2006 (7) TMI 95 - 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 depreciation and set aside the penalty proceeding

Summary

Issues:
Challenge to order disallowing depreciation claimed in assessment under Section 143(3) of the Income Tax Act, 1961 for the assessment year 1993-94. Penalty imposed under Section 271(1)(c) of the Act and appeal against it. Consideration of genuineness of sale and lease back transaction of bio gas plant by the assessee.

Analysis:
In this appeal, the Revenue contested an order by the Income Tax Appellate Tribunal disallowing depreciation claimed by the assessee for a bio gas plant in the assessment year 1993-94. Initially accepted by the Assessing Officer, a notice under Section 148 was issued, leading to re-assessment proceedings where the entire depreciation was disallowed without providing any reason. The Commissioner of Income Tax (Appeals) considered the appeal against the penalty proceedings under Section 271(1)(c) and ruled in favor of the assessee, setting aside the penalty. The Tribunal upheld the Commissioner's decision based on the lack of evidence showing the transaction was not genuine or bogus, as no material was presented during the re-assessment proceedings.

During the re-assessment proceedings, the Assessing Officer requested the assessee to produce the Managing Director of the company involved in the sale and lease back transaction. The assessee was unable to comply as the Managing Director was untraceable after five years. The Tribunal considered the time lapse and lack of evidence provided by the Revenue to challenge the genuineness of the transaction. As no material was presented to prove the transaction was not genuine or was bogus, the Tribunal upheld the Commissioner's decision, leading to the dismissal of the appeal by the Revenue.

The High Court, upon reviewing the Tribunal's order, concurred with the findings that there was no evidence presented by the Revenue to demonstrate the transaction's lack of genuineness or authenticity. Given the circumstances and the inability of the assessee to produce the Managing Director after a significant time lapse, the Court found no substantial question of law to be determined. Consequently, the appeal was dismissed.