2016 (9) TMI 101 - AT - Income Tax

Levying the penalty u/s 271(12)(c) - exemption u/s 10(22) - Held that - It is observed that the assessee was registered under Societies Registration Act in the year 1968. The assessee was also granted exemption u/s 10(22) of the Act vide order dated 27.01.1994 issued by the Director of Exemption, the exemption u/s 10(22) was available to the assessee till Assessment Year 1998-99 as Section 10(22) stood deleted w.e.f. Assessment Year 1999-2000. From the records placed before us, it is observed that the assessee was under a belief that the exemption is available with the assessee under the Act. It was subsequently during the year under consideration that the assessee realized that the exemption is not available. It was during the assessment proceedings for Assessment Year 2004-05 that assessee realized the exemption being not available vide assessment order for the Assessment Year 2004-05 where the Ld. A.O. rejected the assessee s claim. From the facts of the case, it does not appear that the assessee has deliberately abstained itself from presenting such application in time. In the application dated 31.10.2006 assessee has also claimed for condonation of delay and has requested for registration to be granted w.e.f. 01.04.1999. Considering the above facts, we are of the opinion that the imposition of penalty u/s 271(1)(c) is not justified as there was complete disclosure of facts and the claim made by the assessee was not found acceptable in law. We, therefore set aside the penalty order passed by Ld. A.O.

Summary

Issues:
1. Whether the penalty order passed by Ld. CIT(A) for the Assessment Year 2006-07 against the assessee is in violation of principles of natural justice.
2. Whether the assessee is liable for penalty u/s 271(1)(c) for the given facts and circumstances.

Analysis:

Issue 1:
The appeal was filed by the assessee against the penalty order passed by Ld. CIT(A) for the Assessment Year 2006-07. The assessee contended that the order was passed in violation of principles of natural justice. The Ld. CIT(A) had held that the assessee did not apply for registration u/s 12AA as required from A.Y. 1999-2000, and therefore, there was negligence on the part of the assessee. The Ld. CIT(A) concluded that the assessee filed inaccurate particulars of income by claiming exemption u/s 11 without having the necessary registration. The Tribunal observed that the assessee was under a genuine belief regarding the availability of exemption and that there was no deliberate concealment of income. The Tribunal set aside the penalty order, emphasizing that there was complete disclosure of facts by the assessee.

Issue 2:
The second issue revolved around whether the assessee was liable for penalty u/s 271(1)(c) for the given facts and circumstances. The Ld. A.R. argued that the assessee had a bona fide belief in its entitlement for exemption under the Act, supported by the application for registration u/s 12AA. The Ld. D.R., on the other hand, contended that the assessee filed inaccurate particulars of income and thus fell under Explanation 1A to 271(1)(c) of the Act. The Tribunal considered the history of the assessee's registration and exemptions under the Act, noting that the assessee had a genuine belief in its entitlement for exemption. Citing relevant case law, the Tribunal concluded that the imposition of penalty was not justified as there was no deliberate concealment of income and the claim made by the assessee was based on genuine belief, ultimately setting aside the penalty order.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the absence of deliberate concealment of income and the genuine belief held by the assessee regarding its entitlement for exemption under the Act.