2018 (4) TMI 191 - HC - Income Tax

Penalty u/s 271(1)(c) - individual disallowances especially when it is being taxed under Section 115JB of the Act - The matter is no longer res-integra. The question regarding levy of penalty under Section 271(1)(c) of the Act where tax was paid on the basis of book profits determined under Section 115JB of the Act was decided by this Court in M/s Vardhman Acrylics Limited s case (2014 (8) TMI 1144 - PUNJAB & HARYANA HIGH COURT) holding that no penalty under Section 271(1)(c) of the Act was leviable on any amount of expenses claimed by the assessee - Decided against revenue.

Summary

Issues:
1. Whether penalty under Section 271(1)(c) of the Income Tax Act can be levied on an assessee taxed under Section 115JB of the Act.
2. Whether penalty can be imposed for individual disallowances when assessed under Section 115JB.

Analysis:

Issue 1:
The primary issue in the appeals was the liability of an assessee for penalty under Section 271(1)(c) of the Act when taxed under Section 115JB. The Tribunal's decision was based on the precedent set by the High Court in a similar case, emphasizing that no penalty under Section 271(1)(c) was applicable to expenses claimed by the assessee under Section 115JB. The judgment highlighted that concealment of income did not lead to tax evasion when assessed under MAT, and thus, penalties for regular income additions were not justified.

Issue 2:
Regarding individual disallowances under Section 115JB assessment, the Tribunal relied on the legal fiction created by the Act where total income is computed under normal provisions and compared with book profits under Section 115JB. The Tribunal found that penalties for disallowances made in regular income were not applicable when the assessee's income was assessed under Section 115JB. The judgment cited previous decisions to support the conclusion that penalties could not be imposed based on disallowances or additions under regular provisions when assessed under Section 115JB.

In conclusion, the appeals were dismissed as no substantial question of law arose from the findings of the CIT(A) and the Tribunal. The judgment reiterated that penalties under Section 271(1)(c) were not applicable to an assessee taxed under Section 115JB, emphasizing the legal distinction between assessments under different provisions of the Income Tax Act.