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Facts
The assessee, a registered public charitable trust running educational institutions, did not file its return of income for AY 2010-11. The Assessing Officer (AO) initiated reassessment proceedings under Section 147, alleging escaped income due to cash deposits of Rs. 28,71,515/- in its bank account. The AO ultimately added this amount to the assessee's income as unexplained.
Held
The Tribunal noted that the AO issued the notice under Section 148 without obtaining the necessary approval from the PCIT(E). This lack of approval rendered the notice beyond jurisdiction. The Tribunal also observed that the assessee had provided documentary evidence and explanations regarding the cash deposits.
Key Issues
Whether the assessment order passed by the AO and the order of the CIT(A) are valid when the reassessment proceedings were initiated without proper approval from the competent authority.
Sections Cited
143(3), 147, 148, 142(1), 151, 139(1), 139(4), 271(1)(c)
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI, AM. &
Captioned appeal filed by assessee pertaining to Assessment Year 2010- 11, is directed against order passed by Commissioner Of Income Tax (Appeal), vide order dated 21/06/2023, which in turn arises out of an order passed by the Assessing Officer dated 29/12/2017 u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961.
Grounds of Appeal
1. In law, the Income-tax Officer (Exemption), Ward - 2, Rajkot erred in issuing notice u/s 148 of the Act and thus assessment framed u/s 143(3) r.w.s. 147 of the Act is bad in law.
2. On merits, the Learned Commissioner of Income-tax (Appeals) - NFAC, Delhi erred in confirming the action of the assessing officer in making addition of Rs. 28,71,545/-by treating cash deposits into bank account as unexplained and alleged to be earned from undisclosed sources.
3. The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal.
Facts of the Case (1) The facts, in brief, giving rise to the present appeal are enumerated as under: The assessee M/s. Patel Kelavani Mandal Junagadh, being a registered Public Charitable Trust, is running different types of educational institutions. The assessee has been registered u/s.12AA of the Act w.e.f. AY 2015-16. As such, for the impugned AY 2010-11, the assessee is not entitled to claim exemption of its income u/s.11, 12 and 13 of the Act. The assessee did not file its return of income for the impugned AY 2010-11 within the due date(s) stipulated u/s.139(1) or 139(4) of the Act. As such, the assessee is a non-filer for the impugned AY 2010-11. Subsequently, the AO received specific information that, during the FY 2009-10 relevant to the impugned AY 2010-11, the assessee deposited cash to the tune of Rs.28,71,515/- in its bank account maintained with Union Bank of India, Junagadh.
Accordingly, since the assessee did not file its return of income for the impugned AY 2010-11, the AO had reason to believe that income chargeable to tax had escaped assessment within the meaning of Explanation 2(a) to section 147 of the Act. In view of the matter, after obtaining prior approval of the sanctioning authority u/s. 151 of the Act, the AO issued a notice u/s.148 of the Act dated 31.03.2017, requiring the assessee to file return of income within 30 days from receipt of the notice. However, the assessee did not file the return of income within 30 days from the date of receipt of the notice and, therefore, the AO issued the statutory notice u/s.142(1) of the Act, but in vain. Later, in response to notice u/s.148 of the Act (supra), the assessee filed return of income for the impugned AY 2010-11 in Form ITR-5 on 27.09.2017, declaring a total income of Rs. Nil. After having considered the same, the AO issued the statutory notices u/s, 143(2) and 142(1) of the Act and conducted hearings with the Authorized Representative (AR) of the assessee. While doing so, the assessee was asked to furnish details and documentary evidence in respect of accounted sources of cash deposits made in the bank account to the extent of Rs.28,71,545/-. In response thereto, it is stated in the impugned assessment order that the AR of the assessee furnished part details and documentary evidence, but failed to explain the sources of cash deposits made in the bank account, along with documentary evidence. Under the circumstances, the AO finalized the impugned assessment order u/s. 143(3) rws 147 of the Act dated 29.12.2017, determining the total income of the assessee at Rs.28,71,545/- by treating the cash deposits made in the bank account as undisclosed income of the assessee. With undermentioned remark.
(2) On perusal of the submission made by the trust on various dates and narration of cash deposits, it is found that no one cash transaction made with trust is not found genuine. The trust has generated cash receipt as per necessity of fund. Hence, all the cash depositions amounting to Rs.28,71,545/- are found bogus one and requires to be added in the total income of the trust. Hence the same is trated as un explain and earned from un disclosed source of income and therefore the same is added to the total income of the assessee trust. As the assessee has concealed its income by way of furnishing maccurate particulars of its income penalty proceeding are initiated u/s 271(1)(c) of the Subject to the above remarks and on the basis of data made available on record. Total income of the assessee trust is determined as under:
Income as per return of Income Rs. Nil/- Additions as per para6 & 7 above: Rs.28,71,545/- Rounded off u/s. 288A... Rs.28,71,550/- (4) That the assessee file an appeal against the assessee order dated 29.12.2017 before CIT (A). The Ld CIT(A) has disposed of there appeal with following observation. In view of the aforementioned factual matrix of the case, in the absence of any details and documentary evidence forthcoming from the assessee in respect of receipt of unsecured cash loans and cash donations, I am of the considered opinion that the AO has rightly treated the cash deposits made in the bank account of Rs.28,71,545/- as unaccounted income of the assessee. Accordingly, I don't want to interfere with the order of the AO. Thus, the ground of appeal raised by the assessee is dismissed. (5) The assessee is an appeal against the impugned order dated 21.06.2023 of the Ld CIT before us. (i) During the course of argument the Ld AR has submitted that no proper and reasonable opportunity was given to explain the case. The reason recorded are was no sensation was option for issue of notice exemption in respect of reason recorded. That the books of accounts are audited by CA. and the same was submitted to the AO along with term that the cash deposited by the amount Rs. 28,71,545/- was deposited out of cash available with the assessee has received in the form of donation of loan. (ii) On the contrary the Ld DR as supported the order of the lower authority. (6) We have heard both the parties and perused the document available on recorded. (i) Ground No.2 is raised against the AO's action in making an addition of Rs.28,71,545/- by treating the cash deposits made in the bank account as unaccounted income of the assessee. (ii) The said ground is taken up for discussion and adjudication in the subsequent paragraphs of this order. Further, as explained elsewhere in this order, during the course of appellate proceedings, the assessee furnished detailed written submissions, along with supporting documentary evidence. The relevant portion of the written submissions is reproduced below for ready reference. "Shri patel kelavani mandal junagadh is a charitable trust running a different types of educational institutions with the permission of District primary education officer - running a Krishna Primary School for standard 1 to 5 junagadh, in the year 2006 as on dt - 23/05/2006 with the permission of National Council For Technical Education Bhopal this trust running a S.P. Patel College for P.T.C. courses in junagadh. In the year 2009 as on dt. 29/06/2009 with the permission of All India Council For Technical Education this trust running a M.B.A. courses in junagadh, in the year 2006 as on dt. 15/09/2006 this trust running a S.P. Patel B.Ed. College in junagadh with the permission of NCTE - WRC - Bhopal. As the above educational institution is running by this trust since 2004 & 2006 and thereafter and all the activities of this trust is for educational purpose, this trust register under income tax section 12A since 2015 with register no CIT(E)/12AA/571/PKM/2015-2016 dt. 24/10/2015 issued by CIT(Exemption) so the activities of this trust is charitable nature. In the F.Y. 2009-2010 this trust also running different types of educational institutions as stated above & there is big necessity of cash for daily expenses of institution, the cash is require for payment to teachers salary & other daily institutions expenses. So cash is deposited in bank by the trust as per your notice 'when there is a cash in hand with the trust the reply is done to A.O. that cash in hand with the institution" cash is received from unsecured loan & Donation from the person & there is a cash in hand with the institution the photocopy of cash book relevant pages with the supporting evidence like unsecured loan receipt are attach here with. We also provide the relevant evidence to A.O. at the time of assessment u/s 148 but A.O. not consider our evidence & cash deposited amount are treated as a unexplained money. Your honor in actual all cash are collected from the respective parties as a unsecured loan & donation to provide cash to other educational institute running by the trust hence cash is required. Your honor order passed by A.O. not giving the detail reason for treated as unexplained money in his order A.O. is a quasi judicial authority and passing any order he has to give detail reason for not satisfying with the evidence provided by us but order of A.O is not giving detail reason for not satisfying with the evidence provided by us, your honor narration provided in the books of account in credit clearly write about taking loan from the person with his name and other entry is for donation with the name of donor but A.O. not giving any sufficient reason and say this amount as a bogus found. Your honor this is the duty of the officer to inquire and detail inquiry u/s 148 before passing the order. Your honor A.O. has power u/s 131 to collect the evidence from the respective party for cross verification of unsecured loan & donation provider under this inquiry no any cross verification evidence is demanded or done by the A,0. further no any order for production of necessary evidence is passed by him for satisfying himself before passing the order your honor when we provide the evidence in inquiry u/s 148 he has to passed the detail order for not satisfying himself but no detail order passed by A.O. under the circumstances the order passes by A.0. is here by set aside this appeal. As per our ground of appeal A.O. eared in law and facts in making addition of unexplained cash, your honor no any section of I.T. is site in his order u/s 148 to for unexplained money.
Your honor no detail calculation sheet is provided to assessee for calculating the tax amount & directly demand notice u/s 156 is issued to the A.O. that types of order is bad in law and hence require to be set aside under this appeal. Your honor when we give detail explanation that this trust running different types of educational institutions as per para-1 & the reply is given to A.O. in his order relating to the activities of this trust the income & expenses are relevant to the business activities of the trust & hence no any bogus transaction are done by the trust but A.O. not consider our reply & evidence and only single reason that" narration of cash deposited are not genuine. your honor this reason is not sufficient reason for passing the order for unexplained money when all the evidence are provided to A.O, your honor when there is a necessity to other institution for cash then cash is received as a unsecured loan from the person and hence the reason of A.O. that "The trust has generated cash receipt as per necessity of fund" this reason is given by the A.O we say and submit that when any person is necessity of cash then cash is taken as a loan from the other person if no any requirement of cash then no necessity to take loan from the other person hence reason given by the A.O is not satisfactory and without showing the evidence provided by us and hence liable to be set aside. Your honor we also file the return of income u/s. 148 of income tax Act. and in return of income showing the fees income and other income total Rs.5164607/- and total expenses Rs.5400517/- and hence total loss Rs.235910/-is arise during the year so your honor no any tax is payable to the assessee but A.O making the order of cash deposited in to bank treated as a unexplained money only on the basis of his suspicion your honor for the suspicion we relied on the principal establish by the supreme that The honorable supreme court establish the principal in the case of CIT V/S.Daulat Ram Rawatmull reported in 53 ITR 574.SUPREME COURT That it is settled law, a suspicion can not take the place of the evidence as held by supreme court. Your honour when we provide the evidence and if the evidence is not satisfactory then officer has to go in to the deep inquiry but A.O not utilise his power for production of additional evidence of passing any order for that and hence order passed by the A.O only on the basis of his suspicion and hence the above principal establish by the honourable supreme court is applicable and hence order passed by the A.O is require to be set aside. Your honour the additions have been made without the earned Assessing Officer issuing any show cause notice as such containing his proposal to make those additions and calling upon the appellant to show cause as to why his proposal for making the additions should not be carried out; and so the impugned assessment order has been passed without observing elementary principles of natural justice and hence the order passed by the A.O is require to be set aside." (iii) We note that the assessee did not file any return of income for the impugned AY 2010-11 u/s.139 of the Act in spite of the fact that the assessee was running various educational institutions generating huge amount of revenue, which is subject to tax since the assessee was not registered u/s.12AA of the Act during the year. (iv) We note, the assessee did not file any return of income within the due date specified in the notice issued u/s.148 of the Act, later, the assessee filed return of income belatedly on 27.09.2017. While doing so, the assessee did not disclose any taxable income regarding cash deposits made in the bank account.
(7) since assessee have raised Ground No. 1 for the first time a legal ground and the same is disposed it is noted that the Ld AO has issued notice u/s 148 of the IT date o31.03.2017. That the Ld AO has recorded the reasons for initiation of proceedings u/s. 147 of the act and for opening approval of the PCIT(E) Ahd. 30/03/2017. However no approval has been obtained from the PCIT(E) Ahd. The copy of issued in the notices as well as copy of reason record and copy proposal re-opening of assessment of PCIT(E) is placed on record.
(8) We have perused the documents on record relating to reasons for re-opening processes, approval necessary permission to take action u/s 147 of the Act, and found that collum no. 13 of the reasons recorded by the AO is blank, meaning thereby no permission was granted by the Ld. PCIT(E). We observed that no approval has been obtained from the Pr commissioner of Income Tax ( Exemption) Ahd. Hence the notice issued by the Ld AO u/s 148 of the Act. Is beyond the jurisdiction, that the order of the Ld CIT dated 21/06/2023 and order of Ld AO dated 29/12/2017 are here by quashed. In result ground no. 1 of the assessee is allowed and the other ground do not required any adjudication. (9) In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 07 / 03 /2025.