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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
Out of these four appeals two appeals filed by the Revenue and two Cross Objection filed by the assessee are arising out of the order of Commissioner of Income Tax-, Mumbai [in short CIT(A)], in appeal No. CIT(A)-12/DCIT-6(3)(2)/346& 347/15-16, order dated 21.03.2017. The Assessments were framed by the Asst. Commissioner of Income Tax, Circle 6(2)(2), Mumbai (in short ‘ACIT/ AO’) for the A.Ys. 2011-12 & 2012- 13 vide orders dated 31.03.2015 & 30.03.2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’). The penalties under dispute was levied by DCIT, Circle 6(3)(2), Mumbai vide his different orders passed under section 271(1)(c) of the Act vide orders of even date 29.09.2015.
At the outset, the learned Counsel for the assessee stated that the assessee has raised jurisdictional issue in its CO against the appeals of Revenue. The Revenue has challenged the order of CIT(A) deleting the penalty levied by the AO on income assessed on the basis of computation of book profit under section 115JB of the Act. The learned Counsel for the assessee stated that in both the year facts and circumstances are exactly identical and hence, the assessee took up the first Cross Objection No. 284/Mum/2018 arising out of 3832/Mum/2017 for AY 2011-12. The learned Counsel drew our attention to the following grounds: -
CO Nos. 283 & 284/Mum/18
1. The learned CIT(A) ought to have held that since returned income as well as assessed income are computed under MAT provisions, penalty u/s. 271(1)(c) of the Act cannot be levied in respect of addition made in normal computation.
2. The learned CIT(A) ought to have held that the penalty levied by the Assessing Officer is contrary to the ratio laid down in the case of CIT v. Nalwa Sons Investments P. Ltd. [327 ITR 543 (Del)]. The learned CIT(A) ought to have held that Explanation 4(e) to section 271(1)(c) of the Act is not applicable for A.Y.2011-12.
3. The learned CIT (A) ought to have held that the penalty levied by the Assessing Officer u/s.271(1)(c) of the Act is without jurisdiction and bad in law.
4. The learned CIT(A) has erred in summarily rejecting the legal proposition argued before her by merely stating that 'it appears to be afterthought on the part of the appellant though backed by various decisions of Honorable Courts and Tribunals."
The grounds raised
in AY 2012-13 are also exactly identical. Hence, we will take up the issue from AY 2011-12. The learned Counsel for the assessee drew our attention to the assessment order passed under section 143(3) of the Act dated 31.03.2015, wherein at Para 6 page 13 and 14 the computation of income computed by the AO reads as under: -
6. Subject to the above, total income of assessee is computed as under: CO Nos. 283 & 284/Mum/18 Particulars Amount (Rs.) Income from Business Loss as per computation -35,78,33,393 Income from other sources Other Income as discussed above 3,15,21,980 Loss 3263,11,953 Computation of Book Profit:
Book profit as per computation ₹ 61,63,57,908/- Tax @ 18.5% works out to ₹ 11,09,44,423/-."
4. According to the learned Counsel, the AO noted that the tax computed under normal provisions of the Act is lower than the tax computed on book profit and therefore, the income computed on book profit under section 115JB of the Act is deemed to be the income of assessee at ₹ 61,63,57,908/-. The learned Counsel for the assessee also drew our attention to the computation of income attached with the assessee’s paper book at page 1, wherein computation under 115JB of the Act under MAT calculation, the tax is at ₹ 11,92,65,255/-. According to the learned Counsel, this issue is squarely covered by the decision of Hon’ble Delhi High Court in the case of CIT V. Nalwa Sons Investments Ltd. (2010) 327 ITR 543 (Del). Further, the Revenue has accepted the decision of Hon’ble Delhi High Court in the case of Nalwa Sons Investments Ltd. (supra) and finally issued CBDT Circular No. 25/2015, F.No. 279/Misc./140/2015/ITJ vide order dated 31.12.2015, wherein it is stated that no penalty under section 271(1)(c) of the Act is to be levied wherein addition/ disallowance made under normal provision of the Act but tax levied under MAT under section 115JB/ 115JC of the Act is more prior to AY 2016-17. The relevant circular reads as under: - “Subject: Penalty u/s 271(1)(c) wherein additions/disallowances made under normal CO Nos. 283 & 284/Mum/18 provisions of the Income Tax Act, 1961 but tax levied under MAT provisions u/s 115JB/115JC, for cases prior to A.Y. 2016-17-reg.- 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 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 26.8.20 10 in of 2009 in the case of Naiwa 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 11 5JB 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. CO Nos. 283 & 284/Mum/18
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. 01.04.2016.
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 u/s 11 5JB of the Act, then penalty under 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.
The above settled position is to be followed in respect of section 11SJC of the Act also.
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 CO Nos. 283 & 284/Mum/18 various Courts/Tribunals may be withdrawn/not pressed upon. This may be brought to the notice of all concerned." 5. We have also gone through the judgement of Hon’ble Delhi High Court in the case of Nalwa Sons Investments Ltd. (supra), wherein it is held that the tax payable on income computed under normal provisions is lesser than the tax payable under the deeming provisions of section 115JB of the Act. This penalty under section 271(1)(c) of the Act cannot be imposed with reference to additions / disallowance made under normal provisions. The admitted fact in the present case are that the penalties were levied on the additions made on account of income earned as interest by assessee from margin money deposits and site formation services/ scrap treating as income under the head other sources. Respectfully following the Hon’ble Delhi High Court decision and consequent to the same, CBDT Circular issued by Revenue accepting the judgement, we are of the view that the CO’s of assessee are allowed. Accordingly, the appeals filed by Revenue are dismissed. 6. In the result, the COs’ of assessee are allowed and that the appeals of Revenue are dismissed.