• Aug
  • 13
  • 2013

Levy of Penalty u/s 271(1)(c) if enhancement in assessment is been fully absorbed by brought forward business loss?

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The penalty in the instant case stands levied in the sum of Rs.2,41,858/-, i.e., at 100% of the tax sought to be evaded, in view of Explanation (4) to section 271(1)(c). The entire enhancement in assessment having been absorbed against brought forward (unabsorbed) business losses, there was no tax impact of the said enhancement. The same was, however, considered as of no moment by the ld. CIT(A) in view of Explanation (4) to the provision, further relying on the decision inter alia by the hon’ble apex court in the case of CIT vs. Gold Coin Health Food P. Ltd. [2008] 304 ITR 308 (SC). Aggrieved, the assessee is in further appeal.

ITAT “A” BENCH, MUMBAI

BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA, AM

I.T.A. No. 3619/Mum/2012- Assessment Year: 2004-05

Ambuja Cement India Private Limited

Vs.

Dy. CIT, Circle- 3(1)

Date of Hearing : 12.06.2013

Date of Pronouncement : 21.06.2013

O R D E R

Per Sanjay Arora, A. M.:

This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-5, Mumbai (‘CIT(A)’ for short) dated 01.03.2012, confirming the levy of penalty u/s.271(1)(c) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y.) 2004-05 vide order dated 3 1.03.2010.

2. The penalty in the instant case stands levied in the sum of Rs.2,41,858/-, i.e., at 100% of the tax sought to be evaded, in view of Explanation (4) to section 271(1)(c). The entire enhancement in assessment having been absorbed against brought forward (unabsorbed) business losses, there was no tax impact of the said enhancement. The same was, however, considered as of no moment by the ld. CIT(A) in view of Explanation (4) to the provision, further relying on the decision inter alia by the hon’ble apex court in the case of CIT vs. Gold Coin Health Food P. Ltd. [2008] 304 ITR 308 (SC). Aggrieved, the assessee is in further appeal.
3. We have heard the parties, and perused the material on record as well as the case law cited. The assessee’s case before us was based primarily on the decision by the hon’ble Delhi High Court in the case of CIT vs. Nalwa Sons Investments Ltd. [2010] 327 ITR 543 (Del). It stands explained therein that notwithstanding the increase in the assessed income vis-à-vis as returned, under the regular provisions of the Act, the same has no tax impact inasmuch as the tax paid and assessed is in terms of ‘book profit’, which remains unchanged on assessment. There is consequently no tax that could be said to have been evaded even on invoking Explanation (4) to the provision. The decision in the case of Gold Coin Health Food P. Ltd. (supra) stands also considered by the hon’ble court. No decision taking a contrary view in the matter has been brought to our notice. Rather, as informed, the Special Leave Petition (SLP) preferred by the Revenue against the said decision by the hon’ble Delhi Court has since been dismissed by the apex court (in SLP No.18564/2011). The matter, thus, stands effectively concluded in favour of the assessee and against the Revenue. Under these circumstances, we have no hesitation in, accepting the assessee’ s plea per its Grounds # 1 & 2, directing deletion of the impugned levy. We decide accordingly.

4.         In the result, the assessee’s appeal is allowed.

Order pronounced in the open court on June 21, 2013


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