ITO Vs Market Halai Memon Jamat (ITAT Mumbai)
Audit Alone Not Enough for Section 11 Claim – ITAT Restores Matter for Evidence Verification
Mumbai ITAT held that mere reliance on audited books and Form 10BB is insufficient to substantiate application of income by a charitable trust.
The assessee-trust had claimed application of income of ₹1.55 crore towards its objects, but failed to produce supporting evidence (invoices, bills, vendor details, etc.) during assessment. The AO, therefore, made an addition by denying the claim.
The CIT(A) deleted the addition solely on the ground that the books were audited, terming the AO’s action arbitrary.
The Tribunal disagreed, observing that:
- Audit does not replace the requirement of verification of actual application of income
- Claims under Section 11 must be backed by documentary evidence
- No supporting proof was produced even at appellate stage
However, considering the long-standing charitable nature of the trust, the ITAT granted one more opportunity.
Accordingly, the issue was restored to the AO for fresh adjudication, directing the assessee to substantiate the application of income with proper evidence. The Revenue’s appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The Revenue has filed the present appeal against the impugned order dated 07.11.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2023-24.
