15 Penalty – Concealment of income – Assessment u/s. 115JB – Assessment of income determined by legal fiction – Penalty for concealment of income cannot be imposed

Princ.
CIT vs. International Institute of Neuro Sciences and Oncology Ltd.; 402 ITR
188 (P&H); Date of Order: 23/10/2017:

A.
Y. 2005-06:

Sections
115JB and 271(1)(c)

The
assessee is a company. For the A. Y. 2005-06, the income of the assessee was
assessed u/s. 115JB of the Income-tax Act, 1961. The Assessing Officer also
imposed penalty u/s. 271(1)(c) of the Act for concealment of income.

The
Tribunal deleted the penalty holding that when the income is assessed u/s.
115JB penalty for concealment of income cannot be imposed.

On appeal
by the Revenue, the Punjab and Haryana High Court upheld the decision of the
Tribunal and held as under:

“i)   Under the scheme of the Income-tax Act, 1961,
the total income of the assessee is first computed under the normal provisions
of the Act and tax payable on such total income is computed with the prescribed
percentage of the book profits computed u/s. 115JB of the Act. The higher of
the two amounts is regarded as total income and tax payable with reference to
such total income. If the tax payable under the normal provisions is higher,
such amount is the total income of the assessee, otherwise the book profits are
deemed as the total income of the assessee in terms of section 115JB of the
Act.

ii)    Where the income computed in accordance with
the normal procedure is less than the income determined by legal fiction namely
the book profits u/s. 115JB and income of the assessee is assessed u/s. 115JB
and not under the normal provision, the tax is paid on the income assessed u/s.
115JB of the Act, and concealment of income would have no role to play and
would not lead to tax evasion.

iii)   Therefore, penalty cannot be imposed on the
basis of disallowance or additions made under the regular provisions. Appeal
stands dismissed.”