Penalty under section 271(1)(c) not justified for denied section 80IB claim unless apparently bogus

ITAT Mumbai held that penalty under section 271(1)(c) was not justified for denial of assessee's claim under section 80IB. The tribunal found that the assessee's claim was not ex-facie bogus, merely failing to satisfy project size requirements. Following SC precedent in Reliance Petroproducts and Bombay HC decision in Petels Engineers Limited, the tribunal ruled that mere denial of deduction claim under section 80IA/80IB cannot attract penalty unless the claim is apparently bogus. The CIT(A) erred in distinguishing relevant precedents and imposing penalty.

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Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2010-11 based on disallowance of deduction claimed under section 80IB(10).

Analysis:
The appellant, engaged in the business of redeveloping residential buildings, filed a return of income for the year 2010-11 claiming a deduction of Rs. 31,26,206 under section 80IB(10) for a completed project on a plot less than 1 acre. The Assessing Officer (AO) disallowed the deduction, which was upheld by the CIT(A), leading to a 100% penalty imposition by the AO. The appellant argued that the claim was based on professional advice and not concealment of income. However, the CIT(A) confirmed the penalty, emphasizing the inadmissibility of the claim under section 80IB(10) due to project size requirements and lack of slum area designation.

The Appellate Tribunal noted that penalty under section 271(1)(c) requires proof of concealment or furnishing inaccurate particulars of income. The Tribunal disagreed with the lower authorities, stating that the appellant's claim was not ex-facie bogus and did not warrant penalty imposition. Referring to relevant case laws, the Tribunal highlighted that denial of a claim does not automatically lead to penalty, especially when the claim is not found to be patently false. The Tribunal also cited a Bombay High Court decision to support its stance that penalty is not applicable solely based on claim denial under similar circumstances.

In conclusion, the Tribunal set aside the penalty imposed by the lower authorities, ruling in favor of the appellant. The decision emphasized that the mere denial of a deduction claim, without evidence of concealment or false particulars, does not warrant penalty under section 271(1)(c). The judgment was pronounced on 02.09.2021.

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