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2018 (12) TMI 461

Held that:- The claim of exemption of income under section 11(1) is allowed only when the assessee is registered under section 12AA(1) of the Act . In view of the no registration, the claim of exemption under section 11 is a patently bogus claim made by the assessee. - It is evident that the assessee failed to give any bonafide explanation in respect of the bogus claim made in all the three assessment years and thus Explanation -1 below the section 271(1)(C) of the Act is conspicuously attracted in the case of the assessee. For levying penalty under section 271(1)(C) of the Act, mensrea of having intention of evading tax is not important. What is important is whether the assessee has substantiated the explanation given and able to prove that the explanation is bonafide. If the assessee failed in doing so , it is liable to attract penalty under section 271(1)(C)of the Act . - As in the case of COMMISSIONER OF INCOME TAX vs. HCIL KALINDEE ARSSPL (2013 (8) TMI 245 - DELHI HIGH COURT) has held that Penalty provisions are not criminal and do not require culpable mensrea. Whether or not the assessee had acted malafidely is not the relevant question to be asked and answered. The r .....

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; 9, 93, 603/-and ₹ 3, 98, 862/-is involved. 4. Briefly stated facts of the case as culled out from the order of the lower authorities are that the assessee society is registered under the Societies Registration Act, 1860 on 11/09/1979 and registered under section 12AA(1) of the Act on the 28/04/2006 w.e.f. 01/04/2005 for the assessment year 2006-07 onward. The assessee had been enjoying the exemption under section 10(23) of the Act up to assessment year 2002-03. However the provisions of section 10(23) have been omitted by the Finance Act 2002 w.e.f. 01/04/2003. In the return of income filed for the assessment years 2003-04 to 2005-06, the assessee claimed exemption of its income under section 11(1) of the Act without any registration under section 12AA(1) of the Act. As far as status of the quantum proceedings is concerned, the factual position as mentioned by the Ld. CIT(A) in para 4.2 of the impugned order, is reproduced as under for ready reference: 4.2 So the assessee was earlier enjoying the exemption u/s 10(23) and has been enjoying the exemption u/s 11(1) subsequently but the assessee did not have any registration u/s 12AA(1) or notification u/s 10(23) during the per .....

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The Ld. DR on the other hand, submitted that the assessee was aware of the fact that it was not registered under section 12AA(1) of the Act for the three years involved and despite a bogus claim of exemption under section 11(1) was made by the assessee. The Ld. DR submitted that a bogus claim is liable for penalty under section 271(1)(c) of the Act in view of the decision of the Hon ble Delhi High Court in the case of CIT Vs Zoom Communications private limited 327 ITR 510 (Del). 8. We have heard the rival submissions and perused the relevant material on record. The undisputed fact in the cases involved is that assessee failed to produce any evidence that it was registered under section 12AA(1) of the Act for these three assessment years. The claim of exemption of income under section 11(1) is allowed only when the assessee is registered under section 12AA(1) of the Act . In view of the no registration, the claim of exemption under section 11 is a patently bogus claim made by the assessee. In the facts and circumstances of the case ,the Ld. CIT(A) upheld the penalty in assessment year 2003- 04 observing as under: 4.5 I have considered the order of the AD and the submissions of the a .....

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) read with its explanations is a civil liability and wilful concealment is not an essential ingredient for attracting the civil liability/penalty. 4.11 The case of the Hon'ble Supreme Court of Dharmendra Textiles (supra) was again analysed and followed in the recent case by the Hon'ble jurisdictional Delhi High Court in the case of CIT Vs Zoom Communication P Ltd, 327 ITR 510 (Del) [2010) (ITA No.07/2010) order dated 24/05/2010. The Hon'ble High Court has noted in Para Nos.19 and 20 of its order as :- lt is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala-fide, Explanation 1 to Section 271(1) would come into play and work to the disadvantage of the assessee………………. (20) The Court cannot overlook the fact that only a small percentage of the Income Tax Returns are picked up for scrutiny. If the assessee makes a claim is not only incorrect in law but also wholly without any basis and the explanation furnish .....

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g the penalty imposed by the Income-tax Officer under section 271(1)( c) of the Act. The findings given in assessment proceedings are relevant and have probative value. Where the assessee produces no fresh evidence or presents any additional or fresh circumstance in penalty proceedings, he would be deemed to have failed to discharge the onus placed on him and the levy of penalty could be justified. Even if there is no concealment of income or furnishing of inaccurate particulars, but on the basis thereof the claim which is made is ex facie bogus, it may still attract penalty provision. The Explanations appended to section 27H1)(c) of the Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The object behind enactment of section 271(1)(c) read with the Explanations indicate that the section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under section 276C of the Act." 4.13 After considering all th .....

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