2024 (12) TMI 1534 - AT - Income Tax

Exemption u/s 10(23C) (iiiab) - while filing the return of income wrong sub clause of section 10(23C) quoted - HELD THAT - As undisputed fact that the assessee is entitled to exemption u/s 10(23C)(iiiab) and it is only the mistake of the counsel wherein while filing the return of income wrong sub clause of section 10(23C) has been mentioned and similar facts were there in the case of the Habrol Cooperative Agricultural Society 2024 (9) TMI 1696 - ITAT CHANDIGARH wherein wrong sub clause namely 80P(2)(c) was mentioned in the return form for claiming the deduction instead of deduction to be claimed u/s 80P(2)(a)(i). Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the delay in filing appeals for the assessment years 2018-19 and 2019-20 should be condoned due to the alleged negligence of the Assessee's previous counsel.

2. Whether the Assessee is entitled to exemption under Section 10(23C)(iiiab) of the Income Tax Act, 1961, despite the incorrect section being mentioned in the income tax returns filed by the Assessee's counsel.

ISSUE-WISE DETAILED ANALYSIS

1. Condonation of Delay

Relevant legal framework and precedents: The principle of condonation of delay is guided by the concept of "sufficient cause," which allows courts to adopt a liberal approach to ensure justice is served. The judgment refers to the Supreme Court's decision in 'Esha Bhattacharjee vs. Managing Committee of Raghunathpur Nafar Academy & Others,' which emphasizes a flexible interpretation of "sufficient cause" to prevent meritorious cases from being dismissed due to procedural delays.

Court's interpretation and reasoning: The Tribunal reviewed the affidavit and documentary evidence provided by the Assessee, which indicated that the previous counsel misled the Assessee into believing that the appeals were pending. The Tribunal recognized the Assessee's lack of expertise in tax matters and reliance on the counsel's assurances.

Key evidence and findings: The Tribunal examined email exchanges between the Assessee and the previous counsel, confirming that the counsel had misrepresented the status of the appeals.

Application of law to facts: The Tribunal applied the principle of "sufficient cause" and concluded that the delay should be condoned, as the Assessee was misled by the counsel and had no knowledge of the procedural lapse.

Conclusions: The delay of 691 and 706 days for the assessment years 2018-19 and 2019-20, respectively, was condoned.

2. Entitlement to Exemption under Section 10(23C)(iiiab)

Relevant legal framework and precedents: Section 10(23C)(iiiab) of the Income Tax Act exempts income of universities or educational institutions substantially financed by the government. The Tribunal referenced various judgments, including those from the Delhi High Court and the Chandigarh Bench of ITAT, which support the notion that a bona fide mistake in claiming exemptions should not penalize the taxpayer.

Court's interpretation and reasoning: The Tribunal acknowledged that the Assessee was entitled to the exemption under Section 10(23C)(iiiab) but had incorrectly cited the relevant section due to the counsel's error. The Tribunal emphasized that the Assessee should not suffer due to a bona fide mistake made by the counsel.

Key evidence and findings: The Tribunal noted that the Assessee is a government-financed university, as evidenced by substantial grants received, and is thus eligible for the exemption under the correct provision.

Application of law to facts: The Tribunal applied the principles from previous judgments and CBDT Circular No. 14 of 1955, which encourages tax officers to guide taxpayers in claiming rightful exemptions. The Tribunal concluded that the Assessee's income should be exempt under the correct provision, despite the procedural error.

Treatment of competing arguments: The Revenue's contention that the exemption was correctly disallowed was rejected, as the Tribunal found that the Assessee met the substantive requirements for exemption.

Conclusions: The Tribunal allowed the Assessee's appeal, granting the exemption under Section 10(23C)(iiiab) for both assessment years.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The expression 'sufficient cause' employed by the legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which sub serves the ends of justice, for that is the life-purpose for the existence of the institution of courts."

Core principles established: The Tribunal reiterated the principle that procedural errors, especially those resulting from counsel's mistakes, should not prevent a taxpayer from receiving rightful exemptions. Additionally, the Tribunal emphasized the importance of a liberal approach in condoning delays to ensure justice.

Final determinations on each issue: The appeals for both assessment years were allowed, with the delay in filing condoned and the exemption under Section 10(23C)(iiiab) granted.