Balaji Educational Welfare Society Vs Assessing Officer (ITAT Lucknow)
Wrong Section Selected in ITR – Exemption u/s 10(23C)(iiiad) Cannot Be Denied Mechanically – Matter Remanded to AO – ITAT Lucknow
In this case, the assessee-society running educational institutions filed its return claiming exemption but mistakenly selected u/s 10(23C)(iv) instead of the correct provision u/s 10(23C)(iiiad). During processing u/s 143(1), CPC disallowed the exemption and made addition of ₹94.27 lakh. Rectification u/s 154 and appeal before CIT(A) were rejected on the ground that incorrect claim in ITR cannot be altered through rectification or appellate proceedings.
Before ITAT, the assessee argued that the mistake was purely inadvertent and relied on earlier judicial precedents and CBDT Circular No.14 of 1955 stating that the department should assist taxpayers in granting legitimate reliefs. It was also submitted that exemption eligibility could be examined on merits by AO.
The Tribunal observed that processing u/s 143(1) is a mechanical computerized process, whereas orders u/s 154 and appellate proceedings require proper application of mind. Authorities cannot simply follow CPC adjustments without examining facts and materials on record. ITAT held that denial of exemption merely due to wrong section coding in ITR is not justified, especially when claim was raised during rectification and appeal proceedings.
Relying on CBDT Circular No.14 (XL-35) of 1955 and earlier ITAT decisions, the Tribunal set aside the CIT(A) order and remanded the issue to AO to examine eligibility of exemption u/s 10(23C)(iiiad) on merits after granting opportunity of hearing. The appeal was partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT LUCKNOW
