SURAJ GYAN SHIKSHA PRASAR SAMITI,JALAUN V. I.T.O WARD- 2(3)(3), JHANSI, JHANSI

ITA 72/AGR/2023

AI Insights

The case involves Suraj Gyan Shiksha Prasar Samiti, a charitable society running educational institutions, which appealed against the order of the Commissioner of Income-tax (Appeals) National Faceless Appeal Centre, Delhi. The primary issues were the denial of income exemption under section 10(23C)(iiiad) of the Income Tax Act and the treatment of cash deposits during the demonetization period as unexplained income. The Assessing Officer had treated the society's receipts as taxable business income and added the cash deposits as unexplained money. The Tribunal disagreed with the lower authorities, finding that the society was eligible for the exemption and that the cash deposits could be explained as legitimate fee collections.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 102845 (ITAT-AGRA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961, Societies Registration Act, 1860
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILENDER SHRIVASTAVA
• Assessee Lawyers: SAHIB P. SATSANGEE
• Keywords: Set aside; Business income; Onus to prove; Deemed to accrue or arise in india; Benefit of exemption
• Section: 144; 142(1); 143(2); 11; 139(1); 133(6); 44AD; 13; 69A; 139; 10(23C)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE :SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER ITA No. 72/Agr/2023 Assessment Year: 2017-18 Suraj Gyan Shiksha Prasar Samiti, Jalaun Road, PanchanandChouraha, Konch- 285205. Vs. Income-tax Officer, Ward 2(3)(3), Jhansi. PAN :AADAS9958H (Appellant) (Respondent) ORDER Per Annapurna Gupta, Accountant Member: The present appeal has been filed by the assessee against the order passed by the learned Commissioner of Income-tax (Appeals) National Faceless Appeal Centre (NFAC), Delhi [in short “CIT(A)”] u/s. 250(6) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). 2. Brief facts relating to the case are that the assessee is a charitable society registered under the Societies Registration Act, 1860 , and stated to be running three educational institutions – (i) Suraj Gyan Mahavidyalaya; (ii) Suraj Gyan Inter College; and (iii) Suraj Gyan Model Assessee by Sh. Sahib P. Satsangee, CA Department by Sh. Shailender Shrivastava, Sr. DR Date of hearing 25.03.2025 Date of pronouncement 16.04.2025 ITA No.72/Agr/2023 2 | P a g e Public School. No return of income was filed by the assessee. However, notice u/s. 142(1) of the Act was issued to the assessee, on account of cash transactions noted in its bank account, requiring the assessee to file return of income. The assessee, however, failed to file return of income within the stipulated time. Subsequently, questionnaire was issued to the assessee, in reply to which, the assessee furnished certificate of society registration, copy of bank statement, balance sheet, income & expenditure account, receipt & payment account, computation of income and copy of 26AS, which were examined and placed on record. The Assessing Officer noted on perusal of bank statements that the assessee had deposited cash during demonetization period. He noted the aggregate amount credited in the bank account during the year to be Rs. 1,41,02,550/- whereas during the demonetization period from 09.11.2016 to 30.12.2016, the assessee was noted to have deposited Rs.17,79,500/- in the said accounts. The bank, i.e., Axis Bank, in which assessee’s bank account was maintained, informed in compliance to notice u/s. 133(6) of the Act that the assessee has deposited Specific Bank Notes (SBN) currency of Rs. 13,96,000/-. During the assessment proceedings, show cause notice was issued to the assessee intimating about the additions proposed to be made in this case. However, no response was received. Accordingly, the Assessing Officer proceeded to decide the case on the basis of material ITA No.72/Agr/2023 3 | P a g e available on record. Noting that no return was filed by the assessee u/s. 139(1) and even the return filed in response to notice u/s. 142(1) was delayed, he treated the assessee to have filed no return of income at all treating the return filed in response notice u/s. 142(1) as invalid and non- est on account of being delayed. Further, he noted that no evidence of the assessee being eligible to exemption to its income by way of any exemption certification obtained from the prescribed Income-tax Authorities was furnished by the assessee. Accordingly, he proceeded to treat the entire business receipts of the assessee as taxable in the hands of the assessee in the status of AOP. Noting the gross receipts to be Rs.1,30,15,807/-, he reduced there from the amount deposited in cash during the demonetization period in SBN currency of Rs.13,96,000/- and treated the balance of Rs.1,16,19,607/- as business receipts of the assessee and computed the income thereon on estimate basis applying the net profit rate of 8% thereto resulting in income from business or profession being assessed at Rs.9,29,584/-. The cash noted to be deposited in the bank account of the assessee in SBN currency was all treated as unexplained money and added to the income of the assessee u/s. 69A of the Act resulting in total income at Rs.23,25,584/-. 3. Aggrieved by the assessment order the assessee carried the matter in appeal before the ld. CIT(Appeals). Before him, the assessee ITA No.72/Agr/2023 4 | P a g e contended that it was eligible to exemption of income in terms of the provisions of section 10(23C(iiiad) of the Act since the receipts of each of the three institutions run by it were below the threshold of Rs.1.00 crore as prescribed u/s. 10(23C)(iiiad) of the Act. Learned CIT(Appeals) agreed with the same. However, he held that since the assessee had failed to claim this exemption in a valid return filed u/s. 139(1)/139(4A)/139(4e) of the Act and therefore, it was not entitled to claim the said exemption. Accordingly, business income of the assessee assessed of Rs.9,29,584/- by the Assessing Officer was confirmed by the ld. CIT(Appeals).Learned CIT(Appeals) also confirmed the addition of cash deposited in the bank account of the assessee during the demonetization period noting that the assessee was unable to substantiate its explanation of cash deposits being attributable to the fees received by it in the course of running its educational institutions. In effect, learned CIT(Appeals) confirmed the order of the Assessing Officer dismissing the appeal. Aggrieved by the same, the assessee has come up in this appeal before us raising following grounds : 1. That having regard to facts and circumstances of the case, learned authorities below have erred both in law and on facts in not allowing exemption under section 10(23C) (iiiad) of the Income Tax Act, 1961 eligible to a Registered Society existing solely for educational purposes wherein annual receipts of such institution did not exceed Rs. 1 Crore. ITA No.72/Agr/2023 5 | P a g e 2. That having regard to facts and circumstances of the case, learned authorities below have erred both in law and on facts in denying exemption under section 10(23C) (iiiad) of the Income Tax Act, 1961 for the reason of not filing of ITR under section 139 of the Income Tax Act, 1961 and treating the return filed beyond the expiry of the time specified notice under section 142(1)(i) as invalid and non-est. 3. That having regard to facts and circumstances of the case, learned authorities below have erred both in law and on facts in estimating the income of the Society running institutions solely for the purposes of education by application net profit rate @ 8% and computing the income from Business under section 44AD of the Income Tax Act, 1961 amounting to Rs. 9,29,584. The addition made is liable to be deleted. 4. That having regard to facts and circumstances of the case, learned authorities below have erred both in law and on facts in considering the cash amounting to Rs. 13,96,000 deposited during demonetisation period as unexplained and adding the same as deemed income under section 69A r.w.s. 115BBE of the Income Tax Act. 1961. The addition made is liable to be deleted. 5. That having regard to facts and circumstances of the case, learned authorities below have erred both in law and on facts treating the source of such cash deposited during demonetisation period on incorrect presumption of receipt of fee in SBN not being a legal tender. 6. That having regard to facts and circumstances of the case, learned authorities below have erred both in law and on facts in treating the return filed in response to notice under section 142(1)(i) of the Income Tax Act, 1961 after the expiry of the time period as non-est. 7. That having regard to facts and circumstances of the case the learned authorities below have erred both in law and on facts in assessing the income without issuing notice under section 143(2) of the Income Tax Act, 1961. The assessment order passed is bad in law. 8. That the appellant craves the leave to add, amend, modify, delete any grounds of appeal before or at the time of hearing and all the above grounds are without prejudice to each other.” 4. We have heard both the parties and have also gone through the orders of the authorities below. ITA No.72/Agr/2023 6 | P a g e 5. Taking up first the issue of the assessee being denied exemption u/s 10(23C)(iiad) of the Act and its business income assessed at Rs.9,29,584/-, undisputedly, the ld. CIT(Appeals) has agreed that the assessee is eligible to exemption of its income in terms of the provisions of section 10(23C)(iiiad) of the Act. The same is noted in para 4.8 of the order as under : “4.8 The impugned order u/s 144 of the Act, submissions of the appellant, the remand report and rejoinder to the remand report has been considered. It is a fact that the AO had applied net profit rate of 8% in the absence of any evidence for exemption available to the appellant. The AO has not mentioned section 44AD as claimed by the appellant. The AO has clearly mentioned that the appellant has failed to produce any documentary evidences regarding exemption as claimed therefore, all receipts from educational institutions are treated as business receipts and business income of the appellant has been computed on estimate basis for A.Y. 2017-18 @ 8% of Rs. 1,16,19,807/-. The appellant has not filed return of income within the time allowed u/s. 139(1)/139(4) as also no valid return had been filed in response to notice u/s 142(1) of the I.T. Act. Thus, the AO in the remand report submitted that in the absence of a valid return benefit of section 11 is not available to the appellant. However, the appellant submitted that it has not claimed benefit of section 11 but it has claimed exemption u/s 10(23C) (iiiad) of the Act. Evidently, the receipts of each of the institutions are below the threshold of Rs. 1 crore as prescribed under Section 10(23c) (iiiad), hence the claim to that extent is valid in light of the Judgments relied on by the appellant. However, the allowability of exemption u/s 10(23C) (iiiad) in the presentcase also depends on the further questions arising as discussed below.” 6. However, he has held the denial of claim of exemption u/s. 10(23C)iiiad) of the Act to be correct because the assessee failed to file its return of income as prescribed by law u/s. 139(4C) and 139(4C)(e) of the Act. The findings of the learned CIT(Appeals) are incorporated at para 4.8.2 of the order as under: ITA No.72/Agr/2023 7 | P a g e “4.8.2 Now the question arises as to whether the benefit of Section 10(23C)(iiiad) can be denied on the reason of non-filing of ITR 139(1)/139(4A) or in case of late filing of return response to notice u/s 142(1). In this regard, it is settled law that the provisions of Income Tax Act had not conferred any discretion on the assessing authority or the appellate authority to condone the delay in filing the return of income. It is further, observed that the appellant has not filed the ITR as provided in the section 139(4C)(e) which clearly provides that every university or other educational institutions referred to in sub-clause (iiiad) shall, if the total income in respect of which such educational institution is assessable without giving effect to the provisions of section 10, exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income. In the appellant's case, the appellant being trust/educational institute the return of income was admittedly filed beyond the due date prescribed under Section 139(4A)/139(4C) of Income Tax Act. Hence, appellant was not entitled for exemption under Section 11 or 10(23C) (iiiad) Income Tax Act 1961. In view of the above discussion, the addition made by the AO estimating 8% of receipts of Rs. 1,16,19,807/- from educational institutions treating receipts as its business income of Rs. 9,29,584/- is hereby confirmed. The ground of appeal 1 and 2 are dismissed.” 7. We are unable to agree with the ld. CIT(Appeals) on this account. We have gone through the relevant provisions of law in this regard. The provision of section 139, particularly, clause (4C)(e), to which the ld. CIT(Appeals) has referred, we find, only prescribes the requirement of filing of income-tax returns. Section 139(4C)(e) states that every university or other educational institution referred to in sub-clause (iiiad) of section 10(23C) shall, if the total income of such educational institute ,without giving effect to the benefit of exemption provisions ,exceeds maximum amount which is not chargeable to tax shall furnish the return of income. Plainly speaking, section 139 only prescribes the persons and circumstances and conditions, in which different assessees are required ITA No.72/Agr/2023 8 | P a g e to file their returns of income. The provisions of section 139(1) are reproduced hereunder for clarity : 139. (1) Every person,— (a) being a company or a firm; or (b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. . . . . (4C) Every— . . . (e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (iiiab) or sub-clause (iiiad) or sub- clause (vi) or any hospital or other medical institution referred to in sub- clause (iiiac) or sub-clause (iiiae) or sub-clause (via) of clause (23C) of section 10.” . . . Shall (to be reproduced) 8. The section does not state that the exemption will be denied if return of income is not filed by the assessee or for that matter benefit of exemption is available only if the return of income is filed by the assessee in terms of section 139 of the Act. Therefore, clearly, Ld CIT(Appeals) misinterpreted the provisions of section 139(4C)(e) of the Act to hold that ITA No.72/Agr/2023 9 | P a g e since the assessee has not filed return of income as prescribed in the said section, it is not eligible to exemption in terms of section 10(23C)(iiiad) of the Act. Even otherwise, during the course of hearing before us, ld. Counsel pointed out that the prescription in law of the entitlement to exemption only on furnishing of return of income was brought on the statute by introducing the 20th proviso to section 10(23C) of the Act by the Finance Act, 2022 w.e.f. 01.04.2023. In this regard, he drew our attention to the said proviso as under : “Provided also that the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub- clause (via) shall furnish the return of income for the previous year in accordance with the provisions of sub-section (4C) of section 139, within the time allowed under sub-section (1) or sub-section (4) of that section.” 9. It is clearly evident from the same that denial of exemption u/s. 10(23C) of the Act for not filing the return of income as prescribed by law u/s. 139 of the Act was introduced on the statute only subsequently w.e.f. 01.04.2023 and was not there in the statute in the impugned assessment year before us, i.e., assessment year 2017-18. The ld. CIT(Appeals) has also stated that the assessee is not eligible to exemption on account of late filing of return in response to notice u/s. 142(1) of the Act agreeing with The Assessing Officerthat the return filed ITA No.72/Agr/2023 10 | P a g e by the assessee in response to notice u/s. 142(1) has to be treated as invalid. During the course of hearing Learned DR was directed to point out as to which provision of law provided a belated return filed in response to notice u/s. 142(1) to be treated as non-est. He was unable to draw our attention to any provision in this regard. On the contrary, attention of the ld. DR was drawn to section 234A of the Act which provided for interest to be charged from the assessee for filing belated return in response to notice u/s. 142(1) of the Act. The provisions of section 234A are reproduced here : 234A. (1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) 43[or sub-section (8A)] of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period commencing on the date immediately following the due date, and,— 10. When the statute itself recognizes belated return being filed in response to notice issued u/s. 142(1) of the Act, condoning their delay by levying interest on the assessee, there can be no case with the Assessing Officer or the ld. CIT(Appeals) for treating the belated return filed by the assessee as non-est or invalid. Learned DR had nothing to say in counter. In the light of the same, we do not agree with the ld. CIT(Appeals) that the return filed by the assessee in response to notice u/s. 142(1) claiming exemption u/s. 10(23C)(iiiad) of the Act was an invalid return. On the ITA No.72/Agr/2023 11 | P a g e contrary, we note that the assessee had claimed exemption in a return filed in response to notice u/s. 142(1) of the Act. Therefore, we hold that the ld. CIT(Appeals) was wrong in denying the assesee’s claim of exemption of its income u/s. 10(23C)(iiiad) of the Act. The order of the ld. CIT(Appeals) confirming the addition made by the Assessing Officer of business income of Rs.9,29,584/- is, therefore, set aside. The Assessing Officer is directed to delete the addition made to the income of the assessee on account of business income amounting to Rs.9,29,584/-. 11. Coming to the other aspect of the cash deposited during the demonetization period of Rs.13,96,000/- treated as unexplained income of the assessee, the orders of the authorities below reveal that other than the fact that this amount was found deposited in SBN currency during the demonetization period, there is no other basis with the authorities below to treat the same as unexplained money of the assessee. On the contrary, we note that the ld. CIT(Appeals) in para 5.3 of his order has noted that during the appellate proceedings, the assessee did submit sample fee receipts issued to the students, some of which related to demonetization period. The contents of para 5.3 of the order are reproduced as under : “5.3 The impugned order u/s 144 of the Act, submissions of the appellant, the remand report and rejoinder to the remand report has been considered. It is observed that the appellant during the assessment stage has not submitted any evidence before the AO to explain the said ITA No.72/Agr/2023 12 | P a g e cash deposit. Further during the remand proceedings also the appellant failed to submit any evidence before the AO. Later on in the appellate proceedings, the appellant could submit only sample fee receipts issued to the students. On perusal of the same, it is observed that some of the receipts clearly appear to be pertaining to period of demonetization, but the receipts do not mention whether the same are accepted in SBN or not. Further, even if it is presumed that the same were in SBN than the appellant had accepted SBN currency in spite of the fact that the same are not a legal tender, in form of fees and had deposited SBN currency of Rs. 13,96,000/- in its bank account. The appellant has not submitted any cash book, complete details of SBN accepted during the demonetization period, opening balance of cash before demonetization period etc. Hence, the action of the appellant cannot be approved in light of the fact that the Government had banned the general public except specific persons to accept the SBN from any person. Merely stating that the said cash was from the fee receipts is not conclusive proof. The onus to prove that the said cash deposit is from the fee receipts is on the appellant by producing the evidences with its books of account before the AO during the assessment proceedings. The appellant also failed to avail the benefit of submitting the same to the AO during the remand proceedings. Hence, the appellant failed to establish the source of cash deposit of SBN during the demonetisation period. In view of the same, the addition made by the AO of Rs. 13,96,000/- u/s 69A is hereby confirmed. The grounds of appeal 3 and 4 are dismissed.” 12. The assessee therefore had explained the cash deposited in the bank account to relate to fees collected by it and had duly evidenced the same with sample fee receipts relating to the said period,while the department ,we find has no basis at all for treating the entire amount of cash deposited during demonetization period as unexplained except for the fact that the deposit was in SBN notes, which alone , we hold, does not make the deposits unexplained.By this logic every SBN deposit during demonetization would take the color of being from unexplained sources which is an incredulous conclusion of the Revenue. ITA No.72/Agr/2023 13 | P a g e In the light of the same we see no reason or basis with the Revenue authorities to treat the cash deposited during demonetization period as unaccounted money of the assessee. We therefore do not agree with the ld. CIT(Appeals) that the amount of Rs.13,96,000/- deposited in the bank account of the assessee during demonetization period is unaccounted money of the assessee. The addition, therefore, confirmed by the ld. CIT(Appeals) of Rs.13,96,000/- u/s. 69A of the Act is directed to be deleted. In result, both the additions made in the hands of the assessee of Rs.9,29,584/- on account of business income and Rs.13,96,000/- u/s. 69A of the Act are deleted. 13. Appeal of the assessee is allowed in the above terms. Order pronounced in the open court on 16.04.2025. Sd/- Sd/- (SUNIL KUMAR SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 16.04.2025 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra "