2012 (7) TMI 407 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Additions to income on rejecting assessee s claim on amount paid to the ROC on account of fee and stamp duty amounts as revenue expenditure - Held that - As decided in CIT Versus NALWA SONS INVESTMENTS LTD. 2010 (8) TMI 56 (HC) that the income of the assessee has ultimately been determined under sec. 115JB and no addition or adjustment has been made by the Assessing Officer in the computation of book profit meant for section 115JB - if ultimate tax is levied on book profit under sec. 115JB then any changes made in the computation of income of an assessee under the regular assessment would be an irrelevant factor for imposing the penalty - in favour of assessee.

Summary

Issues:
Penalty under sec. 271(1)(c) of the Income-tax Act, 1961 for claiming capital expenditure as revenue expenditure.

Analysis:
The appellant, a joint venture company, appealed against the penalty imposed under sec. 271(1)(c) of the Income-tax Act, 1961 for claiming certain expenses as revenue expenditure. The Assessing Officer found an increase in share capital and directed the appellant to provide details. The appellant claimed certain expenses as revenue expenditure, which the Assessing Officer deemed as capital in nature based on a Supreme Court decision. Consequently, a penalty of Rs.63 lacs was imposed for furnishing inaccurate particulars of income. The CIT(Appeals) upheld the penalty.

The appellant argued that the issue was covered in their favor by a High Court decision and emphasized that the income was determined under sec. 115JB without adjustments. The appellant contended that penalties should only be based on adjustments made while computing book profit under sec. 115JB, not on regular income adjustments. The Departmental Representative cited a Supreme Court case where penalties were imposed for reducing losses carried forward. The Tribunal noted the distinction between tax levies under normal procedures and sec. 115JB. Referring to the High Court's decision, the Tribunal held that penalties should only relate to adjustments affecting book profit under sec. 115JB. Since no adjustments were made to the book profit in this case, the penalty was deleted, following the High Court's ruling.

In conclusion, the Tribunal allowed the appeal, deleting the penalty imposed under sec. 271(1)(c) of the Income-tax Act, 1961. The decision was based on the High Court's interpretation that penalties should only be imposed based on adjustments affecting book profit under sec. 115JB, not on regular income adjustments.