M/s. Improvement Trust, Bathinda V. The Asstt. Commissioner of Income-tax, Bathinda

ITA 413/ASR/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1422 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 17-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Charitable institution; Bonafide mistake
• Section: 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (BEFORE SHRI A.D. JAIN, JM & SHRI T.R. MEENA AM) ITA NO. 412/ASR/2013 ASSESSMENT YEAR : 2006-07 IMPROVEMENT TRUST, DR. MELA RAM ROAD, BHATINDA. VS. THE DY.C.I.T. CIRCLE-1, BHATINDA. PAN NO.: AAATE 1563 E APPELLANT RESPONDENT ITA NO. 413/ASR/2013 ASSESSMENT YEAR : 2005-06 IMPROVEMENT TRUST, DR. MELA RAM ROAD, BHATINDA. VS. THE A.C.I.T. CIRCLE-1, BHATINDA. PAN NO.: AAATE 1563 E APPELLANT RESPONDENT ASSESSEE BY : SHRI Y.K. SUD (CA) REVENUE BY : SHRI TARSEM LAL (SR. DR) DATE OF HEARING : 27 /08/2015 DATE OF PRONOUNCEMENT : 16/09/2015 O R D E R PER: T.R. MEENA, A.M. BOTH THE APPEALS ARE HEARD TOGETHER ON COMMON ISSUE S, THEREFORE, COMMON ORDER IS BEING PASSED. THE ASSESSEES APPEAL ARE EMANATING FROM 2 ITA 412 & 413/ASR/2013 IMPROVEMENT TRUST, BHATINDA VS. DCIT THE ORDER OF CIT(APPEALS) ORDER DATED 19-3-2013 FOR THE A.Y 2006-07 AND 2005-06. THE EFFECTIVE GROUNDS OF APPEAL FOR THE A. Y 2006-07 IS AS UNDER:- 1. THAT THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-I, BATHINDA HAS ERRED IN LAW AND ON FACTS WHI LE IMPOSING THE PENALTY OF RS. 1,00,00/- UNDER SECTION 271B. 2. THAT THE LD. DCIT HAS NOT APPRECIATED THE FACT THAT IMPROVEMENT TRUST BATHINDA IS NOT DOING ANY BUSINESS OR PROFESSION TO EARN ANY PROFIT. THE INCOME OF THE TRUS T IS ALSO EXEMPT UNDER SECTION 11 OF THE ACT DURING THE ASSESSMENT YEAR 2006-074 AND AS SUCH NO PENALTY IS LIABLE. 3. THAT THE DELAY IN AUDITING OF ACCOUNTS IS A BONAFIDE MISTAKE/OMISSION AND NO PENALTY IS LEVIABLE IN VIEW OF THE DECISION OF HINDUSTAN STEEL LTD. VS STATE OF ORISSA REPORTED AT 83 ITR 26 (SC). 4. THAT IMPOSITION OF PENALTY UNDER THIS SECTION IS NOT MANDATORY AND AS SUCH THE ACIT IS NOT JUSTIFIED WHILE IMPOSING THE PENALTY IN VIEW OF THE FACTS & CIRCUMST ANCES OF THE CASE. 2. THE GROUNDS FOR A.Y 2005-06 ARE IDENTICAL , THERE FORE, WE ARE NOT REPEATING FOR SAKE OF CONVENIENCE. 3. THE LD. AO HAD OBSERVED THAT THE ASSESSEE HAD FIL ED ITS RETURN OF INCOME ON 31-1-2007 FOR A.Y 2006-07 AND ON 27-1- 2006 FOR A.Y 2005-06 DECLARING CESS OF RS. 32,65,590/- AND NIL I NCOME RESPECTIVELY. 3 ITA 412 & 413/ASR/2013 IMPROVEMENT TRUST, BHATINDA VS. DCIT THE ASSESSEE DEALS IN PURCHASE OF LAND AND DEVELOPME NT THEREOF INTO RESIDENTIAL AND COMMERCIAL PLOTS AND BUILDINGS. DUR ING THE YEAR 2006- 07 THE ASSESSEE HAD SHOWN TOTAL RECEIPT OF RS. 12,2 1,97,171/-. THE AO NOTICED THAT THERE WERE ANOTHER RECEIPTS OF RS. 7 ,39,80,248/- AS PER PARA 6 OF ASSESSMENT ORDER. THUS THE TOTAL RECEI PT OF THE ASSESSEE FOR THE YEAR 2006-07 WAS RS. 19,61,77,419/-. THE ASS ESSEE WAS ALLOWED REGISTRATION U/S 12AA BY THE LD. CIT, BATHIND A ON 16-8-2010 W.E.F. 12-6-2003. THE ASSESSEE WAS TO UTILIZED 85% OF ITS RECEIPTS AS PER PROVISIONS OF SECTION 11(1)(A) TO CLAIM EXEMPTIO N OF ITS INCOME. HOWEVER, THE ASSESSEE HAD SHOWN THE APPLICATI ON OF INCOME & EXPENDITURE ACCOUNT TO THE TUNE OF RS. 4,16,51,37 0/- WHICH WORKED OUT 21.23% OF THE TOTAL RECEIPTS AT RS. 19,61,77,41 9/-. THUS THE BALANCE RECEIPTS OF 12,51,02,340/- OBVIOUSLY TAXABL E RECEIPTS. THESE TAXABLE ARE ASSESSABLE RECEIPTS FROM BUSINESS. AS THE TAXABLE RECEIPTS WERE ABOVE RS. 40LAKH. THE ASSESSEE WAS REQUIRED TO GE T ITS ACCOUNT AUDITED AS PER PROVISION OF SECTION 44AB OF THE ACT . IN A.Y 2005-06 THE LD. AO NOTICED THAT THE ASSESSEE HAS SHOWN RECEI PTS AN ACCOUNT OF SALE OF LAND TO THE TUNE OF RS. 3,98,561/- BESIDES HAVING RECEIPTS OF RS. 1,04,13,300/- UNDER DIFFERENT HEADS WHICH RECOVE RY OF CESS, FEES, 4 ITA 412 & 413/ASR/2013 IMPROVEMENT TRUST, BHATINDA VS. DCIT FINES, PENALTIES, INTEREST, SALE OF FARMS AND ENHAN CEMENT. AS THE TURNOVER/GROSS RECEIPTS EXCEEDED RS. 40 LAKH. THE AS SESSEE WAS A REQUIRED TO GET ITS ACCOUNT AUDITED AS PER THE PROV ISIONS OF 44AB OF THE IT ACT, 1961. BUT THE ASSESSEE FAILED TO COMPLY WITH THESE PROVISIONS THEREFORE NOTICE U/S 271B WAS ISSUED ON 25-6-2007 AND SERVED UPON THE ASSESSEE ON 4-7-2007 FIXING THE CAS E FOR 9-7-2007. THE ASSESSEE HAD SUBMITTED BEFORE THE AO THAT THE TR UST IS FILING ITS ANNUAL RETURN BEING CHARITABLE TRUST. THEREFORE, ACC OUNTS WERE NOT GOT AUDITED FROM THE C.A OR ANY AUTHORITY UNDER THE PROVISIONS OF I.T ACT. MOREOVER RETURN FOR THE F.Y. 2004-05 HAD BEEN FILED IN LOSS TO THE TRUST. AS SUCH ACCOUNTS WERE NOT REQUIRED TO BE GOT A UDITED. 3.1 BUT THE LD. AO HELD THAT STATUTORY BODY CANNOT BE SAID TO BE EXEMPT FROM GETTING IT ACCOUNT AUDITED IF IT DERIVE S INCOME FROM BUSINESS. THE REGISTRATION U/S 12AA DOES NOT MADE A PERSON OR ENTITY EXEMPT FROM GETTING IT ACCOUNTS AUDITED. IF ITS GRO SS RECEIPTS EXCEEDS THE LIMITS AS PRESCRIBED U/S 44AB. THUS THE LD AO I MPOSED PENALTY RS. 1 LAKH U/S 271B FOR THE A.Y 2006-07. 4. BEING AGGRIEVED BY THE ORDER OF ASSESSING OFFICE R, THE ASSESSEE CARRIED THE MATTER BEFORE CIT(APPEALS) BATHINDA WHO HAD CONFIRMED 5 ITA 412 & 413/ASR/2013 IMPROVEMENT TRUST, BHATINDA VS. DCIT THE APPEAL FOR BOTH THE YEARS BY OBSERVING THAT HON BLE ITAT, AMRITSAR BENCH, AMRITSAR VIDE ITS ORDER DATED 8-12- 2012 IN THE CASE OF THE APPELLANT ITSELF IN ITA NO. 366(ASR) 2012 HAS D ISMISSED THE APPEAL FOR GRANT OF REGISTRATION U/S 12AA OF THE AC T HAD BEEN REFUSED BY THE CIT, BATHINDA VIDE ORDER DATED 27-3-2006. THE HONBLE ITAT IN ITS ORDER IN PARAGRAPH NO. 7.6 AT PAGE NO. 16 HAS H ELD THAT THE ASSESSEES TRUST HAD BEEN INVOLVED IN CARRYING A VA RIOUS ACTIVITIES WHICH ARE IN THE NATURE OF TRADE, COMMERCE OR BUSINES S AND THAT IT HAS NOT DONE ANY ACTIVITY FOR ADVANCEMENT OF GENERA L PUBLIC UTILITY. THEREFORE HE DISMISSED THE ASSESSEES APPEAL. 5. THE SIMILAR FINDING HAD BEEN GIVEN BY CIT(APPEALS) FOR THE A.Y 2005-06. HE FURTHER RELIED IN CASE OF DCIT VS. BIHAR STATE LEATHER DEVELOPMENT CORP.(P)LTD. 58 ITD 276. ITAT PATNA AND U P NALCOOP NIGAM LTD. VS. DCIT, ITAT ALLAHABAD. THE ASSESSEE SUB MISSION MADE BEFORE THE LD. CIT(APPEALS) THAT HE HAD SUBMITTED TH E AUDIT REPORT ON 6-2-2008 BEFORE THE AO DURING THE ASSESSMENT PROCEE DINGS BUT HE WAS NOT CONVINCED WITH THE SUBMISSION MADE BY THE APP ELLANT. THUS HE CONFIRMED THE ORDER OF THE AO. 6 ITA 412 & 413/ASR/2013 IMPROVEMENT TRUST, BHATINDA VS. DCIT 6. THE ASSESSEE FILED THE APPEAL BEFORE THE ITAT WHO H AD CONFIRMED THE ORDER OF THE CIT(APPEALS) VIDE ORDER D ATED 15-10-2013 FOR BOTH THE YEARS. THE ASSESSEE FILED THE APPEAL B EFORE THE PUNJAB & HARYANA HIGH COURT WHO HAS SET ASIDE THE ORDER OF TH E ITAT VIDE ORDER DATED 6-8-2014 AND REMITTED THE ISSUE BACK TO THE TRIBUNAL TO DECIDE THE APPEALS RELATING TO TAXABILITY OF THE IN COME OF THE TRUST AFRESH. ACCORDING THIS BENCH REHEARD THE APPEAL FIL E IN ITA NO. 412 & 413 FOR IMPOSITION OF PENALTY U/S 271B OF THE ACT. 7. THE LD. AR ARGUED THAT CIT, BATHINDA VIDE ORDER DA TED 16-8- 2010 AT GRANTED THE REGISTRATION OF TRUST U/S 12AA W.E.F. 12-6-2003. THE ASSESSEE BEING TRUST IS REQUIRED TO BE AUDITED U /S 12A1(B) OF THE IT ACT. THE PENALTY U/S 271B IS IMPOSABLE ON AUDIT NO T COMPLETED U/S 44AB TURNOVER/GROSS RECEIPTS ARE MORE THAN PRESCRIB ED LIMITS IN CASE OF BUSINESS OR PROFESSION. THE ASSESSEE WAS NOT DOING ANY BUSINESS DURING THE YEAR UNDER CONSIDERATION THEREFORE PENAL TY U/S 271B IS NOT IMPOSABLE. THE ASSESSEE EARLIER WAS EXEMPTED U/S 10(2 0A) OF THE ACT UP TO 31-3-2003 AND SAID SECTION WAS OMITTED W.E.F 1- 4-2003. THEREAFTER ASSESSEE MAINTAINED THE BOOKS OF ACCOUNTS ON DOUBLE ENTRY SYSTEM AND FURNISHED THE AUDIT REPORT FOR A.Y 2005-06 BEFORE 7 ITA 412 & 413/ASR/2013 IMPROVEMENT TRUST, BHATINDA VS. DCIT THE AO ON 6-2-2008 DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FURTHER THERE WAS A LOSS IN AY 2005-06 & 2006-07. TH EREFORE ASSESSEE IS NOT REQUIRED TO FILE AUDIT REPORT AS PE R SECTION 12A. THUS PENALTY CONFIRMED BY THE CIT(APPEALS) IS NOT AS PER THE LAW. AT THE OUTSIDE LD DR SUPPORTED THE ORDER OF THE CIT(APPEALS ) AND ARGUED THAT THE ASSESSEE ACTIVITY IS NOT CHARITABLE. THE LD CIT (APPEALS) HAS GIVEN DETAIL FINDING ON THIS ISSUE THEREFORE ORDER OF THE CIT(APPEALS) MAY PLEASE BE CONFIRMED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT THE LD CIT, BHATINDA HAD GRANTED REGISTRATION W.E.F. 12/06/2003 VIDE ORDER DATED 16/08/2010. THE ASSESSEE TRUST REQUIRED TO BE AUDITED U/S 12A(B) OF THE I.T. ACT, 1961. THE PENALTY U/S 271 B CAN BE IMPOSED ON CASE WHERE THE ASSESSEE FAILS TO GET ACCO UNT AUDITED U/S 44AB. AS PER SECTION 44AB AUDIT OF ACCOUNT IS TO BE GOT IN CASE CARRYING ON BUSINESS OR PROFESSION. IN CASE OF ITO VS. INDIAN HOCKEY FEDERATION (2011) 9 ITR (TRIB) 692 (DEL.) HAS HELD TH AT SINCE ITS INCOME WAS LARGELY OUT OF GRANT FROM GOVT., ITS ACTI VITIES ARE NOT TO BE TREATED AS BUSINESS. PENALTY FOR NOT HAVING THE ACC OUNTS AUDITED U/S 8 ITA 412 & 413/ASR/2013 IMPROVEMENT TRUST, BHATINDA VS. DCIT 44AB WAS THEREFORE DELETED. THE FACTS AND CIRCUMSTAN CES OF THE ASSESSEES CASE ARE IDENTICAL TO THE CASE OF CASE L AW REFERRED ABOVE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT PENALTY U/S 271B ARE NOT LEVIABLE IN BOTH THE YEARS. ACCORDINGLY, WE DELE TE THE PENALTY FOR BOTH THE YEARS. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.09.2015. SD/- SD/- (A.D. JAIN) (T. R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16.09.2015 /PK/ PS. COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- IMPROVEMENT TRUST, BHATINDA. 2. THE RESPONDENT- THE DCIT/ACIT, CIRCLE-1, BHATINDA 3. CIT 4. THE CIT(A) 5. DR, ITAT, AMRITSAR. 6. GUARD FILE (ITA NO. 412 & 413/ASR/2013). BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.