THE JANSEVA TRUST,GODHRA vs. THE INCOME TAX OFFICER, WARD 4(1)(2), VADODARA (NOW INCOME TAX OFFICER, WARD 1, GODHRA), GODHRA

Cash Other Total Bank Name Account Mode of Deposits Credits Deposits No. Deposit (Rs.) (Rs.) (Rs.) The Janta Co- 898 Cash 56,86,500 10,43,059 67,29,559 op Bank The Janta Co- 14421 Cash 2,02,000 10,28,650 12,30,650 op Bank The Godhra Urban Co-op 1889 Cash 1,76,73,000 19,29,240 1,96,02,240 Bank The Godhra Urban Co-op 430020 Cash 3,00,000 39,814 3,39,814 Bank The Godhra Urban Co-op 13029 Cash 7,50,000 2,01,659 9,51,659 Bank Total 2,46,11,500 42,42,422 2,88,53,922 The Janseva Trust vs. ITO Asst. Year : 2017-18 2.1. The AO issued multiple notices under Sections 142(1) and 133(6) of the Act to the assessee, requiring the assessee to file its return of income for the A.Y. 2017-18 and an explanation regarding the nature and source of the deposits. While the assessee submitted certain details, including audited financial statements, transactional data, and supporting evidence, the AO found these explanations unsatisfactory. Subsequently, a show-cause notice was issued on 12.12.2019, granting the assessee a final opportunity to explain why the deposits should not be treated as unexplained income under Section 69A of the Act. The assessee responded to the show cause notice by seeking additional time on 19.12.2019, citing the absence of its trustees. However, the AO passed the assessment order on 24.12.2019. Treating the entire amount of Rs.2,88,53,922 as unexplained, the AO invoked Section 69A of the Act, deeming it as undisclosed income. The AO proceeded to tax this amount under Section 115BBE of the Act at the rate of 60%, initiated penalty proceedings under Sections 271AAC and 271F, and levied interest under Sections 234A, 234B, and 234C of the Act.

Invalid Proceedings:

1. 1. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“CIT(A)”] erred in fact and in law in confirming the action of learned Income Tax Officer, Ward 4(1)(2), Vadodara (“the AO”) in passing the order which is invalid in law and therefore liable to be quashed.

2. The learned CIT(A) erred in fact and in law in confirming the action of learned AO in passing the assessment order without granting an opportunity of being heard before transfer of case from Godhra to Vadodara as per provisions of section 127 of the Income Tax Act, 1961 (“the Act”). Best Judgment u/s 144: 3. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in passing the order u/s 144 of the Act.

4. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in passing the order u/s 144 without considering the facts on record in proper perspective.

5. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in passing the order u/s 144 of the Act despite the fact that details pertaining to cash deposit during demonetisation period were duly submitted to the Income Tax Officer, Ward – 1, Godhra (“previous AO”).

6. The learned CIT(A) erred in fact and in law in confirming the action of learned AO in passing the order u/s 144 of the Act merely on the basis of assumptions and presumptions. Invalid Appellate Proceedings: 7. The learned CIT(A) erred in fact and in law in passing an appellate order without granting personal hearing as mandated under clause 12 of Faceless Appeal Scheme despite the fact that the request for personal hearing through video conferencing was requested by the Appellant vide submission dated 01.08.2023.

8. The learned CIT(A) erred in fact and in law in passing an appellate order in violation of the principles of natural justice.

9. The learned CIT(A) erred in fact and in law in passing an appellate order without granting proper opportunity of being heard. The Janseva Trust vs. ITO Asst. Year : 2017-18 Addition u/s 69A – Rs.2,88,53,922: 10. The learned CIT(A) erred in fact and in law in confirming the action of learned AO in invoking provisions of section 69A of the Act and thereby making addition of Rs.2,88,53,922/-.

7.2. The assessee failed to file its return of income for A.Y. 2017-18, even after receiving a notice under Section 142(1) of the Act. This non-compliance is a critical factor that weakened the assessee's position and necessitated the passing of the best judgment assessment order under Section 144 of the Act. Despite repeated demands by the AO and the CIT(A), the assessee failed to furnish complete and satisfactory details to substantiate the nature and source of deposits totalling to Rs.2,88,53,922/- in its bank accounts. Furthermore, the assessee did not produce any new documents or evidence during the proceedings before us.

7.3. The assessee claims that the cash deposits represent recoveries from borrowers in the course of its charitable micro-finance activities. However, no reconciliation of these deposits with individual borrower accounts or adequate supporting evidence was provided at any stage of the proceedings. The AO invoked Section 69A of the Act to treat the deposits as unexplained income. While the assessee's explanation of loan recoveries was not properly verified by the AO, the onus was on the assessee to substantiate its claim, which it failed to do. The Janseva Trust vs. ITO Asst. Year : 2017-18 7.4. The assessee's contention that the transfer of jurisdiction from Godhra to Vadodara was made without granting an opportunity of being heard under Section 127 is valid. This procedural lapse violates the principles of natural justice, warranting a reconsideration of the assessment.

7.5. The denial of a personal hearing before the CIT(A) despite a written request by the assessee constitutes a significant procedural lapse. While the assessee’s failure to file its return of income and provide complete details during the assessment stage is a serious non-compliance, it is essential to ensure that the principles of natural justice are upheld at every stage of the proceedings.

7.6. The AO treated the entire deposits of Rs.2,88,53,922/- as unexplained income without conducting proper inquiries into the explanations and documents submitted by the assessee. The AO is required to verify the claim that the deposits represent loan recoveries from borrowers in the course of the assessee’s charitable activities. While the addition under Section 69A requires verification, the failure of the assessee to furnish sufficient evidence during assessment and appellate proceedings is equally notable.

7.7. Based on these findings, we observe that the assessee’s non-filing of the return of income and its failure to provide adequate explanations despite repeated opportunities demonstrate non-cooperation and disregard for compliance obligations under the Act. While there were procedural lapses in the assessment and appellate stages, such lapses cannot absolve the assessee of its primary obligation to file a return of income and provide satisfactory explanations for the deposits. The Janseva Trust vs. ITO Asst. Year : 2017-18 7.8. In the interest of justice and fair play, and considering the charitable nature of the assessee’s activities, the matter is remanded back to the file of the AO for fresh adjudication. The assessee is directed to fully cooperate with the reassessment proceedings and promptly submit all necessary documents and evidence as required by the AO. Any failure or delay on the part of the assessee may result in adverse inferences being drawn against it.

7.9. While recognizing the charitable nature of the assessee’s activities, we also note its non-compliance in filing the return of income and furnishing complete details during the assessment and appellate proceedings. In the interest of justice, we impose a nominal cost of Rs.5,000/- on the assessee, payable to the Income Tax Department within two weeks of receipt of this order and production of receipt before the AO. This cost is intended to promote adherence to procedural obligations under the Act and ensure timely compliance in future proceedings, without undermining the trust's charitable objectives.