PRAKASH EDUCATION SOCIETY SALWAD,SALWAD vs. EXEMPTION WARD, THANE

PER OM PRAKASH KANT, AM

This appeal filed by the assessee is directed against the order dated 24.06.2025 passed by the Ld. Additional/Joint Commissioner of Income-tax (Appeals) – Agra [ in short the ld CIT(A)]for Assessment Year (in short AY) 2016–17, raising following grounds:

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i. Taxable Income on which tax liability is raised is incorrect

The Assesee had filed ITR for AY 2016-17 in ITR form 7, Tax Liability has been considered on gross income of Rs.40,37,384 which includes total receipts and saving interest, the assesse had filed ITR form 7 assuming that Asseesee was running not for profit educational institution and exemption on the income received should have been granted. However, the Assesee later realise when the demand notice received that the present un registered trust u/s 12 AA were not eligible to file the return Using ITR-7 as the trust not registered under 12AA and 80G on which the demand of Rs. 14,16,310 was raised on gross income of Rs. 40,37,384. ii. Wrong Form ITR form 7 was selected.

It was a bonafide mistake from the assessee which was brought to knowledge on the receipt of the Demand. Assessee had to file the same in ITR form 5 however due to time lapse, the option of rectification was not available. If the assesse had filed computation in form ITR form 5 then the total income would sum up to Rs.7,33,563/- (where gross income is Rs. 40,37,384 less expenditure incurred were Rs.33,03,821:22) total income includes net profit and saving bank interest. Tax liability would derive as Rs.2,25,669/- the amount includes tax payable, interest under section 234A, 234B, 234C the same has been paid by assessee. The Assessee requests you to consider ITR filed in ITR form 7 as if ITR form 5 had been filed with correct income and liability details. In addition to that whatever the tax applicable as if return filed using ITR Forin-5 same has already discharged by the assesse via challan no 03334 dated: 14/11/2024

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“5.1. Upon careful consideration of the facts and contentions of the appellant and the provisions of the Act, it is noted that the appellant, not being registered under section 12A of the Act, is not entitled to exemption under section 11. Consequently, its income is to be computed under the normal provisions applicable to an Association of Persons (AOP).

5.2. The appellant admittedly filed its return using ITR-7, which is applicable to trusts claiming exemption under sections 11 and 12. This resulted in a defective claim since the selection of ITR-7 suppressed disclosure of business expenses under the relevant heads, leading to CPC processing the return without allowing any expenses. The claim now made by the appellant-namely, that the return should be read as if it was filed in ITR-5-cannot be entertained at the appellate stage.

5.3 The Hon'ble Supreme Court in Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC) held that any claim for deduction or modification in the return must be made through a revised return. The Hon'ble Apex Court ruled that such claims cannot be entertained, and cannot allow a fresh claim which was not made through a valid return or revised return. 5.4 It is further noted that the appellant had the option to file a revised return under section 139(5) before the due date, but failed to do so. 5.5 On the merits, the return filed in ITR-7 is a self-contained document that does not permit deduction of business expenditure, and hence the CPC rightly treated the gross receipts as taxable income. The law does not permit re- engineering the return to allow expenses merely based on post-facto representations or alternate computations filed along with the appeal.

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5.6 In view of the foregoing legal position and facts on record, the appellant's plea to treat the ITR-7 as ITR-5 and recompute the tax liability cannot be acceded to. There is no provision under the Act that permits such retrospective alteration of return form selection at the appellate stage. 5.7 The ground relating to deletion of interest under sections 234B and 234C is also not maintainable. These are consequential statutory interests arising automatically due to underpayment of advance tax and cannot be waived unless covered under the CBDT's instructions or specific provisions of the Act. 5.8 Accordingly, all the grounds of appeal raised by the appellant are found devoid of merit and are hereby rejected.” 3. We have heard the submissions of Ld. DR, perused the orders of the authorities below and carefully examined the material placed on record.

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4.1 Once it is accepted that the assessee is assessable under the normal provisions of the Act, its taxable income has necessarily to be computed in accordance with those provisions. Under the scheme of the Act, it is only the real income, computed after allowing admissible deductions and expenditure, that is chargeable to tax. Mere gross receipts cannot, by themselves, constitute taxable income unless the statute specifically so provides. The denial of legitimate deduction in the present case is not founded upon any statutory embargo but is merely the consequence of the assessee having inadvertently selected an incorrect return form. Such a technical lapse cannot be elevated to a substantive ground for taxing the gross receipts in disregard of the settled principles governing computation of taxable income. The Income-tax Act is intended to levy tax on real income and not on artificial or inflated income resulting from procedural or technical errors. A bona fide mistake in selecting an incorrect return form cannot deprive an assessee of deductions otherwise admissible in law, particularly when there is no dispute regarding the nature of the receipts or the expenditure incurred for earning them. The reliance placed by the Ld. CIT(A) upon the decision of the Hon'ble Supreme Court in Goetze (India) Ltd. v. CIT (284 ITR 323) is, in our considered opinion, misplaced. The said decision merely restricts the power of the Assessing Officer to entertain a fresh claim otherwise than by way of a revised return and expressly clarifies that it does not

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impinge upon the powers of the appellate authorities. It is well settled that the appellate authorities possess wide plenary powers to render substantial justice and to determine the correct taxable income in accordance with law.

4.2 In the present case, the assessee is not seeking any fresh exemption or deduction de-hors the provisions of the Act. Its grievance is that owing to a bona fide procedural mistake in filing the return in an incorrect form, the income has not been computed under the provisions admittedly applicable to it. Such a grievance deserved consideration on merits instead of being rejected on a purely technical ground.

4.3 Having regard to the totality of the facts and circumstances of the case, we are of the considered opinion that the interests of justice would be adequately served by restoring the matter to the file of the Assessing Officer. The Assessing Officer shall recompute the income of the assessee strictly in accordance with the normal provisions of the Act applicable to an Association of Persons, after examining the books of account and the expenditure claimed to have been incurred for earning the receipts and after affording the assessee a reasonable opportunity of being heard. Needless to observe, the Assessing Officer shall decide the issue independently and in accordance with law without being influenced by the

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observations contained in the impugned order. The grounds raised by the assessee are, accordingly, allowed for statistical purposes.

In the result, the appeal filed by the assessee is allowed for 5. statistical purposes.

Order pronounced in the open Court on 06/07/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 06/07/2026 Z.U., P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER,

//True Copy// (Assistant Registrar) ITAT, Mumbai