INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR

ITA No. 655/JP/2014
M/s Flower Valley Foods Farms Pvt. Ltd (Appellant) vs ACIT (Respondent)
Assessment Year : 2010-11
Date of Order: 27-11-2015

ORDER

PER T.R. MEENA, A.M.
This is an appeal filed by the assessee against the order dated 21/07/2014 of the learned CIT(A), Alwar for A.Y. 2010-11. The respective grounds of appeal are as under:-

“1. The ld CIT(A) has erred on facts and in law in confirming the levy of penalty of Rs. 3,01,025/- U/s 271(1)(c) imposed by the A.O. with reference to the addition of Rs. 8,85,630/- made under the normal computation.

1.1 The ld CIT(A) has erred on facts and in law in confirming the levy of penalty even when the income is assessed on book profit U/s 115JB tax on which is more than the tax on income determined in normal computation.”

2. The grounds in appeal is against confirming the penalty imposed U/s 271(1)(c) of the Income Tax Act, 1961 (in short the Act) and income disclosed U/s 115JB of the Act. The assessee filed its return at total income of Rs. NIL on 27/09/2010. The case was scrutinized U/s 143(3) of the Act and income was assessed at Rs. 8,85,626/-. During the course of the assessment proceedings it was found by the Assessing Officer that income of Rs. 8,85,626/- was pertained to interest on FDRs and this income had been claimed U/s 80IC of the Act, therefore, the ld Assessing Officer disallowed this interest income and made addition of the same amount. Penalty proceeding U/s 271(1)(c) of the Act was initiated for furnishing inaccurate particulars of income. Before imposing penalty U/s 271(1)(c) of the Act, the ld Assessing Officer had given reasonable opportunity of being heard, which was replied by the assessee. After considering the assessee’s reply, it was not found satisfactorily to the Assessing Officer, he imposed 100% penalty of tax sought to be evaded at Rs. 3,01,025/- U/s 271(1)(c) of the Act.

3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the order by observing as under:-

“4.5 I have considered the submissions made in this regard alongwith the judicial citations on this issue and find that the appellant has earned interest income on the FDRs which has been assessed under the head income from other sources. The A.O. has made a disallowance with regard to the claim of deduction U/s 80IC of the interest income on the ground that this income has to be assessed as income from other sources and therefore no claim of deduction under this section can be made by the appellant. The facts of the case of the Hon’ble ITAT, Chandigarh Bench which has been cited by the appellant are distinguishable as in that case it was on account of DEPB incentives and therefore it is not applicable in the present circumstances. Accordingly, I hold that penalty U/s 271(1)(c) of the IT Act has been rightly imposed by the A.O. Further, I place reliance on the following judgments for this proposition:-

(i) MAK Data Pvt. Ltd. Vs. CIT 358 ITR 593 (SC) - Penalty held to be validly levied, even if amount surrendered in survey was to due peace of mind.

(ii) CIT Vs Arcotech Ltd. (earlier known as SKS Ltd.)- 93 DTR 313 (Del)- Penalty held to be valid, even if assessee makes wrong claim of depreciation and loss on sale of investment claimed as business loss etc.- held that assessee has furnished inaccurate particulars of income. Explanation-1 to Section 271(1)(c) would not be satisfied.

(iii) Sharma Alloys (India) Ltd. Vs. ITO -357 ITR 379 (Mad.)- Penalty held to be valid, if claim of depreciation is found to be not substantiated with evidence and GP ate addition made on estimate basis after rejection of booksExplanation 1 to Section 271(1)(c) would come into play.

(iv) Sanghvi Swiss Refills Pvt. Ltd. Vs. CIT (SC) – 88 CCH 039 1SCC- ITA No. 250/2011- Inaccurate particulars furnished with regard to expenses paid to sister concern which were aimed at reducing tax liability- Penalty held to be valid.

(v) UP Matsya Vikas Nigam Ltd. Vs CIT- 87 CCH 001 (All.)- Assessee wrongly claiming set-off of unabsorbed losses and depreciation of earlier years-held guilty of furnishing inaccurate particulars of income-liable for penalty U/s 271(1)(c) of the IT Act.

In view of the above, he confirmed the penalty of Rs. 3,01,025 imposed by the A.O. U/s 271(1)(c) of the IT Act.”

4. Now the assessee is in appeal before us. The ld AR of the assessee has argued that even the assessment made, the assessee’s income was assessed U/s 115JB of the Act as per MAT provision, therefore, no penalty can be imposed where any addition made by the Assessing Officer even then the assessment made by the Assessing Officer U/s 115JB of the Act. He relied on the following case laws:-

(i) CIT Vs Caplin Point Laboratories Ltd. 293 ITR 524 (Mad.) (HC)
(ii) CIT Vs Lotus Trans Travels (P) Ltd. 177 Taxman 37 (Del.) (HC).
(iii) CIT Vs. Nalva Sons Investments Ltd. 327 ITR 543 (Del.) (HC).
(iv) CIT Vs Jindal Polyster & Steel Ltd. (2014) 365 ITR 225 (All.) (HC). (v) ACIT Vs. Torque Pharmaceuticals Pvt. Ltd. (2015) 124 DTR 356 (Chd.) (Trib).
(vi) Citi Tiles Ltd. Vs DCIT (2013) 37 CCH 123 (Ahd.) (Trib).
(vii) ACIT Vs. Tupperware India Pvt. Ltd. (2012) 34 CCH 59 (Del) (Trib).

Therefore, he prayed to delete the penalty.

5. At the outset, the ld DR vehemently supported the order of the ld CIT(A).

6. We have heard the rival contentions of both the parties and perused the material available on the record. It is settled law that if any addition made in regular assessment even then income computed under the MAT provisions U/s 115JB of the Act, then no penalty U/s 271(1)(c) of the Act is leviable. The case laws relied upon by the ld AR are squarely applicable. Accordingly we allow the assessee’s appeal.

7. In the result, the assessee’s appeal is allowed.

Order pronounced in the open court on 27/11/2015.

(Laliet Kumar)              (T.R. Meena)
Judicial Member           Accountant Member