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2012 (10) TMI 255 - AT - Income TaxPenalty u/s 271(1)(c) - dis allowing exemption u/s 10(22) - CIT (A) deleted the levy by allowing the claim - A.Y. 1997-98 - Held that - CIT(A) has rightly allowed the assessee s claim after a detailed discussion that the assessee is an Educational Institution existing solely for the that purpose and not for the purpose of profit and thus fulfilled the conditions of section 10(22) of the Act. The CIT(A) has rightly deleted the addition which was made in the hands of the assessee on protective basis as the addition in the hands of Shri S. Anwar Saeed has been added on substantive basis. Even on merit, the CIT(A) found that merely because the employee has gained personal benefit, it cannot change the character of the Institution as a whole from non-profit Institution to a profit making Institution - as the additions made by the A.O. have been deleted there is no question of levy of penalty under section 271(1)(c) Disallowance under section 40A(3) - Held that - As CIT(A) has deleted the addition holding that the income of the Institution is exempt under section 10(22) the disallowance under section 40A(3) became academic - appeal decided in favour of assessee.
Issues:
- Appeals filed by Revenue against orders passed by CIT(A) for A.Ys. 1997-98 and 1998-99. - Common grounds raised by Revenue based on identical facts. - Two appeals on merit of the case, two on penalty under section 271(1)(c) of the Income Tax Act, 1961. - CIT(A) allowed exemption u/s 10(22) of the IT Act, 1961 to the assessee. - CIT(A) deleted penalty u/s 271(1)(c) amounting to Rs.55,00,000. - CIT(A) considered the institution as an Educational Institute existing solely for educational purposes. Analysis: 1. The appeals were filed by the Revenue against orders passed by the CIT(A) for A.Ys. 1997-98 and 1998-99. The grounds raised were common as they were based on identical facts. Two appeals focused on the merit of the case, while the other two pertained to the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961. 2. The CIT(A) allowed exemption under section 10(22) of the IT Act, 1961 to the assessee, which was an Educational Institute. The CIT(A) deleted the penalty amounting to Rs.55,00,000 levied under section 271(1)(c) of the Act, after detailed analysis and consideration of the facts presented. 3. The CIT(A) considered the institution as an Educational Institute existing solely for educational purposes. The CIT(A) reviewed various aspects, including the institution's registration under section 12A of the Act and its activities related to education. The CIT(A) examined the issue of exemption under section 10(22) of the Act in detail, considering documentary evidence and relevant case laws. 4. The CIT(A) found that the institution met the conditions of section 10(22) of the Act and was entitled to exemption. The CIT(A) also addressed other issues such as disallowance on protective basis, addition in the hands of an individual, and disallowance under section 40A(3) in favor of the assessee based on the institution's eligibility for exemption. 5. The CIT(A) further discussed the disallowance under section 40A(3) and concluded that it became academic due to the institution's exemption status. The CIT(A) dismissed the Revenue's ground regarding the assessment made under section 144 of the Act, highlighting the thorough examination of the case and lack of substance in the Revenue's appeal. 6. The CIT(A) decision was upheld after detailed discussions and considerations by the ITAT. The ITAT confirmed the CIT(A)'s orders, dismissing all four appeals filed by the Revenue. The ITAT found no grounds to overturn the CIT(A)'s decisions, including the deletion of penalties under section 271(1)(c) of the Act for the relevant assessment years. 7. In conclusion, the ITAT upheld the CIT(A)'s decisions, confirming the exemption granted to the Educational Institute under section 10(22) of the Act and dismissing the Revenue's appeals against the penalty levied under section 271(1)(c) for the respective assessment years.
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