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Facts
The assessee, a charitable trust, appealed against the CIT(A)'s order which dismissed its appeal for non-prosecution. The AO had denied exemption u/s 11 and taxed gross receipts of Rs. 72,24,232/- due to non-submission of registration u/s 12A and other documentation. The assessee claimed non-compliance was due to office redevelopment and the principal officer's health issues.
Held
The Tribunal found that the assessee's explanations for non-compliance due to redevelopment and health issues were reasonable and not disputed by the revenue. The Tribunal decided to grant one more opportunity to the assessee to submit necessary documentation.
Key Issues
Whether the assessee's claim for exemption u/s 11 can be denied solely based on non-compliance and absence of 12A registration, especially when reasonable grounds for non-compliance are presented.
Sections Cited
12A, 11, 68, 144, 142(1), 250, 270A, 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI “A” BENCH : MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI RAJ KUMAR CHAUHAN
Assessment Year : 2017-18 Majlis E Khuddamul Madari S, ITO(Exem), Ward-2(1), 14, Uasim Mansion, Room No. 512, 5th Floor, Koleueheri Village, vs. Piramal Chambers, Chinchpada, Lal Baug, Parel, Kalina, Mumbai-400012. Mumbai-400098. PAN : AAAAM0694F (Appellant) (Respondent) For Assessee : NONE For Revenue : Shri Surendra Mohan, Sr.DR Date of Hearing : 16-10-2025 Date of Pronouncement : 27-10-2025 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟], dated 25-06-2025, pertaining to Assessment Year (AY) 2017-18, wherein the assessee has taken the following grounds of appeal:
“1. On the facts and in the circumstances of the case, the learned Assessing Officer (hereafter called AO) has erred in holding that Registration Certificate under section 12A of the Income Tax Act is not obtained by the Appellant by overlooking the details submitted in part during the course of assessment proceedings.
2. On the facts and in the circumstances of the case, the learned Assessing Officer erred in adding the entire gross receipts of Rs. 72,24,232/- without considering the expenses of Rs. 68,96,173/- which were incurred exclusively for attaining the objects of the trust u/s 11[5].
3. On the facts and in the circumstances of the case, the learned Assessing Officer erred in adding the amount Cash deposited in Bank during the demonetization period by the Appellant trust amounting to Rs. 18,14,000- being part of the total cash deposited by the Appellant in his Bank Account during the demonetization period as unexplained cash credit and treated the same as income in the hands of the Appellant u/s 68 of the Income Tax Act. a. Deposit was out of donations received from Walk in Donors b. Deposits were also made prior to Demonetisation as well. c. Arbitrarily rejecting the fact that they were already offered as income under the head donations.
On the facts and in the circumstances of the case, the learned Assessing Officer erred in passing order u/s 144 because notices issued by the Learned Officer were not received by the Appellant Trust due to the fact that the building where the office of the Trust was located had gone for redevelopment & the General Secretary Mr. Ahmed Ali Merchant was not well for which his medical reports was submitted along with form 35 and was therefore not able to appear before the Learned Assessing Officer during the assessment proceedings.
In the facts of the case and in Law, the learned CIT(A) erred in confirming the addition by rejecting all the grounds of appeal without deciding the case on merits and just because there were non-compliance to the notices u/s.250 by the Appellant.”
None appeared on behalf of the assessee nor was any adjournment application filed. Considering that notice has been duly served on the assessee through RPAD as well as through e-mail, it was decided that no useful purpose would be served in adjourning the matter any further and to decide the matter based on material available on record.
Briefly the facts of the case are that assessment in this case was completed u/s. 144 of the Income Tax Act, 1961 („the Act‟), wherein an amount of Rs. 72,24,232/- was brought to tax as „undisclosed gross receipts‟ and the relevant findings of the AO reads as under:
“10. In the present case, the assessee had deposited Cash and other Credit entries appearing in the bank account of State Bank of India, ICICI Bank and Bank of Baroda amounting to Rs. 44,31,685/- (as per Table: 4 & 5) which is treated as explained cash credit.
Therefore, in cases where assessees' deposited huge Cash in bank accounts during Demonetisation period (9th November, 2016 to 30th December, 2016), but the sources were neither explained nor such receipts offered for taxation, the onus is on the assessees to prove that the Cash deposits made did not bear the character of income. In this case, the assessee Trust has failed to prove this fact that the Cash deposited during demonetisation period are normal general receipts and therefore, I hold that the amount of Deposits made in the bank accounts, including Cash deposited during Demonetisation period, represented income from undisclosed sources. The assessee Trust has concealed its true income which otherwise is taxable. Further, by relying upon deposits as cited in above tables that there was ample evidence that Cash was deposited in bank accounts, which is prima facie evidence against the assessee that the deposits are undisclosed income or gross receipts on which the Department can proceed in absence of good explanation.
The assessee has made cash deposits amounting to Rs 18,27,600/- and other Credit entries appearing in bank account of Rs 26,04,085/- thereby total amounting to Rs. 44,31,685/- (Table:4 & 5) appearing in the account of State Bank of India, ICICI Bank and Bank of Baroda of the assessee Trust in the FY 2016-17 relevant to AY 2017-18 remained unexplained and also undisclosed. Section 68 of the Income-tax Act, 1961, provides that where any sum is found credited in the books of the assessee for any previous year it may be charged to income-tax as the income of the assessee of the previous year if the explanation offered by the assessee about the nature and source of such sums found credited in the books of the assessee is, in the opinion of the Assessing Officer, not satisfactory. Such opinion itself constitutes a prima facie evidence against the assessee relating to the receipt of income, and if the assessee fails to rebut the evidence it can be used against the assessee holding that it was a receipt of an income. To prove the genuineness of the transaction, the burden lies on the assessee and to discharge the onus, the assessee must prove (1) the identity of the creditor, (ii) the capacity of the creditor to advance money, and (iii) the genuineness of the transaction. The assessee Trust has not filed ITR for the particular Assessment Year i.e. 2017-18, not declared its true income and has not paid taxes due thereon. The assessee Trust has not responded to notices u/s 142(1) issued during E-assessment proceedings (Table:2). The assessee Trust failed to give any explanation about the nature and source of cash deposits, hence the value of Credit entries, including Cash deposits, appearing in the Bank Account as tabulated in the body of the Order (Table:4 & 5) is treated as undisclosed and considered as the undisclosed Gross receipts of the assessee in the year under consideration. Penalty proceedings 270 Ar.w.s 274 of the I.T. Act is initiated separately for misreporting of income.
As discussed above, the assessee has not filed any reply through e filing portal, however, the assessee has filed part details viz copy of trust deed, copy of bank statements, copy of report of an auditor relating to accounts audited under section 33(2) and 34 and rule 19 of the Bombay Public Trust Act alongwith copy of balance sheet as on 31.07.2017 and income & expenditure account for the year ending 31.03.2017. On perusal of the same it is noticed that the date of audit is mentioned as 05/03/2018. Further, gross receipt as per income & expenditure account is at Rs. 72,24,232/-and total expenses are at Rs. 68,96,173/. It is pertinent to mentioned here that the assessee has not submitted audit report in prescribed form as per income tax act and Rules despite having gross receipts more than minimum prescribed limit. From the above it is evident that the assessee has gross receipt of Rs. 72,24,232/- and the same has not been offered for taxation. The assessee has claimed expenses as expenditure on the object of the trust religious at Rs. 68,34,956/- against the receipt of Rs. 72,24,232/-. The above expenses are charitable/ religious in nature and the same is allowable in the case of assessee who got registered u/s. 12A of the Act. The assessee was asked to submit copy of registration u/s. 12A of the Act, however, the assessee has not submitted the same. Therefore, the assessee is not eligible for claim of exemption u/s. 11 of the act. Further, the assessee has not submitted any supporting details regarding above expenses viz, nature of expenses, purpose, details of persons to whom the same was paid etc., therefore, above expenses as reflected in the income & expenditure account of assessee is not allowable. 13.1 As discussed above, gross receipt as per income & expenditure account is at Rs. 72,24,232/-. The assessee has not offered any explanation regarding nature and source of the above receipts of Rs. 72,24,232/- therefore, the same is remained unexplained and also undisclosed as the assessee has not filed return of income. Section 68 of the Income-tax Act, 1961, provides that where any sum is found credited in the books of the assessee for any previous year it may be charged to income-tax as the income of the assessee of the previous year if the explanation offered by the assessee about the nature and source of such sums found credited in the books of the assessee is, in the opinion of the Assessing Officer, not satisfactory. Such opinion itself constitutes a prima facie evidence against the assessee relating to the receipt of income, and if the assessee fails to rebut the evidence it can be used against the assessee holding that it was a receipt of an income. To prove the genuineness of the transaction, the burden lies on the assessee and to discharge the onus, the assessee must prove (i) the identity of the creditor, (ii) the capacity of the creditor to advance money, and (iii) the genuineness of the transaction. The assessee Trust has not filed ITR for the particular Assessment Year i.e. 2017- 18, not declared its true income and has not paid taxes due thereon. The assessee Trust has not responded to notices u/s 142(1) issued during E- assessment proceedings (Table:2). The assessee Trust failed to give any explanation about the nature and source of cash deposits, hence the value of Credit entries/ gross receipts of Rs. 72,24,232/- is treated as undisclosed and considered as the undisclosed Gross receipts of the assessee in the year under consideration. Penalty proceedings 270A r.w.s 274 of the I.T.Act is initiated separately for misreporting of income.”
4. The assessee thereafter, carried the matter in appeal before the Ld.CIT(A). However, the same was dismissed on account of non- prosecution. The Ld.CIT(A) affirmed the findings of the AO, stating that the assessee has not filed any submissions to corroborate the grounds of appeal so taken in its appeal. Against the said order, the assessee is in appeal before us.
5. On perusal of the material on record, it is noted that initially the AO has referred to cash deposits during the demonetization period amounting to Rs. 44,31,685/- which has remained unexplained and thereafter has referred to the part submissions filed by the assessee, wherein the assessee has submitted a copy of trust deed, copy of bank statement and a copy of auditor‟s report as required under the Bombay Public Trust Act along with a copy of the Balance Sheet and Income and Expenditure A/c. On perusal of the same, the AO observed that the assessee has not submitted copy of registration u/s. 12A of the Act and hence, it is not eligible for claim of exemption u/s. 11 of the Act. Further the details of expenses also could not have been verified in absence of supporting documentation.
6. Further, as part of the statement of facts filed before the Ld.CIT(A), the assessee has submitted that due to the assessee‟s trust office having gone in redevelopment, the notices issued by the AO were not received by the assessee-Trust. It was also submitted that the assessee-trust was not having insight in using the e-portal while replying to the AO. It was further submitted that the assessee is a Public Charitable Trust registered u/s. 12A of the Act and also with the Charity Commissioner. It was further submitted that the Principal officer, who is handling the day to day affairs of the trust is not well since May 2016 as he is suffering from severe liver malfunction viz. Hepatitis C and other ailments. After receiving the final notice, some of the documents which were instrumental in enabling the AO to pass the assessment order u/s. 144 of the Act were submitted by the Trust representative in physical form though the said documents were not uploaded on the e-portal since the staff members were not conversant with the same and it was also the first year of e-portal submissions. After receiving the assessment order passed by the AO u/s.144 of the Act, the Trust representatives contacted some Income tax experts, but unfortunately the COVID-19 virus was declared as a global pandemic and all the matters came to a standstill and submitted that despite of the same the assessee-trust is providing food and shelter to the poor children on an ongoing basis.
7. Per contra, the Ld.DR is heard, who has relied on the orders of the AO as well as that of the Ld.CIT(A) and it was submitted that the case of the assessee trust was selected due to cash deposits in its bank account during the demonetization period and the notices were issued calling for the necessary information/documentation to explain the nature and source of such deposits. It was submitted that there was no compliance by the assessee inspite of repeated opportunities given by the AO except for submissions of some limited information/documentation. It was submitted that the AO thereafter taking the said submissions in account and given that the assessee trust couldn‟t submit the necessary registration documentation u/s.12A, the AO has proceeded denying the claim of exemption u/s.11 of the Act and the gross receipts have been brought to tax. It was submitted that even though the assessee has taken pains to file appeal before the Ld.CIT(A) but has continued with earlier non-compliance approach to the notices so issued by the Ld.CIT(A) which has resulted in passing of the impugned order. He accordingly supported the order so passed by the Ld.CIT(A) and submitted that the appeal of the assessee trust thus deserve to be dismissed due to repeated non- compliance.
We have heard the rival contentions and perused the material available on record. The assessee trust as so claimed is a Public Charitable Trust registered u/s.12A of the Act and also with the Charity Commissioner. The matter was initially take up for scrutiny to examine cash deposits during the demonetization period and thereafter, the gross receipts as reflected in its financial statements have been brought to tax denying claim of exemption u/s.11 in absence of registration documentation placed on record by the assessee and part compliance on behalf of the assessee. At the same time, we find that the assessee trust has put forward reasonable explanation in terms of non-compliance on account of varied reasons in terms of its office undergoing re-development and apparently non-functional and the principle person, who has been handling the day to day affairs of the trust suffering from varied and severe health issues, a claim not seriously disputed by the Revenue. We therefore find that in the interest of substantial justice, the assessee trust deserves one more opportunity to submit necessary information/documentation in support of its claim of exemption u/s 11 especially in the light of the fact that the assessee trust claims to be registered as a charitable institution u/s. 12A of the Act and continue to undertake charitable activities. In light of the same, we deem it appropriate to set aside the matter to the file of the Ld. CIT(A) for deciding the same afresh as per law, after providing necessary opportunity to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 27-10-2025.