NANIK EDUCATION SOCIETY,THANE vs. INCOME TAX OFFICER (EXEMPTION) WARD, THANE

This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre, Delhi [for short 'the CIT(A)] both dated 23.05.2023 for the AY 2013-14. The assessee raised the following grounds of appeal:

The appellant therefore prays that disallowance / addition made by Ld Assessing Officer and confirmed by Hon'ble CIT (A) not being in accordance with the provisions of law deserves to be & may please be deleted.”

The assessee is a charitable trust registered under section 12A of the Income Tax Act, 1961 (for short 'the Act') and filed the return of income for AY 2013-14 on 26.09.2013 declaring the income of Nil. The Assessing Officer (AO) during the course of assessment noticed that the assessee has claimed as um of Rs. 28,02,816/- as exemption under section 11(1)(c) of the Act and called on the assessee to furnish the relevant documents in support of the said claim. The assessee submitted that – Regarding exemption of Income u/s 11(1)(c) of the Income tax Act. 1962, I would like to say that the exemption of the Income of the Trust was to be claimed u/s 11(2) of the Income tax Act 1961 and thereafter the accumulated or set a part income has been invested by the said trust with Banks under fixed Deposits, held is the name of the said trust with renewal every year as specified subsection 5 of section II of the Income tax Act, 1961. I say trust has set aside the said accumulated funds with banks by way of fixed deposits held us the trust was to purchase their own land and construct the school building thereon, as the school imparting education to the poor and needy students with low fees structure and we are managing school activities in such a way to create better schooling with limited sources, even the school don't charge donations for admissions taken by the students in the said school,”

The AO from the perusal of the return of income filed by the assessee noticed that the accumulation of funds which the assessee has claimed to have Nanik Education Society done under section 11(2) has not been furnished under Schedule I by the assessee and that even for the claim to be allowed under 11(1)(c), the disclosure in the return is not proper. The AO therefore held that the assessee that the assessee is misleading the revenue by incorrect disclosures and accordingly is not entitled for exemption under section 11(1)(c) of the Act to the tune of Rs. 28,02,816/-. However, the AO allowed the deduction of 15% of the gross receipt amounting to Rs. 9,40,513/- as exemption under section 11(1)(a) of the Act. The AO also made an addition of Rs. 13,606/- as undisclosed interest income. Aggrieved the assessee filed further appeal before the CIT(A). The assessee did not represent the case before the CIT(A) and did not furnish any further details. Therefore, the CIT(A) dismissed the appeal by holding that – “4. After introduction of Faceless Appeal Scheme with effect from 25/09/2020, fresh notices u/s. 250 of the Act were issued on various dates as mentioned in Para 1.1 above. On all these occasions, the appellant neither made any written submissions nor filed any application seeking adjournment. After enabling the window for communication with the CIT(A), by the NFAC with effect from 31/10/2022 also, no communication has been received from the appellant. Considering the above facts, it is clear that, in this case, sufficient number of opportunities have already been granted to the appellant which the appellant has failed to avail. It may also be noted that this is an old appeal, filed before 01/04/2019, and is to be disposed off on priority basis as per Interim Central Action Plan 2023-24. Under these facts and circumstances, where the appellant's consistent non-compliance and indifference to the appellate proceedings is abundantly manifest, I do not have any alternative but to decide the appeal on the basis of facts available in grounds of appeal

We have heard the parties and perused the material available on record. We noticed from the order of the CIT(A) that the assessee was given opportunity to provide written submission on various occasions from March 2019 to April 2023. However, it is noticed that the assessee neither submitted any written submissions nor filed any documentary evidences contending the disallowance/additions made by the AO. We further notice from the perusal of the assessment order that the AO has not confronted issue of incorrect disclosure in the return of income with the assessee and has concluded that the assessee is trying to mislead the revenue. In our considered view the claim of the assessee towards accumulation needs factual verification and therefore in the interest of natural justice and fair play, we deem it fit to give one more final opportunity to the assessee to represent the case properly before the AO. Therefore the issue is restored back to the AO for fresh consideration. The assessee is directed to file the necessary documents as may be called on by the AO and co-operate with the assessment proceedings without seeking adjournments. It is ordered accordingly.