2021 (9) TMI 234 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - denial of the assessee s claim under section 80IB - HELD THAT - It is not the case that assessee s claim was exfacie bogus - CIT(A) in dealing with the penalty order has distinguished the assessee s reliance upon decision in the case of Vandana Property 2012 (4) TMI 54 - BOMBAY HIGH COURT by holding that assessee is picking lines from the above Hon ble jurisdictional High Court decision. CIT(A) has misled himself in distinguishing the assessee s reliance upon the decision in the case of Reliance Petroproducts 2010 (3) TMI 19 - SUPREME COURT wherein as expounded that mere denial of an assessee s claim cannot fasten upon the assessee liability of penalty u.s 271(1)(c), unless the assessee s claim is found to be ex-facie bogus - assessee s claim by no stretch of imagination can be said to be apparently bogus claim. Hence, in our considered opinion, on the facts and circumstances of the case authorities below have erred in levying the penalty u.s. 271(1)(c) upon the assessee. The only aspect in the present case is that the claim of deduction was made, which has not been allowed because of the non-satisfaction of the requirement of size of the project. We note that in similar situation in the case of CIT vs. Petels Engineers Limited 2013 (11) TMI 1374 - BOMBAY HIGH COURT has held that penalty u/s. 271(1)(C) is not exigible on denial of claim u/s 80IA. Therefore, levy of penalty in the present case is not justified - Decided in favour of assessee.

Summary

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 ?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.