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Facts
The assessee, Uttarakhand Pollution Control Board, an Association of Persons (AOP), did not file Income Tax Returns for AYs 2012-13 to 2014-15 despite earning substantial interest income. Assessments were completed, adding significant income, and penalties under Section 271(1)(c) were levied for claiming exemption under Section 10(46) without the required CBDT notification. The CIT(A) dismissed the assessee's appeals, confirming the penalties.
Held
The Tribunal noted that the underlying quantum assessment orders, which were the basis for these penalties, had already been remanded back to the Assessing Officer by a previous Tribunal order in the assessee's own case. Consequently, the Tribunal set aside the impugned penalty orders and remanded the penalty matter back to the Assessing Officer for fresh consideration after the resolution of the quantum assessments.
Key Issues
Whether the penalty levied under Section 271(1)(c) for concealment of income due to an invalid exemption claim under Section 10(46) is maintainable when the underlying quantum assessment orders have been remanded for re-adjudication.
Sections Cited
147, 148, 271(1)(c), 10(46), 10(23C)(iv), 119(2)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Before: MS. MADHUMITA ROY & SHRI AVDHESH KUMAR MISHRA
Date of Hearing 17/07/2025 Date of Pronouncement 28/07/2025 ORDER PER BENCH: Common facts and grounds arise in the above captioned appeals of the assessee; therefore, these appeals were heard together and are being disposed off by this common order.
The above captioned appeals of the assessee for the Assessment Years (‘AYs’) 2012-13, 2013-14 and 2014-15 are directed against orders dated 10.09.2024 of the Commissioner of Income Tax (Appeals), NFAC, New Delhi [‘CIT(A)’].
The assessee, vide various grounds has challenged the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 (‘Act’) in all the above captioned appeals.
The relevant facts giving rise to these appeals are that the assessee, an Association of Persons (‘AOP’), had never filed any Income Tax Return (‘ITR’) for the relevant years though it was earning interest income in Crores of Rupees. Based on the information of interest income, the Assessing Officer (‘AO’) issued notices under section 148 of the Act to assessee for AYs 2012- 13 and 2013-14. The case of AY 2014-15 was picked up for scrutiny in regular course. Consequentially, the assessments of these years were completed at income of Rs.14,22,34,208/-, Rs.23,14,94,016/- and Rs.23,12,25,364/- for AYs 2012-13, 2013-14 and 2014-15 respectively. Later on, penalties under section 271(1)(c) of the Act were levied, in all the relevant years, on the assessed income @ 100% of the tax.
Aggrieved, the assessee filed appeals before the Ld. CIT(A), who dismissed all appeals vide impugned orders. The relevant part of the order of the Ld. CIT(A) for AY 2012-13 reads as under:
“5.2 Brief facts leading to the impugned penalty is that based on the AIR information case of the appellant was re-opened u/s 147 of the Act by issuing notice u/s 148 of the Act. It was found that the board has not granted exemption u/s 10(46) for the relevant A.Y. and appellant has been granted exemption u/s 10(46) with effect from 2014-15. Accordingly, assessment was completed u/s 147 of the Act making an addition of Rs.14,22,34,208/- and penalty proceedings u/s 271(1)(c) were initiated by the AO. Subsequently, AO levied the penalty u/s 271(1)(c) total amounting to Rs. 4,39,50,369/- on account of concealment of income by furnishing inaccurate particulars of income. It is also on record that the impugned addition made by the AO on account of disallowance of exemption u/s 10(46) of the Act thereby has been confirmed by the Ld. CIT(A), Dehradun vide order dated 27.02.2018. 5.3 The factual matrix of the case is that the appellant is engaged in environment protection and pollution control and such entity can claim exemption u/s 10(46) of the Act. However, to successfully claim this exemption the assessee has to obtain notification in its name from the Central Board of Direct Taxes for the relevant assessment year for which the exemption is claimed. The appellant has failed to do so. But while filing its return of income, claim of exemption u/s 10(46) of the Act were made. AO has pointed out in the assessment order as well as in the penalty order that in the absence of such a notification issued by the CBDT in favour of the assessee, no exemption can be allowed. Before the Ld. CIT(A), appellant has claimed that it has now sought exemption from the CBDT and this is pending before the concerned authorities. These facts demonstrate that appellant was fully well aware that the exemption u/s 10(46) of the Act was not available for it during the A.Y in consideration whereas it has one for A.Y. 2015-16 onwards. Ld. CIT(A) has also pointed out in its order cited (supra) that when asked as to why it did not seek the exemption with retrospective effect, the AR stated that the appellant forgot to do so. The income generated during the year shows that appellant is a big organization and must have battery of tax advisors and consultants. This being the state of affairs and that the appellant is unmindful of its legal duties clearly demonstrate that appellant was fully aware of the fact that the exemption claimed was not applicable for the year under consideration. Hence, I am of the view that the exemption u/s 10(46) amounting to Rs. 14,22,34,208/- was claimed deliberately and knowingly by the appellant for concealment of income by furnishing the inaccurate particulars of income. 5.4 The provisions of section 271(1)(c) of the Act stipulate that if the Assessing Officer or the CIT(Appeals) or the Commissioner, in the course of proceedings under this Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars thereof, he may direct that such person shall pay by way of penalty a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by a reason of the concealment of particulars of his income. Explanation 1 to section 271(1)(c) of the Act mentions that where in respect of any facts material to the computation of the total income of any person under the Act, such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as a result thereof shall for the purpose of clause (c) of section 271(1), be deemed to represent the income in respect of which particulars have been concealed. In other words, the necessary ingredients for attracting Explanation 1 to section 271(1)(c) are that (i) the person fails to offer the explanation, or (ii) he offers the explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or (iii) the person offers explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him. If the case of any assessee falls in any of these three categories, then the deeming provision provided in Explanation 1 to section 271(1) (c) come into play, and the amount added or disallowed in computing the total income shall be considered as the income in respect of which particulars have been concealed, for the purposes of clause (c) of section 271(1), and the penalty follows. 5.5 In the instant case, the assessee has failed to discharge the onus cast on it in terms of Explanation 1 to sec. 271(1)(c) of the Act. The reason submitted by the appellant before the Appellate Authority as well as before the AO for making the wrong claim is self-serving and without any factual backing. As pointed out above, appellant was fully aware of the fact that it is not eligible for the exemption u/s 10(46) during the year under consideration. And in spite of that wrong claim of exemption was made in the return of income filed and it is clear cut case of deliberate act on the part of the appellant for concealing the income by furnishing inaccurate particulars of income. 5.6 During the course of appellate proceedings, no written submission was uploaded by the appellant to rebut the finding of the AO in this regard and also substantiate its grounds of appeal. In these circumstances, therefore, I don't find any reason to interfere in the penalty order passed by the AO. Penalty levied by the AO amounting to Rs. 4,39,50,369/- is found to be justified and proper. As such, I uphold the impugned order and dismiss the appeal of appellant. Thus, Ground no. 2 and 5 of the appeal raised by the appellant on the issue are dismissed.” 5.1 Similarly, the Ld. CIT(A) dismissed appeals of other years.
5.2 Aggrieved with the order of the Ld. CIT(A), the assessee is before us.
At the outset, the Ld. Authorized Representative (‘AR’) drew our attention to the facts that the relevant assessment orders, which formed the basis for penalties, had been remanded back to the AO by the Tribunal vide order dated 15/01/2025 in 3193 and 3194/Del/2018. Hence, he prayed for remanding the matter back to the file of the AO. The relevant part of the Tribunal order reads as under:
“12. We have heard the rival submissions and have perused the relevant material on record. There is no dispute that the assessee has applied for exemption u/s 10(23C) (iv)/ 10(46) of the Act w.r.e in terms of power vested with CBDT/CIT(E) and its authority u/s 119(2)(b) of the Act. It is also not controverted that the CBDT has notified Madhya Pradesh Pollution Control Board and State Pollution Control Board, Odisha with retrospective effect and no person is adversely affected by giving retrospective effect to these notifications. We find that the Id. DR has not controverted that there has been any change in the activities performed by the assessee since its inception and the assessee has been notified for FY 2014-15 onwards on the basis of the same activities.
However, we find that the question involved in these appeals are dependent on the approval u/s 10(23C)(iv) of the Act which is pending before the CBDT. Therefore, we are of the considered view that the matter be remanded to the file of the Assessing Officer till such time the petition for approval is disposed of by the CBDT.” 5
On the other hand, the Ld. CIT-DR appeared in agreement with the submission/contention of the Ld. AR.
We have heard both parties and have perused the material available on records. Since, the quantum appeals emerging from assessment orders of relevant years entailing penalties under section 271(1)(c) of the Act had been remanded back to the file of the AO; therefore, in such facts and circumstances, we deem it proper to set aside all the impugned orders and the penalty matter to the file of the AO with a direction re-visit the issue of imposition of penalties in dispute here after giving effect to the Tribunal order dated 15/01/2025 in the assessee’s own case in the 3193 and 3194/Del/2018.
In the result, all three appeals are allowed for statistical purposes.
Order pronounced in open Court on 28.07.2025.