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Facts
The Assessee, DatarKulmandal, filed a nil return for A.Y. 2022-23. The Assessing Officer (AO) made an addition of Rs.3,22,574/-, treating gross receipts as undisclosed income and denying exemption under section 11, citing the rejection of registration renewal under section 12A/12AB by CIT Exemption. The Ld. CIT(A) confirmed the AO's order, dismissing the assessee's appeal.
Held
The Tribunal noted that the issue of 12A registration was already restored for de novo adjudication by a coordinate bench. Consequently, it set aside the Ld. CIT(A)'s order and restored the matter to the AO for re-assessment de novo, contingent on the fresh decision regarding 12A registration. The Tribunal further clarified that only net profit, not gross receipts, can be taxed even if section 12A registration is not available.
Key Issues
1. Whether gross receipts can be taxed as undisclosed income when Section 12A registration is denied. 2. Whether the assessment should be reframed de novo pending a decision on Section 12A registration. 3. Whether only net profit or gross receipts are taxable in the absence of Section 12A registration.
Sections Cited
Section 250, Section 143(3), Section 144B, Section 11, Section 12A, Section 12AB, Section 270A
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
ORDER
PER VINAY BHAMORE, JM :
This is an appeal filed by the Assessee against the order of Ld.Commissioner of Income Tax(Appeal)[NFAC], passed under section 250 of the Income Tax Act, 1961 for the A.Y.2022-23dated 17.10.2025 emanating from the Assessment Order passed under section 143(3) r.w.s. 144Bof the I.T.Act, 1961 dated 26.02.2024.
1. The learned AO erred in making addition of Rs.3,22,574/- being gross receipts of assessee by denying claim of exemption under section 11 and taxing the same as undisclosed income and the learned CIT (Appeals) erred in confirming the same
2. The AO erred in disallowing the claim of exemption under section 11 in assessee's case and in making addition of gross receipts and the Ld. CIT A erred in sustaining the same
3. The learned AO erred in not considering and allowing deduction of expenses incurred while assessing income of assessee since net gain / surplus is taxable and not gross receipts, and the learned CIT (Appeals) erred in confirming the same.
4. The AO has erred in treating gross receipts of assessee as taxable income and taxing it at maximum marginal rate.
5. The learned AO erred in solely relying on the order passed by the CIT Exemption refusing to renew registration u/s 12AB.
6. The assessee trust is liable to pay tax at normal slab rate on the net surplus and not on gross receipts since it is entitled to claim threshold income limit as AOP 7 The learned CIT Appeals erred in dismissing assessee's appeal without affording adequate opportunity of being heard and without considering assessee's submissions
8. The Assessee prays before your honour to allow any other relief as available under the income tax law 9 The appellant craves leave to add, revise, amend or alter any of the grounds of appeal” Findings & Analysis :
3. We have heard both the parties and perused the records. In this case, Assessee had filed Return of Income for A.Y.2022-23 on 19.09.2022 declaring total income at Rs.NIL. During the scrutiny proceedings, Assessing Officer observed that Assessee do not have registration u/s.12A of the Act. Assessing Officer made addition of Rs.3,22,574/-. The relevant paragraph 4.6 of the assessment order is reproduced here as under : “4.6 Conclusion drawn:- During the year, the assessee was in receipt donations& other miscellaneous incomesof Rs. 3,22,574/-and claimed all these receipts exempt u/s 11 of the Act. However, as the CIT Exemptions, Pune, vide order dated31.03.2023 rejected the assessee's application for registration u/s 12A(1) of the Act. Therefore, the assessee's claim of exemptions u/s 11 of the Act become automatically invalid and these receipts of Rs.3,22,574/- is assessee's undisclosed income of the year and is added to the total income of the year. Penalty proceedings u/s 270A of the IT Act for under-reporting of income is also initiated separately for under reporting of income.”
Being aggrieved with the above assessment order, Assessee filed an appeal before the Ld.CIT(A)/NFAC. Not being satisfied with the submission of the assessee, Ld. CIT(A)/NFAC dismissed the appeal of the assessee by observing as under :- “5.1.4 From the above, it is noted that document furnished could not be accepted as proof as a documentary evidence in support of the exemption u/s 11 of the Act as the CIT Exemptions, Pune, vide order dated 31.03.2023 rejected the appellant's claim of the exemptions u/s 11 of the Act become automatically invalid and these receipts of Rs.3,22,574/- is appellant's undisclosed income of the year. Accordingly, it is held that the action of the AO for making disallowance of exemption u/s 11 of the Act is hereby upheld. Hence, addition/disallowances made by the AO is confirmed. The ground of appeal
is dismissed.
6. In the result, the appeal is dismissed.“
5. It is the above order against which the assessee is in appeal before this Tribunal. We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that the Assessing Officer has taxed the entire receipts of the assessee stating that the assessee do not have section 12A registration. In this regard, Ld. AR brought to the notice of the Bench that a coordinate bench of this Tribunal by allowing the appeal of the assessee in order dated 27.02.2025 has already restored the issue of grant of registration u/s 12A of the IT Act to the file of Ld. CIT, Exemption for de novo adjudication. Under these circumstances, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC and restore the matter back to the file of the Assessing Officer with a direction to reframe the assessment de novo in the light of fresh decision of Ld. CIT, Exemption after providing reasonable opportunity of hearing to the assessee. However, in this regard, we are of the considered opinion that even if the assessee do not have section 12A registration whole of the receipts cannot be taxed rather only net profit can be taxed. Accordingly, grounds of appeal raised by the Assessee are allowed for statistical purpose.