2015 (2) TMI 623 - AT - Income Tax

Penalty u/s. 271(1)(c) - showing exaggerated claim of deduction u/s. 80IB - Held that - Assessee has sufficient own funds available which can be stated to have been utilised towards the credit needs of Slivassa unit. We find that when the assessee has both interest free and interest bearing funds available it is the prerogative of the assessee to allocate the funds towards specific activities which suits him. In this view of the matter also it cannot be said that assessee has made any ex-facie bogus claim. Assessee can also not be stated to have furnished inaccurate particulars or made any concealment. In these circumstances, in our considered opinion, assessee should not be visited with the rigors of penalty u/s. 271(1)(c). In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. See CIT vs. Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT and CIT vs Dharampal Prem Chand 2010 (9) TMI 155 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) - Claim of deduction u/s. 80IB

Analysis:
The appeal was against the penalty imposed under section 271(1)(c) for reduction in the amount eligible for rebate u/s. 80IB. The Assessing Officer contended that the Assessee inflated profits by maintaining an OD facility at the head office and booking all interest expenses there, leading to an exaggerated claim of exemption u/s. 80IB. However, the Assessee had disclosed all details and claimed the deduction in accordance with the law. The auditors supported the claim, and the system of accounting had been consistently followed in the past without any issues raised by the revenue.

The Tribunal noted that the Assessee had sufficient own funds available, which were utilized in the business of the exempted unit. The Assessee's allocation of funds, considering both interest-free and interest-bearing funds, was deemed legitimate. The Assessee's claim was not ex-facie bogus, and there was no concealment or furnishing of inaccurate particulars. Citing relevant case laws, the Tribunal emphasized that making an incorrect claim does not equate to furnishing inaccurate particulars. As the Assessee had disclosed all material facts and the claim was supported by experts, the penalty under section 271(1)(c) was deemed unwarranted.

The Tribunal set aside the orders of the lower authorities and deleted the penalty of Rs. 20 lacs. Given the deletion of the penalty, the second ground of the appeal was considered academic and not adjudicated upon. Consequently, the appeal filed by the Assessee was partly allowed.

In conclusion, the Tribunal found that the Assessee's claim under section 80IB was not bogus, and there was no concealment or furnishing of inaccurate particulars. The penalty under section 271(1)(c) was deemed unjustified, and the levy of Rs. 20 lacs was deleted. The judgment highlighted the importance of disclosing material facts and following statutory procedures in claiming deductions under the Income Tax Act.