THE VAISH AGGARWAL EDUCATION SOCIETY,NEW DELHI vs. ADIT (E), NEW DELHI

At the outset Ld. Counsel for the assessee submitted that assessee’s society is not liable penalty for concealment of income, because in the computation made u/s 11, even if the amount of funds amounting to Rs. 2,76,342/- is treated as part of income and expenditure account then same stood utilised by the assessee and hence no income is taxable. That is why Assessing Officer has computed the income at nil. In support he drew our attention to the computation made by the Assessing Officer, wherein the income has been computed as nil. He submitted that, once there is no taxable income, then there cannot any tax which can be said to be evaded by the assessee. On this ground alone the penalty should be deleted. Ld. DR on the other hand relied upon the order of the AO and Ld. CIT (A).

After considering the aforesaid submission and on perusal of the assessment order, we find that it is not in dispute that assessee is a society carrying on activities which fall within the ambit of ‘charitable purposes’ u/s 2(15). The AO noted that the amount of funds received by the assessee for sums amounting to Rs. 27,63,342/- which was from the contribution received from students as development funds has been taken to the balance sheet instead of routing it through income and expenditure account. AO has confirmed the income and expenditure account in the following manner:-

Thus, even the said amount is treated as part of income and expenditure then looking to the utilisation as per section 11, there is in fact deficit and taxable income is nil. Once there is no tax computed by the AO on the basis of computation made u/s 11, then there is computation of tax liability or could be case of tax sought to be evaded by the assessee so as to warrant any kind of penalty u/s 271(1)(c).

In the result appeal of the assessee is allowed.