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TMI Blog2010 (8) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... on was made under Section 115 JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, the concealment did not lead to tax evasion at all. – Penalty not to be imposed. - 1420/2009 - - - Dated:- 26-8-2010 - MR. A.K. SIKRI AND MS. REVA KHETRAPAL Ms. Prem Lata Bansal, Advocate. Mr. Ajay Vohra and Ms. Kavita Jha, AdvocateS A.K. SIKRI, J. 1. In this appeal, we are concerned with the penalty proceedings initiated by the Assessing Officer in respect of the assessment year 2001-02. For the said assessment year the respondent-assessee had filed return declaring loss at Rs.43.47 crores. Thereafter, the revised return exhibiting the income at Rs.3,86,82,128/- was filed under the provisions of Section 115JB of the Income Tax Act, 1961 (for short the Act‟). The assessment order was framed by the Assessing Officer under Section 143(3) at a loss of Rs.36.95 crores as per normal provisions and at book profits at Rs.4,01,63,180/- under Section 115 JB of the Act. While doing so, various additions were made by the Assessing Officer including the following: - a. In so far the claim of depreciation is concerned, the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was that after taking into account the loss in trading goods and loss in manufacturing goods there was a negative figure and, accordingly, relying on the judgment of the Bombay High Court in the case of IPCA Laboratories vs. DCIT 251 ITR 451, the Assessing Officer held that it was not entitled to any deduction under Section 80HHC. Whether the deduction under Section 80HHC of the Act can be allowed or not was a debatable issue as there were judgments of other High Courts as per which under these circumstances, deductions under Section 80 HHC of the Act were permissible. In these circumstances, when the law on this issue had not been authoritatively determined and crystallized and two opinions prevailed at that time, penalty under Section 271 (1) (c) could not be imposed. The Tribunal, in support of this proposition has relied upon the judgment in CIT vs. International Audio Visual Company 288 ITR 570. Therefore, we do not find any error in the orders of the CIT (A) as well as the ITAT deleting the penalty on that score. 7. Coming to the imposition of the penalty on disallowance of depreciation, the assessee had claimed depreciation on certain plants and machinery in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation by the appellate authority and confirming addition u/s 43B in itself does not prove that it was a proved case of furnishing of the inaccurate particular of income. Fact remains that in the penalty proceedings, the A.O. has not independently established that the appellant company has furnished inaccurate particulars of income. With this discussion, a penalty levied by the A.O. of Rs.26,68,625/- is hereby cancelled." 9. The CIT (A) was, therefore, of the opinion that as the facts in this year were also the same, there was no reason to differ with the finding as recorded in the earlier order and deleted the penalty. The CIT (A) also observed that even on merits, such a penalty was not leviable and rather there was no need of adjudication because the same disallowance had not been considered while computing the income of the assessee under Section 115JB Of the Act. 10. It is pointed out by Ms. Bansal, the learned counsel for the appellant-Revenue that the reliance placed on the order dated 15th May, 2007 in respect of the assessment year 1999-00 was totally misconceived. She read out the aforesaid extracted portion of that order and drew our attention to the fact that in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a totally a different twist to the matter by predicating his submission on Section 115JB of the Act. His contention was that as per Explanation 4 of Section 271 (1) (c) of the Act, the penalty is levied with respect to the amount of tax sought to be evaded. According to him since the amount of tax had been paid by the assessee under Section 115JB of the Act, no penalty could be levied in respect of the additions/disallowances made by the A.O. 13. Before we proceed to take note of further argument on this point, we reproduce the relevant provision of Section 271 (1) (c) of the Act:- "271. Failure to furnish returns, comply with notices, concealment of income, etc. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- xxx xxx xxx (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or xxx xxx xxx He may direct that such person shall pay by way of penalty,- xxx xxx xxx (iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the total income of the assessee in terms of Section 115 JB of the Act. He thus submitted that once 'book profits' are, by a legal fiction, deemed to be total income of the assessee, such deeming fiction must be taken to its logical conclusion. As a necessary corollary, in such a case where income of an assessee company is finally assessed at book profits‟ by deeming the same to be total income of the assessee, penalty imposable under Section 271(1) (c) of the Act could only be levied in respect of any adjustment/addition/disallowance made while computing such 'book profits'. In such a situation, the revenue cannot be allowed to impose penalty with reference to the additions/ disallowances made while computing normal income since such income pales into insignificance, both for the purpose of imposition of tax and all logical consequences following thereon. 16. In nut shell, his submission was that when the tax was imposed and calculated under the Act on the deemed income under Section 115JB of the Act, for the purposes of the imposition of penalty the department could not revert back to the normal income as it would lead to an absurd situation of two different income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because as per the judgment of Supreme Court I the case of Apollo Tyres Limited (255 ITR 273) Balance Sheet prepared by the assessee as per Schedule VI of the Companies Act is sacrosanct, and the AO cannot tamper with the net profit declared in such Profit Loss A/c. Therefore, AO could not have tampered with the figure of depreciation as claimed by the assessee as per the Companies Act, may be WDV method or straight line method or any other method. 20. We have considered the rival submissions. Judgment of the Supreme Court in Gold Coin's (supra) clarifies that even if there are losses in a particular year, penalty can be imposed as even in that situation there can be a tax evasion. As per Section 271 (1) (c), the penalty can be imposed when any person has concealed the particulars of his income or furnished incorrect particulars of the income. Once this condition is satisfied, quantum of penalty is to be levied as per clause (3) of Section 271 (1) (c) which stipulates that the penalty shall not exceed three times "the amount of tax sought to be evaded". The expression "the amount of tax sought to be evaded" is clarified and explained in Explanation 4 thereto, as per which it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Central Bureau of Direct Taxes (in short 'CBDT). It is stated that in a case where on setting off the concealed income against any loss incurred by the assessee under any other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure the penalty would be imposable because in such a case "the tax sought to be evaded will be tax chargeable on concealed income as if it is "total income". 21. The question, however, in the present case, would be, as to whether furnishing of such wrong particulars had any the effect on the amount of tax sought to be evaded. Under the scheme of the Act, the total income of the assessee is first computed under the normal provisions of the Act and tax payable on such total income is compared with the prescribed percentage of the 'book profits' computed under section 115JB of the Act. The higher of the two amounts is regarded as total income and tax is payable with reference to such total income. If the tax payable under the normal provisions is higher, such amount is the total income of the assessee, otherwise, 'book profits' are deemed as the total income of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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