AXIS CAPITAL LTD, MUMBAI V. DCIT CIR 3(1), MUMBAI

ITA 2958/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0280 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 15-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK LD
• Assessee Lawyers: VIPUL MODI LD ARS
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 115JB

Judgement Text

ITA NO. 2958/MUM/2015 AXIS CAPITAL LIMITED ASSESSMENT YEAR 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . , , BEFORE SHRI C.N. PRASAD, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.2958/MUM/2015 ( / ASSESSMENT YEAR:2010-11) AXIS CAPITAL LIMITED 1 ST FLOOR, AXIS HOUSE C-2, WADIA INTERNATIONAL CENTRE P.B.MARG WORLI MUMBAI-400 025 / VS. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 3(1) 6 TH FLOOR, AAYKAR BHAVAN M.K.ROAD, CHURCHGATE MUMBAI 400 020 ! ./ ./ PAN/GIR NO. AAACU-8367-M ( !# /APPELLANT ) : ( $!# / RESPONDENT ) !# / APPELLANT BY : NITESH JOSHI & VIPUL MODI, LD. ARS $!# / RESPONDENT BY : DR. A.K.NAYAK, LD. DR / DATE OF HEARING : 05/06/2017 / DATE OF PRONOUNCEMENT : 07/06/2017 2 ITA NO. 2958/MUM/2015 AXIS CAPITAL LIMITED ASSESSMENT YEAR 2010-11 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010- 11 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-8 [CIT(A)], MUMBAI DATED 27/02/2015 QUA CONFIRMATION OF PENALTY OF RS.16,65,513/- U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THE REGISTRY HAS NOTED THAT THE APPEAL IS TIME B ARRED BY 17 DAYS. HOWEVER, THE LD. COUNSEL FOR ASSESSEE [AR] DREW OUR ATTENTION TO THE FACT THAT THE ORDER OF THE LD. CIT(A) WAS PASSED ON 27/0 2/2015 AND THE SAME WAS COMMUNICATED TO THE ASSESSEE ON 09/04/2015 AND THE ASSESSEE HAS FILED THE APPEAL ON 15/05/2015 WHICH IS WITHIN THE STATUTORY TIME PERIOD OF 60 DAYS AND THEREFORE, THERE WAS NO DELAY IN FILING THE APPEAL. THE ASSESSEE INADVERTENTLY MENTIONED THE WRONG DATE OF COMMUNICATION OR ORDER IN FORM NO. 36 WHICH HAS SINCE BEEN REVISED. THE LD. DR FAIRLY CONCEDED THE SAME AND COULD NOT CONTROVERT THE SAID FACT. THEREFORE, FINDING THE APPEAL BEING FILED WITHIN THE STATUTORY TIME LIMIT, WE PROCEED WITH THE SAME ON MERITS. 3. FACTS LEADING TO THE DISPUTE ARE THAT THE ASSESS EE, BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN FINANCIAL SERVICES , WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 07/02/2013 AT RS. NIL UNDER NORMAL PROVISIONS AFTER SET-OFF OF UNABSORBED DEPRECIATION AND BROUGHT FORWARD BUSINES S LOSSES OF RS.11.15 CRORES . IN THE QUANTUM ASSESSMENT, ONE OF THE ADDITION 3 ITA NO. 2958/MUM/2015 AXIS CAPITAL LIMITED ASSESSMENT YEAR 2010-11 OF RS.49,00,010/- WAS RELATED WITH EXPENSES CLAIMED FOR INCREASE IN AUTHORIZED SHARE CAPITAL, THE SAME BEING CAPITAL IN NATURE. CONSEQUENTLY, PENALTY PROCEEDINGS WERE INITIATED AGAINST THE SAME FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND FINALLY THE AS SESSEE WAS SADDLED WITH IMPUGNED PENALTY OF RS.16,65,513/- U/S 271(1)(C) READ WITH EXPLANATION-1 VIDE ASSESSING OFFICER [AO] ORDER DATED 30/08/2013. 4. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITHO UT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 27/02/2 015 WHERE THE ASSESSEE ATTRIBUTED THE CLAIM TO INADVERTENT ERROR WHILE FILING THE RETURN OF INCOME. IT WAS FURTHER CONTENDED THAT SINCE THE ASS ESSEE PAID TAX ON BOOK PROFITS U/S 115JB, BEING HIGHER THAN THE NORMAL PRO FITS AND THEREFORE, NO PENALTY COULD BE LEVIED IN VIEW OF HONBLE DELHI HI GH COURT DECISION IN THE CASE OF NALWA SONS INVESTMENTS LTD. [327 ITR 543]. HOWEVER, NOT CONVINCED, THE LD CIT(A) CONFIRMED THE PENALTY AGAI NST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. AR DREW OUR ATTENTION TO CBDT CIRCULAR NO. 25/2015 DATED 31/12/2015 ISSUED IN CONSEQUENCE TO THE CITED JUDGMENT OF HON BLE DELHI HIGH COURT. THE LD. AR EXPLAINED THAT THE ASSESSEE S RETURNED INCOME WAS NIL UNDER NORMAL PROVISIONS AFTER SET-OFF OF UNABSORBED DEPRECIATION AND BROUGHT FORWARD LOSSES OF EARLIER YEARS AND THEREFORE, THE ASSESSEE PAID TAXES ON BOOK PROFITS OF RS.6.32 CRORES U/S 115JB. IN THE QUANTUM ASSESSMENT, THE ASSESSEE SUFFERED ADDITIONS OF RS.6 9.63 LACS IN TOTAL OUT OF WHICH PENALTY PROCEEDINGS WERE INITIATED AGAINST ADDITION OF RS.49.00 4 ITA NO. 2958/MUM/2015 AXIS CAPITAL LIMITED ASSESSMENT YEAR 2010-11 LACS ON ACCOUNT OF EXPENSES DEBITED TO PROFIT & LOS S ACCOUNT TOWARDS INCREASE IN AUTHORIZED CAPITAL. HOWEVER, THE SAME W ERE INADVERTENTLY CLAIMED AND THE ASSESSEE UPON NOTICING THE ERROR, A CCEPTED THE QUANTUM ADDITIONS AND DID NOT FILE ANY FURTHER APPEAL BEFOR E FIRST APPELLATE AUTHORITY. HOWEVER, THE SAID ADDITION / ADJUSTMENT DID NOT AFF ECTED THE ASSESSEES TAX LIABILITY SINCE THE ASSESSEE WAS LIABLE TO PAY TAX ON HIGHER BOOK PROFIT U/S 115JB IN VIEW OF THE FACT THAT IT HAD UNABSORBED DE PRECIATION AND BROUGHT FORWARD BUSINESS LOSSES WHICH REDUCED THE NORMAL IN COME TO RS. NIL . THEREFORE, THE TAX LIABILITY AS PER RETURNED INCOME AND ASSESSED INCOME BEING THE SAME, NO PENALTY COULD BE LEVIED ON THE A SSESSEE. 6. PER CONTRA, LD. DR DREW OUR ATTENTION TO THE FACT THAT THE ASS ESSEE FULLY KNOWING THE EXPENSES TO BE CAPITAL IN NATURE, DEBITED THE SAME TO PROFIT & LOSS ACCOUNT AND CLAIMED THE SAME IN THE R ETURN OF INCOME AND WRONGLY ATTRIBUTED THE SAME TO INADVERTENT ERROR. F URTHER, THE ACTION OF DEBITING THE SAID EXPENDITURE TO PROFIT & LOSS ACCO UNT HAS RESULTED INTO LOWERING OF BOOK PROFITS U/S 115JB AND TAX LIABILIT Y OF THE ASSESSEE AND THEREFORE, THE RELIANCE ON THE SAID CBDT CIRCULAR A ND THE CITED CASE LAW WAS MISCONCEIVED. 7. THE LD. AR REBUTTED THE SAME BY CONTENDING THAT BOOK PROFIT U/S 115JB COMPUTED BY THE ASSESSEE HAS NOT BEEN DISTURB ED BY THE REVENUE AT ANY STAGE AND THEREFORE THE REVENUE, AT THIS STAGE, COULD NOT BRING OUT ALTOGETHER NEW FACTS / GROUNDS TO JUSTIFY THE PENAL TY IN THE ASSESSEES APPEAL AND THE LD. DR COULD NOT IMPROVE UPON THE CA SE OF LOWER AUTHORITIES 5 ITA NO. 2958/MUM/2015 AXIS CAPITAL LIMITED ASSESSMENT YEAR 2010-11 FROM NEW ANGLES. FURTHER, THE PENALTY HAS BEEN INIT IATED AND LEVIED ONLY FOR QUANTUM ADDITION IN NORMAL INCOME AND THEREFORE, TH E SAME STOOD SQUARELY COVERED BY THE SAID CIRCULAR. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS EVIDENT FROM THE RECORD THAT THE R ETURNED INCOME AND ASSESSED INCOME UNDER NORMAL PROVISIONS HAVE BEEN C OMPUTED AS NIL AFTER SET-OFF OF UNABSORBED DEPRECIATION AND BROUGHT FORWARD BUSINES S LOSSES. THE QUANTUM ADDITION OF RS.69.63 LACS HAS RESULTED INTO ADJUSTMENT IN THE FIGURES OF UNABSORBED DEPRECIATIO N & BROUGHT FORWARD BUSINESS LOSSES. THE TAX PAYABLE FIGURES OF RS.1.07 CRORES ON BOOK PROFITS U/S 115JB HAS BEEN ACCEPTED BY THE REVENUE AS EVIDE NT FROM INCOME TAX COMPUTATION FORM ISSUED PURSUANT TO ASSESSMENT U/S 143(3) AS PLACED ON PAGE NO. 54 OF THE PAPER BOOK. 9. AT THIS JUNCTURE, IT WOULD BE PRUDENT TO EXTRACT THE RELEVANT PORTION OF CBDT CIRCULAR NO. 25/2015 DATED 31/12/2015 WHICH RE ADS AS FOLLOWS:- PENALTY UNDER SECTION 271(1)(C) WHEREIN ADDITIONS/ DISALLOWANCES MADE UNDER NORMAL PROVISIONS OF ACT BUT TAX LEVIED UNDER MAT P ROVISIONS UNDER SECTION 115JB/115JC, FOR CASES PRIOR TO ASSESSMENT YEAR 201 6-17 - SECTION 115JB OF THE ACT IS A SPECIAL PROVISION FOR LEVY OF MINIMUM ALTE RNATE 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 PART ICULARS OF INCOME IS DETERMINED BASED ON THE 'AMOUNT OF TAX SOUGHT TO BE EVADED' WH ICH HAS BEEN DEFINED INTER ALIA, AS THE DIFFERENCE BETWEEN THE TAX DUE ON THE INCOME AS SESSED AND THE TAX WHICH WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN RED UCED BY THE AMOUNT OF CONCEALED INCOME OR INCOME IN RESPECT OF WHICH INAC CURATE PARTICULARS HAD BEEN FILED. 3. IN THIS CONTEXT, HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. NALWA SONS INVESTMENTS LTD. [2010] 194 TAXMAN 387, HELD THAT W HEN THE TAX PAYABLE ON INCOME COMPUTED UNDER NORMAL PROCEDURE IS LESS THAN THE TA X PAYABLE UNDER THE DEEMING PROVISIONS OF SECTION 115JB OF THE ACT, THEN PENALT Y UNDER SECTION 271(1)(C) OF THE ACT 6 ITA NO. 2958/MUM/2015 AXIS CAPITAL LIMITED ASSESSMENT YEAR 2010-11 COULD NOT BE IMPOSED WITH REFERENCE TO ADDITIONS/DI SALLOWANCES 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, WHI CH PROVIDE FOR THE METHOD OF CALCULATING THE AMOUNT OF TAX SOUGHT TO BE EVADED F OR SITUATIONS EVEN WHERE THE INCOME DETERMINED UNDER THE GENERAL PROVISIONS IS LESS THA N THE INCOME DECLARED FOR THE PURPOSE OF MAT U/S 115JB OF THE ACT. THE SUBSTITUTE D EXPLANATION 4 IS APPLICABLE PROSPECTIVELY W.E.F. 1-4-2016. 5. ACCORDINGLY, IN VIEW OF THE DELHI HIGH COURT JUD GMENT 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 TO TAL INCOME AS COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT IS LESS THAN THE TAX P AYABLE ON THE BOOK PROFITS U/S 115JB OF THE ACT, THEN PENALTY UNDER SECTION 271(1)(C) OF THE ACT, IS NOT ATTRACTED WITH REFERENCE TO ADDITIONS/DISALLOWANCES MADE UNDER NOR MAL PROVISIONS. IT IS FURTHER CLARIFIED THAT IN CASES PRIOR TO 1-4-2016, IF ANY A DJUSTMENT IS MADE IN THE INCOME COMPUTED FOR THE PURPOSE OF MAT, THEN THE LEVY OF P ENALTY U/S 271(1)(C) OF THE ACT, WILL DEPEND ON THE NATURE OF ADJUSTMENT. UPON PERUSAL OF THE SAME, WE FIND THAT THE SAID PRO POSITION OF LAW AS LAID DOWN BY HONBLE DELHI HIGH COURT IN CITED CASE LAW HAS BEEN ACCEPTED BY THE REVENUE. WE FURTHER FIND THAT THE REVENUE CONTE STED THE SAID DECISION OF DELHI HIGH COURT BEFORE HONBLE APEX COURT BY WAY O F SPECIAL LEAVE PETITION (CIVIL) NO. 18564 OF 2009 DATED 04/05/2012 BUT THE SAME WAS DISMISSED. THEREFORE, WE CONCLUDE THAT THE ASSESSEE STOOD BENEFITTED BY THE SAID CIRCULAR COUPLED WITH DECISION OF THE HON BLE DELHI HIGH COURT IN THE CITED CASE LAWS AND THEREFORE, BY DELETING THE IMPU GNED PENALTY, WE ALLOW ASSESSEES APPEAL. 7 ITA NO. 2958/MUM/2015 AXIS CAPITAL LIMITED ASSESSMENT YEAR 2010-11 10. RESULTANTLY, THE ASSESSEES APPEAL STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH JUNE, 2017. SD/- SD/- (C. N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 07.06.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT CONCERNED 5. '. , . , / DR, ITAT, MUMBAI 6. /0 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI