Facts of the Case

The assessee, Acharya Dharamchandradeo Medical College (or related institutional entity), was subjected to scrutiny assessment proceedings by the Income Tax Department. During the course of assessment, the Assessing Officer made additions to the declared income, allegedly on account of certain receipts, transactions, or discrepancies treated as unexplained or improperly accounted.

The assessee challenged the assessment order before the Commissioner of Income Tax (Appeals), contending that the additions were unjustified and not supported by proper verification of records. Being dissatisfied with the outcome at the appellate stage, the assessee preferred a further appeal before the Income Tax Appellate Tribunal, Allahabad Bench.

Issues Involved

  1. Whether the additions made by the Assessing Officer were justified in law and on facts.
  2. Whether the AO conducted adequate inquiry into the institution’s accounts and receipts.
  3. Whether the explanations and documentary evidence furnished by the assessee were properly considered.
  4. Whether the appellate order required interference by the Tribunal.

Petitioner’s (Assessee’s) Arguments

  • The additions were arbitrary and based on presumptions rather than concrete evidence.
  • Complete books of account, records, and explanations had been furnished during assessment.
  • The AO failed to carry out meaningful verification before drawing adverse conclusions.
  • The institutional nature of activities and accounting treatment were not properly appreciated.
  • Therefore, the additions were liable to be deleted.

Respondent’s (Revenue’s) Arguments

  • The Assessing Officer acted within statutory authority based on material available on record.
  • The explanations furnished by the assessee were insufficient or not satisfactorily substantiated.
  • The CIT(A) had already examined the matter, and the assessment order should be upheld.
  • The additions were necessary to safeguard revenue interests.

Court Order / Findings (ITAT)

  • Additions must be supported by cogent material and proper inquiry.
  • Suspicion or conjecture cannot substitute proof in taxation matters.
  • When the assessee furnishes plausible explanations supported by documents, the burden shifts to the Revenue to disprove them.
  • Failure of the Assessing Officer to rebut such evidence renders the additions unsustainable.

Important Clarification by the Tribunal

  • Assessment of educational or medical institutions must consider the nature of activities and accounting practices.
  • Revenue authorities must base conclusions on verified facts and evidence.
  • Appellate authorities must ensure fairness and legality in sustaining additions.

Link to download the order  https://itat.gov.in/public/files/upload/1658402519-ita%20no.%2021%20alld%202021%20Acharya%20Dharamchandradeo%20Medical.pdf 

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