2014 (8) TMI 1144 - HC - Income Tax

Penalty under section 271(1) (c) - furnishing inaccurate particulars for treating the sales tax subsidy/exemption as capital receipt instead of revenue receipt - tax was paid on the basis of book profits determined under Section 115JB - Held that - The issue relating to levy of penalty under Section 271(1)(c) where tax was paid on the basis of book profits determined under Section 115JB of the Act was considered by the Delhi High Court in CIT vs. Nalwa Sons Investments Limited, (2010) 327 ITR 543. It was held that where the book profits were determined under section 115JB of the Act any amount of expenses claimed would not render the assessee liable to penalty under section 271(1) (c) of the Act on account of false claim of expenses. - Decided in favour of assessee.

Issues:
1. Appeal by revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal regarding penalty cancellation under section 271(1)(c).
2. Justification of upholding the cancellation of penalty under section 271(1)(c) for treating sales tax subsidy contrary to jurisdictional High Court decisions.
3. Assessment under section 115JB affecting computation of total income and carry forward of losses.
4. Appeal against the order of the Commissioner of Income Tax (Appeals) quashing the penalty order.
5. Applicability of penalty under section 271(1)(c) for furnishing inaccurate particulars regarding subsidy claims.

Analysis:
1. The appeal by the revenue challenged the Tribunal's decision upholding the cancellation of penalty under section 271(1)(c) for treating sales tax subsidy as capital receipt. The High Court considered the relevant facts, including the assessee's business activities and tax filings for the assessment year 2005-06. The Assessing Officer imposed a penalty under section 271(1)(c) for inaccurate particulars related to the treatment of sales tax subsidy. The Commissioner of Income Tax (Appeals) later quashed the penalty, leading to the revenue's appeal before the Tribunal and subsequently the High Court.

2. The revenue argued that the penalty was justified based on a wrong deduction claim by the assessee regarding the subsidy, citing a judgment of the Delhi High Court. However, the High Court, after hearing the arguments, found no merit in the revenue's appeal. It referred to a judgment by the Delhi High Court in a similar case, emphasizing that under the Income Tax Act, concealment leading to tax evasion is relevant only under normal assessment procedures, not under MAT provisions.

3. The High Court further elaborated on the Delhi High Court's decision regarding the computation of total income under normal provisions versus section 115JB of the Act. It highlighted that concealment of income would not lead to tax evasion under section 115JB assessments, as tax is paid based on the income assessed under this section. The Tribunal also relied on this judgment to uphold the deletion of penalty by the CIT(A), as no concealment can be inferred when income is assessed under section 115JB.

4. Ultimately, the High Court concurred with the Tribunal's decision based on the Delhi High Court's precedent, emphasizing that no concealment can be established when income is assessed under MAT provisions. Therefore, the High Court dismissed the revenue's appeal, stating that no substantial question of law arose from the case.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the High Court's reasoning behind dismissing the revenue's appeal regarding the penalty under section 271(1)(c) of the Income Tax Act, 1961.

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