Youthreach Vs ITO (ITAT Delhi)
Delhi ITAT: Genuine Reporting Error in Form 10B Should Not Defeat Section 11 Exemption; AO Directed to Consider Revised Form
The Delhi ITAT held that a genuine reporting error in Form 10B should not deprive a charitable trust of exemption under section 11. Setting aside the orders passed under sections 143(3) and 154, the Tribunal directed the Assessing Officer to consider the revised Form 10B and determine the correct taxable income instead of denying relief on a technical mistake.
The assessee, a charitable organisation, had filed its return in ITR-7, along with Form 10B and Form 10. While processing the return under section 143(1), the CPC made an adjustment of ₹47 lakh without issuing the mandatory show-cause notice contemplated by the first proviso to section 143(1A). The assessee subsequently sought rectification under section 154, explaining that due to an inadvertent error the amount accumulated under section 11(2) had been disclosed in the wrong column of the return, despite Form 10 having been duly filed. The rectification request was rejected on the ground that the issue required a long-drawn process of reasoning.
Before the Tribunal, the assessee submitted that the mistake was purely clerical and had also filed a revised Form 10B correcting the reporting error. It further contended that the adjustment under section 143(1) was itself invalid for want of the mandatory opportunity prescribed under the first proviso to section 143(1A).
The Tribunal observed that the proceedings under section 143(1) were vitiated because the mandatory procedure under the first proviso to section 143(1A) had not been followed. It further held that, where the assessee had claimed that the error was due to an oversight and had even furnished an indemnity bond, the Assessing Officer ought to have appropriately considered the rectification request instead of adopting a purely technical approach.
Accordingly, the ITAT set aside both the orders and restored the matter to the Assessing Officer with directions to consider the revised Form 10B dated 21.05.2026, carry out the rectification if warranted, and recompute the correct income so that the assessee is not unduly penalised for an inadvertent reporting error. The appeals were partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This is a batch of two appeals for AY 2020-21 of the same Assessee. For the sake of convenience, both these appeals are being disposed of through a single order.
