2021 (2) TMI 128 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - denying the claim of deduction u/s 80IB(10) of Act on the ground that the area of the plot on which the housing project was taken up is less than one acre - HELD THAT - It appears that the AO had concluded that the size of the land is less than one acre based on the entries in 7/12 extract. It is also a matter of fact that the actual area is more than one acre i.e., 4722 sq.mtrs, which is more than the area mentioned in 7/12 extract. Considering these facts, the Tribunal had allowed the appeal 2021 (2) TMI 80 - ITAT PUNE and had clearly held the entries made in 7/12 extract are not conclusive and what is to be considered is the actual area of the plot and accordingly, allowed the appeal of the assessee in the quantum appeal. Thus, since the addition made in the assessment was deleted in the quantum appeal, no penalty can be levied. It i s a case of mere disallowance of claim made which does not tantamount to furnishing of inaccurate particulars of income nor is it false claim, as the assessee had made a bonafide claim and contended vehemently the findings of the AO that the size of the land is less than one acre. Therefore, the ratio of the decision of Hon ble Apex Court in the case of Reliance Petroproducts Ltd. 2010 (3) TMI 80 - SUPREME COURT is squarely applicable to the facts in the present case. It is not a fit case for levy of penalty u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income - it is not a fit case for levy of penalty u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under Sec.271(1)(c) of the Income Tax Act, 1961 for the assessment year 2007-08 based on inaccurate particulars of income.

Detailed Analysis:

Issue 1: Levy of Penalty
The appeal was filed against the order confirming the penalty under Sec.271(1)(c) of the Income Tax Act. The appellant contended that the penalty order was bad in law and prayed for its deletion. The appellant, a partnership firm engaged in Builders and Promoters business, had filed an e-return of income for the assessment year 2007-08, claiming a deduction under Sec. 80IB(10) of the Act. The assessment was completed denying the deduction based on the size of the land for the housing project. The Assessing Officer (AO) initiated penalty proceedings under Sec. 271(1)(c) for furnishing inaccurate particulars of income.

Issue 2: Disallowance of Deduction
The AO disallowed the deduction based on the land size being less than one acre as per the 7/12 extract, despite the appellant's claim of possessing more than one acre. The AO issued show cause notices, which the appellant did not respond to, leading to the levy of a substantial penalty. The Commissioner of Income Tax (Appeals) upheld the penalty, citing previous court decisions to support the disallowance of the claim for deduction.

Issue 3: Appellant's Arguments
The appellant argued that the disallowance of the claim does not imply furnishing inaccurate particulars of income. The appellant relied on court decisions to support the contention that a debatable claim does not constitute concealment of income or inaccurate particulars. The appellant highlighted that the penalty order was premature as the quantum appeal was pending before the Tribunal or Commissioner of Income Tax (Appeals).

Issue 4: Tribunal's Decision
The Tribunal analyzed the facts and held that since the addition made in the assessment was deleted in the quantum appeal, no penalty could be levied. Additionally, the Tribunal observed that there was no finding by the AO on how the inaccurate particulars of income were furnished by the appellant. The Tribunal referred to various court decisions to support its conclusion that a mere disallowance of a claim does not amount to furnishing inaccurate particulars of income.

Conclusion:
The Tribunal set aside the penalty order, stating that it was not a fit case for the levy of penalty under Sec. 271(1)(c) for furnishing inaccurate particulars of income. The lower authorities' reliance on previous court decisions was deemed misplaced, and the penalty of ?1,63,43,480/- was directed to be deleted. The appeal filed by the assessee was allowed in light of the discussions and analysis presented.