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2017 (2) TMI 591

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..... ld. CIT(A) confirming the penalty u/s 271(1)(c) of the Act calculated on the tax to be evaded of ₹ 98,79,990/- calculated @ 100% of deemed income u/s 115JB of ₹ 98,79,990/-. - Decided against assessee Disallowance of expenditure made in the computation of assessee’s total income - Held that:- The impugned expenses have already been disallowed and assessee has agreed to pay taxes thereon but certainly assessee should not be visited by penalty u/s 271(1)(c) of the Act. We further observe that penalty is not imposable on this impugned disallowance of expenses because for the year under appeal assessee’s tax liability under MAT is higher than the normal tax liability and even the disallowance of expenses will not affect the overall tax liability and in such situation penalty is not leviable u/s 271(1)(c) of the Act on the disallowed expenses. We, therefore, delete the penalty - Decided against revenue - ITA No. 1275/Ahd/2012 - - - Dated:- 9-2-2017 - Shri Rajpal Yadav, JM And Shri Manish Borad, AM Appellant by Shri S. N. Soparkar P. M. Mehta, AR Respondent by Shri Prasoon Kabra, Sr.DR ORDER Per Manish Borad, Accountant Member This appeal of th .....

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..... 98,79,990 u/s. 271(1)(c) on the ground that the appellant was guilty of concealment of income inasmuch as it had failed to show in its return the total income pursuance to Section 115JB and instead, merely returned total income as per the normal provisions of the Income-tax Act, 1961. The same may be deleted for the reasons stated in the Synopsis attached herewith. 3. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding the levy of penalty of ₹ 4,63,247 u/s. 271(1)(c) in respect of disallowance of expenses made in the computation of the appellant's total income as per the normal provisions of the Income-tax Act, 1961 in total disregard of the fact that the appellant's total income for the present assessment year having been deemed to be equal to the book profit pursuant to the provisions of Section 115JB, the impugned disallowance of expenditure had no bearing in arriving at the appellant's tax liability and in turn, in arriving at the amount of tax alleged to have been evaded as envisaged by clause (iii) of Section 271(1) which formed the very basis for arriving at the quantum of the penal .....

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..... sider it necessary to furnish computation of book profit. It was further pointed out that assessee proceeded on a bona fide and honest belief. Further provisions of section 115JB of the Act were amended w.e.f. 1.4.2007 which were completely applicable from Asst. Year 2007-08. As per the amended provisions exempt income u/s 10(38) of the Act from sale of sale of equity shares is required to be added to the book profit. It is true that while filing the return of income assessee company inadvertently lost sight of the amended provisions and therefore while computing the long term capital gain exempt income u/s 10(38) of the Act was not considered which resulted into bona fide error. However, there is no concealment of income and/or furnishing of inaccurate particulars of income at any stage. Ld. AR further referred and relied on the judgment of Hon. Delhi High Court in the case of CIT vs. NG Technologies Ltd. (2015) 57 taxmann.com 389 (Delhi) and the judgment of Ho. Punjab Haryana High Court in the case of CIT vs. Stock Home India Ltd. (2015) 58 taxmann.com 197 (Punjab Haryana) wherein similar facts were adjudicated by the Hon. Courts and just for the sake of not filing revised re .....

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..... s below we find that during the course of assessment proceedings, the AO observed that the assessee was liable under the provisions of section 115JB and that the assessee has not filed form No. 29B which is required to be filed u/s 115JB(4) of the Act. The assessee had claimed long term capital gains on the sale of securities/shares as exempt u/s 10(38). the profit on long term capital gain is to be added while computing the book profit and tax liability u/s 115JB. The A.O. issued show cause notice in this regard to the assessee. The assessee thereafter revised the computation of income. The AO initiated penalty proceedings u/s 271(l)(c) of the Act and levied penalty of ₹ 13.58.452/- with this finding that the assessee had filed revised computation of income only after detection of concealment of facts. The l.d. CIT(A) has deleted the penalty accepting the contention of the assessee that it had neither concealed the particulars of income nor furnished inaccurate particulars of income and relied on the decision of Hon'ble Supreme Court in the ease of CIT v. Reliance Petro Products Ltd. 230 CTR 320 (SC) and of Hon'ble Punjab Haryana High Court in the case of CIT v. SS .....

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..... erm capital gains on shares is to be included while determining the book profits. It was for the first time that for the assessment year 2007-08 onwards, the aforesaid provision became applicable. The plea of the assessee regarding the bona fides has been accepted by the Tribunal, '['here is nothing to doubt the veracity of the aforesaid findings recorded by the Tribunal. 8. In view of the above, no question of law much le s a substantial question of law arises in this appeal for consideration of this Court. Accordingly, finding no merit in the appeal, the same is hereby dismissed. 10. We observe that there is no dispute that assessee committed an error by not disclosing correct book profit u/s 115JB of the Act. Further there is also no dispute with regard to the fact that assessee has not furnished form no.29B referred under Rule 40B of the IT Rules which dealt with special provisions of tax of certain companies and requires that a report of an Accountant to be furnished along with the return of income under sub-sec.(4) of section 115JB of the Act and the same was neither attached with the return of income nor was it furnished during the course of assessment pro .....

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..... t stopped it for not calculating the same for Asst. Year 2007-08 when the MAT was higher than the normal tax. It gives a sound basis to infer that there was a lack of bona fideness and mens rea of concealment of particulars of income because assessee had earned a handsome income on long term capital gain from sale of investment at ₹ 8.53 crores (approx.) and the liability under MAT was much higher than normal tax. If the case of assessee had not come under scrutiny this year it might have passed free out of the clutches of the Revenue authorities without paying the correct tax under MAT. Further even during the course of assessment proceedings when assessee had fair chances to correct its mistake by filing form 29B and paying the necessary taxes, the same was not done on its part. Assessee has relied on various decisions but the same will not be of any help to assessee as the facts are different and most importantly the fact of not filing a revised return along with form no.29B and paying of taxes before finalization of assessment u/s 143(3) of the Act. We further observe that ld. Assessing Officer has given proper reasoning before concluding to impose penalty u/s 271(1)(c) o .....

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..... T calculation and also had not filed form 29B statutorily required under the Act to be furnished along with the return of income. We, therefore, uphold the order of ld. CIT(A) confirming the penalty of ₹ 98,79,990/- u/s 271(1)(c) of the Act calculated on the tax to be evaded of ₹ 98,79,990/- calculated @ 100% of deemed income u/s 115JB of ₹ 98,79,990/-. Accordingly, this ground of assessee s appeal is dismissed. 15. Ground no.3 reads as under :- 3. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding the levy of penalty of ₹ 4,63,247 u/s. 271(1)(c) in respect of disallowance of expenses made in the computation of the appellant's total income as per the normal provisions of the Income-tax Act, 1961 in total disregard of the fact that the appellant's total income for the present assessment year having been deemed to be equal to the book profit pursuant to the provisions of Section 115JB, the impugned disallowance of expenditure had no bearing in arriving at the appellant's tax liability and in turn, in arriving at the amount of tax alleged to have been evaded as envisaged by .....

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..... ough this ground no.3 assessee is aggrieved with the order of ld. CIT(A) upholding levy of penalty of ₹ 4,63,247/- u/s 271(1)(c) of the Act in respect of disallowance of expenditure made in the computation of assessee s total income. We observe that assessee is incorporated since 1986 and is regularly filing return of income. During the year under consideration assessee s main source revenue was from interest income, rent income, dividend income and amount received from Keyman Insurance Policy. Assessee has also incurred various day to day expenses including salary, wages, contribution to ESI, PF, audit fees, electricity expenses, office maintenance etc. Assessee has shown depreciation of ₹ 29,36,189/- which has been added back to the profit in the computation of income and depreciation of a sum of ₹ 2,91,780/- which has been calculated on the office building, office equipment, furniture etc. used in the normal running of business. Apart from that assessee has disallowed demat charges and security transaction tax. The ld. Assessing Officer disallowed a sum of ₹ 13,24,563/- being expenditure claimed during the year on the basis of his observation that assesse .....

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