DCIT, CIR-12, KOLKATA, KARNATAKA vs. M/S ASSOCIATED ALCOHOLS & BREWERIES LTD., KOLKATA

आदेश /O R D E R PER Waseem Ahmed, Accountant Member:-

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-XII, Kolkata dated 20.01.2014. Assessment was framed by DCIT, Circle-12, Kolkata u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 27.04.2012 for assessment year 2009-10. Shri Sauarabh Kumar, Ld. Departmental Representative represented on behalf of Revenue and Shri V.N. Dubey, Ld. Advocate appeared on behalf of assessee. 2. In this appeal the Revenue has challenged the order of CIT(A) whereby the CIT(A) confirmed the order of AO imposing penalty on the assessee u/s 271(1)(c) of the Income Tax Act, 1961 (Act).

ITA No.749/Kol/2014 A.Y. 2009-10 DCIT Cir-12 Kol. Vs. M/s Associated Alcohols & Breweries Ltd. Page 2 3. The facts and circumstances under which penalty u/s 271(1)(c) of the Act was levied on the assessee by the Assessing Officer are that the assessee is a limited company and is engaged in the manufacturing business of potable alcohol. The assessee filed return of income for A.Y. 2009-10 declaring total income at NIL. However, the assessee paid the taxes under provisions of Minimum Alternate Tax (MAT) u/s 115JB of the Act. In the course of assessment proceedings u/s 143(3) of the Act, the AO noticed that the assessee had not declared capital gain income and deduction claimed u/s 80JJA of the Act was not supported on the basis of necessary documents. The above addition of Long Term Capital Gains income and denial of 80JJA deduction was confirmed by the AO. In respect of the aforesaid addition and denial of deduction in the course of assessment proceedings the AO initiated penalty proceedings u/s 271(1)(c) of the Act. The AO imposed penalty by holding that the assessee has violated the provision of law enumerated in Section 271(1)(c) of the Act by furnishing inaccurate particulars of income and imposed penalty. The CIT(A) deleted the penalty levied by the AO. The Revenue, being aggrieved, is in appeal before us. 4. The ld. Counsel for the assessee submitted before us that there was no tax liability under normal provisions of law. Thus the addition made under the normal provisions of law cannot be subject matter of penalty where the taxes are paid under MAT provisions. The said provisions have been clarified by the CBDT in its circular No. 25/2015 dated 31.12.2015 which reads as under: “Subject: Penalty U/S 271(1)(c) wherein additions/disallowances made under normal provisions of the Income Tax Act, 1961 but tax levied under MAT provisions u/s 115JB/115JC, for cases prior to A.Y. 2016-17-reg.- Section 115JB of the Act is a special provision for levy of Minimum Alternate Tax on Companies, inserted by Finance Act 2000 with effect from 1-4-2001. 2. Under clause (iii) of sub-section (1) of section 271 of the Act, penalty for concealment of income or furnishing inaccurate particulars of income is determined based on the "amount of tax sought to be evaded" which has been defined inter-alia, as the difference between the tax due on the income assessed and the tax which would have been chargeable had such total income been reduced by the amount of concealed income or income in respect of which inaccurate particulars had been filed.

ITA No.749/Kol/2014 A.Y. 2009-10 DCIT Cir-12 Kol. Vs. M/s Associated Alcohols & Breweries Ltd. Page 3 3. In this context, Hon'ble Delhi High Court in its judgment dated 26.8.2010 in ITA No.1420 of 2009 in the case of Nalwa Sons Investment Ltd. (available in NJRS as 2010-LL-0826-2), held 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(l)(c) of the Act could not be imposed with reference to additions /disallowances made under normal provisions. The judgment has attained finality. 4. Subsequently, the provisions of Explanation 4 to sub-section (I) of section 271 of the Act have been substituted by Finance Act, 2015, which provide for the method of calculating the amount of tax sought to be evaded for situations even where the income determined under the general provisions is less than the income declared for the purpose of MAT u/s 115JB of the Act. The substituted Explanation 4 is applicable prospectively w.e.f. 01.,04.2016. 5. Accordingly, in view of the Delhi High Court judgment and substitution of Explanation 4 of section 271 of the Act with prospective effect, 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(l)(c) of the Act, is not attracted with reference to additions/disallowances made under normal provisions. It is further clarified that in cases prior to 1.4.2016, if any adjustment is made in the income computed for the purpose of MAT, then the levy of penalty u/s 271(1)(c) of the Act, will depend on the nature of adjustment. 6. The above settled position is to be followed in respect of section 115JC of the Act also. 7. Accordingly, the Board hereby directs that no appeals may henceforth be filed on this ground and appeals already filed, if any, on this issue before various Courts/Tribunals may be withdrawn/not pressed upon. This may be brought to the notice of all concerned.”

The ld. Counsel for the assessee also drew our attention to the decision of the Hon’ble Delhi High Court in the case of CIT vs. Nalwa Sons Investments Limited in ITA No. 1420/2009 dated 26.08.2010 wherein the Hon’ble Court took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law if the taxes are paid under the provisions of MAT. The relevant extract reads as under:- “22. … 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 assessed in the negative i.e. at a loss of Rs.369521018. On the other hand,

ITA No.749/Kol/2014 A.Y. 2009-10 DCIT Cir-12 Kol. Vs. M/s Associated Alcohols & Breweries Ltd. Page 4 assessment under Section 115JB of the Act resulted in calculation of profits at Rs.40163180. 23. In view thereof, in conclusion, the assessment order records as follows:- ‘Assessed at Rs.40163180 u/s. 115JB, being higher of two. Interest u/s. 234B and 234C has been charged as per the provisions of Income Tax Act, 1961. Penalty proceedings us/s 271(1)(c) of the Income Tax Act, 1961 have been initiated. Issue necessary forms.’ 24. The income of the assessee was thus assessed under Section 115JB and not under the normal provisions. It is in this context that we have to see and examine the application of Explanation 4. 25. Judgment in the case of Gold Coins (supra), obviously, does not deal with such a situation. What is held by the Supreme Court in that case is that even if in the income tax return filed by the assessee losses are shown, penalty can still be imposed in a case where on setting off the concealed income against any loss incurred by the assessee under other head of income or brought forward from earlier year, the total income is reduced to a figure lower than the concealed income or even a minus figure. The court was of the opinion that ‘the tax sought to be evaded’ will mean the tax chargeable not as if it was the total income. Once, we apply this rationale to explanation 4 given by the Supreme Court, in the present case, it will be difficult to sustain the penalty proceedings. Reason is simple. No doubt, there was concealment but that 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 concealment did not lead to tax evasion at all. 26. The upshot of the aforesaid discussion would be to sustain the order of the Tribunal, though on different grounds. Therefore, while we do not agree with the reasoning and approach of the Tribunal, for our reasons disclosed above, we are of the opinion that penalty could not have been imposed even in respect of claim of depreciation made by the assessee. this al is accordingly dismissed.”

The ld. Counsel further brought to our notice that as against the decision of the Hon’ble Delhi High Court the revenue preferred a SLP in Civil No.18564/2011 and the Hon’ble Supreme Court by its order dated 04.05.2012 dismissed the SLP preferred by the department. He relied on the order of Ld. CIT(A). On the contrary, the ld. DR relied on the order of Assessing Officer.

ITA No.749/Kol/2014 A.Y. 2009-10 DCIT Cir-12 Kol. Vs. M/s Associated Alcohols & Breweries Ltd. Page 5 5. We have heard the contentions of both the parties and perused the material available on record. We have already observed that in the present case the income of the assessee was charged under the MAT provisions and there is no doubt in this regard. Thus, there is no question for levying the penalty u/s 271(1)(c) of the Act for the additions made under the normal provisions of law. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. AO is directed accordingly. 6. In the result the appeal of the Revenue is accordingly dismissed. 7. In the result, appeal of Revenue stands dismissed. Order pronounced in the open court 07/06/2017

Sd/- Sd/- (Aby. T. Varkey) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp �दनांकः- 07/06/2017 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-DCIT,Circle-12, P-7,Chowringhee Sq. Aayakar Bhawan, 7th FL, Kol-69 2. ��यथ�/Respondent-M/s Associated Alcohols & Breweries Ltd., 106A, Shyam Bazar Station, Ground Floor, Kolkata-05 3. संबं�धत आयकर आयु�त / Concerned CIT Kolkata 4. आयकर आयु�त- अपील / CIT (A) Kolkata 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/

Sr. Private Secretary, Head of Office/DDO आयकर अपील�य अ�धकरण, कोलकाता ।