2019 (3) TMI 725 - AT - Income Tax

Assessee's Belief in Tax Deduction Validated by ITAT Decision

The ITAT upheld the deletion of the penalty imposed under section 271(1)(c) of the Income Tax Act on the assessee for restricting the deduction claimed ... Penalty u/s 271(1)(c) - bonafide belief - addition made by restricting its claim of deduction u/s 80IC to 25% of the eligible profits as against 100% claimed on account of substantial expansion - HELD THAT:- Levy of penalty on account of restriction of claim of deduction u/s 80IC to 25% of the eligible profit is as against 100% claimed by the assessee beyond a period of five years, claimed on account of substantial expansion carried out, has been decided in favour of the assessee in the case of Hycron Electronics [2015 (10) TMI 2752 - ITAT CHANDIGARH) and M/s Quixotic Healthcare [2019 (1) TMI 1055 - ITAT CHANDIGARH] holding that this claim of the assessee was based on a bonafide belief. The I.T.A.T. held that differing orders passed by the revenue authorities, appellate authorities, the High Court and Supreme Court on this issue lend credence to the fact that the belief of the assessee was a bonafide belief. Since the issue involved in the present case is identical, the decision rendered by the I.T.A.T. in the aforesaid cases is squarely applied to the present case, also following which we delete the penalty levied u/s 271(1)(c). We, therefore, uphold the order of the CIT(A) in deleting the penalty levied.- Decided against revenue Issues:- Penalty levied under section 271(1)(c) of the Income Tax Act for restricting deduction claimed under section 80IC to 25% instead of 100%.- Bonafide belief of the assessee in claiming 100% deduction beyond five years.- Deletion of penalty by the Ld. CIT(A) based on bonafide belief and reliance on previous judgments.- Appeal by the Revenue challenging the deletion of penalty.- Comparison with judgments in similar cases by ITAT.Analysis:Issue 1: Penalty under section 271(1)(c) for restricting deduction claimed under section 80ICThe penalty was levied on the assessee for restricting its claim of deduction under section 80IC to 25% of eligible profits instead of the 100% claimed due to substantial expansion. The addition made in the quantum proceedings was upheld by the CIT(A) and ITAT, leading to the penalty under section 271(1)(c) for concealment of income.Issue 2: Bonafide belief in claiming 100% deductionThe Ld. CIT(A) deleted the penalty, stating that the assessee's claim of 100% deduction beyond five years under section 80IC was based on a bonafide belief. The CIT(A) held that there was no concealment of income or furnishing inaccurate particulars, as the assessee genuinely believed in the admissibility of the deduction.Issue 3: Deletion of penalty and reliance on previous judgmentsThe Ld. CIT(A) relied on the ITAT Chandigarh Bench's decision in a similar case where the penalty was deleted for the same reason of bonafide belief. The Ld. CIT(A) emphasized that the penalty cannot be upheld when the assessee acts on a bonafide belief, as supported by judicial precedents.Issue 4: Appeal by the RevenueThe Revenue appealed the deletion of penalty, arguing that the CIT(A) erred in not appreciating the facts and in deleting the penalty amount. The Revenue contended that the burden of proof was on the assessee to establish the bonafide belief, which they failed to do.Issue 5: Comparison with judgments in similar casesDuring the hearing, the ITAT referred to previous cases where penalties were deleted for similar reasons of bonafide belief in claiming deductions under section 80IC. The ITAT noted the oscillations in decisions by various authorities, ultimately supporting the assessee's bonafide belief.In conclusion, the ITAT upheld the deletion of the penalty, citing the bonafide belief of the assessee in claiming the deduction under section 80IC. The decision was based on precedents and the totality of facts, leading to the dismissal of the Revenue's appeal. The ITAT emphasized the importance of bonafide belief in tax matters and the relevance of consistent judicial interpretations in such cases.