KONGU EDUCATIONAL CHARITABLE TRUST,NAMAKKAL V. INCOME TAX OFFICER, EXEMPTIONS WARD, SALEM, SALEM

ITA 2534/CHNY/2025

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The case involves the Kongu Educational Charitable Trust, a public charitable trust registered under section 12AA of the Income Tax Act, 1961, which appealed against the order of the Commissioner of Income Tax (Appeals) [NFAC], Delhi. The appeal was concerning the addition of Rs.5,00,000 to the trust's income for the Assessment Year 2016-17, which was treated as income under section 68 read with section 115BBE of the Income Tax Act due to the failure to prove the creditworthiness and genuineness of the transaction. The trust argued that the amount was applied towards its charitable objects and should not be added as income. The ITAT found merit in the trust's argument and remanded the matter for further examination of the application of the said amount towards charitable purposes.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 848651 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Chennai
• Assessment Year: 2016-2017
• Appeal Filed On: 13-09-2025
• Other Referred Cases: M.Kalappa Sethi Vs. M.V.Laxmi Narain Rao AIR 1973 SC 627
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: K. VISHVA PADMANABAN
• Keywords: Condonation of delay; Bonafide belief; Charitable institution

Judgement Text

" आयकर अपीलीय अिधकरण ”बी” Ɋायपीठ चेɄई मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCHES “B” :: CHENNAI BEFORE SHRI GEORGE GEORGE K, VICE-PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.2534/CHNY/2025 Ǔनधा[रण वष[ / Assessment Year: 2016-17 Kongu Educational Charitable Trust, 3/107, Manathi, Manathi(PO)(, Trichengode(TK), Namakkal – 637003. Vs Income Tax Officer, Exemption Ward, Salem. PAN: AABTK5989R Appellant/ Assessee Respondent / Revenue Assessee by Mr. K. Vishva Padmanaban – C.A. Revenue by Ms. Gouthami Manivasagam – Addl.CIT Date of hearing 12/02/2026 Date of pronouncement 25/03/2026 आदेश/ ORDER PER INTURI RAMA RAO, AM : This appeal filed by the Assessee Trust directed against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], Delhi dated 24.02.2025 passed under section 250 of the Income Tax Act, 1961 for the A.Y.2016-17. Printed from counselvise.com ITA No.2534/CHNY/2025 [A] 2 2. The Assessee raised the following grounds of appeal : “1. That the Learned Addl/JCIT(A)-1, Chandigarh [\"ld.JCIT(A)\"] is not justified in sustaining the addition of Rs.5,00,000/- made by the Assessing Officer u/s.68 r.w.s 115BBE of the Act. 2. That the ld.JCIT(A) failed to appreciate that the sum of Rs.5,00,000/-, having been applied by the appellant trust towards its charitable objects, ought, in the alternative, to be considered as application of income, and consequently, no addition is warranted in the facts and circumstances of the case.” 2. Briefly the facts of the case are that the Appellant is a Public Charitable Trust. It is a duly registered trust u/s.12AA of the Income Tax Act, 1961. It is formed with the object of running an educational institution. The Return of Income for the Assessment Year 2016-17 was filed on 07.10.2016 declaring NIL income claiming exemption u/s.11 of the Income Tax Act, 1961. Against said return of income, the assessment was completed by Income Tax Officer, Exemption Ward, Salem (herein after called ‘AO’) vide order dated 28.12.2018 passed u/s.143(3) of the Act at a total income of Rs.21,25,400/-. While doing so, the Assessing Officer made addition of unsecured loans received from one Ms. N.Sumati of Rs.10,00,000/-, Shri R.Subramaniam of Rs.13,00,000/- by holding that the appellant trust had failed to prove the creditworthiness of the creditors and genuineness of the transactions. Printed from counselvise.com ITA No.2534/CHNY/2025 [A] 3 3. Being aggrieved by the above assessment order, an appeal was filed before ld.CIT(A)NFAC, contending that no addition u/s.68 can be made as such credits were not received during the previous year relevant to the assessment year under consideration. Without prejudice to the above, it was contended that the loan creditors in response to summons u/s.131 issued by the Assessing Officer had confirmed having lent the money to the appellant trust, therefore, the question of addition does not arise. However, the ld.CIT(A)NFAC deleted the addition to the extent of Rs.18,00,000/- by holding that the credits were not received during the previous year relevant to the assessment year under consideration, however, confirmed the addition to the extent of Rs.5,00,000/- received from R.Subramaniam by holding that the appellant trust had failed to substantiate the creditworthiness of the creditor and genuineness of the transaction. 4. Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal. 5. At the outset, we find that there is delay in filing the present appeal before us by 136 days. The appellant filed an Affidavit seeking the condonation of delay on the ground that it was under Bonafide belief that Printed from counselvise.com ITA No.2534/CHNY/2025 [A] 4 there was no necessity of filing appeal, as there was no adverse financial impact. However, on the advice of the Chartered Accountant Shri R.Venkata Raman, the appeal was filed as the Assessing Officer initiated the penalty proceedings after passing consequential order to the ld.CIT(A)’s order. 6. The averments made in the Affidavit seeking the condonation of delay in filing appeal before us remains uncontroverted by the ld.Sr.DR. The Hon’ble Supreme Court in the case of M.Kalappa Sethi Vs. M.V.Laxmi Narain Rao AIR 1973 SC 627, it was held that an uncontroverted affidavit shall be taken as an affidavit on fact. Therefore, in our considered opinion since the appellant was under the Bonafide belief that there was no necessity of filing appeal, this would constitute a reasonable, sufficient cause for delay. Therefore, the delay is condoned and the appeal is admitted for adjudication on merits. 7. The ld.Counsel submits that without prejudice to the argument that the loan received from R.Subramaniam is genuine and the assessee satisfied the identity, creditworthiness and genuineness of the transactions, it is contended that even if the loan credit is treated as income in the hands of the appellant trust, the same was applied for charitable objects for which the appellant trust Printed from counselvise.com ITA No.2534/CHNY/2025 [A] 5 was formed. It is further contended that the provisions of section 115BBE have no application for the assessment year under consideration. 8. On the other hand, ld.Sr.Departmental Representative submits that the appellant had failed to discharge the onus lying upon it to prove the identity, creditworthiness and genuineness of the transaction. It is further contended that the appellant had not substantiated that the income was applied for charitable trust. 9. We heard rival submissions and perused the material available on record. The issue that arises for our consideration is whether the ld.CIT(A) was justified in confirming the addition of Rs.5,00,000/- being the amount of loan received from one Mr.R.Subramaniam. The Assessing Officer made addition of Rs.5,00,000/- treating the amount of loan received from R.Subramaniam as income of the appellant, as the appellant had failed to discharge the onus of proving the identity, creditworthiness of creditors and genuineness of the transaction. Even on the appeal before the ld.CIT(A), the addition was confirmed by holding that the appellant had failed to discharge the onus of proving creditworthiness of the creditor and as genuineness of the transaction. However, before us, no pleadings were made on behalf of the appellant trust with regard to satisfaction of ingredients of Printed from counselvise.com ITA No.2534/CHNY/2025 [A] 6 creditworthiness of the creditor and the genuineness of the transaction. However, an alternative plea was made that addition resulting into income of the appellant trust was applied for charitable purpose and therefore, no addition is required to be made. This plea was raised for the first time before us. Keeping in view, the fact that the appellant trust which enjoys exemption u/s.11 of the Act, is entitled to carryforward 15% of the current income for application towards charitable objects in subsequent years, we are of the considered opinion that matter requires a remand to the file of Assessing Officer with a direction to examine the alternative plea of the appellant. We order accordingly. 10. In the result, appeal filed by the assessee stands partly allowed for statistical purpose. Order pronounced in the open Court on 25th March, 2026. Sd/- Sd/- (GEORGE GEORGE K) (INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT MEMBER Chennai; Ǒदनांक / Dated : 25th March, 2026 SGR, Sr.PS Printed from counselvise.com ITA No.2534/CHNY/2025 [A] 7 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT Chennai/Madurai/Coimbatore/Salem. 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, “बी” बɅच, चेÛनई / DR, ITAT Chennai. 5. गाड[ फ़ाइल / Guard File. Printed from counselvise.com "