ITAT Remands Assessments of Education Society for Fresh Verification of Section 10(23C)(iiiad) Exemption :

Shri Bajrangi Education Society is a society registered under the Societies Registration Act, 1860, was established with the primary objective of running an educational institution. The assessee filed returns declaring nil income for both assessment years. During the relevant financial year 2013-14, the Department found that the assessee had made investments of Rs. 8 lakh in fixed deposit receipts, incurred building construction expenditure of Rs. 3,95,835 and purchased a car worth Rs. 8 lakh. The assessee had disclosed aggregate annual receipts of Rs. 51,00,497 but claimed exemption of Rs. 52 lakh under Section 10(23C)(iiiad) of the Act.

Since the assessee neither filed a return in response to the notice under Section 148 nor responded to notices issued under Section 142(1), the AO completed the assessment under Sections 147 read with 144 and 144B. The AO treated the aggregate amount of Rs. 19,95,835 as unexplained investment and brought it to tax under Section 115BBE. The exemption claim of Rs. 52 lakh under Section 10(23C)(iiiad) was also disallowed.

For AY 2017-18, the Department identified an unexplained investment of Rs. 12 lakh and cash deposits of Rs. 2 lakh in the assessee's bank account.

Against total receipts of Rs. 26,41,896, the assessee had claimed exemption under Section 10(23C)(iiiad). In the absence of any response to the notices issued under Sections 148 and 142(1), the AO completed the assessment under Section 144 read with Section 147. The investment and cash deposits aggregating to Rs. 14 lakh were added under Sections 69 and 69C, respectively, and the exemption claim of Rs. 26,41,896 was disallowed.

On merits, the Tribunal noted that the assessee had contended that notices under Section 148 had not been served upon it and that notices under Section 142(1), though uploaded on the portal, had not been served, resulting in non-compliance. The Tribunal further observed that the assessee was a society registered under the Societies Registration Act, 1860, established solely for educational purposes. It claimed that its receipts were below Rs. 1 crore and, therefore, it was eligible for exemption under Section 10(23C)(iiiad).

In the interest of justice to both parties, the Tribunal considered it appropriate to restore both assessments to the file of the AO so that the assessee could produce the necessary evidence to substantiate its claims. Accordingly, the AO was directed to examine whether the investments and expenditure were duly explained out of the assessee's receipts and whether the society was entitled to exemption under Section 10(23C)(iiiad) of the Act.