SANAND AGRICULTURAL PRODUCE MARKET COMMITTEE ,AHMEDABAD vs. THE ITO, WARD-2, EXEMPTION, AHMEDABAD

2.4 The learned Departmental Representative (DR) pointed out that the assessee had been non-compliant before the lower authorities and had failed to respond to notices issued by CPC as well as by the CIT(A).

3 It was contended that the assessee cannot take advantage of its own defaults and should not be permitted to plead delay as bona fide. However, when queried, the DR did not press any specific objection to the condonation, leaving the matter to the discretion of the Bench.

2.5 We have carefully considered the submissions and the material on record. It is a well-settled principle of law that in matters of condonation of delay, a liberal approach is warranted when the delay is not deliberate or due to negligence, but on account of bona fide reasons. The Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji [167 ITR 471 (SC)] has held that substantial justice must prevail over technicalities, and unless mala fides are established, delay should normally be condoned.

2.5 In the present case, we find that the assessee had indeed been prosecuting alternate remedies by way of rectification applications before CPC and CIT(A) and grievance before the AO, who himself has admitted that the exemption u/s 10(26AAB) was wrongly denied by CPC. The explanation offered in the affidavit is convincing and supported by record. There is no material to suggest that the assessee stood to benefit in any manner by delaying the filing of appeal before the Tribunal.

2.6 In view of the above and considering that the DR has not raised serious objections, we are satisfied that there exists sufficient cause for the delay. Accordingly, the delay of 174 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.

3.2 Aggrieved, the assessee preferred an appeal before the CIT(A) raising specific grounds that the income of an APMC is exempt under section 10(26AAB) of the Act, and CPC erred in disallowing the same.

3.3 The CIT(A), however, dismissed the appeal. From the order, it is evident that repeated show-cause notices were issued to the assessee on 28.04.2024, 24.06.2024, 19.09.2024 and 18.10.2024, fixing the hearings on 08.05.2024, 01.07.2024, 27.09.2024 and 25.10.2024 respectively. The assessee did not file any reply to the first three notices, and on the last date sought adjournment till 15.11.2024. The CIT(A) recorded that even after granting ample time, no substantive submission or supporting evidence was placed on record. Observing that the assessee had not submitted any reply or furnished any material in support of its grounds, the CIT(A) proceeded to dismiss the appeal. Thus, the addition sustained by CPC stood confirmed.

3.4 Subsequent to the order of the CIT(A) dated 16.12.2024, the assessee pursued alternate remedies. A rectification application was first filed before CPC on 01.04.2025 pointing out that exemption under section 10(26AAB) had been wrongly denied. Though CPC reprocessed the return on 20.05.2025, it again failed to grant the 5 exemption, despite recording that the claim was made. Thereafter, a rectification petition was moved before the CIT(A) on 10.06.2025, but no order was passed. In parallel, the assessee lodged a grievance on the Income Tax portal on 17.06.2025 before the jurisdictional Assessing Officer. The ITO, Ward 2(Exempt), Ahmedabad, disposed of the grievance on 18.07.2025, categorically admitting that CPC had erred in not allowing exemption under section 10(26AAB) and wrongly taxing the gross receipts. However, the AO expressed his inability to rectify the mistake in view of the appellate order already passed by the CIT(A) and accordingly advised the assessee to seek appropriate remedy before the Hon’ble ITAT.

3.5 It is in the above backdrop that the present appeal has been filed before us. The grounds raised by the assessee are: Exemption u/s 10(26AAB) of the Act is not allowed.

1. Assessee is an APMC eligible for the exemption under section 10(26AAB) of the Income Tax Act. However, while processing the income tax return under section 143(1) of the Income Tax Act, the CPC has not granted an exemption and made an addition of Rs.3,57,30,363/-(i.e. Total Income), even the expenses incurred by the assessee were not allowed.

2. CIT(A), without rejecting the adjournment application or giving any further notice and without considering the Grounds of Appeal and documents attached along with the Form 35 has dismissed the appeal, which is against natural justice.

3. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing. PRAYER OF APPEAL

1. Assessee hereby pray that the exemption of Rs.3,57,30,363/- under section 10(26AAB) of the Act should be allowed and requests to delete the addition of Rs. 3,57,30,363/- made by the CPC.

2. Assessee further pray that if the exemption u/s 10(26AAB) of the Act is not allowed, then the expenses which were incurred by the assessee should be allowed as a deduction against the income. 3.6 At the time of hearing, the learned Authorised Representative (AR) of the assessee appeared and reiterated the facts already placed 6 on record in the statement of facts and grounds of appeal. He submitted that the assessee is duly entitled to exemption under section 10(26AAB) of the Act and that the denial of such exemption by CPC and its confirmation by the CIT(A) was unjustified. He further contended that the dismissal of appeal by the CIT(A) without adjudicating on merits was in violation of principles of natural justice. In support of the claim, the AR placed reliance upon earlier assessment orders in which the exemption was allowed, as well as the grievance resolution order of the Assessing Officer acknowledging the mistake by CPC. He, therefore, prayed that the addition sustained may be deleted, or in the alternative, the expenditure incurred for statutory functions of the assessee may be allowed as deduction.

3.7 On a specific query from the Bench as to whether the assessee had filed the audit report in Form 10B along with the return of income, the learned AR replied in the affirmative. However, he was unable to place on record a copy of Form 10B either during the course of hearing or as part of the paper book.

5.1 It is a matter of record that the assessee did not respond to the variation proposed by CPC. The explanation tendered before us is that the intimation was sent to the e-mail address of the earlier counsel and hence remained unattended. Be that as it may, the fact remains that no reply was filed to CPC’s variance and no effective compliance was made before the learned CIT(A) as well, despite repeated notices.

5.2 At the same time, it is equally pertinent to note that the assessee has been consistently claiming exemption u/s 10(26AAB) in earlier years, and in the assessment orders for AY 2010-11 and AY 2013-14 the claim was accepted by the Department. However, in those assessment orders there is a specific reference to filing of audit report in Form 10B, whereas in the present year no such form has been filed. During the course of hearing, on a query from the Bench, the learned AR affirmed that Form 10B was filed, but could not produce a copy thereof on record. This omission is material, as compliance with statutory filing requirements is a condition for availing exemption.

5.3 Without prejudice, we also note that even assuming the exemption u/s 10(26AAB) were to be denied, the expenditure incurred by the assessee in the discharge of its statutory functions under the Agricultural Produce Market Committee Act cannot be outrightly disallowed. Taxing the gross receipts without allowing legitimate expenditure results in determination of income not in accordance with 5.4 Considering the totality of facts, while the assessee’s conduct has been less than diligent in not complying with notices and in failing to place Form 10B on record, we are of the view that the issue requires reconsideration in the interest of substantial justice. The learned CIT(A) has dismissed the appeal without adjudicating the merits. Given that past assessments have allowed exemption, and grievance resolution by the AO himself acknowledged a mistake in CPC’s processing, it would be appropriate to provide one more opportunity to the assessee to substantiate its claim by furnishing Form 10B and other relevant material.

5.5 Accordingly, we set aside the impugned order of the CIT(A) and restore the matter to his file for fresh adjudication in accordance with law, after granting adequate opportunity of hearing to the assessee. The assessee is directed to place on record all requisite documents including Form 10B, accounts and supporting evidence to substantiate its claim. The CIT(A) shall decide the matter afresh, both on the question of exemption u/s 10(26AAB) and, in the alternative, allowance of expenditure against the receipts.