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Facts
The assessee, a trust running an educational institution, claimed exemption under Section 10(23C). Their return for AY 2017-18 was initially deemed invalid. The AO reopened the assessment based on information about substantial cash deposits of Rs. 80 Lakhs during demonetization, which were not sufficiently explained by the assessee.
Held
The Tribunal held that while the assessee failed to provide necessary details and opportunities before the CIT(A), the interest of justice demands a fair hearing. Therefore, the order of the CIT(A) was set aside, and the matter was restored to the AO for fresh adjudication after granting the assessee one final opportunity.
Key Issues
Whether the appeal should be dismissed for non-prosecution due to the assessee's failure to appear or provide evidence, or if the matter should be remanded to the AO for fresh adjudication on merits to uphold the principle of natural justice.
Sections Cited
10(23C), 139, 148, 69, 234A, 234B, 234C, 69A
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Income Tax Appellate Tribunal, ‘B’ BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The appeal filed by the assessee is against the order passed by the NFAC, Delhi dated 12/08/2024 in DIN No. ITBA/NFAC/S/250/2024- 25/1067524525(1) for the assessment year 2017-18.
At the outset, we note that there was a delay in filing the appeal by the assessee before us of 68 days. The assessee filed an Affidavit for condonation of the delay in filing the appeal. In the Affidavit, it was submitted that the assessee has not received physical copy of the order passed by the ld. CIT(A). The email.id mentioned in Form No. 35 was that of the ex-employee who was earlier in charge of managing the day-
Page 2 of 7 to-day affairs of the trust and subsequent to his disengagement from the trust, there was no access to the e-mail. The person attended the IT Department call in the month of Dec, 2024 thinking that it was spam call and therefore he did not intimate regarding the outstanding demand. Only upon receipt of the letter from IT Department, the CA was approached, who in turn informed that his staffs are unavailable till 31.12.2004 on account of time barring GST audits and was able to meet him in January 2025. Thereafter, the appeal was immediately filed before the Tribunal on 07.01.2025 with a delay of 68 days. Thus, it was submitted that the delay has occurred in filing the appeal before the ITAT due to unavoidable circumstances. In view of the above, the ld. AR requested to condone the delay in filing the appeal and adjudicate the matter on merit.
2.1 On the other hand, the ld. DR did not oppose it if the delay is condoned and the issue is set aside on the merit of the case as per the provisions of law to the file of the AO.
2.2 We have heard the rival contentions of both the parties and perused the materials available on record. In view of the aforesaid discussion and considering the length of the delay in filing the appeal, we are inclined to condone the delay in the interest of justice and fair play. Accordingly, we condone the delay and proceed to adjudicate the matter on merit.
The assessee has raised the following grounds of appeal:
1. The order of the authorities below in so far as it is against the appellant is opposed to law, equity and weight of evidence, probabilities, facts and circumstances of the case.
2. The appellant denies itself liable to be assessed to a total income of .
Page 3 of 7 Rs. 80,00,000/- for the impugned assessment year 2017-18 on the facts and circumstances of the case.
3. The learned CIT(A) should have another opportunity of hearing in the interest of natural justice and equity on the facts and circumstances of the case.
4. The provisions of section 69A of the Act finds no applicability as the cash deposited in the bank account , Rs.80,00,000/- represents the collection from students towards school fee and other incidental activities, on the facts and circumstances of the case.
5. The provisions of section 69A of the Act finds no applicability if the nature and source of money stands explained, on the facts and circumstances of the case 6. The authorities below have failed to appreciate that the power to invoke the rigours of section 69A of the Act is directory in nature and not mandatory on the facts and circumstances of the case.
The appellant denies the liability to pay interest under section 234A, 234B and 234C of the Act in view of the fact that there is no liability to additi l tax as determined by the learned assessing officer. Without prejudice the rate, period and on what quantum the interest has been levied are not in accordance with law and further are not discernable from the order and hence deserves to be cancelled on the facts and circumstances of the case.
8. The appellant craves to add, alter, amend, substitute, change and delete any of the grounds of appeal
9. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed and justice rendered and the appellant shall be awarded cost in prosecuting the appeal and also order for the refund of institution fees as part of the cost.”
3.1 The facts in brief are that the assessee is a trust and engaged in the activity of running educational institution. The assessee is claiming exemption under section 10(23C) of the Act. The assessee for the year under consideration filed return under section 139 of the Act as on 31st March 2018 which was held invalid. In the impugned invalid return, the assessee has shown total receipt of Rs. 88,11,777/- consisting of receipt on account of voluntary contribution (other than corpus) of Rs. 44,85,459/- and receipt from main object of Rs. 43,26,318/-. The entire stated receipt was claimed as exempted income and accordingly total income was declared at NIL.
Subsequently, the AO received information that the assessee has made cash deposits of Rs. 80 Lakh during the demonetization period in bank account Nos. 64059765057 (55 lakh) and 64106969967 (25 lakh) maintained with SBI. The AO was of the view that the cash deposits are not commensurate with the income declared by the assessee. Therefore, the AO forms the reason to believe that income chargeable to tax has been escaped and reopened the assessment by issuing notice under section 148 of the Act, dated 29-03-2021.
The AO found that the assessee was provided several opportunities to explain the sources of cash deposit based on cogent material. The assessee only furnished a copy of the “cash transaction statement” and based on the same claimed that the cash deposit was sourced out of receipt of voluntary contribution and fee collected from the students. The AO found that claim of the assessee was not substantiated by the material evidence. The assessee has not furnished the cash book, bank book, cashflow statement, detail of cash deposit pre and post demonetization, copy of cash receipt, fee collection receipts, identity of the donor etc. Hence the AO treated the impugned amount of cash deposit of Rs. 80 Lakh as unexplained cash under section 69 of the Act and added to the total income of the assessee.
The aggrieved assessee preferred an appeal before the learned CIT(A).
7. The learned CIT(A) found that the assessee was asked to furnish the supporting documentary evidence and as many as 11 opportunities were given but the assessee failed to make a reply. Therefore, the . learned CIT(A) referring to the judgment of Hon’ble Supreme court in the case of B.N. Bhattacharjee and Another reported in 118 ITR 461 concluded that the assessee is not interested in pursuing the appeal. Hence, the ld. CIT-A held that the appeal is liable to be dismissed.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us requested to restore the issue to the AO and further assured to extend full co-operation during the proceedings.
On the other hand, the learned DR before us vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The assessee, a trust engaged in running an educational institution, has claimed exemption under section 10(23C) of the Income Tax Act. The assessment in this case was reopened under section 148 of the Act based on substantial cash deposits amounting to ₹80 lakhs during the demonetization period, which were allegedly not supported by sufficient material evidence.
11.1 It is noted from the assessment order that the AO treated the cash deposits as unexplained under section 69 of the Act, as the assessee failed to substantiate the claim of receipts from voluntary contributions and student fees with documentary evidence such as cash books, bank books, receipts, or identity of donors. Subsequently, the assessee preferred an appeal before the learned CIT(A), but failed to . appear or furnish any submission or evidence despite being granted as many as eleven opportunities.
11.2 The learned CIT(A), citing the judgment of the Hon’ble Supreme Court in B.N. Bhattacharjee and Another v. Union of India [118 ITR 461], dismissed the appeal for non-prosecution, holding that the assessee is not interested in pursuing the matter.
11.3 In our considered view, while it is true that the assessee did not avail multiple opportunities granted by the learned CIT(A), the interest of justice demands that an assessee should not be denied a fair hearing, particularly in cases where substantial additions have been made under deeming provisions like section 69 of the Act. The principle of natural justice requires that every party be given a reasonable opportunity to present its case, and the assessee’s failure to do so earlier should not become a bar to seeking justice, especially when the order has been passed ex-parte.
11.4 It is also important to note the assessee has not furnished the necessary details during the assessment proceedings, we, therefore, deem it appropriate to restore the matter back to the file of the AO for fresh adjudication on merit. The AO shall grant one final opportunity to the assessee to present its case and submit necessary documents and evidence to support its claim. The assessee is also directed to cooperate in the proceedings and furnish the requisite details as may be called for by the AO within the time allowed.
11.5 Accordingly, the order of the learned CIT(A) is set aside, and the matter is restored to the file of the AO for de novo adjudication after providing reasonable opportunity to the assessee. The appeal is treated as allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in court on 21st day of April, 2025