2017 (1) TMI 1094 - AT - Income Tax

Penalty u/s 271(1)(c) - proof of concealment of any fact - trust denied exemption u/s 11 on the ground that income from running of newspaper had not been applied for charitable purposes - Held that - The issue of claim of exemption in the case of the assessee has been a debatable one, as far as its appellate history goes. Relying on the decision of the Hon ble Supreme Court in the case of ACIT vs Thanthi Trust (2001 (1) TMI 80 - SUPREME Court ) held that the claim of the assessee is debatable. He also noted that as far as the facts and figures of income and expenditure statements are concerned, there is not dispute that the assessee had not concealed any such facts and figures. But the assessee had presumed that in its opinion, it had made a bonafide claim of exemption u/s 11 of the Act, which has been denied to it by the AO and the appellate authorities in the years under consideration. Therefore, it cannot be said that the assessee had concealed the particulars of its income or had furnished inaccurate particulars of such income. ITAT in the case of the assessee for the A.Y. 1989-90, 1992-93, 1995-96, 1996-97, 1998- 99 and 2003-04 has explicitly recorded a finding of fact and held that the objects of trust, as a whole, are for charitable purpose falling within the meaning of section 2(15) of the Act. For the A.Y. 1998-99, 2000-01, 2003-04, 2007-08 and 2008-09, the decision has been reversed by the ITAT. Once, this proposition is accepted, the issue of grant of exemption in the case of the assessee can at best be described as a debatable issue. The learned CIT(A) relied on the judgement of the Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P.) Ltd 2010 (3) TMI 80 - SUPREME COURT wherein it has been held that penalty cannot be levied merely because the AO and the assessee hold a divergent view on allowablity of a claim for deduction. - Decided in favour of assessee

Issues Involved:
1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Determination of whether the assessee's activities were charitable or commercial.
3. Validity of the assessee's claim for exemption under Section 11.
4. Applicability of the decision in the case of ACIT vs Thanthi Trust.
5. Reliance on the Supreme Court judgment in CIT vs. Reliance Petroproducts (P.) Ltd.

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The revenue appealed against the deletion of penalties amounting to ?19,32,354/- for A.Y. 2007-08 and ?18,62,354/- for A.Y. 2008-09, imposed by the AO under Section 271(1)(c) of the Act. The AO had determined that the assessee was engaged in commercial activities rather than charitable ones, thus denying the exemption under Section 11 and imposing penalties for concealment of income. The learned CIT(A) deleted the penalties, stating that the assessee had not concealed any facts or figures and had made a bona fide claim for exemption under Section 11, which was denied by the AO and upheld by appellate authorities. The CIT(A) relied on the Supreme Court judgment in CIT vs. Reliance Petroproducts (P.) Ltd, which stated that mere rejection of a claim does not amount to furnishing inaccurate particulars of income.

2. Determination of Whether the Assessee's Activities Were Charitable or Commercial:
The AO, referring to the ITAT's decision for A.Y. 1989-90, concluded that the assessee's activities were not charitable as it was running a newspaper business. Consequently, the exemption under Section 11 was denied. The CIT(A) noted that the assessee trust was registered under Section 12A and the Bombay Public Trust Act but was denied exemption under Section 11 because the income was spent on acquiring assets rather than charitable purposes. The CIT(A) observed that the issue of exemption had been debatable, with varying decisions in different assessment years.

3. Validity of the Assessee's Claim for Exemption under Section 11:
The CIT(A) and ITAT had previously dismissed the quantum appeals for A.Y. 2007-08 and 2008-09, upholding the denial of exemption under Section 11. The CIT(A) noted that the assessee had presumed a bona fide claim for exemption, which was denied, but this did not constitute concealment of income. The CIT(A) relied on the Supreme Court judgment in CIT vs. Reliance Petroproducts (P.) Ltd, which held that differing views on claim allowability do not justify penalty imposition.

4. Applicability of the Decision in the Case of ACIT vs Thanthi Trust:
The CIT(A) referred to the Supreme Court's decision in ACIT vs Thanthi Trust, which dealt with the conditions under which a trust carrying on business could claim exemption under Section 11. The CIT(A) noted that the assessee's case was debatable and that the ITAT had previously held that the trust's objects were charitable. The CIT(A) concluded that the issue of exemption was debatable, and thus, penalty under Section 271(1)(c) was not warranted.

5. Reliance on the Supreme Court Judgment in CIT vs. Reliance Petroproducts (P.) Ltd:
The CIT(A) and ITAT relied on the Supreme Court judgment in CIT vs. Reliance Petroproducts (P.) Ltd, which clarified that penalty under Section 271(1)(c) cannot be imposed merely because the AO and the assessee have divergent views on the allowability of a claim. The judgment emphasized that inaccurate particulars of income must be shown for penalty imposition, which was not the case here.

Conclusion:
The ITAT upheld the CIT(A)'s order, concluding that the assessee had not concealed any particulars of income or furnished inaccurate details. The penalty imposed by the AO under Section 271(1)(c) was deleted, and the appeals filed by the revenue were dismissed. The judgment emphasized that differing views on the allowability of a claim do not justify penalty imposition, aligning with the Supreme Court's interpretation in CIT vs. Reliance Petroproducts (P.) Ltd.

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