Town Educational Society Vs ITO (ITAT Varanasi)
Fee Collections of Govt-Aided College Need Verification: ITAT Sets Aside 69A Addition of ₹1.86 Cr Ex-parte 69A Addition on Educational Society Quashed—Matter Remanded for De-novo Assessment
The Varanasi Circuit Bench of the ITAT, in Town Educational Society vs ITO, Ballia (ITA No. 141/VNS/2024, AY 2016-17), set aside the ex-parte addition of ₹1.86 crore made u/s 69A on account of cash deposits in a bank account and restored the matter to the AO for de-novo assessment.
The AO reopened the assessment based on information of cash deposits aggregating to ₹1,86,58,039 in a savings bank account maintained with PNB, Ballia, and, due to complete non-compliance, treated the same as unexplained money u/s 69A. The CIT(A)/NFAC also confirmed the addition ex-parte for want of representation.
Before the Tribunal, the Assessee contended that it is a registered educational society running four Government-aided institutions, and that the impugned bank account pertained to Sri Murli Manohar Town PG College, wherein fees collected in cash from students were deposited and duly recorded in the cash book. It was further contended that such receipts are exempt u/s 10(23C), and that mere negligence or non-compliance cannot convert an otherwise exempt receipt into taxable income.
The Tribunal observed that no authority had examined the fundamental issue whether the cash deposits represented fee receipts of a Government-aided educational institution eligible for exemption. Emphasising that tax liability cannot arise merely due to procedural lapses, the ITAT held that the issue requires proper factual verification. Accordingly, the assessment was set aside and remanded to the AO with a direction to grant opportunity and verify the nature of receipts. The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT VARANASI
The present appeal has been filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi dated 14.06.2024, pertaining to the assessment year 2016-17. The assessee has raised the following grounds of appeal: –
“1. That, the addition of Rs.18658039/- as unexplained money u/s 69A of the Act, on account of cash deposited in the Saving Bank account number 6176000100050071 of Punjab National Bank, Kunwar Singh Branch Ballia, in fact this account is for FEES Collection of Sri Murli Manohar Town Post Graduate College, as mentioned on the Bank statement. Thus, the source of amount deposited in the bank account is very clear and cannot be treated as unexplained
2. That, appellant is a registered educational institution, which run the four institutions, named Sri Murli Manohar Town Post Graduate College, Sri Murli Manohar Town Intermediate College, Gulab Devi Girls Post Graduate College and Gulab Devi Girls Intermediate College. This particular Bank account has been maintained by the Sri Murli Manohar Town Post Graduate College, where the fees collected in cash had been deposited in this Bank account. AO had failed to consider the fact that assessee is an educational institution covered u/s 10(23c) (iiiab), being fully aided by the Government of UP for the salary payment and the deposits in the bank account represented fee from students which are duly recorded in the cash book.
3. That, appellant had maintained the source of cash collection, which were deposited in the Bank account after recording in the Cash Book, which is explained now with the various types of fees collection, which were subsequently transferred to other fund, as per the collection in head Audio Visual, Scouting, Reading room, Library, Rashtra Nirman, Environmental! fund etc.
So, the provision of section 69A could not be invoked due to recording of cash collection in the cash book of the institution and thus the unjustified assessed income must be quashed and the necessary relief should be given to the appellant.
4. That, the action was initiated against the Town Educational Society, which is an AOP but the Bank account was maintained in the name, style and ownership of student fees of Post Graduate College, as also evident from the attached Bank statement, the controlling society has not owned any assets and only in the facilitating position due to very fact that the Education is under the Govt. fundamental rights and can never be of business orientation, due to which the Govt. affiliation was given in the 1950. It was the Bank, who demanded the PAN to regulate and report the cash deposit to the Income Tax Department, otherwise these cash collections were done from the students and deposited in the Bank for the definite and well prescribed heads from the U.P. State Intermediate Education Board, institutions had no role or control to collect the fees as per their wish and desire. It is also evident that now the guardians are not interested to send their children in the Govt. aided school.
5. That, the appellant is a registered educational society and having no regular source of income or infrastructure or staff deployment and when notices were served to the address of Society, which was mentioned the Sri Murli Manohar Town Post Graduate College, the concerned person of college had not bothered to inform the management of Society and nothing to do with the use of PAN of society by the institution and in fact Society had no control over the Bank account, it was totally governed, controlled and operated by the Principal of institution. These were the true grounds of appeal and thus necessary relief should be given to the appellant, as the cash money deposited in the Bank account were from the students of institutions and duly recorded in the cash book of respective institution and fulfilled the criteria of non-applicability of section 69A.
6. That, appellant may add any further ground of appeal, paper book, statement and documents at the time of hearing.”
2. The facts giving rise to the present appeal are that the Assessing Officer was having an information regarding cash deposited by the assessee amounting to Rs.1,86,58,039/- in its saving bank account, maintained with Punjab National Bank. Therefore, after obtaining the requisite approval of the Competent Authority, a notice under section 148 of the Income-tax Act, 1961 (“Act” for short) was issued to the assessee by AO. However, the assessee failed to file its return of income for the relevant assessment year. During the course of assessment proceedings, multiple opportunities were granted to the assessee to furnish the source of the cash deposits, but no compliance was made. Consequently, the Assessing Officer proceeded to complete the assessment ex parte to the assessee and made an addition of Rs.1,86,58,039/- by invoking the provisions of section 69A of the Act. Aggrieved against this, the assessee preferred an appeal before the Ld. CIT(A), before him also, there was no representation on behalf of the assessee. The Ld. CIT(A) has categorically noted in the impugned order that the multiple notices of hearing were issued to the assessee; however, there was no compliance. Therefore, he also passed ex parte order. Thereby, he confirmed the addition made by the Assessing Officer. Now, the assessee is in appeal before this Tribunal.
