2016 (12) TMI 496 - HC - Income Tax

Penalty u/s 271(1)(c) - rejection of the patently wrong claim of the assessee of setting off of brought forward business loss in its return of income - ITAT deleted penalty levy - Held that - Tribunal noted that the respondent had claimed the set off of its business income of ₹ 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 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. As 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. - Decided against revenue

Summary

Issues:
Appeal against Tribunal's order allowing respondent's appeal regarding penalty under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2004-2005.

Analysis:
The appellant raised substantial questions of law regarding the cancellation of penalty under section 271(1)(c) by the Tribunal. The main issue was whether the rejection of the assessee's claim of setting off brought forward business loss in its return of income constituted furnishing inaccurate particulars of income or concealment of income, thus attracting penalty under the IT Act, 1961. The Tribunal's decision was based on the change in the assessee's stand regarding the return of income for the assessment year in question.

The assessee, formerly known as Max Atotech Limited, initially a private limited company converted into a public limited company, sought to set off its income against brought forward business losses in its return of income for the assessment year 2004-2005. However, later, it claimed the set off against unabsorbed depreciation through a letter dated 13.12.2006, with no financial implications in either case. The Tribunal found that the change in the claim was voluntary and not due to a notice under Section 143(2) of the Act, based on a legal opinion from a reputable firm of Chartered Accountants. The Tribunal concluded that there was no malafide intent in obtaining the opinion or in the change of claim, as the loss was allowed to be carried forward in a previous assessment year.

The Tribunal's decision not to impose a penalty on the assessee was upheld, stating that there was no financial impact due to the change in the claim basis. It was noted that there was no evidence of any malafides or inaccuracies in the assessee's actions. Consequently, the Court dismissed the appeal, finding no substantial question of law in the case. The cross objections filed by the respondent were not considered in light of the dismissal of the appeal.