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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
PER MANISH BORAD, AM.
These three appeals filed at the instance of the assessee pertaining
to Assessment Year 2004-05, 2005-06 & 2006-07 are directed
against the consolidated order of Ld. Commissioner of Income
Tax(Appeals)-3 (in short ‘CIT(A)’), Bhopal dated 8.12.2016 which
are arising out of the order u/s 271(1)(c) of the Income Tax Act
1961(In short the ‘Act’) dated 03.03.2016 framed by ACIT(Central)-
II, Bhopal.
Fortune Builders ITA No.82 to 84/Ind/2017 2. As the issues raised in all the appeals relates to the legality
and quantum of penalty levied u/s 271(1)(c ) of the Act, these were
heard together and are being disposed off by this common order for
sake of convenience.
Common grounds are raised in all these 3 appeals. For sake of
adjudication we mention the grounds raised for Assessment Year
2004-05 which also includes the additional ground raised by the
assessee vide application dated 14.8.2018.
“1. a. On CIT(A) erred in confirming penalty when show cause notice I assessment order does not explicitly mentioned the limb 271(1)lc) of the Act Le. whether it 1S for furnishing inaccurate particulars or concealment of income. b. In view of the facts & circumstances & the case, CIT(A) should not have confirmed the penalty u Is 271(1)(C) of the Act. c. Appellant prays that penalty confirmed by CIT(A) u/s 271(1)(C)of the Act, 1961 be deleted. WITHOUT PREJUDICE TO ABOVE ADDITIONAL GROUND NO.1 2. a. CIT(A) erred in confirming penalty u Is 271(1 HC) when the issue involved is debatable. b. In view of the facts & circumstance of the case appellant prays that penalty conf1rmed by CIT(A) u/s 271(1)(C) of the Act be deleted. Appellant humbly requested that the above ground of appeal may kindly be admitted per need justice, appellant reiterates their assurance to co-operate in early disposal of appeal”. 2
Fortune Builders ITA No.82 to 84/Ind/2017 4. At the outset the Ld. Counsel for the assessee submitted that
the penalty has been levied u/s 271(1)(c) of the Act on the
disallowance of deduction claimed u/s 80IB(10) of the Act by the
assessee at Rs.11,00,000/-, Rs.28,00,000/- and Rs.8,00,000/-
respectively for Assessment Year 2004-05, 2006-07 and 2007-08
respectively. He submitted that the alleged notice issued u/s 274
r.w.s. 271(1)(c) of the Act is not valid as the Ld. Assessing Officer (In
short Ld.A.O) has not mentioned the specific charge in the notice
against the assessee as to whether the impugned penalty has been
levied for concealing the particulars of income or furnishing
inaccurate particulars of income. Such notices have been held to
be invalid and the proceedings u/s 271(1)(c) have been held to be
void ab initio by the Hon'ble jurisdictional High Court in the case of
Principal Commissioner of Income Tax-I Vs Kulwant Singh Bhatia
ITA No.9/2018 order dated 9.5.2018.
As regards the merits for levy of penalty, reliance was placed
on the judgment of jurisdictional High Court in the case of
Principal Commissioner of Income Tax V Surabhi Homes Pvt.Ltd
ITA No.68-69/2016 order dated 21.03.2017 wherein the Hon'ble
Fortune Builders ITA No.82 to 84/Ind/2017 Court confirmed the finding of the Tribunal holding that no penalty
should have been levied u/s 271(1)(c) of the Act as no incorrect
declaration has been filed by the assessee and the deduction u/s
80IB(10) of the Act was claimed on the basis of a project approval
certificate.
Per contra Ld. Departmental Representative vehemently
argued and supporting the orders of lower authorities.
We have heard rival contentions and perused the records
placed before us.
In these three appeals the issue relates to penalty levied u/s
271(1)(c) of the Act at Rs.11,00,000/-, Rs.28,00,000/- and
Rs.8,00,000/- for the Assessment Year 2004-05, 2005-06 and
2006-07 respectively on the disallowance of deduction claimed u/s
80IB(10) of the Act at Rs.29,99,883/-, Rs.74,42,241/- and
Rs.23,04,302/- respectively.
Though the assessee has taken the additional ground
challenging the legality of the notice issued u/s 274 r.w.s. 271(1)(c)
of the Act but we would like to first deal with the merits of the case
Fortune Builders ITA No.82 to 84/Ind/2017 about the justification of levying the penalty u/s 271(1)(c) of the Act
on the alleged disallowance of deduction u/s 80IB(10) of the Act.
We find that the assessee claimed deduction u/s 80IB(10) of
the Act in respect of housing project. The map was approved.
Audited Report in Form 10CCB of the IT rules were issued by the
Chartered Accountant. Project was approved by the local authority.
However the assessee was denied deduction u/s 80IB(10) of the Act
because the commercial constructed area sold by the assessee
exceeded the statutory limit provided under the provisions of
Section 80IB(10) of the Act which says that such commercial
constructed area should not exceed 5% of the aggregate built up
area of the housing project or 2000 Sq.Ft whichever is less. In the
case of assessee the commercial constructed area measuring 2254
sq.ft was sold and the assessee after claiming the benefit under
section 80IB(10) for the 2000 Sq.ft area offered for income the
remaining area measuring 254 sq.ft for profits. In other words
assessee claimed deduction u/s 80IB(10) of the Act only for 2000
sq.ft area. However, Ld. A.O took a view that as the assessee has
exceeded the statutory limit of area provided in the provision of
Fortune Builders ITA No.82 to 84/Ind/2017 80IB(10) it is not eligible to any deduction u/s 80IB as it has
violated one of the conditions. Ld. A.O therefore concluded the
assessment denying the benefit of deduction u/s 80IB(10) of the Act
and also initiated the penalty proceedings u/s 271(1)(c) of the Act
on the alleged disallowance.
Apart from this technical Issue all the other details of
expenditure and revenue pertaining to construction of the project
as well as sale consideration from the sale of built up area have
been found to be correct. All the details thereto have been furnished
in the audited financial Accounts. In the backdrop of these facts,
"whether the assessee can be visited with the benefit of u/s 271(1)(c)
of the Act is to be examined".
We find that the Hon'ble Apex Court in the case of CIT V
Reliance Petro Products 2010 189 Taxmann 322 wherein it has
been held that;
“as assessee had furnished all details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as concealment of income on its part it was up to the authorities to accept its claim in Return or not – Merely because assessee had claimed expenditure, which claim was not
Fortune Builders ITA No.82 to 84/Ind/2017 accepted or was not acceptable to Appellant, that by itself would not, in our opinion, attract penalty under Section 271(1)(c) of Act. If Court accepts contention of Appellant then in case of every Return where claim made is not accepted by Assessing Officer for any reason, assessee will invite penalty under Section 271(1)(c) of Act – That is clearly not intendment of Legislature”
Ld. Counsel for the assessee has also relied on the decision of
Hon'ble High Court in the case of Principal Commissioner of Income
Tax V Surabhi Homes Pvt.Ltd (supra) which also deals with the
similar issue of penalty levied u/s 271(1)(c) of the Act on the wrong
claim of the deduction u/s80IB(10) of the Act.
“The assessee claimed deduction under section 80IB(10) of the Income Tax Act, 1961 (for short the Act ). The Assessing Officer rejected the claim of the assessee of such deduction under section 80IB(1O) of the Act, for the reason that-the assessee does not satisfy the conditions to avail the benefit in the orders of assessment-passed on 30.12.2008 and 17.12.2009. 'The Assessing Officer also ordered for initiating penalty proceedings after disallowing the deduction claimed for concealing income and furnishing inaccurate particulars of income. In pursuance to such an order, the Assessing Officer passed an order imposing penalty of RS·32,35,858/- under section 271(1)(C) of the Income Tax Act, 1961. Such order of imposition of penalty was set aside in appeal by the Commissioner of Income Tax (Appeals), wherein it was held in as under:-
4.10 In the instant case also, there is no finding on record that any
Fortune Builders ITA No.82 to 84/Ind/2017 details supplied by the appellant in its returns of income for these years are found to be incorrect or false and therefore, there is no question of levying penalty u/s 271(1)(C). A mere making of a claim u/s 80lB(10) which was not allowed by the assessing officer, by itself will not amount to furnishing inaccurate particulars or concealing the income. Therefore, considering the facts and circumstances of the case and legal position of the issue, I am of the considered view that the appellant is not liable for penalty u/s 271(1)(C) for claiming deducting u/s 80IB(1O) on the profits derived from a housing project in A.Ys 2006-07 & 2007-08. Accordingly, penalty orders u/s 271(1)(C) for these assessment years imposing penalty of Rs.58,78,458/-- & Rs.32,35,858/-respectively are hereby, cancelled . It is the said order which was not interfered with by the Tribunal in further appeal. Learned counsel for the appellants placed reliance upon an order passed by the Delhi High Court reported as (2010) 327 ITR 510 [Commissioner of Income Tax Vs. Zoom Communication (P) Limited], to contend that if the issue is not debatable then the assessee is liable for penalty. We have heard learned Counsel for the appellant and find that no question of law arises for consideration in the present appeals.
In the present case, the Assessing Officer found that the assessee has produced an a invalid project approval certificate . The invalidity was in respect of automatic cancellation of the permission to raise construction of building. Another ground for imposition of penalty was that possession was given to the allottees before obtaining the a completion certificates which is said to be in gross violation of condition NO.7 of the approval certificate.
Such facts have been taken into consideration by the Commissioner of Income Tax (Appeals), wherein the Commissioner has recorded the finding referred to above.
The fact is that the assessee claimed deduction under section 8oIB(1O) for the reason that the a project approval certificate was filed and the possession delivered: May-be the technical formality of obtaining completion certificate was not satisfied, but ,it will-not mean that the 8
Fortune Builders ITA No.82 to 84/Ind/2017 assessee has claimed incorrect or false deduction. Mere non-satisfaction of. a condition of deductions will not mean that the assessee has furnished incorrect return, which will make it liable for penalty. Still further, the Commissioner of Income Tax (Appeals) and the Tribunal have given a finding of fact that there was no incorrect declaration filed by the assessee. Said is a finding of fact, which does not give rise to any substantial question of law. Accordingly, both the appeals are dismissed.”
Ld. Counsel for the assessee also stated at the bar that the the
appeal of the assessee i.s Fortune Builders relating to quantum
addition is pending before the Hon’ble Apex Court. This fact proves
that there is a “substantial question of law” in the ground raised by
the assessee on the quantum addition which means that two legal
views were possible at the time of claiming deduction u/s 80IB of
the Act and one cannot ignore the possibility that the assessee may
succeed.
We therefore in the given facts and circumstances of the case
and respectfully following the decisions of Hon'ble jurisdictional
High Court in the case of Principal Commissioner of Income Tax V
Surabhi Homes Pvt. Ltd (supra) and also looking to the fact that
“substantial question of law” is pending before the Hon'ble Apex
Court in the case of the assessee, we are of the considered view that 9
Fortune Builders ITA No.82 to 84/Ind/2017 the lower authorities erred in levying the penalty u/s 271(1)(c) of
the Act for disallowance of deduction u/s 80IB(10) merely on a
technical ground. We therefore allow the relevant ground No.3 for
all the three appeals challenging the penalty confirmed by Ld.CIT(A)
u/s 271(1)(c ) of the Act.
Apropos to the additional ground relating to the legality of
notice issued u/s 274 r.w.s. 271(1)(c) of the Act we refrain ourselves
from adjudicating the same it being academic in nature, as we have
already deleted the impugned penalty for all the three years
adjudicating the merits of the case. Therefore the additional ground
raised by the assessee are dismissed as infructuous.
The other grounds are general in nature which needs no
adjudication.
In the result all the three appeals of the assessee are allowed.
The order pronounced in the open Court on 18.10.2018.
Sd/- Sd/-
( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER �दनांक /Dated : 18 October, 2018 /Dev 10
Fortune Builders ITA No.82 to 84/Ind/2017
Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By order Assistant Registrar, ITAT, Indore