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Facts
The assessee, an educational institution, filed its return of income admitting Nil income. The AO added Rs. 35,87,93,714/- to the returned income for disallowing expenditure on fixed assets and capital expenditure due to lack of proper details and reconciliation. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal noted that the AO had not adjudicated properly and the CIT(A) had not given a conclusive finding on the expenditure. Therefore, the Tribunal remitted the issue back to the AO for fresh consideration after providing a reasonable opportunity to the assessee.
Key Issues
Whether the AO and CIT(A) properly adjudicated the expenditure claimed by the assessee, and if not, whether the matter should be remanded for fresh consideration.
Sections Cited
143(2), 12A, 10(23)(C), 11(1)(a), 11(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI. LAXMI PRASAD SAHU & SHRI. SOUNDARARAJAN K
Per Laxmi Prasad Sahu, Accountant Member :
This is an appeal filed by the assessee against CIT(A)’s Order, on the following grounds of appeal:
1. 1. That the order of the learned Commissioner of Income Tax (Appeals) is in so far prejudicial to the interest of the appellant is bad and erroneous in law considering the circumstances of the case.
2. That the learned Commissioner of Income Tax (Appeals) erred in law and facts in making a bald statement that the appellant has not produced proper details and not reconciled with the payments in the bank accounts and such statement is bad in law as the same is cryptic and not specific.
Page 2 of 6 3. That the learned Commissioner of Income Tax (Appeals) erred in law and facts in not providing a proper opportunity of being heard and ought to have sought for the exact format of the information required even though the notice was issued 18 months prior to the date of passing the order.
4. That the learned Commissioner of Income Tax (Appeals) erred in law and facts in confirming the addition of Rs. 35,87,93,714 /- to the returned income of the appellant.
5. That the learned Commissioner of Income Tax (Appeals) erred in law and facts in making an addition of Rs. 35,87,93,714 /- even though he has alleged that only few details were missing.
6. That the learned Commissioner of Income Tax (Appeals) erred in law and facts in computing the total income of the appellant at Rs. 17,08,31,908 /- without considering the invoices in respect of purchase of fixed assets.
7. That the learned Commissioner of Income Tax (Appeals) erred in law and facts in computing the total income of the appellant at Rs. 18,79,61,806/- without considering the invoices in respect of capital expenditure incurred by the appellant.
8. That the learned Commissioner of Income Tax (Appeals) erred in law and facts in making addition of all fixed assets citing they are related to construction without observing that few fixed assets were not related to the construction.
That the learned Commissioner of Income Tax (Appeals) erred in law and facts by disallowing the expenditure incurred for purchase of fixed assets and capital expenditure even though all the details sought were produced by the appellant.
That the learned Commissioner of Income Tax (Appeals) violated the principles of natural justice in not providing an opportunity of video conferencing. Each of the above grounds is without prejudice to one another, the appellant seeks the leave of the Hon'ble Income Tax Appellate Tribunal, Bangalore to add, delete, amend or modify otherwise one or more grounds of the appeal either before or at the time of hearing this appeal.
Page 3 of 6 2. Briefly stated, the facts of the case are that assessee filed return of income on 15.08.2018 admitting income of Rs.Nil and the same was processed on 07.02.2020. The case was selected for scrutiny under CASS and notice under section 143(2) of the Act dated 22.09.2019 was sent and subsequently other notices were sent to the assessee. The assessee is running educational institutions across the State of Karnataka and has been granted registration under section 12A of the Act by the CIT(A)-1 vide Order No.718/01-A/Vol.A-III dated 22.09.1974 and registered under section 10(23)(C) of the Act. For the impugned Assessment Year, assessee has declared voluntary contribution other than corpus of Rs.96,76,547/-, income under sections 11 and 12 of Rs.69,02,26,323/- and revenue expenditure of Rs.36,10,05,535/-. Further, the assessee has claimed accumulation under section 11(1)(a) of the Act of Rs.10,49,85,431/- and has also claimed accumulation under section 11(2) of the Act of Rs.23,40,00,000/-. Further, the assessee has spent Rs.2500,38,289/- out of accumulated fund from the year 2014-15 and Rs.10,87,55,425/- from the accumulated fund from the year 2015-16. It was observed that the amount spent for purchase of fixed assets for Rs.17,08,31,908/- and capital expenditure of Rs.18,79,61,806/-. Accordingly, notice under section 142(1) of the Act dated 02.12.2021 was sent calling for details of application of income and evidence for the amount spent out of accumulated funds and other details. The assessee furnished description of assets showing amount spent and details of the amount spent. Assessee did not produce evidence for the expenditure incurred. The AO noted that the amount should have been spent for the purpose for which it is accumulated. The assessee in the prescribed form has specified the purpose for which the amount is accumulated. To verify the genuineness of details of expenditure, further opportunity was granted to the assessee but the assessee was unable to furnish the details of expenditure to the satisfaction of the AO. Therefore, in the absence of the vouchers / bills and proof of payment, the genuineness of the expenditure as claimed by the assessee could not be verified and further show cause notice was also issued to the assessee proposing the addition of Rs.35,87,92,714/-. The Page 4 of 6 assessee furnished breakup of expenditure incurred for the institutions and filed copy of invoices. Out of the invoices filed, some were shown as pay bill and proof of payment is not enclosed and assessee expressed its inability to produce the details as they are to be collected from the various institutions run by the Trust. Accordingly, the AO made addition as per discussion in the Assessment Order of Rs.35,87,93,714/- and completed the Assessment Order on 28.09.2021.
Aggrieved from the above Order, assessee filed appeal before the learned CIT(A). The case was posted for hearing on different dates. The assessee filed submissions on 29.06.2023, 03.07.2023, 01.10.2024 and 16.01.2025 and reiterated the contentions / submissions as filed before the AO and requested to consider the same. As per the observation of the learned CIT(A), assessee has filed various bills / vouchers as proof of expenditure incurred on fixed assets and capital expenditure for Rs.35.87 Crores. The expenditure contains various names of vendors / material suppliers / service providers / contracts / labourers details, etc., involved in providing material / works, etc., of fixed assets and capital expenditure and learned CIT(A) noted that the same could not be comprehensively and conclusively reconciled as attributable to assessee related Trust, fixed assets and capital works expenditure with its supporting proof of payments as reconcilable with assessee’s books of accounts and bank accounts to support the assessee’s contentions which were submitted before the AO. The detailed written submissions were also filed. After considering the entire details, he observed that assessee’s appeal is dismissed as not maintainable as per facts available on record and consideration of assessee’s submissions as reasoned and explained in his Order. Accordingly, he dismissed the appeal of the assessee.
Aggrieved from the above Order, assessee is in appeal before the Tribunal.
The learned AR reiterated the submissions made before the lower authorities and submitted that the assessee has more than 185 educational Page 5 of 6 institutions across the State of Karnataka and it has maintained 514 bank accounts. The entire details were filed before the authorities but they have not given conclusive finding and requested that the matter may be remitted back to the AO for fresh consideration.
On the other hand, the learned DR relied on the Order of the lower authorities.
Considering the rival submissions, we noted from the Order of the lower authorities that various details were furnished in its expenditure claimed by the assessee before the AO and AO has not adjudicated properly and CIT(A) has also not given conclusive finding on the expenditure incurred by the assessee. Considering the facts of the case and in the interest of justice, we are remitting this issue back to the file of AO for fresh consideration and decide the issue as per law after affording reasonable opportunity of being heard to the assessee. The assessee is directed to substantiate its case in support of its claim and not seek unnecessary adjournments in the matter for early disposal of the case.
In the result, appeal filed by the assessee is allowed for statistical purposes.