2012 (10) TMI 283 - AT - Income Tax

Difference of opinion between two members - Reference to Third member to decide whether matter in relation to Charitable Trust is required to be restored back to the file of CIT(A) for a fresh decision - Held that- It is observed that assessee has produced its books of accounts along with names and complete addresses of the donor along with original receipt book of corpus fund before the AO. AO has chosen not to make further inquiry. Additional evidences in form of declaration from donors to the corpus fund had been admitted before the CIT(A). Revenue has not taken any ground of appeal in relation to violation of provision of Rule 46A. In the absence of any specific ground of appeal to the effect, it is held that JM was justified in not restoring back the issue to the file of the CIT(A) for a fresh decision - Decided in favor of assessee. Whether any inquiry was still required to decide the nature of the said corpus fund - Held that - It was for the AO to make or not to make further inquiry in the facts and circumstances of the case with regard to the genuineness of the donation claimed by the assessee-trust to have received by it towards its corpus fund . The Tribunal as a second appellate authority could not direct the AO to make detailed inquiry for the reason that the issue of inquiry is not before the Tribunal - Decided in favor of assessee

Summary

Issues:
1. Restoration of the matter to CIT(A) or Tribunal's decision
2. Requirement of inquiry to decide the nature of "Corpus Fund"
3. Determination of whether the amount constituted the "Corpus Fund"

Analysis:
1. The matter was referred to the Third Member due to a difference in opinion between the Judicial Member (JM) and Accountant Member (AM) of ITAT Ahmedabad Benches. The questions referred by the Hon'ble President included whether the matter should be sent back to CIT(A) for a fresh decision or decided by the Tribunal based on the proposed orders. The Third Member, after considering submissions, found that the issue did not require restoration to CIT(A) as the Revenue did not raise any grounds of appeal regarding the violation of Rule 46A or the admission of additional evidence. Thus, the Third Member sided with the JM's order, concluding in favor of the assessee.

2. The question of whether an inquiry was necessary to determine the nature of the "Corpus Fund" was considered. The Third Member noted that the AO had the discretion to decide the extent of inquiry required. In this case, the assessee had provided detailed account books and receipts where the "Corpus Fund" was clearly identified and signed by trust employees. The AO's failure to conduct further inquiry based on the nature of receipts was deemed inappropriate. The Third Member agreed with the JM's decision, ruling in favor of the assessee and against the Revenue.

3. Regarding the determination of whether the amount constituted the "Corpus Fund," the Third Member relied on the answers to the previous questions. Considering that the CIT(A) had accepted declarations from all 60 donors certifying their donations towards the corpus fund and the Revenue did not challenge this admission, the Third Member concluded that the amount indeed constituted the "Corpus Fund." Therefore, all three questions referred to the Third Member were answered in favor of the assessee, aligning with the JM's orders. The matter was directed to the Division Bench for further proceedings based on the majority view.