AI Drafter 
TaxTMI 
TaxTMI 
2017 (2) TMI 1238
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of generation of electricity. For AY 2005-06, the assessee filed return of income and declared a loss of Rs. 1,39,92,809/-. The case was selected for scrutiny and assessment order under section 143(2) was passed. In the assessment order, depreciation of Rs. 2,20,10,209/- was inter alia disallowed on the basis that wind-will on which depreciation was claimed was commissioned after 30/09/2004. Accordingly, depreciation on wind-mill assets were restricted to 50% of the eligible depreciation as the wind-mill was alleged to be put to use for the purpose of business for a period of less than 180 days in the Financial Year (FY) relevant to AY 2005-06. In consequence of the assessment, penalty proceedings under section 271(1)(c) was initiated with reference to aforesaid excess claim of depreciation. The assessee challenged the assessment order before the CIT(A). The CIT(A) after appreciating the facts of the case held in favour of the assessee and allowed the depreciation for the full year as claimed. Aggrieved thereto, the Assessing Officer (AO) went in appeal before the Tribunal against the order of the CIT(A). Thus, the ITAT did not concur with the order of the CIT(A) and restored the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or was stated to be by road and from Daman to Village Soda, Tehsil Fatehgarh, District Jaisalmer, Rajasthan. Farther as per the invoices, supply of machine is ex-works Daman. Before us no material in the form of lorry receipt, Octroi receipts or any other proof of transportation of goods, which would evidence that the machinery was indeed transported from Daman to the village Soda and had reached the site and commissioned, has been placed on record nor there was any finding of the CIT(A) to the aforesaid. Further, as per the invoice placed at page no.39, the insurance was to be arranged by the Suzlon Energy Ltd., up to the site. No evidence has been placed on record by the assessee to demonstrate that the insurance was indeed taken for transportation of the machinery. In view of the aforesaid facts, the Hon'ble ITAT, Rajkot held that no evidence /material was on record which could prove the machinery was in fact transported from Daman to village Soda and had reached village Soda before 30/09/2004 and was commissioned before 30/09/2004, the AO was justified in restricting the disallowance to 50% of the prescribed rate since the machinery was not installed before 30th September, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of revenue. The penalty under section 271(1) (c) is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability. As in the case in the matter of prosecution under section 276C of the Income Tax Act." 9. In the light of the above facts, and ongoing discussion, it is clear that the assessee has not disclosed fully and correctly all the facts relating to his total income. In this case, Rs. 2,20,10,209/- is the income in respect of which inaccurate particulars has been filed. I am therefore, satisfied that the assessee has concealed the income and thereby committed a clear default punishable to penalty u/s 271(l)(c) of the Act. The minimum penalty levy able in the case is Rs. 66,03,063/- being 100% of tax on concealed income and the maximum penalty levy able in the case Rs. 1,98,09,188/- being 300% of the tax on concealed income. Accordingly, I levy a penalty of Rs. 66,05,000/- u/s. 271(l)(c) of the I.T. Act, 1961 which is the minimum. 10. The order is passed after obtaining the necessary approval from the Joint Commissioner of Income Tax, Range-1, Jamnagar." 5. The CIT(A) however, found merit in the case of the assessee for non....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aled the income. Appellant has furnished before me evidences in the form of commissioning certificate, Energy generation report of the month of September 2004, joint inspection report of various officials, copy of power purchase agreement, date wise sale of electricity from the date of commercial operation, invoices for supply of windmill, copy of delivery challans with lorry receipts of various transporters for supply of parts of windmill, communication in the form of letters between various officials and appellant, minutes of meeting by officials of Suzlon and Rajasthan renewable Energy Corp. Ltd. in paper book page no. 47 to 115. On perusal of the paper book it is evident that assessee during the course of assessment proceedings has submitted at page no. 60 to 78 which are lorry receipts and delivery chailans for material supplied by Suzlon Energy Ltd. Appellant's contention was that it was never the issues raised by AO as well as CIT (A) that machine has never reached the site so that it could have been installed before 30.9.2004. Further, the invoice submitted by the appellant wherein fact of insurance is required to be arranged by Suzlon energy Ltd. was mentioned, hence i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee. In my view the disallowance which is rejected by AO and hon. ITAT cannot put the assessee subject to penalty u/s 271(1) (c) of the Act. Further in the case of the assessee AO has disallowed the claim of depreciation partially on one aspect which has been deleted by CIT (A). Hon ITAT has sustained the disallowance on altogether on another point which itself proves that issue is debatable. Therefore in my view the disallowance which is rejected by AO and hon. ITAT and which is supported by the decision of the High Court and admitted by the jurisdictional high court makes the issue highly debatable and cannot put the assessee subject to penalty u/s 271(1) (c) of the Act. Claim of the assessee is based on the certificate of the government agencies and claim of the assessee is disallowed disbelieving that certificate. Honourable Supreme court in case of Reliance Petro Products V CIT 322 ITR 178 (SC) has held that "Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(l)(c). If we accept the contention of the Revenue th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h is signed by two representatives of Suzion Energy Ltd., executive Engineer of Jodbpur Vidyut Vitran Nigam Ltd., Project Officer of Rajasthan renewal energy Corp Ltd., executive Engineer III (TCC-IV), This minutes copy is furnished at page no. 96-97 of paper book. Appellant has also submitted invoices of windmill purchased at page no. 75 to 83 of paper book. Copy of delivery challans and lorry receipts for parts of windmill supplied from 03.09.2004 to 09.09.2004 are also submitted at page no. 60 to 74. Appellant had also entered into power purchase agreement for supply of power with Jodhpur Vidyut Vitran Nigarn Limited. As per this agreement it is confirmed that power plant has been commissioned in the month of September 2004. However, chargeability of the power would be applicable from the commercial operation date when performance acceptance is completed.1 Till then it was agreed that power would be supplied free of cost by these units. Appellant has submitted all these documents which shows that date of commissioning is 30.09..2004. However, the statement prepared by officials of Suzion Energy Ltd. Obtained by AO from ADIT (Inv.) suggest that date of commissioning is 05.11.2004....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment order, notice u/s 274 rws 271(1) (c) dated 31.12.2007 regarding initiation of penalty proceedings for furnishing inaccurate particulars and concealment of income was issued. Notice is standard proforma without striking off the relevant clauses will lead to inference as to nonapplication of mind by Ld. AO. Therefore she relied on the decision of GET V Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250 (Karnataka). It is apparent that has issued notice without striking off any of the alternatives of the "'furnishing of inaccurate particulars' or 'concealment of income'. Hon. Karnataka High court in that decision has laid down a proposition that Notice under section 274 should specifically, state the grounds mentioned in section 271(l)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form, where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law. The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....levied u/s 271(1)(c) of the Act of Rs. 66,05,000/- on disallowance of partial depreciation on windmill, the penalty levied u/s 271(l)(c) of the Act of Rs. 66,05,000/- is hereby cancelled." 6. Dissatisfied by the order of the CIT(A) dropping the penalty, the AO has preferred appeal before the Tribunal. 7. The Ld.DR relied upon the order of the AO in quantum assessment and the penalty proceedings order as well as the order of the ITAT in quantum assessment. The Ld.DR submitted that the ITAT in the course of fact finding in quantum appeal reversed the order of the CIT(A) and confirmed the action of the AO. Thus, the ITAT found on facts that the depreciation is allowable only for a part of the year as against claimed by the assessee for full year. The Ld.DR relied upon the judgement of Hon'ble Supreme Court in the case of N.G. Technologies vs. CIT reported at (2016) 7 Taxmann.com 37 (SC) and submitted that the wrong claim of the assessee has resulted in escapement of income to the extent of depreciation disallowed by the AO and sustained by the ITAT. The Ld.DR accordingly submitted that the penalty order of the AO ought to have been confirmed by the CIT(A) in the light of the ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment year. Thus, the entire action of the AO is revenue neutral and does not call for harsh action of penalty. The Ld.AR adverted our attention to the order of the CIT(A) in quantum assessment and contended that relief was granted to the assessee by a superior authority of the Revenue at some point of time which indicates that the issue involved is not entirely free from doubt. Therefore, the order of the CIT(A) in quantum assessment is also entitled to great weight while determining the grievance. The ld.AR adverted our attention to the order of the ITAT in quantum assessment and submitted that the basis of conclusion by the ITAT against the assessee was on the ground that lorry receipts, octroi receipts, or other proof of transportation of goods was not produced before the CIT(A) or before the ITAT. In defence, the ld.AR submitted that the seller was under obligation for transportation and insurance of the wind-mill. The ld.AR also submitted that the AO heavily relied upon the statement obtained from the official of the seller company in the course of survey proceedings. Such statement used against the assessee was not provided to the assessee for the appreciating of the nat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion in the next year. We simultaneously note that the CIT(A) in the quantum assessment has approved the plea taken by the assessee on merits and dislodged the assessment order. Thus, the bonafides of the claim of the assessee cannot be entirely disproved merely on the ground that ITAT in quantum assessment has agreed with the action of the AO. The order of the CIT(A) on facts in quantum assessment, in our view, is a strong mitigating circumstance in favour of the assessee. We simultaneously note that the assessee has sought to explain by way of evidences as noted in aforesaid paras that actual generation of electricity of 402 units has been shown for the month of September-2004. The invoices of the supplier of the machinery is also prior to the purported date of installation on 30/09/2004. The assessee has offered some explanation on deficit noted by the ITAT towards transportation and insurance. The explanation offered by the assessee is somewhat plausible particularly in the context of penal provisions of section 271(1)(c) of the Act. Needless to say, penalty proceedings are independent of assessment proceedings and it is well settled that concealment of income cannot be automati....