Commissioner of Income Tax vs M/s. Sweta Kalyan Samiti

We have heard Shri Dhananjai Awasthi, learned counsel appearing for the department. This Income Tax Appeal filed u/s 260-A of the Income Tax Act arises from an order of Income Tax Appellate Tribunal, Agra Bench, Agra dated 22.2.2013 in ITA No. 219/Agr/2011 in respect of assessment year 2005-06.

The appeal has been preferred by the department on following substantial questions of law:-

Whether the ITAT erred in law in giving relief to the Assessee on basis of doctrine of "res-judicata", which is not applicable in tax proceeding.

Whether the ITAT has erred in law in deleting the addition of Rs. 31,05,967/- on account of alleged income and unaccounted expenses and investment, ignoring the fact that assessee society was not maintaining books of account in regular course of business and for the same reason it was not entitled for exemption u/s. 10(23C) of the Act, 1961.

Whether the ITAT has erred in law in deleting the addition of Rs. 11,83,249/- made on the basis of the valuer''s report without giving sufficient opportunity to valuation officer to make his stand clear on this issue and passing the order in haste.

Whether the ITAT has erred to allowing the exemption u/s. 10(23C) of the IT Act, ignoring the fact that the assessee was not maintaining the books of account in the regular course of business.

Whether the ITAT has erred to allowing the exemption on the basis of exemption granted to the assessee in previous and subsequent years which is not correct as per law because doctrine of re-judicata in not applicable in Income tax proceedings, moreover non-maintenance of books of accounts in the issue in this year only.

We have perused the orders passed by the AO, CIT(A) and ITAT. The ITAT has recorded findings on the question of maintenance of books of account and the defects, on which the matter was argued before it; the valuation of the building under construction and withdrawal of exemption u/s 10(23C) in paras 7, 10 and 12, as follows:-

We have heard the ld. representatives of the parties and records perused. The admitted facts of the case are that seized/impounded loose papers found at the time of survey were recorded in the books of account and no incorrectness was found in respect of recording such transaction in books of account. Only grievance of the Revenue was that at the time of survey books of account was not found maintained upto the date. The A.O. himself admitted before the CIT(A) that all the entries in the loose papers were found duly incorporated in the books of account. In this regard, we are of the considered view that the books of account subsequently prepared on the basis of the loose papers or material found at the time of survey is acceptable unless there is material showing that the books of account subsequently maintained was not proper or not in accordance with approved method of accounting. In the case under consideration no such contrary material was found that the books of account subsequently maintained were not in accordance with principle of accountancy. When the A.O. made addition on the basis of loose paper which has been incorporated in the books of account and no defect otherwise has been found that those loose paper entries were recorded incorrectly. Under the circumstances when those entries pertaining to the loose papers have been incorporated in books of account and that was found in order and that amounts to a satisfactory explanation about the loose papers found, under that circumstances, we are of the considered view that no addition is warranted. The CIT(A) has correctly appreciated the facts of the case and rightly deleted the addition of Rs. 40,85,115/-. Order of the CIT(A) is confirmed on the issue.

We have heard the ld. representative of the parties and records perused. The CIT(A) has deleted the addition after considering all aspects and explanation of the assessee. The CIT(A) found that the difference of Rs. 5,05,769/- is self explanatory because the Valuation Officer mentioned cost of construction as per assessee''s books, progressive value of constructed building as on 31.03.2005 was Rs. 38,72,646/-. The CIT(A) accepted the difference of Rs. 5,05,769/- as unexplained. Thus, on account of simple error made by Valuation Officer the CIT(A) has also considered all the 8 points of objections raised by the assessee and found that the said objections of the assessee were never considered either by the A.O. or by Valuation Officer. A part from the technical objections, the CIT(A) found that the difference in C.P.W.D. and P.W.D. rates were well explained which is upto 10% value. It has also been recorded by the CIT(A) that some of the items of expenditure towards building construction have already been made on account of loose papers of which addition of Rs. 40,85,115/- has been deleted, meaning thereby, that to the extent there is explanation from the assessee. After considering all the aspects of the matter, the CIT(A) deleted the addition of Rs. 11,83,249/-. We, therefore, find that the CIT(A) has rightly deleted the addition of Rs. 11,83,249/-. Order of the CIT(A) is confirmed on the issue.

We have heard the ld. representatives of the parties and records perused. It is admitted fact that the books of account prepared subsequent to survey was found in order. There is no provision under the Act that if the books of account are not found at the time of survey, the exemption u/s 10(23C) will be withdrawn. When finally at the time of assessment and before the CIT(A) the books of account was found in order, even otherwise also exemption u/s 10(23C) does not depend upon books of account but it depends upon relevant provisions of the Act. In this regard, we may refer a judgment of the Hon''ble Supreme Court in the case of The Kedarnath Jute Mfg. Co. Ltd. Vs. The Commissioner of Income Tax, (Central), Calcutta, . In the light of the facts and circumstances, we find that the CIT(A) has rightly allowed the assessee''s claim u/s 10(23C) of the Act.

We find that the ITAT had considered the facts, that though the records were not available at the time of survey and some loose papers were found, the assessee had made a statement on specific question regarding maintenance of books of accounts that books of accounts are with the auditor. The AO did not make any effort to get these books of account. After the books of account were produced, no defects or discrepancies were found. The CIT(A) considered all the entries. He also made a sample verification and recorded findings that the majority of the entries in the loose papers pertain to the expenses in respect of building constructions and all these were found duly recorded in primary records as well as in books of accounts.

The ITAT considered the question regarding the entries in the loose papers and confirmed the finding about satisfactory explanation. It held that the CIT(A) has correctly appreciated the facts of the case and rightly deleted the addition of Rs. 40,85,115/-.

On the question of valuation of the building under construction, the CIT(A) considered all the points of objections raised by the assessee and found that these objections were never considered by the AO. It was also found that the difference in C.P.W.D. and P.W.D. rates were explained and which is upto 10% value. The deletion of Rs. 11,83,249/- by the CIT(A) was confirmed by the ITAT.

On the last question as to whether the exemption u/s 10(23C) of the Act could be withdrawn, the ITAT observed that such exemption does not depend upon books of account but it depends upon relevant provisions of the Act, and relied upon The Kedarnath Jute Mfg. Co. Ltd. Vs. The Commissioner of Income Tax, (Central), Calcutta, .

We do not find any error in the judgment of ITAT. There is no question of law much less a substantial question of law to be considered in this appeal. The Income Tax Appeal is dismissed.