ASST CIT 2(3), MUMBAI vs. SHIVGOPAL TRADING COMPANY P.LTD, MUMBAI

Kailas Corporate Lounge Opp. Kailas Complex, Hiranandani Vikhroli Link Road, Mumbai-400 079. �थायी लेखा सं./PAN :AACCS 2167 F .. (अपीलाथ� /Appellant) (��यथ� / Respondent) Shri Vimal Punamiya अपीलाथ� क� ओर से / Appellant by : Shri V. Justin-DR ��यथ� क� ओर से/ Respondent by : सुनवाई क� तारीख /Date of Hearing : 24/04/2018 घोषणा क� तारीख /Date of Pronouncement : 12/07/2018 आदेश / O R D E R आदेश आदेश आदेश PER SHAMIM YAHYA, ACCOUNTANT MEMBER: This appeal by the revenue is directed against the order of ld. Commissioner of Income tax(Appeals) dated 20/09/2013 and pertains to assessment year 2009-10, wherein the CIT(A) has deleted the penalty of Rs.20,12,481/- under section 271(1)(c ). The Grounds of appeal read as under :-

The assessee company e-filed its return of income on 31/10/2009 declaring total income of Rs. 3,060/- and book profit at Rs.92,51,412/-. During the year under consideration, the appellant sold a capital asset i.e. a flat at Maker Tower 'J' Cuffe Parade, Mumbai. The assessee computed its tax liability as per the provisions of section 115JB of the Act at Rs.9,52,895/-, which was higher than the tax calculated as per normal provisions of the Act. The tax liability was accordingly discharged by way of advance tax paid before March 15, 2009. The assessment was completed under section 143(3) on 20/09/2011 determining total income as per normal provisions of the Act and the book profit as per the provisions of section 115JB was determined at Rs.2,61,72,780/-. Since, the tax payable under section 115JB was higher than the tax payable as per normal provisions of the Act, the AO charged the tax as per section 115JB and initiated penalty proceedings under section 271 (1)(c) of the Act.

Under the normal provisions of the Act, the assessee claimed deduction u/s 54 at Rs.1,69,21,367/- in respect of purchase of a new residential property and u/s 54EC of the Act by investing Rs.1,00,00,000/- (Rs.50,00,000/- before 31/03/2009 and Rs.50,00,000/- after 31/03/2009) in the prescribed bonds. The AO assessed the total income of the appellant at Rs.92,85,932/-, while disallowing the filing fees of Rs.37,120/- and the deduction u/s 54EC in respect of the investment of Rs.1,00,00,000/- in prescribed bonds.

Under section 115JB, the AO computed the book profit of the appellant by making addition of Rs.1,69,21,367/- in respect of the purchase of new house, which was wrongly claimed by the assessee and determined the book profit at Rs.2,61,72,780/-(Rs.92,51,412/- + Rs.1,69,21,367/-). Consequent tax liability was determined at Rs.26,12,532/-. Since the assessee did not succeed on the issue of determination of book profit, penalty u/s. 271(1) (c ) was levied by the AO by concluding as under :- "4.8 The assessee had credited less amount of capital gain to profit and loss account i.e. Rs.92,47,752/- which was less by the cost of new asset of Rs.1,69,21,367/- which resulted into lesser amount carried forward to reserve & surplus which reflect to liability side of the balance sheet. By doing this, the assessee's new asset is not reflected on the assets side of the balance sheet. This goes to prove that assessee has intentionally and deliberately manipulated its profit and loss account and balance sheet. This act of the assessee clearly reveals its Mala fide intention to reduce tax liability on book profit u/s 115JB on returned income. 4.9 Further, had this case not been selected for scrutiny, this fact would have gone unnoticed and the assessee would have gone scot-free which would have resulted in loss of exchequer as the tax paid by the assessee as per its computation of income is much lesser than the actual tax required to be paid by the assessee as per tax pay able on book profit u/s 115JB.

In view of the above and after considering all the facts and circumstances of the case, as discussed above, I am of the opinion that the assessee has concealed the particulars of its income for the year under consideration within the meaning of section 271(l)(c) read with Explanation-1 thereto, of the Income-tax

In the background of above facts, therefore, it is evident that the appellant's case is not a case where particulars of income have been concealed or inaccurate particulars of such income have been furnished, From the details and records furnished by the appellant along with the return of income as well as during the course of assessment proceedings, it was very much possible for the AO to compute the correct income of the appellant, both under the normal provisions of the Act as well as under section 115JB of the Act. The AO has not brought on record any extra material on the basis of which the said disallowance has been made by him.

So far as the case laws cited by the appellant are concerned, it is seen that the decision of Hon'ble Supreme Court in the case of Nalwa Sons Investment Ltd (supra) is on a different issue where additions were made under the normal provisions of the Act, but the income of the assessee was taxed under section 115JB of the Act and there was no disallowance/addition made under section 115JB of the Act. Some other cases cited by the appellant are also on the same issue and hence, these are not applicable to the case of the appellant.

However, the appellant has also cited a number of other decisions where it has been held that no concealment penalty can be levied in a case where a claim is made which is not sustainable in law [CIT Vs. Reliance Petro Products Pvt. Ltd, 189 Taxman 322 (SC); [CIT Vs. SSP Ltd, 328 ITR 643 (P & H)]. In other decisions, it has also been held that where an assessee has furnished all particulars of income, imposition of penalty is not automatic [Dilip N. Shroff, 291 ITR 519 (SC); Twin Star Jupiter Cooperative Housing Society Ltd, 31 SOT 474 (Mumbai); Enpake Motors Pvt. Ltd, ITA No. 9147Mum/2008]. It has also been held that where a legal issue under consideration is debatable and the assessee makes a claim which is not acceptable, penalty cannot be levied [Devsons Pvt.Ltd. 329 ITR 483(Del.)].”

Thereafter learned CIT(A) elaborately quoted from the decision of Hon'ble Apex Court in the case of Reliance Petro Products .Ld. CIT(A) concluded as under:-

Against above order, revenue is in appeal before us.

We have heard both the counsel and perused the records. We find that on the facts and circumstances of this case, the assessee cannot be visited with the rigours of penalty u/s.271(1)(c ). The assessee has disclosed all the necessary particulars. There is no case of concealment or furnishing of inaccurate particulars of income. The assessee’s claim of reduction in the profit and loss account for the computation of book profit u/s. 115 JB has been rejected. This has led to the levy of penalty. As rightly noted by the ld. CIT(A) all the particulars and facts were already disclosed by the assessee for the purpose of computation of income under the normal provisions of the Act, and the same was also allowed by the AO under normal provisions. In these circumstances, in our considered opinion ratio from the Hon'ble Apex Court decision in the case of Reliance Petro Products (supra), applies squarely. In the said case it was expounded that the disallowance of a claim by the assessee cannot ipso facto the reason for levy of penalty u/s. 271 (1)(c ).