MSME Technology Centre Vs ITO (ITAT Visakhapatnam)
Summary: MSME Technology Centre, a non-profit Government Organization and a center of excellence established in Visakhapatnam by the Ministry of Micro, Small and Medium Enterprises, Government of India, filed its return for AY 2022-23 under section 139(4) declaring total income of Rs.15,08,96,622/-. While processing the return under section 143(1), the CPC disallowed Rs.13,82,21,062/- towards corpus donations and Rs.1,26,75,560/- towards aggregate income derived under section 11 from voluntary contributions. The assessee filed an appeal before the CIT(A) with a delay of 453 days, explaining the delay, but the CIT(A) dismissed the appeal without examining the merits. Before the Tribunal, the assessee submitted that it had been pursuing an alternate remedy by filing a condonation petition before the Income Tax Authorities and was hopeful of receiving a favourable reply. The Tribunal held that the reasons explained constituted “sufficient cause” for condonation of delay and that the CIT(A) ought to have condoned the delay in the interest of substantial justice. Accordingly, the Tribunal condoned the 453-day delay and remitted the issue to the CIT(A) for consideration on merits. Considering the assessee’s lackadaisical approach, the Tribunal directed payment of a cost of Rs.5,000/- to the Prime Minister’s National Relief Fund within 15 days from the date of the order, with proof to be produced before the Registry. The appeal was allowed for statistical purpose.
Pursuing Alternative Remedy Constitutes Sufficient Cause: ITAT Condones 453-Day Appeal Delay
MSME Technology Centre, a non-profit organisation established by the Ministry of MSME, challenged the CPC’s disallowance of ₹13.82 crore towards corpus donations and ₹1.27 crore towards voluntary contributions while processing its return under Section 143(1). The CIT(A), however, refused to condone the delay of 453 days and dismissed the appeal without examining the merits.
The Visakhapatnam ITAT accepted the assessee’s explanation that it had been pursuing an alternative remedy by filing a condonation petition before the income-tax authorities and was awaiting a favourable response. The Tribunal held that this constituted sufficient cause and that the CIT(A) ought to have condoned the delay in the interest of substantial justice. Since the appeal had been dismissed in limine, the matter was restored to the CIT(A) for adjudication on merits. However, considering the assessee’s lackadaisical approach, the Tribunal imposed costs of ₹5,000, payable to the Prime Minister’s National Relief Fund.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
This appeal is filed by the Assessee against the order of Learned Commissioner of Income Tax (Appeals), Ld. ADDL/JCIT(A), Panchkula vide DIN: ITBA/NFAC/S/250/2025 -26/1079259004(1) dated 04-Aug-2025 for the Assessment Year 2022-23.
2. The Assessee has raised the following grounds of appeal:
1) The Ld. AO CPC erroneously treated gross receipts as income without applying Sections 11 and 12, ignoring the actual deficit. Since total income did not exceed the basic exemption limit, audit Report in Form 10B was not applicable under sec 12A(1) (b)(ii).
2) a) The Ld A O CPC has erred in not rectifying the mistake in not computing the Total Income referred in sec 11(1)(a) which ought have been Net Income and not Gross Income OR receipts as was held in many judicial precedents as per commercial principles after deducting all legitimate revenue expenses only.
3) b) The Ld AO CPC is not justified in not accepting the submission of Audit report which is directory in nature (being procedural), and not mandatory for claiming exemption under section 11, as was held in many judicial precedents, and (even after holding Form 10AC valid certificate of registration, is bad in the eyes of the law when form 10B was furnished belatedly but before completion of assessment, hence arbitrary and mechanical, makes the entire assessment illeg al and void ab initio as the objective of sec 11 defeated.
4) c) The Ld AO CPC has not followed the circular issued by Honble CBDT in letter and spirit, fails to exercise liberal approach, as the impugned order contradicts CBDT circulars and judicial precedents which uphold that procedural lapses should not defeat substantive rights of appellant and severely harm the public interest served by the charitable work of the appellant organization.
5) That the Ld AO CPC has erred in disallowing Corpus donations and its a rectifiable mistake apparent from record under section 154 which is factually disallowed of Rs. 13.82 crores, without stating any reason and without following provision in sec 11(1)(d) and disallowed without giving an opportunity of bei ng heard which is clear from the intimation under section 143(1)(a). The same was held in the following cases that the said Corpus donation is exempted as per the decision of the jurisdictional Bench in i. SATYA SAI EDUCATIONAL and SERVICE SOCIETY vs. (V ISAKHAPATNAM Trib.): (2022) 108 TLC 384 ii. ITA No. 101 of VIZ of 2015 (A.Y.: 2010 11), dated 22.11.2017 in the case of Touching Heart Ministries v. ITO.
6) The Ld. Commissioner (Appeals) is not justified in sustaining the adjustment of Rs. 13,82,21,06 2, made in respect of voluntary contributions forming part of corpus received for specific purposes and with a direction. The same being capital receipts and are exempted under section 11(1)(d) and further the same is not an Income under section 2(24)(iia) as per the IT Act.
7) The AO CPC ought not to have adjusted while processing the return of income for Corpus donations falling under Section 11(1)(d) and Voluntary contributions under Section 11(1)(a), which were beyond the scope of intimation under sect ion 143(1) of the act, as this defeats the provisions of sec 11 and 12, and the impugned disallowances do not fall under 143(1)(a) to (e) as prescribed and hence contrary to law laid down.
8) The Ld AO CPC is not justified in disallowing a correct statutory exemption wrt voluntary contributions under Section 11(1)(a) and Corpus donations under Section 11(1)(d) and doesn’t fall under definition of Incorrect claim and does not fall under (i), (ii) and (iii) as Incorrect claim as provided in the provisions of the act.
9) AO CPC has erred in levying interest wrongly under Section 234A, B and C, F and the surcharge of 10 percent in consequence of invalid assumed facts, due to impugned additions made wrongly.
10) Any other ground(s) that may be added OR deleted OR modified OR altered, urged at the time of hearing of the Appeal before your goodself.
11) That both the lower authorities DDIT CPC, Bengaluru [AO CPC] And Ld. CIT (Appeals) [CIT(A)] who passed the impugned Intimation cum summary assessment Under section 143(1), order Under section 250 and rectification order Under section 154 were not as per the Facts of the case and not as per the law applicable under the Income tax act, 1961.
3. Brief facts of the case are that, the assessee is a non-pro fit Government Organization, a center of excellence established in Visakhapatnam, by the Ministry of Micro, Small and Medium Enterprises, Government of India and has filed its return of income under section 139(4) of the Act on 31.12.2022 by declaring total income of Rs.15,08,96,622/-. The Centralized Processing Center / Ld.AO, processed the return of income, under section 143(1) of Income Tax Act, 1961 [hereinafter in short “the Act”] by disallowance of Rs.13,82,21,062/- towards corpus donations showing all the assets transferred form CITD, Hyderabad, by deeming as investment under section 11(5) of the Act, and Rs.1,26,75,560/- towards aggregate income derived under section 11 form voluntary contributions.
4. Being aggrieved by the disallowances/additions made by the Centralized Processing Center / Ld.AO, assessee preferred an appeal before the Ld. CIT(A) with a delay of 453 days and filed its explanations for the delay in filing the appeal. After considering the explanation of the assessee in filing the appeal with a delay of 453 days, Ld. CIT(A) dismissed the appeal for not filing the appeal within due date provided under the Act.
5. Being aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before the Tribunal.
6. At the outset, Learned Counsel for the assessee, Shri M. Muralidhar, CA, inviting our attention to the order of the Ld.CIT(A) submitted that the Ld.CIT(A) did not condone the delay of 453 days in filing the appeal stating that submissions are general/ vague and dismissed the appeal without going into the merits of the case. Learned Counsel for the assessee, submitted before us, that Ld.CIT(A) dismissed the appeal of the assessee without condoning the delay in filing the appeal as no such sufficient cause is established. Further, Ld.AR submitted that the Ld.CIT(A) did not appreciate the submissions properly and without giving any reasons for not condoning the delay and except stating that s genera/ vague, rejected the condonation petition. Ld.AR submitted that the delay may be condoned and the appeal be restored to the file of the Ld.CIT(A) for deciding on merits and pleaded that one more opportunity may be provided to the assessee in the interest of justice.
7. Learned Senior AR for the Revenue, Shri A.P. Babu, Sr.AR, strongly placed reliance on the order of the Ld.CIT(A) in rejecting the condonation petition. Ld. DR strongly opposed for condonation of delay.
8. We have heard both the sides, perused the material available on record and had gone through the orders of the authorities below. Assessee explained the reason that it was pursuing alternate remedy by fling condonation petition before Income Tax Authorities and hopeful of getting favorable reply, and, therefore, not filed the appeal. Going by the reasons explained by the assessee, reasons given by the Centralized Processing Centre “(in short “CPC”) for denial of exemption for not filing audit report on or before due date, in our considered view, the reasons do come under “sufficient cause” for condonation of delay, and, Ld. CIT(A) ought to have condoned the delay in filing of the appeal. Therefore, we condone the delay of 453 days in filing of appeal before Ld. CIT(A) for advancement of substantial justice. Since the Ld. CIT(A) dismissed the appeal in limine by not condoning the delay and not considered the issue on the merits, in our considered view, the issue needs to be remitted to the file of Ld. CIT(A). Thus, we set- file of Ld. CIT(A) to consider the issue on merits. The assessee is directed to pay a cost of Rs.5,000/- (Rupees Five Thousand only) for showing lackadaisical approach and cost as directed above shall be paid to Prime Minister’s National Relief Fund within 15 days from the date of this order, and produce the proof to the Registry.
9. In the result, appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on 21st August, 2026.
