Onus of substantiation: proving application of income defeated blanket percentage disallowance; appellate deletion of addition affirmed.

Onus of substantiation and application of income was considered where a registered educational trust filed consolidated returns and produced unit-wise breakups, salary registers, ledgers, cash and bank books and audited accounts; the tribunal found the assessee discharged the initial onus and the assessing officer made a blanket 10% disallowance without pointing to specific defects in evidence, so the appellate deletion of the addition was upheld and the revenue appeal dismissed.

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Issues: Whether the Commissioner of Income Tax (Appeals) was justified in deleting the addition of Rs. 3,96,94,712/- made by the Assessing Officer by disallowing 10% of total expenses of Rs. 39,69,47,124/- for alleged non application/substantiation of income by the trust.

Analysis: The Tribunal examined the material on record and the order of the CIT(A). It noted that the assessee is a registered trust engaged in educational activities and had filed consolidated return and consolidated expenditure for 35 institutions. The CIT(A) recorded that out of total expenditure of Rs. 39,69,47,124/-, capital expenditure of Rs. 9,20,02,482/- was not adversely treated by the AO and the balance included salary payments of Rs. 23,59,03,194/-, for which the assessee produced unit wise breakups, salary registers, ledgers, cash book, bank book and audited income and expenditure accounts. The CIT(A) found that the assessee had discharged the initial onus of substantiating application of income and that the AO had not pointed to any specific defect in the evidences before making a blanket 10% disallowance. The Revenue did not controvert the factual findings of production of documents before the Tribunal.

Conclusion: The deletion of the addition of Rs. 3,96,94,712/- made by the CIT(A) is upheld and the Revenue's appeal is dismissed; decision is in favour of the assessee.

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