INCOME TAX ACT, 1961

--Penalty under section 271(1)(c)--Concealment Setting aside of disallowances and assessment under section 115JB--Since disallowance forming basis for levy of penalty itself have been set aside, penalty under section 271(1)(c) could not be sustained and as regards addition in terms of provisions of section, 115JB, same also could not be sustained.

Though the Commissioner (Appeals) upheld these disallowances, the Tribunal restored the issues in relation to these disallowances to the file of the assessing officer vide Order dt. 23-2-2012 in ITA Nos. 617 and 618/Del/2010. Since the disallowances, forming the basis for levy of penalty, itself have been set aside, penalty imposed under section 271(1)(c) does not survive. No penalty survives after deletion of additions, forming the basis for the levy of penalty. [Para 8.2] Since the very basis upon which the penalty has been imposed on the amount disallowed on account of excess claim of depreciation and interest on loan to subsidiaries, does not exist in view of the aforesaid order dt. 23-2-2012 of the Tribunal in quantum appeal, penalty levied in relation to the said amount does not survive. The other arguments made by the Authorised Representative on the issue of levy of penalty in relation to these disallowances, consequently become redundant and infructuous. [Para 8.2] As regards additions in terms of provisions of section 115JB the issues in quantum appeal have been admitted for adjudication by the High Court. [Para 9] When the dispute between the Revenue and the assessee is on a legal issue and question of law is admitted by the High Courts, then there cannot be an allegation of furnishing of inaccurate particulars and concealment and, therefore, normally in such cases penalty cannot be justified. A plea or claim which is held by the High Court to give rise to a substantial question of law, cannot be treated to be frivolous or mala fide so as to attract levy of penalty under section 271(1)(c), Penalty levied in relation to additions in terms of provisions of section 115JB, does not survive. [Para 9.1] Where no information given in the return is found to be incorrect and where an assessee has made only incorrect claim, it does not amount to furnishing inaccurate particulars. Mere rejection of a legal claim does not give rise to concealment of income. [Para 10] Moreover, in these two assessment years, book profits alone have been assessed as income. The jurisdictional High Court in the case of CIT v. Nalwa Sons Investments Ltd. has held that if tax is paid on the income assessed under section 115JB, concealment of income had no role to play and is totally irrelevant. SLP against this decision has been dismissed on 4-5-2012 by Hon'ble Apex Court in CIT v. Nalwa Sons Investments Ltd. SLP No. 18564 of 2011. [Para 11]