2012 (3) TMI 115 - AT - Income Tax

Penalty Proceedings - Deductions claimed under 80IA - Windmill leased and used in generating Electricity - AO treated as transfer from associated enterprise - Tribunal set aside order of CIT, penalty proceedings initiated - Held That - When case is accepted by Hon ble High Court show that there was substance in the claim of the assessee. In view of Reliance Petroproducts Pvt. Ltd.(2010 - TMI - 75701 - SUPREME COURT), Penalty unjustified.

Summary

Issues:
- Appeals filed by Revenue against deletion of penalty under Section 271(1)(c) for assessment years 2003-04 and 2004-05.
- Dispute regarding eligibility for deduction under Section 80-IA of the Income-tax Act.
- Consideration of whether the claim for deduction was bonafide or malafide.
- Analysis of the Tribunal's reversal of the CIT(Appeals) decision and subsequent admission of appeals by the High Court.

Issue 1: Appeals against Deletion of Penalty
The Revenue filed appeals against orders deleting penalties under Section 271(1)(c) for assessment years 2003-04 and 2004-05. The penalties were imposed due to the denial of deductions claimed under Section 80-IA of the Income-tax Act.

Issue 2: Eligibility for Deduction under Section 80-IA
The dispute centered around the assessee's claim for deduction under Section 80-IA for income generated from windmills leased from associated companies. The Assessing Officer contended that the lease constituted a transfer under the Transfer of Property Act, leading to the denial of the deduction. However, the CIT(Appeals) found in favor of the assessee, allowing the deduction.

Issue 3: Bonafide or Malafide Claim
The Assessing Officer imposed penalties under Section 271(1)(c) on the grounds that the claim for deduction was malafide. The assessee argued that the claim was bonafide, supported by relevant reports, and genuine. The CIT(Appeals) agreed with the assessee, citing legal precedents in favor of the claim.

Issue 4: Tribunal's Decision and High Court's Admission of Appeals
The Tribunal reversed the CIT(Appeals) decision, reinstating the denial of the deduction. However, the High Court admitted appeals filed by the assessee, indicating a legitimate dispute regarding the claim's validity. The Tribunal acknowledged the bonafide nature of the claim, supported by legal arguments and submissions.

In conclusion, the Tribunal dismissed the Revenue's appeals, upholding the CIT(Appeals) decision to delete the penalties. The Tribunal found the claim for deduction under Section 80-IA to be bonafide, supported by legal arguments and the admission of appeals by the High Court, indicating a genuine dispute over the claim's validity.