The DCIT, Central Circle-1, Visakhapatnam V. M/s The Jeypore Sugars Company Ltd., Chagallu

ITA 268/VIZ/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2635 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-11-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 29-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Depreciation; Period of limitation; Wrong claim; Difference of opinion; Time period of passing order; Sham transactions; Set aside
• Section: 271(1)(c); 143(3); 246

Judgement Text

ITA 268/VIZ/2010 THE JEYPORE SUGARS CO. LTD, CHAGALLU IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 268 /VIZAG/ 20 10 ASSESSMENT YEAR : 2000 - 01 DCIT, CENTRAL CIRC LE - 1, VISAKHAPATNAM THE JEYPORE SUGARS CO. LTD CHAGALLU (APPELLANT) VS. (RESPONDENT) PAN NO.AAACT 9942R APPELLANT BY: SHRI D.S. SUNDER SINGH, DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER : - THIS APPEAL IS P REFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) ON VARIOUS GROUNDS BUT THEY ALL RELATE TO THE DELETION OF PENALTY LEVIED U/S 271(1)(C) BY THE CIT(A). 2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED ON RECORD. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SUGAR AND PRODUCTION AND SALE OF FERRO CHROME AND RECTIFIED SPIRIT. IT HAD E NTERED INTO A LEASE AGREEMENT WITH M/S. CEAT FINANCIAL SERVICES LIMITED FOR SALE AND LEASE BACK OF FERRO CHROME FURNACE LOCATED AT THE E.M. DIVISION OF THE COMPANY AT RAYAGADA. THIS PLANT HAS BEEN SOLD AT AN AMOUNT OF RS.11,37,51,000 / - IN THE FINANCIAL YE AR 1995 - 96. ON THE SAID SALE AN AMOUNT OF RS.10,92,11,776/ - HAS BEEN CONSIDERED AS SHORT TERM CAPITAL GAIN U/S 50 AFTER ALLOWING CREDIT FOR THE WRITTEN DOWN VALUE OF THE ASSET OF RS.45,39,224/ - . THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME AT RS. 3,76,85,678/ - AND AFTER SETTING OFF BROUGHT FORWARD LOSSES, DECLARED NIL INCOME. HOWEVER, AS PER THE PROVISIONS OF SECTION 115 JA THE ASSESSEE HAS DECLARED INCOME ON BOOK PROFITS AT RS.1,05,91,683 AND PAID TAXES THEREON. THE ASSESSMENT WAS COMPLETED U/S 143(3) DETERMINING THE TOTAL INCOME AT RS.4,19,34,014/ - BEFORE SETTING OFF ITA 268/VIZ/2010 THE JEYPORE SUGARS CO. LTD, CHAGALLU 2 DEPRECIATION LOSSES, BY DISALLOWING LEASE RENTALS CLAIMED AMOUNTING TO RS.28,66,524/ - . PENALTY PROCEEDINGS U/S 271(1)(C) HAVE ALSO BEEN INITIATED PURSUANT TO THE ASSESSMENT PROCEED INGS. 3. SUBSEQUENTLY, IN APPEAL THE CIT(A) ALLOWED THE CLAIM OF DEDUCTION OF LEASE RENTALS. THE DEPARTMENT HAS FILED AN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL SET ASIDE THE ORDER OF THE CIT(A) AND RESTORED THE FILE TO THE A.O. WITH THE DIRECTION TO TREAT THE LEASE CUM SALE TRANSACTIONS AS A FINANCIAL TRANSACTION AND TO ALLOW THE DEDUCTIONS TOWARDS THE INTEREST PORTION. SUBSEQUENT TO THE PASSING OF THE ORDER BY THE TRIBUNAL, THE A.O. HAD LEVIED THE PENALTY U/S 271(1)(C) OF RS.11,03,611/ - . 4. THE ASSESSEE CHALLENGED THE PENALTY BEFORE THE CIT(A) WITH THE SUBMISSIONS THAT THE A.O. HAS DISALLOWED THE DEDUCTION TOWARDS LEASE RENTAL ONLY FOR THE REASON THAT SALE AND LEASE BACK IS THE SHAM TRANSACTIONS. THE DISALLOWANCE BY THE A.O. WAS DELETED BY THE C IT(A). IT WAS FURTHER CONTENDED THAT ASSESSEE HAS FURNISHED ALL INFORMATION BEFORE THE A.O. WITH RESPECT TO THE SALE CUM LEASE BACK TRANSACTIONS, THEREFORE, IT CANNOT BE CALLED THAT ASSESSEE HAS EITHER CONCEALED THE INCOME OR HAS FURNISHED THE INACCURATE PARTICULARS. IT WAS ALSO CONTENDED BEFORE THE CIT(A) THAT THE PENALTY PROCEEDINGS ARE BARRED BY LIMITATION AS THE ASSESSMENT ORDER HAS BEEN SUBJECT MATTER OF APPEAL BEFORE THE CIT(A) WHO HAS PASSED AN ORDER ON 24 TH DECEMBER, 2003 AND AS PER THE PROVISIONS OF SECTION 275, THE A.O. WAS REQUIRED TO PASS THE PENALTY ORDER WITHIN A PERIOD OF 6 MONTHS FROM THE DATE OF THE RECEIPT OF THE ORDER OF THE CIT(A). THE CIT(A) HAS EXAMINED THE ASSESSEES CONTENTION MINUTELY AND BEING CONVINCED WITH IT, THE CIT(A) HAS DE LETED THE PENALTY. THE CIT(A) HAS ALSO HELD THAT THE PENALTY ORDER IS ALSO BARRED BY LIMITATION. THE RELEVANT OBSERVATION OF THE CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, APPELLANT S SUBMISSIONS, AS WELL AS AOS CONTENTIONS. I HAVE GONE THROUGH THE DOCUMENTARY EVIDENCES FILED BY THE APPELLANT COMPANY AND CASE LAW RELIED UPON. IN THIS CASE, PENALTY HAS BEEN LEVIED BY THE A.O., ON THE GROUND THAT THE APPELLANT COMPANY HAD FURNISHED I NACCURATE ITA 268/VIZ/2010 THE JEYPORE SUGARS CO. LTD, CHAGALLU 3 PARTICULARS OF ITS INCOME BY CLAIMING EXPENDITURE IN THE GUISE OF LEASE RENTALS AND HAD CONCEALED INCOME. AO HAD ALSO RELIED ON THE EXPLANATION 1 TO SECTION 271(1)(C) REGARDING OFFERING AN EXPLANATION WHICH IS FOUND TO BE FALSE OR OFFERING AN EX PLANATION WHICH IS NOT SUBSTANTIATED OR PROVED TO BE BONA FIDE DISCLOSING ALL THE RELEVANT FACTS. 5.1 HOWEVER, FROM THE ABOVE FACTS AND ON PERUSAL OF THE DOCUMENTARY EVIDENCE PLACED ON RECORD, IT IS EVIDENT THAT THE APPELLANT COMPANY HAD ONLY ENTERED INTO A SALE CUM LEASE BACK AGREEMENT FOR THE PURPOSE OF OBTAINING FUNDS FOR THE PURPOSE OF CARRYING ON ITS BUSINESS. THE SALE CUM LEASE BACK AGREEMENT HAS BEEN ENTERED WITH A COMPANY BELONGING TO A REPUTED GROUP CEAT. THERE IS NO DISPUTE OVER THE FACT THAT T HE APPELLANT HAD RECEIVED FUNDS THROUGH THE SALE AND LEASE BACK AGREEMENT AND REPAID THE SAME DURING A PERIOD OF SEVERAL YEARS. IT HAD OFFERED A SUBSTANTIAL SUM OF RS.10,92,11,776/ - TOWARDS THE PROFIT ON SALE AND CLAIMED AS A DEDUCTION THE LEASEHOLD CHARG ES PAYABLE AS PER THE TERMS OF AGREEMENT WITH THE M/S. CEAT FINANCIAL SERVICES LTD. THE CLAIM MADE BY THE APPELLANT HAS BEEN DISALLOWED BY THE AO AND THE DISALLOWANCE MADE BY THE AO HAS BEEN REVERSED BY THE LD. CIT(A). FURTHER IN THE APPEAL BEFORE THE HO NBLE INCOME TAX APPELLATE TRIBUNAL, DIRECTIONS WERE ISSUED TO TREAT THE TRANSACTION AS A FINANCE TRANSACTION AND TO ALLOW DEDUCTION TOWARDS THE INTEREST PORTION. IN OTHER WORDS, THE EFFECT OF THE DIRECTIONS OF HONBLE INCOME TAX APPELLATE TRIBUNAL ARE TO THE EFFECT THAT THE NATURE OF THE TRANSACTION BE INTERPRETED IN A DIFFERENT MANNER. THUS, EVEN ACCORDING TO THE EXPLANATION - 1 TO SECTION 271(1)(C), IT IS NOT THE CASE THAT THE APPELLANT HAD EITHER RENDERED AN EXPLANATION WHICH IS FALSE OR RENDERED AN EXP LANATION WHICH IT IS UNABLE TO SUBSTANTIATE. APPELLANT HAD ONLY CLAIMED THE SALE CUM LEASE TRANSACTION UNDER ONE METHOD AND ULTIMATELY THE SAME TRANSACTION HAS BEEN DIRECTED TO BE INTERPRETED IN A DIFFERENT MANNER. 5.2 FURTHER, IT IS TO BE NOTED THAT ULT IMATELY THE CLAIM FOR PAYMENTS MADE TO THE LENDING COMPANY WITH WHICH THE APPELLANT HAD ENTERED INTO THE TRANSACTION HAVE BEEN DIRECTED TO BE ALLOWED ONLY BIFURCATING THE PRINCIPAL PORTION AND THE INTEREST PORTION. THEREFORE, THERE IS NO ALLEGATION AGAINS T THE APPELLANT THAT IT HAD EITHER MISREPRESENTED THE TRANSACTION OR THAT IT HAD CONCEALED ANY PARTICULARS IN RESPECT OF THE TRANSACTION. IN FACT, HAD THE APPELLANT REFLECTED IN ITS BOOKS OF ACCOUNT THE TRANSACTION OF SALE CUM LEASE BACK AS A DIFFERENT TR ANSACTION, THEN ONLY THE QUESTION OF CONSIDERING THAT APPELLANT HAD CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF WOULD HAVE ARISEN. WHEN IT COMES TO PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) WHICH ARE QUASI CRIMINAL PROCEEDINGS, WHAT IS TO BE SEEN WHETHER THERE IS ANY FALSITY OR INACCURATE CLAIM BY THE APPELLANT BUT NOT WHETHER THE CLAIM WHICH HAS BEEN MADE BY THE APPELLANT HAS BEEN ACCEPTED AS IT IS OR HAS BEEN ACCEPTED IN A DIFFERENT CATEGORY. IN THE ITA 268/VIZ/2010 THE JEYPORE SUGARS CO. LTD, CHAGALLU 4 APPELLANTS CASE, THE ONLY SITUATIO N IS THAT THE CLAIM MADE BY IT TOWARDS LEASE CHARGES HAS BEEN DIRECTED BY THE HONBLE INCOME TAX APPELLATE TRIBUNAL TO BE TREATED AS REPAYMENT OF INTEREST AND PRINCIPAL. IN THE APPELLANTS CASE, IT HAD CONSIDERED THE ENTIRE AMOUNT RECEIVED TOWARDS FINANCE AS SALE VALUE OF THE LEASED ASSETS AND REPAID THE AMOUNT TOGETHER WITH INTEREST BY TREATING THE AMOUNT REPAID AS LEASEHOLD CHARGES. ONCE THE STATUS OF THE CLAIM IS CHANGED FROM SALE CUM LEASE BACK TO A FINANCE TRANSACTION, THE RESULT WOULD BE THE SAME, T HE SALE VALUE NEED NOT BE CONSIDERED AS APPELLANTS INCOME AND THE AMOUNT PAID TOWARDS INTEREST WOULD BE CONSIDERED AS INTEREST AS SUCH. THUS, IMPOSITION OF PENALTY CANNOT BE WARRANTED ONLY ON THE BASIS OF A DIFFERENT INTERPRETATION OF A TRANSACTION ENTER ED INTO BY AN APPELLANT, WHEN THE FACTS SURROUNDING THE TRANSACTION ARE NEITHER FOUND TO BE INACCURATE NOR FALSE. FURTHER, IN THE APPELLANTS CASE, ANOTHER ISSUE TO BE CONSIDERED IS THAT THE APPELLANT IS THE BORROWER OF FUNDS AND IT HAD LITTLE CHOICE OR O PTION IN FRAMING THE NATURE IN WHICH THE TRANSACTION SHOULD BE FORMULATED. THERE IS NO DOUBT REGARDING THE TRANSACTION WHICH HAS BEEN ENTERED INTO WITH A WELL REPUTED OUTSIDE PARTY. FURTHER IT IS A FACT, THAT THE APPELLANT IN ITS BOOKS OF ACCOUNT REFLECT ED THE TRANSACTION CORRECTLY AND THERE IS NEITHER FURNISHING OF ANY INACCURATE PARTICULARS NOR ANY CONCEALMENT OF INCOME. THEREFORE, THE APPELLANT SHOULD NOT BE HELD TO BE LIABLE FOR DEFAULT U/S 271(1)(C) ONLY ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION CL AIM IN SUCH A TRANSACTION. IT HAS BEEN HELD IN THE CASE OF MAHABALESHWAR GAS & CHEMICAL (P) LTD. (SUPRA) BY THE HONBLE HIGH COURT THAT WHEN A CLAIM WAS BASED ON BONA FIDE BELIEF AND DISALLOWANCE OF SAID CLAIM WAS ON A DIFFERENCE OF OPINION, IT COULD NOT BE TREATED AS CONCEALMENT OF INCOME BY APPELLANT, PARTICULARLY WHEN ALL PARTICULARS IN RESPECT OF SAID CLAIM WERE FULLY FURNISHED BY APPELLANT IN ITS RETURN OF INCOME. SIMILARLY, IN THE OTHER CASES RELIED UPON BY THE APPELLANT CITED ABOVE, IT HAS BEEN HEL D THAT EVEN WHEN THE TRANSACTION OF SALE CUM LEASE BACK IS REJECTED OR VIEWED FROM A DIFFERENT ANGLE, PENALTY WOULD NOT BE ATTRACTED UNDER SECTION 271(1)(C) WHEN THE APPELLANT HAD DISCLOSED TRULY THE FACTS AND HAD REFLECTED THE SAME IN ITS BOOKS OF ACCOUNT . IN FACT, VIEWING IN THE APPELLANTS CASE, WHEN IT HAD BEEN OFFERED FINANCES FROM A REPUTED CONCERN FOR UNDERTAKING ITS BUSINESS OPERATIONS AND THE LENDER HAD INDICATED TO IT A PARTICULAR MODE OF FINANCE WHICH RESULTED IN A LESSER RATE OF INTEREST FOR TH E AMOUNTS LENT, NO FAULT CAN BE FOUND WITH THE BORROWER. THAT BEING THE CASE, UNDER THE FACTS, I AM OF THE VIEW THAT THE AO HAS ERRED IN IMPOSING PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 OF RS.11,03,611/ - . 5.3 FURTHER ON THE TIME BARRI NG ISSUE ON WHICH THE APPELLANT HAD CHALLENGED THE LEVY OF PENALTY UNDER THE PROVISIONS OF SECTION 275, FIND FORCE IN THE ARGUMENTS AND SUBMISSIONS PUT FORWARD. IN THE APPELLANTS CASE, THE PENALTY HAS BEEN LEVIED VIDE ORDER DATED 29.7.2009, AND THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS) AGAINST THE ASSESSMENT ORDER IS DATED 28 TH NOVEMBER, 2003. THE ITA 268/VIZ/2010 THE JEYPORE SUGARS CO. LTD, CHAGALLU 5 A.O. INSTEAD OF CONSIDERING THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) AS THE BASIS FOR CONSIDERING THE LIMITATION PERIOD FOR PASSING THE P ENALTY ORDER, HAD TO THE CONTRARY CONSIDERED THE ORDER PASSED BY THE HONBLE INCOME TAX APPELLATE TRIBUNAL. AS PER THE SPECIFIC PROVISIONS OF SECTION 275 OF THE INCOME TAX ACT, AS PER THE PROVISO OF CLAUSE (A) INSERTED BY THE FINANCE ACT, 2003 WITH EFFECT FROM 1.6.2003, A PENALTY ORDER UNDER CHAPTER XXI SHOULD BE PASSED WITHIN BEFORE THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS ARE INITIATED OR WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IS RECEIVED. IN THE APPELLANTS CASE, THE PENALTY PROCEEDINGS HAVE BEEN INITIATED PURSUANT TO THE ASSESSMENT ORDER DATED 26.3.2002 AND THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS BEEN PASSED VIDE ORDER DATED 28 TH NOVEMBER, 2003. TH US, FROM THE LATER DATE OF THE APPELLATE ORDER, THE PENALTY ORDER OUGHT TO HAVE BEEN PASSED BEFORE 31 ST MARCH, 2005 I.E. ONE YEAR FROM THE END OF 31 ST MARCH, 2004. HOWEVER, IN THE APPELLANTS CASE, THE PENALTY ORDER HAS BEEN PASSED ONLY IN THE MONTH OF JU LY, 2009 VIDE ORDER DATED 28.7.2009. FROM THE FACTS ON RECORD, IT IS CLEARLY EVIDENT THAT THE PENALTY ORDER IS BARRED BY PERIOD OF LIMITATION BY MORE THAN FOUR YEARS. 5.4 UNDER THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE A.O. HAS ERRED IN LEVYING PENALTY OF RS.11,03,611/ - UNDER THE PROVISIONS OF SECTION 271(1)(C) BOTH ON MERITS AND ON THE GROUND OF LIMITATION, THE PENALTY ORDER ALSO BEING TIME BARRED. THE A.O. IS THEREFORE DIRECTED TO DELETE THE PENALTY. 5. NOW THE REVENUE HAS PREFERRED AN APPEAL AND THE LD. D.R. HAS INVITED OUR ATTENTION TO THE PROVISIONS OF SECTION 275 OF THE I.T. ACT WITH THE SUBMISSION THAT AS PER SECTION 275(1)(A) THE PENALTY ORDER CAN BE PASSED WITHIN THE PERIOD OF 6 MONTHS FROM THE END OF THE MONTH IN WHICH ORDER OF THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER. IN THE INSTANT CASE, THE TRIBUNAL HAS PASSED AN ORDER ON 29 TH OF DECEMBER, 2008 AND THE PENALTY ORDER WAS PASSED BY THE A.O. ON 28.7.2009. THEREFORE, THE PENALT Y ORDER WAS PASSED WITHIN THE PERIOD OF 6 MONTHS FROM THE DATE OF THE ORDER OF THE TRIBUNAL. THE CIT(A) HAS WRONGLY HELD THAT THE PERIOD OF LIMITATION STARTS FROM THE RECEIPT OF THE ORDER OF THE CIT(A). IN THE INSTANT CASE, THE CIT(A) HAS DELETED THE ADD ITION. THEREFORE, T HERE WAS NO QUESTION OF IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. THE PENALTY CAN ONLY BE LEVIED WHEN THE ADDITION WAS RESTORED BY THE TRIBUNAL, THUS , THE LIMITATION HAS TO START FROM THE DATE OF THE RECEIPT OF THE ORDER OF THE T RIBUNAL BY THE CIT OR CCIT. ON MERIT THE LD. D.R. HAS CONTENDED THAT THE ASSESSEE HAS ITA 268/VIZ/2010 THE JEYPORE SUGARS CO. LTD, CHAGALLU 6 RAISED A FALSE CLAIM OF SALE AND LEASE BACK TRANSACTION WHICH WAS CONSIDERED BY THE A.O. TO BE THE SHAM TRANSACTION. THEREFORE, THE PENALTY WAS RIGHTLY LEVIED FOR CONCE ALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED A HEAVY RELIANCE UPON THE ORDER OF THE CIT(A). THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE LIMITATION FOR PASSING AN ORDER IS TO START FROM THE RECEIPT OF THE ORDER OF THE CIT(A) AND NOT FROM THE DATE OF RECEIPT OF THE ORDER OF THE TRIBUNAL. ON MERIT IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT ASSESSEE HAS FURNISHED ALL INFORMATION BEFORE THE A.O. AND CLAIMED THE PAYMENT OF LEASE RENTAL ON THE BASIS OF SALE AND LEASE BACK TRANSACTIONS. HE HAS ALSO PLACED HEAVY RELIANCE UPON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LIMITED 322 ITR 158 IN WHICH IT HAS BEEN HELD THAT THE RATIO LAID DOWN BY TH E APEX COURT IN THE CASE OF DILIP AND SHROFF VS. JCIT AND OTHERS 210 CTR (SC) 228 HAS NOT BEEN OVER RULED IN THE CASE OF DHARMENDRA TEXTILE AND PROCESSORS AND OTHERS 212 CTR (SC) 432. ONLY THE FINDINGS WITH REGARD TO THE EXISTENCE OF MENS REA FOR IMPOSITI ON OF PENALTY U/S 271(1)(C) HAS BEEN OVER RULED AND IT WAS HELD THAT MENS REA IS NOT REQUIRED TO BE ESTABLISHED BEFORE IMPOSING A PENALTY AS IT IS A CIVIL LIABILITY. IT WAS FURTHER CONTENDED ON BEHALF OF THE ASSESSEES THAT IN THE CASE OF RELIANCE PETRO PR ODUCTS (SUPRA) THEIR LORDSHIP OF THE APEX COURT HAVE HELD WHEN THE COMPLETE INFORMATION WERE GIVEN IN THE RETURN OF INCOME , THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. MAKING A N INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURN ISHING OF INACCURATE PARTICULARS . M ERELY BECAUSE THE ASSESSEE CLAIMED DEDUCTION WHICH HAS NOT BEEN ACCEPTED BY THE REVENUE , PENALTY U/S 271(1)(C) IS NOT ATTRACTED. THEREFORE, THE CIT(A) HAS RIGHTLY DELETED THE PENALTY. 7 . HAVING HEARD THE RIVAL SUBMISSI ONS AND FROM A CAREFUL PERUSAL OF THE ORDER OF THE CIT(A), WE ARE OF THE VIEW THAT U/S 275 A TIME LIMIT WAS PRESCRIBED UNDER WHICH PENALTIES ARE TO BE IMPOSED. UNDER SECTION 275(1)(A), PENALTIES ARE TO BE IMPOSED IN A CASE WHERE RELEVANT ASSESSMENT OR OTH ER ORDERS IN THE SUBJECT MATTER OF AN APPEAL TO THE CIT(A) OR TO THE TRIBUNAL AFTER THE EXPIRY OF FINANCIAL YEAR IN THE PROCEEDINGS IN THE COURSE OF ITA 268/VIZ/2010 THE JEYPORE SUGARS CO. LTD, CHAGALLU 7 WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED OR 6 MONTHS FROM THE END OF TH E MONTH IN WHICH ORDER OF THE CIT OR THE TRIBUNAL RECEIVED BY THE COMMISSIONER OR CHIEF COMMISSIONER, WHICHEVER PERIODS EXPIRES LATER. OUR ATTENTION WAS ALSO INVITED TO THE PROVISO TO THE SUB - SECTION INSERTED W.E.F. 1.6.2003 AND WE FIND THAT THROUGH THIS PROVISO, THE TIME LIMIT FOR IMPOSITION OF PENALTY WAS INCREASED TO 1 YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE CIT (A) IS RECEIVED BY THE CHIEF COMMISSIONER OR THE COMMISSIONER. IN THIS PROVISO, NO REFERENCE WAS MADE WITH RESPECT T O THE ORDER OF THE TRIBUNAL ON THE BASIS OF WHICH PENALTY IS REQUIRED TO BE IMPOSED. THEREFORE, THIS PROVISO ONLY APPLY TO THE ORDER OF THE CIT(A). WE HOWEVER, FOR THE SAKE OF REFERENCE EXTRACT THE RELEVANT PORTION OF THIS SECTION 275(1)(A) AS UNDER: 275 [(1)] NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE PASSED - [(A) IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT MATTER OF AN APPEAL TO THE COMMISSIONER (APPEALS) UNDER SECTION 246 [OR SECTION 246A] OR AN APPEAL TO THE APPELLATE TRIBUNAL UNDER SECTION 253, AFTER THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER PERIOD EXPIRES LATER: [ PROVIDED THAT IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT - MATTE R OF AN APPEAL TO THE COMMISSIONER (APPEALS) UNDER SECTION 246 OR SECTION 246A, AND THE COMMISSIONER (APPEALS) PASSES THE ORDER ON OR AFTER THE 1 ST DAY OF JUNE, 2003 DISPOSING OF SUCH APPEAL, AN ORDER IMPOSING PENALTY SHALL BE PASSED BEFORE THE EXPIRY OF T HE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED, OR WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER IS LATER;] 8 . FROM PLAIN READING OF THIS SECTION, WE FIND THAT UNDER CLAUSE (A), THE TIME LIMIT WAS PRESCRIBED FOR IMPOSITION OF PENALTIES CONSEQUENT TO THE ORDER OF THE CIT(A) OR THE TRIBUNAL. BUT BY INTRO DUCING THE PROVISO W.E.F. 1.4.2003 BY FINANCE ACT, 2003, TIME LIMIT FOR IMPOSITION OF PENALTY CONSEQUENT TO THE ITA 268/VIZ/2010 THE JEYPORE SUGARS CO. LTD, CHAGALLU 8 ORDER OF THE CIT(A) IS INCREASED TO 1 YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH ORDER OF THE CIT(A) IS RECEIVED BY THE CIT OR CCIT. THER EFORE, THE PROVISO WOULD NOT APPLY FOR THE PURPOSE OF TIME LIMIT FOR IMPOSITION OF PENALTY CONSEQUENT TO THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL. THE TIME LIMIT FOR IMPOSITION OF PENALTY CONSEQUENT TO THE ORDER OF THE TRIBUNAL IS TO BE GOVERNED BY THE CLAUSE (A) OF SUB - SECTION 275(1) OF THE ACT. THEREFORE, THE TIME LIMIT AVAILABLE WITH THE ASSESSING OFFICER FOR IMPOSITION OF PENALTY CONSEQUENT TO THE ORDER OF THE TRIBUNAL IS 6 MONTHS FROM THE DATE OF THE RECEIPT OF TH E ORDER OF THE TRIBUNAL BY THE CIT OR THE CCIT. THEREFORE, WE DO NOT AGREE WITH THE FINDINGS OF THE CIT(A) THAT THE TIME LIMIT FOR IMPOSING OF PENALTY IS TO START FROM THE DATE OF THE RECEIPT OF THE ORDER OF THE CIT(A) BY THE CIT OR CCIT. THUS , WE SET ASIDE THE FINDING OF THE CIT(A) I N THIS REGARD. 9 . SO FAR AS ON MERIT IS CONCERNED, WE ARE OF THE VIEW THAT ASSESSEE HAS FURNISHED THE RELEVANT INFORMATION BEFORE THE ASSESSING OFFICER. IT IS NOT THE FIRST YEAR IN WHICH THE ASSESSEE HAS CLAIMED THE PAYMENT OF LEASE RENTAL ON THE SALE AND LEASE BACK TRANSACTIONS. IT WAS AN ADMITTED CASE THAT THIS TRANSACTIONS TOOK PLACE IN THE FINANCIAL YEAR 1995 - 96 RELEVANT TO THE ASSESSMENT YEAR 1996 - 97 AND THERE AFTER ASSESSEE HAS BEEN PAYING THE LEASE RENTALS AND IT WAS ACCEPTED BY THE REVENUE ALSO . THE IMPUGNED YEAR IS THE FIRST YEAR IN WHICH THE LEASE RENTAL WAS NOT ALLOWED BY THE A.O. AFTER HAVING HELD THAT IT IS NOT A CASE OF LEASE TRANSACTION . I T WAS RATHER A CASE OF FINANCIAL TRANSACTION AND ACCORDINGLY THE INTEREST PAYMENT WAS ALLOWED BY TH E A.O. CONSEQUENT TO THE ORDER OF THE TRIBUNAL. NOW THE QUESTION ARISES THAT IN THIS TYPE OF SITUATION WHETHER PENALTY U/S 271(1)(C) CAN BE LEVIED? THE FACT AND CIRCUMSTANCES UNDER WHICH PENALTY U/S 271(1)(C) CAN BE LEVIED ARE EXAMINED BY US IN THE CASE OF SMT. M. SHAKUNTALAMMA, GUNTUR ITA NOS.131 TO 136/VIZAG/2010 DATED 25.11.2010 IN WHICH WE HAVE HELD FOLLOWING THE JUDGEMENT OF THE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LIMITED (SUPRA) THAT WHERE THE INFORMATION ARE FURNISHED IN THE RETURN OF INCOME BEFORE THE ASSESSING OFFICER AND IF THEY WERE NOT FOUND TO BE INCORRECT OR INACCURATE, ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS ONLY FOR MAKING AN INCORRECT CLAIM IN LAW BECAUSE MERE INCORRECT CLAIM IN LAW CANNOT BE TANTA MOUNT TO FURNISHING OF INACCURATE PARTICULARS. MERELY BECAUSE ITA 268/VIZ/2010 THE JEYPORE SUGARS CO. LTD, CHAGALLU 9 THE ASSESSEE CLAIMED DEDUCTION WHICH HAS NOT BEEN ACCEPTED BY THE REVENUE, PENALTY U/S 271(1)(C) IS NOT ATTRACTED. THEREFORE, IN THE INSTANT CASE ALL RELEVANT INFORMATION WERE FURNISHED BEFORE THE A.O. AND THE CLAIM OF THE ASSESSEE FOR PAYMENT OF LEASE TRANSACTION S WAS TURNED DOWN BY THE A.O. MERE REJECTION OF A CLAIM OF THE ASSESSEES DOES NOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS. THEREFORE, WE ARE OF THE VIEW THAT CIT(A) HAS RIG HTLY ADJUDICATED THE ISSUE UNDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. WE THEREFORE DO NOT FIND INFIRMITY THEREIN AND WE CONFIRM HIS ORDER. 10 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30.11 .20 10 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 30 TH NOVEMBER , 20 10 COPY TO 1 THE DCIT, CIRCLE - 1, VISAKHAPATNAM 2 M/S. THE JEYPORE SUGARS COMPANY LIMITED, NO.6/69, CHAGALLU , W.G. DIST. 3 THE CI T, VISAKHAPATNAM 4 THE CIT (A) , VISAKHPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM