A.D. EDUCATIONAL SOCIETY,C/O AKUL AGARWAL AND ASSOCIATES vs. DCIT/ACIT EXEMPTIONS CIRCLE - 2, CHANDIGARH

आयकर अपीलीय अिधकरण,च�ीगढ़ �ायपीठ “ए” , च�ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: HYBRID MODE �ी लिलत कुमार, �ाियक सद� एवं �ी मनोज कुमार अ�वाल, लेखा सद� BEFORE: SHRI. LALIET KUMAR, JM & SHRI. MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No. 1190/Chd/ 2025 िनधा�रण वष� / Assessment Year : 2016-17 A.D. Educational Society बनाम The DCIT/ACIT Plot No. D2/20, Sector 10, DLF, Exemption Circle-2 Faridabad, Haryana-121006 Chandigarh �ायी लेखा सं./PAN NO: AAAAA4089L अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Akul Aggarwal, C.A (Virtual) राज� की ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT Sr. DR सुनवाई की तारीख/Date of Hearing : 20/07/2026 उदघोषणा की तारीख/Date of Pronouncement : 27/07/2026 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A), NFAC, Delhi dt. 22/07/2025 for the Assessment Year 2016-17.

164(3) of the Income Tax Act, 1961. Further, the order of the Ld. A.0. is not a speaking order and one fails to understand the grounds and basis of making the addition. The addition has been made by recording incorrect facts and findings and by disregarding the evidences/submissions filed by the appellant and without providing adequate opportunity of being heard and in violation of principles of natural justice. That in any case and in any view of the matter, action of Ld. A.0. in making an addition of Rs. 99,16,184/- is bad in law and against the facts and circumstances of the case is liable to be deleted. 3. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in making the impugned additions and framing the impugned assessIment order which is contrary to law and facts and without providing adequate opportunity of hearing and without confronting the entire adverse material which was used against the appellant and by recording incorrect facts and findings and in violation of principles of natural justice and the and the same is not sustainable on various legal and factual grounds and which deserves to be quashed. The appellant filed all the requisite documents and the Ld. A.0. didn't rebut anything on record and didn't issue mandatory show cause notice before framing an opinion on the documents/ information submitted. 4. That having regard to the facts and circumstances of the case, the Hon'ble CIT(A) passed the order u/s 250 of the Income Tax Act, 1961 without considering any submissions made in the appeal proceedings, without rebutting any facts or citations submitted on record. In light ofa non-speaking order the order of the Hon'ble CIT(A), thereby rendering the order bad in law and void. 5. That having regard to the facts and circumstances of the case, Ld. A.0. has erred in law and on facts in charging interest us 234A, 234B, 234C and 234D of the Income Tax Act, 1961. 6. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.

International School. For the year under consideration, the return of income was filed declaring nil income and was processed under section 143(1) of the Act. Subsequently, the assessment was reopened under section 147 of the Act on the basis of information gathered during investigation conducted by the Assessing Officer indicating that the assessee had allegedly paid excessive salary and interest to persons specified under section 13(3) of the Act, thereby attracting the provisions of section 13(1)(c). Pursuant to the reassessment proceedings, the Assessing Officer held that the remuneration and interest aggregating to Rs.99,16,184/- paid to the specified persons constituted undue benefit and consequently denied the exemption available under sections 11 and 12 of the Act to that extent.

7.1 It was further submitted that identical payments made to the very same specified persons had been accepted by the Department in the subsequent assessment year. It was contended that in Assessment Year 2017- 18, the issue had travelled before the Tribunal and consequential relief had also been granted by the Ld. CIT(A) as well as by the Assessing Officer while giving effect to the appellate order. It was, therefore, submitted that in the absence of any distinguishing feature, the reopening as well as the addition deserved to be quashed.

9.1 So far as the legal challenge to the reassessment proceedings is concerned, we find that the reasons recorded disclose that the Assessing Officer had received information and had conducted inquiries with respect to the payments made by the assessee to persons specified under section 13(3) of the Act. The reasons recorded indicate that the Assessing Officer formed a prima facie belief that income chargeable to tax had escaped

assessment on account of excessive payments allegedly made to specified persons. At the stage of initiation of reassessment proceedings, the Assessing Officer is only required to possess a prima facie "reason to believe" and not to conclusively establish escapement of income. We, therefore, do not find any infirmity in the assumption of jurisdiction under section 147 of the Act. Accordingly, the legal challenge to the reopening fails and Ground No. 1 is dismissed.

9.2 Coming to the merits of the addition, we find that both the Assessing Officer as well as the Ld. CIT(A) have proceeded on the assumption that the remuneration and interest paid to the specified persons were excessive so as to attract the provisions of section 13(1)(c) read with section 13(3) of the Act. However, except making a bald allegation, neither of the authorities below has undertaken any objective exercise to determine whether the remuneration paid was, in fact, excessive having regard to the services rendered by the specified persons.

9.3 It is indeed disheartening that neither the Assessing Officer nor the Ld. CIT(A.) has brought on record any objective basis or comparable material for arriving at the conclusion that the remuneration paid was excessive. The mere fact that the recipients are specified persons within the meaning of section 13(3) of the Act cannot ipso facto lead to the conclusion that the payments made to them are unreasonable. The statute itself contemplates an examination of the reasonableness of the payment.

9.4 The provisions of section 13(2), read with section 13(1)(c) and section 13(3) of the Act, require the Assessing Officer to examine whether the remuneration paid to a specified person is reasonable having regard to the nature of services rendered and whether such remuneration is in consonance with the prevailing market standards. Such an exercise necessarily requires an objective comparison with remuneration paid by similarly placed

educational institutions to persons rendering comparable administrative, managerial or supervisory services. The authorities below have not undertaken any such exercise.

9.5 Admittedly, the specified persons are stated to have been performing supervisory and administrative functions in the educational institution. However, there is no discussion whatsoever regarding the exact nature of their duties, responsibilities, qualifications, experience, time devoted, contribution made towards the institution or any comparable data demonstrating that the remuneration paid to them was either reasonable or excessive.

9.6 We also find no merit in the contention of the Ld. AR that since similar payments made to the very same specified persons have been accepted by the Department in the subsequent assessment years, the issue stands concluded in favour of the assessee. The reliance placed upon the consequential assessment orders passed in the subsequent assessment years is of no assistance to the assessee. A careful perusal of those orders reveals that the Assessing Officer has not examined the nature of services rendered by the specified persons by bringing any contemporaneous evidence on record to establish that the remuneration paid to them was commensurate with the services rendered. No benchmarking exercise has been undertaken with reference to the prevailing market trend or with the remuneration paid by similarly placed educational institutions to persons rendering comparable services. Mere acceptance of a claim in subsequent assessment years, without carrying out the statutory exercise contemplated under section 13 of the Act, cannot operate as a precedent or as a conclusive determination regarding the reasonableness of the payments. Every assessment year is an independent unit of assessment and the issue of reasonableness has to be examined on the basis of evidence available for the relevant assessment year.

9.7 At the same time, the burden equally lies upon the assessee to establish that the remuneration and other payments made to the specified persons were reasonable and commensurate with the services actually rendered by them. Merely producing educational qualifications, biodata or designation of the specified persons cannot by itself justify payment of substantial remuneration. The assessee must demonstrate through cogent evidence the actual services rendered, responsibilities discharged, contribution made towards the growth and administration of the institution and the basis on which such remuneration was determined. Unless effective and meaningful services are established by contemporaneous evidence, the payment cannot automatically be regarded as reasonable merely because it has been made by the assessee.

9.8 Considering the totality of the facts and circumstances, we are of the considered opinion that the issue requires fresh examination at the end of the Assessing Officer. Accordingly, while upholding the validity of the reassessment proceedings and dismissing Ground No. 1, we set aside the orders of the authorities below on the issue involved in Ground No. 2 and restore the matter to the file of the Assessing Officer with the direction to examine afresh the reasonableness or otherwise of the salary and interest paid to the persons specified under section 13(3) of the Act. The Assessing Officer shall independently examine the nature of services rendered by each specified person, their qualifications, experience, responsibilities and contribution to the institution, and thereafter determine whether the remuneration paid was reasonable by bringing on record appropriate contemporaneous comparable instances, prevailing market standards and remuneration paid by similarly placed educational institutions for rendering similar services. The Assessing Officer shall not merely rely upon or be influenced by the treatment accorded in the subsequent assessment years unless those orders also demonstrate a proper examination of the issue on the basis of contemporaneous evidence.

9.9 The assessee shall also furnish complete documentary evidence to establish that the remuneration and other payments made to the specified persons were reasonable, commensurate with the services actually rendered and justified having regard to the legitimate requirements of the institution. Needless to add, the Assessing Officer shall afford adequate opportunity of being heard to the assessee and thereafter decide the issue afresh in accordance with law by passing a reasoned and speaking order. Accordingly, Ground No. 1 is dismissed, Ground No. 2 is allowed for statistical purposes, whereas Ground Nos. 3 and 4 are dismissed as not pressed.

Order pronounced on 27/07/2026

Sd/- Sd/- मनोज कुमार अ�वाल लिलत कुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद�/ ACCOUNTANT MEMBER �ाियक सद� /JUDICIAL MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��थ�/ The Respondent 3. आयकर आयु�/ CIT 4. आयकर आयु� (अपील)/ The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A CHANDIGARH