2013 (5) TMI 373 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of deduction u/s 80-IA as assessee was only a contractor executing the work and was not owner of the facility and hence neither designing nor conceiving it - CIT(A) deleted the penalty - Held that - It is an undisputed fact that the assessee company is under a bona fide belief that it is eligible for deduction u/s 80-IA and the same is evident from the conduct of the assessee, who has not filed appeal before the CIT(A) against quantum additions. From the above write up given by the assessee, it is evident that the assessee would have won the appeal on quantum additions if were to file. Therefore, the attaining finality on the quantum additions against the assessee is no issue for confirming the penalties. As such there exists dispute on the debatable nature of the said provisions. As per the judgment of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT), it is a settled law that no penalty should be levied when the issue is a debatable one and when the claim is wrongly made in the return of income. Considering the settled nature of the issue, CIT (A) has rightly deleted the penalty made by the AO u/s 271(1)(c) and it does not call for any interference. Against Revenue.

Summary

Issues involved: Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act for assessment years 2004-05 to 2008-09.

Analysis:

1. Issue 1 - Penalty under section 271(1)(c) for assessment year 2008-2009:
The appellant challenged the deletion of penalty under section 271(1)(c) by the CIT (A) for filing inaccurate particulars of income related to deduction claim under section 80-IA. The AO imposed a penalty of Rs. 20,000 for deliberate concealment. The CIT (A) canceled the penalty, citing debatable nature of the claim and reliance on judicial precedents like the decision in CIT vs. Reliance Petroproducts Pvt. Ltd. The appellant argued that the claim was valid based on various tribunal decisions supporting similar deductions under section 80-IA. The Tribunal upheld the CIT (A)'s decision, emphasizing the bona fide belief of the assessee and the debatable nature of the issue, in line with the Supreme Court's ruling on penalties in debatable cases.

2. Issue 2 - Common issues for assessment years 2004-05 to 2007-08:
The Tribunal considered the same issues raised by the Revenue for the remaining four assessment years, following the analysis and decision given for the assessment year 2008-2009. The grounds raised by the Revenue were dismissed based on the settled nature of the issue, the bona fide belief of the assessee, and the debatable nature of the claim under section 80-IA. Consequently, the penalties under section 271(1)(c) were not upheld for the other assessment years as well.

In conclusion, the Tribunal dismissed all five appeals filed by the Revenue, upholding the CIT (A)'s decision to delete the penalties under section 271(1)(c) for the assessment years 2004-05 to 2008-09. The judgments were based on the debatable nature of the claim, the bona fide belief of the assessee, and the principles established in relevant judicial precedents, including the decision in CIT vs. Reliance Petroproducts Pvt. Ltd. The Tribunal found no grounds for interference, affirming the cancellation of penalties in all instances.