Bharathi Education Trust, Bangalore V. Deputy Commissioner Of Income Tax (Exemption), Circle- 1, Bangalore

ITA 586/BANG/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1385 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-06-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 24-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R E BALASUBRAMANYAM
• Keywords: Depreciation; Charitable institution; Principle of natural justice; Difference of opinion; Capital expenditure
• Section: 271(1)(c); 12A; 274; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.586/BANG/2020 ASSESSMENT YEAR: 2013-14 BHARATHI EDUCATION TRUST, NO.1435, 7 TH B MAIN, RPC LAYOUT, VIJAYANAGAR, BENGALURU-560 040 PAN NO : AABTB 7102 P VS. THE DY. COMMISSIONER OF INCOME-TAX, (EXEMPTIONS) CIRCLE-1 BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI R.E BALASUBRAMANYAM, C.A RESPONDENT BY : SHRI KANNAN NARAYANAN, ADDL. CIT (DR) DATE OF HEARING : 17.06.2021 DATE OF PRONOUNCEMENT : 02.07.2021 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER: PRESENT PENALTY APPEAL HAS BEEN FILED BY ASS ESSEE AGAINST ORDER DATED 29/06/2018 PASSED BY THE LD.CIT(A)-3, B ANGALORE FOR ASSESSMENT YEAR 2013-14 ON FOLLOWING REVISED GROUND S OF APPEAL FILED BY ASSESSEE ON 24/03/2021: 1. THAT THE IMPUGNED ORDER IS OPPOSED TO FACTS AND LAW IN SO FAR AS IT IS PRE-JUDICIAL TO THE INTERESTS OF TH E APPELLANT. GENERAL GROUND PAGE 2 OF 9 ITA NO.586/BANG/2020 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF PENALTY PASSED BY THE ASSESSING OFFICER AND IN DOING SO, RS.1,76,46,858 A. HE FAILED TO APPRECIATE THAT THE NOTICE U/S 274 WAS ISSUED BY AN OFFICER OTHER THAN THE ONE WHO RECORDED SATISFACTIO N FOR LEVYING PENALTY. B. WITHOUT PREJUDICE TO GROUND NO 2 (A) ABOVE AND A SSUMING WITHOUT ADMITTING THAT THE PROCEEDINGS WERE PROPERLY INITIA TED AND CONTINUED BY THE SUCCEEDING INCUMBENT IN OFFICE, THE IMPUGNED PE NALTY ORDER IS UNTENABLE AND BAD IN LAW INASMUCH AS NO INTIMATION OF CHANGE OF INCUMBENT WAS GIVEN TO THE APPELLANT AND THE PENALT Y WAS LEVIED FOR REASONS OTHER THAN WHAT IS RECORDED IN THE ASSESSME NT ORDER. C. WITHOUT PREJUDICE TO ABOVE AND ASSUMING WITHOUT ADMITTING THAT THE SUCCEEDING INCUMBENT IN OFFICE CAN INITIATE PENALTY PROCEEDINGS FOR THE FIRST TIME, THE IMPUGNED PENALTY ORDER IS UNTENABLE AND BAD IN LAW AS THE NOTICE U/S 274 IS A NULLITY AT LAW IN VIEW OF THE D ECISION OF THE HONORABLE HIGH COURT OF KARNATAKA IN THE CASE OF MANJUNATHA C OTTON & GINNING FACTORY (359 ITR 565) INASMUCH AS THE NOTICE DOES N OT SPECIFY CLEARLY WHETHER THE PENALTY IS PROPOSED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS. 3. WITHOUT PREJUDICE TO ABOVE GROUNDS, AND ASSUMING WITHOUT ADMITTING THAT THE INITIATION AND PROCEDURAL SAME AS ABOVE RE QUIREMENTS OF PENALTY ARE HELD TO BE VALID, NO PENALTY IS WARRANTED WHEN THE RETURNED INCOME AND ASSESSED INCOME ARE BOTH THE SAME AND THE PENAL TY TO BE LEVIED ON THE ALLEGED AMOUNT OF TAX SOUGHT TO BE EVADED AS CO NTEMPLATED UNDER EXPLANATION 4 TO SECTION 271 OF THE ACT IS ALSO NIL . RS.1,76,46,858 4. WITHOUT PREJUDICE TO ABOVE GROUNDS, THE PENALTY SO SAME AS ABOVE CONFIRMED BY THE LD CIT(A) IS BAD-IN-LAW AND DESERV ES TO BE CANCELLED INASMUCH AS THE APPROVAL FOR THE SAME WAS GRANTED B Y THE LD JOINT COMMISSIONER OF INCOME TAX WITHOUT AFFORDING AN OPP ORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE BEFORE HIM IN VIOLATIO N OF THE PRINCIPLES OF NATURAL JUSTICE. THE APPELLANT PRAYS FOR LEAVE TO ADD, DELETE, MODIF Y AND/OR ADDUCE ADDITIONAL GROUND AT ANY TIME BEFORE THE APPEAL IS DISPOSED OFF. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADDUCE D OR REMOVED IN TIME TO TIME, IT IS REQUESTED THAT THE HON'BLE ITAT MAY BE PLEASED TO EXAMINE THE CASE IN THE LIGHT OF JUSTICE AND GRANT THE RELIEF SOUGHT FOR. RS.1,76,46,858 BRIEF FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSEE IS A TRUST REGISTERED UNDER 12A AND ENTITLED FOR EXEMPTION UNDER SECTION 11 FOR THE RELEVANT YEAR UN DER CONSIDERATION. IT HAD FILED ITS RETURN OF INCOME DE CLARING NIL PAGE 3 OF 9 ITA NO.586/BANG/2020 INCOME AS THE APPLICATION OF FUNDS FOR CHARITABLE P URPOSES EXCEEDED THE TOTAL RECEIPTS. THE ASSESSEE INCURRED CAPITAL EXPENDITURE TO THE EXTENT OF RS.56,46,98,998/- AND CLAIMED DEPRECIATION TO THE EXTENT OF RS.1,21,62,267/-. DUR ING THE YEAR UNDER CONSIDERATION ASSESSEE TREATED DONATIONS TOWA RDS CORPUS FUNDS, WHICH THE LD.AO TREATED AS NORMAL DONATIONS. THE LD.AO ALSO MADE CERTAIN OTHER ADDITIONS BY DISALLOWING DE PRECIATION CLAIMED ON ASSETS WHICH WAS CLAIMED AS APPLICATION BY ASSESSEE IN EARLIER YEARS. THE LD.AO DETERMINED TAXABLE INCO ME OF ASSESSEE AS NIL AS THE TOTAL REVENUE AND CAPITAL EXPENDITURE APPLIED FOR CHARITABLE PURPOSES EXCEEDED THE AMOUNT CONSIDERED AS SURPLUS BY HIM. THE LD.AO INITIATED PENALTY PROC EEDINGS UNDER SECTION 271(1)(C) OF THE ACT, SINCE ASSESSEE CONCEALED THE PARTICULARS OF INCOME WITHIN THE MEANING OF IS SECT ION 271(1)(C) OF THE ACT. 3. IT IS SUBMITTED THAT, AS THERE WAS NO DEMAND, TH E ASSESSEE CHOSE NOT TO AGITATE THE ISSUE ON QUANTUM. 4. SUBSEQUENTLY, ON 21/09/2016 NOTICE UNDER SECTION 274 OF THE ACT, WAS ISSUED TO ASSESSEE. DURING THE PENALTY PROCEEDINGS ASSESSEE FILED VARIOUS SUBMISSIONS AND REPLIES IN S UPPORT OF NON- LEVY OF PENALTY. LD.AO AFTER CONSIDERING THE REPLIE S HELD THAT, THE AMOUNT PAID BY THE STUDENTS ADMITTED TO THE ASSESSE ES EDUCATIONAL INSTITUTION WAS NOT TOWARDS CORPUS DONA TION ACCOUNT, BUT WAS COLLECTED ONLY BY WAY OF CAPITATIO N FEE AND THAT SUCH AMOUNT OF CAPITATION FEE WAS NOT EXEMPT IN THE HANDS OF ASSESSEE. THE LD.AO RELIED ON THE DECISION OF HONBLE SUPREME PAGE 4 OF 9 ITA NO.586/BANG/2020 COURT IN CASE OF MOHINI JAIN VS STATE OF KARNATAKA AND ORS. REPORTED IN (1992) 3 SCC 666 . THE LD.AO THUS LEVIED PENALTY BY HOLDING THAT ASSESSEE FILED INACCURATE PARTICULARS. 5. AGGRIEVED BY THE ORDER PASSED BY THE LD.AO, ASSE SSEE PREFERRED APPEAL BEFORE THE LD.CIT(A). 6. THE LD.CIT(A), UPHELD THE ORDER OF THE LD.AO BY REJECTING THE CONTENTIONS OF ASSESSEE. THERE WAS CERTAIN CLER ICAL ERROR IN THE COMPUTATION OF PENALTY WHICH WAS CORRECTED BY T HE LD.CIT(A). 7. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), ASSESSE E IS IN APPEAL BEFORE US NOW. 8. THE LD.AR SUBMITTED THAT PENALTY IS INITIATED DU E TO THE DIFFERENCE IN THE OPINION ON THE PART OF THE LD.AO REGARDING THE NATURE OF RECEIPT IN THE HANDS OF ASSESSEES. HE SU BMITTED THAT A MERE DIFFERENCE OF OPINION FOR REJECTION OF THE CLA IM MADE BY ASSESSEE DOES NOT LEAD TO THE PRESUMPTION THAT THER E IS CONCEALMENT FURNISHING OF INACCURATE PARTICULARS. T HE LD.AR RELYING ON BALANCE SHEET OF ASSESSEE FOR THE YEAR U NDER CONSIDERATION SUBMITTED THAT THE ENTIRE MONEY RECEI VED FROM PARENTS ARE DECLARED AS CORPUS DONATION, WHICH IS R EJECTED BY THE LD.AO. HE SUBMITTED THAT WHILE INITIATING PENALTY I N THE QUANTUM ASSESSMENT ORDER, THE LD.AO WENT ON CONCEALMENT OF PARTICULARS OF INCOME, WHILE ISSUE OF NOTICE UNDER SECTION 274 OF THE ACT, THE PENALTY IS SHOWN TO BE INITIATED FOR BOTH THE LIMBS BEING FILING OF INACCURATE PARTICULARS AS WELL AS CONCEALMENT OF IN COME. HOWEVER IN THE PENALTY ORDER PASSED BY THE LD.AO, T HE PENALTY IS PAGE 5 OF 9 ITA NO.586/BANG/2020 LEVIED FOR FILING OF INACCURATE PARTICULARS OF INCO ME BY CHANGING THE COLOUR OF RECEIPTS. 9. INSOFAR AS THE ISSUE OF DEPRECIATION IS CONCERNE D LD.AR SUBMITTED THAT, THIS ISSUE IS NO MORE RES INTEGRA AS DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION REPORTED IN 402 ITR 441 , IS IN FAVOUR OF ASSESSEE ON THE ISSUE. 10. ON THE CONTRARY, THE LD.SR.DR RELIED ON THE OBS ERVATIONS OF LD.CIT(A) 11. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN THE LIGHT OF RECORDS PLACED BEFORE US. 12. WE NOTE THAT THE ISSUE OF DEPRECIATION IS COVER ED IN FAVOUR OF ASSESSEE AND THEREFORE NO PENALTY CAN BE LEVIED ON THAT ISSUE. MOREOVER THE DISALLOWANCE MADE BY THE LD. AO ON THI S RESPECT IS ON ACCOUNT OF DIFFERENCE OF OPINION. 13. ON THE OTHER ISSUE OF DISALLOWANCE OF ALLEGED C ORPUS DONATION, WE NOTE THAT ASSESSEE DISCLOSED THE ENTIR E AMOUNT IN THE BALANCE SHEET AS CORPUS DONATION WHICH WAS NOT ACCEPTED BY THE LD.AO AND TREATED IT AS INCOME IN THE HANDS OF ASSESSEE. UNDER BOTH THESE ADDITIONS MADE BY THE LD.AO, THERE IS NO FINDING THAT THESE ARE BOGUS ALSO THE GENUINENESS I S NOT QUESTIONED BY THE LD.AO. HONBLE SUPREME COURT IN CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD., REPORTED IN (2010) 322 ITR 158 HELD AS UNDER: A GLANCE OF PROVISION OF SECTION 271 (L) (C) WOULD SUGGEST THAT IN ORDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE P ARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED PAGE 6 OF 9 ITA NO.586/BANG/2020 INACCURATE PARTICULARS OF HIS INCOME. THE INSTANT C ASE WAS NOT THE CASE OF CONCEALMENT OF THE INCOME. THAT WAS NOT THE CASE OF THE REVENUE EITHER. IT WAS AN ADMITTED POSITION IN THE INSTANT CASE THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INC ORRECT OR INACCURATE. IT WAS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL S UPPLIED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, PRIMA F ACIE, THE ASSESSEE COULD NOT BE HELD GUILTY OF FURNISHING INA CCURATE PARTICULARS. THE REVENUE ARGUED THAT SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INCOME. SUCH CANNOT BE THE INTE RPRETATION OF THE CONCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRI CTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNO T TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS. 14. SIMILARLY, IN THE PRESENT SCENARIO, THE ASSESSE E CANNOT BE PENALIZED FOR MAKING A CLAIM WHICH IN ITSELF MAY BE UNSUSTAINABLE IN LAW. HONBLE SUPREME COURT FURTHER HELD THAT: MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPEND ITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVEN UE, THAT, BY ITSELF, WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1) (C). IF THE CONTENTION OF THE REVENUE WAS ACCEPTED, THEN IN CASE OF EVERY RET URN WHERE THE CLAIM MADE WAS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WOULD INVITE PENALTY UNDER SECTION 271(1)(C) 15. FROM THE FACTS OF THIS CASE IT IS CLEAR THAT TH E ASSESSEE DISCLOSED ALL THE PARTICULARS OF HIS INCOME. THE LD .AO HAS DISALLOWED CLAIM WITHOUT HOLDING IT TO BE BOGUS OR FALSE. THUS, THE GENUINENESS OF THE CLAIM IS NOT IN QUESTION HER E. HONBLE SUPREME COURT WHILE ELABORATING THE SCOPE OF SECTIO N 271(1)(C) IN CIT VS RELIANCE PETROPRODUCTS PVT LTD [2010] 322 ITR 158 HELD THAT- A GLANCE OF PROVISION OF SECTION 271 (L) (C) WOULD SUGGEST THAT IN ORDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PART ICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURN ISHED INACCURATE PARTICULARS OF HIS INCOME. THE INSTANT CASE WAS NOT THE CASE OF CONCEALMENT OF THE INCOME. THAT WAS NOT THE CASE OF THE REVENUE EITHER. IT WAS AN ADMITTED POSITION IN THE INSTANT CASE THAT N O INFORMATION GIVEN IN PAGE 7 OF 9 ITA NO.586/BANG/2020 THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT WAS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESS EE COULD NOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE RE VENUE ARGUED THAT SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPEND ITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INC OME. SUCH CANNOT BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORD S ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING A N INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE P ARTICULARS. 16. RELYING ON THE ABOVE OBSERVATIONS BY HONBLE SUPREME COURT, WE ARE OF THE VIEW THAT THE PENALTY LEVIED DESERVE S TO BE DELETED. 17. AS WE HAVE DELETED THE PENALTY ON MERITS, OTHER GROUNDS RAISED BY THE ASSESSEE BECOMES ACADEMIC AT THIS STA GE. ACCORDINGLY THE APPEAL OF ASSESSEE STANDS ALLOWED O N GROUND NO.2 (C). THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 2 ND JULY, 2021 SD/- SD/- (CHANDRA POOJARI ) ACCOUNTANT MEMBER (BEENA PILLAI) JUDICIAL MEMBER BANGALORE, DATED 2 ND JULY, 2021. VMS PAGE 8 OF 9 ITA NO.586/BANG/2020 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. PAGE 9 OF 9 ITA NO.586/BANG/2020 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -7-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -7-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -7-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -7-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -7-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -7-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -7-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS