Indian National Congress Vs. Asstt. Cit - Court Judgment

Excerpt:
income tax act, 1961, section 143; in favor of : revenue - - the assessing officer issued show-cause on 29-1-1997, informing that if the assessed failed to furnish the required accounts, details, etc. the assessing officer held that assessed had failed to satisfy the conditions in section 13a of the act for grant of exemption. 8. aggrieved, the assessed challenged the assessing officer's order in the first appeal before the learned commissioner (appeals) on several grounds including lack of fair, proper opportunity, non- appreciation of reasonable cause for failure to produce books of accounts, disregard of the provisions of sections 13a, 139(4b), etc. he further observed that there was no reasonable cause for the assessed's failure to file complete accounts, documents, details etc. 10. the learned commissioner (appeals) held that since the assessed had failed to satisfy the conditions for exemption under section 13a before the assessing officer, the same exemption could not be allowed during appellate proceeding before him on the basis of additional accounts, documents, details furnished before him. 16,45,27,326 of central office was supported by audited accounts of the central office which were furnished before the assessing officer and, hence, the same was clearly allowable. he also drew support from the dissenting note of justice subarao in that case about the meaning of scope of the expression 'object of general public utility'.he further drew support from the provisions of indian constitution and explained that ultimate aims and object of the party is to achieve the advancement and well being of the people of india in accordance with the preamble and aims and objects enshrined in the constitution of india. he added the provisions of section 13a of the act were introduced with effect from 1-4-1979, and the gujarat high court decision in gujarat pradesh congress committee's case (supra) was rendered in 1993. thus, the assessed was well aware long before the due date for filing the return for the assessment year 1994-95. he further added that the assessed's failure to file the return on the basis of complete accounts in respect of all the units and its failure to furnish the same even till 25-3-1997, would prove that the assessed's plea of reasonable cause was untenable and unacceptable. 23. the learned departmental counsel further submitted that having failed to comply with the substantive mandatory conditions of keeping accounts, getting them audited and furnishing names and addresses of the donors exceeding rs. i to section 77(l) of the representation of the people act, 1951. 28. the learned departmental counsel further submitted that it is well settled that income attracts tax as soon as it accrues. perusal of the order sheet entry vide copies in the paper book clearly shows that the assessing officer had given several opportunities to the assessed to file consolidated accounts, documents, list of donors exceeding rs. it is a well known fact that it is only one party and state units do not have separate and independent existence. it is an oldest and biggest party having availability of best brain in law and accountancy. it is also worth noting here that even after several opportunities given by the assessing officer the assessed failed to furnish complete accounts and produce the books of accounts of all the units. the facts of the case clearly establish deliberate disregard and defiance of the provisions of law. if fairness is shown by the decision maker to the man proceeded against the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. the admitted fact is that the audit of the accounts of state and other units was done after the completion of assessment on 31-3-1997. this shows that the accounts as well as the audit were not complete till the completion of assessment and the assessed's plea that it could not furnish complete accounts ,as its different state and other units were spread all over india and, thereforee, it could not obtain the same in time and, hence, it was prevented by reasonable cause is untenable and unacceptable. a proper construction of the provision of section 13a would clearly indicate that exemption would be admissible in respect of voluntary contributions received or exemption would be denied in respect of voluntary contributions received. 39. the unreasonableness and excessiveness of the estimate of receipts is also clearly established by the fact and the materials on record of the assessing officer at the time of completion of assessment. 40. the learned commissioner (appeals) also committed similar mistake when he confirmed the assessing officer's estimate of receipts, in fact, the learned commissioner (appeals) was even in better position to take stock of the material in the case and come to more reasonable figure of receipts for all the state and other units apart from the receipts of the central office. the words 'voluntary contribution received' used in the section are strong indication of the intention of the legislature that the provisions of section 13a are applicable to 'voluntary contribution received' and not to notional or estimated contribution. it is noteworthy here that the aims and objects of association like ficci, cii, etc. 46. regarding the contention of the learned counsel for the assessed that exemption can be granted even in appeal stage on fulfillment of the prescribed conditions, we are not inclined to accept this plea because we have already held above that on the facts and in the circumstances of the case, the learned commissioner (appeals) was justified in not admitting the additional evidence because there was no sufficient cause for failure to produce books of accounts, etc. we have also held above that the facts of the case clearly show deliberate disregard and defiance of provisions of section 13a, inasmuch as from the facts stated above it was clear that the assessed did not keep its accounts, in regular course of conduct of its political activity, receipt of income and incurring of expenditure. 47. we agree with the learned counsel that by not computing income head wise and making lump sum estimate of income he has failed to follow the provisions of section 13a of the act and to compute the total income properly in the case.ordersikander khan, a.m.:these are cross-appeals by the assessed and the revenue in respect of assessment year 1994-95. the assessed is an all india political party. it filed returns for the assessment years 199194 to 1995-96 on 14-2-1996 declaring nil income claiming exemption under section 13a of the income tax act, 1961. the assessing officer issued notice under sections 143(2) and 142(l) in respect of assessment year covered under the present appeal calling for completion of accounts and details vide letter dated 25-9-1996. there was no compliance, though promise was given for compliance later. the assessing officer issued show-cause on 29-1-1997, informing that if the assessed failed to furnish the required accounts, details, etc. by 16-2-1997, assessment would be completed on material available on record. on 25-3-1997, copies of income and expenditure accounts of 14 state units were filed. copies of accounts of remaining state units were not filed even till 31-3-1997. tn) assessing officer examined the accounts filed and passed assessment order on 31-3-1997 when it was time barring.2. the return for the assessment year 1994-95 was filed on the basis of accounts of the central office of the party only. even on 25-3-1997, accounts of 14 state units were filed. thus the return filed and the accounts furnished till the completion of the impugned assessment were not complete.3. the assessing officer proceeded to complete the assessment on the basis of the material on record. he noted that as per accounts of the central office, assessed had shown the following receiptsrs.(i)collection from sale of coupons and purse money, etc.20,75,000(ii)other income3,12,65,500(iii)aicc membership fee3,220(iv)delegation fee13,375(v)aicc membership fund600 11,33,57,696other income (i)interest on fixed deposit89,72,827(ii)misc. receipts13,522(iii)donation2,22,73,430(iv)literature sale5,710 3,12,65,5004. he further noted that in the details of donation of rs. 2,22,73,430 furnished by the assessed, complete addresses of donors were not given as required under section 13a of the act. he also pointed out several defects in the accounts of 14 state units furnished on 25-3-1997, and noted that books of accounts and documents furnished in respect of 14 units and central office were not produced for verification. after referring to the provisions of sections 13a and 139(4b) and supreme court's observation in common cause case (wp no. 24 of 1995), etc. the assessing officer held that assessed had failed to satisfy the conditions in section 13a of the act for grant of exemption. he then proceeded to estimate receipt expenditure and income. he observed that in the return filed the assessed had shown receipts from sale of coupons, voluntary contributions donation, etc. at rs. 11,33,57,696 in respect of central office only, but had not shown receipts in respect of state and other units of the party. he estimated such receipts of all the state and other units including 14 state units whose accounts were furnished on 25-3-1997 but rejected for defects pointed out and other units whose accounts were not furnished at rs. 15 crores. thus, the total receipts were estimated at rs. 26,33,67,696 (rs. 11,33,57,696 + rs. 15 crores).5. the assessing officer then dealt with the expenditure side. he noted that the assessed had shown expenditure of central office of the party at rs. 16,45,27,326 against the receipt of rs. 11,33,57,696. he observed that the expenditure mostly related to political activity of the party and the only non-political expenditure could be the establishment expenses of the party. he held that expenditure related to political activity was not allowable and expenditure incurred for earning income from house property and income from other sources only was admissible for deduction. he further noted that the assessed had shown interest on fixed deposits at rs. 89,72,827 which was assessable under the head income from other sources. no income under the head income from house property was shown. he, thereforee, held that only the expenses incurred for running the establishment of the party relatable to the earning of income from interest on fixed deposits could be allowed as expenditure relatable to the said receipts of interest on fixed deposits.6. with the above observations about the deduction of expenditure, the assessing officer allowed expenditure of rs. 52,17,912 out of the establishment expenditure shown in the accounts of central office and rs. 68,71,700 for the state and other units going by proportion which interest receipts bear to the total receipts of the central office. accordingly, total expenses allowable were taken at rs. 1,20,89,616.7. thus, the total income of the party was computed by the assessing officer at rs. 25,12,68,081 (receipts rs. 26,33,57,696 minus expenses rs. 1,20,89,616) as against the return filed declaring excess of expenditure over income of rs. 5,11,69,631 in respect of central office of the party.8. aggrieved, the assessed challenged the assessing officer's order in the first appeal before the learned commissioner (appeals) on several grounds including lack of fair, proper opportunity, non- appreciation of reasonable cause for failure to produce books of accounts, disregard of the provisions of sections 13a, 139(4b), etc., rejection of receipts and expenditure shown, arbitrary estimate of receipts and expenditure, etc. the assessed filed copies of accounts of remaining state and other units, documents, details, etc. before the learned commissioner (appeals) which were not filed before the assessing officer in the course of assessment proceeding. it also filed audit report in respect of complete accounts. it requested the learned commissioner (appeals) to admit all these and decide the appeal after considering the same. the learned commissioner (appeals) called for the remand report from the assessing officer who opposed their admission.9. after considering the remand report and hearing the assessed, the learned commissioner (appeals) declined to admit the additional evidence and materials filed in the course of appellate proceedings before him. he observed that the assessed did not fulfill the conditions prescribed under r. 46a for admission of additional evidence. he added their admission at the appellate stage would amount to filing of return itself during the appellate proceeding which was not permissible under the law. he further observed that there was no reasonable cause for the assessed's failure to file complete accounts, documents, details etc. before the assessing officer during the assessment proceedings. he added that the assessed was aware right from 1978 in general when sections 13a, 139(4b) were inserted and from july, 1993, in particular, after gujarat high court's decision in cit v. gujarat pradesh congress samiti : [1994]207itr622(guj) that it had to maintain its books of accounts as required under section 13a and submit he same as required under section 139(4b) of the act. thus, the assessed had sufficient opportunity to comply with these provisions before the assessing officer. he further added that the assessing officer had also given sufficient opportunity. he, thereforee, declined to admit the additional evidences, accounts, documents, etc. he relied on supreme court decision in cit v. guijargravures (p) ltd. : [1978]111itr1(sc) and jute corporation of india ltd. v. cit & anr. 0044/1991 : [1991]187itr688(sc) in this regard.10. the learned commissioner (appeals) held that since the assessed had failed to satisfy the conditions for exemption under section 13a before the assessing officer, the same exemption could not be allowed during appellate proceeding before him on the basis of additional accounts, documents, details furnished before him. he relied on supreme court decisions in cit v. r. venkataswamy naidu (1956) 29 itr 529 , lala gopi mal kuthiala charitable trust v. income tax officer , rai bahadur babulu subarao v. cit (1956) 30 itr 280 , novapan india ltd. v. collector of central excise in civil appeal no. 3556 of 1994 (sc). declining to admit the additional accounts, etc., the learned commissioner (appeals) confirmed the estimate of receipts by the assessing officer.11. the learned commissioner (appeals) considered the assessing officer's estimate of expenditure. he observed that the expenditure of rs. 37,68,036 being employees expenses and depreciation of rs. 1, 15,86,998 being mandatory allowance should be allowed in full. he thus allowed rs. 1,63,05,034 as against rs. 1,20,89,616 allowed by the assessing officer. the learned commissioner (appeals) further observed that out of balance expenditure of rs. 14,92,22,294, 60 per cent should be allowed as reasonable expenditure to carry on its political activity, i.e., rs. 8,95,33,374. thus, the learned commissioner (appeals) held that the assessed was entitled to deduction of expenditure on its political activity also, though he restricted the allowance to 60 per cent of the expenditure shown. accordingly, the learned commissioner (appeals) allowed deduction for expenditure and depreciation at rs. 9,27,48,793 (rs. 8,95,33,374 + rs. 1,53,05,034 minus rs. 1,20,89,616).12. both the assessed and the revenue are aggrieved by the order of the learned commissioner (appeals). hence, the cross-appeals filed before this tribunal by the assessed and the revenue.13. in the assessed's appeal as many as 25 grounds have been taken. most o them are argumentative. in brief, it can be said that the grounds relate to the principle of natural justice, fair and reasonable opportunity, reasonable grounds, which prevented the assessed from filing complete accounts, etc., before the assessing officer, provisions of sections 13a, 139(4b), admission of audited accounts, documents and details under rule 46a, estimates of expenditure and receipts, admissibility of expenditure to carry out political activity, alleged non- consideration of some facts of the grounds by the learned commissioner (appeals) and interest charged under sections 234a and 234b of the act.14. starting with the assessed's appeal, the learned counsel for the assessed submitted before us that the assessed filed the return on the basis of the audited accounts of central office only under bona fide belief that it was liable to file the return for the central office only and the state and other units were liable to file their respective returns separately. the assessing officer asked the assessed to file consolidated accounts on all india basis on 28-11-1996. it could receive accounts from 14 state units by 26-4-1997, and furnished the same to the assessing officer on that date. the accounts of the remaining units could not be received as they were spread far and wide all over india. thus, the assessed was prevented by sufficient reasonable cause from filing the complete accounts, etc., before the assessing officer before completion of the assessment on 31-3-1995. however, accounts of the remaining states and other units were received thereafter and complete audited accounts of all india units were furnished before the learned commissioner (appeals). he contended that looking to the reasonable cause, the learned commissioner (appeals) should have admitted the accounts furnished under r. 46a and passed fair and just order in the case after considering the same. he further contended that their non- consideration amounted to violation of principle of natural justice. he submitted that appellate proceedings are continuation o assessment proceeding and, thereforee, complete audited accounts furnished before the learned commissioner (appeals) should have been admitted and considered by him in the interest of justice and fair play. he relied on the decisions reported as cit v. prabhat zarda factory : [1996]221itr791(patna) , cit v. kanpur coal syndicate : [1964]53itr225(sc) , cit v. anjuman moinia fakharia (1994) 208 itr 568 , cit v. shivanand electronics : [1994]209itr63(bom) , cit v. nagpur hotel owners association : [1994]209itr441(bom) , cit v. mumtaz yarud dowla waqf : [1998]234itr6(ap) , madeva upendra sinai v. union of india & ors. : [1975]98itr209(sc) (sc) dhrangadhra chemical works ltd. v. cit : [1975]101itr491(bom) , anglo french textiles ltd. v. income tax officer : [1976]103itr282(mad) , etc. vide pp. 5 & 6 of written arguments, dated 23-1-2001.15. he further submitted that the estimate of receipt from voluntary contributions was not permissible under section 13a of the act. he added that the section concerns grant of exemption in respect of income from house property, other sources and voluntary contribution on fulfillment of the prescribed conditions. in case of non-fulfilment of the prescribed conditions, the exemption is not allowable under section 13a of the act. however, unlike section 145 of the act, section 13a of the act does not empower to estimate income from voluntary contribution. he added that there was no material in possession of the assessing officer that the assessed had hot disclosed any specific voluntary contribution or received any specific voluntary contribution exceeding rs. 10,000 for which names and addresses were not recorded. he pointed out that the word 'received' used in section 13a of the act is in respect of voluntary contribution and, hence, it is only the actual voluntary contribution received which can be considered for grant or denial of exemption under section 13a of the act. there is no scope for applying the provisions on estimated, hypothetical or notional contribution. he added that provisions of section 13a cannot be interpreted in the manner of section 145 because the political party is not a business concern, where sales, profit, etc., can be estimated under section 145 of the act under certain circumstances. voluntary contribution does not fall under any head and it is taxable only because of the provisions of section 13a of the act.16. the learned counsel further submitted that the learned commissioner (appeals) should have deleted the estimated addition for the assessment year 1994-95 also considering the fact that assessments for earlier years and subsequent years were made at nil income after the impugned assessment for assessment year 1994-95 and the assessment for the assessment year 1995-96 was set aside in appeal by the learned commissioner (appeals). he urged that in the interest of justice and fair play, the assessing officer may be directed to pass fair and just order afresh after considering the complete audited accounts of all the units, documents and details. he added that there was no time-limit prescribed under section 13a for completing the audited account and, thereforee, the accounts audited after original assessment can be considered by the assessing officer in fresh assessment on direction of tribunal. in this connection, he referred to cbdt circular no. 1998 vide f. no. 225/128/99/ita/2 (et.), dated 19-10-2000, and pointed out that sections 44ab and 271b were not applicable to a political party. he added that cbdt circular is binding as per decision reported' as paper products ltd. v. cce : [2001]247itr128(sc) , uco bank v. cit : [1999]237itr889(sc) . he added that in fact even in respect of provisions of the act where the audit report is to be filed along with the return, appellate authority in the interest of justice and fair play have directed the assessing officer in many cases to consider the audit report filed after assessment. he contended that supreme court's decision in the case of nagpur hotels owners association (supra) would not be applicable in the present case because the facts were different. he added that in the said case, the supreme court was considering the provisions of section 11(2)(a) read with r. 17 of the it rules which provided the prescribed manner and the time for giving notice in writing before claiming exemption of such accumulation as provided in section 11(2)(a) of the act. he contended that provisions of section 13a of the act were different from the provisions of section 11(2)(a) read with rule 17 of the it rules, and, hence, the supreme court decision in the case of nagpur hotels owners association (supra) would not be applicable to the case of the present assessed..17. the learned counsel for the assessed further submitted that the estimate of receipts was arbitrary and without any basis. he added that while estimating the receipts of all the state units besides taking the actual receipt of central office shown, the assessing officer had not considered the receipts of 14 state units whose accounts were furnished on 25-3-1997 before completion of assessment on 31-3-1997. he pointed out that the receipts of all these 14 state units shown in the accounts were rs. 3,82,97,972. in view of this, the assessing officer's estimate of receipts of all the 14 state units plus that of remaining units whose accounts were not furnished on 25-3-1997 should not have been estimated by the assessing officer at the astronomical figure of rs. 15 crores. the same was also arbitrarily and unjustifiably confirmed by the learned commissioner (appeals). he stated that as per accounts of the remaining units furnished before the learned commissioner (appeals), their receipts were rs. 1,81,17,534. thus, the total receipts of all the state and other units other than the central office worked out to rs. 3,82,97,972 + rs. 1,81,17,534 = rs. 5,64,15,506 as against which the assessing officer estimated at rs. 15 crores. he contended that the learned commissioner (appeals) in his arbitrariness had ignored the glaring facts of the case.18. the learned counsel further submitted that the assessing officer was not justified in disallowing the expenditure on political activity and the learned commissioner (appeals) in restricting the allowance of the same to 60 per cent only. there was no basis for the same. he added that expenditure of rs. 16,45,27,326 of central office was supported by audited accounts of the central office which were furnished before the assessing officer and, hence, the same was clearly allowable. he, thereforee, contended that the learned commissioner (appeals) was wrong in restricting allowance of expenditure to rs. 9,27,48,793 + rs. 1,20,89,615, as allowed by the assessing officer. this also proved arbitrariness of both the assessing officer and the learned commissioner (appeals).19. he further submitted that the question of grant of exemption under section 13a of the act would arise in case of income but there was no income for the assessment year in question rather it was deficit being excess of expenditure over income. the overall deficit in the consolidated accounts filed before the learned commissioner (appeals) was rs. 4.60 crores. he contended that there was no justification for the learned commissioner (appeals) to confirm the estimate of receipts and allow only part of the expenditure which resulted into computation of excessive income on estimate only. he contended that section 13a of the act provides for exemption on fulfillment of the prescribed conditions but it does not empower to estimate receipts and treat the same as income. he referred to the decision in vellayan chettiar trust v. income tax officer (1995) 54 itd 201 (mad) and cit v. k.y. pilliah & sons : [1967]63itr411(sc) , bajrang bali engineering co. (p) ltd. v. cit : [1967]66itr82(cal) and jhandunial tara chand rice mills v. cit . he added that only the actual voluntary contribution received could be subject of consideration under section 13a of the act.20. he further submitted that expenditure incurred to achieve the objects of the political party was allowable and the assessing officer was wrong in his view that only expenditure incurred for earning income from house property and 'other sources' was allowable as per provisions of the act. he added that there was nexus between the assessed's political activity and the voluntary contribution and, thereforee, the expenditure was allowable. he further added that in section 13a word 'income' and not 'receipts' has been used which means receipt minus expenditure. he contended that in view of this also, expenditure incurred on political activity has to be allowed from the receipts of voluntary contribution to compute the income. in this connection he referred to the scheme of computation of income in the cases of charitable trust where expenditure incurred for carrying out the charitable object, i.e., aims and objects of the trust are allowed. he relied on supreme court decision in srm-mct m. trippani trust v. cit : [1998]230itr636(sc) .21. the learned counsel for the assessed further submitted that political activity would fall within the scope of 'object of general public utility' used in section 2(15) of the act for the definition of charitable purposes. it is further in view of special provisions of section 13a granting absolute exemption on fulfillment of the prescribed conditions and considering the wider activity of a political party which is registered as a political party and not as trust that a political party has to seek the benefit of section 13a and not section 11 of the act. he added that the ratio of the supreme court decision in cit v. all india hindu mahasabha : [1983]140itr748(delhi) was not applicable in the present case because the facts were distinguishable. he stated that the assessed is a political party duly registered with election commission of india and as such it squarely falls within the purview of section 13a of the act whereas in the case of hindu mahasabha, facts were different as it was a society registered under the societies registration act and its aims and objects were also different. moreover, the said judgment was not in respect of the provisions of section 13a. he also drew support from the dissenting note of justice subarao in that case about the meaning of scope of the expression 'object of general public utility'. he further drew support from the provisions of indian constitution and explained that ultimate aims and object of the party is to achieve the advancement and well being of the people of india in accordance with the preamble and aims and objects enshrined in the constitution of india. he, thereforee, contended that the assessed satisfies the conditions of 'objects of general public utility'.22. the learned departmental counsel however opposed the contention of the learned counsel for the assessed. he submitted that there was no violation of principle of natural justice and fair and reasonable opportunity was given by the ao before completing the assessment. he referred to the order sheet entry, show-cause letter, etc., issued by the assessing officer before completing the assessment. he also referred to written reply of the assessed showing inability to furnish complete accounts, details, etc. and produce audited accounts of all the units on flimsy grounds that they were spread all over india and getting them at delhi from far and wide places in the given time could not be possible. he contended that it did not constitute reasonable cause. he added the provisions of section 13a of the act were introduced with effect from 1-4-1979, and the gujarat high court decision in gujarat pradesh congress committee's case (supra) was rendered in 1993. thus, the assessed was well aware long before the due date for filing the return for the assessment year 1994-95. he further added that the assessed's failure to file the return on the basis of complete accounts in respect of all the units and its failure to furnish the same even till 25-3-1997, would prove that the assessed's plea of reasonable cause was untenable and unacceptable. he further added that the facts also proved that the assessed did not maintain its books of accounts in course of its day-to-day activity and did not get them audited within the reasonable time. he submitted that the assessed's plea of violation of principle of natural justice, etc., was liable to be rejected.23. the learned departmental counsel further submitted that having failed to comply with the substantive mandatory conditions of keeping accounts, getting them audited and furnishing names and addresses of the donors exceeding rs. 10,000 as provided in the proviso to section 13a of the act, the assessed had forfeited its claim of exemption. he added that since the assessed did not fulfill the conditions of section 13a of the act, the assessing officer was justified in not allowing the exemption. he relied on the supreme court decision in nizam's h.e.m. religious endowment trust v. cit : [1966]59itr582(sc) . he further added that in assessment years 1993-94 and 1995-96, assessing officer allowed the exemption because the assessed had produced audited accounts, etc., and fulfilled the conditions. he contended that since the facts in the assessment year 1994-95 covered under the present appeal were different, the assessed cannot justifiably take the plea for similar treatment in the assessment year 1994-95.24. the learned departmental counsel further submitted that the conditions had to be fulfilled before completion of assessment and not thereafter at appellate stage or during fresh assessment on set aside of original assessment. he contended that if the assessment is set aside to provide opportunity to comply with the above requirements of section 13a of the act to grant exemption, it would be wrong as it would amount to reopening of the assessment which power is not vested with the tribunal. he relied on supreme court decision in nagpur hotels owners association (supra). he further submitted that exemption provision has to be interpreted strictly and its benefit should not be given to defaulter-assessed. he relied on supreme court decision in novapan india ltd. v. collector of central excise & customs, hyderabad : 1994(73)elt769(sc) . he added that the requirements of r. 46a were not present in the case and, thereforee, the learned commissioner (appeals) was justified in declining to admit the accounts, etc., furnished before him.25. the learned departmental counsel further submitted that since voluntary contribution had nexus with the objects and activities of the party, it was taxable as income. he referred to several decisions in support. he further submitted that since the assessed did not produce necessary accounts and furnish required details, the assessing officer was justified in estimating the receipts. in this connection, he relied on sections 144 and 145 and decision of punjab high court reported in 12 itr 939 and supreme court decision narain swadeshi weaving mills v. cept : [1954]26itr765(sc) . he added that voluntary contribution falls under the head income from other sources and, hence, section 145 was applicable. he also added that cbdt circular referred to above cannot override the provisions of the act. the circular does not prohibit application of section 145 to voluntary contributor. this circular is regarding sections 44ab and 271b and not regarding application of section 145, etc., of the act.26. the learned departmental counsel further submitted that since there is no mandate in law to allow deduction for expenditure incurred by a political party for political purposes for computing the total income, the assessing officer was justified in not allowing such expenditure. only that expenditure can be allowed which is wholly and exclusively incurred for earning income under the head income from house property and other sources as provided in law. he added that unlike the provisions of section 11 and 12 relating to the charitable trust, there is no provision in section 13a or elsewhere in the act to allow deduction for expenses incurred for the objects of the political party. political purpose cannot be said to be a charitable purpose or an object of general public utility. he relied on the supreme court decision in all india hindu mahasabha case (supra). he added that 'sabha' was also recognised as political party as noted in the decision. he further added such expenditure was also disallowed by the assessing officer in assessment year 1993-94 and in the assessment years after the assessment year 1994-95 but the assessed did not contest the disallowance in appeal.27. the learned departmental counsel referred to the supreme court decision in the case of common cause v. union of india : [1996]222itr260(sc) and submitted that the supreme court held that section 13a is mandatory and that a political party not maintaining its audited accounts and not filing the income-tax return cannot ordinarily be permitted to say that it had incurred or authorised (sic) expenditure for the election of the activity in terms of expln. i to section 77(l) of the representation of the people act, 1951.28. the learned departmental counsel further submitted that it is well settled that income attracts tax as soon as it accrues. the application or destination of the income has nothing to do with its accrual or taxability. he relied on tuticori alkali chemicals & fertiliser v. cit : [1997]227itr172(sc) .29. regarding the revenue's appeal, the learned departmental counsel submitted that since the assessed did not derive income from business or profession, depreciation was not allowable. he added that there was no provision in the income tax act to allow depreciation to a political party. he contended that the learned commissioner (appeals) was wrong in allowing depreciation. he further submitted that for the reasons given regarding inadmissibility of expenditure of a political party on its political activity as above, it should be held that the learned commissioner (appeals) was not justified in allowing 60 per cent of such expenditure. accordingly, as mentioned in the grounds of the revenue's appeal, the learned departmental counsel argued that the learned commissioner (appeals) had erred in allowing the expenses of rs. 10,48,38,480 as against ps. 1,20,89,616 allowed by the learned assessing officer.30. in reply, the learned counsel for the assessed submitted that if the learned departmental counsel's claim that voluntary contribution falls under the head income from other sources is to be accepted, then depreciation would be admissible under section 57(l) of the act. according to him, depreciation is also admissible on account of use of the asset for the objects and purposes of the political party. in this regard, the submission made in support of the claim of expenditure on political activity would equally apply to the admissibility of depreciation. he pointed out that as depreciation is allowed to a charitable trust despite there being no income under the head income from business or profession on the ground of use for its objects and charitable purposes, similarly depreciation is admissible to a political party. as regards the revenue's objection to the allowance of 60 per cent of expenditure by the learned commissioner (appeals), he submitted that the learned commissioner (appeals) ought to have allowed the entire expenditure and not 60 per cent. he reiterated his arguments as above regarding the admissibility of expenditure as a whole.31. we have considered the submissions and contentions both oral and written of the learned counsel for the assessed and the revenue. we have also gone through the materials on the file including the paper book. we are of the view that there was no breach of natural justice. perusal of the order sheet entry vide copies in the paper book clearly shows that the assessing officer had given several opportunities to the assessed to file consolidated accounts, documents, list of donors exceeding rs. 10,000 with addresses and details and produce complete books of accounts. he had given several reminders but there was no compliance. finally, he issued show-cause on 30-1-1997, informing that in case of non-compliance the assessed would not be entitled to exemption under section 13a and the case would be decided by estimating the receipts of state and other units and he would club them with the receipts of central office. he also informed that the assessment was time barring on 31-3-1997. he fixed compliance on 14-2-1997, but again there was no compliance. it was on 25-3-1997, that the assessed only filed income and expenditure account of 14 state units but without audited accounts, balance sheet and other required details. books of accounts of these 14 units were also not produced even on 25-3-1997. regarding remaining state and other units even income and expenditure accounts were not filed. ultimately the assessing officer completed the assessment on 31-3-1997.32. on consideration of the facts and circumstances of the case, we are also of the view that the assessed did not maintain proper books of accounts regularly in the course of conduct of the activity and receipt of income and incurring of expeiiditure. it is evident from the facts of the case that the assessed filed the return merely on the basis of accounts of its central office without incorporating the accounts of the state and other units. even on 25-3-1997, it could file income and expenditure accounts of 14 states units without their balance sheet, completed audited accounts and without producing the books of accounts. the assessed's plea that it had filed return in respect of its central office only under the bona fide belief that the state units were required to file their returns separately is nalve, diversionary and totally untenable. it is a well known fact that it is only one party and state units do not have separate and independent existence. thereforee, they could not be separate taxable entities. this rule and correct position was within the knowledge of the party. it is an oldest and biggest party having availability of best brain in law and accountancy. it cannot take the untenable plea of bona fide wrong belief as above.33. moreover, section 13a of the act came into effect from 1-4-1979. the assessed cannot take the plea that it was not aware of the correct position and its duty under the law. for the purposes of section 13a of the act, the explanationn to section 13a provides that political party means 'an association or body of individual citizens of india registered with the election commission of india as a political party under para 3 of election symbol (reservation and allotment) order, 1968 and includes a political party deemed to be registered with the commission under the proviso to sub-para (2) of that paragraph'. as the assessed itself was registered with the election commission of india as an all india party and state units were not so registered, the question of the state units having separate and independent status as political party was out of context and any plea of having any such wrong belief in this regard was untenable and wrong. further the gujarat high court's decision in gujarat pradesh congress committee's case was rendered in 1993. if the assessed had any doubt, this judgment of the gujarat high court should have cleared it and the assessed must have understood the real and correct import of explanationn to section 13a of the act. it is also worth noting here that even after several opportunities given by the assessing officer the assessed failed to furnish complete accounts and produce the books of accounts of all the units. the facts of the case clearly establish deliberate disregard and defiance of the provisions of law. the following observations of the supreme court about the natural justice in the case of chairman, board of mining examination and chief inspector of mines & anr. : [1977]2scr904 referred to by the learned departmental counsel is relevant to the point here:'natural justice is no unruly horse, no lurking land-mine, nor a judicial cure-all. if fairness is shown by the decision maker to the man proceeded against the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. unnatural expansion of natural justice without reference to the administrative realities and other factors of a given case, can be exasperating. we can neither be finical nor clinical but should be flexible yet firm in this jurisdiction. no man shall be hit below the belt that is the conscience of the matter.'34. the assessing officer did not hit below the belt. he gave reasonable opportunity to the assessed and considered all the available materials on the file before finally completing the assessment. we, thereforee, dismiss this ground of alleged violation of principle of natural justice and fair and reasonable opportunity in the case.35. now we come to the ground against non-admission by the learned commissioner (appeals) of additional evidence in the form of audited accounts of all the states and other units, details, etc. we are of the view that, on the facts and in the circumstances of the case, the learned commissioner (appeals) was justified in not admitting the additional evidence filed before him. from the facts, it is evident that the assessing officer had given ample opportunity to the assessed to file audited accounts of the entire party and produce books of accounts but the assessed did not comply. the admitted fact is that the audit of the accounts of state and other units was done after the completion of assessment on 31-3-1997. this shows that the accounts as well as the audit were not complete till the completion of assessment and the assessed's plea that it could not furnish complete accounts ,as its different state and other units were spread all over india and, thereforee, it could not obtain the same in time and, hence, it was prevented by reasonable cause is untenable and unacceptable. even if no time-limit is prescribed for the completion of accounts and their audit, they had to be completed within the reasonable time. non-completion of accounts and their audit even in two years from the end of the relevant financial year cannot be condoned and the assessed cannot be given the benefit of reasonable cause and the additional evidence filed before the learned commissioner (appeals) could not have been admitted under rule 46a of the it rules, 1962. rule 46a, sub-rule (1), clauses (b) and (c) provide for the existence of sufficient cause which prevented the assessed from producing the evidence before the assessing officer for the admission of the additional evidence by the learned commissioner (appeals). as stated above, since there was no sufficient cause existing in this case, the learned commissioner (appeals) was justified in declining to admit the additional evidence. accordingly, this ground of the assessed is also dismissed.36. we now come to the issue of exemption under section 13a of the act. this section provides as under :section 13a : any income of a political party which is chargeable under the head 'income from house property' or 'income from other sources' or any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political partyprovided that :(a) such political party keeps and maintains such books of account and other documents as would enable the assessing officer to properly deduce its income there from:(b) in respect of each such voluntary contribution in excess of ten thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution: and(c) the accounts of such political party are audited by an accountant as defined in the explanationn below sub-section (2) of section 288.explanation : for the purposes of this section 'political party' means an association or body of individual citizens of india registered with the election commission of india as a political party under paragraph 3 of the election symbols (reservation and allotment) order, 1968, and includes a political party deemed to be registered with that commission under the proviso to sub-para (2) of that paragraph.'37. it is evident from the facts of the case that the assessed had not fulfilled the conditions (a), (b) and (c) mentioned in the proviso to section 13a above. the assessing officer was, thereforee, justified in not allowing exemption under section 13 of the act. the contention of the learned counsel for the assessed that since the assessed had filed necessary accounts, documents and details, etc., and thus fulfilled the conditions prescribed under the proviso to section 13a at the appellate stage, the learned commissioner (appeals) should, have considered and allowed the exemption is not tenable and acceptable. we have already held above that the learned commissioner (appeals) was justified in not admitting the additional evidence filed before him in the form of copies of audited accounts, documents, details, etc., because there was no sufficient cause which prevented the assessed from producing the same before the assessing officer before completion of the assessment and also because in fact as stated above the accounts and the audit thereof were not complete before completion of the assessment. in these circumstances, and as the additional evidence was not admitted, the question of considering and allowing exemption under section 13a by the learned commissioner (appeals) did not arise. we, thereforee, dismiss the assessed's ground.38. we now come to the issue of estimate of receipts and expenditure. after considering the rival submissions and contentions in this regard we are of the view that the assessing officer was not justified in estimating the receipts of state and other units at rs. 15 crores. there was no basis or any material on record to warrant such an estimate. the reasons given by the assessing officer for the estimate are not convincing and satisfactory. from the perusal of section 13a reproduced above, it will be seen that income chargeable under the head income from house property, income ir other sources or income by way of voluntary contributions received by a political party is exempt if the conditions prescribed in the proviso to this section are fulfilled. in the present case, the assessing officer did not separately compute income from house property, income from other sources and income by way of voluntary contribution received. he made a lump sum estimate of all the receipts of the state and other units of the party at rs. 15 crores. it will be noted that the word 'received' in section 13a mentioned after 'voluntary contributions' has been used for voluntary contributions. this would mean that the provisions of section 13a in respect of voluntary contributions are applicable only to the actual voluntary contributions received and they would not be applicable to any accrued, deemed, notional or estimated voluntary contributions. a proper construction of the provision of section 13a would clearly indicate that exemption would be admissible in respect of voluntary contributions received or exemption would be denied in respect of voluntary contributions received. thus, under the provisions of section 13a there is no scope for estimating the voluntary contributions. we are inclined to accept the submissions of the learned counsel for the assessed that in view of the special provisions in section 13a of the act, the provisions of section 145 relating to the estimate of income under the head income from business or profession and income from other sources would not be applicable to voluntary contributions. 39. the unreasonableness and excessiveness of the estimate of receipts is also clearly established by the fact and the materials on record of the assessing officer at the time of completion of assessment. as mentioned above, the assessed had furnished accounts of 14 state units on 25-3-1997. the receipts of all these 14 states units were rs. 3,82,97,972. there was no material on record to show that the assessed had any other receipts which were not recorded. if the assessing officer had taken reasonable clue from these receipts and estimated the receipts of the remaining states and other units, though not justifiably under the law as mentioned above, the total receipts of all the state and other units including the 14 state units would not have come to the figure of rs. 15 crores as taken by the assessing officer. thus, from any yardstick, the assessing officer's estimate was not warranted and called for.40. the learned commissioner (appeals) also committed similar mistake when he confirmed the assessing officer's estimate of receipts, in fact, the learned commissioner (appeals) was even in better position to take stock of the material in the case and come to more reasonable figure of receipts for all the state and other units apart from the receipts of the central office. this is because the assessed had filed complete audited accounts of all the state and other units before him. when he had called for the remand report from the assessing officer, he should have made a specific query from the assessing officer in the remand report whether the assessing officer's estimate of receipts could be considered as fair and reasonable in the light of the actual receipts of all the state and other units as per the audited accounts filed before him. it was a different thing not to admit the additional evidence on ground of absence of reasonable cause for non-production of the same before the assessing officer but it was relevant and imperative that these materials should have been appreciated by the learned commissioner (appeals) to decide about the estimate of receipts in the case. as mentioned above, the total receipts of all the state and other units apart from the receipts of the central office worked out to rs. 3,82,97,972 + 1,81,17,534. there is no material on record to show that the assessed had not recorded any specific receipts. in view of these facts, we have to hold that the learned commissioner (appeals) was not justified in confirming the assessing officer's estimate of receipts of the state and other units at rs. 15 crores. it is also relevant to mention here that according to the provisions of section 13a of the act, the assessing officer cannot add receipts from voluntary contribution on notional or estimate basis. the words 'voluntary contribution received' used in the section are strong indication of the intention of the legislature that the provisions of section 13a are applicable to 'voluntary contribution received' and not to notional or estimated contribution. we, thereforee, hold that the assessing officer was legally not justified to add receipts on notional and estimate basis and the learned commissioner (appeals) was also wrong in confirming the addition.41. in the above view of the matter, we direct the assessing officer to accept the receipts shown in central office account at rs. 11,33,57,696 and from all the state and other units at rs. 3,82,97,972 to rs. 1,81,17,534 as shown above. in case the assessing officer has information of any specific receipt not disclosed in the accounts, he can take appropriate action under the law.42. now we come to the ground relating to the allowance of expenditure. as mentioned above, the assessing officer held that the expenditure incurred on political activity of the party was not admissible for deduction. the learned commissioner (appeals), however, allowed 60 per cent of such expenditure. on this issue both the assessed and the revenue are in appeal before us. we are of the view that there is close nexus between the voluntary contribution and expenditure on political activity of a political party. the political activity is part of the aims and objects of a political party. the voluntary contribution is given to enable the political party to carry out its aims and objects. thus, the voluntary contribution and expenditure on political activity are intertwined and the voluntary contribution is received because of the political activity and the expenditure is incurred from the voluntary contribution. the position of a political party in this regard is akin to the carrying out of the aims and objects of a trust or other welfare societies where the donations and expenditure incurred on the aims and objects of a trust are interconnected and interdependent and the expenditure incurred on carrying out their aims and objects is allowed as deduction from donation/contribution. we are of the view that according to the provisions of section 13a of the act voluntary contribution does not fall under the head income from house property or income from other sources. it will be seen from the reproduction of section 13a as above that voluntary ontribution comes separately after the two heads of income from house property and income from other sources and it is not part of the first two heads. we agree with the submissions of the learned counsel for the assessed that voluntary contribution becomes taxable income because of the provisions of section 13a and in the absence of section 13a, it would not have been taxable income as it does not fall under any of the heads of income mentioned in section 14 of the act. we do not accept the contention of the learned departmental counsel that it would come under the head income from other sources. from the perusal of sections 56 to 59, we come to the view that voluntary contribution cannot be brought under the head income from other sources. we, thereforee, hold that contribution to a political party is taxable in view of the provision of section 13a and the same will be exempt under the same section on fulfillment of the prescribed conditions. in this view of the matter, we have to hold that the view of the assessing officer that since the expenditure incurred on political activity was not the expenditure incurred for earning income from voluntary contribution, such expenditure was not allowable as deduction was erroneous and untenable. if this view is taken as correct then by its implication the expenditure incurred by a charitable trust on carrying out its aims and objects will not be allowed because such expenditure in the light of the assessing officer's view was not incurred for earning the income from donation.43. we are of the view that expenditure incurred by a political party on its political activity is allowable for deduction and such expenditure was incurred for carrying out its aims and objects for which the voluntary contribution was also received. there is close nexus between the expenditure and the voluntary contribution. we also find force in the submissions of the learned counsel for the assessed that the aims and objects of a political party fall within the scope of the expression 'any other object of general public utility' appearing for the meaning of expression 'charitable purposes' as given in section 2(15) of the act. the observations of mr. justice subarao j. (as his lordship then was) in the dissenting note referred to by the learned counsel for the assessed in his submission are reproduced below for proper appreciation of the matter :'the english decisions are based upon a pragmatic approach to the problems that arose before them, having regard to the historical development of the law of charities in that country; there is no common thread discernible in the large volume of english decisions. (2) under the act, unlike in england, the advancement of the object of common public utility is declared to be a charitable purpose, and it is not permissible to curtail its scope with reference to english decisions. (3) the express 'object of general public utility' is very comprehensive and it includes all purposes whether political or otherwise, provided it is an object of general public utility.'44. we agree with the submission of the learned counsel for the assessed that the supreme court decision in the case of all india hindu mahasabha (supra) will not be applicable in the present case because all the facts and the aims and objects of the present assessed and the sabha were not similar. we find force in the arguments of the learned counsel for the assessed that, since the party's aims and objects were in tune with the preamble and directive principles and other provisions of the constitution to work for the creation of a secular welfare state, the aims and objects of the party would fall within the scope of the expression 'any other object of general public utility'. it will be a different thing if the assessing officer finds and proves that the assessed's activity was not in tune with its aims and objects and its working was not towards the achievement of its objects of general public utility but any other object. the assessing officer has not brought any material on record to prove, so. he has also not pointed out any specific expenditure to show that the expenditure was incurred other than for the aims and objects of the party. it is noteworthy here that the aims and objects of association like ficci, cii, etc., have been considered as objects of general public utility. the importance, place and role of the assessed-political party has been much broader in general public interest.45. under the circumstances, we have to hold that the expenditure incurred to achieve the aims and objects of the party was allowable as deduction.46. regarding the contention of the learned counsel for the assessed that exemption can be granted even in appeal stage on fulfillment of the prescribed conditions, we are not inclined to accept this plea because we have already held above that on the facts and in the circumstances of the case, the learned commissioner (appeals) was justified in not admitting the additional evidence because there was no sufficient cause for failure to produce books of accounts, etc., before the assessing officer. we have also held above that the facts of the case clearly show deliberate disregard and defiance of provisions of section 13a, inasmuch as from the facts stated above it was clear that the assessed did not keep its accounts, in regular course of conduct of its political activity, receipt of income and incurring of expenditure. the supreme court decision in common cause case (supra) is also relevant here. we, thereforee, hold that on the peculiar facts of this case, the assessed did not deserve grant of exemption at appellate stage, on the same ground the assessed does not deserve its assessment to be set aside so that the assessing officer can grant exemption under section 13a of the act.47. we agree with the learned counsel that by not computing income head wise and making lump sum estimate of income he has failed to follow the provisions of section 13a of the act and to compute the total income properly in the case.48. as regards the ground relating to charging of interest under sections 234a and 234b, we direct the assessing officer to delete the same in view of overall excess of expenditure over income (i.e., deficit of rs. 4,60,36,497) and supreme court decision in cit & ors. v. ranchi club ltd. : [2001]247itr209(sc) .49. as regards the revenue's appeal, for the reasons given while holding that the expenditure incurred by the assessed to achieve its aims and objects and for its political activity is allowable, we dismiss the revenue's appeal against allowance of depreciation and 60 per cent of expenditure by the learned commissioner (appeals), as the expenditure so also the depreciation on assets used for the aims and objects of the party is held to be allowable.50. we, thereforee, in the interest of justice, set aside the impugned order on the allowability of expenditure and restore the matter to the assessing officer with direction to decide it de novo. expenditure can be allowed subject to the condition that there exists nexus between the expenditure and the voluntary contribution, and the expenditure was incurred to attain the aims and objects of the party. we, further, direct the assessing officer to provide adequate opportunity to the assessed of being heard.51. in the result, the appeal of the assessed stands partly allowed and the appeal of the revenue stands dismissed.

Judgment:
ORDER

Sikander Khan, A.M.:

These are cross-appeals by the assessed and the revenue in respect of assessment year 1994-95. The assessed is an all India political party. It filed returns for the assessment years 199194 to 1995-96 on 14-2-1996 declaring nil income claiming exemption under section 13A of the Income Tax Act, 1961. The assessing officer issued notice under sections 143(2) and 142(l) in respect of assessment year covered under the present appeal calling for completion of accounts and details vide letter dated 25-9-1996. There was no compliance, though promise was given for compliance later. The assessing officer issued show-cause on 29-1-1997, informing that if the assessed failed to furnish the required accounts, details, etc. by 16-2-1997, assessment would be completed on material available on record. On 25-3-1997, copies of income and expenditure accounts of 14 State units were filed. Copies of accounts of remaining State units were not filed even till 31-3-1997. TN) assessing officer examined the accounts filed and passed assessment order on 31-3-1997 when it was time barring.

2. The return for the assessment year 1994-95 was filed on the basis of accounts of the Central office of the party only. Even on 25-3-1997, accounts of 14 State units were filed. Thus the return filed and the accounts furnished till the completion of the impugned assessment were not complete.

3. The assessing officer proceeded to complete the assessment on the basis of the material on record. He noted that as per accounts of the Central office, assessed had shown the following receipts

Rs.

(i)

Collection from sale of coupons and purse money, etc.

20,75,000

(ii)

Other income

3,12,65,500

(iii)

AICC membership fee

3,220

(iv)

Delegation fee

13,375

(v)

AICC membership fund

600

11,33,57,696

Other income

(i)

Interest on fixed deposit

89,72,827

(ii)

Misc. receipts

13,522

(iii)

Donation

2,22,73,430

(iv)

Literature sale

5,710

3,12,65,500

4. He further noted that in the details of donation of Rs. 2,22,73,430 furnished by the assessed, complete addresses of donors were not given as required under section 13A of the Act. He also pointed out several defects in the accounts of 14 State units furnished on 25-3-1997, and noted that books of accounts and documents furnished in respect of 14 units and Central office were not produced for verification. After referring to the provisions of sections 13A and 139(4B) and Supreme Court's observation in Common Cause case (WP No. 24 of 1995), etc. the assessing officer held that assessed had failed to satisfy the conditions in section 13A of the Act for grant of exemption. He then proceeded to estimate receipt expenditure and income. He observed that in the return filed the assessed had shown receipts from sale of coupons, voluntary contributions donation, etc. at Rs. 11,33,57,696 in respect of Central office only, but had not shown receipts in respect of State and other units of the party. He estimated such receipts of all the State and other units including 14 State units whose accounts were furnished on 25-3-1997 but rejected for defects pointed out and other units whose accounts were not furnished at Rs. 15 crores. Thus, the total receipts were estimated at Rs. 26,33,67,696 (Rs. 11,33,57,696 + Rs. 15 crores).

5. The assessing officer then dealt with the expenditure side. He noted that the assessed had shown expenditure of Central office of the party at Rs. 16,45,27,326 against the receipt of Rs. 11,33,57,696. He observed that the expenditure mostly related to political activity of the party and the only non-political expenditure could be the establishment expenses of the party. He held that expenditure related to political activity was not allowable and expenditure incurred for earning income from house property and income from other sources only was admissible for deduction. He further noted that the assessed had shown interest on fixed deposits at Rs. 89,72,827 which was assessable under the head Income from other sources. No income under the head income from house property was shown. He, thereforee, held that only the expenses incurred for running the establishment of the party relatable to the earning of income from interest on fixed deposits could be allowed as expenditure relatable to the said receipts of interest on fixed deposits.

6. With the above observations about the deduction of expenditure, the assessing officer allowed expenditure of Rs. 52,17,912 out of the establishment expenditure shown in the accounts of Central office and Rs. 68,71,700 for the State and other units going by proportion which interest receipts bear to the total receipts of the Central office. Accordingly, total expenses allowable were taken at Rs. 1,20,89,616.

7. Thus, the total income of the party was computed by the assessing officer at Rs. 25,12,68,081 (receipts Rs. 26,33,57,696 minus expenses Rs. 1,20,89,616) as against the return filed declaring excess of expenditure over income of Rs. 5,11,69,631 in respect of Central office of the party.

8. Aggrieved, the assessed challenged the assessing officer's order in the first appeal before the learned Commissioner (Appeals) on several grounds including lack of fair, proper opportunity, non- appreciation of reasonable cause for failure to produce books of accounts, disregard of the provisions of sections 13A, 139(4B), etc., rejection of receipts and expenditure shown, arbitrary estimate of receipts and expenditure, etc. The assessed filed copies of accounts of remaining State and other units, documents, details, etc. before the learned Commissioner (Appeals) which were not filed before the assessing officer in the course of assessment proceeding. It also filed audit report in respect of complete accounts. It requested the learned Commissioner (Appeals) to admit all these and decide the appeal after considering the same. The learned Commissioner (Appeals) called for the remand report from the assessing officer who opposed their admission.

9. After considering the remand report and hearing the assessed, the learned Commissioner (Appeals) declined to admit the additional evidence and materials filed in the course of appellate proceedings before him. He observed that the assessed did not fulfill the conditions prescribed under r. 46A for admission of additional evidence. He added their admission at the appellate stage would amount to filing of return itself during the appellate proceeding which was not permissible under the law. He further observed that there was no reasonable cause for the assessed's failure to file complete accounts, documents, details etc. before the assessing officer during the assessment proceedings. He added that the assessed was aware right from 1978 in general when sections 13A, 139(4B) were inserted and from July, 1993, in particular, after Gujarat High Court's decision in CIT v. Gujarat Pradesh Congress Samiti : [1994]207ITR622(Guj) that it had to maintain its books of accounts as required under section 13A and submit he same as required under section 139(4B) of the Act. Thus, the assessed had sufficient opportunity to comply with these provisions before the assessing officer. He further added that the assessing officer had also given sufficient opportunity. He, thereforee, declined to admit the additional evidences, accounts, documents, etc. He relied on Supreme Court decision in CIT v. Guijargravures (P) Ltd. : [1978]111ITR1(SC) and Jute Corporation of India Ltd. v. CIT & Anr. 0044/1991 : [1991]187ITR688(SC) in this regard.

10. The learned Commissioner (Appeals) held that since the assessed had failed to satisfy the conditions for exemption under section 13A before the assessing officer, the same exemption could not be allowed during appellate proceeding before him on the basis of additional accounts, documents, details furnished before him. He relied on Supreme Court decisions in CIT v. R. Venkataswamy Naidu (1956) 29 ITR 529 , Lala Gopi Mal Kuthiala Charitable Trust v. Income Tax Officer , Rai Bahadur Babulu Subarao v. CIT (1956) 30 ITR 280 , Novapan India Ltd. v. Collector of Central Excise in Civil Appeal No. 3556 of 1994 (SC). Declining to admit the additional accounts, etc., the learned Commissioner (Appeals) confirmed the estimate of receipts by the assessing officer.

11. The learned Commissioner (Appeals) considered the assessing officer's estimate of expenditure. He observed that the expenditure of Rs. 37,68,036 being employees expenses and depreciation of Rs. 1, 15,86,998 being mandatory allowance should be allowed in full. He thus allowed Rs. 1,63,05,034 as against Rs. 1,20,89,616 allowed by the assessing officer. The learned Commissioner (Appeals) further observed that out of balance expenditure of Rs. 14,92,22,294, 60 per cent should be allowed as reasonable expenditure to carry on its political activity, i.e., Rs. 8,95,33,374. Thus, the learned Commissioner (Appeals) held that the assessed was entitled to deduction of expenditure on its political activity also, though he restricted the allowance to 60 per cent of the expenditure shown. Accordingly, the learned Commissioner (Appeals) allowed deduction for expenditure and depreciation at Rs. 9,27,48,793 (Rs. 8,95,33,374 + Rs. 1,53,05,034 minus Rs. 1,20,89,616).

12. Both the assessed and the revenue are aggrieved by the order of the learned Commissioner (Appeals). Hence, the cross-appeals filed before this Tribunal by the assessed and the revenue.

13. In the assessed's appeal as many as 25 grounds have been taken. Most o them are argumentative. In brief, it can be said that the grounds relate to the principle of natural justice, fair and reasonable opportunity, reasonable grounds, which prevented the assessed from filing complete accounts, etc., before the assessing officer, provisions of sections 13A, 139(4B), admission of audited accounts, documents and details under rule 46A, estimates of expenditure and receipts, admissibility of expenditure to carry out political activity, alleged non- consideration of some facts of the grounds by the learned Commissioner (Appeals) and interest charged under sections 234A and 234B of the Act.

14. Starting with the assessed's appeal, the learned counsel for the assessed submitted before us that the assessed filed the return on the basis of the audited accounts of Central office only under bona fide belief that it was liable to file the return for the Central office only and the State and other units were liable to file their respective returns separately. The assessing officer asked the assessed to file consolidated accounts on all India basis on 28-11-1996. It could receive accounts from 14 State units by 26-4-1997, and furnished the same to the assessing officer on that date. The accounts of the remaining units could not be received as they were spread far and wide all over India. Thus, the assessed was prevented by sufficient reasonable cause from filing the complete accounts, etc., before the assessing officer before completion of the assessment on 31-3-1995. However, accounts of the remaining States and other units were received thereafter and complete audited accounts of all India units were furnished before the learned Commissioner (Appeals). He contended that looking to the reasonable cause, the learned Commissioner (Appeals) should have admitted the accounts furnished under r. 46A and passed fair and just order in the case after considering the same. He further contended that their non- consideration amounted to violation of principle of natural justice. He submitted that appellate proceedings are continuation o assessment proceeding and, thereforee, complete audited accounts furnished before the learned Commissioner (Appeals) should have been admitted and considered by him in the interest of justice and fair play. He relied on the decisions reported as CIT v. Prabhat Zarda Factory : [1996]221ITR791(Patna) , CIT v. Kanpur Coal Syndicate : [1964]53ITR225(SC) , CIT v. Anjuman Moinia Fakharia (1994) 208 ITR 568 , CIT v. Shivanand Electronics : [1994]209ITR63(Bom) , CIT v. Nagpur Hotel owners Association : [1994]209ITR441(Bom) , CIT v. Mumtaz Yarud Dowla Waqf : [1998]234ITR6(AP) , Madeva Upendra Sinai v. Union of India & Ors. : [1975]98ITR209(SC) (SC) Dhrangadhra Chemical Works Ltd. v. CIT : [1975]101ITR491(Bom) , Anglo French Textiles Ltd. v. Income Tax Officer : [1976]103ITR282(Mad) , etc. vide pp. 5 & 6 of written arguments, dated 23-1-2001.

15. He further submitted that the estimate of receipt from voluntary contributions was not permissible under section 13A of the Act. He added that the section concerns grant of exemption in respect of income from house property, other sources and voluntary contribution on fulfillment of the prescribed conditions. In case of non-fulfilment of the prescribed conditions, the exemption is not allowable under section 13A of the Act. However, unlike section 145 of the Act, section 13A of the Act does not empower to estimate income from voluntary contribution. He added that there was no material in possession of the assessing officer that the assessed had hot disclosed any specific voluntary contribution or received any specific voluntary contribution exceeding Rs. 10,000 for which names and addresses were not recorded. He pointed out that the word 'received' used in section 13A of the Act is in respect of voluntary contribution and, hence, it is only the actual voluntary contribution received which can be considered for grant or denial of exemption under section 13A of the Act. There is no scope for applying the provisions on estimated, hypothetical or notional contribution. He added that provisions of section 13A cannot be interpreted in the manner of section 145 because the political party is not a business concern, where sales, profit, etc., can be estimated under section 145 of the Act under certain circumstances. Voluntary contribution does not fall under any head and it is taxable only because of the provisions of section 13A of the Act.

16. The learned counsel further submitted that the learned Commissioner (Appeals) should have deleted the estimated addition for the assessment year 1994-95 also considering the fact that assessments for earlier years and subsequent years were made at nil income after the impugned assessment for assessment year 1994-95 and the assessment for the assessment year 1995-96 was set aside in appeal by the learned Commissioner (Appeals). He urged that in the interest of justice and fair play, the assessing officer may be directed to pass fair and just order afresh after considering the complete audited accounts of all the units, documents and details. He added that there was no time-limit prescribed under section 13A for completing the audited account and, thereforee, the accounts audited after original assessment can be considered by the assessing officer in fresh assessment on direction of Tribunal. In this connection, he referred to CBDT Circular No. 1998 vide F. No. 225/128/99/ITA/2 (Et.), dated 19-10-2000, and pointed out that sections 44AB and 271B were not applicable to a political party. He added that CBDT Circular is binding as per decision reported' as Paper Products Ltd. v. CCE : [2001]247ITR128(SC) , UCO Bank v. CIT : [1999]237ITR889(SC) . He added that in fact even in respect of provisions of the Act where the audit report is to be filed along with the return, appellate authority in the interest of justice and fair play have directed the assessing officer in many cases to consider the audit report filed after assessment. He contended that Supreme Court's decision in the case of Nagpur Hotels owners Association (supra) would not be applicable in the present case because the facts were different. He added that in the said case, the Supreme Court was considering the provisions of section 11(2)(a) read with r. 17 of the IT Rules which provided the prescribed manner and the time for giving notice in writing before claiming exemption of such accumulation as provided in section 11(2)(a) of the Act. He contended that provisions of section 13A of the Act were different from the provisions of section 11(2)(a) read with rule 17 of the IT Rules, and, hence, the Supreme Court decision in the case of Nagpur Hotels owners Association (supra) would not be applicable to the case of the present assessed..

17. The learned counsel for the assessed further submitted that the estimate of receipts was arbitrary and without any basis. He added that while estimating the receipts of all the State units besides taking the actual receipt of Central office shown, the assessing officer had not considered the receipts of 14 State units whose accounts were furnished on 25-3-1997 before completion of assessment on 31-3-1997. He pointed out that the receipts of all these 14 State units shown in the accounts were Rs. 3,82,97,972. In view of this, the assessing officer's estimate of receipts of all the 14 State units plus that of remaining units whose accounts were not furnished on 25-3-1997 should not have been estimated by the assessing officer at the astronomical figure of Rs. 15 crores. The same was also arbitrarily and unjustifiably confirmed by the learned Commissioner (Appeals). He stated that as per accounts of the remaining units furnished before the learned Commissioner (Appeals), their receipts were Rs. 1,81,17,534. Thus, the total receipts of all the State and other units other than the Central office worked out to Rs. 3,82,97,972 + Rs. 1,81,17,534 = Rs. 5,64,15,506 as against which the assessing officer estimated at Rs. 15 crores. He contended that the learned Commissioner (Appeals) in his arbitrariness had ignored the glaring facts of the case.

18. The learned counsel further submitted that the assessing officer was not justified in disallowing the expenditure on political activity and the learned Commissioner (Appeals) in restricting the allowance of the same to 60 per cent only. There was no basis for the same. He added that expenditure of Rs. 16,45,27,326 of Central office was supported by audited accounts of the Central office which were furnished before the assessing officer and, hence, the same was clearly allowable. He, thereforee, contended that the learned Commissioner (Appeals) was wrong in restricting allowance of expenditure to Rs. 9,27,48,793 + Rs. 1,20,89,615, as allowed by the assessing officer. This also proved arbitrariness of both the assessing officer and the learned Commissioner (Appeals).

19. He further submitted that the question of grant of exemption under section 13A of the Act would arise in case of income but there was no income for the assessment year in question rather it was deficit being excess of expenditure over income. The overall deficit in the consolidated accounts filed before the learned Commissioner (Appeals) was Rs. 4.60 crores. He contended that there was no justification for the learned Commissioner (Appeals) to confirm the estimate of receipts and allow only part of the expenditure which resulted into computation of excessive income on estimate only. He contended that section 13A of the Act provides for exemption on fulfillment of the prescribed conditions but it does not empower to estimate receipts and treat the same as income. He referred to the decision in Vellayan Chettiar Trust v. Income Tax Officer (1995) 54 ITD 201 (Mad) and CIT v. K.Y. Pilliah & Sons : [1967]63ITR411(SC) , Bajrang Bali Engineering Co. (P) Ltd. v. CIT : [1967]66ITR82(Cal) and Jhandunial Tara Chand Rice Mills v. CIT . He added that only the actual voluntary contribution received could be subject of consideration under section 13A of the Act.

20. He further submitted that expenditure incurred to achieve the objects of the political party was allowable and the assessing officer was wrong in his view that only expenditure incurred for earning income from house property and 'Other sources' was allowable as per provisions of the Act. He added that there was nexus between the assessed's political activity and the voluntary contribution and, thereforee, the expenditure was allowable. He further added that in section 13A word 'income' and not 'receipts' has been used which means receipt minus expenditure. He contended that in view of this also, expenditure incurred on political activity has to be allowed from the receipts of voluntary contribution to compute the income. In this connection he referred to the scheme of computation of income in the cases of charitable trust where expenditure incurred for carrying out the charitable object, i.e., aims and objects of the trust are allowed. He relied on Supreme Court decision in SRM-MCT M. Trippani Trust v. CIT : [1998]230ITR636(SC) .

21. The learned counsel for the assessed further submitted that political activity would fall within the scope of 'object of general public utility' used in section 2(15) of the Act for the definition of charitable purposes. It is further in view of special provisions of section 13A granting absolute exemption on fulfillment of the prescribed conditions and considering the wider activity of a political party which is registered as a political party and not as trust that a political party has to seek the benefit of section 13A and not section 11 of the Act. He added that the ratio of the Supreme Court decision in CIT v. All India Hindu Mahasabha : [1983]140ITR748(Delhi) was not applicable in the present case because the facts were distinguishable. He stated that the assessed is a political party duly registered with Election Commission of India and as such it squarely falls within the purview of section 13A of the Act whereas in the case of Hindu Mahasabha, facts were different as it was a society registered under the Societies Registration Act and its aims and objects were also different. Moreover, the said judgment was not in respect of the provisions of section 13A. He also drew support from the dissenting note of Justice Subarao in that case about the meaning of scope of the expression 'object of general public utility'. He further drew support from the provisions of Indian Constitution and explained that ultimate aims and object of the party is to achieve the advancement and well being of the people of India in accordance with the preamble and aims and objects enshrined in the Constitution of India. He, thereforee, contended that the assessed satisfies the conditions of 'objects of general public utility'.

22. The learned Departmental counsel however opposed the contention of the learned counsel for the assessed. He submitted that there was no violation of principle of natural justice and fair and reasonable opportunity was given by the AO before completing the assessment. He referred to the order sheet entry, show-cause letter, etc., issued by the assessing officer before completing the assessment. He also referred to written reply of the assessed showing inability to furnish complete accounts, details, etc. and produce audited accounts of all the units on flimsy grounds that they were spread all over India and getting them at Delhi from far and wide places in the given time could not be possible. He contended that it did not constitute reasonable cause. He added the provisions of section 13A of the Act were introduced with effect from 1-4-1979, and the Gujarat High Court decision in Gujarat Pradesh Congress Committee's case (supra) was rendered in 1993. Thus, the assessed was well aware long before the due date for filing the return for the assessment year 1994-95. He further added that the assessed's failure to file the return on the basis of complete accounts in respect of all the units and its failure to furnish the same even till 25-3-1997, would prove that the assessed's plea of reasonable cause was untenable and unacceptable. He further added that the facts also proved that the assessed did not maintain its books of accounts in course of its day-to-day activity and did not get them audited within the reasonable time. He submitted that the assessed's plea of violation of principle of natural justice, etc., was liable to be rejected.

23. The learned departmental counsel further submitted that having failed to comply with the substantive mandatory conditions of keeping accounts, getting them audited and furnishing names and addresses of the donors exceeding Rs. 10,000 as provided in the proviso to section 13A of the Act, the assessed had forfeited its claim of exemption. He added that since the assessed did not fulfill the conditions of section 13A of the Act, the assessing officer was justified in not allowing the exemption. He relied on the Supreme Court decision in Nizam's H.E.M. Religious Endowment Trust v. CIT : [1966]59ITR582(SC) . He further added that in assessment years 1993-94 and 1995-96, assessing officer allowed the exemption because the assessed had produced audited accounts, etc., and fulfilled the conditions. He contended that since the facts in the assessment year 1994-95 covered under the present appeal were different, the assessed cannot justifiably take the plea for similar treatment in the assessment year 1994-95.

24. The learned departmental counsel further submitted that the conditions had to be fulfilled before completion of assessment and not thereafter at appellate stage or during fresh assessment on set aside of original assessment. He contended that if the assessment is set aside to provide opportunity to comply with the above requirements of section 13A of the Act to grant exemption, it would be wrong as it would amount to reopening of the assessment which power is not vested with the Tribunal. He relied on Supreme Court decision in Nagpur Hotels owners Association (supra). He further submitted that exemption provision has to be interpreted strictly and its benefit should not be given to defaulter-assessed. He relied on Supreme Court decision in Novapan India Ltd. v. Collector of Central Excise & Customs, Hyderabad : 1994(73)ELT769(SC) . He added that the requirements of r. 46A were not present in the case and, thereforee, the learned Commissioner (Appeals) was justified in declining to admit the accounts, etc., furnished before him.

25. The learned departmental counsel further submitted that since voluntary contribution had nexus with the objects and activities of the party, it was taxable as income. He referred to several decisions in support. He further submitted that since the assessed did not produce necessary accounts and furnish required details, the assessing officer was justified in estimating the receipts. In this connection, he relied on sections 144 and 145 and decision of Punjab High Court reported in 12 ITR 939 and Supreme Court decision Narain Swadeshi Weaving Mills v. CEPT : [1954]26ITR765(SC) . He added that voluntary contribution falls under the head income from other sources and, hence, section 145 was applicable. He also added that CBDT circular referred to above cannot override the provisions of the Act. The circular does not prohibit application of section 145 to voluntary contributor. This circular is regarding sections 44AB and 271B and not regarding application of section 145, etc., of the Act.

26. The learned departmental counsel further submitted that since there is no mandate in law to allow deduction for expenditure incurred by a political party for political purposes for computing the total income, the assessing officer was justified in not allowing such expenditure. Only that expenditure can be allowed which is wholly and exclusively incurred for earning income under the head income from house property and other sources as provided in law. He added that unlike the provisions of section 11 and 12 relating to the charitable trust, there is no provision in section 13A or elsewhere in the Act to allow deduction for expenses incurred for the objects of the political party. Political purpose cannot be said to be a charitable purpose or an object of general public utility. He relied on the Supreme Court decision in All India Hindu Mahasabha case (supra). He added that 'sabha' was also recognised as political party as noted in the decision. He further added such expenditure was also disallowed by the assessing officer in assessment year 1993-94 and in the assessment years after the assessment year 1994-95 but the assessed did not contest the disallowance in appeal.

27. The learned departmental counsel referred to the Supreme Court decision in the case of Common Cause v. Union of India : [1996]222ITR260(SC) and submitted that the Supreme Court held that section 13A is mandatory and that a political party not maintaining its audited accounts and not filing the income-tax return cannot ordinarily be permitted to say that it had incurred or authorised (sic) expenditure for the election of the activity in terms of Expln. I to section 77(l) of the Representation of the People Act, 1951.

28. the learned departmental counsel further submitted that it is well settled that income attracts tax as soon as it accrues. The application or destination of the income has nothing to do with its accrual or taxability. He relied on Tuticori Alkali Chemicals & Fertiliser v. CIT : [1997]227ITR172(SC) .

29. Regarding the revenue's appeal, the learned departmental counsel submitted that since the assessed did not derive income from business or profession, depreciation was not allowable. He added that there was no provision in the Income Tax Act to allow depreciation to a political party. He contended that the learned Commissioner (Appeals) was wrong in allowing depreciation. He further submitted that for the reasons given regarding inadmissibility of expenditure of a political party on its political activity as above, it should be held that the learned Commissioner (Appeals) was not justified in allowing 60 per cent of such expenditure. Accordingly, as mentioned in the grounds of the revenue's appeal, the learned departmental counsel argued that the learned Commissioner (Appeals) had erred in allowing the expenses of Rs. 10,48,38,480 as against Ps. 1,20,89,616 allowed by the learned assessing officer.

30. In reply, the learned counsel for the assessed submitted that if the learned departmental counsel's claim that voluntary contribution falls under the head income from other sources is to be accepted, then depreciation would be admissible under section 57(l) of the Act. According to him, depreciation is also admissible on account of use of the asset for the objects and purposes of the political party. In this regard, the submission made in support of the claim of expenditure on political activity would equally apply to the admissibility of depreciation. He pointed out that as depreciation is allowed to a charitable trust despite there being no income under the head income from business or profession on the ground of use for its objects and charitable purposes, similarly depreciation is admissible to a political party. As regards the revenue's objection to the allowance of 60 per cent of expenditure by the learned Commissioner (Appeals), he submitted that the learned Commissioner (Appeals) ought to have allowed the entire expenditure and not 60 per cent. He reiterated his arguments as above regarding the admissibility of expenditure as a whole.

31. We have considered the submissions and contentions both oral and written of the learned counsel for the assessed and the revenue. We have also gone through the materials on the file including the paper book. We are of the view that there was no breach of natural justice. Perusal of the order sheet entry vide copies in the paper book clearly shows that the assessing officer had given several opportunities to the assessed to file consolidated accounts, documents, list of donors exceeding Rs. 10,000 with addresses and details and produce complete books of accounts. He had given several reminders but there was no compliance. Finally, he issued show-cause on 30-1-1997, informing that in case of non-compliance the assessed would not be entitled to exemption under section 13A and the case would be decided by estimating the receipts of State and other units and he would club them with the receipts of Central office. He also informed that the assessment was time barring on 31-3-1997. He fixed compliance on 14-2-1997, but again there was no compliance. It was on 25-3-1997, that the assessed only filed income and expenditure account of 14 State units but without audited accounts, balance sheet and other required details. Books of accounts of these 14 units were also not produced even on 25-3-1997. Regarding remaining State and other units even income and expenditure accounts were not filed. Ultimately the assessing officer completed the assessment on 31-3-1997.

32. On consideration of the facts and circumstances of the case, we are also of the view that the assessed did not maintain proper books of accounts regularly in the course of conduct of the activity and receipt of income and incurring of expeiiditure. It is evident from the facts of the case that the assessed filed the return merely on the basis of accounts of its Central office without incorporating the accounts of the State and other units. Even on 25-3-1997, it could file income and expenditure accounts of 14 States units without their balance sheet, completed audited accounts and without producing the books of accounts. The assessed's plea that it had filed return in respect of its Central office only under the bona fide belief that the State units were required to file their returns separately is nalve, diversionary and totally untenable. It is a well known fact that it is only one party and State units do not have separate and independent existence. thereforee, they could not be separate taxable entities. This rule and correct position was within the knowledge of the party. It is an oldest and biggest party having availability of best brain in law and accountancy. It cannot take the untenable plea of bona fide wrong belief as above.

33. Moreover, section 13A of the Act came into effect from 1-4-1979. The assessed cannot take the plea that it was not aware of the correct position and its duty under the law. For the purposes of section 13A of the Act, the Explanationn to section 13A provides that political party means 'an association or body of individual citizens of India registered with the Election Commission of India as a political party under para 3 of Election Symbol (Reservation and Allotment) Order, 1968 and includes a political party deemed to be registered with the Commission under the proviso to sub-para (2) of that paragraph'. As the assessed itself was registered with the Election Commission of India as an all India party and State units were not so registered, the question of the State units having separate and independent status as political party was out of context and any plea of having any such wrong belief in this regard was untenable and wrong. Further the Gujarat High Court's decision in Gujarat Pradesh Congress Committee's case was rendered in 1993. If the assessed had any doubt, this judgment of the Gujarat High Court should have cleared it and the assessed must have understood the real and correct import of Explanationn to section 13A of the Act. It is also worth noting here that even after several opportunities given by the assessing officer the assessed failed to furnish complete accounts and produce the books of accounts of all the units. The facts of the case clearly establish deliberate disregard and defiance of the provisions of law. The following observations of the Supreme Court about the natural justice in the case of Chairman, Board of Mining Examination and Chief Inspector of Mines & Anr. : [1977]2SCR904 referred to by the learned departmental counsel is relevant to the point here:

'Natural justice is no unruly horse, no lurking land-mine, nor a judicial cure-all. If fairness is shown by the decision maker to the man proceeded against the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice without reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical nor clinical but should be flexible yet firm in this jurisdiction. No man shall be hit below the belt that is the conscience of the matter.'

34. The assessing officer did not hit below the belt. He gave reasonable opportunity to the assessed and considered all the available materials on the file before finally completing the assessment. We, thereforee, dismiss this ground of alleged violation of principle of natural justice and fair and reasonable opportunity in the case.

35. Now we come to the ground against non-admission by the learned Commissioner (Appeals) of additional evidence in the form of audited accounts of all the States and other units, details, etc. We are of the view that, on the facts and in the circumstances of the case, the learned Commissioner (Appeals) was justified in not admitting the additional evidence filed before him. From the facts, it is evident that the assessing officer had given ample opportunity to the assessed to file audited accounts of the entire party and produce books of accounts but the assessed did not comply. The admitted fact is that the audit of the accounts of State and other units was done after the completion of assessment on 31-3-1997. This shows that the accounts as well as the audit were not complete till the completion of assessment and the assessed's plea that it could not furnish complete accounts ,as its different State and other units were spread all over India and, thereforee, it could not obtain the same in time and, hence, it was prevented by reasonable cause is untenable and unacceptable. Even if no time-limit is prescribed for the completion of accounts and their audit, they had to be completed within the reasonable time. Non-completion of accounts and their audit even in two years from the end of the relevant financial year cannot be condoned and the assessed cannot be given the benefit of reasonable cause and the additional evidence filed before the learned Commissioner (Appeals) could not have been admitted under rule 46A of the IT Rules, 1962. Rule 46A, sub-rule (1), clauses (b) and (c) provide for the existence of sufficient cause which prevented the assessed from producing the evidence before the assessing officer for the admission of the additional evidence by the learned Commissioner (Appeals). As stated above, since there was no sufficient cause existing in this case, the learned Commissioner (Appeals) was justified in declining to admit the additional evidence. Accordingly, this ground of the assessed is also dismissed.

36. We now come to the issue of exemption under section 13A of the Act. This section provides as under :

Section 13A : Any income of a political party which is chargeable under the head 'income from house property' or 'income from other sources' or any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political party

Provided that :

(a) such political party keeps and maintains such books of account and other documents as would enable the assessing officer to properly deduce its income there from:

(b) in respect of each such voluntary contribution in excess of ten thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution: and

(c) the accounts of such political party are audited by an accountant as defined in the Explanationn below sub-section (2) of section 288.

Explanation : For the purposes of this section 'political party' means an association or body of individual citizens of India registered with the Election Commission of India as a political party under paragraph 3 of the Election Symbols (Reservation and Allotment) Order, 1968, and includes a political party deemed to be registered with that Commission under the proviso to sub-para (2) of that paragraph.'

37. It is evident from the facts of the case that the assessed had not fulfilled the conditions (a), (b) and (c) mentioned in the proviso to section 13A above. The assessing officer was, thereforee, justified in not allowing exemption under section 13 of the Act. The contention of the learned counsel for the assessed that since the assessed had filed necessary accounts, documents and details, etc., and thus fulfilled the conditions prescribed under the proviso to section 13A at the appellate stage, the learned Commissioner (Appeals) should, have considered and allowed the exemption is not tenable and acceptable. We have already held above that the learned Commissioner (Appeals) was justified in not admitting the additional evidence filed before him in the form of copies of audited accounts, documents, details, etc., because there was no sufficient cause which prevented the assessed from producing the same before the assessing officer before completion of the assessment and also because in fact as stated above the accounts and the audit thereof were not complete before completion of the assessment. In these circumstances, and as the additional evidence was not admitted, the question of considering and allowing exemption under section 13A by the learned Commissioner (Appeals) did not arise. We, thereforee, dismiss the assessed's ground.

38. We now come to the issue of estimate of receipts and expenditure. After considering the rival submissions and contentions in this regard we are of the view that the assessing officer was not justified in estimating the receipts of State and other units at Rs. 15 crores. There was no basis or any material on record to warrant such an estimate. The reasons given by the assessing officer for the estimate are not convincing and satisfactory. From the perusal of section 13A reproduced above, it will be seen that income chargeable under the head income from house property, income ir other sources or income by way of voluntary contributions received by a political party is exempt if the conditions prescribed in the proviso to this section are fulfilled. In the present case, the assessing officer did not separately compute income from house property, income from other sources and income by way of voluntary contribution received. He made a lump sum estimate of all the receipts of the State and other units of the party at Rs. 15 crores. It will be noted that the word 'received' in section 13A mentioned after 'voluntary contributions' has been used for voluntary contributions. This would mean that the provisions of section 13A in respect of voluntary contributions are applicable only to the actual voluntary contributions received and they would not be applicable to any accrued, deemed, notional or estimated voluntary contributions. A proper construction of the provision of section 13A would clearly indicate that exemption would be admissible in respect of voluntary contributions received or exemption would be denied in respect of voluntary contributions received. Thus, under the provisions of section 13A there is no scope for estimating the voluntary contributions. We are inclined to accept the submissions of the learned counsel for the assessed that in view of the special provisions in section 13A of the Act, the provisions of section 145 relating to the estimate of income under the head income from business or profession and income from other sources would not be applicable to voluntary contributions.

39. The unreasonableness and excessiveness of the estimate of receipts is also clearly established by the fact and the materials on record of the assessing officer at the time of completion of assessment. As mentioned above, the assessed had furnished accounts of 14 State units on 25-3-1997. The receipts of all these 14 States units were Rs. 3,82,97,972. There was no material on record to show that the assessed had any other receipts which were not recorded. If the assessing officer had taken reasonable clue from these receipts and estimated the receipts of the remaining States and other units, though not justifiably under the law as mentioned above, the total receipts of all the State and other units including the 14 State units would not have come to the figure of Rs. 15 crores as taken by the assessing officer. Thus, from any yardstick, the assessing officer's estimate was not warranted and called for.

40. The learned Commissioner (Appeals) also committed similar mistake when he confirmed the assessing officer's estimate of receipts, In fact, the learned Commissioner (Appeals) was even in better position to take stock of the material in the case and come to more reasonable figure of receipts for all the State and other units apart from the receipts of the Central office. This is because the assessed had filed complete audited accounts of all the State and other units before him. When he had called for the remand report from the assessing officer, he should have made a specific query from the assessing officer in the remand report whether the assessing officer's estimate of receipts could be considered as fair and reasonable in the light of the actual receipts of all the State and other units as per the audited accounts filed before him. It was a different thing not to admit the additional evidence on ground of absence of reasonable cause for non-production of the same before the assessing officer but it was relevant and imperative that these materials should have been appreciated by the learned Commissioner (Appeals) to decide about the estimate of receipts in the case. As mentioned above, the total receipts of all the State and other units apart from the receipts of the Central office worked out to Rs. 3,82,97,972 + 1,81,17,534. There is no material on record to show that the assessed had not recorded any specific receipts. In view of these facts, we have to hold that the learned Commissioner (Appeals) was not justified in confirming the assessing officer's estimate of receipts of the State and other units at Rs. 15 crores. It is also relevant to mention here that according to the provisions of section 13A of the Act, the assessing officer cannot add receipts from voluntary contribution on notional or estimate basis. The words 'voluntary contribution received' used in the section are strong indication of the intention of the legislature that the provisions of section 13A are applicable to 'voluntary contribution received' and not to notional or estimated contribution. We, thereforee, hold that the assessing officer was legally not justified to add receipts on notional and estimate basis and the learned Commissioner (Appeals) was also wrong in confirming the addition.

41. In the above view of the matter, we direct the assessing officer to accept the receipts shown in Central office account at Rs. 11,33,57,696 and from all the State and other units at Rs. 3,82,97,972 to Rs. 1,81,17,534 as shown above. In case the assessing officer has information of any specific receipt not disclosed in the accounts, he can take appropriate action under the law.

42. Now we come to the ground relating to the allowance of expenditure. As mentioned above, the assessing officer held that the expenditure incurred on political activity of the party was not admissible for deduction. The learned Commissioner (Appeals), however, allowed 60 per cent of such expenditure. On this issue both the assessed and the revenue are in appeal before us. We are of the view that there is close nexus between the voluntary contribution and expenditure on political activity of a political party. The political activity is part of the aims and objects of a political party. The voluntary contribution is given to enable the political party to carry out its aims and objects. Thus, the voluntary contribution and expenditure on political activity are intertwined and the voluntary contribution is received because of the political activity and the expenditure is incurred from the voluntary contribution. The position of a political party in this regard is akin to the carrying out of the aims and objects of a trust or other welfare societies where the donations and expenditure incurred on the aims and objects of a trust are interconnected and interdependent and the expenditure incurred on carrying out their aims and objects is allowed as deduction from donation/contribution. We are of the view that according to the provisions of section 13A of the Act voluntary contribution does not fall under the head income from house property or income from other sources. It will be seen from the reproduction of section 13A as above that voluntary ontribution comes separately after the two heads of income from house property and income from other sources and it is not part of the first two heads. We agree with the submissions of the learned counsel for the assessed that voluntary contribution becomes taxable income because of the provisions of section 13A and in the absence of section 13A, it would not have been taxable income as it does not fall under any of the heads of income mentioned in section 14 of the Act. We do not accept the contention of the learned departmental counsel that it would come under the head income from other sources. From the perusal of sections 56 to 59, we come to the view that voluntary contribution cannot be brought under the head income from other sources. We, thereforee, hold that contribution to a political party is taxable in view of the provision of section 13A and the same will be exempt under the same section on fulfillment of the prescribed conditions. In this view of the matter, we have to hold that the view of the assessing officer that since the expenditure incurred on political activity was not the expenditure incurred for earning income from voluntary contribution, such expenditure was not allowable as deduction was erroneous and untenable. If this view is taken as correct then by its implication the expenditure incurred by a charitable trust on carrying out its aims and objects will not be allowed because such expenditure in the light of the assessing officer's view was not incurred for earning the income from donation.

43. We are of the view that expenditure incurred by a political party on its political activity is allowable for deduction and such expenditure was incurred for carrying out its aims and objects for which the voluntary contribution was also received. There is close nexus between the expenditure and the voluntary contribution. We also find force in the submissions of the learned counsel for the assessed that the aims and objects of a political party fall within the scope of the expression 'any other object of general public utility' appearing for the meaning of expression 'charitable purposes' as given in section 2(15) of the Act. The observations of Mr. Justice Subarao J. (as his Lordship then was) in the dissenting note referred to by the learned counsel for the assessed in his submission are reproduced below for proper appreciation of the matter :

'The English decisions are based upon a pragmatic approach to the problems that arose before them, having regard to the historical development of the law of charities in that country; there is no common thread discernible in the large volume of English decisions. (2) Under the Act, unlike in England, the advancement of the object of common public utility is declared to be a charitable purpose, and it is not permissible to curtail its scope with reference to English decisions. (3) The express 'object of general public utility' is very comprehensive and it includes all purposes whether political or otherwise, provided it is an object of general public utility.'

44. We agree with the submission of the learned counsel for the assessed that the Supreme Court decision in the case of All India Hindu Mahasabha (supra) will not be applicable in the present case because all the facts and the aims and objects of the present assessed and the Sabha were not similar. We find force in the arguments of the learned counsel for the assessed that, since the party's aims and objects were in tune with the preamble and directive principles and other provisions of the Constitution to work for the creation of a secular welfare State, the aims and objects of the party would fall within the scope of the expression 'any other object of general public utility'. It will be a different thing if the assessing officer finds and proves that the assessed's activity was not in tune with its aims and objects and its working was not towards the achievement of its objects of general public utility but any other object. The assessing officer has not brought any material on record to prove, so. He has also not pointed out any specific expenditure to show that the expenditure was incurred other than for the aims and objects of the party. It is noteworthy here that the aims and objects of association like FICCI, CII, etc., have been considered as objects of general public utility. The importance, place and role of the assessed-political party has been much broader in general public interest.

45. Under the circumstances, we have to hold that the expenditure incurred to achieve the aims and objects of the party was allowable as deduction.

46. Regarding the contention of the learned counsel for the assessed that exemption can be granted even in appeal stage on fulfillment of the prescribed conditions, we are not inclined to accept this plea because we have already held above that on the facts and in the circumstances of the case, the learned Commissioner (Appeals) was justified in not admitting the additional evidence because there was no sufficient cause for failure to produce books of accounts, etc., before the assessing officer. We have also held above that the facts of the case clearly show deliberate disregard and defiance of provisions of section 13A, inasmuch as from the facts stated above it was clear that the assessed did not keep its accounts, in regular course of conduct of its political activity, receipt of income and incurring of expenditure. The Supreme Court decision in Common Cause case (supra) is also relevant here. We, thereforee, hold that on the peculiar facts of this case, the assessed did not deserve grant of exemption at appellate stage, on the same ground the assessed does not deserve its assessment to be set aside so that the assessing officer can grant exemption under section 13A of the Act.

47. We agree with the learned counsel that by not computing income head wise and making lump sum estimate of income he has failed to follow the provisions of section 13A of the Act and to compute the total income properly in the case.

48. As regards the ground relating to charging of interest under sections 234A and 234B, we direct the assessing officer to delete the same in view of overall excess of expenditure over income (i.e., deficit of Rs. 4,60,36,497) and Supreme Court decision in CIT & Ors. v. Ranchi Club Ltd. : [2001]247ITR209(SC) .

49. As regards the revenue's appeal, for the reasons given while holding that the expenditure incurred by the assessed to achieve its aims and objects and for its political activity is allowable, we dismiss the revenue's appeal against allowance of depreciation and 60 per cent of expenditure by the learned Commissioner (Appeals), as the expenditure so also the depreciation on assets used for the aims and objects of the party is held to be allowable.

50. We, thereforee, in the interest of justice, set aside the impugned order on the allowability of expenditure and restore the matter to the assessing officer with direction to decide it de novo. Expenditure can be allowed subject to the condition that there exists nexus between the expenditure and the voluntary contribution, and the expenditure was incurred to attain the aims and objects of the party. We, further, direct the assessing officer to provide adequate opportunity to the assessed of being heard.

51. In the result, the appeal of the assessed stands partly allowed and the appeal of the revenue stands dismissed.