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Facts
The assessee, a welfare fund for Maharashtra police, did not file an income tax return for AY 2014-15, assuming its income was non-taxable. Following advice, they filed a return and offered tax after a notice under section 148. The Assessing Officer initiated penalty proceedings under section 271(1)(c) based on the tax identified.
Held
The Tribunal held that the assessee acted on a bonafide belief and that TDS was deducted on income. Relying on High Court judgments, the Tribunal found the penalty unjustified, especially since the assessee is a welfare fund not engaged in profit-making activities.
Key Issues
Whether penalty under section 271(1)(c) is leviable when the assessee acted on a bonafide belief that the income was non-taxable.
Sections Cited
271(1)(c), 147, 148, 250, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI ANIKESH BANERJEEAND SHRI GIRISH AGRAWAL
Instant appeal of the assessee was filed against the order of theLearned National Faceless Appeal Centre (NFAC), Delhi [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), for Assessment Year 2014-15, date of order 08.03.2024.The impugnedorder was emanated from the order of the ld. Assistant Commissioner of Income-tax, Ward-17(2), Mumbai passed under section 271(1)(c) of the Act, order dated 26/06/2019.
“The Commissioner of Income-tax (Appeals) -National Faceless Appeal Centre, Delhi (hereinafter referred to as the CIT(A)) erred in upholding the action of the Assistant Commissioner of Income-tax 17(2), Mumbai (hereinafter referred to as the Assessing Officer) in levying penalty of Rs 1,08,56,103 under section 271(l)(c) of the Act. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have confirmed the impugned penalty levied by the Assessing Officer under section271(l)(c)ofthe Act. The appellants further contend that the CIT(A) erred in upholding the action of the Assessing Officer in levying the impugned penalty inasmuch as the bona fides of the appellants cannot be doubted. The appellants crave leave to add to, alter or amend the aforestated ground of appeal
.”
3. The brief fact of the case is that the assessee is an AOP and maintaining a fund for the welfare of the Police of Maharashtra. For the impugned assessment year, the assessee has not filed the income-tax return of income (in short ROI). The assessee had an assumption that the income generated for the impugned assessment year under consideration was not taxable as it is used for the welfare of the state government employees. Accordingly, after the advice from tax consultant, the assessee filed first ROI for A.Y. 2015-16. The notice under section 148 was issued and the case was reopened under section 147 for impugned assessment year. After receiving the notice, the assessee immediately filed the return U/s 148 of the Act and offered tax on the professional fees and interest income amount to Rs.13,83,20,568/-. The assessment was framed under section 147 / 143(3) of the Act and no separate addition was made. The return filed under section 148 is duly accepted and the demand was Nil for the impugned assessment year. The Ld.AO initiated penalty proceedings under section 271(1)(c)
Mumbai Police Welfare Fund of the Act. As the income was first identified by the revenue authorities on that basis, the penalty @100% being tax sought to be evaded amount to Rs.1,08,56,103/- is levied. Being aggrieved on the penalty order, the assessee filed an appeal before the ld. CIT(A). The assessee submitted the detailed submission. But the ld.CIT(A) passed the appeal order upholding the penalty order. Being aggrieved on the appeal order, the assessee filed an appeal before us.
We heard the rival submissions and considered the documents available on the record. Ld.AR argued that the assessee is in bonafide belief did not file the return of income for the impugned assessment year. The assessee is a welfare fund and activities related to the welfare of the police of Maharashtra State. The welfare fund was formed by the Mumbai police on dated 04/05/2012 and it is just the second assessment year, the assessee has not filed the ROI. The moot question is whether the penalty will be leviable for the impugned assessment year after a bonafide belief of the assessee that income is nontaxable, and TDS was deducted on income. Considering this question, the Ld.AR respectfully relied on the judgment of Hon’ble Bombay High Court in the case of CIT vs Sudhirkumar Chottubhai (2002) 120 Taxman 277 (Bombay) wherein the Hon’ble jurisdictional High Court accepted the bonafide belief of the assessee and the penalty was rejectedand the order was passed in favour of the assessee. The Ld.AR further relied on the decision in the case of City and Industrial Development Corporation of Maharashtra Limited vs ACIT-10(3) 25 taxmann.com 333(Mum), held that no income in the hands of the assessee acting totally on behalf of the state
The Ld.DR argued and fully relied on the orders of the revenue authorities.
In our considered view, the assessee was a non-filer of ROI for the impugned assessment year. But there wassufficient amount of TDS was deducted on income. After receiving the notice under section 148, the return was filed which was before receiving of the recorded reason and the tax was paid in full. In the assessment ld. AOaccepted ROI and tax paid and no other findings for concealment of income was found. The assessee is a welfare fund and not in the activity of profit making. All the personnel are employed in the State of Maharashtra. We respectfully relied on the order of the Hon’ble jurisdictional High Court in the case of SudhirkumarChottubhai (supra) and City and Industrial Development Corporation of Maharashtra Limited (supra). The levy of penalty is unjustified. So, the penalty under section 271(1)(c) amount to Rs.1,08,56,103/- is quashed.