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The Income Tax Officer, Versus. Shri Sanjay Walchand Sanghvi

Penalty under section 271(1)(c) - deduction claimed under section 80IB(10) denied - Held that:- The assessee before us had furnished complete details with regard to the computation of income in his hands and also the details with regard to the computation of deduction under section 80IB(10) of the Act in Form No.10CCB, which was filed along with return of income. Though the deduction under section 80IB(10) of the Act was denied to the assessee, but because of judicial propositions on the issue o .....

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on 271(1)(c) of the Act. In this regard, we find merit in the reliance placed upon by the learned Authorized Representative for the assessee on the ratio laid down by the Hon’ble Supreme Court in CIT Vs. Reliance Petro Products (2010 (3) TMI 80 - SUPREME COURT ). - Decided against revenue - ITA Nos.695 to 697/PN/2014 - Dated:- 31-12-2015 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM Appellant by : Shri Mazhar Akram Respondent by : S/Shri Vipin K. Gujrathi and Krishna V. Gujarathi ORDER .....

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rence is being made to the facts and issues in ITA No.695/PN/2014 to adjudicate the issue. 3. The Revenue in ITA No.695/PN/2014 has raised the following grounds of appeal :- 1. The order of the Commissioner of Income Tax (Appeals) is contrary to law and to the facts and circum stances of the case. 2. The Commissioner of Income Tax (Appeals) erred on facts and in law in deleting the penalty levied u/s.271 (1)(c) of the Income Tax Act, 1961. 3. The Commissioner of Income Tax (Appeals) erred in app .....

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issioner of Income Tax(Appeals) may be vacated and that of the A .O. be restored. 5. The appellant craves leave to add, am end, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal. 4. The issue arising in the bunch of present appeals is against the levy of penalty under section 271(1)(c) of the Act, wherein penalty of ₹ 23,55,910/- was levied in assessment year 2006-07, ₹ 8,87,445/- in assessment year 2007-08 a .....

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deration, the assessee had claimed deduction under section 80IB(10) of the Act at ₹ 69,99,139/-. Since the assessee had commenced the project on 25.01.2005, the said project should have been completed on or before 31.03.2009. But, the same was not completed before the said date. Certain enquiries were made by the Assessing Officer by deputing the Inspector and it was reported that the project had not been completed. Thereafter, notice under section 148 of the Act was issued to the assessee .....

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; 69,99,139/-. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Act. In reply to the show cause notice issued with regard to the levy of penalty under section 271(1)(c) of the Act, the assessee furnished reply submitting that he has furnished return of income for the year under consideration on 30.10.2006, wherein it had claimed deduction under section 80IB(10) of the Act under the bonafide impression that he was entitled to the said claim of deduction. The .....

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2009. The plea of the assessee in this regard was that it had furnished return of income for the instant year on 30.10.2006 and the completion of the project on 31.03.2009 was a future event and at the relevant point of time, the assessee could not be expected to know that his project would not be completed before 31.03.2009. Since the assessee had furnished complete details and the conduct of the assessee was bonafide, the assessee claimed that the provisions of Explanation (1) to section 271(1 .....

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the assessee for the assessment year 2006-07 had furnished return of income on 30.10.2006 and the scrutiny assessment was completed on 06.11.2008. During the scrutiny assessment proceedings relating to assessment year 2008-09, it was noticed that the assessee had not completed the project till 31.03.2009. Thereafter, notice under section 148 of the Act was issued to the assessee on 18.11.2010 and the case was reopened. The assessee along with his Consultant attended the proceedings on 18.11.201 .....

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e Assessing Officer held that where the assessee had concealed particulars of his income or had furnished inaccurate particulars of such income, penalty under section 271(1)(c) of the Act is to be levied and since the conditions for levy of aforesaid penalty existed in the case of assessee, the Assessing Officer levied penalty of ₹ 23,55,910/- @ 100% of the tax sought to be evade. 7. Before the CIT(A), the contention of the assessee was that though it had withdrawn the deduction under mist .....

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and the area of each of the plot was more than one acre and these were separate and bisected by a 12 meters wide road passing between them, against which it had got two separate building plans approved from the Municipal authorities on 25.01.2005. As against 36 bungalows in plot No.1, the assessee had completed 20 bungalows and as against 31 bungalows in plot No.2, the assessee had completed 31 bungalows, before the prescribed date. The assessee further explained that under mistaken belief, it h .....

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tion of the project as the same was stayed by Court of law i.e. plot No.1. The next contention of the assessee was that it could have claimed the deduction under section 80IB(10) of the Act on partial completion of the project. However, under mistaken belief of fact and law, the deduction was withdrawn, but in such circumstances, no penalty under section 271(1)(c) of the Act is leviable. The CIT(A) observed that both the quantum and penalty proceedings were independent of each other and the addi .....

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tum proceedings. Further, making reference to the provisions of section 271(1)(c) of the Act, the CIT(A) observed as under:- 5.2 It is now examined whether the impugned addition / disallowance made in the Assessment order in the case of the appellant attracts penal provisions u/s. 271(1) (c) of the I.T. Act. The scheme of sec. 271(1)(c) visualizes imposition of penalty when the assessee has concealed income or when the assessee has furnished inaccurate particulars of income. In addition to these .....

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second, where in respect of any facts material to the computation of total income under the provisions of this Act, the assessee is not able to substantiate the explanation and the assessee 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 the assessee. Thus, the penalty under sec. 271(1)(c) is a penalty for concealment of income or for furnishing of inaccurate particulars, or, .....

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e provides an explanation which he fails to substantiate and he fails to prove that the explanation was bonafide and that all the facts necessary for the same and material for computation of income have been duly disclosed by the assessee. The CIT(A) further noted the factual aspects of the case and observed vide para 5.5, which reads as under:- 5.5 In the instant case, condition (i) is not satisfied as the appellant has offered an explanation during assessment proceedings that the entire accoun .....

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far as condition in (iii) is concerned, it could not be said that the explanation furnished by the appellant was not bonafide and that all the facts necessary for the same and necessary for computation of income were not disclosed in the return of income filed. In this regard, the appellant's contention is that his bonafides are demonstrated by the fact that he has withdrawn the claim on becoming aware that he is not eligible to the deduction. His bonafides in claiming the said deduction are .....

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earlier years can be withdrawn. But there is no mention in the said Instruction that such withdrawal of claims would amount to deemed concealment of income or deemed furnishing of inaccurate particulars. 9. The CIT(A) further noted the arguments of the assessee that the assessee himself under mistaken belief of fact and law, had considered both the projects as a single project and also noted that the stay order of the Court in respect of balance 16 bungalows in plot No.1. The finding of the CIT( .....

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entitled to prorata deduction as laid down by various judicial authorities, which was also withdrawn by the assessee under mistaken belief of fact and law. 10. Now, coming to the next objection i.e. deeming provision of Explanation (1) to section 271(1)(c) of the Act, wherein as per the Assessing Officer, the assessee has failed to substantiate his explanation on the claim of deduction under section 80IB(10) of the Act, the CIT(A) observed that as far as there were no factual errors or inconsis .....

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of the Act. The CIT(A) thus, held that in view of the bonafide legal claim made in the return of income, even if the same was found to be not acceptable, due to events occurring in the future cannot amount to concealing particulars of income or furnishing of inaccurate particulars of income. The CIT(A) held that the assessee could not be saddled with levy of penalty under section 271(1)(c) of the Act. Accordingly, the penalty levied f or the captioned assessment year under appeal was deleted by .....

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80IB(10) of the Act. In such facts, the assessee was liable to penalty under section 271(1)(c) of the Act. 13. The learned Authorized Representative for the assessee placing reliance on the order of CIT(A) took us through the factual aspects of the case and pointed out that on the first date when show cause notice was issued to the assessee on 18.11.2010, the assessee withdrew its claim of deduction under section 80IB(10) of the Act and thereafter filed revised return of income on 22.11.2010. Th .....

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ssociates in ITA No.1273/PN/2011, relating to assessment year 2005 - 06, order dated 27.02.2013. 14. We have heard the rival contentions and perused the record. The issue arising in the present appeal is against levy of penalty for concealment under section 271(1)(c) of the Act on an addition made with regard to the rejection of deduction claimed under section 80IB(10) of the Act. The assessee had developed a residential project at Karmala, Dist. Solapur and in the return of income, had claimed .....

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tructed by the assessee upto October, 2010. The Assessing Officer vide letter dated 18.11.2010 show caused the assessee to explain as to why the deduction claimed under section 80IB(10) of the Act should not be withdrawn as it had not completed the project by 31.03.2009. The assessee vide letter dated 18.11.2010 itself stated that it is withdrawing the claim of deduction under section 80IB(10) of the Act in respect of all three captioned assessment years. It may be clarified herein that the init .....

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s letter dated 18.11.2010 had also filed revised return of income in which, it had withdrawn the claim of deduction under section 80IB(10) of the Act. The assessment order was passed in the case of the assessee and penalty proceedings under section 271(1)(c) of the Act were initiated. In view of the above said facts and circumstances, the Assessing Officer was of the view that the assessee has concealed the particulars of income and furnished inaccurate particulars of income and consequently, pe .....

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ide explanation, were not accepted by the Assessing Officer. Even the reliance placed upon by the learned Authorized Representative for the assessee on the ratio laid down by the Hon ble Supreme Court in CIT Vs. Reliance Petro Products (supra) was found to be misplaced. The CIT(A) elaborately considered the submissions of the assessee, which were raised before the Assessing Officer during the course of penalty proceedings and noted the factual aspects in detail and also examined the said factual .....

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ence to the addition made or confirmed in the quantum proceedings. Impliedly, the penalty proceedings are independent of the assessment proceedings and in each case, where addition or disallowance is made in the hands of the assessee would not automatically result in imposition of penalty upon the assessee. Even in cases, where the assessee has accepted the addition made by the Revenue authorities, it does not imply that the penalty for concealment should be automatically leviable. In this backg .....

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plots independently were in excess of one acre, on which the assessee had planned to construct bungalows. In respect of plot No.1, which was on an area of 5537 sq. mtrs., total of 36 bungalows had to be constructed and 20 bungalows were completed upto July, 2006. Further, on plot No.2, an area of 5198 sq. mtrs., on which 31 bungalows had to be constructed, which were completed by 25.07.2006. The assessee had claimed the deduction under section 80IB(10) of the Act relating to assessment years 200 .....

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dited balance sheet, audit report in Form No.3CD and Form No.10CCB in order to avail the aforesaid deduction under section 80IB(10) of the Act. The complete details of the projects were furnished in Form No.10CCB. Though the deduction under section 80IB(10) of the Act has been denied to the assessee on the premise that the assessee has not completed project by 31.03.2009, in view of various judicial propositions, the case of the assessee before us was that it was entitled to the aforesaid deduct .....

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re independent i.e. plot No.1, on which there was sanction of 36 bungalows, 20 bungalows were completed by stipulated date and in plot No.2, where 31 bungalows were sanctioned, all were developed before the stipulated date. The assessee thus, claims that in respect of plot No.2, it was entitled to full deduction under section 80IB(10) of the Act and in respect of plot No.1, it was entitled to prorata deduction. The alternate submission of the assessee is that even if both the plots are considere .....

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by the assessee and in that confusion, where he was not looking after the projects and not being aware of the legal position, the assessee had withdrawn its claim of deduction under section 80IB(10) of the Act before the Assessing Officer. 16. The question arising before us is whether in such scenario can the deeming provisions of Explanation (1) to section 271(1)(c) of the Act be applied to hold that the assessee has concealed particulars of income or furnished inaccurate particulars of income .....

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essee provides explanation which he fails to substantiate and he fails to prove that the explanation was bonafide. The assessee before us had furnished complete details with regard to the computation of income in his hands and also the details with regard to the computation of deduction under section 80IB(10) of the Act in Form No.10CCB, which was filed along with return of income. Though the deduction under section 80IB(10) of the Act was denied to the assessee, but because of judicial proposit .....

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