INCOME TAX OFFICER, TIRUPUR vs. SRI RAM DEV SEVA SANGH, TIRUPUR

The brief facts of the case emanating from the records are that the assessee is an AOP, did not file its return of income for the AY 2016-17. On the basis of information uploaded on insight portal of the department, the AO noted that despite having purchased immovable property during the financial year 2015-16, the assessee failed to furnish its return of income for the AY 2016-17. The AO accordingly issued statutory notices to the assessee for reopening the assessment. The assessee again did not file its return of income in response to the notice u/s.148 of the Act. Considering the assessee’s continued non- compliance, the AO passed exparte assessment order u/s.144 r.w.s. 147 of the Act on 26.03.2022 determining the total income at Rs.4,03,83,000/- by making an addition u/s.69 of the Act towards unexplained investment in immovable property.

Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee submitted that the entire amount required for purchase of immovable property has been collected from its members and hence the same is not taxable as per the principles of mutuality as the assessee being an AOP. The only taxable income may be the interest received on fixed deposits made out of the amount collected from its members. Further, the assessee stated that the President of the Society expired due to Corona and hence the operations of the society was severely affected and the person who took charge latter did not have sufficient information to follow the affairs of the society. Therefore, the assessee could not present the case before the AO to explain the source for the investment.

The assessee filed a reply on 11.11.2025 before the AO stating that the corpus donation received from the members has been utilized for purchase of property and further stated that as the amount collected was only from its own members, the same is not taxable under the principles of mutuality. In support of the same, the list of corpus donations received was furnished. The AO sent a remand report dated 17.11.2025 stating that the assessee has failed to furnish any supporting documents in support of their claim that they had received

The ld.CIT(A) provided an opportunity to rebut the remand report of AO dated 17.11.2025. In response to the same, the assessee filed a certificate of registration of the society dated 19.08.1988, memorandum of association, cash book and ledger, sample copy of member admission form and two sales deeds dated 02.12.2015 for Rs.55,86,000/- and Rs.3,47,97,000/- evidencing the purchase of property. The assessee further stated that the above documents proved the sources of purchase of property by the society in the form of donations from its members along with the list of members also were submitted.

On perusal of the submissions made by the assessee along with the remand report of the AO, the ld.CIT(A) deleted the additions made by the AO by passing an order dated 15.12.2025 by allowing the grounds of appeal raised by the assessee.

Aggrieved by the order of the ld.CIT(A), the Revenue preferred an appeal before us by raising the following grounds of appeal:-

The ld.DR for the Revenue submitted that the ld.CIT(A) has erred in deleting the additions without providing property opportunity to the AO for verification of the documents submitted for the first time before the ld.CIT(A), which is in violation of Rule 46A of the Income-tax Rules, 1962. The ld.DR contended that the assessee had not filed any details before the AO when the reply for remand report was called for. However, the assessee has filed the details and application only before the ld.CIT(A) at the time of giving response to the rejoinder to the remand report. Therefore, there was no opportunity to the AO to give his remarks on the evidence relied by the ld.CIT(A) for deleting the additions. Therefore, the ld.DR prayed for remitting the matter back to the ld.CIT(A) for giving opportunity to the AO.

Per contra, the ld.AR for the assessee submitted that the impugned addition is merely made for want of explanation to the source for purchase of the immovable property, which was contributed by the members of the society, which is not an income in the hands of the assessee on the basis of principles of mutuality. Further, the ld.AR contended that the list of members and the donations received along with the ledger has already been verified by the AO during the proceedings of remand report sought by the ld.CIT(A). Therefore the ld.AR prayed for dismissing the appeal of the Revenue as there is not error in the order of the ld.CIT(A).

We have heard the rival submissions and carefully perused the material available on record, including the assessment order, the impugned order of the ld.CIT(A), the remand report furnished by the AO and the documentary evidences placed by the assessee before the first appellate authority. The

It is an undisputed fact that the assessee had not filed its return of income for the year under consideration and had also not participated in the assessment proceedings. Consequently, the assessment was completed ex parte u/s.144 r.w.s.147 of the Act, wherein the investment of Rs.4,03,83,000/- in immovable properties was treated as unexplained investment u/s.69 of the Act. Before the ld.CIT(A), the assessee explained that the investment was made out of corpus contributions/donations received from its members and, therefore, the source of investment stood explained. During the appellate proceedings, the ld.CIT(A) called for a remand report from the AO. The assessee, vide reply dated 11.11.2025, claimed that corpus donations received from its members had been utilized for purchase of the properties and furnished a list of such contributions. However, in the remand report dated 17.11.2025, the AO observed that the assessee had not furnished supporting documents such as the cash book, books of account, receipt books or confirmations from the members/donors in support of its claim.

Subsequently, while filing its response to the remand report before the ld.CIT(A), the assessee furnished further documentary evidences, inter alia, the certificate of registration of the society dated 19.08.1988, memorandum of association, cash book and ledger accounts, sample copy of member admission form and two sale deeds dated 02.12.2015 for Rs.55,86,000/- and Rs.3,47,97,000/-. The ld.CIT(A), after considering the aforesaid documents, accepted the explanation of the assessee and deleted the addition. We find that the basic claim of the assessee throughout the appellate proceedings is that the investment in the immovable properties was sourced out of contributions received from its members. The assessee has also placed on record its

In our considered view, the matter does not require a wholesale restoration for fresh adjudication. What is required is only a limited factual verification of the source and flow of funds claimed to have been utilized for acquiring the immovable properties. The documentary evidences produced by the assessee ought to be examined by the Department before the claim is finally accepted. Accordingly, in the interest of substantial justice, we restore the matter to the file of the Jurisdictional Assessing Officer (JAO) for the limited purpose of verification of the documentary evidences furnished by the assessee in support of the source of investment of Rs.4,03,83,000/- in the immovable properties.

The JAO shall restrict the verification to the following aspects: (i) the details of the members who made the corpus contributions/donations and the amounts and dates of such contributions; (ii) whether the contributions are duly reflected in the cash book, ledger accounts, receipt books and/or bank accounts of the assessee; (iii) the membership records and other supporting material establishing that the persons from whom the contributions were received were members of the assessee society/AOP during the relevant period; (iv) the correlation/nexus between the contributions so received and the payments made towards acquisition of the immovable properties under the two sale deeds dated 02.12.2015; and

The assessee is directed to furnish before the JAO all relevant books of account, cash book, ledger accounts, bank statements, membership records, receipts, details of contributions and such other supporting documents as may reasonably be required for the aforesaid limited verification. The JAO shall afford reasonable opportunity of being heard to the assessee and shall not travel beyond the scope of the verification directed hereinabove. We make it clear that the restoration is only for the limited purpose of factual verification of the source of investment and shall not be construed as setting aside the entire matter for a de novo assessment. If, upon verification, the JAO finds that the contributions received from the members and the corresponding utilization thereof towards purchase of the immovable properties are duly supported by the books and documentary evidences, the addition u/s.69 of the Act shall stand deleted. However, to the extent any part of the investment remains unsupported or unexplained upon such verification, the JAO shall be at liberty to sustain the addition only to such extent, in accordance with law, after affording reasonable opportunity to the assessee. In view of the above, the grounds raised by the Revenue are treated as partly allowed for statistical purposes in the terms indicated hereinabove.

In the result the appeal of the revenue is allowed for statistical purposes.