1. Instant income tax appeal U/S. 260A of the Income Tax Act (in short, the Act’) is directed against the order dated 31.10.2000 passed by the Income Tax Appellate Tribunal, Jaipur (in short ‘the Tribunal’) & it relates to the assessment year 1991-92.

2. The present appeal was admitted by this Court on the following substantial question of law-

“Whether in the facts and circumstances of the case it can be said that appellant society is entitled for exemption under Section 10(22) of the Income Tax Act.?”

3. The brief facts noticed for disposal of the appeal are that the appellant claims to be a registered society, being registered under the Rajasthan Society Act and claims to have primary objects of imparting education. The appellant society had 23 branches in various parts of the State in the year under appeal and it was inter-alia claimed that the main and primary object of the society is imparting education only and as per provisions of section 10 (22) of the Income Tax Act, 1961 (in short ‘the Act’), the assessee is entitled for exemption as it is not being run for the motive to earn profit & in the past years all along exemption U/Sec. 10 (22) of the Act has been allowed.

4. Survey operation came to be conducted U/Sec. 133A of the Act on 23.09.1991 on the Appellant Society at Jaipur, Jodhpur & Ajmer and in addition therto officer of the DDIT (Investigation) conducted discrete enquiries at Jodhpur where statements of 17 teachers were recorded U/Sec. 131 by visiting their residences situate at different places of the city. The statements of the teachers were recorded and on analysing the statement viz-a-viz a salary paid and shown in the books of accounts, showed wide discrepancy. The Assessing Officer came to the conclusion that the salary almost to the tune of Rs. 7,00,000/- was inflated by the managing committee/appellant. The survey resulted into noticing several discrepancies/deficiencies and misappropriation of funds of the appellant-society and it was found noticed that the assessee had received amount from various persons exceeding over ; Rs. 1,00,000/- and on an enquiry, creditors were unable to prove the source of amount having been deposited. The survey also revealed that some of the members of the society were residing in the building owned by the assessee at A-3, Sunder Path, Bani Park and no rent was received by the society and in addition to that, water, electricity, telephone, conveyance and other facilities were provided to the members of the managing committee free. The enquiry also resulted into, donations have been received by the Society but no proper records of donation was maintained by the school/society. The enquiry resulted into, purchases of school clothes, sarees, watch, Dry fruits etc. and these were found to have been used for personal purposes. In addition to that number of discrepancies were noticed and show cause notice was issued as to why exemption U/Sec. 10 (22) of the Act be not denied to the assessee and the expenses being not disallowed.

5. It was contended on behalf of the assessee that the society exist solely for the purpose of education and 23 branches are running throughout Rajasthan and is imparting education only and the exemption U/Sec. 10 (22) of the Act cannot be denied. It was also contended that all along in the past society has been held to be enuring for exemption U/Sec. 10 (22) of the Act However, the claim was not accepted by the Assessing Officer.

6. An appeal was filed by the assessee assailing the said order of C (A). However, the CIT (A) examined the issue and in the light of the judgment of this Court in the case of Deputy Commissioner of Income Tax v. Cosmopolitan Education Society (2000) vol. 244 ITR 494 he found identical facts thus the claim U/Sec. 10 (22) of the Act was allowed by the CIT (A), the CIT (A) was of the opinion that action on account of misappropriatioi deserves to be taken in individual cases and to bring such amount to taxation in their respe