2012 (10) TMI 1083 - AT - Income Tax

Summary

Issues involved: Appeal against deletion of penalty u/s 271(1)(c) of the Income Tax Act, 1961 by the Ld CIT(A) for A.Y. 2006-07.

Issue 1: Deletion of penalty u/s 271(1)(c) - Claim of deduction u/s 80IB(10):
The Revenue challenged the deletion of penalty by the Ld CIT(A) regarding the disallowance of the claim of Rs. 28,06,265 under Sec. 80 IB (10). The assessee, a builder and developer, claimed deduction u/s 80 IB (10) for the project 'Rohan Heights'. The AO disallowed the claim as the completion certificate was not produced to show completion before 31st March 2008. The AO also disallowed Rs. 90,263 for non-deduction of TDS. The penalty proceedings were initiated by the AO based on these disallowances. The assessee contended that the claim was withdrawn upon realizing non-fulfillment of conditions and argued no concealment of income or inaccurate particulars. The Ld CIT(A) deleted the penalty, citing the Supreme Court's decision in CIT v. Reliance Petro Products Pvt. Ltd., emphasizing that a mere unsustainable claim does not warrant penalty u/s 271(1)(c).

Issue 2: Deletion of penalty u/s 271(1)(c) - Non-deduction of TDS:
Regarding the disallowance under Sec. 40(a)(ia) for non-deduction of TDS, the Ld CIT(A) found no concealment or furnishing of inaccurate particulars. The AO noted the TDS omission from details submitted by the assessee. The Ld CIT(A) reasoned that the TDS breach had separate provisions for interest and penalty, not falling under penalty u/s 271(1)(c). The Ld CIT(A) highlighted that incorrect application of law does not attract penalty under section 271(1)(c), as seen in the case of Kanbay. The inability to obtain a completion certificate by the due date was not sufficient grounds for penalty, as the assessee filed the return before knowing this fact.

Conclusion:
The ITAT Pune upheld the Ld CIT(A)'s decision to delete the penalty, emphasizing the assessee's withdrawal of the claim upon discovering non-compliance with conditions. The Tribunal found the case aligned with the Supreme Court's ruling on bonafide claims not warranting penalties u/s 271(1)(c). The appeal by the Revenue was dismissed, affirming the deletion of the penalty by the Ld CIT(A) on 19th October 2012.