SHRI BHOGILAL CHOTALAL KOTHARI TATHA KUSUMBEN PALANPUR CHARITABLE TRUST,SURAT V. .ITO(EXEMPTION) WARD, SURAT

ITA 422/SRT/2024

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The case involves Bhogilal Chotalal Kothari Tatha Kusumben Palanpur Charitable Trust appealing against the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income-tax Act, 1961, for furnishing inaccurate particulars of income. The penalty was related to a disallowance of a corpus donation of Rs. 17,00,000, which was claimed as exempt under section 11(1)(d) of the Act. The AO had denied the exemption on the grounds that the trust was not registered under section 12AA at the relevant time. The Commissioner of Income Tax (Appeals) partly upheld the penalty, which led to the trust's appeal to the Tribunal. The Tribunal, referencing the Supreme Court's decision, deemed the application for registration as having been allowed, thus invalidating the grounds for the penalty.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473293 (ITAT-SURAT)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 12-04-2024
• Other Referred Cases: CIT vs. Society for Promotion of Education, Allahabad, Shree Bhanushali Mitra Mandal Trust vs. ITO, CIT vs. Mayur Foundation
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVISH BHATT
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Charitable institution
• Section: 143(3); 250; 271(1)(c); 11; 12AA; 12A; 13; 274; 12; 80G; 11A; 20

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.422/SRT/2024 Assessment Year: (2013-14) (Physical Hearing) Bhogilal Chotalal Kothari Tatha Kusumben Palanpur Charitable Trust, 402, 5th Floor, Shivanjali Apartment, Parle Point, Surat - 395007 Vs. The ITO, ITO (Exemption Ward), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: AAJTS5837N (Appellant) (Respondent) Appellant by Shri Sapnesh Sheth, CA Respondent by Shri Ravish Bhatt, Sr. DR Date of Hearing 12/11/2024 Date of Pronouncement 09/12/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 15.02.2024 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2013-14. 2. The grounds of appeal raised by the assessee are as under: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals), NFAC has erred in partly confirming the action of assessing officer in imposing penalty u/s 271(1)(c) of the I.T. Act, 1961 by sustaining penalty on the disallowance of Rs.17,00,000/- made u/s 11(1)(d) of the I.T. Act, 1961. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals), NFAC 2 ITA No.422/SRT/2024/AY.2013-14 Bhogilal Chotalal Kothari T. K. P. Charitable Trust has erred in confirming the action of learned assessing officer in imposing penalty without levelling specific charge in the notice as to whether assessee has concealed particulars of income or furnished inaccurate particulars of income as in the show cause notice, the AO has not stuck off the words “and/or”. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. Brief facts of the case are that assessee filed its return of income for AY.2013-14 on 31.03.2015, declaring total income of Rs. Nil. The assessment proceedings were finalized u/s 143(3) of the Act on 03.03.2016 after making disallowance of exemption Rs.17,00,000/- claimed u/s 11 of the Act, disallowance of various expenses of Rs.18,37,542/- and addition of interest on income-tax refund of Rs.525/-. The Assessing Officer (in short, ‘AO’) observed that assessee is not registered u/s 12AA of the Act and hence is not entitled to benefit u/s 11, 12 and 13 of the Act. Thereafter, penalty proceedings u/s 271(1)(c) were initiated by AO on the above additions vide notice dated 03.03.2016 and issued show cause notice dated 16.02.2018. The AO asked the assessee as to why the penalty should not be imposed on above additions. The assessee filed its reply dated 28.02.2018 and stated that assessee had duly applied for registration u/s 12AA on 06.10.2010 but the CIT has not yet granted or refused it. The assessee trust received corpus donation of Rs.17,00,000/- along with documentary evidence, PAN, bank statement and notarized will of Kusumben Kothari. The assessee trust also submitted copy of ledger account, bills and vouchers in respect of expense claimed. However, the 3 ITA No.422/SRT/2024/AY.2013-14 Bhogilal Chotalal Kothari T. K. P. Charitable Trust AO levied penalty of Rs.9,95,414/- u/s 271(1)(c) of the Act on account of furnishing inaccurate of particulars of income. 4. Aggrieved by the order of AO, the assessee filed this appeal before CIT(A). The CIT(A) discussed the findings of AO on denial of corpus donation of Rs.17,00,000/-, disallowance of educational relief expenses of Rs.18,37,542/- and interest on income tax refund of Rs.525/- and the same is extracted from page 3 to 10 of the appellate order. The CIT(A) also reproduced the statement of facts, filed by the assessee along with Form No.35, which is at page no.12 of his order. The CIT(A) observed that the AO had discussed the facts of the case and had levied the penalty of Rs.9,95,414/-. He deleted penalty on disallowance of expenses and interest income. Accordingly, the claim of corpus donation had not been allowed for non-submission of Registration Certificate u/s 12AA of the Act. The assessee trust had actually applied for registration u/s 12AA on 06.10.2010 but no communication has been received from Commissioner. However, the CIT(A) directed the AO to recompute the levy of penalty on the addition of Rs.17,00,000/- only as the penalty levied on the said addition had been sustained and appeal of the assessee was allowed partly. 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee submitted that the CIT(A) has partly allowed appeal of the assessee and upheld the penalty on donation on corpus fund of 4 ITA No.422/SRT/2024/AY.2013-14 Bhogilal Chotalal Kothari T. K. P. Charitable Trust Rs.17,00,000/-. The ld. AR submitted that assessee had filed application before the CIT(A)-1, Surat on 06.10.2010, which is pending even now. The application is at page 8 of the paper book and copy of Form No.10A is at page 20 of the paper book. It is seen from the copy that the said application u/s 80G(5) along with Form No.10A are dated 07.08.2010 and the application was filed on 06.10.2010. It is a combined application for registration u/s 12AA and 80G of the Act. Since approval was not received within 6 months, i.e., 30.04.2010, it is deemed to have been allowed as per decision of the Hon’ble Supreme Court in case of CIT vs. Society for Promotion of Education, Allahabad, 382 ITR 6 (SC). The ld. AR further submitted that the CIT(A) given giving approval for later year 2016-17 vide letter dated 27.12.2016 which is at page 6 of the paper book. The ld. AR also submitted that the quantum appeal is still pending but even if the quantum is sustained, penalty is not liable to be sustained because the AO has not stuck off the relevant limb of the penalty notice in terms of the decision of Hon’ble Bombay High Court in case of CIT vs. Samson Perinchery, 434 ITR 1 (Bombay). He, therefore, requested to delete the penalty. 6. On the other hand, learned Senior Departmental Representative (ld. Sr. DR) of the revenue supported the order of lower authorities. He has referred to para 4.4 of the appellate order where the CIT(A) has given the decision. The CIT(A) has observed that AO is not empowered to decide the fait accompli of the application filed before CIT(A) for registration u/s 12A 5 ITA No.422/SRT/2024/AY.2013-14 Bhogilal Chotalal Kothari T. K. P. Charitable Trust of the Act. Unless such registration is granted, benefit of section 11A could not be given. The AO has no authority to question as to how and why registration has not been granted to the trust by the CIT. Hence, the CIT(A) upheld the denial of claim of corpus donation of Rs.17,00,000/-. Since there was no registration u/s 12AA of the Act, the case of the appellant had gone out of the ambit of section 11 to 13 of the Act. Therefore, CIT(A) has rightly levied penalty because assessee had furnished inaccurate particulars of income u/s 271(1)(c) of the Act. He, therefore, requested to uphold the penalty levied by AO and confirmed by CIT(A). 7. We have heard both the parties and perused the materials available on record. We have also carefully gone through the decisions relied upon by the ld. AR. The AO has levied penalty on addition of Rs.35,38,067/-. This includes disallowance of corpus donation of Rs.17,00,000/- u/s 11(1)(d) and disallowance of expenses and interest of Rs.18,38,067/-. The CIT(A) has deleted penalty on the expenses of Rs.18,38,067/- and confirmed the penalty on addition of Rs.17,00,000/-. The reasons for sustaining penalty is because there was no registration u/s 12AA of the Act. Hence, the corpus donation of Rs.17,00,000/- claimed as exempt u/s 11(1)(d) was not in order and amounted to furnishing of inaccurate particulars of income. The ld. AR has relied on the decision of Hon’ble Supreme Court in case of Society for Promotion of Education, Allahabad (supra) and decision of ITAT, Ahmedabad in case of Shree Bhanushali Mitra Mandal Trust vs. ITO, 68 taxmann.com 250 (Ahd – Trib) and CIT vs. Mayur Foundation, 274 ITR 6 ITA No.422/SRT/2024/AY.2013-14 Bhogilal Chotalal Kothari T. K. P. Charitable Trust 562 (Gujarat). The Hon’ble Supreme Court in case of Society for Promotion of Education, Allahabad (supra) has held that where assessee-society filed an application u/s 12A for grant of registration and the same was not responded to within stipulated period of 6 months, application for registration was to be deemed to have been allowed. In this case, the assessee has made the application for registration before CIT-1, Surat on 06.10.2010; therefore, expiry of the period of 6 months was on 30.04.2011. The CIT-1, Surat has not granted or refused registration by the said date and it is still pending. Therefore, in view of the decision of Hon’ble Supreme Court in case of Society for Promotion of Education, Allahabad (supra), the application for registration is deemed to have been allowed. Once it is allowed, the disallowance of corpus donation and consequent levy of penalty is not liable to sustained. Further, the Co- ordinate Bench in case of Shree Bhanushali Mitra Mandal Trust (supra), has held that exemption u/s 11 could not be denied to a trust if it got registration during pendency of appeal. The ld. AR has filed copy of Certificate of Registration u/s 12AA by the CIT(E), Ahmedabad, dated 27.12.2016 for FY.2016-17 for which application in Form 10A was filed on 01.08.2016. It is mentioned therein that the trust has been registered with the Charity Commissioner/Registrar of Society on 29.07.2010. Therefore, exemption u/s 11 could not be denied if the trust got registration during pendency of appeal. In view of the above decisions, the order of CIT(A) is 7 ITA No.422/SRT/2024/AY.2013-14 Bhogilal Chotalal Kothari T. K. P. Charitable Trust quashed and AO is directed to delete the penalty levied u/s 271(1)(c) of the Act. Accordingly, the ground is allowed. 8. Ground No.2 pertains to confirming penalty which was imposed without levelling specific charge in the notice as to whether assessee has concealed particulars of income or furnished inaccurate particulars of income in the show cause notice. Since we have deleted the penalty, this issue becomes academic in nature and does not require adjudication. 9. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 09/12/2024. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 09/12/2024 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat "