1992 (9) TMI 131 - AT - Income Tax

Appeal Dismissed: Penalty Cancelled for School Exempt as Educational Institution

Income-Tax Officer. Versus St. Michaeals Education Foundation.

Income-Tax Officer. Versus St. Michaeals Education Foundation. - ITD 043, 656, Issues involved: Appeal against cancellation of penalty u/s 271(1)(a) imposed on respondent by ITO for late filing of income tax return.Summary:The respondent, a school registered u/s 12A(a) of the Income-tax Act, claimed exemption u/s 10(22) as an educational institution during assessment. The ITO rejected this claim but allowed benefits u/s 11 & 12 as the aims were charitable. Penalty proceedings u/s 271(1)(a) were initiated due to late filing of return. The penalty was calculated at 1% of gross income. The DC (Appeals) cancelled the penalty based on the argument that as an educational institution, the respondent was not obligated to file a return.The Departmental Representative supported the penalty, citing the rejection of exemption u/s 10(22) by the ITO. The respondent's counsel argued that subsequent Tribunal orders granted the exemption and as the income was nil, penalty provisions were not applicable. The Tribunal noted a factual error in the DC (Appeals) order regarding the exemption under section 10(22) and confirmed that the respondent was enjoying this benefit. Institutions covered u/s 10(22) are not required to file returns if they have no other taxable income. Charitable institutions benefiting from u/s 11 & 12 must file returns as per section 139(4A), failure of which attracts penalty u/s 271(1)(a) even if income is nil.The ITO levied the penalty based on gross income without allowing benefits u/s 11 & 12. However, as the respondent was fully exempt u/s 10(22) and classified as an educational institution by the Tribunal, penalty provisions were deemed inapplicable. Therefore, the DC (Appeals) order cancelling the penalty was upheld, and the appeal was dismissed.