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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SMT. BEENA PILLAI & SHRI LAXMI PRASAD SAHU
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against order u/s. 263 dated 31/03/2021 passed by the Ld.CIT(E), Bangalore for A.Y. 2017-18 on following grounds of appeal.
Tax Effect relating to GROUNDS OF APPEAL each Ground of appeal On the facts and in the circumstances of the case, the conditions precedent being absent, the proceedings initiated U/s.263
1. NA of the Act was opposed to law and the order passed U/s.263 is liable to be cancelled. On the facts there being no error much less an error prejudicial to the interest of revenue, the learned Pr.Commissioner of NA
2. Income-tax ought to have refrained from invoking the provisions of Sec.263 of the Act. The learned Pr.Commissioner ought to have appreciated the assessment was done under scrutiny after collecting all the particulars in respect of various donations and other particulars and after obtaining the particulars, details and explanation and having satisfied the Assessing
3. Rs.5,00,00,000 Authority passed the assessment order u/s.143(3) of the Act and accordingly the order cannot be said to be erroneous to apply the provisions of. Sec.263 of the Act and accordingly the order passed is without jurisdiction and ought to be cancelled. The learned Pr.Commissioner ought to have appreciated the Hon'ble Supreme Court judgment cited supported the case of the appellant and accordingly he ought to have refrained from cancelling the assessment 4. order to direct the assessing authority to Same as above make a fresh assessment after making enquiries when that exercise had already been done by the assessing authority while making the assessment u/s.143(3) of the Act.
The learned Pr.Commissioner ought to have appreciated that all the donors have specifically provided the donation towards the corpus of the trust which is evident from the letters addressed to the 5. Same as above appellant by the respective donors and that being so, the Ld.Commissioner erred in holding that there was no specific instruction from the donor to hold the amount as corpus of the trust. The learned Pr.Commissioner ought to have appreciated that the donor while donating the amount towards corpus need not specifically mention the purpose for which 6. the amount to be spent and that was not a Same as above condition precedent under section 11(1)(d) of the Act and that being so the donations having made towards corpus they were not includible in the income of the appellant. On the facts the learned Pr.Commissioner ought to have appreciated that the judgment cited by the appellant fully 7. Same as above supported the claim of the appellant and accordingly was not liable to be included for taxation. The learned Pr.Commissioner further ought to have appreciated that even in the case of Rs.2.72 crore and 8. small donations the donors have Rs.19.90 lakhs specifically directed the donation to be taken towards corpus.
The learned Pr.Commissioner ought to have appreciated that the cash deposits of Rs.7,50,00,000 made by the appellant in Canara Bank were out of the amount provided by the patients whose details were all fully available and provided to the 9. assessing authority and the entire amount Rs.7,50,00,000 stood explained and the learned Pr.CIT ought to have refrained from directing the Assessing Authority to consider the addition after making enquiries when that exercise had already been done before the completion of the original assessment.
The learned Pr.CIT ought to have appreciated the alleged Mismatch in the value of import had been reconciled and 10. explained fully and accordingly he ought to Rs.37,79,739 have refrained from directing the AO to consider the addition of the difference for the purpose of taxation. Without prejudice, the learned AO having obtained the explanation and having satisfied before passing the order the learned Pr.CIT ought to have refrained from 11. directing a fresh assessment after Same as above cancellation of the original assessment which is opposed to law and accordingly the order of the Commissioner is liable to be cancelled. Without prejudice, the direction of the learned Pr.CIT for addition of the donation is to be considered, the learned Commissioner ought to have directed the 12. Same as above AO to allow the appellant to prove the accumulation of the amount unspent u/s.11(2) of the Act after making necessary application in accordance with law. Without prejudice, the additions suggested by the learned Pr.CIT are arbitrary, 13. NA excessive, and unreasonable and liable to be deleted. For these and grounds that may be urged at the time of hearing of the appeal the 14. NA appellant prays that the appeal may be allowed. TOTAL TAX EFFECT Rs.4,73,90,921/- 2. Brief facts of the case are as under: 2.1 Assessee is a charitable trust and is registered u/s. 12AA /80G of the Act. For the year under consideration, assessee filed its return of income on 28/10/2017 declaring Nil income after claiming exemption u/s. 11 of the Act. The case was selected for scrutiny by CASS and statutory notices were issued to assessee. In response to the notices, assessee filed requisite details as Page called for. The Ld.AO after verification of the return of income and the details furnished by assessee concluded the assessment u/s. 143(3) on 19/12/2019 by accepting the returned income. 2.2 Subsequently, the Ld.CIT(E) on perusal of records observed that assessee claimed corpus donation of Rs.7,91,19,000/- from various donors which has been considered as exempt income. 2.3 The Ld.CIT(E) further observed that there were cash deposits during the demonetisation period that amounted to Rs.7,50,00,000/- in a bank held by assessee which was not verified. The Ld.CIT(E) also noted that assessee has claimed to have imported machinery and equipments worth Rs.2,25,34,172/- on which customs duty payment of Rs.60,81,606/- was shown. On verification of ITS details, the Ld.CIT(E) noted that the imported goods was worth Rs.2,63,13,911/- and post assessment by custom authorities the value was assessed at Rs.2,73,70,486/- on which assessee had paid customs duty of Rs.2,71,483/-. As there was a mismatch in the value of the imported goods, the Ld.CIT(E) was of the opinion that the details were not verified by the Ld.AO. 2.4 The Ld.CIT(E) thus issued notice u/s. 263 on 06/01/2021 to the assessee. The copy of the same is scanned and annexed herewith.
2.5 The assessee on receipt of the notice, filed various details vide reply dated 27/03/2021 and the Ld.PCIT after verifying the same, passed the impugned order u/s. 263 directing the Ld.AO to make necessary enquiries and to pass fresh assessment orders.
Page 2.6 Aggrieved by the above directions of the Ld.CIT(E), assessee is in appeal before this Tribunal.
The Ld.AR submitted that the Ld.CIT(E) was not right in invoking the provisions of section 263 for the reason that all the details have been verified by the Ld.AO at the time of assessment proceedings. It is submitted that specific query has been raised in respect of the corpus donation and replies have been filed by the assessee. In respect of the import of materials / machinery by assessee, a query has been raised and the details were furnished by the assessee during the assessment proceedings. He referred to the notice issued by the Ld.AO u/s. 142(1) which is placed at page 126 -129 of the paper book. The Ld.AR thus relied on the decision of Hon’ble Supreme Court in case of Malabar Industrial Co. Ltd. vs. CIT reported in 243 ITR 83 and submitted that the provision cannot be invoked to correct each and every type of mistake or error committed by the Ld.AO. The Ld.AR submitted that unless the order passed by the assessing officer is erroneous insofar as prejudicial to the interest of revenue, the provisions of section 263 cannot be invoked.
On the contrary, the Ld.DR submitted that though the query has been raised in respect of the corpus donation and the cost of the imported materials / machinery, no enquiry has been made in respect of the cash deposited by the assessee during the demonetisation period. It is the submission of the Ld.AR that there is no specific observation by the Ld.AO regarding the enquires conducted during the assessment proceedings. He thus supported the order passed by the Ld.CIT(E).
Page We have perused the submissions advanced by both sides in the light of records placed before us.
We note that the provisions of section 263 has been invoked in the present facts of the case on the following 3 issues. Issue 1: Corpus donation received without any specific purpose Issue 2: Non-verification of cash deposits Issue 3: Mismatch in value of import goods between CBEC export import summary 6. Issue 1: Corpus donation received without any specific purpose 6.1 On perusal of the notice u/s. 263 of the Act, we find that the Ld.CIT(E) was not satisfied with the alleged donations received from LakhiSamtani – amounting to Rs. 2,50,00,000/- on two different dates being 23/09/2016 and 28/09/2016. 6.2 Another donation received by assessee from M/s. Jindal Nature Care Ltd. amounting to Rs.2,72,00,000/- was not accepted by the Ld.CIT(E) since no direction was mentioned as to the specific purpose. It is also noted that the Ld.CIT(E) has doubted the purpose of certain voluntary donations / contributions of small amounts made by various donors during the year under consideration. To summarise the details of all the donors, this Tribunal had directed the assessee to furnish the details of corpus funds received along with the letters that formed part of the assessment proceedings. 6.3 For the sake of convenience, the list of donors are reproduced as under:
6.4 We note that during the assessment proceedings, the Ld.AO had issued notice u/s. 142(1) on 04/12/2019 calling for the details of voluntary contributions received during the AY 2017- 18. It is also noted that the Ld.AO had called for the total voluntary contributions received during the AY 2016-17 and 2015-16. The relevant queries form part of the notice issued u/s. 142(1) which is scanned and reproduced as under:
6.5 It is noted that the assessee had furnished the details of corpus donations received from the donors along with the letters indicating the purpose of donation which is placed in the paper book at pages 2-26 of the paper book filed on 28/06/2022. On Page verification of each and every letters, we note that the purpose of the donation has been mentioned to be towards corpus donation. We therefore do not find any reason to uphold the 263 proceedings being invoked on this issue.
Issue 2 : Non-verification of cash deposits 7.1 The legal argument raised by the assessee challenging the validity of the notice issued cannot be appreciated for the simple reason that in the notice issued u/s. 263, there is a reference to ITBA No. and DIN No. Further, the notice also carries the name of the PCIT who has issued the alleged document and therefore merely because there is no digital signature will not vishiate the validity of such notice. 7.2 We note that even the 263 order passed by the Ld.PCIT as well as the 263 order passed by the Ld.PCIT and the notice issued u/s. 143(2) during the original assessment proceedings by the Ld.AO are on similar lines which has not been under challenge by the assessee. 7.3 We therefore reject this argument by the Ld.AR. Now coming to the merits of the case, we are of the opinion that there is a violation of natural justice in respect of not granting sufficient time to the assessee for representing its case before the Ld.PCIT. However, considering the fact that in any event, the issue would have to be remanded to the Ld.AO in order to verify the cash deposit of Rs. 3,00,07,129/- in specified bank notes during the demonetisation period in its bank account in accordance with various instructions referred to by the Ld.DR hereinabove.
Page 7.4 Admittedly, the assessee had accepted the SBNs which were no longer a legal tender and were to be explained in accordance with the relevant circular mentioned hereinabove. These instructions gives a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases. 7.5 In 1 of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money. 7.5.1 The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give Page some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not. 7.5.2 The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. The Ld.AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. 7.5.3 Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim.
Issue 3: Mismatch in value of import goods between CBEC export import summary 8.1 We note that though there is a query raised in respect of the value of machinery imported by assessee, the same has not been verified by the Ld.AO. There is no details in respect of the same filed by the assessee except for filing the submissions being part of 10/12/2019 that reads as under:
Page “11.1 The value of Imports as per CBEC data is significantly large whereas you have filed non-business or presumptive business return of income. Please explain the reasons for the same:- During the assessment year 2017-18, we have imported various items like electronic equipments, medical equipments and other consumable item, which were generally used by us in providing health care services. Further, we have not engaged in any business activity for the selling of such imported items. Details of imported items are given under point no. 11.2 and 11.3 of the letter.” We therefore do not find any infirmity in initiating 263 proceedings to verify this issue. 8.2 While upholding the 263 proceedings on the two issues as observed hereinabove, we refer to the observations of Hon’ble Supreme Court in case of Malabar Industrial Co. Ltd. vs. CIT (supra) as under: “7. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the AO accepting the same as such will be erroneous and prejudicial to the interest of the Revenue. Rampyari Devi Saraogi vs. CIT (1968) 67 ITR 84 (SC) : TC 57R.202 and in S t Tara Devi Aggarwal vs. CIT 1973 CTR (SC) 107 : (1973) 88 ITR 323 (SC) : TC 57R.206.” 8.3 Based on the above discussions, we partly uphold the 263 initiated by the Ld.CIT(E). The Ld.AO is directed to verify the claims by granting proper opportunity of being heard to assessee on the issues that has been upheld herein in accordance with law.
Page Accordingly the ground nos. 3 & 8 stands allowed, ground nos. 9 & 10 raised by the assessee stands dismissed. 9. Remaining grounds are general in nature and therefore do not require adjudication. In the result, the appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 04th January, 2023.