NALANDA GROUP OF MANAGEMENT EDUCATION,KOLKATA V. ITO, WARD-1(1)EXEMPTION, , KOLKATA

ITA 140/KOL/2024

AI Insights

The case involves the Nalanda Group of Management Education, a charitable trust, appealing against the order of the Commissioner of Income Tax (Appeals) which confirmed additions made by the AO in the assessment for AY 2013-14. The primary issues included the disallowance of commission and consultancy charges amounting to 70,07,000 and other disallowed expenses. The Tribunal noted procedural lapses in the earlier hearings due to the personal circumstances of the assessee's representative and decided to remand the case for a fresh assessment, emphasizing the need for the assessee to substantiate its claims with adequate evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783489 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 25-01-2024
• Other Referred Cases: CIT Vs. B.N Bhattachargee & Ors. (118 ITR 461), Estate of Late Tukojirao Holkar Vs. CWT (223 ITR 480), M/s. Chemipol V/s. Union of India in Excise Appeal No. 62 of 2009, CIT Vs. Multiplan India (P) Ltd. (38 ITD 320), Lachminarayan Madan Lal vs. Commissioner of Income-tax [1972] 86 ITR 439 (SC), Swadeshi Cotton Mills Co. Ltd. v. Commissioner of Income-tax [1967] 63 ITR 57 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Set aside; Depreciation; Charitable institution
• Section: 143(3); 11; 12A; 37; 10B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA Before SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 140/KOL/2024 Assessment Year: 2013-14 Nalanda Group of Management Education Vs. ITO, Ward-1(1) Exemption, Kolkata (Appellant) (Respondent) PAN: AABTN0923C Appearances: Assessee represented by : Anil Kochor, Adv. Department represented by : Altaf Hussain, Addl. CIT, Sr. DR. Date of concluding the hearing : 13-August-2025 Date of pronouncing the order : 06-November-2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2013-14 dated 20.12.2023, which has been passed against the assessment order u/s 143(3) of the Act, dated 29.03.2016. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: Printed from counselvise.com Page | 2 I.T.A. No.: 140/KOL/2024 Assessment Year: 2013-14 Nalanda Group of Management Education. “1. For that the orders passed by the lower authorities are arbitrary, erroneous, without proper reasons, invalid and bad-in-law, to the extent to which they are prejudicial to the interests of the appellant. 2. For that the CIT (A) erred in passing order u/s 250 of the Act without taking into consideration the facts and circumstances of the case. 3. For that the Ld. CIT (A) erred in confirming the addition on account of Commission and Consultancy charges amounting to Rs.70,07,000/-without taking into consideration the nature and circumstances of the payment. 4. For that the Ld. CIT (A) erred in confirming the income from Hostel, Uniform and Study Material by treating the same as the Business activity of the appellant-Trust and considered the same for the purposes of computation of total income invoking the provision of Sec.11(4) & 11(4A) of the Act. 5. For that the Ld. CIT (A) erred in disallowing the expenditure on account of Administrative & Establishment expenses treating the same as forming part of accumulation u/s 11(1)(a) of the Act on alleged grounds. 6. For that the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds.” 3. The appeal was earlier dismissed vide ITA No. 140/KOL/2024 for AY 2013-14 order dated 07.06.2024. The assessee filed a Miscellaneous Application which was allowed and the order was recalled vide order dated 17.04.2025 in MA No. 6/KOL/2025 arising out of ITA No. 140/KOL/2024. Consequently, the appeal was re-heard and is being adjudicated afresh. 4. Brief facts of the case are that the assessee is a charitable Trust registered u/s 12A of the Act on 25.05.2009 and had filed Form No. 10B before the Assessing Officer (hereinafter referred to as Ld. 'AO'). The return of income declaring ‘NIL’ income was filed for AY 2013-14 after claiming exemption u/s 11 of the Act. The case was selected for scrutiny and after making several disallowances, the total income was assessed at ₹57,15,940/- with the major addition being a sum of ₹ 70,07,000/- Printed from counselvise.com Page | 3 I.T.A. No.: 140/KOL/2024 Assessment Year: 2013-14 Nalanda Group of Management Education. paid as commission and ₹16,65,920/- as expense disallowed which was not treated as application and further part disallowance of depreciation etc. Another sum of income/loss for providing uniform and study material for students and hostel facility on payment basis was also partly disallowed. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who issued several notices for hearing and dismissed the appeal primarily on account of non- prosecution after relying upon the decisions in the cases of CIT Vs. B.N Bhattachargee & Ors. (118 ITR 461) by the Hon'ble Supreme Court, Estate of Late Tukojirao Holkar Vs. CWT (223 ITR 480) (MP), M/s. Chemipol V/s. Union of India in Excise Appeal No. 62 of 2009 of Hon'ble Bombay High Court & CIT Vs. Multiplan India (P) Ltd. (38 ITD 320) (Del). The addition made on account of disallowance of commission/consultancy charges 5. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal. 6. Rival contentions were heard and the submissions made have been examined. 7. The Ld. AR stated that the Ld. AO had asked the assessee to produce the parties on 15.01.2016 but on 15.03.2016 the father of the then AR had expired. There was no compliance before the Ld. CIT(A) either and the Ld. AR requested for remanding the matter to the Ld. CIT(A). The Bench highlighted that the then AR had been requested on 11.01.2016, 03.02.2016 and on 11.03.2016 for the third time to produce the party/evidence and his father expired subsequently on 19.03.2016; therefore, there was no sufficient cause for the non- Printed from counselvise.com Page | 4 I.T.A. No.: 140/KOL/2024 Assessment Year: 2013-14 Nalanda Group of Management Education. production of the evidence/parties. The Ld. AR submitted in response that the father of the Ld. AR was hospitalized. He was about 82 years of age and was admitted in ICU in Appollo Hospital, Kolkata and was under treatment for a long time. The Ld. DR rebutted this argument by stating that this issue was not raised before the Ld. AO. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld. 8. The Ld. AR requested that the matter may be remanded to the Ld. AO for the production of the necessary evidences. The Ld. AR further stated that a sum of ₹70,07,000/- was disallowed as application of income which was paid as commission/consultancy charges. The Trust earns income from education which is a charitable purpose and necessary evidences are in the possession of the assessee for the expenses claimed, it was so claimed. The Ld. AR also filed an affidavit of Sh. Samindra Sur, the then AR for non-production of the required evidence before the Ld. AO, the relevant contents of which are reproduced as under: “2. That I was representing Nalanda Group of Management Education in the assessment proceedings relating to AY 2013-14 before the Income Tax Officer. I was attending the case from time to time before the A.O. and was submitting relevant details as called for. 3. That there was claim of payment of commission amounting to Rs.70,07,000/- by the assessee Nalanda Group of Management Education in respect of which I had submitted all relevant details before the A.O. The A.O. required production of recipients with certain papers and documents and compliance was required on 15.03.2016 as noted by the A.O. in the order of assessment at Page no. 3. 4. That at the relevant time my father aged about 82 years was feeling unwell and I got him admitted in ICU in the Apollo Hospital, Kolkata towards the end of February, 2016 but he was so unwell that he expired on Printed from counselvise.com Page | 5 I.T.A. No.: 140/KOL/2024 Assessment Year: 2013-14 Nalanda Group of Management Education. 19.03.2016. I being the only son of my father, due to my non-availability for attending to the Income Tax hearing on 15.03.2016 fixed by A.O., I could not attend before the A.O. on the date of hearing as my father was extremely ill. I enclose copy of the death certificate of my father.” 9. We have considered the submissions made. Since proper compliance could not be made before the Ld. AO nor the assessee could furnish evidence in support of commission and consultancy charges paid, the Bench considered the request of the assessee and was of the view that another opportunity may be provided to the assessee and the matter needs to be remanded to the Ld. AO. The assessee is directed to produce the persons who had received the commission before the Ld. AO as was also assured by the Ld. AR during the course of the hearing before us and on failure to produce the same, adverse inference may be drawn by the Ld. AO. As regards the payment of commission, it has been held in the case of Lachminarayan Madan Lal vs. Commissioner of Income-tax [1972] 86 ITR 439 (SC) that despite an agreement in existence, the question whether an amount claimed as an expenditure was laid out or expended wholly and exclusively for the purpose of the business has to be decided on the facts and in the light of the circumstances in each case. The relevant extract from the order is as under: “In our opinion, the facts of this case come within the rule laid down by this court in Swadeshi Cotton Mills Co. Ltd. v. Commissioner of Income-tax [1967] 63 ITR 57 (SC). The question whether an amount claimed as an expenditure was laid out or expended wholly and exclusively for the purpose of the business has to be decided on the facts and in the light of the circumstances in each case. The mere existence of an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment, does not bind the Income-tax Officer to Printed from counselvise.com Page | 6 I.T.A. No.: 140/KOL/2024 Assessment Year: 2013-14 Nalanda Group of Management Education. hold that the payment was made exclusively and wholly for the purpose of the assessee's business. Although there might be such an agreement in existence and the payments might have been made, it is still open to the Income-tax Officer to consider the relevant-factors and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible under section 37 of the Act.” 10. The Ld. AO shall also consider the decision of Hon'ble Supreme Court in the case of Lachminarayan Madan Lal (supra) in support of the claim that the commission was paid for the services rendered which were directly related to the income earned by the assessee and/or was to be treated as application of income. This being so, the order of the Ld. CIT(A) is hereby set aside and all the issues in this appeal are restored to the file of the Ld. AO for making the assessment de novo, subject to the assessee paying a cost of ₹50,000/- (Rupees Fifty Thousand) to the Legal Aid Services, 3rd Floor of the Centenary Building, High Court, Calcutta - 700001, within sixty days from the date of this order and to produce the receipt of the same before the Ld. AO on the date of the first hearing as there were defaults before both the Ld. AO as well as before the Ld. CIT(A). In case the assessee does not pay the above-mentioned cost of ₹50,000/- within the prescribed period of sixty days from the date of this order or in the event of non-production of the witnesses who had received commission, the Ld. AO shall be at liberty to draw adverse inference. The assessee shall also file evidence in support of the relief claimed against other additions made, which shall be examined by the Ld. AO for appropriate decision as per law. Hence, all the grounds of appeal raised are partly allowed for statistical purposes. Printed from counselvise.com Page | 7 I.T.A. No.: 140/KOL/2024 Assessment Year: 2013-14 Nalanda Group of Management Education. 11. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 6th November, 2025. Sd/- Sd/- [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 06.11.2025 Bidhan (Sr. P.S.) Printed from counselvise.com Page | 8 I.T.A. No.: 140/KOL/2024 Assessment Year: 2013-14 Nalanda Group of Management Education. Copy of the order forwarded to: 1. Nalanda Group of Management Education, 30, Dr. L.M. Bhattacharjee Road, Entally, Kolkata, West Bengal, 700014. 2. ITO, Ward-1(1) Exemption, Kolkata. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata Printed from counselvise.com "