2017 (2) TMI 591 - AT - Income Tax

Penalty u/s 271(1)(c) - not offering correct MAT on the book profit u/s 115JB and non-submission of explanation for claiming expenditure claimed against exempt dividend income and income from house property - Held that - The assessee has concealed particulars of income by allegedly not calculating MAT u/s 115JB which in the case of assessee was higher than the normal taxes; as the long term capital gain exempted u/s 10(38) of the Act is required to be added in the book profits for the purpose of calculating MAT. Assessee is also guilty for the fact that it was well aware of the provisions of section 115JB of the Act as it has been consistently furnishing details of the same in the previous Asstt. Years wherein normal tax was higher than the MAT but in the year under appeal wherein tax u/s 115JB of the Act was 1, 10, 85, 350/- as against normal tax of 25, 63, 322/- assessee had not furnished any detail of MAT calculation and also had not filed form 29B statutorily required under the Act to be furnished along with the return of income. We therefore uphold the order of ld. CIT(A) confirming the penalty u/s 271(1)(c) of the Act calculated on the tax to be evaded of 98, 79, 990/- calculated @ 100% of deemed income u/s 115JB of 98, 79, 990/-. - Decided against assessee Disallowance of expenditure made in the computation of assessee s total income - Held that - The impugned expenses have already been disallowed and assessee has agreed to pay taxes thereon but certainly assessee should not be visited by penalty u/s 271(1)(c) of the Act. We further observe that penalty is not imposable on this impugned disallowance of expenses because for the year under appeal assessee s tax liability under MAT is higher than the normal tax liability and even the disallowance of expenses will not affect the overall tax liability and in such situation penalty is not leviable u/s 271(1)(c) of the Act on the disallowed expenses. We therefore delete the penalty - Decided against revenue

Summary

Issues Involved:
1. Validity of the penalty order passed by the Assessing Officer.
2. Levying of penalty of ?98,79,990 under Section 271(1)(c) for concealment of income under Section 115JB.
3. Levying of penalty of ?4,63,247 under Section 271(1)(c) for disallowance of expenses in the computation of total income.
4. Quantum of penalty under Section 271(1)(c).

Detailed Analysis:

1. Validity of the Penalty Order:
The appellant contested the validity of the penalty order passed by the Assessing Officer. It was argued that the appellant provided all necessary material facts and information, and there was no concealment of income or filing of inaccurate particulars. The appellant contended that the omission to include the capital gain in the book profit calculation was a bona fide error due to oversight of the amended provisions of Section 115JB applicable from the assessment year 2007-08.

2. Penalty of ?98,79,990 under Section 271(1)(c) for Concealment of Income:
The appellant argued that the penalty for not showing the total income pursuant to Section 115JB and instead returning total income as per normal provisions was erroneous. The appellant cited judgments from the Delhi High Court and Punjab & Haryana High Court, emphasizing that the omission was bona fide and not intentional. The Tribunal, however, observed that the appellant failed to file the required Form 29B and did not revise the return to include the MAT calculation, raising doubts about the bona fides and suggesting a lack of compliance with statutory requirements. The Tribunal upheld the penalty, noting that the appellant had consistently provided MAT calculations in previous years but failed to do so when MAT was higher than normal tax.

3. Penalty of ?4,63,247 under Section 271(1)(c) for Disallowance of Expenses:
The appellant contended that the disallowance of expenses had no bearing on the tax liability since the total income was deemed equal to the book profit under Section 115JB. The Tribunal observed that the expenses claimed were genuine and supported by evidence, and the appellant had shown positive business income. It was noted that the expenses were of a general administrative nature necessary for running the company. The Tribunal concluded that the appellant did not furnish inaccurate particulars or conceal income, and the penalty was not justified given the higher tax liability under MAT. The penalty of ?4,63,247 was deleted.

4. Quantum of Penalty under Section 271(1)(c):
The appellant argued that even if the penalty was justified, the quantum should be less than the amount levied. The Tribunal did not find this argument persuasive in the context of the ?98,79,990 penalty, as the appellant had not complied with the statutory requirements and failed to revise the return or file the necessary form. The penalty was upheld at 100% of the deemed income under Section 115JB.

Conclusion:
The Tribunal upheld the penalty of ?98,79,990 for concealment of income under Section 115JB, emphasizing the appellant's failure to file the required form and revise the return. However, the penalty of ?4,63,247 for disallowance of expenses was deleted, recognizing the genuineness of the expenses and the higher tax liability under MAT. The appeal was partly allowed.