IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘F’ NEW DELHI

BEFORE SHRI G. C. GUPTA, HON’BLE VICE-PRESIDENT AND
SHRI J. S. REDDY, HON’BLE ACCOUNTANT MEMBER

I.T.A. No.1636/Del/2012

Assessment Year: 2008-09

M/s Rama Associates Ltd. (Appellant) Vs ACIT, Circle 15(1), New Delhi (Respondent)

ORDER

PER J. S. REDDY, AM:
This is an appeal filed by the assessee directed against the order of ld. CIT (Appeals)-XVIII, New Delhi, dated 20.01.2012 for the Assessment Year 2008-09.

2. The assessee in this case has filed his return of income, declaring Nil income under the normal provisions of the Act and declaring book profit of Rs.64,93,796/- u/s 115JB of the Act. The AO determined the total income under the normal provisions at Nil. He determined the book profits u/s 115JB at Rs.63,62,933/- and assessed the assessee on this amount of book profits. It can be noticed that the book profit determined by the AO is below the amount returned by the assessee as book profits u/s 115JB of the Act. Thereafter penalty u/s 271(1)(c) was levied by the AO on the adjustment made incomputing book profits. The adjustment made are as follows:
1. Prior period expenses Rs.32,000/-
2. FBT Tax Rs.48,706/-
3. Wealth Tax Rs.8,000/-

3. Aggrieved the assessee carried the matter in appeal without success. Further aggrieved the assessee is before us on the following grounds:

“1. The Ld. CIT(A) has erred in law and facts by confirming a penalty of Rs.27,410/- which was levied by the Ld. AO without appreciating the fact that the returned income u/s 115JB of Rs.64,93,796/- was more than the assessed income u/s 115JB of Rs.63,62,933/-

2. The Ld. CIT(A) and as well as Ld. AO has failed to appreciate that the addition of prior period expenses amounting to Rs.32,000/- in book profit was a  disputed point of allow ability in the current assessment year and thus levying of the penalty on the disputed addition is totally unwarranted and bad in law.

3. The Ld. CIT(A) and as well as Ld. AO has erred in law and facts by treating FBT Tax , which is not related to the income but certain expenses, amounting to Rs.48,706/- and Wealth Tax Rs.8,000/- to be added in the book profit as per clause (a) of “Explanation” (1) of section 115JB as both the amounts were neither income tax paid or payable.

4. The Ld. AO has failed to record his satisfaction for filing in accurate particular regarding various additions made by him on which penalty was levied.

5. The appellant here by pray to permit take any additional ground of appeal or amend or withdraw or modify any grounds of appeal.”

4. We have heard Mr. R. K. Gupta ld. Counsel for the assessee and Shri Vikram Sahay the ld. Sr. DR on behalf of the Revenue.

5. After hearing rival contention, we hold as follows:

6. The issue whether an adjustment can be made on account of prior expenses, while computing book profits u/s 115JB of the Act is debatable. The Mumbai Bench of the Tribunal in the case of Shivshahi Punarvasan Prakalp Ltd. Vs. ITO 2011 (10) TMI 153 adjudicated the issue in favour of the assessee. As this is a debatable issue, in our view, no penalty can be levied on such debatable  adjustment u/s 271(1)(c) of the Act.

6. Similarly with regard to an adjustment made on FBT Tax, the Mumbai Bench of the Tribunal in the case of ASB International (P) Ltd. Vs. DCIT in ITA No.7040 to 7042/Mum/2011 and ITA No.245/Mum/2011 order dated 29.6.2012, adjudicated the issue in favour of the assessee. As this is also a debatable adjustment made while computing book profits u/s 115JB of the Act we are of the considered opinion that no penalty can be levied u/s 271(1) (c) of the Act. Similar is the case with adjustment made on account of wealth tax.

7. The assessee has raised number of contentions including the fact that the AO has assessed income less than what was returned by the assessee and still proceed  to  penalty  levied  u/s  271(1)(c).  Reliance  was  also  placed  on  the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Nalwa Sons Investment Ltd. [2010] 194 Taxman 387 (Delhi).

8. As we have already held that all these adjustments made to book profits u/s 115JB of the Act by the AO as debatable we apply the proposition laid down by the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products 322 ITR 158 (SC) and we delete the penalty levied.

9. In the result, the appeal of the assessee is allowed.

Order pronounced in the open Court on 15/07/2015.

Sd/-                                                            Sd/-
(G. C. GUPTA)                               (J. S. REDDY)
VICE-PRESIDENT                 ACCOUNTANT MEMBER
Dated: 15/07/2015