Case Law Details
National P.G. College Bhongaon Vs ITO (ITAT Agra)
Educational Institution’s Tax Exemption Cannot Be Denied for Typographical Error in Return; ITAT Allows Correction of Wrong Income Disclosure That Triggered ₹3.84 Crore Tax Demand; System-Generated Tax Demand Set Aside After ITAT Finds Exempt Income Wrongly Reported; ITAT Holds Clerical Mistake in ITR Does Not Override Exemption Under Section 10(23C)(iiiab).
The Income Tax Appellate Tribunal (ITAT), Agra Bench, allowed an appeal filed by an educational institution against the order of the Commissioner of Income Tax (Appeals), NFAC, for Assessment Year 2016-17. The dispute arose after a tax demand of Rs.3.84 crore was generated despite the Assessing Officer not drawing any adverse inference during reassessment proceedings.
The case was reopened under Section 148 based on information flagged through the ITBA system and Insight Portal regarding cash deposits. In response, the assessee filed a return declaring nil income and submitted explanations, bank statements, fee registers, ITC details, and related documents. After examining the records, the Assessing Officer found the submissions satisfactory and finalized the assessment without adverse findings. However, while issuing the tax demand under Section 156, a demand of Rs.3,84,45,459 was raised.
Before the CIT(A), the assessee submitted that while filing the return under Section 148, a mistake occurred whereby exempt income under Section 10(23C)(iiiab) amounting to Rs.3.97 crore was wrongly disclosed under “income from other sources” along with actual income from other sources of Rs.6.81 lakh. The assessee contended that this was a typographical error. The CIT(A) rejected the claim on the grounds that the assessee had not filed an original return under Section 139(1), had not filed a revised return, and had not brought the mistake to the notice of the Assessing Officer during assessment proceedings. Reliance was also placed on the Supreme Court decision in Goetze (India) Ltd. vs. CIT.
Before the Tribunal, the assessee argued that it existed solely for educational purposes, received substantial government grants, and was eligible for exemption under Section 10(23C)(iiiab). It was further submitted that the incorrect disclosure in the return was an inadvertent clerical error.
The Tribunal observed that the Assessing Officer had not drawn any adverse view on the income declared and that the tax demand arose because the system-generated computation included exempt income. ITAT held that the assessee was substantially financed by the Government and eligible for exemption under Section 10(23C)(iiiab). The Tribunal directed the Assessing Officer to verify the claim and rectify the mistake, including through proceedings under Section 154 if necessary. The appeal was allowed for statistical purposes and remitted back for limited rectification.
FULL TEXT OF THE ORDER OF ITAT AGRA
The assessee has filed appeal against the order of the Learned Commissioner of Income-Tax (Appeals)/ NFAC, Delhi [“Ld. CIT(A)”, for short] dated 21.05.2025 for the Assessment Year 2016-17.
2. The Brief facts of the case are, the Assessing Officer had certain information through the ITBA system and Insight Portal. The same was flagged by the Directorate of Income Tax (Systems), CBDT in accordance with the risk management strategy formulated by the Board. Accordingly, the notice under Section 148 of the Act was issued and served on the assessee. In response, the assessee filed its return of income for Assessment Year 2016–17 on 09.04.2023, declaring total income at Nil. Subsequently, a notice under Section 142(1) was issued and duly served upon the assessee. In response, the assessee filed detailed submissions along with explanation letters, bank statements, bank receipts, fee-register, ITC details, etc. After considering the same, the Assessing Officer recorded that it appears satisfactory, on the basis of submissions and documentary evidence furnished by the assessee during the course of assessment proceedings, no adverse inference was drawn on the reasons of the case. The Assessing Officer after considering the submissions of the assessee, no adverse inference drawn by finalizing the assessment order. However, while determining the tax demand under Section 156, there is a demand of Rs. 3,84,45,459/- was raised against the assessee.
3. Aggrieved with the said order, the assessee preferred an appeal before the learned CIT(A), NFAC, Delhi, and filed detailed submissions. After submitting the information on assessment records, the assessee also submitted that while filing returns of income u/s 148 of the Act, it made a mistake wherein it is supposed to disclose income from other sources of Rs. 6,81,898/-, but instead, it disclosed Rs. 4,04,18,941/-, (exempt income under Section 10(23C)(iiiab) of the Act amounting to Rs. 3,97,36,523/- along with income from other sources as stated above). After considering the submissions of the assessee, the learned CIT(A) rejected the contentions of the assessee, observed that the assessee had not filed its return of income under Section 139(1) of the Act, and since assessee has not filed original return of income, Ld. CIT(A) further observed that the mistake was not brought to the notice of the Assessing Officer during the assessment proceedings. The rectification of mistake at the assessment stage would have been the proper form or the assessee could have filed a revised return of income. Further, he observed that it is a well-settled principle of law that any claim of exemption under Section 10(23C)(iiiab) of the Act is subject to claim by filing timely return of income under Section 139(1) of the Act or via such revised return of income. Since the assessee had not filed any such claim for exemption under Section 139(1), thus, there are no provisions under the Income Tax Act to make amendment in the return of income without revising it. He also relied upon the decision in the case of Goetze (India) Ltd. vs. CIT (2006) 284 ITR 323 (SC) and rejected the submissions of the assessee.
4. Aggrieved with the above order, the assessee is in appeal before us, raising the following grounds.
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5. At the time of hearing, the learned AR brought to our notice the relevant facts on record and brought to our notice, the Income and Expenditure Account for the year under consideration which is placed at page 46 of the paper book and he drawn our attention to the fact that the assessee receives substantial grants from the Government and that the case of the assessee squarely falls under Section 10(23C)(iiiab) of the Act. He further drew our attention to page 24 of the paper book, wherein the assessee, by mistake, disclosed exempt income along with income from other sources in its return of income. He submitted that this was a typographical error committed by the assessee while filing of the return of income. He submitted that the Assessing Officer had not inferred any adverse view in this case. The mistake was apparent on record. He contended that the appellate authorities have the power to correct such an error and prayed that the matter may be remitted back to the Assessing Officer for appropriate action.
6. On the other hand, the learned DR relied upon the findings of the learned CIT(A) and the decision in the case of Goetze (India) Ltd. vs. CIT (1992) 198 ITR 297.
7. Considered the rival submissions and the material placed on record. The assessee is an educational institution and it has not filed any original return of income for the year under consideration. Based on the information available with the Assessing Officer, he observed that the assessee had deposited cash during the year under consideration. Based on the above information, the case of the assessee was reopened and during the assessment proceedings, based on the information submitted by the assessee and the Assessing Officer has not drawn any adverse views on the income declared by the assessee. However, in the computation sheet, the system generated a tax demand which includes exemption claimed by the assessee under Section 10(23C)(iiiab) of the Act.
7.1 During first appellate proceedings, the assessee brought to the notice of the learned CIT(A) that, while filing the return under Section 148 of the Act, the assessee by mistake disclosed at the column income from Other Sources including the exempt income u/s 10(23C) (iiiab) of the Act. The learned CIT(A) refused to give any direction for the reason that the assessee has not filed original return of income nor filed any revised return of income. After considering the facts on record, we are of the view that there is merit in the claim of the assessee that the assessee is existing solely for educational purposes and is substantially financed by the Government. Therefore, the assessee is eligible to claim exemption under Section 10(23C) (iiiab) of the Act.
8. Therefore, we direct the Assessing Officer to verify the same and rectify the above mistake. If required the assessing officer may take a rectification application u/s 154 of the Act from the assessee and do rectification as per law.
9. In the result, the appeal filed by the assessee is allowed for statistical purposes, with the matter remitted back to the file of the Assessing Officer for limited purposes of rectification of the above inadvertent mistake.
Order pronounced in the open court on this 09th April, 2026.
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