2013 (7) TMI 251 - AT - Income Tax

Penalty u/s 271(1)(c) - deduction u/s 80IA disallowed as the assessee which was awarded a contract for construction of four lane road was acting merely as a contractor, therefore, the deduction will not be allowable in view of the amended provisions of section 80IA(4) brought in the statute by the Finance Act, 2007 with retrospective effect from the year 2000-2001 - Held that - As decided in assessee s group case viz. DCIT v/s Unity Chopra (Joint Venture) 2013 (5) TMI 373 - ITAT MUMBAI after the decision in the case of ABVG Heavy industries Ltd. (2010 (2) TMI 108 - BOMBAY HIGH COURT) has allowed the claim of deduction u/s 80-IA on similar facts claim of appellant, even on merit (in quantum proceedings) is valid and sustainable. The assessee company was under a bonafide belief that it is eligible for deduction u/s 80-IA. Moreover, from the decisions cited above, it is clearly evident that the said issue is a highly debatable one. It is well settled law that no penalty u/s 271(1)(c) can be levied when the issue is a debatable one as decided in CIT vs. Reliance Petroproducts 2010 (3) TMI 80 - SUPREME COURT - thus the orders passed by the Commissioner (Appeals) deleting the penalty levied under section 271(1)(c) confirmed - In favour of assessee.

Summary

Issues:
Challenge to penalty order under section 271(1)(c) of the Income Tax Act for multiple assessment years.

Analysis:
The Revenue challenged a common order related to penalty under section 271(1)(c) of the Income Tax Act for various assessment years. The Assessing Officer disallowed the claim for deduction under section 80IA as the assessee was acting as a contractor and not a developer of infrastructure facilities. The Commissioner (Appeals) deleted the penalty, considering the debatable nature of the claim and the legal precedents. The Tribunal noted that the issue was identical to a previous case where penalties were deleted. The Tribunal referred to various decisions allowing deduction under section 80IA and emphasized the debatable nature of the issue. It cited the Supreme Court's ruling that no penalty should be levied on debatable issues. Consequently, the Tribunal upheld the deletion of penalties by the Commissioner (Appeals) for all the assessment years.

The Tribunal found that the assessee had a bona fide belief in claiming deduction under section 80IA, which was evident from their conduct. The Tribunal emphasized that the issue was debatable and that penalties should not be levied in such cases. Referring to the Supreme Court's decision, the Tribunal upheld the deletion of penalties by the Commissioner (Appeals). The Tribunal dismissed the Revenue's grounds and upheld the deletion of penalties for the year under appeal and all the appeals due to the similarity of the issue across cases. The Tribunal concluded by treating the Revenue's appeals as dismissed and upheld the orders deleting the penalties.

In conclusion, the Tribunal affirmed the deletion of penalties by the Commissioner (Appeals) for the assessment years in question, emphasizing the debatable nature of the claim for deduction under section 80IA. The Tribunal upheld the decisions based on legal precedents and the principle that penalties should not be imposed on debatable issues. The appeals by the Revenue challenging the penalty orders were dismissed, and the penalties were deleted for all the assessment years involved.