ITAT Deletes Addition as Income Was Disclosed Despite Wrong Schedule Entry

Rinchen Zangpo Endowment Society Vs ITO (ITAT Delhi)

In the case of Rinchen Zangpo Endowment Society Vs ITO, the appeal arose from an order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] dated 15.01.2026 for Assessment Year 2021–22. The assessee, a registered charitable society, had filed its return of income declaring NIL income after claiming exemption under Sections 11 and 12 of the Income Tax Act, 1961. During the relevant year, the assessee received foreign contributions amounting to ₹10,30,324, which were duly recorded in its books of account and also reflected in the return of income.

However, while filing the return, the assessee inadvertently disclosed the foreign contribution under the wrong schedule. Instead of reporting it in ‘Schedule-VC’, the amount was shown in ‘Schedule-AI’. During processing under Section 143(1), the Central Processing Centre (CPC) identified this discrepancy and treated it as non-disclosure in the appropriate schedule, resulting in an addition of ₹10,30,324 to the income.

The assessee contested the addition before the CIT(A), explaining that the foreign contribution had not been suppressed and was fully disclosed in both the books of account and the return of income, albeit under an incorrect schedule. The CIT(A) acknowledged that the amount was disclosed but upheld the addition solely on the ground that the assessee failed to correct the error by filing a revised return or seeking condonation.

Aggrieved by this decision, the assessee appealed before the Income Tax Appellate Tribunal (ITAT). The assessee’s counsel argued that the case involved only an inadvertent reporting error and not concealment of income. It was further submitted that the department should not take advantage of such mistakes to impose tax liability where none was actually due. Reliance was placed on CBDT Circular No. 14 (XL-35) dated 11.04.1955, which clarifies that the tax authorities must not collect more tax than what is legitimately due and should not exploit an assessee’s ignorance.

The Revenue, on the other hand, supported the order of the CIT(A) and argued for dismissal of the appeal.

After examining the facts and hearing both parties, the ITAT observed that it was an undisputed fact that the foreign contribution had been properly accounted for in the books and disclosed in the return of income. The only issue was that the disclosure was made in an incorrect schedule. The Tribunal noted that there was no suppression or concealment of income by the assessee.

The ITAT held that merely placing an amount in the wrong schedule of the return cannot justify making an addition, particularly when the income has already been disclosed. It further observed that the CIT(A) erred in sustaining the addition solely on the technical ground that a revised return was not filed. The Tribunal emphasised that procedural lapses or inadvertent mistakes should not result in taxation beyond what is legally due.

Relying on the CBDT Circular, the Tribunal reiterated the principle that the Revenue cannot collect taxes in excess of the lawful liability by taking advantage of an assessee’s ignorance or clerical error. Accordingly, the ITAT deleted the addition of ₹10,30,324, set aside the order of the CIT(A), and allowed the appeal of the assessee.

The order was pronounced in open court on 25.03.2026.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), [Addl/JCIT(A)], Kochi [for short CIT(A)] dated 15.01.2026, for assessment year 2021-22.

2. Shri R.S. Singhvi, CA appearing on behalf of the assessee submits that the assessee is a registered charitable society. The assessee filed its return of income for assessment year 2021-22 declaring NIL income after claiming exemption u/s. 11 & 12 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). He further submits that during the period relevant to assessment year 2021-22, the assessee had received foreign contribution to the extent of Rs. 10,30,324/-. The said foreign contribution was duly accounted in the books of account and was also shown in the computation of income. However, while filing the return of income, the assessee inadvertently failed to show foreign contribution in ‘Schedule-VC’. The CPC while processing the return of income u/s. 143(1) of the Act raised a query and pointed an error committed by the assessee with regard to non-declaration of foreign contribution in Schedule-VC. The Ld. AR further submits that assessee explained that the amount of foreign contribution has been duly reflected in the books as well as return of income, however, in the return of income, it was inadvertently shown at wrong place. The CPC completed the assessment after adding back the foreign contribution of Rs. 10,30,324/-

3. The assessee carried the issue in appeal before the CIT(A). The CIT(A) records that the assessee has reflected the foreign contribution in the return of income in a wrong Schedule, but upholds the addition made by the CPC. The CIT(A) rejected contention of the assessee solely on the ground that the assessee should have filed revised return.

4. The ld. Counsel submits that it is not a case where the assessee has not reflected foreign contribution. Referring to CBDT’s Circular No. 14(XL-35) dated 11.4.1955, he submits that the department cannot collect taxes more than what is due. The said Circular further clarifies that the Department should not take advantage of an assessee’s ignorance to collect more tax than what is legitimately due from him.

5. Per contra, Shri Manoj Kumar, Sr. DR representing the Revenue defended the impugned order and prayed for dismissal of the appeal of assessee.

6. Both sides heard. Orders of the authorities below examined. The solitary issue in the instant appeal is with regard to addition of Rs. 10,30,324/- in respect of foreign contribution received by the assessee. It is an undisputed fact that the assessee has accounted foreign contribution in his books of account and has also reflected the same in the return of income filed for assessment year 2021-22. However, in the return of income, the assessee has shown foreign contribution in wrong Schedule i.e. instead of ‘Schedule-VC’, entire contribution has been reflected in ‘Schedule-AI’. It is not a case where the assessee has suppressed foreign contribution. The fact that the assessee has disclosed foreign contribution in the return of income is also accepted by the CIT(A), but the claim has been rejected solely for the reason that the assessee should have rectified the claim by filing revised return/belated revised return with an application for condonation before the appropriate authority. Considering entire facts of the case, I am of the considered view that the CIT(A) has erred in sustaining addition on account of foreign contribution of the assessee. Merely for the reason that in the return of income, the amount of foreign contribution is reflected at a place other than the designated place, cannot be a reason to sustain the addition. The Revenue cannot collect tax more than what is due from the assessee, taking advantage of assessee’s ignorance or inadvertent mistake. Hence, addition of Rs. 10,30,324/- is deleted, the impugned order is set aside and appeal of the assessee is allowed.

Order pronounced in the Open Court on 25/03/2026.