R.N. Knitfab Pvt. Ltd., Ludhiana V. ACIT/JCIT, Circle III(1), Ludhiana

ITA 396/CHANDI/2022

AI Insights

The case involves R.N. Knitfab Pvt. Ltd., which appealed against the penalty levied by the Assessing Officer (AO) under section 271(1)(c) for furnishing inaccurate particulars of income. The penalty was related to disallowances made under section 80IB, which were not eligible for deduction. The Tribunal noted that although the additions were sustained under normal provisions, the tax liability was ultimately determined under MAT provisions, which were higher. The Tribunal referenced the decision of the Delhi High Court in Nalwa Sons Investment Ltd. and the CBDT Circular, which collectively established that penalties should not be imposed in such scenarios where the MAT tax liability exceeds that under normal provisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127534 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-06-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2022
• Other Referred Cases: Nalwa Sons Investment Ltd. (2010) 327 ITR 543, Unison Hotel Ltd. Vs DCIT (2013) 86 CCH 94 Del HC
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 271(1)(c); 143(3); 115JB; 80IB

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “B” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी आकाश द प जैन, उपा य एवं ी #व$म &संह यादव, लेखा सद+य BEFORE: SHRI A.D.JAIN, VICE PRESIDENT AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA NO. 396/Chd/ 2022 नधा रण वष / Assessment Year : 2009-10 R.N. Knitfab Pvt. Ltd., 251, Rahon Road Guru Vihar, Ludhiana. बनाम The ACIT/JCIT, Circle III(1), Ludhiana. थायी लेखा सं./PAN NO:AABCR9687E अपीलाथ /Appellant यथ /Respondent नधा रती क! ओर से/Assessee by : None (Written submission) राज व क! ओर से/ Revenue by : Shri Dharamvir, JCIT, Sr. DR स ु नवाई क! तार&ख/Date of Hearing : 08.06.2023 उदघोषणा क! तार&ख/Date of Pronouncement : 09.06.2023 आदेश/Order PER VIKRAM SINGH YADAV, AM: This is an appeal filed by the assessee against the order of the ld. CIT(A) NFAC, Delhi dated 07.04.2022 wherein the assessee has challenged the sustenance of levy of penalty amounting to Rs.2,71,897/- u/s 271(1)(c) of the Income Tax Act. 2. None has appeared on behalf of the assessee. The ld AR Shri B.K. Khanna has however filed written submission dated 25.04.2023 stating that due to illness, he is unable to appear personally and the written submissions may be considered for adjudication of the matter. The ld DR, Shri Dharamvir was heard and the material available on record was purused and examined. ITA 396/CHD/2022 A.Y. 2009-10 2 3. Briefly the facts of the case are that the assessee filed its return of income declaring total income at Rs.2,85,870/- after claiming deduction u/s 80IB amounting to Rs 3,10,55,734/- under the normal provisions of the Act and book profit u/s 115JB at Rs.2,89,87,619/- and since tax liability u/s 115JB at Rs 28,98,762/- was higher than the tax liability under the normal provisions at Rs 85,761/-, tax liability was determined payable under section 115JB at Rs. 28,98,762/- plus applicable surcharge and education cess. The matter was selected for scrutiny and thereafter the assessment was completed u/s 143(3) of the Act at an assessed income of Rs.43,55,250/- under the normal provisions of the Act by making disallowances of certain income/receipts which were claimed by the assessee but not found eligible for deduction u/s 80IB of the Act. However, as far as the computation of book profits for the purposes of MAT liability u/s 115JB of the Act, there was no adjustment done by the AO. And the tax liability was finally determined under 115JB as initially determined and computed by the assessee as against normal provisions of the Act. Separately penalty proceedings u/s 271(1)(c)of the Act were initiated by the AO for furnishing inaccurate particulars of income. 4. Subsequently, the assessee carried the matter in appeal before the ld. CIT(A) who has partly allowed the appeal in favour ITA 396/CHD/2022 A.Y. 2009-10 3 of the assessee and on matters relating to interest on FDR and other interest income, the claims of the assessee that the same are eligible for deduction u/s 80IB were decided against the assessee and in favour of the Revenue. 5. The assessee did not appeal against the order of the ld. CIT(A) for the reason that the tax liability was computed under MAT provisions and even where the certain disallowances were sustained by the ld. CIT(A) while computing the deduction u/s 80IB, there was no overall tax impact which was involved as the final tax liability would continue to be under the MAT provisions. 6. Given the finality in the quantum proceedings, the AO proceeded with the penalty proceedings and after considering the submissions of the assessee but not finding the same acceptable, he levied penalty @ 100% of tax sought to be evaded at Rs.3,93,932/-. 7. Here it is relevant to note that the AO has recorded the finding that the assessee has furnished inaccurate particulars of income amounting to Rs.12,74,863/- which pertains to interest on FDR amounting to Rs.3,94,937/- and other interest income of Rs.8,79,926/- which were held not eligible for claim of deduction u/s 80IB while computing tax liability under normal provisions of the Act. It is, therefore, a case where the additions have been sustained under the normal provisions and the penalty has been ITA 396/CHD/2022 A.Y. 2009-10 4 levied in respect of the additions so sustained whereas the tax liability has been finally determined by the AO under the MAT provisions. 8. In the said factual matrix of the case, the question that arises for consideration is whether penalty u/s 271(1)(c)of the Act can be levied wherein the additions have been made under the normal provisions of the case but the tax liability has been determined under MAT provisions u/s 115JB of the Act for the impugned assessment year 2009-10. 9. We find that the matter is squarely covered by the decision of Hon'ble Delhi High Court in case of Nalwa Sons Investment Ltd. (2010) 327 ITR 543, which has subsequently been followed in case of Unison Hotel Ltd. Vs DCIT (2013) 86 CCH 94 Del HC, wherein it has been held that where 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. 10. It is also relevant to note that the Central Board of Direct Taxes had also came out with Circular No. 25/2015 dated 31.12.2015 wherein referring to the decision of Hon'ble Delhi High Court in case of Nalwa Sons Investment Ltd. and ITA 396/CHD/2022 A.Y. 2009-10 5 subsequent Explanation-4, sub-section (1) to Section 271 introduced by the Finance Act, 2015 has held that it is a settled position that prior to 01.04.2016 where the income tax payable on 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 u/s 271(1)(c)of the Act is not attracted with reference to the additions made in the normal provisions of the case. It has also been directed that no appeal shall henceforth be filed on this ground and the appeals already filed before various Courts and Tribunals may be withdrawn and not pressed upon. The contents of the Circular issued by the CBDT read as under: “Subject: Penalty u/s 271 (1 )(c) wherein additions/disallowances made under normal provisions of the Income Tax Act, 1961 but tax levied under MAT provisions u/s 115JB/115JC, for cases prior to A.Y. 2016-17-reg.- Section 115JB of the Act is a special provision for levy of Minimum Alternate 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 particulars of income is determined based on the "amount of tax sought to be evaded" which has been defined inter-alia, 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. 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. (available in NJRS as 2010-LL-0826-2), 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. ITA 396/CHD/2022 A.Y. 2009-10 6 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(l)(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(l)(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.” 11. In view of the aforesaid settled position of law and which has also been accepted by the Revenue, as evident from the aforesaid CBDT Circular, we do not deem it necessary to examine the various contentions so advanced by the ld. AR in his written submissions and at the same time, following the dicta of the Hon’ble Delhi High Court and as accepted by the Revenue, in terms of the aforesaid Circular No. 25 of 2015 dated 31.12.2015, the levy of penalty u/s 271(1)(C) on the disallowances under the normal provisions of the Act wherein the tax liability has been determined under section 115JB is hereby directed to be deleted. 12. In the result, appeal of the assessee is allowed. Order pronounced in the Open Court on 09.06.2023. Sd/- Sd/- आकाश द प जैन #व$म &संह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा य / VICE PRESIDENT लेखा सद+य/ ACCOUNTANT MEMBER Poonam ITA 396/CHD/2022 A.Y. 2009-10 7 आदेश क! त,ल-प अ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय ु /त/ CIT 4. -वभागीय त न2ध, आयकर अपील&य आ2धकरण, च5डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड फाईल/ Guard File आदेशान ु सार/ By order सहायक पंजीकार/ Assistant Registrar