Falahar Shivayogeeshwar Shikshana Samiti Vs ITO (ITAT Panaji)
Panaji ITAT Restores Educational Society’s Section 10(23C)(iiiad) Exemption Claim: CIT(A) Cannot Reject Claim Merely Because It Was Not Made Before AO
The Panaji ITAT in Shri Falahar Shivayogeeshwar Shikshana Samiti v. ITO dealt with appeals for AYs 2018-19 and 2019-20 concerning an educational institution’s claim for exemption under section 10(23C)(iiiad).
For AY 2018-19, the assessee, an AOP engaged in providing educational facilities, had initially not filed its return. Based on information regarding cash deposits of ₹61.60 lakh, reassessment proceedings were initiated. In response to the section 148 notice, the assessee filed a return declaring a deficit of ₹5.27 lakh. The AO, however, estimated income at 8% of total bank credits of ₹69.32 lakh, resulting in an addition of ₹5.55 lakh, and separately added bank interest of ₹1.17 lakh, assessing total income at ₹6.71 lakh.
Before the CIT(A), the assessee claimed exemption under section 10(23C)(iiiad). The CIT(A) rejected the claim, inter alia, because it had not been made before the AO.
Before the Tribunal, the assessee submitted that it existed for providing education and not for earning profit, its gross receipts were below the prescribed statutory limit, and its books actually reflected a deficit supported by bills and vouchers. It also contended that the AO had wrongly estimated profit at 8% of gross bank credits despite maintenance of regular books and had again added ₹1.17 lakh bank interest even though the interest was already accounted for in the income and expenditure account, resulting in a double addition.
The ITAT considered it appropriate, in the interest of justice, to set aside the CIT(A)’s order and restore the matter to the jurisdictional AO for fresh assessment in accordance with facts and law. The AO was directed to examine the assessee’s evidence concerning its section 10(23C)(iiiad) exemption, deficit as per books and other claims, after granting reasonable opportunity of hearing.
The same ruling was applied mutatis mutandis to AY 2019-20, and both appeals were allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT PANAJI
These appeals filed by the assessee are directed against the separate orders dated 25.11.2025 passed by Ld. CIT(A)/NFAC for the assessment years 2018-19 and 2019-20 respectively.
2. Since identical facts and common issues are involved in both the above captioned appeals of the assessee, therefore, we proceed to dispose of the same by this common order.
3. First, we shall take up the appeal of the assessee in ITA No.42/PUN/2026 for A.Y. 2018-19 for adjudication as the lead case.
ITA No.42/PUN/2026, A.Y. 2018-19 :
4. The appellant has raised the following grounds of appeal :-
“1. The order passed by the Ld. AO & Ld. CIT(A), to the extent prejudicial to the revenue, is bad in law, contrary to facts, opposed to the principles of natural justice, and liable to be quashed.
2. The Ld. CIT(A) has erred in confirming the order passed by the Ld AO without proper appreciation of facts, submissions and material available on record.
3. The AO & Ld. CIT(A). has erred in law and on facts in assuming jurisdiction under section 147 of the Act without satisfying the mandatory conditions of “reason to believe” and without valid application of mind, rendering the reassessment proceedings void ab initio.
4. The AO & Ld. CIT(A) has erred in completing the reassessment under section 147 read with section 144B of the Act in violation of principles of natural justice, without granting effective opportunity of being heard and without properly considering the replies filed by the Appellant.
5. Without prejudice, the AO & Ld. CIT(A) has erred in upholding the reassessment despite procedural lapses in proceedings under section 148A of the Act, thereby vitiating the entire assessment.
6. The order is passed in violation of provisions of section 151A of the Act, and therefore bad in law.
7. Since the assessed income is less than 50 lakhs, the same is barred by limitation as per Section 149 of the Act,
8. The Ld. AO & Ld. CIT(A), bas erred in law and on facts in imputing 8% of the gross cash deposits aggregating to ₹61,60,693/- in the bank accounts as income of the Appellant, without appreciating the nature, source and purpose of such receipts and without bringing any cogent material on record.
9. The AO & Ld. CIT(A) has erred in confirming the addition by overlooking the fact that the receipts represented institutional collections and advances, and not taxable income of the Appellant.
10. The Ld.CIT(A) has erred in law and in facts in not appreciating that the Appellant is eligible for the benefit of exemption under section 10(23C)(iiiad) of the Act.
11. The Ld.AO & CIT(A) have erred in law and in facts in not appreciating that the Appellant is eligible for the said exemption even if the return of income has not been filed or even if the claim has been made for the first time before the Appellate authorities;
12. The AO & Ld. CIT(A), has erred in law and on facts in computing assessed income at Rs.6,71,364/ on an arbitrary basis, which is unsustainable and liable to be deleted.
13. The basis of the rejection of the books of the Appellant is incorrect, the Ld.AO has erred in law and on facts in doing so;
14. The addition has been made merely on the basis of surmises and presumptions and therefore liable to be quashed.
15. The Appellant therefore prays that the reassessment order and the additions, and disallowances sustained therein may kindly be deleted and appropriate relief be granted, and any other relief deemed fit in the facts and circumstances of the case be awarded.”
5. Facts of the case, in brief, are that the assessee is an Association of Person (AOP) engaged in the activity of providing educational facilities to students and has not filed its return of income for year under consideration. On the basis of information available on the income tax portal that the assessee has deposited cash amount of Rs.61,60,693/- in its bank account maintained with Syndicate Bank, however, not disclosed its sources by filing return of income, therefore, the case of the assessee was reopened u/s 147 and notice u/s 148 of the IT Act was issued on 06.04.2022 after following due procedure laid down in section 148A(b)/(d) of the IT Act. In response to above notice, the assessee filed his return of income on 20.05.2022 by declaring deficit of Rs.5,26,943/-. Subsequently, notices u/s 143(2), & 142(1) and show cause notice respectively were issued to the assessee. After considering the reply and submissions of the assessee, the Assessing Officer vide order dated 19.03.2024 completed the assessment proceedings u/s 147 r.w.s. 144B of the IT Act by determining the income of the assessee at Rs.6,71,364/- as against the deficit of Rs.5,26,943/- returned by the assessee. The above assessed income includes addition of Rs.5,54,552/- being 8% profit calculated on total bank credits of Rs.69,31,902/- and addition of Rs.1,16,812/- being bank interest income as per income and expenditure account.
6. Being aggrieved with the above assessment order, the assessee preferred an appeal before Ld. CIT(A)/NFAC. After considering the reply and submissions of the assessee, Ld. CIT(A)/NFAC dismissed the appeal filed by the assessee and also rejected the claim made by the assessee u/s 10(23C)(iiiad) of the IT Act.
7. It is the above order against which the assessee is in appeal before this Tribunal.
8. We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that the assessee has filed an application dated 12.06.2026 for withdrawal of technical grounds and requested to decide the appeal on merits of the case. In this regard, we find that it is the claim of the assessee that the assessee is running educational institutions and meant only for providing education and not for the purposes of earning profit. It is the sole request of the counsel of the assessee that the assessee is entitled to claim exemption u/s 10(23C)(iiiad) of the IT Act, since its gross receipts is less than the prescribed limit & even otherwise there is deficit as per books of accounts which are duly supported by bills & vouchers. The claim of the assessee was negated by Ld. CIT(A)/NFAC since the claim was not made before the Assessing Officer. Apart from above, it was also the contention of the counsel of the assessee that regular books of accounts were maintained and all the bills and vouchers were available, however, the Assessing Officer erred in calculating estimated net profit of 8% on the gross credit entries appearing in the bank account resulting in profit of Rs.5,54,552/- and separately making double addition of bank interest of Rs.1,16,812/- which was already disclosed by the assessee in its income and expenditure account.
9. Considering the totality of the facts of the case and in the interest of justice, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC and restore the matter back to the file of the Jurisdictional Assessing Officer with a direction to pass assessment order afresh and as per fact and law after providing reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to respond to the notices issued by the Jurisdictional Assessing Officer in this regard and to produce relevant documents, submissions and evidences in support of its contentions regarding claim of exemption u/s 10(23C)(iiiad) of the IT Act & regarding claim of deficit as per books of accounts & other claims without taking any adjournment under any pretext, otherwise the Jurisdictional Assessing Officer shall be at liberty to pass appropriate orders as per law. Thus, the grounds of appeal related to merits of the case are allowed for statistical purposes.
10. In the result, the appeal filed by the assessee in ITA No.42/PAN/2026 for A.Y. 2018-19 is allowed for statistical purposes.
ITA No.43/PAN/2026, A.Y. 2019-20 :
11. Since the facts and issues involved in the appeal of the assessee in ITA No.43/PAN/2026 for A.Y. 2019-20 are identical to the appeal of the assessee in ITA No.42/PAN/2026 for A.Y. 2018-19 therefore, our decision in ITA No.42/PAN/2026 for A.Y. 2018-19 shall apply mutatis mutandis to the appeal of the assessee in ITA No.43/PAN/2026 for A.Y. 2019-20. Accordingly, the appeal of the assessee in ITA No.43/PAN/2026 for A.Y. 2019-20 is also allowed for statistical purposes.
12. In the result, the appeal filed by the assessee in ITA No.43/PAN/2026 for A.Y. 2019-20 is allowed for statistical purposes.
13. To sum up, both the above captioned appeals filed by the assessee are allowed for statistical purposes.
Order pronounced on this 07th day of August, 2026.
