2026 (2) TMI 365 - AT - Income Tax

Penalty for incorrect 80IC deduction denied where MAT charge prevents revenue loss; revised return withdrawal led to appeal allowed

Penalty under section 271(1)(c) was contested as triggered by an incorrect claim of deduction under section 80IC in the original return. The assessee ... Penalty levied u/s 271(1)(c) - disallowance of claim of deduction u/s 80IC as wrongly claimed - bonafide wrong claim v/s false claim HELD THAT:- Original return of income was filed u/s 139(1) of the Act wherein assessee had wrongly claimed deduction u/s 80-IC of the Act for Eleventh Assessment Years and therefore, as under the provisions of section 80-IC the claim of the assessee was not allowable. The assessee later through revised return of income, withdraw this claim. It is observed that even after revision of income, tax paid under MAT was higher than the tax on the normal income and there was no loss to the Revenue. Other additions made were deleted by CIT(A) and therefore, income declared in the revised return is the final income of the assessee. As decided in the case of CIT vs Nalwa Sons Investments Ltd. [2010 (8) TMI 40 - DELHI HIGH COURT] has held that where income has been assessed u/s 115JB of the Act, no penalty can be levied for the disallowance made while computing the income under the normal provisions of the Act. The assessee has filed a chart before us according to which tax payable under MAT u/s 115JB of the Act as per original return of income and as per revised return remained the same and the tax payable under normal tax is less than the tax chargeable under MAT under both the situations therefore, even otherwise, there is no loss to the revenue by making such incorrect claim inadvertently and thus there is no loss to revenue on account of tax sought to be evaded by the assessee. Appeal of the assessee is allowed. Issues: (i) Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 is sustainable for a wrong claim of deduction under section 80-IC when tax liability is higher under section 115JB (MAT) and there is no loss to revenue.Analysis: The issue requires examination of whether wrong particulars in the return resulting from an eleventh-year claim of section 80-IC deduction led to tax sought to be evaded where tax was ultimately determined and paid on the higher deemed income (book profits) under section 115JB. Relevant considerations include that the assessee filed a revised return withdrawing the incorrect deduction, tax under MAT exceeded tax under normal provisions both before and after revision, and earlier identical penalty proceedings in a related year were deleted by the appellate authority. Precedent establishes that where assessment is finally made on the basis of book profits under section 115JB and tax payable under that provision is higher, the incorrect claim that does not affect the tax payable under section 115JB does not result in tax evasion for the purposes of section 271(1)(c). The absence of loss to revenue and the factual matrix of correction by revised return and higher MAT liability render the levy of penalty unsustainable.Conclusion: Penalty under section 271(1)(c) is not sustainable; decision is in favour of the assessee and the penalty is deleted.