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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL
Date of Hearing – 08.05.2019 Date of Order – 22.05.2019
O R D E R PER SAKTIJIT DEY. J.M.
The aforesaid appeal has been filed by the assessee challenging the order dated 5th March 2016 passed by the learned Commissioner (Appeals)–2, Mumbai, confirming penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") pertaining to the assessment year 2006–07.
2 Photo Quip India Ltd. 2. The legal issue raised in the present appeal is, where the tax liability of the assessee is ultimately computed on the book profit under section 115JB of the Act, whether penalty imposed under section 271(1)(c) of the Act on the basis of disallowance made under the normal provisions of the Act would survive?
Brief facts are, while completing the assessment in case of the assessee for the impugned assessment year under the normal provision, the Assessing Officer made certain disallowances/additions which resulted in determination of income at ` 46,36,310, as against the loss returned by the assessee at ` 1,63,19,690. However, the tax liability computed under the normal provisions of the Act exceeded the tax liability computed under section 115JB of the Act. Therefore, the Assessing Officer ultimately passed the assessment order by bringing the total income computed under the normal provisions of the Act to tax. On the basis of addition/disallowance made in the assessment order, the Assessing Officer initiated proceedings for imposition of penalty under section 271(1)(c) of the Act and ultimately passed the order under the said provision on 31st March 2014, imposing penalty under section 271(1)(c) of the Act for an amount of ` 26,70,921.
Though, the assessee filed an appeal against the aforesaid penalty order, however, learned Commissioner (Appeals) confirmed the penalty imposed under section 271(1)(c) of the Act.
3 Photo Quip India Ltd.
The learned Authorised Representative submitted before us, while giving effect to the order of the learned Commissioner (Appeals) for the impugned assessment year, the Assessing Officer has ultimately computed the tax liability of the assessee under section 115JB of the Act, since, under the normal provisions of the Act loss of ` 74,77,297 was determined. Thus, he submitted, when assessee’s tax liability was ultimately computed under section 115JB of the Act, the penalty imposed under section 271(1)(c) of the Act on the basis of disallowance made under the normal provisions of the Act will not survive. In support of such contention, he relied upon the decision of the Co–ordinate Bench in Mehta Sulfites India Ltd. v/s ACIT, ITA no. 4772/Mum./2013, dated 20th November 2015.
The learned Departmental Representative, though, relied upon the observations of learned Commissioner (Appeals), however, he fairly submitted that assessee’s tax liability has ultimately been computed under section 115JB of the Act.
We have considered rival submissions and perused the material on record. From the factual matrix of the case it is seen that while completing the assessment under section 143(3) r/w section 147 of the Act, the Assessing Officer made various additions/disallowances which resulted in a positive income of ` 46,36,310, under the normal
4 Photo Quip India Ltd. provisions of the Act as against the loss shown of ` 1,63,19,690. Since the tax liability on the total income computed under the normal provisions of the Act exceeded the tax liability on the book profit computed under section 115JB of the Act, the Assessing Officer proceeded to levy tax as per the normal provisions of the Act. On the basis of additions/disallowances made under the normal provisions of the Act, the Assessing Officer imposed penalty under section 271(1)(c) of the Act. However, while giving effect to the order passed by the learned Commissioner (Appeals), the Assessing Officer in his order dated 26th July 2017, a copy of which is placed before us by the learned Authorised Representative has computed the total loss of the assessee under the normal provisions of the Act at ` 74,77,297, and has ultimately computed the tax liability of the assessee on the book profit determined under section 115JB of the Act. Keeping in view the aforesaid factual aspect if we examine the legal position, it can be seen that the Hon'ble Delhi High Court in CIT v/s Nalwa Sons Investment Ltd., 327 ITR 543 (Del.) has held that when the income of the assessee is computed under section 115JB of the Act, penalty under section 271(1)(c) of the Act on the basis of additions / disallowances made under the normal provisions of the Act would not survive. The aforesaid decision of the Hon'ble Delhi High Court has been followed by the Co–ordinate Bench in Mehta Sulfites India Ltd.
5 Photo Quip India Ltd. (supra) while deciding identical issue. Therefore, respectfully following the decision of the Hon'ble Delhi High Court and the Co–ordinate Bench cited supra, we delete the penalty imposed under section 271(1)(c) of the Act. Grounds are allowed.
In the result, appeal is allowed. Order pronounced in the open Court on 22.05.2019