AGRICULTURAL PRODUCE MARKETING COMMITTEE,CHAMARAJANAGAR vs. INCOME TAX OFFICER, WARD-1, CHAMARAJANAGAR

The Ld. Assessing Officer observed that, according to the risk management strategy and data available on the Insight Portal Appellant made cash deposits during the fiscal year 2014-15 amounting to Rs. 1,100/- and Rs. 6,00,095,547/- into bank accounts maintained at Vijaya Bank (now Bank of Baroda), Gundlupet, and Mysore Chamarajanagar DCC Bank. Assessee has not filed any return of income for this period. Consequently, the Ld. Assessing Officer has reason to believe that income to this extent has escaped assessment for Financial Year 2014-15, relevant to Assessment Year 2015-16, due to Assessee‘s failure to file a return of income for the impugned Assessment Year.

In these circumstances a notice u/s. 148 of the Act was issued by the Ld. Assessing Officer on 25.04.2022 which was responded to by the Assessee stating before the Ld. Assessing Officer that income of the Assessee is exempt under the above section and therefore was not in fact obliged to file and return of income and there could not be any escapement of assessment of income. The to 2808/Bang/2025 SA No. 29-32/Bang/2026 The Agriculture Produce marketing committee Gundlupet Vs. The Income tax officer ward 1 Chamarajanagar Page 3 of 11 Ld. Assessing Officer noted that Assessee has even not filed any return of income in response to notice u/s. 148 of the Act also. The assessment proceedings continued where the Appellant also submitted the same fact stating that Assessee is an Agricultural Produce Marketing Committee whose income is exempt under section 10 [26AAB] of the Act.

The Ld. Assessing Officer observed that the status of the Assessee is classified as a trust according to the Permanent Account Number. Consequently, the Assessee was obligated to file a return of income, which has not been submitted. Therefore, the cash deposits totalling Rs.1,06,95,547/- across various bank accounts are subject to taxation in the hands of the Assessee.

The Assessee submitted that, as the Permanent Account Number is registered as a trust, attempts were made to file the return of income using ITR 7. However, ITR 7 does not provide an option for deduction under section 10 [26 AAB], which prevented the filing of any return of income. The Assessee provided a copy of the income tax return along with the statement of accounts, including the income and expenditure account and balance sheet, in paper format to the Ld. Assessing Officer. It was also stated that the primary sources of receipts are market fees and market cess from agricultural produce trades and commission agents. The main transactions generating income are remitted to the account in cash, resulting in cash deposits in the bank account. Furthermore, the Assessee clarified that all cash deposited in these bank accounts is accounted for, with all cash receipts reconciling with the books of accounts and bank statements. Therefore, there is no unaccounted income.

The Ld. Assessing Officer explicitly observed that the entire transaction was conducted under the Permanent Account Number assigned to a trust bearing the name of the Assessee. This permanent account number does not correspond to the status of a local authority. The modification in the Permanent Account Number reflecting local authority status became effective on 12.05.2022, applicable from Assessment Year 2023-24 onward. As the assessee remains to 2808/Bang/2025 SA No. 29-32/Bang/2026 The Agriculture Produce marketing committee Gundlupet Vs. The Income tax officer ward 1 Chamarajanagar Page 4 of 11 registered under the trust’s Permanent Account Number, eligibility for exemption under section 10(26AAB) is not established.

Consequently, the Assessment Order was issued to the Assessee, classified as a Trust (association of persons). The gross receipts of Rs. 1,47,86,899/- were reduced by Rs. 1,13,42,732/-, representing the income applied toward earning that amount, resulting in a net total income of Rs. 44,44,167/-. This net income was assessed pursuant to section 147 r.w.s. 144 of the Income Tax Act, 1961, as per the order dated 19.03.2024.

Identical orders were also passed for the Assessment Years 2016- 17, 2018 -19 and 2019 -20.

The Assessee collected all these Assessment Orders. Before the Ld. Appellate Authority, the Appeal was delayed by 84 days. The Assessee in form number 35 mentioned the reason for filing the appeal late but the Ld. CIT dismissed the lead appeal stating that the delay was not for sufficient cause. Same facts are also there in other years Appeal as far as delay is concerned which is not condoned by the First Appellate Authority and same was dismissed.

Aggrieved with the same these appeals before us for all these four assessment years.

The Ld. Authorised Representative submitted that the Appeal filed by the Assessee for Assessment Year 2015-16 was delayed by 84 days. It was acknowledged in Form No. 35, specifically in column 15, that there was a delay in filing the Appeal. The Assessee also included an application for condonation of delay within Form No. 35, stating that the Appellate Order was received on 19.03.2024, and the due date for filing the Appeal should be calculated from this date. The appeal was filed on 12.07.2024. The reasons for the delay are detailed in paragraph 3 of the Appellate Order.

It was explained that the Assessee consulted a competent tax professional to address and resolve the issue. The delay was not intentional, nor did the to 2808/Bang/2025 SA No. 29-32/Bang/2026 The Agriculture Produce marketing committee Gundlupet Vs. The Income tax officer ward 1 Chamarajanagar Page 5 of 11 Assessee derive any benefit from not filing the Appeal within the prescribed time. A request was made for a liberal approach regarding the condonation of delay. The Assessee claimed unawareness about the appropriate course of action under these circumstances and sought legal advice, which contributed to the delay. The delay is considered nominal, and thus, the Appellate Authority should have treated this as sufficient cause for late filing of the Appeal.

Furthermore, it was submitted that the delay resulted from seeking legal counsel on matters relating to an incorrect permanent account number and the fact that the Appellant’s income was exempt, yet still subjected to tax under the Assessment Order, which required additional time to address. The First Appellate Authority was noted to have erred in this aspect, primarily on the grounds that no relevant evidence or specific details were provided. However, it was contended that, in such situations, it is not always feasible to provide a detailed, date-wise analysis or documentation of legal consultations. The principal reason for rejection was the Appellant's inability to submit pertinent evidence and specific particulars to support the condonation of delay. Therefore, it was requested that the delay be condoned and the Appeal be heard on its merits.

For the Assessment Year 2015-16 under review, the Authorised Representative, Shri Ravi Shankar, Advocate, submitted a paper book comprising twenty-three pages. Reference was made to the first page, containing a letter dated 10.12.2025 from the Income Tax Officer, Ward-1, Chamarajanagar, addressed to the Secretary of the Assessee under the Right to Information Act. In this correspondence, the Assessee requested copies of the sanction granted under Section 151 of the Act by the Principal Commissioner of Income Tax for the issuance of notice u/s. 148, as well as copies of the order passed under Section 148A(d) of the Act for the relevant assessment years. Additionally, reference was made to the notice issued u/s. 148 of the Income Tax Act for the Assessment Year 2015-16, duly approved by the Principal Chief Commissioner of Income Tax, Karnataka, on 22.04.2022.

Shri Ravishankar further cited the decision of the Hon’ble Karnataka High Court in Writ Petition No. 18395 of 2025, dated 24.11.2025, contending that the to 2808/Bang/2025 SA No. 29-32/Bang/2026 The Agriculture Produce marketing committee Gundlupet Vs. The Income tax officer ward 1 Chamarajanagar Page 6 of 11 Assessment Order for the Assessment Year 2015-16 is barred by limitation. He noted that the High Court relied upon its earlier judgment in Mohammad Yasin vs. Income Tax Officer, dated 17.04.2025. Furthermore, he referred to the decision in Tarnish Investment and Trading Company Private Limited vs. Union of India [2025] 179 taxman.com 198, dated 21.08.2025, where a notice u/s. 148 for Assessment Year 2017-18 issued on 07.05.2024 was held to be time-barred, as the limitation period had expired on 31.03.2024. Based on these precedents, it was submitted that the order passed by the Assessing Officer is similarly barred by limitation and should therefore be set aside.

Reference is made to the Appeal for the Assessment Year 2016-17, specifically to case number 2806/Bangalore/2025, as well as the Right to Information order dated 10.12.2025. The Assessee has been granted an order u/s. 148A(d) of the Income Tax Act, dated 24.03.2023. Copies of the notice issued u/s. 148, along with an unsigned sanction u/s. 151 of the Act, have also been submitted. The contention of the Assessee is that the sanction accorded u/s. 151 of the Income Tax Act is unsigned, and this issue is directly addressed by the decision of the Allahabad High Court in Vikas Gupta v. Union of India [2022] 448 ITR 1 (Allahabad). Consequently, it was argued that the Assessment Order issued by the Ld. Assessing Officer, based on the unsigned sanction, is invalid and should be quashed. Further reference is made to the facts of the Assessment Year 2016- 17, where the Assessee deposited Rs. 1,12,18,290/- in their bank account, arising from cash deposits received from various producers. The Assessee’s income is stated to be exempt.

The representative referenced Assessment Year 2018-19, noting the response received under the Right to Information Act on 10.12.2025, which included a copy of the order issued u/s. 148A(d) on April 5, 2022, while the notice u/s. 148 was issued on 06.04.2022. He relied on the Supreme Court's decision in Income Tax Officer v. Bangla Gupta [2026] 183 Taxmann.com 121 (Supreme Court), which held that when a notice u/s. 148A is issued to the assessee after more than three years from the end of the relevant Assessment Year, approval must be obtained from the appropriate authority as specified in Clause 2 of Section 151. If approval to 2808/Bang/2025 SA No. 29-32/Bang/2026 The Agriculture Produce marketing committee Gundlupet Vs. The Income tax officer ward 1 Chamarajanagar Page 7 of 11 is sought from authorities listed in Clause 1 instead, both the notice and the order may be quashed due to a lack of proper authorization u/s. 151.

The Assessee also cited the Delhi High Court's ruling in Kusum Healthcare Private Limited v. Deputy Commissioner of Income Tax [2025] 173 Taxmann.com 58 (Delhi), which further established that reassessment actions commenced more than three years after the relevant Assessment Year require approval from the Principal Chief Commissioner, not the Principal Commissioner. Thus, sanction provided by the Principal Commissioner for reassessment under Section 148A would not stand.

In this context, he submitted that, based on information available on record, approval was obtained from the Principal Commissioner of Income Tax, Bengaluru, on 05.04.2022, for Assessment Year 2018-19, with the notice u/s. 148 issued on 06.04.2022. As more than three years had elapsed, he argued that approval should have been obtained from the Principal Chief Commissioner rather than the Principal Commissioner. Therefore, he contended that the Assessment Order should be set aside.

Regarding the Appeal for the Assessment Year 2019-20, the Assessee submitted an additional paper book, stating that the sanction granted u/s. 151 of the Act on 17.03.2023 for the issuance of notice u/s. 148 of the Act on 20.03.2023, pursuant to an order u/s. 148A dated 20.03.2023 furnished to the Assessee, was an unsigned sanction by the Principal Commissioner of Income Tax, Bangalore. Accordingly, the Assessee relied on the decision of the Hon’ble Allahabad High Court in the case of Vikas Gupta versus Union of India (Writ Petition No. 554 of 2022, dated 08.09.2022, reported in 2022 448 ITR 1 [Allahabad]). It was further asserted that this order should also be set aside.

The Joint Commissioner of Income Tax, Shri Balusamy N, together with Sri Raghu, the Income Tax Officer, approved the Assessment Order for all four relevant years. Both officers reported that the Appellant did not file any income tax returns, making it unclear whether its income was exempt. During the to 2808/Bang/2025 SA No. 29-32/Bang/2026 The Agriculture Produce marketing committee Gundlupet Vs. The Income tax officer ward 1 Chamarajanagar Page 8 of 11 reassessment proceedings, it was discovered that the Appellant is an Agricultural Marketing Produce Committee. Upon further inquiry, it was confirmed that no returns had been submitted. Therefore, there are no grounds to challenge the reopening of the proceedings. Additionally, in response to the notice issued u/s. 148 of the Act, the Appellant again failed to file any return. Submission of paper returns to the Assessing Officer does not constitute proper compliance and cannot warrant relief for the Appellant. Furthermore, the Permanent Account Number (PAN) obtained by the Appellant does not align with its business activities or status. The PAN was acquired some time ago, and subsequently, the Appellant neglected to consider its implications. As such, the revenue authorities cannot be held accountable for the Appellant’s lack of diligence. The recent change in the Appellant's PAN from 2022-23 also occurred due to actions taken by the revenue department. Considering these circumstances, no Revenue Authority could have granted assessee the benefit of Section 10 [26AAB] of the Act.

Regarding the order of the Ld. CIT(A), both officers submitted that the Assessee was provided opportunities to submit an application for condonation of delay and to substantiate the reasons for the delay before the first appellate authority. Despite multiple specific chances, the Appellant failed to present any persuasive justification. Consequently, the Ld. CIT determined that there was no sufficient cause for the delay in filing the Appeal and, therefore, did not condone it.

We have carefully considered the rival contention and perused the orders of the Ld. lower authorities.

The first contentious issue in this Appeal is whether the Ld. CIT (A) was correct in not condoning the delay of 84 days all these Appeals were disposed of dismissing them by not condoning the delay. The main reason given by the Assessee that Assessee is an Agricultural Produce Marketing Committee naturally its income is exempt u/s 10(26AAB) of the Act. It is not required to file its return of income because there is no requirement to file any return of income where Appellant earns any unconditionally exempt income. However, the facts to 2808/Bang/2025 SA No. 29-32/Bang/2026 The Agriculture Produce marketing committee Gundlupet Vs. The Income tax officer ward 1 Chamarajanagar Page 9 of 11 are little bit strange in the case of the Assessee that at the time of obtaining the permanent account number the Permanent Account Number was allotted as a trust. It is also not known whether the Assessee applied for the same showing the status of trust or it was allotted wrongly. Further no Authority denied that Assessee is an Agricultural Produce Marketing Committee and therefore its income is exempt. However merely because of the reason that Assessee could not file its return of income because its Permanent Account Number was of a trust, its activities were not of a trust but of a local authority. Its income was exempt. Therefore, when it tried to file a return of income even in response to notice of reopening, it was given ITR-7 which did not have any clause to claim exemption u/s. 10 [26AAB] of the act. Really the situation of the Assessee was very precarious. In that situation the Assessee was taking an advice and there was a delay of 84 days in filing of the Appeal. It is all together now irrelevant that Assessee did not furnish further reply showing sufficient cause before the first appellate authority to justify the delay in filing of the Appeal. Therefore, on the available facts before the first appellate authority, it needs to be evaluated. According to us, the Assessee’s situation was dicey and there is no solution available also unless the Permanent Account Number is changed. That permanent account was changed somewhere in 2022. Till that time the Assessee neither could have filed any return of income other than in ITR 7 and nor could have claimed any deduction under 10(26AAB) of the Act. Therefore, naturally there is some time required for seeking a professional advice in these circumstances. No doubt, had the Assessee had the relevant proof, it would have been produced before the first appellate authority but merely because Assessee does not have any evidence of seeking a legal advice and its timelines, it cannot be said that cause shown was not sufficient for condonation of delay. This was the pedantic approach adopted by the Ld. CIT(A) in not condoning the delay. Therefore, we hold that there is a sufficient cause in filing late before they Ld. CIT(A), by 84 days and according to us, it was for sufficient reason. Hence the Ld. CIT (A) was incorrect in not condoning the delay and not admitting the Appeal of the Assessee for all four years. Thus, the Appellate Orders for all 4 years are reversed.

The second issue concerns the fact that, as confirmed by all parties including the revenue authorities, the Assessee is an Agricultural Produce Marketing Committee. Its income is exempt u/s. 10(26AAB) of the Act. According to the Law, any income earned by an Agricultural Produce Market Committee or Board constituted under any current legislation for the regulation of agricultural produce marketing shall be excluded from the computation of total income for a given previous year.

The mere possession of a different Permanent Account Number, reflecting the Assessee's status as a "trust," does not warrant denial of benefits nor taxation of its income. Subsequently, the Assessee was granted a Permanent Account Number indicating its classification as a local authority from 2022. Therefore, an error in obtaining or allotting the Permanent Account Number should not result in taxation, particularly when the Income Tax Act provides for complete exemption of the Assessee’s income u/s. 10(26AAB) of the Act.

Based on the foregoing facts, we conclude that the Assessee is eligible for deduction under section 10(26AAB) of the Act, rendering the Assessee's income exempt. Consequently, the Assessment Orders on merits are hereby set aside. The Ld. Assessing Officer is instructed to grant exemption on the entirety of the Assessee's income and to determine the total income for all relevant Assessment Years as Nil.

In view of the above facts as the Assessee has been granted benefit of exemption u/s. 10, through the issue of reopening is also found to be in favour of the Assessee, same is not discussed and decided as the total income chargeable to tax itself is determined at Rs Nil.

In conclusion, it is our considered opinion that the Ld. Assessing Officer acted appropriately in this instance. The officer was unable to grant the Assessee the benefit of exemption u/s. 10(26AAB) of the Act because there was neither a return of income submitted nor any supporting evidence from the Permanent Account Number of the Assessee to justify the exemption. Additionally, it is noted to 2808/Bang/2025 SA No. 29-32/Bang/2026 The Agriculture Produce marketing committee Gundlupet Vs. The Income tax officer ward 1 Chamarajanagar Page 11 of 11 that the Ld. Assessing Officer made efforts to update the Appellant's Permanent Account Number to reflect the correct status.

As a result, all four Appeals are hereby allowed on their merits. The Ld. Assessing Officer is directed to grant exemption to the Assessee u/s. 10(26AAB) of the Act for all four assessment years and to determine the total income of the Assessee at Rs Nil/-. Considering this decision, all stay petitions filed by the Assessee for these years are rendered infructuous.

In the result Appeals of the Assessee are allowed and stay petitions are dismissed as infructuous.