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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV&SHRI AMARJIT SINGH
PER AMARJIT SINGH - AM:
The appeal filed by the Revenue for A.Y. 2008-09, arise from order of the CIT(A)-III, Baroda dated 29.09.2014, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
The solitary ground of appeal of the Revenue is against the order of CIT(A)-III Baroda in deleting the penalty u/s. 271(1)(c) of the Act amounting to Rs. 2,41,03,119/- .
The fact in brief is that assessee has filed return of income on 30.09.2008 declaring total income of Rs. NIL. Assessment u/s. 143(3) of the Act was finalized on 30.12.2010 determining the total income at loss of Rs. (- 5,27,03,077/-).
[DCIT vs. Madhya Gujarat Vij Company Ltd.] A.Y. 2008-09 2
During the course of assessment the AO observed that assessee has received government grant/subsidy and consumer contribution to the tune of Rs. 23,745.27 lakh towards cost of capital assets and the same has not been reduced from the cost of capital assets. The AO also noticed that assessee company was in the practice of writing back 10% of the year end balance of government grant, subsidy and consumer contribution and offering as income in the profit and loss account. However, the AO was of the view that as per provisions of Sec. 43(1) and Explanation 10 the subsidy grant and contribution should have been reduced from cost of capital asset. Therefore, the AO has reduced the proportionate subsidy grant from the cost of plant and machinery and worked out the excess depreciation to be disallowed at Rs. 33,48,63,384/-. After reducing the 10% amount to the amount of Rs. 26,39,51,000/- which the assessee itself has offered as income in the profit and loss account, the AO has added the balance amount of Rs. 7,09,12,384/- to the total income treating the same as excess depreciation.
Aggrieved assessee filed appeal before the Ld. CIT(A). Ld. CIT(A) has dismissed the appeal of the assessee.
The AO has also initiated penalty u/s. 271(1)(c) of the Act for filing inaccurate particulars of income as per Para 4 of the assessment order.
During the course of penalty proceeding in response to the show-cause the assessee submitted that it had furnished all the particular of income and there was no concealment of income or furnishing of any particular of income during the course of assessment proceeding. The assessee has further submitted that when the additions are made under the normal provisions of the Act and the income is finally assessed u/s. 115JB of the Act there cannot be any evasion of tax on account of addition made to the total income under the normal provisions of the Act and consequently no penalty can be levied. The AO has not accepted the contention of the assessee that it has paid tax u/s. 115JB and therefore penalty is not leviable. The AO was of the view that since there was loss under the normal provisions of the Act and tax has been [DCIT vs. Madhya Gujarat Vij Company Ltd.] A.Y. 2008-09 3 calculated under the deeming provisions of Sec. 115JB therefore penalty u/s. 271(1)(c) is leviable in respect of furnishing of inaccurate particulars of income. Consequently, the AO has levied penalty of Rs. 2,41,03,119/- u/s. 271(1)(c) of the Act being 100% of the tax issued to be evaded.
Aggrieved assessee has filed appeal before the Ld. CIT(A). Ld. CIT(A) has allowed the appeal of the assessee. The relevant part of the decision of CIT(A) is reproduced as under:-
“4.3. I have considered the facts of the case, the AO’s observations and submission made by the AR of the appellant. The ITAT Ahmedabad Bench in its decision in the case of Vijay Mistry Construction and Rajkamal Builders Pvt. Ltd. 20 Taxman.com 352 (Ahd) has held that where the income was finally computed u/s. 115JB of the Act and there is no effect of any omission of the item not allowable as expenditure on the income computed u/s. 115JB of the Act, penalty u/s. 271(1)(c)cannot be levied. In that case, the income had been finally computed u/s. 115JB and the disallowance made while computing relief u/s. 80IA had no effect on such income computed u/s. 115JB. This decision was upheld by the Hon’ble Gujarat High Court in Tax Appeal No. 2224 of 2009 vide order dated 29.08.2011. This decision of the High Court has been relied upon by Gujarat High Court in the case of Gujarat State Fertilizers and Chemical Ltd. reported in 36 Taxman.com 533(Guj.) and again similar decision was given. It may be mentioned here that the ITAT in its decision in the case of Gujarat State Fertilizer and Chemicals Ltd. (Supra) had relied upon the decision of Delhi High Court in the case of Nalwa Sons Investments Ltd. 327 ITR 543 (Del.). The SLP filed against this decision of Delhi High Court has been rejected by the Apex Court in its decision reported in 21 Taxman.com 184 (SC). The High Court in its decision in the case of Nalwa Sons Investments Ltd. had held that where the assessment was made on income computed u/s. 115JB and tax has been paid on income so computed, penalty u/s. 271(1)(c) would not be imposed with respect to the additions that would have been made taking into account concealment made by the assessee while making assessment under normal procedure. 4.3.1. In the present case also, the final income has been computed u/s. 115JB of the Act. The addition made to the income computed under normal procedure and in respect of which penalty proceedings have been initiated has not been made to the income computed as per section 115JB. Hence, as per ratio laid down by the above mentioned decisions, no penalty u/s. 271(1)(c) can be levied in this case. Accordingly, the penalty levied by the AO is directed to be deleted.”
We have heard the rival contention and perused the material on record. The Ld. CIT(A) has deleted the penalty levied after referring the decision of ITAT Ahmedabad in the case of Vijay Mistry Construction and Rajkamal Builders Pvt. Ltd. 20 Taxman.com 352 (Ahd) wherein it is held that where the income was finally [DCIT vs. Madhya Gujarat Vij Company Ltd.] A.Y. 2008-09 4 concluded u/s. 115JB of the Act and there is no effect of any omission of the item not allowable as expenditure on the income computed u/s. 115JB of the Act penalty u/s. 271(1)(c) cannot be levied. The Ld. CIT(A) has stated that the above cited decision was upheld by the Hon’ble Allahabad High Court in Tax Appeal No. 2224 of 2009 vide order dated 29.08.2011. The Ld. CIT(A) has also referred the other decision of Hon’ble Gujarat High Court and Hon’ble Delhi High Court as referred above in his finding wherein it is held that where the assessment was made on income computed u/s. 115JB and tax has been paid on income so computed penalty u/s. 271(1)(c) would not be imposed.
During the course of appellate proceeding before us the Ld. Counsel has brought to our notice the copy of Circular No. 25/2015 of the CBDT dated 31.12.2015 wherein after following the decision of Delhi High Court in the case of Nalwa Sons Investments Ltd. 327 ITR 543 (Del.) stated that it is now a settled position that prior to 01.04.2016 where the income tax payable on the total income as computed under the normal provisions of the Act is less than the tax payable on the book profit u/s. 115JB of the Act then penalty u/s. 271(1)(c) of the Act is not attracted with reference to additions/disallowance made under normal provisions. At Para 5 of the Circular the Board has also stated that no appeal made henceforth be filed on this ground and appeal already filed if any on this issue before various courts/tribunals may be withdrawn or not pressed upon. In the light of the above facts and findings and after considering the Circular No. 25/2015 dated 31.12.2015 of the CBDT as above we do not find any substance in the appeal of the Revenue. Therefore, the same is dismissed.
In the result, the appeal of the Revenue is dismissed.
This Order pronounced in Open Court on 23/09/2019