TMI Blog2014 (10) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... iable with respect to the amount of ₹ 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 CIT(A) arbitrary held that part of it was liable for penalty - 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. Diminution in value of equity shares and 'provisions for deferred taxation" were made originally and contested by the assessee in appeal - the assessee cannot be penalized for claims which were not disallowable by any express provision on the statute book at the relevant time - once the book profits are computed on the basis of the audited accounts then the AO cannot interfere in the book profits calculations - penalty is impossible on the basis of information furnished the return - If the assesse has furnished all the relevant details and information along with the return, then disallowance of any claim by assessing officer is not exigible to penalty - Besid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after 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 ₹ 4,01,43,383/-. Minimum Alternate Tax u/s 115J of the Act was worked out at ₹ 6,73,10,934/- i.e. 7.65% of book profit of ₹ 87,98,81,489/-. 3.0 On the basis of the revised return, the AO, Kota made various disallowances/additions and completed the assessment u/s 143(3) vide his order dated 29-03-2005. Aggrieved assesse preferred first appeal on merits of additions. 4.0 Ld. CIT(A) passed order on 14-12-2006 partly allowing the assessee's appeal. After giving the appeal effect, the income was determined at ₹ 33,62,71,496/- and book profit was worked out at ₹ 2,01,06,05,781/- resulting in tax liability of ₹ 15,38,1,343/-, as against the liability calculated by the assessee by way of revised return at ₹ 6,73,10,934/-. 5.0 Aggrieved, both the parties preferred second appeals. ITAT Jaipur Bench vide its consolidate order dated 22-10-2010 passed the order in which both the appeals were partly allowed. 6.0 In the meanwhile, the AO issued penalty notice u/s 271(1) ( c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 by the same logic cannot be part of book profits and has to be excluded from computation of book profits. The assessee's case is on a weaker footing then the cases referred above as by following the ratio of Hon'ble 1TAT, even actual loss has to be excluded from computation of book profits whereas in the case of assessee it was only notional loss as the shares were not sold during the year but only re-valued. The assessee's claim that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counting 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 ₹ 100/- Tax on this ₹ 40/- Income as per I.T. Act ₹ 50/- Tax on this income ₹ 20/- Provision for taxation ₹ 10/- Provision for deferred tax (Rs.40-20-10) ₹ 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 provision for part of the income tax. The case of assessee can be illustrated by following examples:- Profit as per Company Act ₹ 100 Tax on this ₹ 40 Income as per Income Tax Act ₹ 50/- Tax on this income ₹ 20 Provision for taxation ₹ 20/- ₹ 10. Provision for deferred tax 10/- (Rs. 40-20-10) Following the above illustration, the provision for deferred tax in the case of assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 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 which was not included in the total income was ₹ 9,28,030/- instead of ₹ 7,80,018/-. Hence, the CIT(A) directed to take the figure of TDS at ₹ 9,28,030/- and therefore, amount of concealment of income on this account is taken at ₹ 9,28,030/~. For this penalty for concealment / furnishing inaccurate particulars is also initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 debate on such claim, besides all the relevant details were disclosed along with the return by way o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 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 according to the DTAA between India and the Kingdom of Moroco in the case of India d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long 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) 2. CIT vs. Moser Baer India Ltd., 315 ITR 460 (SC) 16 Apropos Revenue&# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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