2016 (5) TMI 250 - AT - Income Tax

Depreciation on bio-gas plant - Held that - In view of the available documentary evidence; the positive affirmation made by WPIL, the lessee who is a party to the lease transaction, regarding the existence of the bio gas pilot plant; the inconsistent statements made by the MD of Niphad SSK Ltd and the incomplete inquiry in the case of IDBI, about the ownership of the bio gas plant, non-existence of bio-gas plant especially during F.Y.1992-93 was not conclusively proved by lower authorities. In view of the above discussion and keeping in view the totality of facts and circumstances of the case, we set aside the orders of both the lower authorities and the matter is restored back to the file of AO for deciding afresh considering the documentary evidences discussed above and after giving due opportunity to the assessee. - Decided in favour of assessee for statistical purposes. Penalty imposed u/s.271(1)(c) - Held that - Assessing Officer only says that assessee has committed a default but what is the nature of default has not been discussed at all. The Assessing Officer is silent on exactly which provisions of section 271 (1 )(c), he is invoking to impose the penalty. This is not justified at all for imposition of penalty. Assessing Officer has not made out a case of what is the default committed and what is the provision of the Income-tax Act applicable in that default for imposing penalty. There is inadequate satisfaction of the Assessing Officer for imposition of penalty on facts also. I am satisfied that the evidences relied upon in the assessment proceedings are only indicative and do not go to establish non existence of pilot plants. In fact the evidence relied upon by appellant in the penalty proceedings, particularly, insurance documents which clearly mention existence of the plants at the sites, goes to establish the other way round. In such a situation, the confirmation of quantum addition is to our mind based upon a perception of preponderance of probabilities about existence or otherwise of the pilot plants. There is no conclusive deduction in the assessment order or in the first appellate order of quantum appeal. In such a situation, imposition of penalty is not justified and the same is deleted - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of reopening assessment under Section 147.
2. Disallowance of depreciation on bio-gas plants for the assessment years 1993-94 and 1994-95.
3. Imposition of penalty under Section 271(1)(c) for the assessment year 1993-94.

Issue-wise Detailed Analysis:

1. Validity of Reopening Assessment Under Section 147:
The assessee contested the reopening of the assessment under Section 147, arguing that there was no "reason to believe" that income had escaped assessment. The assessee had already submitted complete details of the lease transactions during the original assessment proceedings, and the depreciation was allowed based on those details. The reopening was based on an investigation report dated 11th November 1996, which the assessee claimed was based on statements and oral submissions not directly related to the lease transactions. The Tribunal found that there was sufficient reason to believe that income had escaped assessment, as per the findings recorded by the AO based on the investigation report. Therefore, the Tribunal upheld the reopening of the concluded assessment.

2. Disallowance of Depreciation on Bio-Gas Plants:
The assessee was aggrieved by the CIT(A)'s decision to disallow depreciation on three bio-gas pilot plants leased to Western Paques India Ltd. (WPIL). The AO disallowed the depreciation on the grounds that the assets were not in existence. The assessee provided various documentary evidences, such as invoices, insurance cover notes, installation certificates, delivery challans, and lorry receipts, to establish the physical existence of the bio-gas plants during the relevant financial year. The Tribunal noted that the AO relied on a site inspection report and statements that were inconsistent and not conclusive. The Tribunal found that the documentary evidence and positive affirmations from WPIL supported the existence of the bio-gas plants. Therefore, the Tribunal set aside the orders of the lower authorities and restored the matter to the AO for fresh consideration, ensuring that the assessee is given due opportunity to present their case.

3. Imposition of Penalty Under Section 271(1)(c):
The revenue appealed against the CIT(A)'s decision to delete the penalty imposed under Section 271(1)(c) for the assessment year 1993-94. The penalty was imposed for the decline of the claim of depreciation. The CIT(A) observed that the AO did not adequately justify the imposition of the penalty and failed to discuss the nature of the default committed by the assessee. The Tribunal referred to the Supreme Court's decision in the case of Reliance Petroproducts Ltd., which held that making an incorrect claim in law does not amount to furnishing inaccurate particulars of income. The Tribunal agreed with the CIT(A) that the evidences relied upon by the assessee indicated the existence of the bio-gas plants and that the imposition of penalty was not justified. Therefore, the Tribunal upheld the CIT(A)'s order deleting the penalty.

Conclusion:
The Tribunal upheld the reopening of the assessment under Section 147 but found that the disallowance of depreciation on the bio-gas plants was not conclusively proved by the lower authorities. The matter was restored to the AO for fresh consideration. The Tribunal also upheld the CIT(A)'s decision to delete the penalty imposed under Section 271(1)(c), finding no justification for the penalty based on the evidences presented.