Maharastra Apex Corporation Ltd.,, Manipal v. ACIT, Udupi

ITA 343/BANG/2010 | 1992-1993
Pronouncement Date: 15-03-2011 | Result: Allowed

Appeal Details

RSA Number 34321114 RSA 2010
Bench Bangalore
Appeal Number ITA 343/BANG/2010
Duration Of Justice 1 year(s) 7 day(s)
Appellant Maharastra Apex Corporation Ltd.,, Manipal
Respondent ACIT, Udupi
Appeal Type Income Tax Appeal
Pronouncement Date 15-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 15-03-2011
Date Of Final Hearing 14-03-2011
Next Hearing Date 14-03-2011
Assessment Year 1992-1993
Appeal Filed On 08-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE DR. O.K. NARAYANAN VICE PRESIDENT AND SMT. P. MADHAVI DEVI JUDICIAL MEMBER ITA NOS. 343 & 344/BANG/2010 ASSESSMENT YEARS : 1992-93 & 1993-94 MAHARASTHRA APEX CORPORATION LTD. SYNDICATE HOUSE MANIPAL 576 101. : APPELLANT VS. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1 UDUPI. : RESPONDENT APPELLANT BY : SHRI S.P. BHAT ADVOCATE & SHRI H.A.K. RAO C.A. RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI ADDL. C IT(DR) O R D E R PER SMT. P. MADHAVI DEVI JUDICIAL MEMBER BOTH ARE ASSESSEES APPEALS FOR THE ASSESSMENT YE ARS 1992-93 & 1993-94. IN BOTH THE APPEALS THE ASSESSEE IS AGGR IEVED BY THE ORDER OF THE CIT(APPEALS) IN NOT ONLY CONFIRMING BUT ENHANC ING THE PENALTY LEVIED BY THE AO U/S. 271(1)(C) OF THE INCOME-TAX ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF LEASING AND FINANCE. DUR ING THE ACCOUNTING YEAR ITA NO.343 & 344/BANG/10 PAGE 2 OF 6 RELEVANT TO ASSESSMENT YEAR 1992-93 THE ASSESSEE P URCHASED SOME MACHINERY FROM M/S. J.L. MORRISON (INDIA) LTD. [JLM] AND GAVE IT BACK TO THE SAME COMPANY ON LEASE. THE ASSESSEE CLAIMED DE PRECIATION ON THE SAID MACHINERY. DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) THE AO OBSERVED THAT THE ASSESSEE HAD CLAIMED TO HAVE PURC HASED MACHINERY AND HAS GIVEN IT ON LEASE TO THE SAME COMPANY BUT IT H AS NOT PAID THE CONSIDERATION BUT RETAINED THE SAME AS DEPOSIT FOR THE LEASE AMOUNT. HE ALSO OBSERVED THAT THE PLANT & MACHINERY WAS PURCHA SED BY JLM AND AFTER USAGE OF NEARLY 15 TO 20 YEARS THE WDV WAS ALMOST NIL WHILE THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED IT FOR RS.65 LAKHS WHICH IS NOT JUSTIFIABLE. THUS THE ASSESSING OFFICER CAME TO T HE CONCLUSION THAT THIS IS NOTHING BUT A SHAM TRANSACTION TO AVOID TAX LIABILI TY BY CLAIMING DEPRECIATION. HE THEREFORE DISALLOWED THE CLAIM OF DEPRECIATION. 3. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(APPEALS) WHO CONFIRMED THE ORDER OF THE AO AND IN THE SECOND APPEAL ALSO THE ITAT DECIDED THE ISSUE AGAINST THE ASSESS EE. 4. MEANWHILE THE ASSESSING OFFICER INITIATED PROCE EDINGS U/S. 271(1)(C) OF THE INCOME-TAX ACT AND LEVIED PENALTY @ 100% OF THE TAX SOUGHT TO BE EVADED. AGGRIEVED BY THE SAME THE AS SESSEE PREFERRED APPEAL BEFORE THE CIT(APPEALS) WHO ENHANCED THE LE VY OF PENALTY TO 300% OF TAX SOUGH TO BE EVADED. AGGRIEVED THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE CHALLENGED THE PENALTY ORDER ON THE FOLLOWING POINTS: ITA NO.343 & 344/BANG/10 PAGE 3 OF 6 (I) THE ASSESSING OFFICER HAS NOT RECORDED HIS SAT ISFACTION FOR INITIATING PENALTY PROCEEDINGS IN THE ASSESSMEN T ORDER AND THEREFORE INITIATION OF PENALTY PROCEEDINGS ITS ELF IS INVALID. FOR THIS PROPOSITION HE RELIED UPON THE FOLLOWING DECISIONS: (A) CIT V. RAM COMMERCIAL ENTERPRISES LTD. 246 ITR 568 (DEL) (B) CIT V. SUPER METAL RE-ROLLERS 265 ITR 82 (DEL) (C) CIT V. MUNISH IRON STORE 263 ITR 484 (P&H) (D) DIWAN ENTERPRISES V. CIT & ORS. 246 ITR 570 (D EL) (E) GANPAT RAI SANTU LAL V. CIT BIHAR 147 ITR 224 (PAT) (II) THERE WAS NO CONCEALMENT OF PARTICULARS OF INC OME OR FURNISHING OF INACCURATE PARTICULARS AND THEREFORE PENALTY IS NOT LEVIABLE. (III) WITHOUT PREJUDICE TO THE ABOVE THE CIT(APPEA LS) HAS NOT ISSUED ANY NOTICE BEFORE ENHANCING THE PENALTY AND THEREFORE PENALTY @ 300% IS NOT LEVIABLE. 6. IN SUPPORT OF HIS CONTENTIONS THE LD. COUNSEL F OR THE ASSESSEE DREW OUR ATTENTION TO VARIOUS FINDINGS OF THE AO AS WELL AS CIT(APPEALS) AND ALSO THE ASSESSEES WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A). HE HAS FILED COPIES OF THE WRITTEN SUBMISSIONS. 7. THE LD. DR ON THE OTHER HAND SUBMITTED THAT TH IS IS A FIT CASE FOR LEVY OF PENALTY AS THE ITAT IN ITS ORDER IN QUANTUM APPEAL BY THE ASSESSEE HAS CLEARLY HELD THAT THE TRANSACTION IS A SHAM TRA NSACTION. SHE PLACED THE COPY OF THE ORDER BEFORE US. ITA NO.343 & 344/BANG/10 PAGE 4 OF 6 8. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THEIR RIVAL CONTENTIONS WE FIND THAT THE NATURE OF TRANSACTION OF SALE AND LEASE BACK HAS NOT BEEN ACCEPTED BY THE AO AS WELL AS THE CIT( APPEALS). THE CIT(APPEALS) HAS IN FACT HELD IT TO BE A FINANCIAL TRANSACTION IN THE GARB OF SALE AND LEASE BACK TRANSACTION. THE ASSESSING AUT HORITY HAS WHILE ASSESSING THE INCOME OF THE ASSESSEE HAS ONLY DISAL LOWED THE CLAIM OF DEPRECIATION BUT HAS NOT RECORDED ANY FINDING IN T HE ORDER OF ASSESSMENT THAT THERE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME NECESSARY FOR COMPUTATION OF CORRECT INCO ME OF THE ASSESSEE. HE HAS ONLY MENTIONED ISSUE NOTICE U/S. 271(1)(C). THIS IS ONLY A FORMAL OBSERVATION SUCH AS ISSUE DEMAND NOTICE. THUS I T CANNOT BE HELD THAT THE AO HAS APPLIED HIS MIND TO THE FACTS OF THE CAS E BEFORE COMING TO THE CONCLUSION THAT A NOTICE HAS TO BE ISSUED U/S. 271( 1)(C) OF THE I.T. ACT. HE SEEMS TO HAVE ISSUED NOTICE AS A MATTER OF FACT AND NOT ON THE BASIS OF ANY SATISFACTION REACHED BY HIM. ON THIS GROUND ALONE RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT AND VA RIOUS OTHER DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE TH E PENALTY APPEAL IS TO BE ALLOWED AND PENALTY IS TO BE DELETED. 9. EVEN OTHERWISE THE CIT(APPEALS) HAS NOT ISSUED ANY NOTICE BEFORE ENHANCING THE PENALTY. THIS IS ALSO ANOTHER GROUND FOR DELETING THE PENALTY ENHANCED BY THE CIT(APPEALS) AT 300%. ACCORDING TO US THE ASSESSEE HAS FURNISHED ALL THE DETAILS RELEVANT FOR THE COMP UTATION OF ASSESSEES INCOME AND IT IS FOR THE ASSESSING OFFICER TO EITHE R ACCEPT OR REJECT THE CONTENTIONS OF THE ASSESSEE. IT MAY BE A GOOD GROU ND FOR REJECTION OF THE ASSESSEES CLAIM AND CONSEQUENT ADDITION BUT EVERY ADDITION CANNOT ITA NO.343 & 344/BANG/10 PAGE 5 OF 6 AUTOMATICALLY ATTRACT PENALTY. IN VIEW OF THE SA ME WE ALSO HOLD THAT THERE WAS NO CONCEALMENT OR FURNISHING OF INACCURATE PART ICULARS OF INCOME BY THE ASSESSEE. 10. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED AND PENALTY IS DELETED. A.Y. 1993-94 11. DURING THIS YEAR WE FIND THAT THE AO HAS DISAL LOWED THE CLAIM OF DEPRECIATION ON THE MACHINERY PURCHASED FROM JLM AN D LEASED BACK TO THEM AND FOR ANOTHER SIMILAR TRANSACTION WITH KONGA RAR COTTON AND SYNTHETIC PRIVATE LIMITED [KCS] . AS FAR AS LEVY OF PENALTY WITH REGARD TO JLM IS CONCERNED WE HOLD THAT THE PENALTY IS NOT L EVIABLE BECAUSE THE PENALTY IS ALREADY LEVIED FOR THE A.Y. 1992-93 AND ON THE SAME BLOCK OF ASSETS THE PENALTY IS AGAIN SOUGHT TO BE LEVIED FOR THE A.Y. 1993-94 WHICH AMOUNT TO DOUBLE JEOPARDY. 12. FOR THE RELEVANT YEAR ALSO WE FIND THAT THE AO HAS NOT RECORDED HIS SATISFACTION FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE I.T. ACT AND HAS ONLY FORMALLY MENTIONED PENAL ACTION U/S. 271(1)(C) IS INITIATED. ISSUE NOT ICE. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF T HE HONBLE DELHI HIGH COURT AND OTHER DECISIONS RELIED UPON BY THE LD. CO UNSEL FOR THE ASSESSEE AND FOR THE DETAILED REASONS GIVEN BY US FOR THE A. Y. 1992-93 THIS APPEAL OF THE ASSESSEE IS ALSO ALLOWED AND PENALTY IS DELE TED. 13. IN THE RESULT THE ASSESSEES APPEALS ARE ALLOW ED. ITA NO.343 & 344/BANG/10 PAGE 6 OF 6 PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF MARCH 2011. SD/- SD/- ( DR. O.K. NARAYANAN ) ( SMT. P. MADHAVI DEVI ) VICE PRESIDENT JUDICIAL M EMBER BANGALORE DATED THE 15 TH MARCH 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.