2006 (7) TMI 92 - HC - Income Tax

Penalty - Assessee claim depreciation in respect of sale and lease back of the bio-gas plant but AO disallowed the depreciation and initiate penalty proceeding - Held that assessee is entitle for the deprecition and set aside the penalty proceeding

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding disallowance of depreciation claimed by assessee for bio gas plant; Penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act; Appeal against penalty imposition by Joint Commissioner; Consideration of genuineness of sale and lease back transaction of bio gas plant during re-assessment proceedings.

Analysis:
1. The appeal under Section 260A of the Income Tax Act challenged the order of the Income Tax Appellate Tribunal regarding the disallowance of depreciation claimed by the assessee for a bio gas plant purchased from M/s. Western Paques India Ltd. The Assessing Officer initially accepted the claim but later issued a notice under Section 148 of the Act for reassessment, leading to the disallowance of the entire depreciation amount without providing any reason. The Commissioner of Income Tax (Appeals) considered the appeal, and penalty proceedings under Section 271(1)(c) were initiated by the Assessing Officer.

2. The Joint Commissioner of Income Tax imposed a penalty on the assessee, which was appealed by the assessee. The Commissioner of Income Tax (Appeals) ruled in favor of the assessee, setting aside the penalty proceedings. The Revenue then appealed to the Tribunal, resulting in the impugned order. During the reassessment proceedings, the Assessing Officer requested the assessee to produce the Managing Director of M/s. Western Paques India Ltd. to verify the genuineness of the sale and lease back transaction of the bio gas plant.

3. The assessee explained that the Managing Director was not traceable, leading to the inability to comply with the requirement. The Tribunal considered the findings of the Commissioner and noted the time lapse between the original assessment and reassessment, which hindered the production of the Managing Director. The Tribunal found no evidence to suggest the transaction was not genuine or bogus, leading to the dismissal of the appeal. The High Court, upon reviewing the Tribunal's order, found no material provided by the Revenue to challenge the genuineness of the transaction, thus upholding the concurrent findings of the Commissioner and the Tribunal.

4. The High Court concluded that in the absence of evidence showing the sale and lease back transaction was not genuine or bogus, there was no reason to interfere with the decisions of the lower authorities. The inability of the assessee to produce the Managing Director after a significant time gap was considered a valid reason, and no substantial legal question was identified for determination. Consequently, the appeal was dismissed.