2016 (10) TMI 521 - AT - Income Tax

Tribunal overturns penalty under Income Tax Act, 1961

The Tribunal allowed the appeal, setting aside the penalty of Rs. 4,99,520 imposed under section 271(1)(c) of the Income Tax Act, 1961. The Tribunal held ... Penalty proceedings under section 271(1)(c) - disallowance of deduction claimed u/s 80IB(10) - Held that:- For mere making of claim which is not acceptable to the revenue, the penalty u/s 271(1)( c) cannot be levied. In the present case, the assessee has made claim which the deduction u/s 80IB (10) of the Act for the first time was allowed by the revenue whereas in the second assessment disallowed and rejected the same and therefore, this is not a fit case for levy of penalty. - Decided in favour of assessee Issues Involved:1. Confirmation of penalty of Rs. 4,99,520 under section 271(1)(c) of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Confirmation of Penalty under Section 271(1)(c):The appellant challenged the confirmation of a penalty amounting to Rs. 4,99,520 by the CIT(A), which was originally levied by the AO under section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed for allegedly furnishing inaccurate particulars of income and concealing income by wrongfully claiming a deduction under section 80IB(10).Facts of the Case:A search and seizure action under section 132(1) was conducted on 22.9.2005. The initial assessment was completed under section 143(3)(ii), determining the total income at Rs. 17,272/-. The Commissioner of Income Tax, exercising revisionary powers under section 263, set aside the assessment, directing the AO to pass a de novo order. The reassessment under section 143(3) read with section 263 was completed on 31.12.2009, determining the total income at Rs. 14,88,910/-. The penalty proceedings were initiated for disallowance of the deduction claimed under section 80IB(10) amounting to Rs. 14,84,029/-.Arguments by the Assessee:The assessee argued that the project initially commenced in 1996 but was halted due to certain issues. The development rights were later acquired on 28.4.1999, and a fresh commencement certificate was obtained on 11.7.2000. The assessee claimed that all facts were disclosed in the return of income and that there was no concealment or furnishing of inaccurate particulars. The assessee also contended that since there was only one project, a separate profit and loss account and balance sheet were not required.AO's and CIT(A)'s Findings:The AO rejected the assessee's explanation, stating that the approval for the housing project was obtained more than once, and thus, the project was deemed to have commenced on 10.1.1996, making it ineligible for the deduction under section 80IB(10). The AO imposed a penalty of Rs. 4,99,520, which was upheld by the CIT(A), who observed that the claim was false and not bonafide.Tribunal's Analysis:The Tribunal considered the submissions and material placed before it. It noted that the assessee's claim was initially accepted in the original assessment but was later disallowed in the reassessment. The Tribunal found merit in the argument that if the approval for the housing project was obtained twice, the subsequent approval should be considered for determining the eligibility for deduction under section 80IB(10). The Tribunal also noted that the claim was certified by a Chartered Accountant in Form No. 10CCB.Legal Precedents:The Tribunal relied on the decision of the Jurisdictional High Court in Commissioner of Income-tax (Central) v/s Ashray Premises (P.) Ltd., which held that if the approval of a project is taken twice, the subsequent approval should be considered for determining the claim under section 80IB(10). The Tribunal also referred to the case of Prakash Steelage Ltd V/s ACIT, which stated that a claim based on a bona fide belief and supported by an auditor's report does not attract penalty under section 271(1)(c).Conclusion:The Tribunal concluded that mere non-acceptance of a claim does not amount to furnishing inaccurate particulars or concealment of income. It held that the assessee's claim was based on a bona fide belief and supported by an auditor's certificate. Therefore, the penalty under section 271(1)(c) was not justified. The Tribunal set aside the order of the CIT(A) and directed the AO to delete the penalty of Rs. 4,99,520.Result:The appeal of the assessee was allowed, and the penalty was deleted. The order was pronounced in the open court on 16th August 2016.