No penalty can be levied if assessment is framed on income computed u/s 115JB and the addition on which penalty has been levied has no tax incident in the normal course of assessment:

AO disallowed lease rent paid by the assessee and levied penalty on the same. Hon’ble ITAT observed that “Total income” of the assessee was assessed at NIL after allowing set off in respect of unabsorbed business loss of earlier years. Still, there was substantial unabsorbed depreciation which was carried forward for subsequent years. However, assessee had declared income under the provisions of MAT u/s 115JB. It was further observed that even after disallowance of the said lease rent, there was no taxable income on which tax was payable by the assessee in the regular course of the assessment. Hence, the said disallowance had no bearing on the imposition of tax liability. Since the assessment was framed under the MAT provisions by invoking S.115JB and the impugned addition (i.e. lease rent) had no tax incident in the normal course of assessment, the penalty was deleted.

[DCIT vs. M/s. Narmada Chematur Petrochemicals Ltd. – ITA No.3837/Ahd/2008]