2025 (3) TMI 227 - HC - Income Tax

Charitable Trust wins appeal: Penalty under Section 271(1)(c) overturned due to lack of evidence for concealment or inaccuracy.

Bhagwan Shri. Hamsa Trust Versus Income Tax Officer, (E) -I (1) Mumbai

The Court ruled in favor of the Appellant, a Charitable Trust, by overturning the Tribunal's decision to impose a penalty under Section 271(1)(c) of the ... Penalty u/s 271 (1) (c) - denial of benefit of Section 11 as they did not have a registration certificate u/s 12A - HELD THAT:- Trust has came into existence on 17 October 2007 and the first accounting year of the Trust is from 25 October 2007 to 31 March 2008. Assessee also undertook to file the audited accounts before 30 September 2008, which was duly done. However, the application dated 5 September 2008 came to be disposed of by the CIT (E) only on 31 March 2009. The delay in disposing of the application and making it applicable from AY 2009-2010 only cannot be attributed to the Appellant-Assessee. There is no reason given as to why the registration could not have been granted with effect from the date when the firm came into existence. In any case, the Appellant-Assessee is a Charitable Trust and was under a bona fide belief that the registration certificate would be granted from the date of its existence and it was on the basis of that bona fide belief that the claim was made. It was first year of the Appellant-Assessee. In our view, no case is made out for concealment of income or furnishing of inaccurate particulars of income since the application for registration u/s 12A was filed with the Respondent-Revenue and the same was on record at the time of filing the return of income while making the claim. No justification for imposing the penalty of concealment or furnishing of inaccurate particulars of income u/s 271 (1) (c) of the Income Tax Act, 1961. Decided in favour of assessee. ISSUES PRESENTED and CONSIDERED:1. Whether the Tribunal was justified in confirming the penalty under Section 271 (1) (c) of the Income Tax Act for the Assessment Year 2008-2009Rs.ISSUE-WISE DETAILED ANALYSIS:Relevant legal framework and precedents:Section 271(1)(c) of the Income Tax Act allows for the imposition of penalty for concealment of income or furnishing inaccurate particulars of income. The decision in CIT Vs. Reliance Petroproducts [2010] 3 Taxmann.com 47 is relevant in determining the applicability of this provision.Court's interpretation and reasoning:The Court considered the timeline of events where the Appellant filed an application for registration under Section 12A on 5 September 2008, but the certificate was issued on 31 March 2009 with retroactive effect from 1 April 2008. The Court noted that the Appellant acted in good faith based on the belief that the registration would be granted from the date of its establishment.Key evidence and findings:The Appellant, a Charitable Trust, filed the necessary application for registration under Section 12A and submitted audited accounts before the due date. The delay in processing the application by the authorities resulted in the registration being effective from a later date than anticipated by the Appellant.Application of law to facts:The Court applied the principle that for a penalty under Section 271(1)(c) to be imposed, there must be a case of concealment of income or furnishing inaccurate particulars of income. In this case, the Court found that the Appellant's actions were based on a genuine belief and there was no intent to conceal income or provide inaccurate information.Conclusions:The Court concluded that no justification existed for imposing a penalty under Section 271(1)(c) as the Appellant's conduct did not amount to concealment or furnishing inaccurate particulars of income. The Court ruled in favor of the Appellant and overturned the Tribunal's decision, restoring the order of the CIT (A).SIGNIFICANT HOLDINGS:The Court's core principle established was that penalties under Section 271(1)(c) require a finding of concealment or furnishing inaccurate particulars of income, which was not present in the Appellant's case. The final determination was in favor of the Appellant, reversing the Tribunal's decision and reinstating the CIT (A) order.