Case Law Details
DCIT (E) Vs Baroda Cricket Association (ITAT Ahmedabad)
Article 20(1) of the Constitution of India provides certain protection in this regard which states that no person can be convicted for any offence except for a violation of a law in force at the time of action charged an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of offence. Therefore, where the taxpayer complies with the law as actually existed at the earlier point of time prior to the retrospective change and files return in accordance with law as it existed at that date, imposition of penalty on the grounds of retrospective amendment would be unjustified.
Action of the Assessing Officer fails on both counts, namely; (i) the penalty is rightly held to be not applicable where the issue involved is so complex and debatable and the assessee had adopted a view which is quite plausible and endorsed favourably by judicial precedents at many instances. (ii) The income arising on retrospective applicability of section 13(8) inserted by Finance Act, 2012 i.e. at a time when the returns for all the assessment years in question were already filed by assessee cannot attract penalty by any stretch of imagination.
FULL TEXT OF THE ITAT JUDGEMENT
The captioned appeals have been filed at the instance of the Revenue against the separate orders of the Commissioner of Income Tax(Appeals)-9, Ahmedabad [CIT(A) in short] dated 03/02/20 17, 06/02/2017 & 07/02/2017 in the matter of assessment orders under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) & 143(3) of the Act dated 27/02/2014, 29/03/2013 & 17/02/2014 relevant to Assessment Years (AY) 2009-10, 2010-11 & 2011-12 respectively.
2. Since all the three appeals involves common issue i.e. imposition of penalty of varied amounts under s.27 1(1)(c) of the Act flowing from denial on exemption under s.1 1 & 12 of the Act to the income/loss generated by the assessee from the activity of promoting the game of cricket and hosting cricket tournaments.
3. For the purposes of appreciating the facts, we shall first take up Revenue’s appeal in ITA No.999/Ahd/2017 concerning AY 2009-10 as a lead case, wherein the Revenue raised the following effective ground of appeal:
1. Whether on the facts and in the circumstances of the case the Ld. CIT(A) justified in deleting the penalty of Rs.1,25,31,670/- levied by the A.O. u/s.271(1)(c) of the Act.
4. The assessee is stated to be an AOP (Trust) engaged in the activity of promoting the game of cricket. It filed its return of income for AY 2009-10 in question declaring total income in the negative at Rs.(-)1,57,21,610/- and thereafter filed the revised return on 31/03/2011 showing revised total income in negative at Rs.(-) 4,50,00,000/-. The assessment was finalized under s. 143(3) r.w.s. 147 of the Act determining total income in positive at Rs.5,67,32,540/-. The Assessing Officer alleged that the assessee has furnished inaccurate particulars of income and has wrongly claimed exemption under s.11 & 12 of the Act which is not entitled to the cricket association on the nature of income generated, by it. It was inter alia observed that the definition of charitable purpose in section 2(15) clearly debars the income from activity in the nature of business trade or commerce towards advancement of object of general public utilityfrom exemption under s. 11 & 12 of the Act in the hands of recipient. It was inter alia observed that the receipts from carrying out activities in the nature of trade/commerce/business as specified in proviso to s.2(15) of the Act is excluded from the purview of section 11 & 12 in view of section 13(8) of the Act. The Assessing Officer accordingly imposed penalty of Rs.1,75,30,355/- on wrong claim of exemption under s.11 & 12 of the Act in defiance of law.
5. Against aforesaid action of the Assessing Officer, the assessee preferred appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee by deleting the penalty imposed under s.27 1(1)(c) of the Act broadly on the ground that there is a difference of opinion regarding applicability of proviso to section 2(15) r.w.s. 13(8) of the Act in respect of such cricket bodies and consequently the action of the assessee is to be regarded as bonafide. The CIT(A) also observed that the assessee had disclosed full facts and since its is registered under s.12A, the penalty imposed under s.27 1(1)(c) of the Act is not sustainable in the facts and circumstances of the case. The relevant operative para of the order of the CIT(A) is reproduced hereunder for ready reference:
“6. I have carefully considered rival contentions, case law relied upon and observations made by the A. O. in the penalty order. It is seen from the order of penalty that appellant had filed Return of Income on 30/09/2009 declaring total income at Rs.(-) 1,57,21,610/- and thereafter filed the revised return on 31/03/2011 reflecting total income at Rs.(-) 4,50,00,000/-. The assessment was finalized u/s.1 43 (3) r.w.s. 147 of the Act on 2 7/02/2014 determining total income at Rs.5,67,32,540/-. During the assessment proceedings, the benefit of exemption u/s. 11 & 12 of the Act was denied by the A. O. by invoking provisions of section 13(8) of the Act. The said amendment was inserted by Finance Act, 2012 with retrospective effect from 01-04-2009. Thus, according to the appellant at the time of filing of return on 30/09/2009 or on 31/03/2011, the changes that were brought out with retrospective effect did not exist. Further appellant has also argued before the A. O. that where a debatable, controversial or debatable deduction is claimed, the claim cannot said to be false. Otherwise it would become impossible for any Assessee to raise any claim or deduction which might be debatable. Therefore, according to appellant, penal provisions would not be applicable for such claims. However, A. O. has not accepted the arguments of the appellant and has proceeded to levy penalty u/s.2 71 (1 )(c) of the Act.
7. During the appellate proceedings appellant has relied upon the decision of CIT v/s. Yahoo India (P) Ltd. (2013) 33 taxguru.in 332 (Bombay HC) on the issue of retrospective amendment and how penal provisions are not applicable. Further with regard to furnishing of inaccurate particulars of income, the appellant submitted that A. O. has not pointed out that the information submitted was wrong. Regarding the claim made by the appellant it has relied upon the judgment of
Hon ‘ble Supreme Court in the case of CIT v/s. Reliance Petroproducts P.Ltd. 230 CTR 320. Further, it has also relied upon the judgrnent of Hon ‘ble Gujarat High Court in the case of Sarabhal Chemicals P.Ltd. v/s. CIT 257 ITR 355 (Guj.).
8. I have gone through the various case law relied upon by the appellant as well as submissions made by the appellant on the merits of the case. It cannot be denied that assessment proceedings and penal proceedings are separate proceedings. It is apparent that there is difference of opinion regarding applicability of proviso to section 2(15) w.s. 13(8) of the Act. It is the opinion of A.O. that proviso to section 2(15) is attracted because of the nature of activities undertaken by the appellant. CIT(A) has confirmed the additions/disallowances made by the A. O. Based on the bonafide belief that its activities are not covered by proviso to section 2(15) of the Act, appellant has claimed benefit of section 11 & 12 of the Act. Appellant has diselosecLall the facts with regard to the activities undertaken by it. Nowhere in the order of assessment as well as penalty order, the A.O. has questioned the genuineness of the activities of the appellant as well as correctness of the facts submitted. When appellant has disclosed full facts, it cannot be said that appellant had disclosed incorrect/wrong facts with regard to its activities. Appellant was well within rights to claim the benefit of exemption u/s.11 & 12 of the Act when it is registered u/s.12A of the Act. Thus, it is apparent that claim made by the appellant is legal claim and is a debatable issue. Disallowance of such legal claim of the-appellant cannot render the appellant liable for levy of penalty u/s.271(1)( c) of the Act. I fully agree with the reliance placed by the appellant in the case of CIT v/s. Reliance Petroproducts P.Ltd. (supra) and other case law. In the light of above, I am of the considered opinion that A.O. was not justified in levying penalty of Rs. 1,75,30,355/- u/s.271(1)(c) of the Act. The same is directed to be cancelled. The ground Nos. 1 & 2 raised by the appellant are thus hereby allowed.
9. The Ground No. 3 raised by the appellant is general in nature which does not require adjudication. For statistical purpose, the same is treated as dismissed.
10. The last ground of appeal raised by the appellant is residuary in nature. The assessee has not availed this ground of appeal. Accordingly this ground of appeal is treated as dismissed.”
The CIT(A) accordingly reversed the action of the Assessing Officer and deleted penalty on erroneous claim of exemption under s.11&12 of the Act.
6. The Revenue has impugned the aforesaid action of the CIT(A) before the Tribunal.
7. The Ld.DR for the Revenue, relied upon the penalty order of the Assessing Officer and contended that the activities of the association are in the nature of trade and commerce in the category referred to in proviso to section 2 (15) and thus the assessee has made wrong claim of exemption under s. 11 & 12 of the Act and consequently liable for penalty under s.27 1(1)(c) of the Act as a remedy for the loss of possible revenue.
8. The Ld.AR, on the other hand, relied upon the order of the CIT(A) and pointed out that the exclusion provided under s.13(8) to deny exemption under s. 11 & 12 of the Act has been inserted by Finance Act, 2012 with retrospective effect from 01/04/2009. It was thus submitted that without prejudice to all other submissions, the assessee cannot be charged with any defiance of law per se when the section 13(8) itself was not in existence at the time of filing of the return of income and was enacted with retrospective effect at a later stage by Finance Act, 2012. The Ld.AR further submitted that the issue as to whether the case of the assessee falls within the ambit of proviso to section 2(15) itself is highly complex and debatable and therefore it is not possible for anybody to readily infer the correct position of law. For such a claim where several judicial pronouncements have been rendered in favour of assessee, the action of the assessee cannot be seen as malafide of any sort. The AR referred to the decision of Coordinate Bench in Gujarat Cricket Association vs. JCIT (Exemption) Ahmedabad and Ors. in ITA No.1257/Ahd/2013 and Ors order dated 24/01/2019 to contend that after a very detailed and lengthy discussion on the very subject, the Coordinate Bench has concluded that proviso to section 2(15) is not applicable to the nature of income generated by assessee and consequently assessee is entitled to exemption under s. 11 & 12 of the Act. The Ld.AR submitted that on the face of merits itself, imposition of penalty under s.27 1(1)(c) of the Act is farfetched. It was thus submitted that CIT(A) has correctly taken note of the position of law and deleted the penalty.
9. We have carefully considered the rival submissions. We are called upon to address the controversy as to whether any penal action under s.27 1(1)(c) of the Act can be brought against the assessee on account of denial of exemption under s. 11 & 12 of the Act having regard to interpretation of proviso to section 2(15) of the Act. An incidental question also arises as to whether penalty action can be taken against the assessee while fastening liability to tax as a result of any retrospective amendment in law especially when the assessee could not foresee such law at the time of filing of return of income.
9.1. We straight away notice that the Coordinate Bench in a detailed and voluminous order in Gujarat Cricket Association (supra) after taking note of several judicial decisions holding the field in this regard came to the conclusion that proviso to section 2(15) has been wrongly invoked against such cricket bodies. Thus, where the issue towards applicability of proviso to section 2(15) which seeks to restrict and exclude the exemption under s. 11 & 12 of the Act itself has been approved in favour of assessee, one cannot say that the issue is free from doubt, to say the least.
9.2. This apart, a question arises as to whether an assessee can be imputed with clairvoyance where some amendment has been brought with retrospective effect whereby tax liability is sought to be imposed on assessee. In the instant case, section 13(8) of the Act has been enacted by Finance Act, 2012 with retrospective effect from 01/04/2009. As per aforesaid enactment, benefit of section 11 & 12 will not be available to the assessee where such assessee is in receipt of income which falls under proviso to clause (15) of section 2 of the Act. Admittedly, the aforesaid amendment seeking to deny benefit of s. 11 to the assessee was not in existence at the time of filing of return of income.
9.3. The law in this regard is loud and clear. In CIT vs. Hindustan Electro Graphites Ltd. (2000) 160 CTR(SC) 8 : (2000) 243 ITR 48 (SC) in the context of applicability of the provisions of section 28(iiib) of the Act, the Apex Court quoted.
“An assessee cannot be imputed with clairvoyance. When the return was filed, the assessee could not possibly have known that the decision on the basis of which cash compensatory support had been claimed as not amounting to the assessee’s income ceased to be operative by reason of retrospective legislation.”
Further, Article 20(1) of the Constitution of India provides certain protection in this regard which states that no person can be convicted for any offence except for a violation of a law in force at the time of action charged an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of offence. Therefore, where the taxpayer complies with the law as actually existed at the earlier point of time prior to the retrospective change and files return in accordance with law as it existed at that date, imposition of penalty on the grounds of retrospective amendment would be unjustified.
9.4. Similar issue came up for consideration before the Hon’ble High Court of Bombay in the case of CIT vs. Yahoo India Pvt. Ltd. (2013) 33 taxmann.com 332 (Bom.). In this case, the assessee (Yahoo India), was hired by an Indian media agency to display advertisement on the website of Yahoo Hong Kong. Accordingly, the assessee paid Yahoo Hong Kong for uploading and display of banner advertisement on its website portal. The Tax Authorities construed such payment to Yahoo Hong Kong taxable as royalty income u/s 9(1) (vi) of the Act and accordingly, disallowed the same for non-deduction of tax at source u/s 40a(i). Further, penalty u/ 271(1) (c) for concealment or furnishing of inaccurate particulars of income was also imposed upon the assessee. On appeal before the High Court, the Revenue sought to justify the disallowance and penalty by placing reliance on Explanation 5 introduced to Section 9 of the Act by the Finance Act, 2012 with retrospective effect from 1st June, 1976 to tax royalty income. The High Court while dismissing the revenue appeal held that no penalty u/s 271(1)(c) can be imposed upon the assessee on account of disallowance made due to retrospective amendment made in the Act. It was observed by the High Court that the fact that the law has been amended with retrospective effect clearly shows that the issue was debatable. Further in the absence of any failure to disclose material facts necessary for the purpose of assessment, penalty under Section 271(1) (c) of the Act cannot be levied. Accordingly the penalty u/s 27 1(1) (c) was deleted.
10. In the light of above discussion, the action of the Assessing Officer fails on both counts, namely; (i) the penalty is rightly held to be not applicable where the issue involved is so complex and debatable and the assessee had adopted a view which is quite plausible and endorsed favourably by judicial precedents at many instances. (ii) The income arising on retrospective applicability of section 13(8) inserted by Finance Act, 2012 i.e. at a time when the returns for all the assessment years in question were already filed by assessee cannot attract penalty by any stretch of imagination. We thus, find no infirmity in the action of the CIT(A) in deleting the penalty in all the three appeals of the Revenue. We thus decline to interfere.
11. In the result, all the three appeals of the Revenue are dismissed.
