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TMI Blog2017 (11) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the ld. CIT(A) on this issue. For he amount transferred to general reserve for which we have already taken a view that the assessee has made the claim in the return of income and has submitted all relevant documents. Further it was a debatable issue, therefore, in this year also, we sustain the order of the ld. CIT(A). The other issue for levy penalty of 9,45,825/- was that income over expenditure. The issue was debatable and it was simply a difference of opinion between A.O. and assessee society. The assessee had neither concealed income nor filed inaccurate particulars of income. On this issue also, we agree with the findings of the ld. CIT(A) that this was a debatable issue and there was different opinion on such issue. Considering all these facts, we find no fault in the order of the ld. CIT(A) and accordingly, we sustain the same. - Decided against revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... ding as under: "3.1.2 I have duly considered assessee's submission and carefully gone through assessment order & penalty order passed by the AO. I have carefully perused the case record also. I have also carefully gone through the Hon'ble ITAT Bench Jaipur's order dated 15/3/2012 in ITA No 1062/JP/2011 for AY 2008-09 and also perused the case records. I have taken a note of factual matrix of the case as well as applicable case laws relied upon. Assessee, being a society, is registered u/s 12AA of the Act, accordingly its income is exempt u/s 10(23C) of the Act. The appellant society applies its income and funds accrued from institutes namely Global Institute of Technology & Global Collage of Technology for charitable purposes as defined u/s 2(15) of the Act. On perusal of audit report submitted u/s 12A(b) of the Act, it is seen that an amount of income of the previous year applied to charitable purpose during the year is at ₹ 44,27,077.89 whereas addition to fixed assets is at ₹ 10,37,64,384.26. AO in the assessment order on pg 3 has mentioned that the issue relating to sec. 10(23C) of the Act has been decided by the Hon'ble ITAT Bench Jaipur in favour of reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished inaccurate particulars or that the case of the assessee is covered by deeming fiction of one of the Explanations appended to Section 271(1) (c) of the Act. Further, it is also well settled in law that penalty proceedings are distinct from the assessment proceedings and based on the findings in the assessment order per se, penalty cannot be imposed. Therefore, for the sake of adjudication, it has to be decided that when assessee has deliberately made the said amount Transfer to its General Reserve, then whether it constitutes a case of furnishing inaccurate particulars or concealment, which is being decided in para below. 3.1.3 It is a fact that the satisfaction for concealment of particulars of income or furnishing of inaccurate particulars of income has to come from the assessment order passed as a consequence of the return filed under section 153A of the Act. In this case, there is no tax implication arising out of assessment order passed because of the fact that additions made in the assessment order have been set off with b/f losses. However, AO observed that not only assessee's case will be squarely fall under explanation 5A to the provision of Sec 271(1)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, in view of facts and circumstances of the case as discussed above, penalty levied of ₹ 17,51,000/= is hereby deleted. Assessee's appeal in ground No 2 is allowed." Similar findings has also been given by the ld. CIT(A) in A.Y. 2012-13 where revenue in appeal i.e. in ITA No. 1030/JP/2015 while deleting the penalty levied by the Assessing Officer. 5. Now the revenue is in appeals before the ITAT. The ld CIT DR has relied on the order of the Assessing Officer. On the contrary, the ld AR of the assessee has relied on the order of the ld. CIT(A). 6. We have heard both the sides on this issue. The assessee society is registered U/s 12AA of the Income Tax Act, 1961 (in short the Act), accordingly, whose income is exempted as per provisions of Section 10(23C) of the Act. The assessee had applied its income and funds accrued for charitable purposes as defined in Section 2(15) of the Act. The Assessing Officer considered two amounts for levy of penalty i.e. transfer of general reserve of ₹ 55,83,342/- and claim of higher depreciation to the tune of ₹ 5,68,512/-. The claim of depreciation at higher rate was based on bonafide belief that the buses for transpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, the Ld. CIT(A)-4, Jaipur has erred in coming to the conclusion that the assessee has furnished the inaccurate particulars of its income. 3. Under the facts and circumstances of the case and in law, the Ld. CIT(A)-4, Jaipur has not appreciated the ratio laid by the Hon'ble Supreme Court of India in the case of CIT vs Reliance Petroproducts (P) Ltd (2010) 322 ITR 158 (SC) wherein it was held that the mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. 4. Under the facts and circumstances of the case and in law, the Ld. CIT(A)-4, Jaipur has erred in levying the penalty under section 271(1)(c) in spite of the fact that in view of the appeal effect order dated 27.09.2012 passed by the Ld. CIT(A)-II, Jaipur, the assessed income of the appellant was reduced to Nil meaning thereby that there was no tax sought to be evaded by the appellant. 9. The brief facts of the case are that the return of income was filed on 30/09/2009 declaring income at Rs. NIL. The assessment was completed U/s 143(3) of the Act at total income of ₹ 60,75,130/- and levied th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred appeal against the AO's order before the worthy CIT(A) and the action of the AO was confirmed. However while deciding such appeal the worthy CIT(A) directed the AO to allow benefit of carry forward business losses of earlier years. Due to such finding of worthy CIT(A) the positive income of ₹ 6075130 was reduced to nil income. As the assessee has wrongly claimed exemption u/s 10(23)(c) as also that benefit of sec. 11 & 12 was also to be disallowed because of violations in terms of sec. 13(3)/ 11(5) of IT Act, therefore while completing the assessment the AO also initiated penalty proceedings u/s 271(1)(c) of IT Act. During the proceedings before the AO the appellant contended that penalty proceedings and assessment proceedings are independent proceedings as also that the assessee has neither furnished inaccurate particulars of income nor concealed any income and therefore simply on the reason that claim u/s 10(23)(c) and benefit of exemption u/s 11 & 12 was not allowed as also certain additions were made, no penalty u/s 271(1)(c) of IT Act can be imposed. However the AO noted that by making such wrong claim u/s 10(23)(c) and exemption u/s 11 & 12 the assessee intentiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st appellate authority. Similarly, the various additions made by the AO are also confirmed by the first appellate authority. As regards these additions the appellant has not disputed the finding of the AO or of the first appellate authority. It is also not a case that such disallowance has been made by the AO simply on the reason that proper explanation was not furnished by the assessee and the fact is that such additions were made because these were not at all of allowable nature and there was no two opinion on the fact that such additions were to be made as per the provisions of IT Act. As regards the another contention of the assessee that there was no malafide intention for making such claim, it may be mentioned that prima facie such claim were not of bonafide nature. Moreover for imposition of penalty u/s 271(l)(c) of IT Act it is not necessary that the mens rea of the assessee or the malafide intention of the assessee is to be proved. For such proposition of law reliance is placed on the decision of Hon. Supreme Court in the case of Union of India vs. Dharmendra Textile Processors, 295 ITR 244, wherein it has been held that the willful concealment is not an essential ingredie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d no infirmity in the order of the Id. CIT(A) who has followed the order of this Bench in assessee's own case for the assessment year 2008-09 (ITA No. 1062/JP/2011 dated 15-03-2012) holding that the assessee is eligible to benefits of set off of earned forward losses. Respectfully following the decision of this Bench (supra), we dismiss the appeal of the Revenue. Since the appeal of the Revenue is dismissed, therefore, the grounds of the assessee will become infructuous as contended by the Id. counsel for the assessee. 3.0 In the result, the appeal of the Revenue as well as C.O. of the assessee are dismissed." It was also pleaded that the ld. Chief Commissioner of Income Tax allowed the withdrawal of application of the assessee filed on 19/05/2009 U/s 10(23C)(iv) of the Act on the basis that there is no taxable income after considering exemption U/s 11 of the Act available to the assessee. Considering all these aspects, we are of the view that the authorities below were not justified for levying the penalty for willful concealment of income or willful furnishing inaccurate particulars of income. Further we would like to state that the A.O. was not sure under which limb of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect ; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms ; (i) an item of receipt may be suppressed fraudulently ; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we acce ..... 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