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2019 (5) TMI 1324 - AT - Income TaxPenalty u/s 271(1)(c) - tax liability of the assessee is ultimately computed on the book profit under section 115JB - whether penalty imposed u/s 271(1)(c) on the basis of disallowance made under the normal provisions of the Act would survive? - HELD THAT - On the basis of additions/disallowances made under the normal provisions of the Act, AO imposed penalty u/s 271(1)(c). However, while giving effect to the order passed by the Commissioner (Appeals), AO in his order dated 26th July 2017, a copy of which is placed before us by the AR has computed the total loss of the assessee under the normal provisions of the Act at ₹ 74,77,297, and has ultimately computed the tax liability of the assessee on the book profit determined under section 115JB. If we examine the legal position, it can be seen that the Hon'ble Delhi High Court in CIT v/s Nalwa Sons Investment Ltd. 2010 (8) TMI 40 - DELHI HIGH COURT has held that when the income of the assessee is computed u/s 115JB of the Act, penalty under section 271(1)(c) of the Act on the basis of additions / disallowances made under the normal provisions of the Act would not survive. - Decided in favour of assessee.
Issues:
1. Challenge to penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2006-07. 2. Legal issue of whether penalty under section 271(1)(c) would survive when tax liability is computed on book profit under section 115JB of the Act. Analysis: Issue 1: Challenge to Penalty Imposed The appeal was filed by the assessee against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2006-07. The Assessing Officer made certain disallowances/additions resulting in a positive income under the normal provisions of the Act. The tax liability computed under the normal provisions exceeded that under section 115JB, leading to the imposition of the penalty. The learned Commissioner (Appeals) confirmed the penalty, which was challenged by the assessee. Issue 2: Survival of Penalty under Section 271(1)(c) The crux of the legal issue was whether the penalty under section 271(1)(c) would survive when the tax liability was ultimately computed on the book profit under section 115JB of the Act. The assessee argued that once the tax liability was determined under section 115JB, the penalty based on disallowances under the normal provisions should not stand. The argument was supported by a decision in Mehta Sulfites India Ltd. v/s ACIT, emphasizing that such penalties would not survive in such cases. Judgment and Decision After considering the submissions and the factual matrix, the Tribunal noted that the tax liability was ultimately computed under section 115JB of the Act. Citing the decision of the Hon'ble Delhi High Court in CIT v/s Nalwa Sons Investment Ltd., the Tribunal held that penalties under section 271(1)(c) based on additions/disallowances under normal provisions would not survive when income is computed under section 115JB. This principle was further supported by the Co-ordinate Bench decision in Mehta Sulfites India Ltd. Consequently, the Tribunal deleted the penalty imposed under section 271(1)(c) of the Act, allowing the appeal in favor of the assessee. In conclusion, the Tribunal ruled in favor of the assessee, deleting the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The decision was based on the legal principle that such penalties do not survive when the tax liability is ultimately computed under section 115JB of the Act.
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