SHOBHA WELFARE SOCIETY ,BANGALORE vs. INCOME TAX OFFICER, WARD-7(2)(5), BANGALORE

Brief facts of the case are that the assessee is a society registered under the Karnataka Society Registration Act, 1960. It is submitted that the society is in the activity of providing formal quality education to economically backward students under the name and style of “Max Muller High School” and is permanently recognised by the Government of Karnataka. During the financial year 2015-16, relevant for the assessment year 2016-17, the assessee collected school fees from 349 students and also incurred various expenditures for running the school. The books of accounts were also audited by the Chartered Accountant. As per the information available with the department, it was seen that the assessee society had made total cash deposit of Rs . 64,98,470/- in a bank account maintained with HDFC Bank Ltd. However, the assessee failed to file its return of income u/s 139 of the Act. Accordingly, the notices u/s 148 & 142(1) of the Act, along with show cause notices u/s 144 of the Act, were issued. However, the assessee failed to comply with such notices and did not file any submissions/reply to substantiate its claim. As the assessee failed to file its ITR in response to notice u/s 148 of the Act and the assessee also remained non-responsive to the notices, the AO had no option but to treat the entire cash deposit Shobha Welfare Society, Bangalore Page 3 of 5 amounting to Rs.64,98,470/- as unexplained money u/s 69A of the Act and added to the income of the assessee.

Aggrieved by the order of the ld. AO passed u/s 147 r.w.s. 144 of the Act dated 23.2.2024, the assessee preferred an appeal before the ld. CIT(A)/NFAC.

The ld. CIT(A)/NFAC dismissed the appeal of the assessee as despite providing four opportunities, the assessee remained non- compliant and accordingly the ld. CIT(A)/NFAC held that the assessee is not interested in pursuing its appeal. The ld. CIT(A)/NFAC observed that the assessee had not bothered to comply with any of the notices, even during the course of appellate proceedings, and accordingly dismissed the appeal of the assessee.

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 assessee society is running a school and during the financial year 2015-16, the school fees received from 349 students were deposited into the bank account. Further, ld. A.R. of the assessee submitted that the assessee, being a non-profit organisation, had a total gross receipts of Rs.79,85,331/- and also incurred expenditure towards running the school amounting to Rs.79,10,268/- for the Asst. year 2016-17. Lastly, the ld. A.R. submitted that the assessee did not file its return of income on an honest and bonafide belief that their income is exempted u/s 10(23C)(iiiad) of the Act, as the gross receipts of the educational institution do not exceed Rs.1 Crore.

The ld. D.R., on the other hand, supported the orders of the authorities below and vehemently submitted that the assessee is Shobha Welfare Society, Bangalore Page 4 of 5 completely non-responsive during the assessment as well as during the appellate proceedings, and therefore, the authorities below have rightly added the entire gross receipts as income of the assessee u/s 69A of the Act.

We have heard the rival submissions and perused the materials available on record. It was submitted that the assessee society is a non-profit making organisation and runs a school for economically backward students under the name and style of “Max Muller High School”. It is an undisputed fact that the assessee was not able to represent its case before both the authorities below. Before us, the ld. A.R. of the assessee submitted that due to frequent changes in the management of the Society, the assessee could not represent its case before both the authorities below. Further, we take note of the fact that the gross receipts from the school are below Rs.1 Crore. Therefore, we find force in the argument of the assessee that their income is liable to be exempt u/s 10(23C)(iiiad) of the Act. However, these facts were not examined by the authorities below. This being so, in the interest of justice and fair play and as requested by the ld. A.R. of the assessee, we deem it fit and proper to remit the entire issue in dispute to the file of the AO to decide afresh in accordance with law. Needless to say, an opportunity of being heard must be granted to the assessee. The assessee is also directed to produce all the relevant details/information/records/audited books of accounts, bills & vouchers and any other documents as required by the AO for proper adjudication. WE make it clear that in case of further default, the assessee shall not be entitled to any leniency. It is ordered accordingly. Shobha Welfare Society, Bangalore Page 5 of 5 10. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.

The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file