"आयकर अपीलीय अिधकरण, ‘सी’ ा यपीठ, चे\u0012ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI \u0015ी जॉज\u0018 जॉज\u0018 क े, उपा \u001a\u001b एवं सु\u0015ी पदमा वती यस, लेखा सद$ क े सम\u001b BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND MS. PADMAVATHY.S, ACCOUNTANT MEMBER ITA No.521/CHNY/2026 & CO No.72/CHNY/2026 िनधा\u0005रण वष\u0005/Assessment Year: 2013-14 DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS), COIMBATORE. Vs. ARUPUKOTTAI SBK GIRLS HIGHER SECONDARY SCHOOL MANAGING BOARD, 15, SBK BOYS HIGHER SECONDARY SCHOOL ROAD, VIRUDHUNAGAR ARUPPUKKOTTAI-626101, TAMIL NADU अपीलाथ\u000f Appellant \u0010\u0011थ\u000f Respondent/Cross Objector Permanent Account Number of Assessee: AABTA 6573B अपीलाथ\u000f \u0013ारा/Assessee represented by: Mr. K.Balasubramanian, Advocate \u0010\u0011थ\u000f \u0013ारा/Revenue represented by: Ms. Nayani Swapna, CIT सुनवाई की तारीख / Date of conclusion of hearing: 14-07-2026 घोषणा की तारीख / Date of pronouncement: 21-07-2026 आदेश / O R D E R PER PADMAVATHY.S, A.M: This appeal by the Revenue and the Cross Objections (CO) by the assessee are against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short \"CIT(A)\") passed u/s. 250 of the Income Tax Act, 1961 (in short \"the Act\") dated 25.11.2025 for Assessment Year (AY) 2013-14. Printed from counselvise.com ITA No.521/Chny/2026 & CO No.72/Chny/2026 Arupukottai SBK Girls Higher Secondary School Managing Board :- 2 -: 2. The assessee is an educational institution existing solely for educational purposes. The assessee did not file the return of income for the year under consideration. The A.O received information that the assessee has made cash deposit of Rs.1,76,64,940/- into the bank account. The A.O did not accept the return filed by the assessee stating that the same is filed beyond the due date and hence is to be considered as non-est. The assessee furnished the income and expenditure account before the A.O and based on the same the AO treated the entire income to the tune of Rs. 3,02,11,210/- as taxable in the hands of the assessee. The A.O also treated the difference between the cash deposited into the bank account and the fees received as reflected in the income and expenditure account amounting to Rs. 73,77,414/- as unexplained income in the hands of the assessee. Before the CIT(A), the assessee furnished various details pertaining to the impugned additions. The CIT(A) after considering the submissions of the assessee gave relief to the assessee by holding that: “c) Alognwith above submission, the appellant has furnished that the appellant is wholly or substantially financed by the Government and exists solely for educational purposes without the motive of profit. Accordingly, its income is exempt under section 10(23C)(iiiab). The appellant has furnished the copy of Government orders sanctioning grants and audited accounts which have been duly verified. Further, the appellant has submitted that the provisional approval u/s 80G(5)(iv) granted vide Form No. 10AC dated 08.02.2022 is effective from A.Y. 2022-23 onwards. Hence, the same does not apply to A.Y. 2013-14. However, subsection (2) of section 12A of the Act provides that where an application for registration under section 12AB of the Act has been made, the exemption shall be available with respect to the assessment year relevant to the financial year in which the application is made and subsequent assessment years. Further, the appellant has furnished the details that Out of the total receipts of Rs.3,02,11,211/- for A.Y. 2013-14, an amount of Rs. that 1,78,13,708/- was received as Government grants. The appellant has furnished the complete bank statement for the A.Y. 2013-14 and details of fee collected from students excluding government grants. d) From the perusal of the copies of Government Grant Sanction Orders and Accounts and bank statement of the appellant, it is evident that during Printed from counselvise.com ITA No.521/Chny/2026 & CO No.72/Chny/2026 Arupukottai SBK Girls Higher Secondary School Managing Board :- 3 -: the year under consideration i.e. A.Y. 2013-14, out of total receipt of Rs. 3,02,11,211/-; Rs. 1,78,13,708/- has been received as Government Grant which is more than 50% of the total receipt. There is no denying the fact that appellant is an educational institute solely for educational purposes, and, also is substantially financed by the Government during the concerned A.Y. The provision of section 10(23C)(iiiab) of the Act as stands for A.Y. 2013-14 as under:- “Income not included in total income. 10(23C)(iiiab)- any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or” e) In light of the above facts and provisions of law, I am of the considered view that during the year under consideration the appellant is eligible for benefits of exemption available u/s 10(23C)(iiiab) of the Act. It is pertinent to mention here that the appellant has also got registration u/ s12A and 80G of the Act subsequently. Thus, grounds No. 3,4 and 5 raised by the appellant are allowed herewith and addition made by the AO amounting to Rs. 3,02,11,210/- is deleted herewith. f) The ground NO. 6 and 6.1 of the appellant relates to the addition of Rs. 73,77,414/- made by the AO to the total income of the appellant. The AO has observed in para-5 of the assessment order as:- “5. The assessee uploaded the details on 25/02/2022. As regards the cash deposits in the Bank it has been explained that major part of cash deposits it made on fees received and receivable from students. Substantially documentary evidence is also enclosed. However, as per information available with the Department the cash deposit in Bank amounted to Rs. 1,76,64,950/-. Whereas, the fees received from the students is shown as per Income & expenditure account at Rs. 99,39,184. Even after considering the fees receivables of Rs. 3,48,352/-, there is a difference of an amount of Rs. 73,77,414/-, Since there is no explanation for the difference, the same is added back to the total income. Penalty proceedings u/s 271(1)© of the I.T.Act, 1961 is initiated separately for concealment of income.” g) It would be pertinent to mention here that the AO has relied on the information available on the AIMS module. There seems no verification done with the banks concerned u/s 133(6) of the Act. On the other hand, the appellant claims that it maintains regular books of accounts and every deposit (whether cash or otherwise) in the bank account has been duly reflected in the day book and books of account. The appellant has submitted the following on this issue: “The following are the details of Cash Receipts & Cash Deposits: Printed from counselvise.com ITA No.521/Chny/2026 & CO No.72/Chny/2026 Arupukottai SBK Girls Higher Secondary School Managing Board :- 4 -: The facts of the case as the appellant's, fees collection and other above Collection alone accounted for Rs.1,78,10,400, which is much more than cash deposit of Rs.1,76,64,950 assessed by AO [not to speak of Govt aid of Rs. 1,78,13,708] which receipts alone were deposited in cash in Indian Bank and TMB then and as per the books of accounts and hence this is not unexplained income or unexplained investment as assumed by the learned AO. We also have a valid 12A & 80G Registration. We attached herewith the same for your kind reference.” h) On perusal of the above and the bank statement submitted by the appellant; I find that fee collected from the students during the year under consideration is Rs. 99,39,185/-. The appellant claims other receivables also totalling to Rs. 1,78,10,400/-. The appellant also has government grants of Rs. 1,78,13,708/- which receipts alone have been claimed to be deposited in Indian bank and TMB which have been recorded in books of accounts. 3. The Revenue is in appeal before the Triubnal raised the following grounds of appeal: “5.2 Further the tax effect in this case is Rs 1,16,14,887/- which is more than the prescribed monetary limit for filing further appeal as per CBDT Circular 09/2024. Therefore, further appeal is suggested in this case for the AY 2013- 14 for the grounds of appeal as stated below: i) The CIT(A) has erred in admitting new evidences at the appellate stage without giving the AO an opportunity to cross verify the same which is a clear violation of the procedures laid down in Rule 46A of the Income Tax Rules. ii) The CIT(A) has erred in law by misapplying allowing exemption under a different section (10(23C)(iiiab) of the Act) which was not claimed by the assessee in the Return of Income or during assessment proceedings. Printed from counselvise.com ITA No.521/Chny/2026 & CO No.72/Chny/2026 Arupukottai SBK Girls Higher Secondary School Managing Board :- 5 -: Further the return of income filed by the assesse was declared as non-est due to expiration of the time limitation. iii) Whether the CIT(A) is justified in granting relief to the assessee by relying on the fresh evidences submitted by the assessee in the form of Government Grant Sanction Orders and Books of Accounts without fact- checking whether the government grants exceed the prescribed percentage of total receipts or not. The government grant orders and the books of accounts submitted by the assessee during appellate stage ought to have been remanded to the AO for verifying the authenticity of the grant orders and to correctly compute the ratio of grants to total receipts for claiming eligibility u/s 10(23C) (iiiab) of the Act. iv) The CIT(A) has erred in law by misapplying the proviso to Section 12A(2) of the Act. As per the provision to section 12A(2), a trust granted registration in a later year may claim Section 11 benefits for earlier AYs provided that assessments for such year were pending as on date of grant of registration and the objects and activities of the trust in the earlier year were the same as those in the year of registration. Hence, the CIT(A) ought to have remanded the issue back to the file of the AO for verification of the activities of the trust during earlier AYs. v) For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the ld. CIT(A) may be set aside and that of the A.O. may be restored.” 4. The primary contention of the Ld. DR is that the assessee furnished several documents as additional evidence before the CIT(A) and the CIT(A) without calling for a remand report from the A.O has given relief to the assessee. The Ld. DR further submitted that therefore there is a violation Rule 46A of the Rules and accordingly the CIT(A)'s action of giving relief to the assessee is not valid. The Ld. DR further argued that CIT(A) has given relief to the assessee u/s. 10(23C) (iiiab) of the Act which claim was not made by the assessee before the A.O. With regard to the relief given by the CIT(A) towards cash deposits, the Ld. DR submitted that the CIT(A) has not given any detailed finding with regard to examination of the source as submitted by the assessee but has given relief stating that the assessee has received Government grants more than the cash deposit which goes to prove that the Printed from counselvise.com ITA No.521/Chny/2026 & CO No.72/Chny/2026 Arupukottai SBK Girls Higher Secondary School Managing Board :- 6 -: CIT(A) has not applied his mind in giving relief to the assessee. The Ld. DR accordingly prayed that the order of the A.O be upheld. 5. The Ld. Authorized Representative (AR) of the assessee, on the other hand, submitted that there is no violation of Rule 46A of the Rules in the present case since the CIT(A) himself has sent a notice u/s. 250(4) of the Act calling for the various details. The Ld. AR in this regard drew our attention to the notice u/s. 250 of the Act dated 29.08.2025 where the CIT(A) has called on the assessee to furnish various details and also to state clearly how the assessee is exempt u/s. 10(23C)(iiiab) of the Act. The Ld. AR further submitted that as per sub section (4) of section 250 if the CIT(A) calls for any details for proper disposal of the appeal then there is no violation of Rule 46A of the Rules and the said exception is clearly is applicable to the present case. With regard to the exemption allowed by the CIT(A) u/s. 10(23C)(iiiab) of the Act, the Ld. AR drew our attention to the income and expenditure account of the assessee to submit that the assessee is a Government funded school where the grants received is more than 50% of the income of the assessee and as per Rule 2BBB of the Rules, the assessee is entitled for exemption u/s. 10(23C)(iiiab) of the Act. With regard to the contention that the exemption is claimed for the first time, the ld AR submitted that assessee has filed the return declaring loss and hence the exemption could not have been claimed. On the issue of cash deposit, the Ld. AR has submitted the assessee has provided the following breakup explaining the source and that the CIT(A) has rightly considered the same for giving relief to the assessee: Printed from counselvise.com ITA No.521/Chny/2026 & CO No.72/Chny/2026 Arupukottai SBK Girls Higher Secondary School Managing Board :- 7 -: 6. We have carefully considered the rival submissions and perused the material available on record. The short issue that arises for our consideration is whether the first appellate authority was justified in calling for and relying upon material which was not available before the A.O.. We notice that section 250(4) of the Act empowers the CIT(A), before disposing of any appeal, to make such further inquiry as he thinks fit or to direct the A.O. to make further inquiry and report the result of the same. Thus, the statute itself confers upon the first appellate authority the power to undertake or cause to be undertaken such enquiry as may be necessary for a proper and effective adjudication of the issues arising in appeal. We further notice that Rule 46A of the Rules, regulates the production of additional evidence by an assessee before the CIT(A) whereas sub-rule (4) expressly provides that nothing contained in Rule 46A shall affect the power of the CIT(A) to direct the production of any document or the examination of any witness for enabling him to dispose of the appeal or for any other substantial cause. Accordingly in our view there is a clear distinction exists between additional evidence voluntarily produced by an assessee and evidence or information called for by the appellate authority in exercise of the powers conferred under section 250(4) of the Act. While the former is governed by the restrictions contained in Rule 46A, the latter is an independent statutory power vested in the appellate authority to ensure a Printed from counselvise.com ITA No.521/Chny/2026 & CO No.72/Chny/2026 Arupukottai SBK Girls Higher Secondary School Managing Board :- 8 -: proper adjudication of the appeal. Consequently, where the CIT(A), in the course of appellate proceedings, considers it necessary to call for further material or information for arriving at the correct conclusion, such exercise cannot be treated as admission of additional evidence at the instance of the assessee so as to attract the rigours of Rule 46A. Further the object of Rule 46A is to prevent an assessee from withholding evidence before the A.O. and subsequently producing the same in appeal as a matter of right. The Rule is not intended to curtail the statutory powers conferred upon the appellate authority under section 250(4) of the Act. Accepting the contention of the Revenue would render the powers expressly conferred under section 250(4) and preserved under Rule 46A(4) largely otiose. 7. In the light of the above principles, when we look at the facts of the present case, we find that the material relied upon by the CIT(A) was called for in exercise of the powers vested in him under section 250(4) of the Act for the purpose of effective adjudication of the appeal and this is substantiated from the perusal of the notice issued by the CIT(A). Such material cannot be equated with additional evidence voluntarily produced by the assessee so as to invoke Rule 46A. The Revenue has also not demonstrated that any prejudice has been caused by the exercise of such statutory power. We are, therefore, unable to accept the contention that the impugned order suffers from any infirmity on this count. Accordingly, the ground raised by the Revenue in this regard is rejected. 8. Now we will consider the contentions of the revenue with regard to the issue as to whether the assessee is entitled to exemption under section 10(23C)(iiiab) of the Act. We notice that section 10(23C)(iiiab), as applicable Printed from counselvise.com ITA No.521/Chny/2026 & CO No.72/Chny/2026 Arupukottai SBK Girls Higher Secondary School Managing Board :- 9 -: to the assessment year under consideration, exempts the income of any university or other educational institution existing solely for educational purposes and not for purposes of profit, which is wholly or substantially financed by the Government. Thus, the statutory requirements are twofold, namely, that the institution should exist solely for educational purposes without any profit motive and that it should be wholly or substantially financed by the Government. We further notice that Rule 2BBB of the Rules, explains the expression \"substantially financed by the Government\" occurring in section 10(23C)(iiiab). The Rule provides that an educational institution shall be regarded as substantially financed by the Government if the Government grant to such institution exceeds fifty per cent of its total receipts, including voluntary contributions, during the relevant previous year. The Rule thus provides an objective benchmark for determining whether the institution satisfies the condition of substantial Government financing. 9. We notice that, during the appellate proceedings, the CIT(A) specifically called for the Government grant sanction orders, audited accounts, bank statements and the break-up of Government grants received during the relevant previous year. Upon verification of these records, the CIT(A) recorded a categorical finding that out of the total receipts of Rs.3,02,11,211/- the assessee had received Government grants of Rs.1,78,13,708/-, which constitute more than fifty per cent of the total receipts for the relevant previous year. The Revenue has not placed any material before us to controvert these factual findings recorded by the ld. CIT(A.). We also notice that there is no dispute regarding the nature of the activities carried on by the assessee. The A.O. has nowhere recorded that the assessee existed for any purpose other than education or that it had a profit motive. The Printed from counselvise.com ITA No.521/Chny/2026 & CO No.72/Chny/2026 Arupukottai SBK Girls Higher Secondary School Managing Board :- 10 -: exemption has been denied solely on the ground that the assessee did not possess registration under section 12A for the relevant assessment year. In our considered opinion, such reasoning is not tenable since the exemption under section 10(23C)(iiiab) operates independently of the exemption available under sections 11 and 12 and does not depend upon registration under section 12A or section 12AB. The eligibility has to be tested only with reference to the conditions prescribed in section 10(23C)(iiiab). Further, the factual findings recorded by the ld. CIT(A), based on the documentary evidence produced by the assessee, clearly establish that the assessee existed solely for educational purposes and that the Government grant received during the relevant previous year exceeded fifty per cent of its total receipts, thereby satisfying the test of substantial Government financing as contemplated under Rule 2BBB. The Revenue has not brought any material on record to dislodge these findings. In these circumstances, we are of the considered view that the assessee fulfils the conditions prescribed under section 10(23C)(iiiab) of the Act. We, therefore, find no infirmity in the order of the ld. CIT(A) in granting exemption under the said provision. Accordingly, the grounds raised by the Revenue on this issue stand dismissed. 10. The next issue pertain to the addition made towards cash deposit. In this regard we notice that the A.O. made the impugned addition on the premise that the aggregate cash deposits in the bank accounts exceeded the fee receipts reflected in the Income and Expenditure Account and that the assessee had failed to satisfactorily explain the difference. On the other hand, the assessee contended before the ld. CIT(A) that the cash deposits represented not only the fees collected from the students but also arrears of fees, other receipts, cash withdrawals re-deposited and amounts received Printed from counselvise.com ITA No.521/Chny/2026 & CO No.72/Chny/2026 Arupukottai SBK Girls Higher Secondary School Managing Board :- 11 -: towards school development. It was further contended that all the deposits were duly recorded in the regular books of account and, therefore, the provisions of section 69A were not attracted. We notice that the ld. CIT(A) has accepted the explanation of the assessee and deleted the addition primarily on the ground that the cash deposits were duly recorded in the books of account. However, the order of the ld. CIT(A) does not contain any clear factual finding demonstrating how the cash deposits have been reconciled with the cash book and the corresponding entries in the bank accounts. Though reference has been made to the fee collections, Government grants and other receipts, it is not coming out clearly whether there was any verification by the CIT(A) of the submissions of the assessee. In our view the impugned issue need to be essentially decided based on factual verification of the books of account and the supporting records and in the absence of a proper reconciliation between the cash deposits and their corresponding sources. Accordingly in the interest of natural justice, we deem it appropriate to set aside the order of the CIT(A) on this issue and restore the matter to the file of the A.O.. The A.O. is directed to examine the necessary documents as may be required to decide the issue afresh in accordance with law after affording the assessee a reasonable opportunity of being heard. The assessee shall extend full cooperation by producing all the relevant books of account and supporting evidence. The ground of the revenue in this regard is allowed for statistical purposes. 11. The Ld. AR submitted during the course of hearing that the grounds raised in CO is not pressed. Hence, the CO is dismissed as not pressed. Printed from counselvise.com ITA No.521/Chny/2026 & CO No.72/Chny/2026 Arupukottai SBK Girls Higher Secondary School Managing Board :- 12 -: 12. In result, the appeal of the revenue is partly allowed for statistical purposes and the C.O. of the assessee is dismissed as not pressed. Order pronounced on 21st day of July, 2026 at Chennai. Sd/- Sd/- (जॉज\u0018 जॉज\u0018 क े) (George George K) उपा\u001a\u001b / Vice President (पदमावती यस) (Padmavathy.S) लेखा लेखा लेखा लेखा सद य सद य सद य सद य /Accountant Member चे नई/Chennai, \u000fदनांक/Dated: 21st July, 2026. EDN, Sr. P.S आदेश क\u0012 \u0013ितिल\u0016प अ\u0019े\u0016षत/Copy to: 1. अपीलाथ\u000f/Appellant 2. \u0010\u0011थ\u000f/Respondent 3. आयकर आयु /CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय \u0010ितिनिध/DR 5. गाड\u0005 फाईल/GF Printed from counselvise.com EJTADA DURGA NARESH Digitally signed by EJTADA DURGA NARESH Date: 2026.07.22 17:03:38 +05'30' "