Income Tax Appellate Tribunal - Chennai
Sri Gokulam Hotels India P Ltd., , ... vs Department Of Income Tax on 24 July, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, CHENNAI
BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI V. DURGA RAO, JUDICIAL MEMBER
I.T.A. No. 1012/Mds/2012
(Assessment Year : 2007-08)
M/s Sri Gokulam Hotels India
The Assistant Commissioner Pvt. Ltd.,
of Income Tax, v. No.49, Arcot Road,
Company Circle VI(4), Kodambakkam,
Chennai - 600 034. Chennai - 600 004.
PAN : AAECS 2586 E
(Appellant) (Respondent)
Appellant by : Shri Guru Bashyam, JCIT
Respondent by : Shri S. Sridhar, Advocate
Date of Hearing : 24.07.2013
Date of Pronouncement : 31.07.2013
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by the Revenue, its grievance is that CIT(Appeals) deleted the penalty of ` 10,07,300/- levied by the Assessing Officer, under Section 271(1)(c) of Income-tax Act, 1961 (in short 'the Act').
2 I.T.A. No. 1012/Mds/12
2. Facts apropos are that assessee, running a business of hotel, had filed its return for the impugned assessment year declaring NIL total income. Assessee had not made any computation of Minimum Alternate Tax (MAT) payable under Section 115JB of the Act. During the course of assessment proceedings, Assessing Officer noted that assessee was liable to tax under Section 115JB of the Act. The adjusted book profit for working out the tax payable under Section 115JB was calculated by the A.O. as under:-
Net Profit as per Profit & Loss A/c 13799075
Add: Provision for bad and doubtful debts __254910
14053985
Less: Provision for Fringe Benefit Tax ___44795
14009190
Less: Carried forward loss Asst Yr 2002-03 2147324 Carried forward loss Asst Yr 2003-04 2884699 5032023 Adjusted Book Profit 8977166
3. Thereafter, proceedings for levy of penalty under Section 271(1)(c) of the Act was initiated for the failure of the assessee to compute the book profit and tax payable by it under Section 115JB of the Act. As per the A.O., assessee had furnished inaccurate particulars of income. Reply of the assessee was that against net profit of ` 1,37,99,075/-, there were unadjusted brought forward loss of ` 6,14,58,606/-. As per the assessee, there was no willful 3 I.T.A. No. 1012/Mds/12 suppression of income and it had preferred an appeal against levy of tax under Section 115JB of the Act. However, the Assessing Officer was not impressed. According to him, assessee had failed to comply with the requirements of Section 115JB of the Act. As per clause (iii) of sub-section (2) of Section 115JB, what could be reduced from the book profit, were the amount of brought forward loss or depreciation, whichever was lower. A.O. also noted that assessee by itself had submitted a tabular data at the time of hearing which clearly indicated that brought forward loss of assessment years 2002-03 and 2003-04 were ` 60.81 lakhs and ` 28.84 lakhs respectively. According to him, assessee had thus failed to return the book profit under Section 115JB of the Act. He, therefore, levied penalty at 100% of the tax sought to be evaded, viz. ` 10,07,238/-.
4. Assessee moved in appeal before CIT(Appeals). Submission of the assessee was that there were substantive brought forward loss, from earlier years, which had to be set-off against current book- profits. Break-up thereof was also furnished, which reads as under:-
Profit & Loss Before Asst Year Depreciation Depreciation Lower of (1) (2) (3) (2) & (3) 2002-03 60,81,430 77,67,512 60,81,430 2003-04 28,84,699 2,13,52,356 28,84,699 4 I.T.A. No. 1012/Mds/12 2004-05 Nil 1,75,63,204 Nil 2005-06 Nil 1,45,24,200 Nil As per the assessee, atleast an amount of ` 89,66,129/- was required to be deducted from the net profit as per Profit & Loss account, while working out the adjusted book profit.
5. Ld. CIT(Appeals) was appreciative of the contention of the assessee. According to him, the difference between the assessee and Assessing Officer, while working out the adjusted book profit, was limited to the carried forward loss of assessment year 2002-03. Assessing Officer had restricted the carried forward loss for assessment year 2002-03 to ` 21,47,324/- against the claim of ` 60,81,430/- made by the assessee. This, as per ld. CIT(Appeals), was due to a difference in interpretation of Section 115JB of the Act. As per ld. CIT(Appeals), a levy of penalty could not be made for variations arising out of difference in interpretation of law. In this view of the matter, he deleted the penalty.
6. Now before us, learned D.R., strongly assailing the order of CIT(Appeals), submitted that assessee had not made any computation of book profit while filing its return of income. It had made a computation of total income as per normal provisions of the 5 I.T.A. No. 1012/Mds/12 Act and never returned the book profit under Section 115JB of the Act. It was during the course of assessment proceedings, that Assessing Officer found assessee to be liable for MAT on the book profit. But for that, this would have gone unnoticed. There was failure on the part of the assessee to truly furnish particulars regarding its income. Failure to report the book profit under Section 115JB definitely invited levy of penalty. This was nothing but furnishing of inaccurate particulars. As per learned D.R., even if the assessee's contention that unabsorbed loss of ` 60,81,430/- for assessment year 2002-03, was available for set-off against current book profit, was accepted, still there would be a positive adjusted book profit. Aggregate of the two amounts would come to ` 89,66,129/-, which was much lower than the reported net profit of ` 1,37,99,075/-. Thus, in any case, according to learned D.R., assessee would be liable to Minimum Alternate Tax. Assessee had failed to make any such computation. Therefore, penalty was rightly imposed by the Assessing Officer. Relying on the decision of Hon'ble Delhi High Court in the case of CIT v. Nalwa Sons Investments Ltd. (327 ITR 543), learned D.R. submitted that penalty could not be levied for understatement of book profit under Section 115JB of the Act only where assessee by itself had computed such book profit. 6 I.T.A. No. 1012/Mds/12 According to learned D.R., failure on the part of the assessee to compute the book profit would automatically attract penalty. In the case of Nalwa Sons Investments Ltd. (supra), Hon'ble Delhi High Court held against Revenue only for the reason that assessee itself had computed book profit under Section 115JB of the Act, and penalty was levied only for a reason that such computed book profit was lower. Relying on the decision of Mumbai Bench of this Tribunal in the case of Trillizo Holding Ltd. v. ITO in I.T.A. No. 412/Mum/2010 dated 16th March, 2011, learned D.R. submitted that when assessee failed to make any computation of book profits, as required under Section 115JB of the Act, there was a failure which warranted levy of penalty. Thus, according to him, CIT(Appeals) fell in error in deleting the penalty levied by the Assessing Officer.
7. Per contra, learned A.R., supporting the order of CIT(Appeals), submitted that levy of penalty arose only on account of difference in interpretation of Section 115JB of the Act. According to him, there was difference of opinion between Assessing Officer and assessee with regard to brought forward losses and depreciation which resulted in adjusted book profit. As per the learned A.R., penalty could not be levied on an addition arising out of a difference in interpretation of 7 I.T.A. No. 1012/Mds/12 law. Reliance was placed on the decision of Hon'ble Apex Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd. (322 ITR 158), that of Hon'ble jurisdictional High Court in the case of CIT v. Caplin Point Laboratories Limited (293 ITR 524) and that of Hon'ble Madhya Pradesh High Court in the case of CIT v. Skyline Auto Products Pvt. Ltd. (271 ITR 335).
8. We have perused the orders and heard the rival submissions. There is no dispute that assessee had not made any computation of book profit under Section 115JB of the Act, while filing its return of income. Assessing Officer had found during the course of assessment proceedings that there was failure on the part of the assessee to report the book profit and made a work-out thereof himself. Assessee, by its letter dated 17.2.2012, addressed to the CIT(Appeals), had admitted that the amount of depreciation/loss available for set-off against book profit, was at the best ` 60,81,430/- for assessment year 2002-03 and ` 28,84,699/- for assessment year 2003-04. With regard to the brought forward loss for assessment year 2003-04, there is no difference between the work-out furnished by the assessee and Assessing Officer. The difference pertains only to the brought forward loss of assessment year 2002-03. While 8 I.T.A. No. 1012/Mds/12 assessee's calculations show the amount as ` 60,81,430/-, Assessing Officer had considered ` 21,47,324/-. Even if we presume assessee to be correct, the aggregate amount of brought forward loss/depreciation available for a set-off will not be more than ` 89,66,129/-. Admittedly, the net profit as per the P & L account came to ` 1,37,99,075/-. Thus, viewed from any angle, assessee was liable to Minimum Alternate Tax. Assessee had failed to furnish a computation of its book profit in its return of income. But for the vigilant attitude of the A.O., this would have been missed out altogether. There was definitely a failure on the part of the assessee to furnish particulars necessary for its assessment. Rigours of Section 271(1)(c) was attracted. No doubt, Hon'ble Delhi High Court in the case of Nalwa Sons Investments Ltd. (supra) had held that such levy was not appropriate where the addition to income resulted out of difference in computation of the book profit under Section 115JB of the Act. Here, on the other hand, it is not on account of computational difference, but on account of failure of the assessee to report the book profit under Section 115JB, that the addition was made. As for the decision of Hon'ble Apex Court in the case of Reliance Petroproducts Pvt. Ltd. (supra), there, addition and penalty resulted out of disallowance of a claim and Hon'ble Apex Court held 9 I.T.A. No. 1012/Mds/12 that making an incorrect claim would not tantamount to furnishing of inaccurate particulars. As for the decision of Hon'ble jurisdictional High Court in the case of Caplin Point Laboratories Limited (supra), it was a wrong deduction claimed by the assessee for which penalty was levied. In the case of Skyline Auto Products Pvt. Ltd. (supra) before Hon'ble Madhya Pradesh High Court, penalty was levied on a wrong calculation of depreciation. Facts here are entirely different. Here, the penalty was levied for failure of assessee to report its book profit under Section 115JB of the Act. Nevertheless, we do appreciate there could have been difference with regard to the carried forward loss claimed by the assessee for assessment year 2002-03 at ` 60,81,430/- and considered by the Assessing Officer at ` 21,47,324/-. For the levy of penalty, we are of the opinion that Assessing Officer had to consider the claim of carried forward loss for assessment year 2002-03 as ` 60,81,430/-. Vis-à-vis the claim of carried forward loss for assessment year 2003-04, there was no difference in the claim of the assessee and that considered by the Assessing Officer. For the limited purpose of correctly working out the amount of unabsorbed loss available for set-off, we remit the issue back to the file of the Assessing Officer. A.O. has to recompute 10 I.T.A. No. 1012/Mds/12 the penalty accordingly. Orders of the authorities below are set aside to this extent.
9. In the result, appeal filed by the Revenue is partly allowed. Order was pronounced in the Court on Wednesday, the 31st of July, 2013, at Chennai.
sd/- sd/-
(V.Durga Rao) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 31st July, 2013.
Kri.
Copy to: (1) Appellant
(2) Respondent
(3) CIT(A)-I, Chennai
(4) CIT, Central-I, Chennai
(5) D.R.
(6) Guard file