2009 (8) TMI 857 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of penalty u/s 271(1)(c) of the Income-tax Act, 1961.
2. Validity of the Penalty Notice.
3. Bona fide belief regarding claim u/s 80-IB(10).
4. Compliance with conditions for deduction u/s 80-IB(10).
5. Impact of withdrawal of claim u/s 80-IB(10) on penalty.
6. Difference of opinion on deduction u/s 80-IB(10).
7. Survey findings and their impact on the penalty.
8. Relevance of Chapter XIX-A provisions.

Summary:

1. Confirmation of Penalty u/s 271(1)(c):
The CIT(A) confirmed the penalty of Rs. 50,41,777 levied by the ITO u/s 271(1)(c) for furnishing inaccurate particulars and making a false claim of deduction u/s 80-IB(10). The Tribunal noted that the assessee withdrew the claim only after the survey action, indicating that the claim was not bona fide.

2. Validity of the Penalty Notice:
The assessee argued that the Penalty Notice was invalid as the material column was left blank. However, this issue was not elaborated upon in the judgment.

3. Bona Fide Belief Regarding Claim u/s 80-IB(10):
The assessee claimed that the deduction was made under a bona fide belief that all conditions were met. The Tribunal found that the assessee, being a builder with expert assistance, should have been aware of the requirements, and thus, the claim was not bona fide.

4. Compliance with Conditions for Deduction u/s 80-IB(10):
The Tribunal examined whether the housing project met the conditions of commencement date and built-up area. It was found that the project commenced after 1-10-1998, and the built-up area of the flats was within the permissible limit, except for six merged flats.

5. Impact of Withdrawal of Claim u/s 80-IB(10) on Penalty:
The Tribunal noted that the withdrawal of the claim during the survey was to avoid litigation and buy peace. However, this did not absolve the assessee from penalty as the claim was not made in good faith.

6. Difference of Opinion on Deduction u/s 80-IB(10):
The Tribunal acknowledged that there could be a difference of opinion on the interpretation of the conditions for deduction. However, the facts indicated that the assessee knowingly made an incorrect claim.

7. Survey Findings and Their Impact on the Penalty:
The survey revealed that six flats were merged into three larger flats, violating the conditions of u/s 80-IB(10). The Tribunal held that this constituted furnishing inaccurate particulars, justifying the penalty.

8. Relevance of Chapter XIX-A Provisions:
The CIT(A) erroneously relied on Chapter XIX-A provisions, which were not relevant to the case. The Tribunal focused on the specific conditions of u/s 80-IB(10) and the findings of the survey.

Conclusion:
The Tribunal set aside the penalty for statistical purposes, directing the Assessing Officer to verify the built-up area of the merged flats. If the built-up area exceeded the permissible limit, the penalty would be justified. Otherwise, there would be no case for the revenue. The appeal was allowed for statistical purposes.