COMMISSIONER OF INCOME TAX-IV vs. SHAH ALLOYS LTD

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TAXAP/1367/2011HC GujaratGJHC24025741201105 September 2012Author: HONOURABLE MR. JUSTICE VIJAY MANOHAR SAHAI,HONOURABLE MR. JUSTICE N.V.ANJARIA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Appellate Tribunal was right in canceling the penalty. The reasoning was that the quantum appeal concerning the addition made on account of excessive deduction claimed under Section 80-IA had been allowed by the Tribunal. The Tribunal correctly relied on the Supreme Court's judgment in Reliance Petrol Products Ltd. (322 ITR 158), which held that making an incorrect claim does not, in itself, constitute concealment of income. Since the quantum appeal was allowed and the additions were deleted, the entire basis for imposing the penalty under Section 271(1)(c) ceased to exist. Therefore, no ground survived to sustain the penalty. The High Court found no substantial question of law in the appeal.

What were the facts?

The appeal concerns Assessment Year 2004-2005. The Assessing Officer (AO) disallowed an excess claim of deduction under Section 80-IA by the assessee, Shah Alloys Ltd., amounting to Rs. 6,06,33,959/-. Consequently, the AO levied a penalty of Rs. 2,17,52,430/- under Section 271(1)(c) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) deleted this penalty. The Revenue appealed to the Income Tax Appellate Tribunal (ITAT), which upheld the deletion of the penalty. The Revenue has now filed this appeal before the High Court against the ITAT's order.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in canceling the penalty of Rs. 2,17,52,430/- levied by the Assessing Officer under Section 271(1)(c)? Assessee's Contentions: The judgment does not record any specific contentions made by the assessee before the High Court. However, the ITAT's reasoning indicates that the deletion of the addition in the quantum appeal was decisive. The ITAT relied on the Supreme Court's decision in Reliance Petrol Products Ltd. (322 ITR 158), stating that making an incorrect claim does not, by itself, amount to concealment of income. Since the quantum appeal was allowed and deletions were set aside, the basis for penalty ceased to exist. Revenue's Contentions: The Revenue, represented by learned advocate Ms. Paurami Sheth, argued that the Appellate Tribunal was not right in canceling the penalty. The Revenue's appeal to the High Court was based on the premise that the penalty was wrongly deleted.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 80-IA,Section 115JB,Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
TAXAP/1367/2011 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1367 of 2011 For Approval and Signature: HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX-IV - Appellant(s) Versus SHAH ALLOYS LTD - Opponent(s) ========================================================= Appearance : MS PAURAMI B SHETH for Appellant(s) : 1, None for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 05/09/2012

ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) The present appeal under Sec. 260A of the Income Tax Act, 1961 arises out of the common order dated 21.01.2011 of the TAXAP/1367/2011 2/4 JUDGMENT Income Tax Appellate Tribunal, Bench 'A', Ahmedabad passed in ITA No. 3615 of 2008 and 3616 of 2008, and relates to in so far as the said common order decides ITA No. 3616 of 2008 for Assessment Year 2004-2005.

1.

1 The following question is raised by the appellant proposing it as a substantial question of law in this Tax Appeal. “Whether the Appellate Tribunal is right in law and on facts in canceling the penalty of Rs. 2,17,52,430/- levied by the Assessing Officer under section 271(1)(c)?”

2.

We heard learned advocate Ms. Paurami Sheth for the appellant.

3.

The relevant facts are that the assessment against the respondent-assessee was finalized for the Assessment Year 2004- 2005 determining the total income. The book profit under section 115JB of the Income Tax Act, 1961 (hereinafter referred to as 'the Act, for sake of brevity) came to be worked out. The Assessing Officer disallowed the excess claim of the assessee for deduction under Sec. 80-IA to the tune of Rs. 6,06,33,959/- from the profit for computing the benefit.

4.

The Assessing Officer levied penalty of Rs. 2,17,52,430/- under section 271(1)(c) of the Act by order dated 25.03.2008. The TAXAP/1367/2011 3/4 JUDGMENT Commissioner of Income Tax (Appeals) deleted the penalty allowing

the appeal of the assessee by order dated 12.08.2008. Thereafter, Revenue preferred appeal before Income Tax Appellate Tribunal which culminated into the impugned order.

5.

On consideration of the impugned order and the facts on record, it could be seen that when the Assessing Officer and the CIT(A) passed their respective orders with regard to the imposition of penalty, the quantum appeal of the assessee being I.T.A NO. 2073 of 2006 for the Assessment Year 2004-2005 was pending before the Tribunal. That quantum appeal came to be allowed for the reasons recorded therein.

6.

In the above light, the Tribunal was right in observing and holding in the impugned order, as under : “It is pertinent to note that ITA in quantum appeal has virtually restored the issue regarding quantum of explosion interest to the file of A.O.. However, the addition made on excessive deduction claimed u/s 80IA in respective Captive Power Plant has been deleted. Be that it may be we are of the view that in respect of both the additions, penalty u/s 271(1)(C) is not leviable keeping in view the ratio of judgment of the Hon'ble Supreme Court in the case of Reliance Petrol Products Pvt. Ltd.”

6.

1 The deletion of addition by the Tribunal in the quantum appeal preferred by the assessee was decisive. The Tribunal correctly placed reliance on the decision of the Supreme Court in Reliance Petrol

TAXAP/1367/2011 4/4 JUDGMENT Products Ltd. (322 ITR 158) that making incorrect claim by itself does not amount to concealment of income. When the quantum appeal itself was allowed and the deletions made were set aside, the whole basis which led to the imposition of penalty ceased to exist. In the circumstances, no ground could survive to sustain the penalty.

6.

2 The present Appeal does not raise any substantial question of law in the light of above position of facts.

7.

The appeal is accordingly dismissed. [V.M.SAHAI, J.] [N.V.ANJARIA, J.] cmjoshi

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