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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
O R D E R
PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising from the order of the CIT (A)-41, Mumbai in appeal No.CIT (A)-41/DCCC-36/IT-328/10-11 dated 15-03-2012. Assessment was framed by the DCIT, Central Circle-36, Mumbai for the assessment year 2008-09 vide his order dated 04-03-2010 u/s 143(3) of the Income Tax Act, 1961 (hereinafter “the Act”). Penalty u/s 271 (1) (c) of the Act was levied by the AO vide his order dated 21-09-2010.
The only issue in this appeal of the assessee is against the order of the CIT (A) confirming the levy of penalty u/s 271 (1) (c) of the Act on account of withdrawal of claim of deduction u/s 80-IA (4) of the Act.
Briefly stated the facts are that the assessee is engaged in the business of execution construction of road projects as sub-contractor under the following contractors:- i) Larsen & Toubro Ltd. for NHAI projects at Orissa ii) M/s. ARSS Infrastructure Project Ltd. iii) M/s. New Mangalore Port Trust iv) PWD, Govt. of Orissa v) Keonjhar Infrastructure Development Co. Ltd. The Assessee Company claimed deduction u/s 80-IA (4) of the Act amounting to Rs.10,42,60,228/- on sub-contract receipts from the above parties claiming to be in execution of infrastructure projects in the light of the decision of the ITAT in the case of ACIT Vs Bharat Udyog Ltd. 118 ITD 336 (Mum.). The AO disallowed the claim of deduction and added the same to the returned income of the assessee. The AO initiated proceedings u/s 271 (1) (c) of the Act for furnishing of inaccurate particulars of income. The quantum addition was not challenged by the assessee and it has become final. The AO levied penalty u/s 271 (1) (c) of the Act for furnishing of inaccurate particulars of income as nobody filed any explanation before the AO. Aggrieved, the assessee preferred appeal before the CIT (A), who confirmed the penalty by observing in Para 1.7 of his order as under:- “7.1 In view of the facts and circumstances and the decisions of the Hon’ble Courts, it is held that the assessee has deliberately claimed wrong deduction inspite of the fact that amendment has been made by inserting explanation to this section by the Finance Act, 2007 w. e. f. 1.4.2000 more than a year before filing the return. Therefore, the penalty levied by the A. O. is upheld and ground of appeal is dismissed.” Aggrieved, now the assessee is in second appeal before the Tribunal.
We have heard the rival contentions and gone through the facts of the case. We find that the assessee has made claim of deduction u/s 80-IA (4) of the Act claiming as infrastructure project developer; whereas the assessee is merely a sub-contractor. We find that the assessee was awarded contract for construction of Four Lane Road and was acting merely as a sub-contractor. We are of the view that in view of the amended provisions of Section 80-IA (4) of the Act brought in the Statute by the Finance Act, 2007 with retrospective effect from assessment year 2000-01, the assessee has not fulfilled the conditions laid down in Section 80-IA (4) of the Act as it was merely executing contract work and is not a developer of infrastructure facilities. We find that in view of the amendment in Section 80-IA (4) of the Act, the assessee is merely a sub-contractor and cannot claim this deduction. The learned Counsel for the assessee before us argued that the 80-IA (4) of the Act has been rejected by the AO relying on the amendment brought out by the Finance Act, 2007 with effect from assessment year 2000-01. He referred to the decision of the Hon’ble Bombay High Court in the case of ABVG Heavy Industries Ltd. 322 ITR 323 wherein on exactly identical facts, the claim of deduction u/s 80-IA (4) of the Act was allowed. According to the learned Counsel for the assessee, in view of the above judgment of the Hon’ble Bombay High Court this issue is highly debatable and even the wrong claim made by the assessee would not attract penalty u/s 271 (1) (c) of the Act. The learned Counsel for the assessee relied on the decision of the Hon’ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158. The learned Counsel for the assessee further relied on the Order of ITAT Mumbai “E” Bench in the case of ACIT Vs. M/s. Thakur Mhatre Unity Joint Venture dated 16-06-2015 passed in for assessment year 2009-10 and argued that the claim of the assessee even on merit is valid and sustainable. The learned Counsel for the assessee relied on the decision of Tribunal in the case of DCIT Vs Unity Chopra (Joint Venture) in ITA No.322 to 324/M/2011 Order dated 03-04-2013, wherein penalty levied u/s 271 (1) (c) of the Act was deleted by observing as under:- “(b) In the present case, the AO has levied penalty u/s 271 (1) (c) of the Act. In this regard, it is humbly submitted that the assessee company was under a bonafide belief that it is eligible for deduction u/s 80-IA of the Act. However, from the decisions cited above, it is clearly evident that the said issue is a highly debatable one. It is well settled law that no penalty u/s 271 (1) (c) can be levied when the issue is a debatable one. Your Honours, kind attention is invited to the decision of the Hon’ble Supreme Court in the case of CIT Vs. Reliance Petroproducts (322 ITR 158) in which it was held as under (Head Note): “A mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing accurate particulars regarding the income of assessee. Such a claim in the return cannot amount to furnishing in accurate particulars. The above decision of the Apex Court has considered the decision of Union of India vs. Dharmendra Textile Processors (306 ITR 227). In the present case, on interpretation of section 80-IA, it is settled laws that if the appellant makes a claim under a bona-fide belief then it will not amount to furnishing inaccurate particulars. It needs specific mention that the appellant has taken a legal view and no particulars have been concealed by the appellant. Further, the claim of the appellant is allowable even on merits on the basis of the above decisions. It can be concluded that the issue is a highly debatable issue and the assessee has neither
271 (1) of the Act. “ 5. We find that the Assessee Company was under bona fide belief while claiming deduction u/s 80-IA (4) of the Act for the reason that the Tribunal in the case of Om Metal Infrastructure Projects Ltd. Vs CIT and B. T. Patil & Sons has allowed the claim of the assessee. Even, the conduct of the assessee is evident from the facts of the case that he has filed all the details before the AO in the return of income as well as during the course of assessment proceedings. The assessee has not challenged the addition made rather during the course of assessment suo moto declared the income and paid taxes. At the best, it can be said that this is a wrong claim made by the assessee and it cannot be termed as furnishing particulars of income. Following the decision of the Hon’ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd., it is settled law that if the assessee makes a claim under bona fide belief then it will not amount to furnishing of inaccurate particulars of income. In view of the above, the penalty levied by the AO and sustained by the CIT (A) is hereby deleted. Resultantly, the appeal of the assessee stands allowed.