Wrong ITR Form Not Fatal – Family Trust Not Taxable at MMR: ITAT Agra

Lipi Jain Family Trust Vs ITO (Exemption) (ITAT Agra)

Wrong ITR Form, But No Punishment: Tribunal Accepts Bona Fide Error -Private Family Trust with Single Beneficiary Not Taxable at MMR

Background

• Assessee: Lipi Jain Family Trust, a private specific family trust created by will of late Shri Babulal Jain for sole beneficiary Ms. Lipi Jain.
• Original return filed on 18.02.2017 in ITR-7 (meant for charitable trusts) instead of ITR-5.
• CPC processed return (19.10.2017) & taxed income at Maximum Marginal Rate (MMR).
• Revised return later filed in correct form, but CPC ignored it, saying original was already processed.
• CIT(A) – Dismissed appeal, holding revised return invalid since filed after processing of original return u/s 143(1) & Upheld MMR taxation.
• Appeal before ITAT: Assessee argued it was a private family trust with only one beneficiary having no independent taxable income; hence income should be taxed at normal rates under proviso to s.164(1), not at MMR.

Tribunal’s Findings

• Mistaken filing in ITR-7 was a bona fide error by old consultant.
• Revised return in ITR-5 + rectification application was valid.
• Similar issue already decided in assessee’s favour in AY 2016-17 (ITA No.78/AGR/2025, order dated 29.05.2025).
• Tribunal in that year held:

Private family trust created solely for specified beneficiaries not having taxable income cannot be taxed at MMR.