2014 (5) TMI 400 - HC - Income Tax

Deletion of penalty u/s 271(1)(c) of the Act Computation u/s 115JB of the Act Concealment of particulars Held that - Tribunal was of the view that Concealment Assessment u/s 115JB loss under normal provisions Assessee's income computed as per the normal procedure was less than the income determined by legal fiction namely, book profit u/s 115JB and thus income was assessed u/s 115JB and not under the normal provisions - Though there was concealment, it had repercussion only when assessment was made under the normal procedure - Assessment as per the normal procedure was not acted upon - It is the deemed income u/s 115JB which has become the basis of the assessment - tax was paid on the income assessed u/s 115JB - the concealment did not lead to tax evasion at all penalty u/s 271(1)(c) could not be imposed in respect of the false claim of depreciation. The assessee would pay before and after additions would remain exactly the same - the Commissioner did not permit any increase in the assessee's book profit computation u/s 115JB of the Act, even after unearthing the concealed income, the assessee ended up paying the same amount of minimum alternative tax u/s 115JB of the Act even after the concealments were unearthed and accepted by the assessee - the implication of Explanation 4 to section 271(1) of the Act must be seen - the assessee's tax liability did not change despite unearthing of concealed income, no penalty could have been levied - simply because before and after the additions the assessee remained a MAT company and paid tax u/s 115JB of the Act or such similar provision, that by itself would mean that no penalty could be imposed - If the effect of the addition of the concealed income results into higher minimum alternative tax by increasing the book profit also, penalty could as well be imposed Decided against Revenue.

Summary

Issues Involved:
1. Whether the Income Tax Appellate Tribunal was right in law in deleting the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, on the ground that no such penalty is leviable where computation of income is made under Section 115JB of the Act, even though concealment of particulars of income is established.

Issue-wise Detailed Analysis:

Issue 1: Deletion of Penalty under Section 271(1)(c) when Computation is under Section 115JB

Revenue filed appeals questioning the deletion of a penalty of Rs.16,51,520/- imposed under Section 271(1)(c) of the Income Tax Act, 1961, by the Income Tax Appellate Tribunal. The Tribunal deleted the penalty on the grounds that the computation of income was made under Section 115JB of the Act, and despite the concealment of particulars of income, no penalty was leviable.

The facts revealed that the respondent-assessee, a company engaged in the business of ceramic tiles, filed a return of income declaring 'Nil' income after claiming deductions and depreciation. However, scrutiny by the Assessing Officer revealed unaccounted cash receipts amounting to Rs.46,78,545/- for the assessment year under consideration, which were added to the income of the assessee for both normal computation and book profit computation under Section 115JB. The Assessing Officer also initiated penalty proceedings.

The Commissioner (Appeals) upheld the penalty, noting that the unaccounted sales were detected during a search by the Excise Department and admitted by the Director of the Company. The assessee's revised return was filed only after the search, indicating concealment of income and furnishing of inaccurate particulars.

The Tribunal, however, allowed the assessee's appeal, observing that the income remained 'Nil' after the additions, and the tax was payable on book profit under Section 115JB. It relied on the Delhi High Court's decision in CIT Vs. Nalva Sons Investment Ltd., which held that when income is computed under Section 115JB, concealment does not lead to tax evasion, and thus, no penalty under Section 271(1)(c) could be imposed.

The Tribunal's decision was based on the rationale that the penalty provisions under Section 271(1)(c) are applicable only when concealment leads to tax evasion. Since the tax liability remained the same before and after the concealment was unearthed, no penalty was imposable.

The Revenue argued that the Tribunal erred in deleting the penalty, contending that the decision in Nalwa Sons Investments Ltd. was not applicable. However, the Tribunal's decision was upheld, noting that the Commissioner had deleted the additions for book profit computation under Section 115JB, making the tax liability the same before and after the concealment was unearthed.

The court clarified that its conclusions should not be interpreted as a general rule that no penalty can be imposed simply because the assessee remains a MAT company before and after additions. Penalty could still be imposed if the addition of concealed income results in higher minimum alternative tax by increasing the book profit.

In conclusion, the court dismissed the Tax Appeals, discharging the notice and ruling that no costs were to be awarded.