Denial of Expense Deductions due to Lack of Supporting Documents: ITAT Sets Aside Order [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal(ITAT)  set aside the order of the Additional/Joint Commissioner of Income Tax (Appeals) [Addl.Joint CIT(A)], matter involving a small religious trust that was denied expense deductions due to lack of supporting documents.

Anjuman E Farogh E Islam Trust, appellant-assessee,a small religious trust, had its application for registration under Section 12A rejected. Based on this, the Assessing Officer (AO) initiated proceedings under Section 147 and issued a notice under Section 148 on October 30, 2017.

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In response, the trust filed its return on October 16, 2018, declaring an income of INR 22,170. Notices under Sections 143(2) and 142(1) were issued, but the trust did not provide the required details. During the assessment, it was found that for the assessment year 2016-17, the trust had submitted a Section 12A registration certificate. It had reported donation income of INR 10,57,298 and claimed expenses of INR 10,25,123.

A final show cause notice was sent, but no response was received. Due to the lack of details, the assessment was completed under Section 144 read with Section 147 on November 20, 2018, and the total income was assessed at INR 10,57,298.

The assessee appealed before the Addl./Joint CIT(A), but the appeal was dismissed. The authority noted that the assessee received Section 12A registration on October 31, 2017, and was ineligible for exemption under Sections 11 and 12 for the assessment year 2014-15.

The assessee failed to submit details of claimed expenses despite multiple opportunities. While it provided documents for the 2016-17 assessment, no supporting evidence was submitted for the year under review. The appellate authority held that without proper details, the expenses could not be allowed and upheld the Assessing Officer’s additions.

Aggrieved, the assessee filed an appeal before the tribunal.

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The assessee's counsel stated that the trust, registered in 2012, received Section 12A registration in 2017 after a delay. It did not receive initial notices and learned about the proceedings in September 2018 through its Chartered Accountant.

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The assessee filed its return on October 16, 2018, and presented its case orally. However, the AO issued a show cause notice on November 18, 2018, and passed the order two days later, leaving no time to respond.

The assessee’s books were regularly audited and submitted to the Charity Commissioner. Expecting a chance to submit details, it requested an opportunity to provide the necessary documents.

The two member bench comprising Amarjit Singh(Accountant Member) and Sandeep Singh Karhail (Judicial Member) reviewed the submissions and restored the appeal to the Addl./Joint CIT(A) for fresh adjudication. It directed the assessee to submit relevant documents and instructed that no order be passed without a fair hearing. The Addl./Joint CIT(A) could also seek a remand report from the AO. With these directions, the order was set aside.

In short,the appeal filed by the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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