Revenue cannot take advantage of Clerical mistakes in ITR Filing: ITAT grants Income Tax Exemption for Trust [Read Order]

Revenue cannot take advantage of clerical mistakes in ITR Filing: ITAT grants Income Tax Exemption for Trust

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) granted an income tax exemption to a trust that made a clerical mistake in the Income Tax Return (ITR) filing and condemned the revenue for taking advantage of it.

Fig Tree Foundation, a charitable trust based in Bangalore, filed its appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] who had upheld the denial of exemption under Section 11 of the Income Tax Act, 1961.

The Central Processing Centre (CPC) had earlier rejected the exemption claim because the trust did not mention its registration details under Section 12AB in the return of income. So, the gross receipts of the trust were treated as taxable income.

The assessee’s counsel argued that the registration under Section 12AB was already available with the department and that the exemption could not be denied merely because the details were not furnished in the return. The counsel further argued that taxing the gross receipts without allowing deduction for application of funds was against the settled provisions of law, since the expenses claimed covered the entire receipts.

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The single-member bench comprising Waseem Ahmed (Technical Member) observed that CPC was correct in processing the return based on the information furnished, but the CIT(A) should have rectified the mistake once the assessee produced proof of registration. The tribunal explained that the Revenue cannot take advantage of clerical errors committed by the assessee and that the income must be assessed strictly within the framework of law.

The tribunal pointed out that treating the gross receipts as income was a fundamental mistake, as the assessee had shown application of funds against such receipts. Since the trust was entitled to exemption under Section 11, the tribunal directed the Assessing Officer to delete the addition.

The appeal was allowed with the tribunal condoning the delay in filing, subject to a cost of Rs. 1,000 imposed on the assessee for negligence in pursuing the matter.

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