2016 (9) TMI 297

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.... under Section 115JB of the Income Tax Act, 1961 [hereafter "the 1961 Act"] in the normal computation. It had claimed certain deductions, especially under Section 88E of the 1961 Act. The Assessing Officer (AO), in the original assessment proceedings was of the opinion that the deductions claimed were inadmissible. However, the AO accepted the assessment on the basis of Section 115JB returns. This led to the deposit of higher tax by the assessee in terms of Section 115JB(1). Apparently, in the course of further proceedings, both the CIT(A) and the ITAT added back further amounts to the normal income which led to higher tax liability on the part of the assessee. In the meanwhile, the AO had initiated penalty proceedings by issuing Show Ca....

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....the submissions. The issue in Nalwa (supra) was as to the precise meaning of "concealment" under Section 271(1)(c) in the context of Explanation 4. The revenue had relied upon a decision of the Supreme Court in CIT v. Gold Coin Health Food (P) Ltd. 2008 (304) ITR 308 (SC) which had interpreted the fourth Explanation after taking note of a departmental circular. The Court had then ruled that income has to be read to include losses in the context of its previous decision and that even when on account of concealed income, the returned loss is reduced, penalty would nevertheless be leviable. After considering these decisions, this Court in Nalwa (supra) observed as follows: "22. In the present case, the income computed as per the normal proc....

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....argeable not as if it were the total income. Once, we apply this rationale to Explanation 4 given by the Supreme Court, in the present case, it will be difficult to sustain the penalty proceedings. Reason is simple. No doubt, there was concealment but that had its repercussions only when the assessment was done under the normal procedure. The assessment as per the normal procedure was, however, not acted upon. On the contrary, it is the deemed income assessed under Section 115 JB of the Act which has become the basis of assessment as it was higher of the two. Tax is thus paid on the income assessed under Section 115 JB of the Act. Hence, when the computation was made under Section 115 JB of the Act, the aforesaid concealment had no role ....