Case Law Details

Case Name : Guru Nanak Public School Vs ACIT (ITAT Chandigarh)
Appeal Number : ITA No. 946/Chd/2019
Date of Judgement/Order : 28/02/2020
Related Assessment Year : 2008-09
Courts : All ITAT (6795) ITAT Chandigarh (155)

Guru Nanak Public School Vs ACIT (ITAT Chandigarh)

The facts of the present case are that the assessee committee was registered under the Societies Registration Act, 1860 with the Registrar of Firms and Society, Punjab, Chandigarh with the object of managing and running Guru Nanak Public Schools and other educational institutions to be established from time to time. The assessee committee had been granted registration U/s 12A of the Act dated 28/09/2007 and had been claiming exemption/deduction U/s 11/12 of the Act since then. However, the registration was canceled U/s 12AA(3) of the Act dated 30/03/2013 with retrospective effect from 28/09/2007, since when the registration was granted.

For the impugned assessment year, the assessee had filed return of income declaring NIL income after claiming exemption U/s 11/12 of the Act. On the cancellation of the registration, the case of the assessee for the impugned year was reopened U/s 147 of the Act and thereafter assessment was completed by treating corpus contribution and the excess of receipt over expenditure as income of the assessee’s society.

ITAT have considered the rival contentions and have gone through the order passed by the Coordinate Bench. ITAT see no reason to uphold the levy of penalty in the present case U/s 271(1)(c) of the Act, since the basis for levy of penalty, being cancellation of registration granted to the assessee U/s 12A of the Act and as a consequence treating its surplus and corpus donation as not exempt but taxable under the Act, has been quashed by the ITAT. In effect the registration granted to the assessee u/s 12A stands restored by the order of the ITAT. The additions made to the income of the assessee as a consequence of cancellation of registration, no longer survive and there remains no basis for the levy of penalty in the present case. The penalty so levied U/s 271(1)( c) of the Act amounting to Rs. 19,35,258/- is therefore, directed to be deleted.

FULL TEXT OF THE ITAT JUDGEMENT

The present appeal has been filed by the assessee against the order passed by the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana [hereinafter referred to as the CIT(A)] dated 29/04/2019 confirming the levy of penalty U/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act) for the A.Y. 2008-09.

2. The facts of the present case are that the assessee committee was registered under the Societies Registration Act, 1860 with the Registrar of Firms and Society, Punjab, Chandigarh with the object of managing and running Guru Nanak Public Schools and other educational institutions to be established from time to time. The assessee committee had been granted registration U/s 12A of the Act vide order of the ld. CIT-III, Ludhiana dated 28/09/2007 and had been claiming exemption/deduction U/s 11/12 of the Act since then. However, the registration was canceled U/s 12AA(3) of the Act vide order of the ld.CIT-III, Ludhiana dated 30/03/2013 with retrospective effect from 28/09/2007, since when the registration was granted.

3. For the impugned assessment year, the assessee had filed return of income declaring NIL income after claiming exemption U/s 11/12 of the Act. On the cancellation of the registration, the case of the assessee for the impugned year was reopened U/s 147 of the Act and thereafter assessment was completed by treating corpus contribution and the excess of receipt over expenditure as income of the assessee’s society. Thus, the income was computed at Rs.66,20,860/- as against NIL income returned by the assessee for the impugned year. The appeal of the assessee was dismissed by the ld CIT(A) and thereafter show cause notice U/s 274 read with Section 271(1)(c) of the Act was issued for levying penalty. Due reply was filed by the assessee claiming that the mere rejection of its claim of exemption U/s 11 of the Act would not tantamount to furnishing inaccurate particulars of income. The plea of the assessee was not found acceptable by the Assessing Officer (A.O.) and accordingly, penalty @ 100% of the tax sought to be evaded was levied by the A.O. amounting to Rs. 19,35,258/-. The same was upheld by the ld. CIT(A).

4. Against the order of the ld. CIT(A), the assessee has come up in appeal before us raising several grounds. At the outset, the ld counsel for the assessee pointed out that the ITAT had restored back its registration U/s 12A of the Act vide its order passed in appeal filed to it in ITA No. 619/Chd/2013 and had also deleted the additions in its quantum appeal filed in ITA No. 910/Chd/2016, vide a consolidated order passed on 20/12/2019. Copy of the said order was placed before us at paper book page No. 22 to 35. Our attention was drawn to the relevant finding of the ITAT quashing order of the ld. CIT cancelling registration granted to the assessee U/s 12AA of the Act at para 13 to 15 of the order, which are reproduced as under:

“13. After analyzing the details in brief of the present case, we find that ld. CIT had cancelled the registration of the appellant by taking into consideration the set of facts pertaining to the year 1971 and the circumstances before grant of registration which was granted on 28.09.2007. At this stage, we are of the view that ld. CIT can subsequently cancel the registration only under above two contingencies as mentioned in detail above, however, for the sake of repetition i.e. (i) the activities of the Trust are not genuine, or (ii) the activities of the Trust being not carried out in accordance with the objects of the Trust.

14. It is admitted fact that ld. DR could not point out before us any change in circumstances after the grant of registration by the CIT in the year 2007. It has further not been pointed out that what are the material changes in the circumstances which led the CIT to cancel the registration which was earlier granted to the appellant. In our considered view, the CIT cannot cancel the registration already granted on the basis of circumstances pertaining to the year 1971 or prior to grant of initial registration as he do not enjoy the power of review and in case the CIT is allowed to cancel the registration on the basis of circumstances which were in existence before the grant of permission initially granted to the appellant, then the said order would amount to review of the decision of the earlier CIT which admittedly not the position of law. Since the CIT can exercise the jurisdiction to cancel the registration only in the two circumstances which are mentioned in Section 12AA(3) of the Act and in the present case, it has not been pointed out by the CIT that any of those conditions are present in the case of the appellant, thus in no circumstances, the registration of the appellant could have been cancelled on the basis of circumstances prior to 28.09.2007, the date on which the initial registration was granted.

15. Apart from above, we have also noticed that CIT in his order has mentioned that CCIT, Ludhiana had refused to allow application u/s 10(23C) to the appellant. It was stated at bar by ld. AR that the said order of CCIT, Ludhiana regarding refusal to allow application u/s 10(23C) of the Income Tax Act has already been challenged by them before Hon’ble High Court and the Hon’ble High Court has already admitted the said petition for adjudication. Thus, in our view, the CIT could not cancel the registration of the appellant which was already granted on 28.09.2007 by holding that CCIT Ludhiana had refused to allow application of the assessee u/s 1 0(23C) of the Act. Therefore, in view of the above facts and circumstances as detailed above, we quash the order of CIT dated 30.03.2013 regarding cancellation of registration granted to the appellant u/s 12AA.”

The ld. counsel for the assessee, therefore, contended that there was no case for levy of penalty since the additions made did not survive.

5. The ld. DR, on the other hand, fairly conceded to the above fact.

6. We have considered the rival contentions and have gone through the order passed by the Coordinate Bench. We see no reason to uphold the levy of penalty in the present case U/s 271(1)(c) of the Act, since the basis for levy of penalty , being cancellation of registration granted to the assessee U/s 12A of the Act and as a consequence treating its surplus and corpus donation as not exempt but taxable under the Act, has been quashed by the ITAT. In effect the registration granted to the assessee u/s 12A stands restored by the order of the ITAT. The additions made to the income of the assessee as a consequence of cancellation of registration, no longer survive and there remains no basis for the levy of penalty in the present case. The penalty so levied U/s 271(1)( c) of the Act amounting to Rs. 19,35,2 58/- is therefore, directed to be deleted.

7. In the result, the appeal of the assessee stands allowed.

Order pronounced in the open court on 28th February, 2020

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