Deputy Commissioner of Income tax, Circle 2(1), JABALPUR V. Madhya Pradesh Power Generating Co. Ltd., JABALPUR

ITA 251/JAB/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6270 (ITAT-JABALPUR)
• Duration Of Justice: 3 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 06-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india
• Section: 147; 271(1)(c); 143(3); 115JB; 195; 251; 119

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR (through web-based video conferencing platform) BEFORE SHRI SANJAY ARORA, HON’BLE ACCOUNTANT MEMBER & SHRI MANOMOHAN DAS, HON'BLE JUDICIAL MEMBER I.T.A. No. 251/JAB/2018 (Asst. Year: 2008-09) Assessee by : Shri Rahul Bardia, CA. Department by : Shri S.K. Halder, DR Date of hearing : 23/02/2022 Date of pronouncement : 23/03/2022 O R D E R Per Sanjay Arora, AM: This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-1, Jabalpur ('CIT(A)' for short) dated 12.09.2018, partly allowing the assessee's appeal disputing the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 ('the Act' hereinafter) for Assessment Year (AY) 2008-09 vide order dated 12.09.2016. 2.1 The facts of the case, to the extent relevant, are that the assessee, a Government company in the business of power generation, filed its' return of income for the relevant year on 29/9/2009 at an income of (-) Rs..3,44,98,070 (under normal provisions of the Act) and at Rs. 8,17,28,568 (u/s. 115-JB), Dy. CIT, Circle-2(1), Jabalpur. vs. Madhya Pradesh Power Generating Co. Ltd., Block No.09, Shakti Bhavan, Vidyut Nagar, Rampur, Jabalpur. PAN : AADCM 4472 A (Appellant) (Respondent) ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 2 paying tax (including interest Rs.9.98 lacs) at Rs.102.50 lacs on the latter income, at which income the same was assessed u/s. 143(3) on 16.12.2010. Subsequently, it was observed that prior period income of Rs. 6636.02 lacs, credited to the profit and loss account and duly returned as income for the year, was at net of prior period expenditure for Rs.238.29 lacs, which was accordingly disallowed, assessing the income (under the regular provisions) at (-) Rs.1,06,68,638 vide order u/s. 147 r/w s. 143(3) dated 21.3.2016. The same was further modified u/s.154 (on 11.01.2017) to bring on record the income under Minimum Alternate Tax (MAT) regime at Rs. 817.29 lacs, which income had remained unchanged. The said reassessment and modification were not challenged in appeal', attaining finality. 2.2 In the penalty proceedings, initiated on 21.3.2016, the assessee's explanation (dated 24.8.2016/PB pg. 93) of it being a Government company, which cannot, therefore, be attributed with the intent of concealing income, and that it had in fact incurred a loss for the• relevant year, was not found satisfactory by the Assessing Officer (AO). He, accordingly, levied penalty u/s. 271(1)(c) on the sum of Rs.2,38,29,432 assessed on 21.3.2016 at the minimum rate (100%) of the tax thereon, i.e., Rs.71,48,830. In appeal, the same was deleted by the ld. CIT(A), holding as: '6.2.5 I have examined the facts of the case and have considered the submission' of the appellant including citation in support of its claim. I find that the AO has not appreciated the entire facts of the case in right perspective before levying the penalty u/s 271(1)(c). The AO in the penalty order has stated that the netting of prior period expenditure of Rs.2,38,29,432/-with prior period income of Rs.68,74,31,814/- was not in order. The AO accepted the prior period income of Rs.68,74,31,814/- however rejected expenses of Rs.2,38,29,432/- which is not correct. After considering the entire facts and circumstances of the case, I am of the opinion that the AO is not justified in levying penalty of Rs.71,48,830/- as all the information has been reflected in the audit report and the appellant has not concealed any particulars of its income. The penalty levied at Rs.71,48,830/- u/s 271(1)(c) is directed to be deleted.' ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 3 3. The respective cases Before us, the assessee's case, as before the first appellate authority, was that there has been no furnishing of inaccurate particulars; the details of prior period expenses having been duly disclosed in the final accounts. It was not open for the AO to, while bringing the prior period income to tax, reject the claim for prior period expenditure, which is in fact being, as in the past, accounted for on accrual basis in accordance with the system of accounting regularly followed, whereat no such adjustment was made in assessment. Mere unsustainability of the claim would in any case not attract penalty (CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC)). Without prejudice, the tax has been paid on the basis of 'book-profit', deemed as income under the MAT provisions. The reassessment dated 21/3/2016, thus, had no tax impact inasmuch as the tax payable was only consequent to the deemed total income u/s. 115-JB. No penalty, even as explained in CIT v. Nalwa Sons Investment Ltd. [2010] 327 ITR 543 (Del), is leviable u/s. 271(1)(c) under such circumstances. Special Leave Petition (SLP) against the said decision has been dismissed (in SLP (C) No.18564 of 2011, dated 04.5.2012), so that the same has attained finality. Further-more, the Revenue, accepting the legal position, has issued a Circular (No. 25/2015, dated 3.12.2015/copy on record), stating so, and with reference to the amendment to Explanation 4 to section 271(1)(c) — which defines the term ‘the amount of tax sought to be evaded’ occurring in section 271(1)(c), by Finance Act, 2016, w.e.f. 01.04 2016, whereby the tax assessed under MAT provisions is also sought to be provided for the purpose of reckoning tax sought to be evaded, clarified that prior to 01.4.2016 no appeal be filed or pressed in such cases. 4. We have heard the parties, and perused the material on record. 4.1 The relevant part of the Board Circular 25/2015 reads as under: ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 4 '3. 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. 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. 4. 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 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. 6. The above settled position is to be followed in respect of section 115JC of the Act also. 7. 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.' [ We consider the matter as covered by the Board Circular (supra) (copy on record), read out during hearing. This is as no exception having been drawn therein in its respect, the lower tax under the normal provisions of the Act (i.e., vis-a-vis the tax on the book-profit) would also include a case of no tax thereunder, as where the income assessed under the regular provisions is a loss, even as was the case in Nalwa Sons Investment Ltd. (supra). The same being a benevolent Circular, is binding on the income tax authorities u/s. 119 of the Act and, accordingly, the Revenue ought to have been fair enough not to have filed an appeal or, having filed it, not pressed the same, i.e., as directed vide para 7 of the Circular (Navnit Lal C. Javeri v. Appellate Asst. CIT [1956] 56 ITR 198 ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 5 (SC)). In fact, even on an earlier occasion, Shri Bardia, the learned counsel for the assessee, relying on the decision in Nalwa Sons Investment Ltd. (supra), the Bench had inquired if any SLP had been admitted against it, and if so, its status, inasmuch as dismissal of the SLP by a speaking order would imply a confirmation of the decision relied upon, while, on the contrary, its admission would suggest that the same cannot be relied upon (Kunhayammed & Ors. vs. State of Kerala [2000] 245 ITR 360 (SC)). Though the order dismissing the SLP (not quoted in the Board Circular), was not filed by Sh. Bardia, to practically the same effect is the acceptance by the Revenue of the decision in Nalwa Sons Investment Ltd. (supra) as final, issuing instructions to its' officers not to file or press an appeal for period prior to 01.04.2016, i.e., the date from which the substituted Explanation 4 (by Finance Act, 2015) comes into effect prospectively. This would imply AY 2016-17 onwards, or the previous year commencing 01.4.2015 (refer para 4 of the Circular). This is as with effect from the said, latter date, the substituted Explanation 4, which clarifies the issue in the matter, becomes operative. 4.2 It is well-settled that the law applicable for the levy of penalty u/s. 271(1)(c) is that as obtaining on the date of filing the original return, being 29.9.2009 in the instant case (Onkar Saran & Sons v. CIT [1992] 195 ITR 1 (SC); ITO v. Mewalal Dwarka Prasad [1989] 176 ITR 529 (SC)), so that the issue of maintainability of penalty would be governed by the substituted Explanation 4, interpretation of which, considering the acceptance by the Revenue of the view expressed in Nalwa Sons Investment Ltd. (supra) and, in fact, instructing its' officers accordingly, which is binding thereon u/s. 119(2)(a), gets resolved as per the said view. Needless to add, no submissions were made by the ld. Sr. DR, Sh. Halder, on this aspect of the assessee's case, argued without prejudice (refer para 3). ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 6 4.3 We may, before parting, however, if only for the sake of completeness of our order, record our view on the merits of the case, also argued before us. Section 271(1)(c) in its relevant part, reads as under: 271. Failure to furnish returns, comply with notices, concealment of income, etc. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person— (a) (omitted) (b) has failed to comply with a notice Under 'sub-section (2) of section 115WD or under sub-section (2) of section 115WE or under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142; or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits, he may direct that such person shall pay by way of penalty,— (i) (omitted) (ii) ........; (iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits. Explanation 1.—Where in respect of any facts material to the computation of the total income of any person under this Act,— (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub- ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 7 section, be deemed to represent the income in respect of which particulars have been concealed. (emphasis, ours) Explanation 1 to section 271(1)(c) deems concealment of particulars of income where the conditions set out in clause (A) or clause (B) of the said Explanation 1 are not met. The assessee stating of prior period expenses being not liable to be disallowed inasmuch as prior period income had been assessed for the current year, overlooks the fact that the expenditure can be allowed only in the computation of income for a particular previous year, so that expenditure relating to a preceding year/s gets ousted for being allowed at the threshold. That income, in the computation of which the expenditure is to be allowed, is to be subject to tax in the hands of the right person and for the right year, is trite law (ss. 3 to 5) and, rather, it being assessed in the hands of another, or in the hands of the right person but for another year, is no ground for it being not taxed in the hands of the right person or the right year (CIT v. British Paints India Ltd. [1991] 144 ITR 88 (SC)). The assessment of income, on the other hand, is governed by section 5, so that where the assessee chooses to return it for the current year, on receipt basis, as in the present case, the AO may not insist on it being assessed for the year to which it actually relates, i.e., on accrual basis. There could also be an issue as to the realizability of income; 'prudence' being a fundamental accounting assumption. Sure, strictly speaking, the same would not in that case qualify as a 'prior period adjustment' in accounts, inasmuch as application of AS is mandatory, but we are only highlighting a possibility and, more important, to a basic difference between accounting of income and expenditure, marked by 'prudence' and 'conservatism' respectively. In fact, assessing the income for the current year works to, in most cases, the assessee's benefit inasmuch as tax incidence for a preceding year would be accompanied by interest liability as well. The two, i.e., accrual of income and expenditure, therefore, cannot always be equated. Of course, it would be a different matter where the expenditure under reference is in respect ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 8 of the very same income being offered for assessment for the current year, which is not the case here. In fine, it would not be correct to equate the two, and which forms the basis of the relief allowed by the ld. CIT(A). 4.4 It is then said that the relevant expenditure was 'approved' during the relevant year and, thus, is the expenditure for the current year. No such contention, which is in fact contrary to the admitted position per its' audited accounts — which cannot be dismissed without a firm basis inasmuch as they bear the opinion of the Auditor, an independent expert, was raised in the assessment or the penalty proceedings, while that before the ld. CIT(A), whereat it was so contended for the first time, is not substantiated. The default is, in that sense, admitted, precluding contesting the penalty, as explained by the Hon'ble jurisdictional High Court in S.S. Ratanchand Bholanath v. CIT [1994] 210 ITR 682 (MP). Further, where the expenditure is in terms of the relevant contract, its non-approval, being a matter internal to the assessee, may not be of any consequence for determining the accrual of the said expenditure. Further, even so, in case of a doubt or dispute, of which there is no whisper, a provision for expenditure, on the basis of the information available as at the date of the closure of accounts, i.e., as to the conditions as at the end of the relevant year, is to be made under the mercantile system of accounting, which the assessee is admittedly following. The booking of expenditure, adjusting the provision made, would be made in accounts on the resolution of the conflict. The assessee's case is sans any factual basis. That being the case, i.e., as to the facts and law, even an allowance of the prior period expenses for the preceding years may not be of much consequence, as it does not alter the settled law, only on the basis of which an assessment is to be made and, besides, on facts, the assessee may have been able to prove the facts for those years, while for the current year, as afore-stated, there is no case made out at any stage. ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 9 4.5 Thirdly, as we observe, the assessee has in fact suo motu disallowed prior period expenditure for AY 2007-08 (PB pgs.39-42), while the position is not clear for AY 2009-10 (PB pgs. 43-46); the AO having (as for AY 2007-08) accepted the assessee's computation, stating so in the assessment order, albeit without mentioning the computation details in the body of the order, as is the case for AY 2007-08. The assessee's contention of the Revenue acting inconsistent for the current year is thus incorrect; rather, it is it, the assessee, who is doing so. 4.6 As regards the reliance on Reliance Petroproducts (supra), the same does not, and neither it is claimed, alter the settled law, i.e., with reference to Explanation 1 to section 271(1)(c). The said Explanation 1 is to be read along with the main section, even if not specifically mentioned in the show cause notice, and not de hors the same. The case law in the matter is legion (viz. Mak Data (P.) Ltd. vs. CIT [2013] 358 ITR 593 (SC); Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277 (SC); K.P. Madhusudhanan vs. CIT [2001] 251 ITR 99 (SC); B.A. Balasubramaniam & Bros. v. CIT [1999] 236 ITR 977 (SC); Addl. CIT vs. Jeevan Lal Shah [1994] 205 ITR 244 (SC); CIT vs. K.R. Sadayappan [1990] 185 ITR 49 (SC)), so that the law in its respect, succinctly stated, is that a plausible explanation, supported by facts, saves penalty. Rather, inasmuch as implicit therein is the concept of 'reasonable cause', penalty u/s. 271(1)(c) does not find mention in s. 273B, stipulating, in respect of the penalty provisions specified therein, non-levy of penalty where the default under reference is proved as on account of a reasonable cause. A debatable issue, therefore, cannot lead to penalty, which forms the basis of the Hon'ble Court stating that mere unsustainability of a claim would not attract penalty. The cited decision is to be read and understood in the context and backdrop of the facts of the case. The claim under reference was for interest expenditure u/s. 36(1)(iii) for AY 2001-02, which was found as ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 10 liable to be disallowed u/s. 14A, inserted only by Finance Act, 2001. The borrowed capital had been invested by the assessee in shares, stated to be purchased as a matter of business policy as an investment company, which had not yielded any dividend income for the relevant year. The claim, though confirmed for disallowance by the Tribunal, had been allowed by it for AY 2000-01, and admitted in appeal by the High Court for the current year. It was under these facts and circumstances that the Hon'ble Court held that penalty would not follow only because the claim was not sustainable in law, with no details of the expenditure claimed being stated inaccurately. If not so read or understood, it would mean that one could claim any, including admittedly impermissible expenditure, as (say) personal expenditure (not being a contractual obligation incurred for business purposes), as a deductible business expense, and no penalty would arise where the particulars of the personal expenditure claimed, viz. 'marriage expenses', are truthfully reported in the financial accounts, rubbishing the settled law in the matter, and making travesty of all law, reason and justice. Any non-admissible claim, as long as it is stated as such in the return, could be claimed with impunity, and would, for the reason of it being stated correctly, attract no penalty. The said decision must thus necessarily receive a balanced and reasonable interpretation in light of the facts of the case and the settled law afore-referred. The test of Explanation 1 to the provision, thus, becomes instrumental in deciding if the adjustment to the returned income in assessment would attract penalty or not, and which covers cases of both concealment of, as well as furnishing inaccurate, particulars of income, which signify acts of omission and commission respectively. Why, the penalty was in fact confirmed on facts in Nalwa Sons Investment Ltd. (supra), the decision — rendered post Reliance Petroproducts (supra), being relied upon before us by the assessee, in view of the assessee-respondent being unable to substantiate its' case with facts, i.e., failing the test of Explanation 1, and was ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 11 allowed relief by the Hon'ble Court on the basis of Explanation 4. In the facts of the instant case, the assessee has in the past suo motu disallowed prior period expenses. Further, the findings in the assessment proceedings, though not binding inasmuch as penalty proceedings are separate and distinct proceedings, are yet extremely relevant for penalty proceedings, and more so where admitted, and toward which we have cited the decision in S.S. Ratanchand Bholanath (supra). 4.7 The assessee's case is wholly unproved on facts and against the settled law. 4.8 We may finally also consider the assessee's without prejudice case, which involves interpretation of Explanation 4 to s. 271(1)(c) of the Act. The same, as it stood prior to its amendment by Finance Act, 2015, reads as under: 271. Failure to furnish returns, comply with notices, concealment of income, etc. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person— (a) .. (b) (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) .... he may direct that such person shall pay by way of penalty,— (i) (omitted) (ii) ......; (iii) in the cases referred-to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits. Explanation I to 3 Explanation 4.—For the purpose of clause (iii) of this sub-section, the expression "the amount of tax sought to be evaded,— ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 12 (a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income; (b) in any case to which Explanation 3 applies, means the tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148; (c) in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished.' (emphasis, supplied) A bare reading of sec. 271(1)(c) along with sec. 271(1)(iii) makes it abundantly clear that the words 'such income' in the latter provision refers to the income, particulars in respect of which income have been concealed or furnished inaccurate, i.e., as specified in the former provision, so that penalty is to be levied only in respect thereof, also referred to herein as 'relevant income', to be determined, save in cases directly covered by other Explanations, on the anvil of Explanation 1. Explanation 4 defines the expression 'the amount of tax sought to be evaded', with reference to which, at a percentage, in the range specified, penalty is to be levied. Clause (a) is applicable in the instant case inasmuch as against a returned income of (-) Rs. 344.98 lacs, it has been finally assessed at (-) Rs. 106.69 lacs vide assessment dated 21/3/2016. The penalty, thus, as per the substituted Explanation 4, which would apply, is the tax chargeable on the said increase in income (by way of reduction in loss), being the prior period expenditure disallowed, i.e., Rs. 238.29 lacs. Where and what, one may ask, is the ambiguity, either on facts or in law? The Apex Court in CIT v. Gold Coin Health Foods (P.) Ltd. [2008] 304 ITR 308 (SC), a decision by its' larger bench, reversed the decision by the ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 13 Hon'ble Gujarat High Court wherein it was held that penalty u/s. 271(1)(c) was, in view of Explanation 4 to the section as it stood prior to its amendment by Finance Act, 2002 (w.e.f. 01.4.2003), not attracted where the income returned and assessed is in the negative. The Apex Court, in further appeal by the Revenue, which was admitted despite the decision in Virtual Soft Systems Ltd. v. CIT [2007] 289 ITR 83 (SC) being against it, overruling the said decision, clarified that Expl. 4 provided for the levy of penalty even where no tax is payable. The amendment thereto by Finance Act, 2002 was clarificatory in nature, so that penalty under section 271(1)(c) would get attracted in such a case even prior to 1.4.2003. Explanation 4(a), it explained, was inserted on the statute-book with effect from 01.4.1976, accepting the recommendations of the Wanchoo Committee report, adverting to para 2.74 thereof (at pg. 313). With reference to the said provision; the Notes on Clauses; the Board Circular 204 dated 24/7/1976 (reported at [1977] 110 ITR(St.) 21, 48), reproducing the relevant part thereof (at pgs. 313-314), it clarified that the same was only with a view to provide for penalty where the returned loss was reduced, even getting converted thereby into a positive income, so that in either case penalty was to be reckoned with reference to the amount of tax chargeable on the income, particulars in respect of which had been concealed or inaccurately furnished, as if it was the 'total income', giving thus a specific meaning and value to the said term. We may reproduce the relevant part thereof as under: (pg. 314) '10. A combined reading of the Committee's recommendations and the Circular makes the position clear that Expln. 4(a) to s. 271(1)(c) intended to levy the penalty not only in a case where after addition of concealed income, a loss returned, after assessment becomes positive income but also in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss or a minus figure. Therefore, even during the period between 1st April, 1976 to 1 st April, 2003 the position was that the penalty was leviable even in a case where addition of concealed income reduces the returned loss. 11. When the word "income" is read to include losses as held in Harprasad's case (supra) it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 14 income is a loss, still penalty was leviable thereon even during the period 1st April, 1976 to 1st April, 2003. Even in the Circular dated 24th July, 1976, referred to above, the position was clarified by Central Board of Direct Taxes (in short 'CBDT'). It is stated that in a case where on setting off the concealed income against any loss incurred by the assessee under any other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure the penalty would be imposable because in such a case "the tax sought to be evaded" will be tax chargeable on concealed income as if it is "total income".' (emphasis, supplied) The reading of the provision (s.271(1)(c)), coupled with Explanation 4, and its elucidation in Gold Coin Health Foods (supra), makes it abundantly clear that there is no requirement in law that for the levy of penalty (w.r.t. the tax sought to be evaded), the tax liability for the relevant year has actually increased to that extent in assessment, i.e., on account of adjustment for the relevant income while computing total income in the course of the proceedings under the Act. For all we know, the said increase in tax liability and, correspondingly, the reduction in the tax liability by not returning the relevant income, for which adjustment is made in assessment, would — in case of assessed loss, arise only on the earning of sufficient taxable income in the future year/s; and within the time frame as prescribed in law. And which may not fructify. This is as the assessed loss cannot be carried forward indefinitely. Then, again, the business (i.e., the source of income) must continue till then in future, which again cannot be stated with certainty as at the end of the relevant year. The actual tax impact is thus hinged by conditions to be met in future, which may or may not materialize. That, however, is not relevant, as the law presumes an intent to evade tax in the absence of the assessee being able to reasonably explain the adjustment to its’ returned income in assessment with facts. This is not to say that 'tax' and 'penalty' bear no relation to each other, or that the penalty could be levied de hors the tax on the relevant income; the sole basis for the latter being only the evasion of the former, as signified by the words 'by reason of' in section 271(1)(iii), providing the rationale for reckoning the penalty with reference to the tax chargeable on the relevant income. What ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 15 is being sought to be clarified though is that the same is not to be understood to imply a one-to-one correspondence between the tax chargeable on the relevant income and an increase in the assessee' tax liability for the relevant year. A direct correspondence between the two may not be established, and a tax implication of the relevant income is sufficient. The law presumes the nexus, so that the conditions required for such reduction in or evasion of tax to materialize, which may only be in future, are regarded as satisfied. It is this rational nexus that gets lost or compromised where tax, though payable under the regular provisions, being lower than that payable under MAT, gets paid under the latter. The tax payable under either set of provisions being in a positive sum, the increased tax (due to the relevant income) on the income under the normal provisions, gets jettisoned or subsumed in the tax payable under the MAT which, having not witnessed any change, would be in any case levied/paid. It cannot therefore be said, and neither is there any basis for a presumption that any tax has been evaded by the increased income under the regular provisions. That is, there is a breakdown in the said nexus, which is a prerequisite for, and therefore must exist for a valid levy of penalty. It is this breakdown, so that the very basis for the levy of penalty, i.e., the tax sought to be evaded by reason of non-returning the relevant income, is absent, that was responsible for the Hon'ble Court in Nalwa Sons Investment Ltd. (supra) holding that no penalty could be levied in a case where the adjustment to the returned income is made under the regular provisions, while the tax gets finally paid under the MAT provisions; the relevant part of its' decision reading as: (pgs. 552-553) '21. 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 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 ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 16 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 s. 115JB of the Act. 22. to 24..... 25. The judgment in the case of Gold Coin (supra), obviously, does not deal with such a situation. What is held by the Supreme Court in that case is that even if in the income tax return filed by the assessee losses are shown, penalty can still be imposed in a case where on setting off the concealed income against any loss incurred by the assessee under other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even a minus figure. The Court was of the opinion that 'the tax sought to be evaded' will mean the tax chargeable on the concealed income as if it were the total income. Once, we apply this rationale to Explanation 4 given by the Supreme Court, in the present case, it will be difficult to sustain the penalty proceedings. Reason is simple. 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 s. 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.' (emphasis, supplied) In a case of reduction in loss, as in the instant case, no tax under the regular provisions irrespective of the adjustment thereunder in assessment, is payable, which fact is however irrelevant in view of Explanation 4(a), as further clarified by the Apex Court in Gold Coin Health Foods (supra). This would be the case irrespective and independent of whether tax, if any, is payable under MAT provisions. Payment of tax, as explained by it, is not a concomitant of the penalty u/s. 271(1)(c); the said Explanation effectively delinking the two. And which position obtained even prior to the insertion of the words 'if any' in sec. 271(1)(iii) w.e.f. 01/4/2003, being held as only clarificatory. The incidence of tax payable being rendered irrelevant, how would it matter whether the tax payable, where so, is under the regular provisions or the MAT provisions? The 'total income' referred to in Explanation 4(a) is not to be confused with the 'total income' as defined u/s. 2(45) r/w 5, or even s.115-JB(1) for that matter. The same is only for the purpose of sec. 271(1)(iii), defining and computing 'the ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 17 amount of tax sought to be evaded' per Explanation 4 thereto. It would be a different matter where, on the other hand, the reduction of loss in assessment on account of relevant income results in a positive income, so that it results in a tax liability, which though gets subsumed in the tax payable under MAT, so that, indubitably, no tax can be regarded as evaded irrespective of the applicability of Explanation 4(a). This is as the vital condition of 'by reason of’, occurring in s. 271(1)(iii), as afore-explained, is not satisfied in such a case. In fact, even in such a case, it is only the tax on the positive income — and not on the increase in income on account of adjustment for the entire relevant income in assessment, that would, due to deemed total income u/s 115JB(1), stand to be subsumed in the tax payable u/s. 115JB(1), and which only, thus, cannot be regarded as evaded despite the applicability of Explanation 4(a) on the tax on the relevant income. To illustrate, if a loss of Rs. 9 lacs (say) gets converted, due to adjustment for relevant income, to (+) Rs.3 lacs (say), it is the tax on Rs.3 lacs which gets subsumed and not on Rs.12 lacs, the deemed total income u/s. 271(l)iii) r/w Explanation 4(a). So, however, fiscal statutes are to be strictly construed, and the Court cannot make good the deficiency therein. Accordingly, tax on Rs.12 lacs (for which sum adjustment is made in assessment) cannot be segregated into tax on Rs.3 lacs — for which there is in fact tax mitigation (due to section 115JB(1)) and that on Rs. 9 lacs, for which there is no tax mitigation, and for which the assessee would have, but for its' default having been detected and neutralized in assessment, stood to gain in terms of reduction of tax by way of carry forward of loss to that extent. The vital condition aforesaid, therefore, cannot be said to be met in such a case for the entire relevant income of Rs.12 lacs, the deemed total income under Explanation 4(a), and with reference to which the tax sought to be evaded is to be worked out. Continuing further, a confusion could also— again absent in the instant case, arise where adjustments on account of relevant income are made in both ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 18 assessments, i.e., under the normal and the special provisions, inasmuch as the same would lead to two amounts of tax sought to be evaded in terms of Explanation 4(a), i.e., prior to amendment by Finance Act, 2015, which specifies the said term for the limited purpose of s. 271(1)(iii). The deeming of book-profit as 'total income' u/s. 115-JB is only for determining the tax liability for the relevant year, and serves no other purpose. It is notable that the amendment of 2015 makes no change in the 'total income' as defined u/s. 2(45), or as referred to in ss.5; I15-JB; 271(1)(c). Rather, the 'total income' under either set of provisions is referred to in the amended Explanation 4 as 'total income', albeit under the relevant provisions, as indeed is the case as both satisfy the test of s. 2(45) r/w s.5. Again, it cannot be lost sight of that 'income' includes 'loss' (CIT v. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 (SC)). Its carry forward (for being set off against the income for the subsequent year/s) — which is not lost on the tax being paid under MAT, is only on that premise and, further, as it forms part of the total income for the relevant year. It cannot but be otherwise. It is precisely for this reason that an assessment order bears the year-wise detail of the brought forward loss/es under different heads of income, as also that, if any, assessed for the current year, as well as that to be, after set off, carry forward. It is well-settled that all the parts of a statute are to be construed together (Prakash Nath Khanna v. CIT [2004] 266 ITR 1 (SC)). To say that the income is not 'acted upon', as held in Nalwa Sons Investment Ltd. (supra) (para 25), would thus be valid only in case of an assessed positive income inasmuch as tax, though chargeable thereon, is yet not payable, so that there is tax mitigation — the basis of the said decision — to that extent. And not in a case of assessed loss, which stands to be carried forward for set off against future income and, thus, bears a potential reduction in tax liability (due to non-returning of the relevant income). The assessee's case is thus squarely covered by Explanation 4(a) to s. 271(1)(c) as it stood prior to its amendment ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 19 by Finance Act, 2015. That the said provision may not apply in the other case is no reason for regarding it as not applicable where it actually is. It may not be out of place here to mention that the Hon'ble Gujarat High Court in Gold Coin Health Foods (P.) Ltd (in TA No. 1842/2005, dated 31/7/2006) disapproved of penalty in case of reduction in loss in assessment and not where the returned loss stands converted into a positive income, in which case tax becomes, therefore, payable. 5. Be that as it may, the Board, construing the decision in Nalwa Sons Investment Ltd. (supra) in a broad manner, has issued a Circular (# 25/2015, dated 31/12/2015), instructing its' officers not to levy penalty in cases where the tax payable under the regular provisions is lower than that under the MAT provisions, and, where so, desist from filing appeals or pressing the same. The said Circular, as afore-noted, covers the instant case as it does not carve out any exception for a case of assessed loss under the normal provisions of the Act even as tax becomes payable under the deeming provision of s.115JB(1). The Board Circular, not binding on the appellate authorities, is so on the income tax authorities, where favorable to the taxpayer. The Revenue's instant appeal is thus not maintainable. Rather, it is this non-binding character (on the appellate authorities) that forms the basis of our expressing our view, which is, as apparent, based on the plain language of the provision and, further, as explained by the Apex Court in Gold Coin Health Foods (supra). The same though becomes academic under the circumstances. We decide accordingly. 6. In the result, the Revenue's appeal is dismissed as not maintainable. Order Pronounced in open Court on March 23, 2022 Sd/- Sd/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Dated: March 23, 2022 ITA No. 251/JAB/2018 (A.Y. 2008-09) Dy. CIT vs Madhya Pradesh Power Generating Co. Ltd. 20 vr/- Copy to: 1. The Assessee: Madhya Pradesh Power Generating Co. Ltd., Block No.09, Shakti Bhavan, Vidyut Nagar, Rampur, Jabalpur 2. The Revenue: Dy. CIT, Circle-2(1), Jabalpur. 3. The Principal CI T-2, Jabalpur. 4. The CI T( Appeals)-1, Jabalpur. 5. The Sr . DR, I TAT, Jabalpur. 6. Guard file. By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur.