Shobha Welfare Society Vs ITO (ITAT Bangalore)
Overview of the Dispute
The appeal before the Income Tax Appellate Tribunal (ITAT), Bangalore Bench, arose from a dispute between the Shobha Welfare Society (the Assessee) and the Income Tax Officer (ITO) concerning the assessment year 2018-19. The central issue was the addition of Rs. 64,98,470/- to the society’s total income, which the Assessing Officer (AO) treated as unexplained money under Section 69A of the Income Tax Act, 1961. The society, a non-profit organization registered under the Karnataka Society Registration Act, 1960, operates “Max Muller High School” for economically backward students, claiming the cash deposit represented school fees collected.
Background and Lower Authority Holdings
The case originated from the financial year 2015-16, relevant to the assessment year 2016-17, during which the Shobha Welfare Society made a total cash deposit of Rs. 64,98,470/- into its HDFC Bank account. Despite the deposit, the society failed to file its return of income under Section 139 of the Act.
The Income Tax Department initiated reassessment proceedings by issuing notices under Section 148 and later Section 142(1), followed by a show cause notice under Section 144. However, the society remained non-compliant and failed to file any submissions or replies to substantiate its claim regarding the source of the large cash deposit.
- Assessing Officer’s Holding: Given the society’s non-responsiveness, the AO proceeded to finalize the assessment ex-parte under Section 147 read with Section 144. Lacking any explanation or evidence, the AO invoked Section 69A, treating the entire cash deposit of Rs. 64,98,470/- as unexplained money and adding it to the society’s total income.
- CIT(A)/NFAC’s Holding: Aggrieved by the ex-parte order, the society appealed to the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (CIT(A)/NFAC). However, the appellate proceedings faced the same hurdle: the society failed to comply with the notices issued. The CIT(A)/NFAC noted that despite being granted four opportunities, the assessee showed no interest in pursuing the appeal and remained non-compliant. Consequently, the CIT(A)/NFAC dismissed the appeal, thereby upholding the addition made by the AO.
Assessee’s Contentions Before the ITAT
