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Judgment
PER RENU JAUHRI :
The above captioned appeal is preferred by the assessee against the order dated 03.09.2025, passed by Ld. CIT(A)/NFAC, New Delhi u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for A.Y. 2014-15.
The assessee has raised certain grounds of appeal which are as under:
1.That the Learned Deputy Commissioner of Income Tax, CPC is bad in law and on the facts of the case.
2.That the Learned Deputy Commissioner of Income Tax, CPC of Income tax erred in stating in the assessment orders that the assessee is not carrying any educational activities in the premises.
3.That the Learned Deputy Commissioner of Income Tax, CPC denial of exemption under section 10(23C)(iiiad),income received by a person by means of any university or any other educational institution existing solely for educational purposes and not for the purpose of profit and having aggregate annual receipts less than Rs. 1 Crore is exempt from income tax.
4.That the Learned Deputy commissioner of Income tax, CPC erred in stating in the assessment order that the receipts of Rs. 49,95,490/-is income.
5.That the Learned Deputy Commissioner of Income Tax, CPC erred in not eligible for exemption under section SECTION 10(23C) (IIIAD), 10(23C) this receipts for charitable activity covered u/s 2 (15) of the Income tax Act, 1961.
6.That the Learned Deputy Commissioner of Income Tax, CPC erred in ignoring the other expenses which was stated in the audited Profit and Loss accounts,
7.That the Learned Deputy Commissioner of Income Tax, CPC erred in not applying the receipts against other expenses incurred for the purpose of educational activity
8.That the Learned Deputy commissioner of Income tax eSecrred in not eligible for benefit of exemption u/s 10(23C) (iiiad) of the Income tax act 1961.
9.That the Learned Deputy Commissioner of Income Tax, CPC erred in passing an order u/s 154 without giving a reasonable opportunity of being heard to the assessee for explaining bills and voucher which was made.
10.That the Learned Deputy Commissioner of Income Tax, CPC of Income tax erred in not disclosing fully and truly all facts material to the assessment of its income
11.That the Learned Deputy Commissioner of Income Tax, CPC erred in charging interest u/s without any basis. 12 That the appellant may 234A/B/C/D add/amend/rectify/modify/delete any grounds of appeal either at the time of hearing or prior thereof.”
Brief facts of the case are that the assessee is a Charitable Society and is registered under the Societies Registration Act, 1860 on 15.05.2004. It was formed with the object of running an education institution. The assessee is affiliated with the Central Board of Secondary Education [CBSE] with effect from 29.10.2015 and was earlier affiliated with Haryana Board of Secondary Education since 2005. The assessee filed return declaring NIL income for year under consideration. The CPC, Bangaluru, issued a notice u/s 154 and held that the assessee was not utilizing the receipts for charitable/ educational purposes and, therefore, the entire receipts of Rs. 49,95,490/- were treated as taxable income, denying benefit u/s 10(23C)(iiiad) of the Act. The reason for disallowance was the incorrect selection of “No” against the column “University/Educational Institution” in the return of income - a purely clerical and inadvertent error- without appreciating the supporting documents and evidence filed along with the return. Aggrieved, the assessee preferred an appeal before Ld. CIT(A), against the order of the CPC.
Vide order dated 03.09.2025, Ld. CIT(A) partly allowed the assessee’s appeal after upholding the action of CPC in rejecting claim of deduction u/s 10(23C)(iiiad) as the assessee had itself mentioned in its return that it was not eligible for exemption. However, part relief was allowed by the Ld. CIT(A) by directing the Ld. AO to restrict the addition to Rs. 6,95,940/- , after allowing the claim of expenditure incurred against the receipts. Further aggrieved, the assessee is in appeal before the Tribunal.
Before us, Ld. AR has argued that the incorrect selection of option “No” against the column relating to whether the entity is a “University/Educational Institution” was a clerical mistake and inadvertent error. The assessee’s activities are purely educational and its receipts are below Rs. 1,00,00,000/- and, therefore, it is entitled for full exemption u/s 10(23C)(iiiad) of the Act. He has further submitted that it is well settled judicial principle that substantive relief cannot be denied due to procedural mistake. He has further argued that the rectification u/s 154 made by CPC for making the impugned disallowance is also not sustainable as it was not a matter covered u/s 154 of the Act.
Ld. AR has further placed reliance on the following decisions of the co-ordinate Benches wherein relief has been allowed in similar facts and circumstances:
a. Sarvoday Shikshan Prasarak Mandal, Shirol vs. ITO, Exemption Ward, Kolhapur-ITAT Pune, ITA No. 316/PUN/2023; A.Y. 2014-15
b. ITO vs Mamta Modern School- ITAT Lucknow Bench “B”, ITA No. 187/LKW/2014; A.Y. 2010-11
c. M/S. D. Banumaiah’s Educational Institutions vs. ITO, ITA No. 911/Bang/2023 (AY 2016-17)- ITAT Bangalore
On the other hand, Ld. DR has relied on the orders of the lower authorities and argued that the assessee in his return had stated that it is not running any educational institution. Hence, the disallowance made by the CPC and held by Ld. CIT(A) was in order and, deserves to be upheld.
We have heard the rival submissions and perused the material before us. In view of the documents furnished by the assessee with regard to the running of M D S Public High School district Gurugram which is affiliated with the CBSE, it is clear that the assessee is running an educational institution. We are of the considered opinion that the inadvertent error in filling the return should not result in disallowance of the legitimate claim of exemption u/s 10(23C)(iiiad) of the Act to the assessee. Accordingly, we direct the Ld. AO to allow the assessee’s claim of deduction u/s 10(23C)(iiiad) of the Act.
In the result, appeal of the assessee is allowed.