2014 (4) TMI 207 - AT - Income Tax

Tribunal Upholds CIT (A)'s Decision on Income Tax Penalty Rule

DCIT, Circle-14(1), New Delhi Versus Quadrant EPP Surlon Uttaranchal P. Ltd.

The tribunal upheld the CIT (A)'s decision to delete the penalty imposed under section 271(1)(c) of the Income Tax Act 1961. It ruled that the penalty ... Penalty u/s 271(1)(c) - income computed u/s 115JB of the Act was higher than the assessed income - furnishing of inaccurate particulars of income – Held that:- penalty u/s 271(1)(c) is leviable only if higher income was assessed under the normal provisions after making any additions in the assessment order - penalty u/s 271(1)(c) is leviable only if higher income was assessed under the normal provisions after making any additions in the assessment order - CIT (A), it is seen, while deleting the penalty, has followed the decision in 'CIT vs. Nalwasons Investments Ltd. [2010 (8) TMI 40 - DELHI HIGH COURT]. Therein, it has been held that no penalty u/s 271(1)(c) of the Act can be levied when the income u/s 115JB of the Act is higher than the assessed income. well reasoned order passed by the Ld. CIT (A) following 'Nalwasons Investments Ltd.' (supra), is hereby upheld- Decided against Revenue. Evasion of Tax - Provisions of Section 115JB (5) of Act – Held that:- no evasion of tax in this case as tax was paid on basis of 115JB calculations as returned by appellant at a total income of Rs.99,74,805/- - While assessment was completed on an income of Rs.7,65,780/- as per normal provisions which is lower than income declared u/s 115JB. Since there is no evasion of tax, penalty levied for furnishing inaccurate particulars of income is not sustainable – Rightly found by the Ld. CIT (A), the income of the assessee u/s 115JB of the Act was of Rs. 99,74,805/-. Issues:- Penalty u/s 271(1)(c) for furnishing inaccurate particulars of income- Applicability of provisions of Income Tax Act 1961 vs. Companies Act 1956- Ignoring provisions of Section 115JB (5) of the ActPenalty u/s 271(1)(c) for furnishing inaccurate particulars of income:The appeal was filed against the order deleting the penalty imposed under section 271(1)(c) of the Income Tax Act 1961. The assessing officer had levied a penalty on the assessee for claiming excess deduction u/s 80IC of the Act without providing any explanation. The CIT (A) deleted the penalty, citing that there was no evasion of tax as the tax was paid based on 115JB calculations, even though the assessed income under normal provisions was lower. The CIT (A) followed the decision in 'CIT vs. Nalwasons Investments Ltd.' and held that penalty u/s 271(1)(c) cannot be levied when the income u/s 115JB is higher than the assessed income. The tribunal upheld the CIT (A)'s decision, stating that the penalty is leviable only if higher income was assessed under normal provisions after additions.Applicability of provisions of Income Tax Act 1961 vs. Companies Act 1956:The department contended that the CIT (A) erred in not appreciating the applicability of the Income Tax Act 1961 over the Companies Act 1956, despite the tax being paid based on Book Profit calculated under the Companies Act. However, the tribunal did not find any error in the CIT (A)'s decision to delete the penalty. The tribunal emphasized that the penalty under section 271(1)(c) is not sustainable when the tax was paid based on 115JB calculations, even if the assessed income under normal provisions was lower.Ignoring provisions of Section 115JB (5) of the Act:The department argued that the CIT (A) ignored the provisions of Section 115JB (5) of the Act, which state that all other provisions of the Act shall apply to every company mentioned in the section. However, the tribunal upheld the CIT (A)'s decision based on the precedent set by 'Nalwasons Investments Ltd.', where it was established that penalty u/s 271(1)(c) cannot be levied if the income under 115JB is higher than the assessed income under normal provisions. The tribunal found no error in the CIT (A)'s reasoning and rejected the department's grounds.In conclusion, the tribunal dismissed the department's appeal, upholding the CIT (A)'s decision to delete the penalty imposed under section 271(1)(c) of the Income Tax Act 1961. The tribunal emphasized the importance of following legal precedents and clarified the conditions under which the penalty is leviable, based on the comparison of income calculated under different provisions of the Act.