M/S PUNJAB HERITAGE & TOURISM PROMOTION BOARD,CHANDIGARH vs. DCIT, CHANDIGARH

Per Sanjay Garg, Judicial Member:

The captioned appeals have been preferred by the assessees

against the separate orders of the Commissioner of Income Tax(A),

Patiala [hereinafter referred to as ‘CIT(A)’] dated 21.11.2014.

the levy of penalty / confirmation of penalty u/s 271(1)(c) of the

Income-tax Act, 1961 (in short 'the Act'). ITA No. 157/Chd/2015

for assessment year 2007-08 is taken as a lead case for narration of

facts.

ITA No. 157/Chd/2015 for AY 2007-08

The assessee applied for registration u/s 12AA of the Act to the

ITA Nos. 157 to 159//Chd/2015- Punjab heritage & Tourism Promotion Board, Chandigarh 2

Commissioner of Income Tax as charitable trust / society on

18.12.2006. The Commissioner of income Tax-II issued a letter dated

22.6.2007 to the assessee stating therein as under:-

“Subject : Application for registration u/s 12A(a)of the Income-tax Act, 1961 – Regarding

Please refer to your application for registration u/s 12A(a) of Income-tax Act, 1961 filed with office on 18.12.2006.

A perusal of the deed of declaration of the Board reveals that clause 26 dealing with the ‘Dissolution is in violation of section 11 of the Income-tax Act, 1961. Therefore, your application for registration u/s 12AA of the Income-tax Act, 1961 may not be considered favorably. It can only be considered an amendment of this clause and receipt of amended Rules and Regulations.”

Thereafter the assessee society filed return of income for the year

under consideration on 31.10.2007 claiming exemption of income u/s

11 of the Act. In the return of income under Column 8, in respect of

the particular date of registration u/s 12A of the Act, it was

mentioned by the assessee as ‘Applied for”. Subsequently, as

required by the Commissioner of I.Tax (CIT) vide letter dated

22.6.2007 , the amended constitution incorporating dissolution clause

was filed with the CIT on 1.1.2008. However, the office of the

Commissioner of Income Tax directed the assessee to file a fresh

form 10A / application for registration. Thereafter, the assessee filed

a fresh form No. 10A along with amended trust deed with the

Department vide letter dated 19.3.2008. Finally, vide order dated

2.7.2008, registration u/s 12A was granted to the assessee but the

same was granted w.e.f. Assessment year 2009-10.

ITA Nos. 157 to 159//Chd/2015- Punjab heritage & Tourism Promotion Board, Chandigarh 3

officer noted that assessee had wrongly claimed exemption u/s 11 of

the Act as the assessee was granted registration u/s 12A of the Act

only w.e.f. assessment year 2009-10. He, therefore, denied the

claim of exemption to the assessee and made the addition in respect

of interest income earned by the assessee on the grants received from

the government. He further noticed that the assessee had not shown

the receipt of interest income in its profit and loss account rather the

same had directly been reflected in the balance sheet to avoid the tax

liability. He further noted that the assessee society claimed

expenditure of Rs. 7,29,721/- in the income and expenditure

account and that the major portion of this expenditure was on account 400th year Martyrdom Day (c). That the government had already

provided huge grant in aid for such purpose and that the application

of these grants could not be allowed out of interest on FDRs. He,

therefore, disallowed the expenditure of Rs. 7,29,721/- on this

account claimed by the assessee and added back the same to the total

income of the assessee. The assessee unsuccessfully contested the

above addition upto the level of the Tribunal. The Assessing officer

also initiated penalty proceedings u/s 271(1)(c) of the Act and levied

the impugned penalty of Rs. 50,29,240/- in this case which has been

further confirmed by the CIT(A).

assessee society is a Government undertaking and that there was no

deliberate intention either on the part of the assessee or on the part

of its employees to conceal its income or to avoid the tax liability.

ITA Nos. 157 to 159//Chd/2015- Punjab heritage & Tourism Promotion Board, Chandigarh 4

Further, it has been pleaded that since the Ld. CIT(A) in his letter

dated 22.6.2007 had not rejected the application of the assessee for

registration u/s 12A of the Act, rather, it was observed that the

application can be considered on amendment of the clause and receipt

of amended rules and regulations. That the assessee was under

bonafide belief that the application of the assessee for registration

was pending and that is why in the return of income under the

relevant column, it was mentioned that the registration u/s 12A was

‘Applied for”. It has been further submitted that the assessee

received grants from the government for specific purpose. The

remainder of such grants after application i.e. the surpluses, if any,

and the further interest earned/ accrued on such grants / surplus was

liable to be remitted back to the government, hence, the assessee did

not show the same as its income. The Ld. Counsel for the assessee

has further submitted that since assessee was under bonafide belief

that its application for registration u/s 12A will be accepted and the

registration will be granted from the date of application i.e.

18.12.2006 covering the year under consideration, hence, there was

no act of furnishing of inaccurate particulars of income or

concealment of income on the part of the assessee.

the lower authorities and has vehemently submitted that since the

additions made by the Assessing officer have been confirmed up to

the level of the Tribunal, hence, the penalty u/s 271(1)(c) of the Act

has rightly been levied /confirmed by the lower authorities.

ITA Nos. 157 to 159//Chd/2015- Punjab heritage & Tourism Promotion Board, Chandigarh 5

the Tribunal has not confirmed the addition on merits, rather, the

appeal of the assessee had been dismissed being barred by limitation.

records. In our view, though the additions on merits have been made

in this case, yet, it is not a fit case for levy of penalty u/s 271(1)(c)

of the Act. The assessee had claimed exemption u/s 11 of the Act

vide his application 18.12.2006, however, the registration to the

assessee institution as a charitable institution had been granted from

assessment year 2009-10. The fact on the file also shows that the

assessee had applied for registration vide his application on

18.12.2006 and the said application of the assessee was not rejected

by the Ld. CIT in clear terms rather it was conveyed that the

application of the assessee can be considered on filing of the

amended deed with dissolution clause incorporated in it. The

assessee was under bonafide belief that its application for

registration was likely to be allowed and it had also been specifically

mentioned in the return in the relevant Colum that registration is

“Applied for”. The assessee has also pleaded on merits that even

otherwise since the assessee was liable to remit the amount of

interest to the government and it was shown as liability, hence, the

same was not shown as receipt in the income and expenditure

account. Similar plea has also been taken regarding interest

expenditure earned by the assessee. In view of the above, it is not a

case of furnishing of inaccurate particulars of income or concealment

of income on the part of the assessee warranting penalty u/s

ITA Nos. 157 to 159//Chd/2015- Punjab heritage & Tourism Promotion Board, Chandigarh 6

271(1)(c) of the Act. The impugned penalty levied by the lower

authorities is, therefore, ordered to be deleted.

ITA Nos. 158/Chd/2015 (A.Y. 2008-09)

hence, the levy of penalty agitated in this appeal is ordered to be

deleted.

ITA Nos. 159 Chd/2015 (A.Y. 2009-10)

registration u/s 12A of the Act, hence, the Assessing officer accepted

the claim of the assessee for exemption u/s 11 of the Act. However,

the impugned penalty has been levied treating the interest earned as

income of the assessee which has not been utilized for charitable

purposes.

while adjudicating the appeal for earlier years 2007-08 and 2008-

09, it is not a case of furnishing of inaccurate particulars of income

or concealment of income on the part of the assessee warranting

penalty u/s 271(1)(c) of the Act. The impugned penalty levied by the

lower authorities is, therefore, ordered to be deleted.

In the result, all the three appeals of the assessee are hereby

allowed.

Order pronounced in the Open Court on 07.09.2018.

Sd/- Sd/- (B.R.R. KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 07.09.2018 Rkk

ITA Nos. 157 to 159//Chd/2015- Punjab heritage & Tourism Promotion Board, Chandigarh 7

Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR