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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI B.R.Baskaran & SHRI SANDEEP GOSAIN
Date of Hearing-03.04.2018 Date of Order- 02.05.2018 O R D E R PER: SANDEEP GOSAIN, JUDICIAL MEMBER.
The present appeal has been filed by the assessee against the order of the Ld. CIT(A)-53, Mumbai, dated 30/12/2015 and pertains to AY 2011-12. The grounds of appeal read as under:-
The learned CIT (A) erred in confirming the Penalty Order 1. passed by the Assessing Officer u/s 271(1)(c) of the Income ./2016 Kalpataru Limited Tax Act, 1961 amounting to Rs. 6,00,691/- on account of disallowance u/s 69C towards purchase of construction materials from suspicious dealers based on information available on the website of Sales Tax Department. The learned CIT (A) failed to appreciate that the Appellant has 2. made a true and full disclosure of material facts in the return of income and accompanying documents during the assessment proceedings, resulting in absolutely no case of either concealment or furnishing of inaccurate particulars of Income.
The learned CIT (A) erred in stating in its Order that the Appellant couldn't produce before the Assessing Officer or CIT (A), the documents related to Purchases in order to establish the genuineness of the Purchases. The learned CIT (A) failed to verify the details submitted by 4. the Appellant during the course of assessment proceedings vide submission dated 20.02.2014 submitting all the relevant documentary proofs evidencing genuineness of purchases i.e. copies of invoices, delivery challans, entry in the inward register at site, purchase orders, Bank Statements for proof of payment to respective parties and their ledger accounts. The learned CIT (A) erred in drawing adverse inferences of 5. the judicial rulings relied upon by the Appellant. The learned CIT (A) failed to consider the facts and law 6. applicable and endorsed the views and findings of the Assessing Officer. The conclusions of the learned CIT (A) are contrary to law and 7. facts on record and unsustainable in law. The learned CIT (A) erred in upholding levy of Penalty u/s 8. 271(1)(c) of the Income Tax Act, 1961.
The appellant craves leave to add, alter, amend, delete, and vary any or all the above grounds of appeal.
Brief facts of the case are that the assessee has filed its return of income on 30/09/2011 declaring total income of Rs.50,32,06,730/- after claiming deduction u/s 80IB(10) of the ./2016 Kalpataru Limited Income Tax Act, 1961 (hereinafter „the Act‟) for A.Y. 2010-11. The assessment was completed u/s 143(3) of the Act on 28/03/2014 determining total income of the assessee at Rs. 50,50,15,090/- after making an addition of Rs. 18,08,355/- u/s 69C of the Act for unexplained expenditure. During the assessment proceedings, It was found by the AO that assessee had not purchased any goods from all the parties, therefore, the AO treated the purchases amounting to Rs.18,08,355/- as unexplained expenditure as per the provision of section 69C of the Act. Consequently, the penalty proceedings u/s 271(1)(c) of the Act was initiated against for that purpose. The AO also issued show cause notice u/s 274 r.w.s 271(1)(c) of the Act and after seeking reply and providing opportunity of hearing to the assessee, imposed penalty of Rs.6,00,691/- u/s 271(1)(c) of the Act for concealing particulars of income.
2.1. Aggrieved by the order of penalty u/s 271(1)(c) dated 29/09/2014, the assessee preferred appeal before the Ld. CIT(A) and the Ld. CIT(A) after considering the contentions raised by the ./2016 Kalpataru Limited assessee as well as the Revenue dismissed the appeal of the assessee and upheld and sustained the penalty.
2.2. Aggrieved by the order of the Ld. CIT(A), the assessee has filed the present appeal before us on the grounds mentioned hereinabove.
2.3. At the very outset, the Ld. AR appearing on behalf of the assessee, drawn our attention to the order of assessment passed u/s 143(3) of the Act, wherein the total income of the assessee was computed by taking normal provisions as well as book profit u/s 115JB of the Act and since the tax liability was computed on book profit and the same was more than that of tax liability computed under normal provisions of the Act, therefore, the total income of the assessee was assessed as per the computation under Book Profit u/s 115JB of the Act.
2.4. Ld. AR submitted that wherein income computed in accordance with normal procedure is less than the income determined by the legal fiction, namely, the book profit u/s 115JB of ./2016 Kalpataru Limited the Act and the income of the assessee is assessed u/s 115JB and not under the normal provision then the concealment of income would have no role to play and would not lead to tax evasion. Therefore, penalty cannot be imposed on the strength of these submissions.
Ld. AR submitted that penalty cannot be imposed on the basis of disallowance or additions made under the normal provisions and thus in order to support its contentions, Ld. AR relied upon the judgment passed by the Hon‟ble Delhi High Court in the case of CIT vs Nalwa Sons Investments Ltd. (2010) 327 ITR 543(Del.). The operative portion of the judgment is reproduced here under:-
“PENALTY- CONCEALMENT OF INCOME -COMPANIES -BOOK PROFITS- TOTAL INCOME COMPUTED UNDER REGULAR PROVISIONS LESS THAN BOOK PROFITS-ASSESSMENT MADE UNDER SECTION 115JB-PENALTY CANNOT BE LEVIED—INCOME-TAX ACT, 1961, ss. 115JB, 271(1)(c). Under the scheme of the Income-tax Act, 1961, the total income of the assessee is first computed under the normal provisions of the Act and tax payable on such total income is compared with the prescribed percentage of the book profits computed under section 115JB of the Act. The higher of the two amounts is regarded as total income and tax is payable with reference to such total income of the tax payable under .the normal provisions is higher, such amount is the total income of the assessee, otherwise, the book profits are 7kenied as the total income of the assessee in terms of section 1 151B of the Act. Where the income computed in accordance with the normal procedure is less than the income determined by legal fiction, namely, the book profits under section 1 15JB of the Act and the income of the assessee is assessed under section 1 15JB and not under the normal provisions, the tax is paid on the income ./2016 Kalpataru Limited assessed under section 115JB of the Act. Concealment of income would have no role to play and would not lead to tax evasion. Therefore, penalty cannot - be imposed on the basis of disallowances or additions made under the regular provisions.”
2.5. On the other hand, the Ld. DR relied upon the order passed by the Revenue authorities.
2.6. We have heard the counsels of both the parties at length and we have also perused the material placed on record as well as order passed by the revenue authorities, judgments cited by both the parties, we found that although before imposing penalty u/s 271(1)(c) of the Act, the AO had issued a show cause notice u/s 274 r.w.s. 271(1)(c) upon the assessee and the assessee has submitted his reply in writing but the above plea now raised before us was never raised by the assessee at any time either before the AO at the time of imposing penalty or before the Ld. CIT(A) during the appellate proceedings. We have also gone through the grounds of appeal, raised by the assessee before us. No such grounds has been raised, since, the assessee has raised this ground for the first time before us but he same being legal in nature is allowed to be raised and therefore, while invoking ./2016 Kalpataru Limited provisions of section 254 of the Act, we deem it appropriate to adjudicate the same on merits.
We find that in the present case, the income computed in accordance with normal procedure is less than the income determined by the legal fiction, namely, the book profit u/s 115JB of the Act, therefore, the judgment relied upon by the Ld. AR in the case of CIT vs Nalwa Sons Investments Ltd. (supra) is fully applicable on the facts of the present case as in nutshell it was concluded in the said judgment that when, tax was imposed and calculated under the Act on the deemed income u/s 115JB of the Act, then for the purposes of the imposition of penalty, the Department could not revert back to the normal income as it would lead to an absurd situation of two different incomes of the same person for the same assessment year. Furthermore, when the income tax is paid on the “book profits” by a legal fiction, such a legal fiction has to be taken to its logical conclusion. Apart from that the Ld. AR also relied upon the circular no. 25/2015, wherein, at para number-3, it is specifically mentioned 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) i the Act could not be imposed with reference to additions/disallowance made under ./2016 Kalpataru Limited normal provisions. Therefore, respectfully following the judgment of Hon‟ble Delhi High Court, which has also been upheld by the Hon‟ble Supreme Court restored in (2012) 21 taxmann.com 184 (SC), we set-aside the penalty levied u/s 271(1)(c) of the Act and allowed the appeal filed by the assessee.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the Open Court on 02.05.2018