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Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SHRI M. BALAGANESH & SHRI SUNIL KUMAR SINGH
ORDER PER : SUNIL KUMAR SINGH, JUDICIAL MEMBER:
This appeal has been preferred by assessee against the impugned order dated 18.03.2025 passed in Appeal No. NFAC/2016-17/10297334 by the Ld. Commissioner of Income-tax (Appeals), NFAC, Delhi u/s. 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2017-18, wherein learned CIT(Appeals) has dismissed assessee’s appeal filed against rectification order dated 26.09.2023 passed u/s. 154 of the Act.
Brief facts state that the appellant assessee is a charitable organization duly registered u/s. 12A vide registration number CIT/GWL/12AA/43/16/09-10 and 80G. Appellant assessee claimed the exemption u/s 11 of the Act at the time of filing return. The CPC, Bengaluru considered Rs. 1,92,66,092/- as income of the appellant and raised demand of Rs.89,74,690/-, whereas according to the assessee, it had carried out charitable activities and had applied more than 85% of its receipts for charitable purposes. Appellant filed audit report and revised return but the demand has not been rectified.
Rectification application moved u/s. 154 of the Act has also been rejected by CPC, Bengaluru.
Aggrieved, assessee preferred an appeal before learned CIT(Appeals), who, dismissed assessee’s first appeal.
Assessee has filed this second appeal on the following grounds :
“1. That the Ld. CIT(A) failed to appreciate that the appellant is a registered charitable trust under section 12AA, and the income was fully applied for charitable purposes, which qualifies for exemption under section 11, and the denial of exemption solely on technical grounds is grossly unjustified. Hence the demand so generated by confirming the order of AO should be deleted.
2. That the Ld. CIT(A) erred in law and on facts in upholding the rejection of rectification under section 154 of the Income Tax Act, 1961, despite the assessee has shown all revenue expenditure under Schedule ER and all Capital Expenses under schedule EC. Only because income was wrongly shown under Income from other sources which should have been shown under schedule Ai. Hence the order so passed by the Ld CIT(A) confirming the order of AO is bad in law.
3. That the Ld. CIT(A) erred in dismissing the assessee's appeal stating that "This section does not cover the case of appellant and hence the action of AO is upheld" were as section 154(1)(b) covers the rectification of intimation u/s 143(1) and the mistake was also apparent on record. Hence action of AO and CIT(A) are incorrect.
4. That the Ld. CIT(A) erred by not verifying the fact that ITR-7 so filed by the assessee by using departmental utility does not reflect any taxable income or tax liability under PART BTTI "Computation of Tax Liability on Total Income" hence the mistake did not come in the knowledge of assessee and hence the demand so generated by AO is incorrect and should be deleted.
5. That the Ld. CIT(A) erred in upholding the CPC's action of applying Maximum Marginal Rate (MMR) on gross receipts were as the assessee is a registered charitable trust duly registered by Registrar Public Charitable Trust, Guna vide its order dated 20.08.2002 and hence provisions of section 1678 are not applicable in assessee's case. Hence, tax so computed on gross total income under Maximum marginal rate is incorrect.
6. That the authorities below failed to invoke the doctrine of substance over form, leading to taxation of a registered public charitable trust's income purely on the basis of form-filing lapse, despite the genuineness and legality of the exemption claim being fully verifiable from the return and supporting documents. 7. That the matter may be remanded back to the file of AO with a direction that the income shown under the head income from other sources should be verified and if found income from charitable activity, tax liability should be derived after allowing benefit of section 11 of Income Tax Act, 1961. 8. That the Ld. CIT(A) erred in confirming the tax demand on Gross Total Income without providing relief of revenue and capital expenditure once the assessee is registered u/s 12AA of Income Tax Act, 1961. 9. That the resulting tax demand of 89,74,690 is oppressive, arbitrary, and detrimental to the functioning of a public trust, undermining the objective of tax exemption granted to genuine charitable institutions……………….”
Perused the records and heard learned AR for assessee and learned Sr.
DR for revenue.
Learned AR for assessee has submitted that the assessee is a charitable trust registered u/s. 12A of the Act and is eligible for exemption u/s. 11 of the Act. During the year under consideration, a clerical mistake has 3 | P a g e incurred due to new utility on the portal. The income was mistakenly shown under another head “income from other sources”, due to clerical mistake, which led the aforesaid demand, having been raised. Learned CIT(Appeals) has also rejected assessee’s appeal, which was filed against dismissal of rectification application u/s. 154 of the Act, merely on the ground that there is no error apparent on record. Ld. AR has thus requested that matter may be restored back to the Assessing Officer for verifying the income shown under the head “income from other sources” and if found for charitable activities, tax liability may be determined after allowing benefit of section 11 of the Act.
Learned DR has submitted that the assessee did not claim exemption while filing income tax return, hence, there is no error committed by any of the revenue authorities. Supported the impugned order.
A very small issue is involved in the instant matter. Assessee, while filing the income tax return, has mistakenly shown the receipts/income of the trust under the wrong head “income from other sources”, which has been treated by the revenue as assessee’s income and tax liability has accordingly been calculated. It is settled law that the object of prescribing procedure is to advance the cause of justice. Justice is the goal of jurisprudence. Procedural law is not to be tyrant but a servant not an obstruction but an aid to justice. A procedural prescription is the hand maid and not the mistress, lubricant, not a resistance in the administration of justice. Technical justice cannot take place 4 | P a g e of substantial justice. Hence, in such circumstances, we deem it just and proper to restore the matter back to the file of Assessing Officer with a direction that the Assessing Officer shall examine as to whether the impugned income is the exempt income as claimed to have been received from public charitable trust etc. If after examination/verification, learned Assessing Officer finds that such receipts/ income are exempt income u/s. 11 of the Act, he will give credit of such exemption to the assessee and pass an order afresh in accordance with law, ignoring all clerical mistakes/technical errors for doing substantial justice.
In the result, appeal is allowed for statistical purposes.
Order pronounced in the open court on 28.10.2025.