By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi Chartered Accountants
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Penalty u/s.271(1)(c) — If tax liability is determined u/s.115JB, penalty cannot be levied with reference to the additions made under normal provisions of the Act.
Facts:
The Assessing Officer had made two additions to the returned income under normal provisions of the Act which were upheld by the Tribunal. However the addition made to book profits on account of diminution in the value of investments for the purpose of computation u/s.115JB was deleted by the Tribunal. While passing the consequential order the tax payable was determined u/s.115JB since tax payable under normal provisions of the Act was nil.
The AO imposed penalty u/s.271(1)(c) in respect of disallowances made under normal provisions of the Act.
Held:
The additions which constitute the foundation for imposition of penalty u/s.271(1)(c), were made while computing income under the regular provisions of the Act. However, tax u/s.115JB was determined by making an addition on account of diminution in the value of investment, which finally stands deleted by the Tribunal. Thus the basis of assessment under the regular provisions of the Act is no more relevant because of the AO finally computed income u/s.115JB pursuant to the order passed by the Tribunal. Thus the additions which were made in the original assessment as per the regular provisions of the Act, have become academic inasmuch as they have not entered the final computation of total income made by the AO. Neither the total income has increased with such additions, nor has the loss scaled down.
The assessment under regular provisions of the Act, in which such additions were made, has been substituted with that u/s. 115JB, and in the latter case, such additions were either not made or finally deleted by the Tribunal. As such there cannot be any question of imposing or confirming the penalty u/s.271(1)(c) qua these additions.
The argument of the Revenue that penalty should be sustained since the assessee was granted credit in respect of tax paid on deemed income u/s.115JAA was not accepted as the tax credit was not available for tax paid u/s.115JB till A.Y. 2005-06.
