Comet Leasing & Finance Ltd.,, v. ACIT, Circle-3(1),.,

ITA 1172/DEL/2006 | 1996-1997
Pronouncement Date: 26-02-2010 | Result: Allowed

Appeal Details

RSA Number 117220114 RSA 2006
Bench Delhi
Appeal Number ITA 1172/DEL/2006
Duration Of Justice 3 year(s) 10 month(s) 15 day(s)
Appellant Comet Leasing & Finance Ltd.,,
Respondent ACIT, Circle-3(1),.,
Appeal Type Income Tax Appeal
Pronouncement Date 26-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 26-02-2010
Date Of Final Hearing 09-12-2009
Next Hearing Date 09-12-2009
Assessment Year 1996-1997
Appeal Filed On 10-04-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G : NEW DELHI BEFORE SHRI DEEPAK R. SHAH ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NO.1172/DEL/2006 ASSESSMENT YEAR : 1996-97 M/S. COMET LEASING & FINANCE LTD. ASST. COMMIS SIONER OF INCOME-TAX 207-208 C-1/B GREEN PARK VS. CIRCLE-3( 1) NEW DELHI. EXTENSION SRI AUROBINDO MARG NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI TANEJA ADVOCATE. RESPONDENT BY : SHRI KISHORE B. SR. DR. O R D E R PER DEEPAK R. SHAH ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V NEW DELHI DATED 16 TH FEBRUARY 2006 FOR THE ASSESSMENT YEAR 1996-97 IN AN APPEAL A GAINST PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT 1961 (THE ACT). 2. THE ASSESSEE CHALLENGES LEVY OF PENALTY UNDER SE C.271(1)(C) OF THE ACT. 2 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LEASI NG AND FINANCING. THE ASSESSEE CLAIMED DEPRECIATION OF RS.10 70 000/- @ 1 00% IN RESPECT OF ONE SUGAR MILL ROLLER LEASED OUT TO M/S. MAHALAXMI SUGA R MILLS CO. LTD. (MSMC). DURING THE COURSE OF ASSESSMENT PROCEEDING S THE ASSESSING OFFICER FOUND THAT THE SAID ROLLER WAS PURCHASED FO R A SUM OF RS.10 70 000/- FROM RACHNA PVT. LTD. ON 2.6.1995 WHO IN TURN PURCH ASED IT FROM M/S. VIPIN INTERNATIONAL PVT. LTD. ON 16.9.1994 FOR A SUM OF R S.2 50 000/- AND M/S. VIPIN INTERNATIONAL PVT. LTD. HAD PURCHASED IT FOR A SUM OF RS.70 600/- FROM M/S. MAHALAXMI SUGAR CO. LTD. ON 30 TH JULY 1994. THE ASSESSING OFFICER ALSO FOUND THAT ALL THESE CONCERNS BELONG TO THE SA ME GROUP FUNCTIONING FROM THE SAME ADDRESS. THE ASSESSING OFFICER NOTED THAT THE TOTAL LEASE RENTAL RECEIVABLE BY THE ASSESSEE OVER THE PERIOD OF LEASE WHICH IS 3 YEARS WERE RS.12 96 840/-. THE ASSET IS PURCHASED FOR RS.10 7 0 000/- AND CLAIMED DEPRECIATION AT 100%. THE DEPRECIATION IS CLAIMED BY INFLATING THE COST OF ASSET TO REDUCE THE TAX LIABILITY. HENCE APPLYING THE PROVISIONS OF EXPLANATION 3 TO SECTION 43(1) THE COST OF ASSET W AS TAKEN AT RS.70 600/- ONLY WHICH WAS THE AMOUNT FOR WHICH M/S. MAHALAXMI SUGAR CO. LTD. SOLD THE ROLLER. ACCORDINGLY THE CLAIM OF DEPRECIATION WAS ALSO RESTRICTED TO RS.70 600/- WHICH RESULTED INTO DISALLOWANCE OF DEP RECIATION OF A SUM OF RS.9 99 400/-. THUS THE RETURNED LOSS OF RS.77 280 /- WAS CONVERTED INTO 3 INCOME OF RS.9 22 120/-. THE ASSESSMENT ORDER WAS UPHELD BY THE COMMISSIONER (APPEALS). THE ASSESSEE CARRIED THE M ATTER FURTHER BEFORE THE TRIBUNAL. THE TRIBUNAL BY ITS ORDER DATED 8 TH FEBRUARY 2005 HELD THAT THE ENTIRE TRANSACTION IS A FINANCING TRANSACTION AND N OT A LEASE TRANSACTION. THEREFORE THE ASSESSEE IS NOT ENTITLED TO DEPRECIA TION. AT THE SAME TIME THE TRIBUNAL ALSO HELD THAT THE ENTIRE LEASE RENT RECEI VED BY THE ASSESSEE CANNOT BE TAXED AND ONLY THE INTEREST COMPONENT OF RS.2 26 840/- WAS BROUGHT TO TAX OVER A PERIOD OF 3 YEARS. AS PER THE DIRECTION OF THE TRIBUNAL THE LEASE RENTAL OFFERED BY THE ASSESSEE OF RS.4 62 240/- WAS EXCLUD ED FROM THE INCOME AND THE INTEREST OF RS.1 34 820/- WAS BROUGHT TO TAX. THIS RESULTED INTO COMPUTING THE TOTAL INCOME AT RS.5 65 300/- AGAINST RS.9 22 120/- COMPUTED BY THE ASSESSING OFFICER. 4. THE ASSESSING OFFICER IN THE PENALTY PROCEEDINGS HELD THAT THE ASSESSEE DELIBERATELY FURNISHED INACCURATE PARTICUL ARS OF INCOME TO THE TUNE OF RS.10 70 000/- BEING EXCESS DEPRECIATION CLAIMED AND INTEREST INCOME TO THE TUNE OF RS.1 34 820/- NOT OFFERED. THE TOTAL RS .12 04 820/- WAS CONSIDERED TO BE INCOME IN RESPECT OF WHICH THE ASS ESSEE HAS CONCEALED THE PARTICULARS BY FURNISHING INACCURATE PARTICULARS OF INCOME AND PENALTY WAS LEVIED UNDER SECTION 271(1)(C) OF THE ACT. BEFORE THE LEARNED CIT(A) THE ASSESSEE NOT ONLY CHALLENGED LEVY OF PENALTY BUT AL SO ARGUED THAT PENALTY IF 4 LEVIABLE CAN ONLY BE RESTRICTED TO THE EXTENT OF IN COME ADDED ULTIMATELY AND NOT FOR DISALLOWANCE OF DEPRECIATION AS WELL AS INT EREST CHARGEABLE. THE LEARNED CIT(A) HELD THAT AS PER THE ORDER OF TRIBUN AL IT IS CLEAR THAT THE DEPRECIATION WAS WRONGLY CLAIMED AND THE ASSESSEE H AD ALSO NOT OFFERED INTEREST INCOME SINCE IT WAS A FINANCING TRANSACTIO N THEREFORE THE PENALTY IS LEVIABLE. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI ASHWA NI TANEJA SUBMITTED THAT WHAT THE ASSESSING OFFICER ORIGINALLY HELD WAS THAT THE TRANSACTION WAS A LEASE TRANSACTION BUT ONLY THE CLAIM OF DEPRECIATIO N WAS RESTRICTED UNDER EXPLANATION 3 TO SECTION 43(1) BY AMENDING THE ACTU AL COST AND NOT ON THE GROUND THAT THE TRANSACTION IS NOT A LEASE TRANSACT ION. IF THE TRANSACTION IS THE LEASE TRANSACTION THE ASSESSEE HAD RIGHTLY CLAIMED DEPRECIATION. THE NECESSARY PARTICULARS IN THIS REGARD WERE FILED BY THE ASSESSEE ONLY AND ONLY ON APPRECIATION OF SUCH PARTICULARS THE VIEW OF TH E ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS WERE THAT THE DEPRECIATION S HOULD BE ALLOWED TO THE EXTENT OF COST WITH THE ORIGINAL OWNER. HOWEVER P RIOR TO THE ORDER OF THE TRIBUNAL THE ASSESSEE HAD ALL ALONG DECLARED THE EN TIRE RENTAL AS ITS INCOME WHICH HAS BEEN ASSESSED AS SUCH. THERE IS NO CONCE ALMENT OF PARTICULARS OF INCOME. THE TOTAL INCOME OFFERED BY THE ASSESSEE F ROM THE SAID TRANSACTION 5 WAS ONLY RS.2 26 840/-. THIS HAD ALREADY BEEN OFFE RED FOR TAX IN THE FOLLOWING MANNER:- INCOME BY WAY OF LEASE RENT OFFERED FOR 3 YEARS RS .12 96 840/- DEPRECIATION CLAIMED RS.10 70 000/- TOTAL INCOME RS. 2 26 840/- THUS THE CLAIM OF THE ASSESSEE WAS BONA FIDE. EVEN THERE IS DIFFERENCE OF OPINION BETWEEN THE ASSESSING OFFICER AND THE TRIBU NAL. THE ASSESSING OFFICER HAD HELD THE TRANSACTION TO BE LEASE TRANSA CTION WHEREAS THE TRIBUNAL HAS HELD THE TRANSACTION TO BE A FINANCIAL TRANSACT ION. HOWEVER WHETHER THE TRANSACTION IS A FINANCE TRANSACTION OR LEASE TRANS ACTION IS NOT THE SUBJECT MATER OF DISPUTE. THE DISPUTE WAS WITH REFERENCE T O THE COST TO BE ADOPTED FOR THE PURPOSE OF CLAIM OF DEPRECIATION. JUST AS THE ASSESSEE CLAIMED HIGHER COST HIGHER AMOUNT OF LEASE RENTAL WAS OFFERED FOR TAX AND THAT TOO MUCH PRIOR TO THE ORDER OF THE TRIBUNAL. IF THERE IS HON EST DIFFERENCE OF OPINION ON THE SAME SET OF FACTS IT DOES NOT AMOUNT TO EITHER CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS O F INCOME. FOR THIS PURPOSE RELIANCE WAS PLACED ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILE 249 ITR 125. HE A LSO RELIED UPON THE FOLLOWING DECISIONS FOR THE PROPOSITION THAT EVEN A FTER THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA 6 TEXTILE PROCESSORS 306 ITR 277 MERELY BECAUSE AMO UNT IS DISALLOWED OR ADDED PENALTY IS NOT AUTOMATIC:- 1. SUPER METAL INDUSTRIES VS. DY. CIT 119 ITD 153 (MU M.)(TM); 2. ACIT VS. VIP INDUSTRIES LTD 122 TTJ 289; 3. CIT VS. M/S. SIDHARTHA ENTERPRISES LUDHIANA ORDER DATED 14.07.2009 BY PUNJAB & HARYANA HIGH COURT; & 4. CIT VS. ARISUDANA SPINNING MILLS LTD. ORDER DATED 19.11.2009 BY PUNJAB & HARYANA HIGH COURT. COPIES OF THE SAID ORDERS WERE FILED BEFORE US. 6. THE LEARNED DR SHRI KISHORE B ON THE OTHER HAND SUBMITTED THAT AS PER ORDER OF TRIBUNAL WHAT IS CONCLUDED IS THAT TH E TRANSACTION WAS IN THE NATURE OF FINANCING TRANSACTION AND HENCE THE ASSES SEE WAS INCORRECT IN CLAIMING DEPRECIATION THEREON. THE ASSESSEE SHOULD ALSO HAVE OFFERED INTEREST INCOME ON SUCH FINANCING TRANSACTION AS IT S INCOME. SINCE THE ASSESSEE MADE INCORRECT CLAIM OF DEPRECIATION AT 10 0% AND ALSO DID NOT OFFER INTEREST INCOME FOR TAX PENALTY IS LEVIABLE FOR BO TH THE DISALLOWANCES/ADDITIONS. IN REPLY THE LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE LEASE RENTALS WERE ALREADY OFFER ED FOR TAX AND SINCE THE SAME WERE REDUCED TO THAT EXTENT THE PENALTY IS NO T SUSTAINABLE. 7. WE HAVE CAREFULLY CONSIDERED THE RELEVANT FACTS ARGUMENTS ADVANCED AND THE CASE LAWS CITED. WE ARE IN AGREEMENT WITH THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE. THE SUBJECT MATTER OF DISP UTE BEFORE THE TRIBUNAL WAS 7 AS TO WHAT IS THE AMOUNT ON WHICH THE DEPRECIATION IS ALLOWABLE AND NOT WHETHER THE TRANSACTION IS A LEASE TRANSACTION OR A FINANCING TRANSACTION. THE TRIBUNAL HAS ULTIMATELY HELD THE TRANSACTION TO BE FINANCING TRANSACTION. THIS ITSELF SHOWS THAT THE VIEW OF THE ASSESSEE THAT THE RE WAS LEASE TRANSACTION WAS ORIGINALLY ACCEPTED BY THE ASSESSING OFFICER AS WEL L AS BY THE COMMISSIONER (APPEALS). THUS IT CAN BE SAID THAT FROM THE SAME FACTS AS PUT FORWARD BY THE ASSESSEE THERE WAS A DIFFERENCE OF OPINION AS TO THE NATURE OF TRANSACTION AND NOT THAT THE FACTS RELATING TO SUCH TRANSACTION WERE CONCEALED. IN THE OPINION OF THE ASSESSEE SINCE THE TRANSACTION WAS A LEASE TRANSACTION IT WAS ENTITLED TO CLAIM DEPRECIATION AND THE DEPRECIATION WAS CLAIMED AT THE APPROPRIATE RATE ONLY. PRIOR TO THE ORDER OF TRIBU NAL THE ASSESSEE HAD ALL ALONG OFFERED THE ENTIRE LEASE RENTAL AS ITS INCOME WHICH WAS RS.12 96 840/- OVER THE PERIOD OF 3 YEARS. AS AGAINST THIS THE D EPRECIATION CLAIMED WAS ONLY RS.10 70 000/-. THIS SHOWS THAT IN THE ULTIMA TE ANALYSIS RS.2 26 840/- IS THE INCOME OF THE ASSESSEE IN THE FORM OF INTERE ST AND IT WAS ALSO DIRECTED TO BE SPREAD OVER THE PERIOD OF LEASE. THUS LOOKIN G TO THE CONDUCT OF THE ASSESSEE IT CAN BE SAID THAT THE ASSESSEE HAD ALRE ADY OFFERED NET INCOME OF RS.2 26 840/- WHICH IS IN TUNE WITH THE DIRECTION O F TRIBUNAL ALSO. IF AS PER THE ORDER OF TRIBUNAL THE TRANSACTION IS A FINANCI NG TRANSACTION IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE PARTICULAR S OF INCOME OR FURNISHING 8 INACCURATE PARTICULARS OF INCOME. THE PARTICULARS WERE CORRECTLY STATED BUT THE VIEW OF THE ASSESSEE AND THE ASSESSING OFFICER ON ONE HAND DIFFERS WITH THE VIEW OF THE TRIBUNAL. THIS ITSELF WILL NOT AMO UNT TO CONCEALMENT OF PARTICULARS OF INCOME. SINCE IN THE ULTIMATE ANALY SIS THE INCOME OFFERED BY THE ASSESSEE IS THE SAME AS DIRECTED TO BE COMPUTED BY THE TRIBUNAL THE ASSESSEE CANNOT BE FASTENED WITH FURTHER LIABILITY OF PENALTY MERELY BECAUSE THE INCOME IN ONE YEAR IS HIGHER THAN THAT OFFERED BUT IN SUBSEQUENT YEAR THE INCOME OFFERED BY THE ASSESSEE IS HIGHER THAN THAT ASSESSABLE. IT IS NOT THE CASE THAT HIGHER INCOME WAS OFFERED IN SUBSEQUENT Y EARS ON RECEIPT OF ORDER OF THE TRIBUNAL. INCOME WAS OFFERED IN REGULAR COU RSE BY SHOWING THE ENTIRE LEASE RENTAL AS INCOME. THEREFORE THE ASSESSEE HA VING OFFERED AN EXPLANATION WHICH IS ALSO SUBSTANTIATED WHICH IS B ONA FIDE AND SINCE ALL THE FACTS RELATING TO SAME AND MATERIAL TO THE COMPUTAT ION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM EVEN IN TERMS OF EXPLANATION 1 TO SECTION 271(1)(C) THE AMOUNT DISALLOWED BY WAY OF DEPRECIATION WILL N OT RESULT INTO INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. WE THEREFORE CANCEL PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. IN THE CASE OF CIT VS. ARISUDANA SPINNING MILLS LTD . (SUPRA) THE HONBLE PUNJAB & HARYANA HIGH COURT HELD THAT WHEN THE ASSESSEE CLAIMED DEDUCTION UNDER SEC. 80-IA IN RESPECT OF PROFIT DER IVED FROM TRADING TURNOVER 9 WHICH AT THE TIME OF FILING RETURN OF INCOME WAS BA SED ON JUDICIAL PRECEDENT AND SUPPORTED BY AUDITED ACCOUNT ALONG WITH AUDIT R EPORT RELATING TO CLAIM U/S 80-IA BECAUSE OF THE SUBSEQUENT DECISION OF JU RISDICTIONAL HIGH COURT IF THE CLAIM IS NOT ALLOWABLE IT DOES NOT AMOUNT TO C ONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF I NCOME AND HENCE PENALTY IS NOT LEVIABLE. IN OUR OPINION THE ORDER OF HONB LE PUNJAB & HARYANA HIGH COURT SUPPORTS THE VIEW WHAT WE HAVE TAKEN AS NOTED ABOVE. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. M/S. SIDHARTHA ENTERPRISES (SUPRA) HELD THAT WHEN THE ASSESSEE CLA IMED LOSS ON SALE OF MACHINERY WHICH BEING A CAPITAL LOSS AGAINST THE P ROFITS OF BUSINESS AND IN RESPECT OF WHICH CORRECT PARTICULARS ARE FILED BUT ONLY BEING A MISTAKE OF THE COUNSEL ON SUCH MISTAKE PENALTY IS NOT LEVIABLE. IT WAS FOUND THAT WHEN THE MISTAKE COMMITTED BY THE COUNSEL WAS ACCEPTED BY TH E ASSESSEE PENALTY IS NOT AUTOMATIC. HONBLE HIGH COURT HELD THAT EVEN A FTER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEX TILE PROCESSORS (SUPRA) THE CONCEPT OF PENALTY HAS NOT UNDERGONE C HANGE. IT WAS HELD THAT PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAKE. IN OUR OPINION THIS DECISI ON ALSO SUPPORTS THE CASE OF THE ASSESSEE. THE DECISIONS OF THE TRIBUNAL ARE ON THE FACTS OF EACH CASE. HOWEVER IN ULTIMATE ANALYSIS IT CAN BE SAID THAT W HEN ALL THE FACTS ARE STATED 10 CORRECTLY BUT ONLY BECAUSE THERE IS DIFFERENCE OF O PINION BETWEEN THE ASSESSEE AND ASSESSING OFFICER ON ONE SIDE AND THE TRIBUNAL ON THE OTHER SIDE IT CANNOT BE SAID THAT THERE IS CONCEALMENT O F PARTICULARS OF INCOME SO AS TO LEVY PENALTY. WE THEREFORE CANCEL THE PENA LTY LEVIED UNDER SEC.271(1)(C) OF THE ACT. 8. IN THE RESULT THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY 2010. SD/- SD/- (GEORGE MATHAN) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26 TH FEBRUARY 2010. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.