2019 (5) TMI 1316 - AT - Income Tax

Penalty u/s. 271(1)(c) - denial of exemption under s.11 12 - difference of opinion regarding applicability of proviso to section 2(15) r.w.s. 13(8) of the Act in respect of such cricket bodies and consequently the action of the assessee is to be regarded as bonafide - whether penalty action can be taken against the assessee while fastening liability to tax as a result of any retrospective amendment in law especially when the assessee could not foresee such law at the time of filing of return of income? - HELD THAT - Coordinate Bench in a detailed and voluminous order in Gujarat Cricket Association 2019 (1) TMI 1522 - ITAT AHMEDABAD after taking note of several judicial decisions holding the field in this regard came to the conclusion that proviso to section 2(15) has been wrongly invoked against such cricket bodies. Thus, where the issue towards applicability of proviso to section 2(15) which seeks to restrict and exclude the exemption under s.11 12 itself has been approved in favour of assessee, one cannot say that the issue is free from doubt, to say the least. A question arises as to whether an assessee can be imputed with clairvoyance where some amendment has been brought with retrospective effect whereby tax liability is sought to be imposed on assessee. In the instant case, section 13(8) of the Act has been enacted by Finance Act, 2012 with retrospective effect from 01/04/2009. As per aforesaid enactment, benefit of section 11 12 will not be available to the assessee where such assessee is in receipt of income which falls under proviso to clause (15) of section 2 of the Act. Admittedly, the aforesaid amendment seeking to deny benefit of s.11 to the assessee was not in existence at the time of filing of return of income. The action of the AO fails on both counts, namely; (i) the penalty is rightly held to be not applicable where the issue involved is so complex and debatable and the assessee had adopted a view which is quite plausible and endorsed favourably by judicial precedents at many instances. (ii) The income arising on retrospective applicability of section 13(8) inserted by Finance Act, 2012 i.e. at a time when the returns for all the assessment years in question were already filed by assessee cannot attract penalty by any stretch of imagination. We thus, find no infirmity in the action of the CIT(A) in deleting the penalty in all the three appeals of the Revenue.

Summary

Issues Involved:
1. Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Denial of exemption under sections 11 and 12 of the Income Tax Act to the income generated by the assessee from promoting cricket and hosting cricket tournaments.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The primary issue revolves around whether the penalty imposed by the Assessing Officer (A.O.) under section 271(1)(c) for furnishing inaccurate particulars of income and making a wrongful claim of exemption under sections 11 and 12 is justified.

- Facts and Background: The assessee, an AOP (Trust) engaged in promoting cricket, filed its returns declaring negative income but was assessed with a positive income by the A.O., who alleged that the assessee furnished inaccurate particulars and wrongly claimed exemptions under sections 11 and 12.
- A.O.'s Position: The A.O. imposed a penalty of ?1,75,30,355/- for the wrongful claim of exemptions, arguing that the income from activities in the nature of trade, commerce, or business is excluded from exemptions under sections 11 and 12 as per section 13(8) and the proviso to section 2(15).
- CIT(A)'s Decision: The CIT(A) deleted the penalty, highlighting that the issue was debatable and that the assessee's actions were bona fide. It was noted that the amendments leading to the denial of exemptions were introduced with retrospective effect, which the assessee could not have anticipated at the time of filing returns.
- Tribunal's Analysis: The Tribunal upheld the CIT(A)'s decision, emphasizing that the issue of applicability of the proviso to section 2(15) was complex and debatable. It was also noted that penal provisions should not apply to claims made in good faith based on the law as understood at the time of filing returns.

2. Denial of Exemption under Sections 11 and 12:
The second issue concerns whether the denial of exemption under sections 11 and 12 to the income generated by the assessee from promoting cricket was correct.

- A.O.'s Position: The A.O. denied the exemptions, arguing that the income was from activities in the nature of trade, commerce, or business, which are excluded from exemptions under sections 11 and 12 as per section 13(8) and the proviso to section 2(15).
- CIT(A)'s Decision: The CIT(A) allowed the appeal of the assessee, stating that there was a difference of opinion regarding the applicability of the proviso to section 2(15) and that the assessee's actions were bona fide. The CIT(A) observed that the assessee had disclosed all facts and was registered under section 12A, which justified the claim for exemptions.
- Tribunal's Analysis: The Tribunal concurred with the CIT(A), noting that the issue was highly complex and debatable. The Tribunal referenced a detailed order in a similar case (Gujarat Cricket Association vs. JCIT) where it was concluded that the proviso to section 2(15) was wrongly invoked against cricket bodies. The Tribunal also highlighted that penal action based on retrospective amendments is unjustified, as the assessee could not foresee such changes at the time of filing returns.

Conclusion:
The Tribunal dismissed the appeals of the Revenue, upholding the CIT(A)'s decision to delete the penalties imposed under section 271(1)(c). It was concluded that the issue of exemptions under sections 11 and 12 was complex and debatable, and the assessee's claims were made in good faith based on the law as it existed at the time of filing returns. The retrospective amendments could not justify the imposition of penalties.