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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Per B R Baskaran, AM: The appeal filed by the assessee is directed against the order dated 17.11.2005 passed by the ld. CIT(A), Central-I, Mumbai for the assessment year 2001-02 confirming the penalty of 29.10 cr. levied by the AO under section 271 (1)( c ) of the Act.
The ld. Counsel appearing for the assessee submitted that the assessee filed return of income declaring a taxable income of Rs.26.87 lakhs under normal provisions of Act and book profit of Rs.135.39 lakhs under the provisions of section 115JB of the Act. Accordingly, the assessee paid income tax under section 115JB of the Act. The AO
2 completed the assessment by determining the total income under the normal provisions of Act on Rs.55.92 cr.
In the appellate proceedings, the assessee got partial relief. However, the assessee also made additional claim for deduction of Rs.105 crores relating to the liability incurred for guarantee agreement. The said claim was ultimately allowed by the Tribunal, vide its order dated 30.9.2015 passed in ITA No.746/Mum/2005 (AY-2001-02). The ld.AR submitted that the total income of the assessee would result in negative figure on allowing the additional claim of Rs.1.05 crores. Accordingly, the ld. AR submitted that the total income is ultimately computed under section 115JB of the Act at Rs.135.39 lakhs.
The ld. AR submitted that the Hon’ble Delhi High Court in the case of CIT vs. Nalwa Sons Investments Ltd as reported in [2010] 327 ITR 543 {Del} has held that when the tax payable on the income payable under the normal provisions is less than the tax payable under the deeming provisions of section 115JB of the Act, then penalty u/s 271(1)(c) should not be imposed with reference to the above addition/disallowance made under the normal provisions. Accordingly, he submitted that the impugned penalty confirmed by the ld.CIT(A) is liable to be cancelled.
On the contrary, the ld. DR placed strong reliance on the order passed by the ld. CIT(A).
We heard the rival contentions of the parties and perused the record. We notice that the CBDT has recently issued a circular No.25/2015 dated 31.12.2015, wherein the CBDT has accepted the decision rendered by the Hon’ble Delhi High Court in the case of Nalwa Sons Investments Ltd
3 (supra). For the sake of convenience, we extract below the CBDT circular No.25/2015 dated 31.12.2015:
“CIRCULAR NO. 25/2015 F.No.279/Misc./140/2015/ITJ Government of India Ministry of Finance Central Board of Direct Taxes New Delhi, 31st December, 2015 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.
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(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. 4
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(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. (Ramanjit Kaur Sethi) DCIT (O ) (ITJ), CBDT, New Delhi”
It is well settled proposition that the circulars issued by the CBDT are binding on the Income Tax Authorities. For this proposition, one may gainfully refer to the decisions rendered by the Hon’ble Supreme Court in the case of Azadi Bachao Andolan (2003)(177 Taxation 775) and Pradip J
Since the CBDT has taken a conscious decision not to pursue penalty appeals in respect of the cases, wherein the income was assessed u/s 115JB of the Act by following the decision of Hon’ble Delhi High Court (referred above), we find merit in the contentions of the assessee. As submitted by the ld. AR after passing the Tribunal order dated 30.9.2015 (referred above), the total income is a negative figure under normal provisions of the Act. Hence the income declared by the assessee u/s 115JB of the Act shall remain total income of the assessee. In view of the 5 circular referred above, the penalty u/s 271(1)(c) is not leviable in respect of the additions made while computing the income under the normal provisions of Act. In view of the above, we set aside the order of ld. CIT(A) and direct the AO to delete the penalty levied under section 271(1)(c) for the year under consideration.
In the result, the appeal filed by the assessee is allowed.
Pronounced accordingly on 8th Jan, 2016. घोषणध खुरे न्मधमधरम भें ददनधंकः8th Jan.2016 को की गई । (AMARJIT SINGH) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER भुंफई Mumbai: 8th Jan, 2016. व.नन.स./ SRL , Sr. PS आदेश की प्रतिलऱपप अग्रेपिि/Copy of the Order forwarded to : अऩीरधथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A)- concerned 3. आमकय आमुक्त / CIT concerned 4. ववबधगीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई /
DR, ITAT, Mumbai concerned गधर्ा पधईर / Guard file. 6. आदेशधनुसधय/ BY ORDER,सहधमक ऩंजीकधय (Asstt.