CREDENTIAL FINANCE LTD ( INLIQUIDATION), MUMBAI v. ACIT 1(1), MUMBAI

ITA 797/MUM/2009 | 1995-1996
Pronouncement Date: 31-05-2010 | Result: Allowed

Appeal Details

RSA Number 79719914 RSA 2009
Assessee PAN AAACC2220P
Bench Mumbai
Appeal Number ITA 797/MUM/2009
Duration Of Justice 1 year(s) 3 month(s) 25 day(s)
Appellant CREDENTIAL FINANCE LTD ( INLIQUIDATION), MUMBAI
Respondent ACIT 1(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 31-05-2010
Date Of Final Hearing 18-05-2010
Next Hearing Date 18-05-2010
Assessment Year 1995-1996
Appeal Filed On 05-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI BEFORE SHRI. PRAMOD KUMAR (A.M.) AND SHRI. VIJAY PA L RAO (J.M) ITA NO.797/MUM/2009 ASSESSMENT YEAR: 1995-1996 CREDENTIAL FINANCE LTD.(INLIQUIDATION) C/O. CHHAJED KEDIA & ASSOCIATES 208 BLUE MOON CHAMBERS NAGINDAS MASTER RD. NR. WELCOME RESTAURANT FORT MUMBAI 400 023. PAN : AAACC2220P VS. ACIT 1(1) AAYAKAR BHAVAN M.K. RD. MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRADIP KEDIA (AR) RESPONDENT BY : SHRI AJIT KUMAR SINHA (CIT-DR) O R D E R PER VIJAY PAL RAO J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30.09.2008 OF LEARNED CIT(A)-XLVI MUMBAI ARISING F ROM PENALTY ORDER PASSED U/S.271(1)(C) OF THE I.T. ACT FOR THE ASSESS MENT YEAR 1995-1996. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN THIS APPEAL. HOWEVER THE ONLY ISSUE ARISES IS WHETHER IN THE FACTS AND CIRCU MSTANCES OF THE CASE THE CIT(A) IS JUSTIFIED IN SUSTAINING THE PENALTY IMPOS ED U/S.271(1)(C) OF THE ACT ON ESTIMATED DISALLOWANCE OF DEPRECIATION. 3. THE RELEVANT FACTS EMERGING FROM RECORD ARE THAT THE ASSESSEE WAS A NON-BANKING FINANCE COMPANY ENGAGED IN EQUIPMENT LE ASING HIRE PURCHASE BILL DISCOUNTING PLACEMENT OF INTER-CORPORATE DEPO SITS AND OTHER FINANCE ACTIVITIES AT THE RELEVANT POINT OF TIME. THE ASS ESSEE FILED ITS RETURN OF INCOME DECLARING THE LOSS OF RS.3 94 775/- FOR THE YEAR UNDER CONSIDERATION. THE ASSESSMENT WAS FRAMED U/S.143(3) OF THE ACT AND THE AO DISALLOWED THE ITA NO.797/MUM/2009 A.Y.: 1995-1996 2 DEPRECIATION ON LEASE ASSETS TO THE TUNE OF RS.6 26 40 625/- VIDE ORDER DATED 30.03.1998 THE ASSESSEE CHALLENGED THE ORDER OF THE AO BEFORE THE CIT(A). VIDE ORDER DATED 20.11.1998 THE CIT(A) SET ASIDE T HE ORDER OF THE ASSESSMENT ON THE GROUND THAT THE DOCUMENTS IN POSS ESSION OF THE AO WERE NOT CONFRONTED TO THE ASSESSEE FOR REBUTTAL OR CROS S EXAMINATION. IN THE RE- ASSESSMENT THE AO ARRIVED TO SAME CONCLUSION AND RE TAIN THE DISALLOWANCE OF DEPRECIATION AT RS.6 26 40 625/- VIDE ORDER DATE 27.03.2001. 4. ON APPEAL THE CIT(A) ALLOWED THE CLAIM OF THE A SSESSEE TOWARDS DEPRECIATION ON THE ASSETS PURCHASED AND LEASE OUT AND PARTLY ALLOWED THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON THE EQUIP MENTS PURCHASED BY THE ASSESSEE AND LEASED BACK TO THE SELLER. THE CIT( A) RESTRICTED DEPRECIATION DISALLOWANCE TO RS.69 63 000/- ON ACCOUNT OF OVERVA LUATION OF THE EQUIPMENT. THE PENALTY PROCEEDINGS WERE AGAIN INI TIATED BY ISSUING THE SHOW CAUSE NOTICE DATED 15.02.2008 WITH REGARD TO T HE DEPRECIATION DISALLOWANCE OF RS.63 63 000/- WHICH WAS CONFIRMED BY THE CIT(A) AND THEN BY THIS TRIBUNAL. CONSEQUENTLY THE PENALTY OF RS .32 02 980/- WAS LEVIED VIDE ORDER DATED 29.02.2008. THE ASSESSEE FILED A N APPEAL AGAINST PENALTY ORDER BEFORE THE CIT(A). THE APPEAL OF THE ASSESSE E IS DISMISSED BY AN IMPUGNED ORDER. 5. BEFORE US THE LD AR OF THE ASSESSEE SUBMITTED T HAT THERE IS NO CONCEALMENT OF INCOME ON PART OF THE ASSESSEE. TH E ASSESSEE EXPLAINED AND DISCLOSED ALL RELEVANT FACTS WITH REGARD TO THE PUR CHASE OF THE MACHINERY AND LEASE BACK TO THE SELLER M/S. DEVE SUGAR LTD. THE PURCHASE PRICE OF THE PLANT AND MACHINERY GIVEN ON LEASE WERE BASED ON TH E VALUATION REPORT GIVEN BY A RECOGNIZED CHARTERED ENGINEER. THE AO TOOK TH E VALUE OF THE MACHINERY AS NIL AND THEREBY DISALLOWED THE DEPRECI ATION CLAIMED BY THE ASSESSEE ON THE SAID PLANT AND MACHINERY. THE CI T(A) ESTIMATED THE VALUE AT RS.1 80 37 000/- AS AGAINST THE VALUE DECLARED B Y THE ASSESSEE AT RS.250.00 LAKHS. CONSEQUENTLY THE ADDITION OF DEP RECIATION WAS RESTRICTED TO RS.69 63 000/-. THE AR OF THE ASSESSEE FURTHER CONTENDED THAT WHEN THE ITA NO.797/MUM/2009 A.Y.: 1995-1996 3 FACTUM OF PURCHASE OF THE MACHINERY AND LEASE OUT T HE SAME TO THE SELLER IS UNDISPUTED AND ONLY THE VALUATION HAS BEEN ESTIMATE D BY THE CIT(A) WHICH DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICU LARS OF INCOME. HE HAS PLEADED THAT THE EXPLANATION OF THE ASSESSEE WITH R EGARD TO THE VALUATION OF THE LEASED ASSETS IS BONA FIDE BEING BASED ON THE V ALUATION OF THE CHARTERED ENGINEER THEN THE PENALTY U/S.271(1)(C) OF THE ACT IS NOT CALLED FOR. WHEN THE ASSESSEE PLACED ALL THE MATERIAL FACTS RELEVANT TO THE COMPUTATION OF THE TOTAL INCOME BEFORE THE AO THEN THERE IS NO QUESTIO N OF SUPPRESSION OF ANY FACT WHICH MAY LEAD TO INITIATION OF PROCEEDING. H E HAS RELIED UPON DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). 6. ON THE OTHER HAND THE LD DR HAS SUBMITTED THAT THE MACHINERY WAS PURCHASED IN THE YEAR 1954-55 AND USED UP TO 1958. THE SAID MACHINERY WAS VALUED AT RS.1 20 25 000/- IN OCT 1993 BY THE M/S. DEVE SUGAR LTD. SINCE THE BOOK VALUE OF THE MACHINERY WAS NIL AND A LL OF SUDDEN THE MACHINERY WAS VALUED AT RS.250.00 LACS IN SEPT 199 4 WHEN THE ASSESSEE ALLEGEDLY PURCHASED AND LEASE BACK THE MACHINERY TO THE SELLER FOR THE PURPOSE OF THE CLAIMING 100% DEPRECIATION ON THE SA ME. THIS TRANSACTION OF PURCHASE AND LEASE BACK OF THE MACHINERY BY INFL ATED VALUATION HAS SUBSTANTIALLY REDUCED THE ASSESSEES TAXABLE INCOME AND TAX LIABILITY. THE ASSESSEE MADE A FALSE CLAIM WHICH IS NOT ACCEPTABLE TO TAX AUTHORITIES AND THEREFORE THE ASSESSEE HAS CONCEALED THE PARTICULA RS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME. HE HA S RELIED UPON THE ORDER OF LOWER AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL CONTENTION AND RELE VANT RECORD. IN THE QUANTUM APPEAL THE CIT(A) HAS ACCEPTED THE PURCHASE AND LEASE BACK TRANSACTION BETWEEN THE ASSESSEE AND M/S. DEVE SUGA R LTD. THE EXISTENCE OF MACHINERY WAS NOT AT ALL DISPUTED BY REVENUE AUT HORITIES. THE ONLY DISPUTE WAS REGARDING VALUATION OF THE MACHINERY THE ASSESSEES CLAIM WAS BASED ON VALUATION REPORT OF CHARTERED ENGINEER AND ALSO SUPPORTED BY THE RELEVANT BILLS/VOUCHERS. THE PAYMENT FOR PURCHASE OF THE MACHINERY WAS ITA NO.797/MUM/2009 A.Y.: 1995-1996 4 ALSO NOT IN DISPUTE. THEREFORE THE ASSESSEE WHIL E MAKING THE CLAIM OF DEPRECIATION AT 100% ON THE MACHINERY PURCHASED AND LEASED BACK TO THE SELLER ITSELF DISCLOSED ALL THE BASIC AND PRIMARY F ACT RELATING TO TRANSACTION AND CLAIMED THE DEPRECIATION. WHEN THE ASSESSEE H AS DISCLOSED ALL THE RELEVANT FACTS REGARDING THE TRANSACTION THEN IT CA NNOT BE SAID THAT ASSESSEE HAD MADE A BOGUS CLAIM OF DEPRECIATION MERELY BECAU SE THE CLAIM OF THE ASSESSEE FOR DEPRECIATION WAS DISALLOWED PARTLY DUE TO DIFFERENCE IN VALUATION DECLARED BY THE ASSESSEE AND ESTIMATED BY THE CIT(A). THE SAID DISALLOWANCE WOULD NOT AUTOMATICALLY LEAD TO THE CO NCLUSION THAT THERE HAS BEEN CONCEALMENT OF INCOME WARRANTING PENALTY. THU S OTHERWISE THE VALUATION IS A MATTER OF SUBJECTIVE NATURE AND DISA LLOWANCE BASED ON THE VALUATION CANNOT RESULT IN LEVY OF PENALTY WHEN THE CLAIM OF THE ASSESSEE WAS BONA FIDE. WHEN THE CLAIM OF THE ASSESSEE WAS DUL Y SUPPORTED BY THE DOCUMENTARY EVIDENCE THEN EVEN THE CLAIM WAS FINALL Y FOUND ERRONEOUS AND NOT SUSTAINABLE UNDER THE LAW THE SAME CANNOT AMOUN T TO CONCEALMENT OF INCOME AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) WHEREIN HONBLE APE X COURT HAS HELD IN PARA 11 AS UNDER: WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTICU LARS IN THE EARLIER PART OF THIS JUDGMENT. READING THE WOR DS IN CONJUNCTION THEY MUST MEAN THE DETAILS SUPPLIED IN T HE RETURN WHICH ARE NOT ACCURATE NOT EXACT OR CORRECT NOT ACCORD ING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT I N THIS CASE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE AS SESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FAL SE. SUCH NOT BEING THE CASE THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 27(1)(C) OF THE ACT. A MERE MAKING OF T HE CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOU NT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. 8. ACCORDINGLY IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT SUPRA WE DELETE THE PENALTY LEVIED U/S.271(1)(C). ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE. ITA NO.797/MUM/2009 A.Y.: 1995-1996 5 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON THIS 31 ST DAY OF MAY 2010. SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) MUMBAI DATED 31 ST MAY 2010. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- MUM BAI 4. COMMISSIONER OF INCOME TAX CITY- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH E MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI