INCOME TAX OFFICER-3(1), RAIPUR, RAIPUR vs. CHHATTISGARH STATE AGRICULTURAL MARKETING BOARD, RAIPUR

Due to inadvertence, the appellant filed its return of income in Form no. ITR-7 instead of Form no. ITR-5. The return of income was processed by CPC, Bangalore on 24.12.2016 disallowing the exemption claimed by the appellant and assessing the income at Rs.2,12,61,318. The appellant filed rectification request on 04.11.2019 before CPC Bangalore. In the rectification order passed on 23.11.2019, the total income has been taken at Rs.2,12,61,318- and no exemption was allowed.

Aggrieved with the aforesaid order dated 18.06.2020 u/s 154 passes by the CPC, wherein the rectification request to allow the exemption claimed u/s 10(26AAB) by the assessee board was rejected by the CPC, the assessee preferred an appeal before the Ld. CIT(A) wherein contentions of assessee found to be acceptable and, therefore, the appeal of assessee is partly allowed with the following observations: 5. DECISION:

As the relief is granted by the Ld. CIT(A) to the assessee by allowing exemption u/s 10(26AAB) claimed, aggrieved thereby the revenue assailed the impugned order by filling of the present appeal.

On the contrary, Shri. R. B. Doshi, CA, Authorized Representative (in short “Ld. AR”) on behalf of the assessee, to establish the eligibility of the assessee board for exemption u/s 10(26AAB) have submitted that the assessee is a “State Agricultural Marketing Board” set up under the Chhattisgarh Krishi Upaj Mandi Adhiniyam, 1972 for which a notification was issued on 23.12.2000, by order and in the name of Governor of Chhattisgarh, copy of the same is placed before us at page no. 236-237. The same is extracted hereunder for the sake of reference and information:

Ld. AR further drew our attention to CBDT Circular 18/2017, dated 29.05.2017, the same is culled out hereunder:

Referring to para 4 of the aforesaid circular by the CBDT, Ld. AR advanced his argument that as per the clause no. (xiii) of para 4 of the aforesaid circular “any agricultural produce marketing committee referred to in clause 26AAB of section 10 of the Income Tax Act, cannot be subjected to taxations according to the provisions of the Income Tax Act. As per aforesaid clause, the authorities or boards or bodies, by whatever name called, referred to in section 10 of the Income Tax Act, whose income is unconditionally exempt under that section and who are also statutorily not required to file return of income under the provisions of Income Tax Act, there would be no requirement for tax deduction at source, since their income any way is exempt under Income Tax Act.”

With such contention, Ld. AR submitted that the assessee board was not even require to file return of income under the provisions of Income Tax Act, as the same is covered u/s 10(26AAB) and according to the CBDT’s Circular No. 18/2017 (supra), its income is unconditionally exempt.

For a proper evaluation of the aforesaid contentions, the provisions of section 10(26AAB) are culled out as under:

Based on aforesaid submissions, it was the prayer by Ld. AR that since the income of assessee board is unconditionally exempt as per CBDT Circular No. 18/2017 dated 29.05.2017, which is binding on the authorities of Income Tax Department, under such circumstances mere filing of return of income under wrong Form should not be the sole reasons for denying the exemption to the assessee board, who is eligible for exemption under the provisions of section 10(26AAB) of the Act.

We have considered the rival submissions, perused the material available on record and case laws referred to by the Ld. AR. Admittedly, there is no dispute that the assessee board i.e., “Chhattisgarh State Agricultural Marketing Board” is an authority or board covered under the provisions of section 10(26AAB) of the Act, however the exemption claimed by the assessee is denied by the CPC on account of assessee’s filing of return in Form No. ITR- 7 instead of Form No. ITR-5 for which the reasons stated by the Ld. AR was that, the assessee board is having Alphabet T in their PAN No., the extant Income Tax Portal / system had not permitted the assessee to file the return in Form No. ITR-5. This was an inadvertent error on the part of assessee, which was very mechanically dealt with by the CPC and have disallowed the exemption without going through the merits of the claim of the assessee. On this issue, Ld. CIT(A) had rightly taken the support from the order of Coordinate Bench of ITAT, i.e., “B” Bench, Kolkata in the case of Young Mends Welfare Society in &614/Kol/2022, wherein it is categorically observed that the action of lower authorities in mechanical manner, without considering the claim of assessee on merits was not justified. It has been held time and again that the Income Tax Authority was not supposed to punish assessee for their Bonafide mistakes.

Further, we find support to the contention raised by the Ld. AR, from the CBDT’s Circular No. 18/2017 referred to (supra) that the assessee board’s income is unconditionally exempt, and the board is not statutorily liable to file the return of income.

In backdrop of aforesaid facts and circumstances, we do not find any infirmity in the order of Ld. CIT(A) in allowing the exemption claimed by the assessee u/s 10(26AAB) of the Act, therefore, we do not see any reason to interfere with the said decision of the Ld. CIT(A).

Resultantly, the appeal filed by the revenue in absence of any contention contradicting the arguments of Ld. AR or the case laws or the directions under Circular No. 18/2017 of CBDT referred to supra, therefore the appeal of department in , being bereft of merits, stands dismissed.