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IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI
BEFORE S/SHRI B.R.BASKARAN, AM AND AMARJIT SINGH, JM
./I.T.A. No.980/Mum/2006
( / Assessment Year:2001-02)
Killick Nixon Ltd., / Dy. Commissioner of Income Tax
Basement, CC-3,
Vs.
Commercial Union House, Old CGO
9, Wallace Street, Mumbai-400020
Fort,
Mumbai-400001
( /Appellant) .. ( / Respondent)
./ ./PAN. :AAACK8526A
/ Assessee by Shri Vijay C Kothari
/Revenue by Shri K Krishna Murty
/ Date of Hearing : 30.12.2015
/Date of Pronouncement: 08.1.2016
/ O R D E R
Per B R Baskaran, AM:
The appeal filed by the assessee is directed against the order
dated 17.11.2005 passed by the ld. CIT(A), Central-I, Mumbai for the
assessment year 2001-02 confirming the penalty of 29.10 cr. levied by the
AO under section 271 (1)( c ) of the Act.
2. The ld. Counsel appearing for the assessee submitted that the
assessee filed return of income declaring a taxable income of Rs.26.87
lakhs under normal provisions of Act and book profit of Rs.135.39 lakhs
under the provisions of section 115JB of the Act. Accordingly, the
assessee paid income tax under section 115JB of the Act. The AO
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completed the assessment by determining the total income under the
normal provisions of Act on Rs.55.92 cr.
3. In the appellate proceedings, the assessee got partial relief.
However, the assessee also made additional claim for deduction of Rs.105
crores relating to the liability incurred for guarantee agreement. The said
claim was ultimately allowed by the Tribunal, vide its order dated
30.9.2015 passed in ITA No.746/Mum/2005 (AY-2001-02). The ld.AR
submitted that the total income of the assessee would result in negative
figure on allowing the additional claim of Rs.1.05 crores. Accordingly, the
ld. AR submitted that the total income is ultimately computed under
section 115JB of the Act at Rs.135.39 lakhs.
4. The ld. AR submitted that the Hon'ble Delhi High Court in the case
of CIT vs. Nalwa Sons Investments Ltd as reported in [2010] 327 ITR
543 {Del} has held that when the tax payable on the income payable
under the normal provisions is less than the tax payable under the
deeming provisions of section 115JB of the Act, then penalty u/s 271(1)(c)
should not be imposed with reference to the above addition/disallowance
made under the normal provisions. Accordingly, he submitted that the
impugned penalty confirmed by the ld.CIT(A) is liable to be cancelled.
5. On the contrary, the ld. DR placed strong reliance on the order
passed by the ld. CIT(A).
6. We heard the rival contentions of the parties and perused the
record. We notice that the CBDT has recently issued a circular No.25/2015
dated 31.12.2015, wherein the CBDT has accepted the decision rendered
by the Hon'ble Delhi High Court in the case of Nalwa Sons Investments Ltd
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(supra). For the sake of convenience, we extract below the CBDT circular
No.25/2015 dated 31.12.2015:
"CIRCULAR NO. 25/2015
F.No.279/Misc./140/2015/ITJ
Government of India
Ministry of Finance
Central Board of Direct Taxes
New Delhi, 31st December, 2015
Subject: Penalty u/s 271(1)(c) wherein additions/disallowances
made under normal provisions of the Income Tax Act,
1961 but tax levied under MAT provisions u/s
115JB/115JC, for cases prior to A.Y. 2016-17-reg.-
Section 115JB of the Act is a special provision for levy of Minimum
Alternate Tax on Companies, inserted by Finance Act 2000 with effect
from 1-4-2001.
2. Under clause (iii) of sub-section (1) of section 271 of the Act, penalty
for concealment of income or furnishing inaccurate particulars of income
is determined based on the "amount of tax sought to be evaded" which
has been defined inter-alia, as the difference between the tax due on the
income assessed and the tax which would have been chargeable had such
total income been reduced by the amount of concealed income or income
in respect of which inaccurate particulars had been filed.
3. In this context, Hon'ble Delhi High Court in its judgment dated
26.8.2010 in ITA No.1420 of 2009 in the case of Nalwa Sons Investment
Ltd. (available in NJRS as 2010-LL-0826-2), held that when the tax
payable on income computed under normal procedure is less than the tax
payable under the deeming provisions of Section 115JB of the Act, then
penalty under section 271(1)(c) of the Act could not be imposed with
reference to additions /disallowances made under normal provisions. The
judgment has attained finality.
4. Subsequently, the provisions of Explanation 4 to sub-section (1) of
section 271 of the Act have been substituted by Finance Act, 2015, which
provide for the method of calculating the amount of tax sought to be
evaded for situations even where the income determined under the
general provisions is less than the income declared for the purpose of
MAT u/s 115JB of the Act. The substituted Explanation 4 is applicable
prospectively w.e.f. 01.04.2016.
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5. Accordingly, in view of the Delhi High Court judgment and substitution
of Explanation 4 of section 271 of the Act with prospective effect, it is now
a settled position that prior to 1/4/2016, where the income tax payable on
the total income as computed under the normal provisions of the Act is
less than the tax payable on the book profits u/s 115JB of the Act, then
penalty under 271(1)(c) of the Act, is not attracted with reference to
additions /disallowances made under normal provisions. It is further
clarified that in cases prior to 1.4.2016, if any adjustment is made in the
income computed for the purpose of MAT, then the levy of penalty u/s
271(1)(c) of the Act, will depend on the nature of adjustment.
6. The above settled position is to be followed in respect of section 115JC
of the Act also.
7. Accordingly, the Board hereby directs that no appeals may henceforth
be filed on this ground and appeals already filed, if any, on this issue
before various Courts/Tribunals may be withdrawn/not pressed upon. This
may be brought to the notice of all concerned.
(Ramanjit Kaur Sethi)
DCIT (OSD) (ITJ), CBDT, New Delhi"
7. It is well settled proposition that the circulars issued by the CBDT
are binding on the Income Tax Authorities. For this proposition, one may
gainfully refer to the decisions rendered by the Hon'ble Supreme Court in
the case of Azadi Bachao Andolan (2003)(177 Taxation 775) and Pradip J
Mehta Vs. CIT (2008)(300 ITR 231). Hence, the latest circular issued by
the CBDT (referred supra) is binding on the income tax authorities.
8. Since the CBDT has taken a conscious decision not to pursue penalty
appeals in respect of the cases, wherein the income was assessed u/s
115JB of the Act by following the decision of Hon'ble Delhi High Court
(referred above), we find merit in the contentions of the assessee. As
submitted by the ld. AR after passing the Tribunal order dated 30.9.2015
(referred above), the total income is a negative figure under normal
provisions of the Act. Hence the income declared by the assessee u/s
115JB of the Act shall remain total income of the assessee. In view of the
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circular referred above, the penalty u/s 271(1)(c) is not leviable in respect
of the additions made while computing the income under the normal
provisions of Act. In view of the above, we set aside the order of ld.
CIT(A) and direct the AO to delete the penalty levied under section
271(1)(c) for the year under consideration.
9. In the result, the appeal filed by the assessee is allowed.
Pronounced accordingly on 8th Jan, 2016.
8th Jan.2016
Sd sd
(AMARJIT SINGH) ( B.R. BASKARAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai: 8th Jan, 2016.
.../ SRL , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
True copy
(Asstt. Registrar)
, /ITAT, Mumbai
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