Exemption u/s 10(23C)(iiiad) allowed despite return erroneously mentioning receipts under wrong head i.e. income from other source.
In a recent judgment ITAT Amritsar has allowed exemption u/s 10(23C) (iiiad) without revised return ignoring the inadvertent error in filling up the return mentioning receipts under wrong head “income from other source”
ABCAUS Case Law Citation:
5116 (2026) (04) abacus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in dismissing the appeal by not considering the claim of exemption u/s 10(23C) of the Income Tax Act, 1961 (‘the Act’).
The assessee was an educational institution affiliated with State Education Board and had claimed exemption u/s 10(23C) (iiiad) of the Act for all the years in the past. In the relevant Assessment Year, the counsel of the assessee has uploaded the return ITR-7 in the portal, with correct figures of receipts in schedule I E – 4 which was applicable to the assessee, but additionally, he had entered the same figure under the head: “income from other sources” which was not required.
The assessment was completed by CPC, Bangalore u/s 143(1), raising a tax demand on a total assessed income considering the amount wrongly returned under the head “other source income”.
The CIT(A) observed that the denial of exemption was in conformity with the return filed by the appellant itself and the discrepancies therein. The CIT(A) also referred to the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. wherein it was held that a claim for deduction or exemption, if not made in the original return or by filing a revised return under section 139(5), cannot be entertained by the Assessing Officer otherwise than by way of a revised return.
Before the Tribunal, the assessee stated that the assessee was running a school, total receipts of the school were much less than the stipulated limit of Rs. five crore and it existed solely for the purpose of education and not for purpose of profit.
It was also stated that the only default committed by the counsel while uploading the return was that the receipts had been wrongly entered under the head “ other source”, but the same had been correctly reflected under schedule IE-4 ( in ITR-7 ) which was the statement of income and expenditure applicable for assessee claiming exemption under sections 10(23C)(iiiad).
The assessee referred to the decision of Delhi High court wherein it was held that according to the CBDT circular No 14 (XL-35) dated 11/04/1955 officers of the Department must not take advantage of the ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him.
The assessee also place reliance on the decision of the Gujarat High court wherein it was held that regardless of whether the over-assessment is as a result of assessee’s own mistake or otherwise, the CIT has the power to correct such an assessment under section 264(1) of the Act. If the CIT refuses to give relief to the assessee, in such circumstances, he would be acting de hors the powers under the Act and the provisions of the Act and, therefore is duty-bound to give relief to an assessee, where due, in accordance with the provisions of the Act.
The assessee also referred to decision of ITAT Chandigarh where it had been held that if there is a mistake by the assessee for claiming legitimate deduction, the AO is duty bound to consider such deductions even it was not claimed or claimed under wrong sections.
The asssesse also placed reliance on another judgment of ITAT Chandigarh where it had been held that only due to mistake of assessee counsel, in mentioning the correct section or mentioning a wrong sub clause, while filing the return of income, the exemption cannot be denied.
The Tribunal noted that it was an admitted fact that the assessee was an educational institution affiliated with State Education Board and it had been allowed the exemption u/s 10(23C) (iiiad) under the Act for past as well as in subsequent years and the income and expenditure A/c and balance sheet for the year under appeal it was evident that the total receipts of the school was less than the stipulated limit of Rs.five crore and the same was existing solely for the purpose of education (running a school) and not for purpose of profit.
The Tribunal opined that the assessee was entitled to exemption and the only issue risen was because of a superfluous entry, offering the said receipts under the head “income from other sources” when actually there was no such income of the assessee, which had been wrongly entered due to technical ignorance of the counsel filing the return.
The Tribunal referred to decision of the Hon’ble jurisdictional High court where Hon’ble court had opined that where ever there is no fresh claim by the assessee , return need not be revised.
The Tribunal opined that the claim of exemption u/s 10(23C) (iiiad) by the assessee was always there in the original return filed in ITR- 7, as such the said claim cannot be brushed aside, in absence of any revised return.
Accordingly, the Tribunal held that assessee was entitled to exemption u/s 10(23C) (iiiad) and the same was allowed.
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