Income Tax Officer-2(1), Lucknow V. Bharat Sewa Sansthan, Lucknow

ITA 727/LKW/2013

• Counselvise Citation: 72723714 RSA 2013
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 31-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Assessee Lawyers: SURINDER KOHLI
• Keywords: Depreciation; Charitable institution; Bonafide belief; Question of law; Difference of opinion; Valuation report
• Section: 143(3); 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKN BENCH A : LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA , ACCOUNTANT MEMBER I.T.A. NO. 727 /LKW/201 3 ASSESSMENT YEAR :2006 - 2007 INCOME TAX OFFICER - 2(1), VS. BHARAT SEWA SANSTHAN, LUCKNOW. MOTI MAHAL,2 RANA PRATAP MAR G, LUCKNOW. PAN:AAATB0829L (APPELLANT) (RESPONDENT) C.O. NO.53/LKW/2013 (IN I.T.A. NO. 727 /LKW/201 3) ASSESSMENT YEAR :2006 - 2007 BHARAT SEWA SANSTHAN, VS. INCOME TAX OFFIC ER - 2(1), M OTI MAHAL,2 RANA PRATAP MAR G, LUCKNOW. LUCKNOW. (OBJECTOR) (RESPONDENT) REVENUE BY : SHRI ALOK MITRA, D.R. RESPONDENT BY : SHRI SURINDER KOHLI, ADVOCATE DATE OF HEARING : 28 / 11 /2013 DATE OF PRONOUNCEMENT : 18/12/2013 ORDER PER SUNIL KUMAR YADAV: TH IS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF CIT(A) , DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 2. THE FACTS, IN BRIEF, BORNE OUT FROM THE RECORD, ARE THAT THE ASSESSEE IS A CHARITABLE TRUST REGISTERED U/S 12A OF THE ACT. RETURN OF INCOME 2 SHOWING NIL INCOME WAS FILED AND ON EXAMINATION OF DETAILS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE TRUST HAS SHOWN UTILIZATION OF ACCUMULATED FUND OF RS.15,25,000/ - FOR EDUCATIONAL PURPOSES IN FINANCIAL YEAR 1996 - 97 , 1997 - 98 & 1998 - 99. OUT OF THE ACCUMULATED FUND , THE ASSESSEE TRUST HAS PAID RS.5 LACS TO SHIKSHA SAMITI, LUCKNOW WHICH IS ALSO REGISTERED U/S 12A AND RUNS BAKSHI KA TALAB INTER COLLEGE AND AN AMOUNT OF RS.10,25,000/ - WAS PAID BY CHEQUE TO CHANDRA BHANU GUPTA KRISHI MAHAVIDYALAYA, BAKSHI KA TALAB, LUCKNOW, WHICH IS ALSO RUN BY SHIKSHA SAMITI, LUCKNOW. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE PAYMENT OF INCOME SO ACCUMULATED SHOULD NOT BE TREATED AS CONTRAVENTION OF THE PROVISIONS OF SECTION 11(3)(D) AND EXPLANATION TO SECTION 11(2) OF THE ACT. 2.1 THE ASSESSEE SUBMITTED THAT THE SAID PROVISIONS HAVE BEEN INSERTED BY THE FINANC E ACT, 2002 W.E.F. 01/04/2003 AND CANNOT BE APPLIED RETROSPECTIVELY TO THE INCOME ACCUMULATED IN THE FINANCIAL YEARS 1996 - 97, 1997 - 98 & 1998 - 99. THE ASSESSEE FURTHER SUBMITTED THAT THE ABOVE AMOUNT HAS BEEN RIGHTLY APPLIED FOR CHARITABLE PURPOSES. THE AS SESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND MADE ADDITION OF RS.15,25,000/ - AND ACCORDINGLY ASSESSED THE INCOME U/S 143(3) OF THE ACT. PENALTY PROCEEDINGS U/S 271(1)(C) WERE ALSO INITIATED. THE ADDITIONS WERECONFIRMED BY THE CIT(A) A S WELL AS BY THE TRIBUNAL. CONSEQUENTLY, THE ASSESSING OFFICER LEVIED THE PENALTY OF RS.5 LACS HOLDING IT AS CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME AGAINST WHICH AN APPEAL WAS FILED BEFORE THE CIT(A) WITH T HE SUBMISSION THAT THE PENALTY ORDER HAS BEEN PASSED WITHOUT APPLICATION OF MIND AS THE ASSESSING OFFICER HAS FAILED TO SUBSTANTIATE THAT 3 THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME AS ENVISAGED UNDER THE RELEVA NT PROVISIONS OF LAW IN AS MUCH AS ALL THE RELEVANT DOCUMENTS WERE BROUGHT ON RECORD. HE FURTHER SUBMITTED THAT MEREDIFFERENCE OF OPINION DOESNOT TANTAMOUNT TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THE OBSERVATION OF THE ASSESS ING OFFICER IN PARA 7 OF THE PENALTY ORDER DOES NOT HOLD WATER WHICH CLEARLY INDICATES THAT THE ASSESSING OFFICER HAS UTTERLY FAILED TO ESTABLISH ANY DEFAULT AS CONTEMPLATED UNDER THE RELEVANT PROVISIONS OF LAW. THE CIT(A) RE - EXAMINED THE ISSUE IN THE LIG HT OF THE ASSESSEES CONTENTION AND VARIOUS JUDICIAL PRONOUNCEMENTS REFERRED TO BY THE ASSESSEE. HAVING CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, THE CIT(A) DELETED THE PENALTY. 3. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND PLACED RELIANC E UPON THE PENALTY ORDER. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS EMPHATICALLY ARGUED THAT THE ASSESSEE HAS MADE THE PAYMENT UNDER A BONAFIDE BELIEF THAT THE RELEVANT PROVISIONS WERE NOT APPLICABLE TO THE OLD ACCUMULATED FUND. S INCE THE ISSUE IS DEBATABLE AND THERE WAS DIFFERENCE OF OPINION, THE PENALTY SHOULD NOT BE LEVIED AS THE ASSESSEE HAS ACTED UNDER A BONAFIDE BELIEF. 5. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A PERUSAL OF THE ORDERS OF TH E AUTHORITIES BELOW, WE FIND THAT THERE WAS NO CONCEALMENT ON THE PART OF THE ASSESSEE. HE HAS FURNISHED ALL THE RELEVANT INFORMATION BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. MOREOVER, HE RAISED A CLAIM UNDER A BONAFIDE 4 BEL IEF THAT THE RELEVANT PROVISIONS, WHICH WERE CLAIMED TO BE VIOLATED, WERE INSERTED BY THE FINANCE ACT, 2002 AND CANNOT APPLY RETROSPECTIVELY TO THE INCOME ACCUMULATED IN THE EARLIER FINANCIAL YEAR. THOUGH THECLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE A PPELLATE AUTHORITY BUT FOR THE ABOVE REASONS, WE ARE OF THE VIEW THAT THE PENALTY IS NOT LEVIABLE AS THE ASSESSEE HAS RAISED A CLAIM UNDER A BONAFIDE BELIEF. THE CIT(A) HAS EXAMINED THE ISSUE IN DETAIL IN HIS ORDER AND FOR THE SAKE OF REFERENCE, WE EXTRAC T THE SAME AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENT CITED BY THE LD. AUTHORIZED REPRESENTATIVE DURING THE COURSE OF HEARING BEFORE US. I.T.A.T., INDORE BENCH IN THE CASE OF LATE MOHD. ANWAR KHAN VS. INCOME TAX OFFICER IN I.T.A.NO.343/IND/2011 HAVE HELD AS UNDER: - '3. WE ARE CONSISTENTLY TAKING THE VIEW THAT WHERE SUBSTANTIAL QUESTION OF LAW HAS BEEN ACCEPTED BY THE HON'BLE HIGH COURT , THE ISSUE BECOMES DEBATABLE, THEREFORE, NO PENALTY CAN BE IMPOSED FOR SUCH ADDITION. I.T.A.T. IN ITS ORDER PASSED IN I.T.A. NO. 329/LND/2 0 12 DATED 29TH ]ANUARY, 2013, IN THE CASE OF SURENDRA SINGH THAKUR VS. ITO, FOR THE ASSESSMENT YEAR 1996 - 97 HAS OBSE RVED AS UNDER - '8. IT IS CLEAR FROM THE ORDER OF THE HON'BLE HIGH COURT THAT THEY HAVE ACCEPTED SUBSTANTIAL QUESTION OF LAW WITH RESPECT TO THE ADDITION MADE ON ACCOUNT OF CASH CREDIT. IN TERMS OF DECISION OF AHMEDABAD BENCH IN THE CASE OF RUPAM MERCANTIL E, 91 ITD 1273, WHERE A PLEA FOR CLAIM WHICH IS HELD BY THE HIGH COURT COULD HAVE GIVEN RISE TO A SUBSTANTIAL QUESTION OF LAW, CANNOT BE TREATED TO BE FRIVOLOUS OR MALA FIDE SO AS TO ATTRACT LEVY OF PENALTY U/S 271( 1 )(C) OF THE INCOME - TAX ACT, 1961. SIMILA R VIEW WAS TAKEN BY 5 THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF NAYAN BUILDERS AND DEVELOPERS PRIVATE LIMITED, WHEREIN IT WAS HELD THAT WHEN HON'BLE HIGH COURT ADMITS SUBSTANTIAL QUESTION OF LAW ON AN ADDITION, IT BECOME APPARENT THAT ADDITION TS CERTAINL Y DEBATABLE AND UNDER SUCH CIRCUMSTANCES PENALTY CANNOT BE LEVIED U/S 271( 1 )(C) OF THE LNCOME - TAX ACT, 1961 . THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW LEADS CREDENCE TO THE BONA FIDES OF THE ASSESSEE. BY FOLLOWING THESE DECISIONS, SIMILAR VIEW HAS BEEN TAKEN BY THE I.T.A.T., INDORE BENCH IN THE CASE OF KUSUM OSWAT I T(SS).A. NO. 101/LND/2009 DATED 20TH APRIL, 2011. RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH AS NARRATED ABOVE, WE DO NOT FIND ANY SUBSTANCE IN ACTION OF ASSESSING OFFICER FOR LEVY OF PENALTY IN RESPECT OF ADDITION FOR WHICH SUBSTANTIAL QUESTION OF LAW HAS BEEN ACCEPTED BY THE HON'BLE HIGH COURT EVEN ON MERITS, THERE IS NO JUSTIFICATION FOR IMPOSITION OF PENALTY WHERE THE ASSESSEE HAS DISCHARGED THE BURDEN CASTED ON IT, NOTWITHSTANDING THE FACT OF CONFIRMATION OF SUCH ADDITION BY APPELLATE AUTHORITIES.' 9 . F URTHERMORE, HON'BLE DELHI HIGH COURT IN THE CASE OF C I T VS. LIQUID INVESTMENT LIMITED , I. T . A. NO.240/2009 VIDE ITS ORDE R DATED 05/10/2010 HAS CLEARLY HELD THAT WHERE HIGH COURT HAS ACCEPTED SUBSTANTIAL QUESTION OF LAW U/S 260A, THIS ITSELF SHOWS THA T I SSUE IS DEBATABLE. ACCORDINGLY, NO PENALTY WAS IMPOSABLE U/S 271( 1 )(C) OF THE INCOME - TAX ACT , 1961. HON'BLE SUPREME COURT IN THE CASE OF SANTOSH HOSIERY, CIVIL APPEAL NO. 1117 OF 2001 IN ITS ORDER DATED 3RD FEBRUARY, 2001, OBSERVED THAT 'TO BE SUBSTANTIAL, A QUESTION OF LAW MUST BE DEBATABLE . HON'BLE SUPREME COURT WHILE DECIDING AS TO WHAT IS SUBSTANTIAL QUESTION OF LAW HAS HELD THAT SAME MUST BE DEBATABLE. 10. IN THE INSTANT CASE, T HE APPEAL AGAINST QUANTUM ADDITIONS WAS ADMITTED BY HON'BLE M.P. HIGH CO URT VIDE ORDER DATED 6.9.2005, ON THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW: - 6 (I) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE TRIBUNAL WAS RIGHT IN LAW IN DIRECTING DEPRECIATION ON THE ESTIMATED VALUE OF RS. 18,00,000/ - AS AGAINST ACTUAL PURCHASE VALUE OF RS. 26,05 ,000/ - ON WHICH ASSESSEE TOOK OVER THE ASSET IGNORING BASIC VALUATION REPORT OF THE CHARTERED ENGINEER. (II) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE TRIBUNAL WAS RIGHT IN LAW IN DIRECTING THE OUTSTANDING LIABILITIES AGAINST PURCH ASES OF RS.8,34,690/ - AS INCOME AND THE ORDER OF THE TRIBUNAL IS PERVERSE IN LAW WHEN PURCHASES ARE ASSESSED AS GENUINE? (III) W HETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE TRIBUNAL WAS RIGHT IN DIRECTING THE OUTSTANDING LIABILITIES OF JOB WORKS OF RS . 3,49 0 ,395/ - AS INCOME IGNORING THE DETAILED FACTS CONSIDERED BY C I T(A) AND FACTS ON RECORDS AND THE ORDER OF THE TRIBUNAL IS PERVERSE AND BAD IN LAW? 11. I N VIEW OF THE ABOVE, RESPECTFULLY FALLOWING THE DECISION OF COORDINATE BENCH AS WELL AS PROPOSITIONS LAID DOWN BY HON'BLE HIGH COURT AND SUPREME COURT, AS NARRATED ABOVE, WE DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY IMPOSED U/S271( 1 )(C) WITH RESPECT TO THE ADDITIONS SO MADE BY ASSESSING OFFICER WHICH WERE DELETED BY CIT(A), AND FAR W HICH SUBSTANTIAL QUESTION OF LAW HAS BEEN ACCEPTED BY HON'BLE HIGH COURT. AGREEING WITH THE CONTENTIONS OF MR. SHAH, WE DO NOT FIND ANY MERIT IN THE ORDER OF ASSESSING OFFICER FAR LEVYING THE PENALTY U/S 271( 1 )(C) OF THE INCOME - TAX ACT, 1961. SINCE IN THE CASE OF THE APPELLANT SUBSTANTIAL QUESTIONS OF L AW HAVE BEEN ADMITTED BY THE HON'BLE HIGH COURT FOR ADJUDICATION, THE ISSUE INVOLVE D AND THE CLAIM MADE BY THE APPELLANT IN RESPECT OF WHICH ADDITION HAS BEEN MADE IS CERTAINLY DEBATABLE OR ARGUABLE AND NO PENALTY U/S271( 1 )(C) IS IMPO S ABLE IN RESPECT OF SUCH ADDITION. PENALTY OF RS.5,00,000/ - IMPOSED U/S 271( 1 )(C) FOR CO NCEAL M E NT OF INCOME IS, THEREFORE, CANCELLED . 7 5.1 IT HAS ALSO BEEN BROUGHT TO OUR NOTICE THAT ON THIS ISSUE, THE SUBSTANTIAL QUESTION OF L AW HAS BEEN ADMITTED BY HIGH COURT AND IN SUCH TYPE OF SITUATION WHERE CONTROVERSY ON ISSUE ON WHICH ADDITION WAS MADE IS ADMITTED BY HON'BLE HIGH COURT AS SUBSTANTIAL QUESTION OF LAW, PENALTY U/S 271(1)(C) CANNOT BE LEVIED AS THE ISSUE IS DEBATABLE ONE. WE , THEREFORE, FIND OURSELVES IN AGREEMENT WITH THE ORDER OF CIT(A). AS A RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 6. SINCE THE CROSS OBJECTION IS FILED IN SUPPORT OF THE ORDER OF CIT(A) AND THE ORDER OF CIT(A) IS CONFIRMED THE CROSS OBJECTION HAS BECOME INFRUCTUOUS AND ACCORDINGLY WE DISMISS THE SAME. 7. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 18/12/2013 ) SD/. SD/. (A. K. GARODIA) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18/12/2013 *CL SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR