2019 (4) TMI 1616 - AT - Income Tax

Penalty u/s 271(1) (c) - additions/ disallowances made under normal provisions of the Act, if ultimately the tax liability is determined u/s 115JB - HELD THAT - CBDT vide Circular No. 25/2015 dated 31.12.2015 is unambiguous and categorical that no penalty u/s 271(1)(c ) of the Act could be levied in respect of additions/ disallowances made under normal provisions of the Act, if ultimately the tax liability is determined u/s 115JB of the Act by the AO. It is not in dispute that the assessee is liable to tax only u/s 115JB of the Act even after the completion of assessment u/s 143(3) of the Act for the year under consideration. Hence respectfully following the aforesaid circular, we hold that no penalty u/s 271(1)( c) of the Act could be made in the facts of the instant case in the hands of the assessee. Since relief is granted to the assessee on this ground, the arguments advanced by the AR on merits of the addition / disallowance need not be gone into and we refrain to give our opinion on the same. - Decided in favour of assessee.

Summary

Issues:
1. Justification of penalty u/s 271(1)(c) of the Income Tax Act, 1961.
2. Applicability of Circular No. 25/2015 dated 31.12.2015 in penalty proceedings.

Detailed Analysis:
Issue 1: Justification of penalty u/s 271(1)(c) of the Income Tax Act, 1961
The appeal in ITA No.1529/Mum/2018 for A.Y.2013-14 was against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The assessee had filed its return of income declaring total income and had set off a loss against dividend income from a foreign subsidiary. The assessing officer (AO) disallowed the set off of the loss and initiated penalty proceedings under section 271(1)(c) of the Act. The Commissioner of Income Tax (Appeals) upheld the penalty. The main issue was whether the penalty was justified in the circumstances.

Issue 2: Applicability of Circular No. 25/2015 dated 31.12.2015 in penalty proceedings
The Circular issued by the CBDT was crucial in determining the applicability of penalty under section 271(1)(c) of the Act. The Circular clarified that where the tax payable on the total income computed under normal provisions was less than the tax payable on book profits under section 115JB of the Act, no penalty should be levied with reference to additions/disallowances made under normal provisions. The Circular provided guidance based on a judgment of the Delhi High Court and explained the method of calculating the amount of tax sought to be evaded. The Circular had retrospective effect until 1-4-2016, and it was emphasized that no penalty should be imposed in such cases.

The Tribunal analyzed the facts and found that the tax payable under section 115JB of the Act was higher than under normal provisions. Therefore, relying on the Circular and the Delhi High Court judgment, the Tribunal held that no penalty under section 271(1)(c) of the Act could be imposed in the case at hand. The Tribunal emphasized that the Circular was binding on revenue authorities and provided a clear directive on the issue. Consequently, the appeal of the assessee was allowed based on the applicability of the Circular and the settled legal position regarding penalty imposition in such cases.

In conclusion, the Tribunal's decision was based on the interpretation of relevant legal provisions, Circular No. 25/2015, and judicial precedents, leading to the allowance of the assessee's appeal against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.