ASSOCIATION OF ORAL MAXILLOFACIAL SURGEONS OF INDIA,PUNE vs. ASSISTANT COMMISSIONER OF INCOME TAX,WARD-1(1), PUNE, PUNE

आदेश / ORDER

PER R.S. SYAL, VP :

This appeal by the assessee is directed against the order dated

13-01-2023 passed by the CIT(A) in National Faceless Appeal

Centre (NFAC), Delhi confirming the penalty of Rs.2,46,999/-

imposed by the Assessing Officer (AO) u/s.271(1)(c) of the Income-

tax Act, 1961 (hereinafter also called ‘the Act’) Act in relation to

the assessment year 2012-13.

association for Oral Maxillofacial surgeons of India, which was set

up several years ago having registered office in Pune. The return

2 ITA No.274/PUN/2023 Association of Oral Maxillofacial Surgeons of India

for the year under consideration was not furnished. The AO, on

getting information about the assessee having made FDR of Rs.5.00

lakh with State Bank of India, issued notice u/s.148 of the Act. In

response, the assessee filed return declaring total income at

Rs.7,99,352/-, claiming that it was engaged in promotion of

research in Oral and maxillofacial surgery. In the absence of any

registration u/s 12A of the Act, no benefit of exemption u/s.11 was

claimed. The assessment was completed at the returned income.

Thereafter, penalty proceedings were initiated u/s.271(1)(c) of the

Act. The AO observed that the assessee was not granted

registration u/s.12A of the Act on the date of his passing the order.

He, therefore, imposed penalty amounting to Rs.2,46,999/-. The ld.

CIT(A) invoked Explanation 3 to section 271(1)(c) of the Act and

upheld the penalty. Aggrieved thereby, the assessee has approached

the Tribunal.

relevant material on record. The ld. AR opened his arguments by

urging that the matter be restored to the lower authorities for the

reason that the assessee was, in fact, granted registration by means

of an order dt. 18-05-2023 passed u/s.12AA, which would apply to

the year under consideration as well. If the effect to the registration

was granted, the earlier return filed by the assessee without claiming

3 ITA No.274/PUN/2023 Association of Oral Maxillofacial Surgeons of India

any exemption u/s.11 and the determination of total income at the

declared level, would require downward revision of income because

only 15% of the receipts could be taxed by treating remaining 85%

as application of income.

u/s.12AA granting registration to the assessee is effective from the

A.Y. 2019-20. As such, the assessment year under consideration,

namely, 2012-13, is not covered by the express mandate of the

registration. Howbeit, it is material to note the command of the

second proviso to section 12A(2), that was operative for the year

under consideration, which provides that “where registration has

been granted to the trust or institution u/s.12AA or section 12AB,

then the provisions of section 11 and 12 shall apply in respect of

any income derived from property held under trust of any

assessment year preceding the aforesaid assessment year, for which

assessment proceedings are pending before the Assessing Officer as

on the date of such registration. . . . . . .”. It is apparent from the

prescription of the proviso that notwithstanding the benefit of

registration not having been expressly granted by the ld. CIT(E) in

his order u/s.12AA, such benefit gets automatically extended to all

the assessment years for which the assessment proceedings are

pending on the date of such registration. Adverting to the facts of

4 ITA No.274/PUN/2023 Association of Oral Maxillofacial Surgeons of India

the extant case, it is noticed that the assessee had not furnished any

return prior to notice u/s.148. The solitary return was filed after the

notice on 24-04-2019. The consequential assessment was

completed u/s 147 of the Act on 17-12-2019 determining total

income equal to the amount of income returned, which attained

finality without any challenge thereto. The benefit of proviso can

be granted only when the assessment proceedings are pending on

the date of grant of registration by the ld. CIT(E). We are

confronted with a situation in which the registration was granted by

the ld. CIT(E) on 18-05-2023 and the assessment proceedings got

concluded, much before that, on 17-12-2019. Notwithstanding that,

no benefit of exemption u/s.11 was ever claimed in the return and,

as such, there was no question of granting or denying such benefit

also. In this view of the matter, the assessee cannot claim the

benefit of exemption u/s.11 for the year under consideration in any

manner.

that the assessee furnished the return pursuant to notice u/s.148 and

the income declared was assessed as the total income. The ld.

CIT(A) has invoked Explanation 3 for confirming the penalty

imposed by the AO u/s.271(1)(c) of the Act, which reads as under :

5 ITA No.274/PUN/2023 Association of Oral Maxillofacial Surgeons of India

“Explanation 3.—Where any person fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 or section 148 and the Assessing Officer or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148.”

person without reasonable cause fails to furnish his return within

the prescribed time and the AO etc. is satisfied that the assessee has

taxable income in respect of such assessment year, the assessee will

be deemed to have concealed the particulars of his income in terms

of section 271(1)(c) notwithstanding the fact that a return of income

has been subsequently furnished pursuant to notice u/s.148. The

effect of this provision, to the extent we are concerned, is that if

return is not furnished in time; the AO issues notice u/s.148; the

assessee files its return declaring certain income; then, the income

declared in the return, even if assessed de hors any variation, would

warrant the imposition of penalty u/s.271(1)(c) of the Act. The

prescription of Explanation 3 is to be read in contrast to the mandate

6 ITA No.274/PUN/2023 Association of Oral Maxillofacial Surgeons of India

of Explanation 1 to section 271, which specifically states that where

a person fails to offer an explanation or the explanation given is

found by the AO etc. to be false etc., then the amount added or

disallowed in computing the total income of such person shall be

deemed to represent the income in respect of which the particulars

have been concealed. On a conjoint reading of the Explanations 1

and 3, it becomes overt that the making of an addition or

disallowance is sine qua non for imposition of penalty u/s.271(1)(c)

except, where the assessee, not having filed return earlier, files it

only pursuant to notice u/s.148. In the cases falling in the

exception, even the income declared in the return, sans any addition

or disallowance, also gives a foundation for imposition of penalty.

Reverting to the facts of the present case, it is seen that, in principle,

the Explanation 3 is applicable which has expressly been invoked

by the ld.CIT(A) as well, as per the mandate of which, the amount

of income assessed is deemed as concealment for the purposes of

section 271(1)(c) of the Act. As the assessee admittedly did not file

any return earlier for the year under consideration, it is covered

within the scope of the Explanation 3.

the return filed pursuant to notice u/s.148 does not per se call for

imposition of penalty. The legislature has used the words “without

7 ITA No.274/PUN/2023 Association of Oral Maxillofacial Surgeons of India

reasonable cause” in the opening part of Explanation 3. The effect

of these words is that the mandate of Explanation 3 would be

magnetized and the penalty would be levied even on the declared

income pursuant to notice u/s.148, only when there was no

reasonable cause for not filing the return within the time prescribed

u/s.153 of the Act. Au contraire, if there exists a reasonable cause

for not filing the return u/s.139, the directive of the Explanation 3

will not be triggered and the case would come out of this

Explanation to be considered in terms of the main part of the

provision read with other Explanations.

examine if there was any reasonable cause in not filing the return

of income within the stipulated time. The main object of the

assessee, consisting of surgeons across the country, is to attain

higher Oral Maxillofacial surgical standards and to promote

research in Oral and Maxillofacial surgery. The assessee was set up

several years ago having and continuing to have its registered office

in Pune. It, being an all India body of surgeons, keeps moving its

area of operations and the relevant records on a certain frequency

from one city to another. A chart has been placed on record at page

48 of the paper book, which shows year-wise place of audit of

accounts. For the A.Y. 2012-13 to 2013-14, the operations of the

8 ITA No.274/PUN/2023 Association of Oral Maxillofacial Surgeons of India

society were in Mangalore and the audit was conducted by Mr. K.

Santha Kumar, Chartered Accountant, Thrissur. Thus, for the year

under consideration and the next year, the operations and the

records were kept in Mangalore. From the A.Y. 2014-15, there was

a shift of operations and the records from Thrissur to Faridabad,

which continued up to the A.Y. 2018-19. Name of the auditor who

conducted the audit and the date of audit reports have also been

given in this chart. Again, its operations came back to Pune with

effect from the A.Y. 2019-20. It was during such earlier years,

when the operations and records were outside Pune, that the

concerned persons at the relevant stations got the accounts audited,

but could not co-ordinate qua the filing the returns either because of

misunderstanding or ignorance. When the operations came back to

Pune in the year 2018, the trustees realised that though the accounts

were got audited for the earlier years, but neither the registration

was sought nor the returns were filed for such earlier assessment

years. Immediately, they swung into action and applied for

registration u/s.12AA on 07-10-2018 and also furnished the income-

tax return for the A.Y. 2019-20. It has been submitted by ld. AR

that no return prior to that was ever furnished for the above reasons

and the filing of such returns in the year 2018 became impossible of

compliance because of the requirement of filing on-line returns and

9 ITA No.274/PUN/2023 Association of Oral Maxillofacial Surgeons of India

the Income tax portal not accepting return for the assessment year

under consideration. It was stressed that the returns for all the

subsequent years are being regularly filed in Pune. This shows that

because of the regular shifting of the operations of the assessee-trust

from one station to another and the resultant confusion about the

correct person responsible for filing return, i.e. whether from the

station where the operations were going on and records were kept or

the registered office in Pune, the returns could not be filed for any

of the assessment years prior to the A.Y. 2019-20. In our

considered opinion, this constitutes a reasonable cause for which

the return for the year under consideration could not be filed within

the time prescribed u/s.153 of the Act. Taking a wholistic view of

the factual panorama of the case and the circumstances in which the

return for the year could not be filed within the stipulated time, we

are satisfied that this being a reasonable cause, brings the case out

of the purview of Explanation 3. If this Explanation fails to apply

and we come back to examine the case within the terms of

Explanation 1, the sequitur is that no penalty can be imposed in the

absence of any addition or disallowance in the determination of total

income by the AO. We, therefore, order to delete the penalty.

10 ITA No.274/PUN/2023 Association of Oral Maxillofacial Surgeons of India

Order pronounced in the Open Court on 14th August, 2023.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 14th August, 2023 सतीश आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant; 1. ��थ� / The respondent 2. 3. The Pr.CIT concerned 4. DR, ITAT, ‘A’ Bench, Pune गाड� फाईल / Guard file. 5.

आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 09-08-2023 Sr.PS 2. Draft placed before author 10-08-2023 Sr.PS 3. Draft proposed & placed before JM the second member 4. Draft discussed/approved by JM Second Member. 5. Approved Draft comes to the Sr.PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *