JAMYANG CHOLING INSTITUTE,DHARAMSHALA, HIMACHAL PRADESH vs. INCOME TAX OFFICER, EXEMPTIONS WARD - SOLAN, SOLAN

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ITA 378/CHANDI/2025Status: DisposedITAT Chandigarh02 July 2026AY 2021-225 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the CIT(A) has a statutory obligation to adjudicate grounds of appeal on merits. Since the issues involved factual and legal aspects requiring examination, the ex-parte order was set aside.

What were the facts?

The assessee's appeal was dismissed ex-parte by the CIT(A) for non-prosecution. The assessee claimed exemption under sections 11 & 12, which was initially allowed but later denied in rectification proceedings. The denial was based on various grounds including non-filing of audit report and registration details.

What were the issues?

Whether the CIT(A) erred in passing an ex-parte order without adjudicating the appeal on merits, and whether the denial of exemption under sections 11 & 12 was justified.

Which sections of the Income-tax Act were involved?

Section 11,Section 12,Section 12AB,Section 143(1),Section 154,Section 139(1),Section 250

AI-generated summary — verify with the full judgment below

आयकर अपीलीय अिधकरण,च�ीगढ़ �ायपीठ “ए” , च�ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL 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. 378/Chd/ 2025 िनधा�रण वष� / Assessment Year : 2021-22 Jamyang Choling Institute बनाम The ITO C/o Tejmohan Singh, Advocate Exemptions Ward # 527, Sector 10-D, Chandigarh- Solan 160011 �ायी लेखा सं./PAN NO: AAATJ3512G अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Tejmohan Singh, Advocate राज� की ओर से/ Revenue by : Shri Prabodh Sharma, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 25/06/2026 उदघोषणा की तारीख/Date of Pronouncement : 02/07/2026 आदेश/Order PER LALIET KUMAR, J.M: This appeal has been preferred by the assessee against the order dated 16.01.2025 passed by the Ld. CIT(A), National Faceless Appeal Centre, Delhi, for the Assessment Year 2021-22. 2. In the present appeal Assessee has raised the following grounds:

1.

That the Ld. Commissioner of Income Tax (Appeals) has erred in passing an ex-parte order without affording a proper opportunity of hearing which is against the Principles of Natural Justice and as such the order passed is arbitrary and unjustified. 2. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in passing an ex-parte order dismissing the appeal in limine without discussion on merits which is against the Principles of Natural Justice and as such the order passed is arbitrary and unjustified. 3. That the Ld. Commissioner of Income Tax(Appeals) has erred in upholding the denial of exemption /s 11 & 12 of the Income tax Act, 1961 by CPC, Bengaluru in the rectification order passed u/s section 154 which is illegal, arbitrary and unjustified. 4. That the Ld. Commissioner of Income Tax(Appeals) has erred in not appreciating the facts available on record that the intimation passed u/s 143(1) was not in respect of denial of exemption u/s 11 and 12 but only in respect of denial of TDS and as such the deduction so disallowed in the order passed u/s 154 and upheld is arbitrary and unjustified. 5. That the Ld. Commissioner of Income Tax(Appeals) has erred in upholding the denial of exemption claimed u/s I1 of the Act for the reason that the assessee has not e-filed the Audit report in Form 10B at least one month prior to the due date for furnishing return u/s 139(1) which is factually incorrect and as such the order passed is arbitrary and unjustified. 6. That the Ld. Commissioner of Income Tax(Appeals) has erred in upholding the denial of exemption claimed u/s I1 of the Act in as much as Form 10B was filed on 04.02.2022 which is one

2 month prior to the extended due date of filing of return to 15.03.2022 and as such upholding of denial of exemption u/s 11/12 is arbitrary and unjustified. 7. That in any case, it is a debatable issue that whether the exemption u/s 11 claimed by uploading of the audit report in form 10B before or after one month of filing of ITR is directory or mandatory and as such is beyond the scope of Section 143(1) and 154 of the Act which makes the appellate order arbitrary and unjustified. 8. That without prejudice to above, in the order passed u/s 143(1), СРСC has further erred in law as well on facts in treating the entire receipt of Rs 91,19,702/-declared in the income and expenditure a/c as income of the assessee, without considering the expenses claimed in the income and expenditure a/c and that being so addition made of entire receipts of Rs.91,19,702/- and levying tax on such income in the order passed /s 154 is arbitrary, unjustified and unwarranted. 9. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 10. That the order of the Ld. Commissioner of Income Tax(Appeals) is erroneous, arbitrary, opposed to law and facts of case and is, thus, untenable.

3.

Briefly the facts of the case are that the assessee is a charitable society duly registered under section 12AB of the Income-tax Act, 1961. For the assessment year under consideration, it filed its return of income on 26.12.2021 declaring Nil income after claiming exemption under sections 11 and 12 of the Act. Initially, the return was processed under section 143(1) on 17.09.2022 whereby the exemption claimed under sections 11 and 12 was accepted. However, credit for TDS was not granted.

3.1 The assessee thereafter filed a rectification application under section 154 seeking grant of TDS credit. While disposing of the rectification application, CPC not only declined the TDS credit but also withdrew the exemption allowed under sections 11 and 12 on the ground that registration details had not been furnished in the prescribed schedules of the return. Thereafter, successive rectification applications were filed by the assessee. In the subsequent rectification orders dated 16.02.2023 and 06.04.2023, exemption under section 11 continued to be denied for want of registration particulars. Thereafter, by order dated 06.05.2023, the exemption was denied on a different ground, namely that the audit report in Form No.10B had not been furnished within the prescribed time. According to the assessee, the audit report had in fact been duly signed and uploaded by the Chartered Accountant within the extended statutory time prescribed. Nevertheless, the final rectification order dated 03.06.2023 again denied the exemption under sections 11 and 12.

4.

Aggrieved, the assessee preferred an appeal before the Ld. CIT(A).

5.

The Ld. CIT(A) issued various notices fixing the appeal for hearing. However, according to the appellate order, the assessee did not file any written submissions or supporting documents in response to the notices issued. Holding that the assessee had failed to prosecute the appeal, the Ld. CIT(A) proceeded to dispose of the appeal ex parte after referring to various judicial precedents dealing with dismissal of appeals for non-prosecution. The Ld. CIT(A) further observed that since no material had been brought on record by the assessee to controvert the findings of the Assessing Officer/CPC, there was no justification to interfere with the impugned order. Consequently, all the grounds of appeal were dismissed. 6. Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal.

7.

At the time of hearing before us, the Ld. AR submitted that the assessee could not effectively participate before the Ld. CIT(A) due to bona fide circumstances, resulting in non-compliance with the notices issued during the appellate proceedings. It was contended that the appeal has been dismissed without adjudicating the issues raised on merits. 7.1 The Ld. AR submitted that substantial questions have been raised regarding the legality of denial of exemption under sections 11 and 12 in proceedings under section 154, the allowability of exemption in view of the registration under section 12AB, the filing of audit report in Form No.10B within the extended due date, and grant of TDS credit. These issues require proper appreciation of facts and examination of documentary evidence, which could not be placed before the Ld. CIT(A).

7.2 It was, therefore, prayed that, in the interest of substantial justice, the impugned order may be set aside and the matter restored to the file of the Ld. CIT(A) for fresh adjudication after providing adequate opportunity of hearing to the assessee. The Ld. AR further undertook that the assessee shall

4 fully cooperate in the appellate proceedings and shall not seek unnecessary adjournments.

8.

Per contra, the Ld. DR fairly submitted that the assessee admittedly remained non-compliant before the Ld. CIT(A), and therefore the Ld. CIT(A) was justified in proceeding ex parte. However, the Ld. DR did not seriously object to restoration of the matter to the file of the Ld. CIT(A), provided suitable directions are issued to the assessee to cooperate in the proceedings and not to delay the disposal of the appeal.

9.

We have heard the rival submissions and carefully perused the material available on record. It is an admitted position that the Ld. CIT(A) has dismissed the appeal substantially on account of non-compliance by the assessee during the appellate proceedings. Although the Ld. CIT(A) has referred to various judicial precedents regarding non-prosecution, it is equally well settled that the first appellate authority, being the final fact-finding authority, is under a statutory obligation to adjudicate the grounds of appeal on merits after considering the material available on record. The appellate jurisdiction vested under section 250 of the Act is quasi-judicial in nature and requires a reasoned adjudication of the issues raised before the appellate authority.

9.1 The controversy involved in the present appeal pertains to denial of exemption under sections 11 and 12 in rectification proceedings under section 154, the effect of registration under section 12AB, the filing of audit report in Form No.10B, and consequential grant of TDS credit. These issues involve examination of factual and legal aspects and deserve adjudication on merits after affording reasonable opportunity to the assessee.

9.2 Considering the totality of the facts and in the interest of substantial justice, we deem it appropriate to set aside the impugned order of the Ld. CIT(A) and restore the entire matter to his file for adjudication afresh. The Ld. CIT(A) shall decide the appeal by passing a speaking and reasoned order after considering all the grounds raised by the assessee and after granting

5 adequate opportunity of hearing. The assessee shall extend full cooperation in the appellate proceedings and shall file all supporting documents and written submissions within the time stipulated by the Ld. CIT(A). Failure to cooperate shall entitle the Ld. CIT(A) to proceed in accordance with law. Accordingly, the impugned order of the Ld. CIT(A) is set aside and the matter is restored to his file for adjudication afresh in accordance with law.

10.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced on 02/07/2026 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

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