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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
ORDER PER BENCH :
These appeals by the department are directed against the separate orders each dated 28.03.2016 of the CIT(A)-36, New Delhi. 2. Since the issue involved is common in these appeals which were heard together so these are being disposed of by this consolidated order for the sake
ITA No.3281-3287/Del/2016 2 of convenience and brevity. The common ground raised in these appeals reads as under :
1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee by ignoring the fact that assessee has furnished inaccurate particulars of income by claiming exemption u/s 11 of the Act in respect of business which was not incidental to the objects of the trust.”
At the first instance, we will deal with the appeal in ITA no. 3281.Del.2016 for the assessment year 1992-93.
The grievance of the Department in this appeal relates to the deletion of penalty levied by the AO u/s 271 (1) (c) of the Income Tax Act, 1961 (hereinafter referred to as the Act). Facts of the case, in brief, are that the assessee filed the return of income on 30.10.1992 declaring nil income. The assessee was registered u/s 12A of the Act and claiming its income exempt from tax u/s 11 and 12 of the Act.
During the course of assessment proceedings, the AO noticed that the assessee had Katha Manufacturing Factory in OEL(HP) which was given on lease to M/s. Shankar Trading Co. Pvt. Ltd., a sister concern and the total receipts included the lease rental income from M/s. Shankar Trading Co. P. Ltd. claimed to be exempt u/s. 11 whereas the business of manufacturing of Katha was not incidental to the objects of the trust. He invoked the provisions of section 11(4A) of the Act, denied the benefit of exemption u/s 11 of the Act and assessee the income at Rs. 62,86,390/-. 5. Being aggrieved the assessee carried the matter of the ld. CIT(A) who vide order dated 06.03.1996 confirmed the action of the AO for denial of exemption u/s 11 of the Act. On further appeal, the ITAT vide order dated 04.09.2002 allowed the exemption u/s 11 of the Act but the department did not ITA No.3281-3287/Del/2016 3 accept the said order and filed an appeal u/s 260A of the Act before Hon’ble Jurisdictional High Court wherein vide order dated 20.11.2012 the stand of the AO was confirmed.
Subsequently the appeal effect was given by the A.O. and income was recomputed at Rs. 62,53,390/- vide order dated 31.05.2013. The AO also initiated the penalty proceedings and noted that the assessee could not substantiate its claim as regards to the benefit of exemption u/s 11 of the Act and that there was no nexus between the Katha business and the objects of the assessee Trust which could constitute the carrying on of the Katha business an activity incidental to the attainment of the objects. The AO held that the assessee furnished inaccurate particulars of income by claiming exemption u/s 11 of the Act in respect of the business which was not incidental to the objects of the assessee trust and the said mistake could not have been said to be bona fide one. Accordingly penalty u/s 271(1)(c) of the Act was levied for Rs. 36,14,670/-.
Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that there was neither any concealment of income nor furnishing of inaccurate particulars of income by the assessee and the difference between the returned income and the taxable income computed was on account of difference of opinion in respect of legal issues which were all debatable in which situation there would be no charge of any concealment. It was stated that the claim of exemption u/s 11 of the Act was based on bona fide belief and expert’s opinion which could not be termed as mala fide. It was further stated that the AO himself allowed the exemption up to the assessment year 1988-89 and thereafter up to assessment year 2007-08 and even ITAT had also allowed the exemption. Therefore, the assessee had a bona fide belief that it was entitled to exemption u/s 11 of the Act. It was contended that the order of the Hon’ble
ITA No.3281-3287/Del/2016 4 Delhi High Court came much later on 20.11.2012, therefore, there was no mala fide intention on the part of the assessed furthermore, the impugned penalty was levied on the basis of wrong and illegal computation of total income by the AO taking the gross income / gross receipts as taxable income without deducting the legitimate expenses, depreciation, etc. and that the Hon’ble High Court in their order for the assessment year 2009-10 directed the AO to examine the admissibility of the expenditure and depreciation. Therefore, the determination of taxable income was also not final. It was submitted that the assessee had furnished all the material facts for the purpose of computation of total income, so, there was neither concealment nor furnishing of inaccurate particulars of income on its part and it was purely a case of difference of opinion with regard to a debatable matter which could not be treated as concealment. The reliance was placed on the judgment of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products reported at 322 ITR 158.
The ld. CIT(A) after considering the submissions of the assessee observed that the AO had imposed the penalty mainly on the point of the mistake on the part of the assessee which could not be said to be bona fide one, the inaccurate particulars had been furnished by claiming exemption u/s 11 in respect of business which was not accidental to the objects of the assessee trust and that the assessee could not have been routinely careless while submitting the returns. The ld. C.I.T.(A) observed that no evidence had been brought on records to adduce that furnishing of inaccurate details had been done by the assessee willfully in order to avoid the payments of tax or to conceal the particulars of its income and that no averment or fact exists to show that any detail or particular filed in support of the claim, was untrue or false or to show that any material fact has been suppressed by the assessee. He further observed that the penalty in the present case was levied after the Hon’ble High Court
ITA No.3281-3287/Del/2016 5 confirmed the disallowance of assesse’s claim of exemption u/s 11 of the Act. This claim was earlier allowed by the ITAT Delhi Bench besides, this, the AO did not find any adverse material against the assessee for furnishing inaccurate details or concealment of income and that from the past history also it was clear that the claim was not deliberately or willfully made in a false manner because in the earlier years even the AO and the Ld. CIT(A) had been allowing the claim of deduction. Therefore, the debatable interpretation can not held to be a reason for levying the penalty u/s 271(1)(c) of the Act. Accordingly the impugned penalty was deleted. The reliance was placed on the following case laws :- “1. CIT vs. Reliance Petro Products P.Ltd. (2010) 322 ITR 158(SC) 2. CIT vs. Lakhani India Ltd. (2010) 324 ITR 73, (P & H High Court) 3. In Devsons Logistics Pvt. Ltd. vs. CIT (2010) 329 ITR 483 (Del.)”
Now the department is in appeal.
The ld. DR strongly supported the penalty order passed by the AO and further submitted that since the claim of the assessee u/s 11 of the Act was not allowable in view of the judgment of the Hon’ble Jurisdictional High Court. Therefore, the assessee concealed the income by making a false claim as such the AO was justified in levying the penalty u/s 271(1)(c) of the Act.
In his rival submissions, the ld. Counsel for the assessee reiterated the submissions made before the authorities below and repeated the observations made by the Ld. CIT(A) in the impugned order. Reliance was placed on the following case laws :- “1. CIT vs. Reliance Petro Products P.Ltd. (2010) 322 ITR 158(SC) 2. CIT vs. Lakhani India Ltd. (2010) 324 ITR 73 (P & H) 3. In Devsons Logistics Pvt. Ltd. vs. CIT (2010) 329 ITR 483 (Del.)”
We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is an admitted fact that ITA No.3281-3287/Del/2016 6 the claim of the assessee for exemption u/s 11 of the Act was earlier allowed by the AO up to the assessment year 1988-89 and thereafter upto assessment year 2007-08, for the year under consideration also the claim of the assessee was allowed by the ITAT. Subsequently the Hon’ble Jurisdictional High Court did not allow the claim of the assessee u/s 11 of the Act. However, SLP is pending before the Hon’ble Supreme Court. Therefore, it can be said that the issue relating to the claim of exemption u/s 11 of the Act is highly a debatable and legal issue. Therefore, it cannot be said that the assessee furnished inaccurate particulars of income or concealed its income.
On a similar issue, the Hon’ble apex court in the case of CIT vs. Reliance Petro Products 322 ITR 158 (supra) held as under :- “A glance at the provisions of section 271(l)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(l)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate partic- ulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”
In the present case also the claim of the assessee for exemption u/s 11 has not been allowed by the AO on the basis of the judgment of the Hon’ble High Court. Therefore, not allowing the claim of the assessee u/s 11 of the ITA No.3281-3287/Del/2016 7 Act itself cannot tantamount to furnishing of inaccurate particulars of income. We, therefore, in view of the ratio laid down by the Hon’ble Apex Court in the aforesaid referred to case are of the confirmed view that the impugned order passed by the ld. CIT(A) do not require any interference. In that view of the matter, we do not see any merit in this appeal of the department.
In all other appeals i.e. the facts are identical as where involved in ITA no. 3281.Del.2016 for the assessment year 1992-93 which have already adjudicated in the former part of this order, therefore, our findings given therein shall apply Mutatis Mutandis.
In the result appeals filed by the department are dismissed. (Order Pronounced in the Open Court on 26/12/2017).