M/s Babu Har Govind Dayal Trust, Lucknow V. Inocme Tax Officer-(Exemption), Lucknow

ITA 301/LKW/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2174 (ITAT-LUCKNOW)
• Duration Of Justice: 4 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 12-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARISH GIDWANI
• Keywords: Charitable institution; Principle of natural justice; Set aside
• Section: 27; 12A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “A”, LUCKNOW BEFORE SHRI. A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA No.301/LKW/2018 Assessment Year: 2009-10 M/s Babu Har Govind Dayal Trust 26/1-G, Wazir Hasan Road Near Gokhle Marg Lucknow v. The ITO (Exemption) Lucknow TAN/PAN:AABTB2939E (Appellant) (Respondent) Appellant by: Shri A. P. Sinha, Advocate Respondent by: Shri Harish Gidwani, D.R. Date of hearing: 06 07 2022 Date of pronouncement: 28 07 2022 O R D E R PER A.D. JAIN, V.P.: This is assessee’s appeal against the order of the ld. CIT(A) – 4, Lucknow, dated 7.2.2018 for Assessment Year 2009- 10, raising the following grounds of appeal: 1. The ld. CIT(A)-II, Lucknow erred while sustaining the addition of Rs.28,50,000/-. 2. The ld. CIT(A)-II, Lucknow erred while not appreciating the Khataunies on record which proves the existence of donors and fulfills the mandate of Section 115BBC(3) of the Income Tax Act. 3. The assessee has also raised Additional Grounds of Appeal, which read as under: Page 2 of 11 1. Because the learned A.O. as well as the CIT (A), Lucknow have erred in holding that the assesse had failed to produce Shri Preetam Singh whereas the said Preetam Singh s/o Pooran Singh who had donated a sum of Rs.2,50,000/- had appeared and was also cross examined as is evident from para no. (VI) at page 15 of the order dated 29.12.2011 rendering the addition so made by the A.O as approved by the learned CIT (A) illegal and liable to be deleted. 2. Because the learned A.O. and the CIT (A), Lucknow have erred in wrongly recording, contrary to the factual position that Bhagwant Singh son of Pargat Singh r/o 244/28, Yahiyaganj, Lucknow who had given a donation of Rs.2,50,000/- had failed to appear in as much as he had apparently no notice in as much as the other family members including his own real elder brother and father had all appeared as is evident from a perusal of serial no. 16 of the order dated 29.12.2011 and as such the presumption drawn that the absence of Bhagwant Singh was deliberate is palpably erroneous and unsustainable. 4. At the outset, the ld. Counsel for the assessee has contended that he wishes to withdraw Ground no.2 originally raised in the Grounds of appeal as well as the Additional Grounds. Therefore, Ground no.2 as well as the Additional Grounds raised by the assessee are rejected as withdrawn. Now we are left with only Ground no.1, challenging the order of the ld. CIT(A) in sustaining the addition of Rs.28,50,000/-. 5. The brief facts of the case are that the assessee is a Charitable Trust registered under section 12A of the Income Tax Act, 1961; that the return of income for the year under consideration was filed on 21.7.2010, declaring NIL income; that the assessment was completed under section 143 (3) of the Act at Page 3 of 11 an income of Rs.1,27,46,700/- after making addition under section 115 BBC of the Act; that aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld. CIT(A), who deleted the addition of Rs.66,46,700/- and confirmed the addition of Rs.61,00,000/-; that aggrieved by the order of the ld. CIT(A), the assessee as well as the Revenue filed cross appeals before the Lucknow Bench of the Tribunal; and that the Tribunal, vide its order dated 30.7.2015 dismissed the appeal filed by the Department challenging the deletion of addition, whereas the matter relating to the issue in respect of thirteen donors was restored to the file of the Assessing Officer for a fresh decision. In the remand proceedings, the Assessing Officer reconfirmed the addition of Rs.28,50,000/-. The ld. CIT(A), vide the impugned order, upheld the order of the Assessing Officer. 6. Aggrieved, the assessee is in appeal before us. The ld. Counsel for the assessee has submitted that the Assessing Officer as well as the CIT (A) have erred in holding that the assesse had failed to produce Shri Preetam Singh, whereas the said Preetam Singh s/o Pooran Singh, who had donated a sum of Rs.2,50,000/-, had appeared before the Assessing Officer, as is evident from para no. 3.2.9 (vi) at page 15 of the Assessment Order dated 29.12.2011; that therefore, the observation that service of notice could not be made on Preetam Singh, Son of Puran Singh, is not correct; that likewise, in the name of Bhagwant Singh, Son of Pargat Singh, R/o 244/28, Yahiaganj, Lucknow, donation amount of Rs.2,50,000.00 is appearing at Sl. No. 16 of the Assessment Order dated 29.12.2011; that he is the real brother of Sajjan Singh, S/o Pargat Singh, who had appeared and his statement was also recorded, which is appearing at Page No. 13 of the Page 4 of 11 Assessment Order dated 29.12.2011; and that the addresses of all the thirteen donors originally given during the course of assessment proceedings, are correct and complete. The prayer of the ld. Counsel for the assessee was that, considering the above facts, the matter be restored to the file of the Assessing Officer for providing another opportunity to the assessee. 7. The ld. D.R., on the other hand, placing reliance on the orders of the authorities below, 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 Assessing Officer for cross-examination; and that therefore, no interference is called for in the order of the ld. CIT(A), who has rightly confirmed the order of the Assessing Officer. 8. Heard. It is evident from the Remand Report sent by the Assessing Officer to the ld. CIT(A), that the Assessing Officer 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), notwithstanding the fact that the service of notice on these persons, at the addresses provided by the assessee in the original assessment proceedings, could not be effected at that time. 9. Before us, from the assessee’s side, an affidavit has been filed, wherein, it has, inter alia, been stated that: “6. That the Assessing Officer on account of non-appearance of some of the donors in respect of whom the postal authority (postman) had made an endorsement that they were not available at the given address; and in a couple of cases that the address was incomplete, drew an adverse inference even without examining or cross examining the postal authority. Page 5 of 11 No presumption can be drawn without ascertaining the veracity of the report submitted by the postman and sine qua nan for drawing an inference against the Assessee was establishment of the fact that those who had not appeared had been duly served by the postal authorities and that the summons issued by the Assessing Officer had duly been received by them. 7. That instead of making a determination and ascertainment regarding the service of notice of summons upon those who had not appeared, the Assessing Officer proceeded to make an assessment by drawing an adverse inference against the Assessee. The total amount of donation made by 13 donors is about Rs.28,50,000. 8. That the decision of the Assessing Officer was subjected to appeal and the Hon'ble Appellate Tribunal vide an order dated 30.07.2015 required furnishing of fresh and complete addresses of those who could not be served-or in the alternative to produce them in person. 9. That the addresses were accordingly furnished but it appears that no effort was made for service of notice upon the donors who could not be served as per the endorsement made by the postal department. No effort was also made by the Assessing Officer to examine the postal authorities to ascertain as to whether the addressees could be actually served or not. 10. That the addresses which had been provided afresh are on record and have been confirmed to be the same addresses on which the summons had initially been issued. 11. That as a majority of the addressees had been served and in response to the summons they had also appeared before the Assessing Officer and adequately deposed regarding the donations having been made by them, it was incumbent upon the Assessing Officer to have ascertained as to whether the postal authorities had actually endeavoured to serve the addressees or not. Page 6 of 11 12. That in so far as the direction regarding production of the donors is concerned, it is submitted that the majority of the donors who had appeared before the Assessing Officer had been subjected to indignities and harassment by the Assessing Officer and were also made to wait outside the office of the Assessing Officer throughout the day. In view of the extreme harassment, which was duly communicated to the rest of the persons, even those who could not be formally served but derived knowledge, refused to appear before the Assessing Officer to avoid indignities and harassment. They have also refused to respond to any summons issued by the Income Tax Department in view of the harassment meted out to the donors and have declined to appear in person. 13. That in view of the submissions made above the Assessing Officer was under an obligation to ensure that the postal authorities had taken due steps for service of summons on those who had failed to appear and having failed to do so, it was imperative to have carried out the necessary exercise upon confirmation of the addresses to be correct. However, the same not having been done has resulted in grave miscarriage of justice. In the circumstances the appeal is liable to be allowed.” 10. In this regard, it is seen that in the original assessment proceedings, the summons issued by the Assessing Officer to the thirteen donors of the assessee were returned by the postal authorities with the remarks “diye pate par nahin” in five cases, “adhoora pata” in four cases, “is naam ka koi nahin” in three cases and “ baar baar talaash karne par pata sahi nahin mila” in one case (Original Assessment Order dated 29.12.2011, page 11, para 3.2.6). No reason for non-service like “left without address” has been communicated by the Postal Department. The comments from the Postal Department, as above, raised doubts regarding the genuineness or whereabouts of the person to whom Page 7 of 11 the letter was sent. “Left without address”, on the other hand, shows that it was found that the person to whom the letter was addressed, was present at the place, but has left without further intimation to the Post Office about his new address. As such, in order to understand the evidence, a specific response ought to have been obtained by the Assessing Officer from the Postal Authorities. Else, it does not stand established that the donor/lender is a bogus entity or a nonexistent entity, or that their identity has not been proved. 11. The procedure for service by post is governed by section 27 of the General Clauses Act, 1897. This provision reads as follows: “Meaning of service by post. — Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression “serve” or either of the expressions “give” or “send” or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.” 12. Thus, evidently, the requirement for valid service by post, in accordance with the afore-quoted Section 27 of the General Clauses Act, 1897 are: (i) Properly addressing, (ii) Pre-paying, and (iii) Sending by Registered Post/Speed Post with Acknowledgement Due. Page 8 of 11 13. The service is effected when the letter is delivered in the ordinary course by post, through either Registered Acknowledgement Due, or Speed Post. Once the letter has been properly addressed, the postage stamp charges have been prepaid and it has been posted either by Registered Acknowledgement Due Post, or through Speed Post, it is presumed that the delivery of the letter has been effected. It would be the assessee’s onus to prove otherwise. In case the letter comes back with the postal remark “refused”, it would have the very same effect of a valid service. On the contrary, if the addressee of the letter denies such refusal on oath, the postman would have to be examined. Per contra, in case the letter is returned with the postal remark “left”, or “not found”, or “unknown”, there would be no case for presumption of valid service. It goes without saying, however, that the presumption under section 27 of the General Clauses Act, 1897, is a rebuttable one. Where the letter/notice is not served on the addressee, the presumption that the usual course of the post was followed through evidence of the postman, would not be available, unless it specifically highlights the reason for the non- service of the notice, why it was returned and what the remarks of the postman were. In the absence of such postal remark, specific in nature, having been made available to the addressor, drawing adverse inference against them, would clearly be violative of the principles of natural justice. 14. The Hon'ble’ble Supreme Court in the case of ‘C. C. Alavi Haji vs. Palapetty Muhammed and Another’, 2007 (6) SCC 555, inter alia, held that: “Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by Page 9 of 11 registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. This Court has already held that when a notice is sent by registered post and is returned with a postal endorsement ‘refused’, or ‘not available in the house’, or ‘house locked’, or ‘shop closed’, or ‘addressee not in station’, due service has to be presumed, [Vide Jagdish Singh v. Natthu Singh: AIR 1992 SC 1604; State of M.P. vs. Hiralal and Ors.: (1966) 7 SCC 523 and V. Raja Kumari V. P. subbarama Naidu and Anr.: (2004) 8 SCC 774].” 15. The Assessing Officer, in the remand proceedings, did not deem it appropriate to issue fresh summons to the alleged donors of the assessee, as indicated above. This, to us, was not proper. It amounted to nonsuiting the assessee neck and crop, i.e., summarily without following the principles of natural justice. The Assessing Officer, as such, in the Remand proceedings, should have issued summons to the thirteen donors of the assessee, so as to clear the doubt. The Assessing Officer, it goes without saying, is all powerful and issuing such summons could not have caused any harm to the Department. Rather, it would have made the things crystal clear. 16. Before the ld. CIT(A), the assessee filed Rebuttal dated 13.11.2017 to the Assessing Officer’s Remand Report dated 23.10.2017. Therein, the assessee contended, inter alia, as follows: Page 10 of 11 “..............The appellant filed the same address before the ld. CIT(A) because these were the authentic addresses. It was only because of postal remark that the persons are not traceable it cannot be held to be non-genuine. The contention of the appellant gets strength by filing the Khataunies of respective donors. Names and addresses given in Khataunies cannot be denied...............” 17. The ld. CIT(A), it is seen, has nowhere considered the assessee’s contentions. No findings have been recorded on these submissions. The Assessing Officer having not summoned the thirteen donors of the assessee during the Remand proceedings, from the addresses provided by the assessee before the ld. CIT(A), the Assessing Officer’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. 18. 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. 19. In the above peculiar facts and circumstances, we find this to be a fit case where despite the Authorities below erred in not Page 11 of 11 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. Ordered accordingly. 20. In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on 28/07/2022. Sd/- Sd/- [T. S. KAPOOR] [A. D. JAIN] ACCOUNTANT MEMBER VICE PRESIDENT DATED:28/07/2022 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar