TMI Blog2012 (7) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee at the assessment stage itself does not amount to be a valid reason for treating the transaction as non-genuine and for coming to a conclusion that it had concealed income or furnished inaccurate particulars of such income. Incorrect claim by itself will not tantamount to furnishing of inaccurate particulars - thus, levy of penalty u/s 271 (1)(c) was not warranted - decided in favour of assessee. - I.T.A. No. 474/Mds/2011 - - - Dated:- 31-5-2012 - SHRI ABRAHAM P. GEORGE, SHRI CHALLA NAGENDRA PRASAD, JJ. Appellant by : Shri R. Vijayaraghavan, Advocate Respondent by : Shri K.E.B. Rengarajan, Junior Standing Counsel O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : In this appeal filed by the assessee, its grievance is that the CIT(Appeals) upheld the levy of penalty of ₹ 56,55,061 made by the A.O. under Section 271(1)(c) of Income-tax Act, 1961 (in short 'the Act'). 2. Short facts apropos are that assessee, engaged in hire purchase finance, leasing, etc., had filed return for impugned assessment year declaring an income of ₹ 1,70,88,730/-. During the course of assessment proceedings, it was noted by the A.O. that assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items to the lessee. The A.O., however, relying on a letter dated 3.10.2000 of Managing Director of M/s Bellary Steels and Alloys Ltd., came to a conclusion that arrangement was not in the nature of operational lease. Assessing Officer also examined the Chartered Accountant of the said concern, who it seems stated that these were all financial arrangements and in the book of the said concern shown as financial transactions. In the result, the claim of depreciation on such purchases of ₹ 50,51,515/- was also disallowed in the re-assessment. 6. Thereafter, penalty proceedings were initiated for a reason that assessee had furnished inaccurate particulars and concealed its income. As per the A.O., it was physically impossible for transportation of the leased materials insofar as purchases made from M/s ORV Castings Pvt. Ltd. was concerned. According to the A.O., the claim of lease to M/s Bellary Steels and Alloys Ltd. was not genuine. Assessing Officer also noted that the transactions claimed by the assessee as entered with M/s Jay Agrochem Ltd. was also not genuine. Submission of the assessee on the notice for penalty proceedings, was that it was under a bonafide belief regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own as purchaser and M/s Bellary Steels and Alloys Ltd. as the lessee. Assessee had bonafide believed in the records given by M/s Bellary Steels and Alloys Ltd. Similar was the case with M/s Jay Agrochem Ltd. Assessee was not at all aware as to why affidavits were given by M/s Jay Agrochem Ltd. claiming the transactions to be mere financing transactions and what were the irregularities in their transactions with the supplier. According to him, assessee had raised a bonafide claim, but during the course of assessment, when it was pointed out that claim of the assessee was not correct, it had in good faith offered to withdraw the claim of depreciation. Just because there was an offer to withdraw depreciation, a penalty ought not have been levied on the assessee. Learned A.R. also filed a copy of order of this Tribunal in assessee's own case for assessment year 1995-96 and 2000-01 dated 24.8.2007 and submitted that similar transactions entered with M/s Bellary Steels and Alloys Ltd. in such years, were considered for levy of penalty, but, the penalty levied was deleted by the Tribunal on a finding that the documents furnished by the assessee were not false. 9. Per contra, D.R. sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spected by the officials on 3.3.2000 and they submitted their reports. (11) Letter of confirmation issued by Sri Madava, the Managing Director of BSAL, stating that the assets were, indeed taken on lease with IEL For lease to M/s Jay Agrochem Ltd. (1) Payment of₹ 48,26,776/- was made on 10/10/95 to the Supplier viz. Atin Industries after deducting ₹ 1,91,224/- towards first lease rent and other charges vide DD on State Bank of India. (2) Invoice dt. 15.9.95 was issued in the name of IEL by the Supplier (3) Lease agreement was duly executed on 10.10.95 (4) The assets were taken delivery vide delivery slip dt. 15.9.95 issued by Atin Industries. (5) Installation certificate was issued by the lessee, which confirms the use of the assets. (6) Official of IEL inspected on 6.2.97 and chairman of Jay Agrochem Ltd. himself confirmed about the physical verification of the assets. As per the lease deed with M/s Bellary Steels and Alloys Ltd., a copy of which is placed at paper-book pages 44-52, it is clear that the responsibility of the lessor was to purchase the equipments selected by the lessee from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dimension pointed to the physical impossibility of the Rolls being transported in the manner indicated in the documents furnished by the assessee. 10.9 The assessee has produced the following documents to the lower authorities as per paper-book submitted to the Tribunal: BELLARY STEELS ALLOYS Ltd. (BSAL) 1 22/02/1995 Office note approving the business proposal of BSAL 2 23/02/1995 Agreement to enter into lease executed by BSAL and Personal guarantee of their Managing Director 3 21/03/1995 BSAL authorization letter to release payment to B.H. Enterprises along with proforma invoice 4 21/03/1995 SFL s letter releasing the payment to B.H. Enterprises vide DD 019432 dt. 21/03/1995 drawn on State Bank of Travancore payable at Mumbai 5 17/04/1995 Invoices of B.H. Enterprises 6 17/04/1995 Delivery Challans duly signed by BSAL 7 17/04/1995 Installation Certificate 8 17/04/1995 Insurance policy 9 03/03/2000 Inspection carried out by SFL 10.10 There is no finding by the assessing officer to show that the above documents are false. Without giving the finding that the above documents are false, penalty cannot be levied. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lease period. Have the machinery been returned? Have steps been taken to recover the machinery or to extend the lease? The lessee has defaulted in the payment of lease rentals. Since the contracted obligations are not yet over, returning of the machinery has not happened. However, steps are being taken to recover the rental arrears. 5. Was any security (other than the machinery) taken before the loans were made available? Personal guarantee of the Managing Director of the lessee is available. The explanation offered by the assessee is bonafide. In our opinion penalty cannot be levied. 11. The fact situation being similar, we are of the opinion that the decision taken by the Tribunal for earlier years clearly applies. As for the claim of the Revenue that in the decision of Hon ble Apex Court in the case of Dharmendra Textile Processors (supra) it was held that it was for the assessee to explain its bonafides, we are of the opinion that in the subsequent decision of Hon ble Apex Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd. (322 ITR 158), it has been clearly held that an incorrect claim by itself will not tantamount to furnishing of inaccurate particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X
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