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Income Tax Appellate Tribunal, AGRA (SMC
Before: SHRI A. D. JAIN
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA (SMC) BENCH: AGRA
BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER
I.T.A No. 90/Agra/2016 (ASSESSMENT YEAR-2003-04)
M/s Miss Hill Education Society Vs..ACIT-Circle-1, Laxmi Bai Colony Padav Lashkar Gwalior. Gwalior. PAN No.AAATM8693D (Assessee) (Revenue)
Assessee by Shri Ajay Wadjikar, AR. Revenue by Shri Waseem Arshad, Sr.DR.
Date of Hearing 31.08.2017 Date of Pronouncement 27.09.2017
ORDER This is assessee’s appeal for Assessment Year 2003-04, taking the following grounds: “1. The learned Commissioner of Income Tax (Appeal)-III, Kanpur, camp at Gwalior has passed the order without giving the relief of salary of Rs.18,17,520/- allowed by Honorable CIT(Appeal) Gwalior vide his order dated 17/05/2006 and by the Honorable Income Tax Appellate Tribunal Agra Bench, Agra vide order dated 26/06/2013. 2. The learned Commissioner of Income Tax (Appeal)-III, Kanpur, camp at Gwalior has passed the order on the
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ground of furnishing inaccurate particulars of income without considering the facts produced before him at the time of hearing and during the course of hearing before the Learned Assessing Officer. 3. The assessee has clearly mentioned in the return of income that it has moved application before the Honourable CCIT Bhopal u/s 10(23C) of the Act well before one year than the question of furnishing inaccurate particulars of income is not justified to impose penalty under section 271(1)(c) of the Act.” 2. The ld. Counsel states as at the bar that ground no. 3 is not pressed. Rejected as not pressed. 3. Regarding ground nos. 1 and 2, the facts are that the AO rejected the assessee’s claim of exemption u/s 10(23C) of the Act, at the time of filing of return or consequential assessment it had not been granted approval by the Competent Authority being the Chief Commissioner of Income-tax, Bhopal. Penalty proceedings u/s 271(1)(c) of the Act were also initiated. Subsequent to finalization of assessment order, the assessee had moved an application u/s 154 of the Act claiming rectification on account of depreciation which was allowed by the AO, as a result of which, income was re-computed at Rs.22,34,510/- in place of Rs.40,18,771/-. Against the assessment, the appeal was filed before the CIT(A), which appeal got dismissed.
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3.1 In reply to the Show Cause Notice issued by the AO, the appellant had submitted that it had applied in the prescribed form No.56 for approval by the Chief Commissioner and it was further submitted that its application u/s 154 for allowing deduction of Salary debited to the Income & Expenditure A/c was still pending before the AO. In the said background it prayed that it had neither concealed the particulars of income, nor it has filed inaccurate particulars of income, during the course of assessment and hence penalty so initiated be dropped. However, the AO, noting that since its gross receipts were of more than Rs.1 crores and hence for claiming exemption u/s 10(23)(c) approval was a condition precedent and since, the appellant was not having the mandatory approval, held the appellant to have furnished inaccurate particulars of income and thereafter he levied the penalty of Rs.6,44,353/-. 3.2 In the appeal filed before the CIT(A), the following grounds of appeal were raised: “1. The penalty order u/s 271(1)(c) of the Income Tax Act, 1961 is bad in law as well as on facts and need to be corrected, revised and/ or cancelled. 2. The learned Assistant Commissioner of Income Tax, Range-3 Gwalior has grossly erred in imposing penalty of Rs.6,44,353/-. As the assessee's exemption application u/s 10(23C) of the
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Income Tax Act, 1961 was pending with Hon'ble CCIT, Bhopal since a long time. 3. That the learned ACIT has grossly erred in not allowing credit of salary paid Rs.18,17,525/- of which all particulars were filed. 4. That the appellant has neither furnished inaccurate particulars of his income nor concealed income. 5. The appellant craves to add, alter, delete or amend any ground or grounds of appeal on or before the date of hearing." 4. Before the ld. CIT(A), the assessee requested that there was no failure on the part of the appellant to disclose any particular correctly. He further pointed out that the appellant's claim for allowability of Salary expenditure of 18,17,520/- too has been allowed by the Appellate Tribunal, Agra and thereafter, the income surviving was just of Rs.4,16,990/-. He laid emphasis that at every stage full particulars were furnished and requested that the penalty so levied be cancelled. 5. The ld. CIT(A), vide the impugned order dated 17.02.2016, confirmed the penalty, observing as follows: “3.1 The submissions made by the appellant have been considered carefully. Undisputedly, (i) At the time of filing of the return of income appellant was not having approval
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granted by the Chief CIT, Bhopal which was a mandatory condition to claim any exemption u/s 10(23C) of the Act. (ii) Even till finalization of the assessment proceedings & penalty proceedings also the appellant was not having approval. 3.2 Conduct of the appellant in claiming exemption u/s 10(230) in the return of income even in the absence of approval by the Chief Commissioner is indicative of the unacceptable assumption on the part of it. It is not understood as to how the appellant believed that it shall be granted approval as a fate accompli just because application had been moved. The Society which is assisted by the competent Lawyers and Consultants took the deliberate risk. Question, whether the there was furnishing of inaccurate particulars of income or not has to be seen in the context of the disclosures made in the return or income and not otherwise. In my considered opinion claiming exemption even when it was not having requisite approval whereas for claiming exemption it ought to have approval m hand is nothing but a surer act of furnishing of
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inaccurate particulars of income in the statutory return of income. In the absence of approval computing income by at its own claiming exemption u/s 10(23C) was a deliberate act of furnishing of inaccurate particulars of income. As a matter of fact, the appellant has failed to appreciate that though its conduct of claiming exemption was very grave still the AO has already been very soft when he had levied penalty just @ 100% as against the maximum leviable penalty of upto 300%. 3.3 Qua the reliance placed by the appellant on following decisions/judgments: “Yogesh R Desai v.ACIT”, 2 ITR 267 Mum Trib. (i) “Silicon Graphics System (India) v. CIT” , 122 TTJ Del. (ii) Trib. 800. “CIT v. Rubber Udyog Vikas Pvt. Ltd.”, 335 ITR 558 ( P (iii) & H). “Reliance Petro Products Ltd. v. CIT”, 322 ITR 158 SC (iv) “KC Builders v. ACIT”, 265 ITR 562 SC. (v) “CIT v. Siddartha Enterprises”, 184 Taxman 460 (vi) (P&H) it seen that they have been relied without demonstrating as to how these are applicable in the facts of the
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present appeal. That apart, on careful perusal of them by me they are found to be of no assistance to the cause of the appellant in so far as present penalty proceedings are concerned. All these decisions/judgments are found to be altogether in a different fact situation and the facts involved therein are substantially different. Factum of claiming exemption knowing very well that it had not been granted approval by the Chief Commissioner itself indicates that with lot of deliberation taking risk only the exemption had been claimed in the return of income. When the appellant was not having exemption, the appellant cannot be heard to say that still its claim was bonafide. In fact the claim of the appellant was such on the disallowance of which there could not have been any opinion different from that of the AO. 3.4 Accordingly, the order of the Asstt. Commissioner of Income Tax in levying penalty u/s 271(1)(c) is hereby upheld and Ground No. 1, 2 & 3 of the appeal are dismissed. In so far as Ground No. 3 “That the learned ACIT has 3.5 grossly erred in not allowing credit of salary paid Rs.18,17,525/- of which all particulars were filed.” is concerned it is also dismissed for the simple reason that it does not arise out of the penalty order passed by the Assessing Officer.” 6. The ld. Counsel for the assessee submits that the learned Commissioner of Income Tax (Appeal)-III, Kanpur, Camp at Gwalior has passed the order without
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giving the relief of salary of Rs.18,17,520/- allowed by ld. CIT (Appeal) Gwalior vide his order dated 17/05/2006 and by the Tribunal, Agra Bench, vide order dated 26/06/2013; that the learned Commissioner of Income Tax (Appeal)-III, Kanpur, Camp at Gwalior has passed the order on the ground of furnishing of inaccurate particulars of income, without considering the facts produced before him at the time of hearing and during the course of hearing before the Assessing Officer. 7. On the other hand, the ld. DR has placed strong reliance on the impugned order. 8. Section 10 (23C)(vi) of the Act, under which, the assessee claimed exemption, provides that non inclusion of income in computing the total income of a previous year of any person, where such income is received by the person on behalf of, inter alia, any educational institution, as per the said section, which may be approved by the prescribed authority. The AO observed that in the absence of approval by the prescribed authority, the assessee could not enjoy exemption u/s 10 (23C) of the Act. The assessee’s income was assessed at Rs.40,18,770/-. Vide application filed u/s 154 of the Act, the assessee claimed depreciation. The AO allowed depreciation of Rs.17,84,261/- and revised the income of the assessee to Rs.22,34,510/-.
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The ld. CIT(A), vide order dated 16.01.2006, confirmed the assessment order, dismissing the appeal filed by the assessee. 10. Penalty of Rs.6,44,353/- was levied on the assessee u/s 271(1)(c) of the Act, on the reasoning that the assessee had willfully furnished wrong particulars of its income, treating its income as exempt u/s 10(23C)(vi). This penalty has been confirmed by the impugned order. 11. In its aforesaid application filed u/s 154 of the Act, the assessee had also claimed allowance of expenditure of Rs.18,17,520/-, claimed on advance salary paid to teachers. The assessee stated that this amount represented the portion of salary which was to be reimbursed by the M.P. Government under various Schemes by way of grant. This amount, as per the assessee, had not been charged to the expenses and was shown in the balance sheet as advance salary paid. Later, the M.P. Government had decided not to reimburse the amount to the assessee. The assessee claimed the expenditure to be of a revenue nature. The AO, vide order (APB 27) passed u/s 154 of the Act, disallowed the assessee’s claim, observing that the expense had not been debited to the income and expenditure account, nor any claim was made at the time of assessment; that the expenditure was debited to the Grant in Aid account; and that therefore, there was no mistake apparent from the record. The ld. CIT(A), vide order (APB-28-31) dated 12.10.2012, deleted the
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disallowance. The Tribunal, vide order (APB 33-35) dated 28.06.2013, upheld this
deletion made by the ld. CIT(A).
It finds mention in para 2.2 of the impugned order, that the assessee had pointed out before the ld. CIT(A) that the assessee’s claim of allowability of salary expenditure of Rs.18,17520/- had been allowed by the Tribunal. However, the ld.
CIT(A) has not dealt with, much less controverted, this assertion of the assessee.
Now, once the Tribunal has deleted the disallowance, the very basis for levy of
penalty to the extent of the amount of Rs.18,17,520/- no longer exists. That being
so, the penalty qua this amount is also deleted. The AO is requested to provide
necessary relief to the assessee accordingly.
In the result, the appeal is allowed.
Order pronounced in the open court on 27/09/2017.
Sd/- (A.D. JAIN) JUDICIAL MEMBER Dated 27/09/2017 *AKV* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR