2014 (1) TMI 79 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - Following Ekta Sankalp Developers V/s Addl. CIT 2014 (1) TMI 103 - ITAT MUMBAI - Deduction shall be allowed to the assessee u/s 80IB(10) on pro-rata basis for the flats having built up area less than 1000 sq. ft - The disallowance made by department was not justified and does not qualify as a basis for levying penalty u/s 271(1)(c) - Decided against Revenue.

Summary

Issues:
Penalty imposed under section 271(1)(c) for wrongly claiming deduction under section 80IB(10).

Analysis:
1. The appellant, an AOP, developed a housing project and claimed a proportionate deduction under section 80IB(10) in its return of income. The AO disallowed the deduction, initiating penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income.

2. The CIT(A) considered the submissions and case laws cited by the appellant. The dispute centered on whether the appellant could claim a proportionate deduction under section 80IB(10) for flats meeting the criteria. The CIT(A) noted that various judicial pronouncements supported the appellant's claim for proportionate deduction based on recent decisions by ITAT and High Courts.

3. The CIT(A) highlighted that the issue of deduction under section 80IB had been examined from different angles by different courts. Notably, the CIT(A) referred to a decision involving the appellant's sister concern where proportionate deduction was allowed. Considering the debatable nature of the issue, the CIT(A) concluded that the penalty was not justified, citing the Apex court decision in the case of Reliance Petroproducts (P) Ltd.

4. During the hearing, the appellant's representative referenced a previous ITAT decision in the appellant's favor, allowing deduction on a pro-rata basis for flats meeting the size criteria. The Tribunal had reversed the CIT(A)'s decision in the appellant's appeal, supporting the deduction claim. The appellant's representative also highlighted that the disallowance, which led to the penalty, had been deleted in the quantum appeal.

5. The Tribunal upheld the CIT(A)'s decision to cancel the penalty, noting that the basis for the penalty no longer existed after the disallowance was deleted in the quantum proceedings. Consequently, the Tribunal dismissed the department's appeal, affirming the cancellation of the penalty under section 271(1)(c).

In conclusion, the Tribunal dismissed the department's appeal, upholding the CIT(A)'s decision to cancel the penalty imposed under section 271(1)(c) for the appellant's claim of deduction under section 80IB(10) on a proportionate basis.