Section 271(1)(c) – Where assessee’s claim for deduction under section 80-IB was rejected for not satisfying conditions u/s. 80-IB(7A), penalty u/s. 271(1)(c) was not leviable

The assessee claimed deduction u/s.
80-IB. The claim was rejected by the Assessing Officer. At the same
time, the Assessing Officer had opined that the assessee had wrongly
made the above claim which amounted to concealment of income, so he
levied the penalty u/s. 271(1)(c). It was held by the Hon. High Court that in the audit report in Form 10CCBA relevant to the assessment year 2006-07 also the date of completion of construction has been mentioned as 1-5-2002, falling in the assessment year 2003-04. On the basis of these facts, there was a strong justification for the assessee to claim exemption u/s. 80-IB(7A) in the assessment year 2006-07, as it was the fourth year and the benefit is available for five consecutive years beginning from the initial assessment year. The fact about the completion of construction as noted by the Commissioner (Appeals), supported by the audit report, remained undisputed at the stage of the Tribunal. Therefore, the assessee cannot be visited with the charge of filing inaccurate particulars, on the basis of which penalty u/s. 271(1)(c) has been levied by the Assessing Officer.

The Assessing Officer has only stated that such claim was not allowable as the conditions envisaged u/s. 80-IB(7A) were not fulfilled. Thus, the claim was found to be legally unacceptable but it does not amount to furnishing of the inaccurate particulars/concealment of income. It is a simple case of non-allowance of the legal claim for which the penalty is not desirable. Hence, penalty order was set aside by the Hon’ble High Court .

Revenue filed an SLP against the Order of Hon’ble Allahabad High court, which was dismissed.