2022 (2) TMI 341 - AT - Income Tax

Assessment of trust - Disallowance of 25% addition of expenses of the audited accounts - Assessment completed under scrutiny assessment and orders under section 143(3) passed - assessee was taken up for complete scrutiny on the ground of large profits or gain from business or profession in the case of trust - HELD THAT - During the assessment proceedings one Shri Ram Kumar Gupta, CA/AR of the Trust appeared and filed written submission. It was recorded by the Assessing Officer that the assessee had been non-cooperative and there was no effective representation on behalf of the assessee and due to non-cooperation of assessee assessment for assessment year 2013-14 was also completed u/s 143(3)/144. From the finding of the authorities below it can be inferred that the assessee did not file requisite details as called for except certain details. In the absence of the requisite details, supporting the claim of the assessee, no reason to interfere into the decision of the authorities below. The grounds raised in the appeal are dismissed.

Summary

Issues:
1. Adhoc disallowance of 25% addition of expenses
2. Non-cooperation of assessee leading to dismissal of appeal
3. Lack of representation before assessing authority and CIT(A)

Analysis:

Issue 1: Adhoc disallowance of 25% addition of expenses
The assessee appealed against the order confirming the adhoc disallowance of 25% addition of expenses, arguing that the disallowance was made without verifying the facts and details submitted to the Commissioner of Income Tax (Appeals). The appellant contended that the disallowance was unjustified as the NGO's accounts were duly audited, and there was no basis for the adhoc rate of 25%. The Commissioner of Income Tax (Appeals) confirmed the disallowance, stating that the appellant did not provide necessary details during the appellate proceedings. However, the Assessing Officer failed to provide a cogent basis for the disallowance, and no evidence of bogus expenditure or shortcomings in vouchers was presented. The Tribunal held that the estimated addition of 25% without any basis could not be sustained, citing the case law of ITO vs. Lake Palace Hotels and Motels (P) Ltd. 13 TTJ (JP) 216.

Issue 2: Non-cooperation of assessee leading to dismissal of appeal
The Tribunal noted that the assessee failed to appear on multiple occasions despite receiving notices and opportunities for representation. The appellant did not attend hearings fixed on various dates, leading to the appeal being decided based on the material on record. The Tribunal considered the lack of cooperation from the assessee in the assessment proceedings, where the Assessing Officer noted non-cooperation and lack of effective representation by the assessee. Due to the absence of requisite details supporting the claim of the assessee, the Tribunal upheld the decision of the authorities below and dismissed the grounds raised in the appeal.

Issue 3: Lack of representation before assessing authority and CIT(A)
The case involved a trust registered under sections 12A and 80G(vi) of the Income-tax Act, 1961, which underwent complete scrutiny due to large profits or gains from business or profession. Despite opportunities, the assessee did not provide effective representation before the Assessing Officer and the Commissioner of Income Tax (Appeals). The lack of cooperation and non-provision of supporting evidence led to the dismissal of the appeal by the authorities. The Tribunal considered the failure of the assessee to submit requisite details and represent their case effectively, resulting in the dismissal of the appeal.

In conclusion, the Tribunal upheld the decision to dismiss the appeal due to the lack of cooperation and non-provision of necessary details by the assessee, leading to the confirmation of the adhoc disallowance of 25% addition of expenses without a proper basis.