The ADIT.,(Intl.Taxn.), Ahmedabad v. The Niko Resources Ltd.,, Baroda

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. 2476/AHD./2008 ASSESSMENT YEAR : 2002-2003 NIKO RESOURCES LIMITED BARODA -VS.- ASSISTANT COMMISSIONER OF INCOME TAX (PAN : AAACN 7060 L) CIRCLE-6 BARODA (APPELLANT) (RESPONDENT) & I.T.A. NO. 2718/AHD./2008 ASSESSMENT YEAR : 2002-2003 ASSISTANT DIRECTOR OF INCOME TAX -VS.- NIKO RESOURCES LIMITED BARODA INTERNATIONAL TAXATION AHMEDABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI PERCY P. PARDIWAL LA SR. ADVOCATE TANVISH BHATT VISPI T. PATEL RESPONDENT BY : SHRI JAGDEO CIT D.R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THESE CROSS APPEALS ARE AGAINST THE ORDER DATED 25 .07.2007 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 2002-03. 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 APPEAL THE ASSESSEE-COMPANY FILED ITS RETURN OF IN COME DECLARING INCOME OF RS.63 14 97 010/-. 2 ITA NO. 2476 & 2718/AHD /2008 THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER S ECTION 143(3) VIDE ORDER DATED 28.02.2005 DETERMINING TOTAL INCOME AT RS.77 14 83 380/- WHER EIN HE ALSO INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) FOR FURNISHING INACCURATE P ARTICULARS OF INCOME. THESE PENALTY PROCEEDINGS WERE KEPT IN ABEYANCE TILL THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DECIDED THE QUANTUM APPEAL ON 30.11.2006. IN QUANTU M APPEAL THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) VIDE ORDER DATED 30.11.2006/- C ONFIRMING THE FOLLOWING ADDITIONS/ DISALLOWANCES:- (I) ADDITION BY DISALLOWANCE OF EXPENDITURE INCURRE D ON EXPLORATION AND DRILLING ACTIVITIES AMOUNTING TO RS.13 65 14 009/- U/S. 42 OF THE I.T. ACT 1961. THE DISALLOWANCE WAS MADE BY THE ASSESSING OF FICER ON THE GROUND THAT U/S. 42 OF THE ACT ONLY THOSE DEDUCTIO NS WOULD BE ALLOWABLE WHICH ARE SPECIFIED IN THE AGREEMENT BETWEEN THE AS SESSEE AND THE CENTRAL GOVERNMENT AND AS NO DEDUCTIONS HAVE BEEN S PECIFIED IN THE AGREEMENT NO ADDITIONAL DEDUCTION CAN BE ALLOWED O VER AND ABOVE THE DEDUCTIONS UNDER THE NORMAL PROVISIONS. THE LD. CIT (A.) CONFIRMED THE DISALLOWANCE AFTER FOLLOWING THE CIT(A.)S ORDER FO R A.Y. 2001-02. (II) ADDITION BY DISALLOWANCE OF DEPRECIATION ON LA ND BASED DRILLING PLATFORM @ 10% INSTEAD OF 25% ON THE GROUND THAT TH E EXPENDITURE ON THE LAND BASED DRILLING PLATFORM REFERRED TO PUTTIN G DOLLOSSES AROUND THE CAUSE WAY AND THEREFORE IT AMOUNTED TO A ROAD CALL ED PATHWAY I.E. A BUILDING AND ACCORDINGLY DEPRECIATION WAS ALLOWABLE @ 10%. THE LD. CIT(A.) CONFIRMED THE DISALLOWANCE AFTER FOLLOWING THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)S ORDER FOR A.Y . 2001-02. (III) ADDITION BY DISALLOWANCE OF DEPRECIATION CLAI MED ON THE COST OF 36.14 KMS. PIPELINE AMOUNTING TO RS.2 14 19 917/-. (IV) THE CLAIM OF THE DEDUCTION U/S. 80IB(9) MADE B Y A LETTER DATED 07.01.2005 DURING THE REASSESSMENT PROCEEDINGS ON T HE PLEA THAT THE COMPANY IS ENGAGED IN THE PRODUCTION OF MINERAL OIL AND THEREFORE IT IS 3 ITA NO. 2476 & 2718/AHD /2008 ELIGIBLE FOR DEDUCTION U/S. 80IB(9) OF THE ACT IN R ESPECT OF UNDERTAKING H2 WELL AND H2-3 WELL. HOWEVER THE ASSESSING OFFIC ER REJECTED THE CLAIM AND THE SAME WAS CONFIRMED BY THE CIT(A.) AFT ER FOLLOWING THE CIT(A.)S ORDER FOR A.Y. 2003-04. 3. SUBSEQUENTLY THE ASSESSING OFFICER VIDE ORDER D ATED 27.06.2007 LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF RS.3 17 14 898/- BEING 100% OF TAX SOUGHT TO BE EVADED IN RESPECT OF ALL THE AFORESAID ADDITIONS/ DISALLOWANCES. 4. ON APPEAL AGAINST THE PENALTY ORDER BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE MADE THE FOLLOWING SUBMI SSIONS :- 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 2002!-03: 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. 2476 & 2718/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. THE APPELLANT HAD UNDER CLAUSE 14 OF 'HE TAX A UDIT REPORT FURTHER STATED THAT THE BASIS OF ITS CLAIM FOR DEDUCTION U/S 42 HAD BEEN ACCEPTED BY THE INCOME TAX AUTHORITIES AS PER THE ASSESSMENT U/S 143(3) OF THE ACT FOR AY 1998-99. D. MOREOVER THE APPELLANT HAD PLACED ON RECORD B EFORE THE ACIT THE P5C FOR THE NIKO-GSPC BLOCK STATING AN ITS SUBMISSION DATED 3.2.2005 ON PAGE 2 THAT ARTICLE 15 3 OF THE PSC PROVIDES FOR THE DEDUCTIONS ENUMERATED UNDER SECTION 42 OF T HE ACT. E. THE BASIS OF THE APPELLANTS CLAIM FOR DEDUCTIO N U/S 42 AS SUBMITTED BEFORE THE ACIT IS ALSO REPRODUCED ON PAGES 8-12 OF THE ACITS ASSESSMENT OR DER WHICH EVIDENCES THE FACT THAT THE APPELLANT HAD MADE APPROPRIATE DISCLOSURES TO SUBST ANTIATE ITS CLAIM FOR DEDUCTION. F. AS REGARDS THE ALTERNATE CLAIM U/S 32 THE APP ELLANT HAD SUBMITTED BEFORE THE ACIT AND THE CIT(A) THAT COURTS IN INDIA HAVE HELD THAT AN ITEM THAT IS A TOOL IN THE ASSESSEE'S BUSINESS IS A 'PLANT' AS DISTINCT FROM 'BUILDING' WHICH ONLY REF ERS TO THE PRESSES OR THE SETTING WHERE THE ASSESSEE'S BUSINESS IS CARRIED ON 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 DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE APPELLANT HAD CLAIMED DEDUCTION U/S. 80IB(9) OF THE ACT IN RESPECT OF H2 AND H3 UNDERTAK INGS. THE APPELLANT HAS M ITS SUBMISSIONS DATED 3 2.2005 CLEARLY STATED THAT UNDERTAKINGS H2 & H3 IN RESPECT OF WHICH DEDUCTION COMPRISE OF GAS WELLS. C. 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 DEDUCT ION U/S 80-IB(9) OF THE ACT SHOULD BE AVAILABLE TO IT ON COMMENCEMENT OF COMMERCIAL PRODUCTION OF N ATURAL GAS. D. 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 APPL ICABLE STATUTES GOVERNING THE BUSINESS OF EXPLORATION AND PRODUCTION WHICH INCLUDE 'NATURAL GAS' AS WELL THIS FACT HAS ALSO BEEN CLEARLY STATED IN VARIOUS SUBMISSIONS FILED BY THE APPELLAN T BEFORE THE ACIT. E. THE SAME HAS ALSO BEEN ACKNOWLEDGED BY THE ACI T ON PAGES 22-23 OF HIS ASSESSMENT ORDER CLAIM FOR DEPRECIATION ON THE 36' 14 KM PIPELINE 5 ITA NO. 2476 & 2718/AHD /2008 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. IT HAD ALSO BEEN CLEARLY STATED BY THE TAX AUD ITORS OF THE COMPANY IN THE AUDIT REPORT U/S 44AB OF THE ACT IN FORM NO. 3CA THAT THE DISPUTE WI TH REGARD TO CUSTODY OF THE PIPELINE IS SUBJUDICE AND IS SUBJECT TO THE TERMS OF THE MEMORA NDUM OF UNDERSTANDING (MOU) DATED 3.10.2002 SIGNED BY THE APPELLANT WITH GSPCL C. THE FACT HAD ALSO BEEN STATED IN NOTE 3(C) OF THE AUDITED FINANCIAL STATEMENTS OF THE APPELLANT FILED WITH THE RETURN OF INCOME. D. IT HAD ALSO BEEN CLEARLY STATED IN THE NOTES T O THE FINANCIAL STATEMENTS THAT THE APPELLANT HAS FILED AN ACTION IN THE SUPREME COURT FOR APPOINTMEN T OF AN ARBITRATOR AND THE DECISION IS AWAITED. HOWEVER AS PER THE DECISION OF THE DELHI HIGH COURT REGULAR AND SEPARATE ACCOUNTS ARE REQUIRED TO BE MAINTAINED BY GSPCL & GSPL FOR THE P IPELINE E. IT HAD BEEN FURTHER STATED IN THE NOTES THAT I N THE ABSENCE OF INFORMATION FROM GSPCL/GSPL AND DUE TO THE COURT'S DIRECTIONS THE APPELLANT HA S NOT BEEN ABLE TO QUANTIFY THE REVENUE FROM THE SAID PIPELINE. F. A FINDING IN RESPECT OF THE DISCLOSURES MADE B Y THE APPELLANT IN ITS NOTES TO COMPUTATION AND THE NOTES TO FINANCIAL STATEMENTS HAD ALSO BEEN MAD E BY THE ACIT ON PAGE 18-20 OF HIS AS SEGMENT ORDER AND PAGES 6-7 OF HIS PENALTY ORDER. G. 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) 6 ITA NO. 2476 & 2718/AHD /2008 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 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 7 ITA NO. 2476 & 2718/AHD /2008 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 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. 8 ITA NO. 2476 & 2718/AHD /2008 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 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 9 ITA NO. 2476 & 2718/AHD /2008 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 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. 5. AFTER CONSIDERING THE AFORESAID SUBMISSIONS IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE P ENALTY IN RESPECT OF FOLLOWING TWO ITEMS I.E. (I) ADDITION MADE ON DEDUCTION CLAIMED UNDER SECTION 42 OF THE I.T. ACT; (II) DISALLOWANCE OF DEPRECIATION ON LAND BASED PLATFORM WHICH WAS RESTRICTED FROM 25% TO 10%. HOWEVER THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) DELETED THE PENALTY IN RESPECT OF DISALLOWANCE OF DEPRECIATION CLAIMED ON COST OF 36 14 KM. HAZIRA MORA PIPELINE AMOUNTING TO RS.2 14 19 917/- .AGGRIEVED BOTH THE SIDES ARE IN APPEALS BEFORE US. 6. AT THE TIME OF HEARING BEFORE US ON BEHALF OF A SSESSEE SHRI PERCY P. PARDIWALLA SR. ADVOCATE APPEARED AND TOOK US THROUGH THE RELEVANT PORTION OF THE ORDER OF ASSESSING OFFICER/ 10 ITA NO. 2476 & 2718/AHD /2008 LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN QUAN TUM APPEAL RELEVANT PORTION OF THE ORDER OF ASSESSING OFFICER AND LEARNED COMMISSIONER OF IN COME TAX(APPEALS) IN THE EARLIER AND SUBSEQUENT YEAR AS WELL AS THE ORDER OF ASSESSING O FFICER AND LEARNED COMMISSIONER OF INCOME TAX(APPEALS) LEVYING THE PENALTY AND THE IMPUGNED O RDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). HE POINTED OUT THAT IN THE IMMEDIATEL Y PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2001-02 THE ASSESSING OFFICER LEVIED THE PENA LTY UNDER SECTION 42 OF THE INCOME TAX ACT IN RESPECT OF DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 42 OF I.T. ACT IN RELATION TO NIKO- GSPC BLOCK AND EXCESS CLAIM OF DEPRECIATION ON LAND BASED PLATFORM. IN THAT YEAR ALSO PENALTY IS LEVIED IN RESPECT OF BOTH THESE ADDITIONS/ DISALLOW ANCES. THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT FACTUAL MATRIX AND REASONING GIVEN BY ASSE SSING OFFICER FOR LEVYING THE PENALTY IN RESPECT OF (I) ADDITION MADE ON DEDUCTION CLAIMED U NDER SECTION 42 OF THE I.T. ACT AND (II) DISALLOWANCE OF DEPRECIATION ON LAND BASED PLATFORM WHICH WAS RESTRICTED FROM 25% TO 10% IS SAME AS IN THE ASSESSMENT YEAR 2001-02 IN ITA NO. 2 475/AHD/2008. THE LD. D.R. ALSO RAISED THE IDENTICAL ARGUMENTS AS IN ITA NO. 2475/AHD/2008 FOR THE ASSESSMENT YEAR 2001-02. 7. IN THE ASSESSMENT YEAR 2001-02 WE IN ITA NO.24 75/AHD/2008 VIDE PARAS 7 8 & 9 CANCELLED THE PENALTY FOR CONCEALMENT UNDER SECTION 271(1)(C) WHICH WAS CONFIRMED BY THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN RESP ECT OF (I) ADDITION MADE ON DEDUCTION CLAIMED UNDER SECTION 42 OF THE I.T. ACT IN RELATIO N TO NIKO-GSPC BLOCK AND (II) DISALLOWANCE OF DEPRECIATION ON LAND BASED PLATFORM WHICH WAS R ESTRICTED FROM 25% TO 10%. THE REASONING GIVEN BY US IN THAT ORDER IS SQUARELY APPLICABLE TO THE FACTS OF ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2002-03. THE SAID REASONING IS CONT AINED IN PARAS 7 8 & 9 OF THE SAID ORDER WHICH READS AS UNDER :- 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 11 ITA NO. 2476 & 2718/AHD /2008 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. 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. 12 ITA NO. 2476 & 2718/AHD /2008 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. 8. THE FACTS AND CIRCUMSTANCES IN THE ASSESSMENT YE AR UNDER APPEAL REGARDING LEVY OF PENALTY IS SAME. WE THEREFORE FOLLOWING OUR DECIS ION IN ITA NO. 2475/AHD/2008 (SUPRA) FOR THE ASSESSMENT YEAR 2001-02 CANCEL THE PENALTY CON FIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN RESPECT OF (I) ADDITION MADE ON DEDUCTION CLAIMED UNDER SECTION 42 OF THE I.T. ACT IN RELATION TO NIKO-GSPC BLOCK AND (I I) DISALLOWANCE OF DEPRECIATION ON LAND BASED PLATFORM BY RESTRICTING THE SAME AT 10% AS AGAINST 25% CLAIMED BY THE ASSESSEE. RESULTANTLY THE APPEAL OF THE ASSESSEE IS ALLOWED. 9. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LE ARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN DELETING THE PENALTY LEVIED O N THE DISALLOWANCE ON ACCOUNT OF DEPRECIATION CLAIMED ON THE COST OF 3614 KMS. PIPELINES AMOUNTI NG TO RS.2 14 19 917/-. 10. AT THE TIME OF HEARING BEFORE US SHRI JAGDEO CIT D.R. APPEARING ON BEHALF OF THE REVENUE POINTED OUT THAT THE ASSESSEES CLAIM FOR D EPRECIATION ON 3614 KM. HAZIRA MORA PIPELINE WITHOUT CLAIMING THE COMMENSURATE REVENUE FROM THE PIPELINE. ON THE OTHER HAND SHRI PERCY P. PARDIWALLA SR. ADVOCATE APPEARING ON BEH ALF OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 11. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE REASONING GIVEN BY THE LEARNED COMMISSIO NER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER ON PAGE 18 FOR CANCELLING THE PENALT Y IN RESPECT OF DISALLOWANCE OF DEPRECIATION CLAIMED ON 3614 KMS. HAZIRA-MORA PIPELINES AMOUNTI NG TO RS.2 14 19 917/- IS AS UNDER :- IN SO FAR AS DISALLOWANCE OF DEPRECIATION ON 3614 KM. HARIZA MORA PIPELINE AND LEVY OF PENALTY THEREON IS CONCERNED IT IS NOTED FROM THE ORDER OF THE ASSESSING OFFICER THAT THERE IS A JOINT VENT URE OF NIKO-GSPCL AND GSPCL TRANSFERRED THE PIPELINE TO ITS SUBSIDIARY G UJARAT STATE PETRONET 13 ITA NO. 2476 & 2718/AHD /2008 LIMITED (GSPL) WHO MADE THE PIPELINE OPERATIONAL DU RING THE F.Y. 2000-01 WITHOUT THE CONSENT OF THE APPELLANT. THE APPELLANT IS OF THE OPINION THAT IT HAS A LEGAL TITLE TO THIS PROPERTY AND ACCORDINGLY DID NOT ACCEPT THE TRANSFER OF THE PIPELINE TO GSPL BY GSPCL. THE MATTER IS BEF ORE THE ARBITRATOR AS AGREED UPON BY GSPCL AND THE APPELLANT AND THE DECI SION OF THE ARBITRATOR IS AWAITED AND IN VIEW OF THAT THE ASSESSING OFFICE R DID NOT ALLOW THE CLAIM OF THE APPELLANT REGARDING DEPRECIATION. THE DEPREC IATION WAS DISALLOWED BY THE ASSESSING OFFICER AND HAS ALSO BEEN CONFIRMED B Y THE CIT(A.) HOLDING THAT THESE CAN BE REVISITED AFTER THE DECISION IS F INAL. AS IS EVIDENT FROM THE ABOVE FACTS NARRATED IN BRIEFLY THAT THE ISSUE CO ULD BE REVISITED AFTER THE DECISION OF THE ARBITRATOR WHICH MEANS THAT THE CL AIM OF THE APPELLANT IS DEBATABLE WHICH IS ALSO IN THE KNOWLEDGE OF THE DE PARTMENT. THEREFORE TO LEVY PENALTY ON A DEBATABLE CLAIM IS NOT JUSTIFIED. I THEREFORE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED ON T HE DISALLOWANCE MADE ON ACCOUNT OF DEPRECIATION ON THIS 3614 KM. HAZIRA MO RA PIPELINE. 12. FROM THE REASONING GIVEN BY THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS) WE ARE CONVINCED THAT THE DEPRECIATION CLAIMED BY THE ASSE SSEE ON 3614 KM. HAZIRA-MORA PIPELINE WAS BONAFIDE. THE SAME HAS BEEN DISALLOWED ON DIFFERENC E OF OPINION OR FOR WANT OF DECISION OF ARBITRATOR WHICH WAS AWAITED. THE HON'BLE SUPREME COURT RECENTLY IN THE CASE OF CIT VS.- RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC) HELD THAT NO OPINION GIVEN IN THE RETURN FOUND TO BE INCORRECT MAKING OF INCORRECT C LAIM DOES NOT AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME AND PENALTY UNDER SECTION 27 1(1)(C) IS NOT LEVIABLE. THE HEAD-NOTES OF THE SAID JUDGMENT 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 T HERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 2 71(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INF ORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORD ER TO EXPOSE THE ASSESSEE TO PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION 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 EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE BECAUSE THAT IS THE ONLY DOCUMENT WHE RE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PA RTICULARS ARE FOUND TO BE INACCURATE THE LIABILITY WOULD ARISE. TO ATTRAC T PENALTY THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE NOT EX ACT OR CORRECT NOT ACCORDING TO THE TRUTH OR ERRONEOUS. 14 ITA NO. 2476 & 2718/AHD /2008 WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FA LSE 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 NO T AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFFIRMED. 13. IN OUR CONSIDERED OPINION THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS.- RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) IS S QUARELY APPLICABLE TO THE FACTS OF ASSESSEES CASE. WE THEREFORE INCLINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND REJECT THE GROUNDS OF APPEAL OF TH E REVENUE. 14. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY 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 REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.