M/S UFV INDIA GLOBAL EDUCATION (SOCIETY),CHANDIGARH vs. DCIT, EXEMPTION CIRCLE-1, CHANDIGARH

Grounds of appeal are as under: -

That the Ld. CIT (Appeal)-NFAC has erred in confirming the penalty levied by the AO under section 270A of the I T Act, 1961.

That the Ld. CIT (Appeal)-NFAC has erred in not appreciating the fact that the penalty order as passed by the AO was illegal, void and non-speaking order.

That the Ld. CIT (Appeal)-NFAC in para 6.1.1 of his order has factually erred in observing that the assessee while filing its return of income for the A.Y. 2018-19 on 09.10.2018 had the benefit of the assessment order passed by the AO for the Asstt. Year 2016-17 whereas the said assessment order was passed by the then AO on 03.12.2018.

That the Ld. CIT (Appeal)-NFAC while confirming the penalty u/s 270A in para 6.1.2 of his order has failed to appreciate that the assessee was engaged in carrying out the education activity and had a valid registration u/s 12A of Act and thus the claim of exemption u/s 11 made by the assessee in its ITR was based on sound legal footing.

That the Ld. CIT (Appeal)-NFAC has erred in concluding in para 6.1.4 of his order that there has been misrepresentation or suppression of facts by the assessee in terms of section 270A(9) of the Act whereas the claim made by the assessee was evident from its ITR and later voluntary disclosure made during the course of assessment proceedings.

This is a case of a company operating under the name and style of M/s. UFV India Global Education ('UIGE'). The assessee company was incorporated as a not for profit entity u/s 8 of The Companies Act, 2013 vide certificate of Incorporation dated 05.11.2014.

The assessee company is affiliated to the University of Fraser Valley, Canada and since its incorporation in year 2014, the assessee is engaged in imparting of academic courses in the field of business, liberal arts, computer information system and management post baccalaureate certificate to its students in India. It is pertinent to mention here that the parent entity is a State University of Fraser Valley which is a Government funded Institution under British Columbia, Canada engaged in imparting education. The assessee company in India works with a vision of providing a world class education at affordable prices to students in India and for such purpose, the assessee has established its set up in the premises of SD College, Chandigarh which is a recognized institution being run by a registered charitable society namely 'Goswami Ganesh Dutta Sanatan Dharma College Society'.

The primary objectives of the assessee company are in the field of education and related activities which comes under the ambit of the provisions of section 2(15) of The Income Tax Act, 1961 ('the Act') and hence, the objects of the assessee company is recognized as a charitable activity, hence, the assessee was registered u/s 12AA of the Act vide order dated 08.09.2015 bearing ref no. CIT- (EXEMPTIONS)/CHD/12A/2015-16/3852 passed by the Commissioner of Income Tax (Exemptions), Chandigarh w.e.f. AY 2015-16.

The assessee maintains complete set of books of accounts for such activity and the same are audited by the Chartered Accountant and the return of income for Asstt. Year 2018-19 was filed with the Tax Audit Report and the exemption u/s 11 was claimed.

For the Assessment Year 2016-17, which was the first year of the scrutiny assessment of the assessee, there was unexpected litigation with the Assessing Officer on account of disallowance of claim of exemption u/s 11 and such assessment was finalized only on 03.12.2018 by the DCIT (Exemptions).

The return for Asstt. Year 2018-19 was filed on 09.10.2018 and similarly, return for Asstt. Year 2017-18 was filed on 16.10.2017 after claiming exemption u/s 11 of the Act.

It is important to note that no such assessment had been framed prior to the above date of filing the return of income for Asstt. Year 2018-19.

The case of assessee company for Asstt. Year 2018-19 was selected for scrutiny on account of 'foreign travel expenses' and, not on account of incorrect claim of exemption u/s 11 and, as such, no doubt at that time was pointed out with regard to claim of exemption u/s 11 claimed by the assessee, on the date of filing the return of income.

The assessment for Asstt. Year 2016-17 denying the claim of exemption u/s 11 of the Act was finalized on 03.12.2018 i.e. after the return for Asstt. Year 2018-19 had already been filed on 09.10.2018 and the assessee could not have foreseen the fate of assessment for Asstt. Year 2016-17, wherein, the claim of exemption u/s 11 has been disallowed.

In the meanwhile, when the appeal for Asstt. Year 2016- 17 and 2017-18 were pending before the CIT(A), the assessee in order to buy peace of mind decided to end all pending litigations and opted for Vivad Se Vishwas Scheme (VSV) of the department for Asstt. Years 2016-17 & 2017-18 and by virtue of that, paid substantial amount of tax.

The Assessee not revise the return of Income for Asstt. Year 2018-19 because the time to revise the return had elapsed as assessment order for Asstt. Year 2016-17 u/s 143(3), where, for the first time, the claim u/s 11 was withdrawn on 03.12.2018.

The Assessing Officer while framing the assessment has not doubted anything but has reproduced a letter filed before him surrendering the claim u/s 11 during the course of assessment proceedings and only reason for initiation of penalty u/s 270A(9) were initiated as per para 4.3 of the order of Assessing Officer that the claim of exemption u/s 11 was surrendered only after notice u/s 143(2) was issued. It is important to mention here that the notice u/s 143(2) was only intimation for taking the case under scrutiny and nothing was asked for.

During the course of penalty proceedings, the Assessee filed detailed reply based on the case laws that both penalty proceedings and assessment proceedings are distinct and separate proceedings and further, the object of the society regarding providing education have not been doubted at all and there was no case of 'misreporting' of income being there. But, however, though, in the penalty

Before the Ld. CIT(A) again, detailed submissions were made alongwith case laws, and the same has been reproduced in the order by the CIT(A). The CIT(A) has incorrectly given the finding in para 6.1.1. that when, the assessee filed the return of income for Asstt. Year 2018- 19. claiming exemption u/s 11 then the assessment order for Asstt. Year 2016-17 was available with the assessee, in which, the said exemption u/s 11 had been withdrawn.

It is hereby submitted that we have already filed the Brief Synopsis and in those Brief Synopsis, the chronological sequence is as under:-

The Ld. CIT(A) had given a incorrect finding while passing the order in that the order for Asstt. Year 2016-17 was available with the assessee before filing the return for Asstt. Year 2018-19, which is totally incorrect finding, as since, at that time', the assessment order for Asstt. Year 2016-17 had not been passed and the same was finalized

The assessee could not have foreseen that its exemption u/s 11 would be disallowed by the Assessing Officer, rather the assessee was under a bonafide belief that the exemption u/s 11 would be allowed in Asstt. Year 2016- 17.

Further, the notice u/s 143(2) had been issued on 22.09.2019 is only intimation about the case having been taken under scrutiny and the reason for selection of case under scrutiny was 'expenditure for such charitable and religious purpose' as per notice attached. It was only on 04.12.2020 that by way of notice u/s 142(1), certain general details were asked for and by that time, the assessee had already availed the benefit of the sheme of the department Vivad Se Vishwas for Asstt. Year 2016-17 & 2017-18 on 18.05.2020 and surrendered its claim of exemption u/s 11 vide letter dated 26.10.2020 as per chart reproduced above. Thus, the very basis of initiation of 143(2) proceedings loses its significance, since nothing was asked for by way of that notice.

Reliance is being placed on the judgment of Jurisdictional Bench of the ITAT Chandigarh Bench in the case of Smt. Neelu Garg in ITA No. 1472/Chd/2018, wherein, the surrender was made by the assessee by filing the revised

It was held by the Chandigarh Bench of the ITAT as per finding given in para 10 as under:-

The Hon'ble Bench relied upon on the judgment of Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Rajiv Garg, reported in 313 ITR, page 256 and judgment of ITAT, Chandigarh Bench, and, in para 11 and 12 given

The ld. DR, on the other hand, argued vehemently on the line of findings given by the ld. CIT(A) in his appeal order.

We have considered the findings given by the ld. CIT(A) in his appeal order. We find that the order for A.Y. 2016-17 was passed by the Assessing Officer on 03.12.2018 while the return for A.Y. 2018-19 was already filed on 9.10.2018, therefore, while the Assessee was filing its return of income of for A.Y. 2018-19, it had no benefit of information or knowledge as to what the Assessing Officer is giving his findings in order for assessment year 2016-17. Therefore, to that extent, the ld. CIT(A)’s findings on this issue, as mentioned in his appeal order is not correct. Further, the ld. counsel of the Assessee has rightly brought on record that no fact was suppressed from the Department so even if the claim made by the Assessee was not acceptable to the Department and it was rejected by the Assessing Officer, it could not attract penalty u/s 270A of the Income Tax Act, 1961 (in short 'the Act').

We have also considered the order of the coordinate Chandigarh Bench of the ITAT in the case of ‘Smt Neelu Garg vs. ITO’, ITA No.

Keeping in view the facts of this case as well as the judicial pronouncements cited above, Assessee’s appeal on this ground is allowed. 7. In the result, appeal is allowed. Order pronounced on 20.09.2024.