Mumbai ITAT: No penalty u/s 271(1)(c) for tax evasion when final determination of income on Minimum Alternate Tax basis.

Ruchi Strips & Alloys Ltd. v. DCIT, on 21^st January, 2011

Assessment Year/s: 2003-04, 2005-06

Question/s before the Hon’ble Tribunal: Whether penalty can be imposed in respect of the assessment of total income under the normal provisions of the act when ultimately the total income is determined u/s. 115 JB of the Income Tax Act?

Relevant facts: There was a search and seizure operation u/s. 132 of the Income Tax Act, 1961 (the Act) carried out by the department in the business premises of the assessee on 17.11.2005. In the return of income filed after the search for Assessment year 2003-04 and 2005-06, the income surrender at the time of search was duly offered for tax. Since the total income computed as per the normal provision of the Act in both the aforesaid assessment years was less than the book profits computed u/s. 115 JB of the Act. The AO ultimately levied tax on the total income computed under the provision of section 115 JB of the Act.

Upholding the appeal of the assessee, the Hon’ble Tribunal held that:

Para 7: "In the facts and circumstances of the present case no penalty could have been imposed on the assessee because there was no tax sought to be evaded because the addition in respect of which penalty was imposed was made while computing total income under the normal provisions of the Act and ultimately the total income of the Assessee was determined on the basis of book profits u/s.115JB of the Act. We, therefore, cancel the penalty imposed by the Assessing Officer and confirmed by the CIT(A)."

The decision is available here.