2024 (7) TMI 224 - HC - Income Tax

Rejection of revision petition u/s 264 - Merely on account of an inadvertent error while filing Form ITR-VII, the petitioner had been denied the benefit of exemption to trust - HELD THAT - The Trust was granted approval u/s10(23C) of the Income-tax Act in the year 2013. The impugned order does not contain any indication that the Trust is not entitled to exemption. Indeed, the first respondent has examined the returns of income of the petitioner for assessment years 2017-18 and 2019-20. Those returns of income would clearly indicate whether the assessee claimed exemption during those years. After examining those returns of income, the only observation of the first respondent is that the petitioner made errors while filing returns in respect of those years also. As correctly submitted by learned counsel for the petitioner, wide powers are conferred u/s 264 provided the party concerned has not filed an appeal against the relevant order. Without examining the petitioner's request on merits, the first respondent has rejected the application on the ground of delay. Therefore, the matter requires reconsideration. The impugned order is set aside and the matter is remanded to the first respondent for reconsideration. The first respondent is directed to reconsider the matter by taking into account the observations set out in this order and issue a fresh order within three months from the date of receipt of a copy of this order.

Summary

Issues:
Challenge to rejection of revision petition under Section 264 of the Income-tax Act, 1961 by a public charitable trust regarding exemption claim due to inadvertent error.

Analysis:
The petitioner, a public charitable trust running a school, was granted approval under Section 10(23C)(vi) of the Income-tax Act. An error in mentioning exemption in the return of income for the assessment year 2018-19 led to a request for rectification, which was rejected, prompting the filing of a revision application under Section 264. The petitioner argued that despite consistent exemption claims and wide powers of the CIT under Section 264, the benefit was denied due to a minor error.

The respondents, represented by learned senior counsel, defended the rejection by citing reasons such as the petitioner's failure to rectify the error post intimation under Section 143(1) and past instances of defective returns. However, the petitioner contended that the impugned order lacked justification for denying exemption, as evidenced by the examination of returns for other assessment years which only highlighted filing errors without questioning the entitlement to exemption. The petitioner emphasized the need for a reconsideration based on merits rather than a mere dismissal on procedural grounds.

In the final judgment, the High Court set aside the order dated 18.03.2024 and remanded the matter to the first respondent for a fresh consideration. The first respondent was directed to reevaluate the case, considering the observations made in the order, and issue a new order within three months. The writ petition was disposed of without any costs, along with the closure of connected miscellaneous petitions.