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2016 (9) TMI 297 - DELHI HIGH COURT

2016 (9) TMI 297 - DELHI HIGH COURT - TMI - Penalty u/s 271(1)(c) - Assessee had filed its returns under Section 115JB - Held that:- What is of importance is that at the time when jurisdiction is assumed by the AO i.e. upon completion of proceedings or within the time stipulated by forming an opinion that there is no concealment of income, there should be objective material to reach the conclusion that such concealment is material having regard to the nature and circumstances of the case, espe .....

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ct the unfortunate circumstances of the litigating parties. That would not in any manner deviate from the fact as to whether the AO could have assumed, on the basis of the opinion that there was concealment of income which led to revenue loss. If the revenue evasion were to be accepted, a satisfaction which was otherwise warranted at the time when it was recorded because of operation of Section 115JB(1) or other such like provision would remain pending for about 15 years and the revenue can hope .....

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ndra Singh, Jr. Standing Counsel with Sh. Anup Kumar Kesari, Advocates. Respondent Through: None. O R D E R 1. The revenue is aggrieved by the decision of the Income Tax Appellate Tribunal (ITAT) dated 02.03.2016 whereby the deletion of penalty amounts assessed in this case was challenged. 2. The brief facts necessary are that the assessee had filed its returns under Section 115JB of the Income Tax Act, 1961 [hereafter the 1961 Act ] in the normal computation. It had claimed certain deductions, .....

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ty on the part of the assessee. In the meanwhile, the AO had initiated penalty proceedings by issuing Show Cause Notice (SCN) under Section 271(1)(c) of the 1961 Act to which the assessee had replied. The ITAT s adverse orders on the assessment/quantum proceedings were taken note of in the penalty proceedings. The AO thereafter issued SCN on the basis of an earlier satisfaction opinion recorded by him with respect to concealment of income. This led to penalty order. The CIT(A) deleted the penalt .....

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IT v. Nalwa Sons Investments Ltd. 2010 (327) ITR 543 (Del). In that case, this Court, taking note of Explanation 4 to Section 271 had clarified that if at the stage of assessment in respect of the higher computation - upon which tax is payable, no concealment is alleged or found, the initiation of penalty proceedings would not be warranted and would be impermissible. It is contended that in the present case, the satisfaction had been arrived at but no proceedings were initiated - a significant f .....

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e 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 procedure was less than the income determined by legal fiction namely, book profits‟ under Section 115 JB of the Act. On the basis of normal provision, .....

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ave been initiated. Issue necessary forms. The income of the assessee was thus assessed under Section 115 JB and not under the normal provisions. It is in this context that we have to see and examine the application of Explanation 4. The judgment in the case of Gold Coins 2008 (304) ITR 308, obviously, does not deal with such a situation. What is held by the Supreme Court in that case is that even if in the income tax return filed by the assessee losses are shown, penalty can still be imposed in .....

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cult 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 co .....

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