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Facts
The assessee, a charitable organization, filed a Nil income return for A.Y. 2023-24, which was processed u/s 143(1). Its case was selected for compulsory scrutiny, and the AO made an addition of Rs. 9,71,939/- as the assessee was not granted regular registration u/s 12A. The CIT(A) confirmed this assessment, noting that a prior Tribunal order had remitted the 12A registration matter back to the CIT(Exemption) for fresh adjudication but did not direct withholding of appeal proceedings.
Held
The Tribunal dismissed the assessee's first grievance regarding the validity of compulsory scrutiny selection. However, for the second grievance, the Tribunal noted that the rejection order of CIT(Exemption) concerning 12A registration had already been set aside by the Tribunal in a previous order. Consequently, the Tribunal restored the issues on merits to the Jurisdictional Assessing Officer for fresh adjudication, to be carried out after the CIT(Exemption) decides the assessee's 12A registration application.
Key Issues
1. Whether the Assessing Officer erred in selecting the assessee's case for compulsory scrutiny despite the pendency or remittance of the application for regular registration u/s 12A. 2. Whether the merits of the addition should be adjudicated when the underlying issue of 12A registration rejection has been set aside by the Tribunal for fresh examination.
Sections Cited
250, 143(3), 144B, 143(1), 12A, 12AB, 35(1), 10(23C)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
: Assessee by Shri Rajendra Agiwal : Shri Vishwajit Shinde Revenue by : Date of hearing 22.01.2026 Date of pronouncement : 02.02.2026 आदेश / ORDER The captioned appeal at the instance of assessee pertaining to the Assessment Year 2023-24 is directed against the order dated 19.08.2025 of National Faceless Appeal Centre (Delhi (NFAC) passed u/s.250 of the Income- tax Act, 1961 (hereinafter also called ‘the Act’) arising out of the Assessment Order dated 31.01.2015 passed u/s.143(3) r.w.s.144B of the Act.
Brief facts of the case are that the assessee is a charitable organisation and declared Nil income in the return of income filed o 27.10.2023 for A.Y. 2023-24. Return processed u/s.143(1) of the Act on 07.06.2024 at Nil income. Thereafter, return of the assessee selected for compulsory scrutiny as per parameter of CBDT for compulsory selection. After serving valid statutory notices, ld. AO carried out the 2 Tarachand Gupta Foundation assessment proceedings on observing that the assessee has not been granted regular registration u/s12A of the Act accordingly treated the total receipts including corpus for the year as income from other sources and made addition of Rs.9,71,939/- 3. Against the addition assessee preferred appeal before ld.CIT(A) and during the course of appellate proceedings assessee stated that assessee has filed appeal before the Hon’ble Tribunal against the order of ld.CIT(Exemption) rejecting the application for regular registration u/s.12A of the Act and that the Hon’ble Tribunal has restored the issue back to the file of ld.CIT(Exemption) for deciding it afresh. However, ld.CIT(A) came to the conclusion that since the order of Hon’ble Tribunal does not contain any direction to the authority to withhold the appeal proceedings and that the same is limited to remitting the registration matter back to ld.CIT(Exemption) for afresh adjudication, therefore, appeal filed by the assessee is being devoid of any merit and accordingly confirmed the assessment order.
Now the assessee is an appeal before this Tribunal and has raised as many as 11 grounds of appeal
but the grievance is two fold firstly that ld. AO erred in selecting the assessee’s case for compulsory scrutiny inspite of the fact that the assessee’s application for regular registration u/s.12A of the Act is pending before ld.CIT(A) and therefore ld. AO has not adhered to the CBDT directions. Secondly a ground has been raised that considering the fact that application for regular registration u/s.12A is pending before ld.CIT(Exemption) the issue on merit deserves to be restored to the file of ld. Jurisdictional Assessing Officer for afresh
3. Tarachand Gupta Foundation adjudication after the passing of the order by ld.CIT(Exemption).
On the other hand, ld. DR supported the order of ld.CIT(Exemption).
I have heard the rival contentions and perused the record placed before us. So far as the issue raised by the assessee challenging the selection of assessee’s case for compulsory scrutiny, I find that at the time when ld. AO selected the case for scrutiny, the assessee’s application for regular registration u/s.12A of the Act stood rejected by ld.CIT(Exemption) and the matter was pending before this Tribunal. Parameter of CBDT for compulsory scrutiny has been mentioned by ld. AO in the assessment order at page 1 which reads as under : “1. Reasons for Selection of the Case:- The assessee case was selected for compulsory scrutiny assessment under compulsory selection under the Parameter of CBDT for Compulsory Selection "Cases where registration/approval under various sections of the Act, such as section 12A, 12AB, 35(1) (1) (la)/(), 10(23C) etc., have not granted or have been cancelled/withdrawn by the competent authority, yet the assessee has been found to be clamming tax exemption/deduction in the return. However, where such orders of withdrawal of registration/approval have been reversed /set-aside in appellate proceedings, those cases will not be selected under this clause". Reason for selection mentioned herein below: .”
On going through the above, I find that when the case of the assessee was selected for scrutiny at that point of time assessee’s application u/s.12A for regular registration u/s.12A already stood rejected by ld.CIT(Exemption) and therefore ld. AO has made no error in assuring jurisdiction 4 Tarachand Gupta Foundation for selecting the assessee’s case for compulsory scrutiny. Therefore, this legal issue raised by the assessee is dismissed.
So far as the second grievance of the assessee is concerned, I find merit since the rejection order of ld.CIT(Exemption) has been set aside by this Tribunal vide order dated 03.06.2025 vide and 936/PUN/2025 and directions have been given to ld.CIT(Exemption) for examining the assessee’s application afresh. Under these given facts and circumstances, I deem it appropriate to restore the issues raised on merits to the file of ld. Jurisdictional Assessing Officer for afresh adjudication to be carried out after the passing of the order by ld.CIT(Exemption) deciding the fate of assessee’s application for regular registration u/s.12A. Needless to mention that ld.JAO shall afford reasonable opportunity of hearing in the set aside proceedings. Impugned order is set aside and the grounds of appeal
raised by the assessee are allowed for statistical purposes.