Clerical Mistake in Audit Report Form 10B can be Rectified: ITAT grants Tax Exemption to Society [Read Order]

In a significant ruling, the Lucknow bench of the Income Tax Appellate Tribunal (ITAT) has held that the clerical mistakes in audit report form 10B can be rectified and the same shall not be a ground to deny tax exemption to the assessee.

Along with filing of return of income, the assessee, Desh Bharti Public School Samiti also uploaded Form-10B which is audit report under section 12A(b) of the Act. However, in the return of income, the assessee claimed exempt income under section 10(23C) instead of claiming the same under section 12A of the Act. The CPC rejected the claim of the assessee under section 10(23C) by holding that the assessee had not obtained the necessary approval from the prescribed authority and the receipts of the assessee exceeded Rs.1.00 crore. The application for rectification under section 154 was also rejected and on appeal before ld. CIT(A), the ld. CIT(A) also dismissed the appeal of the assessee by first holding that there was no mistake apparent from record and further held that there is lot of difference between the claim of exemption under section 10(23C) and Section 11 of the Income Tax Act.

The department was of the view that filing of return is done by the professionals and therefore it cannot be accepted that the mistake had happened due to mistake by a Clerk. On appeal, the first appellate authority confirmed the original order.

The Tribunal bench comprising Shri A.D Jain, Vice President and Shri T.S. Kapoor, Accountant Member observed that nowhere in the appellate order the ld. CIT(A) disputed the fact that assessee was not registered under section 12A of the Act.

“The registration certificate granted by the department on 2.9.2014 is on record. Further the uploading of Form-10B which is a audit report u/s.12A(b) of the Act, proves that the mistake committed by assessee in claiming exemption u/s.10(23C) is inadvertent mistake as by committing such a mistake the assessee is not going to gain anything. Fact of the matter is that assessee is registered u/s.12A of the Act and is eligible for exemption u/s.11 of the Act. Therefore for inadvertent mistake the assessee cannot be penalized. Since the assessee has been claiming exemption u/s.10(23C) in the earlier years therefore during the year under consideration there is high probability that assessee again claimed exemption u/s.10(23C) by overlooking the fact that it had already got registration u/s.12A of the Act which in any case was available with the assessee before the filing of return of income. The mistake has occurred as a human error and should have been judicially considered,” the Tribunal said.

Shri Rakesh Garg, Advocate appeared for the assessee.

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