2015 (12) TMI 1521 - AT - Income Tax

Penalty under section 271(1)(c) - deduction claimed under section 80IB(10) denied - Held that - The assessee before us had furnished complete details with regard to the computation of income in his hands and also the details with regard to the computation of deduction under section 80IB(10) of the Act in Form No.10CCB, which was filed along with return of income. Though the deduction under section 80IB(10) of the Act was denied to the assessee, but because of judicial propositions on the issue of allowability of the said deduction, we find that the assessee had prima facie bonafide claim vis- -vis the deduction under section 80IB(10) of the Act. In such circumstances, where the assessee had furnished complete details and the claim of the assessee was a bonafide claim, merely because the deduction claimed under section 80IB(10) of the Act was denied to the assessee, does not merit the levy of penalty for concealment of income or furnishing of inaccurate particulars of income under section 271(1)(c) of the Act. In this regard, we find merit in the reliance placed upon by the learned Authorized Representative for the assessee on the ratio laid down by the Hon ble Supreme Court in CIT Vs. Reliance Petro Products (2010 (3) TMI 80 - SUPREME COURT ). - Decided against revenue

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Eligibility for deduction under section 80IB(10) of the Income Tax Act, 1961.
3. Applicability of Explanation (1) to section 271(1)(c) for concealment of income or furnishing inaccurate particulars.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):

The Revenue appealed against the order of the CIT(A) which deleted penalties levied under section 271(1)(c) for the assessment years 2006-07 to 2008-09. The penalties were imposed because the assessee had claimed deductions under section 80IB(10) which were later withdrawn when it was found that the project was not completed by the stipulated date. The CIT(A) held that the mere disallowance of a claim does not automatically lead to the imposition of penalty. The CIT(A) further noted that the assessee had provided a bonafide explanation and had disclosed all material facts necessary for the assessment. The Tribunal upheld the CIT(A)'s decision, stating that the penalty proceedings are independent of the assessment proceedings and the addition or disallowance made does not automatically result in the levy of penalty.

2. Eligibility for Deduction under Section 80IB(10):

The assessee had claimed deductions under section 80IB(10) for a housing project which was supposed to be completed by 31.03.2009. However, the project was not completed by the stipulated date. The assessee argued that at the time of filing the returns, it could not foresee that the project would not be completed on time. The CIT(A) noted that the assessee had undertaken the construction of two plots, both of which were independently eligible for deduction under section 80IB(10). The CIT(A) observed that the assessee had a bonafide belief that it was entitled to the deduction and had disclosed all necessary details in the return of income. The Tribunal concurred with the CIT(A), noting that the assessee's claim was bonafide and supported by judicial precedents, even though the deduction was ultimately denied.

3. Applicability of Explanation (1) to Section 271(1)(c):

The CIT(A) examined whether the assessee's actions attracted the deeming provisions of Explanation (1) to section 271(1)(c), which applies when an assessee fails to offer an explanation, offers a false explanation, or fails to substantiate an explanation that is not bonafide. The CIT(A) found that the assessee had provided a plausible explanation, which was not found to be false, and had disclosed all material facts. Therefore, the conditions for the application of Explanation (1) were not satisfied. The Tribunal agreed, stating that the assessee had furnished complete details and the claim was made in a bonafide manner. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the penalties.

Conclusion:

The Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s order which deleted the penalties under section 271(1)(c). The Tribunal held that the assessee had made a bonafide claim for deduction under section 80IB(10) and had disclosed all necessary details. The mere disallowance of the claim did not warrant the imposition of penalty for concealment of income or furnishing inaccurate particulars. The Tribunal's decision applied to all the assessment years under appeal.