Charitable exemption claim restored for fresh verification after a technical return-entry error left income application figures uncaptured.

A charitable assessee's claim to exemption under section 11 was not examined on merits because a technical ITR glitch left the application-of-income figures uncaptured in Part B-T1, even though the return and Form 10B reflected application of funds for charitable objects. The Tribunal found that the processing under section 143(1) and subsequent rectification under section 154 proceeded without proper verification of the claim. It therefore restored the matter to the Assessing Officer for de novo adjudication to verify whether the amounts were applied for charitable purposes and, if so, to grant exemption in accordance with law.

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Issues: Whether the Commissioner of Income Tax (Appeals) was justified in upholding the intimation under section 143(1) by treating gross receipts as taxable and denying exemption under section 11 of the Income-tax Act, 1961 in the facts of the case.

Analysis: The assessee is a registered charitable entity and filed return for AY 2013-14 with an audit report in Form 10B claiming exemption under the Act; due to a technical/typographical glitch figures showing application of income for charitable purposes were not captured in Part B-T1 of the ITR although the computation and audit report showed application of funds of Rs. 32,69,696 towards charitable objects.

Analysis: An intimation under section 143(1) was processed and later suo motu rectified under section 154 without service to the assessee; the assessing officer did not verify the claim of application of funds. The Tribunal found that the omission was a non-capturing error and that the substantive claim of application of income had not been examined on merits by the assessing officer.

Analysis: In the interest of justice the Tribunal held that the matter requires verification by the assessing officer and therefore restored the matter to the file of the Assessing Officer for de novo adjudication to examine whether the amounts were applied for charitable purposes and, if so, to allow exemption under section 11 in accordance with law; grounds were allowed for statistical purposes.

Conclusion: The appeal is allowed in favour of the assessee and the matter is restored to the Assessing Officer for fresh adjudication on the claim of application of income for charitable purposes.

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