2025 (2) TMI 1376 - AT - Income Tax

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 ... Penalty proceedings u/s. 271(1)(c) - disallowance made u/s.80IB(10) - reason for disallowance of AO was that the three flats were allotted to one individual and his family members and thereby following the provisions of Section 80IB(10)(f) entire claim has to be disallowed; and secondly, the built-up area for 18 flats has exceeded the prescribed limit violating the provisions of Section 80IB(10)(c) Contention of the assessee was that clause ‘f’ of Section 80IB(10) was inserted w.e.f. 19/08/2009 and assessee had received all the payments in respect of three flats had also issued allotment letters prior to the insertion of this provision. These flats were allotted to three members of family separately and therefore, assessee was under a bonafide belief that there is no breach of condition HELD THAT:- As we find that all the allegations made by the ld. AO to disallow the claim of deduction u/s.80IB(10) has been dealt and reversed by the ld. CIT(A) and the Tribunal. The only issue was proportionate disallowance with respect to three flats on which penalty has been levied. Once it has been brought on record that these flats were allotted and part payment was received prior to insertion of Clause ‘f’ of Section 80IB(10) as these flats were allotted to three different members of the family then, it cannot be held that assessee had concealed any particulars of income or there was any inaccurate particulars of income. Thus, penalty cannot be levied on these facts and accordingly, same is deleted. Appeal of the assessee is allowed. 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.