1. This appeal of the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-3, Coimbatore dated 24.11.2015 pertaining to assessment year 2011-12.
2. The grievance of the assessee in this appeal is levy of penalty under section 271(1)(c) of the Act at ` 36,76,440/-.
3. The facts of the issue are that the assessee filed its return of income on 29.09.2011 declaring total income of ` 34,84,680/- after claiming deduction of ` 57,01,338/- u/s. 80-IA of the Act. In this case, there was a survey u/s. 133A of the Act on 11.01.2011 during the course of which an amount of ` 1,10,67,779/- was offered as additional income. Subsequently, the assessment was completed by accepting the above amount of ` 1,10,67,779/- as additional income and also disallowance of deduction at ` 57,01,338/- u/s. 80-IA of the Act. Later, the AO invoked the provisions of Sec. 271(1)(c) of the Act for levy of penalty in respect of ` 1,10,67,779/- was offered as additional income. It is also pertinent to mention herein that the assessee carried the appeal to the Ld. CIT(A) with regard to claim of deduction u/s. 80-IA of the Act which was allowed by Tribunal by placing reliance on the decision of jurisdictional High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. v. ACIT reported in : 231 CTR (Mad.) 368 and order was confirmed by the Tribunal in ITA No. 1972/Mds./15 in assessee's own case vide order dated 08.12.2015.
3.1 Coming to the levy of penalty u/s. 271(1)(c) of the Act, the assessee carried the appeal before the Ld. CIT(A). Ld. CIT(A) observed that there was a concealment of income by the assessee which is on account of non-disclosure of the waste sales in the return of income and the disclosure in the statement recorded in the survey based on impounded material. According to him, there is a concealment of income and levy of penalty under Sec. 271(1)(c) of the Act is valid. Against this, the assessee is in appeal before us.
4. Before us, the ld. A.R submitted that finally the income was computed u/s. 115JB of the Act, which is at ` 3,08,45,298/- and the income under normal computation is only ` 1,45,52,459/- after giving effect to the order of Tribunal cited supra in assessee's own case for assessment year 2011-12. According to him, in view of Circular of CBDT No. 25/15 dated 31.12.2015, when the income of assessee was computed u/s. 115JB of the Act, no penalty can be levied under Sec. 271(1)(c) of the Act. Without prejudice to the above, he submitted that addition is only based on the survey report and as such in view of the judgment of jurisdictional High Court in the case of CIT v. S. Khader Khan Son in : (2008) 300 ITR 0157, penalty cannot be levied.
5. On the other hand, ld. D.R supported the order of lower authorities.
6. We have heard both the parties and perused the material on record. Admittedly, in this case, on account of survey, the assessee offered additional income at ` 1,10,67,779/-. The AO in his penalty order had not pointed out on what basis there is concealment of income at ` 1,10,67,779/- and he had not brought on record any impounded material in support of the disclosure made by the assessee. In other words, in our opinion the addition is only based on disclosure made by the assessee during the course of survey. Even in the assessment order, the AO has mentioned that the assessee has offered additional undisclosed income generated from the sale of waste garments, which relates to the Garment unit of the company at Mudalipalayam, Tirupur and not mentioned the details of materials gathered by the survey party. In the absence of details based on computation for undisclosed income, it is not possible to confirm the findings of the lower authorities. More so, as seen from the records, the income of assessee was computed u/s. 115JB of the Act. As rightly pointed out by the ld. A.R, as per CBDT Circular No. 25/15/F. No. 279/140/2015/ITJ dated 31.12.2015 states as follows:-
"Section 115JB of the Act is a special provision for levy of Minimum Alternate Tax on Companies, inserted by Finance Act 2000 with effect from 1-4-2001.
2. Under clause (iii) of sub-section (1) of section 271 of the Act, penalty for concealment of income 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 2009 in the case of Nalwa Sons Investment Ltd. 2010-TIOL-890-HC-DEL-IT held that when the tax payable on income computed under normal procedure is less than the tax payable" under the deeming provisions of Section 115JB of the Act, then penalty under section 271(1)(c) of the Act could not be imposed with reference to additions/disallowances made under normal provisions. The judgment has attained finality.
4. Subsequently, the provisions of Explanation 4 to sub-section (1) of section 271 of the Act have been substituted by Finance Act, 2015, which provide for the method of calculating the amount of tax sought to be evaded for situations even where the income determined under the general provisions is less than the income declared for the purpose of MAT u/s. 115JB of the Act. The substituted Explanation 4 is applicable prospectively w.e.f. 01.04.2016.
5. Accordingly, in view of the Delhi High Court judgment and substitution of Explanation 4 of section 271 of the Act with prospective effect, it is now a settled position that prior to 1/4/2016, where the income tax payable on the total income as computed under the normal provisions of the Act is less than the tax payable on the book profits u/s. 115JB of the Act, then penalty under 271(1)(c) of the Act, is not attracted with reference to additions/disallowances made under normal provisions. It is further clarified that in cases prior to 1.4.2016, if any adjustment is made in the income computed for the
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purpose of MAT, then the levy of penalty u/s. 271(1)(c) of the Act, will depend on the nature of adjustment. 6. The above settled position is to be followed in respect of section 115JC of the Act also." Further, the Delhi High Court in the case of CIT v. Center Warehousing corporation in 81 CCH 55 (Del.) wherein held that when the computation of income was made u/s. 115JB of the Act, the concealment had no role to play. Therefore, the concealment in normal computation of income only will lead to tax evasion. Being so, We are inclined to delete the levy of penalty under Sec. 271(1)(c) of the Act. 7. In the result, the appeal of assessee is allowed.