M/S Rohilkhand Educational Charitable ... vs Department Of Income Tax

ITA No.343 to 345/LKW/2014 Assessment year:2004 -2005 to 2006 - 07 D.C.I.T. Circle - 2, Vs. M/s Rohilkhand Educational Charitable Trust, Bareilly C/o Keshlata Hospital, Delapeer, Bareilly - 243122 PAN:AAATR6920JR (Appellant) (Respondent) CO No.14 to 16/LKW/2014 Assessment year:2004 -2005 to 2006 - 07 M/s Rohilkhand Educational Charitable Trust, Vs. D.C.I.T. Circle - 2, C/o Keshlata Hospital, Delapeer, Bareilly Bareilly - 243122 PAN:AAATR6920JR (Appellant) (Respondent) Assessee by Written Submissions Revenue by Shri Punit Kumar, Sr. DR Date of hearing 30/03/2015 Date of pronouncement 21/04/2015 ORDER PER A. K. GARODIA, A.M.

All these three appeals are filed by the revenue and these three Cross Objections are filed by the assessee and these are directed against three separate orders of Learned CIT (A) Bareilly all Dated 28.02.2014 for A.Y. 2004 - 2005 to 2005

- 2007.

2. First, we take up the appeal for A.Y. 2004 - 05 in ITA No. 343/LKW/2014. The grounds are as under:-

(1) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 5,77,000/- made by the Assessing Officer on account of Advance of Fees Receipts.

(2) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition made by the Assessing Officer at Rs.

23,72,884/- on account of Salary Expenses.

2 (3) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 2,28,500/- on account of travelling expenses, Rs. 17,810/- on account of difference in payment of salary though the same was explained to auditors & ID A.O., the addition of Rs. 9,60,236/- out of expenditure incurred by assessee without considering needs, exigencies and reasonableness of payments, Rs. 53,850/- on account of capital expenditure debited by the assessee to profit & loss account.

(4) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 1,25,707/- u/s 40A(3) without taking into consideration the real facts and documentary evidence as mentioned by the assessing officer in the assessment order.

(5) That the Commissioner of Income Tax (Appeals), Bareilly has erred in law and on facts in deleting the addition of Rs. 5,11,227/- rightly made by the assessing officer on account of Surplus/Deficit as per Cash System.

(6) That the Commissioner of Income Tax (Appeals), Bareilly has erred in law and on facts in deleting the addition of Rs. 21,480/- made by the assessing officer on account Capital Expenditure u/s 40A (3).

(7) That the Commissioner of Income Tax (Appeals), Bareilly has erred in law and on facts in deleting the addition of Rs. 36,350/- rightly made by the assessing officer on account of loss on sale of Maruti.

(8) That the Commissioner of Income Tax (Appeals), Bareilly has erred in law and on facts in deleting the disallowance of Rs. 46,00,092/- rightly made by the assessing officer on account of Depreciation.

(9) That the order of the Commissioner of Income Tax (Appeals), Bareilly is erroneous in law and on facts may be cancelled and the order of the Assessing Officer may be restored.

(10) Any other grounds of appeal may be taken at the time of hearing of appeal.

3. Learned DR of the revenue supported the assessment order. None appeared on behalf of the assessee but a letter is submitted by the assessee that written submissions are already sent by the Learned A.R. of the assessee by registered post on 08.01.2015 and these appeals and Cross Objections may be decided by considering these written submissions. In the written submissions, it is submitted by the learned AR of the assessee that all these issues are covered in favour of the assessee by the tribunal order in assessee's own case for A.Y. 2007 - 08 in ITA No. 178/LKW/2013, & 339 to 341/ LKW/2012 dated 12.11.2013. He submitted a copy of this tribunal order along with written submissions.

3 4. We have considered the rival submissions. We find that in the written submissions, a chart is submitted pointing out relevant Para of the Tribunal Order for A.Y. 2007 - 08 in relation to each ground No. 1 to 6 and it is submitted that these grounds are covered. This chart is as under:-

Ground No. Issue involved Amount Para No. of tribunal order for A.Y. 2007 - 08 1 Advance of Fees Receipts 5,77,000 Para 33 to 35, Pages 25 to 27 2 Salary Expenses 23,72,884 Para 40 to 41, Pages 28 to 29 3 Travelling expenses, 2,28,500 Para 38 to 39, Page 28 Difference in payment of 17,810 salary Out of expenditure 9,60,236 Para 47 to 48, Page 30 Capital expenditure 53,850 Para 47 to 48, Page 30 4 u/s 40A(3) 1,25,707 Para 16 to 17, Pages 10 to 11 5 Surplus/Deficit as per Cash 5,11,227 Para 33 to 35, Pages 25 to 27 System.

6 Capital Expenditure u/s 40A 21,480 Para 16 to 17, Pages 10 to 11 (3).

5. We have gone through the tribunal order in assessee's own case for A.Y. 2007 - 08 and find that the assertion of the assessee is correct. The issue involved in Ground No. 1 here was decided by the tribunal on this basis that the assessee was following cash system of accounting till A.Y. 2006 - 07 and the same was changed to mercantile system from A.Y. 2007 - 08. In that year, the tribunal approved the change in accounting system. In the present year, it is observed by the learned CIT (A) that this addition is on hypothetical basis as there is no change in accounting system in the present year. This finding of learned CIT (A) could not be controverted by the learned DR of the revenue and hence, we find no reason to interfere in the order of learned CIT (A) on this issue. Accordingly, Ground No. 1 is rejected.

4 6. Regarding Ground No. 2 also, we find that similar disallowance was made in A.Y. 2007 - 08 by making similar observations by the A.O. and were deleted in that year by learned CIT (A) with a clear finding that simply because the name of a doctor is missing from the list submitted to DCI/MCI, salary paid cannot be disallowed. This order of learned CIT (A) in that year was confirmed by the tribunal. In the present year also, the basis of disallowance by the A.O. and deletion by CIT (A) is same. In the present year also, Learned DR of the revenue could not point out any specific defect in the order of learned CIT (A) on this issue. Hence, we do not find any reason to take a contrary view in the present year. Accordingly, Ground No. 2 is also rejected.

7. Regarding first issue in Ground No. 3 of Rs. 228,500/-, we find that this amount of Rs. 228,500/- includes Rs. 78,500/- being OPD charges paid to Dr. A. K. Goel and Rs. 1,50,000/- paid to Dr. A. K. Gaekwad as reimbursement of travelling expenses. Disallowance was made by the A.O. as there was no TDS from these payments. A clear finding is given by CIT (A) that no TDS was to be deducted in these two cases because in the first case, the income was below taxable limit and in the second case, TDS is not required to be deducted from reimbursement of expenses. This finding of learned CIT (A) could not be controverted by learned DR of the revenue. Hence, we do not find any reason to interfere in the order of learned CIT (A) on this issue. Accordingly, on this issue, Ground No. 3 is rejected.

8. Regarding second issue in Ground No. 3 of Rs. 17,810/-, we find that this finding is given by CIT (A) that the assessee had explained before the A.O. that there is a mistake in the auditor's report regarding figure of salary to Shri Anurag Singhal. He has also observed that it was requested by the assessee to the A.O. that necessary reconciliation be sought from the auditors. He also observed that the assessee had produced books of account supporting this contention but no independent enquiry was made by the A.O. and no clarification was sought by the A.O. from the auditors. Thereafter, he deleted this addition by observing that since the A.O. has not brought on record any adverse evidence, addition is not justified. We do not find any infirmity in the order of learned CIT (A) on this issue. Hence, we 5

do not find any reason to interfere in the order of learned CIT (A) on this issue. Accordingly, on this issue also, Ground No. 3 is rejected.

9. Regarding third issue in Ground No. 3 of Rs. 9,60,236/-, we find that this addition was made by the A.O. on this basis that sufficient supporting are not available. This finding is given by CIT (A) that the assessee had explained that looking to the nature of expenses, its magnitude and volume and the nature of charitable activities in which the assessee is engaged, some vouchers may not be available. Learned CIT (A) has given a categorical finding that for expenses such as Mess, Generator, Staff Welfare and travelling etc., self made vouchers are also sufficient if the volume is small of such self made vouchers. Thereafter, he deleted this addition by observing that since no claim of bogus expenditure has been found by the A.O., addition is not justified. We do not find any infirmity in the order of learned CIT (A) on this issue in the facts of the present case because the activities of the assessee are charitable and considering the nature and volume of expenses. Hence, we do not find any reason to interfere in the order of learned CIT (A) on this issue. Accordingly, on this issue also, Ground No. 3 is rejected.

10. Regarding fourth issue in Ground No. 3 of Rs. 53,850/-, we find that this addition was made by the A.O. on this basis that these expenses are of capital nature. sufficient supporting are not available. This finding is given by CIT (A) that the assessee had explained that looking to the nature of expenses, its magnitude and volume and the nature of charitable activities in which the assessee is engaged, some vouchers may not be available. Learned CIT (A) has given a categorical finding that for expenses such as Mess, Generator, Staff Welfare and travelling etc., self made vouchers are also sufficient if the volume is small of such self made vouchers. Thereafter, he deleted this addition by observing that since no claim of bogus expenditure has been found by the A.O., addition is not justified. We do not find any infirmity in the order of learned CIT (A) on this issue in the facts of the present case because the activities of the assessee are charitable and considering the nature and volume of expenses. Hence, we do not find any reason to interfere in 6

the order of learned CIT (A) on this issue. Accordingly, on this issue also, Ground No. 3 is rejected.

11. Regarding Ground No. 4, we find that similar disallowance was made in A.Y. 2007 - 08 also by making similar observations by the A.O. and were deleted in that year by learned CIT (A). This order of learned CIT (A) in that year was confirmed by the tribunal. In the present year also, the basis of disallowance by the A.O. and deletion by CIT (A) is same. In the present year also, Learned DR of the revenue could not point out any specific defect in the order of learned CIT (A) on this issue and no difference in facts could be pointed out by him. Hence, we do not find any reason to take a contrary view in the present year. Accordingly, Ground No. 4 is also rejected.

12. Regarding Ground No. 5, we find that similar addition was made in A.Y. 2007

- 08 also by making similar observations by the A.O. and were deleted in that year by learned CIT (A). This order of learned CIT (A) in that year was confirmed by the tribunal. We have gone through the tribunal order in assessee's own case for A.Y. 2007 - 08 and find that the assertion of the assessee is correct. The issue involved in Ground No. 5 here was decided by the tribunal in that year on this basis that the assessee was following cash system of accounting till A.Y. 2006 - 07 and the same was changed to mercantile system from A.Y. 2007 - 08. In that year, the tribunal approved the change in accounting system. In the present year, it is observed by the learned CIT (A) that this addition is on hypothetical basis as there is no change in accounting system in the present year. This finding of learned CIT (A) could not be controverted by the learned DR of the revenue and hence, we find no reason to interfere in the order of learned CIT (A) on this issue. Accordingly, Ground No. 5 is rejected.

13. Regarding Ground No. 6, we find that similar disallowance was made in A.Y. 2007 - 08 also by making similar observations by the A.O. and were deleted in that year by learned CIT (A). This order of learned CIT (A) in that year was confirmed by the tribunal. In the present year also, the basis of disallowance by the A.O. and 7

deletion by CIT (A) is same. In the present year also, Learned DR of the revenue could not point out any specific defect in the order of learned CIT (A) on this issue and no difference in facts could be pointed out by him. Hence, we do not find any reason to take a contrary view in the present year. Accordingly, Ground No. 6 is also rejected.

14. Regarding Ground No. 7, we find that this disallowance is in respect of loss on sale of Maruti Car. The same was deleted by earned CIT (A) by observing that since the loss is suffered on a business asset, the same is allowable. Learned DR of the revenue could not point out any specific defect in the order of learned CIT (A) on this issue. Hence, we do not find any reason to take a contrary view in the present year. Accordingly, Ground No. 7 is also rejected.

15. Regarding Ground No. 8, we find that this disallowance is in respect of depreciation. Disallowance was made by the A.O. on this basis that there is no opening WDV of Building and addition of Rs. 286 Lacs was made in the present year. The A.O. asked the assessee to furnish date of completion of building. The A.O. noted that no explanation was furnished and therefore, the A.O. disallowed the depreciation. The same was deleted by earned CIT (A) without giving a finding that the building was completed and put to use. In fact, this is stated by learned CIT (A) on page 21 of his order that for allowing depreciation, ownership and use of asset for business purpose is essential. Thereafter, he observed that none of these have been challenged by the A.O. but this is not correct because the A.O. asked for date of completion but no reply was given by the assessee. Neither before any of the authorities below nor before us, any evidence is brought on record regarding date of completion of building and putting it to use. Hence, Depreciation is not allowable. We, therefore, reverse the order of learned CIT (A) on this issue and restore that of the A.O. Accordingly, Ground No. 8 is allowed.

15. In the result, the appeal of the revenue is partly allowed.

16. Now, we take up the appeal of the revenue for A.Y. 2005 - 06 in ITA No. 344/LKW/2014. The grounds are as under:-

(1) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 1,77,957/- without taking 8

into consideration the real facts and documentary evidence. The addition was rightly made by the assessing officer on account of disallowance of expenses u/s 40A(3) of I.T. Act, 1961.

(2) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition without taking into consideration the real facts and documentary evidence. The assessing officer has rightly made the addition of Rs. 2,31,450/- on account of Capital expenditure of u/s 40A(3) of I.T. Act, 1961.

(3) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition made by the assessing officer at Rs. 12,76,355 on account of salary expenses.

(4) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 8,000 on account of unexplained waive off.

(5) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 35,464/- made by the assessing officer on account of Surplus/Deficit as per Cash System Accounting.

(6) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 54,40,659/- made by the assessing officer out of Revenue Expenses in cash having no supporting vouchers or any evidence.

(7) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the disallowance of Rs. 82,481/- on account of written off bad debts.

(8) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the disallowance of Rs. 2,09,703/- made by the assessing officer on account of salary made without deducting TDS.

(9) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 27,800/- made by the assessing officer on account of difference in payment of salary and in Form No. 16 issued by the assessee.

9 (10) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 4,53,596/- made by the assessing officer out of Capital Expenditure incurred in cash exceeding Rs. 20,000/-.

(11 That the order of the Commissioner of Income Tax (Appeals), Bareilly is erroneous in law and on facts may be cancelled and the order of the Assessing Officer may be restored.

(12) Any other grounds of appeal may be taken at the time of hearing of appeal.

17. Learned DR of the revenue supported the assessment order. None appeared on behalf of the assessee but a letter is submitted by the assessee that written submissions are already sent by the Learned A.R. of the assessee by registered post on 08.01.2015 and these appeals and Cross Objections may be decided by considering these written submissions. In the written submissions, it is submitted by the learned AR of the assessee that all these issues are covered in favour of the assessee by the tribunal order in assessee's own case for A.Y. 2007 - 08 in ITA No. 178/LKW/2013, & 339 to 341/ LKW/2012 dated 12.11.2013. He submitted a copy of this tribunal order along with written submissions.

18. We have considered the rival submissions. We find that in the written submissions, a chart is submitted pointing out relevant Para of the Tribunal Order for A.Y. 2007 - 08 in relation to each ground No. 1 to 11 and it is submitted that these grounds are covered. This chart is as under:-

Ground No. Issue involved Amount Para No. of tribunal order for A.Y. 2007 - 08 1 Expenses u/s 40A(3) 1,77,957 Para 16 to 17, Pages 10 to 11 2 Capital expenditure u/s 40A(3) 2,31,450 Para 36 to 37, Pages 27 3 Salary expenses 12,76,355 Para 18 to 19 & 36 to 37, Pages 11 to 12 & 27 4 Unexplained Written Off 8,000 Para 43 to 46, Pages 29 to 30 5 Surplus/Deficit as per Cash 35,464 Para 33 to 35, Pages 25 to 26 System Accounting.

6 Revenue Expenses in Cash 54,40,659 Para 47 to 48, Page 30 10

having no supporting 7 Written Off Bad Debts 82,481 8 Salary paid without TDS 2,09,703 Para 18 to 19 & 36 to 37, Pages 11 to 12 & 27 9 Difference in Salary & Form 16 27,800 Para 38 to 39, Pages 28 10 Capital Expenditure in Cash 4,53,596 Para 47 to 48, Pages 30 having no supporting 11 Capital Expenditure u/s 40A 4,79,338 Para 16 to 17, Pages 10 to 11 (3).

19. We have gone through the tribunal order cited by the assessee. We find that all these issues were decided by the tribunal in favour of the assessee in A.Y. 2007 -

08. No difference in facts could be pointed out by learned DR of the revenue and hence, we do not find any reason to take a contrary view in the present year on any of the issues.

20. In the result, the appeal of the revenue is dismissed.

21. Now, we take up the appeal of the revenue for A.Y. 2006 - 07 in ITA No. 345/LKW/2014. The grounds are as under:-

(1) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 38,032/- u/s 40A(3) of I.T. Act, 1961 without taking into consideration the real facts and documentary evidence. The addition was rightly made by the assessing officer on account of disallowance of expenses u/s 40A(3) of I.T. Act, 1961.

(2) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 5,68,976/- on account of Capital expenditure incurred in cash exceeding Rs. 20,000/- without taking into consideration the real facts and documentary evidence. The assessing officer has rightly made the addition.

(3) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition made by the assessing officer at Rs.

9,65,000 on account of payment of salary.

11 (4) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 10,52,351/- on account of Salary Expenses.

(5) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 3,44,804/- made by the assessing officer on account of Payments made to Doctors not reflected in DCIT and declared by the assessee as paid salary.

(6) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 3,57,797/- rightly made by the assessing officer on account of difference in payment of salary and in Form No. 16 issued by the assessee.

(7) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the disallowance of Rs. 1,35,000/- on account of unexplained waive off.

(8) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the disallowance of Rs. 28,68,829/- made by the assessing officer on account of expenditure in cash without vouchers.

(9) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 1,89,340/- made by the assessing officer on account of capital expenses disallowed without voucher or evidence.

(10) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 3,93,777/- made by the assessing officer on account of profit on sale and purchase of medicine.

(11) That the Commissioner of Income Tax (Appeals), Bareilly has erred on facts and in law in deleting the addition of Rs. 29,23,336/- made by the assessing officer on account of variation as per comparative Analysis of Surplus/Deficit.

(12) That the order of the Commissioner of Income Tax (Appeals), Bareilly is erroneous in law and on facts may be cancelled and the order of the Assessing Officer may be restored.

(13) Any other grounds of appeal may be taken at the time of hearing of appeal.

12 22. We have gone through the tribunal order cited by the assessee. We find that in this year also, all these issues were decided by the tribunal in favour of the assessee in A.Y. 2007 - 08 and no difference in facts could be pointed out by learned DR of the revenue and hence, we do not find any reason to take a contrary view in the present year on any of the issues.

23. In the result, the appeal of the revenue is dismissed.

24. Now, we take up the three Cross Objections filed by the assessee for these three years. All these Cross Objections are merely in support of the orders of Learned CIT (A) and hence not maintainable. Dismissed Accordingly.

25. In the result, all three Cross Objections of the assessee are dismissed.

26. In the combined result, the appeal of the revenue for A.Y. 2004 - 05 is partly allowed and remaining two appeals of the revenue and all three CO of the assessee are dismissed.

(Order was pronounced in the open court on the date mentioned on the caption page) Sd/. Sd/.

(SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member

Dated:21/04/2015 *C.L.Singh Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow Asstt. Registrar