SUKANTO ROY DEVELOPERS,PUNE vs. INCOME-TAX OFFICER,

Shri Sanket Joshi appearing on behalf of the assessee challenging levy of penalty submitted that in scrutiny assessment proceedings the Assessing Officer disallowed assessee‟s claim of deduction of Rs.8,37,808/- u/s. 80IB(10) of the Act. The assessee had earned interest income of Rs.8,37,808/- and had claimed deduction u/s. 80IB(10) of the Act on the aforesaid income along with the profits of housing project. The Assessing Officer after disallowing deduction u/s. 80IB(10) also initiated penalty proceedings u/s. 271(1)(c) in respect of above disallowance. The ld. AR further pointed that while recording satisfaction for initiating penalty proceedings the Assessing Officer mentioned both the limbs of section 271(1)(c) by using the expression, “concealed the interest income by furnishing inaccurate particulars”. In the notice issued u/s. 274 r.w.s. 271(1)(c) the irrelevant limb of section 271(1)(c) was not stuck off and hence, the notice contained both the charges of section 271(1)(c) i.e. concealing the particulars of income or furnishing inaccurate particulars of income. In the order levying penalty u/s. 271(1)(c) dated 25-06-2016 the Assessing Officer levied penalty for concealing interest income. However, while concluding the penalty order the Assessing Officer mentioned that the assessee has furnished inaccurate particulars of income hence penalty of Rs.2,56,700/- u/s. 271(1)(c) is levied. A perusal of assessment order and penalty order shows that there was ambiguity in the mind of Assessing Officer with respect to the charge for levying penalty u/s. 271(1)(c) of the Act.

On the other hand Shri M.K. Verma representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals) in confirming the addition. The ld. DR submitted that the assessee had claimed deduction u/s. 80IB(10) in respect of interest income, whereas, no deduction is admissible on interest income.

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The assessee is a builder and developer. The assessee is eligible for claiming deduction u/s. 80IB(10) in respect of its housing project „Surabhi Regency‟. While claiming deduction u/s. 80IB(10) on the profits of aforesaid project the assessee also claimed deduction u/s. 80IB(10) in respect of interest income Rs.8,37,808/-. The Assessing Officer disallowed the deduction claimed on interest income and initiated penalty proceedings u/s. 271(1)(c). A perusal of assessment order dated 27-11-2011 shows that while initiating penalty the Assessing Officer recorded satisfaction as under : “As the assessee has concealed the interest income by furnishing inaccurate particulars, penalty proceedings u/s. 271(1)(c) are initiated.”

The Assessing Officer levied penalty u/s. 271(1)(c) vide order dated 25-06-2012. While levying penalty the Assessing Officer held as under : “6. In view of above facts and circumstances, I am convinced that the assessee has concealed interest income of Rs.8,37,808/- being the amount of interest income from fixed deposit. Hence, it is a fit case for levying penalty U/s. 271(1)(c) of the I.T. Act, 1961. Accordingly provisions of section 271(1)(c) of the I.T. Act, 1961 are attracted in the case of the assessee. xxxxxxxxxx xxxxxxxxxx In view of the fact that the assessee has furnished inaccurate particulars of his income I levy a penalty of Rs.2,56,700/- u/s. 271(1)(c) of the I.T. Act, 1961.”

The manner in which satisfaction has been recorded and thereafter, penalty has been levied clearly shows that there was ambiguity and vagueness in the mind of Assessing Officer while recording satisfaction as well as at the time of levy of penalty u/s. 271(1)(c) of the Act. The Assessing Officer was not clear as to whether penalty is to be levied for furnishing inaccurate particulars or for concealment of income. The Assessing Officer has invoked both the charges of section 271(1)(c) by using different expressions at the time of recoding satisfaction and for levy of penalty. Where there is ambiguity of charge while levying penalty u/s. 271(1)(c), the penalty does not survive. Thus, the penalty levied u/s. 271(1)(c) is liable to be quashed on this legal ground itself.

Even on merits, the penalty levied by the Assessing Officer is not sustainable. The assessee while filing return of income had filed computation of income. In computation of income the assessee has separately mentioned interest income on fixed deposits and also the fact that the deduction u/s. 80IB(10) has been claimed on the said interest income. The Hon‟ble Supreme Court of India in the case of Commissioner

In the result, the appeal of assessee is allowed.