THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH vs. M/S PUNJAB HERITAGE AND TOURISM PROMOTION BOARD, CHANDIGARH

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ITA/297/2019HC Punjab & HaryanaPHHC01056941201904 December 2023Author: MR. JUSTICE GURMEET SINGH SANDHAWALIA,MS. JUSTICE LAPITA BANERJI7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the ITAT had rightly concluded that the assessee was under a bona fide belief that its application for registration was likely to be allowed. The court noted that the assessee had filed an application for registration on December 18, 2006, and a fresh application with amended bye-laws on April 15, 2008. The Commissioner of Income Tax had granted registration from assessment year 2009-10, stating there was no provision for retrospective registration. However, the assessee had pursued rectification, seeking registration from the date of the initial application. The court found that as the matter was pending consideration before the authorities, and the application for registration was pursued, it could not be said that the assessee had furnished inaccurate particulars or concealed income. The court relied on its own decision in CIT vs. Raj Overseas (2011 (336) ITR 261) and the Supreme Court's decision in CIT vs. Reliance Petro-products P. Ltd. (2010) 322 ITR 158 (SC), holding that the ITAT's view was a possible view. Therefore, no substantial question of law arose for consideration. The appeals were dismissed.

What were the facts?

The appeals by the Commissioner of Income Tax (Exemptions), Chandigarh, are against the Income Tax Appellate Tribunal's (ITAT) order dated September 7, 2018. The ITAT had deleted penalties levied under Section 271(1)(c) of the Income Tax Act, 1961, for assessment years 2008-09 and 2009-10. The assessee, M/s. Punjab Heritage & Tourism Promotion Board, Chandigarh, had claimed exemption under Section 11. Registration under Section 12AA was granted from assessment year 2009-10, but the assessee had applied for it earlier. The assessee contended it was under a bona fide belief that registration would be granted retrospectively, and interest income was treated as a liability due to pending remittance to the government. The revenue argued that the assessee was aware exemption was not granted for the relevant years.

What were the issues?

The High Court was asked to decide the following substantial questions of law: 1. Whether the ITAT was correct in deleting penalty under Section 271(1)(c) by accepting the assessee's plea of a bona fide belief that registration under Section 12AA would be allowed, ignoring the Supreme Court's decision in UOI vs. Dharmendra Textile Processors (306 ITR 277 SC) that penalty proceedings are a civil liability where mens rea is not relevant? 2. Whether the ITAT was correct in deleting penalty under Section 271(1)(c) ignoring the Delhi High Court's decision in CIT vs. Zoom Communications Pvt. Ltd. (327 ITR 510 Del) when the assessee's claims for exemption under Section 11 were untenable without Section 12AA registration? 3. Whether the ITAT was correct in deleting penalty under Section 271(1)(c) by accepting the assessee's plea on merits regarding disallowance of interest income on FDR, despite the ITAT having dismissed the assessee's appeals on quantum additions for earlier assessment years? 4. Whether the ITAT was correct in deleting penalty under Section 271(1)(c) on the issue of disallowance of interest income on FDR, when it is not debatable that interest earned is a revenue receipt? 5. Whether the ITAT's order was perverse, contrary to evidence, and suffered from non-application of mind? Assessee's Contention (as inferred from the Tribunal's reasoning): The assessee acted under a bona fide belief that registration under Section 12AA would be granted, as its application was pending. Interest income was treated as a liability due to pending remittance to the government, which was a bona fide exercise. It was not a case of furnishing inaccurate particulars or concealment of income. Revenue's Contention: The assessee was aware that exemption under Section 11 was not granted for the assessment years in question, as registration under Section 12AA was granted only from assessment year 2009-10. The assessment orders had been upheld.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 12AA,Section 11,Section 260A,Section 12A(2),Section 154,Section 80-IB

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA

AT CHANDIGARH Date of Decision: 04.12.2023 The Commissioner of Income Tax (Exemptions), Chandigarh

.....Appellant(s) Versus M/s. Punjab Heritage & Tourism Promotion Board, Chandigarh ...Respondent(s) CORAM: HON'BLE MR. JUSTICE G.S.SANDHAWALIA HON'BLE MS. JUSTICE LAPITA BANERJI Present: Mr. Varun Issar, Advocate, for the appellant (in both the cases). G.S.SANDHAWALIA, J. (Oral)

1.

The present judgment shall dispose of two appeals i.e. ITA Nos.297 an 298 of 2019, which have been filed under Section 260A of the Income Tax Act, 1961 (in short 'the Act'), as both the appeals arise out of same order dated 07.09.2018 (Annexure A-6 in both the cases) passed by the Income Tax Appellate Tribunal, Chandigarh in ITA No. 158/Chd/2015 for the assessment year 2008-09 and in ITA No.159/Chd/2015 for the assessment year 2009-10. It is pertinent to mention that ITA No.299 of 2019 has been dismissed as not maintainable vide order of even date on account of low tax element and in view of Circular No.3/2018 dated 11.07.2018 and Circular No.17/2019 dated 08.08.2019. 2. Reference is being made to ITA-297-2019, The Commissioner of Income Tax (Exemptions), Chandigarh vs. M/s. Punjab Heritage & Tourism Promotion Board, Chandigarh for the assessment year 2008-09. 3. The following substantial questions of law as such are sought to Shivani Gupta 2023.12.12 10:32 integrity of this document -2- be raised before this Court for consideration:- “(i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in deleting penalty u/s 271(1)(C) by accepting the plea of the assessee that it was under a bonafide belief that it would be allowed registration u/s 12AA for A.Ys 2007-08 and 2008-09 ignoring the decision of the Hon'ble Supreme penalty proceedings u/s 271(1)(c) is a civil liability and mens-rea is not relevant? (ii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in deleting penalty u/s 271(1)(c) ignoring the decision of the Hon'ble Delhi High Court in the case of CIT vs. Zoom communications Pvt. Ltd. 327 ITR 510 (Del) when the claims of the assessee with respect to exemption u/s 11 for the AY 2007-08 and 2008-09 were untenable in law since the assessee did not have registration u/s 12AA? (iii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in deleting penalty u/s 271(1)(C) by accepting the plea of the assessee on merits on the issue of disallowance of interest income on FDR when the ITAT had itself dismissed the appeals of the assessee on quantum addition vide its earlier orders in ITA No.257, 258, 1094 & 1095/Chd/2011 for the A.Ys. 2007-08 and 2008-09 and ITA No. 1031/Chd/2012 for the AY 2009-10? (iv) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in deleting penalty u/s 271(1)(C) on the issue of disallowance of interest income on FDR when it is not debatable issue that the interest earned is a revenue receipt and should have been included in the income of the assessee? Shivani Gupta 2023.12.12 10:32 integrity of this document -3- (v) Whether on the facts and circumstances of the case, the order of the Appellate Tribunal is contrary to the evidence and material on the record of the case and further suffering from non-application of mind and is unreasonable and arbitrary and therefore, perverse.”

4.

A perusal of the order of the Tribunal (Annexure A-6) would go on to show that the reasons which weighed with the Tribunal while allowing

the appeal as such are that it was not a fit case for levy of penalty under Section 271(1)(c) of the Act on account of the fact that the assessee had claimed exemption under Section 11 of the Act vide the application dated 18.12.2006. The registration to the assessee as a charitable institution had been granted from the assessment year 2009-10 and on account of the fact that the assessee was under a bona fide belief that its application for registration was likely to be allowed, it had been mentioned in the relevant column that registration is applied for. The plea was also noticed that since the assessee was liable to remit the amount of interest to the government and it was shown as liability and was not shown as receipt in the income and expenditure account which was a bona fide exercise. Similar plea had been taken regarding interest expenditure earned by the assessee. Resultantly, a finding had been recorded that it is not a case of furnishing of inaccurate particulars of income and concealment of income on the part of the assessee warranting penalty under Section 271(1)(c) of the Act while allowing the appeals.

5.

Counsel for the Revenue has argued that on 30.06.2008/02.07.2008, the benefit of exemption was granted in the application filed under Section 11 w.e.f. 2009-10 and the return was filed for the assessment year 2008-09 on 21.01.2009 and, therefore, the assessee was Shivani Gupta 2023.12.12 10:32 integrity of this document -4- well aware of the fact that the benefit of exemption has not been granted. It is submitted that the assessment proceedings otherwise have been upheld till this Court in ITA Nos.147 to 150 of 2014, M/s. Punjab Heritage and 22.08.2012 (Annexure A-3).

6.

We have perused the paper book. It is not disputed that against the order dated 30.06.2008/02.07.2008 whereby exemption was granted under Section 12AA of the Act, the assessee had filed a rectification application. The rectification application was dismissed on 04.12.2009 by the Commissioner of Income Tax. The said order reads thus:- “ORDER U/S 154 OF THE INCOME TAX ACT, 1961 The assessee, Punjab Heritage and Tourism Promotion Board, Sector 38, Chandigarh vide its letter dated 30.11.2009 has stated that order u/s 12AA of Income-tax Act, 1961 passed by this office on 30.6.2008 granting registration to it w.e.f. the A.Y 2009-10 is not correct. Registration was required to be allowed to it from the AY 2007-08. The assessee's submission was considered in the light of the facts of the case and the provisions of law applicable. The assessee society filed an application with this office on 18.12.2006 in the prescribed proforma requesting for grant of registration u/s 12A of the Income-tax Act, 1961 enclosing therewith a copy of bye-laws and Income and Expenditure" statement. On Shivani Gupta 2023.12.12 10:32 integrity of this document -5- perusal of clause 26 of the bye-laws, it was noticed, that the dissolution' clause was inconsistent and improper and was not in accordance with the provisions of the Societies Registration Act, 1860. The application of the assessee was thus filed on 22.6.2007 informing the society that its case can be considered only on amendment of this clause and receipt of amended Rules and Regulations. A fresh application alongwith a copy of amended 'dissolution' clause was filed by the assessee on 15.4.2008. As the fresh application was filed by the assessee during the Financial Year 2008-09, an order u/s 12AA of Income-tax Act, 1961 was passed by the undersigned on 30.6.2008 granting registration to the society from the A.Y 2009-10 as per the provisions of section 12A(2) of Income-tax Act, 1961. In the Act, there is no provision for granting registration retrospectively. As there was filing of fresh & correct application on 15.4.2008 i.e. FY 2008-09, the assessee was entitled for registration from A.Y 2009-10 only and registration u/s 12AA of the Income tax Act, 1961 was rightly granted to it from the A.Y 2009-10 as per provisions of section 12A (2) of Income-tax Act. There is no mistake apparent from record. The assessee's application for rectification of the above said order is thus rejected. Commissioner of Income Tax-II Chandigarh”

7.

A perusal of the said order would go on to show that the assessee was always wanting its applications to be considered from the date he had filed which was 18.12.2006 and his case for registration was to be allowed for the year 2007-08. Once the issue was pending before the authorities, it is in Shivani Gupta 2023.12.12 10:32 integrity of this document -6- such circumstances, the assessee in his return filed had mentioned that the matter was pending. Thereafter, it was followed up by filing an application for rectification asking for exemption from the date the application was filed.

8.

Thus, we are of the considered opinion that the Tribunal has rightly come to the conclusion that the assessee was under a bona fide belief that his application for registration was likely to be allowed. The co-ordinate under Section 80-IB of the Act in respect of the income from duty drawback which was disallowed. Resultantly, penalty was also levied. This Court came to the opinion that the order of the Tribunal that it is a debatable issue whether penalty was not liable to be levied was accordingly upheld as the deduction claimed by the assessee did not lack any bona fides and the penalty under Section 271(1)(c) of the Act was not attracted. Reliance was placed upon the judgment of the Apex Court in CIT vs. Reliance Petro-products P. Ltd. (2010) 322 ITR 158 (SC) and it was held that the view taken by the Shivani Gupta 2023.12.12 10:32 integrity of this document -7- Tribunal is a possible view.

10.

Accordingly, we are of the considered opinion that the facts and circumstances herein also are identical to that extent and, therefore, we do not feel that any question of law is arising for consideration before this Court which is to be considered.

11.

Accordingly, both the appeals stand dismissed.

(G.S. SANDHAWALIA) JUDGE 04.12.2023 (LAPITA BANERJI) shivani JUDGE Whether reasoned/speaking Yes Whether reportable Yes Shivani Gupta 2023.12.12 10:32 integrity of this document

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