Case Law Details
Radha Mohan Education Charitable Trust Vs ITO (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT) Ahmedabad recently set aside an order passed under Section 144 of the Income Tax Act in the case of Radha Mohan Education Charitable Trust vs. ITO. The appeal was filed by the assessee challenging an assessment order that resulted from notices sent to an incorrect address.
The appeal concerns the assessment year 2017-18, where the assessee trust, Radha Mohan Education Charitable Trust, contested the addition of Rs. 1,34,87,426 made by the Assessing Officer (AO) under Section 69A of the Income Tax Act. The AO had made this addition on the grounds of unexplained cash deposits during the demonetization period and cheque deposits, which the assessee claimed were genuine borrowings.
Background of the Case
The issue began with the issuance of a notice under Section 142(1) of the Income Tax Act, calling upon the trust to submit a true and correct return of income for the assessment year 2017-18. The notice was sent on March 8, 2018, with a deadline to submit the return by April 7, 2018. However, the trust failed to file the return within the stipulated time or in response to the notice.
In response to the non-compliance, the AO invoked Section 144 of the Income Tax Act, which allows for a best judgment assessment in cases where the taxpayer fails to respond to statutory notices. The AO added a sum of Rs. 1,34,87,426 to the trust’s income as unexplained money under Section 69A. This included Rs. 4,90,000 deposited in cash during the demonetization period and further amounts reflected in the bank statement.
Assessee’s Contentions
The assessee contested the assessment order, arguing that the notices were not properly served. According to the Authorized Representative (AR) of the trust, the physical notices were sent to an incorrect address in Mehsana, while the correct address was in Sabarkantha. Additionally, the online notices were sent to an outdated email address associated with a former trustee, leading to further miscommunication.
The AR further contended that the trust had filed an appeal physically before the Commissioner of Income Tax (Appeals) [CIT(A)], but due to the lack of access to the trust’s online portal, it could not respond electronically. The trust explained that the notices were inadvertently received by one of the trustee’s sons, who failed to communicate them to the appropriate person.
In light of these circumstances, the trust requested that the matter be remanded back to the AO for reconsideration, allowing for the submission of additional evidence to clarify the discrepancies in the notices and the assessment.
Revenue’s Stand
The Departmental Representative (DR) argued in favor of the assessment order, asserting that the additions made under Section 69A were valid and justified. The DR pointed to the trust’s failure to provide timely responses to the statutory notices, which had necessitated the invocation of Section 144 for best judgment assessment.
ITAT’s Decision
After reviewing the facts and hearing both parties, the ITAT found merit in the assessee’s contention regarding the incorrect address and lack of proper communication. The Tribunal acknowledged the genuine reasons cited by the trust for not responding to the notices, particularly the miscommunication caused by incorrect address details and outdated email information.
The Tribunal also admitted the additional evidence submitted by the trust and remanded the case back to the AO for fresh adjudication. The ITAT directed the AO to verify the new evidence provided by the trust and to reassess the case in accordance with the provisions of the Income Tax Act.
The Tribunal emphasized the importance of adhering to the principles of natural justice, directing that the assessee be given an adequate opportunity to present its case before any further adjudication.
Conclusion
In conclusion, the ITAT set aside the assessment order under Section 144 and remanded the case back to the AO for reconsideration. The Tribunal’s decision underscores the necessity of proper communication in assessment proceedings and the importance of giving taxpayers a fair opportunity to respond to statutory notices.
This case highlights the significance of accurate address details and up-to-date contact information in tax matters. It also demonstrates the ITAT’s commitment to ensuring that procedural errors, such as sending notices to the wrong address, do not result in unfair assessments.
Key Takeaways:
- The ITAT set aside an income tax order due to notices being sent to the wrong address.
- The case has been remanded to the AO for fresh adjudication with the submission of additional evidence.
- The Tribunal emphasized the importance of natural justice and fair opportunity for the assessee.
The decision is an important reminder of the need for procedural fairness in tax assessments, particularly when notices are not properly served to taxpayers.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee against order dated 24.11.2023 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-1 8.
2. The assessee has raised the following grounds of appeal :-
“1. The Ld. CIT(A) has erred in confirming the addition of Rs. 12,04,000/- being the cash deposits made in the bank account under Section 69A in as much as the bank deposits in the bank accounts are duly recorded in the books of accounts and it is from explained sources and therefore Section 69A is not applicable on the facts of the case and therefore Section 115BBE is not applicable on the facts of the case.
2. The learned CIT(A) has erred in confirming the addition of 1,22,83,426/- being the amounts reflected in the bank statements by cheque under Section 69A in as much as the same represents the borrowings from third parties which is duly recorded in the books of accounts and therefore the question of Section 69A does not arise.
3. The appellant says and submits that the borrowings are from genuine sources from identified persons and therefore the question of addition does not arise.”
3. Notice under Section 142(1) of the Income Act, 1961 issued on 08.03.2018 calling upon the assessee to prepare a true and correct return of income in respect of which the assessee is assessable under the Income Tax Act for Assessment Year (A.Y.) 2017-18. As per the provisions of Section 142(1) of the Act, the assessee was required to furnish the said return of income as required to be furnished as per the conditions and manner prescribed in Rule 12 of the Income Tax Rules, 1962 on or before 07.04.2018. But the assessee failed to furnish return of income under Section 139 (on or before 31 .03.201 8) and failed to furnish Income Tax return in response to notice under Section 142(1) of the Act. The Assessing Officer observed that the assessee Radha Mohan Education Charitable Trust deposited cash of Rs.4,90,000/- in its bank account during the demonetisation period (9th November 2016 to 30th December 2016) in old currency. Since the assessee has not responded any of the Statutory Notices and not filed the return of income, the Assessing Officer proceeded on the basis of Section 144(1)(b) of the Act. The Assessing Officer made addition of 1 ,34,87,426/- as unexplained money under Section 69A of the Act.
4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The Ld. AR submitted that the notices were sent physically to an address at Village: Moyad, District Mehsana instead of at the correct address of Village: Moyad – 383 120, Tal: Prantij, District Sabarkantha. Further, the online notices were not received since the Email ID was of the old Trustee who had not shared the notices and, therefore, the assessee could not comply the assessment notices. Though subsequently the assessee trust filed appeal before the CIT(A) physically, since in the absence of password and login ID, it was not possible to file online. Thus, though the notices were received on one of the trustee’s son’s Email ID, but inadvertently he did not bring the same to the notice of his father who is the trustee in the assessee Trust. Therefore, the Ld. AR submitted that the matter may be remanded back to the file of the Assessing Officer as the assessee has filed additional evidences which has to be taken on record and the matter may be decided on merit.
6. The Ld. DR relied upon the Assessment Order and the order of the CIT(A).
7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee trust through the Chairman of the trust has filed the affidavit stating the actual reasons for not appearing before the Assessing Officer as well as before the CIT(A) and not filing the requisite documents before both the Authorities. The reasons appear to be genuine and hence it will be appropriate to remand back this matter to the file of the Assessing Officer for proper adjudication and verification of the documents filed by the assessee before us and by way of additional evidences. Thus, the additional evidences filed by the assessee are admitted and the Assessing Officer is directed to verify the same and adjudicate the matter in consonance with the Income Tax Statute and decide the issue as per law. Needless to say, the assessee be given opportunity of hearing by following the principles of natural justice.
8. In the result, appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open Court on this 8th August, 2024.
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