Case Law Details
Rotary Charitable Trust Vs JCIT (ITAT Bengaluru)
The issue under consideration is whether the penalty levied by CIT(A) u/s 272A of the Income Tax Act, 1961 is justified in law?
In the present case, there was a delay in filing the return of income by the assessee, though it is undisputed that the income of the assessee was not chargeable to tax in view of the provisions of section 10(23C)(iiiad) of the Act. Against this issue CIT(A) has initiated the penalty proceeding u/s 272A of the Act.
ITAT states that the provisions of Sec.139(4A) makes a reference only to provisions of Sec.11 and 12 and not to the provisions of Sec.10(23C(iiiiad) of the Act. Under section 272A(2)(e) of the Act, failure to file Return of income in terms of section 139(4A) of the Act is liable to penalty of Rs.100/- for every day of delay. However, u/s 273B of the Act, no penalty u/s 272(A)(2)(e) of the Act can be levied, if failure to file Return of income was due to reasonable cause. In the instant case, the reasonable cause was that the President of the Trust was a very senior citizen of more than 80 years of age. He was under bonafide belief that since income of the Trust is exempt u/s 10(23C)(iiiad) of the Act, there was no requirement to file return of income. When the correct legal position was apprised, return of income was filed immediately.
Hence, ITAT are of the view that the penalty imposed deserves to be deleted.
FULL TEXT OF THE ITAT JUDGEMENT
These are appeals filed by the assessee against two orders, both dated 26/6/2018 of the CIT(Appeals)-10, Bengaluru, relating to assessment years 2013-14 and 2014-15. In both these appeals, the assessee has challenged the imposition of penalty on the assessee u/s 272A(2)(e) of the Income-tax Act,1961 [‘the Act’ for short].
2. Under the provisions of section 139(4A) of the Act, every assessee which has receipts of income derived from property held under trust or other legal obligation has to file Return of income irrespective of its tax liability, if its income exceeds maximum amount which is not chargeable to income-tax, before giving effect to the provisions of sections 11 and 12 of the Act. The abovesaid provisions read as follows:
“139(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in subclause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to incometax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).”
Admittedly, there was a delay in filing the return of income by the assessee, though it is undisputed that the income of the assessee was not chargeable to tax in view of the provisions of section 10(23C)(iiiad) of the Act in both the assessment years. For assessment year 2013-14, the due date for filing return of income was 30/9/2013 but the return of income was filed on 6/12/2016. For assessment year 2014-15, due date for filing return of income was 30/9/2015 but the Return of income was filed on 16/12/2016.
3. Under section 272A(2)(e) of the Act, failure to file Return of income in terms of section 139(4A) of the Act is liable to penalty of Rs.100/- for every day of delay. However, u/s 273B of the Act, no penalty u/s 272(A)(2)(e) of the Act can be levied, if failure to file Return of income was due to reasonable cause. The reasonable cause pleaded by the assessee for consideration by the Revenue authorities was that the President of the Trust was a very senior citizen of more than 80 years of age. He was under bona fide belief that since income of the Trust is exempt u/s 10(23C)(iiiad) of the Act, there was no requirement to file return of income. When the correct legal position was apprised, return of income was filed immediately. It was also pleaded that there was no tax liability and that the assessee was primary and pre-university education for students in rural area. The above plea for reasonable cause was not accepted by the revenue authorities and hence the assessee is in appeal before us.
4. We head the rival submissions. The learned counsel for assessee placed reliance on the decision of the Bengaluru Bench of Tribunal in the case of HTSL Community Service Trust Vs. JDIT(Exemptions) (2012) 52 SOT 144 (Bangalore)(URO) wherein on identical reason, penalty-imposed u/s 272(A)(2)(e) was deleted by the Tribunal. The following were the relevant observations of the Tribunal:
“In the instant case, the assessee was under a bona fide impression for not filing the return of income within the prescribed time-limit. The assessee did not act dishonestly or negligently. The delay in filing the return was due to a reasonable and genuine cause. It is also not a case that the assessee did not file a return of income at all. During the year preceding the relevant assessment year, the assessee-trust was formed. The relevant previous year was the first year of activities of the assessee and the assessee was not familiar with the relevant provisions of filing of return of income and the procedure involved thereof. It was under a bona fide belief that the return is to be filed only after securing recognition under section 80G. However, on being appraised of the provisions of law, return was filed without any further delay. Since the entire income was applied towards the charitable activities, no tax was payable for the relevant assessment year. As a result of late filing of the return, there was no loss of revenue to the Government. The assessee had no ulterior motive to defraud the revenue and had not acted dishonestly or negligently. Therefore, there was reasonable cause for the delay in furnishing the return of income. [Para 8.4]
In view of the above, the assessee trust is not liable for penalty under section 272A(2)(e) for delay in filing the return of income. [Para 8.5]”
We are of the view that the reasons assigned in the present case are identical to the reasons assigned in the case decided by the Tribunal and referred to above. Following the ratio laid down therein, we are of the view that the penalty imposed deserves to be deleted.
5. Besides the above, We also agree with the submission of the learned counsel for assessee that the provisions of section 139(4A) are applicable only in case where exemption is claimed u/s 11 and 12 of the Act and not in case where income of an organization does not form part of the total income under the Act in view of the provisions of Sec.10(23C)(iiiad) of the Act. Provisions of Sec.139(4A) makes a reference only to provisions of Sec.11 and 12 and not to the provisions of Sec.10(23C(iiiiad) of the Act.
6. For the reasons given above, we cancel the penalty imposed and allow both the appeals of the assessee.
7. In the result, the appeals of the assessee are allowed.
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