2019 (1) TMI 745 - AT - Income Tax

Penalty u/s 271(1)(c) - exemption claimed u/s 11 has been denied - Held that - In the present case, the simple fact is that the exemption claimed by the assessee u/s 11 has been denied, which denial has been confirmed by the CIT also. Now, denial of exemption claimed cannot, by any stretch of imagination, be said to amount to either concealment of particulars of income or furnishing of inaccurate particulars thereof. Department has not been able to refute this position. CIT(A) cannot be said to have erred in observing that denial of exemption cannot be considered within the purview of Section 271(1)(c). Accordingly, finding no error in this regard in the impugned order, the same is confirmed and the grievance sought to be raised by the Department is rejected as without merit. - Decided against revenue.

Summary

Issues:
1. Whether the initiation of proceedings under section 271(1)(c) of the Income Tax Act was justified in the case where exemption under section 11 was denied.

Analysis:
The Appellate Tribunal ITAT LUCKNOW heard the Department's appeal for Assessment Year 2012-13. The main issue was whether the initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act was appropriate when the exemption under section 11 had been denied to the assessee. The Tribunal noted that the assessee did not appear despite notice. The ld. CIT(A) had allowed the assessee's grounds, stating that the initiation of penalty proceedings was not proper in the context of denial of exemption. The Department argued that since the denial of exemption was confirmed, the initiation of penalty proceedings was justified. However, the Tribunal explained that denial of exemption does not amount to concealment of income or furnishing inaccurate particulars under section 271(1)(c). The Tribunal upheld the ld. CIT(A)'s decision, stating that denial of exemption cannot be considered under penalty provisions. Therefore, the Department's appeal was dismissed, and the Tribunal confirmed the order of the ld. CIT(A).

In conclusion, the Tribunal held that the denial of exemption under section 11 does not fall within the scope of penalty provisions under section 271(1)(c) of the Income Tax Act. The Tribunal emphasized that mere denial of exemption does not constitute concealment or furnishing inaccurate particulars of income. As a result, the Tribunal rejected the Department's appeal and upheld the decision of the ld. CIT(A) to allow the assessee's grounds regarding the initiation of penalty proceedings.