CHILDREN TOY FOUNDATION ,MUMBAI vs. CIT (EXEMPTION),MUMBAI, MUMBAI

We heard the Ld.DR and considered the documents available on the record. The assessment was completed u/s 143(3) of the Act. The assessee is a trust and filed the return by claiming exemption u/s 11 of the Act. But the assessee had not filed the audit report in Form 10B as required as per the provisions of section12A of the Act. Accordingly, in assessment was completed in absence of Form 10B, required as per provisions of section 12A(b) of the Act. The Ld.AO denied the deduction u/s 11 and added back the expenses claimed by the assessee amount to Rs.14,42,310/- and added back with the total income of the assessee.

After completion of the assessment proceeding, the Ld.CIT by invoking provisions of section 263 of the Act, treated the assessment order as erroneous and prejudicial to the interest of the revenue on the ground that the Ld.AO had not disallowed the corpus donation amount to Rs.9,46,608/- and addition to earmarked fund amount to Rs.2,08,456/- which was also not added back to the total income. Further, it is seen from Schedule 1 of the return of income the assessee had claimed utilization out of accumulation made for the year 2015-16 amounting to Rs.4,48,804/-. However, as per the balance-sheet, there is no Chiuldren Toy Foundation addition to the fixed asset, which shows that there is no real utilization. Considering the above findings, the Ld.CIT treated the assessment order as erroneous and prejudicial to the interest of the revenue.

The Ld.DR stated that the assessee is a habitual defaulter in making compliance to the notice and willfully commits default in representing the matter even before the Tribunal. He relied fully on the order of Ld.CIT.

In our considered view, the assessment was completed by making disallowance under Section 11 of the Act and by adding back certain expenses on account of non-filing of the audit report in Form No. 10B as required under the Act. It is further noted that the corpus donations, earmarked funds, and accumulations were rightly identified by the Ld. CIT in the revisional order, wherein it was observed that the Ld. AO had erroneously failed to add back the aforesaid amounts to the total income of the assessee due to the non-furnishing of Form No. 10B during the course of assessment proceedings. In the impugned assessment order, the Ld. AO has remained silent on the issue of inquiries regarding corpus donations, earmarked funds, and accumulations. There is no material on record to indicate that the Ld. AO had applied his mind to these transactions. We, therefore, find no infirmity in the revisional order passed by the Ld. CIT. To this extent, the assessment order is held to be erroneous and prejudicial to the interests of the revenue. Accordingly, we uphold the impugned revisional order and dismiss the appeal filed by the assessee.