Gruh Finance Ltd., Ahmedabad V. The Income Tax Officer, Ward-4(4), Ahmedabad

ITA 2010/AHD/2004

• Counselvise Citation: 201020514 RSA 2004
• Duration Of Justice: 8 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-06-2012
• Assessment Year: 1996-1997
• Appeal Filed On: 08-06-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA KUMAR
• Assessee Lawyers: M G PATEL
• Keywords: Depreciation; Question of law
• Section: 271(1)(c); 195; 32; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI, KUL BHARAT, JUDICIAL MEMBER ITA NO S . 2010 /AHD/ 20 04 ASSESSMENT YEAR :1996-97 ITA NOS. 1314/AHD/2004 & 1008/AHD/2006 ASSESSMENT YEAR :1997-98 GRUH FINANCE LTD. GRUH MITHAKHALI SIX ROADS, ELLISBRIDGE, AHMEDABAD V/S . INCOME TAX OFFICER, WARD- 4(4), AHMEDABAD PAN NO. NOT FOUND (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI M.G. PATEL, A.R. /BY RESPONDENT SHRI RAVINDRA KUMAR, CIT D.R. /DATE OF HEARING 12.06.2012 /DATE OF PRONOUNCEMENT 20.07.2012 O R D E R PER : A.K. GARODIA, ACCOUNTANT MEMBER ALL THESE THREE APPEALS ARE FILED BY THE ASSESSEE, OUT OF WHICH TWO APPEALS ARE IN QUANTUM PROCEEDINGS FOR A.Y. 96-97 A ND 97-98 AND REMAINING ONE APPEAL IS IN PENALTY PROCEEDING U/S 271(1)(C) O F THE IT ACT FOR A.Y. 97-98. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP BOTH THE QUANTUM APPEALS OF THE ASSESSEE. GROUNDS ARE SIMILAR AND IT WAS ARGUED BY BOTH SIDES THAT ON THE BASIS OF ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 2 GROUNDS AND FACTS OF ONE YEAR, BOTH APPEALS CAN BE DECIDED. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER IN A.Y. 1996-97 , ITA NO. 2010/AHD/2004:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY HOLDING THAT THE ASSESSING OFFICER WAS RIGHT IN INVOKING THE PRO VISIONS OF SECTIN 147 OF THE INCOME TAX ACT, 1961 AND HAD REASON TO BELIE VE THAT THE INCOME HAD ESCAPED ASSESSMENT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS.1,40,07,126/- MA DE BY THE ASSESSING OFFICER IN RESPECT OF ASSETS GIVEN ON LEA SE THOUGH THE ASSETS LEASED WERE OWNED BY THE APPELLANT AND USED FOR ITS BUSINESS OF LEASING. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING LEASE T RANSACTIONS BETWEEN THE APPELLANT AND LESSEES AS FINANCIAL LEASES AND N OT OPERATIONAL LEASES THOUGH SUFFICIENT EVIDENCES WERE PRODUCED BY THE AP PELLANT IN SUPPORT OF ITS CLAIM. 3. GROUND NO. 1 OF THE APPEAL WAS NOT PRESSED BY TH E LD. AR OF THE ASSESSEE IN BOTH YEARS. ACCORDINGLY, THIS GROUND I S REJECTED AS NOT PRESSED. 4. REMAINING GROUNDS ARE RELATING TO ONLY ONE ISSUE I.E. DISALLOWANCE OF DEPRECIATION OF RS.1,40,07,126/-. 5. THE BRIEF FACTS REGARDING THIS ISSUE TILL ASSESS MENT STAGE ALONG WITH DECISION OF THE LD. CIT (A) ARE CONTAINED IN PARA ( II) (III) & (IV) OF THE ORDER OF LD. CIT (A) WHICH ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE:- ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 3 (II) AS REGARDS THE ISSUE OF MACHINERY GIVEN ON LEA SE TO M/S. RAJINDER STEELS LTD. TO BE FOUND IN EXISTENCE AND SO DISALLO WANCE OF DEPRECIATION BEING NOT JUSTIFIED, APPELLANT HAS GIVEN EVIDENCE O F HAVING ATTENDED MEETING, (CALLED ON 9.5.2003, IN COMPLIANCE OF THE HIGH COURT ALLAHABAD ORDER DATED 23.4.2003), OF THE SECURED CREDITORS FO R FORMATION OF ASSET SALE COMMITTEE IN THE OFFICE OF THE OFFICIAL LIQUID ATOR U.P. AT ALLAHABAD IN MATTER OF M/S. RAJINDER STEELS LTD. (IN LIQUIDATION ). ALSO EVIDENCE IS GIVEN THAT MACHINERIES WERE IDENTIFIED THERE AND TH E EXACT MACHINERIES WHICH WERE PURCHASED BY THE APPELLANT AT RS.1,47,81 ,250/- WERE LISTED BY THE VALUERS G.S.BIRDIE, AND VALUED ON 6.2.2003 O N PHYSICAL INSPECTION AT A VALUE OF RS. 20 LAKHS . I FIND THAT THIS ESTABLISHES EXISTENCE OF MACHINES, BUT THE AO HAS DISALLOWED CL AIM OF DEPRECIATION NOT JUST ON GROUND OF NON-EXISTENCE BUT ALSO FOR RE ASON THAT THE LEASE TRANSACTIONS WERE NOT CONSIDERED AS OPERATING LEASE . TO QUOTE, THE PARAS 7 AND 8 OF A.OS ORDER ARE VERY RELEVANT AND A RE SO GIVEN HEREUNDER: '7. IN RESPONSE TO THE ABOVE SHOW CAUSE NOTICE, THE ASSESSES COMPANY VIDE LETTER DATED 28.1.2002 SUBMITTED THAT; ' THE ASSESSEE HAS ENTERED INTO THIS AGREEMENT WITH RAJENDER STEEL LTD.. ON 11.9.1995. THE LEASE PERIOD WAS AGREED UPON AT JIVE YEARS AND ALSO TAKEN INSURANCE POLICY FOR THE ABOVE MACHINARY FROM UNITE D INSURANCE CO. AND SUBMITTED THE SAME. FROM THE ABOVE, IT IS QUITE CLE AR THAT IT WAS A GENUINE LEASE TRANSACTION AND NOT ONLY A LOAN AGREEMENT. TH E MACHINES WAS PURCHASED BY THE ASSESSES AND SAME WAS GIVEN ON LEA SE TO M/S. RAJENDER STEEL LTD. AND LEASE RENT WAS ALSO RECEIVED ON SOME OCCASION, AND THEREFORE, IT CAN NOT BE A SHAM TRANSACTION AND DEPRECIATION A LLOWED IS IN ACCORDANCE WITH PROVISIONS OF THE IT ACT. FURTHER IN RESPECT OF OTHER LEASE BACK TRANSACTION S, THE ASSESSEE COMPANY HAS STALED AS PER THE PROVISION OF SECTION 32 OF THE ACT, THE DEPRECIATION IS ALLOWABLE TO THE ASSESSES ON COMPLI ANCE OF TWO CONDITIONS NAMELY: (I) ASSETS IS OWNED BY THE ASSESSEE AND ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 4 (II) IT SHOULD BE USED FOR THE PURPOSE OF THE BUSINESS. THEREFORE, ALL THE ABOVE ASSETS ARE OWNED BY GRUH F INANCE LTD. AND USED FOR THE LEASING BUSINESS OF THE ASSESSES AND THAT THRE IS NO MENTION OF OPERATING LEASE OR FINANCE LEASE FOR THE PURPOSE OF ALLOWABIL ITY OF DEPRECIATION UNDER THE IT ACT. THEREFORE DEPRECIATION IS RIGHTLY CLAIMED A ND ALLOWED. ' 8. I HAVE CAREFULLY CONSIDERED THE REPLY OF THE ASSESSEE COMPANY AND FOUND NOT ACCEPTABLE. SUBMISSIONS MADE BY THE ASSESSEE HAVE BEEN CONSIDERED CAREFULLY. IN ASSESSEE'S CASE REAL OWNERSHIP OF /FEE OWNER IS QUESTIONED AND DURING THE SEARCH AND SEIZU RE OPERATION BY DEPARTMENT IT WAS FOUND THAT THERE WAS NO ASSETS AVAILABLE AT TH E PREMISES OF RAJINDER STEEL LIMITED. IN VIEW OF THE FOLLOWING REASONS THE LEASE TRANSACTIONS AS REFERRED ABOVE ARE NOT CONSIDERED AS OPERATING LEASE AND THEREFORE DEPRECIATION ON SU CH LEASE IS NOT ALLOWABLE.' THESE PARAS QUOTED ABOVE SHOW THAT APPELLANT WAS AW ARE OF A.O'S BOTH GROUNDS FOR PROPOSED DISALLOWANCE OF CLAIM OF DEPRE CIATION IN CASE OF RAJENDER STEELS AND HAS ALSO ANSWERED BOTH THE SAID GROUNDS AND THEREFORE THIS OBJECTION IS NOT ACCEPTABLE. (III) THE PURCHASE OF MACHINERY FROM A THIRD PARTY AND THEN ITS DELIVERY TO M/S. RAJENDER STEELS LTD. DOES NOT CHANGE POSITION AS TH E CONDITION OF LEASE ARE AS EXPLAINED IN DETAIL BY A.O TO BE SUCH AS RAISE DOUB TS ABOUT RIGHT OF ARE AMPLE EVIDENCE OF THIS. THE PURCHASE ITSELF WAS AT THE BE HEST OF THE LESSEE AS THE DEED READS. 'WHEREAS THE LESSEE HAS REQUESTED THE LESSOR TO PUR CHASE THE EQUIPMENT' ..... ' AND WHEREAS THE LESSEE HAS OFFER ED TO TAKE ON LEASE THE EQUIPMENT SO PURCHASED BY THE LESSOR' ... ..... THIS ARGUMENT IS ALSO THEREFORE NOT ACCEPTABLE. ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 5 (IV) THE ARGUMENTS RAISED THAT DECISIONS OF THE ITA T, SPL. BENCH IN CASE OF MID EAST PORTFOLIO MANAGEMENT LTD. ARE NOT APPLI CABLE TO APPELLANT'S CASE BECAUSE OF VITAL POINTS OF DISTINCTION IN TERM S OF LEASES AND BECAUSE THE SPL. BENCH HAD RELIED ON DECISION OF MC DOWCLL WHICH IS OVERRULED BY AZADI BACHAO AUDOLAN 263 1TR 706 IS AL SO NOT ACCEPTABLE. THE ISSUE IN ME DOWELL AND AZADI BACHAO OF THERE BEING AN UNDERLYING MOTIVE SUPPOSEDLY RESULTING IN SOME ECON OMIC DETRIMENT OR PREJUDICE TO THE NATIONAL INTERESTS IS NOT REQUIRED TO BE ESTABLISHED HERE. IT IS HERE A CASE OF MERELY A MATTER OF ESTABLISHIN G THAT THE LEASE WERE ONLY FINANCIAL LEASES AND NOT OPERATIONAL ONES. NOW , I FIND THAT APPELLANT HAS NOT GIVEN ANY EVIDENCE TO DISPROVE FINDING OF A .O. IN THIS BEHALF. THERE IS NO ATTEMPT TO EXPLAIN THAT THE FINDINGS OF A.O IN PARAS 9 TO 14.1 ON PAGES 4 TO 11 OF THE ASSESSMENT ORDER ARE NOT JU STIFIED OR ARE INCORRECT. IN ABSENCE OF ANY SUCH ARGUMENTS OR EVIDENCE, I FI ND NO REASON TO DISTURB FINDING OF A.O. THE DISALLOWANCE OF DEPR ECIATION IS THEREFORE UPHELD AND GROUND OF APPEAL NOS. 1,2,3 AND 4 ARE RE JECTED. 6. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US . IT WAS SUBMITTED BY LD. A.R. OF THE ASSESSEE THAT THERE IS A DECISION O F SPECIAL BENCH OF THE TRIBUNAL ON THIS ISSUE HAVING BEEN RENDERED IN THE CASE OF INDUSLND BANK LTD. VS. ACIT AS REPORTED IN 135 ITD 165, MUMBAI SPECIAL BENCH, BUT THIS DECISION OF SPECIAL BENCH OF THE TRIBUNAL IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. HE SUBMITTED A COMPARATIV E CHART IN WHICH HE HAS NARRATED FACTS IN THE CASE OF INDUSLND BANK LTD. (S UPRA) AND IN THE CASE OF PRESENT ASSESSEE AND THE THIRD COLUMN IS REMARKS. WE WILL REPRODUCE THIS CHART AFTER NOTING DOWN FURTHER CONTENTIONS OF LD. A.R. OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE BOARDS CIRCULAR NO. 2 D ATED 09-02-2007 WAS NOT CONSIDERED BY THE SPECIAL BENCH AND HE FURTHER SUBM ITTED THAT THIS BOARDS ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 6 CIRCULAR IS AVAILABLE ON PAGE NO.117 OF THE PAPER B OOK. HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF NAVNITLAL C. ZAVERI V. K.K.SEN, CIT [1965] (SC), 56 ITR 198, IN SUPPORT OF THIS CONTENTION THAT BOARDS CIRCULARS ARE BINDING ON DEPARTMENT. RELIA NCE WAS ALSO PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: (A) CIT VS. GUJARAT GAS CO. LTD. [2009] (GUJ-HC), 380 ITR 243 (B) CIT VS. RAJASTHAN STATE ELECTRICITY BOARD, 204 CTR 415 (C) CIT V. SHAAN FINANCE (P) LTD.[1998] (SC), 231 I TR 308 (D) CIT V. PINNACLE FINANCE LTD. [2004] (GUJ-HC), 2 68 ITR 395 (E) CIT V. COSMO FILMS LTD., ITA NO. 1404/2008, COP Y ON PAGE NOS. 135 TO 145 OF PAPER BOOK. (F) CIT, DELHI-VI V. INSTALMENT SUPPLY LTD., [2012] 207 TAXMAN19 7. AS AGAINST THESE, IT WAS SUBMITTED BY LD. D.R. O F THE REVENUE THAT NOTHING IS BROUGHT ON RECORD BY LD. A.R. OF THE ASS ESSEE THAT AFTER THE EXPIRY OF LEASE PERIOD, ASSETS WERE TAKEN BACK BY THE ASSESSE E LESSOR. HE ALSO SUBMITTED THAT PRE-PAYMENT CHARGES ARE THERE IN TER MS AS PER LEASE AGREEMENT. HE ALSO DRAWN OUR ATTENTION TO PAGE NOS . 34 TO 56 OF THE PAPER BOOK RELATING TO ASSESSMENT YEAR 97-98 AND SUBMITTE D THAT IT IS ASSESSEES LETTER DATED 19.02.2003 SUBMITTED BY THE ASSESSEE B EFORE THE A.O. AND POINTED OUT THAT AS PER THOSE SUBMISSIONS OF ASSESS EE BEFORE THE A.O., ASSETS IN QUESTION WERE ULTIMATELY SOLD TO THE RESPECTIVE LESSEE AT 1% OF THE ORIGINAL COST OF ASSET. HE SUBMITTED THAT THE ASSET WAS SOL D TO MONARCH DYESTUFFS INDUSTRIES & EXPORTS LTD. FOR RS.25,300/- WHEREAS T HE ORIGINAL COST OF ASSEST ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 7 WAS RS.25.30 LACS. HE FURTHER SUBMITTED THAT ACCOR DINGLY ASSET WAS SOLD TO M/S. PRAKASH INDUSTRIES LIMITED FOR RS.1.02 LACS AND RS. 0.83 LAC WHEREAS THE ORIGINAL COST OF THESE ASSETS WERE RS.102 LACS AND RS.83 LACS RESPECTIVELY. HE FURTHER SUBMITTED THAT SIMILARLY IN RESPECT OF O THER ASSETS ALSO, THE ASSETS WERE SOLD TO THE LESSEE AT 1% OF THE ORIGINAL COST OF THE CONCERNED ASSETS. IN THE REJOINDER, THE LD. A.R. OF THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF HONBLE THE APEX COURT RENDERED IN THE CASE OF SOUT HERN TECHNOLOGIES LTD. V. JCIT AS REPORTED IN 320 ITR 577 (SC). 8. NOW WE PRODUCE HERE THE CHART SUBMITTED BY LD. A .R. OF THE ASSESSEE IN WHICH HE HAS MADE EFFORTS TO POINT OUT DIFFERENCE I N FACTS IN THE PRESENT CASE AND IN THE CASE OF INDUSLND BANK LTD. VS. ACIT (SUP RA). THIS IS AS UNDER:- SR. FACTS IN CASE OF INDUSIND BANK LTD. FACTS IN CASE OF GRUH FINANCE LTD. REMARKS 1 INITIALLY THE BANK SANCTIONED SHORT TERM LOAN & THEN CONVERTED IT INTO LEASE FINANCE. PAGE 53 - PARA 7.6 : DURING THE COURSE OF HEARING THE BENCH REQUIRED THE ID. AR TO PLACE ON RECORD THE SANCTION LETTER OF THE FINANCIAL ASSISTANCE BY THE ASSESSEE HANK TO INDO GULF FERTILIZERS. A COPY OF SUCH LETTER DATED 26TH MAY, 1997 HAS BEEN SUBMITTED WHICH WAS ADDRESSED BY THE ASSESSEE BANK TO THE LESSEE STATING THAT: 'WE REFER TO YOUR REQUEST FOR LEASE EQUIPMENT FOR RS.20.79 CRORE WITH A FACILITY OF RS. 19.00 CRORE AS PER CAPITALIZATION ADVANCE (WITHIN RS.20.79 CRORE) AND ARE PLEASED TO ADVANCE SANCTION OF THE SAME ON THE FOLLOWING TERMS NO PRECEDING SHORT TERM LOAN GIVEN, MACHINERY GIVEN ON LEASE ONLY. SANCTION LETTERS SHOWING THAT THE TRANSACTION IS LEASE ONLY PB PAGE NO. 1. RSL 421-423 2. DATAR 232-239 3. SWIL 348-354 4. TATA 432-435 ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 8 AND CONDITIONS'. THIS SANCTION LETTER DATED 26TH MAY, 1997 ALSO STATES THAT 'SHORT TERM LOAN' OF RS. 19.00 CRORE WAS SANCTIONED BY THE ASSESSEE BANK. ON A PERTINENT QUERY, THE LEARNED AR SUBMITTED THAT INITIALLY A SHORT TERM LOAN WAS SANCTIONED TO THE ASSESSEE ON 26TH MAY, 1997, WHICH WAS LATER ON CONVERTED INTO LEASE BY WAY OF THE AGREEMENT DATED 04.09.1997. 2 LEASE AGREEMENT EXECUTED BEFORE PURCHASE OF MACHINES : PAGE 53 - PARA 7.6 IN FINANCIAL TERMS, OUT OF THE TOTAL COST OF THE LEASED ASSET AT RS.19.45 CRORE THE ASSESSEE MADE PURCHASES APPROXIMATELY WORTH RS.18.40 CRORE BEFORE'THE DATE OF LEASE AGREEMENT ITSELF. THIS FACT CASTS A SERIOUS DOUBT ON THE GENUINENESS OF THE LEASE AGREEMENT ITSELF. WHEN AROUND 95% OF THE PURCHASE OF UNITS OF BOILER WAS MADE PRIOR TO THE DATE OF THE LEASE AGREEMENT THEN HOW IT COULD HAVE BEEN MENTIONED IN THE LEASE AGREEMENT THAT 'THE LESSOR HAS AGREED TO PURCHASE' AND LET ON LEASE THE EQUIPMENT TO THE LESSEE. THE FURTHER FACT THAT INITIALLY SHORT TERM LOAN OF RS.19.00 CRORE WAS SANCTIONED BY THE ASSESSEE TO INDO GULF FERTILIZER & CHEMICAL CORPORATION LIMITED WHICH AS PER THE LEARNED AR'S VERSION WAS LATER ON CONVERTED INTO LEASE, EVIDENTLY DESTROYS THE THEORY OF GENUINE LEASE. LEASE AGREEMENT EXECUTED BEFORE PURCHASE OF MACHINES BUT AFTER PLACEMENT OF ORDERS FOR MACHINERY. STEPS IN ACQUIRING LEASED MACHINERY: 1. MACHINERY IDENTIFICATION BY LESSEE & ORDERS PLACED. 2. LEASE AGREEMENT EXECUTED WITH LESSOR-GRUH 3. MACHINERY PURCHASED. 4. TOTAL PAYMENT MADE BY LESSOR. 3 TAX NEUTRALITY NOT PRESENT SINCE LESSOR IS HAVING PROFITS BUT LESSEE WAS HAVING ACCUMULATED BROUGHT FORWARD LOSSES : TAX NEUTRALITY IS PRESENT SINCE BOTH THE LESSOR AND LESSEE ARE SHOWING NET PROFIT AS PER PROFIT & LOSS A/C AS SHOWN IN THE AUDITED ACCOUNTS ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 9 PAGE 55 - PARA 7.9 IT CAN BE OBSERVED FROM THE ASSESSMENT ORDER THAT THE ASSESSEE FILED ITS RETURN DECLARING TOTAL INCOME OF RS.100.78 CRORE AFTER CLAIMING THE SAID DEPRECIATION. ON THE OTHER HAND, THE SO CALLED LESSEE I.E. INDO GULF FERTILIZER & CHEMICAL CORPORATION LIMITED HAD ACCUMULATED BROUGHT FORWARD LOSSES AND THEY FILED LOSS RETURN. THIS FACT IS APPARENT FROM PARA 2.21 OF THE ASSESSMENT ORDER. ..........................THE ATTENDING CIRCUMSTANCES OF THE CASE RUN IN COMPLETE CONTRADISTINCTION TO THE CLOAK OF LEASE AGREEMENT WHICH HAS BEEN USED BY THE ASSESSEE IN CONNIVANCE WITH INDO GULF FERTILIZER & CHEMICAL CORPORATION LIMITED AS A DUBIOUS WAY TO MITIGATE THE RIGHTFUL TAX LIABILITY. ............................ IT CAN BE APPRECIATED WITHOUT ANY DIFFICULTY THAT THE SO-CALLED LEASE AGREEMENT IS SHAM WHICH WAS EXECUTED WITH THE SOLE INTENTION OF ALLOWING THE ASSESSEE TO CLAIM DEPRECIATION IN ITS HANDS AS A MEASURE OF TAX AVOIDANCE. PROFITS AND PAYING TAXES AT THE SAME RATE BEING COMPANIES. OF LESSEE: PB PAGE NO. 1. RSL 374 2. DATAR 195 3. SWIL 308 4. TATA 9 (COPY ATTACHED HERETO) 4 ELEMENT OF BAILMENT IS MISSING. PAGE 25 CLAUSE 13 & 14 : FROM THE ABOVE CLAUSES IT CAN BE SEEN THAT IT IS THE LESSEE WHO HAS BEEN MADE ABSOLUTELY RESPONSIBLE TO BEAR THE LOSS DUE TO DAMAGE OR DESTRUCTION OF THE EQUIPMENT FOR ANY REASON WHATSOEVER. THE RESPONSIBILITY OF THE LESSEE IS NOT RESTRICTED ONLY TO TAKING 'AS MUCH CARE AS A MAN OF ORDINARY PRUDENCE WOULD' EVEN IF LESSEE IS MADE RESPONSIBLE FOR LOSSES DURING LEASE PERIOD, THE SAME IS POSSIBLE BY VIRTUE OF SPECIAL CONTRACT- SECTION 152 OF THE INDIAN CONTRACT ACT, 1872 AND THE CONTRACT DOES NOT CEASE TO BE BAILMENT. ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 10 AS WARRANTED UNDER SECTION 151 OF THE CONTRACT ACT, BUT COMPLETE IN ALL RESPECTS EXTENDING TO ALL SITUATIONS. ANY LOSS OCCURRING TO THE EQUIPMENT OR ITS PARTS, WHILE TAKING DUE CARE OR OTHERWISE, IS THE SOLITARY LIABILITY OF THE LESSEE. EVEN IF THE LOSS ARISES DUE TO ANY NATURAL CALAMITY SUCH AS FIRE, ACCIDENT, OR IN ANY MANNER WHATSOEVER, IT IS THE LESSEE WHO SHALL BEAR SUCH LOSS. IT IS FURTHER IMPERATIVE TO NOTE THAT IT IS NOT ONLY THE LIABILITY PUT ON THE LESSEE TO BEAR THE LOSS TO EQUIPMENT UNDER ANY CIRCUMSTANCE, BUT CLAUSE 14 OF THE AGREEMENT ALSO MANDATES THAT THE LESSEE WILL BE LIABLE EVEN FOR THE DAMAGES TO THIRD PARTIES TOWARDS ANY LOSS CAUSED DUE TO EQUIPMENT. THUS IT IS MANIFEST THAT THE ELEMENT OF BAILMENT IS COMPLETELY MISSING IN THE INSTANT AGREEMENT. 5 REFERENCE TO AS 19 AND GUIDANCE NOTE- INDICATORS OF FINANCE LEASE. PAGE 6 PARA 5.3 : ON A PERUSAL OF THE MEANING OF OPERATING LEASE AND FINANCE LEASE FROM THE GUIDANCE NOTE AND ACCOUNTING STANDARD 19 ABOVE WE FIND THERE IS NOT MUCH DIFFERENCE BETWEEN THE TWO. OPERATING LEASE HAS BEEN DEFINED IN BOTH AS A LEASE OTHER THAN FINANCE LEASE. AND WHEN WE EXAMINE THE MEANING OF 'FINANCE LEASE' AS PER GUIDANCE NOTE ALONG WITH EXPLANATION GIVEN IN PARA 4, IT TURNS OUT THAT ITS SCOPE IS ALMOST THE SAME AS THAT GIVEN IN THE AS 19. RATHER THE AS SIMPLY ELABORATES THE CONCEPT OF FINANCE LEASE AS GIVEN IN THE APPELLANT FALLS UNDER CLAUSE 23 TO 46 (EXCLUDING CLAUSE 37 & 38) OF AS 19 DEALING WITH OPERATING LEASE. ALL DISCLOSURES AS REQUIRED IN CASE OF OPERATING LEASE HAS BEEN MADE IN BOOKS OF LESSEE AND LESSOR. FURTHER AS PER BOARD CIRCULAR NO.2 DATED 09/02/2001:- 'IT HAS COME TO THE NOTICE OF THE BOARD THAT THE NEW ACCOUNTING STANDARD ON 'LEASES' ISSUED BY ICA1 REQUIRE LEASE CHARGES DEBITED IN P&L A/C PB PAGE NO. 1. RSL 375 2. DATAR 195 3. SWIL 313 4 . TATA 13 (COPY ATTACHED HERETO) DISCLOSURE IN NOTES ON ACCOUNTS PB PAGE NO. 1. RSL 387 2. SWIL 315 CIRCULAR NOT BROUGHT TO NOTICE ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 11 GUIDANCE NOTE WITHOUT MAKING ANY QUALITATIVE ADDITION TO OR SUBTRACTION FROM THAT. CAPITALIZATION OF ASSET BY LESSEE IN FINANCIAL LEASE TRANSACTION. BY ITSELF THE ACCOUNTING STANDARD WILL HAVE NO IMPLICATION ON ALLOWANCE OF DEPRECIATION ON ASSETS UNDER THE PROVISIONS OF INCOME TAX ACT. (JUDGEMENT PAPER BOOK PAGE-117) OF THE HONBLE BENCH IN INDUS IND BANK CASE. CIRCULAR IS BINDING ON DEPARTMENT. NAVNITLAL C. ZAVERI V. CIT [56 ITR 198 (SC)] 6 THE APPELLANT HAS CLAIMED 100% DEPRECIATION. PAGE 2 - PARA 2 BRIEFLY STATED THE FACTS OF THE CASE FOR THE A.Y. 1998-99 ARE THAT THE ASSESSEE BANK FILED ITS RETURN CLAIMING DEPRECIATION OF RS.25,70,03,293. THE ASSESSING OFFICER OBSERVED THAT THERE WAS SUBSTANTIAL VARIATION BETWEEN THE AMOUNT OF DEPRECIATION AS PER BOOKS OF ACCOUNT AND THAT CLAIMED IN THE COMPUTATION OF INCOME. SUCH VARIATION WAS FOUND MAINLY DUE TO 100% DEPRECIATION CLAIMED ON LEASED ASSETS TO THE TUNE OF RS.9,72,74,434 DURING THE YEAR. THE LESSOR HAS CLAIMED DEPRECIATION AS PER RATES APPLICABLE ON THE SAID ASSETS I.E. 25%, 40% ETC. REFER PAPER BOOK PAGE NO.29 7 LESSEE TO REPOSSESS THE ASSET AT THE END OF LEASE PERIOD AT A PRE- DETERMINED PRICE. PAGE 19-CLAUSE C : IT IS FURTHER RELEVANT TO NOTE THAT IT HAS BEEN DECIDED BETWEEN THE ASSESSES AND INDO GULF THAT THE ASSET WOULD BE SOLD TO THE LATTER AT THE END OF THE LEASE PERIOD AT A FIXED RESIDUAL VALUE EQUAL TO 1 % OF THE COST OF THE ASSET. THIS PRE-DETERMINED RESIDUAL VALUE CLAUSE HAS BEEN INSERTED TO ASSET TO BE REPOSSESSED BY LESSOR AT THE END OF LEASE PERIOD WITH AN OPTION TO SELL IT TO LESSEE AT A PRICE TO BE FIXED WHEN LEASE PERIOD IS OVER OR TO EXTEND THE LEASE PERIOD BY MUTUAL AGREEMENT. PB PAGE NO. 1. RSL 20.5 78 2.DATAR 20.5 133 3. SWIL 20.5 158 ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 12 ENSURE THAT THE ASSESSEE MUST NECESSARILY PART WITH ITS FORMAL OWNERSHIP OF THE BOILER AT THE END OF THE LEASE PERIOD SO THAT THE LESSEE BECOMES ABSOLUTE LEGAL OWNER APART FROM THE EXISTING REAL OWNER. ........... IT, THEREFORE, SHOWS THAT THE BOILER WHICH WAS LEASED OUT TO INDO GULF FERTILISERS AND CHEMICAL CORPORATION REMAINED WITH IT EVEN AFTER THE EXPIRY OF THE LEASE PERIOD. 8 REPAIRS & INSURANCE OF THE ASSET IS THE SOLE LIABILITY OF LESSEE. PAGE 19 - PARA D : CLAUSE 7 OF THE AGREEMENT STIPULATES THAT THE LESSEE SHALL INSTALL, USE AND OPERATE THE EQUIPMENT CAREFULLY AND MAINTAIN THE SAME IN GOOD WORKING CONDITION AND REPAIR AT ITS COST AND EXPENSES. IT IS FURTHER RELEVANT TO NOTE THAT THE ENTIRE LIABILITY TOWARDS INSURANCE HAS BEEN CAST ON THE LESSEE AND NOT THE ASSESSEE-LESSOR. INSURANCE POLICY OF THE ASSETS IS IN THE NAME OF LESSOR PB PAGE NO. 1. RSL 89 2. DATAR 117 3. SWIL 168 9 CASE RELIED UPON : ASEA BROWN BOVERI LTD. VS. IFCI [154 TAXMAN 512 (SC)] 1. OWNERSHIP IN THE NAME OF LESSEE 2. 25% DEPOSIT TAKEN. 3. AT THE END OF 5 YR. LEASE PERIOD ASSET TO BE TAKEN BY LESSEE WITHOUT ANY PAYMENT. 4. INSURANCE BY LESSEE. 5. LIFE SPAN OF THE ASSET IS EQUAL TO LEASE PERIOD. CASE QUOTED NOT APPLICABLE TO THE APPELLANT. 1. OWNERSHIP IN THE NAME OF LESSOR. 2. NO SECURITY DEPOSIT 3. AMOUNT TO BE DECIDED AT THE END OF 1 EASE PERIOD ON MUTUAL AGREEMENT IF LEASE IS NOT EXTENDED. IN CASE LEASE IS EXTENDED, IN CASE OF ASEA BROWN BOVERI LTD., THE PAYMENT BY LESSEE WAS MADE IN FULL AND PERIOD OF LEASE VIZ. FIVE YEARS HAD EXPIRED. NATURALLY, AS PER PROVISIONS OF AGREEMENT, LESSEE IS THE OWNER WHILE IN CASE OF APPELLANT, THIS IS FIRST YEAR OF LEASE AGREEMENT. THIS JUDGEMENT OF ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 13 TERMS TO BE DECIDED AFRESH. 4. INSURANCE IN NAME OF LESSOR. 5. LIFE SPAN OF ASSET IS MORE THAN LEASE PERIOD. ASEA BROWN BOVERI LTD. MENTIONED HAS ALREADY BEEN CONSIDERED IN CASE OF CIT V. COSMO FILM LTD. (SEE PBPAGENO.L35 TO 145) 10 REFERENCE TO JUDGMENT OF CIT V. PODAR CEMENT (P) LTD. [226ITR 625 (SC)] AND MYSORE MINERALS LTD VS CIT [239 ITR 775 (SC)] PAGE 41 PARA 6.6 BY APPLYING THE RATIO DECIDENDI OF THE JUDGMENT IN THE CASE OF MYSORE MINERALS LTD. TO THE FACTS OF THE PRESENT CASE, THERE HARDLY REMAINS ANY COMPLEXITY IN DECIDING THAT IT IS THE LESSEE WHO IS THE REAL OWNER OF BOILER. IT IS THE LESSEE WHO IS IN POSSESSION OF PROPERTY EXERCISING CONTROL OVER THE BOILER BY EXCLUDING OTHERS INCLUDING THE ASSESSEE- LESSOR THERE FROM. M/S INDO GULF HAS THE RIGHT TO USE AND TO OCCUPY THE PROPERTY IN ITS OWN RIGHT. APART FROM EXERCISING COMPLETE CONTROL OVER THE BOILER AND HAVING FULL RIGHT TO USE, THERE IS PRIOR UNDERSTANDING WITH THE LESSOR THAT AFTER THE EXPIRY OF THE LEASE PERIOD THE BOILER WILL BE TRANSFERRED TO IT AT A PREDETERMINED 1% VALUE. LESSOR HAS NOT RECEIVED FULL PAYMENT OF AMOUNT OF COST OF MACHINERY. PROPERTY IS ONLY GIVEN FOR USE BY LESSOR ON BAILMENT & NOT AS DEFACTO OWNER PB PAGE NO. 1. RSL 67 2. TATA 95 3. DATAR 123 3. SWIL 148 11 REFERENCE TO RBL CIRCULAR NO. FSCBC 18/24-01 -001 /93-94 DATED 14/02/1994 WHICH INTER ALEA DEALS WITH EQUIPMENT LEASING. PAGE 34 PARA 5.24] RBL CIRCULAR IS NOT BINDING UNDER THE INCOME TAX ACT, 1961. SOUTHERN TECHNOLOGIES LTD. V. JCIT [320 ITR 577 (SC)] ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 14 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIALS ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. WE FIND THAT THE ISSUE IN DISPUTE WAS DECIDED BY THE SPECIA L BENCH OF THE TRIBUNAL IN THE CASE OF INDUSLND BANK LTD. VS. ACIT (SUPRA) AND FOR THE SAKE OF READY REFERENCE, PARA NO.5.2 OF THIS DECISION IS REPRODUC ED AS UNDER:- 5.2 AS PER GUIDANCE NOTE ON ACCOUNTING FOR LEASES, FINANCE LEASE MEANS: A LEASE UNDER WHICH THE PRESENT VALUE OF TH E MINIMUM LEASE PAYMENTS AT THE INCEPTION OF THE LEASE EXCEEDS OR I S EQUAL TO SUBSTANTIALLY THE WHOLE OF THE FAIR VALUE OF THE LE ASED ASSET. OPERATING LEASE HAS BEEN DEFINED TO MEAN : A LEASE OTHER TH AN A FINANCE LEASE. THE PHRASE FAIR VALUE AS USED IN THE DEFINITION O F FINANCE LEASE HAS BEEN FURTHER DEFINED TO MEAN : THE AMOUNT FOR WHIC H AN ASSET COULD BE EXCHANGED BETWEEN A KNOWLEDGEABLE, WILLING BUYER AN D A KNOWLEDGEABLE, WILLING SELLER IN AN ARMS LENGTH TR ANSACTION. THE EXPLANATION FURTHER ELABORATES THE DEFININTION OF FINANCE LEASE BY PROVIDING THAT: A LEASE IS CLASSIFIED AS A FINANCE LEASE IF IT SECURES FOR THE LESSOR THE RECOVERY OF HIS CAPITAL OUTLAY PLUS A RETURN ON THE FUNDS INVESTED DURING THE LEASE TERM. SUCH A LEASE IS NO RMALLY NON- CANCELLABLE AND THE PRESENT VALUE OF THE MINIMUM LE ASE PAYMENTS AT THE INCEPTION OF THE LEASEEXCEEDS OR IS EQUAL TO SU BSTANTIALLY THE WHOLE OF THE FAIR VALUE OF THE LEASED ASSET. THE LEARNE D AR HAS INVITED OUR ATTENTION TOWARDS CLAUSE 28 OF THIS GUIDANCE NOTE W HICH PROVIDES THAT THE RECOMMENDATIONS OF THIS GUIDANCE NOTE SHALL APP LY TO ALL ASSETS LEASED DURING THE ACCOUNTING PERIODS BEGINNING ON O R AFTER 1 ST APRIL, 1995. IT WAS PUT FORTH THAT THE ASSESSEE ENTERED I NTO THE INSTANT LEASE TRANSACTION DURING THE PREVIOUS YEAR RELEVANT TO TH E ASSESSMENT YEAR 1998-99 AND HENCE THIS GUIDANCE NOTE SHALL BE RELEV ANT FOR DETERMINING THE DISTINCTION BETWEEN THE OPERATING AND FINANCE L EASE IN THE YEARS IN QUESTION. FROM THE ABOVE GUIDANCE NOTE WE CAN UNDE RSTAND THE AMBIT ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 15 OF FINANCE LEASE IN A GENERIC SENSE TO MEAN A LEASE UNDER WHICH THE LESSOR SECURES THE RECOVERY OF HIS CAPITAL OUTGO PL US A RETURN ON SUCH FUNDS DURING THE LEASE TERM AND THE PRESENT VALUE O F THE MINIMUM LEASE PAYMENTS AT THE INCEPTION OF THE LEASE EXCEEDS OR I S EQUAL TO SUBSTANTIALLY THE WHOLE OF THE FAIR VALUE OF THE LE ASED ASSET. ANOTHER HIGHLIGHT OF SUCH A LEASE IS THAT IT IS NORMALLY NO N-CANCELLABLE. 10. FROM THE ABOVE PARA OF THE DECISION OF THE SPEC IAL BENCH OF THE TRIBUNAL, WE FIND THAT IT IS NOTED BY THE SPECIAL B ENCH OF THE TRIBUNAL THAT THE GUIDANCE NOTE SHALL APPLY TO ALL ASSETS LEASED DURI NG THE ACCOUNTING PERIODS BEGINNING ON OR AFTER 1 ST APRIL, 1995 AND THEREFORE, THE SAME ARE APPLICABLE IN THE PRESENT TWO YEARS WHICH ARE BEFORE US. IN PARA NO.5.6 OF THIS DECISION OF THE TRIBUNAL, THE SPECIAL BENCH OF THE TRIBUNAL HAS CONSIDERED THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF ASEA BROWN BOVERI LTD. V. INDUSTRIAL FINANCE CORPN. OF INDIA [(2006) 154 TAXM AN 512 (SC) AND THEREAFTER IT HAS REPRODUCED VARIOUS FEATURES OF FINANCE LEASE AS NOTED BY HONBLE APEX COURT AS PER DICTIONARY OF ACCOUNTING AND FINANCE BY R. BROCKINGTON AND SOME OTHER BOOKS BY J.C. VERMA, SHR I VINOD KOTHARI. THESE FEATURES ARE AS UNDER: 1. THE ASSET IS USE-SPECIFIC AND IS SELECTED FOR T HE LESSEE SPECIFICALLY. USUALLY, THE LESSEE IS ALLOWED TO SE LECT IT HIMSELF. 2. THE RISKS AND REWARDS INCIDENT TO OWNERSHIP ARE PASSED ON TO THE LESSEE. THE LESSOR ONLY REMAINS THE LEGAL OWNER OF THE ASSET. 3. THEREFORE, THE LESSEE BEARS THE RISK OF OBSOLESC ENCE. 4. THE LESSOR IS INTERESTED IN HIS RENTALS AND NOT IN THE ASSET. HE MUST GET HIS PRINCIPAL BACK ALSONG WITH INTEREST. THEREFORE, THE LEASE IS NON-CANCELLABLE BY EITHER PARTY. ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 16 5. THE LEASE PERIOD USUALLY COINCIDES WITH THE ECON OMIC LIFE OF THE ASSET AND MAY BE BROKEN INTO PRIMARY AND SECONDARY PERIOD. 6. THE LESSOR ENTERS INTO THE TRANSACTION ONLY AS A FINANCIER. HE DOES NOT BEAR THE COSTS OF REPAIRS, MAINTENANCE OR OPERATION. 7. THE LESSOR IS TYPICALLY A FINANANCIAL INSTITUTIO N AND CANNOT RENDER SPECIALIZED SERVICE IN CONNECTION WITH THE ASSET. 8. THE LEASE IS USUALLY FULL-PAY-OURT, THAT IS, THE SINGLE LEASE REPAYS THE COST OF THE ASSET TOGETHER WITH THE INTEREST. 11. SPECIAL BENCH OF THE TRIBUNAL HAS DECIDED THIS ISSUE IN PARA NO. 6.6 AND HELD THAT IN THE CASE OF FINANCE LEASE, THE LESSEE IS ENTITLED FOR DEPRECIATION WHEREAS ONLY IN THE CASE OF OPERATING LEASE, THE LE SSOR IS ENTITLED FOR DEPRECIATION. FOR THE SAKE OF READY REFERENCE, WE REPRODUCE PARA NO.6.6 OF THE DECISION OF THE SPECIAL BENCH, WHICH IS AS UNDE R: THE COROLLARY WHICH FOLLOWS ON CONSIDERATION OF TH E PODAR CEMENT (P) LTD. (SUPRA) ALONG WITH MYSORE MINERALS LTD. (SUPRA ), IS THAT FOR THE PURPOSES OF SECTION 32(1) THE WORD OWNER IS TO BE ASSIGNED A WIDER MEANING SO THAT ANYONE IN POSSESSION OF SUCH PROPER TY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS AS BEING EXCLUDED THERE FROM AND HAVING A RIGHT IN HIS OWN RIGHT WOULD BE THE OWNER OF BUILDING FOR THE PROPOSE OF SECTION 32 (1) NOTWITHDTANDING THE FACT THAT A FORMAL DEED OF TITLE MAY NOT HAVE B EEN EXECUTED AND REGISTERED IN HIS NAME. BY APPLYING THE RATIO DECI DENDI OF THE JUDGMENT IN THE CASE OF MYSORE MINERALS LTD. (SUPRA) TO THE FACTS OF THE PRESENT CASE, THERE HARDLY REMAINS ANY COMPLEXITY IN DECIDI NG THAT IT IS THE LESSEE WHO IS THE REAL OWNER OF BOILER. IT IS THE LESSEE WHO IS IN POSSESSION OF PROPERTY EXERCISING CONTROL OVER THE BOILDER BY EXCLUDING OTHERS INCLUDING THE ASSESSEE-LESSOR THERE FROM. M /S INDO GULF HAS THE RIGHT TO USE AND TO OCCUPY THE PROPERTY IN ITS OWN RIGHT. APART FROM EXERCISING COMPLETE CONTROL OVER THE BOILER AND HAV ING FULL RIGHT TO USE, ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 17 THERE IS PRIOR UNDERSTANDING WITH THE LESSOR THAT A FTER THE EXPIRY OF THE LEASE PERIOD THE BOILER WILL BE TRANSFERRED TO IT A T A PREDETERMINED 1% VALUE. THE ASSESSEE-LESSOR HAS ABSOLUTELY NO CONTR OL OVER THE PROPERTY DURING THE LEASE PERIOD. IT HAS NO OPTION TO REPOS SESS THE BOILED EITHER DURING THE CONTINUATION OF LEASE PERIOD OR AFTER TH AT. ALL THE RISKS AND REWARDS ATTACHED TO THE PROPERTY ARE THAT OF THE LE SSEE. BY NO STANDARD WHATSOEVER THE ASSESSEE-LESSOR CAN BE DESCRIBED AS THE OWNER OF THE PROPERTY. THUS WHEREAS IN A CASE OF OPERATING LEAS E, THE LESSOR IS BOTH DE FACTO AND DE JURE OWNER, IN THE CASE OF FINANCE LEASE, THE LESSEE IS DE FACTO OWNER AND THE LESSOR IS ONLY DE JURE OWNER . WE, THEREFORE, HOLD THAT IN CASE OF A FINANCE LEASE IT IS THE LESSEE WH O IS THE OWNER OF THE PROPERTY FOR ALL PRACTICAL PURPOSES ENTITLED TO DEP RECIATION AS PER LAW AND NOT THE LESSOR. WHEN THE LESSORS SO CALLED SYMBOL IC OWNERSHIP IS PITTED AGAINST THE LESSEES REAL OWNERSHIP, ONE HARDLY ENC OUNTERS ANY TROUBLE IN FINDING OUT THAT IT IS THE LESSEE WHO IS THE REA L OWNER. 12. THEREAFTER IN PARA NO. 8 OF THE DECISION OF THE TRIBUNAL, IT WAS HELD THAT THE AGREEMENT IN QUESTION BEFORE THE SPECIAL BENCH CANNOT BE CALLED AS THE FINANCIAL LEASE AGREEMENT AND IT WAS HELD TO BE A S IMPLE CASE OF ADVANCING OF LOAN BY THE ASSESSEE TO THE LESSEE AND THE SO CALLE D LEASE AGREEMENT WAS HELD TO BE A DEVICE TO REDUCE TAX LIABILITY. IN TH E LIGHT OF THIS FINDING OF THE SPECIAL BENCH OF THE TRIBUNAL, IT IS NOT NECESSARY THAT ALL THE FACTS OF THAT CASE SHOULD TALLY WITH THE PRESENT CASE BECAUSE IN THE P RESENT CASE, THIS IS NOT A CASE OF THE REVENUE THAT IT IS NOT A CASE OF FINANC E LEASE BUT A CASE OF SIMPLE CASE OF ADVANCING OF LOAN BY THE ASSESSEE TO THE LE SSEE AND THE LEASE AGREEMENT IS A DEVICE TO REDUCE THE TAX LIABILITY. THEREFORE, REGARDING VARIOUS DIFFERENCES POINTED OUT BY THE LD. A.R. OF THE ASSE SSEE IN THE FACTS OF THE PRESENT CASE AND THE FACTS IN THE CASE OF INDUSLND BANK LTD. VS. ACIT (SUPRA), ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 18 WE FEEL THAT ONLY THOSE ASPECTS ARE TO BE EXAMINED ON THE BASIS OF WHICH THIS ISSUE CAN BE DECIDED THAT WHETHER THE LEASE IN THE PRESENT CASE IS A FINANCE LEASE OR OPERATING LEASE AND IF IT IS SEEN THAT FAC TS ON THAT ISSUE ARE SIMILAR THEN DIFFERENCE IN FACTS ON OTHER ASPECTS ARE NOT R ELEVANT. AS PER VARIOUS SALIENT FEATURES OF FINANCE LEASE NOTED BY HONBLE APEX COURT AND REPRODUCED BY THE SPECIAL BENCH OF THE TRIBUNAL IN PARA NO.5.6 REPRODUCED ABOVE, WE FIND THAT IF THE ASSET IS SELECTED BY THE LESSEE AND RIS KS AND REWARDS INCIDENTAL TO OWNERSHIP ARE PASSED ON TO THE LESSEE, THE LESSOR O NLY REMAINS THE LEGAL OWNER OF THE ASSET. THE OTHER IMPORTANT ASPECT IS THIS THAT THE SINGLE LEASE REPAYS THE COST OF THE ASSET TOGETHER WITH THE INTE REST. THE OTHER IMPORTANT FEATURE NOTED BY HONBLE APEX COURT AND REPRODUCED BY THE SPECIAL BENCH IS THIS THAT THE LESSOR IS TYPICALLY A FINANCIAL INSTI TUTION AND CANNOT RENDER SPECIALIZED SERVICE IN CONNECTION WITH THE ASSET AN D IT DOES NOT BEAR THE COST OF REPAIRS AND MAINTENANCE OR OPERATION. THIS IS A LSO HELD TO BE AN IMPORTANT FEATURE THAT LEASE IS NON-CANCELLABLE BY EITHER PAR TY. 13. NOW, WE EXAMINE WHETHER ON THESE PARAMETERS THE FACTS OF THE PRESENT CASE ARE TALLYING WITH THE FACTS IN THE CASE OF IND USLND BANK LTD. VS. ACIT(SUPRA). 14. REGARDING THE FIRST ASPECT AS TO WHETHER THE AS SET IN QUESTION WAS SELECTED BY THE LESSEE, WE FIND THAT IT IS NOTED BY THE A.O. IN PAGE NO.9 OF THE ASSESSMENT ORDER FOR A.Y.96-97 THAT LEASE ASSETS AR E VARIOUS TYPES DEPENDING UPON THE REQUIREMENT OF THE LESSEE AND IN ALL THE CASES, THE LESSEE PURCHASED THE ASSET ON A LEASE FINANCE OF ASSETS RE QUIRED BY HIM AND THAT THE ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 19 ASSET IS USER SPECIFIC AND IS SELECTED BY THE LESSE E FOR HIS OWN USE AND HENCE THE FIRST CONDITION REGARDING FINANCE LEASE IS SATI SFIED IN THE PRESENT CASE. THE SECOND ASPECT IS THAT RISK AND REWARDS, INCIDENTAL TO OWNERSHIP ARE PASSED ON TO THE LESSEE. IN THIS REGARD, WE FIND THAT IN PAR A NO.10(E), IT IS NOTED BY THE A.O. IN ASSESSMENT ORDER FOR A.Y.96-97 THAT LESSOR SHALL IN NO WAY BE LIABLE TO THE LESSEE FOR ANY LIABILITY/CLAIM ETC. IN RESPECT OF ANY DAMAGE/LOSS OF THE ASSET ITS TRANSPORTATION, DELIVERY, USE OR ITS FAILURE TO PERFORM OPERATE ETC. IT IS NOTED BY THE A.O. THAT LESSOR IS NOT REQUIRED TO BEAR ANY EXPENSE IN CONNECTION TO INSURANCE, REPAIR ETC. AS PER PARA 10(F). ALL THES E CLAUSES OF LEASE AGREEMENT GO TO SHOW THAT RISK AND REWARDS INCIDENTAL TO THE OWNERSHIP OF THE ASSET IN QUESTION IS PASSED ON TO THE LESSEE AND HENCE, THE SECOND CONDITION OF FINANCE LEASE IS ALSO SATISFIED IN THE PRESENT CASE . THE THIRD CONDITION IS THAT SINGLE LEASE REPAYS THE COST OF THE ASSET TOGETHER WITH THE INTEREST. IN THIS REGARD, THERE IS NO MENTION IN THE ASSESSMENT ORDER BUT AS PER LEASE DEED BETWEEN ASSESSEE AND RAJENDRA STEEL LTD. DATED 11.0 9.1995, THE COPY OF WHICH IS AVAILABLE ON PAGE NOS. 62 TO 87 OF THE PAP ER BOOK, WE FIND THAT THE COST OF ASSET IS RS.1,47,81,250/- AND QUARTERLY LEA SE RENTAL FOR 20 QUARTERS I.E. 60 MONTHS WAS FIXED AT RS.12,45,506/- PER QUARTER. HENCE, TOTAL RENTAL TO BE PAID BY THE LESSEE TO THE LESSOR IN THE ENTIRE LEAS E OF THE 60 MONTHS WAS OF RS.2,49,10,120/- AND EVEN IF WE CALCULATE 12% INTE REST PER ANNUM ON THE TOTAL COST OF ASSET FOR ENTIRE LEASE PERIOD OF 5 YE ARS I.E. 60 MONTHS, THE INTEREST OF 5 YEARS COMES TO RS.88,68,750/- ALTHOUGH THE LE SSEE IS PAYING LEASE RENT QUARTERLY AND THEREFORE INTEREST HAS TO BE REDUCED EVERY QUARTER BY THE ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 20 AMOUNT OF INTEREST ON PRINCIPAL REPAID BECAUSE THE PRINCIPAL OUTSTANDING WILL BE REDUCED BY THAT PORTION OF THE LEASE RENTAL WHIC H CONSTITUTES PRINCIPAL RE- PAYMENT BUT EVEN IF, THE ENTIRE INTEREST FOR THE PE RIOD OF FIVE YEARS IS CONSIDERED I.E. RS.88,68,750/-, THE TOTAL OF ORIGIN AL COST PLUS INTEREST COMES TO RS.236.50 LACS ONLY WHEREAS THE ASSESSEE IS GETTING RENTAL OF RS.249.10 LACS IN RESPECT OF THIS ASSET FROM THE LESSEE AND HENCE, IT IS SEEN THAT THE SINGLE LEASE COVERS RECOVERY OF ENTIRE COST OF ASSET PLUS INTEREST FOR THE ENTIRE LEASE PERIOD. THEREFORE, THIS CONDITION OF FINANCE LEASE IS ALSO SATISFIED IN THE PRESENT CASE. REGARDING THIS LEASE OR ANY OTHER LE ASE, IT WAS NOT BROUGHT ON RECORD BY LD. A.R. OF THE ASSESSEE TO SHOW THAT LEA SE RENTAL IS SUCH THAT IT WILL NOT RECOVER THE COST OF ASSET PLUS INTEREST AND THE REFORE WE INFER THAT THIS CONDITION IS FULFILLED IN RESPECT OF ALL THE LEASE ASSETS. THE OTHER IMPORTANT FEATURE IS THAT THE LESSOR DOES NOT BEAR THE COST O F REPAIRS, MAINTENANCE AND OPERATION. IN THIS REGARD, A CLEAR FINDING IS GIVE N BY THE A.O. IN PARA NO. 10(F) OF THE ASSESSMENT ORDER FOR A.Y. 96-97 THAT THE LES SEE IS REQUIRED TO PAY ALL TAXES PENALTY ETC. LEVIED EITHER IN CONNECTION WITH THE TRANSACTION OR THE ASSET BY SALES TAX, INTEREST TAX ETC. AND HE IS ALSO TO B EAR ALL COSTS IN CONNECTION WITH THE PRESERVATION OF ASSET BY INSURANCE, REPAIR ETC. HENCE, IT IS CLEAR THAT THIS CONDITION IS ALSO FULFILLED FOR HOLDING THAT THE LE ASE IN THE PRESENT CASE IS THE FINANCE LEASE. WE HAVE ALREADY SEEN THAT THE LEASE IS NOT CANCELLABLE BY ANY OF THE PARTIES. IT IS ALSO POINTED OUT BY THE LD. D.R. OF THE REVENUE THAT AS PER THE SUBMISSION OF THE ASSESSEE DATED 19.02.2003 SUB MITTED TO THE A.O. FOR A.Y. 97-98, WHICH IS AVAILABLE ON PAGE NOS. 34 TO 5 6 OF THE PAPER BOOK FOR THAT ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 21 YEAR, ALL THE ASSETS WERE ULTIMATELY SOLD TO THE LE SSEE AT 1 % OF THE ORIGINAL COST OF THE ASSET. 15. CONSIDERING THESE FACTS, WE ARE SATISFIED THAT IN THE PRESENT CASE, THE ASSESSEE HAS SATISFIED AND FULFILLED ALL THE IMPORT ANT FEATURES OF A FINANCE LEASE AS NOTED BY HONBLE APEX COURT AND REPRODUCED BY THE SPECIAL BENCH OF THE TRIBUNAL IN PARA NO.5.6 OF THE DECISION AND THEREFORE, EVEN IF THERE ARE SOME DIFFERENCE IN FACTS ON OTHER ISSUES IN THE PRE SENT CASE AND IN THE CASE OF INDUSLND BANK LTD. VS. ACIT (SUPRA), IT DOES NOT MA KE ANY DIFFERENCE AND INSPITE OF OTHER DIFFERENCES, IF ANY, IT HAS TO BE HELD IN THE PRESENT CASE THAT THE LEASE IN QUESTION IS A FINANCE LEASE AND NOT AN OPE RATING LEASE. ONCE, WE COME TO THIS CONCLUSION THAT LEASE IN QUESTION IN P RESENT CASE IS FINANCE LEASE, AS PER THE SAME DECISION OF THE SPECIAL BENCH OF TH E TRIBUNAL, DEPRECIATION IS ALLOWABLE TO THE LESSEE AND NOT TO THE LESSER. 16. NOW, WE DISCUSS THE APPLICABILITY OF VARIOUS JU DGMENTS CITED BY LD. A.R. OF THE ASSESSEE AS NOTED ABOVE: THE FIRST JUDGMENT IS RENDERED IN THE CASE OF NAVNI TLAL C. ZAVERI V. K.K.SEN, CIT (SUPRA). RELIANCE ON THIS DECISION WA S PLACED IN SUPPORT OF THIS CONTENTION THAT THE BOARD CIRCULAR IS BINDING ON RE VENUE. IN THIS CASE, THE ISSUE BEFORE HONBLE APEX COURT WAS REGARDING THE C ONSTITUTIONAL VALIDITY OF DEEMING PROVISION REGARDING TREATING LOANS AS DIVID ENDS AND HENCE, THIS JUDGMENT IS NOT RELEVANT IN THE PRESENT CASE. THE SECOND JUDGMENT CITED BY HIM IS THE JUDGMENT O F HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. GUJARAT GAS CO. LTD.(SUPRA). IN ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 22 THIS CASE, THE DECISION OF HONBLE GUJARAT HIGH COU RT IS THIS THAT THE TRIBUNALS FINDING IS THIS THAT TRANSACTION WAS GENUINE AND ON THIS FINDING, THE TRIBUNAL ALLOWED THE DEPRECIATION. IT WAS HELD BY HONBLE G UJARAT HIGH COURT THAT THIS IS THE FINDING OF FACT AND THEREFORE, NO QUESTION O F LAW ARISES. IN THE PRESENT CASE, THE DISPUTE IS THIS AS TO WHETHER THE LEASE I S FINANCE LEASE OR OPERATING LEASE WHICH WAS NOT BEFORE HONBLE GUJARAT HIGH COU RT IN THAT CASE AND THEREFORE, THIS JUDGMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. THE THIRD JUDGMENT CITED BY HIM IS THE JUDGMENT OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. RAJASTHAN STATE ELECTRICITY BOARD (SUPRA). SIMILARLY IN THIS CASE, THE QUESTION BEFORE RAJASTH AN HIGH COURT WAS REGARDING THE GENUINENESS OF SALE AND LEASE TRANSACTION. IT IS THE FINDING THAT THE SALE AND LEASE TRANSACTION ENTERED INTO WAS GENUINE AND THE ASSESSEE IS ENTITLED TO DEDUCTION OF LEASE RENT PAID BY IT . IN THESE FACT S, IT IS ALSO HELD BY HONBLE RAJASTHAN HIGH COURT THAT THIS FINDING OF THE TRIBU NAL IS NOT PERVERSE AND THEREFORE, NO QUESTION OF LAW ARISES. SINCE, THE F ACTS AND ISSUES ARE DIFFERENT, THIS JUDGMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. THE FOURTH JUDGMENT CITED BY HIM IS THE JUDGMENT O F HONBLE SUPREME COURT IN THE CASE OF CIT V. SHAAN FINANCE (P) LTD.( SUPRA). IN THIS CASE, THE ISSUE BEFORE HONBLE THE APEX COURT WAS AS TO WHETH ER THE ASSESSEE WHO IS IN THE BUSINESS OF LEASING OF MACHINERY TO MANUFACT URE IS ENTITLED TO INVESTMENT ALLOWANCE U/S 32 A OF THE IT ACT OR NOT. IT IS SEEN THAT IN THAT CASE, THIS ISSUE WAS NOT IN DISPUTE BEFORE HONBLE APEX C OURT AS TO WHETHER THE ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 23 ASSESSEE WHO HAS GIVEN FINANCE LEASE IS ENTITLED TO DEPRECIATION OR NOT. HENCE, THIS JUDGMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. THE FIFTH JUDGMENT CITED BY HIM IS THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. PINNACLE FINANCE LTD.(S UPRA). IN THIS CASE, IT WAS NOT THE ISSUE IN DISPUTE BEFORE THE HONBLE GUJARAT HIGH COURT AS TO WHETHER THE ASSESSEE GIVING A FINANCE LEASE IS ENTITLED TO DEPRECIATION OR NOT. HENCE, THIS JUDGMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. THE SIXTH JUDGMENT CITED BY HIM IS THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. COSMO FILMS LTD.(SUPRA) . IN THAT CASE, THIS ISSUE WAS NOT IN DISPUTE BEFORE HONBLE DELHI HIGH COURT AS TO WHETHER THE ASSESSEE CARRYING OUT BUSINESS OF GIVING FINANCE LE ASE IS ELIGIBLE FOR DEPRECIATION AND HENCE, THIS JUDGMENT OF HONBLE DE LHI HIGH COURT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. THE SEVENTH JUDGMENT CITED BY HIM IS THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT, DELHI-VI V. INSTALME NT SUPPLY LTD.(SURPA). IN THAT CASE, THE QUESTION BEFORE HONBLE DELHI HIGH C OURT WAS WHETHER DEPRECIATION IS ALLOWABLE TO THE ASSESSEE IN RESPEC T OF ASSETS LEASED TO HCL HEWLETT PACKARD LIMITED. IN THAT CASE, THE ISSUE W AS RESTORED BACK BY HONBLE DELHI HIGH COURT TO THE TRIBUNAL FOR DECIDI NG THE ISSUE AFRESH BY HOLDING THAT THE MATTER HAS NOT BEEN EXAMINED BY TH E TRIBUNAL FROM PROPER PERSPECTIVE. IT WAS ALSO HELD THAT WHETHER TRANSA CTION IN QUESTION WAS A FINANCE AGREEMENT OR AN OPERATING LEASE COULD NOT B E DECIDED BY MERELY LOOKING AT TITLE OF AGREEMENT ITSELF OR NOMENCLATUR E GIVEN TO SAID AGREEMENT ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 24 RATHER, SURROUNDING CIRCUMSTANCES AS WELL AS NATURE OF ASSET WERE ALSO TO BE TAKEN INTO ACCOUNT. HENCE, IT IS SEEN THAT THIS JU DGMENT HAS NOT LAID DOWN ANY RATIO AND THE MATTER WAS REMANDED BACK TO THE TRIBU NAL AND THEREFORE, THIS JUDGMENT IS ALSO NOT RELEVANT IN THE PRESENT CASE. LAST JUDGMENT CITED BY HIM IS THE JUDGMENT OF HON BLE APEX COURT RENDERED IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA). THIS JUDGMENT IS ALSO NOT APPLICABLE BECAUSE IN THIS CASE ALSO, IT W AS NOT THE DISPUTE AS TO WHETHER DEPRECIATION IS ALLOWABLE TO LESSOR ON FINA NCE LEASE. FROM THE ABOVE DISCUSSION, IT IS SEEN THAT NONE OF THE JUDGMENTS CITED BY LD. A.R. OF THE ASSESSEE IS RELEVANT IN THE PRES ENT CASE. 17. WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDE R OF LD. CIT(A) IN BOTH THE YEARS BECAUSE IN A.Y. 97-98 ALSO, THE LD. A.R. OF T HE ASSESSEE DID NOT PRESS THE GROUND NO.1 REGARDING RE-OPENING AND APART FROM THAT, THERE IS ONLY ONE ISSUE I.E. DEPRECIATION ON LEASE ASSETS AND IT WAS AGREED BY BOTH THE SIDES THAT THE FACTS ARE SIMILAR IN BOTH THE YEARS AND TH EREFORE, THE DECISION CAN BE ON THE BASIS OF ONE ORDER AND THE SAME CAN BE FOLLO WED IN THE NEXT YEAR. 18. IN THE RESULT, BOTH APPEALS OF THE ASSESSEE FOR QUANTUM PROCEEDING ARE DISMISSED. 19. NOW WE TAKE UP THE ASSESSEES APPEAL IN PENALTY PROCEEDING FOR A.Y. 97-98 IN ITA NO. 1008/AHD/06. 20. THE GROUND RAISED BY THE ASSESSEE IS AS UNDER:- 1. THE LEARNED CIT (A)-VIII, AHMEDABAD HAS ERRED I N LAW AND FACTS OF THE CASE BY CONFIRMING THE PENALTY OF RS.18,27,7 40/- LEVIED U/S 271(1)(C) OF THE IT ACT, 1961 BY THE ASSESSING OFFI CER AFTER HOLDING THAT ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 25 THE APPELLANT HAS KNOWINGLY AND DELIBERATELY FURNIS HED INACCURATE PARTICULARS OF INCOME. 21. IT IS SUBMITTED BY LD. A.R. OF THE ASSESSEE THA T EVEN IF THE DECISION OF TRIBUNAL IN QUANTUM PROCEEDING IS AGAINST THE ASSES SEE, PENALTY IS NOT JUSTIFIED IN THE FACTS OF PRESENT CASE BECAUSE ALLO WABILITY OF THE DEPRECIATION ON FINANCE LEASE WAS A DEBATABLE ISSUE TILL THE DECISI ON OF THE SPECIAL BENCH OF THE TRIBUNAL RENDERED ON 14.03.2012. HE ALSO PLACE D RELIANCE ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. 322 ITR 158 . LD. D.R. OF THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDER OF THE AUTHORITIE S BELOW AND THE JUDGMENT CITED BY THE LD. A.R. OF THE ASSESSEE. 23. CONSIDERING THE FACTS IN THE PRESENT CASE, WE A RE OF THE CONSIDERED OPINION THAT IN THE PRESENT CASE, THE PENALTY U/S 2 71(1)(C) IS NOT JUSTIFIED IN RESPECT OF DISALLOWANCE OF DEPRECIATION. IT IS SEE N THAT THE SAME IS IN RESPECT OF DISALLOWANCE OF DEPRECIATION ON FINANCE LEASE AL THOUGH THE CLAIM WAS ON THIS BASIS THAT THESE ARE OPERATING LEASE. WE FIND THAT THERE WAS NO CLARITY ON THIS ASPECT AND THEREFORE, IT CANNOT BE SAID THAT T HERE IS ANY CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME IN THE FACTS OF PRESENT CASE BECAUSE ISSUE WAS DEBATABLE TILL VERY RECENTLY WHEN SPECIAL BENCH OF THE TRIBUNAL CLARIFIED THE LEGAL POSITION. WE, THE REFORE, DELETE THE PENALTY. ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 26 24. IN THE COMBINED RESULT, BOTH THE APPEALS IN QUA NTUM PROCEEDING ARE DISMISSED WHEREAS THE APPEAL OF THE ASSESSEE IN PEN ALTY PROCEEDING IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (KUL BHARAT) ( A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 17 & 18.07.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 19.07.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION ,, ,, 6) DATE OF INITIAL SIGN BY MEMBERS 20.07.2012 7) ORDER UPLOADED ON 20.07.2012 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 20.07.2012 ITA NOS. 2010,1314/AHD/04 A.Y.96-97 & 97-98 & ITA NO. 1008/AHD/2006, A.Y. 97-98 PAGE 27