ITAT deleted addition made under normal provision and deleted penalty

1. Khaitan Chemicals and Fertilisers Ltd manufactured single super phosphate fertilizer and edible oil.

2. It filed return of income declaring income of Rs.1,70,33,500 computed under the normal provisions of the Act.

3. However book profits of the assessee was computed at Rs.9,70,27,173 and MAT tax payable was Rs.81,64,837.

4. AO completed the assessment u/s 143(3) (of Income Tax Act, 1961).

5. CIT u/s 263 (of Income Tax Act, 1961) set aside order passed by the AO u/s 143(3) (of Income Tax Act, 1961).

6. CIT rejected claim for deduction u/s 80 (of Income Tax Act, 1961) IA for the fertiliser plant.

7. AO issued a demand notice, wherein MAT payable on book profits, remained the same.

8. CIT levied penalty u/s 271(1)(c) (of Income Tax Act, 1961).

On appeal, the ITAT held as under:

9. The appellant is entitled to succeed in view of the decision of the Delhi High Court in CIT vs. Nalwa Sons Investments Ltd. (2010) 327 ITR 543 (Del) wherein it has been held that when taxable income is computed on book profits under section 115 (of Income Tax Act, 1961) JB and not under the normal provisions, Explanation (4) has to be accordingly applied.

10. In view of the said Explanation, the additions made by the AO under the normal provisions are totally irrelevant.

11. Thus, there cannot be imposition of penalty u/s 271(1)(c) (of Income Tax Act, 1961) for addition made under the normal provisions.

12. Respectfully following the same we allow this appeal of the assessee.

Case Reference - Khaitan Chemicals & Fertilisers Ltd. Vs. CIT

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: "D" NEW DELHI

BEFORE SHRI J.SUDHAKAR REDDY, A.M.

AND SHRI C.M. GARG, J.M.

ITA No: 5625/Del/2013

(Assessment Year: 2006-07)