GAWANDE CONSULTANTS P.LTD, MUMBAI V. DCIT 2(1), MUMBAI

ITA 3003/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3691 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 07-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2014
• Court: TRIBUNAL
• Department Lawyers: SHRIKANT NAMDEO
• Assessee Lawyers: RA JEEV WAGLAY
• Section: 115JB; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER ITA NO. 3003 /MUM./2014 ( ASSESSMENT YEAR : 20 08 09 ) GAWANDE CONSULTANTS PVT. LTD. 801, MAHALAXMI CHAMBERS 22, BHULABH AI DESAI ROAD MUMBAI 400 026 PAN AABCG3865F . APPELLANT V/S DY . COMMISSIONER OF INCOME TAX CIRCLE 2 (1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI RAJEEV WAGLAY REVENUE BY : SHRI SHRIKANT NAMDEO DATE OF HEARING 07 . 01 .201 6 DA TE OF ORDER 0 7 .01.2016 O R D E R PER SAKTIJIT DEY , J.M. INSTANT APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 14 TH FEBRUARY 2014, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 4 , MUMBAI, CONFIRMING PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 08 09. 2. BRIEFLY STATED THE FACTS ARE, THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 29 TH SEPTEMBER 2008, GAWANDE CONSULTANTS PVT. LTD. 2 DECLARING TOTAL INCOME AT N IL UNDER THE NORMAL PROVISIONS AND BOOK PROFIT OF ` 1,39,96,811 UNDER SECTION 115JB OF THE ACT. WHILE COMPLETING ASSESSMENT UNDER SECTION 143(3), VIDE ORDER DATED 12 TH OCTOBER 2010, THE ASSESSING OFFICER MADE CERTAIN DISALLOWANCE UNDER THE NORMAL PROVISION S, HOWEVER, SINCE THE TAX DUE ON BOOK PROFIT IS MORE THAN TAX DUE ON INCOME DECLARED UNDER NORMAL PROVISIONS, THE ASSESSING OFFICER ULTIMATELY COMPLETED THE ASSESSMENT UNDER SECTION 115JB. THE DISALLOWANCE MADE UNDER THE NORMAL PROVISIONS WAS NOT CHALLENGE D BY THE ASSESSEE. ON THE BASIS OF DISALLOWANCE S UNDER THE NORMAL PROVISIONS, THE ASSESSING OFFICER INITIATED PROCEEDINGS UNDER SECTION 271(1)(C) AND ULTIMATELY PASSED AN ORDER IMPOSING PENALTY OF ` 2 LAKH UNDER SECTION 271(1)(C). BEING AGGRIEVED OF THE PE NALTY ORDER, ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS). 3. THE FIRST APPELLATE AUTHORITY ALSO CONFIRMED THE IMPOSITION OF PENALTY , THOUGH , HE RESTRICTED THE QUANTUM OF PENALTY TO 100% OF TAX ON INCOME S OUGHT TO BE EVADED WHICH WORKE D OUT TO ` 1,83,987. 4. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , AS THE DISALLOWANCE S ON THE BASIS OF WHICH PENALTY WAS IMPOSED UNDER SECTION 271(1)(C) HAD NO RELEVANCE TO INCOME DETERMINED UNDER SECTION 115JB, PENALTY UNDER SECTION 271(1)(C) CANNOT BE I MPOSED. FOR SUCH PROPOSITION, HE RELIED UPON THE FOLLOWING DECISIONS: GAWANDE CONSULTANTS PVT. LTD. 3 I) CIT V/S NALWA SONS INVESTMENTS LTD., 327 ITR 543 (DEL.); II) RUCHI STRIPS AND ALLOYS LTD. V/S DCIT, ITA NO.6940/ MUM./2008 DATED 21 ST JANUARY 2011; AND III) BSEL INFRASTRUCTURES REALTY LTD. V /S ACIT, [2012] 150 TTJ 159. 5. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE DECISION OF THE LEARNED COMMISSIONER (APPEALS). 6. HAVING CONSIDERED THE FACTS AND MATERIAL ON RECORD, WE FIND MERIT IN THE SUBMISSIONS OF THE LEARNED COUNSEL. AS COULD BE SEE N, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT BY ASSESSING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT AS THE INCOME DECLARED AND TAX LEVIED UNDER SECTION 115JB OF THE ACT IS MORE THAN THE INCOME DECLARED UNDER THE NORMAL PROVISIONS. IT IS FURTH ER EVIDENT THAT THE DISALLOWANCE S ON THE BASIS OF WHICH PENALTY UNDER SECTION 271(1)(C) W AS IMPOSED RELATED TO DETERMINATION OF INCOME UNDER THE NORMAL PROVISIONS OF THE ACT. THEREFORE, THEY HAVE NO RELEVANCE AT ALL AS FAR AS COMPUTATION OF BOOK PROFIT UND ER SECTION 115JB AND LEVY OF TAX THEREON. THEREFORE , THE DECISION OF THE HON'BLE DELHI HIGH COURT IN NALWA SONS INVESTMENTS LTD. (SUPRA) SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. IN FACT, THE ISSUE IN DISPUTE HAS BEEN SET AT REST BY THE CBDT CIRCU LAR NO.25 OF 2015 DATED 31 ST DECEMBER 2015, WHEREIN IT HAS BEEN CLARIFIED THAT IN VIEW OF THE DECISION OF THE HON'BLE DELHI HIGH COURT IN NALWA SONS INVESTMENTS LTD. (SUPRA) AND SUBSTITUTION OF GAWANDE CONSULTANTS PVT. LTD. 4 EXPLANATION 4 TO SECTION 271 OF THE ACT, PROSPECTIVELY , IF 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 PROFIT UNDER SECTION 115JB OF THE ACT, THEN PENALTY UNDER SECTION 271(1)(C) IS NOT ATTRACTED WITH REFERENCE TO ADDITIONS / D ISALLOWANCE MADE UNDER NORMAL PROVISIONS. FOR BETTER CLARITY , THE CBDT CIRCULAR REFERRED TO ABOVE IS EXTRACTED HEREUNDER: SECTION 115JB OF THE ACT IS A SPECIAL PROVISION FOR LEVY OF MINIMUM ALTERNATE TAX ON COMPANIES, INSERTED BY FINANCE ACT 2000 WITH E FFECT 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 IN TER - AL/A, 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. 3. I N 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 LE SS THAN THE TAX PAYABLE UNDER THE DEEMING PROVISIONS OF SECTION 11 5JB 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 FINA LITY. 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 IN COME DETERMINED UNDER THE GENERAL PROVISIONS IS LESS THAN THE INCOME DECLARED FOR THE PURPOSE OF MAT U/S 11 5 JB OF THE ACT. THE SUBSTITUTED EXPLANATION 4 IS APPLICABLE PROSPECTIVELY W.E.F. 01.04.2016. GAWANDE CONSULTANTS PVT. LTD. 5 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 T AX PAYABLE ON THE BOOK PROFITS U/S 11 5JB 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 ADJUSTM ENT 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. 7. IN VI EW OF THE PRINCIPL E LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN NALWA SONS INVESTMENTS LTD. (SUPRA) AND THE CIRCULAR ISSUED BY THE CBDT AS REFERRED TO ABOVE, WE DELETE THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. 8. IN THE RESULT, ASSESSEES APPE AL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JANUARY 2016 SD/ - N.K. BILLAIYA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED : 7 TH JANUARY 2016 GAWANDE CONSULTANTS PVT. LTD. 6 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVEN UE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI