2021 (4) TMI 171 - AT - Income Tax

Penalty u/s. 271(1) - Assessment was completed by making disallowance of depreciation claimed on rented property - tax payable under the provisions of MAT different from tax computed on the assessed income - HELD THAT - A perusal of the computation of taxable income as per provisions of section 115JB of the Act show that tax payable comes to ₹ 16,18,097/- under the provisions of MAT whereas tax computed on the assessed income comes to ₹ 15,53,355/-, which means that the appellant has paid taxes as per the provisions of section 115JB of the Act. As per the CBDT Circular No. 25/2015 dated 31.12.2015, no penalty can be levied on an income which has been computed u/s. 115JB of the Act and penalty has been levied on the additions/disallowances made under normal provisions of the Act. Thus as per CIRCULAR No. 25/2015 we direct the Assessing Officer to delete the penalty levied u/s. 271(1)(c) of the Act. - Decided in favour of assessee.

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax [Appeals] confirming the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2013-14. The penalty was imposed based on the assessment order that disallowed depreciation claimed on rented property, resulting in an increased assessed income. The appellant had paid taxes as per the provisions of section 115JB of the Act, and it was argued that no penalty could be levied on income computed under this section. Reference was made to CBDT Circular No. 25/2015, which clarified that penalty should not be imposed when the tax payable on the total income computed under normal provisions is less than the tax payable on book profits under section 115JB of the Act. The Circular emphasized that penalty under section 271(1)(c) is not attracted with reference to additions/disallowances made under normal provisions prior to 1-4-2016.

The Circular also highlighted the substitution of Explanation 4 to section 271(1) by Finance Act, 2015, which provided for calculating the amount of tax sought to be evaded even when the income determined under general provisions is less than the income declared for Minimum Alternate Tax (MAT) purposes under section 115JB of the Act. It was clarified that prior to 1-4-2016, penalty under section 271(1)(c) is not attracted for additions/disallowances made under normal provisions if the tax payable on total income computed under normal provisions is less than the tax payable on book profits under section 115JB. The judgment of the Hon'ble Delhi High Court in the case of Nalwa Sons Investment Ltd. supported this position, and it was stated that this interpretation has attained finality.

In light of the CBDT Circular and the settled legal position, the Tribunal directed the Assessing Officer to delete the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. Consequently, the appeal filed by the assessee was allowed, and the order was pronounced in the open court on 25.03.2021.