2022 (4) TMI 438 - AT - Income Tax

Assessment of trust - donation in corpus fund and in non-corpus fund - addition had been made, observing that no reply had been hitherto received in response to letter issued, on the basis of random selection, in the cases of both, corpus as well as non-corpus donations - HELD THAT - Firstly, the assessee cannot be faulted for non-receipt of replies to letters written by the Assessing Officer directly to the donors. Even the Show Cause Notice issued to the assessee, was issued on 6.12.18, whereas the assessment would have been gotten time-barred on 31.12.18. Assessment Order got passed on 27.12.18. It was, therefore, that at the remand stage that the details, i.e., complete ledger account of the donors in the corpus and other and non-corpus funds, the copies of Receipts and Confirmations from various donors along with their ID proof got to be filed by the assessee again before the AO and that too, on its own accord - Irrespective, the fact remains that all these details were thoroughly examined and verified by the AO, as required by the ld. CIT(A), and it was only on the basis of such verification that the Remand Report, accepting both the corpus as well as non-corpus donations, was furnished by the AO before the ld. CIT(A). No fault of the assessee that the confirmations could not be received by the AO in the original assessment proceedings. It was, rather, that even the time provided by the AO to the assessee for furnishing details was too short, though the assessee had maintained, again, undisputedly, all possible details of all its donors, both the corpus as well as non-corpus, and such details were duly furnished by the assessee, before the AO. The assessee, of its own, had furnished before the Assessing Officer in the assessment proceedings, all information regarding the donors and the donations. AO had not required the assessee to offer an explanation as to why the verification letters issued by the AO had not been confirmed by the donors. Not even a list of the persons to whom verification letters had been issued by the AO, had been given to the assessee. The addition, thus, stood made without confronting the assessee in this regard and thereby violating the basic principles of natural justice and basing the assessment order on the enquiry conducted at the back of the assessee. CIT(A) found, on the basis of the above facts and circumstances, beside the Remand Report of the Assessing Officer, that the assessee had maintained complete details of the donors, indicating their names and addresses and the amount received from each one of them. The Assessing Officer was observed to have conducted necessary verification. The Remand Report submitted by the Assessing Officer was seen to be without any adverse finding in view of the complete details provided and the verification made. Thus it cannot at all be said that the ld. CIT(A) deleted the addition merely on the basis of the affidavit submitted by the assessee. Accordingly, Ground No. 1 raised by the Department carries no merit.

Issues:
1. Deletion of addition (donation in corpus fund and other than corpus fund) by ld. CIT (A) without independent inquiry.
2. Challenge to impugned order by ld. D.R. regarding deletion of donation addition.
3. Verification and acceptance of donations by DCIT(E) and ld. CIT(A).
4. Assessment proceedings time-barred and verification of donors' details.
5. Additional evidence submitted by assessee in appellate proceedings.
6. Remand Report by Assessing Officer on verification of donors.
7. Verification of corpus and non-corpus donors by Assessing Officer.
8. Absence of adverse remarks by Assessing Officer on verification.
9. Addition made without replies from donors and time constraints.
10. Thorough examination and verification of donor details by Assessing Officer.
11. Validity of remand proceedings under Section 250(4) of the I.T. Act.
12. Furnishing of donors' list and confirmations by assessee in remand proceedings.
13. Information provided by assessee in assessment proceedings.
14. Addition made without confrontation and violation of natural justice.
15. Complete details of donors maintained by assessee and verification by Assessing Officer.
16. Grounds for deletion of addition and rejection of Department's appeal.

Analysis:
The judgment involves an appeal by the Revenue against the order of the ld. CIT (A) for the Assessment Year 2016-17. The Revenue challenged the deletion of addition representing donations in corpus and non-corpus funds without independent inquiry. The ld. D.R. contended that the deletion was based solely on the affidavit submitted by the assessee. However, the assessee provided complete details and evidence justifying the donations, which were accepted by the DCIT(E) and the ld. CIT(A). The DCIT(E) verified donations from genuine donors, leading to the deletion of the addition by the ld. CIT(A) based on a thorough enquiry.

In response to time constraints in assessment proceedings, the assessee submitted donor details, ledger accounts, and confirmations in the appellate stage. The ld. CIT(A) admitted this additional evidence for proper consideration. The Assessing Officer provided a Remand Report on verification of donors, reporting complete verification in most cases. No adverse remarks were made by the Assessing Officer, indicating the genuineness of donations.

The ld. CIT(A) upheld the deletion of the addition, emphasizing that the assessee maintained complete donor details and the donations were not anonymous. The judgment highlighted the importance of remand proceedings under Section 250(4) of the I.T. Act to consider additional evidence. The Assessing Officer's verification and acceptance of donor details, along with the absence of confrontation with the assessee during the assessment, led to the rejection of the Revenue's appeal. The judgment concluded that the ld. CIT(A) did not solely rely on the affidavit but conducted a valid enquiry, justifying the deletion of the addition and dismissing the Revenue's appeal.

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