KONGU WELFARE TRUST,VILLUPURAM vs. ITO, EXEMPTIONS WARD-1,, CHENNAI

This appeal filed by the assessee is directed against the order dated 20.03.2025 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi for the assessment year 2018-19.

The assessee raised 6 grounds of appeal amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in confirming the addition made by the Assessing Officer by passing exparte order in the facts and circumstances of the case.

Brief facts relating to the case of the assessee are that the assessee filed its return of income on 30.08.2018 and claimed exemption under section 10(23C)(iiiad) of the Income Tax Act, 1961 [“Act” in short]. The return was selected for complete scrutiny and the Assessing Officer issued notice under section 142(1) of the Act along with questionnaire. The assessee has reported voluntary contribution forming part of corpus ₹.2,70,000/- . The assessee also shown receipts of ₹.11,21,000/- in the ITR as receipts from the activity of rendering any service in relation to any trade, commerce or business for any consideration as referred to in proviso to section 2(15) of the Act. Since the assessee could not produce the registration under section 12A of the Act or approval under section 10(23C) of the Act for the assessment year under consideration and not filed the audit report in Form 10B, the Assessing Officer held the entire exemption claimed is not allowable and accordingly added to the total income of the assessee and completed the assessment under section 143(3) r.w.s. 144B of the Act dated 03.06.2021. On appeal, the ld. CIT(A) dismissed the appeal of the assessee since the assessee did not comply with the hearing notices or filed any documentary evidences in support of grounds of appeal.

The ld. AR Shri Mudit Bohra, Advocate submits that non- compliance to the hearing notices issued by the ld. CIT(A) is neither wilful nor deliberate but due to circumstances beyond assessee’s control. He submits that in the absence of registration under section 12A of the Act, or approval under section 10(23C) of the Act for AY 2018-19, audit report in Form 10B, the Assessing Officer treated the receipts and corpus as income of the assessee. He further submits that the Assessing Officer ought to have assessed the assessee as an Association of Persons (AOP) under section 164(2) of the Act and allowed expenditure incurred in the course of its activities. He further argued that the Assessing Officer erroneously treated the gross receipts as taxable income by ignoring legitimate expenses incurred during AY 2018-19 and prayed that suitable directions may be given to the Assessing Officer to tax net income by treating the assessee as an AOP under section 164(2) of the Act.

The ld. DR Ms. V. Supraja, Addl. CIT fairly conceded that the matter may be remanded to the file of the Assessing Officer for fresh consideration.

Heard both the parties and perused the material on record. We note that the assessment was completed under section 143(3) r.w.s. 144B of the Act dated 03.06.2021. In the absence of the registration under section 12A of the Act, or approval under section 10(23C) of the Act for the assessment year under consideration, audit report in Form 10B, the Assessing Officer treated the receipts and corpus as income of the assessee in the absence of any explanation or documentary evidence furnished before the Assessing Officer. On perusal of Form 35, under “statement of facts”, we note that the assessee made submission to treat the assessee trust as an AOP under section 164(2) of the Act in the absence of registration under section 12A of the Act for which audit report in Form 10B is not required. However, the ld. CIT(A) did not consider the submissions of assessee in the absence of detailed written submissions in response to the hearing notices issued by the ld. CIT(A). Under the above facts and circumstances, we set aside the order of the ld. CIT(A) and direct the Assessing Officer to tax net income instead of gross income after verification of details as may be furnished by the assessee and decide the issue in accordance with law by considering the submissions of the assessee to treat the assessee as an AOP in the absence of registration under section 12A of the Act by affording an opportunity of being heard to the assessee. Thus, the grounds raised by the assessee are allowed for statistical purposes.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 18th July, 2025 at Chennai.