SARASWATI VIDYA MANDIR UMV,RAJGARH vs. ITO, RAJGARH, RAJGARH

Per Paresh M Joshi, J.M.:

This is an Appeal filed by the Assessee under section 253 of

the income tax Act 1961,[ herein after referred to as the Act

for the sake of brevity] before this tribunal as & by way of a

second appeal .The Assessee is aggrieved by the order

bearing No:-ITBA/APL/S/250/2024-25/1071957597(1)

dated 07.01.2025 passed by the Ld. CIT(A) u/s 250 of the

Act, which is herein after referred to as the “Impugned

order”. The Relevant Assessment year is 2017-18 and the corresponding previous year period is from 01.04.2016 to

31.03.2017.

2.1 That as and by way of an Assessment order made u/s

144 of the Act, the total income of the Assessee was

computed & assessed at Rs. 5,23,010/-. No return of Income

was filed. The aforesaid assessment order bears no: -

ITBA/AST/S/144/2019-20/1020813208(1) and that the

same is dated 20.11.2019 which is hereinafter referred to as

the “impugned assessment order”.

2.2 In this case as per ITBA-NMS information the assessee

had deposited cash of Rs. 10,71,960/- during the

demonetization period 09.11.2016 to 30.12.2016 in the FY

2016-17 relevant to Assessment Year 2017-18 in the bank

A/c No.- 032710100000803, maintained with Narmada

Jhabua Grammen Bank but no return of Income was filed by

the assessee for the above mentioned Assessment Year 2017-

18 till 13.03.2018. Notice u/s 142(1) dated 14.03.2018 was

issued to the assessee to file the return of Income which was through speed post. However no return of Income was

filed.

2.3 Yet another notice dated 01.11.2019 was issued through

speed post and hearing was fixed on 11.11.2019.

2.4 The Ld. AO in the “Impugned Assessment Order” has

recorded that the assessee is a society engaged in providing

educational facilities to villagers. The Assessee society

maintained books of accounts for FY 2016-17 audited by the

Harpreet Singh Saluja and Co Ujjain and audited report is

placed on record. Assessee was having PAN but no ROI was

filed up to Assessment Year 2017-18.

2.5 During the course of proceedings on 14.11.2019 statement

of Shri Mohan Soni Treasurer was recorded.

2.6 During the course of the assessment proceedings it was

revealed that under the name and banner of the society an

education institute is running. The source of cash deposited

in the bank account is fees collected from the students. It

was also revealed that as was stated that the turnover of the

assessee society is less than one crore and auditor had not

guided assessee society to file the return of Income, consequently return of Income was not filed. It was stated that assessee society

is in the process of getting registration u/s 12A/10(23c) and from

the next year the return of Income would be filed. Hence the

addition was made as net income was Rs. 5, 23,013/-.

Provision of section 139(4C) were not complied with. Sixth

provision to section 139(1) was highlighted. Shri Soni was

confronted with this fact too. The answer was lack of knowledge

and hence no ROI was filed. This contention was not found to be

tenable.

2.7 That the assessee being aggrieved by the aforesaid

“Impugned Assessment Order” prefers first appeal u/s 246A

of the Act before the Ld. CIT(A) who by the “Impugned Order”

has dismissed the first appeal of the assessee on the grounds &

reasons stated therein. The core grounds & reasons for the

dismissal of the first appeal was as under:-

“The Income Tax Act mandates that any person claiming an exemption under Section 10(23C)(iiiad) must first file an ROI u/s 139(4C) of the Act, report their Income, and claim the exemption based on their net profit. The failure to file the ROI prevents the appellant from availing the benefit of the exemption, as the tax authorities cannot verify the appellant's income, expenses, and other relevant details required to assess the claim. The appellant's gross receipts were Rs.67,71,935/- which is below the Rs. 1 crore thresholds required for the exemption. However, without the proper filing of the ROI and reporting of expenses, the tax authorities cannot deduct the legitimate business expenses incurred by the institution. As a result, the net profit (which includes the gross receipts minus the expenses) was added as income to the appellant's tax liability, even though part of this income could potentially be exempt under Section 10(23C)(iliad) if the proper filing was done.

In conclusion, while the appellant's gross receipts fall below the Rs. 5 crore threshold for exemption under Section 10(23C) (iiiad), the failure to file ROI means the exemption cannot be granted. The Income Tax Act requires transparency, proper filing of returns, and supporting documentation to substantiate claims for exemptions. The appellant's failure to comply with these procedural requirements means that their entire net profit is subject to taxation. Without filing the ROI, the appellant cannot avail the benefit of the exemption under Section 10(23C)(iiiad).

The appellant cited several legal precedents, including the Hon'ble Supreme Court's decision in the case of M/S Queen's Educational Society vs. Commissioner of Income Tax, to support his argument. However, the appellant's reliance on these decisions is misplaced, as they are not applicable to the present case. In the cases referenced by the appellant, the courts based their rulings on the fact that the appellant has filed returns of income (ROI). These decisions dealt with situations where the tax returns were submitted in accordance with the law, and the legal issues were resolved based on the information provided in those returns. In contrast, the appellant's case is different because, in this instance, no ROI was filed. Since the decisions cited by the appellant are rooted on the assumption that tax returns were duly filed, they cannot be applied to a situation where no return was submitted. Therefore, the legal precedents referred to by the appellant are not relevant or applicable in this specific case, and the appellant's argument based on these decisions must be reconsidered.

In view of the facts narrated above, addition made by the AO is upheld. This ground of the appellant Dismissed. 7.In the result, appeal is “dismissed.” 2.8 The assessee being aggrieved by the “Impugned Order” has

preferred the instant second appeal before this Tribunal & has

raised following grounds of appeal in the form no. 36 against the

“Impugned Order” which are as under:- “1.The Id AO was not justified in passing the order, which is bad in- law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled. 2.The Id CIT(A) was not justified in confirming the order, which is bad- in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled. 3.The ld CIT(A) was not justified in confirming the addition of Rs. 5,23,010/- by not entertaining the exemption u/s. 10(23C)(iiiad). 4.The appellant carves leave to add, amend or modify any of the grounds of appeal.”

3.1 The hearing in the matter took place before this Tribunal

on 13.04.2026 when the Ld. AR for & on behalf of the

Assessee appeared before us & interalia contended that the

“Impugned Order” is bad in law, illegal & not Proper. It

therefore deserves to be set aside. The Ld. AR has placed on

the record of this tribunal a submission/synopsis from pages

1 to 6. A paper book containing pages 1 to 28. It was

contended by the Ld. AR basis para 4.1 of the “Impugned

Assessment Order” that return of income was not filed. The gross receipt of the assessee society was Rs. 67,71,935/-[page 10

of the CIT(A) order & PB page 5] which was less than 1 crore,

threshold required for the exemption. It was contended that before the introduction of 20th proviso there was no requirement

in law [Assessment Year 23-24]. The gross receipt is less than 1

crore. Few judgements of ITAT were relied upon however copy of

ITAT decision reported in (2025) 174 taxmann.com 680 (Indore

Tribunal) in case of Harda Nagar Bal vikash samiti, Harda v/s

ITO was tendered across bar [PB pages 19-28]. Per contra Ld. DR

for the revenue concurred with the submissions made by the Ld.

AR. Hearing was then concluded and was closed. The written

submission so filed by the Ld. AR is reproduced below by us as

under:-

4.1 We have to decide the legality, validity and proprietary of the

“impugned order” basis records of the case & the rival

submission canvassed before us.

4.2 We have carefully perused the records of the case and have

heard the submissions.

4.3 We basis records of the case & after hearing & further

upon examining the rival contentions of the Ld. AR & the Ld.

DR canvassed before us, are of the considered opinion that both the Ld. AR & the Ld. DR are at adidem that the

“impugned order” should be set aside. In addition we hold that

the lower authorities have focussed only on one issue i.e. non-

filing of the return. We observe that the gross receipt of the

assessee was of Rs. 67,71,935/- as & by way of “school fee”

which has remained undisputed which amount was less than

on crore. Save & except “school fee” no other sources of

income has come on record. The activity of imparting the

education to school children by the assessee society has not

been questioned in any manner what so ever by the lower

authorities. The assessee has in fact got its accounts duly

audited by a chartered accountant which accounts have not

been rejected in manner known to law [PB pages 1 to 5].

Under these facts & circumstances we find considerable force in

the written submission of the assessee which have not been

rebutted by the revenue basis any cogent grounds on the facts &

in the law. Nothing contrary to the provision of law has been

brought on record by the revenue. Therefore we set aside the

“impugned order” and allow the appeal of the assessee. We

further hold that the assessee case is also covered by Choudhary Charan Singh Haryana agriculture university v/s ITO (E) (2025)

174 taxmann.com 917 & so also by ITAT, Indore in case of Harda

Nagar Bal Vikas Samiti Harda v/s ITO (2025) 174 Taxmann.com

680 & hold that both proviso to section 10(23C) which explicitly

denies the exemption for non-filling of a return under section

139(4C) only become effective from AY 2023-24. For the Prior

years/ earlier years there was no statutory provision to deny the

exemption based on the return filing status alone.

4.4 In view of the premises drawn up by us we set aside the

“impugned order” & allow the claims made by the assesse.

However, we remand the matter back to the file of the Ld. AO for

the due verification of the amounts as claimed. The necessary

details in this regard to be furnished to the Ld. AO by the asessee.

5 Order

5.1 The impugned order is set aside as & by way of remand to

the Ld. AO for due verification of the claims & then to give benefit

to the assessee as claimed, the legal claim of the assessee is

however allowed.

5.2 The appeal of the assessee is allowed for statistical purpose.

Pronounced in open court on 24.04.2026.

Sd/- Sd/-

(BHAGIRATH MAL BIYANI) (PARESH M JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Indore Dated : 24/04/2026 Patel/Sr. PS

Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Senior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore

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