Bombay High Court
Shri Bhandup Jain Temple vs Deputy Director Of Income Tax (Also Shri ... on 14 August, 1995
Equivalent citations: (1996)54TTJ(MUMBAI)104
ORDER
S. L. BANERJEE, J. M. :
Both these appeals filed by the assessees relate to levy of penalty under s. 272(2)(e) [sic - 272A(2)(e)] of the Act and involve common facts. They arise out of the orders passed by the same CIT(A) and, therefore, they are disposed of by this common order for the sake of convenience.
2. In both the cases the penalty levied and confirmed Rs. 51,600 for asst. yr. 1991-92.
3. The assessees are charitable trusts and it appears that no tax was payable for the year under consideration. However, in view of s. 272(2)(e) the AO (AO) levied penalties for delay of submission of return at Rs. 51,600. Before the CIT(A) the assessees argued that there was no time limit prescribed under s. 139(4) for filing of the return of income as the time limit is prescribed in s. 139(3). It was, further argued that due to lack of competent accountant audit of the accounts could not be completed in time. The assessee also relied on the decision of the Calcutta High Court in the case of Calcutta Chromotype Pvt. Ltd. vs. ITO (1971) 80 ITR 627 (Cal) and the decision of the Allahabad High Court in the case of CIT vs. Anchor Pressing (P) Ltd. (1982) 136 ITR 505 (All). The CIT(A), however, did not accept this submission of the assessee as, according to him, sub-s. (4A) of s. 139 provides that the provisions of the section, so far as may be, apply as if it were a return required to be furnished under sub-s. (1) of s. 139. According to him, under s. 139(1) the return is required to be filed before 31st October. Therefore, the deeming provisions relating to filing of the return of income under s. 139(4A) will have to be given full effect. In the case of Gulabchand Motilal vs. CIT (1988) 174 ITR 117 (MP) and CIT vs. Kothari Plantation & Industries Ltd. (1993) 203 ITR 547 (Cal) the Honble Calcutta High Court held that a fiction has to be given its full effect and has to be carried out to its logical conclusion. The fiction created by sub-s. (4A) of s. 139 relating to filing of return as if it were a return required to be furnished under sub-s. (1) of s. 139 has to be given full effect and has to be carried out to its logical conclusion. If the arguments of the learned counsel for the assessees are accepted then it would be difficult to calculate the penalty for late furnishing of return of income because in that case it would be impossible to determine the date from which the penalty is to be calculated. Similarly the fiction created by sub-s. (4A) of s. 139 would also become useless and redundant. If it was the intention of the legislature to allow the appellant trusts to file the returns of income at any time, then the introduction of s. 139(4A) treating the return under sub-s. (4A) as if it were return required to be furnished under sub-s. (1) would become totally redundant. The learned CIT(A) further pointed out that it was the duty of the trustees to maintain the accounts and file the return of income in time. It has not been proved by evidence that any effort was made by the trustees to appoint a competent accountant for the purpose of maintaining accounts as there is no evidence on record to support the arguments of the assessees. According to him, as no reasonable cause has been proved for non-furnishing the returns of income in time, the AO was justified in imposing the penalty under s. 272A(2)(e). He dismissed the appeals.
4. The learned counsel for the assessee reiterated the submissions made before the learned CIT(A). He further adverted to s. 139(4A) which runs as under :
"Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-cl. (iia) of cl. (24) of s. 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of ss. 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-s. (1)."
According to the learned counsel for the assessees, the words such income denote the income which has to be computed without giving effect to ss. 11 and 12. He submitted that it postulates that when a charitable or religious trust is not entitled to claim the benefit of those two sections, i.e. s. 11 and 12, then only it has to file its return under this sub-section. Otherwise when a charitable or religious trust claims exemption under these two sections then it cannot file a return without claiming the benefits of these sections, because return in Form No. 3 mandates a charitable or religious trust to claim exemptions under ss. 11 and 12 which is evident from col. 13 of the said Return Form. According to him, the idea behind this sub-section is where a charitable or religious trust is not entitled to the benefits of ss. 11 and 12 then only it has to file a return within the time stipulated under s. 139(1). He submitted that a charitable or religious trust once registered with the Department as per s. 12A continues to get the benefit of ss. 11 and 12 provided its income does not fall under s. 13 of the Act or did not apply the income for charitable purposes. According to him, though a trust is charitable or religious, it may in certain years contravene the obligations to get the benefit of ss. 11 and 12 (See s. 13). In that case, he submitted, the charitable or religious trust is under obligation to file the return within the time, otherwise it will not be possible for the Department to know that the trust has contravened the obligations to obtain the benefit of ss. 11 and 12 in any particular year. He pointed out that charitable or religious trusts registered under the IT Act (s. 12A) are not numerous as in the case of individuals, firms and companies. Their cases can be monitored by the Department on the basis of registration and to serve notices when the returns had not been filed in time. If a trust, which is registered as charitable or religious trust, does not file the return in time and if it is found that it is not entitled for the exemptions under s. 11 and 12, draconian penalty as envisaged in s. 272A(2)(e) can be levied. Otherwise it is not equitable to levy penalty of such rate when there is no tax payable in the case of charitable trust. He submitted that if this view of the Department is accepted then in many cases the penalties will club up the corpus of the trusts themselves. He submitted that it has to be strongly presumed that in the case of charitable or religious trust, the trustees are not generally careful for maintaining the accounts and moreover they may nourish the belief that as the trust is registered as a charitable or religious trust by the CIT as non-taxable institution, no penalty can be levied for delay in filing the return because there is religious trusts registered under the IT Act (s. 12A) are not numerous as in the case of individuals, firms and companies. Their cases can be monitored by the Department on the basis of registration and to serve notices when the returns had not been filed in time. If a trust, which is registered as charitable or religious trust, does not file the return in time and if it is found that it is not entitled for the exemptions under s. 11 and 12, draconian penalty as envisaged in s. 272A(2)(e) can be levied. Otherwise it is not equitable to levy penalty of such rate when there is no tax payable in the case of charitable trust. He submitted that if this view of the Department is accepted then in many cases the penalties will club up the corpus of the trusts themselves. He submitted that it has to be strongly presumed that in the case of charitable or religious trust, the trustees are not generally careful for maintaining the accounts and moreover they may nourish the belief that as the trust is registered as a charitable or religious trust by the CIT as non-taxable institution, no penalty can be levied for delay in filing the return because there is no involvement of tax in it. He, therefore, argued that the cause shown by the assessee should also be accepted even if it is without evidence. The learned Departmental Representative strongly supported the orders of the learned CIT(A).
5. I have considered the rival submission, facts and material on record. In my opinion, the stand taken by the learned counsel for the assessees cannot be said to be without any force. In any case the view taken by the learned CIT(A) can also be said to be a view which supports the levy of penalty. But when two views are possible, I am of the opinion that the issue should be decided in favour of the assessee in view of the Supreme Court decision in the case of CIT vs. Vegetable Products (1973) 88 ITR 192 (SC). I, therefore, cancel the penalties.
6. In the result, the appeals are allowed.