2020 (7) TMI 594 - AT - Income Tax

Violation of rule 46A - CIT-A deleted addition without giving opportunity to the AO and seeking remand report - HELD THAT - CIT(A) after examining each and every detail directed the AO to delete the addition. CIT(A) has not violated rule 46A of the I.T. Rules and adjudicated the issue after examining all the details. 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. Therefore, the ld. CIT(A) rightly directed the Assessing Officer to delete the addition. Expenditure incurred on construction, based on the submissions made by the assessee - 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. Exemption u/s 11 - expenditure to the extent of 85% - HELD THAT - It is very clear that assessee s total income for the year under consideration is ₹ 16,66,37,767/-, the expenditure of the assessee is ₹ 14,82,12,178/- the assessee has spent more than 85% of the income for the year under consideration. 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). 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).

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, in violation of 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)'s order is perverse as it mentions that the assessee spent 85% of the gross receipts for charitable purposes without evidence.

Detailed Analysis:

Issue 1: Allowing the Appeal of the Assessee
The Revenue contended that the CIT(A) erred in allowing the appeal of the assessee. The Tribunal noted that the CIT(A) examined all the details and directed the Assessing Officer to delete the addition made. The CIT(A) found that the construction activity was in line with the objects of the assessee trust and that the expenditure was incurred through cheque payments.

Issue 2: Deleting Expenditure without Remand Report
The Revenue argued that the CIT(A) directed the deletion of expenditure without calling for a remand report. The Tribunal observed that the CIT(A)'s findings were based on the material available on record. The assessee had provided details of the construction costs, which were paid through cheques. The Tribunal found that the Assessing Officer had not given the assessee sufficient time to furnish all details and had based his decision on the Inspector's report, which was not competent to estimate construction costs. The Tribunal concluded that the CIT(A) did not violate Rule 46A of the I.T. Rules and rightly directed the deletion of the addition.

Issue 3: Admitting Additional Evidence without Opportunity to Assessing Officer
The Revenue claimed that the CIT(A) admitted additional evidence without offering an opportunity to the Assessing Officer to examine it, violating Rule 46A. The Tribunal noted that the CIT(A) examined the details and found that the construction activity was genuine and in line with the trust's objectives. The Tribunal held that the CIT(A) did not violate Rule 46A as the expenditure was clear from the records, and no remand report was necessary.

Issue 4: Deleting Addition of ? 3,63,96,696/-
The Revenue contended that the CIT(A) erred in deleting the addition of ? 3,63,96,696/- due to lack of evidence. The Tribunal reiterated that the CIT(A) had thoroughly examined the details and found the construction activity to be genuine. The Assessing Officer's addition was based on the Inspector's report, which was not a competent estimate. The Tribunal upheld the CIT(A)'s decision to delete the addition.

Issue 5: Order Mentioning 85% Expenditure for Charitable Purposes
The Revenue argued that the CIT(A)'s order was perverse as it mentioned that the assessee spent 85% of the gross receipts for charitable purposes without evidence. The Tribunal noted that the assessee's total income for the year was ? 16,66,37,767/-, and the required expenditure was ? 14,16,42,102/-. The assessee incurred ? 13,25,14,186/- excluding depreciation, and including depreciation, the expenditure was ? 14,82,12,178/-, which exceeded the required 85%. The Tribunal found that the assessee's activities were charitable, and the expenditure was genuine. The CIT(A) correctly concluded that the entire income was exempt under section 11(1) of the Act.

Cross Objection by the Assessee:
The cross objection filed by the assessee was supportive of the CIT(A)'s order and was dismissed as infructuous.

Conclusion:
The Tribunal dismissed the Revenue's appeal and the assessee's cross objection, upholding the CIT(A)'s order in favor of the assessee. The Tribunal found no reason to interfere with the CIT(A)'s findings, which were based on the material on record and in accordance with the law.

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