TaxTMI 
TaxTMI 
2018 (10) TMI 245
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....New Shorrock Mills (a division of M/s.Mafatlal Industries Limited) and they entered into a lease transaction with the said M/s.Mafatlal Industries Limited by lease agreement dated 25.03.1996, by which, the above mentioned assets were leased out for a period of 3 years to M/s.Mafatlal Industries limited. The company had claimed 100% depreciation on machinery worth Rs. 25,00,000/-. The depreciation claimed by the company being Rs. 12,50,000/- each for assessment year 1996-1997 and 1997-1998. There were certain irregularities found by the Revenue with regard to the lease of machinery by the appellant. The Assessing Officer by its assessment order for the assessment year 1996-1997, has disallowed the said claim of depreciation, and assessment was completed under Section 143(3) of the Income Tax Act. Independently, penalty proceedings under Section 271(i)(c) was initiated. As against the assessment order, the assessee preferred appeal before the Commissioner of Income Tax (Appeals) [CIT (A)], who by order dated 21.05.2000, deleted certain additions, but did not consider the issue of dis-allowance of depreciation. The assessee filed petition under Section 154 of the Act to rectify the er....
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....ealment of Income of furnishing of incorrect particulars of income. 8. The learned counsel also relied upon the Judgment reported in 1980 AIR 1149 in the case of Anantharam Veerasingaiah and Company Vs. Commissioner of Income Tax, Andhra Pradesh, wherein, it has been observed as follows:- "But while considering the legal principles involved in the application of Section 271(i)(c) the High Court, in our opinion, has erred in entering into the facts of the case and determining in point of fact that the assessee earned income during the relevant previous years and that he was guilty of concealing such income or furnishing inaccurate particulars of it. Having found that the legal basis underlying the order of the Appellate Tribunal was not sustainable, the High Court should have limited itself to answering the question raised by the reference in the negative, leaving it to the Appellate Tribunal to take up the appeal again and redetermine it in the light of the law laid down by the High Court. It is the Appellate Tribunal which has been entrusted with the authority to find facts. A High Court is confined to deciding the question of law referred to it on facts found by the A....
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....71(1)(c) of the Act, clearly provides for penalty that too when there is concealment categorically found, based on which, the assessment order was passed, including the penalty, and the concurrent confirmation of the penalty by the authorities cannot be interfered. 14. The learned counsel for the Department would rely upon the Judgment, reported in [2014] 49 taxmann.com 129 (Karnataka), in the case of Commissioner of Income Tax Vs. BPL Sanyo Finance Limited, to substantiate that penalty under Section 271(1)(c) of the Income Tax Act, was legally sustainable for furnishing inaccurate particulars on concealment of Income. It was also further stated that by virtue of notice under Section 271(1)(c) of the Act, was put to notice that if the assessee does not prove in the circumstances stated in the explanation, that is failure to return his current income, was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof and consequently, be liable to penalty provided by that Section. 15. The learned counsel for the Department, to substantiate his claim, would also rely upon the Judgment reported in [2014....
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....h the findings, they have voluntarily reversed the depreciation claimed by them. Thus, the Court has observed that the Tribunal has rightly held that the assessee was liable for penalty. 18. Heard the learned counsel for the appellant and the learned counsel for the respondent, and perused the materials available on record. 19. On careful perusal of the documents, it is not in dispute that the assets claimed to have been leased to the said Mafatlal Industries limited, were an integral part of the appellant's factory at Gujarat. The Appellate Authority while confirming the order passed by the Assessing Authority, has held that the machineries being incapable of commercial purchase and sale in the open market, already being an integral part of the factory of the vendor - lessee, and further held that the assessee had earlier also indulged in similar bogus sale and lease back transaction with A.T.V.Projects India Limited, Bombay in 1993 and had subsequently availed of VDIS in 1997, by withdrawing this depreciation. This suggests that the assessees is aware of such mechanism of claiming false depreciation and thus, concealing the income. The judgments referred to by the Reven....
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....accurate particulars of income. 23. In this regard, the reliance placed by the appellant's counsel, on the decisions referred above have not come in the way to assist the appellant's case. The set of facts in the cases relied by the appellant, is totally different and distinguishable with the case on hand. That apart, it is clear from the documents available and the discussion made by the 1st Appellate Authority as well as the Appellate Tribunal that the said sale cum lease back transaction is to conceal a simple financial transaction, the documents produced by the appellant did not substantiate the claim made by the appellant in any justifiable manner claiming 100% depreciation. There is no proper justification placed by the appellant for us to consider or to disbelieve the transaction would not lead to a presumption of concealment of Income or suppression of fact, which is squarely covered under Section 271(1)(c) of the Income Tax Act, empowering the Assessing Authority to levy penalty. 24. In Goyal M.G.Gases (P) Ltd., (supra), the Assessing Officer disallowed depreciation on computers purchased by the assessee and leased back to another company and both companies b....
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....loyee and therefore, it is not an independent evidence. Further, the valuation report has not considered the encumbrance on the assets. Further, the insurance policy also revealed several defects. After referring to the decisions, the CIT (A) confirmed the order passed by the Assessing Officer. Before the Tribunal, the assessee pointed out that the lease denials have been executed to exceed to tax as revenue receipts. In the hands of the lessee, the sale of the asset has been reduced from the written down value of the respective blocks of assets and the lease rental paid by them has been allowed as revenue deduction. The Tribunal examined the factual position and pointed out that the so called assets were part of integral factory owned by the sister concern of the lessee, Mafatlal Industries Ltd., namely New Shorrock Mills. The Tribunal referred to the valuation report and pointed out that when the assets were part of an integral factory they could not have been sold out to the assessee and leased out to different concern. Further, the Tribunal pointed out that it is not clear whether Mafatlal Industries Ltd., already borrowed certain monies against the assets because in the ....