New Surya Public School Vs DCIT (ITAT Delhi)
Procedural Lapse ≠ Tax Punishment: Filing ITR-7 Instead of ITR-5 Can’t Wipe Out Genuine Expenditure-Wrong ITR Form Is a Curable Defect: Substance Over Form
Delhi ITAT ‘E’ Bench in New Surya Public School vs DCIT, Ward-31(4), Delhi (ITA No.5082/Del/2025, AY 2018-19, order dated 24-12-2025) set aside the order of CIT(A) and restored the matter to the Assessing Officer for de-novo assessment, holding that mere filing of return in a wrong ITR form cannot result in automatic disallowance of otherwise genuine expenditure.
Assessee, a society running an educational institution, filed its return declaring income of ₹1.53 lakh. CPC, Bengaluru while processing the return u/s 143(1) disallowed expenditure of ₹62.71 lakh, solely on the ground that the return was filed in ITR-7 instead of ITR-5. CIT(A) upheld the CPC action and dismissed the appeal without examining the allowability of expenditure on merits.
ITAT held that:
- Selection of an incorrect ITR form is a procedural / technical lapse, not a substantive default
- The assessee had not claimed exemption u/s 11 or 12, and had disclosed all receipts and expenditure
- Only lawful tax can be collected; authorities are not meant to punish assessees for bona fide mistakes
- Substance must prevail over form, and procedural technicalities cannot defeat substantive rights
Relying on coordinate bench decisions including Care Foundation Village vs ITO (Exemption) and Kolkata ITAT rulings, Tribunal directed the AO to reassess the income as per ITR-5, after allowing the assessee to file financial statements and data in the correct form, and to pass a fresh speaking order after granting proper opportunity of hearing.
Accordingly, the appeal was allowed for statistical purposes, with all issues restored to the AO.
Key takeaway: Wrong ITR form is a curable procedural defect. Genuine business or school expenditure cannot be disallowed mechanically for such lapse—substantive justice prevails over technical form.
FULL TEXT OF THE ORDER OF ITAT DELHI
