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Facts
The assessee, a society running a school, collected Rs.64,98,470/- in school fees and deposited it in the bank. They failed to file a return of income, claiming their income was exempt under Section 10(23C)(iiiad) of the Act. The Assessing Officer treated the deposit as unexplained income under Section 69A.
Held
The Tribunal noted that the assessee was unable to represent its case properly before the lower authorities due to management changes. It was also acknowledged that the gross receipts were below Rs.1 Crore, making the income potentially exempt. However, these facts were not examined by the lower authorities.
Key Issues
Whether the cash deposits from school fees can be treated as unexplained income when the assessee claims exemption and the gross receipts are below the prescribed limit, and if the lower authorities erred by not examining these facts.
Sections Cited
250, 69A, 139, 148, 142(1), 144, 147, 10(23C)(iiiad)
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Income Tax Appellate Tribunal, “B’’ BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 14.02.2025 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1072516062(1) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2018-19.
The assessee has raised the following grounds of appeal:
1. Order of CIT(A) is liable to be set aside as it wrongly treated the cash deposit of Rs.64,98,470/- made out of school fees collected as unexplained money u/s 69A and added the same to the total income of the appellant on the following grounds: (a) It wrongly denied the exemption to school fees received by the appellant on the ground that the appellant has deposited the cash received by them into its bank account and the appellant had made some general grounds of appeal, but not produced proper Shobha Welfare Society, Bangalore Page 2 of 5 explanation and documentary evidence in order to buttress and substantiate the grounds of appeal in the appeal proceedings. (b) It wrongly upheld the addition made by the assessing officer in respect of school fees collected by the appellant by wrongly treating the same as unexplained money u/s 69A even though the appellant promptly deposited the school fees into the bank account and duly accounted for the same in its books of accounts (which is audited). (c) It wrongly held that the appellant has not pursued the appeal and has not submitted the explanation about the alleged cash deposits without considering the situation arising on account of transition in the management of the appellant as a result of take over by the new management. Total tax effect: Rs.57,42,907/-
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
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.
Order pronounced in the open court on 19th Sept, 2025