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IN THE INCOME TAX APPELLATE TRIBUNAL

B BENCH : BANGALORE
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER

ITA Nos. 1458 & 1459/Bang/2010


Assessment years : 2004-05 & 2005-06

M/s. Darshanika Foundation


Rep. by its trustee
Mr. N.V. Krishnamurthy,
No.85, 1st Floor, 1st East Block,
Byrasandra Main Road,
Jayanagar,
Bangalore 560 011.

Vs. The Deputy Director of


Income Tax (Exemptions),
Circle 17(1),
Bangalore.

PAN : AAATD 5463G


APPELLANT

Appellant by
Respondent by

RESPONDENT

:
:

Shri N.V. Krishnamurthy, Trustee


Smt. Preeti Garg, CIT(DR)

Date of hearing
Date of Pronouncement

:
:

31.10.2011
31.10.2011

ORDER

Per N.K. Saini, Accountant Member


These two appeals have been filed by the assessee against the
separate orders each dated 12.10.2010 of the CIT(Appeals)-V, Bangalore.

ITA No.1458 & 1459/Bang/2010


Page 2 of 5
2.

Common grounds have been raised in both these appeals and the

appeals were heard together, so these are being disposed of by this


consolidated order for the sake of convenience.
3.

First, we will deal with ITA No.1458/B/2010, wherein the following

grounds have been raised:

4.

1.

The order of the learned CIT(Appeals) is opposed to law


and facts of the case.

2.

The order of the CIT(A) that the trust has collected the
amount in the guise of donation and not utilizing the same
for charitable activity is erroneous.

3.

The trust had utilized the amount collected for charitable


purpose. It had organized more than 15 functions and
distributed stretchers, wheel chairs, tri-cycles, sticks for
the blinds, two wheelers for handicapped, houses for
disabled villagers at Kundapura, Distributed stainless tell
meal plates, Tumblers to rural spreads, mats to oldage
orphanage homes. These activities were carried on by the
donations collected.
Therefore the finding of
CIT(Appeals) is erroneous.

4.

The computation of income on the basis of Rs.53,91,560/is erroneous.

5.

The finding arrived at without the records are erroneous.


The records are seized by the police and many records are
destroyed by the so called depositors.

6.

Without there being any basis for the computation the


order is bad-in-law.

The facts of the case in brief are that the assessee filed the return of

income on 1.1.2004 declaring total income at Nil on the ground that the
amount was deemed to have been applied for charitable purposes u/s. 11
of the Income-tax Act, 1961 [hereinafter referred to as the Act in short].
The said return was processed u/s. 143(1) of the Act on 17.3.2005,

ITA No.1458 & 1459/Bang/2010


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thereafter the assessee filed revised return of income on 31.3.2005. In the
said revised return also, the total income was declared at Nil on the same
ground that the amount was deemed to have been applied for charitable
purposes u/s. 11 of the Act. The case was selected for scrutiny and the
Assessing Officer framed assessment u/s. 144 of the Act. While framing
the assessment the AO held that the deposits in the guise of donation had
not been refunded to the persons, so, it was treated as assessees own
income. The AO pointed out that the assessee had stated that it shall
produce the evidence of the books seized by police department, but had
not furnished any evidence. The AO disallowed the expenditure classified
as programme expenses amounting to Rs.28,18,551 and added the same
to the income of the assessee and the income was computed at
Rs.53,91,560.
5.

The assessee carried the matter to the ld. CIT(Appeals), who

confirmed the action of the AO by observing as under:

5.
Before me the A.R. of the trust and the trustees submitted
that the books of a/c are under the police custody. I am in
agreement with the A.O. as he has rightly brought the income to
tax. In view of this, the addition made by the A.O. amounting to
Rs.53,91,560/- is hereby confirmed.

6.

Now the assessee is in appeal.

The trustee, Mr. N.V.

Krishnamurthy, appearing for the trust submitted that the books of accounts
could not be produced before the Assessing Officer since those were in the
police custody. It was further stated that the ld. CIT(A) had passed a nonspeaking order, while confirming the addition made by the AO.

ITA No.1458 & 1459/Bang/2010


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7.

In his rival submissions, the ld. CIT(DR) strongly supported the

impugned order passed by the ld. CIT(A).


8.

We have considered the submissions of both the parties and the

material on record. In the present case, it is noticed that the Assessing


Officer framed the assessment ex parte u/s. 144 of the Act. He made the
additions for the reasons that the assessee did not produce the books of
accounts. While doing so, he did not find merit in the submissions of the
assessee that the books of accounts were seized by the police department.
It is also noticed that the ld. CIT(A) while confirming the action of the AO
had not discussed the submissions of the assessee which were made
before him and also no reason has been given why and how he was in
agreement with the observations of the AO.
9.

In the present case, it appears that the assessee was prevented by

sufficient cause in not producing the books of accounts, because those


were in the custody of police, as such it was beyond the control of the
assessee to produce the books of accounts before the AO. In the present
case, it seems that no efforts were made by the department to requisition
the books, which were in the custody of the police, it appears that a
reasonable opportunity of being heard had not been given to the assessee
to defend its case. It is well settled that nobody should be condemned
unheard, but in the present case, the AO framed the assessment ex parte
u/s. 144 of the Act and the ld. CIT(A) also confirmed the action of the AO
because the books were not produced by the assessee. We therefore,
considering the totality of facts, are of the view that the assessee deserves
an opportunity of being heard.

In our opinion, due and reasonable

ITA No.1458 & 1459/Bang/2010


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opportunity of being heard had not been provided by the department to the
assessee. We, therefore, deem it appropriate to set aside the impugned
order passed by the ld. CIT(A) and remand the issue back to the file of the
AO, to be decided afresh after providing due and reasonable opportunity of
being heard to the assessee.
10.

In ITA No.1459/Bang/2010 identical grounds have been raised, as

were in ITA No.1458/Bang/2010, except the amount mentioned in ground


No.4.

Since the facts are similar in both the years, therefore, our findings

given while adjudicating the appeal in ITA No.1458/Bang/2010 for the A.Y.
2004-05 (supra) shall apply mutatis mutandis to the appeal in ITA
No.1459/Bang/2010 for the A.Y. 2005-06.
11.

In the result, both the appeals are allowed for statistical purposes.
Pronounced in the open court on this 31st day of October, 2011.

Sd/-

( SMT. P. MADHAVI DEVI )

Judicial Member

Sd/-

( N.K. SAINI )

Accountant Member

Bangalore,
Dated, the 31st October, 2011.
Ds/Copy to:
1.
Appellant 2. Respondent 3. CIT
4. CIT(A)
5.
DR, ITAT, Bangalore. 6. Guard file (1+1)
By order

Assistant Registrar
ITAT, Bangalore.

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