2016 (6) TMI 1312 - AT - Income Tax

Levy of penalty u/s.271(1)(c) - disallowance of claim of deduction made u/s.80IA(4) - Held that - It is assessee s submission that the facts in the year under appeal are identical to that of earlier years in which the Hon ble Gujarat High Court has admitted the appeals of the assessee. The aforesaid facts, have not been controverted by Revenue. In the present case, since the penalty has been levied on the issue which is already before the Hon ble Gujarat High Court and in view of the fact that the assessee was allowed deduction in AY 2006-07, we are of the view that the issue of penalty on such claim needs to be remanded back to the file of AO for deciding it on the basis of the decision in quantum appeal which is before the Hon ble Gujarat High Court and in accordance with law. We therefore without expressing our view on the merits of the case, restore the issue back to the file of ld.AO. Thus, grounds of assessee s appeal are allowed for statistical purposes.

Summary

Issues:
Assessee filed three Stay Petitions and appeals against orders of CIT (Appeals) for AYs 2007-08, 2008-09, and 2009-10. The main issue is the disallowance of deduction claimed under section 80IA(4) of the Income Tax Act, leading to the imposition of penalties under section 271(1)(c).

Analysis:

Issue 1 - Disallowance of Deduction under Section 80IA(4):
The Assessee, engaged in manufacturing irrigation products, claimed deduction under section 80IA(4) for AY 2007-08. The AO disallowed the claim, stating the Assessee was not a Developer but a Work Contractor. This led to a penalty of ?83,33,586 under section 271(1)(c). The CIT (Appeals) upheld the penalty. The Assessee argued that the issue was debatable, citing a similar case allowed by the Gujarat High Court for AY 2006-07. The ITAT noted that the High Court had admitted the appeal for AY 2006-07, raising questions on whether the Assessee was a developer and the inconsistency in disallowing the deduction. Given the pending appeal and the debatable nature of the issue, the ITAT remanded the penalty decision to the AO based on the High Court's decision, without expressing a view on the merits. Consequently, the Assessee's appeal for AY 2007-08 was allowed for statistical purposes.

Issue 2 - Similarity in AYs 2008-09 & 2009-10:
The ITAT found identical issues in the Assessee's appeals for AYs 2008-09 and 2009-10. Following the same reasoning as in AY 2007-08, the ITAT allowed the appeals for AYs 2008-09 and 2009-10 for statistical purposes.

Issue 3 - Stay Petitions:
The Assessee filed Stay Petitions seeking to halt the penalties imposed under section 271(1)(c). Since the ITAT remitted the penalty decision back to the AO, the Stay Petitions became irrelevant and were dismissed. Consequently, the Assessee's appeals were allowed for statistical purposes, while the Stay Petitions were dismissed.

In conclusion, the ITAT's judgment addressed the disallowance of deduction under section 80IA(4) for AYs 2007-08, 2008-09, and 2009-10, remanding the penalty issue to the AO based on the pending appeal decision. The Assessee's appeals were allowed for statistical purposes, and the Stay Petitions were dismissed due to the remittance of the penalty decision.