NARAYANA REDDY EDUCATIONAL SOCIETY,NALGONDA vs. DCIT, CENTRAL CIRCLE-2(4), HYDERABAD

In this appeal, the assessee has assailed the impugned order of the CIT(A) on the following grounds of appeal:

Succinctly stated, the assessee which is an educational society, viz., M/s. Narayana Reddy Educational Society, had not filed its return of income for the year under consideration.

Survey operation under section 133A of the Act was conducted at the business premises of the assessee society on 18/10/2019. During the course of the survey proceedings, certain incriminating material relating to the assessee society was impounded vide order passed under section 133A(3)(ia) of the Act in F.No.DDIT(Inv)/U- 1(2)/133A/NRES/19-20, dated 18/10/2019. 5. During the course of the assessment proceedings, the AO observed that on verification of the impounded material, viz., Page Nos.10-19 of Annexure A/NRES/OFF/11 impounded during the course of the survey proceedings, that the assessee society had incurred expenditure of Rs.3.64 crores for construction of school building during the subject year. However, as the assessee society failed to furnish the details regarding the source of its income for incurring the subject expenditure, the AO in absence of any return of income, initiated proceedings under section 147 of the Act. Notice under section 148 of the Act, dated 25/03/2021 was served upon the assessee society, wherein it was called upon to file its return of income for AY 2014-15. However, the assessee society failed to comply with the aforesaid notice and did not file any return of income. Also, the notice issued under Narayana Reddy Educational Society vs. DCIT section 142(1) of the Act, dated 19/07/2021 that was served upon the assessee society calling for certain information was not complied with.

The AO based on the aforesaid facts vide his “show cause notice” (SCN), dated 04/01/2022 called upon the assessee society to explain the source of the expenditure to the tune of Rs.3.64 crores (supra) incurred towards construction of school building. However, as the assessee society failed to come forth with any explanation regarding the source of its aforesaid investment, the AO held the same as an unexplained investment under section 69 of the Act. Accordingly, the AO vide his order passed under section 147 r.w.s 144 of the Act, dated 02/03/2023 determined the income of the assessee society at Rs.3.64 crores.

Aggrieved, the assessee society carried the matter in appeal before the CIT(A) but the same on account of non-prosecution was dismissed by him after considering the merits of the case, vide his order No. CIT(A)-12, Hyderabad/10358/2013-14, dated 11/01/2023. 8. Subsequently, the assessee society preferred an appeal before the Tribunal, which vide its consolidated order passed in ITA No.146 to 150/Hyd/2023 (for AY 2014-15 to AY 2018-19), dated 24/03/2023 set aside the impugned order and restored the appeal of the assessee society after imposing a cost of Rs.2,000/- for each appeal which the assessee society was directed to deposit to the credit of Prime Minister’s Relief Fund, on or before 01/04/2023. The Tribunal while restoring the matter to the file of the CIT(A) had directed the latter to afford an opportunity to the assessee society and take a view according to law. Also, it was observed in the order that this was the last opportunity being afforded to the assessee and if for any reason it failed to avail the same, the CIT(A) would remain at liberty to proceed with according to law. Accordingly, the Tribunal based on its aforesaid observations set aside the matter to the file of the CIT(A) for fresh adjudication and thus partly allowed the same for statistical purposes. For the sake of clarity, we deem it apposite to cull out the observations of the Tribunal in ITA No.146 to 150/Hyd/2023, dated 24/03/2023, as under:

Thereafter, the CIT(A) for giving effect to the directions of the Tribunal which had restored the appeals to his file for fresh adjudication fixed up the matter and though issued notices to the assessee on seven occasions, but the assessee society failed to participate and put forth its case on either of the dates before the CIT(A). Accordingly, the CIT(A) acting upon the directions of the Tribunal proceeded with to adjudicate on merits of the case and finding no infirmity in the addition of Rs.3.64 crores (supra) made by the AO upheld the same and dismissed the appeal both on account of non-prosecution and on merits.

The assessee, being aggrieved with the order of the CIT(A) has carried the matter in appeal before us.

We have heard the Learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record.

Shri Ravi Bharadwaj, CA, the Learned Authorised Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal submitted that the same involves a delay of 315 days. Representative (for short, “Ld. Sr. DR”) strongly objected to the seeking of the condonation of the delay involved in the present appeal.

We have given thoughtful consideration and, considering the totality of the facts leading to the delay in filing of the present appeal, are of firm conviction that, as the same had crept in because of bona fide reason, therefore, the same merits to be condoned. Our aforesaid view is supported by the recent decision of the Hon'ble Supreme Court in the case of Vidya Shankar Jaiswal vs. The Income Tax Officer, Ward-2, Ambikapur in Special Leave Petition (Civil) Nos. 26310- 26311/2024, dated 31st January, 2025. The Hon'ble Apex Court while setting aside the order of the Hon'ble High Court of Chhattisgarh, which Narayana Reddy Educational Society vs. DCIT had approved the declining of the condonation of the delay of 166 days by the Income-Tax Appellate Tribunal, Raipur Bench, had observed, that a justice-oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay involved in filing the appeal.

Coming to the merits of the case, Shri Ravi Bharadwaj, CA, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal submitted that as the assessee was unaware about the fixation of the appeal by the CIT(A) in the course of the second round of proceedings, therefore, for the said reason it had failed to participate in the proceedings. The Ld. AR on being queried as to whether pursuant to the directions of the Tribunal vide its order passed in ITA No.146 to 150/Hyd/2023, dated 24/03/2023 the assessee had deposited the cost of Rs.2,000/- per appeal to the credit of the Prime Minister’s Relief Fund, which he was required to do latest by 01/04/2023, comeforth with an evasive reply. The Ld. AR on being specifically directed to place on record the copy of the challan as was directed by the Tribunal evidencing the payment of Rs.2,000/- per appeal on or before 01/04/2023, failed to do so.

Per contra, Dr. Sachin Kumar, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”), at the threshold submitted that as per the record the assessee society had till date not deposited the Narayana Reddy Educational Society vs. DCIT cost of Rs.2,000/- per appeal that was imposed by the Tribunal in the first round of litigation, which he was directed to deposit with Prime Minister’s Relief Fund on or before 01/04/2023. Apart from that, the Ld. DR submitted that the Tribunal in its order in ITA No.146 to 150/Hyd/2023, dated 24/03/2023 had categorically observed that the matter was being set aside to the file of the CIT(A) as a last opportunity to the assessee and in case he failed to participate in the proceedings, the CIT(A) shall remain liberty to proceed with and dispose of the appeal. Elaborating further on his contention, the Ld. AR submitted that the assessee in the present case despite having been afforded 6 opportunities had failed to participate in the proceedings before the CIT(A) (in the course of the set-aside proceedings), as a result whereof the latter was constrained to dispose of the appeal after considering the material available on record. The Ld. Sr-DR submitted that as the assessee society had failed to comply with the directions of the Tribunal, viz., (i) depositing of cost imposed; and (ii) non-participation in the course of the set aside proceedings, therefore, the assessee cannot despite the aforesaid blatant non-compliance assail the order passed by the CIT(A), dated 30/08/2024. 17. We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the material available on record.

Admittedly, as observed herein above, the Tribunal vide its order passed in ITA No.146 to 150/HYd/2023, dated 24/03/2023 had though set aside the matter to the file of the CIT(A), but the same was with a rider that it was the last opportunity being afforded to the assessee and for any reason it failed to avail the same, the CIT(A) shall remain at liberty to proceed with and dispose of the appeal as per law. Also, the Tribunal while disposing of the appeal had imposed a cost @ Rs.2,000/- per appeal which the assessee was directed to deposit with Prime Minister’s Relief Fund, on or before 01/04/2023. 19. As observed herein above, the assessee society had failed to comply with the directions of the Tribunal and not deposited the cost @ Rs.2,000/- per appeal not only by the prescribed date, i.e., on or before 01/04/2023, but also there is nothing available on record which would reveal that he had even thereafter deposited the said amount. Apart from that, we find that though the Tribunal while setting aside the matter to the file of the CIT(A) had specifically observed that this was the last opportunity afforded to the assessee and if for any reason it fails to avail the same, then the CIT(A) shall remain at liberty to proceed with the appeal in accordance with law. We find that the CIT(A) in the course of the set aside proceedings had afforded six opportunities to the assessee, i.e., over the period from 12/12/2023 to 27/08/2024, but on Narayana Reddy Educational Society vs. DCIT neither of the occasion the assessee society had participated in the proceedings before him.

We have given thoughtful consideration and are of firm conviction that as the assessee society despite having been afforded a last opportunity by the Tribunal while setting aside the matter to the file of the CIT(A), had adopted a most casual approach and had not abided by either of its directions, therefore, the latter had rightly proceeded with and dismissed the appeal. We thus, find no infirmity in the view taken by the CIT(A) and therefore uphold the same. ITA No.1454/Hyd/2025 (AY 2018-19)

We shall now take up the appeals filed by the assessee society against the respective orders of the CIT(A)-12, Hyderabad for the AY 2015-16 to AY 2018-19 respectively.

Shri Ravi Bharadwaj, CA, the Learned Authorised Representative (for short, “Ld. AR”) for the assessee society, at the threshold of hearing of the appeals submitted that there is a delay of 315 days in each appeal. Elaborating on the reasons leading to the delay, the Ld. AR submitted that the same had crept in because of the reason that the orders were served upon the assessee through email however, the same were delivered in the spam folder and therefore, the assessee Representative (for short, “Ld. Sr. DR”) strongly objected to the seeking of the condonation of the delay involved in the present appeals.

We have given thoughtful consideration and, considering the totality of the facts leading to the delay in filing of the present appeals, are of firm conviction that, as the same had crept in because of bona fide reason, therefore, the same merits to be condoned. Our aforesaid view is supported by the recent decision of the Hon'ble Supreme Court in the case of Vidya Shankar Jaiswal vs. The Income Tax Officer, Ward-2, Ambikapur in Special Leave Petition (Civil) Nos. 26310- 26311/2024, dated 31st January, 2025. The Hon'ble Apex Court while setting aside the order of the Hon'ble High Court of Chhattisgarh, which had approved the declining of the condonation of the delay of 166 days Narayana Reddy Educational Society vs. DCIT by the Income-Tax Appellate Tribunal, Raipur Bench, had observed, that a justice-oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay involved in filing the appeal.

Coming to the merits of the cases, as the facts and the situation in the present appeals remain the same as were there in the assessee’s appeal in ITA No.1450/Hyd/2025 for AY 2014-15, therefore, the order therein passed shall apply mutatis mutandis for the purpose of disposing of the present appeals.

The Principal Commissioner of Income Tax, Hyderabad.

"वभागीय""त"न"ध, आयकरअपील"यअ"धकरण /DR,ITAT, Hyderabad.

The Commissioner of Income Tax 6. गाड"फ़ाईल / Guard file