AARTI DRUGS LTD, MUMBAI V. ASST CIT RG 6(1), MUMBAI

ITA 5534/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1462 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-04-2017
• Assessment Year: 2000-2001
• Appeal Filed On: 02-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: BHAVIN M DEDHIA
• Keywords: Bad and doubtful debts
• Section: 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JM AND SHRI RAJESH KUMAR , AM ./ I.T.A. NO . 5534 / MUM/ 201 4 ( / ASSESSMENT YEA R : 2 000 - 01 ) AARTI DRUGS LIMITED, MAHENDRA INDUSTRIAL ESTATE, GROUND FLOOR PLOT NO. 109D, ROAD NO.29, SION (E), MUMBAI - 400022 / VS. ASSTT. COMMISSIONER OF INCOME TAX - RANGE 6(1), AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 APPELLANT RESPONDENT PAN: AAACA441OD / APPELLANT BY : SHRI BHAVIN M DEDHIA /R ESPONDENT BY : SHRI RAJESH KUMAR YADAV / DATE OF HEARING : 4.4.2017 / DATE OF PRONOUNCEMENT : 4.4. 2017 / O R D E R PER RAJESH KUM AR, A. M: THIS IS AN APPEAL FILED BY THE ASSESSEE CHALLENGING THE ORDER OF LD. CIT(A) - 14, MUMBAI, DATE D 19.6.2014 PERTAINS TO THE ASSESSMENT YEAR 2000 - 01. 2 I.T.A. NO.5534 / MUM/ 201 4 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS OF APPEAL WHEREIN ONE OF THE GROUND S IS AGAINST THE CONFIRMATION OF LEVY OF PENALTY OF RS.3,66,279 / - BY THE LD. CIT(A) B Y OVERLOOKING THE FACT THAT THE DISALLOWANCE OF PROVISIONS FOR DOUBTFUL DEBTS U/S 36(1)(VII) OF THE INCOME TAX ACT, 1961 OF RS.9,51,373/ - WAS MADE UNDER THE NORMAL PROVISIONS OF THE ACT WHEREAS THE AS SESSEE WAS ASSESSED TO TAX UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. THE LD. AR SUBMITTED BEFORE THE BENCH THAT THE DISALLOWANCE FOR DOUBTFUL DEBTS WAS MADE TO THE TUNE OF RS.9,51,373/ - UNDER THE NORMAL PROVISIONS OF ACT ASSESSING THE TOTAL INCOME AT RS.1,64,04,377/ - WHEREAS AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT THE TOTAL INCOME WAS ASSESSED AT RS.2,42,56,832/ - . 3. THE LD.AR DREW OUR ATTENTION TO THE CIRCULAR NO.25/20 (F NO.279/MISC./140/2015/ITJ, DATED 31.12.2015, WHEREIN IT HAS B EEN HELD THAT 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 PROFIT U/S 155JB OF THE ACT, THEN PENALTY UNDER SECTION 271(1)(C) OF THE ACT, IS NOT A TTRACTED WIT H R EFE R ENCE TO ADDITIONS/DISALLOWANCE MADE UNDER NORMAL PROVISIONS . 3 I.T.A. NO.5534 / MUM/ 201 4 4. THE LD. DR ALSO APPEARS TO BE FAIRLY AGREED WITH THE CONTENTIONS OF THE LD.AR. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDI NG THE ORDERS OF AUTHORITIES BELOW AND CA S E LAW RELIED UPON BY THE LD. AR. WE FIND THAT THE CBDT HAS BROUGHT OUT NOTIFICATION THAT NO PENALTY SHALL BE LEVIED IN THIS CASE WHERE TAX PAYABLE BASED ON TOTAL INCOME UNDER THE NORMAL PROVISIONS OF ACT IS LESS THAN THE TAX PAYABLE ON THE BOOKS PROFIT U/S 115JB OF THE ACT. THE RELEVANT EXTRACT OF THE CIRCULAR (SUPRA) IS REPRODUCED BELOW: CIRCULAR NO. 25/2015 F.NO.279/MISC./140/2015/ITJ GOVERNMENT OF INDIA MINISTRY OF FINANCE CENTRAL BOARD OF DIRECT TAXES NEW DELHI, 31' DECEMBER, 2015 SUB: 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/I15JC, FOR CASES PRIOR TO A.Y. 2016 - 17 - REG. - SECTION 115JB O F 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. 4 I.T.A. NO.5534 / MUM/ 201 4 2. UNDER CLAUSE (III) OF SUB - SECTION (1) OF SECTION 271 OF THE ACT, PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING IN ACCURATE PARTICULARS OF INCOME IS DETERMINED BASED ON THE 'AMOUNT O[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'B1E DELHI HIGH COURT IN ITS JUDGMENT DATED 26.8.2010 IN ITA NO.1420 OF 2009 IN THE CASE OF NALWA SONS INVESTMEN T LTD. (AVAILABLE IN NJRS AS 2010 - LL - 0826 - 2), HELD THAT WHEN THE TAX PAYABLE ON INCOME COMPUTED UNDER NORMAL PROCEDUTE IS LESS THAN THE TAX PAYABLE UNDER THE DEEMING PROVISIONS OF SECTION 115.IB OF THE ACT, THEN PENALTY UNDER SECTION 271(1)(C) OF THE ACT C OULD 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 AC T, 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 SUBSTI TUTED 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 1/4/20 16, 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 ADDIT IONS /DISALLOWANCES MADE UNDER NORMAL PROVISIONS. IT IS FURTH ER CLARIFIED 5 I.T.A. NO.5534 / MUM/ 201 4 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 1 L5JC 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 BEFOR E VARIOUS COURTS/TRIBUNALS MAY BE WITHDRAWN/NOT PRESSED UPON. THIS MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED. 6 . IN THE PRESENT CASE, WE FIND TH A T THE PROVISION FOR DOUBTFUL DEBTS OF RS .9,51,373/ - WE R E ADDED TO THE TOTAL INCOME UNDER THE NORMAL PROVI SIONS OF ACT AND THEREFORE THE CIRCULAR AS STATED ABOVE IS DIRECTLY APPLICABLE TO THE PRESENT CASE . ACCORDINGLY, WE HOLD THAT THE ORDER OF THE FAA CONFIRMING THE PENALTY IS BAD IN LAW AND CANNOT BE SUSTAINED. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD . CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4TH APRIL , 2017 S D SD ( SAKTIJIT DEY ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 4.4 . 2017 SRL,SR.PS 6 I.T.A. NO.5534 / MUM/ 201 4 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI