Case Law Details
Gurudeva Seva Samsthe Vs ITO (ITAT Bangalore)
Genuine Application of Income Cannot Be Denied for Mere Reporting Mismatch in Return
The Bangalore ITAT held that a charitable trust’s claim of capital expenditure as application of income cannot be disallowed merely because of a mismatch in figures reported in different schedules of the return of income. The Tribunal observed that when the expenditure is supported by documentary evidence and its genuineness is not disputed, a technical reporting inconsistency cannot be the sole basis for denial of the claim.
In this case, the assessee-trust claimed capital expenditure of ₹29.45 lakh as application of income. While processing the return under section 143(1), CPC noticed that different amounts of capital expenditure were reflected in different parts of the return and consequently disallowed the claim. The subsequent rectification application under section 154 was also rejected, and the CIT(A) upheld the adjustment.
Before the Tribunal, the assessee demonstrated that the expenditure related to acquisition of capital assets, was fully supported by records, and had never been questioned on merits by the Revenue authorities. The Tribunal noted that neither the CPC nor the CIT(A) had disputed the actual incurrence of expenditure, the acquisition of assets, or the eligibility of such expenditure to qualify as application of income. The only basis for disallowance was the mismatch in reporting.
The Tribunal held that while a discrepancy in figures may warrant verification, it cannot justify outright rejection of an otherwise valid claim. Since the assessee had explained the mismatch and furnished supporting evidence during rectification and appellate proceedings, the authorities erred in rejecting the claim on purely technical grounds. Accordingly, the Tribunal set aside the orders of the CPC and CIT(A) and directed that the capital expenditure be allowed as application of income.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The present appeal filed by the assessee pertaining to A.Y. 2019-20 is directed against the order of the learned Commissioner of Income Tax (Appeal) (hereafter- the learned CIT(A)) under section 250 of the Income Tax Act, 1961 (hereafter- the Act) vide order dated 22/12/2025.
2. The assessee filed its return of income claiming, inter alia, capital expenditure of ₹29,45,535 as application of income. While processing the return under section 143(1) of the Act, the CPC issued an intimation disallowing the said claim. The CPC noticed that different amounts of capital expenditure had been disclosed in different parts of the return of income. Since the figure of ₹29,45,535 claimed as application of income did not tally with the amount reflected elsewhere in the return, the CPC treated the claim as inadmissible and made an adjustment under section 143(1) of the Act. Subsequently, the assessee filed an application under section 154 of the Act pointing out that the claim was duly supported by records and that the discrepancy was only a reporting mismatch. However, the CPC rejected the rectification application and maintained the disallowance.
3. Aggrieved by the CPC intimation issued under section 143(1) of the Act and the order passed under section 154 of the Act, the assessee preferred an appeal before the learned CIT(A) who concurred with the view taken by the CPC and observed that there was inconsistency in the figures disclosed in the return of income. According to the learned CIT(A), since different amounts were reflected in different schedules, the assessee had failed to establish the correctness of its claim through the return as filed. On that basis, the learned CIT(A) upheld the adjustment made in the CPC intimation under section 143(1) of the Act.
4. Being aggrieved by the order of ld. CIT-A, the assessee is in appeal before us.
5. The ld. AR before us filed a paper book running from pages 1 to 79 and strongly challenged the orders of the lower authorities. Referring to pages 21 to 25 of the paper book, the learned AR submitted that the assessee had incurred capital expenditure amounting to ₹29,45,535 towards acquisition of capital assets and that the same constituted application of income for charitable purposes. It was argued that the expenditure was fully supported by documentary evidence and that neither the CPC nor the learned CIT(A) had disputed the genuineness of the expenditure. The learned AR further submitted that the details of the capital expenditure were available on record and were specifically brought to the notice of the Revenue authorities through the rectification application filed under section 154 of the Act. According to the learned AR, a mere mismatch in figures appearing in different parts of the return could not be a valid ground for denying an otherwise allowable claim.
5.1 The learned AR contended that the adjustment made in the CPC intimation under section 143(1) of the Act was unjustified because the issue required examination of supporting records and was not a case of an apparent and undisputed error. Once documentary evidence substantiating the claim was available on record, the authorities were required to consider the claim on merits rather than rejecting it on technical grounds.
6. Per contra, the learned Departmental Representative (DR) relied upon the CPC intimation, the order passed under section 154, and the order of the learned CIT(A). The learned DR submitted that the assessee itself had furnished inconsistent figures in the return of income and, therefore, the CPC was justified in making the adjustment while processing the return under section 143(1) of the Act. It was argued that when different amounts were disclosed in different schedules of the return, the claim lacked certainty and the authorities below were correct in refusing the benefit claimed by the assessee.
7. We have considered the rival submissions and examined the materials available on record. It noted that the sole reason for disallowance in the CPC intimation under section 143(1) of the Act, the order under section 154 of the Act, and the order of the learned CIT(A) was the mismatch in the figures of capital expenditure disclosed in the return of income. We note that the authorities below had not disputed the actual incurrence of expenditure, the acquisition of capital assets, or the eligibility of such expenditure to be treated as application of income. Significantly, no adverse finding had been recorded regarding the genuineness of the supporting documents produced by the assessee.
7.1 In this regard, we hold that a legitimate claim supported by documentary evidence cannot be denied merely because of a reporting inconsistency in the return of income. The discrepancy in figures may justify verification, but it cannot lead to outright rejection of the claim when the expenditure itself is not disputed. We further note that the assessee had explained the discrepancy and had furnished supporting evidence both during the rectification proceedings and before the appellate authorities.
7.2 In these circumstances, we find that the authorities below had erred in denying the claim solely on technical grounds without examining the substance of the matter. Since the capital expenditure incurred by the assessee was duly supported by evidence and qualified as application of income, the disallowance made in the CPC intimation under section 143(1) of the Act, sustained in the order under section 154 of the Act and confirmed by the learned CIT(A), we hold that the disallowance is unsustainable. Accordingly, we set aside the order of the learned CIT(A) and directed the Assessing Officer/CPC to allow the assessee’s claim of capital expenditure as application of income. Hence, the ground of appeal of the assessee is therefore allowed.
8. In the result, the appeal of the assessee is hereby allowed.
Order pronounced in court on 16th day of June, 2026
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