Income Tax Appellate Tribunal - Ahmedabad
Nootan Sarva Vidyalaya Kelvani Mandal, ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "B" AHMEDABAD
Before Shri Mahavir Singh, Judicial Member, and
Shri D. C. Agrawal, Accountant Member
ITA No.1390/Ahd/2008
Assessment Year :2004-05
Date of hearing:1.12.10 Drafted:3..12.10
Nootan Sarva V/s. Addl. Comm. of
Vidhyalaya Kelavani Income Tax, Patan
Mandal, Patani Circle, Patan (N.G.)
Darwaja, Visnagar
PAN No.AAATN1595K
(Appellant) .. (Respondent)
Appellant by :- Shri S.N.Soparkar, SR-AR
Respondent by:- Shri K.Madhusudan, SR-DR
ORDER
PER Mahavir Singh, Judicial Member:-
This appeal by assessee is arising out of order of Commissioner of Income-tax (Appeals)-Gandhinagar, appeal No. CIT(A)/GNR/156/2007- 08 dated 31-01-2008. The penalty under dispute was levied by Asstt. Commissioner of Income-tax, Patan Circle, Patan u/s271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') vide his order dated 25-07-2007 for assessment year 2004-05.
ITA No.1390/Ahd/2008 A.Y.2004-05Nootan Sarva Vidhyalaya Kelavani Mandal v. ACIT, Patan Circle Page 2
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the penalty levied by Assessing Officer u/s 271(1)(c) of the Act. For this, assessee has raised the following effective four grounds:-
"(1) The Hon. CIT(A) was wrong in confirming the concealment penalty of Rs.3,00,000/- 271(1)(c)(c) of the I.T. Act.
(2) The finding of the Hon. CIT(A) that the appellant has committed a default in providing inaccurate particulars of rental income which is not correct.
The appellant submits that the rental income submitted by the appellant was correct in the original as well as revised return.
(3) The Hon. CIT(A) has not considered the following facts while levying the penalty.
(a) The mistake in depreciation amount on account of oversight an similarity, not a concealment.
(b) The revised return has been filed in time and so valid that indicates there is no mala fide intention to conceal the income because the revised return is filed before the date of the notice issued.
(c) The appellant has withdrawn the appeal because being a Charitable Trust, the Trustee is not interested in the long litigation and decided to co-operate with the Department and wanted to buy a peace.
(d) The Hon. CIT(A) has not considered the various judgements cited by the appellant in reply to the Show Cause Notice dated 23.7.2007.
(4) The appellant therefore requests that the penalty confirmed by the Hon. CIT(A) should be deleted on merits."
3. The brief facts leading to the above issue are that the assessee is a charitable trust registered under Bombay Public Trust Act on 19.-03- 1952 and has also been registered with Commissioner of Income-tax u/s 12A(a) of the Act. The main object of the trust is charitable like spreading ITA No.1390/Ahd/2008 A.Y.2004-05 Nootan Sarva Vidhyalaya Kelavani Mandal v. ACIT, Patan Circle Page 3 of education and allied activities regarding education. The assessee- trust has established eighteen institutions on various education fields like schools, colleges, engineering colleges, technical colleges etc and above eighteen institutions are run by the main trust viz. Nootan Sarva Vidyalaya Kelvani Mandal, Visnagar. For the relevant assessment year 2004-05 return of income was filed on 25-10-2004 declaring a total income at "Nil" under the status of A.O.P. (Trust) and return of income was processed u/s.143(1) of the Act on 07-07-2005 and granted the refund for Rs.1,82,120/-. Thereafter the assessee has filed a revised return on 28-03-2006 with the reasons as follows:-
a) In the computation sheet showing the total expenses of the trust, depreciation was mistakenly written as Rs.9,30,046/- instead of Rs.94,30,046/- resulting in total depreciation figure wrongly written as Rs.70,04,772/- instead of Rs.1,54,91,812/- which amounted to excess claim of Rs.84,87,040/- being expenses on the objects of the trust.
b) In the computation sheet showing the capital expenditure of C.J.
Patel College of Commerce in respect of deduction of Rs.1,70,289/- from computer equipments, it was shown as addition by mistake and actual addition was at Rs.650/- in respect of library books which has been correctly stated. Therefore instead of showing the net deduction of Rs.1,69,639/- total addition of Rs.1,70,940/- was stated. The correct of capital expenditure is Rs.1,37,55,800/- and not Rs.1,40,96,379/- as per the original return. These two corrections sin the computation mistakes requires to be rectified by filing the revised return and as per the revised computation of income option u/s.11(1) is exercised with the revised return of income.
The assessee filed revised return on 28-03-2006 with option letter for the deemed application u/s.111(1) of the Act and option is exercised as the expenditure of Rs.79,24,026/- deemed tom be applied, which is incurred in assessment year 2005-06. On scrutiny, Assessing Officer issued a notice u/s.143(2) of the Act and in response to notice, the assessee has ITA No.1390/Ahd/2008 A.Y.2004-05 Nootan Sarva Vidhyalaya Kelavani Mandal v. ACIT, Patan Circle Page 4 attended before the Assessing Officer and made submission from time to time and AO has determined the income as under:-
Income of the Trust as arrived Rs.7,92,37,075/-
above Rs.6,04,88,768
Rs.1,87,48,307
Less: Actual Exps. incurred
Addl. Difference of expenses made Rs. 68,62,745 not up to 85% of income Rs.2,56,11,052 Add: surplus not eligible for Rs. 85,79,873 accumulation in excess of 15% of Rs.3,41,90,925 income.
Less: Capital expenditure as Rs.1,37,55,800 shown Rs.2,04,35,125 Less: Donation to corpus as shown Rs. 7,21,450 Total income Rs.1,97,13,675 Aggrieved, assessee preferred appeal before CIT(A). Simultaneously, assessee also filed a rectification application on 22-01-2007 requesting to re-compute the addition for difference of expenditure not made up to 85% of the income of the assessee at Rs.68,,62,745/- and to deduct the permitted accumulation of the gross receipt. In response to the said application, Assessing Officer passed an order u/s.154 on 03-01-2007, wherein assessee's income was recomputed as under:-
Income of the trust as arrived Rs.7,92,37,075/- (inclusive of corpus donation of Rs.7,21,450/-) Less: Actual expenditure incurred Rs.6,04,88,768/-
Rs.1,87,48,307/-
Add: Difference of expenditure made not up
To 85% of income already included in
Rs.1,87,48,307/- hence not required to be
Added again Nil
Less: 15% permitted accumulation Rs.1,18,85,561/-
Rs. 68,62,746/-
ITA No.1390/Ahd/2008 A.Y.2004-05
Nootan Sarva Vidhyalaya Kelavani Mandal v. ACIT, Patan Circle Page 5
Add : Surplus not eligible for accumulation
In excess of 15% of income Rs. 85,79,873/-
Less: Capital expenditure as shown Rs.1,37,55,800/-
Rs 16,86,819/-
Less: Donation to corpus as shown Rs.7,21,450/-
Revised total income Rs. 9,65,369/-
4. Thus, the income of the assessee was arrived at Rs.9,65,369/-
against the nil returned income. Subsequently, the assessee has withdrawn the appeal before the CIT(A) on 23-03-2007 and same was treated dismissed vide order No. CIT(A)-XXI/Patan/230/06-07 dated 02- 04-2007. In view of the above facts, the assessee was issued a show cause notice u/s.274 r.w.s. 271(1)(c) of the Act and assessee stated that there was an error in working of depreciation and that the assessee has filed revised return to correct the same, which was not accepted by Assessing Officer. The assessee further contended that the income had increased on account of bona fide error which does not amount to concealment. The Assessing Officer has not accepted the plea of assessee and imposed penalty u/s.271(1)(c) of the Act amounting to Rs.3 lakh. Aggrieved, assessee preferred appeal before CIT(A) and CIT(A) confirmed the action of Assessing Officer on the ground that assessee has furnished inaccurate particulars of rental income of Rs.3 lakh by giving following findings in para-5 to 5.9 of his appellate order:-
"5. The matter has been given serious consideration. In my view the issue will have to be decided by referring to the following four questions:
(1) Whether the original return filed contained any inaccurate particulars of income leading to concealment inaccurate particulars of income leading to concealment of income for which penalty u/s.271(1)© could considered.ITA No.1390/Ahd/2008 A.Y.2004-05
Nootan Sarva Vidhyalaya Kelavani Mandal v. ACIT, Patan Circle Page 6 (2) Whether revised return filed, rectified such inaccurate particulars of income, if any.
(3) Whether the revised return filed can be treated as a valid return, in the absence of any finding at the assessment stage or the appellate stage for the quantum order.
(4) Whether the fact of revised return can be considered for disposing of the penalty, when the same has not been considered and pressed upon by the appellant at the CIT(A) stage in the quantum order.
5.1 A comparison of the computation of income in the original return filed and the assessment completed by the Assessing Officer finally crystallized in the order u/s.154 shows that the reason for the assessed income being Rs.9,65,369/- as against the 'nil' declared by the appellant is primarily due to the appellant showing the rental income received from the various schools run by it as under the head Income from Housing Property and thereupon claiming the statutory deduction of 30% towards repairs, etc. which amounted to Rs.31,03,018/-. In fact, these being transactions between different units of the Trust, were not income by any stretch of imagination. Although, the contra effect of this income did get reflect in the expenditure shown by the appellant, yet by showing it as a formal source of income under the head Income from Housing Property, the assessee got an additional amount of Rs.31,03,018/- as a component of expenditure to work out the statutory requirement of having spent at least 85% of the total income during the year towards charitable purpose. This was clearly a false claim, which the Assessing Officer did not allow. As per the computation of the appellant, in the original return, the total income of the appellant as per provisions of section 11 were Rs.8,68,87,454/- and therefore the 15% of this, which it could have accumulated, came to Rs.1,29,24,900/-. On the other hand, after claiming the 30% statutory deduction, the appellant had shown the total expenditure of Rs.7,90,55,221/- and therefore the unspent amount of Rs.78,32,233/- was the below 15% permitted for accumulation u/s 11. The computation clearly changes in case the rental income between the Trust and the schools run by it is excluded. As worked by the Assessing Officer, the total income of the Trust in such a situation comes to Rs.7,92,37,075/- and after considering the actual expenditure incurred of Rs.6,04,88,768/- plus the capital expenditure of Rs.1,37,55,800/- and the donation to the corpus Rs.7,21,450/-, the surplus between the actual expenditure incurred and the 85% limit comes to Rs.9,65,369/-, ITA No.1390/Ahd/2008 A.Y.2004-05 Nootan Sarva Vidhyalaya Kelavani Mandal v. ACIT, Patan Circle Page 7 which the Assessing Officer has assessed as income. Hence, it is clear that if we exclude 30% of statutory deduction restored to by the appellant, the computation results in expenditure being less than the 85% limit prescribed by the section and hence there has been a surplus of Rs.9,65,369/-.
5.2 The appellant has accepted this figure of income while withdrawing the appeal. Normally, in the income-tax proceedings, no adverse inference can be drawn if an assessee does not file an appeal or withdraws an appeal. Yet, in the facts of the case, it is difficult to ignore this circumstantial evidence that when the Assessing Officer recomputed it by excluding the wrong claim of the appellant, the said assessment was accepted although the assessed income was also not so small.
5.3 Coming to the question No.(2) above, the computation of the revised return does show that in the revised return, the appellant withdrew this claim. Although, the reasons for filing the revised claim were attributed to the inappropriate computation of the depreciation and the capital expenses, the major difference was the withdrawal of the claim of 30% statutory deduction. This is an admittance on the part of the appellant that the claim made was incorrect, although the Trust did not highlight it when filing the revised return.
5.4 Coming to the issue whether the revised return filed is invalid or not, from the chronology of events, prima-facie the revised return has been filed within time as the judicial opinion is now clear that intimation u/s.143(1) can not be equated with an assessment. Also it is quite clear that the return has been filed suo-moto before the issue of notice u/s.143(2). However, a return can be revised u/s.139(5) only for if it "discovers any omission or wrong statement". The appellant has tried to rectify both with respect to arithmetical errors (depreciation) as also the legal position (with respect to rent and the consequent statutory deduction of 30%) by filing the revised return.
5.5 The provisions of section 139(5) are meant to rectify inadvertent mistake that might have crept in while filing the original return. Therefore, when the appellant is revising the return on the legal ground, it could very well be a debatable issue whether such a return was to be treated as a revised return or not and such an issue could have been settled at the assessment and appellate ITA No.1390/Ahd/2008 A.Y.2004-05 Nootan Sarva Vidhyalaya Kelavani Mandal v. ACIT, Patan Circle Page 8 stage thereafter. Therefore, in the penalty stage, it would be inappropriate to give a specific finding whether the revised return filed, which was treated as invalid by the Assessing Officer, was a valid return or not.
5.6 Regarding to fourth question listed above, the matter whether the information contained in the revised return was to be kept in view by the Assessing Officer, notwithstanding whether it was valid return or not and whether this is an important fact in deciding the penalty in hand, I am of the opinion that in deciding the penalty, this revised return has no role to play. The appellant having decided not to pursue the appeal and having accepted the assessment passed on the original return, I think it shall be safe to presume that the appellant has not pressed for his revised return at the appeal stage as a matter of conscious decision and has in the process voluntarily foregone whatever claims he might have had. If that revised return has not been pressed before the CIT(A) at the quantum stage, I am afraid it cannot be relied upon now. The penalty in question gets related to the original return filed and therefore whether the revised return filed was a valid return or not, the issue of penalty has to be considered in the context of the original return only.
5.7 Therefore, considering the discussion of the earlier paragraphs, it appears quite clear that the assessee made a claim of statutory deduction, which was false and for which assessee was not eligible for, with a view to show an enhanced expenditure on charitable purposes to meet the 85% limit laid down by the Act. Although, the appellant revised his return and in the process rectified its mistakes, neither the Assessing Officer accepted this rectification/ revision as valid nor the appellant perused and thereby it abrogated its claim for whatever reliance he could have been placed on this revised return. Therefore, the fact of assessee having provided inaccurate particulars of income leading to concealment is quite apparent.
5.8 Consequent to introduction of Explanation-I to section 271(1)©, the Department is no more required to prove mens-rea in the context of this penalty. The recent decisions of the Supreme Court in the case of T. Ashok Pai Vs. CIT (supra) etc. only emphasize the fact that the Department must have to first prove the prima- facie fact of inaccurate particulars or some act of concealment before invoking Explanation-I to throw the onus on the appellant. In ITA No.1390/Ahd/2008 A.Y.2004-05 Nootan Sarva Vidhyalaya Kelavani Mandal v. ACIT, Patan Circle Page 9 the instant case, I think the Department has brought out quite clearly the act of an attempt of manipulation and an attempt to reduce tax liability by providing inaccurate particulars. The assessee in the appellant proceedings has, at no stage, given any explanation about the circumstances in which such a claim was made. Hence bonafide credentials of the assessee remain unproved.
5.9 Hence, to sum up, in my view, the appellant has committed a default in terms of providing inaccurate particulars of rental income which had led to concealment of income, which has been detected by the Department. Hence the penalty levied u/s.271(1)© is justified. Since the quantum of the penalty levied has not been argued about and in any case it is near about the minimum leviable, the penalty of Rs.3,00,000/- is confirmed."
Aggrieved, assessee came in second appeal before Tribunal.
5. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee in his revised return has claimed that the total expenses of the Trust on account of depreciation was written as Rs.9,30,046/-, on mistaken notion, in stead of the actual claim of Rs.94,30,046/- resulting in less depreciation written as Rs.70,04,772/- in stead of Rs.1,54,91,812/-, which amounting to excess of Rs.84,87,040/-, being expended on the object of the Trust. This fact can be verified from the rectification order passed by the Assessing Officer u/s.154 of the Act and computation attached along with that order. The relevant computation is reproduced in this order. The CIT(A) has not gone into the computation of revised return, which is given on assessee's paper book at page-4, which clearly revealed that in case the actual depreciation is allowed, the assessee's income will be NIL. The CIT(A) has merely levied the penalty that the assessee has not challenged the additions of Rs.9,65,369/- before the appellate authorities and at this stage now the assessee cannot take the plea that proper ITA No.1390/Ahd/2008 A.Y.2004-05 Nootan Sarva Vidhyalaya Kelavani Mandal v. ACIT, Patan Circle Page 10 depreciation be allowed while adjudicating the penalty proceedings. The CIT(A) has not accepted the plea of the assessee and confirmed the penalty. We are of the view that the assessee has explained before us that after the allowance of expenditure & depreciation assessee's income, in fact, will be NIL. In our view, the assessee has not concealed any particulars of income and the lower authorities erred in levying penalty. Accordingly, we delete the penalty and allow the appeal of assessee.
6. In the result, assessee's appeal is allowed.
Order pronounced in Open Court on 10/12/2010
Sd/- Sd/-
(D.C.Agrawal) (Mahavir Singh)
(Accountant Member) (Judicial Member)
Ahmedabad,
Dated : 10/12/2010
*Dkp
Copy of the Order forwarded to:-
1. The Assessee.
2. The Revenue.
3. The CIT(Appeals)-Gandhinagar
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
/True copy/
Deputy/Asstt.Registrar
ITAT, Ahmedabad