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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL
Aforesaid appeal has been filed by the assessee challenging the order dated 30th January 2015, passed by the learned Commissioner (Appeals)–12, Mumbai, confirming the penalty imposed under section 271(1)(c) of the Act for assessment year 2009–10.
Brief facts are, the assessee company is engaged in providing high speed internet service. For the impugned assessment year, the 2 Five Network Solution India Ltd. assessee filed its return of income on 22nd February 2010, declaring nil income. The return of income filed by the assessee was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction under section 80IA of the Income Tax Act, 1961 (for short “the Act”) in respect of interest income and misc. income called upon the assessee to explain why the deduction claimed should not be disallowed. After rejecting the explanation of the assessee, the Assessing Officer disallowed the deduction claimed under section 80IA of the Act in respect of the aforesaid income and accordingly, added back the amount of ` 2,21,649, while computing income under the normal provisions of the Act. Since, the tax computed on the book profit under section 115JB of the Act was more than the tax on income determined under the normal provision, the Assessing Officer ultimately completed the assessment under section 115JB of the Act. However, on the basis of addition made on account of disallowance of deduction claimed under section 80IA of the Act, the Assessing Officer initiated proceedings for imposition of penalty under section 271(1)(c) of the Act. Though, the assessee in reply to the show cause notice issued under section 274 r/w 271(1)(c) of the Act objected to the penalty proceedings initiated under section 271(1)(c) of the Act, however, the Assessing Officer rejecting the explanation of the assessee imposed penalty of ` 68,490
3 Five Network Solution India Ltd. under section 271(1)(c) of the Act. Though, the assessee challenged the penalty order before the learned Commissioner (Appeals), however, the learned Commissioner (Appeals) also sustained the imposition of penalty.
The learned Authorised Representative submitted before us, the Assessing Officer having completed the assessment under section 115JB of the Act, he cannot impose penalty under section 271(1)(c) of the Act in respect of disallowance / addition made while computing income under the normal provisions of the Act. In support of such contention, he relied upon the decision of the Hon'ble Punjab & Haryana High Court in PCIT v/s International Institute of Neuro Sciences and Oncology Ltd. [2018] 402 ITR 188 (P&H) and the decision of the Hon'ble Delhi High Court in CIT v/s Nalwa Sons Investments Ltd., [2010] 324 ITR 543 (Del.). In support of his contention, the learned Authorised Representative also relied upon Central Board of Direct Taxes (CBDT) Circular no.25/2015, dated 31st December 2015.
The learned Departmental Representative relied upon the order of the learned Commissioner (Appeals).
We have considered rival submissions and perused materials on record. It is evident from the facts on record, the Assessing Officer
4 Five Network Solution India Ltd. made the addition of ` 2,21,649, on account of disallowance of deduction claimed under section 80IA of the Act while computing the income of the assessee under the normal provisions of the Act. However, from Para–7 of the assessment order, it is evident, the Assessing Officer having found that tax on book profit computed under section 115JB of the Act is more than the tax on income computed under the normal provision ultimately completed the assessment under section 115JB of the Act. Therefore, the issue arising for consideration before us is, in a case where assessment is completed under section 115JB of the Act, can the Assessing Officer impose penalty under section 271(1)(c) of the Act in respect of addition made while computing income under the normal provisions of the Act? The Hon'ble Delhi High Court in case of CIT v/s Nalwa Sons Investments Ltd.(supra) while considering identical issue held that when the Assessing Officer completes the assessment under section 115JB of the Act, no penalty can be imposed under section 271(1)(c) of the Act in respect of additions made in computing income under the normal provisions of the Act. Following the aforesaid decision of the Hon'ble Delhi High Court, the Hon'ble P&H High Court in International Institute of Neuro Sciences and Oncology Ltd. (supra) have also expressed similar view. In fact, taking note of the decision of the Hon'ble Delhi High Court in Nalwa Sons Investments Ltd. (supra), the CBDT vide
5 Five Network Solution India Ltd. Circular no.25/2015, dated 31st December 2015, has clarified that prior to amendment in section 271(1)(c) by insertion of Explanation–4 w.e.f. 1st April 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 under section 115JB of the Act, penalty under section 271(1)(c) of the Act is not attracted with reference to addition / disallowances made under the normal provisions. Thus, in view of the aforesaid legal position, no penalty under section 271(1)(c) of the Act can be imposed in case of the assessee. Accordingly, we delete the penalty imposed of ` 68,490.
In view of our above decision, the additional grounds raised by the assessee are of mere academic importance, hence, do not require adjudication.
In the result, assessee’s appeal is partly allowed. Order pronounced in the open Court on 12.10.2018