By TIOL News Service

CHENNAI, JULY 22, 2014: THE issue before the Bench is - Whether when the MAT liability of the assessee is found out only because of the alertness of the AO, the levy of penalty u/s 271(1)(c) is legitimately warranted. And the HC's answer is YES.

Facts of the case

The assessee company runs a hotel business. It filed its return disclosing "nil" income. It had admitted income from business at Rs.1,51,92,970/- and the same was set off with carried forward loss of the earlier years. In the course of the scrutiny proceedings, it was seen that the assessee was liable to tax u/s 115JB. The AO was of the view that the assessee was liable to pay MAT u/s 115JB. The adjusted book profit for working out the MAT payable u/s 115JB was calculated by the AO. Thereafter proceedings for levy of penalty u/s 271(1)(c) was initiated for the failure of the assessee to compute the book profit and the MAT payable u/s 115JB. The AO was of the view that the assessee furnished inaccurate particulars of income. The plea of the assessee that there was no suppression of income based on their own calculation was rejected and therefore an appeal was preferred against the levy of tax u/s 115JB and the said appeal was stated to be pending. Since the assessee furnished inaccurate particulars, the Revenue proceeded to impose penalty u/s 271(1)(c). After hearing the assessee, the ACIT passed an order imposing penalty u/s 271(1)(c) holding that the assessee had furnished inaccurate particulars of income.

On appeal, the CIT(A) allowed the appeal holding that the liability as per the assessment order had arisen due to difference in interpretation u/s 115JB as to what constituted the eligible amount to set off while computing the book profit. The assessee had claimed the lower of the depreciation or loss before depreciation for the A.Ys 2002-03 and 2003-04. The AO had restricted the set off of business loss pertaining to the A.Y 2002-03 to Rs.21,47,324/-. The difference of Rs.39,34,105/-, in the opinion of the AO was not eligible for set off against the AY 2007-08 as it had been notionally set off against the AY 2006-07 in his assessment order. According to the assessee, there was 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 were 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 was 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 was because of interpretation of the amount eligible for set off. Because of this, according to the assessee, there was no liability under the provisions of section 115JB, whereas according to AO there was a liability. The liability had arisen on account of difference in the interpretation of section 115JB. Therefore the assessee cannot be held to had concealed its income or had furnished inaccurate particulars, therefore the CIT(A) had deleted the penalty levied u/s 271(1)(c) be deleted.

On appeal before the Tribunal, the Revenue contended that penalty was liable to be imposed in terms of Section 271(1)(c), as the assessee had failed to compute the book profit and tax payable under Section 115JB. The Tribunal had accepted the submissions of the Revenue, partly allowed the appeal holding that the assessee failed to make proper computation and therefore penalty was rightly imposed by AO. The Tribunal also held that there was no dispute that the assessee had not made any computation of book profit u/s 115JB, while filing its return of income. The AO found out that the assessee had reported higher carried forward loss and thereby filed 'nil' return.

Held that,

++ the findings of the Tribunal that in an admitted case of 'nil' return, without complying with the provisions of Section 115JB, where the assessee is liable to pay MAT and the non-compliance thereof results in imposition of penalty in terms of Section 271(1)(c), is correct. The Tribunal also found that only on account of 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 115JB stands established;

++ as a result, penalty has to be levied as per the provisions of Section 271(1)(c) and the AO 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. The issue in the present appeal is only relates to the penalty imposed u/s 271(1)(c), which we find is justified in the facts and circumstances of the case. In view of the above, we find that the issue decided by the Tribunal on the basis of the admitted case of the assessee by filing 'nil' return when they are liable to pay Minimum Alternate Tax is correct. Hence, the provisions of Section 271(1)(c) gets attracted. Accordingly, no question of law much less any substantial question of law arises for consideration in this Tax Case (Appeal). The Tax Case (Appeal) stands dismissed. No costs.

(See 2014-TIOL-1177-HC-MAD-IT)