KALPATARU GARDENS P.LTD,MUMBAI vs. DCIT CEN CIR 5(3), MUMBAI

In this appeal, the only issue is with regard to penalty imposed by the Assessing Officer u/s 271(1)(c) of the Act amounting to Rs.4,82,244/-.

In brief, the relevant facts are that the appellant-company, which is engaged in the business of real estate development, filed a return of income for Assessment Year 2011-12 declaring an income of Rs.15,79,750/- which, inter-alia, included claim of deduction u/s 80IB(10) of the Act on the entire business income of Rs.24,84,21,867/- under the normal provisions of the Act; and, book profit u/s 115JB of the Act was declared at Rs.24,99,54,208/-. Since the tax liability in terms of Sec. 115JB of the Act was higher, the return of income was finally filed on the basis of income computed in terms of Sec. 115JB of the Act. The assessment u/s 143(3) of the Act was completed on 25.02.2014 whereby an addition of Rs.16,07,480/- was made to the business income u/s 69C of the Act, which resulted in enhanced business income of Rs.25,00,29,348/-, but the income as per the normal provisions of the Act was finalised at Rs.15,79,750/- (as returned) because the entire business income was held eligible for claim of deduction u/s 80IB(10) of the Act. The final income was, however, determined in terms of Sec. 115JB of the Act at the returned figure of Rs.24,99,54,208/-, wherein the tax liability was higher than the tax liability on the income assessed under the normal provisions of the Act. Subsequently, the Assessing Officer levied penalty u/s 271(1)(c) of the Act qua the tax sought to be evaded on the addition of Rs.16,07,480/- made u/s 69C of the Act and such penalty has been determined at Rs.4,82,244/-. The CIT(A) has also affirmed the penalty.

At the time of hearing, the learned representative for the assessee pointed out that the addition of Rs.16,07,480/- though made at the time of computing the income under the normal provisions of the Act, did not have any impact on the finally assessed income inasmuch as the enhanced business income was found eligible for benefit u/s 80IB(10) of the Act under the normal provisions of the Act. Even otherwise, it is sought to be pointed out that the tax liability has been finally determined in terms of Sec. 115JB of the Act, and following the ratio of the judgment of the Hon'ble Delhi High Court in the case of Nalwa Sons Investment Ltd., 327 ITR 543 (Delhi), no penalty could be imposed with reference to an addition made under the normal provisions of the Act. The learned representative pointed out that such a legal position has even been accepted by the CBDT vide its Circular no. 25/2015 dated 31.12.2015.

On the other hand, the ld. DR has merely relied upon the orders of the authorities below and has not controverted the factual matrix brought out by the learned representative for the assessee.

We have carefully considered the rival submissions. In the present case, it is abundantly clear that the impugned penalty of Rs.4,82,244/- levied by the Assessing Officer is unsustainable on more than one count. Firstly, the CBDT vide its Circular no. 25/2015 dated 31.12.2015 (supra) accepted that “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 115JB of the Act, then penalty under 271(1)(c) of the Act, is not attracted with reference to additions/disallowances made under normal provisions”.

In the instant case, the penalty has been levied with respect to the enhancement of returned business income by a sum of Rs.16,07,480/- on account of addition u/s 69C of the Act, but the same does not alter the final assessment whereby the ultimate tax liability has been determined in terms of Sec. 115JB of the Act. Thus, any penalty levied with respect to the aforesaid addition is unsustainable having regard to the legal position accepted by the CBDT vide its Circular no. 25/2015 dated 31.12.2015 (supra). In fact, in the concluding paragraph of the Circular dated 31.12.2015 (supra), the CBDT has directed that any such appeals pending before any court/tribunal “may be withdrawn/not pressed”. On this ground itself we deem it fit and proper to allow the appeal of the assessee and direct the Assessing Officer to delete the penalty imposed u/s 271(1)(c) of the Act of Rs.4,82,244/-.

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