The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) has ruled that the deduction under Section 80C of Income Tax Act, 1961 cannot be denied solely due to incorrect filing in ITR Form-5 instead of ITR Form-2.
Pashiben Prajapati Family Trust (assessee) filed its income tax return for the assessment year 2021-22 using Form ITR-5 instead of the correct form, ITR-2, due to a wrong PAN number. The assessee had been filing its income tax return in ITR-2 for previous years but due to changes in the e-portal and also the assessee mistakenly put the wrong PAN number where the fourth character was T instead of A, the trust was forced to file using ITR-5 or ITR-7.
Due to wrong filing, the trust was taxed at the maximum marginal rate (42.17%) MMR and was denied the benefit of Section 80C deductions. The assessee filed an appeal before the Commissioner of Income Tax (Appeals) which upheld the Assessing Officer’s (AO) decision to tax the trust at MMR under Section 164(1) read with Section 167B(2)(i).
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Aggrieved by the CIT(A) order, the assessee appealed before the ITAT, Ahmedabad where the assessee’s counsel submitted that the trust had historically filed ITR-2 and received deductions under Chapter VI-A, and the incorrect filing in ITR-5 was due to technical issues with the PAN. The trust should be allowed deductions under Section 80C (Rs. 1,50,000) and other benefits available to individual assessees.
The revenue counsel relied on the CIT(A) order and argued that the assessee had wrongly filed the income tax return in ITR-5. The revenue further submitted that the shares of the beneficiaries are indeterminate and unknown so the income must be taxed at MMR.
The single bench led by Ramit Kochar, an Accountant Member heard both sides. The tribunal observed that incorrect filing in ITR-5 should not result in denial of benefits like Section 80C deductions, as the trust had been filing correctly in prior years.
The tribunal stated that the prescribed form of income tax return is irrelevant, as the Income Tax Act, 1961 mandates the collection of the correct tax from the correct assessee for the correct assessment year.
The Tribunal observed that there was no justification to penalize the assessee for using an incorrect form as long as the correct income was brought to tax. Consequently, the Tribunal directed the Assessing Officer to grant the applicable benefits after verification. Therefore, the assessee’s appeal was partly allowed.
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