RAM PARSAD DAV PUBLIC SCHOOL SOCIETY,MARKANDA vs. ITO (EXEMPTIONS), WARD, AMBALA

Against the order of the AO the assessee went in appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal filed by Ram Parsad DAV Public School Society for A.Y. 2016-17, due to the assessee’s failure to pursue the appeal. Despite multiple hearing notices issued between January 2020 and July 2022, the assessee neither attended nor responded, nor requested adjournments, indicating a lack of interest in prosecuting the appeal. Citing the principle "VIGILANTIBUS ET NONDORMIENTIBUS JURA SUB VENIUNT" (the law aids the vigilant, not those who sleep on their rights) and judicial precedents, the CIT(A) noted that Section 250(6) requires a speaking order but restricts adjudication to available records when the assessee fails to appear or submit documents. Consequently, the appeal was dismissed on 26/10/2022 for lack of prosecution, without addressing the merits of the assessee’s grounds 3 regarding the denial of exemption under Section 10(23C)(vi) or the treatment of the donation as taxable income.

Against the order of the Ld CIT(A) the assessee preferred an appeal before the Tribunal.

During the course of the hearing, the assessee argued that the assessment order suffers from both factual and legal infirmities, alleging violations of Sections 250(4), 250(5), 250(6), 251(1)(a), 251(1)(b), and the Explanation to Section 251(2) of the Income Tax Act, 1961. It was submitted that the order lacks proper reasoning, thereby contravening the principles laid down in CIT v. Prem Kumar Arjundas Luthra (HUF) [(2017) 154 DTR 302 (Bom)]. The assessee further contended that the Assessing Officer misunderstood and misapplied the law, resulting in an arbitrary determination of the assessed income at Rs.23,50,119/- without adequate justification, in violation of the principles of natural justice as upheld in Kranti Associates Pvt. Ltd. v. Sh. Masood Ahmed Khan [(2010) 9 SCC 496 (SC)]. It was also pointed out that the CIT(A) failed to properly adjudicate the assessee’s grievances, thereby rendering the appellate process defective. Accordingly, the assessee seeks annulment of the impugned order, consequential relief, liberty to amend the grounds of appeal, and a fair adjudication in accordance with law.

We have heard the rival contentions and carefully perused the material available on record. In the present case, we find that the Ld. CIT(A) dismissed the assessee’s appeal for non-prosecution without adjudicating the matter on merits. This approach is in violation of the provisions of Sections 250(4), 250(5), 250(6), 251(1)(a), 251(1)(b), and the Explanation to Section 251(2) of the Income Tax Act, 1961, as well as the principles of natural justice upheld by the Hon’ble Courts in CIT v. Prem Kumar Arjundas Luthra (HUF) [(2017) 154 DTR 302 (Bom)] and Kranti Associates Pvt. Ltd. v. Sh. Masood Ahmed Khan [(2010) 9 SCC 496 (SC)]. The CIT(A) failed to pass a speaking order or examine the available material concerning the assessee’s claim for exemption under Section 10(23C)(vi) and the taxability of the donation 4 amounting to Rs. 2,52,325/- under Section 2(24)(iia). In light of these procedural lapses and the necessity for factual verification of the assessee’s claims, the matter is remanded to the file of the Assessing Officer for a fresh assessment. The Assessing Officer is directed to afford the assessee a fair opportunity to substantiate their claims, conduct a thorough inquiry, and pass a reasoned and speaking order.

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