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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI R.C. SHARMA, AM & SHRI RAVISH SOOD, JM
आदेश / O R D E R
PER RAVISH SOOD, JUDICIAL MEMBER
The present appeal is directed against the order passed by the CIT(A)-53, Mumbai, dated 30.09.2015, which in itself arises from the order passed by the A.O under Section 271(1)(c) of the Income-tax Act, 1961 (for short ‘Act’), dated 22.03.2013. The assessee assailing the order of the CIT(A) who had confirmed the penalty imposed by the A.O under Section 271(1)(c), had therein raised the following grounds of appeal before us: - “Being aggrieved by the order of the learned Commissioner of Income Tax (Appeals)-53, Mumbai, this appeal petition is submitted on the following grounds:-
1. On facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the Ld. A.O in levying penalty of Rs.1,07,594/- being minimum penalty at the rate 100% of tax by holding that the Ld. A.O was justified in holding that the appellant had furnished inaccurate particulars of its income by way of making an untenable claim for deduction u/s. 80-IB(10) in respect of interest on fixed deposit/SB Account amounting to Rs.3,48,202/-. The levy of penalty, considering the claim of the appellant as not a bonafide claim, is bad in law and needs to be cancelled.
2 The appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing.”
2. Briefly stated, the facts of the case are that the assessee firm which is engaged in the business of Real Estate Development had e-filed its return of income on 30.09.2008 declaring Nil income after claiming deduction under Section 80IB(10) of the ‘Act’. The assessment in the case of the assessee was framed under Section 143(3) by the A.O vide his order dated 14.12.2010, wherein the latter observing that the assessee had claimed deduction under Section 80IB(10) amounting to Rs.54,72,24,920/-, which included ‘Income from other Sources’ of Rs.3,48,202/-, therein being of the view that the aforesaid deduction was not available in respect of ‘Income from other sources’, thus inter alia made an addition of Rs.3,48,202/- and assessed its income at Rs.21,69,326/-. The A.O during the course of the assessment proceedings holding a conviction that the assessee had raised a false claim by claiming deduction under Sec. 80IB(10) in respect of its ‘Income from other sources’, therefore alleging furnishing of inaccurate particulars of income in respect of the deduction claimed by the assessee under Section 80IB(10) on the aforesaid amount of Rs.3,48,202/-(supra) therein initiated penalty proceedings under Sec. 271(1)(c).
3. The A.O. issued a notice under Section 274 r.w.s. 271(1)(c) of the ‘Act’, therein calling upon the assessee to show cause as to why penalty under Section 271(1)(c) in respect of the wrong claim of deduction under Section 80IB(10) may not be imposed on it. The assessee submitted before the A.O that as it was in receipt of interest income on the amounts which were parked as fixed deposits, which had to be kept as margin money for facilitating obtaining of various permissions required for smooth running of the project, had thus remaining under a bonafide belief that the interest income of Rs.3,48,202/- generated on such fixed deposits had a clear nexus with the business of the assessee, therein treated the same as part of its business ‘income’ and claimed deduction under Section 80IB(10) in respect of the said amount. The A.O however not being satisfied with the explanation of the assessee and holding a conviction that the latter had raised a claim which was not acceptable in the eyes of law, therein imposed a penalty of Rs.1,07,594/- in the hands of the assessee under Section 271(1)(c) of the ‘Act’.
4. The assessee being aggrieved with the penalty imposed by the A.O therein carried the matter in appeal before the CIT(A). That during the course of the appellate proceedings the assessee submitted before the CIT(A) that the claim of deduction under Sec. 80IB(10) was prompted by a bonafide belief that the said amount qualified for claim of deduction under the aforesaid statutory provision. The assessee taking support of a host of judicial pronouncements therein submitted before the CIT(A) that as the complete details pertaining to the process of computing and raising of the consequential claim of deduction under Section 80IB(10) was furnished by the assessee in its ‘Computation of income’, as well as the ‘Audit report’ filed along with its return of income, therefore the same to the most being in the nature of a misconceived claim raised on the basis of facts which were fully disclosed in the return of income, thus did not call for imposition of penalty under Sec. 271(1)(c) in the hands of the assessee. The assessee further in order to drive home his aforesaid contention that the claim under Section 80IB(10) in respect of the interest income on the margin money parked with the banks by way of fixed deposits was raised remaining under the bonafide belief that as the same had an inextricable nexus with the business of the assessee, therein submitted that pursuant to the judgment of the Hon’ble Supreme Court in the case of Liberty India Vs. CIT 317 ITR 218 (SC), wherein the Hon’ble Apex Court had interpreted the scope and gamut of the term ‘derived from’, and had thus once and for all put to rest the divergent and conflicting views as regards the same, the assessee therein yielding to the said interpretation of the Hon’ble Supreme Court had thus itself conceded the said point in the course of its quantum appeal before the Tribunal. The CIT(A) however not being persuaded to subscribe to the contention of the assessee, therein upheld the order of the A.O imposing penalty under Section 271(1)(c).
5. The assessee being aggrieved with the order of the CIT(A) sustaining the penalty imposed by the A.O under Section 271(1)(c), had thus carried the matter in appeal before us. That during the course of hearing of the appeal it was vehemently submitted by the ld. Authorized Representative (for short ‘A.R’) that in the backdrop of the fact that the assessee remaining under a bonafide belief that interest on margin money maintained by way of fixed deposits as a requisite condition for satisfying the various permissions needed for smooth running of the project, was inextricably interlinked and rather interwoven with the business of the assessee, was thus eligible for claim of deduction under Section 80IB(10), had thus being prompted by such belief had included the same in its ‘business income’ while computing the deduction under Sec. 80IB(10). It was submitted by the Ld. A.R. that the aforesaid claim was supported on the basis of the ‘Auditors report’ given by a Chartered accountant, and the complete details as regards the computation of the said deduction, therein revealing inclusion of the aforesaid income from other sources of Rs.3,48,202/- while computing the deduction under Sec. 80IB(10) were available before the A.O. It was submitted by the ld. A.R that making of a claim by the assessee on the basis of complete facts disclosed in the return of income, which however is dislodged by the A.O by adopting a different interpretation of the scope of the statutory provision under which the deduction had been raised, would not automatically lead to levy of penalty under Section 271(1)(c) in the hands of the assessee. It was thus submitted by the ld. A.R that in the backdrop of the facts involved in the case, the penalty imposed under Section 271(1)(c) was liable to be vacated. Per contra, the. Ld. D.R therein submitted that as the assessee by wrongly including the ‘Income from other sources’ of Rs. 3,48,202/- (supra) in its ‘business income’ had raised a false claim of deduction under Section 80IB(10) in respect of the said amount, therefore, the penalty had rightly been imposed by the A.O and sustained by the CIT(A). It was submitted by the ld. D.R that the appeal of the assessee was devoid of any merit and was liable to be dismissed.
We have heard the Authorized Representatives of both the parties, perused the orders of the lower authorities and the material made available before us. We have given a thoughtful consideration to the facts of the case and find that the assessee while raising the claim under Section 80IB(10) of the ‘Act’, remaining under a bonafide belief that as the interest income on the margin money parked by way of fixed deposits with the banks was inextricably interlinked and rather interwoven with the business of the assessee, had therein included the same as part of its ‘business income’ and claimed deduction under Section 80IB(10) on the same. We find that there is no dispute on the fact that the aforesaid ‘interest income’ of Rs.3,48,202/- had been included by the assessee in its ‘business income’ for computing the deduction under Section 80IB(10), and the said process of computation was fully disclosed by the assessee in the ‘Computation of income’ filed along with its return of income, as well as the ‘Audit report’, which formed part of the latters return of income. We thus are of the considered view that now when the complete facts and details as regards inclusion of the interest income of Rs.3,48,202/- in the ‘business income’ of the assessee for claim of deduction under Section 80IB(10) was duly disclosed by the assessee in its return of income, and thus was very much before the A.O, therefore in the backdrop of the aforesaid factual matrix it can safely be concluded that the assessee on the basis of the facts as they so remained, being of the view that the interest on the margin money parked with the banks was eligible for claim of deduction under Section 80IB(10), thus being prompted by his said conviction had therein included the same in the ‘business income’ and claimed the consequential deduction under Sec. 80IB(10) with respect to the said amount. We further find substantial force in the contention of the assessee that after the term ‘derived from’ used in Section 80-IB(10) was strictly construed and given a narrow connotation as against the word ‘attributable to’ by the Hon’ble Supreme Court in the case of Liberty India Vs. CIT (2009) 317 ITR 218 (SC), the assessee yielded to the same and in its quantum appeal before the Tribunal brought his interpretation of the said term in accord with the judgment of the Hon’ble Apex Court. We thus in the totality of the facts involved in the case of the present assessee, are of the considered view that the assessee remaining under a bonafide belief as regards its eligibility towards claim of deduction under Section 80IB(10) as regards the interest income pertaining to the margin money lying with the banks as ‘Fixed deposits’ in the normal course of its business, had thus included the same while computing its claim for deduction under Section 80IB(10). We further find that as the complete facts and details therein revealing the inclusion of the aforesaid interest income in the course of computing the aforesaid deduction under Section 80IB(10) was duly furnished by the assessee along with its return of income, which details were at no stage found to be inaccurate. We thus in the backdrop of the aforesaid facts are of the considered view that on account of the bonafide claim of deduction raised by the assessee on the basis of fully disclosed facts in the return of income, penalty under Section 271(1)(c) of the ‘Act’ was liable to be imposed in the hands of the assessee. That our aforesaid view is fortified by the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Product (P) Ltd. (2010) 322 ITR 758 (SC),wherein the Hon’ble Apex Court had held as under: -
“We have already seen the meaning of the word “particulars” in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under S. 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.”
We thus being of the considered view that the claim of the deduction under Section 80IB(10) raised by the assessee in respect of the interest on margin money parked in the form of fixed deposits with bank, remaining under a bonafide belief that the same being inextricably interlinked and interwoven with the business of the assessee, is a claim raised by the assessee on account of a mistaken interpretation of a statutory provision on its part, which on the said count would not invite penalty under Section 271(1)(c) in the hands of the assessee. We thus set aside the order of the CIT(A) and quash the penalty of Rs.1,07,594/- imposed by the A.O under Section 271(1)(c) in the hands of the assessee.
Resultantly, the appeal of the assessee is allowed.
Order pronounced in the open court on 12/04/2017