Case Law Details
Kongnoli Sarva Seva Society Ltd Vs ITO (ITAT Pune)
Introduction: The Income Tax Appellate Tribunal (ITAT) in Pune recently delivered an impactful ruling in the Kongnoli Sarva Seva Society Ltd Vs ITO case. ITAT set aside the order from the National Faceless Appeal Centre (NFAC), making it clear that incorrect claims of deductions or expenses in an Income Tax Return (ITR) do not amount to concealment of income or furnishing inaccurate particulars. The appellant had challenged the penalty imposed by the Income Tax Officer (ITO) under section 271(1)(c) of the Income-tax Act, 1961.
Analysis: The case hinged on the interpretation of section 271(1)(c) of the Income-tax Act, related to penalties for concealing income or furnishing inaccurate particulars. The ITAT found that the appellant society had, indeed, made mistakes in their ITR, which led to certain additions under section 80P of the Act and the taxation of consequential income. However, following the precedence set by the Supreme Court in ‘Reliance Petro Products Pvt. Ltd.’, it was ruled that these mistakes did not amount to concealment of income or furnishing of inaccurate particulars.
Interestingly, the ruling also pointed out the divergent interpretations by the CIT(A) and NFAC, even though the same set of facts and circumstances were presented to both. The CIT(A) had allowed the appellant’s appeal and deleted the penalty, while the NFAC dismissed the appeal.
Conclusion: This ruling brings forth a clear message that incorrect claims in an ITR do not automatically amount to concealment of income. It also emphasizes the importance of consistency in interpretations across different appellate authorities. This verdict by ITAT Pune will undoubtedly have a significant impact on future assessments and appeals related to penalties under section 271(1)(c) of the Income-tax Act.
FULL TEXT OF THE ORDER OF ITAT PUNE
The present appeal of the assessee for the assessment year [‘AY’ in short] 2013-14 is directed against the order of National Faceless Appeal Centre, Delhi [‘NFAC’ in short] dt. 17/03/2023 passed u/s 250 of the Income-tax Act, 1961 [‘the Act’ in short].
2. The appellant assessee raised following grounds for adjudication of the issue in its favour;
‘1. Under the facts and circumstances of case and in law Ld. Assessing Officer is erred in levying penalty u/s. 271(1)(c).
2. Under the facts and circumstance of case and in law Ld. Assessing Officer is erred in levying penalty u/s. 271(1)(c) without adequate satisfaction.
3. Under the facts and circumstances and in law Ld. CIT(A) is erred in passing appeal order wherein appeal is already decided.
4. Appellant prays for just and equitable relief.
5. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal if deemed necessary at the time of hearing of the appeal. ’
3. In-spite of due notice none represented the assessee nor there is any application for adjournment on record; considering the material placed on record we proceeded to adjudicate the matter ex-parte in the light of rule 24 of ITAT Rules 1963. During the course of physical hearing the Ld. DR at the outset adverting to the impugned order solidified that, the assessee had filed two appeals against the levy of penalty one in physical regime and other in faceless mechanism. The present appeal lies against the order of Ld. NFAC confirming the penalty, whereas the appellant was successful before the Ld. CIT(A). Without contravening the other facts of the case, the Ld. DR relied on the orders of tax authorities below.
4. After hearing to Ld. DR and subject to the provisions of rule 18 of ITAT, Rules 1963 perused the material placed on records, we observed that;
4.1 The return of income [‘ITR’ in short] filed by the appellant society was subjected to regular assessment u/s 143(3) whereby certain additions were carried on account of disallowance u/s 80P of the Act and brought to tax the consequential income under the head ‘House Property’ and ‘Other Sources’, by the Income Tax Officer [‘AO’ in short] by an order dt. 12/02/2016.
4.2 Pursuant to the satisfaction noted in the aforestated assessment order, the Ld. AO initiated penalty proceedings for concealment u/s 271(1)(c) of the Act and considering the submission, has imposed penalty of ₹1,07,739/- by an order dt. 26/08/2016.
4.3 Aggrieved by the said levy, the assessee filed two appeals before the first appellate authority i.e. one filed before the learned Commissioner of Income Tax-Appeals, Kolhapur-1 [‘CIT-(A) in short] on 10/10/2016 and another appeal against the levy of penalty was also filed before Ld. NFAC on 19/10/2016.
4.4 The Ld. CIT(A) vide his DIN & order No. ITBA/APL/S250/2019-20/1022192303(1) dt. 12/12/2019 allowed the appeal of the assessee society in the light of Hon’ble Supreme Court decision in ‘Reliance Petro Products Pvt. Ltd.’ reported in 322 ITR 158 (SC).
4.5 Insofar as the faceless appeal against the said levy of penalty u/s 271(1)(c) of the Act is concerned, we note that, the Ld. NFAC vide DIN & Order No ITBA/NFAC/S/250-2022-23/1050917760(1) dt. 17/03/2023 confirmed the action of Ld. AO imposing the penalty, thus dismissed the appeal of the appellant society.
4.6 Saddled with the action of first appellate authority, the assessee set-up its case against the impugned order dt. 17/03/2023 passed u/s 250 of the Act by the Ld. NFAC.
5. In this factual uncontroverted facts and circumstances, we note that, Ld. CIT(A) after careful perusal of the records, submission and averment vis-à-vis arguments put forth by the Ld. counsel for the assessee during the course of physical hearing, has rightfully allowed the appeal of the appellant assessee and deleted the penalty levied u/s 271(1)(c) of the Act in the light of judicial precedents. Per contra NFAC, on the basis of same submission placed on record, has failed to appreciate the facts and circumstances of the case and dismissed the appeal of the assessee outstepping the judicial discipline i.e. turning blind eye to the judicial precedents.
6. In these interesting circumstances, we fail to understand as to how same set of facts and circumstances in the light of settled legal position and judicial precedents could give rise to divergent adjudication by the same appellate forum i.e. one in the physical hearing mode before Ld. CIT(A) and other in faceless mechanism by the Ld. NFAC.
7. Nevertheless, on thoughtful consideration of facts and circumstance and judicial precedents, we are heedful to set-aside the impugned order of Ld. NFAC dt. 17/03/2023 appealed against on two counts;
a) Following the judicial precedents laid by Hon’ble Apex Court (supra), that rejection of incorrect claim of deduction or expense made in the ITR, do not ispo-facto tantamount to concealment of income or furnishing of inaccurate particulars.
b) The Ld. CIT(A) had passed his order on 12/12/2019, thus cause of action culminated the grievance brought before the first appellate authority, consequently rendered the appeal before Ld. NFAC as infructuous so the impugned order.
8. In result, the appeal of the assessee is ALLOWED.
In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Thursday 15th day of June, 2023.
