ACIT, Chandigarh V. M/s Punjab Information & Communication Technology Corporation Ltd., Chandigarh

ITA 499/CHANDI/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8359 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 08-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: GURJIT SINGH
• Keywords: Bad and doubtful debts
• Section: 143(3); 115JB; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.499/CHD/2014 ( ASSESSMENT YEAR : 2005-06) THE A.C.I.T., VS. M/S PUNJAB INFORMATION & CIRCLE-2(1), ROOM NO.414, COMMUNICATION TECHNOLOGY 4 TH FLOOR, AAYAKAR BHAWAN, CORPORATION LTD., 18, UDYOG SECTOR 17-E, BHAWAN, SECTOR 17, CHANDIGARH. CHANDIGARH. PAN: AACCN5223H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. MITTAL, DR RESPONDENT BY : SHRI GURJIT SINGH DATE OF HEARING : 18.02.2016 DATE OF PRONOUNCEMENT : 17.03.2016 O R D E R PER RANO JAIN, A.M . : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), CHANDIGARH DATED 24.2.2014, RELATING TO ASSESSMENT YEAR 2005-06. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT WAS LEVIED BY TH E ASSESSING OFFICER ON THE ADDITION OF RS.8,26,54,498 /- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF WRI TE OFF OF 2 BAD DEBTS, IN PROCEEDINGS UNDER SECTION 143(3) R.W. S. 254 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 3. THE LEARNED CIT (APPEALS) CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER. 4. NOW, THE ASSESSEE HAS COME UP IN APPEAL AGAINST THE CONFIRMATION OF PENALTY. 5. WHILE MAKING THE ARGUMENTS BEFORE US, OUR ATTENTION WAS INVITED BY THE LEARNED COUNSEL FOR TH E ASSESSEE TO THE FACT THAT THE TAX IN THIS CASE HAS BEEN ASSESSED UNDER SECTION 115JB OF THE ACT SINCE THERE WERE UNABSORBED LOSSES RELATED TO EARLIER YEARS. THE T AX WAS LEVIED UNDER THE PROVISIONS OF MAT UNDER SECTION 11 5JB OF THE ACT. IN THIS BACKGROUND, RELIANCE WAS PLACED O N THE CIRCULAR NO.25/2015, DATED 31.12.2015 ISSUED BY THE CBDT WHICH PROVIDES THAT THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT IN CASES WHERE TAX IS COMPUTED UNDER MAT CAN BE LEVIED ONLY W.E.F. 1.4.2016. 6. THE LEARNED D.R. COULD NOT CONTROVERT THE SAID SUBMISSIONS MADE BY THE LEARNED CIT (APPEALS). 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. FROM THE ORDER PLACED ON RECORD GIVING EFFECT TO T HE ORDER 3 OF THE I.T.A.T. IN FIRST ROUND, SHOWS THAT THE REGU LAR INCOME HAS BEEN COMPUTED AS NIL, SINCE THERE WERE BROUGHT FORWARD LOSSES. THE CIRCULAR OF THE CBDT A S REFERRED TO BY THE LEARNED COUNSEL FOR THE ASSESSEE , READS AS UNDER : 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 BASE D ON THE AMOUNT OF TAX SOUGHT TO BE EVADED WHICH HAS BEE N 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 CONC EALED INCOME OR INCOME IN RESPECT OF WHICH INACCURATE PAR TICULARS HAD BEEN FILED. 3. IN THIS CONTEXT. HON'BLE DELHI HIGH COURT IT, IT S JUDGMENT DATED 26.8.2010 IN ITANO.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 U NDER NORMAL PROCEDURE IS LESS THAN THE TAX PAYABLE UNDER THE DEEMING PROVISIONS OF SECTION 115JB OF TH E ACT, THEN PENALTY UNDER SECTION 271(1)(C) OF THE ACT COUL D NOT BE IMPOSED WITH REFERENCE TO ADDITIONS /DISALLOWANCES MAD E UNDER NORMAL PROVISIONS. THE JUDGMENT HAS ATTAINED FIN ALITY. 4. SUBSEQUENTLY THE PROVISIONS OF EXPLANATION 4 TO S UB- SECTION (1) OF SECTION 271 OF THE ACT HAVE BEEN SUBSTITUTED BY FINANCE ACT. 2015, WHICH P ROVIDE FOR THE METHOD OF CALCULATING THE AMOUNT OF TAX SOU GHT 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 SU BSTITUTED EXPLANATION 4 IS APPLICABLE PROSPECTIVELY W.E.F. 01.04.20 16. 4 5. ACCORDINGLY IN VIEW OF THE DELHI HIGH COURT JUDGM ENT AND SUBSTITUTION OF EXPLANATION 4 OF SECTION 271 OF THE ACT WITH PROSPECTIVE EFFECT, IT IS NOW A SETTLED POSITION THAT PRIOR TO L/4/2016, WHERE THE INCOME TAX PAYABLE ON THE TOTAL INC OME AS COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT IS LESS THAN THE TAX PAYABLE ON THE BOOK PROFITS U/S 115JB O F THE ACT, THEN PENALTY UNDER SECTION 271(1)(C) OF THE ACT , IS NOT ATTRACTED WITH REFERENCE TO ADDITIONS /DISALLOWANCE S MADE UNDER NORMAL PROVISIONS. IT IS FURTHER CLARIFIED THA T IN CASES PRIOR TO 1.4.2016, IF ANY ADJUSTMENT IS MADE IN THE IN COME COMPUTED FOR THE PURPOSE OF MAT, THEN THE LEVY OF PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT, WILL DEPEND ON THE NATURE OF ADJUSTMENT. 6. THE ABOVE SETTLED POSITION IS TO BE FOLLOWED IN RES PECT OF SECTION 11JC OF THE ACT ALSO. 7. ACCORDINGLY, THE BOARD HEREBY DIRECTS THAT NO AP PEALS MAY HENCEFORTH HE 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. 8. OTHERWISE ALSO IN THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. M/S VARDHMAN ACRYLICS LIMITED, IN ITA NO.346 OF 2013 (O&M), DATED 4.8.2014, IT HAS BEEN HELD THAT T HE ASSESSMENT HAVING BEEN MADE UNDER THE PROVISIONS OF MAT UNDER SECTION 115JB OF THE ACT, PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE LEVIED ON ADDITIONS AND DISALLOWANCES MADE IN REGULAR INCOME . THE INCOME BEING ASSESSED UNDER SECTION 115JB OF TH E ACT, THE RATIO LAID DOWN BY THE HON'BLE 5 JURISDICTIONAL HIGH COURT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S VARDHMAN ACRYLICS LIMITED (SUPR A) IS SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE. THE HON'BLE PUNJAB & HARYANA HIGH COURT HAS RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF NAL WA SONS INVESTMENTS LIMITED (SUPRA), WHEREBY IT HAS BEEN HE LD AS UNDER : UNDER THE SCHEME OF THE INCOME TAX ACT, 1961, TH E TOTAL INCOME OF THE ASSESSEE IS FIRST COMPUTED UNDE R THE NORMAL PROVISIONS OF THE ACT AND TAX PAYABLE ON SUCH TOTAL INCOME IS COMPUTED WITH THE PRESCRIBED PERCENTAGE OF THE BOOK PROFITS COMPUTED UNDER SECTIO N 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 HIGHER, SUCH AMOUNT IS THE TOTAL INCOME OF THE ASSESSEE, OTHERWISE THE BOOK PROFITS ARE DEEMED AS THE TOTAL INCOME OF THE ASSESSEE IN TERMS OF SECTION 115JB OF THE ACT. WHERE THE INCOME COMPUTED IN ACCORDANCE WITH THE NORMAL PROCEDURE IS LESS THAN THE INCOME DETERMINED BY LEGAL FICTION NAMELY, THE BO OK PROFITS UNDER SECTION 115JB OF THE ACT AND THE INCO ME OF THE ASSESSEE IS ASSESSED UNDER SECTION 115JB AND NO T UNDER THE NORMAL PROVISIONS, THE TAX IS PAID ON THE INCOME ASSESSED UNDER SECTION 115JB OF THE ACT, CONCEALMENT OF INCOME WOULD HAVE NO ROLE TO PLAY AND WOULD NOT LEAD TO TAX EVASION. THEREFORE, PENALTY CANNOT BE IMPOSED ON THE BASIS OF DISALLOWANCE OR ADDITIONS MADE UNDER THE REGULAR PROVISIONS. 9. IN VIEW OF THE ABOVE, WE FIND THAT THE ASSESSEE BEING ASSESSED UNDER SECTION 155JB OF THE ACT, THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT B E LEVIED. IN VIEW OF THIS, THE PENALTY LEVIED BY THE ASSESSING 6 OFFICER UNDER SECTION 271(1)(C) OF THE ACT IS HEREB Y DELETED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF MARCH, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 17 TH MARCH, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH