M/S M.D.EDUCATIONAL SOCIETY,GURGAON vs. ADDL.CIT (EXEMPTION), PANCHKULA

At the outset, the appeal of the assessee is barred by limitation by 11 days. In the application for condonation of delay, the assessee has stated that the order of the Ld.

After considering the submission made by learned counsel and objections raised by the learned Department Representative, we find that there is no latches on the part of the assessee to pursue the appeal and the reasons given by the assessee appears to be bona fide as there was inadvertent fault of the functionaries of the school in not communicating appellate order to the Chairman of the Society and to the concern legal advisor/CA. Accordingly, delay of 11 days are condoned.

The facts in brief qua the levy of penalty are that, assessee is an educational society, running a school for which it has claimed exemption u/s. 10(23C)(iiiad). As against the ‘Nil’ return of income filed on 29.09.2010, assessment was completed u/s. 143(3) vide order dated 29.11.2012 at a ‘Nil’ income accepting the exemption claimed by the assessee u/s.10(23C)(iiiad). However, during the course of the assessment proceedings, Assessing Officer had written a letter

Before the ld. CIT (A) assessee has challenged the penalty proceedings on various grounds:-

Before us, ld. counsel for the assessee apart from raising the legal contention that the Assessing Officer did not had jurisdiction to initiate penalty proceedings u/s. 271E on 16.02.2015 for a transaction which took place in the financial year 2009-10; and on merits submitted that, firstly, the transaction in question is not in the nature of loan or deposit, because such a liability was created by way of journal entry; and secondly, he submitted that assessee society was under a bona fide belief that this transaction is not in the nature of loan or deposit as repayment of cash on monthly installments is not prohibited by law. In support, he relied upon the following judgments. 1. CIT vs. Muthoot Fiancers, (2015) 371 ITR 408 (Delhi0 2. CIT vs. T Perumal (Indl.) (2015) 370 ITR 313 (Mad.) 3. CIT vs. Panchsheel Overseas Association (2017) 395 ITR 380 (Guj.)

On the other hand, learned Department Representative submitted that, penalty u/s.271D and 271E has no relevance to assessment proceedings as both are independent and in support her contention, she strongly relied upon the judgment of Hon'ble Rajasthan High Court in the case of CIT vs. Hisaria Brothers which has been confirmed by the Hon'ble Supreme Court vide judgment and order dated 20th August, 2016 in Civil Appeal No.5252/2008. In so far as issue of limitation of penalty proceedings is concerned, she relied upon the decision of Special Bench, Chandigarh in the case of Dewan Chand Amrit Lal vs. DCIT, (2006) 98 ITD 200. On merits, she submitted that it was a clear cut case of repayment of loan in cash, and therefore, penalty u/s.271 E has rightly been levied.

We have heard the rival submissions and also perused the relevant findings given in the impugned orders. Here, in this case, Chairman of the Assessee Society, Sri Satbir Singh has given an advance of Rs.10,30,000/- directly for purchase of 2 acres of land on 16.11.2007 on behalf of appellant society. Such an advance was treated as a liability by the Society in its books of account and start making repayment in cash in installments below sum of Rs.20,000/-. During the financial year 2009-10 aggregate payment of Rs.4,90,000/- was made to Sri Satbir Singh. One of the main contentions raised by the learned counsel before us is that assessee- society was under a bona fide belief that such a liability created by a journal entry for which repayment was made in

The provision of Section 269SS and 269T was brought in the statute to prevent tax evasion done in the garb of cash payment and repayment. Here, in this case, the first limb of the transaction, that is, the payment of Rs.10,30,000/- for purchase of plot on behalf of the society has been accepted to be genuine and since the payment was made on behalf of the assessee society, the society has treated the same as a liability. Such liability has been discharged by making monthly installments of sums below Rs.20,000/-. In such circumstances, it cannot be held that second limb of transaction was to avoid any tax or transaction itself is not genuine. In such circumstances, it could be very well inferred that there was bona fide and reasonable belief on such repayment of liability in monthly installments. Therefore, in terms of provision of Section 273B, penalty cannot be imposed for any failure of Section 269T. Accordingly, we hold that no penalty is leviable due to bona fide and reasonable belief and accordingly same is directed to be deleted.

Since, we have already deleted the penalty on merits, therefore, other contention raised by the learned counsel are

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 31st January, 2019.