DCIT, C-1, (E), Chandigarh v. M/s Manav Mangal Society, Chandigarh

ITA 28/CHANDI/2020 | 2014-2015
Pronouncement Date: 27-05-2021 | Result: Dismissed

Appeal Details

RSA Number 2821514 RSA 2020
Assessee PAN AAAAM0564C
Bench Chandigarh
Appeal Number ITA 28/CHANDI/2020
Duration Of Justice 1 year(s) 4 month(s) 19 day(s)
Appellant DCIT, C-1, (E), Chandigarh
Respondent M/s Manav Mangal Society, Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 27-05-2021
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 27-05-2021
Last Hearing Date 17-11-2020
First Hearing Date 30-03-2021
Assessment Year 2014-2015
Appeal Filed On 08-01-2020
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BE NCH B CHANDIGARH (VIRTUAL COURT) .. ! '# .. $ %& BEFORE: SHRI. N.K.SAINI VP & SHRI R.L. NEGI JM ./ ITA NOS. 02 & 03/CHD/2020 / ASSESSMENT YEARS : 2010-11 & 2011-12 M/S MANAV MANGAL SOCIETY SECTOR-21-C CHANDIGARH. DY. COMMISSIONER OF INCOME TAX CIRCLE-1 (EXEMPTIONS) CHANDIGARH. ./ PAN NO: AAAAM0564C / APPELLANT / RESPONDENT ./ ITA NOS. 136 & 137/CHD/2020 / ASSESSMENT YEARS : 2010-11 & 2011-12 DY. COMMISSIONER OF INCOME TAX CIRCLE-1 (EXEMPTIONS) CHANDIGARH. M/S MANAV MANGAL SCHOOL (MANAV MANGAL SOCIETY) SECTOR-21-C CHANDIGARH. ./ PAN NO: AAAAM0564C / APPELLANT / RESPONDENT ./ ITA NOS. 27 28 29 & 30/CHD/2020 / ASSESSMENT YEARS : 2013-14 TO 2016-17 DY. COMMISSIONER OF INCOME TAX CIRCLE-1 (EXEMPTIONS) CHANDIGARH. M/S MANAV MANGAL SCHOOL (MANAV MANGAL SOCIETY) SECTOR-21-C CHANDIGARH. ./ PAN NO: AAAAM0564C / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI SUDHIR SEHGAL ADV. # ! ' / REVENUE BY : SHRI SANDEEP DAHIYA CIT-DR $ % ! &/ DATE OF HEARING : 30/03/2021 '()* ! &/ DATE OF PRONOUNCEMENT : 27/05/2021 2 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) %'/ ORDER PER BENCH: CROSS APPEALS BY THE ASSESSEE AND THE DEPARTMENT FO R THE A.Y. 2010-11 AND 2011-12 ARE DIRECTED AGAINST THE COMMON ORDER D ATED 15/11/2019 WHILE THE DEPARTMENTAL APPEALS FOR THE A.Y. 2013-14 TO 20 16-17 IN ITA NOS. 27 TO 30/CHD/2020 ARE DIRECTED AGAINST THE COMMON ORDER D ATED 09/10/2019 OF THE LD. CIT(A)-1 CHANDIGARH. 2. SINCE COMMON ISSUES ARE INVOLVED IN THE ASSESSEE S AS WELL AS DEPARTMENTAL APPEALS WHICH WERE HEARD TOGETHER SO THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONV ENIENCE AND BREVITY. 3. AT THE FIRST INSTANCE BOTH THE PARTIES ARGUED TH E APPEAL OF THE DEPARTMENT IN ITA NO. 27/CHD/2020 FOR THE A.Y. 2013 -14. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: I. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE SALARY PAYMENTS TO THE SPECIFIED PERSONS UNDER SECTION 13(3) AS REASONABLE AND JUSTIFIED WHEN THE ASSESSEE HAD FAILED TO PROVIDE EVIDENCE OF WHAT WORK THESE SPECIFIED PERSONS WERE DOING AND HAD FAILED TO JUSTIFY THE SALARIES PAID TO THESE SPECIFIED PER SONS. II. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THAT THE ONUS TO PROVE THE EXCESSIVE NESS OF THE SALARY/REMUNERATION PAID TO THE SPECIFIED PERSONS L IES ON THE REVENUE AUTHORITIES CONTRARY TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF CUSTOMS (IMPORT) MUMBAI VS M/S. DILIP KUMAR AND COMPANY DATED 30 JULY 2018 IN CIVIL APPEAL NO. 332 7 OF 2007 WHEREIN THE HON'BLE APEX COURT HELD THAT THE BURDEN OF PROVING APPLICABILITY WOULD BE ON THE ASSESSEE TO SHOW THAT HIS CASE COMES WITHIN THE PARAMETERS OF THE EXEMPTION CLAUSE OR EXEMPTION NOTIFICATION OVERRUL ING ITS OWN JUDGMENT IN THE CASE OF SUN EXPORT [2002-TIOL-118-SC-CX-LB] AND ALL THE DECISIONS WHICH TOOK SIMILAR VIEW AS IN SUN EXPORT CASE. III. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE HIGH SALARY PAYMENTS TO THE SPEC IFIED PERSONS UNDER SECTION 13(3) AS REASONABLE AND JUSTIFIED WHEN THE PAYMENTS TO OTHER NON- SPECIFIED EMPLOYEES WAS MUCH LESS. IV. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A)HAS ERRED IN LAW IN HOLDING THE SALARY PAYMENT TO SH. G.S.SARDAN A AS JUSTIFIED WHEN THE 3 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) PAYMENT MADE TO HIM IN CONTRADICTION TO THE RULES O F MEMORANDUM BECAUSE HE WAS A MEMBER OF THE EXECUTIVE COMMITTEE AND HAD THE RESPONSIBILITY OF MANAGING THE EDUCATIONAL INSTITUT IONS OF THE ASSESSEE AND AS PER THE CLEAR TERMS OF THE MEMORANDUM HE COULD NOT CHARGE ANY REMUNERATION FOR THIS FUNCTION AND HAD TO WORK IN H ONORARY CAPACITY. V. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE SALARY PAYMENT TO SH. SANJAY SAR DANA AND SH. SANDEEP SARDANA AS JUSTIFIED WHEN NON- SPECIFIED PRINCIPALS OF OTHER SCHOOLS UNDER THE ASSESSEE SOCIETY WERE GETTING MUCH LESS SALARY FOR THE SAME WORK AND SAME POST. VI. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE RENT PAYMENT TO THE SPECIFIED PE RSONS UNDER SECTION 13(3) FOR H.NO. 3085 SECTOR-21/D CHANDIGARH AND H.NO. 3 084 SECTOR-21/D CHANDIGARH AS JUSTIFIED IGNORING THAT THIS WAS NOT A GENUINE TRANSACTION AND THAT THE SPECIFIED PERSONS HAD SIMPLY MADE AN ARRAN GEMENT WHEREBY THEY WERE BEING PAID RENT FOR STAYING IN THEIR OWN HOUSE AND ALL THE REGULAR UPKEEP OF THE HOUSE INCLUDING WHITEWASHING MINOR R EPAIRS ETC. WAS BORNE OUT OF THE FUNDS OF THE ASSESSEE. VII. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE RENT PAYMENT TO THE SPECIFIED PE RSONS UNDER SECTION 13(3) FOR H.NO. 3085 SECTOR-21/D CHANDIGARH AND H.NO. 3 084 SECTOR-21/D CHANDIGARH AS JUSTIFIED IGNORING THE FACT THAT THE ASSESSEE HAD WRONGLY CLAIMED THAT THE RENT-FREE ACCOMMODATION WAS GIVEN TO THE 'DIRECTORS' WHEN THE LEASE DEED SAYS THAT THE PREMISES WAS LEAS ED OUT TO THE 'PRINCIPAL(S)' OF ITS SCHOOL AND NOT TO THE DIRECTO RS AND NO OTHER NON-SPECIFIED PRINCIPAL OF THE OTHER SCHOOLS OF THE ASSESSEE SOCI ETY WERE PROVIDED THIS FACILITY. VIII. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE INTEREST ON UNSECURED LOANS PAID TO THE SPECIFIED PERSONS @ 12% AS JUSTIFIED WHEN THE ASSESSING OFFICER HAD CL EARLY BROUGHT OUT THAT THE ASSESSEE HAD GIVEN OUT FUNDS TO THE SPECIFIED PERSO NS UNDER SECTION 13(3) IN THE FORM OF EXCESSIVE SALARY RENT AND THIS WAS TH E SOURCE OF INCOME OF THESE SPECIFIED PERSONS AND ALSO THE SOURCE OF UNSECURED LOANS AND THEREFORE IT WAS RIGHTLY NOTED THAT THE FUNDS OF THE ASSESSEE WE RE GIVEN OUT TO THE SPECIFIED PERSONS AND THEN A PART OF IT WAS TAKEN B ACK AND INTEREST WAS PAID ON THIS MONEY. IX. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE INTEREST ON UNSECURED LOANS PAID TO THE SPECIFIED PERSONS @ 12% AS JUSTIFIED WITHOUT APPRECIATING THE FACT TH AT THE ASSESSEE WAS PAYING INTEREST FOR ITS OWN FUNDS AND HAD THESE FUNDS NOT BEEN DIVERTED TO THE SPECIFIED PERSONS IN THE FIRST PLACE THERE WOULD N OT BE ANY NEED FOR UNSECURED LOANS. X. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE ORDER OF THE ASSESSING OFFICER NO T RIGHT BECAUSE THE ASSESSEE HAD BEEN RUNNING FOR THE PAST MANY YEARS A ND VARIOUS ASSESSMENTS U/S 143(3) HAD BEEN MADE FOR THE EARLIER YEARS AND NO SUCH ADVERSE VIEW 4 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) HAD BEEN TAKEN THEN COMPLETELY IGNORING THAT IN THE EARLIER ASSESSMENTS THE ISSUES WERE NOT EXAMINED IN DETAIL AND RATHER MATE RIAL DOCUMENTS LIKE LEASE DEED COMPARISON OF SALARIES WITH OTHER EMPLOYEES ETC. WAS NOT ASKED/DISCUSSED. XI. THAT THE APPELLANT CRAVES TO LEAVE ADD OR AMEN D THE GROUNDS OF APPEAL ON OR BEFORE THE APPEAL HEARD AND DISPOSED OFF. 4. VIDE GROUND NO. I TO V THE GRIEVANCE OF THE DEPA RTMENT RELATES TO THE DELETION OF ADDITION MADE BY THE A.O. ON ACCOUNT OF SALARY PAYMENT TO THE SPECIFIED PERSONS BY INVOKING THE PROVISIONS OF SEC TION 13(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS ACT). 5. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS REGISTERED AS SOCIETY UNDER THE SOCIETY REGISTRATION ACT (XXI OF 1860) AG AINST THE REGISTRATION NO. 45 DATED 31/05/1969. THE ASSESSEE IS ALSO REGISTERED U NDER SECTION 12AA OF THE ACT WITH LD. CIT PATIALA VIDE REGISTRATION DATED 03/10 /1994. THE ASSESSEE FILED THE RETURN OF INCOME ON 30/09/2013 DECLARING NIL INCOME . LATER ON THE CASE WAS PICKED UP FOR SCRUTINY UNDER CASS. 5.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS T HE A.O. NOTED THAT THE ASSESSEE WAS PROVIDING SOME PAYMENTS TO ITS MEMBERS AGAINST THE SERVICES PROVIDED BY THEM WHICH WAS NOT REASONABLE AND WAS UNDUE BENEFITS FOR THE MEMBERS. HE THEREFORE ISSUED A NOTICE TO SHOW CAUSE THE ASSESSEE AS TO WHY THE EXEMPTION UNDER SECTION 13(1)(C) OF THE ACT MAY NOT BE DENIED. IN RESPONSE THE ASSESSEE SUBMITTED AS UNDER: 'KINDLY REFER TO THE ASSESSMENT PROCEEDINGS PENDING IN THE ABOVE NOTED CASE AND YOUR NOTICE DATED 29.01.2016 REGARDING FAILURE TO EXPLAIN JUSTIFICATION OF THE PAYMENT OF SALARY TO MEMBERS OF THE SOCIETY AND WHY THE PAYMENT MADE ON ACCOUNT OF RENT SALARY AND INCREASING THE SAME MAY NOT BE DISALLOWED UNDER SECTION 13(L)(C)(II) & 13(2)(C) & (D) READ WITH SEC TION 13(3) OF IT ACT. IN THIS REGARD IT IS SUBMITTED THAT SH G S SARDANA IS THE CHAIRMAN OF THE MANAV MANGAL SCHOOLS. SH. SANJAY SARDANA AND SANDEEP SARD ANA ARE TWO DIRECTORS OF THE MANAV MANGAL SCHOOLS HAVING THREE SCHOOLS (MANA V MANGAL HIGH SCHOOL SECTOR 21 CHANDIGARH MANAV MANGAL SCHOOL SECTOR 1 1 PANCHKULA AND MANAV MANGAL SMART SCHOOL MOHALI.) MANAV MANGAL SMART SCH OOL MOHALI BECAME 5 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) OPERATIONAL DURING 2007-08 AND OTHER TWO SCHOOLS WE RE OPERATIONAL SINCE LONG AND ARE RECOGNISED WITH CBSE. SALARIES PAID TO THE SH. G S SARDANA SANJAY SARDAN A AND SANDEEP SARDANA DURING THE LAST THREE YEARS AND THE CURRENT YEAR IS AS BELOW: FINANCIAL YEAR SH G S SARDANA / PER MONTH SH SANJAY SARDANA/ PER MONTH SH SANDEEP SARDANA/ PER MONTH 2010-11 120000.00 186877.00 186877.00 2011-12 156667.00 217583.00 217583.00 2012-13 201333.00 304656.00 304656.00 SH. G S SARDANA IS LOOKING AFTER THE AFFAIRS OF THE MANAV MANGAL SCHOOLS/SOCIETY AS ITS CHAIRMAN / MANAGER AND IS RESPONSIBLE FOR TH E OVERALL CONDUCT OF AFFAIRS OF THE SOCIETY AND ITS SCHOOLS. SH. SANJAY SARDANA & S ANDEEP SARDANA ARE THE TWO DIRECTORS OF FOUR SCHOOLS OF THE MANAV MANGAL SOCIE TY VIZ. MANAV MANGAL SCHOOLS LOCATED IN CHANDIGARH PANCHKULA AND MOHALI AND ALS O OF THE UPCOMING SCHOOL AT ZIRAKPUR DIST. MOHALI SCHOOL AT MOHALI BECAME FU NCTIONAL IN THE F. Y 2007-08. OTHER TWO SCHOOLS AS STATED ABOVE WERE FUNCTIONAL PR IOR TO THE PERIOD 2006-07. TOTAL RECEIPTS OF THE SOCIETY AND THE THREE SCHOOLS FOR THE LAST SIX YEARS ARE AS BELOW: FINANCIAL YEAR SOCIETY CHANDIGARH PANCHKULA MOHALI TOTAL 2006-2007 7972 17740320 28721188 2972 46472452 2007-2008 12199 19916472 33113211 28685160 81727042 2008-2009 65847 23496870 38474656 49234408 111271781 2009-2010 150084 26440280 43598375 70971463 141160202 2010-2011 188361 29857196 48607564 101336218 179989339 2011-2012 975024 37485335 60517786 127569625 226547770 2012-2013 3332508 41610004 65337980 141923785 252204277 IT SHALL BE SEEN THAT TOTAL TURNOVER OF THE ASSESSE E'S SOCIETY HAS INCREASED FROM 4 64 72 452/-IN FY 2006-07 TO RS. 25 22 04 227/- WI TH THE SHEER EFFORTS OF SH. G S SARDANA CHAIRMAN / MANAGER AND SH. SANJAY SARDANA D IRECTOR AND SH. SANDEEP SARDANA DIRECTOR OF THE MANAV MANGAL GROUP OF SCHOO LS RUN BY MANAV MANGAL SOCIETY. INCREASE IN TURNOVER OF THE SOCIETY IS 542 .70% OVER A PERIOD OF SIX YEARS. EXCESS OF INCOME OVER THE EXPENDITURE OF THE THREE SCHOOLS AND SOCIETY HAS ALSO INCREASED TREMENDOUSLY FROM RS. 1 40 44 157/- IN TH E YEAR 2006-07 TO RS. 5 86 95 680/- DURING THE PERIOD 2012-2013. ASSESSEE SOCIETY HAD BEEN UTILISING ITS INCOME MAINLY ON EDUCATIONAL FACILITIES AND INFRAST RUCTURE FOR EDUCATION OF CHILDREN IN THEIR SCHOOLS. IT WAS THE VISION OF THE SE PEOPLE THAT THE SCHOOLS ARE IMPARTING BEST OF THE EDUCATION IN THESE SCHOOLS. I T IS NOT ONLY THE STUDIES WHERE THE CHILDREN OF THE SCHOOL ARE EXCELLING BUT THEY A RE ALSO EXCELLING IN THE FIELD OF SPORTS DEBATE AND CULTURAL PROGRAMMES. THE STUDENT S OF MANAV MANGAL SCHOOLS ARE EXCELLING IN SPORTS EVEN AT STATE LEVEL AND ALS O PARTICIPATING AT NATIONAL LEVEL IN YOGA TABLE TENNIS LAWN TENNIS SKATING CRICKET AND HOCKEY. SH. SANJAY SARDANA IS M.SC (GOLD MEDALLIST) M. PHI L M. ED FROM PUNJAB UNIVERSITY. SH. SANDEEP SARDANA IS B.E (HONS.) PGDCA (GOLD MED ALIST) FROM PUNJAB UNIVERSITY. SANJAY SARDANA JOINED THE MANAV MANGAL SCHOOL ON 1 ST AUGUST 1986 AND HAS A TOTAL EXPERIENCE OF 29 YEARS AS ON DATE. SH. SANDEEP SARDANA JOINED MANAV MANGAL SCHOOL ON 14 TH OCT 1988 AND HAS EXPERIENCE OF 27 YEARS AS ON DATE. THUS BOTH OF THEM HAVE EXPERIENCE OF MORE THA N 27 YEARS EXPERIENCE IN THE FIELD OF EDUCATION AND ADMINISTRATION. BOTH SH. SANJAY SARDANA AND SH. SANDEEP SARDANA HAVE BEEN AWARDED AT THE DIST LEVEL STATE LEVEL AND ALSO AT 6 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) NATIONAL LEVEL. CONSOLIDATED LIST OF THE AWARDS & A PPRECIATIONS RECEIVED BY SH. SANJAY SARDANA AND ALSO BY SH. SANDEEP SARDANA DURI NG THE PERIOD 2002 TO 2015 IS ENCLOSED FOR READY REFERENCE. SH. SANJAY SARDANA AND SH. SANDEEP SARDANA ARE PRIN CIPALS OF MANAV MANGAL HIGH SCHOOLS SECTOR 21 C CHANDIGARH AND MANAV MANGA L SCHOOL SECTOR 11 PANCHKULA RESPECTIVELY AND WERE DRAWING THE FOLLOWI NG SALARY FROM THE RESPECTIVE SCHOOLS PARTICULARS OF SANJAY SARDANA SANJAY SARDANA INCREASE IN SALARY IN PERCENTAGE MONTHLY SALARY FY 2011-12 FY 2012-13 OVER PREVIOUS YEAR TERMS BASIC PAY 51850 53410 1560 3% GRADE PAY 12000 12000 0 0 DA 28733 39246 10513 15% INCREASE IN DA TOTAL 92583 104656 12043 13% THE INCREASE IN SALARY OF THE SANJAY SARDANA & SAND EEP SARDANA WAS NOMINAL AND COMPARABLE TO ANNUAL INCREASE IN SALARY AS IN G OVERNMENT SERVICE. INCREASE IN DEARNESS ALLOWANCE WAS GRANTED TO THESE TWO PERS ONS AS WAS GRANTED TO OTHER EMPLOYEES OF THESE SCHOOLS. AS SUCH THERE WAS NO AB NORMAL ENHANCEMENT IN SALARY OF THE PRINCIPALS OF THESE TWO SCHOOLS WHO H AVE MORE THAN 25 YEARS OF EXPERIENCE IN THE FIELD OF EDUCATION. BESIDES THE ABOVE SALARY BOTH SH. SANJAY SARDANA & SH. SANDEEP SARDANA WERE ALSO THE DIRECTORS OF THE FOUR SCHOOLS. THREE OF TH E SCHOOLS AT CHANDIGARH PANCHKULA AND MOHALI ARE THE EXISTING SCHOOLS WITH A STRENGTH OF AROUND EIGHT THOUSAND STUDENTS. DURING THIS YEAR IT WAS PROPOSED TO OPEN A NEW STATE OF THE ART SCHOOL AT ZIRAKPUR. THEY WERE ALSO DRAWING SALA RY IN RESPECT OF EACH SCHOOL AS DIRECTOR OF THAT INSTITUTE AS UNDER: PARTICULARS OF MONTHLY DIRECTOR SALARY PER MONTH SANJAY SARDANA FY 2011-12 SANJAY SARDANA FY 12-13 INCREASE AS COMPARED TO LY INCREASE IN % TERMS MANAV MANGA L HIGH SCHOOL SECTOR 21C CHANDIGARH 41667 50000 8333 20% MANAV MANGA L SCHOOL SECTOR 11 PANCHKULA 41666 50000 8334 20% MANAV MANGA L SMART SCHOOL MOHALI 41666 50000 8334 20% MANAV MANGAL SOCIETY S ECTOR 21 CHANDIGARH (FOR OPENING OF NEW SCHOOL AT ZIRAKPUR) 50000 FIRST YEAR TOTAL 125000 200000 THUS IT SHALL BE SEEN THAT INCREASE IN SALARY OF TH E TWO DIRECTORS SH. SANJAY SARDANA AND SANDEEP SARDANA AS COMPARED TO LAST YEAR WAS 13 % AND IN THAT OF DIRECTORS SALARY WAS OF 20% AS COMPARED TO LAST YEAR. THE INC REASE IN SALARY OF THE TWO DIRECTORS OF THESE SCHOOLS WAS GRANTED AFTER CONSID ERING THE PERFORMANCE OF THE DIRECTORS OF THESE SCHOOLS WHICH WAS CONSIDERED IN THE BOARD'S MEETING IN MARCH 2012.1 HAVE ALREADY ENCLOSED A CHART OF RECEIPTS OF THE THREE SCHOOLS AND SOCIETY FOR SEVEN YEARS. IT WAS THE PERFORMANCE OF THE SOCIETY & ITS SCHOOLS AND EFFORTS MADE BY THE CHAIRMAN/MANAGER TWO DIRECTORS AND OTHER DEDICATED MEMBERS TEAM INCLUDING THE RELATED PERSONS THAT INC REASE IN SALARIES AS PRINCIPALS OF SCHOOLS AND SALARY AS DIRECTORS OF THREE SCHOOLS WAS CONSIDERED. IT MAY BE NOTED THAT RECEIPTS OF THE CHANDIGARH SCH OOL HAS INCREASED FROM RS.2 98 57 196/-IN FY 2010-11 TO RS. 3 74 85 335/- IN 2011-12. THUS THERE WAS AN 7 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) INCREASE IN RECEIPTS OF RS. 76 28 139/- WHICH WAS A N INCREASE OF25.54% OVER THE PREVIOUS YEAR. IN RESPECT OF PANCHKULA SCHOOL THE RECEIPT IN FY 20 10-11 WAS OF RS. 4 86 07 564/- WHICH INCREASED TO RS. 6 05 17 786/- DURING THE FY2 011-12. THUS THERE WAS AN INCREASE IN RECEIPTS OF RS. 1 19 10 222/- WHICH WAS AN INCREASE OF 24.5% OVER THE PREVIOUS YEAR. IN RESPECT OF MOHALI SCHOOL THE RECEIPTS INCREASED FROM 10 13 36 218/- IN FY 2010- 11 TO RS. 12 75 69 625/-. THE INCREASE IN RECEIPTS WAS OF RS. 2 62 33 407/- WHICH WAS AN INCREASE OF 25.89% OVER THE PREVIOUS YEAR. IT MAY THUS BE NOTED THAT SOCIETIES TOTAL RECEIPTS INCREASED FROM 17 99 89 339/- IN 2010-11 TO 22 65 47 770/- WHICH GIVE AN INCREASE OF RS. 4 65 58 431/- WHICH GAVE AN INCREASE OF25.96% OVER THE PREVIOUS YEAR. IT WAS KEEPING IN VIEW THIS STELLAR PERFORMANCE OF THE THREE SCHOOLS THAT DIRECTORS OF THESE SCHOOLS WERE GRANTED AN INCREASE OF SALARY OF RS.8334/- PER MONTH AND THE SALARY AS DIRECTOR INCREASED FROM RS. 41 666/- TO RS. 50 000/- PER MONTH AGAINST THE DEMAND OF INCREASE TO RS. 75 000/-PER SCHOOL PE R MONTH. SINCE BOTH THE DIRECTORS WERE FURTHER ASSIGNED THE TASK OF PLANNING THE OPENING OF A NEW STATE OF THE ART SCHOOL AT ZIRAKPUR THEY WER E GIVEN SALARY OF RS. 50 000/- EACH BY THE SOCIETY FOR THE SAID PURPOSE. THE EFFOR TS MADE BY THEM UNDER THE ABLE GUIDANCE OF CHAIRMAN / MANAGER OF THE SOCIETY HAVE BEEN ABLE TO DEVELOP THIS PROJECT FROM DRAWING BOARD STAGE AND T HIS SCHOOL IS READY FOR ACADEMIC SESSION W.E.F 1.4.2016 THE ADMISSIONS FOR WHICH ARE ALREADY IN PROGRESS. HAD ANYBODY ELSE FROM OUTSIDE BEEN ENGAGED FOR THE SAME ITS COST WOULD HAVE BEEN MUCH MORE AS COMPARED TO WHAT HAS BEEN PAID TO THESE TWO PERSONS. THUS SALARIES PAID TO THESE PERSONS WAS IN NO WAY EXCESS IVE AND WAS IN COMMENSURATE WITH THE SERVICES PROVIDED BY THEM TO THE SCHOOL AN D SOCIETY. THE INCREASE IN SALARY WAS THUS SANCTIONED BASED ON THE PERFORMANCE OF THE SCHOOLS IN MARCH 2012 BEFORE THE START OF NEW SESS ION WAS BASED ON THE PERFORMANCE AND RESULTS AS COMPARED TO IMMEDIATE EA RLIER YEAR AND IN NO CASE THERE WAS AN ABNORMAL INCREASE IN SALARIES OF THE T HESE PERSONS. 5.2 THE A.O. HOWEVER DID NOT FIND MERIT IN THE SUBM ISSIONS OF THE ASSESSEE AND HELD THAT THE AMOUNT PAID TO THE SPECIFIED PERSONS WAS NOT REASONABLE AND LIABLE TO BE DISALLOWED BY OBSERVING IN PARA 4.1 TO 4.3 OF THE ASSESSMENT ORDER DATED 23/02/2016 WHICH READ AS UNDER: 4.1 ASSESSEE HAS MADE PAYMENTS TO THEIR MEMBERS REG ARDING SALARY AND OTHER CHARGE. THESE AMOUNTS ARE NOT REASONABLE BECAUSE AS SESSEE HAS SUBMITTED THAT TRUST IS PAYING CHARGES TO THEM AGAINST THE SERVICE S PROVIDED BY THEM AND THEY ARE WELL QUALIFIED PERSONS. THE REPLY OF ASSESSEE D ULY CONSIDERED BUT NOT ACCEPTED ON THIS GROUND BECAUSE MEMBERS OF TRUST A RE WELL QUALIFIED CANNOT BE A GROUND FOR THE HIGH SALARY. THE SALARY PAID TO ME MBERS IS NOT REASONABLE AND UNDUE BENEFIT FOR THESE RELATED PERSONS. ASSESSEE H AS FAILED TO PRODUCE OR SUBMIT 8 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) ANY DOCUMENTARY EVIDENCES REGARDING THE SERVICES PR OVIDE BY THESE PERSONS. ONLY RUNS A CHARITABLE INSTITUTION CAN NOT BE A GROU ND TO PAY THE SALARY OR OTHER ALLOWANCE TO THE MEMBERS OF THE TRUST. 4.2 ASSESSEE HAS SUBMITTED THAT INCREASING IN THE R ECEIPTS OF THE SOCIETY IS VERY MUCH HIGHER COMPARED TO EARLIER YEARS AND THAT WHY ASSESSEE IS INCREASING THE SALARY OF THE MEMBERS. THIS IS NOT A VALID GROUND F OR PAYING HIGH SALARY TO ITS MEMBERS. IF SOCIETY RECEIPTS ARE INCREASING THEN TH ERE ARE VARIOUS REASONS NOT THAT MEMBERS ARE DOING EXCELLENT AND THEY ARE ELIGIBLE F OR HIGH SALARY. THE PURPOSE OF THE SOCIETY TO RUN AN EDUCATIONAL INSTITUTE AND PRO VIDE THE BETTER EDUCATION TO STUDENTS WHICH IS COVERED UNDER CHARITABLE PURPOSE S U/S 2 (15) OF I. T. ACT. IT IS NO WHERE MENTIONED THAT AGAINST THE CHARITABLE ACTIVIT IES MEMBERS OF THE SOCIETY ARE ELIGIBLE FOR THE BENEFITS OF THE SOCIETY. SOCIE TY IS REGISTERED U/S 12 AA AS CHARITABLE INSTITUTION AND THE PURPOSE IS EDUCATION ONLY. THIS IS NOT VALID REASON THAT WHEN RECEIPTS OF THE SOCIETY WILL INCREASE THE N SALARY OR OTHER REMUNERATIONS WILL ALSO INCREASE SIMULTANEOUSLY IF IT IS AN INTE NTION THEN WHERE IS CHARITY. THESE FACTS SHOW THAT THE MEMBERS OF THE SOCIETY DOING EF FORTS FOR THEMSELVES ONLY NOT FOR CHARITY. THE DETAILS OF INDIVIDUAL ITR OF MEMBE RS SHOW THAT THEY ARE EARNING INCOME FROM SOCIETY THROUGH VARIOUS MODES OF INCOME AS SALARY RENT INTEREST ETC. THE INCOME DETAILS OF THESE MEMBERS ARE AS UNDER- SR. NO. NAME A.Y. 2011-12 A.Y. 2012-13 A.Y. 2013-14 1. ARSHI MANCHANDA D/O SHRI G.S. SARDANA # 3085 SECTOR 21 - D CHANDIGARH SALARY RENT INTEREST SALARY RENT INTEREST SALARY RE NT INTEREST 5 17 407 4 29 000 93 441 6 53 562 4 29 00 0 93 559 7 42 699 4 53 072 1 34 533 2. AJAY MANCHANDA S/O LATE SHRI AMIR CHAND MANCHANDA # 3085 SECTOR - 21 .D CHANDIGARH SALARY RENT INTEREST SALARY RENT INTEREST SALARY RE NT INTEREST 2 40 000 51 655 2 95 000 3 27 500 3. MONICA SARDANA D/O SHRI GIAN CHAUDHARY # 3085 SECTOR 21 D CHANDIGARH SALARY RENT INTEREST SALARY RENT INTEREST SALARY RE NT INTEREST 7 49 564 1 10 000 5 29 477 8 82 960 1 23 50 0 2 81 344 11 12 73 2 1 29 500 4 43 868 4. SANDEEP SARDANA S/O SHRI GIAN SINGH SARDANA # 3085 SECTOR 21 D CHANDIGARH SALARY RENT INTEREST SALARY RENT INTEREST SALARY RE NT INTEREST 22 42 52 4 1 10 000 5 33 559 27 88 15 7 1 23 50 0 3 94 780 39 23 86 6 1 29 500 38 200 5. ANJALI SARDANA D/O SHRI R.K. CHHABRA # 3085 SECTOR 21 D CHANDIGARH SALARY RENT INTEREST SALARY RENT INTEREST SALARY RE NT INTEREST 7 57 407 2 83 000 4 46 329 8 93 562 4 00 00 0 2 97 754 11 27 68 8 4 94 000 3 51 451 6. SANJAY SARDANA S/O SHRI GIAN SINGH SARDANA # 3085 SECTOR 21 D CHANDIGARH SALARY RENT INTEREST SALARY RENT INTEREST SALARY RE NT INTEREST 20 59 27 8 2 83 000 4 62 572 25 66 84 4 4 00 00 0 2 97 768 39 23 86 6 4 94 000 2 88 366 7. USHA SARDANA SALARY RENT INTEREST SALARY RENT INTEREST SALARY RE NT INTEREST 9 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) D/O SHRI SATYA DEV CHAUDHARY # 3085 SECTOR 21 D CHANDIGARH 5 09 564 3 03 463 6 42 960 2 192 7 62 732 66 250 8. GIAN SINGH SARDANA S/O SH. J.R. SARDANA MANAV MANGAL HIGH SCHOOL SECTOR 21 C CHANDIGARH SALARY RENT INTEREST SALARY RENT INTEREST SALARY RE NT INTEREST 14 40 00 0 2 05 459 18 80 00 0 2 191 24 16 00 0 5 000 PARTICULARS A.Y. 2011-12 A.Y. 2012-13 A.Y. 2013-14 TOTAL SALARY PAID 85 15 744/- 1 06 03 045/- 1 43 37 083/- 3 34 55 872/- INTEREST PAID 26 25 955/- 13 69 588/- 16 27 668/- 56 23 211/- RENT PAID 12 15 000/- 14 76 000/- 17 00 072/- 43 91 072/- TOTAL PAYMENTS 1 23 56 699/- 1 34 48 633/- 1 76 64 823/- 4 34 70 155/- TOTAL RECEIPTS 17 99 89 339/- 22 65 47 770/- 25 22 04 277/- 65 87 41 386/- % OF TOTAL RECEIPTS 6.86% 5.93% 7.0% 6.5% ON PERUSAL OF THE ABOVE CHART IT IS CLEAR THAT MEMB ERS OF THE SOCIETY ARE EARNING INCOME FROM THE SOCIETY ONLY AND THEN INVESTED THE SAME FOR THEIR PERSONAL CAPITAL AND PROVIDE THE UNSECURED LOANS TO THE SOCI ETY THEN GET THE INTEREST INCOME AGAINST THE INVESTMENTS AND THEN AGAIN INVES TED THE SAME INTO THE SOCIETY. THE CHART SHOWS THAT NUMBERS OF THE SOCIET Y HAVE DIVERTED 7% REVENUE FROM THE TOTAL RECEIPTS OF THE TRUST IN THEIR HANDS IN THIS A.Y. 2013-14. THIS TREND IS CONTINUING FROM LAST MANY YEARS. THIS SHOWS THAT IN CREASING IN THE SALARY NOTHING ONLY FOR CAPITAL INVESTMENTS INTO THEIR PERSONAL HA NDS AND SOCIETY. IT IS ALSO A FACT THAT SALARY PAID TO DIRECTORS OF THE TRUST IS HIGH COMPARED TO OTHER SALARIED EMPLOYEES. SO REPLY IN THIS REGARD IS NOT ACCEPTED AND PAYMENTS TO THESE PERSONS ARE NOT REASONABLE AND LIABLE FOR DISALLOWA NCE U/S 13 (L)(C) R.W. 13(3) OF I. T. ACT 1961 AND TAXED U/S 164 (2) OF I. T. ACT. 4.3 ASSESSEE'S REPLY REGARDING SECTION 13 (2) AND V ARIOUS CASE LAWS REGARDING THIS DULY CONSIDERED BUT NOT ACCEPTED BECAUSE ASSESSEE H AS FAILED TO PROVE THAT THE AMOUNTS PAID TO SPECIFIED PERSONS ARE REASONABLE AN D SHOULD BE ALLOWED U/S 13 (2) OF I.T.ACT 1961. ALL THESE PERSONS ARE NOT GETT ING GENUINE AND REASONABLE SALARY OR PAYMENTS AGAINST THE SERVICES. THE DETAIL S OF THE SALARY PAID IS AS UNDER- SR. NO. NAME OF THE MEMBER AY. 2011-12 A.Y. 2012 -13 INCREASING A.Y. 2013-14 INCREASING 1. SH. GIAN SINGH SARDANA 14 40 00 0 18 80 00 0 4 40 000 (30.55 %) 24 16 000 5 36 000 (28.51 %) 2. SH. SANJAY SARDANA 22 42 52 4 27 88 15 7 5 45 633 (24.33 %) 39 23 866 11 35 709 (40.73 %) 3. SH. SANDEEP SARDANA 22 42 52 4 27 88 15 7 5 45 633 (24.33 %) 39 23 866 11 35 709 (40.73 %) 4. SMT. USHA SARDANA 5 09 564 6 42 960 1 33 396 (26.17%) 7 62 732 1 19 772 (18.62%) 5. SMT. ANJALI SARDANA 7 57 407 8 93 562 1 36 155 (17.97 %) 11 27 688 2 34 126 (26.20 %) 10 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 6. SMT. MONICA SARDANA 7 49 564 8 82 960 1 33 396 (17.79%) 11 12 732 2 29 772 (26.02 %) 7. SH. AJAY MANCHANDA 2 40 000 2 95 000 55 000 (22.91 %) 3 27 500 32 500 (11.01 %) 8. SMT. ARSHI MANCHANDA 5 17 407 6 53 562 1 36 155 (26.31 %) 7 42 699 89 137 (13.63 %) TOTAL 86 98 99 0/- 1 08 24 358/- 21 25 368/- (24.44 %) 1 43 37 0 83/- 35 12 725/- (32.45 %) THE ABOVE MENTIONED CHART CLEARLY SHOWS THAT THERE IS HUGE INCREASING INTO THE SALARY FROM A.Y. 2011-12 TO 2012-13 AND 2012-13 TO 2013-14. THE PERCENTAGE OF INCREASING IS BETWEEN 40.73 % TO 11.01 % WHICH CAN NOT BE CONSIDERED AS REASONABLE PAYMENTS. IT IS ALSO MENTIONED THAT THIS % OF INCREASE IS IN CASE OF MEMBERS ONLY NOT IN CASE OF OTHER EMPLOYEES. 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT SALARY PAID HAD ALREADY BEEN ALLOWED VIDE ORDER PASSED UNDER SECTION 143(3) OF THE ACT THEREFORE ON ACCOUNT OF CONSISTENCY OF THE FACTS AND CIRCUMSTANCES BEING THE SAME THERE COULD NOT BE ANY DEVIATION ON ACCOUNT OF PRINCIPLE OF CONSISTENCY. IT WAS STATED THAT THE VA RIOUS STATEMENTS WERE RECORDED DURING THE COURSE OF SURVEY CONDUCTED BY THE DEPART MENT AT SCHOOL PREMISES ON 28 TH AND 29 TH OF SEPTEMBER 2016 WHICH HAD BEEN VERIFIED THAT ALL THE INTERESTED PERSONS HAD BEEN WORKING IN THE SCHOOL. IT WAS FURTHER STATED THAT THE A.O. MADE THE ADDITION IN RESPECT OF DISALLOWANCE O F SALARY THOUGH HE PROCEEDED WITH THE FACT THAT THE SALARY WAS NOT COM MENSURATE WITH DUTIES BEING PERFORMED AND THAT UP TO THE A.Y. 2012-13 THE SALARY WAS ALLOWED BY THE SUCCESSIVE ASSESSING OFFICER BY WAY OF ORDERS UNDER SECTION 143(3) OF THE ACT. IT WAS STATED THAT EVEN IF THERE WAS VIOLATION OF SECT ION 13 OF THE ACT THEN THE RELEVANT PORTION ONLY WAS LIABLE FOR ADDITION NOT T HE ENTIRE SURPLUS COULD BE BROUGHT TO TAX. THE ASSESSEE ALSO FURNISHED THE CHA RT AND TRACK RECORD OF SALARY OF THE RELATED PERSONS IN THE FOLLOWING MANNER: NAME OF PERSON DATE OF JOINING DESIGNATION QUALIFICATIONS EXPERIENCE SH.G.S. SARDANA FATHER [13(3)(A)] APRIL 01 1968 FOUNDER: CHAIRMAN M.A.(ENGLISH) M.A. (HINDI) RETIRED AFTER SERVING FOR APPROXIMATELY 50 YEARS MRS. USHA SARDANA MOTHER (13(3)(A)]- AUTHOR OF THE FOUNDER APRIL 01 1968 FOUNDER: STAFF WELFARE OFFICER HONS. IN HINDI (PRABHAKAR) INTERMEDIATE EXAMINATION IN ENGLISH RETIRED AFTER SERVING FOR APPROXIMATELY 48 YEARS 11 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) FROM PANJAB UNIVERSITY MR. SANJAY SARDANA [13(3)(D)] AUGUS T 01 1986 PRINCIPAL: MANAV MANGAL HIGH SCHOOL CHANDIGARH & DIRECTOR: MANAV MANGAL GROUP OF SCHOOLS M.SC(GOLD MEDALIST) M.PHIL. M.ED 33 YEARS MR. SANDEEP SARDANA [13(3)(D)] OCTOBER 14 1988 PRINCIPAL: MANAV MANGAL HIGH SCHOOL. CHANDIGARH & DIRECTOR: MANAV MANGAL GROUP OF SCHOOLS B.E.(HONS) PGDCA (GOLD MEDALIST) 31 YEARS MRS. ANJALI SARDANA [13(3)(D)] NOVEMBER 01 1990 VICE-PRINCIPAL M.SC M.PHIL. B.ED 29 YEARS MRS. MONICA SARDANA [13(3)(D)] SEPTEMBER 01 1992 VICE-PRINCIPAL B.COM B.ED 27 YEARS MRS. ARSHI MANCHANDA [13(3)(D)] JULY 01 1989 HEAD PRIMARY BSC. B.ED COURSE IN FUNDAMENTALS OF ELECTRONIC DATA PROCESSING AND PROGRAMMING 30 YEARS MR. AJAY MANCHANDA [13(3)(D)] APRIL 01 1998 TRANSPORT MANAGER B.A 21 YEARS TRACK RECORD OF SALARY S. NO. NAME OF THE PERSON DESIGNATION D0J AY 2012 - 13 AY 2013 - 14 AY 2014 - 15 AY 2015 - 16 AY 2016 - 17 1 SH G.S. SARDANA FOUNDER: CHAIRMAN APRIL 01 1968 160000 200000 240000 300000 400000 2 MRS. USHA SARDANA FOUNDER: STAFF WELFARE OFFICER APRIL 01 1968 54520 61264 75000 90000 160000 3 MR. SANJAY SARDANA PRINCIPAL: MANAV MANGAL HIGH SCHOOL. CHANDIGARH AUGUST 01. 1986 92583 104656 132125 150000 180000 4 MR SANDEEP SARDANA PRINCIPAL: MANAV MANGAL HIGH SCHOOL. PANCHKULA OCTOBER 14 1988 92583 104656 132125 150000 180000 5 MRS. ANJALI SARDANA VICE-PRINCIPAL NOVEMBER 01. 1990 75419 92480 110000 120000 160000 6 MRS. MONICA SARDANA VICE-PRINCIPAL SEPTEMBER 01 1992 74520 91264 110000 120000 160000 7 MRS. ARSHI MANCHANDA HEAD: PRIMARY JULY 01 1989 55419 62480 80675 88556 96780 8 MR. AJAY MACHDANA TRANSPORT MANAGER APRIL 01 1998 25000 27500 32500 36500 50000 1 MRS. NEENA RODRIGUES PRINCIPAL* JULY 01 2007 37540 42328 47305 NA. N.A. 2 MRS. KAVITA MALIK PRINCIPAL* DECEMBER 01. 2014 N.A N.A N A 48844 53020 'FIRST APPOINTMENT AS PRINCIPAL NOTE: DA SLAB OF THE ABOVE PERSONS IS THE SAME AS IN THE CASE OF OTHER TEACHERS OF ALL THE SCHOOLS UNDER MANAV MANGAL SOCIETY 12 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) TRACK RECORD OF SALARY AS DIRECTOR S. NO. NAME OF THE PERSON DESIGNATION DOJ AY 2012-13 AY 2013- 14 AY 2014-15 AY 2015-16 AY 2016- 17 1 MR. SANJAY SARDANA DIRECTOR MANAV MANGAL GROUP OF SCHOOLS APRIL 01. 1986 I 125000 200000 220000 280000 320000 2 MR. SANDEEP SARDANA DIRECTOR MANAV MANGAL GROUP OF SCHOOLS OCTOBER 14. 1988 ' 125000 200000 220000 280000 320000 SCHOOLS BEING MANAGED BY MANAV MANGAL SOCIETY (READ .) MONTH YEAR BRANCH APPROXIMATE STRENGTH STAFF STRENGTH APRIL 1968 MANAV MANGAL SCHOOL SECTOR-9 CHANDIGARH MAY 1975 SCHOOL SITE ALLOTTED BY UT CHANDIGARH APRIL 1979 MANAV MANGAL HIGH SCHOOL SECTOR -21C CHANDIGARH 1530 61 DECEMBER 1988 SCHOOL SITE ALLOTTED BY HUDA APRIL 1993 MANAV MANGAL SCHOOL SECTOR-11 PANCHKULA 2550 92 AUGUST 2005 SCHOOL SITE BOUGHT FROM PUDA APRIL 2007 WORKING OF MANAV MANGAL SMART SCHOOL SECTOR-64 SAS NAGAR MOHALI BEGINS 3700 145 FEBRUARY 2012 SCHOOL SITE PURCHASED FROM SHIPRA EST ATE LTD ON INSTALLMENT BASIS APRIL 2012 TO AUGUST 2014 (A) PAYMENT OF INSTATLLMENTS TO SHIPRA ESTATES LTD. (B) PLANNING & SEEKING APPROVALS FROM GMADA FOR CONSTRUCTION OF SCHOOL BUILDING SEPTEMBER 2014 TO MARCH 2016 CONSTRUCTION OF SCHOOL BUILDING IN SHIPRA ESTATE LTD. ZIRAKPUR APRIL 2016 WORKING OF MANAV MANGAL SMART WORLD NAGLA ZIRAKPUR BEGINS 2300 97 SEPTEMBER 2013 SCHOOL SITE BOUGHT FROM DLF NEW CHANDIGARH IN INSTALLMENTS SEPTEMBER 2014 TO DATE PAYMENT OF INSTALLMENTS TO DLF TOTAL STRENGTH 10080 395 6.1 IT WAS FURTHER SUBMITTED BEFORE THE LD. CIT(A) AS UNDER: 13 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 1. ASSESSEE SOCIETY IS REGISTERED SINCE 1969 AND REGIS TERED UNDER SECTION 11 AND 12AA SINCE 01.04.1993 AND ITS OBJECTIVE IS TO P ROVIDE EDUCATION. 2. NO INCRIMINATING MATERIAL FOUND DURING SURVEY OR P OST-SURVEY SALARY STAFF NUMBER NO. OF STUDENTS UNVOUCHED BILLS. 3. ASSESSMENT ORDERS FOR FY 2012-13 AND SURVEY PROCEED INGS POINTS ARE SIMILAR AS NOTHING NEW COULD BE FOUND. 4. INCREASE IN RECEIPTS/GROWTH/SURPLUS: A) THE INCREASE IN RECEIPTS IS DUE TO HIGHER INTAKE OF STUDENTS AND A NORMAL ANNUAL INCREASE IN FEES; B) HIGHER INTAKE OF STUDENTS HAPPENS ON OPENING A N EW SCHOOL LIKE SMART SCHOOL MOHALI DURING 2007-08; C) THE INCREASE IN RECEIPTS IS DUE TO THE INCREASE IN DEMAND FOR THE HIGH-TECH QUALITY EDUCATION OF OUR SCHOOLS; D) THE INCREASE IN FEE IS ONLY 10% WHICH IS EVER L ESS THAN THE INFLATION AT THAT TIME. 5. IF SURPLUS REMAINS THERE IS NOTHING WRONG AND IT WOULD BE ENTITLED FOR EXEMPTION PROVIDED IT EXISTS SOLELY FOR THE PURPOSE OF EDUCATION (PINE GROVE INTERNATIONAL CHARITABLE TRUST: PAGE 39 AND QUEEN'S EDUCATIONAL SOCIETY: PAGE 48). THE ASSESSING OFFICER HAS NEVER DOUBTED THAT TH E ASSESSEE SOCIETY IS CARRYING OUT ANY ACTIVITY OTHER THAN EDUCATION. 6. THE CAPITAL EXPENDITURE IS TO BE ALLOWED IN CASE OF EDUCATIONAL INSTITUTION LIKE THE ASSESSEE SOCIETY (PINE GROVE INTERNATIONAL CHARITABLE TRUST: PAGE 4 0). IN OUR CASE TOO THE SURPLUS IS BEING PLOUGHED BACK BY THE SOCIETY AND RATHER THERE IS A DEFICIT (TABLE AT PAGE 5 AND 6). IT THUS CLEARS THE TEST L AID DOWN BY HON'BLE SUPREME COURT THAT IF THE SURPLUS IS PLOUGHED BACK FOR EDUCATIONAL PURPOSES IT EXISTS SOLELY FOR EDUCATIONAL PURPOSES. (QUEEN'S ED UCATIONAL SOCIETY: PAGE 62) 7. THE INVESTMENTS HAVE BEEN MADE BY THE SOCIETY FO R THE ATTAINMENT AND ACHIEVEMENT OF ITS OBJECTIVES. THE SCHOOL LANDS HAV E BEEN PURCHASED AT THE RATES LOWER THAN THE ONES AT WHICH SCHOOL LAND IS M ADE AVAILABLE BY CHANDIGARH ADMINISTRATION HUDA AND GMADA AS THEY HAVE ALREADY SWITCHED OVER TO THE PRACTICE OF AUCTIONING SCHOOL SITES. 8. SALARY A) PAYMENTS ARE BEING MADE ON RECIPROCAL SERVICES A ND HENCE THESE TRANSACTIONS ARE REMUNERATION AND NOT BENEFITS. B) AO HAS NOT PLACED ON RECORD ANY COMPARISON THAT H OW SALARY BEING PAID IS EXCESSIVE. THE ONUS LIES ON AO (DAULAT RAM RAWATM ULL: PAGE 81) C) AS PER US THE SALARY IS BEING PAID AS PER EXPER IENCE QUALIFICATIONS AND WORK PROFILE. AO IS NOT IN A POSITION OF THE MANAGEM ENT TO DECIDE THAT WHAT IS A REASONABLE SALARY (DALMIA CEMENT BHARAT LTD. PAGE 7 5) 14 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) D) ON ONE HAND AO IS SAYING THAT THE INCREASE OF SAL ARY IS EXCESSIVE AND THEN HIMSELF DISALLOWING THE ENTIRE SALARY THUS CONTRADI CTING HIMSELF 6.2. IT WAS SUBMITTED THAT IN EARLIER YEARS THE AS SESSMENT HAD BEEN FRAMED U/S 143(3) OF THE ACT AND THE EXPENSES INCURRED UNDER T HE HEAD SALARY RENT AND INTEREST HAD BEEN ALLOWED YEAR AFTER YEAR BY THE V ARIOUS AOS THEREFORE THE PRINCIPLE OF CONSISTENCY NEEDS TO BE APPLIED AND TH E REVENUE SHOULD NOT HAVE TAKEN U TURN ALL OF A SUDDEN. THE ASSESSEE ALSO R ELIED ON THE OBSERVATIONS MADE BY THE REVENUE/DEPARTMENT IN THE ASSESSMENT ORDERS OF THE EARLIER YEARS WHICH HAVE BEEN INCORPORATED BY THE LD. CIT(A) AT PAGE NO S. 17 TO 20 OF THE IMPUGNED ORDER FOR THE COST OF REPETITION THE SA ME ARE NOT REPRODUCED HEREIN. THE ASSESSEE ALSO FURNISHED A WRITTEN SUBMISSION WH ICH HAS BEEN INCORPORATED IN PARA 5.1.1 OF THE IMPUGNED ORDER AND READ AS UNDER: I. THERE IS ADDITION ON ACCOUNT OF RENT WHICH IS PAID BY THE SOCIETY IN RESPECT OF RESIDENTIAL HOUSE WHICH IS OWNED BY SAR ASHRI SANJAY SARDANA AND SH. SANDEEP SARDANA WHO ARE DRAWING SALARY AS PRINCIPA L AND DIRECTOR OF THE SOCIETY. THE RENT WHICH IS PAID BY THE SOCIETY IS B EING TAKEN INTO CONSIDERATION AS PERQUISITE IN THE HANDS OF SH. SANJAY SARDANA AN D SH. SANDEEP SARDANA IN THEIR INCOME TAX RETURNS. II. FOR THE PURPOSE OF PAYMENT OF RENT BEING PAID FOR THE LAST MANY YEARS THERE IS REPORT OF THE GOVT. APPROVED VALUER ABOUT THE 'FAIR RENT' AND THE ASSESSING OFFICER HAS NOT RAISED ANY ISSUE ON THAT. III. THE RENT HAS BEEN PAID THROUGH NORMAL BANKING CHANNELS AND THE ASSESSING OFFICER HAS NOT BEEN ABLE TO DISPUTE THAT WHAT SHOULD BE THE 'FAIR RENT' AND NO DOUBT HAS BEEN RAISED IN THIS REGARD. IV. IN THE EARLIER YEARS SUCH PAYMENT OF RENT OF THE MEMBERS OF SOCIETY HAS BEEN ACCEPTED IN THE INCOME TAX ASSESSMENTS OF THE SOCIETY IN THE ORDER PASSED U/S143(3)/143(1). 2. WE WISH TO INVITE YOUR KIND ATTENTION TO THE LAT EST JUDGEMENT OF HON'BLE APEX COURT IN THE CASE OF CIT VS. BHOLARAM EDUCATIONAL S OCIETY AS REPORTED IN [20191 101 TAXMANN.COM 193 IN WHICH THE ISSUE WAS EXACTLY THE SAME IN AS MUCH AS THE EDUCATIONAL SOCIETY WAS BEING RUN BY T HE HUF WHOSE KARTA WAS THE TRUSTEE OF THE TRUST AND EXEMPTION U/S 11 WAS DENIE D BY THE ASSESSING OFFICER AS ACCORDING TO THE ASSESSING OFFICER SUCH PAYMENT OF RENT BREACHED SECTION 13(1)(C). THE HON'BLE HIGH COURT UPHELD TRIBUNAL'S ORDER THAT RENT PAID BY THE ASSESSEE TRUST TO A TRUSTEE FOR USING LAND AND BUIL DING WAS NOT EXCESSIVE AND THUS EXEMPTION COULD NOT BE DENIED TO THE ASS ESSEE UNDER SECTION 11 15 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) BY INVOKING PROVISIONS OF SECTION 13(1)(C) AND SLP FILED AGAINST SAID ORDER WAS DISMISSED THE RELEVANT FINDING OF THE HON'BLE APEX COURT IS AS UNDER:- 'SECTION 13 READ WITH SECTION 11 OF THE INCOME-TA X ACT 1961 - CHARITABLE OR RELIGIOUS TRUST-DENIAL OF EXEMPTION (SUB-SECTION (1 )(C)-ASSESSMENT YEAR 2010-11- ASSESSEE TRUST WAS RUNNING A SCHOOL-T PAID RENT TO HUF WHOSE KARTA WAS TRUST OF ASSESSEE TRUST-ASSESSING OFFICER TAKING A VIEW THAT SUCH PAYMENT BREACHED SECTION 13(1)(C) DENIED EXEMPTION CLAIMED BY THE A SSESSEE UNDER SECTION 11- COMMISSIONER (APPEALS) AS WELL AS TRIBUNAL OPINED T HAT HAVING REGARD TO FAIR MARKET VALUE OF PROPERTY RENT PAID WAS NOT EXCESSI VE-MOREOVER RENT HAD BEEN VALUED AS PER PREVAILING RATE FIXED FOR PURPOSE OF STAMP DUTY- ACCORDING DISALLOWANCE MADE BY ASSESSING OFFICER WAS DELETED- HIGH COURT UPHELD ORDER PASSED BY TRIBUNAL- WHETHER ON FACTS SLP FILED AGA INST DEDUCTION OF HIGH COURT WAS TO BE DISMISSED- HELD YES IN FAVOUR OF ASSESSE E.' THE COPY OF THE JUDGEMENT IS ENCLOSED AT PAGES 1 TO 3 OF THE PAPER BOOK. 3. IN FACT IN THE ASSESSMEN T YEAR THE ASSESSING OFFICER HAS DISALLOWED THE ENTIRE RENT BEING CLAIMED AS DEDUCTION AND DENIED THE EXEM PTION U/S 11 WHICH IS CONTRARY TO THE FACTS AND CIRCUM STANCES WHE N ON SIMILAR FACTS AND CIRCUMSTANCES THE ISSUE HAVE BEEN DECIDED IN FA VOUR OF ASSESSEE IN THE EARLIER YEARS IN THE ORDER U/S 143(3) AND NOW THERE IS A BI NDING JUDGMENT OF THE HON'BLE APEX COURT. 4. YOUR GOODSELF'S ATTENTION IS INVITED TO THE JUDG EMENT OF 'HON'BLE APEX COURT' IN THE CASE OF QUEEN'S EDUCATIONAL SOCIETY V/S CIT AS REPORTED IN [20151 55 TAXMANN.COM 255 (SO IN WHICH IT HAS BEEN HELD AS UNDER: 'SECTION 10(23C) OF THE INCOME-TAX ACT 1961- EDUCA TIONAL INSTITUTION (PROFIT MOTIVE) - ASSESSMENT YEARS 2000-2001 AND 2001-2002 - WHETHER WHERE A SURPLUS WAS MADE BY EDUCATIONAL INSTITUTION WHICH WAS PLOUG HED BACK FOR EDUCATIONAL PURPOSES SAID INSTITUTION WAS TO BE HELD TO BE EXI STED SOCIETY FOR EDUCATIONAL PURPOSE AND NOT FOR PURPOSE OF PROFIT - HELD YES [PARA 19] IN FAVOUR OF ASSESSEE/ MATTER REMANDED'. 5. WHILE DELIVERING THE ABOVE SAID JUDGEMENT THE H ON'BLE APEX COURT HAS APPROVED THE FINDING OF THE HON'BLE PUNJAB & HARYAN A HIGH COURT IN THE CASE OF 'PINEOROVE INTERNATIONAL CHARITABLE V. UNION OF IND IA T20101 327 ITR 73 P&H-HC AND ST. LAWRENCE EDUCATIONAL SOCIETY (REGD.) VS. CI T (2013) 353 ITR 320 6. THE ABOVE SAID VIEW HAS FURTHER BEEN APPROVED BY THE JURISDICTIONAL HIGH COURT I.E. PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT (EXEMPTIONS) VS. MANAGING COMMITTEE ARYA HIGH SCHOOL IN WHICH IT HAS BEEN HELD THAT IF THE EXCESS ACCUMULATION IS APPLIED FOR O BJECTS OF THE SOCIETY THEN NO ADVERSE VIEW/ CAN BE TAKEN FOR THE REGISTRATION OF SOCIETY. IN OU R CASE ALSO THERE IS NO DISPUTE THAT THE FUNDS HAVE BEEN UTILIZED FOR RAISING INFRA STRUCTURE OF THE SCHOOL AND BY WHICH THE OBJECTS OF THE SOCIETY I.E. PROVIDING ED UCATION IS TAKEN CARE OFF. 7. WE ALSO INVITE YOUR GOODSELF'S ATTENTION TO THE JUDGEMENT OF JURISDICTIONAL IT AT CHANDIGARH BENCH CHANDIGARH IN THE CASE OF M/S INDO SOVIET FRIENDSHIP 16 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) COLLEGE FOR PHARMANCY MANAGING COMMITTEE IN WHICH THE VEHICLE RUNNING EXPENSES AND DEPRECIATION ON CAR WERE DISALLOWED U/ S 13(2)(B) OF THE ACT SINCE THE CAR WAS BEING USED BY THE CHAIRMAN OF TRUST. IT WAS HELD BY THE HON'BLE IT AT THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH THAT THE CARS WERE BEING USED FOR PERSONAL PURPOSE AND FOR ALLEGA TION OF SECTION 13(2)(C) THE ASSESSING OFFICER SHOULD BRING SOME EVIDENCE ON RECO RD AS TO WHAT SHOULD BE REASONABLE AMOUNT WHICH SHOULD BE PAID FOR SERVICE S RENDERED BY THE CHAIRMAN . SIMILARLY IN THE ABOVE JUDGEMENT THERE WAS ISSUE OF SALARY BEING PAID TO THE CHAIRMAN OF THE SOCIETY AND IT WAS CONTENDED BY THE ASSESSEE THAT THE SALARY BEING PAID TO THE CHAIRMAN WAS IN RESPECT OF DUTIES PERFORMED FOR POLICY PLANNING PRESCRIBING NORMS OF FEE AND ADMISSION F ACULTY DEVELOPMENT RECRUITMENT CONSTRUCTION OF BUILDING ETC AND ALSO I N VIEW OF THE FACT THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH THAT ANY EXCESS SALARY WAS PAID TO THE CHAIRMAN THE ADDITION WAS DELETED AS PER FINDING GIVEN IN PARA-17 PAGES 46 TO 48 OF THE JUDGEMENT. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCES THESE SUBMISSIONS MAY PLEASE BE CONSIDERED AND OBLIGE. 2. WE HAVE SUBSTANTIATED AND FILED A PAPER BOOK BEFORE YOUR GOODSEIF THAT IN THE SIMILAR SCHOOLS THERE HAS BEEN ADMINISTRATO R DIRECTOR AND PRINCIPAL AND OTHER POSTS AS WELL AND THEIR JUSTIFICATION FOR THE SAME HAS B EEN SUBMITTED TO YOUR GOODSELF AND NOW WE ARE SUBMITTING HEREWITH THE F OLLOWING EVIDENCES OF THE SCHOOLS AT CHANDIGARH AND ADJOINING AREAS I.E. AT M OHALI WHERE THERE ARE SCHOOLS WHERE DIFFERENT PERSONS HAVE BEEN APPOINTE D I.E. CHAIRMAN MANAGING DIRECTOR DIRECTOR ADMINISTRATOR VICE PRINCIPAL A ND WHICH EVIDENCES ARE AS UNDER:- 1. DOON INTERNATIONAL SCHOOL. CHANDIGARH THERE IS POST OF DIRECTOR EDUCATION AND MANAGING DIRECTOR 1-4 APART FROM PRINCIPAL 2. SMART WONDER SCHOOL MOHALI THERE IS POST OF DIRECTOR AND PRINCIPAL 5 3. ASHIANA PUBLIC SCHOOL CHANDIGARH 6-7 THERE IS POST OF DIRECTOR AND PRINCIPAL 4. MOUNT CARMEL SCHOOL CHANDIGARH 8-9 THERE IS POST OF FOUNDER DIREC TORS APART FROM PRINCIPAL 5. AJIT KARAM SINGH INTERNATIONAL PUBLIC SCHOOL CH ANDIGARH 10-13 THERE IS POST OF FOUNDER DIRECTOR AND PRINCIPAL 6.SAUPIN'S SCHOOL THERE IS POST OF DIRECTOR AND PRINCIPAL 14-15 7.YADVINDRA PUBLIC SCHOOL MOHALI THERE IS POST OF DIRECTOR AND PRINCIPAL 16 8. ST. KABIR PUBLIC SCHOOL CHANDIGARH THERE IS POST OF DIRECTOR. CHIEF ADVISOR AND PRINCI PAL 17-20 9.MANAV RACHNA INTERNATIONAL SCHOOL MOHALI 21 THERE IS POST OF PRINCIPAL. VICE PRINCIPAL. HEADMASTER. ACADEMIC COORDINATOR . CURRICULUM COORDINATOR E STATE OFFICER AND MARKETING MANAGER 10.CHITKARA INTERNATIONAL SCHOOL CHANDIGARH THERE IS POST OF CHAIRPERSON. PRINCIPA L. 22-28 17 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) VICE PRINCIPAL. DIRECTOR ACADEMI C SUPPORT RESEARCH AND DEVELOPMENT CO-COORDIN ATOR CHIEF ADMINISTRATIV E OFFICER. MANAGER OPERATION S ETC. 11 ST. JOSEPH'S SENIOR SECONDARY SCHOOL. CHANDIGARH THERE IS POST OF PRINCIPAL. DIRECTOR AND CHAIRMAN 29-34 12 STRAWBERRY FIELDS HIGH SCHOOL THERE IS A POST OF DIRECTOR. PRINCIPAL 35-36 AND CHIEF ACADEMIC OFFICER 3. IT IS SUBMITTED THAT BECAUSE OF THE FACT THAT T ILL 2006 THERE WERE ONLY TWO SCHOOLS I. E. AT CHANDIGARH AND PANCHKULA AND THERE WAS ONLY ONE POST OF DIRECTOR NAMELY SH.G.S. SARDANA FOUNDER MEMBER OF M ANAV MANGAL SOCIETY BUT AS AND WHEN NEW SCHOOLS WERE TO BE OPENED AT MOHALI AND ZIRAKPUR. THE NEED WAS FELT FOR APPOINTMENT OF DIRECTORS AND THEREFOR E BY WAY OF RESOLUTION IN NOVEMBER 2005 A RESOLUTION WAS PASSED AND FOR WHIC H THE COPY HAS ALREADY BEEN SUBMITTED ALONGWITH WRITTEN SUBMISSIONS AND BY WAY OF THIS SARVASHRI SANJAY SARDANA AND SH.SANDEEP SARDANA WERE GIVEN ADDITIONA L CHARGES OF DIRECTOR HAVING CHARGE OF PRINCIPAL OF CHANDIGARH AND PANCHK ULA SC HOOL RESPECTIVELY AND THUS THE SALARY PAID TO THEM AS DIRECTOR IS F ULLY JUSTIFIED. 4. EVEN OTHERWISE IF WE HAD TO APPOINT SOME PERSO NS FROM OUTSIDE AS DIRECTOR EVEN THEN THE SALARY WOULD HAVE TO BE PA ID BUT IT WAS THOUGHT ADVISABLE TO GIVE SH SANJAY SARDANA AND SANDEEP SAR DANA ADDITIONAL DUTIES AS THEY WERE FOUND TO BE DEPENDABLE AND RESPONSIBLE WH ICH REQUIRED THEIR LOT OF TIME AND ENERGY IN ORDER TO ACHIEVE THE OBJECTS OF THE SOCIETY. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCES A ND EVIDENCES OF THE COMPARABLE CASES OUR SUBMISSIONS MAY PLEASE BE AC CEPTED AND OBLIGE. 6. FROM THE ABOVE SAID FACTS IT IS VERY CLEAR THA T STARTING FROM THE SCHOOL AT RESIDENTIAL PREMISES BY SH. G.S. SARDANA AND SMT. U SHA SARDANA AND DUE TO THE FAR SIGHTEDNESS AND PLANNING OF BOTH OF THEM COUPL ED WITH THE PLANNING AND EXECUTION BY SH. SANJAY SARDANA AND SH. SANDEEP SAR DANA IN THE LATER YEARS 'MANAV MANGAL SOCIETY' HAS BUILT ITS OWN GOODWILL A ND REPUTATION OVER THE YEARS IN CHANDIGARH MOHALI PANCHKULA AND AT ZIRAKPUR AN D AS ON THE DATE THE SOCIETY CAN BOAST OF HAVING 10080 CHILDREN 395 TEA CHERS IN ALL THE FOUR SCHOOLS PUT TOGETHER. WITH THIS BACKGROUND THE FOLLOWING F URTHER ISSUE-WISE SUBMISSIONS MAY PLEASE BE CONSIDERED WHICH ARE IN CONTINUATI ON OF EARLIER SUBMISSIONS AS MADE BEFORE YOUR GOODSELF'S PREDECESSORS OVER A PER IOD OF TIME:- 6.3. IT WAS FURTHER SUBMITTED AS UNDER: II. PAYMENT OF SALARY TO SH. SANJAY SARDANA/SANDEEP SARDANA I. SH. SANJAY SARDANA IS HIGH 'QUALIFIED PRINCIPAL' HAVING AN EXPERIENCE OF 33 YEARS AS ON THE DATE AND ALL THE PAYMENT OF SALARY HAVE BEEN PAID TO HIM YEAR AFTER YEAR THROUGH NORMAL BANKING CHANNELS AND THER E ARE NO CASH PAYMENT AND ALL SUCH SALARIES AS PAID TO HIM COMPARE FAVOURABLY WELL WITH THE SALARY PAID BY THE OTHER COMPARABLE SCHOOLS AND FOR THAT CERTAIN E VIDENCE FROM THE SIRSA SCHOOL SIRSA' 'STAR GLOBAL SCHOOL' ROHTAK 'DELH I PUBLIC SCHOOL' FEROZEPUR SURMOUNT INTERNATIONAL SCHOOL GORAKHPUR SMART WON DERS MOHALI. SALWAN PUBLIC 18 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) SCHOOL DELHI AND A CONSULTANCY AGENCY OF A REPUTED SCHOOL IN THE TRICITY ARE BEING ENCLOSED HEREWITH. II. ALL ADVERTISEMENTS WILL SHOW THAT A HIGH SALAR Y PACKAGE IS BEING GIVEN TO THE PRINCIPALS EVEN WITH A REASONABLE EXPERIENCE AN D IN FACT IS MORE THAN THE ONE BEING OFFERED BY MANAV MANGAL SOCIETY TO SH. SA NJAY SARDANA AND SH. SANDEEP SARDANA WITH A MUCH HIGHER EXPERIENCE. THUS ON THE BASIS OF ABOVE DOCUMENTARY EVIDENCES THERE IS A COMPLETE JUSTIFIC ATION FOR PAYMENT OF SALARY AND RENT FREE ACCOMMODATION. III. FROM THE ABOVE SAID COMPARISON OF THE CASES YOUR GOODSELF WOULD APPRECIATE THAT BESIDES THE SALARY WHICH IS ON MUC H HIGHER SIDE OF THE OTHER SCHOOLS AND IN THOSE SCHOOLS THE PRINCIPALS ARE AL SO OFFERED 'RENT FREE ACCOMMODATION' CONVEYANCE AND LEAVE ENCASHMENT ME DICAL FACILITY ETC AND IN OUR CASE SOME OF THESE BENEFITS ARE NOT GIVEN LIKE MEDICAL AND LEAVE ENCASHMENT. THEREFORE FROM THE ABOVE SAID DOCUMENT ARY EVIDENCES IT STANDS JUSTIFIED ABOUT THE PAYMENT OF SALARY AND 'RENT FRE E ACCOMMODATION' WHICH COMPARES FAVOURABLY WELL WITH THE OTHER SCHOOLS CO UPLED WITH THE PAST HISTORY OF THE CASE WHERE NO DISALLOWANCE WAS CALLED FOR YOUR GOODSELF WOULD ALSO APPRECIATE THAT THOUGH INITIALLY IN THE ASSESSMEN T ORDER THE ASSESSING OFFICER HAS MENTIONED THAT A REASONABLE SALARY HAS TO BE CONSID ERED TO THE RELATED PERSONS BUT THEN WHILE PASSING THE ORDER HE HAS ADDED THE ENTIRE SALARY WHICH IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE THOUGH BO TH SH. SANJAY SARDANA AND SH. SANDEEP SARDANA HAVE BEEN FOUND TO BE WORKING I N THE SCHOOL AT THE TIME OF SURVEY OPERATIONS CONDUCTED BY THE ASSESSING OFFI CER ON 28/29.09.2016 AND EVEN NO ADVERSE MATERIAL WAS FOUND DURING THE COURS E OF SUCH SURVEY OPERATIONS WHICH WAS CARRIED OUT FOR ABOUT TWO DAYS AND FURTHE R ALL THE FOUR PERSONS NAMELY SARVASHI SANJAY. SANDEEP ANJALI & MONIKA WERE PRES ENT IN THE SCHOOL AND EVEN THE EVIDENCE OF OTHER RELATED PERSONS WERE FURNISHE D AND THESE SUBMISSIONS ARE CONTAINED IN OUR REPLY DATED MAY 23 2017 PAGE NO . 12 TO 14 AND REPLY (IN PARA- D) POINT NO. HI AND NO ADVERSE COMMENTS HAVE EVEN B EEN GIVEN BY THE ASSESSING OFFICER IN THIS REGARD. IV. IT IS ALSO WORTHWHILE TO MENTION HERE THAT IN ALL THE OTHER SCHOOLS WHERE THE SALARY OF RS. 2 LACS OR MORE TO THE PRINCIPAL HAS B EEN OFFERED AND THEY HAVE EXPERIENCE OF RS. 10 YEARS/7 YEARS HAS BEEN MENTION ED AND WHEREAS SH. SANJAY SARDANA AND SH. SANDEEP SARDANA ARE HAVING EXPERIEN CE OF 33 YEARS AND 31 YEARS RESPECTIVELY. THUS IN WHATEVER WAY WE LOOK WHETHER BY VIRTUE OF PAST HISTORY OF THE CASE OR BY COMPARABLE CASES THERE I S A COMPLETE JUSTIFICATION OF SALARY. III. SALARY AS DIRECTOR TO SH. SANJAY SARDANA AND SH. SANDEEP SARDANA I. IT IS SUBMITTED THAT TWO SCHOOLS WERE IN EXISTEN CE ONE AT CHANDIGARH AND ANOTHER AT PANCHKULA AND NO DIRECTOR HAD BEEN APPOI NTED. THE PANCHKULA SCHOOL HAVE BEEN IN OPERATION SINCE 1993. THEREAFTE R IN ORDER TO EXPAND THE CAUSE OF PROVIDING EDUCATION TO LARGER SECTION OF S OCIETY IT WAS DECIDED TO OPEN A 'SMART SCHOOL' AT MOHALI GOING BY THE EVER CHANG ING REQUIREMENT OF EDUCATION AND FOR PROVIDING QUALITY EDUCATION TO THE LARGE SE CTIONS OF SOCIETY. FOR THIS LOT OF EFFORTS AND EXTRA TIME WAS REQUIRED ON ACCOUNT OF P LANNING/ LIASONING AND LOOKING AFTER THE DESIGNS CONSTRUCTION EMPLOYMENT OF STAFF INFRASTRUCTURE TO BE 19 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) PROVIDED IN THE SCHOOL FOR GETTING THE ELECTRICITY CONNECTION GETTING THE BUILDING PLAN APPROVED SUPERVISION OF THE CONSTRUCTION WORK AT VARIOUS PHASES AND FOR THAT THERE WAS NEED OF APPOINTMENT OF DIRECTORS AND FOR WHICH A RESOLUTION WAS PASSED DATED NOVEMBER 5 2005 WHEREIN IT HAS BEEN MENTIONED THAT THERE WAS NEED OF DIRECTOR AND INSTEAD OF APPOINTING SOME PER SON FROM OUTSIDE IT WAS DESIRED THAT THESE IMPORTANT ADDITIONAL RESPONSIBI LITIES MAY BE GIVEN TO SH. SANJAY SARDANA AND SH. SANDEEP SARDANA WH O HAD BEEN WORKING VERY HARD AND HAVE ENHANCED THE GOODWILL AND REPUTATION OF TH E SCHOOLS OF THE SOCIETY BEING WORKING AS TEACHER/ PRINCIPAL FOR MORE THAN 1 5 YEARS AND ACCORDINGLY THEY WERE GIVEN ADDITIONAL RESPONSIBILITIES OF WORK ING AS 'DIRECTORS' AND TO WHICH ALL SUCH ABOV E JOBS FOR LOOKING AFTER THE EXTENSION OF THE ACTIV ITIES OF THE SCHOOLS RUN BY MANAV MANGAI SOCIETY RIGHT FROM THE SELECTION OF SUITABLE SITE FOR THE PLOT OF NEW SCHOOL S TO BE SET UP AND FINALLY SETTING UP A COMPLETE SC HOOL REQUIRED LOT OF TIME/ ENERGY AND WHICH HAD BEEN DULY DISCHARGED BY SH. SANJAY/ SANDEEP SARDANA . II. ALL SUCH PAYMENTS AS DIRECTOR SALARY ARE BEIN G MADE THROUGH NORMAL BANKING CHANNELS AND FURTHER BOTH OF THEM TOOK CHA RGE AS DIRECTORS FROM NOVEMBER 2005 I.E. THE DATE OF RESOLUTION BUT NO P AYMENT AS 'DIRECTOR' WAS MADE TO THEM FROM NOVEMBER 2005 TO 31.03.2006 AND IT WAS ONLY AFTER THAT THE SOCIETY FOUND THEIR SERVICES AS VALUABLE THAT THEY WERE PAID 'DIRECTOR SALARY' FROM 01.04.2006. ALL THE SALARIES PAID AS DIRECTOR/ PRIN CIPAL HAVE BEEN ALLOWED BY THE SUCCESSIVE ASSESSING OFFICERS YEAR AFTER YEAR IN THE ORDERS AS PASSED U/S 143(3). THERE IS NO CHANGE OF FACTS AND CIRCUMSTANCES AND I T IS ONLY ON ACCOUNT OF THEIR SINCERE EFFORTS THAT 'MOHALI SMART SCHOOL' AND ANOT HER 'SMART SCHOOL AT ZIRAKPUR' STARTED OPERATIONS IN THE YEAR 2007 & 2016 RESPECTI VELY. III. IT IS FURTHER SUBMITTED THAT THIS APPOINTMENT OF DIRECTOR IN THE SCHOOL HAS NEVER BEEN A NEW PHENOMENON AND RATHER IN THE VARI OUS SCHOOLS BESIDES THE POST OF PRINCIPAL THERE ARE POSTS OF VICE PRINCIPA L ESTATE MANAGER AND EVEN THERE ARE DIFFERENT DIRECTORS APPOINTED FOR DIFFERE NT FIELDS LIKE DIRECTOR ACADEMIC DIRECTOR ADMIN DIRECTOR ACTIVITIES AND DIRECTOR HR APART FROM OTHER POST LIKE 'ESTATE MANAGER' FOR MANAGING AND PROCURING SUPPLY OF VARIOUS FURNITURE AND FIXTURE REQUIREMENTS OR THE ADMINISTRATIVE OFFICERS/ MANAGERS FOR MANAGING THE ADMINISTRATIVE ASSIGNMENTS AND EDUCATIONAL ADVISORS FOR CURRICULUM DESIGNING ETC. THIS IS PROVED BY THE VARIOUS DOCUMENTARY EVID ENCES WHICH ARE BEING FURNISHED IN THE PAPER BOOK AND THEREFORE IN THIS CASE IF THE SOCIETY HAD APPOINTED OTHER PERSONS THEN THE SALARIES OF THOSE PERSONS WOULD HAVE TO BE CHARGED AS EXPENSE IN THE EXPENDITURE ACCOUNT AT M UCH HIGHER RATE THAN IN THE PRESENT CASE THEREFORE THE DIRECTORS SALARY IS FU LLY JUSTIFIED COUPLED WITH THE FACT THAT IN THE EARLIER YEARS THE SAME HAS BEEN ALLOWE D U/S 143(3) AND THE SAID SALARY AS DIRECTOR HAS ALSO BEEN ACCEPTED IN THE HANDS OF SH. SANJAY SARDANA AND SH. SANDEEP SARDANA AND THERE HAS BEEN NO DISPUTE. IV. FURTHER THE SERVICES BEING RENDERED BY THEM HA VE BEEN RECOGNIZED AND LAUDED BY WAY OF VARIOUS APPRECIATION LETTERS/ AWAR DS FROM THE DIFFERENT STATE GOVERNMENTS AND ALSO AS A MARK OF APPRECIATION BY ' YEOMAN SERVICES' RENDERED BY THEM FOR UPLIFTMENT OF EDUCATION STANDARD AND WH ICH ULTIMATELY HELPED THE 'MANAV MANGAL SOCIETY' IN ACHIEVING ITS AIM OF RENDERING QUALITY EDUCATION TO ALL THE SECTIONS OF THE SOCIETY. 20 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) V. IT IS SUBMITTED THAT ALL THE TEACHERS LEAVE THE SCHOOL AT STIPULATED TIME OF THE SCHOOL BUT THE DIRECTORS IN VIEW OF NUMEROUS AS SIGNMENTS BOTH SHRI SANJAY SARDANA AND SHRI SANDEEP SARDANA HAVE TO WORK BEY OND THE NORMAL SCHOOL HOURS AS UNDER- NATURE OF ASSIGNMENT AS DIRECTORS - MR. SANJAY SARDANA & MR. SANDEEP SARDANA * FINALISING ALL APPOINTMENTS OF STAFF IN ALL THE B RANCHES. * DEALING WITH ESTATE OFFICE: CHANDIGARH HUDA: PAN CHKULA AND PUDA: MOHALI & ZIRAKPUR * CONSULTING ARCHITECTS/ ENGINEERS FOR CONSTRUCTION / RENOVATION/ BEAUTIFICATION OF SCHOOLS. * ENGAGING CONTRACTORS/ SUB-CONTRACTORS FOR CONSTRU CTION/ RENOVATION/ BEAUTIFICATION OF SCHOOLS. * ARRANGING MATERIAL REQUIRED FOR CONSTRUCTION/ REN OVATION/ BEAUTIFICATION AND SUPERVISING WORK AT SITE. * ARRANGING FOR OUTSOURCED PARTIES FOR EFFICIENT WO RKING OF SCHOOLS LIKE TRANSPORT SERVICES/ MEDICAL SERVICES/ SMART CLASS C ONTENT/ HOUSEKEEPING/ MAINTENANCE WORK ETC. AND SUPERVISING THEIR PERFORM ANCE IN THE SCHOOLS. * DEALING WITH THE CONCERNED GOVERNMENT DEPARTMENTS LIKE HEALTH DEPARTMENT ELECTRICITY DEPARTMENT STATE TRANSPORT AUTHORITY FIRE DEPARTMENT AND OFFICES OF P.F. ESI MUNICIPAL COUNCIL/CORPORAT ION AT CHANDIGARH PANCHKULA AND MOHALI.] * LOOKING AFTER PRINT MEDIA COVERAGE OF EVENTS/ ACT IVITIES ORGANIZED BY ALL SCHOOLS. * DEALING WITH EDUCATION DEPARTMENT OF U. T. PANCHK ULA MOHALI * DEALING WITH C8SE DELHI * DESIGNING OF CURRICULUM FOR ALL SCHOOLS] * DESIGNING AND PRINTING OF SCHOOL STATIONERY/ EXAM INATION MATERIAL OF ALL SCHOOLS] * ARRANGING ORIENTATION PROGRAMMES/ WORKSHOPS FOR T EACHERS TO ENSURE THEIR CONTINUOUS PROFESSIONAL GROWTH. * CO-ORDINATING FOR THE CONDUCT OF OUTDOOR EDUCATIO NAL ACTIVITIES COMMON FOR ALL THE SCHOOLS.] * ARRANGING SUPPLY OF FURNITURE AND FIXTURES ON DEM AND/ AS PER NEED TO ALL THE SCHOOLS. VI. IT IS FURTHER SUBMITTED THAT SHRI G.S. SARDANA HAS BEEN 'FOUNDER CHAIRMAN' ALONG WITH SMT. USHA SARDANA SINCE 1968 AND DUE TO THEIR HARD EFFORTS AND 21 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) PLANNING THE MANAV MANGAL SOCIETY HAS ATTAINED GOODWILL AND REPUTATION IN THE FIELD OF EDUCATION A ND STILL THEY ARE ACTIVELY ASSOCIATED WITH IT AND AS SUCH THE SALARY BEING PA ID TO SH. G.S. SARDANA AND SMT. USHA SARDANA BEING THE FOUNDER MEMBERS OF THE SOCI ETY WHO HAVE TOILED HARD OVER THE YEARS AND AS SUCH THE SALARY PAID TO THEM IS FULLY JUSTIFIED. THEY ARE SOURCE OF INSPIRATION AND GUIDANCE TO THE PRINCIPAL/ DIRECTORS AND OF ALL THE STAFF WORKING I N THE FOUR SCHOOLS. IT IS FURTHER SUBMITTED THAT ONLY SHRI G.S. SARDANA IS THE 'MEMB ER' OF THE SOCIETY AND THEY ARE RENDERING THE SERVICES TO THE SOCIETY FOR WHICH TH EY ARE RECEIVING THE SALARY ON MONTH TO MONTH BASIS AS A N ORMAL EMPLOYEE. IT IS SUBMITTED THAT NO EXTRA BENEFIT HAS BEEN GIVEN TO T HE RELATED PERSONS SINCE THEY HAVE BEEN FOUND TO BE RENDERING SERVICES TO THE SOC IETY AND AS SUCH THE SECTION 13(3) OF THE ACT WILL NOT APPLY ACCORDINGLY . WE ARE SUBMITTING HEREWITH A CHART SHOWING THE QUALIFICATION OF RELAT ED PERSON WHICH PROVES THAT ALL SUCH PERSONS ARE GETTING SALARY IN VIEW OF THEI R QUALIFICATION AND SERVICES RENDERED TOWARDS THE FIELD OF EDUCATION IN 'MANAV M ANGAL SOCIETY'. VII. IT IS FURTHER BEING BROUGHT ON RECORD ALL THE RELATED PERSONS ARE GETTING THE SALARIES FOR THE WORK BEING CARRIED ON BY THEM AND NOT AS 'CHARITY' AND THE SAME KIND OF SALARY IS BEING PAID TO THE NON-RELATED PER SONS FOR WHICH NO DOUBT HAS BEEN RAISED BY THE ASSESSING OFFICER. THE SAID SALAR Y IS BEING PAID TO THEM ON ACCOUNT OF THEIR QUALIFICA TION EXPERIENCE AND THE SERVICES BEING RENDERED BY THEM AND THUS THE WHOL E BASIS OF MAKING THE ADDITION BY THE ASSESSING OFFICER IS TOTALLY UNCALLE D FOR. BESIDES THE ABOVE WE ARE ENCLOSING HEREWITH A CHART TO SUBSTANTIATE THE FACT THAT DEARNESS ALLOWA NCE BEING PAID TO RELATED PERSONS AND TO THE OTHERS IS THE SAME WHICH PROVE THE FACT THAT NO EXTRA BENEFIT HAS BEEN GIVEN TO THE RELATE D PERSONS. VIII. IT IS FURTHER SUBMITTED THAT AS DIRECTORS HAS BEEN PAID SALARY IN A CONSOLIDATED MANNER AND THERE HAS BEEN INCREASE IN THE SALARY OVER A PERIOD OF TIME AS DIRECTOR IN VIEW OF THE ADDITIONAL RESPONSI BILITIES UNDERTAKEN BY THEM YEAR AFTER YEAR AND ALSO ON ACCOUNT OF OPENING OF 'NEW S CHOOLS AND THE DAY TO DAY PLANNING AND EMPLOYMENT OF TEACHERS BESIDES OTHER PLANNING OR CONSTRUCTION OF SCHOOLS BUILDING WHICH WE HAVE HIGHLIGHTED ABOVE HAD INCREASED MANIFOLD OVER A PERIOD OF TIME AND THE INCREASE IS THEREFORE ON ACCOUNT OF ADDITIONAL RESPONSIBILITY IS FULLY JUSTIFIED. YOUR GOODSELF WOULD APPRECIATE THAT WE HAVE ALREADY GIVEN THE FACTS ABOUT DIFFERENT SCHOOLS BEI NG OPERATIONAL IN DIFFERENT YEARS. IX. FOR THE OTHER ASSESSMENT YEARS I.E. A.Y. 2014-1 5 2015-16 AND 2016-17 IT IS SUBMITTED THAT WE HAVE FILED THE PAPER BOOK AND THE FACTS REMAIN THE SAME AND NOTHING HAS BEEN MENTIONED BY THE ASSESSING OFFICER AND NEITHER THERE ARE ANY ADDITIONAL ISSUES IN THOSE YEARS. THE ASSESSING OFFI CER HAS MADE THE ADDITION ON ACCOUNT OF SALARY INTEREST AND RENT BEING PAID TO THE RELATED PERSONS AND BESIDES THE ASSESSING OFFICER HAS ADDED THE ENTIRE ' SURPLUS' AS REFLECTED IN THE INCOME AND EXPENDITURE ACCOUNT AND WHICH SURPLUS AL SO STANDS UTILIZED FOR INFRASTRUCTURE OF THE SOCIETY AND FOR WHICH NO DO UBT HAS BEEN RAISED BY THE ASSESSING OFFICER. THUS THE ADDITION OF SURPLUS AS MADE BY THE ASSESSING OFFICER IS TOTALLY DEVOID OF ANY VALID REASONS RELIANCE IS ALS O BEING PLACED ON THE FOLLOWING JUDGEMENTS 22 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) I. DIRECTOR OF INCOME TAX (EXEMPTIONS) VS. SHETH MAFATIAL GAGAL BHAI FOUNDATION TRUST (2001) 249 ITR 533 BOMBAY HIGH CO URT II. CIT VS. FR. MULLERS CHARTIABLE INSTITUTIONS (2 014) 363 ITR 230 KARNATAKA HIGH COURT III. THE ABOVE SAID VIEW IS FURTHER FORTIFIED BY T HE CIRCULAR NO.387 DATED 6 TH OF JULY 1999 IN WHICH IT HAS BEEN HELD AS UNDER:- THEREFORE UNDER SUCH CIRCUMSTANCES TAXING OF ENTI RE SURPLUS AS PER INCOME AND EXPENDITURE ACCOUNT IS NOT PROPER AS THESE CIRCULAR S ARE BINDING UPON ALL THE OFFICERS OF THE DEPARTMENT. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCES A ND CASE LAWS THE ADDITION AS MADE BY THE ASSESSING OFFICER MAY PLEASE BE DELETE D AND OBLIGE. 1.1 SALARY TO CHAIRMAN AND DIRECTORS 1.1.1. ONE OF THE MEMBERS OF THE SOCIETY SH. G.S. S ARDANA [M.A. (ENGLISH) -DELHI UNIVERSITY M.A. (HINDI) - PUNJAB UNIVERSITY] JOINE D THE SOCIETY IN APRIL 1968 (I.E. OVER 45 YEARS OF EXPERIENCE) AND IS CURRENTLY SERVING AS THE CHAIRMAN FOR THE SOCIETY'S 4 SCHOOLS [LOCATED IN CHANDIGARH PANCHKULA MOHALI A ND ZIRAKPUR] AND OVERSEAS THE FOLLOWING FUNCTIONS IN HIS CAPACITY AS A CHAIRM AN * OVERALL SUPERVISION OF THE INSTITUTIONS; * POLICYMAKING AND OVERSIGHT FOR POLICY IMPLEMENTAT ION BY PRINCIPALS AND DIRECTORS;] * PLANNING IMAGE - BUILDING STRATEGY FOR THE INSTIT UTION; * FINANCIAL PLANNING AND BUDGETING; * OVERSIGHT FOR STAFF RECRUITMENT AND WELFARE;] * SUPPORT FOR LEGAL MATTERS. DURING THE SUBJECT YEAR THE APPELLANT THROUGH ITS MEMBERS HAD HANDLED THE ADDITIONAL RESPONSIBILITY OF PLANNING AND EXECUTING THE DEVELOPMENT OF A STATE OF ART SCHOOL AT ZIRAKPUR. AN ADDITIONAL SALARY OF RS. 50 000/- PM EACH WAS THEREFORE SANCTIONED TO THE TWO DIRECTORS. THIS WAS DULY APPR OVED IN THE MEETING OF THE EXECUTIVE BODY OF THE SOCIETY ON MARCH 24 2012. TH E INCREASE IN SALARY OF THE TWO DIRECTORS OF THESE SCHOOLS WAS GRANTED AFTER CONSID ERING THE PERFORMANCE OF THE DIRECTORS OF THESE SCHOOLS. IT WAS THE PERFORMANCE OF THE SOCIETY & ITS SCHOOLS AND EFFORTS MADE BY THE CHAIRMAN/ MANAGER TWO DIRECTOR S AND OTHER DEDICATED MEMBERS INCLUDING THE RELATED PERSONS THAT INCREASE IN SALARIES AS DIRECTORS OF SCHOOLS WAS CONSIDERED. THEIR ABILITY CAN BE JUDGED FROM THE AWARDS AND APPRECIATIONS THEY HAVE WON OVER A PERIOD OF TIME F ROM THE STATE & OTHER HIGH DIGNITARIES AT THE STATE LEVEL AND ALL INDIA LEVEL IN APPRECIATION OF THE SERVICES PROVIDED BY THEM TOWARDS THE FIELD OF EDUCATION AND SETTING UP OF INFRASTRUCTURE FOR IMPARTING QUALITY EDUCATION. THESE CERTIFICATES CONFIRM THE RECOGNITION GIVEN TO THEIR CONTRIBUTION IN THE AREA OF EDUCATION. 23 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) HAD ANYBODY ELSE FROM OUTSIDE BEEN ENGAGED FOR THE SAME ITS COST WOULD HAVE BEEN MUCH MORE AS COMPARED TO WHAT HAS BEEN PAID TO THESE TWO PERSONS. THE EFFORTS MADE BY THEM UNDER THE ABLE GUIDANCE OF CHA IRMAN/ MANAGER OF THE SOCIETY HAS YIELDED RESULTS AND THEY HAVE SUCCEEDED IN DEVELOPING THIS PROJECT FROM DRAWING BOARD STAGE TO THE STATE OF THE ART SC HOOL WITH ALL MODERN EDUCATIONAL FACILITIES AND THIS ZIRAKPUR SCHOOL IS ALREADY FUNCTIONING W.E.F. 1.4.2016 AND THAT TOO WITH ALMOST 1000 STUDENTS ON ROLLS. PARTICULARS OF MONTHLY DIRECTOR SALARY PER MONTH SANJAY SARDANA FY 2011-12 SANJAY SARDANA FY 2012-13 INCREASE AS COMPARED TO LAST YEAR INCREASE IN % TERMS MANAV MANGAL HIGH SCHOOL SECTOR-21-C CHANDIGARH 41667 50000 8333 20% MANAV MANGAL SCHOOL SECTOR 11 PANCHKULA 41666 50000 8334 20% MANVA MANGAL SMART SCHOOL MOHALI 4166 50000 8334 20% MANAV MANGAL SOCIETY SECTOR 21 CHANDIGARH (FOR OPENING OF NEW SCHOOL AT ZIRAKPUR) TOTAL 125000 200000 PARTICULARS OF MONTHLY DIRECTOR SALARY PER MONTH SANDEEP SARDANA FY 2011-12 SANDEEP SARDANA FY 2012-13 INCREASE COMPARED LAST YEAR INCREASE IN % TERMS MANAV MANGAL HIGH SCHOOL SECTOR 21-C CHANDIGARH 41667 50000 8333 20% MANAV MANGAL SCHOOL SECTOR 11 PANCHKULA 41686 50000 8334 20% MANAV MANGAL SMART SCHOOL MOHALI 41666 50000 8334 20% MANAV MANGAL SOCIETY SECTOR 21 CHANDIGARH (FOR OPENING OF NEW SCHOOL AT ZIRAKPUR) - 50000 FIRST YEAR TOTAL 125000 200000 1.1.3. THE TOTAL RECEIPTS OF THE SOCIETY DURING FY 2011-12 INCREASED BY 4.6 CRORES I.E. 25.9% APPROXIMATELY AGAINST RECEIPTS IN FY 201 0-11. KEEPING IN VIEW THE STELLAR PERFORMANCE OF THE SCHOOLS UNDER THE SOCIETY FOR TH E YEAR ENDING MARCH 31 2012 THE DIRECTORS WERE OFFERED AN INCREASE IN THE SALAR Y OF RS.8334/- PM FROM EACH SCHOOL FOR THE SUBJECT YEAR. IT WOULD BE PERTINENT TO MENTION HERE THAT TOTAL RE CEIPTS OF THE ASSESSEE SOCIETY HAVE INCREASED FROM RS.4 64 72 452/- IN FY2006-07 T O RS.25 22 04 277/- IN FY 2012-13 WITH THE SHEER EFFORTS OF SH. G.S. SARDANA MANAGER OF THE SOCIETY AND SH. SANJAY SARDANA DIRECTOR AND SH.SANDEEP SARDANA DIRECTOR OF THE MANAV MANGAL GROUP OF SCHOOLS RUN BY MANAV MANGAL SOCIETY. INCRE ASE IN TURNOVER OF THE SOCIETY IS 542.70% OVER A PERIOD OF SIX YEARS. EXCE SS OF INCOME OVER THE EXPENDITURE OF THE THREE SCHOOLS AND SOCIETY HAS AL SO INCREASED TREMENDOUSLY FROM RS.1 40 44 157/- IN THE YEAR 2006-07 TO RS.5 8 6 9S 680/- DURING THE PERIOD 2012- 2013. 24 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) APPELLANT SOCIETY HAS BEEN UTILIZING ITS INCOME ONL Y ON EDUCATIONAL FACILITIES AND INFRASTRUCTURE FOR EDUCATION OF CHILDREN IN THEIR S CHOOLS. IT IS THE VISION OF THESE PEOPLE THAT THE SCHOOLS ARE IMPARTING BEST OF THE E DUCATION IN THE TRICITY. THEY ARE ALSO THE PIONEERS IN INTRODUCING 'SMART EDUCATION' IN THE TRICITY DURING 2007 AND IN GIVING FIRST HIGH TECH GREEN SCHOOL IN ZIRAKPUR THI S YEAR . 1.1.4. IN ADDITION TO THEIR RESPONSIBILITY AS DIREC TORS OF THE 4 SCHOOLS SH. SANJAY SARDANA AND SH. SANDEEP SARDANA WERE ALSO THE ACTIN G PRINCIPALS FOR THE SOCIETY'S SCHOOL IN CHANDIGARH AND PANCHKULA RESPEC TIVELY. THERE WAS AN INCREASE OF 3% IN BASIC PAY AND 15% IN DA DURING TH E SUBJECT YEAR AS EXPLAINED BELOW: PARTICULARS OF MONTHLY SALARY SANJAY SARDANA FY 2011-12 SANJAY SARDANA FY 2012-13 INCREASE IN SALARY OVER PREVIOUS YEAR IN PERCENTAGE TERMS BASIC PAY 51850 53410 1560 3% GRADE PAY 12000 12000 0 0 DA 28733 39246 10513 15% INCREASE IN DA TOTAL 92583 104656 12043 13% PARTICULARS OF MONTHLY SALARY SANDEEP SARDANA FY 2011-12 SANDEEP SARDANA FY 2012-13 INCREASE IN SALARY OVER PREVIOUS YEAR IN PERCENTAGE TERMS BASIC PAY 51850 53410 1560 3% GRADE PAY 12000 12000 0 0 DA 28733 39246 10513 15% INCREASE IN DA TOTAL 92583 104656 12043 13% BASIC PAY 57850 5341C 1560 3% THE INCREASE IN SALARY OF SH. SANJAY SARDANA AND SH. SANDEEP SARDANA AS PRINCIPAL OF CHANDIGARH SCHOOL & PANCHKULA SCHOOL R ESPECTIVELY WAS ON THE SAME LINES AS WAS GRANTED TO OTHER TEACHING STAFF O F THE SCHOOL (INCREASE IN BASIC SALARY BEING AT 3% AND INCREASE IN DA BEING GRANTED AT 15%). AS SUCH THERE WAS NO ABNORMAL ENHANCEMENT IN SALARY OF THE PRINCIPALS . MISTAKE APPARENT FROM RECORD - A VERY IMPORTANT FAC TUAL MISTAKE APPARENT FROM THE ORDER OF THE LEARNED AO IS THAT HE HAS ALLEGED I N THE ORDER THAT THE ABOVE MENTIONED INCREASE OF 3% AND 15% WAS ONLY OFFERED T O THE PRINCIPAL. HOWEVER IT IS CLARIFIED BE FORE YOUR HONOR THAT THE INCREASE IN SALARY WAS ACROSS THE BOARD OFFERED TO ALL THE TEACHERS IN THE SCHOOL 1.1.6 THE LEARNED AO HAS NOT EVEN DISCUSSED AS TO WH AT THE COMMENSURATE SALARY PAYABLE TO PERSONS OF SUCH EXPERIENCE AND ST ATURE SHOULD BE PAID AND HAS WHOLLY DISALLOWED THE SALARY PAID TO MEMBERS AND RE LATIVES TERMING IT AS UNREASONABLE. 1.1.7 THE MEMBER AND RELATIVES APART FROM THEIR RO LE AS EDUCATORS ARE ALSO HANDLING ADMINISTRATIVE FUNCTIONS ON BEHALF OF THE SCHOOLS AND ARE THEREFORE ELIGIBLE TO THE REASONABLY REMUNERATED FOR THE SAME . THE LEARNED AO'S ACTION OF DISPROVING THE ENTIRE PAYMENT OF SALARY TO THE ABOV E PERSONS IS BAD IN LAW AND LIABLE TO BE DELETED. 1.2 JUDICIAL PRECEDENTS 25 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 1.2.1 THE HON'BLE PUNJAB & HARYANA HC IN THE CASE O F CIT VS. IDICULA TRUST SOCIETY [2014] 104 DTR 9 (P&H) 1.2.2 THE HON'BLE KARANATAKA HC IN CIT VS. CMR JNAN ADHARA TRUST [2015] 92 CCH 396 (KAR) 1.2.3 THE PUNE BENCH OF THE HON'BLE INCOME-TAX APPE LLATE TRIBUNAL (ITAT) IN THE CASE OF DR.D.Y. PATIL PRATISTHAN VS. DCIT[2013] 154 TTJ 320 (PUNE ITAT. 1.2.4 THE HYDERABAD BENCH OF THE HON'BLE ITAT IN TH E CASE OF DDIT (EXEMPTION) - ILL VS. GIDEON'S INTERNATIONAL IN INDIA [2016] 15 6 ITD 666 (HYDERABAD) 1.2.5 THE JURISDICTIONAL CHANDIGARH BENCH OF THE HO N'BLE ITAT IN THE CASE OF YOUNG SCHOLARS EDUCATIONAL VS. ITO [2011] 12 ITR 640 (CHANDIGARH) OBSERVED AS FOLLOWS 'SALARY PAID TO THE PRINCIPAL A MEMBER OF THE SOCI ETY CANNOT BE DISALLOWED AS THE PAYMENT WAS MADE TO THE PERSON HAVING QUALIFIED DEGREES AND DIPLOMAS AND SALARY WAS REASONABLE. FURTHER SINCE THE SALAR Y WAS ALLOWED IN THE ASSESSMENT MADE UNDER SECTION 143(3) IN EARLIER YEA RS DOCTRINE OF CONSISTENCY WAS APPLICABLE AS FACTS WERE SIMILAR.. 1. UNDUE BENEFITS TO RELATED PERSONS 1.1 THE LEARNED AO HAS ALLEGED IN THE IMPUGNED ASSE SSMENT ORDER THAT (I) THERE IS UNDUE BENEFIT FOR RELATED PERSONS (II) IT IS NOWHERE MENTIONED THAT AGAINST CHARITABL E ACTIVITIES MEMBERS ARE ELIGIBLE FOR BENEFITS OF THE SOCIETY. 1.2 BEFORE ADVANCING ARGUMENTS AGAINST ALLEGATIONS OF THE LEARNED AO IT NEEDS TO BE CLARIFIED THAT ONLY SH. GS SARDANA IS T HE MANAGER OF THE SOCIETY AND OTHER PERSONS RELATED TO HIM AS MENTIONED IN THE IM PUGNED ASSESSMENT ORDER ARE NOT THE MEMBERS OF THE SOCIETY. THEY ARE ONLY THE E MPLOYEES OF THE SCHOOLS BEING RUN BY THE SOCIETY AND COVERED UNDER THE DEFI NITION OF INTERESTED PERSONS UNDER SUB- SECTION (3) TO SECTION 13 OF THE ACT.. 1.7 ALL PAYMENTS MADE BY THE APPELLANT TO THE INTER ESTED PERSONS IS AGAINST RECEIPT OF BONA FIDE SERVICES FROM SUCH PERSONS AND WHERE THE PAYMENTS ARE MADE AGAINST A RECIPROCAL SERVICE THE TRANSACTION CONVERTS FROM BEING A 'BENEFIT' TO BEING A 'REMUNERATION' FOR SERVICES. 1.8 SINCE THE ABOVE REMUNERATION TO THE INTERESTED PERSONS RELATES TO THE SERVICES IN THE NATURE OF MANAGEMENT LEASING OF PR EMISES AND PROVISION OF CAPITAL THEY ARE COVERED WITHIN THE AMBIT OF SECTI ON 13(2)(C) OF THE ACT. 1.9 RELYING ON THE RULING BY THE HON'BLE ANDHRA PRA DESH HC IN THE CASE OF CHIREC EDUCATION SOCIETY (SUPRA) THE APPELLANT CON TENDS THAT THE LEARNED AO HAS ERRED IN MAKING DISALLOWANCE UNDER SECTION 13(1 )(C) OF THE ACT ESPECIALLY 26 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) WHERE IN HIS OWN JUDGEMENT THE LEARNED AG HAS QUEST IONED 'REASONABILITY' OF THE PAYMENTS MADE BY THE APPELLANT TO THE INTERESTED PE RSONS. 2. AMOUNT PAID TO RELATED PERSONS NOT REASONABLE 2.1 THE LEARNED AO HAS ALLEGED IN THE IMPUGNED ASSES SMENT ORDER THAT (I) AMOUNTS PAID BY THE APPELLANT TO ITS MEMBERS AR E NOT REASONABLE; (II) QUALIFICATION OF PERSON IS NOT A VALID GROUND FOR DETERMINING REMUNERATION; (III) INCREASE IN RECEIPTS OF THE SOCIETY IS NOT R ELEVANT FOR DETERMINING REMUNERATION; (IV) SALARY PAID TO DIRECTORS IS HIGHER THAN TEACHE RS EMPLOYED BY THE APPELLANT; THERE IS NO INCREMENT IN THE SALARY OF OTHER EMPLOY EES; (V) PROVIDING RENT FREE ACCOMMODATION TO DIRECTORS IS NOT ALLOWED IN THE ACT. WHILE THE ALLEGATIONS OF THE LEARNED AO HAVE BEEN RE BUTTED BY THE APPELLANT IN THE FOLLOWING PARAGRAPHS IT IS PERTINENT TO NOTE T HAT THE LEARNED AO HAS FAILED TO GIVE ANY REASON IN HIS ORDER TO SHOW THAT THE PAYME NTS MADE BY THE APPELLANT ARE NOT REASONABLE. THIS CAUSES GRAVE MISCARRIAGE O F JUSTICE AS THE LEARNED AO HAS PASSED A NON-SPEAKING ORDER THE GRIEVANCES FOR WHICH ARE FURTHER DISCUSSED IN PARA 5 LATER.. IT IS THEREFORE THE RESPONSIBILITY OF REVENUE TO PLACE MATERIAL ON RECORD TO SHOW HOW THE SALARY PAID BY THE TRUST IS UNREASONABLE. F URTHER THE LEARNED AO IS REQUIRED TO MENTION VALID REASONS IN THE ASSESSMENT ORDER TO INDICATE THAT THE SALARY PAID TO INTERESTED PERSON IS NOT COMMENSURAT E WITH THE RESPONSIBILITIES/ DUTIES PERFORMED BY HIM. 2.3 AS DISCUSSED AT PARA 1.4 ABOVE THE INTERESTED PERSONS ARE IN RECEIPT OF SALARY RENT AND INTEREST INCOME FROM THE SOCIETY IN RELATI ON TO REQUISITE SERVICES BEING PROVIDED BY THE MEMBERS AND RELATIVES. 4. APPELLANT HAS FAILED TO PROVIDE DOCUMENTARY EVID ENCE FOR SERVICE PROVIDED 4.4.1 WITH RESPECT TO THE ABOVE ALLEGATION OF THE L EARNED AO YOUR HONOR'S KIND ATTENTION IS REQUESTED TO THE SHOW-CAUSE RESPONSE F ILED BY THE APPELLANT BEFORE THE LEARNED AO VIDE SUBMISSION DATED FEBRUARY 15 20 16. (A COPY OF THE RESPONSE IS ENCLOSED AS PART OF THE ACCOMPANYING PA PER BOOK FOR YOUR HONOR'S KIND REFERENCE) 4.1.2 THROUGH THE RESPONSE THE APPELLANT HAD NOT O NLY DISCLOSED ALL THE REQUISITE DATA WHICH FORMED THE BASIS FOR THE LEARN ED AO'S ORDER BUT ALSO ATTACHED THE FOLLOWING EVIDENCE IN SUPPORT OF THE A PPELLANT'S CLAIM (I) COPY OF ITR OF DIRECTORS FOR AY 2013-14. (II) COPY OF RENT DEED ALONG WITH RENT VALUATION RE PORT. (III) COPIES OF REWARDS AND ACHIEVEMENTS OF THE DI RECTORS (IV) PROOF OF PREVAILING MARKET INTEREST RATE FOR P UBLIC SECTOR BANKS; (V) RESOLUTION DEEDS AUTHORIZING PAYMENTS TO INTERE STED PERSONS; (VI) COPY OF REVISED COMPUTATION OF INCOME 27 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 5. NON-SPEAKING ORDER OF THE LEARNED A.O. 5.1.1. THE LEARNED AO HAS PASSED A NON-SPEAKING ORDE R WHEREIN (I) THE BASIS OF ARRIVING AT THE REASONABLENESS OF THE PAYMENTS MADE BY THE APPELLANT TO THE INTERESTED PARTIES IS NOT EXPLAINE D. (II) THE BASIS OF CALCULATION OF THE UNDUE BENEFIT ADVANCES ARRIVED AT RS. 1 83 94 823/- IS NOT DISCLOSED. (III) PAYMENTS MADE BY THE SOCIETY TO ITS MEMBERS HAVE BEEN CAPTURED INCORRECTLY BY THE LEARNED AO; (IV) THE RELEVANT PROVISIONS OF THE ACT FOR DISALLO WANCE OF GRATUITY PAYMENT HAS NOT BEEN PROVIDED; (V) THE COMPUTATION OF TAX DEMAND ARRIVED AT RS.91 49 290/- AS PER NOTICE OF DEMAND UNDER SECTION 156 IS NOT PROVIDED. 1. DEVIATION FROM CONSISTENCY BY THE LEARNED AO 1.4 THIS ACTION OF THE LEARNED AO COMPLETELY VIOL ATES THE PRINCIPLES OF CONSISTENCY APPRECIATED BY THE HON'BLE COURTS IN V ARIOUS DECISIONS EXTRACTS FOR WHICH ARE DISCUSSED HEREUNDER:- A) CIT VS. DALMIA DADRI CEMENT LID. [1970] 77 ITR 4 10 (P&H) B) BERGER PAINTS INDIA LTD. VS. CIT [2004] 266 ITR 99 (SC) ] C) DCIT V/S UNITED VANASPATI LTD. [2005] 275 ITR 12 4 (AT)(TM) D) RADHASOAMI SATSANG VS. CIT[1992] 193 ITR 321 (SC E) CIT V/S ARTHUS ANDERSEN & CO. [2009] 318 ITR 229 (BOM) F) COMMISSIONER OF INCOME TAX V/S LEADER VALVES LTD [2007] 295 ITR 273 (P&H) 2. INTERVENTION INTO MATTERS OF COMMERCIAL EXPEDIEN CY BY THE LEARNED A.O. 2.1 NOTWITHSTANDING THE APPELLANT'S CONTENTION THAT THE LEARNED AO'S IMPUGNED ACTION TO DISALLOW THE PAYMENTS MADE TO IN TERESTED PERSONS WAS NOT SUPPORTED BY THE PROVISIONS OF THE ACT WE WISH TO HIGHLIGHT THE JUDICIARY'S VIEW ON LIMITING THE SCOPE OF AUTHORITY GIVEN TO THE LEARNE D AO IN MATTER INVOLVING COMMERCIAL EXPEDIENCY. 2.2 IN S.A BUILDERS LTD. VS. CIT (APPEALS) & ANR. [ 2007] 288 ITR 1 (SC) THE HON'BLE COURT HAD DEFINED COMMERCIAL EXPEDIENCY AS- .... FURTHER THE HON'BLE SC AGREEING WITH VIEW TAKEN B Y THE HON'BLE DELHI HIGH COURT IN CIT VS. DALMIA CEMENT (BHARAT) LTD. [2002] 254 I TR 377 (DEL) OPINED- 2.3 FURTHER THE HON'BLE SC IN CIT VS. DELHI SAFE D EPOSITS CO. LTD. [1982] 133 ITR 756 (SC) GAVE A VIEW THAT- 2.4 TAKING IN CONSIDERATION THE RATIO LAID DOWN BY THE HONBLE SC THE APPELLANT WISHES TO APPLY THE SAME TO ITS OWN CASE. THE LEARNED AO IN THE IMPUGNED ORDER MADE REFERENCE TO THE FACT THAT THE DIRECTOR/ PRINCIPAL OF THE 28 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) SCHOOL WAS IN RECEIPT OF A SALARY MUCH HIGHER THAN WHAT WAS PAID TO ANY OTHER TEACHER. 2.5 THE LEARNED AO BY APPLYING THE ABOVE LOGIC HA S COMPLETELY DEFIED COMMERCIAL PRUDENCE AND THE PRINCIPLES OF EQUITY IN COMPENSATION. 2.6 WHEREAS THE ROLE OF A TEACHER WAS LIMITED TO TH E TEACHING FUNCTION ASSIGNED THE DIRECTORS WERE WORKING BEYOND THE REG ULAR CALL OF DUTY FOR A TEACHER BY NOT ONLY MANAGING AND DIRECTING THE STRA TEGY FOR 3 SCHOOLS (AS EXPLAINED IN THE DETAILED SUBMISSION) BUT WERE ALSO OVERSEEING THE DEVELOPMENT OF A 4 TH SCHOOL. 2.7 THE LEARNED AO HAS COMPLETELY IGNORED THE FACT THAT THE ADMINISTRATIVE RESPONSIBILITY AND LIABILITIES ON THE CHAIRMAN AND DIRECTOR FAR EXCEED THAT OF THE TEACHING STAFF. IT IS A PRINCIPLE OF NATURAL JUSTIC E TO COMPARE ONLY LIKE THINGS WHICH ARE CAPABLE OF BEING COMPARED. 3. DUE COMPLIANCE OF SECTION 11 BY THE APPELLA NT 3.1 NOTWITHSTANDING THE PRAYER OF THE APPELLANT TO DELETE THE DISALLOWANCE UNDER SECTION 13(1)(C) OF THE ACT THE APPELLANT WI SHES TO BRING TO YOUR HONOR'S KIND NOTICE THAT THE APPELLANT IN ITS TRUE NATURE M AINTAINS THE STATUS OF A CHARITABLE NATURE. 3.2 THE PRIMARY GOAL AND OBJECTIVE OF THE APPELLANT HAS BEEN THE DEVELOPMENT AND OUTREACH OF QUALITY EDUCATION TO TH E STUDENTS OF THE REGION. IN THIS ENDEAVOR THE SOCIETY HAS GROWN EXPONENTIALLY OVER TIME FROM 1 SCHOOL TO NOW RUNNING A TOTAL OF 4 SCHOOLS (INCLUDING 2 SMART SCHOOLS). 3.3 THE APPELLANT HAS CONSISTENTLY MAINTAINED ITS E XPENDITURE (OF OVER 85% OF THE TOTAL RECEIPTS) TOWARDS THE ADVANCEMENT OF ITS OBJECTIVES AND THE LEARNED AO'S REMARKS ON BONA FIDE EXPENSES IS WITHOUT ANY G OOD CAUSE 6.4. THE LD. CIT(A) POINTED OUT THAT A SURVEY WAS C ONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE AND THE SURVEY REPORT WAS GIVEN VIDE LETTER DATED 21/3/2017 FOR THE COMMENTS. THE GIST OF THE SAID RE PORT HAS BEEN REPRODUCED IN PARA 5.1.2 OF THE IMPUGNED ORDER AND THE REPLY OF T HE ASSESSEE ON THE SAID REPORT IS REPRODUCED IN PARA 5.1.3 OF THE IMPUGNED ORDER. FOR THE COST OF REPETITION THE SAME ARE NOT REPRODUCED HEREIN. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE SURVEY REPORT OF T HE A.O. AND THE REBUTTAL TO THE SAID SURVEY REPORT BY THE ASSESSEE ALLOWED THE CLA IM OF THE ASSESSEE FOR THE SALARY BY OBSERVING IN PARA 5.2.2 TO PARA 5.2.9 OF THE IMPUGNED ORDER WHICH READ AS UNDER: 29 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 5.2.2. AS PER SECTION 2(15) OF THE A CT 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR EDUCATION MEDICAL RELIEF [PRESERVATI ON OF ENVIRONMENT (INCLUDING WATERSHEDS FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST ] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY; PROVIDED THAT THE ADVANC EMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE COM MERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY: PROVID ED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEI PTS FROM THE ACTIVITIES REFERRED TO THEREIN IS [TWENTY-FIVE LAKH RUPEES] OR LESS IN THE PREVIOUS YEAR IT IS TRITE LAW THAT THAT THE MAIN INTENT OF A 'CHARITABLE ORGANISATION' IS THE SUSTENANCE OF ITS MAIN OBJECT OR 'CHARITABLE PURPOSE' AS IS DEFINED UNDER SECTION 2(15) OF THE ACT AND ANY EXPENSE/EXPENDITURE PERTAINING TO ITS MAIN OBJE CT AND FURTHERANCE THEREOF IS PART AND PARCEL OF THE NON-PROFIT ACTIVITY . FOR THIS THE ACT PROVIDES A FAVORABLE TAX TREATMENT BY WAY OF PROVISIONS CONTAINED IN SECTION 11 TO SECTION 13 WHICH PROVIDE FOR A TAX EXEMPTION TO SUCH ENTITIES HAVING THEIR MAIN OBJECT AS ANY ACTIVITY WHICH FALLS UNDER THE DEFINITION OF 'CHARI TABLE PURPOSE. IF AN ENTITY WHICH HAS BEEN GRANTED AN EXEMPTION ABUSES THE EXEMPTION FOR PRIVATE BENEFIT OF ITS TRUSTEES MANAGERS DIRECTORS BENEFICIARIES OR REL ATED PERSONS SECTION 13 PROVIDES FOR AN ANTI-ABUSE MECHANISM. THE SECTION INCLUDES A MECHANISM TO ALLOW THE AUTHORITIES TO WITHDRAW AND IN SOME CASES CANCEL T HE EXEMPTION IN THE EVENT OF ABUSE. WITH THIS INTENT TO CURB ABUSE THE LEGISLAT URE BY WAY OF SECTION 13(1)(C) OF THE ACT INCLUDES AMONGST OTHER PROVISIONS A PROVI SION TO PREVENT PAYMENT OF SUCH SALARY OR ALLOWANCE TO ANY PERSON OUT OF THE RESOURCES OF THE CHARITABLE ORGANISATION WHERE THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. PERSON DEFINED ABOVE INCLUD ES; (I) THE AUTHOR OF THE TRUST OR THE FOUNDER OF THE INSTITUTION (II) ANY PERSON WHO HAS MADE A SUBSTANTIAL CONTRIBUTION TO THE TRUST OR INSTITUTION [THAT IS TO SAY ANY PERSON WHOSE TOTAL CONTRIBUTION DURING A YEAR EXCEEDS RS. 50 000/-} ( III) WHERE SUCH AUTHOR FOUNDER OR PERSON IS A HINDU UNDIVIDED FAMILY A MEMBER OF THE FAMILY (IV) ANY TRUSTEE OF THE TRUST OR MANAGER (BY WHATEVER NAME CALLED) OF T HE INSTITUTION (V) ANY RELATIVE OF ANY SUCH AUTHOR FOUNDER PERSON [MEMBER TRUST EE OR MANAGER] AS AFORESAID AND (VI) ANY CONCERN IN WHICH ANY OF THE PERSONS RE FERRED TO IN CLAUSES ABOVE HAS A SUBSTANTIAL INTEREST (VOTING SHARE EXCEEDING 20%) . THE DEFINITION OF PERSON SEEMS EXHAUSTIVE ENOUGH TO COVER THE TRUSTEES DIRECTORS PROMOTERS THEIR RELATIVES AND MAIN CONTRIBUTORS UNDER ITS AMBIT. IT IS THE SECOND LIMB OF THE DEFINITION WHICH IS MORE RELEVANT TO THE INSTANT CASE WHEREIN THE SCOPE IS LIMITED ONLY TO THOSE CASES WHERE PAYMENT OF SUCH SALARY AND ALLOWANCE IS IN EX CESS OF WHAT MAY BE 'REASONABLY' PAID FOR SUCH SERVICES. IN OTHER WORDS THE LEGISLATURE HAS NOT PUT RESTRICTIONS ON PAYMENT OF SALARY OR ALLOWANCE FOR SERVICES RENDERED BY 'PERSONS' (REFERRED ABOVE) WHERE AMOUNTS PAID ARE CONSTRUED A S 'REASONABLE' FOR SUCH PAYMENT. 5.2.3. IT IS APPARENT THAT THE ACT HAS NOT DEFINED OR PROVIDED GUIDANCE AS TO WHAT IS REASONABLE. THIS GAP HAS BEEN FILLED BY VAR IOUS JUDICIAL PRONOUNCEMENTS. THE HON'BLE ITAT CHANDIGARH BENCH IN THE CASE OF Y OUNG SCHOLARS EDU CATIONAL VS. ITO (2011) 12 ITR 640 (CHANDIGARH) HAS OBSERVED THAT SALARY PAID TO THE PRINCIPAL A MEMBER OF THE SOCIETY CANNOT BE DISALL OWED AS THE PAYMENT WAS MADE TO THE PERSON HAVING QUALIFIED DEGREES AND DIP LOMAS AND SALARY WAS REASONABLE. FURTHER SINCE THE SALARY WAS ALLOWED I N THE ASSESSMENT MADE UNDER 30 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) SECTION 143(3) IN EARLIER YEARS DOCTRINE OF CONSIS TENCY WAS APPLICABLE AS FACTS WERE SIMILAR THE HIGH COURT OF PUNJAB AND HARYANA I N THE MATTER OF CIT V. IDICULA TRUST SOCIETY [2014) 45 TAXMANN.COM 158/223 TAXMAN 66 (P&H) GAVE CONSONANCE TO THE FACT THAT APART FROM BEING FULL T IME TEACHERS THE TRUSTEE MEMBERS WERE ENGAGED IN WHOLE TIME MANAGEMENT ACTIV ITIES OF TRUST AND AS SUCH REMUNERATION PAID TO THEM COULD NOT BE TREATED AS 'EXCESSIVE'. THE REASONABLENESS OF PAYMENT OF SALARY OR ALLOWANCE TO A SPECIFIED PERSON SHOULD BE CONSIDERED FROM THE POINT OF VIEW OF THE TRUST A ND SHOULD NOT BE CONFINED TO CRITERIA LAID DOWN IN SECTION 40A(2) OF THE ACT AS THE TWO PROVISIONS ARE NOT IN PARI MATERIA. QUALIFICATIONS EXPERIENCE STATUS AND OT HER TRAITS OF A SPECIFIED PERSON RENDERING SERVICES TO THE TRUST ARE RELEVANT FACTOR S TO DETERMINE THE REASONABLENESS OF PAYMENT OF SALARY OR ALLOWANCE AN D NOT MERELY THE MARKET VALUE OF THE SERVICES RENDERED BY HIM. FURTHER A S PECIFIED PERSON SERVES IN TWO CAPACITIES FIRST AS A TRUSTEE HENCE SPECIFIED PER SON AS SUCH AND SECONDLY AS AN EMPLOYEE WHEN HE RECEIVES SALARY OR ALLOWANCE. THE BENEFIT NORMALLY GIVEN TO AN EMPLOYEE WHEN HE RECEIVES SALARY OR ALLOWANCE SHOULD NOT BE TREATED AS EXCESSIVE. INTERPRETATION OF 'REASONABLENESS' WAS I LLUMINATED IN THE MATTER OF PNR SOCIETY FOR RELIEF & REHABILITATION OF DISABLED TRU ST V. DV. PIT (EXEMPTION) (2014) 52 TAXMANN.COM 362 (2015) 67 SOT 171 (AHD. TRIB.) (URO) WHEREIN REMUNERATION GIVEN TO FULL-TIME SECRETARY OF THE TRUST BEING ABO UT 1% OF THE TOTAL VALUES OF ACTIVITIES OF THE TRUST CANNOT BE HELD AS UNREASONA BLE. IN ARRIVING AT THE SAID DECISION THE STAT TOOK COGNIZANCE OF THE EDUCATIONAL QUALIFICATIONS AND PAST EXPERIENCE OF THE AFOREMENTIONED BENEFICIARY FROM THE ABOVE RULINGS IT'S EVIDENT THAT THE REVENUE AUTHORITIES TAKE NOTE OF THE EDUCA TIONAL EXPERIENCE AND QUALIFICATION OF PERSON RENDERING SERVICES TO ARRIV E AT A 'REASONABLE' REMUNERATION RATE. THE ONUS IS ON THE REVENUE AUTHORITIES TO PRO VE 'UNREASONABLENESS' A VIEW WHICH HAS BEEN AFFIRMED BY THE ITAT PUNE IN THE MAT TER OF DR. D.Y . PATIL PRATISTHAN V. DY. CIT (2013) 39 TAXMANN.COM 138(2014] 61 SOT 47 (URO). THE HON'BLE KARANATAKA HIGH COURT IN CIT VS. CMR JNANADHARA TRU ST [2015) 92 CCH 396 (KAR) ON REASONABLY OF THE REMUNERATION PAID TO INTERESTE D PERSONS HAS HELD THAT THE PAYMENTS OF THE REMUNERATION TO THE TRUSTEES OUT O F THE TRUST AMOUNT IS NOT IN DISPUTE. THE TRIBUNAL HAS CLEARLY SET OUT THE SERVI CES RENDERED BY THESE TRUSTEES FOR THE TRUST END THEREAFTER IT HAS COME TO THE CONCLUS ION THAT THE SAID AMOUNT PAID ARE REASONABLE AND NOT EXCESSIVE. WHEN THE TRUST IS AVAILING THE SERVICES OF THESE TRUSTEES AND ON ACCOUNT OF THE SERVICES RENDERED BY THEM THERE IS A SUBSTANTIAL GROWTH IN THE TRUST AND ITS ACTIVITIES THEN THE PA YMENTS MADE FOR SUCH SERVICES RENDERED IT CANNOT BE SAID THAT IT CONTRAVENES SEC TION 13(1)(C) OF THE ACT CONSEQUENTLY THERE IS NO JUSTIFICATION FOR DENYING THE BENEFIT UNDER SECTION 11 OF THE ACT. THE HON'BLE ITAT CHANDIGARH BENCH IN THE CASE OF M/S INDO SOVIET FRIENDSHIP COLLEGE FOR PHA RMACY MANAGING COMMITTEE IN ITA NO.478 & 479/CHD/2013 DAT ED 2.6 09.2015 HAS HELD THAT THE VEHICLE RUNNING EXPENSES AND DEPREC IATION ON CAR DISALLOWED BY THE AO U/S 13(2)(B) OF T HE ACT ARE NOT SUSTAINABLE SINCE THE CAR WAS BEING USED BY THE CH AIRMAN OF TRUST. IT WAS HELD BY THE HON'BLE ITAT THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH THAT THE CARS WERE BEING USED FOR PERSONAL P URPOSE AND FOR ALLEGATION OF SECTION 13(2)(C) THE ASSESSING OFFICER SHOULD BRING SOME EVIDENCE ON RECORD AS TO WHAT SHOULD BE REASONABLE AMOUNT WHICH SHOULD B E PAID FOR SERVICES RENDERED BY THE CHAIRMAN. SIMILARLY IN THE ABOVE JU DGEMENT THERE WAS IS SUE OF SALARY BEING PAID TO THE CHAIRMAN OF THE SOCIETY AND IT WAS CONTENDED BY THE ASSESSEE THAT THE SALARY BEING PAID TO THE CHAIRMAN WAS IN RESPECT OF DUTIES PERFORMED FOR POLICY PLANNING PRESCRIBING NORMS OF FEE AND ADMISSION FACULTY DEVELOPMENT RECRUITMENT CONSTRUCTION OF BUILDING ETC AND ALSO IN VIEW OF THE 31 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) FACT THAT NO INCRIMINATING MATERIAL WAS FOUND DURIN G THE SEARCH THAT ANY EXCESS SALARY WAS PAID TO THE CHAIRMAN THE ADDITION WAS D ELETED. THE HON'BLE ITAT HYDERABAD BENCH IN THE CASE OF DDIT (EXEMPTION)-III V S. GIDEON'S INTERNATIONAL IN INDIA [20161 158 U P 6SS (HYDERABAD) MADE SIMILAR OBSERVATIONS BY HOLD ING THAT THE AO HAS NOT MENTIONED ANY VALID REASON IN THE ASS ESSMENT ORDER TO INDICATE MAT THE SALARY PAID TO THE EXECUTIVE DIRECTOR IS NO T COMMENSURATE WITH THE RESPONSIBILITIES/ DUTIES PERFORMED BY HIM. IN THE A BSENCE OF MATERIAL ON RECORD TO INDICATE THAT THE SALARY PAID IS UNREASONABLE OR EX CESSIVE ITAT DID NOT SEE REASON TO MAKE DISALLOWANCE BY THE AO AND TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A).RECENTLY THE HON'BLE APEX COURT IN THE CASE OF CIT VS. BHOLARAM EDUCATIO NAL SOCIETY AS REPORTED IN (2019) 101 TAXMANN.COM 193 IN WHICH THE ISSUE WAS EXACTLY THE SAME IN AS MUCH AS THE EDUC ATIONAL SOCIETY WAS BEING RUN BY THE HUF WHOSE KARTA WAS THE TRUSTEE OF THE TRUS T AND EXEMPTION U/S 11 WAS DENIED BY THE ASSESSING OFFICER AS ACCORDING TO THE ASSESSING OFFICER SUCH PAYMENT OF RENT BREACHED SECTION 13(I)(C.) THE HON' BLE HIGH COURT UPHELD TRIBUNAL'S ORDER THAT RENT PAID BY THE ASSESSEE TRU ST TO A TRUSTEE FOR USING LAND AND BUILDING WAS NOT EXCESSIVE AND THUS EXEMPTION COU LD NOT BE DENIED TO THE ASSESSEE UNDER SECTION 11 BY INVOKING PROVISIONS OF SECTION 13(1 )(C) OF THE ACT. ALL THESE RULINGS GO ON TO STATE THAT ONUS TO PROVE THE EXCESS IVENE SS OF THE SALARY/REMUNERATION PAID TO THE 'PERSONS' LIES ON T HE REVENUE AUTHORITIES AND WHERE THE SAME HAS NOT BEEN EVIDENCED IT CANNOT B E HELD THAT THE PROVISIONS O F SECTION 13 OF THE ACT HAVE BEEN VIOLATED. !T IS IN THIS JUXTAPOSITION OF PROVISIONS OF INCOME TAX ACT 1981 AND JUDICIAL PRONOUNCEMENTS TH AT THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE ARE TO BE ADJUDIC ATED. 5.2.4 THE AIMS & OBJECTS OF MANAV MANGAL SOCIETY AR E (I) TO PROMOTE THE CAUSE OF NATIONAL INTEGRATION (II) TO PROPAGATE HI GHER SOCIAL VALUES (III) TO HELP THE YOUNGER GENERATION TO HAVE A HEALTHY GROWTH; ME NTAL PHYSICAL AND INTELLECTUAL (IV) TO WORK FOR BRINGING ABOUT BETTE R STANDARDS OF EDUCATION AND (V) TO ESTABLISH A MANAV MANGAL SCHOOL/ SCHOOLS TO ACHI EVE THE OBJECTS MENTIONED ABOVE. 5.2.5. THE FIRST AND FOREMOST ASPECT THAT NEEDS TO BE APPRECIATED IS THAT OUT OF THE EIGHT PERSONS WHOSE SALARY HAS BEEN QUESTIONED AND DISALLOWED BY THE AO ONLY SH. GS SARDANA IS THE FOUNDER CHAIRMAN/MANAGER OF THE APPELLANT SOCIETY AND ALL OTHER PARTIES ARE THOUGH HIS FAMILY MEMBERS BUT THEY ARE THE DIRECTORS/ EMPLOYEES IN THE SCHOOLS RUN BY THE SOCIETY MERE FA CT THAT THE SOCIETY HAS PAID REMUNERATION OR INTEREST OR RENT TO THE MEMBERS/ RE LATIVES OF MEMBERS IS NOT SUFFICIENT TO INVOKE THE PROVISIONS OF SECTION 13(1 )(C) R.W. SECTION 13(3) OF THE ACT. WHAT THEREFORE NEEDS TO BE EXAMINED IS THAT WHETHER THE PAYMENTS BEING MADE TO THE MEMBERS/ INTERESTED PARTIES ARE COMMENSURATE WITH THE MARKET VALUE OF SERVICES RENDERED BY THESE PERSONS AND THE TERMS OF THEIR ENGAGEMENT SHOULD NOT BE SUCH THAT THEY ARE LETTING AN UNDUE FAVOUR B EING PASSED ON TO THEM IN THE GARB OF THE COMPENSATION BEING PAID TO THEM. 5.2.6. IN THE CASE OF THE APPELLANT SHRI G S SARD ANA IS THE FOUNDER OF THE SOCIETY (JOINED THE SOCIETY IN APRIL 1968) AND IS THE CHAIR MAN OF THE MANAV MANGAL SCHOOLS BEING RUN BY THE SOCIETY. HE HAS BEEN ENTRU STED WITH THE TASK OF OVERALL SUPERVISION MANAGEMENT POLICY MAKING STRATEGY AN D PLANNING FOR THE SOCIETY AND IS RESPONSIBLE FOR ITS LEGAL MATTERS. THE SOCIE TY AND THE SUCCESSFUL SCHOOLS BEING RUN BY IT ARE THE BRAIN CHILD OF THIS PERSON AND IT SEEMS THAT DUE TO HIS VISION AND LEADERSHIP THAT THE SOCIETY IS RUNNING SUCH REN OWNED SCHOOLS. LD. AR HAS 32 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) RIGHTLY CLAIMED THAT HIS EXPERIENCE AND GUIDANCE FO R THE LAST 45 YEARS HAS RESULTED IN THE RISE OF STRENGTH OF STUDENTS FROM 100 TO 105 00 AS ON THE DATE & TEACHERS FROM 8 TO ABOUT 475 AS ON DATE HAS TOTALLY BEEN IG NORED BY THE ASSESSING OFFICER. IT IS TOTALLY UNJUST ON THE PART OF THE ASSESSING OF FICER TO DISALLOW THE SALARY BEING PAID TO THE FOUNDERS' OF THE SOCIETY WITH WHOSE EX PERIENCE GUIDANCE AND VISION MANAV MANGAL SOCIETY IS AT THIS POSITION WHICH IS ENVY OF ASSESSING OFFICER 3S WELL. SIMILARLY SHRI SANJAY SARDANA AND SHRI SANDEEP SAR DANA ARE THE TWO DIRECTORS OF AH THE SCHOOLS BEING RUN BY THE SOCIETY AND BOTH TH ESE PERSONS HAVE OVER 25 YEARS OF EXPERIENCE. ALL THESE PEOPLE WHO HAVE BEEN ENGAGED BY THE SOCIETY ARE HIGHLY QUALIFIED AND ARE THUS COMPETENT TO CARR Y OUT THE KEY FUNCTIONS FOR THE SOCIETY AND WHICH ARE THE BACK BONE FOR ANY INSTITU TION TO GROW AND PROSPER SHRI SANJAY SARDANA AND SHRI SANDEEP SARDANA ARE ALSO SE RVING AS THE PRINCIPAL FOR THE MANAV MANGAL SCHOOLS LOCATED AT CHANDIGARH AND PANCHKULA RESPECTIVELY AND IN ADDITION TO THEIR EMOLUMENTS AS A. DIRECTOR THEY ARE BEING COMPENSATED BY WAY OF SALARY IN THE CAPACITY OF PRINCIPAL. IT I S ALSO A FACT ON RECORD THAT DURING THE YEA?' UNDER CONSIDERATION THE SOCIETY HAD STAR TED THE DEVELOPMENT OF A NEW SCHOOL AT ZIRAKPUR FOR WHICH ADDITIONAL BURDEN WAS BEING UNDERTAKEN BY THE DIRECTORS TO PRACTICALLY HANDLE EVERY ASPECT OF THI S NEW DEVELOPMENT AND TO ENSURE THAT THE EXISTING SCHOOLS ALSO DO NOT SUFFER AS A RESULT OF THE DIVISION IN TIME. LD. AR HAS FILED VARIOUS DETAILS FROM WHERE IT IS O BSERVED THAT SUCH POSTS OF DIRECTORS/ADMINISTRATORS ETC ARE ENGAGED BY VARIOUS REPUTED SCHOOLS LIKE DOON INTERNATIONAL SCHOOL CHANDIGARH SMART WONDER SCHOO L MOHALI ASHIANA PUBLIC SCHOOL CHANDIGARH MOUNT CARMEL SCHOOL CHANDIGARH YPS SCHOOL MOHALI ST. KABIR PUBLIC SCHOOL CHANDIGARH MANAV RACHNA INTER NATIONAL SCHOOL MOHALI CHITKARA INTERNATIONAL SCHOOL CHANDIGARH ST. JOSE PHS SENIOR SECONDARY SCHOOL CHANDIGARH AND STRAWBERRY FIELDS HIGH SCHOOL ETC. T HE SALARY HAS BEEN PAID TO DIRECTOR STARTING FROM A. Y.2007-2008 AND WAS ALSO BEING ALLOWED BY THE DEPARTMENT AFTER DUE VERIFICATION BECAUSE OF ADDIT IONAL RESPONSIBILITIES I.E. PLANNING DESIGNING AND OPENING OF NEW SCHOOL ONE A FTER ANOTHER AT MOHALI AND ZIRAKPUR WHICH REQUIRED A LOT OF TIME AND ENERGY A S SUBMITTED BY THE APPELLANT IN ITS VARIOUS SUBMISSIONS. FURTHER DURING THE COURSE OF SURVEY NOTHING WAS FOUND FOR DISALLOWING THE SALARY PAID TO THE ABOVE PERSONS OR TO THE OTHER RELATED PERSONS HOWEVER THE TOTAL DISALLOWANCE OF SALARY WAS MADE I N AYS 2013-2014 TO 2015-16. IT IS FOUND THAT IN THE AY 2016-17 LD.AO AT PAGE 14 OF THE ORDER HAS ALLOWED THE PAYMENT OF SALARY TO SH. SANJAY SARDANA AND SH. SAN DEEP SARDANA AT THE SAME FIGURES AS BEING PAID TO THE PRINCIPALS OF 'SMART S CHOOL' AT MOHALI AND ZIRAKPUR AT RS.6 31 564/- PER ANNUM EACH AND DISALLOWED THE BAL ANCE SALARY IT IS APPARENT THAT THERE HAS BEEN CONTRADICTORY STAND OF DIFFEREN T ASSESSING OFFICERS. SIMILARLY THE OTHER FAMILY MEMBERS UNDER QUESTION ARE ENGAGED IN THE DIFFERENT ROLES AND RESPONSIBILITIES AS ASSIGNED TO THEM. AO HAS FAILED TO BRING ON RECORD THAT APPELLANT SOCIETY HAS VIOLATED THE GUIDELINES OF TH E CBSE. DURING SURVEY PROCEEDINGS ONE OF THE COORDINATORS OF ONE MOHALI BR ANCH SCHOOL SRNT. TARUN BHARADWAJ HAS STATED UNDER OATH THAT SALARY IS PAID AS PER NORMS OF AICTE [CBSE]. THIS WAS NOT REBUTTED BY THE AO. EVEN SOME OF THE PA RENTS LIKE MRS. SHAMA SHANKAR AND SH. GURPREET SINGH WHO VISITED THE MOHA LI SCHOOL DURING SURVEY PROCEEDINGS HAVE NOT STATED ANYTHING ADVERSE ABOUT THE QUALITY OF EDUCATION OR FEE STRUCTURE ETC. DA SLAB FOR THE CHAIRMAN OR MEMB ER RELATIVES OR OTHER STAFF MEMBERS WAS ON SAME FOOTING I.E. @60% IN AY 2013-14 @.75% IN AY 2014-15 @87.5% IN AY 2015-16 AND @ 100% IN AY 2016-17. THE ANNUAL INCREMENT IS 3% OF BASIC PAY DURING AY 2012-13 DA OF STAFF WAS RAISED FROM 15% TO 45% IN ORDER TO INTRODUCE PAY SCALE OF PUNJAB 5 TH PAY COMMISSION. HOWEVER DIRECTORS ARE GETTING CONSOLIDATED REMUNERATIONS FROM AY 2013-14. NO INCR IMINATING MATERIAL HAS BEEN 33 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) BROUGHT ON RECORD BY THE AO TO ESTABLISH UNREASONABL ENESS OF ABOVE SALARY/DA SLAB/DIRECTORS REMUNERATIONS. THE CHAIRMAN/DIRECTOR S ETC ARE NOT REQUIRED TO MARK ATTENDANCE. HOWEVER THE APPELLANT HAS SUBMITT ED ATTENDANCE REGISTER OF ALL OTHER STAFF MEMBERS. APPELLANT HAS ALSO FILED C OMPLETE SALARY DETAILS OF ALL THE PERSONS LIKE CHAIRMAN AND MEMBER RELATIVES WHICH HA VE NOT BEEN REBUTTED BY THE AO DURING ASSESSMENT PROCEEDINGS. IT IS OBSERVED THAT DURING THE COURSE OF SURVEY PROCEEDINGS SH. SANJAY SARDANA SH. SANDEEP SARDANA MS. ANJALI SARDANA AND MS. MONICA SARDANA WERE ALL PRESENT IN THE SCHOOLS. ON PERUSAL OF STATEMENTS RECORDED DURING SURVEY PROCEEDINGS IT I S FURTHERMORE OBSERVED THAT ABOVE PERSONS WERE QUESTIONED ON THE VARIOUS ACTIVI TIES OF THE SCHOOL AND THEY RESPONDED TO EACH AND EVERY QUERY RAISED BY THE OFF ICIALS OF SURVEY TEAM MEANING THEREBY THAT THEY HAVE BEEN FOUND TO BE ACT IVELY INVOLVED IN DAY TO DAY WORKING OF SCHOOLS AND FOR UPLIFTING OF THE INF RASTRUCTURE AND GOODWILL OF THE SCHOOLS. THE QUALIFICATIONS EXPERIENCE AND PERFORM ANCE OF THE DIRECTORS NAMELY SH. SANJAY SARDANA M.SC. (GOLD MEDALIST) M.PHIL. M.ED AND SH. SANDEEP SARDANA: BE. (HONS.) PGDCA (GOLD MEDALIST) WHO HAV E BEEN FOUND ACTIVELY INVOLVED IN DAY TO DAY WORKING OF THE SCHOOL FOR TH E PAST MORE THAN 25 YEARS IS UNQUESTIONABLE. THE TWO FOUNDERS AND ADVISORS TO TH E SCHOOLS NAMELY SH. G.S. SARDANA AND MRS. USHA SARDANA WHO ARE CORNER STONE OF 'MANAV MANGAL SCHOOL' SINCE 1968 ARE UNDISPUTEDLY HIGHLY QUALIFIED. SH. S ANJAY SARDANA THE DIRECTOR IN ANSWER TO QUESTION NO.5 'PLEASE PROVIDE ATTENDANCE REPORT OF SH. G.S. SARDA NA REPLIED THAT 'SINCE SH. G.S. SARDANA IS INVOLVED IN POLICY MATTE RS OF THE SOCIETY AS MANAGER THE POLICY DECISIONS MADE BY THE EXECUTIVE BODY OF THE SOCIETY IS GET IMPLEMENTED IN ALL THE FOUR BRANCHES WITH THE HELP OF TWO DIRECTORS. SINCE THESE THREE INDIVIDUALS SH. G.S. SARDANA AND OTHER TWO DIRECTORS I.E. MR. SANJAY SAR DANA AND SH. SANDEEP SARDANA ARE INVOLVED IN THE WORKING AND GROWTH OF ALL THE FOUR SCHOOLS THEIR ATTENDANCE IS NOT MARKED AT A PARTIC ULAR PLACE.' EVEN SH. AJAY MANCHANDA WHO WAS ON LEAVE THAT DAY WAS RECORDED D URING POST SURVEY OPERATIONS AS PLACED AT PAGE NO.66 TO 71 IN PAPER B OOK NO II HAS REPLIED EVERYTHING ABOUT THE SCHOOL AND HIS WORKING AND NOT HING HAS BEEN DOUBTED BY THE ASSESSING OFFICER IN THE REPORT OR DURING ASSESS MENT PROCEEDINGS. THE COORDINATOR NAMELY MS. HARJOT KAUR AND PRINCIPAL OF MOHALI BRANCH OF THE SCHOOLS MRS. KAVITA MALIK DURING THE COURSE OF REC ORDING THEIR STATEMENTS PLACED AT PAGE NO.93 AND 77 OF PAPER BOOK II HAD STATED IN DEPENDENTLY AS FOLLOWS. WHEN MS. HARJOT KAUR WAS ASKED A QUESTION Q6. IS MR. AJAY MANCHANDA WORKS IN THE SCHOOL?'. SHE HAS ANSWERED THAT 'YES HE COMES TO SCHOOL IN CONNECTION WITH SOME MAINTENANCE WORK BUT WE DO NOT HAVE ANY INTER ACTION WITH HIM.' SIMILARLY WHEN MS. KAVITA MALIK PRINCIPAL OF MANAV MANGA! SM ART SCHOOL MOHALI WAS PUT TO A QUESTION LIKE 'Q8 IS SH AJAY MANCHANDA OR MS. ARSHI MANCHANDA I S WORKING IN THIS SCHOOL?'. SHE ALSO STATED THAT 'SH. AJAY MANCHANDA COMES TO THE SCHOOL SOMETIMES FOR PROBLEMS REGARDING TRANSPORT AND MAIN TENANCE OF GENERATORS AND GENERAL MAINTENANCE. AS FAR AS I KNOW. MS ARSHI MA NCHANDA IS NOT WORKING IN THIS SCHOOL ' IT IS FOUND FROM RECORD THAT MS. ARSHI MANCHANDA IS WORKING IN MANAV MANGAL HIGH SCHOOL CHANDIGARH. THE FACT THAT MS. A RSHI MANCHANDA IS ON REGULAR ROILS OF CHANDIGARH BRANCH HAD BEEN CLARIFI ED BY SH. SANJAY SARDANA DURING THE COURSE OF RECORDING HIS STATEMENT PLACED AT PAGES 21 & 22 OF PAPER BOOK II AND HE HAD EXPLAINED THE NATURE OF DUTIES A S ASSIGNED TO MS. ARSHI MANCHANDA WHICH IS VERY MUCH CLEAR IN ANSWERS TO Q UESTION NOS. 73 AND 74 AS FOLLOWS. IN A QUESTION NO.73 PUT TO MR. SANJAY SARD ANA HE STATED THAT 'ANS. THE PROOF OF MS. ARSHI BEING INVOLVED IN DAY TO DAY WOR KING OF THE SCHOOL IS THAT SHE TAKES UP MATHS OF CLASS 7 APART FROM ATTENDING TO O THER ACTIVITI ES OF PRIMARY BLOCK. AS REGARDS MRS. ANJALI SHE WAS AVAILABLE IN THE SCHOOL WHEN THE SURVEY 34 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) TEAM REACHED THE SCHOOL.' AGAINST QUESTION 'Q74. PLEASE PRODUCE ANY ONE DOCUMENT OF THEIR ACTIVITY IN SCHOOL.' HE REPLIED THAT 'ANS. IN CASE OF MS. ARSHI A COPY OF TIMETABLE IS BEING PRODUCED. AS REGARDS HER APPOINTMENT HER SERVICE BOOK AND TEACHER FILE ARE BEING PROVIDED. SAME FOR THE CASE OF MRS. ANJALI SARDANA.' THESE WERE FOUND PROVIDED TO THE AO. NO ADVERSE INFE RENCE HAS BEEN DRAWN BY THE AO DURING ASSESSMENT PROCEEDINGS BY WAY OF REFERRING TO ANY ADVERSE EVIDENCE BROUGHT ON RECORD. 5.2.7. EDUCATION IN THE PRESENT TIMES IS ONE OF TH E MOST COMPETITIVE SECTORS AS THE TEACHERS AND THE SCHOOLS ARE EXPECTED TO KEEP U P AND MAINTAIN HIGH STANDARDS IN ORDER TO ENSURE SAFETY POLICIES AND CO NSTANTLY ENDEAVOUR TO CREATE AN IDEAL LEARNING ENVIRONMENT FOR THE STUDENTS. NOT ONLY THIS THE TEACHERS WHO ARE BEING ENGAGED IN THE SCHOOLS HAVE TO BE MOTIVAT ED FOR LATEST TECHNIQUES AND METHODS IN EDUCATION BY WAY OF ORGANIZING TRAIN INGS ETC. AND ALL THIS REQUIRES THE MANAGEMENT AND THE HEAD OF THE SCHOOL TO BE ON THEIR TOES ALL THE TIME. THUS THE ROLE OF A GOOD MANAGEMENT IN CASE OF RUNN ING EDUCATIONAL INSTITUTIONS CAN NEVER BE OVER ESTIMATED. IT IS OBSERVED FROM TH E RECORD THAT THE DIRECTORS OF THE SCHOOLS HAVE TIME AND GAIN WON VARIOUS AWARDS A ND APPRECIATIONS OVER A PERIOD OF TIME FROM THE STATE AND OTHER HIGH DIGNIT ARIES AT THE STATE LEVEL AND ALL INDIA LEVEL IN APPRECIATION OF THE SERVICES PROVIDE D BY THEM TOWARDS THE FIELD OF EDUCATION AND SETTING UP OF INFRASTRUCTURE FOR IMPA RTING QUALITY EDUCATION. THAT BEFITS THEM TO BE IN THE KEY ROLES ASSIGNED TO THEM BY THE SOCIETY. TO SAY THAT MEMBERS OF THE SOCIETY ARE EARNING COMMISSION INCOM E FROM SUSHMA BUILDTECH LTD CHANDIGARH MONA TOWNSHIP PVT.LTD. NEW DELHI AND GSC ESTATES SECTOR 22D CHANDIGARH IT IS OBSERVED THAT EVEN IF AO IS CONVIN CED THAT THE COMMISSION INCOME IS NOT GENUINE THEN HE/SHE IS AT LIBERTY TO INITIATE ACTION AGAINST THE INDIVIDUALS BY PERUSING THEIR RETURNS OF INCOME. TH E PERSONS REFERRED ABOVE HAVE EARNED THE INCOME FROM A COUPLE OF BUILDERS BY VIRT UE OF THEIR CAPABILITIES. RECEIPT OF COMMISSION INCOME BY THE PERSONS IS A PE RSONAL MATTER OF THE INDIVIDUAL ASSESSEE. THE STATEMENTS OF SH. DEVINDER SINGH SH.HARINDER PAL SINGH SH.MOHINDER SINGH SH.VISHAL RAJ AGGARWAL NO WAY ES TABLISH THAT ANY CASH HAS BEEN TRANSFERRED TO THE MEMBERS OR TO THESE PEOPLE OR CONCERNS AND THEY HAD PROCURED BOGUS COMMISSION INCOME. NO SUCH DOCUMENT HAS BEEN BROUGHT TO MY NOTICE BY THE AO OR SURVEY REPORT THAT ESTABLISHES TRAIL OF TRANSFER OF CASH CLANDESTINELY TO THE MEMBERS OF THE SOCIETY. HENCE IF THERE IS BOGUS COMMISSION RAISED BY THE MEMBERS OF THE SOCIETY LD.AO IS FREE TO INITIATE ACTION AGAINST THE MEMBERS IN THEIR PERSONAL CAPACITIES AS THEY HAVE S HOWN SUCH COMMISSION INCOME IN THEIR RESPECTIVE RETURNS OF INCOME. THESE RECEIPTS SHOWN BY SUCH INDIVIDUALS HAVE NO CORRELATION TO THE APPEAL PROCE EDINGS FOR THE ASSESSMENT YEAR/YEARS UNDER REFERENCE. 5.2.8. UNDER THESE CIRCUMSTANCES THE UNDISPUTED FA CT ON RECORD IS THAT THE SCHOOLS OF THE ASSESSEE SOCIETY ARE BEING SUCCESSFU LLY RUN AND THE REVENUES ARE CONSISTENTLY RISING WHICH IS EVIDENT FROM THE FACT THAT IN FY 2006-07 THE SOCIETY WAS HAVING TOTAL RECEIPTS OF RS.4.64 CRORES WHICH HAS R ISEN TO RS.25.22 CRORES IN THE FY 2012-13 AND WHICH MEANS AN INCREASE OF 542 70% IN T HE RECEIPTS WITHIN A SPAN OF 6 YEARS. THE ROLE OF MANAGEMENT THE DIRECTORS THE PRINCIPAL AND THE OTHER ADMINISTRATIVE HEADS CANNOT BE UNDERMINED AND THERE FORE THE SALARIES AND EMOLUMENTS GRANTED TO THEM (IN THE FORM OF RENT FRE E ACCOMMODATION TO DIRECTORS) DO NOT APPEAR TO BE EXCESSIVE VIS--VIS THE SERVICES OFFERED BY THESE PEOPLE TO THE ASSESSEE SOCIETY. THE INCREMENTS GRAN TED TO THESE PERSONS ARE ALSO IN LINE WITH THE INCREASED ROLE AND RESPONSIBILITY BEING UNDERTAKEN BY THEM AND 35 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) WITH THE MULTIPLE TIMES GROWTH IN THE NUMBER SIZE AND STRENGTH OF THE SCHOOLS THE INCREASE IN THE SALARIES OVER THE YEARS IS BUT NATU RAL AND JUSTIFIED. 5.2.9. ON THE OTHER HAND THE ASSERTIONS MADE BY THE AO IN HIS ASSESSMENT ORDER ARE NOTHING MORE THAN ABSTRACT STATEMENTS. THE A.O. IN VARIOUS PARTS OF HIS ORDER HAS STATED THAT THE SALARIES BEING PAID TO THE MEMB ERS IS EXCESSIVE AND BEYOND REASONABLE LIMITS HOWEVER HE HAS NOT BROUGHT ON R ECORD A SINGLE INSTANCE FOR COMPARISON TO PROVE THAT WHAT COULD HAVE BEEN REASO NABLE SALARY FOR THESE PERSONS. IT IS NOT THE CASE OF THE AO THAT THESE PER SONS HAD NOT RENDERED ANY SERVICES TO THE SOCIETY/SCHOOLS OR HAVE NOT WORKED FOR THE BENEFIT OF THE SOCIETY/SCHOOLS. MOREOVER THE FACT THAT THESE PERS ONS WHOSE SALARY HAS BEEN QUESTIONED AND DISALLOWED BY THE AO HAVE IN FACT BEE N FOUND TO BE ACTIVELY ENGAGED IN RENDERING THEIR RESPECTIVE SERVICES AS I S PROVED FROM THE FACT THAT DURING THE COURSE OF SURVEY ON THE ASSESSEE AND THE POST SURVEY ENQUIRIES AIL THESE PARTIES HAVE GIVEN THEIR STATEMENTS VIS-A-VIS THE SALARY BEING DRAWN BY THEM FROM THE SOCIETY AND THE SERVICES BEING RENDER ED TO THE SOCIETY AND NO DEFECT/ SHORTCOMING COULD BE POINTED OUT BY THE AO E VEN DURING THE SURVEY AND IN THE ASSESSMENT IN PREVIOUS/SUBSEQUENT YEARS. THE A.O. HAS FAILED TO APPLY HIS/HER MIND THAT ON THE ONE HAND HE HIMSELF IS ALL EGING THAT THE SALARY IS MORE THAN REASONABLE AND ON THE OTHER HAND HE HAS SIMPLY GONE AHEAD TO DISALLOW THE ENTIRE SALARY PAID TO THE MEMBERS/ RELATIVES OF MEMBERS WHICH IN ITSELF IS CONTRADICTORY. NONE OF THE FACTUAL DATA FURNISHED B Y THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAVE BEEN DENIED B Y THE AO. FURTHER IN THE SURVEY REPORT OF THE AO HE HAS HIMSELF ADMITTED TH AT THE ASSESSEE'S SCHOOLS ARE HAVING A VERY IMPRESSIVE GROWTH RATE AND THIS VERY FACTS GOES IN FAVOUR OF THE APPELLANT THAT IF IT IS ACHIEVING A GOOD GROWTH RAT E THE SAME CANNOT BE WITHOUT THE ACTIVE AND EFFECTIVE EFFORTS OF THE MEMBERS AND MANAGEMENT OF THE SCHOOLS. THE OTHER GROUNDS HIGHLIGHTED BY THE AO IN HIS SURVE Y REPORT THAT THE SOCIETY IS ALLEGEDLY RUNNING AS A COMMERCIAL INSTITUTION FOR P ROFIT MOTIVE ETC. ARE FIRSTLY NOT RELEVANT TO THE ISSUE UNDER CONSIDERATION AS THE CR ITERIA FOR APPLICATION OF DISALLOWANCE UNDER SECTION 13(1)(C) IS TO JUDGE THE REASONABLENESS OF THE PAYMENTS MADE TO THE MEMBERS OF THE SOCIETY AND SEC ONDLY AND MORE IMPORTANTLY THERE IS NO FINDING OF THE AO THAT THE SOCIETY IS NOT WORKING TOWARDS THE OBJECTS OF EDUCATION ETC. AS DEFINED IN ITS MEM ORANDUM AND RULES AND REGULATIONS. NO CASE OF SIPHONING OFF OF THE FUNDS OF THE SOCIETY BY ITS MEMBE R S HAS BEEN ALLEGED OR FOUND BY THE AO AND FURTHERMORE THE REGISTRATION BEING GRANTED TO THE SOCIETY BY THE CIT U/S 12A OF THE AC T IS STILL VALID. IN FACT NO INCRIMINATING DOCUMENT HAS BEEN FOUND DURING SURVEY AND POST SURVEY INVESTIGATIONS NOR SUCH DOCUMENT HAS BEEN EMPHASIZ ED BY THE AO DURING APPELLATE PROCEEDINGS. IT IS APPARENT THAT THE SOCI ETY IS DULY COMPLYING WITH THE CONDITIONS LAID DOWN U/S 11 OF THE ACT AND IS WORKI NG AS PER ITS OBJECTIVES. THE RELIANCE PLACED BY THE LD. AR ON THE JUDGEMENT OF T HE HON'BLE SUPREME COURT IN THE CASE OF QUEEN'S EDUCATIONAL SOCIETY 372 ITR 89 9 WHEREIN IT HAS BEEN HELD THAT THE MERE FACT THAT THE EDUCATIONAL INSTITUTION IS M AKING A PROFIT AND IS HAVING SURPLUS CANNOT BE GROUND TO DISENTITLE THE INSTITUT ION FROM EXEMPTION U/S 10(23C)(VI) OF THE ACT IS QUITE APT. ON SIMILAR LINE S ARE THE JUDGEMENT OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PINE G ROVE INTERNATIONAL CHARITABLE TRUST 327 ITR 0073. 7. NOW THE DEPARTMENT IS IN APPEAL. 36 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 8. THE LD. CIT-DR STRONGLY SUPPORTED THE ORDER PASS ED BY THE A.O. AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER. IT WAS FURTHER SUBMITTED THAT THE PAYMENT OF SALARY TO THE TRUSTEE / MEMBERS AND THE SPECIFIED PERSONS U/S 13(3) OF THE ACT WAS UNREASON ABLE FOR THE FOLLOWING REASONS: * SH. G.S. SARDANA IS FOUNDER MEMBER OF THE SOCIETY AND WAS A MEMBER OF THE EXECUTIVE COMMITTEE OF THE SOCIETY. AS PER MEMO RANDUM OF ASSOCIATION HE HAD THE RESPONSIBILITY OF MANAGING THE EDUCATION IN STITUTIONS OF THE SOCIETY AND HE COULD NOT CHARGE ANY REMUNERATION FOR THIS FUNCT ION AS HE HAD TO WORK IN HONORARY CAPACITY. * THE NON-SPECIFIED PERSONS AS PRINCIPALS OF OTHER SCHOOLS UNDER THE ASSESSEE SOCIETY WERE GETTING MUCH LESS SALARY FOR THE SAME WORK AS COMPARED TO SH. SANJAY SARDANA AND SH. SANDEEP SARDANA. * SH. SANJAY SARDANA AND SH. SANDEEP SARDANA HAD BE EN STATED TO HAVE BEEN WORKING AS PRINCIPALS OF THE SCHOOLS WHICH IT SELF IS A FULL TIME JOB TILL 5.00 PM AND ON THE OTHER HAND THEY HAD BEEN PAID SALARY AS DIRECTORS SIMULTANEOUSLY. FURTHER IT IS ON RECORD (PAGE 31 OF THE ID. CIT(A) 'S ORDER) THAT BOTH THESE SPECIFIED PERSONS WERE PAID SALARY AS DIRECTOR FOR THE SAME W ORK. * FURTHERMORE IF BOTH THESE FAMILY MEMBERS WOULD HA VE BEEN EMPLOYEES AT SOMEWHERE ELSE HAD THEY BEEN ALLOWED TO DO SUCH EX TRA JOB DURING THEIR DUTY HOURS AS PRINCIPAL ? THIS SALARY AS DIRECTOR TO BOT H THESE CERTIFIED PERSONS IS NOTHING MORE THAN DIVERSION OF FUNDS OF THE SOCIETY FOR THE BENEFIT OF THE CERTIFIED PERSONS. * THE ASSESSEE SOCIETY HAD MADE EXPENDITURE FOR PUR CHASE OF MERCEDES BENZ VEHICLES FOR THE TRUSTEE AND THE SPECIFIED PER SONS. THIS WAS AN ADDITIONAL PERQUISITE FOR THESE PERSONS WHICH HAS NOT BEEN TH ERE FOR ANY OTHER PRINCIPALS OF THE SCHOOLS OF THE SOCIETY. * FURTHER IT HAS MADE AVAILABLE THE RENT FREE ACCO MMODATION TO SH. SANJAY SARDANA AND SH. SANDEEP SARDANA WAS ALSO A PERQUIS ITE TO THESE SPECIFIED PERSONS WHICH HAS NOT BEEN THERE FOR ANY OTHER PRI NCIPALS OF THE SCHOOLS OF THE SOCIETY. 8.1 THE LD. CIT DR FURTHER SUBMITTED THAT THE DOCUM ENTS AVAILABLE ON THE RECORD ITSELF SPEAKS THAT THE SALARY PAID TO THE TR USTEES AND THE SPECIFIED PERSONS WAS UNREASONABLE WITH A MOTIVE TO DIVERT THE FUNDS OF THE SOCIETY TO THE INDIVIDUAL. IT WAS STATED THAT THE LD. CIT(A) ALLOW ED THE SALARY ONLY ON THE BASIS OF THE EDUCATIONAL QUALIFICATIONS OF THE SPECIFIED PER SONS BUT IGNORED THIS FACT THAT 37 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) THE SALARY PAID TO THE FOUNDER MANAGER OF THE TRUST SHRI G.S. SARDANA WAS EXPRESSLY BARRED BY THE MEMORANDUM OF SOCIETY. 8.2 IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) T HOUGH HAD GIVEN CREDENCE TO THE EDUCATIONAL QUALIFICATIONS BUT HE HAD IGNORED T HE FACT THAT THE SALARY HAS TO BE PAID AS PER THE STANDARDS PRESCRIBED FOR PRIVATE SCHOOLS AND THAT THE CIT(A) HAS FAILED TO CONSIDER THE FACT THAT THE SPECIFIED PERSONS HAD BEEN ALLOWED PERQUISITE IN THE FORM OF RENT FREE ACCOMMODATION I N POSH SECTOR OF CHANDIGARH APART FROM THIS EXORBITANT SALARY PAID AND NO SUCH FACILITY HAD BEEN PROVIDED TO THE MEMBERS OF OTHER SCHOOLS OF THE ASSESSEE SOCIET Y WHO ARE NOT THE SPECIFIED PERSONS. IT WAS SUBMITTED THAT THE LD. CIT(A) HAD A LSO NOT GIVEN ANY FINDING ON THE FACT THAT THE SPECIFIED PERSONS WORKING AS PRIN CIPALS HAD BEEN GIVEN PERQUISITE OF MERCEDES CARS WHICH WAS HIGHLY ABNORM AL EVEN WHEN THE VICE CHANCELLORS OF THE UNIVERSITIES ARE NOT ALLOWED MER CEDES CARS AS PERQUISITE. THE RELIANCE WAS PLACED ON THE DECISION OF ITAT DELHI B ENCH D IN THE CASE OF PARIVAR SEWA SANSTHA VS DCIT (2005) 1 SOT 71 (DELHI ). 8.3 THE LD. CIT-DR ALSO DREW OUR ATTENTION TOWARDS BACK SIDE OF PAGE NO. 14 OF THE PAPER BOOK WHICH IS THE COPY OF THE MEMORANDUM OF SOCIETY WHEREIN IT WAS MENTIONED THAT ALL THE THREE OFFICE BEARERS NAMELY PRESIDENT VICE PRESIDENT AND MANAGER WOULD WORK AS HONORARY MEMBER. HE THEREFOR E SUBMITTED THAT SHRI G.S. SARDANA BEING THE FOUNDER MANAGER WAS NOT ALLO WED TO HAVE REMUNERATION. IT WAS ALSO STATED THAT THE SALARY PA ID TO THE PRINCIPALS WAS EXCESSIVE WHICH ATTRACTS PROVISIONS OF SECTION 13(2 )(C) OF THE ACT AND THE DISALLOWANCE MADE BY THE A.O. WAS JUSTIFIED. AS SUC H THE LD. CIT(A) WRONGLY DELETED THE DISALLOWANCE MADE BY THE A.O. 9. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND F URTHER SUBMITTED THAT THE SCHOOLS RUN BY THE ASSESSEE SOCIETY HAVE BEEN MAKIN G CONTRIBUTION IN THE FIELD 38 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) OF EDUCATION FOR THE LAST 50 YEARS AND THE DETAILS OF THE STUDENTS AS WELL AS STAFFS DURING THE PAST FEW YEARS IS AS UNDER: STUDENT AND STAFF STRENGTH (AY 2007-08 TO 2019-20) S.NO ASSESSMENT YEAR NO. OF SCHOOLS TOTAL STRENGTH TOTAL STAFF (EXCLUDING OUTSOURCED STAFF) 1 2007-08 2 4446 157 2 2008-09 3 5624 209 3 2009-10 3 6102 236 4 2010-11 3 6615 270 5 2011-12 3 7234 290 6 2012-13 3 7690 313 7 2013-14 3 7839 320 8 2014-15 3 7906 328 9 2015-16 3 7925 331 10 2016-17 3 7983 335 11 2017-18 4 8861 398 12 2018-19 4 9475 421 13 2019-20 4 9818 444 IT WAS STATED THAT FROM THE AFORESAID CHART IT WOU LD BE CLEAR THAT OVER THE YEARS DUE TO SINCERE EFFORTS OF SH. G.S. SARDANA AND SMT. USHA SARDANA FOUNDERS OF THE ASSESSEE SOCIETY A RARE REPUTATION HAS BEEN BUILT IN CHANDIGARH MOHALI ZIRAKPUR AND PANCHKULA AREA IN THE FIELD OF EDUCATI ON AND THE STRENGTH OF THE SCHOOLS ITSELF SPEAK ABOUT THE UNTIRING EFFORTS PUT IN BY THE FOUNDERS AND SOCIETY MEMBERS. IT WAS STATED THAT EXCEPT SH. G. S. SARDAN A THE OTHER 'SPECIFIED PERSONS' ARE NOT MEMBERS OF THE ASSESSEE SOCIETY BU T ONLY RELATED TO SH. G.S. SARDANA. IT WAS CONTENDED THAT OVER THE YEARS IN TH E SAID SCHOOLS SH. SANJAY SARDANA AND SH. SANDEEP SARDANA SONS OF SH. G.S. SA RDANA WHO ARE VERY WELL QUALIFIED JOINED AS TEACHERS ON 1 ST OF AUGUST 1986 AND 14 TH OF OCTOBER 1988 RESPECTIVELY AND THEN OVER THE YEARS THEY WERE PR OMOTED AS HEAD OF THE 'DEPARTMENT OF SCIENCE' AND HEAD OF DEPARTMENT OF ' COMPUTER SCIENCE' RESPECTIVELY. WITH THE PASSAGE OF TIME SH. SANJAY SARDANA BECAME VICE PRINCIPAL OF MANAV MANGAL SCHOOL CHANDIGARH WHERE AS SH. SANDEEP SARDANA BECAME THE ADMINISTRATOR OF 'PANCHKULA SCHOOL' BEFO RE BEING APPOINTED AS PRINCIPAL OF THEIR RESPECTIVE SCHOOLS. IT WAS STATE D THAT ASSESSEE SOCIETY IN ORDER TO MEET GROWING NEEDS OF LARGE SECTION OF THE SOCIE TY PURCHASED LAND FROM 39 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 'GREATER MOHALI AREA DEVELOPMENT AUTHORITY' MOHALI IN PHASE-X FOR SETTING UP THE SCHOOL I.E. FIRST 'SMART SCHOOL IN THE REGION AND ACCORDINGLY THE WORK HAD TO BE ASSIGNED TO SOMEONE FOR PROVIDING THE BEST INFRA STRUCTURE BUILDING AND OTHER FACILITIES FOR SETTING UP A 'SMART SCHOOL' AND INST EAD OF ENGAGING THE SERVICES OF SOME OUTSIDE PERSONS A RESOLUTION WAS PASSED DATE D NOVEMBER 5 2005 TO GIVE ADDITIONAL CHARGE TO SH. SANJAY SARDANA AND SH. SAN DEEP SARDANA AS DIRECTORS FOR SETTING UP OF THIS REGION'S FIRST 'SMART SCHOOL ' AGAINST THE PAYMENT OF SALARY. THUS THEY HAD DUAL CHARGE OF BEING PRINCIPALS AS W ELL AS DIRECTORS OF THE SCHOOLS. A REFERENCE WAS MADE TO PAGE. NOS. 521 AND 523 OF P APER BOOK VOLUME-LL WHICH ARE COPIES OF RESOLUTION OF EXECUTIVE BODY OF THE SOCIETY DATED 05.11.2005. 9.1. LD. COUNSEL FOR THE ASSESSEE FURNISHED A CHART SHOWING QUALIFICATIONS OF MEMBERS OF THE ASSESSEE SOCIETY SH. SANJAY SARDANA AND SH. SANDEEP SARDANA AND OTHER 'SPECIFIED PERSONS' ALONGWITH THEIR DESIG NATION AS UNDER: NAME OF THE PERSON DATE OF JOINING DESIGNATION QUALIFICATIONS EXPERIENCE SH. G S SARDANA APRIL 01 1968 FOUNDER: CHAIRMAN M.A (ENGLISH) M.A (HINDI) RETIRED AFTER SERVING FOR APPROXIMATELY 50 YEARS MRS. USHA SARDANA APRIL 01 1968 FOUNDER: STAFF WELFARE OFFICER HONS.I N HINDI (PRABHAKAR) INTERMEDIATE EXAMINATION IN ENGLISH FROM PANJAB UNIVERSITY RETIRED AFTER SERVING FOR APPROXIMATELY 48 YEARS MR. SANJAY SARDANA AUGUST 01 1986 PRINCIPAL: MANAV M ANGAL HIGH SCHOOL CHANDIG ARH & DIRECTOR: MANAV MANGAL GROUP OF SCHOOLS M.SC (GOLD MEDALIST) M.PHIL. M.ED 33 YEARS MR. SANDEEP SARDANA OCTOBER 14 1988 PRINCIPAL: MANAV M ANGAL SCHOOL PANCHKULA & DIRE CTOR: MANAV M ANGAL GROUP OF SCHOOLS B.E (HONS.) PGDCA (GOLD MEDALIST) 31 YEARS MRS. ANJALI SARDANA NOVEMBER 01 1990 VICE-PRINCIPAL MANAV M ANGAL HIGH SCHOOL SECTOR 21/C CHANDIGARH M.SC M. PHIL. B.ED 29 YEARS MRS. MONICA SARDANA SEPTEMBER 01 1992 VICE-PRINCIPAL MANAV M ANGAL SCHOOL SECTOR 11 PANCHKULA B. COM B.ED 27 YEARS 40 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) M RS. ARSHI MANCHANDA JULY 01 1989 HEAD: PRIMARY MANAV M ANGAL HIGH SCHOOL SECTOR 21/C CHANDIGARH B. SC. B.ED COURSE IN FUNDAMENTALS OF ELECTRONIC DATA PROCESSING AND PROGRAMMING 30 YEARS MR. AJAY MANCHANDA APRIL 01 1998 TRANSPORT MANAGER MANAV MANGAL GROUP OF SCHOOLS B.A. 21 YEARS 9.2 IT WAS EMPHASIZED THAT THE EVIDENCES OF THE QUA LIFICATIONS OF ALL THE PERSONS ARE PLACED AT PAGE NOS. 491 TO 519 OF THE A SSESSEES PAPER BOOK. IT WAS SUBMITTED THAT ALL THE 'SPECIFIED PERSONS' ARE ALL TIME DEVOTED TOWARDS ACHIEVING THE OBJECT OF EDUCATION FOR WHICH ASSESSEE SOCIETY HAD BEEN FORMED AND THEY ARE NOT CARRYING ON ANY OTHER BUSINESS/PROFESSION. IT WAS ALSO EMPHASIZED THAT SARVASHRI SANJAY SARDANA AND SANDEEP SARDANA ARE WO RKING AS PRINCIPALS FOR AROUND 25 YEARS APART FROM HAVING AN ADDITIONAL ASS IGNMENT OF DIRECTORS OF ALL THE SCHOOLS RUN BY THE ASSESSEE SOCIETY FOR THE LAS T 15 YEARS AND THAT SOME OTHER SPECIFIED PERSONS HAD ALSO BEEN WORKING IN THE SCHO OLS AND GIVING YEOMAN SERVICES TO THE SOCIETY ALL OF THEM ARE THE EMPLOY EES OF THE SOCIETY AND ARE BEING PAID SALARY FOR THEIR SERVICES. IT WAS CONTEN DED THAT THE DIRECTORS CUM PRINCIPALS I.E; SH. SANJAY SARDANA AND SH. SANDEEP SARDANA HAD BEEN PROVIDED RENT FREE ACCOMMODATION WHICH IS A NORMAL PRACTICE IN SCHOOLS FOR THAT PURPOSE THE ASSESSEE SOCIETY HAD TAKEN TWO PROPERT IES ON LEASE BELONGING TO SH. SANJAY SARDANA AND SH. SANDEEP SARDANA AND RENT WAS BEING PAID TO BOTH OF THEM YEAR AFTER YEAR FOR WHICH A LEASE DEED WAS EXECUTED AND THE MARKET VALUE OF THE RENT WAS GOT VALUED FROM THE REGISTERE D VALUER AND THE SAID RENT HAD BEEN INCLUDED AS PERQUISITE IN THE HANDS OF SH. SANJAY SARDANA AND SH. SANDEEP SARDANA WHILE FILING THEIR RETURNS OF INCOM E YEAR AFTER YEAR WHICH HAD BEEN ACCEPTED BY THE DEPARTMENT. 9.3 LD. COUNSEL FOR THE SUBMITTED THAT THE ASSESSEE HAD BEEN MAINTAINING REGULAR BOOKS OF ACCOUNTS WHICH WERE DULY AUDITED A ND THE RETURNS OF INCOME HAD BEEN FILED ON THE BASIS OF SUCH BOOKS OF ACCOUN T ALL THE PAYMENTS OF SALARY TO THE SPECIFIED PERSONS AND OTHERS HAD BEEN MADE T HROUGH NORMAL BANKING 41 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) CHANNEL YEAR AFTER YEAR WHICH HAD BEEN ACCEPTED BY THE A.O. WHILE FRAMING THE ASSESSMENT SINCE THE ASSESSMENT YEAR 1997-98 TO 2012-13 U/S 143(3) OF THE ACT AFTER EXAMINING THE ISSUE IN DETAIL. REFERENCE WAS MADE TO THE PAGE NOS. 178 TO 277 OF THE ASSESSEES PAPER BOOK WHICH ARE T HE COPIES OF THE ASSESSMENT ORDERS PASSED U/S 143(3) OF THE ACT FOR THE EARLIER YEARS. IT WAS STATED THAT THE ISSUE HAD BEEN EXAMINED THREADBARE YEAR AFTER YEAR BY THE A.O. AFTER RAISING SPECIFIC QUERIES WITH REGARD TO JUSTIFICATION OF TH E SALARY TO THE SPECIFIED PERSONS THE SALARY HAD BEEN ALLOWED AS CLAIMED YEAR AFTER YEAR AND THAT THE CASE FOR THE ASSESSMENT YEAR 2010-11 HAD EARLIER BEEN FRAMED U/S 143(3) OF THE ACT AFTER EXAMINING ALL THE ISSUES. IT WAS STATED THAT FOR TH E FIRST TIME IN THE REGULAR PROCEEDINGS FOR THE ASSESSMENT YEAR 2013-14 THE A. O. HAD DISALLOWED THE PAYMENT OF SALARY TO THE SPECIFIED PERSONS BY MENTI ONING IN PARA 4.1 OF THE ASSESSMENT ORDER THAT THE SALARY TO THE MEMBERS AND SPECIFIED PERSONS WAS NOT REASONABLE AND UNDUE BENEFIT HAD BEEN GIVEN TO THE RELATED PERSONS BUT WHILE PASSING THE ORDER THE ENTIRE SALARY PAID TO THE SP ECIFIED PERSONS HAD BEEN ADDED BACK. IT WAS CONTENDED THAT WHILE GIVING THE REPLY FOR THE ASSESSMENT YEAR 2010-11 WHICH IS PLACED AT PAGE NOS. 142 TO 15 9 OF THE ASSESSEES PAPER BOOK THE ASSESSEE FURNISHED THE JUSTIFICATION FOR THE PAYMENT OF SALARY TO THE SPECIFIED PERSONS AND THE EDUCATIONAL QUALIFICATION ALONGWITH NATURE OF DUTY OF THE SPECIFIED PERSONS HAD BEEN GIVEN IN PAGE NOS. 1 45-146 OF THE ASSESSEES PAPER BOOK. IT WAS POINTED OUT THAT THE LD. CIT(A) WHILE DELETING THE DISALLOWANCE MADE BY THE A.O. HAD STRESSED UPON THE FACT THAT AS THE ACT HAS NOT DEFINED AS TO WHAT COULD BE THE REASONABLE BENE FIT THAT SHOULD BE ALLOWED TO THE SPECIFIED PERSONS AND A PERUSAL OF THE ORDER OF THE A.O. DOES NOT IN ANY WAY DOUBT THE SERVICES/QUALIFICATIONS OF THE SPECIF IED PERSONS. IT WAS STATED THAT THE REASONABLENESS OF PAYMENT OF SALARY SHOULD BE C ONSIDERED ON THE POINT OF VIEW OF THE TRUST/SOCIETY ONLY. IT WAS CONTENDED TH AT ALL THE PAYMENTS HAD BEEN MADE THROUGH BANKING CHANNEL FROM MONTH-TO-MONTH 42 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) BASIS AND TDS HAD BEEN DEDUCTED WHICH WAS DEPOSITED IN TIME BY THE ASSESSEE SOCIETY. 9.4 THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON TH E DECISIONS WHICH HAVE BEEN REFERRED BY THE LD. CIT(A) IN THE IMPUGNED ORD ER AND ALSO REITERATED THE RATIO LAID DOWN IN THOSE ORDERS OF THE VARIOUS HON' BLE HIGH COURTS AND VARIOUS BENCHES OF THE ITAT. IT WAS STATED THAT THE LD. CIT (A) RIGHTLY HELD IN PARA 5.2.5 AT PAGE NO. 29 OF THE IMPUGNED ORDER THAT SHRI G.S. SA RDANA WAS THE FOUNDER MEMBER OF THE ASSESSEE SOCIETY AND ACTED IN DUAL CA PACITY FIRST AS MANAGER OF THE SOCIETY FOR WHICH HE WAS NOT IN RECEIPT OF ANY SALARY HOWEVER HE HAD BEEN ENTRUSTED WITH THE TASK OF OVERALL SUPERVISION MAN AGEMENT POLICY MAKING STRATEGIC PLANNING HANDLING ALL LEGAL MATTERS RELA TING TO ALL THE SCHOOLS AND DUE TO HIS EFFORTS & LEADERSHIP THE SOCIETY HAD BEEN R UNNING SCHOOLS WITH MORE THAN TEN THOUSAND STUDENTS WHICH COULD HAVE BEEN ACHIEVE D ON ACCOUNT OF HIS BRAINCHILD THEREFORE HE WAS NOT RECEIVING ANY SAL ARY AS A MANAGER OF THE SOCIETY BUT FOR THE OTHER SERVICES RENDERED BY HIM. IT WAS EMPHASIZED THAT THERE WAS NO CLAUSE OF NON-PAYMENT OF SALARY TO SHRI G.S. SARDANA AND OTHERWISE ALSO FOR DOING THIS JOB SOME OTHER PERSON WITH SUCH A V AST EXPERIENCE WOULD HAVE BEEN APPOINTED WHICH COULD BE COSTLIER AND THEREFOR E THE GROUND RAISED BY THE DEPARTMENT IS WHOLLY MISCONCEIVED AND AGAINST T HE FACTS OF THE CASE. IT WAS CONTENDED THAT THE LD. CIT(A) AT PAGE 28 OF THE IMP UGNED ORDER HAD DISCUSSED ABOUT THE REASONABLENESS OF THE SALARY AND OTHER AL LOWANCES AND HELD THAT WHEN A SPECIFIED PERSON SERVES IN TWO CAPACITIES FI RST AS A MEMBER AND SECONDLY AS AN EMPLOYEE AND HE RECEIVED SALARY ALON GWITH ALLOWANCES AS AN EMPLOYEE THE NOMINAL BENEFIT GIVEN TO THE EMPLOYEE AS SALARY OR ALLOWANCE SHOULD NOT BE TREATED AS EXCESSIVE. IT WAS STATED T HAT NONE OF THE SPECIFIED PERSONS WAS MEMBER OF THE SOCIETY THEY WERE DIRECT ORS/EMPLOYEES IN THE SCHOOLS RUN BY THE ASSESSEE SOCIETY AND THEREFORE MERELY THE SOCIETY HAD PAID SALARY AND RENT THERE COULD NOT BE ANY DISALLOWANCE AUTOMATICALLY PARTICULARLY WHEN THERE HAD BEEN TREMENDOUS GROWTH OF NUMBER OF STUDENTS ONLY DUE TO 43 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) CONTINUOUS EFFORTS MADE BY THE SPECIFIED PERSONS AL ONGWITH OTHER TEACHERS AND THAT THE SCHOOLS HAVE ATTAINED GOODWILL AS WELL AS REPUTATION OVER THE YEARS WHICH IS EVIDENT FROM THIS FACT THAT THE STRENGTH O F THE STUDENTS IN SCHOOLS HAD RISEN FROM 100 TO 10500 WHICH JUSTIFIED THE PAYMENT OF DIRECTORS SALARY TO SHRI SANJAY SARDANA AND SHRI SANDEEP SARDANA FOR OPENING OF SMART SCHOOLS AT MOHALI AND ZIRAKPUR. IT WAS STATED THAT THE LD. CIT (A) AT PAGE NOS. 29 AND 30 OF THE IMPUGNED ORDER HAD COMPARED THE SALARY PAID TO THE DIRECTORS IN DIFFERENT SCHOOLS IN AN AROUND CHANDIGARH AND FOUND THAT THER E WAS COMPLETE JUSTIFICATION OF PAYMENT OF SALARY TO THE SPECIFIED PERSONS. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE FINDINGS GIVEN BY THE LD. CIT(A) AT PAGE NOS. 30 TO 32 OF THE IMPUGNED ORDER PARTICULARLY THIS FINDING THAT T HE RECEIPTS HAD BEEN RISEN TO 542.70% FROM THE RECEIPTS IN THE F.Y. 2006-07 AND I NCREMENTS GRANTED TO THE PERSONS WERE ALSO IN LINE WITH THE INCREASED ROLE A ND RESPONSIBILITIES BEING UNDERTAKEN BY THEM AND THAT THE A.O. HAD NOT BROUGH T ANY MATERIAL ON RECORD EITHER DURING THE ASSESSMENT PROCEEDINGS OR IN THE SURVEY REPORT AFTER COMPLETION OF THE ASSESSMENT FOR THE A.Y. 2013-14. IT WAS SUBMITTED THAT THE LD. CIT(A) CATEGORICALLY STATED IN PARA 5.2.9 OF THE IM PUGNED ORDER THAT THERE WAS NO FINDING OF THE A.O. THAT THE ASSESSEE SOCIETY WA S NOT WORKING TOWARDS THE CAUSE OF EDUCATION OR IT WAS THE CASE OF SIPHONING OF FUNDS OF THE SOCIETY BY THE MEMBERS. LD. COUNSEL FOR THE ASSESSEE REITERATE D THE FINDINGS OF THE LD. CIT(A) ON THE BASIS OF REPORT OF SURVEY GIVEN IN PA RA 5.2.9 AT PAGE NOS. 32 AND 33 OF THE IMPUGNED ORDER. RELIANCE WAS ALSO PLACED ON THE FOLLOWING CASE LAWS: (I) PINE GROVE INTERNATIONAL CHARITABLE TRUST 327 I TR 0073 (P&H) ((II) DDIT EXEMPTIONS VS GIDEONS INTERNATIONAL IN INDIA 156 ITD 0666 (HYD) 9.5 AS REGARDS TO THE SUBMISSIONS OF THE LD. CIT-DR THAT MERCEDES CARS WERE PROVIDED TO THE SPECIFIED PERSONS WHICH WERE HIGHLY ABNORMAL AND NOT EVEN THE VICE CHANCELLORS OF THE UNIVERSITIES WERE ALLOTTED MERCEDES CARS AS PERQUISITE. IT WAS STATED THAT THE ASSESSEE IS RUNNING FOUR SCHOOL S WHICH ARE AFFILIATED TO CBSE 44 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) AND THESE VEHICLES WERE REQUIRED FOR MAINTAINING CL OSE LIASIONING WITH THE CBSE OFFICIALS AT CHANDIGARH AND DELHI BESIDES MEETING VARIOUS OFFICIALS OF HARYANA GOVERNMENT FOR DAY-TO-DAY EFFECTIVE WORKING OF SCHO OLS AND THAT BOTH SHRI SANJAY SARDANA AND SHRI SANDEEP SARDANA DO NOT OWN ANY PERSONAL VEHICLES. IT WAS STATED THAT THE VEHICLES WERE OWNED BY THE ASSE SSEE SOCIETY AND THE LD. CIT(A) BY FOLLOWING THE DECISION OF JURISDICTIONAL BENCH OF THE ITAT IN THE CASE OF INDO SOVIET SOCIETY IN ITA NO. 478 & 279/CHD/2013 HAS NOT VIEWED THIS ADVERSELY. IT WAS FURTHER SUBMITTED THAT IN THE CASE RELIED BY THE LD. CIT-DR I.E. PARIVAR SEWA SANSTHAN THE FACTS WERE DIFFERENT AS IN THAT CASE EX GRATIA PAYMENT WAS MADE TO THE SPECIFIED PERSONS WHEREAS THE PAYMENT H AD BEEN MADE IN THE ASSESSEES CASE AGAINST RENDERING THE SERVICES THE REFORE THE CASE RELIED UPON BY THE LD. CIT-DR IS DISTINGUISHABLE ON FACTS. RELI ANCE WAS PLACED ON THE DECISION OF ITAT CHANDIGARH BENCH DATED 03/12/2020 IN THE CA SE OF HERITAGE EDUCATIONAL SOCIETY IN ITA NO. 1060 TO 1071/CHD/202 0 COPY OF THE SAME WAS FURNISHED WHICH IS PLACED ON RECORD. RELIANCE WAS A LSO PLACED ON THE FOLLOWING CASE LAWS: (I) ANAND EDUCATION SOCIETY VS. ASSTT. DIT(E) ITA N O. 761/DEL/2013 & ITA NO. 1005/DEL/2013 (DELHI TRIB) ORDER DATED 15/07/2016. (II) CIT VS IDICULA TRUST SOCIETY 104 DTR 0009 P&H HC (III) CIT EXEMPTIONS VS CMR JNANADHARA TRUST 55 TAX MANN.COM 516 KAR-HC (IV) YOUNG SCHOLARS EDUCATIONAL SOCIETY VS ITO 25 TA XMANN.COM 422 CHD-TRIB (V) DR. D.Y. PATIL PRATISTHAN VS DY.CIT 39 TAXMANN. COM 138 ITAT PUNE BENCH (VI) CIT(EXEMPT) VS BHOLARAM EDUCATIONAL SOCIETY 10 1 TAXMANN.COM 193 (SC) (VII) PINEGROVE INTERNATIONAL CHARITABLE TRUST VS D CIT ITA NO. 567/CHD/2019 DATED 31/08/2020/ (VIII) CIT VS FOUNDATION FOR SOCIAL CARE 94 DTR 29 8 ALL-HC (IX) CCIT VS ST. PETERS EDUCATIONAL SOCIETY 385 IT R 0066 (SC) (X) PINEGROVE INTERNATIONAL CHARITABLE TRUST & ORS. VS UNION OF INDIA & ORS. 327 ITR 0073 P&H (HC) (XI) DDIT VS GIDEOUS INTERNATIONAL IN INDIA 156 ITD 666 HYD-TRIB. 45 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT IS NOTICED THAT THE A.O. DISALLOWED THE SALARY PAID TO THE SPECIFIED PERSONS BY INVOKING THE PROVISIONS OF SECTION 13(1)(C) R.W.S. 13(3) OF THE ACT. THE MAIN REASON FOR MAKING THE DISALLOWANCE WAS THAT THERE WAS INCREASE IN THE SAL ARY OF THE SPECIFIED PERSONS FROM YEAR TO YEAR WHICH WAS NOT REASONABLE SINCE TH E INCREASE WAS IN THE CASES OF THE SPECIFIED PERSONS AND NOT IN THE CASE OF OTH ER EMPLOYEES. IN THE INSTANT CASE IT IS RELEVANT TO POINT OUT THAT THE A.O. ALT HOUGH MENTIONED THAT THE SALARY PAID WAS NOT REASONABLE HOWEVER HE DISALLOWED THE ENTIRE SALARY PAID TO THE SPECIFIED PERSONS WITHOUT POINTING OUT EXCESSIVE SA LARY IF ANY. IN THE PRESENT CASE IT IS NOTICED THAT THE ASSESSEE SOCIETY WAS F OUNDED BY SHRI G.S. SARDANA AND SMT. USHA SARDANA IN THE YEAR 1968. SHRI G.S. S ARDANA WAS NOT CLAIMING ANY SALARY ON ACCOUNT OF HONORARY MEMBER BUT CLAIMED SA LARY FOR THE WORK DONE AS A PRINCIPAL AND LATER ON AS A DIRECTOR AND THEN AS A CHAIRMAN. HE WAS INVOLVED IN DAY TO DAY WORKING OF THE ASSESSEE SOCIETY. HE W AS HAVING THE QUALIFICATION OF M.A. ENGLISH AND M.A. HINDI AND WORKED FOR THE ASSE SSEE SOCIETY APPROXIMATELY FOR 50 YEARS. ANOTHER MEMBER OF THE SOCIETY I.E; SM T. USHA SARDANA WAS ALSO ASSOCIATED WITH THE ASSESSEE SOCIETY SINCE ITS INCE PTION ON 01/04/1968 AND WORKED AS WELFARE OFFICER. SHE WAS HAVING THE DEGRE E OF PRABHAKAR IN HINDI AND WORKED ABOUT 48 YEARS. ANOTHER SPECIFIED PERSONS I. E; SHRI SANJAY SARDANA IS HAVING THE DEGREE OF MSC. (GOLD MEDALIST) M.PHILL AND M.ED HE JOINED THE ASSESSEE SOCIETY ON 01/08/1986. HE WAS WORKING AS A PRINCIPAL FOR THE LAST 23 YEARS SHRI SANDEEP SARDANA IS HAVING THE DEGREE OF BE HONORS AND PGDCA (GOLD MEDALIST) HE JOINED THE ASSESSEE SOCIETY ON 14/10/1988 AND WORKED ABOUT 21 YEARS AND AS A PRINCIPAL FOR THE LAST 14 Y EARS. ANOTHER SPECIFIED PERSON MRS. ANJALI SARDANA IS HAVING THE DEGREE OF MSC. M .PHILL AND B.ED. SHE JOINED THE ASSESSEE SOCIETY ON 01/11/1990 AND WORKED AS VICE P RINCIPAL. SHE IS HAVING THE EXPERIENCE OF ABOUT 29 YEARS. SIMILARLY MRS. MONIK A SARDANA JOINED THE ASSESSEE SOCIETY ON 01/09/1992 HAVING THE DEGREE OF B.COM AN D B.ED. SHE IS ALSO WORKING 46 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) AS VICE PRINCIPAL OF THE SCHOOL AT PANCHKULA. SHE I S HAVING TOTAL EXPERIENCE OF ABOUT 27 YEARS. SMT. R.C. MANCHANDA IS ALSO HAVING DEGREE OF BSC. B.ED AND COURSE OF FUNDAMENTALS OF ELECTRONICS DATA PROCESSI NG AND PROGRAMMING. SHE IS WORKING AS HEAD OF THE PRIMARY SCHOOL AT CHANDIGARH . SHE JOINED ON JULY 01 ST 1989 HAVING THE TOTAL EXPERIENCE OF ABOUT 30 YEARS. ANOTHER SPECIFIED PERSON IS MR. AJAY MANCHANDA WHO JOINED ON APRIL 1998 WORKIN G AS TRANSPORT MANAGER AND HAVING THE DEGREE OF B.A. FROM THE AFORESAID DE TAILS IT WOULD BE CLEAR THAT ALL THE SPECIFIED PERSONS ARE HAVING THE EDUCATIONA L QUALIFICATIONS REQUIRED FOR THE JOB ASSIGNED TO THEM AND THEY ARE WHOLE TIME EM PLOYEES OF THE ASSESSEE SOCIETY FOR ACHIEVING THE OBJECT OF EDUCATION FOR W HICH THE ASSESSEE SOCIETY HAD BEEN FORMED AND ARE NOT CARRYING ON ANY OTHER BUSIN ESS/PROFESSION. SARVSHRI SANJAY SARDANA AND SANDEEP SARDANA APART FROM WORKI NG AS PRINCIPALS OF THE SCHOOLS AT CHANDIGARH AND PANCHKULA RESPECTIVELY AR E ALSO HAVING ADDITIONAL ASSIGNMENT OF DIRECTORS OF ALL THE SCHOOLS. THE REM UNERATIONS PAID TO THE SPECIFIED PERSONS WERE CONSIDERED TO BE GENUINE IN THE PRECEDING YEARS HOWEVER FOR THE FIRST TIME THE DISALLOWANCE WAS M ADE BY THE A.O. FOR THE YEAR UNDER CONSIDERATION. 10.1 IN THE PRESENT CASE DUE TO JOINT AND CONSISTE NT EFFORTS OF THE SPECIFIED PERSONS THE STRENGTH OF THE STUDENTS IN THE SCHOOL S SINCE 2007-08 TO 2019-20 HAS INCREASED FROM 4446 TO 9818 THE DETAILS OF THE SA ME HAD BEEN GIVEN IN PARA 9 OF THE FORMER PART OF THIS ORDER NOW THE ASSESSEE IS HAVING SCHOOLS AT CHANDIGARH MOHALI ZIRAKPUR AND PANCHKULA AREA. IT IS ALSO RELEVANT TO POINT OUT THAT ONLY SHRI G.S. SARDANA AND HIS WIFE SMT. USHA SARDANA ARE THE MEMBERS OF THE ASSESSEE SOCIETY AND NO OTHER SPECIFIED PERSON IS THE MEMBER OF THE ASSESSEE SOCIETY BUT ONLY RELATED TO SHRI G.S. SARD ANA. IN THE PRESENT CASE SARVSHRI SANJAY SANDANA AND SANDEEP SARDANA ARE THE SONS OF SHRI G.S. SARDANA THEY ARE WELL QUALIFIED AND JOINED THE ASS ESSEE SOCIETY IN THE BEGINNING AS TEACHER THEN OVER THE YEARS THEY WERE PROMOTED AS HEAD OF THE DEPARTMENT THEN VICE PRINCIPALS AND ULTIMATELY AS P RINCIPALS. THE ASSESSEE 47 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) SOCIETY TO EXPAND THE FIELD OF EDUCATION PURCHASED LAND FROM GREATER MOHALI AREA DEVELOPMENT AUTHORITY FOR SETTING UP FIRST SM ART SCHOOL IN THE REGION AND THE WORK WAS ASSIGNED TO SARVSHRI SANJAY SANDANA AN D SANDEEP SARDANA AS DIRECTORS AGAINST THE PAYMENT OF SALARY AS PER THE RESOLUTION PASSED ON 05/11/2005 THAT WAS THE REASON FOR INCREASE IN SAL ARY IN THEIR HANDS. IN THE INSTANT CASE THE ASSESSEE SOCIETY HAD BEEN MAINTAINING REG ULAR BOOKS OF ACCOUNTS WHICH WERE DULY AUDITED AND THE RETURNS OF INCOME H AD BEEN FILED ON THE BASIS OF SUCH BOOKS OF ACCOUNTS. THE PAYMENTS OF SALARY T O THE SPECIFIED PERSONS WERE MADE THROUGH BANKING CHANNEL AND THE ISSUE HAD BEEN EXAMINED YEARS TO YEARS SINCE A.Y. 1997-98 U/S 143(3) OF THE ACT TILL THE A.Y. 2012-13. COPIES OF THE ASSESSMENT ORDERS FRAMED U/S 143(3) OF THE ACT FOR THOSE ASSESSMENT YEARS ARE PLACED AT PAGE NOS. 178 TO 277 OF THE ASSESSEES CO MPILATION. IT IS RELEVANT TO POINT OUT THAT THE DIFFERENT ASSESSING OFFICERS AF TER PROPER EXAMINATION ACCEPTED THE SALARY PAID TO THE SPECIFIED PERSONS I N THE EARLIER YEARS AND THE FIRST TIME THE DISALLOWANCE WAS MADE IN THE ASSESS MENT FRAMED FOR THE A.Y. 2013-14 BY ASSIGNING THE REASON THAT THE SALARY PAI D TO THE SPECIFIED PERSONS WAS NOT REASONABLE AND UNDUE BENEFIT WAS GIVEN TO THOSE RELATED PERSONS. HOWEVER NO MATERIAL IS BROUGHT ON RECORD TO SUBSTA NTIATE THAT HOW AND IN WHAT MANNER THE SALARY PAID TO THE SPECIFIED PERSONS CO NSIDERING THEIR QUALIFICATIONS AND THE DUTY ASSIGNED TO THEM WAS NOT REASONABLE SI NCE NO COMPARABLE CASE WAS BROUGHT ON RECORD BY THE A.O. IN THE PRESENT CA SE THE A.O. DID NOT DOUBT THE SERVICES RENDERED AND QUALIFICATIONS OF THE SPE CIFIED PERSONS HE DISALLOWED THE SALARY BY OBSERVING THAT IT WAS NOT REASONABLE HOWEVER NOTHING IS BROUGHT ON RECORD TO SUGGEST HOW AND IN WHAT MANNER IT WAS NOT REASONABLE OR WAS EXCESSIVE. 10.2 ON A SIMILAR ISSUE THE ITAT CHANDIGARH BENCH B IN THE CASE OF YOUNG SCHOLARS EDUCATIONAL SOCIETY VS ITO (SUPRA) HELD AS UNDER: THAT THE ASSESSEE CONTENDED THAT 'V WAS M.B.A. (MAR KETING) AND HE POSSESSED REQUISITE QUALIFICATION IN THE FIELD OF ADVERTISEME NT. THE ASSESSING OFFICER AS WELL AS 48 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) THE COMMISSIONER (APPEALS) FAILED TO BRING ANY COGE NT AND CREDIBLE EVIDENCE DEMONSTRATING NON-GENUINENESS OF THE PAYMENT IN THE FACE OF SUBMISSIONS FILED BY THE ASSESSEE IN THE FORM OF VARIOUS EVIDENCES IN DICATING RENDERING OF SERVICES BY V IT HAS FURTHER BEEN HELD THAT THE QUALIFICATION OF 'S' WAS INDICATED AS M.A. B.ED BESIDES OTHER DEGREES AND DIPLOMAS E.G. SANGEET VISHARAD (SITAR) SANGEET BHUSHAN (VOCAL) SANGEET BHUSHAN (SITAR) SENIOR DIPLOMA (VOCAL) SANGEET PAR VEWSHIKA (VOCAL) AND SHE ALSO HELD NCC 'J' CERTIFICATE. A NUMBER OF CERTIFIC ATES AND DISTINCTIONS HAD ALSO BEEN MENTIONED HAVING REGARD TO PROFESSIONAL QUALIF ICATIONS OF THE PRINCIPAL S. THOUGH THE PAYMENT OF SALARY FELL UNDER THE BAR PLA CED BY SECTION 13 HOWEVER HAVING REGARD TO HER QUALIFICATIONS AND SERVICES RE NDERED TO THE ASSESSEE THE CASE OF THE ASSESSEE FELL UNDER SECTION 13(2)(C) AS THE SALARY PAID WAS NOT UNREASONABLE. IN VIEW OF THIS THE ASSESSEE WENT OU T OF THE BAR PLACED BY THE PROVISIONS OF SECTION 13. 10.3 IN THE PRESENT CASE ALSO AS WE HAVE ALREADY D ISCUSSED THE SPECIFIED PERSONS POSSESSED THE REQUISITE QUALIFICATIONS AND RENDERED THE SERVICES THEREFORE IT CANNOT BE HELD THAT PAYMENT OF SALARY TO THE SPECIFIED PERSONS WAS UNREASONABLE PARTICULARLY WHEN NO COMPARABLE CASE W AS CITED BY THE A.O. 10.4 SIMILARLY THE HON'BLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS IDICULA TRUST SOCIETY (SUPRA) HELD AS UNDER: PAYMENT WAS MADE TO THE STATED PERSONS AND WAS CON FIRMED BY THE TAX- AUDITORS AS WELL IS NOT IN DISPUTE. THE PAYMENTS H AVE BEEN MADE AND THE EXPENDITURE IS ACTUALLY INCURRED BY THE ASSESSEE (W HICH IS A CHARITABLE SOCIETY EXISTING SOLELY FOR THE PURPOSE OF EDUCATION). THER E IS NOTHING TO SHOW THAT THE PAYMENTS MADE TO THE PERSONS MENTIONED IN THE RETUR N AS ALSO IN TAX AUDIT REPORTS WERE EXCESSIVE. IT HAS FURTHER BEEN HELD THAT SALARIES OF TEACHERS WHO ARE ALSO ENGAGED IN WHOLE TIME MANAGEMENT ACTIVITIES OF TRUST AND WERE ALSO RENDERING ADMINISTRATIVE FUN CTIONS QUA RUNNING OF SCHOOLS FOR WHICH THEY WERE NOT BEING PAID ANY EXTRA SALARY WOULD BE EXEMPTED U/S 11 OF THE ACT. 10.5 IN THE PRESENT CASE ALSO THE SALARY HAD BEEN PAID TO THE SPECIFIED PERSONS AGAINST THE SERVICES PROVIDED BY THEM THE I NCOME FROM SALARY HAD BEEN SHOWN IN THEIR INDIVIDUAL RETURN OF INCOME AND NOTH ING IS BROUGHT ON RECORD BY 49 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) THE A.O. TO SUBSTANTIATE THAT ANY EXTRA SALARY WAS PAID FOR THE ADMINISTRATIVE FUNCTION AND THAT THE SALARY WAS EXCESSIVE IN COMPA RISON TO ANY SIMILAR CASE THEREFORE THE DISALLOWANCE MADE BY THE A.O. WAS RI GHTLY DELETED BY THE LD. CIT(A). 10.6 A SIMILAR ISSUE HAS BEEN DECIDED BY THE ITAT D ELHI BENCH A NEW DELHI IN THE CASE OF ANAND EDUCATION SOCIETY VS ASSTT.DIT(E) (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER: 25 IN THE PRESENT CASE IT IS AN ADMITTED FACT THA T THE RELATIVES OF THE TRUSTEES WERE APPOINTED AS PRINCIPAL VICE-PRINCIPAL AND ADM INISTRATIVE DIRECTOR. HOWEVER THEIR APPOINTMENTS WERE NOT ILLEGAL AS THE SAME WER E DONE BY FOLLOWING THE PROPER PROCEDURE AN ADVERTISEMENT WAS PUBLISHED IN THE NATIONAL NEWSPAPER FOR THE POST OF PRINCIPAL AND VICE-PRINCIPAL. IN RE SPONSE TO THE SAID ADVERTISEMENT THE APPLICATIONS WERE RECEIVED FROM THE ELIGIBLE PE RSON AND AFTER A PROPER SCRUTINY THOSE PERSONS WHO FULFILLED THE REQUISITE QUALIFICATION AND HAVING THE EXPERIENCE PERSONS WERE CALLED FOR AN INTERVIEW. T HE SELECTION BOARD WHO CONDUCTED THE INTERVIEW INCLUDED TWO NOMINEES OF T HE EDUCATION DEPARTMENT OF THE GOVERNMENT AND SELECTION WAS DONE ON MERIT. THE REMUNERATION PAID WAS IN ACCORDANCE WITH THE PAY SCALE FIXED BY THE DIREC TORATE OF EDUCATION FOR THE SIMILAR POST. IT IS NOT THE CASE OF THE AO THAT THE REMUNERATION PAID WAS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. I T IS ALSO NOT THE CASE THAT THE EXPENSES RELATING TO TELEPHONE ETC. WERE NOT INCURR ED FOR FURTHERANCE OF THE OBJECTIVES OF THE ASSESSEE SOCIETY. IN THE PRESENT CASE THE AO HAS OBSERVED THAT THE DEVELOPMENT CHARGES WERE NOT SHOWN IN THE INCOM E AND EXPENDITURE ACCOUNT AND REOPEN THE ASSESSMENT ON THE SAID BASIS . THIS OBSERVATION OF THE AO WAS FACTUALLY INCORRECT BECAUSE THE ASSESSEE HAD SH OWN THE DEVELOPMENT CHARGES IN ITS BOOKS OF ACCOUNT WHICH IS EVIDENT FR OM THE VARIOUS COPIES OF THE LEDGER ACCOUNT FURNISHED BY THE ASSESSEE TO THE AO VIDE LETTER DATED 19.12.2011 WHICH ARE PLACED AT PAGE NOS. 282 TO 305 OF THE AS SESSEES PAPER BOOK. THE ASSESSEE ALSO FURNISHED COPIES OF THE JOURNAL VOUCH ERS IN RESPECT OF TUITION FEES AND DEVELOPMENT FEES ALONG WITH STUDENT WISE DETAIL S WHICH ARE PLACED AT PAGE NOS. 306 TO 314 OF THE ASSESSEE'S PAPER BOOK. IN TH E PRESENT CASE THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO SUBSTANTIAT E THAT THE EXPENDITURE ON SALARY OR FACILITIES PROVIDED TO THE RELATIVES OF T HE TRUSTEES OF THE ASSESSEE SOCIETY WERE EXCESSIVE HAVING REGARD TO FAIR MARKET VALUE O F THE SERVICES PROVIDED BY THEM. THEREFORE THE AO WRONGLY INVOKED THE PROVISIO NS OF SECTION 13(3) OF THE ACT AND THE ID. CIT(A) WAS NOT JUSTIFIED IN CONFIRM ING THE ACTION OF THE AO. WE THEREFORE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO TO ALLOW THE EXEMPTION U/S 11 OF THE ACT TO THE ASSESSEE. SINCE WE HAVE DECIDED THE GROUND NOS. 6 TO 11 IN FAVOUR OF THE ASSESSEE ON MERITS T HEREFORE NO FINDINGS ARE BEING 50 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) GIVEN ON THE ISSUE RELATING TO THE REOPENING U/S 14 7 OF THE ACT RAISED BY THE ASSESSEE VIDE GROUND NOS. 1 TO 5. 10.7 IN THE PRESENT CASE ALSO THE ASSESSEE FURNISH ED ALL THE DETAILS RELATING TO THE PAYMENT OF SALARY TUITION FEE RECEIVED FROM TH E STUDENTS AND NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE EXPENDIT URE ON SALARY OR FACILITIES TO THE RELATIVES OF THE TRUSTEES OF THE ASSESSEE SOCIE TY WERE EXCESSIVE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVICES PROVIDED B Y THEM. THEREFORE THE A.O. WAS NOT JUSTIFIED IN MAKING DISALLOWANCE U/S 13(3) OF THE ACT. 10.8 ON A SIMILAR ISSUE THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT(E) VS CMR JNANADHARA TRUST (SUPRA) HELD AS UNDER: WHEN THE TRUST IS AVAILING THE SERVICES OF THESE T RUSTEES AND ON ACCOUNT OF THE SERVICES RENDERED BY THEM THERE IS A SUBSTANTIAL G ROWTH IN THE TRUST AND ITS ACTIVITIES WHEN THE PAYMENTS ARE MADE FOR SUCH SER VICES RENDERED IT CANNOT BE SAID THAT IT CONTRAVENES SECTION 13(L)(C). CONSEQUE NTLY THERE IS NO JUSTIFICATION FOR DENYING THE BENEFIT UNDER SECTION 11. 10.9 IN THE PRESENT CASE ALSO AS WE HAVE ALREADY P OINTED OUT IN THE FORMER PART OF THIS ORDER THAT THE ASSESSEE TRUST WAS AVAI LING THE SERVICES OF THE SPECIFIED PERSONS AND THERE WAS SUBSTANTIAL GROWTH IN THE FUN CTIONING AND ACTIVITIES OF THE ASSESSEE SOCIETY THEREFORE IT CANNOT BE SAID THAT THE PAYMENTS MADE ON ACCOUNT OF SALARY TO THE SPECIFIED PERSONS CONTRAVE NE THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT AS SUCH THE A.O. WAS NOT JUST IFIED IN MAKING THE DISALLOWANCE AND THE LD. CIT(A) RIGHTLY DELETED THE SAME. WE THEREFORE CONSIDERING THE TOTALITY OF THE FACTS AND THE RATIO LAID DOWN BY THE VARIOUS HON'BLE HIGH COURTS AS WELL AS DIFFERENT BENCHES OF THE ITAT AS REFERRED TO ABOVE ARE OF THE VIEW THAT THE LD. CIT(A) RIGHTLY DELETED THE DISALLOWANCE MADE BY THE A.O. WE DO NOT SEE ANY VALID GROUND TO INTER FERE WITH THE FINDINGS GIVEN BY THE LD. CIT(A) ON THIS ISSUE. 51 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 11. THE NEXT ISSUE VIDE GROUNDS NO. VI AND VII RELA TES TO DELETION OF DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF RENT PA ID TO THE SPECIFIED PERSONS BY INVOKING PROVISIONS OF SECTION 13(3) OF THE ACT. 12. THE FACTS OF THE CASE IN BRIEF ARE THAT THE A.O . DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO JUSTIF Y THE PAYMENTS MADE TO THE MEMBERS. AS REGARDS TO THE PAYMENT OF RENT MADE TO THE SPECIFIED PERSONS. THE ASSESSEE SUBMITTED AS UNDER: WITH RESPECT TO RENT PAID TO SANJAY SARDANA & SANDE EP SARDANA IT IS SUBMITTED THAT BOTH SH. SANJAY SARDANA & SHRI SANDEEP SARDANA HAVE BEEN PROVIDED RENT FREE ACCOMMODATION. FOR THE SAID PURPOSE THE ASSESS EE SOCIETY HAS TAKEN ON LEASE H. NO. 3084 SECTOR 21 D WHICH IS A ONE KANAL HOUSE ON A MONTHLY RENT OF RS.20000/- FROM SH SANDEEP SARDANA & MRS. MONICA SA RDANA W.E.F 1.9.2010 TO 31.8.2015. THE LEASE RENT AS PER THE LEASE DEED IS TO INCREASE BY 5% OF THE FIRST YEAR RENT AFTER COMPLETION OF EACH YEAR. RENT DURIN G THE RELEVANT PERIOD WAS THUS RS. 21000/- FROM 1.4.2012 TO 31.8.2012 AND RS. 2200 0/- FROM 1.9.2012 TO 31.3.2013. THIS PROPERTY CONSISTS OF ONE ROOM SET A KITCHEN A ND TOILET ON GROUND FLOOR AND ANOTHER SET OF ROOM KITCHEN AND TOILET ON FIRST FL OOR. RENT OF RS. 2 59 000/- WAS PAID BY MANAV MANGAL SCHOOL PANCHKULA. RENT WAS PAI D IN EQUAL SHARE TO SANDEEP SARDANA AND MONICA SARDANA. THE 2ND PREMISE S WHICH WAS TAKEN ON LEASE WAS FROM SH. SANJAY SARDANA & SMT. ANJALI SAR DANA BEING H. NO. 3085 SECTOR 21 D CHANDIGARH AT A MONTHLY LEASE RENT OF R S. 80000/- PER MONTH W.E.F 1.9.2011 TO 31.8.2016 WITH ANNUAL INCREASE OF 5% OF FIRST YEAR RENT. RENT DURING THE YEAR 1.4.2012 TO 31.8.2012 WAS RS. 80000/- PER MONT H AND RS. 84000/- PER MONTH FROM 1.9.2012 TO 31.3.2013. THIS HOUSE IS A ONE KAN AL HOUSE WITH BASEMENT GROUND FLOOR FIRST FLOOR AND SECOND FLOOR HAVING 5 760 SQ. FEET. RENT OF THIS HOUSE IS PAID BY MANAV MANGAL HIGH SCHOOL SECTOR 21 PANCH KULA AND IS PAID TO THE CO- OWNERS IN EQUAL PROPORTION. WHILE FILING RETURNS OF INCOME BOTH SH. SANJAY SARDANA & SH. SANDEEP SARDANA ARE SHOWING THE PERQUISITE VA LUE OF THE RENT FREE ACCOMMODATION IN SALARY INCOME DECLARED BY THEM. RE NTAL INCOME RECEIVED BY THEM IS ALSO DECLARED IN THEIR HANDS. (COPIES OF TH E LEASE DEEDS OF THE TWO PROPERTIES IS ENCLOSED FOR READY REFERENCE). RENT PAID FOR THE PREMISES TAKEN ON RENT IS BASED O N THE PREVAILING MARKET RENT AT THE TIME OF TAKING THE PREMISES ON LEASE IN THE YEA R 2010 & 2011 RESPECTIVELY. RENTS OTHERWISE IN THE MARKET OF SUCH ACCOMMODATION DURING THE PERIOD UNDER CONSIDERATION WAS MUCH HIGHER. IT IS ALSO NOT OUT OF WAY TO MENTION HERE THAT SH. SANJAY SARDANA & SH. SANDEEP SARDANA WERE USING THE PART OF THE ACCOMMODATION FO R OFFICIAL PURPOSES ALSO AS THEY HAVE TO DO A LOT OF WORK RELATING TO THE DUTIE S ASSIGNED TO THEM AS DIRECTORS OF THE FOUR SCHOOLS AS THE SCHOOL PREMISES ARE CLOS ED AT 5.00 PM ALTHOUGH THE SCHOOL TIMINGS ARE UPTO 2.30 PM ONLY. NORMALLY BOTH THESE WORK UPTO 5.00PM IN THE RESPECTIVE SCHOOLS AND THEREAFTER ATTEND TO MAN AGEMENT WORK OF OTHER SCHOOLS SOCIETY AFFAIRS AND PLANNING FOR FUTURE EX PANSIONS ARE ATTENDED TO AT THE 52 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) OFFICES THEY ARE MAINTAINING AT THEIR RESIDENCE WHI CH ARE PROVIDED TO THEM BY THE SCHOOL ADMINISTRATION. 12.1 IT WAS FURTHER SUBMITTED AS UNDER: (A) IT IS SUBMITTED THAT H. NO. 3084 SECTOR-2ID CHANDIGARH IS OWNED BY DIRECTOR SH. SANDEEP SARDANA AND HIS WIFE SMT. MONI CA SARDANA. THIS HOUSE IS PARTIALLY BUILT. THE SCHOOL HAS TAKEN THIS HOUSE ON RENT FOR PROVIDING RENT FREE ACCOMMODATION TO HIM. THIS IS PERQUISITE GIVEN BY T HE SOCIETY TO ITS DIRECTOR THIS IS NOT EXCESSIVE PAYMENT UNDER SECTION 13(3) AS IF TH E DIRECTOR WAS PROVIDED RENT FREE ACCOMMODATION BY HIRING ANOTHER HOUSE THE MONT HLY RENT WOULD HAVE BEEN MORE THAN RS. 45000/- P.M. FOR THE SIMILAR ACCOMMOD ATION IN ONE KANAL HOUSE. (B) H. NO. 3085 SECTOR 21 D CHANDIGARH IS OWNED B Y DIRECTOR SH. SANJQY SARDANA AND HIS WIFE SMT. ANJALI SARDANA THIS IS A DOUBLE STOREY DUPLEX ONE KANAL HOUSE. THE SOCIETY HAS TAKEN THIS HOUSE ON RENT FOR PROVIDING RENT FREE ACCOMMODATION TO THE DIRECTOR. THIS IS PERQUISITE G IVEN BY THE SOCIETY TO ITS DIRECTOR THIS IS NOT EXCESSIVE PAYMENT UNDER SECTI ON 13(3) AS IF THE DIRECTOR WAS PROVIDED RENT FREE ACCOMMODATION BY HIRING ANOTHER HOUSE THE MONTHLY RENT WOULD HAVE BEEN MORE THAN RS. 120000/- P.M. FOR THE SIMILAR ACCOMMODATION IN ONE KANAL HOUSE. IN MANY CASES THE INSTITUTES SCHO OLS AND COLLEGES ARE PROVIDING RENT FREE ACCOMMODATIONS TO THEIR PRINCIPALS/ADMINI STRATORS. FURTHER IT IS SUBMITTED THE SH. SANDEEP SARDANA IS WORKING AS PRINCIPAL OF MANAV MANGAL SCHOOL SECTOR-11 PANCHKULA AND DIRECTOR OF ALL THE THREE RUNNING SCHOOL AND FOURTH UPCOMING SCHOOL IN ZIRAKPUR AND SH. SANJQY SARDANA IS WORKING AS PRINCIPAL OF MANAV MANGAL SCHOOL SECFOR-21 CHANDIGARH AND DIRE CTOR OF ALL THE THREE RUNNING SCHOOLS OF THE SOCIETY AND FOURTH UPCOMING SCHOOL AT ZIRAKPUR. (ANNEXURE DI). 12.2 HOWEVER THE A.O. DID NOT FIND MERIT IN THE SU BMISSIONS OF THE ASSESSEE AND MADE THE DISALLOWANCE BY OBSERVING IN PARA 4.4 OF T HE ASSESSMENT ORDER DATED 23/02/2016 WHICH READ AS UNDER: 4.4 ASSESSEE IS PAYING RENT TO THEIR MEMBERS AGAI NST THE PREMISE LETTING OUT BY THE MEMBERS TO THE ASSESSEE. AND IT IS A INTERESTIN G FACT THAT IN THESE PREMISES THE MEMBERS ARE RESIDING AND THEY ARE OWNER OF THE SAME BUILDING AGAINST THE SAME THEY ARE GETTING RENT FROM THE SOCIETY. REPLY OF TH E ASSESSEE THAT IT IS REQUIREMENT FOR THE SOCIETY AND THEIR DIRECTORS/MEMBERS IS NOT ACCEPTED. BECAUSE ASSESSEE IS PAYING RENT TO THE OWNERS OF THE PROPERTY IN WHICH OWNERS OF THE PROPERTY RESIDING. DURING THE ASSESSMENT PROCEEDINGS IT HAS FOUND THAT TRUST IS NOT PROVIDING THIS SERVICE TO THEIR ANY OTHER EMPLOYEES WHICH SHOWS DISCRETION BETWEEN OTHER EMPLOYEES OR DIRECTORS OF THE SOCIETY . IT IS BEYOND UNDERSTAND THAT WHY ASSESSEE IS PROVIDING SPECIAL TREATMENT TO THEI R MEMBERS. IN THE ABOVE FACTS IT SHOWS THAT THESE MEMBERS HAVE USED THEIR OWN PRO PERTY FOR THEIR PERSONAL USE AND GETTING THE RENT AGAINST THE SAME WHICH IS NOT ALLOWABLE U/S 13 (L)(C) R.W. 13(3) OF I. T. ACT 1961. 53 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 13. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CIT(A) AND SUBMITTED AS UNDER: I. JUSTIFICATION OF RENT BEING PAID TO SH. SANJAY SA RDANA/ SANDEEP SARDANA AS REGARDS FOR THE PAYMENT OF RENT THE FOLLOWING A RE THE BRIEF FACTS AND ALL SUCH FACTS HAVE BEEN MENTIONED TO THE ASSESSING OFFICER D URING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A. Y. 2013-14. I. SH. SANJAY SARDANA BESIDES GETTING THE SALARY WAS PROVIDED 'RENT FREE ACCOMMODATION' AND FOR PROVIDING THE RENT FREE ACCO MMODATION A LEASE AGREEMENT WAS ENTERED INTO FOR THE H. NO. 3085 SEC TOR-21-D @RS. 30000/- PER MONTH IN THE YEAR 2001 WITH A STIPULATION THAT THERE WOULD BE 5% INCREASE ON THE BASIS RENT IN EVERY YEAR AND THE SAID LEASE AGREEMENT WAS FOR FIVE YEARS. THE HOUSE IS OWNED BY SH. SANJAY SARDANA AND MRS. ANJALI SARDANA. II. THIS AGREEMENT WAS THEN RENEWED AGAIN IN AUGUST 2006 FOR A FURTHER PERIOD OF FIVE YEARS AND THE RENT WAS AGREED TO THE TUNE OF RS. 40000/- PER MONTH WITH 5% INCREASE EVERY YEAR ON THE BASIC RENT YEAR AFTER YEAR. III. AGAIN ON 01.09.2011 THE LEASE AGREEMENT WAS REVISED FOR 5 YEARS AND FOR THAT FAIR RENTAL VALUATION' WAS NOT MADE FROM THE ' GOVT. APPROVED VALUER' VIDE VALUATION REPORT DATED 07.07.2011 AND LEASE AGREEM ENT WAS DRAWN ON 01.08.2011 FOR FIVE YEARS AT A RENTAL OF RS. 80 000 /- PER MONTH WITH THE INCREASE OF 5% OF BASIC RENT EVERY YEAR. IV. THEN AGAIN ANOTHER 'LEASE AGREEMENT' WAS EXECU TED FROM 01.09.2016 TO 31.08.2021 AND FOR WHICH THE RENT WAS AGREED TO BE PAID @ RS. 1 10 000/- ON THE BASIS OF 'APPROVED VALUER REPORT' DATED 28.08. 2016 AND IT WAS AGAIN STIPULATED 5% INCREASE EVERY YEAR OF THE BASIS RENT . V. ALL THE PAYMENTS OF RENT HAVE BEEN PAID THROUGH NORMAL BANKING CHANNELS TO SH. SANJAY SARDANA & MRS. ANJALI SARDAN A AND THERE IS NO CASH PAYMENT AND THE TDS AS APPLICABLE IS BEING DEDUCTED AND SH. SANJAY SARDANA AND HIS WIFE MRS. ANJALI SARDANA WHILE FILING THEI R RETURNS OF INCOME HAVE DISCLOSED SUCH RENT AS RECEIVED FROM THE SOCIETY IN THEIR RESPECTIVE RETURNS OF INCOME YEAR AFTER YEAR AND BESIDE THAT WHILE FILIN G HIS (SANJAY SARDANA) RETURN OF INCOME THE PERQUISITE VALUE ON ACCOUNT OF SUCH 'RENT FREE ACCOMMODATION' HAVE BEEN INCLUDED AS SALARY IN HIS (SANJAY SARDANA ) RETURN OF INCOME FOR ALL THE YEARS. ALL SUCH EVIDENCES HAVE BEEN SUBMITTED IN WRITING A ND ORALLY EXPLAINED TO THE ASSESSING OFFICER CONCERNED WHILE FRAMING THE AS SESSMENT FOR A. Y. 2013-14 AND THE SAME HAD BEEN DISCUSSED IN THE ORDER FOR A. Y. 2013-14 OF THE ASSESSING OFFICER AT PAGES 5 & 6 AND BESIDES THE COPIES OF AL L SUCH LEASE AGREEMENTS/ RESOLUTION/ VALUER REPORT AS STATED ABOVE HAVE BEEN ENCLOSED IN THE SEPARATE PAPER BOOK. VI. THE PLOT FOR THE HOUSE NO. 3085 SECTOR-21-D W AS PURCHASED IN THE YEAR 1999 IN THE NAME OF SH. SANJAY SARDANA AND HIS WIFE SMT. ANJALI SARDANA AND THEREAFTER THE CONSTRUCTION WAS CARRIED OUT FROM 1 999 ONWARDS AND EVIDENCE FOR EXISTENCE OF HOUSE IS ENCLOSED HEREWITH. IT IS SUBM ITTED THAT ONLY AFTER BOTH SH. 54 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) SANJAY SARDANA AND SH. SANDEEP SARDANA HAD WORKED A S PRINCIPAL FOR FEW YEARS THAT THE SOCIETY ASKED THEM TO SHIFT TO THE HOUSE N O. 3085 SECTOR- 21-D CHANDIGARH WHICH HAD BEEN TAKEN ON LEASE IN 2001 B Y THE SOCIETY . VII. THERE IS ANOTHER HOUSE BEARING NO.3084 AT SECT OR-21-D CHANDIGARH IN THE NAME OF SH. SANDEEP SARDANA AND HIS WIFE SMT. MONI KA SARDANA FOR WHICH THE PLOT WAS PURCHASED IN SEPTEMBER 1999 AND THEREAFTE R A SMALL PORTION WAS CONSTRUCTED THERE CONSISTING OF TWO ROOMS TOILET AND A PANTRY AND FOR THIS HOUSE THE LEASE AGREEMENT WAS ENTERED INTO ON AUG 13 201 0 AT A MONTHLY RENT OF RS. 20000/- FOR FIVE YEARS WITH INCREASE OF 5% EVERY YE AR OF THE BASIC RENT. SUCH INCOME HAS BEEN DULY DISCLOSED BY SH. SANDEEP SARDA NA AND SMT MONIKA SARDANA IN THEIR RETURN OF INCOME AND EVEN SH. SAND EEP SARDANA HAD DISCLOSED PERQUISITE VALUE WHILE FILING HIS RETURN OF INCOME EACH YEAR. EVEN WE ARE FILING DOCUMENTARY EVIDENCES WHEREIN VARIOUS SCHOOLS ARE ALLOWING 'RENT FREE ACCOMMODATION' TO THE PRINCIPALS AND THUS IT IS A TRADE PRACTICE AND NOT A NEW PHENOMENON. SUCH EVIDENCES ARE BEING ENCLOSED IN TH E PAPER BOOK IN CASE OF SOME SCHOOLS LIKE ISHORI INTERNATIONAL SCHOOL: CHIRAWA BAL BHARTI PU BLIC SCHOOL: GANDHAR S.B. SHARMA WORLD SCHOOL: JAMNAGAR SALWAN PUBLIC SCHOOL GHAZIABAD DUNLOD PUBLIC SCHOOL: LUCKNOW S.D. JAIN MODERN SCHOOL SURAT THE SIRSA SCHOOL: SIRSA THE STAR GLOBAL SCHOOL: ROHTAK DELHI PUBLIC SCHOOL: FEROZEPUR: SURMOUNT INTERNATIONAL SCHOOL: GORAKPUR . VIII. IT IS SUBMITTED THAT SAID RENT HAS ALREADY BE EN ALLOWED BY THE DEPARTMENT PREVIOUSLY IN THE VARIOUS ORDERS PASSED U/S 143(3) OF THE SOCIETY AND THERE HAS BEEN NO DISPUTE EITHER DURIN G ALL SUCH YEARS AND EVEN FOR SOME OF THE YEARS THERE HAVE BEEN CERTAIN DISALLOW ANCE OF CAPITAL EXPENDITURE IN RESPECT OF PURCHASE OF LAND AND CONSTRUCTION OF BUILDING BY THE SOCIETY BUT THE MATTER HAVE ATTAINED FINALITY BY THE HIGHEST CO URT OF THE COUNTRY I.E. HON'BLE SUPREME COURT AFTER THE APPEAL OF THE ASSESSEE HAV E BEEN ALLOWED BY THE CIT(A) ITAT CHANDIGARH BENCH AND HON'BLE PUNJAB & HARYANA HIGH COURT AND THEREAFTER THE SLP OF THE DEPARTMENT HAD BEEN DISM ISSED BY THE HON'BLE SUPREME COURT. COPIES OF AIL SUCH ORDERS HAVE ALREA DY BEEN FILED IN THE SEPARATE PAPER BOOK. THUS IT STAN DS ESTABLISHED THAT IN ALL THE YEARS THE SURPLUS H AVING BEEN UTILIZED FOR THE C AUS E OF EDUCATION WAS NEVER IN DOUBT . IX. EVEN OTHERWISE IT MAY BE STATED THAT BOTH THE HOUSES BELONGING TO SANJAY SARDANA AND HIS WIFE AND SH. SANDEEP SARDANA AND HIS WIFE HAVE BEEN PLEDGED TO THE 'KARNATAK SANK' FOR RAISING LOAN FOR THE PURPOSES OF CONSTRUCTION OF SCHOOL I.E. FOR PROVIDING BASIC INFRASTRUCTURE AND IMPROVING THE EARLIER INFRASTRUCTURE AND NONE OF SUCH FUNDS HAVE BEEN USE D BY ANY OF THE RELATED PERSONS FOR THEIR PERSONAL USE. COPY OF THE BANK CERTIFICATE FROM THE KARNATAKA BANK HAVE ALREADY BEEN FILED BEFORE THE ASSESSING OFFICER AND COPY OF THE SAME IS BEING FILED HEREWITH AGAIN IN THE PAPER BOOK BEI NG FILED NOW JUST TO SUBSTANTIATE THE FACT THAT EVEN THE PERSONAL PROPER TY OF SH. SANJAY SARDANA AND HIS WIFE AND SH. SANDEEP SARDANA AND HIS WIFE HAVE BEEN USED FOR RAISING THE 'LOAN' FOR THE PURPOSE OF SOCIETY WHICH IS ENGAGED IN PROVIDING QUALITY EDUCATION TO THE CHILDREN OF ALL WALKS OF THE SOCIETY. X. WE HAVE ALSO BROUGHT TO YOUR GOODSELF'S PREDEC ESSOR ATTENTION ABOUT THE LATEST JUDGEMENTS OF HON'BLE SUPREME COURT IN THE C ASE OF CIT V/S BHOLA RAM FOR THE PROPOSITION OF PAYMENT OF RENT TO THE TRUSTEES AND WHICH HAVE BEEN HELD TO BE ALLOWABLE AND BESIDES DIFFERENT JUDGEMENTS OF J URISDICTIONAL 'PUNJAB & 55 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) HARYANA HIGH COURT' AND IT AT CHANDIGARH BENCH IN FAVOUR OF THE ASSESSEE WHEREIN THE SALARY PAID TO THE TRUSTEES HAVE DULY B EEN ALLOWED. THIS IS BROUGHT ON YOUR RECORD THAT DURING THE COURSE OF SURVEY EVEN NOTHING ADVERSE WAS POINTED OUT BY THE ASSESSING OFFICER CONCERNED AND THUS DIS ALLOWANCE/ IGNORING THE PAST HISTORY OF THE CASE THE CONSISTENCY HAS TO BE MAIN TAINED AND NOT TO DISREGARD THE JUDGEMENTS OF HON'BLE SUPREME COURT PUNJAB AND HARYANA HIGH COURT AND IT AT CHANDIGARH BENCH CHANDIGARH. WE RELY UPON T HE RECENT JUDGEMENT IN THE CASE OF SMT. AMARJIT KAUR WHICH IS THE LATEST JUDG EMENT ON ACCOUNT OF CONSISTENCY WHEREIN THE JUDGEMENTS OF HON'BLE APEX COURT IN TH E CASE OF BERGER PAINTS AND LEADER VALUES HAVE BEEN FOLLOWED. 13.1 THE LD. CIT(A) POINTED OUT THAT THERE WAS A SU RVEY CONDUCTED U/S 133A OF THE ACT ON THE BUSINESS PREMISES OF THE ASSESSEE SO CIETY. THE GIST OF SURVEY REPORT WAS GIVEN TO THE ASSESSEE FOR COMMENTS BY THE THEN CIT(A)WHICH READ AS UNDER: 6. ASSESSEE IS PAYING RENT TO THEIR MEMBERS AGAIN ST THE PREMISE LETTING OUT BY THE MEMBERS TO THE ASSESSEE. AND IT IS AN INTERESTI NG FACT THAT IN THESE PREMISES THE MEMBERS ARE RESIDING AND THEY ARE OWNER OF THE SAME BUILDING AGAINST THE SAME THEY ARE GETTING RENT FROM THE SOCIETY. REPLY OF THE ASSESSEE THAT IT IS REQUIREMENT FOR THE SOCIETY AND THEIR DIRECTORS/ ME MBERS IS NOT ACCEPTED. BECAUSE ASSESSEE IS PAYING RENT TO THE OWNERS OF TH E PROPERTY IN WHICH THE SAME OWNERS OF THE PROPERTY RESIDING. DURING THE ASSESSM ENT PROCEEDINGS IT HAS FOUND THAT TRUST IS NOT PROVIDING THIS SERVICE TO THEIR A NY OTHER EMPLOYEES WHICH SHOWS DISCRETION BETWEEN OTHER EMPLOYEES OR DIRECTORS OF THE SOCIETY. IT IS BEYOND UNDERSTAND THAT WHY ASSE SSEE IS PROVIDING SPECIAL TREATMENT TO THEIR MEMBER S IN THE ABOVE FACTS IT SHOWS THAT THESE MEMBERS HAVE U SED THEIR OWN PROPERTY FOR THEIR PERSONAL USE AND PETTING THE RENT AGAINST THE SAME WHICH IS NOT ALLOWABLE U/S 13(1) OF I. T. ACT. 1961. DURING THE SURVEY PROCEEDINGS ON 28-29.12.2016 IT IS FOUND THAT ASSESSEE IS DIVERTING SOCIETY'S MONEY TO PERSONAL HANDS OF THES E PERSONS. IT IS FOUND THAT SH. G.S. SARDANA CHAIRMAN OF MANAV MANGAL GROUP AND TH EIR FAMILY MEMBERS ARE MAIN PROMOTERS OF THIS GROUP. THEY ARE ENJOYING SAL ARY AND OTHER FACILITIES OF THE SOCIETY AND MAK ING THEIR OWN CAPITAL WITHOUT PROVIDING THE SERVICE S TO THE SOCIETY DURING THE SURVEY PROCEEDINGS IT HAS FOUND THAT TH ESE PERSONS ARE TAKING HUGE SALARY WITHOUT THEIR SERVICES AND WITHOUT FOLLOWING THE NORMS AND CONDITIONS OF THE CBSE. IT IS FOUND DURING SURVEY THAT SH. G.S. SARDA NA AND MRS. USHA SARDANA AND THEIR FAMILY MEMBERS ARE NOT COMING TO SCHOOL AND A LSO NOT INVOLVED IN THE DAY TO DAY BUSINESS OF THE SCHOOL DESPITE THE FACTS THE Y ARE TAKING HUGE SALARY FROM THE SOCIETY. DURING THE ASSESSMENT PROCEEDINGS IT HAS FOUND THAT SH. G.S. SARDANA AND HIS WIFE MRS. USHA SARDANA ARE VERY OLD AND NOT ABLE TO DO WORK PROPERLY DESPITE THE FACT ASSESSEE IS PAYING HUGE SALARY TO THEM. THIS HAS BEEN CONFRONTED TO SH. SANJAY SARDANA. DIRECTOR OF THE S OCIETY IN THE STATEMENT RECORDED DURING THE SURVEY PROCEEDINGS ON 28-29.09. 2016 HAS FAILED TO EXP LAIN THE SAME THE CHAIRMAN A ND THEIR FAMILY MEMBERS FROM THE SCHOOL AND ASSESSE E HAS FAILED TO PRODUCE THESE PERSONS. SH. G.S. SARDANA MRS. USHA SARDANA MRS. ANJALI SARDANA MR. AJAY MANCHANDA MR. ARSHI MANCH ANDA MS. SHRISTI SARDANA MR. SANKALP SARDANA AND ALSO FAILED TO SUBMIT ANY R EPLY OR DOCUMENTS RELATED WITH THE SEN/ICES PROVIDED BY THEM IN SCHOOLS AND S OCIETY. ASSESSEE HAS ALSO 56 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) FAILED TO SUBMIT OR PRODUCE APPOINTMENT FILE IN THE SE CASES. ASSESSEE HAS ALSO FAILED TO SHOW THEIR OFFICIAL ROOM IN WHICH THEY WO RKED. 7. ASSESSEE IS PAYING RENT TO THEIR MEMBERS AGAINS T THE PREMISE LETTING OUT BY THE MEMBERS TO THE ASSESSEE AND IT IS A INTERESTING FACT THAT IN THESE PREMISES THE MEMBERS ARE RESIDING AND THEY ARE OWNER OF THE SAME BUILDING AGAINST THE SAME THEY ARE GETTING RENT FROM THE SOCIETY. REPLY OF TH E ASSESSEE THAT IT IS REQUIREMENT FOR THE SOCIETY AND THEIR DIRECTORS/ MEMBERS IS NO T ACCEPTED. BECAUSE ASSESSEE IS PAYING RENT TO THE OWNERS OF THE PROPERTY IN WHICH OWNERS OF THE PROPERTY RESIDING. DURING THE ASSESSMENT PROCEEDINGS IT HAS FOUND THA T TRUST IS NOT PROVIDING THIS SERVICE TO THEIR ANY OTHER EMPLOYEES WHICH SHOWS DISCRETION BETWEEN OTHER EMPLOYEES OR DIRECTORS OF THE SOCIETY . IT IS BEYOND UNDERSTAND THAT WHY ASSESSEE IS PROVIDING SPECIAL TREATMENT TO THEI R MEMBERS. IN THE ABOVE FACTS IT SHOWS THAT THESE MEMBERS HAVE USED THEIR OWN PRO PERTY FOR THEIR PERSONAL USE AND GETTING THE RENT AGAINST THE SAME WHICH IS NOT ALLOWABLE U/S 13(1)(C) R.W.S. 13(3) OF I.T. ACT 1961. 13.2 IN RESPONSE THE ASSESSEE SUBMITTED THAT THE A .O. DISREGARDED THE ACCEPTED PAST HISTORY OF THE CASE WHEREIN ALL THE A SSESSMENTS OF EARLIER YEARS ON THE SAME ISSUE I.E; THE PAYMENT OF RENT HAD BEEN AC CEPTED YEAR AFTER YEAR IN THE ORDERS PASSED U/S 143(3) OF THE ACT AND THAT TH E PAYMENTS HAD BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES EVERY MONTH AFTER DED UCTING TDS. 13.3 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE DELETED THE DISALLOWANCE MADE BY THE A.O. BY OBSERVING AS UNDER : 5.2.10. NOW COMING TO THE ISSUE OF PAYMENT OF RE NT TO THE RELATIVES OF THE MEMBERS THE LD. AR HAS SUBMITTED THAT THE SOCIETY IS PROVIDING RENT FREE ACCOMMODATION TO ITS DIRECTORS UNDER THEIR RESPECTI VE SERVICE CONTRACT AND THIS PERQUISITE IS BEING TREATED AS A PART OF THEIR SALA RY AND WHICH IS BEING DULY DECLARED BY THESE DIRECTORS IN THEIR RESPECTIVE RET URNS OF INCOME IT HAS BEEN ARGUED THAT THE DIRECTORS WHO ARE CONSISTENTLY WORK ING FOR THE RUNNING OF THE SCHOOLS OF THE SOCIETY ARE ALSO USING THEIR ACCOMMO DATION PROVIDED BY THE SOCIETY FOR OFFICIAL PURPOSES AS MANY A TIMES THE D IRECTORS HAVE TO WORK BEYOND THE NORMAL WORKING HOURS OF THE SCHOOLS. THE APPELL ANT HAS DULY FURNISHED THE LEASE DEEDS AND THE VALUATION REPORTS OF THE TWO PR OPERTIES AND NO DEFECT OR DISCREPANCY OUT OF THESE DOCUMENTS HAS BEEN FOUND B Y THE AO. IT IS NOT THE CASE OF THE AO THAT THE RENT BEING PAID FOR THE ACCOMMODA TION IS HIGHER THAN ITS NORMAL MARKET VALUE. THE OBSERVATIONS OF THE AO THAT SIMILAR FACILITY OF RENT FREE ACCOMMODATION IS NOT BEING PROVIDED TO OTHER EMPLOY EES OF THE SOCIETY DOES NOT HOLD MUCH SIGNIFICANCE AS THE APPELLANT SOCIETY IS HAVING ONLY TWO DIRECTORS AND THE OTHER JUNIOR EMPLOYEES/ TEACHERS OF THE SOC IETY CANNOT BE COMPARED TO THE POSITION OF A DIRECTOR CONSIDERING THE KEY ROLE AND RESPONSIBILITIES BEING ENTRUSTED UPON THE DIRECTORS AND THE COMPARATIVE WO RK LOAD ON THEM TO MANAGE ALL THE SCHOOLS BEING RUN BY THE SOCIETY. FU RTHER THIS FACILITY IS BEING GIVEN TO THE DIRECTORS SINCE 2001. IN THESE CIRCUMSTANCES I FIND MERIT IN THE SUBMISSIONS OF THE APPELLANT THAT THE PROVISION OF RENT FREE AC COMMODATION TO THE DIRECTORS 57 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) OF THE SOCIETY AND CONSEQUENT PAYMENT OF RENT IS RE ASONABLE AND THUS NOT HIT BY THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT. 14. NOW THE DEPARTMENT IS IN APPEAL. 15. THE LD. CIT-DR STRONGLY SUPPORTED THE ORDER OF THE A.O. AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER. IT WAS F URTHER SUBMITTED THAT THE ASSESSEE SOCIETY PAID THE RENT OF THE PREMISES/BUIL DING BELONGING TO THE SPECIFIED PERSONS WHO WERE RESIDING IN THE SAME PRE MISES FOR WHICH RENT WAS PAID. IT WAS FURTHER SUBMITTED THAT THE SIMILAR PRO PERTY COULD HAVE BEEN HIRED ON THE LESSER RENT BY THE ASSESSEE SOCIETY THEREFORE THE DISALLOWANCE WAS RIGHTLY MADE BY THE A.O. AND THE LD. CIT(A) WAS NOT JUSTIFI ED IN DELETING THE DISALLOWANCE MADE BY THE A.O. 16. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE VALUATION OF THE HOUSES WAS NOT DOUBTED BY THE A.O. AND THE ACCOMMODATIONS PROVIDED TO THE SPECIFIED PERSONS WERE CONSIDERED A S PERQUISITES IN THEIR INDIVIDUAL HANDS WHICH WAS ADDED TO THEIR INCOME AN D ACCEPTED BY THE DEPARTMENT IN THEIR INDIVIDUAL HAND THEREFORE THE RE WAS NO JUSTIFICATION IN MAKING THE DISALLOWANCE. IT WAS FURTHER SUBMITTED T HAT A LEASE AGREEMENT WAS ENTERED INTO BY THE ASSESSEE SOCIETY WITH THE OWNER S OF THE PREMISES COPIES OF WHICH ARE PLACED AT PAGE NOS. 393 TO 415 OF THE ASS ESSEES PAPER BOOK. THE RENT ON THE BASIS OF LEASE AGREEMENT WAS BEING PAID REGULARLY THROUGH BANKING CHANNEL WHICH WAS SHOWN BY THE OWNER IN THEIR RESPE CTIVE RETURNS AND THE SPECIFIED PERSONS HAD SHOWN THE VALUE OF THE RENT A S PERQUISITES IN THEIR HANDS AND PAID DUE TAXES. IT WAS FURTHER SUBMITTED THAT T HE DIRECTORS WERE ALSO WORKING FROM THEIR RESIDENTIAL PREMISES AND THE A.O. HAD NO T RAISED ANY OBJECTION AND STATED THAT THE RENT PAID WAS MORE THAN NORMAL MARK ET RENT FURTHER THIS PRACTICE OF PROVIDING RENT FREE ACCOMMODATION TO THE SENIOR MANAGEMENT EMPLOYEES AS PERQUISITES WAS BEING FOLLOWED IN OTHER SCHOOLS ALSO. AS REGARDS TO THE OBSERVATION OF THE A.O. THAT THE SIMILAR FACILITIES OF RENT FREE ACCOMMODATION 58 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) WAS NOT BEING GIVEN TO OTHER EMPLOYEES OF THE ASSES SEE SOCIETY IT WAS SUBMITTED THAT THE ASSESSEE SOCIETY HAS TWO DIRECTO RS-CUM-PRINCIPALS AND OTHER JUNIOR EMPLOYEES/TEACHERS OF THE ASSESSEE SOCIETY C ANNOT BE COMPARED TO THE POSITION OF A DIRECTOR-CUM-PRINCIPAL CONSIDERING TH E KEY ROLE AND RESPONSIBILITY BEING ENTRUSTED UPON THEM AND ALSO THE WORK LOAD ON THEM TO MANAGE ALL THE SCHOOLS BEING RUN BY THE SOCIETY. RELIANCE WAS PLAC ED ON THE FOLLOWING CASE LAWS: (I) CIT(EXEMPT) VS BHOLARAM EDUCATIONAL SOCIETY 101 TAXMANN.COM 193 (SC) (II) PINEGROVE INTERNATIONAL CHARITABLE TRUST VS DC IT ITA NO. 567/CHD/2019 DATED 31/08/2020. 17. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE IT IS NOT IN DISPUTE THAT THE ASSESSEE PROVIDED ACCOMMODATION TO THE PRINCIPALS-C UM-DIRECTORS OF THE ASSESSEE SOCIETY WHO WERE ALSO MANAGING ADMINISTRAT IVE WORK FROM THE RESIDENTIAL PREMISES. IT WAS NOT THE CASE OF THE A. O. THAT THE RENT PAID WAS EXCESSIVE AS COMPARED TO THE SIMILAR ACCOMMODATION. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SPECIFIED PERSONS HAD SHOWN THE VALUE OF THE RENT AS PERQUISITES IN THEIR RESPECTIVE HANDS WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT HAS NOT BEEN REBUTTED AND THAT IN EARLIE R YEARS ALSO FOR THE SIMILAR PAYMENTS NO DISALLOWANCE WAS MADE BY THE DEPARTMEN T. 17.1 ON A SIMILAR ISSUE THE HON'BLE APEX COURT IN THE CASE OF CIT VS BHOLARAM EDUCATIONAL SOCIETY (SUPRA) HELD AS UNDER: 4. IT CAN BE SEEN THAT THE ENTIRE ISSUE IS IN THE REAL M OF APPRECIATION OF MATERIALS ON RECORD. CIT (APPEALS) AND THE TRIBUNAL CONCURRENTLY CAME TO THE CONCLUSION THAT THE RENT WAS NOT EXCESSIVE. THE APP LICATION UNDER SECTION 13(L)(C) OF THE INCOME TAX ACT THEREFORE WOULD BE RULED OUT. REMAINING DISALLOWANCES BEING CONSEQUENTIAL TO THE MAIN ONE NO FURTHER DIS CUSSION IS NECESSARY WHEN WE DO NOT FIND ANY REASON TO INTERFERE IN CONNECTION W ITH THE MAIN ISSUE. 59 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 17.2 IN THE PRESENT CASE ALSO THE PAYMENT OF RENT WAS NOT DOUBTED AND THE A.O. DID NOT BRING ANY MATERIAL ON RECORD TO SUBSTA NTIATE THAT THE RENT PAID WAS EXCESSIVE AND THE SPECIFIED PERSONS TO WHOM ACCOMMO DATION WAS PROVIDED HAD SHOWN THE VALUATION OF THE SAID PROPERTIES AS P ERQUISITES IN THEIR RESPECTIVE HANDS. THEREFORE THE LD. CIT(A) RIGHTLY DELETED TH E DISALLOWANCE MADE BY THE A.O. PARTICULAR WHEN THE RENT PAID FOR THE SAME ACC OMMODATION HAS BEEN ACCEPTED IN THE PRECEDING YEARS. WE THEREFORE CON SIDERING THE TOTALITY OF THE FACTS DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS GIVEN BY THE LD. CIT(A) ON THIS ISSUE. 18. THE NEXT ISSUE VIDE GROUND NO. VIII AND IX RELA TES TO DELETION OF DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF INTERES T ON UNSECURED LOANS PAID TO THE SPECIFIED PERSONS. 19. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT T HE A.O. ASKED THE ASSESSEE TO JUSTIFY THE PAYMENTS MADE TO THE SPECIFIED PERSONS ON ACCOUNT OF INTEREST. THE ASSESSEE SUBMITTED AS UNDER: WITH REGARD TO THE INTEREST PAID ON LOANS RAISED F ROM THE PERSONS COVERED UNDER SECTION 13(3) IT IS RESPECTFULLY SUBMITTED THAT THE SAME HAS BEEN PAID @12% PER ANNUM. THE INTEREST PAID TO THESE PERSONS IS AT THE SAME RATE AT WHICH INTEREST IS BEING PAID TO BANKS. WHILE RAISING LOANS FROM BANKS ADEQUATE SECURITY HAS BEEN TAKEN BY BANKS FOR ADVANCING THESE LOANS. HOWEVER I N THE CASE OF THESE PERSONS THERE WAS NOT ANY SECURITY GIVEN BY THE SOCIETY AND SUCH LOANS WERE UNSECURED LOANS. THESE LOANS WERE RAISED FOR CREATING INFRAST RUCTURE OF SCHOOLS RUN BY THE SOCIETY. THE SOCIETY IS FORCED TO RAISE LOANS THROU GH THESE PERSONS AS THE BANKS HAVE THEIR LIMITATIONS IN ADVANCING WHOLE AMOUNT OF REQUIRED FINANCES. IN FACT THE DIRECTORS MR. SANJAY SARDANA AND MR. SANDEEP SA RDANA CAME FORTH TO HELP THE SOCIETY'S CAUSE BY PLEDGING THEIR HOUSES TO RAI SE BANK LOANS FOR THE SOCIETY DURING THE COMING UP OF ITS THIRD BRANCH AT MOHALI. THE PERSONS COVERED U/S 13(3) IN ORDER TO STRENGTHEN THE SOCIETY AND TO MEET WITH THE REQUIRED FUNDS HAVE COME FORWARD TO PROVIDE UNSECURED TO THE SCHOOLS RU N BY THE SOCIETY. THESE 60 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) FUNDS WERE NECESSITATED TO MEET FINANCIAL OF SCHOOL S TO RAISE REQUISITE INFRASTRUCTURE TO PROVIDE QUALITY EDUCATION TO THE STUDENTS ENROLLED IN THE SCHOOLS. SIR THE INTEREST ON UNSECURED LOANS IS USUALLY HIG HER THAN THE INTEREST ON SECURED LOANS AS UNSECURED LOANS ARE NOT SECURED BY ANY GU ARANTEE IMMOVEABLE/MOVEABLE. THESE PERSONS WHO COULD HAVE I NVESTED THEIR HARD EARNED ACCUMULATED FUNDS IN REAL ESTATE OR OTHER SE CURITIES FOR BETTER RETURNS BUT THEY CHOOSE TO SUPPORT THE SAID SCHOOLS FINANCI ALLY BY VIRTUE OF THEIR PASSION FOR PROVIDING QUALITY EDUCATION IN THE SAID SCHOOLS IT IS FURTHER SUBMITTED THAT THESE PERSONS ARE BEING PAID MUCH LESS INTEREST ON THEIR UNSECURED ADVANCES THAN THE SECURED LOANS FROM BANKS. THE INTEREST PAI D ON SAID UNSECURED LOANS DURING THEIR IN QUESTION IS MUCH LESS I.E. @12% PA THEN THE INTEREST CHARGED BY BANKS ON SECURED LOANS I.E. @13% DURING THE FINANCI AL YEAR 2012-13. THE A.O. DID NOT FIND MERIT IN THE SUBMISSIONS OF T HE ASSESSEE AND DISALLOWED INTEREST PAID TO THE SPECIFIED PERSONS. 20. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTE R TO THE LD. CIT(A) AND SUBMITTED THAT THE INTEREST WAS BEING PAID TO THE P ERSONS WHO HAD EXTENDED THEIR FUNDS TO THE SOCIETY AGAINST NO SECURITY AS P ER THE REQUIREMENT OF THE SOCIETY AND IT WAS BEING DONE AT A RATE LOWER THAN THE INTEREST BEING PAID BY THE ASSESSEE SOCIETY TO THE BANKS AGAINST SECURED L OANS. THE LD. CIT(A) POINTED OUT THAT A SURVEY WAS CONDUCTED U/S 133A OF THE ACT ON THE BUSINESS PREMISES OF THE ASSESSEE SOCIETY AND THE GIST OF SURVEY REPORT WAS GIVEN TO THE ASSESSEE VIDE LETTER DATED 21/03/2017 FOR COMMENTS BY THE THEN CI T(A). THE RELEVANT PORTION OF THE REPORT READ AS UNDER: 8. ASSESSEE IS ALSO P AYING HUGS INTEREST TO THE CHAIRMAN AND THEIR FAMILY MEMBERS AGAINST THE UNSECURED LOAN. DURING THE SURVEY AND POST SURVEY PROCEEDINGS IT HAS FOUND THAT THERE ARE HUGE AMOUNT S HAVE RECEIVED BY THESE PERSONS IN THEIR PERSONAL HANDS FROM THE SOCIETY AN D INVESTED THE SAME IN PROPERTIES. THE DETAILS OF UNSECURED LOANS ARE AS U NDER:- 61 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) ON PERUSAL OF THE ABOVE IT IS SEEN THAT THERE IS HUGE INCREASE IN THE UNSECURED LOAN FROM A.Y. 2013-14 TO A.Y. 2016-17 AND THE SOUR CES ARE FROM THE SOCIETY ONLY. THE MONEY HAS DIVERTED THROUGH SOCIETY TO INDIVIDUA LS AND THEN INDIVIDUALS TO INDIVIDUALS AND AGAINST TO THE SOCIETY. AGAINST THE SAME THEN THESE PERSONS ARE GETTING INTEREST INCOME. 20.1 IN RESPONSE THE ASSESSEE SUBMITTED AS UNDER: 6. REGARDING SALARY RENT AND INTEREST WHICH ACCORDIN G TO THE ASSESSING OFFICER HAVE GONE BACK TO THE SCHOOL IN THE FORM OF LOAN IS NOT CORRECT OBSERVATION BECAUSE OF THE FOLLOWING FACTS:- I) ALL THE PAYMENTS OF SALARY INTEREST OR RENT HAVE B EEN PAID BY ACCOUNT PAYEE CHEQUES AS PER DUE DATES EVERY MONTH AFTER DE DUCTING TDS AND NO CASH PAYMENTS HAVE BEEN MADE TO ANY OF THE RELATED PERSONS. II) ALL THE PERSONS ARE WELL QUALIFIED AND MOST OF THEM HAVE AN EXPERIENCE OF MORE THAN 25 YEARS AND HAVE RENDERED REQUISITE SERVICES AND FOR WHICH THERE IS NOT AN IOTA OF DOUBT OR WHISPER IN THE ASSESSMENT ORDER THAT EITHE R THE PERSONS DO NOT HAVE REQUISITE QUALIFICATIONS OR HAVE NOT RENDERED ANY SERVICES. III) THE FUNDS AS ADVANCED BY THEM TO THE SOCIETY HAVE B EEN GENERATED BY SUCH PERSONS OUT OF SALE OF THEIR PERSONAL LAND HOLDINGS IN SOME CASES OR INTEREST INCOME OF SUCH PERSONS FROM OTHER SOURCES AND IT IS TOTALLY WRONG ASSERTION ON THE PART OF THE ASSESSING OFFICER TO MENTION THAT SALARY RENT AND INTEREST R ECEIVED BY THEM HAVE COME BACK AS LOAN TO THE SOCIETY. IV) IN ORDER TO SUBSTANTIATE OUR ABOVE CONTENTION WE ARE SUBMITTING HEREWITH A CHART FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WHICH WOULD PROVE THE SOURCE OF FUNDS AS 62 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) ADVANCED TO THE SOCIETY IN SOME CASES AND THIS ITSE LF WOULD CLARIFY EACH AND EVERYTHING. THE CHART IS PLACED AT PAGE 01 TO 03 OF PAPER BOOK V. V) WE ARE SUBMITTING HEREWITH THE COPY OF THE BANK STA TEMENTS OF THE RELATED PERSONS TO PROVE THAT MAJORITY THE REMUNERATION R ENT OR INTEREST DRAWN FROM THE SCHOOL HAVE BEEN UTILIZED FOR THE PERSONAL NEEDS OF EACH P ERSON I .E. FOR PAYMENT OF LIC PAYMENT OF 'EDUCATION FEE' FOR THE CHILDREN CAR LOAN REPAY MENTS TRAVELLING TRAVELLING (PERSONAL) AND FOR HOUSEHOLD EXPENSES ETC. COPY IS PLACED AT P AGE 04 TO 31 OF PAPER BOOK V. VI) THERE IS NO BAR TO MAKE ADVANCES TO THE SOCIETY ON INTEREST OUT OF THE INCOME EARNED FROM THE SOCIETY BY RENDERING REQUISI TE SERVICES OR LETTING OUT THEIR PROPERTY AGAINST WHICH THE RENT IS BEING RECEIVED. THIS ISSU E HAS THOROUGHLY BEEN LOOKED INTO BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS AND LATER ON DURING THE COURSE OF SURVEY BUT STILL THE ABOVE SUBMISSIONS ARE BEING MADE TO NEGATE THE CONTENTION OF THE ASSESSING OFFICER. VII) IT IS ALSO PERTINENT TO MENTION HERE THAT THE SOCIETY TODAY HAS FOUR SCHOOLS HAVING 'INTERNATIONAL STANDARD INFRASTRUCTU RE' FOR RENDERING QUALITY EDUCATION AND THERE ARE ABOUT TEN THOUSAND STUDENTS ON ROLLS AND ALL THIS CREATION OF HUGE INFRASTRUCTURE INCLUDING LAND AND BUILDING REQUIRED MAJOR INVESTME NTS AND FOR WHICH THE REQUISITE FUNDS WERE REQUIRED. VIII) EVEN FUNDS WERE ARRANGED BY THE SOCIETY BY TA KING HEAVY LOANS FROM THE BANKS FOR WHICH THE RELATED PERSONS HAVE MORTGAGED THEIR PER SONAL ASSETS AND ALSO GIVEN PERSONAL SURETIES AND WITH NO OUTSIDER READY TO LEND MONEY T O THE SOCIETY THE RELATED PERSONS HAD TO PART THEIR PERSONAL 'TAXED INCOME' IN THE SOCIET Y SO THAT THE AIMS AND OBJECTS FOR RENDERING THE QUALITY EDUCATION COULD BE ACHIEVED. 7. HAD THE RELATED PERSONS NOT ADVANCED THE FUNDS T O BE SOCIETY NO SUPER STRUCTURE WHICH IS EXISTING NOW COULD BE CREATED AND AS SUCH THE VERY PURPOSE OF FORMATION OF SOCIETY FOR RENDERING QUALITY EDUCATION WOULD HAVE BEEN DEFEATED. AGAINST SUCH ADVANCEMENT OF AMOUNT A NOMINAL RATE OF INTEREST O F 12% IS BEING CHARGED BY THE PERSONS AND WITH NO GUARANTEE FROM THE SOCIETY . 8. WE ARE SUBMITTING FURTHER THE FOLLOWING FACTS WH ICH WOULD PROVE BEYOND ANY DOUBT THAT THERE WAS REQUIREMENT OF FUNDS TO THE SO CIETY FOR ACHIEVING THE OBJECTS OF THE SOCIETY AND MEMBERS AND RELATED PERSONS HAVE BEEN E XTENDING LOAN TO THE SOCIETY SO THAT ITS GROWTH DOES NOT GET HAMPERED AT ANY STAGE DUE TO FINANCIAL CONSTRAINTS. OBVIOUSLY IT IS SOCIETY'S INTEREST AND NOT THE INT EREST INCOME THAT HAS B EEN THEIR PRIMARY CONSIDERATION. A) FUNDS WERE REQUIRED BY THE SOCIETY FOR RAISING I NFRASTRUCTURE AND FACILITIES IN THE EXISTING SCHOOLS FOR PAYING INSTALLMENTS OF PURCHA SED SCHOOL SITE(S) AND FOR EXPANSION OF EDUCATIONAL SERVICES BY OPENING NEW SCHOOL AT ZIRAK PUR SCHOOL SITE. THE REQUIREMENT OF FUNDS BY THE SOCIETY IS ENCLOSED (PAGE NO. 32 OF PA PER BOOK V ) B) THE PRACTICE OF ALLOTMENT OF SCHOOL LAND IN CHAN DIGARH PUNJAB & HARYANA AT CONCESSIONAL RATES HAS BEEN STOPPED SINCE LONG. IT IS NOW AUCTIONED AT VERY HIGH PRICES. MANAV MANGAL SOCIETY IN FACT PURCHASED THE SCHOOL SITE IN ZIRAKPUR AT A MUCH LOWER RATE. SINCE THE BANKS DO NOT READILY COME FORWARD TO GIVE LOANS FOR THE PURCHASE OF LAND THESE PERSONS PROVIDED UNSECURED LOANS TO THE SOCIETY AT A REASONABLE RATE OF 12% PER ANNUM . C) RATE OF INTEREST BEING PAID BY SOCIETY TO THE BA NKS AGAINST SECURED LOANS (OD A/C) DURING FY 2012-13 WAS 13% (PAGE NO. 33 OF PAPER BOO K V). THUS THE INTEREST PAID TO THE SAID PERSONS AGAINST UNSECURED LOANS WAS LOWER THAN THE INTEREST PAID TO BANKS ON SECURED LOANS. INTEREST PAID AGAINST UNSECURED LOANS IS ALW AYS HIGHER THAN THE INTEREST PAID AGAINST SECURED LOANS IN THE FINANCIAL MARKET AS THE UNSECU RED LOANS ARE NOT SECURED AGAINST ANY 63 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) GUARANTEE (18% INTEREST AGAINST UNSECURED LOANS ALL OWED IN M/S STANDARD TOILS CORPN - PAGES 108 & 109 OF PAPER BOOK IV.) D) IN THE INTEREST OF WORKING OF MANAV MANGAL SOCIETY AND ITS CAUSE THESE PERSONS HAVE BEEN TAKING THE RISK OF PLEDGING THEIR HOUSES AS COLLATERAL SECURITY TO ENA BLE THE SOCIETY TO AVAIL THE SECURED LOANS FROM THE BANKS FOR CONSTRUCTION O F SCHOOL BUILDINGS. (PAGE NO. 34 & 35 OF PAPER BOOK V). NOT ONLY THAT: THESE PERSONS HAVE BEEN GIVING THEIR PERSONAL GUARANTEES TO HELP THE SOCIETY TO RAISE SE CURED LOANS FROM THE BANKS. E) THE AO HAS UNFORTUNATELY MISSED TO GET THE FACT THAT THESE PERSONS HAVE BEEN BRINGING IN THE MAJOR PART OF THEIR UNSECURED LOANS TO SOCIETY FROM THEIR SOURCES SUCH AS: I) INTEREST INCOME FROM AND RETURN OF INVESTMENTS I N FDRS DEBENTURES ETC. II) SALE PROCEEDS OF PROPERTY III) MATURITY PROCEEDS OF INSURANCE POLICIES IV) RECOVERED LOANS GIVEN TO BUSINESS HOUSES AT 12% INTEREST CHART SHOW ING THE SOURCES OF THE AMOUNT ADVANCED TO THE SOCIETY 64 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) IT IS EVIDENT FROM THE ABOVE CHART THAT RS .2 55 04 046/- HAS COME TO THESE PERSONS FROM THEIR OWN SOURCES/ SAVINGS AND NOT FROM SALARY/INTE REST/RENT PAID BY THE SOCIETY AGAINST A SUM OF RS.2 55 04 046/- RECEIVED BY THESE PERSONS F ROM THEIR OTHER SOURCES/ SAVINGS AN AMOUNT OF RS. 2 04 50 000/- HAS BEEN ADVANCED TO THE SOCIETY AS UNSECURED LOANS. F) INVESTING MONEY TO EARN INTEREST IS NOT THE ONLY OP TION AVAILABLE. FOR LUCRATIVE RETURN ONE CAN INVEST IN DIVERSIFIED MUTUAL FUNDS DEBENTURES OF COMPANIES PROPERTY ETC. SALE OF PROPERTY BY MRS. ANJALI SARDANA AND MRS. MONICA SARDANA DURING THE FINANCIAL YEAR 2012-13 WHICH GAVE THEM MORE THAN 30% RETURN PER ANNUM AFTER ANSWERING THEIR INCOME TAX LIABILITY SAYS IT ALL (PAGE 36 & 37 OF PAPER BOOK V) 9. THUS FROM THE ABOVE FACTS HIGHLIGHTING THE REQUIREMENT OF FUN DS WHICH HAD TO BE PROVIDED TO THE SOCIETY FROM THE SOURCES OF THE MEMBERS/ RELATED PERSONS AS NO OUTSIDER WAS WILLING TO LEND THE FUNDS TO THE SOCIETY AND TH E SOURCE FROM THE BANK HAD ALREADY BEEN EXHAUSTED AND THUS IT WAS LEFT TO THE MEMBER S OF THE SOCIETY ONLY TO PROVIDE THE FUNDS AT A VERY REASONABLE RATE OF INTEREST WHICH WAS LOWER THAN THE RATE OF INTEREST OF THE BANK WHICH IS TO BE TUNE OF 13%. ALL THESE FUNDS WERE REQUIRED AS ALREADY STATED FOR ACHIEVING THE AIMS AND OBJECTS OF THE SOCIETY FOR WHICH THE SOCIETY HAD BEEN FORMED AND HAD THESE FUNDS NOT BEEN MADE AVAILABLE THE VERY P URPOSE OF FORMATION AND WORKING OF SOCIETY WOULD HAVE BEEN DEFEATED. 10. LAST BUT NOT THE LEAST THE TREMENDOUS PROGRESS MADE BY THE SCHOOLS BEING MANAGED BY THE S OCIETY SPEAKS VOLUMES OF THE DEDICATION WITH WHICH THE TWO DIRECTORS AND OTHER RELATED PERSONS HAVE BEEN WORKI NG BY INTRODUCING SMART LEARNING CONCEPT FOR THE FIRST TIME IN THE REGION BY WINNING TRUST OF THE PARENTS IN ABUNDANCE BY TAKING THE STRENGTH OF THE SCHOOLS CLOSE TO TEN THO USAND BY OFFERING HANDSOME SALARIES AND DECENT RETIREMENT BENEFITS TO ALMOST 400 EMPLOYEES THEY HAVE NOT ONLY MADE MANAV MANGAL A HIGHLY RESPECTABLE NAME BUT HAVE ALSO WON RECOGNITION FOR THEIR PERFORMANCE IN THE FIELD OF EDUCATION (PAGES 43 TO 73 OF PAPER BOOK I)' 20.2 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE DELETED THE DISALLOWANCE MADE BY THE A.O. BY OBSERVING IN P ARA 5.2.11 OF THE IMPUGNED ORDER AS UNDER: 5.2.11. THE NEXT ISSUE IS THE PAYMENT OF INTEREST ON UNSECURED LOANS AVAILED BY THE SOCIETY FROM ITS MEMBERS/ THEIR RELATIVES THE A PPELLANT HAS AVAILED UNSECURED LOANS FROM THE MEMBERS/ THEIR RELATIVES AND IS PAYI NG INTEREST @ 12%. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO QUESTIONED THE REASONABLENESS OF THE PAYMENT OF INTEREST AND IN RESPONSE TO THE SAME TH E APPELLANT DULY SUBMITTED THAT THE PREVAILING RATE OF INTEREST ON BANK LOANS (WHICH ARE SECURED) WAS 13% AND EVEN MORE DURING THE YEAR UNDER CONSIDERATION. THE APPELLANT SOCIETY CONSIDERED IT WISE AND REASONABLE TO AVAIL UNSECURE D LOANS FROM THE MEMBERS/ RELATIVES AS THE FUNDS WERE REQUIRED FOR EVER INCRE ASING INFRASTRUCTURE NEEDS OF THE SCHOOLS RUN BY THE SOCIETY AND THE BANKS IMPOSE A L OT OF LIMITATIONS AND CONDITIONS TO GRANT EVEN SECURED LOANS. THE PERSONS COVERED U/S 13(3) OF THE ACT CAME FORWARD TO PROVIDE LOANS TO MEET THE FUNDING N EEDS OF THE SOCIETY. IT IS A WELL KNOWN FACT THAT THE INTEREST RATE PREVAILING O N UNSECURED LOANS ARE GENERALLY HIGHER THAN THE SECURED LOANS AS THE RISK OF LOSS O F CAPITAL IN THIS CASE IS HIGHER ALL THE SAID ARGUMENTS AND CONTENTIONS OF THE APPELLANT WERE IGNORED BY THE AO AND HE DISALLOWED THE ENTIRE PAYMENT OF INTEREST ON THE PRESUMPTION THAT THE MEMBERS OF THE SOCIETY ITSELF TO GAIN INTEREST INCO ME AND HE ACCORDINGLY INVOKED THE PROVISIONS OF SECTION 13(1}(C) OF THE ACT. DURI NG THE COURSE OF APPELLATE 65 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) PROCEEDINGS THE LD. AR FOR THE APPELLANT REITERATE D THE SUBMISSIONS AS MADE BEFORE THE AO. THE APPELLANT HAS FURTHER SUBMITTED T HAT THE AO HAS WRONGLY ALLEGED THAT ROTATION OF THE FUNDS RECEIVED BY THE MEMBERS FROM THE SOCIETY IN THE FORM OF SALARY ETC. IS BEING DONE AS UNSECURED LOANS TO EARN INTEREST INCOME WHEREAS THE FACT OF THE MATTER IS THAT THESE PARTIE S HAVE MADE ADVANCES OF THEIR OWN FUNDS TO THE SOCIETY FOR THE PURPOSE OF THE NEE DS OF THE SOCIETY. IT IS A FACT ON RECORD THAT TWO HOUSES OF SHH SANJAY SARDANA AND SH RI SANDEEP SARDANA (BOTH DIRECTORS) HAVE IN FACT BEEN GIVEN AS COLLATERAL SE CURITY WITH THE KARNATAKA BANK FOR THE PURPOSE OF RAISING LOANS FOR THE SOCIETY. T HUS THE DIRECTORS HAVE EVEN RISKED THEIR PERSONAL ASSETS TO ADDRESS THE NEEDS O F THE SOCIETY. IT IS ALSO TO BE SEEN THAT THESE PEOPLE COULD HAVE EASILY FETCHED SIMILAR OR HIGHER RETURNS EXCEEDING 12% IF THEY WOULD HAVE DEPLOYED THEIR FUNDS ELSEWHE RE. THE LD. AR OF THE APPELLANT HAS ALSO BROUGHT MY ATTENTION TO THE CHAR T FORMING PART OF THE PAPER BOOK WHEREIN THE SOURCES OF FUNDS OF THE MEMBERS OT HER THAN THE SALARY INTEREST AND RENT DRAWN FROM THE SOCIETY ARE TABULATED AND E XPLAINED DURING ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS. AO HAS ACCEPTED THESE EXPLANATIONS AS NO ADVERSE INFERENCE HAS BEEN DRAWN ON THE SOURCE OF SUCH FUNDS OF THE CHAIRMAN/MEMBER RELATIVES. FURTHER TH E REQUIREMENT OF THE FUNDS AND THEIR UTILIZATION BY THE APPELLANT SOCIETY HAS ALSO BEEN EXPLAINED BY WAY OF A SEPARATE CHART FORMING PA R T OF THE PAPER BOOK [REFER PARA 5.1 SUPRA]. IT IS EVIDENT FROM THE CHART THAT THE UNSECURED LOANS HAVE BEEN G IVEN TO THE SOCIETY FOR IT TO MEET ITS OBJECTIVES AND THAT TOO ON TERMS THAT ARE FAVOURABLE TO THE SOCIETY. IN VIEW OF THESE FACTS AND CIRCUMSTANCES STATED ABOVE AND THE PREVAILING MARKET CONDITIONS IT IS MY CONSIDERED OPINION THAT THE PA YMENT OF INTEREST @ 12% ON UNSECURED LOANS BY THE APPELLANT IS VERY MUCH REASO NABLE. THIS RATE IS IN FACT BELOW THE PREVAILING MARKET RATE OF INTEREST HENCE NO DISALLOWANCE IS CALLED FOR ON THIS ISSUE. IT IS ALSO FOUND THAT THE SOCIETY HA S PURCHASED TWO MERCEDES BENZ CARS IN ITS OWN NAME IN THE MONTH OF AUGUST 2016. NO EVIDENCE HAS BEEN BROUGHT ON RECORD THAT THESE CARS ARE USED FOR PERS ONA* PURPOSE OF THE DIRECTORS MERE ABSENCE OF LOG BOOK CANNOT ESTABLISH THAT THES E ARE USED FOR OTHER THAN SOCIETY'S PURPOSES. 21. NOW THE DEPARTMENT IS IN APPEAL. 22. THE LD. CIT-DR REITERATED THE OBSERVATIONS MADE BY THE A.O. AND STRONGLY SUPPORTED THE ASSESSMENT ORDER DT. 23/02/2016. IT W AS FURTHER SUBMITTED THAT THE SUFFICIENT CASH WAS AVAILABLE WITH THE ASSESSEE THE N WHY THE LIABILITY OUTSTANDING WAS NOT DISCHARGED ON WHICH INTEREST WAS PAID. IT W AS STATED THAT HAD THE ASSESSEE REPAID THE LOANS RECEIVED FROM THE SPECIFI ED PERSONS THERE WAS NO NEED TO PAY THE INTEREST BUT THE ASSESSEE DID NOT E XERCISE THE SAID OPTION THEREFORE THE A.O. RIGHTLY MADE THE DISALLOWANCE. 23. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR T HE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND F URTHER SUBMITTED THAT THE 66 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) SPECIFIED PERSONS OUT OF THEIR OWN FUNDS HAD ADVANC ED CERTAIN FUNDS TO THE ASSESSEE SOCIETY AT THE RATE OF 12% PER ANNUM AS AG AINST THE INTEREST OF 13% PER ANNUM CHARGED BY THE DIFFERENT BANKS FOR WHICH NECE SSARY EVIDENCES WERE FURNISHED WHICH ARE PLACED AT PAVE NOS. 110 TO 113 OF THE ASSESSEES PAPER BOOK. IT WAS FURTHER STATED THAT THE BANK IMPOSES L OT OF LIMITATIONS AND CONDITIONS FOR GRANTING SECURED LOANS AND IN THE PRESENT CASE THE SPECIFIED PERSONS HAD NOT INSISTED THAT ANY SECURITY AND ALL THE INTEREST WAS BEING PAID THROUGH NORMAL BANKING CHANNEL ON WHICH TDS HAD BEEN DEDUCTED AND THE RECIPIENT HAD DISCLOSED THE SAME IN THEIR RESPECTIVE RETURNS OF I NCOME. IT WAS STATED THAT THERE WAS NO ROTATION OF FUNDS RECEIVED BY THE MEMBERS OF THE SOCIETY IN THE FORM OF SALARY BUT SUCH FUNDS HAD BEEN ADVANCED FOR THE REA SON THAT THE SOCIETY NEEDS FUNDS TO ACHIEVE ITS OBJECTS OF EDUCATION AND EVEN SARVSHRI SANJAY SARDANA AND SANDEEP SARDANA HAD MORTGAGED THEIR PROPERTIES TO T HE BANK FOR RAISING LOAN. REFERENCE WAS MADE TO PAGE NOS. 110 TO 113 OF THE A SSESSEES PAPER BOOK. IT WAS STATED THAT THE LD. CIT(A) HAD VERY RIGHTLY HOL D THAT IF THE FUNDS WERE PAYABLE BY THE SPECIFIED PERSONS TO SOME OTHER ENTI TY THEY COULD HAVE EARNED MORE INTEREST. THEREFORE THE ARBITRARY DISALLOWANC E MADE BY THE A.O. WAS RIGHTLY DELETED BY THE LD. CIT(A). 24. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT APPEARS THAT THE ASSESSEE SOCIETY REQUIRED THE FUNDS TO EXPAND ITS ACTIVITIES AND RAISED THE LOANS FROM THE BANKS AS WELL AS FROM ITS MEMBERS AND THE SPECIFIED PERSONS. THE A.O. INVOKED THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT AND M ADE THE DISALLOWANCE. HOWEVER HE IGNORED THIS VITAL FACT THAT THE RATE O F INTEREST AT 12% WAS LESS THAN THE PREVAILING MARKET RATE OF INTEREST WHICH WAS 13 % FROM THE BANK. THE SAID FACT IS EVIDENT FROM PAGE NOS. 110 OF THE ASSESSEES PAP ER BOOK WHICH IS A COPY OF CREDIT SANCTION INTIMATION GIVEN BY KARNATAKA BANK LTD. WHEREIN IT HAS BEEN MENTIONED THAT OVERDRAFT FACILITY WITH EXCESSIVE LI MIT OF RS. 2.00 CRORES WERE RENEWED AND THE RATE OF INTEREST WAS 14% AT MONTHLY RATE FOR A PERIOD OF 18 67 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) MONTHS I.E. UP TO 30/06/2013. THE SAID RATE OF INTE REST WAS FURTHER REDUCED TO 13% VIDE LETTER DATED 16/04/2012 COPY OF WHICH IS PLAC ED AT PAGE NO. 112 OF THE ASSESSEES COMPILATION. THE SAID RATE OF INTEREST W AS FURTHER REDUCED TO 12.5% PER ANNUM I.E. CONCESSIONAL INTEREST RATE VIDE LETTER D ATED 16/6/2012. COPY OF WHICH IS PLACED AT PAGE NO. 113 OF THE ASSESSSEES PAPER BOOK. THEREFORE IT IS CLEAR THAT THE ASSESSEE WAS PAYING INTEREST AT A HIGHER R ATE THAN THE INTEREST PAID TO THE SPECIFIED PERSONS AND MEMBERS OF THE ASSESSEE S OCIETY. IN OTHER WORDS THE INTEREST PAID BY THE ASSESSEE SOCIETY TO ITS MEMBER S AND SPECIFIED PERSONS WAS NOT EXCESSIVE THEREFORE THE DISALLOWANCE MADE U/S 13(1)(C) OF THE ACT WAS NOT JUSTIFIED AND THE LD. CIT(A) RIGHTLY DELETED THE SA ME. WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CI T(A) ON THIS ISSUE. 25. ANOTHER ISSUE AGITATED BY THE DEPARTMENT VIDE G ROUND NO. (X) RELATES TO EXEMPTION U/S 11 OF THE ACT FOR THE REASON THAT THE ASSESSEE SOCIETY WAS EARNING HIGH PROFIT YEAR AFTER YEARS WHICH WAS DISCUSSED BY THE LD. CIT(A) IN PARA 13.2.9 TO 13.2.16 OF THE IMPUGNED ORDER FOR THE A.Y. 2014- 15 WHICH READ AS UNDER: 13.2.9. AO FURTHER RAISED THE QUESTION I.E. WHETHER THE ACTIVITIES CARRIED OU T BY ASSESSEE INVOLVES CARRYING ON ANY ACTIVITY IN NATUR E OF TRADE. BUSINESS OR COMMERCE OR RENDERING SERVICES IN RELATION TO THE S AME AS DEFINED IN SECTION 2(15) 'BUSINESS INCLUDES ANY TRADE COMMERCE OR MANUFACTU RE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE COMMERCE OR MANUFACTURE.'] ON THE PERUSAL OF ACTIVITIES OF APPELLANT AO HAS GIVEN THE FINDINGS TH E ACTIVITIES OF THE SOCIETY ARE FOR PROFIT MOTIVE. REVENUE INCOME FROM VARIOUS RECE IPTS IS ONLY BASIS OF MOTIVE TO MAXIMIZE THE PROFITS/SURPLUS THESE ACTIVITIES ARE F OR MAKING HUGE PROFIT SATISFIES ALL THE FEATURES OF 'BUSINESS' I.E. IT INVOLVES RECIPROCAL ACTIVITY BETWEEN TWO PARTIES LARGE NUMBER OF RECURRING TRANSACTIONS CONSIDERATION AND PROFIT MOTIVE. IN A VIEW OF THE ABOVE IT IS SEEN THAT THE ASSESSEE HAS RECE IPTS ARISING OUT OF ACTIVITY IN THE NATURE OF BUSINESS OR COMMERCE AND ACCORDINGLY SECT ION 11 (4A) IS APPLICABLE IN THIS CASE. WHEN THERE IS NO BUSINESS ACTIVITY OTHER THAN IMPARTING EDUCATION BY WAY OF RUNNING FOUR SCHOOLS THEN THERE IS NO QUESTION OF INVOKING SECTION 11 (4A) OF THE ACT AND TO MAINTAIN SEPARATE BOOKS OF ACCOUNTS PERTAINING TO INCOME FROM THE SO CALLED BUSINES S. AO HAS NO WHERE POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS OF THE APPELLANT NOR DID HE REJECT THE BOOKS OF ACCOUNTS OF THE APPELLANT. INVOKING PROVISIONS OF PROVISO TO SECTION 2(15) IS A FARFETCHED ASSUMPTION OF THE AO. IMPARTING EDUCATION IS ITSELF A CHARITABLE ACTIVITY U/S 2(15) OF THE ACT. AO HAS TO ESTABLISH ITS PREMISE ON SOLI D INCRIMINATING EVIDENCE THAT APPELLANT IS INDULGED IN COMMERCIAL ACTIVITIES. SO FAR AS THE INVESTMENT IN FIXED ASSETS IS CONCERNED ON CAREFUL PERUSAL OF RECORD A ND FINANCIAL STATEMENTS IT IS OBSERVED THAT SUCH ASSETS ARE BROUGHT INTO EXISTENC E IN ORDER TO EXPAND THE 68 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) EDUCATION FACILITIES IN THE TRICITY. IT HAS FURTHER BEEN BROUGHT TO MY NOTICE BY THE AR THAT THE PRACTICE OF ALLOTMENT OF SCHOOL LAND IN CHANDIGARH PUNJAB AND HARYANA AT CONCESSIONAL RATES HAS BEEN STEPPED SINC E LONG. ST IS NOW AUCTIONED AT MUCH HIGHER PRICE THAN THE ONE PAID BY MANAV MAN GAL SOCIETY ALL SUCH INVESTMENTS ARE IN THE NAME OF SOCIETY AND SUCH ASS ETS HAVE BEEN USED FOR IMPARTING QUALITY EDUCATION WHICH IS THE ONLY OBJE CT OF THE SOCIETY. HE HAS FURTHER SUBMITTED THAT NO EVIDENCE WHATSOEVER HAS BEEN FO UND DURING THE COURSE OF SURVEY THAT THERE IS SIPHONING OF FUNDS TOWARDS THE PERSONAL HEAD OF THE CHAIRMAN AND OTHER DIRECTORS/ CONNECTED PERSONS OF THE SOCIE TY. ST IS TRITE- LAW THAT THE AO CANNOT SUGGEST THAT BY NOT INVESTING HUGE MONEY IN THESE PROJECTS BY THE SOCIETY THIS MONEY CAN BE INVESTED IN SOME CHARITA BLE PURPOSE OR RELAXATION IN FEES STRUCTURE OF THE STUDENTS. LD. AR HAS ALSO RIGHTLY SUBMITTED THAT AO AT NO STAGE CAN STEP INTO THE SHOES OF THE MANAGEMENT OF THE SOCIETY/ BOARD OF DIRECTORS OF THE SOCIETY AND CANNOT DICTATE HIS TER MS OF WHAT TO DO AND IN WHAT WAY AS IS PRONOUNCED BY THE HON'BLE DELHI HIGH COUR T IN THE CASE OF CIT VS. DALMIA CEMENTS (264 ITR 377) DELHI HIGH COURT. IT I S MY CONSIDERED OPINION THAT THE INVESTMENT IN LAND IS A BONAFIDE CAPITAL EXPEND ITURE TOWARDS FULFILLING THE OBJECT(S) OF THE APPELLANT SOCIETY TO MAKE TECH-SMA RT QUALITY EDUCATION AVAILABLE TO MORE AND MORE ASPIRANTS IT IS OBSERVE D THAT AGREEMENT WITH M/S DLF UNIVERSAL LIMITED WAS ENTERED INTO BY THE MANAV MAN GAL SOCIETY TO BUY A 5 ACRE SCHOOL SITE IN NEW CHANDIGARH. THE SAID LAND BEING PURCHASED FROM M/S DLF UNIVERSAL LIMITED IS APPROVED ONLY AS A SCHOOL SITE BY GMADA AND CANNOT BE USED FOR ANY OTHER PURPOSE. APPELLANT HAS SUBMITTED THAT THE COMPLETE PAYMENT IS TO BE PAID IN INSTALLMENTS AND SOME INSTALLMENTS ARE STILL PENDING AS ON DATE. MANAV MANGAL SOCIETY WILL BE GETTING THE POSSESSION OF SCHOOL SITE AS SOON AS THE PAYMENTS ARE COMPLETED. THEREAFTER THE SCHOOL BUIL DING WILL COME UP. SIMILAR PROCESS WAS FOLLOWED WHEN THE SCHOOL SITE WAS BOUGH T BY THE SOCIETY FROM SHIPRA ESTATE LTD IN ZIRAKPUR. THE SCHOOL IN SHIPRA ESTATE ZIRAKPUR IS OPERATIONAL NOW AND IS IN ITS FOURTH YEAR OF WORKING. ABOUT 2300 STUDEN TS ARE BEING IMPARTED QUALITY EDUCATION IN THIS REGION'S FIRST TECHSMART GREEN SC HOOL. LD. AR HAS PROVIDED LIST OF CONCESSION HOLDERS FOR THE FINANCIAL YEAR 2013-14 A T CHANDIGARH SCHOOL-33 STUDENTS PANCHKULA SCHOOL-49 STUDENTS AND EVENING SCHOOL HAVING 188 STUDENTS PLACED AT PAGE NO 14 TO 17 OF THE PAPER BOOK. AO HAS NOT REBUTTED THESE FACTS. 13.2.10. IT IS NOT THE CASE OF THE AO THAT SIGNIFICA NT SURPLUS FUNDS ARE PARKED IN THE FDRS. FACTS DO NOT GIVE CREDENCE TO THIS PREMISE. IN AY 2011-12 THE FACTS ABOUT FDRS IS AS FOLLOWS: FDR (CHANDIGARH SCHOOL)- RS.4.5/- LAKH. FDR (PANCHKUIA SCHOOL)-RS.5.72/- LAKH AND FDR (MOHALI SCHOOL)-RS. 1.32/- LAKH ONLY IN THE AY 2013-14 FDR (CHANDIGARH SCHOOL)-RS.45 000/- FDR S OCIETY-RS.4.75 CRORE. IN ASSESSMENT YEAR 2014-15 THERE IS NO FDR. !N AY 201 5-16 & 2016-17 FDR (MOHALI SCHOOL)-RS.5.21/- LAKH FDR (PANCHKULA SCHOOL)-RS. 7.55/- LAKH AND FDR (CHANDIGARH SCHOOL)- RS.6.44 LAKH. NO ADVERSE INFER ENCE CAN BE DRAWN FROM THESE FACTS. 13.2.11. IN THE YEAR UNDER CONSIDERATION ON PERUSA L OF ASSESSMENT RECORD IT EMANATES THAT LD. AO ISSUED SHOW-CAUSE TO THE ASSESSEE VIDE LETTER DATED 29.01.2016 WITHOUT ANY SPECIFIC D EFECTS IN THE BOOKS OR ANY EVIDENCE CULLED OUT FROM THE SURVEY PROCEEDI NGS OR SUBMISSIONS MADE BY THE ASSESSES DURING ASSESSMENT PROCEEDINGS. THIS SHOW-CAUSE IS M ECHANICS! IN NATURE. IT IS FOUND THAT ALL THE RELEVANT MATERIAL HAS BEEN PRODUCED BY THE ASSESSEE IN DETAIL ON ALL THE QUERIES RAISED BY THE AO. FURTHER IN THE AY 2014-15 IT COMES TO FORE THAT IN THE SHOW-CAUSE ISSUED ON 22.1 2.2016 WHEREIN AO HAS ALLEGED HUGE PAYMENTS MADE UNDER THE HEAD SALARY R ENT AND INTEREST ARE 69 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) BASED ON THE PERCENTAGE ANALYSIS OF BALANCE SHEET F IGURES OF DIFFERENT ASSESSMENT YEARS HE HAS FAILED TO POINT OUT WHY AND HOW SUCH PAYMENTS ARE NOT REASONABLE. SIMILAR IS THE CASE OF VIOLATION OF PRO VISIONS OF SECTION 11(1) R . W .S 2(15) OF THE ACT MEANING THEREBY THAT ALLEGED VIOLATIONS OF SECTION 11(1) R .W. S 2(15) ARE NOT SUBSTANTIATED WITH ANY ADVERSE EVIDENCE. 13.2.12. AS PER SECTION 2(15) OF THE ACT 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR EDUCATION MEDICAL RELIEF [PRESERVATION OF ENVIRONMENT (INC LUDING WATERSHEDS FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST ] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA! PUBLIC UTILITY; PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINESS OR ANY ACTIV ITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY: PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS [TWENTY-FIVE LAKH RUPEES] OR LESS IN THE PREVIOUS YEAR. IT IS TRITE LAW THAT THE MAIN INTENT OF A 'CHARITABLE ORGANISATION' IS THE SUSTENANCE OF ITS M AIN OBJECT OR CHARITABLE PURPOSE' AS IS DEFINED UNDER SECTION 2(15; OF THE ACT AND ANY EXPENSE/EXPENDITURE PERTAINING TO ITS MAIN OBJECT AND FURTHERANCE THEREOF IS PART AND PARCEL OF THE NON-PROFIT ACTIVITY FOR THIS THE ACT PROVIDES A FAVORABLE TAX TREATMENT BY WAY OF PROVISIONS CONTAINED IN SECTION 11 TO SECTION 13 WHICH PROVIDE FOR A TAX EXEMPTION TO SUCH ENTITIES HAVING THEIR MAIN OBJECT AS ANY ACTIVITY WHICH FALLS UNDER THE DEFINITION OF 'CHARITABLE PURPOSE' IF AN ENTITY WHICH HAS BEEN GRANTED AN EXEMPTION ABUSES THE EXEMPTION FOR PRIVATE BENEFIT OF ITS TRUSTEES MANAGERS DIRECTORS BENEFICIARIES OR REL ATED PERSONS SECTION 13 PROVIDES FOR AN ANTI-ABUSE MECHANISM. THE SECTION INCLUDES A MECHANISM TO ALLOW THE AUTHORITIES TO WITHDRAW AND IN SOME CASES CANCEL THE EXEMPTION IN THE EVENT OF ABUSE. 13.2.13. IT IS FURTHER RIGHTLY SUBMITTED BY THE APP ELLANT THAT THE REAL CAUSE OF SCHOOLS' GROWTH RANGING FROM 8 % TO 43 % DURING THE AY 2008-09 TO AY 2016-17 IS NOT BEING RUN ON COMMERCIAL GROUNDS. THE FACT IS TH AT 'MOHALI SCHOOL FACTUALLY STARTED FROM FINANCIAL YEAR 2007-08 (AY-2008-09). B EING A REPUTED NAME AND THE FIRST 'TECH-SMART SCHOOL OF THE REGION' IT PROVED TO BE A GREAT ATTRACTION FOR THE PARENTS. WITH THE RESULT THAT THERE WAS A SUBSTANTI AL INCREASE IN THE NUMBER OF STUDENTS FOR FY- 2007-08. WITH THIS SUBSTANTIAL GRO WTH OF STUDENTS CAME THE SUBSTANTIAL INCREASE OF RECEIPTS. THE GROWTH IS NOT BECAUSE OF ANY COMMERCIAL ACTIVITY AS ALLEGED BY AO BUT ON ACCOUNT OF POPULA RITY OF THE SCHOOLS IN THE AREAS WHERE THEY ARE LOCATED AND CONFIDENCE OF THE PARENTS IN GETTING THE ADMISSIONS OF THEIR WARDS AT A VERY REASONABLE FEE. THE INCREASE IN RECEIPTS OF THE SCHOOLS FEES IS ON ACCOUNT OF HIGHER INTAKE OF STUD ENTS AND A NORMAL ANNUAL INCREASE IN FEES. THE APPELLANT HAS FURTHER RIGHTLY ARGUED THAT THE ONLY EXCEPTION IS FOR CHANDIGARH & PANCHKULA BRANCHES FOR AY 2012-13 AND AY 2014-15. DURING AY 2012-13 EACH & EVERY CLASSROOM WAS CONVERTED INTO SMART CLASS BY PROVIDING IT WITH INTERACTIVE BOARD PROJECTOR AND COMPUTER TO I NTRODUCE SMART EDUCATION IN CHANDIGARH & PANCHKULA BRANCHES EXACTLY ON LINES OF MANAV MANGAL SMART SCHOOL MOHALI ON REQUEST OF PARENTS. THE PARENTS W ERE GIVEN OPTION TO PAY RS.950/- PER MONTH FOR A CONVENTIONAL CLASSROOM AND RS.1200/- FOR SMART CLASSES THE PARENTS EVENTUALLY DECIDED TO GO FOR SMART CLAS SES OVER A PERIOD OF 2 MONTHS IT IS OBSERVED THAT STUDENTS AND STAFF STRENGTHEN D UE TO IMPARTING QUALITY 70 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) EDUCATION BY THE SOCIETY SCHOOLS HAS INCREASED SUBS TANTIALLY OVER THE LAST TEN YEARS AS GIVEN IN THE TABLE BELOW. THIS HAS SUBSTAN TIALLY INCREASED THE RECEIPTS. STUDENT AND STAFF STRENGTH (ASSESSMENT YEAR 2007-08 TO 2018-19) S.NO. ASSESMENT YEAR NO. OF SCHOOLS TOTAL STRENGTH TOTAL STAFF (EXCLUDING OUTSOURCED STAFF) 1 2007-08 2 4446 157 2 2008-09 3 5624 209 3 2009-10 3 6102 236 4 2010-11 3 6615 270 5 2011-12 3 7234 290 6 2012-13 3 7690 313 7 2013-14 3 7839 320 8 2014-15 3 7906 328 9 2015-16 3 7925 331 10 2016-17 3 7983 335 11 2017-18 4 8861 398 12 2018-19 4 9475 421 13.2.14. IT IS UNDISPUTED FACTS THAT SINCE THE YEAR OF SOCIETY'S ESTABLISHMENT I.E. 1968 SOCIETY SCHOOLS GROWTH HAD RISEN FROM LESS TH AN 100 STUDENTS TO MORE THAN 9400 DURING AY 2018-19 WHICH SHOWS THAT A LOT OF DE DICATION HAS GONE INTO MAKING IT WHAT IT IS TODAY. THE SUBSTANTIAL GROWTH OF THE SOCIETY SCHOOLS HOLDS TESTIMONY TO THE FACT THAT EVERY BIT OF ITS SURPLUS HAS BEEN PLOUGHED BACK TO MAKE IT BETTER AND BIGGER INSTITUTION WITH EVERY PA SSING DAY. THE TABLE AT PARA 13.2.13 SUPRA PLACED AT PAGE NO. 83 OF PAPER BOOK-X EMPHATICALLY ESTABLISHES THE FACT THAT THE SOCIETY IS MEETING ITS AIMS AND O BJECTIVES OF GIVING QUALITY EDUCATION TO STUDENTS OF THE TRICITY. DURING AY 200 7-08 MANAV MANGAL SOCIETY WAS MANAGING TWO SCHOOLS AND HAVING THE STRENGTH OF 4446 AND A STAFF OF 157. DURING AY 2008-09 IT CAME UP WITH REGIONS FIRST TEC HSMART SCHOOL IN MOHALI AND GRADUALLY THE SOCIETY COULD OFFER SERVICES TO 7983 STUDENTS AND HAD STAFF STRENGTH OF 335 DURING AY 2016-17. IN AY 2017-18 THE SOCIET Y CAME UP WITH YET ANOTHER INITIATIVE BY COMING UP WITH REGION'S FIRST GREEN S CHOOL IN ZIRAKPUR AND DURING AY 2018-19 THE SOCIETY HAD 4 BRANCHES WITH 9475 STUDEN TS AND 421 STAFF MEMBERS. IN OTHER WORDS IN JUST 12 YEARS THE NUMBER OF STUDENT S HAS MORE THAN DOUBIED AND SAME IS TRUE FOR THE STAFF MEMBERS WHO HAVE BEEN EM PLOYED IN THE 4 BRANCHES OF THE SCHOOL THAT HAS UNDISPUTEDLY INCREASED THE RECE IPTS OF THE SOCIETY. MANAV MANGAL SOCIETY HAS YEAR AFTER YEAR PLOUGHED BACK T HE ENTIRE SURPLUS AS IS PRESENTED AT PARA 13 2.8 SUPRA AND PLACED AT PAGES 84 TO 91 OF PAPER BOOK-X. IT IS PERTINENT TO MENTION HERE THAT THE INVESTMENT OF SU RPLUS IN CAPITAL TO ACHIEVE THE AIMS AND OBJECTIVES OF THE SOCIETY HAVE ALREADY FOU ND FAVOUR OF CIT(A) HON'BLE ITAT CHANDIGARH HON'BLE HIGH COURT AND HON'BLE SU PREME COURT IN THE CASE OF THE ASSESSEE DURING AY 2003-04 . THE SAME ISSUE CAME UP DURING AY 2006-07 AND THAT TOO WAS IN FAVOUR OF THE ASSESSEE BEFORE C!T ( A) AND HON'BLE ITAT. IT IS SUBMITTED BY THE LD.AR THAT THE DEPARTMENT DID NOT CARRY THE MATTER FURTHER FOR THIS ASSESSMENT YEAR SINCE THE HON'BLE HIGH COURT AND HON'BLE SUPREME COURT HAD ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE FOR AY 2003-04. 71 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 13.2.15. LAST BUT NOT THE LEAST THE OBSERVATIONS O F THE AO IN THE LIGHT OF VARIOUS CASE LAWS LIKE THAT THERE SHOULD BE REASONABLE SURP LUS FROM THE EDUCATIONAL ACTIVITY TO QUALIFY THAT IT IS EXISTING SOLELY FOR EDUCATION PURPOSE IN THE LIGHT OF THE HON'BLE SUPREME COURT IN THE CASE OF QUEEN'S EDUCAT IONAL SOCIETY AND OTHERS ARE MISPLACED IT IS OBSERVED THAT THE JUDGEMENT OF HON'BLE APEX COURT IN THE CASE OF QUEEN'S EDUCATIONAL SOCIETY TAKES INTO CONS IDERATION ALL THE JUDGEMENTS REFERRED ON THIS ISSUE AND HAVE BEEN ANALYSED AND A FTER DISCUSSING ALL THE JUDGEMENTS THE HON'BLE SUPREME COURT HAS HELD IN T HE ABOVE CASE OF QUEEN'S EDUCATIONAL SOCIETY THAT THE LAW COMMON TO SECTION 10(23C)(IIIAD) AND (VI) MAY BE SUMMONED UP AS FOLLOWS (I) WHERE AN EDUCATIONAL INSTITUTION CARRIES ON THE ACT IVITY OF EDUCATION PRIMARILY FOR EDUCATING PERSONS THE FACT THAT IT M AKES A SURPLUS DOES NOT LEAD TO THE CONCLUSION THAT IT CEASES TO EXIST SOLELY FOR EDUCATIONAL PURPOSES AND BECOMES AN INSTITUTION FOR THE PURPOSE OF MAKING PROFIT (II) THAT THE PREDOMINANT OBJECT TEST MUST BE APPLI ED I.E. THE PURPOSE OF EDUCATION SHOULD NOT BE SUBMERGED BY A PROFIT MAKING MOTIVE (III) THAT A DISTINCTION MUST BE DRAWN BETW EEN THE MAKING OF A SURPLUS AND AN INSTITUTION BEING CANIED ON 'FOR PROFIT' NO INFE RENCE ARISES THAT MERELY BECAUSE IMPARTING EDUCATION RESULTS IN MAKING A PROFIT IT BECOMES AN ACTIVITY FOR PROFIT (IV) THAT IF AFTER MEETING EXPENDITURE A SURPLUS ARISES INCIDENTALLY FROM THE ACTIVITY CARRIED ON BY THE EDUCATIONAL INSTITUTION IT WILL NOT CEASED TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES. WHILE DELIVERING T HE ABOVE JUDGEMENT THE VARIOUS JUDGEMENTS HAVE BEEN ANALYSED BY THE HON'BL E SUPREME COURT LIKE (A) CIT V. SURAT ART SILK CLOTH MANUFACTURERS' ASSN. (1 980) 121 ITR 1 WHEREIN THE APEX COURT WHILE CONSTRUING THE DEFINITION OF 'CHARITABL E PURPOSE 1 IN SECTION 2(15) OF THE INCOME TAX ACT HAS HELD: 'BUT WHERE THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO CARRY OUT THE CHARITABLE PURPOSE AND NOT TO EARN PR OFIT IT WOULD NOT LOSE ITS CHARACTER OF A CHARITABLE PURPOSE MERELY BECAUSE SOME PROFIT ARISES FROM THE ACTIVITY... (B) ADITANAR EDUCATIONAL INSTITUTION V. ADDITIONAL COMMISSIONER OF INCOME TAX (1977) 224 ITR 310 THE APEX COURT WHIL E CONSTRUING THE PREDECESSOR SECTION NAMELY SECTION 10(22) OF THE INCOME TAX A CT HELD THAT AFTER MEETING THE EXPENDITURE IF ANY SURPLUS RESULTS INCIDENTALL Y FROM THE ACTIVITY LAWFULLY CARRIED ON BY THE EDUCATIONAL INSTITUTION IT WILL NOT CEAS E TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES SINCE THE OBJECT IS NOT ONE TO MAKE PROFIT. THE DECISIVE OR ACID TEST IS WHETHER ON AN OVERALL VIEW OF THE MATT ER THE OBJECT IS TO MAKE PROFIT (C) AMERICAN HOTEL & LODGING ASSN. EDUCATIONAL INST ITUTE V. CBDT (2008) 301 ITR 86 THE APEX COURT DEALT WITH SECTION 10(23C)(VI) A ND HAS HELD THAT THE PURPOSE WOULD NOT LOSE ITS CHARACTER MERELY BECAUSE SOME PR OFIT ARISES FROM THE ACTIVITY THAT IT IS NOT POSSIBLE TO CARRY ON EDUCATIONAL AC TIVITY IN SUCH A WAY THAT THE EXPENDITURE EXACTLY BALANCES THE INCOME AND THERE I S NO RESULTANT PROFIT FOR TO ACHIEVE THIS WOULD NOT ONLY BE DIFFICULT OF PRACTI CAL REALIZATION BUT WOULD REFLECT UNSOUND PRINCIPLES OF MANAGEMENT IN ORDER TO ASCER TAIN WHETHER THE INSTITUTE IS CARRIED ON WITH THE OBJECT OF MAKING PROFIT OR NOT IT IS THE DUTY OF THE PRESCRIBED AUTHORITY TO ASCERTAIN WHETHER THE BALANCE OF INCOM E IS APPLIED WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH THE APPLICANT IS ESTABLISHED. IF AFTER MEETING EXPENDITURE SURPLUS REMAINS INCIDENTALLY FROM THE ACTIVITY CARRIED OR. BY THE EDUCATIONAL INSTITUTION IT WILL NOT CEASE TO BE ON E EXISTING SOLELY FOR EDUCATIONAL PURPOSES. THE HON'BLE APEX COURT IN THE JUDGEMENT O F QUEEN'S EDUCATIONAL SOCIETY HAS HELD THAT THE FINAL CONCLUSION THAT IF A SURPLUS IS MADE BY AN 72 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) EDUCATIONAL SOCIETY AND PLOUGHED BACK TO CONSTRUCT ITS OWN PREMISES WOULD FALL FOUL OF SECTION 10(23C) IS TO IGNORE THE LANGUAGE O F THE SECTION AND TO IGNORE THE TEST LAID DOWN IN THE SURAT ART SILK CLOTH CASE AD ITANAR CASE AND THE AMERICAN HOTEL AND LODGING CASE. IT IS CLEAR THAT WHEN A SUR PLUS IS PLOUGHED BACK FOR EDUCATIONAL PURPOSES THE EDUCATIONAL INSTITUTION E XISTS SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT.' IN THIS J UDGEMENT THE REVENUE'S APPEAL FROM THE JUDGEMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT WAS TAKEN INTO CONSIDERATION ALONGWITH THE ABOVE SAID JUDGEMENT AN D THE HON'BLE SUPREME COURT APPROVED THE JUDGMENT OF HON'BLE PUNJAB & HAR YANA HIGH COURT AND SUMMED UP ITS CONCLUSION THAT IT IS OBLIGATORY ON T HE PART OF THE CHIEF COMMISSIONER OF INCOME TAX OR THE DIRECTOR WHICH A RE THE PRESCRIBED AUTHORITIES TO COMPLY WITH PROVISO THIRTEEN. ACCORDINGLY IT HA S TO BE ASCERTAINED WHETHER THE EDUCATIONAL INSTITUTION HAS BEEN APPLYING ITS PROFI T WHOLLY AND EXCLUSIVELY TO THE OBJECT FOR WHICH THE INSTITUTION IS ESTABLISHED. ME RELY BECAUSE AN INSTITUTION HAS EARNED PROFIT WOULD NOT BE DECIDING FACTOR TO CONCL UDE THAT THE EDUCATIONAL INSTITUTION EXISTS FOR PROFIT IT HAS TO BE BORNE IN MIND THAT MERELY BECAUSE PROFITS HAVE RESULTED FROM THE ACTIVITY OF IMPARTING EDUCAT ION WOULD NOT RESULT IN CHANGE O F CHARACTER OF THE INSTITUTION THAT IT EXISTS SOLELY FOR EDUCATIONAL PURPOSE. THE REFERENCE WAS MADE TO THE JUDGEMENT OF HON'BLE PUNJ AB & HARYANA HIGH COURT FOLLOWED BY THE DELHI HIGH COURT IN THE CASE OF ST. LAWRENCE EDUCATIONAL SOCIETY (REGD.) V. COMMISSIONER OF INCOME TAX & ANR (2011) 53 OTR (DEL) 130. ALSO TOLANI EDUCATION SOCIETY V. DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS) & ORS. (2013) 351 ITR 184 THE BOMBAY HIGH COURT HAS EXPRESSED A VIEW IN LINE WITH THE PUNJAB & HARYANA HIGH COURT VIEW FOLLOWING THE JUDGEMENTS O F THIS COURT IN THE SURAT ART SILK MANUFACTURERS ASSOCIATION CASE AND ADITANAR ED UCATIONAL INSTITUTION CASE AS FOLLOWS THE FACT THAT THE PETITIONER HAS A SURPLUS OF INCOME OVER EXPENDITURE FOR THE THREE YEARS IN QUESTION CANNOT BY ANY STRETCH O F LOGICAL REASONING LEAD TO THE CONCLUSION THAI THE PETITIONER DOES NOT EXIST SOLEL Y FOR EDUCATIONAL PURPOSES OR AS THAT CHIEF COMMISSIONER HELD THAT THE PETITIONER EX ISTS FOR PROFIT. THE TEST TO BE APPLIED IS AS TO WHETHER THE PREDOMINANT NATURE OF THE ACTIVITY IS EDUCATIONAL. IN THE PRESENT CASE THE SOLE AND DOMINANT NATURE OF T HE ACTIVITY IS EDUCATION AND THE PETITIONER EXISTS SOLELY FOR THE PURPOSES OF IM PARTING EDUCATION. AN INCIDENTAL SURPLUS WHICH IS GENERATED AND WHICH HAS RESULTED IN ADDITIONS TO THE FIXED ASSETS IS UTILIZED AS THE BALANCE-SHEET WOULD INDICATE TOW ARDS UPGRADING THE FACILITIES OF THE COLLEGE INCLUDING FOR THE PURCHASE OF LIBRARY B OOKS AND THE IMPROVEMENT OF INFRASTRUCTURE. WITH THE ADVANCEMENT OF TECHNOLOGY NO COLLEGE OR INSTITUTION CAN AFFORD TO REMAIN STAGNANT. THE INCOME-TAX ACT 1961 DOES NOT CONDITION THE GRANT OF AN EXEMPTION UNDER SECTION 10(23C) ON THE REQUIR EMENT THAT A COLLEGE MUST MAINTAIN THE STATUS-QUO AS IT WERE IN REGARD TO I TS KNOWLEDGE BASED INFRASTRUCTURE. NOR FOR THAT MATTER IS AN EDUCATION AL INSTITUTION PROHIBITED FROM UPGRADING ITS INFRASTRUCTURE ON EDUCATIONAL FACILIT IES SAVE ON THE PAIN OF LOSING THE BENEFIT OF THE EXEMPTION UNDER SECTION 10(23C). IMP OSING SUCH A CONDITION WHICH IS NOT CONTAINED IN THE STATUTE WOULD LEAD TO A PER VERSION OF THE BASIC PURPOSE FOR WHICH SUCH EXEMPTIONS HAVE BEEN TAKEN GRANTED TO ED UCATIONAL INSTITUTIONS. KNOWLEDGE IN CONTEMPORARY TIMES IS TECHNOLOGY DRIVE N. EDUCATIONAL INSTITUTIONS HAVE TO MODERNIZE UPGRADE AND RESPOND TO THE CHANG ING ETHOS OF EDUCATION. EDUCATION HAS TO BE RESPONSIVE TO A RAPIDLY EVOLVIN G SOCIETY. THE PROVISIONS OF SECTION 10(23C) CANNOT BE INTERPRETED REGRESSIVELY TO DENY EXEMPTIONS. SO LONG AS THE INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PU RPOSES AND NET FOR PROFIT THE TEST IS MET. 73 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 13.2.16. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES IT CAN BE SAFELY CONCLUDED THAT LD.AO HAS MISERABLY FAILED TO ESTABLISH THAT T HE APPELLANT IS RUNNING SCHOOLS SOLELY WITH THE PURPOSE OF COMMERCIAL GAINS. THE SU BSTANTIAL INCREASE IN RECEIPTS ARE ON ACCOUNT OF VARIOUS FACTORS LIKE INCREASE IN NUMBER OF SCHOOLS STUDENTS AND STAFF/TEACHERS WHICH IS DUE TO ESTABLISHING STATE O F THE ART INFRASTRUCTURAL FACILITIES IN ORDER TO IMPART QUALITY EDUCATION IN THE TNCITY. CA PITAL INVESTMENT HAS DIRECT NEXUS WITH QUALITY EDUCATION AND INCREASE IN RECEIP TS LEADING TO INCIDENTAL SURPLUS OF FUNDS. THESE FUNDS HAVE BEEN INVESTED TO CREATE MORE SCHOOLS WITH BETTER INFRASTRUCTURAL FACILITIES. EVENTUALLY THE SO CALL ED SURPLUS ENDS UP WITH DEFICIT OVER THE YEARS. HENCE ; AO HAS NO CASE OF VIOLATIONS OF SECTION 11(1) R.W.S . 2(15) OF THE ACT. AO IS DIRECTED TO DELETE THE ADDITION OF RS 7 5 1 68.672/-. THE GROUNDS OF APPEALS NOS.2(VI) TO (XIV) ARE ALLOWED. 26. AS REGARDS TO THIS ISSUE THE LD. CIT-DR SUBMIT TED THAT THE ASSESSEE SOCIETY WAS RUNNING VARIOUS EDUCATIONAL INSTITUTION ON COMM ERCIAL PRINCIPLE AND EARNING PROFITS FROM THE SAME. THE PROFIT RATIO (BEFORE CAP ITAL INVESTMENT) WAS RANGING FROM 23% TO 26% OF THE TOTAL RECEIPTS THIS PROFIT RESULTED INTO GENERATION OF SURPLUS WHICH WAS ON ACCOUNT OF SUBSTANTIAL RECEIPTS THROUG H ANNUAL CHARGES COMPUTER TUITION FEES ADMISSION FEES QUARTERLY F EES APART FROM NORMAL TUITION FEE WHICH WAS ENORMOUSLY INCREASED FROM STUDENTS. THE AMOUNTS SO RECEIVED WERE APPLIED TOWARDS THE BENEFIT OF THE TRUSTEE AND THE SPECIFIED PERSONS IN THE SHAPE OF HUGE SALARY TO ALL FAMILY MEMBERS; SALARY AS DIRECTORS TO THE FAMILY MEMBERS; INTEREST ON THE UNSECURED LOANS RAI SED FROM THE FAMILY MEMBERS; AND PROVIDING RENT FREE ACCOMMODATION TO T HE PRINCIPALS (FAMILY MEMBERS). THE SOCIETY MONEY WAS DIVERTED TO THE FAM ILY MEMBERS AND AGAIN BROUGHT INTO THE SOCIETY. WITH THIS INTENTION THE ASSESSEE SOCIETY HAS INCREASED FEES OF THE STUDENTS AND THIS INCREASE WAS NOT WITH THE MOTIVE TO PROVIDE 'EDUCATION' BUT TO GENERATE INCOME TO DIVERSIFY THE SAME TO THE FAMILY MEMBERS UNDER VARIOUS HEADS. THUS THE SOCIETY WAS WORKING WITH A PROFIT MOTIVE AND HENCE EXEMPTION CLAIMED U/S 11 HAS TO BE DENIED. T HERE HAD BEEN INCREASE OF 10 TO 11% ANNUALLY IN THE FEE PER STUDENTS WHEREAS THE INCREASE IN THE SALARY AS PRINCIPAL WAS 13% AND AS DIRECTOR 20%. THUS THE INC REASE IN THE STUDENTS FEE WAS WITH THE MOTIVE TO GENERATE THE FUNDS TO DIVERT THE SAME TO THE TRUSTEES AND THEIR FAMILY MEMBERS WHICH SHOWS THAT THE ASSESSEE SOCIETY WAS RUNNING ITS 74 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) SCHOOLS WITH THE COMMERCIAL INTENT TO EARN MORE PRO FITS AND SINCE THE PROFIT GENERATED FROM EDUCATIONAL ACTIVITIES WAS NOT SOLEL Y FOR THE PURPOSES OF ACHIEVING THE OBJECTS OF THE ASSESSEE SOCIETY THE EXEMPTION CLAIMED U/S 11 OF THE ACT HAS TO BE DENIED. 27. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THIS ISSUE WAS NOT RAISED BY THE DEPARTMENT IN THE ASSES SMENT YEAR UNDER CONSIDERATION. IT WAS FURTHER SUBMITTED THAT THE LD . CIT(A) HAS DISCUSSED THE ISSUE FOR THE A.Y. 2014-15 AND ORDER IN THE BOARDS CIRCU LAR NO. 387 OF CBDT THE EXEMPTION CANNOT BE WITHDRAWN EVEN IF THERE IS VIOL ATION OF SECTION 13 OF THE ACT. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS : I. UCO BANK VS CIT (1999) 237 ITR 889 (SC) II. DIT VS WORKING WOMENS FORUM 235 TAXMAN 516 (SC ) IT WAS POINTED OUT THAT THIS ISSUE HAS BEEN SETTLED BY THE ITAT CHANDIGARH BENCH IN ITA NO. 266/CHD/2007 FOR THE A.Y. 2003-04 IN ASS ESSEES OWN CASE VIDE ORDER DATED 22/11/2007 COPY OF WHICH IS PLACED AT PAGE N OS. 224 TO 234 OF THE ASSESSEES PAPER BOOK AGAINST THE SAID ORDER THE DEPARTMENT FILED AN APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IN ITA NO. 450/2008 WHEREIN VIDE ORDER DATED 19/08/2009 REPORTED AT 184 TAXMAN 502 THE VIEW TAKEN BY THE ITAT FOR ALLOWING THE EXEMPTION U/S 11(1)(A) OF THE ACT HAS BEEN UPHELD COPY OF WHICH IS PLACED AT PAGE NOS. 235 TO 238 OF THE ASSE SSEES PAPER BOOK. AGAINST THE SAID ORDER THE DEPARTMENT FILED SLP BEFORE THE HONBLE SUPREME COURT WHICH WAS DISMISSED VIDE ORDER DATED 19/07/2010 COP Y OF WHICH IS PACED AT PAGE NO. 239 OF THE ASSESSEES COMPILATION. IT WAS ACCORDINGLY SUBMITTED THAT THIS ISSUE HAS ATTAINED FINALITY THEREFORE THERE IS NO MERIT IN THE SUBMISSIONS MADE BY THE LD. CIT-DR. 28. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT IS NOTICED THAT THE ISSUE 75 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) RELATING TO THE EXEMPTION U/S 11 OF THE ACT HAS BEE N SETTLED BY THE ITAT CHANDIGARH BENCH FOR THE A.Y. 2003-04 WHICH WAS AFF IRMED BY THE HONBLE JURISDICTIONAL HIGH COURT AND THE SLP AGAINST THE J UDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT WAS DISMISSED BY THE HON BLE APEX COURT THEREFORE WE DO NOT SEE ANY MERIT IN THE ARGUMENTS PUT FORTH BY THE LD. CIT-DR ON THE ISSUE RELATING TO EXEMPTION U/S 11 OF THE ACT. 29. GROUND NO. XI IS GENERAL IN NATURE; THEREFORE IT DOES NOT REQUIRE ANY ADJUDICATION ON OUR PART. 30. IN THE PRESENT CASE ONE OBSERVATION WAS MADE B Y THE A.O. THAT THE MERCEDES CARS WERE PURCHASED AND USED BY THE DIRECT ORS ALTHOUGH NO SPECIFIC DISALLOWANCE WAS MADE RELATING TO THE RUNN ING EXPENSES OF THE MERCEDES CARS. WITH REGARD TO THAT OBSERVATION OF T HE A.O. THE SUBMISSIONS OF THE LD. CIT-DR WERE THAT THE ASSESSEE PROVIDED MERC EDES CARS TO THE MEMBERS- CUM-DIRECTORS WHICH WAS NOT EVEN PROVIDED TO THE VI CE CHANCELLORS OF THE UNIVERSITIES. 31. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE MERCEDES CARS PROVIDED TO THE DIRECTORS NAMELY SARV SHRI SANJAY SARDANA AND SANDEEP SARDANA WERE USED FOR THE BUSINESS PURPOSES BECAUSE THEY WERE REQUIRED TO MEET THE VARIOUS OFFICIALS AT DELHI CH ANDIGARH AND MOHALI. IT WAS ALSO STATED THAT NOTHING WAS BROUGHT ON RECORD TO S UBSTANTIATE THAT THE CARS WERE BEING USED FOR PERSONAL PURPOSES BY THE DIRECT ORS AND FURTHER PERQUISITE VALUE OF THE CARS WAS BEING DISCLOSED BY THE DIREC TORS IN THEIR INDIVIDUAL RETURNS AS PER LAW WHICH WAS ACCEPTED BY THE DEPARTMENT. RE LIANCE WAS PLACED ON THE DECISION OF ITAT CHANDIGARH BENCH IN THE CASE O F INDO SOVIET IN ITA NOS. 478 & 479/CHD/2013 ORDER DATED 28/09/2015. 32. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE NOTHING IS BROUGHT ON RECORD 76 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) BY THE A.O. THAT THE MERCEDES CARS GIVEN TO THE DIR ECTORS FOR THE ADMINISTRATIVE WORK RELATING TO THE ASSESSEE SOCIETY WERE USED FOR PERSONAL PURPOSES. FURTHERMORE THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT PERQUISITE VALUES OF THE CARS WAS BEING DISCLOSED BY THE DIREC TORS IN THEIR INDIVIDUAL RETURNS AS PER THE LAW AND ACCEPTED BY THE DEPARTMENT WAS N OT REBUTTED. WE THEREFORE DO NOT SEE ANY MERIT IN THE SUBMISSIONS OF THE LD. CIT-DR. 33. THE FACTS RELATED TO THE OTHER APPEALS OF THE D EPARTMENT IN ITA NO. 28 TO 30/CHD/2020 FOR THE A.Y. 2014-15 TO 2016-17 RESPECT IVELY ARE SIMILAR TO THE FACTS INVOLVED IN ITA NO. 27/CHD/2020 FOR THE A.Y. 2013-1 4 THEREFORE OUR FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER SHALL APPLY MUTATI S MUTANDIS TO ALL THE APPEALS OF THE DEPARTMENT. 34. NOW WE WILL DEAL THE APPEAL OF THE ASSESSEE IN ITA NO. 02/CHD/2020 FOR THE A.Y. 2010-11. 35. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPE AL. 1. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN REOPENING THE CASE U/S 148. 2. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ORIGINAL ASSESSMENT HAVE BEEN COMPLETED U/S 143(3) AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND THEREFORE THE REOPENIN G OF THE CASE U/S 148 AFTER THE EXPIRY OF THE FOUR YEARS FROM THE END OF RELEVA NT ASSESSMENT YEAR IS BAD IN LAW. 3. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ORIGINAL ASSESSMENT HAD BEEN FRAMED AFTER THOROUGH APPLICATI ON OF MIND BY THE ASSESSING OFFICER BY CALLING FOR VARIOUS DETAILS PARTICULARLY WITH REGARD TO AND JUSTIFICATION OF SALARY INTEREST AND RENT PAID TO THE RELATED PERSO NS. 4. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSING OFFICER HAS TAKEN A CONSCIOUS DECISION ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND APPLIED HER MIND ON THE ISSUES RELATING TO RELATED PERSONS WHICH IS EVIDENT FROM THE DETAILS AS FURNISHED DURING THE CO URSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND THEREFORE FINDING OF THE CIT(A) I N CONFIRMING THE ACTION OF THE ASSESSING OFFICER WITH REGARD TO REOPENING OF THE CA SE IS BAD IN LAW. 77 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 5. THAT NO FRESH TANGIBLE MATERIAL HAVE BEEN FOUND OR BROUGHT ON RECORD AFTER COMPLETION OF ORIGINAL ASSESSMENT AND THUS IT AMOUNTS TO MERELY A CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER WHI CH IS NOT PERMITTED IN LAW. 6. THAT THE LD. CIT(A) HAS BRUSHED ASIDE THE BINDIN G JUDGMENTS OF THE APEX COURT AND OTHERS AND HIS RELIANCE ON SOME OF THE JU DGMENTS IS NOT PROPER. 7. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 36. FROM THE AFORESAID GROUNDS IT WOULD BE CLEAR T HAT ONLY GRIEVANCE OF THE ASSESSEE RELATES TO CONFIRMATION OF THE ACTION OF T HE A.O. IN REOPENING THE CASE U/S 147 OF THE ACT. 37. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT THE ASSESSEE SOCIETY IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT XXI OF 1860 HAVING REGISTRATION NO. 45 DATED 31/05/1969. THE ASSESSEE WAS ALSO REGISTER ED U/S 12AA OF THE ACT WITH THE CIT PATIALA VIDE REGISTRATION DATED 03/10/1994 . THE ASSESSEE FILED THE RETURN OF INCOME ON 30/09/2010 DECLARING NIL INCOME. LATER ON THE CASE WAS REOPENED U/S 147 AND THE NOTICE U/S 148 OF THE ACT WAS ISSUED ON 28/03/2017. THE A.O. PROVIDED COPY OF REASONS RECORDED ON 23/06 /2017 WHICH READ AS UNDER: ON PERUSAL OF THE RECORD AVAILABLE IT REVEALS THAT T HE ASSESSEE HAD MADE PAYMENTS OF RS. 1 09 12 261/- TO ITS MEMBERS UNDER VARIOUS HEADS AS SALARY RENT AND INTEREST. THE DETAILS OF THE SAME ARE AS UNDER: - S.NO. NAME A .Y. 2010.11 TOTAL SALARY RENT INTEREST 1. ARSHI MANCHANDA D/O SHRIG.S. SARDANA #3085 SECTOR-21D CHANDIGARH 4 07 088/ - 1 10 360/ - 5 17 448/ - 2. AJAY MANCHANDA S/O LATE SHRI AMIR CHAND MANCHANDA # 3085 SECTOR-21D 2 40 000/ - 1 13 251/ - 3 53 251/ - 3. MONICA SARDANA D/O SHRI GIAN CHAUDHARY # 3085 4 67 088/ - 5 66 381/ - 10 33 469/ - 78 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) SECTOR - 21D CHANDIGARH 4. SANDEEP SARDANA S/O SHRI GIAN CHAUDHARY # 3085 SECTOR-21D CHANDIGARH 13 68 840/ - 6 42 011/ - 20 10 851/ - 5. ANJALI SARDANA D/O R.K. CHHABRA # 3085 SECTOR-21D CHANDIGARH 4 67 088/ - 2 71 000/- 4 65 0281 - 12 03 116/ - 6. SANJAY SARDANA S/O SHRI GIAN SARDANA # 3085 SECTOR-21D CHANDIGARH 13 68 840/ - 2 71 000/- 5 64 135/ - 22 03 975/ - 7. USHA SARDANA D/O SHRI SATYA DEV CHAUDHARY # 3085 SECTOR-21D CHANDIGARH 4 07 088/ - 5 73 299/ - 9 80 987/ - 8. GAIN SINGH SARDANA S/O SH. J.R. SARDANA MANAV MAGAL HIGH SCHOOL # 3085 SECTOR-21D CHANDIGARH 11 70 000/ - 7 43 058/ - 19 13 058/ - 9. SANJAY SARDANA HUF - - 2 81 660/ - 2 81 660/ - 10 SANDEEP SARDANA - - 2 81 811/ - 2 81 811/ - 11. SANKLAP SARDANA - - 1 33 235/ - 1 33 235/ - TOTAL (RS.) 58 96 032/ - 5 42 000/- 44 74 229/ - 1 09 12 261 /- THE ABOVE PAYMENT OF RS. 1 09 12 261/- ARE NOT GENU INE AND REASONABLE U/S 13(2) AND CLEAR VIOLATION OF SECTION 13(L)(C) R.W. 13(3) OF I.T. ACT. AS PER SECTION 13(L)(C) ONE OF THE ESSENTIAL CONDITIONS FOR CLAIMING EXEMPT ION IS THAT NO PART OF THE INCOME SHOULD INCURRED DIRECTLY OR INDIRECTLY FOR T HE BENEFIT OF THE FOUNDER MEMBER AND THEIR FAMILY MEMBERS OR ANY OTHER SPECIF IED PERSONS U/S 13(3) OF I. T. ACT. ASSESSEE IS VIOLATING THE CONDITIONS OF THE PR OVISION OF SECTION 11(1) 13(L)(C) OF I.T. ACT. ASSESSEE IS DIVERTING ITS RECEIPTS IN THE PERSONAL HANDS OF THEIR FOUNDER MEMBERS SH. G.S. SARDANA AND THEIR FAMILY MEMBERS. IT IS ALSO SEEN FROM THE INCOME AND EXPENDITURE ACC OUNT FOR THE UNDER CONSIDERATION YEAR THAT THERE ARE HUGE AMOUNTS ARE COLLECTED FROM THE STUDENTS UNDER THE VARIOUS HEADS & SHOWN THE SAME AS ADMISSI ON FEE TUITION FEE REED. DEVELOPMENT FUND REED. COMPUTER FEE TRANSPORT CHA RGES & MISC FEE ETC. ASSESSEE IS SHOWING THE FEES UNDER THE HEADS ADMISS ION & REGISTRATION FEES TUITION FEES AND CLAIMING VARIOUS KIND OF HUGE EXPENSES AGA INST THE RECEIPT ALSO SHOW THAT ASSESSEE IS DOING ACTIVITIES ON COMMERCIAL BAS IS AND EARNING HUGE PROFITS AND ALSO ACCUMULATE THE SAME IN ITS BOOKS AND NOT F ULFILLING CONDITIONS OF SECTION 79 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 11(1) R.W. 2(15) OF I. T. ACT. ASSESSEE HAS SHOWN A MOUNT OF RS. 2 91 56 429/- AS NET INCOME AGAINST THE TOTAL INCOME OF RS. 14 11 60 203 /- WHICH IS 20.65% OF TOTAL INCOME. WHICH SHOWS THAT ASSESSEE IS EARNING HUGE P ROFITS AND ACCUMULATES THE SAME IN BANKS AND ENJOYING HUGE INTEREST INCOME. IT IS ALSO MENTIONED HERE THAT WHEN DEPRECIATION AMOUNT OF RS. 1 77 63 831/- AS PE R KERALA HIGH COURT JUDGEMENT IN CASE OF M/S LISSIE MEDICAL INSTITUTION VS CIT KOCHI AND DISALLOWANCE OF RS. 1 09 12 261/- U/S 13(L)(C) R.W. 13(3) OF I.T . ACT ADDED INTO NET INCOME THEN THE TOTAL SURPLUS WILL BE RS. 5 78 32 518/- WHICH IS 40 .96% OF TOTAL INCOME. THESE ALL FACTS SHOW THAT ASSESSEE HAS FAILED TO SPEND THE PROFITS ON CHARITABLE ACTIVITIES AND ALSO FAILED TO FULFILL THE CONDITIONS OF SECTION 11(1) A ND 11(2) R.W. 11(5) 13(L)(C) R.W. 13(3) 2(15) OF I.T. ACT. IN THE LIGHT OF ABOVE FAC TS & DISCUSSION YOU ARE HEREBY SHOW CAUSED AS TO WHY YOU EXEMPTIONS U/S 12 AA MAY NOT BE DENIED & YOU ASSESSED AS AOP. THE SURPLUS OF RS. 2 91 56 426 IS P ROPOSED TO BE TAXED. FURTHER YOU ARE SHOW CAUSED AS TO WHY THE PAYMENT MADE TO P ERSONS COVERED U/S 13(3) AMOUNTING TO RS. 10 912 261/- MAY NOT BE DISALLOWED AND TAXED U/S 13(L)(C) R.W. 13(3) OF I. T. ACT 1961. THUS A TOTAL ADDITION OF RS. 40068687/-(SURPLUS 29156426/- + DISALLOW U/S 12(L)(C) OF RS. 10912261/-) IS PROPOSE D TO BE MADE IN YOUR CASE. ' 37.1 IN RESPONSE TO THE ABOVE THE ASSESSEE FURNISH ED WRITTEN SUBMISSIONS AND OBJECTIONS VIDE LETTER DT. 11/10/2017 WHICH HAVE BE EN REPRODUCED BY THE A.O. IN PARA 5 AT PAGE NO. 2 TO 10 OF THE ASSESSMENT ORD ER. FOR THE COST OF REPETITION THE SAME IS NOT REPRODUCED HEREIN. THE A.O. HOWEVE R DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE BY OBSERVING THAT THE A SSESSEE HAD MADE PAYMENTS TO ITS MEMBERS REGARDING SALARY RENT AND INTEREST WHICH WERE NOT REASONABLE AND THAT AN UNDUE BENEFIT WAS GIVEN TO THE RELATED PERSONS. 38. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTE R TO THE LD. CIT(A) AND SUBMITTED THAT SINCE THE ORIGINAL ASSESSMENT HAD BE EN FRAMED U/S 143(3) OF THE ACT AND THERE WAS NO FAILURE ON THE PART OF THE ASS ESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT THEREFORE THE REOPENING OF THE ASSESSMENT U/S 148 OF THE ACT AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS ACCORDINGLY BAD IN LAW . THE ASSESSEE ALSO FURNISHED THE WRITTEN SUBMISSIONS WHICH HAD BEEN IN CORPORATED IN PARA 5.1 OF THE IMPUGNED ORDER BY THE LD. CIT(A) AND READ AS UNDER: 'THIS IS AN APPEAL (TIED BY THE ASSESSES RAISING VA RIOUS GROUNDS OF APPEAL AND GROUND NO. 1 TO 3 DEALS WITH THE REOPENING OF THE C ASE U/S 148 ON MERE CHANGE 80 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) OF OPINION AND ALSO THEM WAS NO TANGIBLE MATERIAL W ORTH THE NAME FOR REOPENING OF THE CASE BEYOND FOUR YEARS BY THE ASSESSING OFFIC ER AND THE ASSESSES HAD DISCLOSED ALL THE PARTICULARS OF INCOME AT THE TIME OF FILING THE ORIGINAL RETURN OF INCOME AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE BRIEF FACTS OF THE CASE ERE AS UNDER:- 1. THE ASSESSES SOCIETY HAS BEEN FILING ITS RETURNS OF INCOME YEAR AFTER YEAR VERY REGULARLY AND ASSESSMENTS HAVE BEEN MADE EITHE R UNDER SECTION 143(1) OR UNDER MOTION 143(3) OF IT ACT. MOST OF THE ASSESSME NTS FOR AND FROM AY 1997-98 ONWARDS HAVE BEEN MADE UNDER SECTION 143(3} AND THE ASSESSMENTS WERE FRAMED AFTER DUE APPLICATION OF MIND ON EACH AND EV ERY ISSUE. 2. THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2010 -11 HAD BEEN FRAMED U/S 143(3) VIDE ORDER DATED 26/02/2013 BY THE ASSTT. CO MMISSIONER OF INCOME TAX CIRCTE-3 (1) CHANDIGARH AND ALL PAYMENTS INCLUDING SALARY RENT INTEREST AND CAPITAL EXPENDITURE WERE FOUND TO BE TRUE AND GENUI NE AND THE SAID DATA WAS ACCEPTED AS CORRECT FOR ALL INTENTS AND PURPOSES WH ILE PASSING THE ORDER SHE HAD EXCLUDED THE DEPRECIATION OF RS 1 77 63 831/- FROM THE APPLICATION OF INCOME AND ALSO MADE SOME SMALL DISALLOWANCE OF VEHICLE EXPENS ES ON ESTIMATE BASIS. (PAGES 1 TO 3). 3. THAT WE HAD FILED AN APPEAL AGAINST THE ORDER O F THE ASSESSING OFFICER BEFORE THE WORTHY COMMISSIONER OF INCOME TAX (APPEA LS) AND THE ID CIT (A) GURGAON IN APPEAL NO.304/2/2015-16 FOR ASSTT YEAR 2 010*11 VIDE ORDER DATED 27.03.2017 HAS HELD THAT THE CLAIM OF DEPRECIATION IS PERMISSIBLE FOR THE PURPOSES OF UTILIZATION AS CLAIMED BY US AS PER COPY OF THE ORDER BEING ENCLOSED HEREWITH (PAGES 4 TO 8). 4. THE ASSESSING OFFICER HAS RECORDED THE REASONS U/ S 148 AS PER COPIES OF THE REASONS IS BEING ENCLOSED HEREWITH. 5. AT THE OUTSET IT IS OUR SUBMISSION THAT THE PERU SAL OF THE REASONS RECORDED INDICATES THAT THE PROCEEDINGS UNDER SECTION 147 AR E COMPLETELY WITHOUT JURISDICTION AS THERE IS NO MATERIAL INDICATED IN T HE REASONS RECORDED WHICH COULD HAVE FURNISHED THE BASIS FOR THE FORMATION OF BELI EF THAT THERE IS AN ESCAPEMENT OF INCOME. THE EXISTENCE OF MATERIAL FOR FORMATION OF BELIEF THAT THERE IS ESCAPEMENT OF THE INCOME IS THE CONDITION PRECEDENT FOR ISSUAN CE OF NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT. THAT IN THE REASONS RECORDED AS SUPPLIED TO US THERE IS A PASSING REFERENCE TO THE SURVEY PROCEEDING CONDUCTED ON 2 S-29TH SEPTEMBER 2016 FOR ISSUING THE PRESENT NOTICE. IF IS RELEVANT TO POINT OUT THAT IN THE SURVEY NOTHING ADVERSE OR INCRIMINATING MATERIAL HAS BEEN FOUND DURING THE COURSE OF SURVEY WHICH CONTINUED FOR 2 DAYS IN WHICH THE TE AM OF THE INCOME TAX DEPARTMENT COVERED ALL THE FOUR SCHOOLS INCLUDING THE OFFICE OF THE SOCIETY AND VOLUMINOUS RECORDS WERE SCRUTINIZED IN DETAIL. EACH AND EVERYTHING WAS FOUND IN ORDER WITH REFERENCE TO BOOKS OF ACCOUNTS NUMBER O F STUDENTS AND STAFF SALARY. 81 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) EACH AND EVERY BILL/VOUCHER WAS INSPECTED AND TALLI ED WITH THE BOOKS OF ACCOUNTS AND NO CASE HAS BEEN MADE OUT BY THE ASSES SING OFFICER WITH REGARD TO ANY EXTRA FEE CHARGED BY THE SOCIETY OR ANY BOGUS E XPENDITURE. THAT THE SURVEY PROCEEDING WERE CONDUCTED ON 28-29TH SEPTEMBER 2016. IT IS RELEVANT TO POINT OUT THAT DURING THE SURVEY ON RECORD RELATING TO AS SESSMENT YEAR 2010-11 WAS EXAMINED. THEREFORE THE OBSERVATION IN THE REASONS RECORDED THAT IT WAS DURING THE FINDING OF SURVEY PROCEEDINGS THAT IT WAS REVEA LED THAT AN AMOUNT OF RS. 10912261/- WAS PAID TO MEMBERS UNDER VARIOUS HEADS AS SALARY RENT AND INTEREST IS COMPLETELY CONTRARY TO THE RECORD OF THE SURVEY PRO CEEDINGS ITSELF AND THUS THERE IS NO BASIS FOR THE SAME. 6. THAT SINCE THERE WAS NO MATERIAL FOR FORMATION O F BELIEF THAT THERE IS ESCAPEMENT OF INCOME THE SAID REASONS RECORDED BEI NG BASED ON NO NEW MATERIAL ARE A RESULT OF RE-APPRECIATION OF MATERIA L ALREADY EXISTING ON RECORD AND WHICH HAS BEEN SUBJECT MATTER OF A DETAILED SCRUTIN Y U/S. 143(3) OF THE INCOME TAX ACT. 7. YOUR GOOD SELFS ATTENTION IS INVITED TO THE SET TLED LAW BY THE HON'BLE SUPREME COURT IN VARIOUS JUDGMENTS WHICH LAY DOWN THAT FORMATION OF BELIEF ON THE BASIS OF ESCAPEMENT OF INCOME BASED ON RE-APPRE CIATION OF MATERIAL ALREADY ON RECORD IS NOTHING BUT CHANGE OF OPINION AND THIS VIEW HAS BEEN TAKEN IN THE FOLLOWING LATEST JUDGMENTS.- A). COMMISSIONER OF INCOME TAX V /S HINDUSTAN ZINC LTD [2007] 393 ITR 264 -RAJ- HC. IN THE ABOVE JUDGMENT THE HON'BLE RAJASTHAN HI GH COURT HAS RELIED ON THE FOLLOWING CELEBRATED JUDGMENTS:- I). CIT VS KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 (SC) II). CALCUTTA DISCOUNT CO. LTD. VS. ITO [1961) 41 IT R 191 (SC). III). S. NARAYANAPPA VS CIT[1967] 63 ITR 219 (SC) IV). ITO VS LAKHMANI MEWAL DASS [1976] 103 ITR 437 ( SC) V). S. GANGA SARAN AND SONS P. LTD. VS ITO [1981] 13 0 ITR 1(SC) VI). SRI KRISHNA P. LTD. V. ITO [1996] 221 ITR 538 ( SC). B). THE HON'BLE DELHI HIGH COURT IN THE CASE OF DIR ECTOR OF INCOME TAX VS. ROLLS ROYCE INDUSTRIAL POWER INDIA LTD. HAS HELD AS UNDER : 8. THAT IN CASE PROCEEDINGS UNDER SECTION 147 ARE I NITIATED AFTER EXPIRY OF FOUR YEARS FROM THE ASSESSMENT YEAR WHICH IS SUBJEC T TO SCRUTINY ASSESSMENT UNDER SECTION 143(3} OF THE INCOME TAX ACT THEN THE ESCA PEMENT OF INCOME SHOULD RESULT FROM FAILURE OF THE ASSESSEE TO DISCLOSE THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE REASONS RECORDED DO NOT ALLEGE ANY FAILURE ON THE PART OF THE 82 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) ASSESSEE TO DISCLOSE THE EXPENDITURE INCURRED ON SA LARY INTEREST AND RENT. THE ORIGINAL RETURN FOR ASSESSMENT YEAR 2010-11 GIVES T HE TOTAL RECEIPTS AND EXPENDITURE UNDER VENOUS HEADS WHEREIN CLAIM OF SAL ARY INTEREST RENT CAPITAL EXPENDITURE AND DEPRECIATION HAD BEEN MADE. COPY OF THE SAME IS ENCLOSED FOR YOUR REFERENCE AS PAGES 9 TO 10 WITH THE PRESENT OB JECTION. THE NOTICE U/S. 147 THUS IS COMPLETELY WITHOUT JURISDICTION IN TERMS O F THE DECISIONS OF VARIOUS COURTS DETAILED AS UNDER:- I) NAVKAR SHARE AND STOCK BROKERS PVT LTD. V/S ASST T. CIT [2007] 393 ITR 362 - GUJ-HC II). MICRO INKS P. LD. V/S ASSISTANT COMMISSIONER O F INCOME TAX [2007] 393 ITR 366 GUJ-HC III). DR. RAJIVRAJ RANBIRSINGH CHAUDHARY V /S ASSISTANT C OMMISSIONER OF INCOME TAX (2017} 393 ITR 660- GUJ-HC 9 FURTHER RELIANCE IS BEING PLACED ON THE FOLLOWI NG JUDGMENTS:- I). GREATER MOHALI AREA DEVELOPMENT AUTHORITY V/S D CIT ITA NO.410/CHD/2013. ITAT CHANDIGARH BENCH. CHANDIGARH II). PR. COMMISSIONER OF INCOME TAX V/S ANIL NAGPAL 145 DTR 209 P&H-HC III) A P REFINERY (P) LTD. V/S ADDL. COMMISSIONER O F INCOME TAX 174 TTJ 0041. ITAT CHANDIGARH BENCH CHANDIGARH IV). KARAMCHAND APPLIANCES PVT. LTD. V/S DCIT 399 I TR 323 DEL-HC V). AJANTA PVT. LTD. VS DCIT (2016) 402 ITR 72 IN WHICH THE HON'BLE HIGH COURT HAS HELD AS UNDER.. THUS THE ACTION OF THE ASSESSING OFFICER IN REOPENI NG THE CASE IS AGAINST THE SETTLED TAW AND AS SUCH THE NOTICE MAY PLEASE BE QUASHED. 10. FURTHER IT IS SUBMITTED THAT THIS CHANGE OF OP INION AND WHICH IS BEING SUBSTANTIATED BELOW:- IN THE REASONS SO RECORDED BY YOUR GOODSELFS PREDE CESSOR ON 14.03 2017 THREE GROUNDS ARE THERE FOR THE PURPOSES OF REOPENING THE CASE U/S 148 WHICH ARE AS UNDER:- A) 'THE PERUSAL OF INCOME AND EXPENDITURE ACCOUNT A ND FINDINGS OF SURVEY PROCEEDINGS (DATE OF SURVEY- 28-29-09-2016) IN THE CASE OF ASSESSEE. IT REVEALS THAT THE ASSESSEE HAD MADE PAYMENTS OF RS. 1 09 12 261/- TO ITS MEMBERS UNDER VARIOUS HEADS AS SALARY RENT AND INTEREST.' 83 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) THEN YOUR GOODSELF HAS OBSERVED THAT THE ABOVE PAY MENT OF SALARY AND INTEREST ARE NOT GENUINE AND REASONABLE U/S 13 (2) AND THERE IS VIOLATION OF SECTION 13(1)(C) READ WITH SECTION 13{3) OF THE ACT. B) 'IT IS ALSO SEEN FROM THE INCOME AND EXPENDITURE ACCOUNT FOR THE UNDER CONSIDERATION YEAR THAT THERE ARE HUGE AMOUNTS COLL ECTED FROM THE STUDENTS UNDER THE VARIOUS HEADS AND SHOWN THE SAME AS ADMISSION F EE TUITION FEE REGD. DEVELOPMENT FUND REGD. COMPUTER FEE. TRANSPORT CHA RGES AND MISC. FEE ETC. THE ASSESSEE IS SHOWING FEES UNDER THE HEADS ADMISS ION AND REGISTRATION FEES TUITIONS FEES AND CLAIMING VARIOUS KIND OF HUGE EXP ENSES AGAINST SHE RECEIPTS ALSO SHOW THAT ASSESSEE IS DOING ACTIVITIES ON COMMERCIA L BASIS AND EARNING HUGE PROFITS AND ALSO ACCUMULATED THE SAME IN ITS HOOKS AND NOT FULFILLING CONDITIONS OF SECTION 11 (1) R.W. 2(15) OF I.T. ACT ASSESSEE HAS SHOWN AMOUNT OF RS. 2 91 56 426/- AS NET INCOME AGAINST THE TOTAL INCOME OF RS. 14 11 60 203/- WHICH IS 20 65% OF TOTAL INCOME WHICH SHOWS THAT ASSESSEE IS EARNING H UGE PROFITS AND ACCUMULATED THE SAME IN BANKS AND ENJOYING HUGE INTEREST INCOME .' C) LASTLY IT IS ALSO MENTIONED THAT 'WHEN DEPRECIA TION AMOUNT OF RS. 1.77.63 831/- AS PER KERALA HIGH COURT JUDGMENT IN CASE OF M/S LI SSIE MEDICAL INSTITUTION VS CIT KOCHI AND DISALLOWANCE OF RS. 1 09 12 261/- U/S 13( 1)(C) R.W. 13(3) OF I.T. ACT IS ADDED INTO NET INCOME THEN THE TOTAL SURPLUS WILL BE RS. 5 78 32 518/- WHICH IS 40.96% OF TOTAL INCOME THESE ALL FACTS SHOW THAT AS SESSEE HAS FAILED TO SPEND THE PROFITS ON CHARITABLE ACTIVITIES AND ALSO FAILED TO FULFILL THE CONDITIONS OF SECTION 11(1) AND 11(2) R.W. 11(5) 13(1)(C) R.W. 13(3) 2( 15) OF I.T. ACT' 11. IT HAS BEEN STATED IN THE REASONS SO RECORDED THAT FROM THE PERUSAL OF INCOME AND EXPENDITURE ACCOUNT AND FINDING OF SURVEY PROCE EDINGS ON 28-29 02.2016 THIS BELIEF WAS FORMED BY THE ASSESSING OFFICER CONC ERNED AFTER SURVEY. THIS FINDING OF THE ASSESSING OFFICER AT THE VERY OUTSET IS MISCO NCEIVED END AGAINST THE DOCUMENTARY EVIDENCE ON RECORD. THIS IS PROVED ON T HE BASIS OF FOLLOWING FACTS:- A) THAT WE HAD FILED THE ORIGINAL RETURN FOR THE AS STT YEAR 2010-11 ALONGWITH COMPUTATION AND AUDITED BALANCE SHEET WHICH GIVES T HE FIGURES OF TOTAL RECEIPTS AND EXPENDITURE UNDER VARIOUS HEADS WHEREIN CLAIM OF SALARY INTEREST RENT CAPITAL EXPENDITURE & DEPRECIATION HAD BEEN MADE. COPY ENCLOSED AS PAGES 9 TO 10. THUS EVERY PIECE OF INFORMATION HAS BEEN DISCLO SED BY THE ASSESSEE. B) THAT AIL THE THREE REASONS WHICH HAVE BEEN RECO RDED HAVE ALREADY BEEN LOOKED INTO BY THE CONCERNED ASSESSING OFFICER AT TH E TIME OF FRAMING THE ASSESSMENT U/S 143(3) FOR THE AY 2010-11 AND SPECIF IC QUERIES WERE MADE TO WHICH WE HAVE REPLIED- THE CASE WAS TAKEN UP UNDER SCRUTINY U/S 143(3) AND WE WERE ISSUED QUESTIONNAIRE DATED 13.07.2012 AND IN T HIS THREE-PAGE QUESTIONNAIRE THE DETAILED INFORMATION WAS ASKED FOR WITH REGARD TO THE NAME OF THE TRUSTEES COPY OF THE TRUST DEED AND REGISTRATION U/S 12AA/B0 G. ENQUIRIES ABOUT THE 84 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) ACTIVITIES OF THE SOCIETY AND MOST IMPORTANTLY VID E QUESTION NO. 9 6 12 AND I7 THE FOLLOWING THINGS WARE ASKED FOR- Q NO 9 OF THE QUESTIONNAIRE DATED 13.07.2012 GIVEN DURING SCRUTINY U/S 143(3} OF THE AY 2010-11 'DETAILS OF APPLICATION OR USE OF INCOME OR PROPERT Y FOR THE BENEFIT OF PERSONS REFERRED TO IN SECTION 13(3) ALONG WITH AN EXPLANAT ORY NOTE ON ITS JUSTIFICATION. PLEASE FILE DETAILS OF PAYMENTS MADE TO SPECIFIED P ERSONS IN LAST TWO YEARS AS WELL AS IN THE YEAR UNDER CONSIDERATION. PLEASE FILE DET AILS OF INVESTMENTS MADE AND ALSO CONFIRM THE INVESTMENT HAVE BEEN MADE IN THE S PECIFIED ASSETS MENTIONED IN SECTION 11 OF THE I. T. ACT. Q.NO.8 OF THE QUESTIONNAIRE DATED 13.07.2012 GIVEN DURING SCRUTINY U/S 143(3) OF THE AY 2010-11. 'PLEASE GIVE THE DETAILS OF SURPLUS/DEFICIT FOR THE PAST FIVE YEARS AND SHOW AS HOW THE ACCUMULATED SURPLUS HAS BEEN UTILIZED IN SUBSEQ UENT YEARS. PLEASE CERTIFY THAT THE ACCUMULATED INCOME HAS BEEN UTILIZED WITHIN THE TIME PERIOD ALLOWED FOR THE SAME AND FOR THE PURPOSE IN ACCORDANCE WITH THE PRO VISIONS OF SECTION 11 OF THE I. T. ACT. SUBMIT A CHART THEREOF FOR THE LAST FIVE YE ARS AS UNDER:- YEAR OF ACCUMULATION TO BE USED UP TO PURPOSE DATE OF UTILIZATION EVIDENCE THEREOF PLEASE ALSO FURNISH COPY OF ACKNOWLEDGEMENT OF SUBM ISSION OF FORM NO. 10 TO THE AO WITH RESPECT TO EACH YEAR AND THE COPY OF RESOLUT ION PASSED FOR THE ABOVE PURPOSE FOR THE LAST FIVE YEARS.' Q.NO.12 OF THE QUESTIONNAIRE DATED 13.07.2012 GIVEN DURING SCRUTINY U/S 143(3) OF THE AY 2010-11. 'PLEASE FURNISH FOLLOWING DETAILS FOR THE YEAR UNDE R ASSESSMENT AND THREE PREVIOUS YEARS: SR. NO. TOTAL RECEIPTS/INCOME AS PER INCOME & EXPENDITURE ACCOUNT REVENUE EXPENDITURE DURING THE YEAR CAPITAL EXPENDITURE DURING THE YEAR TOTAL EXPENDITURE (3+4) % AGE OF EXPENDITURE (5/2 X 100) 1. 2 3 4 5 6 Q.NO.17 OF THE QUESTIONNAIRE DATED 13.07.2012 GIVEN DURING SCRUTINY U/S 143(3) OF THE AY 2010-11 PLEASE GIVE DETAILS OF ANY LOAN BORROWED OR REPAID DURING THE LAST 3 YEARS INCLUDING THE YEAR UNDER CONSIDERATION. 85 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) COPY OF THE QUESTIONNAIRE DATED13.07.2012 IS ENCLOSED AS PAGES 11 TO 13 END BESIDES THAT SO MANY OTHER DETAILS WERE ASKED FOR COVERING ALL THE ISSUES AS STATED IN THE REASONS. I) WE HAD REPLIED TO EACH AND EVERY ITEM AS ASKED F OR WITH REFERENCE TO VARIOUS ITEMS IN QUESTIONNAIRE PARTICULARLY WITH R EGARD TO Q.9 THE DETAIL WAS GIVEN FOR THE LAST THREE YEARS. THE DETAILED LIST OF AMOU NT OF SALARY RENT AND INTEREST AS PAID TO EACH OF THE PERSON REFERRED TO SECTION 13(3 ) HAD BEEN GIVEN AND COPY OF THAT REPLY IS BEING ENCLOSED HEREWITH FOR YOUR READ Y REFERENCE AS PAGES 14 TO 16. II) IN RESPONSE TO Q. NO. 17 WE SUBMITTED THE COMP LETE LEDGER ACCOUNTS OF UNSECURED LOANS GIVEN BY THESE PERSONS AND THE INTE REST RECEIVED BY THEM DURING AY 2010-11. ENCLOSED AS PAGES 17 TO 28. III) THE TDS RETURNS IN FORM NO. 24 Q AND 26 Q WIT H ALL THE DETAILS FOR ALL THE FOUR QUARTERS OF AY 2010-11 WERE SUBMITTED WELL BEFORE T HE DUE DATES AND ARE A PART OF DEPARTMENT'S RECORDS (PAGES 29 TO 44) THE SAME HAD BEEN SUBMITTED ALONG WITH THE COMPLETE DETAIL OF TDS DEPOSITED AGAINST P AYMENT OF SALARY RENT INTEREST TO THESE SPECIFIED PERSONS IN RESPONSE TO Q. NO 14 OF THE QUESTIONNAIRE DATED 13 07 2012 WHICH IS BEING ENCLOSED AS PAGES 45 TO 66. IV} IT IS PERTINENT TO MENTION THAT ALL THE PAYMENT S MADE TO THESE SPECIFIED PERSONS HAVE BEEN THROUGH BANK TRANSFER / ACCOUNT P AYEE CHEQUES AFTER DEDUCTING TDS. THE ASSESSEE SOCIETY HAS BEEN FILLIN G TDS RETURNS REFLECTING ALL THESE PAYMENTS AND THE SPECIFIED PERSONS IN THEIR OWN TUR N ARE REFLECTING THESE PAYMENTS RECEIVED IN THEIR INCOME TAX RETURNS YEAR AFTER YEAR BY PAYING MAXIMUM MARGIN RATE OF TAX. V) IN RESPONSE TO Q.NO. 8 & Q.NO.12 OF THE QUESTION NAIRE THE RECEIPTS AND EXPENDITURE DURING THE YEAR UNDER CONSIDERATION AND FOR THE THREE PREVIOUS YEARS WERE ASKED FOR UTILIZATION OF ACCUMULATED SURPLUS COPIES OF BANK ACCOUNTS AND COMPLETE BOOKS OF ACCOUNTS WERE ALSO REQUIRED TO BE PRODUCED AND THE SAME WERE SUBMITTED TO THE DEPARTMENT IN OUR DETAILED R EPLY FURNISHED IN THE ORIGINAL PROCEEDINGS WE HAD IN RESPONSE TO QUESTION NO. 12 SUBMITTED THE DETAILS OF CAPITAL EXPENDITURE OF RS 336.15 LAKHS WHICH IS ENC LOSED AS PAGES 67 TO 68. VI) SO FAR AS SURPLUS IS CONCERNED IT IS SUBMITTED HEREWITH THAT THE ASSESSING OFFICER WHILE RECORDING THE REASONS HAS NOT CONSIDE RED OR TAKEN INTO CONSIDERATION MAY BE DELIBERATELY THE COMPLETE DET AILS OF THE UTILIZATION OF SURPLUS BY CONSIDERING THE CAPITAL EXPENDITURE. IN OUR ORIGINAL INCOME TAX RETURN AND FURTHER A DETAILED REPLY FURNISHED IN THE SCRUT INY PROCEEDINGS WE HAD IN RESPONSE TO QUESTION NO. 12 SUBMITTED THE DETAILS OF CAPITAL EXPENDITURE OF RS. 336.15 LAKHS {ALREADY ENCLOSED AS PAGE 10). THIS HA S COMPLETELY BEEN IGNORED BY THE ASSESSING OFFICER AT THE TIME OF RECORDING THE R EASONS AND ONLY SURPLUS AS PER PROFIT AND LOSS ACCOUNT HAVE BEEN CONSIDERED TO THE TUNE OF RS.2 91 56 426/-. THUS WRONG FACTS HAVE BEEN MENTIONED IN THE REASONS IGN ORING THE DETAILS ALREADY ON 86 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) RECORD WHICH HAVE ALREADY BEEN LOOKED INTO AND. TH US THERE WAS NO TANGIBLE MATERIAL FOUND DURING THE COURSE OF SURVEY FOR RESO RTING TO REOPENING OF THE CASE U/S 148. EVEN OTHERWISE IT MAY BE STATED THAT THE SAME ISSUE OF CAPITAL EXPENDITURE WAS SUBJECT MATTER OF APPEAL IN ASSTT. YEAR 2003-04 FOR THE PURPOSES OF UTILIZATION AND THE WORTHY GIT (A) CHANDIGARH H AD GRANTED US THE RELIEF. THE MATTER WAS CARRIED TO THE HON'BLE ITAT. CHANDIGARH BENCH CHANDIGARH BY THE DEPARTMENT AND THE HON'BLE ITAT IN IT A NO 266/CHO V2007 AND MA. NO. 84/CND/20LO FOR THE ASSTT YEAR 2003-04 DECIDED IN FA VOUR OF ASSESSE (PAGES 69 TO 79). THE SAME WAS AGAIN DECKLED IN FAVOUR OF THE AS SESSE IN HON'BLE PUNJAB AND HARYANA HIGH COURT IN IT APPEAL NO. 450 OF 2008 TH E COPY OF ALT THESE ORDERS IS BEING ENCLOSED HEREWITH AS PAGES 80 TO 83. SIMILARL Y FOR ASSTT. YEAR 2006-07 THE ISSUE OF CAPITAL EXPENDITURE ON THE CONSTRUCTION OF MOHALI SCHOOL FOR THE PURPOSES OF 85% OF THE UTILIZATION HAD BEEN LOOKED INTO AND THE WORTHY CST (A) HAD GRANTED THE RELIEF (ORDER ENCLOSED AS PAGES 84 TO89 ).IN AN APPEAL BY THE DEPARTMENT BEFORE THE HON'BLE ITAT IN ITA NO. 1126/ CHANDI/2009 THE ISSUE WAS DECIDED AGAIN IN FAVOUR OF THE ASSESSES AND AGAINST THE DEPARTMENT. THE COPY OF THESE ORDERS IS BEING ENCLOSED HEREWITH AS PAGES 90 TO 94. VII) THE LD. ASSESSING OFFICER WHILE FRAMING THE AS SESSMENT FOR ASSTT. YEAR 2010- 11 HAD DISALLOWED THE DEPRECIATION AS CLAIMED BY U S ON THE PLEA THAT ITS COST HAVE ALREADY BEEN DEBITED IN THE BOOKS OF ACCOUNTS. THIS ISSUE HAS ALREADY ATTAINED FINALITY IN VIEW OF THE JUDGMENT OF HON'BL E PUNJAB & HARYANA HIGH COURT AS REPORTED IN 330 ITR PAGE 321 AND THE WORTHY CIT (A). GURGAON HAS GRANTED US THE NECESSARY RELIEF IN THE ORDER DATED 27TH OF MA RCH 2017 FOR THE ASSTT. YEAR 2010-11 AND THAT JUDGMENT IS ALREADY THERE. THUS THIS ISSUE ALSO STANDS SETTLED IN FAVOUR OF T HE ASSESSEE IN THE EARLIER YEARS AND IS PART OF THE RECORD OF THE ASSESSEE AND AS SUCH THE CONTENTION OF THE ASSESSING OFFICER THAT THIS INFORMATION HAS COME TO THE NOTICE AT THE TIME OF SURVEY IS TOTALLY WRONG. 12. IT IS SUBMITTED THAT THESE DETAILS ARE THUS A LREADY PART OF THE RECORD NOT ONLY FOR THE YEAR UNDER CONSIDERATION BUT FOR ALL THE YEARS WHENEVER SCRUTINY ASSESSMENT HAD BEEN MADE AND SUCH DETAILS WERE ASKE D FOR AND THUS IT IS PROVED BEYOND ANY IOTA OF DOUBT THAT THIS INFORMATI ON AS BEING ALLEGED TO BE STATED TO HAVE COME TO THE NOTICE OF THE ASSESSING OFFICER AT THE TIME OF SURVEY IS TOTALLY FALSIFIED. THAT THE REASSESSMENT PROCEEDINGS ARE THUS A RESULT OF CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW. REFERENCE MAY BE MADE TO THE FOLLOWING JUDGMENTS:- A) CIT VS. KALVINATOR OF INDIA LTD. 320 ITR 561. B). ORIENT NEWS PRINTS LTD. V/S DEPUTY COMMISSIONER OF INCOME TAX [2007] 393 ITR 527 - GUJ-HC 87 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 13. BESIDES THAT WE RELY ON THE FOLLOWING JUDGMENT S ON THE SAME ISSUE- A) BBF INDUSTRIES VS JCIT OF INCOME TAX (OSD) IN ITA NO. 1162/CHD/2012 CHANDIGARH BENCH {PAGES 1-51 RELEVANT PAGE 12-13 OF JUDGMENT SET) B) GUJARAT LEASE FINANCING LTD. V/S DEPUTY COMMISSI ONER OF INCOME TAX 360 ITR 496 GUJ-HC (PAGES 52-57 RELEVANT PAGE 53 OF JUDGME NT SET) C) GENERAL MOTORS INDIA PVT. LTD. V/S DEPUTY COMMIS SIONER OF INCOME TAX 360 ITR 527 GUJ-HC (PAGES 59-62 RELEVANT PAGE 59 OF JU DGMENT SET) D) JASHAN TEXTILE MILLS (P) LTD. V/S DEPUTY COMMISS IONER OF INCOME TAX 284 ITR 542 BOM-HC (PAGES 63-67 RELEVANT PAGE 64 OF JUDGME NT SET) E) G N SHAW (WINE) (P) LTD V/S INCOME TAX OFFICER 260 ITR 513 CAL-HC {PAGES 68-71 RELEVANT PAGES 68-69 OF JUDGMENT SET) F) HARYANA ACRYLIC MANUFACTURING CO. V/S COMMISSION ER OF INCOME TAX 308 ITR 36 DEL-HC (PAGES 72-78 RELEVANT PAGES 72 75 & 76 OF JUDGMENT SET) G) SUN PHARMACEUTICAL INDUSTRIES LTD V/S DY COMMISSIONER OF INCOME TAX 381 ITR 387 DEL-HC (PAGES 79-82 RELEVANT PAGES 79 80 & 81 OF JUDGMENT SET) H) MAHAVIR SPINNING MHIS LTD. V/S COMMISSIONER OF I NCOME TAX 270 ITR 290 P&H-HC (PAGES 83-87 RELEVANT PAGE 83 & 84 OF JUDGM ENT SET) I) DULL CHAND SINGHANIA V/S ASSISTANT COMMISSIONER OF INCOME TAX 26$ ITR 192 (PAGES 88-91 RELEVANT PAGE 88 OF JUDGMENT SET) J) APEEJAY EDUCATION SOCIETY V/S ASSISTANT COMMISSI ONER OF INCOME TAX 47 ITR (TRIB) 33 ASR-TRIB (PAGES 92-96 RELEVANT PAGE 92 & 93 OF JUDGMENT SET) K) COMMISSIONER OF INCOME TAX V/S FORMER FRANCE 2 64 ITR 566 (SC) (PAGES 114- 115 RELEVANT PAGE 115 OF JUDGMENT SET) L) BERGER PAINTS INDIA LTD V/S JOINT COMMISSIONE R OF INCOME TAX 245 ITR 645 CAL-HC (PAGES 116-122 RELEVANT PAGE 116 OF JUDGMEN T SET) M) SHRI ABHAY SINGH CHAUTALAVS ACIT IN ITA NO. 522 /CHD/2015 DATED 06 03.2017 (PAGES 130-141 1 RELEVANT PAGES 140 & 141 OF JUDGMENT SET) N) ACIT VS TATA CHEMICALS LTD IN ITA NO. 6647/MU M/2013 ORDER DATED 23 12.2016 (PAGES 185-213 RELEVANT PAGE 185 202 & 201 7 OF JUDGMENT SET) O) ACIT VS ICICI SECURITIES PRIMARY DEALERSHIP LTD . 348 ITR 299 (SC) P) CIT VS KELVINATOR OF INDIA LTD. (SC) AS REPORTE D IN (2010) 320 ITR 561 88 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) KEEPING IN VIEW THE DETAILS AND FACTS GIVEN ABOVE IT IS DEAR THAT COMPLETE DETAILS WERE SUBMITTED BY THE ASSESSEE SOCIETY AT THE TIME OF FILING OF INCOME TAX RETURN AND THAN DURING THE ASSESSMENT PROCEEDINGS FOR THE AY 2010-11 U/S 143(3) AND THUS NOTHING HAS BEEN LEFT UNDISCLOSED. FURTHER NEI THER ANY INCRIMINATING DATA NOR ANY FRESH DATA HAS BEEN FOUND DURING SURVEY. ALL TH E FINDINGS OF THE SURVEY GIVEN IN THE REASONS EXACTLY MATCH DETAILS ALREADY SUBMIT TED TO THE DEPARTMENT AT THE TIME OF FILING THE RETURN AND DURING THE ASSESSMENT OF THE CASE U/S 143 (3) FOR THIS ASSESSMENT YEAR 2010-11. THUS ASSESSEE HAS DISCLOSE D TRULY AND FULLY ALL THE MATERIAL FACTS RELATING TO ITS INCOME. NO FRESH MAT ERIAL OR FACTS HAVE BEEN FOUND OR POINTED OUT AND AS SUCH NO VIOLATION U/S 11(1) AND 11(2) R.W. 11(5) 13(1) 2(15) OF I. T. ACT HAS BEEN MADE. IN VIEW OF ABOVE SAID POSITION OF LAW AND THE FACTU AL FACTS AND CIRCUMSTANCES THE BASIS OF REOPENING OF OUR CASE FOR THE AY 2010- 11 U/S 148 BOTH ON FACTS AND ON LEGAL POSITION AS ENUMERATED IN DIFFERENT JUDGME NTS OF HON'BLE SUPREME COURT AND OTHERS IS TOTALLY DEVOID OF ANY VALID REASONING . IT IS REQUESTED THAT THE REOPENING BEING BAD IN LAW AND THE SAME IS DESERVED TO BE QUASHED. 38.1 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE OBSERVED THAT THE A.O. HAD DULY RECORDED THE REASONS FOR REO PENING THE ASSESSMENT U/S 148 OF THE ACT WHICH WERE PROVIDED TO THE ASSESSEE WHO RAISED OBJECTIONS AND THE SAME WERE DULY DISPOSED OFF BY A SPEAKING ORDER PASSED BY THE A.O. HE FURTHER OBSERVED THAT THE A.O. HAD RIGHT TO REOPEN A COMPLETED ASSESSMENT IN TWO SITUATIONS FIRSTLY A COMPLETED ASSESSMENT CAN BE REOPENED EITHER IF THERE WAS OMISSION OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL AND RELEVANT FACTS AND THE A.O. MUST HAVE IN HIS POSSESSION BEFORE HE ISSUES NOTICE SOME MATERIAL ON WHICH HE CAN REASONA BLY FORM A BELIEF THAT THERE HAS BEEN ESCAPEMENT OF INCOME DUE TO SOME FAILURE O R OMISSION ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL RELEVAN T MATERIAL FACTS. IN THE SECOND SITUATION THE A.O. HAS RIGHT UNDER EXPLANATION-2 T O SUB-CLAUSE (C) OF SECTION 147 OF THE ACT WHICH EMPOWERS THE A.O. TO REOPEN A COMP LETED ASSESSMENT. HE ALSO OBSERVED THAT THE A.O. CAN RESORT TO REOPENING UNDER CLAUSE (C) OF SECTION 147 OF THE ACT NOTWITHSTANDING THE FACT THAT THERE WAS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE EITHER TO MAKE A RETURN OR TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS BUT THE A.O. IN CONSEQUENCE OF INFOR MATION IN HIS POSSESSION SUBSEQUENT TO THE FIRST ASSESSMENT HAS REASON TO BE LIEVE THAT THE INCOME 89 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED AND CONSE QUENTLY HAS ESCAPED ASSESSMENT. 38.2 THE LD. CIT(A) POINTED OUT THAT IN THE INSTAN T CASE A SURVEY WAS CONDUCTED ON 28-29/09/2016 AND THE A.O. HAS NOTICED THAT THE ASSESSEE HAD MADE PAYMENTS OF RS. 1 09 12 261/- TO THE RELATED PERSON S UNDER VARIOUS HEADS LIKE SALARY RENT AND INTEREST WHICH WERE NOT REASONABLE U/S 13(2) OF THE ACT AND THERE WAS VIOLATION OF SECTION 13(1)(C) R.W.S. 13(3 ) OF THE ACT AND ALSO CLAIMED THAT THE ASSESSEE HAD CREATED SURPLUS AFTER CHARGIN G HEFTY FEE FROM THE STUDENTS AND CREATING CAPITAL ASSETS MEANING THEREBY THAT TH E ASSESSEE WAS INDULGING INTO COMMERCIAL ACTIVITIES. THE LD. CIT(A) WAS OF T HE VIEW THAT ONCE THE REASON TO BELIEVE WAS FORMED BY THE A.O. ON THE BASIS OF MATE RIAL WITH HIM SHOWING UNDER ASSESSMENT OF THE INCOME OF THE ASSESSEE HE WAS WE LL WITHIN HIS POWERS TO ISSUE NOTICE U/S 148 OF THE ACT. THE LD. CIT(A) ALSO OBSE RVED THAT UNDER ASSESSMENT OF INCOME WAS A TANGIBLE MATERIAL WHICH GAVE THE A.O. REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT AND A T THE TIME OF FORMATION OF BELIEF BY THE A.O. REGARDING ESCAPEMENT OR UNDER ASSESSMENT OF INCOME WAS SUFFICIENCY OF THE REASONS FOR REOPENING OF THE ASS ESSMENT AND NOT ITS ACCURACY. THEREFORE THE OBJECTION OF THE ASSESSEE TO THE REO PENING OF THE CASE AND STATING THE SAME AS BAD IN LAW COULD NOT BE ACCEPT ED. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (I) S. NAARAYANAPPA VS CIT (1967) 63 ITR 219 (SC) (II) PRAFUL CHUNILAL PATEL VS ACIT (1998) 148 CTR 62 (GUJ) 38.3 THE LD. CIT(A) ALSO OBSERVED THAT THE ACTION U /S 147 OF THE ACT IS PERMISSIBLE EVEN IF THE A.O. GATHERS HIS REASON TO BELIEVE FROM A VERY SAME RECORD WHICH HAD BEEN THE SUBJECT MATTER OF THE COM PLETED ASSESSMENT PROCEEDINGS. THE ARGUMENT THAT THE PRODUCTION OF TH E ACCOUNT BOOKS AND OTHER DOCUMENTARY EVIDENCE RELEVANT FOR ASSESSMENT MUST IMPLY A FULL AND TRUE 90 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) DISCLOSURE OF ALL MATERIAL FACTS MUST BE REJECTED OUT OF HAND IN THE LIGHT OF PROVISIONS OF EXPLANATION (I) TO SECTION 147 OF THE ACT ACCORDING TO WHICH THE MERE PRODUCTION OF BOOKS OF ACCOUNT OR OTHER EVIDEN CE FROM WHICH THE A.O. COULD HAVE WITH DUE DILIGENCE DISCOVERED THE MATER IAL EVIDENCE DOES NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO. ACCORDING TO THE LD. CIT(A) THE SUBMISSION THAT EVEN WHEN TH E ORDER OF THE ASSESSMENT DOES NOT RECORD ANY EXPLICIT OPINION ON THE ASPECT SOUGHT TO BE EXAMINED IN REASSESSMENT IT MUST BE PRESUMED THAT THOSE ASPECT S WERE PRESENT IN THE MIND OF THE A.O. AND HAD BEEN HELD IN THE FAVOUR OF THE ASSESSEE COULD NOT BE ACCEPTED AND THAT THE PRINCIPLE THAT A MERE CHANGE OF OPINION CANNOT BE A BASIS FOR REOPENING COMPLETED ASSESSMENTS WOULD BE APPLICABLE ONLY TO THE SITUATION WHERE THE A.O. HAD APPLIED HIS MIND AND T AKEN A CONSCIOUS DECISION ON A PARTICULAR MATTER IN ISSUE AND IT WOULD HAVE N O APPLICATION WHERE THE ORDER OF ASSESSMENT DID NOT ADDRESS ITSELF TO THE ASPECT WHICH WAS THE BASIS FOR REOPENING OF THE ASSESSMENT. THE RELIANCE WAS PLACE D ON THE FOLLOWING CASE LAWS: (I) CONSOLIDATED PHOT & FINVEST LTD. VS ASST.CIT (2 006) 151 TAXMAN 41 (DELHI). (II) INDO ADEN SALT MFG. & TRADING CO. (P) LTD. VS CIT (1996) 159 ITR 624 (SC) (III) M/S GREATER MOHALI AREA DEVELOPMENT AUTHORITY VS DCIT CIRCLE 6(1) CHANDIGARH DATED 27/04/2018 (2018) 93 TAXMANN.COM 441 (P&H). (IV) SONIA GANDHI VS ACIT CIRCLE-52(1) ORDER DATED 10/09/2018 (2018) 97 TAXMANN.COM 150 (DELHI). 38.4 ACCORDING TO THE LD. CIT(A) WHAT WAS NECESSARY AT THE TIME OF ISSUANCE OF NOTICE U/S 148 OF THE ACT WAS THE REASON TO BELIEVE BY THE A.O. THAT THE INCOME HAD ESCAPED ASSESSMENT AND THE ACTUAL DISCOVERY OF ESCAPEMENT WAS NOT ESSENTIAL THEREFORE THERE WAS NO STRENGTH IN THE ARGUMENT OF THE ASSESSEE THAT SINCE IT HAD AT THE TIME OF ORIGINAL SCRUTINY ASSES SMENT SUBMITTED ALL THE DOCUMENTS AND EXPLANATIONS REQUIRED BY THE A.O IN RESPECT OF PAYMENTS TO INTEREST PERSONS UNDER VARIOUS HEADS AND CREATION O F ASSETS BY INDULGING INTO 91 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) COMMERCIAL ACTIVITIES THE A.O. AFTER APPLYING HIS MIND ACCEPTED HIS POINT OF VIEW AND MOREOVER A SURVEY WAS CONDUCTED ON THE PR EMISES OF THE ASSESSEE IN AUGUST 2016. THE LD. CIT(A) HELD THAT THE VIOLATIO N OF EXPRESSED PROVISIONS OF THE ACT BY THE ASSESSEE CONSTITUTE SUFFICIENT MATERIAL IN THE POSSESSION OF THE A.O. TO FORM THE REASON TO BELIEVE REGARDING ESCAPEMENT OF INCOME AT THE TIME OF REOPENING OF ASSESSMENT WHICH ESCAPED IN THE ORIGIN AL ASSESSMENT ORDER. HE ACCORDINGLY REJECTED THE GROUNDS RAISED BY THE ASS ESSEE RELATING TO THE REOPENING OF THE CASE. 39. NOW THE ASSESSEE IS IN APPEAL. 40. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT TH E ASSESSEE HAD BEEN IMPARTING EDUCATION TO ALL THE SECTIONS OF THE SOCI ETY THROUGH FOUR SCHOOLS LOCATED AT CHANDIGARH MOHALI ZIRAKPUR AND PANCHKU LA HAVING THE REGISTRATION U/S 12AA OF THE ACT SINCE 01/04/1993. IT WAS FURTHE R STATED THAT THE ASSESSEE HAD BEEN FILING RETURNS OF INCOME REGULARLY YEAR AFTER YEAR ON THE BASIS OF AUDITED BOOKS OF ACCOUNTS AND THE ASSESSMENTS FOR THE EARLI ER YEARS AS WELL AS THE LATER YEARS HAD BEEN FRAMED MAJORLY U/S 143(3) OF THE ACT . REFERENCE WAS MADE TO PAGE NOS. 178 TO 277 OF THE ASSESSEES PAPER BOOK-I I WHICH ARE COPIES OF THE ASSESSMENT ORDERS U/S 143(3) OF THE ACT FOR THE VAR IOUS ASSESSMENT YEARS. IT WAS STATED THAT THE DEPARTMENT AFTER RAISING SPECIFIC Q UERIES WITH REGARD TO PAYMENT OF SALARY RENT AND INTEREST TO THE SPECIFIED PERSO NS HAD ACCEPTED THE FACT THAT SUCH PAYMENTS WERE BEING MADE ON THE BASIS OF SERVI CES BEING OFFERED BY THE SPECIFIED PERSONS. IT WAS FURTHER STATED THAT THERE WAS NO TANGIBLE MATERIAL ON RECORD WHICH CAME INTO THE POSSESSION OF THE ASSESS EE AFTER COMPLETION OF THE ASSESSMENT U/S 143(3) OF THE ACT AND FURTHER THE AS SESSEE HAD DISCLOSED ALL PRIMARY FACTS BEFORE THE DEPARTMENT WITH REGARD TO SALARY RENT AND INTEREST AS SUCH MADE FULL AND TRUE DISCLOSURE. IT WAS REITERAT ED THAT THE ISSUE HAD SPECIFICALLY BEEN ENQUIRED INTO BY THE A.O. BY WAY OF QUESTIONNAIRE WHICH WAS 92 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) REPLIED IN DIFFERENT YEARS BY THE ASSESSEE THUS I T WAS MERELY A CHANGE OF OPINION WHICH IS NOT PERMITTED BY LAW. IT WAS SUBMI TTED THAT FOR THE YEAR UNDER CONSIDERATION THE ORIGINAL ASSESSMENT HAD BEEN FRA MED U/S 143(3) OF THE ACT VIDE ORDER DATED 26/02/2013 THERE WAS NO FAILURE O N THE PART OF THE ASSESSEE TO DISCLOSE FULL & TRUE PARTICULARS OF INCOME AND THAT THERE WAS NO TANGIBLE MATERIAL ON RECORD TO JUSTIFY REOPENING OF THE ASSESSMENT PA RTICULARLY WHEN THE SAME VERY ISSUE HAD BEEN EXAMINED DURING THE COURSE OF ORIGIN AL ASSESSMENT PROCEEDINGS AS WELL AS DURING THE ASSESSMENT PROCEEDINGS OF TH E EARLIER YEARS THEREFORE THE REOPENING OF THE ASSESSMENT WAS NOT JUSTIFIED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS SUBMITTED THAT THE ORIGINAL RETURN FOR THE YEAR UNDER CONSIDERATION WA S FILED WITHIN TIME ALONGWITH COMPUTATION OF INCOME (COPY OF WHICH IS PLACED AT P AGE NOS. 1 TO 4 OF THE ASSESSEES PAPER BOOK-I) ALONGWITH TAX AUDIT REPORT WHEREIN THE PARTICULARS OF PAYMENTS MADE TO THE SPECIFIED PERSONS HAD BEEN MEN TIOEND AS PER ANNEXURE-(III) COPIES OF WHICH ARE PLACED AT PAGE NO. 24 & 25 OF THE ASSESSEES PAPER BOOK AND ALL THE DETAILS RELATING TO THE SPEC IFIED PERSONS ARE MENTIONED AT PAGE NO. 27 OF THE SAID PAPER BOOK. IT WAS FURTH ER STATED THAT THE A.O. VIDE DETAILED QUESTIONNAIRE DATED 13/07/2012 (COPY OF WH ICH IS PLACED AT PAGE NOS. 46 TO 49 OF THE ASSESSEES PAPER BOOK) ASKED THE RE LEVANT QUESTIONS NO. 9 12 17 & 18 AND THE ASSESSEE REPLIED TO THE SAME BY INFORM ING THE DETAILS OF PAYMENT OF SALARY RENT AND INTEREST TO THE SPECIFIED PERSO NS (COPY OF WHICH IS PLACED AT PAGE NO 50 OF THE ASSESSEES PAPER BOOK) SIMILAR D ETAILS FOR THE ASSESSMENT YEARS 2009-10 AND 2008-09 HAD BEEN PLACED AT PAGE N OS. 51 & 52 OF THE ASSESSEES PAPER BOOK. IT WAS FURTHER STATED THAT T HE COPIES OF THE ACCOUNTS OF UNSECURED LOANS FROM THE SPECIFIED PERSONS HAD BEEN GIVEN AT PAGE NOS. 53 TO 64 OF THE ASSESSEES PAPER BOOK ALONGWITH FORM NO. 27 AND OTHER TDS DETAILS ARE PLACED AT PAGE NOS. 65 TO 80 OF THE ASSESSEES PAPE R BOOK. IT WAS SUBMITTED THAT THE A.O. AFTER EXAMINING ALL THOSE DETAILS AC CEPTED THE SAME AND NO ADVERSE VIEW HAD BEEN TAKEN FOR THE DEDUCTION OF SA LARY RENT AND INTEREST. IT 93 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) WAS POINTED OUT THAT FOR THE A.Y. 1998-99 THE A.O. WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DATED 20/02/2001 H AD GIVEN AN OFFICE NOTE (COPY IS PLACED AT PAGE NO. 194 OF THE ASSESSEES P APER BOOK) AS UNDER: 2. PAYMENT OF SALARY TO PERSONS AS DEFINED TO SE C. 40A(2)(A) OF THE I.T. ACT THE SALARY HAS BEEN GIVEN KEEPING IN VIEW THE EXPERIENCE AND E DUCATIONAL QUALIFICATION OF THE PERSON(S) WHICH APPEARS TO BE REASONABLE AND CALLS FOR NO ACTION. 3. LOANS AND ADVANCES HAVE SATISFACTORILY BEEN EXPL AINED. COPIES OF THE AFORESAID ASSESSMENT ORDER DATED 20/0 2/2001 IS PLACED AT PAGE NOS. 193 TO 195 OF THE ASSESSEES PAPER BOOK-I I. 40.1 IT WAS ALSO STATED THAT THERE WAS ANOTHER NOTE WITH REGARD TO FACT THAT THE ASSESSEE HAD SPENT REQUISITE AMOUNT FOR ACHIEVING A LL THE OBJECTS OF THE ASSESSEE SOCIETY AND NO FUNDS HAD BEEN DIVERTED FOR PERSONAL USE. REFERENCE WAS MADE TO PAGE NO. 194 OF THE ASSESSEES PAPER BO OK. IT WAS CONTENDED THAT EVEN FOR THE LATER ASSESSMENT YEAR 2012-13 THE CLA IM OF THE ASSESSEE FOR PAYMENT OF SALARY RENT AND INTEREST TO THE SPECIFI ED PERSONS WAS ALLOWED WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT WHICH CLEARLY SHOWS THAT THERE WAS A COMPLETE APPLICATION OF MIND BY THE A.O. ON THE I SSUE WHICH HAD BEEN MADE THE BASIS FOR REOPENING THE PROCEEDINGS U/S 148 OF THE ACT. IT WAS FURTHER STATED THAT IN THE REASONS RECORDED (COPY OF WHICH IS PLAC ED AT PAGE NOS. 120 TO 122 OF THE ASSESSEES PAPER BOOK) IT HAD BEEN MENTIONED THAT PERUSAL OF RECORD AND THEN IT HAD BEEN MENTIONED ABOUT THE SURVEY PRO CEEDINGS ON 28 & 29/09/2016 IN THE CASE OF THE ASSESSEE WITHOUT POI NTING OUT ANY ADVERSE MATERIAL FOUND DURING THE COURSE OF SURVEY AND NO A DDITION HAD BEEN MADE ON ACCOUNT OF ANY ISSUE FOUND DURING THE COURSE OF SUR VEY. THUS IT HAD WRONGLY BEEN MENTIONED THAT THE SURVEY PROCEEDINGS REVEALED ABOUT PAYMENT OF SALARY RENT AND INTEREST TO THE SPECIFIED PERSONS ON THE CONTRARY EARLIER YEARS ASSESSMENT RECORDS BEAR TESTIMONY THAT THE SAID ISS UE PERTAINING TO PAYMENT OF SALARY RENT AND INTEREST WAS EXAMINED THOROUGHLY B Y THE THEN A.O.S PARTICULARLY 94 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) THE OFFICE NOTE GIVEN FOR THE A.Y. 1998-99 COPY OF WHICH IS PLACED AT PAGE NO. 194 OF THE ASSESSEES PAPER BOOK PROVED THIS FACT. IT WAS STATED THAT THE ASSESSEE FILED DETAILED OBJECTIONS BEFORE THE A.O. WITH REGARD TO REOPENING OF THE CASE UNDER SECTION 148 OF THE ACT CONTENDING T HEREIN THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE COM PLETE AND TRUE PARTICULARS OF INCOME AND THAT THE SALARY RENT AND INTEREST WERE PAID TO THE SPECIFIED PERSONS FOR THE LAST OVER 10 YEARS AND ALL SUCH PERSONS HA D REQUISITE QUALIFICATIONS EXPERIENCE HAD BEEN RENDERING THE SERVICES TO THE ASSESSEE SOCIETY AND NO TANGIBLE MATERIAL HAD CAME INTO POSSESSION OF THE A .O. AFTER COMPLETION OF THE ASSESSMENT TO SUBSTANTIATE THAT THE INCOME OF THE A SSESSEE HAD ESCAPED ASSESSMENT AND IT HAD WRONGLY BEEN MENTIONED IN THE REASONS RECORDED THAT FROM SURVEY IT CAME TO THE NOTICE OF THE DEPARTMENT THAT THE SPECIFIED PERSONS WERE RECEIVING SALARY RENT AND INTEREST FROM THE A SSESSEE. IT WAS STATED THAT AFTER RAISING A SPECIFIC QUERY FOR THE A.Y. 2010-11 REGARDING SALARY RENT AND INTEREST PAID TO SPECIFIED PERSONS ANY BY CONSIDERI NG THE REPLY FILED BY THE ASSESSEE THE A.O. HAD ALLOWED SALARY RENT AND INT EREST BY PASSING THE ASSESSMENT ORDER U/S 143(3) OF THE ACT. THUS IT AM OUNTS TO A CHANGE OF OPINION ON THE PART OF THE A.O. ON THE BASIS OF SAME FACTS WHICH IS NOT PERMITTED IN LAW. THEREFORE THE A.O. WAS NOT JUSTIFIED IN REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND THE LD. CIT(A) WRONGLY SUSTAINED THE ACTION OF THE A.O. 40.2 IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) H IMSELF OBSERVED THAT IN TWO SITUATIONS THE CASE CAN BE REOPENED U/S 148 OF THE ACT I.E. A. ONE WHERE THERE IS OMISSION/FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. OR B. THE ASSESSING OFFICER HAS IN HIS POSSESSION SOME MATERIAL FOR FORMATION OF BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. 95 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) IT WAS STATED THAT NONE OF THE ABOVE CONDITIONS APP LIES TO THE ASSESSEES CASE AS NEITHER THERE WAS INFORMATION NOR ANY MATERIAL I N POSSESSION OF THE A.O. ALTHOUGH THERE WAS SURVEY CONDUCTED ON THE ASSESSE E ON 28/29 TH SEPTEMBER 2016 BUT THIS FACT OF PAYMENT OF SALARY RENT AND I NTEREST WAS IN THE KNOWLEDGE OF THE A.O. FOR THE PAST 10 YEARS ESPECIALLY FOR TH IS YEAR AS THE QUESTIONNAIRE WAS RAISED AND THE REPLY WAS FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS THEREFORE THE FINDING OF T HE LD. CIT(A) IN PARA 5.1.2 AT PAGE NO. 13 OF THE IMPUGNED ORDER THAT THE A.O. NOT ICED THE PAYMENT OF SALARY RENT AND INTEREST TO THE TUNE OF RS. 1 09 1 2 261/- DURING THE COURSE OF SURVEY WAS TOTALLY AGAINST THE FACTUAL FACTS AND CI RCUMSTANCES OF THE CASE. A REFERENCE WAS MADE TO THE ORDERS FOR DIFFERENT ASSE SSMENT YEARS COPIES OF WHICH ARE PLACED AT PAGE NO. 178 TO 277 OF THE ASSESSEES PAPER BOOK. IT WAS FURTHER STATED THAT THE FACTS OF THE CASE RELIED BY THE LD. CIT(A) I.E. THE CASE OF S. NARAYANAPPA REPORTED IN 263 ITR 219 WERE NOT APPLIC ABLE TO THE FACTS OF THE ASSESSEES CASE AS THERE WAS NO FRESH MATERIAL WITH THE A.O. AS WAS IN THE SAID CASE. IT WAS FURTHER SUBMITTED THAT THE FINDINGS OF THE LD. CIT(A) IN PARA 5.1.4 ARE AGAIN MISPLACED SINCE THE FORMATION OF BELIEF WAS V OID AB INITIO AS THERE WAS NO SUCH TANGIBLE MATERIAL ON RECORD AND THE ISSUE RELA TING TO PAYMENT OF SALARY RENT AND INTEREST WAS WELL WITHIN THE KNOWLEDGE OF THE A.O. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION AS WELL AS OF THE EARLIER YEARS. IT WAS SUBMITTED THAT THE OBSERV ATION OF THE LD. CIT(A) IN PARA 5.1.6 ARE IN FAVOUR OF THE ASSESSEE BECAUSE IN THE PRESENT CASE NOT ONLY THE BOOKS OF ACCOUNT/RECORDS WERE PRODUCED BUT THERE WA S A SPECIFIC QUERY WITH REGARD TO PAYMENT OF SALARY RENT AND INTEREST AND THE A.O. HAD TAKEN A CONSCIOUS DECISION ABOUT THE DEDUCTION OF SUCH SALA RY RENT AND INTEREST WHICH HAD BEEN ALLOWED IN THE EARLIER YEARS AS WELL AS IN THE YEAR UNDER CONSIDERATION THEREFORE THE JUDGEMENT IN THE CASE OF PRAFUL CHUN ILAL PATEL(SUPRA) RELIED BY THE LD. CIT(A) WAS IN FAVOUR OF THE ASSESSEE. IT WAS SU BMITTED THAT THE CASE LAWS RELIED UPON BY THE LD. CIT(A) WERE ON DIFFERENT FAC TS AND NOT APPLICABLE IN THE 96 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) FACTS OF THE ASSESSEES CASE PARTICULARLY WHEN NO T ANGIBLE MATERIAL WAS IN POSSESSION OF THE A.O. WHO MADE THE SPECIFIC QUERY AND EXAMINED THE REPLY GIVEN BY THE ASSESSEE THEN ACCEPTED THE CLAIM OF TH E ASSESSEE THEREFORE THE REOPENING ON THE BASIS OF CHANGE OF OPINION WAS NOT JUSTIFIED. RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF ORIENT CRAFT LTD. REPORTED IN 354 ITR 536. 40.3 IT WAS SUBMITTED THAT THERE WAS NO VIOLATION O F MATERIAL FACTS IN THE ASSESSEES CASE AS THE A.O. HIMSELF MENTIONED IN TH E REASONS RECORDED ABOUT THE PERUSAL OF RECORD AND NO NEW TANGIBLE MATERIAL HAVING COME INTO THE POSSESSION OF THE A.O. WHO HAD ALREADY ENQUIRED AND ACCEPTED THE CLAIM OF THE ASSESSEE RELATING TO PAYMENT OF SALARY RENT AN D INTEREST THEREFORE REOPENING WAS BAD IN LAW AND THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE A.O.. RELIANCE WAS PLACED ON THE FOLL OWING CASE LAWS: 1. ASSISTANT COMMISSIONER OF INCOME TAX V/S MARICO LTD 117 TAXMANN.COM 244 (SC) 2. NEW DELHI TELEVISION LTD V/S DCIT 116 TAXMANN.C OM 151 (SC) 3. GREATER MOHALI AREA DEVELOPMENT AUTHORITY V/S DC IT ITA NO.410/CHD/2013 CHD-TRIB 4. TROPEX PROMOTION AND TRADING LTD V/S CIT 423 IT R510 (DEL) 5. PCIT V/S ZEE MEDIA CORPORATION LTD. 423 ITR 304 (BOM) 6. PRASAD MULTI SERVICES PVT. LTD V/S DCIT 423 ITR 542 (GUJ) 7. KAPADIA MONEY CHANGERS PVT. LTD. VS. ASSTT. CIT 423 ITR 633 (GUJ) 8. NIRANJAN CHIMANLAL JANI VS. DEPUTY CIT 425 ITR 162 (GUJ) 9. B. KASI VISWANATH VS. ITO 425 ITR 538 (MAD) 10. ARUN MUNSHAW HUF VS. ITO 425 ITR 79 (GUJ) 11. ASIAN TUBES PVT. LTD. VS. DEPUTY CIT 425 ITR 6 13 (GUJ) 12. R. KANTILAL AND CO. VS. ITO 424 ITR 92 (GUJ) 13. CIT VS. INDIA CEMENTS LTD. 424 ITR 410 (MAD) 14. DR. RAJIVRAJ RANBIR SINGH CHAUDHARY VS. ASSISTA NT CIT [2017] 79 TAXMANN.COM 152 (GUJ) 97 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 15. BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD. V S. DEPUTY CIT 81 ITR (TRIBUNAL) 419 (CHD- TRIB) 16. SKYVIEW CONSULTANT PVT. LTD V/S ITO AND ANOTHER 423 ITR 645 (DLEHI) 17. MITSUBISHI ELECTRIC AUTOMOTIVE INDIA (P.) LTD V/S UNION OF INDIA 377 ITR 266 (P&H) 18. STATE BANK OF PATIALA V/S COMMISSIONER OF INCOM E TAX 375 ITR 109 (P&H) 19. COMMISSIONER OF INCOME TAX V/S ITW INDIA LTD. 377 ITR 195 (P&H) 20. COMMISSIONER OF INCOME TAX V/S KELVINATOR OF IN DIA LTD 320 ITR 561(SC) 21. PR. COMMISSIONER OF INCOME TAX V/S MEENAKSHI OV ERSEAS P LTD 82 TAXMANN.COM 300(DEL) 22. M/S HOLY FAITH INTERNATIONAL PVT. LTD V/S DCIT ITA NO.181/ASR./2017 (ASR) 23. M/S INDO GLOBAL TECHNO TRADE LTD V/S INCOME TAX OFFICER ITA NO 1616/CHD/2018 CHD-TRIB 24. MAHAVIR SPINNING. MILLS LTD V/S COMMISSIONER OF INCOME TAX 270 ITR 290 (P&H) 25. COMMISSIONER OF INCOME TAX V/S HINDUSTAN ZINC L TD. 393 ITR 264 (RAJ) 26. PCIT V/S BALDEV SINGH PROP M/S NANKANA SAH IB ROAD LINES ITA NO. 283 OF 2016 (O&M) ORDER DATED. 12.02.2018 (P&H) 27. JIVRAJ TEA LIMITED V/S ASSISTANT COMMISSIONER O F INCOME TAX 426 ITR 146 (GUJ) 28. MADURAI POWER CORPORATION PRIVATE LIMITED VS. D CIT(2020) 428 ITR 117 (A.P) 41. IN HIS RIVAL SUBMISSIONS THE LD. CIT-DR STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT AFTER CONDUCTING THE SURVEY THE RELEVANT INFORMATION CAME TO THE KNOWLEDGE OF THE A SSESSEE THAT THE PAYMENTS WERE MADE TO THE SPECIFIED PERSONS SO THE A.O. WAS HAVING A BONAFIDE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT AND WAS JUST IFIED IN REOPENING THE ASSESSMENTS FOR THE A.Y. 2010-11 AND 2011-12. IT WA S FURTHER SUBMITTED THAT THE A.O. DISPOSED OFF THE OBJECTIONS RAISED BY THE ASSE SSEE AND THERE WAS NO FORMATION OF OPINION DURING THE COURSE OF REGULAR A SSESSMENT AS SUCH THE REOPENING OF THE ASSESSMENTS BY THE A.O. BY INVOKIN G PROVISIONS OF SECTION 147 R.W.S. 148 OF THE ACT WAS JUSTIFIED AND THE LD. CIT (A) RIGHTLY CONFIRMED THE ACTION OF THE A.O. 98 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 42. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE A.O. FRAMED ORIGINAL ASSESSMENT U/S 143(3) OF THE A CT AND BEFORE COMPLETING THE ORIGINAL ASSESSMENT THE A.O. ASKED THE ASSESSE E ABOUT THE PAYMENT OF SALARY RENT AND INTEREST BY ISSUING QUESTIONNAIRE COPY OF WHICH IS PLACED AT PAGE NOS. 46 TO 49 WHICH READS AS UNDER: TO M/S. MANAV MANGAL SOCIETY SECTOR 21 CHANDIGARH. SIR SUB: ASSESSMENT PROCEEDING FOR A. Y. 2010-11 REGARD ING- ****** PLEASE REFER TO YOUR RETURN OF INCOME FOR THE A. Y. 2010-11 FILED IN THIS OFFICE. IN THIS CONNECTION YOU ARE REQUESTED TO PLEASE FURNISH THE FOLLOWING INFORMATION:- (THE INFORMATION SHOULD BE COMPLETE AND FILED SYSTE MATICALLY IN THE SAME SEQUENCE.) Q1. PLEASE FILE COPY OF TRUST DEED/INSTRUMENTS/MEM ORANDUM OF ASSOCIATION WITH WHICH THE TRUST/SOCIETY WAS CREATED AND SUBSEQ UENT MODIFICATION TO THE DEED/INSTRUMENT/MEMORANDUM OF ASSOCIATION. Q2. PLEASE FILE A READABLE COPY OF REGISTRATION U /S 12A DULY ATTESTED BY THE PERSON AUTHORIZED TO SIGN THE RETURN. YOU ARE ALSO REQUESTED TO PRODUCE ORIGINAL CERTIFICATE FOR VERIFICATION. Q3. WHETHER THE TRUST/SOCIETY IS NOTIFIED U/S 80G OF THE I. T. ACT OR IS NOTIFIED U/S 10(23C). IF YES PLEASE FILE A CERTIFIED COPY BY T HE PERSON AUTHORIZED TO SIGN THE RETURN. Q4. IF ANY ASSESSMENT U/S 143(3)/144/147 HAVE BEEN FRAMED IN YOUR CASES IN EARLIER YEARS PLEASE FURNISH A COPY OF LATEST ASSE SSMENT ORDER. Q5. PLEASE FURNISH NAME COMPLETE ADDRESS AND ASSE SSMENT PARTICULARS ALONG WITH PAN OF EACH TRUSTEE. Q6. PLEASE FURNISH A NOTE OF THE ACTIVITIES OF YOU R INSTITUTION/TRUST. WHETHER THERE ARE ANY ACTIVITIES WHICH ARE NOT AS PER TRUST DEED. 99 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) Q7. PLEASE FURNISH COPIES OF ANY RESOLUTION PASSED BY THE TRUST/INSTITUTION IN THE YEAR UNDER CONSIDERATION. Q8. PLEASE GIVE THE DETAILS OF SURPLUS/DEFICIT FOR THE PAST FIVE YEARS AND SHOW AS TO HOW THE ACCUMULATED SURPLUS HAS BEEN UTILIZED IN SUBSEQUENT YEARS. PLEASE CERTIFY THAT THE ACCUMULATED INCOME HAS BEEN UTILIZ ED WITHIN THE TIME PERIOD ALLOWED FOR THE SAME AND FOR THE PURPOSE IN ACCORDA NCE WITH THE PROVISIONS OF SECTION 11 OF THE I. T. ACT. SUBMIT A CHART THEREOF FOR THE LAST FIVE YEARS AS UNDER:- YEAR OF ACCUMULATION TO BE USED UP TO PURPOSE DATE OF UTILIZATION EVIDENCE THEREOF PLEASE ALSO FURNISH COPY OF ACKNOWLEDGEMENT OF SUBM ISSION OF FORM NO. 10 TO THE AO WITH RESPECT TO EACH YEAR AND THE COPY OF RESOLUT ION PASSED FOR THE ABOVE PURPOSE FOR THE LAST FIVE YEARS Q9. DETAILS OF APPLICATION OR USE OF INCOME OR PROP ERTY FOR THE BENEFIT OF PERSONS REFERRED TO IN SECTION 13(3) ALONG WITH AN EXPLANAT ORY NOTE ON ITS JUSTIFICATION. PLEASE FILE DETAILS OF PAYMENTS MADE TO SPECIFIED PERSONS IN LA ST TWO YEARS AS WELL AS IN THE YEAR UNDER CONSIDERATION. PLEASE FILE DETAILS OF INVESTM ENTS MADE AND ALSO CONFIRM THE INVESTMENT HAVE BEEN MADE IN THE SPECIFIED ASSETS M ENTIONED IN SECTION 11 OF THE I. T. ACT. Q10. PLEASE GIVE ADDRESSES WITH OWNERSHIP DETAILS O F ALL THE PREMISES USED BY THE TRUST. Q11. PLEASE STATE THE BANK ACCOUNTS OF THE TRUST/SO CIETY ALSO FILE CONFIRMATION OF BANK BALANCES AS ON 31.3.2010 ALONG WITH BANK RECONCILIA TION STATEMENT. Q.12 PLEASE FURNISH FOLLOWING DETAILS FOR THE YEAR UNDER ASSESSMENT AND THREE PREVIOUS YEARS: SR. NO. TOTAL RECEIPTS/INCOME AS PER INCOME & EXPENDITURE ACCOUNT REVENUE EXPENDITURE DURING THE YEAR CAPITAL EXPENDITURE DURING THE YEAR TOTAL EXPENDITURE (3+4) % AGE OF EXPENDITURE (5/2X100) 1 2 3 4 5 6 Q13. FURNISH DETAILED BREAK UP THE AMOUNTS RECEIVE D AS CORPUS/DONATIONS/OTHER GROSS RECEIPTS IN THE FOLLOW ING FORMAT ALONG WITH RELEVANT DOCUMENTS EXECUTED BY THE DONOR IN THIS REGARD. SR. NO. SOURCE AMOUNT Q14. PLEASE STATE WHETHER YOU WERE LIABLE TO DEDUC T TAX AT SOURCE DURING THE YEAR AS PROVIDED IN CHAPTER XVII-B OF THE INCOME-TA X ACT. IF SO WHETHER TAX HAS BEEN DULY DEDUCTED AND PAID WITHIN TIME. PLEASE GIV E DETAILS THEREOF. 100 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) Q15. PLEASE PRODUCE COMPLETE BOOKS OF ACCOUNTS ALO NGWITH SUPPORTING VOUCHERS. Q16. DETAILS OF VEHICLE HELD BY THE TRUST/SOCIETY/ INSTITUTION IN FOLLOWING FORMAT:- REGISTRATION NO. MAKE MODEL NO. UTILIZATION Q17. PLEASE GIVE DETAILS OF ANY LOAN BORROWED OR R EPAID DURING THE LAST THREE YEARS INCLUDING THE YEAR UNDER CONSIDERATION. Q18. ALSO PRODUCE ITR STATEMENTS OF THE TRUSTEES PLEASE NOTE THAT THE ABOVE INFORMATION HAS BEEN CAL LED FOR U/S 142(1) OF THE INCOME TAX ACT 1961 WHICH SHOULD BE FURNISHED DULY VERIFIED AND AS PROVIDED IN RULE 14 OF THE INCOME TAX RULES AND EACH PAGE SHOUL D BE SIGNED BY THE PERSON AUTHORIZED TO SIGN THE RETURN. NOTICE U/S 142(1) IS ENCLOSED HEREWITH AND YOUR CAS E IS FIXED FOR HEARING ON 06.08.2012. YOURS FAITHFULLY SD/- (KANIKA AGGARWAL) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 3(1) CHANDIGARH. FROM THE AFORESAID REASON IT WOULD BE CLEAR THAT T HE A.O. VIDE QUESTION NO. 9 SPECIFICALLY ASKED THE ASSESSEE TO FURNISH TH E DETAILS OF PAYMENTS MADE TO THE SPECIFIED PERSONS AND VIDE QUESTION NO. 12 THE DETAILS WERE ASKED RELATING TO THE TOTAL RECEIPTS AS WELL AS THE EXPENDITURES. THE A.O. VIDE Q.NO. 17ALSO ASKED THE DETAILS OF LOANS BORROWED OR REPAID THER EFORE IT IS CLEAR THAT THE A.O. ASKED THE ASSESSEE SPECIFIC INFORMATIONS. 42.1 IN RESPONSE THE ASSESSEE FURNISHED THE REPLY AND GAVE THE DETAILS WHICH ARE PLACED AT PAGE NOS. 50 TO 52 OF THE ASSESSEES PAPER BOOK WHICH READ AS UNDER: 101 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 102 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 103 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) FROM THE AFORESAID DETAILS IT WOULD BE CLEAR THE A SSESSEE FURNISHED THE DETAILS FOR THE A.YS 2008-09 TO 2010-11 RELATING TO SALAR Y RENT AND INTEREST PAID TO THE SPECIFIED PERSONS WHICH WERE ASKED BY THE A.O. THE REFORE THE OBSERVATIONS OF THE LD. CIT(A) THAT ON THE BASIS OF DOCUMENTS OR DE TAILS FOUND DURING THE COURSE 104 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) OF SURVEY THE A.O. CAME TO KNOW ABOUT THE PAYMENTS MADE TO THE SPECIFIED PERSONS. ON THE CONTRARY THOSE DETAILS WERE EXAMIN ED BY THE A.O. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS WHICH IS EVIDENT FROM THE AFORESAID QUESTIONNAIRE ISSUED BY THE A.O. AND THE DETAILS FU RNISHED BY THE ASSESSEE. THEREAFTER THE A.O. FRAMED THE ASSESSMENT U/S 143(3 ) OF THE ACT AND OBSERVED IN PARA 3 OF THE ASSESSMENT ORDER DATED 26/02/2013 AS UNDER: 3. IN RESPONSE TO THE NOTICE THE COUNSEL SH. RAMESH KU MAR MALHOTRA ATTENDED THE ASSESSMENT PROCEEDINGS. REQUISITE DOCU MENTS BOOKS OF ACCOUNTS WERE CALLED FOR TO VERIFY THE EXPENSES CLAIMED. FR OM THE PERUSAL OF THE RELEVANT INFORMATION IS THE FOLLOWING ISSUES WERE IDENTIFIE D. 42.2 HOWEVER AFTER EXAMINING THE BOOKS OF ACCOUNTS AND THE DETAILS FURNISHED BY THE ASSESSEE THE A.O. DISALLOWED 20% OF THE EXP ENSES RELATING TO TRAVEL AND VEHICLES AS HAS BEEN MENTIONED IN PARA 4 OF THE AFO RESAID ASSESSMENT ORDER WHICH READ AS UNDER: 4. VIDE ORDER SHEET ENTRY DATED 23.10.2012 THE COUNSE L MENTIONED THAT NO LOG BOOKS HAVE BEEN MAINTAINED BY THE ASSESSEE/SOCI ETY REGARDING TRAVEL & VEHICLES (CARS). ALSO NO SEPARATE CARS ARE BEING M AINTAINED FOR PERSONAL USE. HENCE THE USE OF THESE VEHICLES BY THE ASSESSEE & HIS FAMILY MEMBERS FOR PERSONAL USES CAN'T BE RULED OUT. THUS A DISALLOWA NCE TO THE TUNE OF 20% IS BEING MADE ON THE EXPENSES CLAIMED ON VEHICLES. SR. NO. SCHOOL VEHICLE RUNNING & MAINTENANCE 1. CHANDIGARH 156755/- 2. PANCHKULA 1692098/- 3. MOHALI 123440/- 4. SOCIETY 173569/- TOTAL 21 45 862/- THUS RS. 4 29 172/- IS BEING DISALLOWED & ADDED BAC K TO THE INCOME OF THE ASSESSEE. 42.3 FROM THE AFORESAID NARRATED FACTS IT IS CLEAR THAT THE A.O. PROPERLY EXAMINED ALL THE DETAILS FURNISHED BY THE ASSESSEE AND MADE DISALLOWANCE ALSO FOR THOSE EXPENSES WHICH IN HIS VIEW WERE PERSONAL IN NATURE. THE A.O. AFTER FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT REOPE NED THE ASSESSMENT BY RECORDING THE FOLLOWING REASONS: 105 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 106 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 107 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 42.4 FROM THE AFORESAID REASONS RECORDED BY THE A.O . IT IS CLEAR THAT THE A.O. CONSIDERED THE EXPENSES RELATING TO THE SALARY TO T HE SPECIFIED PERSONS AMOUNTING TO RS. 1 09 12 261/- AS NON-GENUINE. HOWE VER THE SAME WERE CONSIDERED TO BE GENUINE WHILE FRAMING THE ASSESSME NT U/S 143(3) OF THE ACT SO IT WAS A CHANGE OF OPINION. SIMILAR WAS THE POSITIO N WITH REGARD TO THE RENT AND THE INTEREST. NOW THE QUESTION ARISES AS TO WHETHER THE ASSESSMENT CAN BE REOPENED ON THE BASIS OF CHANGE OF OPINION. 42.5 ON THE SAME ISSUE THE HONBLE APEX COURT IN T HE CASE OF NDTV VS DCIT (SUPRA) HELD THAT THERE BEING NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NOTICE ISSUED TO ASSESSEE AFTER A P ERIOD OF FOUR YEARS WAS TO BE QUASHED AND SET ASIDE. IN THE PRESENT CASE ALSO THERE WAS NO NEW MATERIA L WHICH CAME TO THE KNOWLEDGE OF THE A.O. AFTER FRAMI NG THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT THEREFORE THE REOPENING WAS NOT VALID. 108 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) 42.6 SIMILARLY IN THE CASE OF ACIT VS MARICO LTD. ( SUPRA) THE HONBLE APEX COURT DISMISSED THE SLP AGAINST THE ORDER OF THE HONBLE HIGH COURT WHEREIN IT WAS HELD THAT NON-REJECTION OF EXPLANATION IN ASSESSMENT ORDER W OULD AMOUNT TO A.O. ACCEPTING VIEW OF THE ASSESSEE THUS FORMING A N OPINION AND THAT THE REASON IN SUPPORT OF REASSESSMENT NOTICE WAS ON ACC OUNT OF A MERE CHANGE OF OPINION AND HENCE THE SAME WAS COMPLETELY WITHOUT J URISDICTION. IN THE PRESENT CASE ALSO THE A.O. ACCEPTED THE CLAIM OF THE ASSES SEE WHILE FRAMING THE ORIGINAL ASSESSMENT AND CONSIDERED THE EXPENSES CLA IMED BY THE ASSESSEE AS GENUINE THE SAME EXPENSES WERE CONSIDERED TO BE NO N-GENUINE WHILE ISSUING THE NOTICE U/S 148 OF THE ACT. THEREFORE IT WAS A MERE CHANGE OF OPINION AND ON THE BASIS OF CHANGE OF OPINION THE ASSESSMENT R EOPENED WAS NOT VALID. FURTHERMORE THE A.O. ACCEPTED THE CLAIM OF THE ASS ESSEE NOT ONLY IN THE EARLIER YEARS BUT ALSO IN THE LATER YEARS AND CONSIDERED TH E EXPENSES ON ACCOUNT OF SALARY RENT AND INTEREST PAID TO THE SPECIFIED PER SONS AS GENUINE. MOREOVER THE A.O. FOR THE YEAR UNDER CONSIDERATION DID NOT BRING ANY MATERIAL ON RECORD TO SUBSTANTIATE THAT THE EXPENSES INCURRED FOR THE SPE CIFIED PERSONS BY THE ASSESSEE WERE EXCESSIVE IN COMPARISON TO THE EXPENSES INCURR ED BY ANOTHER COMPARABLE CASES. 42.7 A SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE G UJARAT HIGH COURT IN THE CASE OF JIVRAJ TEA CO. VS ACIT (SUPRA) WHEREIN IT H AS BEEN HELD THAT: THE REOPENING OF THE ASSESSMENT UNDER SECTION 147 FOR THE ASSESSMENT YEAR 2011-12 WAS ON A CHANGE OF OPINION. THERE WAS NOTHING ON RE CORD TO INDICATE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRU LY AND FULLY ALL THE MATERIAL FACTS. THERE WAS NO TANGIBLE MATERIAL AVAILABLE FOR THE PURPOSE OF ISSUING THE NOTICE UNDER SECTION 148 FOR REOPENING THE ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS AND WAS UNSUSTAINABLE. 42.8 IN A SIMILAR CASE THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MITSUBISHI ELECTRIC AUTOMOTIVE INDIA (P) LTD. VS UN ION OF INDIA 377 ITR 266 (SUPRA) HELD AS UNDER: THAT THE ASSESSING OFFICER AND THE TRANSFER PRICING OFFICER WERE NOT ONLY AWARE OF THE PAYMENT OF ROYALTY BUT HAD TAKEN THE PAYMENT OF ROY ALTY INTO CONSIDERATION AT EVERY STAGE. THE ASSESSING OFFICER HAD IN FACT EXPRESSLY CALLED FOR THE INFORMATION. IT COULD NOT BE HELD 109 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) THEREFORE THAT THE ASSESSING OFFICER WAS NOT AWARE OF THE ROYALTY AND HAD NOT TAKEN THE ROYALTY PAYMENT INTO CONSIDERATION BEFORE PASSING T HE ASSESSMENT ORDER UNDER SECTION 143. PROCEEDINGS WERE INITIATED UNDER SECTION 154 BEFORE THE ISSUANCE OF A NOTICE UNDER SECTIONS 147 AND 148 BUT THE PROCEEDINGS WERE DROPP ED HOLDING THAT IT WAS A DEBATABLE ISSUE. THEREFORE THE NOTICE UNDER SECTIONS 147 AND 148 WERE CLEARLY BASED ONLY ON A MERE CHANGE OF OPINION WHICH WAS NOT PERMISSIBLE. 42.9 IN THE PRESENT CASE ALSO THE A.O. NOT ONLY AS KED THE ASSESSEE TO FURNISH THE DETAILS RELATING TO THE PAYMENT MADE TO THE SPE CIFIED PERSONS ON ACCOUNT OF SALARY RENT AND INTEREST BUT ALSO EXAMINED THOS E AND THEREAFTER FRAMED THE ASSESSMENT U/S 143(3) OF THE ACT THEREFORE THE IS SUANCE OF THE NOTICE U/S 148 R.W.S. 147 OF THE ACT ON THE BASIS OF THE SAME ISS UE WAS A MERE CHANGE OF OPINION WHICH WAS NOT PERMISSIBLE. 42.10 SIMILARLY THE HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF STATE BANK OF PATIALA VS CIT (2015) 375 ITR 109 (P&H) HEL D AS UNDER: THAT THE REASONS FOR REOPENING THE ASSESSMENTS WHIC H HAD ALREADY BEEN CONCLUDED DID NOT SHOW THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS AND THUS IT WAS MERELY A CHANGE OF OPINION AND IN VIEW OF THE SETTLED POSITION OF LAW THE ASSESSEE WOULD BE ENTITLED TO SETTING ASIDE OF THE NOTICES ISSUED. THE ADDITIONAL FACTOR REGARDING THE CHANGE OF OPINION B Y THE ASSESSING OFFICER WOULD ALSO BE A VALID GROUND FOR SETTING ASIDE THE NOTICE ISSUED FO R THE ASSESSMENT YEAR 2007-08. FURTHER THE REASON FOR REOPENING WAS MERELY A CHANGE OF OPINION ON ACCOUNT OF THE ASSESSMENT BEING MADE FOR THE SUBSEQUENT YEARS WOULD NOT GIVE THE ASSESSING OFFICER THE JURISDICTION TO REOPEN AS HE WOULD THUS BE REVIEWING HIS EARLI ER DECISION WHICH HAS BEEN HELD NOT TO BE PERMISSIBLE. THUS THE NOTICES AND THE ORDERS WE RE ACCORDINGLY QUASHED. 42.11 ON A SIMILAR ISSUE THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF MADURAI POWER CORPORATION PVT. LTD. VS. DCIT [2020] REPORTED AT 428 ITR 117 HELD AS UNDER: THE ADMITTED FACTS WERE THAT (I) THE ASSESSEE HAD D ISCLOSED ALL THE FACTS BEFORE THE ASSESSING OFFICER IN ONE FORM OR THE OTHER; (II) TH E ASSESSMENT WAS REOPENED FOUR YEARS AFTER ITS ACCEPTANCE SANS FRESH MATERIAL EMANATING SUBSEQ UENTLY (HI) IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAD SUPPRESSED ANY INCOME OR ANY MATERIAL FACTS; (IV) THE ASSESSMENT WAS NOT REOPENED ON THE BASIS OF ANY NEW MATERIAL FACT WHICH CAME TO LIGHT AFTER THE PASSING OF THE ASSESSMENT ORDER; (V ) A REPLY CAME TO BE GIVEN TO THE AUDIT OBJECTION BY THE ASSESSING OFFICER FOR DROPPING THE OBJECTIONS RAISED. THE NOTICE OF REASSESSMENT WAS NOT VALID. 42.12 AS WE HAVE ALREADY POINTED OUT IN THE FORMER PART OF THIS ORDER THAT THE REASON FOR REOPENING OF THE ASSESSMENT BY THE A.O. ON THE BASIS OF THE ISSUE WHICH WAS EXAMINED AND ACCEPTED BY HIM WHILE FRAMIN G THE ORIGINAL 110 ITA 02/CHD/2020 & 7 ORS. M/S MANAV MANGAL SOCIETY VS DCIT(E) ASSESSMENT WAS MERELY A CHANGE OF OPINION WHICH WOU LD NOT GIVE THE A.O. THE JURISDICTION TO REOPEN THE SAME AS HE WOULD BE REVI EWING HIS EARLIER DECISION WHICH IS NOT PERMISSIBLE. ACCORDINGLY THE REOPENIN G BY THE A.O. IN THE PRESENT CASE DESERVES TO BE QUASHED. WE THEREFORE BY KEEP ING IN VIEW THE TOTALITY OF THE FACTS AS DISCUSSED HEREINABOVE AND BY RESPECTFU LLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT AS WELL AS VARIOU S HONBLE HIGH COURTS IN THE AFORESAID REFERRED TO CASES ARE OF THE VIEW TH AT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE A.O. IN R EOPENING THE ASSESSMENT THEREFORE THE REASSESSMENT FRAMED BY THE A.O. IS Q UASHED. 43. THE FACTS FOR THE A.Y. 2011-12 IN ITA NO. 03/CH D/2020 ARE IDENTICAL TO THE FACTS INVOLVED FOR THE A.Y. 2010-11 IN ITA NO. 02/C HD/2020(SUPRA) THEREFORE OUR FINDINGS GIVEN FOR THE A.Y. 2010-11 SHALL APPLY MUT ATIS MUTANDIS FOR THE A.Y. 2011- 12. 44. IN THE RESULT ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED AND ALL THE APPEALS OF THE DEPARTMENT ARE DISMISSED. (ORDER PRONOUNCED IN THE COURT ON 27/05/2021). SD/- SD/- .. .. (R.L. NEGI) (N.K . SAINI) $ %&/ JUDICIAL MEMBER ! / VICE PRESIDENT DATE: 27/05/2021 *RANJAN / AG (+ ! - .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ / / CIT 4. $ / ()/ THE CIT(A) 5. -23 4 & 4 67839/ DR ITAT CHANDIGARH 6. 38 :%/ GUARD FILE