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Facts
The Revenue filed appeals against the CIT(A)'s order deleting penalties imposed under Section 271(1)(c) for furnishing inaccurate particulars of income for AYs 2013-14 and 2014-15. The penalties were levied on various disallowances, including depreciation on KGD6 and steel purchases, and transfer pricing adjustments. The core contention was whether such penalties are applicable when the tax liability under normal provisions is lower than under Minimum Alternate Tax (MAT) provisions (Section 115JB).
Held
The Tribunal upheld the CIT(A)'s decision, confirming that for assessment years prior to April 1, 2016, penalty under Section 271(1)(c) cannot be levied if the tax payable under normal provisions is less than the tax payable on book profits under Section 115JB. This ruling aligns with the Delhi High Court's judgment in CIT vs. Nalwa Sons Investments Ltd. (upheld by the Supreme Court) and CBDT Circular No. 25/2015, which clarified the prospective application of Explanation 4 to Section 271(1)(c).
Key Issues
Whether penalty under Section 271(1)(c) for furnishing inaccurate particulars of income is attracted when the tax payable under normal provisions is less than the tax payable under Section 115JB (MAT) for assessment years prior to 01.04.2016.
Sections Cited
Section 271(1)(c), Section 115JB, Section 274, Section 143(3), Section 144C(3), Section 92CA(5), Section 154, Section 14A, Section 80IA, Section 80IB(9), Explanation 4 to Section 271(1)(c), Section 115JC
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Income Tax Appellate Tribunal, MUMBAI “D” BENCH : MUMBAI
Before: SHRI SATBEER SINGH GODARA & SHRI GIRISH AGRAWAL
ORDER PER SATBEER SINGH GODARA, J.M. These Revenue’s twin appeals ITA.Nos.1875 & 1872/Mum./2024 with assessee’s as many cross objection nos.C.O.Nos.88 & 89/Mum./2024, for assessment years 2013- 2014 & 2014-2015; arise against the CIT(A)-57, Mumbai, Mumbai’s common DIN & Order no.ITBA/APL/S/250/2023-24/
2 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 1060866250(1) dated 13.02.2024 in proceedings u/s. 271(1)(c) of the Income Tax Act, 1961 (in short “the Act”); respectively.
Heard both the parties. Case files perused.
The Revenue’s “lead” appeal ITA.No.1875/MUM./2024 for the former assessment year 2013-2014 raises the following sole substantive ground :
“Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee's appeal and allowed the grounds of assessee ignoring the fact that the appeal on this issue is pending before Hon'ble High Court, which may lead to increase in the income of the assessee under normal provision ?”
Both the parties next invited our attention to the CIT(A)’s lower appellate discussion reversing the Assessing Officer’s findings imposing sec.271(1)(c) penalty of Rs.23,98,83,694/- vide order dated 26.03.2022; reading as under:
3 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 4 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 5 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 6 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 7 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 8 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024
9 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 10 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 11 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 12 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 13 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 14 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 15 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 16 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 17 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024
We wish to make it clear that both the parties are very much ad idem during the course of hearing that the learned CIT(A) has followed the very reasoning in paragraphs 17 to 17.1 to delete the corresponding penalty of Rs.234,33,40,276/- in his impugned order for the latter assessment year 2014-2015. It is evident therefore that the learned CIT(A) has held that the assessee’s taxable income computed under normal provisions is less than it’s sec.115JB book profits in both these assessment years and conclude that the Assessing Officer had erred in law and on facts in levying the consequential penalty(ies) hereinabove inter alia going by CIT vs. Nalwa Sons Investments Ltd., [2010] 194 Taxman 387 (Del.) (HC); CBDT’s circular no.25/2015 dated 31st December, 2015 as well as the legislative amendment to sec.271(1)(c) Explanation-4, applicable in prospectively w.e.f. 01.04.2016. Learned CIT-DR vehemently argued in this factual 18 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 backdrop that the CIT(A) herein has erred in law and on facts in deleting the impugned penalty(ies) for the sole reason of the assessee’s taxable income coming out to be less than it’s sec.115JB book profits. She further stated that the Revenue’s quantum appeals are indeed pending before higher judicial forums and therefore, the impugned penalty(ies) deserve to be kept in abeyance being consequential in nature.
Learned counsel representing the assessee has drawn strong support from the CIT(A)’s above extracted detailed discussion deleting the impugned penalty(ies) for the reason that it’s book profits are more than the income computed under the normal provisions.
We have given our thoughtful consideration to the foregoing rival stands and find no merit in the Revenue’s instant identical sole substantive ground(s). Suffice to say, it has come on record that we are in assessment years 2013-2014 and 2014- 2015 wherein case law Nalwa Sons (supra) as well as the CBDT’s circular no.25/2015 have settled the issue in assessee’s favour that the impugned penalty could not be levied in an instance of 19 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 the taxable income computed under the normal provisions turning out to be less than sec.115JB book profits. We wish to make it clear that the legislative amendment in sec.271(1)(c) Explanation-4 carries only prospective effect from 01.04.2016 onwards. Faced with this situation, we affirm the learned CIT(A)’s action deleting the impugned penalty(ies) in both these assessment years. These Revenue’s twin appeals ITA.Nos.1875 & 1872/Mum./2024 fail in above terms. The assessee’s cross objections C.O.Nos.88 and 89/MUM./2024 stand render academic in very terms. Ordered accordingly.
To sum-up, these Revenue’s twin appeals ITA.Nos.1875 & 1872/Mum./2024 and assessee’s cross objections C.O.Nos.88 & 89/MUM./2024 are dismissed in above terms. A copy of this common order be placed in the respective case files. Order pronounced in the open Court on 10.07.2024 Sd/- Sd/- [GIRISH AGRAWAL] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Mumba, Dated10th July, 2024 VBP/- 20 ITA.Nos.1875, 1872 /Mum./2024 & C.O.Nos.88 & 89/Mum./2024 Copy to