Society not entitled to exemption under sections 11 and 12 due to non-filing of return of income.

Circulars and Notifications: CBDT Circular No. 29D(XIX) of 1965, F.No. 45/239/65-ITC, dated 31st March, 1965

ORDER

Ravish Sood, Judicial Member.- The present appeal filed by the assessee society is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 30.05.2024, which in turn arises from the order passed by the Assessing Officer (A.O.) under Sec.144 of the Income-tax Act, 1961 (in short ‘the Act’) dated 26.11.2019 for the assessment year 2017-18. The assessee society has assailed the impugned order on the following grounds of appeal:

“Ground No. 1: In the facts & under the circumstances of the case. Ld. CIT(A) erred in concluding that surplus Rs.23,06,283/- as per income and expenditure a/c is taxable income of appellant without appreciating facts of case properly.

The appellant is entitled for exemption u/s 11 & 12 which has been wrongly denied.

Ground No.2: Without prejudice to ground no. 1, the appellant is eligible to claim deduction of depreciation which has not been allowed.

Ground No.3: Without prejudice to above ground, Ld. CIT(A) erred in making enhancement of Rs.5,43,493/- to the income of appellant without appreciating facts of the case properly. The enhancement made by Ld. CIT(A) is illegal inasmuch as the enhancement is without any opportunity to the appellant.

Ground No.4: The appellant reserves the right to add, amend or alter any ground/s of appeal.”

2. Succinctly stated, the AO gathered information that the assessee society had during the demonetization period though made cash deposits of Rs.10,18,050/- in Specified Bank Notes (SBNs) in its bank account No.936020110000203 held with Bank of India but had not filed its return of income for the year under consideration, i.e A.Y 2017-18. The AO issued notice u/s 142(1) of the Act, dated 09.03.2018 calling upon the assessee society to file its return of income for the subject year. As the assessee society failed to file its return of income in compliance to the aforesaid notice, therefore, the AO was constrained to proceed with and frame the assessment to the best of his judgment u/s 144 of the Act.

3. The A.O, thereafter, issued a show cause notice (SCN) dated 18.06.2019, wherein the assessee society was queried about the source of the cash deposits in SBN’s made in its bank account during the demonetization period. In reply, it was submitted by the assessee society that the subject cash deposits were sourced from the fees collected from the students, which was exempt from tax u/s 10(23C) of the Act. However, the aforesaid claim of the assessee society did not find favor with the AO. The AO, observed that the assessee society was not registered/approved by the prescribed authority u/s 10(23C)(vi) of the Act. Also, it was further observed by him that for an educational institution referred to in sub-clause (iiiab) or sub-clause (iiiad) or sub-clause (vi) of section 10(23C) of the Act, whose total income in respect of which such institution was assessable, without giving effect to the provisions of section 10 of the act, exceeded the maximum amount which was not chargeable to income tax, was statutorily required to furnish its return of such income of the previous year in the prescribed form. The AO, observed that the assessee society had never filed its return of income even though material available on record revealed that it had conducted its activities beyond the period AY 2016-17 also.

4. Apropos the claim of the assessee society that the cash deposits in SBN’s made during the demonetization period in its bank account were sourced from of the fees collected from the students, which was exempt from tax as per section 10(23C) of the Act, the AO did not find any substance in the same. The A.O was of the view that the government had not granted any relaxation, based on which, the assessee society during the demonetization period could have accepted fees from the students in demonetized currency of Rs.500/- and Rs.1,000/-. Accordingly, the AO based on his aforesaid deliberations, rejected the claim of the assessee society that the cash deposits in SBN’s in its bank account was sourced out of the fees collected from its students. Accordingly, the AO in absence of any plausible explanation as regards the source of the cash deposits in SBN’s of Rs.10,18,050/-, held the same as the assessee’s unexplained money u/s 69A of the Act, observing as under:

“ANALYSIS OF CASH ENTRIES APPEARING DURING F.Y. 2016-17

5. The AO, further observed, that the assessee society during the period other than the demonetization period had in its aforementioned bank account made cash deposits of Rs.62,74,700/-. Also, it was observed by him that the assessee society had during the subject year deposited amounts in its bank account (other than cash) amounting to Rs.29,39,301/-. On being queried, the assessee society stated that the cash deposits and receipts other than cash made during subject year were sourced from the fees that it had collected from the students. As the assessee had failed to produce its books of account for the year under consideration i.e. receipt and payment account, income expenditure account, balance sheet, copy of form 10B etc., which were required to be maintained as per provisions of the Act, therefore, the AO rejected the claim of the assessee that the amounts deposited in its bank account was the fees that was collected from the students. The AO after perusing the bank account of the assessee society, observed that it had vide its letter dated 04.11.2019 that was filed with the JCIT, Range-II, Raipur, admitted that the total fees received during the financial year was Rs.1,86,45,939. The AO, based on the aforesaid claim of the assessee society except for the cash deposits in SBN’s of Rs. 10,18,050/- (supra) held the balance receipts of Rs. 1,76,27,889/- [Rs. 1,86,45,939/-(-) Rs. 10,18,050/-] as its business receipts for the year under consideration. Accordingly, the AO worked out the income component on the aforesaid business receipts @ Rs. 10% i.e. 17,62,790/- and vide its order passed u/s 144 of the Act, dated 26.11.2019, determined income of the assessee society at Rs.27,80,840/-.

6. Aggrieved, the assessee society carried the matter in appeal before the CIT(A), who concurred with its the that the cash deposits made in its bank account during the demonetization period were sourced from the fees that it had collected from the students. Accordingly, the CIT(A) vacated the addition of the cash deposits in SBN’s of Rs. 10,18,050/- that was made by the AO u/s 69A of the Act. After so concluding, the CIT(A) observed that the assessee society as per its audited financial statements had disclosed net surplus/income from the tuition receipts at Rs. 23,06,282.79. The CIT(A) further observed that as the assessee society had disclosed gross receipts (tuition receipts) of Rs. 1,86,45,939/- which exceeded the threshold amount prescribed u/s 10(23C)(iiiad) of the Act, therefore, it was not entitled to seek exemption under the said statutory provision. As regards the claim of the assessee society that it was eligible to get benefit as per “1^st proviso” to subsection (2) of Sec. 12A of the Act, which contemplated that where registration has been granted to the trust or institution under Sec.12AA or Sec. 12AB then, the provisions of section 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid year for which assessment proceedings are pending before the AO as on date of such registration, subject to the conditions that the objects and activities of such trust or institution remain the same for such preceding assessment year, the CIT(A) did not find favor with the same. It was observed by him that as the assessee society was granted registration u/s 12AA of the Act on 29.09.2020 whereas the assessment was completed on 26.11.2019, hence, it was not entitled to take the benefit of the said concession. Accordingly, the CIT(A) held a firm conviction that the assessee society was not eligible to claim exemption u/s 11 & 12 of the Act.

7. Apropos the estimation of the business income by the AO @ 10% of the gross receipts i.e. at Rs. 17,62,790, the CIT(A) observed that as the “Income and expenditure account” of the assessee society for the subject year revealed a net surplus/income of Rs.23,06,282.79, and the books of account maintained by the assessee society had not been rejected by the AO, therefore, there was no rationale for the AO to have estimated the business profit of the assessee society. Accordingly, the CIT(A), concluded that the surplus/profit declared by the assessee society in its “Income and expenditure account” was to be treated as its taxable income for the subject year de hors any exemption u/s 10(23C) or 12A of the Act. The CIT(A) based on his aforesaid observations substituted the “business income” that was estimated by the A.O at Rs.17,60,790/- by the amount that was disclosed by the assessee as per its “Income and expenditure account” of Rs.23,06,283/-. For the sake of clarity, the observations of the CIT(A) are culled out as under:

“7. Decision:

I have carefully considered the submissions made by the appellant, the facts on record and the applicable law in this regard.

7.1 Vide Ground No.1, it is contended that the AO has erred in making addition of Rs. 10,18,050/- on account of unexplained money being cash deposited into bank. Vide Ground No.2 it is contended that the AO has erred in estimating net profit 10% of Rs. 17,62,790/- on gross receipts of Rs.1,76,27,889, In this case, the information was received that the appellant had deposited cash Rs. 10,18,050/- in its bank account during demonetization period. The appellant had not filed its return of income u/s.139 nor in response to notice u/s.142(1). In the course of assessment proceedings, the appellant explained that itwas an educational institution, and the cash deposited in its bank account during demonetization was the fees collected from its students and the same was claimed as exempt u/s. 10(23C) of the Income tax Act. However, the AO observed that the appellant had not furnished any documents to support its claim, nor did it file return of income as required u/s 139(4C). Further, the AO noted that the appellant had accepted old notes of Rs.500 and Rs.1000 (SBN) during the demonetization period, even though no relaxation was granted by the Government. In view of the above, the AO concluded that the appellant could not explain the nature and source of his cash deposits and accordingly added the above amount u/s.69A r.w.s115BBE of the Income tax Act.

It was also noted that the appellant had deposited cash amounting to Rs.62,74,700/- in the period other than demonetization period and received amount other than cash of Rs.29,39,301/- during the F.Y.2016-17 in its bank account. The appellant explained the above amounts also as being fees received from its students. However, in the absence of supporting documents regarding claim of exemption u/s. 10(23C), and failure to furnish books of accounts maintained for F.Y.2016-17, copy of Form 10B etc, the AO did not accept the appellant’s explanation. Accordingly, the total amount received during the relevant financial year excluding the cash deposits during demonetization i.e Rs.1,762790/- (1,86,45,939-10,18,050) was treated as business receipts of the assessee and profit @10% of the amount of Rs. 1,76,27,889/-i.e. 17,62,790/-was treated as total income of the appellant.

In the course of proceedings u/s.250 the appellant submitted information regarding the details of cash deposits during demonetization period in its account with Bank of India. On remand, the A.O submitted that on verification of the record it was found that there was a calculation error in the assessment order and the actual amount of cash deposits during demonization was Rs.9,66,550/-as claimed by the appellant. It was further submitted by A.O that the appellant’s contention that only Rs. 11,500/- out of the above was in SBN, was not acceptable as the certificate of cash deposits issued by the Bank of India did not contain necessary details such as denomination and number of currency notes etc.

In this regard, on verification of the certificate issued by the Bank of India it is seen that the certificate clearly states the denomination and number of currency notes, it is also certified by the bank that out of total amount of Rs. 966550/-deposited during demonetization period only Rs. 11,500/- was deposited in SBN (old currency). Further as regards the source of the above amount, the appellant has claimed the same to be from the fees received from its students. As seen from the submissions, the appellant Society is running Vidya Kunj School, Loharsi, Dhamtari and is a ‘Non- Profit Organisation’ registered under the Chhattisgarh Societies Registrikaran Adhiniyam, 1973 on 22nd December, 2008. Further the appellant society is registered u/s 12A of the Income Tax Act, 1961w.e.f Assessment Year 2020-2021 The appellant also submitted copies of audited financials and bank statements for the relevant A.Y, which support its contention that the cash receipts during demonetization were from out of fees collected from students. Further, with regard to the fact that part of the cash deposits were in SBN, it may be noted that Section 2(1)(a) of Specified Bank Notes (Cessation of Liabilities) Act, 2017 states that “appointed day” means the 31st day of December, 2016. Further Section 3 of Specified Bank Notes (Cessation of Liabilities) Act, 2017 states that “On and from the appointed day, notwithstanding anything contained in the Reserve Bank of India Act, 1934 or any other law for the time being in force, the specified bank notes which have ceased to be legal tender, in view of the notification of the Government of India in the Ministry of Finance, number S.O. 3407(E), dated the 8th November, 2016, issued under subsection(2) of section 26 of the Reserve Bank of India Act, 1934, shall cease to be liabilities of the Reserve Bank under section 34 and shall cease to have the guarantee of the Central Government under sub-section (1) of section 26 of the said Act.” From the above, it is clear that use of Specified Bank Notes (SBN) pursuant to 8th November, 2016 upto 31st December, 2016 was always allowed. It was never the intention of the Law to prohibit its use for transaction upto 31st December, 2016. This view was accepted by Bangalore ITAT in Prathamika Krushi Pattina (ITA No. 593/Bang/2021) and Bhageeratha Pattina Sahakara Sangha Niyamitha (ITA No.646/Bang/2021 dated 18-02-2022) and Anantpur Kalpana v. ITO (ITA No.541/Bang/2021) wherein it was held that, in this case both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation.

In the present case, the appellant submitted that the cash deposits during demonetization were from out of fees collected from the students. There is no material on record or brought on record to indicate otherwise. Accordingly, as per above judicial decisions and in the light of the facts and circumstances of the present case, it is clear that the cash deposits during demonetization cannot be treated as unexplained money u/s 69A. Accordingly, the addition made u/s 69A is deleted and the ground of appeal No. 1 is allowed.

7.2 Vide Ground No.2 it was contended that the AO has erred in estimating net profit 10% of Rs. 17,62,790/- on gross receipts of Rs. 1,76,27,889.

In the course of appellate proceedings, the appellant submitted that it was maintaining detailed books of accounts which were audited and in which the receipts and payments are fully vouched and verified. It was submitted that the A.O had computed net profit of Rs.17,62,790/- arbitrarily without considering its audited financial statements and submissions. It was further submitted that the appellant is a society which registered u/s. 12AA of the I.T Act from A.Y.2020-21 and in view of the proviso to sub section 2 of section 12AA, the benefit of section 11 and 12 should be given to it.

On consideration of the material evidence, it is observed that as per the audited financial statements submitted by the appellant, it had received tuition fees of Rs. 1,86,45,939/- during the F.Y.2016-17. As the gross receipts exceeds the threshold amount as prescribed u/s. 10(23C) (iiiad), it is clear that the appellant was not eligible to claim such exemption.

With regard to the appellant’s contention that it is eligible to get the benefit of proviso to sub section 12A it may be noted that the said proviso reads as under:

“Provided further that where registration has been granted to the trust or institution under section 12AA or section 12AB then, the provisions of section 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year.” In the present case, the appellant was granted 12AA registration on 29.09.2020 whereas the assessment was completed on 26.11.2019, hence it cannot take the benefit of the above proviso. Accordingly, it is not eligible to claim exemption u/s 11 and 12 of the I.T Act.

It is further noted as per the income and expenditure account for the F.Y 201617 the appellant had shown net surplus of Rs.2306282.79. The A.O. had accepted the gross receipts on account of tuition fees less the cash deposited during demonetization as the business receipts of the appellant and estimated profit at 10% of such receipts. It is pertinent to note that the appellant was maintaining books and the same were not rejected. In fact, the gross receipts forming the basis for estimation of profit have also been taken from its audited accounts. Hence, there is no rationale for estimating the profit. Accordingly, the surplus as declared by the appellant in its income and expenditure account is to be treated as its taxable income for the relevant A.Y. in the absence of any exemption u/s 10(230) or 12A. Thus, the appellant’s taxable income for the A.Y.2017-18 is to be taken as per its audited financial statement at Rs.23,06,283/- and not as estimated by the A.O. at Rs.17,60,790/-. To this extent, the appellant’s second ground of appeal is treated as allowed for statistical purpose.

8. In the result, the appeal filed by the appellant is partly allowed.”

8. The assessee being aggrieved with the order of Ld. CIT(A) has carried the matter in appeal before the Tribunal.

9. Shri R.B. Doshi, learned authorized representative (for short, Ld. AR) for the assessee, at the threshold, submitted that the Ld. CIT(A) had erred in declining the claim of the assessee society for exemption u/s 11 and 12 of the Act, which it was entitled for as per “1^st proviso” to section 12A(2) of the Act (as applicable during the year under consideration). The Ld. AR to buttress his aforesaid claim took us through the “1^st proviso” to Sec. 12A(2) of the Act. The Ld. AR submitted that the assessee society had applied for grant of registration u/s 12A of the Act on 08.11.2019, which, thereafter was granted by the CIT(Exemption), Bhopal vide his order dated 29.09.2020, Page Nos. 59-61 of APB. Elaborating further on his contention, the Ld. AR, submitted that though the AO had passed order u/s 144 of the Act, dated 26.11.2019, but the assessee had thereafter carried the matter in its appeal before the CIT(A), which was disposed of by the latter vide his order dated 30.05.2024. Carrying his contention further, the Ld. A.R, submitted that as the proceedings before the CIT(A) are continuation of the assessment proceedings, therefore, in the backdrop of the fact that the appeal of the assessee society for the year under consideration i.e. AY 2017-18 was pending on the date on which registration was granted by the CIT (Exemption), Bhopal u/s 12A of the Act, i.e. on 29.09.2020, the assessee society as per the concession provided in the “1^st proviso” to Sec. 12A(2) of the Act was entitled for exemption u/s 11 & 12 for the subject year i.e A.Y 201718. It was, thus, the Ld. AR’s claim that as the assessment proceedings in the case of the assessee society for the year under consideration i.e A.Y 207-18 were pending on the date of grant of registration u/s 12A by the CIT(Exemption), Bhopal vide his order dated 29.09.2020, therefore, the income of the assesse for the year under consideration ought to have been computed after allowing exemption u/s 11 & 12 of the Act. The Ld. AR to support his claim that the proceedings before the CIT(A) are to be construed as continuation of the assessment proceedings had pressed into service the order of the Tribunal in the case of Prem Prakash Mandal Sewa Trust v. ITO. The Ld. AR in his attempt to fortify his aforesaid claim had placed on record the “Notes to clauses” of the Finance Act, 2014 wherein the purpose for incorporating the “1^st proviso” to section 12A(2) of the Act was explained. Alternatively, the Ld. AR submitted that in case of the assessee society claim of exemption u/ss 11/12 of the Act was not to be accepted, then, the AO be directed to allow depreciation on the “fixed assets” of the assessee society, though a claim for the same was raised in the “Income and expenditure account” The Ld. AR to buttress its entitlement for claim of depreciation on fixed assets had relied upon the “Explanation 5” of Sec. 32(1) of the Act.

10. Per contra, Dr. Priyanka Patel, Learned Senior Departmental Representative (for short, Sr. DR) relied upon the orders of the lower authorities.

11. I have heard the learned authorized representatives of both the parties, perused the orders of the lower authorities, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.

12. The controversy involved in the present appeal hinges around two issues, viz., (i). that as to whether or not the assessee society per the “1^st proviso” of subsection (2) of section 12A of the Act, based on the registration granted u/s 12A of the Act, dated 29.09.2020, is entitled for exemption u/ss. 11/12 of Act for the reason that its application for registration filed u/s 12A of the Act, dated 08.11.2019 was pending prior to the disposal of its appeal by CIT(A)/ NFAC, Delhi, who had disposed of the same vide his order dated 30.05.2024? (ii). that as to whether or not the assessee society is entitled for claim of depreciation on its “fixed assets” despite the fact that it had not raised a claim for the same in its return of income for the year under consideration, i.e AY 2071-18?

13. Before proceeding any further, I deem it fit to cull out Section 12A of the Act, which contemplates the “Conditions for applicability of sections 11 and 12 of the Act” (relevant extract – applicable for the year under consideration):

“12A(1). The provisions of section 11 and section 12 shall not apply on relation to the income of any trust or institution unless the following conditions are fulfilled:

(a) to (ac) xxxx xxxx xxxxx

(b) where the total income of the trust or institution as computed under this Act without giving effect to [the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year] the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 [and the person in receipt of the income furnishes alongwith the return of income for the relevant assessment year]the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed;”

(emphasis supplied by me)

14. Ostensibly, clause (b) of sub-section (1) to section 12A of the Act (as applicable to the year under consideration i.e AY 2017-18) contemplates that the provisions of section 11 and 12 shall apply in relation to the income of any trust or institution, inter alia, subject to a pre-condition that where the total income of the trust or institution as computed under this Act without giving effect to the provisions of Sec. 11 and Sec. 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the “Explanation” below subsection (2) of Sec. 288 [and the person in receipt of the income furnishes alongwith the return of income for the relevant assessment year] the report of such audit in the prescribed form duly signed and verified by such accountant as setting forth such particulars as may be prescribed. Accordingly, Sec. 12A(b) [as was available on the statute during the year under consideration i.e AY 2017-18] had for claiming of exemption under Sec. 11 or Sec. 12, inter alia, set out a procondition, as per which the trust or institution was statutorily required to cumulatively satisfy two conditions, viz. (i) to get its accounts audited by an accountant defined in the “Explanation” below sub-section (2) of Sec. 288; and (ii). to furnish alongwith the return of income for the relevant assessment year the report of audit in the prescribed form. Now, as the present assessee society had not filed any return of income for the year under consideration i.e AY 2017-18, therefore, the aforesaid pre-condition is not satisfied by it. In fact, it transpires on a perusal of the CIT(A) order that the assessee society had in its written submissions filed before him stated that it had filed its audited financial statements only in the course of the assessment proceedings.

15. As it is a matter of fact borne from the record that the assessee society had failed to file its return of income as required per the mandate of section 12A(1)(b) of the Act (as was applicable during the year under consideration), therefore, for the said reason it would stand disentitled for claiming exemption u/s 11 and 12 of the Act.

16. As I have in terms of my aforesaid deliberations concluded that the assessee society is disentitled from claiming exemption u/ss. 11/12 of the Act, therefore, I refrain from looking into the scope of “1^st proviso” to section 12A of the Act. The Ground of appeal No. 1 is dismissed.

17. Apropos the Ld. AR’s claim that in case the entitlement of the assessee society for exemption u/ss. 11/12 of the Act does not merit acceptance, then, the A.O be directed to allow deduction for depreciation on the “fixed assets” owned by the assessee society, I find substance in the same. “Explanation 5” to Sec. 32(1) had been made available on the statute vide the Finance Act, 2001, w.e.f 01.04.2002 making depreciation mandatory “whether or not the assessee has claimed the deduction”. It nullifies the decision of the Hon’ble Apex Court in CIT v. Mahendra Mills, which took the view, that where particulars are not furnished, depreciation cannot be forced on the assessee. The Hon’ble Apex Court, had held, that the privilege of claiming depreciation cannot be turned to a disadvantage and an option cannot become an obligation. After insertion of “Explanation 5”, w.e.f A.Y 2002-03, the A.O is authorized to gather the particulars and allow depreciation whether claimed or not. Rather, I find that even prior to “Explanation 5”, when depreciation was optional, the Hon’ble High Court of Bombay in CIT v. Parle Plastics Ltd had held, that for purposes of reckoning relief under Sec. 80-IA, depreciation not claimed by the assessee would have to be charged in computation of the eligible profits. In fact, I find that the ITAT, Vishakapatnam in the case of Arthi Nursing Home v. ITO (2009) 309 ITR (AT) 269 (Vishakapatnam), had observed, that in a case where the income is recomputed by allowing the assessee the mandatory deprecation, which he has not claimed, the consequential adjustment by way of reduction of interest to partners with reference to the revised income is justified. Rather, the CBDT vide its Circular No. 29D(XIX) of 1965, F.No. 45/239/65-ITC, dated 31^st March, 1965, had, inter alia, observed that even where best judgment assessment is made and the income of the assessee is proposed to be estimated, then, in case the prescribed particulars have been furnished by the assessee, the depreciation allowance should be separately worked out. I, thus, in the backdrop of my aforesaid observations, am of a firm conviction, that though the assessee society is not entitled for claiming exemption under Sec. 11 and Sec. 12 of the Act, but, at the same time, as per “Explanation 5” to Sec. 32(1) of the Act, the deduction for depreciation on the “fixed assets”, though not claimed, ought to be allowed while computing its income in a commercial manner. Accordingly, the A.O is directed to allow depreciation on the “fixed assets”, though, after verifying satisfaction of the requisite conditions contemplated in Sec. 32(1) of the Act. The Ground of appeal No. 2 is allowed in terms of my aforesaid observations.

18. Apropos, the Ld. AR’s claim that the CIT(A) had erred in carrying out enhancement of the income of the assessee society by an amount of Rs.5,43,493/-, i.e. without affording an opportunity to the assessee to put forth an explanation, I am unable to concur with the same. As the CIT(A) had taken the net income/surplus disclosed by the assessee society in its “Income and expenditure account” for the subject year for computing its taxable income, therefore, I am afraid the same cannot be construed as enhancement of income as canvassed by the Ld. AR before me. The Ground of appeal No. 3 of the appeal is dismissed.

19. Resultantly, the appeal filed by the assessee society is partly allowed in terms of my aforesaid observations.