Facts of the Case

The assessee, Almahad Trust, filed its return of income for Assessment Year 2013-14. Based on information from the e-filing portal, the Assessing Officer noted cash deposits of ₹21,84,076 in a bank account maintained with J & K Bank and issued notice under Section 148 of the Income-tax Act. In response, the assessee filed a return of income on 13.04.2021. Thereafter, notices under Section 143(2) and other statutory notices were issued. According to the Assessing Officer, there was no compliance and the assessee failed to furnish registration under Section 12A or approval under Section 80G. Consequently, exemption under Section 11 was denied and the entire cash deposit was treated as income. The CIT(A) remanded the matter to the Assessing Officer for verification. The assessee filed appeal before the Tribunal with a delay of 355 days.

Issues Involved

Whether the delay in filing the appeal deserved condonation, whether the entire gross cash receipts could be taxed without examining net income, whether the source of cash deposits required fresh examination, and whether the matter warranted remand for de novo adjudication in accordance with law.

Petitioner’s Arguments

The assessee submitted that the delay in filing the appeal was due to a bona fide belief that the Assessing Officer would compute income on a net basis pursuant to the remand by the CIT(A). It was contended that the trust was engaged in charitable and educational activities and that voluntary contributions deposited in the bank account could not be taxed on a gross basis. The assessee argued that as per settled law, only net income can be subjected to tax and that the authorities below erred in treating the entire cash deposits as income without considering expenditure incurred for charitable activities. It was therefore requested that the matter be remanded for fresh consideration.

Respondent’s Arguments

The Revenue relied on the orders of the lower authorities and contended that the assessee failed to explain the source of cash deposits. It was argued that unless the assessee first establishes the nature and source of receipts in accordance with the provisions of the Act, no relief can be granted, and opposed granting further opportunity.

Court Order / Findings

The ITAT Patna condoned the delay in filing the appeal after considering the affidavit and relying on judicial precedents, including the decision of the Supreme Court in Collector, Land Acquisition vs. Mst. Katiji. On merits, the Tribunal observed that while income tax is chargeable on net income and not on gross receipts, the assessee had failed to properly explain the source of cash deposits. Considering the facts and in the interest of justice, the Tribunal held that the issue required fresh examination. Accordingly, the matter was remitted to the file of the Assessing Officer for de novo consideration with a direction to compute taxable income on a net basis as per law after granting reasonable opportunity to the assessee.

Important Clarification

The Tribunal clarified that while taxation must be on net income and not on gross receipts, the assessee is under an obligation to satisfactorily explain the source and nature of cash deposits. Failure to substantiate the claim with cogent evidence may disentitle the assessee from relief. Adequate opportunity must, however, be provided before drawing adverse conclusions.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes, the delay was condoned, and the matter was remanded to the Assessing Officer for de novo adjudication in accordance with law after providing due opportunity of hearing to the assessee.

 

Link to download order   https://www.mytaxexpert.co.in/uploads/1769072605_ALMAHADTRUSTPATNAVS.ITOEXEMPTIONWARD1PATNAPATNA.pdf 

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