CT EDUCATIONAL SOCIETY,JALANDHAR vs. DCIT, CHANDIGARH

That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in denying benefit of exemption u/s 11 of the Act and assessing the trust as AOP and making an addition of Rs.8,35,76,594.11/-, without considering the facts of the case and without observing the principles of natural justice. 5. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in disallowance of interest amounting to Rs.3,78,144.35/-, without considering the facts of the case and without observing the principles of natural justice. 6. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in disallowing the expenses of Rs.3,84,000/- on account of salaries paid, without considering the facts of the case and without observing the principles of natural justice. 7. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition of Rs.17,05,082/- on account of alleged difference in Interest received as reflected in Form 26AS and as declared in ITR, without considering the fact the entire interest income has duly been accounted in the books of assessee. 8. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition of Rs.4,65,047.23/- on account of miscellaneous receipts, without considering the facts of the case and without observing the principles of natural justice. 9. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in disallowing exemption on account of repayment of loan amounting to Rs.2,46,02,962/-, without considering the facts of the case and without observing the principles of natural justice. 10. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.

Briefly, the facts of the case are that the assessee, CT EDUCATIONAL SOCIETY , a registered TRUST , filed its Return of Income on 28/10/2017 declaring NIL income. The case was selected for Complete Scrutiny assessment under the E-assessment Scheme, 2019, focusing on the "Receipts of trust". The total receipts shown by the assessee amounted to Rs. 53,98,79,869.87/- , including various fees beyond tuition/admission, and income from the sale of books, stationery, uniform, swimming accessories, hostel charges, and transportation. The assessee denied carrying out any business but failed to submit Trading and P&L accounts for activities like the sale of books, stationery, uniforms, swimming accessories, and running a hostel/transportation services. The assessee also paid salaries to specified persons: JASRAJ SINGH-EXECUTIVE (Rs. 3,84,000) and HARVINDER SINGH JOINT SECRETARY (Rs. 6,00,000). The assessment was completed under section 143(3) read with section 144B. 3.1 The AO concluded that the assessee was existing for profit and functioning on commercial principles, leading to the denial of the benefit of exemption under Section 11 of the Income-tax Act. The original surplus of Rs. 8,35,76,594.11/- was consequently taxed as an Association of Persons (AOP). 3.2 The key findings and resulting financial actions were: i. Denial of Exemption u/s 11(4A): Exemption was denied because the assessee failed to prove that activities like selling books, stationery, uniform, swimming accessories, running a hostel, and other miscellaneous receipts were incidental to the main objects of the educational trust, and also failed to maintain separate books of accounts for these business activities. ii. Disallowance of Salary to Specified Person: Salary of Rs. 3,84,000/- paid to JASRAJ SINGH-EXECUTIVE was disallowed, as he was showing other business income ("COMMISSION INCOME FROM PROPERTY"), indicating a diversion of energy and making the salary payment unreasonable under Section 13(1)(c) r.w.s. 13(3). iii. Disallowance of Loan Repayment: Repayment of loan amounting to Rs. 2,46,02,962/- was denied as an application of income because the assessee could not submit proof that the loan amount was included in its income in the year of its receipt.

Against the order of the CIT(A) the assessee preferred in appeal before the Tribunal. 6. Before us, the Ld. Counsel for the assessee submitted that the non- compliance before the Ld. CIT(A) was not intentional but due to unavoidable circumstances/reasonable cause. It was argued that the assessee possesses the necessary documents to substantiate its claim regarding the charitable nature of activities and the reconciliation of receipts. The Ld. Counsel prayed that in the interest of natural justice, one more opportunity be granted to the assessee to present its case before the Ld. CIT(A). 7. The Ld. DR relied on the orders of the lower authorities. He argued that the Ld gave the assessee ample opportunities (six notices). CIT(A), which were ignored. However, he left the matter to the discretion of the Bench regarding the restoration of the appeal. 8. We have heard the rival submissions and perused the material on record. It is an admitted fact that the assessee failed to appear before the Ld. CIT(A), despite multiple notices, leading to an ex parte order confirming high-pitched additions and the denial of exemption u/s 11. We are of the considered view that the right of appeal is a valuable statutory right. The principle of Audi Alteram Partem requires that no one should be condemned unheard. Substantial tax liability has been fastened upon the assessee, and the issues involve the Trust's fundamental status and the denial of charitable exemption. We believe that the assessee should be given an opportunity to explain its case on merits rather than being dismissed on technical non-compliance. 8.1 However, we cannot lose sight of the fact that the assessee has been negligent and lethargic in pursuing the appellate proceedings before the Ld. CIT(A), causing a waste of time and resources of the Revenue. The statutory notices were disregarded without apparent cause.

2 Therefore, in the interest of justice and fair play, we deem it appropriate to set aside the order of the Ld. CIT(A) and restore the entire matter to the file of the Ld. CIT(A) for adjudication de novo. This restoration is subject to the condition that the assessee deposits a cost of Rs. 1,50,000/- (Rupees one lac Fifty Thousand Only) in the Prime Minister's Relief Fund. 8.3 The assessee is directed to submit the proof of payment of the said cost to the Ld. CIT(A) before the commencement of the hearing. The assessee is further directed to appear before the Ld. CIT(A), file all necessary paper books/evidence, and cooperate in the proceedings without seeking unnecessary adjournments. The Ld. CIT(A) shall pass a speaking order after providing a reasonable opportunity of being heard to the assessee. 9. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 10/12/2025. कृणवȶ सहाय

अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File