Income Tax Appellate Tribunal - Delhi
Srei Infrastructure Finance Ltd., New ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI 'G' BENCH
BEFORE SHRI A.N. PAHUJA, AM & SHRI C.M. GARG, JM
ITA nos.1908&1909/Del/2012
AYs: 2006-07 & 2007-08
A.C.I.T., Circle-9(1), Room V/s. SREI Infrastructure Finance
no.163, C.R. Building, New Ltd., D-2, 6 t h Floor, Southern
Delhi Park, Saket Place, New Delhi
[PAN : AAACS 1425 L ]
(Appellant) (Respondent)
Assessee by S/Shri Soumen Adak &
Mrs. Alka Arren, ARs
Revenue by Shri Ramesh Chander,DR
Date of hearing 05-12-2012
Date of pronouncement 14-12-2012
ORDER
A.N.Pahuja:- These two appeals filed on 25.04.2012 by the Revenue against two separate orders dated 30.01.2012 and 29-02-2012 of the ld. CIT(A)-XII, New Delhi, raise the following grounds:-
1. "The Learned CIT(A) erred in law and facts of the case, in cancelling the penalty of ``4,43,56,450/- in the AY 2006-07 & ``8,99,30,100/- in the 2007-08 imposed by the AO u/s 271(1)(c) of the Act.
2. The appellant craves to amend, modify, alter, add or forego any ground of appeal at any time before or during the hearing of this appeal."
2. Facts, in brief, as per relevant orders for the AY 2006-07 are that e- return declaring income of ``2,03,13,738/- under the normal provisions of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') and book profits of 2 ITA nos.1908&1909/Del/2012 ``38,95,04,834/- in terms of provisions u/s 115JB of the Act, filed on 27.11.2006 by the assessee,a non-banking finance company in the business of leasing commercial vehicles, infrastructure construction machinery and financing infrastructural projects, was revised on 7.11.2007, 19.03.2008 and finally on 31.3.2008, reflecting income of ``1,25,92,360/- under the normal provisions of the Act while book profits remain unchanged. After processing, the return was selected for scrutiny with the service of a notice u/s 143(2) of the Act. The assessment was completed on an income of ``16,17,08,631/- under the normal provisions with the addition of ``9,77,07,271/- on account of excess claim of depreciation on vehicles given on lease; ``14,04,000/- on account of interest on loan to subsidiaries beside disallowance of ``5,00,05,000/- u/s 14A of the Act. The book profits were determined at ``67,92,04,834/- with the addition on account of provision for deferred tax-`16,65,00,000/-,corporate dividend tax- `2,52,00,000/- and transfer to special reserve-`9,80,00,000/-. Thus, total income was determined on the book profit of ``67,92,04,834/-.Inter alia, penalty proceedings u/s 271(1)(c) of the Act were initiated for each of the aforesaid additions/disallowances.
2.1 Likewise, in the AY 2007-08 e-return declaring loss of `37,94,15,570/- under the normal provisions and book profits of `47,54,42,043/- in terms of provisions of sec. 115JB of the Act was filed on 29.10.2007.After processing, the assessment was completed u/s 143(3) of the Act, determining loss of ``13,58,44,884/- under the normal provisions of the Act with the disallowance of excess claim of depreciation of ``14,91,54,686/-on account of vehicles given on lease; interest on loans given to subsidiaries-``24,84,000/- beside disallowance of ``9,19,32,000/- in terms of provisions of sec. 14A of the Act while book profits were determined at ``84,05,42,043/- with the addition of ``1,85,00,000/- on account of corporate dividend tax; ``16,00,00,000/- on account of transfer to special reserve and ``18,66,00,000/- on account of transfer to debt redemption reserve. Thus, total income was determined on the book 3 ITA nos.1908&1909/Del/2012 profit of ``84,05,42,043/- and penalty proceedings u/s 271(1)(c )of the Act were also initiated for each of the aforesaid additions/disallowances.
3. On appeal, the ld. CIT(A) upheld the aforesaid additions/disallowances in these two assessment years .After the receipt of order of the ld. CIT(A), in response to a show cause notice issued before levy of penalty u/s 271(1)(c) of the Act, the assessee replied that they have neither concealed any income nor furnished any inaccurate particulars thereof. Inter alia, the assessee relied a number of decisions. However, the AO did not accept the submissions of the assessee and levied a penalty of `4,43,56,450/- for furnishing inaccurate particulars of income in the AY 2006-07@100% of the tax sought to be evaded on the income of ``19,71,11,271/- comprising as under:-
i) Claim of excess depreciation on [In`] vehicles given on lease ` 9,77,07,271/- ii) Interest on loans given to subsidiaries ` 14,04,000/- iii) Transfer to special reserve while computing the book profits u/s 115JB of the Act. ` 9,80,00,000/- 3.1 Similarly, in the AY 2007-08, the AO imposed a penalty of
``8,99,30,100/- for furnishing inaccurate particulars of income @100% of the tax sought to be evaded on the income of ``49,82,36,686/- comprising as under:-
i) Claim of excess depreciation on [In`]
vehicles given on lease `14,91,54,686/-
ii) Interest on loans given to subsidiaries ` 24,84,000/-
iii) Transfer to special reserve while computing the book profits u/s 115JB of the Act. `16,00,00,000/-
iv) Transfer to debt redemption reserve while
computing the book profits u/s 115JB of the Act. 18,66,00,000/-
`
4 ITA nos.1908&1909/Del/2012
4. On appeal, the learned CIT(A) cancelled the penalty in the AY2006- 07 on each of the aforesaid additions/disallowances, holding as under:-
"i). Levy of penalty in relation to disallowance of depreciation:
7.2 I have carefully gone through the submissions made on behalf of the appellant and gone through the relevant judicial pronouncements cited by the AR of the appellant. On perusal of the judicial pronouncements and the facts as enumerated by the AR of the appellant the following conclusions can be drawn.
a. There is no deliberate attempt on the part of the appellant to conceal the particulars of income. The claim of higher rate of depreciation on motor vehicles given on lease was clearly evident from the Tax Audit Report filed during the course of the assessment proceedings.
b. The claim of higher depreciation made by the assessee was based on various judicial pronouncements and the explanation offered by the appellant was bonafide with respect to claim of depreciation which was neither found to be false nor untrue. The claim of the appellant is bonafide and nothing adverse has been found against the claim as such in the course of the assessment proceedings.
Assessee case is also covered by Delhi High Court ITA No 1582/2010 in the case of CIT Vs. Brahmaputra Consortium Ltd. dated August 03, 2011. After hearing both the parties, the high court held that:
" ... there cannot be dispute about allowing depreciation @ 25% on excavators. However, the circumstances under which the claim was made at 40%, shows that it was a genuine and bona fide. The assessee had acquired new excavators and tippers for a total sum of `.1,78,75,260/- and `.6,36,88,865/- respectively. All block of assets were termed as 'earth moving equipments' and taken in the profit and loss account under the aforesaid head. Since, the entire block consisting of excavators and tippers was taken under the head 'earth moving equipments' the explanation given by the assessee was that inadvertently, in respect to excavators are the depreciation was claimed at 40% instead of 25%. This explanation has been accepted as genuine and bona fide by the Tribunal 5 ITA nos.1908&1909/Del/2012 which is the final fact finding authority. Deletion of penalty on the ground of inadvertent error is a finding of fact. AO did not even contradict the plea of the assessee.
Further by making claim of depreciation at higher rate, where the income tax return was at loss, the assessee did not gain any mileage. On the contrary, it was better for him to claim depreciation @ 25% in this year resulting into higher written down value in the next year for claim of depreciation of a higher amount on higher written down value thereby reducing the tax liability. Thus, the AO was not correct in holding that submitting inaccurate claim would amount to giving inaccurate particulars. Thus, no substantial question of law arises in this appeal which is accordingly dismissed. "
The claim of the higher depreciation by the appellant is squarely covered in the appellant's own case for assessment year 1995-96, 2000-01 and 2001-02. The Hon'ble Jurisdictional Tribunal has decided the similar issue in favour of the appellant. Thus, the same was claimed based on the earlier year's precedent."
ii)Levy of penalty in relation to disallowance of notional interest:
"8.3 I have carefully gone through the submissions made on behalf of the appellant and gone through the relevant judicial pronouncements cited by the AR of the appellant. On perusal of the judicial pronouncements and the facts as enumerated by the AR of the appellant the following conclusions can be drawn.
a. The appellant had owned funds of `.41,052 Lacs as at 31-03-2006 and during the year, profit of `.4,842 Lacs (PAT) has been earned which is sufficient to finance interest free loan of `.117 Lacs advanced to the sister concerns. The same is clearly evident from the audited accounts for the year ended F.Y. 2005-06.
b. The claim of the appellant was bonafide based on various juridical pronouncements available at the time of filing of return. Further it is a debatable issue as contrary judgments are available and does not call for imposition of penalty.
c. The above facts as narrated by the AR of the appellant is clearly visible from the Balance Sheet and the Audited accounts of the company which leaves beyond doubt the fact that the appellant had 6 ITA nos.1908&1909/Del/2012 sufficient own funds for advancing such funds to its subsidiary company.
d. Since all the facts relating to the said issue were already disclosed and the appellant had an adequate basis, thus there was no concealment of income or furnishing of inaccurate particulars in the return of income.
8.4 Further, similar issue has been decided in favour of the appellant in A Y 2008-09 in Appeal No.11/10-11 by me.
Thus, keeping in mind that, all the facts relating to the issue were disclosed before Assessing Officer, there was no concealment of income or furnishing of inaccurate particulars by the appellant. The decision of Hon'ble Apex Court in the case of CIT - vs.- Reliance-Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) is applicable in the present case. Since there was neither any concealment of income nor any inaccurate particulars has been furnished by the appellant, the basic conditions for levy of penalty is not satisfied. The penalty imposed is thus cancelled."
iii)Levy of penalty in relation to addition of special reserve while computing book profits:
9.2 "I have carefully gone through the submissions made on behalf of the appellant and gone through the relevant judicial pronouncements cited by the AR of the appellant. On perusal of the judicial pronouncements and the facts as enumerated by the AR of the appellant the following conclusions can be drawn.
a. During the year under consideration, the appellant has transferred a sum of `.9,80,00,000/- to "Special Reserve" as per the provisions of Sec. 45IC of the RBI Act being 20% of the profits. The said transfer was made as per the guidelines laid down by RBI and was statutory in nature.
b. The appellant was under a bonafide relief that the amount transferred to special reserve as per RBI Act is not to be added back to the books profit u/s 115JB and thus the same was not added back. Thus, there has been neither concealment of income nor furnishing of inaccurate particulars of income. The appellant had made complete disclosure of the said fact in the course of the 7 ITA nos.1908&1909/Del/2012 assessment proceedings u/s 143(3) of the Act. Further, the aforesaid fact was clearly evident from audited accounts.
9.3 Further, similar issue has been decided in favour of the appellant in A Y 2008-09 in Appeal No. 11/10-11 by me. Thus, keeping in mind that, all the facts relating to the issue were disclosed before A.O., there was no concealment of income or furnishing of inaccurate particulars by the appellant. The decision of Hon'ble Apex Court in the case of CIT -vs.- Reliance Petro products (P) Ltd. (2010) 322 ITR 158 (SC) is applicable in the present case. Since there was neither any concealment of income nor any inaccurate particulars has been furnished by the appellant, the basic conditions for levy of penalty is not satisfied. The penalty imposed is thus cancelled."
iv)Levy of penalty due to determination of income u/s 115JB of the Act:
10. "As regard Ground No.8, the question as to whether penalty can be imposed in respect of the assessment of total income under the normal provisions of the act when ultimately the total income is determined u/s. 115JB of the Act, reliance was placed on the decision Hon'ble Mumbai ITAT in the case of Ruchi Strips & Alloys Limited vs. DCIT (ITA No. 6940/Mum/2008) wherein it was held that the concealment of income had its repercussions only when the assessment was done under the normal procedure. If the assessment as per the normal procedure was not acted upon and it was the deemed income assessed u/s 115JB which became the basis of assessment, the concealment had no role to play and was totally irrelevant. Similar view has been taken in the case of DCIT vs. Ushdev International Ltd. (2011) 50 DTR 283 (Mum.) and M/s. Paramount Minerals and Chemicals Limited vs. DCIT (ITA No. 4714/Mum/2009).
10.1 In the present case the appellant had to pay tax under the provisions of section 115JB of the Act. However, the A.O. has levied penalty amounting to `.4,43,56,450/- on additions and/or disallowances made under the normal provisions of the Act as well as u/s 115JB of the Act. Further, penalty u/s 27l(l(c) to the tune of Rs.3,33,60853/- was levied on disallowance made under the normal provisions of the Act, however there was no change in tax liability on account of the aforesaid disallowance as the disallowance was made in normal computation of income. Since, there was no impact on tax liability on account of disallowances under the normal provisions of the Act, no tax is sought to be evaded.
8 ITA nos.1908&1909/Del/2012 The assessee has also relied on CIT Vs. Nalwa Sons Investments Ltd. (HC) (2010) 194 TAXMAN 387 (DELHI):-
" ... Section 271(1)(c) read with section 115JB, of the IT Act, 1961 - Penalty - For concealment of income - Assessment Year 2001-02 - Assessee filed its return of income declaring certain loss - While making assessment, Assessing Officer made disallowances on account of PF contribution made belatedly, deduction claimed u/s. 80HHe and depreciation claimed on machinery purchased on last day of year. However, as income so computed under normal procedure was less than income determined u/s. 115JB, assessee was assessed u/s. 115JB - Thereafter, Assessing imposed penalty u/s. 271 (1)(c) in respect of aforesaid three additions holding that assessee had furnished inaccurate particulars of income - Whether, though there was concealment, yet that would have repercussions only when assessment would have been done under normal procedure - Held, yes - Whether when assessment was made on income computed u/s. 115JB and tax had been paid on income so computed, aforesaid concealment did not lead to tax evasion and, therefore, no penalty could have been imposed on assessee - Held, yes.
FINDING 10.2 The light of aforesaid discussion, I find that the issue is covered by the aforesaid decision. Since, there was no change in the tax liability on account of the disallowance made under normal provisions of the Act, the penalty, even otherwise ought not to have been imposed on the disallowances made under the normal provisions of the Act. However, since the individual grounds are allowed above, no further relief is granted in respect of this ground."
5. Similarly, in the AY 2007-08, the ld.CIT(A) cancelled the penalty on each of the aforesaid additions/disallowances, holding as under:-
i)Levy of penalty in relation to disallowance of depreciation:
7.2 "I have carefully gone through the submissions made on behalf of the appellant and gone through the relevant judicial pronouncements cited by the AR of the appellant. On perusal of the judicial pronouncements and the facts as enumerated by the AR of the appellant the following conclusions can be drawn.
9 ITA nos.1908&1909/Del/2012 a. There is no deliberate attempt on the part of the appellant to conceal the particulars of income. The claim of higher rate of depreciation on motor vehicles given on lease was clearly evident from the Tax Audit Report filed during the course of the assessment proceedings.
b. The claim of higher depreciation made by the assessee was based on various judicial pronouncements and the explanation offered by the appellant was bonafide with respect to claim of depreciation which was neither found to be false nor untrue. The claim of the appellant is bonafide and nothing adverse has been found against the claim as such in the course of the assessment proceedings.
Assessee case is also covered by Delhi High Court ITA No 1582/2010 in the case of CIT Vs. Brahmaputra Consortium Ltd. dated August 03, 2011. After hearing both the parties, the High court held that:
" ... there cannot be dispute about allowing depreciation @ 25% on excavators. However, the circumstances under which the claim was made at 40%, shows that it was a genuine and bona fide. The assessee had acquired new excavators and tippers for a total sum of `.1,78,75,260/- and `.6,36,88,865/- respectively. All block of assets were termed as 'earth moving equipments' and taken in the profit and loss account under the aforesaid head. Since, the entire block consisting of excavators and tippers was taken under the head 'earth moving equipments' the explanation given by the assessee was that inadvertently, in respect to excavators are the depreciation was claimed at 40% instead of 25%. This explanation has been accepted as genuine and bona fide by the Tribunal which is the final fact finding authority. Deletion of penalty on the ground of inadvertent error is a finding of fact. AO did not even contradict the plea of the assessee.
Further by making claim of depreciation at higher rate, where the income tax return was at loss, the assessee did not gain any mileage. On the contrary, it was better for him to claim depreciation @ 25% in this year resulting into higher written down value in the next year for claim of depreciation of a higher amount on higher written down value thereby reducing the tax liability. Thus, the AO was not correct in holding that submitting inaccurate claim would amount to giving inaccurate particulars. Thus, no substantial question of law arises in this appeal which is accordingly dismissed."
10 ITA nos.1908&1909/Del/2012 7.3 Thus, keeping in mind that, all the facts relating to the issue were disclosed before Assessing Officer, thee was no concealment of income or furnishing of inaccurate particulars by the appellant. The decision of Hon'ble Apex Court in the case of CIT- vs.-Reliane Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) is applicable in the present case. Since there was neither any concealment of income nor any inaccurate particulars has been furnished by the appellant, the basic conditions for levy of penalty is not satisfied. The penalty imposed is thus cancelled."
ii)Levy of penalty in relation to disallowance of interest: "8.3 I have carefully gone through the submissions made on behalf of the appellant and gone through the relevant judicial pronouncements cited by the AR of the appellant. On perusal of the judicial pronouncements and the facts as enumerated by the AR of the appellant the following conclusions can be drawn.
a. The appellant had has owned funds of `.47,703 Lacs as at 31-03- 2007 and during the year, profit of `.7,925 Lacs (PAT) has been earned which is sufficient to finance interest free loan of `.207 Lacs advanced to the sister concerns. The same is clearly evident from the audited accounts for the year ended F.Y. 2006-07.
b. The claim of the appellant was bonafide based on various juridical pronouncements available at the time of filing of return.
c. The above facts as narrated by the AR of the appellant is clearly visible from the Balance Sheet and the Audited accounts of the company which leaves beyond doubt the fact that the appellant had sufficient own funds for advancing such funds to its subsidiary company.
d. Since all the facts relating to the said issue were already disclosed and the appellant had an adequate basis, thus there was no concealment of income or furnishing of inaccurate particulars in the return of income.
8.4 Further, similar issue has been decided in favour of the appellant in A Y 2008-09 in Appeal No.11/10-11 by me. Thus, keeping in mind that, all the facts relating to the issue were disclosed before Assessing Officer, there was no concealment of income or furnishing of inaccurate particulars by the appellant. The decision of 11 ITA nos.1908&1909/Del/2012 Hon'ble Apex Court in the case of CIT -vs.- Reliance-Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) is applicable in the present case. Since there was neither any concealment of income nor any inaccurate particulars has been furnished by the appellant, the basic conditions for levy of penalty is not satisfied. The penalty imposed is thus cancelled."
iii)Levy of penalty in relation to addition of special reserve while computing book profits:
9.2 I have carefully gone through the submissions made on behalf of the appellant and gone through the relevant judicial pronouncements cited by the AR of the appellant. On perusal of the judicial pronouncements and the facts as enumerated by the AR of the appellant the following conclusions can be drawn.
a. During the year under consideration, the appellant has transferred a sum of `.16,00,00,000/- to "Special Reserve" as per the provisions of Sec. 45IC of the RBI Act being 20% of the profits. The said transfer was made as per the guidelines laid down by RBI and was statutory in nature.
b. The appellant was under a bonafide relief that the amount transferred to special reserve as per RBI Act is not to be added back to the books profit u/s 115JB and thus the same was not added back. Thus, there has been neither concealment of income nor furnishing of inaccurate particulars of income. The appellant had made complete disclosure of the said fact in the course of the assessment proceedings u/s 143(3) of the Act. Further, the aforesaid fact was clearly evident from audited accounts.
9.3 Further, similar issue has been decided in favour of the appellant in A Y 2008-09 in Appeal No. 11/10-11 by me. Thus, keeping in mind that, all the facts relating to the issue were disclosed before A.O., there was no concealment of income or furnishing of inaccurate particulars by the appellant. The decision of Hon'ble Apex Court in the case of CIT -vs.- Reliance Petro products (P) Ltd. (2010) 322 ITR 158 (SC) is applicable in the present case. Since there was neither any concealment of income nor any inaccurate particulars has been furnished by the appellant, the basic conditions for levy of penalty is not satisfied. The penalty imposed is thus cancelled."
12 ITA nos.1908&1909/Del/2012
iv)Levy of penalty in relation to addition of debenture redemption reserve while computing book profits:
10.2 "I have carefully gone through the submissions made on behalf of the appellant and gone through the relevant judicial pronouncements cited by the AR of the appellant. On perusal of the judicial pronouncements and the facts as enumerated by the AR of the appellant the following conclusions can be drawn.
a. During the year under consideration, the appellant has transferred a sum of ``18,66,00,000/- to "debenture redemption reserve" and contended that the same is neither a reserve nor a provision for unascertained liability so as to attract the clause (b) or (c) of Explanation 1 to Section 115JB(2).
b. Any amount transferred to any reserve cannot be treated as a reserve particularly when the amount transferred is not in excess of amount which had to be paid for the special purpose. The above view has also been held by the decision of Hon'ble Apex Court in the case of National Rayon Corporation Ltd. (Supra).
c. On perusal of the meaning of the term 'provision' and 'reserve' as defined in clause 7(1) of Part III, Schedule VI of the Companies Act, 1956 of the Companies Act, it can be said that the said transfer can be termed as a provision and not a reserve, even though it is reflected in the audited accounts as 'debenture redemption reserve'. Thus, the same is not covered by the provisions of clause
(b) of Explanation to section 115JB.
10.3 As all the disclosures relating the amount so transferred to the reserves have already been made in the audited accounts itself and the appellant has made a claim on the bonafide belief that the same is allowable. Thus, keeping in mind that, all the facts relating to the issue were disclosed before A.O., there was no concealment of income or furnishing of inaccurate particulars by the appellant. The decision of Hon'ble Apex Court in the case of CIT -vs.- Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) is applicable in the present case. Since there was neither any concealment of income nor any inaccurate particulars have been furnished by the appellant, the basic conditions for levy of penalty is not satisfied. The penalty imposed is thus cancelled. "
13 ITA nos.1908&1909/Del/2012
v)Levy of penalty due to determination of income u/s 115JB of the Act:
11.1 In the present case the appellant had to pay tax under the provisions of section 115JB of the Act. However, the A.O has levied penalty amounting to Rs.8,99,30,I00/- on additions andlor disallowances made under the normal provisions of the Act as well as u/s 115JB of the Act. Further, penalty 271(l)(c) to the tune of Rs.5,I0,41,5801- was levied 0 disallowance made under the normal provisions of the Act, however there was no change in tax liability on account of the aforesaid disallowance as the disallowance was made in normal computation of income. Since, there was no impact on tax liability on account of disallowances under the normal provisions of the Act, no tax is sought to be evaded.
The assessee is also covered by CIT Vs. Nalwa Sons Investments Ltd. (HC) (2010) 194 TAXMAN 387 (DELHI):-
" ... Section 271(1)(c) read with section 115JB, of the IT Act, 1961 - Penalty - For concealment of income - Assessment Year 2001-02 - Assessee filed its return of income declaring certain loss - While making assessment, Assessing Officer made disallowances on account of PF contribution made belatedly, deduction claimed u/s. 80HHC and depreciation claimed on machinery purchased on last day of year -However, as income so computed under normal procedure was less than income determined u/s. 115JB, assessee was assessed u/s. 115JB - Thereafter, Assessing Officer imposed penalty u/s. 271(1)(c) in respect of aforesaid three additions holding that assessee had furnished inaccurate particulars of income - Whether, though there was concealment, yet that would have repercussions only when assessment would have been done under normal procedure - Held, yes - Whether when assessment was made on income computed u/s. 115JB and tax had been paid on income so computed, aforesaid concealment did not lead to tax evasion and, therefore, no penalty could have been imposed on assessee - Held, yes.
11.2 Thus, in the light of aforesaid discussion, I find that the issue is covered by the aforesaid decision. Since, there was no change in the tax liability on account of the disallowance made under normal provisions of the Act, the penalty, even otherwise ought not to have been imposed on the disallowances made under the normal provisions of the Act. However, since the individual grounds are allowed above, no further relief is granted in respect of this ground."
14 ITA nos.1908&1909/Del/2012
6. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR supported the order of the AO, levying penalty, contending, inter alia, that provisions of section 115JB of the Act are a self contained code and the assessee having not offered to tax the amount transferred to special reserve or debenture redemption reserve in the computation of book profits, furnished inaccurate particulars of income, especially when the assessee itself had been adding back the amount transferred to special reserve in computing the book profits in the earlier years. As regards reliance on the judgment of Hon'ble Delhi High Court in CIT Vs. Nalwa Sons Investment Ltd., 327 ITR 543,the ld. DR in his written submissions pleaded that the Income Tax Act nowhere provided that if provisions u/ s 1l5JB are resorted to, mandatory provisions of the Chapter IV will get suspended. Even when tax is computed u/ s 115JB, AO has to compute income under normal provisions of Chapter IV also which is a must only because it is here that the AO has to give effect to various other claims for deductions/ exemptions of the assessee e.g. set off of brought forward losses, deductions u/ c VIA etc. Had the High Court been explained the correct machinery scheme of the Income Tax Act, that even after computation u/ s 1l5JB, AO is duty bound to compute income or loss under the normal provisions of the Act, its decision would have been different. Besides deeming fiction of the provisions of section 1l5JB could not extend beyond calculation of tax payable by the assessee. Accordingly, the ld. DR submitted that penalty proceedings being independent of the assessment proceedings, provisions of section 1l5JB which were on computation of tax could not be extended to these proceedings. Besides, extending scope of application of 1l5JB to penalty proceedings would make provisions of Clause (a) of the Explanation (4) of section 271(1) (c) of the Act otiose /redundant. The provisions of section 115JB are only for calculating income tax and not for calculating penalty. There is no doubt that even if there is no positive income, penalty can still be calculated by deeming the addition or disallowance itself to be the income. Explanation 4 does not even impliedly provide for attracting the deeming fiction of 15 ITA nos.1908&1909/Del/2012 the provisions of section 115JB. Accordingly, the ld. DR prayed to allow the appeal of the Revenue. While referring to decisions in Trinity Touch (P.) Ltd. v.Income-tax Officer,132 ITD 88 (Delhi); & Chadha Sugars (P.) Ltd.vs. ACIT,135 ITD 42 (Delhi), the ld. DR argued that claim being not bonafide levy of penalty was justified. Inter alia, the ld. DR relied upon decisions in CIT Vs. Zoom Communication (P) Ltd.,( 2010) 191 Taxman 179 (Delhi); CIT Vs. Alkesh K. Patel(2010) 195 Taxman 338 (Bom.);ACIT Vs. Surinder Lal Chopra(2010) 2 CTR (Trib.) 790 (Delhi); CIT Vs. Harparshad & Co. Ltd. (2010) 328 ITR 53 (Delhi);Chadha Sugars (P) Ltd. Vs. ACIT, Circle 3(1), New Delhi(2012) 18 Taxmann.com244(Delhi) & ACIT Vs. Dinesh Goel. (2011) 16 taxmann.com 11 (Delhi)
7. On the other hand, the ld. AR on behalf of the assessee supported the findings of the ld. CIT(A) while contending that penalty is not leviable on additions made to book profits when appeal is admitted by the Hon'ble High Court in their case on the issue of additions on account of transfer to special reserve and debt redemption reserve in I.T.A. nos.371 & 372 of 2012 vide order dated 29th August, 2012 read with order dated 6th November, 2012. In this connection, the ld. AR referred to decisions in CIT Vs. Liquid Investment & Trading Co. in I.T.A. no.240/2009)(Del.);Roger Enterprises (P) Ltd. Vs. DCIT (I.T.A. No.567,568 & 569/Del./06);Hero Honda Motors Ltd. Vs. DCIT (2011 63 DTR 53 (Del);Nayan Builders and Developers Pvt. Ltd. Vs. I.T.O. (2379/Mum/2009); Rupam Mercantiles Ltd. (in liquidation) & Ors. Vs. DCIT (2004) 85 TTJ 609 (Ahd-TM) & ACIT Vs. Vijay Kumar Jindal (I.T.A. no.4237/D/09).The ld. AR further submitted that since the assessee neither concealed any particulars of income nor furnished inaccurate particulars thereof while quantum additions in determining income under the normal provisions of the Act have been restored back to the file of AO by the ITAT vide their order dated 23.02.2012 in I.T.A. Nos.617 and 618/Del./2010, no penalty could be imposed in relation to the said disallowances. In this connection, the ld. AR referred to decision in JCIT vs. M/s Ghaziabad Urban Co-operative Bank Ltd. in 16 ITA nos.1908&1909/Del/2012 iTA no.3992/Del./2011. Since the claims made by the assessee were bonafide, relying upon decisions in CIT Vs. Reliance Petroproducts (P) Ltd. 328 ITR 158 (SC); CIT Vs. Mahanagar Telephones 63 DTR87 (Delhi); CIT Vs. Shyam Tex International Ltd. 48 DTR 19(Delhi); &CIT Vs. Dharam Pal Prem Chand Ltd., 329 ITR 572(Delhi), the ld. AR argued that penalty could not be imposed. The ld. AR also pleaded that decision in UOI Vs. Dharmendra Textile Processors & Others (2008) 306 ITR 277 (SC) is not applicable in view of decisions in CIT Vs. Haryana Warehousing Corporation (2009) 314 ITR 215 (P&H);UOI Vs. Rajasthan Spinning & Weaving Mills (2009) 180 Taxman 609 (SC) .The ratio of the judgment in Dharmendra Textiles (supra) has been explained by the Hon'ble Apex court in Reliance Petroproducts (supra) by observing that the said decision is an authority only for the proposition that element of mens rea stands excluded from the scope of the provisions of section 271(1)(c )and it is only to this extent the decision in the case of Dilip N. Shroff Vs. JCIT (2007) 291 ITR 519 (SC) stood overruled. Further, in the case of CIT Vs. Sidhartha Enterprises (2010) 322 ITR 80 (P&H), it was held that the decision of Supreme Court in Dharmendra Textile (supra) cannot be read as lay down that in every case where particulars of income are inaccurate, penalty must follow. The ld. AR contended that issue is squarely covered by decision in CIT vs. Nalwa Sons Investments Ltd.,327 ITR 543(Delhi) and SLP against the said decision has been dismissed by the Apex Court. The ld. AR added that when facts are disclosed in the balancesheet, no penalty could be levied as held in Gitanjali Ghate vs. DCIT in ITA no.6560/Mum./2010 and DCIT vs. TP Roychowdhary & Co. (P) Ltd.,in ITA no.729/Kol./2010.
8. We have heard both the parties and gone through the facts of the case as also the decisions referred to by both the sides. As is apparent from the aforesaid facts,the assessments for the AYs 2006-07 & 2007-08 in this case were completed under the normal provisions of the Act, with the following disallowances:
17 ITA nos.1908&1909/Del/2012 S Nature of disallowance Assessment year Assessment year No. 2006-07 [In `] 2007-08[In `] 1 Excess claim of depreciation on 9,77,072 14,91,54,686 vehicles.
2. Interest on loans to subsidiaries 14,04,000 14,84,000
3. Disallowance u/s 14A of the Act 5,00,05,000 9,19,32,000 8.1 Book profits were determined u/s 115JB of the Act with the following additions:
S Nature of disallowance Assessment year Assessment year No. 2006-07 [In `] 2007-08[In `]
1. Provision of deferred tax 16,65,00,000/- Nil
2. Corporate dividend tax 2,52,00,000/- 1,85,00,000/-
3. Amount transferred to special 9,80,00,000/- Nil reserve
4. Amount transferred to debt nil 8,66,00,000/-
redemption reserve 8.2 Though the aforesaid disallowances under the normal provisions were upheld by the ld. CIT(A), ITAT vide their order dated 23.2.2012 restored the issues to the file of the AO. The additions made in terms of provisions of sec. 115JB of the Act were upheld by the ld. CIT(A) and the ITAT. On receipt of order of the ld. CIT(A),the AO levied penalty u/s 271(1)(c) of the Act in respect of disallowance on account of excess claim of depreciation on vehicles & Interest on loans to subsidiaries while determining income under the normal provisions . As already stated, though the ld. CIT(A) upheld these disallowances, the ITAT restored the issues in relation these disallowances to the file of the AO vide order dated 23.02.2012 in I.T.A. nos. 617 and 618/Del./2010. Since the disallowances, forming the basis for levy of penalty, itself have been set aside, penalty imposed u/s 271(1)(c) of the Act does not survive. Hon'ble Supreme Court in the case of K.C.Builders Vs. ACIT,265 ITR 562(SC) held that ordinarily, penalty cannot stand if the assessment itself is set aside. W here an order of assessment or reassessment on the basis of which penalty has been levied on the assessee, has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by 18 ITA nos.1908&1909/Del/2012 itself and the same is liable to be cancelled. Hon'ble Delhi High Court in the case of CIT Vs. R.Dalmia,(1992)107 Taxation 107, held that no penalty survives after deletion of additions, forming the basis for the levy of penalty. Similar view was taken in Addl. Commissioner of Income-tax v. Badri Kashi Prasad (1993] 200 ITR 206 (All) and Prabhat Oil Traders v. Income-tax Officer (No. 3) (1996) 218 ITR (A.T.) 39 (ITAT, Ahmedabad),City Dry Fish Company v. Commissioner of Income-tax (1999) 238 ITR 63 (A.P.) , CIT vs. Mohd. Bux Sokat Ali (2004) 265 ITR 326 (Raj)and ACIT vs. VIP Industries (2009) 122 TTJ 289 (Mum).as also in JCIT vs. M/s Ghaziabad Urban Co-operative Bank Ltd. in iTA no.3992/Del./2011 .
8.21 Since the very basis upon which the penalty has been imposed on the amount disallowed on account of excess claim of depreciation and interest on loan to subsidiaries, does not exist in view of the aforesaid order dated 23-2-2012 of the ITAT in quantum appeal , we are of the opinion that penalty levied in relation to the said amount does not survive. The other arguments made by the ld. AR on the issue of levy of penalty in relation to these disallowances, consequently become redundant and infructuous.
9. As regards additions in terms of provisions of sec. 115JB of the Act, the issues in quantum appeal have been admitted for adjudication by the Hon'ble High Court vide their order dated 29th August, 2012 read with order dated 6th November, 2012 in I.T.A. nos.371 & 372/2012 for the AYs 2007-08 & 2006-07 respectively. In this connection, the ld. AR relied upon decision dated 5th October, 2010 of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Liquid Investment and Trading Company in I.T.A. no.240/2009 wherein it was concluded as under:-
19 ITA nos.1908&1909/Del/2012 "Both the CIT(A) as well as the ITAT have set aside the penalty imposed by the Assessing Officer under Section 271(I)(c) of the Income Tax Act, 1961 on the ground that the issue of deduction under Section 14A of the Act was a debatable issue. We may also note that against the quantum assessment whereunder deduction under Section 14A of the Act was prescribed to the assessee, the assessee has preferred an appeal in this Court under Section 260A of the Act which has also been admitted and substantial question of law framed. This itself shows that the issue is debatable. For these reasons, we are of the opinion that no question of law arises in the present case.
This appeal is accordingly dismissed."
9.1 Similar view has been taken in the decisions of the Tribunal, Delhi Bench in the case of Hero Honda Motors Ltd.,63 DTR 53; Chennai 'A' Bench in the case of Sundaram Non Conventional Energy Systems Ltd. in ITA nos. 1706 & 1707/Mds/2011; Mumbai 'B' Bench in the case of M/s. Nayan Builders & Developers Pvt. Ltd. v. ITO in ITA No. 2379/Mds/2009 and a Third Member Decision of Ahmedabad Bench in the case of Rupam Mercantile v. DCIT,91 ITD
237. It has been laid down in these decisions that when the dispute between the Revenue and the assessee is on a legal issue and question of law is admitted by the Hon'ble High Courts, then there cannot be an allegation of furnishing of inaccurate particulars and concealment and, therefore, normally in such cases penalty cannot be justified. A plea or claim which is held by the Hon'ble High Court to give rise to a substantial question of law, cannot be treated to be frivolous or mala fide so as to attract levy of penalty under section 271(1)(c) of the Income-tax Act, as held by the Third Member in the aforesaid decision Rupam Mercantile (supra).In the light of view taken in these decisions,especially when the Revenue have not brought to our notice any contrary decision, we are of the opinion that penalty levied in relation to additions in terms of provisions of sec. 115JB of the Act, does not survive..
10. Even otherwise Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd.,322 ITR 158(SC) held that where no information given in 20 ITA nos.1908&1909/Del/2012 the return is found to be incorrect and where an assessee has made only incorrect claim, it does not amount to furnishing inaccurate particulars. We are of the opinion that a mere rejection of a legal claim does not give rise to concealment of income. [Burmah Shell Oil Storage & Distributing Co. of India Ltd. v. ITO [1978] 112 ITR 592(Cal)]. A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars thereof by the assessee. When two views, are possible, no penalty can be imposed is a principle that has been enunciated in the decision in the case of CIT v. P.K. Narayanan [1999] 238 ITR 905 (Ker) and CIT Vs. HMA Udyog P. Ltd., 211 CTR 543 (Del).
11. Moreover, in these two assessment years, book profits alone have been assessed as income. Hon'ble jurisdictional High Court in the case of CIT v. Nalwa Sons Investments Ltd. [2010] 327 ITR 543 (Delhi) have held that if tax is paid on the income assessed u/s 115JB of the Act, concealment of income had no role to play and is totally irrelevant. SLP against this decision has been dismissed on 4.5.2012 by Hon'ble Apex Court in CIT v. Nalwa Sons Investments Ltd, SLP no.18564/2011
12. In view of the foregoing, especially when the Revenue have not placed before us any material, controverting the aforesaid conclusion of the ld. CIT(A) in these appeals, so as to enable us to take a different view in the matter, we are not inclined to interfere. Therefore, ground no. 1 in these two appeals is dismissed
13. No additional ground having been raised before us in term of residuary ground no.2 in these appeals, accordingly this ground is dismissed.
14. No other plea or arguments have been raised before us.
21 ITA nos.1908&1909/Del/2012
15. In the result, both these appeals are dismissed.
Order pronounced in open Court
Sd/- Sd/-
(C.M. GARG) (A.N. PAHUJA)
(Judicial Member) (Accountant Member)
NS
Copy of the Order forwarded to:-
1. Assessee
2. A.C.I.T., Circle-9(1), Room no.163, C.R. Building, New Delhi
3. CIT concerned
4. CIT(A)-XI, New Delhi
5. DR, ITAT, 'G' Bench, New Delhi
6. Guard File.
By Order, Deputy/Asstt.Registrar ITAT, Delhi