Appeal against ITAT order imposing penalty under Section 271(1)(c) for failure to compute book profit and Minimum Alternate Tax under Section 115JB. Court found appellant filed 'nil' return without complying with MAT provisions, justifying penalty.
The Tax Case (Appeal) stands dismissed. No costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 09.07.2014
CORAM
THE HONOURABLE MR.JUSTICE R.SUDHAKAR & THE HONOURABLE MR.JUSTICE G.M.AKBAR ALI
TAX CASE (APPEAL) NO.82 OF 2014
M/s.Sri Gokulam Hotels India P. Ltd., No.49, Arcot Road, Kodambakkkam, Chennai - 600 024.
.... Appellant
Vs.
The Assistant Commissioner of Income Tax Company Circle VI (4), Income Tax Department, Chennai - 600 034. .... Respondent
APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 31.7.2013 made in I.T.A.No.1012/Mds/2012 on the file of the Income Tax Appellate Tribunal "C" Bench, Chennai for the assessment year 2007-08 against the order of the Commissioner of Income-Tax (A)-I, Chennai 34, dated 27.2.2012 and made in ITA No.54 of 2010-11 and against the order of the Assistant Commissioner of Income Tax, Central Circle (1) Chennai, dated 30.12.2009 and made in PAN AAECS,2586E, and
For Appellant : Mr.A.S.Sriraman For Respondent: Mr.N.V.Balaji Standing Counsel for Income Tax
(Judgment of the Court was delivered by R.SUDHAKAR,J.)
This Tax Case (Appeal) has been filed at the instance of the assessee as against the order dated 31.7.2013 made in I.T.A.No.1012/Mds/2012 on the file of the Income Tax Appellate Tribunal "C" Bench, Chennai for the assessment year 2007-08 raising the following substantial questions of law:
"1. Whether the Appellate Tribunal is correct in law in levying the penalty under Section 271(1)(c) of the Act for not reporting the Minimum Alternate Tax computation under Section 115 JB of the Act which was construed as an https://hcservices.ecourts.gov.in/hcservices/
act of concealment of income or furnishing inaccurate particulars of income even though the interpretation of such provisions and consequential rejection of explanation offered in relation thereto would entitled the use of the legal discretion vested in the statute on the respondent in favour of the appellant?
"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 8977166
Income Tax Act on 30.12.2009. After hearing the assessee, the Assistant Commissioner of Income Tax passed an order on 29th June, 2010 imposing penalty at Rs.10,07,238/- under Section 271(1)(c) of the Income Tax Act holding that the assessee had furnished inaccurate particulars of income.
"8. I have considered the facts of the case, the arguments advanced and the decisions relied upon. The liability as per the assessment order has arisen due to difference in interpretation under Section 115 JB as to what constitutes the eligible amount to set off while computing the book profit. The appellant had claimed the lower of the depreciation or loss before depreciation for the A.Ys 2002-03 and 2003-04. The Assessing Officer had restricted the set off of business loss pertaining to the A.Y2002-03 to Rs.21,47,324/-. The difference of Rs.39,34,105/-, in the opinion of the Assessing Officer was not eligible for set off against the assessment year 2007-08 as it has been notionally set off against the assessment year 2006-07 in his assessment order. According to the appellant, there is a debit balance in the profit and loss account, comprising of accumulated loss under the provisions of Company Act, in their books of account. Therefore, they are entitled for the set off of lower of business loss or depreciation brought forward from the earlier accounting years. Their belief was that set off was available till there is actual profit before providing of depreciation. The lower of the depreciation/business loss for two F.Ys viz., 31-3-2002 and 31-3-2003 were claimed and from the F.Y 31-3-2004 onwards profits before depreciation was available. Therefore, this difference in set off is because of interpretation of the amount eligible for set off. Because of this, according to the appellant, there is no liability under the provisions of section 115 JB, whereas according to the Assessing Officer there is a liability. The liability has arisen on account of difference in the interpretation of section 115JB. Therefore the appellant cannot be held to have concealed its income or had furnished inaccurate particulars, hence I direct that the penalty levied u/s 271(1)(c) be deleted."
"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 115 JB 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 setoff against book profit, was at the best Rs.60,81,430/for assessment year 2002-03 and Rs.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 the Assessing Officer. The difference pertains only to the brought forward loss of assessment year 2002-03. While assessee's calculations show the amount as Rs.60,81,430/-, Assessing Officer had considered Rs.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 Rs.89,66,129/-. Admittedly, the net profit as per the P & L account came to Rs.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."
the Assessing Officer's endeavour, the MAT liability came to be noticed. Therefore, there was a clear case of the assessee failing to furnish particulars necessary for the assessment and the case of the department that the assessee has furnished inaccurate particulars for the purpose of determining the tax under Section 115 JB stands established. As a result, penalty has to be levied as per the provisions of Section 271(1)(c) of the Income Tax Act and the Assessing Officer was justified in imposing such penalty. Hence, the findings of the Tribunal confirming the order of the Assessing Officer and reversing the order of the first Appellate Authority is correct.
Sd/-
Assistant Registrar(CS-IV) Dated: 18.07.2014
//True Copy//
Sub Assistant Registrar
sl
To
T.C.(A) No.82 of 2014
EV(CO)
EU 22.7.14
2 issues framed by the court
Whether the Appellate Tribunal was correct in law in levying penalty under Section 271(1)(c) for failure to report Minimum Alternate Tax computation construed as furnishing inaccurate particulars of i
Whether mistake in not reporting Minimum Alternate Tax computation could be considered a reasonable cause for exercising discretion in favour of the appellant to dispense with penalty?
2 provisions across 1 enactments
M/s. Sri Gokulam Hotels India P. Ltd.
The Assistant Commissioner of Income Tax Company Circle VI (4)
R. Sudhakar
G.M. Akbar Ali
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
