NAZARETH LEARNING SERVICES,CHENNAI vs. ITO, NCW-7(1), CHENNAI

आदेश / O R D E R

PER BENCH: These cross appeals by the assessee and the Revenue for AY 2013-14 and the appeal of the assessee for AY 2017-18 are against the separate orders of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") both dated 20.06.2025

Assessment Year 2013-14: 2. The assessee is a partnership firm engaged in the business providing educational services to the children along with providing them with uniform, books and conducting classes. The assessee did not file the return of income for AY 2013-14. The A.O received information that the assessee has made cash deposits in the current account. Since the assessee did not file the return of income, the A.O reopened the assessment. The assessee in response to the notice filed the return of income on 11.03.2022 which was treated by the A.O as non-est. The assessee did not respond to other notices issued by the A.O calling for various details and therefore the A.O completed the assessment assessing the income at Rs.9,69,40,041/-. Aggrieved, the assessee filed further appeal before the CIT(A). The assessee submitted various details with regard to the cash deposits into the bank account, details of fixed deposits and the details of interest income received. The CIT(A) called for the remand report from the A.O in this regard. The CIT(A) after receiving the remand report from the A.O gave partial relief to the assessee by holding that: “5.3 This remand report submitted by the AO was forwarded to the appellant, however appellant failed to file any comments by way of rejoinder on the submission given by the AO in the remand report. Even otherwise, the remand report submitted by the AO reproduced above, is a sketchy/incomplete report without giving details of opportunities

ITA Nos.2383, 2384 & 3339/Chny/2025 Nazareth Learning Services :- 3 -:

offered to the appellant and the written submission and documentary evidences furnished by the appellant during remand proceedings. This remand report submitted by the AO do not give specific findings on the additional evidences submitted by the appellant stating clearly as to whether the additions made in the impugned assessment order are in accordance with the provision of law or not. The irrelevant and baseless discussion not related with the issues in hand is made by the AO in the said remand report. In view of these facts of the case, the remand report submitted by the AO, since incomplete is not considered and the grounds of appeal raised by the appellant are adjudicated on the basis of material evidences available on case record.

5.7 Keeping in mind this submission furnished by the appellant the list of students provided by the appellant was perused and it is found that there are 2502 entries of fees received from the students of std. LKG, UKG, 1 st , 2 nd, 3 rd and 4 th and there is no entry of fees received from any dropout students. Therefore, it is evident that appellant is not engaged in the activity of training dropout students. It is further noted from the list of students given that fees of an average amount of Rs.12,000/- to Rs.14,000/- has been received from each student. It is further calculated from this list that approx. 10% of the students’ fees is received in two instalments therefore out of 2502 entries of fees received, there are total of approx. 2252 students from whom fees of Rs.2,62,65,640/- is said to have been received by the appellant during the relevant period. Now, if this 2252 students are distributed in six standards(from LKG to 4 th), average student per standard works out to 375 students and if 60 students are considered in one division there are more than 6 divisions per standard required to cater to the student, which normally do not exist in any of the school/educational institution. Further as submitted, the pre-primary school is run by the appellant in the suburb of Avadi. Therefore it is difficult to accept that there are these number of students available in the area and appellant is running more than six divisions per standard at such a remote place of Avadi. This is excluding number of students enrolled in other schools/educational institutions in the vicinity of the appellant. Also there are various permissions and sanctions required from government authority to run an educational institutes with restrictions on number of students intake. Therefore, it is difficult to accept that the appellant is running pre-primary school with 2252 students (approx.) in the suburb of Avadi.

5.8 It is to be noted that the appellant neither during the course of assessment proceedings nor during remand report proceedings or even during appellate proceedings filed a trace of documentary evidences like copies of correspondence/permissions/sanction with government authorities relating to running of school, fee receipts, student’s register, examination details, results, attendance register, details of other

ITA Nos.2383, 2384 & 3339/Chny/2025 Nazareth Learning Services :- 4 -:

activities like sports or cultural activities conducted by school etc. to establish on record that the appellant is running a pre-primary school. The appellant has also failed to provide any authentic documentary evidences either during assessment proceedings, remand proceedings or even at the appellate stage relating to expenditure incurred for running of pre-primary school at Avadhi. In the absence of such documentary evidences various expenditures said to have been incurred by the appellant in running school cannot be said to be genuine expenditure.

5.9 It is further noted from the copy of balance sheet filed by the appellant that as on 31.03.2013 that the entire capital of appellant is lying in the bank in the form of investment (FDs), bank balance and cash in hand and no part of capital is invested towards running of school. It is further noticed from the P&L A/c that appellant has shown class room rent of Rs.3,71,890/- and hence rent per month works out to Rs.30,990/- per month. Considering the total number of students and number of divisions required, it is difficult to accept that the appellant could get the school premises for the rent of Rs.30,990/- per month to accommodate 2252 students with related infrastructure and facilities required in the class room like benches, light, table, canteen, store room etc. and also outside classroom including play ground.

5.10 Further there are no details and documentary evidences brought on record by the appellant in support of huge amount of expenditure claimed by the appellant on account of salary and establishment of Rs.88,40,100/-, books and note books of Rs. 46,79,272/-, study material expenses of Rs.21,36,368/-, part time staff salary of Rs. 26,30,000/- and uniform expenses of Rs.45,91,620/- to prove on record that the appellant is running school at Avadi. It was required on the part of the appellant to provide complete details of these expenditure incurred and provide authentic documentary evidences like name, address, PAN etc. of all the staff members/faculty/teaching staff with copy of payroll, muster register and details of salary paid with mode of payment i.e. cash or by cheque with documentary evidence as also bills/invoices in respect of establishment expenses, purchase of books, notebooks, study material, uniform etc. and student wise details to whom the same have been distributed. The details like name, address, PAN of persons to whom part-time salary paid with copy of payroll, muster register and details of salary paid with mode of payment i.e. cash or by cheque with documentary evidence should also have been provided by the appellant. These details were essential to establish on record that the appellant is engaged in the activity of running a school. In the absence of any such details appellant’s claim that it was running a school and nature and source of said cash deposit is out of fees received in cash from students is not acceptable.

ITA Nos.2383, 2384 & 3339/Chny/2025 Nazareth Learning Services :- 5 -:

5.11 Without prejudice to the above, it needs to be mention that the total cash deposit in the bank account of the appellant during the relevant previous year is of Rs.3,50,96,787/-, out of which as per appellant’s submission, fees received from student is of Rs.2,62,65,640/- and hence otherwise also the nature and source of remaining cash of Rs.88,31,147/- remained unexplained

5.12 In the light of the above facts of the case, I am of the considered view that the appellant is not running pre-primary school at Avadi and hence the nature and source of total cash deposit in bank account of Rs.3,50,96,787/- made by the appellant during the relevant previous year is not out of fees received from students in cash and hence remained unexplained. The same is therefore required to be treated as unexplained money taxable u/s 69A of the I.T. Act. The addition of Rs.3,50,96,787/- made by the AO u/s 69A of the I.T. Act is therefore confirmed. This ground of appeal raised by the appellant thus stand dismissed.

6.3 I have carefully perused the findings given by the AO in the impugned assessment order and written submission alongwith documentary evidences furnished by the appellant. The AO in the assessment order has merely mentioned that the appellant has made time deposit with banks of Rs.6,13,25,728/-, however the details of the same are not given by the AO. It is not clear from the assessment order whether time deposit of Rs.6,13,25,728/- is made by appellant during the relevant previous year. It is calculated from the statement provided by the appellant during appellate proceedings, that the balance fixed deposit of Rs.1,08,29,660/- and Rs.1,20,81,774/- is available with SVC Bank and HDFC Bank respectively. It is further calculated from the copy of bank statement / bank book provided by the appellant that during the relevant previous year, appellant has invested total amount of Rs.95,00,000/- in fixed deposits in HDFC Bank and Rs.1,05,00,000/- in SVC Bank. Thus, during the relevant previous year appellant has made total investment in fixed deposit of Rs.2,00,00,000/-. It is however found from the balance sheet filed by the appellant as on 31.03.2013, the appellant has shown balance fixed deposit with bank of Rs.1,25,81,774/-.

6.4 On verification of case record it is found that neither the AO has given specific details of investment made by the appellant in fixed deposit with bank during the relevant previous year nor the details furnished by the appellant clearly exhibit the details of investment made in the fixed deposit during the relevant previous year. Therefore, none of the figure of fixed deposit either made during the relevant previous year or outstanding as on the balance sheet date matches with the figure given in the balance sheet. However, as mentioned earlier, it is calculated from the bank book that during the relevant previous year

ITA Nos.2383, 2384 & 3339/Chny/2025 Nazareth Learning Services :- 6 -:

appellant has made investment in FDs with HDFC Bank of Rs.95,00,00,000/- and SVC Bank of Rs.1,05,00,000/-, the source of which was required to be explained by the appellant. However, as stated earlier though the total investment in FDs during the relevant previous year is of Rs.2,00,00,000/-, and total FDs available with the appellant as on the balance sheet date as per the statement provided by the appellant is at Rs.2,29,11,434/-,the balance sheet of the appellant for the relevant previous year shows outstanding FDs of Rs.1,25,81,774/-. This clearly indicate that part of the investment in FDs made by the appellant is out of books of accounts and hence should be treated as unexplained investment of the appellant. 6.5 Considering these facts, the investment in FDs over and above the balance sheet figure in respect of investment made during the previous year is treated as unexplained investment which works out to Rs.74,18,226/-(Rs.2,00,00,000/- minus Rs.1,25,81,774/-). This is especially considering that the total cash deposit during the relevant previous year is at Rs.3,50,96,787/- whereas the fees received from student in cash as per details provided by the appellant is at Rs.2,62,65,640/-. 6.6 In light of the above facts of the case addition on account of unexplained investment in fixed deposit u/s 69 of the I.T. Act is restricted toRs.74,18,226/-. Accordingly, appellant get relief of Rs.5,39,07,502/-. This ground of appeal raised by the appellant thus stand partly allowed.”

The assessee and the Revenue are in appeals before the Tribunal against the order of the CIT(A).

ITA Nos.2383, 2384 & 3339/Chny/2025 Nazareth Learning Services :- 7 -:

evidences furnished by the assessee during the remand proceedings. Having held so, we notice that the CIT(A) while the deciding the issue on merits has not afforded proper opportunity to the assessee calling for details but has proceeded to decide the issue based on materials on record and the written submissions of the assessee. Accordingly, there is merit in the argument of the assessee that there is a violation of natural justice in the appellate proceedings since the assessee was not put on notice with regard to the various additions and was not given a proper opportunity of being heard. Considering the overall facts and circumstances peculiar to assessee's case, we are inclined to give one more opportunity to the assessee in the interest of natural justice to represent the case properly by producing the required details. Accordingly, we remit the appeal back to the AO with the direction to call for necessary details and decide the issue in accordance with law. The assessee is required to submit the necessary details as may be called for and cooperate with assessment proceedings. It is ordered accordingly.

Assessment Year 2017-18: 4. The A.O while passing the order u/s. 147 r.w.s 144 of the Act made an addition towards cash deposited into the bank account to the tune of Rs.4,72,18,236/- treating the same as unexplained cash credit u/s. 69A of the Act. On further appeal, the assessee submitted various details before the CIT(A) and the CIT(A) called for a remand report from the A.O. The CIT(A) rejected the remand report submitted by the assessee and proceeded to issue the issue on merits. We in this regard notice that for the year under consideration also the CIT(A) while independently deciding the issue has proceeded to consider the materials on record without giving proper opportunity of being heard to the assessee. Accordingly, there is merit in the

ITA Nos.2383, 2384 & 3339/Chny/2025 Nazareth Learning Services :- 8 -:

argument of the assessee that there is a violation of natural justice in the appellate proceedings since the assessee was not put on notice with regard to the various additions and was not given a proper opportunity of being heard. Considering the facts and circumstances peculiar to assessee's case, we are inclined to give one more opportunity to the assessee in the interest of natural justice to represent the case properly by producing the required details. Accordingly, we remit the appeal back to the AO with the direction to call for necessary details and decide the issue in accordance with law. The assessee is required to submit the necessary details as may be called for and cooperate with assessment proceedings. It is ordered accordingly.

Order pronounced on 01st day of June, 2026 at Chennai.

Sd/- Sd/- (मनु कुमार िग!र) (पदमावती यस) (Manu Kumar Giri) (Padmavathy.S) लेखा सद�य सद�य /Accountant Member �याियक �याियक सद�य �याियक �याियक सद�य सद�य / Judicial Member सद�य लेखा लेखा लेखा सद�य सद�य चे�नई/Chennai, �दनांक/Dated 01st June, 2026. EDN, Sr. P.S

ITA Nos.2383, 2384 & 3339/Chny/2025 Nazareth Learning Services :- 9 -:

आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु!/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF EJTADA Digitally signed by EJTADA DURGA NARESH DURGA Date: 2026.06.04 NARESH 16:56:41 +05'30'