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of <h1>ITAT Mumbai upholds disallowance of deduction, penalty referred back to AO for verification</h1> The ITAT Mumbai upheld the disallowance of deduction u/s. 80IB for A.Y. 2005-06, remanding the issue for further verification by the AO. Penalty ... Deduction u/s 80IB - AO disallowed the deduction claimed holding, the assessee was not eligible for deduction as it did not fulfill all the conditions as laid down u/s. 80IB - HELD THAT:- We find that by the order of Mumbai Tribunal ‘J’ Bench in assessee's own case for A.Y. 2003-04 and A.Y. 2004-05, the matter has been decided by CIT(A), where it was held that, 'In our opinion, there is no clear finding by both the authorities on this issue. We, therefore, considered it fit to restore this issue to the file of the A.O. for verifying whether the assessee fulfils one of the conditions regarding area of the plot on which building ‘C’ has been constructed, as required u/s.80IB(10).' Respectfully following the order of the Tribunal for A.Yrs 2003-04 and 2004-05, we restore the issue to the file of the AO to follow the directions in the order of the Tribunal in AY 2003-04 - Matter restored back Penalty u/s 271(1)(c) - Assessee’s claim of deduction was found to be not genuine in course of assessment proceeding and the claim of deduction was disallowed - CIT(A) confirmed the order of the AO levying penalty at the maximum rate of 300% of tax sought to be evaded - HELD THAT:- We find that the quantum appeal in assessee's own case for A.Y. 2003-04 by ITAT ‘J’ Bench has set aside to the file of the AO and directions have been given by the Tribunal to the AO to be followed during the assessment proceedings, hence we deem it fit that the matter of penalty shall also be restored to the file of the AO to decide the same in accordance with law - Matter restored back. Issues:1. Disallowance of deduction u/s. 80IB of the I.T. Act for Assessment Years 2003-04 & 2005-06.2. Penalty imposition under Section 271(1)(c) of the I.T. Act for Assessment Year 2003-04.Analysis:Issue 1: Disallowance of deduction u/s. 80IB of the I.T. Act- The appellant contested the disallowance of deduction u/s. 80IB amounting to Rs. 43,00,983 for the A.Y. 2005-06, claiming the AO erred in not granting the benefit. The Ld. CIT(A) upheld the disallowance based on the appellant's previous case history.- The Mumbai Tribunal's order in a related matter highlighted discrepancies in the area of the plot where the construction took place. The Tribunal directed the AO to verify if the appellant fulfilled the condition of having a minimum one-acre plot, as required by Section 80IB(10) of the Act.- Following the Tribunal's order for A.Y. 2003-04 and 2004-05, the issue was remanded to the AO for further examination based on approved plans submitted by the appellant. Consequently, the appeal by the assessee was allowed for statistical purposes.Issue 2: Penalty imposition under Section 271(1)(c) of the I.T. Act- The appellant's claim of deduction u/s. 80IB(10) amounting to Rs. 16,36,178 for A.Y. 2003-04 was disallowed during assessment proceedings. The claim was deemed not genuine due to non-fulfillment of deduction conditions.- In penalty proceedings, the AO justified the levy of penalty under Section 271(1)(c) based on the appellant's manipulation of facts to claim the deduction. The AO cited relevant case laws to support the penalty imposition.- The Ld. CIT(A) affirmed the AO's penalty imposition at the maximum rate of 300% of the tax sought to be evaded. However, considering the Tribunal's decision to remand the matter of penalty imposition back to the AO for A.Y. 2003-04, the appeals filed by the assessee were allowed for statistical purposes.In conclusion, the ITAT Mumbai addressed the issues of disallowance of deduction u/s. 80IB and penalty imposition under Section 271(1)(c) for the respective assessment years. The Tribunal upheld the disallowance of deduction for A.Y. 2005-06, remanding the issue to the AO for further verification. Similarly, the matter of penalty imposition for A.Y. 2003-04 was also referred back to the AO in line with the Tribunal's directions. The appeals by the assessee were allowed for statistical purposes in both cases.
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