Delhi High Court
Cit vs Central Warehousing Corporation on 18 April, 2012
Author: Sanjiv Khanna
$~7 & 8
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision : 18th April, 2012.
+ ITA 999/2011
+ ITA 1091/2011
CIT ..... Appellant
Through Mr. Abhishek Maratha, sr. standing
counsel with Ms. Anshul Sharma, Adv.
versus
CENTRAL WAREHOUSING CORPORATION...Respondent
Through Mr. M S Syali, Sr. Adv. with Mr.
Mayank Nagi, Ms. Husnal Syali, Advs.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE R.V. EASWAR
SANJIV KHANNA,J: (ORAL)
These two appeals by the Revenue in the case of Central
Warehousing Corporation, the respondent-assessee, relate to
assessment years 2003-04 and 2004-05. By the common impugned
order dated 15.11.2010, Income Tax Appellate Tribunal („Tribunal‟,
for short) has deleted the penalty under Section 271(1)(c) of the
Income Tax Act, 1961 („Act‟, for short) after applying and following
ITA 999 & 1091 of 2011 Page 1 of 5
the decision of this Court in CIT Vs. Nalwa Sons Investments Ltd.
(2010) 327 ITR 543 (Delhi).
2. The issue raised is whether the decision in Nalwa Sons
Investments Ltd. (supra) is applicable to the facts of the present case.
The facts for the two assessment years may be noted.
3. The assessment year 2003-04: -
(a) The assessee had returned loss of `10.74 crores under the
normal tax provisions. The assessee had disclosed book profit
of `47.62 crores under Section 115JB of the Act.
(b) The Assessing Officer computed the income under the
normal provisions at a positive figure of `149.90 crores after
additions. The book profits under Section 115JB of the Act
were also enhanced to `97.29 crores.
(c) The assessee preferred appeals and after giving appeal
effect, the normal taxable income as per the Act, was finally
assessed at a loss of ` 15.87 lakhs. The book profits under
Section 115JB were assessed at `46.56 crores. The book
profits were more and therefore, the income of the assessee
was assessed under Section 115JB at `46.56 crores. This
figure is slightly less than the figure of book profits mentioned
in the return income of `47.62 crores.
ITA 999 & 1091 of 2011 Page 2 of 5
4. The assessment year 2004-05: -
(a) The returned income under the normal tax provisions
was loss of `26.45 crores. The book profits under Section
115JB were declared at a positive figure of `62.81 crores.
(b) The Assessing Officer made various additions to the
normal income and computed the same at a positive figure of
`48.56 crores. However, the said figure was less than the book
profit of `62.81 crores as declared and accordingly, the taxable
income was computed under Section 115JB at a figure of
`62.81 crores. Book profits were not enhanced.
5. The question raised in the present appeals is whether penalty
can be imposed on the assessee, where additions are made under the
normal provisions of the Act but actually the taxable income of the
assessee is assessed not under the normal provisions but under
Section 115JB and there is no addition as far as book profits is
concerned.
6. The said aspect was examined by this Court in Nalwa Sons
Investments Ltd. (supra). In the said case, after referring to
Explanation 4(a) to section 271(1)(c), it has been held as under: -
ITA 999 & 1091 of 2011 Page 3 of 5
"In the present case, the income computed as per the
normal procedure was less than the income determined by
legal fiction, namely, 'book profits' under section 115JB of
the Act. On the basis of normal provision, the income was
assessed in the negative i.e. at a loss of Rs. 36,95,21,018. On
the other hand, assessment under s. 115JB of the Act resulted
in calculation of profits at Rs. 4,01,63,180.
In view thereof, in conclusion, the assessment order
records as follows:
"Assessed at Rs. 4,01,63,180 under section
115JB, being higher of two. Interest under
section 234B and 234C has been charged as
per the provisions of IT Act, 1961. Penalty
proceedings under section 271(1) (c) of the
Income-tax Act, 1961 have been initiated. Issue
necessary forms."
The income of the assessee was thus assessed under
section 115JB and not under the normal provisions. It is in
this context that we have to see and examine the application
of Explanation 4.
Judgment in the case of Gold Coin (2008) 304 ITR
308, obviously, does not deal with such a situation. What is
held by the Supreme Court in that case is that even if in the
income-tax return filed by the assessee losses are shown,
penalty can still be imposed in a case where on setting off the
concealed income against any loss incurred by the assessee
under other head of income or brought forward from earlier
years, the total income is reduced to a figure lower than the
concealed income or even a minus figure. The court was of
the opinion that 'the tax sought to be evaded' will mean the
tax chargeable not as if it were the total income. Once, we
ITA 999 & 1091 of 2011 Page 4 of 5
apply this rationale to Explanation 4 given by the Supreme
Court, in the present case, it will be difficult to sustain the
penalty proceedings. Reason is simple. No doubt, there was
concealment but that had its repercussions only when the
assessment was done under the normal procedure. The
assessment as per the normal procedure was, however, not
acted upon. On the contrary, it is the deemed income
assessed under section 115JB of the Act which has become
the basis of assessment as it was higher of the two. Tax is
thus paid on the income assessed under section 115JB of the
Act. Hence, when the computation was made under section
115JB of the Act, the aforesaid concealment had no role to
play and was totally irrelevant. Therefore, the concealment
did not lead to tax evasion at all."
7. The issue being clearly covered by the said decision, we do
not think any substantial question of law arises for our consideration.
The appeal is dismissed. No costs.
SANJIV KHANNA, J.
R.V.EASWAR, J.
APRIL 18, 2012
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