AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2012 (3) TMI 481
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....he CIT(A) failed to appreciate that addition of ₹ 2,25,088/- on account of alleged fund transfer from M/s R.K. Video Distributor was accepted because there was no tax effect. In fact, except for suspicion there was nothing to treat transactions with M/s R.K. Video, a distributor of appellant as bogus." 2. Brief facts are: For A.Y. 1994-95 assessee filed its return on 30-11- 1994, declaring loss of ₹ 58,56,48,200/-, which was processed u/s 143(1)(a) on 25-5-95 at the returned loss. Subsequently regular assessment was made u/s 143(3) on 26-3-97 at a loss of ₹ 58,13,55,030/- as against returned loss of ₹ 58,56,48,200/-. 2.1. Aggrieved, assessee filed appeal before the CIT(A), who vide order dated 16-8-2000 set aside the issues to the AO for re-adjudication. In second round i.e. set aside proceedings, the AO vide order dated 27-3-2002 assessed the net loss at ₹ 56,34,39,618/-, by making following additions: a. Addition on a/c of lease rental ₹ 73,00,185/- b. Addition on a/c of depreciation ₹ 93,75,645/- c. Addition on a/c of fund transfer: i. M/s R.K. Video Distributor: 2,50,000 ii. M/s Sahib Engg. Works : 29,54,126 32,04,126/- ₹ ....
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.... Video were not questioned; apart from this there is no proof that the same had been considered by the Assessing Officer at all in the subsequent assessment years. Therefore, the ground of appeal pertaining to this item is dismissed." 2.5. It shall be pertinent here to mention that the AO levied the penalty on the basis of CIT(A)'s order in quantum appeal. However, when the CIT(A) decided the penalty appeal, ITAT order on quantum was already delivered on 18-6-2009, which is considered by CIT(A). 2.6. Aggrieved. Both the parties are before us on respective grievances. 3. Ld. DR contends that the AO from the perusal of details of depreciation was of the view that assessee had wrongly claimed 100% depreciation at ₹ 1,25,00,861/- in Video Tape Division, Kashipur for "Solvent Recovery Plant". As per assessee's chart, it was eligible for 100% depreciation on Solvent Recovery Plant in view of Schedule 111(3)(iii) G(a). According to AO, in item 3(iii) G of Schedule on depreciation table there was no mention of "Solvent Recovery Plant" as claimed by the assessee to be eligible for 100% depreciation. The Solvent Recovery Plant was eligible for normal depreciation @ 25% and not 100%.....
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....ly claim wrong higher depreciation, which had no tax advantages in this year as well as near future as it at the most would have increased claim of unabsorbed depreciation. 4.1. Coming to the facts, assessee was allowed depreciation @ 40% on solvent recovery plant coming under Pollution Control Equipment. From A.Y. 1994-95, the depreciation rates were changed, on water pollution control equipment they were increased from 40% to 100% by way of legislative amendment. The assessee had WDV of ₹ 1,25,00,861/- of solvent recovery plant. Assessee bona fide believed the entire WDV come under the category of "Wet air oxidation equipment under item (3)(iii)G(a) and this legislative amendment was eligible depreciation @ 100% was applicable to it. 4.2. By way of Income-tax (7th Amendment) Rules 1993, w.e.f. 1-4-1994, the rate of depreciation in respect of air and water pollution control equipments were increased from 40% to 100%. Since the AO was not agreeable to the view that solvent recovery plant falls in air pollution control equipment, therefore, the assessee in the alternative argued that the solvent recovery plant falls under the item "(3)(iii)G(a) - Wet air oxidation equipment ....
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....ssee's cross objections, it is contended that assessee in respect of R.K. Video Distributors categorically submitted that this concern was a regular selling agent of the assessee by following observations: "M/s R.K. Videos was the selling agent for the sale of Magnetic Video Tapes and Blank Cassettes produced by the assessee in its Video Tape Division at Kashipur. The production details of Video Tape Division are as under:- 1990-91 1991-92 1992-93 1993-94 Magnetic Tapes for Video( Million running Mtrs.) 1,396 1,432 1,617 1,354 Blank Videos Cassettes (Nos.) 6,49,440 1,140 550 2,99,970 From the above details, it is quite clear that the Magnetic tape for video cassettes and blank video cassettes were manufacturing by the assessee and R.K. Video Distributors was one of the selling agent of the assessee to whom the assessee was selling video tapes and cassettes and receiving money. A sum of ₹ 2,50,000/- being the peak amount in the account of R.K. Video was added whereas the R.P. Video is a selling agent. The Department had not proved any thing wrong against R.K. Video, then why the fund transferred from that account was under question mark." 4.9. None of the lowe....
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....ected by the assessee. In this year, the assessee had acquired new excavators and tippers for a total sum of ₹ 1,78,75,260/- and 6,36,88,865/- respectively. All block of assets were termed as 'earth moving equipments' and taken in the profit and loss account under the foresaid head. The cost on tippers was much higher on which depreciation was rightly claimed at 40%. However, since the entire block consisting of excavators and tippers was taken under the head 'earth moving equipment', the explanation given by the assessee was that inadvertently, in respect of excavators are the depreciation was claimed at 40% instead of 25%. This explanation has been accepted as genuine and bona fide by the Tribunal which is the final fact finding authority. In CIT vs. Escorts Finance Ltd. (2010) 328 ITR 44 this Court has held that deletion of penalty on the ground of inadvertent error is a finding of fact. In fact, the Assessing Officer did not even contradict the plea of the assessee that excess claim of depreciation was not an inadvertent error. 11. That apart, other element present in this case gives a strong indication that the error was genuine and bona fide. Return for the assessment ....