DCIT (LTU) 1, MUMBAI vs. POWERICA LTD, MUMBAI

This appeal by Revenue is directed against the order of the CIT(A)-24, Mumbai dated 31.10.2014 for A.Y. 2008-09 deleting the penalty of `33,33,992/- levied under section 271(1)(c) of the Income Tax Act, 1961 (in short 'the Act') by the Assessing Officer (AO). The penalty levied under section 271(1)(c) was in respect of the following additions made to the total income of the assessee while completing the order of assessment under section 143(3) of the Act dated 27.10.2010: - (i) Disallowance of deduction under section 10A `14,07,352/- `84,00,179/- (ii) Disallowance under section 43B ` 1,214 (iii) Disallowance under section 80IB The AO thus determined the assessee’s income under the normal provisions of the Act at `64,29,31,402/- as against the returned income of `61,29,00,410/-.

2. The appellant prays that the order of the learned CIT(A) on the above ground be set aside and that of the Assessing Officer restored.

3. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

3. At the outset it was brought to the notice of the Bench by the counsels of both sides that the CIT(A) has deleted the penalty levied under section 271(1)(c) of the Act on the ground that the income of the assessee has been taxed on income computed under section 115JB of the Act and therefore the said penalty could not be levied with respect to additions made under the normal provisions of the Act. This is factually incorrect. For the sake of clarity the decision of the CIT(A) while deleting the said penalty at para 4.3 of the impugned order is extracted hereunder: - “4.3 Decision: - I have considered the facts of the case and the submissions made by the assessee. Crux of assessee’s submission is that in view of Supreme Court decision in the case of Nalwa Sons Investment Limited (18564/2011 dated 4/5/2012/ Taxmann.com/184/Sc- 2010/194/ Taxmann.com/387/ Del), levy of penalty u/s. 271(1)(c) of I.T. Act, 1961 is not justified in respect of variations made in total income under the normal provisions of I.T. Act, 1961 when the total income and tax payable have been computed under section 115JB of I.T. Act, 1961. In view of the Supreme Court decision cited in the case of Nalwa Sons Investment Limited, it is held that levy of penalty under section 271(1)(c) of I.T. Act, 1961 in respect of variations made to total income under the normal provisions of I.T. Act, 1961 is not justified when the computation of total income and tax payable is made under section 115JB of I.T. Act, 1961. Comments have not been offered regarding the levy of penalty u/s. 271(1)(c) of I.T. Act, 1961 by the Assessing Officer in respect of variations made to total income under normal provisions of I.T. Act, 1961 in view of the facts of the case. However, the Assessing Officer may consider the applicability of section 271(1)(c) of I.T. Act, 1961 in respect of variations of Rs.2,84,43,817/- (125,46,471 - 122,62,53,654), made in the assessment order u/s. 143(3) of I.T. Act, 1961 dated 27/12/2010 partly because of the variations like disallowance u/s. 10A, 32, etc.

M/s. Powerica Ltd. made in the total income as per provisions of I.T. Act, 1961 and also because of the incorrect computation of book profits u/s. 115JB of I.T. Act, 1961 made by the assessee in the return of income filed on 21/09/2008 declaring book profits at Rs.122,62,53,654/- u/s. 115JB of I.T. Act, 1961. In nutshell, assessee’s appeal is allowed.” 3.1 It was brought to the notice of the Bench by both the learned A.R. for the assessee and learned D.R. that the learned CIT(A) in the decision cited above relied on the decision of the Hon'ble Apex Court in the case of Nalwa Sons Investment Limited (18564/2011 dated 4/5/2012) to hold that levy of penalty under section 271(1)(c) of the Act in respect of variations made to total income under the normal provisions of I.T. Act, 1961 is not justified when the computation of total income and tax payable was on book profit is computed under section 115JB of the Act. It is submitted before the Bench that this is factually erroneous since the assessee has been taxed under the normal provisions of the Act and not under MAT under section 115JB of the Act. In this regard the following details filed show that the assessee was taxed under the normal provisions of the Act as per the assessment order under section 143(3) and not under MAT provisions is extracted hereunder: -

As per ROI As per order 143(3) ST gain 5,189,998 5,189,998 Balance Income 607,710,410 637,741,404 Total Income 612,900,408 642,931,402

ST gain @10% 519,000 519,000 Balance Income 182,313,123 191,322,421 Tax under normal provision 182,832,123 191,841,421

Book Profit 1,226,253,564 1,254,697,471 MAT @10% 122,625,364 125,469,747 3.2 In this factual matrix of the case and after perusing the impugned order and the details filed and brought to our notice by the counsels of both sides, it is seen that the assessee was taxed under the normal provisions of the Act and not on the ‘book profits’ computed under section 115JB and therefore the finding rendered by the CIT(A) in the impugned order to delete the penalty levied under section 271(1)(c) of the Act was based on factually incorrect appreciation of facts. In this view of the matter, we set aside the M/s. Powerica Ltd. decision of the learned CIT(A) in deleting the penalty of `33,33,992/- levied under section 271(1)(c) of the Act and set aside the matter to the file of the CIT(A) with the direction to consider and adjudicate on the merits of the grounds of appeal preferred by the assessee before him in respect of the levy of penalty under section 271(1)(c) of the Act, after affording the assessee adequate opportunity of being heard and to file details and submissions required in the matter. We hold and direct accordingly.