2024 (10) TMI 237 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - disallowance of claim of deduction u/s 80IB(10) - on issue of obtaining the completion certificate within the stipulated period the claim of deduction u/s 80IB(10) was disallowed by the A.O on other two factual grounds being most of the residential units having more than 1500 square feet and secondly the assessee has not developed the residential project but only construction the residential houses as a contractor - HELD THAT - It is pertinent to note that merely mentioning build-up area of 1500 sq ft. in the sanction plan cannot be a determinative fact of actual area of the area constructed units as there may be deviations in the actual area of construction and area of construction as per plan. Even otherwise if extra area of construction of the units is not in breach of building by laws then it is irrelevant for the municipal or development authorities whether a particular unit is having less than or more than 1500 sq. ft. area because civil authorities are concerned only with respect to the overall constructed area within the prescribed limit of building by laws. Nothing has been brought on record to prove that the second contention of the Ld. AR is that the built up area of units are less than 1500 sq. ft. The assessee is a developer and not a works contractor is based on the hypothetical situation and facts and not on the actual facts of the assessee's case. The assesse has not brought any material on record to show that in all the cases sale deed of plots were executed prior to the construction of house to facilitate the buyers to avail loan from the bank/financial institutions. Even otherwise this issue has already attained finality in the quantum proceedings and nothing has been brought on record to show that the case of the assessee falls in the category of developer and sale deed executed by the assesse in favour of the buyers is only for the purpose of availing loan facility by the prospective buyers. Accordingly the decision relied upon by the Ld. AR of the assessee will not help the assessee of the case because those decision are only on the point of addition made by the A.O on a debatable issue and the claim of the assessee was found to be bonafide claim. In the case in hand the claim of the assessee was found to be based on incorrect facts of claiming himself as a developer and secondly the built up area of most of the residential houses was found to be exceeding the stipulated limit of 1500 square feet. Accordingly in the facts and circumstances of the case we do not find any error or irregularity in confirming the levy of penalty u/s 271(1)(c) - Decided against assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Legitimacy of penalty under section 271(1)(c) of the Income Tax Act.
3. Eligibility for deduction under section 80IB(10) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The appeal was filed with a delay of 10 days. The assessee explained the delay, stating that the notices and the order from the Commissioner of Income Tax (Appeals) were sent to the email of the counsel, who inadvertently missed them. Upon discovering the oversight, the counsel promptly advised filing an appeal. The tribunal, considering the circumstances and in the interest of justice, condoned the delay, allowing the appeal to be heard.

2. Legitimacy of Penalty under Section 271(1)(c) of the Income Tax Act:

The assessee challenged the penalty of Rs. 55,00,000 levied under section 271(1)(c), arguing that the penalty was based on a defective show cause notice and was not justified. The tribunal examined the circumstances under which the penalty was imposed, noting that the penalty was related to the disallowance of a deduction claim under section 80IB(10). The assessee argued that the claim was bona fide and relied on precedents, including the Supreme Court's judgment in CIT Vs. Reliance Petro Products Ltd., which held that a bona fide claim does not attract penalty under section 271(1)(c). However, the tribunal found that the claim was based on incorrect facts and upheld the penalty, concluding that the assessee furnished inaccurate particulars of income.

3. Eligibility for Deduction under Section 80IB(10) of the Income Tax Act:

The primary contention was the disallowance of the deduction claim under section 80IB(10) due to three main reasons: (i) the assessee acted as a contractor rather than a developer, (ii) most residential units exceeded the maximum built-up area of 1500 square feet, and (iii) failure to obtain a completion certificate within the prescribed period. The tribunal noted that the assessee sold plots and constructed houses on behalf of the buyers, thus acting as a contractor. The District Valuation Officer's report confirmed that 112 out of 147 houses exceeded the built-up area limit. The tribunal also referenced the jurisdictional High Court's decision, which emphasized the mandatory nature of obtaining a completion certificate. Despite the assessee's argument that the issue was debatable and pending before the Supreme Court, the tribunal found that the factual findings of the Assessing Officer and CIT(A) were upheld in quantum appeals, leading to the conclusion that the assessee's claim was not bona fide. Consequently, the tribunal confirmed the disallowance of the deduction and upheld the penalty under section 271(1)(c).

Conclusion:

The tribunal dismissed the appeal, confirming the penalty under section 271(1)(c) and the disallowance of the deduction under section 80IB(10), based on the factual findings that the assessee acted as a contractor, exceeded the built-up area limits, and failed to obtain the completion certificate within the stipulated period.