Exemption u/s 11 denied on filing wrong ITR-5 instead of ITR-7 by mistake. A genuine and inadvertent mistake by filing ITR-5 instead of ITR-7 as a trust needs to be considered in its proper prospective – ITAT
In a recent judgment, ITAT while remanding the case held that a genuine and inadvertent mistake by filing ITR-5 instead of ITR-7 as a trust needs to be considered in its proper prospective – ITAT
ABCAUS Case Law Citation:
ABCAUS 3880 (2024) (02) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A), National Faceless Appeal Centre (NFAC) in dismissing its appeal for delay.
The appellant was a trust, registered under Section 12A of the Income Tax Act, 1961 (the Act) and was entitled to exemption/deduction under Section 11 & 12 of the Act. The appellant was also registered under Section 80G(5) of the Act.
The main activity of the Trust was to impart education provided to the poor and needy people and filing income tax return every year claiming exemption due to education activity.
In the year under consideration, the appellant filed its return of income declaring a loss after claiming deduction towards application for charitable purpose.
However, application of 15% of total income was disallowed by the AO due to return was filed in Form No. 5 instead of Form No.7. The AO, considered the appellant as AOP and disallowed accumulated set apart 15% of total income and added the same to the total income of the appellant. The AO also applied the interest under Section 234B, 234C & 234D of the Act.
Against the same, the appellant preferred appeal before the First Appellate Authority which was barred by limitation for 313 days. Such appeal stood dismissed on the premise that the appellant failed to show “sufficient cause” which could justify the delay.
Before the Tribunal the assessee in support of the delay in filing the application before the First Appellate Authority furnished an affidavit explaining the delay being the assistant accountant left the job and without informing the pending matter for filing of appeal against the assessment order. The ITAT condoned the delay on being satisfied with the ‘sufficient cause’ shown by the appellant.
On merit the ITAT noted that the appellant was a trust and was required to file return of income in ITR-7 and needs to claim the 15% set apart under Section 11(1)(a) of the Act instead of filing ITR-5 which was not as per the provision of the Act to claim benefit of exemption under Section 11 & 12 of the Act.
The Tribunal observed that a bare appreciation of the reply filed by the appellant before the AO, it cannot be overlooked sight of the fact that the appellant conceded that by mistake the appellant filed ITR-5 instead of ITR-7 as having a charitable trust. However, the same was not considered by the AO and order was passed treating the same as AOP upon making disallowance of accumulated set apart 15% of total income.
The Tribunal noted that the appellant was a registered trust under Section 12AA of the Act, entitled to exemption/deduction under Section 11 & 12 of the Act and also having registration under Section 80G(5) of the Act. Neither it was pointed out by the Revenue that the appellant ever made a mistake in filing ITR-5 instead of ITR-7 as per provision of law.
The Tribunal opined that on the facts of the case, it could be construed as genuine and inadvertent mistake by the appellant in filing ITR-5 instead of ITR-7 as a trust which needs to be considered in its proper prospective, particularly taking into consideration the activities rendered by the appellant trust having social impact. The Tribunal also noted that had the appellant filed ITR-7 instead of ITR-5, the appellant would have been allowed deduction under the Act by the AO as claimed for.
The Tribunal, having regard to this particular fact and circumstances of the matter, provided a further chance to to the appellant to get the relief as claimed for by remanding the issue to the file of the AO.
However, as the appellant had already filed ITR-5 instead of ITR-7, the Tribunal also granted liberty to the appellant to apply before the concerned authority being the Board under Section 119(2)(b) of the Act for approval to file ITR-7.
The AO was also directed to keep the assessment proceeding in abeyance till the finalization of such application to be made by the appellant before the CBDT for a maximum period of 8 months and then to finalize the issue in accordance with law upon giving an opportunity of being heard to the appellant and upon considering the evidence on record and any other evidence which the appellant may choose to file at the time of hearing of the matter.
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