DEPUTY COMMISSIONER OF INCOME-TAX vs. PARMAR PROPERTIES PRIVATE LTD.,, PUNE

Both the appeals relating to the same assessee on similar issue were heard together and are being disposed of by this consolidated order for the

The Revenue in ITA No.610/PUN/2014, relating to assessment year 2006-07 has raised the following grounds of appeal:- 1. The learned Commissioner of Income-tax (Appeals) erred in deleting the penalty u/s.271(1)(c) of the Income Tax Act (Act) without examining the facts and evidences available on records and brought out by the Assessing Officer in the penalty order in support of levy of penalty u/s. 271(1)(c) of the Act. 2. The learned Commissioner of Income-tax (Appeals) while deleting the penalty erred in holding the issue of deduction u/s. 80IB(10) of the Act as 'debatable' and then applying distinguishable precedents even though such deduction was clearly not allowable as the project was not constructed as per the plan approved by the local authority. 3. The learned Commissioner of Income-tax (Appeals) while deleting the penalty erred in concluding that the appellant had disclosed the relevant material at the time of filing the return de hors the specific finding of the CIT(A) in the quantum proceedings that the buildings in the Project did not conform to the plan approved by the local authority. 4. The learned Commissioner of Income-tax (Appeals) erred in not appreciating the fact that the assessee had violated the conditions stipulated u/s. 80IB(10)(a), 80IB(10)(c), 80lB(10)(d) of the Act as it was well within its knowledge that the project had commenced development before 01/10/1998, project had tenements with built up area of more than 1500 sq.ft. and the project contained commercial area more than 2000 sq.ft. and had thus concealed income by furnishing inaccurate particulars of income. 5. The learned Commissioner of Income-tax (Appeals) erred in deleting the penalty on the erroneous findings inspite of the assessee having knowledge of the wrong claim being made at the time of filing the return by furnishing inaccurate particulars of income.

Briefly, in the facts of the case, the Assessing Officer had denied the claim of deduction under section 80IB(10) of the Act to the assessee and consequently, held the assessee to have concealed its income under section

The CIT(A) deleted penalty on the ground that it was case of having two views on the issue, since the matter was debatable. Reliance was placed on the ratio laid down by the Apex Court in CIT Vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC). Further, reliance was placed on the ratio laid down by Pune Bench of Tribunal in the case of Rohan Engg. Construction in ITA No.867/PN/2011, relating to assessment year 2006-07, order dated 19.10.2012 and in the case of DCIT Vs. M/s. Raviraj Company Associates in ITA No.1273/PN/2011, order dated 27.02.2013. In both the cases, penalty was on account of non allowance of deduction under section 80IB(10) of the Act.

The Revenue is in appeal against the order of CIT(A).

The learned Authorized Representative for the assessee pointed out that in the quantum appeal, the deduction under section 80IB(10) of the Act has been allowed to the assessee.

However, the learned Departmental Representative for the Revenue pointed out that the assessee had in the original return of income, claimed the deduction at higher figure which was reduced in the revised return of income, which was filed after the issue of notice of hearing under section 143(2) of the Act. In such circumstances, the assessee itself had wrongly calculated the deduction available. He further pointed out that the issue has been set aside to

We have heard the rival contentions and perused the record. The issue which arises in the present appeal is against levy of penalty under section 271(1)(c) of the Act. The Assessing Officer had initiated penalty proceedings for concealment since the claim of assessee for deduction under section 80IB(10) of the Act was denied to the assessee. Penalty for concealment was levied since the CIT(A) had upheld denial of deduction under section 80IB(10) of the Act. Thereafter, the Tribunal in assessee’s own case in ITA No.234/PUN/2009 and 569/PUN/2009, relating to assessment years 2003-04 and 2004-05, order dated 22.03.2017, held the assessee to be entitled to claim proportionate deduction under section 80IB(10) of the Act in respect of units which fulfills the conditions laid down of having built up area of 1500 sq.ft. The matter was restored back for verification of the built up area of individual flats, to the Assessing Officer. The said ratio was laid down in assessment years 2003-04 and 2004-05 and was later followed in bunch of appeals with lead order in ITA No.344/PUN/2010, relating to assessment year 2005-06, vide order dated 08.11.2017. The claim of assessee in assessment years 2006-07 and 2007-08 i.e. the years against which the appeals for penalty are listed for hearing, were also decided by the said consolidated order. Once the issue has been decided in quantum proceedings, then the assessee cannot be said to have concealed the particulars of income making the assessee exigible to levy of penalty under section 271(1)(c) of the Act.

The case of Revenue on the other hand, is that the said deduction has not been fully allowed to the assessee and only prorata deduction has been

The issue which arises in the present appeal before us is in respect of deduction claimed under section 80IB(10) of the Act which is allowable on fulfillment of various conditions laid down in the Act, which is a debatable issue. Once the issue is debatable, then just because the assessee had made a claim which was not sustainable in law, would not amount to furnishing of inaccurate particulars. Such was the proposition laid down by the Apex Court in CIT Vs. Reliance Petroproducts Pvt. Ltd. (supra). The Apex Court further held that where the assessee had furnished all the details of its expenditure as well as its income, which in itself were found not to be inaccurate, then merely because the claim has been rejected would not make the assessee liable for levy of penalty under section 271(1)(c) of the Act. The said proposition has been applied by the Pune Bench of Tribunal in the case of Rohan Engg. Construction (supra), wherein also the issue was denial of deduction under section 80IB(10) of the Act. In the facts of the said case also, where the assessee found that some of the conditions for claiming the deduction under section 80IB(10) of the Act were not fulfilled, the assessee withdrew its claim. The Tribunal relying on the ratio laid down in CIT Vs. Reliance Petroproducts Pvt. Ltd. (supra), held that the assessee could not be subjected to penal consequences under section 271(1)(c) of the Act. Following the same parity of reasoning, we uphold the order of CIT(A) in deleing penalty levied under section 271(1)(c) of the Act.

The facts and issues in ITA No.611/PUN/2014 are identical to the facts and issues in ITA No.610/PUN/2014 and our decision in ITA No.610/PUN/2014 shall apply mutatis mutandis to ITA No.611/PUN/2014.

In the result, both the appeals of Revenue are dismissed.