2022 (8) TMI 567 - AT - Income Tax

Assessment of trust - addition u/s 68 - unexplained donations - revenue submitted that even during the course of the set aside proceedings, the assessee could neither furnish the correct addresses of the donors, nor produce them before the AO for cross-examination - AO did not issue any fresh summons to the thirteen alleged donors in the remand proceedings, despite the assessee having provided their addresses before the Ld. CIT(A) - HELD THAT - CIT(A), it is seen, has nowhere considered the assessee's contentions. No findings have been recorded on these submissions. Assessing Officer having not summoned the thirteen donors of the assessee during the Remand proceedings, from the addresses provided by the assessee before the CIT(A), AO's Remand Report ought not to have affected the Ld. CIT(A)'s decision adversely to the assessee, particularly when the Ld. CIT(A) too did not deem it proper, for the reasons not evincible from the order under appeal, to so much so as to have taken note of the contentions raised by the assessee in his Rebuttal to the Remand Report, much less deal with them in the impugned order. Rather, the Ld. CIT(A) ought to have directed the Assessing Officer to summon the persons, or to have himself summoned them. Au contraire, the Ld. CIT(A) wrongly endorsed the Assessing Officer's unsustainable finding that the assessee had not provided fresh addresses. Even otherwise, the assessee cannot be said to have gained anything by not providing the addresses of his donors. Rather, in the process, the claim of the assessee remained hanging fire for long years, before the ultimate passing of the order under appeal. We find this to be a fit case where despite the Authorities below erred in not summoning the assessee's donors, the matter requires to be once again remitted to the Assessing Officer to be decided afresh on merit, in accordance with law, after summoning the thirteen donors of the assessee, on affording due and adequate opportunity of hearing to the assessee. The assessee, no doubt, shall cooperate in the fresh proceedings before Assessing Officer. All pleas available under the law shall remain so available to the assessee. Appeal of the assessee is treated as allowed for statistical purposes.

Summary

Issues Involved:
1. Sustaining the addition of Rs. 28,50,000/- by the CIT(A).
2. Failure to appreciate the Khataunies proving the existence of donors.
3. Alleged errors in holding that certain donors failed to appear.

Detailed Analysis:

1. Sustaining the Addition of Rs. 28,50,000/-:
The core issue in this appeal is the confirmation of an addition of Rs. 28,50,000/- by the CIT(A). The assessee, a Charitable Trust registered under section 12A of the Income Tax Act, 1961, filed a return declaring NIL income. The assessment was completed under section 143(3) at an income of Rs. 1,27,46,700/-, with an addition under section 115 BBC. The CIT(A) deleted Rs. 66,46,700/- but confirmed Rs. 61,00,000/-. The Tribunal previously restored the issue concerning thirteen donors to the Assessing Officer (AO) for fresh decision. In remand proceedings, the AO reconfirmed the addition of Rs. 28,50,000/-, which the CIT(A) upheld.

2. Failure to Appreciate Khataunies:
The assessee contended that the AO and CIT(A) erred in not appreciating the Khataunies on record, which proved the existence of donors and fulfilled the mandate of Section 115BBC(3) of the Income Tax Act. The assessee provided addresses of the donors during the remand proceedings, but the AO did not issue fresh summons to the thirteen alleged donors. The Tribunal noted that the AO's failure to issue fresh summons was improper and violated principles of natural justice.

3. Alleged Errors in Holding Donors Failed to Appear:
The assessee argued that the AO and CIT(A) wrongly held that certain donors failed to appear. Specifically, the assessee claimed that Shri Preetam Singh, who donated Rs. 2,50,000/-, appeared before the AO, as evidenced in the assessment order. Similarly, Bhagwant Singh, who donated Rs. 2,50,000/-, was alleged to have not received notice, while other family members appeared. The Tribunal observed that the AO did not summon the donors during remand proceedings, despite the assessee providing their addresses. The Tribunal emphasized the necessity of obtaining specific responses from the Postal Authorities to verify the non-service of notices.

Conclusion:
The Tribunal found that the AO's and CIT(A)'s actions amounted to a violation of natural justice. The AO should have issued fresh summons to the donors to clear doubts. The Tribunal ordered the matter to be remitted to the AO for a fresh decision on merits, after summoning the thirteen donors and providing the assessee with an adequate opportunity of hearing. The appeal was treated as allowed for statistical purposes.