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TMI Blog2013 (6) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... , the machinery received from Singapore was of Indian origin but misdeclared as of foreign origin. On the basis of the marks and numbers found in the containers and the materials available on record, the assessing officer came to a conclusion that the real value of the machinery was concealed by claiming 100% depreciation and furnished inaccurate particulars and, therefore, levied penalty under Section 271(1)(iii) of the Income Tax Act, 1961. It was the further conclusion of the assessing officer that the so called import was made by the assessee only for the purpose of availing 100% depreciation. The order of the Assessing Officer was challenged unsuccessfully by the assessee before the Commissioner of Income Tax (Appeals). It was the contention of the assessee before the appellate authority that M/s. ETK Softech Pvt. Ltd., and ETK International Ferrities Ltd., have cheated the assessee and they came to know about the sham import only at the time of enquiry by the DRI and, thereafter, they withdrew the claim of depreciation vide letter dated 22.9.2000 and treated the same as a loan transaction. The appellate authority rejected the aforesaid contention of the assessee and held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee without waiting for the final outcome of the enquiry, putforth all the facts before the Department and paid an ad hoc amount of Rs.5.35 and also requested the authorities to treat the entire transaction as a loan transaction to show their bona fides and, therefore, there is no concealment or furnishing of inaccurate particulars in the return as alleged by the Department. 4. The Department had mainly relied on the statement of one Shri Sivasankaran of M/s. Anbu Shivam Valuers, who has inspected the machinery on behalf of the assessee and gave a statement dated 7.3.2000 recorded by the DRI to the effect that the machinery was of Indian make and would not cost much. The Tribunal has heavily come down on the statement given by the said person as the statement given by the said officer before the DRI was to safeguard his skin and the assessee genuinely believed the valuation report given by the valuer much earlier. The main reason for reversing the decision of the authorities by the Tribunal is that the import documents, clearance by the Customs Department, valuation report of the valuer, all prove that mens rea is not palpable in this case and the departmental presumption is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such finding and the present appeal is liable to be dismissed. 7. It is very unfortunate case where the Tribunal has upset the concurrent findings of the authorities on the flimsy ground that the Revenue has failed to establish mens rea in the transaction held between the assessee and the lessee and the conclusion arrived at by the authorities is based on presumption. The appeal relate to the assessment year of 1999-2000. During the course of assessment proceedings under Section 143(3), it was found that the assessee had claimed 50% of 100% depreciation allowable on a sum of Rs.30,52,84,527/-, being the cost of Solar Modules for Solar Heater System, Venturi and wet oxidation equipment leased to ETK Softech (P) Ltd. The assessee had imported machinery along with ETK International Ferrites Ltd., Ranipet and the said machinery was leased to ETK Softech (P) Ltd.,to the extent of Rs.30.53 crores and collected an amount of Rs.24 crores as collateral and held the same as lease deposit. The assessee claimed depreciation of Rs.15,26,42,264/- on this machinery and returned the lease rent of Rs.2,14,20,525/- as income. During the inspection made by DRI on the premises of the lessee, namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the DRI authorities, the aforesaid Mr.A. Sivasankaran was examined and he had made the following statement (extract is made from the typed document furnished on behalf of the respondent) :- "I am giving the truthfull statement. You have asked me about the 'Valuation Report' given for M/s. ET K Softech Pvt Ltd, Ranipet. Sri Shankar, DGM, Sundaram Finance Ltd contacted me and gave me the work order on 10.1.99 to value the equipment leased by them to M/s. ETK Softech Pvt Ltd, Ranipet. Accordingly on 11.12.99, myself and other engineers V. Sekar (Mech.), V. Govindasamy (Software), Gajalakshmi (Elec.dip.) came along with me and proceeded for inspection. We reached at Ranipet at 10.15 AM. Mr. Kannan, Director, Softech Pvt Ltd and Govindarajan, ETK IF were present and they asked me to wait for Sri Parthasarathy. We waited there after inspection upto 2.30 p.m. At 12.30, Sri Srinivasan, GM and Shankar, DGM, Sundaram Finance also came. This, they have not informed to our team of valuers. They also inspected the Factory and joined us in the committee room. All of us expecting Sri Parthasarathy who is having a engagement not turned till we leave the place at 2.30 p.m. All of us returned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Indian origin and that the lessee and its sister concern had manipulated the transaction, immediately, without waiting for the notice issued by the Department, had voluntarily gave a letter dated 22.9.2000 withdrawing the claim of depreciation to show their bona fides and therefore the assessee cannot be found fault with. 12. This contention, though appears to be prima facie attractive, it cannot be accepted for the reasons stated by us in the preceding paragraphs. Apart from above, the fact of withdrawal of the claim of depreciation appears to be artificial instead of natural as stated by the learned Senior Counsel. The assessee had chosen to issue withdrawal notice on 22.9.2000, whereas, even according to the assessee, the Department had issued scrutiny notice on 25.9.2000 (according to the Department, the said notice was dated 20.9.2000), three days prior to issuance of notice. This would only go to show that, after the Department had thought it fit to initiate action against the assessee, the assessee had issued the withdrawal notice and, even without waiting for the result of the enquiry, had volunteered to deposit a sum of Rs.5.35 crores towards additional tax liability. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... civil liability, but it does not relieve the assessee from the liability as the object behind the enactment of the said section is to provide for a remedy for loss of revenue. 16. The aforesaid decision came to be further clarified by the Hon'ble Supreme Court in Rajasthan Spinning & Weaving Mills case (cited supra), whereunder the Hon'ble Apex Court has held that application of Section 11AC of the Central Excise Act would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of section 11A. Ultimately, the Hon'ble Apex Court had not made any observations with regard to Section 271(1)(c) or other statutory provisions that came up for consideration. 17. In the last cited case, Reliance Petroproducts Pvt. Ltd., case (supra), after considering the aforesaid decisions, the Hon'ble Supreme Court came to the conclusion that merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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