2024 (6) TMI 1058 - AT - Income Tax

Penalty u/s 271(1)(c) - Exemption u/s 11 - additional income was added by the Ld.AO based on the admission made by the Managing Trustee, while recording statement u/s 132(4) - AO observed that in lieu of supply of labour, the assessee has received cash collection charges, which is a clear business activity and is not covered u/s 2(15) of the Act and also not covered under the objective of the Trust - additional income in the statement recorded u/s. 132(4) - CIT(A) considering the submissions made by the assessee concluded that the assessee has not deliberately concealed the income, but has only committed a mistake by claiming exemption, under the bonafide impression that it is exempt from tax and relying on the various judicial pronouncements allowed the appeal of the assessee - HELD THAT - During the search and seizure, it was found that the actual profit for the impugned assessment year, from it s business operations. However, there is no restriction to the assessee to offer the income u/s. 44AD of the Act on presumptive basis. We also find that the Ld. AO has not disputed the gross collections nor found any incriminating material for concealment of income. Accordingly, the assessee has offered an amount of Rs. 5,35,688/- under the presumptive taxation. AO proposed to tax the balance of Rs. 21,40,708/-, which the Managing Trustee, accepted to offer the same to tax, while recording statement u/s 132(4) of the Act. From the above, discussions, we find that the assessee has disclosed the entire cash receipts and the business receipts, while filing the return of income, but has claimed exemption on the above income based on the provision for expenses. AR s argument that even if the provision is excluded the trust has fulfilled 85% complying with section 11(1) of the Act was also not disputed by the Ld. AO. We have examined the above fact and are of the view that the trust has complied with section 11(1) of the Act. Respectfully following the ratio laid down in CIT Vs. M/s Shakthi Industries 2014 (8) TMI 1248 - ANDHRA PRADESH HIGH COURT we are of the view that mere admission of the additional income in the statement recorded u/s. 132(4) of the Act cannot be considered as concealment in the absence of any incriminating material disclosing such concealment of income. The case laws relied upon by DR is of no help to the revenue and distinguishable on facts. We, therefore, find no infirmity in the order of the Ld.CIT(A) and thereby dismiss the grounds raised by the revenue. Appeal of the revenue is dismissed.

Summary

Issues:
Appeal against penalty order u/s 271(1)(c) of the Income Tax Act, 1961 for A.Y. 2015-16.

Detailed Analysis:

1. Background and Facts:
The case involves an appeal by the Revenue against the penalty order passed under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2015-16. The appellant, a trust registered under section 12A of the Act, had discrepancies in its income declaration post a search and seizure operation conducted on a related entity.

2. Revenue's Allegations and AO's Findings:
The Revenue alleged that the trust engaged in business activities not aligned with its charitable objectives, leading to discrepancies in income declaration. The Assessing Officer (AO) found that the trust had undisclosed income, miscomputation of income, and incorrect application of presumptive taxation provisions. The AO imposed a substantial penalty based on these findings.

3. CIT(A) Decision and Revenue's Grounds of Appeal:
The trust appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who concluded that the trust did not deliberately conceal income but made errors in claiming exemptions in good faith. The Revenue challenged this decision, citing various grounds including non-compliance with statutory provisions and reliance on judicial precedents like the MAK Data Pvt. Ltd. case.

4. Arguments and Counter-arguments:
The Revenue argued that the penalty was justified due to the trust's business activities and admission of additional income post-search. The trust contended that its income disclosure was bona fide, and the provisions made in its accounts were in line with statutory requirements. Both parties referenced relevant case laws to support their positions.

5. ITAT Decision and Analysis:
After hearing both sides and reviewing the facts, the ITAT found that the trust had disclosed its receipts and expenditure, albeit with provisions for future expenses. The ITAT noted that the trust had fulfilled the 85% utilization criteria specified in section 11(1) of the Act. It also observed that the trust had disclosed its business income and offered tax under presumptive taxation provisions. The ITAT concluded that the trust's actions did not amount to concealment of income or furnishing inaccurate particulars.

6. Legal Precedents and Conclusion:
The ITAT relied on the CIT Vs. M/s Shakthi Industries case to emphasize that mere admission of additional income post-search did not constitute concealment without incriminating material. It distinguished the case laws cited by the Revenue and upheld the CIT(A)'s decision to cancel the penalty. The ITAT dismissed the Revenue's appeal, affirming that the trust had not concealed income and had complied with statutory requirements.

In conclusion, the ITAT dismissed the Revenue's appeal against the penalty order, emphasizing the trust's compliance with tax laws and the absence of evidence supporting concealment of income.