ISHAN INTERNATIONAL EDUCATIONAL SOCIETY,PATNA vs. ASSISTANT COMMISSIONER, PATNA

ITA 469/PAT/2024Status: DisposedITAT Patna29 September 2026AY 2017-185 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal noted that the assessee increased the salary of Manjula Sharma, the President of the Trust, by 17.3% from Rs. 7,20,000/- to Rs. 8,44,560/- without providing any documents or minutes of meetings justifying this increase. The AO's disallowance was based on the 3% increase for government employees, but the assessee also failed to provide any basis for the increased salary. Therefore, this issue was remitted back to the AO for determination of salary based on similar circumstances and comparison with salaries paid in other organizations. Regarding the increased school building rent, neither party provided a concrete basis to justify it. Consequently, this issue was also remitted back to the AO for determination of the Fair Market Value (FMV) of the rent paid for running the educational institution. The Tribunal suggested that the CPWD determine the FMV of the school building. The AO was directed to pass an order without being influenced by previous orders, giving the assessee a reasonable opportunity to substantiate its case with cogent documents and not seek unnecessary adjournments.

What were the facts?

The assessee, Ishan International Educational Society, filed a return of income for AY 2017-2018 declaring nil income and is registered u/s 12AA. The Assessing Officer (AO) initiated scrutiny and observed significant increases in salary and rent payments made to specified persons compared to the previous year. The AO noted a 17.3% increase in salary, which was significantly higher than the typical 3% annual increase for government employees. Consequently, the AO made an addition of Rs. 1,50,75,041/- under section 13(3)(c) of the Income Tax Act, 1961. The assessee appealed to the CIT(A), who, after considering a remand report and confronting it to the assessee, upheld the AO's order. The assessee then filed an appeal before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the addition made by the AO under section 13(3)(c) on account of increased salary paid to a specified person is justified, and if not, what is the correct amount of disallowance? (Question of law and fact) 2. Whether the addition made by the AO under section 13(3)(c) on account of increased rent paid to a specified person is justified, and if not, what is the correct amount of disallowance? (Question of law and fact) Assessee's Contentions: - The rent increase was due to sufficient funds and was in accordance with the rent agreement. - The Inspector may have wrongly reported the school building being used for political purposes. - The assessee requested another opportunity to substantiate its case. - The salary addition was made without completing any assessment of similar services provided by teachers. Revenue's Contentions: - The 17.3% salary increase is excessively high compared to government and private sector employees. - The rent paid is very high, and there is no fair market value (FMV) determined for the increased rent. - The lower authorities' orders are justified.

Which sections of the Income-tax Act were involved?

Section 13(3)(c),Section 250,Section 143(3),Section 12AA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PATNA BENCH, PATNA

Before: SHRI GEORGE MATHAN & SHRI LAXMI PRASAD SAHU

For Appellant: Shri D. V. Pathy and Shri Hiresh Karan
For Respondent: Shri Ravi Kant Chowdhary, Sr. DR
Hearing: 22.09.2026Pronounced: 29.09.2026

PER LAXMI PRASAD SAHU, AM: This is an appeal filed by the assessee against the order passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as ‘the ld. CIT(A)’], dated 07.05.2024 vide DIN No. ITBA/NFAC/S/250/2024-25 /1064689862(1), arising out of assessment order by the Assessing Officer (In short, ‘the AO’) passed u/s 143(3) of the Act, dated 17.12.2019 towards making addition of Rs.1,50,75,041/- as rental payments made to specified persons.

2 ITA No.469/Pat/2024/AY 2017-18 Ishan International Educational S

The order continues below.

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