M/s. ICICI BANK LTD., MUMBAI V. DCIT Rg. - 3 (1), MUMBAI

ITA 4903/MUM/2005

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4291 (ITAT-MUMBAI)
• Duration Of Justice: 10 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 11-09-2014
• Assessment Year: 1993-1994
• Appeal Filed On: 07-07-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA R SWAMY
• Keywords: Depreciation; Question of law; Wrong claim
• Section: 143(3)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI E BENCH , ,, , , ,, , ' BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SANDEEP GOSAIN,JUDICIAL MEMBER /.ITA NO.4903/M/2005, # $ /ASSESSMENT YEAR-1993-94 ICICI BANK LIMITED (ERSTWHILE ICICI LIMITED) ICICI BANK TOWERS BANDRA-KURLA COMPLEX BANDRA (EAST)MUMBAI-400 051. PAN:AAACT 1398 K VS DCIT- RANGE-3(1) AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. ( / APPELLANT) ( / RESPONDENT) #%& /ASSESSEE BY : MS. AARTI VISSANJI (AR) / REVENUE BY : SHRI MANJUNATHA R. SWAMY (CIT-DR) / DATE OF HEARING : 05-11 -2015 / DATE OF PRONOUNCEMENT : 01.01.2016 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) ( & ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.9.3.2005 OF THE CIT(A)-XXV II, MUMBAI THE ASSESSEE HAD FILED THE PRESENT APPEAL . ASSESSEE- COMPANY FILED ITS RETURN OF INCOME ON 30 .12.1993 DECLARING TOTAL INCOME OF RS.1,37, 66,09,450/-.THE ASSESSING OFFICER (AO) COMPLETED TH E ASSESSMENT ON 28.3.1996, U/S 143(3) OF THE ACT,ASSESSING ITS INCOME AT RS.164.50 CRORES. W HILE COMPLETING THE ASSESSMENT, THE AO MADE AN ADDITION OF RS.25.00 CRORES ON ACCOUNT OF DEPREC IATION ON THE ASSETS LEASED TO GUJARAT ELECTRICITY BOARD(GEB).AS PER THE AO,THE ASSESSEE HA LEASED SPECIALIZED HIGH EFFICIENCY BOILER PACKAGE AND AUXILIARIES TO GEB UNDER A SALE AND LEA SE BACK ARRANGEMENT SCHEME, THAT IT HAD DECLARED LEASE RENTAL INCOME RS.1.18 CRORES,THAT IT CLAIMED DEPRECIATION @50%, THAT ELABORATE ENQUIRIES WERE CONDUCTED IN THAT REGARD,THAT THE AO HAD HELD THAT THE ASSESSEE HAD NO RIGHT OF OWNERSHIP ON THE ASSETS LEASED TO GEB,THAT THE SALE AND LEASE BACK TRANSACTION WAS A SHAM TRANSACTION THAT WAS ENTERED INTO WITH A VIEW TO AV AIL DEPRECIATION BENEFIT AND THEREBY REDUCE THE TAXABLE INCOME.PENALTY PROCEEDINGS U/S. 271(1)(C) O F THE ACT WERE INITIATED ON THE GROUND THAT ASSESSEE HAD MADE A WRONG CLAIM OF DEPRECIATION BY FURNISHING INACCURATE PARTICULARRS.IN RESPONSE TO THE SHOW CAUSE NOTICE FOR LEVYING CONCE ALMENT PENALTY THE ASSESSEE FILED DETAILED EXPLANATION,VIDE ITS LETTER DT. 17.4.96. 1.1 IN THE MEANWHILE,THE ADDITION MADE BY THE AO WAS CO NFIRMED BY THE FIRST APPELLATE AUTHORITY (FAA).THE ASSESSEE PREFERRED AN APPEAL BE FORE THE TRIBUNAL.VIDE ITS ORDER DT.14.8.2003, THE SPECIAL BENCH OF THE TRIBUNAL-CON STITUTED FOR THE PURPOSE OF DECIDING THE ISSUE OF DEPRECIATION TO BE ALLOWED ON SALE AND LEASE BAC K ASSETS-HELD THAT THE ASSESSEE WAS NOT ENTITLED TO DEPRECIATION ALLOWANCE IN RESPECT OF ASSETS/EQUI PMENT LEASED OUT TO GEB.CONSIDERING THE ABOVE FACTS AND REFERRING TO THE ORDER OF THE SPECI AL BENCH,THE AO HELD THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF ITS INCOME.FINALLY, HE LEVIED A PENALTY OF RS.12.93 CRORES U/S. 271(1)(C) OF THE ACT. ITA 4903/M/05(93-94)-ICICI BANK LTD. 2 2. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,THE ASSE SSMENT ORDER, PENALTY ORDER AND THE ORDER OF THE SPECIAL BENCH,THE FAA HELD THAT TRIBUNAL HAD HE LD THAT IT WAS A TRANSACTION OF FINANCE AND HAD TO BE TREATED AS SUCH. HE REFERRED TO THE CASES OF K.C. BUILDERS (265 ITR 562), MUSSADILAL RAM BHAROSE(165ITR14)AND HELD THAT THERE WAS DIFFER ENCE BETWEEN RETURNED AND ASSESSED INCOME,THAT THE ASSESSEE HAD OFFERED AN EXPLANATION THAT WAS FOUND TO BE INCORRECT, THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS A SHAM TRANSACTION, THAT THE ASSESSEE HAD NOT BEEN ABLE TO DISCHARGE ITS ONUS, THAT EXPLANATION-1 TO S ECTION 271(1) WERE APPLICABLE TO THE FACTS OF THE CASE.FINALLY,HE UPHELD THE ORDER OF THE AO LEVYING THE CONCEALMENT PENALTY. 3. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE(AR)STATED THAT THE ASSESSEE HAD NOT CONCEALED PARTICULARS OF INCOME OR HAD FILED INACCURATE PARTICULARS OF INCOME, THAT IN AY.1995-96 DEPRECIATION ON ALL LEASED ASSET S,INCLUDING THE SIMILAR ASSETS LEASED TO GEB POST THE SPECIAL BENCH DECISION,WAS ALLOWED,THAT DE PRECIATION CLAIMED U/S.32 IN RESPECT OF LEASED ASSET WAS A DEBATABLE LEGAL ISSUE, THAT THE ASSESSE E HAD FILED AN APPEAL AGAINST THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL BEFORE THE HONBLE BO MBAY HIGH COURT, THAT THE COURT HAD ADMITTED THE APPEAL FILED BY THE ASSESSEE,THAT THE ISSUE RAISED IN THE QUANTUM APPEAL HAD BECOME DEBATABLE AND HENCE, NO CONCEALMENT PENALTY COULD B E LEVIED, THAT DECISION WAS IN FAVOUR OF THE ASSESSEE AT THE TIME OF FILING OF RETURN OF INCOME, THAT THE TRIBUNAL HAD DELIVERED A FAVOURABLE DECISION FOR AY 1995-96(115ITD25), THAT SPECIAL BEN CH HAD RELIED UPON THE CASE OF MCDOWELL, THAT THE LAW LAID DOWN BY MCDOWELL WAS NO LONGER A GOOD LAW AFTER THE DECISION OF AZADI BACHAO ANDOLAN AND ANR.(263 ITR 706).SHE REFERRED T O THE CASE OF INDUSIND BANK LTD. (ITA NO.2839/ MUM/2008), INDUSIND BANK LTD. (55 TAXMANN 408), DEVELOPMENT CREDIT BANK (ITA 5490/MUM/2010); HDFC LTD. (ITA NO.4886/87 OF 2010); NAYAN BUILDERS AND DEVELOPERS PVT. LTD. (231TAXMANN 665); ROOPAM MERCANTILE LTD. (91 I TD 237); ADVAITA ESTATE DEVELOPMENT PVT. LTD.(147 ITD 693);SCHRADER DUNKEN LTD.(ITA NO. 8223/M/2010 DT.1.12015),AND ARGUED THAT THE TRANSACTION WITH GEB AND THE ASSESSEE WAS BETWE EN A FINANCIAL INSTITUTION AND A PSU, THAT THE SAME COULD NOT BE TERMED A DEVICE TO EVADE TAX, THAT THE FINDING THAT THE TRANSACTION WAS NOT GENUINE, WAS CONTRARY TO WELL SETTLED PRINCIPLE TH AT GOVERNMENT COULD NOT BE A PARTY TO A SHAM TRANSACTION, THAT PENALTY COULD NOT BE LEVIED MEREL Y BECAUSE THE SALE AND LEASE BACK TRANSACTION AS RE-CHARACTERISED AS FINANCIAL TRANSACTION. DEPARTME NTAL REPRESENTATIVE(DR) STATED THAT ISSUE WAS NOT DEBATABLE AND HENCE THE JUDGMENT OF NAYAN BUILD ERS AND DEVELOPERS (SUPRA), WAS OF NO HELP TO THE ASSESSEE, THAT THE SPECIAL BENCH OF THE TRIB UNAL HAD TERMED THE SALE AND LEASE BACK TRANSACTIONS AS SHAM TRANSACTION, THAT THE BOILER W AS PURCHASED FROM BHEL, THAT IT COULD NOT BE LEASED OUT,THAT TRANSACTION WAS AIMED TO REDUCE THE TAXABLE INCOME OF THE ASSESSEE.HE REFERRED TO THE CASE OF POPULAR JEWELERS (238 ITR 676), PRAKASH S. VYAS(TAX APPEAL NO.660 OF 2010 DT.15. 11.2011), SOFT TOUCH HYGIENE PRODUCTS PVT. LTD.(TAX APPEAL NO.2146 OF 2010 DT.20.12.2011) OF HONBLE GUJARAT HIGH COURT, AVASARALA AUTOMATION LT D(266 ITR 178); SUNDARAM FINANCE LTD. (353ITR375);TVS FINANCE & SERVICES LTD.(125 ITD 341 ); BPL SANYO FINANCE(362 ITR 630); TIMES GUARANTEE LTD. (1681/M/2007,AY-93-94)DT.10.10 .2016; 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT VIDE ITS ORDER DATED 3.3.2004,(INCOME TAX APPEAL NO.8 OF 200 4),THE HONBLE BOMBAY HIGH COURT HAS ADMITTED A SUBSTANTIAL QUESTION OF LAW WITH REGARD TO THE ISSUE OF ALLOWABILITY OF DEPRECIATION ON ASSETS LEASED BY THE ASSESSEE TO GEB. ITA 4903/M/05(93-94)-ICICI BANK LTD. 3 4.1 IN THE MATTER OF NAYAN BUILDER AND DEVELOPER (SUPRA ),THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT ONCE A QUESTION OF LAW IS ADMITTED BY THE HONBLE HIGH COURT IN QUANTUM PROCEEDINGS THE ISSUE BECOMES DEBATABLE AND PENALTY U/S.271(1)(C) OF THE ACT CANNOT BE LEVIED.FOLLOWING THE ABOVE DECISION,VARIOUS BENCHES OF THE TRIBUNAL HAVE DELETED THE CONCEALMENT PENALTY WHERE THE HONBLE HIGH COURT HA D ADMITTED THE QUESTION OF LAW WITH REGARD TO QUANTUM APPEALS.WE HAVE GONE THROUGH THE ORDERS OF ADVAITA ESTATE DEVELOPMENT PVT. LTD.(SUPRA), SCHRADER DUNKEN LTD. (SUPRA),INDUSIND BANK LTD.(SUPRA),DEVELOPMENT CREDIT BANK LTD.(SUPRA).THE PERUSAL OF THE ORDER LEAD US TO THE CONCLUSION THAT ONCE A SUBSTANTIAL QUESTION OF LAW IS ADMITTED BY THE HONBLE HIGH COURT,THEN THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT CANNOT SURVIVE. WE HAVE GONE THROUGH THE JUDGMENTS OF HONBLE GUJARAT HIGH COURT,RELIED UPON BY THE DR WHEREIN A CONTRARY VIEW HAS BEEN TAKEN AN D HAS BEEN HELD THAT MERE ADMISSION OF QUANTUM APPEAL BY THE HONBLE COURT DOES NOT MEAN T HAT PENALTY U/S.271(1)(1)(C)CANNOT BE LEVIED.JUDICIAL DISCIPLINE DEMANDS THAT UNTIL AND U NLESS THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IS REVERSED IT HAS TO BE RESPECTED AND FOLLOWED BY THE TRIBUNAL FUNCTIONING UNDER THE JURISDICTION OF THAT COURT. F OLLOWING THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF NAYAN BUILDER AND DEVELOP ER(SUPRA),WE ARE REVERSING THE ORDER OF THE FAA,AS THE HONBLE COURT HAS ADMITTED A QUESTION OF LAW IN QUANTUM PROCEEDINGS AND THUS IT HAS BECOME A DEBATABLE ISSUE.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JANUARY, 2016. 01 , 2016 SD/- SD/- ( / SANDIP GOSAIN) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 01.01.2016 . . . .. . JV.SR.PS. *& +$& / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ $ & , 4. THE CONCERNED CIT / $ & 5. DR A BENCH, ITAT, MUMBAI / ' , , . . . 6. GUARD FILE/ (, //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.