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Income Tax Appellate Tribunal, “F” Bench, Mumbai
Before: Shri Shamim Yahya (AM) & Shri Saktijit Dey (JM)
IN THE INCOME TAX APPELLATE TRIBUNAL “F” Bench, Mumbai Before Shri Shamim Yahya (AM) & Shri Saktijit Dey (JM) ITA Nos.1465 to 1470/Mum/2020 (Assessment Years: 2006-07 to 2011-12) The University of Mumbai Additional Director of Account Department, M.G.Road Income Tax(Exemption), Range-II 4th Floor, Room No.407, Piramal Fort, Mumbai-400 032 Vs. Chambers, Lalbaug, Parel Mumbai-400 012
PAN/GIR No. AAATU1070A (Assessee) : (Revenue)
: Shri Pradeep D. Kamthekar Assessee by Revenue by : Shri S.N.Kabra
Date of Hearing : 09.11.2021 : 12.11.2021 Date of Pronouncement
O R D E R Per Shamim Yahya(A.M.).:
These appeals by the Assessee are directed against the respective orders of the learned Commissioner of Income Tax (Appeals), Mumbai (‘ld.CIT(A) for short) pertain to the respective assessment years as above.
Since the issues are common and connected and the appeals were heard together, these have been consolidated and disposed of by this common order.
At the outset it is noted that delay of 121 days in filing the appeal. Reasonable cause for the delay has been attributed to change in the counsel. It has been pleaded that in fact the filing fee of Rs. 500/- has already been paid on 04/12/2019, which was within the time for filing the appeal. However, as the previous counsel /Chartered Accountant had left the university and university was under the process of appointing new Counsel/Chartered Accountant to look into the matter the delay in
2 The University of Mumbai
filing of appeal was caused. It has prayed that the delay be condoned. Upon careful consideration and hearing the Ld. DR, we condone the delay in filing the appeal
The issue is in this appeal pertain to levy of penalty u/s. 272A(2)(e) for the following amounts for AY 2006-07,2007-08,2008-09,2009-10,2010-11 & 2011-12.
Sr.No. Assessment Year Penalty (Amount Rs.) 1 2006-07 1,06,000/- 2 2007-08 99,000/- 3 2008-09 1,67.400/- 4 2009-10 1,30.900/- 5 2010-11 94,400/- 6 2011-12 57,900/-
ITA No.1470/Mum/2020 for AY 2006-07
Since, the facts are common and orders of authorities are also identical, we are referring to the facts and figures from the AY 2006-07. The AO in the penalty order noted that the due date for filing return of income by the assessee for A.Y.2006-07 was 30.09.2006. The assessee did not voluntarily file its return of income within the time limit prescribed under the Income Tax Act. After duly recording reasons for income escaping assessment, notice u/s 148 of the I.T.Act was issued to the assessee on 28.03.2013. That the assessee submitted that it had filed its return of income on 25.08.2009 i.e. after a delay of 1060 days from the due date. That these facts were recorded in the assessment order u/s 143(3} r.w.s 147 of I.T.Act and penalty proceedings u/s 272A(2)(e) duly initiated. Penalty notice was issued to the assessee on 28.03.2014 and 01.08.2014.
The AO has reproduced the assessee’s submissions in this regard as under:-
3 The University of Mumbai
"The University of Mumbai is regulated under the Maharashtra Universities Act, 1994. The University of Mumbai is controlled and funded by the Government of Maharashtra/!he Central Government. The Departments/Institutions of the University of Mumbai are situated in various campuses in the city of Mumbai including a Sub- Centre at Ratnagiri. The financial transactions are recorded under the minor heads/detailed heads prescribed in accordance with the provisions of the University of Mumbai Accounts Code. Later on all these accounts which are maintained in various University Departments/Institutions or campuses, are compiled centrally, audited by the Statutory auditor and then presented to the Senate as required by Section 104 of the Maharashtra Universities Act. 1994. An extract of the said Act is enclosed and marked Annexure I. In view of the multiplicity of the locations where accounts are maintained, being various account heads and different funds and many campuses and Sub-centres in various districts, the compilation of accounts has proved to be a very complex and tedious process. Thus preparation of final accounts from the initial considerable time. Consequently, the statutory audit of the accounts also gets delayed, the university of Mumbai has been computerizing the accounts processes. Though efforts had been made to remove the backlog and make the accounts upto date and we have not been able to do so as yet due to various administrative and technical reasons. The University is under an hones/ belief that since its income is exempt U/s. 10(22)/10(23C) of the Income Tax Act, 1961, it is not obligator)' on its part to file the return The income of the University is exemption U/s. 10(23C)(iiab) which reads as under; "Any University or other Educational Institution existing solely for Educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; " Though the University charges fees from students as approved by (he Government and has oilier sources of income, deficit, if any, can be met through grants. Clause 3 of Section 102 of the said Act states that "The Salary fund shall consist of all amounts received from the State Government, Central Government or University Grants Commission towards full or part payment of the salary and allowances. No amount from this fund shall be utilised for the purpose other than payment of salary and allowances. " The above sufficiently endorses the fact that that the University is substantially financed by Government. Besides the University is existing solely for the educational purposes and is not for purposes of profit. Merely having surplus does not tantamount to profit as the surplus is not available for distribution as dividend and the surplus is utilized towards its object, namely - education. In the case of Sikkim Manipal University V/s. Asst. Commissioner of Income Tax. Kolkata Bench, it was held that "a perusal of Sec. 10(23C)(iiiab) shows that the educational institution should exist 'solely 'for educational purposes and not for purposes of profit, that is to mean that the institution should provide education and
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not indulge in any profit making activity. The determination of the existence of educational institution solely for educational purposes is to be done on the basis of its objects and ut)ilization of its income in accordance with the conditions laid down in the third proviso to Sec. 10(23C') In the case of Bangalore University in ITA No. 398/Bang/2007 vide order dt. 28th March. 2008, held that in case in a year fees collected from students exceed the grants received from the Government will not render it outside the purview of being on educational institution existing solely for the education purpose. The fact that the university was being hitherto rim by the Government funds cannot be ignored. Merely for the reason that the educational institution has surplus funds, it would not ipso facto lead to an inevitable conclusion that an educational institution exists for making profits and not solely for educational purposes. " Therefore, the income of the University is exempt from tax. The fact that the income of (he University is exempt U/s. 10(23C) (iiiab) is also accepted by the Department as the return showing Nil Income being exempted U/s. 10(23C) (iiiab) have been accepted by the Department in the past. The objects of the Mumbai University are spelt in Section 4 of "The Maharashtra University Act, 1994 ". The Main objects of the University as mentioned in the Maharashtra Universities act, 197], is as follows ; The objects of the university shall be to disseminate, create and preserve knowledge and , understanding *by teaching, research 'extension and service and by effective demonstration and influence of its corporate life on society in general, and in particular the objects shall be – (1) to carry out its responsibility of creation, preservation, and dissemination of knowledge; (2) to promote discipline and the spirit of intellectual inquiry and to dedicate itself an a fearless academic community to the sustained pursuit of excellence; (3) to encourage individuality and diversity within a climate of tolerance and mutual understanding; (4) to promote freedom, secularism, equality and social justice as enshrined in the Constitution of India and to be catalyst in socio-economic transformation by promoting basic attitudes and values of essence to national development; (5) to extend the benefits of knowledge and skills for development of individuals and society by associating the university closely with local and regional problems of development;
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(6) to carry out soda! responsibility as an informed and objective critic, to identify and cultivate talent, to train the right kind of leadership in all walks of life and to held younger generation to develop right attitudes, interests and values; (7) to promote equitable distribution of facilities of higher education; (S) to provide for efficient and responsive administration, scientific management and develop organisation of teaching, research and extension; (9) to promote acquisition of knowledge in a rapidly developing and changing society and to continually offer opportunities of upgrading knowledge, training and skills in the context of innovations, research and discovery in all fields of human endeavor by developing higher educational network with use of modern communication media and technologies appropriate for a learning society; (10) to promote national integration and preserve cultural heritage; (11) to develop work culture and promote dignity of labour through applied components in the syllabi; (12) to build up financial self-sufficiency by undertaking academic and allied programmes and resource generative services in a cost-effective manner; (13) to promote belter interaction and co-ordination among different universities and colleges by all such means generally to improve the governance of the university and facility it provides for higher education; (14) to generate and promote a sense of self-respect and dignity amongst the weaker sections of the society; (15) to .strive to promote competitive merit and excellence as the sole guiding criterion in all academic and other matters relating to students. Thus, as stated earlier, the' University is existing solely for (he educational purposes. Further, Section 139(4A) which is applicable to the Charitable Trust and the University of Mumbai being not a Charitable Trust, is not, therefore, applicable in the case of University. Section 139(1) is also not applicable as the total income of the University being exempt cannot exceed the maximum amount which is not chargeable to Income Tax. Ordinarily, therefore, it is not incumbent on the University to file the return of income either U/s. 139(1) or I39(4A). We may invite your attention to the judgments in the case of Addnl. Director of Income Tax vs. M.D. Memorial Charitable and Educational Society in which the Delhi 'E' Bench of the Income Tax Appellate Tribunal held that the penalty U/s. 272A(2)(e) urn cancelled on the ground that the assessee was not required to file the 'return U/s. 139(4A) in view off he its income being exempt U/s. 10(22).
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The Delhi Bench of (he Tribunal had relied on Us judgment in the case of I.T.O. Vs. St. Michaels Education Foundation. Section 10(22) of the Income Tax Act. 1961, is replaced by Section 10(23C) of the Income Tax Act. 1961. and hence the aforesaid judgments are applicable to (he cases covered by Section 10(2 3C) of the Income Tax Act, 1961. 8. We further humbly submit that no penalty should be imposed merely when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is no! liable to Act in the manner prescribed by the statute. Our clients rely on the judgment of (he Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa. 9. Based on its convictions, the University has filed an appeal against the aggrieved order and is expecting rifling in its favour. 10. In the past, the penalty proceedings initiated against the University have been dropped inter alia for the above reasons. A copy of the said order for A Y 2003-04 is enclosed and marked Annexure 2. for your ready reference. Besides, assessee being a University, lenient view needs to be taken. The assessee relics on the judgement passed in Slate Bank of India vs Additional Commissioner of Income Tax (TDS). 11. Further the assessee humbly submits that it had not acted deliberately in defiance of law and was not guilty of conduct contumacious or dishonest or acted in conscious disregard to its obligations. The assessee relies on the judgement passed in State Bank of India vs Additional Commissioner of Income Tax (TDS) 12. The Assessee relies of (he judgements passed in the following case-laws: a) Shri Bhandup Jain Temple vs DDIT reported in (1996) 56 TTJ (Bom) 104. b) Branch Manager, SBIvs ACIT (TDS) reported in 2014 62 SOT 119 (Cultack) URO. c) Akali Baba Phool Singh Educational Trust vs DDIT (Exemption) reported in (2011) 43 SOT 700 (Del). d) Shyam Gopal Charitable Trust vs DIT (Exemption reported in (2006) 206 CTR (Del) 493. e) ADIT vsM. D. Memorial Charitable & Educational Society reported in (2002) 74 TTJ (Del) 595. The extracts of l he above judgements are enclosed and marked Annexure 3. 13. We also enclose an article published in CTR publications titled Return and Trusts. The same is enclosed and marked Annexure 4. 14. In view of (he above, the penalty proceedings be dropped and the delay be condoned. "
The AO did not accept the assessee’s explanation. He did not deal with the any of the case law mentioned by the assessee. He did not deal with the reasonable cause
7 The University of Mumbai
attributed that assessee was under an honest belief that assessee was not required to file return of income under the provisions of the Act. He held as under:-
(1) The assessee has claimed that due to multiplicity of locations where accounts are maintained, compilation of accounts is a very complex and tedious process. This argument of the assessee is unacceptable since most large companies have operations spread out over distant geographic locations, yet they file their income tax returns in time. Moreover, it can in no way justify delay of 35 months. (2) The assessee has claimed that it was under an honest belief that since its income is exempt U/s. 10(22)710(23C) of the Income Tax Act, 1961, it is not obligatory on its part to file the return. This argument is unacceptable since an institution like University of Mumbai cannot claim innocence on the ground of ignorance of law. Being headed by eminent personalities and highly educated people, the University ought to be aware of its obligation to file income tax return. The fact that assessment was made on total income of Rs.1,83,84,150/- against Nil returned income shows that its belief of filing income tax return not being obligatory was misplaced.
(3) In its reply, the assessee has relied upon its objects. As pointed out by the Assessing Officer in the assessment order, the assessee has earned surplus of Rs.18,24,45,379/- during the year which shows that motive of the assessee is profit making. Moreover, irrespective of merits of the issues involved, the assessee was liable to file its return of income within the time limit prescribed under the I.T.Act which has not been done. In view of the above reasons, it is held that the assessee has failed to prove that there was a reasonable cause for the delay in filing return of income, and that too of 1060 days. Hence, it is held that the assessee is liable for penalty u/s 272A(2)(e) of the IT Act. Penalty of Rs. 106,000-is-hereby levied @ Rs. 100 per day.
Against the above order, assessee is in appeal before the Ld.CIT(A).
Ld.CIT(A) also reproduced the submission of the assessee. Ld.CIT(A) inter-alia noted the following submission of the assessee.
“The relevant provisions of section 139(4C) of the Act which reads as under: Every — (E) "fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-
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clause (iiiab) or sub-clause (iiiad) or sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (lilac) or sub-clause (iiiae) or sub-clause (via) of clause (23C) of section 10."
The requirement of university covered by S. 10(23C)(iiiab) to file the return of income was introduced by Finance Act, 2015 w. e. f. 01.04.2016.
Please find enclosed herewith Page-22 of Explanatory Memorandum to Finance Bill 2015 as Annexure-1 the relevant para is reproduced below:
Furnishing of return of income by certain universities and hospitals referred to in section 10(23C) of the Act: Under the provisions of section 10 of the \Act, exemption under sub-clause (iiiab) and (iiiac) of clause 23C, subject to specified conditions, is available to such university or educational institution which is wholly or substantially financed by the Government.
Under the existing provisions of section 139, all entities whose is exempt under clause (23C) of Section 10, other than those referred to in sub-clauses (iiiab) and (iiac) of the said clause, are mandatorily required to file their return of income It is proposed to amend the Act in order to provide that entities covered under clauses (iiiab) and (iiiac) of clause (23C) of section 10 shall be mandatory required to file their return on income. This amendment shall take effect from 1st April, 2016 and will accordingly, apply in relation to assessment year 2016-17 and subsequent years.
Thus University submits that there was no mandatory requirement to file the return of income for the year under consideration. ii. Shyam Gopal Charitable Trust vs. DIT( E) 290 ITR 99 (Del) Annex-2 "Where assessee did not file return of income on the initial advice of its chartered accountant that it was not required to file any return for the relevant assessment years. Therefore there was reasonable cause within the meaning of s 273B for failure to file returns within stipulated time and penalty u/s 272A(2)( e) was not leviable. The ratio of this decision applies to the facts of the case of the University.
iii. Akali Baba Phool Singh Educational Trust vs. DDIT(E) 43 SOT 700 (Del Trib). Annex-3. Where assessee institution was under bona fide belief that its income is exempt u/s10(23C)(iiiab) and was not required to file return of income, penalty imposed u/s 273B is not justified.
The facts of the case of University are exactly the same as facts of decision reported in this case and respected CIT(A) is requested to apply ratio of decision of this decision to the case of the University. iv. HTSL Community Service Trust vs. Joint Director of Income Tax (Exemption) reported in (2012) 31 CCH 0251 (Bang Trib) Annex-4.
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An attempt of deliberateness or deceptiveness is associated with the word "failure" - In the present case there was no deliberateness or deceptiveness in not filing the return of income within the prescribed time limit. The delay was not intentional or deliberate, hence penalty u/s 272(A)(2)(e) can not be levied. In the case of University also the delay occurred under circumstances mentioned above and it was not deliberate or intentional. Hence ratio of decision in this case applies to the facts of the case of the University. v. Vatavaran Trust vs. Joint Director of Income Tax (Exemption) (2006) 25 CCH 0093(Dei Trib) Annex-5. There was excess of expenditure over income in all assessment years, assessee 's belief that it was not obliged to file return of income u/$ 139(4A) was bona fide and this constituted reasonable cause , hence penalty u/s 272(A)(2) (e) is not leviable. In the case of University also, its bona fide belief that since its income is exempt u/s 10(23C)(iiiab), it is not required to file the return of income, constitutes reasonable cause and no penalty u/s 272(A)(2)(e) should be levied. In the aforesaid circumstances when there is no loss of revenue, we submit that no penalty should be levied for delay in filing return of income. Further it is submitted that no penalty shall be imposed merely because it is lawful to do so. No penalty need be levied when there is a technical or venial breach of the provisions of the Act or where breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. Hindustan Steel Ltd. vs. State of Orissa 83 ITR 26 (SC) Respected Commissioner of Income Tax - Appeals is hereby requested to delete the penalty levied by learned A.O. u/s 272(A)(2)(e) of I.T. Act, 1961 in the light of above submissions.
The Ld.CIT(A) did not advert to any of the case laws or the reasonable cause of delay attributed by the assessee.He proceeded to hold that if the assessee was under any bonafide belief that it was not required to file its return of income, then, there could not be any reason to file its return of income on 25/08/2019, which was after a delay of 1060 days. He further held that even if assessee income was exempt under section 10(23C) then too such claim of exemption has to be made in the return of income. Further, he dismissed the claim of reasonable cause and he further rejected the assessee’s contentions to keep the penalty proceedings in abeyance as the quantum proceedings were going on.
Against the above order, assessee is in appeal before us.
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We have heard both the parties and perused the record. We find that assessee has submitted reasonable cause for the delay and placed reliance upon several case laws in support of these both before the AO as well as CIT(A). None of them have been dealt with by the AO or CIT(A). This is complete disregard of judicial discipline. It is noted that Banglore Tribunal in the case of HTSL community Service Trust(Supra) has held that an attempt of deliberateness or deceptiveness is the associated with word “failure”. Hence it is pleaded by assessee that in the present case, there was no deliberateness or deceptiveness in not filing the return of income within the prescribed time that the delay was not intentional or deliberate, hence penalty u/s. 272(A)(2)(e) cannot be levied. That in the case of University also, the delay occurred under circumstances mentioned above and it was not deliberate or intentional. That hence ratio of decision in this case applies to the facts of the case of the University. Delhi Tribunal in the case of Vatavaran Trust 25CCCH 0093 and held that there was excess of expenditure over income in all assessment years, assessee’s belief that it was not obliged to file return of income u/s. 139(4A) was bona fide and this constituted reasonable cause, hence penalty u/s. 272(A)(2) (e) is not leviable. In Akali Bba Phool Singh Education Trust (supra) Delhi Tribunal held that where assessee institution was under bona fide belief that its income is exmept u/s. 10(23C)(iiiab) and it was not required to file return of income, penalty imposed u/s. 273B is not justified. In the case of Shyam Gopal Charitable Trust vs CIT(E) 290 ITR 99 Hon’ble Delhi Court has held that where assessee did not file return of income on the initial advice of its chartered accountant that it was not required to file any return for the relevant assessment years. Therefore, there was reasonable cause within the meaning of section 273B for failure to file returns within stipulated time and penalty u/s. 272A(2)(e) was not leviable.
We find that assessee’s plea in the present case duly falls under the ken of aforesaid case laws wherein similar penalty has been deleted. No contrary decision
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has been produced before us. As held by Hon’ble Supreme Court in Motilal Padampat Sugar Mills' [1979] 118 ITR 326 that there is no presumption that everyone known law. Moreover, here assessee has also referred to provision of section. 139 and has pleaded that all entities whose income is exempt under clause (23C) of Section 10 were not required to file return of income. The Ld.CIT(A) has noted the following submissions of the assessee in this regard.
“Furnishing of return of income by certain universities and hospitals referred to in section 10(23C) of the Act: Under the provisions of section 10 of the \Act, exemption under sub-clause (iiiab) and (iiiac) of clause 23C, subject to specified conditions, is available to such university or educational institution which is wholly or substantially financed by the Government. Under the existing provisions of section 139, all entities whose is exempt under clause (23C) of Section 10, other than those referred to in sub-clauses (iiiab) and (iiac) of the said clause, are mandatorily required to file their return of income It is proposed to amend the Act in order to provide that entities covered under clauses (iiiab) and (iiiac) of clause (23C) of section 10 shall be mandatory required to file their return on income. This amendment shall take effect from 1st April, 2016 and will accordingly, apply in relation to assessment year 2016-17 and subsequent years. Thus University submits that there was no mandatory requirement to file the return of income for the year under consideration.”
From the above discussion and precedent, we are of the considered opinion, there was a reasonable cause for the assessee for the delay and the case laws referred above are duly applicable. Hence, in the background of aforesaid discussion and precedent, we set aside the orders of the authorities below and delete the penalty.
In the result, assessee appeal is allowed
ITA Nos. 1465/Mum/2020 to 1469/Mum/2020
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The above order applies mutatis mutandis to all these appeals. Hence, orders of authorities below are set aside and issue is decided in favour of the assessee.
In the result, all these appeals by assessee are stands allowed.
Order pronounced in the open court on 12 .11.2021
Sd/- Sd/- (SAKTIJIT DEY) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated :. .11.2021 Thirumalesh, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT- concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai