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Facts
The assessee, Krishi Upaj Mandi Samiti, filed a nil income return, which was scrutinized for receipts from incidental objects. The AO made an addition of ₹12,51,765 by treating these as business income not exempt under Section 11, due to the assessee's non-compliance. The CIT(A) dismissed the appeal due to a significant delay of 666 days in filing and upheld the AO's order on merits, citing the assessee's continued non-compliance.
Held
The Tribunal observed consistent non-compliance by the assessee but, in the interest of justice, restored the appeal (ITA No. 55/Ind/2025) to the CIT(A) to first decide on the condonation of delay and then for de-novo consideration on merits. The related penalty appeals (ITA No. 54/Ind/2025 and ITA No. 56/Ind/2025) were also restored for de-novo consideration. The assessee was directed to pay costs of Rs. 10,000/- to the Prime Minister Relief Fund for consistent non-compliance.
Key Issues
Whether receipts from incidental objects are eligible for exemption under Section 11, given non-compliance by the assessee, and whether the CIT(A) was justified in dismissing the appeal solely on grounds of limitation and non-compliance without a fresh hearing on merits.
Sections Cited
143(1), 144, 144B, 10(23C), 11, 270A, 272A(1)(d), 282A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI BHAGIRATH MAL BIYANI
O R D E R PER SIDDHARTHA NAUTIYAL - JM:
These three appeals have been filed by the assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 08.10.2024 and penalty order dated 15.09.2021 & 15.02.2022 passed for A.Y. 2018-19.
The Assessee has raised the following grounds of appeal:
(A.y. 2018-19) “1. That on the facts and in the circumstances of the case Ld. AO has erred in making the levy of penalty and Ld. CIT(A) has erred in confirming the penalty of Rs. 10,000 U/s 272A(1)(d) of Income Tax Act, 1961. 2. That on the facts and in the circumstances of the case Ld. AO has erred in passing and Ld. CIT(A) has erred in confirming the impugned penalty order without affording any opportunity of being heard against the principles of natural justice.
Krishi Upaj Mandi Samiti vs. NeAC A.Y. 2018-19 - 2 - 3. That the impugned assessment order and impugned CIT(A) order so passed is illegal and wrong. 4. That the assessee craves leave to add, amend, alter or delete any of the grounds of appeal and all the above grounds are without prejudice to each other.”
(A.y. 2018-19) “1. That on the facts and in the circumstances of the case Ld. AO has erred in making the addition and Ld. CIT(A) has erred in confirming the addition of Rs. 12,51,765 by treating receipt from incidental objects as business receipt being not in accordance with the main object and accordingly income over expenditure is added to total income.
2. That on the facts and in the circumstances of the case Ld. AO has erred in passing and Ld. CIT(A) has erred in confirming the impugned order without affording any opportunity of being heard against the principles of natural justice.
3. That the impugned assessment order and impugned CIT(A) order so passed is illegal and wrong.
4. That the assessee craves leave to add, amend, alter or delete any of the grounds of appeal and all the above grounds are without prejudice to each other.”
(A.y. 2018-19) “1. That on the facts and in the circumstances of the case Ld. AO has erred in making the levy of penalty and Ld. CIT(A) has erred in confirming the penalty of Rs. 96,836 U/s 270A of Income Tax Act, 1961.
2. That on the facts and in the circumstances of the case Ld. AO has erred in passing and Ld. CIT(A) has erred in confirming the impugned penalty order without affording any opportunity of being heard against the principles of natural justice.
That the impugned assessment order and impugned CIT(A) order so passed is illegal and wrong.
That the assessee craves leave to add, amend, alter or delete any of the grounds of appeal and all the above grounds are without prejudice to each other.”
3. The brief facts of the case are that the assessee, Krishi Upaj Mandi Samiti, Chhapiheda, a local authority, filed its return of income for the Assessment Year 2018–19 on 31.08.2018 declaring nil income. The return was Krishi Upaj Mandi Samiti vs. NeAC A.Y. 2018-19 - 3 - processed under section 143(1) of the Income-tax Act, 1961 (“the Act”) on 31.08.2019. Thereafter, the case was selected for complete scrutiny for the specific reason of examining “large receipts from incidental objects.” During the course of assessment proceedings, the Assessing Officer observed from the return of income that the assessee had shown receipts of ₹31,90,771/- from incidental objects, whereas receipts from main objects were ₹74,46,692/-. The assessee was specifically required to furnish details of the incidental objects, activities covered under such incidental objects, income earned therefrom, the nexus between incidental objects and main objects, and also copies of registration under section 12A/12AA and approval under section 10(23C) of the Act as claimed in the return. Since no compliance was made by the assessee to the statutory notices and no explanation or details were furnished in respect of the receipts from incidental objects, the Assessing Officer issued a show cause notice proposing to treat the receipts from incidental objects as business receipts not in accordance with the main objects of the assessee. As the assessee failed to respond even to the show cause notice, the Assessing Officer proceeded to frame the assessment ex parte under section 144 read with section 144B of the Act. The Assessing Officer held that the receipts from incidental objects amounting to ₹31,90,771/- were not proved to be incidental or ancillary to the main objects and, therefore, could not qualify for exemption. Consequently, the income over expenditure of ₹12,51,765/- was treated as unexplained voluntary contribution and added to the total income of the assessee. The total income was thus assessed at ₹12,51,770/- and penalty proceedings under section 270A were also initiated separately for under-reporting of income.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(Appeals). At the outset, the Ld. CIT(A) noted that the Krishi Upaj Mandi Samiti vs. NeAC A.Y. 2018-19 - 4 - assessment order was passed on 20.04.2021, whereas the appeal was filed only on 15.02.2023, resulting in a delay of 666 days, or 261 days even after considering the benefit of extension of limitation granted by the Hon’ble Supreme Court due to the COVID-19 pandemic. The assessee sought condonation of delay on the plea that the assessment order came to its notice only when the Income Tax Officer, Rajgarh, asked the assessee to pay the outstanding demand. The Ld. CIT(A), however, observed that the assessment order was passed by the National Faceless Assessment Centre and was duly served electronically on the e-filing portal in accordance with section 282A of the Act. The CIT(Appeals) held that the assessee failed to produce any evidence to substantiate its claim of non-service of the order and that the explanation offered did not constitute sufficient cause for such an inordinate delay. The CIT(Appeals) relied upon various judicial pronouncements and held that condonation of delay is not a matter of right and that negligence, inaction, or lack of bona fides on the part of the appellant disentitles it from such relief. Accordingly, the Ld. CIT(A) declined to condone the delay and dismissed the appeal in limine on the ground of limitation. The CIT(Appeals) further noted that even during the appellate proceedings, despite issuance of several notices fixing the case for hearing, the assessee failed to make any compliance or file any written submissions, which demonstrated lack of diligence in pursuing the appeal.Without prejudice to the dismissal of the appeal on account of delay and default, the Ld. CIT(A) also proceeded to adjudicate the grounds on merits based on the material available on record. With respect to Grounds of Appeal Nos. 1 and 2, which challenged the addition of ₹12,51,765/- made by the Assessing Officer, the Ld. CIT(A) observed that the assessee had failed to discharge its primary onus of establishing that the receipts from incidental objects were intrinsically linked to the main objects of the trust and that the exemption under section 11 of the Act was correctly claimed. The Krishi Upaj Mandi Samiti vs. NeAC A.Y. 2018-19 - 5 - assessee neither responded to the notices issued by the Assessing Officer nor furnished any explanation or evidence during the appellate proceedings to controvert the findings of the Assessing Officer. In the absence of any material to rebut the assessment findings, the Ld. CIT(A) upheld the action of the Assessing Officer in treating the receipts from incidental objects as business receipts and in confirming the addition of ₹12,51,765/-. Accordingly, Grounds of Appeal Nos. 1 and 2 were dismissed. As regards Grounds of Appeal Nos. 3 and 4, the Ld. CIT(A) held that these grounds were general in nature and did not require separate adjudication, and the same were dismissed. In the result, the appeal filed by the assessee was dismissed both on the ground of limitation as well as on merits.
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
Before us, the Counsel for the assessee submitted that in the instant facts, the non-appearance has been caused due to the assessee not being served the relevant notices of hearing and that there was no mala fide intention on the part of the assessee in not causing appearance before the Assessing Officer and CIT(A). The Counsel for the assessee submitted that in the interest of justice, and in view of the fact that, substantial additions as well as penalty has been imposed in the hands of the assessee, the assessee may be granted one more opportunity to explain the case before the Tax Authority.
In response, Ld. DR placed reliance on the observations made by the Ld. CIT(A) in the appellate order.
We have heard the rival contentions and perused the material on record. In the instant case, we observe that the assessee’s case was open for scrutiny Krishi Upaj Mandi Samiti vs. NeAC A.Y. 2018-19 - 6 - with a specific reason for examining large receipts from incidental objects for which exemption has been claimed by the assessee. The Assessing Officer observed that despite a large number of opportunities, the assessee has not been able to prove the nature of these “receipts from incidental objects” and how the same are linked to the main objects of the assessee. Further, the Assessing Officer was of the view that the assessee, on account of consistent non-appearance, despite a large number of opportunities has neither explained the nature of these “receipts from incidental objects” and neither has he given any explanation / submission regarding eligibility with respect to claim of exemption on these receipts. Before us, the Counsel for the assessee submitted that these receipts from incidental objects comprises of earning income from giving out parking place for rent, giving out shops for rent etc. On going through the case records, we observe that there has been consistent non- appearance on part of the assessee at all stages of proceedings. However, in the interest of justice, the matter is restored to the file of CIT(A) with a direction to first decide on the issue of condonation of delay in filing of appeal before him. The assessee is also directed to file necessary documents / supporting evidence in support of the delay not being filed before Ld. CIT(A) within stipulated timelines.
In the result, the appeal of the assessee is allowed for statistical purposes.
Further, since there has been consistent non-compliance by the assessee at all stages of proceedings, the assessee is directed to pay cost of Rs. 10,000/- to be deposited in the Prime Minister Relief Fund and sbumit proof thereof at the time of hearing before the Ld. CIT(A).
Krishi Upaj Mandi Samiti vs. NeAC A.Y. 2018-19 - 7 -
In the result, the appeal of the assessee is allowed for statistical purposes. relates to levy of penalty under Section 272A(1)(d) and related to levy of penalty under Section 270A of the Act. Since both these appeals have been dismissed by the Ld. CIT(A) on account of non-appearance by the assessee during the course of appellate proceedings, and the main appeal has been restored to the file of Ld. CIT(A) for de-novo consideration, both these appeals are also restored to the file of Ld. CIT(A) for de-novo consideration.
In the result, all appeals filed by the assessee are allowed for statistical purposes and restored to the file of Ld. CIT(A) for de-novo consideration.
This Order pronounced on 17 / 12/2025