Assessee could not be penalized by denying Income Tax exemption otherwise allowable due to a technical violation

Assessee could not be penalized by denying Income Tax exemption otherwise allowable due to a technical violation The Income Tax Appellate Tribunal (ITAT) has said that the assessee could not be penalized by denying the exemption otherwise allowable to the assessee because of a technical violation. The Assessee Barapur Gramodyog Vikas Samiti has filed an appeal with the ITAT against the order of the Ld. CIT(Appeals)-(NFAC), Delhi dated 16.09.2021 for the AY 2016-17. In this case, exemption claimed by the assessee u/s 10(23B) was denied to him observing that the certificate issued by the Khadi and Village Industries Commission was valid from 01.04.2016 to 31.03.2021 beginning from the FY 2016-17 relevant to AY 2017-18 onwards and, therefore, it was held that assessee is not entitled to claim an exemption for AY 2016-17. In this case, the assessee in its Paper Book enclosed copy of certificate issued by Khadi and Village Industries Commission, Mumbai recognizing the assessee for granting rebate and other financial benefits from 11.06.2012 to 31.03.2016 (vide certificate no. 3854/2013-14). This certificate was ignored by the Ld. Commissioner (Appeals) while adjudicating the appeal of the assessee. It is further noticed that the certificate which the Ld. CIT(Appeals) referred to in his order is the certificate issued for the period from 01.04.2016 to 31.03.2021 i.e. for AY 2017-18 onwards which is also placed on record before me. Relying on this certificate the Ld. CIT(A) held that the assessee is not entitled for exemption u/s 10(23B) of the Act which is misplaced. As a matter of fact Khadi and Village Industries Commission had issued certificate to the assessee from 11.06.2012 to 31.03.2016 and the assessee is entitled to claim exemption u/s 10(23B) for the AY 2016-17. Further the Khadi and Village Industries Commission, Divisional Officer, Meerut had also written a letter dated 28.01.2019 to the Assessing Officer the ITO, Bijnore (U.P.) to consider the assessee for granting exemption u/s 10(23B) for the AY 2016-17. The reason for denying the exemption by the AO is that the Commission has given certificate to the assessee for more than three years. The Bench of Mr. C.N. Prasad noted that the time period for which the certificate has to be granted is not within the control of the assessee. In any case it is only a technical violation for which the assessee could not be penalized by denying the exemption otherwise allowable to the assessee. Thus, it was held that the assessee is entitled for exemption u/s 10(23B) of the Act. Accordingly, the Assessing Officer was directed to allow the claim for exemption u/s 10(23B) as claimed by the assessee. To Read Judgment Download PDF Given Below: