Habrol Cooperative Agricultural Service Society Vs ITO (ITAT Chandigarh)
Chandigarh, India – The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, has set aside an order disallowing a deduction claimed by Habrol Cooperative Agricultural Service Society. The ruling, issued on September 26, 2024, emphasized that a legitimate deduction should not be denied solely due to a clerical error in the tax return, affirming the principle that an assessee should not be over-assessed for inadvertent mistakes.
The case involved Habrol Cooperative Agricultural Service Society, a cooperative operating in a remote village in Himachal Pradesh. The society provides banking and credit facilities to its members, a service that entitles it to a deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The society consistently claimed and was allowed this deduction in previous assessment years without dispute.
For the Assessment Year 2018-19, however, a critical error occurred. According to the society, which stated its members were uneducated agriculturists reliant on their counsel for tax matters, their representative mistakenly claimed the deduction under Section 80P(2)(c) instead of the correct Section 80P(2)(a)(i). This led to the deduction being disallowed during processing under Section 143(1) of the Income Tax Act.
The society attempted to rectify the error by filing an application under Section 154 and a rectified return, but these efforts were unsuccessful. Subsequently, an appeal was filed before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A), upholding the disallowance, stated that a valid claim must be made in the return of income, and since the deduction was claimed under the wrong section, it could not be allowed. This prompted the society to appeal to the ITAT.
