MANGAL JIVAN TRUST,PATAN SEDRANA vs. ITO(EXEMP) PALANPUR, PALANPUR

The facts relating to the case are that the assessee had filed return declaring total income of Nil after claiming its income exempt u/s.11/12 of the Act on account of being a charitable entity. The case of the assessee was reopened and, thereafter, assessment framed u/s.147 of the Act denying the assessee benefit of exemption of its income shown to have been utilized for charitable purpose to the tune of Rs.18,23,367/-. The assessee was asked to furnish information about payment fixed assets and payment to specified persons but in the absence of any response Jivan Trust vs. ITO(E)] A.Y. 2023-24 - 3 – filed by the assessee, the AO disallowed the exemption claimed by the assessee u/s.12A of the Act and computed the income of the assessee at Rs.18,23,367/- as opposed to Nil income by the assessee.

The matter was carried in the appeal before the Ld. CIT(A) where in the absence of any cooperation by the assessee, who did not respond to any notice issued by the Ld. CIT(A), the order of the AO was confirmed.

Aggrieved by the same, the assessee has come up in appeal before me.

The solitary plea of the Ld. Counsel for the assessee before me was that the matter be restored back to the AO since the addition had been made by the AO and confirmed by the Ld. CIT(A) without hearing the assessee at all. He contended that the assessee had a valid registration certificate u/s.12A of the Act and was entitled to claim exemption of all its income utilized for charitable purposes. That the AO had denied the exemption merely for the reason that the assessee did not submit information about fixed assets and payment to specified persons. He contended that for this reason alone, the assessee could not be denied exemption of its entire income. Besides he pleaded that the assessee was in a position to satisfy the Revenue authorities regarding the genuineness of its claim of exemption of its entire income. At this juncture, the Ld. Counsel for the assessee was asked at bar as to why he did not cooperate and attend both the Jivan Trust vs. ITO(E)] A.Y. 2023-24 - 4 – assessment and appellate proceedings. To this, he merely stated that the assessee was small trust located in a small town Sedrana in Dist. Patan and was unaware of the legalities of income tax proceedings. That the laxity in participating in the assessment and the appellate proceedings was due to the ignorance of the trustees regarding the Income Tax Act and Law.

Ld. DR fairly conceded that the disallowance had been made without hearing the assessee at all. However, he stated that there was no reason to give a second chance to the assessee, since he had not participated in both the assessment and appellate proceedings due to his own fault.

Having heard both the parties, I am of the view that the matter needs reconsideration, since admittedly the assessment had been framed and addition made to the income of the assessee denying exemption claimed by it u/s 11/12 of the Act entirely, which has been confirmed by the Ld. CIT(A) also, without hearing the assessee at all. It is a fact recorded by the AO that the assessee has a valid registration u/s.12A of the Act and is entitled to claim its income exempt to the extent applied for charitable purposes. I am of the view that interest of justice would be served only when the assessment is framed in accordance with law after hearing the assessee. However, noting the casual attitude of the assessee in not responding and participating in both assessment and appellate proceeding, I impose a cost of Rs.2000/- on the assessee to be deposited in the Prime Ministers National Relief Fund. The appeal of the assessee Jivan Trust vs. ITO(E)] A.Y. 2023-24 - 5 – is restored back to the AO to be decided afresh after giving opportunity of hearing to the assessee. The AO is directed to take up the matter for reconsideration only after the cost imposed is demonstrated to be duly discharged as directed.

In the result, the appeal filed by the assessee is allowed for statistical purposes.