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TMI Blog2015 (12) TMI 1521X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax (Appeals) erred on facts and in law in deleting the penalty levied u/s.271 (1)(c) of the Income Tax Act, 1961. 3. The Commissioner of Income Tax (Appeals) erred in appreciate the fact of the case that the assessee has revised his return of Income withdrawing the claim u/s 80IB(10) for A.Y. 2006 -07 & 2007-08 in proceeding of reopening proceedings after the fact revealed during the scrutiny assessment for A.Y. 2008-09 that the assessee had not completed the project up to the time limit, i.e., 31-03-2009 to be entitled to claim deduction u/s 80IB(10) of the Act. 4. For this and such other reasons as may be urged at the time of hearing, the Order of the Commissioner of Income Tax(Appeals) may be vacated and that of the A .O. be restored. 5. The appellant craves leave to add, am end, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal. 4. The issue arising in the bunch of present appeals is against the levy of penalty under section 271(1)(c) of the Act, wherein penalty of Rs. 23,55,910/- was levied in assessment year 2006-07, Rs. 8,87,445/- in assessment year 2007-08 and Rs. 2,08,050/- in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etion / occupancy certificate within stipulated time before 31.03.2009. The plea of the assessee in this regard was that it had furnished return of income for the instant year on 30.10.2006 and the completion of the project on 31.03.2009 was a future event and at the relevant point of time, the assessee could not be expected to know that his project would not be completed before 31.03.2009. Since the assessee had furnished complete details and the conduct of the assessee was bonafide, the assessee claimed that the provisions of Explanation (1) to section 271(1)(c) of the Act were not applicable. Since the deduction claimed under section 80IB(10) of the Act was denied to the assessee because of difference of opinion between the tax authorities and the assessee, such disallowance did not merit the levy of penalty for concealment under section 271(1)(c) of the Act. In this regard, reliance was placed on the ratio laid down by the Hon'ble Supreme Court in CIT Vs. Reliance Petro Products reported in 322 ITR 158 (SC). 6. The Assessing Officer observed that the assessee for the assessment year 2006-07 had furnished return of income on 30.10.2006 and the scrutiny assessment was completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project and under the said belief, withdrawn its claim of deduction under section 80IB(10) of the Act though it had complied with the conditions of the said section in respect of plot No.2 and partly in respect of plot No.1. The CIT(A) has reproduced the submissions of the learned Authorized Representative for the assessee under para 4 at pages 5 to 11 of the appellate order. Another aspect raised by the assessee was that it was unable to complete the construction of the project as the same was stayed by Court of law i.e. plot No.1. The next contention of the assessee was that it could have claimed the deduction under section 80IB(10) of the Act on partial completion of the project. However, under mistaken belief of fact and law, the deduction was withdrawn, but in such circumstances, no penalty under section 271(1)(c) of the Act is leviable. The CIT(A) observed that both the quantum and penalty proceedings were independent of each other and the additions or disallowances made in the assessment order would not automatically result in levy of penalty. He further observed in the penalty proceedings that the whole matter has to be seen from a different perspective irrespective of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts necessary for the same and material for computation of income have been duly disclosed by the assessee. The CIT(A) further noted the factual aspects of the case and observed vide para 5.5, which reads as under:- "5.5 In the instant case, condition (i) is not satisfied as the appellant has offered an explanation during assessment proceedings that the entire accounting and taxation aspects were being handled by his elder brother, Shri Ashok Sanghvi, who passed away a year earlier and that he could not complete the construction by 31.03.2009 due to disputes with the local people. Such an explanation filed by the appellant was not found to be factually incorrect as the letter submitted to the AO on 19.11 .2010 stating the above facts, and which has been discussed in the impugned penalty order, would show. Thus, the cond ition (ii) is also not satisfied. As far as condition in (iii) is concerned, it could not be said that the explanation furnished by the appellant was not bonafide and that all the facts necessary for the same and necessary for computation of income were not disclosed in the return of income filed. In this regard, the appellant's contention is that his bonafid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and truly disclosure of material facts necessary for its assessment. The CIT(A) held that there was no good reason to reject the same as unacceptable for the purpose of making the claim of deduction being covered by deeming fiction under Explanation (1) to section 271(1)(c) of the Act. The CIT(A) thus, held that in view of the bonafide legal claim made in the return of income, even if the same was found to be not acceptable, due to events occurring in the future cannot amount to concealing particulars of income or furnishing of inaccurate particulars of income. The CIT(A) held that the assessee could not be saddled with levy of penalty under section 271(1)(c) of the Act. Accordingly, the penalty levied f or the captioned assessment year under appeal was deleted by the CIT(A). 11. The Revenue is in appeal against the order of CIT(A). 12. The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer and pointed out that during the course of enquiries in assessment year 2008-09, it was noted that half of the project was not completed, consequent to which, show cause notice was issued to the assessee and the assessee thereafter, furnished t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that it is withdrawing the claim of deduction under section 80IB(10) of the Act in respect of all three captioned assessment years. It may be clarified herein that the initial assessment for assessment year 2006-07 was completed under section 143(3) of the Act. However, during the course of carrying on the assessment proceedings for assessment year 2008-09, the Assessing Officer noted that the project had not been completed by 31.03.2009 and hence, the assessment for the earlier two years were reopened and the deduction claimed under section 80IB(10) of the Act was denied for all three captioned assessment years, which are in appeal before us. The assessee vide its letter dated 18.11.2010 had also filed revised return of income in which, it had withdrawn the claim of deduction under section 80IB(10) of the Act. The assessment order was passed in the case of the assessee and penalty proceedings under section 271(1)(c) of the Act were initiated. In view of the above said facts and circumstances, the Assessing Officer was of the view that the assessee has concealed the particulars of income and furnished inaccurate particulars of income and consequently, penalty for concealment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject, which was divided into two plots i.e. plot Nos.1 and 2. The areas of both plots independently were in excess of one acre, on which the assessee had planned to construct bungalows. In respect of plot No.1, which was on an area of 5537 sq. mtrs., total of 36 bungalows had to be constructed and 20 bungalows were completed upto July, 2006. Further, on plot No.2, an area of 5198 sq. mtrs., on which 31 bungalows had to be constructed, which were completed by 25.07.2006. The assessee had claimed the deduction under section 80IB(10) of the Act relating to assessment years 2006-07 and 2007-08 by filing the returns of income within stipulated time. Since the project was sanctioned on 25.01.2005, the completion of the said project as per section 80IB(10) of the Act, was to be made by 31.03.2009. While filing the returns of income for assessment years 2006-07 and 2007-08 which were much before 31.03.2009, the assessee was not in a position to visualize that the project may not be completed before the stipulated date. The assessee furnished return of income along with audited balance sheet, audit report in Form No.3CD and Form No.10CCB in order to avail the aforesaid deduction under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or levy of penalty under section 271(1)(c) of the Act. In view of the totality of the above said facts and circumstances, we hold that in cases where the assessee provides an explanation which is not found to be false, the Explanation (1) to section 271(1)(c) of the Act is not to be applied. The said Explanation (1) to section 271(1)(c) of the Act is attracted when the assessee fails to provide an explanation or provides explanation, which is found to be false and when the assessee provides explanation which he fails to substantiate and he fails to prove that the explanation was bonafide. The assessee before us had furnished complete details with regard to the computation of income in his hands and also the details with regard to the computation of deduction under section 80IB(10) of the Act in Form No.10CCB, which was filed along with return of income. Though the deduction under section 80IB(10) of the Act was denied to the assessee, but because of judicial propositions on the issue of allowability of the said deduction, we find that the assessee had prima facie bonafide claim vis-à-vis the deduction under section 80IB(10) of the Act. In such circumstances, where the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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