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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
PER DUVVURU RL REDDY, Judicial Member :
This appeal filed by the assessee is against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“Ld. CIT(A)-NFAC”] vide DIN & Order No. ITBA/NFAC/S/250/2023-24/1062248276(1), dated 08/03/2024
2 arising out of the order passed U/s. 143(3) of the Act for the AY 2017-18.
At the outset, it is noticed from the appeal record that there is a delay of 43 days in filing the appeal before the Tribunal. Explaining the reasons for belated filing of the appeal, the Ld. AR drew our attention to the affidavit filed by the assessee along with a petition seeking for condonation of delay and read out the contents of the affidavit which is as under: “………..
3. The appellant-society’s Secretary Sri Gorrepati Chandra Sekhara Rao (Aged 84 years) passed away on 29/01/2024. The new Secretary’s appointment to the appellant-society, running a recognized school, needs to be approved by the District Educational Officer, Krishna District. The said process took a few months in view of the General Elections and the Poll Results and finally the approval was granted only on 1/6/2024. Mr. Gorrepati Venkata Rama Krishna is approved as the Secretary on 1/6/2024 by the DEO, Krishna and communication of the same was received by the appellant society on 3/6/2024. The newly appointed secretary has initiated the filing of the present appeal after taking charge yesterday. 4. It is humbly and respectfully submitted that the appeal could not be filed in time, in view of the above genuine difficulty. Thus, there is an unintended delay of 44 (Forty Four) days only in filing the appeal (the appeal before the Hon’ble Tribunal was due by 6/5/2024). 5. ………”
On perusal of the contents of the affidavit filed by the assessee as well as the submission of the Ld. AR, we find that the assessee is prevented by a reasonable and sufficient cause in 3 filing the appeal beyond the prescribed time limit with a delay of 43 days. Therefore, we hereby condone the delay of 43 days in filing the appeal before the Tribunal and proceed to adjudicate the appeal on merits in the following paragraphs.
Briefly stated the facts of the case are that the assessee- society filed its return of income for the AY 2017-18 on 20/12/2017 admitting NIL income after claiming exemption U/s. 10(23C)(iiiad) of the Act. The case was selected for complete scrutiny through CASS and notice U/s. 143(2) dated 14/09/2018 was duly served on the assessee. Subsequently, notice U/s. 142(1) was issued on various dates calling for specific information and in response thereto, the assessee-society has filed its submissions through e-proceedings. On perusal of the submissions made by the assessee, the Ld. AO observed that the assessee society claimed exemption U/s. 10(23C)(iiiad) on the pretext that the gross receipts of society is only Rs. 98,26,881/- and it does not exceed the threshold limit of Rs. 1 Crore. However, on verification of ITR and financial statements filed by the assessee society, the Ld. AO observed that the gross receipts from fees collection etc., is shown under the head “direct income” at Rs. 98,26,881/-. Accordingly, the Ld. AO issued a notice U/s. 4 142(1) of the Act dated 22/11/2019 wherein the assessee was asked to clarify and show cause regarding the discrepancy in gross receipts offered. In response, the assessee-society filed its submissions vide letter dated 7/12/2019. On perusal of the assessee’s submissions, the Ld. AO observed that there is a shortfall of Rs. 85,69,279/- on account of tuition fees collections alone in reporting of income in the return of income and financial statements. Thus, there is a huge difference in the gross receipts whereas the assessee-society claimed that it is extending concessions to students ie., children of school staff, children from economically weaker sections, children of society influential people, children of friends of school management. With regard to the difference in gross receipts shown in return of income and the gross receipts worked out based on fee structure fixed by the school as given by assessee society itself, the assessee society filed various documents along with a register maintained for concessions given to students. After considering the documents and the material available before the Ld. AO, the Ld. AO observed that the claim of the assessee-society made in the return U/s. 10(23C)(iiiad) is prima facie not allowable since the gross receipts as a whole in the hands of the society are Rs. 1,83,96,160/- which has exceeded the threshold limit of Rs. 1 Crore. The Ld.
5 AO further observed that since the gross receipts has exceeded the threshold limit of Rs. 1 Crore and as such the deemed exemption U/s. 10(23C)(iiiad) is not a valid claim of the assessee society. Therefore, the provisions of section 10(23C)(vi) clearly applies to the facts of the assessee’s case for which approval U/s. 10(23C)(vi) of the competent authority is mandatory. Before the Ld. AO, the assessee also contended with respect to the applicability of section 12AA to the assessee-society. On this issue, the Ld. AO observed that even though the assessee claimed that it was registered U/s. 12AA, no supporting evidence was filed. However, on verification of the record available with the Department, the Ld. AO observed that the assessee society was granted registration U/s. 12AA on 31/01/2018 and the assessee society made a claim on the proviso to section 12A(2) of the Act. The Ld. AO further observed that since on the date of registration ie., 31/01/2018, no assessment proceedings were pending for the AY 2017-18, the assessee society is not entitled for the benefit of exemption U/s. 11 of the Act as per the proviso to section 12A(2) of the Act. The Ld. AO further observed that the assessee-society has also not filed audit report in 10B of the Act to be entitled for benefit of exemption U/s. 11 of the Act which is mandatory as 6 per section 12A(1)(b) of the Act. Thus, the Ld. AO computed the total income of the assessee as under: Gross receipts of the society treated as income from Other sources Rs. 1,83,96,160/- Less: Expenditure incurred by Rs. 1,09,83,426/- the society Taxable income Rs. 74,12,734/- Thus, the Ld. AO completed the assessment U/s. 143(3) of the Act and passed the order dated 16/12/2019. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A)-NFAC.
On appeal, the Ld. CIT(A)-NFAC passed ex-parte order considering the assessee’s no response to the notices issued and dismissed the appeal of the assessee. While dismissing the assessee’s appeal, the Ld. CIT(A)-NFAC confirmed the addition made by the Ld. AO. Aggrieved by the order of the Ld. CIT(A)- NFAC, the assessee is in appeal before the Tribunal by raising the following grounds of appeal:
“1. In the facts and circumstances of case, the Ld. CIT(A) ought to have observed that the very initiation of scrutiny proceedings in the appellant’s case was not in accordance with the mandatory scrutiny guidelines of the Hon’ble CBDT vide Instruction No. 5/2017 [F.No. 225/180/2017/ITA.II], dated 7/7/2017, thus making the assessment unsustainable. (The appellant society filed ITR with a claim of exemption U/s. 10(23C)(iiiad) which claim had no obligation to file any Audit 7 Report as per the Act, whereas the scrutiny was taken up for the failure to file Audit Report in Form 10B/10BB applicable to registered Trusts as per section 12A(b)(Form-10B) and educational institutions covered by Sec.10(23C)(iv),(v) and (vi) [Form10BB]. The reason for scrutiny is erroneous even if picked up as per CASS and was also not in accordance with the CBDT Instruction No. 4/2018, dated 20/08/2018.
2. In the facts and circumstances of the case, Hon’ble jurisdictional High Court as well as many other High Courts and Hon’ble Tribunals held that an assessment taken up in violation of the mandatory scrutiny selection guidelines is void.
3. In the facts and circumstances of the case, the Ld. CIT(A) ought to have considered the facts of the case and the grounds of appeal
taken in the appeal memorandum, before dismissal of the appeal ex-parte.
4. The appellant craves leave to add or amend any ground of appeal.”
At the outset, the Ld. Authorized Representative [“Ld. AR”] submitted before us that the Ld. CIT (A)-NFAC has passed ex-parte order without providing proper opportunity to the assessee of being heard. It was therefore pleaded that the matter may be remitted back to the file of the Ld CIT (A)-NFAC in order to provide one more opportunity to the assessee of being heard.
Ld. Departmental Representative [“Ld. DR”], on the other hand, vehemently opposed to the submissions of the Ld. AR and argued that several opportunities had been provided to the assessee however, on the given dates of hearing, neither the assessee nor its Representative has responded to the notices issued nor filed any details / submissions as called for by the Ld. CIT (A)-NFAC. It was further submitted that, under 8 these circumstances, the Ld. CIT (A)-NFAC had no other option but to pass ex-parte order based on the materials available on record. Hence, it was pleaded that the order passed by the Ld. CIT(A)-NFAC does not call for any interference.
We have heard the rival submissions and carefully perused the materials on record. On examining the facts of the case, we find that the Ld. CIT (A)-NFAC had posted the case on several occasions. However, there was no response on behalf of the assessee before the CIT(A)-NFAC on the dates of hearing with regard to the details / submissions as called for by the Ld. CIT(A)-NFAC. Therefore, the Ld. CIT (A)-NAFC was left with no other option except to adjudicate the appeal ex-parte and dismissed appeal in-limine. In this situation, considering the issues involved in the appeal, we are of the considered view that the Ld. CIT(A)-NFAC ought to have decided the case on merits instead of dismissing the appeal in- limine. However, considering the prayer of the Ld. AR, and in the interest of justice, we hereby remit the matter back to the file of Ld. CIT (A)-NFAC in order to consider the appeal afresh and decide the case on merits by providing one more opportunity to the assessee of being heard in accordance with the principles of natural justice. At the same breath, we also hereby caution the assessee to promptly co-operate before the Ld. CIT (A)-NFAC in the proceedings failing which the Ld. CIT (A)-NFAC shall
9 be at liberty to pass appropriate order in accordance with law and merits based on the materials on the record. It is ordered accordingly.
In the result, appeal filed by the assessee is allowed for statistical purposes as indicated hereinabove.
Pronounced in the open Court on 25th July, 2024. Sd/- Sd/- (एस बालाकृ�णन) (दु�वू� आर.एल रे�ी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सद�य/ACCOUNTANT MEMBER �याियकसद�य/JUDICIAL MEMBER Dated : 25/07/2024 OKK - SPS आदेश की �ितिलिप अ�ेिषत /Copy of the order forwarded to:- 1. िनधा�रती/ The Assessee– Sri Vijaya Educational and Cultural Society, Vijayawada Road, Challapalli, Krishna District – 521126, Andhra Pradesh. 2. राज�व/The Revenue – Income Tax Officer, Ward-1, Machilipatnam, Krishna District, Andhra Pradesh.
3. The Principal Commissioner of Income Tax, 4.आयकर आयु� (अपील)/ The Commissioner of Income Tax (Appeals), 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, िवशाखापटणम/ DR, ITAT, Visakhapatnam 6.गाड� फ़ाईल / Guard file आदेशानुसार / BY ORDER
Sr. Private Secretary ITAT, Visakhapatnam