Rule 27 and book-profit assessment limit concealment penalty where section 115JB governs the final tax liability.

Rule 27 of the ITAT Rules allows a respondent to support the impugned order on a legal ground decided against it, without filing a cross appeal or cross objection, where the point can be decided on the existing record; here, the assessee could raise limitation under section 275(1)(a), but the penalty order was still within time because it was passed within six months from the end of the month in which the quantum order was received. Penalty under section 271(1)(c) was also held unsustainable where the assessment was finally made on book profits under section 115JB and the alleged concealment did not affect the tax liability determined.

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Issues: (i) Whether the respondent assessee could invoke Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 to support the order appealed against and raise the plea that the penalty order was barred by limitation under section 275(1)(a) of the Income-tax Act, 1961. (ii) Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessment was ultimately made on book profits under section 115JB of the Income-tax Act, 1961.

Issue (i): Whether the respondent assessee could invoke Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 to support the order appealed against and raise the plea that the penalty order was barred by limitation under section 275(1)(a) of the Income-tax Act, 1961.

Analysis: Rule 27 permits a respondent, even without filing a cross appeal or cross objection, to support the impugned order on grounds decided against him, provided the issue can be decided on the existing record. The Tribunal held that the assessee was entitled to raise the legal objection. On merits, however, the order of the Tribunal in the quantum matter had been received by the Commissioner in April 2012 and the penalty order was passed on 30.10.2012, which was within the prescribed period of six months from the end of the month of receipt.

Conclusion: The assessee was entitled to invoke Rule 27, but the plea of limitation failed and was rejected.

Issue (ii): Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessment was ultimately made on book profits under section 115JB of the Income-tax Act, 1961.

Analysis: The Tribunal relied on the principle that where the assessed tax is finally determined under section 115JB on book profits, any concealment affecting only the normal computation does not lead to tax evasion if the deemed income under section 115JB is higher and forms the basis of assessment. In such a situation, the alleged concealment becomes irrelevant for the purpose of penalty under section 271(1)(c).

Conclusion: Penalty under section 271(1)(c) was not leviable and the deletion of penalty was upheld.

Final Conclusion: The Revenue's appeal was dismissed because the limitation objection failed and the penalty was unsustainable on merits in view of assessment on book profits under section 115JB.

Ratio Decidendi: Where tax is finally assessed on book profits under section 115JB and the alleged concealment has no effect on the tax liability determined, penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars is not warranted.

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