TaxTMI 
TaxTMI 
2014 (10) TMI 152
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....61 on the addition of Rs. 11.62 lacs on account of consultant's fee paid for drafting of shareholders agreement. (iii) holding that penalty u/s 271(1) (c ) is levibale in respect of addition made on account of provision for deferred taxation to the extent of Rs. 4215.03 lacs only as against addition of Rs. 6624.20 lacs made by AO and confirmed by Hon'ble ITAT, Jaipur Bench, Jaipur '' 2.0 The brief facts of the case are that the assessee is a Public Limited Company which is engaged in the manufacture and sale of Fertilizers, Textile, Software, Food Processing and also trading of DAP and allied products at its industrial units at Gadepan (Distt. Kota), Baddi, Chennai & Sonepat. The assessee filed its return of income on 29-10-2002 which was processed u/s 143(1) of the Act on 10-02-2003. Thereafter the assessee filed a revised return of income u/s 139(5) on 30-03-2004 along with statement of reasons necessitating the revised return being depreciation loss of Rs. 4,01,43,383/-. Minimum Alternate Tax u/s 115J of the Act was worked out at Rs. 6,73,10,934/- i.e. 7.65% of book profit of Rs. 87,98,81,489/-. 3.0 On the basis of the revised return, the AO, Kota made vari....
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....; Ld. CIT (A) charted out the above additions which were confirmed by the ITAT and proceeded to deal with penalty qua separate issue which were retained by the ITAT. A Issues on which penalty is confirmed by ld. CIT(A) (1) Diminution in value of shares Rs. 9,17,90,000/- The ld. CIT(A) referred to AS-13, Accounting Policy and dealt with following cases cited by the assessee in support of its contention. 1. Sutlej Cotton Mills Ltd. vs. ACIT, 45 ITD 222 (Cal.) 2. Vijay Solvex vs. ACIT, 92 ITD 24 (JP) 3. Rajasthan Spinning & Weaving Mills Ltd. vs. DCIT, 199 CTR 305 (Raj.) 4. Peerles General Finance & Investments Co. Ltd. vs. ACIT, 10t TTJ 186 (Kol.) Thereafter the penalty qua this issue was confirmed by ld CIT(A) by following observations. ''From the above discussion, it is clear that capital gain on sale of shares is not part of book profits as the expression 'book profit' is intended to be confined to business profits and not intended to include profit on realization of any asset. The ratio laid down by the Hon"ble High Court equally applies in the case of loss also. In the case of assessee, the provision for reduction in value of shares ....
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....t. I agree with the view of the assessee that if an amount becomes taxable only due to retrospective amendment then no penalty should be levied. However, to find out the claim of assessee the undersigned examined the accounting standard AS-22 which was claimed to have been followed by assessee In my view, penalty may not be leviable in respect of any provision made as per these accounting standard, however, if the assessee has not followed these accounting standards then the issue of penalty has to be considered on merits. As per AS-22, an enterprise has to provide for the time effect. In common men's language we can understand it as difference between tax on income as computed as per provisions of company law and tax on income as computed as per Income Tax Act. For example - Profit as per Company Act Rs. 100/- Tax on this Rs. 40/- Income as per I.T. Act Rs. 50/- Tax on this income Rs. 20/- Provision for taxation Rs. 10/- Provision for deferred tax (Rs.40-20-10) Rs. 10/- In AS-22, certain examples were also given for illustration, however the assessee's case does not fit into any of these for the reason that assessee has already made prov....
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....ax burden. It is therefore, held that penalty u/s 271(1)(c) is leviable with respect to this amount of Rs. 4215.03 lacs (3) Receipt from IMACID: Ld CIT(A) confirmed the penalty by following observations: "The AO levied the penalty in this behalf observing as under:- "During the course of assessment proceedings, the AO noted that the assessee company has assisted its Morocco based joint venture company IMACID by providing various services in the form of technically trained staff etc. For the services so rendered, the joint venture company paid service charges to the assessee company and also deducted tax at source from service charges. While accounting the service charges, the assessee company credited the P&L account by the net amounts of the service charges i.e. after deducting TDS of Rs. 7,80,018/- made by the IMACID. The A.O. in view of provision of section 50 of the IT Act took the gross receipts of service charges and made an addition of Rs. 7,80,018/- to the total income as well as for computing the book profits. In the appeal, the Id. CIT(A) upheld the action of AO. During the appellate proceedings, it has also been pointed out to the CIT(A) that the amount of TDS w....
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....etrospective amendment by Finance Act, 2009 wef 1-4-2001, by which a fetter was put for availing of claim in respect of diminution of shares. At the relevant there was no such express provision. Rather case laws as mentioned above existed which supported the view of the assesse. 10. It is a trite law that no penalty can be imposed on the assesse qua an addition which is occasioned by the operation of a retrospective legislation. Assessee cannot be penalized for a purported wrong which did not exist on statute book at the time the assessee made a claim at the time of filing its return or completion of assessment. It is only at the ITAT level that the retrospective amendment was passed by which ITAT confirmed the addition. Therefore, there is no justification in the order of the ld. CIT(A) holding that in his view without even retrospective amendment, the assessee could not have made this claim. The ld. Counsel vehemently countered this proposition on the pleading that if the provision was so clear there was no need for the legislature to pass the retrospective amendment. Besides no case laws as mentioned above would have been passed. Thus in any case there existed a judicial deba....
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....eld that penalty u/s 271(1)( c) is leviable with respect to this amount of Rs. 4215.03 lacs.'' The amount accounted for as deferred taxation is based on the same audit report which was provided based on consistent method of accounting policy and it has been accepted so by the C.A. and statutory auditors. The ld. CIT(A) arbitrary held that part of it was liable for penalty. Reliance is again placed on the decision of Hon'ble Supreme Court in the case of Apollo Tyres vs. CIT (supra) for the proposition that once the assessee's accounts are audited and book profits are computed according to the audit report then the Revenue authority cannot interfere with the audited figures. 13. Apropos 3rd issue i.e. in respect of IMACID deposit, the ld. Counsel for the assessee contends that the ld. CIT(A) has observed as under:- ''The assessee did not offer any explanation w.r.t. levy of penalty on this amount. Accordingly, it is held that penalty in respect of this amount is levaiable'' It is pleaded that the observation of the ld. CIT(A) is not correct inasmuch as before lower authorities the assessee submitted the following submissions . 1. That accordin....
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....for this omission of fact, besides all the relevant particulars were filed along with return of income in the form of statement of audited accounts and TDS certificates. Thus the entire information emanated from the assessee's accounts and return only. 14. The ld. Counsel for the assessee on these facts and circumstances vehemently relied on the Hon'ble Supreme Court judgment in the case of CIT vs. Reliance Petro Products (P) Ltd. 322 ITR 158, for the proposition that when all the particulars of income are explained and filed the return of income, the mere fact that the claim is not allowed or partially allowed will entail into penalty u/s 271(1)( c) of the Act. It is pleaded that this proposition is squarely applicable to the above issue. The ld. Counsel for the assessee further relied on the following case laws to support his arguments:- 1. CIT vs. Yokogawa India Ltd., 204 Taxman 306 (Ker.) 2. DCIT vs. Escorts Construction Equip. 36 CCH 124 (Del) 3. CIT vs. Petals Engineers (P) Ltd. 42 Taxman 433 (Bombay) 15. The ld. DR relied on the order of the AO and further relied on the following case laws. 1. CIT vs. Gold Coin Health Food (P) Ltd.304 ITR 308 (SC) ....