2022 (5) TMI 1092 - AT - Income Tax

Penalty u/s 271(1)(c) - accrual of income for assessee society - Contribution towards Kalyan Fund, Road Development Fund, Land Development Fund and Charitable Trust Fund - assessee society does not pay full amount to its members but deducts certain amount towards various funds i.e. welfare fund and Hospital fund etc.and these amounts were in the nature of trading receipts and therefore liable to tax and ought to have been shown as income of the assessee - HELD THAT - It is abundantly clear from the judgment of the Hon ble Supreme in the case of Siddheshwar Sahakari Sakhar Karkhana Ltd 2004 (9) TMI 6 - SUPREME COURT that if it is found that certain amounts were deducted by assessee society out of price payable to its members who supplied raw material, conclusion does not necessarily follow that all such realizations get impressed with character of revenue receipts, giving rise to taxable income in the hands of the assessee. Therefore,Contribution towards Kalyan Fund, Road Development Fund, Land Development Fund and Charitable Trust Fund are non-refundable and refundable deposits hence cannot be treated as the income of the Assessee- Societies. In assessee s appeal assessing officer treated contribution towards welfare Fund and Hospital Fund as income of the assessee and added to the total income of the assessee and then initiated penalty proceedings under section 271(1) (c ) of the Act. We note that these are non-refundable and refundable deposits hence cannot be treated as the income of the Assessee-Societies. Therefore, in both the assessee case there is neither the case of furnishing inaccurate particulars of income nor concealment of income, hence penalty under section 271(1) (c) of the Act should not be levied. - we delete the penalty of both the assessee - Decided in favour of assessee.

Issues Involved:
1. Condonation of delay in filing appeals.
2. Whether the contributions towards various funds by the assessee are to be treated as income.
3. Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income and concealment of income.

Detailed Analysis:

1. Condonation of Delay in Filing Appeals:
The appeals filed by the assessees for the Assessment Year 2008-09 were barred by limitation by 2 days and 5 days respectively. The assessees moved petitions requesting the Bench to condone the delay. After hearing both parties and considering the reasons provided in the petitions, the delay was condoned, and the appeals were admitted for hearing.

2. Treatment of Contributions Towards Various Funds as Income:
The assessee, a co-operative society engaged in the business of manufacturing sugar and its by-products, deducted certain amounts from payments to its members towards various funds such as the Kalyan Fund, Road Development Fund, Land Development Fund, and Charitable Trust Fund. The Assessing Officer treated these amounts as trading receipts and added them to the total income of the assessee, subsequently imposing penalties for furnishing inaccurate particulars of income and concealment of income.

The Tribunal found merit in the submissions of the assessee, noting that the issue was covered by the judgment of the Hon'ble Supreme Court in the case of Siddheshwar Sahakari Sakhar Karkhana Ltd. The Supreme Court had held that if certain amounts were deducted by the assessee society out of the price payable to its members, it does not necessarily mean that all such realizations are revenue receipts, giving rise to taxable income. Therefore, contributions towards the Kalyan Fund, Road Development Fund, Land Development Fund, and Charitable Trust Fund were considered non-refundable and refundable deposits and could not be treated as the income of the Assessee-Societies.

Similarly, in another appeal, the Assessing Officer treated contributions towards the Welfare Fund and Hospital Fund as income of the assessee. The Tribunal noted that these were also non-refundable and refundable deposits and could not be treated as the income of the Assessee-Societies.

3. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The Assessing Officer imposed penalties under section 271(1)(c) of the Act, to the tune of Rs.15,37,079/-, on account of furnishing inaccurate particulars/concealment of income. The Tribunal, however, found that there was neither the case of furnishing inaccurate particulars of income nor concealment of income. Therefore, penalty under section 271(1)(c) of the Act should not be levied.

Respectfully following the binding precedent of the Hon'ble Supreme Court in the case of Siddheshwar Sahakari Sakhar Karkhana Ltd, the Tribunal deleted the penalty imposed on both assessees. Since the penalty was quashed based on this judgment, the Tribunal did not address other arguments regarding the initiation of penalty on both limbs or the lack of a definite charge.

Conclusion:
In conclusion, the Tribunal allowed both appeals filed by the assessees, quashing the penalties imposed under section 271(1)(c) of the Income Tax Act, 1961, and directed the Registry to place one copy of the order in all appeals folder/case files. The order was pronounced in the open court on 17/05/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963.

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