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TMI Blog2019 (2) TMI 788X X X X Extracts X X X X X X X X Extracts X X X X ..... nt views were possible, may eventually be decided against the Assessee in quantum proceedings. However, the assessee cannot be burdened with penalty U/s 271(1)(c) of I.T. Act, if on a disputable issue of quantum addition, on which two different views were legitimately possible, the Assessee decided to adopt the view which was favourable to the assessee; in a case in which all necessary details were filed by the Assessee in support of the claim and when no material inaccuracies were found in these details, and when the assessee is not guilty of suppression of any material facts. As regards the contention for Assessee, that the AO did not make specific charge against the assessee - whether the penalty proceedings were for ‘concealment of the particulars of income’ or for ‘furnishing of inaccurate particulars of income’ it is already found that the disputable claim made by the assessee neither amounts to ‘concealment of particulars of income’ nor to ‘furnishing of inaccurate particulars of income’; it is immaterial whether the Assessing Officer made specific charge against the assessee whether the penalty proceedings were for ‘concealment of the particulars of income’ or for ‘furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other. (2) The Assessee filed return of income on 23.11.2006, wherein deduction amounting to ₹ 3,44,56,419/- was claimed U/s 80IB(10) of The Income Tax Act, 1961 ( I.T. Act , for short). Vide Assessment Order dated 26.09.2008 passed U/s 143(3) of I.T. Act; the deduction claimed by the assessee U/s 80IB(10) of the I.T. Act was disallowed. In this Assessment Order, the Book Profit for the purposes of Section 115JB was determined at ₹ 3,61,09,972/-. Penalty proceedings U/s 271(1)(c) of I.T. Act were also initiated by the Assessing Officer ( AO , for short). Vide order dated 08.06.2010, in appeal no. 54/CIT(A)XVII/Del/08-09, Ld. CIT(A) deleted the addition of ₹ 34456419/- which was made by AO under normal provisions. However, addition made in book profit (assessed at ₹ 36109972/- as against returned book profit of Rs. nil) was confirmed by CIT(A). Income was recomputed on 07.09.2010 vide order u/s 250/143(3) at ₹ 1959220/- under normal provision and of ₹ 36109972- u/s 115JB. Vide order dated 25.10.2017 of Co-ordinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11,04,978 11,04,978 NIL NIL 2004-05 88,77,733 86,38,298 2,39,435 NIL 2005-06 2,68,45,130 2,56,89,743 11,55,387 NIL 2006-07 3,64,15,637 3,44,56,419 19,59,218 NIL On perusal of section 115JB it is abundantly clear that deduction u/s 80IB(10) is not allowed to be reduced from book profit for computation of tax u/s 115JB and assessee was liable to pay tax u/s 115JB of the Act. In the event of non-filing of details and non-filing of reasons for not paying taxes u/s 115JB I have reason to believe that assessee has concealed/filed inaccurate particulars of income liable for penal action u/s 271(1)(c) of the Act. The conduct of the assessee proves the malafide intention of evading taxes. In light of the above book profit for computation of tax u/s 115JB is assessed at ₹ 3,61,09,972 as against NIL filed by assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from business as per Income tax Act of ₹ 3,44,56,419 and Income from other sources of ₹ 19,59,218 thereby showing. Gross total Income of the year of ₹ 3,64,15,637. Vide letter dated 7.7.08, assesses replied that assessee has not paid any applicable tax u/s 115J3. Summons u/s 131 dated 10.7.08 and 18.7.08 were issued to Sh. Girish Batra, MD of the assessee company to file details of payment of taxes u/s 115JB for A.Y. 2002-03, 2003-04, 2004-05, 2005-06, 07, 2007-08 and to explain the reason for non-payment of taxes. Sh. Girish Batra neither appeared in response to summons mu assessee filed any reasons for non-payment of tax u/s 115JB. On Sh. Rajeev Sharma counsel appeared for the assessee b it could not explain as to why taxes u/s 115JB of the Act have not been paid for all these years On perusal of section 115JB it is abundantly clear that deduction u/s 80IB is not allowed to be reduced from book profit for computation of tax u/s 115JB and assessee was liable to pay tax u/s 115JB of the Act. In the event of non- filing of details and non filing of reason for not paying taxes u/s 115JB I have reason to believe that assessee has concealed/filed inaccurate par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h hold of such deficiencies which is not possible in each and eve; v case. In the present-case, it can be safely inferred that assessee tried i n evade tax by making such inadmissible/wrong claim. Penal provisions a n meant only to have deterrent effect to dissuade tax payers for making sue a claims and will lose its impact if not applied in cases of such violation 8.1 The Hon'ble Delhi High Court in the case of Zoom Communication Pvt. Ltd. reported in 2010) 40 DTR (Del) 249, dated May 24, 2010 have observed as under The Court cannot overlook the fact that only a small percentage of the Income Tax Returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect that would give a license to unscrupulous assessee to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked for scrutiny and they would be assessed on the basis of self assessment under section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove and accordingly, it is found to be a fit case for imposition of penalty u/s 271(l)(c) of the Act r.w. Explanations thereto. Here it is also noted that tax on book profit has not so far been paid by him assessee. It shows non cooperative and recalcitrant attitude of the assessee. Its conduct further shows that its intention to pay the due and correct taxes is not above doubt. Considering the facts of the case an l conduct (furnishing of the required information and payment of due taxes-.) of the assessee, it is found to be a case fit for imposition of penalty at a rate higher than the minimum amount. (2.1) The Assessee filed appeal before Ld. CIT(A) against the aforesaid order dated 28.03.2012, passed U/s 271(1)(c) of I.T. Act by the AO. Vide order dated 25.11.2013, the Ld. CIT(A) upheld the penalty of the aforesaid amount of ₹ 60,77,308/- and dismissed the Assessee s appeal. The relevant portion of order of the Ld. CIT(A) is reproduced as under: 5. I shall now take up the various Grounds of Appeal which are all in respect of penalty of ₹ 60,77,308/- imposed u/s 271(l)(c). 5.1 The appellant had filed Return of Income declaring income of ₹ 19,59,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain companies.- (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the incometax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2011, is less eighteen per cent, of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-Tax. at the rate of eighteen per cent. (2) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts U and III of Schedule VI to the Companies Act, 1956 (1 of1956): Provided that while preparing the annual accounts including profit and loss account,- (f) the accounting policies ; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (Hi) the method and rates adopted for calculating the depreciation,... 5.5 Therefore, from the provisions it is clear that ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a claim which is incorrect in law would not amount to giving inaccurate particulars of the income fo the assessee, but it cannot be disputed that the claim made by the assessee needs to be bonafide. It is the claim besides being incorrect in law is malafide, Explanation 1 to Section 271(1) would come into play and work to the disadvantage of the assessee. The Court cannot overtook the fact that only a small percentage of the Income Tax Returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bonafide, it would be difficult to say that he would still not be liable to penalty under Section 271(l)(c) of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bonafide while making a claim of this nature, that would give a licence to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th a view to concealment of income. The explanation of the appellant is not bonafide. In view thereof, penalty of ₹ 60,77,308/-, imposed u/s 271(l)(c) on concealed income of ₹ 3,61,09,972 is confirmed. The ground of appeal is thus ruled against the appellant. 7. As a result, the appeal is dismissed. (2.2) Aggrieved, the Assessee has filed this appeal in Income Tax Appellate Tribunal ( ITAT , for short). During the appellate proceedings in ITAT, the Assessee filed a Paper Book of case laws compilation consisting of total 188 pages, containing copies of the following decided cases: 1. Anantharam Veerasinghaiah Co. vs. CIT, (1980) 123 ITR 0457, Supreme Court of India. 2. Tidewater Marine International Inc. vs. DCIT, (2005) 96 ITD 0406, ITAT Delhi Bench. 3. ACIT vs. Smt. Surinder Kaur, (2009) 18 DTR 0038, ITAT Lucknow Bench. 4. CIT vs. M/s Metal Chromium Plater (P) Ltd., 97 CCH 0080, High Court of Madras. 5. M/s Neha Home Builders (P) Ltd., ITA No. 2964/Mum/2016, dated 22.01.2016, ITAT Delhi Bench. 6. ITO vs. Frigsales (India) Ltd, (2005) 4 SOT 0376, ITAT Mumbai Bench. 7. Tristar Intech (P) Ltd. vs. ACIT, (2015) 43 ITR (Trib) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income . The Ld. Counsel for Assessee further contended that the quantum addition in respect of which penalty has been levied U/s 271(1)(c) of I.T. Act was disputable and two views were possible. The Ld. Counsel for Assessee submitted that no penalty U/s 271(1)(c) of I.T. Act should be levied, when two views are possible - one being in favour of Assessee and the other being against the Assessee - even if, the view favourable to Assessee was taken by the assessee; but was eventually not accepted by authorities. Ld. Counsel for Assessee took us through the various judicial precedents referred to in the aforesaid Paper Book of case laws compilation and the other judicial precedents copies whereof were filed during appellate proceedings in ITAT. The Ld. Departmental Representative ( DR , for short) supported the order of the AO and the Ld. CIT(A) also placed reliance in the case of CIT vs. Escorts Finance Ltd. 328 ITR 44 (Delhi). (3) We have heard both sides patiently. We have perused all materials on our records carefully. We have considered all judicial precedents brought to our attention by the two sides. We have also considered the judicial precedents mentioned in the orders o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as taken that the amount of deduction U/s 80IB of I. T. Act is not to be added to Book Profit U/s 115JB of I.T. Act. The Ld. Counsel for Assessee also filed copy of judicial precedents in the cases of ITO vs. Frigsales (India) Ltd (supra) [in which, view was taken that exempt income U/s 50 would remain exempted as per provisions of section 115JA(4) of I.T. Act]; and CIT vs. M/s Metal Chromium Plater (P) Ltd. (supra) [in which, view was taken that Capital Gains which formed part of the net profit in the profit and loss account of the assessee company, but was exempt U/s 54EC of I.T. Act, is not to be taken in account for calculation of Books Profit u/s 115JB of I.T Act.] In view of these judicial precedents, we are of the view that the issue as to whether amount of deduction U/s 80IB of I.T. Act is to be included as Book Profit for the purpose of Section 115JB of I.T. Act was disputable, on which two different views were legitimately possible; one such view being in favour of the Assessee. (4.1) On a the disputable issue of quantum addition, on which two different views are legitimately possible, of which the one favourable to the assessee has been adopted by the assessee; e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) of I.T. Act]; and CIT vs. Mastek Ltd. (2015) 53 taxman.com 142 (Guj.)[in which it was held that no penalty is to be levied to wrong claim of deduction u/s 10A if there was no concealment of income or furnishing of inaccurate particulars]. The reliance placed by the Ld. DR in the case of CIT vs. Escorts Finance Ltd. 328 ITR 44 (Delhi), is not useful to advance the case of Revenue because in the case of CIT vs. Escorts Finance Ltd. (supra), the facts were entirely different. In the case of CIT vs. Escorts Finance Ltd., the claim made by the assessee U/s 35D of I.T. Act was ex-facie bogus. It was not a case where two opinions about the applicability of the Section 35D were possible and it could not be said to be a case of a bonafide error on the part of the assessee. In the case before us, however, as we have already held earlier, two legitimate views were possible on whether the amount of deduction U/s 80IB of I.T. Act is to be included as Book Profit under special provisions of Section 115JB of I.T. Act. (4.2) In view of the foregoing discussions, we cancel the penalty levied U/s 271(1)(c) of I.T. Act by the AO and we set aside the impugned order of Ld. CIT(A), wherein the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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