ACIT, CHENNAI V. M/s. TTK Healthcare Limited, CHENNAI

ITA 2028/CHNY/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2483 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-06-2013
• Assessment Year: 2000-2001
• Appeal Filed On: 12-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R B NAIK
• Keywords: Depreciation; Question of law
• Section: 143(3); 147; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO. 2028 /MDS/201 1 (ASSESSMENT YEAR: 2000-01) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(2), NEW BLOCK 4 TH FLOOR, 121, M.G.ROAD, CHENNAI-600 034. VS. M/S. TTK HEALTHCARE LIMITED, 6, CATHEDRAL ROAD, CHENNAI-600 086. PAN: AABCT3312J (APPELLANT) (RESPONDENT) APPELLANT BY : MR. R.B. NAIK, CIT RESPONDENT BY : MR. VIKRAM VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 12 TH JUNE, 2013 DATE OF PRONOUNCEMENT : 20 TH JUNE, 2013 O R D E R PER CHALLA NAGENDRA PRASAD, JM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I II, CHENNAI DATED 15.09.2011 FOR THE ASSESSMENT YEAR 2 000-01. THE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. ITA NO.2028/MDS/2011 2 2. BRIEF FACTS ARE THAT THE ASSESSEE FILED RETURN D ECLARING NIL INCOME. THE ASSESSMENT WAS COMPLETED UNDER SECT ION 143(3) ON 18.03.2003. LATER, AN ORDER UNDER SECTION 154 WAS PASSED ALLOWING CARRY FORWARD BUSINESS LOSS, UNABSO RBED DEPRECIATION AND CAPITAL LOSS. SUBSEQUENTLY, THE AS SESSMENT WAS REOPENED UNDER SECTION 147 AND COMPLETED THE REASSESSMENT ON 31.12.2007 UNDER SECTION 143(3) REA D WITH SECTION 147 DISALLOWING SET OFF OF CARRY FORWARD LO SSES RELATING TO AMALGAMATING COMPANY NAMELY TTK BIOMED LIMITED. THE ASSESSEE WENT ON APPEAL AGAINST SUCH DISALLOWANCE AND THE COMMISSIONER OF INCOME TAX (APPEALS) BY ORDER DATED 25.11.2008 ALLOWED SET OFF OF CARRY FORWARD LOSSES TO BE ADJUSTED IN THE ASSESSMENT YEAR 2000-01. HOWEVER, THE TRIBUNAL BY ORDER DATED 16.07.2010 IN ITA NO.369/MD S/2009 SET ASIDE THE DECISION OF THE COMMISSIONER OF INCOM E TAX (APPEALS) IN RESPECT OF CARRY FORWARD LOSSES AND RE STORED THE ORDER OF THE ASSESSING OFFICER. THE ASSESSING OFFIC ER WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL HAS ISSU ED NOTICE UNDER SECTION 271(1)(C) DATED 12.01.2011 REQUIRIN G THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY UNDER SECTION 271(1)(C) ITA NO.2028/MDS/2011 3 OF THE ACT SHOULD NOT BE LEVIED FOR FURNISHING INAC CURATE PARTICULARS OF ITS INCOME. THE ASSESSEE FURNISHED I TS REPLY ON 24.01.2011. THE ASSESSING OFFICER REJECTING THE SUB MISSIONS OF THE ASSESSEE PASSED ORDER UNDER SECTION 271(1)(C ) OF ACT ON 31.01.2011 LEVYING PENALTY. AGAINST THIS ORDER, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF IN COME TAX (APPEALS) AND THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING THE SUBMISSIONS OF THE ASSESS EE DELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C), RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. [322 ITR 158 ( SC)] AND VARIOUS OTHER DECISIONS. 3. THE DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORT S THE ORDER OF THE ASSESSING OFFICER IN LEVYING PENALTY U NDER SECTION 271(1)(C) OF THE ACT FOR THE CLAIM MADE BY THE ASSE SSEE IN RESPECT OF SET OFF OF BUSINESS AND DEPRECIATION LOS SES RELATING TO AMALGAMATING COMPANY NAMELY TTK BIOMED LTD. ITA NO.2028/MDS/2011 4 4. THE COUNSEL FOR THE ASSESSEE SUPPORTS THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING TH E PENALTY. HE ALSO SUBMITS THAT THE HONBLE HIGH COUR T HAD IN FACT ADMITTED THE APPEAL FILED BY THE ASSESSEE AGAI NST THE ORDER OF THIS TRIBUNAL IN RESTORING THE ORDER OF TH E ASSESSING OFFICER IN DISALLOWING THE CLAIM FOR SET OFF OF BUS INESS AND DEPRECIATION LOSSES RELATING TO AMALGAMATING COMPAN Y NAMELY TTK BIOMED LTD. THE COUNSEL FOR THE ASSESSE E REFERRING TO PAGE 163 OF THE PAPER BOOK SUBMITS THA T THE HIGH COURT HAD ADMITTED THE APPEAL FILED BY THE ASSESSEE AS THERE IS A SUBSTANTIAL QUESTION OF LAW INVOLVED REGARDING ISSUE OF SET OFF OF CARRY FORWARD LOSSES IN RESPECT OF TTK BIOME D LTD. HE SUBMITS THAT THE HIGH COURT ADMITTED THE ASSESSEE S APPEAL ON 11.07.2011 AND THE APPEAL IS PENDING BEFORE THE HIGH COURT IN RESPECT OF QUANTUM DISALLOWANCE. THE COUN SEL FURTHER SUBMITS THAT THE HIGH COURT HAD NOT PASSED A SEPARATE ORDER ADMITTING THE APPEAL BUT IT WAS ONLY ON DOCKE T OF THE CASE FILE THE ORDER WAS PASSED ADMITTING THE APPEAL . COUNSEL ALSO FILED A LETTER TO THIS EFFECT. HE FURTHER SUB MITS THAT LEVYING PENALTY UNDER SECTION 271(1)(C) IS NOT JUSTIFIED WH EN THE ITA NO.2028/MDS/2011 5 APPEAL IS ADMITTED BY THE HIGH COURT, SINCE THE QUE STION INVOLVING IS A SUBSTANTIAL QUESTION OF LAW. FOR THI S PROPOSITION, HE PLACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. NAYAN BUILDERS & DEVE LOPERS PVT. LTD. VS. ITO IN ITA NO.2379/MUM/2009 DATED 18 TH MARCH, 2011. COPY OF THE ORDER IS PLACED IN THE PAPER BOOK FURNISHED. 5. HEARD BOTH SIDES. PERUSED THE ORDERS OF LOWER AUTHORITIES AND THE CASE LAW RELIED ON. THE ASSESSI NG OFFICER WHILE COMPLETING THE REASSESSMENT DISALLOWED THE AS SESSEES CLAIM FOR CARRY FORWARD AND SET OFF OF BUSINESS AND DEPRECIATION LOSSES RELATING TO AMALGAMATING COMPAN Y NAMELY TTK BIOMED LTD. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE APPELLANT WAS NOT ENTITLED TO CARRY F ORWARD AND SET OFF OF BUSINESS LOSSES. HE WAS OF THE VIEW THAT BY SUCH CLAIM THE ASSESSEE REDUCED THE TOTAL TAXABLE INCOME BY AN AMOUNT OF ` 3,19,60,736/-. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS WELL AWARE THAT IT HAS N OT FULFILLED THE CONDITIONS STIPULATED UNDER SECTION 72A(2) OF T HE ACT AT THE TIME OF FILING OF THE RETURN AND THEREFORE, THE ASSESSEE SHOULD NOT HAVE MADE SUCH CLAIM FOR SET OFF. THE AS SESSING ITA NO.2028/MDS/2011 6 OFFICER HELD THAT BY CLAIMING CARRY FORWARD AND SET OFF OF BUSINESS LOSSES AND DEPRECIATION RELATING TO AMALGA MATING COMPANY NAMELY TTK BIOMED LTD., THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND THEREFORE, IT IS LIABLE FOR LEVY OF PENALTY. ON APPEAL, THE COMM ISSIONER OF INCOME TAX (APPEALS) RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. [322 ITR 158 (SC)], DELETED THE PENALTY HOLDING THAT MERELY BECAUSE CERTAIN ADDITIONS HAVE BEEN MADE BY DISALLOWING THE CLAIM OF THE APPELLANT IN THE ASSES SMENT ORDER, IT DOES NOT MEAN THAT PENALTY WOULD AUTOMATI CALLY BECOME LEVIABLE. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. NAYAN BUILDERS & DEVELOPERS PVT.LTD., VS. ITO(SUPRA) HAD CONSIDERED A SIMILAR SITUATION, WH ERE THE HIGH COURT ADMITTED AN APPEAL FILED BY THE ASSESSEE IN RESPECT OF ADDITIONS MADE IN THE QUANTUM PROCEEDING S AND THE TRIBUNAL HELD THAT PENALTY IS NOT EXIGIBLE. THE TRIBUNAL HELD THAT WHEN THE HIGH COURT ADMITS THE APPEAL ON ADDITIONS MADE ON QUANTUM PROCEEDINGS, THE ISSUE IN QUESTION WOULD ITA NO.2028/MDS/2011 7 INVOLVE A SUBSTANTIAL QUESTION OF LAW. THE TRIBUNAL FURTHER HELD AS UNDER:- 3. IT IS, THEREFORE, ABUNDANTLY CLEAR THAT THE ADDITIONS IN RESPECT OF WHICH PENALTY WAS CONFIRMED HAVE BEEN ACCEPTED BY THE HONBLE BOMBAY HIGH COURT LEADING TO SUBSTANTIAL QUESTION OF LAW. WHEN THE HIGH COURT ADMITS SUBSTANTIAL QUESTION OF LAW ON AN ADDITION, IT BECOMES APPARENT THAT THE ADDITION IS CERTAINLY DEBATABLE. IN SUCH CIRCUMSTANCES PENALTY CANNOT BE LEVIED U/S 271(1) AS HAS BEEN HELD IN SEVERAL CASES INCLUDING RUPAM MERCANTILE VS. DCIT [(2004) 91 ITD 237 (AHD) (TM)] AND SMT.RAMILA RATILAL SHAH VS. ACIT [(1998) 60 TTJ (AHD) 171]. THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW BY THE HONBLE HIGH COURT LENDS CREDENCE TO THE BONA FIDES OF THE ASSESSEE IN CLAIMING DEDUCTION. ONCE IT TURNS OUT THAT THE CLAIM OF THE ASSESSEE COULD HAVE BEEN CONSIDERED FOR DEDUCTION AS PER A PERSON PROPERLY INSTRUCTED IN LAW AND IS NOT COMPLETELY DEBARRED AT ALL, THE MERE FACT OF CONFIRMATION OF DISALLOWANCE WOULD NOT PER SE LEAD TO THE IMPOSITION OF PENALTY. SINCE THE ADDITIONS, IN RESPECT OF WHICH PENALTY HAS BEEN UPHELD IN THE PRESENT PROCEEDINGS, HAVE BEEN HELD BY THE HONBLE HIGH COURT TO BE INVOLVING A SUBSTANTIAL QUESTION OF LAW, IN OUR CONSIDERED OPINION, THE PENALTY IS NOT EXIGIBLE UNDER THIS SECTION. WE, THEREFORE, ORDER FOR THE DELETION OF PENALTY. ITA NO.2028/MDS/2011 8 6. IN THE CASE ON HAND, THE HONBLE HIGH COURT ON 11.7.2011ADMITTED THE APPEAL FILED BY THE ASSESSEE IN RESPECT OF DISALLOWANCE OF CLAIM MADE FOR SET OFF OF BUSINE SS AND DEPRECIATION LOSSES RELATING TO AMALGAMATING COMPAN Y NAMELY TTK BIOMED LTD. AS THERE WAS A SUBSTANTIAL QUESTION OF LAW INVOLVED. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL (SUPRA) WE HOLD TH AT THE PENALTY IS NOT EXIGIBLE, AS THE APPEAL WAS ADMITTED BY THE HIGH COURT IN THE PRESENT CASE. EVEN OTHERWISE, THE PENALTY IS ALSO NOT LEVIABLE IN THE VIEW OF THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT.LTD. (SUPRA), WHEREIN THE HONBLE SUPREME COURT HELD THAT A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABL E IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE AND SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING OF INACCURAT E PARTICULARS. IN VIEW OF THE ABOVE, WE DELETE THE P ENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. THE GROUNDS RA ISED BY THE REVENUE ARE REJECTED. ITA NO.2028/MDS/2011 9 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, TH E 20 TH DAY OF JUNE, 2013, CHENNAI. SD/- SD/- (ABRAHAM P.GEORGE) (CHALLA NAG ENDRA PRASAD) ACCOUNTANT MEMBER J UDICIAL MEMBER CHENNAI, DATED THE 20 TH JUNE, 2013. SOMU COPY TO: (1) APPELLANT (4) CIT (A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.