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Facts
The assessee, an educational institution, filed its return for AY 2018-19 declaring a total income of Rs.38,960 and claiming exemption under section 10(23C)(iiiad). The Assessing Officer (AO) observed that the assessee's gross receipts exceeded Rs.1 crore, disqualifying it from exemption. The AO made several additions to the income, including Rs.52,18,363 for unexplained bank credits, Rs.10,17,000 and Rs.20,48,840 for unexplained cash credits/advances under section 68, Rs.5,90,918 as ad hoc disallowance of expenses, and Rs.2,07,521 as denial of exemption.
Held
The Tribunal admitted additional evidence filed by the assessee for grounds related to unexplained bank credits, cash credits, and advances. The matter concerning these grounds was restored to the AO for verification and readjudication. The ground regarding disallowance of expenses was also remanded to the AO for fresh verification after the assessee provides supporting vouchers.
Key Issues
Whether the additional evidence filed by the assessee can be admitted and the matter remanded to the AO for fresh verification, and whether the grounds of appeal are to be decided based on the findings of the AO on these remanded issues.
Sections Cited
10(23C)(iiiad), 68, 143(2), 144B, 143(3), Rule 29 of ITAT Rules
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by M/s. Suraka Educational Society (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 29.08.2024 for the A.Y. 2018-19.
The assessee has raised the following grounds of appeal :
Brief facts of the case are that, the assessee is an educational institution, filed its return of income for A.Y. 2018-19 on 15.10.2018, declaring total income of Rs.38,960/-,+ claiming exemption under section 10(23C)(iiiad)
of the Income Tax Act, 1961 (“the Act”) having shown gross receipts of Rs.90,65,559/-. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued on 26.09.2019. During the assessment proceedings, the Learned Assessing Officer (“Ld. AO”) observed that the assessee was operating through five bank accounts and the total credits in these bank accounts amounted to Rs.1,73,49,761/-. The Ld. AO concluded that the gross receipts of the assessee exceeded Rs.1 crore, thereby disqualifying the assessee from claiming exemption under section 10(23C)(iiiad) of the Act. The Ld. AO called for the reconciliation of total credits of Rs.1,73,49,761/- in bank accounts and the gross receipts shown by the assessee at Rs. 90,65,559/-. Upon failure to reconcile the figures or substantiate the nature of receipts, the Ld. AO made multiple additions i.e. Rs.52,18,363/- on account of unexplained receipts in bank accounts, Rs.10,17,000/- as unexplained cash credits under section 68 of the Act, Rs.20,48,840/- as unexplained advances received u/s.68 of the Act, Rs.5,90,918/- as ad hoc disallowance of 20% of various expenses and Rs.2,07,521/- as surplus of income over expenditure upon denial of exemption u/s. 10(23C)(iiiad) of the Act. Accordingly, the Ld. AO completed the assessment u/s.143(3) r.w.s. 144B of the Act on 30.04.2021 at total income of Rs.91,21,600/-.
Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). However, the assessee’s appeal before the Ld. CIT(A) was dismissed due to non-furnishing of documentary evidence.
Aggrieved with the order of Ld. CIT(A) the assessee is in appeal before the Tribunal. The assessee has filed the present appeal along with additional evidences in support of ground nos.2, 4 & 5 of the appeal of the assessee with a prayer to admit the same under Rule 29 of the ITAT Rules.
At the threshold of the appellate proceedings, the Ld. AR submitted that ground nos.1 and 7 are general in nature and not pressed. Accordingly, ground nos.1 & 7 are dismissed as not pressed.
Ground No. 2 of the assessee is related to addition of Rs.52,18,363/- on account of unexplained excess receipts in bank accounts. In this regard, the Ld. AR submitted that the Ld. AO added the excess bank credits over declared gross receipts without verifying the nature of bank entries. It was submitted that substantial credits were either inter-bank transfers, FDR maturity proceeds, or other non-revenue transactions. In this regard, the assessee has filed additional evidence (Page nos. 5 to 46 of the Paper Book), including bank statements of all five accounts, detailed reconciliation and specific references to internal transfers (at Page nos. 5, 10, 27, and 45 of Paper Book). The Ld. AR prayed before the bench to admit the additional evidences under Rule 29 of the ITAT Rules and remand the matter to the file of Ld. AO for verification.
Ground No. 3 of the assessee is related to disallowance of Rs.5,90,918/- (20% of various expenses). In this regard, the Ld. AR submitted that disallowance was made due to non-furnishing of relevant bills and vouchers.
However, he stated that the assessee now possesses all the supporting vouchers and is able to substantiate its claim on merits. Accordingly, the Ld. AR prayed before the bench to provide one more opportunity to the assessee to produce all the relevant bills / vouchers in support of their claim before the Ld. AO.
Ground No. 4 of the assessee is related to addition of Rs.10,17,000/- as unexplained cash credit under section 68 of the Act. In this regard, the Ld. AR submitted that, the addition was made due to absence of production of relevant documentary evidences by the assessee. He further submitted that, now the assessee is in possession of relevant documents and has filed confirmation letters from two lenders (Page nos. 1 to 4 of the Paper Book) along with their PAN and identity proofs. These evidences were not filed earlier before the Ld. AO and are in the nature of additional evidence. It was prayed that these documents may be admitted as additional evidence and the matter may be remanded to the Ld. Ld. AO for adjudication of the issue after verification of the relevant evidence.
Ground No. 5 of the assessee is related to the addition of Rs.20,48,840/- as receipt of unexplained advance received under section 68 of the Act. In this regard, the Ld. AR submitted that the advances were received from students through cheques and the same are properly reflected in the ledger (Page no. 47 of the Paper Book). He also submitted that, all the advances received from students are verifiable from the books of accounts of the assessee. He prayed before the bench that, the copy of ledger account being in the nature of additional evidence, may be admitted under Rule 29 of the ITAT Rules. He also requested for remand of the issue to the file of Ld. AO for re-adjudication after verification of additional evidence from the books of accounts of the assessee.
Per contra, the Ld. DR opposed the admission of additional evidence and the remand request. He submitted that the AO had provided adequate opportunity, but the assessee failed to file the necessary evidences at any stage. No valid reason was given for such failure. Finally the Ld. DR prayed before the bench to dismiss the ground nos.2 to 5 of the assessee.
We have considered the rival submissions and perused the additional evidence filed by the assessee (Page nos. 1 to 47 of the Paper Book). As far as ground no.2 regarding addition of Rs.52,18,363/- on account of unexplained excess receipts in bank accounts is concerned, the assessee has filed the reconciliation statement and the bank statements (page nos.5 to 46 of the Paper Book) as additional evidence. On perusal of the same, we find that, a substantial portion of the excess bank credits is explained as inter-account transfers or FDR maturity amounts.
12.1 As far as the ground no.4 of the assessee related to addition of Rs.10,17,000/- u/s. 68 of the Act is concerned, the assessee has filed confirmation and acknowledgement of return of income of loan creditors (page nos.1 to 4 of Paper Book) as additional evidence. On perusal of same, we found that these documents have been filed by the assessee to establish the identity, credit-worthiness and genuineness of transaction qua the loan taken by the assessee.
12.2 As far as ground no.5 of the assessee related to addition of Rs.20,48,840/- u/s. 68 of the Act is concerned, the assessee has filed the ledger copy of the advances received (page no.47 of the Paper Book) as additional evidence.
12.3 The additional evidences filed by the assessee with regard to their submission qua ground nos.2, 4 and 5 were never filed before the revenue authorities. The additional evidences filed by the assessee are crucial to decide the issues covered under the ground nos.2, 4 & 5. The reason cited by the assessee is lack of professional guidance and time constraints. We observe that, the additions are substantial and the assessee is now in possession of evidence that he claims to be genuine. Therefore, we are inclined to admit the additional evidence under Rule 29 of the ITAT Rules, in the interest of justice.
Accordingly, the additional evidences filed qua ground nos.2, 4 and 5 are admitted and the matter is restored to the file of the Ld. AO with the directions to verify all the evidences submitted by the assessee and readjudicate the issues involved qua ground nos.2, 4 and 5 after affording the assessee due opportunity of hearing.
As far as the ground No. 3 of the assessee related to disallowance of Rs.5,90,918/- (20% of various expenses) is concerned, the Ld. AR has submitted that disallowance was made due to non-furnishing of relevant bills and vouchers. However, he stated that the assessee now possesses all the supporting vouchers and is able to substantiate its claim on merits. Since the assessee has expressed readiness to submit all the required vouchers and this goes to the root of the disallowance, in the interest of justice, we find it appropriate to remand the matter to the Ld. AO for fresh verification. The assessee shall submit all relevant evidences and the Ld. AO shall examine the same and decide the issue in accordance with law. Accordingly, ground no.3 of the assessee is set aside for statistical purposes.
Ground No. 6 of the assessee is related to the addition of Rs.2,07,521/- due to denial of exemption under section 10(23C)(iiiad) of the Act. We found that, the issue involved in this ground is consequential to the issue discussed in Ground No. 2. The findings of this ground is depend on the findings, whether the assessee is eligible for exemption under section 10(23C)(iiiad) of the Act or not. The issue, whether the assessee is eligible for exemption under section 10(23C)(iiiad) of the Act or not will be decided by the Ld. AO in the remand proceedings. Accordingly, this ground is also restored to the Ld. AO for adjudication after his findings whether the assessee is eligible for exemption under section 10(23C)(iiiad) of the Act or not. Accordingly, ground no.6 of the assessee is set aside for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 30th June, 2025.