DCIT, C-2, (EXEMPTIONS), CHANDIGARH vs. M/S HP STATE REPRODUCTIVE & CHILD HEALTH CARE SOCIETY, SHIMLA

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH ‘A’, CHANDIGARH

BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA Nos.1335 to 1337/Chd/2017 (Assessment Years : 2006-07 to 2008-09) The D.C.I.T. Vs. M/s H.P. State Reproductive & Circle-2 (Exemption), Child Health care Society, Chandigarh. Directorate of Services SDA Complex, Kasumpati, Shimla. Himachal Pradesh. PAN: AAATH3148J (Appellant) (Respondent)

Appellant by : Smt. Chanderkanta, Add.CIT Respondent by : None Date of hearing : 25.04.2018 Date of Pronouncement : 10.05.2018

ORDER PER ANNAPURNA GUPTA, A.M. :

All the three appeals filed by the Revenue are directed

against the consolidated order of learned Commissioner of

Income Tax(Appeals), Shimla dated 31.3.2017 relating to

assessment years 2006-07, 2007-08 and 2008-09, deleting

the levy of penalty u/s 271(1)(c) of the Income Tax Act,

1961 (in short ‘the Act’).

being penalty levied on account of addition made by

treating grants-in-aid received by the assessee as its

income, they were heard together and are being disposed off

by this consolidated order.

For the sake of convenience, we shall be dealing with

the facts in ITA No.1335/Chd/2017 for assessment year

2006-07 and the decision rendered therein will apply

mutatis mutandis to other appeals also.

an autonomous and independent body engaged in

implementation of reproductive and child health program

and other family planning/welfare programs in the State of

Himachal Pradesh and is registered u/s 12A of the Income

Tax Act. For the impugned assessment year the assessee

had claimed its income as exempt under the provisions of

section 11 of the Act. During assessment proceedings the

AO found that the assessee had received grants in aid .

Holding the same to be in the nature of voluntary

contribution and hence the income of the assessee as per

the provisions of sec. 2(24) r/w Section 12 (1) of the Act,

and finding the same to not having been utilized to the

extent of 85%, as stipulated under section 11 of the Act for

the purpose of claiming the entire income as exempt ,the

Assessing Officer subjected to tax the unspent grants in aid

received by the assessee, to the tune of Rs.3,54,46,191/- .

The appeal filed by the assessee against the aforesaid order

was dismissed by the CIT(Appeals).Further appeal was filed

by the assessee before the I.T.A.T., who accepted the

assessees contention that grants in aid received for specific

purposes if unspent and which were to be refunded to the

parent society, were not in the nature of income of the

recipient. But having accepted so, the ITAT restored the

matter back to the AO to verify the actual refund of the

unspent grant to the Government of India on the close of its

projects, directing the AO to make no addition if the same

is proved.

assessment order, giving his findings that the assessee

could not establish that the unutilized grant-in-aid was

refunded to the Govt. of India. Therefore, the Assessing

Officer added back the amount of Rs.3,54,46,191/- again to

the taxable income of the assessee. The CIT(Appeals) upheld

the order of the Assessing Officer. The Assessing Officer

subsequently proceeded to levy penalty u/s 271(1)(c)

amounting to Rs.1,19,31,188/-vide order dated 28.03.2014.

Ld.CIT(Appeals) who deleted the penalty levied, holding that

the assessee had furnished all particulars of his income vis-

à-vis grant-in-aid and the income had been brought to tax

merely because the assessee’s contention of claiming

exemption of the same u/s 11 was not accepted by the

Assessing Officer.

appeal before us, raising following grounds:

“1. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in deleting the penalty even after upholding the action of the AO of treating the grants-in-aid received by the assessee from the Government as voluntary contribution and hence taxable as income u/s 2(24) of the Act which the assessee failed to show as its income and also failed to utilize it fully as per the required provisions.

to the notice of the Bench that the I.T.A.T., in the second

round of quantum proceedings, had adjudicated the appeals

filed by the assessee vide its consolidated order dated

9.10.2017 in ITA No.337, 338 & 339/Chd/2013 for the

impugned years. Copy of the order was placed before us. It

was pointed out therefrom that the ITAT had again restored

the issue back to the Assessing Officer to verify whether

the grants were tied up grants received for specific

purposes and thereafter decide the issue in accordance with

law. Ld.Counsel for the assessee contended therefore that

since no addition stood as on date on the impugned issue,

no penalty u/s 271(1)© was leviable.

been levied, being grants in aid treated as income of the

assessee, had been restored back to the Assessing Officer

by the ITAT vide its aforesaid order.

account of grants-in-aid, u/s 271(1)(c) of the Act on which

penalty has been levied in the present case has been

restored back to the Assessing Officer by the I.T.A.T. in

quantum proceedings, the penalty proceedings become

infructuous.

is, therefore, dismissed.

Revenue are dismissed.

Order pronounced in the Open Court.

Sd/- Sd/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 10th May, 2018 *Rati* Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) 4. The CIT 5. The DR

Assistant Registrar, ITAT, Chandigarh