Deduction under Section 80IB(10) and penalty under 271(1)(c) rejected where allotments predated amendment and no concealment found

Penalty under section 271(1)(c) was contested after the AO disallowed deduction claimed under Section 80IB(10) on grounds of family allotment and excess built-up area. The assessee showed allotment letters and part payments for three flats were made before insertion of clause f, and flats were allotted to different family members. CIT(A) and ITAT reversed the AO on disallowance issues and found no concealment or inaccurate particulars solely from those facts; consequently the penalty for those three flats was deleted and the assessee's appeal allowed.

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Issues: Whether penalty under Section 271(1)(c) can be sustained for part disallowance of deduction claimed under Section 80IB(10) in respect of three flats when (a) allotment and part payments were made prior to insertion of clause (f) of Section 80IB(10) and (b) the substantive disallowance issue has been reversed by the Commissioner (Appeals) and the Tribunal.

Analysis: The appeal relates to imposition of penalty under Section 271(1)(c) arising from a proportionate disallowance of deduction under Section 80IB(10). Relevant legal framework includes the conditions for deduction under Section 80IB(10) and the statutory penal provision Section 271(1)(c) which requires concealment of particulars of income or furnishing of inaccurate particulars. The facts show that allotment letters and part payments for the three flats were executed prior to the insertion of clause (f) of Section 80IB(10) and that the substantive disallowance was not sustained by the Commissioner (Appeals) and the Tribunal. On these facts there is no basis to conclude that there was concealment or furnishing of inaccurate particulars of income; instead the claim arose from a bona fide position taken in light of the timing of transactions and the later statutory amendment. Where the underlying disallowance has been reversed except for a proportionate adjustment and the factual matrix shows pre-amendment allotment and payments, imposition of penalty under Section 271(1)(c) is not justified.

Conclusion: Penalty under Section 271(1)(c) is deleted and the appeal is allowed in favour of the assessee.

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