Income Tax Appellate Tribunal - Delhi
Income-Tax Officer vs St. Michaeals Education Foundation on 25 September, 1992
Equivalent citations: [1992]43ITD656(DELHI)
ORDER
R.M. Mehta, Accountant Member
1. Revenue is in appeal against the order passed by the DC(Appeals) cancelling a penalty of Rs. 7,489 imposed on the respondent under Section 271(1)(a) by the ITO.
2. The respondent in this case runs a school in Daulatbad near Badli. It is registered under Section 12A(a) of the Act with the CIT. In the course of assessment proceedings, it made a claim that its income be exempted under Section 10(22) of the Act on the ground that it was an educational institution. The ITO on a perusal of the aims and objects of the institution came to the conclusion that exemption under Section 10(22) was not available but allowed to it the benefit of Sections 11 and 12 of the Act on the ground that the aims and objects were charitable within the meaning of Section 2(15) of the Income-tax Act. As against the gross income of Rs. 7,48,967, the ITO computed the total income at Rs. nil after allowing deductions on account of application of income as also the amounts spent in acquisition of capital assets.
3. Inasmuch as the return of income had been filed late, i.e., on 28-11-1986 and that also in response to notice under Section 148 as against the due date of 30-6-1983, the ITO initiated penalty proceedings under Section 271(1)(a). A perusal of the penalty order shows that there was no response on the part of the assessee although numerous opportunities were allowed. In view of this situation, the ITO proceeded to levy the impugned penalty calculating it at 1 per cent of the gross income of Rs. 7,48,967.
4. Being aggrieved with the order passed by the ITO, the assessee came up in appeal before the DC(Appeals). During the course of hearing, it was contended that the assessed income was Rs. nil and that the assessee was under no obligation to file its return of income being an educational institution, whose income was exempt under Section 10(22) of the Act. The DC (Appeals) accepted the aforesaid arguments and proceeded to cancel the penalty.
5. The learned Departmental Representative at the out set supported the penalty order on the ground that, inasmuch as the ITO had allowed the benefit of Sections 11 and 12 by rejecting the main contention for exemption to be granted under Section 10(22), the provisions of Section 271 (1)(a) read with Section 139(4A) squarely applied. According to him, the ITO had rightly levied the impugned penalty by taking the gross income at Rs. 7.48,967 without allowing the benefit of Sections 11 and 12 and levying a penalty at 1 per cent of the said figure.
6. The learned counsel for the respondent, on the other hand, supported the order passed by the DC (Appeals) contending in the process that although the ITO had not allowed the benefit of Section 10(22), the Tribunal on subsequent appeal filed by the assessee, had been pleased to do so vide order dated 26-2-1991 in ITA No. 253/Del./88. He also invited attention to the fact that even in the assessment years 1981-82 and 1982-83, the said exemption had bpen duly allowed by the Tribunal vide order dated 4-4-1991 in ITA Nos. 3344 & 3345/Del./89. The submission thereafter was that the provisions of Section 271(1)(a) read with Section 139(4A) were not at all applicable, inasmuch as the benefit of Sections 11 and 12 had not been availed of and since the income was computed at nil and there being no assessed tax, the penalty had been rightly cancelled by the DC (Appeals).
7. We have examined the rival submissions and have also perused the orders passed by the tax authorities. At the out set, we may mention that there is a factual mistake in the order passed by the DC(Appeals), inasmuch as on the date on which he passed the order, i.e., 9-8-1988, the benefit of exemption under Section 10(22) had not been granted to the assessee and this only came about much later as a result of the order passed by the Tribunal in Feb. 91. The position as of today however boils down to the uncontroverted fact that the assessee is enjoying the benefit of Section 10(22) not only in the assessment year 1983-84, which is under appeal but also in the assessment years 1981-82 and 1982-83 once again as a result of the order passed by the Tribunal. Section 10(22) appears in Chapter III under the heading 'incomes which do not form part of total income". In other words, institutions which are covered by the aforesaid section are not at all required to file returns of income provided they have no other taxable income. However, the position is different in respect of charitable institutions which avail of the benefit of Sections 11 & 12 since they are required to file returns as envisaged in Section 139(4A) and failure on that score invites penalty under Section 271(1)(a) even though the income may be computed at Rs. nil
8. Section 271(1)(a) read with Section 139(4A) provides for the levy of a penalty calculated at 1 per cent of the gross income without allowing the benefit of Sections 11 and 12. It was on this ground that the ITO proceeded to levy the penalty. The complex as of today however has changed and the assessee has the benefit of Section 10(22) and its income has been computed at Rs. nil being fully exempt under the said section. Section 271 (1)(a) read with Section 139(4A) does not provide for any penalty for the late filing of a return by an 'educational' institution, and which the assessee has been held to be by the Tribunal. In this view of the matter, we, in the ultimate analysis, opine that the provisions of Section 271(1)(a) are not at all attracted. The order of the DC(Appeals) is, accordingly, confirmed.
9. The appeal is dismissed.