आदेश / ORDER

PER MAKARAND VASANT MAHADEOKAR, AM:

This appeal is filed by the Revenue against the order dated 22.10.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as "CIT(A)"], under section 250 of the Income-tax Act, 1961[hereinafter referred to as "the Act"], arising out of the assessment order dated 21.12.2019 passed by the Income Tax Officer, Exemption Ward 2(4), Mumbai [hereinafter referred to as "Assessing Officer / AO"]under section 143(3) of the Act for A.Y. 2017–18.

Facts of the case

2. The assessee is a charitable trust registered under section 12A of the Act, engaged in the activity of imparting education through schools and colleges. The assessee filed its return of income for A.Y. 2017–18 on 09.10.2017 declaring total income at Nil along with audit report in Form No.10B. The case was selected for scrutiny and statutory notices under sections 143(2) and 142(1) were issued. During the course of assessment proceedings, the Assessing Officer examined the audit report and noted that in Form No.10B, at Sr. No.7, the auditor had reported that a sum of Rs.2,00,00,000/- was deemed income under section 11(1B). The Assessing Officer further observed that the assessee had also offered the said amount as deemed income in its computation, though adjusted against the deficit. The Assessing Officer issued a show cause notice proposing addition of Rs.2,00,00,000/- under section 11(1B). In response, the assessee submitted that the reporting in Form No.10B was an inadvertent error and that the amount represented accumulation under section 11(2) in earlier years, which was utilised during the year under consideration for payment of salary to staff. The assessee also filed a revised audit report dated 12.02.2019. The Assessing Officer, however, rejected the explanation on the grounds that the original audit report and return of income clearly reflected the amount as deemed income under section 11(1B), the revised audit report was not filed electronically, no revised return of income was filed within the prescribed time, and no satisfactory evidence of utilization was furnished. Accordingly, the Assessing Officer added Rs.2,00,00,000/- under section 11(1B) and assessed total income at Rs.2,00,00,000/-. Penalty proceedings under section 270A were also initiated.

3. Aggrieved, the assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A) deleted the addition holding that the amount represented accumulation under section 11(2) which was actually utilised for charitable purposes during the year, and therefore, the provisions of section 11(1B) were not applicable. The Ld. CIT(A) also observed that the addition was made solely on the basis of erroneous reporting in Form No.10B and that the revised audit report and factual utilization of funds supported the claim of the assessee. Consequently, the addition of Rs.2,00,00,000/- was deleted and interest was also directed to be deleted.

4. The Revenue has raised following grounds, primarily challenging the deletion of addition of Rs.2,00,00,000/- made under section 11(1B) and the acceptance of revised audit report and explanation of the assessee:

i. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 2,00,00,000/- made under section 11(1B) of the Income-tax Act, 1961, without appreciating that the assessee had itself consciously and categorically offered the said amount as deemed income in the return of income for A.Y. 2017-18 on the basis of the original audit report in Form No. 10B dated 19.08.2017, which was duly e-filed along with the return, and further erred in disregarding the said valid audit report while placing reliance on a subsequently filed manually revised audit report having no legal sanctity.

ii. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in accepting the plea of assessee of ‘inadvertent mistake’ in the original a