Narayan Netra Trust, Bharuch V. The ITO, Ward Exemption, Vadodara

ITA 387/AHD/2023

AI Insights

Narayan Netra Trust appealed against the order of the National Faceless Appeal Centre (NFAC), which confirmed an addition of Rs. 28,25,819 as unexplained expenditure for the assessment year 2016-17. The Trust argued that this amount was from previous surplus balances and 15% balance accumulation as per sections 11 and 12 of the Income Tax Act. The Assessing Officer had initially added this amount as unexplained expenditure under Section 69C due to discrepancies in reported educational expenses. The CIT(A) partly allowed the appeal but upheld the addition. The Tribunal, after reviewing the evidence, including audited balance sheets and confirmations of borrowings, found that the Trust had substantiated the source of the funds and reversed the CIT(A)'s decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131574 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-09-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 17-05-2023
• Other Referred Cases: CIT vs. Radhika Creations, Command Detective and Securities Pvt. Ltd. Vs. ACIT
• Laws Referred To: Income Tax Act, 1961, Bombay Public Trust Act, 1950
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure
• Section: 12; 69C; 11; 12A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before: Ms. Suchitra Kamble, Judicial Member Narayan Netra Trust, P. Box No. 9, Near Alaknanda Park, PO. Narmada Nagar, Bholav, Bharuch PAN: AAATN6132G (Appellant) Vs ITO, Ward Exemption, Vadodara (Respondent) Assessee by: Shri Samir Parikh, A.R. Revenue by: Ms. Saumya Pandey Jain, Sr. D.R. Date of hearing : 04-09-2023 Date of pronouncement : 13-10-2023 आदेश/ORDER This is an appeal filed against the order dated 26-04-2023 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2016-17. 2. The grounds of appeal are as under:- “1. The Learned CIT (A) has erred in confirming excess income applied of Rs. 28,25,819/- as unexplained expenditure incurred u/s 69C of the Act. 2. Without prejudice to above, Assessee prays that excess expenditure of Rs. 28,25,819/- is from out of previous surplus balance and 15% balance accumulation as per section 11 and 12 of the Act. ITA No. 387/Ahd/2023 Assessment Year 2016-17 I.T.A No. 387/Ahd/2023 A.Y. 2016-17 Page No. Narayan Netra Trust vs. ITO 2 3. The assessee craves leave to add, amend, alter, delete, change or modify any or all grounds of appeal before or at the time of the hearing.” 3. The assessee is a public trust and is registered under Bombay Public Trust Act, 1950. The trust is also registered with Income Tax Department and has obtained registration u/s 12A of the Income Tax Act, 1961 on 21.09.2004. The object of the trust is educational activity by running a school and providing help for medical treatment to the needy people. The assessee trust filed its return of income for A.Y. 2007- 08 in ITR – 7 on 27.03.2017 declaring total income at Rs. NIL. During the year under consideration, the source of income of the trust is interest, school fees and rent income. Trust has shown the gross receipts of Rs. 3,27,79,339/- and applied income of Rs. 3,56,05,158/- for objects of the trust. The Assessing Officer observed that the assessee trust has debited Rs. 2,30,51,283/- towards educational expenses and the same has been claimed in computation of income also. Besides this on verification of schedule of educational expenses, it was observed by the Assessing Officer that total expenditure is of Rs. 2,26,08,973/-. The assessee did not file the reply, thereafter, the Assessing Officer made addition of Rs. 28,25,819/- as unexplained expenditure under Section 69C of the Act. 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. AR submitted that during the course of appellate proceedings before the CIT(A), the assessee trust submitted all necessary documents and made submissions about the source of the so called excess application. The Ld. AR submitted that the assessee Trust’s books of accounts are regularly audited and the source and its application is I.T.A No. 387/Ahd/2023 A.Y. 2016-17 Page No. Narayan Netra Trust vs. ITO 3 duly reflected in the Balance Sheet. The addition under Section 69C can be made only when the expenditure found to be incurred is without any source. When the expenses are recorded in the regular books of accounts which are duly matched, no addition u/s 69C is called for. The Ld. AR relied upon the decision of Hon’ble Delhi High Court in case of CIT vs. Radhika Creations 10 taxmann.com 138 and the order of the Tribunal in case of Command Detective and Securities Pvt. Ltd. Vs. ACIT (ITA No. 4129-4134/Del/2012 order dated 09.10.2015). The Ld. AR further submitted that the assessee trust has borrowed funds from Shri P. D. Shroff Rs. 25,00,000/- and Shri J. D. Panchal Rs. 6,00,000/- being of excess application of income. The assessee trust submitted copy of ledger accounts from its books of account, confirmation from both the parties, copy of acknowledgement of return of income to establish the genuineness, identity and creditworthiness of the amounts received. Thus, the onus was fully established and therefore Section 69C addition is not justifiable. The Ld. AR submitted that both the parties name is shown in Annexure 5 under the head “Current Liabilities” in the audited Balance Sheet. Total amount under the head “Current Liabilities” of Rs. 45,81,117/- includes name of Shri P. D. Shroff Rs. 25,00,000/- and Shri J. D. Panchal Rs. 6,00,000/-. Thus, the Ld. AR submitted that the CIT(A) was not justified in confirming the addition. 6. The Ld. DR submitted that the assessee trust has not mentioned any borrowings in the balance sheet, the contention of the Ld. AR that of borrowed amount from two persons are not justifiable for proving the genuineness and creditworthiness. In fact, it was afterthought which was rightly not accepted by the CIT(A). The Ld. DR relied upon the order the CIT(A). I.T.A No. 387/Ahd/2023 A.Y. 2016-17 Page No. Narayan Netra Trust vs. ITO 4 7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the “Current Liabilities” mentioned in the annexure-5/schedule of the audited balance sheet of the assessee trust clearly mentioned the name of the said two parties. Thus, the observation of the CIT(A) that the said parties are not mentioned in balance sheet in respect of the borrowing is not correct. Besides this, the assessee trust has also given the details of statement of return of income as well as confirmation of those parties where it appears that the creditworthiness and genuineness has been established by the assessee trust. The CIT(A) has totally ignored these evidences. Therefore, the addition confirmed by the CIT(A) as relates to Section 69C does not survive. The appeal of the assessee trust is allowed. 8. In result, appeal of the assessee is allowed. Order pronounced in the open court on 13-10-2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad : Dated 13/10/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद