Astha Chandra, J.M.:— The appeals by the assessee are directed against the consolidated order dated 12.12.2016 of the Ld. Commissioner of Income Tax (Appeals)-36, New Delhi (“CIT(A)”) pertaining to assessment year (“AY”) 2006-2007 and 2008-2009. These were heard together and are being disposed of by this common order.

2. In AY 2006-2007, the assessee has taken the following grounds of appeal:

“1. That the Commissioner of Income-Tax(Appeals) [‘CIT(A)’] erred on facts and in law in upholding the action of the Assessing Officer in denying exemption under section 11 of the Income-Tax Act, 1961 (‘the Act’), assessing the income of the appellant at Rs. 57,65,790 as against Nil income returned by the assessee.

2. That the CIT(A) erred on facts and in law in not holding that the Assessing Officer exceeded jurisdiction in denying exemption under section 11 of the Act, traversing beyond the direction of the Tribunal to verify whether (i) expenses incurred by the appellant were utilized for the purpose of the Trust, and (ii) all other conditions relating to allowability of deduction under the said section were satisfied or not.

3. That the CIT(A) erred on facts and in law in not holding that assessment order was void ab initio, having been passed in violation of principles of natural justice, without affording adequate opportunity of being heard and without confronting the appellant with the material inspected/collected by the assessing officer ex-parte.

4. That the CIT(A) erred on facts and in law in holding that the action of the Assessing Officer in denying the benefit of exemption under Section 11 of the Act merely on the ground that books of accounts of the appellant were not genuine and were to be rejected.

5. That the CIT(A) erred on facts and in law in not appreciating that books of accounts were verified by the Assessing Officer hastily, i.e. in a short time on the same date on which assessment order being passed without due application of mind, deserved to be set aside.

6. Without prejudice to the aforesaid, that the CIT(A) erred on facts and in law in upholding the action of the Assessing Officer in disallowing 50% of the deficit for establishment and maintenance charges while computing the income of the appellant.

7. Without prejudice to the aforesaid, that the CIT(A) erred on facts and in law in upholding the action of the Assessing Officer in disallowing 50% of the expenses on the ground that paper books of accounts had not been maintained.

8. That the CIT(A) erred on facts and in law in confirming levy of interest under section 234B, 234D and withdrawal of interest under section 244A of the Act.”

3. In AY 2008-2009, the assessee has taken the following grounds of appeal:

“1. That the Commissioner of Income-Tax(Appeals) [‘CIT(A)’] erred on facts and in law in upholding the action of the Assessing Officer in denying exemption under section 11 of the Income-Tax Act, 1961 (‘the Act’), assessing the income of the appellant at Rs. 1,06,14,500 as against Nil income returned by the appellant.

2. That the CIT(A) erred on facts and in law in not holding that the Assessing Officer exceeded jurisdiction in denying exemption under section 11 of the Act, traversing beyond the direction of the Tribunal to verify whether (i) expenses incurred by the appellant were utilized for the purpose of the Trust, and (ii) all other conditions relating to allowability of deduction under the said section were satisfied or not.

3. That the CIT(A) erred on facts and in law in not holding that assessment order was void ab initio, having been passed in violation of principles of natural justice, without affording adequate opportunity of being heard and without confronting the appellant with the material inspected/collected by the assessing officer ex-parte.

4. That the CIT(A) erred on facts and in law in upholding the action of the assessing officer in denying the benefit of exemption under Section 11 of the Act merely on the ground that books of accounts of the appellant were not genuine and were to be rejected.

5. That the CIT(A) erred on facts and in law in not appreciating that books of accounts were verified by the Assessing Officer hastily, i.e. in a short time on the same date on which assessment order was passed and therefore, the assessment order being passed without due application of mind, deserved to be set aside.

6. Without prejudice to the aforesaid, that the CIT(A) erred on facts and in law in upholding the action of the Assessing Officer in disallowing 50% of the deficit for establishment and maintenance charges while computing the income of the appellant.

7. Without prejudice to the aforesaid, that the CIT(A) erred on facts and in law in upholding the action of the assessing officer in disallowing 50% of expenses incurred on support of other education institutions/college alleging that the same could not be verified during the assessment proceedings in the absence of correct and reliable books of accounts.

8. Without prejudice to the aforesaid, that the CIT(A) erred on facts and in law in upholding the action of the assessing officer in disallowing 50% of the expenses on the ground that proper books of accounts had not been maintained.

9. That the CIT(A) erred on facts and in law in confirming levy of interest under Section 234B, 234D and withdrawal of interest under Section 244A of the Act.”

4. Vide applications both dated 07.07.2022 the assessee requested for admission of the following additional ground of appeal in terms of Rule 11 of the Income-Tax (Appellate Tribunal) Rules,1963, common to both the AYs 2006-2007 and 2008-09:

“Without prejudice to the claim for exemption under Section 11 of the Income-Tax Act, 1961, (“the Act”), dividend income of Rs. 90,40,050 and Rs. 1,44,64,080 received in assessment years 2006-2007 and 2008-2009 respectively from investments made in equity shares ought, in any case, to have been reduced from the taxable income in view of section 10(34) of the Act.”

5. In these applications, the assessee narrated the brief facts giving rise to the additional ground of appeal in both the AYs. It is stated that the assessee earned dividend income of Rs. 90,40,050 and Rs. 1,44,64,080 from equity shares held as investment which is exempt under Section 10(34) of the Act. The Ld. Assessing Officer (“AO”) rejected the claim of exemption under section 11 of the Act vide order dated 31.12.2010 which was set aside in appeal by the Tribunal vide order dated 05.08.2011 in ITA No. 2792/Del/2011 for AY 2006-2007 and in ITA No. 2793/Del/2011 for AY 2008-2009. In the order dated 31.03.2013 passed by the Ld. AO to give effect to the order of the Tribunal, the Ld. AO once again denied exemption under section 11 of the Act and computed taxable income of the assessee at Rs. 57,65,793 in AY 2006-2007 and Rs. 1,06,14,500 in AY 2008-2009. The Ld. CIT(A) affirmed the additions made by the Ld. AO. The assessee is in appeal before the Tribunal challenging the denial of exemption under section 11 of the Act.

6. It is stated in the application that the additional ground of appeal raised in both the AYs is without prejudice to the contention of the assessee that its entire income is exempt under section 11 of the Act.

7. Through the additional ground in both the AYs, the assessee seeks to claim exemption under section 10(34) of the Act in respect of dividend income of Rs. 90,40,050 earned in AY 2006-2007 and Rs. 1,44,64,080 in AY 2008-2009 credited to the Income & Expenditure Account and forms part of the taxable income computed by the Ld. AO.

8. It is further stated in the application that the additional ground of appeal is raised pursuant to the decision of the Hon'ble Bombay High Court in DIT(E) v. Jasubhai Foundation, 374 ITR 315 (Bom) and decisions of several Benches of Mumbai Tribunal.

9. The additional ground of appeal, as per the assessee, raises purely legal issue and does not require any fresh investigation into facts.

10. We have heard the Ld. Representative of the parties. The Ld. AR submitted that the additional ground may be admitted for adjudication as it raises an issue of purely legal nature but the Ld. DR objected to it as, according to him, claim of exemption under section 10(34) of the Act has been made for the first time before the Tribunal which was controverted by the Ld. AR who drew our attention to the statement of computation of total income filed along with the return for AY 2006-2007 and AY 2008-2009 appearing at pages 19 and 52 of the Paper Book respectively wherein the assessee claimed exemption of dividend income under section 10(34) of the Act.

11. On careful consideration of the rival submissions, we are inclined to admit the additional ground raised in both the AYs. Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT, 229 ITR 383 (SC) held that the Tribunal should not be prevented from considering questions of law arising in assessment proceedings although not raised earlier. According to the Hon'ble Supreme Court, the view that the Tribunal is confined only to issues arising out of the appeal before CIT(A) is too narrow a view to take of the powers of the Tribunal. The Hon'ble Supreme Court further observed that where the Tribunal is only required to consider the question of law arising from facts which are on the record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. In deference to the decision (supra) of the Hon'ble Apex Court, we admit the additional ground for adjudication by us.

12. Let us now take up the main grounds of appeals in both the AYs. The grievance of the assessee in nut shell is that the Ld. AO traversed beyond the direction of the Tribunal to verify whether expenses incurred by the assessee were utilized for the purpose of the Trust, and all other conditions relating to allowability of deduction under section 11 were satisfied or not which has been upheld by the Ld. CIT(A). Another grievance of the assessee relates to denial of exemption under section 11 of the Act to the assessee merely on the ground that books of account were not genuine and are not maintained properly resulting in impugned disallowances in both the years.

13. Before us the Ld. AR submitted that the Ld. AO was not justified in making the disallowance of expenses on ad hoc basis for the reason that the books of account were duly produced before the Ld. AO which was examined by him during the course of assessment proceedings. The bills and vouchers etc. were also produced before the Ld. AO and payments have been made via account payee cheques which fact is acknowledged by the Ld. AO in his order. The bills and vouchers had also been verified and the Ld. AO had duly recorded that most of them were found to be authentic. No fault had been found in the items of receipts and expenditure by the Ld. AO. The Ld. AR further submitted that Forensic Science Lab (“FSL”) has also not given any categorical finding. It has also been submitted by the Ld. AR that similar expenses have been incurred in the year prior to the relevant AYs and there is no significant variation in the same so as to create any doubt in the mind of the Ld. AO. Therefore, there is no basis of disallowing 50% of expenses on ad hoc basis. According to the Ld. AR, there is no dispute on genuineness of activities of the Trust. The only allegation is regarding the writing of books in one sitting. However, this is irrelevant as there is evidence by way of bills, vouchers etc. which were duly presented before the Ld. AO/Ld. CIT(A) and were also examined.

14. The Ld. DR relied on the orders of the Ld. AO and Ld. CIT(A) and submitted that there is adverse finding by the authorities i.e. FSL/DGIT(Exemption) and the Ld. AO. These discrepancies are not only pertaining to timing of writing of books but also it is noticed that there is overwriting at certain places in the books of account and thus authenticity of books of account is questionable.

15. In rebuttal, the Ld. AR submitted that these are audited books of account. Bills, vouchers etc. were duly produced and verified. Expenses are in sync with expenses in earlier years and there is no abnormal variation shown thereof. The Ld. AR also submitted that ITRs filed by the assessee show specific claim before the Ld. AO in respect of exemption under section 10(34) of the Act.

16. We have given careful thought to the rival submissions of the parties and perused the material available in the records. This is the second round of appeals by the assessee before the Tribunal. The order dated 05.08.2011 of the Tribunal in ITA Nos. 2792 & 2793/Del/2011 for both the years is at pages 1-5 of the Paper Book. Perusal thereof would reveal that the assessee had challenged, inter alia the order of the Ld. CIT(A) in upholding the action of the Ld. AO in denying the benefit of exemption under section 11 of the Act merely on the ground that the assessee could not produce its books of account during the assessment proceedings without appreciating that the books of account could not be produced before the Ld. AO as the same were impounded by the DGIT(Exemption) under section 131(3) of the Act. The assessee had also challenged the order of the Ld. CIT(A) in upholding the action of the Ld. AO in disallowing 50% of various administrative and other expenses on ad hoc basis for want of verification in absence of books of account.

17. The findings of the Tribunal are recorded in para 4. The Tribunal observed that it is a fact that the books of account were impounded by the DGIT(Exemption) under section 131(3) of the Act and were with him. When the books of account are impounded or retained by the department, it will not be possible for the assessee to get them released and produce before the AO. Under these circumstances, it was the duty of the AO to obtain the impounded books of accounts from DGIT(Exemption) and verify the facts of the case whether income was applied by the assessee trust for the objects of the Trust.

18. With the above observations, the Tribunal set aside the appeals of the assessee for both the years and directed the Ld. AO to obtain the books of accounts from the DGIT(Exemption) and verify whether the expenses incurred by the assessee were utilized for the purpose of the Trust and all other conditions relating to allowability of deduction under section 11 were satisfied or not and to pass orders on merits after providing sufficient opportunity of being heard to the assessee to explain its case.

19. It is in pursuance to the above directions of the Tribunal that the Ld. AO completed the fresh assessment for both the years on 31.03.2013. Needless to say that when specific directions were given by the Tribunal, then there is no scope whatsoever for the AO to travel beyond those directions as held by the Hon'ble Allahabad High Court in S.P Kochhar v. Income-Tax Officer, Dehradun., (1984) 145 ITR 255 (Alld).

20. Perusal of the fresh assessment orders would show that request of the Ld. AO to release the books of the assessee or transfer to the ward for verification was not accepted by the Ld. DGIT(Exemption) who asked the Ld. AO to examine the books of account of the assessee in his office. The Ld. AO complied and examined the impounded books of account. According to the Ld. AO, the assessee also produced bills and vouchers. The Ld. AO observed that expenses incurred as per Income & Expenditure Accounts are almost through account payee cheque. The Ld. AO referred to the observations of FSL and the submissions of the assessee before him, namely that the receipts are only for educational activities such as admission fee, courses and training fee; substantial receipts were through cheques only which were entered in cash book; cash receipts were deposited in the bank; minor lapses be ignored as aim of the Trust is to impart education and not making profit and that the assessee is not doing any trade/business.

21. On examination of the books of account and comments/opinion of FSL, the Ld. AO came to the conclusion that books have not been written on day to day basis but in a few sittings.

22. In our considered opinion, the above allegation alone is not sufficient to make ad hoc disallowances of 50% of expenses in the absence of any adverse finding even after examining the books duly supported by the bills and vouchers. Not even single instance has been brought on record to suggest that expenses were incurred for purposes other than the purposes to fulfill the objects of the assessee Trust. There is clear cut finding that payments were made through account payee cheques. No defect has been found in any item of receipts and expenditure. Explanation as to why income from all centers showed vast difference in comparison to expenditure was given by the assessee which explanation has not been considered nor adversely commented by the Ld. CIT(A). We, therefore, delete the ad hoc 50% disallowances out of the expenses in both the years.

23. It is an admitted position that the assessee Trust is engaged in educational activities and it is registered under section 12AA of the Act vide order DIT(E)/T-889 dated 02.01.1982. It is also not in dispute that the Trust has continuously been assessed with exemption under section 10(23C)(iiiad)/10(23C)(vi) upto the AY 2005-2006 under section 143(3)/143(1) and AYs 2007-2008, 2009-2010 under section 143(1) of the Act. The assessments of the Trust for AYs 2010-2011, 2011-2012 and 2012-2013 have also been completed under section 143(3) and benefit of section 11 has been allowed in all these years. In Radha Soami Satsang v. CIT, (1992) 193 ITR 321 (SC), the Hon'ble Supreme Court has laid down the principle that though strictly speaking res judicata does not apply to income-tax proceedings but where a fundamental aspect permeating through the different AYs has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. This principle has been applied by the Hon'ble Delhi High Court in DIT v. Lovely Bal Shiksha Parisad, (2004) 266 ITR 349 (Del). There is nothing in the order of the Ld. AO to show that the conditions for claiming exemption under section 11 have not been satisfied in the AYs under consideration. Moreover, the Hon'ble Allahabad High Court in Commissioner of Income-tax v. Indian Institute of Engineering Society, (2013) 218 Taxman 151 (Alld) and the Hon'ble Bombay High Court in Commissioner Of Income-Tax v. Indian Institute Of Computer Technology of Banking and Finance, (2018) 408 ITR 558 (Bom) have held that benefit under section 11 cannot be denied on the ground that the assessee has not obtained exemption from prescribed authorities under section 10(23C) of the Act.

24. We, therefore, hold that denial of exemption under section 11 of the Act to the assessee Trust in these two AYs is not justified. Exemption under section 11 of the Act deserves to be allowed to the assessse in both the years.

25. Accordingly, the assessee succeeds in all its effective grounds of appeals in both the AYs involved i.e. AYs 2006-2007 and 2008-2009 relating to denial of exemption under section 11 and disallowances out of expenses claimed.

26. The ground relating to levy of interest in both the AYs is consequential.

27. Let us now take up the additional ground raised by the assessee in both the AYs which we have admitted for consideration.

28. In the additional ground, the assessee has claimed exemption of dividend income of Rs. 90,40,050 in AY 2006-2007 and Rs. 1,44,64,080 in AY 2008-2009 under section 10(34) of the Act. The said dividend income has been credited to the Income & Expenditure Account of the relevant years.

29. In support the Ld. AR relied upon the decision of Hon'ble Bombay High Court in the case of DIT(E) v. Jasubhai Foundation, 374 ITR 315 (Bom) and following decisions of Mumbai Benches of the Tribunal:

Sir Ratan Tata Trust v. DCIT : [2021] 188 ITD 151 (Mum-Trib)

Sir Dorabji Tata Trust v. DCIT : [2021] 188 ITD 38 (Mum-Trib)

JRD Tata Trust v. DCIT : [2021] 22 taxmann.com 275 (Mum-Trib)

ITO v. M.K. Tata Trust : ITA No. 6440/Mum/2017 (Mum-Trib) &

DCIT v. Pirojsha Godrej Foundation : ITA No. 822/Mum/2017 (Mum Trib., SMC).

30. We have perused the decision (supra) of the Hon'ble Bombay High Court. In that case the AY involved was 2007-2008. The Hon'ble Bombay High Court held that in computing income of charitable institutions exempt under Section 11, income exempt under section 10 has to be excluded. The Hon'ble Bombay High Court further held that the requirement in section 11 with regard to application of income for charitable purposes does not apply to income exempt under section 10 of the Act. The relevant extract of the decision (supra) is reproduced below:

“8. Upon a perusal of the order of the Assessing Officer and that of the Commissioner upholding it, we are of the view that the Tribunal was correct in setting aside these concurrent orders. The language of the two sections is plain and clear. The provisions, namely, sections 10 and 11 fall under a Chapter which is titled “Incomes Which Do Not Form Part of Total Expenditure” (Chapter III). Section 10 deals with incomes not included in total income whereas section 11 deals with income from property held for charitable or religious purposes. We have not found anything in the language of the two provisions nor was Mr. Malhotra able to point out as to how when certain income is not to be included in computing total income of a previous year of any person, then, that which is excluded from section 10 could be included in the total income of the previous year of the person/assessee. That may be a person who receives or derives income from property held under trust wholly for charitable or religious purposes. Thus, the income which is not to be included in computation of the total income is a matter dealt with by section 10 and by section 11 the case of an assessee who has received income derived from property held under trust only for charitable or religious purposes to the extent to which such income is applied to such property in India and that any such income is accumulated or set apart for application for such purposes in India to the extent of which the income so accumulated or set apart in computing 15% of the income of such property, is dealt with. Therefore, it is a particular assessee and who is in receipt of such income as is falling under clause (a) of subsection (1) of section 11 who would be claiming the exemption or benefit. That is a income derived by a person from property. It is that which is dealt with and if the property is held in trust for the specified purpose, the income derived there from is exempt and to the extent and to the extent indicated in section 11(1)(a) of the Income-Tax Act, 1961. There is nothing in the language of sections 10 or 11 which says that what is provided by section 10 or dealt with is not to be taken into consideration or omitted from the purview of section 11. If we accept the argument of Mr. Malhotra and the Revenue, the same would amount to reading into the provisions something which is expressly not there. In such circumstances, the Tribunal was right in its conclusion that the income which is this case the assessee trust has not included by virtue of section 10, then, that cannot be considered under Section 11.”

31. We are conscious that decision of Hon'ble High Court of a different jurisdiction is not binding on Appellate Tribunal. Nonetheless, the decision of other Hon'ble High Courts relied upon by the assessee does have persuasive value. Hon'ble Gauhati High Court in Commissioner Of Income-Tax v. Sarabhai Sons Pvt. Ltd., (1993) 204 ITR 728 (Gau) has held that the Income-Tax Act is an All India Statute and it is desirable in the interest of uniformity that one High Court should follow the decision of another High Court. In Asstt. CCE v. Dunlop India Ltd., (1985) 154 ITR 172 (SC), the Hon'ble Supreme Court observed that the better wisdom of the Court below must yield to the higher wisdom of the Court above.

32. Since, no contrary decision has been brought to our notice, we, respectfully follow the decision (supra) of the Hon'ble Bombay High Court relied upon by the assessee which has been followed by various benches of Mumbai Tribunal. Accordingly, we decide the additional ground taken by the assessee in both the years in its favour.

33. In the result, both the appeals of the assessee for AY 2006-2007 and AY 2008-2009 are allowed.