NATH CAPITAL & FIANANCE SERVICES LTD, MUMBAI V. CIT(A)-2, MUMBAI

ITA 96/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8041 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-03-2011
• Assessment Year: 1995-1996
• Appeal Filed On: 06-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: N R AGRAWAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SMT.ASHA VIJAYARAGHAVA N, JM ITA NO.96/MUM/2010 : ASST.YEAR 1995-96 M/S.NATH CAPITAL & FINANCIAL SERVICES LTD 1 CHATEAU WINDSOR 86 VEER NARIMAN ROAD CHURCHGATE, MUMBAI 400 020. PAN : AAACN1604J. VS. THE INCOME TAX OFFICER WARD 1(2)-3 THANE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.R.AGRAWAL RESPONDENT BY : SHRI SURENDRA KUMAR O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) DATED 27.10.2009 UPHOLDING THE PENALTY OF RS.27,82,750 I MPOSED BY THE ASSESSING OFFICER U/S.271(1)(C) OF THE ACT IN RELATION TO ASS ESSMENT YEAR 1995-96. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) DETERMINING TOTAL INCOME AT RS .60.92 LAKHS AS AGAINST RETURNED INCOME OF RS.3.43 LAKHS. IN THIS ASSESSMEN T THE DEPRECIATION CLAIMED BY THE ASSESSEE ON PIPELINE OF ABOUT 7 KMS. WAS NOT A LLOWED ON THE GROUND THAT IT WAS A TRANSACTION BETWEEN THE ASSESSEE AND ITS SISTER C ONCERN M/S.NATH PULP AND PAPER MILLS LIMITED IN THE NATURE OF FINANCE LEASE AND NO T OPERATING LEASE. EVENTUALLY THE MATTER CAME UP BEFORE THE TRIBUNAL AND THE MATTER W AS RESTORED TO THE FILE OF A.O. FOR A FRESH DECISION IN THE LIGHT OF THE SPECIAL BE NCH ORDER IN MIDEAST PORTFOLIO MANAGEMENT LTD. VS. DCIT [(2003) 87 ITD 537 (MUM.) (SB)] . IN THE INSTANT PROCEEDINGS THE ASSESSING OFFICER GAVE OPPORTUNITY TO THE ASSESSEE FOR EXPLAINING AS TO HOW ITS CASE WAS DISTINGUISHABLE FROM THAT O F MIDEAST PORTFOLIO MANAGEMENT LTD. (SUPRA). THE ASSESSEE UNSUCCESSFULLY TRIED TO DISTINGUISH ITS CASE FROM THAT OF MIDEAST PORTFOLIO MANAGEMENT LTD. THE ASSESSING OFF ICER , THEREFORE, DISALLOWED THE DEPRECIATION AND ALSO ACCEPTED THE ASSESSEES ALTERNATIVE CONTENTION THAT IF ITA NO.96/MUM/2010 M/S.NATH CAPITAL & FINANCIAL SERVICES LIMITED. 2 DEPRECIATION WAS TO BE DISALLOWED THEN RECEIPTS BY WAY OF LEASE RENTAL SHOULD BE EXCLUDED. THE ASSESSEE REMAINED UNSUCCESSFUL IN THE FIRST APPEAL ON THE QUESTION OF GRANT OF DEPRECIATION. NO SECOND APPEAL WAS FILED AGAINST THE DECISION OF THE LEARNED CIT(A) IN THE QUANTUM PROCEEDINGS. THEREAF TER, THE A.O. IMPOSED PENALTY U/S.271(1)(C) ON THE AMOUNT OF DEPRECIATION DISALLO WED, WHICH CAME TO BE UPHELD IN THE FIRST APPEAL. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. BEFORE WE PROCEED FURTHER IT IS NECESSARY TO REITERATE THE WELL SETTLED LEGAL POSITION THAT PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT FROM THE ASSESSMENT PROCEEDINGS. EVEN IF THE ASSESSEE REMAINS UNSUCCES SFUL IN THE QUANTUM PROCEEDINGS, STILL IT HAS RIGHT TO SHOW THE BONA FI DES OF ITS CLAIM IN THE PENALTY PROCEEDINGS. TURNING TO THE FACTS OF THE INSTANT C ASE, IT IS APPARENT THAT THE ASSESSEE CLAIMED THAT LEASE TRANSACTION WITH M/S.NA TH PULP AND PAPER MILLS LIMITED WAS THAT OF OPERATING LEASE FOR WHICH IT CLAIMED DE PRECIATION DEPRECIATION. ON THE OTHER HAND THE ASSESSING OFFICER OPINED, LOOKING IN TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THAT IT WAS A CASE OF FINANCE LEASE AN D HENCE DEPRECIATION COULD NOT BE ALLOWED. ALL THE FACTS RELATING TO THE CLAIM OF DEP RECIATION WERE DULY DISCLOSED BY THE ASSESSEE. FURTHER THE GENUINENESS OF THE TRANSA CTION OF LEASE, WHETHER OPERATING OR FINANCE, HAS NOT BEEN DOUBTED BY THE AO AND HAS BEEN ACTED UPON. THE DISPUTE IS ONLY ABOUT THE TREATMENT GIVEN TO SUCH LEASE TRA NSACTION AS ASSUMING THE CHARACTER OF OPERATING LEASE OR FINANCE LEASE. THE ASSESSEE GENUINELY CONSIDERED IT AS OPERATING LEASE AND ENTERTAINED A BONA FIDE BELI EF THAT DEPRECIATION WOULD BE ALLOWABLE ACCORDINGLY. SINCE THE ASSESSEES CLAIM TO BE OPERATING LEASE WAS HELD TO BE OTHERWISE BY THE AUTHORITIES BELOW, IT MAY RI GHTLY CALL FOR DISALLOWANCE OF DEPRECIATION, BUT CANNOT FALL WITHIN THE MISCHIEF O F SECTION 271(1)(C). WE ARE REMINDED OF THE RECENT JUDGEMENT OF THE HONBLE IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. [(2010) 322 ITR 158 (SC)] WHEREIN THE COURT HAS HELD THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABL E IN LAW, BY ITSELF, WILL NOT ITA NO.96/MUM/2010 M/S.NATH CAPITAL & FINANCIAL SERVICES LIMITED. 3 ATTRACT PENALTY U/S.271(1)(C). WHEN THE ASSESSEE HA S FURNISHED ALL THE PARTICULARS IN RETURN WHICH ARE NOT FOUND TO BE INACCURATE, IT WAS FOR THE AUTHORITIES TO ACCEPT THE CLAIM OR NOT BUT THAT COULD NOT LEAD TO THE IMPOSIT ION OF PENALTY. SIMILARLY IN CIT VS. INDIAN METALS AND FERRO ALLOYS LTD. [(1995) 211 ITR 35 (ORI.)] THE ASSESSEE CLAIMED DEDUCTION INTER ALIA ON ACCOUNT OF DEPRECIATION WHICH WAS HELD TO BE NO T ALLOWABLE. HOWEVER, THE TRIBUNAL HOLDING THE VIEW T HAT PENALTY COULD NOT BE IMPOSED U/S.271(1)(C) ON SUCH DISALLOWANCE, WAS UPH ELD BY THE HONBLE ORISSA HIGH COURT. IN VIEW OF THE FOREGOING DISCUSSION WE ARE SATISFIED THAT THE PENALTY IS NOT SUSTAINABLE IN SUCH CIRCUMSTANCES. WE, THEREFOR E, ORDER FOR THE DELETION OF PENALTY. 4. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 16 TH DAY OF MARCH, 2011 . SD/- SD/- (ASHA VIJAYARAGHAVAN) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 16 TH MARCH, 2011. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) II, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.