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2015 (4) TMI 633 - ALLAHABAD HIGH COURT

2015 (4) TMI 633 - ALLAHABAD HIGH COURT - [2015] 376 ITR 544 (All) - Penalty under Section 271(1)(c) - deduction under Section 80-IB(7A) denied - Held that:- By making legal claim for deduction under Section 80-IB(7A) assessee is not guilty to concealment of income. In the earlier years, the A.O. himself has cancel the levy of the penalty for the similar reasons. When it is so, then the principal of consistency will have to be followed as per ratio laid down in the case of Radhasoami Satsang, [1 .....

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e penalty is not desireable. Hence, we set aside the impugned order of the Tribunal and restore the order passed by the first appellate authority, who has rightly cancelled the levy of the penalty. - Decided in favour of the assessee - Income Tax Appeal No. - 65 of 2015 - Dated:- 16-4-2015 - Hon'ble Arun Tandon And Hon'ble Dr. Satish Chandra,JJ. For the Appellant : S.K. Garg,Ashish Bansal For the Respondent : C.S.C. It ORDER The present appeal is filed by the assessee against the impugne .....

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essee was engaged in the construction of Multiplex Theater, but the same could not become commercially operational and functional even after the "trial runs". So on 07.11.2002, the assessee has filed the return showing "nil" income where no depreciation was claimed on capital expenditure. But the A.O. suo moto has allowed the depreciation by taking view that the "trial runs" having been carried out by the assessee, so the project is complete. For assessment year 200 .....

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ed the completion of project. For the purpose, the assessee has submitted audit report in the prescribed form 10CCBA of the Income Tax Rules, 1962. However, the claim was rejected by the A.O. vide order dated 26.12.2008. At the sametime, the A.O. has opined that the assessee has wrongly made the above claim which amounts the concealment of income, so he levied the penalty under Section 271(1)(c). But, the C.I.T.(A) has cancelled the levy of the penalty by observing that the assessee made a wrong .....

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allowed the depreciation suo moto for the assessment year 2002-03. The A.O. wrongly treated the "trial runs" as a "business runs", which was not so. Legally, the assessee was entitled to claim the deduction under Section 80-IB(7A) for the assessment year 2003-04 and onwards. For the year under consideration (2006-07), the assessee was advised by the Chartered Accountant to make a legal claim for the deduction. For the purpose, necessary form was also submitted alongwith the r .....

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relating to the levy of penalty under section 271(1)(c). It is also a submission of the learned counsel for the assessee that the same claim was made by the appellant in the assessment year 2004-05, which was disallowed and penalty proceedings were also started in the said assessment year, but later, it was dropped vide order dated 31.3.2010. He read out the section 80-IB(7A), which on reproduction reads as under : "(7A) The amount of deduction in the case of any multiplex theatre shall be- .....

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i, Mumbai or Kolkata; (b) the deduction under clause (a) shall be allowable only if- (i) such multiplex theatre is constructed at any time during the period beginning on the 1st day of April, 2002 and ending on the 31st day of March, 2005; (ii) the business of the multiplex theatre is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of any building or of any machinery or of plant previously used for any purpose; (iii) .....

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nsel, in the case of penalty, proceedings under Section 271(1)(c) are separate and distinct from the assessment proceedings. This aspect will have to be taken into consideration. The assessee has claimed the deduction on legal advice rendered by the professionally qualified persons, thus, the claim made in the return was pressed not only on the factual matrix of the case, but also on the legal advice. There was no occasion or even necessity for the assessee to revise its return for the assessmen .....

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(AP) 196: (2008) 6 DTR (AP) 265 : (2008) 300 ITR 40 (AP); (d) Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26(SC); (e) Burmah-Sheel Oil Storage and Distributing Co. of India vs. ITO reported in (1978) 112 ITR 592; (f) Cement Marketing Co. of India Ltd. vs. ASCT (1980) 124 ITR 15 (SC); (g) CIT vs. Harshvardhan Chemicals and Mineral Ltd. (2003) 259 ITR 212 (Rajasthan-Jaipur bench); (h) CIT vs. International Audio Visual Co. (2007) 288 ITR 570 (Del.); (i) CIT vs. Nath Bros. Exim Internati .....

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mits that that assessee has wrongly made the claim for deduction. The assessee has not revised the return to drop the claim specially when in the earlier years, the claim for deduction under Section 80-IB(7A) was already rejected by the A.O. But repeatedly, the assessee is making the said claim. It is also a submission of the learned counsel for the Department that the failure of the assessee to file the revise return is without any bona-fide reason, hence, the penalty is justified. Since, no de .....

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om the record, it appears that penalty was levied by the A.O. by observing that the assessee had made a wrong claim under Section 80-IB(7A). The Tribunal has confirmed the said penalty by observing that the assessee has not revised its return, so the penalty is justified. But fact remains that the assessment proceedings and penalty proceedings are quite different. The findings are not binding on each other as per ratio laid down in the case of Durga Kamal Rice Mill vs. CIT 265 ITR 25 (Calcutta). .....

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tion 80-IB(7A), which was rejected by the A.O. The claim of the assessee is the legal claim. Nothing was concealed by the assessee. Entire material was available before the A.O. For the legal advise rendered by the Chartered Accountant under bona-fide belief, no penalty is leviable as per the ratio laid down in the case of CIT vs. S. Dhanabal, 309 ITR 268 (Del) where it was observed that . "The claim of the assessee had been duly certified by the chartered accountant and, therefore, the ple .....

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e Revenue's appeal was consequently dismissed." Further the record, it appears that construction of the Multiplex had not been completed by 31.3.2002, although a part of it had been completed and the part so completed had started yielding income also. Section 80-IB(7A) specifically talks about construction and not commencing of business. The CIT(A) while deciding the issue of leviability of penalty under Section 271(1)(c) in favour of the assessee has specifically noted that in the fina .....

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quot; of the multiplex theatre as envisaged under section 80IB(7). It was incumbent upon the A.O. to give specific findings in this regard especially when the appellant had submitted that there was construction of value exceeding ₹ 4.12 crore in subsequent years (including F.Y. 2002-03). In this view of the matter, it cannot be said that the impugned claimed made by the assessee was a bogus claim or a claim that was wholly untenable." It may be mentioned that the penalty can be impose .....

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r was guilty of conduct contumacious or dishonest, or acted in concious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. In the audit report in Form 10CCBA relevant to the assessment year 2006-07 (year under appeal here) also the date of completion of construction has been mentioned as 1.5.2002 falling in the assessment year 2003-04. On the basis of these facts there was a strong justification for the assessee to claim exemption under section 80 .....

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also relevant to mention that penalty has been levied for furnishing inaccurate particulars, whereas the Tribunal in para 8 of its order which reads as under :- "8. We have considered the rival submissions. We find that the admittedly the return of income for the present year was filed by the assesse on 30/11/2006 i.e. before the order of CIT(A) in assessment year 2002-03 as per which he rejected the claim of the assessee regarding its eligibility for deduction u/s 80IB and the same has be .....

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