NEW PHARMA P.LTD,MUMBAI vs. DCIT CEN CIR 5(3), MUMBAI

2 ITA.No. 1740/MUM/2016 (A.Y:2011-12) M/s. Neo Pharma Private Limited 2. At the outset, the Ld. Counsel for the assessee submitted that the penalty was levied with reference to the disallowance made towards unexplained expenditure u/s. 69C of the Act being the non-genuine purchases while computing the income under normal provisions of the Act. Referring to Para 4 of the Assessment Order, it was further submitted that the Assessing Officer though made addition u/s.69C under normal provisions of the Act ultimately the income was assessed under provisions of Section 115JB of the Act as the tax liability was more in computing the book profits. Therefore, the Ld. Counsel referring to the decision of the Hon’ble Delhi High Court in the case of CIT v. Nalwa Sons Investments Ltd. [327 ITR 543] submitted that when additions/disallowances were made under normal provisions of the Act and penalty was levied with reference to such additions and ultimately if the income is assessed under book profits u/s. 115JB of the Act, penalty u/s. 271(1)(c) will not attract. Ld. Counsel also submitted that CBDT had issued Circular No. 25/2015 in F.No.279/Misc./140/2015/ITJ dated 31st December, 2015 clarifying that no such penalty can be levied when income is assessed under the provisions of section 115JB the book profits and the penalty was levied with reference to the additions/disallowances made under normal provisions of the Act. Therefore, it is submitted that in view of the above, penalty is not sustainable.

We have heard the rival submissions, perused the orders of the Authorities below, the decision of the Hon’ble Delhi High Court and the CBDT Circular No.25/2015. It is an admitted fact that the income in this case was assessed under the provisions of section 115JB of the Act and the penalty was levied with reference to the addition made u/s.69C while computing the income under normal provisions of the Act. In the case of CIT v. Nalwa Sons Investments Ltd. (supra) the Hon’ble Delhi High Court considered a similar situation where the penalty was levied with reference to the additions/disallowance made under normal provisions of the Act and penalty was levied with reference to such additions though the income was finally assessed under the provision of 115JB and it was held that penalty in such situation is not attracted. We also find that the CBDT in circular No. 25/2015 dated 31st December, 2015 taking note of the decision of the Hon’ble Delhi High Court in the case of CIT v. Nalwa Sons Investments Ltd. (supra) also clarified that prior to 01.04.2016 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 u/s.271(1)(c) is not attracted with reference to the additions/disallowances made under normal provisions of the Act. In these circumstances following the decision of the Hon’ble Delhi High

In the result, the appeal of the assessee is allowed.