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IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘F’ NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER (Assessment Year: 2007-08) vs Dr. Puran Chand Dharmarth ACIT Trust, Circle 1(1) Gurgaon. C/o RRA TAXINDIA, D-28, South Extension, Part-1, New Delhi. PAN No. AAATD7474R APPELLANT RESPONDENT Appellant/ Assessee by Sh. Deepesh Garg, Adv. Sh. Saurabh Goyal, CA Respondent/ Revenue by Sh. Atiq Ahmed, Sr. DR Date of Hearing 13.06.2018 Date of Pronouncement 18.06.2018 ORDER PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order dated 24.11.2014 passed by the Ld. CIT(Appeals)-1, Gurgaon for AY 2007-08.
The Grounds of appeal
are as under: 1. “That having regard to the facts and circumstances of the case, the Ld.CIT (A) has erred in law and on facts in confirming the action of the Ld. AO in levying penalty of Rs. 52,00,470/- u/s 271(1)(c) that too without granting adequate opportunity of hearing and without considering the submissions of assessee.
2. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned penalty order being contrary to law as the assessment framed u/s 148/143(3) of the Act dated 30.12.2009 as the same addition is also contrary to law and facts. 3. That in any case and in any view of the matter, action of Ld. CIT (A) in confirming the action of the Ld. AO in levy of penalty u/s 271(1)(c) is illegal, bad in law and against the facts and circumstances of the case and by recording incorrect facts and findings. 4. That the assessee craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other.”
3. Return of income declaring income of Rs. Nil claiming exemption u/s 11 of the Income Tax Act, 1961 was filed by the assessee trust on 30.10.2007. Assessment proceedings were completed u/s 143(3) of the Act on 30.12.2009 by making addition of Rs. 1,54,50,000/-. Penalty proceedings were initiated u/s 271(1)(c) of the Act, vide notice dated 30.12.2009. In response to the notice none attended the proceedings as well as there was no written reply filed by the assessee. The Assessing Officer observed that during the course of assessment proceedings, it was revealed that assessee had given a loan of Rs. 1,54,50,000/- to M/s Hare Krishna Dharmarth Trust during F.Y. 2004-05 which was outstanding as on 31.03.2007. the assessee trust has to deposit the surplus fund available with the trust in any one form or more as specified in the provisions of Section 11(5) of the Act. The assessee trust diverted the funds to another trust which is run by the same trustee. Therefore, the Assessing Officer held that there is violation of provisions of Section 13 of the Act in advancing funds to Hare Krishna Dharmarth Trust and added the said amount to the income of the assessee and held that the assessee trust has concealed the particulars of income to the tune of Rs. 1,54,50,000/- attracting penalty u/s 271(1)(c) of the Act. The Assessing Officer imposed penalty at 100% which amounts to Rs. 52,00,470/-.
Being aggrieved by the penalty order the assessee filed appeal before the CIT (A). The CIT (A) dismissed the appeal of the assessee. The Ld. AR submitted that the quantum assessment for AY 2007-08 has been set aside by the Tribunal vide order dated 04.05.2018 in assessee’s own case being ITA No. 1994/Del/2011.
The Ld. DR relied upon the order of the Assessing Officer and order of the CIT (A).
We have heard both the parties and perused all the records. It is pertinent to note that the quantum appeal of the assessee is allowed by the Tribunal. The Tribunal held as under:
“28. Now coming to second Part of withdrawal of exemption u/s 11 on such funds advanced as loan to another trust. In the present facts of the case, sum of Rs. 1,54,40,000/- was a loan given to another Trust. Neither the object of assessee before us has been disputed, nor that of the recipient trust by authorities below.
In our considered opinion Ld. CIT (A) has overlooked the applicability of Sec. 13(2)(a) to the facts of the present case. Admittedly the money has been advanced as a loan to other trust for which assessee has not received any securities or interest. The said sum has been returned by the other trust during financial year ending on 31.03.2008 to assessee.
Authorities below are alleging that these are common trustees and, therefore, Section 13(1)(d) of the Act comes into play. But nothing has been brought on record to establish that the common trustees have substantial interest in the other trust.
Ld.CIT (A) placed reliance on decision of Hon’ble Gujarat High Court in case of Sarla Devi Sarabai Trust 40 Taxman 388 which approves the exception in Section 13(2)(a). Authorities below have not been able to bring on record anything to prove contrary to what has been held by the Hon’ble Gujarat High Court.
We are therefore of considered opinion that the amount advanced cannot be held to be in violation of Section 13(1)(d). Section 11(5) cannot be applied to present facts as the money advanced is not an investment but a loan.
We, therefore, reverse the findings of Ld. CIT (A) and delete the disallowance made by Ld.AO.
In the result, appeal filed by the assessee stands allowed.”
Thus, the quantum appeal is held in favour of the assessee which means that the original assessment does not survive and hence, penalty u/s 271(1)(c) of the Act also does not survive.
In the result, the appeal of the assessee is allowed.