2016 (8) TMI 1467 - AT - Income Tax

Charging of interest u/s. 234 - HELD THAT - Assessee had filed the return of income on 30th September 2009 whereas the amendment to clause (i) to Explanation was made by Finance (No 2) Act 2009 with retrospective effect from 1st April 2001 meaning thereby that at the time of filing of return of income, the amendment(had already come into force and that the assessee was aware about it. During the course of regular assessment proceedings, Assessee voluntarily revised the computation of income on the basis of newly inserted s.115JB(2) Explanation 1(h). In such a situation it was held that when the assessee was under a bona fide belief and based his estimate of income as per the law prevailing at the relevant time of filing the original return of income, no interest u/s 234B and 234C of the Act is leviable on account of subsequent amendment to the provisions. In view of these facts, we are of the view that the additional ground of Assessee needs to be decided against the assessee and therefore to be dismissed. MAT computation - Book profits u/s 115JB - provision for bad debts debited to profit and loss account for calculating book profit u/s.115JB (MAT) - in all the decisions that are relied upon by Ld AR, the issue in those appeals was not with respect to clause (i) to Explanation 1 of s. 115JB and therefore the benefit of those decisions will not be applicable to the facts of the present case. On the other hand we find that Hon'ble Punjab Haryana High Court in the case of CIT v. Steriplate (P.) Ltd. 2011 (5) TMI 645 - PUNJAB AND HARYANA HIGH COURT , in the case of CIT v. Mysore Breweries Ltd 2009 (9) TMI 829 - KARNATAKA HIGH COURT and CIT v. Yashaswi Leasing Finance Ltd. 2011 (8) TMI 765 - KARNATAKA HIGH COURT have held that in view of insertion of clause (i) to Explanation 1 to s. 115JB, with retrospective effect, amount set aside as provision for diminution in value of assets is to be added back for computation of book profits u/s 115JB of the Act. In view of the fact that the provision made by the assessee is covered by the clause (i) to Expln.1 to s.115JB of the act and in view of the various decisions of Hon'ble High Courts cited herein, we are of the view that no interference to the order of CIT(A) is called for and thus we dismiss this ground of Assessee. Penalty u/s.271(1)(c) - addition on account of provision for bad and doubtful debts to book profit u/s.115JB - HELD THAT - Merely because additions have confirmed in appeal or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. Before us, ld.AR has given the reasons and the facts which had resulted into addition. These submissions have not been controverted by the Revenue. Further, there is nothing on record to demonstrate that assessee had filed inaccurate particulars of income or had concealed the particulars of income. We also get support from the judgement of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. 2010 (3) TMI 80 - SUPREME COURT wherein held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of provision for bad debts to book profit under section 115JB.
2. Levy of interest under section 234B.
3. Levy of penalty under section 271(1)(c).

Issue-wise Detailed Analysis:

1. Addition of Provision for Bad Debts to Book Profit under Section 115JB:

The primary issue was whether the provision for bad debts should be added back to the book profit while computing Minimum Alternate Tax (MAT) under section 115JB. The Assessee argued that the provision was not an unascertained liability and hence should not be added back. However, the AO, relying on the Finance (No.2) Act, 2009 amendment with retrospective effect from 2001, added the provision for bad debts to the book profit. The CIT(A) upheld the AO's decision, noting that the provision pertained to loans and advances, which were investments, and thus fell under the clause (i) of Explanation 1 to section 115JB.

The Tribunal confirmed the CIT(A)'s order, stating that the provision for bad debts related to loans and advances, and share application money was covered under the amended clause (i) to Explanation 1 of section 115JB. The Tribunal also noted that the decisions cited by the Assessee did not specifically address clause (i) of Explanation 1 to section 115JB. Hence, the addition of the provision for bad debts to the book profit was justified.

2. Levy of Interest under Section 234B:

The Assessee contended that interest under section 234B should not be levied due to the retrospective amendment. The Tribunal rejected this argument, noting that the Assessee filed the return after the amendment came into force and was aware of the changes. The Tribunal distinguished the present case from the Uttam Sugar Mills Ltd. case, where the Assessee had filed the return before the amendment. Thus, the Tribunal upheld the levy of interest under section 234B.

3. Levy of Penalty under Section 271(1)(c):

The AO imposed a penalty under section 271(1)(c) for concealment of income, which was upheld by the CIT(A). The Tribunal, however, found that the Assessee had disclosed all relevant details and that the addition was due to a difference in interpretation. The Tribunal emphasized that penalty proceedings are separate from quantum proceedings and that merely because an addition is confirmed does not automatically warrant a penalty. The Tribunal relied on the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd., which held that a mere claim not sustainable in law does not amount to furnishing inaccurate particulars. Consequently, the Tribunal directed the deletion of the penalty.

Conclusion:

The appeal regarding the addition of provision for bad debts to book profit under section 115JB and the levy of interest under section 234B was dismissed, while the appeal against the levy of penalty under section 271(1)(c) was allowed.