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Facts
The appellant, an educational institution, did not file a regular income tax return for AY 2018-19. The AO initiated reassessment proceedings under Section 147 after noting a significant cash deposit, estimating income from fees at 8% of gross receipts and adding bank interest. The CIT(A) upheld the AO's order, leading to the present appeal.
Held
The Tribunal held that the AO's estimation of income was arbitrary as it was not based on clear grounds, the assessee's past history, or comparable businesses. Consequently, the matter was remanded to the AO for a fresh assessment, requiring a reasonable opportunity of hearing for the appellant.
Key Issues
Whether the estimation of income by the AO at 8% of gross receipts, without rejecting books of account or considering past history/comparables, was justified.
Sections Cited
139(1), 148A, 148A(d), 148, 147, 144B
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
Assessment Year: 2018-19 Islahi English Medium School .......... Appellant Irikkur P.O., Kannur 670593 [PAN: AAAAI9586J] vs. Income Tax Officer, Ward-1 & TPS, Kannur .......... Respondent Assessee by: Shri Suresh Kumar,CA Revenue by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 04.11.2025 Date of Pronouncement: 10.11.2025 O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 04.03.2025 for Assessment Year (AY) 2018-19.
Brief facts of the case are that the appellant is an association of persons running an educational institution. No regular return of income under the provisions of section 139(1) of the Income Tax Act, 1961 (the Act) was filed by the appellant for AY 2018-19. Based on the information that the appellant made cash deposit of Rs. 90,10,470/-, the AO formed an opinion that income escaped assessment to tax. Accordingly, after complying the procedure laid Islahi English Medium School down u/s. 148A of the Act, order u/s. 148A(d) was passed on 03.05.2022 and a notice u/s. 148 was issued to the assessee on 03.05.2022. In response to the notice, the appellant furnished a return of income on 03.06.2022 Against the said return of income, the assessment was completed by the Assessment Unit, Income Tax Department (hereinafter called "the AO") vide order dated 21.12.2023 passed u/s. 147 r.w.s. 144B of the Act at a total income of Rs. 9,28,107/-. While doing so, the AO estimated the income on the fees receipts of Rs. 1,09,85,494/- at 8% of the total income and also made addition on interest income received from banks of Rs. 6,957/-.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
The learned counsel for the assessee submits that the estimation of 8% of the gross receipts is arbitrary and excessive. Without rejecting the books of account by the AO ought not have estimated the income.
On the other hand, the learned Sr. DR supporting the orders of the learned lower authorities submits that no interference is called for.
I heard the rival contentions and perused the material available 7. on record. The issue in the present appeal relates to estimation of Islahi English Medium School income in respect of business of running educational institution. Having heard the both the parties, I am of the considered opinion that the matter requires remand to the AO, as the estimation of income on the basis of turnover adopted by the AO is not clear. The estimation of income is not based on past history of the assessee or on comparables, which are in the similar lines of business. Therefore I remand the matter back to the file of the AO for fresh assessment in accordance with law after affording reasonable opportunity of hearing to the appellant.
In the result, the appeal filed by the assessee stands partly allowed for statistical purposes.
Order pronounced in the open court on 10th November, 2025.