2015 (6) TMI 347 - AT - Income Tax

Penalty levied by the AO u/s. 271(1)(c) - the assessee did not file the returns of income as per the provisions of Sec. 139 and the assessee was issued the notices u/s. 148 - Held that - It is not in dispute that the assessee was treated as a local authority u/s. 10(20) of the Income-tax Act up to the A.Y. 2002-03. Subsequently, there was an amendment to section 10(2) of the Incometax Act and the APMC was removed from the definition of the local authority. It is pertinent to note that the Finance Act, 2008 has introduced Sub-sec. (26AAB) to Sec. 10 and again the income of the APMC has been exempted from tax. There is no dispute about the fact that APMC is constituted for Marketing of the Agricultural Produce helping the Agriculturists to get the better price in the open market and to avoid the brokers and agents. It appears that the collective efforts were made by the different APMCs in India after the amendment to Sec. 10(20) for getting exemption. Moreover, as per the facts on record the Govt. audit of the assessee for period ending on 30-09-2007 and 31-03- 2008 was completed on 14-07-2009 and hence, there was a delay in finalizing tax audit report. It is also seen that in both the assessment years the returns filed by the assessee were accepted without making any addition. We find that the Explanation 3 below Sec. 271(1)(c) which is deeming provision, is applicable to the assessee as period mentioned u/s. 153(1) has expired and then only the assessee filed the returns of income but at the same time the assessee can still avail the Explanation 1 to establish the bonafide for not filing the returns of income within the time allowed u/s. 139 of the Act. In the present case, we are of the opinion that the explanation of the assessee is bonafide for not filing the returns of income for both these assessment years within the meaning of Explanation 1 below Sec. 271(1)(c) of the Act and in our opinion no penalty can be levied on the assessee - Decided in favour of assessee.

Summary

Issues:
- Penalty levied under section 271(1)(c) for concealment of income.
- Reasonable causes for late filing of income tax returns.

Analysis:
1. Penalty under section 271(1)(c) for concealment of income:
The Agricultural Produce Market Committee (APMC) challenged the penalty orders imposed by the Assessing Officer and upheld by the CIT(A) for the assessment years 2007-08 and 2008-09. The Assessing Officer contended that the APMC concealed income by not filing returns as required under section 139 of the Income Tax Act. The APMC argued that due to amendments in the tax laws and uncertainties regarding tax exemptions, they were prevented by reasonable causes from timely filing returns. The APMC provided detailed explanations, including the history of tax exemptions, lack of guidance from the State Agricultural Marketing Board, and delays in tax audits. Despite these submissions, the Assessing Officer imposed penalties amounting to Rs. 23,40,865 and Rs. 5,82,034 for the respective assessment years.

2. Reasonable causes for late filing of income tax returns:
The APMC's contentions before the CIT(A) emphasized the nationwide issue regarding the taxability of APMCs and the ambiguity surrounding their tax-exempt status. The APMC cited the decision of ITAT Chandigarh Bench in support of their claim that mere differences in interpretation of tax laws do not constitute concealment of income. The CIT(A), however, upheld the penalties, leading the APMC to appeal the decision. The ITAT Pune, after considering the facts and submissions, concluded that the APMC's explanations for the delay in filing returns were genuine and constituted reasonable causes. The tribunal noted that the APMC's actions were in good faith and aligned with the legislative intent behind tax exemptions for entities serving agricultural interests. Consequently, the penalties levied by the Assessing Officer were revoked for both assessment years, and the appeals of the APMC were allowed.

In summary, the ITAT Pune held that the APMC's failure to file income tax returns within the statutory limits was justified by reasonable causes, and the penalties imposed under section 271(1)(c) for concealment of income were unwarranted. The tribunal emphasized the bona fide nature of the APMC's actions and the uncertainties surrounding their tax obligations, ultimately ruling in favor of the APMC and overturning the penalties imposed by the lower authorities.