2011 (10) TMI 646 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of penalty levied u/s 271(1)(c) of the I.T. Act, 1961.
2. Voluntary surrender of claim u/s 80IB and its implications.
3. Factual and legal objections regarding the conditions for allowance of deduction u/s 80IB(10).

Summary:

Issue 1: Deletion of penalty levied u/s 271(1)(c) of the I.T. Act, 1961
The revenue challenged the order of the Ld. CIT (A) deleting the penalty of Rs. 18,46,849/- levied u/s 271(1)(c) of the I.T. Act, 1961. The Ld. CIT (A) held that the assessee had voluntarily surrendered its claim u/s 80IB to avoid litigation, indicating no criminal intention of concealment or deliberately furnishing inaccurate particulars, i.e., 'mens rea'. The Ld. CIT (A) also noted that the claim was withdrawn by the assessee only after the AO detected that the conditions laid down for allowance of the deduction u/s 80IB were not justified.

Issue 2: Voluntary surrender of claim u/s 80IB and its implications
The assessee, engaged in civil construction, filed a return for A.Y. 2003-04 claiming a deduction u/s 80IB(10) of Rs. 59,49,677/-. The AO issued a notice u/s 148 and completed the assessment by declining the claim. The AO's investigation revealed that the project did not meet the conditions laid down in sec. 80IB(10). The assessee voluntarily withdrew the claim citing health issues and Coastal Zone Regulations (CZR), aiming to avoid litigation and buy peace. The Ld. CIT (A) found the claim to be bona fide and based on the interpretation of sec. 80IB(10), and thus deleted the penalty.

Issue 3: Factual and legal objections regarding the conditions for allowance of deduction u/s 80IB(10)
The AO had reservations about allowing the deduction u/s 80IB(10) due to:
- The project being on two separate plots.
- Each plot being less than one acre.
- More than 50% of flats exceeding the 1000 sq.ft. built-up area.
- Commercial establishment area exceeding the prescribed limit.

The Ld. CIT (A) found that the assessee's claim was based on the audit report in form 10CCB and that the plots were consolidated as per the approved plan by BMC. The Tribunal noted that the assessee's claim was based on the interpretation of sec. 80IB(10) and that the objections raised by the AO were contrary to the decisions of the Tribunal. The Tribunal concluded that the assessee did not consciously make a wrong claim and upheld the Ld. CIT (A)'s order deleting the penalty.

Conclusion:
The Tribunal dismissed the revenue's appeal, confirming the Ld. CIT (A)'s order deleting the penalty u/s 271(1)(c) of the I.T. Act, 1961, as the assessee's claim was found to be bona fide and based on the interpretation of sec. 80IB(10). The Tribunal found no evidence of concealment of income or filing of inaccurate particulars by the assessee.