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Facts
Navdeep Educational Trust, running 'Navadeep Public School', filed its return for AY 2016-17. The assessment completed u/s 143(3) included disallowances for travel expenses incurred by the managing trustee (to Hyderabad for training and to UK for meeting educational consultants) and a protective addition under Section 68 for alleged unexplained cash credit in the managing trustee's account. The ld. CIT(A) upheld these additions and disallowances.
Held
The Tribunal deleted the protective addition made under Section 68, stating that a protective addition cannot be made when no substantive addition exists in the hands of the other assessee (the managing trustee). For the disallowance of travel expenses, the matter was remanded back to the ld. CIT(A) for fresh adjudication, directing the assessee to provide evidence of expenditure, outcome, and business relevance.
Key Issues
1. Whether a protective addition under Section 68 for unexplained cash credit is valid when no substantive addition has been made in the hands of the primary assessee. 2. Whether the disallowance of travel expenses was justified given the lack of evidence and proof of business utility, or if the matter warrants further review.
Sections Cited
250, 1961, 37(1), 143(2), 142(1), 143(3), 68, 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH: COCHIN
Before: SHRI INTURI RAMA RAO & SHRI KESHAV DUBEY
Assessment Year: 2016-17 Navdeep Educational Trust 38/109, Navdeep Mundakkal East 691001 ACIT Vs. Kollam Circle Kerala Kollam PAN NO : AABTN0952H APPELLANT RESPONDENT Appellant by : Shri Surendranath Rao, A.R. Respondent by : Smt. Leena Lal, Sr. D.R. Date of Hearing : 29.01.2025 Date of Pronouncement : 24.04.2025 O R D E R
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld.CIT(A)/ NFAC dated 26.02.2024 vide DIN & Order No. ITBA/NFAC/S/250/2023-24/1061508122(1) for the AY 2016-17 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”).
The assessee has raised the following grounds of appeal:
Brief facts of the case are that the assessee being a private trust, engaged in running an educational institution with CBSE affiliation under the name & style of ‘Navadeep Public School’. The assessee trust filed its return of income for the AY 2016-17 on 16.10.2016 declaring total income of 33,74,920/-. Thereafter the case was selected for scrutiny under CASS to verify "Large cash deposit in the accounts of trustee" and accordingly notices u/s 143(2) & notice u/s 142(1) of the act were served on the assessee. The assessee furnished the details as called for. Finally, after verification of details, the assessment was completed u/s 143(3) of
Aggrieved by the assessment completed u/s 143(3) of the Act by the AO, the assessee preferred an appeal before the ld. CIT(A)/NFAC.
The ld. CIT(A)/NFAC vide order dated 26/02/2024 partly allowed the appeal. However, the ld. CIT(A)/NFAC has not granted any relief in respect of the following additions: Particulars Amount Travelling expenses of Managing 2,19,604 trustee and chairman to Hyderabad for attending conference disallowed Travelling expenses of Managing 3,33,606 trustee to UK Protective addition made u/s 68 for alleged unexplained cash 1,54,45,000/- credit in the account of the Managing trustee- Cletus Austin
Aggrieved again by the order of the ld. CIT(A)/NFAC, the assessee is in appeal before us. The assessee filed a paper book comprising 10 pages containing therein comparative chart, assessing officer’s letter dated 19.11.2019, assessee’s reply dated 2.12.2019 as well as ITAT order in ITA No.243/Bang/2024. Further, assessee has filed another paper book comprising 59 pages containing therein the argument note and various case laws relied upon by the assessee.
Before us, ld. A.R. of the assessee submitted that the AO has made protective addition u/s 68 of the Act for the alleged unexplained cash credit in the account of managing trustee Mr. Navdeep Educational Trust, Kollam Page 4 of 6 Cletus Austin vide order dated 29.12.2018. However, the reassessment proceedings were subsequently commenced against trustee Mr. Cletus Austin on 29.1.2020. Therefore, at the time of completion of the assessment in the hands of assessee in which the protective addition was made there was no substantive assessment/addition made in the hands of any other person. Further, ld. A.R. of the assessee submitted that there can be no protective addition without there being substantive addition in any other’s hand by relying the judgement of Apex court in the case of Lalji Haridas Vs. Income Tax Officer (1961) 43 ITR 387 (SC). Further, without prejudice to the above, ld. A.R. submitted that as the substantive addition which enables the AO to make a protective addition was dropped by holding that the sources from which funds were introduced by him by credit to his current account in the books of the assessee were genuine and there is no income escapement, there cannot be any protective addition in the hands of the assessee trust as there is no substantive addition in the hands of Mr. Cletus Austin on the date of protective addition. Further, with regard to disallowance of expenses, the ld. A.R. of the assessee submitted that the expenses are genuine and bonafide and it is allowable unless it is proved that the same is not connected with business at all.
Ld. D.R. on the other hand supported the order of authorities below.
We have heard the rival submissions and perused the materials available on record. On going through the order of the assessment passed by the AO, we find that cash was credited on various dates as received from Mr. Cletus Austin, Chairman of the Trust and also the repayments were also made by the Trust. The AO added Rs.1,54,45,000/- (Rs.1,84,45,000 (-) Rs.30,00,000/-) as unexplained cash credit u/s 68 of the Act in the hands of trust Navdeep Educational Trust, Kollam Page 5 of 6 protectively. The assessment order was passed by the AO on 29.12.2018. Further, on going through the order of assessment, passed in the case of Mr. Cletus Austin, Managing Trustee of the Trust placed at page 5 - 10 of the paper book, the AO has observed that the assessee has elaborately explained the facts and figures and observed that the ledger account as well as income and expenditure account are produced in his case, in the case of his spouse and Navadeep Public School and accordingly, the AO accepted the returned income as explained in the letters dated 14.10.2020 and 23.3.2021. Therefore, we are of the considered opinion that at the time of completion of the assessment in the hands of assessee trust, in which the protective additions were made, there was no substantive assessment/addition made in the hands of Mr. Cletus Austin, Managing Trustee as on that date. Protective addition was made in the assessment order of the assessee dated 29.12.2018 whereas reassessment proceedings in the hands of the Managing Trustee Mr. Cletus Austin commenced only on 29.1.2020 and thus, on the date of protective addition there was no substantive addition. We are of the considered opinion that such a course of action in making a protective addition first and substantive assessment later is not sustainable in the light of apex court’s judgement in the case of Lalji Haridas vs. ITO (supra) and Suresh K. Jajoo Vs. ACIT (2010) 39 SOT 514 (Mum.) supporting assessee’s case that a protective addition comes to play then there arises a doubt in the mind of the assessing officer regarding taxability of an income in case of more than one assessee, he could indeed make a substantive addition followed by the protective one and not vice versa. Faced with situation, we deem it fit to delete the impugned protective addition of Rs.1,54,45,000/- u/s 68 of the Act in very terms. Accordingly, this ground of appeal is allowed. 9.1 Now with regard to the disallowances made with respect to travelling expenses of the Managing Trustee to Hyderabad Navdeep Educational Trust, Kollam Page 6 of 6 amounting to Rs.2,19,604/- and disallowances of travelling expenses of the Managing Trustee to U.K. amounting to Rs.3,33,606/-, the ld. CIT(A)/NFAC has confirmed the disallowances on the ground that assessee failed to produce evidence of expenditure such as air tickets, vouchers etc. and also fails to furnish the outcome and productivity of the business and how it was related to the work of the trust. Being so, in the interest of justice and fair play and as requested by the ld. A.R. of the assessee, we remit these two issues to the file of ld. CIT(A)/NFAC to decide afresh in accordance with law after affording reasonable opportunity of being heard to the assessee. The assessee is also directed to produce the above evidence of expenditure and justify the outcome and productivity of the business and demonstrate how it is related to the work of the trust. It is ordered accordingly.