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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 ..... d Authorized Representative for the assessee on the ratio laid down by the Hon’ble Supreme Court in CIT Vs. Reliance Petro Products (2010 (3) TMI 80 - SUPREME COURT ). - Decided against revenue - ITA Nos.695 to 697/PN/2014 - - - Dated:- 31-12-2015 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM Appellant by : Shri Mazhar Akram Respondent by : S/Shri Vipin K. Gujrathi and Krishna V. Gujarathi ORDER PER SUSHMA CHOWLA, JM : This bunch of appeals filed by the Revenue are against consolidated order of CIT(A)-III, Pune, dated 02.01.2014 relating to assessment years 2006-07 to 2008- 09 against levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 (in short the Act ). 2. This bunch of appeal relating to the same assessee for different assessment years on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. However, reference is being made to the facts and issues in ITA No.695/PN/2014 to adjudicate the issue. 3. The Revenue in ITA No.695/PN/2014 has raised the following grounds of appeal :- 1. The order of the Commissioner of Income Tax (Appeals) is contrary to law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.2010 withdrawing the claim of deduction under section 80IB(10) of the Act for all three years. Since the assessee had not completed the project as per the provisions of section 80IB(10) of the Act within stipulated time, the Assessing Officer held that the assessee was not entitled to the claim of deduction under section 80IB(10) of the Act amounting to ₹ 69,99,139/-. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Act. In reply to the show cause notice issued with regard to the levy of penalty under section 271(1)(c) of the Act, the assessee furnished reply submitting that he has furnished return of income for the year under consideration on 30.10.2006, wherein it had claimed deduction under section 80IB(10) of the Act under the bonafide impression that he was entitled to the said claim of deduction. The complete details in respect of the income earned by the assessee and the deduction claimed under section 80IB(10) of the Act were submitted with the return of income and also the audit report furnished for the year under consideration, both in Form No.3CD and Form No.10CCB for claiming the deduction under section 80IB(10) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of aforesaid penalty existed in the case of assessee, the Assessing Officer levied penalty of ₹ 23,55,910/- @ 100% of the tax sought to be evade. 7. Before the CIT(A), the contention of the assessee was that though it had withdrawn the deduction under mistaken belief of law / fact that he was not entitled to the deduction under section 80IB(10) of the Act as his project was not completed by 31.03.2009, but the Assessing Officer had disallowed the deduction without verifying the documents pertaining to the deduction viz. layout of the land, copy of approved building plan and completion certificate. The learned Authorized Representative for the assessee further pointed out that the assessee was engaged in construction of two projects in one layout and the area of each of the plot was more than one acre and these were separate and bisected by a 12 meters wide road passing between them, against which it had got two separate building plans approved from the Municipal authorities on 25.01.2005. As against 36 bungalows in plot No.1, the assessee had completed 20 bungalows and as against 31 bungalows in plot No.2, the assessee had completed 31 bungalows, before the prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the AO or the CIT(A); and, (b) second, where in respect of any facts material to the computation of total income under the provisions of this Act, the assessee is not able to substantiate the explanation and the assessee fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by the assessee. Thus, the penalty under sec. 271(1)(c) is a penalty for concealment of income or for furnishing of inaccurate particulars, or, under the extended definition by the virtue of Expln. 1 to s. 271(1)(c), for a deemed concealment of income. 8. The CIT(A) further observed that the deeming provisions of Explanation (1) to section 271(1)(c) of the Act comes into play where in respect of any facts material to the computation of the total income of any person under this Act, (1) when the assessee fails to provide an explanation, (ii) when the assessee provides an explanation which is found to be false, and (iii) when the assessee provides an explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Court in respect of balance 16 bungalows in plot No.1. The finding of the CIT(A) vide para 5.6 is that although 51 out of total 67 bungalows in the project had been completed by 25.07.2006, balance 16 units could not be constructed, in view of the stay of the Court and where the layout consisted of two projects, out of which, one was completed within stipulated time, the same was in-fact, eligible for deduction under section 80IB(10) of the Act, but the Counsel of the assessee withdrew the entire claim of deduction. Secondly, in respect of second project, the assessee was entitled to prorata deduction as laid down by various judicial authorities, which was also withdrawn by the assessee under mistaken belief of fact and law. 10. Now, coming to the next objection i.e. deeming provision of Explanation (1) to section 271(1)(c) of the Act, wherein as per the Assessing Officer, the assessee has failed to substantiate his explanation on the claim of deduction under section 80IB(10) of the Act, the CIT(A) observed that as far as there were no factual errors or inconsistencies and it was supported by reasonable supporting evidence, the bonafide should be taken as proved. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sociates in ITA No.1273/PN/2011, relating to assessment year 2005 - 06, order dated 27.02.2013. 14. We have heard the rival contentions and perused the record. The issue arising in the present appeal is against levy of penalty for concealment under section 271(1)(c) of the Act on an addition made with regard to the rejection of deduction claimed under section 80IB(10) of the Act. The assessee had developed a residential project at Karmala, Dist. Solapur and in the return of income, had claimed the deduction under section 80IB(10) of the Act in respect of profits disclosed from the said project. During the course of assessment proceedings, the Assessing Officer noted that since the date of commencement of the project was shown to be on 25.01.2005, the said project ought to have been completed by 31.03.2009 in order to avail the deduction under section 80IB(10) of the Act. The Assessing Officer also deputed the Inspector, who reported that out of 67 bungalows, 16 bungalows were not constructed by the assessee upto October, 2010. The Assessing Officer vide letter dated 18.11.2010 show caused the assessee to explain as to why the deduction claimed under section 80IB(10) of the Act s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch other and the addition / disallowance made in the assessment proceedings does not automatically result in levy of penalty. We are in conformity with the said finding of CIT(A), since under the provisions of section 271(1)(c) of the Act itself, it is provided that before levying any penalty upon the assessee, the Assessing Officer is to show cause as to why penalty should not be imposed with reference to the addition made or confirmed in the quantum proceedings. Impliedly, the penalty proceedings are independent of the assessment proceedings and in each case, where addition or disallowance is made in the hands of the assessee would not automatically result in imposition of penalty upon the assessee. Even in cases, where the assessee has accepted the addition made by the Revenue authorities, it does not imply that the penalty for concealment should be automatically leviable. In this background, we proceed to look at the facts of the present case in order to determine whether the assessee had bonafidely put up the claim for deduction under section 80IB(10) of the Act, which was rejected by the Assessing Officer and whether the assessee in the developed legal position of the said se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the stipulated date. The assessee thus, claims that in respect of plot No.2, it was entitled to full deduction under section 80IB(10) of the Act and in respect of plot No.1, it was entitled to prorata deduction. The alternate submission of the assessee is that even if both the plots are considered to be one project, then also the assessee is entitled to prorata deduction under section 80IB(10) of the Act in respect of non-completion of the balance bungalows in plot No.1. The assessee pointed out that the stay was granted by the Civil Court, Karmala and hence, the non-completion of the project. Another aspect pointed out by the assessee before the authorities below was that the said projects were being looked after by his brother, who expired and thereafter, the projects were taken over by the assessee and in that confusion, where he was not looking after the projects and not being aware of the legal position, the assessee had withdrawn its claim of deduction under section 80IB(10) of the Act before the Assessing Officer. 16. The question arising before us is whether in such scenario can the deeming provisions of Explanation (1) to section 271(1)(c) of the Act be applied ..... X X X X Extracts X X X X X X X X Extracts X X X X
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