Niko Resources Ltd.,, Baroda v. The ACIT., Circle-6, Baroda

ITA 2477/AHD/2008 | 2003-2004
Pronouncement Date: 30-04-2010 | Result: Allowed

Appeal Details

RSA Number 247720514 RSA 2008
Assessee PAN AAACN7060L
Bench Ahmedabad
Appeal Number ITA 2477/AHD/2008
Duration Of Justice 1 year(s) 10 month(s)
Appellant Niko Resources Ltd.,, Baroda
Respondent The ACIT., Circle-6, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 30-04-2010
Date Of Final Hearing 16-03-2010
Next Hearing Date 16-03-2010
Assessment Year 2003-2004
Appeal Filed On 30-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HONBLE SH RI N. S. SAINI A.M.) I.T.A. NO. 2477/AHD./2008 ASSESSMENT YEAR : 2003-2004 NIKO RESOURCES LIMITED BARODA -VS.- ASSISTANT COMMISSIONER OF INCOME TAX (PAN : AAACN 7060 L) CIRCLE-6 BARODA (APPELLANT) (RESPONDENT) & I.T.A. NO. 2719/AHD./2008 ASSESSMENT YEAR : 2003-2004 ASSISTANT DIRECTOR OF INCOME TAX -VS.- NIKO RESOURCES LIMITED BARODA INTERNATIONAL TAXATION AHMEDABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI PERCY P. PARDIWALLA SR . ADVOCATE TANVISH BHATT VISPI T. PATEL RESPONDENT BY : SHRI JAGDEO C IT D.R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THESE CROSS APPEALS ARE AGAINST THE ORDER DATED 14 .05.2008 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XXI AHMEDABAD PARTLY CONFIRMIN G THE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT FOR THE ASSESSMENT YEAR 2003-04. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COMPANY INCORPORATED IN CANADA. IT IS ENGAGED IN THE BUSINESS OF NATURAL GAS AND OIL EXPL ORATION. THE ASSESSEE IS A TAX RESIDENT OF CANADA AND IS ELIGIBLE FOR THE BENEFITS OF THE AGRE EMENT BETWEEN THE GOVERNMENT OF INDIA AND THE GOVERNMENT OF CANADA FOR THE AVOIDANCE OF DOUBLE TA XATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL. THE ASSESSEE-COMPANY ENTERED INTO A JOINT VENTURE WITH GUJARAT STATE PETROLEUM CORPORATION LI MITED (IN SHORT GSPCL) FOR THE EXPLORATION AND DEVELOPMENT OF NATURAL GAS AND OIL FIELDS IN INDIA. THE NIKO-GSPCL JOINT VENTURE ENTERED INTO PRODUCTION SHARING CONTRACTS ( IN SHORT PSC) WITH THE GOVERNMENT OF INDIA ON 23.09.1994 FOR THE EXPLORATION AND DEVELOPMENT O F FIVE DESIGNATED NATURAL GAS AND OIL FIELDS IN GUJARAT (IN SHORT NIKO-GSPC BLOCK_. THE ASSESS EE-COMPANY WAS PERMITTED BY THE RESERVE BANK OF INDIA TO SET UP A PROJECT OFFICE IN INDIA W .E.F. 14.08.1994. FOR THE ASSESSMENT YEAR UNDER 2 ITA NO. 2477 & 2719/AHD /2008 APPEAL THE ASSESSEE-COMPANY FILED ITS RETURN OF IN COME DECLARING INCOME OF RS.25 57 03 870/-. THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER S ECTION 143(3) VIDE ORDER DATED 07.03.2006 DETERMINING TOTAL INCOME AT RS.1 58 29 79 355/- WH EREIN HE ALSO INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THESE PENALTY PROCEEDINGS WERE KEPT IN ABEYANCE TILL THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DECIDED THE QUANTUM APPEAL ON 29.11.20 06. IN QUANTUM APPEAL THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) VIDE ORDER DATE D 29.11.2006/- CONFIRMING THE FOLLOWING ADDITIONS/ DISALLOWANCES:- (I) ADDITION BY DISALLOWANCE OF EXPENDITURE INCURRE D ON EXPLORATION AND DRILLING ACTIVITIES AMOUNTING TO RS.25 81 55 828/- U/S. 42 OF THE I.T. ACT 1961. THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT U/S. 42 OF THE ACT ONLY THOSE DEDUCTIONS WOULD BE ALLOWABL E WHICH ARE SPECIFIED IN THE AGREEMENT BETWEEN THE ASSESSEE AND THE CENTRAL GOVE RNMENT AND AS NO DEDUCTIONS HAVE BEEN SPECIFIED IN THE AGREEMENT NO ADDITIONAL DEDUCTION CAN BE ALLOWED OVER AND ABOVE THE DEDUCTIONS UNDER THE NORMAL PROVISIONS. THE LD. CIT(A.) CONFIRMED THE DISALLOWANCE AFTER FOLLOWING THE CIT(A.)S ORDER FOR A.Y. 2001-02. (II) ADDITION BY DISALLOWANCE OF EXPENDITURE INCURR ED ON EXPLORATION AND DRILLING ACTIVITIES AMOUNTING TO RS.1 06 48 81 736/ - U/S. 42 OF THE I.T. ACT 1961 IN CONNECTION WITH ITS BUSINESS EXPLORATION AN D EXTRACTION OF OIL AND NATURAL GAS RELATED TO SURAT BLOCK CB-ONN-2000/02. THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT U/ S. 42 OF THE ACT ONLY THOSE DEDUCTIONS WOULD BE ALLOWABLE WHICH ARE SPECIFIED I N THE AGREEMENT BETWEEN THE ASSESSEE AND THE CENTRAL GOVERNMENT AND AS NO D EDUCTIONS HAVE BEEN SPECIFIED IN THE AGREEMENT NO ADDITIONAL DEDUCTION CAN BE ALLOWED OVER AND ABOVE THE DEDUCTIONS UNDER THE NORMAL PROVISIONS. T HE LD. CIT(A.) CONFIRMED THE DISALLOWANCE AFTER FOLLOWING THE CIT(A.)S ORDE R FOR A.Y. 2001-02. 3 ITA NO. 2477 & 2719/AHD /2008 (III) THE CLAIM OF THE DEDUCTION OF RS.25 57 03 871 /- U/S. 80IB(9) MADE IN REVISED RETURN IN RESPECT OF PROFITS AND GAINS FOR THE PRODUCTION OF MINERAL OIL DERIVED FROM UNDERTAKING H2 AND H3 WELL. (IV) ADDITION BY DISALLOWANCE OF DEPRECIATION CLAIM ED ON THE COST OF 3614 KMS. PIPELINE OF HAZIRA MORA AMOUNTING TO RS.1 60 6 4 938/-. 3. SUBSEQUENTLY THE ASSESSING OFFICER LEVIED THE P ENALTY UNDER SECTION 271(1)(C) AMOUNTING TO RS.60 63 10 000/-. ON APPEAL AGAINST T HE PENALTY ORDER BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE M ADE THE FOLLOWING SUBMISSIONS :- THE APPELLANT SUBMITTED THAT PENALTY UNDER SECTION 271(L)(C) OF THE ACT CAN BE LEVIED ONLY IF THE ASSESSING OFFICER IS SATISFIED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THAT AN ASSESSEE HAS CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED IN ACCURATE PARTICULARS OF SUCH INCOME. FURTHER THE EXPLANATION 1 TO THE ABOVE SECTION LAYS DOWN TH AT AN ASSESSEE SHALL BE DEEMED TO HAVE CONCEALED PARTICULARS M RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF TOTAL INCOME IF; A) THE ASSESSEE FAILS TO OFFER AN EXPLANATIO N OR; B) THE EXPLANATION OFFERED BY THE ASSESSEE IS CONSIDERED TO BE FALSE BY THE ASSESSING OFFICER OR; C) THE EXPLANATION OFFERED IS WITHOUT ANY MA TERIAL TO SUBSTANTIATE IT. THE APPELLANT HAD MADE APPROPRIATE DISCLOSURES IN T HE ROI A DURING ASSESSMENT PROCEEDINGS THE APPELLANT SUBMITTED THAT IT HAD FILED ITS RETUR N OF INCOME WITHIN THE TIME STIPULATED IN THE ACT AND HAD INTER-ALIA SUBMITTED THE FOLLOWING DOCUMEN TS ALONGWITH THE RETURN OF INCOME FOR THE AY 2003-04: COMPUTATION OF TOTAL INCOME AND TAX ALONGWITH THE NOTES THERETO; TAX AUDIT REPORT FOR AY 2003-04 UNDER SECTION 4 4AB OF THE ACT; COPY OF THE AUDITED FINANCIAL STATEMENT ALONGWI TH THE NOTES AND SCHEDULES; AND CERTIFICATES IN FORM 10CCB FOR UNDERTAKINGS H2 & H3 FOR CLAIMING DEDUCTION U/S 80-IB(9) OF THE ACT ALONG WITH THE COMPUTATION OF INCOME AND AUDIT ED FINANCIAL STATEMENTS FAR EACH OF THE UNDERTAKINGS. THE BASIS FOR CLAIMING THE DEDUCTIONS WAS CLEARLY M ENTIONED IN THE RETURN OF INCOME AND THE ATTACHMENTS THERETO. A COPY OF THE RETURN OF INCOME ALONGWITH THE AFORESAID DOCUMENTS ARE SUBMITTED. IT WAS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO IT HAD FURNISHED ALL NECESSARY PARTICULARS / DETAILS AS RE QUESTED FROM TIME TO TIME MADE BONAFIDE SUBMISSIONS TO THE ACIT AND COMPLIED WITH ALL REQUI REMENTS OF NOTICES SENT FROM TIME TO TIME. THE DISCLOSURES MADE BY THE APPELLANT IN THE ABOVE MENTIONED DOCUMENTS AND SUBMISSIONS FILED IN THE COURSE OF ASSESSMENT PROCEEDINGS ARE AS UNDE R-. CLAIM FOR DEDUCTION U/S. 42 OF THE ACT FOR NICO-GSP C BLOCK 4 ITA NO. 2477 & 2719/AHD /2008 A. THE APPELLANT HAD PROVIDED THE BREAK-UP OF THE NATURE OF EXPENSES CLAIMED U/S 42 OF THE ACT IN ANNEXURE I TO THE COMPUTATION OF INCOME. B. THE APPELLANT UNDER CLAUSE 14 OF THE TAX AUDI T REPORT HAD CLEARLY STATED THAT SINCE IT HAD CLAIMED DEDUCTION U/S 42 OF THE ACT IN RESPECT OF C APITAL EXPENDITURE NO TAX DEPRECIATION WAS CLAIMED BY IT ON SUCH CAPITAL EXPENDITURE. IT WAS N OT THE APPELLANT'S CASE TO CLAIM DEDUCTION IN TERMS OF DEDUCTION U/S 42 OF THE CAPITAL EXPENDITUR E AND FURTHER CLAIM DEPRECIATION ON SUCH CAPITAL EXPENDITURE TO CONCEAL PARTICULARS OF INCOM E. C. MOREOVER THE APPELLANT HAD PLACED ON RECORD B EFORE THE ACIT THE P5C FOR THE NIKO-GSPC BLOCK STATING AN ITS SUBMISSION DATED 28.09.2005 O N PAGE 6 THAT ARTICLE 15 3 OF THE PSC PROVIDES FOR THE DEDUCTIONS ENUMERATED UNDER SECTION 42 OF T HE ACT. D. THE FACT THAT THE APPELLANT HAD FURNISHED DETAIL ED REPLY TO THE ACITS NOTICES WITH REGARD TO ITS CLAIM U/S. 42 FOR THE NIKO-GSPC BLOCK IS ALSO STATE D ON PAGE 4 OF THE ASSESSMENT ORDER OF THE ACIT. CLAIM FOR DEDUCTION U/S. 42 OF THE ACT FOR SURAT BL OCK A. IN RESPECT OF THE SURAT BLOCK THE APPELLANT HAD CL EARLY STATED IN THE NOTES TO COMPUTATION OF INCOME THAT IT HAD COMMENCED COMMERCIAL PRODUCTION DURING THE PREVIOUS YEAR 2002-03 AND HENCE CLAIMED DEDUCTION U/S. 42 OF THE EXPLORATION AND DRILLING COSTS. B. THE FACT THAT THE APPELLANT HAD COMMENCED COMMERCIA L PRODUCTION DURING THE YEAR UNDER APPEAL HAD ALSO BEEN STATED IN NOTE 1 OF THE AUDITE D FINANCIAL STATEMENTS FOR THE YEAR. C. IN SUPPORT OF ITS CLAIM FOR DEDUCTION U/S.42 OF THE ACT THE APPELLANT HAD IN ITS VARIOUS SUBMISSIONS BEFORE THE ACIT & CIT(A.) EXPLAINED WI TH FACTUAL DETAILS AND DOCUMENTS THE BASIS OF COMMENCEMENT OF COMMERCIAL PRODUCTION IN F Y 2002-03. D. THE APPELLANT HAD ALSO EXPLAINED IN ITS ASSESSMENT SUBMISSIONS TO THE ACIT THE ENTIRE SEQUENCE OF EVENTS FROM THE DATE OF SUBMITTING THE DEVELOPMENT PLAN FOR BHEEMA FIELD TO THE RECEIVING APPROVALS FROM DIRECTOR GENERAL OF HYDROC ARBONS AND MANAGEMENT COMMITTEE MEETING AND COMMENCEMENT OF COMMERCIAL PRODUCTION A LONGWITH THE REASONS FOR DELAY IN GRANT OF APPROVAL OF DEVELOPMENT PLAN BY THE DGH. E. TO SUBSTANTIATE ITS CLAIM FOR THE AFORESAID DEDUCTI ON THE APPELLANT VIDE ITS ASSESSMENT SUBMISSIONS DATED 26 TH JULY 2005 ALSO FILED THE PSC FOR THE SURAT BLOCK COPY OF THE GAS SALES CONTRACT WITH GUJARAT GAS COMPANY LTD. DATED 20 TH MARCH 2003 AND COPY OF INVOICE DATED 31 ST MARCH 2003 FOR SUPPLY OF NATURAL GAS TO GGCL ON 3 1 ST MARCH 2003 ETC. IN SUPPORT OF ITS CLAIM THAT COMMERCIAL PRODUCTION HAD COMMENCED DURING AY 2003-04. F. THE FACT THAT THE APPELLANT PRODUCED ALL THE AFORES AID DOCUMENTS BEFORE THE ACIT DURING THE ASSESSMENT PROCEEDINGS IS CLEARLY MENTIONED ON PAGE 16 OF THE ACITS ASSESSMENT ORDER. G. FURTHER THE APPELLANT ALONGWITH ITS ASSESSMENT SU BMISSIONS DATED 20 TH FEBRUARY 2006 SUBMITTED BILLS VOUCHERS OF VARIOUS VENDORS FOR THE BHEEMA GAS PIPELINE AND HORIZONTAL TEST SEPARATORS INCLUDING THAT OF ANERI CONSTRUCTIONS ITS INSTALLATION CONTRACTOR FOR THE PIPELINE. H. IT WAS ALSO SUBMITTED BEFORE THE ACIT IN THE ASSESS MENT SUBMISSIONS DATED 27 TH FEBRUARY 2006 ON PAGE 3 THAT THE ANNUAL AUDITED ACCOUNTS OF THE APPELLANT FOR FY 2002-03 ARE SUBMITTED WITH DGH WHICH REFLECT THE PRODUCTION AND SALE OF GAS FROM BHEEMA FIELD FOR RS.70 278/-. THE ACCOUNTS HAVE ALSO BEEN APPROVED B Y THE DGH VIDE ITS LETTER OCTOBER 25 2005. FURTHER IN SUPPORT OF THE FACT THAT COMMERCI AL PRODUCTION OF GAS HAD COMMENCED FROM FY 2002-03 THE APPELLANT HAD SUBMITTED BEFORE THE ACIT THAT ROYALTY OF RS.5 324/- ON PRODUCTION AND SALES TAX OF RS.11 713 ON SALE FROM BHEEMA FIELD HAD BEEN PAID TO GUJARAT GOVT. FOR FY 2002-03 AND THE REQUISITE INFRASTRUCTU RE WAS PUT IN PLACE AND SUPPLY CONTRACTS WITH CUSTOMERS WERE ALSO ENTERED INTO THE SAID FY. 5 ITA NO. 2477 & 2719/AHD /2008 I. FURTHER VIDE THE AFORESAID ASSESSMENT SUBMISSIONS THE APPELLANT HAD CLEARLY STATED THAT THE MCM HAD APPROVED THE COMMERCIAL DISCOVERY IN FEBRUA RY 2003 AND ALSO AS A PART OF THE FDP APPROVAL APPROVED THE CREATION OF PRODUCTION F ACILITIES AT BHEEMA FOR LAYING NECESSARY PIPELINES AND OTHER RELATED EQUIPMENTS. J. FURTHER VIDE THE AFORESAID ASSESSMENT SUBMISSIONS T HE APPELLANT HAD CLEARLY STATED THAT THE DGH GAVE IN PRINCIPLE APPROVAL TO THE DEVELOPMENT P LAN ON JULY 31 2003 WHICH WAS SUBJECT TO REACHING GAS BALANCING AGREEMENT WITH ONGC AND O UTCOME OF CYANIDE COURT CASE. K. THE GAS BALANCING AGREEMENT WITH ONGC SIGNED ON 11 TH OCTOBER 2004 WAS ALSO SUBMITTED BEFORE THE ACIT VIDE SUBMISSIONS DATED 1 ST MARCH 2006. REFERENCE WAS ALSO DRAWN TO PAGE 13 OF THE GBA WHEREIN IT IS STATED THAT NIKO PRODUC ED 6.12 MMM3 (MILLION CUBIC METRES) OF NATURAL GAS FROM THE PERIOD 30.11.2002 TO 30.06.200 4. L. WITH TWO IN PRINCIPLE APPROVAL FROM DGH IN FEBRUARY 2003 AND JULY 2003 THE COMPANY COMMENCED IT PRODUCTION IN MARCH 2003. DELAY IN SI GNING OF GBA/ APPROVALS SHOULD NOT AFFECT THE COMMERCIAL PRODUCTION. CLAIM FOR DEDUCTION U/S 80-IB(9) OF THE ACT A. THE FACT THAT THE APPELLANT'S REVENUE WAS FROM SALE OF NATURAL GAS HAS BEEN CLEARLY STATED IN NOTE 5 OF THE FINANCIAL STATEMENTS OF UNDERTAKINGS H2 & H3 FOR- WHICH DEDUCTION HAS BEEN CLAIMED AS WELL AS NOTE 18 OF FINANCIAL STATEMENTS OF THE APPELLANT. B. THE APPELLANT VIDE ITS SUBMISSIONS DATED 3. 2 2005 AND 7.2.2005 HAS BROUGHT OUT THE REASONS TO SUBSTANTIATE ITS BELIEF AS TO WHY DE DUCTION U/S 80-IB(9) OF THE ACT SHOULD BE AVAILABLE TO IT ON COMMENCEMENT OF COMMERCIAL PR ODUCTION OF NATURAL GAS. C. IN THIS REGARD THE APPELLANT HAD RELIED UPON THE DEFINITION OF THE TERM 'MINERAL OIL' IN THE OTHER SECTIONS OF THE ACT AS WELL AS ALL OTHER APPLICABLE STATUTES GOVERNING THE BUSINESS OF EXPLORATION AND PRODUCTION WHICH INCLU DE 'NATURAL GAS' AS WELL THIS FACT HAS ALSO BEEN CLEARLY STATED IN VARIOUS SUBMISSIONS FIL ED BY THE APPELLANT BEFORE THE ACIT. CLAIM FOR DEPRECIATION ON THE 36' 14 KM PIPELINE A. THE MATTER OF 36' 14 KM HAZIRA-MORA PIPELINE I S SUB-JUDICE WAS DEARLY STATED IN NOTE 5 OF THE NOTES TO COMPUTATION OF INCOME AND UNDER CLAUSE 13(A) OF THE TAX AUDIT REPORT WHICH FORMS PART OF THE RETURN OF INCOME. B. THE FACT HAD ALSO BEEN STATED IN NOTE 3 OF THE AUDITED FINANCIAL STATEMENTS OF THE APPELLANT FILED WITH THE RETURN OF INCOME. IT HAD ALSO BEEN C LEARLY STATED IN THE SAID NOTE THAT THE CASE IS PENDING BEFORE ARBITRATORS AND THE MATTER IS SUBJUD ICE. C. THE APPELLANT FURTHER DURING THE ASSESSMENT PRO CEEDINGS PRODUCED THE MEMORANDUM OF UNDERSTANDING (MOU) DATED OCTOBER 3 2002 SIGNED BY THE APPELLANT WITH GSPCL FOR RESOLUTION OF THE DISPUTE. A FINDING IN THIS RESPECT HAD ALSO BEEN MADE BY THE ACIT ON PAGE 59-60 OF HIS ASSESSMENT ORDER AND ON PAGE 28 OF HIS PENALTY ORDE R. D. THE CIT(A.) HAS ON PAGE 80 OF HIS ORDER DISMISSE D THE ALLOWANCE ON THE BASIS OF THE MATCHING PRINCIPLE OF ACCOUNTANCY STATING THAT THE ISSUE IS BEFORE THE ARBITRATOR FOR DETERMINATION OF THE CLAIM AND CAN BE REVISITED AFTER THE DECISION OF TH E ARBITRATOR IN THE MATTER. 6 ITA NO. 2477 & 2719/AHD /2008 E. THE APPELLANT THEREFORE SUBMITS THAT IT HAD TH ERE BEEN NO DISPUTE REGARDING THE CUSTODY OF THE PIPELINE THE DEPRECIATION WOULD HAVE BEEN CLAIMED AND THE REVENUES CORRECTLY OFFERED TO TAX. BASED ON THE ABOVE THE APPELLANT SUBMITTED THAT IT HAD MADE APPROPRIATE DISCLOSURES IN ITS RETURN OF INCOME THAT WERE REQUIRED TO SUBSTANTIATE ITS CL AIM. IT WAS ALSO SUBMITTED THAT AT THE TIME OF FILING THE RETURN OF INCOME IT WAS ONLY SO MUCH TH AT AN ASSESSEE WAS REQUIRED TO AND EXPECTED TO DISCLOSE IN HIS RETURN OF INCOME AND THE ATTACHMENT S THERETO THE APPELLANT FURTHER SUBMITTED THAT THERE WAS NO F AILURE ON PART OF THE APPELLANT TO OFFER AN EXPLANATION M RESPECT OF ANY FACTS MATERIAL TO COMP UTATION OF TOTAL INCOME. THE APPELLANT HAD PRODUCED ALL DOCUMENTS IN SUPPORT OF ITS CLAIM DURI NG THE ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS. THE APPELLANT HAD ALSO OFFERED ALL EXP LANATIONS TO THE ACIT/CIT(A) AS REQUIRED DURING THE ASSESSMENT PROCEEDING TO SUBSTANTIATE IT S CLAIM. THE CLAIM OF THE APPELLANT WAS DISALLOWED BY THE CIT(A) BASED ON INTERPRETATION IS SUES AND NOT FAR WANT OF FURTHER INFORMATION OR EXPLANATIONS. IN THIS REGARD RELIANCE WAS PLACE D ON THE FOLLOWING JUDICIAL RULINGS WHEREIN IT HAS BEEN HELD THAT WHERE APPROPRIATE DISCLOSURES HA VE BEEN MADE BY THE ASSESSEE THERE IS NO CONCEALMENT OF INCOME: CIT V DALJIBHAI KANJIBHAI [1991] 189 ITR 41 (BOM) CIT V LULLABHAI HIRABHAI [1991] 190 ITR 427 (BOM) CIT V SPK STEELS PRIVATE LIMITED (2004) 270 ITR 15 6 (MP) DCIT V GUJARAT MACHINERY MFRS LTD. 67 TTJ 466 (IT AT AHD.) DILIP M. SHROFF VS JCIT [2007] 291 ITR 519 (SC) I TO V SADHU SINGH & SONS [2000] 73 1TD 15 (AMRITS AR) NUCHEM LIMITED V DCIT - 47 ITD 487 (DEL) THE APPELLANT ALSO RELIED ON THE FOLLOWING DECISION S WHEREIN IT HAS BEEN REITERATED THAT NO PENALTY CAN BE LEVIED WHEN A DISCLOSURE HAS BEEN MA DE AND CLAIMS WERE MADE UNDER BONAFIDE BELIEF :- KHODAY ESWARA & SONS (83 ITR 369) (SC) DCIT VS. LEE & MUIRHEAD LTD. 60 ITD 57 (MUM) CIT VS. DHARAMCHAND L. SHAH (204 ITR 462) ACIT VS. DELHI CLOTH A GENERAL MILLS CO. LTD (157 ITR 822) (DEL) CIT VS. RITA MALHOTRA (154 ITR 550) (DEL) SUNDER LAL MOHINDER PAL V. CIT 135 ITR 80) (P A H) CIT VS. SHIVLAL DESAI & SONS (114 ITR 377) (BOM) M.V. KENLUCKY VS. ACIT (60 ITD 492) (PUNE) CIT VS. P.M. SHAH (203 ITR 792) (BOM) IMPULSE INDIA (P) LTD. VS. ITO (40 ITD 36) (DELHI) CIT VS & G.D. NAIDU (165 ITR 63) (MAD) ITO VS. VEENA ESTATES P. LTD (81 ITD 401) IN VIEW OF THE ABOVE IT WAS RESPECTFULLY SUBMITTED THAT THERE HAS BEEN NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME F OR INITIATING AND LEVYING PENALTY U/S 271(L)(C) OF THE ACT. HENCE IT WAS PRAYED THAT THE PENALTY O RDER- PASSED IS ERRONEOUS UNWARRANTED AND BE QUASHED. NO PENALTY CAN BE LEVIED FOR DIFFERENCE IN OPINION 7 ITA NO. 2477 & 2719/AHD /2008 THE APPELLANT SUBMITTED THAT MERE DIFFERENCES IN OP INION CANNOT BE CONSTRUED AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. IN THIS CONNECTION THE APPELLANT SUBMITTED AS UNDER: CLAIM FOR DEDUCTION U/S 42 OF THE ACT FOR NIKO-GSPC BLOCK A. IT WAS SUBMITTED THAT ON A LIBERAL INTERPRETAT ION OF THE PROVISIONS OF SECTION 42 OF THE ACT READ WITH ARTICLE 15 OF THE PSC THE APPELLANT HAD BONOF IDE REASON TO BELIEVE WHICH WAS SUBSTANTIATED BEFORE THE ACIT AS WELL AS THE CIT(A) THAT IT WAS E LIGIBLE TO CLAIM DEDUCTION IN RESPECT OF EXPLORATION AND DRILLING COSTS FOR THE NIKO-GSPC BL OCK. B. THE APPELLANT ARGUED THAT IT WAS WERE DIFFEREN CE IN THE OPINION OF THE APPELLANT AND THAT OF THE ACIT AND CIT(A) THAT LED TO THE DISALLOWANCE OF THE APPELLANT'S CLAIM FOR DEDUCTION. IN FACT THE ACIT HAD ALLOWED THE DEDUCTION U/S 42 OF THE AC T FOR AY 1998-99 TO 2000-01. IN THE CASE OF OUR JOINT-VENTURE PARTNER GSPCL THE ASSESSING OFF ICER HAD ALLOWED THE CLAIM MADE U/S 42 IN RESPECT OF THE SAME PSC. EVEN IN AY 2001-02 THE AC IT IN THE ASSESSMENT ORDER HAD PARTIALLY ALLOWED THE APPELLANT'S CLAIM U/S 42. HOWEVER THE SAME WAS SUBSEQUENTLY DISALLOWED ENTIRELY BY WAY OF ENHANCEMENT OF ASSESSMENT BY THE C1T(A) IN T HE APPELLATE PROCEEDINGS. ON THE BASIS OF THE CIT(A)'S ORDER FOR AY 2001-02 THE ACIT HAD DISA LLOWED THE CLAIM OF THE APPELLANT IN THE ASSESSMENT PROCEEDINGS. IN FACT THE MINISTRY OF PET ROLEUM AND NATURAL GAS VIDE ITS FETTER DATED 11.4.2007 POINTED OUT TO THE JOINT SECRETARY DEPAR TMENT OF REVENUE MINISTRY OF FINANCE THAT OUT OF 13 PSCS SIGNED BY THE GOVERNMENT OF IND IA DO NOT CONTAIN THE SPECIFIC PROVISION FOR ALLOWANCES/DEDUCTION/SET-OFF FOR EXPE NDITURE INCURRED BY COMPANIES FOR THE PURPOSE OF COMPUTING OF PROFITS AND GAINS OF THE BU SINESS CONSISTING OF PROSPECTING FOR OR EXTRACTION OF MINERAL OIL WHICH WAS AN OVERSIGHT AS CONTRACTS SIGNED UNDER THE FIRST OFFER CONTAIN SIMILAR TERMS AND CONDITIONS. THEREFORE IT HAS REQUESTED THE DEPARTMENT OF REVENUE MINISTRY OF FINANCE TO ISSUE NECESSARY CLA RIFICATION TO THE CONCERNED ASSESSING OFFICER TO APPLY THE PROVISIONS OF SECTION 42 IN TH E CASE OF THOSE 11 PSCS. HOWEVER THE TRIBUNAL FOR THE AY 2002-03 HAS CONFIRMED THE DISAL LOWANCE ON THE GROUND THAT THE ALLOWANCES ARE NOT SPECIFIED IN THE PSC. C. IT WAS ALSO SUBMITTED THAT ON THE BASIS OF THE CIT(A)'S ORDER FOR THE AY 2001-02 THE SAME ACIT HAD ALSO REOPENED THE ASSESSMENT FOR THE AYS 1 998-99 AND 1999-2000 AND HAD DISALLOWED THE APPELLANT'S CLAIM U/S 42. HOWEVER HE HAD NOT I NITIATED ANY PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME FOR THOSE TWO YEARS. D. IN VIEW OF THE ABOVE AND THE FACT THAT THE ACI T HAD EARLIER ALLOWED THE APPELLANT'S ON THE BASIS OF THE SAME PSC IT WAS ARGUED THAT IT IS DEB ATABLE WHETHER THE PSC FOR THE NIKO-GSPC BLOCK PROVIDES FOR DEDUCTION U/S 42 OF THE ACT AND THE SAME IS ALSO CAPABLE OF DIFFERENT VIEWS AS EXPRESSED BY DIFFERENT ACITS IN THE APPELLANT'S CA SE. CLAIM FOR DEDUCTION U/S. 80IB(9) OF THE ACT A. THE APPELLANT HAD CLAIMED DEDUCTION UNDER SECT ION 80-IB(9) OF THE ACT AS IT WAS ENGAGED IN THE PRODUCTION OF NATURAL GAS. THE SAID CLAIM WAS MERELY DISALLOWED ON THE PREMISE THAT THE TERM 'MINERAL OIL' AS USED IN THIS SECTION DOES NOT INCL UDE 'NATURAL GAS'. THE APPELLANT HAD SUFFICIENT REASONS TO BELIEVE INCLUDING THE FACT THAT THE CIT (A) HAD ALLOWED THE APPELLANT'S CLAIM FOR DEDUCTION U/S 80-IB(9) OF THE ACT FOR AY 2001-02 T HAT MINERAL OIL INCLUDES NATURAL GAS AND THE 8 ITA NO. 2477 & 2719/AHD /2008 SAME HAS NOW BEEN ACCEPTED BY THE TRIBUNAL IN AY 20 01-02. THE FACT THAT THE APPELLANT WAS PRODUCING NATURAL GAS HAS BEEN CLEARLY STATED IN TH E NOTES TO FINANCIAL STATEMENT OF THE UNDERTAKING FOR WHICH DEDUCTION HAS BEEN CLAIMED AN D ALSO IN THE SUBMISSIONS FRIED BEFORE THE ACIT. THE SAME WAS ALSO SUBSTANTIATED BEFORE THE A CIT & THE CIT(A). B. IT WAS SUBMITTED THAT THE ACT HAS CONSISTENTLY DEFINED THE TERM MINERAL OIL IN ALL OTHER SECTIONS OF THE ACT DEALING WITH EXPLORATION AND PRODUCTION TO INCLUDE NATURAL GAS. FURTHER ALL OTHER APPLICABLE STATUTES GOVERNING THE BUSINESS OF EXPLO RATION AND PRODUCTION OF MINERAL OIL M THE COUNTRY DEFINE MINERAL OIL TO INCLUDE NATURAL GAS. AS PER THE OPINION OF THE APPELLANT BASED ON THE ABOVE. NO TWO VIEWS ARE POSSIBLE AS TO WHETHER MINERAL OIL INCLUDES NATURAL GAS. THIS OPINION OF THE APPELLANT THAT MINERAL OIL INCLUDES NATURAL GAS FOR THE PURPOSE OF SECTION 80-IB(9) OF THE ACT HAS ALSO BEEN ACCEPTED BY THE CIT(A) AND THE TR IBUNAL IN THE APPELLANT'S CASE FOR AY 2002- 03. THIS INDICATES THAT THERE COULD BE A DIFFERENCE OF OPINION ON THE SAME PROVISION OF THE ACT. C. THE FACT THAT FOR AV 2001-02. THE CIT(A) AND T HE TRIBUNAL HELD IN FAVOUR OF THE APPELLANT FOR DEDUCTION UNDER SECTION 80-IB(9) OF THE ACT MAKES I T ABUNDANTLY CLEAR THAT THERE IS A DIFFERENCE OF OPINION EVEN AMONG THE CIT(A)S FOR DIFFERENT YEARS IN SIMILAR CASE D. IT IS THEREFORE SUBMITTED THAT IF AN ARGUABLE C LAIM FOR DEDUCTION IS NOT ALLOWED PENALTY CANNOT BE IMPOSED. FURTHER WHERE TWO OPINIONS ON A QUESTI ON EXIST AND AS THERE IS NO FINDING TO PROVE THE CLAIM AS MALA FIDE THE IMPOSITION OF PENALTY I S NOT JUSTIFIABLE. MOREOVER IT IS RELEVANT TO NOTE THAT THE APPELLANT'S OPINION WAS BASED ON THE DEFIN ITION OF THE TERM MINERAL OIL IN THE OTHER SECTIONS OF THE ACT AND THE INTENTION OF THE LEGISL ATURE IN INTRODUCING THE SAID PROVISION IN THE ACT. THE APPELLANT FURTHER RELIED ON THE DEFINITION OF T HE TERM IN OTHER APPLICABLE STATUTES GOVERNING THE OIL & GAS SECTOR. CLAIM FOR DEPRECIATION ON THE 36' 14 KM. PIPELINE THE APPELLANT SUBMITTED THAT A SIMILAR ISSUE HAS AR ISEN IN AY 2004-05 WHEREIN THE ITAT HAS HELD AS UNDER (PAGE 45/ PARA 25 OF THE ITAT ORDER) :- 25. THE ASSESSEE HAS CLAIMED DEPRECIATION IN THE R ETURN OF INCOME GIVING THE NOTE 3 TO THE FINANCIAL STATEMENT S CAPITAL WORK IN PROGRE SS INCLUDES RS.8 56 79 667/- BEING THE PROJECT OFFICES SHARE OF COST IN A 36 PIPELINE UN DER CONSTRUCTION BY NIKO GSPCL JOINT VENTURE IN 1999-2000 GSPCL INFORMED THE PROJECT OF FICE THAT IT DOES NOT WISH TO TREAT THIS AS A JOINT VENTURE PROJECT AND TRANSFERRED THE PIPELINE TO ITS SUBSIDIARY GUJARAT STATE PETRONET LTD. WHO MADE THE PIPELINE OPERATIONAL DUR ING THE FY 2000-01 WITHOUT THE CONSENT OF THE ASSESSEE WHO IS THE OPERATOR. THE GS PCL AND NIKO HAVE SIGNED A MEMORANDUM OF UNDERSTANDING OCTOBER 3 2002 TO RESO LVE THE ISSUE. AT PRESENT THE CASE IS PENDING BEFORE ARBITRATORS AND MATTER IS SUBJUDI CE IN CERTAIN RESPECTS IN THE ARBITRATION PROCEEDINGS. GSPCL THE SHARE PARTNER ST ATED THAT LAYING OF HAZIRA MORA PIPELINE COMMENCED IN 1999 AND THE COST FOR THE SAM E WAS TO BE BORNE BY GSPC AND NIKO IN PROPORTION OF THEIR PARTICIPATING INTEREST. SINCE THE APPROVAL OF DGH WAS NOT ACCEDED TO THIS PROPOSAL THE GSPC TOOK CONTROL OVER HMPL BEFORE ITS COMPLETION AND IN THE YEAR 1999-2000 GSPC HAS SOLD HWPL TO ITS SUBSID IARY COMPANY GSPL FOR A CONSIDERATION OF RS.49.5 CRORES. AT THE PRESENT TH IS PIPELINE IS OWNED BY GSPL AND REVENUE IS EARNED BY GSPC. THOUGH THE MOU DATED OCT OBER 3 2002 WAS SIGNED BY GSPCL AND NIKO BUT TILL DATE IT HAS NOT BEEN IMPLEM ENTED. THE OWNERSHIP OF THIS PIPELINE STILL VESTS WITH GSPL. THEREFORE THE A.O. DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND THE CLAIM OF DEPRECIATION ON THE SAME PIPELINE OF RS.1 60 64 938/- WAS DISALLOWED. LEARNED COMMISSIONER OF INCOME TAX(APPE ALS) UPHELD THE DISALLOWANCE BY OBSERVING HAVING CONSIDERING THE RIVAL SUBMISSION A ND ALSO THE ORDER OF THE DELHI HIGH 9 ITA NO. 2477 & 2719/AHD /2008 COURT IN THE MATTER IT IS SEEN THAT NO REVENUE HAS ACCRUED TO THE APPELLANT IN THIS YEAR FROM THE SAID PIPELINE. FURTHER THE ISSUE IS BEFOR E THE ARBITRATOR FOR DETERMINATION OF EXACT CLAIM OF THE APPELLANT. IN VIEW OF THE MATCHI NG PRINCIPLE OF ACCOUNTANCY THE APPELLANT WOULD BE ENTITLED TO CLAIM DEPRECIATION I N RESPECT OF THE PIPELINE WHEN THE COMMENSURATE REVENUES ARE ALSO ACCOUNTED FOR AND OF FERED FOR TAXATION. THE ISSUE CAN BE REVISITED AFTER THE DECISION OF THE ARBITRATOR IN T HE MATTER. THE MATTER IS SUBJECT TO DETERMINATION OF OWNERSHIP OF THE PIPELINE WHICH IS PENDING IN ARBITRATION AND THEREFORE CLAIM WAS RIGHTLY REJECTED SUBJECT TO REVISIT OF TH E CLAIM ON FINAL DECISION THEREON. IN VIEW OF THE ABOVE IT WAS SUBMITTED THAT THE ADD ITIONS/ DISALLOWANCES IN THE ASSESSEES CASE HAVE A RISEN ENTIRELY DUE TO DIFFERENCES IN OPINION BETWEEN THE ASSESSEE AND THE ACIT /LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND THEREFORE CANNOT BE CONSTRU ED AS ARISING OUT OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS WARRANTING LEVY OF PENALTY. IN THIS REGARD RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS WHEREIN IT WAS HELD THAT PE NALTY CANNOT BE LEVIED IF THERE ARE CONFLICTING OPINIONS ON CLAIM OF A DEDUCTION CIT VS.- HARSHVARDHAN CHEMICALS AND MINERALS LTD. 259 ITR 212 (RAJ.) CIT VS.-SIVANADA STEELS LTD. 256 ITR 683 (MAD.) BURMAH SHELL OIL STORAGE DISTRIBUTING CO. OF INDIA LTD. VS.- ITO (1978) 112 ITR 592 (CAL.). CIT VS.- CALCUTTA CREDIT CORPORATION 166 ITR 29 (C AL.) CIT VS.- G.D. NAIDU (1987)165 ITR 63 (MAD.) ITO VS.- ROBORANT INVESTMENTS PVT. LTD. 7 SOT 181 MUM. CIT VS.- MANILAL TARACHAND 254 ITR 630 (GUJ.) RUPAM MERCANTILES LTD. VS.- DCIT 91 ITD 237 (AHME DABAD TRIBUNAL) THIRD MEMBER SHRI VIVEK JAIN VS.- DCIT (ITA NO. 645/D/2007) (20 08 TIOL 160 HC-P&H-IT) (P&H) SMT. LAXAMI (L.R. FOR SHRI GANESH DAS NARANG) VS.- CIT MP-II [1983] 144 ITR 82 (MP). COMMISSIONER OF INCOME TAX VS.- JAGABANDHU PRASANN A KUMAR RUPAL SEN PODDAR [1982] 133 ITR 156 (CAL.); ACIT VS.- DELHI CLOTH AND GENERAL MILLS CO. LTD. ( 1986) 157 ITR 822 (DEL.) AND DCIT VS.- RAHOUL SIEMSSEN ENGG. (P) LTD. (2004) 14 0 TAXMAN 100 (DEL ITAT). THEREFORE IT IS RESPECTFULLY SUBMITTED THAT SINCE THE APPELLANT HAD CLAIMED DEDUCTIONS WHICH ARE DEBATABLE ARGUABLE AND CAPABLE OF DIFFERENT INTERP RETATIONS OR VIEWS AND HAS MADE FULL DISCLOSURE OF ALL MATERIAL FACTS IN THAT REGARD IT CANNOT BE SAID TO HAVE CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME FOR EVASION OF TAX. HENCE TH E DISALLOWANCES BEING MERELY DUE TO DIFFERENCE OF OPINION SHOULD NOT LEAD TO LEVY OF PENALTY. WITHOUT PREJUDICE TO THE ABOVE MERE DISALLOWANCE O F DEDUCTION DOES NOT AUTOMATICALLY LEAD TO ORDER OF PENALTY THE APPELLANT FURTHER SUBMITTED THAT MERE ADDITION TO THE TAXABLE INCOME OR DISALLOWANCES OR REJECTION OF EXPENSES CANNOT AUTOMATICALLY LEAD TO AN ORDER OF P ENALTY OR JUSTIFY PENALTY. DISALLOWANCES/ ADDITION IN THE QUANTUM PROCEEDINGS NEED NOT NECESSARILY LEAD T O INITIATION OF PENALTY PROCEEDINGS. THE APPELLANT FURTHER RESPECTFULLY SUBMITTED THAT FINDINGS IN QUA NTUM PROCEEDINGS ARE NOT BINDING IN PENALTY PROCEEDINGS. IT WAS THEREFORE SUBMITTED THAT THE LE VY OF PENALTY NEEDS TO BE ADJUDGED ON THE BASIS OF STATE OF AFFAIRS PRESENTED TO THE DEPARTMENT COUPLED WITH THE INTENTIONS OF THE ASSESSEE AND NOT MERELY ON T HE BASIS OF DISALLOWANCES MADE IN THE ASSESSMENT PROCE EDINGS. IN SUPPORT OF ITS CONTENTION THAT PENALTY 10 ITA NO. 2477 & 2719/AHD /2008 CANNOT BE LEVIED ON MERE DISALLOWANCE OF A CLAIM T HE APPELLANT RELIES ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS : DURGA KAMAL RICE MILLS V. CIT (2003) 265 ITR 25 (CA L.); CIT VS.- INDIAN BISLERS (1998) 240 ITR 943 (MAD.); VINOD KAPUR VS.- ITO [2003] 127 TAXMAN 53 (MUM. TR IBUNAL); RUPAM MERCANTILES LTD. VS.- DCIT 91 ITD 237 (AHMED ABAD TRIBUNAL ) THIRD MEMBER. 4. AFTER CONSIDERING THE AFORESAID SUBMISSIONS IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) PARTLY CONFIRME D THE PENALTY LEVIED BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) BOTH THE SIDES ARE IN APPEAL BEFORE US. 5. THE VARIOUS GROUNDS RAISED BY THE ASSESSEE IN IT S APPEAL ARE AS UNDER :- (I) THE LD. CIT(A.) ERRED IN CONFIRMING THE PENALTY ORDER PARTIALLY WHICH WAS PASSED UNDER SECTION 271(1)(C) OF THE INCOME TA X ACT BY THE ASSESSING OFFICER. (II) THE LD. CIT(A.) ERRED IN CONFIRMING THE PENALT Y IN RESPECT OF DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 42 OF THE INCOME TAX ACT IN RELATION TO NIKO-GSPC BLOCK. HE ERRED IN OBSERVING THAT THE APPELLANT WAS IN FUL L KNOWLEDGE OF THE FACT THAT IT WAS NOT ELIGIBLE TO CLAIM DEDUCTION UNDER S ECTION 42 STILL IT HAD CLAIMED THE DEDUCTION. (III) THE LD. CIT(A.) ERRED IN CONFIRMING THE PENAL TY IN RESPECT OF THE CLAIM OF THE APPELLANT WITH REGARD TO DEPRECIATION ON LAND BASED PLATFORM BEING RESTRICTED FROM 25% TO 10%. 6. THE VARIOUS GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER :- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A.)-XXI HAS ERRED IN DELETING THE PENALTY ON DISALLOWANCE O F DEDUCTION UNDER SECTION 42 IN RESPECT OF BHEEMA FIELD. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A.)-XXI AHMEDABAD ERRED IN LAW IN ALLOWING THE APPEAL OF TH E ASSESSEE AND 11 ITA NO. 2477 & 2719/AHD /2008 DELETING THE PENALTY LEVIED ON THE DISALLOWANCE ON ACCOUNT OF DEPRECIATION CLAIMED ON THE COST OF 3614 KMS. PIPE LINES AMOUNTING TO RS.1 60 64 938/- (III) THE LD. CIT(A.)-XXI AHMEDABAD HAS ERRED IN N OT CONSIDERING THE FACT THAT THE ASSESSEE HAS CLAIMED THE DEPRECIATION ON THE 3614 HAZIRA- MORA PIPELINE WITHOUT CLAIMING THE COMMENSURATE REV ENUE FROM THE PIPELINE. (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A.) AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE A.O . (V) IT IS THEREFORE PRAYED THAT THE ORDER OF THE CIT(A.) MAY BE CANCELLED AND THAT OF THE A.O. MAY BE RESTORED TO THE ABOVE EXTENT. 7. AT THE TIME OF HEARING BEFORE US ON BEHALF OF A SSESSEE SHRI PERCY P. PARDIWALLA SR. ADVOCATE APPEARED AND FILED A PAPER BOOK CONTAINING 432 PAGES AND ARGUED AT LENGTH AND EXPLAINED US THE CHRONOLOGY OF DATES AND EVENTS RIG HT FROM THE FILING OF RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL ON 28.11.2003 AND ADMI SSION OF APPEAL BEING TAX APPEAL NO. 1969 OF 2008 WHEREIN THE APPEAL OF THE ASSESSEE WA S ADMITTED ON FOLLOWING SUBSTANTIAL QUESTION OF LAW :- WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN NOT ALLOWING THE SPECIAL DEDUCTION UNDER SECTION 42 OF THE INCOME TAX ACT 1961 TO THE ASSESSEE FOR THE YEARS UNDER CONSIDERATION. THE LD. COUNSEL OF THE ASSESSEE ALSO TOOK US THROUG H THE RELEVANT PORTION OF THE ORDERS OF QUANTUM APPEAL AS WELL AS PENALTY ORDER OF ASSESSING OFFICE R AND THE IMPUGNED ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THE VARIOUS SU BMISSIONS MADE BY THE ASSESSEE ARE SUMMARIZED AS UNDER :- (1) THE ASSESSING OFFICER HAS INITIATED AND LEVIED PENA LTY UNDER SECTION 271(1)(C) FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE APPELLANT HAS CONCEALED ANY PARTICULARS OF INCOME AND THEREFORE THE RELIANCE AN EXPLANATION 1 AND T HE ARGUMENT OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT THERE WAS A CONCEA LMENT OF INCOME HAS NO LEGS TO STAND ON. (2) THE ORDER PASSED UNDER SECTION 271(1)(C) DOES NOT S PELL OUT AS TO WHAT INACCURATE PARTICULARS HAVE BEEN FURNISHED. IT MERE LY PROCEEDS ON THE BASIS 12 ITA NO. 2477 & 2719/AHD /2008 THAT AS THE APPELLANT HAS CLAIMED A DEDUCTION WHICH WAS NOT ALLOWED NOT ONLY BY THE ASSESSING OFFICER BUT WHICH DISALLOWANCE WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WOULD T ANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. (3) IT IS SUBMITTED THAT FULL AND CORRECT PARTICULARS O F THE CLAIM FOR DECLARATION UNDER SECTION 42 WERE MADE IN THE RETURN OF INCOME (PAGES 189 READ WITH PAGE 197 AND 202) AND THE AGREEMENT WAS A PART OF T HE RECORD FOR ASSESSMENT PROCEEDINGS. (4) IT IS SUBMITTED THAT THE LAW IS NOW WELL SETTLED TH AT IF AN ASSESSEE MAKES A BONAFIDE CLAIM FOR A DEDUCTION WHICH CLAIM IS NEGAT IVE DOES NOT JUSTIFY THE IMPOSITION OF PENALTY. (BURMAH SHELL OIL STORAGE & DISTRIBUTING CO. VS.- ITO 112 ITR 592) CIT J. MEHTA ENGINEERS 300 ITR 308 C IT V ORIENTAL POWER CASTLE LTD. 303 ITR 49 MAHAVIR IRRIGATION PVT. LTD . V CIT 314 ITR 150 (AT) CIT V. HARYANA WAREHOUSING CORPORATION 314 ITR 215 INDIA PETROLEUM PVT. LTD. V JT. CIT 315 ITR 40 (AT) GUJARAT CREDIT CORP ORATION LTD. V ACIT 113 ITD 133 (SB) ACIT V. MAHINDRA SHABHLAB SERVICES LT D. 315 DT 361 ACIT V. VIP INDUSTRIES LTD. 122 TTJ 289). (5) THE FACT THAT THE APPELLANTS CLAIM WAS BONAFIDE IS BORNE OUT BY; (I) THE ASSESSING OFFICER HAS HIMSELF ALLOWED THE DEDUC TION UNDER SECTION 42 AS CLAIMED FROM ASSESSMENT YEARS 1996-97 TO ASSE SSMENT YEAR 2000-01 IN THE ORIGINAL ASSESSMENTS THAT WERE FRAME D; (II) EVEN IN THE ASSESSMENT FRAMED FOR THE ASSESSMENT YE AR 2001-02 THE ONLY DISALLOWANCE MADE WAS IN RESPECT OF THE DEPREC IATION ON ASSETS AND EXPENDITURE WHICH WAS NOT DIRECTLY RELATABLE TO THE DRILLING AND EXPLORATION OPERATIONS; (III) THE LETTERS OF THE MINISTRY OF PETROLEUM DATED APRI L 11 2007 AND JUNE 17 2005 ALSO INDICATE THAT THE MINISTRY OF PETROLEU M WAS OF THE VIEW THAT THE APPELLANT WAS ENTITLED TO A DEDUCTION UNDE R SECTION 42 AND IT WAS ONLY DUE TO AN OVERSIGHT THAT THE SAME WAS NOT SPECIFICALLY MENTIONED IN THE PSC; (IV) THE APPELLANTS CONTENTION WAS SUPPORTED BY THE LAN GUAGE OF ARTICLE 15.3 READ WITH ANNEXURE C OF THE PSC WHERE IT WAS CLEARLY SPECIFIED THAT THE DEDUCTIONS ALLOWABLE UNDER THE INCOME TAX ACT WOULD BE ALLOWED AND THE METHODOLOGY OF DETERMINING THE DEVE LOPMENT COST PRODUCTION COST ETC. WAS ALSO SPELT OUT. THUS THE APPELLANTS CONTENTION WAS BASED ON A PURE INTERPRETATION OF TH E RELEVANT PROVISIONS OF THE AGREEMENT; (V) THE FACT THAT THE HIGH COURT HAS ADMITTED AN APPEAL SHOWS THAT A SUBSTANTIAL QUESTION OF LAW AS TO THE INTERPRETATIO N OF THE AGREEMENT ARISES RUPAM MERCANTILE LTD. VS.- DY. CIT 91 ITD 2 37 K.G. NARIMAN VS. ITO 33 TTJ 565 N.S. NARULA VS. ACIT 10 6 TAXMAN 123 (DEL.). 6. EVEN THE ASSESSING OFFICER WHEN HE COMPLETED THE REASSESSMENT FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000 IN WHICH REA SSESSMENT HE DISALLOWED THE CLAIM FOR DEDUCTION UNDER SECTION 42 HAS NOT EVEN INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C). 13 ITA NO. 2477 & 2719/AHD /2008 7. NEITHER THE ASSESSING OFFICER NOR THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) HAVE INITIATED / LEVIED PENALTY UNDER SECTION 271(1)(C) EITHER FOR THE PARTIAL DISALLOWANCE OR THE COMPLETE DISALLOWAN CE OF THE DEDUCTION CLAIMED UNDER SECTION 42 FOR THE ASSESSMENT YEAR 20 01-02 WHICH ORDER IS THE BASIS FOR MAKING THE DISALLOWANCE IN THE YEAR UNDER APPEAL. 8. FOR DISALLOWANCE OF DEDUCTION ON WHICH THE LEARN ED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE PENALTY. IT WAS SUB MITTED THAT CLAIM/ DEDUCTION WHICH IS DEBATABLE ARGUABLE AND CAPABLE OF DIFFERENT INTERPRETATION OR VIEWS AND ASSESSEE MADE FULL DISC LOSURE OF ALL THE MATERIAL FACTS IN THAT REGARD IT CANNOT BE SAID TO HAVE CON CEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF. FOR THIS RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS :- (I) CIT VS.- HARSHAVARDHAN CHEMICALS AND MINERALS LTD. 259 ITR 212 (RAJ.); (II) CIT VS.- SIVANADA STEELS LTD. 256 ITR 683 (MAD.); (III)CIT VS.- CALCUTTA CREDIT CORPORATION 166 ITR 29 (CAL.). 9. WITHOUT PREJUDICE TO THE ABOVE THE APPELLANT SU BMITS THAT THERE IS NO CHANGE IN THE ULTIMATE TAX LIABILITY OF THE APPELLA NT AS PER THE RETURN OF INCOME FILED AND AS PER THE ORDER GIVING EFFECT TO THE TRI BUNALS ORDER AS THE ULTIMATE TAX LIABILITY WAS DETERMINED IN BOTH THE OCCASIONS AS P ER THE PROVISIONS OF SECTION 115JB. THEREFORE AS PER EXPLANATION 4(C) TO SECTIO N 271(1)(C) NO PENALTY CAN BE LEVIED. THE LEARNED COMMISSIONER OF INCOME TAX(APPE ALS) HAS ALSO DELETED THE PENALTY ON THE SAME BASIS FOR THE SAME ASSESSMENT Y EAR IN RESPECT OF APPEAL FILED AGAINST WRONG CALCULATION OF PENALTY BY THE ASSESSI NG OFFICER WHILE GIVING EFFECT TO CIT(A.)S ORDER AGAINST THE ORIGINAL PENALTY ORD ER. A COPY OF THE SAID ORDER IS ENCLOSED [ANNEXURE VI PAGE 4 TO 7 OF THE CIT(A.)S ORDER]. IN THIS CONNECTION A RELIANCE IS PLACED ON HARSHVARDHAN CHEMICALS & MINE RALS LTD. V. DCIT (39 TTJ 212) (JAI.) (ANNEXURE IX) WHICH HAS BEEN FURTHER CO NFIRMED BY THE RAJASTHAN HIGH COURT (259 ITR 212) (ANNEXURE X). 8. ON THE OTHER HAND SHRI JAGDEO SR. D.R. APPEARE D ON BEHALF OF THE REVENUE TO THE EXTENT PENALTY CONFIRMED BY THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) SUPPORTED THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). HE POINTED OUT ALL THE ADDITIONS/ DISALLOWANCES ON WHICH ASSESSING OFFICER LEVIED THE PENALTY ARE CONFIRMED BY THE TRIBUNAL. THE EXCESS EXPENDITURE CLAIMED ALSO AMOUNTS TO FURNISHI NG INACCURATE PARTICULARS FOR WHICH PENALTY CAN BE LEVIED UNDER SECTION 271(1)(C) AS HELD BY TH E ITAT KOLKATA BENCH IN THE CASE OF ACIT VS.-MCLEOD RUSSEL INDIA LTD. REPORTED IN 101 ITD 39 . HE ACCORDINGLY SUBMITTED THAT PENALTY TO THE EXTENT CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. FURTHER PENALTY LEVIED BY THE ASSESSING OFFICER ON DISALLOW ANCE OF DEDUCTION UNDER SECTION 42 AND DISALLOWANCE ON ACCOUNT OF DEPRECIATION CLAIMED ON COST OF 3614 KM. PIPELINES WHICH IS 14 ITA NO. 2477 & 2719/AHD /2008 DELETED BY THE LEARNED COMMISSIONER OF INCOME TAX(A PPEALS) BE RESTORED BECAUSE THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME WITHIN THE MEANING OF EXPLANATION 1 TO SECTION 271(1)((C) OF THE INCOME TAX ACT 1961. 9. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THESE CROSS APP EALS WERE HEARD ALONGWITH THE ASSESSEES APPEAL BEING ITA NO. 2475/AHD/2008 FOR THE ASSESSMENT YEAR 2000-01. IN THAT ASSESSMENT YEAR WE HAVE CANCELLED THE PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF DISALLOWANCE OF DEDUCTION UNDER SECTION 42 OF THE INCOME TAX ACT 1961 IN RELATION TO NIKO-GSPC BLOCK AND DISALLOWANCE OF DEPRECIATION ON LAND BASED PLATFORM WHICH WAS RESTR ICTED FROM 25% TO 10% FOR THE ASSESSMENT YEAR 2000-01. THE REASONING GIVEN BY THE TRIBUNAL I N THAT ORDER IS CONTAINED IN PARAS 7 8 & 9 WHICH IS RE-PRODUCED HEREUNDER :- 7. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. RECENTLY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS.- RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 IT R 158 (SC) HELD THAT MAKING INCORRECT CLAIM DOES NOT AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME. THE HEAD-NOTES OF THE SAID DECISION READS AS UNDER :- A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 SUGGESTS THAT IN ORDER TO BE COVERED BY IT THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MA DE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCO RRECT OR INACCURATE THE ASSESSEE CANNOT BE HELD GUILTY OF F URNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSE SSEE TO PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIO N THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGI NATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACC URATE THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY THE DETA ILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE NOT EXACT OR CORRECT NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS O R FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1)(C). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNO T AMOUNT TO FURNISHING INACCURATE PARTICULARS. 15 ITA NO. 2477 & 2719/AHD /2008 DECISION OF THE GUJARAT HIGH COURT AFFIRMED. 8. IT IS TRUE THAT IN QUANTUM PROCEEDINGS DISALLOW ANCE OF EXPENDITURE CLAIMED UNDER SECTION 42 AS WELL AS DISALLOWANCE OF EXCESS DEPRECIATION ON LAND BASED DRILLING PLATFORM IS CONFIRMED RIGHT UPTO TRIBUNAL. IN THE ORIGINAL ASSESSMENT FRAMED BY THE ASSESSING OFFICER UNDER SECTION 143(3) ON 26 .02.2003 BOTH THE CLAIMS OF THE ASSESSEE WERE ALLOWED. THIS IN OUR OPINION IS SUF FICE TO HOLD THAT THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS.- RELI ANCE PETROPRODUCTS PVT. LTD. (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF ASSE SSEES CASE. THE APPEAL OF THE ASSESSEE AGAINST NON-ALLOWANCE OF CLAIM UNDER SECTI ON 42 OF THE I.T. ACT HAS BEEN ADMITTED BY THE HON'BLE GUJARAT HIGH COURT UNDER SE CTION 260A OF THE INCOME TAX ACT 1961. WHETHER LAND BASED DRILLING PLATFORM IS TO BE TREATED AS PART AND PARCEL OF PLANT AND MACHINERY OR NOT IS A DEBATABLE ISSUE. AD MITTEDLY THE CASE OF THE ASSESSEE DOES NOT FALL WITHIN THE MISCHIEF OF MAIN PROVISION OF SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 BECAUSE MERE REJECTION OF ASSESSEES CLAIM WOULD NOT BE SUFFICIENT TO HOLD THE ASSESSEE TO BE GUILTY OF CONCEALMENT. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SARABHAI CHEMICAL (P) LTD. [2002] 257 ITR 3 55 (GUJ.) HELD AS UNDER :- THE DEEMING FICTION THAT THE ADDED/ DISALLOWED AMO UNTS REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED CONTAINED IN EXPLANATION 1 WILL NOT APPLY IF THE EXPLANATION THAT WAS GIVEN BY THE ASSESSEE IN THE QUANTUM PROCEEDINGS WHICH HE COULD NOT SUBSTANTIATE IN THOSE PROCEEDINGS WAS (I) BONA FIDE AND (II) IF HE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME. IN CASES WHERE EXPLANATION WAS OFFERE D BUT WAS REJECTED AS IT COULD NOT BE SUBSTANTIATED BY THE ASSESSEE T HERE WOULD ARISE NO PRESUMPTION OF CONCEALMENT OF THE PARTICULARS OF IN COME THAT WAS ADDED OR DISALLOWED AND SUCH ASSESSEE CAN SHOW THAT THE SAID EXPLANATION OFFERED BY HIM WAS A BONA FIDE ONE AND THAT HE HAD DISCLOSED ALL FACTS RELATING TO SUCH EXPLANATION AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME DURING THE QUANTUM PROCEEDINGS. 9. IN THE PRESENT CASE THE ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS. IT IS ALSO FURNISHED THE EXPLANATION WHICH IS NOT ONLY B ONA FIDE BUT THE ASSESSEE HAS ALSO SUBSTANTIATED THE SAME BY THE FACT THAT IN ORIGINAL ASSESSMENT DEDUCTION UNDER SECTION 42 AS WELL AS DEPRECIATION CLAIM WAS ALLOWE D. MOREOVER THE APPEAL OF ASSESSEE ON DISALLOWANCE CLAIMED UNDER SECTION 42 O F RS.4 58 84 791/- IS ADMITTED BY THE HON'BLE GUJARAT HIGH COURT UNDER SECTION 260 A. IN THIS VIEW OF THE MATTER IN OUR OPINION IT IS NOT A FIT CASE TO LEVY THE PENAL TY UNDER SECTION 271(1)(C). THEREFORE PENALTY CONFIRMED BY THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS) IN RESPECT OF BOTH THE ITEMS OF ADDITIONS/ DISALLOW ANCES IS HEREBY DELETED. 10. IN THE ASSESSMENT YEAR 2002-03 IN CROSS APPEAL BEING NO. 2476/AHD/2008 & 2718/AHD/2008 WE HAVE CANCELLED THE PENALTY WHICH IS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN RESPECT OF D ISALLOWANCE OF DEDUCTION CLAIMED UNDER 16 ITA NO. 2477 & 2719/AHD /2008 SECTION 42 AND IN RESPECT OF CLAIM OF DEPRECIATION ON LAND BASED PLATFORM WHICH WAS RESTRICTED FROM 25% TO 10%. FURTHER IN THAT ORDER THE APPEAL OF THE REVENUE AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CANCELLING THE PENALTY ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION CLAIMED ON COST OF 3614 KM. PIPELINE WAS ALSO REJECTED. THE FACTUAL MATRIX AND REASONING GIVEN BY THE LEARNED COMMISSIONER OF INCO ME TAX(APPEALS) FOR PARTLY CONFIRMING THE PENALTY IN ASSESSMENT YEAR UNDER APPEAL ARE SAME AS GIVEN IN THE ASSESSMENT YEAR 2002-03. FOR THIS YEAR ALSO WE FOUND CONSIDERABLE FORCE IN THE SUBMISSIONS MADE BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THAT ALL THE DE DUCTIONS/ EXEMPTION CLAIMED BY THE ASSESSEE WERE BONAFIDE FOR WHICH PENALTY UNDER SECT ION 271(1)(C) IS NOT LEVIABLE. IN SUPPORT OF THIS RELIANCE CAN BE PLACED ON THE LATEST JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS.- RELIANCE PETROPRODUCTS PVT. LTD. [2010] 3 22 ITR 158 (SC). 11. WITHOUT PREJUDICE TO ABOVE AS PER EXPLANATION 4(C) TO SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 IN THIS CASE NO PENALTY IS LEVIABLE BECAUSE ULTIMATE TAX LIABILITY WAS DETERMINED UNDER SECTION 115JB OF INCOME TAX ACT 1961. IN THE RETURN OF INCOME THE ASSESSEE HAS DECLARED INCOME UNDER SECTION 115JB AND PAID THE TAXES THERE ON. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XXI AHMEDABAD IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 VIDE ORDER DATED 17.12.2008 CANCELLED THE PENALTY WHICH WAS FINALLY RE-DETERMINED AT RS.10 29 18 109/- (AFTER GIVING APPEAL EFFECT TO TH E ORDER OF CIT(A.)/ ITAT IN QUANTUM APPEAL). THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) IS SUPPORTED BY THE JUDGMENT OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS.- HARSHAVARDHAN CHEMICALS & MINERALS LTD. 259 ITR 212 (RAJ. HC JA IPUR BENCH). 12. WE THEREFORE HOLD THAT THE LEARNED COMMISSION ER OF INCOME TAX(APPEALS) IS FULLY JUSTIFIED FOR CANCELLING THE PENALTY IN RESPECT OF DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 42 AND DISALLOWANCE OF DEPRECIATION ON LAND BASED P LATFORM WHICH WAS RESTRICTED FROM 25% TO 10%. FURTHER IN OUR OPINION THE LEARNED COMMISSIO NER OF INCOME TAX(APPEALS) OUGHT TO HAVE CANCELLED THE PENALTY IN RESPECT OF DEDUCTION UNDER SECTION 42 IN RESPECT OF BHEEMA FIELD/ SURAT BLOCK AND DEPRECIATION FOR CLAIM ON THE COST OF 36 14 KM. PIPELINE. CONSEQUENTLY THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) PARTLY CANCELLING THE PENALTY IS UPHELD. FURTHER 17 ITA NO. 2477 & 2719/AHD /2008 PART PENALTY CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AGAINST WHICH THE ASSESSEE IS IN APPEAL IS ALSO CANCELLED. 13. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED AND THAT OF THE REVENUE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 30.04.2010 . SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 / 04 /2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY RE GISTRAR ITAT AHMEDABAD LAHA/SR.P.S.