Facts of the Case

The appellant, Ariana Charitable Trust, is a trust engaged in running a school up to Class VIII. During the relevant assessment year, the trust reported total receipts of ₹41,68,597 and claimed expenditure of ₹48,07,340.

However, while processing the return under Section 143(1) of the Income Tax Act, 1961, the Assessing Officer (CPC, Bangalore) treated the entire receipts as income and disallowed the claim of expenditure.

Aggrieved by this action, the appellant filed an appeal before the First Appellate Authority. Due to a considerable delay in filing the appeal, the First Appellate Authority held that the delay was not condonable and dismissed the appeal. Consequently, the matter was brought before the Income Tax Appellate Tribunal (ITAT).

 Issues Involved

  1. Whether the delay in filing the appeal before the First Appellate Authority ought to have been condoned.
  2. Whether it was justified to treat the entire receipts of a charitable trust as taxable income without allowing corresponding expenditure.
  3. Whether the appellant was denied a reasonable opportunity of being heard.

 Petitioner’s Arguments (Assessee)

The Authorized Representative contended that the First Appellate Authority failed to provide an opportunity to explain the reasons for the delay. The persons managing the trust were not conversant with legal procedures and were unaware of the requirement to justify the delay.

It was further submitted that a charitable institution should not suffer adverse tax consequences merely due to ignorance of procedural rules. Additionally, it was emphasized that no receipts can exist without incurring expenditure; therefore, disallowing the entire expenditure resulted in an unjust tax burden on the trust.

 Respondent’s Arguments (Revenue)

The Departmental Representative argued that carelessness or negligence in pursuing an appeal should ordinarily not be condoned, implying that the dismissal by the First Appellate Authority was justified.

 Court Order / Findings (ITAT Allahabad)

After considering the rival submissions and examining the record, the Tribunal observed that it is a settled legal position that condonation of delay in filing appeals should generally be the rule rather than the exception.

Although the Tribunal acknowledged that the appellant had committed a serious lapse in not responding adequately to communications from the First Appellate Authority, it held that, in the interest of substantive justice, the matter deserved reconsideration.

Accordingly, the Tribunal remanded the case to the file of the First Appellate Authority for fresh adjudication after providing the appellant a proper opportunity of being heard.

 Important Clarification

The Tribunal clarified that the appellant must utilize the opportunity granted during remand proceedings to properly present its case. The appeal was allowed for statistical purposes, meaning that no final decision on merits was rendered, and the matter remains open for fresh adjudication by the First Appellate Authority.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771060707_ARIANACHARITABLETRUSTALLAHABADVS.ITOEXEMPTIONALLAHABADALLAHABAD.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.