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Facts
The assessee, Gujarat State Electricity Corporation Ltd., filed a return of income declaring nil income for AY 2011-12. Additions were made by the Assessing Officer, leading to initiation of penalty proceedings under Section 271(1)(c) for an amount of Rs. 47,70,90,100/-. The Assessing Officer levied a penalty of Rs. 16 crore.
Held
The CIT(A) deleted the penalty by relying on CBDT Circular No. 25 of 2015, which states that penalty under Section 271(1)(c) is not attracted when the tax payable on total income is less than the tax payable on book profits under Section 115JB, for periods prior to 01-04-2016.
Key Issues
Whether the penalty under Section 271(1)(c) is leviable when the tax under normal provisions is less than that under Section 115JB, for AY 2011-12, considering CBDT Circular No. 25 of 2015 and the prospective applicability of Explanation 4 to Section 271.
Sections Cited
271(1)(c), 115JB, 143(3), 263, 115JC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Smt. Annapurna Gupta & Shri T.R. Senthil Kumar
Date of hearing : 08-01-2025 Date of pronouncement : 07-03-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Revenue is against the appellate order dated 02.05.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), cancelling penalty levied under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2011-12.
A.Y. 2011-12 Page No 2 DCIT vs. Gujarat State Electricity Corporation Ltd.
Brief facts of the case is that the assessee is a company constituted under the Electricity Act, 2003 and subsidiary of Gujarat Electricity Board. The assessee is engaged in the business of generation of electricity. For the Asst. Year 2011-12, assessee filed its Return of Income on 27-09-2011 declaring nil income, after setting off brought forward losses of Rs.177,69,81,562/- and as per the Book Profit under 115JB of Rs.179,31,09,000/-. The return was taken up for scrutiny assessment and several additions and disallowances made by the Assessing Officer. However penalty proceedings were initiated only for the addition on account capital grant amounting to Rs.47,70,90,100/-.
In reply to penalty notice, the assessee submitted that the addition on account of capital grant is a matter pending before ITAT, when assessment has been made on basis of book profit, penalty u/s. 271(1)(c) cannot be levied on the addition made under normal provisions of the Act and relied upon ITAT Mumbai Bench decision in the case of BSEL Infrastructure Reality Ltd. vs. ACIT reported in (2012) 22 taxmann.com 155. However the above explanation was not found to be satisfied and thereby the Assessing Officer levied a penalty of Rs.16 crore u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income.
4. Aggrieved against the penalty order, the assessee filed an appeal before Ld. CIT(A) who has deleted the addition after considering CBDT Circular No. 25 of 2015 dated 31-12-2015 by observing as follows: “In the case of the appellant, it is evident from the perusal of the assessment order that the Income tax payable on the total Income as A.Y. 2011-12 Page No 3 DCIT vs. Gujarat State Electricity Corporation Ltd. computed under the normal provisions of the Act for the year under consideration is less than the tax payable on book profits u/s 115JB of the Act. The same holds true, more so, after giving effect to the appellate order in quantum appeal. Considering the above, para 5 of afore- mentioned CBDT's Circular 25 of 2015 dated 31-12-2015 comes into play, and thus penalty u/s 271(1)(c) is not attracted. Accordingly, the same is deleted.”
5. Aggrieved against the appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal: (i.) Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in deleting the penalty u/s 271(1)(c) of the Act, relying on the CBDT's circular 25 of 2015 dated 31-12-2015 in a case where additions have also been made in the income computed u/s 115JB of the Act. (ii.) Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) is justified in deleting the penalty u/s 271(1)(c) of the Act without adjudicating the issue on merits, under the circumstance where the quantum addition made u/s 115JB is pending before the Hon'ble ITAT. (iii) The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal.
6. Heard rival submissions and perused the materials available on record. To adjudicate the ground raised before us, the relevant CBDT Circular No. 25 of 2015 is reproduced as follows:
CIRCULAR NO.25/2015 (F.NO.279/MISC/140/2015/ITJ), DATED 31-12-2015 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 A.Y. 2011-12 Page No 4 DCIT vs. Gujarat State Electricity Corporation Ltd. 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.
3. In this context, Hon'ble Delhi High Court in its judgment dated 26-8- 2010 in of 2009 [2010] 194 taxman 387 (Delhi) 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 115IB 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 wef 1-4-2016.
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 than the tax payable on the book profits w/s 115JB of the Act, then penalty under section 271(1)(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 271(1)(c) of the Act, will depend on the nature of adjustment 6. The above settled position is to be followed in respect of section 115JC of the Act also.
7. 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.
A.Y. 2011-12 Page No 5 DCIT vs. Gujarat State Electricity Corporation Ltd. 6.1. Undisputedly Explanation 4 to sub-section (1) of Section 271 of the Act was introduced by Finance Act, 2015 for the method of calculating the amount of tax sought to be evaded in a situations where the income determined under the general provisions is less than the income declared under 115JB of the Act. However this Explanation is applicable prospectively with effect from 01-04- 2016. Further Para 5 of the CBDT Circular makes it very clear, any adjustment is made in the income computed for the purpose of MAT prior to 01-04-2016, wherein levy of penalty u/s. 271(1)(c) is not warranted. It is undisputed fact that the adjustment was made by passing assessment order dated 02-12-2016 u/s. 143(3) r.w.s. 263 of the Act which is prior to 01-04-2016. Thus the question of invoking Explanation 4 to sub-section (1) of Section 271 of the Act does not arise in the present case. Thus we do not find any infirmity in the order passed by Ld. CIT(A) following CBDT Circular, deleting the penalty levied u/s. 271(1)(c) by the Assessing Officer. Thus the Grounds raised by the Revenue is a devoid of merits and the same is liable to be dismissed.
In the result, the appeal filed by the Revenue is hereby dismissed.
Order pronounced in the open court on 07-03-2025 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 07/03/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee A.Y. 2011-12 Page No 6 DCIT vs. Gujarat State Electricity Corporation Ltd.