Rectification of Clerical Error: Assessing the Denial of 12A Registration.

Introduction:

• The recent appeal filed by the assessee against the order dated 28.11.2022 of the Ld. Commissioner of Income Tax (Appeals) NFAC, Delhi (“CIT(A)”) sheds light on a critical issue pertaining to the denial of the benefit under section 12A/12AA of the Income Tax Act, 1961 (the “Act”) for the Assessment Year (“AY”) 2013-14. The crux of the matter revolves around a clerical mistake made during the electronic filing of the Income Tax Return (ITR), leading to the rejection of the assessee's claim.

Grounds of Appeal:

The grounds of appeal put forth by the assessee highlight key contentions:

1. The rejection of the claim under section 12A/12AA and the subsequent addition of Rs. 54,03,420 is contested as being legally flawed.
2. The appellant argues that, being registered under section 12A of the Act, the denial of benefits under section 12A/12AA due to a clerical error in the ITR filing is unjust.
3. The appellant emphasizes that it was the first year of electronic filing, and the mistake was a result of unfamiliarity with the new process.
4. The appellant asserts that principles of natural justice and the doctrine of substance were overlooked, highlighting the continuous validity of registration under section 12A in previous and subsequent years.

Background and Proceedings:

• The case involves the rejection of the assessee's claim under section 12A/12AA for AY 2013-14 due to an inadvertent omission in the ITR. The rectification application filed by the assessee was rejected by the Assessing Officer, stating that no claim for exemption under section 12A/12AA was made in the original return, and no revised return was filed.
• The CIT(A) upheld the rejection, citing a precedent where the Tribunal held that rectification applications requiring interpretation of certain legal provisions should be considered in scrutiny assessments, not under section 154.

Arguments Before the Tribunal:

• The appellant argued that the clerical error in mentioning "No" under section 12A in the ITR for AY 2013-14 should not lead to the denial of benefits, considering the continuous and unchallenged registration under section 12A since 1993. It was stressed that the rectification application sought correction of a procedural error, not a fresh claim under section 12A/12AA.

Tribunal's Decision:

• The Tribunal, after careful consideration, set aside the order of the CIT(A) and directed the Assessing Officer to allow the benefit of registration under section 12A to the assessee. The Tribunal opined that the rejection was based on a misinterpretation of the assessee's request in the rectification application, emphasizing that no fresh claim under section 12A/12AA was made. The decision underscores the importance of distinguishing between procedural errors and substantive claims.

Conclusion:

• The case serves as a reminder of the significance of accurate and careful filing, especially in the evolving landscape of electronic tax return submissions. While procedural errors should be rectifiable, it is crucial for both taxpayers and authorities to ensure a fair assessment, considering the substance of the claim and the overall compliance history of the assessee. This decision reiterates the need for a nuanced approach in addressing clerical errors to uphold the principles of natural justice and prevent undue denial of legitimate benefits.

Topic-Delhi Policy Group (Reg.) Versus Income Tax Officer

Court-ITAT-Delhi

Date-26/10/2023

Team Taxonation