2018 (4) TMI 882 - AT - Income Tax

Levy of penalty u/s.271(1)(c) - benefit of section 80-IB denied - Held that - As relying on case of VISWAS PROMOTERS PRIVATE LIMITED vs. ACIT 2012 (11) TMI 1117 - MADRAS HIGH COURT the assessee was entitled to proportionate deduction u/s.80IB(10) in respect of 28 units where the construction area did not exceed 1500 sq.ft. Therefore, it is not a case where the deduction u/s.80IB(10)(c) by the assessee was entirely not allowable to the assessee. Only that part of the deduction pertaining to units where the units area exceeded 1500 sq.ft claim for deduction u/s. 80IB (10) was not allowable to the assessee. Therefore, it cannot be said that the claim for deduction u/s.80IB(10) of the Act made by the assessee in its return of income was entirely wrong or false. In the instant case, the penalty was levied by the Assessing Officer on the ground that the assessee has concealed its particulars of income in respect of income of ₹ 16,65,433/-. However, it is observed that no material has been brought on record to show that the assessee has concealed its particular of income. Rather, in the instant case, the assessee disclosed the entire income and simultaneously claimed deduction of that income u/s.80IB(10) of the Act. It is not a case of concealment of income. Hon ble Supreme Court in the case of CIT vs Reliance Petroproducts (P) Ltd.(2010 (3) TMI 80 - SUPREME COURT)has held that merely making of a claim of deduction which is found to be not allowable does not invite penalty u/s.271(1)(c) of the Act. In the instant case, in absence of details of any income where particulars were found to be concealed by the assessee, in our considered view, the penalty imposed by the Assessing Officer and confirmed by the CIT(A) is untenable. - Decided in favour of assessee

Summary

Issues Involved:
- Condonation of delay in filing appeal before ITAT
- Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961

Condonation of Delay:
The appeal filed by the assessee was time-barred by 108 days, but the delay was condoned by ITAT as the assessee provided a reasonable cause for the delay, which was supported by an affidavit. The delay was condoned, and the appeal was admitted for hearing.

Confirmation of Penalty:
The main issue revolved around the confirmation of a penalty of ?5,97,480 under section 271(1)(c) of the Income Tax Act. The penalty was imposed for the alleged concealment of income. The Assessing Officer disallowed a deduction claimed under section 80IB of the Act, leading to the penalty. However, the ITAT found that the disallowance of the deduction did not amount to concealment of income, citing legal precedents and the absence of evidence showing deliberate concealment.

Detailed Analysis:
The Assessing Officer disallowed the deduction claimed under section 80IB due to non-compliance with specific conditions, resulting in the penalty imposition. The ITAT referred to a Madras High Court case to establish that the disallowance should be proportionate to the non-compliant units, not the entire project. This proportionate deduction approach was applied, leading to the conclusion that the deduction was not entirely wrong or false.

The ITAT further emphasized that the penalty for concealment of income cannot be levied solely based on disallowed deductions. Legal arguments were presented, relying on various court decisions, including the Supreme Court's ruling that a disallowed claim does not automatically attract a penalty. The ITAT found no evidence of deliberate concealment and concluded that the penalty was unjustified.

In light of the legal principles and lack of evidence supporting the concealment of income, the ITAT allowed the appeal, deleting the penalty imposed under section 271(1)(c) of the Income Tax Act. The decision was based on the absence of concealment and the proportionate nature of the disallowed deduction, ensuring a fair and just outcome for the assessee.

In conclusion, the ITAT's judgment focused on the legal interpretation of deduction disallowance and penalty imposition under the Income Tax Act, ultimately ruling in favor of the assessee by deleting the penalty and allowing the appeal. The decision provided clarity on the application of penalties in cases of deduction disallowance and emphasized the importance of evidence in establishing concealment of income.