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 withdrew the claim by filing a revised return and the tax computed under minimum alternate tax remained higher than normal tax, producing no revenue loss; consequential other additions were deleted on appeal. Applying the principle that assessment under MAT precludes levy of penalty for disallowances in normal provisions, the tribunal found no tax evasion or revenue prejudice and allowed the appeal, setting aside the penalty.

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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.

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