AO Directed to Excuse Mistaken Exemption Selection in ITR
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, ruled in favour of a Charitable Trust, ordering the Assessing Officer to rectify a clerical mistake and grant the tax exemptions under sections 11 and 12 of the Income Tax Act.
The assessee, Astitva Charitable Trust, filed its income tax return (ITR) for the assessment year 2018-19, declaring nil income and claiming exemption under sections 11 and 12 of the Income Tax Act. However, an error occurred while filing the return. The assessee wrongly selected section 10(23C)(iv) in the ITR form instead of the correct provisions under section 12AA. As a result, the Centralised Processing Centre (CPC) determined the income at Rs 56,17,029, and demanded a tax of Rs 23,49,300.
When the assessee came to know about this, it filed a rectification petition on 14.17.2024 under section 154 explaining that it was a data entry error in the return and was purely unintentional, but the Assessing Officer rejected the rectification petition, claiming that the petition was beyond the time limit of four years under section 154(7) of the Act.
The petitioner appealed before the CIT(A), submitting that the rectification application was filed within the extended time limit given by the Supreme Court during COVID–19. The assessee trust also contended that the Assessing Officer should have helped rectify the error as mandated by the CBDT Circular No. 14 (XL-35) dated 11.04.1955. However, the CIT(A) rejected the appeal, holding that the said circular of CBDT was not applicable in the assessee’s case. Therefore, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT) Ahmedabad.
The assessee explained that the error occurred due to the incorrect selection of the relevant exemption field by the representative handling the e-filing process. Additionally, the representative also failed to respond to the electronic notice issued by CPC. The assessee claimed that the error was a clerical mistake and was unintentional.
The ITAT analysed the facts and agreed with the assessee that the mistake was genuine and clerical. It pointed out that the trust was properly registered under section 12AA and had been claiming exemptions consistently in previous years. Since the mistake was genuine and bona fide, the ITAT decided to set aside the order of the CIT(A) and directed the Assessing Officer to condone the default and check whether the exemption under sections 11 and 12 was given to the assessee in the earlier years. The AO was also directed to pass a speaking order after giving the assessee a proper hearing.