2020 (8) TMI 912 - AT - Income Tax

Exemption u/s. 11 - income from the trust was drawn by the trustee and evidences for the applications were not produced, the AO treated them as violation u/s. 13(1)(c) and hence denied the exemption - assessee incurred capital expenditure, in view of denial of exemption u/s. 11, the A O treated it as non-application of income, however, allowed the depreciation and thus assessed the entire income in the status of AOP at maximum marginal rate - HELD THAT - The assessee is registered u/s. 12(A)(a) as a charitable trust and is running an educational institution. It is not clear from the orders of the lower authorities whether the assessee has submitted all the evidences in support of its claim of exemption and such material were properly appreciated or not. In the facts and circumstances and in the interests of justice, we deem it fit to remit the entire issues back to the AO for a fresh examination. Since, the right to exemption must be established by those who seek it, the onus therefore, lies on the assessee. In order to claim the exemption from payment of income tax, the assessee had to put before the income tax authorities proper materials which would enable them to come to conclusion - Therefore, the assessee shall place all contemporaneous primary as well as secondary evidences in support of its claim before the AO. The AO shall after due verification and after appropriate enquiry, as deemed fit, and after affording adequate opportunity to the assessee, shall pass a speaking order - Assessee s appeal is treated as partly allowed for statistical purposes.

Summary

Issues:
Assessment of exemption u/s. 11 for a charitable trust based on cash withdrawals without proper vouchers.

Analysis:
The appeal was filed against the Commissioner of Income Tax (Appeals) order for the assessment year 2009-10 regarding the denial of exemption u/s. 11 for a charitable trust. The Assessing Officer (AO) observed cash withdrawals by the trustee, which lacked proper vouchers. Consequently, the AO treated it as a violation u/s. 13(1)(c) and denied the exemption. The AO also treated capital expenditure as non-application of income, assessed the income at the maximum marginal rate under the status of AOP, and allowed depreciation. The assessee, a charitable trust, appealed before the CIT(A) challenging the AO's decision.

During the appellate proceedings, the CIT(A) upheld the AO's action, emphasizing the lack of necessary bills/vouchers for expenses incurred from cash withdrawals. Despite the appellant's claims of producing bills/vouchers during assessment, the AO denied their submission. The CIT(A) noted the trustee's withdrawals without proper evidence, leading to the denial of exemption u/s. 11(3) due to violation u/s. 13(1)(c). Dissatisfied, the assessee appealed further.

The case was presented before the Appellate Tribunal, highlighting the trust's charitable nature and the trustee's role in managing the school's finances. The trustee's cash withdrawals were accounted for, but the lack of vouchers for these transactions was a point of contention. The Tribunal noted discrepancies in the lower authorities' handling of evidence and decided to remit the issues back to the AO for a fresh examination. The Tribunal stressed the onus on the assessee to establish the right to exemption by providing proper materials and evidence. The AO was instructed to conduct a thorough verification, make a detailed enquiry, and pass a speaking order after affording the assessee adequate opportunity.

Ultimately, the Tribunal partially allowed the assessee's appeal for statistical purposes, emphasizing the need for proper documentation and evidence to support the claim for exemption. The decision was pronounced on 7th August 2020 in Chennai.