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Income Tax Appellate Tribunal, “H”, BENCH MUMBAI
Before: SHRI G. MANJUNATHA & SHRI RAM LAL NEGI
Revenue by Shri Sachchidanand Dube, DR Assessee by Shri B.P. Purohit & Lavayna Rajpurohit, AR’s Date of Hearing 06/01/2020 Date of Pronouncement 10/01/2020 आदेश आदेश / O R D E R आदेश आदेश PER G.MANJUNATHA (A.M):
This appeal filed by the assessee is directed against, the order of the Ld. Commissioner of Income Tax (Appeals)–02, Mumbai, dated 31/07/2018 and it pertains to Assessment Year 2007-08.
The assessee has raised the following grounds of appeal:-
Following grounds of appeal are submitted without prejudice to one another: 1) On the facts and in the circumstance of the case and in law, the Ld, Commissioner of Income Tax (Appeals)-2, has erred in confirming the penalty imposed by the AO us/ 271(1)(c) without specifying the exact default for which the penalty is imposed in the notice issued u/s 274, hence in view of CIT v Shri Samson Perinchery, CIT v. Manjunath Cotton & Ginning Factory, etc, sustaining penalty by CIT(A) is not justified.
2) On the facts and hi the circumstances of the case and in law, the Ld CIT(A)-2 has erred in passing the impugned order ignoring the fact that the income of the appellant is assessed u/s 115JB at returned income, hence no penalty can be imposed u/s 271(l)(c) as held in CIT v. Nalwa Sons Investments Ltd, etc, and CBDT Circulars No. 25/2015 dated 31/12/2015. Hence, the penalty cannot be sustained.
3) On the facts and in the circumstances of the case and in law, the Ld CIT(A)-2 has erred in passing the impugned order without appreciating that me AO has imposed the penalty against the principles of natural justice, without giving copies of materials relied upon by the AO and without providing opportunity to cross examine / depose the witness. Therefore, in view of judgment of Hon’ble Supreme Court in Andaman Timber Industries v. Commissioner of Central Excise, the said order is void and needs to be quashed. 4) Your appellant therefore prays that the penalty imposed by the AO and sustained by the CIT(A)-2 may kindly be deleted and penalty order be quashed. 5). Your appellant craves leave to add to, amend, alter, modify and/or delete any of the above grounds or to add any new grounds thereto.
The brief facts of the case are that the assessee has filed its return of income for Asst. Year 2007-08 on 31/10/2007, declaring ‘Nil’ total income under normal provision of the Act. The assessment was completed u/s 143(3) r.w.s. 147 of the I.T.Act, 1961 on 18/03/2015, determining the total income at Rs. 5 Lacs under normal provision of the I.T.Act, 1961 and at Rs. 28,54,430/- under the provisions of section 115JB of the I.T.Act, 1961. The said assessed income was arrived after making additions of Rs. 5 Lacs u/s 68 of the I.T.Act, 1961, in respect of unexplained cash credit being loan taken from M/s Nakshatra Business Pvt. Ltd. The assessee accepted the assessment, because, the tax payable as per the assessment order was at Rs. 10/-. Thereafter, the Ld. AO initiated penalty proceedings 271(1)(c) of the I.T.Act, 1961 and after considering relevant submissions of the assesee levied penalty of Kapil Rayon (India) Pvt.Ltd. Rs. 1,53,000/- u/s 271(1)(c) of the I.T.Act, 1961, which is equivalent to 100% of tax sought to be evaded.
Aggrieved by the penalty order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has challenged initiation of penalty proceedings, in absence of proper notice issued u/s 271(1)(c) r.w.s. 274 of the I.T.Act, 1961. The assessee had also challenged penalty levied , on the ground that it has neither concealed particulars of income, nor furnished inaccurate particulars of income, which warrants levy of penalty u/s 271(1)(c) of the I.T.Act, 1961. The Ld. CIT(A) after considering relevant submissions of the assesee and also, by relied upon the decision of Hon’ble Delhi Court, in the case of CIT vs. Zoom Communications Private Limited 327 ITR 510, confirmed penalty levied by the Ld. AO u/s 271(1)(c) of the Act, on the ground that explanation furnished by the assessee for making such a claim is not found to be a bonafide. Further, Explanation (1) to section 271(1)(c) would come into play and assessee will be liable to pay penalty, if explanation offered by the assesse is found to be false or which he is not able to substantiate. Aggrieved, by the Ld.CIT(A) order, the assessee is in appeal before us.
The Ld. AR for the assesee submitted that the Ld.CIT(A) has erred in confirmed penalty levied u/s 271(1)(c) of the Act, 1961, without appreciating the fact that the income of the assessee is assessed u/s 115JB of the Act at returned income, hence no penalty was imposed as held by the Hon’ble Delhi High Court, in the case of CIT vs Nalwa sons Investments Ltd (2010) 327 ITR 543 (Delhi) and also, as per the CBDT circular No. 25/2015, dated 31/12/2015.
The Ld. DR, on the other hand, strongly supported order of the Ld.CIT(A).
7. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that the Hon’ble Delhi High Court, in the case of Nalwa sons Investments Ltd. Vs CIT (supra) held that when, the tax payable on income computed under normal provisions of the Act is less than, the tax payable under the deeming provisions of section 115JB of the Act, then penalty u/s 271(1)(c) of the I.T.Act, 1961 could not be imposed with reference to additions/disallowances made under normal provisions of the Act. The CBDT had issued a circular No. 25/2015, dated 31/12/2015, where it has accepted the judgment of Hon’ble Delhi High Court and accordingly, issued a circular explaining the position of law before insertion of Explanation 4 to sub section (1) of section 271(1)(c) of the I.T.Act, 1961 by the Finance, Act, 2015, which provide for method of calculating the amount of tax sought to be evaded for situations, where the income determined under the normal provision is less than the income declared for the purpose of MAT provisions u/s 115JB of the Act. Accordingly, it has clarified that 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 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 normal provisions of the Act. In this case, it is an admitted fact that the Ld. AO has made additions towards unexplained cash credit u/s 68 of the Act to income computed under normal provisions of the Act. Further, even after
Kapil Rayon (India) Pvt.Ltd. additions, the tax payable under normal provisions of the Act is less than, the tax payable under the provisions of section 115JB of the I.T.Act, 1961. Therefore, we are of the considered view that penalty u/s 271(1)(c) of the Act, cannot be levied with reference to additions/ disallowances made to total income computed under normal provisions of the Act. Hence, we direct the Ld. AO to delete penalty levied u/s 271(1)(c) of the I.T.Act, 1961.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on this 10 /01/2020