DUDHSAGAR RESEARCH AND DEVELOPMENT ASSOCIATION,MEHSANA V. THE DCIT(E) CIRCLE-1, AHMEDABAD

ITA 1048/AHD/2023

AI Insights

The case involves the Dudhsagar Research and Development Association appealing against a penalty imposed by the Deputy Commissioner of Income Tax (Exemption) for allegedly furnishing inaccurate particulars of income. The penalty was based on the reclassification of 'corpus donations' received by the Association as 'revenue receipts' by the Assessing Officer, which was upheld by the CIT(A). The Tribunal examined whether the imposition of the penalty was justified, considering the long-standing practice of the Association and the complete disclosure made during the assessment proceedings. The Tribunal concluded that the penalty was not warranted, citing several judicial precedents that support the view that a mere disagreement on the tax treatment of receipts does not constitute furnishing of inaccurate particulars of income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396281 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Other Referred Cases: CIT vs. Gurdaspur Co-operative Sugar Mills Ltd., CIT vs. Reliance Petroproducts Pvt. Ltd., CIT vs. Oshwal Education Trust
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Assessee Lawyers: S.N. SOPARKAR; PARIN
• Keywords: Capital receipt
• Section: 271(1)(c); 12

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.1048/Ahd/2023 (Assessment Year: 2014-15) Dudhsagar Research And Development Association, C/o. Dudhsagar Dairy, Highway Mehsana, Gujarat-384002 Vs. Deputy Commissioner of Income Tax (Exemption), Circle-1, Ahmedabad [PAN No.AAATD1312J] (Appellant) .. (Respondent) Appellant by : Shri S. N. Soparkar, Sr. Advocate & Shri Parin Shah, A.R. Respondent by: Shri V Nandakumar, CIT DR Date of Hearing 07.04.2025 Date of Pronouncement 26.05.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 06.11.2023 passed for A.Y. 2014-15. 2. The Assessee has taken the following grounds of appeal:- “1. The order passed by NFAC is bad in law and required to be quashed. 2. Ld. NFAC erred in law and on facts in confirming penalty of Rs. 2,53,40,840/- u/s. 271(1)(c) of the Act under the limb furnishing of inaccurate particulars of income ignoring fact that full details are submitted in assessment proceedings regarding corpus donation. 3. Ld. NFAC ought to have considered fact that non acceptance of bona fide claim does not lead to furnishing inaccurate particulars of income which leads to penalty. ITA No. 1048/Ahd/2023 Dudhsagar Research and Development Association vs. DCIT(E) Asst.Year –2014-15 - 2– 4. The order passed by lower authorities is required to be quashed as same is without recording proper satisfaction.” 3. The brief facts of the case are that in it’s return of income, the assessee claim to have received “corpus donation” both from members as well as non-members of the association. During the assessment proceedings, the Assessing Officer held that these donations are in fact “revenue receipts”, since these are received from sale of Bovine Semen to milk societies which use the same to breed better quality milch cattle. The Assessing Officer held that the assessee / association was not providing any charitable services and the receipts were compensation received by the assessee association for providing it’s services. In appeal, in quantum proceedings, both the Ld. CIT(A) and the ITAT decided the issue against the assessee and held that the contributions received by the associations are not “voluntary in nature”, as stated by the assessee and mere production of receipts which state that the amount has been paid towards “corpus fund of the assessee” cannot lead to the conclusion that the contribution qualifies as “corpus donation”, more so, when the receipts do not even state the specific purpose for which these donations have been given. 4. Accordingly, in light of these facts the Assessing Officer initiated proceedings under Section 271(1)(c) of the Act, which were confirmed by Ld. CIT(A) with the following observations: “3.4.1 Grounds No.1 and 2: It is seen that in its return of income the appellant has claimed that it is receiving \"corpus donations\" from members and non-members of the association. During assessment proceedings it was held that these are, in fact, revenue receipts since these are received for sale of bovine semen to milk societies which use it to breed better quality milch cattle. It was held that the association was not providing any charitable service and was being compensated for its services. ITA No. 1048/Ahd/2023 Dudhsagar Research and Development Association vs. DCIT(E) Asst.Year –2014-15 - 3– 3.4.2 The grounds are general and do not really add anything new to the arguments already taken during the penalty proceedings. Paras 4.1 to 4.5 bring out clearly the discrepancies in the arguments taken by the appellant and show the clear commercial and operational nature of transactions- based on a set formula, which belie the claims of the appellant that these are donations. The substance of the transactions is cleary at odds with the claimed form. It is a case of furnishing of innacurate particulars of income and the penalty proceedings were rightly initiated for the same. I find no reason to interfere with the order of the Assessing Officer (AO) and the grounds are dismissed.” 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) confirming the levy of penalty under Section 271(1)(c) of the Act. Before us, the Counsel for the assessee submitted that admittedly in this case the ITAT had decided this issue against the assessee in quantum proceedings. However, this is by itself should not lead to automatic levy of penalty for furnishing inaccurate particulars of income when the full details with regards to these receipts as “corpus donation” have been submitted by the assessee during the course of assessment proceedings. The Counsel for the assessee submitted that so far as the assessee trust is concerned, for the past many years the income in the nature of fees collected from milk society has always been received by the assessee with a clear direction from the donors in writing that they are “voluntary” donations. The Counsel for the assessee submitted the practice of receiving and treating such donation as contributions to the “corpus fund” of the assessee trust has been prevalent for more than 15 years to 20 years. Further, it was submitted that the books of accounts have been audited by an independent Chartered Accountant, who has agreed to such accounting treatment by the assessee. Accordingly, the submission of the Counsel for the assessee was that just because a certain tax position with regards to these receipts which has been taken by the ITA No. 1048/Ahd/2023 Dudhsagar Research and Development Association vs. DCIT(E) Asst.Year –2014-15 - 4– assessee, has not been accepted by the Tax Authorities, should not by itself lead to automatic levy of penalty for furnishing inaccurate particulars of income. 6. In response, Ld. D.R. placed reliance on the observations made by Ld. CIT(A) in the appellate order. 7. We have heard the rival contentions and perused the material on record. 8. We observe that the Income Tax Appellate Tribunal for the impugned assessment year in the assessee’s own case, while dealing with quantum additions has decided this issue against the assessee and has held that looking into the substance of transactions, the said amounts so received by the assessee do not qualify as “corpus donation”. However, so far as penalty proceedings is concerned, we observe that the assessee has been consistently following the practice of receiving and treating such funds as “corpus funds of the trust” for the past 15 to 20 years. The books of accounts have been audited by an independent Chartered Accountant and further complete disclosure with this regard has been made before the Revenue Authorities, during the course of assessment proceedings. 9. In the case of CIT vs. Gurdaspur Co-operative Sugar Mills Ltd. 35 taxmann.com 395 (Punjab & Haryana), the High Court has held that where issue whether amount of grant-in-aid was capital receipt or a revenue receipt was a debatable issue, penalty under section 271(1)(c) of ITA No. 1048/Ahd/2023 Dudhsagar Research and Development Association vs. DCIT(E) Asst.Year –2014-15 - 5– the Act could not be imposed. Further, the Hon’ble Supreme Court also dismissed the SLP filed by the Department against the aforesaid order passed by Hon’ble High Court of Punjab & Haryana (reported in 159 taxmann.com 7 (SC)). In the case of CIT vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC), the Hon’ble Supreme Court has held that merely because assessee has claimed expenditure, which claim was not accepted by Revenue Authorities, that by itself could not attract penalty under Section 271(1)(c) of the Act. Further, in the case of CIT vs. Oshwal Education Trust 52 taxmann.com 332 (Gujarat)/369 ITR 91 (Gujarat), the Gujarat High Court held that where assessee trust under bona fide belief treated voluntary contributions as corpus donation, Assessing Officer could not pass a penalty order under section 271(1)(c) while taking a view that said amount was taxable as income under Section 12 of the Act. While passing the order, the Gujarat High Court made the following observations: “6. Considering the aforesaid facts and circumstances and when it has been found that the assessee was under bona fide belief that he was legally entitled to treat Rs.1,08,80,765 as corpus donation and when the learned CIT(A) accepted the contention on behalf of the assessee to the extent of Rs.60,25,000 as corpus donation and with respect to Rs.38,07,354, out of the aforesaid amount, was considered as income under Section 12 of the Act, the learned Tribunal has rightly cancelled the penalty imposed on the assessee under Section 271(1)(c) of the Act. We are in complete agreement with the view taken by the learned Tribunal, while deleting/canceling the penalty imposed under Section 271(1)(c) of the Act, and we see no reason to interfere with the judgment and order passed by the learned Tribunal. 7. In view of the above and in the facts and circumstances of the case, present appeal fails and deserves to be dismissed and is accordingly, DISMISSED.” 10. Accordingly, in light of the facts of the assessee’s case and our observations in the preceding paragraphs wherein we observed that the ITA No. 1048/Ahd/2023 Dudhsagar Research and Development Association vs. DCIT(E) Asst.Year –2014-15 - 6– assessee has consistently been treating the aforesaid receipts as “corpus donations” for past 15 to 20 years and all facts were duly disclosed to the Revenue Authorities at the stage of assessment proceedings, we are of the considered view that this is not a fit case of levy of penalty under Section 271(1)(c) of the Act for furnishing inaccurate particulars of income. 11. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 26/05/2025 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 26/05/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 21.05.2025 2. Date on which the typed draft is placed before the Dictating Member 22.05.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 23.05.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement .05.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 26.05.2025 7. Date on which the file goes to the Bench Clerk 26.05.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order…………………………………… "