SRI JAWAHAR EDUCATION TRUST,CHAMARAJANAGAR vs. THE INCOME TAX OFFICER WARD 1, CHAMARAJANAGAR, CHAMARAJANAGAR

Facts

The assessee, Sri Jawahar Education Trust, filed an appeal against the order of the CIT(A) dated 17 February 2026, which dismissed its appeal against a reassessment order passed by the Income Tax Department's Assessment Unit on 21 March 2024. The reassessment order was passed under sections 147, 144, and 144B of the Income Tax Act, 1961, for Assessment Year 2016-17. The Income Tax Department received information about cash deposits totalling ₹66,52,785 in the assessee's bank accounts. As the assessee had not filed a return, the source of these deposits was unknown. The assessee claimed to be a charitable trust running an educational institution and believed its income was exempt. However, it was found not to be registered under section 12AA of the Act, and thus could not claim exemption. The Assessing Officer treated the deposits as business income, increasing the returned income by ₹66,52,782 to ₹67,36,102. The CIT(A) dismissed the assessee's appeal for non-response to notices.

Held

The Tribunal noted that the assessee was denied exemption under sections 11 and 12 of the Income Tax Act due to its failure to produce the registration certificate required under section 12AA. The assessee had neither furnished the certificate before the Assessing Officer nor any information before the CIT(A) despite notices. Before the Tribunal, the assessee sought condonation of delay in applying for registration under section 12AA and requested the matter be restored to the Assessing Officer to enable it to apply for registration and thereafter claim relief under sections 11 and 12 or any other applicable exemption provision. The Tribunal agreed to restore the matter to the Assessing Officer. The assessee was directed to apply for registration under section 12A within 90 days from the order date, with an application for condonation of delay. The Assessing Officer was directed to decide the remaining issues based on the outcome of that application. The Tribunal also directed the Assessing Officer to examine the claim for exemption under section 10(23C) without registration under section 12AA, if applicable, upon production of requisite details by the assessee, even though this contention was not raised before the lower authorities. The appeal was allowed for statistical purposes.

Key Issues

1. Whether the notice issued under section 148 of the Income Tax Act, 1961, is bad in law, without jurisdiction subsequent to the 'faceless assessment scheme', invalid for failure to strike off irrelevant portions, or if the mandatory procedures for assessment under section 147 were not followed, and if the sanction under section 151 was invalid or mechanical (mixed law and fact, turning on Sections 147, 148, 148A, 151). 2. Whether the cash deposits pertaining to the educational activity of the assessee can be construed as business income, and if the assessee's income is exempt from tax under section 10(23C)(iiiad) (mixed law and fact, turning on Sections 10(23C), 11, 12). 3. Whether the assessee is liable to pay interest under sections 234A, 234B, and 234C of the Act, considering there is no liability to additional tax, and if the levy of interest is not in accordance with law (mixed law and fact, turning on Sections 234A, 234B, 234C). Assessee's contentions: The assessee argued that the notice under section 148 was bad in law and issued without jurisdiction. It contended that its income was exempt under section 10(23C)(iiiad) as it was a charitable trust for educational purposes, and registration under section 12AA was not required. It also argued that interest under sections 234A, 234B, and 234C was not leviable. The assessee further argued that the CIT(A) should have provided another opportunity of hearing in the interest of natural justice. Revenue's contentions: The revenue contended that the assessee failed to produce registration under section 12AA, hence could not claim exemption under sections 11 and 12. The CIT(A) dismissed the appeal for non-response to notices.