M/S.SOCIAL EDUCATION & WELFARE ASSOCIATION,MUMBAI vs. INCOME TAX OFFICER WARD-14(3)(3), MUMBAI

The appellant M/s. Social Education & Welfare Association (hereinafter referred to as ‘the assessee’) by filing the present appeals, sought to set aside the impugned orders even dated

Briefly stated facts necessary for adjudication of the controversy at hand in the quantum appeal for A.Y. 2009-10 & 2010-11 are: on the basis of information received through NMS module of the ITB system that the assessee has not filed its return of income for A.Y. 2009-10 and 2010-11 and from the data available in the system it was noticed that assessee has entered into financial transactions inter alia that purchase and sale of stock and also got contracts’ receipt on which TDS was deducted, assessment was reopened by way of issuance of notice under section 148 of the Act, after recording reasons. In response to the notice, assessee filed its return of income at Rs.4,44,540/- & Rs.18,43,800/- on 20.03.2015 for A.Y. 2009-10 & 2010-11 respectively. Statutory notices under section 143(2) and notice under section 142(1) of the Income Tax Act, 1961 (for short ‘the Act’) along with questionnaire were issued and served upon the assessee and in

AO also noticed that the assessee has also claimed expenditure on account of object of the trust to the tune of Rs.8,76,93,941/- and Rs.4,96,83,444/- on account of construction expenses, salary and allowances to the supervisor and consultancy fees for A.Y. 2009-10 & 2010-11 respectively. Again on failure of the assessee to fully authenticate the vouchers relied upon, AO proceeded to disallow 15% of these expenses amounting to Rs.1,31,54,091/- & Rs.74,52,520/- for A.Y. 2009-10 & 2010-11 respectively and thereby framed the assessment under section 143(3) read with section 147 of the Act.

AO has also initiated the penalty proceedings under section 271B of the Act on failure of the assessee company for filing return of income along with audit report under section 44AB of the Act. Declining the contentions raised by the assessee, the AO proceeded to hold that since the assessee has failed to file the tax audit report

Assessee carried the matter before the Ld. CIT(A) by way of filing appeals who has partly allowed the same. Feeling aggrieved the assessee has come up before the Tribunal by way of filing present appeals.

Aforesaid appeals were filed on 27.06.2017 and were first time listed for 12.11.2018 on which date Shri Sanjay Sonjkar represented the assessee company. Thereafter, Shri Sanjay Sonjkar put in appearance on 10.01.2019, 12.06.2019, 22.01.2019 & 16.11.2016. However, none appeared on behalf of the assessee on 24.02.2022, 25.04.2022, 22.06.2022 and 14.09.2022 despite issuance of the notices sent through registered cover with AD which presumed to have been served upon the assessee but assessee has not preferred to put in appearance to pursue the present appeals. Consequently, Bench has decided to dispose of present appeals on the basis of material available on record as well as with the assistance of the Ld. D.R. for the Revenue.

Bare perusal of the assessment orders framed in these cases by the AO under section 143(3) read with section 147 of the Act goes to prove that the AO after reopening these cases without any enquiry and without discussing the detail, documents and explanation furnished by the assessee as mentioned in para 2 of the assessment order made the addition on adhoc basis by disallowing the various expenses claimed by the assessee company to the tune of 15% of the total expenses claimed.

When we peruse the impugned order passed by the Ld. CIT(A), para 5.1 goes to show that the assessee has made specific averments that assessee has been wrongly assessed as penny entity which is not a company but a registered charitable trust and stated to have furnished the complete documents before the AO and made a request to assess the assessee as an Association of Persons (AOP). It is also brought on record by the assessee that the assessee was incorrectly allotted a PAN card under the series applicable for a company entity by the issuing authority for which the assessee should not be held responsible. It is also brought on record by the assessee that the office bearers of the assessee trust are not highly qualified rather simpleton persons not well versed with the combination of the alphanumeric code that was received on the numeric PAN.

The assessee has tried to file the return as AOP but the same could not be filed due to the PAN error and at the instance of the AO the assessee had to file the return under the category of Pvt. Ltd. Company as there was no option available to the assessee. The factum of wrong PAN allotted to the assessee was brought to the notice of AO who has not taken note of the same as the case was getting time barred and thereby framed the assessment under section 143(3) read with section 147 of the Act.

Undisputedly, the assessee company has filed the return of income pursuant to the notice issued under section 148 of the Act. Both AO as well as Ld. CIT(A) without taking into consideration the submissions made by the assessee extracted in para 5.1 of the

No doubt ignorance of law is no excuse but framing the assessment by making addition on adhoc basis without conducting any enquiry by the AO and without considering any documents brought on record before the Ld. CIT(A) is not sustainable in the eyes of law.

When the assessee has brought on record complete details before the AO he was required to frame the assessment by considering all the details/documents furnished before him and not to botch up the enquiry by making adhoc addition for the reason that the assessment was getting time barred. The AO has not even made a whisper in the order if the assessee is a charitable trust being into the activity of construction of toilet and handing over the same to the locality in the slum areas pertaining to the downtrodden of the society.

However, the Ld. CIT(A) for the reason best known to him has discussed these facts in para 5.2 and 6.2 of the impugned order without recording, if any, application for additional evidence has been made by the assessee rather decided this issue by returning generic findings.

From the perusal of impugned order passed by the Ld. CIT(A) it is evident that the case has not been inquired into at the level of AO for framing assessment as per law. All the details, documents, explanation furnished by the assessee before the AO as mentioned in para 2 of the assessment order have been suppressed

Appeal bearing ITA No.3986/M/2018 for A.Y. 2009-10 challenging the penalty levied by the AO and confirmed by the Ld. CIT(A) under section 271B of the Act is also not sustainable being consequential in nature as the quantum cases decided by the AO as well as Ld. CIT(A) have failed to withstand the judicial scrutiny and consequently have been set aside. So appeal bearing ITA No.3986/M/2018 is also remitted back to the AO to decide afresh after deciding the quantum appeals. Resultantly, all the aforesaid appeals filed by the assessee are allowed for statistical purposes.