INCOME-TAX OFFICER(EXEMPTION), WARD-1, AHMEDABAD vs. ASLALI KELAVNI MANDAL, AHMEDABAD

The brief facts of the case are that the assessee, Aslali Kelavani Mandal, a public charitable trust engaged solely in the field of education, filed its return of income for A.Y. 2018-19 declaring Nil income after

Before the CIT(Appeals), the assessee filed detailed written submissions explaining that more than 71% of its income was received as grants from Government of Gujarat and hence it was substantially financed by the Government, satisfying the requirements of section 10(23C)(iiiab). It was further contended that CPC could not have made an adjustment under section 143(1)(a) in respect of such a debatable claim and that the adjustment made was beyond the scope of the said provision. The assessee submitted that the assessment order of CPC contained no reasoning for the disallowance and merely proceeded to deny the exemption claimed in the return. The assessee, a trust registered under the Bombay Public Trusts Act and also holding registration under section 12AA, had consistently been allowed exemption under section 10(23C) in earlier years, including in assessments completed u/s 143(3) for A.Y. 2016-17 and u/s 143(1) for A.Y. 2017-18. The assessee, therefore, filed an appeal before the CIT(Appeals). The assessee submitted audited accounts, grants statements, registration certificates and past assessment orders to ITA Nos. 1591&1622/Ahd/2025 Asst. Years–2018-19 & 2019-20 - 3–

The CIT(Appeals), after considering the submissions, held that CPC had mechanically denied the exemption without assigning any reason. Relying on the decision of the Hon’ble ITAT Ahmedabad Bench in Packers (India) v. ITO (99 ITD 383), the CIT(A) held that powers under section 143(1) are restricted to making prima facie adjustments and that a claim of exemption under section 10(23C) could not be denied without factual verification. The CIT(A) therefore allowed the appeal of the assessee and directed the Assessing Officer to grant exemption under section 10(23C)(iiiab) as claimed in the return.

The Department is in appeal before us against the order passed by the CIT(Appeals) allowing the appeal of the assessee.

We have heard the rival contentions and perused the material on record. Before us, Ld. DR contended that the CIT(Appeals) has erred in summarily allowing the exemption under section 10(23C)(iiiab) of the Act without proper verification of the facts and without calling for a remand report from the juri ictional Assessing Officer. On the other hand, the Counsel for the assessee relied upon its past assessments and the documentary evidence furnished before the CIT(A).

On examination of the appellate order, we find that although the CIT(Appeals) has referred to the written submissions of the assessee and ITA Nos. 1591&1622/Ahd/2025 Asst. Years–2018-19 & 2019-20 - 4–

In the interest of justice, we deem it appropriate to set aside the order of the CIT(Appeals) and restore the matter to the file of the juri ictional Assessing Officer. The Assessing Officer shall verify the factual aspects relating to Government financing, the nature of activities carried out by the assessee, and its eligibility under section 10(23C)(iiiab) of the Act, after providing adequate opportunity of hearing to the assessee.

In the result, the appeal of the Department is allowed for statistical purposes.

The Department has raised the following grounds of appeal: ITA Nos. 1591&1622/Ahd/2025 Asst. Years–2018-19 & 2019-20 - 5–

Since common facts and issues for consideration are involved for both the years under consideration before us, the appeal of the Department is allowed for statistical purposes for both the assessment years before us.

In the combined result, the appeals filed by the Department are allowed for statistical purposes for both the assessment year under consideration. This Order pronounced in Open Court on 17/11/2025 (DR. BRR KUMAR) JUDICIAL MEMBER Ahmedabad; Dated 17/11/2025