TaxTMI 
TaxTMI 
1996 (4) TMI 154
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....s from1st Jan., 1987to31st March, 1989. The assessee prepared two P&L a/cs-one for the period 1st Jan., 1987 to 30th June, 1988, and second for 1st July, 1988 to 31st March, 1989. Statement of total income was made out considering profit and loss of both the periods. Accordingly, the return declaring net taxable income of Rs. 23,74,987 was filed. In the statement of income the assessee claimed depreciation amounting to Rs. 1,97,51,631. The depreciation chart filed by the assessee along with the return, copy of which is placed at page 22 of the paper book reads as under: Description WDV as on 1-1-87 Addition Sales Total Depreciation for 27 months WDV as on 31-3-89 1 2 3 4 5 6 7 Ist Block (10%) 4,54,321.00 7,25,473.53 - 11,79,794.53 1,34,284.44 10,45,510.09 FactoryBuilding . . . . . . Building Filling Station . . . . Furniture & Fixture . . . . . . 2nd Block (33.33%) 28,18,765.00 91,88,788.55 1,45,500.00 1,18,62,053.55 85,01,648.00 33,60,405.55 Plant & machinery Plant & machinery (Breating apparatus) . . . ....
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....on sale of fixed assets 23,77,273.96 . 1,86,05,846.58" 7. During the course of assessment proceedings the AO asked the assessee to reconcile the claim of depreciation. The assessee first tried to reconcile the claim made by it but ultimately filed a revised statement along with letter dt.26th March, 1992. As per this letter it was claimed by the assessee that there was clerical error in calculating depreciation while filing the return. As per this revised statement, net taxable income shown by the assessee was Rs. 61,19,782 as against Rs. 23,74,987 shown in the original statement. The difference between the two statements was Rs. 37,44,795. The AO treated it as concealment of income by the assessee on account of furnishing of inaccurate particulars of sale value of cylinders. He levied penalty at twice the amount of tax on the said concealed income. The same is upheld by the CIT(A). Hence, this appeal by the assessee. 8. At the time of hearing before us the learned counsel for the assessee argued at length. His arguments may be summarised as under: (i) It was the first year, when the entire law relating to depreciation allowance was changed. From this year the new....
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....d mens rea is not essential. If a person has furnished inaccurate particulars, he is liable for penalty of concealment, whether such act was deliberate or not. That it is impossible to know mental attitude. Therefore, legislation has deleted the provision with regard to 'mental attitude'. That even in prosecution proceedings, the intention of culpable mental attitude shall be presumed unless it is proved otherwise by assessee. He, therefore, submitted that in penalty under s. 271(1)(c) in the main provision itself onus is upon the assessee and not on Revenue. (ii) The assessee is a company, it is guided by tax experts. Therefore, it cannot plead not being properly conversant with the new provision. Moreover, the assessee had claimed depreciation as per amended law which clearly establishes that assessee was fully aware of the new provision. (iii) That the assessee has pleaded there was clerical mistake in working of depreciation. However, it has not specified which clerk committed the mistake, and under which circumstances mistake was committed. No affidavit of clerk/chartered accountant who committed the mistake is filed at any stage. Moreover, the return was signed by Manag....
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....inafter in this Explanation referred to as the correct income) as assessed under s. 143 or s. 144 or s. 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of cl. (c) of this sub-section." 11.2 The effect of above Explanation would be that the assessee would be deemed to have concealed the particulars of income if the returned income was less than 80% of assessed income. There is exception to this deemed concealment, i.e., the expenditure incurred bona fide by the assessee which is disallowed shall not form part of total income for the purpose of deemed concealment. Further, there will be no deemed concealment if assessee establishes that such variation between income returned/assessed was not on account of fraud or any gross or wilful neglect. To put it differently even in a....
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....198 : (1991) 190 ITR 39 (Gau). "The Expln. to s. 271(1)(c) of the IT Act, 1961, pertains to the onus of proof. The onus was earlier on the Revenue. It has now been shifted to the assessee in cases covered by the Explanation. The onus is on the assessee to prove that the failure to file the correct income did not arise from any fraud or gross or wilful neglect on his part." (c) CIT vs. K.S.D. Pandurangan (1996) 132 CTR (Mad) 338 : (1996) 218 ITR 8 (Mad). "No one who has concealed particulars of his income or disclosed inaccurate particulars should be allowed to escape penalty, if he has done it intentionally. No one who has not done any such thing and if any such thing is done unknowingly or inadvertently should be subjected to penalty. If only on the basis of assessment of escaped income or on the basis of later disclosure of some income by the assessee, it has to be inferred that he has infringed the requirements of law, there will be no purpose of a separate penalty proceedings. The very fact that penalty proceedings are separately taken out and an opportunity is given to the assessee to show cause and produce evidence, etc., must assume that before inflicting penalty, i....
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.... out at Rs. 38,77,169. This depreciation written back was separately shown in the P&L a/c for the period ended on30th June, 1988, filed along with return of income itself. Therefore, it cannot be inferred that the assessee intended to conceal actual sale value of cylinders. It would not be out of place to mention here that the assessee submitted complete details of sales on22nd Nov., 1990, and along with it also filed chart showing working of profit on sale of asset. The chart, placed at page 32 of paper book, reads as under: "Details of profit/loss on sales of fixed assets and depreciation written back for the asst. yr. 1989-90 Particulars Cost WDV on 30-6-88 Dep. written back Sale Loss/profit 5,773 cylinders 56,35,645.12 Ni 35,97,037.12 81,60,677 25,25,031.88 Vehicles . . . . . Car MPH-2909 10,000.00 97.54 9,902.46 40,000 30,000.00 Car DIC-4072 65,000.00 45,500.00 19,500.00 63,000 (-)2,000.00 Truck DEG-1413 2,14,727.42 38,698.92 1,76,028.50 42,000 (-)1,72,727.42 Moped DEI-7257 3,531.00 1,012.49 2,518.51 500 (-)3,031.00 . 59,28,903.54 . 38,77....
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....the Tribunal, while deciding the assessee's appeal in quantum, vide para 6 of the order in ITA No. 8105/Del/1992. It reads as under: "6. Ground Nos. 6 to 9: The assessee claimed depreciation on computers purchased from M/s Pertech Computers Ltd., E-46/10, Okhla Industrial Area, New Delhi (PCL for short), in March, 1989, and leased out the same to M/s ALTOS India Ltd., D-60, Okhla Industrial Estate (ALTOS for short) under an agreement dt.18th March, 1989. The AO noticed certain curious features in the claim of the assessee with regard to purchase of computers from PCL as also its claim of leasing out of the same to ALTOS. The AO noted that the assessee had claimed to have purchased 15 computers from PCL, for a sum of Rs. 50,26,200 on15th March, 1989. He also noted that the computers involved were claimed as manufactured by ALTOS which sold the computers to PCL. The AO noted that the Chairman of PCL Shri Bhai, was a Director of ALTOS. He also noticed that though the assessee claimed to have taken delivery of the computers from PCL, there was no such evidence and on the contrary the delivery of the computers was taken by ALTOS itself from PCL, yet the computers continued to remain ....
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....and and had also submitted that PCL and ALTOS would not participate in proceedings. The AO also took note of letter received from another AO relating to another assessee M/s Avanti Overseas Pvt. Ltd., wherein he had conveyed that M/s Avanti Overseas Pvt. Ltd. had also entred into similar agreements with PCL/ALTOS and PCL had confirmed that security deposit is to be treated as a residual price of the computers on completion of the lease agreement and the deposit is non-refundable and interest free. He also took note of the broker and finance consultant who carried out such arrangement between M/s Avanti Overseas and PCL/ALTOS namely M/s Anil Bhatia & Associates. He gave copies of these documents to Shri Goel, director of company on30th March, 1992, and found no satisfctory reply coming from Shri Goel. He thus held that the assessee's claim was devoid of merit. He also held that the agreement with ALTOS was shown when the computers involved simply did not exist which, according to the AO, mean that the same were not even manufactured and therefore, there was no ownership of computers by the assessee. He, therefore, concluded that the money paid by the assessee was only towards financ....
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....as if it had nothing to do with the computers except to realise the amount of Rs. 25,13,100 from ALTOS which, according to the agreement, the assessee is getting in monthly instalments from ALTOS in all aggregating to Rs. 33,42,420 @Rs. 92,845 p.m. The interest of the assessee in this connection is fully secured under its agreement. The agreement of lease of the computers between the assessee and ALTOS does not inspire truthfulness for the obvious reason that the manufacturer of computers would not take lease of the same in normal course of its business. The story of selling of computers by ALTOS to PCL and in turn by PCL to the assessee and again giving back same computers to ALTOS under the colour of lease is nothing beyond that the goods have reached the place of origination throwing great suspicion on the origination itself." The AO mainly relying upon the above finding of the Tribunal came to the conclusion that the assessee made bogus claim of depreciation on computers. He accordingly levied penalty twice the amount of tax on the sum of Rs. 37,69,273. On appeal, the CIT(A) upheld the levy of penalty. While upholding the penalty he also relied upon the statement of Shri Dha....
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....eat suspicion on the origination itself." (vii) That under the identical circumstances, Tribunal, Delhi Benchh "B" in the case of Indian Management Advisers & Leasing (P) Ltd. vs. Dy. CIT (1994) 51 ITD 566 (Del), observed as under: "Under the law, there is no bar on a manufacturer to take back on lease equipment manufactured and sold to the purchaser and pay rent for it. If such a transaction is genuine, the Revenue cannot disallow the claim of rent and depreciation by doubting/challenging the necessity of the manufacturer to take back the manufactured goods on lease. It is common knowledge that several banks and financial institutions are carrying on leasing business by financing purchase of equipment taken back and used by them on lease. The depreciation and interest to the financier and lease rent and interest, etc., to banks are being allowed." (viii) In alternate he submitted that in any case assessee bona fide purchased computers, made payment for it, leased it out, received hire charges and shown the same as its income not only in this year but also in subsequent years. He submitted all the relevant information to the AO. Therefore, if at all any fraud was played, i....
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....computers. The assessee was not aware of the correct location of the computers even after expiry of lease period. (vi) In quantum appeal the Tribunal has concluded that the arrangement between the assessee and ALTOS was only financial arrangement. The finding of fact recorded by the Tribunal in quantum appeal can be disturbed in penalty proceedings only if some fresh material is brought on record by the assessee to support its case. In this case no fresh material is brought on record by the assessee, on the other hand, Revenue has brought further material on record which strengthens the finding of the Tribunal in quantum appeal. (vii) That it is a case where assessee made bogus claim of depreciation on the basis of mere paper transaction. This is a case where maximum penalty was warranted. However, the AO has levied penalty only at twice of the tax sought to be evaded as against maximum of thrice of tax. Therefore, there is no justification for reduction of penalty. He submitted that penalty cannot be reduced merely because it is harsh. 16. We have carefully considered the arguments of both the sides and have perused the material placed before us. For levy of penalty, the ....
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....ee before us, and in the case of Indian Management Advisers & Leasing (P) Ltd. and Apogee International Ltd. are identical. We may further mention that the CIT(A), while confirming the penalty has relied upon the statement of Shri Dadan Bhai, which was recorded at the time of search of the premises of PCL/ALTOS. The CIT(A) had also confronted the assessee with the said statement of Shri Dadan Bhai. The assessee's counsel had made a request to the CIT(A) vide letter dt.24th March, 1995, to produce the said deponent. It is settled law that if a statement of any person was recorded at the back of the assessee and if the Department desires to utilise such statement against the assessee, the assessee must be given an opportunity to cross-examine such person. Admittedly, in this case the assessee was not given the opportunity to cross examine Shri Dadan Bhai. The CIT(A) has also relied upon the statement made by the PCL before the sales-tax authorities. Copy of such statement was supplied to the assessee and a photocopy of the same finds place at pages 265 and 266 of the paper book. The assessee's counsel has objected to the consideration of this statement on two grounds, one, it is not ....