2015 (12) TMI 453 - AT - Income Tax

ITAT dismisses Revenue's appeal, upholds CIT(A) order deleting penalty under Section 271(1)(c).

The ITAT dismissed the Revenue's appeal, affirming that the assessee did not conceal income or file inaccurate particulars. The penalty under Section ... Penalty u/s. 271(1)(c) - disallowance of deduction u/s. 80IA(4) - CIT(A) deleted the penalty - Held that:- Claim made by the assessee at the time of filing of return was a bonafide claim and based upon one of the possible views, as per law prevailing at the time of filing of return. With the objective of bringing its return in line with the amended law, as per the amendment made in section 80IA(4), the assessee had filed its revised computation of income during the course of assessment proceedings, withdrawing the claim of deduction u/s. 80-IA. Under these circumstances, the A.O. had held that the assesse had furnished inaccurate particulars of income by claiming deduction u/s 80-lA(4), and thereby concealed its income, and thus penalty was levied. In our considered view, it was neither a case of furnishing of inaccurate particulars of income nor that of concealment of income. The facts of the present case are squarely covered by the decision of CIT vs Hindustan Electro Graphite Ltd [2000 (3) TMI 2 - SUPREME Court ] because the return was filed on 29.11.2006, before the amendment was made by the Finance Act, 2007 and approved by the Hon'ble President of India on 12.5.2007, with retrospective effect from 1.4.2000. Moreover, on the basis of retrospective amendment, the assessee had revised its computation during the assessment proceedings and withdrawn the deduction claimed u/s 80IA(4). Thus it was not a fit case for levying penalty u/s. 271(1)(c), thus no interference is called for in the order of Ld CIT(A) in deleting the penalty levied - Decided against revenue Issues Involved:1. Justification of the penalty under Section 271(1)(c) of the Income Tax Act, 1961.2. Determination of whether the assessee concealed income or filed inaccurate particulars of income.Issue-wise Detailed Analysis:1. Justification of the Penalty under Section 271(1)(c):The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which had decided against the penalty imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The key contention was whether the penalty was justified given that the assessee had claimed a deduction under Section 80IA(4) at the time of filing the return of income.The AO observed that the assessee, a sub-contractor for road construction projects, claimed a deduction under Section 80IA(4) which was not permissible for sub-contractors under the Act. Consequently, the AO disallowed the deduction and initiated penalty proceedings for furnishing inaccurate particulars of income. The AO imposed a penalty of Rs. 2,82,84,790/- after the assessee failed to respond to the show-cause notice.The CIT(A) later deleted the penalty, noting that the assessee had filed the return before the retrospective amendment to Section 80IA(4) by the Finance Act, 2007, which received presidential assent on 12.05.2007. The assessee had filed the return on 29.11.2006, relying on prevailing legal interpretations, including a decision by the Mumbai ITAT in the case of Bharat Udyog Ltd., which supported the claim. The CIT(A) concluded that the assessee's claim was bona fide and based on a possible view of the law at the time of filing.2. Determination of Whether the Assessee Concealed Income or Filed Inaccurate Particulars:The CIT(A) and subsequently the ITAT both found that the assessee did not conceal income or file inaccurate particulars. The assessee had revised its computation during assessment proceedings, withdrawing the deduction claim under Section 80IA(4) in light of the retrospective amendment. The CIT(A) and ITAT noted that the return was filed based on the legal position existing at the time, and the assessee could not have anticipated the retrospective amendment.The ITAT upheld the CIT(A)'s decision, emphasizing that the assessee's action was based on a legitimate interpretation of the law as it stood at the time of filing the return. The ITAT referenced the Supreme Court's decision in CIT vs. Hindustan Electro Graphite Ltd., which held that penalty could not be imposed if the return was correct as per the law at the time of filing, even if the law was amended retrospectively.Conclusion:The ITAT dismissed the Revenue's appeal, affirming that the assessee did not conceal income or file inaccurate particulars. The penalty under Section 271(1)(c) was deemed unjustified as the assessee's claim was bona fide and based on the legal framework existing at the time of filing the return. The order of the CIT(A) deleting the penalty was upheld, and the grounds raised by the Revenue were dismissed. The appeal of the Revenue was consequently dismissed.Order Pronounced:The order was pronounced in the open court on 13th October, 2015.