MOTILAL NEHRU COLLEGE EVENING AND MORNING,NEW DELHI V. ITO,WARD-1(1) EXEMPTIONS , NEW DELHI

ITA 4310/DEL/2024

AI Insights

The case involves Motilal Nehru College, a government-funded educational institution, which faced a penalty for not filing income tax returns for the Assessment Year 2018-19. The college argued that it was unaware of the legal requirement to file returns following an amendment to the Income-tax Act in 2016, which mandated even exempt institutions to file returns. The Income Tax Officer (ITO) initiated penalty proceedings under section 272A(2)(e) for the delayed filing of returns, which was upheld by the National Faceless Appeal Centre (NFAC). The college appealed to the Income Tax Appellate Tribunal, which found in favor of the college, citing substantial compliance and no intent to evade tax, leading to the penalty being set aside.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470152 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Other Referred Cases: Motilal Padampat Sugar Mills Co P Ltd vs State of UP
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR
• Assessee Lawyers: TAPAS RAM MISHRA
• Keywords: Ignorance of law

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No. 4310/Del/2024 (Assessment Year: 2018-19) Motilal Nehru College, Evening and Morning, Benito Juarez Marg, New Delhi-110021 Vs. ITO, Ward-1(1), (Exemptions), New Delhi PAN: AABTM2895E Assessee by : Shri Tapas Ram Mishra, Adv Revenue by: Shri Sanjay Kumar, Sr.DR Date of Hearing 11/02/2025 Date of pronouncement 05/03/2025 O R D E R 1. The appeal in ITA No.4310/Del/2024 for AY 2018-19 arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2024- 25/1065319934(1) dated 31.05.2024 against the order of assessment passed u/s 272A(2)(e) of the Income-tax Act, 1961 dated 25.09.2023 (hereinafter referred to as ‘the Act’) by ITO, Assessment Unit, Income Tax Department, (hereinafter referred to as ‘ld. AO’). 2. At the outset, I find that there is a delay in filing of appeal by the assessee before me by 51 days. Considering the reasons adduced in the condonation petition supported with an affidavit thereon, I am inclined to condone the delay in the interest of substantial justice and admit the appeal of the assessee for adjudication. 3. The only issue to be decided in this appeal is as to whether the learned NFAC was justified in confirming the levy of penalty under section 272A(2)(e) of the Act in the facts and circumstances of the instant case. ITA No. 4310/Del/2024 Motilal Nehru College Page | 2 4. I have heard the rival submissions and perused the materials available on record. The assessee is a Government College and the entire expenditure is funded by the Government. The gross receipts of the assessee are less than Rs 1 crore. The assessee is entitled for automatic exemption under section 10(23C)(iiiab) of the Act. Since the entire income is exempt from tax, there was no obligation for the assessee to file its income tax returns as per the old law. An amendment was introduced in the statute with effect from 01-04-2016 in section 139(4C) by adding clause (iiiab) thereon. Pursuant to this amendment, it was mandated that even if an educational institution enjoying exemption under section 10(23C)(iiiab) of the Act was bound to file its income tax returns and claim exemption thereon. This amendment had admittedly escaped the attention of the assessee. Since no return of income was filed by the assessee, a notice under section 148A of the Act stood issued for the Assessment Year 2018-19 and ultimately, the reassessment was completed at Nil income after allowing exemption under section 10(23C)(iiiab) of the Act to the assessee. However, penalty proceedings under section 272A(2)(e) of the Act were initiated for delayed filing of income tax return by the assessee. Ultimately, penalty was levied under section 272A(2)(e) of the Act in the sum of Rs 2,83,000/- by the Learned AO, which stood upheld by the Learned NFAC. Aggrieved, the assessee is in appeal before me. 5. It is not in dispute that assessee is entitled for exemption under section 10(23C)(iiiab) of the Act and accordingly not obliged to file any income tax returns prior to the amendment effected from 1-4-2016. Even though the amendment in section 139(4C)(iiiab) of the Act is applicable for the year under consideration, it cannot be denied that assessee had pleaded ignorance of the amended provisions and was under the bona fide belief that since there was no obligation to file income tax returns in the past, it continued to maintain the status quo of not filing the income tax return for the year under consideration also. However, in response to notice issued under section 148A of the Act, the ITA No. 4310/Del/2024 Motilal Nehru College Page | 3 assessee had attained the knowledge of the amended provisions of the Act and had filed its return and ultimately the reassessment was also completed granting full exemption under section 10(23C)(iiiab) of the Act and by determining the total income at Rs Nil. Hence, substantial compliance has been made by the assessee. It is only out of sheer ignorance of the amended provisions, this penalty stood levied on the assessee. Even though the famous legal maxim that ‘Ignorantia Juris Non Excusat’, meaning - that ‘ignorance of law is of no excuse’ would be applicable here and would go against the assessee, still the Hon’ble Supreme Court in the case of Motilal Padampat Sugar Mills Co P Ltd vs State of UP reported in 118 ITR 326 (SC) had held that every person cannot be expected to know the law and such a proposition is never known to law. In this regard, the relevant observations of the Hon’ble Supreme Court are reproduced hereunder:- “6. ……………………………….Morever, it must be remembered that there is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that is not a correct statement : there is no such maxim known to the law. Over a hundred and thirty years ago, Maule, J., pointed out in Martindale v. Falkner, (1846) 2 CB 706: \"There is no presumption in this country that every person knows the law : it would be contrary to common sense and reason if it were so\". Scrutton, LJ„ also once said : \"It is impossible to know all the statutory law, and not very possible to know all the common law\". But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans v. Bartlam, 1937 AC 473\"...the fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse a maxim of very different scope and application.\" It is, therefore, not possible to presume, in the absence of any material placed before the Court, that the appellant had full knowledge of its right to exemption so as to warrant an inference that the appellant waived such right by addressing the letter dated 25th June, 1970. We accordingly reject the plea of waiver raised on behalf of the State Government. 6. This decision would come as a rescue to the assessee to get rid of the legal maxim stated here in above. Since substantial compliance has been made by the assessee and there was no loss to the exchequer in the instant case as ITA No. 4310/Del/2024 Motilal Nehru College Page | 4 ultimately the income of the assessee is exempt under section 10(23C)(iiiab) of the Act, I hold that this is not a fit case for levy of penalty under section 272A(2)(e) of the Act as it is only a mere technical venial breach committed by the assessee with no loss to the exchequer. Accordingly, the grounds raised by the assessee are allowed. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 05/03/2025. -Sd/- (M. BALAGANESH) ACCOUNTANT MEMBER Dated: 05/03/2025 A K Keot opy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "