Commissioner of Income Tax - I Vs. Cadila Pharmaceuticals Ltd. - Court Judgment

SooperKanoon Citationsooperkanoon.com/1145084
CourtGujarat High Court
Decided OnMay-05-2014
Case NumberTax Appeal No. 281 of 2014
JudgeAKIL KURESHI & THE HONOURABLE MS. JUSTICE SONIA GOKANI
AppellantCommissioner of Income Tax - I
RespondentCadila Pharmaceuticals Ltd.
Excerpt:
akil kureshi, j. revenue is in appeal against the judgment of the income tax appellate tribunal raising following questions for our consideration: œa. whether the appellate tribunal has substantially erred in deleting the penalty of rs.25.43 lacs despite the fact that the corresponding quantum additions were already confirmed by the cit(a)? b. whether the appellate tribunal has substantially erred in not appreciating the fact that when furnishing of inaccurate particulars has the effect of reducing the loss declared in the return, then such amount is considered as income in respect of which inaccurate particulars have been furnished, as per clause (a) of explanation 4 to section 271(1)(c)?? the issue pertains to levy of penalty under section 271(1)(c) of the act. from the record, it emerges that even after the disputed additions, the assessee-company continued to pay tax of minimum alternative basis under section 115jb of the act. the tribunal, therefore, held and observed as under: œ4. we have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the judgment cited by the ld.a.r. we find that as per the assessment order, even after making various disallowances, as per which the loss declared by the assessee in the return of income of rs.7,37,41,571/- was reduced to rs.6,53,80,460/-, ultimately the tax was levied by the a.o. on book profit of rs.13,78,32,407/- which is as per form 29b filed along with the return of income and there is no addition in the book profit made by the a.o. under these facts, now we examine the applicability of the judgment of honble delhi high court rendered in the case of cit vs. nalva sons investment ltd., (supra) cited by the ld. a.r. in that case, it was held by honble delhi high court that when when computation of income was made u/s.115jb and there was losss under the normal provisions it has to be accepted that such addition in normal income did not lead to tax evasion at all, and therefore, penalty u/s 271(1)(c) cannot be imposed. we have already seen that in the present case also, the facts are identical because in the present case also, the computation of income was made by the a.o. u/s 115jb and there was loss under the normal provisions and, therefore, it has to be held that in the present case also, concealment, if any, did not lead to tax evasion at all and, therefore, penalty u/s 271(1)(c) cannot be imposed. respectfully following this judgment of honble delhi high court, we delete the penalty in the present case.? similar issue came up for consideration before this court in tax appeal no.140 of 2014. referring to the decision of delhi high court in the case of nalwa sons investments ltd. 327 itr 543 (delhi), it was observed as under: œ11. in the present case, we have noticed that the commissioner in his order dated november 14, 2008, partially allowed the assessees appeal in terms of quantum addition and in terms held that no addition for the purpose of computation of book profit under section 115jb of the act could have been made. the commissioner in order to come to such conclusion relied on the decision of the supreme court in the case of apollo tyres ltd. v. cit, reported in (2002) 255 itr 273 (sc) and malayala manorama co. ltd. v. cit, reported in 300 itr 251, in which it is held that it is not open for the assessing officer to rescrutinize the accounts and satisfy that the accounts have been maintained under the provisions of the companies act. while computing the income of a company under the provision for minimum alternative tax, the assessing officer has only the power of examining whether the books of account are certified by the authorities under the companies acts as having been properly maintained in accordance with the companies act. the assessing officer thereafter has the limited power of making increases and reductions as provided in the explanation to such provision. 12. to this proposition of the commissioner, we have serious doubt. in a case like this, when the assessee concealed certain income not only for the purpose of avoiding excise duty, but also income tax, we wonder whether the provisions of section 115jb of the act would prevent the revenue authorities from making suitable additions not only in the normal computation, but also for computing book profit for minimum alternative tax. we also wonder whether the decisions of the supreme court in the case apollo tyres ltd. (supra) and malayala manorama co. ltd. (supra) lay down such a proposition. when the assessee holds back certain facts even from the statutory auditors, we wonder whether their certification that the accounts have been maintained as required under the companies act would be final and it would be impermissible for the assessing officer to go behind that. such issue, however, we would answer in an appropriate case as and when such facts are presented before us. in the present case, we shall have to proceed on the basis that the order of commissioner has become final. it is, thus, binding both on the revenue as well as the assessee. such order in effect was that addition for normal computation sustained, for the purpose of computation of book profit deleted. the result of this decision of the commissioner would be that the tax that the assessee would pay before and after additions would remain exactly the same. in other words, since the commissioner did not permit any increase in the assessee's book profit computation under section 115jb of the act, even after unearthing the concealed income, the assessee ended up paying the same amount of minimum alternative tax under section 115jb of the act even after the concealments were unearthed and accepted by the assessee. it is in this background, our discussion on the implication of explanation 4 to section 271(1) of the act must be seen. when in facts of the case, the assessee's tax liability did not change despite unearthing of concealed income, no penalty could have been levied. we may clarify that our conclusions should not be seen as laying down, that simply because before and after the additions the assessee remained a mat company and paid tax under section 115jb of the act or such similar provision, that by itself would mean that no penalty could be imposed. if the effect of the addition of the concealed income results into higher minimum alternative tax by increasing the book profit also, penalty could as well be imposed. with this clarification, we answer the question against the revenue. in the result, the tax appeal is dismissed. before closing, we had under our order dated 23.4.2014 called for explanation from the registry about this tax appeal not being linked with similar appeals. such explanation has been rendered by the concerned staff under communication dated 2.5.2014. the explanation is accepted and the issue is closed.
Judgment:

Akil Kureshi, J.

Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal raising following questions for our consideration:

œA. Whether the Appellate Tribunal has substantially erred in deleting the penalty of Rs.25.43 lacs despite the fact that the corresponding quantum additions were already confirmed by the CIT(A)?

B. Whether the Appellate Tribunal has substantially erred in not appreciating the fact that when furnishing of inaccurate particulars has the effect of reducing the loss declared in the return, then such amount is considered as income in respect of which inaccurate particulars have been furnished, as per clause (a) of Explanation 4 to section 271(1)(c)??

The issue pertains to levy of penalty under section 271(1)(c) of the Act.

From the record, it emerges that even after the disputed additions, the assessee-company continued to pay tax of minimum alternative basis under section 115JB of the Act. The Tribunal, therefore, held and observed as under:

œ4. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the judgment cited by the Ld.A.R. We find that as per the assessment order, even after making various disallowances, as per which the loss declared by the assessee in the return of income of Rs.7,37,41,571/- was reduced to Rs.6,53,80,460/-, ultimately the tax was levied by the A.O. on book profit of Rs.13,78,32,407/- which is as per form 29B filed along with the return of income and there is no addition in the book profit made by the A.O. Under these facts, now we examine the applicability of the judgment of Honble Delhi High Court rendered in the case of CIT vs. Nalva Sons Investment Ltd., (supra) cited by the Ld. A.R. In that case, it was held by Honble Delhi High Court that when when computation of income was made u/s.115JB and there was losss under the normal provisions it has to be accepted that such addition in normal income did not lead to tax evasion at all, and therefore, penalty u/s 271(1)(c) cannot be imposed. We have already seen that in the present case also, the facts are identical because in the present case also, the computation of income was made by the A.O. u/s 115JB and there was loss under the normal provisions and, therefore, it has to be held that in the present case also, concealment, if any, did not lead to tax evasion at all and, therefore, penalty u/s 271(1)(c) cannot be imposed. Respectfully following this judgment of Honble Delhi High Court, we delete the penalty in the present case.?

Similar issue came up for consideration before this Court in Tax Appeal No.140 of 2014. Referring to the decision of Delhi High Court in the case of Nalwa Sons Investments Ltd. 327 ITR 543 (Delhi), it was observed as under:

œ11. In the present case, we have noticed that the Commissioner in his order dated November 14, 2008, partially allowed the assessees appeal in terms of quantum addition and in terms held that no addition for the purpose of computation of book profit under section 115JB of the Act could have been made. The Commissioner in order to come to such conclusion relied on the decision of the Supreme Court in the case of Apollo Tyres Ltd. v. CIT, reported in (2002) 255 ITR 273 (SC) and Malayala Manorama Co. Ltd. v. CIT, reported in 300 ITR 251, in which it is held that it is not open for the Assessing Officer to rescrutinize the accounts and satisfy that the accounts have been maintained under the provisions of the Companies Act. While computing the income of a company under the provision for minimum alternative tax, the Assessing Officer has only the power of examining whether the books of account are certified by the authorities under the Companies Acts as having been properly maintained in accordance with the Companies Act. The Assessing Officer thereafter has the limited power of making increases and reductions as provided in the Explanation to such provision.

12. To this proposition of the Commissioner, we have serious doubt. In a case like this, when the assessee concealed certain income not only for the purpose of avoiding excise duty, but also income tax, we wonder whether the provisions of section 115JB of the Act would prevent the Revenue Authorities from making suitable additions not only in the normal computation, but also for computing book profit for minimum alternative tax. We also wonder whether the decisions of the Supreme Court in the case Apollo Tyres Ltd. (supra) and Malayala Manorama Co. Ltd. (supra) lay down such a proposition.

When the assessee holds back certain facts even from the statutory auditors, we wonder whether their certification that the accounts have been maintained as required under the Companies Act would be final and it would be impermissible for the Assessing Officer to go behind that. Such issue, however, we would answer in an appropriate case as and when such facts are presented before us. In the present case, we shall have to proceed on the basis that the order of Commissioner has become final. It is, thus, binding both on the Revenue as well as the assessee. Such order in effect was that addition for normal computation sustained, for the purpose of computation of book profit deleted. The result of this decision of the Commissioner would be that the tax that the assessee would pay before and after additions would remain exactly the same. In other words, since the Commissioner did not permit any increase in the assessee's book profit computation under section 115JB of the Act, even after unearthing the concealed income, the assessee ended up paying the same amount of minimum alternative tax under section 115JB of the Act even after the concealments were unearthed and accepted by the assessee. It is in this background, our discussion on the implication of Explanation 4 to section 271(1) of the Act must be seen. When in facts of the case, the assessee's tax liability did not change despite unearthing of concealed income, no penalty could have been levied. We may clarify that our conclusions should not be seen as laying down, that simply because before and after the additions the assessee remained a MAT company and paid tax under section 115JB of the Act or such similar provision, that by itself would mean that no penalty could be imposed. If the effect of the addition of the concealed income results into higher minimum alternative tax by increasing the book profit also, penalty could as well be imposed. With this clarification, we answer the question against the Revenue.

In the result, the Tax Appeal is dismissed.

Before closing, we had under our order dated 23.4.2014 called for explanation from the Registry about this Tax Appeal not being linked with similar appeals. Such explanation has been rendered by the concerned staff under communication dated 2.5.2014. The explanation is accepted and the issue is closed.