St. Anne’s Educational Society Vs DCIT (ITAT Bangalore)
Massive Additions Based on Bank Credits of a Trust Set Aside – ITAT Orders Fresh Verification of Reconciliation
Bangalore ITAT set aside additions aggregating to over ₹23 crore relating to Section 68, alleged undisclosed income, and short application of funds, holding that the entire case was built on incorrect bank receipt figures and unverified assumptions.
AO had treated a portion of bank credits as unexplained and computed further additions by:
- Adopting gross bank deposits of ₹54.35 crore,
- Treating differences as unexplained u/s 68,
- Alleging shortfall in 85% application, resulting in additional income.
However, the assessee demonstrated through detailed reconciliation that:
- The bank figure itself was incorrect and later rectified,
- It included inter-bank transfers, contra entries, typographical errors, opening balances, and grants,
- After adjustments, the actual income matched audited financial statements.
Tribunal observed:
- Both AO and CIT(A) failed to examine reconciliation and supporting evidence,
- Additions were made mechanically without identifying specific unexplained credits,
- CIT(A) passed a non-speaking order ignoring detailed submissions.
ITAT held that:
- When comprehensive reconciliation is furnished, authorities must verify each component,
- Additions based on gross bank credits without proper analysis are unsustainable.
Accordingly, the Tribunal set aside the entire matter to AO for fresh adjudication, directing:
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