The Delhi Bench of Income Tax Appellate Tribunal has held that assessee could not be penalized by denying the exemption for mere technical violation and allow exemption u/s 10(23B).
The appellant, Barapur Gramodyog Vikas Samiti, is engaged in the business of production, sale, etc. of Khadi and Products of Village Industries and on behalf of that appellant claimed exemption u/s 10(23B) of the Act.
The AO denied the exemption claimed by the assessee u/s 10(23B) of the Act as the approval was granted for more than three assessment years and the condition for claiming exemption u/s 10(23B) was not fulfilled. The CIT(Appeals) sustained the order of the AO against which appeal filed before ITAT.
The Tribunal observed that the certificate issued by Khadi & Village Industries Commission clearly show that it relates to the period from 11.06.2012 to 31.03.2016 and followed by the letter issued by the Commission to the ITO, clearly shows that the assessee is entitled to claim exemption u/s 10(23B) of the Act.
The Coram of Mr. Challa Nagendra Prasad, Judicial Member further observed that the reason for denying the exemption by the AO is that the Commission has given certificate to the assessee for more than three years. It is pertinent to note that the time period for which the certificate has to be granted is not within the control of the assessee. In any case it is only a technical violation for which the assessee could not be penalized by denying the exemption otherwise allowable to the assessee.
The Tribunal has held that “I hold that the assessee is entitled for exemption u/s 10(23B) of the Act. Accordingly, the Assessing Officer is directed to allow the claim for exemption u/s 10(23B) as claimed by the assessee”.
Mr. Om Prakash appeared on behalf of the revenue.
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