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Before: SHRI AMIT SHUKLA & SHRI ASHWANI TANEJA (ACOUNTANT MEMBER)
O R D E R Per ASHWANI TANEJA, AM
This appeal has been filed by the assessee against the order of Commissioner of Income-tax (Appeals) [hereinafter called ld.CIT(A)”] dt 30-04- 2013 passed against the penalty order u/s 271(1)(c) dated 30th April, 2013 for A.Y. 2008-09 on the following grounds:
“1. The Ld. CIT (A) erred in law and facts in upholding penalty on addition of Rs. 1,01,39,4901- u/s 271 (1 )(c) of the Act. The reasons given by him for doing so are wrong, contrary to the facts of the case and against the provisions of law.
2. The Ld. CIT (A) erred in law and facts in upholding penalty u/s 271 (1 )(c) of the Act solely on the basis of additions made in the asst. order without discharging the onus of proving concealment of income or furnishing inaccurate particulars of income by the assessee
3. The Ld. CIT (A) erred in law and facts in upholding penalty d/s 271 (1 )(c) on the addition made in the assessment order in respect of adjustment to ALP of international transactions, even though such addition is made due to difference of opinion between different authorities and I or assessee hence such addition does not attracts penalty.
4. The above grounds / sub-grounds are without prejudice to each other.”
2. During the course of hearing it was submitted by the ld.counsel that in this case assessee had filed its return declaring Nil income after setting off brought forward unabsorbed deprecation / losses, but the book profit was computed u/s 115JB at Rs.11,85,71,056 and tax was paid in the return on this amount. It was further submitted that even after making addition / disallowances in the assessment order, the income of the assessee was assessed on the book profit only. It was thus submitted that in this case, there was no evasion of tax and thus it cannot be said that there was any tax sought to be evaded and therefore, it was not a fit case for levy of penalty. In support of his arguments, he relied upon the judgment of Hon’ble Delhi High Court in the case of CIT vs Nalwa Sons Investments Ltd 327 ITR 543 (Del). He also relied upon the circular of the CBDT No.25 of 2015 dt 21-12-2025 wherein it has been provided by the Board that amendment made by Finance Act, 2015 vide Explanation 4 to sub section (1) of section 271 of the Act has been brought on the statute to tackle such situations, but this Explanation shall be applicable prospectively i.e. wef 01-04-2016.
Per contra, the ld.DR relied upon the orders of the lower authorities. In response to the query of the bench with respect to circular relied upon by the ld.counsel, the ld.DR had no comments to be made to distinguish its applicability or otherwise.
4. We have gone though the orders of lower authorities and copies of judgment and circular placed before us. The admitted facts in this case are that income of the assessee has been accepted at book profit only. No adjustment has been made in the book profit. The assessee has contended that under these facts and circumstances there is no evasion of tax and, therefore, as per section 271(1)(c), no tax has been sought to be evaded and since no tax has been evaded, there cannot be any penalty upon the assessee. It is noted by us that CBDT has clarified this situation by way of its aforesaid circular. We find it appropriate to reproduce relevant part of the circular below: “C CIRCULAR NO. 25/2015, DATED: 31-12-2015 31/12/2015 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.
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.
3. In this context, Hon'ble Delhi High ,Court in its judgment dated 26.8.2010 in of 2009 in the case of Nalwa Sons Investment Ltd. = 2010-TIOL-890-HC-DEL-IT 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 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-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.
5. Accordingly, in view of the Delhi High Court judgement 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.
6. 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.
F.No.279jMisc./140/2015j/ITJ Sd/- (Ramanjit Kaur Sethi) DCIT (OSD)(IJT) Cbdt New Delhi”
A perusal of the circular clearly shows that the circular has been brought in by the legislature to nullify the effect of judgment of Hon’ble Delhi High Court in the case of Nalwa Sons Investments Ltd (supra) in which it was held that where assessment was made on an income computed u/s 115JB and tax had been paid on the income so computed, disallowances / additions made in the assessment order would not lead to tax evasion, and therefore, no penalty can be imposed in such circumstances, on the assessee. It has been clearly provided in the circular that though an Explanation 4 has been added in section 271(1)(c) of the Act to tackle all such situations and to enable the Assessing Officer to compute the amount of tax sought to be evaded where the income is determined u/s 115JB, but it has been clearly provided that this amendment need not be made applicable in the case prior to 01-04-2016. In these circumstances, we find that the law laid down by Hon’ble Delhi High Court in the case of Nalwa Sons Investments Ltd would be applicable and, therefore, it is held that penalty could not have been levied in this case and, therefore, the same is directed to be deleted. The appeal filed by the assessee is allowed on this ground.
We are not going into the other legal issues raised by the assessee as the penalty has been deleted on the preliminary issue itself.
7. As a result, appeal is partly allowed. Order pronounced in the court on this 15th day of June, 2016. Sd/- sd/- (AMIT SHUKLA) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dt : 15th June, 2016 Pk/- Copy to : 1. The appellant 2. The respondent 3. The CIT(A) 4. The CIT 5. The Ld. Departmental Representative for the Revenue, G-Bench (True copy) By order