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2013 (10) TMI 1176 - HC - Income TaxPenalty u/s 271(1)(c) of the Income Tax Act Deduction u/s 80IB of the Income tax act Held that - Commissioner of Income Tax as well as the Income Tax Appellate Tribunal have recorded concurrent findings of fact that as the assessee was allowed deduction under section 801B of the Act for assessment years 2004-05 and 2005-06, but disallowed similar deduction for assessment year 2006-07 as the assessee s returns were beyond the period prescribed by Section 139(1) of the Act, it cannot be said that the claim for deduction under section 801B of the Act was mala fide or raised with an object to evade tax. Reliance has been placed upon the judgment of Hon ble Supreme Court of India in the case of CIT versus Reliance Petro Products Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT , wherein, while considering the question of levy of penalty, it was held that the mere fact that an assessee s claim for deduction is not accepted, does not automatically invite penalty. The revenue has not been able to establish any fact that would enable us to hold that deduction claimed by an assessee was mala fide or raised with the object of evading tax Decided against the Revenue.
Issues:
1. Challenge to the deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961. 2. Impact of not fulfilling basic conditions for claiming a deduction on penalty under section 271(1)(c). 3. Whether a wrong claim for deduction under section 80IB can be considered a bona fide mistake and not attract penalty under section 271(1)(c). Analysis: Issue 1: Challenge to Deletion of Penalty The Revenue challenged the deletion of penalty under section 271(1)(c) by the Income Tax Appellate Tribunal. The appellant argued that the assessee's claim for deduction was mala fide due to not fulfilling basic conditions, justifying the penalty. However, the Tribunal, supported by the Commissioner of Income Tax (Appeals), found no substantial question of law warranting consideration. The Tribunal relied on the judgment in CIT versus Reliance Petro Products Pvt. Ltd. where it was established that a disallowed deduction claim does not automatically lead to a penalty. The Revenue failed to prove that the deduction claim was made with mala fide intentions to evade tax, leading to the dismissal of the appeal. Issue 2: Impact of Not Fulfilling Basic Conditions for Deduction The Assessing Officer rejected the assessee's claim for deduction under Section 80IB and imposed a penalty. However, both the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal concurred that the claim for deduction was not mala fide. They noted that the deduction was allowed for previous assessment years but disallowed for a subsequent year due to a technicality regarding the filing period. The Tribunal emphasized that the mere rejection of a deduction claim does not automatically imply mala fide intentions on the part of the assessee. The judgment in Reliance Petro Products Pvt. Ltd. was cited to support this stance. As a result, the penalty was set aside, and the appeal was dismissed. Issue 3: Wrong Claim for Deduction under Section 80IB The question of whether a wrong claim for deduction under section 80IB could be considered a bona fide mistake was addressed. The Tribunal, in alignment with the Commissioner of Income Tax (Appeals), found that the disallowance of the deduction claim for a specific year did not indicate mala fide intentions or tax evasion. The judgment in Reliance Petro Products Pvt. Ltd. was instrumental in establishing that the rejection of a deduction claim does not automatically attract a penalty under section 271(1)(c). Since the Revenue failed to provide evidence of mala fide intentions, the penalty was not justified, and the appeal was dismissed. In conclusion, the judgment upheld the decision to delete the penalty under section 271(1)(c) based on the findings that the deduction claim was not made with mala fide intentions or to evade tax. The reliance on legal precedents and the absence of substantial questions of law led to the dismissal of the appeal.
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