Penalty under 271(1)(c) not attracted where tax is finally fixed under MAT; penalties deleted in such cases.

Whether penalty under section 271(1)(c) can be levied where tax liability was finally determined under the deeming provisions of the Minimum Alternate Tax is addressed: relying on the established position in precedent and an administrative circular, the circular clarifies that for years prior to the prospective amendment, penalties for additions/disallowances under the normal provisions are not attracted if MAT determination exceeds normal-tax liability; the substituted prospective explanation operates only from its effective date and does not alter the pre-amendment position, and penalties levied in such cases were deleted in favour of the assessee.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 can be levied in respect of additions/disallowances made under the normal provisions of the Act where the tax liability has been finally determined under section 115JB of the Income-tax Act, 1961 (minimum alternate tax) for assessment years prior to 01.04.2016.

Analysis: The assessment records show tax liability for the relevant assessment years was computed and fixed under the deeming provisions of section 115JB of the Income-tax Act, 1961. The Tribunal considered the legal position established by the decision in Nalwa Sons (as accepted by the CBDT) and the CBDT Circular dated 31-12-2015 which clarifies that prior to 01.04.2016, where tax payable under normal provisions is less than tax payable under section 115JB, penalty under section 271(1)(c) is not attracted in respect of additions/disallowances made under normal provisions. The substituted Explanation 4 to section 271(1) operates prospectively w.e.f. 01.04.2016 and does not alter the pre-2016 position. The Revenue did not controvert the effect of the CBDT Circular on the facts of these cases.

Conclusion: Penalty levied under section 271(1)(c) in respect of additions/disallowances made under the normal provisions is deleted for the assessment years where tax was finally determined under section 115JB; appeals are allowed in favour of the assessee.

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