2020 (6) TMI 334 - AT - Income Tax

Expenses on account of construction - Charitable Trust - CIT- A deleted addition - whether CIT(A) erred in admitting additional evidence without offering an opportunity to the Assessing Officer for examining the same, in violation of Rule 46A of the I.T. Rues? - HELD THAT - The objects of the assessee are very clear that the assessee is running various homes for different purposes to run such huge activity various buildings are required, therefore the assessee continuously carrying the construction activity according to the objects of the society, therefore the Assessing Officer without examining the issue and without considering the details filed, simply disallowed the entire expenditure incurred by the assessee is not correct. Further, the assessee started the construction activity in earlier years i.e. A.Ys. 2010-11, 2011-12, 2012-13 2014-15 all the years the AO has allowed the expenditure incurred by the assessee. The only year under consideration, AO without giving proper opportunity has disallowed the expenditure incurred by the assessee is not correct. CIT(A) after examining each and every detail directed the Assessing Officer to delete the addition. Under the above facts and circumstances of the case the ld. CIT(A) has not violated rule 46A of the I.T. Rules and adjudicated the issue after examining all the details. Under these facts and circumstances of the case, we are of the opinion that no remand report is required, for the reason that the expenditure incurred by the assessee is very clear from the records. CIT(A) rightly directed the Assessing Officer to delete the addition. In view of the above, the ld. CIT(A) not violated rule 46A of the I.T. Rules. - Decided against revenue Addition of building expenditure - HELD THAT -The addition made by the Assessing Officer is deleted by the ld.CIT(A) by considering the relevant material available on record, no interference is warranted, therefore same is dismissed. Assessment of trust - Assessee has spent 85% of the gross receipts for charitable purpose - HELD THAT - As per section (11)(1)(a), the income accumulated by the assessee is less than 15%, therefore the entire income of the assessee is exempt u/sec. 11(1) of the Act. We have examined the entire facts and circumstances of the case and find that assessee is running the trust in accordance with the objects. The activities carried by the assessee in running the trust are charitable in nature, the expenditure incurred by the assessee is also a genuine expenditure. CIT(A) after examining the details in respect of expenditure incurred by the assessee gave a finding that the assessee has applied his income more than 85%, therefore as per section 11(1), the entire income of the assessee is exempt. We find no reason to interfere with the order passed by the ld. CIT(A).

Summary

Issues Involved:

1. Whether the CIT(A) erred in allowing the appeal of the assessee.
2. Whether the CIT(A) erred in directing the Assessing Officer to delete the expenditure incurred on construction without calling for a remand report.
3. Whether the CIT(A) erred in admitting additional evidence without offering an opportunity to the Assessing Officer for examining the same, violating Rule 46A of the I.T. Rules.
4. Whether the CIT(A) erred in deleting the addition of ?3,63,96,696/- due to lack of evidence produced by the assessee.
5. Whether the CIT(A) erred in mentioning that the assessee spent 85% of the gross receipts for charitable purposes without evidence filed before the Assessing Officer.

Issue-wise Detailed Analysis:

1. Whether the CIT(A) erred in allowing the appeal of the assessee:

The Revenue contended that the CIT(A) improperly allowed the appeal of the assessee. However, the Tribunal found that the CIT(A) had thoroughly examined the details provided by the assessee and concluded that the expenditure incurred was in line with the charitable objectives of the trust. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

2. Whether the CIT(A) erred in directing the Assessing Officer to delete the expenditure incurred on construction without calling for a remand report:

The Tribunal noted that the CIT(A) had examined all the relevant details regarding the construction expenditure and concluded that the activities were in accordance with the trust's objectives. The CIT(A) found that the payments were made through cheques, and thus, no remand report was necessary. The Tribunal agreed with this assessment, stating that the CIT(A) had not violated Rule 46A of the I.T. Rules, and dismissed the Revenue's appeal on this ground.

3. Whether the CIT(A) erred in admitting additional evidence without offering an opportunity to the Assessing Officer for examining the same, violating Rule 46A of the I.T. Rules:

The Tribunal observed that the CIT(A) had based his decision on the material available on record and had provided sufficient opportunity for the Assessing Officer to examine the details. The Tribunal found that the CIT(A) had not violated Rule 46A and had appropriately directed the deletion of the addition. Therefore, the Tribunal dismissed the Revenue's appeal on this ground.

4. Whether the CIT(A) erred in deleting the addition of ?3,63,96,696/- due to lack of evidence produced by the assessee:

The Tribunal reviewed the assessment order and the CIT(A)'s order, noting that the CIT(A) had examined all the details and found that the construction activities were in line with the trust's objectives. The Tribunal agreed with the CIT(A)'s finding that the Assessing Officer had not properly examined the bills and had relied on an Inspector's report, which was not competent to estimate construction costs. The Tribunal upheld the CIT(A)'s decision to delete the addition, dismissing the Revenue's appeal on this ground.

5. Whether the CIT(A) erred in mentioning that the assessee spent 85% of the gross receipts for charitable purposes without evidence filed before the Assessing Officer:

The Tribunal noted that the assessee's total income for the year was ?16,66,37,767/-, and the expenditure incurred was ?14,82,12,178/-, which was more than 85% of the income. The CIT(A) had examined the details and found that the assessee had applied its income in line with Section 11(1) of the Act. The Tribunal agreed with the CIT(A)'s finding that the entire income of the assessee was exempt under Section 11(1) of the Act and dismissed the Revenue's appeal on this ground.

Cross Objection by the Assessee:

The Tribunal noted that the cross-objection filed by the assessee was supportive of the CIT(A)'s order and found no grievance against it. Therefore, the cross-objection was dismissed as infructuous.

Conclusion:

The Tribunal dismissed both the appeal filed by the Revenue and the cross-objection filed by the assessee, upholding the CIT(A)'s decision. The order was pronounced in open court on June 5, 2020.