Since 1984 Trust Was Exempt, Technical ITR Error Not Enough to Deny: ITAT
The assessee, a recognised provident fund trust, filed NIL income returns for AYs 2014–15 and 2015–16, claiming exemption under Sections 11 and 10. However, the CPC, while processing the returns under Section 143(1), disallowed the exemption under Section 10(25)(ii) on the ground that the specific sub-clause was not mentioned in the appropriate ITR column. The assessee’s subsequent rectification applications under Section 154 were also rejected, based on non-mention of the claim under Section 10(25)(ii) and lack of registration under Section 12A. The CIT(A) upheld the CPC’s position.
The matter had earlier been remanded by the ITAT (order dated 26.08.2022) for fresh adjudication, with directions to consider the facts and precedents. However, in the second round, the CIT(A) again dismissed the claim on similar grounds. Aggrieved, the assessee then appealed before the ITAT once again.
Main issue: Whether the exemption under Section 10(25)(ii) can be denied merely because the ITR reflected the exemption in the wrong column, despite the assessee being a long-standing recognised provident fund trust.
ITAT’s Decision: The ITAT while condoning a delay of 68 days in filing the appeals, held on merits that the assessee had properly claimed exemption under Section 10 in the ITR; however, because of a clerical error, the sub-section was reflected in Column 14 of Part B of ITR-7 rather than Column 16. According to the Tribunal, a claim that has been regularly granted in previous years shouldn’t be rejected by a small column mismatch. Since 1984, the Trust has been recognised in accordance with Rule 3(1) of the Fourth Schedule.
The ITAT ruled that legitimate claims cannot be denied merely due to technical form errors. It emphasized the quasi-judicial, non-adversarial nature of tax appellate proceedings, reiterating that the Tribunal can grant relief even on issues not properly raised before lower authorities. Thus, the ITAT allowed the exemption under Section 10(25)(ii) for both years, setting aside the orders of the CIT(A).
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