Sant Baba Rangi Ram Charitable Trust, Distt. Hoshiarpur V. The Incomet-ax Officer, Hoshiarpur

ITA 185/ASR/2012

• Counselvise Citation: 18520914 RSA 2012
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 09-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Keywords: Business income; Charitable institution; Bonafide belief
• Section: 11A; 10B; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.185(ASR)/2012 ASSESSMENT YEAR:2006-07 PAN :AADTS5245G M/S. SANT BABA RANGI RAM VS. INCOME TAX OFFICER, CHARITABLE TRUST, HOSHIARPUR RANGE-3, HOSHIARPUR. HOSHIARPUR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. SURINDER MAHAJAN, CA RESPONDENT BY:SH. R.L. CHHANALIA, DR DATE OF HEARING: 26/07/2012 DATE OF PRONOUNCEMENT:06/08/2012 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JALANDHAR, DATED 12.03.2012 FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF CASE, LD . CIT(A) HAS GROSSLY ERRED IN CONFIRMING PENALTY OF RS.26,572/- IMPOSED U/S 271B OF THE ACT, PENALTY CONFIRMED IS ILLEGAL AND B AD IN LAW. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF CASE, LD. CIT(A) HAS GROSSLY ERRED IN REJECTING GROUND OF APPEAL OF ASSE SSEE WHEREIN ASSESSEE HAS CLAIMED THAT PENALTY U/S 271B OF THE ACT IS NOT ATTRACTED SINCE IT IS CASE OF CHARITABLE TRUST WHIC H GOT ITS ACCOUNT AUDITED AS PROVIDED UNDER SECTION 12A(B) OF THE ACT . ITA NO.185(ASR)/2012 2 3. THAT PENALTY CONFIRMED BY LD. CIT(A) IS ILLEGAL AND BAD IN LAW SINCE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT BEING CHARITABLE TRUST, PROVISIONS OF SEC. 44AB OF THE ACT ARE NOT A TTRACTED IN CASE OF CHARITABLE TRUSTS. 4. THAT THE ASSESSEE REQUESTS FOR LEAVE TO ADD OR A NNEX ANY OTHER GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DIS POSED OF. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO LEVI ED PENALTY AMOUNTING TO RS.26,572/- UNDER SECTION 271B OF THE INCOME TAX AC T, FOR FAILURE TO GET THE ACCOUNTS OF THE HOSPITAL RUN BY THE ASSESSEE AUDITE D U/S 44AB OF THE ACT. THE AO NOTED THAT THE ASSESSEE HAD CLAIMED EXEMPTIO N OF ITS INCOME OF RS.13.59 LAKHS UNDER SECTION 11 OF THE ACT. THE AO NOTED THAT THOUGH THE ASSESSEES RECEIPTS FROM THE BUSINESS OF THE HOSPIT AL RUN BY IT EXCEEDED RS. 40 LAKHS, IT HAD NOT OBTAINED THE AUDIT REPORT UNDE R SECTION 44AB OF THE ACT. THE AO REJECTED THE CONTENTION OF THE ASSESSEE THAT THE ACCOUNTS WERE NOT REQUIRED TO BE AUDITED AS THE ASSESSEE WAS A CHARIT ABLE ORGANIZATION BY NOTING THAT THE ASSESSEE HAD ITSELF WRITTEN IN THE RETURN OF INCOME THAT THE INCOME WAS BUSINESS INCOME. HE ALSO HELD THAT THE A SSESSEE WAS UNDER A BONAFIDE BELIEF NOT TO FILE THE TAX AUDIT REPORT WA S NOT ACCEPTABLE SINCE THE RETURN HAD BEEN FILED BY A COMPETENT CHARTERED ACCO UNTANT. HE DISTINGUISHED THE VARIOUS JUDGMENTS RELIED UPON BY THE ASSESSEE AND IMPOSED THE IMPUGNED PENALTY @ % OF THE GROSS RECEIPTS OF THE HOSPITAL. ITA NO.185(ASR)/2012 3 3. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION O F THE ASSESSING OFFICER. 4. THE LD. COUNSEL FOR THE ASSESSEE, SH. SURINDER M AHAJAN, CA, RELIED UPON THE ARGUMENTS MADE BEFORE THE LD. CIT(A) AND PRAYED TO DIRECT THE AUTHORITIES BELOW TO CANCEL THE PENALTY SO LEVIED. 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AD GOT ITS ACCOUNTS AUDITED AS PROVIDED UNDER SECTION 12A(B) OF THE ACT AND REP ORT IN FORM NO. 10B DULY SIGNED AND AUDITED BY THE AUDITORS HAD BEEN F ILED ALONGWITH RETURN OF INCOME. THE OBJECTION OF THE AO WAS THAT THE ASSESS EE WAS REQUIRED TO GET ITS ACCOUNTS AUDITED U/S 44AB OF THE ACT SINCE THE ASSESSEE WAS CARRYING OUT BUSINESS OF HOSPITAL. THE ONLY DISPUTE BEFORE US IS THAT WHETHER THE ASSESSEE WAS DOING A BUSINESS WHEN THE ASSESSEE HAD BEEN CLA IMING EXEMPTION U/S 11A OF THE ACT, BEING A CHARITABLE INSTITUTION, WHI CH HAS BEEN ALLOWED AND IS NOT UNDER DISPUTE, IN SUCH SITUATION, WHETHER PENAL TY U/S 271B OF THE ACT CAN BE LEVIED. 6.1. IN THIS REGARD, WE ARE CONVINCED WITH THE SUBM ISSIONS OF THE LD. AR THAT U/S 44AB OF THE ACT AUDIT OF ACCOUNTS OF CERTA IN PERSONS WHO WERE CARRYING BUSINESS OR PROFESSION AND WHOSE TOTAL SAL ES, TURNOVER OR GROSS RECEIPTS, EXCEEDS RS.40 LAKHS HAVE TO GET THEIR ACC OUNTS AUDITED BY AN ITA NO.185(ASR)/2012 4 ACCOUNTANT BEFORE THE SPECIFIED DATE AS PRESCRIBED. THAT NO TAX SHALL BE LEVIED OR COLLECTED EXCEPT BY AUTHORITY OF LAW. TH E LEGAL BASIS FOR LEVY OF INCOME TAX IS GIVEN IN SECTION 4 OF THE ACT, WHICH IS IN RESPECT OF THE TOTAL INCOME DEFINED UNDER SECTION 2(45) OF THE ACT, WHIC H IS COMPUTED AS PER SECTION 5 OF THE ACT, IN THE MANNER LAID DOWN IN TH E ACT. CHAPTER IV OF THE ACT PROVIDES FOR COMPUTATION OF TOTAL INCOME AND SECTION 44AB IS ONLY ONE OF THE SECTIONS ENACTED UNDER CHAPTER IV-D DEA LING WITH COMPUTATION OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. SEC TION 44AB BECOMES OPERATIVE WHEN THERE IS COMPUTATION OF PROFITS AND GAINS OF BUSINESS OR PROFESSION AS A PART OF TOTAL INCOME, WHEREAS THE I NCOME OF THE ASSESSEE TRUST IS ADMITTEDLY WHOLLY EXEMPT U/S 11 OF THE ACT, WHI CH IS PART OF CHAPTER III OF THE ACT. AND HEADING OF CHAPTER III IS INCOMES WHICH DO NOT FORM PART OF THE TOTAL INCOME. THEREFORE, THE ASSESSEE IS C OVERED UNDER CHAPTER III AND NO PROVISIONS OF CHAPTER IV CAN BE MADE APPLICA BLE IN THE PRESENT CASE. HENCE, PROVISIONS OF SECTION 44AB CANNOT BE MADE AP PLICABLE. THE RELIANCE MADE BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CAS E OF ACIT VS. INDIA MAGNUM FUND REPORTED IN 81 ITD 295 (MUMBAI), WHERE IT HAS BEEN HELD THAT INCOME OF THE ASSESSEE WAS EXEMPT FROM TAX UND ER SECTION 10(23D). HOWEVER, SECTION 44AB BECOMES OPERATIVE WHEN THERE IS COMPUTATION OF PROFITS AND GAINS OF BUSINESS OR PROFESSION AS A PA RT OF TOTAL INCOME. THE ASSESSEE BEING A MUTUAL FUND, THE INCOME WAS EXEMPT UNDER SECTION 10(23D). HENCE, THE ASSESSEE WAS NOT LIABLE TO OBTA IN ANY AUDIT REPORT WITHIN ITA NO.185(ASR)/2012 5 THE MEANING OF SECTION 44AB OF THE ACT. THEREFORE, CANCELLATION OF PENALTY UNDER SECTION 271B WAS JUSTIFIED. WE, THEREFORE, AR E CONVINCED WITH THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE BEFOR E THE LD. CIT(A) AND BEFORE US THAT THE INCOME OF THE ASSESSEE TRUST IS WHOLLY EXEMPT UNDER SECTION 11 OF THE ACT, WHICH IS PART OF CHAPTER III OF THE ACT AND THEREFORE, PROVISIONS OF CHAPTER IV CANNOT BE MADE APPLICABLE AND, THEREFORE, THE PROVISIONS OF SECTION 44AB OF THE ACT CANNOT BE APP LIED IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. THEREFORE, THE AO I S NOT JUSTIFIED IN LEVYING PENALTY ON THE ASSESSEE. THE ORDER OF THE LD. CIT( A) IS ACCORDINGLY REVERSED. 6.2. THE ARGUMENTS OF THE ASSESSEE BEFORE THE LD. CIT(A) AND BEFORE US ARE ALSO TAKEN INTO CONSIDERATION. THE ASSESSEE UN DER BONAFIDE BELIEF THAT THE PROVISIONS OF SECTION 44AB ARE NOT ATTRACTED AND T HEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, NO PENALTY CAN B E IMPOSED WHEN THE ASSESSEE HAD ACTED DELIBERATELY. THE RELIANCE HAS B EEN PLACED ON THE FOLLOWING CASE LAWS: I) HINDUSTAN STEEL LTD. VS. STATE OF ORISSA 83 I TR 26(SC) II) ITO VS. NANAK SINGH GULIANI 171 CTR 195 (MP) III) CIT VS. ABHYESHWAR 153 CTR 372 (MP) IV) CIT VS. TEA KING (2000) 158 CTR 413 (GUJ) V) R. WADIWALA & CO. VS. ACIT (2001) 72 TTJ (AHD) 34 ITA NO.185(ASR)/2012 6 6.3. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE , THE AO IS NOT JUSTIFIED IN LEVYING THE PENALTY U/S 271B OF THE ACT AND HE IS DIRECTED TO CANCEL THE PENALTY SO LEVIED AND ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS REVERSED. THUS, ALL THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSE IN ITA NO.185(ASR)2012 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6TH AUGUST, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 6TH AUGUST, 2012 /SKR/P COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. SANT BABA RANGI RAM CHARITABLE TR UST, VPO JAJA, THE. DASUYA, DISTT. HOSHIARPUR. 2. THE ITO, HOSHIARPUR R-3 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.