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Facts
The assessee, an educational society, filed its return of income, which was processed by the CPC under Section 143(1), treating its gross receipts as taxable income and raising a significant demand. The assessee's appeal to the Ld. CIT(A) was dismissed ex-parte due to alleged non-compliance, leading to the present appeal before the ITAT.
Held
The ITAT held that the CIT(A) erred in dismissing the appeal ex-parte without providing a reasonable opportunity of being heard to the assessee. The matter was remitted back to the Assessing Officer for fresh adjudication on merits, adhering to the principles of natural justice.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal ex-parte without affording due opportunity of hearing, and whether the CPC's adjustments taxing gross receipts under Section 143(1) were beyond its permissible scope, especially considering claims for exemption under Section 10(23C).
Sections Cited
143(1), 250(6), 250, 11, 12, 12A, 10(23C)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER V. DURGA RAO, JM:
This appeal filed by the assessee is against the order of the Learned Addl/Joint Commissioner of Income Tax (Appeals)-1, Delhi (in short “Ld. CIT(A)”) vide DIN & Order No. ITBA/APL/S/250/2024- 25/1070709295(1), dated 28/11/2024 arising out of the order passed U/s. 143(1) of the Income Tax Act, 1961 (in short “the Act”), dated 25/11/2022 for the AY 2021-22.
Page No. 1 Murarji Educational Society vs. ITO 2. Briefly stated the facts of the case are that the assessee is an Educational Society filed its return of income on 31/03/2022 for the AY 2021-22 declaring a total income of Rs. 4,93,210/-. Thereafter, the assessee’s return of income was processed U/s. 143(1) by the Central Processing Centre, Bangalore (in short “CPC”) and treated the entire gross receipts of Rs. 93,32,565/- as taxable income and determined the total income at Rs. 98,25,772/- and passed the Intimation order U/s. 143(1), dated 25/11/2022 and raised a demand of Rs. 40,22,830/-. Aggrieved by the order passed by the Ld. AO, the assessee carried the matter in appeal before the Ld. CIT(A).
On appeal, the Ld. CIT(A) dismissed the appeal of the assessee by passing ex-parte order holding that there was no compliance to the notices by the assessee nor the assessee has filed any submissions to substantiate its claim. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us by raising the following grounds of appeal:
“1. That on the facts and circumstances of the case and in law, the intimation order passed U/s. 143(1) of the Act, dated 25/11/2022 as confirmed by the Ld. CIT(A) vide order dated 28/11/2024 is erroneous, being contrary to the facts of the case and the applicable provisions of the case.
That the Ld. CIT(A) disposed of the appeal ex-parte without affording a reasonable opportunity of being heard to the assessee, thereby violating the principles of natural justice.
3. That the ex-parte disposal of the appeal by the CIT(A) is in contravention of section 250(6) of the Act, which mandates the CIT(A) to adjudicate the appeal on merits by passing a reasoned order.
Page No. 2 Murarji Educational Society vs. ITO 4. That the Ld. CIT(A) erred in not appreciating the CPC, Bangalore, incorrectly made adjustments by bringing to tax the gross receipts along with the excess of income over receipts, which is beyond the permissible scope of adjustments U/s. 143(1) of the Act.
5. That the Ld. CIT(A) failed to recognize that the adjustments made during the processing of the return U/s. 143(1) of the Act were not legally sustainable and, therefore, ought to have been deleted.
6. Without prejudice to the above grounds, the Ld. CIT(A) ought to have concluded that the entire gross receipts cannot be subjected to tax in isolation and should have considered the related expenses while determining the taxable income.
7. That, in view of the foregoing and other grounds that may be urged at the time of hearing, the appellant prays that the order passed U/s. 250 of the Act be set aside, and the additions made by the AO and sustained by the CIT(A) be deleted.”
At the outset, the Ld. AR submitted that the appeal of the assessee may be remitted back to the file of the Ld. A.O. because the Ld. Revenue Authorities did not provide proper opportunity to the assessee of being heard. He further submitted that the Auditor of the assessee, while filing the return of income in ITR-7, has inadvertently selected / ticked the columns intended for claiming exemption U/s. 11 and 12 of the Act, although the assessee was not registered U/s. 12A of the Act and having no registration number U/s. 12A of the Act. The Ld. AR further submitted that since the assessee’s gross receipts are below the prescribed threshold limit of Rs. 1 Cr, there is no need for the assessee to obtain registration U/s. 12A of the Act as per the provisions of section 10(23C) of the Act. He further submits that the action of the Ld. AO / CPC in taxing the gross receipts of the assessee is not unsustainable in Page No. 3 Murarji Educational Society vs. ITO law. The Ld. AR also submitted that the Ld. CIT(A) did not provided proper opportunity of being heard to the assessee and passed ex-parte order and therefore, he prayed for remitting the matter back to the file of the jurisdictional Assessing Officer by providing one more opportunity of being heard to the assessee.
The Ld. DR on the other hand argued by stating that proper opportunity was given to the assessee but the assessee or its Counsel failed to appear before the Ld. Revenue Authorities due to which the Ld. Revenue Authorities did not have any other option but to pass order based on the materials available on record.
We have heard both the sides and perused the orders of the Ld. Revenue Authorities and also the material available on record. It is apparent from the order of the Ld. CIT(A) that the appeal of the assessee was dismissed by passing ex-parte order. Before us, the Ld. AR made various submissions as well as filed a paper book wherein it was submitted that since assessee’s total receipts were Rs.93,32,565/- for the AY under consideration, as per the provisions of section 10(23C) of the Act, the income would be exempt if the gross receipts are less than Rs. 1 Cr. It was also the claim of the assessee that since the Ld. AO has considered the status of the assessee as AoP, in which case the Ld. AO ought to have considered the expenses from the receipts. However, the Ld. Revenue Authorities without considering all these aspects passed
Page No. 4 Murarji Educational Society vs. ITO the orders. In our considered opinion, the Ld. CIT(A) ought to have passed the order on merits instead of passing the ex-parte order. Considering all the above facts and circumstances of the case, we are of the opinion that it is a fit case to remit the matter back to the file of the Ld. AO to decide the case afresh after affording a reasonable opportunity of being heard to the assessee as per the principles of natural justice. Further, the assessee is also hereby directed to cooperate with the Ld. Revenue Authorities in their proceedings, otherwise, they are at liberty to pass orders based on the material available on record.
In the result, appeal filed by the assessee is allowed for statistical purposes as indicated herein above.