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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: Shri Amit Shukla, & Shri Ashwani Taneja
आदेश / O R D E R Per Ashwani Taneja (Accountant Member): This appeal has been filed by the Assessee against order of Ld. Commissioner of Income Tax(Appeals), Mumbai-3 (in short ‘CIT(A)’}, dated 24.09.2015 passed against penalty order u/s 271(1)(c), dated 29.03.2014 for Assessment Year 2007-08 on the following Grounds: “On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax 2 R.R. Oomerbhoy P. Ltd. (Appeals) - 3, Mumbai: Penalty levied u/s 271 (1)(c) on disallowance of foreign travel Expenses of Rs.5,00,000/- 1.Erred in restricting the penalty U/S 271(1)(c) on the disallowance of Foreign travel Expenses of Rs. 5,00,000/- without appreciating that in case of a company, tax is paid at deemed income under section 11 5JB. 2. failed to appreciate that the penalty was to be imposed on the alleged concealment of income by the assessee or in respect of income in which inaccurate particulars have been furnished, the quantum of penalty is quantified with reference to the amount of tax sought to be evaded. As per the Explanation 4 of Section 271 (1) (c) the tax sought to be evaded would be the difference between the tax due on the income assessed and the tax that would be chargeable had such total income been reduced by the amount of concealed income. Thus penalty is levied on the basis of Tax on the difference between the income assessed and the income returned. 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 the income assessed as per normal procedure and hence there is no tax sought to be evaded as the tax payable on assessment is same as in the return of income filed.
Failed to appreciate the fact that the addition is subjective and hence the Learned TAT has restricted the same to Rs. 5,00000/- Ad hoc. Hence considering the fact that the addition is adhoc and the fact that the assessee had no malafide intentions nor it has concealed any particular of its income the penalty should not be imposed. The Appellant craves, to consider the above grounds of appeal without prejudice to each other and craves leave to add, alter, delete or modify the above grounds.”
During the course of hearing, arguments were made by Shri Rajiv S. Mehta, Authorised Representatives (AR) on behalf 3 R.R. Oomerbhoy P. Ltd. of the Assessee and by Shri S. Senthil Kumaran, Departmental Representative (DR) on behalf of the Revenue.
3. The brief facts culled out from the orders of the lower authorities are that the assessee is a private limited company engaged in the business of trading in imported Olive oil, Pastas, Sauces, Soaps and Perfumes and selling of packed Edible Oils. The assessee for the year under consideration had filed the return of income on 30.10.2007 and revised return on 19.02.2009 declaring total income at Nil under normal provision of the Act. The assessee revised the return of income on account of merger of M/s Elite Tradex Pvt. Ltd. with the assessee company with effect from 31.03.2007 as per the order of Bombay High Court dated 06.02.2009. However, income was computed under the provisions of 115JB of the Act. The assessment was completed under section 143(3) dated 29.12.2009, assessing the total income at Rs. 27,58,680/-. The assessment was finalized by adding Rs 23,03,389/- on account of foreign travel expenses out of Rs 72,36,654/-. Brought forward losses and unabsorbed depreciation was set off against the gross total income. Subsequently the AO vide order dated 29.03.2014 passed the order levying penalty u/s 271(1)(c) of Rs. 6,91,017/- as 100% of tax sought to be evaded. In the meanwhile the Tribunal reduced the disallowances of Rs.23,03,389/- to Rs. 5,00,000/- vide its order dated 17.04.2015. 4. Subsequently, assessee filed an appeal before Ld. CIT(A) and made detailed submissions to contest the penalty and 4 R.R. Oomerbhoy P. Ltd. inter alia submitted that since the income was assessed u/s 115JB , therefore, penalty was not leviable in view of the judgment of the Supreme Court in the case of CIT vs M/s Nalwa Sons Investment Ltd. wherein SLP filed by the Tribunal was dismissed and thus judgment of Hon’ble Delhi High Court dated 26th August 2016, was affirmed and requested for deleting the penalty. But, Ld. CIT(A) was not convinced with the submissions of the assessee and confirmed the levy of penalty, but with respect to reduced amount of disallowance of Rs.5,00,000/- only. Being aggrieved, the assessee filed an appeal before the ITAT.
During the course of hearing before us, Ld. counsel reiterated its submissions as were made before Ld. CIT(A) and further placed reliance upon the circular of the CBDT No.25/2015 dated 31.12.2015 wherein it was clarified that where the assessment is finally made under section 115JB, no penalty would be leviable.
6. Per contra, Ld. DR Relied upon the orders of the lower authorities.
7. We have gone through the entire facts and circumstances of the case and find that penalty has been wrongly levied in this case keeping in view the facts and circumstances of the case as well as clear position of law. It is noted that in this case Hon’ble Delhi High Court in the case of Nalwa Sons Investment Ltd. dated 26.08.2010 had held that where tax payable on income computed under normal provision is less than the tax payable under the deeming provisions of section 115JB of the Act, then the penalty u/s 271(1)(c) of the Act, 5 R.R. Oomerbhoy P. Ltd. could not be imposed with reference to additions/ disallowance made under normal provisions. It is further noted that department carried this matter to the Supreme Court by filing SLP and Honb’le Supreme Court dismissed the SLP of the department vide its order dated 04.05.2012. Thus, this issue attained finality. 7.1. In addition to that, with a view cut down the litigation, the Central Board of Direct Taxes also clarified this issue by way of its Circular No.25/2015 dated 31st December 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 1. levy of Minimum Alternate Tax on Companies, inserted by Finance Act 2000 with effect from 1-4-2001. Under clause (iii) of sub-section (1) of section 271 of 2. 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 interalia, 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. In this context, Hon'ble Delhi High Court in its 3. judgment dated 26.8.2010 in 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(1)(c) of the Act 6 R.R. Oomerbhoy P. Ltd. could not be imposed with reference to additions /disallowances made under normal provisions. The judgment has attained finality. Subsequently, the provisions of Explanation 4 to sub- 4. section (1) 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. Accordingly, in view of the Delhi High Court judgment 5. 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 (1)(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.
The above settled position is to be followed in respect of section 115JC of the Act also.
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.” 7.2. It is thus noted that the issue on law stands settled in favour of the assessee as on date. It is further noted by us that in any case, the addition made by the AO has been sustained 7 R.R. Oomerbhoy P. Ltd. by the Tribunal at Rs.5,00,000/- on adhoc basis. Under these circumstances, viewed from this angle also, it cannot be said that there was any concealment or furnishing of inaccurate particulars of the part of the assessee. Thus, viewed from any angle, the penalty has been wrongly levied and therefore same is directed to be deleted in toto.
In the result, the appeal filed by the assessee is allowed.
Order was pronounced in the open court at the conclusion of the hearing.