SAINATH EDUCATIONAL SOCIETY,GUNTUR vs. THE INCOME TAX OFFICER, EXEMPTION WARD, GUNTUR

This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi, vide DIN & Order No.ITBA/NFAC/S/250/2023-24/1059897239(1) dated 18.01.2024, arising out of order passed u/s 270 of the Income Tax Act, 1961 (in short ‘Act’) dated 10.09.2021 for the Assessment Year (A.Y.) 2017-18. Sainath Educational Society, Guntur 2. Brief facts of the case are that the assessee society, registered under Section 12A of the Act, running an educational institution in the name of Apple EM High School, filed it’s return of income originally on 31.03.2018, admitting gross receipts at Rs.1,49,64,331/- and claimed revenue expenses to the tune of Rs.1,22,03,023/- and capital expenditure of Rs.36,20,859/-. The assessee filed a revised return on 24.11.2018 which was processed u/s.143(1) of the Act. The case was selected for scrutiny under “Manual – compulsory category scrutiny” as per the CBDT Instruction. The case was also selected under CASS to verify large receipts from incidental objects. The assessment under section 143(3) of the Act was completed on 24.12.2019 and income of the assessee was assessed at Rs. 35,53,070/- as follows : (a) Additional income offered in survey proceedings- Rs.14,54,460/- (b) Rents paid short admitted treated as income- Rs. 1,44,000/- (c) Excess of income over expenditure treated as income, as discussed above - Rs.19,54,608 Subsequently, penalty proceedings u/s 270A of the Act, 1961 was initiated and notice u/s 274 rws 270A of the Act, dated 24.12.2019 was issued and served on the assessee. As per the submission filed by the assessee and as per the facts mentioned in para-2 of the penalty order, the addition of Rs.19,54,608/- made on account of excess of income over Sainath Educational Society, Guntur expenditure was nullified vide rectification order. Further, in respect of other additions made during the course of assessment proceedings, the AO held that the submission filed by the assessee is not justified, considering the fact that the assessee has not voluntarily offered the surrendered amount during the ITR filing but offered the same at later stage i.e. during the course of assessment proceedings and it cannot be considered as voluntarily disclosure on the part of assessee. Besides the AO on the basis of this fact also initiated the penalty proceedings as per provision of section 270A of the Income Tax Act for “Under-reporting of income in consequence of mis-reporting” made by the assessee in its ITR. Therefore held that the submission filed by the assessee is not justified for addition (a) and (b) mentioned above and rejected the submissions and held that the assessee is liable for penalty as per provision of Section 270A of the Income Tax Act,1961 and imposed penalty of Rs. 9,59,076/- being 200% of the amount of tax payable of Rs. 4,79,538/-. On appeal before the CIT(A), the Ld.CIT(A) sustained the penalty imposed and dismissed the appeal of the assessee ex-parte.

On being aggrieved, the assessee preferred an appeal before the Tribunal by raising the following grounds of appeal :

The learned Commissioner of Income Tax (Appeals) is not justified in dismissing the appeal exparte without giving sufficient opportunity of hearing to the applicant.

Any other ground may be urged at the time of hearing.

Per contra, the Ld.DR submitted that the assessee was given sufficient opportunities during the appeal proceedings, but the assessee failed to comply. Hence, the Ld.CIT(A) is justified in sustaining the penalty. The Ld.DR therefore, pleaded to uphold the order passed by the Ld.CIT(A).

We have heard both the parties and perused the material available on record. In the instant case, assessment in the case of the assessee was completed and income of the assessee was assessed at Rs.35,53,070/-. It is undisputed fact that the addition of Rs.19,54,608/- made on account of Sainath Educational Society, Guntur excess of income over expenditure was already nullified vide rectification order. After considering the submissions filed by the assessee, the AO rejected the submissions and levied penalty of Rs.9,59,076/- levied u/s 270A of the Act. The only contention of the Ld.AR is that the assessee society was not given sufficient opportunity to controvert the findings of the revenue authorities and pleaded for an opportunity of being heard before the CIT(A) in the interest of justice. Keeping in view the aforesaid facts and circumstances of the case and in order to meet the principles of natural justice, we are inclined to remit the matter back to the file of the Ld.CIT(A) with a direction to afford an opportunity of being heard to the assessee. The assessee is also directed to adhere to the notices issued by the revenue authorities and cooperate during the proceedings.

In the result, appeal of the assessee is allowed for statistical purpose.