The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the only filing of an ITR in an incorrect form cannot be a foundation to disallow genuine expenditure. The Bench said that procedural lapses must not override substantive rights of the taxpayer.
New Surya Public School, an educational society registered under the Societies Registration Act, 1860, operates a prominent institution in Delhi. The society has filed a formal appeal challenging the order issued by the Commissioner of Income Tax (Appeals), NFAC, for the Assessment Year (AY) 2018-19. This appeal aims to address specific grievances arising from the findings of the appellate authority.
The taxpayer had submitted an ITR specifying a taxable income of Rs 1.53 lakh. The Centralised Processing Centre, Bengaluru, at the time of processing, has disallowed the expenditure of Rs 62.71 lakh made for running the school. The disallowance was made only on the foundation that the taxpayer had submitted its return in Form ITR-7 instead of Form ITR-5.
The appeal submitted to CIT(A) was dismissed with the appellate authority keeping the findings of the CPC, as the taxpayer had chosen the wrong return form. The taxpayer, dissatisfied with the decision, approached the Tribunal.
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In front of the Tribunal, it was argued that choosing ITR-7 instead of ITR-5 was a genuine procedural mistake. The taxpayer did not claim any exemptions under Sections 11 or 12 of the Act, nor did they conceal any income or expenditure details.
The Tribunal, presided over by S. Rifaur Rahman (Accountant Member) and Raj Kumar Chauhan (Judicial Member), reaffirmed the established legal principle that procedural technicalities must not undermine substantive claims. The Bench emphasised that where a lapse does not result in prejudice to the Revenue, the taxpayer’s statutory rights remain protected, ensuring that justice is not denied due to clerical errors.
The bench said that a taxpayer could not be refused a deduction of legitimate expenditure only because of a technical error in choosing the return form.
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The Tribunal, placing reliance on earlier coordinate bench decisions, including Care Foundation Village v. ITO (Exemption), held that income tax authorities are not anticipated to penalise taxpayers for bona fide mistakes.
As per that, the Tribunal set aside the order of the CIT(A) and remitted the case back to the assessing officer with a direction to reassess the taxpayer’s income under Form ITR-5. The taxpayer was asked to provide the financial statements and pertinent data in the appropriate return format.
Therefore, the appeal was permitted for statistical objectives.
| Case Title | New Surya Public School vs. Deputy/Assistant Commissioner of Income Tax |
| Case No. | ITA No.5082/Del/2025, A.Y. 2018-19 |
| Appellant by | Sh. Rahul Satiya |
| Respondent by | Ms Ankush Kalra |
| Delhi ITAT | Read Order |
