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Income Tax Appellate Tribunal, “D”, BENCH
Before: SHRI C.N. PRASAD, JM & SHRI M.BALAGANESH, AM
आदेश / O R D E R PER M. BALAGANESH (A.M):
This appeal in A.Y.2013-14 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-17, Mumbai in appeal No. CIT(A)-17/IT-82/10684/16-17 dated 22/08/2016 (ld. CIT(A) in short) against the imposition of penalty u/s.271(1)(c) of the Income Tax Act, 1961.
2. Though the assessee had raised various grounds before us, we find that the only effective issue to be decided in this appeal is as to whether the ld CITA was justified in confirming the penalty levied u/s 271(1)( c) of the Act in the facts and circumstances of the case.
M/s. Mulchand R. Shah Jewellers P. Ltd.,
The brief facts of this issue are that the assessee filed its return of income for the Asst Year 2013-14 on 30.9.2013 declaring total income of Rs 77,85,890/-. The assessee is engaged in the business of manufacturing and export of gold and diamond jewellery. The assessment was completed u/s 143(3) of the Act by the ld AO on 22.1.2016 determining total income at Rs 93,95,586/- by adding the dividend received from foreign subsidiary u/s 115BBD of the Act. The ld AO observed that the assessee had invested Rs 37,50,000/- in shares of Tasmi Jewells LLC, a foreign subsidiary company of the assessee and was holding 49% stake in the said company. During the year under consideration, the assessee had received Rs 93,95,586/- as dividend from Tasmi Jewells LLC. The ld AO noted that the assessee from its main activity of manufacturing and export of gold and diamond jewellery had incurred a loss of Rs 16,09,699/- which was mainly on account of claim of various expenses. The assessee had set off the said loss against the dividend of Rs 93,95,586/- received from its foreign subsidiary and offered the balance dividend of Rs 77,85,887/- to tax @ 15% u/s 115BBD of the Act. The ld AO denied the set off of the loss of Rs 16,09,699/- against the dividend from foreign subsidiary . However, he allowed the said loss to be carried forward to subsequent assessment years and accordingly brought the entire dividend from foreign subsidiary in the sum of Rs 93,95,586/- to tax in the assessment. The ld AO initiated penalty proceedings u/s 271(1)( c) of the Act for furnishing inaccurate particulars of income. The ld AO thereafter levied penalty u/s 271(1)( c) of the Act in the sum of Rs 2,48,698/- treating the disallowance of loss of Rs 16,09,699/- as concealed income and determined the tax sought to be evaded thereon. The action of the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us.
We have heard the rival submissions and perused the materials available on record. We find that the ld AR made an argument that since ultimately the total income of the assessee was determined only u/s 115JB of the Act by the ld AO, the assessee did not prefer any appeal before the ld CITA against the denial of set off of business loss with foreign dividend income as stated supra. From the M/s. Mulchand R. Shah Jewellers P. Ltd., perusal of the computation of total income placed on record forming part of the paper book filed before us , we find that the total income under normal provisions of the Act was determined at Rs 77,85,890/- which is taxable at the rate of 15%, whereas the book profits of Rs 77,85,890/- is taxable u/s 115JB of the Act at the rate of 18.5% . Hence the tax payable u/s 115JB of the Act was more than the tax payable under normal provisions of the Act in the instant case. In this background, it has to be seen whether the penalty u/s 271(1)(c ) of the Act could be levied on the disallowance / additions made total income under normal provisions of the Act. The ld AR rightly placed reliance on the Circular issued by the CBDT vide Circular No. 25/2015 dated 31.12.2015 which is reproduced hereunder for the sake of convenience :-
SECTION 115JB, READ WITH SECTIONS 115JA AND 271(1)(c), OF THE INCOME-TAX ACT, 1961 - MINIMUM ALTERNATE TAX - PENALTY UNDER SECTION 271(1)(c) WHEREIN ADDITIONS/DISALLOWANCES MADE UNDER NORMAL PROVISIONS OF THE SAID ACT BUT TAX LEVIED UNDER MAT PROVISIONS UNDER SECTIONS 115JB/115JC, FOR CASES PRIOR TO ASSESSMENT YEAR 2016-17 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.
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 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 115JB 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.
M/s. Mulchand R. Shah Jewellers P. Ltd.,
4. 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 w.e.f. 1-4-2016.
5. 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 u/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.
4.1. The ld DR argued that the aforesaid circular was issued after the date of passing of assessment order u/s 143(3) of the Act by the ld AO and accordingly would not bind the revenue. We find that the assessment order u/s 143(3) of the Act was passed by the ld AO on 22.1.2016 and hence the argument of the ld DR on this point is factually incorrect. Morever, on the date of passing of penalty order u/s 271(1)( c) of the Act, this circular was very much in force and would definitely bind the revenue authorities . The aforesaid circular is unambiguous and categorical that no penalty u/s 271(1)(c ) of the Act could be levied in respect of additions/ disallowances made under normal provisions of the Act, if ultimately the tax liability is determined u/s 115JB of the Act by the ld AO. It is not in dispute that the assessee is liable to tax only u/s 115JB of the Act even after the completion of assessment u/s 143(3) of the Act for the year under consideration. Hence respectfully following the aforesaid circular, we hold that no penalty u/s 271(1)( c) of the Act could be made in the facts of the instant case
M/s. Mulchand R. Shah Jewellers P. Ltd., in the hands of the assessee. Since relief is granted to the assessee on this ground, the arguments advanced by the ld AR on merits of the addition / disallowance need not be gone into and we refrain to give our opinion on the same.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on this 24/04/2019