2019 (6) TMI 933 - HC - Income Tax

Penalty u/s 271(1)(c) - non grant exemption u/s 11 and 12 - pendency of SLP against order of quantum deletion - HELD THAT - In view of the decision of this Court in the case of C.I.T. vs. G.I.D.C. 2017 (7) TMI 811 - GUJARAT HIGH COURT the assessee would be entitled for benefit under Sections 11 and 12 of the Act. As Revenue submitted that the decision in the case of Commissioner of Income Tax vs. G.I.D.C. on which the Appellate Tribunal has placed reliance is a subject matter of challenge before the Supreme Court. Pendency of the S.L.P. before the Supreme Court by itself would not be the reason to admit this appeal. Since the quantum addition has been deleted by this Court in the case of C.I.T. vs. G.I.D.C, the penalty being consequential would not survive. We see no good reason to admit this appeal. The Tribunal cannot be said to have committed any error in passing the impugned order. - Decided against revenue

Summary

Issues:
1. Appeal against penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Interpretation of the term "charitable purpose" under Section 2(15) of the Act.
3. Entitlement to benefits under Sections 11 and 12 of the Act.
4. Impact of High Court's decision on penalty imposition.

Analysis:

1. The Tax Appeal was filed by the Revenue against the Tribunal's order imposing a penalty under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2010-11. The substantial question of law raised was whether the Tribunal erred in holding that the penalty does not survive due to the decision of the Hon'ble High Court in a related matter not attaining finality.

2. The case involved the Gujarat Industrial Development Corporation, which filed its income tax return showing a deficit. The Assessing Officer determined the total income of the assessee and initiated penalty proceedings under Section 271(1)(c) of the Act. The issue revolved around the interpretation of the term "charitable purpose" under Section 2(15) of the Act and the eligibility of the assessee for benefits under Sections 11 and 12.

3. The Tribunal, based on previous High Court decisions, held that the assessee was a charitable institution entitled to benefits under Sections 11 and 12. The Tribunal's decision was supported by the High Court's ruling, leading to the deletion of additions made by the Assessing Officer and subsequently canceling the penalty under Section 271(1)(c).

4. The Revenue argued that the High Court's decision was under challenge before the Supreme Court, but the Court noted that since the quantum addition had been deleted by the High Court, the penalty would not survive. The Court upheld the Tribunal's decision, stating that there was no error in passing the impugned order, and dismissed the appeal.

In conclusion, the judgment clarified the interpretation of "charitable purpose," affirmed the entitlement to benefits under Sections 11 and 12, and emphasized the impact of the High Court's decision on the imposition of penalties under the Income Tax Act, ultimately leading to the dismissal of the appeal by the Revenue.