M/s. KILLICK NIXON LTD., MUMBAI V. DCIT CENT. CIR. - 3, MUMBAI

ITA 980/MUM/2006

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4384 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 30-12-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 10-02-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K KRISHNA MURTY
• Assessee Lawyers: VIJAY C KOTHARI
• Section: 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND AMARJIT SINGH , JM ./ I.T.A. NO .980 / MUM/2 006 ( / ASSESSMENT YEA R : 2001 - 02 ) KILLICK NIXON L TD., BASEMENT, COMMERCIAL UNION HOUSE, 9, WALLACE STREET, FORT, MUMBAI - 400001 / VS. DY. COMMISSIONER OF INCOME TAX CC - 3, OLD CGO MUMBAI - 400020 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AAACK8526A / ASSESSEE BY SHRI VIJAY C KOTHARI / REVENUE BY SHRI K KRISHNA MURTY / DATE OF HEARING : 30.12. 201 5 / DATE OF PRONOUNCEMENT: 08. 1 . 201 6 / O R D E R P ER B R BASKARAN, AM : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17.11.2005 PASSED BY THE LD. CIT(A), CENTRAL - I, MUMBAI FOR THE ASSESSMENT YEAR 2001 - 02 CONFIRMING THE PENALTY OF 29.10 CR. LEVIED BY THE AO UNDER SECTION 271 (1)( C ) OF THE ACT. 2. THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FILED RETURN OF INCOME DECLARING A TAXABLE INCOME OF RS.26.87 LAK HS UNDER NORMAL PROVISIONS OF ACT AND BOOK PROFIT OF RS.135.39 LAKHS UNDER THE P ROVISIONS OF SECTION 115JB OF T HE ACT. ACCORDINGLY, THE ASSESSEE PAID INCOME TAX UNDER SECTION 115JB OF THE ACT. THE AO ITA NO. 980 / MUM/ 2006 2 COMPLETED THE ASSESSMENT BY DETERMINING THE TOTAL INCOME UNDER THE NORMAL PROVISIONS OF ACT ON RS.55.92 CR. 3. IN THE APPELLATE PROCE EDINGS, THE ASSESSEE GOT PARTIAL RELIEF. HOWEVER, THE ASSESSEE ALSO MADE ADDITIONAL CLAIM FOR DEDUCTION OF RS.105 CR ORES RELATING TO THE LIABILITY INCURRED FOR GUARANTEE AGREEMENT . THE SAID CLAIM WAS ULTIMATELY ALLOWED BY THE TRIBUNAL , VIDE ITS ORDER D ATED 30.9.2015 PASSED IN ITA NO.746/MUM/2005 (AY - 2001 - 02). THE LD.AR SUBMITTED THAT THE TOTAL INCOME OF THE ASSESSEE WOULD RESULT IN NEGATIVE FIGURE ON ALLOWING THE ADDITIONAL CLAIM OF RS.1.05 CR ORES. ACCORDINGLY, THE LD. AR SUBMITTED THAT THE TOTAL INCO ME IS ULTIMATELY COMP U TED UNDE R SECTION 115JB OF THE ACT AT RS.135.39 LAKHS. 4. THE LD. AR SUBMITTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NALWA SONS INVESTMENTS LTD AS REPORTED IN [2010] 327 ITR 543 {DEL} HAS HELD THAT WHEN THE TA X PAYABLE ON THE INCOME PAY ABLE UNDER THE NORMAL PROVISIONS IS LESS THAN THE TAX PAYABLE UNDER THE DEEMING PROVISIONS OF SECTION 115JB OF THE ACT, THEN PENALTY U/S 271(1)(C) SHOULD NOT BE IMPOSED WITH REFERENCE TO THE ABOVE ADDITION/DISALLOWANCE MADE UNDE R THE NORMAL PROVISIONS. ACCORDINGLY, HE SUBMITTED THAT THE IMPUGNED PENALTY CONFIRMED BY THE LD.CIT(A) IS LIABLE TO BE CANCELLED. 5. ON THE CONTRARY, THE LD. DR PLACED STRONG RELIANCE ON THE ORDER PASSED BY THE LD. CIT(A). 6. WE HEARD THE RIVAL CONTENTI ONS OF THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE CBDT HAS RECENTLY ISSUED A CIRCULAR NO.25/2015 DATED 31.12.2015, WHEREIN THE CBDT HAS ACCEPTED THE DECISION RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF NALWA SONS INVESTMENTS LTD ITA NO. 980 / MUM/ 2006 3 ( SUPRA). FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE CBDT CIRCULAR NO.25/2015 DATED 31.12.2015: CIRCULAR NO. 25/2015 F.NO.279/MISC./140/2015/ITJ GOVERNMENT OF INDIA MINISTRY OF FINANCE CENTRAL BOARD OF DIRECT TAXES NEW DELHI, 31ST DECEMBER, 2015 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 PRO VISION 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 I NCOME 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 AMOU NT 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 A S 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 REF ERENCE 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 FO R 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 AP PLICABLE PROSPECTIVELY W.E.F. 01.04.2016. ITA NO. 980 / MUM/ 2006 4 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(1)(C) OF THE ACT, IS NOT ATTRACTED WITH REFERENCE TO ADDITIONS /DISALLOWANCES M ADE 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(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 COUR TS/TRIBUNALS MAY BE WITHDRAWN/NOT PRESSED UPON. THIS MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED. (RAMANJIT KAUR SETHI) DCIT (OSD) (ITJ), CBDT, NEW DELHI 7. IT IS WELL SETTLED PROPOSITION THAT THE CIRCULARS ISSUED BY THE CBDT ARE BINDING ON THE INCO ME TAX AUTHORITIES. FOR THIS PROPOSITION, ONE MAY GAINFULLY REFER TO THE DECISIONS RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN (2003)(177 TAXATION 775) AND PRADIP J MEHTA VS. CIT (2008)(300 ITR 231). HENCE, THE LATEST CIRCUL AR ISSUED BY THE CBDT (REFERRED SUPRA) IS BINDING ON THE INCOME TAX AUTHORITIES. 8. SINCE THE CBDT HAS TAKEN A CONSCIOUS DECISION NOT TO PURSUE PENALTY APPEALS IN RESPECT OF THE CASES , WHEREIN THE INCOME WAS ASSESSED U/S 115JB OF THE ACT BY FOLLOWING TH E DECISION OF HONBLE DELHI HIGH COURT (REFERRED ABOVE), W E FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE. AS SUBMITTED BY THE LD. AR AFTER PASSING THE TRIBUNAL ORDER DATED 30.9.2015 ( REFERRED ABOVE ) , THE TOTAL INCOME IS A NEGATIVE FIGURE UNDER NORMAL PRO VISIONS OF THE ACT . HENCE THE INCOME DECLARED BY THE ASSESSEE U/S 115JB OF THE ACT SHALL REMAIN TOTAL INCOME OF THE ASSESSEE. IN VIEW OF THE ITA NO. 980 / MUM/ 2006 5 CIRCULAR REFERRED ABOVE, THE PENALTY U/S 271(1)(C) IS NOT LEVIABLE IN RESPECT OF THE ADDITION S MADE WHILE COMPUT ING THE INCOME UNDER THE NORMAL PROVISIONS OF ACT. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) FOR THE YEAR UNDER CONSIDERATION. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 8TH JAN, 2016. 8TH JAN.2016 SD SD ( AMARJIT SINGH ) ( B.R. BASKARAN) JU DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 8TH JAN, 2016 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPON DENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI