INCOME TAX OFFICER, VARANASI vs. NEONATAL HEALTH ACADEMY, VARANASI

I.T.A. No.132/Varanasi/2024

“1. The Ld. CIT(A) has failed to appreciate the facts that the penalty U/s 270 A of the Income Tax Act, 1961 of Rs.1,71,07,822/- was imposed by the AO on the basis of addition made during the course of assessment proceeding after obtaining approval from the competent authority. It is pertinent to note that during the course of assessment proceedings, addition of Rs.2,34,93,962/-

P a g e | 3 was made on account of expenses claimed under the head conference and seminar expenses. This amount of Rs.2,34,93,962/- remained unexplained during the course of assessment proceeding for want of detail and valid explanation from the assessee .In this regard, onus lies on the assessee to prove that the expenditure was incurred for defined purpose only, when the assessee discharges this onus, the assessee would be entitled to deduction under IT ACT, 1961 and in the case of assessee ,no factual condition was laid by the assessee to establish the genuineness of the expenditure said to have incurred for conferences/seminar.”

(A.1) For the sake of convenience and brevity; these two appeals are being disposed of through this consolidated order.

(B) First we take up the quantum appeal in . In this case the assessee filed its return of income on 31/10/2019 declaring total income of Rs.32,80,500/-. The Assessing Officer completed the assessment and passed assessment order under section 143(3) read with section 144B of the I. T. Act on 28/09/2021 and determined the total income of the assessee at Rs.2,67,74,462/-, disallowing the assessee’s claim of conference and seminar expenses amounting to Rs.2,34,93,962/-. The disallowance was made by the Assessing Officer on the ground that the assessee did not furnish any details/explanation during the assessment proceedings. The relevant portion of the assessment order is reproduced below:

P a g e | 4 (B.1) The assessee’s appeal against the aforesaid addition of Rs.2,34,93,962/- was allowed by the learned CIT(A) vide impugned appellate order dated 30/05/2024. Based on the details filed during appellate proceedings and the observations of the learned CIT(A) that the assessee was a nonprofit organization in promotion of neonatal health, and further that the payments of the expenses were made through banking channel. The relevant portion of the order of the learned CIT(A) is reproduced below:

P a g e | 5 and the payments of the expenses claimed have been made through banking channel, it is held that the expenditure of Rs.2,34,93,962/- under the head ‘Conference and Seminar Expenses’ have been incurred by the appellant for The purpose of it’s object. Therefore, the disallowance of Rs.2,34,93,962/- Made by the Assessing Officer is not sustainable and hereby deleted.

(B.2) The Revenue is in appeal against the aforesaid impugned appellate order of learned CIT(A). At the time of hearing, learned Departmental Representative submitted that the assessee did not furnish any details/explanation during the assessment proceedings. He also submitted that the learned CIT(A) admitted additional evidence, as referred to in paragraph 5.4 of the impugned appellate order of the learned CIT(A). He further submitted that the learned CIT(A) did not provide opportunity to the Assessing Officer to examine the details filed by the assessee during appellate proceedings before the learned CIT(A). He moreover submitted that the additional evidence as referred to in paragraph 5.4 of the impugned appellate order of learned CIT(A), which were admitted by the learned CIT(A), should be subjected to examination and scrutiny of the Assessing Officer. For this purpose, he submitted further, that the disputed matter regarding the disallowance and consequent addition of aforesaid amount of Rs.2,34,93,962/- should be restored back to the file of the Assessing Officer

P a g e | 6 to enable the Assessing Officer to examine the additional evidences filed by the assessee during the appellate proceedings before the learned CIT(A).

(C) We have heard both sides. We have perused the materials on record. We are in agreement with the submissions made by the learned D.R. that the additional evidence filed by the assessee during appellate proceedings before the learned CIT(A) should be subjected to scrutiny and examination by the Assessing Officer. In coming to this conclusion, we are guided by provisions of Rule 46A(3) of the Income Tax Rules, reproduced below for the ease of reference:

Rule 46(A)

(3) The 84[Joint Commissioner] (Appeals) or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity— (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant.

(C.1) Even if the additional evidences were admitted by the learned CIT(A) under Rule 46A(4) of the Income Tax Rules, the learned CIT(A) failed in examining the merits of the additional evidences on his own as well as in getting these evidences examined by the Assessing Officer. The learned CIT(A) merely states that the Assessing Officer has not done any verification of expenses; and that the Assessing Officer has not given a finding that Conference and Seminar Expenses were not organized by the appellant in the state of Uttar Pradesh. However, the learned CIT(A) also failed in doing the same either on his own; or through a remand. The mere fact that the assessee is a non profit organization and the payments have been made through banking channel is not sufficient to establish the genuineness of the P a g e | 7 entire claim of expenses, or to establish that the entire expenses were incurred wholly and exclusively for charitable purposes of the assessee. In view of the foregoing, the dispute regarding the aforesaid addition is restored back to the file of the Assessing Officer with the direction to pass de novo order in accordance with law after taking into consideration all relevant materials including the additional evidence filed by the assessee during the appellate proceedings before the learned CIT(A) and after providing reasonable opportunity to the assessee. regarding imposition of penalty by the Assessing Officer, the same is consequential in nature and the fate of penalty will depend upon the outcome of the order to be passed by learned CIT(A). Accordingly, the impugned orders of the learned CIT(A) is set aside and matter regarding penalty u/s 270A of I. T. Act is also restored back to the file of the Assessing Officer with the direction to pass de novo order in accordance with law after providing reasonable opportunity to the assessee, and after passing de novo assessment order as directed under foregoing paragraph (C.1) of this order.

(E) All the grounds of appeal are treated as disposed of in accordance with our directions contained in foregoing paragraphs (C.1) and (D) of this order.

(F) In the result, for statistical purposes, both appeals are partly allowed.

(Order pronounced in the open court on 05/01/2026)