2014 (3) TMI 361 - AT - Income Tax

Assessment of income against declared loss Held that - First appellate authority has upheld the additions made by the Assessing Officer on the ground that the assessee has not provided details of expenditure incurred by the assessee-trust on various activities undertaken to achieve its aims and objects and even no details of purchase and expenditure has been submitted before the Assessing Officer as well as before the learned first appellate authority there is no need for interference in the well-reasoned order passed by first appellant authority Decided against Assessee. Income of trust treated as business income Rejection of applicability of exemption of income u/s 11 of the Act Held that - The decision in Assistant Commissioner of Income Tax, Circle-V, Amritsar Vs. Amritsar Improvement Trust 2013 (10) TMI 745 - ITAT AMRITSAR followed - the details furnished by the assessee pertain to the expenditure incurred in respect of various residential/commercial schemes floated by the assessee trust from time to time and perusal of the activities undertaken by the Amritsar Improvement Trust reveals that except for acquiring land and developing the same into residential/commercial projects like any other private builder have done little for achieving the aims and objectives for which it is created - the income of the assessee from various activities does not qualify for exemption under Section 11 of the Act and the same is brought to tax as income from business, as per provision of Income Tax Act, 1961 Decided against Assessee. Deletion made on account of difference in value of unallotted properties understatement of assets Held that - The first appellant authority has passed a well-reasoned order and no interference is called for in the order the addition made on account of variation in the value of unallotted property is upheld - once the payment has been made it was required that the properties purchased through the process of compulsory acquisition, the same ought to have been accounted for on the receipt side thus, the first appellate authority has rightly upheld the addition made on account of understatement of the assets Decided against Assessee.

Issues Involved:
1. Validity of the assessment of income at Rs. 8,39,18,160 against declared loss of Rs. 594.92 lacs.
2. Applicability of exemption under Section 11 of the Income Tax Act, 1961.
3. Legality of the special audit directions under Section 142(2A).
4. Adequacy of the opportunity provided to the assessee for representation.
5. Validity of the additional grounds raised by the assessee.
6. Confirmation of additions made by the Assessing Officer for the assessment year 2005-06.

Issue-wise Detailed Analysis:

1. Validity of the Assessment of Income at Rs. 8,39,18,160 Against Declared Loss of Rs. 594.92 Lacs:
The assessee's ground that the CIT(A) erred in upholding the assessment at an income of Rs. 8,39,18,160 against the declared loss of Rs. 594.92 lacs was dismissed. The Tribunal noted that the CIT(A) upheld the additions made by the Assessing Officer, citing that the assessee did not provide details of expenditure incurred on various activities. The Tribunal found no reason to interfere with the CIT(A)'s well-reasoned order.

2. Applicability of Exemption Under Section 11 of the Income Tax Act, 1961:
The Tribunal held that the facts and circumstances of the assessment years 2004-05 and 2005-06 were similar to those of the assessment years 2006-07 and 2007-08, where the exemption under Section 11 was denied. The Tribunal reiterated that the assessee's activities were akin to those of a private developer and did not qualify for exemption under Section 11. The Tribunal upheld the CIT(A)'s decision to assess the income as business income.

3. Legality of the Special Audit Directions Under Section 142(2A):
The assessee contended that the directions for a special audit under Section 142(2A) were given mechanically without application of mind. However, the Tribunal found that the CIT(A) had considered the special audit report and the discrepancies pointed out therein. The Tribunal upheld the CIT(A)'s decision, noting that the special audit was justified given the complexities and discrepancies in the assessee's accounts.

4. Adequacy of the Opportunity Provided to the Assessee for Representation:
The assessee argued that it was not given a proper and reasonable opportunity to present its case. The Tribunal, however, found that the assessee had been given multiple opportunities to furnish the required details and explanations but failed to do so. The Tribunal upheld the CIT(A)'s decision, noting that the assessee's non-cooperation justified the conclusions drawn by the Assessing Officer and the CIT(A).

5. Validity of the Additional Grounds Raised by the Assessee:
The Tribunal admitted the additional grounds raised by the assessee, citing the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT. The Tribunal found the additional grounds to be legal and arising from the impugned order, and thus proceeded to decide these grounds along with other grounds raised by the assessee.

6. Confirmation of Additions Made by the Assessing Officer for the Assessment Year 2005-06:
The Tribunal upheld the CIT(A)'s decision to confirm the additions made by the Assessing Officer, including the addition of Rs. 50,11,13,788 on account of variation in the value of unallotted property and Rs. 23,42,92,045 on account of understatement of assets. The Tribunal found that the CIT(A) had correctly applied the principles of accounting and the matching concept, and that the additions were justified based on the special audit report and the facts of the case.

Conclusion:
The Tribunal upheld the CIT(A)'s decisions and dismissed both appeals filed by the assessee for the assessment years 2004-05 and 2005-06. The Tribunal found that the CIT(A) had passed well-reasoned orders after considering all relevant facts and legal provisions, and no interference was warranted.

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