COMMISSIONER OF INCOME TAX-IV vs. TORRENT PVT LTD

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TAXAP/1350/2011HC GujaratGJHC24025732201116 August 2012Author: HONOURABLE MR. JUSTICE VIJAY MANOHAR SAHAI,HONOURABLE MR. JUSTICE N.V.ANJARIA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises for consideration. It affirmed the findings of the CIT(A), which were upheld by the ITAT. These findings established that the assessee held a bona fide belief that it was not liable to pay interest tax, that the issues were debatable, and that a complete disclosure of facts had been made. Consequently, the court concluded that the assessee lacked the mens rea for tax evasion. The order of the CIT(A) was found to be without illegality. Therefore, the appeal filed by the Revenue was dismissed.

What were the facts?

The assessee, Torrent Pvt Ltd, is a private limited company deriving income from investments. It did not file a return under the Income Tax Act. The Assessing Officer (AO) issued a notice under Section 10 of the Interest Tax Act, 1974. The assessee filed a return showing 'Nil' interest liability. The AO disagreed, determining a total interest liable to tax of Rs. 6,72,59,968, including Rs. 3,74,082 on employee loans and Rs. 29,01,644 on loans to Harisiddh Specific Family Trust. Subsequently, the AO levied a penalty of Rs. 6,55,150 under Section 13 of the Act for not disclosing interest. The Commissioner of Income Tax (Appeals) [CIT(A)] set aside the penalty, a decision upheld by the Income Tax Appellate Tribunal (ITAT). The Revenue filed an appeal before the High Court.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in deleting the penalty of Rs. 6,55,150 levied under Section 13 of the Interest Tax Act, 1974? Assessee's contentions: The judgment does not record specific arguments made by the assessee before the High Court. However, it notes that the CIT(A) and the ITAT found that the assessee was under a bona fide belief that it was not liable to pay interest tax, that the disclosure of facts and issues was complete, and that these issues were debatable. The ITAT affirmed the CIT(A)'s finding that the assessee had no mens rea of evading tax. Revenue's contentions: The Revenue argued that the Appellate Tribunal was wrong in deleting the penalty. The proposed substantial question of law framed by the Revenue indicates their contention that the deletion of penalty was erroneous.

Which sections of the Income-tax Act were involved?

Section 13,Section 10

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
TAXAP/1350/2011 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1350 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 Versus TORRENT PVT LTD ========================================================= 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 : 16/08/2012

ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE V. M. SAHAI) We have heard Ms. Paurami Sheth, learned counsel appearing for the Revenue in this tax appeal.

TAXAP/1350/2011 2/3 JUDGMENT

2.

0 In this tax appeal has been filed on the following proposed substantial question of law. “Whether the Appellate Tribunal is right in law and on facts   in   deleting   the   penalty   of   Rs.6,55,150/­   levied u/s.13 of the I.T. Act?”

3.

0 The respondent assessee is a Private Limited Company which derives   income   from   the   investment   in   shares,   debentures, securities of any company. The assessee has not filed any return under  the  Income   Tax Act.  The  Assessing  Officer  issued Notice under Section 10 of Interest Tax Act, 1974 (hereinafter referred to as 'the Act' for short), and in response thereof the Assessee filed return showing that he is liable to pay 'Nil' interest under the Act. Assessing Officer did not accept the return of the assessee and determined  the   total  interest   liable   to   tax  Rs.   6,72,59,968/­  in appeal filed by the respondent, the CIT (Appeal) and thereafter the Income Tax Appellate Tribunal as the liability of the assessee which is as follows:

Interest on employee loan Rs.3, 74,082/­ Interest on loan to Harisiddh Specific Family Trust Rs. 29,01,644/­

4.

0 Thereafter the Assessing Officer found that the assessee was liable to pay penalty under Section 13 of the Act for not disclosing the interest. He levied the penalty at 100% on tax sought to be evaded. That is to say, Rs.6,55,150/­. The penalty levied by the Assessing Officer has been set aside by CIT(A). The finding of the CIT(A) has been upheld by the Income Tax Appellate Tribunal and finding of fact has been recorded that the assessee was under the

TAXAP/1350/2011 3/3 JUDGMENT bona fide belief that he was not liable to pay interest tax and the finding of the CIT(A) in this regard was reasonable. The Tribunal also affirmed the finding of CIT(A) that the assessee has made complete   disclosure   of   facts   and   issues   which   were   debatable. Therefore, in our opinion, in view of finding recorded by the CIT(A) which has been affirmed by the Tribunal, it cannot be held that the assessee had any mens rea of evading tax.

5.

0 For the aforesaid reasons, we do not find any illegality in the order passed by the CIT(A). We also do not find that any substantial question of law arises for consideration of this Court as proposed by the Revenue. This tax appeal is accordingly dismissed. [V. M. SAHAI, J.] [N. V. ANJARIA, J.] Amit

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