Penalty u/s. 271(1)(c) cannot be levied where the tax as per regular Income tax proceedings is nil and tax is payable only as per MAT

IN THE INCOME TAX APPELLATE TRIBUNAL

MUMBAI BENCH ‘E’ MUMBAI

BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND

SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

ITA No.7485/Mum/2010

Assessment Year-2003-04

The Dy. CIT-8(3),

Aayakar Bhavan,

Mumbai-400 020

(Appellant)

Vs.

M/s. Shantivijay Jewels Ltd.,

G-37, Gems & Jewellery

Complex-III,

Seepz, Andheri (E),

Mumbai-400 096

PAN-AAFCS 8914F

 (Respondent)

Appellant by: Shri V. Krishnamoorthy

Respondent by: Ms. Apurva R. Shah

Date of Hearing: 3.09.2012

Date of pronouncement: 5.9.2012

O R D E R

PER N.K. BILLAIYA, AM:

This appeal by the Revenue is directed against the order of Ld. CIT(A)- 18 dt.20.8.2010 for assessment year 2003-04.

2. The sole grievance of the Revenue is that the Ld. CIT(A) erred in deleting the penalty of Rs. 53,92,070/- levied by the AO u/s. 271(1)(c) of the Act. This grievance of the Revenue is based on the judgement of the Hon’ble Supreme Court in the case of Gold Coin Food Pvt. Ltd (2008) 304 ITR 308 (SC).

3. The facts at the assessment stage show that the assessee declared total loss of Rs. 1,96,610/- for the year under consideration. The assessee has also claimed exemption u/s. 10A of the Act at Rs. 96,02,867/-. The returned income was assessed at a loss of Rs. 2,69,670/-. However, the tax payable has been computed on Book Profit u/s. 115JB of the Act. On the basis of this, the Assessing Officer initiated penalty proceedings u/s. 271(1)(c) of the Act.

4. During the course of penal proceedings, the AO show caused the assessee as to why penalty u/s. 271(1)(c) of the Act should not be levied on the disallowances made to the returned income. After considering the detailed reply of the assessee, the AO concluded that provisions of Sec. 271(1)(c) r.w. Explanation-I are attracted and accordingly levied penalty at the rate of 100% at Rs. 53,92,070/-.

5. The matter was carried before the Ld. CIT(A). Before the CIT(A), the assessee contended that since the assessment was on loss of Rs. 2,69,670/-, there is no tax liability. The tax liability has arisen only due to the application of MAT u/s. 115JB of the Act. The Ld. CIT(A) relying upon the decision of ITO Vs Wimco Seedlings Ltd. (2008) 114 TTJ (Del) 986 held that the penalty u/s. 271(1)(c) cannot be levied where the tax as per regular Income tax proceedings is nil and tax is payable only as per MAT provisions, accordingly cancelled the penalty.

6. Revenue is in appeal before us against the order of Ltd. CIT(A). The Ld. Departmental Representative strongly supported the findings of AO. The Ld. Counsel for the assessee relied upon the order of Ld. CIT(A).

7. We have heard the rival submissions and perused the orders of lower authorities. On identical facts in ITA No. 6600/Mum/2011 wherein we have held that penalty cannot be levied u/s. 271(1)(c) when the income is computed as per the provisions of Sec. 115JB of the Act. In that case, we have followed the decision of Hon’ble Delhi High Court in the case of CIT Vs Nalwa Sons Investments Ltd. (2011) 37 ITCL 218 (ITA No. 1420/2009).

Following our own decision in the case of ACIT Vs. M/s. Surface Graphics Pvt. Ltd. (ITA No. 6600/M/2011), we dismiss Revenue’s appeal.

8. In the result, the appeal filed by the Revenue is dismissed.

Order pronounced on this 5th day of September, 2012

                                                         Sd/-                 Sd/-

                                         (D.K. AGARWAL) (N.K. BILLAIYA)

                                           Judicial Member Accountant Member

Mumbai, Dated 5th September, 2012

Rj

Copy to:

1. The Appellant

2. The Respondent

3. The CIT-concerned

4. The CIT (A)-concerned

5. The DR ‘E’ Bench

True Copy

By Order

Asstt. Registrar, I.T.A.T, Mumbai