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The Income Tax Appellate Tribunal has rejected a penalty imposed by the Income Tax department on Jamsetji Tata Trusts in a case related to the sale of TCS shares by the Trusts.
The Tribunal ruled that the penalty notice by the assessing officer (AO) was defective because the asessing officer did not specify whether the penalty was imposed due to furnishing the inaccurate particulars of income and concealment of particulars of income.
“The assessee ( the Trusts) has fully disclosed each and every facts and thereafter claimed exemption under Section 11 & 12 of the IT Act. However, the same was declined. No penalty is leviable in the said circumstances,” ruled ITAT.
It added, “Since the penalty is not sustainable on the issue of defective notice, therefore, we are not inclined to decide the matter of controversy on merits. In view of the said circumstances, the finding of the CIT(A) is wrong against law and facts and is not liable to be sustainable in the eyes of law,” it added.
The IT department had issued a notice against the Trusts after it found that sold shares of TCS and reinvested by way of acquisition of 8 per cent cumulative redeemable preference shares of Tata Sons Ltd. The AO noted that in 2001 the Jamsetji Tata Trusts received corpus donation from Tata Sons Ltd in the shape of 15,25,000 shares of Orchid Print India Ltd. (later known as ICS) of ₹10 each.
Allegations
In the assessment year 2003-04 to 2005- 06, face value of shares were converted from ₹10 to ₹1 and assessee further got bonus shares as well. Thus the AO found that the assessee is in receipt of profit on sale of shares of TCS which was shown directly in the balance sheet without routing through the income and expenditure account.
The investment of accumulated fund is not in conformity to the provisions of Section 13(1)(d) of the Act. This section specifies the circumstances where tax exemptions would not be available for a trust. The CIT(A) had upheld the order of the AO and thereafter the Trusts filed an appeal before the ITAT.
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