"The Ld. CIT(A) has erred in deleting the penalty levied u/s 271 (1) (c) of the IT Act by the Assessing Officer of Rs. 1,09,03,616/- even when the assessee has violated the clear cut provision of law and has claimed deductions wrongly leading to furnishing inaccurate particulars of income."

while the assessee in CO has taken following effective ground of appeal.

"The learned CIT(A) erred in holding that the penalty order passed after receipt of the Hon"ble Tribunal"s order does not suffer from any infirmity as far as time- barring is concerned."

3. The only issue involved in the appeal filed by the Revenue relates to deletion of the penalty imposed by the Assessing Officer u/s 271(1)(c) of the Income Tax Act.

4. The brief facts of the case are that the assessee filed the return of income for Assessment Year 1997-98 on 29.11.1997 declaring a total income of Rs. 2,82,42,861/- under normal provisions of Income Tax Act after claiming deduction u/s 80HHC of the IT Act to the extent of Rs. 22,62,94,648/-. The assessee declared the book profits u/s 115JA of the IT Act of Rs. 6,05,34,680/-. The assessment was completed u/s 143 (3) on 09.03.2000 determining the total income at Rs.14,27,55,184/- after allowing deduction u/s 80HHC amounting to Rs. 7,51,96,065/-. This assessment was rectified determining the total income at Rs. 8,02,82,316/- allowing the deduction u/s 80HHC of the IT Act to the extent of Rs. 13,71,83,740/-. Subsequently, assessment was reopened u/s 147 and the assessment u/s 143(3) read with section 147 was completed vide order dated 27.03.2002 determining the total income at Rs. 13,32,11,626/- after allowing the deduction u/s 80HHC amounting to Rs. 8,42,54,430/-. In the original assessment the Assessing Officer has not initiated a penalty u/s 271(1)(c). The difference in the claim of the deduction u/s 80HHC was due to the depreciation not claimed by the assessee but allowed by the Assessing Officer while computing deduction u/s 80HHC during the assessment passed u/s

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143(3) read with section 147. The Assessing Officer initiated the penalty proceeding u/s 271(1)(c) for claiming the deduction u/s 80HHC. The assessee went in appeal against the order dated 27.3.2002. Ultimately matter travelled to the Income Tax Tribunal. After giving the effect to the Income Tax Appellate Tribunal order, the assessed income was determined at Rs. 1,65,28,657/- against the return of income of Rs. 2,82,42,861/- while the deduction u/s 80HHC was allowed to the extent of Rs. 20,09,37,399/- against the claim of Rs.22,62,94,648/-. The book profit on which the tax was paid by the assessee was determined at Rs. 6,05,34,680/- u/s 115JA. The Assessing Officer due to the excess claim of deduction u/s 80HCC levied the penalty u/s 271(1)(c) for furnishing inaccurate particulars of income amounting to Rs. 1,09,03,616/- @ 100% on the tax on the excess claim of deduction u/s 80HHC treating it to be tax sought to be evaded.

5. The assessee went in appeal before the CIT(A), and CIT(A) deleted the penalty by observing as under:

"Thus, it can be seen that many authorities have reduced or increased the claim of deduction u/s 80HHC of the appellant during the course of assessment, reassessment and various appellate proceedings. This is because of different opinions of different authorities. All the figures were available in the Return of Income and audited accounts, and the same have been treated differently by different authorities at different points of time. Therefore, in my opinion, the appellant has neither concealed his income nor furnished any inaccurate particulars. It was only a matter of opinion and the same has been debated at the level of AO, CIT(A) and Hon"ble ITAT. In view of these facts, I find that, penalty under section 271(1)(c) was not liveable on the facts of this case and in law, and the AO is directed to delete the penalty levied u/s 271(1)(c) for an amount at Rs. 1,09,03,616/-."

6. The Learned AR before us relying upon the order of Hon'ble Delhi High Court in the case of CIT vs. Nalwa Sons Investments Ltd. 327 ITR 543 contended that since in the case of assessee the book profits u/s 115JA has been determined at the same amount as has been returned by the assessee, therefore, in this case, there cannot be any tax sought to be evaded. Referring to the order

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of Assessing Officer, assessee contended that the penalty has been imposed by the Assessing Officer by applying explanation-4 while explanation-4 in the case of assessee cannot be applied. It was pointed out that the Hon'ble Supreme Court has dismissed the SLP against the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Nalwa Sons Investment Ltd. Even otherwise the claim of the assessee was bona fide. It is not a case where Assessee has furnished inaccurate particulars of the income. The assessee duly disclosed particulars of the income. Reliance was also placed on the decision of Jurisdictional Mumbai High Court in the case of CIT vs. M/s. Aditya Birla Nova Ltd. in ITA No. 3899 of 2010. It was contended that the case of the assessee is duly covered by the decision of Hon'ble High Court in the case of Reliance Petroproducts Private Ltd. 322 ITR 158. Merely the claim of the assessee u/s 80HHC was not accepted by the Revenue will not make the claim made by the assessee liable for penalty holding that the assessee has failed to furnish accurate particulars in respect of the said claim. It was also contended that in the original assessment order the Assessing Officer has not initiated penalty proceedings. Even though while computing the claim u/s 80HHC the assessee has computed the book profit for the purpose of 80HHC on the basis of not claiming the depreciation u/s 32, the Assessing Officer while computing the claim u/s 80HHC allowed the depreciation to the assessee. On the same very basis, the claim u/s 80HHC has been reduced in assessment framed u/s 143(3) read with section 147 while computing normal taxable income.

7. Learned DR, on the other hand, relying on the order of the Assessing Officer vehemently contended that the explanation in the case of assessee will apply.

8. We have heard the rival submissions and carefully considered the same. We noted that in the case of the assessee, the provision of section 115JA was applicable. The assessee has returned income as per the provision of Section 115JA at Rs. 6,05,34,680/-. Ultimately the assessee has paid tax on the same

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income after giving effect to the order of the Tribunal. We have gone through the order of the Hon'ble Delhi High Court in the case of CIT vs. Nalwa Sons Investment Ltd. (supra) in which the Assessing Officer imposed penalty u/s 271(1)(c) wherein the income was determined u/s 115JB. When the matter went to the Hon'ble Delhi High Court, the Hon'ble Delhi High has held as under.

"23. In view thereof, in conclusion, the assessment order records as follows:-

"Assessed at Rs. 4,01,63,180 under section 115JB, being higher of two. Interest under section 234B and 234C has been charged as per the provisions of Income-tax Act, 1961. Penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 have been initiated. Issue necessary forms."

24. The income of the assessee was thus assessed under section 115B and not under the normal provisions. It is in this context that we have to see and examine the application of Explanation 4.

25. Judgment in the case of Gold Coin Health Food (P.)Ltd.(supra), 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 a case where on setting off the concealed income against any loss incurred by the assessee under other head of income of 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, it will be difficult 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 115JB 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 115JB of the Act. Hence, 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.

26. The upshot of the aforesaid discussion would be to sustain the order of the Tribunal, though on different grounds. Therefore, while we do not agree with the reasoning and approach of the Tribunal, for our reasons disclosed above, we are of the opinion that penalty could not have been imposed even in respect of claim of depreciation made by the assessee. This appeal is accordingly dismissed."

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The SLP against the said order of the Hon'ble Delhi High Court has been dismissed by the Hon'ble Supreme Court vide the order 4^thMay, 2012, 21 Taxman.com 184(SC). The Hon'ble Delhi High Court has taken a similar view in the case of CIT vs. Central Housing Corporation, 80CCH 055 (Delhi). No contrary decision was brought to our knowledge by the Learned DR. Under the facts and circumstances, since the case of the assessee is duly covered by the decision in the case of Nalwa Sons Investment Ltd. (supra), we confirm the order of the CIT(A) deleting the penalty imposed u/s 271(1)(c), though on a different basis that the explanation-4 in the case of the Assessee will not apply and in the absence of non-application of explanation-4, tax sought to be evaded could not be computed and in the absence of non-computation of tax sought to be evaded u/s 271(1)(c), there cannot be any penalty as the charging provision for imposing penalty will become ineffective. Since the other submissions made by the Learned AR are purely academic and we have already confirmed the order of the CIT(A) deleting the penalty against the u/s 271(1)(c), in our opinion, other submissions made by the learned AR does not require any adjudication.

9. Coming to the CO filed by the Assessee, the only issue involved in the CO relates to the fact that the order passed u/s 271(1)(c) was barred by limitation. Learned AR before us, vehemently contended that the order u/s 143(3) read with section 147 was passed on 12^thAugust 2004 and therefore, the penalty order must have been passed by the Assessing Officer within 6 months from the end of the month in which the order of CIT(A) is received by the Chief Commissioner or Commissioner. The order of CIT(A) was received on 21.09.2004 and therefore, the due date for passing the penalty order was 31^st March 2005. In this case, the Assessing Officer imposed the penalty on the assessee by passing the penalty order on 27.09.2010 after the Penalty order was barred by limitation. The Learned DR on the other hand contended that the proviso to Sec. 275(1)(a) cannot supersede the main provision of sec. 275(1)(a).

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The Assessing Officer can impose the penalty within 6 months from the date when the order of the Appellant Tribunal is received by the Chief Commissioner or Commissioner. Penalty has been imposed within the six months from the date of the order of the Tribunal received by the CIT.

10. We have heard the rival submissions and carefully considered the same. We agree with the Learned DR that the proviso cannot supersede the main provision. Our aforesaid view is duly supported by the following decision:

CIT vs. Mohair Investments & Trading Co. Pvt. Ltd. 345 ITR 51 (Delhi) Rayala Corporation Pvt. Ltd. vs. Union of India 288 ITR 452 (Mad) No contrary decision was brought to our knowledge by the Learned AR. In view of aforesaid two decisions, we confirm the order of the CIT on the issue that the penalty order was not barred by limitation.

11. In the result the appeal filed by the Revenue as well as CO filed by the assessee stand dismissed.

Order pronounced in the open court on 8.11.2013.

Sd/- Sd/-

(D.T. GARASIA) (P.K. BANSAL)

Judicial Member Accountant Member

Place : PANAJI / GOA Dated : 8.11.2013 P.S.- *PK*

Copy to :

(1) Appellant

(2) Respondent

(3) CIT concerned

(4) CIT(A)

(5) D.R

(6) Guard file True copy, By order

Private Secretary, ITAT, Panaji, Goa

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