2021 (7) TMI 1139 - AT - Income Tax

Penalty levied u/s 271(1)(c) - disallowance of the deduction claimed by the assessee u/s 35 - HELD THAT - Proceedings u/s.271(1)(c) of the Act, is a separate proceedings than from the assessment proceedings and the omission or error i.e. concealment of income or furnishing of inaccurate particulars of income should come out specifically from the return of income filed by the assessee before the Department. There is no scope for any guess work or surmises or any hypothetical situation for imposing penalty u/s.271(1)(c). AO has not brought out his case as to why penalty u/s.271(1)(c) of the Act should be levied for filing inaccurate particulars of income in the case of the assessee. Merely not challenging the additions made in the assessment order in an appeal, cannot be the ground for imposing penalty u/s.271(1)(c) of the Act. The Revenue has also not disputed the fact that when deduction was claimed in return of income by the assessee at that time SHGPH was a notified organization by Government of India u/s.35(1)(ii) of the Act. The Ld. DR could not bring on record any evidences contrary to these facts on record. In such scenario, we are of the considered view that this is not a fit case for imposing penalty u/s.271(1)(c) of the Act and therefore, we do not find any reason to interfere with the findings of the Ld. CIT(Appeals) and relief provided to the assessee is hereby sustained - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of donations made to "School of Human Genetics and Population Health" (SHGPH) for claiming deductions under Section 35(1)(ii) of the Income Tax Act, 1961.
3. Retrospective withdrawal of approval granted to SHGPH by the Central Government.

Issue-wise Detailed Analysis:

1. Deletion of Penalty Levied under Section 271(1)(c):
The primary issue in both appeals was the deletion of the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The Revenue argued that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in deleting the penalty for furnishing inaccurate particulars of income. The Assessing Officer (AO) had levied a penalty of ?8,51,681/- for the assessment year 2014-15 on the grounds that the assessee had claimed a deduction under Section 35(1)(ii) based on a donation to SHGPH, which later had its approval rescinded by the Central Government. However, the CIT(A) observed that at the time of filing the return, SHGPH was an approved organization, and the assessee had acted on bona fide belief based on valid notifications and approvals. The Tribunal upheld the CIT(A)'s decision, emphasizing that penalty proceedings are independent of assessment proceedings and cannot be imposed merely because the assessee did not appeal the assessment order.

2. Validity of Donations to SHGPH:
The assessee had claimed a deduction of ?26,25,000/- under Section 35(1)(ii) for a donation made to SHGPH. The AO disallowed this deduction, citing the Central Board of Direct Taxes (CBDT) Office Memorandum dated 15th September 2016, which rescinded the approval granted to SHGPH. The CIT(A) noted that at the time of the donation and filing of the return, SHGPH was a duly notified organization, and the assessee's claim was based on valid and operative approvals. The Tribunal concurred, stating that the bona fide nature of the assessee's actions could not be doubted since the donation was made when SHGPH was recognized as a Scientific and Industrial Research Organization (SIRO) by the Ministry of Science and Technology.

3. Retrospective Withdrawal of Approval:
The Tribunal referred to the Hon'ble Bombay High Court's decision in Ramdas Menklal Gandhi Vs. Union of India, which held that retrospective withdrawal of approval has no effect on an assessee who acted based on valid certificates during the relevant period. The Tribunal also cited the Hon'ble Supreme Court's decision in State of Maharashtra Vs. Suresh Trading Company, which supported the principle that retrospective cancellation does not affect actions taken when the approval was valid. The Tribunal concluded that the assessee's claim for deduction under Section 35(1)(ii) was valid at the time of filing the return, and the subsequent withdrawal of approval did not constitute furnishing inaccurate particulars of income.

Conclusion:
The Tribunal dismissed both appeals by the Revenue, upholding the CIT(A)'s decision to delete the penalty imposed under Section 271(1)(c). The Tribunal emphasized that the assessee's actions were bona fide and based on valid approvals at the time of filing the return. The retrospective withdrawal of SHGPH's approval did not justify the imposition of penalties for inaccurate particulars of income.