SHASHKIYE POLYTECHNIC MAHAVIDYALAYA RAGHOGARH,RAGHOGARH vs. INCOME TAX OFFICER, GUNA

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA (SMC) BENCH, AGRA BEFORE: SUNIL KUMAR SINGH, JUDICIAL MEMBER AND BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No. 589/Agr/2026 (Assessment Year: 2020-21) Shaskiye Polytechnic, Vs. ITO, Guna, Mahavidyalaya, Income Tax Office, Govt. Polytechnic College, Cantt, Guna-473001 Post Daurana, AB Road, Guna-473226 PAN: AAHAS8733Q (Appellant) (Respondent)

Assessee by Shri Mahesh Agarwal, CA Department by Shri Anil Kumar, Sr. DR Date of hearing 14.10.2026 Date of pronouncement 28.10.2026

ORDER PER:SUNIL KUMAR SINGH, J.M. This appeal is directed against the impugned order dated 29.05.2026 passed in appeal No NFAC/2019-20/10497208 by the ld. Commissioner of Income Tax, NFAC(Delhi) [(hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2020-21, wherein, ld CIT(A) has dismissed assessee’s appeal.

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Assessee’s case was reopened by issuance of notice u/s 148 dated 26.03.2024, assessee filed return in compliance thereof on 27.05.2024, declaring nil income for the year under consideration after claiming exemption of Rs. 43,27,497/- u/s 10(23C)(iiiad) of the Act. Statutory notices u/s 143(2) and 142(1) of the Act were issued and served upon the assessee. Assessee submitted that it is a Government Polytechnic which is wholly and substantially financed by the Government and is eligible for claiming exemption u/s 10(23C)(iiiab) of the Act and alternatively u/s 10(23C)(iiiad) as well. Assessee furnished copies of its provisional registration in Form No. 10AC. The assessing officer observed that the documents provided by the assessee do not pertain to the year under consideration. As the provisional registration u/s 12A was obtained by the assessee in Form No. 10AC on 03.12.2024, which was valid from A.Y. 2025-26 to A.Y. 2027-28. The exemption is allowed only if the Government

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grants of such university or educational institution, hospital exceeds 50% of the total receipts including any voluntary contributions. Further the claim was also disallowed by the assessing officer for non filing of the return u/s 139(4C) of the Act. The assessing officer disallowed Rs. 43,27,497/- claimed on account of exemption u/s 10(23C)(iiiad) of the Act, vide assessment order dated 06.03.2025 passed u/s 147 r.w.s. 144B of the Act. 3. Aggrieved, assessee preferred an appeal before ld CIT(A), who approved the action of the assessing officer and dismissed assessee’s appeal. 4. Assessee has preferred this second appeal mainly on the following grounds: “1. That, on the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in confirming the reassessment order passed under section 147 read with section 1448 of the Income-tax Act, 1961, and the consequent addition of 43,27,497/-, which is contrary to law, unsupported by facts, and inconsistent with the evidence on record. 2. That the learned CIT(A) erred in law and on facts in upholding the denial of exemption under section 10(23C)(iliad) solely on the ground of non-filing of return under section 139(4C), without appreciating that, for AY 2020-21, there was no statutory requirement under section 10(23C)(iiiad) mandating filing of return under section 139(1) or section 139(4C) within the prescribed time as a condition precedent, particularly when a valid return was furnished in response to notice under section 148. Observations of the Ld AO in this respect are incorrect and contrary to law. 3. That the learned CIT(A) further erred in sustaining the denial of exemption by introducing new grounds, namely, alleged failure of the appellant to furnish registration, trust deed, sanction orders, grant details or other documents to establish its eligibility under section 10(23C)(iiiad), although neither such ground formed the basis of the assessment order nor such requirements are prescribed under section 10(23C)(iiiad). 4. That the learned CIT(A) grossly failed to appreciate that the appellant fully satisfies the substantive statutory conditions under section 10(23C)(iiiad), being 3 | P a g e

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an educational institution existing solely for educational purposes and not for profit, with annual receipts below the prescribed threshold, and hence exemption could not lawfully be denied on mere procedural lapses. 5. That the learned CIT(A) also erred in disregarding the binding principle of consistency by not following the appellate order in the appellant's own case for AY 2019-20 on identical facts, without demonstrating any distinguishing feature, thereby violating judicial discipline and settled law. …..” 5. We have perused the records. Heard ld representative for the appellant assessee and ld Sr (DR) for the respondent revenue. 6. The main question for determination, on the basis of aforesaid grounds raised under appeal, is as to whether ld CIT(A) has erred in confirming the disallowance of exemption claimed by the assessee merely due to non filing of income tax return u/s 139(4C) and for not satisfying the substantive condition prescribed u/s 10(23C)(iiiad) for A.Y. 2020-21? 7. Ld representative for the assessee has submitted that assessee is a Government Polytechnic College established by the Government of Madhya Pradesh for imparting technical education. Ld AR submits that for A.Y. 2020-21, the prescribed annual receipts threshold was Rs. 1 crore and raised to Rs. 5 crores from A.Y. 2022-23. The section 10(23C)(iiiad) does not prescribe any other condition like registration, trust, deed, funding details etc. The appellant meets all the requirements and is fully eligible for exemption u/s 10(23C)(iiiad) of the Act. Ld AR further submits that in assessee’s own case for A.Y. 2019-20, ld CIT(A) has held it to be eligible for exemption u/s 10 (23C)(iiiad) of the Act. The funds from income and

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expenditure accounts are transferred to the corpus. Thus the appellant is eligible to claim the aforesaid exemption both u/s 10(23C)(iiiab) and u/s 10(23C)(iiiad). Ld AR has referred (i) order dated 01.10.2024 passed by ITAT Kolkata in ITA No. 11/Kol/2024 in Haringhata Mahavidyalaya (ii) order dated 16.04.2025 passed by ITAT Agra in ITA NO. 72/Agr/2023 in Suraj Gyan Shiksha Prasar Samiti and (iii) order dated 30.09.2025 passed by ITAT indore in ITA No. 313/Ind/2025 in Shri Guptnath Bal Shikshan Samiti Machalpur V ITO, Rajgarh, in support of his arguments. 8. Ld representative for the respondent revenue has stated that the assessee did not file return u/s 139(4C) and had no valid registration u/s 12A of the Act. Ld DR, thus, submits that the revenue authorities have rightly disallowed assessee’s claim of exemption u/s 10(23C)(iiiab)/ 10(23C)(iiiad) of the Act. 9. According to the factual matrix, assessee claimed exemption u/s. 10(23C)(iiiad) for the very first time in return filed in response to the notice u/s 148 of the Act. The aggregate annual receipts are less than Rs. 1 crore, which was the maximum limit prescribed under the then existing provisions of the Act before amendment. The requirement of filing return u/s 139 of the Act was not existing before the amendment w.e.f. 01.04.2023. The present case pertains to A.Y. 2020-21, hence the claim of exemption either u/s 10(23C)(iiiab) or u/s 10(23C)(iiiad) could not have been denied. The registration u/s 12A of the assessee trust during the year under 5 | P a g e

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consideration is also not the condition precedent for claiming the said exemption. 10. The coordinate bench of ITAT Kolkata in Haringhata Mahavidyalaya (supra) has also held that no provision or section under the Income Tax Act, disentitles the assessee from claiming exemption u/s 10(23C)(iiiab) of the Act for non filing/ late filing return of income. The coordinate bench held that the action of revenue authorities in denying the exemption to the assessee on this count is unsustainable. 11. The coordinate bench of ITAT Agra in Suraj Gyan Shiksha Prasar Samiti (supra) has held as under: “5. Taking up first the issue of the assessee being denied exemption u/s 10(23C)(iiad) of the Act and its business income assessed at Rs.9,29,584/-, undisputedly, the ld. CIT(Appeals) has agreed that the assessee is eligible to exemption of its income in terms of the provisions of section 10(23C)(iiiad) of the Act. The same is noted in para 4.8 of the order as under : “4.8 The impugned order u/s 144 of the Act, submissions of the appellant, the remand report and rejoinder to the remand report has been considered. It is a fact that the AO had applied net profit rate of 8% in the absence of any evidence for exemption available to the appellant. The AO has not mentioned section 44AD as claimed by the appellant. The AO has clearly mentioned that the appellant has failed to produce any documentary evidences regarding exemption as claimed therefore, all receipts from educational institutions are treated as business receipts and business income of the appellant has been computed on estimate basis for A.Y. 2017-18 @ 8% of Rs. 1,16,19,807/-. The appellant has not filed return of income within the time allowed u/s. 139(1)/139(4) as also no valid return had been filed in response to notice u/s 142(1) of the I.T. Act. Thus, the AO in the remand report submitted that in the absence of a valid return benefit of section 11 is not available to the appellant. However, the appellant submitted that it has not claimed benefit of section 11 but it has claimed exemption u/s 10(23C) (iiiad) of the Act. Evidently, the receipts of each of the institutions are below the threshold of Rs. 1 crore as prescribed under Section 10(23c) (iiiad), hence the claim to that extent is valid in light of the Judgments relied on by the appellant. However, the allowability of exemption u/s 10(23C) (iiiad) in the presentcase also depends on the further questions arising as discussed below.” 6 | P a g e

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the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. . . . . (4C) Every— . . . (e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (iiiab) or sub-clause (iiiad) or subclause (vi) or any hospital or other medical institution referred to in subclause (iiiac) or sub-clause (iiiae) or sub-clause (via) of clause (23C) of section 10.” . . . Shall (to be reproduced) 8. The section does not state that the exemption will be denied if return of income is not filed by the assessee or for that matter benefit of exemption is available only if the return of income is filed by the assessee in terms of section 139 of the Act. Therefore, clearly, Ld CIT(Appeals) misinterpreted the provisions of section 139(4C)(e) of the Act to hold that since the assessee has not filed return of income as prescribed in the said section, it is not eligible to exemption in terms of section 10(23C)(iiiad) of the Act. Even otherwise, during the course of hearing before us, ld. Counsel pointed out that the prescription in law of the entitlement to exemption only on furnishing of return of income was brought on the statute by introducing the 20th proviso to section 10(23C) of the Act by the Finance Act, 2022 w.e.f. 01.04.2023. In this regard, he drew our attention to the said proviso as under : “Provided also that the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or subclause (via) shall furnish the return of income for the previous year in accordance with the provisions of sub-section (4C) of section 139, within the time allowed under sub-section (1) or sub-section (4) of that section.” 9. It is clearly evident from the same that denial of exemption u/s. 10(23C) of the Act for not filing the return of income as prescribed by law u/s. 139 of the Act was introduced on the statute only subsequently w.e.f. 01.04.2023 and was not there in the statute in the impugned assessment year before us, i.e., assessment year 2017-18. The ld. CIT(Appeals) has also stated that the assessee is not eligible to exemption on account of late filing of return in response to notice u/s. 142(1) of the Act agreeing with The Assessing Officerthat the return filed by the assessee in response to notice u/s. 142(1) has to be treated as invalid. 8 | P a g e

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During the course of hearing Learned DR was directed to point out as to which provision of law provided a belated return filed in response to notice u/s. 142(1) to be treated as non-est. He was unable to draw our attention to any provision in this regard. On the contrary, attention of the ld. DR was drawn to section 234A of the Act which provided for interest to be charged from the assessee for filing belated return in response to notice u/s. 142(1) of the Act. The provisions of section 234A are reproduced here : 234A. (1) Where the return of income for any assessment year under sub- section (1) or sub-section (4) 43[or sub-section (8A)] of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period commencing on the date immediately following the due date, and,— 10. When the statute itself recognizes belated return being filed in response to notice issued u/s. 142(1) of the Act, condoning their delay by levying interest on the assessee, there can be no case with the Assessing Officer or the ld. CIT(Appeals) for treating the belated return filed by the assessee as non-est or invalid. Learned DR had nothing to say in counter. In the light of the same, we do not agree with the ld. CIT(Appeals) that the return filed by the assessee in response to notice u/s. 142(1) claiming exemption u/s. 10(23C)(iiiad) of the Act was an invalid return. On the contrary, we note that the assessee had claimed exemption in a return filed in response to notice u/s. 142(1) of the Act. Therefore, we hold that the ld. CIT(Appeals) was wrong in denying the assesee’s claim of exemption of its income u/s. 10(23C)(iiiad) of the Act. The order of the ld. CIT(Appeals) confirming the addition made by the Assessing Officer of business income of Rs.9,29,584/- is, therefore, set aside. The Assessing Officer is directed to delete the addition made to the income of the assessee on account of business income amounting to Rs.9,29,584/-.” 12. The coordinate bench of ITAT Indore in Shri Guptnath Bal Shikshan Samiti Machalpur (supra) has also referred Haringhata (supra) and held that the exemption u/s 10(23C)(iiiad) could not be denied merely because assessee has not filed return u/s 139(4C), after discussing the insertion of 20th proviso to section 10(23C) inserted through Finance Act, 2022 w.e.f. 01.04.2023. 13. Respectfully following the aforesaid decision, we hold that the present case relates to the A.Y. 2020-21, whereas the exemption u/s 10(23C) by 9 | P a g e

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way of insertion of 20th proviso, describing disentitlement of exemption u/s 10(23C)(iiiab) or 10(23C)(iiiad) for non filing of return is applicable from A.Y. 2023-24 and the same cannot be made applicable retrospectively to assessee’s case, which pertains to A.Y. 2020-21. We, therefore, hold that the revenue authorities were not right in denying exemption to the assessee on the premise of non filing of return u/s 139(4C) as the assessee satisfied all the substantial conditions prescribed u/s 10(23C)(iiiad) of the Act, during the year under consideration. The aforesaid point is accordingly determined in positive in favour of the appellant assessee and against the revenue. 14. In the result, assessee’s appeal is allowed. Impugned order is set aside. Order pronounced in Open Court on- 28.10.2026

Sd/- Sd/- (BRAJESH KUMAR SINGH) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 28.10.2026 *Aamir, PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra

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