Income Tax Appellate Tribunal - Bangalore
Garden City Education Trust vs Addl. Dir. Of It on 1 January, 1800
ORDER
1. The appeals have been filed by the assessee and the revenue for the assessment years 1995-96 to 2000-01. The cross objections have been filed by the assessee against the revenue's appeals in support of the action of learned Commissioner (Appeals). Since common issues are involved in all the appeals, they are disposed off by this common order for the sake of convenience.
2. All the appeals are in relation to levy of penalty under Section 272A(2)(e) of the Income Tax Act. According to the assessing officer, the trust failed to furnish returns of income within the due date as per the provision of Section 139(4A) of the Income Tax Act. The assessee filed returns for the assessment years 1995-96 to 1999-2000 claiming exemption under Section 10(22)/10(23C)(vi) of the Income Tax Act on 4-2-2002. For the assessment year 2000-01, return was filed on 4-2-2002 and for the assessment year 2001-02 it was filed on 29-10-2001. Accordingly penalty proceeding was initiated by the ADIT(Exempt.), Bangalore. The explanation of the assessee was that the trust is engaged in the educational and charitable activities and its income is exempted under Section 10(22)/10(23)(vi) of the Income Tax Act. Hence, there was no taxable income. Therefore, the trust is not supposed to file any return under Section 272A(2)(e) of the Income Tax Act. According to the provision of that Section, if a trust is exempted under Sections 11 and 12 of the Income Tax Act, then only return was to be filed under Section 139(4A) of the Act. The assessee never claimed exemption under Sections 11 and 12 of the Act. The explanation of the assessee was not accepted by the assessing officer and penalty was levied for all the years.
2.1 The matter was taken up by the assessee before the Commissioner (Appeals). Before Commissioner (Appeals), the assessee submitted additional ground that it was under bona fide belief that since the Institution was running in loss, it did not have any taxable liability so no return was filed. Further ground was taken that without giving effect to the provision of Section 11 / 12 of the Income Tax Act, total income did not exceed the maximum amount, which is not chargeable to income tax. Therefore, the appellant was not bound to file its return of income under Section 139(4A) of the Act. Learned Commissioner (Appeals) admitted the additional grounds and called for a remand report from the assessing officer. On consideration of the circumstances of the case, it was held by the learned Commissioner (Appeals) that in view of the decision of Bombay High Court in the case of DIT (Exemptions) v. Malad Jain Yuvak Mandal Medical Relief Centre , the assessee was bound to file return of income although it had not claimed exemption under Sections 11 and 12 of the Act. Learned Commissioner (Appeals) considered the provision of Section 273B of the Income Tax Act, according to which, if the assessee proves that there was reasonable cause for such failure in filing return on time, no penalty should be levied. It was held by learned Commissioner (Appeals) that for the assessment years 1998-99, 1999-2000 and 2000-01, there was excess expenditure over income. Hence, there was reasonable cause for not filing return of income by the assessee. Hence, penalty for those years were cancelled. However, in the assessment years 1995-96 to 1997-98, orders of penalty were upheld. Against the said finding, both the assessee and the revenue are in appeal before the Tribunal.
3. Learned DR submitted that the learned Commissioner (Appeals) was not justified in cancelling the orders of penalty on the ground that there was no income in those years. According to the learned DR, the assessee failed to file return of income and only after the notice under Section 142(1), returns were filed although the assessee had taxable income for all the above years. It was submitted that the assessee was denied exemption under Section 10(22)/10(23)(vi) by the assessing officer. The Educational Institutions, which are enjoying exemption, have to file return under Section 139(4A) of the Act. The assessee was denied registration under Section 12A. However, the same was allowed by the Tribunal. According to the learned DR, it is immaterial to claim exemption under Section 10(22) for the purpose of filing return. There was no valid reason to condone the delay. Learned DR placed reliance on the decision of Bombay High Court in the case of DIT(Exemptions) v. Sushmavati Education Trust in support of the submission that even if a trust is not exempted under Section 11 or 12, it is required to file return because claim of exemption could be decided by the department only if the relevant material is placed before the department by filing return by the assessee. The other decision of Tribunal relied upon by the learned DR is in the case of Shri Dadar (Western Railway) Sidhachakara Vardhman Tap Ayambil Khata v. Deputy Director of Investigation (E) (1996) 59 ITD 253 (Mum.). It was submitted that learned Commissioner (Appeals) cancelled the orders of penalty on the ground that the assessee had expenditure more than income, is also factually incorrect. In fact, the assessee had more income than the expenditure for which a table was furnished before the Tribunal by learned DR by way of written submission.
4. On the other hand, learned Counsel for assessee submitted that the Tribunal allowed registration under Section 12A vide its order dated 25-8-2003 in ITA No. 1659/Bang./2002. Penalty proceeding was initiated on 23-9-2002. On the basis of the aforesaid facts, it was submitted that when the penalty was initiated under Section 272A(2)(e) of the Income Tax Act, the trust was not registered under Section 12A of the Act. Since it is not registered under Section 12A, no exemption can be allowed or claimed under Section 11 of the Act. Accordingly there was no liability on the part of the trust for filing return under Section 139(4A) of the Act. It was submitted by learned Counsel that the provision of Section 139(4C) was incorporated only with effect from 1-4-2003 i.e. with effect from the assessment year 2003-04. According to the said provision, if the trust claims exemption under Section 10(23C)(vt) of the Act, it has to file return. However, that provision is applicable from the assessment year 2003-04 only and this aspect was not considered by the Hon?ble Bombay High Court. In support of the proposition that since the assessee did not claim any exemption under Section 11 of the Act no return is to be filed under Section 139(4A) of the Act, learned Counsel placed reliance on the decision of the Tribunal, Bangalore Bench in the case of Vidyasagar Educational Trust (IT Appeal Nos. 228 & 229 (Bang.) of 2003), copy of which has been filed before us. Accordingly, it was submitted that the assessee had reasonable ground for not filing the return of income; hence no penalty is leviable.
5. Having heard both the sides, we find force in the submission of the assessee. There is no dispute that the trust was running educational institution. Registration under Section 12A was denied by the department and the same was allowed to the trust by the Tribunal vide order dated 25-8-2003 in ITA No. 1659/Bang./2002. Further it has been brought on record that exemption under Section 10(22)/10(23C) was also allowed for all the years under consideration by the Commissioner (Appeals), which has been upheld by the Tribunal. According to the assessing officer, the assessee is supposed to file return of income under Section 139(4A) of the Act. Under the provision of Section 139(4A), every person receiving income from property held under trust for charitable purpose, if the total income is assessable as representative assessee exceeds the maximum amount, which is not chargeable to tax, without giving effect to the provision of Sections 11 and 12, shall furnish return of such income. There is no dispute that the assessee is a representative assessee but admittedly, the assessee neither claimed any exemption under Sections 11 and 12 of the Act nor any exemption was allowed to the assessee trust. Admittedly, when the penalty proceeding was initiated on 23-9-2002, there was no registration under Section 12A of the Act, meaning thereby that the assessee cannot claim any exemption under Sections 11 and 12 of the Act. However, Hon?ble Bombay High Court in the case of Malad Jain Yuvak Mandal MedicalRelief Centre (supra) held that even assuming that Sections 11 and 12 is not applicable for a trust claiming exemption under Section 10(22), but for that reason only filing of return under Section 139(4A) cannot be avoided. We have noticed that this decision is dated 30-3-2001. At that time, there was no provision as Section 139(4C) of the Act, which was inserted by Finance Act, 2002 w.e.f 1-4-2003. Specific provision has been introduced for filing return by trust when claiming exemption under Section 10(23)(vi) of the Income Tax Act. We have noticed that the provision was not available when the judgment was delivered by the Hon?ble Court. At that point of time, there was no specific provision for filing return for the institution claiming exemption under Section 10(22)/10(23C) of the Act. Learned Counsel placed reliance on the decision of the Tribunal in the case of Vidyasagar Educational Trust (supra) wherein it has been held that since the assessee is not claiming exemption under Sections 11 and 12 of the Act, provision of Section 139(4A) is not applicable regarding filing of return of income and the Tribunal deleted the penalty on this ground alone.
5.1 Considering the aforesaid circumstances of the case, we are of the view that there was a reasonable cause for not filing return in time by the assessee trust. We are not going to the dispute whether the assessee had positive income or not in all the years under consideration. Looking to the circumstances of the case, the assessee had a bona fide impression in its mind that the trust need not file return of income, since no exemption was allowed under Section 10(22) or 10(23C) of the Act nor the trust was given registration under Section 12A of the Act. At least there were decisions of Tribunal in favour of assessee that unless claim was made under Section 11/12 of the Act, the trust is not liable to file return under Section 139(4A). We need not go to the correctness of the view taken by the Tribunal at this stage. However, it is sufficient to hold that there were circumstances due to which the assessee was under the impression that the trust need not file return of income unless it is exempted. Further we have noticed that subsequently, the amended provision was introduced by inserting the provision of Section 139(4C) of the Act were specific provision was introduced for filing return for the trust or institution claiming exemption under Section 10(23C) of the Act and admittedly, no such specific provision was there when the penalty proceedings were initiated against the trust for the present years. Accordingly we hold that there was reasonable cause for not filing returns by the Trust. The assessing officer is directed to cancel the orders of penalty. The orders passed by the Commissioner (Appeals) by which penalty were cancelled are upheld.
In the result, the assessee's appeals are allowed and the revenue's appeals are dismissed and the Cross Objections filed by assessee are allowed.