ANBU EDUCATIONAL & CHARITABLE TRUST,CHENNAI vs. DCIT, EXEMPTIONS CIRCLE, COIMBATORE, COIMBATORE

The order of the NFAC, Delhi dated 18.12.2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1083841136(1) for the above-mentioned Assessment Year is contrary to law, fact and in circumstances of the case.

The NFAC, Delhi erred in sustaining the rejection of the claim of exemption in terms of Section 10(23C) (iiiad) of the Act forming part of the return of income filed in ITR - 7 during the course of scrutiny assessment proceedings without assigning proper reasons and justification.

The NFAC, Delhi failed to appreciate that filing of wrong ITR - 5 within the prescribed time limit and substituted by filing of ITR 7 should be considered as filing of ROI within the stipulated time frame, there by vitiating the wrong conclusions reached in relation there to.

The NFAC, Delhi failed to appreciate that mistake committed in filing of return of income in ITR 5 instead of ITR 7 was neither willful nor deliberate but due to reasons beyond the control of the appellant and further ought to have appreciated that such mistake was in the nature of curable one in view of filing of correct return of income subsequently, there by vitiating the findings in relation there to.

The NFAC, Delhi erred in sustaining the disallowance of claim of expenditure incurred towards fuel expenses and purchase of books in cash to the tune of Rs. 3, 06,481/- alleged to have made in excess of threshold limit prescribed in terms of Section 40A (3) of the Act and consequently erred in sustaining the addition of such sum in the computation of taxable total income without assigning proper reasons and justification.

The NFAC, Delhi failed to appreciate that provisions of Section 40A (3) of the Act had no application to the present facts of the case and ought to have appreciated that the said provisions should not be applied mechanically in as much as further ought to have appreciated that the exceptions mainly, the commercial expediency theory were completely over looked and brushed aside, there by vitiating the disputed disallowance in its entirety.

The NFAC, Delhi failed to appreciate that in any event the proviso below Section 40A(3A) of the Act, which proviso carving out the exceptions including the transactions in cash exceeding the threshold limit under commercial expediency was completely over looked and brushed aside, there by vitiating the disputed disallowance in its entirety.

The NFAC, Delhi failed to appreciate that the genuineness of the alleged transaction in question being not doubted, the purposive legislation of Section 40A (3) of the Act was completely over looked and brushed aside, there by vitiating the related findings. For ANBU EDUCATIONAL

The NFAC, Delhi failed to appreciate that the scrutiny assessment order was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law.

The NFAC, Delhi failed to appreciate that the entire re-computation of taxable total income was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law.

The NFAC, Delhi failed to appreciate that having not adhered to the prescription of faceless regime, the consequential scrutiny assessment and appellate order passed should be reckoned as bad in law.

The NFAC, Delhi failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.

The Appellant craves leave to file additional grounds/arguments at the time of hearing.

The brief facts of the case are that the assessee Trust filed its return of income on 31.03.2019 in Form No. ITR-5 at a Loss of Rs. (-) 10, 01,730/-. The case of the assessee was selected for limited scrutiny under the e-assessment scheme, 2019 on the issue of “Deductions from income from other sources”. The case of the assessee was assessed u/s. 143(3) r.w.s. 143(3A) and 143(3B) of the Act at a figure of Rs. 6, 02,516/- being disallowance u/s. 40A (3) of the Act. The assessee being aggrieved with the same preferred an appeal before the Ld. CIT (A), who in turn dismissed the appeal of the assessee and confirmed the order of the AO. The assessee being further aggrieved preferred the present appeal before us.

We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of the assessee alongwith grounds taken before us. It is observed that appropriate form of ITR in the case of the assessee was ITR-7, whereas the assessee filed its return in ITR-5, which resulted in adjustment of Rs. 2, 96,035/- u/s.

The assessee trust is running a school in the name and style of “Bright Public School” with annual receipts below Rs. 1 Cr. and this fact is not under challenge by any of the party to the dispute. We have gone through the financials of the assessee vide paper book submitted before us and claim of the assessee is found to be correct, i.e. receipts are less than Rs. 1 Cr. In view of the facts mentioned above, it can be safely concluded that the assessee trust fulfils the conditions of section 10(23C) (iiiad) of the Act and whole issue arisen solely because of filing a wrong return form, i.e. ITR-5, instead of ITR-7.

If the assessee would have filed its return in correct return form, i.e. ITR-7, neither depreciation of Rs. 12,97,765/- would have been disallowed resulting in income of Rs. 2,96,040/- u/s. 143(1) of the Act nor disallowance u/s. 40A (3) of the Act amounting to Rs. 3,06,481/- would have been there. On the issue of filing of wrong return form, the assessee relied upon the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Royal Textiles [1979] 120 ITR 506 (Mad.), wherein it was held as under:

Based on the facts above and the decision of the Hon’ble Jurisdictional High Court in the case of Royal Textiles (supra) we are agreed with the arguments of the assessee and hold that simply because a wrong return form has been filed by the assessee, it’s legitimate entitlements can’t be snatched. Hence, adjustment made u/s. 143(1) based on ITR-5 is deleted and as far as applicability of section 40A (3) of the Act is concerned, same is applicable w.e.f. A.Y. 2019-20 and the year under consideration can’t be affected with the same.

This is also true that the AO during the assessment proceedings can’t accept the claim of the assessee, as there is no valid revised return before him and the AO is bound by the decision of the Hon’ble Apex Court in the case of [2006] 157 Taxman 1 (SC) Goetze (India) Ltd. v. CIT, wherein the Hon’ble Apex Court held as under:

This appellant's appeal before the Commissioner of Income-tax (Appeals) was allowed. However, the order of the further appeal of the Department before the Income-tax Appellate Tribunal was allowed. The appellant has approached this Court and has submitted that the Tribunal was wrong in upholding the Assessing Officer's order. He has relied upon the decision of this Court in National

The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs.”

But, the First Appellate Authority can certainly accept the claim of the assessee after examining the facts of the case. The decision of the Hon’ble Apex Court in the case of Goetze (India) Ltd. (supra) is not a hinderance for appellate authorities, rather in the case of appellate authorities the verdict in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 is squarely applicable and in the light of the same it is hold that Ld. CIT (A) in his order committed a factual legal error and the same is not sustainable. In view of above facts and legal discussion grounds raised by the assessee are allowed and the AO is directed to accept the returned income of the assessee.

In the result, the appeal of the assessee is allowed in above terms.