The assessee, a university, claimed exemption under section 10(23C)(iiiab) and accordingly did not file its return of income. Since no return was filed, the Assessing Officer issued a notice under section 148 requiring the assessee to furnish a return; however, the assessee did not comply. Consequently, the Assessing Officer added the entire cash deposits in the bank account, interest income, and payments towards hotel and restaurant bills to the total income of the assessee, without allowing any expenditure.

In appeal, the Commissioner (Appeals) dismissed the assessee’s appeal on the ground of delay. The assessee subsequently approached the Tribunal.

The Tribunal observed that although the assessee sought adjournment, no justification for such a request was provided, and there was no representation before either the Assessing Officer or the Commissioner (Appeals). The assessment order was passed ex parte, and the first appellate authority dismissed the appeal solely due to delay.

The Assessing Officer had added the entire bank deposits, interest income, and expenditure on hotel and restaurant bills without allowing any deduction for expenses, despite the assessee’s claim that it is a university substantially financed by the Government and the University Grants Commission, and therefore eligible for exemption under section 10(23C)(iiiab). Even assuming the exemption were to be denied, the entire deposits—claimed to represent fee collections and Government grants—could not be brought to tax without computing income on commercial principles and allowing appropriate expenditure.

The Tribunal held that, in the interest of justice, the assessee deserved another opportunity to present its case. The reasons for delay were found sufficient, and the submissions made had not been properly considered. Accordingly, both the assessment order and the order of the Commissioner (Appeals) were set aside, and the matter was remanded to the Assessing Officer for a de novo assessment. The Assessing Officer was directed to examine the assessee’s submissions relating to its claim, including the applicability of section 10(23C)(iiiab), and to allow a reasonable opportunity of being heard.

All grounds of appeal were thus allowed for statistical purposes.