CIT(A) Order Based on Presumption Without Verification of Charitable Trust’s Exemption Claim: ITAT Directs Fresh Assessment [Read Order]
ITAT Holds That the Order Passed Without Examining Additional Evidence Cannot Be Sustained
The Income Tax Appellate Tribunal(ITAT), Ahmedabad Bench, directed the Assessing Officer(AO) to conduct a fresh assessment after observing that the order passed by the Commissioner of IncomeTax (Appeals) (CIT(A)) was based on presumption without verifying the exemption claim made by a charitable trust.
The appellant, Sant Shree Asharamji Mahila Utthan Ashram, filed an appeal challenging the orders passed by the CIT(A) for Assessment Year (AY) 2011-12, where the exemption claimed by the trust under Sections 11 and 12 of the Income Tax Act, 1961 was denied and penalty under Section 271(1)(c) was imposed.
The appellant failed to furnish the required documents before the AO. The AO completed the assessment and disallowed the exemption claimed by the trust. The AO assessed the total income as ₹49,87,952 and initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act.
Aggrieved by the assessment order passed by the AO, the appellant preferred an appeal before the CIT(A). The appellant produced additional evidence including the registration certificate under Section 12A, registration with the Charity Commissioner and the certificate issued under Section 80G of the Income Tax Act before the CIT(A).
However, the CIT(A) dismissed the appeal observing that due to non-compliance during the assessment proceedings.
The counsel for the appellant, S. N. Soparkar, contended that although there was no compliance during the assessment proceedings, all relevant documents including the registration under Section 12A, registration with the Charity Commissioner and certificate under Section 80G were produced before the CIT(A) as additional evidence.
It was further submitted that more than 85% of the income of the trust had been applied for its charitable objects and therefore the trust was entitled to exemption under Section 11 of the Income Tax Act.
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Maithili Mehta, appearing for the Revenue Department, submitted that the appellant had failed to comply with the requirements during the assessment proceedings and the AO had rightly disallowed the exemption claimed.
Narendra Prasad Sinha, Accountant Member, and TR Senthil Kumar, Judicial Member, observed that the appellant had produced the relevant documents before the CIT(A) as additional evidence and therefore the appellate authority ought to have called for a remand report from the Assessing Officer before deciding the appeal.
The Tribunal further noted that the CIT(A) dismissed the appeal without examining whether the expenditure incurred by the trust was actually applied towards its charitable objects and the conclusion of the CIT(A) was based on presumption rather than proper verification.
The Tribunal set aside the order of the CIT(A) and restored the matter to the file of the AO for fresh adjudication after examining the additional evidence produced by the assessee.
The Tribunal also held that since the assessment order was set aside for fresh adjudication, the penalty imposed under Section 271(1)(c) of the Act could not survive and accordingly cancelled the penalty.
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