TMI Blog2013 (6) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... an appropriate manner, had came to a strange conclusion that the departmental presumption is only based upon the statement given by the valuer and such valuation cannot be the basis for levy of penalty. The finding of the authorities based on the evidence of the valuer, which was corroborated by the circumstantial evidence and the background of the case, are not presumptive as has been concluded by the Tribunal. - Levy of penalty confirmed - Decided in favor of assessee. - Tax Case Appeal No.108 of 2008 - - - Dated:- 21-12-2012 - Elipe Dharma Rao And M. Venugopal,JJ. For the Appellant : Mr. K. Subramaniam Standing Counsel For the Respondent : Mr. P. S. Raman Senior Counsel for M/s. Subbaraya Aiyar JUDGMENT Elipe Dharma Rao, J The assessee company is engaged in the business of Hire Purchase financing and leasing and allied activities. The assessee has claimed 50% of 100% depreciation on a sum of Rs.30,52,84,527/- alleged to be the cost of Solar Moulds for Solar Heater System, Venturi Scrubber and Wet Oxidation equipments" leased to EPK Softech Pvt. Ltd.. The officers of the Directorate of Revenue Intelligence, on inspection of the premises of EPK Softech Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following substantial question of law have been framed for consideration :- "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in setting aside the orders of the authorities below and deleted the penalty under Section 271(1)(c) of the Income-tax Act, even though the withdrawal of claim of depreciation was not a voluntary act of the assessee company is valid?" 3. According to the Department, the assessee has imported machinery along with ETK International Ferrites Ltd., Ranipet and it was leased to ETK Softech (P) Ltd., by extending lease finance to an extent of Rs.30.53 crores. Out of the said amount, the assessee had claimed 50% as depreciation. However, on the inspection made by the Directorate of Revenue Intelligence, it was found that the machinery imported by ETK Softech (P) Ltd., was not a genuine transaction and the machinery was assembled at Ranipet and exported by ETK International Ferrites Ltd., through Chennai Port to Singapore and that even the one time seal affixed on the counter stuffed with the goods from Chennai Port was found intact at the time of import at Tuticorin Port. On the aforesaid basis, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be the basis of levy of penalty. In support of the aforesaid contention learned Standing Counsel placed reliance upon the decisions 6. Learned Senior Counsel appearing for the Assessee contended that the finding of the Tribunal on the voluntary nature of the assessee's withdrawal of the claim was clearly borne out by the fact that prior to the letter dated 22.9.2000, the Department has no iota of knowledge regarding the present transaction and there is no logical reason for the assessee to make a claim in December, 1999 only to withdraw the same in September, 2000 and suffer huge interest liability on such tax, when there was no intervention by the Department to this transaction. He has attacked the findings of the Assessing Officer as well as the CIT (Appeals) that they were based on surmises and presumption as if the assessee had knowledge of the fraud or that they were in complicity with the lessee in the fraud played on the import transaction. According to the learned Senior Counsel the Tribunal has rightly held that there is no documentary evidence to conclude that the assessee had concealed any transaction and, on the other hand, the documentary evidence and the seque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lessee was within the framework of Import and Export Policy, it had been furnished technical feasibility / financial viability report by the Members of the Appraisal Committee, that all necessary import documents were obtained, that since the lessee alone is the importer, the assessee company was not enjoined with any duty to verify the worthiness of the capital goods and that the assessee had no reason to entertain any doubt with regard to the goods which came to India would be of quality different from that one intended to be imported. On the aforesaid background, the question arises for consideration is whether the assessee had an hand in such transaction and it had deliberately made false claim for deduction of tax. 9. It is not in dispute that the machinery which was sought to be leased out by the assessee to the lessee M/s. Softech (P) Ltd., was imported from Ranipet to Singapore and from there it was exported to Tuticorin Port and the FOB value of US $ 171300. The assessee had filed its return of income on 31.12.1999 claiming 100% depreciation on the machinery. In order to appreciate the contention of the assessee, we have carefully gone through the valuation report and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l fact to Mr. Kannan, the Director of M/s. Softech Pvt. Ltd., the assessee cannot plead ignorance of the fact that they were kept in dark. It is also pertinent to note that after this inspection and after disclosure of the said fact to the Director of M/s. Softech Pvt Ltd., and after a consultation in the committee room with the officials of the assessee company, whose presence is not denied by the assessee, the assessee had submitted its return on 31.12.1999 claiming depreciation. It is also to be noted that one of the officials of the assessee company who had inspected the machinery along with the valuer, namely, Mr.K.M. Shankar, DGM., was examined by the DRI in August , 1999 and his statement was recorded on 09.08.1999. It is also to be seen that while extending lease finance to the extent of Rs.30.53 crores to the lessee, the assessee had collected Rs.24 crores as collateral. This attitude of the assessee shows that the assessee may be knowing the fact that machinery is not of much cost as it was shown in the Valuation Report and we can even go to an extent of assuming that the assessee knowing that the machinery is of lesser cost and of Indian make had collected a huge sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of India v. Rajasthan Spinning Weaving Mills 4. [2010] 322 ITR 158 (SC) Commissioner of Income-tax v. Reliance Petroproducts Pvt. Ltd. 14. We have perused all the aforesaid decisions relied on by the learned Senior Counsel. The first cited decision in Dilip N. Shroff's case was disapproved by the Hon'ble Supreme Court in the second cited decision in Dharmendra Textiles's case. This decision was relied on by the counsel to contend that the penalty under Section 271(1)(c) is a civil liability and wilful concealment is not an essential ingredient for attracting civil liability. The relevant paragraph which was pressed into service is as follows :- "27. The Explanations appended to section 272(1)(c) of the Income-tax Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The judgment in Dilip N. Shroff's case [2007]8 Scale 304 (SC) has not considered the effect and relevance of section 276C of the Income-tax Act. The object behind the enactment of section 271(1)(c) read with the Explanations indicates that the said section has been enacted to provide for a remedy for loss of revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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