Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, G Bench, Mumbai
Before: Shri C.N. Prasad & Shri A.L. Saini
This appeal has been filed by the Revenue against the order of the CIT(A)-50, Mumbai dated 02.05.2016 for A.Y. 2009-10 restricting the penalty to `51,499/-.
Revenue has raised the following grounds of appeal: - “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 on account of disallowance u/s. 14A to Rs.51,499/- as against the penalty levied of Rs.9,59,000/- without appreciating the fact that the assessee has furnished inaccurate particulars of income.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty u/s 271(1)(c) of the Income Tax Act, 1961 levied of Rs.5,57,200/- on account of excess depreciation claimed ,without discussing the said issue."
3. With referenced to ground No. 2, the learned counsel for the assessee at the outset submitted that in so far as levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter “the Act”) in M/s. Savita Oil Technologies Ltd. respect of disallowance made towards excess depreciation is concerned, the Coordinate Bench vide order in dated 04.08.2017 deleted the disallowance. The learned counsel referring to para 9 of the said order submitted that since this disallowance is deleted the penalty levied on such disallowance will not stand. The learned counsel further submitted that the penalty was levied in the assessment order in respect of disallowance made while computing the income under normal provisions of the Act but ultimately the income was assessed under MAT provisions. The learned counsel, referring to the CBDT circular No. 25/2015 dated 31.12.2015, submitted that prior to 01.04.2016 if the income tax payable on the total income is computed under the normal provisions of the Act is less than the tax payable on the book profit under Section 115JB of the Act then penalty under Section 271(1)(c) of the Act is not attracted with reference to the addition/ disallowance made under normal provisions. Therefore, he submitted that even by virtue of this circular the penalty levied on the addition/ disallowance made in the normal computation will not stand.
4. Coming to ground No. 1, i.e. restricting the penalty levied under Section 271(1)(c) of the Act on account of disallowance under Section 14A of the Act the learned counsel submitted that the CIT(A) worked out the penalty leviable at `51,499/- for disallowance under Section 14A while computing book profits. The learned counsel further submitted that the CIT(A) did not give an opportunity to the assessee before levying penalty on the addition made under Section 14A of the Act in the MAT proceedings. Before initiating penalty no notice is given to the assessee. The CIT(A) simply computed the penalty to be levied under Section 271(1)(c) of the ACt at `51,499/- on deemed income under MAT provisions. The learned counsel further referring to the order of the Coordinate Bench submitted that the Coordinate Bench has restored the issue of disallowance under Section 14A to the file of the AO for re-computation.
The learned D.R., on the other hand, vehemently supported the order of the Assessing Officer.
M/s. Savita Oil Technologies Ltd.
We have heard the rival submissions and perused the orders of the authorities below and the decisions relied upon. As rightly pointed out by the learned counsel, in view of the CBDT circular no penalty is leviable on the addition/disallowance made while computing income under the normal provisions of the Act when the income is assessed ultimately under Section 115JB of the Act and we observe that the CIT(A) has rightly deleted the penalty in so far as addition/disallowance made under the normal provisions. In any case the Tribunal has deleted the disallowance of excess depreciation claim made by the assessee hence no penalty is attracted.
Coming to the penalty levied for disallowance made under Section 14A while computing the book profit, firstly the AO neither initiated nor levied any penalty on this addition/disallowance made under Section 14A while computing book profits. Secondly if the CIT(A) wanted to initiate penalty proceedings for such addition/disallowance he has to issue notice to the assessee. The CIT(A) should give an opportunity to the assessee before imposing penalty. In this case no such notice is issued nor an opportunity is given to the assessee. Therefore the penalty of `51,499/- was levied by the CIT(A) without adhering to the principles of natural justice. Further, the Special Bench of the Tribunal in the case of ACIT vs. Vireet Investment P. Ltd. (58 ITR (Trib) 313) it has been held that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated under Section 14A r.w. Rule 8D of I.T. Rules, 1962. The disallowance under Section 14A while computing book profit cannot be made applying the provisions of Rule 8D.
In the result, the appeal filed by the Revenue is partly allowed for statistical purposes.