2022 (2) TMI 694 - AT - Income Tax

Assessment of trust - Rectification of mistake u/s 154 - whether the assessee's claim of exemption under section 80G/80GGA denied by CPC in 143(1) proceedings is allowable and the denial of same is a mistake apparent on record? - HELD THAT - We find that in the preceding AY i.e. AY 2013-14 and in the succeeding AY i.e. AY 2015-16 the assessee's claim of deduction under section 80G/80GGA has been accepted by the Department. Ostensibly, the assessee has been making similar donations in the preceding and the succeeding AYs towards Chief Minister's Relief Fund, and donation to some other eligible institutions and the consequent benefit of deduction under section 80G has been allowed to the assessee. In AY 2013-14 in scrutiny assessment proceedings, the assessee's claim was allowed and in AY 2015-16, the assessee's claim of deduction under section 80GGA was accepted by the CPC as is evident from the intimation under section 143(1) of the Act dated 02.08.2016. Thus, disallowance of assessee's claim of deduction under Chapter-VIA in the impugned AY was purely a computational error which could have been rectified under section 154 - The assessee had furnished relevant documents evidencing the donations made eligible for deduction under section 80GGA/80G of the Act. The same were not disputed by the Department. It is not a case where the assessee's donations were suspected or the institutions/funds to whom donations were made were under lens of suspicion, therefore, the observations made by CIT(A) for dismissing assessee's appeal are unsustainable. Consequently, the impugned order is set-aside and the appeal of assessee is allowed. The AO is directed to grant benefit of deduction claimed by the assessee under Chapter-VIA of the Act. Appeal of assessee is allowed.

Summary

Issues:
Claim of deduction under Chapter-VIA denied by CPC in 143(1) proceedings - Whether allowable as a mistake apparent on record.

Analysis:

Issue 1: Claim of deduction under Chapter-VIA denied by CPC

The appellant, a charitable trust registered under section 12A of the Income Tax Act, filed its return of income as an Association of Persons (AOP) for the Assessment Year (AY) 2014-15. The appellant made donations eligible for deduction under sections 80G and 80GGA r.w.s 35AC of the Act. However, the CPC denied the deduction claimed under Chapter-VIA without providing a hearing opportunity. The appellant filed a rectification petition under section 154, which was rejected by the CPC. The CIT(A) dismissed the appeal stating the rectification sought was debatable. The appellant argued that in the preceding and succeeding AYs, similar deductions were allowed by the Department, indicating a computational error in the current AY. The appellant provided evidence of eligible donations, uncontested by the Department, and the denial of deduction was deemed a rectifiable error under section 154.

Issue 2: Allowability of denied deduction as a mistake apparent on record

The Tribunal observed that in previous and subsequent AYs, the appellant's deduction claims under section 80G/80GGA were accepted by the Department. The consistent allowance of deductions in similar circumstances highlighted the error in disallowing the appellant's claim in the impugned AY. The Tribunal noted that the appellant's donations were legitimate and not under suspicion, making the denial of deduction a computational mistake. Therefore, the Tribunal set aside the CIT(A)'s decision, allowing the appellant's appeal and directing the AO to grant the deduction claimed under Chapter-VIA. The decision emphasized the rectifiability of the error under section 154 and the appellant's compliance with relevant provisions for claiming deductions under the Act.

In conclusion, the Tribunal ruled in favor of the appellant, highlighting the consistent allowance of deductions in similar situations, and directed the AO to grant the deduction claimed under Chapter-VIA for the impugned AY. The judgment underscored the rectifiability of computational errors under section 154 and the importance of evidence-backed claims for deductions under the Income Tax Act.