MAHI, Sitamarhi V. ITO-Exemption, Ward-Muz., Muzaffarpur

ITA 35/PAT/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6960 (ITAT-PATNA)
• Duration Of Justice: 2 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 28-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 142(1); 143(2); 144

Judgement Text

ITA NO.35/PAT/2019 A.Y. 20 13-2014 MAHI, SITAMARHI 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA-PATNA E-COURT, KOLKATA [VIRTUAL COURT HEARING] BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT(KZ) I.T.A. NO. 35/PAT/2019 ASSESSMENT YEAR: 2013-2014 MAHI,.............................................. ...........................................APPELLAN T VILL. DOSTPUR, P.O. BARIYARPUR, BLOCK-BATHNAHA, SITAMARHI, BIHAR-843302 [PAN: AABAM1977G] -VS.- INCOME TAX OFFICER,................................ ...............................RESPONDENT EXEMPTION WARD, MUZAFFARPUR, BELA KOTHI, R.K. MISSION ROAD, MYUZAFFARPUR, BIHAR-842005 APPEARANCES BY: N O N E, FOR THE APPELLANT SHRI AJAY KUMAR, JCIT, SR. D.R., FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : SEPTEMBER 06, 202 1 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 06, 2021 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), JAMSHEDPUR DA TED 22.10.2018 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE OF 25% MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) OUT OF ACTIVITIES EXPENSES CLAIMED BY THE ASSESSEE. 2. THE ASSESSEE IN THE PRESENT CASE IS A CHARITABLE INSTITUTION, WHICH RUNS VARIOUS ACTIVITIES OF PUBLIC UTILITY FROM THE INCOME DERIVED FROM DONATIONS, SUBSCRIPTIONS, MEMBERS CONTRIBUTION, GRA NT-IN-AID, MISCELLANEOUS RECEIPTS ETC. THE RETURN OF INCOME FO R THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 23.12.2014 DECLARI NG ITS TOTAL INCOME AT NIL. THE SAID RETURN WAS SELECTED FOR SCRUTINY AN D A NOTICE UNDER SECTION 143(2) WAS ISSUED BY THE ASSESSING OFFICER TO THE A SSESSEE ON 21.09.2015. THERE WAS, HOWEVER, NO COMPLIANCE ON THE PART OF TH E ASSESSEE TO THE SAID ITA NO.35/PAT/2019 A.Y. 20 13-2014 MAHI, SITAMARHI 2 NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTIO N 143(2) OF THE ACT AS WELL AS THE SUBSEQUENT NOTICES ISSUED BY HIM UNDER SECTION 142(1) OF THE ACT. THE ASSESSING OFFICER, THEREFORE, WAS LEFT NO OPTION BUT TO COMPLETE THE ASSESSMENT TO THE BEST OF HIS JUDGMENT ON THE B ASIS OF MATERIAL AVAILABLE ON RECORD. IN THE ASSESSMENT SO COMPLETED UNDER SECTION 144 OF THE ACT VIDE AN ORDER DATED 22.03.2016, THE DISALLO WANCE OF RS.9,93,563/- WAS MADE BY THE ASSESSING OFFICER BEING 25% OF THE TOTAL ACTIVITIES EXPENSES OF RS.39,74,251/- CLAIMED BY THE ASSESSEE BY TREATING THE SAME AS UNVERIFIABLE. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 144 OF THE ACT, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) CHALLENGING THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER OUT OF ACTIVITIES EXPENSES. DURING THE COURSE OF TH E APPELLATE PROCEEDINGS BEFORE THE LD. CIT(APPEALS), THE SUBMISSION WAS FIL ED BY THE ASSESSEE ALONG WITH THE COPIES OF BILLS AND VOUCHERS TO SUPP ORT AND SUBSTANTIATE ITS CLAIM FOR DEDUCTION ON ACCOUNT OF ACTIVITIES EXPENS ES. THE LD. CIT(APPEALS), HOWEVER, DID NOT FIND MERIT IN THE CA SE OF THE ASSESSEE AND PROCEEDED TO CONFIRM THE DISALLOWANCE OF 25% MADE O UT OF ACTIVITIES EXPENSES FOR THE FOLLOWING REASONS GIVEN IN PARAGRA PH NO. 3 OF HIS IMPUGNED ORDER:- 3. AS MENTIONED IN PARA 1 OF THIS ORDER THE ASSESS MENT WAS COMPLETED UNDER SECTION 144 OF THE ACT. THERE IS ON LY ONE ISSUE IN THIS APPEAL THAT AO HAD DISALLOWED 25% OF THE ACTIVITIES EXPENSES CLAIMED AT RS.39,74,251/-, I.E. AN AMOUNT OF RS.9,93,563/- WAS ADDED TO THE TOTAL INCOME OF T HE APPELLANT-ASSESSEE. DURING THE COURSE OF THE APPELL ATE PROCEEDINGS, THE APPELLANT FILED A SUBMISSION ALONG WITH COPIES OF BILLS AND VOUCHERS CLAIMED TO BE FOR THE ACTIVITIES EXPENSES. ON PERUSAL OF SUCH COPIES OF BILLS AND VO UCHERS I FIND THAT THOSE BILLS/VOUCHERS DO NOT APPEAR TO BE GENUI NE. THE LARGEST PART OF THE EXPENSE IS SELF-VOUCHED. EVEN T HE THIRD PARTY BILLS ARE ALL 'KUCHHA' BILLS. NOT A SINGLE BI LL BEARS ANY VAT/TIN NO. OF THE BILL ISSUER. MOST OF THE BILLS D O NOT BEAR ANY PROPER, VERIFIABLE ADDRESS. AND THE MOST IMPORT ANTLY, THE ENTIRE EXPENDITURE IS IN CASH. THEREFORE, AFTER CON SIDERING THE FACTS ON RECORD IT IS HELD THAT AO WAS JUSTIFIED IN DISALLOWING 25% OF THE ACTIVITIES EXPENSES, WHICH RESULTED IN A DDITION OF RS. 9,93,563/- TO THE TOTAL INCOME OF THE APPELLANT -ASSESSEE. ITA NO.35/PAT/2019 A.Y. 20 13-2014 MAHI, SITAMARHI 3 HENCE, THE APPELLANT'S GROUNDS ARE DISMISSED AND TH E ACTION OF THE AO IS UPHELD. ACCORDINGLY, THE ADDITION OF RS. 9,93,563/ - IS CONFIRMED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING FIXED IN THIS CASE TODAY, NONE HAS APPEARED ON BEHALF OF THE ASSESSEE. IT IS NOTED THAT THERE W AS A SIMILAR NON- COMPLIANCE ON THE PART OF THE ASSESSEE WHEN ITS APP EAL WAS FIXED FOR HEARING EARLIER ATLEAST ON FIVE OCCASIONS. THIS APP EAL OF THE ASSESSEE, THEREFORE, IS BEING DISPOSED OF EX-PARTE AFTER HEAR ING THE ARGUMENTS OF THE LD. D.R. AND CONSIDERING THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT EVEN THOUGH THERE WAS NO COMPLIANC E ON THE PART OF THE ASSESSEE TO THE NOTICES ISSUED BY THE ASSESSING OFF ICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS RESULTING INTO DISALLOWAN CE OF 25% OUT OF ACTIVITIES EXPENSES AS MADE BY THE ASSESSING OFFICE R IN THE ASSESSMENT COMPLETED UNDER SECTION 144 OF THE ACT, COPIES OF B ILLS AND VOUCHERS TO SUPPORT AND SUBSTANTIATE THE EXPENSES CLAIMED BY IT ON ACCOUNT OF ACTIVITIES WERE PRODUCED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) DURING THE COURSE OF APPELLATE PROCEEDINGS. THE LD. CIT(APPEALS), HOWEVER, FOUND THAT THE ACTIVITIES EXPENSES CLAIMED BY THE ASSESSEE WERE MAINLY SELF-VOUCHED AND THE SAME WERE INCURRED IN C ASH. HE, THEREFORE, HELD THAT THE ACTIVITIES EXPENSES CLAIMED BY THE AS SESSEE WERE NOT FULLY VERIFIABLE AND THE DISALLOWANCE OF 25% MADE BY THE ASSESSING OFFICER OUT OF SUCH EXPENSES WAS CONFIRMED BY HIM. AS SUBMITTED ON BEHALF OF THE ASSESSEE IN THE GROUNDS FILED BEFORE THE ITAT, IT I S A NON-PROFIT SEEKING ORGANIZATION, WHICH IS DOING WORK FOR THE BENEFIT O F THE RURAL PEOPLE OF REMOTE VILLAGES. IT IS SUBMITTED THAT THE ASSESSEE S CHARITABLE WORKS WERE MAINLY SPREAD TO REMOTE VILLAGES WHERE THERE WERE N O BASIC FACILITIES AVAILABLE LIKE BANKS, REGULAR SHOPS, REGULAR MEANS OF TRANSPORTATION ETC. IT IS SUBMITTED THAT IT WAS, THEREFORE, DIFFICULT T O GET REGULAR VOUCHERS/BILLS FOR THE ACTIVITIES EXPENSES INCURRED BY THE ASSESSEE AND ITA NO.35/PAT/2019 A.Y. 20 13-2014 MAHI, SITAMARHI 4 THE SAID EXPENSES, THEREFORE, WERE SUPPORTED BY SEL F-MADE VOUCHERS. IT IS ALSO SUBMITTED THAT THE ACCOUNTS OF THE ASSESSEE WE RE DULY AUDITED BY THE CHARTERED ACCOUNTANT AS PER THE INCOME TAX LAW AND THE ACTIVITIES EXPENSES CLAIMED BY THE ASSESSEE WERE PROPERLY VERI FIED BY THE AUDITOR. KEEPING IN VIEW ALL THESE RELEVANT FACTS OF THE CAS E AND HAVING REGARD TO THE NATURE OF THE ACTIVITIES OF THE ASSESSEE, WHICH IS MAINLY FOR THE BENEFIT OF THE RURAL PEOPLE OF REMOTE VILLAGES, I AM OF THE VIEW THAT THE DISALLOWANCE OF 25% MADE BY THE ASSESSING OFFICER A ND CONFIRMED BY THE LD. CIT(APPEALS) OUT OF ACTIVITIES EXPENSES FOR NON -VERIFIABLE ELEMENT INVOLVED THEREIN IS ON THE HIGHER SIDE. EVEN THE LD . D.R. HAS NOT BEEN ABLE TO RAISE ANY MATERIAL CONTENTION TO REBUT OR CONTRO VERT THIS POSITION. I, THEREFORE, CONSIDER IT FAIR AND REASONABLE TO RESTR ICT THE DISALLOWANCE OF 25% MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) OUT OF ACTIVITIES EXPENSES TO 10%. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 06, 2021. SD/- (P.M. JAGTAP) VICE-PRESI DENT KOLKATA, THE 6 TH DAY OF SEPTEMBER, 2021 COPIES TO : (1) MAHI, VILL. DOSTPUR, P.O. BARIYARPUR, BLOCK-BATHNAHA, SITAMARHI, BIHAR-843302 (2) INCOME TAX OFFICER, EXEMPTION WARD, MUZAFFARPUR, BELA KOTHI, R.K. MISSION ROAD, MUZAFFARPUR, BIHAR-8 42005 (3) COMMISSIONER OF INCO ME TAX (APPEALS), JAMSHE DPUR, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETA RY/DDO INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.