2019 (5) TMI 1677 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - reference to the income assessed u/s. 115-JB - bonafide belief - whether the explanation offered by the assessee in response to the show cause notice u/s. 271(1)(c) of the Act is a plausible explanation or not? - HELD THAT - There is no material on record establishing as to how the appellant had entertained belief that the profits exempt from tax under the provisions of s. 10B of the Act are not liable to tax u/s. 115-JB of the Act. Thus, it is merely bald explanation, therefore, it cannot held to be a plausible explanation and the levy of penalty u/s. 271(1)(c) of the Act is justified having regard to the ratio of the decision of Mad Data Pvt. Ltd. v. CIT 2013 (11) TMI 14 - SUPREME COURT Hon ble High Court of Delhi in the case of Nalwa Songs Investments Ltd. 2010 (8) TMI 40 - DELHI HIGH COURT is not applicable in the present case, as the penalty is levied with reference to the income assessed u/s. 115-JB of the Act, we do not find any merit in the appeal filed by the assessee.

Summary

Issues:
1. Assessment under section 115JB instead of normal provisions.
2. Imposition of penalty under section 271(1)(c) for non-disclosure of book profits under section 115JB.

Analysis:
1. The appellant contended that the income was assessed under section 115JB instead of normal provisions, leading to the imposition of penalty under section 271(1)(c). The appellant argued that concealment of income would only be relevant under normal assessment, not under section 115JB. However, the AO initiated penalty proceedings under section 271(1)(c) for non-disclosure of book profits under section 115JB. The appellant claimed that the concealment did not result in tax evasion as the computation was made under section 115JB, where the concealment was irrelevant. The appellant relied on judgments like CIT v. Nalwa Sons Investment Ltd., affirmed by the Supreme Court, to support their argument.

2. The case involved the issue of whether the explanation provided by the assessee for not disclosing book profits under section 115JB was plausible. The AO issued a show cause notice for penalty under section 271(1)(c) due to non-disclosure of book profits. The appellant explained that they believed profits exempt under section 10B would not be taxed as book profits under section 115JB. However, the AO proceeded with the penalty. The Tribunal found that there was no evidence to support the appellant's belief, considering it a bald explanation. Referring to the decision in Mad Data Pvt. Ltd. v. CIT, the Tribunal justified the penalty imposition. The Tribunal dismissed the appellant's reliance on CIT v. Nalwa Sons Investments Ltd., stating that the penalty was based on income assessed under section 115JB, not normal provisions, making the Delhi High Court's decision inapplicable.

In conclusion, the Tribunal upheld the penalty under section 271(1)(c) as the explanation provided for non-disclosure of book profits under section 115JB was deemed implausible. The appeal filed by the assessee was dismissed, citing the inapplicability of previous judgments to the present case.