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Facts
For AY 2015-16, the assessee was levied a penalty under Section 271(1)(c) for inaccurate particulars, despite the tax liability being determined under Section 115JB (MAT) and not the normal provisions. For AY 2020-21, the Centralized Processing Centre (CPC) adjusted the assessee's declared book loss to a book profit due to the non-furnishing of Form 29B, a decision challenged by both the assessee and the Revenue before the Tribunal.
Held
For AY 2015-16, the Tribunal held that no penalty under Section 271(1)(c) can be imposed when the tax liability is determined based on book profit under Section 115JB, citing CBDT Circular No. 25/2015 and judicial precedents. For AY 2020-21, while the First Appellate Authority's direction to consider a belated Form 29B was deemed in excess of jurisdiction, the Tribunal directed the AO to verify the now-uploaded Form 29B and recompute the loss in the interest of justice.
Key Issues
Whether penalty under Section 271(1)(c) can be imposed when tax liability is determined under Section 115JB of the Act, and whether the First Appellate Authority can direct the AO to consider a belatedly furnished Form 29B for recomputing book profit.
Sections Cited
271(1)(c), 115JB, 143(3), 35AD, 143(1), 143(1A)
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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, VP & SHRI B.R. BASKARAN, AM
(Assessment Year: 2020-21) DCIT-7(1)(1), National Commodities Management Mumbai Services Ltd. (Formerly Known as National Vs. Collateral Management Services Ltd. D-164, TTC Industrial Area, Nerul MIDC, Navi Mumbai Appellant by : Shri Bhupendra Karkhanis, And Shri Jay Dharod Respondent by : Shri Kailash C. Kanojiya, CIT(DR) Ms. Monika H. Pande, Sr. AR PAN/GIR No. AACCN 0054C (Appellant) (Respondent) Date of Hearing : 27.01.2025 Date of Pronouncement : 12.02.2025 O R D E R Per Saktijit Dey, VP: There are cross appeals arising out of quantum proceeding pertaining to Assessment Year (AY) 2020-21. Whereas, appeal for Assesment Year 2015-16 is against penalty imposed under Section (u/s.) 271(1)(c) of the Income Tax Act, 1961 (‘the Act’ for short).
2024 (Assessment Year 2015-16)- Assessee’s appeal 2. This is an appeal by the assessee challenging the levy of penalty u/s. 271(1)(c) of the Act. In addition to the main ground, the assessee vide letter dated 30.12.2024 has raised the following additional ground:
(1.) On the facts and circumstances of the case and in law, the learned lower authorities erred in levying penalty u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income without appreciating the fact that said penalty cannot be imposed when additions/disallowances were made under normal provisions of the Act and ultimate tax liability in assessment order is determined as per the provisions of section 115JB of the Act (MAT). The appellant company craves leave to add, amend, alter, modify and/or delete all or any of the above grounds of appeal, on or before the date of hearing.
3. Having given a thoughtful consideration, we find that the issue raised in the additional ground is a purely legal issue, which can be decided based on facts and materials on record. Therefore, we admit the additional ground for adjudication. The short issue arising out for consideration as per the additional ground, is whether penalty u/s. 271(1)(c) of the Act can be imposed based on additions/disallowances made under normal provisions of the Act when the tax liability of the assessee has been determined under the provisions of Section 115JB of the Act.
4. Briefly the facts are, for the assessment year under dispute assessee filed its original return of income on 30.09.2017. declaring income of Rs.11,17,56,910/-. Subsequently, on 31.03.2017, assessee filed a revised return of income, declaring income of Rs.7,76,63,290/-. While completing the assessment u/s. 143(3) of the Act, the Assessing Officer (AO) disallowed the deduction claimed u/s. 35AD of the Act amounting to Rs.65,20,840/- and determined the total amount of Rs.8,41,84,130/-.
National Commodities Management Services Ltd. Since the tax payable on the income computed under the normal provisions was less than the tax payable on the book profit computed u/s. 115JB of the Act, the Assessing Officer determined the tax liability u/s. 115JB of the Act. However, based on the disallowances made while determining the income under the normal provisions of the Act, the Assessing Officer initiated proceeding for imposition of penalty u/s. 271(1)(c) of the Act alleging furnishing of inaccurate particulars of income and ultimately passed an order under the said provision imposing penalty of Rs.22,16,430/-. Though, the assessee challenged the levy of penalty by filing an appeal before the First Appellate Authority, however, penalty was confirmed.
We have heard the parties and perused the materials on record. We have also applied our mind to the decisions cited before us. It is the say of the assessee that when the AO has determined the tax liability of the assessee on the book profit computed u/s. 115JB of the Act, penalty u/s. 271(1)(c) of the Act cannot be imposed on the additions/disallowances made for computing the income under the normal provisions of the Act. In support of such contention, assessee was relied upon a number of judicial precedents submitted in the case law compilation. Further, the assessee has also relied upon Circular No.25/2015 dated 31.12.2015 issued by the Central Board of Direct Taxes (CBDT).
Having taken note of the submissions made before us and the ratio laid down in the judicial precedents, we find substantial merit in the contention of the assessee that when the tax liability of the assessee is ultimately determined on the book profit u/s. 115JB of the Act, no penalty u/s. 271(1)(c) of the Act can be imposed based on additions/disallowances made for computing income under the normal provisions of the National Commodities Management Services Ltd. Act. In case of ‘CIT vs. Nalwa Sons Investments Ltd.’ (2010) 194 Taxman 387 (HC), the Hon’ble Delhi High Court has propounded that once the tax liability of assessee is determined based on the book profit computed u/s. 115JB of the Act, penalty u/s. 271(1)(c) of the Act cannot be imposed based on income computed under the normal provisions of the Act. The ratio propounded in the aforesaid decision was subsequently followed in various other decisions. In fact, controversy was put to rest by CBDT circular No.25/2015 on 31.12.2015 clarifying 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/disallowances made under the normal provisions. In view of the settled legal position, we delete the penalty imposed u/s. 271(1)(c) of the Act. In view of our decision above in the additional ground, the other grounds have become academic, hence, do not require adjudication.
In the result, appeal is allowed as indicated above.
(Assessment Year 2020-21) -Assessee’s appeal (Assessment Year 2020-21)- Revenue’s appeal
Though, the cross appeals concern different facets of the order passed by learned First Appellate Authority, however, the core issue arising for consideration is allowability of book loss.
Briefly, the facts are, for the assessment year under dispute, assessee filed its return of income on 11.02.2021, declaring loss of Rs.21,58,16,313/- under the normal provisions of the Act and book loss of Rs.43,30,29,850/- u/s. 115JB of the Act. Whereas, the assessee claimed refund of Rs.15,15,56,400/-. While processing the return National Commodities Management Services Ltd. of income filed by the assessee, the Centralized Processing Centre (CPC) made adjustment to the book loss declared by the assessee, resulting in determination of book profit of Rs.16,38,21,827/- as against the book loss of Rs.43,30,29,850/- declared by the assessee. Against the intimation issued u/s. 143(1) of the Act, as aforesaid, assessee preferred an appeal before learned First Appellate Authority. While deciding the appeal, learned First Appellate Authority observed that in terms with Section 115JB(4) of the Act, the assessee was required to furnish a report in Form No. 29B within the prescribed time limit certifying that profit has been computed in accordance with the provisions of Section 115JB of the Act. He observed, since the assessee had not furnished Form No. 29B within the prescribed time limit or even afterwards, assessee’s claim of loss could not have been allowed. However, he observed that if the assessee uploads the Form No.29B before the appeal effect is given or within 15 days of the service of order through ITBA mail and intimate the AO regarding the uploading of the form, the AO may verify the form and recompute the book profits in accordance with law, by mentioning net credit as NIL. Both the parties are aggrieved with the aforesaid decision of the First Appellate Authority.
It is the stand of the Department that in absence of any specific ground raised by the assessee on the issue of filing/non-filing of Form No.29B or even in absence of any submission made by the assessee in this regard, the First Appellate Authority could not have exceeded his brief and issued the direction regarding uploading of Form No.29B and consideration of the same by the AO. The learned Departmental Representative (DR) submitted First Appellate Authority is bound by the grounds raised in the appeal and cannot exceed his jurisdiction in granting relief not sought by the assessee. Without National Commodities Management Services Ltd. prejudice, he submitted that delay in filing Form No.29B can only be condoned by the CBDT and not by any subordinate authority. Therefore, belated uploading of Form No.29B would be of no help to the assessee.
Per contra, learned counsel for the assessee submitted that before making the adjustment CPC has not issued any show cause notice as required u/s. 143(1) of the Act. Without prejudice, he submitted that the CPC could not have time barred with the computation of profit/loss as per the P&L account and made adjustment, which are not provided under Explantion-1 and Explanation-2 of Section 115JB of the Act. Without prejudice, he submitted, in terms with the direction of learned First Appellate Authority the assessee has uploaded Form No.29B, which the AO may verify and recompute the loss accordingly.
We have considered rival submissions and have perused the materials on record. Having taken note of the grounds raised
by the assessee before learned First Appellate Authority, we find substantial merit in the grounds raised by the Revenue. Before the First Appellate Authority, it was never the case of the assessee that opportunity may be provided to file Form No.29B.
13. On the contrary, the assessee had taken a stand that since there was no book profit computed for the year under consideration, there was no need for furnishing Form No.29B. From the materials on record, it is observed that as per the audited P&L account, the assessee had a book loss of Rs.59,68,51,677/-. After making couple of adjustments to the profit so computed, the assessee had declared net book loss of Rs.43,30,29,850/-. From the intimation issued u/s. 143(1A) of the Act, it is observed that the CPC, though, has accepted the loss of Rs.21,58,16,313/- declared under the National Commodities Management Services Ltd. normal provisions of the Act, has not considered the book loss declared by the assessee. Though, from the intimation issued u/s. 143(1)(a) of the Act, it is not clear whether such adjustment was on account of non-furnishing of Form No.29B, however, from the written submissions of learned DR and the report submitted by the AO, it transpires that the adjustment made by the CPC is on account of non-furnishing of Form No.29B. Though, in principle we agree with the submissions of the Revenue that in absence of any ground raised by the assessee, learned First Appellate Authority could not have issued the directions for uploading of Form No.29B, however, fact remains that the assessee has complied with the said direction by uploading Form No.29B. Though, we are of the view that the order of the learned First Appellate Authority is in excess of jurisdiction, hence, cannot be sustained, however, at the same time, we must observe that technicalities should not come in the way of fair play and justice. More so, when it is the case of the assessee that before the adjustment, the assessee has not been issued any show cause. Be that as it may, since Form No.29B is now available before the jurisdictional AO, we direct him to verify it and recompute the loss accordingly.
14. In the result, appeals are allowed for statistical purposes.
15. To sum up, is allowed and & 2635/Mum/2024 are allowed for statistical purposes. Order pronounced in the open court on 12/ 02/2025 Sd/- Sd/- (B.R. Baskaran) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 12/02.2025 Aks/- National Commodities Management Services Ltd. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,