2012 (9) TMI 547 - AT - Income Tax

Penalty u/s 271(1)(c) - Assessee has fulfilled all the conditions for eligibility of deduction u/s 10A and claim the same AO disallow the same on the basis of CBDT Circular dated 6th January, 2005 stated that the deduction under Section 10A would be permissible only in respect of receipt after the date of registration with STPI AO levy penalty u/s 271(1)(c) on basis of claim of the assessee under Section 10A was patently wrong and false Held that - As claim made for deduction u/s 10A was bona fide and merely because the Assessing Officer did not accept the same, it would not amount to either concealment of income or furnishing of inaccurate particulars following the decision of SC in Reliance Petro Products Pvt. Ltd. (2010 (3) TMI 80) & Delhi High Court in Zoom Communication Pvt. Ltd. (2010 (5) TMI 34). Decision in favour of assessee.

Summary

Issues:
1. Justification of deleting penalty u/s 271(1)(c) despite incorrect claim of deduction.
2. Interpretation of Section 10A for eligibility of deduction.
3. Bonafide claim under Section 10A and applicability of penalty under Section 271(1)(c).

Issue 1: The main issue in this appeal was whether the penalty under Section 271(1)(c) should be deleted despite a patently incorrect claim of deduction. The Revenue argued that the claim under Section 10A was false as no export proceeds were received after the STPI approval date. However, the assessee contended that the claim was bona fide and fulfilled all conditions for eligibility.

Issue 2: The interpretation of Section 10A for deduction eligibility was crucial. The Revenue claimed that deduction was only permissible for receipts after STPI approval, citing a CBDT Circular. In contrast, the assessee argued that Section 10A allows deduction on a yearly basis, not limited to post-approval receipts, supported by a Chartered Accountant's certificate.

Issue 3: The crux was determining the bonafide nature of the claim under Section 10A to decide on penalty imposition. The High Court emphasized that a claim, even if legally incorrect, must be bona fide to avoid penalty under Section 271(1)(c). The assessee's claim was deemed bona fide as it met all eligibility criteria, and the deduction was supported by professional advice and past judicial interpretations.

The Tribunal upheld the CIT(A)'s decision to cancel the penalty under Section 271(1)(c) based on the bonafide nature of the assessee's claim under Section 10A. The judgment highlighted the importance of bonafide intentions behind claims, even if legally incorrect, to determine penalty applicability. The decision referenced past legal interpretations and professional advice to support the assessee's position, ultimately dismissing the Revenue's appeal.