2018 (8) TMI 1832 - AT - Income Tax

Penalty u/s 271(1)(c) - benefit of section 11 denied - charitable activity or not u/s 2(15)? - HELD THAT - Factual position of the present case upto the stage of Hon ble Gujarat High Court 2017 (7) TMI 811 - GUJARAT HIGH COURT has not been disputed by the Revenue wherein assessee-corporation held to be a charitable institution and entitled for benefits under section 11 and 12, consequently addition on which impugned penalty was imposed stands eliminated. We find that subclause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. It contemplates that the assessee would be directed to pay a sum in addition to taxes, if any, payable by him, which shall not be less than the addition but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment of income or furnishing of inaccurate particulars of income. In other words, the quantification of the penalty is depended upon the addition made to the income of the assessee. In the instant case addition stands deleted by order of the Hon ble Gujarat High Court cited supra, therefore ld.CIT(A) has rightly deleted the penalty under section 271(1)(c) - Decided against revenue.

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The Revenue appealed before the Tribunal against the order of the ld.CIT(A) for the assessment year 2010-11, specifically challenging the deletion of a penalty amounting to &8377; 199,58,53,200 imposed under section 271(1)(c) of the Income Tax Act. The assessee, a corporation established under the Gujarat Industrial Development Act, 1962, was recognized as a charitable institution and granted registration under section 12A of the Income Tax Act. The ld.AO, however, denied exemption under sections 11 and 12 of the Act, resulting in an increased income for the assessee, which led to the imposition of the penalty. The Tribunal, after considering the contentions, held that the assessee was indeed a charitable institution entitled to benefits under sections 11 and 12, a decision upheld by the Hon'ble High Court. Consequently, the additions made to the income of the assessee, on which the penalty was based, were eliminated by the High Court's order.

The Tribunal noted that the quantification of penalty under subclause (iii) of section 271(1)(c) is dependent on the addition made to the income of the assessee. As the addition was deleted by the High Court, the ld.CIT(A) was justified in canceling the penalty under section 271(1)(c). The Tribunal, after considering the submissions and the factual position of the case, affirmed the decision of the ld.CIT(A) in canceling the penalty and dismissed the appeal of the Revenue.

In conclusion, the Tribunal upheld the order of the ld.CIT(A) in canceling the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, as the additions to the income of the assessee were deleted by the Hon'ble High Court, confirming the charitable status of the institution and its entitlement to benefits under sections 11 and 12.