9911796707
TMI Blog2012 (12) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... Altos India Pvt. Ltd. (Altos, in short); both the companies being under the same management. The CIT(A) through order dated 16.09.1992, and the Income Tax Appellate Tribunal (Tribunal, in short) through order dated 20.10.1993 confirmed the addition made by the AO by disallowing the depreciation on computers. In further appeal, this Court, through judgment dated 04.11.1996 confirmed the AO's disallowance, holding that the findings recorded by the Tribunal were of fact and involved no question of law. Meanwhile, the AO through order dated 26.05.1994 imposed a penalty of Rs. 47,52,648 for understatement of income on sale of cylinders and for bogus claim of depreciation on computers. In first appeal in the penalty proceedings, the CIT(A) by order dated 30.3.1995 confirmed the imposition of penalty. The Tribunal, in second appeal, by order dated 08.04.1996 deleted the penalty as regards sale value of cylinders, and as far as depreciation on computers was concerned, remanded back the matter to the AO with a direction that the assessee be allowed to conduct cross-examination of one Daddan Bhai (the Managing Director of Altos and PCL), and that it (assessee) be also provided with the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s argument was that the mere disallowance of the claim of depreciation was inadequate to attract the levy of penalty; instead, what is needed for attracting penalty under section 271(1)(c) is that inaccurate particulars be actually furnished, which, he claimed, was not the case here, as the assessee had furnished all the relevant details of the transactions between it (the assessee), PCL and ALTOS. To support this argument, counsel placed reliance on Commissioner of Income Tax v. Reliance Petro-products Pvt. Ltd., 322 ITR 158 (SC) and Karan Raghav Exports Pvt. Ltd. v. Commissioner of Income Tax, ITA 1152/2011/Del decided on 14.03.2012. 6. This Court has considered the submissions of the parties. The penalty in dispute in this appeal [imposed by the AO in penalty proceedings conducted de novo, cancelled by the CIT(A) which was upheld by the Tribunal] is on account of bogus claim of depreciation amounting to Rs. 37,69,273/- on computers, which as per the AO, were never owned, used or leased by the assessee. It is a matter of record that the assessee purchased 15 computers from PCL, and according to agreement, leased it out to Altos for a period of three years, who took the delivery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) at pages 35 to 40 of his order and from his correspondence it is seen that the assessee had made efforts to recover the computers leased out to ALTOS. It is further seen that assessee has filed a case for recovery of the computers or to compensate in lieu of returning back the computers. The matter was also listed before one Mr. P.C. Jain, sole Arbitrator and from these facts it is found that the litigation was going on between the assessee and ALTOS. It is further seen that assessee had provided complete details of computers leased out by it after purchasing from PCL. Full particulars of lease rental income were shown by the assessee while filing its return of income were also furnished. Therefore, it cannot be said that assessee has concealed any particular of its income. Of course, assessee made claim of depreciation on account of computer leased out to ALTOS. However, the AO made disallowance of depreciation and the amount of the AO has been confirmed by the Tribunal and on reference the High Court has stated that the finding of the Tribunal are findings of fact. Therefore, they declined to interfere... In the present case, in our considered view, assessee has furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature of the transactions involving these computers has already been stated above. The following extract from the Tribunal's order dated 22.10.1992 in the assessment proceedings, is relevant for this point: "So far the question of ownership is concerned, it is necessary to look into the circumstances obtaining in this case, namely, that ALTOS the manufacturer of computers is claimed to have sold the computers to PCL, its selling agent, and PCL in its turn sold the same to the assessee and again the assessee entered into a contract of leasing with M/s. ALTOS... according to the assessee, computers were never taken actual delivery of and they went back form PCL to ALTOS, the computers were sub-leased by it to PCL and according to PACL they were sent to Calcutta and again sub-leased to various parties at Calcutta. Thus, the entire transaction is so inter-woven that it gives a colour of mere payer transaction without any actual transaction of sale. In other words, there is not material to record to establish that the title in computers ever actually passed to the assessee. The assessee had disowned the knowledge of the alleged sublease by ALTOS to PCL and further sub-lease by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h it claimed depreciation. In this light, the observation of the Supreme Court in Commissioner Of Income-tax West Bengal Ii v. Durga Prasad More, [ 1971 ] 82 ITR 540 ( SC ) is relevant that "the taxing authorities are not required to put blinkers while looking at the documents produced before them' and that 'they are entitled to look into the surrounding circumstances to find out the reality of recitals made in those documents". Thus, even though the assessee may have furnished all particulars for the tripartite transaction, the fact that what it put up in its return was a sham and mere paper transaction leads us to the inevitable conclusion that the explanation of the assessee on the question of its ownership and use of the computers is unsubstantiated and mala fide. The assessee's response that it attempted to recover the unrealized rental, and the possession of the computers, after the expiry of the lease period of 3 years, does not, by any means, substantiate its explanation or make it bona fide. The same is rejected as unacceptable. Therefore, clearly, Explanation 1 to section 271 stands attracted to this case. 12. Consequently, for purposes of section 271(1)(c), the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een unaware about the same. Furthermore, the revenue, in this connection, relied upon the following extracts from Zoom Communication (supra), which are pertinent and applicable to present discussion: "16. The proposition of law which emerges from this case, when considered in the backdrop of the facts of the case before the Court, is that so long as the assessee has not concealed any material fact or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under Section 271(1)(c) of the Act, even if the claim made by him is unsustainable in law, provided that he either substantiates the explanation offered by him or the explanation, even if not substantiated, is found to be bona-fide. If the explanation is neither substantiated nor shown to be bona-fide, Explanation 1 to Section 271(1)(c) would come in to play and the assessee will be liable to for the prescribed penalty. 19. It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona-fide. If the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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