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2017 (1) TMI 1094 - ITAT MUMBAI

2017 (1) TMI 1094 - ITAT MUMBAI - TMI - 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 t .....

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d 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 .....

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Nos. 3833/MUM/2015 - Dated:- 18-1-2017 - SHRI C. N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) For The Appellant : Shri Rajesh Ojha, DR For The Respondent : Shri Anil Sathe, AR ORDER PER N.K. PRADHAN, AM The captioned appeals are filed by the revenue against the order of Commissioner (Appeals) - 7, Mumbai and arise out of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (the Act ). The assessment years are 2007-08 and 2008-09. Regard being had to the similitude of the is .....

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d in not accepting that it was a concealment, when it was proved that the assessee was not in charitable activity but in commercial / business activity and the same was upheld in appeal. Also it is stated that the learned CIT(A) erred in not accepting that the assessee is deliberately claiming exemption u/s 11, even though the judicial authorities have decided that the assessee was not doing a charitable activity. 3. The assessee filed its return of income for the A.Y. 2007-08 on 31.10.2007 decl .....

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erein it has been held that the activities of the assessee were not of charitable nature and it was running the business of publishing newspaper. Thus exemption u/s 11 was denied to the assessee. The AO found that the activities of the assessee in the impugned assessment years were same as the one in the A.Y. 1989-90. In view of the above, the A.O. imposed a minimum penalty of ₹ 19,32,534/- for the A.Y. 2007-08 and ₹ 18,62,354/- for the A.Y. 2008- 09 u/s 271(1)(c) of the Act. 4. The .....

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A) has mentioned that the assessee did not furnish any evidence to prove that it was engaged in the activity of giving relief to the poor, or education, or medical relief. Also the learned CIT(A) has mentioned that since the onus cast on the assessee that it had used its income for charitable purposes, i.e. relief to the poor, education or medical relief etc. was not discharged, the AO has denied to the assessee grant of exemption u/s 11 of the Act even though the registration of the trust u/s 1 .....

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the case of the assessee was not exactly the same. The learned CIT(A) observed 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) 247 ITR 785 (SC), the CIT(A) has stated 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, the .....

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n 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 .....

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e 17 of the order of the learned CIT(A) wherein he has mentioned that the quantum appeals of the assessee for the A.Y 2007-08 and 2008-09 have been dismissed by both the CIT(A) and the ITAT. He also relied on the order of the AO. 6. Per contra, the learned counsel of the assessee relied on the order of the ITAT in the assessee s own case for the A.Y. 1989-90, 1992-93, 1995-96, 1996-97, 1998-99 & 2003-04. Also he relied on the judgement of the Hon'ble Supreme Court in the case of Thanti T .....

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Also it is held therein that donations received by charitable trust without any direction whether it was towards corpus of trust is not exempt u/s 11(1)(d) and the same is assessable as income from other sources. Regarding set off loss u/s 71, the Tribunal held that the loss incurred in the said activity is a business loss and the same cannot be set off against income from other sources comprising voluntary contribution. 7.1 In the case of the assessee for the A.Y. 1992-93 (ITA No. 340/Mum/1998) .....

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sion of the Hon'ble Supreme Court reported in 247 ITR 785 (SC), what is to be seen is, whether the income of the newspaper has been utilised for the purpose of the trust, even though, the objects may be charitable and this aspect of the matter, as rightly been contended by the learned Departmental Representative, were not put to test either by the assessing office or by the Commissioner of Income Tax (Appeal). In view of this, we are inclined to restore the matter back to the file of the ass .....

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mp; 293/Mum/2007), the issue before the Tribunal was whether the surplus funds utilised for acquisition of assets for business purposes would amount to application of income or not for charitable purpose. The Tribunal held that the expenditure in respect of those fixed assets in respect of which depreciation has been claimed and allowed to the assessee cannot be treated as application of income. However, the balance amount spent for acquisition of fixed assets, on which no depreciation has been .....

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is that the exemption u/s 11 will not be available to such a trust that carries on any business unless the business is carried on in the course of the actual carrying out of the primary purpose of the trust , since the business of running a newspaper though held by the assessee- trust as a part of its corpus was not carried on in the course of actual accomplishment of the charitable objects of the trust, bar of section 13(1)(bb) was applicable and the assessee-trust was not entitled to exemption .....

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11 w.e.f. 1st April, 1992, assessee-trust was entitled to exemption u/s 11 for the A.Y. 1992-93 and thereafter in respect of its income of newspaper business which was employed to achieve its charitable objects. 7.4 Now we come to the order of the ITAT C Bench, Mumbai in the case of the assessee for the impugned assessment years (ITA No. 8490/M/2010 & 1880/M/2012). The principal grounds of appeal raised by the assessee for the impugned assessment years as mentioned at para 3.1 of the order o .....

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ed Commissioner of Income Tax (Appeals) erred in not appreciating that while considering application of income, deficits of the earlier years had to be considered and a holistic view had to be taken. 7.5 The Tribunal concluded that the assessee s case was wholly unmaintainable and dismissed the appeal. 7.6 Let us now go back to the background on which the AO has imposed penalty u/s 271(1)(1) of the Act. In the assessment order for the A.Y. 2007-08, the AO has made the following additions: 1. Non .....

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of the case, allowed certain expenses to the assessee and confirmed the following additions: 1. Non-payment of employees & employers Contribution of Provident fund (Rs. 22,57,426-10,22,021) ₹ 12,35,405/- 2. Non-payment/late payment of ESIC contribution (Rs. 3,21,183-1,78,090) ₹ 1,43,093/- 3. Penalty for contravention of law ₹ 5,910/- 4. Non-deduction of TDS on payments attracting Provisions of section 40(a)(ia) ₹ 21,30,302/- 5. Prior Period Expenses disallowed u/s 43B .....

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ion of law ₹ 18,403/- 4. Non-deduction of TDS on payments attracting Provisions of section 40(a)(ia) ₹ 21,84,171/- 5. Prior Period Expenses disallowed u/s 43B ₹ 21,05,756/- 6. Disallowance of loss on sale of fixed assets ₹ 16,297/- Total ₹ 54,79,122/- 7.10 The A.O. has imposed a minimum penalty of ₹ 18,62,354/- u/s 271(1)(c) of the Act on the above additions / disallowances of ₹ 54,79,122/-. 7.11 In the scheme of the Act, the proceedings for imposition o .....

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ucts (P.) (supra) wherein it has held: A glance of provision of section 271(1)(c ) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The instant case was not the case of concealment of the income. That was not the case of the revenue either. It was an admitted position in the instant case that no information given in the return was found to be in .....

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e to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. [Para 7] Therefore, it must be shown that the conditions under section 271(1)(c ) exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed, because that is the only document, where the assessee can furnish the .....

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er section 271(1)(c). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. [Para 9] The revenue contended that since the assessee had claimed excessive deductions knowing that they were incorrect, it amounted to concealment of income. It was argued that the falsehood in accounts can take either of the two forms: .....

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