BELWAN DUDHGANGA SAHAKARI DUDH UTPADAK SANSTHA LTD,SOLAPUR vs. INCOME-TAX OFFICER, WARD - 1, PANDHARPUR

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ITA 1522/PUN/2018Status: DisposedITAT Pune13 July 2022AY 2014-154 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the explanation offered by the assessee regarding the grants received from the government not constituting a receipt in its hands was plausible. The assessee acted as a conduit for government grants for social obligations, not for its exclusive benefit.

What were the facts?

The assessee, a cooperative society, filed its return of income declaring Nil income. The Assessing Officer completed the assessment at a higher income and initiated penalty proceedings for failure to get accounts audited under Section 44AB.

What were the issues?

The primary issue was whether the penalty under Section 271B for failure to obtain a tax audit was leviable when the assessee had a plausible explanation for not treating certain government grants as its receipts.

Which sections of the Income-tax Act were involved?

Section 44AB,Section 271B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, PUNE

Before: SHRI INTURI RAMA RAO & SHRI S.S. VISWANETHRA RAVI

This is an appeal filed by the assessee directed against the order of Ld. Commissioner of Income Tax (Appeals)-7, Pune, dated 29.06.2018 confirming the levy of penalty u/s 271B of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) for the assessment year 2014-15.

2.

When the appeal was called on, none appeared on behalf of the assessee.

3.

Briefly, the facts of the case are as under:

The appellant is a co-operative society registered under the provisions of the Maharashtra Co-operative Societies Act, 1960. The appellant is engaged in the business of sale and purchase of Milk and its products, Cattle feeds and Chara Chhavani, etc. The return of income for the assessment year 2014-15 was filed on 27.03.2016 declaring Nil income. Against the said return of income, assessment was completed by the Assessing Officer vide order dated 19.12.2016 passed u/s 143(3) of the Act at a total income of Rs.9,88,210/-. The Assessing Officer also initiated penalty proceedings for failure of assessee to get the accounts audited under the provisions of section 44AB of the Act and accordingly, the assessee was show caused to explain as to why the penalty should not be levied. In response to the said show cause notice, the appellant filed detailed explanation stating that it was under the bonafide belief that since its books of account were audited under the provisions of Maharashtra Co- operative Societies Act, 1960 and the amount of grant received from the Government of Maharashtra of Rs.1,62,54,638/- does not constitute a receipt in the hands of appellant as the said grants were received by the appellant as conduit to be passed on to the farmers, the Government of Maharashtra had only reimbursed the expenses incurred by the appellant society for maintaining the cattle camp, etc. The said explanation was rejected by the Assessing Officer and proceeded with levy of penalty of Rs.81,300/- under the provisions of section 271B of the Act vide order dated 29.06.2017. Being aggrieved by the levy of penalty, an appeal was filed before the CIT(A), who confirmed the levy of penalty. Being aggrieved, the appellant is in appeal in the present appeal.

4.

When the appeal was called on, none appeared on behalf of the assessee. We have heard Sr. DR and perused the material on record.

5.

The issue in the present appeal relates to the validity of levy of penalty u/s 271B of the Act. In response to the show cause notice, the appellant tendered an explanation saying that the grants received from the Government of Maharashtra towards maintaining the cattle camp, etc. does not constitute receipt in the hands of appellant society. There is nothing on record to show that the grants were receipts of the appellant society. The mere fact that the tax was deducted at source by the Government of Maharashtra on the grant does not imply that it is a receipt in the hands of appellant in as much as, the appellant had acted only on behalf of Government of Maharashtra discharging the social functions / obligations of maintaining the cattle camp, in the areas of drought as per directives of the Government of Maharashtra. The appellant had no control over the grants given by the Government of Maharashtra. The appellant society had no control over the grants and grants were not to be used for the exclusive benefit of the appellant society. In the circumstances, we are of the considered opinion that the explanation offered by the appellant society cannot said to be not plausible explanation and is not a fit case to levy of penalty. Accordingly, the appeal filed by the assessee stands allowed.

6.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 13th July, 2022.

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