DCIT (Exemption) Vs Shree Chanakya Education Society (ITAT Pune)
Tribunal raps AO for selective reading – Statement must be considered in entirety- ITAT Pune; Bogus purchases cannot be treated as unexplained credits; No Cross-Examination, No Independent Enquiry – Addition cannot survive
Pune ITAT has dismissed the Revenue’s appeals against a charitable trust registered u/s 12A, in relation to AY 2014–15. Tribunal upheld the order of the CIT(A)/NFAC deleting the addition of ₹1.85 crore made towards alleged bogus purchases as well as penalty levied u/s 271(1)(c).
Assessee trust, engaged in imparting secular education through schools & colleges, filed its return of income for AY 2014–15 declaring NIL income after claiming exemption u/s 11. The case was reopened based on information from the Investigation Wing, New Delhi, that the trust had made fictitious purchases of ₹1.85 crore from a shell entity, M/s Dev Shreem Solutions, allegedly controlled by one Shri Joginder Pal Gupta, a known entry operator.
AO recorded reasons & issued notice u/s 148. During assessment, relying heavily on the investigation report & Gupta’s statement, AO treated the purchases as bogus & made an addition of ₹1.85 crore u/s 68, besides initiating penalty proceedings.
Assessee strongly refuted the allegation & placed several arguments before the authorities. Being a charitable trust, its application of income far exceeded its receipts & for AY 2014–15, total application stood at ₹108.17 crore against income of ₹102.37 crore, resulting in excess application of ₹5.79 crore. Thus, there was no incentive to inflate expenses with bogus bills. AO had not allowed cross-examination of Joginder Pal Gupta, nor carried out independent enquiry to verify bank transactions or genuineness of invoices. Importantly, Gupta in his sworn statement u/s 132(4) had clearly admitted that he started providing accommodation entry bills only from January 2018, whereas the year under scrutiny was 2013–14. It was further argued that if incriminating material was found during search, proceedings should have been initiated u/s 153C & not u/s 147, rendering the reassessment invalid.
