2012 (5) TMI 631 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - In order to expose the assessee to penalty, unless the case is strictly covered by the provisio, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. The Explanation given by the assessee in our opinion is bonafide and can not be held to be false. Thus, we uphold the order of the first appellate authority and dismiss this appeal of the revenue.

Issues:
1. Validity of penalty under section 271(1)(c) for withdrawal of claim under section 80IB(10).
2. Interpretation of legal provisions regarding eligibility for deduction under section 80IB(10).
3. Bonafide nature of explanation for withdrawal of claim and its impact on penalty imposition.

Issue 1: Validity of Penalty under Section 271(1)(c)
The appeal concerned the cancellation of a penalty of &8377; 14,53,22,773/- imposed by the Assessing Officer (AO) under section 271(1)(c) for the assessment year 2006-07. The penalty was imposed after a survey action revealed that the claim made under section 80IB(10) was withdrawn by the assessee. The AO concluded that the withdrawal amounted to furnishing inaccurate particulars leading to concealment of income. However, the first appellate authority canceled the penalty, stating that the withdrawal was to avoid litigation and buy peace, and that the issue was debatable, not amounting to furnishing inaccurate particulars.

Issue 2: Interpretation of Eligibility for Deduction under Section 80IB(10)
The core issue revolved around the eligibility of the assessee for claiming deduction under section 80IB(10) concerning the construction of residential and commercial buildings. The assessee withdrew the claim during survey proceedings due to a perceived ambiguity in the law regarding the eligibility criteria. The Assessing Officer contended that the claim was withdrawn after detection of its ineligibility, leading to the imposition of the penalty. However, the appellate authority held that the conditions for deduction were fulfilled, and the withdrawal was due to the ambiguous legal interpretation. The High Court's decision in a similar case supported the assessee's eligibility for the deduction, emphasizing that even a single building with multiple residential units could constitute a housing project under section 80IB(10).

Issue 3: Bonafide Nature of Explanation for Withdrawal and Impact on Penalty
The assessee argued that the withdrawal was based on a genuine belief of ineligibility due to legal ambiguity, supported by an audit report. The appellate authority found the explanation bonafide, relying on the Supreme Court's precedent that incorrect claims do not necessarily amount to furnishing inaccurate particulars. The appellate tribunal upheld the cancellation of the penalty, emphasizing the bonafide nature of the explanation and the absence of deliberate concealment or inaccurate particulars. The tribunal dismissed the revenue's appeal, citing the precedence set by the Supreme Court in similar cases.

In conclusion, the appellate tribunal upheld the cancellation of the penalty imposed under section 271(1)(c) for the withdrawal of the claim under section 80IB(10). The judgment highlighted the bonafide nature of the explanation for the withdrawal, the debatable nature of the issue, and the eligibility criteria for claiming the deduction under section 80IB(10) as key factors in determining the validity of the penalty imposition.

← Previous Next →