2018 (10) TMI 423 - AT - Income Tax

Penalty u/s 271(1)(c) - difference in book profits computed during the course of assessment proceedings - MAT computation difference - proof of concealment of income - mistake in the computation made by the assessee u/s 115JB for computing the book profit - DR s contention is that it was only when the assessee was cornered by issuing notice u/s. 143(2) that the assessee filed the revised computation of book profit - Held that - The assessee had produced balance sheet and profit & loss account before the AO during the course of assessment proceedings and the income computed in the profit and loss account has been accepted and during the course of assessment proceeding the assessee filed revised computation which has also been accepted by the Ld. AO. Mere differences were in computation of book profit is not a concealment of income particularly when the assessee had filed revised computation of book profit showing correct figure thereof, on which the AO has no objection. It can hardly be said that the assessee filed revised computation only when the ambiguity was pointed out by the AO. Secondly, the ld. CIT(A) in the impugned order has given various reasonable possibilities to commit the mistake by the assessee while computing the book profit in the return of income, which stood corrected by the assessee by filing the revised computation of book profit. The revised computation of book profit so filed by assessee stood accepted by the AO. In such view of matter, various decisions relied by the ld. DR are not applicable to the present case having not been based on parallel facts. Thus we uphold the order of the Ld. CIT(A) and he has rightly deleted the penalty imposed by the AO - decided against revenue

Summary

Issues Involved:
1. Calculation of Tax under Section 115JB.
2. Disclosure of Book Profit and Disallowance under Section 14A.
3. Imposition of Penalty under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Calculation of Tax under Section 115JB:
The revenue contended that the assessee violated Section 10(38) by reducing income from book profit, which is barred under clause (ii) of Explanation 1 to Section 115JB. The assessee, an NBFC, initially filed a return showing book profit of ?10,98,142 and later revised it to ?2,02,95,426 during scrutiny proceedings. The AO observed that the assessee had reduced the profit on the sale of long-term investments exempt under Section 10(38), which is not permissible. The CIT(A) accepted the assessee's revised computation and deleted the penalty imposed by the AO.

2. Disclosure of Book Profit and Disallowance under Section 14A:
The revenue argued that the assessee did not add disallowances made under Section 14A to its book profit as required under clause (f) of Explanation 1 to Section 115JB. The AO noticed that the assessee disallowed expenses incurred against exempt income under Section 14A. The CIT(A) found that the assessee had disclosed all material facts and that the error in computation was a bona fide mistake. The revised computation filed by the assessee was accepted by the AO, indicating no concealment of income.

3. Imposition of Penalty under Section 271(1)(c):
The AO imposed a penalty of ?34,55,511 under Section 271(1)(c) for allegedly concealing income by furnishing inaccurate particulars of book profit. The CIT(A) deleted the penalty, noting that the assessee's mistake in computation was bona fide and not an attempt to conceal income. The CIT(A) emphasized that the assessee had disclosed all relevant facts and that the error was rectified voluntarily before any specific query was raised by the AO. The ITAT upheld the CIT(A)'s decision, stating that the mere computational error did not amount to concealment of income, especially since the revised computation was accepted by the AO.

Conclusion:
The ITAT concluded that the CIT(A) had made a well-reasoned order, which did not require interference. The tribunal found that the assessee had disclosed all material facts and that the error in computation was a bona fide mistake. The revised computation of book profit was accepted by the AO, and there was no concealment of income. The appeal of the revenue was dismissed, and the order of the CIT(A) deleting the penalty was upheld.