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Facts
The assessee, an educational institution, filed its return claiming exemption under section 10(23C)(iiiad) but inadvertently mentioned section 10(23C)(iiiab). The CPC disallowed the exemption due to this incorrect section. The CIT(A) upheld the disallowance on technical grounds.
Held
The Tribunal held that the assessee is legally entitled to the exemption under section 10(23C)(iiiad) as it is an educational institution with gross receipts below Rs. 1 crore. It was a bonafide mistake in mentioning the wrong section and should not lead to denial of legitimate claim.
Key Issues
Whether the disallowance of exemption under Section 10(23C)(iiiad) on account of mentioning the wrong section (10(23C)(iiiab)) in the return is justified.
Sections Cited
10(23C)(iiiad), 10(23C)(iiiab), 143(1), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AMRITSAR BENCH: AMRITSAR.
Before: SH. UDAYAN DAS GUPTA & SH. KRINWANT SAHAY
Appellant by Sh. Sudhir Sehgal, Adv. Respondent by Sh. Manpreet Singh Duggal, Sr. DR Date of Hearing 20.03.2025 Date of Pronouncement 24.04.2025 ORDER Per: Udayan Das Gupta, J.M.:
This appeal is filed by the assessee against the order of ld. JCIT(A)-1, Gurugram, passed u/s 250 of the Income Tax Act 1961 dated 26.08.2024 which has emanated from the order of the AO, CPC Bangaluru passed u/s 143(1) of the Act dated 30.09.2019. 2. The Grounds of appeal preferred by the assessee in form 36 are as follows:
“1. The Ld. ADDLZJCIT(A) has erred on facts and law, vide order u/s 250 of the Act Dt. 26.08.2024, in dismissing the appeal of the assessee society against order u/s 143(1) of the Act dt. 30.09.20219 of the CPC in which the income of the assessee has been assessed at Rs. 40,01,827/- as against nil income declared in the return of income filed by the assessee society.
The Ld. ADDLZJCIT(A) has erred on facts, vide order uZs 250 of the Act Dt. 26.08.2024 while recording the finding that the CPC has disallowed the exemption claimed u/s 10(23C)(iiiad) of the Act as the assessee was not entitled to the same because the assessee had actually claimed exemption u/s 10(23C)(iiiab) of the Act in the return of income due to inadvertent mistake which has been disallowed by the CPC.
The Ld. ADDLZJCIT(A)has erred on facts and law, vide order u/s 250 of the Act Dt. 26.08.2024, in rejecting the exemption claimed u/s 10(23C) (iiiad) of the Act, as it is settled principle of law that any fresh and additional claim, which has not been made in the return of income, can be made before the appellate authority.
That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of.”
3. The facts emerging from the records are that the assessee is a society registered under the Additional Registrar of Society, Punjab and has filed its return by claiming exemptions u/s 10(23C)(iiiad) amounting to Rs.40,01,827/- which has been disallowed by the CPC Bangaluru on the ground that the claim has been made under a wrong section. It is seen that though the assessee is eligible for exemption u/s 10(23C)(iiiad) the claim has been made in the return of income under wrong section i.e. u/s 10(23C)(iiiab) of the Act which has been disallowed by the CPC Bangaluru. Being aggrieved the appeal filed before the ld. CIT(A) against the order u/s 143(1) of the Act has been dismissed by the ld. JCIT(A) by observing as follows:
“5. Decision
Reply filed by the appellant has been considered. A perusal of the available record reveals that the appellant has submitted its ITR on 31.08.2018 and the same was processed by the CPC on 30.09.2019. In the return so filed, admittedly the appellant had claimed deduction u/s 10(23C) (iiiad) and the AO, CPC has processed the return of the appellant accordingly. As the appellant was not eligible for deduction u/s 10(23C) (iiiad) it was denied the exemption by the AO, CPC. Since the CPC has not committed any mistake in disallowing the exemption under the section in which it was claimed in the Return, the ground of appeal taken by the appellant neither comes under the preview of question of law nor a mistake apparent from record. Considering the facts and circumstances of the case, I am of the view that the ground taken by the appellant is liable to be dismissed on technical count.”
4. It is also observed that the ld. JCIT(A) in his conclusion has inadvertently altered the section of the claim actually made. The claim actually should have been under clause (iiiad) which has been wrongly mentioned as clause (iiiab) in the return. It is also observed that in course of appellate proceedings the assessee has made a fresh claim of deduction/exemption relying on the judgment of the Hon’ble Apex Court in the case of Goetz India Ltd. vs. CIT [2006] 157 Taxman 1 (SC) and also relying on the judgment of the Bombay High Court in the case of CIT vs.
Pruthvi Brokers Y& shareholders [2012] 23 taxmann.com 23 (Bombay), to submit that any fresh claim of deduction or exemption can be made by the assessee society before the appellate authority, even if the same claim has not been made in the return filed by the assessee. In course of hearing before the bench the assessee has submitted a short paper book containing copies of memorandum of agreement amongst the Hon’ble President of India /Administrator Governor of State of Punjab and Institute of Management Committee, through chairman and the Hon’ble Ministry of labour and employment Government of India, alongwith copies of income and expenditure a/c, balance sheet, copy of extract of ITR for the year under appeal and also copies of order u/s 143(1) for earlier years as evidence to prove that the claim of the assessee has been accepted in the earlier years.
4.1 He further submitted copies of decision of Coordinate Bench in the case of Punjab Agriculture University vs. DCIT in dated 18.12.2024 in support of his arguments. The ld.AR submitted that the assessee is running Industrial Training Institute under the Hon’ble Ministry of Skill Development and Entrepreneurship for women at Bathinda for educational purpose only and not for the purpose of profits.
4.2 He further stated that aggregate receipts is less than Rs.1 (one) crore for the F.Y. 2017-18 (relevant to assessment year under appeal) and the society is exempt from income tax under section 10(23C)(iiiad) of the Act. He further submitted that on account of bonafide mistake of the counsel of the assessee, or on account of inadvertent error on the part of the person who has filed the return of income, the aggregate claim for deduction u/s 10(23C)(iiiad) has been incorrectly mentioned as u/s 10(23C) clause (iiiab). As a result, the entire claim of the assessee has been disallowed at the time of processing of the return u/s 143(1) by CPC Bangaluru. He further stated that the claim for deduction has all along been accepted by the department even in subsequent years and as evidenced he has placed before us, an extract of ITR Form and copy of a/cs for the A.Y. 2023-24 (page 68 to 87 of the paper book). He further submitted that the assessee society has no practical knowledge of income tax matters and are totally dependent on the counsel for filing of the return and in the instant case, the counsel who has filed the return has committed an inadvertent technical error and relying on the Hon’ble Jurisdictional Punjab & Haryana High Court in the case of Manoj Ahuja (Minor) & Anr. vs. Inspecting Assistant Commissioner reported in 43 CTR 229, he submits that the assessee should not be punished due to technical mistake on the part of his counsel. He further relied on the judgment in the case of National Contracting Company Pvt. Ltd. Vs. DCIT, ITAT Chennai, and in the case of SRK Kishti Vs. CIT, Gujarat High Court reported in 276 ITR 165 in support of his arguments. The Hon’ble High Court in the case of SRK Kishti has observed as under:
“a. The Habrol Cooperative Agricultural Service Society Limited vs. The ITO in dated 26.09.2024 ITAT Chd “9. From this provision it is clear that section 80A(5) is broadly applied where any deduction is to be claimed u/s 10A or section 10AA or section 10(B) or section 10BA etc. Here, in this case, the Assessee is a cooperative society and it has to be allowed deduction u/s 80P(2)( c)(i) so, it has got nothing to do with section 80A (5) of the Act.
Further, we have considered the case laws brought on record by the Id. Counsel of the Assessee and we find that there are number of case laws supporting view that in case there is a mistake by Assessee for claiming legitimate deduction, the Assessing Officer is duty bound to consider such legitimate deduction to the Assessee even if it was not claimed or claimed under wrong sections. Accordingly, we do not find any justification in the findings given by the Addl/JCIT (A) and so it cannot be sustained, thus Assessee’s appeal on this issue is allowed. The Coordinate Bench has also observed as follows: b. Punjab Agriculture University vs. The DCIT(Exemption), Chandigarh 18.12.2024 ITAT Chd “23. Thus, it is clear that as already stated above that due to the mistake of the earlier Counsel of the Assessee who claimed deduction by putting wrong section in the return of income should not be considered the culpability of the Assessee. Accordingly, we are of the considered opinion that Assessee’s appeal on grounds in both the assessment years i.e., 2018- 19 and 2019-20 should be allowed. 24. In the result, Assessee’s appeal for A. Y. 2018-19 and 2019-20 are allowed.” He also relied on the judgment of Coordinate Benches in the case of i) Harbol Cooperative Agricultural Service Society Ltd. Vs. ITO in dated 26.09.2024, in support of his contention.
The ld. DR relied on the order of the ld. CIT(A).
We have heard the rival submissions and considered the materials on record.
It is a case of inadvertent mistake committed by the counsel of the assessee who has uploaded the return claiming the exemption under a wrong clause of section 10(23C) (iiiab). The correct section is 10(23C)(iiiad).
6.1 But considering the legality of the matter, we find that this is an educational institution without any profit motive, and the gross receipts being less than Rs.1 (One) crore for the year under appeal, the assesse is entitled to the claim of exempt u/s 10(23C)(iiiad) and simply putting a wrong clause in the return of income should not be considered the culpability of the assessee, because considering the entire factual aspect of the matter, the assessee is entitled to legitimate claim of deduction. Respectfully following the law laid down by the Hon’ble Gujarat High Court in the case of SRK Kishti (supra), we are of the opinion that in the instant case the assessee is legally entitled to the exemption u/s 10(23C)(iiiad), of the Act, and the exemption should not be denied, only because the claim has been made inadvertently under a wrong clause. Therefore, the A.O. is duty bound to give relief to an assessee where there is no doubt regarding the legality of claim.
As such, respectfully following the judgment of the Hon’ble Gujarat High 6.1 Court and also the decisions of the Coordinate Benches in the case of Punjab Agriculture University (supra)., we direct the AO to allow the deduction as claimed by the assessee u/s 10(23C)(iiiad) as it is legally allowable and the assessee is entitled to it. As such, the appeal of the assessee is allowed. allowed.
Order pronounced on 24.04.2025 at Amritsar, Punjab in accordance with Rule 34(4) of the Income tax (Appellate Tribunal) Rules, 1963.