2019 (4) TMI 507 - AT - Income Tax

Penalty u/s 271(1)(c) - tax payable as per the MAT u/s 115JB - penalty imposed based on various disallowances made in normal computation - HELD THAT - A reference to the decision in the case of Nalwa Sons Investments Ltd. (2010 (8) TMI 40 - DELHI HIGH COURT) has been made on behalf of the assessee which squarely covers the issue in favour of the assessee. The subsequent amendment to the Explanation (4) of Section 271(1)(c) also suggests the purport of the existing provisions as applicable in the relevant assessment year. Therefore, we find merit with the appeal of the assessee. AO is accordingly directed to delete the penalty imposed under normal provision when the tax liability has been fastened on the assessee under the special provisions of Section 115JB - Appeal of the Revenue is dismissed.

Summary

Issues:
Imposition of penalty under s. 271(1)(c) of the Income Tax Act, 1961 concerning AY 2006-07.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) concerning the penalty order passed by the Assessing Officer under s. 271(1)(c) of the Act for AY 2006-07. The grounds of appeal raised by the Revenue questioned the deletion of the penalty levied on additions as per the Income Tax Act, 1961. The main issue in the appeal was the imposition of a penalty of ?54,70,000 under s. 271(1)(c) of the Act.

During the hearing, the Revenue relied on the penalty order passed by the AO, while the assessee's representative argued that the penalty was imposed based on additions/disallowances made under normal provisions, whereas the assessment was done under special provisions of Section 115JB of the Act. The representative cited case laws to support the argument that no concealment could be envisaged under s. 271(1)(c) when the tax payable under MAT provisions exceeded the tax liability under normal provisions. The representative also highlighted the modification in Explanation (4) to Section 271(1)(c) by the Finance Act, 2015, applicable from AY 2016-17 onwards.

The Tribunal considered the rival submissions and the legal precedents cited by the assessee's representative. It was noted that the issue revolved around whether a penalty could be imposed under s. 271(1)(c) for alleged concealment of income when the tax liability arose under special provisions of Section 115JB. Citing the decision of the Delhi High Court and the subsequent amendment to Explanation (4) of Section 271(1)(c), the Tribunal found merit in the appeal of the assessee. Consequently, the AO was directed to delete the penalty imposed under normal provisions due to the tax liability under Section 115JB.

In conclusion, the Tribunal dismissed the appeal of the Revenue, emphasizing that the penalty was not justified under the circumstances where the tax liability was determined under special provisions, as per Section 115JB of the Act.