Charitable Trust Gets Second Chance: ITAT Orders Re-examination of Penalty u/s 271(1)(b) [Read Order]

The Income Tax Appellate Tribunal (ITAT), Patna Bench, has ordered a fresh adjudication in the matter of Narayani Educational Health And Charitable Trust, which had challenged the confirmation of penalty imposed under Section 271(1)(b) of the Income Tax Act. The decision pertains to three appeals relating to Assessment Years 2013–14, 2015–16, and 2016–17.

Narayani Educational Health And Charitable Trust, a registered charitable institution based in Patna, filed the appeals against separate penalty orders passed by the Assessing Officer for alleged non-compliance with statutory notices during assessment proceedings. In the case of Assessment Year 2013–14, the assessment was initially concluded under Section 153C read with Sections 153A and 143(3), with no addition made.

However, based on a revision under Section 263, a fresh assessment under Section 144 was completed determining income at Rs.4,50,000. During this reassessment, penalty proceedings under Section 271(1)(b) were initiated, leading to an order imposing a penalty of Rs.10,000.

The assessee approached the Commissioner of Income Tax (Appeals) against the penalty order, but the appeals were dismissed. The CIT(A) noted that the trust failed to demonstrate a reasonable cause for its non-compliance with the notices issued, and thus was not entitled to relief under Section 273B.

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In its appeal before the Tribunal, Narayani Educational Health And Charitable Trust submitted that it was unable to present proper evidence before the CIT(A) due to genuine difficulties and prayed for an opportunity to furnish the necessary documentation. The Tribunal observed that the trust had not effectively demonstrated its case during the earlier proceedings and found merit in the plea for re-examination.

The Bench Comprising of Sonjoy Sharma (Judicial Member) and Rakesh Mishra (Accountant Member) remanded the matter back to the CIT(A) with a direction to reconsider the penalty issue afresh after giving the assessee an opportunity to produce all relevant documents. The assessee was also instructed to ensure compliance with future notices. Since the facts and issues in ITA Nos. 302 and 303/Pat/2023 were identical, the same directions were extended to those appeals as well.

In delivering the order, the Tribunal relied on the precedent laid down in M/s Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust (2008), which held that penalty under Section 271(1)(b) should not be imposed where there is a reasonable cause for non-compliance.

All three appeals were allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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