In a recent order, the Allahabad Bench of the Income Tax Appellate Tribunal ( ITAT ) quashed the tax liability imposed for the Assessment Year (A.Y.) 2018-19. The Tribunal remanded the matter back to the Commissioner of Income Tax (Appeals) [CIT(A)] for fresh adjudication, emphasizing the importance of substantive justice.
The case stemmed from the denial of expenditure claims by the Assessing Officer ( AO ) under Section 143(1) of the Income Tax Act, 1961. Ariana Charitable Trust, assessee, running a school up to the 8th standard, reported total receipts of Rs.41,68,597 against an expenditure of Rs.48,07,340. However, the AO treated the entire receipt as taxable income, disregarding the expenditure claims.
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The Trust subsequently filed an appeal before the First Appellate Authority, which was dismissed due to a significant delay in filing and the assessee’s inability to provide adequate justification for the delay. This prompted the Trust to escalate the matter to the ITAT.
Praveen Gupta ,the Trust’s Counsel contended that the dismissal by the CIT(A) was harsh as the Trust’s members were unfamiliar with legal procedures. He further argued that ignoring the expenditure claims had resulted in an unfair tax burden, as no income could be generated without incurring costs.
The Department’s representative, however, maintained that carelessness in pursuing appeals should not be condoned.
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After examining the submissions and records, the ITAT highlighted that condonation of delay should typically be the rule rather than the exception. The Tribunal noted that while the Trust erred in not responding effectively to the CIT(A), denying them an opportunity to substantiate their case went against the principles of justice.
Two member Bench Comprised of Subhash Malguria(Judicial Member) and Sanjay Aswathi(Accountant Member) directed the CIT(A) to reconsider the matter and provide the Trust with an opportunity to explain the delay and substantiate its expenditure claims. The Tribunal also advised the Trust to proactively present its case during the reassessment.
In Conclusion,the appeal was allowed for statistical purposes, granting the Trust another chance to present its case and rectify procedural lapses.
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