KULANDAIAMMAL TRUST,ERODE vs. ASSISTANT COMMISSIONER OF INCOME TAX EXEMPTIONS, COIMBATORE

The Assessee raised the following grounds of appeal : “1 The learned Addl./JCIT (Appeals)-12, Mumbai, erred in refusing to condone the delay of 906 days, despite the appellant having a bona-fide and reasonable cause. The delay occurred due to a genuine mistake in initially pursuing rectification under section 154, based on professional advice supported by judicial precedents and CBDT Circular No. 29/1968, instead of filing an appeal directly against the 143(1) intimation. The affidavit filed before this Hon'ble Tribunal establishes that the appellant acted diligently and in good faith and there was no negligence, only a procedural error arising from professional judgment.

The learned Addl./JCIT (Appeals)-12, Mumbai, erred in denying condonation solely on limitation grounds, despite the delay arising from a bona fide procedural mistake in pursuing rectification u/s 154. The income of the appellant is below the taxable limit and therefore there is absolutely no loss of revenue due to the delay The Hon'ble Supreme Court in N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123 held that the length of delay is immaterial where the explanation is bona fide and without negligence. Further, in PIC Departmentals Pvt. Ltd. v. Sreeleathers Pvt. Ltd., SLP (C) No.14902 of 2024, the Hon'ble Apex Court reiterated that procedural technicalities must yield to substantive justice. Hence, the appellant deserves a fair adjudication on merits

The learned CPC/Assessing Officer erred in bringing to tax the gross receipts of the appellant trust without granting deduction for legitimate revenue expenditure incurred in running the educational institution. Taxing the gross receipts instead of net income is contrary to the principle that only real income can be taxed

The learned CPC/Assessing Officer failed to appreciate that even without registration under section 12A, the income of the trust must be computed on commercial principles after allowing revenue expenditure. Taxing gross receipts is arbitrary and contrary to law.

The learned Assessing Officer erred in rejecting the rectification petition under section 154, despite the mistake of taxing gross receipts instead of net income being apparent from the record. The rejection is mechanical and unsustainable.

Without prejudice, even if the appellant is treated as an AOP in the absence of registration under section 12AA, income must be computed under normal provisions of the Act, allowing expenditure u/s 57(iii), basic exemption limit, and individual slab rates.

The appellant respectfully prays that this Hon'ble Tribunal may be pleased to condone the delay in filing Form 35, set aside the order of the learned Addl./JCIT (Appeals)-12, Mumbai, dismissing the appeal in limine, adjudicate the appeal on merits allowing the appellant to claim deduction for legitimate revenue expenditure and pass such other or further orders as may be deemed just and proper in the circumstances of the case.”

Briefly the facts of the case are that appellant is a Charitable Trust registered under Indian Trust Act. It is formed with the object of running an educational institution. The appellant filed the Return of Income for the Assessment Year 2022-23 on 16.09.2023 declaring income of Rs.56,030/- after claiming exemption u/s.11 of the Income Tax Act. The Trust was not registered u/s.12A of the Income Tax Act, 1961during the previous year relevant the assessment year under consideration. However, the appellant trust was granted registration earlier on 16.11.2007 and again granted registration on 19.06.2025. The said return of income processed by CPC u/s.143(1) of the Act vide intimation dated 08.03.2023 by assessing the entire gross receipts to the tax without allowing deduction of the expenditure incurred to earn the gross receipts. On receipt of the said intimation, a petition u/s.154 was filed on 25.12.2023 seeking the allowance of deduction of expenditure. The said petition was came to be rejected vide order dated 15.11.2024. 4. Being aggrieved by the above order, an appeal was preferred before the ld.CIT(A) which is pending for disposal. However, on a professional advice, the appellant filed an appeal against the intimation dated 08.03.2023 passed u/s.143(1) of the Act with a delay. The appellant also filed a petition seeking condonation of delay of 906 days before the ld.CIT(A) on the ground that the delay is occurred on account of bonafide belief that the appellant was pursing the remedy against the order u/s.154 of the Act. However, on a professional advice, the appeal was filed against the intimation issued u/s.143(1) of the Act. However, the ld.CIT(A) has refused to condone the delay and dismissed the appeal in limine on the grounds of delay.

Being aggrieved, appellant is in appeal before us in the present appeal. Before us, the appellant has also filed an Affidavit from the Advocate- Mr.M.Manickasundaram stating that based on his advice, an appeal u/s.154 was preferred before the ld.CIT(A) and subsequently, it was realized the appropriate remedy lies in challenging intimation issued u/s.143(1) and based on his advice, the pending appeal against the order u/s.154 of the Act before the ld.CIT(A) was withdrawn and appeal against intimation u/s.143(1) was filed, this resulted in delay. Thus, he submits that the delay before ld.CIT(A) be condoned and matter may be restored to the file of ld.CIT(A).

On the other hand, ld.Sr.DR vehemently opposed the above submission and submits that the ld.CIT(A) had refused to condoned the delay by passing reasoned order. The explanation filed by the appellant seeking the condonation of appeal before ld.CIT(A) lacks sufficient cause and placing reliance on the decision of Hon’ble Supreme Court in the case of C.I.Builders (P.) Ltd., Vs. PCIT [2025] 484 ITR 192(SC) vide order dated 04.09.2025 submits that delay should be condoned.

We heard rival submissions and perused the material available on record. The solitary issue that arises for our consideration is whether the ld.CIT(A) was justified in refusing to condone the delay of 906 days before him. It is an admitted position that there was a delay of 906 days filing of appeal before the ld.CIT(A). The appellant had filed a petition seeking the condonation of delay by stating that the delay had occurred on account of late realization on the part of the Advocate, who was looking after tax matter that ‘effective remedy’ lies in appeal against the 143(1) not u/s.154 of the Act. In our considered opinion, since the appellant was following the professional advice given by the Advocate, who was looking after his tax matters, the appellant society should not be made to suffer on account of the mistaken advice of the ld.Counsel. The ld.Counsel also filed an Affidavit affirming the fact that the delay had occurred on account of late realization on his part about the perusing of the ‘effective remedy’. Therefore, in our considered opinion, this would constitute a sufficient and reasonable cause for delay in filing of appeal against the intimation u/s.143(1) and the 8. In the result, appeal of the assessee is partly allowed for statistical purpose. Order pronounced in the open Court on 16th April, 2026. (SS VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai; "दनांक / Dated : 16th April, 2026 SGR, Sr.PS आदेश क" ""त"ल"प अ"े"षत / Copy of the Order forwarded to : अपीलाथ" / The Appellant.