Shivaganga Yoga Centre Vs ITO (Exemptions) (ITAT Bangalore)
Clerical Drop-Down Lapse Can’t Kill Exemption: ITAT Allows 10(23C)(iiiad) Claim, Quashes CPC Adjustment
The Bangalore SMC Bench of the ITAT allowed the appeal of a charitable trust and held that denial of exemption u/s 10(23C)(iiiad) merely for non-selection of a drop-down option / non-filing of Schedule IE-4 is unsustainable, as the issue is debatable and beyond the scope of adjustment u/s 143(1).
The Assessee, running a Yoga Centre, filed its return within the due date claiming exemption of ₹8.82 lakh u/s 10(23C)(iiiad). CPC, while processing the return u/s 143(1), denied the exemption on the ground that:
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the relevant drop-down option for section 10(23C)(iiiad) was not selected in the return, and
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Schedule IE-4 was not filed.
A rectification application u/s 154 was rejected on the footing that the issue was debatable, and the CIT(A) upheld the rejection.
The Tribunal observed that:
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If an issue is debatable, it cannot be adjusted at the processing stage u/s 143(1).
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The denial was not due to any arithmetical inconsistency or incorrect claim apparent from the return, but only due to a technical/clerical lapse in selecting a drop-down menu, despite the substantive eligibility being evident on record.
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CPC itself accepted the return even without mandatory schedules, which shows the issue is not a patent error.
The Tribunal further held that procedural defects cannot override substantive exemption, especially when the receipts were admittedly below ₹1 crore and audit details were available. The AO was directed to verify the facts and allow exemption either u/s 10(23C)(iiiad) or, alternatively, u/s 11, as may be applicable in law.
Accordingly, the appeal was allowed for statistical purposes with directions to grant the lawful exemption.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
