2019 (4) TMI 264 - AT - Income Tax

Penalties Deleted for Assessee's Belief in Deduction (1)(c)

The ITAT upheld the deletion of penalties under section 271(1)(c) for the assessee's bonafide belief in claiming 100% deduction under section 80IC. ... Penalty u/s 271(1)(c) - deduction u/s 80IC - restricting claim to 25% of the eligible profits as against 100% claimed by on account of substantial expansion carried - addition made in the quantum proceedings had been upheld both by the CIT(A) and the I.T.A.T. - bonafide belief - HELD THAT:- Identical issue of levy of penalty on account of restriction of claim of deduction u/s 80IC to 25% of the eligible profits 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] by the I.T.A.T. holding that this claim f 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. Thus we delete the penalty levied u/s 271(1)(c) - decided in favour of assessee. Issues:- Appeal against deletion of penalty 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 under section 80IC.- Application of Explanation 1 to section 271(1)(c) regarding the burden of proof on the assessee.- Reliance on judicial precedents and decisions in similar cases for deleting the penalty.- Discrepancy between the decisions of revenue authorities, appellate authorities, High Court, and Supreme Court on the issue of deduction under section 80IC.Analysis:The Appellate Tribunal ITAT Chandigarh heard appeals filed by the Revenue against separate orders of the Commissioner of Income Tax (Appeals) deleting penalties under section 271(1)(c) of the Income Tax Act for restricting the deduction claimed by the assessee under section 80IC to 25% instead of 100%. The penalty was imposed due to the addition made to the income of the assessee in quantum proceedings, which was upheld by the CIT(A) and ITAT. However, the CIT(A) deleted the penalty, citing the assessee's bonafide belief in claiming 100% deduction under section 80IC beyond five years. The CIT(A) relied on the ITAT Chandigarh Bench's decision in a similar case where the penalty was deleted for the same reason.The Revenue challenged the CIT(A)'s decision, arguing that the penalty should not have been deleted as the assessee failed to discharge the burden of proof under Explanation 1 to section 271(1)(c). The Revenue also questioned the reliance on the ITAT's decision in the case of Hycron Electronics, which was under appeal before the High Court. However, during the hearing, it was noted that the ITAT had previously deleted penalties in similar cases where the issue of deduction under section 80IC was based on a bonafide belief.The ITAT upheld the CIT(A)'s decision to delete the penalty, emphasizing the bonafide belief of the assessee in claiming the deduction. The ITAT considered the conflicting orders from various authorities and courts on the issue, concluding that the assessee's belief was bonafide. Therefore, the penalties were dismissed in line with previous decisions. Both appeals of the Revenue were subsequently dismissed by the ITAT, following the precedent set in similar cases.In conclusion, the ITAT upheld the deletion of penalties under section 271(1)(c) for the assessee's bonafide belief in claiming 100% deduction under section 80IC, despite differing opinions from revenue authorities and courts. The decisions in similar cases were relied upon to support the deletion of penalties, leading to the dismissal of the Revenue's appeals.