ADIT, CHENNAI V. Periyasamy Pillai Educational Trust, CHENNAI

ITA 2720/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96434 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M N MAURYA
• Assessee Lawyers: T VASUDEVAN
• Keywords: Bonafide belief; Question of law; Reasonable cause; Condonation of delay
• Section: 143(3); 80G; 12AA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # , $ & BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.2720/MDS/2014 ( / ASSESSMENT YEAR: 2009-10) ASSISTANT DIRECTOR OF INCOME TAX (EXEMPTIONS)IV, AAYAKAR BHAVAN ANNEXE BLDG 3 RD FLOOR, 121, MG ROAD, CHENNAI-600 034. VS. M/S. PERIYASAMY PILLAI EDUCATIONAL TRUST, 4, AISWARIYA COMPLEX, DURAISAMY ROAD, CHENNAI-600 017. PAN: AAATP9255C ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. M.N.MAURYA, CIT DR /RESPONDENT BY : MR. T. VASUDEVAN, ADVOCATE /DATE OF HEARING : 9 TH SEPTEMBER , 2015 /DATE OF PRONOUNCEMENT : 27 TH NOVEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VII, CHENN AI DATED 16.07.2014 FOR THE ASSESSMENT YEAR 2009-10. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS THAT COM MISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE PENAL TY LEVIED UNDER SECTION 271(1)(C) OF THE ACT HOLDING THAT THE RE IS NO FURNISHING OF INACCURATE PARTICULARS IN THE RETURN OF INCOME FILED BY THE ASSESSEE. 2 ITA NO.2720/MDS/2014 2. THE APPEAL OF THE REVENUE IS TIME BARRED BY E LEVEN DAYS. THE REVENUE FILED A PETITION EXPLAINING REASO N THAT RECORDS OF THE CASE INADVERTENTLY GOT MIXED UP WITH OTHER FILES AND AS SOON AS THE RECORDS OF THIS CASE WAS TRACED, THE APPEAL PAPERS WERE PREPARED FOR SUBMISSION AND THUS THERE WAS A DELAY OF 11 DAYS IN FILING OF APPEAL AND PRAY S FOR CONDONATION OF DELAY. WE HAVE PERUSED THE REASONS A ND ARE SATISFIED THAT THERE IS A REASONABLE CAUSE FOR THE DELAY IN FILING OF THE APPEAL. IN THE INTEREST OF JUSTICE, W E CONDONE THE DELAY OF ELEVEN DAYS IN FILING OF THE APPEAL. THE PETITION FOR CONDONATION OF DELAY IS ALLOWED AND APPEAL IS ADMI TTED FOR HEARING. 3. BRIEF FACTS ARE THAT THE ASSESSEE IS A CHARITABL E TRUST RUNNING VARIOUS EDUCATIONAL INSTITUTIONS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 9.10.200 9 ADMITTING NIL INCOME AFTER CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT. THE ASSESSMENT WAS COMPLETED UNDER S ECTION 143(3) ON 30.12.2011 DETERMINING THE TAXABLE INCOME OF THE ASSESSEE AT ` 7,36,21,715/- BY DENYING EXEMPTION UNDER SECTION 11 OF THE ACT ON THE GROUND THAT THERE IS V IOLATION 3 ITA NO.2720/MDS/2014 UNDER SECTION 13(1)(C) OF THE ACT FOR THE REASON TH AT THE ASSESSEE TRUST ADVANCED MONIES TO THE CONCERNS IN W HICH ONE OF THE TRUSTEES IS THE PROPRIETOR. THE ASSESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS), WHO ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT THERE IS NO VIOLATION UNDER SECTION 13(1)(C) OF THE ACT. ACC ORDING TO THE COMMISSIONER OF INCOME TAX (APPEALS) AMOUNTS AR E ONLY DUE TO THE MANAGING TRUSTEE BY THE TRUST AND NOT VI CE-VERSA, HE HELD THAT THERE IS NO VIOLATION UNDER SECTION 13 (1)(C) OF THE ACT. HOWEVER, THE TRIBUNAL REVERSED THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORED T HE ORDER OF ASSESSING OFFICER IN HOLDING THAT THERE IS VIOLATION UNDER SECTION 13(1)(C) OF THE ACT. WHILE HOLDING SO , THE TRIBUNAL WAS OF THE VIEW THAT TRUSTEE GOT BENEFITED INDIRECTLY BY THE ACTION OF THE TRUST ADVANCING MONEY TO SOME OTHER CONCERNS OF THE TRUSTEE. THE ASSESSING OFFICER INI TIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. IN RESPONSE TO THE PENALTY NOTICE, ASSESSEE SUBMITTED THAT PENALTY CAME TO BE LEVIED FOR THE REASON THAT THE C LAIM FOR EXEMPTION UNDER SECTION 11 WAS DENIED. IT WAS CONTE NDED THAT LIABILITY TO TAX AROSE ON ACCOUNT OF DENIAL OF EXEMPTION 4 ITA NO.2720/MDS/2014 UNDER SECTION 11 OF THE ACT AND NO INFERENCE OF CON CEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS O F SUCH INCOME COULD BE DRAWN. IT WAS STATED THAT ASSESSEE HAS FURNISHED ALL THE PARTICULARS OF INCOME IN ITS RETU RN OF INCOME AND SUCH PARTICULARS WERE NOT FOUND TO BE INCORRECT OR INACCURATE, THEREFORE THE PROVISIONS OF SECTION 271 (1)(C) ARE NOT ATTRACTED. HOWEVER, THE ASSESSING OFFICER WAS O F THE VIEW THAT THE ASSESSEE SHOULD NOT HAVE CLAIMED EXEMPTION UNDER SECTION 11 OF THE ACT AS THERE IS INDIRECT BENEFIT TO THE TRUSTEE AS THE TRUST HAS ADVANCED MONIES TO THE CONCERNS OF THE TRUSTEE. THEREFORE, HE WAS OF THE VIEW THAT THERE I S FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE THEREBY ATTRACTING PROVISIONS OF SECTION 271(1)(C) OF THE A CT. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS) WHO DELETED THE PENALTY HOLDIN G THAT ASSESSEE DISCLOSED ALL THE INFORMATION RELATING TO THE TRANSACTIONS OF THE TRUST WITH THE GROUP CONCERNS A ND IT WAS THE BONAFIDE BELIEF OF THE ASSESSEE THAT TRANSACTI ONS ARE NOT HIT BY SECTION 13(1)(C) READ WITH SECTION 13(2)(B) OF THE ACT . AGAINST THIS ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 5 ITA NO.2720/MDS/2014 4. THE DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORD ER OF THE ASSESSING OFFICER IN LEVYING THE PENALTY BY SUB MITTING THAT THERE IS CONCEALMENT AND FURNISHING OF INACCURATE P ARTICULARS AS THE ASSESSEE TRUST ADVANCED MONIES TO THE CONC ERNS OF THE MANAGING TRUSTEE, THUS THE MANAGING TRUSTEE GOT BENEFITED WITH SUCH PAYMENTS MADE BY THE ASSESSEE T RUST. 5. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUPPORTS THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE I S FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE WHICH ATTRACTS PROVISIONS OF SECTION 271(1)(C) OF THE ACT . ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT CONFIRMATION OF ADDITIONS BY THE TRIBUNAL WILL NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY. THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT MONEY IS PAYABLE TO THE CONCERN S OF THE MANAGING TRUSTEE AND SIMILARLY THE CONCERNS OWE MO NEY TO THE ASSESSEE TRUST THUS IT WAS HELD THAT COMBINED EFFECT OF THE TRANSACTIONS OF THE ASSESSEE WITH THE THREE CO NCERNS AS 6 ITA NO.2720/MDS/2014 CREDIT BALANCE AS ON 01.04.2008 I.E. ASSESSEE TRUST OWES MONEY TO THE MANAGING TRUSTEE FOR THE CONCERNS IN W HICH HE IS INTERESTED. THE COMMISSIONER OF INCOME TAX (APPE ALS) HELD THAT COMBINED TRANSACTIONS FOR THE ASSESSMENT YEAR 2009-10 RESULTED IN DEBIT BALANCE AND ANALYZING THE TRANSACTIONS OF ALL THE THREE CONCERNS THE TRANSAC TIONS WITH AIHMC & FT AND APOLLO COMPUTER EDUCATION WILL CAN CEL EACH OTHER AND THERE IS NO EFFECT ON THE ASSESSEE T RUST . THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE TRANSACTION WITH APOLLO COMPUTER EDUCATION LTD. ON LY RESULTS IN DEBIT BALANCE I.E. MONEY IS DUE TO THE ASSESSEE TRUST. ON EXAMINING THE INFLOW AND OUTFLOW OF MONEY, COMMISSI ONER OF INCOME TAX (APPEALS) HELD THAT SUCH MONIES ARE TO B E EXPENDED FOR THE PURPOSE OF TRAINING STUDENTS IN CO MPUTER EDUCATION FROM THE INSTITUTIONS RUN BY THE ASSESSEE AND IT GOES TO SHOW THAT EXPENSES ARE INCURRED TOWARDS FUL FILLING THE OBJECTS OF THE ASSESSEE TRUST AND NO PART OF THE MO NEY WAS DIVERTED TO THE BENEFIT OR GAIN OF THE MANAGING TRU STEE. THUS THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT NO PENALTY IS LEVIABLE IN THIS CASE AS ALL THE PARTICU LARS WERE FURNISHED BY THE ASSESSEE IN ITS RETURN OF INCOME ITSELF AND 7 ITA NO.2720/MDS/2014 THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT ITS INCOME IS EXEMPT UNDER SECTION 11 OF THE ACT. WHILE COMING T O SUCH CONCLUSION, THE COMMISSIONER OF INCOME TAX (APPEALS ) ELABORATELY CONSIDERED THE SUBMISSIONS OF THE ASSES SEE AND VARIOUS CASE LAWS ON THE ISSUE AS UNDER:- 6. PENALTY U/S 271(1)(C) OF THE ACT AMOUNTING TO RS.2,50,24,022/- WAS LEVIED BECAUSE THE FUNDS OF TH E ASSESSEE TRUST WERE MADE AVAILABLE TO PERSONS PROHIBITED BY SEC.13(3) OF THE ACT. THEY ARE AS UND ER: 1. APOLLO COMPUTER EDUCATION - RS.1,61,03,553/- AS ON 31.03.2009. 2. APOLLO COMPUTER EDUCATION LIMITED - RS.1,40,95,053/- AS ON 31.03.2009. THE FORMER IS THE PROPRIETARY CONCERN OF THE MANAGING TRUSTEE AND THE LATER ONE IS THE COMPANY I N WHICH THE MANAGING TRUSTEE IS HAVING SUBSTANTIAL INTEREST. THE ABOVE TRANSACTIONS WERE HIT BY PROVISIONS OF SEC.13(1)(C) READ WITH SEC.13(2)(A) O F THE ACT AND HENCE EXEMPTION U/S 11 WAS DENIED TO THE ASSESSEE IN THE ASSESSMENT ORDER. HENCE A SUM OF RS. 7,36,21,715/- WAS BROUGHT TO TAX. THE ADDITI ON WAS FINALLY CONFIRMED BY THE ITAT CHENNAI THOUGH IT WAS DELETED BY THE CIT(A)-XII, CHENNAI. THE ENTIRE INCOME OF ` 7,36,21,715/- (ASSESSED) WAS TREATED BY THE AO AS CONCEALED INCOME TO DUE FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. HENCE 100% OF TAX SOUGHT TO BE EVADED I.E. RS.2,50,24,022/- WA S LEVIED AS PENALTY U/S 271(1)(C) OF THE ACT. 6.1 THE RELEVANT PROVISIONS OF SEC.271(1)(C) OF THE ACT WITH REGARD TO LEVY OF PENALTY ARE REPRODUCED HEREIN BELOW FOR A BETTER UNDERSTANDING OF THE ISSUES 8 ITA NO.2720/MDS/2014 RAISED IN THE PRESENT APPEAL. SECTION 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CONCEALMENT OF INCOME, ETC. (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON - (A) (B) ....... . (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME (OR) HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY- (I) (II) ........ . (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLAUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFITS OR THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS. EXPLANATION 1. - WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSO N UNDER THIS ACT- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER ON THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SU CH EXPLANATION IS BONA-FIDE AND THAT ALL THE FACTS REL ATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 9 ITA NO.2720/MDS/2014 6.2 PERUSAL OF THE RETURN FILED FOR AY 2009- 10 REVEALS THE FOLLOWING DETAILS:- S. N NAME OF THE APOLLO ARTS APOLLO APOLLO ENGG. APOLLO COLLEGE TRUST CONCERN & SCIENCE POLYTECHNIC COLLEGE OF EDUCATION A/C (RS.) COLLEGE COLLEGE 1 APOLLO -- -- -- -- 1,61,03,553 COMPUTER (DR) EDUCATION 2 APOLLO 6,76,378 18,86,935 11,23,912 1,64,097 1,40,95,054 COMPUTER DR. (CR.) (DR.) (DR.) (DR.) EDUCATION LTD. 3 APOLLO -- 2,09,000 50,000 60,300 1,61,70,535 INSTITUTE OF (CR.) (DR.) (DR.) (CR.) HM CAT&FT THE APOLLO COMPUTER EDUCATION AND APOLLO INSTITUTE OF HM, CAT &FT ARE THE PROPRIETARY CONCERNS OF MR. P. SUBRAMANI, MANAGING TRUSTEE OF THE ASSESSEE TRUST AND MIS. APOLLO COMPUTER EDUCATION LIMITED IS A COMPANY IN WHICH THE MANAGING TRUSTEE IS HAVING SUBSTANTIAL INTEREST. THE ABOVE FINANCIAL TRANSACTIONS ARE AVAILABLE IN THE RETURN ITSELF AND DISCLOSED TO THE DEPARTMENT WITHOUT ASKING. THE ASSESSEE GOT REGISTRATION U/S 12AA OF THE ACT AND APPROVAL U/S 80G OF THE ACT. HENCE THE ASSESSEE WAS OF THE VIEW THAT ITS INCOME WAS EXEMPTED U/S 11 OF THE ACT. IN THE SCRUTINY ASSESSMENT PROCEEDINGS, THE AO WAS OF THE VIEW THAT THE TRUSTS ' TRANSACTIONS WITH THE ABOVE CONCERNS ARE HIT BY PROVISIONS OF SECTION 13(1)(C) READ WITH SEC.13(2)( A) OF THE ACT AND THE ENTIRE SURPLUS OF THE TRUST WAS BROUGHT TO TAX DENYING EXEMPTION U/S 11 OF THE ACT. THE ORDER OF THE AO WAS CONFIRMED BY THE HON'BLE ITAT, CHENNAI THOUGH DELETED BY THE ORDER OF THE CIT(A)-XII, CHENNAI. PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT IT WAS MENTIONED AT THE END OF T HE ORDER 'PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT IS INITIATED SEPARATELY.' 6.3 IN THE ABOVE CIRCUMSTANCES, IT IS IMPERATIVE TO SEE WHETHER PENALTY U/S 271(1)(C) OF THE ACT IS EXIGIBLE IN THIS CASE OR NOT? PENALTY ORDINARILY BECOMES PAYABLE WHEN IT IS FOUND THAT AN ASSESSEE HAS WILLFULLY VIOLATED ANY OF THE PROVISIONS OF THE TAXING STATUTE THOUGH THE WORDS 'WILFULLY', 'DELIBERATELY', 'WITHOUT REASONABLE CAUSE' HAVE BEE N OMITTED FROM THE STATUTE. SEC.273B OF THE ACT PROVIDES THAT THE PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS IF HE PR OVES 10 ITA NO.2720/MDS/2014 THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. 6.4 IN THE PRESENT CASE, THE AR ARGUED THAT THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. HE CONTENDED THAT ALL THE TRANSACTIONS WITH THE GROUP CONCERNS ARE DISCLOSED IN THE RETURN ITSELF. IT IS ONLY THE INTERPRETATION WHICH LED TO THE TAXATION OF INCOME. THE ASSESSEE GENUINELY BELIEVES THAT ITS INCOME IS EXEMPTED U/S 11 OF THE ACT AND THE TRANSACTIONS WITH THE GROUP CONCERNS ARE NOT DISADVANTAGEOUS TO THE TRUST, HE ARGUED. IT WAS FURTHER CONTENDED THAT THE WORDS 'MAY DIRECT TH AT SUCH PERSON SHALL PAY BY WAY OF PENALTY' IN SECTION 271 LEAVE A CERTAIN AMOUNT OF DISCRETION IN IMPOSIT ION OF PENALTY WHICH NEED NOT BE IMPOSED WHEN THERE IS MINOR BREACH OF LAW AND, WHEN HAVING REGARD TO THE FACTS, ENDS OF JUSTICE REQUIRE THAT THE ASSESSEE SH OULD NOT BE PENALIZED. HE ALSO EMPHASIZED THAT SIMILARLY THE WORDS 'REASONABLE CAUSE' IN SEC.271B OF THE ACT ARE ALSO INDICATIVE OF SOME KIND OF DISCRETION IN T HE AUTHORITY IMPOSING PENALTY TO FIND OUT WHETHER THER E WAS REASONABLE CAUSE OR NOT. IF SUCH AUTHORITY IS SATISFIED THAT THERE WAS REASONABLE CAUSE IT MAY NO T IMPOSE PENALTY. HENCE HE REQUESTED TO DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 6.5 PENALTY PROCEEDINGS HAVE BEEN HELD TO BE DISTIN CT FROM ASSESSMENT PROCEEDINGS AND ARE INDEPENDENT PROCEEDINGS. THE LAW THAT ASSESSMENTS AND PENALTY PROCEEDINGS ARE DIFFERENT AND THAT PENALTY DOES NOT BECOME EXIGIBLE THEREBY BECAUSE THE ADDITION HAD BECOME FINAL IS WELL SETTLED. COURTS HAVE HELD THAT IF THE FACTS ARE DISCLOSED BY THE ASSESSEE, PENALTY IS NOT EXIGIBLE. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS. IN THE CASE OF CIT VS NATH BROS. EXIM INTERNATIONAL LIMITED (2007) 288 ITR 670 (DELHI) IT WAS HELD THAT 'THAT THERE WAS FULL DISCLOSURE OF ALL RELEVANT MAT ERIAL. IT COULD NOT BE SAID THAT THE CONDUCT OF THE ASSESSEE ATTRACTED THE PROVISIONS OF SEC.271 (1)(C) OF THE A CT. THE CANCELLATION OF PENALTY WAS JUSTIFIED.' IN THE CASE OF CIT VS CAPLIN POINT LABORATORIES LIMITED (2007) 293 ITR 524 (MADRAS), IT WAS HELD, 'THAT IT WAS FOUND BY THE TRIBUNAL THAT WHEN DISALL OWANCES WERE MADE ON THE BASIS OF DIFFERENT INTERPRETATIONS , IT COULD 11 ITA NO.2720/MDS/2014 NOT BE SAID THAT PARTICULARS OF INCOME HAD BEEN CON CEALED. IN THIS CASE, THE ASSESSEE ADOPTED A PARTICULAR VI EW ON THE BASIS OF CERTAIN CASE LAW OR SOME BONAFIDE BELIEF AND A MERE REJECTION OF THE CLAIM OF THE ASSESSEE BY RELY ING ON DIFFERENT INTERPRETATIONS DID NOT AMOUNT TO CONCEAL MENT OF PARTICULARS OF INCOME OR FURNISHING IF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. THE TRLBUNAL HELD THAT I T WAS NOT A FIT CASE FOR LEVYING PENALTY. ' IN THE CASE OF CIT VS. HARSHVARDHAN CHEMICALS AND MINERALS LTD. (259 ITR 212) THE RAJASTHAN HIGH COUR T QUOTED THE ORDER OF ITAT WHICH AS UNDER:- 'WHERE AN ARGUABLE, CONTROVERSIAL OR DEBATABLE DEDUCTION IS CLAIMED, THE CLAIM COULD NOT BE SAID T O BE FALSE, OTHERWISE IT WOULD BECOME IMPOSSIBLE FOR ANY ASSESSEE TO RAISE ANY CLAIMS OR DEDUCTIONS WHICH MI GHT BE DEBATABLE, AND IT WAS NOT THE INTENTION OF THE LEGISLATURE TO MAKE PUNISHABLE SUCH CLAIMS, IF THEY ARE NOT ACCEPTED. ' THE COURT FURTHER OBSERVED AS UNDER: 'THE FINDING OF THE TRIBUNAL THAT WHEN THE ASSESSEE HAD CLAIMED SOME AMOUNT THOUGH THAT IS DEBATABLE, I N SUCH CASES, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ANY INCOME OR FURNISHED OR INACCURATE PARTICULARS FOR EVASION OF THE TAX. ' IN THE CASE OF CIT VS C.J. RATHNASWAMY (1997) 223 ITR 5, THE HON'BLE MADRAS HIGH COURT OBSERVED AS UNDER: 'THE ASSESSEE AGREED FOR AN ADDITION OF THE UNDISCLOSED INCOME, BUT DID NOT AGREE FOR AN ADDITI ON ON THE BASIS THAT THE UNDISCLOSED INCOME WAS HIS CONCEALED INCOME. IT WAS ALSO ADMITTED THAT THE DEPARTMENT HAD NOT BROUGHT ANY OTHER MATERIALS TO SHOW THAT THE ASSESSEE CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS SO AS TO WARRANT PENALTY. THE TRIBUNAL WAS JUSTIFIED IN CANCELLING T HE PENALTY. ' SIMILARLY IN THE CASE OF CIT VS S. SANKARAN (2000) 241 ITR 825, THE HON'BLE MADRAS HIGH COURT HELD THAT 'IN THE ABSENCE OF ANY MATERIALS AVAILABLE WITH THE DEPARTMENT TO SHOW THAT THE INCO ME HAD BEEN CONCEALED BY THE ASSESSEE, MERE ADDITION T O THE INCOME AT THE INSTANCE OF THE ASSESSEE WOULD NO T 12 ITA NO.2720/MDS/2014 WARRANT A FINDING OF CONCEALMENT OR LEVY OF PENALTY U/S 271 (1 )(C) OF THE ACT.' IN THE CASE OF DILIP N. SHROFF VS JCIT AND ANOTHER (2007) 291 ITR 519, THE HON'BLE SUPREME COURT OBSERVED AS UNDER: 'CLAUSE (C) OF SECTION 271(1) OF THE ACT, 1961, CATEGORICALLY STATES THAT PENALTY WOULD BE LEVIABLE IF THE ASSESSEE CONCEALS PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF BUT BY REASON OF SUCH CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS ALONE, THE ASSESSEE DOES NOT IPSO FACTO BECOME LIABLE FOR PENALTY. IMPOSITION OF PENALTY IS NOT AUTOMATIC. NOT ONLY IS THE LEVY OF PENALTY DISCRETIONARY IN NATURE BUT THE DISCRETION IS ALSO REQUIRED. TO BE EXERCISED ON THE PART OF THE ASSESSING OFFICER KEEPING THE RELEVANT FACTORS IN MIND. SOME OF THESE FACTORS, APART FROM BEING INHERENT IN THE NATURE OF PENALTY PROCEEDINGS, INHE RE ON THE FACE OF THE STATUTORY PROVISIONS. PENALTY PROCEEDINGS ARE NOT TO BE INITIATED MERELY TO HARAS S THE ASSESSEE. THE APPROACH OF THE ASSESSING OFFICER IN THIS BEHALF MUST BE FAIR AND OBJECTIVE. ' CONCEALMENT OF INCOME' AND 'FURNISHING OF INACCURATE PARTICULARS' ARE DIFFERENT. BOTH CONCEAL MENT AND FURNISHING OF INACCURATE PARTICULARS REFER TO DELIBERATE ACTS ON RS.1,41,05,523/-. IF WE ANALYZE THE TRANSACTIONS OF ALL THE THREE CONCERNS, THE TRANSACTION WITH AIHMC&FT AND APOLLO COMPUTER EDUCATION WILL CANCEL EACH OTHER AND NO EFFECT ON THE ASSESSEE TRUST. THE TRANSACTION WITH APOLLO COMPUTER EDUCATION LIMITED ONLY RESULTS IN DR. BALANCE I.E. MONEY TO THE ASSESSEE TRUST. THE INFLOW AND OUTFLOW OF MONEY IS SAID TO BE FOR THE PURPOSE OF TRAINING STUDENTS IN COMPUTER EDUCATION FROM THE INSTITUTIONS RUN BY THE ASSESSEE. THIS GOES TO PROVE THAT THE EXPENSES ARE INCURRED TOWARDS FULFILLING ) THE OBJECTS OF TH E TRUST ONLY AND NO PART OF THE MONEY WAS DIVERTED FOR PRIVATE GAIN OF THE MANAGING TRUSTEE. THE AO OVERLOOKED THIS IMPORTANT ASPECT OF BONAFIDE TRANSACTIONS OF THE ASSESSEE TRUST WHILE LEVYING PENALTY. 6.7 THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LIMITED (2010) 322 ITR 158 SUCCINCTLY PUT AS UNDER: 13 ITA NO.2720/MDS/2014 'A GLANCE AT THE PROVISION OF SECTION 271(1)(C) OF THE I. T. ACT, 1961 SUGGESTS THAT IN ORDER TO BE COVERED B Y IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF T HE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME . THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTI ON 271 (1 )(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PEN ALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIO N, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUN T TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETUR N FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOR EXACT OR CORRECT, NOR ACCORDIN G TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORREC T OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271 (1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. ' 6.8 THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS CIT (2001) 249 ITR 125 OBSERVED AS UNDER: 'IN ORDER TO JUSTIFY THE LEVY OF PENALTY, TWO FACTS MUST CO-EXIST, (I) THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESEN T THE ASSESSEE'S INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INCOME AND (II) THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS I.E. CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE. THE 14 ITA NO.2720/MDS/2014 EXPLANATION HAS NO BEARING ON FACTOR NO.1 BUT IT HA S A BEARING ONLY ON FACTOR NO.2. THE EXPLANATION DOES N OT MAKE THE ASSESSMENT ORDER CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACTS AN D CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHESIS THAT IT DOE S. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPRO VED BUT NOT DISPROVED, I. E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE'S CASE IS FALS E, THE EXPLANATION CANNOT HELP THE DEPARTMENT BECAUSE THERE WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT I N QUESTION WAS THE INCOME OF THE ASSESSEE.' 6.9 IN MY CONSIDERED VIEW, THIS SITUATION DOES NOT WARRANT LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. HENCE, I HEREBY DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT WHEN ALL THE PARTICULARS WERE FURNISHED BY THE ASSESSEE IN THE RETURN ITSELF. THE ASSESSEE WAS OF THE BONAFIDE BELIEF THAT ITS INCOME IS EXEMPT U/S 11 OF THE ACT. IT WAS INFORMED THAT APPEAL AGAINST THE ORDER OF THE ITAT WAS PENDING BEFORE THE HON'BLE HIGH COURT, MADRAS. IN THIS CONTEXT, RELIANCE IS PLACED ON THE DECISION OF ITAT, MUMBAI 'B' BENCH IN THE CASE OF M/S. NAYAN BUILDERS & DEVELOPERS PVT. LIMITED VS LTO WARD-7(1)(1), MUMBAI IN ITA NO.2379/MUM/2009 FOR AY 1997-98 DATED 18.03.2011. THE PENALTY L EVIED U/S 271(1)( C) OF THE ACT WAS DELETED BY THE !TAT 'B' BENCH, MUMBAI UNDER SIMILAR CIRCUMSTANCES. THE APPEAL IN RESPECT OF QUANTUM ADDITION IN THE SAME CASE WAS PENDING BEFORE THE HON'BLE BOMBAY HIGH COURT. SEIZED OF THE MATTER, THE BOMBAY HIGH COURT IN ITS ORDER IN ITA NO.415 OF 2012 DATED 08.07.2014 HELD THAT 'THERE WAS NO CASE MADE OUT FOR IMPOSITION OF PENALTY AND THE SAME WAS RIGHTLY SET ASIDE. THE APPEAL RAISES NO SUBSTANTIAL QUESTION OF LAW, IT IS DISMISSED.' 7. ON GOING THROUGH THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS) AND THE OBSERVATIONS MADE THER EIN, WE 15 ITA NO.2720/MDS/2014 DO NOT FIND ANY REASON FOR CONCEALMENT OR FURNISHIN G OF INACCURATE PARTICULARS BY THE ASSESSEE AS THE ASSES SEE WAS UNDER BONAFIDE IMPRESSION THAT PROVISIONS OF SECTI ON 13(1)(C) ARE NOT ATTRACTED AS THE TRANSACTIONS BETWEEN THE A SSESSEE TRUST AND THE CONCERNS IN WHICH THE MANAGING TRUST EE IS INTERESTED DOES NOT SHOW THAT PAYMENTS WERE MADE FO R THE BENEFIT OF THE MANAGING TRUSTEE. NONE OF THE FINDIN GS OF THE COMMISSIONER OF INCOME TAX (APPEALS) HAVE BEEN REBU TTED BY THE REVENUE. THEREFORE, WE SUSTAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING TH E PENALTY AND REJECT THE GROUNDS RAISED BY THE REVENU E. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2015. SD/- SD/- ( # ) ( & (# ) ( CHANDRA POOJARI ) ( CHALLA NAG ENDRA PRASAD ) * / ACCOUNTANT MEMBER ( * / JUDICIAL MEMBER ( /CHENNAI, , /DATED 27 TH NOVEMBER, 2015 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2.RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .