TMI Blog2006 (10) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... s or facts before the authorities and has not acted bona fide. Thus, we hold that it is not a fit case for levy of penalty u/s 271(1)( c ), which is accordingly cancelled and the grounds of appeal of the assessee are allowed. We want to make it clear that our decision is limited only with regard to the validity of penalty imposed u/s 271(1)( c ) and shall not effect the merits of claim of the assessee for deduction u/s 80-IB(10) of the Act, which may be subject-matter of Revision Application pending before the Ld. CIT. In view of our decision cancelling the penalty imposed u/s 271(1)( c ) in this case, the present Stay Application of the assessee becomes infructuous - In the result, the appeal of the assessee is allowed. - G.C. GUPTA AND D.K. SRIVASTAVA, JJ. Keshav B. Bhujle for the Appellant. Adityavikram for the Respondent. ORDER G.C. Gupta, Judicial Member. - This appeal by the assessee for the assessment year 2003-04 is directed against the order of CIT(A). The grounds of appeal Nos. 1 and 2 of the assessee are as under : " 1. The Ld. CIT(A) seriously erred in law and on the facts and in the circumstances of the case in confirming minimu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion Petition before the CIT under section 264 of the Income-tax Act requesting for deduction under section 80-IB(10) of the Act amounting to Rs. 3.16 crores and the Revision Petition was filed before the CIT on 4-1-2006, which is still pending with CIT. The Ld. Counsel for the assessee submitted that the bona fide of the assessee is proved by the fact that assessee filed a written letter before the Assessing Officer dated 18-12-2001 disclosing the relevant facts of the case of the assessee and enquiring whether the assessee is entitled to 100% tax rebate in respect of profits and gains from the construction of their new project "Gayatri Darshan" on Plot No. 381/A, 381/B, Thakur Complex, Kandivali (East), Mumbai under section 80-IB of the Income-tax Act, 1961. No reply was given to this letter of the assessee by the Assessing Officer till date. He referred to certificate issued by the Registered Architect dated 28-4-2003 wherein certified that all the relevant conditions for the grant of deduction under section 80-IB of the Act are satisfied in the case of the assessee. A copy of this certificate of the Architect dated 28-4-2003 was filed in the compilation before Tribunal. He re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the assessee, which shows that the assessee has not fulfilled the various conditions laid down under section 80-IB of the Act for the grant of deduction as the land area of "Gayatri Darahsn" project was below one acre and 11% of the total of the project area consists of 34 shops and therefore, this project was residential- cum -commercial project and not a purely housing project. Twenty-four flats are of the area of more than 1,000 Sq. ft. The Ld. Departmental Representative submitted that faced with these facts confronted by the Assessing Officer, the assessee after the survey operation admitted in his statement recorded on oath to withdraw the claim under section 80-IB of the Act and filed a revised return surrendering the said claim of deduction. The assessee has not filed any appeal against the assessment order and the revision application under section 264 was filed after the initiation of the penalty proceedings in this case. He submitted that the Assessing Officer is not the authority for advance ruling and therefore, is not competent to give any reply to the application of the assessee dated 18-12-2001 enquiring about the admissibility of the claim of deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is liable to levy of penalty under section 271(1)( c ) is that whether the conduct of the assessee is bona fide or not and whether the assessee has disclosed the material facts relevant for its assessment before the Revenue authorities. We are aware of the deemed provision of Explanation 1 to section 271(1) of the Act which provides that any person fails to offer an explanation or offers an explanation, which is found by the authorities to be false, or offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person shall for the purpose of section 271(1)( c ) be deemed to represent the income in respect of which particulars have been concealed. But there is nothing in Explanation 1 to section 271(1) that penalty should be levied under section 271(1)( c ) by invoking Explanation 1 thereto in each case where an addition or disallowance is made by the Assessing Officer. The presumption as per Explanation 1 to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istakenly withdrawn by the assessee subsequent to the survey action under section 133A of the Act by filing a revised return and that the filing of revised return was a gross error and mistake and totally contrary to the various facts and material on record. Thus, it is evident that the assessee is itself not sure of admissibility of deduction under section 80-IB of the Act in its case at some point of time. But it does not follow that the claim of the assessee for deduction under section 80-IB in its original return of income was not a bona fide claim. We have perused the copy of computation of income filed by the assessee along with the original return of income as well as the revised return of income filed by the assessee and find that the claim of deduction under section 80-IB(10) of the Act is specifically made and the material facts necessary for assessment were disclosed by the assessee at the time of filing of its original as well as its revised return. In the computation of income filed along with the revised return filed by the assessee, it is specifically mentioned in the note given thereto that the "revised return is filed to modify the claim made under section 80-IB( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, the Mumbai Tribunal held that the mere rejection of legal claim of the assessee for taxability of income under a particular head of income is not by itself sufficient to warrant imposition of penalty. The tax matters are highly complex and hence there is bound to be a genuine difference of opinion in matters of law between the tax collectors and the tax payers. It is indeed very difficult for the assessee to predict, in advance, as to what view the Assessing Officer or Appellate authorities would take on the legal claim made by the assessee. The case involving genuine difference of opinion on matters of law between the assessee and the Assessing Officer are clearly outside the scope of Explanation 1 to section 271(1) provided assessee made full disclosure of all the relevant facts and also acted bona fide. In the case before us, we find that it is a clear case of difference of opinion between the Tax Authorities and the assessee with regard to the issue of deduction under section 80-IB(10) of the Act. The case involves genuine difference of opinion with regard to deduction provided under the statute between the assessee and the tax authorities and is thus, clearly outside th ..... 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