE INNUMERABLE INSTANC ES WHICH REFLECTED DIVERSION OF FUNDS FOR PERSONAL BENEFITS AND UNDERSTATEMENT OF INCOME BY WAY OF VARIOUS MODES AN D DRAWING OF INCOME FOR PERSONAL BENEFITS. 2. DONATIONS ARE TAKEN FROM THE PARENTS FOR THE ADM ISSION OF THEIR CHILDREN IN THE SCHOOL IN CASH/CHEQUE/KIND. NO RECEIPTS WERE GIVEN FOR THESE DONATIONS AND THESE ARE NOT ENTERED IN THE BOOKS OF ACCOUNTS. 3. THIS CASH WAS SENT TO THE BENEFICIARY SHRI V.K. BHATNAGAR FOUNDER/CHAIRMAN/ACTUAL CONTROLLER OF ALL THESE SOC IETIES. THUS THIS CASH IS UTILIZED FOR THE INDIVIDUAL BENEFIT OF SHRI V.K.BHATNAGAR HIS FAMILY MEMBERS AND HIS COMPANIES . 4. THIS UNACCOUNTED CASH WAS THEN INVESTED IN ACQUI RING PROPERTIES IN AND OUTSIDE DELHI AND IN MAKING INVES TMENTS IN CONSTRUCTION OF RESIDENTIAL BLOCK COMMERCIAL PLAZA ADMINISTRATIVE BLOCK SPORTS COMPLEX AT GURGAON IN THE NAME OF VIR ENDRA GRAM. 5. DONATIONS IN KIND I.E. STEEL WAS ALSO TAKEN FOR ADMITTING CHILDREN. THIS STEEL WAS USED FOR CONSTRUCTION OF RESIDENCE OF MR.BHATNAGAR AND VARIOUS COMMERCIAL PROJECTS NAMEL Y SHOPPING PLAZA MEDICINE CENTRE BANQUET HALLS LUXURY GROUP HOUSING SOCIETY ETC. IN VIRENDER GRAM AT GURGAON. 20 6. CASH IS RECEIVED FROM THE SCHOOL CHILDREN IN VAR IOUS WAYS ON ACCOUNT OF LOCAL AND OUTSIDE DELHI TOURS AND TRI PS BUT THIS IS NOT ENTERED IN THE BOOKS RATHER EXPENDITURE UNDER THE H EAD STUDENT WELFARE IS PAID TO THE COMPANY BIIR LTD. 7. THE PRECIOUS LAND ABOUT 32.65 ACRES AT GURGAON O N THE MAIN HIGHWAY BELONGING TO DIFFERENT SOCIETIES AND S CHOOL WAS TRANSFERRED IN THE NAME OF SHRI V.K.BHATNAGAR AND H IS FAMILY MEMBERS THROUGH LEASE AND ORAL AGREEMENTS (MS-1 AN NEXURE A- 28). LATER ON THE LAND BELONGING TO SOCIETIES HAV E BEEN TRANSFERRED IN THE NAME OF SHRI V.K.BHATNAGAR AND FAMILY MEMBER S THROUGH DECLARATORY SUITS NAMELY COMPROMISE SUITS. IN SUC H SUITS SHRI V.K.BHATNAGAR AND FAMILY MEMBERS ARE FILING THE SUI TS AND THEY ARE ALSO CONTESTING THE SUITS AND BY WAY OF COMPROM ISE SINCE THEY ARE THE CONTROLLERS OF SOCIETIES THE LANDS HAVE BE EN TRANSFERRED IN THEIR NAMES RESULTING INTO SUBSTANTIAL GAIN TO THE AFORESAID PERSONS. IN EXCHANGE THE INTERIOR QUALITY OF LANDS SITUATED AT INTERIOR VILLAGES AT RAISINA WAS GIVEN TO THE SOCIETIES. 8. INVESTMENT IN SHARES OF BARON AIR BY THE SCHOOLS /SOCIETIES CAN NOT BE TERMED AS AN EDUCATIONAL ACTIVITY (MS-1 ANNEXURE A- 84). 9. VEHICLES OF THE SCHOOLS/SOCIETIES ARE USED BY SH RI V.K.BHATNAGAR AND FAMILY MEMBERS. 10. SALARY IS BEING PAID TO ANURAG BHATNAGAR WHILE HE WAS A STUDENT AND VIKRAM BHATNAGAR FROM VARIOUS SCHOOLS A ND SOCIETIES. SUBSTANTIAL SALARY OF RS.6.71 LACS IS BEING PAID TO SMT.MAMTA BHATNAGAR AS A PRINCIPAL WHEREAS OTHER PRINCIPALS A RE GETTING NOMINAL SALARIES OF RS.15 000/- P.M. 11. CASH ARE TAKEN FROM VARIOUS SCHOOLS AND SOCIETI ES FROM VARIOUS HEADS AND FROM CAUTION MONEY AND OTHER FUND S AND THESE ARE DIVERTED FOR MAKING INVESTMENT AT RESIDENTIAL B LOCK AND COMMERCIAL PROJECTS NAMELY HEALTH CARE HEALTH RE SORTS AND ALTERNATIVE MEDICINE AND TO RUN THE POULTRY FARM AT VIRENDRA GRAM AT GURGAON (MS-10 ANNEXURE A-5). 12. SOME OF THE PARTIES WHO ARE GENUINELY EXISTING DENIED IN THEIR STATEMENTS THAT THEY HAVE NOT RENDERED ANY SE RVICES OR SUPPLIED THE GOODS. THEY WERE SURPRISED TO SEE THE IR BILLS. THUS FINANCIAL FRAUDS HAVE BEEN DONE TO MIS-UTILIZE THE SOCIETY FOR THE PERSONAL GAIN OF THE FOUNDER CHAIRMAN AND HIS FAMI LY MEMBERS. 21 13. SOME OF THE EXPENSES CLAIMED IN INCOME & EXPEND ITURE A/C OF THE SOCIETY FOR MATERIAL NEVER PURCHASED. T HEY ARE PAPER BILL WITHOUT PHYSICAL DELIVERY OF GOODS. CASH HAS BEEN RECEIVED FROM THE PARTIES FROM WHERE BILLS WERE PROCURED AFT ER DEDUCTING THEIR CHARGES. THESE PARTIES ARE BASICALLY GOODWIL L STEEL SYNDICATE SHUBHAM CEMENT PUNEET TRADERS ETC. TH IS HAS BEEN CLEARLY ADMITTED BY GOODWILL STEEL SYNDICATE. THIS CLEARLY SUBSTANTIATES THE EXTENT THE SOCIETIES WERE USED FO R PERSONAL BENEFIT OF THE FOUNDER CHAIRMAN. 14. HUGE INVESTMENTS HAVE BEEN MADE FOR THE RESIDEN CE OF SHRI V.K.BHATNAGAR AND HIS FAMILY MEMBERS AT VIRENDRA GR AM BY DIVERTING THE FUNDS FROM SCHOOLS/SOCIETIES EITHER T HROUGH BHATNAGAR FOUNDATION OR DIRECTLY FROM SCHOOLS/SOCIETIES. 15. FUNDS OF THE SCHOOLS/SOCIETIES HAVE BEEN DIVERT ED TO HEALTH CARE HEALTH RESORTS & ALTERNATIVE MEDICINE TO RUN THE POULTRY FARM AT VIRENDRA GRAM (MS-10 ANNEXURE A-5). 16. HUGE LOANS AND ADVANCES FROM VARIOUS SOCIETIES/ SCHOOLS WERE GIVEN TO BHR LTD. BCC(P) LTD. FROM CAUTION MO NEY ACCOUNT AT THE TIME OF PURCHASE OF THESE UNITS. 17. CAUTION MONEY AMOUNTING TO SEVERAL LACS WAS WIT HDRAWN IN CASH THROUGH BEARER CHEQUES FOR THE PARENTS WHO DIDNT TURN UP TO COLLECT THE AMOUNT. THE CASH WAS TAKEN BY THE S TAFF AND SENT TO THE CENTRAL OFFICE I.E. SHRI V.K.BHATNAGAR. LIST OF PERSONS WITH ADDRESSES TO WHOM PAYMENTS HAVE BEEN MADE HAS NOT BEEN FILED FOR VERIFICATION. 18. PAYMENTS WERE MADE FROM THE SCHOOLS/SOCIETIES T O THE CONSULTANT OF THE HOTEL AND RECEIPT WERE TAKEN FOR TEACHING CHARGES IN THE NAME OF HIS MOTHER AND WIFE. THIS WAS STATE D BY MR.ANIL SEHGAL IN HIS STATEMENT AND COPY OF THE SAME HAS AL READY BEEN GIVEN TO THE ASSESSEE. 19. FROM THE CONSTITUTION OF THE SOCIETIES IT IS A GAIN FOUND THAT THE SOCIETIES ARE BEING RUN BY THE SALARIES EMPLOYE ES OF SHRI V.K.BHATNAGAR AND ENTIRE CONTROL OF ALL THE SCHOOLS AND SOCIETIES RESTS ONLY WITH HIM. NO SOCIETY IS INDEPENDENT FOR ITS WORKING AND FOR EVERY WORK APPROVAL IS BEING TAKEN FROM SHRI V. K.BHATNAGAR. ALL THESE FACTS ARE CLEAR FROM THE ANALYSIS OF SEIZ E DOCUMENTS. NO MINUTE BOOK/RESOLUTION BOOK OF THE SOCIETIES ARE MA INTAINED. AS MENTIONED EARLIER NO PROPER BOOKS OF ACCOUNTS WERE MAINTAINED AND ONLY AFTER A GAP OF ABOUT 2 YEARS FROM THE DATE OF SEARCH 22 COMPUTERIZED BOOKS WERE PREPARED AND PRODUCED. THE FACT THAT THE LANDS OWNED BY THE SOCIETIES WORTH RUPEES MORE THAN 100 CRORES (MS-1 ANNEXURE A-80) AT GURGAON HAVE BEEN TRANSFER RED TO SHRI V.K.BHATNAGAR AND HIS FAMILY MEMBERS IN EXCHANGE FO R THE LANDS WHICH HAVE NOMINAL VALUE. THIS ONLY CERTIFIES THAT THE SOCIETIES ARE ONLY A TOOL TO CLAIM EXEMPTIONS AND TO EVADE PROPER TAXATION. AS MENTIONED EARLIER ACQUISITION OF CRORES OF ASSETS WITHOUT ANY OTHER INDEPENDENT SOURCE OF INCOME IS ONLY A CERTIFICATE TO THE FACT THAT THE SCHOOLS WERE THE SOURCE OF INCOME AND WERE RUN ONLY FOR PROFIT AND EARNING INCOME. 20. SHRI V.K.BHATNAGAR OWES LOANS OF RS.1.01 CRORES TO THE SCHOOLS BUT NO INTEREST WAS CHARGED. THIS SUBSTANT IAL AMOUNT WAS UTILIZED FOR MAKING VARIOUS INVESTMENTS AND IN PURC HASE OF PROPERTIES. FROM THE ACCOUNTS OF VARIOUS SCHOOLS A ND SOCIETIES IT IS FOUND THAT ENTIRE ASSETS HAVE BEEN ACQUIRED BY S HRI BHATNAGAR AND FAMILY MEMBERS BY WITHDRAWING FUNDS FROM SCHOOL S AND SOCIETIES AS THERE WAS NO OTHER INDEPENDENT SOURCE OF INCOME. HE HAS HIMSELF SURRENDERED AN INCOME OF RS.1.01 CRORES UNDER THE VDIS97 WHICH REPRESENTED UNACCOUNTED CASH EARNED F ROM THE SCHOOLS AND SERVICE CHARGES CLAIMED AS BOGUS EXPENS ES IN THE SCHOOLS INVESTMENT AT KULLU & MANALI AND OTHER IMM OVABLE PROPERTIES. DURING THE SEARCH SHRI V.K.BHATNAGAR HAS AGAIN SURRENDERED UNDISCLOSED INCOME OF RS.50 LACS WHICH WAS EARNED FROM THE SCHOOLS AND THE SOCIETIES HAVE ALSO DECLAR ED UNDISCLOSED INCOME. FROM THE CHART OF ASSETS OWNED BY SHRI V.K .BHATNAGAR AND HIS FAMILY MEMBERS AND ASSETS DECLARED AND DONA TIONS COLLECTED AT THE TIME OF ADMISSION IT IS CRYSTAL C LEAR THAT THE SCHOOLS ARE RUN ONLY FOR PROFIT AND NOT FOR EDUCATI ONAL ACTIVITIES ONLY AND THE SCHOOLS ARE BEING SHOWN AS BEING RUN B Y THE SOCIETIES ONLY TO CLAIM VARIOUS EXEMPTIONS. 11. KEEPING IN VIEW THE ABOVE ALLEGATION MADE BY HI M AS WELL AS THE FACT THAT THE ASSESSEE-SOCIETY HAD CLAIMED DEPRECIATION IN IT S INCOME AND EXPENDITURE INCOME THE AO HELD THAT THE EDUCATIONAL INSTITUTIO N WAS BEING RUN BY THE ASSESSEE-SOCIETY CLEARLY WITH A PROFIT MOTIVE AND I T WAS THEREFORE NOT ENTITLED FOR EXEMPTION U/S 10(22). 12. BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE- SOCIETY THAT IT WAS RUNNING AN EDUCATIONAL INSTITUT E VIZ. ST.VIVEKANAND SCHOOL AND 23 AS ITS RECEIPTS WERE ENTIRELY DERIVED FROM THE SAID SCHOOL WHICH WAS BEING RUN SOLELY FOR EDUCATION PURPOSES AND NOT FOR THE PURPO SES OF PROFIT THE ENTIRE INCOME EARNED FROM THE SAID SCHOOL WAS EXEMPT U/S 10(22). IT WAS CONTENDED THAT EVEN IF SOME INDIVIDUAL WAS FOUND TO HAVE SIPHONED OFF CERT AIN FUNDS FROM THE SCHOOL THE SOCIETY COULD NOT BE DENIED BENEFIT OF EXEMPTION U/ S 10(22). IN SUPPORT OF THIS CONTENTION RELIANCE WAS PLACED BY THE ASSESSEE ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. COSMOPO LITAN EDUCATIONAL SOCIETY 240 ITR 494. IT WAS ALSO POINTED OUT THAT THE SLP FILED BY THE REVENUE AGAINST THE SAID DECISION OF HON'BLE RAJASTHAN HIGH COURT H AS BEEN DISMISSED BY THE HON'BLE SUPREME COURT. THIS SUBMISSION OF THE ASSE SSEE WAS NOT FOUND ACCEPTABLE BY THE LEARNED CIT(A). ACCORDING TO HIM THE ASSESSEE WAS OBLIGED TO FILE ITS RETURN OF INCOME FOR CLAIMING EXEMPTION U/ S 10(22) AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF ADITANAR EDUCATIONAL I NSTITUTION VS. ADDL.CIT 224 ITR 310 AND IN THE ABSENCE OF ANY RETURN OF INCOME FILED BY IT REGULARLY FOR ANY OF THE YEARS COMPRISING OF THE BLOCK PERIOD HE HELD T HAT THE ASSESSEE WAS NOT ENTITLED FOR EXEMPTION U/S 10(22). HE HELD THAT THE ENTIRE INCOME OF THE ASSESSEE FOR THE SAID YEARS ON THE OTHER HAND WAS LIABLE TO BE TRE ATED AS UNDISCLOSED INCOME IN THE ABSENCE OF ANY REGULAR RETURN OF INCOME FILED BY IT AS RIGHTLY DONE BY THE AO. HE ALSO HELD THAT THE CLAIM OF THE ASSESSEE FOR EXEMPT ION U/S 10(22) IN ANY CASE COULD HAVE BEEN CONSIDERED ONLY IN THE REGULAR ASSESSMENT S AND IT WAS BEYOND THE SCOPE OF BLOCK ASSESSMENT UNDER CHAPTER XIV-B WHICH REQUI RES THE AO ONLY TO COMPUTE THE UNDISCLOSED INCOME AS PER THE PROVISION S CONTAINED IN THE SAID CHAPTER. HE THEREFORE UPHELD THE ACTION OF THE A O IN DISALLOWING THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10(22). 13. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THERE IS NO DISPUTE AS TO THE FACT THAT THE ASSESSEE-SOCIETY IS RUNNING AN EDUCATIONAL INSTITUTION. HE SUBMITTED THAT THE SAID EDUCATIONA L INSTITUTION WAS EXISTING SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT DURING THE ENTIRE BLOCK PERIOD AND THEREFORE THE INCOME OF THE ASSESSEE-SO CIETY FROM THE EDUCATIONAL 24 INSTITUTION WAS FULLY EXEMPT U/S 10(22). HE ALSO S UBMITTED THAT AS THE INCOME OF THE ASSESSEE-SOCIETY FROM EDUCATIONAL INSTITUTION W AS ENTIRELY EXEMPT U/S 10(22) IT WAS NOT REQUIRED TO FILE THE RETURNS OF INCOME F OR THE RELEVANT YEARS FALLING WITHIN THE BLOCK PERIOD AND THIS POSITION GETS FORT IFIED WITH THE AMENDMENTS MADE IN SECTION 10(22)/10(23C) WHEREBY THE FILING OF RET URN FOR CLAIMING SUCH EXEMPTION HAS BEEN MADE OBLIGATORY W.E.F. 1.4.2003. HE ALSO SUBMITTED THAT THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10(22) WAS LIABLE TO BE CONSIDERED BY THE AUTHORITIES BELOW IN RESPECT OF EACH ASSESSMENT YEA R SEPARATELY. HE CONTENDED THAT THE ORDERS PASSED BY THEM IN THE CASE OF THE A SSESSEE HOWEVER SHOW THAT THERE IS NO DISCUSSION AS TO FOR WHICH PARTICULAR A SSESSMENT YEAR THE SOCIETY ALLEGEDLY EXISTED FOR PROFIT. HE SUBMITTED THAT EV EN THE ALLEGATIONS/OBSERVATIONS MADE BY THE AO WHILE DENYING THE CLAIM OF THE ASSES SEE FOR EXEMPTION U/S 10(22) ARE GENERAL IN NATURE AND THEY DO NOT RELATE TO ANY SPECIFIC YEAR TO ARRIVE AT A CONCLUSION THAT THE ASSESSEE-SOCIETY WAS EXISTING F OR PROFIT IN THAT PARTICULAR YEAR. IN ORDER TO MEET THE SAID ALLEGATIONS/OBSERVATIONS MADE BY THE AO HE MADE THE FOLLOWING SUBMISSIONS IN RESPECT OF EACH AND EVERY ALLEGATION/OBSERVATION MADE BY THE AO IN THIS CONTEXT:- 1. THE DCIT HAS SIMPLY RELIED UPON THE REPORT OF D DIT(INV.) WITHOUT MAKING ANY INDEPENDENT ENQUIRY. THIS ACT I S DISREGARDING THE DECISION OF ITAT MADRAS BENCH IN CASE OF KIRTIL AL KALIDAS & CO. VS. DCIT 67 ITD 573. 2. THE DONATIONS ARE RECEIVED FOR EDUCATION PURPOSE . THIS IS NOT A BASE TO CONSIDER THAT THE ASSESSEE SOCIETY IS RUNNING THE SCHOOLS FOR PROFIT. USE OF THE FUNDS AT VIRENDRA G RAM IS FOR DEVELOPMENT OF THE COMMON FACILITIES USED BY THE VA RIOUS SCHOOLS FOR THE EDUCATIONAL PURPOSE. THE FUNDS WERE NEVER USED FOR CONSTRUCTION OF THE RESIDENTIAL HOUSE. 3. THE ALLEGATION IS WITHOUT ANY BASIS. AO HAS NOT POINTED OUT ANY RECEIPT WHICH IS NO ACCOUNTED FOR RATHER HE HA S RELIED ON THE RECEIPT SHOWN IN THE BOOKS OF ACCOUNTS FOR TAKING T HE SURPLUS. 25 4. THE LAND HAS BEEN EXCHANGE IN EXECUTION OF THE D ECREE OF THE COURT. THE LAND SO EXCHANGED IS USED BY THE SO CIETY FOR EDUCATIONAL ACTIVITIES WITHOUT ANY CHARGE. 5. NO SHARE OF BARON AIR LTD. IS PURCHASED BY THE A SSESSEE SOCIETY/SCHOOL. 6. THIS OBSERVATION IS WITHOUT ANY BASIS. EVEN OTH ERWISE THE VEHICLES ARE USED BY THEM ONLY FOR EDUCATIONAL PURP OSE. THIS HAS NO RELEVANCE WITH THE EXEMPTION U/S 10(22). 7. THE PAYMENT OF SALARY HAS BEEN MADE ACCORDING TO THE SCALES RECOMMENDED BY THE PAY COMMISSION AND NO DIS ALLOWANCE OF SUCH SALARY WAS MADE IN THE ASSESSMENT AND ALL T HESE PERSONS ARE ACTIVELY ENGAGED IN THE ADMINISTRATION OF SCHOOL/SO CIETY. 8. THESE ARE SHEER ALLEGATIONS WITHOUT ANY BASIS. EVEN THE AO HAS NOT MADE ANY ADDITION TO INCOME FOR SUCH ALL EGED DIVERSION OF FUNDS. 9. THE AO HAS NOT CONFRONTED TO THE ASSESSEE SOCIET Y ANY PERSON WHO HAS DENIED THE PAYMENT MADE TO THEM. PA YMENTS ARE MOSTLY BY CHEQUES. BILLS & VOUCHERS OF PAYMENT IS AVAILABLE. NO INSTANCE IS GIVEN WHERE MATERIAL IS SHOWN PURCHASED WITHOUT DELIVERY OF GOODS. 10. FROM THE BALANCE SHEET IT CAN BE NOTED THAT NO SUCH ADVANCE ARE GIVEN. 11. COMPLETE DETAILS OF STUDENT WISE CAUTION MONEY RECEIPT AND PAYMENT WERE FILED IN ASSESSMENT PROCEEDING. NOT A SINGLE INSTANCE OF CAUTION MONEY WITHDRAWN THROUGH BEARER CHEQUE WAS FILED. 12. THE ALLEGATION IS WITHOUT ANY BASIS. THE ASSES SEE HAS FILED THE DETAILS OF THE PERSONS MANAGING THE SOCIETY. T HERE IS NO PROHIBITION THAT PERSON MANAGING THE SOCIETY AND SC HOOL CANT DRAW SALARY SO LONG AS IT IS REASONABLE. THE AO HAS NOT DISPUTED REASONABLENESS OF SALARY. 13. THESE ARE ONLY MEMORANDUM RECORDS. THIS DOES N OT AFFECT THE CLAIM OF EXEMPTION U/S 10(22). 14. IN COURSE OF SEARCH ALSO THE BOOKS OF THE ACCOU NTS OF THE SOCIETY WERE FOUND. 26 15. THE OBSERVATIONS OF THE AO ARE WITHOUT ANY BASI S. NO SUCH INSTANCES WERE CONFRONTED TO THE ASSESSEE. 16. NO LOAN HAS BEEN GIVEN BY THE SOCIETY TO SHRI V.K.BHATNAGAR AND HIS FAMILY MEMBERS. ACTUAL POSIT ION IS THAT SHRI V.K.BHATNAGAR HAS GIVEN LOAN TO V B SANSTHAN A ND OUTSTANDING AS ON 31.03.1998 IS AS RS.52.84 LACS. 14. RELYING ON THE DECISION OF HON'BLE SUPREME COUR T IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTION (SUPRA) THE LEARNED COUNSE L FOR THE ASSESSEE CONTENDED THAT THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10 (22) IS REQUIRED TO BE EVALUATED EVERY YEAR SEPARATELY AND MERELY BECAUSE SURPLUS HA S RESULTED INCIDENTALLY FROM THE ACTIVITY LAWFULLY CARRIED OUT BY THE EDUCATIONA L INSTITUTION IT WOULD NOT CEASE TO BE ONE EXISTING SOLELY FOR THE EDUCATIONAL PURPO SES AS THE OBJECT IS NOT ONE TO MAKE PROFIT. THE DECISIVE OR ACID TEST IS WHETHER ON AN OVERALL VIEW OF THE MATTER THE OBJECT IS TO MAKE PROFIT. HE ALSO PLACED RELIA NCE ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF COSMOPOLITAN ED UCATION SOCIETY (SUPRA) WHEREIN IT WAS HELD THAT EXEMPTION U/S 10(22) COULD NOT BE DENIED TO THE EDUCATIONAL SOCIETY ON THE GROUND OF MISUTILIZATION OF FUNDS OF THE SOCIETY BY ITS MEMBERS. 15. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SU BMITTED THAT A SIMILAR ISSUE WAS INVOLVED IN THE CASE OF RAJENDER NAGAR EDUCATIO N SOCIETY BELONGING TO THE SAME GROUP WHEREIN THE CLAIM FOR EXEMPTION U/S 10(2 2) WAS DISALLOWED BY THE AO ON THE BASIS OF SIMILAR ALLEGATIONS AS MADE IN T HE PRESENT CASE. IN THIS REGARD HE INVITED OUR ATTENTION TO THE COPY OF ORDER PASSE D BY THE TRIBUNAL IN THE SAID CASE DATED 29.2.2008 IN IT(SS)A.NO.34 & 84/DEL/2005 PLACED AT PAGE NO.335 OF HIS PAPER BOOK WHEREIN IT WAS HELD THAT THE CLAIM O F THE ASSESSEE FOR EXEMPTION U/S 10(22) CAN BE CONSIDERED IN THE BLOCK ASSESSMEN T PROCEEDINGS AS THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IS REQUIRED TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME-TAX ACT 1961. H E POINTED OUT THAT EVEN THE SIMILAR ALLEGATIONS MADE BY THE AO IN THAT CASE WHI LE DENYING THE EXEMPTION U/S 27 10(22) WERE ELABORATELY CONSIDERED BY THE TRIBUNAL AND IT WAS HELD THAT THE SAME WERE NOT SUFFICIENT TO DENY THE CLAIM OF THE ASSESS EE FOR EXEMPTION U/S 10(22). HE SUBMITTED THAT IT WAS HOWEVER HELD BY THE TRIBUNA L THAT IF SOME INSTANCES ARE FOUND WHILE DEALING WITH OTHER GROUNDS TO SHOW THAT THE ASSESSEE DID NOT EXIST SOLELY FOR THE PURPOSE OF EDUCATION THEN IT WOULD NOT BE ENTITLED TO EXEMPTION U/S 10(22) FOR THE RELEVANT YEAR(S). HE CONTENDED THAT THE TRIBUNAL THUS HAS HELD IN THAT CASE THAT EXEMPTION U/S 10(22) HAS TO BE CONSI DERED IN THE BLOCK ASSESSMENT AND ONLY IF SOME INSTANCES ARE FOUND IN A PARTICULA R YEAR TO SHOW THAT THE ASSESSEE- SOCIETY DID NOT EXIST SOLELY FOR THE PURPOSE OF EDU CATION BUT EXISTED FOR THE PURPOSE OF PROFIT THE CLAIM OF EXEMPTION U/S 10(22 ) COULD BE DENIED ONLY IN THAT YEAR(S). 16. THE LEARNED DR ON THE OTHER HAND SUBMITTED TH AT THE ADVERSE FINDINGS OF THE SEARCH OPERATION CONDUCTED IN THE CASE OF THE A SSESSEE AND THE ADDITION MADE TO ITS UNDISCLOSED INCOME ON THE BASIS OF DOCUMENTS FOUND DURING THE COURSE OF THE SAID OPERATION CLEARLY REVEALED THAT THE ASSESS EE-SOCIETY WAS RUNNING THE SCHOOL NOT ONLY FOR EDUCATIONAL PURPOSE BUT THE REA L MOTIVE WAS TO EARN PROFIT. HE SUBMITTED THAT FOR INSTANCE DONATIONS WERE COLLECTE D BY THE ASSESSEE-SOCIETY FROM THE PARENTS OF THE STUDENTS SEEKING ADMISSION IN TH EIR SCHOOL AND THE DONATIONS SO COLLECTED WERE NOT ACCOUNTED FOR BUT WERE USED FOR THE BENEFIT OF SHRI V.K.BHATNAGAR THE KEY PERSON CONTROLLING THE ENTIR E AFFAIRS OF THE ASSESSEE- SOCIETY. HE SUBMITTED THAT THE SAID DONATIONS THUS WERE NOT VOLUNTARY CONTRIBUTIONS BUT THE SAME WERE COLLECTED FORCIBLY FROM THE PARENTS FOR GIVING ADMISSIONS TO THEIR CHILDREN. HE CONTENDED THAT TH IS VERY FACT THAT THE SAID DONATIONS WERE OBTAINED FORCIBLY OUTSIDE THE BOOKS OF ACCOUNT CLEARLY SHOW THAT THE MOTIVE OF THE ASSESSEE-SOCIETY BEHIND RUNNING T HE EDUCATIONAL INSTITUTION WAS TO EARN PROFIT AND AS THE SAID AMOUNT OF DONATIONS REMAINED UNACCOUNTED FOR WAS USED FOR THE BENEFIT OF AN INDIVIDUAL THE ASSESSEE -SOCIETY CANNOT BE SAID TO BE ENTITLED FOR EXEMPTION U/S 10(22) AS RIGHTLY HELD B Y THE AUTHORITIES BELOW. HE ALSO CONTENDED THAT SIMILARLY THE OTHER FINDINGS OF THE SEARCH OPERATION AS WELL AS THE 28 POST-SEARCH ENQUIRIES MADE BY THE AO CLEARLY REVEAL ED THAT THE ASSESSEE-SOCIETY DID NOT EXIST DURING THE ENTIRE BLOCK PERIOD SOLELY FOR THE EDUCATION PURPOSE AND IT EXISTED ALSO FOR THE PURPOSE OF PROFIT. IN THIS RE GARD HE INVITED OUR ATTENTION TO THE SPECIFIC FINDINGS/OBSERVATIONS RECORDED BY THE AO A T PAGES 26 TO 30 OF THE ASSESSMENT ORDER AND STRONGLY RELIED ON THE SAME IN SUPPORT OF THE REVENUES CASE THAT THE ASSESSEE-SOCIETY WAS NOT ENTITLED FOR EXEM PTION U/S 10(22) AS CLAIMED BY IT. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. EXEMPTION U/S 10(22) WAS AVAIL ABLE UPTO AY 1998-99 FOR INCOME OF UNIVERSITY OR OTHER EDUCATIONAL INSTITUTI ON EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT . THE CLAIM OF THE ASSESSEE FOR EXEMPTION UNDER THE SAID PROVISIONS IN RESPECT OF I TS INCOME EARNED FROM RUNNING OF THE SCHOOL MADE IN THE BLOCK ASSESSMENT PROCEEDI NGS WAS DISALLOWED BY THE AO AS ACCORDING TO HIM THE SCHOOL WAS BEING RUN B Y THE ASSESSEE-SOCIETY NOT SOLELY FOR EDUCATIONAL PURPOSES AND THERE WAS A PRO FIT MOTIVE IN UNDERTAKING THE SAID ACTIVITY AS NOTICED FROM THE FINDINGS OF THE S EARCH OPERATION AS WELL AS THE POST-SEARCH ENQUIRIES MADE BY HIM. HE HAS ENUMERAT ED SUCH FINDINGS/OBSERVATIONS IN THE ASSESSMENT ORDER PASSE D FOR THE BLOCK PERIOD TO SUPPORT AND SUBSTANTIATE HIS DECISION DISALLOWING T HE EXEMPTION CLAIMED BY THE ASSESSEE U/S 10(22) AND WE SHALL DEAL WITH THE SAME SEPARATELY AT THE APPROPRIATE STAGE. THE LEARNED CIT(A) UPHELD THE SAID DECISION OF THE AO DENYING THE CLAIM OF THE ASSESSEE-SOCIETY FOR EXEMPTION U/S 10(22) AL THOUGH ON A DIFFERENT GROUND THAT THE SAID CLAIM COULD HAVE BEEN CONSIDERED AND ALLOWED IN THE REGULAR ASSESSMENTS IF IT WAS CLAIMED BY THE ASSESSEE-SOCIE TY BY FILING THE RETURNS OF INCOME FOR THE RELEVANT YEARS MAKING SUCH CLAIM. H E HELD THAT THE SAID CLAIM HOWEVER WAS BEYOND THE SCOPE OF BLOCK ASSESSMENT P ROCEEDINGS AND EVEN IF THE SAID EXEMPTION WAS CLAIMED BY THE ASSESSEE IN THE B LOCK ASSESSMENT PROCEEDINGS THE SAME COULD NOT BE CONSIDERED AND ALLOWED IN THE SAID PROCEEDINGS. AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US A 29 SIMILAR ISSUE HAD ARISEN BEFORE THE TRIBUNAL IN THE CASE OF RAJINDER NAGAR EDUCATION SOCIETY A SOCIETY BELONGING TO THE SAME GROUP AND VIDE ITS ORDER DATED 29.2.2008 PASSED IN IT(SS) A.NO.34 & 84/DEL/2005 I T WAS HELD BY THE TRIBUNAL THAT THE INCOME OF THE ASSESSEE-SOCIETY FROM RUNNIN G THE SCHOOL HAVING BEEN TREATED AS UNDISCLOSED INCOME IN THE BLOCK ASSESSME NT IT WAS ENTITLED TO CLAIM EXEMPTION U/S 10(22) IN RESPECT OF THE SAID INCOME AS THE PROVISIONS OF SECTION 158BB(1) CLEARLY LAY DOWN THAT UNDISCLOSED INCOME F OR THE BLOCK PERIOD IS THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE I NCOME-TAX ACT 1961. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRI BUNAL WE HOLD THAT THE CLAIM OF THE ASSESSEE-SOCIETY FOR EXEMPTION U/S 10(22) IN RE SPECT OF INCOME FROM RUNNING THE SCHOOL IS LIABLE TO BE CONSIDERED ON MERITS IN THE BLOCK ASSESSMENT PROCEEDINGS. ACCORDINGLY WE NOW PROCEED TO CONSID ER AND DECIDE THE SAME ON MERITS. 18. REVERTING BACK TO THE ORDER OF THE AO DISALLOWI NG THE CLAIM OF THE ASSESSEE-SOCIETY FOR EXEMPTION U/S 10(22) HOLDING T HAT THE SCHOOL WAS NOT BEING RUN BY IT SOLELY FOR EDUCATIONAL PURPOSE BUT FOR TH E PURPOSE OF PROFIT IT IS OBSERVED THAT VARIOUS ALLEGATIONS WERE MADE BY THE AO TO SUP PORT AND SUBSTANTIATE HIS DECISION ON THIS ISSUE WHICH HAVE ALREADY BEEN REPR ODUCED BY US IN PARAGRAPH NO.10 OF THIS ORDER. AT THE TIME OF HEARING BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS MADE POINT-WISE SUBMISSIONS IN ORDER T O MEET ALL THESE OBJECTIONS RAISED BY THE AO WHICH HAVE ALREADY BEEN REPRODUCED BY US IN PARAGRAPH NO.13 OF THIS ORDER. A PERUSAL OF THE SAID SUBMISSIONS V IS--VIS THE OBJECTIONS RAISED BY THE AO AS REGARDS THE ISSUE RELATING TO THE ASSESSE ES CLAIM FOR EXEMPTION U/S 10(22) SHOWS THAT SIMILAR TYPE OF ALLEGATIONS WERE MADE BY THE AO EVEN IN THE CASE OF RAJINDER NAGAR EDUCATION SOCIETY WHILE DISA LLOWING THE ASSESSEES CLAIM IN THAT CASE FOR EXEMPTION U/S 10(22) AND AFTER CON SIDERING THE SIMILAR SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE TO MEET THE SAID OBJECTIONS THE 30 TRIBUNAL CONSIDERED AND DISCUSSED THE SAME POINT-WI SE IN ITS ORDER DATED 29.2.2008 (SUPRA) AS FOLLOWS:- (I) ACCORDING TO THE AO THE DY.DIT(INV.) REPORT P AGE NO.481 TO 561 AND ALSO PAGE NO.19 AND PAGE 20 WAS SHOWN TO THE ASSESSEE AND THE ASSESSEE WAS CALLED UPON TO REBUT IMMUNERAB LE TRANSACTION WHICH REFLECTS A DIVERSION OF FUNDS FOR PERSONAL BE NEFIT AND UNDER STATEMENT OF INCOME BY VARIOUS MODES OF DRAWING OF FUNDS FOR PERSONAL BENEFITS. THE ASSESSEE'S CONTENTION ON THE ABOVE WAS THAT THE AO HAS FAILED TO APPRECIATE THE FACT THAT THE O NUS OF PROOF SHOULD NOT BE SHIFTED ON THE ASSESSEE MERELY BY REL YING UPON THE SAID REPORT WITHOUT MAKING FRESH AND INDEPENDENT EN QUIRIES. IN OUR VIEW THERE ARE NO SPECIFIC INSTANCES WITH REFERENCE TO THE ASSESSEE POINTED OUT BY THE AO IN THE ORDER OF ASSESSMENT. S UCH GENERAL STATEMENTS CANNOT FORM THE BASIS FOR DRAWING ANY AD VERSE INFERENCE AGAINST THE ASSESSEE. (II) ACCORDING TO A.O. DONATIONS ARE TAKEN FROM TH E PARENTS FOR ADMISSION OF THEIR CHILDREN AND NO RECEIPTS ARE GIV EN FOR THEIR DONATIONS AND THESE ARE NOT ENTERED IN THE BOOKS OF ACCOUNTS. THE REPLY OF THE ASSESSEE ON THE ABOVE WAS THAT THE CON CLUSION IS COMPLETELY BASELESS ERRONEOUS AND UNJUSTIFIED IN V IEW OF THE FACT THAT NO DONATION HAS BEEN RECEIVED BY THE ASSESSEE AS IS EVIDENT FROM THE VERY FACT THAT NO ADDITION WHATSOEVER HAS BEEN MADE ON THIS GROUND IN THE CASE OF THE ASSESSEE. WE ARE OF THE VIEW THAT NO SPECIAL INSTANCE HAS BEEN POINTED OUT BY THE AO VIS --VIS THE ASSESSEE. THE GENERAL OBSERVATIONS IN THE CASE OF S CHOOLS CONTROLLED BY BHATNAGAR WOULD NOT BE SUFFICIENT TO COME TO ANY SUCH CONCLUSION. (III) IN PARAS 1 2 AND 3 AT PAGE 28 OF AO'S ORDER THERE WAS ALLEGATION BY THE AO THAT CASH WAS SENT FROM VARIOU S SCHOOLS TO MR.BHATNAGAR WHO USED THEM FOR HIS INDIVIDUAL BENEF IT. ALL THESE ALLEGATIONS RELATED TO RECEIPT OF HAVE NO APPLICATI ON WHATSOEVER IN THE CASE OF ASSESSEE IN VIEW OF THE FACT THAT NO AD DITION WHATSOEVER HAS BEEN MADE ON THIS GROUND IN THE CASE OF THE ASS ESSEE. THE AO HAS TO FIRST CONSIDER SUCH DONATIONS AS INCOME OF T HE ASSESSEE AND THEN COME TO CONCLUSION THAT INCOME WAS DIVERTED FO R PERSONAL GAINS OF PERSONS OTHER THAN THE EDUCATIONAL INSTITU TIONS. NO SPECIFIC INSTANCE RELATING TO THE ASSESSEE HAS BEEN POINTED OUT BY THE A.O. 31 (IV) IN PARA 4 AT PAGE 28 OF THE ORDER OF ASSESSME NT THE AO HAS ALLEGED COSTLY THE CASH RECEIVED FOR MAKING LOCAL A ND OUT SIDE DELHI TOURS AND TRIPS HAS NOT BEEN ENTERED IN THE B OOKS OF ACCOUNT WHEREAS EXPENDITURE HAVE BEEN DEBITED IN A STUDENT WELFARE FOR AMOUNT PAID TO BHATNAGAR HOTEL & RESORTS LTD. THIS OBSERVATION OF THE AO IS TOTALLY BASELESS AS THE AO HAS FAILED TO CITE ANY SUCH INCIDENCE WHERE ANY RECEIPT AS ALLEGED BY THE AO HA S NOT BEEN RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. SUCH GENERAL OBSERVATIONS NOT SUPPORTED BY ANY EVIDENCE IN OUR V IEW IS NOT SUFFICIENT TO DRAW ANY ADVERSE INFERENCE. (V) IN PARA 5 AT PAGE 28 OF ASSESSMENT ORDER THE A O HAS ALLEGED THAT COST LAND OF SOCIETIES HAVE BEEN TRANSFERRED T O SHRI VK BHATNAGAR AND HIS FAMILY MEMBERS. NO LAND HAS BEEN EXCHANGED BY THE ASSESSEE WITH BHATNAGAR AS IS CLEAR FROM THE OBSERVATIONS OF THE AO AT PAGE 12 OF HIS ORDER OF ASSESSMENT GIVING DETAILS OF LAND EXCHANGED BY VARIOUS SOCIETIES WITH BHATNAGAR. THE PROPERTY OF MANAV STHALI SCHOOL PUSA ROAD WAS EXCHANGED AND N OT THAT OF THE ASSESSEE. (VI) IN PARA 6 AT PAGE 28 OF HIS ORDER THE AO HAS ALLEGED THAT THE SHARE IN BARON AIR LTD. PURCHASED BY SOCIETIES /SCHOOL CANNOT BE CONSIDERED AS EDUCATIONAL ACTIVITIES. THESE OBSE RVATIONS ARE NOT CORRECT BECAUSE THERE WAS NO SUCH INVESTMENT BY THE ASSESSEE. THE SEIZED DOCUMENT REFERRED TO BY THE AO IN THIS REGAR D DOES NOT PERTAIN TO THE ASSESSEE. (VII) IN PARA 7 AT PAGE 28 OF HIS ORDER THE AO HAS ALLEGED THAT THE VEHICLE OF THE SCHOOL/SOCIETIES ARE USED BY SHRI VK BHATNAGAR & FAMILY. THE LD DY.CIT HAS MADE THIS OBSERVATION IN TOTAL DISREGARD OF THE FACT THAT HOW THE USE OF THE VEHICLE CAN AFF ECT THE GENUINENESS OF THE CLAIM OF EXEMPTION U/S 10(22). E VEN OTHERWISE THIS OBSERVATION IS NOT BASED ON ANY EVIDENCE AND I S A MERE SURMISE OF THE AO. (VIII) IN PARA 8 AT PAGE 28 OF HIS ORDER THE AO HA S ALLEGED THAT THE SALARIES ARE PAID TO SHRI VIKRAM BHATNAGAR & AN URAG BHATNAGAR WHILE THEY WERE STUDENTS AND ALSO HUGE SA LARY OF RS. 6.71 LACS P.A. IS PAID TO SMT.MAMTA V.BHATNAGAR AS AGAINST NORMAL SALARY OF RS. 1.90 LACS P.A. (RS. 15 000/= P.M.) TO OTHER EMPLOYEES. ACCORDING TO ASSESSEE SHRI VIKRAM BHATNAGAR AND SH. ANURAG BHATNAGAR WERE NOT GETTING SALARIES FROM THE ASSESS EE. SMT. MAMTA BHATNAGAR WHO IS THE PRINCIPAL OF MANAV STHALI SCH OOL RAJINDER NAGAR AN EDUCATIONAL INSTITUTION BEING RUN BY THE ASSESSEE SOCIETY 32 AND WHICH IS UPTO 12 TH STANDARD. THE SALARIES ARE BEING PAID TO HER AS PER THE SCALES AS RECOMMENDED BY THE PAY COMMISS ION AND ARE AT PARITY TO OTHER INSTITUTIONS AND ARE NOT DISALLO WED IN THE RESPECTIVE SOCIETY. IN VIEW OF THE ABOVE WE ARE OF THE VIEW THAT NO ADVERSE INFERENCE CAN BE DRAWN IN THIS REGARD AGAIN ST THE ASSESSEE. (IX) IN PARA 1 AT PAGE 29 OF HIS ORDER THE AO HAS ALLEGED THAT THE FUNDS ARE WITHDRAWN FROM CAUTION MONEY FOR PAYM ENT IN COMMERCIAL PROJECT LIKE HEALTH CARE HEALTH RESORTS & ALTERNATIVE MEDICINE AND VIRENDRA POULTRY FARM. THE CONTENTION OF THE ASSESSEE ON THIS ISSUE WAS THAT THE CONTRIBUTIONS T OWARDS COMMON BUILDING AT VIRENDRA GRAM HAVE BEEN MADE BY DIFFERE NT SOCIETIES AND THAT TOO THROUGH ACCOUNT PAYEE CHEQUES AND THE PAYMENTS SO MADE ARE BEING DULY REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS OF RESPECTIVE SOCIETIES. THE FURTHER PLEA OF THE ASSES SEE WAS THAT VG IS A COMPLEX FOR EDUCATION PURPOSE AND THE COMPLETE UN IVERSITY LIKE COMPLEX AND THIS IS TO BE BUILT UP WITH THE OBJECT STATED ABOVE. ACCORDING TO THE ASSESSEE THE EVIDENCE IN SUPPORT OF THIS SUBMISSION CAN ALSO BE VERIFIED FROM THE SEIZED ANN EXURE INVENTORISED AS R-1 ANNEXURE A-27. THAT THE ASSESS EE HAS NOT USED FACILITY AT VIRENDRA GRAM FOR COMMERCIAL PURPO SE. IN OUR VIEW OBSERVATION REGARDING THE INVESTMENT IN COMMON BUILDING AT VIRENDRA GRAM FROM CAUTION MONEY IS BASELESS AND NO EVIDENCE AS SUCH HAS BEEN CONFRONTED TO THE ASSESSEE FOR ITS REBUTTAL AND IN ANY WAY IT COULD NOT BE A GROUND FOR THE REJECTION OF CLAIM OF EXEMPTION U/S 10(22) WITHOUT PROOF OF PROFIT MOTIVE OF THE ASSESSEE. (X) IN PARA 2 AT PAGE 22 OF HIS ORDER THE AO HAS A LLEGED THAT THE PARTIES FOR WHICH EXPENSES ARE CLAIMED HAS DENI ED THE PAYMENT. THE BASIS FOR THE ABOVE ALLEGATION AND THE VALIDITY OF CONCLUSIONS ARRIVED AT BY THE AO WILL BE DEALT WITH WHILE DEALI NG WITH GROUND NO.3 AND 4 OF REVENUE'S APPEAL. (XI) IN PARA 3 AT PAGE 29 OF HIS ORDER THE AO HAS ALLEGED THAT SOME OF THE EXPENSES CLAIMED IN THE INCOME & EXPEND ITURE ACCOUNT OF THE SOCIETY WERE FOR MATERIAL NEVER PURC HASED AND THESE PARTIES ARE GOODWILL STEEL SYNDICATE SHUBHAM CEMEN T AND PUNEET TRADERS ETC. THE BASIS OF THIS ALLEGATION WILL BE D ISCUSSED WHILE DEALING WITH GROUND NO.2 RAISED BY THE REVENUE. (XII) IN PARA 4 AT PAGE 29 OF HIS ORDER THE AO HA S ALLEGED THAT THE HUGE INVESTMENTS HAVE BEEN MADE FOR THE RESIDEN CE OF SHRI V.K.BHATNAGAR AND HIS FAMILY MEMBERS AT V /G BY DI VERTING THE FUNDS FROM SCHOOLS / SOCIETIES. THIS ALLEGATION IS MERELY THE 33 REPRODUCTION OF THE ALLEGATION WHICH THE LD.A.O. HA VE ALREADY MADE. THE A.O. HAS NOT PLACED ANY EVIDENCE ON RECOR D IN SUPPORT OF SUCH AN ALLEGATION. (XIII) IN PARA 6 AT PAGE NO.29 OF HIS ORDER THE A .O. HAS ALLEGED THAT HUGE LOANS AND ADVANCES FROM VARIOUS SCHOOLS/S OCIETIES WERE GIVEN TO BHR LTD. AND BCC{P) LTD. FROM THE CAUTION MONEY ACCOUNT. SOCIETY HAS NOT GIVEN EITHER TO BHR LTD. O R BCC(P) LTD. ANY LOAN. THE ALLEGATION IS NOT SUPPORTED BY ANY EV IDENCE WHATSOEVER. (XIV) IN PARA 7 AT PAGE 29 OF HIS ORDER THE AO HA S ALLEGED THAT CAUTION MONEY WAS WITHDRAWN IN CASH THROUGH BEARER CHEQUES FOR THE PARENTS WHO DID NOT TURN UP TO COLLECT THE AMOU NT. THE ALLEGATION IS COMPLETELY BASELESS AND UNSUSTAINABLE FOR THE WANT OF ANY RELIABLE MATERIAL/ EVIDENCE ON RECORD IN SUPPOR T THEREOF IN THE CASE OF THE ASSESSEE. (XV) IN PARA 8 OF HIS ORDER AT PAGE 29 THE AO HAS ALLEGED THAT THE PAYMENTS DRAWN BY SHRI ANIL SEHGAL CONSULTANT I N THE NAME OF MOTHER AND WIFE ALSO. THE A.O. WHILE DRAWING THIS I NFERENCE HAS FAILED TO PLACE ON RECORD ANY EVIDENCE IN SUPPORT O F THIS CONTENTION. FURTHER MORE NO SUCH EVIDENCE HAS BEEN CONFRONTED TO THE ASSESSEE FOR ITS REBUTTAL AND AS SUCH THIS OBSERVA TION IS BAD IN LAW. (XVI) IN PAGE NO.29 LAST PARA AND PAGE NO.30 FIRST PARA THERE ARE ALLEGATIONS OF MISAPPROPRIATION OF FUNDS. SO FAR AS THE ALLEGATIONS REGARDING THE ALLEGED MISAPPROPRIATION OF THE FUNDS OF THE SCHOOLS/SOCIETIES BY SHRI V.K.BHATNAGAR AND HIS FAM ILY MEMBERS AS CONTAINED IN THESE PARAS ARE CONCERNED IT IS SE EN THAT THESE ALLEGATIONS ARE MERELY A REPRODUCTION OF THE ALLEGA TIONS ALREADY MADE BY THE LD.A.O. IN PAGE NOS. 1-19 OF THE ORDER. THE SAME HAVE ALREADY BEEN DEALT WITH HEREINBEFORE. THE SAME IS N OT BEING REPRODUCED HERE AGAIN. IT IS PERTINENT TO MENTION H ERE THAT THE LD.A.O. HAS MERELY REPEATED THE SAME ALLEGATIONS WI THOUT PLACING ON RECORD ANY RELIABLE MATERIAL/ EVIDENCE IN SUPPOR T THEREOF. (XVII) IN PAGE NO.31 PARA NO. 1 OF HIS ORDER THE LD.A.O. HAS OBSERVED THAT THE EXEMPTION U/ S 11 OF THE INCOME T AX ACT 1961 IS NOT PERMISSIBLE IN CASE THERE IS INFRINGEMENT OF S. 13 OF THE ACT. THERE IS NO RELEVANCE OF REFERRING TO S.LL WHILE CO MMENTING UPON THE EXEMPTION U/ S 10(22) OF THE ACT AS BOTH THE S ECTIONS ARE SEPARATE AND DISTINCT. 34 (XVIII) IN PAGE NO.31 PARA NO.4 THE A.O. HAS ALL EGED THAT BY CLAIMING THE DEPRECIATION THE ASSESSEE HAVE ADMITT ED THAT IT IS RUNNING SCHOOLS FOR EARNING BUSINESS INCOME. THAT T HE CASE LAW CITED BY ASSESSEE IN RESPECT OF CLAIM OF DEPRECIATI ON ARE NOT APPLICABLE AND THERE IS NO SUPREME COURT OR ANY HI GH COURT DECISION WHICH DIRECTED TO ALLOW EXEMPTION U/S 10(2 2). REGARDING THIS OBSERVATION OF THE LD.A.O. HE HAS COMPLETELY F AILED TO APPRECIATE THE FACT THAT NO INVESTMENT HAS BEEN MAD E BY THE ASSESSEE IN THE VIRENDRA GRAM AND AS SUCH NO QUESTI ON OF CLAIMING ANY DEPRECIATION AT VIRENDRA GRAM AS REFERRED BY THE LD.A.O. ARISES AT ALL. EVEN OTHERWISE CLAIMING OF DEPRECI ATION BY AN EDUCATIONAL INSTITUTION CAN NOT ADVERSELY AFFECT IT S CLAIM FOR EXEMPTION U/S 10(22) WHEN THE DEPRECIATION IS VERY MUCH PERMISSIBLE UNDER THE INCOME TAX ACT AS THERE IS NO PROHIBITION IN LAW. 19. THE TRIBUNAL THUS EXAMINED THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE IN RESPECT OF EACH OBJECTION RAISED BY THE REVENUE AND FOUND ON MERITS THAT THERE WAS NO MUCH SUBSTANCE IN THE OBJECTIONS RAISED BY THE AO. THE TRIBUNAL HOWEVER HASTENED TO ADD THAT IF THERE AR E SOME INSTANCES WHICH ARE FOUND WHILE DEALING WITH THE ISSUES RAISED IN OTHER GROUNDS TO SHOW THAT THE EDUCATION INSTITUTION OF THE ASSESSEE-SOCIETY DID N OT EXIST SOLELY FOR THE PURPOSE OF EDUCATION BUT ALSO FOR THE PURPOSE OF PROFIT IN A P ARTICULAR YEAR/YEARS THEN IT WOULD NOT BE ENTITLED TO CLAIM EXEMPTION U/S 10(22) IN THAT YEAR(S). THE TRIBUNAL ALSO DISCUSSED THE LEGAL POSITION IN THIS CONTEXT A S LAID DOWN IN THE VARIOUS JUDICIAL PRONOUNCEMENTS AND IT WOULD BE RELEVANT TO TOUCH UP ON THESE ASPECTS WHICH ARE RELEVANT TO APPRECIATE THE CONCEPT OF EDUCATIONAL I NSTITUTION WHICH IS EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PUR POSES OF PROFIT. 20. IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTION VS. ADDL.CIT 224 ITR 310 IT WAS HELD BY THE HON'BLE SUPREME COURT THAT WHERE THE OBJECT OF THE ASSESSEE-SOCIETY IS TO ESTABLISH RUN MANAGE OR AS SIST COLLEGES OR SCHOOLS OR OTHER EDUCATIONAL INSTITUTIONS SOLELY FOR EDUCATIONAL PUR POSES AND IN THAT REGARD TO RAISE OR COLLECT FUNDS DONATIONS GIFTS ETC. COLLEGES A ND SCHOOLS ARE THE MEDIA THROUGH WHICH THE ASSESSEE IMPARTS EDUCATION AND EFFECTUATE S ITS OBJECTS. EXPLAINING 35 FURTHER IT WAS OBSERVED BY THE HONBLE APEX COURT THAT IF THE SOLE PURPOSE FOR WHICH THE ASSESSEE HAD COME INTO EXISTENCE IS TO IM PART EDUCATION AT THE LEVELS OF COLLEGES AND SCHOOLS SUCH AN EDUCATION SOCIETY SHO ULD BE REGARDED AS AN EDUCATIONAL INSTITUTION COMING WITHIN SECTION 10(22 ). IT WAS FURTHER HELD BY THE HON'BLE SUPREME COURT THAT IT WOULD NOT BE POSSIBLE OR PROPER TO LAY DOWN IN ANY PRECISE TERMS AS TO WHAT WOULD BE THE INCOME OF THE EDUCATIONAL INSTITUTION WHICH WOULD QUALIFY FOR EXEMPTION U/S 10(22) AND WHAT WOU LD BE OUTSIDE THE EXEMPTION. THE ANSWER WOULD DEPEND UPON THE FACTS OF EACH CASE . IT WAS ALSO HELD THAT THE LANGUAGE OF SECTION 10(22) IS PLAIN AND CLEAR AND T HE AVAILABILITY OF SUCH EXEMPTION SHOULD BE EVALUATED EACH YEAR TO FIND OUT WHETHER THE INSTITUTION EXISTED DURING THE RELEVANT YEAR SOLELY FOR EDUCATI ONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. AFTER MEETING THE EXPENDITURE IF ANY SURPLUS RESULTS INCIDENTALLY FROM THE ACTIVITY LAWFULLY CARRIED ON BY THE EDUCATIONAL INSTITUTION IT WILL NOT CEASE TO BE ONE EXISTING ONLY FOR EDUCATIO NAL PURPOSES SINCE THE OBJECT IS NOT THE ONE TO MAKE PROFIT. 21. A SIMILAR ISSUE HAD ALSO ARISEN FOR CONSIDERATI ON IN THE CASE OF SECONDARY BOARD OF EDUCATION VS. ITO 86 ITR 408 WHEREIN IT WAS HELD THAT THE SOURCES OF INCOME OF AN EDUCATIONAL INSTITUTION GENERALLY ARE COLLECTION OF FEES FROM STUDENTS GRANTS GIVEN BY THE GOVERNMENT AND DONATIONS. SUCH INCOME MAY HOWEVER BE INSUFFICIENT TO COPE UP WITH THE GROWING NEEDS WHEN DYNAMIC PROGRESS IS INTENDED TO BE MADE IN EDUCATIONAL SPHERE. TO SUPPLEMENT SU CH INCOME THE INSTITUTIONS MAY TAKE RECOURSE TO SOME PROFIT EARNING BUSINESS. SUCH PROFIT WOULD GO TO THE GENERAL FUND AND WOULD BE APPROPRIATED TOWARDS EXPA NSION AND DEVELOPMENT OF EDUCATIONAL SCHEMES TAKEN UP BY THOSE INSTITUTIONS. IN SUCH A CASE THOUGH INCIDENTALLY PROFIT IS EARNED TO MEET THE GROWING N EEDS ALL THE SAME THE INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. TO THE SIMILAR EFFECT IS THE DECISION OF HONBLE ANDHRA PR ADESH HIGH COURT IN THE CASE OF GOVERNING BODY OF RANGARAYA MEDICAL COLLEGE VS. ITO 117 ITR 284 WHEREIN IT WAS HELD THAT MERELY BECAUSE CERTAIN SURPLUS ARI SES FROM ITS OPERATIONS IT CANNOT 36 BE HELD THAT THE INSTITUTION IS BEING RUN FOR THE P URPOSE OF PROFIT SO LONG AS NO PERSON OR INDIVIDUAL IS ENTITLED TO ANY PORTION OF THE SAID PROFIT AND THE SAID PROFIT IS USED FOR THE PURPOSES AND FOR THE PROMOTION OF T HE OBJECTS OF THE INSTITUTION. IN THE CASE OF EDUCATIONAL INSTITUTE OF AMERICAN HOTEL & MOTEL ASSOCIATION 219 ITR 183 AUTHORITY FOR ADVANCE RULING HAS HELD THAT THERE CAN BE NO DOUBT THAT THE PURPOSE OF MAKING PROFITS IS NOT THE REAL PURPO SE WHERE THE ARTICLES OF ASSOCIATION OF THE INSTITUTION CLEARLY PROVIDE THAT ITS NET EARNINGS SHALL NOT ENURE TO THE BENEFIT OF ANY MEMBER OR DIRECTOR OR TO ANY OTH ER INDIVIDUAL. 22. THE PROPOSITION PROPOUNDED IN THE JUDICIAL PRON OUNCEMENTS AS DISCUSSED ABOVE MAKES IT ABUNDANTLY CLEAR THAT ONE HAS TO APP RECIATE IN THE FACTS OF THE CASE OF THE ASSESSEE AS TO WHETHER IN A PARTICULAR YEAR OR YEARS IT EXISTED SOLELY FOR THE EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSES OF PRO FIT. THIS CAN APPROPRIATELY BE DONE AS RIGHTLY HELD BY THE TRIBUNAL IN THE CASE OF RAJINDER NAGAR EDUCATION SOCIETY (SUPRA) ON THE BASIS OF OUR DECISION TO BE RENDERED ON THE VARIOUS ISSUES INVOLVED IN THE PRESENT APPEALS ON MERITS. ACCORDI NGLY WE WILL REVERT BACK TO THIS ISSUE AFTER DECIDING THE OTHER GROUNDS RAISED IN THESE CROSS-APPEALS ON MERITS SO THAT THE ISSUE RELATING TO THE ASSESSEES CLAIM FOR EXEMPTION U/S 10(22) CAN BE CONSIDERED IN RESPECT OF EACH YEAR FORMING PART OF THE BLOCK PERIOD IN THE LIGHT OF THE FINDINGS RECORDED ON MERITS OF THE SAID ISSUES . RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO-ORDI NATE BENCH WHEREIN ONE OF US (JM) IS PARTY WE ALLOW THIS GROU ND OF APPEAL RAISED BY THE ASSESSEE FOR STATISTICAL PURPOSES. IN PRINCI PLE WE HOLD THAT ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SEC. 10(22 ) OF THE ACT IN RESPECT OF INCOME FROM RUNNING THE SCHOOLS. THE ASS ESSING OFFICER IN ANY PARTICULAR YEAR IS ABLE TO FIND THAT THE ASSESS EE DID NOT EXIST SOLELY FOR THE PURPOSE OF EDUCATION ONLY FOR THAT YEAR TH E CLAIM OF EXEMPTION UNDER SEC.10(22) CAN BE DENIED. 16. IN VIEW OF THE ABOVE DISCUSSION THE ASSESSEE W ILL BE ENTITLED TO CLAIM EXEMPTION UNDER SECTION 10(22) OF THE ACT. SINCE IN THE PRESENT CASE ON FACTS WE FIND THAT IN NONE OF THE YEARS ANY EVIDE NCE WAS FOUND INDICATING 37 THE RECEIPT OF MONEY OUT OF BOOKS WHICH WAS NOT USE D FOR THE PURPOSE OF THE EDUCATION. WE HAVE DISCUSSED THE FACTS IN DETAIL IN THE PRESENT APPEALS. WE DO NOT FIND ANY MERIT IN GROUND NO.1 RAISED BY THE REVENUE. 17. GROUND NO.1(I): THIS GROUND OF REVENUES APPEAL IS INTER-CONNECTED WITH GROUND NO.2 OF ASSESSEES APPEAL. THE AO HAS M ADE AN ADDITION OF RS.50.50 LACS BY MAKING A DISALLOWANCE OUT OF TRANS PORT AND REFRESHMENT EXPENSES. LEARNED CIT(A) HAS RESTRICTED THIS DISALL OWANCE TO RS.33 43 522. THE ASSESSEE IS IMPUGNING THIS RETENTION OF THE ADD ITION WHEREAS THE REVENUE IS IMPUGNING THE PART DELETION OF THE ADDITION. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT SIMILAR ADDITION WAS MADE IN THE CASE OF OTHER SOCIETIES NAMELY RAJINDER NAGAR EDU CATION NAV MANAV SANSTHAN VIREJNDER BHATNAGAR AND SANT VASWANI EDUC ATION SOCIETY. THESE ADDITIONS HAVE BEEN DELETED IN THOSE CASES. THE FAC TS IN THE PRESENT CASE AS WELL AS IN ALL THOSE CASES ARE COMMON. HE FURTHER C ONTENDED THAT THE FACTS IN THE PRESENT CASE ARE ON A BETTER FOOTING BECAUSE IN THIS CASE ASSESSEE HAS FILED THE RETURN FOR ASSESSMENT YEARS 1992-93 TO 1998-99. THESE EXPENSES ARE FORMING PART OF THE REGULAR BOOKS. THESE HAVE BEEN ACCEPTED BY THE AO IN THE REGULAR RETURNS. IN THE BLOCK RETURN AO HAS MA DE ESTIMATED DISALLOWANCE OUT OF THE TOTAL EXPENSES. HE FURTHER CONTENDED THA T THE ASSESSEE HAD INCURRED 38 A SUM OF RS.1.82 CRORES UNDER THIS HEAD. THE DETAIL S HAVE DULY BEEN NOTICED BY THE AO ON PAGE NO.13 OF THE ASSESSMENT ORDER. TH E BASIC GRIEVANCE OF THE AO IS THAT THE PAYMENTS WERE MADE TO FIFTY PART IES OUT OF THOSE FIFTY TWENTY FOUR PARTIES WERE FOUND TO BE BOGUS. THEREFO RE AO HAS MADE AN ESTIMATED ADDITION BY DISALLOWING 25% OF THE TOTAL CLAIM RESULTING INTO AN ADDITION OF RS.50.50 LACS. LEARNED CIT(A) HAS RESTR ICTED THIS DISALLOWANCE TO RS.33 53 522 WHICH RELATES TO THE PAYMENTS MADE TO ALLEGED TWENTY FOUR PARTIES. 18. LEARNED DR ON THE OTHER HAND RELIED UPON THE OR DER OF THE AO AND POINTED OUT THAT DURING THE BLOCK ASSESSMENT PROCEE DINGS AO DIRECTED THE ASSESSEE TO PROVE THE INCURRENCE OF EXPENSES. ASSES SEE COULD NOT PRODUCE TWENTY FOUR PARTIES AND THEY WERE FOUND TO BE BOGUS ONE THEREFORE AO HAS RIGHTLY MADE THE ADDITION OF 25% OF TOTAL EXPENSES. 19. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. IF THIS ISSUE IS EXAMINED WITHIN THE MEANING OF SCOPE OF BLOCK ASSESSMENT AS DISCUSSED SUPRA THEN IT WOULD REVEAL THAT ALL THESE CLAIMS WERE MADE BY THE ASSESSEE IN THE REGULAR RET URN AND THESE EXPENSES WERE ALLOWED TO THE ASSESSEE. THEIR GENUINENESS CAN NOT BE EXAMINED IN THE BLOCK ASSESSMENT PROCEEDINGS. THESE WERE BROUGHT TO THE NOTICE OF THE 39 DEPARTMENT IN THE REGULAR ASSESSMENT. DURING THE CO URSE OF SEARCH NO SPECIFIC MATERIAL WAS FOUND RELATING TO THE ASSESSE E SOCIETY WHICH INDICATES THAT THE CLAIM MADE BY THE ASSESSEE IN THE REGULAR RETURNS OF INCOME WAS FALSE. IF THE EXPENSES WERE NOT GENUINE THESE COULD HAVE BEEN DISALLOWED IN THE REGULAR RETURNS OF INCOME. APART FROM THE ABOVE WE FIND THAT SIMILAR ISSUE WAS CONSIDERED IN THE CASES WHERE EVEN NO RET URN WAS FILED BY THE ASSESSEE SOCIETIES THE ADDITIONS HAVE BEEN DELETED . THE FINDING IN THE CASE OF MANAV STHALI RAJINDER NAGAR SOCIETY HAVE BEEN REPR ODUCED IN THE CASE OF SANT VASMANI EDUCATION SOCIETY IN ITA NO.30/DEL/200 7 WHICH READ AS UNDER: THIS ADDITION IS BASED ON THE FACT THAT THE ASSESS EE HAD MADE PAYMENT OF TRANSPORT CHARGES TO 3 PERSONS WHO WERE IDENTIFIED BY THE DY.DIT AS NON-EXISTING PERSONS. THEY ARE JEET SING H JAGDISH BUS SERVICE AND SURENDRA TRAVELS. THE LD.A.O. HAVE NOT EVEN AP PRECIATED THE FACT THAT OUT OF THESE 50 PARTIES NO TRANSACTION WHATSOEVER HAS BEEN CARRIED OUT BY THE ASSESSEE SOCIETY WITH 32 PARTIES AND SO FAR AS THE REMAINING 18 PARTIES ARE CONCERNED THE TRANSACTIONS WITH THESE PARTIES ARE DULY SUPPORTED BY THE RELEVANT DOCUMENTARY EVIDENCES. THE TRANSPORT AND MISC. EXPENSES TO THE TUNE OF RS.4 98 307/- WERE ALLEGED TO BE FOUND TO B E UNVOUCHED AND EVEN IN RESPECT OF THESE EXPENSES THE COPIES OF THE REL EVANT DOCUMENTARY EVIDENCES WERE DULY FURNISHED VIDE LETTER DATED 22. 01.2001 BY THE ASSESSEE TO THE AO. UNDER THESE CIRCUMSTANCES IT IS CLEARL Y EVIDENCE THAT THE LD.A.O. HAVE ERRED IN DRAWING AN ADVERSE INFERENCE REGARDING THE GENUINENESS OF THE TRANSPORT AND MISC. EXPENDITURE INCURRED BY THE ASSESSEE WITHOUT APPRECIATING THE ACTUAL FACTS AND CIRCUMSTANCES AND ALSO WITHOUT CONSIDERING WHATEVER JUSTIFICATION WAS FURN ISHED BY THE ASSESSEE IN SUPPORT OF GENUINENESS OF THESE EXPENSES. BESID ES THE ABOVE NO ENQUIRY WAS MADE BY THE AO REGARDING THE EXISTENCE OF THESE 3 PARTIES AND RELIANCE HAS BEEN PLACED BY HIM ONLY ON THE INVESTI GATION MADE BY DY.DIT. IN OUR VIEW SUCH AN APPROACH IS NOT PERMIS SIBLE IN LAW. THEREFORE THE ADDITION SUSTAINED BY THE LD.CIT(A) IS DIRECTED TO BE 40 DELETED. GROUND NO.3 OF THE REVENUE IS DISMISSED WHILE GROUND NO.2 OF THE ASSESSEE IS ALLOWED. 36. THE ISSUE INVOLVED IN THE PRESENT CASE AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF RAJINDE R NAGAR EDUCATION SOCIETY INASMUCH AS THE DETAILS OF THE EXPENSES IN QUESTION AS WELL AS COPIES OF THE RELEVANT DOCUMENTARY EVIDENCE WERE FURNISHED BY THE ASSESSEE BEFORE THE AO VIDE LETTER DATED 29.8.2000. DESPITE THESE DETAILS FURN ISHED BY THE ASSESSEE AN ADVERSE INFERENCE REGARDING GENUINENESS OF THE TRANSPORT AN D REFRESHMENT EXPENSES WAS DRAWN BY THE AO AS WELL AS BY THE LEARNED CIT(A) WH ICH AS HELD BY THE TRIBUNAL IN THE CASE OF RAJINDER NAGAR EDUCATION SOCIETY WA S NOT JUSTIFIED. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US THE LEAR NED COUNSEL FOR THE ASSESSEE WAS DIRECTED TO FURNISH THE DETAILS OF EXPENSES INC URRED BY THE ASSESSEE-SOCIETY ON TRANSPORT AND REFRESHMENT IN THE SUBSEQUENT YEARS A LONGWITH THE CORRESPONDING RECEIPTS. A PERUSAL OF THE SAID DETAILS FURNISHED BY HIM SHOWS THAT HARDLY ANY PROFIT WAS EARNED BY THE ASSESSEE-SOCIETY FROM THE ACTIVITIES OF PROVIDING TRANSPORT AND REFRESHMENT FACILITY TO THE STUDENTS OF ITS SCH OOL AND AS THE SAID RESULTS HAVE BEEN ACCEPTED BY THE AO IN THE REGULAR ASSESSMENTS FOR THE RELEVANT YEARS IT SUPPORTS THE CASE OF THE ASSESSEE THAT THE SAID ACT IVITY WAS BEING CARRIED ON ON NO- PROFIT NO-LOSS BASIS. KEEPING IN VIEW ALL THESE FA CTS OF THE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF RAJINDER NAGAR EDUCATION SOCIETY ON A SIMILAR ISSUE WE HOLD THAT THE ADDITI ON MADE BY THE AO AND SUSTAINED BY THE LEARNED CIT(A) BY WAY OF DISALLOWA NCE OF TRANSPORT AND REFRESHMENT EXPENSES WAS NOT JUSTIFIED AND DELETING THE SAME WE ALLOW FIRST PART OF GROUND NO.3 OF THE ASSESSEES APPEAL AND DISMISS GROUND NO.3 OF THE REVENUES APPEAL. 20. TAKING INTO CONSIDERATION THE ABOVE FACTS AND C IRCUMSTANCES OF THE CASE NO ADDITION OUT OF TRANSPORT AND REFRESHMENT EXPENSES DESERVES TO BE MADE IN THE CASE OF ASSESSEE. THEREFORE GROUND NO. 1(II) RAISED BY THE REVENUE IS REJECTED WHEREAS GROUND NO.2 RAISED BY T HE ASSESSEE IS ALLOWED. 21. GROUND NO.1(III): IN THIS GROUND OF APPEAL GRI EVANCE OF THE REVENUE IS THAT THE LEARNED CIT(A) HAS ERRED IN DELETING THE A DDITION OF RS.50 000 41 WHICH WAS TREATED BY THE AO ON ACCOUNT OF UNEXPLAIN ED CASH FOUND AND SEIZED. 22. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF SEARCH A CASH OF RS.93 130 WAS FOUND. ACCORDING TO THE AO NO REG ULAR BOOKS OF ACCOUNT WERE MAINTAINED IN THE ROUTINE COURSE OF ACTIVITIES AND BOOKS OF ACCOUNT WERE ONLY PREPARED AFTER THE SEARCH OPERATION. IN H IS OPINION ASSESSEE FAILED TO EXPLAIN THE AVAILABILITY OF THE CASH ON THE DATE OF SEARCH HENCE HE MADE THE ADDITION. IT WAS CONTENDED BY THE ASSESSEE BEFO RE THE LEARNED CIT(A) THAT CASH FOUND DURING THE COURSE OF SEARCH WAS TALLIED BY THE AUTHORIZED OFFICER WITH THE BOOKS FOUND MAINTAINED AS WELL AS CASH BOO K FOUND MAINTAINED IN THE CASE OF BOTH THE SCHOOLS. THE ASSESSEE ALSO CON TENDED THAT AT THE TIME OF SEARCH NO EXPLANATION WAS SOUGHT FROM IT AND THE CASH WAS NOT SEIZED. LEARNED CIT(A) HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND DELETED THE ADDITION. 23. LEARNED DR RELIED UPON THE ORDER OF THE AO WHER EAS LEARNED COUNSEL FOR THE ASSESSEE REITERATED HIS CONTENTIONS AS WERE RAISED BEFORE THE LEARNED CIT(A). THE ALLEGATION OF THE AO THAT ASSESSEE WAS NOT MAINTAINING BOOKS OF ACCOUNT IN THE ROUTINE COURSE ARE NOT SUPPORTED BY ANY SPECIFIC MATERIAL. THE ASSESSEE HAS BEEN FILING REGULAR RETURNS OF INC OME WHICH HAVE BEEN 42 ASSESSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT. THE RETURNS WERE FILED IN RESPONSE TO THE NOTICE OF ISSUE UNDER SEC. 148 OR 142(1) OF THE ACT. THIS WOULD INDICATE THAT BOOKS OF ACCOUNT MUST HAVE BEEN PRODUCED BY THE ASSESSEE WHEN THE AO HAS ALLOWED EXEMPTION TO I T. THE CASH FOUND WAS NOT SEIZED. ACCORDING TO THE ASSESSEE IT HAS EXPLA INED THE CASH AVAILABLE IN THE SOCIETY AND THE OFFICER WAS SATISFIED. THIS ARG UMENT WAS ACCEPTED BY THE LEARNED CIT(A) AND WE DO NOT FIND ANY ERROR IN THIS ARGUMENT THEREFORE THE GROUND OF APPEAL RAISED BY THE REVENUE IS REJECTED. 24. GROUND NO.I(IV): IN THIS GROUND OF APPEAL THE GRIEVANCE OF THE REVENUE IS THAT THE LEARNED CIT(A) HAS ERRED IN DEL ETING THE ADDITION OF RS.1 57 905. 25. THE BRIEF FACTS OF THE CASE ARE THAT AO ON PAGE 22 HAS NOTICED THE CLAIM OF CERTAIN EXPENSES NAMELY; A.Y: 1990-91: : 47 541 A.Y. 1991-92: : 34 897 SANITATION EXPENSES BUILDING REPAIR : 75 467 TOTAL : 1 57 905 43 26. THE ASSESSING OFFICER DID NOT MAKE ANY OBSERVA TION IN RESPECT OF THESE AMOUNTS BUT SIMPLY CALCULATED THEM AS INDICATED ABO VE AND MADE THE ADDITIONS. THE CONTENTIONS OF THE ASSESSEE IS THAT THESE EXPENSES HAVE DULY BEEN DEBITED IN THE BOOKS OF ACCOUNT. IT HAS FILED RETURN FOR ASSESSMENT YEAR 1991-92 IN RESPONSE TO A NOTICE UNDER SECTION 148 A FTER THE SEARCH. THE BOOKS OF ACCOUNT FOR THESE ASSESSMENT YEARS WERE DU LY MAINTAINED. THESE EXPENSES CANNOT BE CONSIDERED IN THE BLOCK ASSESSME NT BECAUSE THESE HAVE NOT BEEN CALCULATED BY THE AO ON THE BASIS OF ANY S EIZED MATERIAL RATHER HE HAS WORKED OUT THEM FROM THE BOOKS OF ACCOUNT ITSEL F. LEARNED CIT(A) TAKING INTO CONSIDERATION THESE ARGUMENTS DELETED T HE ADDITIONS. ON DUE CONSIDERATION OF THE FINDINGS OF THE LEARNED CIT(A) ON ABOVE FACTS AND CIRCUMSTANCES WE DO NOT FIND ANY ERROR IN IT AND T HIS GROUND OF APPEAL IS REJECTED. 27. GROUND NO.1(V): IN THIS GROUND OF APPEAL GRIEV ANCE OF THE REVENUE IS THAT LEARNED CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS.14 12 000. 28. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS MADE A CONTRIBUTION OF RS.14 12 000 FOR VASANT KUNJ BUILDI NG. THE AO WITHOUT MAKING ANY OBSERVATION STRAIGHTWAY ADDED THIS AMOUN T ON PAGE 23 OF THE ASSESSMENT ORDER. LD. CIT(A) HAS DELETED THE ADDITI ON ON THE GROUND THAT 44 THIS AMOUNT STANDS DULY DISCLOSED BY THE ASSESSEE I N ITS INCOME AND EXPENDITURE ACCOUNT FOR ASSESSMENT YEAR 1998-99 AND IT HA FILED THE RETURN OF INCOME FOR THIS ASSESSMENT YEAR PRIOR TO THE SEARCH . THEREFORE IT CANNOT BE CONSIDERED FOR THE PURPOSE OF THE BLOCK ASSESSMENT. 29. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVE WE HAVE GONE THROUGH THE RECORD CAREFULLY. IT APPEARS THAT THIS ADDITION HAS BEEN MADE BY THE AO SIMPLY FOR THE REASONS THAT SIMILAR ADDITION HAS BE EN MADE IN THE CASE OF SANT VASMANI EDUCATION SOCIETY NAV MANAV SANSTHAN ETC. THE ASSESSMENT ORDERS ARE ALMOST SIMILARLY WORDED IN ALL THE CASES . THERE IS A DIFFERENCE IN THE QUANTUMS ONLY. THE GENERAL OBSERVATION IS ALSO COMMON IN ALL THESE ASSESSMENT ORDERS. ONCE A PARTICULAR ITEM HAS BEEN DISCLOSED BY THE ASSESSEE IN THE REGULAR RETURN OF INCOME THAT CANNOT BE CONS IDERED IN THE BLOCK ASSESSMENT UNLESS SOME SEIZED MATERIAL WAS FOUND IN DICATING THE CLAIM MADE BY THE ASSESSEE IN THE REGULAR RETURN AS FALSE. AO HAS NOT MADE ANY REFERENCE TO ANY SEIZED MATERIAL. THEREFORE THIS ADDITION CA NNOT BE MADE. LEARNED CIT(A) HAS RIGHTLY DELETED. THE GROUND OF APPEAL IS THUS REJECTED. 30. GROUND NO. I(VI): THIS GROUND OF APPEAL IS I NTER-CONNECTED WITH GROUND NO.3 RAISED BY THE ASSESSEE. AO HAS MADE AN ADDITION OF RS.32 37 677 ALLEGEDLY ON THE BASIS OF SEIZED DOCUM ENTS. THE LEARNED 45 CIT(A) REDUCED THIS ADDITION TO RS.3 12 028. THIS R EDUCTION OF THE ADDITION HAS BEEN CHALLENGED BY THE ASSESSEE IN GROUND NO.3 WHEREAS REVENUE IS CHALLENGING THE DELETION OF THIS ADDITION IN GROUND NO.1(VI). THE REVENUE HAS BIFURCATED THIS GROUND UNDER NINE HEADS I.E. (A) TO (I). 31. AT SERIAL NO.(A) REVENUE IS IMPUGNING THE DELE TION OF ADDITION OF RS.16 326. THE FACTS LEADING TO THIS ADDITION HAS B EEN DISCUSSED BY THE ASSESSING OFFICER ON PAGE 34 OF THE IMPUGNED ASSESS MENT ORDER. IT IS OBSERVED THAT ANNEXURE A-39 INDICATES THAT ASSESSEE HAS MADE PAYMENT OF LABOUR CHARGES FOR THE MONTH OF MAY 1997 AMOUNTING TO RS.16 326. ACCORDING TO THE ASSESSING OFFICER ASSESSEE HAS RE CORDED A PAYMENT OF RS.10 200 MADE IN OCTOBER 1997 WITH THIS PAYMENT. HE THEREFORE DISALLOWED THE CLAIM OF EXPENSES. LEARNED CIT(APPEA LS) DELETED THE ADDITION ON THE GROUND THAT PAYMENT RELATES TO ASSE SSMENT YEAR 1998-99 FOR WHICH RETURN OF INCOME WAS FILED BY THE ASSESSEE. T HE AMOUNTS HAVE DULY BEEN RECORDED IN THE BOOKS OF ACCOUNT HENCE IT CANN OT BE ADDED IN THE BLOCK ASSESSMENT. ON DUE CONSIDERATION OF THE FINDINGS OF THE LEARNED CIT(APPEALS) RECORDED IN PARAGRAPH 9.9 WE DO NOT F IND ANY ERROR IN HIS ORDER BECAUSE THE PAYMENT OF RS.16 326 WERE MADE BY THE ASSESSEE THROUGH CHEQUE ON 3 RD MAY 1997. THE EXPENSES HAVE DULY BEEN RECORDED IN THE BOOKS 46 OF ACCOUNT AND DISCLOSED TO THE DEPARTMENT IF THESE ARE NON-GENUINE THEN THEY COULD BE DISALLOWED IN THE REGULAR ASSESSMENT NOT IN THE BLOCK ASSESSMENT. 32. AT SERIAL NO.(B) REVENUE HAS PLEADED THAT LEAR NED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 2 LACS. THE B RIEF FACTS IN RESPECT OF THIS ADDITION HAS BEEN DISCUSSED ON PAGE 35 OF THE ASSES SMENT ORDER. ASSESSING OFFICER WHILE MAKING A REFERENCE TO ANNEXURE A-40 H AS OBSERVED THAT ON PAGE 63 THERE ARE THE DETAILS OF RECEIPT OF RS. 2 LACS. ACCORDING TO HIM THIS AMOUNT IS NOT RECORDED IN THE BOOKS OF ACCOUNT HEN CE IT IS ADDED. ASSESSING OFFICER EXCEPT MAKING AN OBSERVATION IN ONE AND HAL F LINE DID NOT MAKE ANY ELABORATE DISCUSSION. THE CASE OF THE ASSESSEE BEFO RE THE LEARNED CIT(APPEALS) WAS THAT ASSESSING OFFICER FAILED TO A PPRECIATE THE TRUE AND CORRECT NATURE OF THE DOCUMENT MS-3/A-40/63. INVITI NG THE ATTENTION OF THE LEARNED CIT(APPEALS) IT WAS SUBMITTED BY THE ASSES SEE IN ITS WRITTEN SUBMISSIONS THAT IN FACT THIS DOCUMENT CONTAINS T HE CHEQUE-WISE DETAILS OF THE PAYMENT MADE BY MSS-DOUBLE STOREY RATHER THAN A NY RECEIPT AS ALLEGED BY THE ASSESSING OFFICER. LEARNED CIT(APPEALS) AFTE R APPRECIATING THE FACTS ACCEPTED THE CONTENTION OF THE ASSESSEE AND DELETED THE ADDITION. 47 33. BEFORE US LEARNED COUNSEL FOR THE ASSESSEE POI NTED OUT THE EXPLANATION OF THE ASSESSEE ON THIS PAPER AVAILABLE AT PAGE A-8 0 OF THE PAPER BOOK VOLUME-I. 34. WE HAVE GONE THROUGH THE EXPLANATION OF THE ASS ESSEE AS WELL AS THE SEIZED MATERIAL ALONG WITH THE REPRESENTATIVES OF T HE PARTIES. ACCORDING TO THE FINDINGS OF THE LEARNED CIT(APPEALS) PAYMENTS HAVE BEEN MADE TO 16 PARTIES BY WAY OF CHEQUES. IT IS NOT THE RECEIPT AN D THEREFORE ASSESSING OFFICER WITHOUT MAKING ANY ELABORATE DISCUSSION IS NOT JUSTIFIED IN ADDING THIS AMOUNT IN THE UNDISCLOSED INCOME OF THE ASSESS EE. LEARNED CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION. 35. AT SERIAL NO.(C) THE REVENUE IS IMPUGNING THE ACTION OF LEARNED CIT(APPEALS) WHEREBY IT REDUCED THE ADDITION FROM R S.1 97 940 TO RS.1 16 160. THE ASSESSEE IN ITS GROUNDS OF APPEAL IS IMPUGNING THIS RETENTION OF ADDITION AT RS.1 16 160. THE FACTS LEA DING TO THIS ADDITION ARE DISCUSSED BY THE ASSESSING OFFICER ON PAGE 36 OF TH E ASSESSMENT ORDER. ASSESSING OFFICER WHILE MAKING A REFERENCE TO MS-3- A-40 PAGES NO.106 TO 129 HAS OBSERVED THAT THESE DOCUMENTS CONTAINS THE BILLS/RECEIPTS OF 12 DIFFERENT PARTIES AGGREGATING TO RS.1 87 940. ACCOR DING TO THE A.O. THE D.D.I.T. MADE AN INQUIRY IN RESPECT OF THE PAYMENTS MADE TO THESE PARTIES 48 AND REFLECTING IN THE SEIZED MATERIAL. ON INQUIRY IT WAS FOUND THAT ALL THESE PARTIES WERE BOGUS EXCEPT M/S. SONY GLASSES COMPANY . HE THEREFORE MADE THE ADDITION OF RS.1 87 940. BEFORE THE LEARNED CIT (APPEALS) ASSESSEE RAISED TWO FOLD SUBMISSIONS. IT FIRSTLY CONTENDED T HAT SUM OF RS.71 780 FORMING PART OF THE TOTAL AMOUNT OF RS.1 87 040 WOR KED OUT ON THE BASIS OF ENTRIES APPEARING ON PAGE NOS. 106 TO 129 ARE ALSO REFLECTING ON PAGE 63 OF A-40. LEARNED CIT(APPEALS) WAS SATISFIED THAT THERE IS A DOUBLE ADDITION OF THE SAME AMOUNT ONE ON THE BASIS OF PAGE 63 AND TH E OTHER ON THE BASIS OF PAGES 106 TO 129 AND THEREFORE DELETED THE ADDITI ON OF RS.71 780 WHICH IS BEING IMPUGNED BY THE REVENUE IN ITS APPEAL. ON DUE CONSIDERATION OF THE LEARNED CIT(APPEALS)S ORDER WE DO NOT FIND ANY ER ROR IN IT. LEARNED DR WAS UNABLE TO POINT OUT THAT THESE AMOUNTS WERE NOT FORMING PART OF PAGE 63. THEREFORE THE GROUND OF APPEAL RAISED BY THE REVEN UE IS REJECTED. 36. AS FAR AS THE GROUND OF ASSESSEES APPEAL IS CO NCERNED THE SECOND FOLD OF ARGUMENT RAISED BY THE ASSESSEE BEFORE THE LEARN ED CIT(APPEALS) WAS THAT ASSESSING OFFICER HAS FAILED TO APPRECIATE THE SEIZED MATERIAL. THE DOCUMENTS ITSELF CONTAIN THE RELEVANT CHEQUE NUMBER THROUGH WHICH THE PAYMENTS WERE MADE BY THE ASSESSEE AGAINST THE BILL S RAISED BY THE CONCERNED PARTIES. THE CHEQUE-WISE DETAILS OF PAYME NTS ARE DULY REFLECTED IN 49 THE BOOKS OF ACCOUNT OF MSS-DOUBLE STOREY. THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT ALL THESE DETAILS HAVE DULY BEEN RECORDED IN THE BOOKS OF ACCOUNT. THE ADDITION CANNOT BE MADE I N THE BLOCK ASSESSMENT. LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 37. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. FROM THE SEIZED MATERIAL IT REVE ALS THAT CERTAIN DETAILS WERE FOUND IN RESPECT OF PAYMENT MADE BY THE ASSESSEE. A CCORDING TO THE ASSESSEE THESE DETAILS HAVE DULY BEEN RECORDED IN THE BOOKS OF ACCOUNT OF THE SCHOOL. THE PAYMENTS HAVE BEEN MADE THROUGH CHE QUE SUPPORTING BILLS FOR RAISING THE DEMAND FROM THE SCHOOL WERE ALSO FO UND. IN THE BLOCK ASSESSMENT IT HAS NOT TO BE SEEN WHETHER EXPENSES ARE GENUINE OR NOT BECAUSE ASSESSEE HAS BEEN FILING REGULAR RETURN OF INCOME. ALL THESE ACCOUNTS COULD HAVE BEEN APPRECIATED IN THE REGULAR RETURN O F INCOME. THEREFORE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE AD DITION. WE ALLOW THE GROUND OF APPEAL RAISED BY THE ASSESSEE AND DELETE THE ADDITION OF RS.1 16 160 WHICH HAS BEEN CONFIRMED BY THE LEARNED CIT(APPEALS). AS FAR AS THE ADDITION DELETED BY THE LEARNED CIT(APPEALS) AMOUNTING TO RS.71 780 IS CONCERNED WE CONFIRM THE DELETION. 50 38. AT SERIAL NO.(D) THE REVENUE IS IMPUGNING THE DELETION OF RS.6350. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS PURCHASED GOLD ORNAMENTS WHICH WERE GIVEN TO THE STAFF AND HEAD MI STRESS. ACCORDING TO THE ASSESSEE THE PAYMENT IS MADE FOR PURCHASE OF G OLD ORNAMENTS AS A GIFT TO HEAD MISTRESS OF THE SCHOOL BY WAY OF STAFF WELFARE MEASURES. THE AMOUNT WAS PAID THROUGH ACCOUNT PAYEE CHEQUE TO CHAUHAN JE WELLERS AND IT HAS BEEN DULY RECORDED IN THE BOOKS OF ACCOUNT. LEARNED CIT(APPEALS) ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND DELETED THE ADD ITION. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES WE D O NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(APPEALS) BECAUSE THE PAYME NT IS DULY REFLECTED IN THE BOOKS OF ACCOUNT OF MANAV STHALI SCHOOL AND IT CANNOT BE A SUBJECT MATTER OF BLOCK ASSESSMENT. 39. AT SERIAL NO. (E) THE GRIEVANCE OF REVENUE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.1 53 533. THE BRIEF FACTS LEADING TO THIS ADDITION ARE THAT THE ASSESSI NG OFFICER FOUND THAT ASSESSEE HAS INCURRED EXPENSES FOR THE MONTH OF JUL Y 1997 FOR REFRESHMENT ETC. ACCORDING TO THE ASSESSING OFFICER ASSESSEE F AILED TO EXPLAIN AND RECONCILE THE EXPENSES. THE CASE OF THE ASSESSEE IS THAT PAPER RELIED BY THE ASSESSING OFFICER ONLY REFLECTS THE INFORMATION FOR THE MANAGEMENT ABOUT 51 REFRESHMENT EXPENSES OF VARIOUS SOCIETIES FOR THE M ONTH OF JULY 1997 INCLUDING THE ASSESSEE. THE EXPENSES PERTAINING TO THE ASSESSEE WERE DULY RECORDED IN ITS BOOKS OF ACCOUNT FOR THE RELEVANT P ERIOD. LEARNED DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE LEARNED CIT(A PPEALS). ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF TH E CASE WE ARE OF THE OPINION THAT ASSESSING OFFICER HAS NOT MADE ANY ELA BORATE DISCUSSION ON THE ISSUE. HE ONLY REFERRED A PAPER EXHIBITING THE INFO RMATION GIVEN BY THE SCHOOL TO THE MANAGEMENT ABOUT REFRESHMENT EXPENSES OF VARIOUS SOCIETIES FOR THE MONTH OF JULY 1997 WHEREIN ASSESSEE IS ONE OF THE SCHOOLS. ACCORDING TO THE ASSESSEE EXPENSES PERTAINING TO I T WERE DULY RECORDED IN THE BOOKS OF ACCOUNT AND THEY CANNOT BE ADDED IN TH E BLOCK ASSESSMENT. LEARNED CIT(APPEALS) HAS ACCEPTED THIS CONTENTION A ND NOTHING CONTRARY WAS BROUGHT TO OUR NOTICE. THEREFORE WE DO NOT FIN D ANY JUSTIFICATION TO INTERFERE IN THE ORDER OF THE LEARNED CIT(APPEALS). 40. AT SERIAL NO.(F) THE REVENUE HAS PLEADED THAT THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.11 66 633 AND RS.7 01 017 WHICH WAS ADDED BY THE ASSESSING OFFICE R ON THE BASIS OF VARIOUS PAGES OF ANNEXURE A-4 (MS-1). 52 41. THE BRIEF FACTS LEADING TO THESE TWO ADDITIONS ARE THAT ASSESSEE HAS MADE CONTRIBUTION FOR VASANT KUNJ BUILDING. ACCORDI NG TO THE ASSESSING OFFICER THESE AMOUNTS OUGHT TO HAVE BEEN TREATED A S CAPITAL EXPENDITURE BY THE ASSESSEE. THE CASE OF THE ASSESSEE IS THAT IT I S RUNNING EDUCATIONAL INSTITUTION A FACILITY AT VASANT KUNJ WAS DEVELOPE D WHERE SCHOOL WAS TO RUN CLASSES UPTO 12 TH STANDARD. THE STUDENTS OF THE ASSESSEE WOULD BE FA CILITATED FOR STUDYING IN THE HIGHER CLASSES BECAUSE IT WAS R UNNING THE SCHOOL UP TO 7 TH STANDARD ONLY. IT WAS ALSO THE CASE OF THE ASSESSEE THAT CONTRIBUTION MADE TO ANY OTHER EDUCATIONAL SOCIETY IS TO BE TREATED AS A PPLICATION OF MONEY FOR THE PURPOSE OF THE EDUCATION AND NO DISALLOWANCE CAN BE MADE. LEARNED CIT(APPEALS) HAS ACCEPTED THE CONTENTION OF THE ASS ESSEE AND OBSERVED THAT ONCE THE ASSESSEE HAS RECORDED THESE TWO AMOUNTS IN THE BOOKS OF ACCOUNT THEY CANNOT BE SUBJECTED TO SCRUTINY IN THE BLOCK A SSESSMENT. THE ADDITION IN THE BLOCK ASSESSMENT HAS TO BE MADE ON THE BASIS OF SEIZED MATERIAL. 42. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES WE HAVE GONE THROUGH THE RECORD CAREFULLY. ASSESSING OFFICER HIMSELF NO TED THAT THESE TWO AMOUNTS ARE DULY REFLECTED IN THE BOOKS OF ACCOUNT. IN SUCH SITUATION THE ISSUE ONLY BE EXAMINED IN THE REGULAR ASSESSMENT AN D NOT IN THE BLOCK 53 ASSESSMENT. THEREFORE LEARNED CIT(APPEALS) HAS RIG HTLY DELETED THE ADDITION. 43. AT SERIAL NO.(G) THE GRIEVANCE OF THE REVENUE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.80 000. THE FACTS IN RESPECT OF THIS ISSUE HAS BEEN DISCUSSED BY THE ASS ESSING OFFICER AT PAGE 38 OF THE ASSESSMENT ORDER. ACCORDING TO THE ASSESSING OFFICER AN ENVELOP WITH A NARRATION AS 80-CASH FROM DOUBLE STOREY DATED 2. 1.99 FOR RESPECTED MADAM WAS FOUND. ASSESSING OFFICER OBSERVED THAT 8 0 MEANS RS.80 000 AND ASSESSEE FAILED TO GIVE ANY DETAILS THEREFORE HE MADE THE ADDITION. LEARNED CIT(APPEALS) DELETED THE ADDITION ON THE GR OUND THAT THERE IS NO MATERIAL WHICH CAN BE GOAD THE ASSESSING OFFICER TO DRAW AN INFERENCE THAT 80 MEANS 80 000. 44. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES WE HAVE GONE THROUGH THE RECORD CAREFULLY. ACCORDING TO THE ASSESSEE T HE PAPER IS NOT SEIZED FROM THE SCHOOL PREMISES BUT IT WAS SEIZED FROM ANOTHER SCHOOL (PATEL NAGAR) OF MSS GROUP. IN OUR OPINION THERE WAS NOT A SUFFICIE NT MATERIAL FOR DRAWING AN INFERENCE THAT 80 000 CASH WAS EITHER GIVEN BY T HE MADAM OR GIVEN TO THE MADAM. WHETHER IT WAS PERTAINING TO THIS SCHOOL OR PERTAINING TO SOME 54 ASPECT OF ANY INDIVIDUAL. THEREFORE ON THE BASIS O F THIS DOCUMENT NO ADDITION CAN BE MADE. THIS GROUND OF APPEAL IS REJE CTED. 45. AT SERIAL NO.(H) THE GRIEVANCE OF REVENUE IS T HAT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.1 40 000 AND RS.1 50 000. SIMILARLY AT SR.NO. (I) THE GRIEVANCE OF REVENUE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.2 40 000. THE FACTS LEADING TO THESE ADDITIONS ARE DISCUSSED BY THE ASS ESSING OFFICER ON PAGE 39 OF THE ASSESSMENT ORDER. THE ADDITIONS HAVE BEEN MA DE BY THE ASSESSING OFFICER ON THE GROUND THAT CERTAIN PAYMENTS SENT BY THE BIS TO CENTRAL OFFICE WERE NOT RECORDED IN THE ASSESSEES BOOKS OF ACCOUNT. SIMILARLY DONATIONS COLLECTED BUT NOT RECORDED. THE CASE OF T HE ASSESSEE IS THAT RS.1 40 000 HAS NOT BEEN SENT BY THE SOCIETY BUT BY BIS. THE ADDITION OF RS.1 50 000 AND RS.2 40 000 HAVE BEEN MADE BY THE A SSESSING OFFICER ON THE BASIS OF PAGE NO. 298 OF ANNEXURE A-143 OF MS-9 AND ANNEXURE A-57 OF MS-INCOME-TAX OFFICER. LEARNED CIT(APPEALS) HAS DELETED THE ADDITION ON THE GROUND THAT NEITHER OF THE TWO DOCUMENTS HAV E BEEN FOUND FROM THE PREMISES OF THE ASSESSEE NOR THEY ARE RELATED TO TH E ASSESSEE. 55 46. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES WE HAVE GONE THROUGH THE RECORD CAREFULLY. ASSESSING OFFICER WHILE MAKI NG THESE ADDITIONS HAS MADE THE FOLLOWING OBSERVATIONS: ANNEXURE A-143: PAGE 269: AS PER THIS DOCUMENT ON 18.4.96 VARIOUS PAYMENTS DETAILS ARE MENTIONED. PAYMENT HAS BEEN RECEIVED FOR COPIES AND JAIPUR TRIP ETC. TOTAL PAYMENT SENT BY BIS A-1 TO THE CENTRAL O FFICE AMOUNTED TO RS.1 40 000. THIS AMOUNT IS NOT RECORDED IN THE BOO KS OF ACCOUNT AND HENCE ADDED. PAGE 298: DONATION OF RS.1 50 000 WAS COLLECTED BY DOUBLE STOREY AND SINCE IT IS NOT RECORDED IT IS ADDED. MS-II ANNEXURE AA-57 PAGE 18 19: AS PER THIS DOCUMENT THERE IS DONATIO N COLLECTED FROM STUDENTS AMOUNTED TO RS.2 40 000. SINCE IT IS UNREC ORDED IT IS ADDED. 47. FROM PERUSAL OF THE ABOVE DISCUSSION IT IS NOT DISCERNIBLE HOW THESE AMOUNTS ARE TO BE ADDED IN THE UNDISCLOSED INCOME. ASSESSING OFFICER HAS NOWHERE OBSERVED THAT DOCUMENTS WERE FOUND FROM THE PREMISES OF THE ASSESSEE. THEY ARE RELATED TO IT. THE CASE OF THE A SSESSEE IS THAT NEITHER THESE DOCUMENTS WERE FOUND FROM ITS PREMISES NOR THEY ARE RELATED TO THE ASSESSEE HOW IT CAN GIVE ANY EXPLANATION. LEARNED CIT(APPEAL S) HAS ACCEPTED THIS CONTENTION OF THE ASSESSEE. THE FINDINGS OF THE ASS ESSING OFFICER DO NOT LEAD 56 US TO ANY CONCLUSION THAT THESE AMOUNTS ARE THE UND ISCLOSED INCOME OF THE ASSESSEE. IN OUR OPINION LEARNED CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION. 48. IN THE ASSESSEES APPEAL IT HAS BIFURCATED ITS GROUND NO.3 IN FIVE PARTS. WE HAVE ALREADY DISCUSSED ONE OF THE ISSUES ALONG W ITH GRIEVANCE OF REVENUE TAKEN AT SR.NO.(C). THE FIRST GRIEVANCE OF THE ASSE SSEE IS IN RESPECT OF ADDITION CONFIRMED AT RS.26 000. ACCORDING TO THE A SSESSING OFFICER THERE IS A BILL DATED 6.5.1998 FOR AN AMOUNT OF RS.26 000 IN RESPECT OF INKOO TRAVELS. THE PROPRIETOR OF INKOO TRAVELS MR. MALHOTRA DISOWN ED THIS BILL AND ALSO CLAIMED THAT NO BILLS WERE RECEIVED BY HIM. THE ASS ESSEE HAS CONTENDED THAT STATEMENT OF MR. MALHOTRA WAS TAKEN BEHIND ITS BACK AND IT WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE MR. MALHOTRA. IT P RAYED THAT NO ADDITION BE MADE ON THE BASIS OF THE STATEMENT OF SHRI MALHOTRA . ASSESSING OFFICER HAS HELD THAT BILL IS BOGUS THEREFORE THE AMOUNT REFL ECTED IN THE BILL DESERVES TO BE ADDED IN THE INCOME OF THE ASSESSEE. 49. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE CASE OF THE ASSESSEE IS THAT STATEMENT OF MR. MALHOTRA WAS RECORDED BEHIND ITS BACK AND NO OPPORT UNITY TO CROSS-EXAMINE WAS GIVEN THEREFORE SUCH INVESTIGATION CANNOT BE RELIED UPON WHILE TREATING 57 THE BILL AS BOGUS. A BILL WAS FOUND DURING THE COUR SE OF SEARCH EXHIBITING PAYMENT OF RS.26 000 THE RECIPIENT HAS DENIED THE RECEIPT OF MONEY. IN SUCH SITUATION IT IS FOR THE ASSESSEE TO ESTABLISH THAT PAYMENT WAS ACTUALLY MADE AND IT IS A GENUINE EXPENSE. ACCORDING TO THE ASSES SEE THE ONLY EVIDENCE AGAINST IT IS THE STATEMENT OF SHRI MALHOTRA WHICH WAS DULY RECORDED BEHIND ITS BACK. WE FIND THAT NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE FOR CROSS- EXAMINATION THEREFORE THE STATEMENT OF SHRI MALHO TRA CANNOT BE USED AGAINST THE ASSESSEE. WE ALLOW THIS GROUND OF APPEA L AND SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICA TION. 50. THE NEXT ITEM DISPUTED BY THE ASSESSEE IS IN RE SPECT OF RIDING EXPENSES AMOUNTING TO RS.9180. A BILL IN THE NAME OF VIRENDR A GRAM WAS FOUND FROM THE PREMISES OF THE ASSESSEE. ASSESSEE FAILED TO EX PLAIN THE NATURE OF EXPENSES AND HOW PAYMENT WAS MADE. THE FACILITY AT VIRENDRA GRAM HAVE BEEN UTILIZED BY THE STUDENTS OF ASSESSEE AND OTHER SOCIETIES. IF THE BILL PERTAINING TO THAT PREMISES IS AVAILABLE ON THE PRE MISES OF THE ASSESSEE THEN IT CAN EASILY BE INFERRED THAT THIS MUCH OF EXPENSES M UST BE ATTRIBUTABLE TO THE ASSESSEE. CONSIDERING THE FINDINGS OF THE LEARNED C IT(APPEALS) WE DO NOT SEE ANY REASON TO INTERFERE IN IT. THE ADDITION IS CONFIRMED. 58 51. THE NEXT ITEM DISPUTED BY THE ASSESSEE IS OF RS .13 050. A SUM OF RS.13 050 WAS ALLEGED TO HAVE BEEN PAID TO ONE SHAR MA CONTRACTOR. THE WHEREABOUTS OF THIS MAN COULD NOT BE FOUND OUT. THE REFORE EXPENSES WERE NOT ALLOWED TO THE ASSESSEE AND ADDED IN THE TOTAL INCOME OF THE ASSESSEE. THE CASE OF THE ASSESSEE IS THAT PAYMENT IS MADE BY CHEQUE DULY RECORDED IN THE BOOKS. THE DDIT NEVER CONFRONTED THE ASSESSEE. WHILE CONDUCTING THE INQUIRY THERE WERE 50 PARTIES IN THE LIST TO WHOM PAYMENTS WERE MADE. HAD THE OPPORTUNITY WAS GIVEN ASSESSEE COULD HAVE EXPL AINED ITS POSITION. LEARNED CIT(APPEALS) AS WELL AS ASSESSING OFFICER H AS NOT DISCUSSED THE ISSUE ELABORATELY. CONSIDERING THE STAND OF ASSESSE E WE SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER FOR READJ UDICATION AFTER AFFORDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. 52. THE NEXT ITEM DISPUTED BY THE ASSESSEE IS THAT THE ADDITION OF RS.69 450 ON ACCOUNT OF BOGUS EXPENSES. THE FACTS O N THIS ISSUE HAVE BEEN DISCUSSED BY THE ASSESSING OFFICER ON PAGE NO.36 OF THE ASSESSMENT ORDER. IT IS OBSERVED THAT PAGE NOS. 80 AND 127 OF MS-3/A-42 CONTAINS BILL OF MR. JAGJIT SINGH BUILDER FOR RS.27 800 CLAIMED IN THE MONTH OF AUGUST 1998 WHICH ACCORDING TO THE ASSESSEE WERE DULY PAID. THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THIS PA RTY DOES NOT EXIST. 59 SIMILARLY A PAYMENT OF RS.18 250 ALLEGED TO HAVE B EEN MADE IN AUGUST 1998 TO ONE MR. VIJAY PAINTER WHICH ARE REFLECTED ON PAGE NO.92 OF THE SEIZED MATERIAL. A PAYMENT OF RS.23 400 WERE CLAIME D IN THE MONTH OF AUGUST 1998 TO M/S. BANSAL FURNITURES. THE DETAILS ARE BEING REFLECTED ON PAGE 125 OF THIS SEIZED MATERIAL. ACCORDING TO THE ASSESSING OFFICER ALL THESE THREE ENTITIES ARE NON-EXISTING AND THEREFOR E THE ADDITION HAS TO BE MADE. THE CASE OF THE ASSESSEE IS THAT IT HAS BEEN MAINTAINING BOOKS OF ACCOUNT. THE EXPENSES HAVE DULY BEEN DEBITED IN THE BOOKS. THE PAYMENTS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE AND TH EREFORE NO ADDITION IN THE BLOCK ASSESSMENT CAN BE MADE. ON THE OTHER HAND LEARNED DR HAS POINTED OUT THAT THESE PAYMENTS FALL IN THE ASSESSM ENT YEAR 1999-00 AND FOR THIS YEAR NO RETURN OF INCOME WAS FILED BY THE ASSE SSEE PRIOR TO THE SEARCH OPERATION THEREFORE THE GENUINENESS OF THE EXPENS ES CAN VERY WELL BE EXAMINED IN THE BLOCK ASSESSMENT. 53. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. ON PERUSAL OF THE SUBMISSIONS MAD E BY THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) WHICH IS AVAILABLE AT PAGE NO.A82 OF THE PAPER BOOK WE FIND THAT ALL THE INVESTIGATION WITH REGAR D TO EXISTENCE OF THESE PARTIES ARE CONCERNED THEY WERE CARRIED OUT BY THE DDIT AT THE BACK OF THE 60 ASSESSEE. ACCORDING TO THE ASSESSEE THESE PARTIES ARE NOT EVEN COVERED BY THE LIST OF 50 PARTIES WHICH WERE ALLEGED TO BE BOG US BY THE DEPARTMENT. SINCE THE INVESTIGATION REPORT WAS NOT CONFRONTED T O THE ASSESSEE AND IT WAS NOT GIVEN AN OPPORTUNITY TO ESTABLISH THE GENUINENE SS OF THESE EXPENSES WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OF FICER FOR READJUDICATION AFTER AFFORDING DUE OPPORTUNITY OF HEARING TO THE ASSESSE E. 54. THE NEXT ITEM DISPUTED BY THE ASSESSEE IS THE C ONFIRMATION OF AN ADDITION OF RS.68 388. ACCORDING TO THE ASSESSEE T HE CORRECT AMOUNT IS RS.68 188. THE ALLEGATION AGAINST THE ASSESSEE IS T HAT THIS AMOUNT REPRESENT THE CASH SENT BY THE ASSESSEE TO THE CENTRAL OFFICE . ACCORDING TO THE ASSESSING OFFICER SUM OF RS.7 000 RS.9662 RS.7 0 00 RS.15 000 RS.7 000 RS.15 726 AND RS.7000 WERE TRANSFERRED TO THE CENTR AL OFFICE AND NOT RECORDED IN THE BOOKS. THEREFORE HE MADE THE ADDIT ION IN THE UNDISCLOSED INCOME OF THE ASSESSEE. LEARNED CIT(APPEALS) HAS CO NFIRMED THE ADDITIONS ON THE GROUND THAT AMOUNTS SENT TO THE CENTRAL OFFI CE ARE NOT RECORDED IN THE BOOKS OF ACCOUNT AND ASSESSEE FAILED TO GIVEN ANY E XPLANATION. THE CONTENTION OF THE ASSESSEE BEFORE US IS THAT AT PAG E 45 RS.7000 HAS BEEN ADDED TWICE. IT ALSO CONTENDED THAT SINCE THERE WER E VOLUMINOUS PAGES SUPPLIED TO IT IN THE BLOCK ASSESSMENT PROCEEDINGS IT MIGHT HAVE FAILED TO 61 REPLY ON THIS ISSUE BUT BEFORE THE LEARNED CIT(APPE ALS) THESE PAYMENTS WERE DULY GOT VERIFIED BY THE ASSESSEE WITH THE BOO KS OF ACCOUNT. LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TOWARDS PAGES A-85 AND A-86 OF THE PAPER BOOK WHERE ASSESSEE HAS PLACED ON RECORD THE COPY OF THE WRITTEN SUBMISSIONS FILED BEFORE THE LEARNED CIT(APPEALS). LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDERS OF THE REVENUE A UTHORITIES BELOW. 55. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE ACCOUNTING ENTRIES REPRODUCED BY THE ASSESSEE ON PA GES 86 AND 87. IT HAS PLACED ON RECORD THE EXPLANATION WITH REGARD TO THE SEIZED MATERIAL BEFORE THE LEARNED CIT(APPEALS). BUT THESE ISSUES HAVE NOT BEEN EXAMINED BY THE LEARNED FIRST APPELLATE AUTHORITY. CONSIDERING THE EXPLANATION OF THE ASSESSEE AND OUR FINDINGS ON CERTAIN OTHER ISSUES W HICH WE REMITTED BACK TO THE ASSESSING OFFICER FOR WANT OF PROPER OPPORTUNIT Y OF HEARING OR NON- SUPPLY OF RELEVANT DOCUMENTS WE DEEM IT FIT THAT E NDS OF JUSTICE WOULD MEET IF WE SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THESE ACCOUNTING ENTRIES AND READJU DICATION OF THE ISSUE. 56. GROUND NO.2: IN THIS GROUND OF APPEAL GRIEVANC E OF THE REVENUE IS THAT THE LEARNED CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS.12 LACS. THE GROUND RAISED BY THE REVENUE READS AS UNDER: 62 ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LE ARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.12 00 000 MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF EXPENSES CLAIMED UNDE R THE HEAD FURNITURE & FIXTURES REPAIRS TO BUILDING AND FURNI TURE ETC. 57. THE FACTS LEADING TO THIS ADDITION ARE NOTICED BY THE ASSESSING OFFICER ON PAGE 21 OF THE ASSESSMENT ORDER. ASSESSING OFFIC ER FOUND THAT ASSESSEE HAS DEBITED EXPENSES IN RESPECT OF SALARY PAYMENT FURNITURE & FIXTURE REPAIR TO THE BUILDING AND OTHERS FURNITURE REPAIR AND VE HICLE REPAIRS ETC. ACCORDING TO THE ASSESSING OFFICER ASSESSEE FAILED TO BRING SUPPORTING VOUCHERS TO THESE EXPENSES. IT ALSO FAILED TO FILE EVIDENCE OF PAYMENT OF SALARY AND THE NAME AND ADDRESS TO WHOM SALARY IS PAID. HE WORKED OUT THE TOTAL EXPENSES UNDER ALL THESE HEADS AT RS.23 00 587. CONSIDERING THE NATURE OF PAYMENT HE DISALLOWED A SUM OF RS.12 LACS ONLY. ON APPEAL LEA RNED CIT(APPEALS) DELETED THE DISALLOWANCE ON THE GROUND THAT THESE E XPENSES WERE DULY RECORDED IN THE BOOKS OF ACCOUNT AND EXPENSES WERE CLAIMED BY THE ASSESSEE IN THE REGULAR RETURN. ASSESSING OFFICER FAILED TO BRING ANY EVIDENCE ON THE RECORD WHICH WAS FOUND DURING THE COURSE OF SEARCH AND DEMONSTRATE THAT CLAIM MADE BY THE ASSESSEE IN THE REGULAR RETURN OR IN THE REGULAR BOOKS OF ACCOUNT WAS FALSE. 63 58. ON DUE CONSIDERATION OF THE LEARNED CIT(APPEAL S)S FINDINGS WITHIN THE LIGHT OF SCOPE OF BLOCK ASSESSMENT DISCUSSED BY US IN PARAGRAPH NO.11 OF THIS ORDER WE ARE OF THE VIEW THAT ONCE EXPENSES W ERE RECORDED IN THE BOOKS WHICH WERE CLAIMED IN THE REGULAR RETURN OF INCOME AND ALLOWED BY THE ASSESSING OFFICER THEN SUCH EXPENSES CANNOT BE DISA LLOWED ON THE GROUND THAT THEY ARE NOT VERIFIABLE. THE ADDITION IN THE B LOCK ASSESSMENT HAS TO BE MADE ON THE BASIS OF SEIZED MATERIAL. ASSESSING OFF ICER HAS DISALLOWED THE CLAIM OF EXPENSES ON AN ESTIMATE BASIS WHICH IS NOT PERMISSIBLE IN THE BLOCK ASSESSMENT. ASSESSING OFFICER CANNOT REAPPRECIATE T HE FACTS AND THE CLAIM ALREADY MADE BY THE ASSESSEE IN THE REGULAR RETURN WITHOUT THERE BEING ANY SEIZED MATERIAL FOUND AT THE TIME OF SEARCH INDICAT ING THE CLAIM OF ASSESSEE AS FALSE. IN VIEW OF THE ABOVE DISCUSSION THIS GRO UND OF APPEAL IS REJECTED. 59. GROUND NO.3 TAKEN BY THE REVENUE READS AS UNDER : ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LE ARNED CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS.15 00 000 MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF EXPENSES BEING BOGUS UND ER THE HEAD LEGAL PROFESSIONAL STUDENT WELFARE REPAIR DIESE L TOUR ETC. 60. THE FACTS LEADING TO THESE ADDITIONS ARE DISCUS SED BY THE ASSESSING OFFICER ON PAGE NO.23 OF THE ASSESSMENT ORDER. ASSE SSING OFFICER HAS 64 NOTICED THE DETAILS OF EXPENSES CLAIMED BY THE ASSE SSEE UNDER THE HEAD LEGAL CHARGES PROFESSIONAL CHARGES REPAIR STUDENT WEL FARE DIESEL PETROL AND TOUR IN ASSESSMENT YEARS 1990-91 UP TO 1999-00. ASSESSIN G OFFICER HAS OBSERVED THAT ASSESSEE HAS CLAIMED THE EXPENSES UNDER THESE HEADS IN DIFFERENT ASSESSMENT YEARS BUT HAS FAILED TO PRODUCE EVIDENCE WITH REGARD GENUINENESS OF THE EXPENSES DEBITED UNDER THESE HEADS. IN THE OPINION OF THE ASSESSING OFFICER ASSESSEE SHOULD HAVE FILED PARTY-WISE LIST TO WHOM THE PAYMENTS HAVE BEEN MADE WITH ADDRESSES AND IN THE ABSENCE OF THESE EVIDENCES THE EXPENSES ARE TO BE TREATED AS UNVERIFIABLE. ASSESSI NG OFFICER HAS FOUND THAT THE ASSESSEE HAS CLAIMED LEGAL CHARGES FOR ALL THES E YEARS AT RS.7 97 296. HE DISALLOWED A SUM OF RS.1 50 000. PROFESSIONAL CHARG ES HAVE BEEN CLAIMED AT RS.11 41 500. ASSESSING OFFICER MADE AN AD HOC DISA LLOWANCE AT RS.2 15 000. THE ASSESSEE CLAIMED EXPENSES TO RS.64 18 777 UNDER THE HEAD REPAIR. ASSESSING OFFICER HAS MADE AN AD HOC DISA LLOWANCE OF RS.6 50 000. THE ASSESSEE CLAIMED A SUM OF RS.15 49 791 UNDER TH E HEAD STUDENTS WELFARE IN ALL THESE YEARS. ASSESSING OFFICER DISA LLOWED A SUM OF RS.1 50 000. SIMILARLY UNDER THE HEAD DIESEL & PE TROL RS.8 48 231 WERE CLAIMED BY THE ASSESSEE AND THE ASSESSING OFFICER D ISALLOWED RS.1 LAC. THE ASSESSEE HAD CLAIMED RS.7 43 807 IN ALL THESE ASSES SMENT YEARS FOR TOUR. 65 ASSESSING OFFICER DISALLOWED RS. 2 LACS. LEARNED CI T(APPEALS) DELETED THE DISALLOWANCE ON THE GROUND THAT ONCE EXPENSES ARE R ECORDED IN THE BOOKS OF ACCOUNT FOR THE RESPECTIVE ASSESSMENT YEAR AND BROU GHT TO THE NOTICE OF THE DEPARTMENT THEN SUCH EXPENSES CANNOT DISALLOWED ON AN ESTIMATE BASIS IN THE BLOCK ASSESSMENT. ASSESSING OFFICER HAS NOT DISCUSS ED ANY EVIDENCE FOUND DURING THE COURSE OF SEARCH IN SUPPORT OF SUCH DISA LLOWANCE. 61. ON DUE CONSIDERATION OF THE FINDINGS OF THE LEA RNED CIT(APPEALS) IN THE LIGHT OF OUR OBSERVATION MADE WHILE DECIDING GR OUND NO.2 OF REVENUES APPEAL WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS REJECTED. 62. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. 63. NOW WE TAKE THE APPEAL OF ASSESSEE. THE ONLY G ROUND LEFT FOR ADJUDICATION IS GROUND NO.1 WHEREIN THE ASSESSEE IS IMPUGNING THE DISALLOWANCE OF DEPRECIATION ON VIRENDER GRAM BUILD ING AMOUNTING TO RS.26 81 965. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASS ESSEE BY THE ORDER OF THE ITAT IN THE CASE OF NAV MANAV SANSTHAN AND VIRENDER BHATNAGAR SANSTHAN AND SANT VASWANI EDUCATION SOCIETY (SUPRA). LEARNED DR WAS UNABLE TO CONTROVERT THE CONTENTIONS OF THE LEARNED COUNSEL F OR THE ASSESSEE. 66 64. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. THE FACTS AND CIRCUMSTANCES ON TH IS ISSUE ARE IDENTICAL. THE ASSESSEE IS ALSO A CONTRIBUTOR AND ASSOCIATE OF VIR ENDER GRAM BUILDING. THE FINDINGS OF THE ITAT IN THE CASE OF NAV MANAV SANST HAN ON THIS ISSUE READS UNDER: 23. GROUND NO.2 OF THE ASSESSEES APPEAL RELATES TO THE ISSUE OF DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(A) ON ACCOUNT OF DEPRECIATION CLAIMED ON VIRENDRA GRAM BUILDING. 24. DURING THE BLOCK PERIOD THE ASSESSEE-SOCIETY H AD SHOWN TO HAVE MADE INVESTMENT IN THE MULTI PURPOSE PROJECT CALLED AS V IRENDRA GRAM PROJECT SITUATED ON AN AREA OF ABOUT 55 ACRES AT GURGAON ON BYE-PASS ROAD. ORIGINALLY THE LAND OF THIS PROJECT WAS OWNED BY VARIOUS SOCIETIES INCL UDING THE ASSESSEE-SOCIETY RUNNING DIFFERENT SCHOOLS. THE SAID SOCIETIES HAD MADE AN INVESTMENT OF ABOUT RS.10 CRORES IN THE SAID PROJECT AND THE SHARE OF T HE ASSESSEE-SOCIETY IN THE SAID INVESTMENT WAS TO THE EXTENT OF RS.1.5 CRORES. THE SAID PROJECT INCLUDING THE INFRASTRUCTURE CREATED THEREON WHICH WAS MAINLY COM PRISING OF DIFFERENT BUILDINGS THUS WAS CLAIMED TO BE JOINTLY OWNED BY THE DIFFERE NT SOCIETIES INCLUDING THE ASSESSEE AND DEPRECIATION THEREON WAS CLAIMED IN TH E RATIO OF RESPECTIVE INVESTMENT MADE BY THE SOCIETIES ON THE GROUND THAT THE SAID ASSETS WERE OWNED BY THEM TO THE EXTENT OF INVESTMENT MADE AND THE SA ME WERE USED FOR THE PURPOSE OF THEIR EDUCATIONAL ACTIVITIES. THIS CLAIM OF THE ASSESSEE FOR DEPRECIATION ON INVESTMENT MADE IN THE FIXED ASSETS IN VIRENDRA GRA M PROJECT WAS EXAMINED BY THE AO. ON SUCH EXAMINATION HE FOUND THAT THE LAN D OF VIRENDRA GRAM PROJECT ORIGINALLY OWNED BY VARIOUS SOCIETIES WAS LATER ON TRANSFERRED TO SHRI V.K.BHATNAGAR AND HIS FAMILY MEMBERS BY WAY OF DECL AMATORY AND COMPROMISE SUITS AND THE OWNERSHIP OF THE LAND ON WHICH THE VI RENDRA GRAM PROJECT WAS SET 67 UP THUS WAS FINALLY TRANSFERRED TO AND VESTED WITH SHRI V.K.BHATNAGAR AND HIS FAMILY MEMBERS. IN THIS REGARD IT WAS CLAIMED BY THE ASSESSEE-SOCIETY THAT EVEN THOUGH THE LAND BELONGED TO SHRI V.K.BHATNAGAR AND HIS FAMILY MEMBERS THE INFRASTRUCTURE CREATED THEREON BY MAKING INVESTMENT S BY DIFFERENT SOCIETIES CONTINUED TO BELONG TO THE SAID SOCIETIES. THIS CL AIM OF THE ASSESSEE HOWEVER WAS NOT ACCEPTED BY THE AO ON THE GROUND THAT THERE WAS NO DOCUMENTARY EVIDENCE TO SUPPORT AND SUBSTANTIATE THE SAME. HE ALSO NOTED THAT THERE WAS NO AGREEMENT BETWEEN THE CONCERNED SOCIETIES ABOUT SHA RING OF ASSETS IN THE VIRENDRA GRAM PROJECT SHARING OF OTHER BENEFITS RELATING TO THE SAID PROJECT AS WELL AS SHARING OF ACTIVITIES UNDERTAKEN IN THE SAID PROJEC T. ACCORDING TO HIM THERE WAS NO COGENT EVIDENCE TO ESTABLISH THE USE OF THE VIRE NDRA GRAM PROJECT BY THE ASSESSEE-SOCIETY FOR THE PURPOSE OF ITS EDUCATIONAL ACTIVITY. HE THEREFORE HELD THAT BOTH THE CONDITIONS OF OWNERSHIP OF ASSETS AND USE THEREOF WERE NOT SATISFIED ON EVIDENCE BY THE ASSESSEE AND IT WAS THEREFORE NOT ENTITLED TO CLAIM DEPRECIATION IN RESPECT OF ASSETS OF VIRENDRA GRAM PROJECT. THE LEARNED CIT(A) UPHELD THE DECISION OF THE AO ON THIS ISSUE ADOPTIN G THE SAME REASONS AS GIVEN BY THE AO IN SUPPORT THEREOF. 25. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LAND FOR VIRENDRA GRAM PROJECT WAS ACQUIRED BY THE DIFFERENT SOCIETIE S INCLUDING THE ASSESSEE- SOCIETY DURING THE PERIOD 1980 TO 1990 AND INVESTME NT WAS ALSO MADE JOINTLY BY THE SAID SOCIETIES IN CONSTRUCTION OF BUILDING ON T HE SAID LAND. HE SUBMITTED THAT THE SAID PROJECT COMPRISING OF HOSTEL TEACHERS BLO CK ADMINISTRATIVE BLOCK CONFERENCE HALL SKATING RINK SWIMMING POOL ETC. W AS MEANT FOR USE BY THE SOCIETIES FOR EDUCATIONAL PURPOSES AND SUFFICIENT D OCUMENTARY EVIDENCE TO ESTABLISH THE SAID USE WAS PRODUCED BEFORE THE AUTH ORITIES BELOW. HE INVITED OUR ATTENTION TO SUCH EVIDENCE PLACED ON RECORD AND SUB MITTED THAT NO SPECIFIC REASON HAS BEEN GIVEN EITHER BY THE AO OR BY THE LEARNED C IT(A) TO DISPUTE THE USE OF THE ASSETS AT VIRENDRA GRAM PROJECT BY THE ASSESSEE-SOC IETY FOR ITS EDUCATIONAL ACTIVITIES. HE SUBMITTED THAT THE TOTAL INVESTMENT MADE BY THE DIFFERENT SOCIETIES IN THE SAID PROJECT UPTO THE DATE OF SEARCH WAS SHO WN AT RS.9.99 CRORES AND WHEN 68 THE MATTER WAS REFERRED BY THE AO TO THE DVO THE V ALUE OF CONSTRUCTION WAS DETERMINED BY HIM AT RS.9.65 CRORES. HE SUBMITTED THAT NO DOUBT THE LAND OF THE SAID PROJECT WAS TRANSFERRED TO SHRI V.K.BHATNAGAR AND HIS FAMILY MEMBERS IN EXCHANGE OF OTHER LAND OWNED BY THEM VIDE A DECLARA TORY SUIT AS PER THE DECISION OF THE COURT ON 30.1.1998 THE CONSTRUCTION AS WELL AS OTHER FACILITIES DEVELOPED ON THE SAID LAND REMAINED THE PROPERTY OF THE SOCIETIE S. HE CONTENDED THAT BOTH THE CONDITIONS OF OWNERSHIP AS WELL AS USE OF THE ASSET S AT VIRENDRA GRAM PROJECT THUS WERE SATISFIED IN THE CASE OF THE ASSESSEE-SOCIETY AND IT WAS ENTITLED FOR DEPRECIATION THEREON AS CLAIMED. HE ALSO SUBMITTED THAT YEAR-WISE DETAILS OF THE INVESTMENT MADE BY DIFFERENT SOCIETIES INCLUDING TH E ASSESSEE-SOCIETY IN THE VIRENDRA GRAM PROJECT WERE FURNISHED BEFORE THE AO. IN THIS CONTEXT HE INVITED OUR ATTENTION TO THE SAID DETAILS FURNISHED IN HIS PAPER BOOK. HE ALSO INVITED OUR ATTENTION TO THE PROVISIONS OF SECTION 32 TO POINT OUT THAT DEPRECIATION IS ALLOWABLE EVEN IF THE RELEVANT ASSET IS PARTLY OWNED BY THE A SSESSEE. RELYING ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF PRATHAS TRUST 249 ITR 120 HE SUBMITTED THAT PROPERTY MAY BELONG TO ONE PERSON AN D THE STRUCTURE MAY BELONG TO ANOTHER PERSON. HE ALSO RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. PODDAR CEMENT PVT.LTD. 226 ITR 62 5 WHEREIN IT WAS HELD THAT OWNER OF THE PROPERTY IS A PERSON WHO IS ENTITLED T O RECEIVE INCOME FROM THE SAID PROPERTY IN HIS OWN RIGHT. HE FURTHER RELIED ON TH E DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF ST.VASVANI EDUCATION SOCIET Y VIDE AN ORDER DATED 28.9.2004 IN ITA NO.1199/DEL/2004 [COPY AT PAPER BO OK PAGE 335 (77 & 78)] AND SUBMITTED THAT THE CLAIM OF THE ASSESSEE IN THAT CA SE FOR DEPRECIATION IN THE SIMILAR FACTS AND CIRCUMSTANCES WAS ALLOWED BY THE TRIBUNAL . 26. THE LEARNED DR ON THE OTHER HAND STRONGLY SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE DISALLOWING THE CLA IM OF THE ASSESSEE FOR DEPRECIATION ON ASSETS AT VIRENDRA GRAM PROJECT. H E CONTENDED THAT THE USE OF THE ASSETS BY THE ASSESSEE-SOCIETY FOR ITS EDUCATION AC TIVITY OF THE SAID ASSETS AS WELL AS OWNERSHIP THEREOF WAS NOT SATISFACTORILY ESTABLISHE D AS RIGHTLY HELD BY THE 69 AUTHORITIES BELOW. HE ALSO CONTENDED THAT UNLESS B OTH THESE CONDITIONS ARE SATISFIED BY THE ASSESSEE-SOCIETY IT CANNOT BE ALL OWED DEPRECIATION ON THE ASSETS AT VIRENDRA GRAM. REFERRING TO THE RELEVANT PORTIONS OF THE ORDERS OF THE AUTHORITIES BELOW HE SUBMITTED THAT EVEN THE RELEVANT DETAILS OF THE SHARE OF INVESTMENT MADE BY THE ASSESSEE-SOCIETY IN THE VIRENDRA GRAM PROJEC T WERE NOT FURNISHED TO SUPPORT AND SUBSTANTIATE ITS CLAIM FOR DEPRECIATION THEREON. 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE CLAIM O F THE ASSESSEE-SOCIETY FOR DEPRECIATION ON ASSETS FORMING PART OF INFRASTRUCTU RE OF VIRENDRA GRAM PROJECT WAS DISALLOWED BY THE AO AS WELL AS BY THE LEARNED CIT(A) ON THE GROUND THAT BOTH THE CONDITIONS FOR ALLOWING THE SAID CLAIM VIZ . OWNERSHIP OF THE SAID ASSETS AS WELL AS THE USE THEREOF WERE NOT SATISFIED IN THE C ASE OF THE ASSESSEE. IT WAS ALSO HELD BY THE AUTHORITIES BELOW THAT THE RELEVANT DET AILS OF THE INVESTMENT MADE IN THE SAID ASSETS AS WELL AS THE BASIS FOR THE EXACT SHARE OF THE ASSESSEE-SOCIETY IN THE SAID ASSETS JOINTLY OWNED BY VARIOUS SOCIETIES WERE NOT GIVEN. BEFORE WE COME TO THE ISSUE OF SATISFACTION OF THE TWO CONDITIONS FOR ALLOWING THE CLAIM OF THE ASSESSEE FOR DEPRECIATION I.E. OWNERSHIP AND USER O F THE ASSETS WE MAY NOTE THAT ALL THE RELEVANT DETAILS OF THE INVESTMENT MADE BY THE ASSESSEE-SOCIETY ALONGWITH OTHER SOCIETIES WERE FURNISHED BY IT DURING THE COU RSE OF BLOCK ASSESSMENT PROCEEDINGS ITSELF AS POINTED OUT BY THE LEARNED CO UNSEL FOR THE ASSESSEE. IN FACT IN THE CASE OF V.B.SANSTHAN THE COPIES OF ALL THE BILLS OF THE CONTRACTORS RUNNING INTO 2 562 PAGES WERE SUBMITTED BEFORE THE AO VIDE A LETTER DATED 15.5.2002 AND A CONSOLIDATED CHART OF THE INVESTMENT MADE IN THE VI RENDRA GRAM PROJECT AND THE CONTRIBUTIONS BY THE VARIOUS SOCIETIES WAS ALSO PRE PARED AND FURNISHED. AS PER THE SAID SUMMARY TOTAL INVESTMENT MADE BY DIFFERENT SO CIETIES IN THE SAID PROJECT UPTO THE DATE OF SEARCH WAS SHOWN AT RS.9.99 CRORES AND IN ORDER TO ASCERTAIN THE CORRECTNESS OF THE SAID CLAIM EVEN A REFERENCE WAS ALSO MADE BY THE AO TO THE DVO WHO VALUED THE SAID ASSETS COMPRISING MAINLY TH E CONSTRUCTION WORK AT RS.9.65 CRORES. IT CLEARLY SHOWS THAT NOT ONLY THE REQUIRED DETAILS OF THE INVESTMENT MADE IN VIRENDRA GRAM PROJECT WERE FURNI SHED BY THE ASSESSEE-SOCIETY 70 BUT THE SAME WERE ALSO VERIFIED BY THE AO. AS FAR AS THE SHARE OF DIFFERENT SOCIETIES IN THE OWNERSHIP OF THE SAID ASSETS IS CO NCERNED IT WAS CLAIMED THAT THE SAME WAS AGREED TO BE TAKEN IN THE RATIO OF CONTRIB UTION OF FUNDS MADE BY EACH SOCIETY AND THERE BEING NO DISPUTE AMONGST THE DIFF ERENT SOCIETIES FOR ADOPTION OF THE SAID BASIS THERE WAS NO REASON FOR NOT ACCEPTI NG THE SAID BASIS. 28. REVERTING BACK TO THE USE OF THE INFRASTRUCTURE FACILITIES/ASSETS OF VIRENDRA GRAM PROJECT FOR THE PURPOSE OF ITS ACTIVITIES BY T HE ASSESSEE-SOCIETY THE EVIDENCE IN THE FORM OF PHOTOGRAPHS SHOWING VARIOUS ACTIVITI ES AND COMPETITIONS HELD IN THE VIRENDRA GRAM PROJECT WAS PLACED ON RECORD BY THE A SSESSEE-SOCIETY. A COPY OF REPORT OF VIRENDRA GRAM PROJECT IS ALSO PLACED ON R ECORD EXPLAINING THEREIN THE RATIONALE BEHIND DEVELOPMENT OF THE SAID PROJECT T HE RELEVANT PORTION OF WHICH IS REPRODUCED BELOW:- THE EDUCATIONAL COMPLEX OF VIRENDRA GRAM IS AN U NIQUE CAMPUS OF GENERAL EDUCATION SPORTS AGRICULTURAL A ND ENVIRONMENTAL SCIENCES UPTO HIGHER SECONDARY LEVEL WHICH IS BEING ESTABLISHED IN THE PERIPHERY OF DELHI ON MEHR AULI-GURGAON ROAD IN VILLAGE SIKANDERPUR ONLY AT A DISTANCE OF 7 KMS. FROM MEHRAULI BY VIRENDRA BHATNAGAR SANSTHAN A REGISTE RED SOCIETY UNDER SOCIETIES REGISTRATION ACT 1860. IT WILL B E ONE OF THE PRESTIGIOUS EDUCATIONAL INSTITUTIONS OF INDIA CATE RING THE NEED OF VARIOUS CONVENT SCHOOLS OF METROPOLITAN CITY OF DEL HI AS WELL AS OF ITS SURROUNDING STATES BY PROVIDING PEACEFUL HEALT HIER & RURAL ENVIRONMENT TO THEIR STUDENTS WHICH IS HARDLY AVAIL ABLE IN THE SCHOOLS LOCATED IN CONGESTED AREAS OF THE CAPITAL. FIRSTLY THE ORIGIN OF THE ABOVE EDUCATIONAL COMPLE X OF VIRENDRA GRAM IS THE RESULT OF AN EXCITING BUT SILENT REVOL UTION FOR BETTER ENGLISH MEDIUM CONVENT EDUCATION WHICH HAS STARTED RECENTLY PARTICULARLY IN ALL URBAN AREAS OF INDIA AS THERE I S A CRAZE AMONG URBAN PARENTS FOR EDUCATING THEIR CHILDREN IN ENGLI SH MEDIUM CONVENT SCHOOLS. IN THESE DAYS THE ABOVE REVOLUTIO N IS AT PEAK IN THE METROPOLITAN CITY OF NEW DELHI WHICH RESULTED I N HEAVY RUSH OF ENROLMENT OF NEW STUDENTS IN ALL OUR SEVEN PUBLIC S CHOOLS (THE DETAIL OF SCHOOLS IS DESCRIBED HEREINAFTER) RUN BY VIRENDRA BHATNAGAR SANSTHAN AND ITS ALLIED SOCIETIES. SECO NDLY THE REPUTATION OF OUR ABOVE EDUCATIONAL INSTITUTIONS DU E TO REMARKABLE RESULTS (GENERALLY MORE THAN 60 PERCENT STUDENTS OF OUR PUBLIC 71 SCHOOLS GOT DISTINCTIONS AT ALL INDIA LEVEL IN EVER Y YEAR) HAVE ALSO BECOME AN ATTRACTION FOR THE BRILLIANT STUDENTS OF THE COUNTRY AGAIN RESULTING INTO HEAVY RUSH OF STUDENTS AND HENCE ORI GIN OF VIRENDRA GRAM. THE ABOVE TENDENCY OF INCREASING STRENGTH O F STUDENTS CAUSED SCARCITY OF BUILDINGS PLAY GROUNDS AND OTHE R EDUCATIONAL FACILITIES IN OUR ALREADY EXISTING SEVEN PUBLIC SCH OOLS LOCATED AT NEW DELHI. REALIZING THE ABOVE PROBLEMS SEVEN EDUCATIONAL ORG ANIZATIONS OF NEW DELHI I.E. (1) MANAV SHIKSHA SAMITI NEW DELHI. (2) RAJENDRA NAGAR EDUCATION SOCIETY NEW DELHI. (3) V.B.SANSTHAN NEW DELHI (4) ST.WASVANI EDUCATION SOCIETY NEW DELHI. (5) NAV MANAV SANSTHAN NEW DELHI. (6) ARYA BHATT VIDYA SANSTHAN N EW DELHI. (7) LAXMI BAI FOUNDATION NEW DELHI ADOPTED A RESO LUTION ON 1 ST MARCH 1979 (ANNEXURE-I) FOR JOINTLY PURCHASING AN AREA OF ABOUT 100 ACRES ON DELHI-HARYANA BORDER FOR THE ESTABLISH MENT OF AN EDUCATIONAL INSTITUTION BASED ON NATURAL ENVIRONMEN T NAMED VIRENDRA GRAM. IN THE RESOLUTION IT WAS ALSO DEC IDED THAT THE ABOVE EDUCATIONAL INSTITUTION WILL BE RUN BY VIREN DRA BHATNAGAR SANSTHAN FORMED JOINTLY BY THE ABOVE SEVEN EDUCATI ONAL ORGANIZATIONS. IT IS WORTH MENTIONING HERE THAT AS MENTIONED IN THE RESOLUTION DATED 1 ST MARCH 1989 THE ABOVE MENTIONED EDUCATIONAL ORGANIZATION ARE RUNNING SEVEN PUBLIC SCHOOLS IN NE W DELHI I.E. MANAV STHALI SCHOOL NEW RAJENDRA NAGAR NEW DELHI (RUN BY RAJENDRA NAGAR EDUCATION SOCIETY) MANAV STHALI SCH OOL PUSA ROAD NEW DELHI (RUN BY MANAV SHIKSHA SAMITI) MANA V STHALI SCHOOL SOUTH EXTENSION NEW DELHI (RUN BY ST.WASVA NI EDUCATION SOCIETY) SOUTH TOWN SCHOOL SOUTH EXTENS ION NEW DELHI (RUN BY ARYA BHATT VIDYA SANSTHAN) CONVENT O F RANI JHANSI R.K.PURAM NEW DELHI (RUN BY LAXMI BAI FOUN DATION) ST.VIVEKA NAND SCHOOL EAST PATEL NAGAR NEW DELHI (RUN BY NAV MANAV SANSTHAN) AND MANAV STHALI SCHOOK DOUBLE STO REY NEW RAJENDRA NAGAR NEW DELHI (RUN BY MANAV SHIKSHA SAM ITI). ALL THESE SCHOOLS ARE LOCATED IN CONGESTED AREAS WH ERE THERE IS NO SCOPE OF EXPANSION AND THEREBY ALL THE ABOVE EDUCAT IONAL ORGANIZATIONS DECIDED TO HAVE A BIG EDUCATIONAL INS TITUTION HAVING ADEQUATE SPACES FOR ALL TEACHING BLOCKS RECREATION AL FACILITIES STUDENTS & STAFF ACCOMMODATION AND ADEQUATE LAND WH ERE STUDENTS MAY BE TAUGHT ABOUT CULTIVATION AGRICULTURE POULT ING FARMING CATTLE FARMING FRUIT CULTURE ETC. AS WELL AS ADEQU ATE SPACES FOR ALL MODERN GAMES. 72 ALSO IT WAS DECIDED THAT THERE WAS A NEED TO INTROD UCE ENVIRONMENTAL EDUCATION AMONG THE URBAN STUDENTS (S TUDENTS OF THE INSTITUTION) WHICH SHOULD INCLUDE THE STUDY OF ALL ENVIRONMENTAL ELEMENTS SUCH AS CLIMATE EARTH PLANTS ANIMALS AN D THEIR NATURAL ECO-SYSTEM AS WELL AS STUDIES OF INTERDEPENDENCE OF THESE ELEMENTS FROM PRIMARY LEVELS. THE PRACTICAL KNOWLEDGE OF AL L ENVIRONMENTAL ELEMENTS IS OF GREAT IMPORTANCE TO THE STUDENTS OF PRIMARY LEVEL AS ENVIRONMENTAL PROBLEMS ARE INCREASING DAY BY DAY AN D THE GOVERNMENT IS ALSO KEEN IN INTRODUCING SUCH SUBJECT S TO THE STUDENTS OF PRIMARY LEVEL. IN ADDITION TO THIS V IRENDRA GRAM WILL ALSO INTRODUCE THE RURAL WAY OF LIFE AND RURAL OCCU PATIONS SUCH AS AGRICULTURE POULTRY FARMING CATTLE FARMING FRUIT CULTURE ETC. AS STUDENTS OF URBAN AREAS KNOW NOTHING ABOUT THE ABOV E RURAL OCCUPATIONS WHICH ARE OF GREAT IMPORTANCE FOR THE S URVIVAL OF MANKIND. THUS VIRENDRA GRAM SHALL FUNCTION AS A TRAINING CENTRE FOR ALL STUDENTS OF THE SCHOOLS RUN BY ABOVE EDUCATIONAL OR GANIZATION. THE STUDENTS OF ABOVE MENTIONED SCHOOLS SHALL TAKE TRAI NING IN THE VIRENDRA GRAM IN ROTATION I.E. SOCIETY WISE OR AG E WISE. WITH THE ESTABLISHMENT OF VIRENDRA GRAM THE PROBLEMS OF AL L ABOVE SCHOOLS WILL BE SOLVED. 29. THE OBJECTIVES OF THE VIRENDRA GRAM PROJECT WER E ALSO ENUMERATED IN THE AFORESAID REPORT WHEREIN IT WAS CLEARLY INDICATED T HAT THE SAID PROJECT WAS BEING ESTABLISHED FOR SOLVING THE PROBLEMS OF SCARCITY OF LAND AND BUILDINGS OF THE SEVEN SCHOOLS OF THE PARTICIPATORY SOCIETIES INCLUDING ST .VIVEKANAND SCHOOL OF THE ASSESSEE-SOCIETY. IN ORDER TO ASCERTAIN THE PARTIC IPATION OF THE STUDENTS OF THE SCHOOL OF THE ASSESSEE-SOCIETY IN THE SAID ACTIVITI ES WE DIRECTED THE LEARNED COUNSEL FOR THE ASSESSEE DURING THE COURSE OF APPEL LATE PROCEEDINGS BEFORE US TO FILE THE SUPPORTING DOCUMENTARY EVIDENCE IF ANY. IN THIS REGARD HE HAS FILED A COPY OF SCHOOL NEWS BULLETIN VIZ. MANAV MIRROR PU BLISHED IN MARCH 1995 WHICH SHOWS THAT INTERSCHOOL SKATING CHAMPIONSHIP W AS ORGANIZED AT VIRENDRA GRAM PROJECT AND THE STUDENTS OF VIVEKANAND SCHOOL RUN BY THE ASSESSEE-SOCIETY HAD PARTICIPATED IN THE SAID COMPETITION. IT ALSO SHOWS THAT ANNUAL FUNCTION OF THE DIFFERENT SCHOOLS INCLUDING THE SCHOOL RUN BY THE A SSESSEE-SOCIETY WAS HELD IN VIRENDRA GRAM PROJECT. KEEPING IN VIEW THIS EVIDEN CE PLACED ON RECORD BY THE 73 ASSESSEE AND HAVING REGARD TO THE FACT THAT HUGE IN VESTMENT WAS ADMITTEDLY MADE BY THE ASSESSEE-SOCIETY TO CREATE THE INFRASTRUCTUR E FACILITIES TO FACILITATE DIFFERENT SCHOOL ACTIVITIES WE ARE OF THE VIEW THAT THE ASSE SSEE-SOCIETY HAS DULY ESTABLISHED ITS CLAIM THAT THE INFRASTRUCTURE CREATED AT VIREND RA GRAM PROJECT WAS USED FOR ITS ACTIVITY OF RUNNING A SCHOOL AND THE AUTHORITIES BE LOW WERE NOT JUSTIFIED IN HOLDING THAT SUCH USE WAS NOT SATISFACTORILY ESTABLISHED BY THE ASSESSEE. 30. AS REGARDS THE OWNERSHIP OF THE ASSETS OF VIREN DRA GRAM PROJECT IT IS OBSERVED THAT THE LAND ON WHICH THE SAID PROJECT WA S DEVELOPED HAD BEEN INITIALLY PURCHASED AND OWNED BY THE ASSESSEE-SOCIETY JOINTLY WITH OTHER SOCIETIES. THIS BEING THE UNDISPUTED POSITION AND KEEPING IN VIEW T HAT THE FACTUM AND QUANTUM OF INVESTMENT MADE BY THE ASSESSEE-SOCIETY IN CREATION OF INFRASTRUCTURE ON THE SAID LAND WAS ACCEPTED EVEN BY THE AO AFTER HAVING GOT T HE SAID INVESTMENT VALUED FROM THE DVO WE ARE OF THE VIEW THAT THE OWNERSHIP OF THE ASSETS FORMING PART OF THE SAID INFRASTRUCTURE TO THE EXTENT OF ITS SHARE AS DETERMINED ON THE BASIS OF CONTRIBUTION OF FUNDS MADE HAS TO BE TAKEN AS DULY ESTABLISHED. THE AO AS WELL AS THE LEARNED CIT(A) HOWEVER HAS DISPUTED THE SA ME MAINLY ON THE GROUND THAT THE LAND BELONGING TO THE ASSESSEE-SOCIETY ON WHICH VIRENDRA GRAM PROJECT HAD BEEN DEVELOPED WAS SUBSEQUENTLY TRANSFERRED TO SHRI V.K.BHATNAGAR AND HIS FAMILY MEMBERS IN EXCHANGE OF SOME OTHER LAND AND I T HAD THUS NO MORE REMAINED THE OWNER OF THE LAND OR EVEN THE INFRASTRUCTURE CR EATED THEREON. AFTER HAVING NOTED THAT THE SAID EXCHANGE OF LAND WAS EFFECTED B Y WAY OF A DECLARATORY SUIT THE LEARNED COUNSEL FOR THE ASSESSEE WAS DIRECTED BY US TO FILE THE COPIES OF RELEVANT PLAINT AND COMPROMISE DECREES THROUGH WHICH THE LAN D OF THE SOCIETY WAS EXCHANGED WITH LAND OF SHRI V.K.BHATNAGAR AND HIS F AMILY MEMBERS. A PERUSAL OF THE SAID DOCUMENTS PLACED BY HIM ON RECORD SHOWS THAT THE LAND BELONGING TO THE SOCIETY WAS ACTUALLY EXCHANGED ONLY IN THE MONT H OF JANUARY 1998 AND THE ASSESSEE-SOCIETY THUS HAD CEASED TO BE THE OWNER OF THE SAID LAND ON WHICH VIRENDRA GRAM PROJECT WAS DEVELOPED THEREAFTER. IT FOLLOWS THAT THE ASSESSEE- SOCIETY CONTINUED TO REMAIN THE OWNER OF THE SAID L AND UPTO THE END OF THE PREVIOUS YEAR RELEVANT TO AY 1997-98 AND THIS BEING SO THE OWNERSHIP OF THE ASSETS COMPRISING THE INFRASTRUCTURE CREATED ON THE SAID LAND BELONGING TO IT COULD NOT BE QUESTIONED ON THE BASIS OF EXCHANGE OF LAND WHICH HAD TAKEN PLACE ONLY IN THE PREVIOUS YEAR RELEVANT TO AY 1998-99. AS REGAR DS THE CLAIM OF THE ASSESSEE- SOCIETY FOR DEPRECIATION ON THE SAID ASSETS FOR AND FROM AY 1998-99 THE PLEA TAKEN BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFOR E THE AUTHORITIES BELOW AS WELL AS BEFORE US HAS BEEN THAT EVEN THOUGH THE LAND OF THE VIRENDRA GRAM PROJECT WAS TRANSFERRED TO SHRI VIRENDER BHATNAGAR AND HIS FAMI LY MEMBERS IN JANUARY 1998 IN EXCHANGE OF SOME OTHER LAND THE OWNERSHIP OF TH E ASSETS COMPRISING INFRASTRUCTURE CREATED ON THE SAID LAND CONTINUED T O REMAIN WITH THE VARIOUS SOCIETIES INCLUDING THE ASSESSEE-SOCIETY IN THE RAT IO OF INVESTMENT MADE THEREIN. IT 74 IS NO DOUBT TRUE THAT THE CONCEPT OF DUAL OWNERSHIP IS RECOGNIZED BY LAW IN INDIA AND AS HELD BY THE HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. PRATASTH TRUST 249 ITR 120 CITED BY THE LEARNED COUNSEL FO R THE ASSESSEE THE LAND PROPERTY MAY BELONG TO ONE PERSON AND THE STRUCTURE THEREON MAY BELONG TO ANOTHER PERSON. HOWEVER THE ONUS TO ESTABLISH THA T THERE WAS SUCH A DUAL OWNERSHIP IN EXISTENCE HAS TO BE ESTABLISHED BY THE ASSESSEE CLAIMING THE SAME ON THE FACTS OF EACH CASE AS WELL AS THE EVIDENCE IN S UPPORT THEREOF. IN THE PRESENT CASE THE ORDERS OF THE AUTHORITIES BELOW SHOW THAT THIS EXERCISE WAS NOT SPECIFICALLY DONE INASMUCH AS THE ASSESSEE WAS NOT CALLED UPON TO ESTABLISH HIS CASE. WE THEREFORE FIND IT FAIR AND PROPER AND I N THE INTEREST OF JUSTICE TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WIT H A DIRECTION TO ALLOW AN OPPORTUNITY TO THE ASSESSEE TO ESTABLISH ITS CLAIM THAT EVEN AFTER TRANSFER OF ITS LAND IN JANUARY 1998 THE OWNERSHIP OF THE ASSETS COMPR ISING INFRASTRUCTURE CREATED ON THE SAID LAND CONTINUED TO BE WITH IT. ACCORDINGLY THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON ASSETS OF VIRENDRA GRAM PROJECT IS ALLOWED UPTO AY 1997-98 WHEREAS THE ISSUE RELATING TO ITS CLAIM FOR THE SAI D DEPRECIATION FOR AY 1998-99 AND ONWARDS IS RESTORED TO THE FILE OF THE AO FOR D ECIDING THE SAME AFRESH AS PER THE DIRECTION GIVEN ABOVE. 65. RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT W E DIRECT THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION TO THE ASSESSEE U P TO 1997-98 AND FOR THE YEARS 1998-99 ONWARDS HE SHALL RE-ADJUDICATE THE IS SUE IN ACCORDANCE WITH THE DIRECTIONS OF THE ITAT GIVEN IN NAV MANAV SOCIE TY WHICH IS A SIMILARLY SITUATED SOCIETY. 66. IN THIS APPEAL THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF THE ITAT'S RULES THEY AR E DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF THE GRIEVANCE OF ASSESSEE RELATES TO DENIAL OF EXEMPTION UNDER SEC. 10(22) OF THE INCOME-TAX AC T 1961 IN ASSESSMENT YEAR 1997-98 AND TAXING THE SURPLUS OF RS.20 54 384 . THE OTHER GRIEVANCE OF 75 THE ASSESSEE IS THAT ASSESSING OFFICER HAS ERRED IN CHARGING INTEREST UNDER SEC. 234-B OF THE INCOME-TAX ACT 1961. 67. THE BRIEF HISTORY OF THE ASSESSEE HAS ALREADY B EEN NOTICED BY US WHILE DISPOSING OF THE BLOCK ASSESSMENT APPEALS. IT HAS F ILED ITS RETURN FOR ASSESSMENT YEAR 1997-98 ON 31.3.1999 IN THE TRUST CIRCLE TOTAL INCOME WAS DECLARED AT NIL. THE ASSESSING OFFICER AFTER DISCUS SING THE BRIEF HISTORY OF THE ASSESSEE I.E. WHEN IT CAME INTO EXISTENCE WHAT ARE ITS MAIN OBJECTS AND WHICH EDUCATIONAL INSTITUTION IT HAS BEEN RUNNING MADE A REFERENCE ABOUT THE ROLE OF SHRI VK BHATNAGAR BEING FOUNDER OF VARIOUS SOCIETIES AND SCHOOLS. HE OBSERVED THAT ASSESSEE HAD MADE AN ADVANCE OF AT RS.1.43 CRORES WHICH READS AS UNDER: ADVANCE FOR FLATS FOR PURCHASE OF CAPITAL ASSETS RS.10 77 280 ADVANCE FOR LAND DELHI DEVELOPMENT AUTHORITY RS.17 00 000 C.L. SHARMA . RS. 1 37 695 LAXMI BAI FOUNDATION CONVENT OF RANI JHANSI RS. 6 00 000 SECTOR-8 RK PURAM N.DELHI RAJENDRA NAGAR MANAV STHALI SCHOOL RS. 78 35 032 EDUCATION SOCIETY R-BLOCK RAJENDER NAGAR NEW DELHI. ST. VIVEKANAND SCHOOL 2/3 EAST PATEL NAGAR N.DELHI . RS. 6 500 RS.1 43 56 507 76 68. THE ASSESSING OFFICER HAS DIRECTED THE ASSESSEE TO PRODUCE THE RESOLUTION/MINUTES BOOK IN SUPPORT OF ITS CLAIM THA T SUCH AMOUNTS WERE ADVANCED BY THE SOCIETY AFTER A PROPER AUTHORIZATIO N. THE ASSESSING OFFICER THEREAFTER TOOK NOTE OF THE SURPLUS SHOWN BY THE AS SESSEE IN ASSESSMENT YEARS 1992-93 UP TO 1997-98. ASSESSING OFFICER IN A BRIEF FINDING TOOK NOTE OF THE CIRCUMSTANCES FOUND DURING THE COURSE OF SEARCH EXH IBITING THE ROLE OF VARIOUS INDIVIDUALS IN RUNNING THE EDUCATIONAL SOCI ETY THE APPLICATION OF INCOME BY SUCH SOCIETIES. HE BRIEFLY OBSERVED THAT SUBSTANTIAL AMOUNTS WERE DIVERTED TO THE OTHER SOCIETIES RUN BY THIS GROUP. THE ASSESSEE INSPITE OF REPEATED REQUESTS FAILED TO FILE ANY PLAUSIBLE EXPL ANATION OR CLARIFICATION OR EVIDENCE TO JUSTIFY THE DIVERSION OF FUNDS. ACCORDI NG TO THE ASSESSING OFFICER THE ASSESSEE HAS ONLY STATED THAT THE FUND S WERE UTILIZED FOR NECESSARY INFRA-STRUCTURE LIKE BUILDING PLAY GROUN D AND OTHER FACILITIES BUT IT HAS NOT CLARIFIED ITS STAND. THE ASSESSING OFFICER HAS DENIED THE EXEMPTION TO THE ASSESSEE UNDER SEC. 10(22) AND TAXED THE SUR PLUS OF RS.21 54 380 WORKED OUT IN THE INCOME AND THE EXPENDITURE ACCOUN T. 69. ON APPEAL LEARNED CIT(APPEALS) HAS CONFIRMED T HE ORDER OF THE ASSESSING OFFICER ON THE GROUND THAT IN THE BLOCK A SSESSMENT HE HAS DISCUSSED THIS ISSUE IN HIS ORDER DATED 24 TH NOVEMBER 2005. THE PRESENT 77 ASSESSMENT YEAR IS FORMING PART OF THE BLOCK ASSESS MENT AND IN THE BLOCK ASSESSMENT HE HAS GIVEN A FINDING THAT THE FUNDS OF THE ASSESSEE HAVE BEEN UTILIZED FOR NON BUSINESS PURPOSES. IN THIS WAY LE ARNED CIT(APPEALS) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 70. LEARNED COUNSEL FOR THE ASSESSEE WHILE IMPUGNIN G THE ORDERS OF THE REVENUE AUTHORITIES BELOW CONTENDED THAT THE ASSESS EE IS AN EDUCATIONAL SOCIETY WHOSE MAIN OBJECT IS TO IMPART EDUCATION AN D IN PURSUANCE OF THIS OBJECT IT HAS BEEN RUNNING TWO SCHOOLS NAMELY MA NAV STHALI SCHOOL BEHRA ENCLAVE PASCHIM VIHAR AND MANAV STHALI SCHOOL DOU BLE STOREY NEW RAJINDER NAGAR NEW DELHI. 71. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER C ONTENDED THAT ASSESSEE HAS FILED RETURNS OF INCOME FOR THE ASSESSMENT YEAR S 1992-93 UP TO 1998-99 EXCEPT ASSESSMENT YEAR 1997-98 BEFORE THE SEARCH AC TION TAKEN UPON THE ASSESSEE. THE ASSESSMENTS HAVE BEEN FRAMED UNDER SE C. 143(3) READ WITH SECTION 147 AND EXEMPTIONS WERE ALLOWED TO THE ASSE SSEE UNDER SEC. 10(22) EXCEPT IN ASSESSMENT YEAR 1997-98. HE FURTHER CONTE NDED THAT EXEMPTION UNDER SEC. 11 WAS ALSO DENIED TO THE ASSESSEE ON SI MILAR REASONS IN ASSESSMENT YEAR 2000-01. THE DISPUTE TRAVELED UP TO THE ITAT IN ITA NO. 631/DEL/08 THE ITAT HAS SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING 78 OFFICER AFTER CONSIDERING THE NATURE OF ADVANCES. I N THE OPINION OF THE ITAT THE ALLEGED ADVANCES CANNOT BE EQUATED WITH THE DEP OSITS AS CONTEMPLATED IN SEC. 11(5) OF THE ACT. IN ASSESSMENT YEAR 1991-92 THE EXEMPTION WAS DENIED BY THE ASSESSING OFFICER AND DISPUTE TRAVELED UP TO THE ITAT IN ITA NO.1343/DEL/06. IN THAT YEAR THE ASSESSEE HAD MADE THE INVESTMENT IN SCHOOL BUILDING AND DISCLOSED THE INVESTMENT AT RS. 10 17 094. THE ISSUE WAS REFERRED TO THE VALUATION CELL WHO ESTIMATED THE CO ST OF CONSTRUCTION AT RS.15 03 347. THE ASSESSING OFFICER DENIED THE EXEM PTION TO THE ASSESSEE ON THIS EXCESS AMOUNT AND THE DISPUTE TRAVELED UP T O THE ITAT WHERE THE ITAT HAS ALLOWED THE APPEAL OF THE ASSESSEE AND HEL D THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SEC. 10(22) OF THE ACT . SIMILARLY IN ASSESSMENT YEAR 2002-03 THE EXEMPTION WAS DENIED TO THE ASSESS EE BY THE ASSESSING OFFICER BUT LEARNED CIT(APPEALS) HAS ALLOWED THE EX EMPTION UNDER SEC. 11 OF THE ACT. THE DISPUTE TRAVELED UP TO THE ITAT IN ITA NO.2600/DEL/06. THE ITAT HAS DECIDED THE FOUR APPEALS FILED AT THE INST ANCE OF THE REVENUE IN CASE THIS GROUP OF SOCIETIES NAMELY LAXMI BAI FOU NDATION ARYA BHAT VIDYA SANSTHAN NAV MANAV SANSTHAN AND MANAV SIKSHA SAMITI. THE ITAT HAS DISMISSED ALL THE APPEALS OF THE REVENUE AND UP HELD THE GRANT OF EXEMPTION UNDER SECTION 11 OF THE ACT BECAUSE IN T HAT YEAR SECTION 10(22) 79 HAS BEEN OMITTED. THE LEARNED COUNSEL FOR THE ASSES SEE FURTHER CONTENDED THAT IN ASSESSMENT YEARS 2004-05 AND 2005-06 ASSES SING OFFICER HIMSELF ALLOWED THE EXEMPTION UNDER SEC. 11 ON THE GROUND T HAT IT IS WORKING SOLELY FOR THE EDUCATION PURPOSES. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE STRENGTH OF ITATS ORDERS IN THE BLOCK ASSESSMENTS IN THE CASES OF RAJINDER NAGAR EDUCATION NAV MANAV SANSTHAN VIRENDRA BHATN AGAR AND SANT VASWANI EDUCATION SOCIETY CONTENDED THAT THERE WAS NO MATERIAL FOUND AT THE TIME OF SEARCH WHICH CAN INDICATE THAT ASSESSEE IS EARNING PROFIT. THE BRIEF NARRATIONS MADE BY THE ASSESSING OFFICER WITH REGARD TO THE FACTS AND CIRCUMSTANCES NOTICED IN THE BLOCK ASSESSMENT ARE C ONCERNED THESE HAVE DULY BEEN CONSIDERED BY THE ITAT IN THE CASES OF OT HER EDUCATIONAL SOCIETIES AS WELL AS IN THE CASE OF ASSESSEE AND AFTER CONSID ERING THOSE FACTORS ITAT HAS OBSERVED THAT ASSESSEES WOULD BE ENTITLED TO CL AIM EXEMPTION UNDER SEC. 10(22) OF THE ACT. 72. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE TAK ING UP THROUGH THE DETAILS OF ALLEGED LOAN CONSIDERED BY THE ASSESSING OFFICER SUBMITTED THAT SUM OF RS.47 LACS WAS PAID TO THE DDA FOR ALLOTMENT OF LAND IN JULY 1988. THE SALE DEED OF THE LAND SOMEHOW COULD NOT BE EXEC UTED IN FAVOUR OF THE ASSESSEE OR IT COULD NOT BECOME THE OWNER ON PAPER BUT ITS SCHOOL IS 80 FUNCTIONING ON THAT VERY PIECE OF LAND. IT WAS DULY BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER AND IT WAS ALSO POINTED OUT T HAT LITIGATION IS GOING ON BETWEEN THE DDA AND THE ASSESSEE. AS FAR AS THE AMO UNT OF RS.78 35 032 IS CONCERNED IT IS AN ADVANCE GIVEN TO M/S. R.N. EDUC ATION SOCIETY WHO ENJOYED THE BENEFIT OF SEC. 12 OF THE INCOME-TAX AC T 1961. THIS SOCIETY IS ALSO RUNNING A SCHOOL AND IT IS FOR EDUCATIONAL PUR POSES. IT WAS NOT HAVING SUFFICIENT FUND AND THEREFORE ASSESSEE HAS HELPED IT. THE ADVANCEMENT OF THIS LOAN IS TO BE CONSTRUED AS APPLICATION OF FUND FOR THE PURPOSE OF FULFILLMENT OF THE OBJECTS OF THE ASSESSEE I.E. TO IMPART EDUCATION. WITH REGARD TO THE SUM OF RS.10 77 280 HE POINTED OUT THAT THI S AMOUNT WAS PAID TO M/S. REGENCY INDUSTRIES FOR THE PURCHASE OF FLATS BECAU SE OF SOME UNCERTAIN REASONS NEITHER FLAT WAS ALLOTTED TO THE SOCIETY NO R THE MONEY WAS RETURNED TO IT. IT IS NOT DEPOSIT BY SOCIETY. WITH REGARD TO TH E LOAN OF RS.1 37 695 IS CONCERNED IT IS THE LOAN PAID TO SHRI C.L. SHARMA IN REGULAR COURSE AND LATER ON IT WAS ADJUSTED. THE ASSESSEE HAS PLACED ON RECO RD COPY OF THE LEDGER ACCOUNT AT PAGE NOS.12 TO 18. THE ASSESSEE HAS FURT HER ADVANCED A SUM OF RS.6 LACS TO LAXMI BAI FOUNDATION WHO IS ENJOYING R EGISTRATION UNDER SEC. 12A AND RUNNING SCHOOL. THIS ADVANCE IS ALSO FOR FU LFILLING THE OBJECT OF EDUCATION. ASSESSEE HAS PAID A SUM OF RS.6500 TO SA INT VIVEKANAND SCHOOL. 81 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BANK HAS WRONGLY DEBITED THE ACCOUNT OF ST. VIVEKANAND SCHOOL AND SU BSEQUENTLY ADJUSTMENTS HAVE BEEN MADE. IT HAS DULY BEEN REFLECTED IN THE L EDGER ACCOUNT. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT IN ASSESSMENT YEAR 2000-01 ASSESSING OFFICER HAS CONSIDERED THESE VER Y AMOUNTS AS DEPOSITS WITHIN THE MEANING OF SEC. 11(5) OF THE ACT. HE DEN IED THE EXEMPTION TO THE ASSESSEE ON THE GROUND THAT THESE ARE NOT THE SPECI FIED MODES PROVIDED IN SEC. 11(5) FOR MAKING DEPOSIT OF THE SURPLUS AMOUNT OF THE SOCIETY. ON THE STRENGTH OF THESE DETAILS HE PRAYED THAT THE EXEMP TION BE ALLOWED TO THE ASSESSEE UNDER SEC. 10(22) OF THE INCOME-TAX ACT 1 961. LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE ASSESSING O FFICER. HE POINTED OUT THAT ASSESSING OFFICER HAS CONSIDERED THE CUMULATIV E EFFECT OF THE FACTS AND CIRCUMSTANCES AND INFORMATION COLLECTED IN THE SEAR CH AND THEREAFTER ARRIVED AT A CONCLUSION THAT ASSESSEE HAS BEEN EARNING PROF IT WHICH HAS BEEN DIVERTED TO OTHER INSTITUTIONS. HE FURTHER CONTENDED THAT LE ARNED CIT(APPEALS) HAS OBSERVED THAT ASSESSEES HAVE UTILIZED THE FUNDS FOR NON-BUSINESS PURPOSES HENCE IT IS NOT ENTITLED FOR EXEMPTION UNDER SEC. 1 0(22) OF THE ACT. 73. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. SECTION 10(22) OF THE ACT PROVIDE S THAT ANY INCOME OF A 82 UNIVERSITY OR OTHER EDUCATIONAL INSTITUTIONS EXIST ING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSE OF PROFIT THEN SUCH IN COME WILL NOT FORM PART OF THE TOTAL INCOME OF THAT ASSESSEE. THE ASSESSEE SOC IETY CAME INTO EXISTENCE W.E.F. 4.2.1976. IT WAS REGISTERED UNDER SEC. 12A O F THE INCOME-TAX ACT 1961. IT IS RUNNING TWO SCHOOLS. THERE IS NO DISPUT E ON FACTS TO THIS EXTENT. THE ASSESSEE HAS BEEN ALLOWED EXEMPTION UNDER SEC. 10(22) FROM ASSESSMENT YEARS 1992-93 UP TO 1998-99 EXCEPT THE PRESENT ASSE SSMENT YEAR. THE LEARNED CIT(APPEALS) IN THE IMPUGNED ORDER WHILE C ONFIRMING THE FINDING OF THE ASSESSING OFFICER HAS MADE THE FOLLOWING OBS ERVATIONS: 2.1 THERE WAS A SEARCH AND SEIZURE OPERATION CONDU CTED BY THE DEPARTMENT AT THE SCHOOL PREMISES RUN BY THE APPELL ANT SOCIETY U/S.132(1) OF THE ACT ON 15 TH JANUARY 1999. BLOCK ASSESSMENT IN THE CASE OF THE APPELLANT SOCIETY WAS COMPLETED BY THE A.O. U/S. 158BC OF THE ACT ON 30 TH JANUARY 2001. AGAINST THIS THE SOCIETY HAD PREFE RRED AN APPEAL BEFORE ME AND THE SAID BLOCK ASSESSMENT A PPEAL WAS DECIDED BY ME VIDE MY ORDER DATED 24 TH NOV. 2004. THE PRESENT ASSESSMENT YEAR I.E. 1997-98 IS COMPRISED IN THE BL OCK PERIOD. IN THE APPEAL FILED AGAINST THE BLOCK ASSESSMENT I HAVE GI VEN A FINDING THAT THE FUNDS OF THE ASSESSEE HAVE BEEN UTILIZED FOR NO N-BUSINESS PURPOSES. AS THE ASSESSMENT YEAR IS COMPRISED IN TH E BLOCK PERIOD MY FINDING GIVEN IN THE BLOCK ASSESSMENT APPEAL THAT T HE FUNDS HAVE BEEN UTILIZED BY THE ASSESSEE FOR OTHER THAN EDUCATIONAL PURPOSES IS 83 APPLICABLE HERE ALSO WITH EQUAL FORCE. THEREFORE I DO NOT FIND ANY MERITS IN THE GROUNDS OF APPEAL AND THE SAME ARE DI SMISSED. THIS FINDING IS CONTRADICTORY TO HIS FINDING GIVEN IN THE BLOCK ASSESSMENT. WE HAVE ALREADY DISPOSED OF THE APPEALS ARISING FRO M BLOCK ASSESSMENT IN THIS VERY ORDER. LEARNED CIT(APPEALS) THOUGH UPHELD THE DENIAL OF EXEMPTION UNDER SEC. 10(22) TO THE ASSESSEE IN SOME OF THE YEARS FORMING PART OF BLOCK ASSESSMENT BUT SUCH EXEMPTION HAS BEE N DENIED ONLY ON THOSE YEARS WHERE ASSESSEE HAS NOT FILED THE REGULAR RETU RN. ACCORDING TO THE LEARNED CIT(APPEALS) THE EXEMPTION CAN ONLY BE GRA NTED TO THE ASSESSEE IF IT HAS FILED THE RETURN. LEARNED CIT(APPEALS) HAS H ELD THAT ASSESSEE WILL BE ENTITLED TO EXEMPTION U/S. 10(22) FOR THE YEARS FOR WHICH IT HAS FILED REGULAR RETURNS. THERE IS NO DISCUSSION OR FINDING IN THE O RDER OF THE LEARNED CIT(APPEALS) THAT SUCH EXEMPTION HAS BEEN DENIED ON THE GROUND THAT ASSESSEE HAS BEEN EARNING PROFIT AND IT WAS NOT UTI LIZED FOR THE PURPOSE OF THE EDUCATION. THE BRIEF RELEVANT FINDING IN THIS CONNE CTION READS AS UNDER: I HAVE SEEN THE RELEVANT RECORD. SECTION 10(22) T HE BENEFIT OF WHICH IS CLAIMED BY THE APPELLANT PROVIDES FOR EXCLUSION OF INCOME OF INTER ALIA EDUCATIONAL INSTITUTIONS EXISTING SOLELY FOR E DUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. WHILE COMPUTING THE INCOME OF A PERSON THE BENEFIT OF EXCLUSION OF INCOME OF EDUCAT IONAL INSTITUTION IS 84 AVAILABLE ONLY WHEN THE APPELLANT DISCLOSES SUCH IN COME AS ALSO SATISFIES THE ASSESSING OFFICER THAT IT COMES WITHI N THE AMBIT OF SECTION 10(22). IT IS FOR THE ASSESSING OFFICER TO EVALUATE THE CLAIM OF THE APPELLANT EVERY YEAR WHICH ACCORDINGLY REQUIRES SUCH A PERSON WHO IS CLAIMING THE BENEFIT TO FILE ITS RETURN OF I NCOME/LOSS EVERY YEAR. IT NEED NOT BE OVER STRESSED THAT THE CLAIM HAS TO BE JUDGED EVERY YEAR AND AS SUCH THE PERSON CONCERNED IS OBLIGED TO FILE ITS RETURN FOR THE YEAR FOR WHICH IT CLAIMS BENEFIT U/S 10(22) AND SUC H BENEFIT CANNOT BE ARROGATED BY THE PERSON TO ITSELF WITHOUT FULFILLIN G THE LEGAL REQUIREMENTS. IF THERE IS ANY SUCH CLAIM IT HAS TO BE EVALUATED BY THE ASSESSING OFFICER AND NOT BY THE ASSESSEE HIMSELF. X X X X X X X THEREFORE THE CLAIM OF THE APPELLANT THAT SINCE ITS INCOME WAS EXEMPT U/S 10(22) IT WAS NOT OBLIGED TO FILE RETURN OF ITS INCOME FOR ANY OF THE YEARS FALLING IN BLOCK ASSESSMENT IS UNACCEPTABLE. CONSEQUENTLY NO BENEFIT IS AVAILABLE TO THE APPELLANT U/S 10(22) OF THE ACT FOR ANY OF THE YEARS FALLING IN THE BLOCK PERIOD WHERE NO RETURN OF INCOME IS FILED AND THE INCOME FOR SUCH YEAR IS HELD AS THE UNDISCL OSED INCOME OF THE APPELLANT. ACCORDINGLY SURPLUS OF SOCIETY FOR ASSE SSMENT YEAR 1991- 92 TO ASSESSMENT YEAR 1998-99 COULD NOT BE BROUGHT TO TAX U/S.158BC. X X X X X X X X X 85 9. IN GROUND NO. 12 AND 13 IT IS CONTENDED THAT THE ASSESSING OFFICER WRONGFULLY DENIED THE BENEFIT AS AVAILABLE TO THE APPELLANT U/S 10(22) SINCE THE APPELLANT IS AN EDUCATIONAL INSTIT UTION EXISTING FOR THE PURPOSES OF IMPARTING EDUCATION ONLY AND NOT FOR TH E PURPOSES OF PROFIT AND NO PART OF INCOME WAS APPROPRIATED OR US ED BY ANY PERSON OTHER THAN THE APPELLANT. I HAVE HEARD THE LEARNED A.R. IN MY VIEW THE ASSES SING OFFICER WHILE FRAMING BLOCK ASSESSMENT ORDER WAS NOT REQUIR ED TO GIVE A FINDING AS TO WHETHER THE APPELLANT CAME WITHIN THE MEANING OF SECTION 10(22) OR NOT. WHAT THE ASSESSING OFFICER WAS REQUIRED IS TO COMPUTE UNDISCLOSED INCOME FOR THE PURPOSE OF FRAMI NG OF ASSESSMENT WITHIN THE MEANING OF CHAPTER XIV-B. FOR THIS PURP OSE HE WAS REQUIRED TO TAKE INTO ACCOUNT ALL THE RETURNS OF IN COME FILED BY THE ASSESSEE DURING THE BLOCK PERIOD AS ALSO THE MATERI AL FOUND DURING THE COURSE OF SEARCH AND THEN COMPUTE UNDISCLOSED INCOM E ON SUCH BASIS. I FIND THAT THIS IS WHAT THE ASSESSING OFFICER HAS ACTUALLY DONE. HOWEVER THE ASSESSING OFFICER HAS ERRED IN NOT GIV ING CREDIT FOR THE YEARS FOR WHICH RETURNS OF INCOME HAD BEEN DULY FIL ED AND EXEMPTION U/S 10(22) STOOD ALREADY ALLOWED. THESE ASSESSMENT YEARS ARE 1991- 92 1992-93 1993-94 1994-95 1995-96 1996-97 19 97-98 AND 1998- 99. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFIC ER THAT ANY MATERIAL HAS BEEN FOUND TO ESTABLISH THAT IN THESE ASSESSMEN T YEARS THE ASSESSEE WAS NOT RUNNING THE EDUCATIONAL INSTITUTIONS. IT I S ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT SUCH SURPLUS DID NOT BEL ONG TO THE SOCIETY OR THAT THE SAME HAS NOT BEEN SHOWN IN THE BOOKS OF ACCOUNTS OF THE 86 APPELLANT SOCIETY. THEREFORE IN MY VIEW WHILE THE ASSESSING OFFICER ERRED IN HOLDING THAT WHILE FRAMING BLOCK ASSESSMEN T PROVISIONS OF SECTION 10(22) COULD BE INVOKED. HOWEVER SINCE TH E ASSESSING OFFICER HAS MADE SPECIFIC ADDITIONS THE SAME ARE LI ABLE TO BE DEALT WITH INDIVIDUALLY ELSEWHERE IN THIS ORDER. 74. THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMEN T ORDER HAS MADE A REFERENCE OF CERTAIN IRREGULARITIES FOUND IN THE AC COUNTS AS WELL AS RUNNING OF VARIOUS EDUCATIONAL INSTITUTIONS BY THIS GROUP ALL THESE FACTS HAVE BEEN CONSIDERED IN THE BLOCK ASSESSMENT AND THE ITAT NOT ONLY IN THE CASE OF THE PRESENT ASSESSEES BUT IN THE CASE OF ALL OTHER ASSE SSEES OF THIS GROUP HAS HELD THAT SECTION 10(22) BENEFIT WILL BE AVAILABLE TO TH E ASSESSEE. WE HAVE ALREADY EXTRACTED SUCH OBJECTIONS OF THE ASSESSING OFFICER AND THE FINDINGS OF THE ITAT IN THE FOREGOING PARAGRAPHS WHICH DECIDING THE APPEALS ARISEN FROM THE BLOCK ASSESSMENT ORDER. THE MAIN EMPHASIS IN TH IS YEAR IS THAT ASSESSEE HAS ADVANCED LOAN OF RS.1.43 CRORES. IT FAILED TO P RODUCE THE RESOLUTION OR AUTHORIZATION BY THE SOCIETY. IN OUR OPINION ASSES SING OFFICER HAS FAILED TO TAKE NOTE OF THE NATURE OF THE ALLEGED ADVANCES. HO W THESE CAN BE CONSIDERED AS DIVERSION OF INCOME OR IT CAN BE CONSTRUED THAT ASSESSEE WAS RUNNING THE INSTITUTION FOR PROFIT. ONE OF THE ALLEGED ADVANCE IS FOR THE LAND. ASSESSEE HAS PLEADED THAT ITS SCHOOL IS RUNNING ON THAT VERY PIE CE OF LAND BUT ON ACCOUNT OF 87 LITIGATION WITH THE DDA SALE DEED COULD NOT BE EXEC UTED IN ITS FAVOUR THEREFORE IT IS TREATING THAT AMOUNT AS AN ADVANCE . THE ITAT IN ASSESSMENT YEAR 1991-92 HAS OBSERVED THAT FOR GRANT OF EXEMPTI ON U/S.10(22) UTILIZATION OF FUND IS NOT A RELEVANT FACTOR. IT IS RELEVANT FO R SECTION 13 OR FOR GRANT OF EXEMPTION U/S.11 OF THE ACT. SECTION 10(22) IS INDE PENDENT OF PROVISIONS OF SEC. 11 TO 13. IT IS POSSIBLE THAT AN EDUCATIONAL I NSTITUTION THE ASSESSEE CAN ADDITIONALLY CLAIM THAT IT IS A CHARITABLE INSTITUT ION AND THEREFORE EXEMPTION U/S.11 TO 13 IS ALSO AVAILABLE. ACCORDING TO THE IT AT IN THAT EVENTUALITY APPLICATION AND UTILIZATION OF INCOME BECOME RELEVA NT. THE ITAT FURTHER OBSERVED THAT THE REVENUE AUTHORITIES CANNOT IMPOSE CONDITIONS UNDER SEC. 13 ON AN ASSESSEE CLAIMING EXEMPTION U/S. 10(22) OF THE ACT. TAKING INTO CONSIDERATION THE NATURE OF ALLEGED ADVANCES THE P AST HISTORY OF THE ASSESSEE WHERE IT HAS BEEN ALLOWED EXEMPTION U/S. 10(22) TH E SUBSEQUENT YEARS WHERE EXEMPTION U/S. 11 HAS BEEN GRANTED TO IT BY T HE LEARNED CIT(APPEALS) AS WELL AS BY THE ASSESSING OFFICER HIMSELF. IN THE ABSENCE OF ANY SPECIFIC MATERIAL WHICH CAN DEMONSTRATE THAT ASSESSEE WAS NO T RUNNING THE SCHOOL OR IT WAS NOT ONLY FOR THE EDUCATION PURPOSE BUT CARRY ING ACTIVITIES FOR EARNING PROFIT WE ALLOW THE APPEAL OF ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GRANT EXEMPTION U/S. 10(22) OF THE ACT. 88 75. IN THE NEXT GROUND OF APPEAL THE ASSESSEE IS I MPUGNING CHARGING OF INTEREST UNDER SEC. 234-B OF THE INCOME-TAX ACT 19 61. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ASSESSMENT O RDER THERE IS NO SPECIFIC DIRECTION BY THE ASSESSING OFFICER TO CHARGE INTERE ST UNDER SEC. 234B OF THE ACT. HE ONLY OBSERVED THAT INTEREST BE LEVIED U/S. 234 OF THE ACT. ON THE STRENGTH OF HON'BLE SUPREME COURTS DECISION IN THE CASE CIT VS. RANCHI CLUB 247 ITR 209 HE CONTENDED THAT UNLESS THERE IS SPECIFIC DIRECTION ASSESSING OFFICER CANNOT CHARGE THE INTEREST. HE FU RTHER CONTENDED THAT INTEREST HAS BEEN CHARGED IN THE DEMAND NOTICE. ON THE OTHER HAND LEARNED DR RELIED UPON THE ORDER OF ASSESSING OFFICER AND S UBMITTED THAT ASSESSING OFFICER HAS OBSERVED THAT INTEREST BE LEVIABLE UNDE R SEC. 234 WHICH CAN TAKE CARE OF SECTION 234A TO 234-D OF THE ACT. 76. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ANJUM M.H. GHASWALA REPORTED IN 252 ITR 1 HAS OBSERVED THAT CH ARGING OF INTEREST UNDER SECTIONS 234-A 234-B AND 234-C OF THE INCOME-TAX A CT 1961 IS MANDATORY IF SOME DEFAULT AT THE END OF ASSESSEE WITHIN THE M EANING OF THOSE SECTIONS HAS OCCURRED. HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF VINOD KHURANA VS. CIT REPORTED IN 170 CTR 383 HAS HELD T HAT IF ORDER OF 89 ASSESSMENT AND NOTICE OF DEMAND HAS BEEN ISSUED BY THE SAME ASSESSING OFFICER AND BOTH THE ORDERS WERE PASSED ON THE SAME DATE THEN ASSESSING OFFICER HAS APPLIED HIS MIND REGARDING THE LEVY OF INTEREST AS ALSO THE PROVISION UNDER WHICH IT WAS CHARGEABLE. THE ASSES SMENT IS COMPLETE ONLY WHEN THE TAXABLE INCOME AND THE DUE AMOUNTS ARE DUL Y DETERMINED AND THE ASSESSMENT AND COMPUTATION SHEET ARE SIGNED OR INIT IALED BY THE ITO. THE COPY OF THE NOTICE OF THE DEMAND HAS NOT BEEN PLACE D ON RECORD BY THE ASSESSEE. CONSIDERING THESE TWO JUDGMENTS AND NON-A VAILABILITY OF THE COPY OF THE NOTICE OF DEMAND WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATION. HE SHALL DECIDE THIS IS SUE IN ACCORDANCE WITH LAW AFTER AFFORDING DUE OPPORTUNITY OF HEARING TO THE A SSESSEE. 77. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 23.07.2010 ( A.K. GORADIA ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23/07/2010 MOHAN LAL 90 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR