2019 (3) TMI 380 - AT - Income Tax

Penalty u/s.271(1)(c) - difference of opinion - all the requisite particulars were furnished - Disputed income offered in subsequent year - other two grounds also related to pre-ponment of income from AY 2008-09 to the current year i.e. AY 2007-08 - Disallowance of benefit of claim U/s.80IB(10)in subsequent year - ITAT subsequently allowed 80IA - HELD THAT - Now the Revenue has accepted the deletion of penalty qua two of the additions and appealed to the ITAT qua one of the additions. No reason for this differentiation has been brought on record. The Revenue in grounds raised itself admits that the impugned amount was offered for taxation in next Assessment Year although with a claim of incorrect deduction u/s.80IB. In this regard, we note that as in the case with other two additions, this addition being business income on account of Manish Garden Project was also offered for taxation in next Assessment Year. Hence, no case of furnishing of inaccurate particulars is made out as in other two additions. The assessee and the CIT(A) are correct in this proposition that it is only a matter of opinion. The A.O. is of a different opinion. When all the facts are available, that cannot be termed as furnishing of inaccurate particulars of income leading to invoking the rigours of penalty u/s. 271(1)(c). As rightly noted by the CIT(A) the issue was only year of taxability and in this regard, the ld. CIT(A) has rightly relied upon the decision in the case of CIT vs. Excel Industries 2013 (10) TMI 324 - SUPREME COURT as expounded that the Revenue should not be aggrieved if it was only a matter of difference in the year of taxability. It was held that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, it was held that the dispute raised by the Revenue was entirely academic or at best may have a minor tax effect. Therefore, it was held that there was no need for the revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers. Though the assessee has not challenged the addition, we note that when the additions itself is on weak footing, the deletion of levy of penalty qua that addition by the CIT(A) cannot be faulted. Just because the assessee has not appealed against the addition, the same cannot lead to a inference of contumacious conduct of the assessee. See COMMISSIONER OF INCOME-TAX VERSUS RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT - Decided in favour of assessee

Summary

Issues Involved:
1. Penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Disallowance of benefit of claim under Section 80IB(10) of the Income Tax Act, 1961.
3. Classification of income as business income or long-term capital gains.
4. Year of chargeability of income.

Detailed Analysis:

1. Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue was whether the penalty under Section 271(1)(c) for furnishing inaccurate particulars of income was justified. The Assessing Officer (AO) levied a penalty amounting to ?6,63,91,160/-, asserting that the assessee had concealed income or furnished inaccurate particulars. However, the Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT) found that the issue was not about concealment but the year of chargeability of the income. The CIT(A) and ITAT relied on the Supreme Court's decision in CIT v. Excel Industries Ltd., which emphasized that disputes over the year of taxability, especially when the tax rates are the same, do not warrant penalties for concealment.

2. Disallowance of benefit of claim under Section 80IB(10) of the Income Tax Act, 1961:
The AO disallowed the benefit of the claim under Section 80IB(10) for the Manish Garden Project, amounting to ?2,42,51,035/-, asserting that the assessee incorrectly claimed the entire profit from this project as a deduction. The CIT(A) upheld this disallowance, and the ITAT noted that this amount was offered for taxation in the subsequent assessment year (AY 2008-09), indicating a mere difference in the year of taxability rather than concealment.

3. Classification of income as business income or long-term capital gains:
The AO classified ?11,04,54,860/- as business income from the sale of land (development rights) and ?9,09,29,507/- as long-term capital gains. The CIT(A) and ITAT upheld these classifications but noted that the assessee had already offered these amounts for taxation in the subsequent assessment year. The ITAT emphasized that the issue was the timing of the taxability, not the concealment or misreporting of income.

4. Year of chargeability of income:
The core issue revolved around the year in which the income should be taxed. The AO believed the income should be taxed in the current year (AY 2007-08), while the assessee had offered it in the subsequent year (AY 2008-09). The CIT(A) and ITAT found that since the income was already disclosed and offered for taxation in the subsequent year, it did not amount to concealment. The ITAT referred to the Supreme Court's decision in Excel Industries, which stated that disputes over the year of taxability, especially when the tax rates are the same, should not lead to penalties.

Conclusion:
The ITAT upheld the CIT(A)'s decision to delete the penalty under Section 271(1)(c) for the impugned addition of ?2,42,51,035/-, noting that the issue was merely about the year of taxability and not concealment or furnishing of inaccurate particulars. The ITAT dismissed the Revenue's appeal, emphasizing that there was no concealment of income and that the dispute was academic, with no significant tax effect.