The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT) upheld the Principal Commissioner of Income Tax (PCIT)’s order, ruling that the ₹718.87 crore exemption claim under Section 10(23C)(iiiab) of Income Tax Act,1961 lacked supporting documents.
Gujarat Medical Education and Research Society,appellant-assessee, did not file its income tax return for Assessment Year 2018-19. The Assessing Officer(AO) found unexplained transactions and issued a notice under Section 148. In response, the assessee filed a NIL return. However, the assessment included additions for income from contracts, rent, cash deposits, interest, professional fees, and time deposits.
The PCIT reviewed the assessment records and found that the assessee had claimed an exemption of ₹718.87 crore under Section 10(23C)(iiiab) but failed to provide supporting documents or justification during the assessment. Despite this, the AO allowed the exemption without verification.
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It noted that the assessee did not submit proof of registration as a charitable institution or evidence to substantiate the claim, even after multiple opportunities. The claim of substantial funding from the State Government also lacked verification of other required conditions, such as exclusive use for educational purposes.
The assessee argued for exemption under both Sections 10(23C)(iiiab) and 10(23C)(iiac), but the PCIT clarified that simultaneous claims under both sections were not allowed.
The PCIT held the assessment order to be erroneous and prejudicial to Revenue. The order was set aside, and the AO was directed to reassess the claim after verifying the facts and considering any alternative claims on their merits.
The assessee appealed before the tribunal.
The assessee argued that most of its funds came from the State Government, justifying its claim for exemption under Section 10(23C)(iiiab), which the AO had allowed. It also cited judicial precedents to support its position.
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The Departmental Representative(DR) countered by relying on the findings of the PCIT in the Section 263 order.
The two member bench comprising Siddhartha Nautiyal(Judicial Member) and Annapurna Gupta(Accountant Member) reviewed the case and found that the Assessing Officer had noted the assessee’s claim for an exemption of ₹718.87 crore but did not receive any supporting documents, despite giving seven opportunities to submit them. The assessee also failed to provide proof of registration as a charitable educational institution.
Although the AO acknowledged the lack of evidence to verify the claim, no disallowance was made in the assessment order. The tribunal held that the judicial precedents cited by the assessee were irrelevant without supporting documents.
The tribunal agreed with the PCIT’s decision that the assessment order was erroneous and prejudicial to Revenue. It upheld the PCIT’s order to set aside the assessment and directed a reassessment of the claim.
In short,the appeal filed by the assessee was dismissed.
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