TAGORE SOUDH AVAIM VIKAS SANSTHAN,JAIPUR vs. EXEMPTION WARD 1, JAIPUR

ITA 475/JPR/2026Status: DisposedITAT Jaipur16 September 2026AY 2017-1810 pages
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What were the facts?

The assessee, Tagore Soudh Avaim Vikas Sansthan, filed its return for Assessment Year 2017-18 declaring nil income. It was not registered under section 12AA and claimed no exemptions. The Assessing Officer (AO) selected the case for scrutiny and requested books of account, bills, and vouchers. The assessee did not comply, leading to a penalty under section 272A(1)(d) and a show cause notice for disallowance. The AO rejected the books of account under section 145(3) and disallowed 25% of the expenditure (Rs 42,86,402) as unverifiable. The Joint Commissioner of Income Tax (Appeals) upheld the AO's order, declining to admit additional evidence and fresh exemption claims. The assessee appealed to the ITAT.

What did the Tribunal hold?

The Tribunal held that the rejection of books of account under section 145(3) was justified due to the assessee's complete non-compliance and failure to produce primary records, despite opportunities and penalty imposition. The Tribunal found no infirmity in this decision. Regarding the disallowance, the Tribunal held that while the rejection of books necessitates a best judgment assessment, it must be based on material and not a wild guess. The Tribunal noted that the disallowance of 25% was not supported by any material on record and was not in line with the principle laid down in CIT v. Gotan Lime Khanij Udhyog (Raj.). However, the Tribunal also acknowledged the assessee's complete default and inability to place records before the AO. The Tribunal admitted audited financial statements of adjacent years as additional evidence under Rule 29. Since the disallowance could not stand and the Tribunal could not compute it itself, the issue of quantum was restored to the AO for fresh determination. The AO was directed to verify the books, bills, vouchers, and adjacent year financial statements, and determine the disallowance afresh, ensuring it rests on material. The rejection of books under section 145(3) was not to be reopened. The issue of exemption claims and additional evidence before the JCIT(A) was not explicitly decided, but the restoration of the quantum issue implies the prior decision on these points might be revisited in the fresh assessment.

What were the issues?

1. Whether the rejection of the assessee's books of account under section 145(3) of the Income Tax Act, 1961, was justified? The assessee argued that the notices were not noticed, and the disallowance was an arbitrary estimate without basis. The revenue contended that the assessee's failure to produce primary records justified the estimate. 2. Whether the ad hoc disallowance of 25% of total expenditure (Rs 42,86,402) was arbitrary and without basis? The assessee argued that no item was found bogus or inflated, and the rate was inconsistent with its audited results from adjacent years. The revenue supported the authorities below, stating that withholding primary records prevents complaints about estimates. 3. Whether the assessee was entitled to claim exemption under section 10(23C)(iiiad) and sections 11 and 12 of the Act, and if additional evidence (segmental income and expenditure statement) should be admitted? The assessee sought to claim exemption and admit additional evidence before the JCIT(A). The AO opposed both in his remand report. The JCIT(A) declined to admit the evidence and rejected the fresh claim.

Which sections of the Income-tax Act were involved?

Section 145(3),Section 144,Section 272A(1)(d),Section 11,Section 12,Section 250,Section 143(3),Section 46A,Section 29,Section 30

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘SMC’ BENCH, JAIPUR

Before: Shri T.R. Senthil Kumar & Shri Prakash

PER : PRAKASH, ACCOUNTANT MEMBER:-

This appeal by the Assessee is directed against the order of the learned Joint Commissioner of Income Tax (Appeals)-1, Gurugram [hereinafter referred to as “the learned JCIT(A)”] dated 12.02.2026 passed under sec- tion 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), arising out of the assessment order dated 23.10.2019 passed by the Assessing Officer (hereinafter referred to as “the AO”) under section 143(3) of the Act for the assessment year 2017-18. The Assessee has raised three grounds of appeal in the memorandum of appeal in Form No.

36.

By Ground No. 1 it challenges the confirmation of the rejection of its bo

The order continues below.

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