HTSL Community Service Trust, Bangalore V. JDIT, Bangalore

ITA 272/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57464 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 14-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMAPATHI
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Charitable institution; Bonafide belief; Reasonable cause
• Section: 80G; 12A; 27; 139

Judgement Text

PAGE 1 OF 7 ITA NO.272 /BANG/2011 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.272/BANG/2011 (ASST. YEAR 2004-05) HTSL COMMUNITY SERVICE TRUST,#151/1, DORAISANIPALYA, BANNERGHATTA ROAD, BANGALORE. PA NO.AAATH3434M VS THE JOINT DIRECTOR OF INCOME TAX (EXEMPTIONS), RANGE-17, BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING 18.01.2012 DATE OF PRONOUNCEMENT 27.01.2012 APPELLANT BY : SHRI PADAM CHAND KH INCHA, C.A. RESPONDENT BY : SHRI UMAPATHI, JCIT O R D E R PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT (A)-V, BANGALORE DATED 07.02.2011 CONCERNING ASSESSMENT YEAR 2004-05. THE ORDER OF THE CIT(A) ARISE OUT OF THE ORDER OF THE JOINT DIRECTOR OF INCOME TAX (EXEMPTIONS) LEVYING PENALTY U NDER SECTION 272A(2)(E) OF THE I T ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- THE APPELLANT IS A PUBLIC CHARITABLE TRUST ENGAGE D IN VARIOUS CHARITABLE ACTIVITIES SUCH AS COMMUNITY DEVELOPMENT PROGRAMMES, VILLAGE PAGE 2 OF 7 ITA NO.272 /BANG/2011 2 ADOPTION PROGRAMMES, HUMANITARIAN RELIEF PROGRAMMES , MEDICAL AND EDUCATION PROGRAMMES ETC. IT WAS FORMED ON 07.04.2 003. THE APPELLANT HAS BEEN GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT AND ALSO SECURED RECOGNITION UNDER SECTION 80G(5)(VI) OF THE ACT VID E ORDER DATED 27.10.2006. 2.1 THE RETURN OF INCOME FOR THE ASSESSMENT YEAR U NDER CONSIDERATION WAS FILED ON 22/3/2006. NOTICE WAS I SSUED BY THE JOINT DIRECTOR OF INCOME TAX (EXEMPTIONS), RANGE 17, BANG ALORE ON 14/5/2007 REQUIRING THE APPELLANT TO SHOW CAUSE AS TO WHY PENA LTY UNDER SECTION 272A(2)(E) SHOULD NOT BE LEVIED FOR NOT FILING THE RETURN OF INCOME WITHIN THE DUE DATE AS PRESCRIBED IN SECTION 139 OF THE AC T. IN RESPONSE TO THE ABOVE NOTICE, THE APPELLANT FILED A LETTER ON 16.7. 2007. IT WAS EXPLAINED IN THE SAID LETTER THAT THE APPELLANT WAS UNDER A BONA FIDE BELIEF THAT RECOGNITION UNDER SECTION 80G WOULD BE A PRE-REQUIS ITE FOR FILING THE RETURN OF INCOME. IT WAS STATED THAT THE TRUSTEES OF THE TRUST OCCUPY VARIOUS POSITIONS IN THE SETTLOR COMPANY. THEY DEVOTE THEIR TIME AND EFFORTS IN THE COURSE OF EMPLOYMENT WITH THE COMPANY AS A RESULT OF WHICH THEY ARE NOT IN A POSITION TO FULLY DEVOTE THEIR TIME IN THE ADMINIS TRATION OF THE TRUST. IMMEDIATELY ON BEING APPRAISED OF THE OBLIGATIONS, T HE INCOME TAX RETURNS WERE FILED WITHOUT ANY FURTHER DELAY. FURTHER, THIS WAS THE FIRST YEAR OF OPERATION OF THE TRUST. THE DELAY IN FILING THE RET URNS WAS NOT INTENTIONAL. IN VIEW OF THE ABOVE EXPLANATION, THE APPELLANT REQ UESTED THE JDIT(E), RANGE 17, BANGALORE TO DROP THE PENALTY PROCEEDINGS. 2.2. THE JDIT(E) PASSED THE ORDER UNDER SECTION 27 2A(2)(E) ON 23.10.2007 LEVYING A PENALTY OF RS.50,600/-. IT WAS STATED IN THE ORDER THAT PAGE 3 OF 7 ITA NO.272 /BANG/2011 3 THE PREOCCUPATION ON ACCOUNT OF PROFESSIONAL DEMAND S IS NOT AN ACCEPTABLE REASON AND HENCE, THE APPELLANT DOES NOT HAVE A REA SONABLE CAUSE FOR DELAY IN FILING THE RETURN. PENALTY WAS CALCULATED AT THE RA TE OF RS.100/- PER DAY FOR THE PERIOD OF DELAY. 3. AGGRIEVED BY THE IMPOSITION OF PENALTY UNDER SECT ION 272A(2)(E) OF THE ACT AMOUNTING TO RS.50,600/-, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORI TY. 4. THE FIRST APPELLATE AUTHORITY CONFIRMED THE VIE W TAKEN BY THE JDIT(E) IN IMPOSING THE PENALTY BY OBSERVING THUS:- I HAVE CONSIDERED THE EXPLANATION OF THE APPELLANT AND I AM OF THE OPINION THAT THERE IS NO REASONABLE CAUSE FOR DELAY IN FILING THE RETURN OF INCOME. THEREFORE, TH E PENALTY IS CONFIRMED AND THE APPEAL IS DISMISSED. 5. THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFOR E US. 6. THE LEARNED AR SUBMITTED THAT THE TRUST WAS FOR MED DURING THE PREVIOUS YEAR RELEVANT TO THE CONCERNED ASSESSME NT YEAR. SINCE THE PREVIOUS YEAR WAS THE FIRST YEAR OF THE ACTIVITIES OF THE APPELLANT TRUST, THE APPELLANT WAS NOT FAMILIAR WITH THE RELEVANT PROVIS IONS OF FILING OF RETURN OF INCOME AND THE PROCEDURES. IT WAS SUBMITTED THAT I T WAS UNDER A BONAFIDE BELIEF THAT THE RETURN IS TO BE FILED ONLY AFTER SEC URING RECOGNITION UNDER SECTION 80G OF THE ACT. ON BEING APPRAISED THE COR RECT PROVISIONS OF LAW, RETURN OF INCOME WAS FILED IMMEDIATELY WITHOUT ANY FU RTHER DELAY. IT WAS FURTHER SUBMITTED THAT THE HONBLE ALLAHABAD HIGH C OURT IN THE CASE OF BUDHAR SINGH AND SONS V CIT 142 ITR 180 HAD CATEGOR ICALLY STATED THAT IN PAGE 4 OF 7 ITA NO.272 /BANG/2011 4 THE FIRST YEAR OF OPERATION OF BUSINESS, THE ASSESSE E MAY NOT BE FAMILIAR WITH CERTAIN PROCEDURES AND THERE IS REASONABLE CAU SE FOR NOT FILING THE RETURN ON TIME. IT WAS STATED BY THE LEARNED COUNSE L THAT THE ENTIRE INCOME OF THE APPELLANT TRUST WAS APPLIED TOWARDS ITS CHAR ITABLE ACTIVITIES AND NO INCOME TAX WAS PAYABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, THERE WAS NO LOSS TO THE REVENUE AS A RE SULT OF LATE FILING OF THE RETURN AND THERE WAS NO ULTERIOR MOTIVE TO DEFRAUD THE REVENUE. HENCE, IT CANNOT BE STATED THAT THE APPELLANT TRUST HAD ACTED DISHONESTLY OR NEGLIGENTLY. 7. THE LEARNED DR STRONGLY SUPPORTED THE ORDERS OF THE INCOME TAX AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. PENALTY MAY BE IMPOSED UNDER SECTION 272A (2)(E) FOR FAILURE TO FURNISH THE RETURN OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 139(4A) RWS 139(1). AN ATTEMPT OF DELIBERATENESS O R DECEPTIVENESS IS ASSOCIATED WITH THE WORD FAILURE. IN THE PRESENT CASE, THERE WAS NO DELIBERATENESS OR DECEPTIVENESS IN NOT FILING THE R ETURN OF INCOME WITHIN THE PRESCRIBED TIME LIMIT. THE APPELLANT WAS UNDER A B ONAFIDE BELIEF THAT SECURING RECOGNITION UNDER SECTION 80G WOULD BE A P RE REQUISITE FOR FILING THE RETURN OF INCOME. ALSO, THE TRUSTEES OF THE AP PELLANT TRUST OCCUPY VARIOUS POSITIONS IN THE SETTLOR COMPANY. THEY DEVOT E THEIR TIME AND EFFORTS IN THE COURSE OF EMPLOYMENT WITH THE COMPANY AS A RES ULT OF WHICH THEY WERE NOT IN A POSITION TO FULLY DEVOTE THEIR TIME IN THE ADMINISTRATION OF THE TRUST. HOWEVER, IMMEDIATELY ON BEING APPRAISED, THE INCOME TAX RETURNS PAGE 5 OF 7 ITA NO.272 /BANG/2011 5 WERE FILED FOR ALL THE YEARS WITHOUT ANY FURTHER DELA Y. THE DELAY IN FILING THE RETURN WAS NOT INTENTIONAL OR DELIBERATE. 8.1 PENALTY CANNOT BE LEVIED UNDER SECTION 272A(2)( E) IF THERE EXISTS SUFFICIENT OR REASONABLE CAUSE FOR THE DEFAU LT (SEE SECTION 273B). THE MEANING OF THE TERM REASONABLE CAUSE AS ENUNC IATED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF AZADI BACHAO ANDOLA N V UNION OF INDIA 252 ITR 471 READS AS FOLLOWS:- REASONABLE CAUSE CAN BE REASONABLY SAID TO BE A CAU SE WHICH PREVENTS A MAN OF AVERAGE INTELLIGENCE AND OR DINARY PRUDENCE, ACTING UNDER NORMAL CIRCUMSTANCES, WITHOU T NEGLIGENCE OR INACTION OR WANT OF BONA FIDES. 8.2 THE HONBLE DELHI HIGH COURT IN THE CASE OF WOODWARD GOVERNORS INDIA (P) LTD. V CIT 118 TAXMAN 433 (DELH I) HELD AS UNDER:- REASONABLE CAUSE AS APPLIED TO HUMAN ACTION IS TH AT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGE NCE AND ORDINARY PRUDENCE. IT CAN BE DESCRIBED AS A PRO BABLE CAUSE. IT MEANS AN HONEST BELIEF FOUNDED UPON REASONABLE GROUNDS, OF THE EXISTENCE OF A STATE OF CIRCUMSTANCES, WHICH, ASSUMING THEM TO BE TRUE, WOU LD REASONABLY LEAD ANY ORDINARY PRUDENT AND CAUTIOUS MAN, PLACED IN THE POSITION OF THE PERSON CONCERNED, TO COME TO THE CONCLUSION THAT THE SAME WAS THE RIGHT THING TO DO . 8.3 THE HONBLE SUPREME COURT IN THE CASE OF HINDU STAN STEEL LTD. V THE STATE OF ORISSA (83 ITR 26) HELD AS FOLLOWS:- AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMIN AL PAGE 6 OF 7 ITA NO.272 /BANG/2011 6 PROCEEDING, AND PENALTY WILL NOT ORDINARILY BE IMPOSE D UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOU S OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD TO ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MEREL Y BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOU LD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATIO N IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISE D JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVAN T CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCR IBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL B E JUSTIFIED IN REFUSING TO IMPOSE PENALTY WHEN THERE I S A TECHNICAL OR VENIAL BREACH OF THE PROVISION OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE. 8.4 IN THE PRESENT CASE, THE APPELLANT WAS UNDER A BONAFIDE IMPRESSION/BELIEF FOR NOT FILING THE RETURN OF INCO ME WITHIN THE PRESCRIBED TIME LIMIT. THE APPELLANT DID NOT ACT DISHONESTLY O R NEGLIGENTLY. THE DELAY IN FILING THE RETURN WAS DUE TO A REASONABLE AND GENUI NE CAUSE. IT IS ALSO NOT A CASE THAT THE APPELLANT DID NOT FILE A RETURN OF IN COME AT ALL. DURING THE YEAR PRECEDING THE ASSESSMENT YEAR UNDER CONSIDERATION, T HE APPELLANT TRUST WAS FORMED. THE RELEVANT PREVIOUS YEAR WAS THE FIRST YEA R OF ACTIVITIES OF THE APPELLANT TRUST. THE APPELLANT WAS NOT FAMILIAR WI TH THE RELEVANT PROVISIONS OF FILING OF RETURN OF INCOME AND THE PROCEDURE INV OLVED THEREOF. IT WAS UNDER A BONAFIDE BELIEF THAT THE RETURN IS TO BE FI LED ONLY AFTER SECURING RECOGNITION UNDER SECTION 80G. HOWEVER, ON BEING A PPRAISED OF THE PROVISIONS OF LAW, RETURN OF INCOME WAS FILED WITHO UT ANY FURTHER DELAY. SINCE THE ENTIRE INCOME WAS APPLIED TOWARDS THE CHA RITABLE ACTIVITIES, NO TAX WAS PAYABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON. AS A RESULT OF PAGE 7 OF 7 ITA NO.272 /BANG/2011 7 LATE FILING OF THE RETURN, THERE WAS NO LOSS OF REV ENUE TO THE GOVERNMENT. THE APPELLANT HAD NO ULTERIOR MOTIVE TO DEFRAUD THE REVENUE AND HAD NOT ACTED DISHONESTLY OR NEGLIGENTLY. THEREFORE, THERE WAS SUFFICIENT/ REASONABLE CAUSE FOR THE DELAY IN FURNISHING THE RET URN OF INCOME. 8.5 IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE APPELLANT TRUST IS NOT LIABLE FOR PENALTY UNDER SECTION 272A(2 )(E) OF THE ACT FOR DELAY IN FILING THE RETURN OF INCOME. IT IS ORDERED ACCO RDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF JANUARY, 2012. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONC ERNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.