Cash deposits claimed as student fees and exemption under 10(23C) returned for fresh AO verification and reassessment.

ITAT considered an addition under section 69A relating to cash deposits in the assessee's bank account alleged as unexplained cash. The assessee asserted the deposits were student fees exempt under section 10(23C) as a government-aided educational NPO; the tribunal noted the need for AO verification of exemption claims and evidence on bank statements. The tribunal held that receipts exempt by law cannot be taxed merely due to taxpayer negligence and set aside the assessment, restoring the matter to the AO for de novo assessment and verification of the exempt status.

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Issues: Whether the addition of Rs. 1,86,58,039/- made under section 69A of the Income-tax Act, 1961 on account of cash deposits in the assessee's bank account is sustainable or whether the matter requires remand to the Assessing Officer for verification of the assessee's claim that the deposits represent exempt fees under section 10(23C).

Analysis: The Tribunal noted that the cash deposits in the bank account are admitted and that the assessee contends these represent student fees deposited by an affiliated college and are claimed to be exempt under section 10(23C). The record showed the assessment and the first appellate orders were completed ex parte after multiple opportunities were not availed by the assessee. The Tribunal observed that the question whether the receipts are exempt under law was not examined by the authorities and that exemption, if established, would negate taxability. In view of the factual nature of the claim and the need for verification of supporting evidence, the Tribunal found that a fresh examination by the Assessing Officer is required.

Conclusion: The addition is set aside and the matter is restored to the file of the Assessing Officer for de novo assessment for verification of the source and claim of exemption; decision is in favour of the assessee.

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