Charitable Society Wins Tax Exemption Appeal Due to Clerical Error Correction, Tribunal Directs Reassessment.

The ITAT allowed the appeal by the assessee, a registered charitable society, granting the exemption under section 11 of the Income-tax Act, 1961, which was initially denied due to a clerical error in the audit report. The Tribunal directed the AO to verify the revised Form 10B and allow the exemption of Rs. 43,98,666, emphasizing the statutory nature of the claim despite the initial filing error.

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Issues:
1. Denial of exemption under section 11 of the Income-tax Act, 1961 due to a clerical error in filing the income tax return.

Analysis:
The judgment revolves around the denial of exemption under section 11 of the Income-tax Act, 1961 to the assessee due to a clerical error in filing the income tax return. The assessee, engaged in charitable activities, filed an appeal against the order passed by the First Appellate Authority, arising from an intimation of assessment by the Assessing Officer for the Assessment Year 2020-21. The crux of the issue was the inadvertent mistake in the audit report (Form No. 10B) filed by the auditors of the assessee, which led to the non-claiming of exemption amounting to Rs. 43,98,666 under the second part of section 11(1)(a).

During the hearing, it was revealed that the assessee, a registered society eligible for exemption under sections 11/12, had applied funds to charitable purposes but inadvertently failed to claim the exemption amount in the audit report and subsequently in the income tax return. The Authorized Representative for the assessee argued that the mistake was rectified by filing a revised audit report, but the revised return could not be filed due to the time limit. The contention was that the statutory claim of exemption could not be denied to the assessee based on a clerical error made by the auditors.

The Appellate Tribunal, after careful consideration, found merit in the arguments presented by the Authorized Representative for the assessee. The Tribunal noted that the second part of the exemption under section 11(1)(a) was a statutory claim of the assessee, which had not been allowed due to the inadvertent mistake in the audit report. The Tribunal emphasized that a legal claim of the assessee could be allowed by appellate authorities, even if not admitted by the Assessing Officer. Referring to legal provisions and judicial views, the Tribunal directed the Assessing Officer to consider and allow the assessee's claim of exemption amounting to Rs. 43,98,666 under the second part of section 11(1)(a) after verifying the revised Form 10B filed by the assessee.

In conclusion, the appeal was allowed, and the Tribunal directed the Assessing Officer to grant the exemption claimed by the assessee under the relevant section of the Income-tax Act, 1961, considering the rectified audit report.

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