2019 (3) TMI 133 - AT - Income Tax

Tribunal cancels penalty under IT Act for enhanced income, rules in favor of Resident Welfare Association

Srishti Resident Welfare Association Versus ITO, Exemption Ward, Ghaziabad.

The Tribunal set aside the CIT(A)'s penalty imposition under section 271(1)(c) of the IT Act on enhanced income for Assessment Years 2012-13 and 2014-15. ... Levying penalty u/s 271(1)(c) - enhancement of income - HELD THAT:- As decided in assessee's own case [2018 (11) TMI 641 - ITAT DELHI] for assessment years 2012-13 and 2014-15 as doubted the surplus without examining each and every item of income. Therefore, restore this issue to the file of the Assessing Officer. The order of the Tribunal came after the penalty was levied by the CIT(A) u/s 271(1)(c) for both the years. Since the Tribunal has set aside the order of the CIT(A), therefore, the very basis on which the penalty was levied by the CIT(A) does not survive. Therefore, the penalty levied by the CIT(A) is directed to be deleted. Thus hold and direct accordingly. The grounds raised by the assessee are accordingly allowed. Issues involved:Challenging penalty u/s 271(1)(c) of the IT Act on enhanced income.Analysis:1. The assessee, a Resident Welfare Association, challenged the penalty imposed by the CIT(A) under section 271(1)(c) of the IT Act on the income enhanced by him for Assessment Years 2012-13 and 2014-15.2. The Assessing Officer determined the total income of the assessee based on commercial activities surplus amounts, denying charitable status benefits under sections 11 and 12 of the IT Act. The CIT(A) enhanced the income, treating the entire receipt as income and disallowing the benefit of mutuality doctrine.3. Subsequently, the CIT(A) initiated penalty proceedings under section 271(1)(c) based on deliberate inaccurate income particulars and concealment. The penalty was set at 200% of the tax sought to be evaded on the enhanced income.4. The assessee appealed to the Tribunal, citing a previous order that set aside the CIT(A)'s income enhancement for the same assessment years. The Tribunal noted the authority of the CIT(Exemptions) for granting registration u/s 12AA and directed the CIT(A) to refrain from questioning this authority. The Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to re-examine the income items.5. Considering the Tribunal's order, the Tribunal held that the basis for the penalty imposed by the CIT(A) no longer existed, leading to the deletion of the penalty. The grounds raised by the assessee were allowed, and both appeals were granted in favor of the assessee.This detailed analysis of the legal judgment highlights the issues involved, the sequence of events, the arguments presented, and the final decision rendered by the Tribunal, providing a comprehensive understanding of the case.