JERMELS ACCADEMY ,DARJEELING vs. ITO, WARD 2(2), EXEMP, , SILIGURI
Facts
Assessee, Jermel's Academy, a charitable trust running a school, deposited ₹50,14,820/- in cash during the demonetization period (AY 2017-18), claiming these were student fees. The Assessing Officer (AO) treated this as unexplained money u/s 69A, considering the trust unregistered and its income as business income. The AO also levied penalties u/s 271B for not auditing accounts and u/s 271AAC(1) for unexplained money. The CIT(A) upheld these additions and penalties, rejecting the assessee's claim for retrospective exemption benefit based on provisional registration.
Held
The Income Tax Appellate Tribunal (ITAT) set aside the CIT(A)'s orders for all three appeals. For the addition u/s 69A (ITA No. 2748), the ITAT remitted the matter to the AO for a de novo assessment, granting the assessee an opportunity to justify the cash deposits, as the original assessment was ex parte. Consequently, penalties u/s 271B (ITA No. 2749) and u/s 271AAC(1) (ITA No. 2750) were also set aside, contingent on the fresh assessment of the quantum addition and charitable status.
Key Issues
1. Whether cash deposits made during demonetization by a charitable trust constituted unexplained money under Section 69A. 2. Eligibility of a charitable trust with provisional registration for retrospective exemption benefits under Section 11/12, and classification of its educational income. 3. Whether the trust was obligated to file income tax returns and have its accounts audited, impacting the assessment and penalties. 4. Validity of penalties imposed under Sections 271B and 271AAC(1) pending re-adjudication of the primary assessment.
Sections Cited
250, 144, 69A, 2(15), 12AA, 12AB, 10(23C), 12A(1)(ac), 11, 12A(2), 139, 12A(1)(ba), 271B, 44AB, 271AAC(1), 139(1), 139(4A), 142(1), 143(3), 147, 12A(1)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATΑ ‘Β ΒENCH AT KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
PER BENCH: These appeals filed by the Assessee are against the separate orders of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for AY 2017-18 dated 02.09.2025 and 03.09.2025. 2. The Assessee is in appeal before the Tribunal raising the following grounds of appeal: I. ITA No. 2748/KOL/2025:
“1. For that on the facts and in the circumstances of the case, the Ld. CIT(A) ought to have held that the order passed by the Ld. A.O u/s 144 is bad in law and liable to be quashed.
For that on the facts and in the circumstances of the case, that the Ld. CIT(A) has erred in sustaining the addition of ₹50,14,820/- made u/s 69A of the Income Tax Act, 1961 by treating the cash deposits during the period 09.11.2016 to 30.12.2016 as unexplained, without appreciating that the said deposits represented genuine fees collections from students and school building fund contributions.
For that on the facts and in the circumstances of the case, the Ld. CIT(A) has failed to appreciate that the appellant is a charitable trust engaged in education, which is per se a charitable purpose u/s 2(15) of the Income Tax Act, and the receipts were applied towards its educational objects; hence the addition sustained is unjustified.
For that on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that non-availability of registration u/s 12AA/12AB or u/s 10(23C) at the relevant time automatically renders the institution a business concern, without appreciating that the objects and activities were charitable in nature being in the nature of educational activities, and that the trust has since been granted provisional registration u/s 12A(1)(ac).
For that on the facts and in the circumstances of the case, the Ld. CIT(A) ought to have held that the income of the assessee was eligible for exemption u/s 11 in view of the proviso to Sec. 12A(2) of the Act.
For that on the facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the finding of the Assessing Officer that filing of return of income u/s 139 was mandatory for AY 2017-18, ignoring the fact that the appellant had deficit of income and there was no taxable income, and further overlooking that section 12A(1)(ba) making return filing a condition was inserted only from AY 2018-19. 7. For that on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in sustaining the assessment without addressing the specific documentary evidences submitted.
That the appellant craves leave to add, alter or delete all or any of the grounds of appeal.” II. ITA No. 2749/KOL/2025:
“1. For that the Ld. CIT(A) ought to have held that the order passed u/s 271B is bad in law and is liable to be quashed.
For that on the facts and in the circumstances of the case, the Ld. CIT (Appeals) erred in law and in facts in confirming the penalty of 1,50,000/- levied under section 271B of the Income Tax Act, 1961. 3. For that on the facts and in the circumstances of the case, has erred in confirming the penalty of ₹1,50,000/- levied u/s 271B of the Act, without appreciating that the appellant is a charitable trust running an educational institution and not engaged in any business activity so as to attract the provisions of section 44AB.
That the appellant craves leave to add, alter or delete all or any of the grounds of appeal.” III. ITA No. 2750/KOL/2025:
“1. (a) For that the Ld. CIT(A) ought to have held that the penalty order passed u/s 271AAC(1) dated 03.03.2025 is bad in law and is liable to be quashed. (b) For that the Ld. CIT(A) ought to have quashed the said penalty order on the ground that the same was barred by the law of limitation.
For that on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in upholding the penalty levied u/s 271AAC(1) of the Act amounting to ₹3,87,394/-, without properly appreciating the facts, explanations and evidences furnished by the appellant.
That the appellant craves leave to add, alter or delete all or any of the grounds of appeal.” We shall first take up ITΑ No. 2748/KOL/2025 for adjudication.
Brief facts of the case are that the assessee is a Trust registered at the office of the Sub
