2016 (3) TMI 1219 - AT - Income Tax

Levy of penalty under section 271(1)(c) - assessee wrongly claimed exemption under section 11 - Held that - Merely because the claim of the assessee for deduction under section 11 of the Act was not accepted, may not be a ground for levy of penalty. Further, the assessee wrongly claimed exemption under section 11 on the basis of a legal advice and details furnished on record. Therefore, the assessee would not have any intention to conceal particulars of income from the Revenue Department. The assessee disclosed complete facts in the return of income as well as in the computation of income for receipt of the donations and incurring expenditure. The authorities below after granting deduction of the expenses claimed, made the small addition against the assessee considering the donations and corpus donations to be income under section 2(24). The assessee, therefore, disclosed complete facts before the authorities below and, therefore, could not be said to have concealed particulars of income. The small income was assessed against the assessee because no registration was granted under section 12A of the Act. Assessing Officer should have followed the rule of consistency and on the same set of facts should not levy penalty against the assessee in assessment years under appeals. It is well settled law that the Income Tax Authorities shall have to maintain the rule of consistency. The explanation of the assessee was bonafide that since it is a registered trust and applied for registration of trust before the Commissioner of Income Tax, Patiala, therefore, the assessee on legal advice has made the claim of exemption of income under section 11 of the Act, therefore, no penalty is leviable against the assessee. - Decided in favour of assessee.

Summary

Issues:
Appeals challenging penalty under section 271(1)(c) of the Income Tax Act, 1961 due to lack of registration under section 12AA for assessment years 2006-07 to 2008-09.

Analysis:
The judgment dealt with appeals against penalties imposed under section 271(1)(c) of the Income Tax Act, 1961 for assessment years 2006-07 to 2008-09 due to the absence of registration under section 12AA. The Assessing Officer noted that the assessee, a trust/AOP, had claimed exemption under section 11 but lacked registration under section 12AA. The penalties were imposed based on the donations received by the assessee. The assessee argued that returns were filed under the belief of being a registered trust and provided evidence of applying for registration under section 12A. Despite no formal registration under section 12AA, the assessee maintained a bonafide belief in its registration status. The assessee contended that all income details were disclosed, and penalties were unwarranted.

The assessee cited legal precedents to support its case, emphasizing that mere claim of deduction not accepted by the Revenue does not warrant penalty. The authorities were reminded of the assessee's disclosure of complete facts and the absence of mala fide intent. The assessee's consistent disclosure of facts across different assessment years was highlighted to argue against the penalties. The judgment noted the principle of maintaining consistency in tax assessments and cited relevant case laws to support the assessee's position.

After considering the arguments, the tribunal found no justification to uphold the penalties. It emphasized the bonafide nature of the assessee's actions and the absence of intent to conceal income. Relying on previous decisions and the rule of consistency, the tribunal set aside the penalties imposed by the lower authorities for all the assessment years in question. Consequently, all appeals by the assessee were allowed, and the penalties were canceled.

In conclusion, the judgment addressed the issue of penalties under section 271(1)(c) of the Income Tax Act due to lack of registration under section 12AA. It highlighted the importance of bonafide beliefs, complete disclosure of facts, and the principle of consistency in tax assessments to determine the validity of penalties.