TMI Blog2016 (2) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... that clause (viii) was inserted in Explanation- I below Section 115JB(1) by Finance Act, 2008, but with retrospective effect from 01.04.2001 and so the assessee could not have known in the year in question that the deferred tax liability was not to be reduced for the purpose of calculation of book profit, which was credited to the Profit Loss Account. In our opinion, there is merit in the above contention of assessee and therefore, we hold that the ld. CIT(Appeals) was fully justified in canceling the penalty on the addition of declared tax liability. Also the tax as per MAT is more than the regular tax calculated by the Assessing Officer. Hence, the assessee company was assessed on the book profits under section 115JB of the Income Tax Act, 1961. Recently, the CBDT has issued circular No. F.279/Misc./140/2015/ITJ dated 31.12.2015, wherein i t is stated that when the tax payable on income computed under normal procedure is less than the tax payable under the deeming provisions of Sect ion 115JB of the Act, then penalty u/s 271(1) (c) of the Act could not be imposed with reference to additions /disallowances made under normal provisions. - Assessee appeal allowed. - ITA No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from net profit for the purposes of MAT at the time of filing of ITR. 3. Briefly stated the facts of the case are that the assessee submitted its return of income on 28.10.2007 for the assessment year 2007-08 declaring total income at ₹ 1,65,41,079/-. The first issue relates to the disallowance of the interest on account of diversion of funds to sister concern. During the course of assessment proceedings, the Assessing Officer not iced that the assessee had advanced loans to M/s K. Sons Associates which, as on 31.03.2007 was at ₹ 3341.26 lacs. The Assessing Officer observed that on one hand the assessee had raised huge secured and unsecured loans and on the other hand, the assessee had diverted funds to its sister concern without any commercial expediency. So the Assessing Officer disallowed interest @ 2.55% on the monthly debit balances in the account of this concern. Accordingly, the Assessing Officer disallowed interest of ₹ 65,72,728/- under sect ion 36(1) (iii) of the Act. 3(i) In the assessment order, the Assessing Officer made another addition on account of defer red tax amounting to ₹ 3,35,63,811/- to the book profit under sect ion 115JB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) of the Act on addition of declared tax liability to the book profit under sect ion 115JB of the Act, observing as under : 6.2 I have considered the submission of the Ld. Counsel. Clause (viii) was inserted in Explanation-1 below section 115JB(1) by Finance Act, 2008, but with retrospective effect from 01.04.2001 and so the appellant could not have known in the year in question i.e. 2006-07 that deferred tax liability was not to be reduced for the purposes of calculation of book profit if it was credited to the profit and loss account. Hence, the Assessing Officer was not right in levying the penalty u/s 271(l)(c) on this addition made in calculation of book profit and so the penalty levied on this issue is also cancelled. Ground of appeal No. 4 is allowed. 7. Aggrieved by the order of ld. CIT(Appeals), the revenue is in appeal before the Tribunal. 8. We have heard Ms. Meha Kansal, ld. counsel for the assessee and Shri Manjit Singh, ld. DR at length and have also perused the materials available on record. Ms. Meha Kansal, ld. counsel for the assessee submitted that while framing assessment, the Assessing Officer made certain notional disallowances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and therefore, we hold that the ld. CIT(Appeals) was fully justified in canceling the penalty on the addition of declared tax liability. 10. Before parting this case, we may also observe here that the tax as per MAT is more than the regular tax calculated by the Assessing Officer. Hence, the assessee company was assessed on the book profits under sect ion 115JB of the Income Tax Act, 1961. Recently, the CBDT has issued circular No. F.279/Misc./140/2015/ITJ dated 31.12.2015, wherein i t is stated that when the tax payable on income computed under normal procedure is less than the tax payable under the deeming provisions of Sect ion 115JB of the Act, then penal ty under sect ion 271(1) (c) of the Act could not be imposed with reference to additions /disallowances made under normal provisions. The aforesaid circular reads as under: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
