2016 (12) TMI 503 - HC - Income Tax

Penalty under section 271(1)(c) - proportionate disallowance of interest on the amount advanced by the respondent-assessee to its sister concern - Held that - What is important is that it was found that there was no concealment of the particulars of income and that the particulars furnished were not inaccurate either. In these circumstances, we see no reason to interfere with the concurrent findings of both the appellate authorities as there was no concealment. Nor is any interference warranted with the exercise of discretion in not levying the penalty.- Decided in favour of assessee. Incorrect claim while calculating the MAT under Section 115JB - Held that - The provisions of Explanation 1(viii) of Section 115JB(1)define book profit to mean the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by the amount of deferred tax, if any such amount is credited to the profit and loss account. Thus, we will assume that the deferred tax was to be included while computing the MAT under Section 115JB. However, the CIT (Appeals) and the Tribunal deleted the penalty, inter alia, on account of the fact that sub-clause (viii) was introduced in the year 2008 with retrospective effect from 01.04.2001 i.e. before the return was filed for the assessment year 2007 with which we are concerned. It is not the appellant s case that there was suppression of any material or a deliberate mis-statement. The mere fact that an incorrect claim was made was held not to be sufficient in the facts and circumstances of the case to initiate the penalty proceedings. There is no warrant for interference with the exercise of discretion. - Decided in favour of assessee.

Summary

Issues:
1. Appeal against the order of the Tribunal confirming the deletion of penalty imposed by the Assessing Officer.
2. Substantial questions of law regarding penalty under section 271(1)(c) on various issues.

Analysis:
1. The appellant raised substantial questions of law challenging the Tribunal's decision to uphold the deletion of penalty imposed by the Assessing Officer. The first issue raised was regarding the reliance on a specific case law by the Tribunal, while the appellant argued that a different decision by the Delhi High Court should have been applied. The second issue involved the deletion of penalty under section 271(1)(c) related to MAT adjustments, where the appellant contested the applicability of Circular No. 25 of 2015 issued by the CBDT. The third and fourth issues concerned the reduction of deferred tax from net profit for MAT calculation, with the appellant disputing the correctness of such reduction based on the timing of amendments to the Income Tax Act.

2. The Assessing Officer initiated penalty proceedings under Section 271 of the Income Tax Act based on two grounds. Firstly, the penalty was proposed due to a proportionate disallowance of interest on the amount advanced by the respondent to its sister concern. However, it was found that there was no concealment of income particulars or inaccuracies in the furnished details, leading to the appellate authorities concluding that no penalty was warranted. Secondly, the penalty was also considered due to an incorrect claim made by the respondent in calculating MAT under Section 115JB of the Act by reducing deferred tax. Despite the quantum appeal decision against the respondent, both the CIT (Appeals) and the Tribunal deleted the penalty, citing the retrospective introduction of a relevant provision and the absence of deliberate misstatements or material suppression.

3. The Tribunal and the appellate authorities found no justification for imposing a penalty in the given circumstances. The interpretation of the provisions related to book profit under Section 115JB(1) of the Act, along with the retrospective effect of certain clauses, played a crucial role in determining the deletion of penalties. The absence of deliberate misstatements or suppression of material facts further supported the decision to not levy penalties. Consequently, the Court dismissed the appeal, emphasizing that no substantial question of law arose from the case.

In conclusion, the judgment highlights the meticulous analysis of penalty imposition under the Income Tax Act, emphasizing the importance of accurate reporting and the retrospective application of relevant provisions in determining the deletion of penalties.