COMMISSIONER OF INCOME TAX (EXEMPTIONS) DELHI vs. JAMNALAL BAJAJ FOUNDATION

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ITA/416/2023HC DelhiDLHC01002035202231 July 2023Bench: HON'BLE MR. JUSTICE RAJIV SHAKDHER,HON'BLE MR. JUSTICE GIRISH KATHPALIA6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was correct in its findings. Regarding the first issue, the Court agreed with the Tribunal that there was no concealment of income. The respondent had disclosed the utilization of accumulated corpus donations from earlier Assessment Years in its revised return before the Assessing Officer flagged the issue. This disclosure negated the claim of concealment. Concerning the second issue, the Court affirmed the Tribunal's view that the penalty proceedings were flawed because the show-cause notice did not specify which limb of Section 271(1)(c) of the Act was invoked. The Court relied on its own previous judgments, including *Pr Commissioner of Income Tax-3 v Ms Minu Bakshi* (2022:DHC:2814-DB), and decisions of the Karnataka High Court in *Commissioner of Income Tax v Manjunatha Cotton and Ginning Factory* (2013) 359 ITR 565, and the coordinate bench's decision in *CIT and Anr. v M/s SSA’s Emerald Meadows* (ITA No. 380/2015). The Court found no substantial question of law arising for its consideration and therefore did not interfere with the Tribunal's order. The appeal was accordingly closed.

What were the facts?

The appeal concerns Assessment Year 2009-10. The appellant, Commissioner of Income Tax (Exemptions) Delhi, challenges an order dated 03.09.2021 by the Income Tax Appellate Tribunal (Tribunal). The respondent, Jamnalal Bajaj Foundation, had appealed to the Tribunal against an order dated 01.02.2017 by the Commissioner of Income Tax (Appeals) [CIT(A)], which sustained a penalty of Rs. 5,39,56,443/-. The respondent, registered under Section 12A, initially filed a return declaring nil income. Subsequently, it filed a revised return on 24.03.2011, declaring an income of Rs. 18,87,107/-, which was taxed. This revision was due to the utilization of accumulated surplus of Rs. 20 crore for donations to other charitable trusts, in line with Section 11(2). The assessment was completed under Section 143(3) at Rs. 19,02,18,230/-. Penalty proceedings under Section 271(1)(c) were initiated, with a show-cause notice served on 03.03.2014. The respondent contended no concealment or inaccurate particulars were furnished. The CIT(A) dismissed the appeal, leading to the respondent's appeal before the Tribunal.

What were the issues?

1. Whether the Tribunal was correct in holding that there was no concealment of income by the respondent, given that the utilization of accumulated corpus donations from earlier Assessment Years was disclosed in the revised return before being flagged by the Assessing Officer? (Question of fact and law, concerning Section 271(1)(c) of the Income Tax Act, 1961). 2. Whether the penalty notice issued to the respondent was valid, as it did not specify which limb of Section 271(1)(c) of the Act was triggered (concealment of income or furnishing inaccurate particulars)? (Question of law, concerning Section 271(1)(c) of the Income Tax Act, 1961). Assessee's Contentions: - There was no concealment of income as the utilization of accumulated corpus was disclosed in the revised return. - The penalty notice was invalid for not specifying the limb of Section 271(1)(c) invoked. Revenue's Contentions: - The revenue sought to rely on the order of the CIT(A) to sustain its appeal.

Which sections of the Income-tax Act were involved?

Section 11(2),Section 11(3)(c),Section 12A,Section 143(3),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

ITA 416/2023

Page 1 of 5 $~42 * IN THE HIGH COURT OF DELHI AT NEW DELHI %

Decision delivered on: 31.07.2023

+ ITA 416/2023 and CM APPLS. 38416/2023 & 38417/2023

COMMISSIONER OF INCOME TAX (EXEMPTIONS) DELHI ..... Appellant Through: Mr Abhishek Maratha, Sr. Standing Counsel with Mr Akshat Singh, Jr. Standing Counsel.

versus

JAMNALAL BAJAJ FOUNDATION

..... Respondent

Through: None.

CORAM:

HON'BLE MR. JUSTICE RAJIV SHAKDHER

HON'BLE MR. JUSTICE GIRISH KATHPALIA

[Physical Hearing/Hybrid Hearing (as per request)]

RAJIV SHAKDHER, J. (ORAL):

1.

This appeal concerns Assessment Year (AY) 2009-10. 2. Via, this appeal, the appellant/revenue seeks to assail the order dated 03.09.2021 passed by the Income Tax Appellate Tribunal [in short, “Tribunal”]. 3. Record shows that the respondent/assesee had preferred an appeal with the Tribunal against the order dated 01.02.2017 passed by the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”]. 4. The respondent/assessee’s appeal was rejected by the CIT(A), which Digitally Signed By:NEELAM SHARMA Signing Date:12.08.2023 09:26:59 Signature Not Verified

ITA 416/2023

Page 2 of 5 resulted in the penalty order, passed against it being sustained. Via, the penalty order the respondent/assessee has been mulct with penalty amounting to Rs. 5,39,56,443/-. 5. The record also discloses that the respondent/assessee which is registered under Section 12A of the Income Tax Act, 1961 [in short, “The Act”] had filed its return on 30.09.2009 declaring “nil” income. 6. The respondent/assessee’s case was selected for scrutiny assessment. During the pendency of the scrutiny assessment, the respondent/assessee filed a revised return on 24.03.2011 and declared an income amounting to Rs. 18,87,107/-. 6.1 The taxes on the income declared in the revised return were paid by the respondent/assessee. 7. It appears that the respondent/assessee had filed a revised return as the accumulated surplus amounting to Rs. 20 crore, in line with the provisions of Section 11(2) of the Act was utilized for granting donations to other charitable trusts. 8. It is in this backdrop that the respondent/assessee’s assessment was completed under Section 143(3) of the Act and its assessed income was pegged at Rs. 19,02,18,230/-. 9. Evidently, penalty proceedings were initiated against the respondent/assessee under Section 271(1)(c) of the Act in the course of the assessment proceedings. 10. A show-cause notice (SCN) under Section 271(1)(c) dated 19.12.2011 of the Act was served on the assessee. The service it appears was effected on 03.03.2014. Digitally Signed By:NEELAM SHARMA Signing Date:12.08.2023 09:26:59 Signature Not Verified

ITA 416/2023

Page 3 of 5 10.1 In response to the said notice, a communication dated 12.03.2014 was filed on behalf of the respondent/assesssee. Inter alia, the respondent/assessee asserted that it had not concealed any facts or furnished inaccurate particulars concerning its income, therefore, penalty under Section 271(1)(c) of the Act ought not to be imposed. 11. Respondent/assessee’s reply cut no ice and hence, penalty order was passed which, as indicated above, was taken in appeal to the CIT(A). 12. The CIT(A), as noticed hereinabove, dismissed the appeal. This led the assessee filing an appeal with the Tribunal. 13. What is emerged from the record is that in the earlier AY, the respondent/assessee had opted for accumulation of its corpus donations. The accumulation led to the respondent/assessee having a corpus donation of Rs. 25,16,00,000/-. The details, as provided in the order of the Tribunal, are extracted hereafter:

S. No. Assessment Year Amount 1 2006-07 4,66,00,000/- 2 2007-08 10,50,00,000/- 3 2008-09 10,00,00,000/-

TOTAL 25,16,00,000/-

14.

There appears to be no dispute that out of the aforementioned amount i.e., Rs. 25,16,00,000/-, Rs. 20 crores was utilized by way of donations to other charitable institutions. 15. Consequently, since the provisions of Section 11(3)(c) of the Act Digitally Signed By:NEELAM SHARMA Signing Date:12.08.2023 09:26:59 Signature Not Verified

ITA 416/2023

Page 4 of 5 were attracted, the respondent/assessee filed a revised return to bring to the fore this aspect. 16. It is also not in dispute that the respondent/assessee did pay tax amounting to Rs. 7,75,69,270/-, as per the computation of its total income set forth in the revised return. 17. The Tribunal, having regard to the aforesaid facts, reversed the order of the CIT(A) on two grounds:

(i) First, there was no concealment of income. The Tribunal was of the view that the respondent/assessee had disclosed the utilisation of the corpus donation accumulated in earlier AYs in its revised return, before it was flagged by the Assessing Officer (AO).

(ii) Second, the penalty notice issued to the respondent/assessee did not specify which limb of Section 271(1)(c) of the Act was triggered against the respondent/assessee i.e., whether the charge levelled concerned concealment of income or furnishing inaccurate particulars. 18. We have heard Mr Abhishek Maratha, learned senior standing counsel, who appears on behalf of appellant/revenue. Mr Maratha has sought to place reliance on the order of the CIT(A) to sustain the appeal. 19. We are of the view that the Tribunal is correct, both with regard to the fact there had been no concealment, as also concerning the view taken by it that the penalty proceedings did not indicate the limb under which the penalty was sought to be levied on the respondent/assessee. 20. In the instant matter, the Tribunal had taken into account the earlier judgments of this Court, as well as the judgments of the Karnataka High Court. Digitally Signed By:NEELAM SHARMA Signing Date:12.08.2023 09:26:59 Signature Not Verified

ITA 416/2023

Page 5 of 5 21. In Pr Commissioner of Income Tax-3 v Ms Minu Bakshi 2022:DHC:2814-DB, a coordinate bench of this court, [of which one of us i.e., Rajiv Shakdher, J. was a member], the issue concerning the penalty notice not indicating the precise limb of Section 271(1)(c) under which the assessee was proceeded came up for consideration. The relevant observations made therein are extracted hereafter:

“7. In our opinion, the conclusion reached by the Tribunal in the instant case that the notice for imposition of penalty under Section 271(1) (c) of the Act, did not specify which limb of the said provision the penalty was sought to be levied, is covered by the following decisions, which includes a decision rendered by a coordinate bench of this Court. (i) CIT and Anr. v M/s SSA’s Emerald Meadows, passed in ITA No. 380/2015, dated 23.11.2015. (ii) Commissioner of Income Tax v Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar.) (iii) PCIT vs M/s Sahara India Life Insurance Company Ltd., passed in ITA No.475/2019, dated 02.08.2019.

7.1. To be noted, the Special Leave Petition filed against the judgement in SSA’s Emerald (mentioned above) was dismissed via order dated 05.08.2016.

7.2. We are in agreement with the view taken by the Karnataka High Court in the above-mentioned judgements (in SSA’s Emerald and Manjunatha Cotton) and, in any event, are bound by the view taken by the coordinate bench of this court in the Sahara India case”.

22.

Thus, for the foregoing reasons, we are not inclined to interfere with the impugned order as, according to us, no substantial question of law arises for our consideration. Digitally Signed By:NEELAM SHARMA Signing Date:12.08.2023 09:26:59 Signature Not Verified

ITA 416/2023

Page 6 of 5 23. The appeal is accordingly closed. 24. Consequently, the pending applications shall also stand closed.

RAJIV SHAKDHER JUDGE

GIRISH KATHPALIA JUDGE JULY 31, 2023/RY Digitally Signed By:NEELAM SHARMA Signing Date:12.08.2023 09:26:59 Signature Not Verified

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