PR COMMISSIONER OF INCOME TAX GURGAON vs. M/S ATOTECH INDIA LTD

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ITA/347/2015HC Punjab & HaryanaPHHC01109992201530 November 2016Author: MR. JUSTICE M.M. AGGARWAL,MR. JUSTICE AVNEESH JHINGAN3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the decision of the Tribunal cancelling the penalty under Section 271(1)(c) was not perverse or absurd. The Tribunal had noted that the assessee relied on a legal opinion for its initial claim and found nothing clandestine or malafide in obtaining it. The Tribunal also found that the change in claim was voluntary and not solely due to a notice under Section 143(2). Crucially, the Court acknowledged that there was no financial implication for the assessee on account of the change in the basis of the claim. Given these circumstances, the Court concluded that no substantial question of law arose. The appeal was therefore dismissed. No issue was expressly left undecided.

What were the facts?

This appeal by the Principal Commissioner of Income Tax, Gurgaon, challenges the order of the Income Tax Appellate Tribunal (ITAT) which allowed the assessee's (M/s Atotech India Ltd.) appeal. The assessment year in question is 2004-2005. The dispute centers around the ITAT's decision to cancel a penalty of Rs. 62,41,758/- imposed under Section 271(1)(c) of the Income Tax Act, 1961. The assessee, formerly Max Atotech Limited, initially sought to set off brought forward business losses against its income for AY 2004-2005. During proceedings under Section 143, the assessee changed its claim to set off against unabsorbed depreciation. It is admitted that both claims had no tax effect or future financial implication.

What were the issues?

1. Whether on the facts and in the circumstances of the case and in law, the Hon’ble Tribunal was justified in cancelling the penalty u/s 271(1)(c) of the Income Tax Act, 1961 of Rs. 62,41,758/-? 2. Whether on the facts and in the circumstances of the case and in law, the Hon’ble Tribunal was justified in holding that rejection of the patently wrong claim of the assessee of setting off of brought forward business loss in its return of income would not amount to furnishing of inaccurate particulars of income/concealment of income and would not be liable for penalty u/s 271(1)(c) of the IT Act, 1961? Assessee's Contentions: The assessee's claim for set off was based on a legal opinion from a leading firm of Chartered Accountants dated 15.06.2001. The change in claim was voluntary and made without malafides. The loss was allowed to be carried forward in AY 2002-2003. There was no financial implication for the future due to the change in the basis of the claim. Revenue's Contentions: The revenue argued that the assessee's change of stand regarding the set off of brought forward business loss constituted furnishing inaccurate particulars or concealment of income, making it liable for penalty under Section 271(1)(c).

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143,Section 143(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA-347-2015 (O&M) Date of decision:- 30.11.2016 The Pr. Commissioner of Income Tax, Gurgaon ...Appellant Versus M/s Atotech India Ltd. ...Respondent CORAM: HON'BLE MR. JUSTICE S.J. VAZIFDAR, CHIEF JUSTICE HON’BLE MR. JUSTICE DEEPAK SIBAL Present:- Mr. Tajender K. Joshi, Advocate, for the appellant. Mr. Salil Kapoor, Advocate, Mr. Sumit Lalchandani, Advocate, for the respondent. * * * * S.J. VAZIFDAR, C.J. (ORAL) This is an appeal against the order of the Tribunal allowing the respondent/assessee’s appeal against the order of the CIT (Appeals) in respect of the assessment year 2004-2005. 2. According to the appellant, the following substantial questions of law arise:- “1. Whether on the facts and in the circumstances of the case and in law, the Hon’ble Tribunal was justified in cancelling the penalty u/s 271(1)(c) of the Income Tax Act, 1961 of Rs. 62,41,758/-?

2.

Whether on the facts and in the circumstances of the case and in law, the Hon’ble Tribunal was justified in holding that rejection of the patently wrong claim of the assessee of setting off of brought forward business loss in its return of income would not amount to furnishing of inaccurate particulars of income/concealment of income and would not be liable for Amodh Sharma 2016.12.03 11:46 I attest to the accuracy and authenticity of this document chandigarh

ITA-347-2015 (O&M) 2 penalty u/s 271(1)(c) of the IT Act, 1961?”

3.

The question is whether the assessee is liable to penalty in view of its change of stand in respect of its return of income for the said assessment year.

4.

The assessee was earlier known as Max Atotech Limited. It appears initially to have been a private limited company and was thereafter converted into a public limited company. For the assessment year 2004-2005, the assessee in its return of income sought to set off its income against the brought forward business losses of the earlier years. Proceedings under Section 143 of the Income Tax Act, 1961 (in short the Act) were initiated in the course of which the assessee by a letter dated 13.12.2006 claimed the above set off against another head, namely, of unabsorbed depreciation. Admittedly, the tax effect in either case is nil. Further, it is admitted that even if the respondent was permitted to claim the set off against the unabsorbed depreciation, it would have no financial implication for the future.

5.

The decision of the Tribunal that the respondent ought not to be made liable for penalty cannot be said to be perverse or absurd.

6.

The Tribunal noted that the respondent had claimed the set off of its business income of Rs. 1.85 crores against the brought forward business losses of the earlier years on the basis of a legal opinion received from a leading firm of Chartered Accountants dated 15.06.2001. The Tribunal found nothing clandestine in the manner in which the opinion was sought. In any event, even our attention was not invited to anything which suggests any malafides either in the obtaining of the opinion or otherwise. Further, the loss was allowed to be carried forward in the assessment year, namely, assessment year 2002-2003. Inter alia, in these circumstances, the Tribunal found as a matter of fact that the letter dated 13.12.2006 was voluntary and not merely because a notice Amodh Sharma 2016.12.03 11:46 I attest to the accuracy and authenticity of this document chandigarh

ITA-347-2015 (O&M) 3 had been issued under Section 143(2) of the Act. This is a perception on the basis of the facts of the case and warrants no interference.

7.

In these circumstances including in view of the fact that there is no financial implication on account of the change in the basis of the claim, no substantial question of law arises in this case.

8.

The appeal is, therefore, dismissed.

9.

In view thereof, it is not necessary to consider the cross objections filed by the respondent. (S.J. VAZIFDAR) CHIEF JUSTICE (DEEPAK SIBAL) JUDGE 30.11.2016 Amodh Whether speaking/reasoned Yes/No Whether reportable Yes/No Amodh Sharma 2016.12.03 11:46 I attest to the accuracy and authenticity of this document chandigarh

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