JINDAL PADDING PRIVATE LIMITED,VILLAGE MANNPURA, TEHSIL NALAG vs. INCOME TAX OFFICER PARWANO, PARWANO

assessee is aggrieved by the order bearing No. ITBA/NFAC/S/250/2023-24/1059642201(1) dated 12.01.2024 passed by ld. CIT(A) which is hereinafter referred to as the “impugned order”, which is passed under Section 250 of the Act. The relevant assessment

ITA 100/CHD/2024 A.Y. 2010-11 2 year is 2010-11 and the corresponding previous year period is from 01.04.2009 to 31.03.2010. The ld. AO order dated 04.02.2022 had imposed penalty of Rs.12,36,000/- on the assessee under Section 271(1)(c) of the Act.

Factual Matrix

The net taxable income of the assessee was assessed at Rs.33,37,263/-. Accordingly, notice under Section 274 r.w.s. 271(1)(c) of the Act was issued on 23.09.2013 calling upon the assessee company to show cause and explain as to why penalty under Section 271(1)(c) of the Act should not be levied for furnishing inaccurate particulars of income. After hearing the assessee, the ld. AO levied minimum penalty of Rs.12,36,000/-. The order

ITA 100/CHD/2024 A.Y. 2010-11 3 under Section 271(1)(c) of the Act imposing penalty of Rs.12,36,000/- bearing No. ITBA/PNL/F/271(1)(c)/2021- 22/1039387330(1) is dated 04.02.2022. The assessee being aggrieved by the order imposing penalty prefers first appeal before CIT(A) in terms of Section 246A and the ld. CIT(A) by impugned order has sustained the order of ld. AO imposing the penalty.

“1. That the order passed under section 250 of the income tax act by the learned CIT (appeal) National Faceless Appeal Centre (NFAC) is against law and facts on file in as much as he was not justified to up hold the action of the learned officer for imposing penalty under section 271 (l)(c).

2. That the learned CIT appeal (NFAC) further gravely erred in upholding the action of the learned AO for initiation and further notice for penalty are not, as per law on the basis, that objection was not raised before AO. And Further, relying upon judgment, which is not relevant at all and ignoring many judgments cited.

3. That the learned CIT appeal (NFAC) further gravely erred in upholding the action of the learned AO in imposing penalty without considering the rectification order passed. The returned Income and assessed income remain the same as income is chargeable under section 115JB, even after the addition made and learned CIT appeal ignored the same and erred in confirming the penalty on the basis of Income original assessment order 4. That the learned CIT appeal (NFAC) further gravely erred in upholding the action of the learned AO in imposing penalty on the basis that once addition are confirmed it is case of concealment which is not as per judicial principal that penalty proceeding are independent proceedings and penalty is not automatic.

ITA 100/CHD/2024 A.Y. 2010-11 4 5. That the appellant craves leave to add delete or modify any ground of appeal and to add any new ground of appeal. Before the same is heard or disposed off .”

Both the parties were treated equally. The ld. AR for and on behalf of the assessee has placed on record a brief synopsis which is undated. A Paper Book from pages 1 to 48. Computation of income totaling three pages, a letter dated 09.01.2024 of ITO, Parwanoo under RTI Act, 2005. The ld. AR at the outset invited our kind attention to Notice dated 23.09.2013 which was issued to the assessee in terms of Section 274 read with Section 271(1)(c) of the Act (Page 15 of Paper Book) and interalia contended that in the said notice dated 23.10.2020 both the limbs of Section 271(1)(c) i.e., ‘Concealed the particulars of his income’ and furnished inaccurate particulars of such income’ have been made applicable.

Reliance was placed on following judgements to ITA 100/CHD/2024 A.Y. 2010-11 5 demonstrate that notice should explicity and expressly mention the charge out of two limbs. Invocation of both limbs in notice is bad in law :

1) Mohd. Farhan A Shaikh Vs DCIT Circle(1) Belgum 280 Taxman 334 (Karnataka HC) 2) CIT Bangalore Vs SSA’s Emerald Meadows 3) CIT Vs Manjunath Cotton & Ginning Factory 359 ITR 565 4) CIT Vs Samson Pernchery (2017) 98 CCH 39 (Bom) 5) PCIT Vs Neew Era sova Mine (2019) SCC Online Bom. 1032 6) PCIT Vs Ground of appeal Resorts & Recreation Pvt. Ltd. (2019) 106 CCH 0183 (Bombay) It was contended that ld. CIT(A) rejected the appeal of the assessee on the ground that this objection was not raised in the proceedings before AO which fact is incorrect as at page 21 of the Paper Book which is reply dated 08.11.2021 of the assessee to penalty notice, this objection was taken up.

3.2 It was next contended by the ld. AR that when there is no variation in the assessed income and the returned income no penalty can be imposed. The ld. CIT(A) in the impugned order has failed to consider the ITA 100/CHD/2024 A.Y. 2010-11 6 rectification order passed in terms of Section 154 of the Act. That the taxable income is Rs.11,11,014/- under Section 115JB as per return of income as well as assessed income. Reliance was placed on judgement of Hon'ble Punjab & Haryana High Court in case of CIT Vs Vardhman Acrylic Ltd., Ludhiana of 2013 (O&M) dated 04.08.2014.

3.3 The ld. AR lastly contended that addition has been made under Section 68 without any inquiry. It is made on basis of Investigation Report. When all the relevant documents were filed, no penalty is imposable just on basis of addition in assessment. Addition has been made on basis of DDI Investigation Report and that there is nothing on record that it was assessee's money, hence penalty be deleted. Reliance was placed on order of this Tribunal in case of Dy. CIT-V Vs M/s Sangrur Industrial Corporation decision in dated 18.06.2018 reported in 2018ITL 2648.

3.4 Per contra, the ld. DR has placed reliance on both the orders of ld. AO and CIT(A) and has adopted same

ITA 100/CHD/2024 A.Y. 2010-11 7 reasoning before us as contained in said order. He finally submitted that impugned order is not liable to be set aside.

5. The issue relating to levy of penalty under Section 271(l)(c) of the Act where tax was paid on the basis of book profits determined under Section 115JB of the Act was considered by the Delhi High Court in CIT vs. Nalwa Sons Investments Limited, (2010) 327 ITR 543. It was held that where the book profits were determined under section 115JB of the Act any amount of expenses claimed would not render the assessee liable to penalty under section 271(1) (c) of the Act on account of false claim of expenses. The relevant observations of the Delhi High Court read thus:- "The question, however, in the present case, would be, as to whether furnishing of such wrong particulars had any effect on the amount of tax sought to be evaded. Under the scheme of the Act, the total income of the assessee is first computed under the normal provisions of the Act and tax payable on such total income is compared with the prescribed percentage

ITA 100/CHD/2024 A.Y. 2010-11 8 of the "book profits" computed under section 115JB of the Act. The higher of the two amounts is regarded as total income and tax is payable with reference to such total income. If the tax payable under the normal provisions is higher, such amount is the total income of the assessee, otherwise, "book profits" are deemed as the total income of the appellant in terms of section 115JB of the Act."

It was also recorded:- "No doubt, there was concealment but that had its repercussions only when the assessment was done under the normal procedure. The assessment as per the normal procedure was, however, not acted upon. On the contrary, it is the deemed income assessed under section 115JB of the Act which has become the basis of assessment as it was higher of the two. Tax is thus paid on the income assessed under section 115JB of the Act. Hence when the computation was made under section 115JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, the concealment did not lead to tax evasion at all."

We are fully in agreement with the view expressed in the aforesaid pronouncement. The Tribunal placing reliance on judgment of Delhi High Court in Nulwa 6. Sons Investments Limited's case (supra) noticed as under:- "7. We have heard the rival submissions carefully and find that Hon'ble Delhi High Court has clearly held that once the income is assessed under MAT provisions then there cannot be any concealment and penalty cannot be levied under section 271(1) (c) of the Act. The observation of the Hon'ble Delhi High Court is as under:- 'Under the scheme of the Income Tax Act, 1961, the total income of the assessee is first computed under the normal provisions of the Act and tax payable on such total income is computed with the prescribed percentage of the book profits computed under section 115JB of the Act. The higher of the two amounts is regarded as total income and tax is payable with reference to such total income. If the tax payable under the normal provisions is higher, such amount is the total income of the assessee, otherwise the book profits are deemed as the total income of the assessee in terms of section 115JB of the Act. Where the income computed in accordance with the normal procedure is less than the income determined by legal fiction namely, the book profits under section 115JB of the Act and the income of the assessee is assessed under section 115JB and not under the normal provisions, the tax is paid on the income assessed under section 115JB of the Act. Concealment of income would have no role to play and would not lead to tax evasion. Therefore, penalty cannot be imposed on the basis of disallowance or additions made under the regular provisions.' We further find that the decision of Hon'ble Delhi High Court in CIT vs. Zoom Communication P.Limited (supra) is totally distinguishable because the penalty was ITA 100/CHD/2024 A.Y. 2010-11 9 deleted by the Tribunal by holding that there was no concealment. However Hon'ble High Court reversed that decision. This decision is distinguishable because in case of CIT v Nalwa Sons Investment Limited (supra) penalty has been deleted by holding that no concealment can be inferred where income has been assessed under section 115JB of the Act. Accordingly, following the decision of Hon'ble Delhi High Court in CIT v Nalwa Sons Investments Ltd. (supra), we hold that the learned CIT(A) has correctly deleted the penalty." ORDER

Order pronounced on 23.12.2024.