M/s. INDUSTRIAL DEVELOPMENT BANK OF INDIA LTD., MUMBAI V. DCIT Rg. - 3(1), MUMBAI

ITA 527/MUM/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4493 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 06-09-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 16-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S DASH
• Assessee Lawyers: DINESH VYAS
• Keywords: Depreciation; Salary income; Wrong claim; Revised return

Judgement Text

ITA NOS. 526 TO 528 /MUM/07 ASSESSMENT YEAR 1998-99, 1999-00 AND 2000-01 PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH, MUMBAI BEFORE SHRI N V VASUDEVAN ( JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) ITA NOS. 526 TO 528 /MUM/07 ASSESSMENT YEAR 1998-99, 1999-00 AND 2000-01 INDUSTRIAL DEVELOPMENT BANK OF INDIA LIMITED .APPELLANT TAXATION CELL, 7 TH FLOOR, IDBI TOWER WORLD TRADE CENTRE CUFFE PARADE, MUMBAI 400 005 VS. DEPUTY COMMISSIONER OF INCOME TAX RANGE 3 (1) MUMBAI . RESPONDENT APPELLANT BY : SHRI DINESH VYAS RESPONDENT BY : SHRI C S DASH O R D E R PER PRAMOD KUMAR: 1. THE SHORT ISSUE THAT WE NEED TO ADJUDICATE IN AL L THESE APPEALS IS WHETHER OR NOT THE LEARNED COMMISSIONER (APPEALS) W AS JUSTIFIED IN UPHOLDING THE PENALTY IMPOSED ON THE ASSESSEE UNDE R SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT IN SHORT), ON THE ISSUE OF DISALLOWANCE OF CLAIM OF DEPRECIATION IN RESPECT OF ASSETS GIVEN ON LEASE. THE ASSESSMENT YEARS INVOLVED ARE 1998-99, 1999-00 AND 2000-01. IN TERMS OF THE REQUIREMENTS OF HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF ONGC VS COLLECTOR OF CENTRAL EXCISE (104 CTR 31), THE ASSES SEE, BEING A PUBLIC SECTOR UNDERTAKING, HAS OBTAINED THE REQUISITE CLEA RANCE OF THE COMMITTEE ON DISPUTES (CABINET SECRETARIAT). ITA NOS. 526 TO 528 /MUM/07 ASSESSMENT YEAR 1998-99, 1999-00 AND 2000-01 PAGE 2 OF 9 2. LEARNED COUNSEL SUBMITS THAT THE ISSUE IN APPEAL BEFORE US IS NOW SQUARELY COVERED BY HONBLE SUPREME COURTS JUDGMEN T IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT LTD (322 ITR 158) INASM UCH AS THERE IS NOTHING MORE THAN REJECTION OF DEPRECIATION CLAIM MADE BY T HE ASSESSEE, AND PARTICULARLY AS THERE WERE SEVERAL JUDICIAL PRECEDE NTS IN FAVOUR OF THE ASSESSEE ON ADMISSIBILITY OF THE SAID CLAIM, WHICH HAS LED TO THE IMPUGNED PENALTY HAVING BEEN LEVIED ON THE ASSESSEE. IT IS P OINTED OUT THAT WHILE THE ASSESSEES CLAIM IS THAT, ON THE ADMITTED FACTS OF THE CASE, THE ASSESSEE IS LEGALLY ENTITLED TO CLAIM DEPRECIATION IN RESPECT O F ASSETS LEASED OUT TO ITS CUSTOMERS, THE CASE OF THE REVENUE IS THAT THE DEPR ECIATION SO CLAIMED IS NOT ADMISSIBLE INASMUCH AS THE TRANSACTION BETWEEN THE ASSESSEE AND ITS CUSTOMER IS A FINANCING TRANSACTION, AND NOT A GENU INE LEASING TRANSACTION. THERE IS NO DISPUTE ABOUT THE FACTS OF THE CASE, BU T THE DISPUTE IS CONFINED TO THE TAX IMPLICATIONS OF THE TRANSACTIONS IN QUESTIO N. THAT IS, ACCORDING TO THE LEARNED COUNSEL, PURELY A MATTER OF INTERPRETATION OF LAW, AND THERE IS NO CONCEALMENT OF FACTS. IT IS SUBMITTED THAT THE QU ANTUM ADDITION IS PENDING BEFORE A SPECIAL BENCH OF THIS TRIBUNAL BUT THE VER Y FACT THAT A SPECIAL BENCH HAD TO BE CONSTITUTED TO RESOLVE CONFLICTING OPINIO NS EXPRESSED BY THE DIVISION BENCHES WOULD SHOW THAT THE CLAIM OF THE A SSESSEE, EVEN IF INCORRECT, WAS NOT A FRIVOLOUS OR PATENTLY INCORREC T CLAIM. OUR ATTENTION IS THEN INVITED TO HONBLE PUNJAB & HARYANA HIGH COURT S JUDGMENT IN THE CASE OF CIT VS HARYANA WAREHOUSING CORPORATION (314 ITR 215) WHEREIN IT WAS HELD THAT CLAIM OF EXEMPTION IN THE RELEVANT ASSESS MENT YEAR BEING LEGITIMATE AND BONAFIDE, IN TERMS OF CONFLICTING DE TERMINATION OF LAW AND IN VIEW OF CATEGORICAL FINDING THAT THE ASSESSEE HAD D ISCLOSED ENTIRE FACTS WITHOUT HAVING CONCEALED ANY INCOME, PENALTY UNDER SECTION 271(1)(C) WAS HELD TO BE NOT LEVIABLE. IT WAS ALSO POINTED OUT TH AT THE ASSESSEE, BEING A PUBLIC SECTOR UNDERTAKING, CANNOT DELIBERATELY MAKE A FRAUDULENT CLAIM OF EXEMPTION OR DEDUCTION, AND, FOR THAT REASON ALSO, IT IS NOT A FIT CASE FOR IMPOSITION OF PENALTY. OUR ATTENTION WAS INVITED TO TRIBUNALS DECISION IN THE CASE OF DENA BANK VS IAC ( 25 ITD 109) IN SUPPORT O F THAT PROPOSITION. A REFERENCE WAS THEN ALSO MADE TO DECISION OF THE TRI BUNAL IN THE CASE OF ITA NOS. 526 TO 528 /MUM/07 ASSESSMENT YEAR 1998-99, 1999-00 AND 2000-01 PAGE 3 OF 9 KANBAY SOFTWARE VS DCIT (31 SOT 153), IN SUPPORT OF THE PROPOSITION THAT MERELY BECAUSE AN ASSESSEE HAS MADE A LEGAL CLAIM, AND EVEN IF IT HAS BEEN FOUND TO BE UNSUSTAINABLE IN LAW, PENALTY UNDER SEC TION 271(1)(C) CANNOT BE IMPOSED. LEARNED COUNSEL ALSO SUBMITS THAT EVEN THO UGH QUANTUM APPEALS MUST AWAIT THE DECISION OF THE SPECIAL BENCH, THESE PENALTY APPEALS CAN BE DISPOSED OF WITHOUT WAITING FOR THE FINALIZATION OF QUANTUM ASSESSMENT PROCEEDINGS. IT IS SUBMITTED THAT EVEN ASSUMING THE WORSE, I.E. CONFIRMATION OF THE STAND OF THE REVENUE AUTHORITIES SO FAR AS Q UANTUM ADDITION IS CONCERNED, IT WILL STILL NOT BE A FIT CASE FOR IMPO SITION OF CONCEALMENT PENALTY UNDER SECTION 271(1)(C). 3. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, VEHEMENTLY RELIES UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITS THAT AS THE THINGS STAND NOW AND THE DISALLOWANCE OF DEPRECIATI ON HAVING BEEN CONFIRMED IN APPEAL, THE ONUS IS ENTIRELY ON THE AS SESSEE TO DEMONSTRATE THE BONAFIDES OF ITS CLAIM OF DEPRECIATION. THERE IS N OTHING MORE THAN ASSESSEES UNSUBSTANTIATED CLAIMS OF HAVING MADE THE CLAIM OF DEPRECIATION BONAFIDE. JUST BECAUSE ASSESSEE MAKES A SUBMISSION THAT IT IS A BONAFIDE CLAIM, ONE CANNOT PROCEED ON THE BASIS THAT IT MUST BE A BONAF IDE CLAIM. THE FACT THAT THE CLAIM OF THE ASSESSEE HAS BEEN REJECTED BY THE ASSESSING OFFICER, AS ALSO IN APPEAL, IT IS CLEAR THAT THE CLAIM OF THE ASSESS EE IS NEITHER CORRECT NOR BONAFIDE. WE ARE THUS URGED TO CONFIRM THE ORDERS O F THE AUTHORITIES BELOW AND DECLINE TO INTERFERE IN THE MATTER. 4. IN OUR CONSIDERED VIEW, A PLAIN READING OF THE ASSESSMENT ORDER SHOWS THAT THERE IS NO DISPUTE ABOUT THE FACTS OF T HE CASE AND THAT PERCEPTIONS OF THE ASSESSEE AND THE REVENUE DIFFER ONLY ON THE LEGAL IMPLICATIONS OF THESE FACTS. IN ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 1998-99, FOR EXAMPLE, ASSESSING OFFICER OBSERVES AS FOLLOWS: .THE SCRUTINY OF THE TERMS OF THE ABOVE LEASE AGR EEMENTS, IN TOTALITY, SHOWS THAT THOUGH IT HAS BEEN ASSERTED RE PEATEDLY IN THE AGREEMENT BY THE ASSESSEE COMPANY AND THE LESSEE, T HAT IT IS THE ASSESSEE COMPANY (NOT THE LESSEE) WHO IS ABSOLUTE O WNER OF THE LEASED ASSET, THE LESSEE HAVING TAKEN POSSESSION OF THE ASSET ONLY AS A LESSEE, AND IT IS THE ASSESSEE (NOT THE LESSEE ) WHO WOULD BE ENTITLED TO DEPRECIATION ON THE ACTUAL COST OF LEAS ED ASSETS UNDER ITA NOS. 526 TO 528 /MUM/07 ASSESSMENT YEAR 1998-99, 1999-00 AND 2000-01 PAGE 4 OF 9 THE INCOME TAX ACT, AS THE LEGAL OWNER OF THE ASSET , BUT THERE ARE CERTAIN TERMS IN THE ABOVE LEASE AGREEMENT WHICH AR E CONTRARY TO OR INCONGRUOUS TO SUCH CLAIM OF LEGAL AND ABSOLUTE OWNERSHIP OF THE COMPANY OVER THE LEASED ASSET AND ALSO CONTRARY TO THE LEGAL NORMS REGARDING MUTUAL RIGHTS AND LIABILITIES OR A LESSOR AND A LESSEE OR A OWNER OR A HIRER UNDER THE LAWS OF LEAS E OR HIRE OF GOODS. 5. THE ASSESSING OFFICER THEN PROCEEDS TO SET OUT R ELEVANT TERMS AND CONDITIONS OF THE LEASE AGREEMENT, WHICH, ACCORDING TO THE ASSESSING OFFICER, DEMONSTRATE THAT THE ASSESSEES CLAIM OF OWNERSHIP IS INCORRECT. WE ARE NOT REALLY CONCERNED, AT THIS STAGE, WHETHER OR NOT THE CLAIM OF THE ASSESSING OFFICER WITH REGARD TO THE AFORESAID LEGAL INTERPRE TATION IS CORRECT. WE ARE ONLY CONCERNED WITH THE BROAD POSITION THAT THE DIS ALLOWANCE HAS BEEN MADE ON THE BASIS OF A LEGAL INTERPRETATION ABOUT THE IM PACT OF THE LEASE AGREEMENT, AND THERE IS NO DISPUTE ON THE BASIC FAC TS OF THE CASE, NOR IS IT EVEN THE CASE OF THE ASSESSING OFFICER THAT THE ASS ESSEE DID NOT MAKE THE CLAIM IN A FAIR AND TRANSPARENT MANNER. WHEN A LEGA L CLAIM IS MADE BY THE ASSESSEE, IT IS OBVIOUSLY OPEN TO THE ASSESSING OFF ICER TO ACCEPT OR REJECT THE INTERPRETATION CANVASSED BY THE ASSESSEE, BUT THEN IT DOES NOT FOLLOW THAT WHEN THE CLAIM IS REJECTED, IT WOULD IMPLY THAT THE RE HAS BEEN A CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE. WHILE DEALIN G WITH THIS ASPECT OF THE MATTER, A COORDINATE BENCH OF THE TRIBUNAL, IN THE CASE OF KANBAY SOFTWARE (SUPRA), HAS OBSERVED AS FOLLOWS: 60. THE EXPRESSION CONCEALMENT OF INCOME HAS NOT BEEN DEFINED IN THE ACT, BUT THE NATURAL MEANINGS OF THE EXPRESSION CONCEALMENT ARE TO KEEP FROM BEING SEEN, FOUND, OBSERVED, OR DISCOVERED. IT WOULD, THEREFORE, FOLLOW THAT THE E XPRESSION CONCEALMENT OF INCOME, IN ITS NATURAL SENSE AND GRA MMATICAL MEANING, IMPLIES AN INCOME IS BEING HIDDEN, CAMOUFL AGED OR COVERED UP SO AS IT CANNOT BE SEEN, FOUND, OBSERVED OR DISCOVERED. THAT IS CERTAINLY NOT THE SITUATION BEF ORE US. THE ASSESSEE HAS MADE A CLAIM, AND THAT TOO BY REVISED RETURN WHICH VIRTUALLY ENSURED THAT THE FACT OF ASSESSEES HAVIN G MADE THIS CLAIM CANNOT REMAIN UNNOTICED BY THE ASSESSING OFFI CER, AND HAS GIVEN SPECIFIC JUSTIFICATION AND ALL THE SUPPORTING DETAILS FOR THE SAME. BY NO STRETCH OF LOGIC, THIS SITUATION CAN BE TREATED AS A SITUATION IN WHICH ANY INCOME IS CONCEALED BY THE A SSESSEE. CONCEALMENT OF AN INCOME BY AN INCOME CANNOT BE A P ASSIVE SITUATION ANYWAY; IT IMPLIES THAT THE PERSON CONCEAL ING THE ITA NOS. 526 TO 528 /MUM/07 ASSESSMENT YEAR 1998-99, 1999-00 AND 2000-01 PAGE 5 OF 9 INCOME IS HIDING, COVERING UP OR CAMOUFLAGING AN IN COME SOMETHING WHICH ESSENTIALLY REQUIRES A CONSCIOUS EF FORT. ON THE CONTRARY, THIS IS A SITUATION IN WHICH THE ASSESSEE HAS ACTED IN VERY TRANSPARENT AND STRAIGHT FORWARD MANNER. THERE CANNOT BE ANY CONCEALMENT OF INCOME IN SUCH A SITUATION. 61. THE EXPRESSION FURNISHING OF INACCURATE PARTI CULARS OF INCOME HAS ALSO NOT BEEN DEFINED IN THE ACT. THE E XPRESSION INACCURATE REFERS TO NOT IN CONFORMITY WITH THE FACT OR TRUTH AND THAT IS THE MEANING WHICH, IN OUR CONSIDERED VIEW, IS RELEVANT IN THE CONTEXT OF FURNISHING OF INACCURATE PARTICULAR S. THE EXPRESSION PARTICULARS REFERS TO FACTS, DETAILS, SPECIFICS, OR INFORMATION ABOUT SOMEONE OR SOMETHING. THEREFORE, THE PLAIN MEANING OF THE EXPRESSION FURNISHING OF INACCURATE PARTICULARS OF INCOME IMPLIES FURNISHING OF DETAILS OR INFORMA TION ABOUT INCOME WHICH ARE NOT IN CONFORMITY WITH THE FACTS O R TRUTH. THE DETAILS OR INFORMATION ABOUT INCOME DEAL WITH THE F ACTUAL DETAILS OF INCOME AND THIS CANNOT BE EXTENDED TO AREAS WHIC H ARE SUBJECTIVE SUCH AS THE STATUS OF TAXABILITY OF AN I NCOME, ADMISSIBILITY OF A DEDUCTION AND INTERPRETATION OF LAW. THE FURNISHING OF INACCURATE INFORMATION THUS RELATES T O FURNISHING OF FACTUALLY CORRECT DETAILS AND INFORMATION ABOUT INC OME. .. THE ADMISSION OR REJECTION OF A CLAIM IS A SUBJECTIVE EXERCISE AND WHETHER A CLAIM IS ACCEPTED OR REJECTED HAS NOTHING TO DO WITH FURNISHING OF INACCURATE PAR TICULARS OF INCOME. THE AUTHORITIES BELOW HAVE APPARENTLY PROCE EDED TO TREAT ASSESSEES MAKING AN INCORRECT CLAIM OF INCOM E AS FURNISHING OF INACCURATE PARTICULARS. WHAT IS A COR RECT CLAIM AND WHAT IS AN INCORRECT CLAIM IS A MATTER OF PERCEPTIO N. IN OUR CONSIDERED VIEW, RAISING A LEGAL CLAIM, EVEN IF IT IS ULTIMATELY FOUND TO BE LEGALLY UNACCEPTABLE, CANNOT AMOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. INACCURATE, AS WE HAVE NOTED ABOVE, IS SOMETHING FACTUALLY INCORRECT AND INTERPR ETATION OF LAW CAN NEVER BE A FACTUAL ASPECT. JUST BECAUSE AN ASSE SSING OFFICER DOES NOT ACCEPT AN INTERPRETATION, SUCH AN INTERPRE TATION IS NOT RENDERED INCORRECT. EVEN THE JUDGMENTS OF HONBLE S UPREME COURT ARE REVERSED BY THE LARGER BENCHES OF HONBLE SUPREME COURT. THE DEVELOPMENT OF LAW IS A DYNAMIC PROCESS WHICH IS AFFECTED BY THE INNUMERABLE FACTORS, AND IT IS ALWA YS AN ONGOING EXERCISE. IN SUCH CIRCUMSTANCES, A BONAFIDE LEGAL C LAIM BY THE ASSESSEE BEING VISITED WITH PENAL CONSEQUENCES ONLY BECAUSE IT HAS NOT BEEN ACCEPTED THUS FAR BY THE TAX AUTHORITI ES OR JUDICIAL AUTHORITIES IS AN ABSURDITY. IN ANY EVENT, AS WE HA VE NOTED ABOVE, THE CONNOTATIONS OF EXPRESSION PARTICULARS OF INCO ME DO NOT EXTEND TO THE ISSUES OF INTERPRETATION OF LAW AND A S SUCH MAKING A CLAIM, WHICH IS FOUND TO BE UNACCEPTABLE IN LAW, CA NNOT BE TREATED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THIS VIEW OF THE MATTER, THE CASE OF THE ASSESSEE CAN NO T BE SAID TO BE A CASE OF FURNISHING OF INACCURATE PARTICULARS OF IN COME, IN ITS NATURAL SENSE, EITHER. ITA NOS. 526 TO 528 /MUM/07 ASSESSMENT YEAR 1998-99, 1999-00 AND 2000-01 PAGE 6 OF 9 6. HONBLE SUPREME COURT JUDGMENT, IN THE CASE OF R ELIANCE PETROPRODUCTS (SUPRA), WERE CONCERNED WITH THE QUES TION WHETHER IN THIS CASE, AS A MATTER OF FACT, THE ASSESSEE HAS GIVEN I NACCURATE PARTICULARS. THEIR LORDSHIPS NOTED THAT IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND T O BE INCORRECT OR ERRONEOUS OR FALSE AND ADD THAT SUCH BEING THE CA SE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1)(C) OF THE ACT AND THAT A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINAB LE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING INCOME OF THE ASSESSEE. IT IS NOT EVEN ASSESSING OFFICERS CASE THAT THE FACTS STATED IN THE RETURN ARE FOUND TO BE ERRONEOUS , OR THE ASSETS W HICH WERE CLAIMED TO HAVE BEEN LEASED OUT DID NOT EXIST . THE CONTROVERSY IS CONFINED TO THE QUESTION AS TO, ON A PROPER CONSTRUCTION OF THE APPLICABLE LEGA L POSITION, WHO IS ENTITLED TO DEPRECIATION ON ASSETS SAID TO HAVE BEEN LEASED BY THE ASSESSEE TO ITS CUSTOMERS. IN OUR CONSIDERED VIEW, IN VIEW OF THE LEGAL POSITION AS DISCUSSED ABOVE, A LEGAL CLAIM PER SE , RIGHT OR WRONG, CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 7. WE MUST HOWEVER ADD THAT MERELY BECAUSE THERE IS NO CONCEALMENT OF PARTICULARS, IT CANNOT BE SAID THAT IT IS NOT A FIT CASE FOR IMPOSITION OF PENALTY. IT IS QUITE POSSIBLE THAT AN ASSESSEE MAY NOT FURNI SH ANY INACCURATE PARTICULARS OF INCOME AND YET HE CAN BE SAID TO HAV E CONCEALED INCOME. THAT CAN POSSIBLY BE IN A SITUATION IN WHICH THE ASSESSE E IS HIT BY THE DEEMING FICTION AND THE ASSESSEE DOES NOT HAVE A REASONABL E EXPLANATION FOR THE LEGAL CLAIM MADE BY THE ASSESSEE. HOWEVER, EVEN ASSUMING THAT DEEMING FICTION UNDER EXPLANATION 1 TO SECTION 271 (1)(C) CAN BE TR IGGERED BY A WRONG LEGAL CLAIM, IT CANNOT BE THE CASE THAT MERELY BECAUSE TH ERE IS A WRONG CLAIM, EVEN IF THAT BE SO, PENALTY UNDER SECTION 271(1)(C) CAN BE IMPOSED. THIS DEEMING FICTION UNDER SECTION 271(1)(C) ONLY SHIFTS THE ONU S OF PROOF ON THE ASSESSEE, AS THIS EXPLANATION ITSELF PROVIDES THAT A PENALTY CAN ONLY BE IMPOSED (A) WHEN THERE IS NO EXPLANATION BY THE ASSESSEE, (B) W HEN THE EXPLANATION GIVEN BY THE ASSESSEE IS FOUND TO BE FALSE, AND (C) WHEN THE ASSESSEE PROVIDES AN EXPLANATION WHICH HE FAILS TO SUBSTANTI ATE AND HE FAILS TO PROVE THAT THE EXPLANATION WAS BONAFIDE AND THAT ALL THE FACTS NECESSARY FOR THE ITA NOS. 526 TO 528 /MUM/07 ASSESSMENT YEAR 1998-99, 1999-00 AND 2000-01 PAGE 7 OF 9 SAME AND MATERIAL FOR COMPUTATION OF INCOME HAVE BE EN DULY DISCLOSED BY THE ASSESSEE. IN THE CASE BEFORE US, THE ASSESSEE H AS GIVEN AN EXPLANATION FOR MAKING THE CLAIM OF DEPRECIATION AND THE SAID EXPLA NATION HAS NOT BEEN FOUND TO BE FALSE. THEREFORE, EXPLANATION TO SECTIO N 271(1)(C) CAN GET ATTRACTED ONLY WHEN THE EXPLANATION OF THE ASSESSEE IS FOUND TO NOT BONAFIDE. IN THE CASE OF CIT VS NATHULAL AGARWAL & SONS (143 ITR 292) FULL BENCH OF HONBLE PATNA HIGH COURT HAS OBSERVED AS FOLLOWS: AS TO THE NATURE OF EXPLANATION OFFERED BY THE ASS ESSEE, IT SEEMS PLAIN ON PRINCIPLE THAT IT IS NOT THE LAW THA T THE MOMENT ANY FANTASTIC OR UNACCEPTABLE EXPLANATION IS GIVEN, THE BURDEN PLACED ON HIM WILL BE DISCHARGED AND PRESUMPTION REBUTTED. IT IS NOT THE LAW, AND PERHAP S HARDLY CAN BE, THAT ANY AND EVERY EXPLANATION OF THE ASSES SEE MUST BE ACCEPTED. IN MY VIEW, THE EXPLANATION OF THE ASS ESSEE FOR AVOIDANCE OF PENALTY MUST BE AN ACCEPTABLE EXPLANAT ION. HE MAY NOT PROVE WHAT HE ASSERTS TO THE HILT POSITIVEL Y, BUT AT LEAST MATERIAL BROUGHT ON RECORD MUST SHOW THAT WHA T HE SAYS IS REASONABLY VALID 8. THE ABOVE VIEWS WERE APPROVED BY THE HONBLE SUP REME COURT IN THE CASE OF MUSSADILAL RAMBHAROSE VS CIT (165 ITR 14). REFERRING THE JUDGMENT OF HONBLE PATNA HIGH COURT, THEIR LORDSHIPS HAVE O BSERVED AS FOLLOWS: THE PATNA HIGH COURT EMPHASIZED THAT AS TO THE NAT URE OF EXPLANATION TO BE RENDERED BY THE ASSESSEE, IT WAS PLAIN ON PRINCIPLE THAT IT IS NOT THE LAW THAT THE MOMENT AN Y FANTASTIC OR UNACCEPTABLE EXPLANATION IS GIVEN, THE BURDEN PLACED ON HIM WILL BE DISCHARGED AND PRESUMPTION REBUTTED. WE AGREE. WE FURTHER AGREE THAT IT IS NO T THE LAW THAT EACH AND EVERY EXPLANATION BY THE ASSESSEE MUS T BE ACCEPTED. IT MUST BE ACCEPTABLE EXPLANATION, ACCEPT ABLE TO A FACT FINDING BODY. 9. VIEWED IN THIS PERSPECTIVE, UNDOUBTEDLY JUST BEC AUSE ASSESSEE HAS AN EXPLANATION WHATEVER BE ITS WORTH AND CREDIBILITY , IT DOES NOT CEASE TO BE A CASE IN WHICH CONCEALMENT PENALTY IS TO BE LEVIED, BUT THEN AS LONG AS THERE IS A REASONABLE EXPLANATION FOR THE CONDUCT OF THE ASS ESSEE, THE ONUS OF THE ASSESSEE STANDS DISCHARGED. TO ILLUSTRATE, WHEN A S ALARIED EMPLOYEE CLAIMS DEDUCTION ON ACCOUNT OF DEPRECIATION ON CAR FROM HI S SALARY INCOME, HE ITA NOS. 526 TO 528 /MUM/07 ASSESSMENT YEAR 1998-99, 1999-00 AND 2000-01 PAGE 8 OF 9 CANNOT POSSIBLY ESCAPE THE RIGOUR OF PENALTY ON THE PLEA THAT WHAT HE HAS MADE IS A PURELY LEGAL CLAIM IN A TRANSPARENT MANNE R, AND MERELY BECAUSE CLAIM IS REJECTED, CONCEALMENT PENALTY CANNOT BE IM POSED. THE LEGAL CLAIM MUST ALSO BE A REASONABLE CLAIM. THE TRUE TEST, TH EREFORE, MUST LIE IN THE NATURE OF EXPLANATION OF THE ASSESSEE FOR HAVING MA DE THE CLAIM, AND WHETHER THE EXPLANATION CAN BE SAID TO BE A BONAFIDE EXPLAN ATION. IN THE PRESENT CASE, THE ASSESSEE HAS MADE A CLAIM WHICH IS NOT ONLY IN ACCORDANCE WITH SEVERAL DECISIONS OF THE COORDINATE BENCHES BUT ALSO ENTIRE LY BASED ON A POSSIBLE CONSTRUCTION OF CERTAIN LEASE AGREEMENTS. IT IS NOT A FRIVOLOUS, ABSURD OR PATENTLY INADMISSIBLE CLAIM THAT HAS BEEN MADE BY T HE ASSESSEE. IN OUR CONSIDERED VIEW, THEREFORE, THE EXPLANATION FOR TH E LEGAL CLAIM OF DEPRECIATION MADE BY THE ASSESSEE CANNOT BE SAID TO BE, WHAT HONBLE SUPREME COURT TERMED AS, A WHOLLY FANTASTIC OR UNAC CEPTABLE EXPLANATION. 10. FOR ALL THESE REASONS, AND IN THE LIGHT OF THE SETTLED LEGAL POSITION DISCUSSED ABOVE, IT WAS INDEED NOT A FIT CASE FOR C ONFIRMATION OF IMPUGNED PENALTY. WE, THEREFORE, UPHOLD THE GRIEVANCE OF THE ASSESSEE, AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTIES IN RESPECT OF DEPRECIATION ON LEASED ASSETS. 11. IN THE RESULT, THE APPEALS ARE ALLOWED PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH DAY OF SEPTEMBER, 2010. SD/- SD/- ( N V VASUDEVAN) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 30 TH _DAY OF SEPTEMBER, 2010. COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT , MUMBAI 4. THE COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE - I BENCH, MUMBA I 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI ITA NOS. 526 TO 528 /MUM/07 ASSESSMENT YEAR 1998-99, 1999-00 AND 2000-01 PAGE 9 OF 9