Wrong Classification In ITR Can't Result Into Denial In Deduction: Chennai ITAT

In a recent decision, the Chennai Bench of Income Tax Appellate Tribunal (ITAT) ruled that genuine deductions claimed by taxpayers should not be denied solely due to procedural errors, such as misclassification in their Income Tax Return (ITR). The case involved National Contracting Company versus DCIT (ITA No.455/Chny/2024), where the assessee's gratuity payment was erroneously classified under the wrong section in the ITR. \r

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Despite this error, all necessary details supporting the deduction were correctly disclosed in the return. The tribunal emphasized that the Income Tax Act should not lead to over-assessment of income due to inadvertent mistakes by taxpayers. It highlighted that as long as the deduction is substantiated by adequate evidence and aligns with the provisions of Section 43B, it should be allowed. The decision overturned the CIT's ruling and instructed the Assessing Officer (AO) to remove the disallowed amount from the assessment.