CIT, FARIDABAD vs. VIMAL CHAWLA CHARITABLE TRUST

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ITA/94/2010HC Punjab & HaryanaPHHC01093888201019 May 2010Author: MR. JUSTICE M.M. KUMAR,MR. JUSTICE JITENDRA CHAUHAN5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose, warranting the dismissal of the appeal. Regarding the deletion of Rs. 5,55,751/- (Issue 2), the Tribunal's view that a difference of less than 10% between the DVO's and assessee's valuation should be ignored was based on sound principles and supported by decisions in Amir Chand v. ACIT, ACIT v. Shivalic Loha Mills Pvt. Ltd., Honest Group of Hotels (P) Ltd. V. CIT, and ITO v. JMP Enterprises. The court noted that the revenue had not appealed against similar orders from other benches, implying acceptance and the applicability of the principle of consistency. Concerning the entertainment of additional evidence and deletion of Rs. 15,00,000/- (Issues 1 & 3), the Tribunal correctly held that there was no bar. The additional evidence, showing donor confirmations, PANs, IT returns, balance sheets, and donations by account payee cheques, was of impeccable character and had been confronted to the AO. The AO's suspicion that it was the assessee's own money routed through donors was found to be conjectural. If the AO had doubts, he could have opened the assessment of the donors, not the assessee. Therefore, the additions were deleted.

What were the facts?

This is an appeal by the revenue against an order of the Income Tax Appellate Tribunal (ITAT) dated July 17, 2009, concerning assessment year 2005-06. The ITAT had upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)]. The revenue challenged the ITAT's decision on three substantive questions of law. The appeal before the High Court was filed under Section 260A of the Income-tax Act, 1961. The ITAT's order was in relation to ITA No. 2841/Del/2008. The CIT(A)'s order was dated June 26, 2008.

What were the issues?

The High Court had to decide three substantive questions of law: 1. Whether the ITAT was correct in upholding the CIT(A)'s order in entertaining additional evidence as per Rule 46A of the Income Tax Rules, despite the assessee failing to produce evidence earlier. 2. Whether the ITAT was correct in upholding the CIT(A)'s order in deleting an addition of Rs. 5,55,751/- made by the Assessing Officer (AO) on account of unexplained expenditure under Section 69C, especially when the assessee failed to explain the difference between its valuation and the Valuation Officer's estimate. 3. Whether the ITAT was correct in upholding the CIT(A)'s order in deleting an addition of Rs. 15,00,000/- made by the AO on account of income from undisclosed sources under Section 68, when the assessee allegedly failed to prove the genuineness of the donors. Assessee's contentions: Not explicitly recorded for all issues, but impliedly supported the CIT(A)'s and ITAT's findings. The assessee had produced additional evidence, including donor confirmations, PANs, IT returns, balance sheets, and donations via account payee cheques. Revenue's contentions: The revenue argued that additional evidence should not have been entertained, and the assessee failed to discharge its onus regarding unexplained expenditure and the genuineness of donors.

Which sections of the Income-tax Act were involved?

Section 260A,Section 69C,Section 68,Section 46A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: May 19, 2010 Commissioner of Income Tax, Faridabad …Appellant Versus Smt. Vimal Chawla Charitable Trust, Faridabad …Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE JITENDRA CHAUHAN Present: Ms. Urvashi Dhugga, Advocate, for the appellant.

1.

To be referred to the Reporters or not?

2.

Whether the judgment should be reported in the Digest? M.M. KUMAR, J. This is an appeal filed by the revenue under Section 260A of the Income-tax Act, 1961 (for brevity, ‘the Act’), challenging order dated 17.7.2009, passed by the Income Tax Appellate Tribunal, Delhi Bench ‘I’, New Delhi (for brevity, ‘the Tribunal’), in ITA No. 2841/Del/2008, in respect of assessment year 2005-06. The Tribunal has upheld the view taken by the CIT(A) in his order dated 26.6.2008. The revenue has thus challenged the concurrent findings by urging that the following substantive questions of law would arise for determination of this Court:- “(I) Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in upholding the order of the Ld. CIT(A) in entertaining the additional evidence as per Rule 46A of Income Tax Rules even though despite numerous opportunities provided to produce the evidence in support of its claim and inspite of this, the assessee had failed to do so? (II) Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in upholding the order of the Ld. CIT(A) in deleting the addition of Rs. 5,55,751/- made by the Assessing Officer on account of unexplained expenditure u/s 69C of the Income Tax Act, 1961 especially when the assessee had failed to explain the reason in respect of difference shown by assessee and estimated by the Valuation Officer? (III) Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in upholding the order of the Ld. CIT(A) in deleting the addition of Rs. 15,00,000/- made by the Assessing Officer on account of income from undisclosed sources u/s 68 of the Income Tax Act, 1961 especially when the assessee had failed to discharge the onus cast upon it to prove the genuineness of the donors?”

2.

All the aforementioned three questions were raised before the Tribunal. In so far as question No. 2 relating to deletion of Rs. 5,55,751/- is concerned, the Tribunal has taken the view that the opinion of the CIT(A) was based on sound principle because the difference between the two valuations is less than 10%. The Tribunal followed the earlier decisions of various other Benches including the decision of the Chandigarh Bench in the cases of Amir Chand v. ACIT, 124 Taxman 162 (Chd); and ACIT v. Shivalic Loha Mills Pvt. Ltd., 123 Taxman 276 (Chd). It has been held in both the decisions that where the difference in the cost of construction estimated by the DVO and the one proffered by the assessee is less than 10% then such a difference has to be ignored for the purpose of making addition to the income of the assessee. The Tribunal has also referred the judgment rendered in the case of Honest Group of Hotels (P) Ltd. V. CIT, 123 Taxman 464 (J&K); and ITO v. JMP Enterprises, 18 TLR 277 (Amritsar).

3.

At the hearing we asked Ms. Urvashi Dhugga, learned counsel for the revenue to apprise us about the status of the aforesaid judgments of the Tribunal. It appears that the revenue has not filed any appeal against those judgments. Ms. Dhugga has not been able to point out that the revenue has filed any appeal against the orders passed by the Chandigarh Bench or Amritsar Bench. If the aforesaid orders have been accepted by the revenue then the principle of consistency would be applicable, as have been laid down by Hon’ble the Surpeme Court in the cases of Radhasoami Satsang v. CIT, [1992] 193 ITR 321 (SC); Berger Paints India Ltd. v. CIT, [2004]

266 ITR 99; CIT v. J.K. Charitable Trust, (2009) I SCC 196; and C.K. Gangadharan v. CIT, (2008) 8 SCC 739. 4. As far as the question concerning adducing of additional evidence is concerned, the Tribunal has held that there is no bar or error in the order of the CIT (A) because the additional evidence was duly put to the Assessing Officer before entertaining the same. It is appropriate to mention that the additional evidence was adduced showing the amount donated by the donors and their confirmation. The donors had disclosed their Permanent Account Numbers, copies of the Income-tax Returns and Balance Sheets. The donations were made by way of Account Payee Cheques. It was in the aforesaid background that the additional evidence of impeccable character was permitted to be adduced. The version of the Assessing Officer that it was assessee’s own money which was routed through various donors has been found to be conjectural. As a consequence of the additional evidence, the resultant additions of Rs. 15,00,000/- were deleted.

5.

Having heard learned counsel for the revenue on the aforesaid question Nos. 1 and 2, we are of the considered view that no exception is provided to entertain the appeal because once additional evidence of impeccable character has been lawfully entertained by the CIT(A) by confronting it to the Assessing Officer and the donors have come forward by confirming the donations by disclosing their Permanent Account Numbers and balance sheets etc. then doubts entertained by the Assessing Officer with regard to donations are rendered merely conjectures. If there was any suspicion then the Assessing Officer could have opened the assessment of the donors and not that of the assessee-respondent.

6.

For the reasons aforementioned, we find that no question of law much less a substantive question of law within the meaning of Section 206A of the Act would arise warranting admission of the instant appeal. The appeal is wholly without merit an the same is accordingly dismissed. (M.M. KUMAR) JUDGE (JITENDRA CHAUHAN) May 19, 2010 JUDGE Pkapoor 5

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