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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: SHRI G. D. AGRAWAL, HON’BLE & SMT. BEENA A. PILLAI
Date of hearing: 13.07.2016 Date of Pronouncement: 27.07.2016 ORDER
PER BEENA A. PILLAI, JM:
The present appeal has been preferred by the assessee against the penalty order dated 25.10.2013 passed by Ld. CIT(A) XXI, New Delhi for the Assessment Year 2006-07 on the following grounds of appeal:
1. The order is bad in law, as it has been passed in gross violation of principles of natural justice.
2. The d. A.O. has erred in levying the penalty u/s 271(12)(c) under the given facts and circumstances.”
The brief facts of the case are as under: 2.1 The assessee has been granted registration u/s 12AA w.e.f. Assessment Year 2007-08 vide order dated
2 I.T.A.No.6263./Del/2013 06.07.2009 passed by DIT (Exemption). The assessee was not having registration u/s 12AA from the Assessment Year 1999-2000 to 2006-07 and such income of the assessee was not exempted u/s 11 of the Act. The case of the assessee before Ld. A.O. during the assessment proceeding was that the assessee had made an application for registration u/s 12AA on 31.10.2006 with retrospective effect from Assessment Year 1999-2000. For the year under consideration, the assessee had field ‘nil’ return of income on the presumption that DIT(E) will grant the registration u/s 12AA of the Act with retrospective effect. 2.2 Ld. A.O. disallowed the exemption u/s 11 as the same was not available to the assessee for the year under consideration. He completed the assessment at Rs.10,80,323/-. The Assessing Officer also levied 100% penalty for the addition made during the assessment proceedings. Aggrieved by the levy of penalty, the assessee preferred an appeal before Ld. CIT(A). Ld. CIT(A) held as under: “2.2. I have considered the penalty order of the AO and the submissions of the assessee and I do not find any merit in the submissions of the assessee. The assessee did not apply for registration u/s 12AA which it was required w.e.f A.Y 1999-2000 and has been filing the nil return. The assessee had filed the application for registration u/s 12AA only on 31/10/2006 and as such there is negligence on the part of the assessee. It is apparent from the order of the AO that the assessee filed the wrong claim of exemption u/s 11 knowing fully that’s the assessee
3 I.T.A.No.6263./Del/2013 was not having registration u/s 12AA and as such the AO is justified to make the additions and levy the penalty. After considering all the facts and circumstances of the case, I am of the view that the assessee filed inaccurate particulars of income as the assessee had filed the nil return as against the taxable income of Rs. 10,80,323/- and accordingly the action of the AO is confirmed.”
2.3 Aggrieved by the order passed by Ld. CIT(A), the assessee is in appeal before us now.
Ld. A.R. submitted that Ld. A.O. levied penalty u/s 271(1)(c) of the Act without mentioning whether the assessee has concealed the particulars of income or has furnished inaccurate particulars of income He submitted that there is no satisfaction recorded by the Ld. A.O. in the assessment order. Thus, he submitted that the order passed by the A.O. suffer from jurisdictional defect. Ld. A.R. submitted that at no stage the assessee has tried to furnish inaccurate particulars of income. He submitted that the assessee was under genuine impression that it is entitled for exemption being a charitable organization and its activities are well covered under the definition of charity as defined under the Act. Ld. A.R. submitted that he assessee was under bona fide belief that it is entitled for exemption u/s 11/12AA of the Act as the application dated 31.10.2006 was filed seeking registration with retrospective effect from Assessment Year 1999-2000. Ld. A.R. submitted that as the application was pending as on the date of filing of return for the year under consideration
4 I.T.A.No.6263./Del/2013 and that no response was issued in response to the same within six months of filing of the application, it was under bona fide belief that the exemption has been deemed to be allowed to the assessee. Ld. A.R. submitted that it had also raised the claim u/s 11 of the Act in the return filed for the year under consideration for the reason that in the event the application dated 31.10.2006 is allowed, then the assessee would be in a position to claim exemption u/s 12/12A of the Act. Ld. A.R. further submitted that there was no intention on behalf of the assessee to conceal any income or to file inaccurate particulars of income. He placed his reliance upon various decisions which are as under: i) CIT Vs Reliance Petroproducts P. Ltd. (2010) 322 ITR 158 (S.C.); ii) ACITVs Sahara India Investment Corpn. Ltd. (2010), 04 ITR (Trib) 284 (Del.); iii) CITVs Dharampal Premchand Ltd. (2010), 329 ITR 572 (Del.); iv) M. S. Bindra & Sons P. Ltd. (2011) 336 ITR 125 (Del.); v) Hero Honda Motors Ltd. s DCIT (2012), 14 ITR (Trib), (Del.); vi) CI Vs Mahavir Irrigation P. Ltd. (2012) 347 ITR 241 (Del.; and vii) Karan Raghav Exports P. Ltd. Vs CIT (2012), 349 ITR 112 (Del.) 3.1 Ld. A.R. submitted that the application dated 31.10.2006 was rejected by the DIT (Exemption) vide order dated 06.07.2009 which was subsequently granted by DIT (Exemption) w.e.f. Assessment Year 2006-07, due to the directions of this Tribunal. Ld. A.R. submitted that no penalty can be levied as the claim of the assessee is 5 I.T.A.No.6263./Del/2013 based upon a bona fide belief and when allowability of a claim is disputed, n penalty can be levied.
On the contrary, Ld. D.R. submitted that the assessee has made the application seeking registration u/s 12A of the Act on the last day of filing of return for the Assessment Year 2006-07. He submitted that it is an afterthought as both the application as well as the return, are even dated. Ld. D.R. thus submitted that the assessee has filed inaccurate particulars of income and thus, is covered under Explanation 1A to 271(1)(c) of the Act.
We have perused the records before us and the submissions advanced by both the parties. It is observed that the assessee was registered under Societies Registration Act in the year 1968. The assessee was also granted exemption u/s 10(22) of the Act vide order dated 27.01.1994 issued by the Director of Exemption, the exemption u/s 10(22) was available to the assessee till Assessment Year 1998-99 as Section 10(22) stood deleted w.e.f. Assessment Year 1999-2000. From the records placed before us, it is observed that the assessee was under a belief that the exemption is available with the assessee under the Act. It was subsequently during the year under consideration that the assessee realized that the exemption is not available. It was during the assessment proceedings for Assessment Year 2004-05 that assessee realized the exemption being not available
6 I.T.A.No.6263./Del/2013 vide assessment order for the Assessment Year 2004-05 where the Ld. A.O. rejected the assessee’s claim. 5.1 Hon'ble Karnataka High Court in case of CIT Vs. Cotton and Ginning Factory 359 ITR 565 has laid down as under: "Section. 271 (l)(c) makes it clear that if the Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Act is satisfied that any person has concealed particulars of his income or furnished inaccurate particulars of such income, then he may direct that such person shall pay by way of penalty stipulated in the aforesaid provision. Then the question is, when an income is said to be concealed so as to attract the penalty provisions. Explanation 1 sets out the circumstances which justifies levy of penalty. It reads as under:
Explanation. 1: Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section be deemed to represent the income in respect of which particulars have been concealed.
7 I.T.A.No.6263./Del/2013
After insertion of Explanation 1 to Section 271(1)(c), the law on concealment and penalty has become stiffer. The explanation as it stands now is a complete code having the following features:
(1) Every difference between reported and assessed income needs an explanation.
(2) If no explanation is offered, levy of penalty may justified.
(3) If explanation is offered, but is found to be false, penalty will be exigible.
(4) If explanation is offered and it is not found to be false, penalty may not be leviable, -
(a) such explanation is bonafide.
(b) the assessee had made available to the Assessing Officer all the facts and materials necessary in computation of income.
Therefore the Explanation-I understood in the proper context, In particular, clause (c) of Sub-section (1) of Section 271 makes the intention of the legislature manifest. It clearly sets out when penalty is leviable and when penalty is not leviable. The condition precedent for levying the penalty is the satisfaction of the authority that there is a concealment of the particulars of the income or inaccurate particulars are furnished to avoid payment of tax. "
5.2 From the facts of the case, it does not appear that the assessee has deliberately abstained itself from presenting such application in time. In the application dated 31.10.2006 assessee has also claimed for 8 I.T.A.No.6263./Del/2013 condonation of delay and has requested for registration to be granted w.e.f. 01.04.1999. Considering the above facts, we are of the opinion that the imposition of penalty u/s 271(1)(c) is not justified as there was complete disclosure of facts and the claim made by the assessee was not found acceptable in law. We, therefore set aside the penalty order passed by Ld. A.O. 7. In the result, appeal filed by the assessee stands allowed. Order pronounced in the open court on 27th July 2016.