2023 (3) TMI 344 - AT - Income Tax

Ex-parte order passed by CIT-A - Exemption u/s 11 - applicability of proviso to section 2(15) - CIT(A) decided to proceed the appeal ex-parte observing that the assessee failed to explain as to how the activity undertaken by the assessee is not commercial or charitable - HELD THAT - It is no doubt true that notices were issued to the assessee on several occasions. The assessee had requested for adjournment in the hearing fixed on 25.05.2022 and the case was adjourned to 10.08.2022. On that date also, the assessee did not appear before CIT(A) and the case was adjourned to 16.10.2022 on which date also neither the assessee nor his Authorized Representative appeared before CIT(A). The order of the CIT(A) has to be set aside and the issue remanded to CIT(A) for a decision on merits. The applicability of the proviso to 2(15) of the Act cannot be on the basis of the default of the parties but should be on the basis of facts and circumstances of each case. In the present case, the donations received by the assessee which was taken as receipts were prima facie donations and there is no material to show that the donations were not voluntary. Both the AO and the CIT(A) have called upon the assessee to demonstrate as to how the donations were voluntary and thereby the assessee was called upon to prove a negative fact. The assessee should have an opportunity of hearing before the CIT(A) who can appreciate as to how the proviso to section 2(15) of the Act will operate on the facts and circumstances of the given case. In this regard, the contentions that the assessee may put forth should also be considered by the CIT(A) rather than deciding the appeal on the basis of default of parties. We set aside the order of the CIT(A) and remand the issue of applicability of proviso to section 2(15) of the Act to the CIT(A) for fresh consideration, after affording the assessee opportunity of being heard. Appeal of the assessee is treated as allowed for statistical purposes.

Summary

Issues:
- Appeal against order dated 10.10.2022 of NFAC, Delhi for Assessment Year 2017-18.
- Classification of receipts from "Cycle Rally" activities as donations or participation fees.
- Exemption under section 11 of the Income Tax Act.
- Delay of 20 days in filing the appeal.

Analysis:
1. The assessee, a registered trust, appealed against the AO's decision to tax excess receipts over expenditure as income due to activities like "Cycle Rally." AO considered these receipts as fees, not donations, impacting exemption under section 11. The assessee claimed the receipts were voluntary donations for charitable activities, not commercial. CIT(A) dismissed the appeal ex-parte as the assessee did not participate in the proceedings, leading to the Tribunal appeal.

2. The delay in filing the appeal was explained by the assessee due to miscommunication, leading to a 20-day delay. The Tribunal, considering no willful delay, condoned the delay to ensure substantive justice over technicalities. This allowed the appeal to proceed on its merits.

3. The Tribunal observed that the CIT(A) should have decided the issue of applicability of the proviso to section 2(15) based on facts, not default. The donations received were prima facie voluntary, and the burden of proof was on the assessee to demonstrate voluntariness. The Tribunal set aside the CIT(A)'s order, remanding the issue for fresh consideration. The assessee was granted an opportunity to be heard, emphasizing the importance of considering the contentions presented.

4. Ultimately, the Tribunal allowed the appeal for statistical purposes, granting the assessee the chance to present their case before the CIT(A) to determine the applicability of the proviso to section 2(15) accurately. The decision aimed to ensure a fair assessment based on the facts and circumstances of the case, emphasizing the importance of due process and proper consideration of the contentions raised by the assessee.