TaxTMI 
TaxTMI 
2026 (7) TMI 34
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee against the order of the Assessing Officer passed under section 147 for the Assessment Year 2015-16, on 28.03.2022. The grounds of appeal are as under:- "1. Because in the facts and circumstances of the case the Ld. CIT(A), (NFAC) erred in law in upholding the issuing notice by AO under section 148 and in making assessment without disposing by reasoned order of our objections to the reopening of the case. 2. Because in the facts and circumstances of the case the Ld. CIT(A), (NFAC) erred in law and on facts in confirming the addition of Rs. 4,00,16, 602/- made by AO for the reason that this is not disclosed in Schedule-I of ITR ignoring the fact that Schedule-I of ITR is not applicable to the amount of deemed application....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee had not shown the same in column 1 of Schedule-I of ITR for the said assessment year. Accordingly, the assessee was asked to clarify the issue. In response, the assessee submitted that the Schedule-I related to amounts accumulated or set apart for specified purpose as per section 11(2), Since the amount of Rs. 4,00,16,602/- is deemed application under clause (2) of Explanation (1) to Section 11(1), Schedule-I of the ITR was not related to this amount. The AO was not convinced with the reply and therefore, he issued a show cause notice to the assessee against which the assessee reiterated its submissions. However, the ld. AO invited attention to clause 4 (vi) of the instruction for filing of ITR where it had been mentioned that....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....09.2014 which disclosed the deemed application of Rs. 4,00,16,602/-. The assessee filed copies of sale deed dated 28.07.2014, copy of bank statement, audited income and expenditure statement of affairs for F.Y. 2014-15 and submitted that the reasons to believe did not consider the material on record. The assessee had protested against the issue of notice under section 148, vide submission dated 17.12.2021 but the assessment had been proceeded without disposing the objections to the reopening assessment. It was submitted that the amount of Rs. 4,00,16,602/-, had neither accrued nor been received during the assessment year 2015-16. Therefore, there was no claim for this amount as deduction from income for the A.Y. 2015-16. In assessment year....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xplanation 1 to section 11(1) was fundamentally flawed. He held that both forms of income being retained for charitable purposes were required to be reported in Schedule-I. He drew reference to clause 4(vi) of the ITR instruction and held that it expressly mandated the disclosure of both accumulated income and deemed application in Schedule-I. The assessee's failure to comply with this instruction led to the omission of Rs. 4,00,16,602/-, which was not just a procedural oversight but a failure to comply with statutory requirements. The ld. CIT(A) held that Schedule-I was not an optional disclosure, its purpose was to provide a clear and accurate trail of how income was applied for charitable purposes to help the AO to verify whether the soc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... been made out of income deemed to be applied in A.Y. 2014-15 and out of the accounted income of the assessee. The ld. AR further submitted that the ld. AO and the ld. CIT(A) had completely confused the issues of deemed application under Explanation (1) to section 11(1), (which was relevant to the assessment year 2014-15) and accumulation for specified reasons under section 11(2). It was further submitted that Schedule-I of the ITR was not applicable to deemed application but only to accumulation under section 11(2). It was further submitted that the assessee had filed Form 10B manually on 28.09.2015 and subsequently online with a condonation petition, which had been condoned by the ld. CIT (E) on 28.02.2018. Therefore, since the assessee h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d not dispose of its objections, we note that the assessee has raised these objections in its very first reply to the AO and the AO has not taken any cognizance of the same in his order. We are of the view that it was obligatory for the ld. AO to consider the objections and dispose them and the failure to do so in violation of the principles of natural justice, which renders the order bad in law. Furthermore, the ld. CIT(A) could not have refused to adjudicate the matter as the objection raised by the assessee on 17.12.2021 had quite clearly been uploaded alongwith the Form No. 35. Hence ground no. 1 of the assessee's appeal is allowed. 7. On a perusal of clause 9 which relates to scheme of the form ITR-7, we noticed that as per 9(iii)(a....