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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI MAHAVIR PRASAD & SHRI MANISH BORAD
The above captioned appeal filed at the instance of the Assessee for Assessment Year 2012-13 is directed against the order of Ld. Commissioner of Income Tax(Appeals) (in short ‘Ld. CIT]-I Indore dated 06.03.2019 which is arising out of the order u/s Flexituff International Ltd. ITANo.512/Ind/2019 271(1)(c) of the Income Tax Act 1961(In short the ‘Act’) dated 14.03.2017 framed by DCIT-1(1), Indore.
The assessee has raised following grounds of appeal:
That the learned Commissioner of Income tax (Appeals) has erred in confirming the penalty levied under section 271 (1)( c ) of the Income Tax Act without appreciating that in penalty notice issued under section 271(1)(c) a specific finding in respect of levy of penalty has not been mentioned and it is simply stated that "have concealed the particulars of your income or furnished inaccurate particulars of such income." And therefore the levy of penalty is unlawful and penalty order passed need to be quashed. 02.'1'hat the learned Commissioner or Income Tax (Appeals) has erred in confirming the penalty levied under section 271(1)(c) of the Income Tax Act without appreciating that the tax has been paid under section 11SJB and there was no additional tax liability under normal provision of income tax on account of disallowance made. 03. That the learned Commissioner of Income tax (Appeals) has erred in confirming the penalty of Rs.5,230000/- under section 271(1)(c ) of the Income tax ct. 03.That the learned Commissioner of Income tax ( appeals) has erred in confirming the penalty on the fact that the ground of appeal
in respect disallowance of insert on income tax on which penalty is levied was taken in quantum app al and no submission was made but failed to appreciate that the ground was not pressed. 04.'That the learned Commissioner of Income tax (Appeals) has failed to appreciate and or overlooked the submissions that the assessee has shown the interest of income tax in the profit and loss account.
5. That the learned Commissioner of Income tax (Appeals) has erred in confirming the penalty is unwarranted, unlawful and against the natural law of justice.
6. That the assessee craves leave to add, alter and/or delete any grounds of appeal.
Flexituff International Ltd. ITANo.512/Ind/2019
Brief facts of the case as culled out from the records are that the assessee is a Limited Company engaged in the business of Manufacturing & trading of HDPE/PP Woven Sacks and FIBC Jambo Bags. E-return of income for A.Y. 2012-13 filed on 27.09.2012 declaring loss of Rs.3,17,87,340/-. Case selected for scrutiny and assessment u/s 143(3) of the Act completed on 30.03.2015 wherein after making addition u/s 14A of Rs.61,43,940/- and disallowance on account of interest paid on income tax at Rs.15,82,154/-, loss assessed at Rs.2,40,10,830/-.
However since the book profit was Rs.44,84,22,703/-, assessee was liable to pay tax u/s 115JB of the Act on the book profit and the same remained unchanged. Ld. AO initiated the penalty proceedings u/s 271(1)(c) of the Act on the disallowance/addition made in the assessment order. Subsequently, penalty proceedings were completed vide order dated 14.03.2017 and penalty of Rs.5,23,000/- was levied on the disallowance of interest paid on income tax.
3. Aggrieved assessee preferred an appeal before the Ld. CIT(A) but failed to succeed.
Flexituff International Ltd. ITANo.512/Ind/2019
4. Now the assessee is in appeal before this Tribunal raising sole issue relating to penalty levied u/s 271(1)(c) of the Act at Rs.5,23,000/- confirmed by Ld. CIT(A).
At the outset, ld. counsel for the assessee apart from referring to the paper book dated 08.07.2020(36 pages), paper book dated 14.07.2021 (71 pages) and the decision of Coordinate Bench Bangalore in the case of Kotarki Construction Pvt. Ltd. vs. JCIT in ITANo.3395/Bang/2018 dated 31.08.2021 submitted that in view of the circular No.25/2015 issued by CBDT dated 31st December 2015, for cases prior to A.Y. 2016-17, penalty u/s 271(1)(c) of the Act is not attracted in case as the assessee is subject to pay income tax under MAT provisions u/s 115JB/115JC of the Act.
6. Per contra ld. Departmental Representative (DR) supported the orders of both lower authorities.
7. We have heard rival contentions and perused the records placed before us. Sole grievance raised by the assessee in the instant is against the finding of Ld. CIT(A) confirming the action of the Ld. AO levying the penalty u/s 271(1)(c) of the Act at Rs.5,23,000/- on the disallowance of interest paid on income tax. Before us Ld. counsel
Flexituff International Ltd. ITANo.512/Ind/2019 for the assessee has referred to CBDT Circular No.25/2015 dated 31.12.2015 and the same is reproduced below:
"CIRCULAR NO. 25/2015 F.No.279/Misc./140/2015/ITJ Government of India Ministry of Finance Central Board of Direct Taxes New Delhi, 31st December, 2015 Subject: Penalty u/s 271(1)(c) wherein additions/disallowances made under normal provisions of the Income Tax Act, 1961 but tax levied under MAT provisions u/s H5JB/ii5JC,for cases prior to A.Y. 2016-17- reg.-
Section 115JB of the Act is a special provision for levy of Minimum Alternate Tax on Companies, inserted by Finance Act 2000 with effect from 1-4-2001.
2. Under clause (iii) of sub-section (1) of section 271 of the Act, penalty for concealment of income or furnishing inaccurate particulars of income is determined based on the "amount of tax sought to be evaded" which has been defined inter-alia, as the difference between the tax due on the income assessed and the tax which would have been chargeable had such total income been reduced by the amount of concealed income or income in respect of which inaccurate particulars had been filed.
In this context, Hon'ble Delhi High Court in its judgment dated 26.8.2010 in of 2009 in the case of Nalwa Sons Investment Ltd. (available in NJRS as 2010- LL-0826-2), held that when the tax payable on income computed under normal procedure is less than the tax payable under the deeming provisions of Section 115JB of the Act, then penalty under section 271(1)(c) of the Act could not be imposed with reference to additions/disallowances made under normal provisions. The judgment has attained finality.
Subsequently, the provisions of Explanation 4 to sub- section (1) of section 271 of the Act have been substituted by Finance Act, 2015, which provide for the method of calculating the amount of tax sought to be evaded for situations even where the income determined under the general provisions is less than the income declared for the purpose of MAT u/s 115JB of the Act. The substituted Explanation 4 is applicable prospectively w.e.f. 01.04.2016.
5. Accordingly, in view of the Delhi High Court judgment and substitution of Explanation 4 of section 271 of the Act with prospective effect, it is now a settled position that prior to 1/4/2016, where the income tax payable on the total income as computed under the normal provisions of the Act is less
Flexituff International Ltd. ITANo.512/Ind/2019 than the tax payable on the book profits u/s 115JB of the Act, then penalty under 27i(i)(c) of the Act, is not attracted with reference to additions /disallowances made under normal provisions. It is further clarified that in cases prior to 1.4.2016, if any adjustment is made in the income computed for the purpose of MAT, then the levy of penalty u/s 27i(i)(c) of the Act, will depend on the nature of adjustment.
The above settled position is to be followed in respect of section 115JC of the Act also.
Accordingly, the Board hereby directs that no appeals may henceforth be filed on this ground and appeals already filed, if any, on this issue before various Courts/Tribunals may be withdrawn/not pressed upon. This may be brought to the notice of all concerned.
From perusal of the above referred CBDT Circular we find that for the cases prior to A.Y. 2016-17 if taxes are levied under MAT provisions u/s 115JB/115JC of the Act then penalty u/s 271(1)(c) of the Act is not attracted with reference to addition/disallowance made under normal provisions. Examining the facts of the instant case, in light of the above circular we find that the assessee declared loss of Rs.3,17,87,340/- in the e-return of income filed on 27.09.2012. However, since the assessee’s book profit stood at Rs.44,84,22,703/- it was liable to pay tax u/s 115JB of the Act and on perusal of the Income Tax Return Acknowledgment placed at page 26 and computation of income placed at page 28 to 29, we find that the assessee paid tax at Rs.8,97,22,555/- and interest u/s 234B and 234C at Rs.10,843,172/-. Further we find that even after making disallowance in the assessment order u/s 143(3) of the Act 6
Flexituff International Ltd. ITANo.512/Ind/2019 there was no impact on the tax liability of the assessee u/s 115JB of the Act. So it remains an undisputed fact that the assessee was liable to pay tax only as per the MAT provisions u/s 115JB of the Act as the normal assessed income was a loss. Under these given facts and circumstances the assessee case is squarely covered by this CBDT Circular No.25/2015 dated 31.12.2015 and no penalty u/s 271(1)(c) of the Act was leviable. We, thus, set aside the finding of Ld. CIT(A) and delete the penalty of Rs.5,23,000/-. Accordingly grounds raised by the assessee are allowed.
In the result, Assessee’s appeal ITANo.512/Ind/2019 is allowed.
The order pronounced as per Rule 34 of ITAT Rules, 1963 on 30.11.2021.