2019 (8) TMI 449 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - assessment completed under normal provisions of the Act was subject to levy of tax on book profit u/s 115JB - HELD THAT - There is also no dispute that the penalty proceedings have been initiated to levy penalty on the tax made under normal provisions of the Act. The dispute is now well settled in favour of the assessee and against the revenue by the decision of the Hon'ble High Court of Delhi in the case of Nalwa Sons Investment Ltd. 2010 (8) TMI 40 - DELHI HIGH COURT which has been accepted by the CBDT vide its Circular No. 25/2015. In the light of Circular of the Board and the decision in the case of Nalwa Sons Investment Ltd 2010 (8) TMI 40 - DELHI HIGH COURT we do not find any merit in the levy of penalty. We, accordingly, direct the AO to delete the penalty. The ground raised by the assessee is allowed.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 based on additions/disallowances made under normal provisions but tax levied under Minimum Alternate Tax (MAT) provisions u/s 115JB for cases prior to A.Y. 2016-17.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax [Appeals] pertaining to the assessment year 2011-12. The primary contention of the assessee was that the CIT(A) erred in confirming the penalty u/s 271(1)(c) by disregarding the CBDT Circular No. 25/2015 dated 31.12.2015. The penalty was initiated after the assessment order under section 143(3) of the Act assessed a loss and tax was levied under section 115JB on book profit. Despite paying the tax, penalty proceedings were initiated separately. The assessee argued that the decision of the Hon'ble Delhi Court in Nalwa Sons Investment Ltd case and the CBDT Circular supported their case against the penalty.

The CIT(A) did not agree with the assessee's contentions, stating that the judgment in the Nalwa Sons Investment Ltd case did not apply when the deeming fiction of section 115JB was invoked. The CIT(A) highlighted that the CBDT Circular indicated the applicability of the substituted Explanation 4 from 01.04.2016, which was after the penalty order dated 30.03.2017. The assessee's counsel argued that the issue was settled in their favor by the Delhi High Court's decision and the CBDT Circular.

After considering the arguments and the orders of the authorities, the Tribunal found that the levy of penalty was not justified based on the settled position as per the Delhi High Court's decision and the CBDT Circular. The Circular clarified that prior to 01.04.2016, penalty under section 271(1)(c) was not attracted when the tax payable under normal provisions was less than the tax payable under section 115JB. Therefore, the Tribunal directed the Assessing Officer to delete the penalty amount, stating that the ground raised by the assessee was allowed. Consequently, the appeal was allowed in favor of the assessee.

In conclusion, the Tribunal's decision was based on the settled legal position as per the Delhi High Court's judgment and the CBDT Circular, which clarified the non-applicability of penalty under section 271(1)(c) in cases where tax payable under normal provisions was lower than the tax payable under section 115JB before 01.04.2016.