2022 (2) TMI 27 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of interest paid on income tax - tax liability of the assessee u/s 115JB - HELD THAT - As per CBDT Circular No.25/2015 dated 31.12.2015 we find that for the cases prior to A.Y. 2016-17 if taxes are levied under MAT provisions u/s 115JB/115JC of the Act then penalty u/s 271(1)(c) of the Act is not attracted with reference to addition/disallowance made under normal provisions. Examining the facts of the instant case, in light of the above circular we find that the assessee declared loss of ₹ 3,17,87,340/- in the e-return of income filed on 27.09.2012. However, since the assessee s book profit stood at ₹ 44,84,22,703/- it was liable to pay tax u/s 115JB of the Act and on perusal of the Income Tax Return Acknowledgment and computation of income we find that the assessee paid tax and interest u/s 234B and 234C - Further we find that even after making disallowance in the assessment order u/s 143(3) of the Act there was no impact on the tax liability of the assessee u/s 115JB of the Act. So it remains an undisputed fact that the assessee was liable to pay tax only as per the MAT provisions u/s 115JB of the Act as the normal assessed income was a loss. Under these given facts and circumstances the assessee case is squarely covered by this CBDT Circular No.25/2015 dated 31.12.2015 and no penalty u/s 271(1)(c) of the Act was leviable. We, thus, set aside the finding of Ld. CIT(A) and delete the penalty - Accordingly grounds raised by the assessee are allowed.

Summary

Issues:
- Appeal against penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2012-13.
- Interpretation of CBDT Circular No.25/2015 regarding penalty under MAT provisions u/s 115JB/115JC for cases prior to A.Y. 2016-17.

Analysis:

1. The appeal was filed against the penalty under section 271(1)(c) of the Income Tax Act for the Assessment Year 2012-13. The appellant contested the penalty stating that the penalty notice did not specify the grounds for penalty and argued that the penalty order should be quashed. The appellant also argued that the tax had been paid under section 115JB, and there was no additional tax liability under the normal provisions of the income tax. The penalty amount in question was &8377; 5,23,000.

2. The case involved a Limited Company engaged in the business of Manufacturing & trading of HDPE/PP Woven Sacks and FIBC Jambo Bags. The assessment for A.Y. 2012-13 resulted in a loss declared by the assessee. However, due to the book profit being higher, the assessee was liable to pay tax under section 115JB of the Act. The penalty proceedings were initiated based on additions and disallowances made during the assessment. The penalty of &8377; 5,23,000 was imposed on the disallowance of interest paid on income tax.

3. The appellant's appeal before the Ld. CIT(A) was unsuccessful, leading to the appeal before the Tribunal focusing on the sole issue of the penalty levied under section 271(1)(c) of the Act. The appellant relied on the CBDT Circular No.25/2015, arguing that for cases prior to A.Y. 2016-17, penalties under section 271(1)(c) were not applicable if taxes were paid under MAT provisions u/s 115JB/115JC.

4. The Tribunal examined the CBDT Circular and the facts of the case. It was noted that the appellant had paid tax under the MAT provisions due to the book profit, despite declaring a loss in the return. As there was no impact on the tax liability under section 115JB after the disallowances, the Tribunal held that the penalty under section 271(1)(c) was not applicable. The penalty of &8377; 5,23,000 was deleted, and the appellant's grounds were allowed.

5. In conclusion, the Tribunal allowed the appellant's appeal, citing the CBDT Circular and the specific circumstances of the case. The penalty under section 271(1)(c) was set aside, emphasizing the applicability of MAT provisions for cases prior to A.Y. 2016-17. The order was pronounced on 30.11.2021 in favor of the assessee.