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Income Tax Appellate Tribunal, DELHI BENCH “E”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI ANADI N. MISHRA
Date of Hearing : 02-08-2016 Date of Order : 09-08-2016
ORDER PER H.S. SIDHU : JM The Revenue has filed the present appeal against the impugned order dated 22/2/2013 passed by the Ld. Commissioner of Income Tax (Appeals)-XVI, Delhi on the following grounds:-
The Ld. CIT(A) has erred in law and on facts in deleting the penalty u/s 271(l)(c) of the Income Tax Act, 1961 amounting to Rs. 81,27,313/- imposed by the assessing officer for furnishing inaccurate particulars by the assessee company.
2. The Ld. CIT(A) has erred in law and on facts in deleting the penalty u/s 271(l)(c) of the Income Tax Act 1961 amounting to Rs. 81,27,313/- ignoring the fact that the said penalty was imposed only after the quantum addition confirmed by the CIT(A), New Delhi.
3. The Ld. CIT(A) has erred in law and facts in not appreciating the fact that provisions of the Income Tax Act 1961 are applicable in the case of the assessee and not the provision of the Companies Act 1956 even if the tax paid by the assessee as per the Book Profit which is calculated as per the provision of the Companies Act 1956;
4. The Ld CIT(A) has erred in law and on facts in ignoring the provisions of section 115JB (5) of the Act, which clearly mentions that "save as otherwise provided in this section, all other provision of this Act shall apply to every assessee, being a company, mentioned in this section."
5. The appellant craves to be allowed to add any fresh grounds of appeal and or delete or amend any of the grounds of appeal.
The facts in brief are that the assessee has filed its E-Return at an income of Rs. 3,51,07,010/- on 25.11.2006 and assessment u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred as the Act) was made on 24.12.2008 at an income of Rs. 7,57,47,219/- after making disallowing claim of additional depreciation amounting to Rs. 2,41,45,314/- and penalty proceedings u/s. 271((1)© was initiated by issue of notice u/s. 274 r.w.s. 271(1)© of the Act and further furnishing the reply by the assessee company, the AO observed that as per provisions of Section 32(1)(iia) of the Act, assessee is not entitled for claim of additional depreciation on the plant and machinery which were acquired before 31.3.2005 but installed during the Financial year under consideration and accordingly, imposed the penalty of Rs. 81,27,313/- u/s. 271(1)© of the Act vide his order dated 9.3.2012.
Aggrieved with the aforesaid penalty order, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order dated 22.2.2013 has deleted the penalty in dispute by allowing the appeal of the assessee.
Now the Revenue is aggrieved against the impugned order and filed the present appeal before the Tribunal.
At the time of hearing Ld. DR relied upon the order of the AO and reiterated the contentions raised by the Revenue in the grounds and requested that Appeal of the Revenue may be allowed.
On the contrary, Ld. Counsel of the Assessee has relied upon the order of the Ld. CIT(A) and stated that he has passed a well reasoned order which does not need any interference, hence, the same may be upheld.
We have heard both the parties and perused the records, especially the impugned order passed by the Ld. CIT(A). We find that Ld. First Appellate Authority has elaborately discussed the issue in dispute by considering the submissions of the assessee and adjudicated the issue vide para no. 4.1 to 4.6 of the impugned order. For the sake of convenience, we are reproducing para no. 4.1 to 4.6 of the impugned order as under:-
“4.1 I have carefully considered the facts of the case, the findings of the A.O. as well as the submissions of the appellant. All the grounds of appeal are directed against penalty of Rs.
Rs.81,27,313/- imposed by the A.O. u/s 271(1)(c) of the LT. Act. The appellant company is engaged in the business of steel manufacturing and power generation. For the year under consideration, the appellant filed its e-return of income on 25/11/2006 declaring income of Rs. 3,51,07,010/- under the normal provisions of the Act and Book
Profit under section 115JB of the Act at Rs.
31,14,79,013/- and paid taxes on Book Profit.
The assessment under section 143 (3) of the Act was completed by the A.O. on 24/12/2008 wherein various additions/disallowances amounting to Rs. 4,06,40,209/- was made to the returned income under normal provisions of the Act and taxable income of the appellant company was computed at Rs. 7,57,47,219/- under the normal provisions of the Act and income was assessed at book profit at Rs.
31,14,79,013/- u/s 115JB of the Act. Among the additions/disallowances made by the AO under the normal provision of the Act, disallowance was also Fn the following issue:
• Disallowance of additional depreciation
Rs. 2,41,45,314/-
4.2 Being aggrieved the appellant preferred appeal before the CIT (A) against the above assessment. Ld. CIT(A) confirmed the disallowance of Rs. 2,41,45,314/- on the above issue. The appellant filed appeal before
ITA T against the order of Ld. CIT (A) which is pending before ITAT and is yet to attain finality. Consequent to the additions confirmed by Id. CIT(A) the A.O. imposed penalty under section 271(l)(c) read with 274 of the Act of Rs. 81,27,313/- on the appellant based on the disallowance upheld by the Ld. CIT(A) in the quantum appeal being 100% of tax sought to be evaded.
4.3 There is no dispute in the present case, that the income computed as per the normal procedure was less than the income determined by legal fiction namely 'book profits' under section 115JB of the Act. On the basis of normal provision, the income was computed at Rs.7,57,47,219/-. On the other hand, assessment under section 115JB of the Act was made at Rs.31,14,79,013/- at the book profit shown by the appellant in the return of income filed on 25/11/2006. In view thereof, in conclusion, the assessment order records as follows:-
“Since the tax on book profit u/s 115JB of IT Act ofRs.31,14,79,013/- is more than the tax on income as per normal provisions of the IT Act, assessed at Book Profit of Rs.31,14,97,013/-. Charge interest U/S 234B, 234C & 234D of the IT Act, issue demand notice and challan.
Penalty proceeding u/s 271(1)( c) of the IT Act, have been initiated separately."
The income of the assessee was thus assessed under section 115JB and not under the normal provisions. Considering the additions/disallowance confirmed by Ld. CIT(A) the A.O. held that the appellant had furnished inaccurate particulars of income and, therefore, imposed penalty @100% of the tax sought to be evaded. The question, therefore, in the present case, would be, as to whether furnishing of such wrong particulars had any the effect on the amount of tax sought to be evaded. The quantum of penalty u/s 271(1)(c) is quantified with reference to the amount of tax sought to be evaded. The tax sought to be evaded would be the difference between the tax due on the income assessed and the tax that would have been chargeable had such total income been reduced by the amount of concealed income. Thus, the penalty is levied on the basis of tax on the difference between the income assessed and the income returned.
4.4 On this principle, the penalty could not be imposed in the present case as the assessee had paid the tax at deemed income under section 115JB of the Act, which income was more than as per normal procedure. Where income of an assessee company is finally by deeming the same to be total income of the assessee, penalty imposable under section 271(1)(c) of the Act could only be levied in respect of any adjustment/addition/disallowance made while computing such 'book profits'. In such a situation, the A.O. cannot impose penalty with reference to the additions/disallowances made while computing normal income since such income pales into insignificance, both for the purpose of imposition of tax and all logical consequences following thereon.
4.5 When the tax was imposed and calculated under the Act on the deemed income under section 115JB of the Act, for the purposes of the imposition of penalty the A.O 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 legal fiction has to be taken to its logical conclusion.
4.6 The furnishing of inaccurate particulars had its repercussions only when the assessment was done under the normal procedure. The assessment as per the normal procedure was, however, not acted upon. On the contrary, it is the deemed income assessed under section 115JB of the Act which has become the basis of assessment as it was higher of the two. Tax is thus, paid on the income assessed under section 115JB of the Act. Hence, when the computation was made under section 115JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, the inaccurate furnishing did not lead to tax evasion at all. The profits declared by the assessee u/s 115JB had been accepted by the A.O. Whatever had been done by the A.O. in assessment under normal procedure, therefore, became academic. Reading of the provisions of see 115JB shows that the book profits "shall be deemed to be the total income of the assessee". There could not be any concealment in the instant case since whatever had been declared by the assessee as book profits was accepted by the A.O. Therefore, there could not be any complaint of concealment. The deeming provisions of see 115JB deeming the book profits as total income, will also apply for determining if there was any concealment or not. Reliance in this regard is placed on the decisions of Hon'ble Jurisdictional Delhi High Court in the case CIT vs. Nalwa Sons Investments Ltd. 194 Taxman 387 (Delhi) and Hon'ble ITA T Delhi case of Jindal polyster and Steel Ltd. in and Joyco India Pvt. Ltd. vs. ITO 152 Taxman 14 (ITAT Delhi) and Hon'ble ITAT Mumbai in the case of BSEL Infrastructure Reality Ltd. vs. ACIT (2012) 22 taxman.com 155 (Mum). Therefore, I am of the considered opinion that the penalty u/s. 271(1)(c) imposed by the A.O. cannot be sustained and as such the same is deleted.”
7.1 After going through the findings of the Ld. CIT(A), as aforesaid, we are of the view that furnishing of inaccurate particulars had its repercussions only when the assessment was done under the normal procedure. The assessment as per the normal procedure was, however, not acted upon. On the contrary, it is the deemed income assessed under section 115JB of the Act which has become the basis of assessment as it was higher of the two. Tax is thus, paid on the income assessed under section 115JB of the Act. Hence, when the computation was made under section 115JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, the inaccurate furnishing did not lead to tax evasion at all. The profits declared by the assessee u/s 115JB had been accepted by the A.O. Whatever had been done by the A.O. in assessment under normal procedure, therefore, became academic. Reading of the provisions of see 115JB shows that the book profits "shall be deemed to be the total income of the assessee". There could not be any concealment in the instant case since whatever had been declared by the assessee as book profits was accepted by the A.O. Therefore, there could not be any complaint of concealment. The deeming provisions of sec. 115JB deeming the book profits as total income, will also apply for determining if there was any concealment or not. We note that in this regard, Ld. CIT(A) has placed the reliance on the decisions of Hon'ble Jurisdictional Delhi High Court in the case CIT vs. Nalwa Sons Investments Ltd. 194 Taxman 387 (Delhi) and Hon'ble ITA T Delhi case of Jindal polyster and Steel Ltd. in and Joyco India Pvt. Ltd. vs. ITO 152 Taxman 14 (ITAT Delhi) and Hon'ble ITAT Mumbai in the case of BSEL Infrastructure Reality Ltd. vs. ACIT (2012) 22 taxman.com 155 (Mum) and rightly deleted the penalty in dispute.
In the background of the aforesaid discussions and respectfully following the precedents relied upon by the Ld. CIT(A) in his impugned order, we are of the considered view that the Ld. CIT(A) has passed a well reasoned order which does not need any interference on our part, hence, we uphold the same and dismiss the appeal filed by the Revenue.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 09/08/2016.