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Income Tax Appellate Tribunal, DELHI BENCHES: D NEW DELHI
Before: SHRI J.SUDHAKAR REDDY, A.M. & SHRI C.M. GARG, J.M.
PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER This is an appeal filed by the Assessee directed against the order of the Ld.Commissioner of Income Tax-II, New Delhi dated 31.3.2006 pertaining to the Assessment Year (A.Y.) 2006-07, wherein the First Appellate Authority has confirmed the penalty levied against the assessee u/s 271(1)(C) of the Income Tax Act 1961 (the Act).
Facts in brief:- The assessee is in the business of manufacturing of single super phosphate (fertilizer) (SSP), and edible oil. It is having plants of SSP at Nimrani, Jhashi, Nimbhera and a plant of Soya Solvent Extraction plant/refinery at Ratlam. It has set up a captive power plant of 3.2 MW capacity at Nimrani (MP) for fertilizer unit.
2.1. A return of income was filed declaring income of Rs.1,70,33,500/- computed under the normal provisions of the Act. The income tax payable under normal provisions of the Act was Rs.57,33,476/-. However book profits of the assessee was computed at Rs.9,70,27,173/- and MAT tax payable was Rs.81,64,837/-. 2.2. The A.O. completed the assessment u/s 143(3) on 19.12.2008. Later the Ld.CIT-II, revised the order passed by the A.O. u/s 143(3) of the Act on 19.12.2008, by invoking his powers u/s 263 of the Act vide order dt. 28.3.2011. In the Section 263 order, the claim for deduction u/s 80 IA for SSP Plant was rejected by the Ld.CIT as incorrect. Later the AO issued a demand notice, wherein under the normal provisions of the Act tax payable was computed at Rs.70,35,859/- and whereas, the minimum alternate tax (MAT) payable on book profits, remained at Rs.81,64,837/-. In other words there is no change in the tax liability of the assessee for the current year as MAT was not disturbed. 2.3. Later the Ld.CIT-II, New Delhi vide his order dt. 26.8.2013, levied penalty u/s 271(1)(C) of the Act.
Aggrieved, the Assessee is in appeal before us on the following grounds . “1. The penalty order passed by the Ld.CIT is bad in law, wrong on facts and against the principles of natural justice. 2(a) The LdCIT has erred in levying penalty of Rs.13,02,382/- u/s 271(1)(c) of the Act @ 100% of income tax sought to be evaded without appreciating the fact that the appellant company has neither concealed its income nor furnished inaccurate particulars thereof and therefore penalty provisions u/s 271(1)(c) of the Act are not attracted. (b) The Ld.CIT has failed to appreciate that there was no concealment of income or furnishing inaccurate particulars of income and the claim u/s 80. IA was made under a bonafide belief and by relying on he auditor’s report u/s 44AB in Form 3CD as well as u/s 80. IA in form
10. CCB of the IT Rules, 1962 and duly allowed in original assessment proceedings.
(c) The Ld.CIT has failed to appreciate that even after disallowing deduction u/s 80 IA the tax payable u/s 115 JB which is more than tax payable under normal provisions and hence no penalty is leviable as held by Hon’ble Delhi High Court.”
We have heard Shri VK Jain, Ld.Counsel for the assessee and Ms.Sulekha Verma, Ld.CIT, D.R. on behalf of the Revenue.
On a careful consideration of the facts and circumstances of the case, perusal of material on record, orders of lower authorities, case laws cited, we hold as follows.
At the outset the Ld.Counsel for the assessee has argued ground no.2C and submitted that the issue is covered in favour of the assessee by the judgement of the Jurisdictional High Court in the case of CIT vs. M/s Nalwa Sons Investment Ltd. reported in 327 ITR 543 (Del) and Unison Hotels Ltd. Vs. DCIT in ITA 89/2013 dt. 10.10.2013. He submitted that the Hon’ble Allahabad High Court has also adjudicated the issue in favour of the assessee.
The Ld.CIT, D.R. on the other hand opposed the contentions of the assessee and submitted that the judgement of the Jurisdictional High Court in the case of CIT vs. Nalwa Sons Investment Ltd. does not apply to the facts of the case, for the reason that Explanation 4 to S.271(1)(c) of the Act was amended w.e.f. 1.4.2003 by the Finance Act, 2002, whereby in Sub Section a) the words ”exceeds the total income assessed” was substituted in the new section by “has the effect of reducing the loss declared in the return or converting the loss into income”. She argued that this change in language in the statute resulted in the proposition of law laid down by the Hon’ble Delhi High Court, in the case of M/s Nalwa Sons Investment Ltd.(supra) is no more good law.
7.1. She further submitted that this argument was never raised before the lower authorities and hence, the Tribunal should restore the matter back to the file of the Ld.CIT in case it wanted to admit this new ground.
After hearing rival contentions, we are of the considered opinion that, the issue in question is covered in favour of the assessee and against the Revenue by the judgement of the Hon’ble Delhi High Court in the case of Unison Hotels Ltd. (supra) wherein the judgment in the case of Nalwa Sons Investment Ltd. (supra) has been applied. This judgement was for the A.Y. 2005-06, and hence the argument that the amendment by Finance Act, 2002 w.e.f. 1.4.2003 changes the legal position, does not survive. Even otherwise, a plain reading of the amended provision do not support the arguments made by the Ld.D.R. 8.1. The Hon’ble Delhi High Court at para 7 of the judgement in the case of Unison Hotels Ltd. (supra) held as follows. “7. Ld.Counsel for the appellant has relied upon decision of the Supreme Court in Price Water House Coopers Pvt.Ltd. vs. CIT(2012) 348 ITR 306 (SC), but we need not examine the said aspect as the appellant is entitled to succeed in view of the decision of the Delhi High Court in CIT vs. Nalwa Sons Investments Ltd. (2010) 327 ITR 543 (Del) wherein it has been held that when taxable income is computed on book profits under section 115 JB and not under the normal provisions, Explanation (4) has to be accordingly applied. In view of the said Explanation, the additions made by the AO under the normal provisions are totally irrelevant. Thus, there cannot be imposition of penalty u/s 271(1)(c) of the Act for addition made under the normal provisions.” 8.2. Respectfully following the same we allow this appeal of the assessee.
In the result the appeal of the assessee is allowed. Order pronounced in the Open Court on 30th October, 2015.