2013 (12) TMI 10 - HC - Income Tax

Validity of penalty proceedings - Held that - The Tribunal held that the assessee was entitled to claim deduction - Merely because the assessee withdrew the deduction, conceded to the demand of the department and paid tax and interest, it cannot be concluded that he was not entitled to deduction - As there is no malafide intention, the assessee cannot be imposed penalty - The claim made by the assessee under Section 80IB(10) of the Act was legal and valid subject to verification - Decided against Revenue.

Summary

Issues:
- Challenge to the order setting aside penalty imposed by Assessing Authority and Appellate Authority
- Validity of the claim made by the assessee under Section 80IB(10) of the Income Tax Act, 1961
- Imposition of penalty on the assessee for withdrawing the deduction claimed

Analysis:

1. The High Court judgment dealt with the appeal challenging the order passed by the Tribunal, which set aside the penalty imposed on the assessee by the Assessing Authority and the Appellate Authority. The assessee, a company engaged in construction, declared income and claimed deduction under Section 80IB(10) of the Income Tax Act, 1961. A survey revealed a violation in claiming the deduction. The assessee withdrew the deduction, paid tax and interest, following which penalty proceedings were initiated. The Tribunal held that the assessee was entitled to claim the deduction, as there was no dishonest intention, leading to the penalty imposition being set aside.

2. The Court noted that the claim made by the assessee under Section 80IB(10) was legal and valid, subject to verification. The assessee agreed to withdraw the deduction, pay tax and interest upon being informed by the revenue about the ineligibility for the deduction. The absence of dishonest intention was crucial, as evidenced by the payment of tax and interest upon notification. The Court emphasized that since the law was clear on the eligibility for the deduction, the assessee's actions did not warrant penalty imposition. The Tribunal's decision to set aside the penalty was upheld, as there was no substantial question of law arising for consideration in the appeal.

3. The judgment concluded by stating that the appeal had no merits and was dismissed. The Court affirmed the Tribunal's decision based on the legal validity of the assessee's claim under Section 80IB(10) and the absence of malafide intentions in withdrawing the deduction claimed.