Atotech India Ltd., Gurgaon V. ACIT, Gurgaon

ITA 1025/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87115 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 09-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: SALIL KAPOOR; VIKAS JAIN S
• Keywords: Business income; Depreciation; Difference of opinion; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH A AA A : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA, VICE , VICE , VICE , VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI B.C. MEENA B.C. MEENA B.C. MEENA B.C. MEENA, , , , ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO. .. .1025/DEL/2010 1025/DEL/2010 1025/DEL/2010 1025/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2004 2004 2004 2004- -- -05 0505 05 M/S ATOTECH INDIA LIMITED, M/S ATOTECH INDIA LIMITED, M/S ATOTECH INDIA LIMITED, M/S ATOTECH INDIA LIMITED, 66 KM STONE, NH 66 KM STONE, NH 66 KM STONE, NH 66 KM STONE, NH- -- -8, 8,8, 8, DELHI DELHI DELHI DELHI- -- -JAIPUR JAIPUR JAIPUR JAIPUR HIGHWAY, HIGHWAY, HIGHWAY, HIGHWAY, VILLAGE SIDHRAWALI, VILLAGE SIDHRAWALI, VILLAGE SIDHRAWALI, VILLAGE SIDHRAWALI, GURGAON. GURGAON. GURGAON. GURGAON. PAN : AACCM0338G. PAN : AACCM0338G. PAN : AACCM0338G. PAN : AACCM0338G. VS. VS. VS. VS. ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, GURGAON CIRCLE, GURGAON CIRCLE, GURGAON CIRCLE, GURGAON CIRCLE, GURGAON. GURGAON. GURGAON. GURGAON. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SALIL KAPOOR AND SHRI VIKAS JAIN, ADVOCATES. RESPONDENT BY : MS. Y. K AKKAR, SR.DR. DATE OF HEARING : 05.03.2015 05.03.2015 05.03.2015 05.03.2015 DATE OF PRONOUNCEMENT : 18.03.2015 18.03.2015 18.03.2015 18.03.2015 ORDER ORDER ORDER ORDER PER G.C. GUPTA PER G.C. GUPTA PER G.C. GUPTA PER G.C. GUPTA, VP , VP , VP , VP : :: : THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEA R 2004-05 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A), PANCH KULA DATED 16 TH DECEMBER, 2009. 2. THE ONLY EFFECTIVE GROUND OF APPEAL IS AS UNDER: - THE NOTICE ISSUED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (ACT) AND THE PENALTY ORDER PASSED UNDER SAID SECTION IMPOSING PENALTY OF RS.62,41,758 IS BAD IN LAW AND LIABLE TO BE QUASHED . 3. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS CARRIED FORWARD LOSSES AND UNABSORBED DEPRECIAT ION PRIOR TO 2001- ITA-1025/DEL/2010 2 02 FINANCIAL YEAR. HE SUBMITTED THAT DURING THE PE RIOD RELEVANT TO AY 2002-03, THERE WAS A CHANGE IN SHAREHOLDING OF THE ASSESSEE COMPANY. HE SUBMITTED THAT THE ASSESSEE HAS SET OF F BUSINESS INCOME OF `1.85 CRORES DURING THE RELEVANT ASSESSMENT YEAR 2004-05 AND HAD SET OFF THE BROUGHT FORWARD LOSSES TO THAT EXTENT. THE ASSESSEE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FILED A LETTE R DATED 13 TH DECEMBER, 2006 BEFORE THE ASSESSING OFFICER THAT TH ERE WAS A CHANGE IN THE SHAREHOLDING OF THE COMPANY AND HENCE, THE C OMPANY COULD NOT ADJUST THE BUSINESS INCOME AGAINST THE BROUGHT FORW ARD BUSINESS LOSSES AND THE SAME COULD BE ADJUSTED AGAINST UNABS ORBED DEPRECIATION OF `4.16 CRORES. HE SUBMITTED THAT TH E ASSESSEE HAS FILED THIS LETTER DATED 13 TH DECEMBER, 2006 VOLUNTARILY VOLUNTARILY VOLUNTARILY VOLUNTARILY AND HAS ALSO GIVEN NOTE NO.3 AS A PART OF FORM NO.3CD WHEREIN THIS FAC T OF CHANGE IN THE SHAREHOLDING OF THE COMPANY WAS SPECIFICALLY MENTIO NED. THIS LETTER OF THE ASSESSEE DATED 13 TH DECEMBER, 2006 WAS ACCEPTED BY THE ASSESSING OFFICER AND THE ASSESSED INCOME AND RETUR NED INCOME OF THE ASSESSEE HAD REMAINED THE SAME AT NIL. HE SUBMITTE D THAT THE CONDUCT OF THE ASSESSEE WAS BONA FIDE AS IT HAS TAKEN LEGAL OPINION FROM THE ESTEEMED M/S BANSI S. MEHTA & CO., MUMBAI DATED 15 TH JUNE, 2001 WHEREIN THEY HAD OPINED REGARDING THE ALLOWABI LITY OF THE BUSINESS INCOME SET OFF AGAINST THE BROUGHT FORWARD LOSSES WITH THE CAUTION THAT POSITION MAY HOWEVER REQUIRE SUCCESSIV E APPEALS ETC. HE SUBMITTED THAT THE ASSESSING OFFICER HAS ALREADY AC CEPTED THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT OF THE ASSESSEE BUT HAS WRONGLY LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX A CT, 1961 FOR NO FAULT OF THE ASSESSEE. 4. LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE RE WAS NO SATISFACTION RECORDED IN THE ASSESSMENT ORDER AND T HE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF HON' BLE DELHI HIGH COURT IN THE CASE OF MS. MADHUSHREE GUPTA, BRITISH AIRWAY S PLC VS. UNION OF ITA-1025/DEL/2010 3 INDIA AND ANOTHER [2009] 317 ITR 107 (DELHI), 155 . HE SUBMITTED THAT THE CHARGE IN THIS CASE WAS THAT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THE PENALTY WAS LEVIED BY INVOKING EXPLANATION (1) TO SECTION 271(1)(C) OF THE ACT, WH ICH IS A DEEMING PROVISION FOR CONCEALMENT OF INCOME AND NOT FOR FUR NISHING OF ANY INACCURATE PARTICULARS OF INCOME. HE SUBMITTED THA T THE AMOUNT IN QUESTION WAS NEITHER ADDED NOR DISALLOWED IN THE CO MPUTATION OF INCOME. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ISSUE WAS DEBATABLE AND, THEREFORE, THE ASSESSEE COULD DE FINITELY MAKE A CLAIM FOR SET OFF OF THE BUSINESS INCOME AGAINST TH E BROUGHT FORWARD LOSSES. MOREOVER, THE BROUGHT FORWARD OF BUSINESS LOSSES WAS ALLOWED BY THE ASSESSING OFFICER IN THE EARLIER YEARS. HE RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. REL IANCE PETROPRODUCTS PVT.LTD. [2010] 322 ITR 158 (SC), OF HON'BLE DELH I HIGH COURT IN CIT VS. HARNARAIN ITA NO.2072/2010, CIT VS. SHYAMA A BIJAPURKAR ITA NO.842/2010 AND OF ITAT IN THE CASE OF ACIT VS. A.B . MOVIES PVT.LTD. ITA NO.432/DEL/2009. ALTERNATIVELY, HE ARGUED THAT NO TAX WAS SOUGHT TO BE EVADED AND THEREFORE, NO PENALTY COULD BE LEV IED. 5. LEARNED DR VEHEMENTLY OPPOSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. SHE SUBMITTED THAT THE R ETURN OF INCOME WAS FILED BY THE ASSESSEE ON 1 ST NOVEMBER, 2004 AND THE ASSESSEE COULD NOT EXPLAIN WHY THE ASSESSEE SURRENDERED ITS CLAIM OF SET OFF AGAINST THE BUSINESS INCOME ONLY AFTER THE SCRUTINY NOTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE. SHE SUBMITTED T HAT THE CONDUCT OF THE ASSESSEE WAS NOT BONA FIDE AND THE ASSESSEE HAS TO EXPLAIN THAT FROM WHERE HE GOT ADVICE LATER ON TO SURRENDER ITS CLAIM OF SET OFF OF BUSINESS INCOME FROM BROUGHT FORWARD BUSINESS LOSSE S AS THERE WAS ONLY ONE LEGAL OPINION AND THAT WAS AS OLD AS DATED 15 TH JUNE, 2001.SHE SUBMITTED THAT IT IS A CASE OF CLEAR VIOLATION OF T HE PROVISIONS OF SECTION 79 OF THE INCOME-TAX ACT, 1961 AND, THEREFORE, THE PENALTY WAS RIGHTLY ITA-1025/DEL/2010 4 LEVIED UNDER SECTION 271(1)(C) OF THE ACT. SHE REL IED ON A SERIES OF DECISIONS IN SUPPORT OF THE CASE OF THE REVENUE AS UNDER:- (I) CIT VS. SMT. SANTOSH SHARMA [2009] 311 ITR 35 3 (DELHI). (II) CIT VS. PEAREY LAL AND SONS (EP) LTD. [2009] 308 ITR 438 (P&H). (III) CIT VS. GOLD COIN HEALTH FOOD P.LTD. [2008] 304 ITR 308 (SC). (IV) CIT VS. N. NANDAKUMAR, AJI INDUSTRIES [2005] 279 ITR 80 (KER). (V) CIT AND ANOTHER VS. SANGMESHWARA ASSOCIATES [ 2012] 345 ITR 396 (KARN). (VI) CIT VS. T. ASHOK PAI [2007] 292 ITR 5 (KARN) . (VII) CIT VS. DHARAMSHI B. SHAH [2014] 366 ITR 14 0 (GUJ). (VIII) CIT VS. HARPARSHAD AND COMPANY LTD. [2010] 328 ITR 53 (DELHI). (IX) CIT VS. ZOOM COMMUNICATION P.LTD. [2010] 327 ITR 510 (DELHI). (X) ACIT VS. DINESH GOEL [2011] 10 ITR (TRIB) 330 (DELHI). (XI) SUBHASH S. SHAH VS. INCOME-TAX OFFICER WARD 11(2) [2013] 213 TAXMAN 43 (GUJARAT)(MAG.). (XII) CIT VS. MORGAN FINVEST (P.) LTD. [2013] 213 TAXMAN 23 (DELHI)(MAG.). (XIII) K.P. MADHUSUDHANAN VS. CIT [2001] 251 ITR 99 (SC). (XIV) CIT VS. R.M.P. PLASTO P.LTD. [2009] 313 ITR 397 (SC). (XV) 41 TAXMANN.COM 447 (ALL). (XVI) 37 TAXMANN.COM 347 (DELHI). 6. SHE REFERRED TO THE RELEVANT PORTION OF THE ORDE R OF THE ASSESSING OFFICER AND THE CIT(A). 7. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CASE LAW CITED BY THE LEARNED DR IS DISTINGUISHABLE ON FACTS , AS, IN THESE CASES, THE ASSESSEE HAS CONCEDED AND IN SOME CASES, IT WAS FOUND THAT THE ASSET WAS NEVER USED FOR BUSINESS ON WHICH DEPRECIA TION WAS CLAIMED ITA-1025/DEL/2010 5 AND THAT THE SPECULATIVE PROFIT WAS NOT DISCLOSED I N THE RETURN OF INCOME. HE RELIED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. RITA MALHOTRA [1985] 154 ITR 550 (DELHI). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDER OF THE ASSESSING OFFICER AND THE CIT(A) AND ALSO CO PIES OF VARIOUS DOCUMENTS FILED IN THE COMPILATION FILED BEFORE US. WE FIND THAT THE ASSESSEE HAS CLAIMED THE SET OFF OF ITS BUSINESS IN COME AT `1.85 CRORES AGAINST THE BROUGHT FORWARD BUSINESS LOSSES OF THE EARLIER YEARS. THIS CLAIM OF THE ASSESSEE WAS BASED ON THE LEGAL OPINIO N RECEIVED BY THE ASSESSEE FROM THE FIRM M/S BANSI S. MEHTA & CO., CH ARTERED ACCOUNTANTS, MUMBAI DATED 15 TH JUNE, 2001. WE FIND THAT THE ASSESSEE WAS ALERT AND, THAT IS WHY, IT HAS SOUGHT LEGAL OPI NION FROM WELL- ESTABLISHED FIRM OF CONSULTANTS AT MUMBAI. M/S BAN SI S. MEHTA & CO. HAS GIVEN THE OPINION WITH CERTAIN QUALIFICATIONS A ND WITH CAUTION THAT IT MAY RESULT IN SUCCESSIVE APPEALS ETC. BUT THAT D OES NOT MEAN THAT THE ASSESSEE COULD NOT PUT A CLAIM OF DEDUCTION BEF ORE THE ASSESSING OFFICER. WE HAVE TO SEE THE OVERALL CONDUCT OF THE ASSESSEE. IT IS NOT THE LAW THAT WHEREVER THERE IS AN ADDITION OR DISAL LOWANCE MADE BY THE REVENUE, THE ASSESSEE SHOULD BE HELD LIABLE FOR PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ISSUE COULD NOT BE SAID TO BE NON-DEBATABLE AS THE BUSINESS LOSS COULD BE ADJUSTED AGAINST THE BROUGHT FORWARD BUSINESS LOSS IN CERTAIN CONDITIONS AS DETAILED BY THE CONSULTANT IN THEIR LETTER DATED 15 TH JUNE, 2001. WE FIND THAT THE LOSS WAS ALLOWED TO BE CARRIED FORWARD IN THE EARLIER ASSESSMENT YEARS IN THE CASE OF THE ASSESSEE. THERE IS NO MATERIAL BROUGHT ON RECORD T O SUGGEST THAT THE LETTER OF THE ASSESSEE DATED 13 TH DECEMBER, 2006 WAS NOT VOLUNTARY VOLUNTARY VOLUNTARY VOLUNTARY. MERELY BECAUSE THE ASSESSING OFFICER HAS ISSUED NOT ICE UNDER SECTION 143(2) OF THE ACT, IT DOES NOT FOLLOW THAT ANY OFFE R MADE BY THE ASSESSEE WAS NOT VOLUNTARY. IT WAS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS MADE THE SURRENDER AFTER BEING COR NERED BY THE ITA-1025/DEL/2010 6 ASSESSING OFFICER BY POINTING OUT THAT THE CLAIM OF SET OFF MADE BY THE ASSESSEE WAS NOT IN ACCORDANCE WITH LAW. THE ASSES SED INCOME AND RETURNED INCOME IN THIS CASE WAS NIL. THE ONLY MAT ERIAL CHANGE WAS THAT THE BUSINESS INCOME WAS SET OFF BY THE ASSESSE E AGAINST THE BROUGHT FORWARD BUSINESS LOSSES OF THE EARLIER YEAR S IN THE RETURN OF INCOME AND, THEREAFTER, WAS CLAIMED TO BE SET OFF A GAINST ANOTHER HEAD OF UNABSORBED DEPRECIATION. THE ARGUMENT OF THE LE ARNED DR, THAT THE ASSESSEE COULD NOT SHOW THAT FROM WHICH SOURCE IT H AS RECEIVED THE CHANGED LEGAL OPINION WHICH PROMPTED IT TO FILE LET TER DATED 13 TH DECEMBER, 2006 CHANGING THE HEAD FOR SET OFF OF BUS INESS LOSSES, COULD NOT BE SUSTAINED AS THE ASSESSEE IS ENTITLED TO OBT AIN ADVICE FROM ANY SOURCE OR, IN SOME CIRCUMSTANCES, BETTER WISDOM MAY PREVAIL UPON THE ASSESSEE. THE PLETHORA OF CASE LAW CITED BY THE LE ARNED DR COULD BE APPLIED TO THE CASE OF THE ASSESSEE ONLY IN THE PEC ULIAR FACTS AND CIRCUMSTANCES OF THE CASE OF AN ASSESSEE. THE ASSE SSEE HAS FILED AN EXPLANATION IN THIS CASE FOR CLAIMING THE SET OFF O F BUSINESS INCOME AGAINST THE BROUGHT FORWARD BUSINESS LOSSES, BASED ON LEGAL ADVICE RECEIVED FROM ESTABLISHED CONSULTANTS AND HAS WITHD RAWN ITS CLAIM BEFORE BEING CORNERED BY THE REVENUE AND IN VIEW OF THE FACT THAT THE CLAIM OF SET OFF OF BUSINESS INCOME WAS ALLOWED BY THE ASSESSING OFFICER HIMSELF UNDER A DIFFERENT HEAD OF UNABSORBE D DEPRECIATION BROUGHT FORWARD FROM THE EARLIER YEARS INSTEAD OF B ROUGHT FORWARD BUSINESS LOSSES, THE CONDUCT OF THE ASSESSEE WAS BO NA FIDE. WE FIND THAT THE ASSESSEE HAS DISCLOSED ALL MATERIAL FACTS RELEVANT FOR ITS ASSESSMENT TO THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT ITSELF. IT IS A CASE OF HONEST DIFFERENCE OF OPINION BETWEEN T HE ASSESSEE AND THE REVENUE REGARDING ALLOWABILITY OF BUSINESS LOSSES U NDER A PARTICULAR HEAD OF BROUGHT FORWARD LOSSES OR THE OTHER HEAD OF BROUGHT FORWARD LOSSES. THERE BEING NO MATERIAL BROUGHT ON RECORD ON BEHALF OF THE REVENUE TO SUGGEST THAT THE CONDUCT OF THE ASSESSEE WAS NOT BONA FIDE , WE ARE OF THE CONSIDERED VIEW THAT IT WAS NOT A F IT CASE FOR LEVY OF ITA-1025/DEL/2010 7 PENALTY FOR CONCEALMENT OF INCOME OR FILING OF INAC CURATE PARTICULARS OF INCOME UNDER SECTION 271(1)(C) OF THE ACT, WHICH IS ACCORDINGLY CANCELLED AND GROUND OF APPEAL OF THE ASSESSEE IS A LLOWED. IN VIEW OF OUR DECISION THAT THIS CASE IS NOT A FIT CASE FOR L EVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON ITS MERITS, WE ARE NOT ADJUDICATING THE OTHER LEGAL ISSUES RAISED BY THE LEARNED COUNSEL FO R THE ASSESSEE ON THE LEGALITY OF THE PENALTY ORDER. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2015. SD/- SD/- ( (( (B.C B.CB.C B.C. MEENA . MEENA . MEENA . MEENA) )) ) (G. (G. (G. (G.C. GUPTA C. GUPTA C. GUPTA C. GUPTA) )) ) ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. COPY FORWARDED TO: - 1. APPELLANT : M/S ATOTECH INDIA LIMITED, M/S ATOTECH INDIA LIMITED, M/S ATOTECH INDIA LIMITED, M/S ATOTECH INDIA LIMITED, 66 KM STONE, NH 66 KM STONE, NH 66 KM STONE, NH 66 KM STONE, NH- -- -8, 8,8, 8, DELHI DELHI DELHI DELHI- -- -JAIPUR HIGHWAY, VILLAGE SIDHRAWALI, JAIPUR HIGHWAY, VILLAGE SIDHRAWALI, JAIPUR HIGHWAY, VILLAGE SIDHRAWALI, JAIPUR HIGHWAY, VILLAGE SIDHRAWALI, GURGAON. GURGAON. GURGAON. GURGAON. 2. RESPONDENT : ASSISTANT COMMISSIONER OF IN ASSISTANT COMMISSIONER OF IN ASSISTANT COMMISSIONER OF IN ASSISTANT COMMISSIONER OF INCOME TAX, COME TAX, COME TAX, COME TAX, GURGAON CIRCLE, GURGAON. GURGAON CIRCLE, GURGAON. GURGAON CIRCLE, GURGAON. GURGAON CIRCLE, GURGAON. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR