Income Tax Appellate Tribunal - Amritsar
Sai Shyam Educational Society,, Jammu vs Assessee on 12 May, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND
SH. T.S. KAPOOR, ACCOUNTANT MEMBER
[
I.T.A No.566(Asr)/2014
Assessment Year: 2007-08
Sai Shyam Educational Vs. ITO, Ward2(3), Jammu
Society, Jammu. (J&K)
PAN:AACTS8409H
(Appellant) (Respondent)
Appellant by: Sh. Vinamar Gupta (CA)
Respondent by: Sh. S.S.Kanwal (DR.)
Date of hearing: 10.05. 2016
Date of pronouncement: 12.05.2016
ORDER
PER T. S. KAPOOR (AM):
This is an appeal filed by assessee against the order of learned CIT(A), dated 21.07.2014, for Asst. Year 2007-08.
2. The assessee has taken the following grounds of appeal.
"(i) The order of the learned commissioner (Appeals), J&K confirming the penalty of Rs.28,46,900/- levied by the Income Tax Officer. On the appellant is contrary to law & the fact of case.
(ii) On the facts brought on record the learned Commissioner(Appeals) ought to have held that the Society was registered u/s 12AA of the Income Tax Act,1961.
(iii) That the appellant did not provide inaccurate particulars of the income nor concealed the income.
(iv) The appellant claimed exemption u/s 11/12 of the Income Tax Act, 1961 on bonafide grounds."2 ITA No.566 (Asr)/2014
Asst. Year: 2007-08
3. The brief facts of the case as noted in the penalty order are that assessee had claimed to have filed application for registration u/s.12AA of the Act. However no order was claimed to have been passed and assessee presumed that after passing over of six months from the date of application it was entitled for deemed registration and therefore, claimed the income exempt u/s 12A of the Act. However, the Assessing Officer did not allow exemption and matter had reached to Hon'ble Jammu and Kashmir High Court, which vide order dated 29.01.2013 also decided the issue against the assessee. The Assessing Officer on the basis of wrong claim filed by assessee for claiming exemption u/s 12AA imposed the penalty of Rs.29,46,900/-. The operative part of penalty orer is reproduced below.
" 7. The reply of the assessee has been considered and it was found that the assessee did not have certificate of registration under section 12Aa of the Income Tax Act, 1961 and the assessee was not entitled for benefit of exemption u/s 11 and 12 of the Income Tax Act,1961. Even then the assessee had claimed wrong exemption under section 11 & 12 of the Income Tax Act, 1961. As such, the assessee a society has deliberately claimed exemption under section 11 & 12 of the Income Tax Act, 1961. Therefore, assessee society is liable for penalty under section 271(1)9c0 of the Income Tax Act, 1961.
8. It is also pertinent to mention here that the assessee filed an appeal before the Ld. CIT(A0, Jammu against the order of the A.O and the Ld. CIT(A) dismissed the appeal of the assessee and upheld the order of the AO vide appeal no.223/09-10 dated 16.02.2012. Subsequently, the assessee filed an appeal before the Hon'ble ITAT, Amr'isar and the Hon'ble ITAT also dismissed the appeal of the assessee and confirmed the order of ld .CIT(A), Jammu, vide ITA No. 134(Asr)/2012 dated 18.09.2012.3 ITA No.566 (Asr)/2014
Asst. Year: 2007-08 8.1 It is evident from the above facts and keeping in view the above decisions of Ld. CIT(A), Jammu and Hon'ble ITAT, Amritsar Bench, Amritsar that the assessee society had deliberately claimed wrong exemption under section 11 7 12 of the Income Tax Act,1961 for which it was not entitled.
9.The provisions cf Section 271(1)(c) of the Income Tax Act, 1961 defines that if the Assessing Officer is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by; Ox penalty in the cases referred to ir. clause (c) in addition to tax, if any payable by him, a sum of such shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reasons of the concealment of particulars of his income or the furnishing of inaccurate of particulars of such income.
10. In view of the above discussion, it is held that the assessee has deliberately furnished inaccurate particular of his income and I hold that it is fit case for imposition of penalty, under section 271(1)(c) of the Income Tax Act, 1961. Therefore, I am satisfied that the assessee has furnished inaccurate of his particulars of his income and direct the assessee to pay a sum of Rs. 28,46,900/-, equal to 100% of the amount of tax sought to be evaded by reason of furnishing of inaccurate particulars of his income."
4. Aggrieved the assessee filed appeal before learned CIT(A), who dismissed the appeal of the assessee by holding as under:
"It is observed that the appellant could not establish before the Hon'ble ITAT Bench that the application u/s 12A had been made by the appellant. Further the Hon'ble High Court of Jammu & Kashmir also dismissed the appeal of the appellant on this issue. The appellant has produced certain new evidence before me during the present appellant proceedings to establish that the said application was made before the Commissioner of Income Tax. Since the matter has been adjudicated by the higher authorities i.e. Hon'ble Tribunal & Hon'ble High Court and it has been held against the appellant, therefore, any fresh evidence, howsoever banafide cannot be accepted now. Therefore, this plea of the appellant that he was under belief of enjoying deemed registration is not acceptable. Moreover, presuming deemed registration is also not a crystallized position of law. Accordingly, this ground is dimissed and penalty imposed is upheld."
5. Aggrieved the assessee is in appeal before us.
4 ITA No.566 (Asr)/2014
Asst. Year: 2007-08
6. At the outset, the learned AR submitted that assessee was denied exemption u/s 12AA of the Act and therefore, the Assessing Officer had imposed penalty u/s 271(1) (c ) of the Act. The learned AR submitted that assessee had not provided inaccurate particulars of income and the income of the assessee was correctly reflected as per P&L account and assessee had not concealed anything and it is only due to the fact that registration u/s 12A was denied that authorities below had imposed penalty u/s 271(1)( c). The learned AR in this respect relied upon the case law of CIT vs. Reliance Petro Products (SC) for the proposition that a mere making of claim which is not accepted by Revenue by itself will not amount to furnishing of inaccurate particulars regarding income of the assessee.
7. The learned DR, on the other hand, heavily relied upon the orders of authorities below and submitted that Jammu & Kashmir High Court has already decided against the assessee and therefore, the order of learned CIT(A) confirmed the penalty should be upheld.
8. We have heard the rival parties and have gone through the material placed on record. We find that it is an undisputed fact that claim of the assessee u/s 12AA was denied by Assessing Officer and which has been upheld by Hon'ble Jammu & Kashmir High Court. It is also an undisputed fact that assessee by claiming exemption u/s 12AA of the Act had a bonafide belief that since the department had not disposed 5 ITA No.566 (Asr)/2014 Asst. Year: 2007-08 off the application for registration within six months, therefore, it was deemed to have been granted registration u/s 12AA of the Act. We further find that vide letter dated 23.06.2014 the assessee had made submissions to the CIT(A), whereby it had submitted that as per the remand report of the Assessing Officer the person to whom application for registration was handed over had admitted of having issued the receipt in question and had also admitted that documents were received along with Form No.10A and in this respect had enclosed photo copy of remand report also. The submissions of the assessee as contained in letter dated 23.06.2014 are reproduced below.
"1. At the request of the assessee the case for the A.Y 2010-11 was remanded back to the A.O for recording the statement of Mr. P.N Saproo presently working as clerk in ward 1(3), Jammu, who had issued receipt no. 1167 dated 27.06.2007. As per the remand report the said person has admitted of living issued the receipt in question and has also mentioned that the documents received i.e. form no. 10A has been handed over to the concerned clerk. We enclose photocopy of remand report for your kind perusal & record. The onus of having filed the requisite documents for seeking registration u/s 12A of the Income Tax Act, 1961 stands fully discharged by the assessee and there is no room left for any doubts. It is worthwnile to mention that the assessee has been all along maintaining that form 10A has been filed.
2.1 The assessee reasonably & legally believed that in absence of rejection of application for seeking registration u/s 12Aby the department the assessee enjoyed deemed registration which was held by Hon'ble High Court in case of Society for the promotion o Education Adventure Sport and Conservation of Environment v/s CIT. The said case hold good at the time of filing of return by the assessee for the A.Y 2007-08.
2.2 Similar views were held in case of Bhagwad Sarup Shri Shri Devraha Baba Memorial Shri Parmarth Dham Trust V/s CI1 Dehradun (2007) 17 SOT 281 (Delhi) SB. The ITAT considered the submissions of the parties and directed the A.O to assessee the assessee as having been registered u/s 11, 2 & 13 of the Act, subject to satisfaction of other conditions laid down in these sections.6 ITA No.566 (Asr)/2014
Asst. Year: 2007-08 In view of these facts, the assessee has not concealed either the income or the facts and as such levy of penalty is totally unjustified and not in accordance with law."
The assessee, therefore, prays that the penalty imposed by the A.O may please be dropped and justice granted."
However, learned CIT(A) did not consider the submissions of the assessee and on the basis of Hon'ble High Court's decision against the assessee upheld the penalty. We find that the action of learned CIT(A) is not correct as assessment proceedings and penalty proceedings are separate proceedings. Though assessment proceedings do have some effect on penalty proceedings yet the assessment proceedings cannot be totally relied upon for penalty proceedings. Moreover, we find that Hon'be Supreme Court in the case of CIT vs. Society for the Promotion of Education, Allahabad (SC), has held that if the application of assessee for registration u/s 12AA is not disposed off within six months then assessee is entitled to assume deemed registration. Though, in the present year in assessment proceedings the assessee was not able to demonstrate up to Hon'ble High Court level regarding filing of application for registration yet during penalty proceedings the assessee had the evidence in the form of remand report of Assessing Officer whereby, he had admitted that assessee had filed application u/s 12AA. Therefore, learned CIT(A) should have deleted the penalty as assessee had brought into the notice of learned CIT(A) vide its letter dated 23.06.2014. 7 ITA No.566 (Asr)/2014
Asst. Year: 2007-08
9. Moreover, we further find that Assessing Officer had imposed the penalty on the basis of figures of profit declared by assessee and in which the Assessing Officer could not point out any discrepancy. He had imposed the penalty only on the basis that assessee had made a wrong claim by claiming its income exempt u/s 12AA of the Act. The Hon'ble Supreme Court of India in the case of CIT vs. Reliance Petro products Pvt. Ltd. has held that a mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of assessee. The operative part of the order of Hon'ble Supreme Court is reproduced below.
"8. Therefore, it is obvious that it must be shown that the conditions under Section 271(1 )(c) must exist before the penalty is imposed. There can be no dispute thati everything would depend upon the Return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. [2007(6) SCC 329], this Court explained the terms "concealment of income" and "furnishing inaccurate particulars". The Court went on to hold therein that in order to attract the penalty under Section 271(1 )(c), mens rea was necessary, as according to the Court, the word "inaccurate" signified a deliberate act or omission on behalf of the assessee. It went on to hold that Clause (iii) of Section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a1 finding as to how and in what manner, the assessee had furnished the particulars of his income. The 8 ITA No.566 (Asr)/2014 Asst. Year: 2007-08 Court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. was upset. In Union of India Vs. Dharamendra Textile Processors (cited supra), after quoting from Section 271 extensively and also considering Section 271(1)(c), the Court came to the conclusion that since Section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of Section 271(1 )(c) read with Explanations indicated with the said Section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, willful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under Section 276-C of the Act. The basic reason why decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra) was overruled by this Court in Union of India Vs. Dharamendra Textile Processors (cited supra), was that according to this Court the effect and difference, between Section 271(1 )(c) and Section 276-C of the Act was lost sight of in case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra). However, it must be pointed out that in Union of India Vs. Dharamendra Textile Processors (cited supra), no fault was found with the reasoning in the decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra), where the Court explained the meaning of the terms "conceal" and inaccurate". It was only the ultimate inference in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra) to the effect that mens rea was an essential ingredient for the penalty under Section 271(1)(c) that the decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra) was overruled.
9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as:-
"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript".
We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. 9 ITA No.566 (Asr)/2014
Asst. Year: 2007-08 We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars."
In view of the above facts and circumstances and in view of judicial precedents, we delete the penalty confirmed by learned CIT(A).
10. In nutshell, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 12th May, 2016.
Sd/- Sd/-
(A.D. JAIN) (T. S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated:12.05.2016.
/PK/ Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By order