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2016 (3) TMI 534 - AT - Income TaxPenalty levied under section 271(1)(c) - assessee paid income tax under section 115JB - Held that - Since the CBDT vide circular No.25/2015 dated 31.12.2015 has taken a conscious decision not to pursue penalty appeals in respect of the cases, wherein the income was assessed u/s 115JB by following the decision of Hon ble Delhi High Court Nalwa Sons Investments Ltd 2010 (8) TMI 40 - DELHI HIGH COURT we find merit in the contentions of the assessee. Total income is a negative figure under normal provisions of the Act. Hence the income declared by the assessee u/s 115JB of the Act shall remain total income of the assessee. In view of the circular referred above, the penalty u/s 271(1)(c) is not leviable in respect of the additions made while computing the income under the normal provisions of Act. In view of the above, we set aside the order of ld. CIT(A) and direct the AO to delete the penalty levied under section 271(1)(c) for the year under consideration. - Decided in favour of assessee
Issues:
Penalty under section 271(1)(c) of the Income Tax Act for the assessment year 2001-02 based on additions/disallowances made under normal provisions versus tax payable under Minimum Alternate Tax (MAT) provisions u/s 115JB. Analysis: Issue 1: Assessment and Penalty Imposition The appeal was filed against the penalty of 29.10 cr. imposed by the Assessing Officer (AO) under section 271(1)(c) of the Act for the assessment year 2001-02. The assessee initially declared a taxable income of &8377; 26.87 lakhs under normal provisions of the Act and a book profit of &8377; 135.39 lakhs under section 115JB of the Act. The AO assessed the total income under normal provisions at &8377; 55.92 cr. The Tribunal allowed an additional claim of &8377; 105 crores, resulting in the total income being computed at &8377; 135.39 lakhs under section 115JB. The issue revolved around whether the penalty under section 271(1)(c) should be imposed based on the additions/disallowances made under normal provisions or the tax payable under the deeming provisions of section 115JB. Issue 2: Legal Precedents and Circulars The assessee relied on the judgment of the Hon'ble Delhi High Court in CIT vs. Nalwa Sons Investments Ltd, which held that if the tax payable under normal provisions is less than that under section 115JB, then penalty under section 271(1)(c) should not be imposed based on additions/disallowances under normal provisions. The Circular No. 25/2015 issued by the Central Board of Direct Taxes (CBDT) on 31.12.2015 accepted the Delhi High Court decision. The circular clarified that prior to 1/4/2016, if the tax payable under normal provisions is lower than that under section 115JB, then penalty under section 271(1)(c) is not attracted for additions/disallowances made under normal provisions. Issue 3: Binding Nature of Circulars The Tribunal noted that circulars issued by the CBDT are binding on Income Tax Authorities as per legal precedents. The circular issued by the CBDT on penalty appeals in cases where income was assessed under section 115JB following the Delhi High Court decision was considered binding. Consequently, the Tribunal found merit in the assessee's contentions and directed the AO to delete the penalty levied under section 271(1)(c) for the year in question. The total income declared by the assessee under section 115JB was upheld as the final income. Conclusion Considering the legal precedents, the CBDT circular, and the binding nature of circulars on Income Tax Authorities, the Tribunal allowed the appeal filed by the assessee, setting aside the penalty imposed under section 271(1)(c) for the assessment year 2001-02. The decision was based on the settled position that prior to 1/4/2016, penalties were not applicable if the tax payable under normal provisions was lower than that under section 115JB.
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