M/S. POLICE WELFARE FILLING STATION, Ujjain V. THE ITO 2(1), Ujjain

ITA 347/IND/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5631 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHMD JAVED
• Assessee Lawyers: WRITTEN SUBMISSIONS FILED
• Keywords: Charitable institution; Bonafide belief; Reasonable cause
• Section: 273B; 80G; 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER M/S. POLICE WELFARE FILING STATION UJJAIN VS. ITO2(1) UJJAIN APPELLANT RESPONDENT PAN:AABAP3933D APPELLANT BY WRITTEN SUBMISSIONS FILED RESPONDENT BY SHRI MOHMD. JAVED, SR. (DR) DATE OF HEARING 08.11.2016 DATE OF PRONOUNCEMENT 08.11.2016 O R D E R PER O.P. MEENA, ACCOUTANT MEMEB 1. THIS APPEAL IS FILED BY THE ASSESSEE; AGAINST THE ORDE R OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-UJJAIN DTD. 03.02.2015 FOR THE AS SESSMENT YEAR 2008-09. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: THAT THE ORDER PASSED BY THE LEARNED CIT (A) CONFIR MING PENALTY U/S. 271B OF RS. 1 LAKH IS WRONG AND UNJUSTIFIED. 2. BRIEF FACTS ARE THAT THE ASSESSEE IS WELFARE INSTIT UTION ESTABLISHED WITH OBJECT OF WELFARE OF EMPLOYEES OF MP POLICE. THE RETURN OF INCO ME WAS FILED ON 8.12.2010 SHOWING NIL INCOME. THE AO IMPOSED PENALTY UNDER SECTION 271B OF I.T.A. NO. 347/IND/2015 ASSESSMENT YEAR:2008-09 POLICE WELFARE FILING STATION/ITANO.347/IND/2015/AY 08-09/ P AGE 2 OF 7 RS. 1 LAKH AS THE ASSESSEE FAILED TO GET ITS ACCOUN TS AUDITED. IT WAS NOTICED THAT THE ASSESSEE IS RUNNING A PETROL PUMP, WHICH IS BUS INESS ACTIVITY OF THE ASSESSEE. THE ASSESSEE IS BEING A CHARITABLE TRUST E NJOYS BENEFIT OF SECTION 80G OF THE ACT ALSO. THE AO NOTED THAT DURING THE Y EAR UNDER CONSIDERATION GROUNDS RECEIPTS OF THE ASSESSEE WERE AT RS. 3.23 C RORES, WHICH EXCEEDED THE LIMIT OF RS. 40 LAKH; HENCE, THE ASSESSEE WAS REQUIR ED TO GET ITS ACCOUNTS AUDITED. AFTER CONSIDERING THE FACTS, THE AO IMPOSED THE PENALTY OF RS. 1 LAKH, WHICH WAS, CAME TO BE CONFIRMED BY CIT (A). 3. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS BEFORE US. ACCO RDING TO WHICH, IT WAS SUBMITTED THAT DOMINATE ACTIVITY OF THE ASSESSEE IS CH ARITABLE ACTIVITIES FOR WORKING OF AND RETIRED POLICE OFFICERS AND THEIR FAMI LIES AND THERE IS NO PROFIT MOTIVE. THE RUNNING OF GAS AND PETROL PUMP IS INCIDENTA L TO BUSINESS. THE ASSESSEE IS A CHARITABLE ORGANIZATION AND HAS BEEN GI VEN EXEMPTION U/S 80G (5) (VI) OF THE INCOME-TAX ACT, 1961. THE ASSESSEE W AS UNDER BONAFIDE BELIEF THAT BEING REGISTERED U/S 12A AND ITS DOMINANT ACTIVI TY BEING CHARITABLE NATURE, THE PROVISIONS OF SECTION 44AB ARE NOT APPLICA BLE OVER HIM. THIS BONAFIDE BELIEF WAS THE REASONABLE CAUSE FOR NOT GETT ING THE BOOKS OF ACCOUNTS AUDITED. IT WAS ALSO STATED THAT THE ASSES SEE HAS NOW BE DONE THE AUDIT ITS BOOKS OF ACCOUNTS AS PER PROVISIONS OF SECT ION 44AB ON 20.10206. THEREFORE, THE COMPLIANCE OF STATUTORY PROVISIONS HAS BEEN MET. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE HAS PLACED RELIANCE ON FOLLOWING CASE LAWS. CIT , HISAR VS. MARKET COMMITTEE, SIRSA, I.T.A. NO. 494 OF 2005 DTD. 17.07.2012 OF PUNJAB & HARYANA HIGH COURT 11. CHAPTER IV OF THE ACT PROVIDES FOR POLICE WELFARE FILING STATION/ITANO.347/IND/2015/AY 08-09/ P AGE 3 OF 7 COMPUTATION OF TOTAL INCOME . SECTION 44AB OF THE ACT IS ONE OF THE SECTIONS E NACTED UNDER CHAPTER IV-D DEALING WITH COMPUTATION OF PROF ITS AND GAINS OF BUSINESS OR PROFESSION. SECTION 44AB OF THE ACT BECOMES OPERATIVE WHERE THE RE IS COMPUTATION OF PROFITS AND GAINS OF BUSINESS OR PROFESSION AS A PART OF TOTAL INCOME . IN OTHER WORDS, IT HAS NO APPLICABILITY WHERE THE ASSESSEE IS NOT INVOLVED IN OR HAS NO INC OME FROM PROFITS AND GAINS FROM BUSINESS OR PROFESSION. IN THE PRESENT CASE, IT WAS NOT DISPUTE D THAT THE INCOME OF THE ASSESSEE WAS EXEMPTED UNDER SECTION 10(20) OF THE ACT, WHICH FAL LS UNDER CHAPTER III OF THE ACT. THERE WAS NO INCOME OF THE ASSESSEE WHICH WOULD FALL UNDER HE ADING PROFITS AND GAINS OF BUSINESS OR PROFESSION. ONCE THAT WAS SO, IT COULD NOT BE SAI D THAT PROVISIONS OF SECTION 44AB WERE APPLICABLE AND AS SEQUEL THERETO, PENALTY UNDER SEC TION 271B OF THE ACT WAS NOT LEVIABLE. THE TRIBUNAL HAS RIGHTLY DECIDED THE ISSUE IN FAVOU R OF THE ASSESSEE. THE ASSESSEE ALSO RELIED IN THE CASE OF URBAN IMPROVEMENT TRUST VS. CIT [2013] 142 ITD 313(JODH- TRIB)WHEREIN IT WAS HELD WHERE THE ASSESSEE DID NOT GET ITS ACCOUNTS AUDITED ON THE BASIS THAT INCOME IS EXEMPT. THEREFORE, THE ASS ESSEE HAS A REASONABLE CAUSE FOR NOT GETTING ITS ACCOUNTS AUDITED UNDER SECTION 44AB OF THE ACT. THE ASSESSEE HAS ALSO RELIED IN THE CASE OF M/S. BIAORA CONSTRUCTION P. LTD. VS. CIT [2006]287 ITR 112/205 CTR 396(MP) WHEREIN THE HON`BLE HIGH COU RT HAS EXPRESSED VIEW THAT THE ORDER IMPOSING FOR FAILURE TO CARRY OUT STATUTO RY OBLIGATION IS THE RESULT OF QUASI-CRIMINAL PROCEEDINGS, AND PENALTY WIL L NOT BE ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED, EITHER ACTED DELIBER ATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHON EST OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. THE ASSESSEE ALSO PLACED RELIANCE IN THE CASE OF GRAMIN VIDYUT SAHKARI SAMITI MARYADIT VS. A CIT [2008] 305 ITR 89(MP) FOR ITS CONTENTION. POLICE WELFARE FILING STATION/ITANO.347/IND/2015/AY 08-09/ P AGE 4 OF 7 4. THE LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIE S. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE THR OUGH THE ORDERS OF THE LOWER AUTHORITIES, AND PERUSED THE MATERIAL AVAI LABLE ON RECORD. WE FIND THAT THE ASSESSEE IS A CHARITABLE ORGANIZATION AND I T HAS BEEN GIVEN EXEMPTION U/S 80G (5) (VI) OF THE INCOME-TAX ACT, 19 61. THE ASSESSEE HAS BEEN RUNNING A PETROL PUMP AND GAS STATION, WHICH IS ANC ILLARY ACTIVITY THE ASSESSEE, EARNS NO PROFIT. THE ASSESSEE IS RUNNING T HE PETROL PUMP ONLY FOR CHARITABLE PURPOSES AND HAS NO PROFIT-EARNING MOTIVE AT ALL. SINCE, THE INCOME OF THE ASSESSEE WAS EXEMPT; THEREFORE, IT HA S A BONAFIDE BELIEF THAT IT DOES NOT REQUIRE THE AUDIT OF BOOKS OF ACCOUNTS AS PER PROVISIONS OF SECTION 44AB OF THE ACT. THE QUESTION OF PENALTY FOR NON-COMPLI ANCE CANNOT BE ENQUIRED INTO WITHOUT READING THE PROVISIONS OF SECTI ON 271B AND 273B TOGETHER AS BOTH ARE INTERNALLY CONNECTED. EVEN IF T HE MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING THE PENALTY, WHEN THERE IS A TECHNICAL OR V ENIAL BREACH OF PROVISIONS OF ACT OR WHEN THE BREACH FLOWS FROM A BONA FIDE BELIE F THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY STATUTE. IN TERMS OF SECTION 271B, THE AO WILL BE REQUIRED TO CONSIDER NOT GETTIN G THE ACCOUNTS AUDITED FOR THE RELEVANT YEAR WAS DUE TO ANY REASONABLE CAUS E, WHICH THE ASSESSEE PUT FORWARD AS SELF-DEFIANCE FOR FAILURE TO COMPLY WI TH THE PREVIOUSLY MENTIONED PROVISIONS. IN EITHER CASE, WHERE THE ASSES SEE RAISED AN ISSUE THAT HIS CASE DOES NOT FIT WITHIN THE PURVIEW OF SECTION 44AB BEFORE PENALTY CAN BE LEVIED. THE AO WILL BE UNDER OBLIGATION TO DECIDE S UCH OBJECTION RAISED BY THE ASSESSEE. THE FACT THAT THE ASSESSEE RAISED CER TAIN QUESTION ABOUT THE POLICE WELFARE FILING STATION/ITANO.347/IND/2015/AY 08-09/ P AGE 5 OF 7 INTERPRETATION OF STATUTE PRIMA FACIE SUPPORTS ITS CAS E IN THAT OBJECTION RAISED BY HIM, IS BONA FIDE; HE SEEKS THE DECISION ON HIS MER IT WHERE THE ACCOUNTS ARE NOT AUDITED EVEN THOUGH SECTION 44AB ATTRACTED. IT DOES NOT AFFECT THE PROPER COMPUTATION OF INCOME IN TERMS OF PROVISIONS OF A CT 1961 NOR DOES IT AFFECT ANY DEDUCTION BY THE ASSESSEE UNDER ANY PROVIS IONS OF THE ACT. IN SUCH EVENT, THE BREACH REMAINS TECHNICAL BREACH OF PROCEDUR AL REQUIREMENT. THE ASSESSEES RECEIPTS WERE IN EXCESS OF RS. 40 LAKHS; THEREFORE, THE ASSESSEES ACCOUNTS ARE SUBJECT TO AUDIT. THE ASSESSEE WAS UND ER THE BONA FIDE BELIEF THAT THE ASSESSEES IS CHARITABLE ORGANIZATION; THE REFORE, THEY ARE NOT REQUIRED TO GET ITS ACCOUNTS AUDITED. THE ASSESSEE, THEREFOR E, NOT COMPLIED WITH THE PROVISIONS OF SECTION 44AB. THE ASSESSEE WHEN COME T O KNOW ONLY DURING THE ASSESSMENT PROCEEDINGS FOR GETTING ITS ACCOUNTS TO BE AUDITED, THE TIME FOR GETTING THE ACCOUNTS AUDITED WERE ALREADY OVER. THE ASSESSEE HAS THEREAFTER GOT AUDITED ITS ACCOUNTS ON 20.10.2016 AND COMPLIED WITH THE PROVISIONS OF SECTION 44AB OF THE ACT. THE ASSESSEE HAS RELIED IN THE CASE OF BIAORA CONSTRUCTION P. LTD. VS. CIT [2006]287 ITR 112/205 C TR 396(MP) WHEREIN THE HON`BLE HIGH COURT HAS EXPRESSED VIEW THAT T HE ORDER IMPOSING FOR FAILURE TO CARRY OUT STATUTORY OBLIGATION IS THE RESULT OF QUASI -CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT BE ORDINARILY BE IMPOSED UNLESS THE PAR TY OBLIGED, EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. SIMILARLY, THE COORDINATE BENCH, IN THE CASE OF URBAN IMPROVEMENT TRUST VS. CIT [2013] 142 ITD 313(JODH-TRIB) HELD THAT WHERE THE ASSESSEE DID NOT GET ITS ACCOUNTS POLICE WELFARE FILING STATION/ITANO.347/IND/2015/AY 08-09/ P AGE 6 OF 7 AUDITED ON THE BASIS THAT INCOME IS EXEMPT. THEREFORE , THE ASSESSEE HAS A REASONABLE CAUSE FOR NOT GETTING ITS ACCOUNTS AUDITE D UNDER SECTION 44AB OF THE ACT. SIMILARLY IN THE CASE OF CIT , HISAR VS. MARKET COM MITTEE, SIRSA, I.T.A. NO. 494 OF 2005 DTD. 17.07.2012 OF PUNJAB & HARYANA HIGH COURT HELD AS 11. CHAPTER IV OF THE ACT PROVIDES FOR COMPUTATION OF TOTAL INCOME . SECTION 44AB OF THE ACT IS ONE OF THE SECTIONS ENACTED UNDER CHAPTE R IV-D DEALING WITH COMPUTATION OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. SECTIO N 44AB OF THE ACT BECOMES OPERATIVE WHERE THERE IS COMPUTATION OF PROFITS AND GAINS OF BUSINE SS OR PROFESSION AS A PART OF TOTAL INCOME. IN OTHER WORDS, IT HAS NO APPLICABILITY WHERE THE ASSE SSEE IS NOT INVOLVED IN OR HAS NO INCOME FROM PROFITS AND GAINS FROM BUSINESS OR PROFESSION. IN THE PRESENT CASE, IT WAS NOT DISPUTED THAT THE INCOME OF THE ASSESSEE WAS EXEMPTED UNDER SECTION 10(20) OF THE ACT, WHICH FALLS UNDER CHAPTER III OF THE ACT. THERE WAS NO INCOME O F THE ASSESSEE WHICH WOULD FALL UNDER HEADING PROFITS AND GAINS OF BUSINESS OR PROFESSI ON. ONCE THAT WAS SO, IT COULD NOT BE SAID THAT PROVISIONS OF SECTION 44AB WERE APPLICABLE AND AS SEQUEL THERETO, PENALTY UNDER SECTION 271B OF THE ACT WAS NOT LEVIABLE. THE TRIBUNAL HAS RIGHTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, AND DECIS ION OF AS CITED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE PENA LTY U/S 271B FOR NON- COMPLIANCE WITH SECTION 44AB FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IS NOT LEVIABLE, HENCE, PENALTY SO LEVIED IS CANCELLED. THIS GROUNDS OF APPEAL IS ALLOWED. 6. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE AL LOWED. 7. THE ORDER PRONOUNCED IN THE OPEN COURT ON 08.11.2016 . SD/- (D.T.GARASIA) JUDICIAL MEMBER SD/- (O.P.MEENA) ACCOUNTANT MEMBER POLICE WELFARE FILING STATION/ITANO.347/IND/2015/AY 08-09/ P AGE 7 OF 7 DATED : 8 TH NOVEMBER, 2016.