TaxTMI 
TaxTMI 
2017 (8) TMI 296
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....ellate Tribunal (hereinafter ITAT), Mumbai, at the instance of the assessee. Brief facts leading to the reference of two questions of law are thus : (a) The assessee is a Trust founded in or about 1941 and it has been publishing newspapers and other periodicals since then. According to the assessee/Trust, it conducts activities for welfare of people of India in general and people from Kutch, Khatiawad and Gujarat, in particular. For educating the masses, it is publishing newspapers and periodicals in Mumbai as well as Gujarat. It is case of the assessee/Trust that the income earned by it is exempt from the liability of payment of income tax. From Assessment Year 1941-42 till Assessment Year 1961-62 the income of the assessee/Trust was exempted under Section 4(3)(i) of the Income Tax Act, 1922, (hereinafter I.T.Act) as publishing of newspapers falls under the definition of General Public Utility. Subsequently, in the I.T.Act, 1961, the term "Charitable Purpose" came to be defined in Section 2(15) which included relief of poor, education, medical relief and the advancement of any other object of general public utility not involving carrying on of activity of profit. (b) By followin....
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....ing Officer further found that the assessee/Trust did not pay the self assessment tax as was payable under Section 140A(1) of the I.T.Act, the Assessing Officer imposed penalty of Rs. 26,34,216/on the assessee/Trust by invoking provisions of Section 140A(3) of the I.T.Act, 1961. (e) In June 1985, the learned ITAT denied exemption claimed under Section 11 of the I.T.Act to the assessee/Trust for the Assessment Year 1975-76 to Assessment Year 1978-79. The Revenue, as such, was assessing the income earned by the assessee /Trust by publishing newspapers and periodicals as taxable income. (f) Feeling aggrieved by the action of imposition of penalty under Section 273(2)(a) and under Section 140A(3) of the I.T.Act by the Assessing Officer, the assessee/Trust filed two separate appeals before the Commissioner of Income Tax (Appeals) (hereinafter CIT (Appeals)) challenging these orders. Both those appeals came to be allowed by the CIT (Appeals) and penalty levied by the Assessing Officer under Section 273(2)(a) and under Section 140A(3) came to be cancelled. (g) The learned CIT (Appeals) was pleased to hold that there was no liability for payment of self assessment tax on the basis of th....
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....shelter of the decision of the Hon'ble Apex Court. The intention of the assessee/Trust was to withhold payment of lakhs of rupees as tax for number of years. The assessee/Trust had no reasonable cause or belief in not paying self assessment tax under Section 140A(1) of the I.T.Act, 1961. While upholding the penalty imposed under Section 273(2)(a) of the I.T.Act, 1961, the learned ITAT was pleased to hold that while filing the estimate of its advance tax, the assessee/Trust did not have a bonafide belief that its entire income is exempt from payment of tax, in view of the fact that for forty years it was being held liable for payment of the tax as the assessee/Trust was not falling in the category of the "Charitable Trust" in order to claim exempt income. It is further held that merely because the appeal has been filed before the Tribunal, the assessee/Trust cannot be said to hold a reasonable belief that its income is not chargeable to tax, and therefore, it is not liable to declare it in an estimate of the advance tax. (j) The assessee/Trust, thereafter, preferred an application under Section 256 of the I.T.Act for referring the two questions of law, as stated in foregoing pa....
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....ocate submitted that imposition of the penalty is not a routine matter. The learned ITAT had taken incorrect view in allowing the appeal of the Revenue and upholding the penalty levied on the assessee/Trust under Section 273(2)(a) and under Section 140A(3) of the I.T.Act. The learned advocate argued that, infact, the position of law is clear from the following judgments / orders : i) Commissioner of Income Tax vs. Nayan Builders and Developers [2015] 56 taxmann.com 335 (Bombay) ii) Order of this court dated 17th February 2017 in Income Tax Appeal No.1498 of 2014 in the matter of Commissioner of Income Tax - 21 vs. M/s.Advanta Estate Development Pvt. Ltd., iii) Order of this court dated 2nd December 2015 in Income Tax Appeal No.851 of 2014, in the matter of Commissioner of Income Tax - 8 vs. M/s.Aditya Birla Power Co. Ltd., iv) Order of Hon'ble Delhi High Court dated 5th October 2010 in Income Tax Appeal No.240 of 2009, Commissioner of Income Tax vs. Liquid Investment & Trading Co., v) Judgment dated 11th January 2017 of Hon'ble Madhya Pradesh High Court in Income Tax Appeal No.89 of 2016, Pr.Commissioner of Income Tax vs. R.K.Gupta Contractors & Engineers Pvt. Ltd.....
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....ct of promotion of commerce and trade in silk and as such, the question of debatable views in the matter of income earned by the assessee / Trust does not arise. It cannot be said that the assessee / Trust was under bonafide belief that its income would not be chargeable to the tax. The liability to pay tax on its income ought not to have been decided by the assessee / Trust itself and there was no reasonable basis for declaring its income as exempt by the assessee / Trust. The learned advocate for the Revenue relied on order dated 21st August 2012 passed by the Division Bench of this court in Income Tax Appeal No.2753 of 2010 in the matter of The Commissioner of Income Tax - 10, Mumbai vs. M/s.Wander Pvt. Ltd. and the order passed by the ITAT, New Delhi, in Income Tax Appeal No.1395/DeL/2009 in the matter of Assistant Commissioner of Income Tax vs. M/s.Khanna & Annadhanam decided on 22nd July 2011 in order to buttress his contention that the entire exercise by the assessee / Trust in not paying the self assessment tax and in submitting NIL estimate of the advance tax is an attempt to evade the tax liability. 8 We have carefully considered the rival submissions and also gone throu....
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....at the quantum of its income is not the test to determine whether the Trust is created for a charitable purpose. What is relevant is the object and purpose of creation of the Trust. 10 As per provisions of Section 273(2)(a) of the I.T.Act, 1961, a false estimate or failure to pay advance tax makes an assessee liable for penalty. However, such penalty is leviable after hearing the affected party and only when the Assessing Officer comes to the conclusion that the assessee knew or had reason to believe that the estimate of advance tax submitted by the assessee is untrue. Similarly, Section 140A(1) enjoins a assessee to submit the returns of income after assessing the tax and after paying the tax prior to furnishing the return of income. The return of income of the assessee is required to be accompanied by proof of payment of self assessed tax. If the assessee fails to pay such self assessed tax, then after hearing the assessee, the Income Tax Officer can direct him to pay penalty as prescribed by subsection (3) of Section 140A(1) of the I.T.Act, 1961. In the case in hand, undisputedly, the assessee/Trust has not submitted any estimate of advance tax by declaring estimated taxable in....
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....me tax. This verdict of the learned ITAT for the assessment years 1962-63 to 1970-71 was very much available to the assessee/Trust in November 1976 itself. In the wake of this factual backdrop, the act of the assessee/Trust in not paying self assessment tax by returning its income and filing "NIL" estimate of the advance tax cannot be said or termed as bonafide act. If the assessee had taken due care and acted authentically or genuinely by keeping in its mind the verdict of the learned ITAT in respect of assessment years 1962-63 onwards, then it would not have acted in such a manner of declaring "NIL" estimate of the advance tax and nonpayment of the self assessment tax while returning its income for the assessment year 1983-84. The excuse sought to be given by the assessee/Trust that it was swayed by the verdict of the Apex Court in the matter of Surat Art Silk Cloth Manufacturers Association (supra) appears to be a lame excuse in order to avoid the tax liability and depriving the Revenue its due share in the taxable income earned by the assessee/Trust. The verdict in the said matter was pronounced long back on 19 th November 1979. Till the Assessment Year 1983-84 the assessee/Tru....
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....AT and other authorities in its own case which were available to the assessee/Trust from the assessment year 1962-63 onwards. 12 Section 140A(1) of the Income Tax Act, 1961, contemplates payment of tax on the basis of any return required to be furnished. The return contemplated under Section 140A is true and faithful return. This means that the return must contain declaration regarding the income offered for the tax. Though the assessee/Trust was knowing from its past experience that its income was liable for tax, despite filing the return under Section 139 of the I.T.Act, 1961, the same was not accompanied by proof of payment of the tax. Rather, no tax was paid prior to filing of the return of self assessment and only exempt came to be claimed. In view of the fact that the assessee/Trust was earning income and it was made subjected to payment of tax by the Revenue, the act of the assessee/Trust cannot be said to be genuine or bonafide act. Till the assessment year 198384, the claim of the assessee/Trust that in the light of verdict of the Apex Court in the matter of Surat Art Silk Cloth Manufacturers Association (supra), income earned by it is exempted from the liability of payme....