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Facts
The assessee, an Agricultural Produce Market Committee (APMC), claimed exemption under Section 10(26AAB) for AY 2017-18. The AO disallowed the exemption, disallowed accumulation claimed under Section 11(2) due to a belated Form 10, and added demonetized cash deposits as unexplained income. The CIT(A) upheld the disallowance.
Held
The Tribunal held that the CIT(A)/NFAC erred in dismissing the appeal on a technical ground (Section 249(4)(b)) without considering the merits, especially since the assessee's income was nil. The Tribunal remitted the issue to the CIT(A)/NFAC for fresh consideration on merits.
Key Issues
Whether the CIT(A)/NFAC was justified in dismissing the appeal on a technical ground instead of adjudicating on merits, and whether the assessee was eligible for exemption under Section 10(26AAB) and provisions related to accumulation under Section 11.
Sections Cited
10(26AAB), 11, 11(2), 115BBE, 12A, 12AB, 139(1), 143(1), 143(2), 142(1), 249(2), 249(4), 249(4)(b), 250, 68, 211
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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the orders of the ld. CIT(A)/NFAC dated 12.06.2025 vide DIN & Order No.ITBA/NFAC/S/250/2025-26/1076950409(1) for the assessment year 2017-18 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”).
The assessee has raised the following grounds of appeal:
Brief facts of the case are that the assessee is an Agricultural Produce Market Committee (in short “APMC”) established under the Karnataka Agricultural Produce Market (Regulation) Act, 1966 for regulating the marketing of agricultural produce as notified by Government of Karnataka vide Notification No.MD/35211/RM-2/68- 69 dated 15.2.1969. The assessee filed its return of income for the assessment year 2017-18 on 12.9.2017 claiming exemption of income u/s 10(26AAB) of the Act. The return of income was thereafter processed u/s 143(1) of the Act. The case of the assessee was selected for scrutiny under CASS and accordingly notices u/s 143(2) as well as 142(1) of the Act were issued from time to time requiring the assessee to furnish details in electronic mode only. On verification of details furnished, it is seen by the AO that the assessee is also registered u/s 12A of the Act vide F.No. A- APMC Tarikere, Tarikere Page 3 of 9 60/12A/CIT/MYS/4-5 dated 6.8.2004 by the ld. Commissioner of Income Tax, Mysore. During the course of assessment proceedings, the AO noticed that as per the statement furnished the gross income is declared at Rs.3,24,21,898/- out of which Rs.1,77,99,088/- is claimed as exempt u/s 10(26AAB) of the Act and the balance of Rs.1,46,30,810/- is claimed as deduction u/s 11 of the Act. On perusal of the details uploaded by the assessee trust, it is also noticed that the trust has claimed accumulation u/s 11(2) of the Act in Form No.10 amounting to Rs.2,81,68,556/- stating that the objective as advancement of any other object of the general public utility. On verification of the same, it is noticed that the Form No.10 is belated as the same was not filed along with return of income within the due date as prescribed u/s 139(1) of the Act. The AO noticed that the assessee trust had not furnished any documents/materials regarding condonation of delay in filing form no.10 nor condonation letter by the ld. CIT(Exemption). Since form no.10 was not filed along with return within the due date specified under the Act, the AO held that assessee trust is not eligible to claim accumulation u/s 11(2) of the Act.
3.1 Further, on verification of the statement filed by the assessee, the AO noticed that the gross income includes interest income, income from deposits and income derived from sale of sites. Thus, it is clear from the above that the assessee trust is engaged in other activities and the income of which does not qualify for exemption u/s 10(26AAB) of the Act. Further upon verification of the assessee trust, details furnished, it is noticed that the trust had incurred expenditure in the course of agricultural produce committee activity and claimed expenditure to the tune of Rs.1,46,30,810/- towards administrative and establishment expenses. The ld. AO held that even though these expenses are not in the nature of charitable activity but considering the fact that they are related to the nature of 3.2 Upon further verification, it is noticed that the assessee has not supported its claim for deduction u/s 11 of the Act by furnishing necessary details of any charitable activity carried out by it. Further, the assessee being a registered trust u/s 12A of the Act, the AO held that the assessee is not entitled to claim exemption u/s 10(26AAB) of the Act except claim u/s 10(1) & 10(23C) as per section 11(7) of the Act and accordingly concluded that exemption claimed by the assessee trust u/s 10(26AAB) of the Act is not allowable in view of the specific provisions contained in section 11(7) of the Act.
3.3 Further, during the course of scrutiny proceedings, the AO noticed that assessee had received cash of Rs.7,63,000/- during the period of demonetization in the form of market fee, license fee, etc. and deposited the same into the bank account. However, on verification of bank certificate furnished by assessee, it was noticed that total deposit during the demonetization period was Rs.10,53,287/- out of which demonetized currency is Rs.7,63,000/- only. The AO held that the contention of the assessee that it is the money by way of the market fees, license fees, penalty and service tax which are transacted before the demonetization period was not at all substantiated by the assessee trust. The AO finally added Rs.7,08,500/- received during the period of demonetization and deposited on various dates holding that to be from undisclosed sources and brought to tax as unexplained credit. Consequent to verification of income and expenditure, financial statement and submission of other details furnished by the assessee trust in the course of scrutiny proceedings, the assessment was completed without allowing the benefit of provisions of section 11 & 12 of the Act for the assessment year 2017-18.
3.4 In view of the above discussion, total income of the assessee trust was computed as under based on the material furnished in the manner as applicable to the AOP after disallowing the claim made u/s 11 of the Act and u/s 10(26AAB) of the Act:-
APMC Tarikere, Tarikere Page 7 of 9 4. Aggrieved by the order of ld. AO passed u/s 143(3) of the Act dated 15.12.2019, the assessee preferred an appeal before the ld. CIT(A)/NFAC. The ld. CIT(A)/NFAC dismissed the appeal of the assessee by holding that the appeal has not been presented within the purview of section 249(2) of the Act i.e. failure to mention the information regarding return filed for the assessment year in connection with which appeal is filed and whether an amount of advance tax as per section 249(4)(b) of the Act was paid and accordingly did not admit the appeal for adjudication on merit.
Again, aggrieved by the order of ld. CIT(A)/NFAC, the assessee has filed the present appeal before this Tribunal.
Before us, the ld. A.R. of the assessee vehemently submitted that the ld. CIT(A)/NFAC erred in law in not admitting the appeal for a technical reason and the assessee is not liable to pay any advance tax since the assessee’s income is exempted u/s 10(26AAB) of the Act and also the assessee is a charitable trust and registered u/s 12AB of the Act.
Ld. D.R. on the other hand supported the orders of the authorities below.
We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that ld. CIT(A)/NFAC dismissed the appeal of the assessee for the technical reasons and did not admit the appeal for adjudication on merit. We are of the considered opinion that for the purpose of payment of advance tax, the assessee shall first estimate his current income. Secondly, the advance tax shall be payable during the financial year where the amount of tax payable is Rs.10,000/- or more and thirdly every person liable to pay advance tax shall on his own agree to pay APMC Tarikere, Tarikere Page 8 of 9 on or before each of the due dates specified in section 211 of the Act. In the present case, it is an undisputed fact that the assessee is registered u/s 12AB of the Act by the ld. CIT Mysore. Further, assessee has also claimed exemption u/s 10(26AAB) of the Act being agricultural produce market committee and therefore, the provisions of section 249(4)(b) of the Act will not be applicable to the assessee.
8.1 Further we are of the considered opinion that Section 249(4)(b) of the Act states that the assessee has paid an amount equal to the amount of advance tax, which was payable by him can never in a stretch of imagination be treated as advance tax payable on 90% of the disputed demand. In our opinion, admittedly, the assessee has filed his return of income declaring total income of Rs.Nil and therefore, in our opinion, the question of payment of advance tax does not arise in the case of the assessee. Therefore, we are of the considered opinion that ld. CIT(A)/NFAC grossly erred in invoking the provisions of section 249(4)(b) of the Act and dismissed the appeal on a technical ground.
8.2 Further, the question of filing of an application as per the proviso to section 249(4) of the Act also does not arise as the assessee was not liable to pay any advance tax as the assessee filed return of income of Rs. Nil.
8.3 This being so, with the above observations, we remit the entire issue in dispute to the file of ld. CIT(A)/NFAC for fresh consideration and decide the same on merits of the case in accordance with law after giving reasonable opportunity of being heard to the assessee. It is ordered accordingly.
In the result, appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 15th Dec, 2025