2019 (5) TMI 1201 - HC - Income Tax

Exemption u/s 11 - assessee had been granted registration under Section 12AA - HELD THAT - Since the assessee had been granted registration under Section 12AA of the Act, therefore, its income had to be computed by giving benefit of Sections 11 and 12 of the Act. The assessee had fulfilled the conditions as provided in Sections 11 and 12 of the Act. See M.R. EDUCATION SOCIETY, 2013 (4) TMI 926 - ITAT DELHI Cancellation of registration u/s 12AA - HELD THAT - There was nothing on record on the basis of which the registration could be continued to be denied to the assessee-trust as the impugned additions made stood deleted. Reference has been drawn to order dated 30.11.2008 of CIT, Central Ludhiana had afterwards considered the activities of the trust as genuine and the objectives as charitable while granting the registration w.e.f. A.Y. 2008-09. A copy of the said order is placed on record, from which it is evident that the date of order of the CIT(C) Ludhiana granting the registration is dated 12.6.2008, and not 30.11.2008 as mentioned in the order of the Hon'ble ITAT. Therefore, respectfully following the decision of the Hon'ble ITAT, the appeal of the assessee allowed Penalty u/s 271(1)(c) - HELD THAT - What an assessee has to pay by way of penalty is an amount equivalent to the tax sought to be evaded or 3 times of the tax sought to be evaded. Once additions are deleted, then there is no amount on which assessee can be said to have evaded the tax and, therefore, there cannot be any penalty. Ld. CIT(A) has observed that additions are deleted, the penalty cannot prevail. We do not find any reason to interfere in the order of Ld. CIT (A). - Decided in favour of the assessee

Summary

Issues:
1. Exemption under Section 11 of the Income Tax Act disallowed by AO
2. Quantum addition made for the assessment year 2006-07
3. Imposition of penalty under Section 271(1)(c) for the assessment year 2007-08

Analysis:

Issue 1: Exemption under Section 11 of the Income Tax Act disallowed by AO
The High Court heard a bunch of appeals involving similar issues. In ITA-291-2014, the revenue appealed against the ITAT order allowing exemption under Section 11 of the Act, which was disallowed by the AO due to non-application of 85% of additional income to charitable or religious purposes. The CIT(A) had deleted certain additions, which the Tribunal affirmed. The Tribunal held that since the assessee had registration under Section 12AA, its income should be computed considering Sections 11 and 12 of the Act. The Tribunal found that the conditions of Sections 11 and 12 were met by the assessee, and the income was determined as nil in regular assessment. The High Court upheld the Tribunal's decision, dismissing the revenue's appeal.

Issue 2: Quantum addition made for the assessment year 2006-07
In ITA-411-2014, the Tribunal upheld the CIT(A) order by deleting a quantum addition of ?1,78,01,645. The registration of the assessee was initially cancelled but later restored, and the Tribunal found no basis to deny registration to the assessee. The Tribunal referred to the CIT's order granting registration and allowed the appeal. The High Court affirmed the Tribunal's decision, emphasizing that once additions were deleted, there was no tax evasion, and therefore, no penalty could be imposed. The High Court dismissed the revenue's appeal in this regard.

Issue 3: Imposition of penalty under Section 271(1)(c) for the assessment year 2007-08
ITA-429-2014 dealt with the imposition of penalty under Section 271(1)(c) for the assessment year 2007-08. The Tribunal affirmed the CIT(A)'s decision to delete the penalty, stating that once the quantum addition was deleted, there was no tax evasion on which penalty could be based. The High Court concurred with the Tribunal's reasoning and dismissed the revenue's appeal, finding no grounds for interference.

In conclusion, the High Court upheld the Tribunal's decisions in all three appeals, ruling in favor of the assessee and dismissing the revenue's appeals.