2012 (4) TMI 434 - HC - Income Tax

Whether penalty can be imposed on the assessee where additions are made under the normal provisions of the Act but actually the taxable income of the assessee is assessed under Section 115JB and there is no addition for book profits Held that - Though there was concealment but that had its repercussions only when the assessment was done under the normal procedure - it is the deemed income assessed under section 115JB of the Act which has become the basis of assessment as it was higher of the two and tax is paid on the income assessed u/s 115JB - the concealment did not lead to tax evasion at all - Penalty not to be imposed in favour of assessee.

Summary

Issues:
1. Applicability of a previous court decision to penalty imposition under Section 271(1)(c) of the Income Tax Act, 1961.
2. Assessment of taxable income under normal provisions versus Section 115JB.
3. Imposition of penalty on the assessee when additions are made under normal provisions but taxable income is assessed under Section 115JB.

Analysis:
1. The judgment concerns two appeals by the Revenue against the Central Warehousing Corporation for assessment years 2003-04 and 2004-05. The Income Tax Appellate Tribunal had deleted the penalty under Section 271(1)(c) of the Income Tax Act, 1961, based on a previous decision by the Delhi High Court in CIT Vs. Nalwa Sons Investments Ltd. The main issue raised was the applicability of the Nalwa Sons Investments Ltd. decision to the present case.

2. For the assessment year 2003-04, the assessee had initially returned a loss under normal tax provisions but disclosed book profit under Section 115JB. The Assessing Officer later computed the income under normal provisions at a positive figure and enhanced the book profits under Section 115JB. Eventually, the income was assessed at a figure slightly less than the book profits mentioned in the return income. Similarly, for 2004-05, the returned income was a loss under normal provisions, but the taxable income was computed under Section 115JB without enhancing book profits.

3. The key question in the appeals was whether a penalty could be imposed on the assessee when additions were made under normal provisions, but the taxable income was assessed under Section 115JB without any additions to book profits. The court referred to the Nalwa Sons Investments Ltd. case where it was held that if the income assessed under Section 115JB is higher than the normal procedure, the concealment under normal provisions does not lead to tax evasion since tax is paid on the income assessed under Section 115JB. Therefore, the concealment becomes irrelevant in such cases, and penalty imposition may not be justified.

4. The court found that the issue was clearly covered by the Nalwa Sons Investments Ltd. decision, and no substantial question of law arose for consideration. Consequently, the appeal was dismissed with no costs incurred.