PYARI DEVI EDUCATIONAL HEALTH SOCIETY,GORAKHPUR vs. ASSESSING OFFICER, NFAC

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW “B”BENCH, LUCKNOW BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.765/Lkw/2025 A.Y. 2022-23 Pyari Devi Educational Health AO/NFAC, Society, Delhi-110001 Tilura, Pali Sahjanwa, vs. Gorakhpur, Uttar Pradesh-273209. PAN: AAJFP7203P (Appellant) (Respondent) Assessee by: Shri Girjesh Kumar Tripathi, F.C.A Revenue by: Smt. Pratibha Singh, Addl. CIT-DR Date of hearing: 11.08.2026 Date of pronouncement: 21.10.2026

O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the order of the ld. CIT (Appeals) / NFAC dated 07.08.2025, wherein the learned CIT(A) has refused to allow the appeal of the assessee against the order passed by the Assessing Officer under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 (the Act), for the AY 2022-23 dated 30.03.2024. The grounds of appeal are as under:- “1. That on facts and circumstance of the case Ld. A.O. of NFAC has erred in Law & facts in making ad-hoc disallowance of total revenue expenditure claimed at Rs.3,22,61,365/- @ 30% and made addition of Rs.96,70,910/- of bills and vouchers of expenses claimed where as all the details, copy of account of expenses claimed were furnished and available on record. Further the Ld. CIT Appeal has also allowed the appeal i.e. accept the 1

ITA No. 765/Lkw/2025 Pyari Devi Educational Health Society addition made by the Ld. A.O. of NFAC while various decision made by ITAT Lucknow has confirmed in his order that ad-hoc Addition cannot be made. 2. That on facts and circumstance of the case Ld. A.O. of NFAC has erred in Law & facts in making ad-hoc disallowance 30% of total revenue expenses claimed at Rs.3,22,61,365/-and made addition of Rs. 96,70,910/- with a general remark whereas all the expenses claimed are genuine, being compulsory in nature and incurred for betterment and smooth running of the educational institution/ institutions run by the society. Further the Ld. CIT Appeal has also allowed the appeal i.e. accept the addition made by the Ld. A.O. of NFAC while various decision made by ITAT Lucknow has confirmed in his order that ad-hoc Addition cannot be made 3. That on facts and circumstance of the case Ld. A.O. of NFAC has erred in Law & facts in making ad-hoc disallowance with general remark for want of bills and vouchers and without pinpointing any specific item which are disallowable in nature. Whereas the receipt and payment account of the entire society itself indicates the nature of expenses claimed which are supported with the Documents and Evidences. Further the Ld. CIT Appeal has also allowed the appeal i.e. accept the addition made by the Ld. A.O. of NFAC while various decision made by ITAT Lucknow has confirmed in his order that ad-hoc Addition cannot be made. 4. That on facts and circumstance of the case Ld. A.O. of NFAC has erred in Law & facts in affording reasonable and adequate opportunity to explain the nature of expenses claimed as all the expenses are totally allowable taking in to consideration of its nature. Further the Ld. CIT Appeal has also allowed the appeal i.e. accept the addition made by the Ld. A.O. of NFAC while various decision made by ITAT Lucknow has confirmed in his order that ad-hoc Addition cannot be made 5. That the order passed by the Ld. CIT (Appeals) of NFAC is illegal, unjustified, against the facts and material available on record, against the law of Equity and natural justice, therefore the appeal allowed made by the Ld. CIT (Appeals) of NFAC is liable to be deleted and allowed the expenses incurred by assessee for smooth & efficient running the institution. If in future any ground will further arise kindly allow us to add it and treat it as a parts and parcel of the original ground of appeal.”

ITA No. 765/Lkw/2025 Pyari Devi Educational Health Society guidance and advice received from them from time to time. The appeal order passed by the learned CIT(A)/NFAC, Delhi dated 07.08.2025 was not informed by the outsourced professional and for this reason, there was delay in filing of the appeal by the Society. It was submitted that since the delay was on account of the guidance placed on the outsourced professional (CA) it could only file the appeal whereas it was informed about the same. As a result of this, the appeal was time barred by 9 days and it was prayed that in absence of any willful negligence on its part, the delay in filing the appeal may kindly be condoned. After considering the condonation petition of the assessee, we condone the delay in filing of the appeal and admit he same for adjudication. 3. The facts of the case are that the assessee filed a return of income on 04.08.2022. Since there was large repayment of borrowed funds, the case was selected for scrutiny. The learned AO records that four notices were issued to the assessee and the assessee made part compliance to them. He found that the assessee had claimed to have repaid borrowed funds amounting to Rs. 1,05,57,709/- during the year under consideration and the assessee was asked to submit the details of the repayment of the loan, the source of the said loan, the details of parties from whom the loan was taken, the bank statement, loan agreement, etc. and in reply it was submitted that the loan had been taken from Punjab National Bank and Indusind bank as well as management. After entering into some further correspondence on the issue, the learned AO thereafter did not draw any adverse inference on this count. However he noted that the assessee had claimed educational expenses during the year of Rs. 3,22,36,365/- during the year under consideration and he asked the assessee to submit copies of bills/vouchers/invoices, name of vendor, PAN of vendor, amount, bank account, GSTIN of vendor, etc. vide notice under section 142(1). In 3

ITA No. 765/Lkw/2025 Pyari Devi Educational Health Society response the assessee provided the head-wise details of expenses made in a tabulated form but these were not considered satisfactory by the learned AO as the details as called for him had not been submitted. He therefore, held that the genuineness of the expenses were not established and he proposed to disallow 30% of the claim and add the same back to the income of the assessee. Accordingly, he show-caused the assessee in this regard. The assessee responded by saying that most of the expenses claimed had been supported with documentary evidences, which were enclosed. Some expenses were supported by cash memo (made through small vendors having no GST registration), therefore, tax invoices could not be produced regarding payment of petty expenses. However, the learned AO was not satisfied. He held that the assessee could have uploaded all the information by way of multiple submissions and therefore he proceeded to disallow 30% of the claimed expenses i.e. Rs. 96,70,910/- in this regard. 4. Aggrieved with the said disallowance, the assessee went in appeal before the learned CIT(A), the learned CIT(A) records that four notices were issued to the assessee at email ID casingh2061983@gmail.com but none of these were responded to. He therefore held that since the assessee was not pursuing its appeal, the appeal was fit to be dismissed for non- pursuit. However, he also proceeded to consider the issue on its merits on the basis of the material on record and concluded that since the assessee could not furnish invoices etc. as asked for by the learned AO, and since it had not furnished any material evidence in support of the grounds of appeal, the assessee had not discharged the burden of proof that was placed upon it. Accordingly, he dismissed the appeal of the assessee. 5. The assessee is aggrieved at this summary disposal of his appeal by the learned CIT(A) and has accordingly come before us.

ITA No. 765/Lkw/2025 Pyari Devi Educational Health Society 6. Shri Girjesh Kumar Tripathi, F.C.A (hereinafter known as “learned AR”) submitted that the assessee was a pure educational society working in remote area. The total turnover of the assessee as per its Income & Expenditure Account was Rs. 4,38,23,372/-. As against this the assessee had incurred expenditure of Rs. 4,26,79,253/- leaving a surplus of Rs. 11,44,119/-. It was submitted that most of the expenditure was vouched and properly documented. Only some petty expenses such as miscellaneous expenditures, expenditures of news paper and magazine, staff welfare, office stationery, medical expenses, garden expenses, etc. were supported by cash memos as the same were paid to small vendors who were having no GST registration and the tax invoices had not been drawn in such case. However, it was submitted that out of total expenses of Rs. 4,26,79,253/- only around Rs. 40,00,000/- were of this nature, which was less than 10% of the expenses incurred by the society. Therefore, there was no justification for the learned AO to make a disallowance of Rs. 96,70,910/- on this account. It was further submitted that the Institutions run by the Society were operating out of village and it was not possible for the assessee society to obtain proper tax invoices in respect of most of these expenses. These practical reality should have been considered before making of any disallowance. It was submitted that even otherwise, the society was having registration under section 12A and 80G of the Act, and therefore the learned AO had to first see whether the society had made expenditure of less than 85% for charitable purpose before bringing any tax in the hands of the assessee. The disallowance had been done in an adhoc manner without pinpointing any specific item which was disallowable. All the expenses that had been claimed were genuine and had been incurred for smooth and effective running of the Institution. The learned AR further pointed out that the Lucknow Bench of the ITAT in the

ITA No. 765/Lkw/2025 Pyari Devi Educational Health Society case of UP Co-operative Federation vs. Department of Income Tax in ITA No. 33/Lkw/2011 dated 22.03.2011, had held that there was no justification is suspecting the genuineness of entire claim and resorting to estimated disallowance. The learned AO has not given any reason for estimating the disallowance at 30% of the claim of revenue expenditure. The learned AO has not doubted the correctness of books of accounts regularly maintained by the assessee. Furthermore the assessee’s accounts were audited and Auditor had not given any adverse comment in the report. Therefore the disallowance had been made for the sake of disallowance. It was also submitted that before making the disallowance, the learned AO had not given any specific notice to the assessee regarding the expenditures claimed. The details were on record and therefore the disallowances made were not justified. Accordingly, it was prayed that the disallowances made may kindly be quashed on the facts of the case. 7. On the other hand, Smt. Pratibha Singh, Addl. CIT-DR submitted that there was no consistency in bills and vouchers that was submitted by the assessee during the assessment proceedings and therefore the learned AO had made disallowances. Furthermore, the assessee had not made any compliance before the learned CIT(A). In the circumstances, the learned AO had no option but to make estimated disallowance and the learned CIT(A) had no option but to sustain the said disallowance in the absence of any co- operation by the assessee during the appeal proceedings. Commenting on the detailed Paper Book submitted by the assessee during the appeal proceedings, the learned DR submitted that many of the vouchers provided did not contain the GSTIN Numbers of the vendors. Accordingly, she prayed that the disallowances may be confirmed.

ITA No. 765/Lkw/2025 Pyari Devi Educational Health Society 8. We have duly considered the facts and circumstances of the case and the arguments advanced by both the parties. We note that the case was primarily picked up for scrutiny to examine the repayment of the loans by the assessee’s society. However, thereafter the learned AO had required the assessee to furnish details of expenditures incurred by it and since he was not satisfied with the response of the assessee, he made an estimated disallowance of 30% of overall expenses. We have gone through the assessment order. We find that the learned AO has not identified any specific item of expenditures before making the disallowance. We also note that the disallowances have primarily been made because the assessee has provided a sample of invoices since it was unable to uphold all the invoices, due to the constraint of submission capacity in the portal being less than 5MB. The learned AO has held that nothing prevented the assessee from making multiple submissions of 5MB each and it appears that in the absence of these submissions, he has held that expenses to be unproved. We have also noted the submission of the assessee, that it being located in rural area, it was not practically possible for it to obtain tax invoices for each and every item of expenses, especially expenses of a petty nature that were paid to non GST registered vendors whose sale turnover was less than Rs. 40,00,000/-. Furthermore we also observe that the accounts of the assessee have been audited and no leakage of expenditure has been reported by the Auditors. The learned AO has also not done the assessment in the manner required to be done for the purpose of computing the income of charitable society. The application towards charitable purpose has to be determined after the disallowance and only if it fell below the requirement of 85%, could the assessee be brought to tax. The learned CIT(A) has not exercised his mind to the matter at all, taking shelter under the non-compliance of the assessee to his notice under section 250 of the

ITA No. 765/Lkw/2025 Pyari Devi Educational Health Society Act, thereby omitting to consider the detailed statement of facts submitted before him. In view of the aforesaid, it appropriate in the interest of justice that the matter should be restored back to the file of the learned AO, so as to afford the assessee an opportunity to provide the details as available with it and for the learned AO to thereafter consider these details and pass a fresh order in accordance with law. As the matters stands restored to the file of the learned AO, the appeal of the assessee is held to be allowed for statistical purposes.

Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21/10/2026 SK, Sr. PS Copy forwarded to: 1. Appellant – 2. Respondent – 3. CITDR , ITAT, 4. CIT, 5. The CIT(A) By order SHARWA Digitally signed by SHARWAN KUMAR N KUMAR Date: 2026.10.27 10:38:08 +05'30' Sr. P.S.