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Whether Penalty u/s 272a(2)(e) imposed is justified for Late / Non-filing of ITR when the Assessee was under the bona fide belief that ITR was not required to file since its incomes is exempt under s. 10(23C)(iiiab)? ITAT Jaipur passed the order on this issue on 24 May, 2021. For full order kindly click the link to get full order.
Income Tax Appellate Tribunal – Jaipur
A.N. School Shiksha Samiti, Sikar vs Jcit-Range (Exemption), Jaipur on 24 May, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES “A”, JAIPUR
BEFORE SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM
ITA No. 252/JP/2020 Assessment Year :2010-11
Section 272A(2)(e), 273B,10(23C)(iiiab), 139(4A), 11, 12
A.N. School Shiksha Samiti, J.C.I.T.-Range
Radha Swami Bag, Vs. (Exemption)
PAN/GIR No.: AABAA 6164 F
Assessee by : Shri Shravan Kr Gupta (Adv) Revenue by: Smt. Monisha Choudhary(JCIT)
Date of Hearing : 25/03/2021 Date of Pronouncement : 24/05/2021
ORDER PER: SANDEEP GOSAIN, J.M.
This appeal has been filed by the assessee against the order of the ld. CIT(A)-3, Jaipur dated 06/09/2019 for the A.Y. 2010-11 wherein following grounds have been taken.
“1. The impugned penalty order u/s 272a(2)(e) dated 02/11/2018 as well as notices are bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same may kindly be quashed.
- The ld. CIT(A) has grossly erred in law as well as on the facts of the case in confirming the imposition of penalty of Rs. 2,53,700/- u/s 272A(2)(e) invoked by the ld JCIT. The penalty so imposed and confirmed by the ld. CIT(A) being totally contrary to the provisions of law and facts on the record and hence the same may kindly be deleted.
- The appellant prays your honors indulgence to add, amend or alter all or any of the grounds of the appeal on or before the date of hearing.”
- The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
- There is delay of 132 days in filing this appeal, for which the assessee filed an application for condonation of delay and the contents of application for condonation of delay reads as under:
“1. In this connection it is submitted that the applicant assessee is AOP. In this case the Penalty of Rs.2,53,700/- u/s 272A(2)(e) was imposed on dated 02.11.2018 by the JCIT(E) and raised the demand. Against which the assessee had filed an appeal before the Id. CIT(A)-3, Jaipur. The Id. CIT(A)-Jaipur has passed the order of appeal on dt. 06.09.202, which was sent by post at the address of assessee and may be served any other person about on dt. 09.09.2019. Hence the appeal was to be filed on or before Month of March 08.11.2019 but the same is being filed on 19.03.2020 i.e by delay of about 4 Month and 11 days late.
- The reason of late filing of appeal was that as the order not received by the assessee and on inquiry it has come to know that the said order has been sent by the office of CIT(A)-3 by post but we have not received the copy of said order, as we did not know on whom the said order has been served. We also inquired from our staff but they also failed to told about the said order. We have come to about the order of CIT(A) from the office of AO. Hence we applied for the certified copy of the order which was received by us on dated 17.03.2020. We mostly remained at Jaipur and our earlier counsel has also not informed about the hearing and disposal of the appeal.
- That due to want of knowledge the appeal could not be filed within time, although the same is within the time from the date of receiving of certified copy of order.
- That the other counsel or advocate has advised to her to file the appeal immediate with the prayer for condonation of delay being the reasonable ground and being a strong case in her favor.
- That due to all this reason the appeal could not be filed within time. In support of these contention an affidavit of the Secretary is enclosed.
- It is submitted that the Hon’ble Supreme Court in the case of Collector, Land & Acquisition v. Mst. Katiji & Others (1987) 167 ITR 471 (SC) has advocated for a very liberal approach while considering a case for condonation of delay. The following observations of the Hon’ble Court are notable:
“The legislature has conferred the power to condone delay by enacting section 5 of the Limitation Act 1963 in order to enable the Courts to do substantial justice to parties by disposing of matters on ‘merits’. The expression sufficient cause’ employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which subserves the ends of justice-that being the life-purpose of the existence of the institution of Courts. It is common knowledge that this Court has been making a justifiably liberal approach in matters instituted in this Court. But, the message does not appear to have percolated down to all the other Courts in the hierarchy.”
The said judgment is a leading case on the subject and has a binding force on all the officers subordinate thereto.
- The action or inaction by an assessee, on the advice of its counsel, whether correct or incorrect, if caused a delay, has been held to be reasonable and sufficient cause in these cases also. Kindly refer N. Balakrishnan v. M. Krishna Murthy(1998) 7 SCC 123 published in 30 BCAJ 922, Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi and Anothers118 ITR 507 .
That it is also settled that for the mistake of the Counsel, the party cannot be suffered. Reliance on Mahaveer Prasad Jain v/s CIT, 172 ITR 331(MP), Concord India Insurance Co. Ltd v/s Smt. Nirmala Devi, 118 ITR 507(SC), Kripa Shankar v/s CIT/CWT 181 ITR 183(AII), N. Balakrishnan v/s M. Krishanmurthy 7 SSC123.
- The Hon’ble Jaipur Bench of ITAT has also condoned the dealy in the case of Ganesh Himalaya Pvt.Ltd. v. ACIT 22 Tax World 415 (Jp) where the filing was delayed because the son of the Managing Director had become victim of some misdeeds committed by the Holigans, particularly when on the similar points in the earlier four years, the appeals were filed in time.
In the instant case also, the appeal could not be filed in time because of the above reasonable cause and was a sufficient cause and there was no melafide intention.
- Recent Decision of Apex Court: in a recent decision, the apex court have again reiterated that the expression “sufficient cause” should receive a liberal construction. The Hon’ble court have also held that advancing of substantial justice should be of prime importance. Kindly refer Vedbai vs. Shantaram Baburam Patil & Others 253 ITR 798 (SC).
- Prayer: In view of above facts and circumstance and with the sympathy and settled legal position, the delay so caused may kindly be condoned.”
- On the other hand, the ld DR could not rebut the facts submitted by the assessee before us for seeking condonation of delay.
- We have considered the rival submissions as well as relevant material on record. As regards the sufficiency of cause for filing the appeals belatedly, it is settled principles of law that the Courts have to take liberal approach while interpreting the expression ‘sufficient cause’ for condonation of delay. In case of Collector, Land Acquisition Vs. Mst. Katiji (1987) 167 ITR 471, the Hon’ble Supreme Court has laid down the principle that the power to condone the delay provided under the statute is to enable the Courts to do substantial justice to the parties by disposing of the matter on merits, therefore, while considering the matters for condonation of delay, the law must be applied in a meaningful manner which subserves ends of justice and technical considerations should not come in the way of cause of substantial justice. There is no quarrel that the explanation and reasons explained for delay must be bonafide and not merely a device to cover an ulterior purpose such as laches on the part of the litigant or an attempt to save limitation in the underhand way. If the party who is seeking condonation of delay has not acted in malafide manner and reasons explained are factually correct then the Court should be liberal in construing the sufficient cause and lean in favour of such party. A justice-oriented approach has to be taken while deciding the matter for condonation of delay. However, this does not mean that a litigant gets free right to approach the court at its will.
- If we apply the settled principles as laid down by the Hon’ble Supreme Court as well as other courts on the facts of the present case we find that the assessee has explained cause of delay, therefore, in the facts and circumstances of the case, we condone the delay of 132 days in filing the present appeal and admit the appeal for hearing.
- The brief facts of the case are that as per the revenue, the assessee trust was required to file its return of income U/s 139(4C)(e) of the Act by 31/07/2010 for the year under consideration. However, return in this case was filed on 12/07/2017, thus, it was late by 2537 days.
Accordingly, after issuing show cause notice and providing opportunity of hearing, penalty U/s 272A(2)(e) of the Act was levied upon the assessee vide order dated 02/11/2018.
- Aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A) and the ld. CIT(A) after considering the facts of the present case, dismissed the appeal filed by the assessee by upholding the imposition of penalty U/s 272A(2)(e) of the Act. Against the said order of the ld. CIT(A), the assessee has preferred the present appeal before the ITAT.
- Grounds No. 1 and 2 of the appeal raised by the assessee are interrelated and interconnected and relates to challenging the order of the ld. CIT(A) in confirming the penalty levied U/s 272A(2)(e) of the Act, therefore, we thought it fit to dispose off these grounds by this consolidated order.
- The ld AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the written submissions filed before the Bench and the same is reproduced below:
“1. Correct facts and position of law not considered: At the very outset it is submitted that as the assessee is an educational institute and solely exist for educational purpose. He was advised by the counsel who stated to the assessee that Its receipts was less then to Rs.1.00 crore and fall u/s 10(23C) (iiiad). Hence its all or entire income were exempt. And as per the provisions of Sec. 139(4C) (e) the person is required to file the return where its income exceeds the maximum amount which is not chargeable to income tax. As the assessee has filled its return of income declaring the nil income and assessment has also ‘been completed at nil income vide assessment order dt. 25.12.2017 u/s 143((3)/148(PB3-4), in the status of education institute. Thus as per clear provision of law the. assessee was not required to file the return on or before 31.07.2010 and no penalty can be imposed u/s 272A(2)(e). In the assessment order the receipts has also been mentioned.
In the case of Additional Director of Income Tax vs. M.D. Memorial Charitable & Educational Society (2002) 74 TTJ 0595 (Del) it has been held Penalty under s. 272A(2)(e)— Delay in filing return under s. 139(4A)–Exemption under s. 10(22)–Income of assessee-trust exempt under s. 10(22)— Assessee was not required to file any return under s. 139(4A)–Penalty not justified.–ITO vs. St. Michaeals Education Foundation (1992) 43 ITD 656 (Del) followed In the case of Shri Bhandup Jain Temple vs. DDIT (1995) 14 CCH 0307 MumTrib (1996) 54 TTJ 0104 It has been held that Penalty under s. 272A(2)(e)–Leviability–Assessee a trust registered as charitable trust enjoying tax exemption–Its belief that it will not be liable to penalty if its return is filed belatedly is bona fide–At the same time, view taken by the CIT(A) also supports the penalty–Two views being possible, one in favour of assessee to be preferred–Penalty cancelled.–CIT vs. Vegetable Products 1973 CTR (SC) 177: (1973) 88 1TR 192 (SC) applied
- Technical breach only: Alternatively and without prejudice to our other submission, even assuming some default was there, the same at the best was a merely technical and venial breach of law and the conduct of the assessee has not been shown to be contumacious. No deliberate defiance of law is established. It has been held that by the Honble Supreme Court in the case of Hindustan Steels v/s State of Orisa 83 ITR 26 (SC). “That in order to impose penalty for failure to carry out a statutory obligation is the result of quasi criminal proceedings and penalty will not ordinarily be imposed, unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. The Supreme Court has further laid down that penalty will not be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority and is to be exercised judiciously and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed the authority competent to impose the penalty, will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.”The assessee in any case entertained a bonafide belief and advised of the counsel that the assessee is an education institute and income falls and exempt u/s 10(23C)(iiiad) and assessee is not required to file the return as he has been advised by some counsel but some other counsel has advised to file the return and that is why he has filled its return of income and thereafter he has regularly. Hence due to fault on the part of above reason and misunderstanding the provision of law the assessee should not be suffer. This way a reasonable cause did exist u/s 273B and hence also the penalty imposed may kindly be quashed. Thus due to the negligence of the consultants/counsel if any a poor assessee should not be suffered.
In the case of HTSL Community Service Trust vs. JDIT(EXEMPTIONS) (2012) 31 CCH 0251 Bang. Trib Charitable Trust–Failure to furnish return within due date–Penalty u/s 272A–Assessee, a registered public charitable trust filed return of income belatedly after the expiry of the due date–A0 levied penalty u/s 272A(2)(e) for not filing the return of income within the due date as prescribed in section 139 of the Act–Penalty may be imposed u/s 272A(2)(e) for failure to furnish the return of income in accordance with the provisions of section 139(4A) rws 139(1)–An attempt of deliberateness or deceptiveness is associated with the word ‘failure’–ln the present case, there was no deliberateness or deceptiveness in not filing the return of income within the prescribed time limit–Assessee was under a bonafide belief that securing recognition u/s 80G would be a pre requisite for filing the return of income–However, immediately on being appraised, the income tax returns were filed for all the years without any further delay– The delay in filing the return was not intentional or deliberate–Since the entire income was applied towards the charitable activities, no tax was payable for the assessment year under consideration–As a result of late filing of the return, there was no loss of revenue to the Government–Assessee had no ulterior motive to defraud the revenue and had not acted dishonestly or negligently–Therefore, there was sufficient/ reasonable cause for the delay in furnishing the return of income– Hence, assessee trust not liable for penalty u/s 272A (2)
(e) of the Act for delay in filing the return of income In the case Vatavaran Trust vs. JDIT (EXEMP.) (2006) 25 CCH 0093 DelTrib (2006) 104 TTJ 0129 Penalty under s. 272A(2)(e)–Failure to file return under s. 139(4A)– Reasonable cause–There being excess of expenditure over income in all the assessment years, assessee’s belief that it was not obliged to file return under s. 139(4A) was bona fide and this constituted reasonable cause–Penalty under s. 272A (2) (e) was not therefore, leviable– Assessee voluntarily filed return for all the years on the advice of new chartered accountant who had enlightened the assessee the correct legal position.
In the the case of Akali Baba Phool Singh Educational Trust vs. DDIT (EXEMPTION) (2010) 29 CCH 0679 Del Trib (2011) 43 SOT 0700 Penalties–Non-filing of returns under s. 273B–Assessee was under the bona fide belief that its incomes is exempt under s. 10(23C)(iiiab) and was not required to file return of income–As per provisions of sub-cl. (iia) of subs. (24) of s. 2, it is found that reference has been made to various other clauses of sub-s. (23C) of s. 10 but no reference has been made to cl. (iiiab) of sub- s. (23C) of s. 10–As per provisions of sub-s. (4A) of s. 139, there is no specific reference to those assessees who are covered by the provisions of s. 10(23C) (iiiab) but for reference been made to ss. 11 and 12–Hence, assessee might have been having a bona fide belief that the provisions of s. 139(4A) are not applicable to it and hence the penalty imposed by the AO is not justified In the case of Shyam Gopal Charitable Trust v/s DIT(Exmp.) 290 ITR 99(Del. HC) it has been held that “18. We are of the view that the appellant ought not to be made to suffer penalty, in the peculiar facts of the present case, for having acted upon an advice of its chartered accountant and not filing the IT returns in time. We should not be understood as laying down a general proposition that in all cases where the assessee fails to file returns in time and attributes the failure to an advice by its chartered accountant, that by itself constitutes a sufficient explanation in terms of s. 273B of the Act. Each case would have to be tested on its merits by the authorities concerned or the Court, as the case may be, for coming to a conclusion that sufficient grounds in the context of s. 273B have been made out for not imposing a penalty for the failure to file returns within the time stipulated.
- On the facts of the present case, we are of the considered view that the appellant has proved that there was reasonable cause within the meaning of s. 273B of the Act for the failure to file IT returns for the relevant assessment years within the time stipulated and, therefore, no penalty was required to be levied in terms of s. 272A(2) (e) of the Act.
- No penalty u/s 271F has been imposed: Further the Id. AO has also not imposed and initiated any penalty proceeding u/s 271F. Which shows contradictory approach of the AO/JCIT because there is provision of Sec. 271 F for non filling of the return in due time.
- View favorable to the assessee: Further it is also settled that if case both the side has been referred then it is the settled legal position that to remove the undue hardship and considering the decision of supreme Court in case of CIT Vs. Vegetable Products Ltd. 88 ITR 192 (SC) where it is held that when two views are possible on an issue, the view in favour of the assessee has to be preferred. And also many High court also held the same.”
- On the other hand, the ld DR has vehemently supported the orders of the revenue authorities.
- We have heard the ld. DR and have also gone through the written submissions filed by the assessee. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. As per facts of the present case, as per the Revenue, the assessee was required to file its return of income U/s 139(4C)(e) of the Act by 31/07/2010. However, the return in this case was filed by the assessee on 12/07/2017, therefore, there was a delay of 2537 days and for which penalty U/s 272A(2)(e) of the Act was imposed after providing opportunity of hearing to the assessee. Whereas on the contrary, the ld AR of the assessee has submitted that the assessee is a charitable trust working in the area of imparting education and it was under bonafide impression that its income is exempted. Income of the assessee does not excess Rs. 1.00 crore which is exempt U/s 10(23c)(iiiad) of the Act, therefore, according to the assessee, it was not obliged to file return of income U/s 139(4A) of the Act. Under these circumstances, it was submitted that the assessee is bonafide and constitute reasonable cause in not furnishing the return of income. We have further perused that the return of income filed by the assessee on which no income tax is payable, thus the assessee cannot be in default for late filing of return particularly when tax is not payable by the assessee. In this regard, we rely on the decision of the Coordinate Bench of Mumbai ITAT in the case of Shri Bhandup Jain Vs Deputy Director of Income Tax (1996) 54 TTJ (Mumbai) 104 wherein it was held that “As the trust is registered as a charitable or religious trust by the CIT as non taxable institution, therefore, no penalty can be levied because there is no involvement of tax in it. Therefore, causes shown by assessee should also be accepted even if it is without evidence. As such the penalty so imposed U/s 272A(2)(e) of the Act deserves to be deleted in full. The department has also issued assessment order u/s 143(3) of the Act under which taxable income Rs. NIL is determined to be payable by assessee.” Further we have also relied on the decision of Hon’ble Supreme Court in the case of Moti Lal Padam Pal Sugar Mills Co. Vs State of U.P. (1979) 118 ITR 236 (SC) wherein it was held that ” Moreover it must be remember that there is no presumption that every person know the law. It often said that everyone is presumed to know the law, but it is a correct statement, there is no such maximum know to the law.”
- After having gone through the case laws relied upon by the assessee as well as orders passed by the revenue authorities, we found that the assessee being an educational institution whose total receipts were less than Rs. 1.00 crore and thus falls U/s 10(23C)(iiiab) of the Act.
Therefore, the entire income of the assessee was exempt and as per provisions of Section 139(4C)(e) of the Act the person is required to file the return where its income exceeds the maximum amount which is not chargeable to income tax. However, in this case, the assessee has filled its return of income declaring the nil income and assessment has also ‘been completed at nil income vide assessment order dated 25.12.2017 u/s 143((3)/148 of the Act in the status of educational institution. The assessee was not required to file the return on or before 31.07.2010 and thus, in this way, no penalty could have been imposed u/s 272A(2)(e). In the case of Akali Baba Phool Singh Educational Trust vs. DDIT (EXEMPTION) (2010) 29 CCH 0679 Del Trib/(2011) 43 SOT 0700 wherein it was as under:
“Penalties–Non-filing of returns under s. 273B–Assessee was under the bona fide belief that its incomes is exempt under s. 10(23C)(iiiab) and was not required to file return of income–As per provisions of sub-cl. (iia) of subs. (24) of s. 2, it is found that reference has been made to various other clauses of sub-s. (23C) of s. 10 but no reference has been made to cl. (iiiab) of sub-s. (23C) of s. 10--As per provisions of sub-s. (4A) of s. 139, there is no specific reference to those assessees who are covered by the provisions of s. 10(23C) (iiiab) but for reference been made to ss. 11 and 12--Hence, assessee might have been having a bona fide belief that the provisions of s. 139(4A) are not applicable to it and hence the penalty imposed by the AO is not justified.”
Considering the totality of facts and circumstances of the case as well as respectfully following the judicial pronouncements referred above, we direct to delete the penalty imposed U/s 272A(2)(e) of the Act.
- In the result, this appeal of the assessee is allowed.
Order pronounced in the open court on 24th May, 2021.
(VIKRAM SINGH YADAV) (SANDEEP GOSAIN)
Accountant Member Judicial Member