MEHTA SULFITES (I) LTD,MUMBAI vs. ACIT 10(2), MUMBAI

PER RAJESH KUMAR, A. M: This appeal by the assessee is directed against the order dated 08-04-2013 of Commissioner of Income Tax (Appeals)22 , Mumbai (Hereinafter called as the CIT(A) ) for assessment year 1999-2000. The assessee has raised the following grounds of appeal as per form 35 and also additional ground as per application filed on 26.10.2015:

Additional Ground: On the facts and in the circumstances of the case and in law, the learned A.O. erred in levying a penalty of Rs.11,03,657/- u/s 271(1)(c) of the act and the learned C.I.T.(A) erred in confirming the same although the tax effect is nil as the final tax has been computed as per the provisions of section 115JB of the act and the disallowances made in the normal computation do not have effect on the tax liability.

4 The facts of the case are that the tribunal set aside the original assessment framed u/s 144 vide order dated 28/02/2002 by directing the AO to make the assessment afresh by admitting the additional evidence after giving fresh opportunity to the Assessee. Assessment was framed by AO u/s 143(3) r.w.s. 250 of the Act vide order dated 24/12/2009. Income under the normal provisions of the Act was computed at a loss of Rs.34,04,686/- by making interalia various disallowances while making the assessment on the book profits u/s 115JB of the Act. The quantum appeal was also dismissed by CIT(A). The ld.AO levied the penalty of Rs.11,03,657 u/s 271(1)(c) of the Act on the ground that various disallowances made by him in the assessment order were upheld by CIT(A) and thus the assessee had furnished inaccurate particulars of income. The ld. CIT(A) dismissed the appeal by confirming the penalty imposed by the AO by holding that the additions made in the quantum order were confirmed vide order dated 16.07.2010 and the explanation offered by the appellant had not been accepted as it was covered by 1(B) of the u/s 271(1)(c) which specifically says that if the explanation offered by the assessee is not substantiated by the assessee, penalty is imposable.

The ld. AR vehemently submitted that penalty u/s271(1)(c) cannot be imposed if the income of the assessee is brought to tax under the provisions of 115 JB of the Act and tax was charged on book profits pursuant to these provisions and the disallowances made by the AO under the normal provisions of the act did not have any effect on tax liability by the assessee. The ld.Counsel relied on the decision of Delhi High Court in the case of CIT(A) vs. M/s Nalwa Sons Investment Ltd. 327 ITR 543 and the decision of Gujrat High Court in the case CIT(A) Vs City Tiles Ltd. 370 ITR 127. Ld. Counsel further submitted that SLP filed by the department in the case of M/s Nalwa Sons Investment Ltd. stands dismissed on 04/05/2012 . ld. DR , on the other hand, relied on the orders authorities below.

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We have heard the rival submission and perused the matter on record. We note that the assessment in the case of assessee was framed u/s 143(3) rws 250 of the act wide order dated 24/12/2009 wherein the income of the assessee was assessed at 30% of the book profits in terms of the provision of section 115JB of the Act while simultaneously make various additions to the profit as per profit and loss account under normal provisions of the Act thereby working out the loss as per normal provisions of the act at Rs.34,04,686/- We however, note that the quantum appeal was dismissed by CIT(A) confirming the made by the ld AO. Also the appeal against the penalty order was dismissed on the ground that assessee filed inaccurate particulars of income qua the additions made in the the assessment order. The appellant had been assessed u/s115JB Act and the various disallowances made in the assessemt order did not have any impact on the tax liability of the assessee. In other words the income computed under the normal provisions of the act is less than the book profits of the assessee. Under these circumstances, we are of the considered opinion that the penalty u/s271(1)(c) of the act cannot be levied . The case of the assessee is fortified by the decision of the Delhi High Court v/s Nalwa Sons Ltd. Supra)wherein the income was computed in accordance with normal procedure is less than the income determined special provisions u/s 115JB of the Act and thus the income of the assessee was assessed u/s 115JB and not under the normal provisions and the tax was paid accordingly on the income as computed u/s 115JB of the Act.

Once the tax is levied on the income of the assessee u/s 115JB of the Act , then the case the concealed of income have no role to play and would not lead to tax evasion and therefore, penalty cannot be imposed on the basis of disallowances or additions made under regular provisions. Further in the case of CIT v/s City Tiles (Supra), the Hon’ble Gujrat High Court has held that where the addition to the income of the assessee did not change the tax liability of the assessee as the assessment was made u/s115JB of the book profits penalty could not be imposed. The facts of the assessee are squarely covered by the above decisions and we therefore, respectfully following the decisions of the High Court , we delete the penalty imposed u/s 271(1)(C) by allowing the appeal of the assessee.

In the result, the assessee’s appeal is allowed.

प"रणामतः "नधा"रती "वीकृत क" जाती है । Order pronounced in the open court on 20th Nov, 2015 (Joginder Singh ) (Rajesh Kumar) "या"यक सद"य / Judicial Member लेखा सद"य / Accountant Member मुंबई Mumbai; "दनांक Dated : 20.11.2015 Ashwini Gajakosh आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant

उप/सहायक पंजीकार (Dy./Asstt.