Case Law Details
Police Welfare Petrol Pump Vs DCIT (ITAT Jabalpur)
Material Facts
The assessee, a Police Welfare Society registered under Section 12A and approved under Section 80G of the Income-tax Act, operated a petrol pump and claimed exemption of its income as incidental to its charitable objects. The assessment under Section 143(3) resulted in additions after the Assessing Officer held the income was not eligible for exemption. Penalty proceedings under Section 270A were initiated, and penalty of 200% of the tax payable on under-reported income was levied. The CIT(A) upheld the penalty.
Procedural History
The appeal before the Tribunal was delayed by 437 days. The Tribunal condoned the delay, accepting the explanation that it resulted from bureaucratic delays in decision-making and not from any deliberate conduct.
Parties’ Submissions
The assessee submitted that all material facts relating to its activities, receipts and expenditure had been fully disclosed and that there was neither concealment nor furnishing of inaccurate particulars. It contended that the exemption claim was made under a bona fide belief. It was further submitted that the assessee had claimed 100% deduction instead of 50% under Section 80G due to a bona fide mistake.
The Revenue argued that the penalty had been imposed for misreporting of income under Section 270A(8), which permits levy of penalty at 200% of the tax payable.
Tribunal’s Findings
The Tribunal observed that although the Assessing Officer repeatedly referred to under-reporting resulting from misreporting, the penalty order ultimately levied penalty for under-reporting. It held that penalty proceedings are separate and distinct, and every default does not automatically attract penalty.
The Tribunal noted that it was not the Revenue’s case that the assessee was ineligible for deduction under Section 80G. It found that the claim of 100% deduction instead of 50% appeared to be a bona fide mistake and that the Revenue had not produced material establishing mala fides or lack of bona fides.
Final Ruling
The Tribunal held that the penalty under Section 270A was not sustainable, set aside the orders of the lower authorities, directed the Assessing Officer to delete the penalty, and allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT JABALPUR
This appeal, by the assessee, is directed against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC) dated 24.11.2023 pertaining to the assessment year 2020-21. The assessee has raised the following grounds of appeal: –
“1. The order passed by the Ld. CIT(A) supporting the order of Ld. AO is bad in law and facts, void ab initio and with jurisdiction.
2. That the ld. CIT(A) erred in law and facts of the case by imposing penalty u/s 270A of an amount of Rs.21,53,258/-
3. The appellant reserves the right to add or amend any ground of appeal.”
2. The present appeal is delayed by 437 days. The assessee has filed an application seeking condonation of delay, duly supported by an affidavit explaining the reasons for the delay. The Ld. Counsel for the assessee reiterated the submissions as made in the condonation application and relied upon the facts stated in the accompanying affidavit. He submitted that the delay was neither intentional nor deliberate and prayed that the same be condoned in the interest of substantial justice.
3. Per contra, the Ld. Departmental Representative strongly opposed the application for condonation of delay. He submitted that the assessee has failed to establish any reasonable and sufficient cause for the inordinate delay. Drawing our attention to the averments made in the affidavit, he contended that the deponent himself has admitted that there was no formal instruction issued by the Police Headquarters in this regard. According to the Ld. DR, the delay has occurred solely on account of negligence and inaction on the part of the assessee and, therefore, the same does not deserve to be condoned.
4. I have heard the rival submissions and perused the material available on records. The appeal is delayed by 437 days. The reasons for the delay have been explained by the assessee through a duly sworn affidavit and the application for condonation of delay. On a careful consideration of the facts stated therein, I find that the delay was caused due to circumstances beyond the control of the assessee and there is nothing on record to suggest that the delay was deliberate, and or intended to take any undue advantage. It is a settled principle of law that while considering an application for condonation of delay, a liberal approach should be adopted where sufficient cause is shown and substantial justice should prevail over technical considerations. The Hon’ble Supreme Court in a catena of decisions has held that ordinarily a litigant does not stand to benefit by lodging an appeal belatedly and that matters should, as far as possible, be decided on merits rather than being dismissed on technical grounds. Though the Ld. DR has contended that the delay occurred due to negligence on the part of the assessee and that there was no formal instruction issued by the Police Headquarters, I find that the explanation furnished by the assessee, due to bureaucratic delay in taking a decision would, constitutes a reasonable and bona fide cause for the delay. In my considered view, the assessee has satisfactorily explained the delay and the same deserves to be condoned in the interest of substantial justice. Accordingly, the delay of 437 days in filing the present appeal is condoned and the appeal is admitted for adjudication on merits.
5. Briefly stated the facts are that the assessee is a Police Welfare Society engaged in welfare activities for police personnel and is duly registered under Section 12A of the Income Tax Act, 1961 (“Act”, for short) and also enjoys approval under Section 80G of the Act. During the relevant assessment year, the assessee operated a petrol pump and claimed exemption of its income by treating the activities as incidental to the attainment of its charitable objects. The assessment was completed under Section 143(3) of the Act wherein the Assessing Officer held that the income earned from the petrol pump activity was not eligible for exemption and accordingly made additions to the returned income. Consequent thereto, penalty proceedings under Section 270A of the Act were initiated for alleged under-reporting/misreporting of income. The Assessing Officer thereafter levied penalty under Section 270A of the Act holding that the assessee had furnished inaccurate particulars and had claimed exemption which was not admissible under law. Aggrieved against this, the assessee preferred in appeal before the Ld. CIT(A) who sustained the penalty. Now, the assessee is in appeal before this Tribunal.
6. Apropos to the grounds of appeal, the Ld. Counsel for the assessee submitted that the assessee had disclosed all material facts relating to its activities, receipts and expenditure in the return of income as well as during the assessment proceedings. It was contended that there was neither concealment of income nor furnishing of inaccurate particulars of income. The Ld. Counsel further submitted that the assessee is a charitable institution duly registered under Section 12A and approved under Section 80G of the Act. The claim of exemption was made under a bona fide belief based on the objects of the society and the manner in which the activities were carried on. He further submitted there is no provision u/s 270A of the Act for levy of penalty of 200% on under reported income. Sub-section (7) to section 270A of the Act empowers the AO to levy penalty in respect of under reporting of the income to the extent of sum equal to 50% of the amount of tax payable on under reported income. He thus, prayed for quashing the penalty order.
7. On the other hand, the Ld. Departmental Representative for Revenue vehemently defended the penalty order u/s.270A of the Act and the order of CIT(A) confirming the same. The ld. DR pointed that a perusal of the penalty order would show that the Assessing Officer has levied penalty for mis-reporting of income. Sub section (8) to section 270A of the Act provides for levy of penalty equal to 200% of amount of tax payable where underreporting is in consequence of any misreporting. He thus prayed for upholding the impugned order.
8. I have considered the rival submissions and perused the material available on record. A perusal of the assessment order reveals that the Assessing Officer while passing the assessment order has initiated penalty proceedings u/s.270A of the Act for misreporting of income. Thereafter, the AO has passed penalty order u/s.270A of the Act on 25.03.2023 levying penalty u/s.270A @ 200% of the tax payable on under reported income. Though, in the body of the order the AO has multiple times used the expression, “the assessee has under reported income in consequence of misreporting thereof”, but has finally levied penalty for under reporting of income.
9. It is well settled that the penalty proceedings are separate and distinct proceedings. Each default would not attract penalty. A bona fide error or clerical mistake would not attract the penal consequence. In the case in hand, it is not the case of AO that the assessee society is not entitled for deduction u/s 80G of the Act. In the present case, the assessee instead of claiming 50% exemption of donation received it claimed 100% of donation. The mistake appears to be bona fide. Further, the Hon’ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd., held that merely because a claim made by the assessee is not accepted or is found to be unsustainable in law, the same would not ipso facto amount to furnishing inaccurate particulars of income so as to attract penalty proceedings. The Hon’ble Apex Court categorically observed that making an incorrect claim in law is distinct from furnishing inaccurate particulars of income. Further, in the case of Price Waterhouse Coopers (P.) Ltd. v. CIT, the Hon’ble Supreme Court held that a bona fide and inadvertent human error, committed despite full disclosure of facts, cannot be visited with penalty. The Hon’ble Apex Court emphasized that penalty provisions are not intended to punish every inadvertent or accidental mistake committed by an assessee. It is a settled proposition of law that rejection of a legal claim does not automatically result in penalty proceedings. The distinction between an unsustainable claim and a false claim is well recognized. In the present case, the Revenue has not brought any material on record to establish that the claim was mala fide or lacking in bona fides. Considering the totality of facts and circumstances of the case, I am of the considered opinion that the impugned penalty levied under Section 270A of the Act is not sustainable. Accordingly, the orders of the authorities below are set aside and the Assessing Officer is directed to delete the penalty.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 30/06/2026.
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