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2016 (7) TMI 579 - ITAT MUMBAI

2016 (7) TMI 579 - ITAT MUMBAI - TMI - Penalty u/s. 271(1)(c) - provisions for leave encashment and provisions for gratuity added back to book profit u/s 115JB - Held that:- We find that the CBDT has issued circular no. 25/2015 dated 31-12-2015 explaining that the pursuant to the judgment of Hon’ble Delhi High Court in the case of Nalwa Sons Investment Ltd (2010 (8) TMI 40 - DELHI HIGH COURT ) and the substitution of Explanation 4 of section 271 of the Act with prospective effect, it is now sett .....

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levy of penalty u/s. 271(1) ( c) of the Act, will depend on the nature of adjustment. The CBDT has also directed the revenue authorities that no appeal may henceforth be filed on this ground and appeals already filed, if any, on this issue before various courts/tribunals may be withdrawn or not pressed upon. Thus penalties deleted - Decided in favour of assessee - ITA No.7418 and 7419/Mum/2012 - Dated:- 8-7-2016 - SRI MAHAVIR SINGH, JM AND SRI RAMIT KOCHAR, AM For The Appellant : Shri Prakash J .....

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fter referred to as the ( Act ). Penalties under dispute were levied by the ACIT, Circle- 9(1) u/s 271(1) (c) of the Act vide his orders, both dated 24-03-2011. At the outset, the learned Counsel for the assessee stated that the facts and circumstances are exactly identical in both the years in regard to levy of penalty by the AO u/s 271 (1) (c) of the Act. Identical grounds are raised by the assessee and identical orders are passed by the CIT (A), hence, we pass this consolidated order for the .....

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ving from the accounts of the assessee, noticed that the assessee made provisions of ₹ 2,73,007/- on account of leave encashment and provisions for gratuity amounting to ₹ 6,90,677/-. According to the AO, these provisions are not made on the basis of actuarial provisions as per Accounting Standard-9 (AS-9). According to the AO, the method adopted by the assessee, for exact valuation of liabilities, was not scientific one and the liability on these two counts cannot be said to have ac .....

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ction 115JB of the Act. The AO initiated penalty proceedings u/s 271 (1) (c) of the Act in respect of the following items including these two provisions:- i) Ad-hoc Miscellaneous exp. ₹ 60,000/- ii) Addition u/s 35D Rs.73,57,252/- iii) Provision for leave encashment ₹ 2,73,003/- iv) Provision for gratuity ₹ 6,53,688/- 4. Learned Counsel for the assessee before us explained that the CIT (A) has deleted the levy of penalty in respect to other additions and only confirmed the pena .....

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e Hon ble Supreme Court in the case of CIT Vs. Nalwa Sons Investment Ltd. [(2012) 21 taxmann.com 184 (SC)]. Aggrieved against the order of the CIT (A), confirming the levy of penalty, the assessee came in second appeal before the Tribunal. 5. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that this issue is squarely covered in favour of assessee and not the department as held by CIT(A). Ld. Counsel taken us through judgment of Hon ble Suprem .....

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an still be imposed in a case where on settings off the concealed income against any loss incurred by the assessee under other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even a minus figure. The court was of the opinion that the tax sought to be evaded will mean the tax chargeable 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, .....

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e, when the computation was made under Section 115JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, the concealment did not lead to tax evasion at all. 6. We find that the CBDT has issued circular no. 25/2015 dated 31-12-2015 explaining that the pursuant to the judgment of Hon ble Delhi High Court in the case of Nalwa Sons Investment Ltd (supra) and the substitution of Explanation 4 of section 271 of the Act with prospective effect, it is now set .....

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e levy of penalty u/s. 271(1) ( c) of the Act, will depend on the nature of adjustment. The CBDT has also directed the revenue authorities that no appeal may henceforth be filed on this ground and appeals already filed, if any, on this issue before various courts/tribunals may be withdrawn or not pressed upon. We have gone through the CBDT Circular and the same reads as under:- "CIRCULAR NO. 25/2015 F.No.279/Misc./140/2015/ITJ Government of India Ministry of Finance Central Board of Direct .....

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e 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 .....

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