OM J J SWA VISHWASHANTI DHAM NIRMAN SANSTHA,VERUL vs. ITO EXEMPTION WARD, AURANGABAD

Assessment Year: 2015-16 Om J J Swa Vishwashanti V The ITO, Dham Nirman Sanstha, s Exemption Ward, VISHWASHANTI DHAM Aurangabad. NIRMAN SANSTHA, SHRI KSHETRA, VERUL, TAL KHULTABAD, AURANGABAD – 431101. PAN: AAAAO3641E Appellant/ Assessee Respondent / Revenue Assessee by Shri Piyush Bafna – AR Revenue by Shri Sandeep P Sathe – JCIT(DR) Date of hearing 06/10/2025 Date of pronouncement 31/10/2025 आदेश/ ORDER

PER DR. DIPAK P. RIPOTE, AM:

1. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-tax (Appeals) erred in dismissing the appeal as withdrawn, despite the fact that the said withdrawal was made inadvertently and under a mistaken belief by the appellant's representative and hence, it is respectfully submitted that the appeal may kindly be restored to the file of the CIT(A) for fresh adjudication on merits in the interest of justice.

Failure to Decide on Merits:

2. On the facts and in the circumstances of the case and without prejudice to any other ground, the Ld. Commissioner of Income-tax (Appeals) erred in not adjudicating the appeal on merits, especially when the issues involved substantial questions of law and fact including eligibility of deduction under section 11 of the Act Intimation u/s 143(1) Bad in Law:

5. On the facts and in the circumstances of the case and without prejudice to any other ground, the CPC has erred in disallowing the claim for exemption under section 11 of the Act, even though the appellant was a registered charitable institution under section 12AA of the Act and had duly applied the income towards its charitable objectives. 2 Capital Nature of Donations - Not Taxable:

6. On the facts and in the circumstances of the case and without prejudice to any other ground, the CPC has erred in not treating the donations received towards the building fund and corpus as taxable income, whereas such receipts are capital in nature.

Erroneous Taxation of Gross Receipts by CPC

7. On the facts and in the circumstances of the case and without prejudice to any other ground, the CPC has grossly erred in taxing the gross receipts of the appellant without considering the corresponding application of income and expenses and without prejudice to the other grounds, even if any addition was warranted, the same ought to have been restricted to the net income, which in the present case was a loss and hence, accordingly, the addition of ₹45,02,150 made by the CPC is wholly unjustified and liable to be deleted General Ground:

8. The appellant craves leave to add, alter, amend, or withdraw any of the above grounds at the time of hearing, in the interest of justice.‖ 2. The Assessee filed an Affidavit for condonation of delay as under : ―AFFIDAVIT FOR CONDONATION OF DELAY I, Mr. Lakshmangiri Guru Mounagiriji, aged about 67 years, having Aadhaar No. 6555 2265 4680 and PAN EICPM9238N, residing at Shri Kshetra, Verul, Tal-Khultabad, Aurangabad - 431101, do hereby solemnly affirm and state as under:

3. That the appeal in respect of AY 2015-16 was filed before the CIT (Appeals) on 31.05.2017. At that time, a different consultant was handling the matter. Over the intervening years, the consultants were changed.

10. That despite sincere efforts, we could not ascertain when and by whom the withdrawal application was filed. No document or record indicating the said withdrawal request is available on the portal or with the trust.

 Bombay High Court : CIT Vs. Premkumar Arjundas Luthra(HUF). Income Tax Appeal No.2336 of 2013, 2016 (5) TMI 290.

 Madras High Court : M Loganathan Vs. ITO Tax Case (Appeal) Nos.361 to 363 of 2006, [2013] 350 ITR 373.

4. Ld.AR further invited our attention to the Affidavit of the Trustee. Ld.AR submitted that the Trustees do not understand Income Tax Provisions. In the Affidavit, it has been admitted that 7 [A] they are not aware why and who filed the so-called withdrawal letter. Ld.AR submitted that in the interest of justice, ld.CIT(A) order may be set-aside to ld.CIT(A) for denovo adjudication on merits.

5. On merits, ld.AR submitted that CPC has not allowed any expenditure and they have taxed the entire receipts which is outside the provisions.

Submission of ld.DR : 6. Ld.Departmental Representative(ld.DR) for the Revenue has not objected to setting aside to ld.CIT(A).

Findings & Analysis : 7. We have heard both the parties and perused the records. We have carefully studied the Affidavit filed by the Trustee of the Assessee Trust.

8. On perusal of the order u/s.143(1), it is observed that entire income has been taxed and deductions claimed by the Assessee have been denied.

8.1 We have studied the decisions relied by the ld.AR. 8 8.2 Section 251 of the Act is reproduced as under : the 69[Joint Powers of Commissioner (Appeals) or the] Commissioner (Appeals). 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment : 70[Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;] …………. 8.3 Thus, as per Section 251 of the Act, Commissioner of Appeal may confirm, reduce, enhance or annul the assessment order.

9. The Hon’ble Bombay High Court has held in the case of Pr.CIT(Central) Vs. Premkumar Arjundas Luthra (HUF) Bombay)/[2017] 297 CTR 614 (Bombay) as under : Quote, “8.From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act.

Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration 9 with reasons in support. Section 251(1)(a) and (b) of the Act provide CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn.

Therefore, it would be noticed that the powers of the CIT(A) is coterminous with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non- prosecution as is evident from the provisions of the Act.” Unquote.

9.1 Thus, Hon’ble Bombay High Court has categorically held that CIT(A) has to decide the appeal on merit. Similarly, ITAT Mumbai Bench in Deekar Gears Vs. ACIT in has held as under : ―9. I have considered rival submissions and perused material on record. I have also applied my mind to the decisions relied upon by the learned Authorised Representative Undisputedly, in the course of proceedings before the first appellate authority the assessee had filed letter dated 19th September 2017, seeking withdrawal of the appeal. Taking note of the said letter, learned Commissioner (Appeals) dismissed assessee's appeal in limine without deciding it on merit. Therefore, the issue which arises for consideration before me is, whether as per the provisions of section 251 of the Act. learned Commissioner (Appeals) can permit withdrawal of the appeal by dismissing it in limine without deciding on merits. As per the provisions of section 251(1)(a) of the Act, the first appellate authority is conferred with the powers to decide an appeal against an order of assessment by confirming, reducing, enhancing or annulling the assessment. Even, the power to set-aside an assessment order was taken away from the first appellate authority by the amendment brought to the statute in Finance Act, 2001, w.e.f. 1st June 2001. Therefore, while deciding an appeal filed by the assessee under section 246A of the Act, learned Commissioner (Appeals) has to act within the parameters laid out in section 251(1)(a) of the Act. Interpreting the aforesaid statutory provision, the Hon'ble Jurisdictional High Court in Premkumar Arjundas Luthra (HUF) (supra) has held as under-

"8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. 11 Further Section 250(6) of the Act obliges the CIT(A) to dispose of [A] an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) is co-terminus with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act 12

10. Similar view was expressed by the Hon'ble Madras High Court in M. Loganathan (supra). If the ratio laid down in the aforesaid decisions is carefully examined, it clearly emerges that learned Commissioner (Appeals), notwithstanding the fact that the assessee has filed an application seeking withdrawal of the appeal, is obliged and duty bound under the Act to decide the appeal on merits within the parameters of section 251(1)(a) of the Act. Thus, following the ratio laid down in the aforesaid decision, I have to hold that while dismissing assessee's appeal in limine without deciding on merit. learned Commissioner (Appeals) has not exercised his power in consonance with the provisions of section 251(1)(a) of the Act. Accordingly, I am inclined to set-aside the impugned order of the learned Commissioner (Appeals). However, since, the issues raised in the said appeal have not been decided on merit, I restore all the issues raised in the present appeal to the learned Commissioner (Appeals) for de novo adjudication Consequently, the appeal filed by the assessee before the learned Commissioner (Appeals) is restored back to its original position. It is open for the assessee to raise all such issues before the first appellate authority for contesting the assessment order passed by the Assessing Officer. Needless to mention, the learned Commissioner (Appeals) must afford reasonable opportunity of being heard to the assessee before deciding the appeal. With the aforesaid observations, the grounds raised are allowed for statistical purposes.‖ 9.2 The Hon’ble Madras High Court has also held the same.

9.3 Respectfully following the judicial precedence, we set-aside the order of ld.CIT(A) to ld.CIT(A) for denovo adjudication. The ld.CIT(A) shall decide the appeal on merits. The ld.CIT(A) shall 13 Assessee. The Assessee shall file necessary documents before the ld.CIT(A). Accordingly, grounds of appeal raised by the Assessee are allowed for statistical purpose.