The Commissioner of Income Tax-IV V. Natco Pharma Ltd

ITTA/108/2014

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax against M/s. Natco Pharma Limited concerning alleged inaccuracies in the company's tax returns, which included bogus purchases, sales, and fictitious loss claims. The ITAT had previously ruled in favor of Natco Pharma, stating that the company did not intentionally conceal income or provide inaccurate particulars. The High Court's judgment affirmed the ITAT's decision, emphasizing that the errors made by Natco Pharma were unintentional and did not meet the criteria for imposing a penalty under the Income Tax Act.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 718965 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 25-02-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: J V PRASAD
• Keywords: Bogus purchases; Fictitious loss; Fraudulent Claim; Income Tax; Penalty Imposition
• Section: 40A(7)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.108 OF 2014 DATED:25.2.2014 Between: The Commissioner of Income Tax – IV Hyderabad … Appellant And M/s. Natco Pharma Limited ‘Natco House’, Road No.2 Banjara Hills Hyderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.108 OF 2014 JUDGMENT: (per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be preferred against the judgment and order of the learned Tribunal dt.22.2.2013 and sought to be admitted on the following suggested questions of law: 1. Whether on the facts and in the circumstances of the case, the ITAT was justified in law in holding that the reasons offered by the assessee are bona fide and supported by reasonable cause ignoring the fact that the assessee has deliberately furnished inaccurate particulars of his income, by reflecting bogus purchases and sales, and claiming a fictitious loss of Rs.1,17,43,125/-, in addition to bogus commission payments on such transactions, which would not have come to light except for the search & seizure operation conducted on him ? 2. Whether on the facts and in the circumstances of the case, the ITAT was correct in ignoring the fact that this was a well-planned and deliberate act by the appellant to create a web of false evidence and make a fraudulent claim of loss ? We have heard Sri J.V. Prasad, learned counsel for the appellant, and gone through the impugned judgment and order of the learned Tribunal. The learned Tribunal on facts observed as follows: “…The fact that the tax audit report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act indicated that the assessee made a computation error in its return of income. The contents of the tax audit report suggested that there was no question of the assessee concealing its income or of the assessee furnishing any inaccurate particulars. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. All that had happened was that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. The assessee should have been careful but the absence of due care, in a case such as the present, did not mean that the assessee was guilty of either furnishing inaccurate particulars or attempting to conceal its income.” After concluding thus, the learned Tribunal recorded its finding as under: “We find the reasons offered by the assessee are bona fide and supported by reasonable cause and acceptable”. In view of the aforesaid fact finding, we think that the learned Tribunal has correctly concluded that the pre-conditions for imposing penalty are not satisfied. The question of fact cannot be scrutinized by us in this appeal. Hence, we dismiss the appeal. There will be no order as to costs. ________________________ K.J. SENGUPTA, CJ _______________________ SANJAY KUMAR, J 25.2.2014 bnr "