Whether when income of assessee is finally assessed u/s 115JB and not under normal provisions of Act, addition can still be made with respect to income determined under normal provisions - NO: ITAT

THE issue before the Bench is - Whether when income of assessee is finally assessed u/s 115JB and not under normal provisions of the Act, addition can still be made with respect to income determined under normal provisions. And the verdict is NO.

Facts of the case

The assessee is a wholly owned subsidiary of M/s. O.N.G.C. and engaged in the business of overseas exploration and production of hydrocarbon, oil and gas to supplement the reserves of the parent company and to augment the National Energy Security of India. The assessee filed its

return of income declaring loss under the normal provisions of the Act and Book Profit under section 115JB of the Act and paid taxes on Book Profit. The assessment u/s 143(3) was completed after making disallowance on account of depreciation inadmissible and disallowance on account of expenditure relating to project pending final evaluation/ approval written off. However, as a result of the order of the CIT(A) in quantum proceedings, addition made by the AO in respect Sakhalin project, and in respect of Myanmar Project was reduced. In the light of the above, the AO held that the assessee has furnished inaccurate particulars of income and thus levied penalty u/s 271(1)(c) of the Act. However, CIT(A) deleted the said penalty. The CIT(A) held that the penalty could not be imposed in the present case as the assessee had paid the tax at deemed income under section 115JB of the Act, which income was more than the income assessed as per normal procedure. Where income of an assessee company is finally assessed at 'book profits' by deeming the same to be total income of the assessee, penalty imposable under section 271(1)(c) of the Act could only be levied in respect of any adjustment/addition/disallowance made while computing such 'book profits'. It was held that in such a situation, the A.O. cannot impose penalty with reference to the additions/disallowances made while computing normal income since such income pales into insignificance, both for the purpose of imposition of tax and all logical consequences following thereon.

Having heard the parties, the Tribunal held that,

++ from the aforesaid it is evident that income of the assessee was finally assessed u/s 115JB of the Act and not under the normal provision of the Act. The addition made by the AO in the order were confirmed to the income determined under the normal provision of the Act and not in respect of the Books profits u/s 115JB of the Act. It is not the case of the Revenue that the assessee has concealed any particulars or furnished any inaccurate particulars while computing the book profit u/s 115JB. In such circumstances the ratio of Delhi High court in Nalwasons has been rightly relied upon by the CIT(A) and therefore no penalty is leviable. Moreover, it has been brought to our notice that the quantum appeal preferred by the Department against the assessee for the relevant assessment year has been dismissed and the appeal of the assessee has been allowed by the Tribunal vide order dated 14.3.2014. Therefore, in such circumstances we are inclined not to interfere in the order of the ld. CIT(A) and we confirm the same and dismiss the appeal of the revenue. In the result, the appeal of the revenue is dismissed.