INCOME TAX OFFICER EXEMPTIONS NANDED, NANDED vs. ANUSAYA SHIKSHAN PRASARAK MANDAL PARBHANI, PARBHANI

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ITA 405/PUN/2026Status: DisposedITAT Pune29 May 2026AY 2020-217 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee is eligible for exemption under Section 10(23C)(iiiab) as it is an educational institution solely for education and not for profit. The Tribunal also found that the statutory requirements for this exemption were met, including the nature of the institution and its funding.

What were the facts?

The assessee, a public charitable trust engaged in educational activities, claimed exemption under Section 10(23C)(iiiab) before the CIT(A) for the first time. The Assessing Officer had made an addition of Rs. 3,44,79,639/-. The CIT(A) allowed the exemption, leading to an appeal by the Revenue.

What were the issues?

Whether an exemption claim under Section 10(23C)(iiiab) can be entertained for the first time before the appellate authority, and whether the assessee fulfilled the statutory conditions for such exemption.

Which sections of the Income-tax Act were involved?

Section 56,Section 143(3),Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE

Before: SHRI Dr. DIPAK P. RIPOTE & SHRI VINAY BHAMORE

For Appellant: Shri Kushal D Gangwal
For Respondent: Smt. Neha Thakur, Addl.CIT-DR

PER Dr. DIPAK P. RIPOTE, A.M : This is an appeal filed by the Income Tax Officer (Exemption) Nanded, against the order u/s 250 of the Income Tax Act, 1961 (Act), dated 18.11.2025 for AY 2020-21, emanating from Assessment Order u/s 143(3) r.w.s. 144B of the Act, dated 20.09.2022.

2.

Grounds of Appeal raised by Revenue are as under: Quote “1.The Ld. CIT(A) has erred in deleting the addition of Rs.3,44,79,639/- made u/s 56 of the I.T. Act by allowing claim of exemption under section 10(23)(iiiab) of the Act made for the first time before the Ld.CIT(A) relying upon the decision of Hon. SC in the case of Goetz (India) Pvt. Ltd. Vs. CIT (2006) 284 ITR 323 and National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383, without appreciating that the such new claim can only be made by the

ITA No. 405/PUN/2026 & C.O. No. 20/PUN/2026

assessee if all the statutory requirements stipulated in the said section are met and only omission on the part of the assessee was that the claim was not made in either the original OR revised return.

2.

The Ld. CIT(A) has erred, in deleting the addition of Rs. 3,44,79,639/- made u/s 56 of the I.T. Act by allowing claim of exemption under section 10(23)(iiiab) of the Act, without appreciating that, the statutory requirements i.e. filing of Audit Report, and filing of ITR in correct form, were not fulfilled in the instant case.

3.

The Ld. CIT(A) has failed to follow the provisions of Rule 46A of the I. T. Rules, 1962 WHARE in it is laid down that the CIT/DCIT (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the A.O. has been allowed a reasonable opportunity to examine the evidence OR document OR to cross examine the witness produced by the assessee OR to produce any evidence OR document OR any witness in rebuttal of the additional evidence produced by the assessee.” Unquote.

3.

Assessee filed CO No.20/PUN/2026. Grounds of appeal raised by the assesse in the said CO are as under:

GROUND 1 : The Revenue contends exemption cannot be claimed at appellate stage. This is legally untenable. The Honble Supreme Court in Goetze (India) Ltd. vs. CIT (2006) 284 ITR 323, National Thermal Power Co. vs. CIT (1998) 229 ITR 383, and Jute Corporation of 1 India vs. CIT (1991) 187 ITR 688 has held that appellate authorities have plenary powers to entertain fresh claims based on facts on record. All four conditions of Section 10(23C)(iiiab) are satisfied: educational institution, solely for education, not for profit, and 91.60 percent government-financed.

GROUND 2: The Revenue alleges non-filing of audit report. Section 10(23C)(iiiab) does NOT require Form 10B OR 10BB. These forms apply only to Section 12A entities and Section 10(23C)(iv)/(v)/(vi)/(via) entities. The legislature deliberately excluded this requirement for

ITA No. 405/PUN/2026 & C.O. No. 20/PUN/2026

government-financed institutions under clause (iiiab). The Cross Objector has filed audited financial statements prepared by a Chartered Accountant.

GROUND 3: Rule 46A compliance. The CIT(A) issued notices dated 29.08.2025 specifically calling for documents, which were served on both the Cross Objector and the AO. The AO was given full opportunity to examine documents and file rebuttal but chose not to respond. The absence of specific rebuttal by the AO during appellate proceedings cannot be attributed to denial of opportunity. Rule 46A was fully complied with.

GROUND 4: The Departments appeal does not raise any 4 substantial question of law but merely seeks to re-agitate factual matters already considered by the Ld. CIT(A).

GROUND NO. 5: ASSESSMENT ORDER MANIFESTLY ERRONEOUS 5.1 Without prejudice to the foregoing, the assessment order dated 20.09.2022 is perverse and legally untenable. 5.2 The Assessing Officer erroneously: a) Treated government salary grants (Rs. 3.18 crores) as taxable income, b) Denied corresponding educational expenditure (Rs. 3.44 crores), c) Taxed gross 5 grants without deductions, creating absurd result. 5.3 Even if exemption u/s 10(23C)(iiiab) were denied (not admitted), expenditure is allowable u/s 37/57. Government grants received for salaries cannot be taxed while denying the salary payments made therefrom. 5.4 Alternative Ground: If exemption denied, allow expenditure of Rs. 3.44 crores, restricting taxable income to Rs. 2.57 lakhs.

GROUND NO 6 : The Cross Objector craves leave to add, alter, amend, modify OR withdraw any of the grounds of cross objection at any stage of the proceedings.

4.

We have heard both the parties and peruse the records.

ITA No. 405/PUN/2026 & C.O. No. 20/PUN/2026

5.

In this case, assesse filed return of income in ITR 7 for AY 2020-21. Assessee’s case was selected for scrutiny. Notice u/s 143(2) of the Act was issued on 29.06.2021. Assesse filed reply dated 14.07.2021 and filed copy of income expenditure account, balance-sheet. The AO issued notices asking assessee to file evidence of expenditure claimed. However, assesse failed to file any reply. Therefore, AO assessed the income at Rs. 3,47,37,009/-. Aggrieved by the Assessment Order assessee filed appeal before Ld. CIT(A). Before Ld.CIT(A) assessee filed copy of trust deed, copy of Government approval for colleges, Audit Report, copy of sanctioned letters for Grant in Aid, copy of salary ledger, bank statement, etc. Before Ld. CIT(A) assesse also claimed that assessee is eligible for exemption u/s 10(23C)(iiiab). Ld. CIT(A) considered the claim of the assessee and allowed assessee exemption u/s 10(23C)(iiiab) of the Act. Aggrieved by the order Revenue has filed appeal and assesse has filed Cross Objection.

5.1. Assesse is a public charitable trust exclusively engage in educational activities. Assesse is duly registered with Assistant Registrar Parbhani. Copy of the certificate is at page No. 74 of the paper book filed by the assessee. Assessee also filed copy of trust deed which was in Marathi. Assessee filed letter dated 09.07.1999 issued by Government of Maharashtra granting assessee permission to start college. Assessee claimed that assessee is running various schools and colleges the list of institutes run by assessee is as under which is at page no. 105 of the paper book:

Quote “1.Anusaya Shikshan Prasarak Mandal, Parbhani 2.Swatantrya Sainik Suryabhanji Pawar Arts College, Purna UGC A/c. 3.Swatantrya Sainik Suryabhanji Pawar Arts Senior College, Purna. 4.Anusaya Creche Unit, Parbhani. 5.Anusaya Computer Institute, Parbhani. 6.Swatantra Sainik Suryabhanji Pawar Junior College Purna. 7.Swatantra Sainik Suryabhanji Pawar Arts College Purna (National Level Seminar) 8.Swatantra Sainik Suryabhanji Pawar Arts College, Purna NSS Regular A/c.

ITA No. 405/PUN/2026 & C.O. No. 20/PUN/2026

9.Swatantra Sainik Suryabhanji Pawar Arts College, Purna NSS Special Camp A/c. 10.Swatantra Sainik Suryabhanji Pawar B.Lib & M.Lib College, Purna. 11.Swatantra Sainik Suryabhanji Pawar Arts College Purna YCMU A/c.” Unquote.

5.2. Ld.AR vehemently opposed the ground no. 3 of the Revenue Ld. AR submitted that a notice was sent by CIT(A) to AO.

5.3. In this case admittedly assessee had not filed the details which assesse filed before Ld. CIT(A). As per Rule 46A of the Income Tax Rules. It is mandatary for CIT(A) to record his satisfaction before admitting additional evidence. It is also mandatary for Ld. CIT(A) to call for Remand Report from the AO. In this case Ld. CIT(A) had not recorded any satisfaction before admitting additional evidence and also not called for Remand Report from AO. This is violation of Rule 46A.

5.4. In these facts and circumstances of the case the ground no. 3 of Revenue is allowed. We set aside the order of the Ld.CIT(A) to the Ld.CIT(A) for denovo adjudication. Ld.CIT(A) shall provide opportunity to the AO and the assessee. Assessee shall file all the relevant details before the Ld.CIT(A). the AO shall file objections, if any.

5.5 Since we have allowed ground no. 3 of Revenue, ground no. 1 and 2 of revenue becomes academic in nature. Accordingly ground no. 1 and 2 are dismissed as unadjudicated.

6.

C.O. No. 20/PUN/2026 of the assessee Ground No. 1 raised by the assesse in the CO is regarding claim u/s 10(23C)(iiiab). In principle, we agree with assesse that CIT(A) can admit additional ground, provided it is emanating from the facts on records which were available before Assessing Officer. In this case it is observed that assesse had not filed any details like evidence of running educational institute, evidence of Grants received from Government, during the assessment proceedings.

ITA No. 405/PUN/2026 & C.O. No. 20/PUN/2026

6.1. Hon’ble Supreme Court in the case of Jute Corporation of India Ltd. vs. CIT, dt. 4th September, 1990; 1991 AIR 241, 1990 SCR Supl. (1) 340 has observed as under: Quote. “There was no dispute about these facts. In these circumstances the Appellate Assistant Commissioner allowed the assessee to raise this question and after hearing the Income Tax Officer, he granted the deduction from the assessee's income.” Unquote. 6.2. Thus, in the case of Jute Corporation of India Ltd. vs. CIT (supra), Hon’ble Supreme Court has observed that appellate Asst. Commissioner allowed the assessee to raise additional ground only after hearing the ITO. Also it has been observed by the Hon’ble Supreme Court that there was no dispute regarding the facts. In that circumstances and facts, Hon’ble Supreme Court has decided the case of Jute Corporation of India Ltd. vs. CIT (supra). However, in the case of the assessee, there were no details before the AO during the assessment proceedings. Therefore, assessee’s claim of exemption 10(23C)(iiiab) does not emanate from assessment record. It is observed that Ld.CIT(A) had admitted additional evidence without following Rule 46A of the Income Tax Rules. Therefore, Ld. CIT(A) has erred in allowing assessee’s claim of exemption. Therefore, the Cross Objection ground No. 1& 2 are dismissed. In this case we have already allowed Revenue’s ground no. 3. Assessee shall file all the necessary details before Ld. CIT(A). Ld.CIT(A) shall provide opportunity of hearing to the AO and Assessee.

7.

Ground No. 3 raised in CO is regarding Rule 46A. We have already observed that additional evidence was filed by assesse before Ld. CIT(A) and CIT(A) had not called for Remand Report. As per Rule 46A it is mandatory for CIT(A) to provide opportunity to the AO. Ld.CIT(A) has violated Rule 46A of Income Tax Rule. Therefore, ground no. 3 raised in CO is dismissed.

8.

Ground No. 4 of CO- Revenue has raised valid grounds. It is not mandatary for Revenue to agitate only question of Law. Therefore, ground no. 4 is dismissed.

9.

Ground No. 5 of CO- In this case assesse had not replied any of the notices during assessment proceedings. Assesse had not filed evidences of

ITA No. 405/PUN/2026 & C.O. No. 20/PUN/2026

Grant, evidence of running educational institute. Assesse had not filed any evidence of expenditure claimed during assessment proceedings. Therefore, AO had passed the Assessment Order based on material available. Hence, ground No. 5 is rejected.

10.

Ground No. 6 is general in nature and hence no adjudication is required.

11.

Accordingly, the appeal of the Revenue is allowed for statistical purposes and the CO raised by the assessee is dismissed in above terms.

Order pronounced in the open Court on 29th May, 2026

Sd/- Sd/- (VINAY BHAMORE) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे/Pune; दिन ांक/Dated : 29-05-2026 TNMM

आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: अपील र्थी / The Appellant 1. प्रत्यर्थी / The Respondent 2. 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘A’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune

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