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Facts
The assessee, an educational trust, filed a nil return for A.Y. 2018-19. The Ld. Assessing Officer disallowed Rs. 60,20,000/- for building construction expenditure and Rs. 1,94,274/- for other expenses due to lack of verifiable documents, cash payments, and non-production of books of accounts. The Ld. CIT(A) upheld these disallowances, stating that essential documents were not submitted to justify the expenses.
Held
The Tribunal acknowledged that the school building was constructed and that capital expenditure for charitable purposes is allowed under Section 12A. Considering the assessee's explanation that books were not submitted due to the remote location and e-filing difficulties, the Tribunal admitted the additional evidence (books of accounts) and remanded the case back to the Ld. Assessing Officer for a *de novo* assessment.
Key Issues
Whether the disallowance of building construction expenditure and other expenses for charitable purposes was justified due to lack of verifiable documents, and whether additional evidence should be admitted for a *de novo* assessment.
Sections Cited
143(3), 12A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW ‘B’ BENCH, LUCKNOW
A.Y. 2018-19 Thakur Roshan Singh, Smirti Sansthan, vs. Income Tax Officer Vill Chathiya Faizu, Shahpur, Baniyan (Exemption), Ward, Bareilly Faridpur, Bareilly PAN: AABAT8692F (Appellant) (Respondent) Assessee by: Ms. Gurneet Kaur, Adv Revenue by: Sh. R.R.N. Shukla, Addl CIT DR Date of hearing: 04.11.2025 Date of pronouncement: 24.11.2025 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the ld. CIT(A), NFAC dated 4.07.2024, wherein the ld. CIT(A) has dismissed the appeal of the assessee against the order under section 143(3) of the Income Tax Act, 1961 dated 16.04.2021. The grounds of appeal are as under: -
1. Because, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in fact and in law in confirming the disallowance made by Assessing Officer Rs. 60,20,000/- as building expenditure for charitable purposes, arbitrarily rejecting the explanation furnished by the assessee.
2. Because, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in fact and in law that such college is being constructed and run in the remote village where in due to various exigencies and not availability of the banking facilities, payments are made in cash.
3. Because, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in fact and in law that the payments of construction had made not being rejected by the Ld. AO. However, due to ongoing work it is a general practice to obtain bills/settlement receipts only on finalization of the work, the Ld. AO has arbitrarily rejected the same.
Thakur Roshan Singh A.Y. 2018-19 4. Because, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in fact and in law in confirming the addition Rs. 1,94,474/- as 30% of the expenses amounting to Rs. 6,48,249/- on adhoc basis, arbitrarily rejecting the explanation furnished by the assessee stating the supporting are not verifiable.
Because on the facts and in the circumstance of the case, the order of Assessment has been passed in absolute violation of the principles of Natural Justice, without providing adequate opportunity of being heard and therefore deserves to be declared a nullity.
The appellant craves for leave to add, modify, amend or delete any other and further grounds of appeal
with permission.”
2. The facts of the case are that the assessee trust filed its ITR on 13.09.2018 declaring total income of rupees Nil for the year under consideration i.e. A.Y. 2018-
19. The case of the assessee was selected for scrutiny on the issue of, “expenditure for charitable or religious purposes” with the reason descriptions, “large amount deemed to have been applied to charitable or religious purposes”. After going through the return of income, the Assessing Officer issued a show cause notice to the assessee in response to which the assessee furnished a reply from which it was noticed that during the year under consideration, the assessee had shown total receipts of Rs. 1,01,75,358/- including donation to corpus fund amounting to Rs. 37,50,860/-. During the year under consideration, the assessee had shown Revenue expenditure of Rs. 44,43,168/-, building construction expenditure of Rs. 60,20,000/- and fixed assets purchases of Rs. 1,78,400/-. With regard to building construction expenses, the Assessing Officer noticed that all bills furnished by the assessee were hand made cash memos; all payments on account of building construction were made in cash; details of work completed by contractor were not submitted; date of transaction and purchases for electrical goods were not indicated on the cash memos; serial numbers on cash memos issued by Agarwal Agency on various dates were the same; some cash memos relating to purchase of bricks did not pertain to this assessment year; details of TDS were not available with regard to payments to contractor; relevant bank statement had not been furnished; GST number, registration number of concerned firm / transacting party for not mentioned on bill / cash memo; there was inconsistency between the purchases and attendance of Mistris and Labour on the site. In view of all these, Thakur Roshan Singh A.Y. 2018-19 the ld. AO held that the expenditure on account of building construction was unverifiable and therefore, not allowable as expenditure for charitable or religious purposes for the year under consideration. Furthermore, the ld. AO observed that included in the expenditure of Rs. 44,43,168/- was depreciation amounting to Rs. 8,52,719/-. The remaining expenditure was in the nature of salary expenses but the Assessing Officer observed that the salary details could not contain any PAN numbers. With regard to the remaining expenditure of Rs. 6,48,249/- with the assessee claimed to be for the business purposes of the trust, the Assessing Officer held that there was no evidence and therefore, he added back a sum of 30% and made a disallowance of Rs. 1,94,274/-.
3. The assessee, being aggrieved with this assessment order filed an appeal before the ld. CIT(A), NFAC. The ld. CIT(A), NFAC held that the assessee had not submitted any of the documents that he believed were essential to justify the construction expenses and therefore, it was not possible to hold that the construction expenses claimed by the assessee were genuine. He also pointed out that the bank statement of the assessee did not show that the any such expenses had been incurred and therefore, he dismissed the appeal against the addition of Rs. 60,20,000/- on this account. He also confirmed the addition of Rs. 1,94,474/- stating that no evidences had been produced before him.
4. The assessee is aggrieved at this order of the ld. CIT(A) and has accordingly come before us. Ms. Gurneet Kaur, Advocate (hereinafter referred to as the ld. AR) represented the matter before us. It was submitted that the assessee had filed a reply before the ld. Assessing Officer and also during the appeal proceedings that the school building was being constructed in a remote rural area close to the river bank of the Ganga river and payments were made to labourers and for procurement of construction material in cash and due to limited knowledge of accounts and record keeping, the final receipts issued to such labours and construction material were submitted at the time of hearing. However, the books of accounts could not be submitted as they were bulky in Thakur Roshan Singh A.Y. 2018-19 nature and because of the limited resources, the same could not be scanned and uploaded on the e-filing portal. It was for this reason that the assessee had not been able to represent its case properly before the Assessing Officer or the ld. CIT(A). In view of the same, the assessee was submitting copy of complete books of accounts and the cash book of Thakur Roshan Singh Smirti Sansthan and Vidya Shree Parth Mahavidyalaya to justify its expenses and it prayed that this additional evidence may kindly be admitted under Rule 29 of the ITAT Rules in the interests of justice.
5. On the other hand, Sh. R.R.N. Shukla, Sr. DR pointed out that the assessee had been given sufficient opportunities to explain its case by both the Assessing Officer and the CIT(A) and therefore, there was no justification for receiving additional evidence at this stage.
6. We have duly considered the arguments made by both parties. We understand that a school building has been constructed and is presently functioning. The provisions of the Income Tax Act allow for capital expenditure to be regarded as application towards charitable purposes by trusts registered under section 12A. Accordingly, in view of the fact that the said school has been constructed and is functional, the fact of expenditure towards its construction cannot be denied. Be that as it may, the Assessing Officer has deemed it fit to disallow the expenditure on the grounds that the books have not been produced. It has been submitted that the failure to produce books is only on account of the remoteness of the assessee trust and the lack of capability of making compliance to e-proceedings. Since, the disallowance has been made primarily in the absence of the books of accounts, we deem it fit to admit the additional evidence so that the Assessing Officer may satisfy himself with regard to the expenditures made on account of the construction of the school building with reference to the books of accounts and such other enquiries as he may deem necessary. Accordingly, we admit the said additional evidence and restore the matter back to the file of the ld. Assessing Officer for de novo assessment as above. As the matter stand restored to Thakur Roshan Singh A.Y. 2018-19 the file of the Assessing Officer, the appeal is held to be allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 24.11.2025 in the Open Court.