ITO (E), NEW DELHI vs. M/S SOCIETY FOR PARTICIPATORY RESEARCH IN ASIA, NEW DELHI

ORDER PER H.S. SIDHU, JM Revenue has filed this appeal against the impugned order dated 29.6.2016 passed by Ld.CIT(A)-26, New Delhi on the following grounds:-

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law deleting penalty u/s. 271(1)(c) when the matter related to the quantum addition

is sub-judice before the Hon’ble High Court on the appeal of the Revenue because no legal remedy would be available in the interest of Revenue if the Hon’ble High

Court decision comes in favour of the Revenue.

2. The appellant craves leave to add, to alter or amend any ground or appeal raised above at the time of hearing.

The case was assessed u/s. 143(3) of the I.T. Act at an income of Rs. 1,09,99,469/-. The A.O. noted that assessee has shown receipt and training grant to the tune of Rs. 15.91 cr., contribution of Rs. 4.18 cr. and other income of Rs. 1.36 cr. In the assessment order, it was held that the assessee does not fall within the scope of charitable purpose as defined in Section 2(15) of the I.T. Act, and thus the benefit of Section 11/12 was denied to the assessee. A show cause notice u/s. 271(1)(c) dated 31.12.2012 of the Act was also issued and served upon the assessee alongwith copy of assessment order for levy of penalty. The Ld. CIT(A) vide his order dated 28.02.2013 for quantum addition has discussed the issue and dismissed the appeal of the assessee by holding that "Furthermore, it is found that the activities of the appellant are not falling under the first three limbs of section 2(15) of the IT Act which are relief to the poor, education and medical relief and it is very clear that activities are in the nature of advancement of General Public Utility which is the last limb. Now only question is to be decided whether activities are in the nature of trade, commerce or business or not. For the same, AD 2 has very categorically discussed the instance in the body of order by mentioning the name if the parties who had deducted TDS on various services offered by the appellant. Further, the appellant has generated surplus of Rs. 1.09 crore as well as earned interest income on the fixed deposit which has been held as taxable by the Hon'ble Supreme Court in the case of Bangalore Club. So after considering the facts of the case in totality, in my opinion ground no. 1 to ground no. 2.8 of the appeal deserve to be dismissed". For penalty, assessee filed reply that the inference drawn is untenable as in the immediate preceding years i.e. AY 1983-84 to 2008-09. the department itself held in their assessment orders u/s. 143(3) years that the assessee society is a 'charitable society' and accordingly granted exemption u/s. 11 to the entire income of the assessee society. That the activities are very much in consonance with aims and objectives contained in the Memorandum of Association of the assessee society. That making a claim which is rejected would not make the assessee society liable under section 271(1)(c) of the Act. The A.O after discussing conditions for imposing penalty was satisfied that the assessee had furnished inaccurate particulars of income and thereby concealed particulars of income. The explanation of the assessee was found neither correct nor bonafide, as the same was not substantiated.

Hence, the penalty of Rs. 37,38,718/- was imposed vide order dated 25.3.2014 passed u/s. 271(1)© of the Act. Aggrieved with the penalty order, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 29.6.2016 has deleted the penalty in dispute by holding that the addition made by the AO in the order u/s. 143(3) has now been deleted by the ITAT, the penalty initiated becomes unsustainable and does not survive, vide his impugned order 29.6.2016. Against the impugned order dated 29.6.2016, Revenue is in appeal before the Tribunal.

“6. I have gone through the penalty order, submissions of the assessee, CIT(A) order and ITAT order on quantum addition. The Hon'ble ITAT has in its order inter-alia mentioned that this appeal filed by the assessee is directed against the order dated 28.02.2013 of the CIT(A)-XXI for the A.Y. 2009-10. The Hon'ble

Court in the aforesaid judgement (Queen's Society 372 ITR 699) affirmed the judgment of the Punjab & 4 Haryana High Court in the case of Pinegrove

International Charitable Trust v. UOI 327 ITR 73 wherein it was held that merely because profits have resulted from the activities of imparting education, it would not result in change of character of the education that it was solely for educational purpose. Thus, respectfully following the aforesaid judgments, we hold that the invocation of proviso of Section 2(15) of the Act to deny claim of exemption u/s. 11 and 12 of the Act is not justified. Accordingly, grounds of appeal are allowed.'

Though, in my opinion the assessee is not engaged in the activities of education perse, as its dominant objectives are different and it is pursuing profit but respectfully following judicial discipline, the order of ITAT is being followed for the purpose of order u/s. 271(1)(c).

by Hon’ble ITAT, the penalty initiated becomes unsustainable and does not survive. The penalty may therefore be deleted subject however, to the outcome of appeal by Department in the Hon’ble High Court.”

6. After going through the aforesaid finding given by the ld. CIT(A in para no. 6 & 7 at page no. 3 of the impugned order dated 29.6.2016, as reproduced above, we are of the considered view that the addition on which the penalty has been initiated by the AO has already been deleted by the ITAT as mentioned in the aforesaid paragraphs. Therefore, the penalty in dispute is not sustainable/survive. Hence, we are of the considered view that the Ld. First Appellate Authority has passed a well reasoned order on the basis of the ITAT order, which does not need any interference on our part, therefore, we uphold the same and accordingly, reject the grounds raised by the Revenue.

Order pronounced on this 12th day of July, 2019.