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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
Feeling aggrieved by order of first appeal dated 03.01.2025 passed by learned Commissioner of Income-Tax (Appeals)-Addl/JCIT(A)–1, Mumbai [“CIT(A)”] which in turn arises out of assessment-order dated 05.11.2019 passed by ITO-Ward Rajgarh [“AO”] u/s 144 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal on following effective grounds:
“Ground No. 1 That the Id. AddI/JCIT (A) -1 Mumbai has erred in confirming the additions made by ld. AO ITO Rajgadh, 1 without considering that the Id.
Shri Guptnath Bal Shikshan Samiti Machalpur AY 2017-18 AO has wrongly invoked the provisions of sections 80AC and which are not applicable in the present case. 2.Ground No. 2 That the Id AddI/JCIT (A)-1 Mumbai has not considered that while filing of return is mandatory u/s 139 (4c), however such filing of return is not a mandatory condition for claiming exemption u/s 10(23C)(iiiad).”
The background facts leading to this appeal are such that the assessee is a society engaged in the activity of imparting education. For AY 2017-18, the assessee did not file any return of income. The AO, based on information in ITBA-NMS that the assessee made cash deposits in bank a/c during demonetization period, issued notice u/s 142(1) calling the assessee to file return but the same remained uncompiled by assessee. During further proceedings, the assessee filed audited accounts (Para 2 of assessment-order), however, the follow-up notices issued by AO u/s 142(1) also remained uncompiled by assessee. Ultimately, the AO issued a summon u/s 131 to the President of society who attended AO’s office on 19.09.2019 wherein his statements were recorded. Finally, taking into account the recorded statements of the President of assessee and the audited accounts, the AO accepted source of impugned cash deposits in bank a/c from ‘fees collected from students’. However, the AO made an adverse observation that as per section 139(4C) of the Act, it was duty of assessee to file its return of income but the assessee has not followed the same. The AO also relied upon statutory provisions of sixth proviso to section 139(1) and section 80AC to conclude that if the return of income is not filed, the assessee is not entitled to exemption or deduction under any provisions of the Act [although the AO has made a generalized observation without mentioning any specific
Page 2 of 13 exemption u/s 10(23C)(iiiad) put forward by assessee]. Accordingly, the AO did not grant exemption u/s 10(23C)(iiiad) to assessee and assessed the net profit of educational activity at Rs. 16,20,485/- as total income of assessee.
Aggrieved, the assessee carried matter in first appeal and made submission which is re-produced by CIT(A) on Page No. 2-6 of impugned order. However, the CIT(A) passed a very short order and dismissed assessee’s appeal as under:
“Decision:- There two grounds raised by the assessee and the same are discussed below:- First ground relates with “addition of Rs. 16,20,485/- by ignoring correct facts of the case and invoking wrong provisions of section 80AC of the Act.” In this regard made its submission and the same is reproduced above under heading submissions. The submissions made by the assessee are perused but does not found to be justifiable and accordingly addition of Rs 16,20,485/- made by the AO is upheld. Hence appeal on this ground is dismissed. Second ground states that "That the Ld. Further erred in initiating penalty u/s 270A and 271F of the Act.” These penalties being consequential in nature are bound to imposed. Hence appeal on this ground is also dismissed. In the result appeal of the assessee is dismissed” [emphasis supplied] Now, the assessee has come in next appeal before us.
3. Ld. AR for assessee invited our attention to the three provisions of law referred by AO, reading as under:
Shri Guptnath Bal Shikshan Samiti Machalpur AY 2017-18 6th proviso to section 139(1): “Provided also that every person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year, without giving effect to the provisions of clause (38) of section 10 or section 10A or section 10B or section 10BA or section 54 or section 54B or section 54D or section 54EC or section 54F or section 54G or section 54GA or section 54GB or Chapter VI-A exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.” Section 139(4C): “Every – (a) to (d) XXX (e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (iiiab) or sub-clause (iiiad) or sub- clause (vi) or any hospital or other medical institution referred to in sub- clause (iiiac) or sub-clause (iiiae) or sub-clause (via) of clause (23C) or section 10; XXX shall, ……. furnish a return of such income ….”
Section 80AC: “Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after – the 1st day of April, 2006 but before the 1st day of April, 2018, any (i) deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, (ii) XXX no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment-year on or before the due date specified under sub-section (1) of section 139.”
Additionally, the Ld. AR also referred the 20th Proviso to section 10(23C) inserted by Parliament through Finance Act, 2022 w.e.f. 01.04.2023 and subsequently amended through Finance Act, 2023, reading as under:
Shri Guptnath Bal Shikshan Samiti Machalpur AY 2017-18 Finance Act, 2022: “Provided also that the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall furnish the return of income for the previous year in accordance with the provisions of sub-section (4C) of section 139 within the time allowed under that section.” Finance Act, 2023: “Provided also that the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall furnish the return of income for the previous year in accordance with the provisions of sub-section (4C) of section 139 within the time allowed under sub-section (1) or sub-section (4) of that section.”
By analysing above provisions of law, Ld. AR submitted that the 6th 5. proviso to section 139(1) is not at all application to exemption u/s 10(23C)(iiiad) and the AO has wrongly referred the same. However, clause (e) of section 139(4C) was definitely applicable to assessee and accordingly, the assessee can be said to have an obligation to furnish return of income u/s 139(4C)(e). But even if it is said that the assessee was obligated to furnish return u/s 139(4C)(e), then also the AO is wrong in denying exemption u/s 10(23C)(iiiad) to assessee under the shelter of section 80AC. He submitted that the section 80AC is very clear in language and it denies deductions u/s 80-IA to 80-IE only which is nothing to do with the exemption u/s 10(23C)(iiiad) claimed by assessee. Ld. AR went ahead to explain that although the Parliament has prescribed 20th proviso to section 10(23C) to deny exemption u/s 10(23C)(iiiad) for non-filing of return but the said 20th Proviso is applicable from 01.04.2023 i.e. AY 2023-24 and not applicable to AY 2017-18 with which we are concerned. Therefore, in present case, there is no provision for denying exemption u/s 10(23C)(iiiad) upto AY 2022-23
Page 5 of 13 obligation u/s 139(4C). Hence, the AO’s action of denying exemption to assessee is illegal being without any provision in Income-tax Act.
6. With above submissions, Ld. AR closed his arguments by making a prayer to the bench to allow exemption u/s 10(23C)(iiiad) to assessee.
Per contra, Ld. DR for revenue relied upon orders of lower-authorities although he could not controvert the legal interpretation made by Ld. AR as narrated in foregoing paras. Additionally, Ld. DR made a submission that although the AO has mentioned in Para 5.1 of assessment-order “It is further stated that the turnover of the society is less than one crore ….” but the AO has not given his personal observation/conclusion as to the amount of turnover of assessee. Therefore, it is not clear whether the turnover of assessee was really less than Rs. 1 crore and consequently the assessee was really entitled to exemption u/s 10(23C)(iiiad) or not.
In rejoinder, Ld. AR submitted that although the AO has accepted assessee’s submission of turnover being less than Rs. 1 crore without controverting the same and furthermore the AO was also possessed of the audited Income & Exp. A/c filed by assessee but, however, he does not have any issue in re-filing audited Income & Exp. A/c for the satisfaction of bench and Ld. DR for revenue. Subsequently after conclusion of hearing, Ld. AR also filed a letter dated 23rd September, 2025 narrating that the turnover of assessee was Rs. 57,18,803/-. The letter is accompanied by audited
We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. The core dispute in present case relates to the allowability of exemption u/s 10(23C)(iiiad). Undisputably, the assessee is engaged in educational activities and the aggregate receipts of assessee during the year were Rs. 57,18,803/- which is less than the prescribed ceiling of Rs. 1 Crore. Thus, the assessee satisfied conditions to avail exemption u/s 10(23C)(iiiad). The only reason for denial of exemption is that the assessee has not filed return of income in terms of section 139(4C). It is a fact that the assessee has not filed any return of income for AY 2017-18 under consideration. But the Ld. AR has given a detailed explanation on various provisions of law i.e. 6th proviso to section 139(1), section 139(4C)(e), section 80AC and the 20th proviso to section 10(23C). On a careful consideration, we find a strong merit in submission of Ld. AR that the provisions of section 80AC is not applicable for denial of exemption u/s 10(23C)(iiiad) claimed by assessee. Further, the provision of 20th proviso to section 10(23C) is though relevant but the same came in statute from AY 2023-24 and was not applicable to AY 2017-18 under consideration. Further, the Ld. DR for revenue is no able to show any other provision in Income-tax Act prescribing denial of exemption u/s 10(23C)(iiiad) if the return of income is not filed. There may be other penal provisions but Page 7 of 13 ITAT, Indore has already dealt a similar issue in Harda Nagar Bal Vikas – AY 2017-18, order dated 06.05.2025, the relevant portion of order is re-produced below:
“13. We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. The core dispute in present case relates to the allowability of exemption u/s 10(23C)(vi). Admittedly, the assessee is having requisite approval granted by CIT(E) vide order dated 10.08.2018 for AY 2017- 18 under consideration. The only reason for denial of exemption advanced by lower-authorities is that the assessee has not filed return of income in terms of section 139(4C). It is a fact that the assessee has not filed any return of income to Income-tax Department for AY 2017-18 under consideration. But the Ld. AR for assessee has given a detailed justification as to why the assessee did not and could not file return. Ld. AR has submitted that the assessee’s application filed to CIT(A) for grant of approval for exemption u/s 10(23C)(vi) was filed on 18.08.2017 before 30.09.2017 which was the due date for filing of return u/s 139(1) and such application was pending at the level of CIT(E) on 30.09.2017 rendering it difficult for the assessee to file return by due date. Thereafter, the CIT(E) disposed of assessee’s application on 10.08.2018 but by that time, the time-limit for filing even belated return u/s 139(4) also expired. Ld. AR has submitted that the assessee has no problem at all in filing physical return to AO, if the bench directs or the AO desires. The facts shown by Ld. AR do not lack bona fides and it cannot be said that the assessee has deliberately or for some ulterior purpose or for some mala fide purpose, did not file return. More importantly, we also find on a consideration of legal provisions of Income-tax Act that there is no authority to deny exemption u/s 10(23C)(vi) to assessee for the reason of non-filing of return. Ld. AR has successfully shown that the 20th Proviso to section 10(23C) denying exemption for non-filing of return u/s 139(4C) came into statute from AY 2023-24 only and prior to that there was no such provision. We may gainfully refer certain judicial rulings holding so in the context of similar scheme of section 11/12 where the assessee was required to file return u/s 139(4A) but the provision dis-entitling exemption for non-filing of return was brought in section 12A(a)(ba) by Finance Act, 2017 from AY 2018-19. These ruling are: (i) ITAT, Delhi in United Educational Society Vs. JCIT, Ghaziabad, 2734/Del/2018 for AY 2006-07, 2007-08: “19. We have heard the rival submissions and perused the relevant findings given in the impugned order. The core issues here is, whether the computation of income of the assessee society should be in accordance with section 11 or not; and whether, the filing of audit report alongwith the return filed in response to notice u/s 148 will entitle the assessee for benefit of computation of section 11. The AO has denied to compute the income in accordance with the Page 8 of 13
Shri Guptnath Bal Shikshan Samiti Machalpur AY 2017-18 provisions of section 11 of the Act on the reasoning that assessee has not filed the return under section 139 (4A) reads with section 12A (b) of the Act. Thus, what we have to adjudicate is, whether assessing officer was right in not applying the provisions of section 11 while computing income of the assessee. It is an admitted fact that the assessee is a society, who has been granted registration under section 12A of the Act by CIT looking to its objects of charitable purpose, i.e., it is engaged in imparting education and running various educational institutions. Thus, the registration u/s 12A is fait accompli and consequently the computation of income has to be in accordance with sections 11 to 13 of the Act. The assessee society had not filed its return of income and it was only in response to notice issued by the Assessing Officer under section 148, the assessee has filed its return of income alongwith the audited Balance Sheet and Profit & Loss Account. Now, whether the income of the assessee society is to be computed in accordance with the provisions of section 11 of the Act, as it has not filed the return as required under section 139(4A) of the Act, but has filed return in response to notice under section 148.
Section 139 falls under Chapter XIV-'Procedure for assessment' which provides procedures and conditions for filing of return of income. Section 139(1) mandates every person having income exceeding the maximum amount not chargeable to tax to file return of income. Similarly, section 139(1) (4A) mandates that every person in receipt of income derived from property held under trust, i.e., charitable trust, etc., to file its return of income in case its total income exceeds the maximum amount not chargeable to tax without giving effect to the provisions of section 11 & 12 of the Act. In case of failure to file such return of income under this section 139, penalty has been prescribed. In case of failure to file return by any person under section 139(1) penalty has been prescribed under section 271F. Similarly, in case of failure to file return by charitable society under section 139 (4A) penalty has been prescribed under section 272A (2)(e). On a plain reading of the relevant provisions, in our opinion, failure to file the return under section 139(4A) cannot be interpreted to mean that income cannot to be computed in the case of a charitable trust under section 11 of the Act. During the relevant assessment years impugned in these appeals, there is no such provision in the Act that in case return is not filed by charitable society under section 139(4A), then its income cannot to be computed in accordance with the provision of the Act.
XXX
Our above view gets further supported from the amendment made by the Finance Act, 2017 whereby a further clause (ba) has been inserted imposing a further condition that such return of income is to be furnished in terms of section 139(4A), within the time allowed under that section. Firstly, this requirement
Shri Guptnath Bal Shikshan Samiti Machalpur AY 2017-18 was not there before this amendment; and secondly, this insertion of additional clause clearly shows that such condition was not there in existing clause (b) of section 12A. Had such condition being there in clause (b) itself, then there was no need to insert a further clause (ba) by the Legislature for denying benefit ofsection 11 & 12 in case return is not filed in time as per provision of section 139 (4A) of the Act. It is relevant to note that clause (b) has not been amended, but a new clause (ba) which has been inserted to put a further condition w.e.f 1.04.2018, which was not there for the assessment years under consideration. It is also important to note that this condition of furnishing the return within the time allowed under section 139(4A) has been made applicable from A.Y. 2018-19 as has been specifically stated in the Finance Act, 2017 and not for the A.Y. under consideration.
We are also not in agreement with the contention of the Ld. DR that this amendment is clarificatory in nature. As rightly pointed out by the Ld. Counsel that this amendment has been made by the Finance Act, 2017 effective from A.Y. 2018-19, meaning thereby that this clause has not been made applicable even for the A.Y. 2017-18, the return of which were still to be filed. Thus, the Legislature has thought fit to make this amendment applicable from next assessment years onwards and not even to the current A.Y. 2017-18.”
[Emphsis supplied] (ii) ITAT, Hydrabad in Anjuman E Khadimul Muslimeen Refah-E Aam Vs. DCIT (2024) 167 taxmann.com 74 (Hyderabad – Trib.): “1. We have heard the rival contentions, perused the material available on record and gone through the order of the Ld. First Appellate Authority. The revenue authorities did not allowed the exemption claimed u/s 11 of the Act of Rs.82,83,576/- contending that the assessee had not filed the ROI and form 10B within the due date specified under the Act and finally raised a demand of Rs.34,47,810/-. As far as the delay in filing of form no.10B is concerned the Ld. CIT(E) has condoned the delay of filing of form 10B vide his order dated 06.08.2024. Therefore, in our considered opinion, on this issue there should not be any denial of exemption u/s 11 of the Act. However, with regards to delay in filing of ROI, section 12A(1)(ba) of the Act stipulates that to claim exemption u/s 11 of the Act, the return must be filed in accordance with the provisions of section 139(4A). However section 12A(1)(ba) have been inserted w.e.f. 01.04.2018 I.e. applicable w.e.f. A.Y.2018-19 only and hence the same is not applicable to the year under consideration. Therefore, in our considered view, due to delay in filing of ROI for the year under consideration also, there cannot be any denial of exemption u/s 11 of the Act. Hence, we are of the considered opinion that the assessee is eligible for exemption u/s 11 of the Act for the year under consideration and we direct the revenue
Shri Guptnath Bal Shikshan Samiti Machalpur AY 2017-18 authorities to allowed the exemption u/s 11 of the Act for the year under consideration to the assessee. Accordingly, we allowed the appeal of the assessee.” [Emphsis supplied] We also refer a recent decision dated 01.10.2024 of ITAT, Kolkata 14. in Haringhata Mahavidyalay Vs. ITO, which is a case for exemption u/s 10(23C)(iiiad) but equally applicable to section 10(23C)(vi) because the legal provisions of section 139(4C) and 10(23C) are same. In this case, the Hon’ble Kolkata Bench held as under:
“2. The first issue involved in this appeal is as to whether the exemption u/s 10(23C)(iiiab) of the Act can be denied to the assessee trust for late filing of the income tax return i.e. beyond time specified u/s 139(1) of the Act and secondly, if the return is required to be mandatorily filed then whether, the filing of the return u/s. 139(4D) instead of section 139(4C) of the Act disentitles the assessee from claiming the exemption u/s. 10(23C)(iiiab) of the Act.
The Ld. Counsel for the assessee has contended that there is no provision under the Income Tax Act vide which the exemption u/s. 10(23C)(iiiab) of the Act can be denied to an assessee for non-filing or late filing of the income tax return as required u/s. 139 of the Act and within the period specified u/s 139(1) of the Act.
4. The Ld. DR could not point out any relevant provision or section under the Income Tax Act which disentitles the assessee from claiming exemption u/s. 10(23C)(iiiab) of the Act for non-filing/late filing of the income tax return. Therefore, the action of the lower authorities in denying the exemption to the assessee on this ground is not sustainable.
The second issue as to whether the filing of the return in wrong form i.e. Form u/s 139(4D) instead of Form u/s. 139(4C) becomes irrelevant.
In view of the above stated legal position the action of the lower authorities in denying exemption to the assessee cannot be held to be justified. The impugned order of the Ld. CIT(A) is set aside and the Ld. AO is directed to grant exemption to the assessee as claimed u/s. 10(23C)(iiiab) of the Act.
In the result, the appeal of the assessee stands allowed.”
From the judicial decisions discussed above, we can safely conclude that the amendment in section 10(23C) by way of insertion of 20th proviso prescribing dis-entitlement of exemption u/s 10(23C)(vi) for non-filing of return, is applicable from AY 2023-24 and the same was not applicable to AY 2017- 18 under consideration. Therefore, in present case, the lower-authorities are wrong in denying exemption to assessee on the premise of non-filing of return. Needless to mention that the assessee has also filed justification for non-filing of return and the assessee’s justification could not be controverted by Page 11 of 13
Shri Guptnath Bal Shikshan Samiti Machalpur AY 2017-18 department. Therefore, the condition imposed by Ld. CIT(E) for filing of return, as relied by Ld. DR, cannot be said to be acceptable for AY 2017-18 with which are concerned in present appeal. So far as reliance of Ld. DR for revenue on the decision of Hon’ble Supreme Court in Wipro Ltd. (supra) is concerned, that decision is not applicable in present case for the reasons that (i) the said decision involved deduction u/s section 10B whereas the present- appeal is concerned with exemption u/s 10(23C)(vi) and (ii) the said decision involved interpretation of sub-section (8) of section 10B which is a negative provision i.e. it provides that if the assessee did not want to apply section 10B, then the assessee had to file a declaration but this is not a case in section 10(23C)(vi).
In view of above discussions, we hold that the assessee is eligble for exemption u/s 10(23C)(vi) as per approval granted by CIT(E) vide order dated 10.08.2018 for AY 2017-18 under consideration. Accordingly, we direct the AO to allow exemption u/s 10(23C)(vi) after necessary verification as he may consider appropriate…”
Thus, adopting the pre-existing view of ITAT, Indore and also various decisions of other benches referred therein, we hold that the assessee is eligible for exemption u/s 10(23C)(iiiad) and the Ld. AO is not justified to deny the same. Accordingly, we direct the AO to allow exemption u/s 10(23C)(iiiad) after necessary verification as he may consider appropriate.
Resultantly, this appeal is allowed for statistical purposes in terms mentioned above.
Order pronounced in open court on 30.09.2025.